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HomeMy WebLinkAboutRetirement Committee - Minutes - 02/07/2002COUNCIL LIAISON: COMMITTEE MEMBERS PRESENT: ABSENT: GENERAL EMPLOYEES' RETIREMENT COMMITTEES February 7, 2002, MEETING MINUTES Mayor Ray Martinez Susan Lehman, 221-6813 Bill Switzer, 221-6713 Jim O'Neill, 221-6779 Michele Hays -Johnson, 416-2158 Approved, as amended, March 7, 2002 Dottie Nazarenus, 204-4429 Alan Krcmarik, 221-6788 OTHERS Debbie Weedman (Human Resources) Julie Depperman (Finance) PRESENT: Vincent Pascale (Human Resources) Nancy Wagner, (Milliman USA) Greg Tempel (City Attorney's Office) CALL TO ORDER: Chair Susan Lehman called the meeting to order at 1:22 p.m. PLAN MEMBER COMMENTS: The Committee reserves this place on the agenda to receive comments from Members of the Plan or the public. The Committee discussed whether there could be an on-line pension calculator at the web -site. Members would need to know their exact service credit and five-year average compensation to make this work as this data is not available through the City web -site. The annual Personal Retirement Planning Statements will be available in late March or early April. The Committee's consensus was that these statements are the best information that we can provide. APPROVAL OF MINUTES: Alan Krcmarik handed out the minutes for the January 10, 2002, meeting. Nancy Wagner noted one change to the Retirement Philosophy section. Jim O'Neill moved to approve the minutes as amended. Dottie Nazarenus seconded the motion. The Committee approved 5-0. DISCUSSION ITEMS Election of Officers Each year the Committee elects officers in February. Elected officers include the Chair and Vice -chair. Dottie nominated Susan for Chair and Alan seconded this motion. The Committee voted 5-0 to pass the motion. Alan nominated Bill Switzer for Vice -Chair and Dottie seconded. The Committee approved this motion 5-0. 2. Retirement Philosophy Filename: GMIN 2002 2Feb6 Final.doc General Employes' Retirement Committee Minutes February 7, 2002 Page 2 of 4 The Committee reserves a place on the agenda to review and discuss the underlying philosophy of the Plan. There were no general discussion items under this heading. The Committee did discuss the death benefit provisions of the Plan under item 5. below. 3. Actuarial Assumptions Each year the Committee reviews the actuarial assumptions that will be used to conduct the annual valuation report. The actuary leads the discussion on this topic. Nancy Wagner started by providing a draft of Personal Retirement Planning Statement for the Committee to review. The Committee and support staff recommended a few formatting changes. Debbie Weedman indicated that the data from the ICMA Retirement Corporation, which Milliman will insert into the tables, should be available by February 8. Debbie said she would e-mail the files to the actuary as soon as they are available. Nancy expressed her concern about the pay increases; they were about 6% over the prior year. This may lead to a funding issue. Nancy asked staff to check to see if the increases were accurate because several were over 10%. Nancy reviewed the assumptions made a year ago and the performance. • The timing of when Members elect to retire and when benefits start affect the Plan. The assumptions for 2001 called for 14 Members to withdraw from City employment prior to age 55. The actual was only 12. • The assumptions included six early retirements. The Plan had just four in 2001. • The assumption is that all Members will retire at 65. In 2001, 6 members reached 65 years of age, only one decided to retire. This actually helps the plan, as the costs incurred after age 65 are not as great. The Actuary assumed we would have three disabled Members, but we only had 1. • The actuarial value of Plan assets is still close to market value. Nancy recommended that the method of valuing and smoothing the assets remain the same for now. Last year, she had presented an alternative method, but she recommended continuing with the present technique. • Nancy recommended that the cost method remain the same. • The inflation and investment return rates will also stay unchanged. The biggest risk to the Plan and its funding status is poor investment results. High inflation would tend to bump actual salaries above the assumption. Should the Plan experience a number of early retirements, that would not harm the Plan, since the early retirement reduction factors are not subsidized. The Plan has some risk based on the withdrawal or separation assumptions. If all current Members stayed in the Plan until full retirement (age 65), the costs to the Plan would increase. The termination rates at the City are fairly low. The City is below national averages. General Emplov-ss' Retirement Committee Minutes February 7, 2002 Page 3 of 4 The average age of the Plan Members is about 50. The Committee discussed the Rule of 80 or 75. This rule adds the years of service to the Members age. If the magic number is reached, the Member could retire with full retirement. This type of benefit has been studied before and is fairly expensive. The last time the City did an early retirement program, it was based on the theory of lower costs due to the reduction of risk of injury. City Departments paid for increased benefits to allow the early retirement program to go forward and the Departments still are paying for some of the cost. Jim moved to accept the actuary's recommendations regarding the assumptions for the annual valuation. Susan seconded the motion. The Committee approved the motion 5-0. 4. Review of Standing Rules Each year, the Committee reviews the standing rules that guide its administrative operations. Alan recommended a few changes. The Committee made a few other editing suggestions. Bill moved to approve the amendments to the Standing Rules. Jim seconded the motion. The Committee approved the motion 5-0. Alan handed out the Boards and Commissions manual from the City Clerk's Office. 5. Review of Death Benefit to Surviving Spouse At the January meeting, the Committee discussed how the death benefit provision of the Plan works. The Committee may consider a change to how this works, depending on the cost to the Plan. Jim moved to change the Plan to offer a full death benefit to a surviving spouse. Nancy pointed out that this would result in an increase in the cost of the Plan by 0.7%. Alan reviewed the differences of a defined benefit plan from a money purchase plan. A defined benefit plan is not designed to provide death benefits. As a matter of fiduciary responsibility, the Committee has a responsibility to protect the long-term viability of the Plan. Jim withdrew his motion. Jim then moved for the Committee to spend up to $500 to do additional research on the cost of changing the death benefit provision after the 2002 actuarial valuation of the Plan is completed. Bill seconded this motion. The Committee approved the motion 5-0. 6. Investment Report At the January meeting, Julie Depperman provided a brief synopsis of the investment results in 2001. At this meeting she presented the full report. At the end of 2001, the Plan held $31,935,708. The Plan experienced a loss of 4.35% for the year. The fixed income portion of the portfolio gained 5.93%. The mutual funds held by the Plan lost 10.86%. The Plan's investment performance was better than its overall benchmark. Nancy mentioned that the results for the Plan were about as good as she had seen. The annual report included a comparison to markets around the world. 2001 was a difficult year for investments in the vast majority of countries. Alan also provided excerpts from a publication that indicated the effects of the national recession on pension portfolios. The handouts provided some investment advice about which sectors may be the strongest coming out of the recession. General Employees' Retirement Committee Minutes February 7, 2002 Page 4 of 4 Plan Change Status Report The Committee has been studying a change to the Plan, which would make Retirement Plan benefits more equitable for Members with part-time service. Before the change will be made, staff needs to complete its review of the Members with part-time service. This will help determine the cost, if any, to the Plan. Staff will provide an update on the research process for the proposed change. Other Business The Committee did not have other business at this meeting. Adjournment: Susan adjourned the meeting at 2:38 p.m. Topics for Next Regular Meeting Plan Member Comments Approval of Minutes Retirement Philosophy Personal Retirement Planning Statement Update Death Benefit Follow-up Monthly Investment Report Status Report on Part-time Plan Change Other Business GENERAL EMPLOYEE'S RETIREMENT PLAN WEB PAGE The 2001 Annual Report and 2002 Work Plan are posted at www.fcgov.com/cityclerk/retirement.php. Minutes for the 2002 meetings will be added and the Standing Rules will be included. 2002 MEETING SCHEDULE The Committee meets at 1:15 p.m. on the first Thursday of the month. The regular location is the Council Information Center at City Hall. For 2002, the Committee has set the following meetings: January 39 April 4 July 11 October 3 FAT May 2 August 1 November 7 March 7 June 6 September 5 December 5