AGENDA CAPTION:
Title
Consider approval of Resolution 2015-67R, adopting the Public Agency Retirement System Trust (“PARS”), including the PARS section 457(b) Alternative Retirement Plan; approving an agreement for administrative services with phase II systems, doing business as Public Agency Retirement Services; appointing the City Manager, or his/her successor or his/her designee as the City’s Plan Administrator for the PARS section 457(b) Alternative Retirement Plan/Trust; authorizing the City’s Plan Administrator to implement the plan(s), execute the PARS legal and administrative documents on behalf of the City and to take whatever additional actions are necessary to maintain the City’s participation in PARS and to maintain PARS compliance of any relevant regulation issued or as may be issued; therefore, authorizing him/her to take whatever additional actions are required to administer the City’s PARS; authorizing the City Manager or his designee to execute the Administrative Services Agreement on behalf of the City; and declaring an effective date.
Body
Meeting date: June 16, 2015
Department: Human Resources
Funds Required:
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Funds Available:
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CITY COUNCIL GOAL:
BACKGROUND:
In 1990, Congress adopted the Omnibus Budget Reconciliation Act (OBRA). OBRA allows cities to establish an alternate retirement program for their part-time, temporary and seasonal employees. Public Agency Retirement Services (PARS) offers an alternate retirement program which meets the OBRA requirements and administers such program to over 300 agencies.
The PARS program benefits both the employee and the City. Currently, the City is required to contribute an amount equal to 6.2% of each part-time, temporary and seasonal, employee’s salary to Social Security and the employee is required to contribute a similar amount for a total contribution of 12.4%. The OBRA legislation requires a minimum contribution to the alternate retirement plan of 7.5%.
Under the PARS plan, the employee’s contribution will remain the same as it is under social security - 6.2%. The City will contribute the remaining 1.3% for a total of 7.5%. The reduced rate of contribution by the City (1.3% versus 6.2%) results in an estimated first year savings of approximately $29,000. This level of savings will continue each year with the amount varying depending upon the total number of part-time, temporary and seasonal employees participating in the program and their hours worked.
The benefits to employees from enrollment in the PARS alternate retirement program versus
Social Security are as follows:
1. PARS plan participants are fully vested in their individual accounts from day one. This is the same as immediate ownership of the invested funds. This compares to Social Security which requires contributions for a minimum of 40 credits (10 years) before the employee is eligible for any Social Security retirement benefit.
2. In the event that a participant separates from the City, the participant may receive the
contributed funds as follows:
(a) Distributed as a lump sum for the participant; or
(b) Rolled over to an IRA or other qualified retirement plan that accepts rollovers.
3. PARS contributions are made with pre-tax dollars. Social Security contributions are post-tax dollars.
The result is additional take-home pay for the enrolled part-time, temporary and seasonal employees.
If approved, the program will be implemented in October 2015.