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HomeMy WebLinkAboutRetirement Committee - Minutes - 01/09/2003City of Fort Collins General Emvlovees Retirement Plan GENERAL EMPLOYEES' RETIREMENT COMMITTEE January 9, 2003, MEETING MINUTES Approved February 6, 2003 COUNCIL LIAISON: Mayor Ray Martinez COMMITTEE Susan Lehman, Chair, 221-6813 Dottie Nazarenus, 204-4429 MEMBERS Ian Krcmarik, 221-6788 Jim O'Neill, 221-6779 PRESENT: Bill Switzer, Vice Chair, 221-6713 MEMBERS ABSENT: Michele Hays -Johnson, 416-2158 OTHERS Pat Kahle (Actuary, Milliman USA) PRESENT: Greg Tempel (City Attorney's Office) Debbie Weedman & Vincent Pascale (Human Resources) Julie Depperman & Ann Wardle (Finance) CALL TO ORDER: Susan Lehman called the meeting to order at 1:16 p.m. Five members of the Committee were present, constituting a quorum. PLAN MEMBER COMMENTS: The Committee reserves this place on the agenda to receive comments from Members of the Plan or the public. A Member had commented to Jim O'Neill that it is hoped that the Plan continues to be adequately funded. APPROVAL OF MINUTES: Alan Krcmarik distributed the December 5, 2002, meeting minutes. A minor wording change was made. Dottie Nazarenus moved approval of the minutes as corrected and Jim seconded the motion. The Committee approved the motion unanimously (5-0). DISCUSSION TOPICS 1. Plan Philosophy: There were no comments. 2. Status on Full-Time/Part-Time Plan Change: The Committee discussed the best approach to inform Members of the proposed change. Alan indicated that he would like to provide detailed benefit calculations for the 46 Members whose benefits would be frozen for a length of time based on the proposed Plan change. These Members' benefits will not be reduced, they will not lose the benefit that they have accrued to date; it is their future benefit that may be 215Fg�,*MPA,4 Ni NtMA3.1jAO0916WE l'.O. Box 580 • Fort Collins, CO 80522-0580 • (970) 221-6788 • FAX (970) 221-6782 General Er )yee's Retirement Committee January 9, 2003, Meeting Minutes Page 2 of 4 frozen for a time based upon the length of their part-time service. The Committee agreed to target a July 1, 2003, implementation date. Julie Depperman will draft a letter to the 46 Plan Members for review at the next meeting and will also attempt to have calculations through December 31, 2002, on all Plan Members completed in March. A background draft memo the Committee had previously prepared and approved could be sent to the remaining Members with a cover letter attached. It was agreed that a couple of open houses should be offered so that Members could have an opportunity to discuss the proposed Plan change; those who cannot make the scheduled meetings could be given a number to call or an email address for questions or concerns. Susan asked Julie to check on the locations of the 46 Members so that the outreach might be scheduled according to where the largest number of Members work. The outreach would not include a formal presentation; it would be informal with handouts and Committee members present. Notice of the dates and times of the outreach will be included with the information that will be sent to Members. It was agreed to send a memo to Plan Member retirees to keep them informed; however, it will be explained that this would not change retiree benefits. The memo will explain that the Plan change will give full-time employees the option of part-time employment while protecting the benefit they have vested and will better match what has been contributed into the Plan for each Member. Dottie volunteered to be a contact person for the retirees. The Committee intends to distribute the memo, background draft, and new calculations to Members in April. Greg Tempel said that City Council would actually have to amend the Plan for this change to go through. Julie and Deb Weedman will need to work with the City's Information Technology department to change the Access database used to prepare Member's benefit calculations. The July 1 implementation date may need to be revised based upon support staff work loads and schedules. The Committee agreed to be flexible with the implementation timing. Greg asked if we have something in writing from the actuary stating that this proposed change would not negatively affect the Plan. The Committee does have such a statement from the former actuary, Watson Wyatt, but not from Milliman USA. Pat Kahle will ask Nancy Wagner, Milliman USA, to write a statement for the February meeting. 3. Approval of Annual Report: Susan distributed copies of the revised draft of the 2002 Annual Report. A minor revision was made. Jim motioned that the report be adopted as revised, and Bill Switzer seconded the motion. The Committee approved the motion unanimously (5-0). Susan will submit the report to the City Clerk's office via email, and a copy of the report will be attached to the meeting minutes. 4. Discussion of Funding Options: Frank Bruno, Assistant City Manager, concurred with Alan's memo requesting additional funding for the Plan. Alan Filename: GMIN 2003 1Jan09 final General Er ryee's Retirement Committee January 9, 2003, Meeting Minutes Page 3 of 4 and Frank expect to meet with Deputy City Manager Diane Jones to discuss the request. Alan believes there are sufficient funds in the 2002 appropriations to cover a $250,000 contribution to the Plan's unfunded liability. The Committee agrees that it is prudent to respond quickly and proactively to the unfunded liability that has been identified. Frank also concurred that these contributions would need to continue beyond 2002. When the Plan started up in the 1970s, supplemental contributions amounting to approximately 12% per year were made to the Plan for 17 years. Beginning in the 1980s, the Plan incurred 14 strong years without additional contributions. The past three years of market deterioration are now requiring additional Plan contributions. S. Quarterly Investment Update: Julie Depperman distributed and reviewed her Investment Report for the Quarter/Year Ended December 31, 2002. The market value of the portfolio at year end was $28.8 million. The Plan had an estimated loss of 9.8% for the year. The Plan holds 17 mutual funds, 14 of which outperformed their benchmarks. This is the first time since 1941 that bonds outperformed stocks for three years in a row. Investors incurred $2.8 trillion in paper losses in the domestic stock market last year. The markets are falling internationally. The City recorded an unrealized loss of $3.68 million for the Plan at year end. Pat said she is impressed with how the Plan is doing compared to its benchmarks. 6. Other Business: Dottie said that one retired Member commented to her that he had a concern about the losses the Plan has suffered due to investing in equities, and he feels that none of the funds ever should have been invested in the equity market. Alan pointed out that had funds not been invested in equities there would be much higher liabilities because they could not have bought people out of the Plan and the Plan would have required supplemental funding much sooner. Pat handed out copies of the Personal Retirement Planning Statements from last year. Milliman USA is planning to distribute the statements in March. Last year, Members received their statements in mid -March. Pat needs to gather data from Deb and Julie in order to put these statements together. Pat will email an information request to Julie and Deb. Nancy asked Pat to have everyone review last year's statement for any required changes. Deb will request information as of December 31, 2002, from ICMA Retirement Corporation. Pat said they would like to defer the pension valuation assumptions for the 2003 Actuarial Report until the February or March meeting. It was agreed that Milliman USA will have a draft Actuarial Report for the April meeting. Adjournment: There being no further business, the Committee adjourned at 2:50 p.m. TOPICS FOR NEXT REGULAR MEETING Filename: GMIN 2003 1Jan09 final General Er >yee's Retirement Committee January 9, 2003, Meeting Minutes Page 4 of 4 The tentative agenda for the February 6 meeting includes: Plan Member Comments Approval of Minutes Plan Philosophy Status on Proposed Part -Time Plan Change Discussion of Funding Options Review of Personal Retirement Planning Statements Review of Actuarial Assumptions Monthly Investment Update Elections Other Business GENERAL EMPLOYEES' RETIREMENT PLAN WEB PAGE: The Retirement Committee's web page can be found at www.fcqov.com/cityclerk/retirement.1phIp. The Committee's 2002 Annual Report, 2002 Work Plan, and monthly minutes are available at this site. 2003 Meeting Schedule: The regular meeting time for the Committee is at 1:15 p.m, on the first Thursday of each month. The regular location is the Council Information Center at City Hall. For 2003, the Committee has scheduled the meetings as shown below: 3anuaryy9 April 3 July 10 October 2 February 6 May 1 August 7 November 6 March 6 June 5 September 4 December 4 Filename: GMIN 2003 1Jan09 fmal General Employees' Retirement Committee 2002 Annual Report The General Employees' Retirement Plan (GERP) is managed and administered by the General Employees' Retirement Committee (GERC) in accordance with the terms of the Plan. The 2002 actuarial report, prepared by Milliman USA (formerly Milliman & Robertson Actuaries & Consultants) indicates that as of January 1, 2002, the GERP had 385 active members, 109 terminated vested members, and 119 retired members for a total of 613 members, as compared to 634 in 2001. The Present Value of Future Benefits is $41,605,914 and the Market Value of Assets is $32,062,446. Comparing the value of benefits under the Plan terms to the value of Plan assets as of the valuation date is one way to look at the adequacy of Plan funding. By this measure, the Plan is fairly well funded since the actuarial value of the Plan assets covers 85.2% of the present value of future benefits and the market value of Plan assets covers 77.1% of the present value of future benefits. The market value of Plan assets exceeds the present value of accumulated Plan benefits by 21 %, as of the January 1, 2002, actuarial report. Due to weak market conditions, the Plan is now under funded and additional contributions to the Plan have been requested. The Committee is working with the Actuary to determine the best course of action. In 2002, the GERP Committee was composed of Susan Lehman, Chair, Advance Planning; Bill Switzer, Vice -chair, Utilities, Financial Operations; Michele Hays -Johnson, Utilities, Water Production; Jim O'Neill, Purchasing Director; Dottie Nazarenus, a retired Plan member; and Alan Krcmarik, Finance Director. Staff support for the GERC included Ann Wardle, Secretary; Debbie Weedman and Vincent Pascale, Human Resources; Greg Tempel, Assistant City Attorney; and Julie Depperman, Finance as staff support for investments. Committee Highlights For 2002: Personal Retirement Planning Statements (PRPS) The GERC had the PRPS prepared by the actuary, Milliman USA, and distributed them to individual members. Plan Amendment In 2002 there was one Resolution amending the Plan to conform with tax law changes. The Committee recommended Resolution 2002-103, which was adopted by City Council on November 5, 2002. Credit for Part Time/Full Time Service The Committee has been discussing an amendment to the Plan that would reduce the inequity of service credit for members that change from full time to part time or vice versa. The Committee developed a formula to correct this inequity in 2001, but found the formula may not be accurate. The Committee asked the financial staff to check each member's account to determine how this proposed change would affect members. The financial staff completed the check and determined that 46 members' benefits could be General Employees Retirement Committee 2002 Annual Report January 04, 2003 Page 2 of 2 reduced. The Committee continues to review the situation to determine what course of action is indicated. A final decision on this amendment should take place in 2003. Retirement Philosophy The Committee continues discussions with the actuary, Milliman USA and has not determined what changes may be necessary in this philosophy considering the state of investment returns. Board and Commission Review by City Council City Council is conducting a systematic review of all boards and commissions. At a City Council Study Session in July, the General Employees' Retirement Committee chair and vice -chair met with Council for a review of the Committee and its recent activities.