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A-5. PERA Phased Retirement ProgramBuilding Inspections Staff is interested in adopting a resolution that would allow the City to enter into x Phased Retirement Agreements when it makes sense for the City and an MEMORANDUM CITY OF TO: Todd Gerhardt, City Manager Phone: 952.227.1160 FROM: Laurie Hokkanen, Assistant City Manager ClIMEMSEN Finance full retirement and to provide employers with a workforce planning tool that can 7700 Market Boulevard DATE: July 14, 2014 PO Box 147 Senior Center less. To participate, the member and City must file a Phased Retirement Chanhassen, MN 55317 SUBJ: PERA Phased Retirement Program Administration Web Site Like most employers, the City anticipates that at least 1/3 of its workforce will be Phone: 952.227.1100 eligible for retirement in the next 10 years. Phased retirement, in some cases, will Fax: 952.227.1110 BACKGROUND Building Inspections Staff is interested in adopting a resolution that would allow the City to enter into Phone: 952.227.1180 Phased Retirement Agreements when it makes sense for the City and an Fax: 952.227.1190 employee. Legislation adopted in 2009 and renewed in 2014 allows Coordinated Engineering and Basic members, age 62 and over, the option to begin receiving a PERA Phone: 952.227.1160 pension without formally resigning. The phased retirement program is intended Fax: 952.227.1170 to facilitate a transition into retirement for a PERA member who is approaching Finance full retirement and to provide employers with a workforce planning tool that can Phone: 952.227.1140 help transfer knowledge from the long -time employee to a new worker. Fax: 952.227.1110 worked by 25 percent, not to exceed 1,044 hours per year -- essentially half -time or Park & Recreation The program has strict requirements for participation. First, the City has sole Phone: 952.227.1120 discretion on offering the phased retirement option to an employee. The initial Fax: 952.227.1110 offer must not exceed one year, but it can be renewed for periods of up to a year, Fax: 952.227.1110 for a total of five years. The City is under no obligation to renew a Phased Recreation Center Retirement Agreement. 2310 Coulter Boulevard (for PERA members who are state employees). Phone: 952.227.1400 To qualify, a member must: Fax: 952.227.1404 In addition, the member must also agree to a reduction in the number of hours Planning & • Meet all other requirements for a pension from PERA; Natural Resources . Be at least 62 years of age; Phone: 952.227.1130 0 Have worked a minimum of 1,044 hours in each of the five years Fax: 952.227.1110 immediately prior to beginning Phased Retirement; and • Not be eligible for the State Employee Post - Retirement Option program Public Works 7901 Park Place (for PERA members who are state employees). Phone: 952.227.1300 Fax: 952.227.1310 In addition, the member must also agree to a reduction in the number of hours worked by 25 percent, not to exceed 1,044 hours per year -- essentially half -time or Senior Center less. To participate, the member and City must file a Phased Retirement Phone: 952.227.1125 Agreement form with PERA (sample attached). Fax: 952.227.1110 Web Site Like most employers, the City anticipates that at least 1/3 of its workforce will be www.ci.chanhassen.mn.us eligible for retirement in the next 10 years. Phased retirement, in some cases, will be a good way to transition positions and shift institutional knowledge. Chanhassen is a Community for Life - Providing for Today and Planning for Tomorrow Mr. Todd Gerhardt July 14, 2014 Page 2 How it works: If mutually agreeable between the member and the City, the member may begin collecting a PERA benefit without the normally required 30 -day break in service and prohibition against having any agreement to return to work with the current employer. Participants are also exempt from PERA's earnings limits that apply prior to full Social Security retirement age. In addition, neither the member nor the City is required to make any further contributions to PERA. Since the member is now receiving a pension, he or she will cease to earn service credits and there will be no future adjustment to the high -five average salary. Upon completion of the phased retirement, a member must meet the requirements normally applied to someone who is terminating public service, including the prohibition of any future employment agreement, and the minimum 30 -day break in public service. If the retiree later returns to PERA- covered employment, the earnings limits would apply. The City incurs no additional costs by participating in the program. RECOMMENDATION If the City Council is interested in offering the Phased Retirement option, City staff will place the item on the July 28th City Council meeting for approval. ATTACHMENTS 1. Frequently Asked Questions (FAQs) 2. Sample Phased Retirement Agreement g: \admin\1h \pera \adopt pera phased retirement program.doe 'PERA Fh zec, Rsto'remsnt Opfoan 1, Q: Do I contact PERA in order to enter a Phased Retirement Option (PRO) Agreement? A: No. The PRO Agreement is between you and your employer, so the offer of a PRO must come from your employer — your employer has sole authority to determine whether PRO Agreements are going to be offered and to whom PRO Agreements are offered. 2. Q: Can I agree to enter a PRO Agreement before I terminate my PERA membership? A: Yes. While retirement requires a separation without an agreement to return, entering a PRO Agreement naturally occurs prior to any termination of PERA membership — you are not required to terminate employment in order to be eligible to enter a PRO Agreement. 3. Q: Can I enter a PRO Agreement after I terminate my PERA- covered employment? A: No. You may not enter a PRO Agreement after you retire, regardless of whether you retired one week, one month, or one year ago. These agreements are not intended to apply to individuals who retired from public employment and now want to return to the PERA- covered workforce. The PRO Agreements are intended to allow a transition into retirement for someone approaching full retirement while providing employers with a workforce planning tool that can, for example, help transfer knowledge from the long -time employee to a new person. 4. Q: Do I have to be eligible for the Rule of 90 to be eligible for a PRO Agreement? A: No. To be eligible for a PRO Agreement, you must be offered a PRO Agreement by your employer, you must meet all other retirement benefit eligibility requirements, be at least age 62, you must have worked at least half -time in a PERA - covered position for a minimum of five years immediately prior to entering a PRO Agreement, and not be eligible for the State Employee Postretirement Option program. 5. Q: If I am eligible for the Rule of 90 but not yet age 62, am I eligible for a PRO Agreement? A: No. You must be at least age 62 to be eligible for a PRO Agreement regardless of whether you are eligible for the Rule of 90. PERA allows early full retirement for persons who qualify for the Rule of 90 (when age plus years of service equal 90), even if they meet the Rule of 90 before age 62. The Internal Revenue Service has regulations in place that direct when a person can collect a retirement benefit while continuing to work in the same job for which the person earned that benefit. The regulations state that a person can only collect the retirement benefit while continuing to work in the same job if he or she is at least age 62. 6. Q: Can I enter a PRO Agreement to take a position covered by MSRS or TRA? A: No. PERA members who are eligible for a PRO and offered a PRO by their employer only terminate PERA membership for purposes of entering a PRO Agreement — the PRO position must be one that would otherwise be covered by PERA. 7. Q: I am in PERA's Police and Fire Plan, can I enter a PRO Agreement? A: No. The PRO program is available only to PERA Coordinated Plan participants. 8. Q: If I enter a PRO Agreement, do I have to begin collecting my retirement benefit right away? A: No. Since PERA cannot accept an application for retirement benefits more than six months prior to the effective date of the benefits, both your benefit and your PRO employment must begin within six months of your termination of membership. If the "Termination Date" on your Retirement Application is more than a month prior to the "Begin Date" on the PRO Agreement you submit, the PRO agreement effective date determines the effective date of your retirement benefit. If the "Begin Date" of your PRO employment is the first of the month, that will also be the begin date of your retirement benefit; if the "Begin Date" of your PRO employment is any other date of the month, your benefit will begin the first day of the following month. 9. Q: Does my employer have to do anything specific for me to enter a PRO Agreement? A: Yes. First, your employer's governing body must vote to participate in offering PRO Agreements to eligible employees. Second, your employer must offer a PRO Agreement to you. However, the law does not require that your employer offer a PRO to any employee. 10. Q: Do I have to terminate my employment at the end of my PRO Agreement ?I A: Yes. You must terminate public employment at the end of your PRO Agreement, have no agreement to return at a later date, and remain out of PERA- covered employment for at least 30 calendar days. You should also know that, while an initial PRO Agreement may only be one year in length, PRO Agreements may be renewed annually for up to five years of total PRO participation. Again, any offer of a PRO and any renewal are at the discretion of your employer. 11. Q: Do I have to start work under a PRO within 30 days of terminating PERA membership? A: No. When you begin work after terminating membership is largely between you and your employer. However, you must begin working under the PRO within six months of terminating membership in PERA. (See FAQ #8.) 12. Q: Can I take an additional PERA- covered position with a different employer during employment under a PRO Agreement? A: Yes. However, the "different" employer must offer you a PRO Agreement and your total hours worked in all PERA- covered positions must represent at least a 25 percent reduction of your pre -PRO regularly scheduled hours and not exceed 1,044 hours in a year. 13. Q: Can I take a position with my current employer that is different than my current position? A: Yes, provided all other criteria (hour reduction of at least 25 percent for no more than 1, 044 hours annually, you are at least age 62, etc.) are met. 14. Q: Can a PERA- covered employer other than my current employer offer me a PRO Agreement? A: Yes. But remember, the PRO Agreement must be entered prior to any termination of employment with your current employer and the agreement must adhere to the employment hour reduction requirement (at least 25 percent when compared to your pre -PRO hours and a maximum of 1,044 -hours annually) and all other PRO eligibility criteria. 15. Q: Can I take an additional position with the same employer with whom I've entered a PRO Agreement? A: Yes. However, your combined hours worked would have to be a reduction of at least 25 percent when compared to your pre -PRO hours and you would not be able to exceed the annual 1,044 -hour limit. 16. Q: Will I accrue vacation and sick leave or be covered by employer health insurance while working under a PRO Agreement? A: Perhaps. Whether you accrue vacation and sick leave or are covered by an employer health insurance plan while working under a PRO Agreement will be up to the agreement between you and your employer — PERA has no authority to direct what, if any, other benefits will be made available. Employers participating in PERA each have their own "other employee" benefit provisions, either through collective bargaining or personnel agreements. 17. Q: If my employer allows me to accrue vacation, sick and holiday leave while working under the PRO, will the hours associated with the leave pay, when taken, count towards the maximum number of hours I may work under the PRO? A: Yes. The hours you take off from work — for which you receive pay — will count towards the maximum number of hours you may work. 18.0: Will I be eligible for disability benefits if I become disabled while working under a PRO Agreement? A: No. Part of your eligibility for a retirement benefit under a PRO Agreement is that your membership in PERA will be terminated, so your right to any benefit other than the retirement benefit for which you become eligible under a PRO Agreement also terminates. 19.Q: Is there a maximum length of time for a PRO Agreement? A: Yes. The PRO Agreements may only be one year in length, but may be renewed annually for up to five years. Any renewal beyond the first year is negotiated between you and your employer. 20. Q: The PRO Program expires June 30, 2019. If I am working under a PRO Agreement, does the expiration date mean that I can really only work under a PRO prior to that date? A: No. The law allows for anyone already working under the terms of a PRO Agreement before June 30, 2019 to continue for up to the allowable five years. 21. Q: Why does the provision expire on June 30, 2019? A: The PERA Board wanted a chance to make sure there is no adverse impact on the funding of the plan by the phased retirement option. The Board's actuarial consultants have indicated that there should be no negative impact on the plan, but the Board wants to review actual experience before making this provision a permanent part of PERA's benefit structure. Originally scheduled to expire in 2014, the program was extended and additional five years to allow more time for evaluation. 22.Q: If I am in a part -time position now, am I eligible for a PRO Agreement? A: Yes, provided you are offered a PRO from your employer and you have worked at least 1,044 hours per year for the past 5 years. Also, you must reduce your hours by at least 25% when compared to the hours you are working now, immediately before entering a PRO Agreement, and you cannot work more than 1,044 total hours annually. 23.Q: Can I work full -time for a certain period and then not work at all for the remainder of a year covered by a PRO Agreement? A: No. You must reduce your regularly scheduled hours of work by at least 25 %. If you were scheduled to work 80 hours per pay period prior to the PRO, you may not work more than 60 hours in any pay period covered by the PRO, and you may not work more than 1,044 total hours for the year. 24.Q: Does the PRO Agreement have to cover 12 consecutive months or can the agreement cover more than one calendar year? A: PRO Agreements may only cover 12 consecutive calendar months from the date you terminate PERA membership for the purpose of entering the PRO Agreement. The agreement may be renewed at the end of those 12 months if you and your employer agree to do so. 25.Q: Can I work in a PERA- covered position at the end of the PRO Agreement? A: Yes. You may return to work with the same employer at the end of the PRO Agreement. However, you will have to have a 30 -day separation from the employment for which you had the PRO Agreement and must not have an agreement to return to employment with that employer prior to the end of the agreement. If you are under Social Security's full retirement age, you would also be subject to PERA's reemployed retiree earnings limit. 26.Q: If I have already reached my normal retirement age (age 65 to 66, depending on your birthday), can I still enter a PRO Agreement? A: Yes, provided your employer offers you a PRO Agreement and you meet the other eligibility criteria (see requirements above). 27.Q: Will I lose my PERA life insurance if I enter into a Phased Retirement Agreement? A: No. If you wish to continue your PERA life insurance, you can do so and PERA will deduct your monthly premium from your pension check. Your employer will no longer deduct the insurance payments from your paycheck. 28.Q: If I currently have employment with more than one PERA- covered employer and want to continue working for these employers, do I have to enter a PRO with those PERA- covered employers? A: Yes, if you intend to continue employment with multiple PERA- covered employers, you have to enter a PRO Agreement with each employer for whom you will continue to work. If you enter a PRO Agreement with one employer and not others (and continue to work for multiple PERA employers), your PRO Agreement will be considered invalid and all retirement benefit payments will have to be returned to PERA when PERA is notified of the employment for which no PRO Agreement was entered. In order to remain eligible for your retirement benefit under a PRO, you must either 1) terminate the employment not covered by a PRO Agreement (and remain out of that employment for at least 30 days without an agreement to return) or 2) enter a PRO Agreement for any position you intend to maintain during the term of a PRO Agreement. Phased Retirement Agreement Public Employees Retirement Association (PERA) 60 Empire Drive, Suite #200, Saint Paul, MN 55103 -2088 Member Information Services: 651- 296 -7460 or 1- 800 - 652 -9026 PERA Fax Number: 651- 297 -2547 L�►�1 Instructions: Type or print in black ink. Original is to be mailed to PERA prior to the start of employment under the phased retirement option (PRO) program and should accompany a completed Application for PERA Retirement Benefits. As applicable, a signed copy of any subsequent Phased Retirement Agreement must also be provided to PERA prior to its effective date. Both Parts A and B must be completed in their entirety. Please read the reverse side for details about the requirements relating to phased retirement. Part A - For completion by the employer that will em loy the individual under a PRO Name of Employer PERA Employer Number (6- digits) Name of Individual who will be Employed under the PRO Program Last 4 digits of Member's Soc. Sec. No. Dates of the Phased Retirement Employment Begin Date End Date (must be limited to a one-year period) Identify if this is the first agreement covering phased retirement for this employee or renewal of a prior agreement. ❑ Initial Agreement ❑ 1st Renewal ❑ 2nd Renewal ❑ 3rd Renewal ❑ 4t" Renewal Note: Phased retirement employment may be for periods of up to one year, not to exceed a total duration of five years. I understand that wages earned by the named individual during this period of employment must be reported to PERA and that the amounts will not be subject to PERA withholding. I further certify that this individual will be employed in accordance with the phased retirement employment conditions described in this agreement and in M.S. §353.371, and I agree to ensure that this governmental unit complies with all related requirements. ----------------------------------- - - - - -- -------- - - - - -- ----------------------------------------- - - - - -- -- - - - - -- --------------------- - - - - -- ----- - - - - -- --------------------------------- Signature of Employer Representative Date of Signature Part B - To be signed by the PERA member I have accepted phased retirement employment with (check the one that applies): ❑ The same governmental unit for which I am currently employed. ❑ A different governmental unit than my current employer. Please indicate the name of your current employer: and your anticipated date of termination with this unit of government (month /day /year): / / I have read the requirements that must be met to qualify for the phased retirement program on the back of this form and confirm that I will meet all of the criteria. I understand that my PERA retirement benefit will be effective on the first day of the month following the begin date of my initial PRO agreement; however, if my agreement begins on the first day of a calendar month, my benefit will be effective on that day. I further realize that while employed in a phased retirement position, I will not accrue service credits in PERA and my retirement benefit will not be subject to reduction under the provisions regarding reemployed annuitants (M.S. §353.37). I understand and accept the conditions of -- phased retirement employment described in this agreement and in M.S. §353.371. -the - --------- - - - - -- -- -- ------------------------------------------------- --------- - -- - - - - -- --------------- - -- Signature of PERA Member Date of Signature 07/27/2010 Information about the Phased Retirement Option Program Public Employees Retirement Association (PERA) Eligibility of Coordinated or Basic Plan Member To draw a retirement benefit while working as an employee for a PERA- covered employer, the member must: 1. be employed for at least 1,044 hours per year for the five years immediately preceding participation in the phased retirement program; 2. be age 62 or older, 3. reduce the hours of work in public service, when compared to his or her previous work schedule, by at least 25 percent and limit the hours of work per year to 1,044 or fewer; 4. be eligible for a monthly retirement benefit from PERA (vested), and 5. provide a completed Phased Retirement Agreement form to PERA, along with an Application for PERU Retirement Benefits, prior to the start of employment under the phased retirement program. Additionally, if the PERA member is accepting a phased retirement position in an agency of the State of Minnesota, he or she cannot be eligible for the State Employee Post - Retirement Option program. Other Important Items An individual's PERA retirement benefit will be effective on the first day of the month following the begin date of the initial employment under a Phased Retirement Agreement; however, if the employment begins on the first day of a calendar month, the benefit will be effective on that day. Participation in the PRO program stops at the conclusion of the initial or renewed agreement. Additionally, to qualify for continued monthly benefits after the phased retirement period ends, the employee must fulfill the usual retirement requirements. This includes terminating public service, having a minimum 30 -day break in service and not having any agreement to return to work in a non - elected position for the same employer until after the 30 -day separation period has passed. Failure to abide by these requirements will result in the cancellation of the PERA benefits. Responsibilities of the Employer An employer is under no obligation to offer the phased retirement option to a PERA Coordinated or Basic Plan member. If participation is offered, the employer must reduce the employee's hours of work, when compared to the individual's previous work schedule, by at least 25 percent and limit the hours per year to 1,044 or fewer. The initial offer of employment under the PRO program is limited to one year. An employer may extend the individual's employment for periods of up to one year, for a maximum of five years. The earnings paid to an employee participating in a PRO program must be reported to PERA after each pay period. The employer will report the employee's salary under the Exempt Plan, after having enrolled the individual in that PERA plan. No employee deductions or employer contributions are payable to the retirement plan on the earnings of the phased retirement position. Participation in PERA's phased retirement program stops at the conclusion of the employee's initial or renewed agreement, whichever is later. When an employee's participation in the phased retirement program ends, the employer must promptly inform PERA. Similarly, employers must notify PERA if an employee covered by a PRO agreement terminates public service.