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Agenda Item Review Form
Muskegon City Commission
Commission Meeting Date: February 14, 2023 Title: MERS- Police
Command DB employee
contribution rate
Submitted By: Kenneth D. Grant Department: Finance
Brief Summary: The City seeks to adopt the Police Command Defined Benefit Employee Contribution as
negotiated per their contract.
Detailed Summary & Background:
The Finance Department wants permission to sign a Defined Benefit Plan Adoption Agreement to
reduce the employee contribution rate for Police Command as follows:
A police command defined benefit employee shall effective January 1, 2023:
Employees shall contribute 3% of their compensation towards the defined benefit plan as
defined by MERS
Goal/Focus Area/Action Item Addressed: Sustainability in financial practices
Amount Requested: Amount Budgeted:
Fund(s) or Account(s): Fund(s) or Account(s):
Recommended Motion: To approve the required employee contribution 3% for Police Command
Defined Benefits.
Approvals: Guest(s) Invited / Presenting
Immediate Division Head [] Information Technology L]
Other Division Heads L] Communication [| Yes U1
Legal Review Cl No i
For City Clerk Use Only:
Commission Action:
Defined Benefit Plan Adoption Agreement
Municipal Employees’ Retirement System
The Employer, a participating municipality or participating court within the state of Michigan, hereby
agrees to adopt and administer the MERS Defined Benefit Plan provided by the Municipal Employees’
Retirement System of Michigan, as authorized by 1996 PA 220, in accordance with the MERS Plan
Document, as both may be amended, subject to the terms and conditions herein.
|. Employer Name City of Muskegon Municipality #; 9116
If new to MERS, please provide your municipality’s fiscal year: through .
Month Month
ll. Effective Date
Check one:
A, If this is the initial Adoption Agreement for this group, the effective date shall be the first day
of , 20
CO) This municipality or division is new to MERS, so vesting credit prior to the initial MERS
effective date by each eligible employee shall be credited as follows (choose one):
[J All prior service from date of hire
1) Prior service proportional to assets transferred; all service used for vesting
CJ Prior service and vesting service proportional to assets transferred
[ No prior service but grant vesting credit
1 No prior service or vesting credit
(1 Link this new division to division number for purposes of determining
contributions (Unless otherwise specified, the standard transfer/rehire rules apply)
B. [S) If this is an amendment of an existing Adoption Agreement (Defined Benefit division number
22 _), the effective date shall be the first day of 1/20
23 (mm/vy). Please note: You only
need to mark changes to your plan throughout the remainder of this Agreement.
C. (1 If this is a temporary benefit (Defined Benefit division number(s) ),
select one of the following:
[1] This is a temporary Benefit Window with a duration of 2-6 months. Effective dates
are from __/01/__ through the last day of ___/20___ (mm/yy). Complete provisions as
applicable under Section IV of this form.
C] This is a temporary Lump Sum Buyout Program for terminated vested participants with
a duration of 6-24 months. Effective dates are from ___/01/____ through the last day of
__/20___ (mm/yy). Payout will reflect ___% (1-100%) of the participant’s present value of
accrued benefit. For example, if 40% is used, the payout will be 40% of the present value
of the benefit. This percentage cannot be changed once adopted.
Form DB-002 (version 2022-08-09) Page 1 of 7
Defined Benefit Plan Adoption Agreement
See eoreeran
b. () If this is to separate employees from an existing Defined Benefit division (existing division
number(s) ) into a new division,
the effective date shall be the first day of , 20
E. (J If this is to merge division(s) into division(s) ;
the effective date shall be the first of , 20
F, (1 if this is an amendment to close Defined Benefit division(s) # , with new
hires, rehires, and transfers going into an existing Defined Benefit division #
the effective date shall be (month/year).
Note: Closing this Defined Benefit division(s) will change future invoices to a flat dollar
amount instead of a percentage of payroll, as provided in your most recent annual
actuarial valuation.
(The amount may be adjusted for any benefit modifications that may have taken place since then).
Ill, Plan Eligibility
Police Command
Division Title:
Only those employees eligible for MERS membership may participate in the MERS Defined Benefit
Plan, lf an employee classification is included in the plan, then employees that meet this definition will
receive service credit if they work the required number of hours to meet the service credit qualification
defined below. All eligible employees must be reported to MERS, Please describe the specific
classifications that are eligible for MERS within this division:
(For example: e.g,, Full-time employees, Clerical staff, Union Employees participating in XXXX union)
This Division includes public safety employees (this information is used for actuarial purposes only. It
does not relate to the additional tax for early distribution): CI Yes CI No
To further define eligibility (select all that apply):
OOOO OO oO
Temporary Employees: Those who will work for the municipality fewer than
months in total
LION LO)
Part-Time Employees: Those who regularly work fewer than per
Seasonal Employees: Those who are employed for tasks that occur at specific times of
the year
Voter-Elected Officials
Appointed Officials: An official appointed to a voter-elected office
Contract Employees
Other:
Other 2:
Form DB-002 (version 2022-08-09) Page 2 of 7
Defined Benefit Plan Adoption Agreement
Probationary Periods (select one):
I Service will begin after the probationary period has been satisfied. Probationary periods are allowed in
one-month increments, no longer than 12 months. During this probationary period, the employer will
not report or provide service. Service will begin to accrue and contributions must be reported when
the Probationary Period ends,
The probationary period will be month(s).
Comments:
"J Service will begin with the employee’s date of hire (no Probationary Period). Effective with the date of
hire, wages paid and any associated contributions must be submitted to MERS.
IV. Provisions
1. Service Credit Qualification
To clarify how eligible employees earn service credit, please indicate how many hours per month an
eligible employee needs to work. For example, if you require 10 eight-hour days, this would be 80
hours per month. If an hours and days has been previously defined (like 10 seven-hour days), stating
“70 hours” will be required. Employees must meet the definition of Plan Eligibility in order to earn
service credit under the plan.
To receive one month of service credit, an employee shall work (or be paid for as if working)
hours in a month.
2. Leaves of Absence
Indicate by checking the boxes below, whether the potential for service credit will be allowed if an
eligible employee is on one of the following types of leave, regardless of meeting the service credit
qualification criteria.
Regardless whether an eligible employee is awarded service credit while on the selected type(s) of
leave:
* MERS will skip over these months when determining the FAC amount for benefit calculations.
e Third-party wages are not reported for leaves of absence.
« Employers are not required to remit employer contributions based on leaves of absence when
no wages are paid by the employer.
e For contributory divisions, employee contributions are required where service credit is granted
and due at the time of monthly wage and contribution reporting. Employers may use the
following formula to calculate employee contributions: the employee’s current hourly rate (prior to
leave), multiplied by service credit qualification (hours) multiplied by employee contribution. For
example, if employees’ hourly rate is $20, the division requires 120 hours to obtain service credit,
and employee contributions are 5%, the calculation will look like: $20/hour X 120 X .05 = $120 in
employee contribution for that leave month. Employers may use another internal formula, if they
choose and MERS will make note of it.
If an alternative formula is going to be used, please describe that here:
sree
Form DB-002 {version 2022-08-09} Page 3 of 7
Defined Benefit Plan Adoption Agreement
Typelof Leave s sek . Servicecredit. | Service Credit
Granted Excluded
Short-Term Disability = ) 7 . ; ) 7
ICICI
Long-Term Disability
Workers’ Compensation
Unpaid Family Medical Leave Act (FMLA)
| Other:
O
CI
For example, sick and accident, administrative, educational, sabbatical, etc.
Additional leave types as above 0 0
Other 2:
Leaves of absence due to military service are governed by the Federal Uniformed Services Employment
and Reemployment Rights Act of 1994 (USERRA), IRC 414(u), effective January 1, 2007, IRC 401(a)(37).
Military reporting requires historical wage and contribution reporting for Defined Benefit as applicable.
3. Definition of Compensation
The Definition of Compensation is used to calculate a participant’s final average compensation and is
used in determining both employer and employee contributions. Wages paid to employees, calculated
using the elected definition, must be reported to MERS.
Select your Definition of Compensation:
Base Wages Box 1 Wages of W-2 [4 Gross Wages
Custom Definition
(To customize your definition, please complete the Custom Definition of Compensation Addendum.)
V. Valuation-Required Provisions
Valuation Date: , 20
1. Review the valuation results
It is recommended that your MERS representative presents and explains the valuation results to
your municipality before adopting. Please choose one:
?
(1 Our MERS representative presented and explained the valuation results to the
: on
(Board, Finance Cmte, etc.) (mm/dd/yyyy)
OC As an authorized representative of this municipality, |
(Name)
waive the right for a presentation of the results.
(Title)
This Adoption Agreement will be implemented in conjunction with a current actuarial valuation certified
by a MERS actuary that sets contribution rates.
Annually, the MERS actuary will conduct an actuarial valuation to determine the employers’
contribution rates. Employers are responsible for payment of said contributions at the fale in the form
and at the time that MERS determines.
ESL ST Re ae oe eee ES Re Ea RO; 2s SARS
Form DB-002 (version 2022-08-09) ~ Page 4 of 7
Defined Benefit Plan Adopticon| Agreement
2. Benefit Multiplier (1 %-2.5%, increments of 0.05%) % (max 80% for multipliers
over 2.25%)
Check here if multiplier will be effective for existing active members’ future service only (Bridged
Benefit as of effective date on page 1)
lf checked, select one below:
[1] Termination Final Average Compensation (calculated over the members entire
wage history)
[ Frozen Final Average Compensation (FAC is calculated twice, once for the
timeframe that matches the original multiplier, and once for the new multiplier)
3. Final Average Compensation (Min 3 yr, increments of 1 yr) years
4, Vesting (5 -10 yrs, increments of 1 yr) years
5. Normal Retirement Age will be the later of: (any age from 60-70), or the vesting provision
selected above (#4).
6. Required employee contribution (Increments of 0.01%) 3.09 %
7. Unreduced Early Retirement/Service Requirements:
©) Age 50 - 54 Service between 25 and 30 years
CO Age 55 - 65 Service between 15 and 30 years
[ Service only (must be any number from 20 — 30 years accrued service):
[ Age + Service Points (total must be from 70 — 90): points
8. Other
[1 Surviving Spouse will receive 50% of Straight Life benefit without a reduction to the
employees’ benefit (also known as an RS50)
[ Duty death or disability enhancement (add up to additional 10 years of service credit not to
exceed 30 years of service)
[] Deferred Retirement Option Program (DROP) - If selected, complete the following:
* Credited interest rate: % (please select either 0 or 3%)
¢ The employer, if selected, will delay a Cost of Living Adjustment (COLA) during the
DROP period (skip if not applicable): [7] Yes (4 No
® Credited payment percentage will be: % (enter a number from 10-100% in
increments of 10%) throughout the duration of the DROP period.
Form DB-002 (version 2022-08-09) Page 5 of 7
Deli ned Beneitt Plan Adoption Agreement
(1 Annuity Withdrawal Program (AWP)
Calculation of the actuarial equivalent of the lump sum distribution made under AWP will be
done using:
C] Interest rate for employee contributions as determined by the Retirement Board, or
[1] MERS’ assumed rate of return as of the date of the distribution.
9. Cost-of-Living Adjustment
(J All current retirees as of effective date (1 Future retirees who retire after
[1] Retirees who retire between effective date
/01/ and /O1/
increase of % or $ per month Increase of % or $ per month
Select one: [J Annual automatic increase
[] Annual automatic increase
[One-time increase
Select one: Select one:
Compounding [J] Compounding
OO — Non-compounding [> ~~ Non-compounding
Employees must be retired months Employees must be retired months
(6-12 months, increments of 1 month) (6-12 months, increments of 1 month)
[J Check here if the existing COLA will be bridged for active participants as of the effective date
selected on this form. Benefits accrued for service after the effective date will have no COLA
increase applied.
10. Service Credit Purchase Estimates are:
7 Not permitted
Permitted
VI. Appointing MERS as the Plan Administrator
The Employer hereby agrees to the provisions of this MERS Defined Benefit Plan Adoption Agreement and
appoints MERS as the Plan Administrator pursuant to the terms and conditions of the Plan. The Employer
also agrees that in the event of any conflict between the MERS Plan Document and the MERS Defined Benefit
Plan Adoption Agreement, the provisions of the Plan Document control.
VII. Modification Of The Terms Of The Adoption Agreement
If the Employer desires to amend any of its elections contained in this Adoption Agreement, including
attachments, the Governing Body or Chief Judge, by resolution or official action accepted by MERS, must adopt
anew Adoption Agreement. The amendment of the new Agreement is not effective until approved by MERS.
Form DB-002 (version 2022-08-09) Page 6 of 7
Defined Benefit Plan Adoption Agreement
Vill. Enforcement
1. The Employer acknowledges that the Michigan Constitution of 1963, Article 9, Section 24, provides
that accrued financial benefits arising under a public Employer’s retirement plan are a contractual
obligation of the Employer that may not be diminished or impaired, and prohibits the use of the
Employer’s required current service funding to finance unfunded accrued liabilities.
2. The Employer agrees that, pursuant to the Michigan Constitution, its obligations to pay required
contributions are contractual obligations to its employees and to MERS and may be enforced in a
court of competent jurisdiction;
3. In accordance with the Constitution and this Agreement, if at any time the balance standing to the
Employer's credit in the reserve for employer contributions and benefit payments is insufficient
to pay all service benefits due and payable to the entity’s retirees and beneficiaries, the Employer
agrees and covenants to promptly remit to MERS the amount of such deficiency as determined by
the Retirement Board within thirty (80) days notice of such deficiency.
4. The Employer acknowledges that wage and service reports are due monthly, and the employee
contributions (if any) and Employer contributions are due and payable monthly, and must be
submitted in accordance with the MERS Enforcement Procedure for Prompt Reporting and
Payment, the terms of which are incorporated herein by reference..
5. Should the Employer fail to make its required contribution(s) when due, the retirement benefits due
and payable by MERS on behalf of the entity to its retirees and beneficiaries may be suspended
until the delinquent payment is received by MERS. MERS may implement any applicable interest
charges and penalties pursuant to the MERS Enforcement Procedure for Prompt Reporting and
Payment and Plan Document Section 79, and take any appropriate legal action, including but
not limited to filing a lawsuit and reporting the entity to the Treasurer of the State of Michigan in
accordance with MCL 141.1544(d), Section 44 of PA 436 of 2012, as may be amended.
6. The Employer acknowledges that changes to the Employer’s MERS Defined Benefit Plan must be
made in accordance with the MERS Plan Document and applicable law, and agrees that MERS
will not administer any such changes unless the MERS Plan Document and applicable law permit
same, and MERS is capable of administering same.
IX. Execution
Authorized Designee of Governing Body of Municipality or Chief Judge of Court
The foregoing Adoption Agreement is hereby approved by City of Muskegon on
the 14 ihday of e ebtu for ry 00 ay (Name of Approving Employer)
4 $-——
Title: Finance Oreectoea
. Received and Approved by the Municipal Employees’ Retirement System of Michigan
Dated: 02/16/2023 20 Signature: Aavina La joce
(Authorized MERYAignatory)
Form DB-002 (version 2022-08-09) Page 7 of 7
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