1 STAFF REPORT
DATE: February 8, 2022
TO: Justin Hess, City Manager
FROM: Betsy McClinton, Management Services Director
VIA: Julianne Venturo, Assistant Management Services Director BY: Julie Chaidez , Administrative Analyst II
SUBJECT: Introduction of an Ordinance and Adoption of a Resolution of Intention to Authorize and Approve an Amendment to a Contract between the City Council of the City of Burbank and the Board of Administration of the California Public Employees’ Retirement System (CalPERS) to Include Additional Employee Contributions toward Their Pension for Burbank City Employees’ Association
RECOMMENDATION
1. Introduce AN ORDINANCE OF THE COUNCIL OF THE CITY OF BURBANK
AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN THE
CITY OF BURBANK AND THE BOARD OF ADMINISTRATION OF THE
CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM TO ADD
COST SHARING PURSUANT TO GOVERNMENT CODE SECTION 20516.
2. Adopt A RESOLUTION OF INTENTION TO APPROVE AN AMENDMENT
TO CONTRACT BETWEEN THE BOARD OF ADMINISTRATION
CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM AND THE
CITY COUNCIL CITY OF BURBANK.
BACKGROUND & DISCUSSION
Additional Pension Contributions
On January 23, 2018, the City Council approved revisions to the City’s Financial Policy regarding employee compensation to provide that “the City and employees
MANAGEMENT
SERVICES
2 will evenly share the Normal Cost of employee pensions.” The Normal Cost of employee pensions is established annually by the California Public Employees’ Retirement System (CalPERS), based on their actuarial report. Implementing the Council’s policy does not result in any pension benefit enhancements, but, rather, Classic employees are paying more toward their exist ing, unenhanced pension.
Therefore, when applied consistently, the Council’s adopted compensation policy benefits the City by significantly improving the five year forecast, eliminating inequities among employees, and providing consistent direction during labor negotiations.
CalPERS requires a separate administrative process when implementing the additional employee contributions (cost share) through a pension contract amendment. Since the adoption of Council’s financial policy, the City has processed an amendment to the CalPE RS pension contract to allow Classic employees in the Burbank Police Officers’ Association, Burbank Management Association, Burbank Fire Fighters -Chief Officers Unit, Burbank Fire Fighters, International Brotherhood of Electrical Workers , and unrepresented employees to pay more toward the Normal Cost of their pension. Additionally, t he City reached an agreement with the Burbank City Employees’ Association (BCEA) to allow Classic employees to make additional contributions toward their pension, effective June 12, 2022. BCEA is the final employee group to agree to have Classic Members contribute more toward their pension, as listed in Column 3 below . Upon implementation of the additional employee pension contribution, all City employees will be paying half the Normal Cost of their respective pension’s Normal Cost.
Classic CalPERS Member Contributions
Column 1 Column 2 Column 3 Column 4
Bargaining
Group
Current Employee
Contribution
Additional Employee
Contribution
Total Employee
Contribution
BCEA 8% 1.14% 9.14%
As previously mentioned, the additional employee contributions will not enhance the City’s pension benefit. The additional contributions will, however, bring employee groups closer in alignment with the Councils’ adopted financial policy, which will result in several important benefits:
• Positively impacting the City’s five year forecast. As a result of the Public Employees’ Pension Reform Act (PEPRA), employees hired on or after 3 January 1, 2013 (PEPRA employees) are required to pay half the Normal Cost of their pension. However, BCEA Classic employees (those hired prior to January 1, 2013) are not paying half of the Normal Cost. As Classic employees begin to pay half the Normal Cost of their pension, the City will realize monetary savings which will assist in maintaining a stable five year forecast.
• Eliminating inequity among employees. PEPRA employees currently pay more toward their pension than Classic employees for a lesser benefit, while Classic employees pay less toward their pension for a better benefit. This creates an inequity among employees within BCEA. By processing the CalPERS contract amendment for Classic BCEA employees , pension contributions will be more equitable.
• Ensuring employee pensions are financially stable. By paying more toward their pension, such as half the Normal Cost, employees help to ensure the long- term financial stability of the City’s pension plans. Financial stability benefits employees by ensuring the security of their retirement pensions, and benefits the City by reducing volatility and ensuring more predictable costs, which can open opportunities for the City to move toward fully funding past service costs.
Process to Implement Additional Pension Contributions
While Council has already approv ed the agreement with BCEA, CalPERS requires a separate administrative process when implementing the additional contributions through a pension contract amendment. According to the agreement with BCEA, and following completion of the CalPERS contract amend ment process, the employees’ additional contributions will be effective the pay period beginning June 12, 2022. The first step in the process is for Council to adopt a Resolution of Intention and introduce the ordinance amending the CalPERS contract. An amendment to the CalPERS contract that changes employees’ rate of contribution, such as the additional contributions, requires a secret ballot election among the affected employees. The secret ballot election must follow Council’s adoption of the Resolution of Intention and precede the adoption of the final documents. Staff anticipates the election among Classic BCEA employees will pass, but the BCEA MOU has a contingency in place in case the election fails, which will still result in the payment of half the normal cost. Staff will return to Council for adoption of the final ordinance following the completion of the secret ballots.
4 FISCAL IMPACT
There is no fiscal impact associated with the adoption of the Resolution of Intention. However, upon completion of the CalPERS contract amendment process, the employees’ additional contribution toward the Normal Cost of their pensions will result in a total cost savings of approximately $179,523 to the General Fund in Fiscal Year 2022- 2023.
CONCLUSION
To align with Council’s adopted financial policy, and because of the positive benefits that are expected to be realized from the additional pension contributions, staff recommends the City Council introduce the ordinance authorizing the contract amendment (Attachment 1) and adopt the Resolution of Intention (Attachment 2).
ATTACHMENTS
Attachment 1 – Ordinance for Adoption
Attachment 2 – Resolution for Adoption