HomeMy WebLinkAboutORDINANCE 1317-1989•
Suggested by:
City of Kenai
ORDiNANM NO. 1317-89
Administration
AN ORDINANCE OF THE COUNCIL OF THE CITY OF KENAI, ALASKA AMENDING KMC'
23,40.095 BY INCREASING THE EMPLOYER CONTRIBUTION TO THE SUPPLEMENTAL
RETIREMENT PLAN FROM 2% TO 4% OF THE FIRST $37,500 OF BASE WAGES..'
WHEREAS, the City currently contributes 2% of the first $37,500 of•base
wages for eligible employees to a supplemental retirement plan, and
WHEREAS, the Supplemental Retirement Program was designed as a partial
replacement for the Social Security Program, from which the City
withdrew in 1981, and
WHEREAS, maximum Social Security contributions for each of the employer
and employee have increased $1,629.75 per employee since 1981, and
WHEREAS, the City Administration is requesting that the employer
contribution rate be increased to 4% of the first $37,500 of base
wages, which is a maximum increase of $750 per employee.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF KENAI-r
ALASKA that KMC 23.40.095 is hereby amended as follows:
23.40.095 Supplemental Retirement: All permanent employees 21
yeare of age or older with six months of service regularly scheduled to
work fifteen (15) hours or more per week shall be eligible to
participate in a supplemental retirement program to be selected by the
City Manager. The City's contribution on behalf of each eligible
employee shall be [TWO] four percent [(2%)] j4� of the first $37,500
of base wages earned in a calendar year. The contribution shall not
apply to additional compensation to employees, such as overtime pay►
holiday pay, and qualification pay.
PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this 17th day of
May, 1989. S-
N J. W IAMS, MAYOR
ATTEST:
et Ruotsala, City Clerk
First Reading: May 3, 1989
Second Reading: May 17, 1989
Effective Date: July 1, 1989
Approved by Finance: _ e c3Q
(4/26/89)
MEMORANDUM
TO: Kenai City Council
FROM:
Charles A.
Brown,
Finance Director
�
Q
DATE:
April 26,
1989
•
SUBJECT: Supplemental Retirement
On December 31, 1981, the City of Kenai withdrew from the Social
Security program. At that time, the City's contribution rate (matched
by the employee) was 6.65% of $29,700 of wages (maximum = $1,975.05).
On July 1, 1984, the City Council authorized a City contribution on
behalf of eligible employees into a supplemental retirement account of
2% of the first $37,500 of base wages (maximum = $750.00). There is
no employee contribution. (It appears that this $37,500 figure was
derived from the maximum social security taxable wages in 1984, which
was 6.7% of $37,800.)
Currently, the social security tax is 7.51% for each of the employer
and employee of the first $48,000 of wages (maximum = $3,604.80).
Had the City remained in the Social Security program, the:..City's share
would have increased (at a maximum) from $1,975.05 in 1981 to
$3,604.80 in 1989, or $1,629.75 per employee.
Since 1984, the date we first started the supplemental retirement
plan, social security has increased (at a maximum) from $2,532.60 to
$3,604.80, or $1,072.20 per employee.
The City Administration is requesting an increase in the supplemental
retirement rate from 2% to 4%, with the cap remaining at $37,500. The
maximum increase per employee would be $750.
The City, over the years, has realized substantial savings as a result
of its withdrawal from the Social Security program versus the
Supplemental Retirement program. For example, in 19.89, the savings at
the 2%/$750 rate is approximately $2000000; at the 4%/$1500 it is
approximately $143,000. However, as if to complicate this
calculation, employees hired after April 1, 1986, have.been in the
medicare portion of social security, which is 1.45% of eligible
wages. In FY88-89, this will cost the City about $10,000.
The cost of the additional 2% budgeted for FY89-90 supplemental
retirement is about $56,000.
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