HomeMy WebLinkAbout2004-02-09 City CouncilCity of Palo Alto
City Manager’s Report
4
TO:HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: HUMAN RESOURCES
DATE:
SUBJECT:
FEBRUARY 9, 2004 CMR: 129:04
APPROVAL OF RESOLUTION OF THE COUNCIL OF THE CITY OF
PALO ALTO TO COMMENCE PAYING AND REPORTING THE
VALUE OF EMPLOYER PAID MEMBER CONTRIBUTIONS FOR
FIRE DEPARTMENT PERSONNEL (IAFF)
RECOMMENDATION
Staff recommends that Council approve the attached resolution to implement Government
Code Section 20636(c) (4) pursuant to Section 20691 to commence paying and reporting the
value of Employer Paid Member Contributions (EPMC) for Fire Department personnel.
BACKGROUND
A contracting agency with CalPERS may agree to pay all or a portion of the normal
contributions otherwise required to be paid by members of an employee group. When the
employer pays the employee’s contribution to PERS, it is called "Employer-Paid Member
Contributions" (EPMC). In 1994, the City Council authorized the conversion of EPMC to
salary in an employee’s final compensation period for all employee groups other than
International Association of Fire Fighters (IAFF). Instead, for IAFF, effective June 24, 1995,
the City discontinued payment of the EPMC of 9% to PERS and instead increased the base
pay of f’u’efighters by the 9%, and required Fire Safety members to pay the employee PERS
contribution out of their salaries.
Paying employee (as well as employer) PERS contributions and reporting them to PERS as
special compensation is one of several ways an employer can pay employees’ retirement
benefits (for retirement-qualifying employees), each of which costs the City roughly the same
amount in retirement costs. Another opti.on for accomplishing the same result is for an
employer to pay EPMC for an employee group, then to implement a "final year reversal" by
PERS contract amendment, under which the EPMC is converted to salary in an employee’s
final (or highest) year, to increase the salary rate on which the employee’s retirement amount
will be based. This is what the City currently does for all employee groups other than IAFF.
CMR: 129:04 Page 1 of 3
Since the enactment of PERS anti-retirement spiking legislation in 1994, employers must
fully pay PERS for the increased retirement benefit. The third way to accomplish the same
result is to increase the salary of all employees in a group by the amount the employer would
have paid in EPMC, with the result that the base salary on which each employee’s retirement
is ultimately based will be that much higher than it otherwise would have been.
The latter is what the City and IAFF agreed to for IAFF members in 1995. This option was
found more advantageous to the City at that time because of the administrative challenges of
implementing the final year conversion option under PERS’ then newly enacted anti-spiking
law. (The City did not have this option with the other employee groups because of the timing
of the enactment of the law in relation to negotiations with those groups.) CalPERS would
collect approximately the same amount of money from the City to fund retirement benefits in
each of the above cases; it is just paid in different manners.
DISCUSSION
As part of the effort to "strengthen the bottom line" by adopting cost-savings measures, staff
proposed the City reduce ftrefighters’ salaries by 9% and instead pay the 9% employee
contribution directly to PERS (as the City did prior to June 1995). Due to a reduction in
overtime and other associated costs, this change will result in an estimated 2003-04 savings
of $62,500, depending on its final implementation date. In order to make this change, PERS
requires the City to adopt a resolution to commence paying and reporting the value of EPMC.
This benefit will consist of paying 9% as EPMC and reporting the same value of
compensation earnable as special compensation. Reporting the value of EPMC will not
increase the City’s costs, and in fact will reduce the City’s overtime costs, because the EPMC,
amount will not be factored into employees’ base salary. The cost for this provision is
expected to be the same as the cost of paying EPMC and converting it to salary in the final
compensation period as done for the other employee groups.
During negotiations, IAFF agreed to the City’ s proposal (to begin paying EPMC again, and
to reduce IAFF members’ base salaries accordingly), and the change was authorized on
November 24, 2003, when the City Council approved a Memorandum of Agreement with
IAFF for fiscal year 2003-2004.
RESOURCE IMPACT
The annualized cost savings associated with this change is approximately $160,000. This is
due to direct reductions in base pay used to calculate overtime expense along with associated
indirect reductions in salary-related benefit costs. Depending on the formal approval date of
this change, however, actual 2003-04 General Fund cost savings will be closer to $62,500 as
only ten pay periods remain in the current fiscal year. This change will remain in place at
least until the City and IAFF negotiate a new agreement applicable to fiscal 2004-05.
CMR: 129:04 Page 2 of 3
Therefore, further overtime cost savings are anticipated in future periods.
POLICY IMPLICATIONS
This request does not represent any change to existing City policy.
ENVIRONMENTAL REVIEW
This is not a project under the California Environmental Quality Act (CEQA).
ATTACHMENTS
Attachment Resolution of the Council of the City of Palo Alto to Commence Paying
and Reporting the Value of Employer Paid Member Contributions for
Fire Department Personnel (IAFF).
PREPARED BY Sandra T.R. Blanch, Risk and Benefits Manager
DEPARTMENT HEAD:
LESLIE LOOMIS
Director of Human Resources
CITY MANAGER APPROVAL:k~~, d~~-’~
EMIL~ HARRISON
Assistant City Manager
CMR: 129:04 Page 3 of 3
NOT YET APPROVED
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO
ALTO TO COMMENCE PAYING AND REPORTING THE VALUE
OF EMPLOYER PAID MEMBER CONTRIBUTIONS FOR FIRE
DEPARTMENT PERSONNEL (IAFF)
WHEREAS, the governing body of the City of Palo Alto has
the authority to implement Government Code Section 20636(c) (4)
pursuant to Section 20691; and
WHEREAS, the governing body of the City of Palo Alto has
a written labor policy or agreement which specifically provides
for the normal member contributions to be paid by the employer,
and reported as additional compensation; and
WHEREAS, one of the steps in the procedures to implement
Section 20691 is the adoption by the governing body of the City
of Palo Alto of a Resolution to commence paying and reporting
the value of said Employer Paid Member Contributions (EPMC); and
WHEREAS, the governing body of the City of Palo Alto has
identified the following conditions for the purpose of its
election to pay EPMC:
¯This benefit shall apply to all employees of Local 1319,
International Association of Fire Fighters (IAFF).
This benefit shall consist of paying 100% of the normal
member contributions (9%) as EPMC, and reporting the
same percent of compensation earnable (excluding
Government Code Section 20636(c) (4)) as additional
compensation.
¯The effective date of this Resolution shall be February
2, 2004.
NOW, THEREFORE, the Council of the City of Palo Alto
does RESOLVE as follows:
SECTION i. The governing body of the City of Palo Alto
elects to pay and report the value of EPMC, as set forth above.
//
//
//
040129 sm 8120444 1
NOT YET APPROVED
SECTION 2. The Council finds that this is not a project
under the California Environmental Quality Act and, therefore,
no environmental impact assessment is necessary.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
.City Clerk
APPROVED AS TO FORM:
Mayor
APPROVED:
Senior Asst. City Attorney City Manager
Director of Human Resources
Director of Administrative
Services
Fire Chief
040129 sm 8120444 2