R-2005-17 adopt Public Agency Retirement Services (PARS) 457 Trust

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e CITY OF LA PORTE FINANCE DEPARTMENT ACCOUNTING DIVISION e To: Cynthia Alexander, Assistant City Manager From: Michael Dolby, Assistant Finance Director Re: PARS (Alternative Retirement System for Part-time Employees) Date: August 11, 2005 RECOMMENDATION: City Council to consider approving a resolution authorizing the City Manager to execute an agreement with Public Agency Retirement Services (PARS) to provide an altemate retirement system for part-time employees. BACKGROUND: The City of La Porte is required to contribute an amount equal to 6.2% of each part-time employee's salary to social security and the employee is required to contribute a similar amount for total contribution of 12.4%. In 1990 Congress adopted the Omnibus Budget Reconciliation Act (OBRA). OBRA mandated that employees not covered at the time by a retirement program should be enrolled in social security or an alternate retirement program, which meets the statutory requirements of the act. Public Agency Retirement Services (PARS) offers an Alternate Retirement System (ARS) that meets these requirements. The ARS program provides certain benefits to both the employee and the City. The legislation requires a minimum contribution to the alternate plan of 7.5%. The employee's contribution will, therefore, remain the same as it is under social security - 6.2%. This deduction can, however, be taken from pretax dollars and this will actually result in an increase in take home pay for the contributing employees. The City will contribute the remaining 1.3% for a total of 7.5%. The reduced rate of contribution by the City (1.3% versus 6.2%) results in estimated first year savings of approximately $20,000. This level of savings will continue each year with the amount varying depending on the total number of part-time employees and the hours worked. The benefits to employees from enrollment in the ARS versus Social Security are as follows: