HomeMy WebLinkAboutResolution No. 2006-20~,'/~
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Suggested by: City Council
CITY OF KENAI
RESOLUTION NO. 2006-20
A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALA~j~A, AUTHORIZING
THE AMENDMENT OF THE CITY OF KENAI, ALASKA AND PUBLIC EMPLOYEES'
RETIREMENT SYSTEM (PERS) PARTICIPATION AGREEMEN ~ EXCLUDE ALL
ELECTED OFFICIALS, EFFECTIVE MAY 3, 2006.
WHEREAS, the City of Kenai wishes to amend the
exclude all elected officials effective May 3, 2006.
NOW, THEREFORE, BE IT RESOLVED BY THE
ALASKA, that effective May 3, 2006, Subparagr
Agreement be amended to read as follows:
dated July i, 1969 to
~CIL OF THE CITY OF KENAI,
on Page 2 of the Participation
2. The political subdivision agrees~at all eligible employees
except in the following designa d category will participate
in the Retirement System:
All El cted Officials
PASSED BY THE COUNCIL OF T CITY OF KENAI, ALASKA, this third day of May,
2006. ~
PAT PORTER, MAYOR
ATTEST:
Carol L. Freas, Cit~ Clerk
Approved by:
(4/21/06) clf
MEMORANDUM
To: Chuck Kopp, Acting City Manager
From: Larry Semmens, Finance Director~
Date: January 10, 2006
Subject: PERS for Elected Officials
Representative Seaton recently published his analysis of the cost of PERS
for elected officials. The results are quite surprising. He estimates the
entity's total liability to be over $434,000 for an elected public officiai that
vests after 10 years of service and retires to collect benefits for 22 years.
The majority of the liability is generated from the medical benefit provided
by PERS. Representative Seaton estimates this to be $368,545, but could
range upward to $450,000 depending on variables.
The PERS system seeks to accumulate sufficient assets while an employee is
working to pay for benefits paid out over the term of retirement. Employees
must contribute 6.75% of salary in addition to what the empioyer pays.
Since council members have a relatively low salary, the amount that they
pay into the system is also relatively smalL The employer must make up the
difference in the total cost of benefits and the amount the employee puts in.
In the case of council members the City will have to put in over $13,000
annually such that there would be about $200,000 available at the end of 10
years using the PERS earning assumption of 8.25%.
One other aspect of elected officials participat'rng in PERS is that if a city
council member ever works for a PERS employer in a regular salaried
position, the cost of the pension benefits will be apportioned strictly by the
number of years of service at each employer. For example if a councii
member served for 12 years (at a low salary) then went to work for a PERS
employer (at a high salary) for 4 years, the City would be liable for 75%
(12/16) of the pension liability. Depending on the salary level the City could
incur greater liability than would be for just the 12 years of City
employment.
The cities of Seward and Homer have opted elected officials out of PERS.
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F-t-E-E- Om a
/~V ~~la~e t.~it~i a~.st, Gi a~it~t ~ F~c~ta~a~e„
210 Fidalgo Avenue, Kenai, Alaska 99611-7794
Telephone: (907) 283-7535 / Fax: (907) 283-3014
www.ci.kenai.ak.us
MEMORANDUM
To: City Council
~ From: Rick Koch, City Manager
DaCe: May 12, 2006
Subject: Resolution No. 2006-20, Authorizing the amendment of the City of Kenai and
Public Employees Retirement Systein (PERS) Participation Agreement to
Excl,ude All Elected Officials, Effecrive May 3 2006
The purpose of this correspondence is to provide information regarding fhis resoludon.
This issue is complieated by any number of variables, including but not limited to interest
earned andlor lost on invesrinents, periods of service, additionai employment other than
as an eiected official in Kenai, covered by PERS. The munber of variables is aimost
endless.
The attached spreadsheet attenipts to distili the issue. Therefore, its vaiue is reaily in Yhe
order of maguitude of the data, rather than exacting accuracy.
For years, given the information generaYed by PERS, it was beiieved given the perceived
over-funding of the plan there was 1itCle or no eost by including elected officials in the
system. We now In1ow tl~e ultimate cost/burden to the City of Kenai is substantial.
There are ttivo seenarios regarding elected officials that are most expensive for the City:
1. An elected official who vests in PERS tier I and who takes early retirement
after five years of service. The elected officials contributions towards a
retirement pensiou and healtl2 benefits (for the City of Kenai) is only $ 27 per
month, or a total of $ 1,620.00 after five years. The estimated cost/burden to the
City will be $ 630,444.
Memo To Council
Resolution 2006-20, PERS
M~ay 12, 2006
An elected official who l~as many years in PERS service who then is
employed by an employer in Yhe PERS system. The example shown on the
attached spreadsheet idenYifies contribuYions by Che elected
officiaUemployee totaling approximately $ 38,000, while the City of Kenai's
cost/burden would be approximately $ 800,000.
It was helpful Co my understanding of the magnitude of the issue to put tlvs in~formation
in a spreadsheet form; I hope it helps define what is a very difficult issue.
Thank you £or your attention in this matCer.
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