HomeMy WebLinkAboutA002 - Council Aciton Form dated June 8, 1993 T
Item # 30
Date: June 8, 1993
COUNCIL ACTION FORM
SUBJECT:
An ordinance to amend the municipal code for the purpose of increasing
the Utility Retirement Benefit from 1 . 90% to 1 . 95% of highest average
earnings for each year of creditable service.
BACKGROUND:
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.
Step 2 of the long-range plan was implemented July 1, 1992 along with
changes to the disability provisions of the ordinance. In December,
1992 the City Council approved the ordinance change specifying a
rehabilitation program.
Step 3 of the long range plan was to have included 2 parts :
a) Increase the normal retirement benefit from 1 . 90% to 1 . 95% of
highest average earnings for each year of service for members retiring
after 7-1-93 and for those retired less than 5 years prior to 7-1-93,
and increase the spousal benefit factor from 1 . 90% to 1 . 95%
b) Establish an annual Cost of Living Adjustment of 1 . 25% for members
retired five years or more.
The actuarial firm of Milliman & Robertson, Inc . of Omaha was requested
to provide a cost analysis of the proposed increase. The analysis
(attached) indicates that implementation of both benefits would
increase the required funding to well beyond the current level of
15 . 60% . Therefore, the Board voted to request approval for part (A)
only and will review the COLA for possible implementation in the future.
The July 1, 1992 annual actuarial report established a required funding
level of 14 . 08% of covered wages . The proposed increase will require a
funding level of 14 . 49% . The current level of funding remains 15 . 6%,
knowingly overfunding the system. Due to the strong feeling of the
members and their representatives on the Board the City Manager and
City Council have agreed to maintaining the contribution at the
overfunded level, at least during the 5 year implementation period for
the long term plan. The contribution could be reduced to the
recommendation of the Actuary, 14 . 49%, and result in a savings for
1993-94 of $35 , 118 .
IPERS benefits increased as scheduled in 1991 and 1992 . The increase
for 7-1-93 , however, is less than planned in the IPERS 5 year plan.
The 1993 increase was to have taken the multiplier from 56% to 58% and
increase the covered wages from $34 , 000 to $37 , 000 . The actual change
will be an increase of the multiplier to 57 .4% and covered wages will
increase to $35, 000 .
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 14 .08% for 1992-93.
If step three were to be implemented as originally planned, funding
would exceed 15. 60%. The Board's requested increase takes the funding
level to 14 .49%. 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: Increase the normal
retirement benefit from 1 . 90% to 1 . 95% of highest average earnings for
each year of service for members retiring after 7-1-93 and for those
retired less than 5 years prior to 7-1-93 , and increase the spousal
benefit factor from 1 . 90% to 1 . 95% .
2 . Adopt the ordinance as stated, but set the funding level at 14 . 49%
of covered payroll . 14 . 49% is the contribution level recommended by
the Actuary and would result in a savings of $35 , 118 . in FY 93-94 .
3 . Deny changes to the Utility Retirement ordinance at this time.
MANAGER' S RECOMMENDED ACTION:
The Manager recommends Alternative #1, Adopt the ordinance changes as
stated: Increase the normal retirement benefit from 1 . 90% to 1 . 95% of
highest average earnings for each year of service for members retiring
after 7-1-93 and for those retired less than 5 years prior to 7-1-93,
and increase the spousal benefit factor from 1 . 90% to 1 . 95%
COUNCIL ACTION: