City of Kalamazoo

Early Retirement Incentive

(ERI)

2011

Why Provide an ERI?

• ERI will help:– Avoid layoffs– Preserve employee morale– Help in restructuring the workforce

ERI Program Criteria

A full retirement will be made available to employees who qualify under current criteria, or would reach 25 years of service, regardless of age, no later than December 31, 2015.

ERI Program

• A retirement date in 2012 will be calculated as retiring on 12/31/12 plus 3 years.

• A retirement date in 2013 will have 3 additional years of credited service added following the last day worked.

• Any caps in pension benefit identified in the current plans will still be in effect.

ERI Program

Qualified employees who elect to participate will also be provided with a cash incentive equal to 1% of the final average compensation multiplied by credited years of service.

ERI Program

Assumptions:$60,000 FACMultiplier 2.3%Years of Service = 22 plus 3 ERI Credited Years

Pension Example:$60,000 x 2.3% = $1,380$1,380 x 22 + 3 years (25) = $34,500

Incentive Example:$60,000 FAC x 1% = $600$600 x 22 + 3 (25) years = $15,000

ERI Program

• Payout Upon Retirement Date:

– All vacation time earned and accrued– ½ Sick leave earned– 1% Incentive

Vacation will not be “run out” during this

program.

ERI Program

• A window of 2 months will be given for eligible employees to consider the ERI.

• Electing to take the ERI is an irrevocable decision, however there is a 45 calendar day period required to consider the offer, and 7 calendar day period to revoke the decision after accepting the offer.

ERI Program Timeline10/13/11 Unions’ Decisions Made

10/14/11 Notification of FY 2012 Position Eliminations

10/17/11 First reading of the City Commission

10/18/11 Begin education sessions of ERI to those qualified

10/31/11 Second reading of the City Commission

11/1/11 – 1/03/12 Decision window for employees

4/1/12 – 1/02/14 Phased out retirements effective

ERI Program

• The ERI addresses a short-term financial issue. There is a long term structural imbalance after the ERI has been implemented.

• A second step is needed to address the long-term structural issue, and that is the implementation of a 2-tier wage scale that reduces wages by 5% for NEW HIRES.

ERI Program

• Managed phase out– Beginning 4/1/12– Most will retire by October of 2012– Running through 1/02/14– Depends on how many accept the offer– Will run in quarters (April, July, October,

December)

ERI Program Logistics

• Approval Process

Unions

City Commission

• Need for managed phase out process

• Employees will be required to sign Election and Waivers

Personal Considerations

• A major life decision

• Personal long term goals

• Family obligations

• Informed choice

• City cannot give advice

Summary

• Review the criteria and the timeline

• Consider your personal circumstances

• Consult outside professionals

• Make an informed choice

• Questions and Answers