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1. City Policy - Optional MPERA MembershipClity of Kalispell NEINIMMEMOM Post Office Box 1997 - Kalispell, Montana 59903-1997 - Telephone (406)758-7700 Fax (406)758-7758 TO: Mayor Pamela B. Kennedy and the Kalispell City Council FROM: Rich Hickel, Adjutant City Attorney Terry Mitton, Human Resources Director SUBJECT: Revised City Policy on Optional MPERA Membership MEETING DATE: November 3, 2008 BACKGROUND: Membership in Montana Public Employees Retirement System (MPERS) is mandatory for employees who work more than 960 hours annually in covered public employment. MPERS requires members to contribute 6.90 of their gross pay into their state retirement account and the employing agency must match this contribution. For employees who work less than 960 hours in a calendar year, membership in MPERS is optional. M.C.A. §19-3- 412(1)(b). This same statute provides that a member who "declined optional membership but later becomes a member may purchase service credit for the period of time beginning with the date of employment in which membership was declined to the commencement of membership." M.C.A. §19-3-412(6). It further provides that the purchase "must comply with M.C.A. §19-3-505." M.C.A. §19-3-505(2)(c) states that the employer may not discriminate among employees who request retroactive purchase of all or a portion of the service credit which accrued while participation was optional. It has been the past city practice to pay non -mandatory contributions for its employees. Under section 505, once the city has established a policy regarding retroactive purchase, it is bound by that policy with respect to all current employees. For future employees, this policy may be revised. The Montana Public Employees Retirement Administration (MPERA) has provided the attached "Employer Payment Policy" which describes alternatives available to the city for non -mandatory contributions. Basically, it allows the city to either keep or change its current policy regarding city payments for past non -mandatory service credit. As was stated, this policy change may be implemented only with regard to FUTURE employees. All current employees are "grandfathered" in under the current practice. A change in current practice will be recognized and accepted by MPERA. RECOMMENDATION: City Administration recommends approval of this revision to the City payment policy with respect to optional MPERS membership for future employees. FISCAL EFFECTS: From a budget perspective, changing the current policy to prospectively provide that the city will not pay the employer's contributions due on previous service should result in a long-term reduction in possible expenditures. The actual budgetary impact of maintaining the current practice is not quantifiable since by definition, non -mandatory participation is optional on the part of the employee. Some may elect to participate, but many others may not. Under the new policy, should a future employee elect to purchase service credit for time employed with the city while MPERA membership was optional, the City would not be required to pay its matching contribution. Respectfully submitted, Rich Hickel, Adj.,City Attorney t Myrt Webb, Interim City Manager 19-3-412 Optional membership. Text (1) Except as provided in subsection (2), the following employees and elected officials in covered positions shall elect either to become active members of the retirement system or to decline this optional membership by filing an irrevocable, written application with the board in the manner prescribed in subsection (3): (a) elected officials of the state or local governments who: (i) are paid on a salary or wage basis rather than on a per diem or other reimbursement basis; or (ii) were members receiving retirement benefits under the defined benefit plan or a distribution under the defined contribution plan at the time of their election; (b) employees serving in employment that does not cumulatively exceed a total of 960 hours of covered employment with all employers under this chapter in any fiscal year; (c) employees directly appointed by the governor; (d) employees working 6 months or less for the legislative branch to perform work related to the legislative session; (e) the chief administrative officer of any city or county; (f) employees of county hospitals or rest homes. (2) (a) Except as provided in subsection (2)(b), employees and officials described in subsections (1)(a) through (1)(f) who are employees or officials but not members on July 1, 1999, have until December 1, 1999, to file an irrevocable, written application with the board. (b) A legislator may also become a member as of the date prior to December 30, 2000, that the legislator filed an irrevocable written application with the board to become a member and paid the employee share of contributions determined by the board to be required to purchase the legislator's prior service credit. However, the legislator shall purchase at least 5 years of service credit or, if the legislator has less than 5 years of membership service, service credit equal to all of the legislator's membership service. The legislative branch is responsible for paying the amount determined by the board to be the employer's share of contributions required to purchase a legislator's service credit under this subsection (2)(b). (c) A member who after April 17, 2003, is elected to a local government position in which the member works less than 960 hours in a calendar year may, within 180 days of being elected, decline optional membership with respect to the member's elected position. (3) (a) The board shall prescribe the form of the written application required pursuant to subsection (1) and provide written application forms to each employer. (b) Each employee or elected official in a position covered under subsection (1) shall obtain the written application form from the employer and complete and return it to the board. (c) The written application must be filed with the board within 180 days of the commencement of the employee's or elected official's employment. (d) The employer shall retain a copy of the employee's or elected official's written application. MTCODE 1 ® 2008 Matthew Bender & Company, Inc., a member of the LexisNexis Group. All rights reserved. Use of this product is subject to the restrictions and terms and conditions of the Matthew Bender Master Agreement. (4) If the employee or elected official fails to file the written application required under subsection (1) with the board within the time allowed in subsection (3), the employee or elected official waives membership. (5) An employee or elected official who declines optional membership may not receive membership service or service credit for the employment for which membership was declined. (6) An employee or elected official who declined optional membership but later becomes a member may purchase service credit for the period of time beginning with the date of employment in which membership was declined to the commencement of membership. Purchase of service credit pursuant to this subsection must comply with 19-3-505. (7) Except as provided in subsection (2)(c), membership in the retirement system is not optional for an employee or elected official who is already a member. Upon employment in a position for which membership is optional: (a) a member who was an active member before the employment remains an active member; (b) a member who was an inactive member before the employment becomes an active member; and (c) a member who was a retired member before the employment is subject to part 11 of this chapter. (8) (a) An employee or elected official who declines membership for a position for which membership is optional may not later become a member while still employed in that position. (b) If, after a break in service of 30 days or more, an employee who was employed in an optional membership position is reemployed in the same position or is employed in a different position for which membership is optional, the employee shall again choose or decline membership. (c) If the break in service is less than 30 days, an employee who declined membership is bound by the employee's original decision to decline membership. (9) An employee accepting a position that requires membership shall become a member even if the employee previously declined membership and did not have a 30-day break in service. History En. Sec. 50, Ch. 265, L. 1993; amd. Sec. 1, Ch. 208, L. 1997; amd. Sec. 13, Ch. 370, L. 1997; amd. Sec. 51, Ch. 51, L. 1999; amd. Sec. 20, Ch. 58, L. 1999; amd. Sec. 26, Ch. 562, L. 1999; amd. Sec. 20, Ch. 99, L. 2001; amd. Sec. 1, Ch. 285, L. 2001; amd. Sec. 1, Ch. 357, L. 2001; amd. Sec. 1, Ch. 402, L. 2003; amd. Sec. 21, Ch. 429, L. 2003; amd. Sec. 19, Ch. 329, L. 2005. Notes Chapter Cross -References Administration of public retirement system assets, Art. VHI, sec. 15, Mont. Const. Social Security, Title 19, ch. 1. The Public Employees' Retirement Act, Title 19, ch. 2. Judges' retirement, Title 19, ch. 5. MTCODE 2 ® 2008 Matthew Bender & Company, Inc., a member of the LexisNexis Group. All rights reserved. Use of this product is subject to the restrictions and terms and conditions of the Matthew Bender Master Agreement. 19-3-505 Purchase of previous employment with employer. Text (1) Subject to the provisions of this section, a member who has employment for which optional membership was declined or employment with an employer prior to the employer's contract coverage may file a written application with the board to purchase all or a portion of the employment for service credit and membership service. The application must include salary information certified by the member's employer or former employer. (2) (a) A purchase under this section is subject to the board's approval. (b) If the board approves the request, the member shall pay all contributions that the member would have contributed during the period of employment as if the employment had been covered by the retirement system and shall pay the regular interest that would have accumulated on the amount to the time of payment. (c) The employer shall establish a policy as to the payment of retroactive employer contributions or retroactive employer contributions and regular interest and apply this policy indiscriminately for all employees and former employees. All employee appeals of discrimination are subject to the determination of the board. All successful appeals obligate the employer to pay the employer and employee contributions with accrued interest for that employee filing the appeal with the board. Each appeal must be heard on its individual merits and may not bind the employer to pay all retroactive payments for all former and present employees. (d) If the employer establishes a policy under subsection (2)(c) of nonpayment, the member shall pay the amount not paid by the employer in order to receive service credit and membership service for the period of employment. History En. 68-1607 by Sec. 12, Ch. 323, L. 1973; amd. Sec. 2, Ch. 190, L. 1974; amd. Sec. 3, Ch. 128, L. 1975; amd. Sec. 1, Ch. 89, L. 1977; amd. Sec. 4, Ch. 132, L. 1977; R.C.M. 1947, 68-1607; amd. Sec. 2, Ch. 103, L. 1987; amd. Sec. 58, Ch. 265, L. 1993; amd. Sec. 23, Ch. 58, L. 1999; amd. Sec. 27, Ch. 562, L. 1999; amd. Sec. 22, Ch. 99, L. 2001; amd. Sec. 24, Ch. 429, L. 2003; amd. Sec. 20, Ch. 329, L. 2005. Notes Chapter Cross -References Administration of public retirement system assets, Art. VIII, sec. 15, Mont. Const. Social Security, Title 19, ch. 1. The Public Employees' Retirement Act, Title 19, ch. 2. Judges' retirement, Title 19, ch. 5. Highway patrol retirement, Title 19, ch. 6. MTCODE 1 ® 2008 Matthew Bender & Company, Inc., a member of the L.exisNexis Group. All rights reserved. Use of this product is subject to the restrictions and terms and conditions of the Matthew Bender Master Agreement. Employer Payment Policy I. Section 19-3-505, MCA Payment of Employer Contributions and Interest on Previous Service A Public Employees' Retirement System (PERS) member may purchase (1) all or a portion of the member's employment with an employer prior to the time the employer entered into a contract for PERS coverage and (2) all or a portion of the member's employment for which optional PERS membership was declined (both of which are known as previous service). PERS employers must establish policies regarding payment of employer contributions and employer interest due for the previous service being purchased by an employee. The policy must be applied indiscriminately to all employees and former employees. Thus, it is our policy to: and to: pay the employer's contributions due on previous service; OR not pay the employer's contributions due on previous service. pay the outstanding interest due on the employer's contributions for the previous service; OR not pay the outstanding interest due on the employer's contributions for the previous service. II. Section 19-3-504, MCA Payment of Interest on Employer Contributions for Workers' Compensation Time A PERS member may purchase time during which the member is absent from service because of an employment -related injury entitling the member to workers' compensation payments. PERS employers are required to pay employer contributions and must establish a policy for the payment of interest on employer contributions due for the workers' compensation time being purchased by an employee. The policy regarding payment of interest must be applied to all employees similarly situated. Thus, it is our policy to: pay the outstanding interest due on the employer's contributions for the employee's purchase of workers' compensation time; OR not pay the outstanding interest due on the employer's contributions for the employee's purchase of workers' compensation time. NAME OF EMPLOYER Signature of Officer: Printed Name: Title of Officer: Dated: CADocuments and Settings\rhickel\Local Settingffemporary Internet Files\OLK9\2HErPmtOptForm072004.doc