R-1147 - 12/27/2011 - PERSONNEL - Resolutions Supporting DocumentsITum 3.A.
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AGENDA ITEM
Special Board of Trustees Meeting
of
December 27, 2011
SUBJECT: Resolution Amending Personnel Manual
FROM: David Niemeyer, Village Manager
BUDGET SOURCE/BUDGET IMPACT: N/A
RECOMMENDED MOTION: Motion to approve Resolution 2011-PL- IMRF- EXI -R-
1147, a Resolution Approving an Amendment to the Village of Oak Brook Personnel
Manual.
Background/History:
Recently, the General Assembly passed legislation that requires municipalities to accelerate
municipal pension contributions whenever certain employees nearing retirement have increases
in their compensation of more than 6 %. However, there could be scenarios where an employee's
final year of compensation could exceed 6% if you take into account unused vacation and sick
time or other benefit increases. Oak Brook would be penalized by having to make an accelerated
pension payment in this case according to this new law.
However, the new law does allow municipalities to exempt current employees from this but only
if the municipality takes action before December 31, 2011. By passing this amendment (the Safe
Harbor Proposal) to the personnel manual, Oak Brook is potentially saving the cost of having to
make accelerated pension payments for employees hired before January Is' whose rate of
earnings plus benefit increases in any year exceed 6 %. The attached memorandum from the
Village Attorney provides additional information and the applicable statute.
Recommendation:
That the Village Board approve Resolution R -1147 amending the Village of Oak Brook
personnel manual.
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RESOLUTION 2011 -PL- IMRF -EX1 -R -1147
A RESOLUTION APPROVING AN AMENDMENT TO
THE VILLAGE OF OAK BROOK PERSONNEL MANUAL
WHEREAS, the Village has previously adopted a personnel manual (the "Manual ") setting forth
the general policies of the Village regarding the terms of employment with the Village; and
WHEREAS, the Village Board desires to ensure that the various provisions of the Manual do not
inadvertently trigger accelerated payments to the Illinois Municipal Retirement Fund in light of the recently
adopted Public Act 97 -0609;
NOW THEREFORE, BE IT RESOLVED BY THE PRESIDENT AND BOARD OF TRUSTEES OF
THE VILLAGE OF OAK BROOK, DU PAGE AND COOK COUNTIES, ILLINOIS as follows:
Section 1: Amendment to Village Personnel Manual. The Village's personnel manual is hereby
amended by adding a new section 7.14 to the personnel manual relating to employees who have begun
service before January 1, 2012, which new section is attached as Exhibit A to this Resolution.
Section 2: Effective Date. This resolution shall be in full force and effect immediately upon its
passage and approval in the manner provided by law.
Ayes:
APPROVED THIS _day of December, 2011
Gopal G. Lalmalani
Village President
PASSED THIS day of December, 2011
ATTEST:
Charlotte K. Pruss
Village Clerk
Resolution 2011 -PL- IMRF -EXI -R -1147
Approving an Amendment to
the Village of Oak Brook Personnel Manual
Page 2 of 2
EXHIBIT A
Safe Harbor Provision Regarding Employees Who Begin Service Before January 1 2012
7.14 Employees Who Beain Service Before January 1, 2012:
In addition to any other categories under which an employee of the Village may be classified
pursuant to the Village's personnel manual, there shall be a class of employees who began service
with the Village prior to January 1, 2012 (a "Pre -2012 Employee "). To the maximum extent
authorized by law, for all Pre -2012 Employees, it is the policy of the Village not to include as part of
such employee's reported earnings for any of the 12 -month periods that may be used to determine
such employee's final rate of earnings, any of the earnings, adjustments, payments, benefits, or
compensation that are provided for or otherwise allowed pursuant to the terms of this personnel
manual for purposes of making accelerated contributions or payments to the Illinois Municipal
Retirement Fund in accordance with 40 ILCS 517- 172(k), including without limitation:
a. Increases in vacation time earned as a result of seniority or continued service;
b. Increases in authorized accrual of vacation time as a result of seniority or
continued service;
C. Increases in sick leave time earned as a result of seniority or continued service;
d. Increases in authorized accrual of vacation time as a result of seniority or
continued service;
e. Payments made from selling back to the Village any accrued vacation or sick
leave time;
f. Changes to insurance benefits that are generally applicable to all Pre -2012
Employees;
g. Increases in annual compensation based on seniority or continued service,
including "step" increases;
h. Adjustments in annual salary based on increases to the Consumers Price Index
or another generally accepted index of inflation;
i. Merit bonuses; and
j. Payments made as reimbursement of amounts paid to an employee for use of a
personal vehicle or other equipment or property.
The provisions of this Section are intended to be severable in the event that any part of this Section
is found not to be enforceable under applicable law.
ATTACHMENT
RESOLUTION 2011-
A RESOLUTION APPROVING AN AMENDMENT TO
THE VILLAGE OF OAK BROOK PERSONNEL MANUAL
WHEREAS, the Village has previously adopted a personnel manual (the "Manual ") setting forth
the general policies of the Village regarding the terms of employment with the Village; and
WHEREAS, the Village Board desires to ensure that the various provisions of the Manual do not
inadvertently trigger accelerated payments to the Illinois Municipal Retirement Fund in light of the recently
adopted Public Act 97 -0609;
NOW THEREFORE, BE IT RESOLVED BY THE PRESIDENT AND BOARD OF TRUSTEES OF
THE VILLAGE OF OAK BROOK, DU PAGE AND COOK COUNTIES, ILLINOIS as follows:
Section 1: Amendment to Village Personnel Manual. The Village's personnel manual is hereby
amended by adding a new section to the personnel manual relating to employees who have begun
service before January 1, 2012, which new section is attached as Exhibit A to this Resolution.
Section 2: Effective Date. This resolution shall be in full force and effect immediately upon its
passage and approval in the manner provided by law.
Ayes:
APPROVED THIS 27th day of December, 2011
Gopal G. Lalmalani
Village President
PASSED THIS _ day of December, 2011
ATTEST:
Charlotte K. Pruss
Village Clerk
ATTACHMENT
Safe Harbor Proposal
Employees Who Begin Service Before January 1. 2012: In addition to any other categories
under which an employee of the Village may be classified pursuant to the Village's personnel
manual, there shall be a class of employees who began service with the Village prior to January 1,
2012 (a "Pre -2012 Employee "). To the maximum extent authorized by law, for all Pre -2012
Employees, it is the policy of the Village not to include as part of such employee's reported
earnings for any of the 12 -month periods that may be used to determine such employee's final rate
of earnings, any of the earnings, adjustments, payments, benefits, or compensation that are
provided for or otherwise allowed pursuant to the terms of this personnel manual for purposes of
making accelerated contributions or payments to the Illinois Municipal Retirement Fund in
accordance with 40 ILCS 517- 172(k), including without limitation:
a. Increases in vacation time earned as a result of seniority or continued service;
b. Increases in authorized accrual of vacation time as a result of seniority or
continued service;
C. Increases in sick leave time earned as a result of seniority or continued service;
d. Increases in authorized accrual of vacation time as a result of seniority or
continued service;
e. Payments made from selling back to the Village any accrued vacation or sick
leave time;
f. Changes to insurance benefits that are generally applicable to all Pre -2012
Employees;
g. Increases in annual compensation based on seniority or continued service,
including "step" increases;
h. Adjustments in annual salary based on increases to the Consumers Price Index
or another generally accepted index of inflation;
i. Merit bonuses; and
j. Payments made as reimbursement of amounts paid to an employee for use of a
personal vehicle or other equipment or property.
The provisions of this Section are intended to be severable in the event that any part of this Section
is found not to be enforceable under applicable law.
policies or the manner by which those policies can be officially exempted from the accelerated
payment provisions of Section 7- 172(k).'
Avoiding the Accelerated Payments
In order to take advantage of the "safe harbor" provision in the Act, we have prepared proposed
language (the "Safe Harbor Proposal') to be included in the Village's personnel manual. The
Safe Harbor Proposal is set forth in Attachment 2 to this memorandum, and it can be adopted as
part of the Village's personnel manual by action of the Village Board.
Please note that the Safe Harbor Proposal is not tested, and it may be over - inclusive of what the
Fund will accept for purposes of the avoiding the accelerated payments under the Act.
Nevertheless, because any safe harbor proposal must be approved before 1 January 2012, we
recommend the broad language in the attached Safe Harbor Proposal in order to preserve the
Village's ability to assert to the Fund that certain increases in earnings over the 6% threshold do
not apply because they are the result of the pre- existing policies in the personnel manual.
Recommended Action
In order to allow the Village to provide the Village with an opportunity to avoid accelerated
payments under Section 7- 172(k) under the Act, we recommend that the Village Board approve the
Safe Harbor Proposal as an amendment to the Village's personnel manual by adopting the
resolution that is Attachment 3 to this memorandum. The Safe Harbor Proposal itself will not alter
any of the provisions in the personnel manual. Rather, it simply allows the Village to assert that
certain increases in earnings are the result of existing Village employment policies, which would
avoid the need for the Village to make an accelerated payment to IMRF.
Importantly, the Safe Harbor Proposal must be approved before 1 January 2012 to have any
benefit to the Village.
Please contact me with any questions you may have.
#10828931 vi
' We note that the explanatory materials circulated by the Illinois Municipal Retirement Fund (the "Fund') staff
have not offered much in terms of clarifying the language of the Act. Moreover, the Fund's materials include some
statements that are wholly outside the scope of the Act.
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ATTACHMENT?
Amended Section 7 -172
(90 ILCS 5/7 -172) (from Ch. 108 1/2, par. 7 -172)
Sec. 7 -172. Contributions by participating municipalities
and participating instrumentalities.
(a) Each participating municipality and each participating
instrumental it shall make pa ent to the fund as follows:
1. municipality contributions in an amount determined
by applying the municipality contribution rate to each
payment of earnings paid to each of its participating
employees;
2. an amount equal to the employee contributions
provided by paragraphs (a) and (b) of Section 7 -173,
whether or not the employee contributions are withheld as
permitted by that Section;
3. all accounts receivable, together with interest
charged thereon, as provided in Section 7 -209;
9. if it has no participating employees with current
earnings, an amount payable which, over a closed period of
20 years for participating municipalities and 10 years for
participating instrumentalities, will amortize, at the
effective rate for that year, any unfunded obligation. The
unfunded obligation shall be computed as provided in
paragraph 2 of subsection (b);
5. if it has fewer than 7 participating employees or a
negative balance in its municipality reserve, the greater
of (A) an amount payable that, over a period of 20 years,
will amortize at the effective rate for that year any
unfunded obligation, computed as provided in paragraph 2 of
subsection (b) or (B) the amount required by paragraph 1 of
this subsection (a).
(b) A separate municipality contribution rate shall be
determined for each calendar year for all participating
municipalities together with all instrumentalities thereof.
The municipality contribution rate shall be determined for
participating instrumentalities as if they were participating
municipalities. The municipality contribution rate shall be
the sum of the following percentages:
1. The percentage of earnings of all the participating
employees of all participating municipalities and
participating instrumentalities which, if paid over the
entire period of their service, will be sufficient when
combined with all employee contributions available for the
payment of benefits, to provide all annuities for
participating employees, and the $3,000 death benefit
payable under Sections 7 -158 and 7 -169, such percentage to
be known as the normal cost rate.
2. The percentage of earnings of the participating
employees of each participating municipality and
participating instrumentalities necessary to adjust for
the difference between the present value of all benefits,
excluding temporary and total and permanent disability and
death benefits, to be provided for its participating
employees and the sum of its accumulated municipality
contributions and the accumulated employee contributions
and the present value of expected future employee and
municipality contributions pursuant to subparagraph 1 of
this paragraph (b). This adjustment shall be spread over
the remainder of the period that is allowable under
generally accepted accounting principles.
3. The percentage of earnings of the participating
employees of all municipalities and participating
instrumentalities necessary to provide the present value
of all temporary and total and permanent disability
benefits granted during the most recent year for which
information is available.
4. The percentage of earnings of the participating
employees of all participating municipalities and
participating instrumentalities necessary to provide the
present value of the net single sum death benefits expected
to become payable from the reserve established under
Section 7 -206 during the year for which this rate is fixed.
5. The percentage of earnings necessary to meet any
deficiency arising in the Terminated Municipality Reserve.
(c) A separate municipality contribution rate shall be
computed for each participating municipality or participating
instrumentality for its sheriff's law enforcement employees.
A separate municipality contribution rate shall be
computed for the sheriff's law enforcement employees of each
forest preserve district that elects to have such employees.
For the period from January 1, 1986 to December 31, 1986, such
rate shall be the forest preserve district's regular rate plus
2 %.
In the event that the Board determines that there is an
actuarial deficiency in the account of any municipality with
respect to a person who has elected to participate in the Fund
under Section 3 -109.1 of this Code, the Board may adjust the
municipality's contribution rate so as to make up that
deficiency over such reasonable period of time as the Board may
determine.
(d) The Board may establish a separate municipality
contribution rate for all employees who are program
participants employed under the federal Comprehensive
Employment Training Act by all of the participating
municipalities and instrumentalities. The Board may also
provide that, in lieu of a separate municipality rate for these
employees, a portion of the municipality contributions for such
rogram participants shall be refunded or an extra charge
assessed so that the amount of municipality contributions
retained or received by the fund for all CETA program
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participants shall be an amount equal to that which would be
provided by the separate municipality contribution rate for all
such program participants. Refunds shall be made to prime
sponsors of programs upon submission of a claim therefor and
extra charges shall be assessed to participating
municipalities and instrumentalities. In establishing the
municipality contribution rate as provided in paragraph (b) of
this Section, the use of a separate municipality contribution
rate for program participants or the refund of a portion of the
municipality contributions, as the case may be, may be
considered.
(e) Computations of municipality contribution rates for
the following calendar year shall be made prior to the
beginning of each year, from the information available at the
time the computations are made, and on the assumption that the
employees in each participating municipality or participating
instrumentality at such time will continue in service until the
end of such calendar year at their respective rates of earnings
at such time.
(f) Any municipality which is the recipient of State
allocations representing that municipality's contributions for
retirement annuity purposes on behalf of its employees as
provided in Section 12 -21.16 of the Illinois Public Aid Code
shall pay the allocations so received to the Board for such
purpose. Estimates of State allocations to be received during
any taxable year shall be considered in the determination of
the municipality's tax rate for that year under Section 7 -171.
If a special tax is levied under Section 7 -171, none of the
proceeds may be used to reimburse the municipality for the
amount of State allocations received and paid to the Board. Any
multiple-county or consolidated health department which
receives contributions from a county under Section 11.2 of "An
Act in relation to establishment and maintenance of county and
multiple-county health departments ", approved July 9, 1943, as
amended, or distributions under Section 3 of the Department of
Public Health Act, shall use these only for municipality
contributions by the health department.
(g) Municipality contributions for the several purposes
specified shall, for township treasurers and employees in the
offices of the township treasurers who meet the qualifying
conditions for coverage hereunder, be allocated among the
several school districts and parts of school districts serviced
by such treasurers and employees in the proportion which the
amount of school funds of each district or part of a district
handled by the treasurer bears to the total amount of all
school funds handled by the treasurer.
From the funds subject to allocation among districts and
arts of districts pursuant to the School Code, the trustees
shall withhold the proportionate share of the liability for
unicipality contributions imposed upon such districts by this
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Section, in respect to such township treasurers and employees
and remit the same to the Board.
The municipality contribution rate for an educational
service center shall initially be the same rate for each year
as the regional office of education or school district which
serves as its administrative agent. When actuarial data become
available, a separate rate shall be established as provided in
subparagraph (i) of this Section.
The municipality contribution rate for a public agency,
other than a vocational education cooperative, formed under the
Intergovernmental Cooperation Act shall initially be the
average rate for the municipalities which are parties to the
intergovernmental agreement. When actuarial data become
available, a separate rate shall be established as provided in
subparagraph (i) of this Section.
(h) Each participating municipality and participating
instrumentality shall make the contributions in the amounts
provided in this Section in the manner prescribed from time to
time by the Board and all such contributions shall be
obligations of the respective participating municipalities and
participating instrumentalities to this fund. The failure to
deduct any employee contributions shall not relieve the
participating municipality or participating instrumentality of
its obligation to this fund. Delinquent payments of
contributions due under this Section may, with interest, be
recovered by civil action against the participating
unicipalities or participating instrumentalities.
unicipality contributions, other than the amount necessary
for employee contributions and Social Security contributions,
for periods of service by employees from whose earnings no
eductions were made for employee contributions to the fund,
may be charged to the municipality reserve for the municipality
or participating instrumentality.
(i) Contributions by participating instrumentalities shall
be determined as provided herein except that the percentage
derived under subparagraph 2 of paragraph (b) of this Section,
and the amount payable under subparagraph 9 of paragraph (a) of
this Section, shall be based on an amortization period of 10
years.
(j) Notwithstanding the other provisions of this Section,
the additional unfunded liability accruing as a result of this
amendatory Act of the 99th General Assembly shall be amortized
over a period of 30 years beginning on January 1 of the second
calendar year following the calendar year in which this
amendatory Act takes effect, except that the employer may
provide for a longer amortization period by adopting a
resolution or ordinance specifying a 35 -year or 40 -year period
and submitting a certified copy of the ordinance or resolution
to the fund no later than June 1 of the calendar year following
the calendar year in which this amendatory Act takes effect.
IM
(k) If the amount of a participating employee's reported
earnings for any of the 12 -month periods used to determine the
final rate of earnings exceeds the employee's 12 month re orted
earnings with the same employer for the previous year by the
greater of 6% or 1.5 times the annual increase in the Consumer
Price Index -U, as established by the United States De artment
of Labor for the 2receding Se tember, the pa rtici atin
municipality or 2articipatin2 instrumentality that paid those
earnings shall pay to the Fund, in addition to an other
contributions required under this Article, the present value of
the increase in the 2ension resulting from the portion of the
increase in salary that is in excess of the reater of 60 or
1.5 times the annual increase in the Consumer Price Index -U, as
determined by the Fund. This present value shall be computed on
he basis of the actuarial assumptions and tables used in the
most recent actuarial valuation of the Fund that is available
at the time of the com utation.
Whenever it determines that a payment is or may be required
under this subsection (k), the fund shall calculate the amount
of the paVment and bill theparticipating munici alit or
participating instrumentality for that amount. The bill shall
specify the calculations used to determine the amount due. If
the participating municipality or participating
instrumentality disputes the amount of the bill, it may, within
30 days after receipt of the bill, apply to the fund in writin
for a recalculation. The application must specify in detail the
rounds of the dispute. Upon receiving a timely application for
recalculation, the fund shall review the ap2lication and, if
appropriate, recalculate the amount due. The participating
municipality and partici2atin2 instrumentality contributions
required under this subsection (k) may be paid in the form of a
lump sum within 90 days after recei t of the bill. If the
participating municipality and participating instrumentality
contributions are not 2aid within 90 days after receipt of the
ill, then interest will be char ed at a rate e ual to the
fund's annual actuarially assumed rate of return on investment
compounded annually from the 91st day after receipt of the
ill. Payments must be concluded within 3 vears after recei t
of the bill by the participating munici pal it or participating
instrumentalit .
When assessing payment for any amount due under this
subsection (k), the fund shall exclude earnings increases
resulting from overload or overtime earnings.
When assessing payment for any amount due under this
subsection (k), the fund shall also exclude earnin s increases
attributable to standard ent2loyment promotions resulting in
increased res2onsibility and workload.
This subsection (k) does not a221y a221 to earnings increases
aid to individuals under contracts or collective bar ainin
a reements entered into, amended, or renewed before the
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Meffective e of this amendator Act of the 97th General
nin s increases aid to members who are 10 ears
retirement eli ibilit , or earnin s increases
m an increase in the number of hours re uired to
When assessing a ent for any amount due under this
subsection (k), the fund shall also exclude earnin s
attributable to personnel policies adopted before the
effective date of this amendatory Act of the 97th General
Assembly as long-as those policies are not-appiicable to
employees who be in service on or after the effective date of
this amendatory Act of the 97th General Assembly.
(Source: P.A. 96 -1084, eff. 7- 16 -10; 96 -1140, eff. 7- 21 -10;
revised 9- 16 -10.)
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Resolution 2011 -
Approving an Amendment to
the Village of Oak Brook Personnel Manual
Page 2 of 2
EXHIBIT A
Safe Harbor Provision Regarding Employees Who Begin Service Before January 1 2012
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