SUBJECT:MILITARY RESERVIST–EXTENSION OF BENEFITS AND SUPPLEMENTAL SALARY AMENDMENT

REPORT IN BRIEF

This report recommends that the City Council approve an additional twenty-six pay period extension of military leave benefits and supplemental salary for eligible employees, who are currently U.S. military reservists through June 30, 2006. This Council action would increase the maximum eligibility period by eight pay periods to a total of sixty.  Council had previously approved a maximum of fifty-two pay periods for each employee.  Currently, the employee with the highest usage has exhausted only thirty-one (31) out of the fifty-two (52) pay periods previously authorized,  therefore, the maximum coverage that could be provided to this employee  through the end of the current fiscal year would be thirty-four (34) pay periods. However, with the requested extension, this employee would have a potential maximum of sixty pay periods. None of the remaining employees will exceed the original fifty-two extended pay periods by the end of June 30, 2006.

This report would continue the extended benefits and supplemental salary only for mandatory active duty per Executive Order 13223 issued on September 14, 2001 and to any involuntary extension related to the same Order.  This action would extend coverage of the military leave benefits and supplemental salary under the same conditions as stipulated in City Council Resolution 113-04 approved on May 4, 2004.       

If the remaining 2004/2005 funds of $307,092 for this leave are carried over to 2005/2006, and the $50,855 budgeted in regular military leave is used, then the estimated funding needed for the additional twenty-six pay periods of extension in benefits and supplemental salary ranges from no additional funding to a maximum of $23,538 additional funding depending on the alternative selected and the number of reservists who utilize the extension.

The City has a current total of nine known employees who are serving in the military, and a total of four employees who have received some supplemental military leave benefits.  No employees are currently deployed; however, one employee has received notice of a possible re-deployment in mid-June, five have not been deployed at all and the other three have served periods ranging from nine to thirty-one pay periods, with three of them exceeding twenty pay periods of this military leave benefit.  All nine of them are subject to activation at a moment’s notice.

Two employees of the original list (October 2001) since have been discharged, and four new employees have been added as of May 31, 2005.  The two employees who have been discharged received twenty and twenty-one pay periods of supplemental pay and benefits, respectively.

BACKGROUND

The Council first adopted extended military benefits and supplemental salary in October 2001, for thirteen pay periods, then an extension for additional thirteen pay periods was approved in April 2003 and finally on May 4, 2004 this military supplemental leave benefit was extended for an additional twenty-six pay periods with a modification that made probationary employees eligible and made the Basic Allowance for Housing (BAH) received by an employee reimbursable to the City. The purpose of these Council actions was to minimize the impact that a call to active duty has on these employees and their dependents because of the unusual length of mandatory military service, which would have deprived them from full-time employment income and benefits.

EXISTING POLICY

Current State Law (Military and Veteran’s Code, Section 395) provides that a member in the reserve of the Armed Forces, National Guard or Naval Militia, who has been a public employee for more than one year  is entitled to receive his or her salary or compensation as a public employee for the first thirty calendar days of such absence.  Pay for those purposes may not exceed thirty days in any one fiscal year, except as otherwise authorized by resolution of a legislative body of a public agency or as provided in a memorandum of understanding reached with an employee organization.  Additional protections and rights such as full reinstatement to employment after return from duty and seniority rights that they would have attained if they were continuously employed are also extended to employees through the Uniformed Services Employment and Reemployment Rights Act (USERRA) signed into law on October 13, 1994.

Under other recent provisions under the Veterans Benefits Improvement Act of 2004 (VBIA), signed into law on December 10, 2004, which amended USERRA, employers are required to offer continuation of  employee-paid health coverage for up to twenty- four months and provide employees with a notice of their rights, benefits and obligations under USERRA.  However, USERRA and VBIA do not require continuation of pay or extension of employer-paid benefits for employees on military leave.

Existing City policy continues City provided benefits and supplemental salary for qualified individuals for a period of up to fifty-two pay periods beyond those required by current State law.  Funding for the current program expires on June 30, 2005.

DISCUSSION

It is proposed that extended military leave benefits and supplemental salary  be extended for another twenty-six pay periods for employees who may be involuntarily recalled to active duty through June 30, 2006.  The employee will continue to reimburse the City the amounts paid for military service plus allowances including the Basic Allowance for Housing (BAH).  It is also proposed that the extension does not exceed a total of sixty pay periods or extend beyond June 30, 2006.  The mandatory active duty eligibility requirements remain the same as stated in Resolution 113-04. An employee who volunteers for an active duty assignment would not be eligible for extended military leave benefits and supplemental salary.

Those who elect not to return to City employment would be required to repay the City for the cost of benefits and supplemental salary plus interest at the 26-week T bill rate.  The rate will be the rate applicable at the time that the final supplemental compensation and benefits were provided and for the period of time that exceeded the mandatory 30 days, when applicable.  The City Manager will have the discretion not to require repayment in the event of an employee’s death or disability as a result of active military duty.

Supplemental  Salary

The City will begin to provide or continue to provide a bi-weekly check in an amount equal to base salary, plus any other compensation the employee would have received had he/she been actually working.  The amounts paid to the employee as basic salary and allowances for military service plus the BAH will be reported and reimbursed to the City of Sunnyvale.  These amounts must be properly documented by military orders, paycheck stubs or similar acceptable documentation as soon as the employee receives it.  All payments will be promptly reconciled by payroll to minimize overpayments.

Benefits

The City’s contribution towards applicable benefits (retirement, medical, dental, dental premiums to PSOA, vision and the Employee Assistance Program) will continue to be paid as if the employees were actively at work.  The appropriate employee contributions will continue to be deducted from every paycheck.  Life Insurance coverage, short-term and long term disability coverage cease upon start or redeployment of active military duty.

FISCAL IMPACT

The estimated cost for this extension ranges from no cost to a maximum of $381,485, depending on the number of reservists who utilize the extension.  Based on the current usage of extended military reservist leave, it is anticipated that approximately $307,092 will be remaining in the current budget for this leave at the end of FY 2004/2005.  In addition, $50,855 is budgeted in FY 2005/2006 for military leave.  These funds would be available under the worst case scenario where all reservists utilize the extension.  Together, $357,947 is available to fund the extension.  Under the worst case scenario, $23,538 would still be needed.  These additional funds would be available from salary savings in the operating programs where the reservists are budgeted.  Salary savings are anticipated where positions are backfilled at a lower salary rate through use of overtime or temporary personnel or not backfilled during all or part of the leave period.

To fund the additional extension, staff recommends carrying over the remaining budget to the FY 2005/2006 budget.  This will fund most of the scenarios.  Under the worst case scenario, staff recommends appropriating salary savings from the operating programs where the reservists are budgeted to fund the remaining portion.  Unspent funds will be returned to the Employee Benefits Fund and General Fund, where the funds originated, at the end of FY 2005/2006.

CONCLUSION

Council approval of this recommendation will continue to provide City benefits and supplemental salary for up to a maximum of sixty pay periods to eligible employees, through June 30, 2006, to minimize the impact that a call to active military duty has on the affected employees and their dependents.

PUBLIC CONTACT

Public contact was made through posting of the Council agenda on the City’s office notice bulletin board, posting of the agenda and report on the City’s web page, and the availability of the report in the Library and the City Clerk’s Office.

ALTERNATIVES

1.      That the City Council adopt a Resolution to extend these benefits and supplemental salary through June 30, 2006 to provide a maximum of sixty pay periods to affected employees effective with the start of  FY 2005/2006, with the entire resolution expiring on June 30, 2006. Fund the extension by carrying over the remaining budget to the FY 2005/2006 budget and appropriating $23,538 from the operating programs salary savings where the reservists are budgeted to fund the worst case scenario.  Unspent funds will be returned to the Employee Benefits Fund and General Fund at the end of FY 2005/2006.

2.      That the City Council does not adopt a Resolution to extend the current military benefits and supplemental salary beyond June 30, 2005.

3.       The City Council modifies any portion of this recommendation.

RECOMMENDATION

Staff recommends approval of Alternative #1.

Reviewed by:

Jane Fleenor, Interim Director, Human Resources Department

Prepared by: Myriam Castaneda, Human Resources Supervisor

Reviewed by:

Mary J. Bradley, Director, Finance Department

Prepared by: Grace Kim, Finance Manager

Approved by:

Amy Chan

City Manager

Attachments

A. Resolution