HomeMy WebLinkAboutA001 - Council Action Form dated June 9, 1992 Item #
Date June 9, 1992
COUNCIL ACTION FORM
Subject:
Utility Retirement Ordinance Revisions
Background
There are two areas of the Utility Retirement ordinance proposed for revision:
1. The second step of the long-range benefit plan; and
2. A revision of the disability provisions.
Long-range Benefit Plan - Step 2
In May, 1991, the City Council accepted the long-range plan of the Utility
Retirement Board and approved the first step of the .plan. Approval of
subsequent steps would be based on:
a) The level of funding required, not to exceed the current combined
contributions of 15.60%;
b) Actual implementation of planned IPERS improvements; and
c) Inclusion of appropriate progressive features into the disability portion
of the Utility Retirement System.
The second step of the plan, to be effective July 1, 1992, increases the basic
retirement benefit factor from 1.85% to 1.9% for members retiring after 7-1-92, for
members retired less than 5 years prior to 7-1-92, and for surviving spouses of
deceased members. Further, the retirement benefit formula for members retired 5
years or more is to be increased from 2.05% to 2.10%.
The cost of these changes has been evaluated by Denis Sullivan of the actuarial
firm of Millman & Robertson, Inc. The cost of the system, with these changes
would be 15.15% of payroll. The current level of funding is 15.60%.
IPERS improvements have been implemented as scheduled.
During the past year, the Board and the City administration have conducted an
in-depth review of the disability provisions as they appear in the existing
ordinance. Included were the following areas:
1. Waiting period between onset of disability and beginning of benefits.
2. Integration with Social Security and offsets for SS benefits received.
3. Rehabilitation and re-employment assistance.
4. Offsets for earned income.
5. Offsets for other employer group benefits.
The Board is proposing two changes in disability provisions. The first is an
offset to earned income. The disability benefit in the Utility Retirement System
as the ordinance now reads is 75% of the employee's highest average earnings.
Disability is defined as the inability to perform the duties of any position within
any utility for any period exceeding sixty days. This change in the ordinance
would restrict the amount a disabled employee could earn in other employment
while receiving disability benefits. Benefits will be decreased when the total of
earned income plus disability benefits exceeds 100% of the member's base pay, as
stated on the current city payroll form, at the time of disability. The offset will
be $1.00 for every $2.00 earned beyond this amount.
The second change in disability provisions being recommended by the Board is
mandatory participation in a rehabilitation program. The members of the Board
do not feel sufficiently qualified to design or administer such a program.
Therefore, a committee has been established to negotiate with the Principal
Financial Group to develop a rehabilitation program for presentation to the Board
and ultimate approval by the City Council.
NOTE: Action taken at this time does not guarantee funding for future steps in
the Long Range Plan. The required level of funding has increased from 12.43% to
14.10% in 1991-92, and to 15.15% for 1992-93. Step three may well require
funding in excess of 15.60%. The Board should be aware that the City
contribution will not exceed the current 8.89% of payroll. Funding for future
steps will only be approved if there are offsetting cost decreases or alternate
funding such as employee contribution increases.
Alternatives
1. Adopt the ordinance changes as stated:
a. Increase the basic retirement benefit formula to 1.9% for members
retiring after 7-1-92, for members retired less than five years prior to
7-1-92, and for surviving spouses of deceased members; increase the
benefit formula for members retired five years or more to 2.10%.
b. Decrease disability benefits for earned income: Amount of decrease to
be 50% of earnings when earnings plus disability exceed 100% of base
pay, as stated on the current city payroll form, at the time of
disability.
C. Approval of item "a" is contingent upon the presentation by the Board
of a rehabilitation program that is acceptable to and approved by the
City Council by January 1, 1993.
2. Delay implementation of the requested ordinance changes until an acceptable
rehabilitation program has been approved by the City Council.
3. Deny all changes to the Utility Retirement ordinance.
4. Approve the disability changes: income offset and the mandatory
rehabilitation program and do not change the basic benefits.
Manager's Recommended Action:
The Manager recommends Alternative #1:
1. Adopt the ordinance changes as stated:
a. Increase the basic retirement benefit formula to 1.9% for members
retiring after 7-1-92, for members retired less than five years prior to
7-1-92, and for surviving spouses of deceased members; increase the
benefit formula for members retired five years or more to 2.1.0%.
b. Decrease disability benefits for earned income: Amount of decrease to
be 50% of earnings when earnings plus disability exceed 100% of base
pay, as stated on the current city payroll form, at the time of
disability.
C. Approval of item "a" is contingent upon the presentation by the Board
of a rehabilitation program that is acceptable to and approved by the
City Council by January 1, 1993.
Recommendation of this alternative emphasizes that item "a" is contingent on the
development of and City Council approval of an acceptable rehabilitation program
by 1-1-93. If that is not accomplished, the increase granted in item "a" will be
rescinded.
Council Action: