Download - Pension Part II - Final
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8/9/2019 Pension Part II - Final
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CityCouncilStudySession
EmployeePensions
PartIIApril20,2010
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Outline
ReviewofCalPERS
OtherRetirementBenefitsandCostsPARSPre-1945PoliceandFirePensionPlanPensionObligationBonds
CurrentPensionCostIssues
OptionsforPensionReform
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ReviewofCitysPERSBenefits
2%2%EmployeeAmountPaid
19.830%25.007%Total%ofpayrollsenttoPERS
11.830%*16.007%*EmployerShare
$21,997$49,205AveragePension
3,5731,458Retirees
$45.6million$34.8millionFY10TotalCosts(AllFunds)
6%7%EmployerPickUpofEmployee
Share(EPMC)
8%9%EmployeeShare
2.5%@55(after10/1/06)
2.7%@55(before10/1/06)
3%@50Formula
Miscellaneousafety
* EmployerShareprojectedtoincreaseto20.7%forSafetyand14.5%forMiscellaneousinFY12*EmployeeandEmployerShareisbasedonapercentageoftheCityspayroll
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OtherRetirement
BenefitsandCosts
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PublicAgencyRetirementSystem(PARS) Retirement
planforSpecialStatusContractors*andSeasonalandTemporaryemployees
Formula(minimumageof65):
PARSRetirementBenefits
$47.401.5%$6325.0
LifetimeMonthlyBenefit
=1.5%xHighest36ConsecutiveMonthsSalaryAverage
xYearsofService
* Closedplan nonewSpecialStatusContractorseligiblefortheplan
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Pre-1945PoliceandFirePensionPlan
TheCityadministersaPoliceandFirePensionProgramunder
CityCharterSection187foremployeeshiredbefore1945andretiredwith20yearsofservice
Asof12/30/2009,therewere67participantsintheprogramwithagesrangingfrom63to103
54weresurvivingspouses
13wereremainingemployeeparticipants
Survivingspousereceives50%ofemployeessalary.Ofthe13
remainingemployeeparticipants,8havespouseswhowillqualifyforbenefitsupontheemployeesdeath.
TotalFY10costsinthisPlanareanestimated$3.4millionintheGeneralFund
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Example:PoliceSergeantwith33yearsofservice
SamplePre-1945Police/FirePensionBenefit
$4,593
MonthlyPension
=$5,997/month(Salary)**X71.58%
In 2010:
$1,117
MonthlyPension=$1,561/month(Salary)X71.58%
In 1979:71.58%*=50%+(13*1.66%)ofSalary=33YOS
*Benefitequals50%ofsalary.Foreachadditionalyearofservicebeyond20years,theemployeereceivesanadditional1.66%ofsalary
**Salaryusedinpensioncalculationbasedonlastclassificationheldduringlastyearofservice.AdjustswithPOAandFFAnegotiatedincreasesplusanadditional7%forEPMC
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PensionObligationBonds
PensionObligationBonds(POBs)areusedtofundpensioncosts
In1995,theCityissuedPOBs totaling$108.6million.Thecurrentoutstandingliabilityforthebondsis$94million,reflecting$70.3millioninprincipaland$23.7millionininterest.
TheaverageannualdebtservicepaymentforFY10- FY11is$11.4million(GeneralFundportion- $4.2million)
ForFY12- FY21,theaverageannualpaymentis$7.1
million(GeneralFundportion- $4.2million)
*The2002POBs wererefundedasthe1995POBs debtservicehadbecomeunaffordable.HarborandWaterdidnotparticipateastheyhadsufficientcash tomakepayments
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CurrentPension
CostIssues
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TrendAnalysis
NOTE: FromFY00 FY04,theCitydidnotcontributetoPERSastheCitywassuper-funded
GeneralFundExpenditures
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CityPERSCosts
NOTE: FromFY00 FY04,theCitypaid$0.00toPERSbecausetheCitywassuper-fundedduetothePOBs andmarketgains.TheamountslistedindicatewhatwouldhavebeenpaidhadtheCitynotbeensuper-funded.
Super-funded
PERSAverageAnnualRateofGrowthFY00 FY10:8.7%
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FY11ProjectedPERSCosts
$84.0100%TOTALPERSCOST
$7.48.8%EmployeeContribution
91.2%
29.2%
62.0%
% ofTotal
$76.6
$24.5
$52.1
All Funds(in Millions)
$50.4TOTALCITYCOST
$14.7
EmployerPickupofEmployee
Share
$31.3EmployerShare
General Fund(in Millions)
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RisingpensioncostsisnotisolatedtoCalPERS alone
OtherSystems UnfundedLiabilities:
CaliforniaStateTeachersRetirementAssociation- $22.5billion
LACountyEmployeesRetirementAssociation- $4.9billion
LACityEmployeesRetirementSystem- $2.2billion
OrangeCountyEmployeesRetirementSystem- $3.1billion
SanDiegoCityRetirementSystem- $2.8billion
OtherAgencies
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Summary
Agreaterpercentageofourbudgetwillbespenton
pensions
InFY10,pensioncostscomprise13.1%ofGPbudget
Ifnoactionistaken,byFY14,pensioncostsareprojectedto
comprise17.6%ofGPbudget
Toensurefiscalsustainability,theCityshouldstart
mitigatingrisingpensioncosts
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PensionReform
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CityActionsTakenToDate
ReducedtheWorkforce GeneralFundBudgetedFTEshavebeenreducedfrom3,459inFY03to2,945inFY10
Reducedformulaformiscellaneousemployeesfrom2.7%@55 to
2.5%@55 in2006
Allemployeespay2%ofpayroll,contributing$8millionayear
LedlobbyingeffortswithPERStoenactrate-smoothingtoaddress28%
marketlossesin2009
Includedare-openerinthePOA/FFAlaboragreementsallowingmutuallyagreeablechangestothepensionplan
NegotiatedatriggerinthePOAagreementthatifany3ofcomparableagenciesconverttoa3%@55formula,thePOAwouldautomaticallyconverttothatformulafornewmembers
Engagedwithlegislativecommitteesregardingpensionreform
EvaluatedPERS/PARSsolution
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CitysOptions CurrentEmployees
Employeespayemployeeshareofpensioncosts SavingsfromfullPERSpickup AllFunds:$25M
Savingsfrom1%- AllFunds:$4M
SavingsfromfullPERSpickup GeneralFund:$16M
Savingsfrom1%- GeneralFund:$2.4M
Requires Negotiations
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CitysOptions FutureEmployees
EstablishNewTier(s)
Examplesinclude:
ModifyPERSbenefitformula(e.g.age,percentage,salary)
Usehighest3yearsofsalaryvs.singlehighestyear
DonotreportEPMCtoPERS
Evaluateotherplanchanges
Reviewexistingagreementsforotherpotentialchanges
Requires Negotiations
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Conclusion
TheCityCharterstatesthattheCityshallparticipateintheStateEmployees RetirementSystem
Changestoemployeepensionswillrequirenegotiationswithemployeeorganizations
CanonlyamendPERScontractsonceeverythreeyears
(Miscellaneous,PoliceandFireareseparateplans)
OtherchangestolocalgovernmentretirementsystemswillrequirechangestoStateretirementlaw
HumanResources,incoordinationwiththeCityAttorney,willcontinuetolookfornewalternatives(withinexistinglaw)
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8/9/2019 Pension Part II - Final
20/20
CityCouncilStudySession
EmployeePensions
PartIIApril20,2010