b. Budget Review - The City Budget Office (CBO) allocated General Fund and other resources to department budgets to pay for the City's share of the increased retirement contribution rates in 2011 and 2012. Central Staff review has uncovered some anomalies in how the policy was reflected in the 2011-2012 Proposed Budget. A technical correction greensheet may address these anomalies, possibly generating some budget savings. Review is ongoing.

2. The Future of Employee Retirement (SLI) - Nationally, many state and local jurisdictions are investigating ways to make their pension obligations more affordable. At over 20% of payroll, the cost of funding the retirement benefit is significant for the City, its employees and the taxpayers. And this cost may grow if the SCERS investment portfolio fails to return the expected 7.75% average annual return going forward. A Statement of Legislative Intent (SLI) could call for a study of retirement policy changes for Seattle, which could be enacted for new hires a s of a certain date. Possible study questions include:

*How does Seattle's retirement benefit compare to those offered by other public and private entities? What level of benefits is necessary to make the City competitive as an employer?

*What market return can SCERS reasonably expect to earn going forward, and what implications does that have for the affordability of retirement benefits? How much are employees, the City, and the taxpayers willing to pay for retirement benefits?

*What employment patterns are young people entering the workforce now likely to experience, and what style of retirement benefit would serve them best? Among the possible alternatives:

* A defined benefit plan like SCERS,

* A defined contribution plan (perhaps with a City match), or

o A hybrid plan (such the Federal employee plan) that features elements of both.

*What percentage of pre-retirement income should the City's retirement benefit aim to replace? Given increasing employee lifespans, what is a reasonable age to begin receiving retirement benefits?

What savings could be achieved by changing the retirement policy? What transition costs must be planned for? Should some employees (particularly newer members of SCERS who are not yet vested) have the option to choose between the old and new systems?

Possible deadlines / timeframes for action could include:

June 1, 2011 Initial stakeholder input and consultant selection

February 15, 2012 Final stakeholder input and consultant report to Mayor, Council and SCERS Board of Administration

Mid-March, 2012 SCERS Board of Administration makes recommendations

March-July, 2012 Mayor/Council deliberation and possible legislation

January 1, 2013 New retirement policy takes effect for new hires

3. Retirement Office Workload and Staffing (Greensheet) - The current configuration of the retirement office may not be able to support the current workload, given the maturity of the Plan's membership. SCERS is currently experiencing a heavy volume of retirement estimate requests and expects the increased workload to continue in 2011. In addition, the SCERS Board of Administration is finalizing its asset / liability study and will likely require additional staffing to implement the contemplated investment changes. Finally, the policy development exercise called for in #2 above will require significant staff effort for research, consultant management, coordination and communication with key stakeholders. A possible greensheet may propose adding two Strategic Advisor positions (one potentially term limited) - to be funded through SCERS's retirement contributions - to the current authorized staffing of 15.5 FTEs. In addition, the greensheet may reclassify a vacant Accounting Tech I position to a Senior or Principal Accountant to assume more operational responsibilities for retirement fund transactions and free up the current finance manager for higher-level strategic and policy tasks.

[1] Figures are rough and reflect baseline budget estimates reduced by 2.3% to reflect proposed layoffs.