Consideration of Purchase under the Strategic Alliance for Volume Expenditures (S.A.V.E.) Contract:  Contract Employment Program for Retirees - Employee leaseback.

Approve the purchase from Smart Works Plus for an annual amount up to $800,000 plus applicable taxes

The City Human Resources Division currently utilizes a Mesa Public Schools contract #14-06MP through Strategic Alliance for Volume Expenditures (S.A.V.E.) to purchase phased retirement services as part of a contract employment program offered to many cities and state agencies throughout Arizona.  A new service agreement has been created to address the need to offer full-time employees medical insurance to comply with the Affordable Care Act and the reimbursement process for those additional expenses.

Smart Works Plus charges a lease fee of 4% of the employee's salary and the City reimburses the applicable taxes which are the employer related expenses such as Social Security, FICA, Medicare, Unemployment, Workers Compensation and the cost of medical insurance, if elected by the retiree.

The phased retirement program has saved the City over $450,000 for the ten leased employees who have participated in the program since the program's inception due to the reductions in the employee's salary, FICA, Medicare, Unemployment and Workers' Compensation and Arizona Retirement System expenses.  Leased employees are compensated at 75% of their exiting salary, sick leave, a reduced number of vacation days and pay for all holidays.  These savings remain in each division's budget to offset the exiting employee's retirement payout first, 30 days salary savings and then may be used for other budgetary expenses.

Effective governance

On July 2, 2013 Council approved the purchase from Smart Works Plus for an annual amount up to $800,000 plus applicable taxes, under S.A.V.E.

1. Award the contract for phased retirement services through a contract employment program for retirees. 
2. Do not award the contract for phased retirement services through a contract employment program for retirees.
3. Conduct our own formal solicitation process in lieu of utilizing Mesa Public Schools cooperative purchasing agreement through S.A.V.E.

The City of Flagstaff has a number of employees eligible for retirement and many of these employees have been with the organization for a significant length  of time.  Thus, the Human Resources division has been utilizing Smart Works Phased Retirement Program as a tool for succession planning within the municipal organization.

As employees begin to retire the phased retirement program provides an additional time frame after retirement to transfer knowledge to other employees within the municipal organization and/or for the employee to finalize any mission-critical projects.  Many times the transfer of knowledge does not occur prior to retirement because the employee's retirement may have come earlier than expected or the employee has been too busy with day-to-day operations to focus on the transfer of knowledge.  If the retirement was earlier than expected, this time may also be used to conduct recruitment efforts.  An amount of time dedicated to the transfer of knowledge is incredibly important to the success of the newly appointed employee fulfilling the role, the municipal organization and the community.

Smart Works Plus provides phased retirement services to cities and state agencies throughout Arizona.  This concept allows retirement-eligible staff to retire from the Arizona State Retirement System (ASRS) and return as a leased employee to their same position in the City or one for which they are qualified. This opportunity is available under current ASRS Return to Work rules. 

All employees eligible for normal retirement with ASRS and demonstrating above-average performance would be eligible for the phased retirement program.  The employee would complete a request form documenting what knowledge would be shared with other employees and/or what critical projects would be completed within the contract period.  There must be a recommendation from the Supervisor and an agreement between the Supervisor, Division Director, Deputy City Manager and the employee regarding the critical projects or succession steps that will be completed.

The contract period for the leased employee ranges from three months to a year with the ability to extend for a maximum of one more year.  Some reasons why a division may request an extension could be the recruitment process was not successful, changes in the budget situation, or a project has experienced an unexpected and uncontrollable delays.  To date, only one leased employee has exceeded a one year contract.  A contract period of up to one year typically provides the municipal organization with a reasonable amount of time to complete the transfer of knowledge and/or complete critical projects without interfering with another employee's ability to advance their career.  The phased retirement program promotes succession and transfer of knowledge, which benefits the newly appointed employee. 

Phased retirement is a work-for-pay program and retains those positions for which the City cannot afford to lose.  A program like this provides capacity within a limited budget and retains institutional knowledge and skills critical to the success of the City.  It is a 'win-win' for the City of Flagstaff, the employees and the community.

The phased retirement program provides the City with another tool to provide succession planning.  The program allows for a period of time specific to the transfer of knowledge and completion of mission critical projects.  Both of these things are important to the success of newly appointed employees, the municipal organization and the community. 

The community benefits from the transfer of institutional knowledge and the completion of critical projects.  The phased retirement program provides valuable transition time, so the City may retain the exiting employee's knowledge and expertise through transferring this information to another employee within the municipal organization.  Utilizing exiting employee's knowledge and expertise to finalize critical projects also provides a positive benefit to the community.

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