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CL-2171 Work Session   Item #: A.       
Meeting Date: 08/08/2019  
Subject:    Changes to Employees' Retirement System
From: Sara Weller

COUNCIL ACTION
Work Session:     08/08/2019
SUMMARY
The National Resource Network made a recommendation to require new employees to contribute a portion of their salary to the Employees' Retirement System (ERS) each pay period. Currently, all contributions to ERS are made by the City. An employee contribution reduces the City's retirement expenses over time and assists in ensuring a continued benefit for all members of the System. If adopted, changes to ERS go into effect September 1, 2019. 
BACKGROUND
The Employees' Retirement System (ERS) of the City of Danville, Virginia is a defined benefit retirement plan that began in 1946 for the purpose of providing retirement, disability, and death-in-service benefits to regular full-time employees of the City of Danville. The System is governed by the provisions of Chapter 32 of the City Code and ordinances made by City Council. Current funding for the System comes from employer contributions paid by the City, and investment income.  Each year, with the annual budget, City Council is provided recommended contribution rates from the Board of Trustees to adopt for the next fiscal year.  Recommendations are made with a goal of maintaining the ERS on a sound financial basis. The adopted contribution rates for Fiscal Year 2020 are 5.315% for General Employees and 16.089% for Public Safety Employees.  ERS funds are separate from other City funds and are invested and administered solely in the interest of the members, retirees, and beneficiaries of ERS.  Employees become vested in ERS after five years of credible service with the City. 

The National Resource Network provided various recommendations to reduce expenditures and increase the City's long-term financial stability. Requiring an employee contribution to help fund ERS is one of the recommendations made. After reviewing the recommendation and discussing it with the City's actuary, it is the City's recommendation to require employee contributions from newly hired or rehired full-time employees effective September 1, 2019. These contributions will be set at the lesser of fifty percent (50%) of the City Council's annually adopted contribution rate or the Virginia Retirement System's (VRS) Hybrid Plan's current contribution rate to be deducted from the employee each pay period. The current VRS employee contribution rate is 5%. The City's contribution rate is volatile, changing each fiscal year.  If adopted, for FY20 the required employee contribution rate will be 2.6575% for General Employees and 5% for Public Safety Employees. 

Recommended changes to Chapter 32 of City Code are attached for review. These changes incorporate the contribution rates for newly hired or rehired employees and the process for returning the contributions if the employee ceases being an employee prior to becoming vested in ERS. There are no recommended changes to ERS for current employees. 
RECOMMENDATION
It is recommended City Council adopt the recommended changes to Chapter 32 of City Code. 

Attachments
Ordinance
Retirement Code


    

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