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HomeMy WebLinkAboutRetirement Committee - Minutes - 04/12/2002GENERAL EMPLOYEES' RETIREMENT COMMITTEE APRIL 12, 2002, MEETING MINUTES Approved May 2, 2002 COUNCIL LIAISON: Mayor Ray Martinez COMMITTEE Susan Lehman, Chair, 221-6813 MEMBERS Bill Switzer, Vice -Chair, 221-6713 PRESENT: Michele Hays -Johnson, 416-2158 OTHERS Nancy Wagner, Actuary (Milliman USA) PRESENT: Debbie Weedman (Human Resources) Dottie Nazarenus, 204-4429 Jim O'Neill, 221-6779 Alan Krcmarik, 221-6788 Julie Depperman (Finance) Greg Tempel (City Attorney's Office) CALL TO ORDER: Susan Lehman called the meeting to order at 9:06 a.m. She thanked the Board for rescheduling the meeting from April 4 to today. She also noted that Dottie Nazarenus would probably have to leave this meeting before its conclusion for another meeting. PLAN MEMBER COMMENTS: The Committee reserves this place on the agenda to receive comments from Members of the Plan or the public. Julie Depperman informed the Committee that the Finance Department distributed the Personal Retirement Planning Statements with the paychecks in March. She noted that a few statements had to be reissued due to incorrect information regarding ICMA Retirement Corporation. A deferred vested member had asked for clarification on when taxes and tax penalties had to be paid on distribution. After considering the situation, Nancy Wagner advised that the answer was in the regular background materials sent to Members that separate from the City. If Members roll their distribution, there is no penalty. If Retired Members elect monthly payments, there is no penalty. APPROVAL OF MINUTES: Alan Krcmarik handed out the minutes from the March 7, 2002, meeting. Alan noted one date correction and one typographical error was corrected. Alan moved and Dottie second the motion to approve the minutes as amended. The Committee approved the minutes unanimously, 6-0. DISCUSSION ITEMS: 1. Retirement Philosophy: The Committee reserves a place on the agenda to review and discuss the underlying philosophy of the Plan. There were no discussion items at this meeting. 2. Annual Valuation Report. Each year the actuary prepares and the Committee reviews the valuation report. Nancy presented copies of the report to Committee members and staff. She presented the highlights of the report using a PowerPoint presentation. Funded Status of the Plan: As of the date of the Annual Valuation Report, January 1, 2002, the Plan has adequate funding. Based on the weak investment markets over the last two years, the Plan's assets have lost value. If this trend continues, it will be difficult for the Plan to meet its projected liabilities. General Employees' Retirement Committee April 12, 2002, Meeting Minutes Page 2 Determine the Annual Required Contribution: The Report determined the annual required contribution to be $809,796. As a percentage of payroll, this amounts to a contribution rate of 4.31 %, up from 3.70% in 2001. The City's contribution rate is now set at 4.5%, providing a small cushion over the required level. If the markets remain weak, this 0.2% will help offset investment earning shortfalls, but by only a small amount. Review Demographics and Financial Experience: There are 385 active Members, 109 terminated vested Members, and 119 retirees and beneficiaries. The Plan is closed to new employees. Average pay for active Members is $48,839. Average service is 14.8 years. Average age is 50.3 years. Nancy noted as age increases, the Plan has less time to fund any shortfall of assets to liabilities. The actuary uses the Aggregate Cost Method to determine the actuarial costs of the Plan. This is a conservative method and produces the largest funding requirement. To value the assets of the Plan, the actuary spreads gains and losses on market value different from the assumed 7.5% rate of return. This means that some of the losses from the last two years will continue to be factored into the annual valuation for the next four years. The assets of the Plan are sufficient at this point, but another year of weak market returns may cause a deficit that may take many years to make up. Nancy advised that the Committee should closely monitor market events, but no actions need to be taken now. 3. Preparation for Council Review: The Council is conducting reviews of all of the Boards and Commissions. This year the Council will review this Committee. The City Clerk's Office has prepared a set of questions for the Committee to answer in preparation for the review. The Committee discussed the questions. Alan will compile and send out proposed answers. He will also check with the Clerk's Office to see if the Committee can be considered early in the Council study session on July 23. 4. Monthly Investment Report: Due to the rescheduled meeting, Julie was able to complete the first quarter report in time for this meeting. Usually, quarterly reports are provided in the second meeting following the end of the quarter. The fixed income portion of the portfolio earned 4.6% in the first quarter. The equity portion gained 1.3% in the quarter. While there are indications that the national economy may be moving out of the recession, earnings for most corporations remain weak. The recovery may be slower than the average recovery. Economists expect that interest rates will rise as the economy recovers. Payments into the fund and earnings on investments exceeded the costs for monthly retirement payments, lump sum distribution, and administrative costs. 5. Status on Part-time Plan Change: Staff provided an update of the progress on the proposed amendment to more equitably match service credit to actual time worked. They continue to review the files of the active Members to determine part-time employment. Other Business • Nancy provided an estimate of the change to the pre -retirement death benefit. The cost of increasing the benefit from 47% to 100% would add over $135,000 of annual costs to the Plan, much higher than previously estimated. This change would increase the contribution rate to 5.0% Generai Employees' Retirement Committee April 12, 2002, Meeting Minutes Page 3 • Jim O'Neill requested that the Committee conduct the actuarial review at the next meeting. This would be the appropriate time, before the renewal of the annual contract. The Committee briefly discussed the required minimum distributions according to the Internal Revenue Code section 401(a)(9), as it relates to the Optional Forms of Benefits that retiring members can choose. The Member's spouse can always be designated as the beneficiary under any of the applicable Optional Forms of Benefits. If the Member designates someone other than the spouse more than ten years younger, the Member cannot choose the 100% Joint and Survivor Benefit option. On the 50% Joint and Survivor Benefit option, the staff will have to refer to tables from the actuary in order to determine whether or not a proposed non - spouse beneficiary can be designated based on the age difference between the member and the beneficiary. Nancy will email the tables to Julie and Debbie Weedman. • Nancy noted she had information about new accounting standards for retiree medical benefits. Adjournment: Susan adjourned the meeting at 11:15 a.m. Topics for Next Regular Meeting Plan Member Comments Approval of Minutes Retirement Philosophy Actuarial Review Preparation for Council Review Monthly Investment Update Status on Part-time Plan Change Other Business General Employees' Retirement Plan Web Page The City Clerk's Office maintains a web page for all of the boards and commissions at www.fcgov.com/city clerk. The Committee's 2001 Annual Report, 2002 Work Plan, monthly minutes, and other materials are available at the site. 2002 Meeting Schedule The Committee meets 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 set the following meetings: daauaPy9 Apd" July 11 October 3 FebwaFy-7 May 2 August 1 November 7 MaFeh 7 June 6 September 5 December 5