22 - Laserfiche WebLink

BACKGROUND On January 1, 2013 the statewide pension reform bill becomes effective and the retirement formulas offered through the California Public Employees' Retirement System (CaIPERS) provides a less generous pension than those currently available. However, these new formulas will apply only to those who are joining the CaIPERS system after January 1, 2013 for the first time in their careers (New Employees) or who have left the system for over 6 months. It does not apply to individuals who became CaIPERS members prior to January 1, 2013 and are moving from one agency to another (Lateral Employees). In other words, in 2013, when the City of Pleasanton hires a Lateral Employee who was a member of the CaIPERS system prior to January 1, 2013, he/she will not be covered by the new formula under the pension reform bill. Instead, the Lateral Employee in this circumstance will be covered by the retirement formula that is in place at the City of Pleasanton on December 31, 2012. Current employees covered by the International Association of Firefighters, Local 1974 (IAFF) have the 3% @ 50 retirement formula with a one-year final compensation calculation. When the Memorandum of Understanding (MOU) for this group expired on December 31, 2011, representatives from the cities of Livermore and Pleasanton negotiated a successor contract with the IAFF. (The Livermore-Pleasanton Fire Department, otherwise known as the LPFD, is a jointly managed department between the two cities.) One element of the new contract was the establishment of a different CaIPERS program for new employees hired for the LPFD. With passage of the statewide pension reform bill as described above, new hires will be divided into two categories. New Employees will be subject to the new formulas under the reform bill and Lateral Employees will be subject to the second tier recently negotiated with IAFF. This tier, which provides for the 3% @ 55 formula with an average of three-year compensation calculation, needs to be implemented by the end of the calendar year. DISCUSSION Adoption of the 3%©55 retirement program will result in savings over the long term for the City since lateral candidates from other CaIPERS agencies will be on this plan, which is less expensive than the 3%@50 program. Meanwhile, the 3% @ 55 program still allows the Fire Department to remain competitive in attracting and retaining high quality lateral candidates. CaIPERS requires that agencies disclose the rate information identified in the amendment actuarial valuation (Attachment 3) for the adoption of this plan amendment. The rate information is as follows: There will be no immediate employer contribution rate impact from this amendment. Ultimately, though, the LPFD's employer normal cost will decrease. If the mix of active member entry ages were the same for both the current continuing first tier employees and the new second tier employees, the decrease in the employer rate would be 2.9%. Page 2 of 3