TO: HONORABLE MAYOR FROM: Jennifer Schembri
AND CITY COUNCIL
SUBJECT: SEE BELOW DATE: August 2, 2023
Approved Date
8/8/23
SUBJECT: ORDINANCE AMENDING THE POLICE AND FIRE DEPARTMENT
RETIREMENT PLAN TO EXTEND THE DEADLINE FOR A RETIRED
MEMBER TO FILE AN ELECTION NAMING A NEW SPOUSE OR
DOMESTIC PARTNER AS BENEFICIARY
RECOMMENDATION
Approve an ordinance amending Section 3.361468 of Chapter 3.36 of Title 3 of the San José Municipal Code to extend the deadline for a retired member to submit post-retirement optional settlement election paperwork naming a new spouse or domestic partner as beneficiary from 30 days to 90 days after the date of marriage or the establishment of domestic partnership in the Police and Fire Department Retirement Plan.
SUMMARY AND OUTCOME
By approving the San José Municipal Code changes in the proposed ordinance, the City Council will extend the deadline for a retired member to submit post-retirement optional settlement election paperwork naming a new spouse or domestic partner as beneficiary from 30 days to 90 days after the date of marriage or the establishment of the domestic partnership.
BACKGROUND
Under the current San José Municipal Code, Section 3.36.1468:
A. Notwithstanding any provision in this Part 9.5 to the contrary, a person who is receiving a monthly retirement allowance or is receiving a monthly allowance from the retirement fund pursuant to Section 3.36.1640 and who marries or establishes a domestic partnership after beginning to receive such monthly allowance may elect an optional settlement under this section by filing a written election with the retirement board on a form provided by the secretary to the board.
COUNCIL AGENDA: 8/22/23
FILE: 23-1076
ITEM: 2.8
HONORABLE MAYOR AND CITY COUNCIL
August 2, 2023
Subject: Ordinance Amending the Police and Fire Department Retirement Plan to Extend the Deadline for a Retired Member to File an Election Naming a Spouse or Domestic Partner as Beneficiary
B. The election for an optional settlement must be filed within the time specified in this Subsection B.
[Paragraphs 1 and 2 to Subdivision (b) are inapplicable]
C. The election must be filed within thirty days after the date of the marriage or the establishment of the domestic partnership, in the case of any person not described in paragraph 1. Or paragraph 2. Above.
The available options allow the retired member to re-apportion their projected retirement benefits between themselves and their new spouse or domestic partner, providing a continuance of benefits to their surviving spouse or domestic partner after their death.
The Police and Fire Retirement Board requested an amendment to San José Municipal Code, Section 3.36.1468(b)(3) extending the deadline from 30 days to 90 days. This was in part due to a retired member who was denied his post-election optional settlement after failing to submit the post-retirement optional settlement election paperwork for his new spouse within the 30-day window.
ANALYSIS
The Office of Employee Relations, along with the Police and Fire Retirement Board, believe changing the current 30-day deadline to a 90-day deadline is a more reasonable window for the submission of post-retirement optional settlement election paperwork for the retired member’s new spouse or domestic partner. This also ensures a continuance of benefits to the surviving spouse or domestic partner.
The Board’s actuary, Cheiron, provided the monthly benefit amount for the post-retirement optional settlement is adjusted so that it is the actuarial equivalent of the monthly benefit amount prior to the election of the post-retirement optional settlement. Consequently, the election, whenever it is made, would not increase the total aggregate cost of the benefit in terms of normal cost and unfunded liability.
Cheiron further provided there would be a small potential anti-selection risk associated with the post-retirement optional settlement in which retired members who know they have a short life expectancy could change their optional settlement to name their new post-retirement spouse as beneficiary, extending the payment of benefits from the Plan. This risk is currently managed both by making the election effective one year after the date of marriage and limiting the election period to 30 days after the date of marriage. Extending the election period from 30 to 90 days does not materially change the management of the anti-selection risk, so there would be no change to the actuarial equivalence.
HONORABLE MAYOR AND CITY COUNCIL
August 2, 2023
Subject: Ordinance Amending the Police and Fire Department Retirement Plan to Extend the Deadline for a Retired Member to File an Election Naming a Spouse or Domestic Partner as Beneficiary
In addition to the deadline change to 90 days, the City Administration is proposing a housekeeping change to San José Municipal Code Section 3.36.1468 E(2.) to clarify the applicability of the effective date, which is one year from the date of the marriage or establishment of the domestic partnership.
The proposed ordinance was also provided to the San José Police Officer’s Association and International Association of Firefighters, Local 230, and there were no comments.
EVALUATION AND FOLLOW-UP
There is no evaluation or follow-up needed for this San José Municipal Code change.
COORDINATION
The memorandum was coordinated with the City Attorney’s Office and the City Manager’s Budget Office.
PUBLIC OUTREACH
This memorandum will be posted on the City’s Council Agenda website for the August 22, 2023 City Council meeting.
COMMISSION RECOMMENDATION/INPUT
The San José Municipal Codes changes were discussed during the January 2023 Police and Fire Retirement Board meeting and provide to the Mayor and City Council via letter on February 2, 2023. The request by the Board has been incorporated in the proposed ordinance. The proposed ordinance was also provided and discussed during the August 2023 Police and Fire Retirement Board meeting.
CEQA
Not a Project, File No. PP17-008 General Procedure and Policy Making resulting in no changes to the physical environment.
HONORABLE MAYOR AND CITY COUNCIL
August 2, 2023
Subject: Ordinance Amending the Police and Fire Department Retirement Plan to Extend the Deadline for a Retired Member to File an Election Naming a Spouse or Domestic Partner as Beneficiary
PUBLIC SUBSIDY REPORTING
This item does not include a public subsidy as defined in section 53083 or 53083.1 of the California Government Code or the City’s Open Government Resolution.
Jennifer Schembri
Director of Employee Relations
Director of Human Resources
For questions, please contact Sarah Steele, Senior Executive Analyst, at (408) 535-8158.