AgdaPkt 2015-10-12 Closed and Joint SA and PFA

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6.3.A. - Page 2 January 1, 2013, the Public Employees' Pension Reform Act (PEPRA) was implemented, creating a third tier (Tier 3) with a further reduced formula for all new employees hired by the City who meet the definition of a new member under CaIPERS. New hires after January 1, 2013 who are current CaIPERS members remain eligible for the City's Tier 2 benefits. Among the reforms included in the new law was the elimination of EPMC for all new CaIPERS members. Therefore, new employees hired by the City who were also new members under CaIPERS after January 1, 2013, are ineligible for EPMC and currently pay their full member contribution. ANALYSIS The City met and conferred with Executive Management, RCMEA and COA, and agreements were reached to begin shifting the payment of the 7% EPMC from the City to the employee. By the 3rd year employees will be paying the full member contribution of 7%-9% depending on the employee's benefit tier and plan. The current Executive Management Summary of Benefits, and Memoranda of Understanding with RCMEA and COA, provide that all Tier 1 and Tier 2 employees in these groups started to pay a portion of their member contributions in 2014. In addition, the new agreements include additional employee contributions to pay a portion of the City's share of pension costs. When fully implemented, the total employee contribution will range from 13% of salary for miscellaneous (non-safety) non-management employees to 20% for Executive Management employees (21% for safety executives). The EPMC amount that is reported to CaIPERS must be modified to align with the agreements with these groups, requiring a resolution each time the EPMC amount is changed to effectuate the changes with CaIPERS regarding the reported compensation for the purpose of calculating retirement benefits. In September 2014, City Council approved and adopted a resolution effectuating a change with CaIPERS adding two percent (2%) to be paid by the employee towards the retirement contribution. With the approval and adoption of this resolution, an additional amount of two percent (2%) will be paid by the employee towards the retirement contribution increasing the employees' contribution to a total of 4% beginning in October 2015. In order to achieve the full elimination of EPMC, the current Executive Management Summary of Benefits, and Memoranda of Understanding with RCMEA and COA call for Tier 1 and Tier 2 members to begin to pay an additional three percent (3%) in 2016. In order to effectuate this future change, a resolution to make this additional adjustment with CaIPERS will be submitted in September, 2016. ALTERNATIVES Changes to the EPMC amounts were previously negotiated with employee groups and approved by Council. Therefore, no alternative actions are proposed.