LTC 072-2008 Response to Request from R. McKinnon to Amend CWA Contract to Include DROP Planm MIAMIBEACH
OFFICE OF THE CITY MANAGER
NO. LTC #072-2008 LETTER TO COMMISSION
TO: Mayor Matti Bower and Members of the City Commission
FROM: Jorge M. Gonzalez, City Manager
DATE: February 28, 2008
SUBJECT: Response To Request From Richard McKinnon To Amend the Communications
Workers of America (CWA) Contract To Include A Deferred Retirement Option
Plan (DROP)
This LTC is in response to the memo sent by Richard McKinnon to explore the possibility of
amending the current CWA collective bargaining agreement to include a DROP plan.
By way of background the current CWA collective bargaining agreement was approved by
the City Commission on September 5, 2007 and covers the period from October 1, 2006
through September 30, 2009. The CWA members overwhelming approved the contract with
97.8% voting in favor of ratifying the contract. The City has no legal obligation to reopen the
CWA contract at this time and doing so may encourage similar requests from other unions
which puts the City in a situation of not having defined contract terms.
During the most recent contract negotiations with the CWA, a number of pension benefits,
including a DROP plan, were discussed, but both parties ultimately came to agreement on
just one (1) pension change, an Early Retirement Incentive Program (ERIP). Under the
ERIP, bargaining unit members age 47 or olderwith 25 or more years of credited service as
of January 25, 2008, were eligible for the ERIP. Members who elected the ERIP will receive
their accrued benefit under the Miami Beach Employee Retirement Plan with no penalty for
early retirement. As negotiated, the ERIP was also made available to members of the
AFSCME and GSA bargaining units.
Now, less than six (6) months after the 2006-2009 CWA contract was ratified, the CWA is
asking to reopen and amend the contract to include a DROP plan. This is a significant
change that would permit employees to "retire" for purposes of the pension plan and
continue to work for the City for an additional three (3) years. During the three (3) year
DROP period, the employee's pension benefits would accrue in the pension plan, and would
be paid out in a lump sum at the end of the DROP. A DROP plan would significantly
increase the City's total employee costs and would add to the administrative complexity of
the Miami Beach Employee Retirement Plan.
In his memo, Mr. McKinnon states that "once an employee becomes a DROP participant,
he/she is considered to be retired and the employee stops earning retirement service credit,"
and "...contributions to the Retirement System for General Employees are no longer
required. This is an immediate cost savings to the City." This statement ignores the fact that
payroll costs for pay rolling these long term employees, (at the end of their careers), and with
longevity pay in the case of the lifeguards, cost significantly more than replacing these
employees (via retirement), with new hires paid at an entry level salary. The City estimates
that the cost of maintaining the most highly paid CWA employees vs. replacing them
per year (for the CWA unit alone) could cost as much as $600,000 per year based on
certain reasonable assumptions.
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