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2010-3693 OrdORDINANCE IMPLEMENTING PENSION PROVISIONS OF 2009-2012 COLLECTIVE BARGAINING AGREEMENTS WITH AFSCME,AND GSA ORDINANCE NO.I 2010-3593 AN ORDINANCE OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, AMENDING THE MIAMI BEACH EMPLOYEES' RETIREMENT PLAN; IMPLEMENTING PROVISIONS OF THE 2009-2012 COLLECTIVE BARGAINING AGREEMENTS BETWEEN THE CITY AND THE AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES (AFSCME), AND GOVERNMENT SUPERVISORS ASSOCIATION .(GSA); IMPLEMENTING SIMILAR RETIREMENT PLAN AMENDMENTS FOR MEMBERS WHO ARE NOT INCLUDED IN ANY BARGAINING UNIT; PROVIDING FOR SEVERABILITY; REPEALING ALL ORDINANCES IN CONFLICT THEREWITH; AND PROVIDING AN EFFECTIVE DATE. BE IT ORDAINED BY THE CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA: Section 1. Section 2.14 of the Miami Beach Employees' Retirement Plan created by Ordinance 2006-3504, as subsequently amended, is amended to read: 2.14 ~"Final Average Monthly Earnings" means one-twelfth of the average annual earnings of the Member during the two highest paid years of creditable service except as otherwise provided in this Section 2.14. Notwithstanding the foregoing, for any Member who became a member of the Unclassified System prior to October 18, 1992 and was continuously a member of the Unclassified System from that date until March 18. 2006 ~h~ ~~^+~~~^~~~+~...oT~+,.~~, ~~Final Average Monthly Earnings" means one-twelfth of the average annual earnings of the Member during the two highest paid years of creditable service, but shall not in any event be less than one-twelfth of the earnings of the Member during the twelve months immediately preceding March 18. 2006 (b) Notwithstanding section 2.14(a) above, for any Member who is in a classification within the AFSCME or GSA bargaining units, and for any Unclassified or "Other" Member. effective September 30, 2010 "Final Average Monthly Earnings" means: 1. For those Members who as of September 30, 2010 have attained normal retirement aQe or are within 24 months from normal retirement age, "Final Average Monthly Earnings" shall have the same meaning as in section 2.14(a) above. 2. For those Members who as of September 30. 2010 are between 24 and 36 months from normal retirement age, "Final Average Monthly Earnings" means one-twelfth (1/12) of the average annual earnings of the Member during the three (3) highest paid years of creditable service. 3. For those Members who as of September 30. 2010 are between 36 and 48 months from normal retirement age. "Final Average Monthly Earnings" means one-twelfth (1/122 of the average annual earnings of the Member during the four (4) highest paid vears of creditable service. 4. For those Members who as of September 30 2010 are more than 48 months from normal retirement age, "Final Averaae Monthly Earnings" means one-twelfth (1/12) of the average annual earnings of the employee during the five (5) highest paid years of creditable service. Section 2. Section 6.02 of the Miami Beach Employees' Retirement Plan created by Ordinance 2006-3504, as subsequently amended, is amended to read: 6.02 Contributions by Members (a) Each Member shall contribute to the Plan eight percent (8%) of earnings, except as otherwise provided in this Section 6.02. Notwithstanding the preceding sentence effective July 14. 2010, each Member in a classification within the AFSCME and GSA bargaining units, and each Unclassified and "Other" Member shall contribute to the Plan ten percent (10%) of earnings except as otherwise provided in this Section 6 02 The contributions made by each Member to the Plan shall be deducted from the Member's Earnings and designated as Employer contributions pursuant to section 414(h) of the Internal Revenue Code. Such designation is contingent upon the contributions being excluded from the Members' gross income for Federal Income Tax purposes. For all other purposes of the Plan, such contributions shall be considered to be Member contributions. (b) Notwithstanding subsection (a) above, all persons entering service with the City prior to April 1, 1993 who are in the classifications within the AFSCME bargaining unit; -2- all persons entering service with the City prior to February 21, 1994 who are in classifications within the CWA (MBEBA) bargaining unit, and all persons entering service .with the City prior to August 1, 1993 who are in classifications within the GSA bargaining unit or classified as "Other", who were members of the Classified Plan continuously from the date they entered service with the City until March 18, 200 ,shall contribute to the Plan ten percent (10%) of their earnings throughout their service as a Member of this Plan. Notwithstanding the preceding sentence, effective Juiy 14, 2010, each Member described in the preceding sentence who is in a classification within the AFSCME or GSA bargaining units shall contribute to the Plan twelve percent (12%) of earnings: and effective January 18, 2010. each Member described in the preceding sentence classified as "Other" shall contribute to the Plan twelve percent (12°1°) of earnings. (c) Notwithstanding subsection (a), above, Members of the Unclassified System who entered service with the City prior to October 18, 1992, were continuously members of the Unclassified System from that date until March 18. 200 and who became Members of this Plan on March 18. 2006+"~4,~+;,~a* shall contribute to the Plan ten percent (10%) of their earnings. Notwithstanding the preceding sentence, effective January 18, 2010, each Member described in the preceding sentence shall contribute to the Plan twelve percent (12% of earnings. (d) Notwithstanding subsection (a), above, Members who are in classifications within the CWA bargaining unit, members of the Classified System who became Members of this Plan on March 18. 2006+"1TTeZITGG+T~1^~P"G'~QC~C-i ~T hin nrn•innr~nr. and are not in any bargaining unit, and members of the Unclassified System who became Members of this Plan on March 18. 2006 ,who accrue the maximum retirement benefit payable under the Plan and continue in City employment, shall contribute to the Plan an amount equal to the applicable percentage contribution in accordance with subsections (a), (b) and (c), above, but such percentage shall be applied only to the amount of earnings in excess of such Members' rate of earnings at the time the member accrued the maximum retirement benefit payable under the Plan. For example, if a Member with earnings of $2,000 each pay period attains the maximum benefit percentage payable under the plan (80% or 90%, depending on which cap applies to the member), the employee contribution will cease until the member has earnings in excess of $2,000, at which time the Employee contribution would be 10% (or 12~%, depending on the contribution rate that is applicable) of the excess over $2,000. If the member's earnings increase to $2,500 per pay period, the Member would contribute $50.00 (at the 10% contribution rate) each pay period. The limitation on member contributions provided in -3- this subsection shall apply to Members in classifications within the AFSCME and GSA bargaining units upon ratification of a collective bargaining agreement that provides for such limitation. Section 3. Article 13 of the Miami Beach Employees' Retirement Plan created by Ordinance 2006-3504, as subsequently amended, is amended to read: ARTICLE 13. Employees hired on or after September 30, 2010. Notwithstanding_dny other provision of the Plan, for employees hired on or after September 30 2010, other than employees hired in classifications within the CWA (MBEBA) baraaining unit the provisions of the Miami Beach Employees' Retirement Plan created by Ordinance 2006- 3504. as subsequently amended, shall be applicable, except as follows: a. The normal retirement date shall be age 55 with at least thirty (30~ years of creditable service. or aae 62 with at least five (5) years of creditable service. b. The early retirement date shall be the date on which the member's age plus years of creditable service equal 75. with a minimum age of 55 c. Final averaae monthly earnings shall be an averaae of the highest five (5) years of employment. d. The benefit multiplier shall be 2.5% multiplied by the member's years of creditable service. subject to a maximum of 80% of the member's FAME. e. The retiree Cost of Living Adjustment shall be 1.5% per year with the first adjustment deferred to one year after the end of the DROP. f. The employee contribution shall be 10% of salary; g. The standard form of benefit shall be a lifetime annuity. h. Members who separate from Citv employment with 5 or more years of creditable service but prior to the normal or early retirement date shall be eliaible to receive a normal retirement benefit at age 62. i. Employees shall be eliaible to enter the DROP at the normal retirement age specified in paragraph a, above, and may participate in the DROP for a maximum of 5 years -4- > > Section 4. Conflicts and Severability. (a) All Ordinances, and parts of ordinances, in conflict herewith shall be and the same, are hereby repealed. (b) In the event any article, section, paragraph, sentence, clause, or phrase of this Ordinance shall be adjudicated invalid or unconstitutional, such adjudication shall in no manner affect the other articles, sections, paragraphs, sentences, clauses or phrases of this Ordinance, which shall be and remain in full force and effect as fully as if the item so adjudged invalid or unconstitutional was not originally a part hereof. Section 5. Effective Date. This Ordinance shall take effect ten days following adoption, except as otherwise specified herein. -5- Aviv - 3~v9~ PASSED and ADOPTED by the City Commission of the City of Miami Beach this. 15thday of September , 2010. ayor Attest: APPROVEp AS TO (Seal) FORS `~ ~NGUAGE & FOR EXECUTION. 1st Reading - July 14, 2010 2nd Reading - September 15, 2010. CityAtt 7/y~fj Date T:\AGENDA\2010\July 14\Regular\MBERP Ordinance.doc -6- COMMISSION ITEM SUMMARY Condensed Title: An Ordinance Of The Mayor And City Commission, Of _The City Of Miami Beach, Amending The Miami Beach Employees' Retirement Plan; Implementing Provisions Of The 2009-2012 Collective Bargaining Agreements Between The City And The American Federation Of State, County And Municipal Employees, Local 1554 (AFSCME), And Government Supervisors Association Of Florida/OPEIU Local 100 (GSA); Implementing Similar Retirement Plan Amendments For Members Who Are Not Included In Any Bargaining Unit; Providing For Severability; Repealing All Ordinances In Conflict Therewith; And Providin An Effective Date. 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 (Surreys, Environmental Scan, etc.: N/A Should the City Commission adopt the Ordinance to amend the Miami Beach Employees' Retirement Plan on second reading? Issue: Item Summa /Recommendation: SECOND READING PUBLIC HEARING The City has been negotiating with the American Federation of State, County, and Municipal Employees, Local 1554 (AFSCME); the Communications Workers of America, Local 3178 (CWA); and the Government Supervisors Association of Florida/OPEIU, Local 100 (GSA) to negotiate changes to the Miami Beach Employees' Retirement Plan (MBERP) in order to effectuate recurring savings in the City's Annual Required Contribution (ARC) to the plan, as well as a reduction in the plan's Unfunded Accrued Actuarial Liability (UUAL). The Administration negotiated a two percenf (2%) increase to the employees' contribution to the pension system, a phased-in change to the Final Average Monthly Earnings (FAME), and changes to MBERP for future employees for the AFSCME and GSA bargaining units. In keeping with the spirit of treating similar groups of employees in a consistent manner, the same changes will be implemented for Unclassified and "Others" employees. The City is still negotiating with the CWA with the goal of reaching the same Agreement. Collectively, these changes result in considerable savings to the City both short and long term. This Ordinance was approved on first reading on July 14, 2010. The Administration recommends approving the ordinance on second readin . Advisory Board Recommendation: Financial Information: ENDA\2010\September 15\Re ar\MBERP Or finance Summary.doc ~GENaA,TE~ I'~5 H ~~~ ~~ ~A~~ - ~- a - - - - .. ........, r~i ..7~p~~rG ~ ~Q{~Inl~~ Ramiro In uanzo Sign-Offs: Department ,Director ~ Assistant Ci Mana ec __ tY 9 Ci Mana er h/ g _amiro In uanzo- ilda erns ez ~ Jorge M~6.onzalez i m MIAMI BEACH City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachH.gov COMMISSION MEMORANDUM TO: Mayor Matti Herrera Bower and Members of the City Commission FROM:. Jorge M. Gonzalez, City Manage DATE: September 15, 2010 SECOND READING PUBLIC HEARING SUBJECT: AN ORDINANCE OF THE MAYOI't~"~-ND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, AMENDING THE MIAMI BEACH EMPLOYEES' RETIREMENT PLAN; IMPLEMENTING PROVISIONS OF THE 2009-2012 COLLECTIVE BARGAINING AGREEMENTS BETWEEN THE CITY AND THE AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES, LOCAL 1554 (AFSCME), AND GOVERNMENT SUPERVISORS.. ASSOCIATION OF FLORIDA/OPEIU LOCAL 100 (GSA); IMPLEMENTING SIMILAR RETIREMENT PLAN AMENDMENTS FOR MEMBERS WHO ARE NOT INCLUDED IN ANY BARGAINING UNIT; PROVIDING FOR SEVERABILITY; REPEALING ALL ORDINANCES IN CONFLICT THEREWITH; AND PROVIDING AN EFFECTIVE DATE. ADMINISTRATION RECOMMENDATION This Ordinance was approved on first reading on July 14, 2010. The Administration recommends that the City Commission approve the ordinance on second reading. 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 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 $1-5.3 million. In addition, the City Commission also directed the .Administration to negotiate with the respective unions for pension reform 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 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 the Communications Workers of America, Local 3175 (CWA)) to .implement Commission Memorandum September 15, 2010 MBERP Pension Ordinance AFSCME and GSA Page 2 of 5 changes to MBERP for current and future employees that are the same for all general employees, including the Unclassified and "Others". This is in addition to the wage and other economic concessions the City was negotiating with all Unions. The target for pension reform for the general employees' salary groups is twelve and one half percent (12.5%) of pension value applicable towards the FY2010/2011. Based on this 12.5% target, the target savings was approximately $2.3 million for FY2010/2011. After assessing a number of options to reach the target savings, the City determined that changing the Final Average Monthly Earnings (FAME) for all general employees who participate in MBERP, 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, would yield the target savings for the general employees' pension plan. By implementing the change in FAME for the AFSCME, GSA, Unclassified and "Others" salary groups, the City would realize a savings to the City's Annual Required Contribution (ARC) of $1,316,031. Unfortunately, since the CWA has not agreed to the changes the City has not completely-met its pension target at this point for the general employees. If the change in FAME was implemented for the CWA salary group, the City would realize an additional savings of $587,424, for a total savings of $1,903,445 towards the City's October 1, 2010 ARC. It should be noted that when this item was initially presented to the City Commission on first reading at the -July 14, 2010 City Commission meeting, the Administration was only able to report the estimated figures that were provided to the City by Gabriel, Roeder and Smith (GRS), the actuary for the general employees' pension plan at that time, The Actuarial Impact Statement with changes to all employees in the AFSCME, GSA, Unclassified, and "Others" salary groups was submitted by GRS to the MBERP Board and subsequently approved by the Board on August 10, 2010. In addition, GRS estimates that the City would recognize approximately $300,000 in actuary gains for the FY2010/2011 valuation period (assuming all assumptions remaining the same), which in turn would be realized as a savings to the City's Annual Required Contribution (ARC) next year. ANALYSIS The negotiated changes'pertaining to pension for AFSCME, GSA, Unclassified and "Others" include the following: Additional Two Percent (2%) Employee Pension Contribution Although the additional two percent (2%) employee pension contribution is a wage concession, it also has an impact on the pension. The savings resulting from this additional contribution for all general employees who participate in MBERP was not included in the $2.3 million target pension savings referenced above. However, based on the Actuarial Impact Statement adopted by the MBERP Board, GRS has recognized the additional two percent (2%) contribution as a reduction to the City's ARC. Below is a summary of the impact to each of the affected employee groups: Government Supervisors Association of Florida/OPEIU Local 100 (GSA) -Previously, on October 29, 2009, after a total of seven (7) sessions held, negotiators for the City and GSA successfully concluded negotiations for a successor Collective Bargaining Agreement (Agreement). The term of the Agreement was for three (3) years, from October 1, 2009 through September 30, 2012, with reopener provisions for the second and third years for pension reform and other economic related articles. The ratified agreement included an additional two percent (2%) increase to the employee's pension contribution for all active GSA members who participate in the Miami Beach Employees' Retirement Commission Memorandum September 15, 2010 MBERP Pension Ordinance AFSCME and GSA Page 3 of 5 Plan (MBERP) beginning on January 18, 2010. The additional employee pension contribution funds have been maintained in an agency account (where the City acts on behalf of the employee in collecting the funds and transmitting those funds to the appropriate agency). The funds collected prior to October 1, 2010 were to be applied to offset the City's required annual contribution to MBERP during the plan year beginning October 1, 2010. On June 3, 2010, the negotiation teams for the City and GSA began negotiations for the economic reopener provisions applicable for years two (2) and three (3) of the ratified Collective Bargaining Agreement. After two (2) negotiation sessions held, the City and GSA reached a tentative agreement. During the negotiations for the economic reopeners, GSA raised concerns. that their members began contributing the additional two percent (2%) employee pension contribution well before employees in the other Classified bargaining units (American Federation of State, County and Municipal Employees, Local 1554 (AFSCME) and Communications Workers of America, Local 3178 (CWA)). The City and GSA have agreed as part of the amended Agreement to start the additional pension contribution upon the ratification of the AFSCME successor Collective Bargaining Agreement (which was ratified by the City Commission at the July 14, 2010 City Commission meeting). Any funds already collected from GSA members between January 1, 2010 through July 18, 2010, were refunded to them and the funds collected between July 20, 2010 and September 30, 2010 will be applied to offset the City's required annual contribution to MBERP during the plan year beginning October 1, 2010. Any funds collected on and after October 1, 2010 will be sent directly to MBERP. Upon the ratification of the AFSCME contract, GSA members as a result of the contract re-opener for FY 2010/2011 and FY 2011/2012, saw an increase to the required employee contribution from ten percent (10%) to twelve percent (12%) of earnings-for "TierA" employees (hired priorto August 1, 1993), and an increase to the required employee contribution from eight percent (8%) to ten percent (10%) of earnings for "Tier B" employees (hired on or after August 1, 1993). This contribution commenced with the pay period beginning on July 19, 2010 and will continue forward through the remaining term of the GSA Collective Bargaining Agreement. American Federation of State County and Municipal Employees, Local 1554 (AFSCME) -During negotiation sessions, AFSCME 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 "TierA" employees (hired priorto 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). At the City Commission of July 14, 2010, the City Commission authorized the Administration to create an agency account, as was done with the GSA contributions, for the purposes of retaining the additional two percent (2%) employee contribution. These funds will be applied to offset the City's required annual contribution to MBERP during the plan year beginning October 1, 2010. Any funds collected on and after October 1, 2010 will be sent directly to MBERP. Unclassified and "Others"On January 18, 2010, the Unclassified and "Others" employees were the first group of employees who began contributing an additional two percent (2%) of earnings towards their pension contribution. These funds have been held in an agency account, as was done with the GSA contributions, for the purposes of retaining the additional two percent (2%) employee Commission Memorandum September 15, 2010 MBERP Pension Ordinance AFSCME and GSA Page 4 of 5 contribution. These funds will be applied to offset the City's required annual contribution to MBERP" during the plan year beginning October 1, 2010. Any funds collected on and after October 1, 2010 will be sent directly to MBERP. Other Pension Changes for Current and Future Employees Change in the Final Average Monthly Earnings (FAME) Calculation Methodology -During the AFSCME negotiations and the GSA reopener negotiations, both groups agreed to the changes in pension requested by the Administration. This included a five (5) year FAME instead of a two (2) year FAME, and changes for employees hired after the implementation. However, concerns were raised about changing the FAME for certain employees who are close to retirement. 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, as described below: • For those MBERP members who, as of September 30, 2010, are of orwithin two (2) years of normal retirement age, the FAME will remain being based on the two (2) highest paid years of creditable service. • For those MBERP members who, as of September 30, 2010, are between two (2) and three (3) years from normal retirement age, the FAME will be based on the three (3) highest paid years of creditable service. • For those MBERP members who, as of September 30, 2010, are between three (3) and four (4) years from normal retirement age, the FAME will be based on the four (4) highest paid years of creditable service. • For those MBERP members who, as of September 30, 2010, are more than four (4) years from normal retirement age, the FAME will be. based on the five (5) highest paid years of creditable service. In addition to the savings the change in FAME will yield next fiscal year, it will also yield a savings of 2.12% of payroll for all future years. Therefore, the City anticipates a recurring annual savings to the City's ARC of approximately $1.5 million for all future years, exclusive of CWA. Changes for future employees - In addition to changing the FAME, AFSCME and GSA have also agreed to the following pension plan changes for all future employees covered under the AFSCME and GSA bargaining units that are hired after the amendment to the City's pension ordinance. As with the other changes, the same provisions will apply to future Unclassified and "Others" employees. Unfortunately, as of this writing, CWA has not agreed to the pension reform measures proposed by the City for current or new employees. • 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 FAME will bean 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. Commission Memorandum September 15, 2010 MBERP Pension prdinance AFSCME and GSA Page 5 of 5 • 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. GRS has stated that the implementation of the pension changes for any employees hired after the amendment to the City's pension ordinance wilt not generate any immediate savings. 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 ofseven-tenths percent (.7%) per year of payroll applied as a reduction towards the City's ARC in perpetuity. These savings will range from $910,000 in FY2011/2012 to as much as $5.995 million in FY2020/2021. These calculations are for all employees hired after the amendment to the City- pension ordinance who participate in MBERP, (including CWA). Unfortunately, as of this writing, CWA has not agreed to the pension reform measures proposed by the City, so theresulting savings may not be as high. FISCAL IMPACT According to GRS, the actuarial impact of pension-related changes for all MBERP members (excluding those in CWA) will decrease the City's ARC by $2,297,564 or 3.28% of non-DROP payroll on October 1, 2010. As has been stated above, these changes will also yield additional savings in future years. Attached is a copy of GRS' Actuarial Impact Statement that was adopted by the MBERP Board on August 10, .2010 (Attachment "A"). CONCLUSION The employees represented by AFSCME and GSA have agreed to the pension changes proposed by the City. The changes will also apply to Unclassified and "Others" employees. The provisions of MBERP will be the same for all salary groups except for CWA, as they have not yet agreed to these changes.. These proposed changes represent substantial short-term and long-term savings for the City, which would be further impacted by any savings realized from similar changes for CWA bargaining unit members. The Administration recommends that the City Commission adopt the Ordinance on second reading JMG/HMF/RI/kt T:WGENDA\2010\September 15\RegularWIBERP Ordinance.Memo.doc Gabriel Roeder Smith & Company Consultants & Actuaries One East Broward Blvd. 954.527.1616 phone Suite SOS 954.525.0083 fax Ft. Lauderdale, FL 33301-1827. www gabrielroedercom August 3, 2010. Mr. Rick Rivera Pension Administrator City of Miami Beach 1700 Convention Center Drive Miami Beach, Florida 33139 Re: Actuarial Impact Statement for Proposed Benefit Changes to the Miami Beach Employees' Retirement Plan Dear Ramiro: As requested, we have prepared the enclosed Actuarial Itnpact Statement showing the financial effect of the following proposed changes to the Miami Beach General Employees' Retirement System. The following changes would apply to-all active members except for CWA members: 1. Increase employee contributions by 2% 2. Change final average earnings period from two to five years, except for members who are less than five years away from normal retirement eligibility. 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. 3. Change the following for new hires only: a. Normal Retirement Age of 55 with 30 years of service or age 62 with 5 years of service b. Early retirement eligibility of "Rule of 75" with a minimum of age 55 c. Multiplier.of 2.5%, subject to a maximum of 80% of final average monthly earnings d. Final average monthly earnings of five years e. Normal form of payment of life annuity f. Members may participate in the DROP for up to 5 years g. Cost-of living adjustment (COLA) of 1.5% at retirement (no. COLA while in the DROP) h. Employee contributions of 10% Please note that the changes for new hires described in item (3) above will have no immediate financial impact on the Plan. 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. Mr. Rick Rivera August 3, 2010 Page 2 of 2 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. We welcome your questions and comments. Sincerely.yours, .~ ~,.~ ~--~ J. Stephen Pahnquist, AS Senior Consultant & Actuary JSP/ma Encloslues Gabriel Roeder Smith. & Company PIan City of Miami Beach Employees' Retirement Plari Valuation Date October 1, 2009. Date of Report - August 3,2010 Report Requested by Board of Trustees .Prepared by J. Stephen Palmquist Group Valued All active and inactive members. Plan Provisions Being Considered for Change Present Plan Provisions Before Change • Tier A employees contribute 10% of earnings and Tier B employees contribute 8% of earnings to the Plan • Normal Retirement eligibility is age 50 with five years of credited service for Tier A employees and age 55 with five years of credited service for Tier B employees. . • Early Retirement is available for Tier B members of the former General Plan whose age plus service is greater than 75, not earlier than age 50. • The multiplier is 3% with. a total accrual cap of 90% for Tier A members and 80% for Tier B members. • Earnings are averaged over the two highest paid years. . • The normal form of payment is a 50% joint and survivor annuity payable to the. spouse... • Members who are eligible for normal retirement may participate in the deferred retirement option . program (DROP) for up to three years. - •Retirees receive an annual cost-of--living adjustment (COLA) of 2.5%. The COLA is not payable while members are in the DROP. Proposed Plan Changes The following changes would apply to current members of the Plane Cept for CWA members: 2 • 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 September 30, 2010. 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. • Tier A employees would contribute 12% of earnings and Tier B employees contribute 10% of earnings to the Plan. The following changes would apply only to all members except CWA members who are hired after September 30, 2010: • Normal Retirement eligibility would be the earlier of age 55 with 30 years of credited service or age 62 with 5 years of credited service. • Members who are at least age 55 and whose age plus credited service is greater than 75 would be eligible to receive an early retirement benefit. • The multiplier would be 2.5% with a total accrual cap of 80%. • Earnings would be averaged over the five highest paid years. • The normal form of payment would be a life annuity • .Members who are eligible for normal retirement may participate in the deferred retvrement option program .(DROP) for up to five years. • Retirees would receive an annual cost-of-living adjustment (COLA) of 1.5%. The COLA is not payable while members are in the DROP. • Employees would contribute 10% of earnings .to the Plan.. Participants Affected The changes. would apply to active members or new members who are not members of the CWA bargaining unit as of the date of the amending ordinance. Actuarial Assumptions and Methods Same as October 1, 2009 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 Change in Actuarial Accrued Liability 30 years. Summary of Data Used in Report Satne as data used in October 1, 2009 Actuarial Valuation Report. 3 Actuarial Impact of Proposal(s) -See attached page(s). The proposed changes for current members will decrease the annual required contribution by $2,297,564 or 3.28% of Non DROP payroll: The changes for new hires will have no immediate ixnancial effect. 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. ~..... sy ~ ~. B ~ ' J. St phen Palmquist, A , MAAA, FCA Melissa R. Algayer, ,FCA Enrolled Actuary No. 08-1560 Enrolled Actuary No. 08-6467 4 CITY OF MIAMI BEACH EMPLOYEES' RETIREMENT PLAN Impact Statement --August 3, 2010 Description of Amendment The proposed ordinance incorporates the following plan changes pursuant to 2009-2012 collective bargaining agreements and would apply to active members except for members of the CWA bargaining unit: 1. Increase employee contributions by 2% 2. Change final average earnings period from two to five years, except for members who are less than five. -years away from normal retirement eligibility. 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. 3. Change the following for new hires only: a. Normal Retirement Age from 55 with 5 years of credited service to 55 with' 30 years of service or age 62 with 5 years of service b. Early retirement eligibility from of "Rule of 75" with a minimum of age 50(only for Tier B members ofthe-former General Plan} to "Rule of 75" with a minunum of age 55 c. Change multiplier from 3.0% to 2.5% with~a maximum accrual of 80% d. Final average monthly earnings from two to five years e. Normal form of payment from 50% joint and survivor annuity to life annuity £ Extend maximum DRC)P participation from 3 to 5 years g. Change cost-of-living adjustment (COLA) from 2.5% to 1.5% at retirement (no COLA during DROP participation) h. Employee contributions of 10% Funding Implications of Amendment An actuarial cost estimate is attached. .The annual required City contribution to the System would decrease by $2,297,564 or 3.28% of Non-DROP payroll. The changes for new hires will have no immediate financial effect. Certification of Administrator i believe the amendment to be in compliance with Part VII, Chapter 112, Florida Statutes and Section 14, Article X of the Constitution of the State of Florida. For the Board of Trustees as Plan Administrator 5 ANNUAL REQUIRED CONTRIBUTION (ARC) A. Valuation Date October 1, 2009 October 1, 2009 Increase/ . Valuation Increase EE Cont. (Decrease) by2% and S-Year Final Average Earnings B. ARC to Be Paid During Fiscal Year Ending ~ 9/30/201 1 9/30/2011 C. Assumed Date of Employer Contrib. 10/1/2010 10/1/2010 D. Annual .Payment to Amortize Unfunded Actuarial Liability $ 7,119,977 $ .6,782,397 $ (337,580) E. Employer Normal Cost 9,545,472. 7,762,550 (1,782,922) F. ARC if Paid on the Valuation Date: D+E 16,665,449 14,544,947 (2,120,502) G. ARC Adjusted for Frequency of Payments 18,057,014. 15,759,450 (2,297,564) H. ARC as % of Covered Payroll -Non-DROP Payroll:. -Total Payroll ~ 25.76 % 24.79 % 22.48 % 21.64 % (3.28) {3.15) I. Covered Payroll for Contribution Year - Non-DROP Payroll 70,097,549 70,097,549 - - Total Payroll ~ 72,835,309 72,835,309 - ll i . 1 I ~ 6 ' ~ ACTUARIAL VALUE OF BENEFITS AND ASSETS A. Valuation Date October 1, 2009 October 1, 2009 Increase/ ~ Valuation Increase EE Cont. (Decrease) by 2% and S-Year Final Avg age Earnings B. Actuarial Present Value of All Projected Benefits for 1. Active Members ' a. Service Retirement Benefits $ 267,872,671 $ 259,557,371 $ (8,315,300) b. Vesting Benefits 27,198,459 26,035,886 (1,162,573) c. Disability Benefits d P e ti t Di th B fi 15,514,626 14,920,228 (594,398) . r re remen ea ene ts Ret f M C ib i 5,251,473 5,059,720 (191,753) e. urn o ember ontr ut ons 651,313 ~ 685,544 34,231 f. Total 316,488,542 306,258,749 (10,229,793) 2. Inactive Members a. Service Retiree ~ & Beneficiaries b Di bili R 327,327,568 327,327,568 - . sa ty etirees 9,874,613 9,874,613 - c. Terminated Vested Members 12,914,814 12,914,814 - d. Total I 350,11 b,995 350,116,995 - 3. Total.for All Members . i 666,605,537 656,375,744 (10,229,793) C. Actuarial Accrued (PastiService) Liability per. GASB No. i25 551,698,377 547,712,969 ~~(3,985,408) D. Plan Assets 1. Market Value ~ 349,416,064 349,416,064 - 2. Actuarial Value ~ 419,393,718 419,393,718 - E: Unfunded Actuarial Accrued Liability (C-D2) 132,304,659 128,319,251 (3,985,408) F. Funded Ratio (D2 ~ C) 76.0 % 76.6 % 0.6 G. Actuarial Present Value of Projected Covered Payroll 518,982,308 518,982,308 - H. Actuarial Present Value of Projected Member Contributions ~ 39,721,439 46,502,862 6,781,424 i i ~ 7 .. CALCULATION OF EMPLOYER NORMAL COST A. Valuation Date October 1, 2009 October 1, 2009 Increase/ Valuation b7crease EE Cont. (Decrease) by 2% and S-Year Final Average Ea~~ings B. Normal Cost for 1 S ic R i B f . erv e et rement ene its $ 11,131,111 $ 10,493,268 $ (637,843) 2. Vesting Benefits 1,707,845 1,614,685 (93,160) 3. Disability Benefits 1,212,589 1,158,603 (53,986) 4. Preretirement Death Benefits 374,643 358,253 (16,390) 5. Return of Member.Contributions 214,559 214,559 - 6. Total for Future Benefits 14,640,747 13,839,368 (801,379) 7. Assumed Amount for Administrative Expenses ~ 657,393 .657,393 - 8. Total Normal Cost ~ 15,298,140 14,496,761 ~ (801,379) %_of Covered Payroll -Non-DROP Payroll 21.82 % 20.68 % (1.14) - Total Payroll ~ 21.00 % 19.90 % (1.10) C. Expected Member Contribution 5,752,668 6,734,211 981,543 of Covered Payroll -Non-DROP Payroll 8.21 % 9.61 % 1.40 -Total Payroll 7.90 % 9.25 % i.35 D. Employer Normal Cost: B8-C 9,545,472 7,762,550 (1;782,922) of Covered Payroll - Excluding DROP Payroll 13.62 % 11.07 % (2.54) -Including DROP Payroll 13.11 % 10.66 % (2.45). Ii 1 ~. ~ PARTICIPANT DATA October 1, 2009 October 1, 2009 Before Changes After Clzanges ACTIVE MEMBERS i I Number (Non-DROP) Covered A nnual Non-DROP Payroll Average Annual Non-DROP. Pay Total Covered Annual Payroll Average Annual Pay Average Age i Average Past Service., Average Age at Hire DROP PARTICIPANTS Number Annual Benefits ~ Average .Annual Benefit Average Age RETIREES & BENEFICIARIES Number Annual Benefits Average Annual Berief t Average Age j DISABILITY RETIREES i Number Annual Benefits Average Annual Benefit Average Age TERMINATED VESTED MEMBERS Number Annual Benefits Average Annual Benefit Average Age ~ 1,154 $ 70,097,549 $ 60,743 $ 72,835,309 $ 61,258 43.5 8.2 35.3 35 $ 1,763,119 $ 50,375 57.9 972 $ 28,200,927 $ 29,013 70.8 41 $ 936,354 $ 22,838 65.9 $ $ 79 1,373,077 17,381 46.9 1,154 $ 70,097,549 $ 60,743 72,835,309 61,258 43.5 8.2 35.3 35 1,763,119 50,375 57.9 972 $ 28,200,927 $ 29,013 70.8 41 $ 936,354 $ ~ 22,838 . 65.9 79 $ 1,373,077 $ 17,381 46.9 8 _,,,,, „,,,,~,_,,,,~, ~ _, __~ THURSDAY, AUGUST 19, 2010 119NE m MIAMIBEACH 'I~ CITY OF MIAMI BEACH. . - - NOTICE OF PUBLIC HEARINGS NOTICE IS HEREBY given that second readings and public hearings will be held by thQ Mayor and City Commission of the City of Miami Beach, Florida, in the Commission Chambers, 3rd floor, City Hall, 1700 Convention Center Drive, Miami Beach, Florida, on Wednesday, September 15"', 2010, to consider the following: 10:15 a.m. - - - - Ordinatrice Amending Miami Beach City Code Chapter 2, Article VII, Division 3 Entitled "Lobbyists", Section 2-482 Thereof Entitled "Registration" So As To Clarify That The Annual Lobbyisf Registration Fee Is Required To Be Paid For Each Twelve Month Period Commencing October 1 Of Each Year; And Amending City Code Section 2-485 Thereof Entitled "List Of Expenditures; Fee Disclosure; Reporting Requirements", So As To Change Annual Reporting Date For Lobbyist Expenditure And Fee Disclosure.From October 1 To February 28, And Changing Corresponding Annual Date For Post-Delinquency Lobbbyist Suspension Due To Failure To File Report After Imposition Of Penalty From December 1 To April 30, 2010. Inquiries may be directed to the City Clerk's Office (305) 673-7411 10:20 a.m. Ordinance Amending The Code Of The City Of Miami Beach, Florida; Amending Chapter 82, "Public Property," Article II, "Sale Or Lease Of Public Property," Sections 82-36 Through 82-40, Amending The Procedures For Sale Or Lease Of City Property; Providing For Inclusion In The Code Of The City Of Miami Beach. Inquiries may be directed to the Real Estate, Housing & Community Development Department (305) 67~- 7260. 10:40 a.m. Ordinance Amending Chapter 106 Of The Miami Beach City Code, Entitled '"Traffic And Vehicles," By Amending Article II, Entitled "Metered Parking," By Amending Division I, Entitled- "Generally," By Amending Section 106-55, Entitled "Parking Rates, Fees, And Penalties," By Amending Subsection (N), Entitled "Hybrid/ILEV (Inherently Low Emissions Vehicles) Vehicles Incentive," By Amending Vehicle Participation Criteria For The Hybrid/ILEV Vehicles Incentive Program To Include Vehicles With An EPA (Environmental Protection Agency) Rating Of Six "6" Or Higher ("Smartway" Designation) And Street Legal Electric Vehicles, Increasing The Number Of Reserved Hybrid Vehicle Spaces At The 42nd Street Garage From One Percent (1 %) To Two Percent (2%), Establishing One Percent (1 %) Of The Parking Spaces At The 7th Street Garage And 13th Street As Reserved For Hybrid Vehicles Only, And Establishing An Automatic Review Of All Hybrid Vehicle Incentives Upon Reaching A Hybrid Permit Sales Threshold Of Five Percent (5%) Of Total Permit Sales. - Inquiries may be directed to the Parking Department (305) 673-7275 11:50 a.m. Ordinance Amending Ordinance No. 1335, The Classified Employees' Leave Ordinance, By Amending The Provisions For Accumulation And Payment Of Annual Leave For The American~Federation Of State, County And Municipal Employees/Local No. 1554 (AFSCME). Inquiries may be directed to the Human Resources Department (305) 673- 7520 11:51 a.m. _ '~ Ordinance Amending The.Miami Beach Employees' Retirement Plan; Implementing Provisions Of The 2009-2012 Collective Bargaining Agreements Between The City And The American Federation Of State, County And Municipal Employees, Local 1554 (AFSCME), And Government .Supervisors Association Of Florida/OPEIU Local 100 (GSA); Implementing Similar Retirement Plan Amendments For Members Who Are Not Included In Any Bargaining Unit; Providing For Severability; Repealing All Ordinances In Conflict Therewith; And Providing An Effective Date Inquiries may be directed to the Human Resources Department (305).673- 7520 11:52 a.m. _ - - Ordinance Amending Part I, Subpart B, Article IX, Related Special Acts, Of The Miami Beach City Code Entitled "Pension System For Disability And Retirement Of. Members Of. Police And Fire. Departments"; implementing Provisions Of The 2009-2012 Collective Bargaining Agreements Between The City And Fire-Fighters Of Miami Beacti, IAFF Loca11510, And The Miami Beach Fraternal Order Of Police, William Nichols Lodge No. 8; Amending Section 65 Entitled "Computation Of Creditable Service; Service Record", Providing For The Purchase Of Additional Creditable Service Upon Completion Of Ten Years Of Service With The City; Amending Section 66 Entitled "Service And Disability Benefits Generally", Providing For The Inclusion Of Compensation For Certain Off Duty Services In A• Member's Salary For Pension- Purposes, And Providing For The Sale Of Unused Sick And/Or Vacation Time For Inclusion In A Member's Final Average Monthly Earnings, Subject To Certain Limitations; Amending Section 79 Entitled "Deferred Retirement Dption Plan", Providing For A Maximum. Drop Period Of Sixty Months And A Modified Cost Of Living Adjustment fluxing The Drop Period; Creating A New Section 87 Entitled "Benefits For Employees Hired On Or After~July 14, 2010"; Providing For Severability; Repeating All Ordinances In Conflict Therewith; And Providing For An Effective. Date. ~ ' Inquiries may be directed to the Human Resources Department (305) 673- 7520 11:53 a.m. Ordinance Implementing Provisions Of The 2009-2012 Collective Bargaining Agreement Between The City And Fire Fighters Of Miami Beach, IAFF Local 1510, And Miami Beach Fraternal Order Of Police, William Nichols Lodge No. 8; Creating A New Article IV Of Chapter 78, Miami Beach City Code Entitled "Health Benefits For Firefighters And Police Officers. Inquiries may be directed to the Human Resources Department (305) 673- 7520 INTERESTED PARTIES are invited to appear at this meeting, or be~represented by ari agent, or to express their views in writing addressed to the City Commission, c/o the City Clerk, 1700 Convention Center Drive, 1st Floor, City Hall, Miami Beach,'Florida 33139. Copies of these ordinances are available for public inspection during normal business hours in the City Clerk's Office, 1700 Convention Center.Drive, 1st Floor, City Hall, and Miami Beach, Florida 33139 or via the City's, web site at www.miamibeachfl.gov. This meeting maybe continued and under such circumstances additional legal notice would not be provided. Robert-E. Parcher, City Clerk City of Miami Beach Pursuant to Section 286.0105, Fla. Stat., the City hereby advises the public that: if a person decides to appeal any decision made by tfae City Commission with respect to any matter considered at its meeting or its hearing, such person must ensure that a verbatim record of the proceedings is made, which record includes the testimony and evidence upon which the appeal is to be based. This notice does not constitute consent by the City for the introduction or admission of otherwise inadmissible or irrelevant evidence, nor does it authorize challenges or appeals not otherwise allowed by law. _ To request this material inaccessible format, sign language interpreters, information on access for persons with disabilities, andlor any accommodation to review any document or participate in any city-sponsored proceeding, please contact (305) 604-2489 (voice), (305)673-7218(TTY) five days in advance to:fnitiate your request. TTY users may also call 711 (Florida Relay Service). _ :.. .. ~ - -~ . Ad #613 _ .: _ ... - ~.