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03-16-1970 - Regular Meeting - MinutesMINUTES OF THE ADJOURNED REGULAR MEETING..OF THE CITY COUNCIL CITY1OF WEST COVINA, CALIFORNIA kARCH 16, 1970. The adjourned regular meeting of the City- .Counci.1-was.-called to order by Mayor Leonard S. Gleckman at 7:32 P.M., in the West Covina City Hall. The Pledge of Allegiance was -led by Councilman Jim -Lloyd. ROLL CALL Present: Mayor Gleckman; Councilmen Gillum, Nichols, Chappell, Lloyd Also Present:_ George.Ai.assa,- City Manager Lela Prepton,,City Clerk George Wakefield, City Attorney Leonard Eliot, Controller Ray Windsor, Administrative Assistant - Ross Nammor, Administrative.Assistant Mr. Strader - Social Security representative Mr. Larson - State Retirement System representative Mr. Mitchell - Actuary (Mayor Gleckman stated this was a Joint Meeting with the Personnel Board to discu ' sis the ..Empl oyees'.Reti-rement Program.. -and asked the City Clerk to take-Ro.1.1 -Call o.fJthe Personnel,.B.oard...)_._ Present: Chairman Tice; Messrs. Faunce, Sanborn, Sornborger. Absent: Mr- Zoelle A) EMPLOYEES', RETIREMENT .-PROGRAM .-,..Joint meeting,. o1. City Council and Personnel Board.,.. Chairman Tice: I might state that we did review the recommenda- Personnel Board tion of the Retirement,Committee and held several meetings,. -We heard,from the Employees' Association who recommended,the withdr �,wal-from S.oc.ial Security. In fact 82.9% of-the.employees voted. to,.withdraw.and enter the State Plan completely., The Board ... had some,reservations with regard to with- drawal and one -of the items,.was,the .liability .factor. We did not get any clear cut.. answers at t]iis-poi,nt......There-appare-n-tly is not suffi- cient cases in court to Judgd....just- how; ­fax - the_ ldabild-ty. would go. I believe, in.the package. -sent, to.-you..,_�, the_re._w.a,s.,,a .1,ettex_f rom., the City Attorney,.,explaining..,.,thi,s. portion.. of i.t., - We-_d.id_ make. a. -motion to withdraw from S.ocial Secur.ity. and. enter- -the. b,as.ic -State Plan with the 1959 Survivorl-s Benefits included. As ,far -as .the statistics and costs, etc., I".,believe the:1ide'tail can be answered by Mr. Eliot, City Controller., and Messrq.�,!Stirader, Mitchell and Larson. Councilman Gillum: UnfQ7rtunately­iMr.,Mayor, the three gentle- men ;that .co.uld.answer-have not yet arrived. I.am: :sure they.wil-1--be here shortly and I am wondering if - we could .hold -..up this one;,porti,,ori. of the meeting until they arrive anA_..I,,.m-ight bring up. another. subject. We received information today- on AB 98 :!bill.,-, (Mayor Gleckman.-inquired i.f-.the ,Personne1 Board had -any further comments at this. - time?., (Norge).. -._He._then- -asked i-f -they had any objection to.Council.-di.scussing.AB 98 while,awaiting the arrival of the three gentlemen (no objection). eiction). He then asked Council if they agreed to the addition of AB 98'to the agenda (no objections).' AB 98 Councilman Gillum.:_... ­.-A-memorandum, dated.. March- .16th. was..,,addressed to. city, Caunc,il,= Jay... -the.. City, Manager.. -regarding AB- 9,8_..,..:,;.The-...staff... has...gon.e o.ver.., the .-bil.l.-and pointed out some..of the. are'.a&_,of_ ..great.-concek-n -..-.and,.,I....hope.-,.to.unc,iI will go along f ._and.:supportthis feeling. Whbn,I._orig.inal1y read the Bill I didIt realize how important it was to all cities as regards to negotiations between employees and the City Council. It states ADJ. REG. C.C. 3=16-70 Page Two AB 98 - Cont°d. in this memorandum that AB.. 98-.would....des.tro.y.....the-..e-f.for.ts of the employment act as it invol.ve.s_ t.he.---pr.inciple...-o.f..-Home. Rule -...concept with controversial bind.i.ng....arb .itr..ation... As..-Z...me.nt.io_ned._.bef.ore and as stated in .the memor.andum.,,..._the.re.....i.s.-....a.conce-rted,-effor..t-in...-. Sacramento at this. time .to..secur.e.-.the,..41 -.vote.s.-.-necessary...to...move the bill out of C.ommi-t.tee.....I._would. .re.commend.--that..Counci.l_g.i.ve serious consideration to the.:'.-staff-.-.recomme.ndat on....to.-instruct_--the City Attorney to draft a resolution .opposing ..AB-.98, and.because it is in Committee and...ver.y - close to.-. comi.ng....:.out,.--_I...wou.ld ..further. suggest that our Mayor placea phone call- to.. Sacr-amento- expressing Councils feelings. I..am deeply concerned after.'., talking to some of the people, that the lobbying in Sacramento by'various organizations, that through this..type of activity the cities are going to come out on the short end of it and will be dictated to by Sacramento and have .very little choice about the setting of tax rates, salaries, etc. This one group is the largest - the Safety Employees group. I don't' think it is to the City°s or citizens benefit to have legislation enacted in Sacramento that would force this City or any other City to binding arbritration set up by a panel of three people. Mayor'Gleckman: Any further comments by Council? If not, a motion would be in order. Motion by Councilman Gillum, seconded by Councilman Chappell, that City Council instruct the City Attorney to draft a resolution for adoption on March 23, 1970, opposing AB 98, for the reasons listed in the March 16th memorandum; and further that Council instruct the Mayor to either bypersonal letter or telephone, express this City°s opposition. Councilman Lloyd: Counci.lman-G.i-1.1-um..- have ..- you -...-contacted.-.,any--of the other. citi-es -to- ,see what -.-.they., might,. -be -doing?---Not that they dictate to us, but I am always interested in the main stream of political action. Councilman Gillum: No, I haven't had the opportunity to discuss it with any other City. Mayor Gleckman: I have talked to three cities and they are all taking similar'action, they are making phone calls as well as drafting resolutions. They are definitely opposed. Motion carried. Mayor Gleckman: I would like to bring to the attention of Council that tomorrow -morning at 10 A.M. there is....a-hearing.---:i-n the. Board Hearing Room of the Hall of Administration before the Board of Supervisors regarding the Grand Jury's investigation regarding the law enforce- ment service that is being paid for by contract cities. They are recommending that the contract-cities--pay-their fair share which is $303, 212.00 per unit rather .than.. th.e.- $.1-3.9,.131...00 they are presently paying. Adeline Gregory,. Pres.i.dent--of-.the .-Inde.pendent Cities, has asked that we have representation-...at•.this.meeting.. I will be • attending a Rapid Transit meeting -so I will be unable to attend. I would like to have .a member,of Council_attend.-= (Discussion by.Cou.ncil . Suggeste.d.Mayor.Pro.--tem.-Chappell attend if possible. Co.uncihman.. Chappe,ll..sa,i.d,.,..he....wou.1d.....)..... Motion by Counci,l.marr:-Lto'yd.,,.that-- the.. attendee -..be ...asked. to present the Council ° s wishes. ...in--actor.d-.with.-th-e-r-ec-omme-ndation° .of .the Independent Cities that the true cost of funding for services to contract cities be reflected and paid by the contract cities.,,, r Seconded by Councilman Gillum, and carried. x -. 2 - ADJ. REG. CC. 3-16-70. Page Three Employees' Retirement Program - Cont'd. Mayor Gleckman: The purpose of this meeting is for the Council and the Personnel Board to discuss in detail the recommendation and the basis on which it was made by the Personnel Board regarding the withdrawal of our employees from Social Security. Previously it was decided that this Joint Meeting would be informational and open to the public but only that the members of the Personnel Board and the invited guests as well as the City Manager if called upon and the City Council, would be the only ones involved in actual discussion and any decision, made would be made at the March 23rd meeting of the City Council. We have the results of the employees vote and we have the recommendation made by the Personnel Board and I have some questions and I believe Council has. Councilman Gillum: Mr. Mayor, may I make the suggestion we use the same procedure we used before the Committee and the Personnel Board in presenting this. Mr. Eliot has a great deal of knowledge and information regarding the Social Security withdrawal and we had Mr. Eliot present that part of it and then asked each of the gentlemen representing Social Security, State Plan, and the actuary, to present their programs. Mr. Mitchell then gave a brief summary on how he computed the figures. (Council agreed to follow the same procedure.) Leonard Eliot Primarily in presenting this what I attempted City Controller to do was not to touch on whether the with- drawal from Social Security was or was not advisable or philosphical, but mainly to show the dollars and cents cost to the City based upon the plans available to the employees. I attempted also, to show what plans were available and where there were differences. The main item the employees have noted as to coverage under Social Security and which would be deleted upon the dropping of Social Security would be under the Disability and Survivors, benefit portions. Under the State Plan the primary purpose is retire- ment and that is true also under Social Security but retirement: .systems are far more comprehensive than that, in that they go into a Survivor's Benefit if you were to die before retirement and also after retirement. Under Social Security as presently enforced�if an individual were to die as an employee of the City and there were minor children under the age of 18 or 22 if full-time students, there would be a monthly allotment paid to the widow and for each minor child until reaching maturity. Also if the employee were to die,once his spouse reached a minimum age she would be able to receive a sum based on his earnings. There is one difference between that and the State Plan. The State Plan is a truly funded system and you get what you paid in. The fact that you have a wife and minor children, there are no benefits .upon death unless.you take the 1959 Survivors.',* benefits which woul.d_...p.ay ..for..e-ach-.:.child..-and. _t.he..spouse as long as there is a minor chi.l.do_..-a._.set... sum......_..,Ho-weve.r.-,. -.the money paid is less than under Social..-S.e.curi=ty.:'..-. The_..maximum.-.u-nder..-..Social Security is • something like $4.30....0 ..and..the...S..tate.... Plan...maximum .is $250. per month. Upon the spouse -.re.aching".- retirement "age --there . is --no provision at all under the State- ..Plan•. for.=.the..spouse..to receive, an increased allowance because of her husband°s-earning.s.. The..only-way this can be achieved is by reducing the employee.-°.s..,ben.e-fi.ts `'dur.ing. his -.lifetime. U_ndsr_,..the . State =" Plan- upon....retiring, you have four choices to make .:.when.it-.comes time_.ta.pi-ck.-..up.-_your retirement. The Unmodified allowance-,-...." h.i.ch-,..is -.the,.'�l-argest- sum payable to you, with no residual -bene.f .ts._,.tto.-:your.-....heir- .If -..you- -we•re to die three months after retir.i•ng- there:•.,wo•u.ld--be.••.no:thing-.go ,,ng..._to anyone. However, if you lived,_-.20._year.s- there- w uld..,.be. largerpayments over your lifetime. Opt i,on,.1_:of,_ he_...Sta..te Plan would -.•-provide a slightly smaller monthly'"benefit"but-''woul:d provide, .'if you were to die before your contributions were exhausted, a lump sum payment to your wife. - 3 - ADJ. REG. C.C. 3-16-70 Page Four Employees' Retirement Program - Cont°d.. Option 2 provides a still lesser payment and provides for something less than half upon your death going to your widow. Option 3 with still lesser payments would provide a level payment as long as either you or your wife lived. The actuary who prepared the studies for the City showed each employee what his benefits would be under the present system as compared to the pro- posed system and used the assumption they would take the Unmodified allowance and that is the highest monthly payments without any residual going to the spouse. The other point is Disability coverage, which differs under the State from Social Security, both in the amounts paid -and what is classified as disablement.. The State is more liberal with what they call a disability and if you are unable to perform the duties of your position you may be considered disabled even though you may be fit to take some other job but you would be entitled to a disability pension. Under Social Security you have to be more or less totally disabled, in a sense that you are not able to perform most of the functions of earning a living in order to qualify for a pension. I understand they have liberalized it now so that you do not have to be a bed patient, but it is still more strict in defin- ing total disability and the payments will average close to what you will be getting upon normal retirement, whereas the State dis- ability would differ depending on whether it was a service connected disability or non -service connected. If it were a work connected disability it would pay 50/ applying only to Safety employees; Miscellaneous employees whether on or off the job would be under the same treatment as an ordinary disability and also the Safety employees under an ordinary disability would get 1-2 for each 10 years they worked for the City and then it would go to one-third pension. The third item is Medicare coverage. The fact that Social Security prow.ides-.Medicare- u-nder----Part-A, which is the hospital coverage,only to those persons eligible to receive a social security benefit. Part B, which is the doctor coverage, is available to everyone that is 65 years or over and has signed up and paid the premiums. Most employees, frankly, have not talked too much about the Medicare coverage, whether or not because they believe more national health insurance is coming or what, but it has not been an issue. We have prepared charts, copies of which I believe you have, comparing the costs and what would happen if the City terminated Social Security. We show the actual present cost to the City for.Miscellaneous employees and then show the computed costs to the City based on 7-1-68 experience. The cost to the City after July 1 of this year for the Miscellaneous if we stayed in our present plan would be $146,705 which includes both the State Plan and Social Security. If we were to drop Social Security the City would be paying $114,534 to which we would add $11,760 for the 1959 Survivor's Benefits, totalling $126,294 or a reduction in cost to the City of something like $20,000. Comparing to Plan A for Safety employees, presently the total cost to the City is $222,466 which includes Social Security as well as the State Plan. If we were to go to a Straight State Plan A the cost would be $198,546 plus Survivor's Benefits of $8,160 or a total cost of $206,706. Again a reduction in cost to the City of something like $16, 000.. In .to.tal _.af.ter_-Ju1y . 1-..under the present system • the cost would be to the City $.369,17.1.........If .we were to drop Social • Security the .total cost- would ..be ... $.3.3:3.,.0.0.0..or.. a- net savings of $ 36, 000. .Phan A- i.s...what. -we - have., designated as the Basic Plan. The Miscellaneous...are_.pr.ese.ntly....under---.the•..1-90-60th plan and when dropping Social....Se.curity--wou-ld_-go.:to--the....straight 1-60th Plan, which provides an incre.aced--bene.fi-t.- over-. -the-..pre-sent State Plan, but no Social Security coverage ...after-.. that.,--date...--.-..,.There would be a slight increase to the. Miscel.l.aneous..eTp.loyee.s._..fo?r the State Plan and of course they would have a..-g.reatei�...-savings•-•because of the dropping of the Social Security...contribut.i.o.ns_,..._........ _...... Presently the Safety Emphoyees do have half pay at age 55 integrated with Social Security benefits. Benefits would be - 4 - ADJ. REG. C.C. 3-16-70 PageFive Employees' Retirement Program - Cont°d. slightly higher under the State Plan proposed but theyp`;would lose Social Security benefits. ' Plan A-1 was the addition of the; widow°s continuance clause to the half -pay at age 55 for Safety Employees° which is another optional coverage that is available if: anyone wished to add it to the Safety Employees' coverage; and Plan A-1 would be"merely the same plan for the Miscellaneous 1.-60th Plan. Plan B would be the California Highway Patrol Plan modified for Social Security. Plan C would be the California Highway Patrol Plan without Social Security. Quite briefly, Plans B and C are higher in cost and they do provide greater benefits for the employees but these plans are only available for the Safety employees. Are there any questions at this point? Chairman Tice: Mr. Mayor - I might state that on Plan A-1 the option of the 50% widow°s continuance clause was not discussed by the Personnel Board. I don't believe at that time it was available. Mr. Eliot: That is correct, it was not available and not discussed. Mayor Gleckman: Are there any questions by the Personnel Board or Council? Mr. Eliot: I might comment on Plan B. It has not been touched upon by anyone but it was available and. we, put -i-t down.. on the -•char-t.... .It is the Iiighw'ay Patrol Plan modified for Social Security. For Miscellaneous Employees based on the straight 1-60th Plan supplemented by Social Security the cost would be $149,607. Safety Employees integrated with Social Security is $324,377. The Highway Patrol Plan differs primarily in their retirement benefits; the present plan is half pay at age 55 and the proposed plan would be age 55, both are predicated on a minimum of 20 years service, but under the Highway Patrol Plan the earnings are less in the early period and in- crease more rapidly toward the end and it is geared for retirement at age 50 for Safety, even though they encourage them to stay to age 55. The State believes that the way the plan is weighed that your percentage of retirement per year.increases much more rapidly between the age of 50 and 55 which will encourage people to stay to 55, but it does permit retirement at age 50. Plan C for the Safety Employees without Social Security, would mean the Miscellaneous would again have just the Straight 1760th Plan because there are no other plans possible for Miscellaneous; :3- can'°...t say._much::.=about :the .Highway' PatrollPtan other than�,"it�,,proV des., a:.:.be.tter. level of .benefi.ts .for.. the Safety employees. Councilman Gillum: I might add that the main thing the Personnel Board took into consider-ation, and this is what • the Council has _to-ze-xo.in.on and consider, is the other plans do pl,ay..a-.-part-.in.. the--.can-s.iderat.ion--of..Council but the • main concern at the mome.nt-'is whether- or--not---we- wi-thdraw from Social Security. The other Plans, ,do ..pl.ay a -part .because-- i-f we decide to withdraw from Social Security--then.-.-we. have --to- consider the alternate options, but the Retirement Committee.-wrest-led..w -th. this issue for 18 months and it is my .suggestion--ge-ntlemen...tha-t, when you get into these other plans it add-s--a. lot of..f.igures- and ---a, .l.ot- of information, so I think if we could- stay .mainly, --on the- subject .of '..withdrawal from Social Security and the State Plan -A-, we­migh-t­thenri reach a decision a lot easier than taking in to cons derat ori"the':`o­ther plans. Mr. Soriiborger• Mr. Mayor - I could like,to point out that we Personnel -Board were a:j waiting ust-`what'-Councilman 'Gillum out-''-- ADJ. REG. C.C. 3-16-70 Employees' Retirement Program .-.Cont°d.. Page Six lined. We felt we could take no action on any one of these Plans other than the one that would be mandatory if you dropped Social Security, until City Council decided whether or not they would drop Social Security. Chairman Tice: Mr. Gleckman - the Plan recommended.by the Personnel Board is the Basic Plan A. Mayor Gleckman: That is the recommendation from the Personnel Board to Council. In taking into considera- tion Plan A-1 - was this an alternate or something suggested to be brought to our attention? I am trying to understand if the Personnel Board made this recommendation why have we Plan A-1 in there? I understand about Plans B and C, but why the Plan A-l? Mr. Eliot: As I remember the Personnel Board's action, there was of course the consequences of with- drawing from Social Security with regard to the cost to the City, and my best recollection was that rather than make the choice I believe the recommendation was that we drop Social Security, but there was no recommendation as to the Plan to be adopted. Merely by not taking any action by April 1, automatically we would be out of Social Security and covered by Plan A according to my con- versation with Sacramento. And I believe the Personnel Board's action was based on that understanding - that merely by not taking any action we would automatically fall under Plan A. I don't believe there was any affirmative action recommended to go into Plan A. Mayor Gleckman: In other words if we don't make a decision -byiApril 1 then we would automatically have Plan A? Mr. Eliot: That is correct. Mayor Gleckman: Then what is the purpose of Plan A-1 being outlined to us? Is this for further negotia- tion? Mr. Eliot: No, this is to determine whether or not the City wishes to make a choice for a new plan for its employees. If they wish to make a choice they have four different ways to go, but by not taking any action they will have Plan A. If Council does not believe that is the best plan for the city employees then, of course, they would discuss the other plans. The other plans have been discussed at one time or another at meetings of the Retirement Committee, not as a formal procedure in front of the Personnel Board, but the information has come to the Personnel Board as items brought up at the Retirement Committee meet- ings, and could have been brought up.if they so desired, but they preferred to take just one action.at.a time.... Mayor Gleckman: The .4-5..7•,.98.7- figure...... wou.ld....that:-have:. anything at.. all..-to..,..do..-with Mr— .Wake.f..lel..d.°..s_..comments Social • Security and an employee retires ..and...,.dies,.- his ..wif.e ..and., children are • not eligible for any survivor's benef.ts.-. ... Would .-that cover the one phase, shall I say, that . the..Ci-ty , might .be.- open.-to...for a lawsuit? .......... Mr. Eliot: It--would,..co.ver .fo-r- Safety-.employee.s...but not Mi.scellaneou-s -because,-the, -widow.'_s...,continuance is. not...,avai,l.able.-..fo.r....M.i.s-el.l.aneo..us,,.,..employees. There is legislation. .pendi.ng.•.in..,the-._St.ate....Capitol.....now..:f.or_..this but what happens to it we . really _don .°.t k.no.ui.._.no.w.,......s.o.....a.s....tax:....as,...tonight is concerned it is not. .._availabl.e....for, ..,,the..-.M.i.sc.el.Lane.ou.s..,..emplo_y_e.es. Councilman Nichols: One of the elements raised is the element of possible liability to th'e City :and it seems to be one that has created some''trepidation �. ADJ. REG. C.C. 3-16-70 Page Seven Employees' Retirement Programs - Cont°d. and clouded the stability of a firm decision on this. I would like to inquire if there is any other body of information or experience available to the Council that might give us a little better insight as to the potential ultimate liability to the City, than the letter received from the City Attorney, which is a very fine letter, but the letter serves only to create concern in my mind, I am particularly concerned about the employee who retires and may pass away in retire- ment and leaves behind a spouse, which seems to be quite a common practice in our society, and if in each of these cases there is a widow not receiving benefits she otherwise would have been entitled to and the City can be held by court decision liable in such instances, the cumulative costs of such additional supplements might be considerable. So I wonder if any of the gentlemen with us tonight or any other source of information has been probed.such as through other cities or the courts? Chairman Tice: Mr. Mayor - I have one comment on the Personnel Board liability factor. Mr. Wakefield brought out in his letter the court weighs the fact if you take away benefits and add additional benefits there is a net result and that determines the liability factor, I believe. In Industry retirement plans have been changed rather readily at times and at this point I am not aware of any repercussions from the liability factor with regard to changes. It is a real unknown. I don't think we have enough in the way of court cases to determine anything at this point. Councilman Gillum: In Council°s packet is a memorandum from Mr. Windsor dated January 6th - where the Personnel Board asked Mr. Windsor to poll other cities. I think you will notice that in most of them it was brought out the liability factor was not an issue although it had been.:discussed. As stated in the letter from Mr. Wakefield the liability factor is a possibility. Mr. Wakefield, would you again state your feelings? Mayor Gleckman: Mr. Wakefield, do you have anything to add to your letter? Mr. Wakefield: No sir, I don't think so. The problem is a City Attorney very difficult one because naturally it will only arise if and when some particular indi- vidual or his spouse is prejudiced by the action taken here and that will only be determinable at some future time and that will be predictable on.whether he survives his wife and many other circum- stances of that sort. The only thing I might add, I think the role in California is different as between private employer plans and their employees, and public agencies and their employees. Our California courts have taken a very strict position with reference to the obligation of public agencies by saying in effect when an employee begins to work for a public agency the retirement plan then in effect becomes a part of his contract of employment and as he continues in his employment he.i.s entitled to .look forward to the time when those benefits -.will -accrue -and mature If...those benefits are changed during the .employment.--per--i.od---the .co-urts -.have virtually said the public agency -has a -.-right to. make.. ch.ang-es ..i.n ,the plan to maintain its fiscal integrity. or..--make-..sur-.e-the--benef-its keep pace with the trends and economy-.. of, the-- tm¢-s a -however.; -in .-general the rule is if benefits are. :taken ..away--the-n-- the e.-.emp.l.oyee-i.s.:entitled to have comparable new bene.f.its added.-- _The -.sum_tota-1 _of benefits taken away added to the..new-..-bene.f.its-.adde-d --gene-r•.al.l,y---..should come out about the same. We -don °.t. have.-.•any..:-co.urt-.-c.asse..-i,n...Cal.ifornia, to my knowledge, which ..involves --.the --w-thdx.awah.•.-of-,..a.--public agency from Social Security, ..and..-be.cau.se...,of--.that faact•....the-.--cour-t.. has never been called upon to decide whether the withdrawal from Social Security and the increased benefits under the State Plan is or is not reasonable in terms of its effect on individual employees. All I can say therefore is there may be a cumulative liability accrue so far as the City is concerned by virtue of the fact under certain circumstances, as Mr. Eliot indicated, an employee may lose sub- - 7 - ADJ. REG. C.C. 3-16-70 Page Eight Employees Retirement Programs - Cont°d. stantial disability benefits or lose substantial survivor benefits for his family as a result of your withdrawal from Social Security, and if this should happen then I think it is my duty to advise you that in my opinion the City would be obligated to make up those lost benefits, Mayor Gleckman: Thank you, Mr. Wakefield. Councilman Gillum you served as the Council liaison to the actual study group, can you as quickly as possible lay out for us as to what brought about the discussion of withdrawal from Social Security and why the Safety employees are 100/ for it and the Miscellaneous employees - 54 - are against it? There must be some inequity for the 54 Miscellaneous employes and no inequities for the 150+ Safety employees and I would like it in the record as to the reasons why. Councilman Gillum: Basically the request came a little over two years ago and I was then asked to study the withdrawal from Social Security. It was based on the fact that the cost of Social Security was going to escalate to the point where it would be quite a large deduction from the individuals pay check. As we proceeded into this inquiry it became apparent to the Committee that the City would have to provide additional type of retirement if the City were to drop Social Security. So there were a number of plans presented. I believe my own feelings about it is that if I were in the same position I would certainly try and find the best type of retirement plan available. Much time and consideration was given to the CHP program which has quite a number of benefits involved such as retiring at age 50, etc. Also within this program the Safety employees do pay considerable more for this than the Miscellaneous employees. Unfortunately we found through.information obtained from the State and Social Security that there were certain benefits that individuals would lose in the Miscellaneous employee group. The packet put together. as Plan A.-wou-ld still. -benef.it-'the..--Safety employees totalwise but the Miscellaneous employees would lose certain benefits. The cost to the employees, both Safety and Miscellaneous, would drop because they would no longer be paying Social Security. My own personal observation, and as I stated to the Personnel Board, I supported the recommendation from the Retirement Committee to withdraw from Social Security with certain reservations, which I stated in my letter directed to the Personnel Board and City Council, copy of which I believe you have. Basically the Safety employees have a much better program available to theme I feel that we always have to upgrade and try to provide what we can as far as the best type of retirement plan for our employees, but unfortunately because the State has not seen fit to give equal ...benefits to the Miscellaneous employees under the different programs, and basically for the reason I brought out when we discussed AB 98 - the Safety employees have a good lobbying going on in Sacramento trying to upgrade their benefits, and the Miscellaneous do.not. I think this is the reason why we got 100% out of Safety and a good portion of the Miscellaneous felt.they.did-not want to drop Social Security.. We had charts, which -were ..not .-included in your packet, • showing the projected costs of , Soci.al--Security--.and_. I... am. sure we all • realize it is increasing in -cost tremendou.sl.y_o._.._ .I think... this is the reason - the reduced pay check...a-nd...the...i-ncre.ased -benefits for the Safety employees. I .think ..to-..g.i.ve-.you -_a clearer. picture of the overall program if we could, .hear, from..Mr......Strade.r.,._.-.the .._Social Security representative....and.• then-the....St,ate...-rep-resentat.iv.e - Mr. Larson. Mayor Gleckman• I am --sure -then-e...-is..-no.-dispute...in--,Mro Mitchell ° s, Mr... Str.ader-...°..s.--o-r Mr- .--Larson°.s.-mind why we are _.-...he.r.e:_...and.wh.at.......we_.ar.,e._.tryln.g.....to.....-find out. I would like to hear from--Mr...-...Str.ader -first .-and..- -my. question - is it their position that they -would Like us to remain in the Social Security Plan, and if so - why? And what are the benefits to the City and to the employees? 8 ADJ. REG. C.C. 3-16-70 Page Nine Employees Retirement Programs - Cont°d. Mr. Strader: First of all I don't believe Social Security Social Security could take a position as to whether they wanted you in or out of the program. It is really your option. And your second part of the question - again please? Mayor Gleckman: Why should we stay in the program? Are there benefits that haven't been brought out to us - in comparison in looking at these other plans? You are more familiar can you tell us what do for the employees that perhaps we haven't grasped yet? Mr. Strader: I think Mr. Eliot did a very good job in Social Security showing what is available to your employees under Social Security and what could possibly result in a loss of benefits should they drop out. The chief feature, I believe, is the fact that they don't have disability coverage after they are out of the program for five years. An employee and his family could conceivably lose under the present benefit schedule as much as $434. per month if he were to become disabled say six years from now and have a wife and a couple of children, If he were at a rate of $7800. or better it would be $434. per month and that would result in an immediate lose for him. Survivor Benefits, I don't feel he would be hurt so badly in that area. Certainly the amount of the Survivor Benefits decrease relative to the total time he stays out of Social Security. As Mr. Eliot pointed out, there is the Medicare feature - Part A, which is available to those who are otherwise qualified for a cash benefit under Social Security. If a young individual doesn't have at least forty quarters at 65 he wouldn't be eligible for a cash benefit or the Part A medicare hospital and convalescent home care. I distributed these blue booklets at theemployees° meetings, which give an explanation of Social Security in capsule form. One other feature, our benefits are wage related. The higher the amount of an 'individuals average monthly wage'the-Higher amount --of -his-.-benefit, -whether it be retirement or disability.. -:or -.the -'Survivor -benefits. Mr. Larson: Basically and looking only at the Miscellaneous State Retirement group, I don't think there would be any doubt but that there is a loss of benefits by dropping Social Security, --hooking at the total retirement picture. There is no loss strictly under the State Plan, but under the combination of the two programs they have not, that is where the loss would occur. Going back to your basic question to Mr. Strader - the State Retire- ment System has no attitude one way or the other whether you should terminate or not terminate. But personally I would like to -stress that I think there would be a loss of benefits to the employees. I think Mr. Wakefield has brought this point out to you on the potential liability in the future. Whether you would ever have it or not is a question. Mr. Eliot has described the State Plan quite accurately and basically looking at the Safety program, one-half pay at 55 modified currently with Social Security, or the 1-90-60th plan modified currently with Social Security, the basic difference today between the programs - if you would go.to the 1-60th plan and the current program is that. the.:employee..-is. only-.paying.,..2,/3 of his normal contribution of hi.s. first•.$4.0.0--.salary-.and .co-nsequently upon • his retirement he is only -going -.- to -receive... 2/-3 of., , normal benefit • of the first $400 of compensation-_ Naw.--this-.-is -.the--basic difference between the program you curr-.en.tly ..have rand --the---program you would go to as far as the retirement ...pr-ogram.- is concerned...,,-- -There is just 1/3 reduction in cost to the -employee on,the-f-irst- $400...of salary and a 1/3 reduction on the benefit he-- is. -..going -to- receive on the first $400 of final compensation when-.we---compute-�t-he---ret-irement allowance. One. thing. ..that -..has .not -been.-.brought out and should be, it is my under.s-tandi.ng....if .you...do. go._.to .t.he .full 1-60th program you will conve.rt....all..past-.serv.ce--. under ... the ;.-1-/...9.0/60th to the 1-60th program and this will result in.an increase Hof benefits to all the employees. He will be getting higher retireme'A allowance for which he hasn't paid. This could in someway offset what he has lost 9 - ADJ. REG. C.C. 3-16-70 Page Ten Employees Retirement Programs - Cont°d. in Social Security benefits. It will probably not offset completely but it could offset partially the benefits lost by dropping Social Security. Mr. Mitchell: Basically I was given for each employee his Actuary current status (explained). In making the projections we assumed there would be no change in salary until retirement or death and that there had been no chaneJe in salary in the past and the only employer had been the City of West Covina and the only employer in the future would be the City of West Covina. Using this, we then projected the current benefits under Social Security and the proposed State Plan. Under the proposed program we assumed the City would drop Social Security and the State Plans automatically revised and in the case of the Safety employees the Highway Patrol program. We then calculated the benefits the employee would receive under the proposed plans, both State and Social Security. For Social Security we showed the benefits he would receive if he somehow remained eligible for Social Security benefits. After 5 years there would be no more disability benefits under Social Security. Mayor Gleckman: What I was really asking for is after doing the actuarial and after hearing from both the State and Social Security - - if we are going to make a move we would like to make a move to the benefit of all our employees, if possible. It is unfortunate that legislation right now does not permit us to split our employees into the two systems and we are as a result put in a situation that we don't relish but do realize our responsibility and would like to attempt to make a decision to the benefit of everyone, and you as'an actuary have reviewed both and made a comparison without actually having to make any type of a 6ecommendation, I thought that I might be able to get a recommendation from you. Mr. Mitchell: I think I realize what you are asking - I Actuary wish you hadn't. You have asked me to put myself in a couple of shoes - if I were an employee what would I do? I think if I were an employee, whether a Miscellaneous or Safety, I would definitely vote to drop Social Security because my cost goes down and in no instance do I, Larry Mitchell, think I am going to lose benefits, and I would like to explain that. If the courts say that the overall package is what counts and I go to court and I say - look they took away a disability benefit, and the City says - yes but I gave you a higher retirement benefit, I think I can argue that if .the costs of the program were less both to the employee and the employer then therefore something was taken away from the group as a whole and therefore I am entitled to receive this disability benefit. So I, Larry Mitchell, don't think I will lose. I think I would be.able to say somehow why a benefit was taken away from me, why you are supposed to give it back to me. If I am the City I am faced with a more difficult situation. I am faced with an immediate cost reduction, which is'always nice, but I am also faced with a verystrong:...possibility of a person becoming disabled and saying.gi.ve_..me-.money,..a-nd I -have to give him that and now I have to pay. it _.all _.by..:myself without employee contribution. Whether or --not I want....to .take the .gamble as a City • is a different question. Mayor Gleckman: I. appreci..a.te .your -frankness Mr.....Mi.tchell, ..fully realizing you didn't have to give that opinion because that is -note what you were hired for. Mr. Mitchell: One.other..thi.ng- .I -.think if, I. were an employee I...wou:ld ..insis.t._be.fore ,,ahi,s became final that the -.,City -state --tha.t--.I—am.-.not ..going to lose a benefi.t.,......... ..... Chairman Tice: I might state that the Personnel Board was - 10 - ADJ. REG. C.C. 3-16-70 Page Eleven Employees Retirement Programs - Contd.... concerned about the benefits of the Miscellaneous employees. The fact there seemed to be a loss overall. The matter of liability, we were surprised after Mr. Windsor's survey to find that the liability factor wasn't brought out more, that the other cities didn't seem concerned. We felt we are either overly concerned or thinking ahead in that area. We did ask staff to investigate the possibility of disability income insurance. There are some legal problems with the State Plan if we decide to go to the State Plan as to what can be supplemented and I don't think staff can answer it at this point, but we did ask staff to check into insurance plans, so there would be some coverage, in the area of the Miscellaneous employees. Councilman Gillum: Mr. Larson, would you verify to Council that the City could not provide any additional benefits under the State Plans that are not provided by the State Plan for other members. Mr. Larson: Yes - you are saying if you went out to a State Retirement private insurance company and bought those benefits. It is my understanding if the employer pays for that benefit you cannot have it, but there is a possibility if the employees' association paid for it, it is perfectly legal. The employer in no way can contribute toward an outside program. Councilman Gillum: In other words what you are saying is that the employer cannot provide any additional benefits that are not provided under the State program? Mr. Larson: Yes, where the disability and survivor benefits are concerned insofar ,as having. -.another program .,currently running with the State Plan, one that you would buy on the outside and paid for by the employer. This is not allowed. Chairman Tice: At the time we asked this question of Mr. Roth he could not give us a definite answer,.but Mr. Larson seems to have more information on it. Mr. Larson: I asked this question to our lawyer in State Retirement Sacramento today anticipating you would have a question like this and his basic difference was if it was employer funded it cannot be; if it were paid by the employees it could be. Councilman Gillum: Do you interpret his statement that we could indirectly provide additional coverage - that it is conceivable that the Employees' Associa- tion could provide additional coverage? Mr. Larson: Yes - this is correct and we also have that State Retirement today in our State Employees' Group, where they provide a disability and survivors program. • Councilman Gillum: One other point - once-the..City.withdraws from • Social Security-..never,..never.again under the prdsent law would the City be able to reenter as an employer their employees into Social.Securi-.ty.-. Mayor Gleckman: When you say that you.are -talking about the full-time employees, you are not talking about the crossing guar-.ds.,...-etc..._,--..that,. come under Social Security? _.. .. . Councilman Gillum: They.. ..are .considered. contr.act....people. Mayor Gleckman: And contract people are'not being oonsidered in this program? I • ADJ. REG. C.C. 3-16-70 Page�Twelve Employee Retirement Programs - Cont°d. Councilman Gillum: What we are talking about is that we as employers, if we drop Social Security, we cannot take the employees back into Social Security. If I am wrong would Mr. Strader please correct me? Mr. Strader: You are correct. Social Security Mr. Sanborn: I have a question of Mr. Larson. You mention - Personnel Board ed the two plans equalling out in the retire- ment area where by the State Plan there is a 1/3 less premium paid and a 1/3 less benefit received and therefore it tends to balance out. Mr. Larson: I didn't mean to say the programs balanced out. State Retirement The basic difference we are looking at today in the current program -and the..program you would get if you terminated Social Security - would be the difference from currently paying 2/3 of your normal rate of contribution of the retirement program on the first $400 and only receiving 2/3 of the benefit when you retire on the first $400 of final compensation from our retirement program. These two things are equal. If you are referring to my statement where I said the City would go back and reflect your program to the full 1-60th Plan in that case the employees would receive an extra benefit for the service already performed which would give them a higher retirement benefit which `night somehow compensate for the reduction in benefits by dropping Social Security. Mr. Mitchell: Just one further comment about the projection Actuary we made. The Social Security.benefits we showed where the ones In effect last year. During the time of the report the benefits actually increased 15/ without an increase in contribution. Mr. Strader: Yes that is!true, and I don't know how many Social Security times that will happen in the future, naturally. Chairman Tice: Even though 82.9/ employees voted to withdraw from Social Security it was a straw vote and should the matter of liability come up I don't think the courts would consider that in favor of the City because it is not a binding type of vote, as explained to us by Mr. Wakefield. Mr. Wakefield: Yes the decision as to whether to withdraw City Attorney from Social Security or not, is one lodged in City Council. The City Council makes that decision unilaterally. The fact the City employees voted to support the withdrawal or not is of no consequence in terms of their ultimate responsibility for that act. It is like any other straw vote. You can consider it for what it is worth but simply because he voted to support withdrawal doesn't mean he is commiting himself to live with the consequences. Mayor Gleckman: of support in case of That is a good point and Council should be fully aware that the vote by the Employees' Association is really. not a matter of grounds any lawsuit. Councilman Nichols: When this entire -matter first .came. before the Council.. we.-we.re..ask.ed---to.-i.n-iti-ate .the pro- ceedings,-.f.or..ultima-te.-Uzi-thdrawa.L.-.from Social Security on a suppositional .basis. _-only..,-..and_the--.Cou_nci.l..--at that time made no committment phi 1osphical.ly--..or.--o-the.r_wi-se,---but-were told we would have to take the .pre l":iminary_.-steps_--in- or.de-r.-.-that.-:we might later withdraw should we decide--to_whe.n.- the.-appr.opr-iate....time came. So I feel equally the., -Council .has. -nothing binding. on it.--o,ther than to weigh all the evidence it has now -=and make" a "decision based on that information without any feeling of duress as resulting from previous action. in ADJ. REG. C.C`. 3-16-70.. Employees' Retirement Programs - Cont.'d. i Page:: Thirteen Councilman Chappell: The State Plan at the present time looks like in some areas it is better, but as I have seen these things develop from time to time it could be in 10 years from now that the Social Security plan with a supplement for Safety people might be a better plan. Just looking at it as of today we may have a little problem foreseeing the future. Do any of the costs of the.State Plan come from the General Fund at the present time? Mr. Larson: No they do not. It is a fully funded system State Retirement and the total benefits are derived from the contributions made by the employer and the employee. Councilman Chappell: I haven't had the benefit of looking at the little booklet on Social Security in the last 10 years, is there anything in your mind any where along the line that you see any upgrading other than this 15/ that might be spelled out in the book? Mr. Strader: You won't find that in the booklet itself. Social Security It seems to me that from time to time we get little philosphical letters from our Commissioner of Social Security, and his constant theme.has been that benefits will be expanded as the programs expanded. I am not enough of an actuary to give any credence to that statement, but I would take his word for it. Councilman Chappell: One plan seemed to be able to obtain more for your dollar than the other, and.I am wondering if it is because of the length of time the plan has been in effect,• -or the .feeling that -.the State is better able to pay more for the money taken in, or that it hasn't been going long enough to make any drastic payments? Mr. Larson: Basically in order to have payments paid out State Retirement you have to have payments paid in. If you have more benefits from one plan the money had to come from someplace and the difference being perhaps in the administrative expense for the handling of the program. I would assume the Federal Government and the State are both as efficient as each other. The other alternative might be the vesting ability of the two plans and here perhaps the State may have some advantage. But generally to pay a benefit the money has to be there and someone has to pay for it - the question is who and when. Chairman Tice: Councilman Chappell asked about the increase Personnel Board in the Social Security benefits. I saw an article this morning in a periodical we receive, stating there is some discussion now in Washington about raising Social Security benefits a little higher - another 15/, at an increase of 5 to 5%/ and at the same time raise the base rate to $9,000 or.higher. ® -Councilman Chappell: That brings -up another question. I haven't seen.any figures on what basis the State wishes to develop. their. plan can anyone help me there? Mr. Larson: First 'we are -not-compa-rIng- two --similar type State Retirement programs..,._The._ Social- Se-curity..program is not --..a,!:ful.l.y. fu-nded-.progr-am.--- I-t--lives off of current receipts to pay the -,cur -rent, year--bene-f-it-s. - The . State Plan is always geared to paying all., the.-.ben6f-its---that -hav-e -accrued in a certain period of time. Because. -of.. --this.,-. e.ach--..f-ou-r.-years they are required to run an evaluation study-..of,;each-..separate..employer seeing that his account is able to pay"the' current'liabIl'i'ties which the actuary has determined in the last four years. So we,do have a - 13 - ADJ. REG. C.C, 3-16-70 - Page Fourteen Employees' Retirement Programs - Cont'd. type of program in the State Retirement System which maintains the account of both the employer and the employee on a current basis based on the funds paid in equalizing exactly what the benefits will be in the next four years. Councilman Gillum: Mr. Larson, a person employed by the City for 10 years -and they withdraw and go back into private industry and enter Social Security - what happens to the amount of money paid into State Retirement? Mr. Larson: The money paid in by the employer is not State Retirement paid back to him,.but he has a credit of that amount paid in and this would tend to reduce his employer rate for the next four years. Once the employee leaves and removes his money from the System he severs connection there in and all liability against the Retirement System and the employer. Councilman Gillum: Mr. Strader - are you under Social Security? Mr. Strader: No sir,.. The Federal Retirement System was Social Security excluded. Councilman Chappell: One of the remarks made brings another question to my mind - if perhaps we have in our City a number of additional claims are we going to be assessed more money in the following four year period to make up those claims? Mr. Larson: Yes. If you had a large experience in the State Retirement preceding four years you would have a higher cost by the ,employer- in the following four years. The Employee cost is based on two things; 1 - the mortality ot life. expectancy factor has increased or decreased; 2 - the investment earnings. These are the two things that generally set the employee's rate of contribution. The employer's rate is set by the experience factor. This is done city by city. Each employer has a separate account upon which he is rated. Councilman Chappell: This makes a big difference as to what the City might pay into the plan in the future. Mr. Larson: It makes a difference whereby the City does pay State Retirement for this history of experience and the employee does not. Mayor Gleckman: Are there any further questions? If not let me on behalf of the City of West Covina thank you three gentlemen for being here this evening. I am sure in many respects you will help us make a decision. Also I would like to express the appreciation of the Council to the Personnel Board members for attending this evening. THE CHAIR DECLARED A RECESS AT 9:02 P.M.- COUNCIL RECONVENED AT 9:14 P.M. Mayor Gleckman: I have two items.that- I would like to bring O before Council.-> .The •first at the request of the,President of -the Co-ordinating Council, Reverend Simmons, I would like to add- the name of -Don- Noska to our Conncil's Youth Advisory Steering Committee. (No objections.) The..next-.orderof. business. -would be to set for Public Hearing the recommendation,by the Personnel Board to the City Council on the Employees' Retirement.-Program--for-:decision making on the 23rd of.March. So moved by Councilman Lloyd, seconded by Councilman Gillum. 14 - ADJ Rker, C4C. 3-16-70 Page Fift een Councilman .Lloyd: I would also like to request tha Chairman of, the Personnel Board to be present so that in case there are, questions directed he can answer.-., ;. Mayor Gleckman: Mr. Aiass-a, will you please request this of Mr'. Tice tomorrow morning? (Mr. Aiassa agreed.) City Clerk: Mr. Mayor do'you want a published notice? Mayor Gleckman: ;Yes, if there' is time. (Answer: Yes there is.), Motion carried'. (Mayor Gleckman called attention to.the notice of the P.O. Department regarding Annexation area 192.') COUNCIL COMMITTEE REPORTS - None. Motion.by Councilman Chappell, seconded by Councilman Lloyd, and carried., that at 9:17 P.,M. this meeting adjourn to March 23, 1970, at 7:30`p.m.