Exhibit CC 02-05-13 #9 Public Agency Retirement System (PARS) CC 27 E-1/3
fip ADMINISTRATIVE SERVICES DEPARTMENT
CITY HALL
�sT.19, 10300 TORRE AVENUE•CUPERTINO,CA 95014-3255 sp
TELEPHONE:(408)777-3227 www.cupertino.org
CUPERTINO
CITY COUNCIL STAFF REPORT
Meeting: February 5, 2013
Subject
Amend the Public Agency Retirement System (PARS) 457 FICA Alternative Retirement
Plan for Part-Time, Seasonal and Temporary Employees.
Recommended Action
Adopt resolution and authorize the City Manager to execute the signature addendum
and any other necessary documents.
Description
Amend the Alternative Retirement System provided by Public Agency Retirement
Services (PARS) in lieu of Social Security for employees not eligible for enrollment in
the California Public Employees Retirement System (Ca1PERS) and direct the City
Manager to execute the trust agreement and all necessary documents.
Discussion
Prior to passage by the United States Congress of the Omnibus Budget Reconciliation
Act (OBRA) in 1990, part-time, seasonal and temporary employees of a public agency
were exempt from participating in a retirement program. However, the passage of
OBRA mandated that public employees who were not members of a retirement
program as of January 1, 1992 be covered by Social Security or an alternate retirement
system. All permanent and part-time employees who work more than 1,000 hours in a
fiscal year are covered by the California Public Employees Retirement System
(Ca1PERS), but part-time, seasonal and temporary employees are not eligible to enroll in
Ca1PERS. After the passage of OBRA, the City chose to enroll its part-time and
temporary workers into Social Security. As a result of participation in Social Security,
both the City and the temporary, part-time or seasonal employee have contributed 6.2%
of salary, for a total contribution of 12.4% to Social Security. Recently, the 2010 Tax
Relief Act reduced the employee Social Security tax rate from 6.2% to 4.2% for 2011, and
this tax holiday for employees was renewed For 2012. The employer Social Security tax
rate remained at 6.2%.
In June, 2012, Staff researched alternative plans and determined the benefits of
participating in an alternative plan to Social Security. Based on this research, staff
proposed that Council adopt a resolution authorizing participation in the PARS
Alternative Retirement System for all part-time, seasonal, and temporary employees
who were currently enrolled in Social Security. At the time of adoption, Staff
recommended that the employee continue to pay the same amount as would be paid to
Social Security, with the City contributing the remainder of the 7.5% (6.2% Social
Security plus 1.3% Medicare) resulting in an employee contribution of 4.2% and a City
contribution of 3.3%. When the employee Social Security rate returned to 6.2%, the City
rate would be reduced to 1.3%.
The temporary rate reduction for social security taxes under the Tax Relief Act of 2010
expired on January 1, 2013. As a result, staff is recommending that the employee rate
for Cupertino be reinstated to 6.2% and the City contribution rate reduced to 1.3%.
Fiscal Impact
The 2012 employee contribution rate of 4.2% saved the City approximately $49,000 per
year. With the expiration of the temporary rate reduction, the employee rate returns to
6.2% and city savings will increase to approximately $72,000 per year.
Prepared by: Carol Atwood, Director of Administrative Services
Approved for Submission by: David Brandt, City Manager
Attachments:
A-Draft Resolution
B-PARS Section 457 FICA Alternative Retirement Plan