220198F
ORI91NAL 'O CITY CLERK ^
i CITY OF ST. PAUL COUNCIL /.JI
OFFICE OF THE CITY CLERK FILE NO
COUNCIL RESOLUTION — GENERAL FORM
PRESENTED BY
COMMISSIONER DATE
WHEREAS, The Health and Welfare and Insurance Committee,
at its meeting on September 17, 1964, reviewed the general features
of the proposed Saint Paul Annuity Plan and, with minor modification,
approved the same and agreed to submit the same to the Council
of the City of Saint Paul for its action thereon, it being the
recommendation of the Health and Welfare and Insurance Committee
that the Council should approve the Plan as to principle and
submit the same to the Ramsey County Legislative Delegation for
consideration and the necessary enabling legislation to implement
such program; now, therefore, be it
RESOLVED, That the Council of the City of Saint Paul
hereby approves said proposed Saint Paul Annuity Plan in principle
and directs the Chairman of the Council's Personnel Committee to
appoint a committee to submit to and discuss with the Ramsey
County Legislative Delegation the proposed Plan.
EO AP_P_ROVED
Asst. Corporation C unsel
SEP3004
COUNCILMEN Adopted by the Council 19—
Yeas Nays
Dalglish� 0 1p�4
Holland pPiOVe h7 19—
Loss 7--In Favor �
Meredith
Peterson l ` Mayor
v Against
Rosen
Mr. President, Vavoulis
10M "2
August, 1964
A , ?0
Honorable Mayor and '�i`'��
Members of the City Council
Gentlemen:
At your request the Health and Welfare and Insurance Committee is
hereby submitting its recommendations with regard to those employees who
are members of PERA and who are required to retire or who may retire
under Chapter 851, Laws of 1963.
The City of St. Paul through its taxpayers contributes to four pension
plans for the Classified employees of the City:
Police Relief Association
Firemen's Relief Association
Health Relief Association
Public Employees Retirement Association
More City employees belong to PERA than to any of the other associa-
tions. While Chapter 851 applies also to the relatively small number of em-
ployees in the Health Relief Association, this report, in accordance with your
instructions, is concerned only with those employees who are members of PERA.
Although pension plans were originally conceived so that employees
could be retired when they became too old to work -- at that time people at 65
years of age were "old" according to todays' standards -- the advances in
medical science makes this concept no longer true. Today most people at 65
are still able to carry on creditably. However, for reasons such as changes
brought about by technological improvements, automation, etc. , employees
are being retired at 65 regardless of their physical, psychological and mental
condition. As a result, many employees, justifiably feeling that they could
continue their employment successfully, become bitter and resentful when they
are forced to retire.
One way to overcome this feeling is to prepare the employee by telling
him of the reasons for compulsory retirement and acquainting him with the
many advantages he will enjoy as a retiree. For example, medical and hospital
insurance which, with your approval and with the help of the legislature, was
provided for in the compulsory retirement act. A program of pre - retirement
counseling has been inaugurated by the Civil Service Bureau and will be con-
tinued as far as budgetary limitations will permit. Such counseling can help
prepare an employee emotionally so that he will welcome retirement rather
than fear it. However, to be emotionally prepared requires that he is also
financially prepared; and it is in this area that a problem arises, the solution
of which will again require your approval and the help of the legislature.
The Public Employees Retirement Association provides for the typical
employee (age 65 with 30 years' service) an annuity of $220 a month. For the
employee whose salary is $440 a month this represents 50% of salary. However,
for employees earning more than $440 a month, the percentage rapidly drops
way below the 50% mark. We refer to this 50% of salary standard because we
.I
find that many public agencies have already subscribed to this standard. Always
referring to the "typical" employee,, the Police Relief Association and the Fire
Relief Association provide 500/6 of salary for the employee earning (in 1963) $565
a month; and the Health Relief Association provides 5076 for an employee earning
(in 1963) $582 a month. A typical employee retiring from the City of Minneapolis,
or from the Minneapolis -St. Paul Sanitary District or the Metropolitan Airports
Commission who also come under the Minneapolis retirement plan, would receive
50% of salary at any level. Other cities and the Federal service, too, hover
around the 50% of salary standard. In Dallas, Miami, Denver, and San Francisco
the annuity for the typical employee is 500/6 of salary; in Cincinnati and Norfolk and
in the Federal civil service; it is more than 50 %; and in Akron, Cleveland, and
Columbus it is slightly less than 50 %.
After careful consideration, the Health and Welfare and Insurance Com-
mittee has concluded that while PERA annuities for the lower paid employees are
considered adequate, this is not true for the higher paid employees. Since PERA
is a state -wide organization affecting almost 40, 000 governmental employees, it
is felt that it would not be wise to request changes in the PERA law to correct a
situation which, for the most part, is unique to the City of Saint Paul. The in-
surance committee in its studies noted that although all the city pension plans
are creatures of the state, the police,. fire and health funds exist independently,
even though comparable state organizations exist; and it is the determination of
the committee that if an independent fund were permitted for St. Paul, the City
could provide for a fund under which supplementary annuities could be provided
over and above what is now provided by PERA.
In private industry the employees are under Social Security which provides
for a basic annuity, disability pension, and survivor benefits. Progressive em-
ployers then provide a supplement to this basic plan in the form of an additional
annuity. City employees are not under Social Security, but PERA provides a
basic plan with features similar to Social Security; and if the City would provide
a supplement to PERA, the City employees would be treated approximately the
same as are the employees of the private employers.
The committee suggests, therefore, that the Council request of the legis-
lature to grant it authority to establish, operate and finance, by ordinance, a
supplementary annuity plan for its employees who are members of PERA. We
are attaching an outline of the general features of such a supplementary plan
which we think would meet the needs of our retirees and which we respectfully re-
commend for your consideration.
Health and Welfare and Insurance Committee
Chairman
. t
I
General Features
of
Proposed St: Paul Annuity Plan
9- 18 =64 "'
F
f
Non - eligibility
No employee of the.City of.St. Paul who is a contributing member
of the Police Relief Assooiation, the Firemen's'Relief Assooiation,
the Health Relief Association, the Public Employees' Police and
Fire Fund or the Teachers' Retirement Fund shall be eligible to
contribute to the St. Paul Annuity Plan.
Contribution mandatory --
Every employee of the City-of St. Paul other than those mentioned
above, who is at least 35 years of age and is paid a salary in ex-
cess of $400 a month, shall be a member of the St. Paul Annuity Plan
and shall be required to contribute to the cost of the annuity;
provided, however, that any employee who is 50 qr more years of age
on the effective date of the St. Paul Annuity Plan may elect not to
become a member within a period of ninety days after such "effective
date, and such election shall "be irrevocable.
Average salary --
"Average salary" for the purpose of determining the employee's an-
nuity means the amount equivalent to the average of the employee's
highest salary for any 5 consecutive Mears during the 10 -year period
immediately preceding his retirement, less 04,800.
Allowable service --
"Allowable service" for the purpose of determining an employee's an-
nuity,other than a deferred annuity means the total period of employ -
ment"prior to retirement computed to the nearest full month of service.,
but not to exceed 30.years', provided that any time during which the
employee was a contributing..member , og any relief association or any
fund listed in the first paragraph hereof- entitled "Non- eligibility"
-shall-not be counted as allowable service.
Refund of employee
In the event an
ployment before
employee's oont:
oontributIons --
employee dies or,in the event of termination of'em-
he has completed ten years of'allowable service, the
ributions' shalt be efunded without interest.
Deferred annuity �-
' •In the event of termination of employment after the'oompletion of ten
pontinuous years of allowable service, as hereinafter defined; the
employee may elect to withdraw his.00ntributions"without interest; or
r. to become eligible for 'a deferred annuity based upon his own and the
employer's contributions.
"Average salary" for the purpose of, determining',the employee's de-
ferred annuity.means the amount - equivalent to the average of the em-
ployee's highest salary for any five oonsecutive years'during thee-
r -
10 -year period immediately preceding his separation from the,service
of the City, less $4,800.
"Allowable service" for the purpose of determining the employees de-
ferred annuity means'any:period of continuous employment of ten years
or more prior t o' h I S' sep arat ion from. the service of the City, computed
to the nearest full month of service, but not to exceed 30 years, ex-
;olusive 6f any time during which the employee was a contributing mem-
Per ofany relief association -or any, fund listed in the first paragraph
hereof entitled "Non - eligibility ".
Age and allowable service and contribution requirements --
After separation from public service, any person who has attained the
age of at least 65 years and who,received credit for not less than
tten years of allowable service is entitled upon application to a
retirement annuity.
Every person eligible for,an annuity under the St. Paul Annuity Plan
who retires before he has contributed to the cost of the annuity for
a period equivalent to,the period,of -his "allowable service" shall
continue to contribute to the cost of the annuity on-the basis of
his "average sala-ry ", until,he has contributed for a total period be-
fore and after retirement equivalent to his period of allowable ser-
vice or until death intervenes. Such contribution shall be deducted
from the retiree's annuity in monthly installments. In the event of
annuitant's demise prior tb the date he has received annuities total -.
ing an amount equal to his*own contributions toward,the cost; without
interest, the difference will,be paid to annuitaht a beneficiary in
a lump sum.
Annuity �-
Upon retirement, an employee's annuity shall be determined by multiply-
ing his "average salary" by the applicable percentage indicated below
and such annuity shall be payable for life.
Percentage
at the ,
Years of allowable service - rate of:
(a) First 20 years or completed
months of service less than '•1j% for each year of
such period._ allowable service.
(b) Next 10 years or completed
months of service less than 1% for each year of
such period, allowable service*
City's contributions
The City of St. Paul shall match the'employeets contributions both
1
before and after retirement,,, 4
-3-
COST OF
PROPOSED ST. PAUL ANNUITY PLAN
Purpose of Study
The purpose of this study is to determine the following:
(a) the percentage of salary contribution required by an employee, with
matching percentage by the employer, to pay the entire cost of the
annuity for an employee who enters the plan at age 35 and retires at
age 65, after contributing for 30 years; and
(b) the additional contribution required to pay for past service deficit
(the amount needed to pay the full annuity to retiring employees who
will not have contributed for 30 years, less the amount of their and
their employer's matching contributions).
Assumptions
A study of this kind requires that there.be certain assumptions. The follow-
ing were used in this computation in addition to the conditions set forth in
the proposed plan:
1. Covered employees - all recorded on tabulated list furnished by
City Civil Service Bureau who are, as of July 1, 1964, between
the ages of 35 and 66, inclusive.
2. Earned interest m 41/16 compounded annually.
3. Mortality Table A 1951 group annuity table projected to 1964.
4. Employee withdrawals - Tdl table from The Actuary's Pension
Handbook having the following rates:
Age
Rate
35
.0235
45
.0027
55
0
5. Salary projection - S•-3 table from The Actuary's Pension Handbook
applied to salaries over $400. 00 monthly.
6. Cost of annuity at retirement
Retirement
Cost of $1.00 Monthly Annuity
Age
Male
Female
65
$131.75
$152.38
66
127.61
148.24
67
123.60
144.18
68
119.58
140.04
69
115.53
135.84
t
Through use of the Mortality Table and interest rate, it was determined that
the average rate necessary to provide a monthly life annuity of $1.00 at age
65, for both male and female, is $140.00.
It was further determined that the level annual contribution needed to accumu-
late to $140.00 at age 65, beginning at age 35, is $3.00. The percentage con-
tribution was then calculated as follows:
(a) the annuity is 40% of monthly salary, therefore, the annual cost
of the annuity is .40 x $1. 00 x $3.00, or $1.20 for a salary of
$1. 00 per month;
(b) the annual salary is $1.00 x 12, or $12. 00;
(c) dividing the cost in (a) ($1. 20) by the salary in (b) ($12.00),
produces .10, or 10 %.
If the cost of 100/a is divided equally between 'employee and employer, each
would contribute 5% of employee's salary in excess of $400. 00 monthly.
Past Service Deficit
Because of the many assumptions which would have to be made in even attempting
to determine the additional contribution required to cover the past service deficit,
no such effort was made. It is suggested that,if $100, 000 a year were allocated
for this purpose for each of the first three years of operation, this amount would
be more than adequate. At the end of three years an evaluation based on the
three years' experience could then be made, and a future program be developed
with some basis of validity.
11 -7 -63
a
City Pensions
for employees with 30 years° service
and age 65
Plan
Pension 1963
Comment
Health
$291.00
Annuity is one-half the salary of a
Health Inspector and will increase
same percent as salary of Health
Inspector increases.
Fire
282.50
Annuity is one -half the salary of a
Fire Fighter and will increase same
percent as salary of Fire Fighter
increases.
Police
282.50
Annuity is one -half the salary of a
Patrolman and will increase same
percent as salary of Patrolman
increases.
Teachers
234.00
Will increase to $300 or $3,600 a
year under present law.
PERA
220.00
Will not change under present law.
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The attention of
Countp UbitWo - Office-
St. Paul, Minn,'
_�2__Zo ) ? P
He no: 1622
Posolniion 9-7524
�o
November 30,
County Legislative Delegation - County Attorney -
1964
Civil Service Commission - County Auditor
is respectfully called to the following Resolution of the Board of County Commissioners of Ramsey
County, Minnesota, adopted at the meeting held on November 30', 1964
By Commissioner Delaney:
WHERE�A , The 1963 Minnesota State Legislature enacted a com-
pulsory retirement law applicable to,.the employees.of Ramsey County;
an
WHEREAS, Many Ramsey County employees have expressed'a need for
• supplementary annuity program above the present PERA,.and
WHEREAS., The City Council of the City. of Saint Paul has passed
• Resolution, CF'220198, requesting the Ramsey County legislative
delegation for a supplementary program such as that described in
said Resolution.
NOW,
, BE IT RESOLVED
That Ramsey County join with the City of'Saint Paul in a request
for a supplementary annuity program above the present PERA to cover
both Ramsey County and City of Saint Paul employees in one program.
OFFICE OF COUNTY AUDITOR )
SS
t3 ISEY COtAVTY, MINNESOTA
I, J. D. Swan, duly appointed and qualified Deputy County Auditor-in and for
Ramsey County Yjinnesota, do hereby certify the, the foregoing copy is a true and
correct transcript of a resolution adopted by the Board of P=-Asey County Commis-
sioners on November 30, 1964.
Dated at St. Paul, Minnesota, this 30th day of November, 1964.
Deputy County Auditor
` Ramsey County, DInnesota
EUGENE X. IMONICL County Auditor
BY Mputy.
Form And. 200 '