Loading...
R5O-Fire And Police Pension Ordinance -Weithorn-COMMISSION ITEM SUMMARY Condensed Title: An 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; Amending Section 63 Entitled "Source of Monies for Fund; Computation of Liability; Use and Investment of Fund"; Service Record"; And Amending Section 66 Entitled "Service and Disability Benefits Generallv" Ke Intended Outcome Su orted: Attract and maintain a workforce of excellence, control costs of payroll including salary and fringes/minimize taxes/ensure expenditure trends are sustainable over the Ion term Item Summary/Recommendation: First Reading On September 30, 2013, the City Commission adopted Ordinance #2013-3817, amending provisions in the Fire and Police Pension Plan to reflect what had been negotiated with the International Association of Firefighters (IAFF) and the Fraternal Order of Police (FOP). Following adoption of the ordinance, both the IAFF and FOP raised concerns regarding the definition of the Final Average Monthly Earnings (FAME) retirement benefit for members hired prior to September 30, 2013, since they believed the ordinance should have maintained the previously existing language, that the FAME would be based on the average of the highest three or the last three years of a member's employment. The amended ordinance provides for the average of the highest three years and is silent on the subject of the last three years. Upon the administration's inquiry, Buck Consultants, the actuary for the Fire and Police Pension Plan advised that its actuarial analysis did not change the FAME calculation of the three last years for members hired prior to September 30, 2013. It is important to note that the previous pension ordinance reflected the FAME based on the average of the two highest years or two last years for members hired prior to July 14, 2010. Additionally, the Fire and Police Pension ordinance adopted at the September 30, 2013, City Commission meeting based the FAME for employees hired on or after September 30, 2013, on the average of the five (5) highest or five last years. After numerous discussions between the parties, the City agreed that the omission of the "last three years" was not intentional and therefore recommends that the definition of the FAME for members hired prior to September 30, 2013, be amended to include both the highest three years and the last three years of employment. On October 2013, the City was served with both a grievance and an unfair labor practice (ULP) charge in which the aggrieved party alleged that a retirement benefit negotiated for members hired as a result of a consent decree had been unilaterally altered by the administration eliminating IAFF members from eligibility. After consulting with the City's and the IAFF's legal counsel, the parties entered into a Memorandum of Understanding (MOU) that made members hired under the consent decree eligible for retirement under the Rufe of 70 with no minimum age requirement. The IAFF confirmed on December 6, 2013, that the MOU was ratified by the membership with 115 voting members in support of the MOU and 23 against. Ordinance 2013-3817 also amended the definition of "employee" as a Plan member to allow new firefighters and police officers to join the pension plan upon employment, rather than at the end of their probationary period. The Chief of Police is a member of the Miami Beach Employees' Retirement Plan (MBERP) because he never held a classified position in the police department and was, therefore, ineligible to join the Fire and Police Pension Plan. According to the pension attorney for the Fire and Police Pension Plan, the recently amended definition of employee excluded the Chief of Police from joining the Fire and Police Pension Plan because he was not hired on or after September 30, 3013. The proposed ordinance seeks to clarify the definition of employee by specifically excluding any unclassified fire or police employee who was hired before September 30, 2013 whose initial employment with the City was in the unclassified service and who continuously remained a member of the unclassified service after that date to remain a member of MBERP. The Pension Board Actuary for the Plan estimates the financial impact of this change to be minimal since there is a small group of future members that this will impact The Administration will provide the Mayor and Commission with the impact statement upon receipt from the Pension Board Actuary. After adoption of the ordinance on September 30, 2013, the City's pension actuary, Michael Tierney, provided revised language concerning the Budget Advisory Committee's recommended pension policies and guidelines adopted by the City Commission on July 17, 2013. Given that the administration is recommending amending the Fire and Police Pension ordinance, these revisions are also included in the proposed ordinance amendment. The Administration recommends approving the proposed ordinance and setting a second reading and public hearing for the Februarv 2014 Citv Commission rneetina. Adviso ust29,2012 Source of Amount Funds: 1 FY2013/2014 NIA c 2 FY2014/2015 N/A 3 FY2015/2016 NIA OBPI Total NIA Financial Impact Summary: According to the City's actuary, the changes to the ordinance will not have a financial impact on the City and their impact statement will be orovided orior to the City Commission meetina. Cit Man er mmy L. Mor~les, ,_.-/-- MIAMI BEACH 714 AGENDA IT M _,R:.....:_s~o"'="--~- DATE '2.--•(t;..-Jq ~ MIAMI BEACH City of Miami Beach, 1700 Convention Center Drive, Miomi Beoch, Florido 33139, www.miamibeachfl.gov C MMISSION MEMORANDUM TO: Mayor Philip Levine and Members FROM: Jimmy L. Morales, City Manager DATE: February 12, 2014 FIRST READING SUBJECT: AN ORDINANCE OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, 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 2012-2015 COLLECTIVE BARGAINING AGREEMENTS BETWEEN THE CITY AND FIRE FIGHTERS OF MIAMI BEACH, (IAFF) LOCAL 1510, AND MIAMI BEACH FRATERNAL ORDER OF POLICE, WILLIAM NICHOLS LODGE NO. 8 (FOP); IMPLEMENTING RECOMMENDATIONS OF THE BUDGET ADVISORY COMMITTEE, A MEMORANDUM OF UNDERSTANDING AND OTHER CHANGES; AMENDING SECTION 63 ENTITLED "SOURCE OF MONIES FOR FUND; COMPUTATION OF LIABILITY; USE AND INVESTMENT OF FUND"; SERVICE RECORD"; AND AMENDING SECTION 66 ENTITLED "SERVICE AND DISABILITY BENEFITS GENERALLY"; PROVIDING FOR SEVERABILITY; REPEALING ALL ORDINANCES IN CONFLICT THEREWITH; AND PROVIDING FOR AN EFFECTIVE DATE. ADMINISTRATION RECOMMENDATION The administration recommends approving the ordinance and setting a second reading and public hearing at the March 5, 2014, City Commission meeting. BACKGROUND On July 17, 2013, the City Commission ratified a collective bargaining agreement covering the period October 1, 2012 through September 30, 2015, between the City of Miami Beach and the IAFF, subject to ratification by the IAFF membership. On August 7, 2013, the IAFF confirmed ratification of the contract by a majority of their voting membership. On July 19, 2013, the City Commission ratified a collective bargaining agreement covering the period October 1, 2012 through September 30, 2015, between the City of Miami Beach and the FOP, subject to ratification by the FOP membership. On September 11, 2013, the City Commission adopted a resolution accepting the amended 2012-2015 collective bargaining agreement with the FOP. The administration received direction from the City Commission to negotiate changes to the Fire and Police Pension Plan that would generate a savings of $6 -$8 million from the City's Annual Required Contribution (ARC) in the first year. In addition, negotiated pension changes were to yield recurring, annual savings from the City's ARC, as well as a reduction to the Unfunded Actuarial Accrued Liability (UAAL). 715 City Commission Memorandum February 12, 2014 Fire and Police Pension -1•t Reading Page 2 of4 Information in the memorandum accompanying Ordinance 2013-3817, focused on highlighting the changes that reflected upon the successful negotiation of terms and conditions in line with the direction the administration had received. They included, but are not limited to: • Increasing the number of years for the computation of the Final Average Monthly Earnings (FAME) for employees hired after September 30, 2013; • Reducing the maximum benefit from 90 to 85 percent of pensionable earnings with a finite number of employees excluded from this change; • Reducing the vesting period from ten to five years; • Limiting the purchase of prior creditable service to military service; • Applying statutory changes where overtime toward the FAME is limited to a maximum of 300 hours and the dollar value of accrued leave cannot be used to increase the pension benefit; and • All new hires to become members of the Fire and Police Pension Plan effective upon their hire date and will start contributing 10.5 percent of their pensionable earnings immediately, rather than at the end of their probationary periods. At the July 17, 2013 City Commission meeting, the City Commission adopted a number of policies and guidelines relating to the City's two pension plans. Therefore, included in the amendments to the Fire and Police Pension ordinance were the following pension policies: • The City shall fund at least the normal cost of pension. If this exceeds the amount of the actuarially determined annual required contribution, the excess should be placed in a pension stabilization fund, to be made available for future pension shortfalls. • The City should require 5, 10 and 20 year projections of required pension contributions as part of the annual actuarial valuations for each of the City's pension plans. These projections shall be based on the current actuarial assumptions for each plan. The projections shall be updated to reflect the cost of any proposed benefit enhancement before the City Commission agrees to the enhancement. The cost of these studies shall be funded separately from the annual contribution to the pension plan • There shall be an experience study of each of the City's pension plans' actuarial assumptions performed by an actuary that is independent from the pension board. The experience study should be conducted at least once every three years to compare actual experience to the assumptions. The independent actuary shall make recommendations for any changes in assumptions based on the results of the experience study, and any deviations from those assumptions by the pension boards shall be justified to the City Commission. Ordinance 2013-3817 incorporated language to address these adopted policies and guidelines. ANALYSIS To allow new firefighters and police officers to join the pension plan upon employment, rather than at the end of their probationary period, the definition of employee had to be changed in the ordinance. The proposed and subsequently adopted language read as follows: "Employee means any full time employee who is certified as a firefighter as a condition of employment in accordance with section 633.35, Florida Statutes. and whose duty it is to extinguish fires. to protect life or to protect property, and any full time employee who is certified or required to be certified as a law enforcement officer in compliance with section 943.1395, Florida Statutes. who is vested with authority to bear arms and make arrests. and 716 City Commission Memorandum February 12, 2014 Fire and Police Pension -1st Reading Page 3 of 4 whose primary responsibility is the prevention and detection of crime of the enforcement of the penal. criminal. traffic. or highway laws of the state. RegtJlar memeer of the police departFRent or fire elopartment who has attaineel rea1:1lar oi'«il serviee stat1:1s in sueh department 1:1nder the official classifications of positions in the elassified service of the Girt. having a rank in such department other than civilian rank and other than the classification of school gtJard. Unless they ha'«O never held classified positions with the Cit•;, the chief of the police and fire departments shall be considered Employees for the p1:1rposes of this System. The new definition of employee changed the status by requiring any certified firefighter or police officer whose position is in the unclassified salary group, who is hired on or after September 30, 2013, to become a member of the Fire and Police Pension Plan. The current Chief of Police is a member of the Miami Beach Employees' Retirement Plan (MBERP) because he never held a classified position in the police department and was, therefore, ineligible to join the Fire and Police Pension Plan. Based on a legal opinion from the Fire and Policy Pension Plan attorney and the City's pension attorney, the recent amendment to the definition of employee excluded the Chief of Police because he was not hired on or after September 30, 2013. The proposed ordinance aims to clarify the recently amended definition by stating that any employee hired prior to September 30, 2013 whose initial employment with the City was in the unclassified service and who continuously remained a member of the unclassified service after that date shall remain a member of the MBERP for as long as employee as an unclassified employee, and shall not be eligible to participate in the Fire and Police Pension Plan. When the vesting period was reduced from ten to five year, the actuarial finding was that there was no real impact on the plan because their evaluation included only classified service employees who tend to have long careers with the City. However, the inadvertent inclusion of unclassified personnel in the definition of employee allows someone to come to the City late in his or her career and retire with full benefits at age 50 with only five years of service. The actuary for the Fire and Police Pension Plan anticipates the financial impact of this change to be minimal since this change only impacts a small group of individuals. At the time of this writing, the actuary has not provided this analysis. This information will be provided to the Mayor and City Commission upon receipt. Following adoption of the amended Fire and Police Pension ordinance, leadership from both the IAFF and FOP raised a concern relating to the newly adopted pension ordinance, which was ultimately determined to be a scrivener's error, concerning a member's Final Average Monthly Earnings (FAME). According to the unions, both IAFF And FOP had negotiated that effective September 30, 2013, the FAME for IAFF and FOP bargaining unit employees hired prior to September 30, 2013, would be based on the average of the three highest years or the three last years of employment; and employees hired on or after September 30, 2013, would be based on the average of the five highest years or the last five years of employment. However, the amended ordinance only reflected the "highest years" for employees hired before September 30, 2013. Upon the administration's inquiry, Buck Consultants, the actuary for the Fire and Police Pension Plan advised that its actuarial analysis did not change the FAME calculation of the three last years for members hired prior to September 30, 2013. The actuarial impact statement is provided as an attachment to this memorandum. It is important to note that until the revisions approved September 30, 2013, the pension benefits for employees hired prior to July 14, 2010, reflected the FAME to be based on the average of the two highest years or last two years of employment. In addition, the Fire and Police Pension ordinance adopted September 30, 2013, did provide employees hired on or after September 30, 2013, a retirement benefit reflecting their FAME based on the average of the five highest or five last years. After numerous 717 City Commission Memorandum February 12, 2014 Fire and Police Pension -1st Reading Page 4 of 4 discussions between the City and the IAFF and FOP Union leadership, the City agreed to recommend a revision to the ordinance so that members hired prior to September 30, 2013, would have their FAME calculations based on the three highest or last three years of employment, whichever is greater. On October 2013, the City was served with both a grievance and an unfair labor practice charge (ULP) in which the aggrieved party alleged that a retirement benefit negotiated for members hired as a result of a consent decree had been unilaterally altered by the administration eliminating IAFF members from eligibility. The benefit allowed members hired as a result of the consent decree to be grandfathered, permitting them to maintain their retirement age eligibility at 47 and the Rule of 70, with no minimum age requirement. After consulting with the City's counsel and counsel for the IAFF, the parties negotiated and entered into a Memorandum of Understanding (MOU) that made members hired under the consent decree ellgible for retirement under the Rule of 70 with no minimum age requirement. Since the MOU changed terms and conditions of employment, it was subject to ratification by the union membership. On December 6, 2013, the IAFF confirmed that the MOU was ratified by the membership with 115 voting members in support of the MOU and 23 against. The MOU was ratified by resolution at the January 15, 2014, City Commission meeting. The Fire and Police Pension Plan actuary has advised that implementing this change for members covered by the IAFF hired as a result of the consent decree will not result in any significant impact to the Plan, as there are only two members who qualify. In late October 2013, the City's pension actuary, Michael Tierney provided the City with revised language concerning the pension policies and guidelines for both of the City's pension plans and adopted by the City Commission on July 17, 2013. Given that the administration is recommending changes to the Fire and Police Pension Plan ordinance, the revised language for the pension policies and guidelines have been included in the proposed ordinance amendment. CONCLUSION The administration recommends that the City Commission approve the proposed ordinance amending certain retirement benefits for Fire and Police Pension Plan members covered by the IAFF that are consistent with benefits granted certain members covered by the FOP; amending the FAME for members hired prior to September 30, 2013 to be based on the average of the three highest or three last years of employment; amending language concerning the BAC's adopted pension policies and guidelines as recommended by the City's pension actuary and amending the Plan provisions regarding unclassified employees to facilitate recruitment of command staff members. The administration recommends approving the proposed ordinance on first reading and setting the second reading and public hearing for the March 5, ~City Commission meeting. '. u JLM/KGB/SC- t:\agenda\2014\february\fire and police pension\fire and police pension ordinance clarification memo 1st reading.doc 718 ORDINANCE TO BE SUBMITTED 719