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93-2860 Ordinance ORDINANCE NO. 93-2860 AN ORDINANCE OF THE CIlY OF MIAMI BEACH, FLORIDA, AMENDING ORDINANCE NO. 1901 WHICH ESTABLISHED THE GENERAL EMPLOYEES PENSION SYSTEM, ESTABLISHING A BENEFIT LEVEL FOR EMPLOYEES WITHIN THE CLASSIFICATIONS OF "OTHER" AND ENTERING THE SYSTEM ON OR AFfER AUGUST 1, 1993; PROVIDING AN IRREVOCABLE OPTION FOR SAID EMPLOYEES ENTERING THE SYSTEM ON OR AFfER AUGUST 1, 1993 TO ELECT TO REJECT MEMBERSHIP IN THIS SYSTEM AND ELECT TO JOIN THE DEFINED CONTRIBUTION RETIREMENT SYSTEM; PROVIDING FOR A CONTRIBUTION RATE OF TEN PERCENT FOR SAID EMPLOYEES; PROVIDING FOR A REPEALER, SEVERABILIlY AND AN EFFECTIVE DATE. Whereas, the City of Miami Beach, Florida has established the General Employees Retirement System (the "System") with the passage of Ordinance 1901 which has been amended from time to time, and, Whereas, the City Commission of said City desires to amend this System to establish a level of benefits for persons entering the System on or after August 1, 1993. NOW, THEREFORE, BE IT ORDAINED BY THE MAYOR AND CIlY COMMISSION OF THE CIlY OF MIAMI BEACH, FLORIDA: SECTION 1 - Article 2.09 of Ordinance 1901 is amended to read as follows: 2.09 "Final Average Monthly Earnings" means, in the case of a person who became a Member of the System on or after November 1, 1976, one-twelfth of the average annual earnings of the Member during the three highest paid years of his creditable service; in the case of a person who became a Member prior to November 1, 1976 or who retires after October 1, 1990, this term means one-twelfth of his average annual earnings during the two highest paid years of his creditable service. Notwithstanding the foregoing, for any person who is in a classification within the AFSCME bargaining unit who entered service with the City on or after April 30, 1993, or for any person who is in the "Other" classification who entered service with the City on or after August 1. 1993. this term means one-twelfth of the average annual earnings of the Member during the three highest paid years of service as an Employee. SECTION 2 - Section 3.04 of Ordinance 1901 is amended to read as follows: 3.04 All individuals holding the position of either City Manager or City Attorney, shall have the option to reject membership in the plan provided herein and to be a member in a retirement program with any public trust fund named by the aforesaid individuals and approved by the City Commission. Any employee within the classifications within the AFSCME bargaining unit entering service with the City on or after April 30, 1993; or any employee within the classification of "Other" who entered service with the City on or after August 1. 1993. and would otherwise become a Member of this retirement system, shall have an irrevocable option to reject membership in the plan provided herein, and select the Defined Contribution Retirement System. SECTION 3 - Article 5.01 of Ordinance 1901 is amended by adding Subsection (f) to read as follows: 5.01(1) Notwithstanding the above subsections, a person who entered service with the City on or after April 30, 1993, and is within the classifications of the AFSCME bargaining unit or a person who entered service with the City on or after August 1. 1993 and who is in the classification of "Other" shall be eligible to retire with full benefits upon the completion of more than ten (10) years of creditable service and the attainment of the sixtieth anniversary of his birth. For persons eligible to retire under this paragraph, the retirement allowance shall be computed as follows: final average monthly earnings multiplied by three percent (3%) per year of creditable service to a maximum of eighty percent (80%) of such final average monthly earnings. Persons with ten (10) or less years of creditable service may retire with a reduced benefit. For persons with less than ten (10) years of creditable service, the retirement allowance shall be computed as follows: Final average monthly earnings multiplied by three percent (3%) per year of creditable service multiplied by ten percent (10%) multiplied by years of creditable service to a maximum of ten. SECTION 4 - Article 5.03 of Ordinance 1901 is amended by adding Subsection (c) to read as follows: 5.03(c) Notwithstanding the above subsections, any Member who entered service with the City on or after April 30, 1993, who is in the classifications within the AFSCME bargaining unit or any Member who entered service with the City on or after August 1. 1993 and who is in the classification of "Other" and whose service with the City is terminated voluntarily or involuntarily, prior to the attainment of his sixtieth anniversary of his birth but after the completion of ten (10) or more years of creditable service shall be entitled, in lieu of a refund of his accumulated employee contributions, to apply for a vested retirement allowance. The vested retirement allowance shall be a deferred allowance commencing on the first day of the calendar month coincident with or next following the sixtieth anniversary of his birth and shall be computed in accordance with the provisions of Article 5.01(f) above. SECTION 5 - Article 5.04(d) of Ordinance 1901 is amended to read as follows: 5.04( d) The allowance payable to a disability Retirant prior to his normal retirement date shall not be less than thirty-five percent (35%) of his final average monthly earnings as defined in Section 2.09 as of the date of his disability if an ordinary disability retirement allowance is payable, and not less than seventy-five percent (75%) of such final average monthly earnings of a service connected disability retirement is payable. For any Member who is in the classifications within the AFSCME bargaining unit and who entered service with the City on or after April 30, 1993,or any Member who is in the classification of "Other" and who entered service with the City on or after August 1. 1993. the allowance payable on a service connected disability retirement shall not be less than sixty percent (60%) of his final average monthly earnings. The allowance payable to a disability Retirant after his normal retirement date shall be an amount computed as a normal service retirement on the basis of the final average monthly earnings and number of years of creditable service he would have had if he had continued in service without interruption until his normal retirement date at the maximum rate of pay in effect at the time of his retirement for the classification at which he retired provided that such allowance shall not exceed the amount payable to him as a disability retirement allowance prior to his retirement date or not less than his normal retirement benefit at his normal retirement date. "Normal Retirement Date" as used in this Section 5.04 means the date determined in accordance with Section 5.01 (a) on the assumption that the disability retirement is deemed to be active service as an Employee for this purpose. SECTION 6 - Section 6.02 is amended by adding subsection (d) to read as follows: 6.02(d) Notwithstanding subsections (a), (b) and (c) above, after April 1, 1993, all persons in service with the City and who are in the classifications within the AFSCME bargaining unit and after August 1. 1993. all persons in service with the City and who are in the classification of "Other" shall contribute to the System ten percent (10%) of their covered earnings throughout their service as an Employee. SECTION 7 - REPEALER All Ordinances or parts of Ordinances in conflict herewith be and the same are hereby repealed. SECTION 8 - SEVERABILIlY If any section, subsection, sentence, clause or phrase of this Ordinance is held to be invalid or unconstitutional by any court of competent jurisdiction, then said holding shall in no way affect the validity of the remaining portions of this ordinance. SECTION 9 - EFFECTIVE DATE This Ordinance shall become effective ten (10) days after its adoption. Passed and adopted this 28th day of July , 1992. Attest: ~J~,\ City Clerk 1st reading 7/14/93 2nd reading 7/28/93 Approved as to Form: :?0 1.6. ')~ City Attorney CITY OF MIAMI BEACH C Ty ..,ALL 1700 CONVENTION CENTER DR'VE M:AM~ BEACf-' FLORiDA 33' 39 OFFICE OF THE CITY MANAGER TELEPHONE: (305) 673-7010 FAX: (305) 673-7782 COMMISSION MEMORANDUM NO. 1403-C;3 July 28, 1993 To: Mayor Seymour Gelber and Members of the City Commission From: Roger M. CarL n I I , i\. J City Manager ~ Subject: Amendments to the Pension System for General Employees of the City of Miami Beach for Members in the Classification of "Other" Administrative Recommendation: The Administration recommends that the City Commission adopt the two ordinances amending the General Employees Pension System for the "Other" members after a public hearing on second reading on July 28, 1993. Back~round: These two ordinances are prepared in accordance with the anticipated savings to be achieved in the FY 92/93 Adopted Budget. There are two ordinances amending Ordinance 1901, The General Employees Pension System as it relates to members in the classification of "Other". The "Other" classification are civil service employees who are in confidential positions and are not included in the bargaining groups of AFSCME or Benevolent. There are currently seventy-two (72) employees in this group and they are principally the first line supervisory positions along with some technical positions. The employees in this group have historically received the salary and benefit changes that had been negotiated with the Employee's Benevolent Association. However, since no resolution has been achieved with that union, the administration is recommending that the historic relationship be severed and these employees be given the same salary and benefit changes that were previously granted to members of the AFSCME union. The first retirement related ordinance implements the recommendations of the Pension Systems Review Committee and institutes a bifurcated pension system for all Other employees with a reduced benefit for new members of the system. The recommendations of this Committee were to decrease the benefit accrual rate to three percent annually, with a retirement age of sixty, vest the benefit incrementally over ten years, modify the AGEND~ 3 "-. ITEM - - \...-> DATE 7- 2?J~~34" calculation of final average monthly earnings to an average of the three highest years, reduce disability benefits and raise the contribution rate to ten percent for all employees. The second retirement related ordinance provides a retirement window with an incentive to encourage eligible employees to retire. These two ordinances, which should be considered a package, will accomplish two necessary goals. First, the retirement incentive should produce two years of employee turnover (anticipated to be 9 employees) immediately. The resulting savings from replacing a portion of the early retired employees (anticipated to be 8 employees) at lower salary and benefit levels will provide the expense reductions anticipated within the FY 92/93 Adopted Budget. Second, the two years of turnover will allow the accomplishment of diversity Goals for "Other" employees covered by the General Employees Retirement System within budget limitations and much sooner than otherwise would be possible without an early retirement program. Analysis: The financial effect of these two Ordinances in conjunction with the amended salary ordinance for new hires of general employees of the City will be an approximate forty percent (40%) reduction in salary cost for new employees. This is accomplished because the existing salary plan has a twenty-five percent (25%) range from minimum to maximum and the retiring employees are typically at the maximum .salary for their respective positions. With the reduction of fifteen percent (15%) in the saiary plan, new employees starting at the entry level for a position will be starting at a salary forty percent (40%) lower than the employee that they are replacing. Additionally, the changes in the pension system will save approximately five percent (5%) of salary as a contribution to the pension system. Members of the City Commission should also be aware that the retirement incentive will produce a cost for the one-time payout amount of the employees accumulated leave balances (which they may elect to receive 50% upon separation and 50% in December or January depending on their tax situation) which will be more' than offset by the savings produced from salary and benefit reductions. These payout amounts have been considered in the net savings projected in the FY 92/93 Proposed Budget to be achieved through the retirement incentive program. There are nineteen (19) persons from a total of seventy-two employees (72) in the "Other" classification who would be eligible for the retirement incentive. The retirement incentive option would be available to the eligible employees for a sixty day period (the "Election Period") from the effective date of the ordinance and would provide credit for two years of creditable service for all employees over normal retirement age or credit for two years of age if the employee is within two years of the normal retirement age within the 1~-- 4.1 period. Seventeen (17) of these employees are over age fifty and would be eligible for the additional service credits and two (2) employees will be within two years of normal retirement during the Election Period and would be eligible for additional age credit. The nineteen (19) employees have combined salaries of $647,047 annually and leave balances for those employees total $254,405. It is anticipated that fifty percent (50% or 9 employees) of those eligible for the incentive will accept the benefit and retire. The retiring employees wili have salaries of approximately $320,000 and it is anticipated that approximately eighty percent (80%) of the retiring employees (or 7) will be replaced. With the new salary structure and anticipating hiring at the entry level for the positions, the salaries for the new hires will be $192,000 annually saving the City $128,000 in salary cost annually. The new level of benefits in the pension system will produce a savings of $16,000 the first year and will grow each year as the bifurcated plan becomes the only plan over time. The total of $144,000 in annual savings will be offset in the first year by the payout on leave settlements of $125,000 (50% of $254,405). It is anticipated that the payout on leave settlements due to option to defer payment for tax reasons will amount to 75% or $94,000 this fiscal year and 25% or $31,000 next fiscal year, producing a net savings for the first twelve months of $19,000 or fifteen percent (2%) of the projected savings from pension plans projected in the FY 92/93 Adopted Budget. The second year, without the payout of the leave settlements, the savings would be $150,000 based on additional employees turnover and performance reviews and the amount would annually increase with the additionai employee turnover. The ~ffect of these I.WU ordinances and !he salary ordinance working together produces savings three and one half times greater than the effect of only implementing the bifurcated pension system recommended by the Pension Systems Review Committee. Conclusion: The savings of $19,000 the first year and $150,000 the second year with the ability to more quickly achieve the diversity commitment of the City of Miami Beach provides the justification for approval of these two ordinances. To accomplish these changes prior to the summer recess, the Administration requests that the City Commission hold the Public Hearing and second reading of the Ordinance on July 28, 1993. RMC/RJN/me 45