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.