|Finance and Economic Resiliency Committee Members
|Alina T. Hudak, City Manager
|April 21, 2023
DISCUSS CREATING A NEW EMPLOYMENT CLASSIFICATION THAT PROVIDES FOR HIGHER PAY WITHOUT PENSION BENEFITS
|At the February 22, 2023 City Commission Meeting this item was referred to FERC for further discussion to consider creating a new employment classification without pension benefits, with the cost savings allowing for the potential for higher salaries.
Legally required benefits under federal laws provide workers and their families with retirement income and medical care, mitigate economic hardship resulting from the loss of work and disability, and cover liabilities resulting from workplace injuries and illnesses (U.S. Bureau of Labor Statistics). These benefits include pensions or Social Security, Medicare, federal and state unemployment insurance, and workers’ compensation. Social Security coverage is generally required for all full time and part time employees unless the employees participate in a qualifying government retirement program and are excluded from Social Security coverage. City of Miami Beach employees who participate in a City retirement plan are excluded from Social Security coverage.
The City’s workforce is divided into seven (7) Salary Groups: Group I represented by the American Federation of State, County and Municipal Employees (“AFSCME”) Local 1554; Group II represented by the Fraternal Order of Police (“FOP”), William Nichols Lodge No. 8; Group III represented by the International Association of Firefighters (“IAFF”), Local 1510; Group IV represented by the Communications Workers of America (“CWA”), Local 3178; Group V represented by the Government Supervisors Association of Florida (“GSAF”), OPEIU, Local 100; Group VI comprising of Unclassified employees; and Group VII comprising of classifications in the classified service not covered by a bargaining unit (commonly referred to as "Others").
The City does not participate in the federal Social Security Program and is exempt from this required federal program due to providing an equivalent (or better) pension program. All full time City employees in the categories above are enrolled in a mandatory City-provided pension program and are eligible for benefits after vesting. Temporary, part time, and contract employees participate in an OBRA plan (An "OBRA" plan is an alternative to Social Security as permitted by the federal Omnibus Budget Reconciliation Act of 1990 (OBRA). See below).
Any significant change(s) to the City's pension programs requires an actuary study and a change(s) to the City's pension ordinance(s). If a pension change(s) affects bargaining unit employees, the change(s) must also be bargained.
The Administration would have to engage an attorney specializing in pensions and/or Social Security in order to provide options or legal advice if the Commission contemplates changing the City's exemption status to participate in the federal social security program. Participation in social security has a cost to the City and also to the employee of 6.2% of gross compensation per eligible employee. The City has not budgeted for this activity and a budget amendment would be required to fund.
The City also utilizes additional categories of employment where appropriate. The City utilizes temporary agency employees to fulfill certain functions. These temporary agency employees are employed by an employment agency under contract with the City and are not City employees. The City also utilizes independent contractors for certain functions where the result of the work is delivered to the City under a contract and scope of work arrangement, but the contractors are self-employed and exercise autonomy over their conditions of work; they are also not City employees. In both of these categories, City benefits such as a pension are not provided nor are required.
An additional employment arrangement is also utilized upon occasion for a full-time employee who has a unique employment contract with the City, with uniquely defined benefits and a term of agreement. In certain cases, a full-time contract City employee participates in a City pension system. In other cases, the employee participates in an OBRA plan (Nationwide) with a 7.5% employee-funded contribution as a Social Security replacement. This type of OBRA plan is the mandatory employee-funded defined contribution plan for part-time seasonal and short-term public employees who are not eligible for public pensions. This type of arrangement may be used, for example, to re-hire a City retiree for a time period.
It is important to note that the City Administration is prioritizing recruitment for vacancies, with the goal of seeking the best qualified and most experienced candidates. Additionally, Human Resources is preparing to engage in a procurement process in order to engage a firm to complete a salary study, to make sure the City's salaries are competitive and aligned to the local market.
The referring Commissioners suggest this item for discussion to explore if creating a new category of employee will assist in recruiting for unclassified positions which may be more difficult to fill, and in order to provide a higher salary in lieu of the City's pension benefit.
Other than the examples of special employees noted above (temporary agency employees, independent contractors, and employees with a special contract such as a re-hired retiree), there would be a significant set of actions and ordinance changes required to put into place a new category of full-time employee which would be exempt from participating in the pension system.
The City currently has broad flexibility to attract and retain talent across a number of employee groups. The administration recommends maintaining broad flexibility in hiring for difficult-to-fill positions. In order that any change to employment categories be most effective, the Administration recommends further allowing for the conclusion of a salary study to benchmark which positions may be misaligned to the local market. Creation of any new category of employee must be well-studied in order to comply with employment law.
|Is this a "Residents Right to Know" item, pursuant to City Code Section 2-14?
|Does this item utilize G.O. Bond Funds?
|Organizational Innovation - Attract and retain top talent.