City Council Memorandum
TO: HONORABLE MAYOR AND CITY COUNCIL DATE: APRIL 5, 2022 FROM: HUMAN RESOURCES DEPARTMENT WARDS: ALL
SUBJECT: CORRECTION AMENDMENT TO THE CONTRACT BETWEEN THE CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM (CALPERS) AND THE CITY OF RIVERSIDE TO IMPLEMENT A RETIREMENT COST-SHARING PROVISION OF AN ADDITIONAL 1% FOR ALL CLASSIC LOCAL FIRE TIER 1 AND TIER 2 MEMBERS AS DEFINED BY CALPERS IN THE FIRE AND FIRE MANAGEMENT UNITS FOR A TOTAL OF 8% ISSUE:
Approve a contract correction amendment between the California Public Employees’ Retirement System (CalPERS) and the City of Riverside for the implementation of a retirement cost-sharing provision for all Tier 1 and Tier 2 members as defined by CalPERS for Fire employees for an additional 1% for a total of 8%, as specified in the respective Fire and Fire Management Units Memoranda of Understanding.
RECOMMENDATION:
That the City Council approve a contract correction amendment between CalPERS and the City of Riverside for the implementation of a cost-sharing provision of an additional 1% for all Tier 1 and Tier 2 members as defined by CalPERS for Fire members for a total of 8%.
BACKGROUND:
On October 2, 2021, the City Council adopted an Ordinance authorizing an amendment to the CalPERS contract to implement a retirement cost-sharing provision of an additional 1% for all Tier 1 Fire members for total of 8% as specified in Fire and Fire Management Units Memoranda of Understanding (MOU) beginning the first pay period following December 30, 2021. In accordance with the Fire and Fire Management MOUs, the cost-sharing provision affects all Tier 1 Fire members defined as those members hired before June 11, 2011. The contract amendment adopted on October 2, 2021, as prepared by CalPERS, indicated it applied to Tier 1 Fire members with no reference to a hire date as CalPERS does not specify hire dates on contract amendments. However, CalPERS has a different tier structure and defines Tier 1 employees as those hired prior to January 1, 1984, and Tier 2 Fire members as those hired prior to June 11, 2011. Therefore, the contract amendment inadvertently omitted the reference of Tier 2 members as defined by CalPERS and a correction amendment must be made and approved by City Council to ensure affected members are properly captured and reported.
DISCUSSION:
Pursuant to the cost-sharing provisions set forth in the California Government Code Section 20516(f) and effective with the contract correction amendment, all Fire members in Tier 1 and Tier 2 as defined by CalPERS will begin paying an additional portion of the employer contribution equal to 1% of pensionable income for a total of 8%.The cost-sharing provision for Fire Tier 1 members will be retroactively effective to January 7, 2022, consistent with the effective date of the CalPERS contract correction amendment. Per the Fire and Fire Management MOUs, this affects employees that fall under Tier 1 only, however, CalPERS defines these employees as Tier 1 and Tier 2 Fire employees.
STRATEGIC PLAN ALIGNMENT:
This item contributes to Strategic Priority No. 5 - High Performing Government and Goal 5.4 - Achieve and maintain financial health by addressing gaps between revenues and expenditures and aligning resources with strategic priorities to yield the greatest impact.
Community Trust – Requiring employees to pay their share into the CalPERS pension plan will improve public trust that the City is implementing changes to ensure its long-term financial health.
Equity – Cost sharing is a fair and equitable method to distribute the burden of rising pension costs. These measures were extended equally to all other bargaining groups and unrepresented employees.
Fiscal Responsibility – Increasing the employee contribution creates an immediate cost reduction for the City using a phased approach and requiring employees to pay the full employee share.
Innovation – CalPERS cost-sharing is a creative solution to meet the City’s current and changing needs. This change provides the City with an opportunity to save money by requiring employees to share a portion of the employer costs.
Sustainability & Resiliency – In order for the City to sustain the rising cost of pension obligations an increase to employee contributions for Tier 1 Fire employees (Tier 2 and PEPRA employees have always paid 100% of the employee’s share) are necessary and have already been negotiated.
FISCAL IMPACT:
There is no fiscal impact associated with this recommendation. The estimated savings resulting from the Fire employees contributing an additional 1% for a total of 8% of the employer contribution to retirement have been incorporated into the FY 2021/22 Budget.
Prepared by: Rene Goldman, Human Resources Director
Certified as to
availability of funds: Edward Enriquez, Chief Financial Officer/City Treasurer Approved by: Rafael Guzman, Assistant City Manager
Approved as to form: Phaedra A. Norton, City Attorney
Attachments:
Resolution Authorizing a Correction to the Contract Amendment Presentation
CalPERS Fire Correction Contract Amendment ● Page 2