Early Retirement Incentive RevieEligible employees must retire within 60-120 days after the school...
Transcript of Early Retirement Incentive RevieEligible employees must retire within 60-120 days after the school...
Early Retirement Incentive ReviewPresented to the
Audit, Budget & Technology Committee
by thePERSONNEL COMMISSION
and HUMAN RESOURCES DIVISION
January 15, 2004
January 15, 2004 2
AGENDA
Introductory CommentsChuck Burbridge
Personnel CommissionOverview by Kathryn Butler
Human Resources DivisionOverview by Tom Killeen
Closing Comments & QuestionsChuck Burbridge
January 15, 2004 3
Introductory Comments
OverviewWhy Offer Early Retirement Incentives?
Reduce costsReduce and improve workforce
Why Do Early Retirement Incentives Work?Comparison of Two Incentive Programs
Why it works for one but not the other
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Personnel Commission Overview
Government Code Section 20904:
Provides two years of additional service credit for employees who are at least 55 years of age
And have at least five years of service credit
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Personnel Commission Overview, con’t.
State Government Code 20904 conditions:The employees must retire within the specific window period of 90-180 days
The District must pay PERS the actuarial equivalent of the increased retirement benefit
The retirement will result in a net savings to the District
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Personnel Commission Overview, con’t.
Section 20904 Conditions, Con’t.The job classifications or organization units eligible for the benefit must be designated
The benefit cannot be provided on the basis of employee organization (bargaining unit) or unrepresented groups (e.g., confidential employees)
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Personnel Commission Overview, con’t.
Cost to the District based on the employees’ annual compensation and a cost factor
AGE COST FACTOR50 - 54 .3955 - 59 .5460 - 64 .5865 + .54
May be made in payments within two years, including interest
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Personnel Commission Overview, con’t.
Staff surveyed eligible classified employees regarding their interest
1,410 responses received 665 would definitely retire 745 indicated they were not prepared to make a decision at the time of the survey
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Personnel Commission Overview, con’t.
Administrators determined if their Division would participate
Impacted positions were required to be left vacant for at least four months
Half of these positions were to be permanently cut
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Personnel Commission Overview, con’t.Participation by:
Food Services Branch 23 job classifications
Office of the Inspector General3 job classifications
Independent Analysis Unit1 job classification
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Personnel Commission Overview, con’t.
$1,124,625.30 TOTAL SAVINGS
359.027.50$365,586 $150,830.44 $239,255.94 NET SAVINGS
359,027.50339,930.50318,870.50304,603.00Half Positions Cut (6/12)
91,136Vacant Four Months
$9,925.50 $25,655.50 31,583.5043,140.50Positions remaining
(salary savings)
($199,623.56)($199,623.56)Cost of Incentive*
2006-072005-062004-052003-04INSPECTOR
GENERAL
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Personnel Commission Overview, con’t.
$11,401 $11,621 Net savings
+11,401+5,655Replacement at lower salary level
+55,293Position to be kept vacant six months
-49,327Cost of additional service credit
2004-052003-04Independent
Analysis Unit
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Personnel Commission Overview, con’t.
$140,657.21 $222,983.01 $1,333,947.87 Cost Savings
2,862,135.07Positions Cut
$140,657.21 $222,938.01 301,016.96Positions remaining (salary savings)
$(1,829,204.16)Cost of Incentive
2005-062004-052003-04Food Services BranchSavings for previously approved classifications:
$21,160.68 $41,331.83 $51,842.95 Cost Savings
$21,160.68 $41,331.83 $327,141.61 Salary Savings
($275,298.66)Cost of Incentive
CAFETERIA WORKER II
SUPERVISORS AND
2004-052003-04 Area Food Services
January 15, 2004 14
Personnel Commission Overview, con’t.
ConclusionsApplicable in limited situations
ReorganizationImpending layoffs
Can save money only by not backfilling positions
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January 15, 2004 16
Human Resources DivisionOverview
Assembly Bill 1207 “Golden Handshake” (2 Yrs Service Credit)
Provides two years of additional service credit for employees who are at least 55 years of age and have at least 5 years of service credit
“2+2” (2 Yrs Service + 2 Yrs Age Credit)
In addition to the above, provides two years to the age factor
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Human Resources DivisionOverview, con’t.
Effective DatesThe “Golden Handshake” is effective January 1, 2004, and has no ending date
The “2+2” program is effective January 3, 2004, through December 31, 2004
Eligible employees must retire within 60-120 days after the school board’s resolution and completion of negotiations with employee bargaining units
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Human Resources DivisionOverview, con’t.
RequirementsThe incentive programs must result in a net savings to the district
The incentive programs must be negotiated with appropriate bargaining units
The incentive programs cannot be selectively offered to certain employees
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Human Resources DivisionOverview, con’t.
Requirements, con’t.
All costs related to the incentive programs must be paid by the school district
Employees are prohibited from paying any of the costs related to the programs
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Human Resources DivisionOverview, con’t.
Post-retirement Reemployment
Benefits are forfeited if retiree returns to any California public school service within one year, or within five years, if return is to the former district
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Human Resources DivisionOverview, con’t.
Informal Survey of School Districts
Over two dozen California public school districts were surveyed, including the largest 15 as well as smaller districts. The Los Angeles County Office of Education was also queried
None of the districts surveyed indicated that they were preparing to offer the retirement incentives provided under AB 1207
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Human Resources DivisionOverview, con’t.
CalSTRS Present Value CostsThe District must pay the CalSTRS actuarial equivalent of the increased retirement benefit, with costs ranging from an average of $18,733 to $136,846 per retiree
CalSTRS Administrative FeeThe District must pay CalSTRS an administrative fee of $250 per retiree, or $280 per retiree if actuarial costs are being deferred
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Human Resources DivisionOverview, con’t.
CalSTRS Deferred Interest Costs
The District must pay the interest of the actuarial costs if costs are deferred. The average costs of deferral interest for eight years range from $3,161 to $23,093 per retiree
Retiree Health and Welfare Benefit Costs
The District must pay lifetime health and welfare benefits for eligible retirees and dependent(s)
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Human Resources DivisionOverview, con’t.
Other Costs
Savings from normal employee turnover historically has been used to fund salary step and schedule increases
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Human Resources DivisionOverview, con’t.
Differences between CalPERS and CalSTRS Retirement Incentive Programs
The CalSTRS programs cannot be selectively offered or limited to certain employees
The District would have no control over the loss of personnel in shortage fields who may not be replaced by qualified persons (e.g. math, science and special education teachers)
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Human Resources DivisionOverview, con’t.
Differences between CalPERS and CalSTRS Retirement Incentive Programs, con’t.
The District would have no control over the tremendous costs associated with the “windfall” for employees intending to retire even without the incentivesUnlike the CalPERS program, most of the retirements would require replacement personnel to be hiredThere is no net savings to the District
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Human Resources DivisionOverview, con’t.
Methodology“Golden Handshake”
60/3058/28
“Golden Handshake” (No Backfill For 6 Months)60/3058/28
“2+2”60/3058/28
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Human Resources DivisionOverview, con’t.
Employee Categories(Certificated Employees Age 55+ With 15+ Years of Service)
Preparation Table 5,210 (79%)
Early Education 104 (2%)
Adult Education 74 (1%)
Support Staff 209 (3%)
Administrators 1,022 (15%)
TOTAL 6,619 (100%)
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Human Resources DivisionOverview, con’t.
Demographics
Employees with 15 years of service
Age 55 and over: 6,619
Age 55 to 59 3,775 (57%)Age 60 plus 2,844 (43%)
UTLA 5,597 (85%)AALA 926 (14%)District Represented 96 (1%)
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Human Resources DivisionOverview, con’t.
Program Cost Per Employee [Savings or (Loss) ]
“Golden Handshake” (Age 60/ Service 30)
One Year Four Year Eight YearPreparation Table ($16,499) $50,118 $90,876Early Education ($22,834) ($14,773) ($26,418)Adult ($15,347) ($13,665) ($30,195)Support Staff ($35,551) ($21,604) ($42,795)Administrators ($28,203) $45,974 $88,520
TOTAL ($118,434) $46,050 $79,988
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Human Resources DivisionOverview, con’t.
Program Cost For Those Expected to Retire (Windfall)
“Golden Handshake” (Age 60/ Service 30)
No. Four Year Eight Year
Preparation Table 644 ($28,024,264) ($29,933,563)Early Education 10 ($ 310,614) ($ 331,721)Adult 7 ($ 145,381) ($ 155,215)Support Staff 29 ($ 1,494,017) ($ 1,595,907)Administrators 120 ($ 7,467,600) ($ 7,977,360)
TOTAL 810 ($37,441,876) ($39,993,766)
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Human Resources DivisionOverview, con’t.
Conclusions
The District does not qualify to offer either of the two retirement incentive programs because there is no net savings resulting from the offers
Even if the District did qualify, (which it does not), the inability to selectively offer the benefits would preclude any recommendation for offer
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Human Resources DivisionOverview, con’t.
Conclusions, con’t.Without the ability to selectively offer the incentives and thereby limit the offer to shortage field personnel, the District could be confronted with possibly a significant number of shortage field vacancies for which qualified staff cannot be recruited to backfill
The District has advised UTLA and AALA that it will not offer the retirement incentives provided under AB 1207
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Closing Comments
Concluding RemarksQuestions