Roseville City Council unanimously passed an early-retirement incentive program Sept. 1 in an attempt to address the city’s short and long-term fiscal challenges.

The Public Agency Retirement Services (PARS) supplementary retirement plan acts as an incentive to get top-step city employees to retire a little sooner than they would otherwise, said PARS Senior Vice President Dennis Yu, during the council meeting.

After retiring, an employee who enrolls in the plan will receive a cash payment equal to 7 percent of the employee’s final annual base salary. The employee chooses the payout option, which might be over the course of five years, for instance, or his or her lifetime, said City of Roseville Human Resources Director Stacy Haney.

Following the retirements, the city can either choose to leave the vacated positions empty or hire people at lower pay levels.

“It can be a very effective tool to avoid layoffs,” Yu said.

To be eligible for PARS, an employee must be at least 50 years of age as of Dec. 23 2010, have worked for the city for at least five years and can’t enroll in the CalPERS Golden Handshake program. Employees have until Oct. 8 to decide whether to submit binding resignation letters. Following this period, a cost-benefit analysis is conducted and the item goes back to the council to vote on approving the program by Nov. 3.

If the council cancels the program, all resignation letters are rescinded and the city must pay PARS a one-time fee of $10,000. Yu said his company has a 90 percent success rate — meaning the majority of school districts and municipalities end up following through with the program and achieving savings.

Currently, 255 Roseville employees are eligible for the program and Yu estimates that about 77 people will take the offer.

The potential savings of the PARS program depend on the resulting vacancy rate. But, according to a staff report, the five-year estimated savings will be between $9 million and $13.5 million. These figures assume 67 employees will participate in the first round and 10 in the second.

During council deliberations, Roseville City Manager Ray Kerridge said the city would replace “mission critical” positions and those that generate money. City Treasurer Russ Branson said the city has made efforts to change its organizational structure in recent years to address current and projected budget deficits — and reducing more staff will force the city to further alter its structure.

“Will it create organizational challenges, yes,” Branson said.

Labor comprises the largest portion of the city’s general fund expenditure. The city has cut 22 percent of its workforce since 2007 and may look at negotiating with labor unions to establish furloughs in the near future.

The PARS program differs from the CalPERS Golden Handshake program in that it provides retiring employees with additional cash compensation, not additional service credit to be used to calculate the employees’ CalPERS benefit. An employee still retires under CalPERS, but also gets the PARS supplemental compensation.

PARS is a privately held company founded in 1983 and administers pension plans for public entities. The company currently administers about 100 retirement programs in northern California, which mainly consists of school districts along with 10 or 12 municipalities, including West Sacramento.

Sena Christian can be reached at senac@goldcountrymedia.com.