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HomeMy WebLinkAboutRetirement Committee - Minutes - 04/07/2005General Employees' Retirement Plan GENERAL EMPLOYEES' RETIREMENT COMMITTEE April 7, 200S, MEETING MINUTES Approved as corrected May 5, 2005 COUNCIL LIAISON: Mayor Ray Martinez k /�/V COMMITTEE Susan Lehman, Chair, 221- 13 Chuck Seest, 221-6788 MEMBERS Jim O'Neill, Vice Chair, 221-6779 Bill Switzer, 221-6713 PRESENT: Dottie Nazarenus, 204-4429 MEMBERS ABSENT: Michele Hays -Johnson, 416-2158 OTHERS Pat Kahle (Actuary, Milliman) & Joel Stewart (Milliman) PRESENT: Greg Tempel (City Attorney's Office) Julie Depperman & Ann Wardle (Finance) Debbie Weedman (Human Resources) CALL TO ORDER: Susan Lehman called the meeting to order at 1:22 p.m. PUBLIC PARTICIPATION AND 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 Plan Member comments. APPROVAL OF MINUTES: Minutes of the March 3, 2005, meeting were distributed. A minor formatting change was made. Bill Switzer moved approval of the minutes as corrected, and Jim O'Neill seconded the motion. The Committee approved the minutes unanimously (5-0). DISCUSSION TOPICS: 1. Plan Philosophy: There were no comments on Plan Philosophy. 2. Draft Actuarial Report Presentation: Joel Stewart passed out a draft of the Actuarial Valuation Report as of January 1, 2005. He also distributed hardcopy reports of Milliman's PowerPoint presentation. The purpose of the valuation is to determine the funded status of the Plan, calculate the Annual Required Contribution for 2005, and review demographic and financial experience. Joel reviewed the data reconciliation. As of January 1, 2005, the Plan included 324 active Members, 113 terminated vested Members, and 132 retired Members. The 215 North Mason Street • 2nd Floor • P.O. Box 580 • Fort Collins, CO 80522-0580 • (970) 221-6788 • FAX (970) 221-6782 General Employees' Retirement Committee April 7, 2005, Meeting Minutes Page 2 of 4 change in membership for the year was discussed and compared to the actuarial assumptions. The Financial Data page was reviewed. As of January 1, 2004, the Plan's market value of assets was $34.1 million, income for the year totaled $4.3 million, disbursements totaled $1.7 million, and the Plan's market value at December 31, 2004 was $36.7 million. The return on investments for 2004 was 9.5%; 2.0% higher than the expected return of 7.5%. The Committee discussed the calculation of actuarial value of assets. Gains and losses are spread over a five-year time horizon. The amount recognized for 2004, when combining one -fifth of all the gains and losses for the years 2000-2004, was a loss of $1,620,694. Pat reviewed the calculation of the Annual Required Contribution (ARC) and said the ARC for 2005 would be $1.4 million or 8.44% of compensation. Julie Depperman reported that $1.1 million was contributed in 2004, which included a one-time additional contribution of $300,000 at the end of 2004. This amount was only $27,600 short of the ARC presented in the 2004 Valuation Report. The Normal Cost Rate (NCR) is used to calculate the ARC. The change in the NCR from 2004 to 2005 of 2.13% was reviewed in detail. The net of asset gains and losses from the prior five years resulted in an increase of 1.34%. The effect of no salary increases in 2004 reduced the ARC by 0.58%. A change in the actuarial report programming created a 1.11% increase, and variances of demographic assumptions to actual Plan experience accounted for 0.26%. (Chuck Seest left the meeting at 2:08 p.m.) The "Comparison of Assets and Present Value of Accrued Benefits" chart was discussed. Pat said the cash out rate for this Plan is 7.5% and that there would have been enough money for the Plan to be terminated at December 31, 2004, if all retirement distributions were made as lump -sum payments. If the Plan was terminated and Members were given a choice to take a lump sum or opt for lifetime annuity payments, the Plan would not have sufficient funds to purchase all the annuity payments at this time. The cost of annuities is too high given the current rate environment. The Committee reviewed a chart entitled "The Projection of Contributions, Benefit Payments, and Market Value of Assets." This is an interactive chart in which asset returns and contribution rates can be changed, showing the future funding status of the Plan under different scenarios. This chart showed how sensitive the Plan is to the market. Pat stated that the Plan's asset mix of 60/40 is a good mix for the current makeup of the Plan's Membership. It has an acceptable return assumption. The Committee modeled several different scenarios, changing both the return assumptions and the contribution assumptions. Pat will run various scenarios and will forward the results to the Committee via e-mail. Filename: 2005 GMIN 04 07 Final General Employees' Retirement Committee April 7, 2005, Meeting Minutes Page 3 of 4 The Committee will review the entire draft copy of the Actuarial Valuation prior to the next meeting. Pat said she has a conflict and will not be able to attend next month's meeting; Joel will attend the May 5 meeting in her place. 3. Monthly Investment Report: Julie distributed the Plan Investment Report for the Quarter Ended March 31, 2005. The total market value of cash and investments for the Plan on March 31, 2005, was $36,175,720. There was a 0.2% loss for the quarter. The Federal Reserve Board raised the federal funds rate twice during the first quarter by a total of 50 basis points. The Plan's domestic mutual fund portfolio lost 1.1%, while the benchmark Standard & Poor's 500 Index fell 2.1%. The Plan's international mutual funds rose 0.1%, compared to the international benchmark, the EAFE, which fell -0.1%. 4. Actuarial Services RFP: Pat and Joel left the meeting at about 3:02 p.m. Jim stated that the contract with Milliman expires in June. He explained that the request for proposal (RFP) process for actuarial services has to occur every five years. Jim sent out the draft RFP to all Committee members and staff prior to the meeting, he would like comments and changes from everyone so that he can send out the RFP next week. Jim hopes to have the entire process completed by the end of June so that the selected firm could attend the July 7, 2005, meeting. S. Other Business: Jim said he would like a wording change in the Summary Plan Description. He made a motion to amend the wording in Summary Plan Description and Bill seconded the motion. The Committee approved the motion unanimously (5-0). Ann Wardle will make the change and repost the Handbook on the web site. (Chuck returned to the meeting at about 3:15 p.m.) Julie reported that staff from Finance, Budget and the City Manager's Office (CMO) met to discuss additional funding options for the Plan. The CMO agreed to make the one-time additional contribution of $300,000 for 2004. The CMO asked that the Committee agree to pay for an outside pension attorney's opinion on the legality of several funding options for the Plan. The options included: requiring active Members to make a bi-weekly contribution as a percent of pay, reducing the future benefit payment formula for active Members, providing an opportunity for Plan Members to convert over to the 401a, terminating the Plan, continuing to make one time contributions based on Membership by fund, and changing the payroll contribution to correspond to the ARC in the actuarial report, which is 8.44%. Greg Tempel said he was asked to answer the legal questions but suggested hiring a pension attorney since he does not feel completely comfortable in answering them. There was considerable conversation about whether to pay for this. Jim moved that the Committee authorize $500 for an outside pension attorney as requested by the CMO, and Bill seconded the motion. The Committee approved the motion unanimously (5-0). Filename: 2005 GMIN 04 07 Final General Employees' Retirement Committee April 7, 2005, Meeting Minutes Page 4 of 4 Debbie Weedman distributed two handouts on the Plan's Retirement Process. The Committee will review these documents and provide Debbie feedback by the end of the week. Adjournment: The Committee adjourned at 3:41 p.m. TOPICS FOR NEXT REGULAR MEETING The next regular meeting of the Committee will be held on May 5, 2005, at 1:15 p.m. in meeting room 2A at 215 North Mason Street. The tentative agenda includes: Public Participation & Plan Member Comments Approval of Minutes Plan Philosophy Actuarial Report Review Plan Funding Options Actuarial RFP Update Other Business GENERAL EMPLOYEES' RETIREMENT PLAN WEB PAGE: The Plan's web page can be found at www.fcaov.com/cityclerk/retirement.php. The Committee's 2004 Annual Report, 2005 Work Plan, and monthly minutes are available at this site. 2005 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 215 North Mason Street, meeting room 2A. For 2005, the Committee has scheduled the meetings as shown below: 7 Fel9FtraFV 3 May 5 Mareh 3 June 2 July 7 October 6 August 4 November 3 September 1 December 1 Filename: 2005 GMIN 04 07 Final