Chapter 4.30

EMPLOYEE RETIREMENT BENEFIT – SUSTAINABILITY

This chapter shall be known and cited as "the sustainable retirement benefit reform initiative of the city of Pacific Grove."

(Ord. 10-021 § 3, 2010)

• (a) In November 2008, the citizens of Pacific Grove approved an advisory initiative that the city end its defined benefit retirement plan for city employees and replace it with a defined contribution plan in an effort to create a sustainable retirement benefit for city employees. Since that time no action has been taken by the city council to reform the city's retirement plan or develop a sustainable retirement benefit.

• (b) In 2006 the city issued a pension obligation bond for $19,000,000 to pay for an unfunded liability of its retirement plan created by an increase in benefits enacted in 2002 and retirement fund investment losses beginning in 2001. This bond will cost the city approximately $1.6 million a year over 30 years.

• (c) Although the pension bond paid the unfunded liabilities as of 2006, additional retirement fund investment losses have occurred since, and the city now faces additional new liabilities and increases in pension costs. The city's financial health and its ability to provide critical services to its citizens are now in jeopardy. A fair and balanced approach to restoring long-term fiscal responsibility requires that the cost of employee retirement benefits be sustainable and free from unpredictable long-term debts and liabilities.

• (d) All city employees have legally protected rights to any accrued benefits of employment, including accrued benefits of any current legally enacted contract for retirement benefits. However, the City Charter and Municipal Code of Pacific Grove provide that city employees do not have vested rights to employment, including any promise of future employment, or to any specific plan for retirement benefits.

• (e) In order to protect the investments that the city will need to sustain and even restore important city services in future years, limits on the cost to the city of retirement benefits for employees are proposed in this chapter.

• (f) The limits on the city's contribution to employee retirement benefits within the chapter do not by themselves restrict the type of retirement benefit or plan that is provided by the city in partnership with employees. It does not specifically require the city to terminate any existing defined benefit retirement plan. It will require that any future employment contract conform to the retirement benefit cost limitations contained in this chapter. The clear intent of these constraints is to ensure the long-term sustainability of this important benefit to employees while preserving other city services and the financial health of the city.

• (Ord. 10-021 § 4, 2010)

In enacting this chapter, the people of Pacific Grove intend to place a maximum limit on the cost to the city of any retirement benefit for city employees as a percentage of salary. The people also

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City of Pacific Grove, CA

PERSONNEL

§ 4.30.005

§ 4.30.050

intend that, as required by law, any legally enacted retirement benefits that have already accrued to public employees in a city-provided retirement plan be honored. (Ord. 10-021 § 5, 2010)

The purpose of this chapter is to ensure the sustainability of employee retirement benefits by establishing limitations on the city with respect to the approval or modification of any agreement that provides an employee retirement benefit.

(Ord. 10-021 § 5, 2010)

As used in this chapter, the following terms shall apply:

• (a) "Salary" is the regular compensation received by an employee for performing duties for a given work period, as an hour or week, including any allowances for any additional compensation, such as for bonuses, overtime pay, pay for sick leave, or vacation time.

• (b) "Social Security benefit" means a benefit under the United States Social Security Old-Age and Survivors Insurance Program.

• (Ord. 10-021 § 6, 2010)

• (a) In accordance with Article 6 of the City Charter it is affirmed that city employees do not possess vested rights to employment, including any promise of future employment, or to any plan, or agreement, or specific terms and conditions, by which employees earn retirement benefits.

• (b) The city shall not approve any employee retirement benefit, or plan or agreement that provides such a benefit, if the payment or contribution by the city for the retirement benefit exceeds 10 percent of the employee's salary. However, if the city provides an employee with a Social Security benefit, then the payment or contribution by the city for any other retirement benefit shall not exceed four percent of the employee's salary.

• (c) The city shall not approve, without advisory approval by a vote of the people, any employee retirement benefit, or plan or agreement that provides such a benefit, which could increase or create any long-term debt or financial liability for the city. [Measure R provisions removed pursuant to June 18, 2013 order of Superior Court of California, County of Monterey; amended in the November 2, 2010 general election (Measure R); Ord. 10-021 § 7, 2010].

The city is authorized to implement or approve any retirement plan, agreement or benefit for employees or further provisions that meet the requirements and conditions of this chapter. The city is authorized but not required to provide a Social Security benefit for any employee. (Ord. 10-021 § 8, 2010)

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City of Pacific Grove, CA § 4.30.050

PACIFIC GROVE CODE

§ 4.30.050

If any of the provisions of this chapter, or part thereof, is for any reason held to be invalid or unconstitutional, the remaining provisions shall not be affected, but shall remain in full force and effect, and to this end the provisions of this chapter are severable. (Ord. 10-021 § 8, 2010)

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City of Pacific Grove, CA