HomeMy WebLinkAboutRetirement Committee - Minutes - 03/04/2004City of Fort Collins
General Employees' Retirement Plan
GENERAL EMPLOYEES' RETIREMENT COMMITTEE
March 4, 2004, MEETING MINUTES
COUNCIL LIAISON: Mayor Ray Martinez
COMMITTEE Susan Lehman, Chair, 221-6813
MEMBERS Jim O'Neill, Vice Chair, 221-6779
PRESENT: Michele Hays -Johnson, 416-2158
MEMBERS
ABSENT: Bill Switzer, 221-6713
Approved April 1, 2004
Dottie Nazarenus, 204-4429
Alan Krcmarik, 221-6788
OTHERS Pat Kahle (Actuary, Milliman USA)
PRESENT: Greg Tempel (City Attorney's Office)
Julie Depperman & Ann Wardle (Finance)
CALL TO ORDER: Susan Lehman called the meeting to order at 1:56 p.m.
PLAN MEMBER COMMENTS: The Committee reserves this place on the agenda to
receive comments from Members of the Plan or the public. There were no comments.
APPROVAL OF MINUTES: Minutes of the February 5, 2004, meeting were
distributed. Jim O'Neill moved the minutes be approved and Dottie Nazarenus
seconded the motion. The Committee approved the minutes unanimously (5-0). The
revised Standing Rules will also be posted on the web site.
TOPICS
1. Plan Philosophy: Jim provided a handout of Bloomberg's mutual fund ratings for
the ICMA-Retirement Corporation Vantagepoint Funds he found on the Internet and an
article about defined contribution plans that appeared in Governing magazine.
2. Review and Approval of Personal Retirement Planning Statements: Pat
Kahle, Milliman USA, distributed an example of the Statements. Only the last four
digits of the social security number will be printed on the Statements. Pat and the
Committee reviewed the wording used under Salary Increases. The Committee was
concerned about Members' reactions to the projected benefit impact of frozen salaries
for 2004 and 2005. Pat said Plan Members might have questions because the
numbers will not be as big as last year. The Committee agreed that the wording was
acceptable as written.
215 North Mason Street • 2nd Floor • P.O. Box 580 • Fort Collins, CO 80522-0580 • (970) 221-6788 • FAX (970) 221-6782
General Employee's Retirement Committee
March 4, 2004, Meeting Minutes
Page 2 of 4
Based on the review of Earned Benefits Based on Current Vesting Status on page two,
the Committee agreed to add a sentence to the statements of Members whose
benefits are frozen based on the Plan change effective July 1, 2003. The Statements
will use the higher of the monthly benefit amounts (June 30, 2003 and December 31,
2003) to feed the chart that appears on page one.
Dottie moved to accept the Personal Retirement Planning Statements as edited, and
Michele Hays -Johnson seconded the motion. The Committee approved the motion
unanimously (5-0). Pat expects to be sending the Statements to the City within two
weeks from March 4. Julie Depperman asked Pat to fax some live examples ahead of
that time.
3. Discussion of Actuarial Report Assumptions: Pat handed out the Actuarial
Procedures and Assumptions and an Experience Analysis Study. The Experience
Analysis Study handout compares the expected Plan experience based on actuarial
assumptions to the actual Plan experience. Comparisons include the amount of
Members withdrawing from the Plan and the ages at which Members retire. Julie
wondered if the actuary should adjust the early retirement projection because the Plan
is aging. Pat would like to have more experience before making such a change since
recent bad economic times may have had a short-term impact on Plan experience. It
is more likely that the Committee might change the early retirement assumptions in
the future because people are retiring later due to the rising cost of health care.
Pat reviewed the Actuarial Procedures and Assumptions. The Aggregate Actuarial Cost
Method is used in calculating funding for the Plan. This method spreads the costs over
the working lifetime of the Members in the Plan. The asset method used to develop
the actuarial value of assets smoothes out the gains and losses over a five-year
period. Alan said that financial report reviewers from the Government Finance
Officers Association ask why we use the Aggregate Actuarial Cost Method. Alan would
like something from Milliman USA in writing to explain the issue. Pat replied that the
Entry Age Normal Cost Method is frequently used in the public sector and is a very
conservative method for an open plan. The General Employees' Retirement Plan is
closed to new employees and the Aggregate Cost Method is frequently considered a
more appropriate method for this situation. Pat will write a letter to this effect by
June. Investment earnings are projected to be 7.50% per annum. This assumption
remains appropriate given the current investment policy for the Plan. Pat also
reviewed the Earnings Progression table used for the valuation. The table is divided
into two pieces, one is based on merit increases, and the other is based on inflation.
Generally, merit salary increases are larger for younger people who are moving up the
job ladder and lower for older people who have reached their career goals. This
portion of the table remains an appropriate assumption. The table used for the 2003
valuation had an inflation factor of 3.5% embedded in the table. This may be high in
today's environment. Pat suggested that this portion of the table be lowered to 2.5%
- 3.0%.
Currently (2003 pension valuation), the 1983 Group Annuity Mortality (83 GAM) Table
is used for non -disabled Members, and the 1983 Railroad Board Disabled Mortality
Table is used for disabled Members. Pat said they could consider changing all
mortality assumptions to the 1994 Group Annuity Mortality (94 GAM) Tables, which
Filename: 2004 GMIN 0304 FINAL
General Employee's Retirement Committee
March 4, 2004, Meeting Minutes
Page 3 of 4
would increase Plan liabilities but would be more realistic. (Michele left the meeting at
this point.) Alan said people are outliving the tables and the reality of changing tables
may be higher costs. He advocated the need to reflect the trends towards longer life
as soon as possible. Pat said that this is not where the Plan's projections have varied
greatly from actual experience with the exception of the disabled. Pat pointed out
that changing the mortality assumptions to the 94 GAM would increase unfunded
liabilities. Pat said the 1994 tables are based on life expectancies in the 1980s and
the 1984 tables are based on life expectancies from the 1970s. Susan said she would
like the actuarial report to reflect as close to reality as possible. Alan said he would
rather state the problem as bluntly as it is rather than waiting two or three more
years to use the 1994 table.
Pat also said that she would provide the Retirement Committee a range of estimated
costs for terminating the Plan on January 1, 2004.
Jim moved to accept the actuarial assumptions as presented with the exception that
the inflation rate be changed to 2.5%, the mortality table changed to 94 GAM, for
both healthy and disabled lives. The impact of the change in assumptions will be
presented at the April meeting. Alan seconded the motion. The Committee passed
the motion unanimously (4-0). Greg Tempel stressed that the motion at the next
meeting clearly states that any change in the Group Annuity Table for the mortality
assumptions is only for the actuarial valuation and not the actuarial equivalent, unless
the Committee desires to change the mortality assumption component of calculating
actuarial equivalence.
4. Update on Summary Plan Description: Deb Weedman said she had reviewed
the Plan Summary Handbook, which was last updated in December 1995. She
distributed a handout on which she had noted any proposed changes in red for the
Committee to consider. Deb will forward copies of the handbook and her handout to
Bill Switzer and Michele for their review; she will also get copies of the handbook to
Susan and Ann. The Committee will review the handout and will bring updates to the
next meeting.
5. Monthly Investment Update: Julie distributed a report of the Plan portfolio as
of February 29, 2004. She said the portfolio returns are up about 2.2% or about
$742,000 since the end of December. Alan and Julie are continuing to rebalance the
portfolio. Investments into one of the new funds, Julius Baer, have reached the
appropriate level. Most of the Plan's funds outperformed their benchmarks. The
market value of the Plan portfolio as of February 29, 2004, was $34,848,958.
6. Other Business: None
Adjournment: There being no further business, the Committee adjourned at 3:41
p.m.
TOPICS FOR NEXT REGULAR MEETING
The next regular meeting of the Committee will be on April 1, 2004, at 1:45 p.m. in
the Council Information Center of City Hall. The tentative agenda includes:
Filename: 2004 GMIN 0304 FINAL
General Employee's Retirement Committee
March 4, 2004, Meeting Minutes
Page 4 of 4
Plan Member Comments
Approval of Minutes
Plan Philosophy
Update on Personal Retirement Planning Statements
Draft Actuarial Report Review
Update on Summary Plan Description
Other Business
GENERAL EMPLOYEES' RETIREMENT PLAN WEB PAGE: The General Employees'
web page can be found at www.fcgov.com/cityclerk/retirement.php. The Committee's
2003 Annual Report, 2004 Work Plan, and monthly minutes are available at this site.
2004 Meeting Schedule:
The regular meeting time for the Committee is at 1:45 p.m. on the first Thursday of
each month. The regular location is the Council Information Center at City Hall. For
2004, the Committee has scheduled the meetings as shown below:
3anUaFy 8 April 1
FebFuary 5 May 6
Mafel-r4 June 3
July 1 October 7
August 5 November 4
September 2 December 2
Filename: 2004 GMIN 0304 FINAL