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Adopt a resolution to amend the Public Agency Retirement System 2.7% @ 55 Retirement Enhancement Plan for non-safety, at-will civil service exempt employees in the Legislative, Executive, and Senior Management Groups; and Authorize the Director of Human Resources to execute the amendment
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Published Notice Required? Yes ____ No _X _
Public Hearing Required? Yes ____ No _X _
DEPARTMENTAL RECOMMENDATION:
The Department of Human Resources recommends the Board of Supervisors:
1. Adopt a resolution to amend the Public Agency Retirement System (PARS) 2.7% @ 55 Retirement Enhancement Plan for non-safety, at-will civil service exempt employees in the Legislative, Executive, and Senior Management Groups; and
2. Authorize the Director of Human Resources to execute the amendment.
SUMMARY:
On October 1, 2002, the Board of Supervisors adopted a resolution adopting the PARS Trust for non-safety, at-will, civil service exempt employees in the Legislative, Executive, and Senior Management Groups and designated the Director of Human Resources as Plan Administrator. This Plan provides a supplemental retirement benefit for employees with prior CalPERS service credit under a retirement formula of less than 2.7% @ 55 who retire(d) from the County with a minimum of eight years of County service. For example, if an otherwise eligible employee had prior CalPERS service credit from a different employer with a formula of 2.5% @ 55, the PARS Plan for County of Solano would pay the 0.2% difference between the two formulas, in effect bringing the prior service credit years up to the 2.7% formula.
On April 3, 2012, in an effort to contain future retirement costs, the County adopted a 2% @ 60 retirement tier for Miscellaneous employees hired on or after May 4, 2012. Also, on April 3, 2012, the Board of Supervisors approved an amendment to the PARS plan limiting PARS eligibility to employees hired into County service before May 4, 2012. The rationale for the amendment focused on the fact that retaining the Plan as then written would reduce savings that had been otherwise achieved in the Legislative, Executive, and Senior Management Groups by the Board action of implementing the new retirement tier. However, language in the April 2012 PARS amendment was unclear that employees hired prior to May 4, 2012, who later become part of the Legislative, Executive, or Senior Management Groups after May 4, 2012, were not intended to be PARS eligible as the intent was to reduce pension costs. This present proposed amendment clarifies language and would close the Plan to additional persons being added as described, effective on the date of the Board’s adoption of this proposed Resolution.
Since April 3, 2012, staff estimates that approximately four employees may have become potentially eligible for PARS benefits by virtue of having been hired prior to May 4, 2012 and then promoting into the Legislative, Executive, or Senior Management Groups after May 4, 2012. Those employees would be unaffected by the action proposed today. Under the Plan, eligibility is determined at the time of the employee’s retirement. Therefore, under the multiple criteria set forth in the Plan, it is not possible to state today whether or not those persons would ultimately be determined eligible at the time of their future retirement. Should those four employees retire from the County in the Legislative, Executive, or Senior Management Groups, and meet all the other Plan requirements, staff estimates the Plan cost for those four employees would be approximately $446,400. This is not a cost associated with the action proposed in this staff report but is instead an approximate indicator of potential costs incurred since April 2012 without this proposed amendment. This amendment is proposed to curtail such additional costs.
FINANCIAL IMPACT:
The County has been making periodic payments to PARS to fund the estimated amount needed for the employees whom, as of April 3, 2012, staff believed would become eligible for the PARS benefit at retirement. The County will now add the additional four employees to its calculations which is not a financial impact of this proposed action. Rather, this proposed action has a financial savings impact for the County’s future expenditures toward the Plan, because it will prevent the eligibility of additional persons to join the group. Absent this proposed action, a person who was otherwise eligible could promote into the Legislative, Executive, or Senior Management Groups and, if all other criteria are met, become eligible for benefits under the Plan. The cost of the PARS benefit for a newly promoted person is removed by this action and is a savings to the County. It is impossible, however, to estimate the dollar amount associated with this savings as it is not possible to know the number of County employees who might promote into the Legislative, Executive, or Senior Management Groups between now and prior to their retirement.
The costs associated with preparing the agenda item are nominal and absorbed by the Department’s FY2023/24 Working Budget.
DISCUSSION:
When the Board acted on April 3, 2012, staff believed the effect of that action was to stop employees from being eligible for PARS upon promotion into Legislative, Executive, or Senior Management on or after May 4, 2012. However, the language in the item that was submitted to the Board requires clarification to ensure the intended result. As written, the Plan Amendment lists the following criteria for eligibility:
(a) Is employed as a full-time or permanent part-time non-safety Executive, Legislative, or Senior Management Employee of the Employer on or after November 24, 2002;
(b) Was hired by the Employer prior to May 4, 2012;
(c) Is at least fifty-five (55) years of age;
(d) Has completed eight (8) or more years of full-time (equivalent) continuous employment with the Employer in an Eligible Classification as of the last day of employment with the Employer; or, for Employees who were previously employed with the Employer in a full-time Eligible Classification and who are subsequently rehired prior to May 4, 2012, must have completed at least a total of ten (10) years of employment with the Employer in a full-time Eligible Classification, of which, at least five (5) years are continuous with the Employer, as of the last day of employment with the Employer;
(e) Has terminated employment with the Employer and concurrently retired under CalPERS, and remains in retired status under CalPERS; and
(f) Has applied for benefits under this Plan.
To more accurately reflect the intent of the Plan Amendment to achieve cost savings, the criteria should specify that eligible employees occupy a qualifying position on or after November 24, 2002 but before the date the amendment is adopted by the Board, as specified in the Plan Amendment attached to this Board item.
Staff is recommending the Board of Supervisors adopt the proposed PARS Plan amendment, since retaining the Plan as written could cancel some of the intended savings achieved by implementing the lower retirement tier for employees in the Executive, Legislative and Senior Management Groups. If approved, the Director of Human Resources, as the designated Plan Administrator, will execute the Plan Amendment (attached to the staff report for reference).
ALTERNATIVES:
The Board of Supervisors could choose not to adopt the resolution; however, staff does not recommend this alternative, since staff believes it was the Board’s intent to close the Plan to contain future retirement costs.
OTHER AGENCY INVOLVEMENT:
The Department of Human Resources worked with the County Administrator’s Office, County Counsel, and PARS on this Board item.
The Department of Human Resources notified all County bargaining units of its intent to amend the PARS Plan to reaffirm elimination of the Plan.
CAO RECOMMENDATION:
APPROVE DEPARTMENTAL RECOMMENDATION