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2010-27458 ResoRESOLUTION NO. 2010-27458 A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, RATIFYING A THREE (3) YEAR LABOR AGREEMENT BETWEEN THE CITY OF MIAMI BEACH AND THE AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES/LOCAL NO. 1554 (AFSCME), FOR THE PERIOD FROM MAY 1, 2010 THROUGH APRIL 30, 2013; AND AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE THE AGREEMENT. WHEREAS, the City Manager is hereby submitting to the Mayor and City Commission the attached Labor Agreement, recently negotiated between the City and the American Federation of State, County, and Municipal Employees/Local no. 1554 (AFSCME), for the employees covered by said Agreement; and WHEREAS, the previous Labor Agreement was for a three year period from May 1, 2007, through April 30, 2010; and WHEREAS, on April 30, 2010 the Collective Bargaining Agreement (Agreement) for AFSCME expired; and WHEREAS, the AFSCME membership held a ratification vote on the proposed Labor Agreement attached on July 8, 2010. The final vote was 176 in favor and 45 opposed (79.4 percent (%) of the voting members were in favor of the proposed Agreement); and NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI .BEACH, FLORIDA, hereby approving and authorizing the Administration to ratify a three (3) year labor Agreement with the AFSCME bargaining unit for the time period covering May 1, 2010 through April 30, 2013. rr// l PASSED AND ADOPTED THIS ~r~ DAY OF !~ 2010. ATTEST: ~'~~ CITY CLERK MAYO T:\AGENDA\2010\July 14\Regular\AFSCME 2010-2013 Labor Agreement Reso.doc APPROVED AS TO FORM & LANGUAGE & FOR EXECUTION ~~ v City eY Date COMMISSION ITEM SUMMARY Condensed Title: A Resolution Of The Mayor And City Commission Of The City Of Miami Beach, Florida, Ratifying A Three (3) Year Labor Agreement Between The City Of Miami Beach And The American Federation Of State, County And Municipal Employees/Local No. 1554 (AFSCME), For The Period From May i, 2010 Through April 30, 2013; And Authorizing The Mayor And City Clerk To Execute The Agreement. Key Intended Outcome Supported: Control costs of payroll including salary and fringes/ minimize taxes/ ensure expenditure trends are sustainable over the long term. Supporting Data (Surveys, Environmental Scan, etc N/A Issue: Should the City Commission adopt the resolution to ratify a three (3) years successor labor Agreement between the City and the AFSCME bargaining unit? item Summa iHecommenaatlon: To help address the challenges being faced during the FY2009/10 and the FY2010/11 budget years, the City Commission requested the Administration to budget for specific employee givebacks that would effectuate a cost savings of approximately $15.3 million over the two fiscal years, which was to be divided up proportionately amongst each of the seven (7) salary groups. AFSCME's target for their portion of employee givebacks for the two fiscal years was approximately $1.35 million. On April 30, 2010 the Collective Bargaining Agreement (Agreement) for AFSCME expired. After 12 negotiation sessions, the City and AFSCME successfully concluded negotiations and reached a tentative three (3) year labor Agreement covering the time period of May 1, 2010 through April 30, 2013. These employee concessions include a zero Cost of Living Increase for 35 months, a 24 month freeze on merits and an additional employee pension contribution of two percent (2%) effective upon ratification of the Agreement. In addition, AFSCME has also agreed to pension plan reform for current and future AFSCME employees. For current employees, the Final Average Monthly Earnings (FAME) calculation will be adjusted from the two (2) highest years and increasing it to the five (5) highest years. In exchange for the employee concessions, the City has agreed that all AFSCME bargaining unit members will be guaranteed a job with the City for the time period of May 1, 2010 through September 30, 2012. During this time period, no employee covered under the AFSCME Bargaining Unit shall be separated from the City for reasons other than disciplinary or voluntary separation. The value for the. proposed successor Agreement is estimated to generate a savings of over $2.9 million through the full term of the Agreement. In addition, these concessions will yield additional, recurring, long term savings in future fiscal years. Board Recommendation: Financial Information: Source of Amount Account - Funds: 1 Fiscal Year 1 ($156,667) Freeze on Merits, Additional 2% Pension Contribution, Chan a of FAME Zero COLA 2 Fiscal Year 2 ($1,126,375) Freeze on Merits, Additional 2% Pension Contribution, Change of FAME, 3% COLA on April 1, 2012 3 Fiscal Year 3 ($1,550,251) 2% Max on Merits, Additional 2% Pension Contribution, Change of FAME, Zero COLA; Pension Changes for Future Em to ees. OBPI Totaf $2,833,293 Financial Impact Summary: The savings for FY 2009/2010 and FY 2010/2011 total $1.28M. This represents a per person impact of $3,574 to each member of the AFSCME bargaining unit for this time period. The total savings for the three (3) year agreement total $2,833,293. In addition, these concessions will yield additional, recurring, long term savings in future fiscal ears. v.• v.c~n ~ vnwc ~c I,IOUVC 1 fdGKlrl Ramiro Inguanzo, Human Resources Director Sign-Offs• Department Director Assistant'City Manager City Manager Ramiro In uanzo Hilda Fernandez Jor a M. Gonzalez m MIAMIBEACH .°°°°.p~;,~ m MIAMIBEACH City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachfl.gov COMMISSION MEMORANDUM To: Mayor Matti Herrera Bower and Members of the City Commission FROM: Jorge M. Gonzalez, City Manager DATE: July 14, 2010 SUBJECT: A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, RATIFYING A THREE (3) YEAR LABOR AGREEMENT BETWEEN THE CITY OF MIAMI BEACH AND THE AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES/LOCAL NO. 1554 (AFSCME), FOR THE PERIOD FROM MAY 1, 2010 THROUGH APRIL 30, 2013; AND AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE THE AGREEMENT. ADMINISTRATIVE RECOMMENDATION Adopt the Resolution. BACKGROUND During the July 2009 Finance and Citywide Projects Committee (Committee) budget preparation meetings for the FY2009/2010 Budget, the Committee requested that all City of Miami Beach employees make certain financial concessions to help address the challenges being faced during the FY2009/2010 budget cycle and beyond. The Committee requested the Administration to budget for specific employee givebacks for FY2009/2010, which would in turn effectuate a cost savings of approximately $4.3 million (approximately $3.5 million savings attributed to the General Fund and $800,000 from various enterprise funds). Furthermore, in 2010 the City Commission directed the Administration to secure and budget for an additional $11 million in savings attributed to employee givebacks for FY2010/2011. Therefore, the total amount of employee givebacks for both the FY2009/2010 and FY2010/2011 is $15.3 million. The City currently has a total of seven (7) salary groups who represent employees: (1) the American Federation of State, County and Municipal Employees, Local 1554 (AFSCME); (2) the Communications Workers of America, Local 3178 (CWA); (3) the Government Supervisors Association of Florida/OPEIU, Local 100 (GSA); (4) the Fraternal Order of Police, William Nichols Lodge No. 8 (FOP); (5) the International Association of Fire Fighters, Local 1510 (IAFF) (6) Unclassified and (7) "Others" (Classified employees not represented by a bargaining unit). Based upon the direction received from the City Commission, the $15.3 million savings in employee concessions for FY2009/2010 and FY2010/2011 combined was to be divided up proportionately amongst each of the seven (7) salary groups based on total budgeted payroll and a proportionate share of the preliminary FY2010/2011 City's Annual Required Contributions to both of the City's pension plans. In addition, the City Commission also directed the Administration to negotiate with the respective unions for pension adjustment and changes to both of the City's pension plans (the Miami Beach Fire Fighters and Police Officers (Fire and Police) Pension Plan and the Miami Beach Employees' Retirement Plan (MBERP)), in order to obtain recurring savings for future years in each of the pension plans. City Commission Memorandum July 14, 2010 AFSCME 2010-2013 Ratified Collective Bargaining Agreement Page2of6 ANALYSIS On April 30, 2010 the previous three (3) year Collective Bargaining Agreement (Agreement) for AFSCME (covering the period of May 1, 2007 through April 30, 2010) expired. In anticipation of the contract expiring, negotiators for the City and AFSCME began negotiating for a successor three (3) year Agreement in February 2010. After twelve (12) negotiation sessions, the City and AFSCME successfully concluded negotiations and reached a tentative three (3) year labor agreement covering the time period of May 1, 2010 through April 30, 2013. Based on the direction from the City Commission, AFSCME's portion towards the FY2009/2010 and FY2010/2011 employee givebacks totaled approximately $1.3 million. Based on the terms and conditions tentatively agreed to between the City and AFSCME, the City estimates the value of AFSCME's portion of employee givebacks to total $1,283,042 for FY2009/2010 and FY2010/2011 combined. This represents a per person impact of $3,574 to each member of the AFSCME bargaining unit. In addition, the value for the proposed successor Agreement is estimated to generate a savings of approximately $2.8 million for the entire three (3) year Agreement. More importantly, these negotiated amendments represent long-term, recurring savings for future fiscal years. The AFSCME membership scheduled a ratification vote among its members for the proposed Agreement on Thursday, July 8, 2010. The final vote was 176 in favor and 45 opposed (79.4 percent (%) of the voting members were in favor of the proposed Agreement). The following is a summary of the most Agreement with AFSCME: Wages Cost of Livina Adjustments (COLA) -Effective May 1, 2010 through March 30, 2012, there will be no across-the-board wage increases (COLA) for this two year period for any AFSCME bargaining unit members. Gabriel, Roeder and Smith (GRS), the actuary for the MBERP, has estimated that the City's Annual Required Contribution (ARC) due on October 1, 2010 would be reduced by approximately $300,000 if no COLA were provided to any active plan participants for FY2009/2010. Furthermore, an additional $600,000 savings will be realized to the City's ARC due on October 1, 2011 if no COLA were provided to any active plan participants in FY2010/2011. The zero COLA for just the AFSCME members will generate a savings of approximately $53,000 to the City's ARC payment due on October 1, 2010, and approximately an additional $106,000 on the City's ARC payment due on October 1, 2011. The total savings for the two (2) year period is approximately $159,000. Effective with the first full pay period ending in April 2012, all active AFSCME Bargaining Unit members will receive an across-the-board COLA of three percent (3%). In addition, effective with the three percent (3%) COLA, the minimum and maximum pay rates of the salary ranges for all job classifications covered by the AFSCME bargaining unit will be adjusted accordingly. Due to this the City estimates a cost impact of $240,000 to be applied towards the City's FY2011/2012 operating budget. Performance Merit increases- Effective with the first pay period beginning in May 2010, merit salary increases will be suspended for any eligible AFSCME bargaining unit member. Merit salary increases will be reinstated effective with the first full pay period of May 2012, and will continue for the remaining term of the Agreement. However, the maximum merit salary increase a AFSCME bargaining unit member will be eligible to receive will be reduced from four percent (4%) to a maximum of two percent (2%), based on their annual performance appraisal score. It is estimated that the savings related to the merits resuming at a maximum City Commission Memorandum July 14, 2010 AFSCME 2010-2013 Ratified Collective Bargaining Agreement Page 3 of 6 of two percent (2%) instead of four percent (4%) for the AFSCME will be approximately $48,000. The value of the wage concessions (COLA and Performance Merit Increases) made by AFSCME total approximately $1.21 million over the term of the three (3) year Agreement. Approximately $516,000 will be realized during FY2009/2010 and FY2010/2011. Approximately $695,000 will be realized during FY2011/2012, primarily due to the compounding effect of no merits in FY2009/2010 and FY2010/2011. The City will spend approximately $240,000 in FY2011/2012 for the three percent (3%) COLA effective the first full pay period in April 2012. In addition, these concessions will yield additional, recurring, long-term savings in future fiscal years. Pension • Employee Pension Contribution -AFSCME has agreed to begin an additional two percent (2%) employee pension contribution for their members who participate in MBERP effective with the ratification of their Agreement (pay period beginning on July 19, 2010). This means an increase from ten percent (10%) to twelve percent (12%) of earnings for "Tier A" employees (hired prior to August 1, 1993), and an increase from eight percent (8%) to ten percent (10%) of earnings for "Tier B" employees (hired on or after August 1, 1993). The City estimates that the additional two percent (2%) contribution from AFSCME will be approximately $427,000 for FY2009/2010 and FY2010/2011 combined. In addition, the City will realize an additional savings of $320,000 in FY201 i/2012, thus providing a total savings of $747,000 through FY2011/2012. The Administration is requesting the City Commission to authorize the Administration to create an Agency Account (where the City acts on behalf of the employee in collecting the funds and transmitting those funds to the appropriate agency) only for FY2009/2010 for the purposes of retaining the additional two percent (2%) employee contribution and to offset the FY2010/2011 City's Annual Required Contribution to the general pension plan. Pension Plan Adjustments/Chanaes - As previously mentioned above, the City Commission directed the Administration to implement changes to the City's two employee pension plans (Fire and Police Pension and the MBERP) which would effectuate recurring savings in the overall reduction to the City's Annual Required Contribution (ARC), as well as a reduction in the Unfunded Accrued Actuarial Liability (UUAL). In keeping with the spirit of treating similar groups of employees in a consistent manner, the Administration has been negotiating with the respective general employee labor unions (AFSCME, GSA and CWA) to implement changes to MBERP for current and future employees that are the same for all general employees, including the Unclassified and "Others" employees. The target for pension reform for the general employees' salary groups applicable towards FY2009/2010 and FY2010/2011 is approximately $2.3 million. After assessing a number of options to reach the target savings, the City determined that changing the Final Average Monthly Earnings (FAME), which is currently one twelfth (1/12) of the average annual earnings of the Member during the two 2 highest paid years of creditable service, to one twelfth (1/12) of the average annual earnings of the Member during the five 5 highest years of creditable service, would yield the approximate target savings for MBERP. The City recognizes that there are a number of employees who have reached or are very close to reaching retirement age eligibility. In order to minimize the impacts of this pension change, the City has agreed to implement the FAME change in a phased-in approach. Upon implementation, those employees who are twenty four (24) months or less away from City Commission Memorandum July 14, 2010 AFSCME 2010-2013 Ratified Collective Bargaining Agreement Page 4 of 6 retirement age eligibility will maintain a two (2) year FAME; those employees who are between twenty-four (24) and thirty-six (36) months away from retirement age eligibility will have a three (3) year FAME calculation; those employees who are between thirty-six (36) months and forty-eight (48) months away from retirement age eligibility will have a four (4) year FAME calculation; and any employees who are forty-eight (48) months or more away from retirement age eligibility will have a five (5) year FAME calculation. By changing the FAME (phased-in) for all current employees who participate in MBERP from the employee's two (2) highest years to the employee's five (5) highest years, the pension board actuary, (Gabriel, Roeder and Smith (GRS)), estimates that the City would generate a savings to the City's ARC for FY2010/2011 of approximately $1.9 million. This amount is recurring and continues for future years, therefore resulting in additional, long-term, recurring savings in future fiscal years. AFSCME's portion of the $1.9 million in savings was based on their proportionate share of payroll as of March 2010. The estimated savings for adjusting the FAME for those employees covered under the AFSCME bargaining unit would be approximately $367,000 for FY2010/2011. This change alone for current AFSCME employees would yield an additional savings of $375,000 for FY2011/2012, thus providing a total savings form changes to FAME of approximately $742,000 for the entire term of the Agreement. In addition, GRS has indicated that these savings will continue to grow in perpetuity as long as the revised FAME formula remains in effect. Attached is a copy of GRS' Supplemental Actuarial Valuation Report for the additional proposed benefit changes to the MBERP for the change in FAME (Attachment "A"). !n addition to changing the FAME, AFSCME has also agreed to the following pension plan changes for any employees covered under the AFSCME bargaining unit that are hired after the amendment to the City's pension ordinance: • The normal retirement date will be age 55 with at least thirty (30) years of creditable service, or age 62 with at least five (5) years of creditable service. • The early retirement date will be the date on which the member's age plus years of creditable service equal 75, with a minimum age of 55. • The Final Average Monthly Earnings (FAME) will be an average of the highest five (5) years of employment. • The benefit multiplier will be two and one half percent (2.5%) multiplied by the member's years of creditable service, subject to a maximum of 80% of the member's FAME. • The retiree Cost of Living Adjustment (COLA) will be one and one half percent (1.5%) per year, with the first adjustment deferred to one (1) year after the end of the DROP. The employee contribution will be ten percent (10%) of salary. • The standard form of benefit is a lifetime annuity. • Members who separate from City employment with five (5) or more years of creditable service but prior to the normal or early retirement date will be eligible to receive a normal retirement benefit at age 62. • Employees will be eligible to enter the Deferred Retirement Option Plan (DROP) at the normal retirement age specified above and may participate in the DROP for a maximum of five (5) years. The following table illustrates a comparison of the benefits currently provided to active MBERP participants versus the benefit changes being proposed for any AFSCME employees hired after the amendment to the City's pension ordinance: GRS has stated that the implementation of the pension changes for any employees hired after the amendment to the City's pension ordinance will not generate any immediate savings for the next City Commission Memorandum July 14, 2010 AFSCME 2010-2013 Ratified Collective Bargaining Agreement Page 5 of 6 fiscal year. However, future savings will be realized beginning in FY2011/2012 with approximately $900,000 (1.92% of payroll) in savings towards the City's ARC. The pension actuary has estimated that the City will realize an additional annual reduction of seven tenths percent (.7%) per year of payroll applied as a reduction towards the City's ARC in perpetuity. Again, this is for all employees hired after the amendment to the City pension ordinance who participate in MBERP, not just those covered under the AFSCME bargaining unit. AFSCME's portion of the $900,000 in savings was based on their proportionate share of payroll as of March 2010. The estimated savings for the pension changes for future employees covered under the AFSCME bargaining unit would be approximately $162,000 to be applied in FY2011/FY2012. Attached is a copy of GRS' Supplemental Actuarial Valuation Report for the additional proposed benefit changes to the MBERP for future employees (Attachment "B"). Other Economic and Contractual Provisions • Vacation Leave - In addition to the economic adjustments mentioned above, the City and AFSCME have agreed to make adjustments to the vacation leave accrual caps for AFSCME members, increasing the annual "must use" cap from 360 to 500 hours (from one payroll year to the next payroll year) and the maximum amount of annual leave paid upon separation, retirement, termination or death from 480 to 620 hours (the 620 maximum is in the employee's final year only). This will make the vacation caps for AFSCME consistent with the other general employee salary groups, similar to the adjustments made to GSA's caps earlier this year. Reduction in Force - In exchange for the employee concessions agreed to by the AFSCME bargaining unit, the City has agreed that all AFSCME bargaining unit members will be guaranteed a job with the City for the time period of May 1, 2010 through September 30, 2012. During this time period, no employee covered under the AFSCME Bargaining Unit will be separated from the City for reasons other than disciplinary action or voluntary separation. In the event that there is an impact to an AFSCME Bargaining Unit member's position for the time period referenced above, the impacted employee will be offered an alternative position with the City for which they meet the minimum qualifications. If the impacted employee's base hourly rate is above the maximum base hourly rate of the position being offered to them, that employee will remain at their current hourly base rate even if that hourly base rate exceeds the maximum hourly base rate of the position being offered. In addition, the impacted employee will have their recall rights to the previously held position extended for an additional year; the employee's recall rights will exist for up to two (2) years after the date of the impact occurred. • Union Time Bank - In the current AFSCME Agreement there is no limit to the number of hours for the Union President and/or designee to conduct union business during regularly scheduled work hours. As part of the negotiations, AFSCME has agreed to a time bank of 1040 hours per year to be used by the Union President and his/her designee to conduct union business during regularly scheduled work hours. • Landfall Team -The new contract provides that designated Landfall Team Members be compensated at time and a half (1.5) for all hours worked related to a weather event for up to three (3) consecutive days. Employees will only qualify for the pay if the Landfall Team is activated by the City's Emergency Operations Center (EOC) and the employee reports to duty and works throughout the activation. City Commission Memorandum July 14, 2010 AFSCME 2010-2013 Ratified Collective Bargaining Agreement Page 6 of 6 CONCLUSION The terms and conditions of the proposed three (3) year labor Agreement include AFSCME employee concessions saves $1,283,042 with a total savings of $2.8 million through September 30, 2010 (with recurring savings through the term of their Agreement which expires on April 30, 2013). The Administration recommends adopting the Resolution to ratify a three (3) year labor Agreement with the AFSCME bargaining unit for the time period covering May 1, 2010 through April 30, 2013. JMG/HMF/RI/cg T:\AGENDA\2010Wu1y 14\RegularWFSCME 2010-2013 Labor Agreement Memo.doc Gabriel Roeder Smith & Company One East Broward Blvd. 954.527.1616 phone R Consultants & Actuaries Suite 505 954.525.0083 fax Ft. Lauderdale, FL 33301-1827 www.gabrielroeder.com June 4, 2010 _ Mr. Ramiro Inguanzo ~ ~; c~ ,ro Human Resources Director ~t''f, ~ :: ~ City of Miami Beach ° +~ ~ ~ 1700 Convention Center Drive ~ ~ ,,;;;~ Miami Beach, Florida 33139 ~ .t~ ~ ~ Re: Supplemental Actuarial Valuation Report for Additional Proposed Benefit Changes t~'the~+iiami Beach Employees' Retirement Plan °°° Dear Ramiro: As requested, please find the enclosed tables summarizing the financial effect of the following proposed changes to the Miami Beach General Employees' Retirement System: • Change final average earnings period from two to five yeazs, except for members who aze less than five years away from normal retirement eligibility. Members who aze eligible for normal retirement in two yeazs or less will have average earnings of two years. Members who aze eligible for normal retirement in three years will have average earnings of three years. Members who aze eligible for normal retirement in four years will have average earnings of four years. • Change final average earnings from two to five years for-all members except CWA members. We have also included aten-year projection of the required contribution under current plan provisions and each of the scenarios described above. When performing these projections, we assumed that there would be no gains and losses or assumption changes after September 30, 2009. In actuality, there will likely be losses due to investments over the next four years. This report is intended to describe the financial effect of the proposed plan changes. No statement in this report is intended to be interpreted as a recommendation in favor of the changes, or in opposition to them. The calculations are based upon assumptions regazding future events, which may or may not materialize. They are also based upon present and proposed plan provisions that aze outlined in the report. If you have reason to believe that the assumptions that were used are unreasonable, that the plan provisions are incorrectly described, that important plan provisions relevant to this proposal are not described, or that conditions have changed since the calculations were made, you should contact the author of this report prior to relying on information in the report. If you have reason to believe that the information provided in this report is inaccurate, or is in any way incomplete, or if you need further information in order to make an informed decision on the subject matter of this report, please contact the author of the report prior to making such decision. Attachment „A„ Mr. Ramiro Inguanzo June 4, 2010 Page 2 of 2 In the event that more than one plan change is being considered, it is very important to remember that the results of separate actuarial valuations cannot generally be added together to produce a correct estimate of the combined effect of all of the changes. The total savings can be considerably smaller than the sum of the parts due to the interaction of various plan provisions with each other, and with the assumptions that must be used. We welcome your questions and comments. Sincerely yours, J. Stephen Palmquist, ASA Senior Consultant & Actuary JSP/ma Enclosures Gabriel Roeder Smith & Company SUPPLEMENTAL ACTUARIAL VALUATION REPORT Plan City of Miami Beach Employees' Retirement Plan Valuation Date October 1, 2009 Date of Report June 4, 2010 Report Requested by City of Miami Beach Prepared by J. Stephen Pahnquist Group Valued All active and inactive members. Plan Provisions Being Considered for Change Present Plan Provisions Before Chance • Earnings are averaged over the two highest paid years. Proposed Plan Changes Earnings would be averaged over the five highest paid years except for members who are within less than five years away from normal retirement eligibility as of October 1, 2009. Members who are eligible for normal retirement in two years or less will have average earnings of two years. Members who are eligible for normal retirement in three years will have average earnings of three years. Members who are eligible for normal retirement in four years will have average earnings of four years. Earnings would be averaged over the five highest paid years except for CWA members. Participants Affected The changes would apply to active members as of the date of the amending ordinance. Actuarial Assumptions and Methods Same as October 1, 2009 Revised Actuarial Valuation Report . Some of the key assumptions/methods are: Investment return - 8.35% per year Salary increase - 6% per year Cost Method -Entry Age Normal Cost Method Amortization Period for Any Increase in Actuarial Accrued Liability 30 years. Summary of Data Used in Report Same as data used in October 1, 2009 Revised Actuarial Valuation Report. Actuarial Impact of Proposal(s) See attached page(s). Special Risks Involved With the Proposal That the Plan Has Not Been Exposed to Previously None Other Cost Considerations None Possible Conflicts With IRS Qualification Rules None As indicated below, the undersigned are Members of the American Academy of Actuaries (MAAA) and meet the Qualification Standards of the Academy of Actuaries to render the actuarial opinion herein. ` _ By J. Stephen Palmquist, A, MAAA, FCA Enrolled Actuary No. 08-1560 By R . Melissa R. Algayer, FCA Enrolled Actuary No. 08-6467 .:~i a a a~ a ..~i CL W V 6~ .nn O U L~ r ~L 0 ,o t~ ° ~ rn oN, o a~ o ~ ~ ~ o o '~ ~ o w d > o - O ~.+ y ~ ~ ..D Ar O ~ ~ Q .D ~ O U a O q "'~ ~ U p ~+ O ~ C7 ~ ~ ~ ~ O bA ~ ~ Q b ~ O a\ o0 ~ N ~ N ~ '~ y ~ ~ N ~ ~ U ~ n ~ -., ~ ~ ~ ~ ~ N . ~ ' A ~ ~ ~ yam., N ~--i N U y c~ b ~ ~ .~ o v ~ '~ c ~ ~ ~ ~ ~ ~ ~ a~ ~ a~ 0 0 a~ ~ ~ ~ ~~ on ~ "~ ~ ~ ~~ . ~ ~ ~ '~ y ~ ~ W . ~ ~ ~ M ~ ~ ~. O C." .~ i ~ 0 M ~ p" N O t~ N U •,.~.~ ~ ~ ~ iti ~ ~ ~ ~ a~ N .-r ~ ~ O ~ . r ~ A .~ ~ h ~., ~ c~ O ~ .5.~ ~ .1y '~ "CY ~, y .+ i.. ~ G ,b `° ° ~ a~ w o ~ -a ~ ~ ~ ~ o ~ ~ m ~ U O °' sl ~ ,~ 5 .-~ ~ U ~ ti ~ _ ~ ~O ~ ~ .b ~ ~ ~ '~ s." v ~ . 3 ~ ~ °' ~~ o a v o, ti.. ~ ~ , b ~ ~ _ c .~ y~ 2 ~' ao U ~ ~ ~ ~ ~ a~ >, c o ,~ a ~ ~ ,~ ~ .r ° ~ a~ cs. ~ ~ ¢' ~ a ~ c ~ ~ °A ~ a . ~~ ~ ~ ~ ~ ~ a~ C ~ a~ 0 0 vi N V '~ °' c .U+ ~ ~ 3 ~ ~ ~ > ~ ~ ~ m ~ N Q ~ c~ bA N N ~ ly C6 U ~ ~ y ~" U O U O U O U ^-~ U U O O N ti Projection of Annual Cost (Savings) Final Average Earnings of Final Average Earnings of Two, Three, Four, or Five Two Years for CWA Members; Years Based on Years Until Final Average Earnings of Normal Retirement Five Years for Non-CWA Members Fiscal Year Ending % of % of 9/30 Dollar Amount Payroll Dollar Amount Payroll 2011 $ (1,883,038) (2.68) % $ (1,490,804) (2.12) 2012 (1,933,335) (2.65) (1,523,116) (2.09) 2013 (1,984,518) (2.61) (1,559,450) (2.05) 2014 (2,037,751) (2.59) (1,597,239) (2.03) 2015 (2,093,112) (2.55) (1,636,538) (1.99) 2016 (2,150,688) (2.52) (1,677,410) (1.97) 2017 (2,210,567) (2.49) (1,719,916) (1.94) 2018 (2,272,841) (2.47) (1,764,123) (1.91) 2019 (2,337,606) (2.44) (1,810,099) (1.89) 2020 (2,404,962) (2.41) (1,857,914) (1.87) 2021 (2,475,011) (2.39) (1,907,640) (1.84) Note: As indicated in the cover letter, these projections have been prepared as though there would be no experience gains or losses or assumption changes after 9/30/2009. This assumption was made in order to keep the projections simple and uncluttered. Gabriel Roeder Smith & Company One East Broward Blvd. 954.527.1616 phone R Consultants & Actuaries Suite 505 954.525.0083 fax Ft. Lauderdale, FL 33301-1827 www.gabrielroeder.com June 4, 2010 c ~ .-~ z o L ~ Mr. Ramiro Inguanzo n~ u, ~ i '~ ; a Human Resources Director ~ ~ '='1 City of Miami Beach ~ a- ~ `~. .~ 1700 Convention Center Drive ~` ~ ~ ~ '~ Miami Beach, Florida 33139 n 3 rv t~ Re:.. ..Supplemental Actuarial Valuation Report for Additional Proposed Benefit Changes t6~the Miami Beach Employees' Retirement Plan Dear Ramiro: As requested, enclosed is a 10-year projection of cost savings assuming the proposed changes listed below apply to new hires of the Miami Beach Employees' Retirement Plan. When performing these projections, we assumed that there would be no gains and losses or assumption changes after September 30, 2009. In actuality, there will likely be losses due to investments over the next four years. • Normal Retirement Age of 55 plus 30 years of service or 62 with 5 years of service • Early Retirement eligibility of "Rule of 75" with a minimum of age 55 • Multiplier of 2.5% for all service • Final average earnings of five years • Normal form of payment of life annuity • Extend DROP to 5 years • Retiree COLA of 1.5% (no COLA while in the DROP) • Employee contributions of 10% Since the Normal Retirement Age would be raised, we used the same normal retirement probabilities that are currently used for Tier B members. All other assumptions and provisions are the same as outlined in the October 1, 2009 report. This report is intended to describe the financial effect of the proposed plan changes. No statement in this report is intended to be interpreted as a recommendation in favor of the changes, or in opposition to them. The calculations are based upon assumptions regarding future events, which may or may not materialize. They are also based upon present and proposed plan provisions that are outlined in the report. If you have reason to believe that the assumptions that were used are unreasonable, that the plan provisions are incorrectly described, that important plan provisions relevant to this proposal are not described, or that conditions have .changed since the calculations were made, you should contact the author of this report prior to relying on information in the report. Attachment ~~8~~ Mr. Ramiro Inguanzo June 4, 2010 Page 2 of 2 If you have reason fo believe that the information provided in this report is inaccurate, or is in any way incomplete, or if you need further information in order to make an informed decision on the subject matter of this report, please contact the author of the report prior to making such decision. We welcome your questions and comments. Sincerely yours, C J. Stephen Palmquist, ASA Senior Consultant & Actuary JSP/ma Enclosure Gabriel Roeder Smith & Company Projection of Annual Cost (Savings) New Benefit Structure for New Entrants Fiscal Year Ending Dollar % of 9/30 Amount Payroll 2011 $ - - 2012 (910,469) (1.25) 2013 (1,451,167) (1.91) 2014 (2,057,695) (2.61) 2015 (2,573,495) (3.14) 2016. .. (3,118,987) (3.66) 2017 (3,627,557) (4.09) 2018 (4,163,830) (4.52) 2019 (4,779,456) (4.99) 2020 (5,376,792) (5.39) 2021 (5,994,726) (5.78) Benefit Structure for New Entrants: • Normal Retirement Age of 55 plus 30 years of service or 62 with 5 years of service • Early Retirement eligibility of "Rule of 75" with a minimum of age 55 • Multiplier of 2.5% for all service • . Final average earnings of five years • Normal form of payment of life annuity • Extend DROP to 5 years • Retiree COLA of 1.5% (no COLA while in the DROP) • Employee contributions of 10% Note: As indicated in the cover letter, these projections have been prepared as though there would be no experience gains or losses or assumption changes after 9/30/2009. This assumption was made in order to keep the projections simple and uncluttered.