92-2812 Ordinance
ORDINANCE NO, 92-2812
AN ORDINANCE OF THE CITY OF MIAMI BEACH,
FLORIDA, AMENDING ORDINANCE NO. 88-2603 WHICH
ESTABLISHED THE UNCLASSIFIED EMPLOYEES AND
ELECTED OFFICIALS RETIREMENT SYSTEM, PROVIDING
FOR THE ABILITY ON A ONE TIME ELECTION BY THE
EMPLOYEE TO TRANSFER THE VALUE OF HIS BENEFIT
TO A DEFINED CONTRIBUTION PLAN, ALSO PROVIDING
THAT ANY EMPLOYEE ENTERING THE SERVICE OF THE
CITY ON OR AFTER OCTOBER 18, 1992, MAY SELECT THE
DEFINED CONTRIBUTION PLAN OR THIS PLAN UPON
EMPLOYMENT WITH THE CITY, PROVIDING FOR
SEVERABILITY, A REPEALER AND AN EFFECTIVE DATE.
Whereas, the City Commission of the City of Miami Beach, Florida enacted
Ordinance no. 88-2603 which created the Unclassified Employees and Elected Officials
Retirement System for all employees in such service to the City; and,
Whereas, the City Commission is desirous of offering an optional defined
contribution retirement plan for unclassified employees as an alternative to this plan for
both existing and future employees,
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COMMISSION OF THE CITY
OF MIAMI BEACH, FLORIDA;
Section 1 - That Article 2 "Definitions", Section 2.05 "Employee" of Ordinance
88-2603 be amended by adding subsection (g) which will read as:
(g} Persons who have elected to join the defined contribution retirement
plan authorized under Section 401(a) of the Internal Revenue Code
of 1986 as amended.
Section 2 - That Article 3 "Membership", Section 3.05 be amended to read as
follows:
3.05 All individuals holding the position of either City Manager or City
Attorney, shall have the option to reject membership in the plan provided herein and
to be a member in a retirement program with any public trust fund named by the
aforesaid individuals and approved by the City Commission. Any employee enterin~
service with the City on or after October 18. 1992. shall have an irrevocable option
to reject membership in the plan provided herein. and select the retirement plan
provided as a defined contribution plan authorized under Internal Revenue Code
Section 401(a) as amended.which plan is sponsored by the City (the "Defined
Contribution Retirement System").
Section 3 - That Ordinance 88-2603 be amended by adding Section 5.11 "Transfer
of Benefit" to read as follows:
5.11 Transfer of Benefit
Commencing on the effective date of this ordinance and for sixty (60) days thereafter
(the "Transfer Election Period"). an employee who is a member of this system shall
have an irrevocable ri~ht to elect to transfer the present value of his accumulated
benefit or the amount of the emplovee's contributions plus the re2Ular interest as
provided for in Section 7.06(d). whichever is ereater. from this plan to the Defined
Contribution Retirement Plan. Upon such transfer. the employee shall have no
futher rights or benefits under this system.
Section 4 - All Ordinances or parts of Ordinances in conflict herewith be and the
same are hereby repealed.
Section 5 - If any section, subsection, clause or provision of this Ordinance is held
invalid, the remainder shall not be effected by such invalidity.
Section 6 - This Ordinance shall take effect on the 18 day of October, 1992.
Passed and Adopted this 8 t: h day of
,1992.
Attest:
~c.l~ ~/< ~-
City Clerk \O/\?j~~-
1st reading 9/16/92
2nd reading 10/8/92
FORM APPROVED
LEG~L ~;PT. .~
By" /~ ~
Da~ 9/?-p/f?
( I
CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH FLORIDA 33139
CITY OF MIAMI BEACH
OFFICE OF THE CITY MANAGER
TELEPHONE: (305) 673.7010
FAX: (305) 673.7782
COMMISSION MEMORANDUM NO. S73J-(j;L
TO:
Mayor Seymour Gelber and
Members of the City Commission
DATE:
September 16, 1992
FROM:
Roger M.
City Manage
SUBJECT:
Two Ordinances Allowing For and Creating A Defined Contribution
Retirement Plan as an Option for Unclassified Employees and Elected
Officials ,Retirement System
Administrative Recommendation
The Administration recommends that the City Commission adopt these Ordinances
on first reading and schedule a public hearing and second reading at the Commission
meeting of October 7, 1992.
Back~ound
At the City Commission meeting of September 2, 1992, a request was made by the
City Commission for the Administration to review the effects of the establishment of a
defined oontribution plan as an optional benefit for employees rather than the current
defined benefit plan.
The implementation of the defined contribution plan requires the adoption of two
ordinances. The first ordinance amends the current Unclassified Employees and Elected
Officials Retirement System to allow for current employees to transfer their accumulated
benefit from that plan to the defined contribution plan and also allows new employees the
option to select either of the two plans upon employment. The second ordinance authorizes
the execution of an agreement with providers of such a 401(a) defined contribution plan,
and establishes the parameters of the benefits within that plan.
Analy~
The defined contribution plan authorized in the second ordinance would
benefits for members of the system as follows:
Employee: can contribute from 5% to 15% of salary at their option
City: match employee contribution up to 10%
Vesting: immediate for unclassified, at the end of probation for others
Retirement: age 60 for new hires, age 55 for transfers
have
83
A~~~~~_~- ~
I C'--.S~
DATE
Transfers: allowed for current employees and the transfer will be equal to the
present value of accumulated benefit.
Disability: City funded long-term disability insurance for six months to life
equivalent to two-thirds of pay to a maximum of $60,000
Loans: ability to borrow up to 40% of balance using balance as collateral
Each new unclassified employee would have an irrevocable option upon employment
to select the bifurcated defined benefit plan, "Green Report", or the defined contribution
plan above described. The experience of other cities has shown that most new employees,
given this option, will select the defined contribution plan. There are two reasons that this
would be their selection. First, the defined contribution plan vests immediately for
unclassified employees and as the defined benefit plan has a 10-year vesting period, most
new employees will not anticipate working for the City for the period it would take to vest
in the defined benefit plan. Second, most of our new hires will be younger and the ability
to select a contribution level at a rate of less than the 10% required in the defined benefit
plan will allow them to increase their take-home pay.
Those current employees most likely to wish to transfer their benefit to this plan will
be those of shorter tenure with the City. Any current employee with less than four years
of service may wish to transfer his benefit for the portability feature inherent in a defined
contribution plan. 'With the amount of the transfer equal to the present value .of the
employee's accumulated benefit, the employee would be in equal position at the point of
the transfer between the two plans.
The defined contribution plan will be less costly to the City than the current
Unclassified and Elected Officials Retirement System. The City currently contributes in
excess of~20% of the employee's covered pay as its contribution into the defined benefit
plan. The maximum contribution, as a percentage of payroll, that the City will be required
to fund into the defined contribution plan is 10% of covered pay with the additional cost
of providing a long-term disability insurance program for that plan. The savings to the City
will be approximately 10% of the amount of total payroll cost for all employees selecting
this plan over the Unclassified Plan. This total covered payroll cost will be approximately
$2.25 million by the end of the first year of the implementation of the new plan. This
would equate to $225,000 in savings to the City on an annual basis. Such savings will
increase in future years as more incoming employees select the defined contribution plan
over the defined benefit plan.
Conclusion
With the anticipated savings of $225,000 for the first year of implementation of the
new defined contribution plan, and as this plan will be solely at the discretion of the
employee, the Administration recommends that the City Commission adopt these
ordinances providing for the amendments to the current Unclassified Employees and
Elected Officials Retirement System and the establishment of the defined contribution plan.
81