HomeMy WebLinkAbout13.E.1. Phased Retirement OfferingCity of Shakopee
MEMORANDUM
TO: Mayor and City Council
Mark McNeill, City Administrator
FROM: Kris Wilson, Assistant City Administrato rJOLUD
SUBJECT: Phased Retirement Offering
DATE: September 1, 2011
b y
Introduction
The City Council is asked to consider two phased retirement offerings for Senior Accounting Clerk Eileen
Klimek.
Background
Senior Accounting Clerk Eileen Klimek has worked for the City for 26 %: years and is now preparing to retire.
The Finance Department has just three employees and will need to carefully plan and prepare for Eileen's
departure. Therefore, the Council is asked to consider two phased retirement offerings which will benefit
both employee and employer during this upcoming transition.
1. PERA PHASED RETIREMENT
In 2009, the state legislature pased a law authorizing PERA to make a Phased Retirement Option
(PRO) available to local government employees over the age of 62 who meet all other requirements
for drawing a pension from PERA. The option is only available to members of the Coordinated
Plan. In Shakopee, all PERA - eligible employees are in the Coordinated Plan, except for licensed
police officers and the full -time Fire Chief, who are in PERA's Police & Fire Plan. Attachment A
provide additional detail regarding this program.
It is up to the local government employer whether they want to offer the phased retirement option
in general and to approve or deny plans for specific employees as they are requested. Under the
PRO plan, eligible employees are allowed to formally retire from their local government job and
begin to draw their pension from PERA, but return to work the next day at half -time or less. Once
they are working half -time or less, neither the employee or employer pay into PERA for the hours
worked. The employee no longer accrues additional service credits for this part -time employment
and they are not subject to the earnings limitations normally placed on PERA retirees who return to
work. Under the program rules this arrangement can continue in one -year increments for up to
five years total, however in the case of Ms. Klimek a much shorter duration is proposed.
Perhaps most notable is the fact that an arrangement for the retired employee to return to work
for the City can be entered into prior to their retirement date and they may start this work as soon
as the next work day after their retirement. Under a standard retirement, there can be no advance
agreement for an individual to return to PERA- covered work with the employer and there must be
at least a 30 day break before a return to work is considered.
The primary benefit to the City is that this phased retirement option would allow us to have long-
term employees working on a part -time basis while their successor is being trained in. By working
only part -time and not paying in to PERA on these hours, some money is freed up for the City to
support this overlap between a new hire and a retiring employee.
City of Shakopee Phased Retirement
In 2006, the City added its own Phase Retirement policy to the Personnel Handbook. This policy
allows individuals who have been employed by the City for 5 years or more and who are age 55 or
older to request a reduction in their work hours while maintaining their benefits - eligible status for
up to six months. The full -text of this policy can be found in Attachment B.
Ms. Klimek meets the requirements for and, with the Council's approval, wishes to take advantage of both
phase retirement programs. This would result in her formally retiring from her position as Senior
Accounting Clerk effective October 31, 2011. She would return to work on November 1, working an
average of 20 hours per week. At that time both she and the City would stop paying into PERA on her
behalf, but she would continue to earn pro -rated vacation and sick time and her existing level of City
contribution toward her monthly medical and dental premiums. It is proposed that this situation would
continue for two months and then Ms. Klimek would completely end her employment with the City on
December 30, 2011.
The City would aim to have Ms. Klimek's successor selected and ready to start in early November so that
there will be a two -month period during which her successor is working here and Ms. Klimek is here half-
time to provide for training and transition.
Recommendation
Staff recommends that the City Council opt in to PERA's Phased Retirement Option (PRO) and approve a
Phase Retirement Offering for Eileen Klimek. Secondly, staff recommends that the City Council approve Ms.
Klimek's request for a phased retirement under Chapter VI, Section E of the City's Personnel Handbook.
This will allow us to retain Ms. Klimek's significant knowledge and skills as we train in her successor.
Relationship to Vision
This item relates to Goal E: Deliver effective and efficient public services by a staff of well- trained, caring
and professional employees.
Requested Action
If the Council concurs, it is asked to offer a motion to approve the City's participation in PERA's Phased
Retirement Option and the offering of Phased Retirement to Eileen Klimek, effective October 31, 2011.
Additionally, the Council is asked to offer a motion to approve Ms. Klimek's request for phased retirement
as outlined in Chapter VI, Section E of the City's Personnel Handbook, for the period of November 1 through
December 31, 2011.
Phased retirement requires a
written agreement between you
and the PERA- covered employ-
er offering you the option.
You must file both a Phased
Retirement Agreement form
and an Application for PERA
Retirement Benefits with PERA.
All other PERA benefit and appli-
cation requirements must be met.
If your phased retirement
agreement is not renewed, your
employer must report your ter-
mination of public employment
to PERA. You may not return
to work for your employer or
another PERA- covered employer
for a minimum of 30 days. If
you later rejoin PERA- covered
employment and are under Social
Security's full retirement age, you
will be subject to PERA's annual
earnings limit.
N ot for retirees
Phased retirement is not avail-
able to PERA members who are
already receiving a retirement
benefit. Retirees who return to
PERA- covered work remain sub-
ject to the Association's earnings
limits.
Sunset
Currently, the phased retire-
ment option is set to end on
June 30, 2014. Until then,
PERA will be evaluating the
program's effectiveness and its
impact on the pension fund.
Continuation of the option
would require legislative action.
This document is available in alternative
formats to individuals with disabilities by
calling 1 800 652 -9026 or through the
Minnesota Relay Service at
1 800 627 -3529.
This brochure is meant to explain the
Public Employees Retirement Association
of Minnesota law as simply and accurately
as possible. If there is any discrepancy
between this publication and the actual
law, the provisions of the law will govern.
Public Employees Retirement
Association of Minnesota
60 Empire Drive, Suite 200
St. Paul, Minnesota 55103 -2088
800 652 -9026 ® (651) 296 -7460
www.mnpera.org
June 2010
i c� r r rrr i •r.
oyees Retirement
of Minnesota
PHASED RETIREMENT: An option Coordinated i+ b • age and over
If you, as a Coordinated mem-
ber, are age 62 or over, you may
be able to ease into retirement
under something called a Phased
Retirement. This option is entirely
at the discretion of your employer.
Under legislation passed this
year, PERA's normal termination
requirements and earnings limits
are waived if you meet the require-
ments of the special provision.
Requirements
To qualify, you must be age 62
or over and a vested member
of PERA. You must also have
worked a minimum of 1,044
hours in each of the five years
immediately preceding the offer
of a phased retirement by your
employer or another PERA -cov-
ered employer.
You must agree that your hours
of work will be reduced by at
least 25 percent and will not
exceed 1,044 hours per year.
bwThe initial phased retirement
agreement cannot exceed one
year. However, it maybe
renewed for up to an addi-
tional year. The total period
of phased retirement may not
exceed five years.
You and your employer (or a
new PERA- covered employer)
must sign a Phased Retirement
Agreement form provided by
PERA. This is used in place
of PERN's normal Termination
Verification form.
I. I .
Normally, in order to receive a
pension, members must formally
terminate employment and have
no prior agreement, either verbal
or written, that they will be reem-
ployed at a later date. In addi-
tion, there must be a minimum
30 -day break in public service
(paid or unpaid) if a member does
return to work for a PERA -cov-
ered employer. Members who
return to PERA- covered employ-
ment are subject to earnings limits
if they are under Social Security's
normal retirement age— exceeding
the limits results in a reduction of
the PERA pension. These restric-
tions are eliminated under phased
retirement. You will receive
the full PERA pension you have
earned, based upon your years
of service, age at retirement, and
high -five average salary.
In addition, neither you nor
your employer are required to
make future contributions to
PERA. Since you are now receiv-
ing a pension, all further accrual of
service credit or adjustment of the
high -five average salary ceases.
R O ME=
Your employer is under no obli-
gation to offer you a phased retire-
ment or to renew any agreement
that is made. You should also
investigate the impact a reduction
of hours may have on your other
employee benefits.
(Continued on reverse side)
3. Life and Long -Term Disability Insurance. Employees who are eligible for
life insurance and long -term disability Insurance may not waive this
insurance. The City will fully fund the cost of long -term disability insurance
and $25,000 in life insurance. Benefits - eligible employees may elect to
purchase additional life insurance at their own cost, subject to the terms and
conditions of the City's insurance carrier.
4. Continuation of Coverage. Employees and/or their dependents may elect to
continue life, medical and dental insurance coverage beyond the date that it
would otherwise terminate as provided by federal and/or state law.
C. Deferred Compensation. The City offers select deferred compensation plans,
which allow employees to have a specified pre -tax dollar amount withheld from
their paycheck and invested for payment at a later date, usually at retirement or
termination of employment. Contributions to these plans are financed solely by
the employee, through payroll deduction. Participation in the United States
Conference of Mayors (USCM) Deferred Compensation plan is mandatory for
paid -on -call firefighters, as required by the Omnibus Budget Reconciliation Act
(OBRA).
D. Retirement Benefits. Under state law, eligible City employees must participate
in the Public Employee's Retirement Association (PERA). Retirement benefits
accrue from both employee and employer contributions. Statutorily- defined
contributions to the retirement system are mandatory and are deducted from the
employee's pay each payroll period.
E. Phased Retirement. Individuals who have been employed by the City of
Shakopee for 5 years or more and who are age 55 or older may be offered a
phased retirement benefit, upon the recommendation of the City Administrator
and approval of the City Council. The purpose of phased retirement is to allow
long -tern employees to work reduced hours while maintaining their benefits and
assisting in the training of a new employee in their specialized skills and
knowledge. In order to be eligible, the employee must hold a specialized position
that will require significant training of a new or promoted employee. Employees
offered and accepting a phased retirement benefit shall work at least an average of
20 hours per week, but shall receive full insurance benefits, at the level they
enjoyed prior to phased retirement, as well as pro -rated vacation, holiday and sick
leave for a period not to exceed 6 months.
F. Post Employment Health Savings Plan's. The City participates in the Post
Employment Health Savings Plan administered by the Minnesota State
Retirement System by contributing an equal dollar amount, as determined by the
City Council annually, for all benefits - eligible employees. This money shall be
deposited in employees' accounts in accordance with the terms and conditions of
the plan. Additionally, all benefits- eligible employees shall contribute a
percentage of their wages to the plan through payroll deductions, according to the
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