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HomeMy WebLinkAbout10.D.1. Authorization of Offer Early Retirement Incentive General Business 10. D. 1. SHAKOPEE TO: Mayor and City Council Mark McNeill, City Administrator FROM: Kris Wilson, Assistant City Administrator DATE: 07/15/2014 SUBJECT: Authorization to Offer Early Retirement Incentive (E) Action Sought The Council is asked to authorize the offering of an early retirement incentive package to certain eligible full-time employees. Background The idea of offering an early retirement incentive package was first discussed at the Council's June 24 workshop meeting and staff was directed to develop the concept further and return with more details. The attached document outlines the proposed incentive program's terms and conditions. Budget Impact The primary funding source for this program would be the City's compensated absences fund, which has a current balance of approximately $1.4 million. There will also be some unspent wages from the 2014 operating budget that can be used to cover a portion of the costs. The exact cost to the City is impossible to calculate without knowing which employees will accept the incentive package. However, my best estimate would be that the City might ultimately pay out a combined total of approximately $250,000. Relationship to Vision This item relates to Goal B: Positively manage the challenges and opportunities presented by growth, development and change and Goal E: Deliver effective and efficient public services by a staff of well-trained, caring and professional employees. Recommendation I recommend that the Council authorize the offering of the proposed early retirement incentive program. Requested Action If the Council concurs, it is asked to offer a motion authorizing the offering of an early retirement incentive program as outlined in Attachment A. Attachments: Attachment A City of Shakopee 2014 VOLUNTARY RETIREMENT INCENTIVE PROGRAM (PROPOSED) ELIGIBILITY Eligible employees are: • Full-time employees with 25 or more full years of service as of December 31, 2014; and • Full-time employees with 15 or more full years of service who are within 5 years of full retirement eligibility under their respective PERA plan as of December 31, 2014. INCENTIVE PROVISIONS A health insurance contribution of$1,020 for every two years of service. ($1,020 is the value of the current employer contribution toward two-party health insurance on the co-pay plan, which is a common selection for recently-retired employees.) A cash payment equal to the employee's current rate of pay at the time of separation times 600 hours (15 weeks of pay). Example: A Public Works Maintenance Operator with 30 years of service would receive: $15,300 lump sum health insurance contribution ($1,020 * 15) $15,780 cash severance pay ($26.30 per hour*600 hours) $31,080 total benefit value The cash severance component would be subject to applicable state and federal taxes. Efforts will be made to identify a tax-favored means of providing the lump sum health insurance contribution. Participating employees would also receive the standard pay out of accrued comp time, vacation and sick leave as called for in the Personnel Handbook or applicable union contract. TIMELINE • August 1: Program formally announced and materials distributed • August 29: Deadline for submitting written commitment to participate. • Must separate employment on or before October 31, 2014. OTHER REQUIREMENTS Employees must sign a separation agreement, which documents that they are separating employment voluntarily and waives their right to bring certain types of claims against the City.