City of Mayor Received*

R1

The Cities should adopt pension plans to extend the retirement age beyond current retirement plan ages. The recommendation has not yet been implemented, but will be implemented in the future, with a time frame for implementation. The State of California and CalPERS control the pension plans available from CalPERS for City employees. As such, the City does not control and is not presently able to offer a pension plan with a retirement age eligibility requirement different than what is offered. The City of Santa Clara does support moving employees to pension plans that are more sustainable, including requiring employees to retire at a higher age to receive particular pension benefits. Consistent with this view, the City already has discussed with all ten (10) of the City's bargaining units the possibility of implementing a two-tier pension plan, with a lesser and more fiscally sustainable pension plan applicable for new City hires. The City already formally negotiated on the subject of a less costly pension plan with one of its bargaining units in December 2011 - the Public Safety Non Sworn Employees Mayor and Council Offices • 1500 Warburton Avenue • Santa Clara, CA 95050 • Phone (408) 615-2250 • Fax (408) 241-6771 • www.santaclaraca.gov Association (PSNSEA). The condition of employment applicable to pension that resulted from these negotiations was as follows: "Future hires" represented by PSNSEA shall receive the 2.0% at 60 with three year average retirement formula. "Future hires" shall refer to employees hired after (1) an appropriate amendment to the City's contract with CalPERS can be made effective and (2) 2.0% at 60 with three year average retirement formula applies to all other miscellaneous bargaining units and employees after the City has satisfied the applicable meet and confer obligations. Should the City reach agreement with or impose on other miscellaneous bargaining groups and employees a pension formula for new hires different than 2.0% at 60 with three year average, such formula shall automatically also apply to new hires represented by PSNSWEA and no further meet and confer to effectuate this change for future PSNSEA hires shall be required. The City is preparing to begin similar negotiations with seven additional bargaining units in the next two months, with similar negotiations with its other two bargaining units in the Fall of 2012. The City plans for these negotiations to include discussion of less costly pension plans as well as options such as calculating final compensation for pension purposes based on the average of an employee's final three years and other options that may be available. (1) How the town [sic] views the various recommendations Answer: Agree. The recommendation above states "The Cities should adopt pension plans to extend the retirement age beyond current retirement plan ages." The California Public Employees' Pension Reform Act (PEPRA) created a new retirement age minimum beyond the current Classic CalPERS employee retirement age. The benefit formulas for current employees under the Classic definition were unchanged by the law and are as follows: Classic Safety Employees: 3% @ 50 and Classic Miscellaneous Employees: 2.7 @ 55 The above retirement formulas have been changed for new PEPRA employees, hired on or after January 1 2013, to the following: PEPRA Safety Employees: 2.7% @ 55 and PEPRA Miscellaneous Employees: 2% at 62 (2) Whether the recommendations were accepted Answer: Yes (3) If there is a plan for future action <b>Answer:</b> Recommendation Met

R2A

Santa Clara County and the cities of Cupertino, Los Altos, Monte Sereno, Morgan Hill, Mountain View, San Jose, Santa Clara, Saratoga and Sunnyvale should work to implement second tier plans. The recommendation has not yet been implemented, but will be implemented in the future, with a time frame for implementation. The State of California and CalPERS control the pension plans available from CalPERS for City employees. As such, the City does not control and is not presently able to offer a pension plan with a retirement age eligibility requirement different than what is offered. The City of Santa Clara does support moving employees to pension plans that are more sustainable, including requiring employees to retire at a higher age to receive particular pension benefits. Consistent with this view, the City already has discussed with all ten (10) of the City's bargaining units the possibility of implementing a two-tier pension plan, with a lesser and more fiscally sustainable pension plan applicable for new City hires. The City already formally negotiated on the subject of a less costly pension plan with one of its bargaining units in December 2011 - the Public Safety Non Sworn Employees Association (PSNSEA). The condition of employment applicable to pension that resulted from these negotiations was as follows: "Future hires" represented by PSNSEA shall receive the 2.0% at 60 with three year average retirement formula. "Future hires" shall refer to employees hired after (1) an appropriate amendment to the City's contract with CalPERS can be made effective and (2) 2.0% at 60 with three year average retirement formula applies to all other miscellaneous bargaining units and employees after the City has satisfied the applicable meet and confer obligations. Should the City reach agreement with or impose on other miscellaneous bargaining groups and employees a pension formula for new hires different than 2.0% at 60 with three year average, such formula shall automatically also apply to new hires represented by PSNSWEA and no further meet and confer to effectuate this change for future PSNSEA hires shall be required. The City is preparing to begin similar negotiations with seven additional bargaining units, with similar negotiations with its other two bargaining units in the Fall of 2012. The City plans for these negotiations to include discussion of less costly pension plans as well as options such as calculating final compensation for pension purposes based on the average of an employee's final three years and other options that may be available. (1) How the town [sic] views the various recommendations Answer: Agree. The recommendation above states "Santa Clara County and the cities of Cupertino, Los Altos, Monte Sereno, Morgan Hill, Mountain View, San Jose, Santa Clara, Saratoga and Sunnyvale should work to implement second tier plans." The City of Santa Clara was negotiating with bargaining units for a 2^nd tier, however, PEPRA came into place and mandated a 2^nd tier plan. (2) Whether the recommendations were accepted <b>Answer:</b> Yes, through PEPRA (3) If there is a plan for future action Answer: Recommendation Met. <b>Recommendation 2B:</b> For Gilroy, Los Gatos, Milpitas and Palo Alto, which have not implemented second tier plans for MISC and Public Safety second tier plans should be implemented for both plans.

R2B

is not applicable to the City of Santa Clara. N/A

R2C

All Cities' new tier of plans should close the unfunded liability burden they have pushed to future generations. The new tier should include raising the retirement age, increasing employee contributions, and adopting pension plan caps that ensure pensions do not exceed salary at retirement. The recommendation has not yet been implemented, but will be implemented in the future, with a time frame for implementation. The State of California and CalPERS control the pension plans available from CalPERS for City employees. As such, the City does not control and is not presently able to offer a pension plan with a retirement age eligibility requirement or pension plan cap or maximum pension benefit different than what is offered. The City does support the type of legislative changes described in the Grand Jury's Recommendation 2C. (1) How the town [sic] views the various recommendations Answer: Agree The recommendation above states "All Cities' new tier of plans should close the unfunded liability burden they have pushed to future generations. The new tier should include raising the retirement age, increasing employee contributions, and adopting pension plan caps that ensure pensions do not exceed salary at retirement." The City of Santa Clara has a desire to reduce its unfunded pension liability. PEPRA did raise the retirement age, and new employees split the normal cost. The CalPERS Board has taken several actions since the Civil Grand Jury Report which require Cities to make significantly higher contributions designed to pay off their unfunded liabilities quicker than under the prior policies. While there is still an unfunded liability, the City Council has recently set aside $5 million from the 2015-16 General Fund budget surplus to establish a separate irrevocable Pension Trust Fund. Additional contributions will be made as funds are available (2) Whether the recommendations were accepted Answer: Yes (3) If there is a plan for future action Answer: PEPRA accomplished this plan, with the exception of closing the unfunded liability gap. However the City is attempting to close the gap by transferring money into a Pension Trust Fund.

R4A

The Cities should require all employees to pay the maximum employee contribution rate of a given plan. The recommendation has been implemented. City of Santa Clara employees rather than the City pay the employee share or contribution of their CalPERS pensions. (1) How the town [sic] views the various recommendations Answer: Agree with the recommendation "The Cities should require all employees to pay the maximum employee contribution rate of a given plan." All City of Santa Clara employees pay the employee contribution. (2) Whether the recommendations were accepted <b>Answer:</b> Employees already pay the employee contribution towards the employee share. (3) If there is a plan for future action <b>Answer:</b> Already met recommendation.

R4B

The Cities should require employees to pay some portion of the Past service Cost associated with the unfunded liability, in proportion to the Benefits being offered. The recommendation has not yet been implemented as employees already pay the employee share or contribution of their CalPERS pension, and the City is discussing and negotiating a second tier pension for future hires, and is analyzing all options for addressing the costs of pension benefits and making sure they are fiscally sustainable in the future. (1) How the town [sic] views the various recommendations Answer: Under PEPRA, new employees hired on or after January 1, 2013 are now paying 50% of the normal cost of their benefit formula. PEPRA did not change employee contributions for "Classic" members. (2) Whether the recommendations were accepted Answer: Yes, however, the City participates in the CalPERS pension system and does not control employee contribution rates. (3) If there is a plan for future action <b>Answer:</b> The City is subject to changes as may be enacted by the CalPERS Board.

R5

The Cities, should immediately work toward implementing policy changes and adopting measures aimed at making full OPEB ARC payments as soon as possible. The recommendation has been implemented. The City of Santa Clara implemented Governmental Accounting Standards Board (GASB) Statement No. 45 dealing with Other Post-Employment Benefits or OPEB in a timely manner. Since implementation, the City has made the full Annual Required Contribution (ARC) each year and has budgeted sufficient funds in its 2012-13 Budget to continue to pay the ARC. (1) How the town [sic] views the various recommendations <b>Answer:</b> The City's position has not changed. It implemented an irrevocable OPEB Trust fund several years before the Civil Grand Jury Report. (2) Whether the recommendations were accepted <b>Answer:</b> Yes, the City has been fully funding its Annual Required Contribution (ARC) each year (3) If there is a plan for future action <b>Answer:</b> Continue to pay at least the ARC each year.

R6

The City of San Jose should eliminate the SRBR program or amend the SRBR program to prevent withdrawal of pension trust money whenever the pension- funded ratios is less than 100%.

R7

The Cities should transition from defined benefit plans to defined contribution plans as the new tier plans are implemented. The City does not currently intend to implement this recommendation because, as a CalPERS member, the City does not control the plans that are offered and/or what changes may be made to pension benefit plans. Currently, CalPERS does not offer a defined contribution plan for new tiers. (1) How the town [sic] views the various recommendations Answer: The City agrees that defined contribution retirement plans are less volatile for the employer. However, CalPERS does not currently offer either a hybrid defined benefit/defined contribution plan or a straight defined contribution plan. (2) Whether the recommendations were accepted <b>Answer:</b> The City has no control over the pension formulas offered by the State. (3) If there is a plan for future action Answer: Any future actions depend on whether the State changes its pension offerings. If there are any questions in regards to the City's response to the above, please contact City Manager, Rajeev Batra at 408/615-2211 or Liz Brown, Director of Human Resources at 408/615-2150. Sincerely, Asam Hullin Mayor Cc: City Council Rajeev Batra, Interim City Manager Liz Brown, Director of Human Resources