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Letter of Agreement
IBEW 1245 and Truckee Donner PUD
Implementation of California Public Employees' Pension Reform Act (PEPRA)
November 5, 2012
1. Preamble
The District and the Union jointly wish to comply with AB340 and to mitigate the effects of
AB340 on current and future employees, while not increasing the CalPERS cost to District
ratepayers. Additionally, both parties wish to minimize financial inequality between new
employees on the 2% @ 62 plan with employees on the 2.7% @ 55 plan.
2. History of Existing CalPERS Retirement Plan
August 2004:The District joined CalPERS with the 2% @ 60 plan.The District agreed to
purchase prior service for the employees,thus creating the side-fund liability. Employees
turned over their personal funds in existing plans to CalPERS to reduce the amount of the
liability.The District assumed the balance of the liability.The District and the Union agreed that
employees would contribute 3%of their pensionable wages (hereafter referred to as "wages")
through payroll.
January 2011:The Union and the District agreed to transition to the 2.7% @ 55 formula with
employees assuming all additional costs with no additional cost to the District. Union
employees relinquished 5.03%of existing benefits back to the District, and agreed to contribute
an additional 3.88%of their wages to cover increased costs. Employees agreed to contribute a
pro-rata share of 29.13%of all future increases or decreases to CalPERS employer rate.
July 2011:The District refinanced the CalPERS side-fund liability with a private lender at a lower
interest rate. District and Union negotiated to lower the employee's contribution rate to the
side-fund by 1.65%on January 1, 2012 due to the lower borrowing costs. All employees
currently pay 3.50%of their wages to the side-fund liability and 2.61%to CalPERS. The District
currently pays 10.41%to the side-fund liability.The District pays a total of 19.91%to CalPERS,
consisting of 14.52%employer portion and 5.39%employee portion.
3.AB340 Pension Reform Provisions Affecting District Employees
(a) For employees hired on, or before, December 31, 2012:
• PEPRA requires that employees pay at least 50%of"normal cost" of the existing
2.7% @ 55 plan, up to 8%of wages.
(b) For employees hired after January 1, 2013, PEPRA requires that:
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• New employees (with no prior CalPERS membership within the past six months)
shall join in the 2% @ 62 plan and must pay at least 50%of the "normal cost" of
this plan, up to 8%of wages.
• An annual salary cap for wages will be capped at$110,100 (adjusted annually to
the social security contribution and benefit base).
(c) CalPERS will determine the eligibility of employees newly hired by the District to join the
2.7% @ 55 plan or the 2% @ 62 plan.
4. Future Pension Payment Structure to Comply with PEPRA
(a) Beginning on 1/1/13, all union employees shall receive 1.89%of their wages in the form of a
District contribution into a Flexible Spending Plan. This amount will not be reportable to
CalPERS as wages, and can be used at the employee's discretion.
(b) Beginning on 1/1/13, For Employees eligible for the 2.7% @ 55 Plan:
• Employees shall pay 50%of"normal costs" as defined by CaIPERS, not to exceed
8%of wages to be adjusted annually on July I"of each year by the District,
based on cost data from CalPERS.
• District shall pay all remaining CAPERS employer and employee costs not
covered by the employees.
• The net employee cost for the first year is 11.14%of wages.
(c) Beginning on 1/1/3, All Other Employees (2% @ 62 Plan):
• Employees shall pay 50%of"normal costs" as defined by CaIPERS, not to exceed
8%of wages. Initial costs shall be based on CalPERS data, and annually adjusted
on July 1st of each year by the District, based on cost data from CAPERS. 50%of
the normal cost for the first year is estimated to be 6.05%.
• District shall pay all remaining CalPERS employer and employee costs not
covered by the employees.
• Employees shall pay an amount into a holding account, hereafter referred to as
"Fund A", of which they will be 100%vested, but the District shall have sole
authority regarding the control of these funds.The amount will be a percentage
of wages equal to the net employee cost of the 2.7% @ 55 Plan, plus the District
contribution toward a Flexible Spending Plan as described in subsection (a), less
the 50%of the normal cost of the 2% @ 62 Plan. For the first year the amount
would be 6.98%of wages, calculated as follows: 11.14% net employee cost of
the 2.7% @ 55 Plan, plus 1.89%District contribution to a Flexible Spending Plan,
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less 6.05%employee portion of the normal cost of the 2% @ 62. Plan.This
amount shall be adjusted annually by the District, based on CaIPERS data.
• District shall match the 6.98%as adjusted annually into Fund A for each
employee participating in the 2% @ 62 plan,which the employees will be 100%
vested, but the District shall have control of these funds.
• The District shall pay 10.37%of wages for each employee in the 2% @ 62 plan
into a District managed holding account,for which the employees are 0%vested.
This shall be referred to as "Fund B".
• Employees earning in excess of$110,100(or the current amount of the cap),
shall have a District contribution to Fund A.The amount will be calculated by
their individual wages amount less the current amount of the cap, multiplied by
the percentage of normal cost paid by the District.
5. Future Legal Challenges and Litigation to AB340 by Outside Parties
(a)The existence of the holding accounts, Funds A and B, and the District and employee's
contribution to these accounts shall remain in effect until any court challenges to AB340, if any,
are completed, not to exceed 3 years from the date of this LOA, unless the time frame is
extended or reduced by mutual agreement between the Union and the District.
(b) If the bifurcated pension plans remain in effect after litigation:
• The amount of individual and District contributions to Fund A shall continue, but
shall be transferred to the individual employee's existing ICMA or CaIPERS 457(b)
or 401(a) plans, as selected by the employee and of which the employee will
have full control.
• District contributions to Fund B shall end and shall be returned to the District's
general fund.
(c) If the courts do not allow for bifurcated plans, employees in the 2% @ 62 plan will transfer
to the 2.7% @ 55 plan. All funds in Fund A plus a matching amount from Fund B will be used to
pay for the employee's buy-in to the 2.7% @ 55 plan. District contributions to Funds A and B
will be terminated after funds are dispersed.The employee (current and new hire) contribution
shall revert to the structure outlined in the now current MOU.
(d)Any overages or under-funding for the buy-in will be funded jointly by the District and the
affected employee proportional to their contributions at the time of buy-in.
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6. Other
Under no circumstances will an employee hired on, or prior to, December 31, 2012 be allowed
to transfer to the 2% @ 62 plan, unless they separate from the District and have a six-month
gap in service, and return to work at the District.
Additional funds in 457(b) or 401(a) accounts as described in Section 4(c) are independent of
any other Supplemental Income Plan (SIP) and will not be subject to District matching.
7. Employee Separation from Employment at the District
At the time of separation from employment at the District, all employee and District
contributions to CalPERS will be handled by CalPERS according to its vesting regulations.
At the time of separation from employment at the District, all employee contributions and
District matching contributions to Fund A shall be relinquished to the employee's control.
8. Future, Unknown Effects from AB340 or Associated Litigation
The District and the Union recognize this MOU cannot forecast issues and agree that unknown
problems may arise related to this agreement. Both parties agree, if necessary, to open this
MOU and resolve issues or problems as needed while using Part 1 (above) as guiding principles.
This Tentative Agreement is subject to ratification by affected members of Local 1245 and
acceptance by the TDPUD Board of Directors.
TA Date: l e
For the District: For the Union: