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ANTONIO R. VILLARAIGOSA Mayur

September 23, 2010

The Honorable City Council City of Los Angeles Room 395, City Hall Los Angeles, California 90012

Honorable Members:

Commission LEE K.ANON ALPERT, p,...,.;denr

THOMAS S. SAYLES, Vice-President

ERIC HOLOMAN CHRISTINA E. NOONAN JONATHAN PARFREY BARBARA E. MOSCHOS, SecretmJ•

·'. AUSTrNBEiJTNER

General Ma11ager

RAMAN RAJ Chief Operating Officer

Subject: Amendment to the Water and Power Employee's Retirement Plan to Suspend the Reciprocal Arrangement Between the Water and Power Employees' Retirement Plan and the Los Angeles City Employees Retirement System

Pursuant to Charter Section 245, enclosed for approval by your Honorable Body is Resolution No. 011-077, adopted by the Board of Water and Power Commissioners (Board) on September 7, 2010, approved as to form and legality by the City Attorney, which authorize execution of Amendment to the Water and Power Employees' Retirement Plan to suspend the reciprocal arrangement (Plan Section IV J) between the Water and Power Employees' Retirement Plan and the Los Angeles City Employees Retirement System. As directed by the Board, transmitted to you are supporting documents.

If there are any questions regarding this item, please contact Ms. Winifred Yancy, Manager -Government and Neighborhood Relations, at (213) 367-0025, or Ms. Sangeeta Bhatia, at (213) 367-1689.

Sincerely,

Barbara E. Moschos Board Secretary

BEM:oja Enclosures: LADWP Resolution

Board Letter

Water and Power Conservation ... a way of life 111 North Hope Street, Los Angeles, California 90012-2607 Mailing addt·ess: Box 5111 1, Los Angeles 90051 -5700

Telephone: (213) 367-4211 Cable address: DEWAPOLA rf3n Recyclalje and made fmm recyded wasre. 'CIQ'

c/enc: Mayor Antonio Villaraigosa Councilmember Jan C. Perry, Chair, Energy and the Environment Committee Mr. Gerry F. Miller, Chief Legislative Analyst Mr. Miguel A. Santana, City Administrative Officer Mr. Rafael Prieto, Legislative Analyst, CLA Mr. William R. Koenig, Chief Administrative Analyst Ms. Winifred Yancy Ms. Sangeeta Bhatia

i ·. ' .. ·)

RESOLUTION NO. 0 1 .. n '( ':

RESOLUTION TO SUSPEND THE RECIPROCAL ARRANGEMENT BETWEEN THE WATER AND POWER EMPLOYEES' RETIREMENT PLAN AND THE LOS· ANGELES CITY EMPLOYEES RETIREMENT SYSTEM, AND TO CLARIFY OTHER GOVERNMENTAL SERVICE

WHEREAS, City employees who were members of the Los Angeles City Employees Retirement System (LAGERS) and have transferred to the Department of Water and Power are entitled to reciprocity between LAGERS and the Water and Power Employees' Retirement Plan (WPERP) pursuant to the provision set forth in Section IV, Subsection J of the WPERP; and

WHEREAS, pursuant to Section IV, Subsection J, the only contrib_utions that WPERP receives from LAGERS are the contributions in the member's LAGERS account and WPERP assumes the obligation to pay all benefits for the period of service transferred to WPERP in connection with the transfer of the member's contributions; and

WHEREAS, at the time that Section IV, Subsection J was enacted, it was not anticipated that employee transfers from LAGERS to WPERP wou ld greatly exceed employee transfers from WPERP to LAGERS; and

WHEREAS, numerous employees are now being transferred from positions with membersh ip in LAGERS to positions with membersh ip in WPERP and more such transfers are anticipated in the near future, which transfers. far exceed the number of employees transferring from WPERP positions to LAGERS positions; and

WHEREAS, the Board of Administration of the Water and Power Employees' Retirement Plan (Retirement Board) is concerned about the potential for significant additional liability of WPERP and therefore wishes to ful ly analyze the impact of these recent transfers on the liabil ity of WPERP and further, dur:ing its analysis of this issue, wishes to protect WPERP aga inst incurring potential additional liability due to future transfers that may otherwise occur; and

WHEREAS, recognizing new transfers to the Department of Water and Power from the Gity shall ultimately be covered by an understanding to be negotiated within the City and ultimately approved as another Plan amendment; and

WHEREAS, the proposed Plan amendment is still under review by the City Attorney, who will report to both the Retirement Board and the Board of Water and Power Commissioners with regard to any legal issues associated with its adoption prior to the approval and adoption of the amendment to WPERP; and

WHEREAS, the Retirement Board recommends approval of the attached amendment to Seotion IV of the Plan.

NOW, THEREFORE, BE IT RESOLVED, the Board of Water and Power Commissioners of the City of Los Angeles approves the attached Plan amendment.

BE IT FURTHER RESOLVED, that all employees who transfer from the City to the Department of Water and Power and whose hire date precedes the effective date of this Plan amendment shall be covered by WPERP's reciprocity provision of Section IV, Subsection J as it existed immediately prior to the effective date of this Plan amendment.

I HEREBY CERTIFY, the foregoing is a full, true, and correct copy of a Resolution adopted by the Board of Water and Power Commissioners of the City oflos Angeles at its regular meeting held SEP 0 7 2010

APPROVED N3 TO FORM AND LEGALITY CARMEN A. TRUTANICH, CliY ATIORNEY

JUL 1 2 2010 s~~ -s;2_-

Jb~EVICH ASSISTANT GENERAL COUNSEL, WATER & POWER

LOS ANGELES DEPARTMENT OF WATER AND POWER

TO: BOARD OF WATER AND POWER COMMISSIONERS

~~ SANGEETA BHATIA

Retirement Plan Manager 0

CITY COUNCIL APPROVAL REQUIRED: Yes D No X

PURPOSE

IF YES, BY WHICH CITY CHARTER SECTION:

DATE: Au ust 10, 2010

SUBJECT: Amendment to the Water and Power

Employees Retirement Plan to Suspend the Reciprocal Arrangement Between the

Water and Power Employees' Retirement Plan and the Los Angeles City Employees

Retirement System

FOR COMMISSION OFFICE USE:

RESOLUTION NO. :'1 -! ·; 0 '}' ' ~·

SEP 0 7 201 0

The attached Resolution recommends approval to amend the Water and Power Employees' Retirement Plan (Plan) to suspend the Reciprocal Arrangement that is currently provided for in Plan Section IV J.

The objective of suspending the Reciprocal Arrangement (Arrangement) is to allow time to fully analyze the fiscal impact of the Arrangement on the Plan and consider modifications, if necessary, without incurring additional liability during the review period.

BACKGROUND

The Reciprocal Arrangement provides portability of pension benefits to Los Angeles City (City) employees who are members of the Los Angeles City Employees Retirement System (LACERS) and then transfer to the Department of Water and Power (DWP). Under this Arrangement, the Plan gives these employees service credit for all time worked at the City. Although the Plan takes on the fu ll liabi lity for the service, the only funding the Plan receives from LAGERS is the employees' contributions and interest; LACERS retains all of the employer contributions from the City.

Section 4.1 060 of the Los Angeles Administrative Code provides the same portability of pension benefits for DWP employees who transfer to another City department.

The Reciprocal Arrangement has not been working the way it was anticipated. When the Arrangement was developed, the estimated movement between the Plan and LAGERS, and the liability that would be borne by each of them, were similar. However, recently the

Board of Water and Power Commissioners Page 2 August 10, 2010

number of employees transferring from the City to DWP has far exceeded the number going from DWP to the City. Moreover, this trend is anticipated to continue for the foreseeable future.

The Board of Administration of the Water and Power Employees' Retirement Plan (Retirement Board) is concerned about the potential for significant additional liabi lity to the Plan. The Financial Services Office of DWP has estimated the cost of these transfers to be $470 million over the past five years. The Retirement Board has begun an analysis of the fiscal impact of past and future transfers on the Plan. Actuarial studies have been requested to aid this effort. While the Retirement Board analyzes this issue, it wishes to mitigate incurring additional liabil ity due to future transfers that may otherwise occur, by suspending the Reciprocal Arrangement during the review period.

Absent the Reciprocal Arrangement, City employees who transfer to DWP could stil l purchase their City service under the Other Governmental Service (OGS) program. Therefore, it is also necessary to clarify that City service may not be purchased under OGS for the suspension of the Reciprocal Arrangement to be effective. This clarification has been included in the proposed Plan amendment.

RECOMMENDATION

It is recommended your Honorable Board approve the attached Resolution to amend Section IV J of the Retirement Plan to suspend the Reciprocal Arrangement as recommended by the Retirement Board, and approved as to form and legality by the City Attorney. Once approved, the Resolution will be presented to the Retirement Board for final adoption.

SB:MCH:jae Attachments e-c/att: Austin Beutner

Raman Raj Richard M. Brown Aram Benyamin James B. McDaniel Cecilia K.T. Weldon Lorraine A. Paskett Mario C. Ignacio .LV

Maria Sison-Roces V'h­Sangeeta Bhatia Mary Higgins

Proposed Plan Amendment to Section IV, Subsections J and L

1. Amend Section IV, subsection J, division (2) by adding a new subdivision (e) to read:

(e) Notwithstanding the above, effective upon adoption of this subdivision, eligibi lity for reciprocity under this subsection shall be suspended for all employees who transfer to the Department of Water and Power from other positions with the City of Los Angeles or who ?reh ired by the Department of Water and Power after having been terminated from other positions with the City of Los Angeles.

2. Amend Section IV, subsection L by adding a new division (6) to read:

(6) Effective upon adoption of this division, new members of the WPERP shal l not be eligible to purchase service with the City of Los Angeles under this subsection.