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HomeMy WebLinkAboutPrepayment of Pers Employer Contributions - FY 2006/2007 Council/Agency Meeting Held: 6 HB - 10: 08 IF Deferred/Continued to: -i` y 0 1 A proved ❑ Conditionally Ap roved ❑ Denied Ci lerk' igna ' CF3 Council Meeting Date: 6/19/2006 Department ID Number: FN 06-003 CITY OF HUNTINGTON BEACH REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: HONORABLE MAYOR AND CITYQOUNCIL MEMBERS SUBMITTED BY: PE LOPE ULBRETH-GRAFT, PA, CITY ADMINISTRAT R PREPARED BY: DANIEL T. VILLELLA, CPA, FINANCE DIRECTOR f� SUBJECT: PREPAYMENT OF PERS EMPLOYER CONTRIBUTIONS Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachment(s) Statement of Issue: The Public Employees Retirement System (PERS) is offering a 3.66% discount to agencies that pay 100% of the employer's contribution for the 2006-2007 PERS fiscal year. The estimated savings for 2006-2007 if the City participates in this program is $180,078. Funding Source: Cash is available within the various funds that usually have PERS obligations. Any amounts paid prior to the obligation date for these benefits in the fiscal year 2006-2007 are considered prepayments of expenses and can be refunded if necessary. Recommended Action: Motion to: Authorize Daniel T. Villella, CPA, Finance Director to approve the Public Employees Retirement System LUMP SUM PAYMENT REQUEST for fiscal year 2006-2007 authorizing the lump sum prepayment of PERS Retirement Employer's Contribution in the amount of $8,300,730 for Safety employees and $3,008,132 for Miscellaneous employees to be paid by July 15, 2006. Alternative Action(s): Make the traditional twenty-six biweekly payments throughout the twelve months. REQUEST FOR ACTION MEETING DATE: 6/19/2006 DEPARTMENT ID NUMBER:FN 06-003 Analysis: The City has been advised that again PERS is offering a 3.66% discount to agencies paying 100% of the employer's share for the 2006-2007 fiscal year by July 15, 2006. Based on this information, the City requested the PERS Actuarial & Employer Services Division to calculate the lump sum payment for the Safety employees (Attachment 1) and the Miscellaneous employees (Attachment 2). This information is based on the most recent annual valuation and assumes payment made between July 1 and July 15, 2006. The amount of pre-payment required is approximately 3.66% less than the total of the twenty- six biweekly payments. This reduced amount was calculated by PERS discounting future payments by their expected rate of return of 7.75%. Safety Miscellaneous Total Normal - Over 26 Pay Periods $ 8,616,382 $ 3,122,522 $ 11,738,904 Prepay Entire Amount by July 15, 2006 8,300,730 3,008,132 11,308,862 Gross Savings 315,652 114,390 430,042 Interest Loss -Assuming Earnings Rate of 4.25% (249,964) Net Savings $ 180,078 The decrease in savings from last year is due to the high interest rate earnings expected in fiscal year 2006-2007. Last year, we estimated savings to the City of$265,695 based on the City's investments earning an interest rate of 3.25%. The updated estimated savings for the present fiscal year is $230,000 due a slightly higher interest rate of 3.25%. With your approval, the Finance Director can approve the LUMP SUM PAYMENT REQUESTS and a check will be processed in the amount of $11,308,862 ($8,300,730 for Safety employees and $3,008,132 for Miscellaneous employees). Environmental Status: Not applicable. Attachment(s): City Clerk's Page Number No. Description 1. Prepayment of the Employer Contributions for Fiscal Year 2006-07 — Safety Plan 2. Prepayment of the Employer Contributions for Fiscal Year 2006-07 — Miscellaneous Plan G:\RCA\RCA-Finance\FN 06-003 PERS Prepayment 2006-20071.doc -2- 6/6/2006 11:28 AM ATTACHMENT # 1 Actuarial & Employer Services Branch P.O. Box 942709 Sacramento, CA 94229-2709 Telecommunications Device for the Deaf-(916) 795-3240 FAX(916)795-3005 May 2, 2006 Employer Number : 0097 Employer Name : CITY OF HUNTINGTON BEACH Rate Plan: SAFETY Re: Lump Sum Payment to prepay 2006-2007 employer contribution rate Dear Requestor: As requested, 2006-2007 employer contribution rate information on your lump sum payment follows. If you are aware of others interested in this information (i.e. payroll staff, county court employees, port districts,etc.), please inform them. The information is based on the most recent annual valuation and assumes payment made between July 1 and July 15, 2006 and no further contractual or financing changes taking effect before June 30, 2007. The change in your 2006-2007 employer contribution rate after you make the proposed lump sum payment, is displayed in the"Change to Total Employer Rate"line below. As of June 30, 2004 $ % 2006-07 Employer Contributions ($) mid year $8,616,382 28.556% 2006-07 Employer Payment($) beg year* $8,300,730 * N/A 2006-07 Revised Employer Contrib ($) mid year 1 $0 00/0 Change to Total Employer Contribution Rate 1 (28.556% * Pay this amount(see attachment). Your pre-payment 2006-2007 Employer Contribution is from your June 30, 2004 actuarial valuation report. It has been reduced by a half year interest credit at the 7.75% actuarial assumed interest rate(resulting in an approximate 3.66% discount). To the extent your actual 2006-2007 payroll or CalPERS actual 2006-07 net investment earnings differ from our assumptions, we anticipate the differences will be reflected in your 2009-2010 and later employer contribution rates. If your rate plan is in a risk pool, these earnings and payroll differences will be shared by all employers in that risk pool, under current practice. To initiate this change, the enclosed Lump Sum Payment Request must be completed and returned to the Fiscal Services Division with a wire transfer or a check between July 1 and July 15. A copy should be sent to us. If you have questions, please call (888) CalPERS (225-7377). Richard Santos Associate Pension Actuary, CalPERS Actuarial&Employer Services Branch P.O. Box 942709 Sacramento, CA 94229-2709 Telecommunications Device for the Deaf-(916)795-3240 FAX(916)795-3005 LUMP SUM PAYMENT REQUEST Please complete and return this form to the following address,with a copy to the address above. Ca1PERS Fiscal Services Division Attn: Susan Patchett P O Box 1982 Sacramento,CA 95809-1982 If a wire transfer is being used after March 8, 2006, it should go to the following account: ABA#0260-0959-3 Bank of America Sacramento Main 555 Capitol Mall,Suite 1555 Sacramento,CA 95814 For credit to State of CA,CalPERS Account#01482-80005 Please e-mail your actuary and Susan Patchett (Susan PatchettOCalPERS.CA.GOV) on the day of the wire. Employer Name: CITY OF HUNTINGTON BEACH Employer Number: 0097 Member Group or Plan: SAFETY PLAN Coverage Group affected by the Payment(choose one within the affected plan): 74001, 75001, 76001 Amount: $8,300,730 Purpose: To prepay the 2006-2007 employer contribution rate Base(s)to which payment is applied: N/A In recognition of our payment please revise our employer contribution rate effective July 1, 2006: Name and Title: (Please Print): Signature: Date: Mailing Address: Street Address: City/State/Zip: Telephone Number: Fax Number: E-mail Address: ACTO PP 2-2006 ATTAC H M E N T #2 Actuarial $ Employer Services Branch P.O. Box 942709 Sacramento, CA 94229-2709 Telecommunications Device for the Deaf-(916)795-3240 FAX(916) 795-3005 May 2, 2006 Employer Number : 0097 Employer Name : CITY OF HUNTINGTON BEACH Rate Plan: MISCELLANEOUS Re: Lump Sum Payment to prepay 2006-2007 employer contribution rate Dear Requestor: As requested, 2006-2007 employer contribution rate information on your lump sum payment follows. If you are aware of others interested in this information (i.e. payroll staff, county court employees, port districts,etc.), please inform them. The information is based on the most recent annual valuation and assumes payment made between July 1 and July 15, 2006 and no further contractual or financing changes taking effect before June 30, 2007. The change in your 2006-2007 employer contribution rate after you make the proposed lump sum payment, is displayed in the"Change to Total Employer Rate"line below. As of June 30, 2004 $ % 2006-07 Employer Contributions($) mid year $3,122,522 7.849% 2006-07 Employer Payment ($) beg year* $3,008,132 * N/A 2006-07 Revised Employer Contrib ($) mid year $0 00/0 Change to Total Employer Contribution Rate 7.849%) * Pay this amountrsee attachments Your pre-payment 2006-2007 Employer Contribution is from your June 30, 2004 actuarial valuation report. It has been reduced by a half year interest credit at the 7.75%actuarial assumed interest rate (resulting in an approximate 3.66%discount). To the extent your actual 2006-2007 payroll or CalPERS actual 2006-07 net investment earnings differ from our assumptions, we anticipate the differences will be reflected in your 2009-2010 and later employer contribution rates. If your rate plan is in a risk pool, these earnings and payroll differences will be shared by all employers in that risk pool, under current practice. To initiate this change, the enclosed Lump Sum Payment Request must be completed and returned to the Fiscal Services Division with a wire transfer or a check between July 1 and July 15. A copy should be sent to us. If you have questions, please call (888)CaIPERS (225-7377). Richard Santos Associate Pension Actuary, CalPERS Actuarial&Employer Services Branch P.O. Box 942709 Sacramento,CA 94229-2709 Telecommunications Device for the Deaf-(916)795-3240 FAX(916)795-3005 LUMP SUM PAYMENT REQUEST Please complete and return this form to the following address,with a copy to the address above. Ca1PERS Fiscal Services Division Attn: Susan Patchett P O Box 1982 Sacramento,CA 95809-1982 If a wire transfer is being used after March 8, 2006,it should go to the following account: ABA#0260-0959-3 Bank of America Sacramento Main 555 Capitol Mall,Suite 1555 Sacramento,CA 95814 For credit to State of CA,CalPERS Account#01482-80005 Please e-mail your actuary and Susan Patchett (Susan Patchett(&CalPERS.CA.GOV) on the day of the wire. Employer Name: CITY OF HUNTINGTON BEACH Employer Number: 0097 Member Group or Plan: MISCELLANEOUS PLAN Coverage Group affected by the Payment(choose one within the affected plan): 70001 Amount: $3,008,132 Purpose: To prepay the 2006-2007 employer contribution rate Base(s)to which payment is applied: N/A In recognition of our payment please revise our employer contribution rate effective July 1, 2006: Name and Title: (Please Print): Signature: Date: Mailing Address: Street Address: City/State/Zip: Telephone Number: Fax Number: E-mail Address: ACTO PP 2-2006 RCA ROUTING SHEET INITIATING DEPARTMENT: FINANCE SUBJECT: Prepayment of the PERS Employer Contributions COUNCIL MEETING DATE: June 19, 2006 RCA.ATTACHMENTS STATUS Ordinance (w/exhibits & legislative draft if applicable) Attached ❑ Not Ap licable E Resolution (w/exhibits & legislative draft if applicable) Attached ❑ Not Applicable Tract Map, Location Map and/or other Exhibits Attached ❑ Not Applicable E Attached ❑ Contract/Agreement (w/exhibits if applicable) Not Applicable (Signed in full by the City Attorney) Attached ❑ Subleases, Third Party Agreements, etc. Not Applicable (Approved as to form by City Attorney) Certificates of Insurance (Approved b the City Attorne Attached ❑ ( pp Y Y Y) Not Applicable Attached ❑ Fiscal Impact Statement (Unbudget, over $5,000) Not Applicable E Attached ❑ Bonds (If applicable) Not Applicable E Attached ❑ Staff Report (If applicable) Not Applicable E Commission, Board or Committee Report applicable)licable Attached ❑ p ( pp ) Not Applicable E Findings/Conditions for Approval and/or Denial Attached Findin ❑ g pp Not Applicable E EXPLANATION FOR MISSING ATTACHMENTS' REVIEWEa RETURNED ' FORWARDED Administrative Staff ) ) Assistant City Administrator (initial) ( ) ) City Administrator (Initial) ( ) City Clerk ( ) EXPLANATION FOR RETURN OF ITEM: (Below Space For City Clerk's Use Only) RCA Author: Robert Sedlak x5907