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VII.6. Creation of 2020 Early Retirement Incentive Program; LenzJune 2, 2020 Council Report 2020-039 CREATION OF 2020 EARLY RETIRMENT INCENTIVE PROGRAM Proposed Action. Staff recommends that the Council approve the following motion: Approve the Creation of the 2020 Early Retirement Incentive Program. Overview: The City has experienced unprecedented service and revenue impacts because of COVID 19 and has worked to rebalance the budget for 2020. Staff is expecting some form of on-going budget impacts in 2021. To get ahead of those impacts, staff is proposing the creation of a limited early retirement incentive that would allow us to restructure to reduce expenditures in 2021. The program developed is consistent with a program offered in 2003 by the City when budget reductions were also necessary. The program is limited in nature to employees who have a tenure with the City of more than 25 years, are eligible for retirement through PERA and have not previously submitted an advanced resignation notice. Based on those parameters the program costs are relatively limited. We estimate there are three individuals who would meet the criteria (and three others who could retire early through PERA with reduced pensions for retiring early). Because of the relatively limited nature, staff is aware of some potential for restructuring and would be able to be recoup the cost within the 2020 calendar year and result in on-going savings in 2021. Primary Issues to Consider  Cost of the program and amount of time necessary to recoup the savings.  How does this agreement fit with the 2020 budget?  What are the potential savings in 2021 budget?  Whether Council is comfortable with incentivizing retirements.  Service impact from retirements.  Retirement is voluntary. Analysis of Issues  Cost of the program and amount of time necessary to recoup the savings. o We are estimating the cost to be a maximum of $115,720 if all six eligible retirees took the incentive (including the ones with reduced pensions). o Incentive is equivalent to 15% of annual salaries and requires retirement by September 30, 2020. Leaving opportunities for position vacancies equivalent at least 15% of the year.  How does this agreement fit with the 2020 budget? o Since the retirement is required by September 30, the cost of the incentive package would be within the 2020 budget if left vacant.  What are the potential savings in 2021 budget? o Depending on who selects retirement there are restructuring opportunities in the areas where eligible employees stand that would allow on-going annual savings for each individual position if taken. Exact savings would depend on final structure decided and how many individuals opted to take the voluntary retirement.  Whether Council is comfortable with incentivizing retirements. o This is an individual decision for each council member. The savings would justify the costs from a fiscal perspective for 2020.  Service impact from retirements. o Without going into specifics on who is eligible for the program, with 25 years of more of tenure with the city, these are the most senior employees within our organization. The retirements will result in a loss of institutional knowledge that is impossible to recoup. Staff hopes that the individuals will allow us to continue to communicate with them to reduce the impact, but not guaranteed. o Additionally, all eligible positions are supervisory roles, which means there will be an impact to the department/division and staffing from the retirement.  Retirement is voluntary. o This is a voluntary incentive program. The employees have the right to decline the offer and to continue employment with the city. There is no cost to the city if employees choose to stay in their positions. Alternatives 1. Adjust incentive associated with program. 2. Expand or reduce eligibility for the program. 3. Offer the program later if necessary. 4. Do not approve the program. Supporting Information: Early Retirement Incentive Program Policy ________________________________________ Ari Lenz Assistant City Manager June 2, 2020 City of Hopkins Early Retirement Incentive Program Due to the economic impacts of COVID-19 the City of Hopkins is projected to have significant revenue reductions in 2021. The City will need to reduce costs and is considering restructuring as one method to reduce costs. This Early Retirement Incentive program is an incentive to assist employees who want to retire. This is a voluntary program designed to reduce expenses in the City's General Fund. Retirement Incentive If an employee voluntarily elects to participate in this program, and retires after July 1, 2020 and on or before September 30, 2020, they will receive in addition to normal severance: • 15% of their annual salary. This incentive supplements any other severance that the employee is entitled. There are many details to this voluntary plan, so please read carefully. The first step is to determine whether you are eligible for the program. Employees who meet the minimum years of service requirement will receive a packet of additional information via interoffice mail. If you do not receive a packet and feel you are entitled or have questions please contact HR. Eligibility requirements (all three must be met to qualify):  Must be eligible for a full or reduced pension through PERA at the time of retirement.  Have worked for the City in a full-time position for at least 25 years on 9/30/2020.  Have not previously submitted an Advanced Resignation Notice. The City reserves the right to decline any employee’s request for the early retirement incentive program based on the number of requests we receive, an employee’s critical skills, or service delivery needs. Program application: • You will have from June 3, 2020 through August 3, 2020 to decide whether or not to apply for this program. Early retirement incentive application packets are available in Personnel. • Employees eligible for this incentive must give a minimum of 30 days’ notice and retire between July 15, 2020 and September 30, 2020. Once your application package is approved, the retirement date cannot be extended or withdrawn, it must be taken on the date you selected or sooner. • All Early Retirement Incentive Program applications must be submitted in writing to Personnel no later than noon on August 3, 2020. We will, however, appreciate learning of your decision as soon as it has been reached. Other considerations: • To accept this offer, employees must complete an application packet including signing a release agreement acceptable to the city, waiving your right to pursue any legal claim June 2, 2020 against the City of Hopkins, its employees and officers within the timeframe set for the program. • An employee has ten (10) days from the date they sign the release agreement to rescind the decision. After this, it is not possible for an employee to change their mind about retiring. There will no longer be a position available after the employee retires. Refusing the payment will not void the agreement. • Consideration of this offer and acceptance are strictly voluntary. • Employees that terminate employment with the City as part of this program may not be rehired by the City as a benefit-earning employee. • The City reserves the right to decline any employee’s request for the early retirement incentive program based on the number of requests received, an employee’s critical skills, or service delivery needs. • All payments made are subject to customary payroll deductions and will be made after termination. • Normal severance is defined as the severance employees were entitled to prior to the program, for more information please see HR. • Contact your union business agent or HR if you have questions.