HomeMy WebLinkAboutRetirement Committee - Minutes - 08/01/2002City of Fort Collins
General, inployees Retirement Plan
GENERAL EMPLOYEES' RETIREMENT COMMITTEE
August 1, 2002, MEETING MINUTES
Approved October 3, 2002
COUNCIL LIAISON: Mayor Ray Martinez
COMMITTEE Susan Lehman, Chair, 221-6813 Dottie Nazarenus, 204-4429
MEMBERS Michele Hays -Johnson, 416-2158 Jim O'Neill, 221-6779
PRESENT: Bill Switzer, Vice Chair, 221-6713 Alan Krcmarik, 221-6788
OTHERS Julie Depperman & Ann Wardle (Finance)
PRESENT: Nancy Wagner (Actuary)
Debbie Weedman (Human Resources)
CALL TO ORDER: Susan Lehman called the meeting to order at 1:23 p.m. Dottie
Nazarenus was caught in Denver traffic and running late. Five members of the
Committee were present prior to Dottie's arrival, constituting a quorum. Dottie
arrived for the meeting at about 2:15 p.m.
PLAN MEMBER COMMENTS: The Committee reserves this place on the agenda to
receive comments from Members of the Plan or the public. Michelle Hays -Johnson
said a member had asked about the proposed cost increase in retiree health insurance
coverage and whether the Committee had discussed this matter. The Committee had
not discussed the proposed cost increase. Deb Weedman indicated that letters
discussing the increase were mailed out last week. Deb will verify the mailing and
notify Michelle.
APPROVAL OF MINUTES: Alan Krcmarik distributed the minutes for the July 11,
2002 meeting. Committee members suggested minor wording changes. Jim O'Neill
moved approval of the minutes as amended and Michelle seconded the motion. The
Committee approved the minutes unanimously (5-0), as amended.
DISCUSSION TOPICS
1. Retirement Philosophy: The Committee reserves this place on the agenda to
review and discuss the underlying philosophy of the Plan. Some comments regarding
philosophy were made within the discussion of `Preparation for Council Review."
Filename: GMIN 2002 8 August F
215 North Mason Street • 2nd Floor • P.O. Box 580 • Fort Collins, CO 80522-0580 • (970) 221-6788 • FAX (970) 221-6782
General Er, 'iyee's Retirement Committee
,ust 1, 2002, Meeting Minutes
Page 2 of 4
2. City Council Review: On July 23, Susan, Bill Switzer, and Alan, met with the City
Council to discuss the role and activities of the Committee. The Council discussed the
Plan's retirement philosophy and the funding of the Plan in their study session.
Council liaison, Mayor Ray Martinez, stated he would like to attend the important
Committee meetings. The two meetings in late fall during which the Committee
reviews the actuarial assumptions and the early spring meeting where actuary
presents the Valuation Report would be worth attending.
Susan suggested the Committee consider the best way to educate Council on the
Plan's funding shortfall. Alan pointed out that a little bit of money from the City at
this time might prevent the need for a lot of additional money later on if the Plan
investments could rebound in an improving stock market. Alan will try to set up a
meeting for August 26 for himself, Susan, and Bill to meet with Mayor Martinez to
discuss temporarily increasing the Plan pension contributions. Alan will draft a memo
for this meeting. The City's budget was adopted in November 2001, but Council will
start considering budget exceptions in September. The other thing the Council could
do is amend the Plan's retirement benefit from 1.5% per year to 1.0%, changing
future accruals; however, Nancy pointed out that puts the entire burden of funding
the liabilities for the current retirees on the remaining current Members.
Council member Eric Hamrick asked that the Committee provide him with the Plan
investment reports. Alan is sending the last three investment reports to Council via
email. Alan also thinks it may be good to make the valuation report available to
them; Nancy will get it in the form of a PDF or Word file and forward it to him.
3. Status on Proposed Part -Time Plan Change: Julie Depperman handed out
copies of information from results of researching 385 active Plan Members, finding
that 69 people (or 15% of the group) had some type of part-time service with the City
as of December 31, 2001. The data indicated that if the Committee implemented the
part-time full-time Plan change, of the 69 Members with part-time service, 46 people
could have some reduction in their future benefits 9 people would have increased
benefits, and 14 people would have no change to their benefits. One chart in the
handout was a review of the contribution rate going back to the 1970's since the Plan
began. For the 46 Members discussed above, contributions and interest of $1.7
million have been made; if these 46 Members all took their single sum distributions
today, they would cash out at roughly $1.9 million. If the Committee implemented
the Plan change as discussed, the single -sum distributions (assuming the new method
was used the entire time) would be $1.8 million, reducing the shortfall.
One of the reasons the Committee is considering a change in the benefit calculation is
that as people age they may consider going from a full-time to a part-time position.
Nancy noted that the current benefit calculation could potentially penalize the
Members who want to do phased retirements. Julie said that making this change, in
her opinion, would be more equitable and would make the distributions more closely
matched to what was contributed to the Plan on their behalf. Alan pointed out that 46
people out of 380 (about 120/6 of the Plan) have an unjust enrichment, that most of
the Members would be getting no change but additional protection of their future in
this Plan, and 9 members who should strongly support it.
Filename: GMIN 2002 8 August F
General Emninyee's Retirement Committee
f ist 1, 2002, Meeting Minutes
Page 3 of 4
The next step in the process will be to write a short description of the proposed Plan
change to distribute to the Members and perhaps have a couple of open houses for all
Members to discuss the proposed method. It was decided to place the proposed part-
time Plan change on the next agenda for review at that time.
4. Monthly Investment Update: Julie provided a short summary of the stock
markets since the last investment report dated June 30 (when the portfolio was down
roughly 2.5% for the year). During July, the NASDAQ was down 9%, the Standard &
Poor's 500 Index (which is benchmark for domestic funds) was down about 8%, the
Dow Jones Industrial Average was down about 5.5% and EAFE (which is the
benchmark for international funds) is down almost 10%.
Julie handed out the quarterly compliance report for the mutual funds. One of the
essential indicators that the Committee reviews is the fund's star rating. Morning Star
has revised the rating to reflect a fund's standing within its own category (i.e., growth
fund, mid -cap blend, large -cap fund, etc.) instead of compared to all domestic or
international funds. Therefore, they look very different than they did on the March
report. They have also changed how they evaluate the risk and return profile; it now
gives a rating of both the return and the risk. Julie also discussed the diversification
of investments; she noted that the Plan has a smaller percentage of technology stocks
than the benchmark (which is good at this time).
Alan and Julie met with representatives from Vanguard Mutual Funds. Vanguard's
Chief Executive Officer noted that the nation was in the 28`h month of a Bear Market,
the longest downward correction since Post War. He also indicated that while a lot of
money has been lost in the stock market, 98% of the dollars remain in mutual funds.
This, in combination with what was reported by representatives from Janus Funds,
makes Alan believe it is wise to continue to make modest investments in this
environment so that we will be able to capitalize when the market goes back up.
S. Other Business: Deb distributed copies of a draft letter that Vincent Pascale and
Greg Tempel prepared regarding reemployment after retirement. Minor wording and
grammar changes were suggested. Deb will make the changes. It was mentioned
that it might be worth considering having employees sign a form that states they have
not been offered a pre -arrangement for reemployment at the point of separation from
employment with the City.
Adjournment: There being no further business, the Committee adjourned at 3:30
p.m.
TOPICS FOR NEXT REGULAR MEETING
The next regular meeting of the Committee will be on September 5, 2002, at 1:15
p.m. in the Council Information Center of City Hall. The tentative agenda includes:
Plan Member Comments
Approval of Minutes
Consideration of the 2nd amendment to the Plan
Filename: GMfN 2002 8 August F
General Err ''iyee's Retirement Committee
A_ just 1, 2002, Meeting Minutes
Page 4 of 4
Plan Philosophy
Discussion of Assumptions and Funding Options
Status on Proposed Part -Time Plan Change
Follow-up from Council Review
Quarterly Investment Update
Other Business
GENERAL EMPLOYEES' RETIREMENT PLAN WEB PAGE: The General Employees'
web page can be found at www.fcgov.com/city clerk. The Committee's 2001 Annual
Report, 2002 Work Plan, and monthly minutes are available at this site.
2002 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
2002, the Committee has scheduled the meetings as shown below:
3u4y 11 October 3
August 1 November 7
September 5-Y,aneelledj December 5
Filename: GMIN 2002 8 August F