Negotiations in a Post PEPRA World - League of California Cities

Negotiations in a Post
PEPRA World
League of CA Cities- Employee Relations Policy Committee
April 4, 2013
Presented by: Steven M. Berliner

To Be Discussed
EPRA Summary
ow PEPRA Affects Negotiations
ptions to Consider for New Members
ost Sharing
pecial Compensation
etiree Medical
) Vesting Issues
) Retiree Medical Options
) Negotiation Strategies

PEPRA Summary - Employers
ll public employers, including MOST charter cities and
ounties
xception for charter cities and charter counties with an
dependent pension plan NOT subject to state-wide
cheme such as PERL or ‘37 Act
chool Districts and CCDs are subject to PEPRA
Examples:
• Charter city with independent pension plan – NOT subject to PEPRA
• Charter city in PERS system – subject to PEPRA
• General law city with independent plan – subject to PEPRA

PEPRA Summary – Employees
enerally, only new member are subject to PEPRA
urrent employees are exempt from most of PEPRA
Notable provisions that apply to current employees
• Prohibition against air time purchases
• New post-retirement work restrictions
• Beginning in 2018, higher employee contributions can be
imposed
Most lateral hires from other public agencies (for the time
being) NOT subject to PEPRA
Lateral hires who are not “new members” will have
retirement plan that was place on December 31, 2012

PEPRA Summary – New Member
n employee who becomes a member of a public
tirement system for the first time on or after
anuary 1, 2013; and
Was not a member of a public retirement system before
January 1, 2013; or
Was a member of a public retirement system before
January 1, 2013 that is not subject to reciprocity with the
new public employer’s plan; or
Alternatively, anyone who was an active member of a
retirement system, has a break in service of six months
or more, and returns to active membership in the same
system with a new employer.

PEPRA Summary – Retirement Formulas
for Miscellaneous New Members
iscellaneous New Members
2% @ 62
Ranges from 1% @ 52 to 25% @ 67
Minimum retirement age = 52
No other options for formula

PEPRA Summary – Retirement
Formulas for Safety Employees
hree different plans – must provide the one
quired by statute
. Basic Safety Plan: 2% @ 57 (range from 1.426% @ 50 to
2%@ 57)
. Safety Option Plan One: 2.5% @ 57 (range from 2.0% @
50 to 2.5% @ 57)
. Safety Option Plan Two: 2.7% @ 57 (range from 2.0% @
50 to 2.7% @ 57)
‣ MUST provide plan that is closest (but lower) than current plan at
age 55
‣ Most will be required to provide 2.7% @ 57
‣ Can provide a lower plan by agreement (for hires after effective
date of plan amendment)

PEPRA Summary – Employee
Contributions
urrent employees’ rules not changed
ew members:
Must pay at least 50% of “normal cost”
No EPMC
Contribution rate not adjusted unless annual normal
cost changes more than 1%
Can agree that employees pay more if collectively
bargained and agreed; an agency is not paying a
higher percentage for non-represented,
management, etc. in the same membership class

PEPRA Summary – Existing MOU
in Place Before 1/1/13
impaired by PEPRA (on issue of employee
ontributions), then MOU requirements apply to
ew members until the earlier of the MOU’s
. Expiration
. Extension
. Amendment

How PEPRA Affects Negotiations
ptional retirement formulas are gone
ome items of special compensation will not be
reditable
o EPMC for new members
o retroactive application of optional benefits
upplemental defined benefit plans are off the table for
ew employees
inal Compensation must be 36 months for new
embers
xisting MOU impairments regarding EPMC

How PEPRA Affects Negotiations
ess flexibility in concession bargaining
rgument that mandatory PEPRA provisions
re already a take-away by the employer
rgument the employer now has more $$ to
ive
isagreements in interpreting PEPRA will
ause delays; lawsuits
Planning for fact-finding
agreement reached, will CalPERS or County
etirement Board agree

Options to Consider for New
Members
lassic members are paying less for better benefits
it politically better to eliminate EPMC
ew or better retiree medical
Vested rights considerations
Do you have to do the same for classic members
57 plans or other defined contribution plans
Subject to limitations for highly compensated employees
igher salaries
Increases final compensation
Increases only in final year will be rejected

Cost-Sharing
vailable for all employees
ot limited to optional benefits
ay be member contributions or employer
ontributions
ay offset significant amount of increase in
mployer contributions

Special Compensation
an be reduced or eliminated for all employees
you have it, it must be reported
nything granted for final year of employment
ill not be credited

Retiree Medical - Vesting Issues
esolutions/Ordinances
Burden is on employee to prove governing body intended
to create contract
OUs
Contract language must indicate agreement that benefit
extend beyond the life of the MOU
Contract by implication
Vested:
Cannot reduce or eliminate for current employees, without
providing equal alternative benefits
Can eliminate or reduce for future employees, unless
prohibited by statute (PEMHCA)

Vesting Issues
eferable Language:
uring the term of this agreement only….”
mployees who retire during the term of this
greement shall be eligible for…”
this benefit shall not be considered a vested
enefit and may be changed at any time after
e expiration of the MOU”

Retiree Medical - Options
umber of years of service to qualify
PEPRA: Vesting schedule may not be shorter for
managerial, elected, or appointed employees than
for other employees
ontributions to Retiree Medical Trust, HSAs
tc. during employment
Highly recommended, more flexibility, no vested
rights to contribution
alPERS medical (PEMHCA)
Less flexibility and options
Equal and minimum contribution rules

Negotiation Strategies
creasing retiree medical benefit based on
creasing number of years of service
ontributions to retiree medical saving
ccounts act like EPMC
educing or eliminating expensive retiree
edical for new hires
alPERS Medical:
Cafeteria plans to avoid equal contribution rule

Questions
teven M. Berliner
artner | Los Angeles Office
10.981.2000 | sberliner@lcwlegal.com
ttp://www.lcwlegal.com/steve-berliner