1 City Council Discussion May 23, 2011 City of Pasadena Pension Reform

Human Resources Department 2 Retirement Systems Timeline of Employer CalPERS Rates Projected CalPERS Cost *FY11 & FY14 Rates are estimated from current payroll FY09FY10FY11FY12FY13FY14 MISCELLANEOUS PLAN10.644%10.855%11.422%15.484%16.300%19.000% SAFETY PLAN21.898%22.977%23.599%26.559%27.200%30.200% FY11FY14 MISCELLANEOUS PLAN$12.3 M$13.2 M SAFETY PLAN$9.6 M$10.3 M

Human Resources Department 3 Retirement Systems Currently the City participates in the CalPERS retirement plans > Miscellaneous Plan  55 > Fire & Police Safety Plan  55 Both retirement plans are currently two tier Eligible part-time & temporary employees participate in separate plan of PARS Retirement

Human Resources Department 4 Miscellaneous Misc. Tier 1 Plan > Employees hired on or before July 1, 1984 > 115 Active Employees > 55 > One (1) year final calculation > 2% COLA Misc. Tier 2 Plan > Employees hired on or after July 2, 1984 > 1333 Active Employees > 55 > Three (3) year final calculation > 2% COLA

Human Resources Department 5 Fire Fire Tier 1 Plan > Employees hired on or before April 29, 1984 > 21 Active Employees > 55 > One (1) year final calculation > Post-Retirement Survivor > 2% COLA > FPRS System Transfer Fire Tier 2 Plan > Employees hired on or after April 30, 1984 > 145 Active Employees > 55 > One (1) year final calculation > Post-Retirement Survivor > 2% COLA

Human Resources Department 6 Police Police Tier 1 Plan > Employees hired on or before May 15, 1983 > 11 Active Employees > 55 > One (1) year final calculation > Post-Retirement Survivor > 2% COLA > FPRS System Transfer Police Tier 2 Plan > Employees hired on or after May 16, 1983 > 222 Active Employees > 55 > One (1) year final calculation > Post-Retirement Survivor > 2% COLA

Human Resources Department 7 PARS Retirement Part-time and Temporary Retirement Plan provided by PARS  Omnibus Budget Reconciliation Act of 1990 (OBRA 90) mandated employees of public agencies who are not members of the employer’s existing plan be covered under an alternative plan.  401(a) Type Plan 7.5% Shared Contribution  City contributes 4.0%  Employee contributes 3.5%

8 Pension Alternatives

Human Resources Department 9 Reform Options Add a third tier to the Retirement Plan  Miscellaneous Plans  60  55  55  55  60 ***(Only Plans offered by CalPERS) Reduce/Change Tier Options  i.e. Final Year Calculation, Military Buyback, Sick Leave Credit, Pre-Retirement Optional Settlement Death Benefit, Post- Retirement Survivor Allowance, Death Benefit Continues, 59 Survivor Benefit Level 4, Prior Service Credit  Safety Plans  55  50  55  55  50

Human Resources Department 10 Reform Options Reduced plan with PARS Supplement Reduce/Change Employee Contributions paid by the City Have employees pick up portion of City’s PERS costs Delay or Eliminate EPMC (PERS on PERS) Revise all plans to 3 year final compensation calculation Restrict calculation of employees’ retirement benefit to base pay only; eliminate add-ons of specialty pays or leave banks Eliminate Retiree Medical Options

Human Resources Department 11 Reform Options Modify Employee Contributions  Current Contributions RETIREMENT PLAN GROUP EMPLOYEE CONTRIBUTION CITY CONTRIBUTION TOTAL CONTRIBUTION CalPERSFire & Police Safety0.0%9.0% CalPERSExecutive & Non-Rep Mgmt3.6%4.4%8.0% CalPERSAll Other Units *4.6%3.4%8.0% PARSTemporary & Seasonal3.5%4.0%7.5% * Some units have agreed to full pickup

Human Resources Department 12 Reform Options Consider the “Time-in-Grade” exception which delays the EPMC payment for all newly hired employees up to five years.  The city would need to pass a resolution and adjust its current contract with CalPERS.

Human Resources Department 13 Reform Options Eliminate EPMC EPMC (PERS on PERS) is defined as reporting the Employee Paid Member Contribution as Compensation Earned. > Example  $50,000 – Employee earnings  + 8% - EPMC  $54,000 – Employee is reported as earning Note: City pays full employer and employee PERS share of the $4,000 (which is PERS on PERS)

Human Resources Department 14 Reform Options Actions Proposed at State Level  Base final retirement salary on three highest paid years worked;  Calculate benefits only on base salary eliminating all “spiking;  Eliminate the purchase of “air time”;  Eliminate the availability of Employer Paid Member Contribution (EPMC);

Human Resources Department 15 Reform Options  Require employees to pay the employees share of PERS;  Remove caps on the percentage employees can pay for the total cost of PERS programs;  Prohibit employees and employers from taking contribution “holidays”;  Change PERS vesting period to seven years;

Human Resources Department 16 Reform Options  Have PERS provide a hybrid pension system option that caps the Defined Benefit PERS pension and supplement with a risk managed PERS defined contribution plan;  Have PERS provide more formula choices with lower benefit local options.

Human Resources Department 17 Reform Options Eliminate Retiree Medical (Non- Safety)  Current Agreement  Provide 850K annually  All units must share cost  Currently in negotiations with the Retiree Medical Coalition Some bargaining units have agreed to opt out

Human Resources Department 18 Next Steps Negotiate with miscellaneous employees’ Retirement Coalition regarding:  New retirement tier plan;  Employer Paid Member Contribution (EPMC) Negotiate with miscellaneous employee bargaining groups for greater share of PERS contributions