R5B-AFSCME MBERP Ordinance -Weithorn-COMMISSION ITEM SUMMARY
Condensed Title:
An Ordinancp Of The Mayor And City Commission Of The City Of Miami Beach, Florida, lmplementing Provisions Of The 201 3-2016
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 Retiremenl 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 Conlribution To The Retirement Plan ls 23.5% Of Payroll Or Less; Providing For Severability; Repealing All Ordinances ln
Conflict Therewith: And Providing An Effective Date.
Key lntended Outcome Supported:
Ensure expenditure trends are sustainable over the long-term.
Supporting Data (Surveys, Environmental Scan, etc.) N/A
Currentty, tnere is a three year DROP for Tier A and Tier B AFSCME MBERP members, and a five year DROP for Tier C (post 2010
employmenl date) members. ln the tentative collective bargaining agreement between the City and AFSCME covering the period May 1,
2013, through April 30, 2016, the parties agree to exlend the DROP period for Tier A and Tier B AFSCME MBERP members from three to
five years, effective upon ratiflcalion of the agreement. The extension of the DROP yields savings by reducing the City's annual required
contiibution (ARC) to MBERP, since DROP participants do not receive the annual retiree coslof-living increase during their DROP years. ln
addition, DROP participants do not earn additional pension benefits.
Effective April 23, 2015, AFSCME bargaining unit members wrll 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 lrue actuarial impact is significantly higher. The ultimate
cost of the prior credilable 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 pursuanl to current
provisions, lhe 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 membe/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 upon ratification of the 2013-2016 collective bargaining agreement by the bargaining unit members April 21, 2014), and the City
Commission April 23, 2014, the additional two percent pension contribution will be 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 percenl 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
approxrmately ($541 ,5OO) for the term of the agreement, and will continue to rise as employee pensionable eamings 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 actu3rial accrued liability (UAAL). The terms of the agreement are parallel to those reached wilh the Communication Workers
of America (CWA) and Government Supervisors Association of Florida (GSAF), as well as those also applied lo non-represented
employees in the "others" and "unclassified" salary groups.
Based on the foregoing, the Administralion recommends approval of the ordinance on first reading and setting the second reading and
public hearing for the nLxt regularly scheduled City Commission meeting on May 21,2O14, as implementing the changes described herein
will orovide Dension savinqs in the short and lonq-term-
Committee Pension Reform lnitiative Recommendalion Report, August 2012
@PextensionwillnotaffectthebudgetduringFY2013l14ihoWever,itwillreSultinrecurringsavings
off the ARC estimated in the amount of $125,000, during FY 2014115, FY 2015116, FY 2016n7 and FY 2017118 for a tolal live year impact
of ($5OO,OOO). The salary cost attributable to the extension of the DROP for AFSCME MBERP members is as follows: $3,077 in FY
2O13t14, $37,487 inFy 2O14t15; $96,021 in FY 2015t16; $87,'109 inFY 2016117 and $1 16,786 inFY 2017118, 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.
ln FY 2013/14 and FY 2O14t15 there will be no savings from the elimination of the ability 10 purchase prior service; however, there will be
an anticipated savings of ($28,579) in FY 2015/16; ($97,169) inFY 2O16t17; 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 2013114;
($272,0b0) in Fy 2oi4l15; ($277,000) in FY 2015/16; ($282,000) in FY 2016/17; and ($288,000) inFY 2017118. The total five year impact
is a savings of ($1,227,000).
combined imoact of these ilems is a savinqs of ($1
Tabak. Human Resources Director
Agenda rtem RSB17
g MIAMI BEACH
€ity of trtiomi Beoch, I 700 Convention Center Drive, Miomi Beoch, Florido 331 39, www.miomibeochfl.gov
COMMISSION MEMORANDUM
To: Mayor Philip Levine and Members of the City
FRoM: Jimmy L. Morales, City Manager
DATE: April30, 20't4 FIRST READING
sUBJECT: AN ORDINANGE OF THE MAYORAND CITY COMMISSION OF THE CITY OF MIAMI
BEAGH, FLORIDA, IMPLEMENTI}IG PROVISIONS OF THE 2013.2016 COLLECTIVE
BARGAINING AGREEMENT BETWEEN THE CITY AND THE AMERICAN FEDERATION
oF STATE, COUNTY AND MUNICIPAL EMPLOYEES, (AFSGME) LOCAL 1554;
AMENDING THE MIAMI BEAGH 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 (s) YEARS FOR ELIGIBLE MEMBERS; AMENDING SECTION 5.13 TO
REFLECT AMENDED ELIGIBILITY AND PARTICIPATION REQUIREMENTS AND
AMENDED DROP PLAN FEATURES; AMENDTNG SECTION 4.03 BY ELIMINATING
THE PURCHASE OF ADDITIONAL CREDITABLE SERVIGE 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 GITY'S ANNUAL REQUIRED CONTRIBUTION TO THE
RETIREMENT PLAN lS 23.5% OF PAYROLL OR LESS; PROVIDING FOR
SEVERABILITY; REPEALING ALL ORDINANCES !N CONFLICT THEREWITH; AND
PROVIDING AN EFFECTIVE DATE.
ADMINISTRATION RECOMMENDATION
The Administration recommends approval of the ordinance on first reading and setting the second
reading and public hearing for the City Commission meeting on May 21,2014.
BACKGROUND
ln 2010, the Administration negotiated changes to pension benefits for then current and future
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. ln 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
18
Commission Memorandum
April 30, 2014
MBERP Pension Ordinance AFSCME First Reading
Page 2 ol2
bargaining unit in November 2010. The additional employee contribution remains in effect for
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 (approxim alely 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.
o 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 ol 80% of the member's FAME. As compared to
three or four percent for Tier A members and three percent for Tier B members.
o 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 Cig's ARC in perpetuity. These savings on the City's ARC were estimated to
vary from a low of $910,000 in FY 20111121o as much as $5.995 million in FY 2020121.
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,
19
Commission Memorandum
April 30,2014
MBERP Pension Ordinance AFSCME First Reading
Page 3 of 3
2013. After ten negotiation sessions, on March 19,2014, the City and AFSCME reached a tentative
three year agreement covering the time period May 1 , 2013, through April 30, 2016. Bargaining unit
employees ratified the contract April 21 , 2014 and the City Commission 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. The estimated impact of
the two percent contribution attributable to AFSCME/MBERP members is approximately $108,000 in
FY 2013114. 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. lnstead 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. lf
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-
20'10 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)
months in total.
20
Commission Memorandum
April 30, 2014
MBERP Pension Ordinance AFSCME First Reading
Page 4 of 4
Based on the actuarial impact statement provided by GRS (Attachment 1), 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. By extending the DROP to five years, retirement-eligible employees who earn
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 2013114; $37,487 in FY 2014115; $96,021 in FY
2015116; $87,109 in FY 2016/17; and $116,786 inFY 2017118. 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 lll (MSW lll) 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 l). ln such example, the impact is the difference between the
MSW lll's salary and the entry level salary of an MSW l. 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 (gl 12.65, Florida Statutes). Eligible prior service includes: (1) military service in the
United States Armed Forces or Coast Guard; (2) fulltime employment with another governmental
entity; or (3) full{ime 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
purchased and the ten percent of pay for each year purchased. For example, the full actuarial cost
21
Commission Memorandum
April 30, 2014
MBERP Pension Ordinance AFSCME First Reading
Page 5 of 5
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 oI 157 buybacks per year, of which
approximately $292,410 is estimated to be attributed to GSAF, CWA, Unclassified and "Others"
combined; and 968,590 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 2014115 FY 2015/r6 FY 2016t17 FY 20'.t7t18 FY 2018/19
FUTURE
YEARS
Elimination of
FY 2014115
loss
amortization
$0 $28,579 $28,579 $28,579 $28,579
THE IMPACT
OF THE
BUYBACK
wlLL
CONTINUE TO
COMPOUND
EACH YEAR
Elimination of
FY 2015/16
loss
amortization
$68,590 $68,590 $68,590
Elimination of
FY 2016117
loss
amortization
$68,590 $68,590
Elimination of
FY 2017t18
loss
amortization
$68,590
TOTAL $28,579 $97,169 $165,759 $234,349
Additional Two Percent Emplovee 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:
"lf 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."
ln 20'10, 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 't2 percent of pensionable earnings and an
incieaie from eight to 10 percent of pensionable earnings for Tier B employees (AFSCME
bargaining unit employees hired on or after April 30, 1993). The additional employee pension
22
Commission Memorandum
April 30, 2014
MBERP Pension Ordinance AFSCME First Reading
Page 6 of 6
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 201 3 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 longterm
savings.
Effective upon ratification of the 2013-2016 collective bargaining agreement, the additional two
percent pension contribution will be reinstated for all AFSCME bargaining unit members, and will not
sunset. When the City's ARC reaches 23.5o/o 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 parties agreed to the aforementioned pension changes. At the time of this writing, AFSCME has
scheduled the ratification vote among their membershipfor April 21 ,2014. The results of this vote
will be provided to the City Commission under separate cover.
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 2013t14 FY 2014t15 FY 2015116 FY 20'.16117 FY 2017118 TOTAL
Estimated lmpact
on ARC From
Extension of DROP
$0 ($125,000)($125,000)($125,000)($125,000)($500,000)
Salary lmpact From
Extension of DROP $3,077 $37,487 $96,021 $87,109 $1 16,786 $340,480
Estimated lmpact
on ARC From
Elimination of Two-
Year Buyback
$o $o ($28,57e)($97,16s)($165,759)($291,507)
SUBTOTAL
COST(SAVINGS)$3,077 ($87,s13)($57,558)($57,558)($173,e73)($451,027)
Estimated Cost
Avoidance lmpact
from Reinstatement
of Additional Two
Percent Pension
Contribution
($1o8,ooo)($272,000)($277,000)($282,000)($288,000)($1,227,000)
TOTAL
cosT(SAVINGS)($104,923)($359,s13)($334,558)($417,060)($46r,973)($1,678,027)
The Admtnistration recommends amending Ordinance No. 2006-3504, the Miami Beach Employees'
23
Commission Memorandum
April 30,2014
MBERP Pension Ordinance AFSCME First Reading
Page 7 of 7
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. lmplementing the described changes will provide
additional pension savings.
Based on the foregoing, the Administration recommends the City Commission approve the
ordinance on first reading and set the second reading and public hearing for May 21 ,2014.
Attach#&nt
+lo
JLM/K@/SC-T
T:\AGENDA\2014\ApriI\AFSCME\April 30, 2014\AFSCME 2013-2016 MBERP Pension DROP and Buyback Memo APRIL 30, 2014.docx
24
ORDINANGE NO.
AN ORDINANCE OF THE MAYOR AND CITY COMMISSION OF THE
GITY OF MIAMI BEACH, FLORIDA, IMPLEMENTING PROVISIONS
OF THE 2013.2016 COLLECTIVE BARGAINING AGREEMENT
BETWEEN THE CITY AND THE AMERICAN FEDERATION OF
STATE, COUNTY AND MUN|C|PAL 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.I3 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 ORDINANGES !N
GONFLIGT THEREWTH; AND PROVIDING AN EFFECTIVE DATE.
BE IT ORDAINED BY THE CITY COMMISSION OF THE CITY OF MIAMI BEACH,
FLORIDA:
Section 1. Section 2.26 ol 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.
(g) 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 1 0, 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
25
monthly retirement benefit paid into a DROP account during the DROP period, in
accordance with Section 5.'l 3.
(E) 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 barqaininq
unit who were hired prior to September 30. 2010. mav elect to retire for purposes of the
Plan but continue emolovment with the Citv for up to sixtv (60) months. and have their
monthlv retirement benefit paid into a DROP account durinq the DROP period. in
accordance with Section 5.1 3.
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 defened 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 priorto 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 barqainino unit.
who were hired prior to September 30. 2010, mav particioate in the
26
4.
DROP for a maximum of sixtv (60) months.
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.
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. anv
Member within classifications in the AFSCME barqaininq unit. who
previouslv executed an election form entitlinq him/her to oarticipate in
the DROP for a period of less than sixtv (60) months and whose
DROP period ceases between April23, 2014 and April22. 2015, shall
have a one-time opportunitv to submit an inevocable amended
election from provided bv the Board. within thirty (30) calendar davs
followino the effective date of this ordinance, extendino his or her
DROP period to a maximum of sixtv (60) months in total.
5.
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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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5.
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. ln no event shall payments for accrued annual or sick
leave be included in a member's Earnings for purposes of the Plan.
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 inevocable 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{ime 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.
Notwithstandino the precedino sentence, eliqible Members whose
classifications are covered bv the AFSCME baroainino unit who are
participants in the DROP on April 23, 2014. shall be qiven a one-time
opoortunitv to submit an irrevocable amended election form. as
provided in Section 5.13 (a) 5, extendino the DROP period to a
maximum of sixtv (60) months in total.
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. ln the event of the
Member's death during or at the conclusion of the DROP period, a
6.
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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 Membe/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 Membe/s death the Membeis designated
beneficiary, may submit a written election on a form approved by the
Board, to receive the Membe/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 lM 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. ln the event a
Member or designated beneficiary does not submit a written election
to receive a distribution of the Membe/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 Membeis termination of City
employment or death.
12. lt 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. lf 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 lnternal 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 flve (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. Notwithstandino any provision of this
Section 4.03, effective Aoril 23. 2015. Members whose classification is included in the
AFSCME barqainino unit shall not be eliqible to purchase additional creditable service under
this section 4.03. The benefit multiplier that the Member is eaming 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
731
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
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
July 14, 2010, each Member in a classification within the AFSCME and GSA bargaining
units, and each Unclassified and 'Othei' Member, shall contribute to the Plan ten percent
(10%) of earnings, except as otheruise 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 othenrvise provided in this Section 6.02., and contingent
on State approval of an acluarial 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
Membe/s Earnings and designated as Employer contributions pursuant to section 414(h) of
the lnternal Revenue Code. Such designation is contingent upon the contributions being
excluded from the Members' gross income for Federal lncome 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
32
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
"Othe/', 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 percenl (12yo) of earnings, and effective January '18, 2010,
each Member described in the preceding sentence classified as "Othe/' shall contribute to
the Plan twelve percent (12Yo) 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 percenl (12o/o) of earnings, contingent on State approval of an
actuarial impact statement conflrming a reduction in the City's annual required pension
contribution tor FY 2O1O-201 'l associated with the pension changes contained in the 2009-
2012 collective CWA bargaining agreement of at least $1 ,000,050.
(e) Notwithstandinq subsections (a) and (b) above. for members who are in classifications
within the AFCSME barqaininq unit:
1. For Members hired orior to April 30. '1993. the emplovee contribution shall be
twelve oercent (12%) of earninqs effective Julv 14. 2010 throuoh April 30, 2013: ten percent
(10%) of earninos effective Ma)L 1 . 201 3 throuqh Aoril 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 earninos effective Julv 14. 2010 throuoh
April 30, 2013; eiqht percent (8%) of earnings effective Mav 'l . 2013 throuqh Aoril 23. 2014;
and ten percent (10%) of earninqs effective April 23. 2014.
3. For members hired on or after Seotember 30. 20'10. the emplovee contribution
shall be ten oercent (10%) of earninos.
4. The employee contribution provided in paraoraphs 1. and 2. above shall decrease
by two percent (2%) of earninos when the Plan actuarv confirms that the City's annual
required contribution to the Plan is twentv-three and one-half percent (23.5%) of oensionable
33
oavroll or less. The two oercent decrease in the emplovee contribution shall take effect on
the same date as the City's annual required contribution of twentv-three and one-half percent
(23.5%) of oensionable pavroll 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) ln 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 Gity of i/liami Beach this
day of 2014-
PHIL!P LEVINE
MAYOR
ATTEST:
APPROVED AS TO
FeRL,l& LA.I'.IGUAGE
& FCIR FJECUTICIN
RAFAEL E. GRANADO
CITY GLERK
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