HomeMy WebLinkAboutRESOLUTION 1971-22. ~ ~. o._ ..,~.-.-. ,-. .! __.-, .-. - . ~~-.,-.~- .-.__ . .-. ~ ~_ ~
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Resolution No. ?1 - 22
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A RESOLUII~N TEW4INATING THE CITY OF KENAI'S PART-
ICIPATION ZN THE STATE OF ALASKA'S POBLIC EMPLOYEES
RETIREMENT SYSTEM.
WEiEREAS, employees of the small City in.the State of
Alaska are prone to move from public. to pri.vate employ-
ment so that the average length of empZay-ment is under
th ree years, and
Wi~EREAS, contributions made by the.City of Kenai. do not
directly benefit the employees because of their length
of service, and
WHEREAS, concributions made by the City of Kenai because
of the nature of the system, seem to be steadily in-
creasing., an,d
Wj~RFAR:r g~ud'~ .ynL~ls!a~_.~„mn~nta r~nntrihute(~.hy
the. ~iIIglorrt3r .a.n.d.. emRlaytee cnuld he. i~t.ter u~.flized;
NOW, THE~iEE'QBE.,. SE..I-T._RF.SDT.vF~.:._.#ha.t..t1~.e.Cit.y. of _Kenai
withcirata»fr.am_~he Sr,ate af Alask.a Puh13.G Rm~Xc~e$
Retirem~t.S.ystem, and that_the State of A2s~':a PERS
is her.eby requested to refund any and a11 contributions
in accordance with the Alaska Statutes 39,35.620 *..hro~?gh
39 . 3 S. G.5.0 i nclusiv.e..
Passede~ ~X,~rt.~ ! y ~'/
CC ~i < < %~ , ~^r~. l~~~ /`
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JOHN F. STEINBECK, MAYOR
ATTEST:
~ ~ Sharon 5terling, Acting C C er
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~ State Retirement System
Tenaination
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AS-39-35-620
A. If the contributions are not traasmi.tted withi,u-the-ps~acsibed
time 13mit, the Commissioner may grant ssn extension: Ho~NV~s, ii tbs
political subdivision is in default at the snd o~ exten~ion, p~stic-
ipation in the system is teriainated.
B. Within 6 months after terminntion, the aatuary oi th~ ~y~t~
shall, at the cost of the terminated employer, deter~nins by acttta=ial
valuation the amount in the pension fund att.ributable tA tbe ~sploy~s.
i Thi.s amount shaii be distribut~d by payment or provision !or payeeat
I of benefits to employees and retired employees o~ the tes7~iuated
Employer in the followinq order of preferenee:
t~ To refund the balance in the employee aOntributioA
and savinqs accounts.
2. To fund in advance the benegits of retirad pes~oes.
3. To all other employees in propartion to, bttt not ~x-
ceeding the respective actuarial value ot theix aeortt~d bu~~t~ts.
AS-39-35-620
The distribution may be made in cash or annuity aontsaot~ at the
discretion of the baard.
AS-39-35-640
The distribution is not subject to question.
, A AS-39-35-650
In no event may an gmployer receive an ataowtt lraM ths p~Aaion
fund until all of the distribution and liabilities ol~th~ ~yst~w atd
to the employeea. Any refund to the ~mployer will dri~e lrp~
variation between actual and expected aetuasisl raquitement~.
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RETIREMENT PLAN
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The City of Kenai and its employees are currently enrolled
. in the State retirement proqram. Contributions percentage wise
are 9$ (employee/employer total) for retirement and 9.68 (total)
on the first $7800.00 for FICA. xf an employee leaves the proqram
prior to retirinq, he gets his contribution back plus 28 simple
interest.
, A cursory examination indicates that the payments for the
' coming year to be something more than $5,500.00 per month total.
Projectinq this fiqure into the future, the total accumulated
capita]. will be 5198,000.00 and interest earnings will be
, • $15,439.00 a~ 5$ simple.
In previous conversations I have expressed a stronq financial
dislike to a retirement system that does not have an investment
return feature. My points are these.
An employee invests about 9$ of his qross earnings into the
retirement proqram, the City matches this contrfbution. As a
matter of theory, the employee benefits auch as this are a part
of his compensation. However, when he leaves the system, he will
receive only his contribution plus a small percentage. The.
employee could do much better investing in a savinqs account
at 4$.
Alaska ia a young state and the population is most transient
fn nature. Tenure of employment seems to run an average of 3 to
7 years. Therefore, out of a group of 35 employees, probably
only 3 of the original group would still be employed by the same
employer at the end of 10 years.
The contribution made on behalf of the employee by the City
is never recovered in the case of leaving the system.
I therefore mnke the followfng suggestionss
1. We set up an employees retirement investment
board.
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i~ 2. We investigate the possibility of withdrawing ~
, fram the state progxam and FICA.
~~ 3. That the program be treated as an investment
rather than retirement. ~
4. That the empioyee be entitled to his contribution
~l~us an amount equal to what his investment
would have earned, if he had it invested at simple
interest lus if he stays 3 years 10$ of the City
. contribut~ 4 13
5 16
6 19
7 22
8 25
' 9 29
10 33
" 11 37
12 41
13 44
, • • 14 48
15 52
16 60 ~
17 70
• 18 80
~ 19 90
~ 20 10 0
Plus
If the employee stays 5 years he receives 258 of the total
earned by the City's contribution
10 yea~. rs 508
15 years 75$
If the employee stays until 20 years, he will receive his
prorate share of the total fund based on the following formula.
Total investment b e lo ee x Total value = Ownership
Investment by a emp oyees of system
in the system
These thoughts are exploratory in nature and nvt firm. I
would appreciate your thought and we should move out if we are
going to move. A general meeting between us would now be in order
with each to present his ideas, preferably in writing.
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