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HomeMy WebLinkAboutCity of Tamarac Resolution R-97-2901 Temp. Reso. # 8063 Page 1 November 24, 1997 Revision #1 11/20/97 CITY OF TAMARAC, FLORIDA RESOLUTION NO. R-97-c2 50 A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF TAMARAC, FLORIDA, ADOPTING AND ENACTING AN EARLY RETIREMENT PROGRAM OFFERING BENEFIT INCENTIVES TO EMPLOYEES MEETING AGE AND SERVICE ELIGIBILITY CRITERIA BASED ON A TEN POINT AND CAFETERIA SELECTION PLAN; SETTING A SPECIAL EARLY RETIREMENT WINDOW OF 45 DAYS; PROVIDING THE CITY MANAGER AUTHORITY TO ADMINISTER THE PROGRAM; PROVIDING FOR CONFLICTS; PROVIDING FOR SEVERABILITY; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the City Commission of the City of Tamarac, Florida has considered an Early Retirement Program (ERP) proposal which is attached as Exhibit A; and WHEREAS, the ERP proposal provides eligibility criteria for employees qualified to participate in the Early Retirement Program; and WHEREAS, the ERP proposal provides benefits (incentives) to eligible employees electing to retire as a part of the Early Retirement Program; and WHEREAS, the City has developed a ten point/cafeteria selection plan for enacting of the Early Retirement Program which is described in the ERP proposal; and Temp. Reso. # 8063 Page 2 November 24, 1997 Revision #1 11/20/97 WHEREAS, financial analyses including the actuarial impact and a cost/benefit analysis have been conducted of the ERP proposal assuming full participation by eligible employees and full replacement of vacant positions; and WHEREAS, legal requirements have been considered as a part of the ERP proposal including the Older Workers Benefit Protection Act which governs permissible early retirement benefits and incentives, the Florida Statutes which provides for the actuarial soundness of public retirement systems, and the City of Tamarac Code on pensions and retirement which provides for retirement pension benefits; and WHEREAS, the ERP proposal provides for the use of a facilitator for offering benefit incentives and to provide for employment, retirement and financial planning counseling to eligible employees; and WHEREAS, on November 12, 1997, the City Commission authorized an agreement with Mathis and Associates as facilitator for the Early Retirement Program; and WHEREAS, on November 12, 1997, the City Commission approved on first reading a pension ordinance amendment for a special early retirement option; and 1 Temp. Reso. # 8063 Page 3 November 24, 1997 Revision #1 11/20/97 WHEREAS, on November 21, 1997, the Pension Board of Trustees approved a pension ordinance amendment for a special early retirement option; and WHEREAS, on November 26, 1997, the City Commission approved on second reading a pension ordinance amendment for a special early retirement option; and WHEREAS, on November 26, 1997, the City Commission will consider the resolution herein approving the adoption and enactment of the Early Retirement Program; and WHEREAS, after all enacting legislation is approved, a general announcement of the Early Retirement Program will follow and initial appointments with the facilitator set; and WHEREAS, the proposed calendar in the ERP provides for the early retirement window of opportunity to open on December 15, 1997 and to close on January 30, 1998; and WHEREAS, the City Manager recommends adoption and enactment of the Early Retirement Program proposal attached hereto as Exhibit A; and WHEREAS, the City Commission of the City of Tamarac, Florida deems it to be in the best interest of the citizens and residents of the City of Tamarac to adopt and enact the Early Retirement Program as proposed in Exhibit A. Temp. Reso. # 8063 Page 4 November 24, 1997 Revision #1 11/20/97 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF TAMARAC, FLORIDA: SECTION 1: The foregoing "WHEREAS" clauses are hereby ratified and confirmed as being true and correct and are hereby made a specific part of this Resolution. SECTION 2: The Early Retirement Program (ERP) proposal, as set forth in detail in Exhibit A attached hereto, is hereby approved and adopted. SECTION 3: The Early Retirement Program window shall officially open at the beginning of the City's business day on Monday, December 15, 1997 and shall officially close by the end of the City's business day on Friday, January 30, 1998, SECTION 4: The City Manager is authorized to administer necessary forms, documentation, and activities necessary for administering the Early Retirement Program. SECTION 5: All resolutions or parts of resolutions in conflict herewith are hereby repealed to the extent of such conflict. SECTION 6: If any clause, section, other part or application of this Resolution is held by any court of competent jurisdiction to be unconstitutional or invalid, in part or application, it shall not affect the validity of the remaining portions or applications of this Resolution. 1 1 1 Temp. Reso. # 8063 Page 5 November 24, 1997 Revision #1 11/20/97 SECTION 7: This Resolution shall become effective immediately upon its passage and adoption. PASSED, ADOPTED AND APPROVED this .2-6 day of NmAJ- ",1997. ATTEST: CAROL A. EVANS, CMC, CITY CLERK I HEREBY CERTIFY that I have ApproV d this RESOLUTI as to form. r,. E SCHREIBER, MAYOR- RECORD Mh MAYOR CHREIBER DIST 1: COMM. MCKAYE DIST 2: V/M MISHKIN DIST 3: COMM. SULTAN, DIST 4: COMM. ROBERT 0 mo, Z Ti EXHIBIT A CITY OF TAMARAC EARLY RETIREMENT PROGRAM (ERP) PROPOSAL r� iCITY OF TAMARAC EARLY RETIREMENT PROGRAM (ERP) I. Definition of Early Retirement II. Introduction of Early Retirement Program (ERP) III. Goals of ERP A. Objectives B. Strategies IV. Eligibility requirements for ERP V. Benefits (incentives) under ERP VI. Analysis of Financial Impact 0 A. Actuarial B. Cost/Benefit VII. Legal Requirements of ERP A. Compliance with Older Workers Benefits Protection Act (OWBPA) B. Waiver for age discrimination claims C. State authorization D. City authorization 1. Pension Ordinance amendment 2. Support documentation Vill. Implementation Plan for ERP A. Announcement/Notice B. Facilitator/Employee meetings C. Application process D. Initial offers E. Retirement and financial counseling F. Final offers G. Recruitment strategy H. Position review process I. Operational review process CITY OF TAMARAC EARLY RETIREMENT PROGRAM I. DEFINITION OF EARLY RETIREMENT The City of Tamarac pension plan pursuant to the City Code, Chapter 16, Pensions and Retirement, provides for the method, rules and procedures for the payment of retirement pension benefits. The plan, by way of illustration and not limitation, provides for conditions of eligibility, standards for vesting of benefits, and the type, amount and calculation of benefits to be paid. The pension plan may be amended by the Board of Trustees at any time, provided that such amendments comply with the applicable sections of the Internal Revenue Code, other applicable law, and are approved by the City Commission. A pension benefit is payable if the participant has the appropriate vesting credits and has reached the applicable retirement age. Early retirement qualification occurs on the first day after a participant has earned 10 vesting credits (years of service) and has attained age 55 for general employees. The benefit level for general employees is two percent of average final compensation reduced by one -fifteenth for each of the first five years and one -thirtieth for each of the next five years by which the participant is younger than the normal retirement age. (Tamarac Code) Early retirement incentives relax some of the usual retirement criteria to allow employees an earlier retirement than would otherwise be possible, or offer an improvement in benefits to induce retirement among people who are already eligible but who would otherwise postpone their retirement in order to earn higher benefits. These improved benefits are usually available only for a brief time. (State Legislative Report) II. INTRODUCTION The City of Tamarac is considering a special early retirement program for its general employees. On October 8, 1997, the City Commission approved Phase I of the three phases which constitute the Early Retirement Program (ERP). Phase I is the plan design, the products of which are the development of a comprehensive ERP proposal (this document) and engagement of a program facilitator (Dr. R. William Mathis). Phase 2 (introduction to City plan) would consist of official notifications and offers to eligible City employees. Phase 3 is the implementation phase for managing employee separations and changes to the organization. For more than three years, the City has studied and deliberated on critical human resource concerns. During this time the City has designed and implemented a pay plan and classification system, acquired and implemented an employee . appraisal system, identified training deficiencies and begun a formal training EARLY RETIREMENT PROGRAM II. INTRODUCTION, (continued) program for City employees, improved employee benefit and insurance programs, and completed extensive research on employee retirement options. As a part of the Major Issues document, early retirement was identified to assist in the considerable change experienced by the Tamarac government in the past three plus years. Major Issues pointed out that "The organizational culture in the City of Tamarac has changed but it is not yet where it needs to be substantially." While early retirement is not suggested as the cure, it does offer some opportunity to reevaluate the organization and its programs while offering a benefit and "Thanks" to those employees who might choose not to participate further in effecting the change. III. GOALS Providing quality service to Tamarac citizens hinges on the City's ability to create and support a work environment which recognizes that people are the City's most valuable resource. The ideal situation is one where employees work in a supportive environment, each individual committed and empowered to provide quality services to citizens and/or customers. The ideal workforce should be encouraged and challenged to reach its highest potential, toward the goal of maximum productivity, creativity, and job satisfaction. (Major Issues) In the proposed 1997 and 1998 budgets, the City Manager highlighted the needs and concerted efforts to enhance management practices throughout the City and the importance of being a competitive employer whose goal it is to help each employee reach their full potential so that the organization can reach its full potential. For Tamarac, the time has come to examine exhaustively how it conducts business, such as technological advancements and abandoning inefficient and high maintenance equipment of manual processes. From a human resource perspective, the organization has begun to renew itself through an infusion of new people and ideas complementing the dedicated contributions of long standing staff. An early retirement program provides an opportunity to welcome new resources while acknowledging, with special thanks, the dedication of long term employees. It allows employees in the latter group, if they choose, to end their service to the City with a special benefit and with dignity. As change occurs in today's dynamic workplace, Tamarac, like other organizations, needs to be flexible. The trend today is that most employees will work at many different jobs and for many different employers throughout the course of their careers. The organization, as well as the people within the organization, must be adaptable if the interests of our customers, the citizens, EARLY RETIREMENT PROGRAM III. GOALS, (continued) are to be well served. Key to the success of this type of organization is rewarding individual effort and allowing individual choice. An important part of the overall compensation package required in order to attract and retain fully qualified, competent and motivated employees is a fair and competitive benefit package. Competitive benefits for employees does not necessarily mean more. An innovation of the private sector that has cut costs and increased the flexibility of organizations to meet both internal and employee needs has been a significant shift away from traditional pension and retirement systems. The traditional defined benefit system is not only more expensive to the organization than alternative plans, but it also falls short of meeting the needs of today's workers. The City has an enhanced opportunity, with the implementation of the special early retirement option, to change the course of its retirement system to become more flexible. Consideration should be given to offering a defined contribution program such as a 401 a plan to general employees. A defined benefit program, such as the City's, does not necessarily meet the needs of today's employees. It obligates the City to pay benefits to any vested employee upon retirement and continuing for as long as that individual lives. Given a situation where employees are likely to move from employer to employer, it makes sense for the City to adopt a retirement system that satisfies its obligation to the employee during the time the employee is employed, rather than decades down the road. A shift to a defined contribution program is estimated to be less costly to the City and may provide a more substantial benefit to the employee. As technology continues to change exponentially, skill requirements for employees change. A successful early retirement program will permit a reallocation of resources and positions enabling the organization to operate more efficiently. Often the need to economize or change an operation is hindered because of the potential impact to employees, i.e., layoffs, change in status, etc.; an early retirement program provides a "win -win" opportunity to the employer and employee for assessing and effecting organizational change. While the experience of senior workers will be missed, the talents, skill level, and training of the new workers fits the goal of the Tamarac organization to be flexible in today's dynamic workplace and prepared for 21 st century challenges. The special early retirement option will be a one-time offer to employees that meet certain qualifications and will be available for a limited time period. It will allow for a review of positions as they become vacant and an evaluation of 3 • • EARLY RETIREMENT PROGRAM Temp. Reso. #8063 III. GOALS, (continued) operations on a meted schedule. It will afford an opportunity for functional and resource matching to better meet the challenges and goals of the changing Tamarac organization. It could also represent an opportunity for transition to a defined contribution program for new hires and/or incumbents. Based on the City's new classification and pay system, new hires on average will be compensated at the minimum of the midpoint of the range offsetting costs of the early retirement benefit increases. IV. ELIGIBILITY Employees eligible to participate in the special early retirement program are the following: • General employees in the City of Tamarac Employees' Pension Plan who are age 62 and over as of December 31, 1997. • General employees in the City of Tamarac Employees' Pension Plan who are age 57 through 61 with 5 years of credited service as of December 31, 1997. • General employees in the City of Tamarac Employees' Pension Plan who are age 50 through 56 with 10 years of credited service as of December 31, 1997. V. BENEFITS (INCENTIVES) The City has developed a ten point plan for a cafeteria selection of benefits. Point configurations shall be based on the following five benefit categories: • Each elective point shall be equivalent to one year of service credit up o a maximum use of 5 points. [Available to eligible general employee participants] • Each elective point shall be equivalent to one and one-half years of age credit up to a maximum use of 10 points. [Available to eligible general employee participants] Each elective point shall be equivalent to 50 percent of the City's proportional cost of theTamarac health insurance plan based on the employee selected plan option (exclusive of the waiver program and coverage beyond age 65) up to a maximum use of 2 points. [Available to eligible general employee participants employed by the City] 4 0 EARLY RETIREMENT PROGRAM Temp. Reso. #8063 V. BENEFITS (INCENTIVES) (continued) • Each elective point shall be equivalent to 50 percent of the cost of a supplemental plan to Medicare based on the City's supplemental health plan cost at the time of selection up to a maximum cost of $175 and maximum use of 2 points. [Available to eligible general employee participants] • Each elective point shall be equivalent to 5 percent of the current salary of the incumbent employee or $1,500, whichever is greater, paid as a lump sum up to a maximum use of 10 points. [Available to eligible general employee participants employed by the City] VI. FINANCIAL ANALYSIS ACTUARIAL IMPACT The report of actuaries, Gabriel, Roeder, Smith & Company, on the actuarial impact of the early retirement program is highlighted below. (A copy of the full report is attached as Appendix C.) • Assuming a maximum benefit ratio selected by all eligible early retirees and that all positions are replaced, the City's annual contribution to the pension plan would increase from approximately $491,000 to $680,000 for a total annual contribution increase of $189,000. COST/BENEFIT ANALYSIS An analysis of the budgetary impact of the early retirement separation has been completed by the City's Budget Office and is highlighted below. It illustrates payroll impact assuming all 56 eligible early retirees elect retirement and are replaced. (A copy of the full analysis is attached as Appendix B.) • Net annual payroll savings are estimated to equal $91,000. This analysis compares the current salary plus longevity for 56 incumbents which equals $1,812,624 to replacement hires for all 56 positions which equals $1,467,863, plus the costs of the retirement health program equaling an estimated $65,000 and the increased pension contribution of $189,000 noted above. A projection for 5 years yields net savings of $560,385. N7 0 EARLY RETIREMENT PROGRAM VI. FINANCIAL ANALYSIS (continued) Assuming an average period to recruit for each position of 10 weeks, payroll savings would yield $532,385 in the first year. One time costs of the ERP including the election of the lump sum cash benefit is estimated to equal $126,000 plus administrative costs of $67,000 (i.e., facilitator, actuaries). The net one time savings equal an estimated $339,000. There would be a budgetary impact in the first year from the payout of accrued liabilities from vacation and sick leave for the retiring incumbents of $345,454. VII. LEGAL CONSIDERATIONS Voluntary early retirement plans or incentives are permissible under the Older Workers Benefit Protection Act (the Act or OWBPA), which amended the Age Discrimination in Employment Act (ADEA) to extend the prohibition on age discrimination in compensation, terms, conditions or privileges of employment. A primary factor that employers must consider when structuring any early retirement plan is whether the incentive denies or reduces benefits to older workers while continuing to provide the same for younger ones. Early retirement incentives that are acceptable under the act apply across the board to all employees regardless of their age. They may include incentives based on: a flat dollar amount, a fixed amount per year of service, a percentage of salary to all employees who reach a certain age, flat dollar increases in pension benefits, percentage increases in pension benefits, and incentives that credit years of service and/or age. Retirement benefits aimed at encouraging early retirement must be voluntary. While the employee bears the burden of showing that he or she accepted the retirement involuntarily, the employer must examine the substantive content of the retirement offer and ensure that the offer was made in an environment free from coercion. An employer may require an employee to execute a waiver or release of any potential age discrimination claims in exchange for early retirement benefits. A valid release or waiver of rights under the ADEA must be "knowing and voluntary" and: 1) be part of a written agreement between the employee and the employer that can be understood by the average individual; 2) specifically refer to any rights and claims arising under the ADEA; 3) state that the employee is not waiving any rights or claims that may arise after the date of execution; 4) be in X.1 a 0 EARLY RETIREMENT PROGRAM VII. LEGAL CONSIDERATIONS (continued) exchange for consideration (i.e., money) in addition to anything of value to which the employee may already be entitled; 5) advise the employee in writing to consult with an attorney before executing the agreement; 6) give the employee a period of at least 21 days in which to consider the agreement or if a waiver is in connection with an exit incentive, at least 45 days; and 7) provide for a period of at least seven days after signing the agreement in which to revoke it and state that the agreement does not become effective or enforceable until the revocation period expires. (Commentary & Statutes, the Bureau of National Affairs, Inc. copyright 1996-1997). The City will require such a waiver as a condition of receiving the early retirement benefits. The waiver will also release claims under similar state, county and local laws. Florida Statutes, Chapter 112, Part VII, provides for the actuarial soundness of public retirement systems also known as the "Florida Protection of Public Employee Retirement Benefits Act." The act establishes minimum standards for the operation and funding of public employee retirement systems and plans and is applicable to municipal governments which participate in, operate, or administer a retirement system or plan for public employees, funded in whole or . in part by public funds. Each retirement system. or plan subject to the provisions of the act requires regular or special actuarial reports prepared and certified by an enrolled actuary. The actuarial report provides for the adequacy of employer and employee contribution rates in meeting levels of employee benefits and/or changes in benefits. Actuarial experience may be used to fund additional benefits, provided that the present value of such benefits does not exceed the net actuarial experience accumulated from all sources of gains and losses. No unit of local government shall agree to a proposed change in retirement benefits unless prior to adoption of the change by the governing body it has received a statement of the actuarial impact of the proposed change. The City of Tamarac pension plan pursuant to the City Code, Chapter 16, Pensions and Retirement, provides for the method, rules and procedures for the payment of retirement pension benefits. The plan provides for conditions of eligibility, standards for vesting of benefits, and the type, amount, and calculation of benefits to be paid. The pension plan may be amended by the Board of Trustees at any time, provided that such amendments comply with the applicable sections of the Internal Revenue Code, other applicable law, and are approved by the City Commission. The amending Ordinance to the pension plan for allowing a special early retirement option has been submitted for consideration by the City Commission and Board of Trustees. 7 0 EARLY RETIREMENT PROGRAM VII. LEGAL CONSIDERATIONS (continued) For bargaining unit employees represented by the Federation of Public Employees (FPE), union consent to the ERP will be sought. VIII. IMPLEMENTATION PLAN FOR ERP A presentation was made at a workshop of the City Commission on November 5, 1997 by City staff and the facilitator on the Early Retirement Program (ERP) proposal. The tentative calendar for implementation provides for the authorization by the Commission of Phases 2 and 3 of the ERP at its November 12 meeting along with the first reading of the Pension Ordinance amendment to allow a special early retirement option. The second reading and public hearing would follow on November 26, and if approved would enable by Commission resolution implementation of the Early Retirement Program. After all enacting legislation is approved, a general announcement of the Early Retirement Program will follow and initial appointments with the facilitator set. These will involve an estimated one hour initial time per employee. After this initial examination of options, a next appointment will be scheduled if interest exists. Follow up meetings will concern planning sessions on retirement or transition inclusive of testing and consultation by phone and final offers. The ERP proposes the use of a facilitator for offering cafeteria options and variations to accommodate the employee and the City. This will involve a flexible timeline for individual implementation so as not to leave the City vulnerable to mass exodus and provision of essential services. The facilitator will also provide options to the employee for career guidelines, retirement and financial planning, or moving to another career path. The chosen facilitator, Mathis and Associates, offers a complete employee outplacement program. Services involve dealing with emotional reactions and provides a supportive framework to begin the transition process. The facilitator will work with the individual employee to explore career options, including career changes, moving to the private sector, self employment and relocation, and will result in an informed decision regarding career direction. Vocational testing and counseling, using structured instruments is offered for employees who have difficulty making important career decisions and lack focus. Sessions with the employee, which will include services of a trained Psychologist, will provide a structured approach to: • Identifying values, interests, goals, needs and priorities 0 Vocational, personality and management style assessment E:3 EARLY RETIREMENT PROGRAM VIII. IMPLEMENTATION PLAN FOR ERP (continued) • Considering the financial situation • Completing a self -assessment of skills, accomplishments and desirable job characteristics • Identifying other career options • Making a decision on career goals The facilitator will assist the employee in developing and preparing job search materials and marketing strategies. In addition, help can be provided in identifying target industries and organizations, and in developing networks. Other assistance may include: • Resume development and review • Writing marketing letters and preparing references • Organizational and employment research assistance • Developing a focused marketing/job search plan based on career decisions • Starting a contact network • Informational interview coaching • Developing and sharpening interview skills, video taping, if desired • Joining a support group In the final phase of the program, the facilitator will periodically review progress with the employee, and provide coaching and assistance on expanding the network, sharpening skills and give feedback on progress. Follow-up Job Search and related counseling assistance will be available, by appointment, for any employee who is having a difficulty with the search process. The Personnel and Operating Departments will need to gear up opportunities for employment, recruiting and hiring replacements or restructuring jobs. While the schedule provides for up to six months after the window of opportunity closes for the special early retirement option, it is anticipated that a majority of early retirees will exit in the early part of the program implementation. This will also present an opportunity to redefine jobs and assess needs and priorities of the organization. The Personnel Department and Finance Department (Budget Office) will be prepared to assist Operating Departments to meet organizational goal opportunities from the impact of the Early Retirement Program. Operational reviews may be undertaken as a part of the annual budget process which commences in February or on a more meted schedule. 9 0 EARLY RETIREMENT PROGRAM VIII. IMPLEMENTATION PLAN FOR ERP (continued) The Early Retirement Program will manifest as an exciting and opportunistic time for the City as well as having a saddened and burdensome effect as the transition occurs and the organization says farewell and thanks to loyal employees but hello to new team members to support the change and challenges of the future. Tamarac is up to the test that the Early Retirement Program offers. C7 1�1