HomeMy WebLinkAboutResolution No. 2006-62Su~ested by: Council Member Eldridge
CITY OF KENAI
RESOLUTION NO. 2006-62
A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, AUTHORI7.ING
1'HE AMENDMENT OF THE CI'I'Y OF KENAI, ALASKA AND PUBLIC EMPLOYEES'
f2ETIREM~NT SYSTEM (PERS) PARTICIPATION AGREEMENT TO EXCLUDE ALL
ELECTED OFFICIAIS, EFFECTIVE NOVEMBER 21, 2006.
WHEREAS, the City of Kenai wishes to amend the agreement dated July l, 1969 to
exclude all elected officials effective Noveinber 21, 2006.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KFNAI,
ALASKA, that effective November 21, 2006, Subparagraph 2 on Page 2 of the
Participation Agreement Ue amended to read as follows:
The political subdivision agrees that ali eligible employees
except in the following designated category will participate
in the Retirement System:
All Elected OfGcials
PASSED BY THL COUNCIL OF THE CITY OF KENf~I, ALASKA, this 215t day of
November, 2006.
. C fi( / ~J ,~-6 ~""
PAT PORTER, MAYOR
A'ITEST:
t/~r r '(~„ f
(_ ~,Z-t2.t~4/L.s l~ .. i `?(_f°'t,~.~G'~"L~% k'C•"H.1
Car~il L. ~eas, City Clerk CJ
Approved by H~nanee:~_
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 official 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 employer pays.
Since council members have a relatively low salary, the amount that they
pay into the system is also relatively small. The empioyer 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 eaming assumption of 8.25%.
One other aspect of elected officials participating 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 council
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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"V'fla9e wit~i a Past, Gc~ wit`l~ a Future"
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
~ ~ Date: May 12, 2006
SubjecC: Resolurion No. 2006-20, Authorizing the amendment of the City of Kenai and
Public Employees Retirement System (PERS) Participation Agreement to
Exclude All ElecTed Officials, Effective May 3 2006
The purpose of this correspondence is to provide infoimation regarding this resolution.
This issue is complicated by any number of variables, including but not limited to interest
earned and/or lost on inveshnents, periods of service, additional employment other than
as an elected official in Kenai, covered by PER5. The number of variables is almost
endless.
The attached spreadsheet atCempYs to distill the issue. Therefore, its value is really in fhe
order af magi~itude of the daTa, rather than exacting accuracy.
For years, given the information generated by PERS, it was believed given the perceived
over-funding of the plan there was little ar no cost by including elected officials in the
system. We now know the ultimate cost/burden to the City of Kenai is substantial.
There are two scenarios regarding elected officials that are most expensive for the City:
1. An elected official who vesfs in PERS tier I and who takes early retirement
after five yeaxs of service. The elected officials contributions towards a
retirement pension and health benefits (for the City of Kenai) is only $ 27 per
month, ar 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
May 12, 2006
2. An elected official who has many years in PERS service who then is
employed by an employer in the PERS system. The example shown on the
attached spreadsheet identifies contributions by the elected
officiaUemployee totaling approximately $ 38,000, while the City of Kenai's
cost/burden would be approximately $ 80Q000.
It was helpful to my understanding of the magnitude of the issue to put this information
in a spreadsheet form; I hope it helps define what is a very difficult issue.
Thank you for your attention in thi s matter.
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