2014-3864 Ordinance ---77707777�77
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ORDINANCE NO. 2014-3864
AN ORDINANCE OF THE MAYOR AND CITY COMMISSION OF THE
CITY OF MIAMI BEACH, FLORIDA, IMPLEMENTING PROVISIONS
OF THE 2013-2016 COLLECTIVE BARGAINING AGREEMENT
BETWEEN THE CITY AND THE AMERICAN FEDERATION OF
STATE, COUNTY AND MUNICIPAL EMPLOYEES, (AFSCME)
LOCAL 1554; AMENDING THE MIAMI BEACH EMPLOYEES'
RETIREMENT PLAN CREATED BY ORDINANCE 2006-3504;
AMENDING SECTION 2.26 OF THE PLAN BY EXTENDING THE
DEFERRED RETIREMENT OPTION PLAN (DROP) PROGRAM
fR.01M THREE (3) TO FIVE (5) YEARS FOR ELIGIBLE MEMBERS;
AMENDING SECTION 5.13 TO REFLECT AMENDED ELIGIBILITY
AND PARTICIPATION REQUIREMENTS AND AMENDED DROP
PLAN FEATURES; AMENDING SECTION 4.03 BY ELIMINATING
THE PURCHASE OF ADDITIONAL CREDITABLE SERVICE
EFFECTIVE APRIL 23, 2015; AMENDING SECTION 6.02 OF THE
PLAN BY REINSTATING AN ADDITIONAL TWO PERCENT
MEMBER CONTRIBUTION FOR MEMBERS OF THE AFSCME
BARGAINING UNIT HIRED PRIOR TO SEPTEMBER 30, 2010; AND
ELIMINATING THE ADDITIONAL TWO PERCENT MEMBER
CONTRIBUTION WHEN THE PLAN ACTUARY CONFIRMS THAT
THE CITY'S ANNUAL REQUIRED CONTRIBUTION TO THE
RETIREMENT PLAN IS 23.5% OF PAYROLL OR LESS; 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 2.26 of the Miami Beach Employees' Retirement Plan created by
Ordinance 2006-3504, as subsequently amended, is hereby further amended as follows:
2.26 Deferred Retirement Option Plan (DROP) —A program under which a Member who
has reached the normal retirement date may elect to retire for purposes of the Plan but
continue employment with the City for up to thirty-six (36) months, and have his/her
monthly retirement benefit paid into a DROP account during the DROP period, in
accordance with Section 5.13. Notwithstanding the preceding sentence:
a) Effective July 17, 2013, Members within classifications in the CWA bargaining unit
who were hired prior to October 27, 2010, and Members not included in any bargaining
unit, who were hired prior to September 10, 2010, may elect to retire for purposes of the
Plan but continue employment with the City for up to sixty (60) months, and have their
monthly retirement benefit paid into a DROP account during the DROP period, in
accordance with Section 5.13.
(b) NeWthst-andiRg the PFeGeding , Effective October 16, 2013, Members
within classifications in the GSAF bargaining unit who were hired prior to July 14, 2010,
may elect to retire for purposes of the Plan but continue employment with the City for up
to sixty (60) months, and have their monthly retirement benefit paid into a DROP
account during the DROP period, in accordance with Section 5.13.
(c) Effective April 23, 2014, Members within classifications in the AFSCME bargaining
unit who were hired prior to September 30, 2010, may elect to retire for purposes of the
Plan but continue employment with the City for up to sixty (60) months, and have their
monthly retirement benefit paid into a DROP account during the DROP period, in
accordance with Section 5.13.
Section 2. Section 5.13 of the Miami Beach Employees' Retirement Plan created by
Ordinance 2006-3504, as subsequently amended, is hereby further amended as follows:
5.13 A deferred retirement option plan ("DROP") is hereby established for eligible
Members, as follows:
(a) Eligibility and participation:
1. A Member who attains the normal retirement date shall be eligible to
participate in the DROP.
2. A Member's election to participate in the DROP shall be irrevocable.
A Member may participate in the DROP only once.
3. An eligible Member may participate in the DROP for a maximum of
thirty-six (36) months. Effective July 17, 2013, Members within
classifications in the CWA bargaining unit, who were hired prior to
October 27, 2010, and Members not included in any collective
bargaining unit, who were hired prior to September 10, 2010, may
participate in the DROP for a maximum of sixty (60) months. Effective
October 16, 2013, Members within classifications in the GSAF
bargaining unit, who were hired prior to July 14, 2010, may participate
in the DROP for a maximum of sixty (60) months. Effective April 23,
2014, Members within classifications in the AFSCME bargaining unit,
who were hired prior to September 30, 2010, may participate in the
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DROP for a maximum of sixty (60) months.
4. An eligible Member who elects to participate in the DROP must
provide at least thirty (30) days' advance written notice to the City of
his or her election to participate in the DROP. A Member who elects to
participate in the DROP may elect to terminate DROP participation
and City employment sooner than the maximum DROP period, with
thirty (30) days' advance written notice to the City.
5. Effective July 17, 2013, any Member within classifications in the CWA
bargaining unit, and any Member not included in any collective
bargaining unit, who previously executed an election form entitling
him/her to participate in the DROP for a period of less than sixty (60)
months and whose DROP period ceases between July 1, 2013 and
July 16, 2016, shall have a one-time opportunity to submit an
irrevocable amended election from provided by the Board, within thirty
(30) calendar days following the effective date of this ordinance,
extending his or her DROP period to a maximum of sixty (60) months
in total. Effective October 16, 2013, any Member within classifications
in the GSAF bargaining unit, who previously executed an election
form entitling him/her to participate in the DROP for a period of less
than sixty (60) months and whose DROP period ceases between
October 16, 2013 and October 15, 2016, shall have a one-time
opportunity to submit an irrevocable amended election from provided
by the Board, within thirty (30) calendar days following the effective
date of this ordinance, extending his or her DROP period to a
maximum of sixty (60) months in total. Effective April 23, 2014, any
Member within classifications in the AFSCME bargaining unit, who
Previously executed an election form entitling him/her to participate in
the DROP for a period of less than sixty (60) months and whose
DROP period ceases between April 23, 2014 and April 22, 2015, shall
have a one-time opportunity to submit an irrevocable amended
election from provided by the Board, within thirty (30) calendar days
following the effective date of this ordinance, extending his or her
DROP period to a maximum of sixty (60) months in total.
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(b) DROP plan features:
1. An eligible Member who elects to participate in the DROP will be
considered to have retired for purposes of the Plan upon entry into the
DROP, except that such Member shall be eligible to vote for and
serve as an Employee member of the Board of Trustees during the
DROP participation period. The Member's monthly retirement benefit,
determined in accordance with the Plan based on years of creditable
service and final average monthly earnings at the time the Member
enters the DROP, will be paid into the Member's DROP account every
month during the DROP period.
2. No Member contributions shall be required after a Member enters the
DROP, and the Member will not accrue any additional creditable
service or any additional benefits under the Plan after entering the
DROP. No City normal cost contributions shall be required after a
Member enters the DROP and DROP participants shall be excluded
from the covered payroll for the Plan.
3. A Member who elects to participate in the DROP shall not be eligible
for disability or preretirement death benefits under the Plan; nor shall
a Member be eligible for any post retirement adjustment provided in
Section 5.10 during the DROP participation period.
4. A Member who elects to participate in the DROP shall retain the
earned balance of annual and sick leave as of the date of entry into
the DROP, and shall continue to earn annual and sick leave during
the DROP period, in accordance with applicable City ordinances.
Alternatively, at the time of entry into the DROP, a
Member may request full or partial payment of the earned balance of
annual and sick leave as of the date of entry into the DROP, up to the
maximum allowed by applicable City ordinances for employees who
terminate City employment, but reduced by the amount of annual and
sick leave used for the purchase of additional credited service under
section 4.03, if any, at the Member's rate of compensation upon
entering the DROP; provided that the Member must retain at least 120
hours of accrued sick leave after any such payment. Upon
termination of City employment, a Member who has participated in the
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DROP shall be eligible to receive payment for the earned balance of
annual and sick leave as of the date of termination, up to the
maximum allowed by applicable City ordinances for employees who
terminate City employment, but reduced by the amount of annual and
sick leave for which payment was received upon entry into the DROP,
if any; and further reduced by the amount of annual and sick leave
used for the purchase of additional credited service under section
4.03, if any. In no event shall payments for accrued annual or sick
leave be included in a member's Earnings for purposes of the Plan.
5. As a condition of participating in the DROP, the Member must agree
to terminate City employment at the conclusion of the DROP period,
and to submit an irrevocable letter of resignation stating this prior to
entering the DROP. A Member who elects to participate in the DROP
must also submit an irrevocable written DROP election prior to
entering the DROP on a form provided by the Board. Notwithstanding
the preceding sentence, eligible Members who are participants in the
DROP on July 1, 2013, shall be given a one-time opportunity to
submit an irrevocable amended election form, as provided in Section
5.13 (a) 5., extending the DROP period to a maximum of sixty (60)
months in total. Notwithstanding the preceding sentence, eligible
Members who are participants in the DROP on October 16, 2013,
shall be given a one-time opportunity to submit an irrevocable
amended election form, as provided in Section 5.13 (a) 5, extending
the DROP period to a maximum of sixty (60) months in total.
Notwithstanding the preceding sentence, eligible Members whose
classifications are covered by the AFSCME bargaining unit who are
participants in the DROP on April 23, 2014, shall be given a one-time
opportunity to submit an irrevocable amended election form, as
provided in Section 5.13 (a) 5, extendinq the DROP period to a
maximum of sixty (60) months in total.
6. At the conclusion of the DROP period and upon termination of City
employment, the Member's monthly retirement benefit shall be paid to
the Member in accordance with the Plan. In the event of the
Member's death during or at the conclusion of the DROP period, a
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benefit may be payable in accordance with Section 5.07
8. Participation in the DROP is not a guarantee of City employment, and
DROP participants will be subject to the same terms and conditions of
employment that are applicable to employees who are not DROP
participants.
9. During participation in the DROP, the Member's monthly retirement
benefit will be paid into the DROP account, and shall be
credited/debited with earnings/losses as provided herein. The
Member may direct that their DROP account be invested in any of the
investment options approved by the Board, on forms provided by the
Board. Any gains on the Member's DROP account investments shall
be credited to the Member's DROP account; and any losses incurred
by the Member shall be deducted from the Member's DROP account
balance, and shall not be made up by the City or the Retirement Plan.
A Member's DROP account shall only be credited or debited with
earnings/losses while the Member is a participant in the DROP.
10. A DROP participant may designate a beneficiary or beneficiaries for
his/her DROP account on a form provided by the Board.
11. Within thirty (30) days following a DROP participant's termination of
City employment or death, whichever occurs first, the Member, or in
the event of the Member's death the Member's designated
beneficiary, may submit a written election on a form approved by the
Board, to receive the Member's entire DROP account balance, which
shall be distributed to the Member (or in the event of the Member's
death, to the Member's designated beneficiary or estate in
accordance with paragraph (b)9., below) in a cash lump sum, unless
the Member elects to have all or any portion of an eligible rollover
distribution paid directly to an IRA or eligible retirement plan specified
by the Member in a direct rollover. Any such direct rollover shall be
processed in accordance with Article 12 of the Plan. In the event a
Member or designated beneficiary does not submit a written election
to receive a distribution of the Member's DROP account balance
within thirty (30) days following the Member's termination of City
employment or death, the Member's DROP account shall be
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maintained by the Plan but shall not be credited with earnings/losses
after thirty (30) days following the Member's termination of City
employment or death.
12. If a DROP participant dies before his or her DROP account is
distributed, the participant's designated beneficiary shall have the
same rights as the participant with respect to the distribution of the
DROP account. If the participant has not designated a beneficiary, the
DROP account balance shall be paid to the Member's estate.
13.The Board of Trustees shall make such administrative rules as are
necessary for the efficient operation of DROP, but shall not adopt any
rule that is inconsistent with this Ordinance or the Plan.
14.The DROP shall be administered so that the Plan remains qualified
under the Internal Revenue Service Code and in compliance with
applicable laws and regulations.
Section 3. Section 4.03 of the Miami Beach Employees' Retirement Plan created by
Ordinance 2006-3504, as subsequently amended, is hereby further amended as
follows:
4.03 (a) A Member with five (5) or more years of creditable service may, at any time prior to
retirement, elect to purchase up to a maximum of two (2) years of additional creditable
service as provided in this section 4.03. Notwithstanding any provision of this Section 4.03,
effective September 30, 2013, Members whose classification is included in the CWA
bargaining unit and Members who are not included in any collective bargaining unit shall not
be eligible to purchase additional creditable service under this section 4.03.
Notwithstanding any provision of this Section 4.03, effective September 30, 2013, Members
whose classification is included in the GSAF bargaining unit shall not be eligible to purchase
additional creditable service under this section 4.03. Notwithstanding any provision of this
Section 4.03, effective April 23, 2015, Members whose classification is included in the
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AFSCME bargaining unit shall not be eligible to purchase additional creditable service under
this section 4.03. The benefit multiplier that the Member is earning at the time of the election
to purchase additional creditable service pursuant to this section 4.03 shall be applied to the
additional credited service purchased. To be eligible to purchase additional creditable
service under this section 4.03, a Member who previously elected to participate in the
Defined Contribution Retirement System (401 (a) Plan) must first purchase all available
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creditable service in accordance with section 4.04. An eligible Member may elect to
purchase additional creditable service under this section 4.03 for any of the following types
of employment prior to the employee's date of hire by the City, provided that the Member
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may not purchase such service if the Member has received or will receive a pension benefit
for the same period of employment under another retirement plan:
1. Active duty military service in the Armed Forces of the United States or the Coast Guard.
2. Full-time employment with another governmental entity.
3. Full-time employment in the private sector performing the same or very similar duties the
employee is performing for the City at the time of his/her election to purchase additional
service.
Section 4. Section 6.02 of the Miami Beach Employees' Retirement Plan created by
Ordinance 2006-3504, as subsequently amended, is hereby further amended as follows:
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
Jul 14 2010 each Member in a classification within the AFSCME and GSA bargaining
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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. Notwithstanding the
first sentence of this subsection (a), effective November 27, 2010, each Member in a
classification within the CWA (MBEBA) bargaining unit shall contribute to the Plan ten
percent(10%) of earnings, except as otherwise provided in this Section 6.02., and contingent
on State approval of an actuarial impact statement confirming a reduction in the City's annual
required pension contribution for FY 2010-2011 associated with the pension changes
contained in the 2009-2012 collective CWA collective bargaining agreement of at least
$1,000,050. 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; all
persons entering service with the City prior to February 21, 1994 who are in classifications
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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 18,2006, 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 July 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%) of earnings. Notwithstanding the first sentence of this
subsection (b), effective November 27, 2010, each Member described in the first sentence of
this subsection (b) who is in a classification within the CWA (MBEBA) bargaining unit shall
contribute to the Plan twelve percent (12%) of earnings, contingent on State approval of an
actuarial impact statement confirming a reduction in the City's annual required pension
contribution for FY 2010-2011 associated with the pension changes contained in the 2009-
2012 collective CWA bargaining agreement of at least$1,000,050.
(e) Notwithstanding subsections (a) and (b) above, for members who are in classifications
within the AFCSME bargaining unit:
1. For Members hired prior to April 30, 1993, the employee contribution shall be
twelve percent (12%) of earnings effective July 14, 2010 through April 30, 2013; ten percent
(10%) of earnings effective May 1, 2013 through April 23, 2014, and twelve percent(12%) of
earnings effective April 23, 2014.
2. For Members hired on or after April 30, 1993 and before September 30, 2010, the
employee contribution shall be ten percent(10%) of earnings effective July 14, 2010 through
April 30, 2013; eight percent (8%) of earnings effective May 1, 2013 through April 23, 2014;
and ten percent(10%) of earnings effective April 23, 2014.
3. For members hired on or after September 30, 2010, the employee contribution
shall be ten percent(10%) of earnings.
4. The employee contribution provided in paragraphs 1. and 2. above shall decrease
by two percent (2%) of earnings when the Plan actuary confirms that the City's annual
required contribution to the Plan is twenty-three and one-half percent(23.5%) of pensionable
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payroll or less. The two percent decrease in the employee contribution shall take effect on
the same date as the City's annual required contribution of twenty-three and one-half percent
(23.5%) of pensionable payroll or less.
Section 5: 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 6. Effective Date.
This Ordinance shall take effect the day of 2014,
except as otherwise provided herein.
PASSED and ADOPTED by the City Commission of the City of Miami Beach this
day of Q' , 2014.
PHILI L
MA
���co�� i0RA ED APPROVED AS TO
ATTEST:
IX
& FOR M(ECUTI N
RAF EL E. GRANADO
CITY CLERK
Casty A#to y Date
T:\NGENDA\2014\April\AFSCME\AFSCME 2013-2016 MBERP Pension DROP and Buyback Ordinance 1st rdg.docx
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Condensed Title: COMMISSION ITEM SUMMARY
An Ordinance Of The Mayor And City Commission Of The City Of Miami Beach, Florida, Implementing Provisions Of The 2013-2016 Collective
Bargaining Agreement Between The City And The American Federation Of State, County And Municipal Employees, (AFSCME) Local 1554;
Amending The Miami Beach Employees' Retirement Plan Created By Ordinance 2006-3504; Amending Section 2.26 Of The Plan By Extending
The Deferred Retirement Option Plan (DROP) Program From Three (3) To Five (5) Years For Eligible Members; Amending Section 5.13 To
Reflect Amended Eligibility And Participation Requirements And Amended DROP Plan Features; Amending Section 4.03 By Eliminating The
Purchase Of Additional Creditable Service Effective April 23, 2015;Amending Section 6.02 Of The Plan By Reinstating An Additional Two Percent
Member Contribution For Members Of The AFSCME Bargaining Unit Hired Prior To September 30, 2010; And Eliminating The Additional Two
Percent Member Contribution When The Plan Actuary Confirms That The City's Annual Required Contribution To The Retirement Plan Is 23.5%Of
Payroll Or Less; Providing For Severabilit ; Repealing All Ordinances In Conflict Therewith,And Providing An Effective Date.
Key Intended Outcome Supported:
Ensure expenditure trends are sustainable over the long-term.
Supporting Data(Surveys,Environmental Scan,etc.)N/A
Item Summary/Recommendation:
Currently, there is a three year DROP for Tier A and Tier B AFSCME MBERP members, and a five year DROP for Tier C (post 2010
employment date) members. In the collective bargaining agreement between the City and AFSCME covering the period May 1, 2013,
through April 30, 2016, the parties agreed to extend the DROP period for Tier A and Tier B AFSCME MBERP members from three to five
years, effective upon ratification of the agreement, April 23, 2014. The extension of the DROP yields savings by reducing the City's annual
required contribution (ARC)to MBERP, since DROP participants do not receive the annual retiree cost-of-living increase during their DROP
years. In addition, DROP participants do not earn additional pension benefits.
Effective April 23, 2015, AFSCME bargaining unit members will no longer have the option to purchase up to two years of prior creditable
service. On average, 157 employees elect to purchase additional creditable service in the MBERP each year. A member pays ten percent
of his or her pensionable earnings for each year of prior services purchased. The true actuarial impact is significantly higher. The ultimate
cost of the prior creditable service purchase provision is measured by the difference between the full actuarial cost of the time purchased
and the ten percent of pay for each year purchased. For example, the full actuarial cost to purchase the maximum of two years of service
to a 45 year old member with ten years of service and an annual salary of $60,000 is approximately $38,000; yet pursuant to current
provisions, the member pays $12,000.The difference of $26,000-is recognized as an experience loss and is funded by additional City
contributions over time. The effect on the ARC due to this member's service purchase is an increase of about$2,300 per year for 30 years.
Based on trends,the average annual impact of$2,300 per member represents$361,000 to the City each year based on an average of 157
buybacks per year, of which approximately$292,410 is estimated to be attributed to GSAF, CWA, Unclassified and"Others"combined; and
$68,590 is attributable to AFSCME members alone.
Effective April 23, 2014, the additional two percent pension contribution was reinstated for all AFSCME bargaining unit members, and will
not sunset. When the City's ARC reaches 23.5% of pensionable payroll or less, the City will rescind the additional two percent pension
contribution levied on employees covered by the AFSCME collective bargaining unit who participate in MBERP and were hired prior to
September 30, 2010. The estimated impact of the additional two percent pension contribution by AFSCME bargaining unit members is
approximately($541,500)for the term of the agreement, and will continue to rise as employee pensionable earnings increase over time.
The pension changes recently negotiated with AFSCME are expected to generate a savings toward the City's ARC, as well as savings off
the unfunded actuarial accrued liability(UAAL). The terms of the agreement are parallel to those reached with the Communication Workers
of America (CWA) and Government Supervisors Association of Florida (GSAF), as well as those also applied to non-represented
employees in the"others"and"unclassified"salary groups.
The collective bargaining agreement was ratified by AFSCME bargaining unit members on April 21, 2014;the City Commission ratified the
agreement on April 23,2014.
Based on the foregoing, the Administration recommends approval of the ordinance, as implementing the changes described herein will
provide pension savings in the short and long-term.
Advisory Board Recommendation:
Bud et Advisory Committee Pension Reform Initiative Recommendation Report,August 2012
Financial Impact Summary: The DROP extension will not affect the budget during FY 2013/14; however, it will result in recurring savings
off the ARC estimated in the amount of$125,000, during FY 2014/15, FY 2015/16, FY 2016/17 and FY 2017/18 for a total five year impact
of ($500,000). The salary cost attributable to the extension of the DROP for AFSCME MBERP members is as follows: $3,077 in FY
2013/14; $37,487 in FY 2014/15; $96,021 in FY 2015/16; $87,109 in FY 2016/17 and $116,786 in FY 2017/18, assuming all eligible
employees opt to extend their participation in DROP.The total five year salary increase impact for the extension of the DROP is$340,480.
In FY 2013/14 and FY 2014/15 there will be no savings from the elimination of the ability to purchase prior service; however, there will be
an anticipated savings of($28,579) in FY 2015/16; ($97,169) in FY 2016/17; and ($165,759) in FY 2017/18. Therefore, the total five year
impact of eliminating the prior service buyback is a savings of($291,507).
The projected savings from the reinstatement of the additional two percent pension contribution is as follows: ($108,000) in FY 2013/14;
($272,000) in FY 2014/15; ($277,000) in FY 2015/16; ($282,000) in FY 2016/17; and ($288,000) in FY 2017/18.The total five year impact
is a savings of($1,227,000).
The total five year combined impact of these items is a savings of($1,678,027).
City Clerk's Office Legislative Tracking:
Sylvia Cres o-Tabak, Human Resources Director
Sign-Offs.
Department Director Assistant City ManageA City Manager
Sylvia Cres o-Tabak 5L- Kathie G. Brooks Jimmy L. Morales
Agenda Item RS
� MIAMI BEACH Date
MIAMI BEACH
City of Miami Beach, 1700 Convention Center Drive,Miami Beach, Florida 33139,www.miamibeachfl.gov
COMMISSION MEMORANDUM
TO: Mayor Philip Levine and Members the City Co i imission
FROM: Jimmy L. Morales, City Manager
DATE: May 21, 2014 S OND READING AND PUBLIC HEARING
SUBJECT: AN ORDINANCE OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI
BEACH, FLORIDA, IMPLEMENTIN PROVISIONS OF THE 2013-2016 COLLECTIVE
BARGAINING AGREEMENT BETWEEN THE CITY AND THE AMERICAN FEDERATION
OF STATE, COUNTY AND MUNICIPAL EMPLOYEES, (AFSCME) LOCAL 1554;
AMENDING THE MIAMI BEACH EMPLOYEES' RETIREMENT PLAN CREATED BY
ORDINANCE 2006-3504; AMENDING SECTION 2.26 OF THE PLAN BY EXTENDING
THE DEFERRED RETIREMENT OPTION PLAN (DROP) PROGRAM FROM THREE (3)
TO FIVE (5) YEARS FOR ELIGIBLE MEMBERS; AMENDING SECTION 5.13 TO
REFLECT AMENDED ELIGIBILITY AND PARTICIPATION REQUIREMENTS AND
AMENDED DROP PLAN FEATURES; AMENDING SECTION 4.03 BY ELIMINATING
THE PURCHASE OF ADDITIONAL CREDITABLE SERVICE EFFECTIVE APRIL 23,
2015; AMENDING SECTION 6.02 OF THE PLAN BY REINSTATING AN ADDITIONAL
TWO PERCENT MEMBER CONTRIBUTION FOR MEMBERS OF THE AFSCME
BARGAINING UNIT HIRED PRIOR TO SEPTEMBER 30, 2010; AND ELIMINATING THE
ADDITIONAL TWO PERCENT MEMBER CONTRIBUTION WHEN THE PLAN ACTUARY
CONFIRMS THAT THE CITY'S ANNUAL REQUIRED CONTRIBUTION TO THE
RETIREMENT PLAN IS 23.5% OF PAYROLL OR LESS; PROVIDING FOR
SEVERABILITY; REPEALING ALL ORDINANCES IN CONFLICT THEREWITH; AND
PROVIDING AN EFFECTIVE DATE.
ADMINISTRATION RECOMMENDATION
The Administration recommends approval of the ordinance.
BACKGROUND
In 2010 the Administration negotiated changes to pension benefits for then current and future
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employees who participate in the Miami Beach Employees' Retirement Plan (MBERP). These
changes were included in the labor agreements entered into by the City with the American
Federation of State, County and Municipal Employees (AFSCME); Communications Workers of
America (CWA), Local 3178; and Government Supervisors Association of Florida (GSAF), OPEIU,
Local 100. In keeping with the spirit of treating similar groups of employees consistently, these
contractual changes were also applied to all members of the plan not covered by a collective
bargaining unit.
The changes to MBERP implemented in 2010 included an increase to the employee's pension
contribution of two percent. This increase was implemented for the general employee salary groups
as follows: Unclassified and Others in January 2010, employees covered by the AFSCME and
GSAF collective bargaining units in July 2010, and employees covered by the CWA collective
bargaining unit in November 2010. The additional employee contribution remains in effect for
Commission Memorandum
May 21, 2014
MBERP Pension Ordinance AFSCME 2"d Reading
Page 2 of 7
incumbents in all salary groups except employees covered by the AFSCME collective bargaining
agreement, which expired April 30, 2013, as the provision sunset.
The final average monthly earnings (FAME) increased from two to five years for current (Tier A and
Tier B members) and future employees (Tier C members), phasing in those members who were
between two and four years from the normal retirement age, so as not to adversely impact them.
The change in FAME yielded a reduction of approximately $1.9 million in the City's annual actuarial
required contribution (ARC). Gabriel, Roeder and Smith (GRS), the actuary for MBERP, estimated
that the change in FAME for all members would yield an annual savings ranging from $1.49 million
to $2.275 million per year (approximately 2.12 percent of payroll) each year over the next ten years.
The standard benefit is a lifetime annuity. Additional pension reform was negotiated for all
employees hired after September 30, 2010 (October 2010 for employees whose classifications are
covered by the CWA collective bargaining unit). The changes for new employees (Tier C) included:
• Normal retirement - Age 55 with a minimum of thirty years of creditable service, or age 62
with a minimum of five years of creditable service. As compared to Tier A members who can
retire at age 50 and Tier B members who can retire at age 55.
• The early retirement date will be the date on which the member's age plus years of creditable
service equals 75, with a minimum age of 55.
• The benefit multiplier will be two and one half percent multiplied by the member's years of
creditable service, subject to a maximum of 80% of the member's FAME. As compared to
three or four percent for Tier A members and three percent for Tier B members.
• The retiree Cost of Living Adjustment (COLA) will be one and one half percent per year, with
the first adjustment deferred to one year after the end of the Deferred Retirement Option
Plan (DROP) as compared to two and one half percent for Tiers A and B members.
• Employee contribution: 12 percent for Tier A members and ten percent for Tiers B and C
members.
• Members who separate from City employment with five 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.
• Members will be eligible to enter the DROP at the normal retirement age specified above and
may participate in the DROP for a maximum of five years.
The annual savings attributed to the changes for future employees beginning in FY 2011/12 was
approximately $900,000 (1.92 percent of payroll) to the City's ARC. GRS estimated that the City
would realize an additional annual reduction of seven-tenths percent per year of payroll applied as a
reduction toward the City's ARC in perpetuity. These savings on the City's ARC were estimated to
vary rom a low of 910 000 in FY 2011/12 to as much as $5.995 million in FY 2020/21.
ry $ ,
The negotiating teams for the City and AFSCME began meeting in April 2013, to negotiate a
successor agreement to the 2010-2013 collective bargaining agreement which expired April 30,
2013. After ten negotiation sessions, on March 19, 2014, the City and AFSCME reached a tentative
Commission Memorandum
May 21, 2014
MBERP Pension Ordinance AFSCME 2"d Reading
Page 3 of 7
three year agreement covering the time period May 1, 2013, through April 30, 2016. Bargaining unit
employees ratified the contract on April 21, 2014; the City Commission ratified the agreement on
April 23, 2014.
ANALYSIS
The pension changes recently negotiated with AFSCME are expected to generate a savings toward
the City's ARC, as well as savings off the unfunded actuarial accrued liability (UAAL).
The agreement with AFSCME includes the reinstatement of the additional two percent pension
contribution effective upon ratification of the three year labor agreement (April 23, 2014). The
estimated impact of the two percent contribution attributable to AFSCME/MBERP members is
approximately $108,000 in FY 2013/14. This amount will increase each year as employee
pensionable earnings rise.
The City and AFSCME have agreed to the following pension related items:
Extension of the Deferred Retirement Option Plan (DROP)
The DROP is an arrangement used by many public organizations under which employees who
would otherwise retire and collect benefits pursuant to the employer's defined benefit (pension)
retirement plan continue working for a fixed number of years. Instead of having the compensation
and additional years of service taken into account for purposes of the defined benefit plan formula,
the employees have a sum of money, equal to their monthly retirement benefit, credited during their
extended employment to an interest bearing account under the employer's retirement plan.
No further contributions are made to the employees' pension but as long as they remain in the
DROP, they continue earning their full salaries and all other applicable incentive pays, if any. If
these employees are not exempt from the provisions of the Fair Labor Standards Act (FLSA), they
earn overtime if they actually work more than 40 hours per week and they are also eligible for merit
increases and/or salary COLAs other employees may receive. When the employees leave at the
end of the DROP period, their contributions to the interest bearing account are disbursed to them by
the plan. At that point, they start collecting the monthly benefits they earned based on earlier years
of service. During the DROP period, employees are not eligible for the retiree COLA.
There are two reasons why the DROP yields saving to the City's ARC. The first, is that participants
are not eligible for the annual retiree COLA. The second is that the employee is not earning
additional pension benefits while in the DROP.
The City has already implemented a five year drop for all members of MBERP excluding members
covered by the AFSCME bargaining unit. Currently, there is a three year DROP for Tier A and Tier B
members covered by AFSCME and a five year DROP for Tier C (post-2010 employment) members
covered by AFSCME. AFSCME has agreed to extend the DROP period for Tier A and Tier B (pre-
2010 employment) members from three to five years, effective upon ratification of the 2013-2016
collective bargaining agreement.
Any employee who previously executed a form entitling him or her to enter the DROP for a period of
less than sixty (60) months in total shall be given a one-time irrevocable election, within thirty (30)
calendar days from the effective date of the conforming City ordinance amending the DROP period
as set forth herein, to execute a new form extending his or her DROP period for up to sixty (60)
Commission Memorandum
May 21,2014
MBERP Pension Ordinance AFSCME 2"d Reading
Page 4 of 7
months in total.
Based on the actuarial impact statement provided by GRS (Attachment), the total estimated impact
from extending the DROP period for all AFSCME pre-2010 employment members represents a
reduction in the present value of future benefits of approximately $1.2 million. This means the plan
would be expected to pay out $1.2 million less, in today's dollars. The City's ARC payable on
October 1, 2014, will be reduced by approximately $125,000. This savings is comprised of a
reduction in the amortization payments on the UAAL of approximately $916,000 and a reduction to
the normal cost.
The analysis provided by the pension actuary does not take into account the financial impact of
salary earnings. B extending the DROP to five ears, retire ible employees who earn
rY 9 Y 9 Y 9
higher salaries will remain employed, requiring the City to pay their higher salaries for a longer
period. That expenditure is offset somewhat by the fact that hiring new employees is postponed,
eliminating the City's contribution toward their pension. Quantifying the fiscal impact from a salary
perspective is difficult since there is no true way to forecast assumptions regarding which employees
will choose to extend their DROP participation or separate earlier.
As of our latest analysis, there are 16 AFSCME bargaining unit members in the MBERP DROP. The
cost effect on salaries caused by the extension of the DROP from three to five years for AFSCME
bargaining unit members is as follows: $3,077 in FY 2013/14; $37,487 in FY 2014/15; $96,021 in FY
2015/16; $87,109 in FY 2016/17; and $116,786 in FY 2017/18. To reach these conclusions, the
salary of each DROP member was compared to the entry level salary of a new incumbent in the
classification ultimately affected by the DROP participant's retirement. For example, when a
Municipal Service Worker III (MSW III) retires, his/her position becomes available to an incumbent in
a feeder classification and the domino effect would lead to the City ultimately hiring a new entry level
Municipal Service Worker I (MSW 1). In such example, the impact is the difference between the
MSW III's salary and the entry level salary of an MSW I. For this illustrative purpose, the assumption
was that all DROP participants take advantage of the opportunity and remain employed with the
City.
Elimination of Prior Creditable Service Purchase Option
Effective one year from date of ratification of the 2013-2016 collective bargaining agreement, the
option to purchase up to two years of prior creditable service will be eliminated.
Currently, any AFSCME/MBERP member with five or more years of service can purchase up to two
years of creditable service earned prior to the member's date of hire by the City. Such purchase is
contingent upon the member not receiving a pension benefit for the same period under another
retirement plan (§112.65, Florida Statutes). Eligible prior service includes: (1) military service in the
United States Armed Forces or Coast Guard; (2) full-time employment with another governmental
entity; or (3) full-time employment in the private sector performing the same or similar duties the
member performs for the City at the time of his/her additional service purchase. Members who
exercise this option pay ten percent of their annual rate of pensionable earnings multiplied by the
number of years and fractions of a year purchased.
On average, 157 employees elect to purchase additional creditable service in the MBERP each
year. A member pays ten percent of his or her pensionable earnings for each year of prior services
purchased. The true actuarial impact is significantly higher. The ultimate cost of the prior creditable
service purchase provision is measured by the difference between the full actuarial cost of the time
Commission Memorandum
May 21, 2014
MBERP Pension Ordinance AFSCME 2�d Reading
Page 5 of 7
purchased and the ten percent of pay for each year purchased. For example, the full actuarial cost
to purchase the maximum of two years of service to a 45 year old member with ten years of service
and an annual salary of $60,000 is approximately $38,000; yet pursuant to current provisions, the
member pays $12,000. The difference of$26,000 is recognized as an experience loss and is funded
by additional City contributions over time.
The effect on the ARC due to this member's service purchase is an increase of about $2,300 per
year for 30 years. Based on trends, the average annual impact of $2,300 per member represents
$361,000 to the City each year based on an average of 157 buybacks per year, of which
approximately $292,410 is estimated to be attributed to GSAF, CWA, Unclassified and "Others"
combined; and $68,590 is attributable to AFSCME members alone (effective in FY 2015/16). As
shown on the table below, this impact is compounded each year buybacks are allowed.
FY 2014/15 FY 2015/16 FY 2016/17 FY 2017/18 FY 2018/19 FUTURE
YEARS
Elimination of
FY 2014/15 $0 $28,579 $28,579 $28,579 $28,579
loss
amortization
Elimination of
FY 2015/16 $68,590 $68,590 $68,590 THE IMPACT
loss OF THE
amortization BUYBACK
Elimination of WILL
FY 2016/17 $68,590 $68,590 CONTINUE TO
loss COMPOUND
amortization EACH YEAR
Elimination of
FY 2017/18 $68,590
loss
amortization
TOTAL $28,579 $97,169 $165,759 $234,349
Additional Two Percent Employee Pension Contribution
The Budget Advisory Committee's (BAC) Recommendation on Pension Reform Report of August
2012, included policies and guidelines for the City to adopt to establish thresholds which, if not met,
would require the City to take prompt and appropriate measures to meet the criteria. At the July 17,
2013 City Commission meeting, the Mayor and City Commission adopted the policies and guidelines
proposed by the BAC. These policies and guidelines included the following related to the
management of risk and risk sharing:
"If the City's contribution to a defined benefit plan exceeds 25 percent of payroll for
general employees and 60 percent of payroll for high-risk employees, the employee
contribution should be reviewed."
In 2010, the City negotiated a two percent increase in pension contributions from all employees
hired before that year. This represented an increase for Tier A members (AFSCME bargaining unit
employees hired prior to April 30, 1993), from ten to 12 percent of pensionable earnings and an
increase from eight to 10 percent of pensionable earnings for Tier B employees (AFSCME
Commission Memorandum
May 21, 2014
MBERP Pension Ordinance AFSCME 2"d Reading
Page 6 of 7
bargaining unit employees hired on or after April 30, 1993). The additional employee pension
contribution implemented in 2010 helped address the increased costs that resulted from the
downturn in the stock market that occurred in 2008 and 2009.
The actuarial valuation report approved by the MBERP Board in March 2013 indicates that the cost
of the plan represents 40.3 percent of payroll. Although the Plan is still recognizing the impact from
the 2008-2009 economic downturns, the recently negotiated pension changes will yield long-term
savings.
Effective upon the April 23, 2014, ratification of the 2013-2016 collective bargaining agreement, the
additional two percent pension contribution was reinstated for all AFSCME bargaining unit members,
and will not sunset. When the City's ARC reaches 23.5% of pensionable payroll or less, the City will
rescind the additional two percent pension contribution levied on employees covered by the
AFSCME collective bargaining unit who participate in MBERP and.were hired prior to September 30,
2010.
Re-instating this provision in the collective bargaining agreement results in the City avoiding a cost
rather than experiencing an actual savings since the plan has not taken into account the fact that the
provision expired April 30, 2013, and the contribution will be re-instated prior to the actuarial
valuation report for October 1, 2014.
CONCLUSION
The estimated five year impact of these proposed pension changes is a combination of savings and
cost avoidance of($1,678,027), as shown below.
FY 2013/14 FY 2014/15 FY 2015/16 FY 2016/17 FY 2017/18 TOTAL
Estimated Impact
on ARC From $0 ($125,000) ($125,000) ($125,000) ($125,000) ($500,000)
Extension of DROP
Salary Impact From $3,077 $37,487 $96,021 $87,109 $116,786 $340,480
Extension of DROP
Estimated Impact
on ARC From $0 $0 ($28,579) ($97,169) ($165,759) ($291,507)
Elimination of Two-
Year Buyback
SUBTOTAL $3,077 ($87,513) ($57,558) ($57,558) ($173,973) ($451,027)
COST/(SAVINGS)
Estimated Cost
Avoidance Impact
from Reinstatement
of Additional Two ($108,000) ($272,000) ($277,000) ($282,000) ($288,000) ($1,227,000)
Percent Pension
Contribution
TOTAL ($104,923) ($359,513) ($334,558) ($417,060) ($461,973) ($1,678,027)
COST/(SAVINGS)
Commission Memorandum
May 21,2014
MBERP Pension Ordinance AFSCME 2"d Reading
Page 7 of 7
The Administration recommends amending Ordinance No. 2006-3504, the Miami Beach Employees'
Retirement Plan, by extending the DROP for pre-2010 AFSCME MBERP members from three to five
years; and eliminating the two year past service purchase option for members covered by the
AFSCME collective bargaining agreement. Implementing the described changes will provide
additional pension savings.
Based on the foregoing, the Administration recommends the City Commission approve the
ordinance.
JLM/K B/SC-T
T:\AGENDA\2014\May\AFSCME\AFSCME 2013-2016 MBERP Pension DROP and Buyback Memo 2nd Reading.docx
ATT IBC H M E N T
Gabriel Roeder Smith & Company One East Broward Blvd. 954.327.16 16 phone
GRS Consultants&Actuaries Suite 505 954.525.0083 fax
Ft.Lauderdale,FL 33301-1804 www.gabrielroeder.com
April 9,2014
Mr.Jose Del Risco
Labor Relations Specialist
Department of Human Resources
City of MiaBni Beach
1700 Convention Center Drive
Miami Beach,Florida 33139
Re: Actuarial Impact Statement for Proposed Changes to the Miami Beach Employees'Retirement Plan
Dear Jose:
As requested,we have prepared the enclosed Actuarial Impact Statement showing the financial effect of the
following proposed changes to the Miami Beach General Employees'Retirement System for members
participating in the Al:SCME bargaining unit:
1. The maximum period for participation in the Deferred Retirement Option Program(DROP)would be
extended from three to five years for members hired before October 1,2010(i.e.,Tier A and Tier B
members). This extension would apply to all active members in Tiers A and B who elect to participate
in the DROP in the future as well as current DROP members. The 2.5%COLA is not payable while
members are in the DROP.
2. The option for members to purchase up to 2-years of credited service would be eliminated effective one
year from the ratification date.
Please note that the above changes have been adopted for aB members except for members who are
participating in the AFSCMZ bargaining unit,and the effect of the above changes Is shown in our
October 7,2013 Actuarial Impact Statement(also referred to as the"Baseline"in this report). The
enclosed figures reflect the additional effect of applying the above changes to members rtieipadug in
the AFSCME bargaim ing unit
The Statement must be filed with the Division of Retirement before the final public hearing on the ordinance.
Please have a member of the Board of Trustees sign the Statement. Then send the Statement along with a copy
of the proposed ordinance to Tallahassee.
With regard to item 2 above,the employer portion of the cost for members to purchase service is not prefunded.
Therefore,eliminating the service purchase provision will not have an immediate financial effect on the Plan.
When we prepare our annual valuation,any increases to the liability due to service purchased during the
previous year are reflected in the net gaintloss for the year,which is amortized over 30 years.
The ultimate cost of the current service purchase provision is measured by the difference between the full
actuarial cost of the service purchased and the amount that members currently pay to purchase service(i.e.,
l0%of pay for each year purchased). As an example,the full actuarial cost to purchase the maximum of 2
years of service for a member who is currently age 45 with 10 years of credited service and an annual salary of
$60,000 is approximately$38,000. Under the current provisions,the member pays$12,000. The difference of
$26,000 is funded by additional City contributions over time. In this example,the effect on the annual required
contribution due to the service purchase is an increase of about$2,300 for the first year.This assumes that all of
862
Mr.Jose Del Risco
April 9,2014
Page 2
our actuarial assumptions as described in the October 1,2012 Actuarial Valuation Report are met each year.
The impact on the total pin/loss varies each year depending on the demographics and the specific benefit
provisions that apply to members who purchased service.
Eliminating the service purchase provision will mean that any losses due to service purchases will not occur in
future years. Please note,however,that there will likely be losses due to service purchases for AFSCME
members in fiscal years ending September 30,2013 and September 30,2014 that will be reflected in the
October 1,2013 and October 1,2014 Actuarial Valuations,since elimination of the service purchase provision
for AFSCME members will not be effective one year after the ratification date.
Summary of Findings
The following summarizes the additional effect of reflecting the above Plan changes for AFSCME members(as
compared to the October 7,2013 Actuarial Impact Statement that includes the effect of these same changes for
all members of the Plan):
• The present value of future benefits decreases by approximately$1.2 million.
- The Plan would be expected to payout$11 million less, in today's dollars,to current members
of the Plan. This can be viewed as the total cost impact due to the extension of the DROP for
AFSCME members if the actuarial assumptions are met each year.
• There is a decrease in the first year Annual Required Contribution for the City that is comprised of a
reduction in the amortization payments on the Unfunded Accrued Liability and a reduction in the normal
cost.
- The Unfunded Accrued Liability decreased by approximately$916,000. This reduction will
decrease the annual required contribution by approximately$81,000 each of the next 30 years.
- The first year normal cost will decrease by approximately$81,000 which is 0.06%of total
covered payroll(0.070/®of Tier A and B member covered payroll). The reduction of 0.07'10 of
Tier A and Tier B member covered payroll will exist until all Tier A and Tier B members have
retired.
- The first year required employer contribution would decrease by approximately$125,000 or
0.19%of Non-DROP payroll.
- The funded ratio will remain at 66.7%.
Other Coat Conslderatioms
• As of October 1,2012 the Market Value of Assets exceeds the Actuarial Value by$2.07 million. This
difference will be recognized over the next several years. Once all the gains and losses through September
30,2012 are fully recognized in the Actuarial.Value of Assets,the contribution rate will decrease by
roughly 0.3%of non-DROP payroll unless there-are further gains or losses.
Additional Disclosures
This report was prepared at the request of the City with the Board's permission and is intended for use by the
City and the Retirement Plan,and those designated or approved by them. This report may be provided to
parties other than the City and Retirement Plan only in its entirety and only with their permission.
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.
This report should not be relied on for any purpose other than the purpose described above.
Gabriel Roeder Smith & Company
863
Mr.Jose Del Risco
April 9,2014
Page 3
The calculations in this report are based upon information furnished by the Plan Administrator for the
October 1,2012 Actuarial Valuation concerning Plan benefits,financial transactions,plan provisions and
active members,terminated members,retirees and beneficiaries. The calculations are also based on
bargaining unit information provided by the City related to this study. We reviewed this information for
internal and year-to-year consistency,but did not otherwise audit the data. We are not responsible for the
accuracy or completeness of the information provided by the Plan Administrator or the City.
The calculations are based upon assumptions regarding future events,which may or may not materialize.
They are also based on the assumptions,methods,and plan provisions outlined in this report. Future
actuarial measurements may differ significantly from the current measurements presented in this report due
to such factors as the following:plan experience differing from that anticipated by the economic or
demographic assumptions;changes in economic or demographic assumptions;increases or decreases
expected as part of the natural operation of the methodology used for these measurements(such as the end of
an amortization period or additional cost or contribution requirements based on the plan's funded status);and
changes in plan provisions or applicable law. 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 the report prior to relying on information in the report.
The undersigned actuaries are members of the American Academy of Actuaries and meet the Qualification
Standards of the American Academy of Actuaries to render the actuarial opinions contained herein. The
undersigned actuaries are independent of the plan sponsor.
This report has been prepared by actuaries who have substantial experience valuing public employee
retirement systems.To the best of our knowledge the information contained in this report is accurate and
fairly presents the actuarial position of the Plan as of the valuation date. All calculations have been made in
conformity with generally accepted actuarial principles and practices,and with the Actuarial Standards of
Practice issued by the Actuarial Standards Board and with applicable statutes.
Respectfully submitted,
ILA&A -� Q F.46"o t an4ou
M hssa Algyer,MAAA,F A /Lff seEnrolled Actuary No. 1]-06467 Actuary Alo. 11-06599
Copy: Rick Rivera
Enclosures
Gabriel Roeder Smith & Company
864
1
SUPPLEMEENTAL ACTUARIAL VALUATION REPORT
Plan
City of Miami Beach Employees' Retirement Plan
Valuation Date
October 1,2012
Date of Report
April 9,2014
Report Requested by
City of Miami Beach
Prepared by
Melissa R.Algayer
Group Valued
All active and inactive members.
Plan Provisions Being Considered for Change
Present Plan ProvisiQU&before Change
All Members RaM AFSCME Members:
• Members hired before October 1,2010(i.e.,Tier A and Tier B members)who become eligible
for normal retirement may participate in the Deferred Retirement Option Program(DROP)for up
to five years. Members currently participating in the three-year DROP may also continue
participation for an additional two years(five years total). The annual COLA of 2.5%is not
payable while members are in the DROP.
■ There is no optional service purchase provision.
AFSCMIE Memo:
• Members hired before October 1,2010(i.e.,Tier A and Tier B members)who become eligible
for normal retirement may participate in the Deferred Retirement Option Program(DROP)for up
to three years.The annual cost-0f-living adjustment(COLA)of 2.5%is not payable while
members are in the DROP.
• Members who have five or more years of service may elect to purchase up to two years of
additional credited service at any time prior to retirement. Members who elect to purchase such
service pay I(Wo of the annual rate of compensation multiplied by the number of years purchased.
865
2
Proposed Plan Changes
The following changes would apply to AFSCME me mbers:
i
• Members hired before October 1,2010(i.e.,Tier A and Tier B members)who become eligible
for normal retirement may participatie in the Defend Retirement Option Program(DROP)for up
to five years. Members currently participating in the throe-year DROP may also continue
participation for an additional two years(five years total). The annual COLA of 2.5%is not
payable while members are in the DROP.
• The optional service purchase provision would be eliminated effective one year after the
ratification date.
Participants Affected
The extension of the DROP participation period would apply to all active AFSCME members hired
prior to October 1,2010(i.e.,Tier A and Tier B members)who become eligible for normal retirement.
The extension of the DROP would also apply to current AFSCME members participating in the DROP
as the effective date of the amending ordinance.
Elimination of the optional savice purchase provision would apply to all active AFS-CME members one
year aver the effective daze of the amending ordinance.
Actuarial Assumptions and Methods
To measure the impact of extending the DROP,the assumed COLA delay was increased from 2.75
years to 4 years for active Tier A and Tier B members. Additionally,the COLA delay was increased
from 3 years to 5 years for members currently participating in the DROP.
All other assumptions and methods are the same as shown in the October 1,2012 Actuarial Valuation
Report.
Some of the key assumptions/methods are:
Investment return— 8.00/6 per year
Salary increase — 4.5%to 70%depending on service
Cost Method — Entry Age Normal Cost Method
Amortization Period for Auy Change in Actuarial Accrued Liability
30 years.
Summary of Data used in Report
Same as data used in October 1,2012 Actuarial Valuation Report.
Actuarial Impact of Proposal(s)
See attached page(s). Extending the DROP from three to five years for AFSCME members will
decrease the first year annual required contribution by$125,412 or 0.19'/0 of Non-DROP payroll.
Since the employer portion of the cost for members to purchase service is not prefunded,eliminating
the optional service purchase provision would not have an immediate financial effect on the Plan.
866
3
Special Risks Involved With the Proposal That the Plan Has Not Been Exposed to Previously
None
Other Cost Considerations
As of October 1,2012 the Market Value of Assets exceeds the Actuarial Value by$2.07 million. This
difference will be recognized over the next several years. Once all the gains and losses through
September 30,2012 are fully n=gnized in the Actuarial Value of Assets,the contribution rate will
decrease by roughly 03%of non-DROP payroll unless there are further gains or losses.
867
4
CITY OF huAM BEACH EMPLOYEES'RETMEMENT PLAN
Impact Statement—April 9,2014
Description of Amendment
The proposed ordinance incorporates the following plan changes and would apply to all active members
participating in the AFSCME bargaining unit and AFSCME members participating in the Deferred
Retirement Option Program(DROP):
1. The maximum period for participation in the Deferred Retirement Option Program(DROP)
would be extended from three to five years for members hired before October 1,2010(i.e.,Tier A
and Tier B members). This extension would apply to all active members in Tiers A and B who
elect to participate in the DROP in the future as well as current DROP rnernbers. The 2.5%
COLA is not payable while members are in the DROP.
2. The option for members to purchase up to 2-years of credited service would be eliminated
effective one year aft the ratification daze.
The above changes were already adopted for all members except members participating in the AFSCME
bargaining unit,and the effect of these changes is shown in our October 7,2013 Actuarial Impact
Statement(also referred to as the"Baseline"in this report). The enclosed figures reflect the additional
effect of applying the above changes to members participating in the AFSCME bargaining unit.
Funding Implilons of Amendment
See attachments.
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 Adminisbmtor
sss
5
ANNUAL REQUIRED CONTRIBUTION(ARC)
A. Valuation Date October 1,2012 October 1, 2012 Increase✓
Baseline* Extend DROP from Decrease
Three to Five Years
B. ARC to Be Paid During
Fiscal Year Ending 9/30/2014 9/30/2014
C. Assumed Date of Employer Contr%. 10/1/2013 10/1/2013
D. Annual Payment to Amortize
Unfunded Actuarial Liability S 169,7609395 $ 16,685,042 S (759353)
E. Employer Normal Cost 6,905,335 6,864,566 (40,769)
F. ARC if Paid on the Valuation Date:
D+E 23,665,730 23,549,608 (116,122)
G. ARC Adjusted for Frequency of
Payments 25,5 58,989 25,433,577 (125.412)
H. ARC as%of Covered Payroll
-Non-DROP Payroll 39.29 % 39.10 % (0.19) %
-Total Payroll 36.63 % 36.45 % (0.18) %
I. Covered Payroll for Contribution Year
-Non-DROP Payroll 65,0539945 65,053,945 -
-Total Payroll 69,7829689 69,782,689 -
*From October 7,2013 Actuarial Impact Statement. Includes changes for all members except chose who are
participating in the AFSCME bargaining unit.
869
6
ACTUARIAL VALUE OF BENEFITS AND ASSETS
A Valuation Date October 1, 2012 October 1, 2012 Increase/
Baseline* Extend DROP from (Decrease)
Three to Five Years
B. Actuarial Present Value of All Projected
Benefits for
1. Active Members
a. Service Retirement Benefits $ 259,785,430 $ 258,655,513 $ (1,129,917)
b. Vesting Benefits 31,967,178 31,967,178 -
c. Disability Benefits 7,271,899 7,271,899 -
d. Pmeretirernent Death Benefits 39953,764 3,953,764 -
e. Return of Member Contributions 631,843 6312843 -
f.Total 303,610,114 302,480,197 (1,129,917)
2. Inactive Members
a. Service Retirees&Beneficiaries 4079835,275 4071,731,946 (103,329)
b. Disability Retirees 12,377,127 12,377,127 -
c. Terminates Vested Members 11,480,115 11,48021 15 -
d. Total 431,6920517 431,589,188 (103,329)
3. Total for All Members 735,302,631 734,069,385 (1,233,246)
C. Actuarial Accrued(Past Service)
Liability per GASB No. 25 632,203,739 631,287,564 (9169175)
D. Plan Assets
1. Market Value 423,447,642 423,447,642 -
2. Actuarial Value 421,376,041 421,376,041
E. Unfunded Actuarial Accrued Liability(C-D2) 210,8271,698 209,911,523 (916,175)
F. Funded Ratio(D2 z C) 66.7 % 66.7 % 0.0 %
G. Actuarial Present Value of Projected
Covered Payroll 543,8259043 543,825,043 -
II. Actuarial Present Value of Projected
Member Contributions 51,791,078 51,791,078 -
*From October 7,2013 Actuarial Impact Statement. Includes changes for all members except those who ate
participating in the AFSCME bargaining unit.
870
7
CALCULATION OF EMPLOYER NORMAL COST
A. Valuation Date October 1,2012 October 1,2012 Increase/
Baseline* &t+end DROP from (Decrease)
Three to Five Years
B. Normal Cost for
1. Service Retirement Benefits S 9,644,778 $ 9,604,009 $ (40,769)
2. Vesting Benefits 2,047,065 2,047,065 -
3. Disability Benefits 529,872 529,872 -
4. Preretarement Death Benefits 268,222 268,222
S. Return of Member Contributions 225,573 225,573 -
6. Total for Future Benefits 12,715,510 12,674,741 (40,769)
7. Assumed Amount for Adminishative
Expenses 694,180 694,180
S. Total Normal Cost 13,409,690 13,3689921 (40,769)
%of Covered Payroll
-Non-DROP Payroll 20.61 % 20-55 % (0.06) %
-Total Payroll 19.22 % 19.16 % (0.06) %
C. Expected Member Contribution 6,504,355 6,504,355 -
of Covered Payroll
-Non-DROP Payroll 10.00 % 10.00 % 0.00 %
-Total Payroll 9.32 % 9.32 % 0.00 %
D. Employer Normal Cost:B8-C 6,905,335 6,864,566 (40,769)
%of Covered Payroll
-Excluding DROP Payroll 10.61 % 10.55 % (0.06) %
-Including DROP Payroll 9.90 % 9.84 % (0.06) %
*From October 7,2013 Actuarial Impact Statement. Includes changes for all members except those who are
participating in the AFSCME bargaining unit.
871
8
PARTICIPANT DATA
October 1, 2012 October 1,2012
Baseline• Ew end DROP,from
Three to Five Years
ACTIVE MEMBERS
Number(Non-DROP) 1,049 1,049
Covered Annual Non-DROP Payroll $ 65,053,945 $ 65,053,945
Average Annual Non-DROP Pay S 62,015 $ 62,015
Total Covered Annual Payroll $ 69,782,689 69,782,689
Average Annual Pay $ 631,209 63,209
Average Age 45.1 45.1
Average Past Service 9.8 9.8
Average Age at Hire 35.3 35.3
DROP PARTICIPANTS
Number 55 55
Annual Benefits $ 2,9940703 2,994,703
Average Annual Benefit $ 54,449 541,449
Average Age 59.3 59.3
RETIREES& BENEFICIARIES
Number 1,002 19002
Annual Benefits $ 33,085,394 $ 33,0859394
Average Annual Benefit $ 33,019 $ 33,019
Average Age 71.1 71.1
DISABILITY RETIREES
Number 43 43
Annual Benefits $ 19117,160 $ 19117,160
Average Annual Benefit $ 25,980 $ 251,980
Average Age 65.6 65.6
TERMINATED VESTED MEMBERS
Number 63 63
Annual Benefits $ 1,343,444 $ 1,343,444
Average Annual Benefit $ 219325 $ 21,325
Average Age 45.9 45.9
*From October 79 2013 Actuarial Impact Statement. Includes changes for all members except those who
are participating in the AFSCME bargaining unit
872
MIAMI HERALD I MiamiHerald.com NE THURSDAY,MAY 8,2014 1 19ME
MIAMI BEACH
CITY OF MIAMI BEACH
NOTICE OF PUBLIC HEARINGS
NOTICE IS HEREBY given that public hearings will be held by the 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,May 21,2014,to consider the following:
10:00 a.m.
Ordinance Amending Chapter 2 Of The Code Of The City Of Miami Beach,Entitled"Administration,"By Amending Article I,Entitled"in General,"By Creating Section 2.1,To Be Entitled"Reasonable Opportunity
To Be Heard,"To Provide Rules Regarding Public Participation In City Meetings.Inquiries may be directed to the City Attorney's Office 305-673-7470.
10:05 a.m.
Ordinance Amending Miami Beach City Code Chapter 2 Entitled"Administration,"Article VII"Standards Of Conduct'Section 2-458 Thereof Entitled"Supplemental Abstention And Disclosure Requirements"By Providing
That A City Of Miami Beach Elected Or Appointed Public Officer With A Conflict Of interest On A Particular Matter Shall Absent Himself From The Agency Meeting On Which He Serves During Said Agency's Discussion
Of That Matter.Inquires may be directed to the CltyAttorney's Office 305.673-7470.
10:10 a.m.
Ordinance Amending Chapter 10 Of The Miami Beach City Code,Entitled'Animals,"By Creating Section 10-17,To Be Entitled"Certain Techniques And Devices Prohibited;Enforcement;Penalties";And By Amending
Sections 10.2 And 1.0-3 To Cross-Reference The New Provisions In Section 10-17.Inquiries may be directed to the Ciry Attorneys Office 305-673-7470.
1015 a.m.
Ordinance Amending Chapter 10 01 The Miami Beach City Code,Entitled"Animals,"By Creating Section 10-18,To Be Entitled"Requirements For Sales Of Dogs And Cats;Definitions;Permitted Sources;Certificate
Of Source;Penalties";And By Amending Sections 10-2 And 10-3 To Cross-Reference The New Provisions in Section 10.18.Inquiries may be directed to the CityAttarneys Office 305-673.7470.
10:20 a.m.
Alcohol In Movie Theaters
An Ordinance Amending The City Code,By Amending Chapter 6,"Alcoholic Beverages,"Article I,"In General,"Section 6-4,"Location And Use Restrictions,"By Permitting Alcohol Beverages To Be Sold In Motion Picture
Theaters,Establishing Criteria,Standards And Procedures For Eligible Theaters And Where Alcohol Can Be Sold And Consumed;And Amending Section 6-5,"Patron Age Restrictions,"Exempting Motion Picture Theaters
From The Code's Patron Age Restrictions.inquiries may be directed to the City Attorney's Office 305-673-7470.
10:25 a.m.
An Ordinance Of The Mayor And City Commisson Of The City Of Miami Beach,Florida,Amending Chapter 70 Of The Code Of The City Of Miami Beach,Entitled"Miscellaneous Offenses,"By Amending Article II,Entitled
'Public Places"By Amending Division 2,Entitled"Bicycling,Skateboarding,Roller Skating,in-Line Skating,And Motorized Means Of Transportation,"By Amending Section 70-67 Thereof,Entitled"Prohibited Activities,"
To Prohibit The Operation 01 Motorized Means Of Transportation In,On Or Upon Any Portion 01 A)The Beachwalk Between 151D And 23i°Streets,Between 6411 And 79"Streets,And South Oi 52'Street;B)The Lummus
Park Promenade(Also Known As The Lummus Park Serpentine Walkway)Between 511 And 151b Streets;C)The Sidewalks On The East Side Of Ocean Drive Between South Pointe Drive And 151h Street;D)The South Pointe
Park Cutwalk Adjacent And Parallel To Government Cut;And E)The Marina Baywalk Adjacent And Parallel To Biscayne Bay And South Of 51h Street;Providing For Repealer,Severability,Codification,And An Effective Date.
Inquiries may be directed to the City Attorney's Office 305-673-7470.
10:30 a.m.
An Ordinance Of The Mayor And City Commission Of The City Of Miami Beach,Florida,Amending Chapter 106 Of The Miami Beach City Code,Entitled'Traffic And Vehicles,"By Amending Article II,Entitled*Metered
Parking,"By Amending Division 1,Entitled"Generally,"By Amending Section 106-55,Entitled"Parking Rates,Fees,And Penalties,"By Amending Subsection(N);Entitled,"HybridALEV(Inherently low Emissions Vehicles)
Vehicles Incentive,"ByAmending Vehicle Participation Criteria For The HybridALEVVehicles Incentive Program To Substitute Vehicles With An EPA(Environmental Protection Agency)Smartway Designation;And Establishing
An Annual Miami Beach Resident Permit Fee For Scooters And Motorcycles;Providing For Codification,Repealer,Severability,And An Effective Date.Inquiries may be directed to the Parking Deparfirent 305-673-7275.
10:35 a.m.
An Ordinance Amending Chapter 106 Of The Miami Beach City Code,Entitled"Traffic AndVehides,"By Amending Article II,Entitled`Metered Parking,'By Amending Division I,Entitled"Generally,"By Amending Section 106-47,
Entitled"Freight,Commercial,And Passenger Curb Loading Zones;Hours,Deliveries";Creating Subsection(F),Permit Required;Further Amending Section 106-55;Establishing Subsection(0),Entitled.*Freight Loading Zone
(FLZ)Permit";And Subsection(P),Entitled,Alley Loading(AL)Permit;Providing For Codification,Repealer,Severability,And An Effective Date.Inquiries maybe directed to the Ruking Department 305-673-7275.
10:40 a.m.
AFSCME MBERP Ordinance
An Ordinance Implementing Provisions Of The 2013-2016 Collective Bargaining Agreement Between The City And The American Federation Of State,County And Municipal Employees,(AFSCME)Local 1554;Amending
The Miami Beach Employees'Retirement Plan Created By Ordinance 2006-3504;Amending Section 2.26 Of The Plan By Extending The Deferred Retirement Option Plan(DROP)Program From Three(3)To Five(5)
Years For Eligible Members;Amending Section 5.13 To Reflect Amended Eligibility And PartIcipatlon Requirements And Amended DROP Plan Features.Amending Section 4.03 By Eliminating The Purchase Of Additional
Creditable Service Effective April 23,2015;Amending Section 6.02 Of The Plan By Reinstating An Additional Two Percent Member Contribution For Members Of The AFSCME Bargaining Unit Hired Prior To September 30,
2010;And Eliminating The Additional Two Percent Member Contribution When The Plan Actuary Confirms That The Cityt Annual Required Contribution To The Retirement Plan is 23.5%Of Payroll Or Less.Inquiries may
be directed to the Human Resources Department 305-673-7524.
NOTE See also advertisement 11884,for additional public hearings occurring on May 21,2014.
Dr.Stanley SuBrick Citizen's Forum-The times for the Or.Stanley Sutnick Citizen's Forum are 8:30 am.and 1:00 p.m.,or as soon as possible thereafter.Approximately thirty minutes will be allocated to each session,
with Individuals being limited to no more than three minutes or for a period established by the Mayor.No appointment or advance notification Is needed In order to speak to the Commission during this Forum.
INTERESTED PARTIES are Invited to appear at this meeting,or be represented by an agent,or to express their views In writing addressed to the City Commission,do the City Clerk,1700 Convention Center Drive,10 Floor,
City Hall,Miami Beach,Florida 33139.Copies of these items are available for public inspection during normal business hours in the City Clerk's Office,1700 Convention Center Drive,la Floor,City Hall,Miami Beach,
Florida 33139.This meeting,or any Item herein,may be continued,and under such circumstances,additional legal notice need not be provided.
Pursuant to Section 286.0105,Fla.Stat.,the City hereby advises the public that:If a person decides to appeal any decision made by the 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 in accessible format,sign language interpreters,information on access for persons with disabilities and/or any accommodation to review any document or participate in any City-sponsored
proceeding,please contact us five days in advance at 305-673-7411(voice)or TTY users may also call the Florida Relay Service at 711.
Rafael E.Granado,City Clerk
886 City of Miami Beach