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HomeMy WebLinkAboutRetirement Committee - Minutes - 03/05/1998,. Gene* Employees Retirement Plan • City of Fort Collins FORT COLLINS GENERAL EMPLOYEES RETIREMENT COMMITTEE MARCH 5, 1999 MEETING MINUTES COUNCIL LIAISON: Mayor Ann Azari COMMITTEE MEMBERS PRESENT: Tim Hume, 221-6776 Dave Agee, 221-6881 Alan Krcmarik, 221-6788 Kevin Westhuis, 224-6156 Patti Teraoka, 221-6715 OTHERS PRESENT: Mark Sanford (for Russ Proctor), Watson Wyatt Worldwide, the City's actuarial firm Laurie Harvey (Staff Support - Human Resources) Greg Tempel (Staff Support - Legal) Bob Eichem (Staff Support - Investments) Sue Wilcox (Staff Support - Secretary) Ginger Uthmann (GER Plan member) CALL TO ORDER: Chairperson Kevin Westhuis called the meeting to order at 1:25 p.m. in the Council Information Center of City Hall West. ITEMS OF NOTE: (1) The Personal Retirement Planning Statements are on schedule and should be distributed with the paychecks on March 27th. (2) Alan read a letter from the Mayor and City Council expressing their appreciation to the General Employees Retirement Committee members for their work and contribution to the City organization. (3) Alan announced that Don Mazanec, actuarial consultant with William M. Mercer, Inc., is retiring after 20+ years with the company. Don served as the GERC's actuarial consultant for many of those years. Alan and Sue will circulate some congratulatory cards for personal messages and check with Human Resources for something with the City logo that might be appropriate to send Don. APPROVAL OF MINUTES: There was some misunderstanding of the discussion that took place at the February 5, 1998 meeting under Item 6. There were actually two issues involved: 1. A possible defined benefit - defined contribution (DB-DC) choice with accompanying education program and individual benefit calculations; and 2. A possible change to the GER Plan which would allow lump -sum payouts at termination without a negative effect on the Plan. Sue -I- 300 LaPorte Avenue • P.O. Box 580 • Fort Collins, CO 80522-0580 • (970) 221-6788 • FAX (970) 221-6782 GERC Minutes - March 5, 1998 will draft a revision of Item 6 to reflect the two separate topics. Alan moved to table approval of the February 5th minutes until the April 2nd meeting. Patti Teraoka seconded the motion. It passed unanimously (5-0). TOPICS: 1. GER PLAN MEMBER(S) COMMENTS/CMZEN PARTICIPATION: A. Kevin relayed the comments of a Plan member about the delay in receiving the GERC minutes until they are approved at the next meeting. If the member wishes to address some item or action from a given meeting, there is no opportunity to know about it until a month or 6 weeks after the event (and after the subsequent meeting). The agenda is sent to all members the week of the meeting, but there may be other issues discussed that are not shown on the agendas. The Committee members are aware of two conflicting problems: If the draft minutes are released before the next meeting (thus before they are reviewed and approved by the 6A Committee), they become the "de facto" minutes, and are taken as gospel ---even if any inaccuracies are later corrected. If the final minutes are not released until reviewed, revised, and approved at the subsequent meeting, the Plan members are not informed of what transpired at the meeting until after the following meeting. Greg Tempel read section 2-73 of the City Code which states that meeting minutes must be provided to the City Clerk's Office before the next meeting of the committee or board. This requirement is currently met by sending a copy of the draft GERC minutes to the Clerk's Office and these are later replaced with the approved minutes. That draft copy is available to anyone who requests it from the Clerk's Office, or by calling Sue at -6788. Possible solutions included making the draft minutes available on the Web Page or distribution of draft minutes that have been reviewed but not yet approved by the full Committee. CONCLUSIONS/NEXT STEPS: Sue will check with the Clerk's Office to see how other committees handle this. Note: Sue's research with the Clerk's Office found that some boards and commissions submit unapproved minutes, with corrections provided later, if necessary. Other groups do not submit minutes until requested to at the end of the year. The GERC did agree to try a new schedule for review of minutes: • Sue will provide a draft by the second Friday after the meeting. • Alan will review the minutes by the third Friday after the meeting. • The revised minutes will be distributed to the GERC members and other staff support on the third Friday following the meeting and could be posted on the Web Page or could be distributed electronically to all Plan members. The Committee will test this process with the April 2 minutes. -2- GERC Minutes - March 5, 199E8 • B. Ginger Uthmann asked the Committee why there is no provision for distribution of 457 funds in a divorce until the employee either leaves City employment, retires, or dies. Assets from a 401(a) plan can be assigned before age 59-1/2 (with a l0e/s penalty) or after age 59-'/2 (without penalty), or after age 55 if the individual works to that age (also without penalty). Also, the benefit can be annuitized at any age. This was made possible several years ago by a change in State law. CONCLUSIONS/NEXT STEPS: Greg Tempel explained that the 457 plan is a deferred compensation plan and that the funds remain the City's money until they are paid out. They are not considered the employee's asset. The conditions for 457 plans were set by Congress and are set forth in the internal revenue code. It was suggested that she contact Bob Schaeffer, Wayne Allard, or Ben Nighthorse Campbell to discuss this subject and the possibility of sponsoring legislation to change the law. 2. PROPOSED QDROs PROCEDURES MAIN POINTS: Greg Tempel had sent the GERC members an outline of the procedure and drafts of the forms for processing QDROs (Qualified Domestic Relations Orders), if any are received by GERC Plan members or support staff. He explained that the City's 401 and 457 plans have similar procedures and forms, but that the GERP process is more complicated because of recent changes in State law. The GERP must be able to track QDRO obligations into the future, as the division of the benefits is deferred. While this process will probably not be used often, the GERC will be directly involved when it is used, as the GERC must ultimately decide whether or not a QDRO will be honored, based upon staff recommendations. CONCLUSIONS/NEXT STEPS: Dave Agee moved to authorize Watson Wyatt to review the QDRO forms and procedures prepared by Greg Tempel for a fee of $1000 or less. Tim Hume seconded the motion, which passed unanimously (5-0) 3. COST OF LIVING ADJUSTMENT (COLA) LETTER OF PROS AND CONS MAIN POINTS: Laurie was not able to talk to Jaime Mares about his views of the pros and cons of funding options for a COLA for current retirees before he left the City. Dave expressed concern that the previous two COLA requests prepared by the GERC were not included in the City Manager's recommended budgets. He suggested the Committee has the option of going directly to City Council with the funding request. The GERC request provided that the departments where the current retirees originally worked include the COLA in their budgets, rather than ask current employees to fund it from Total Compensation wages. It was pointed out that most of these retirees are in their 70's and are unable to work to increase their income. While the Consumer Price Index has moderated in recent years, it has averaged about 5.1 % over the past 28 years. Arguments against a City -funded COLA include (1) the City has fulfilled its commitment to provide a retirement benefit; (2) not funding COLAs helps keep the cost of government down; -3- GERC Minutes - March 5, 1998 (3) there would be no benefit to the City to provide a COLA now; and (4) the City now offers 457 deferred compensation and 401(a) money purchase plans which can provide more retirement income. Additional comments included the fact that the mayor is concerned about the problem of a COLA for current retirees and that neither the GERC nor the Plan members were allowed to provide input when the GERP was made part of Total Compensation. CONCLUSION/NEXT STEPS: This item will be on the April GERC Agenda. It was agreed to write up the pros and cons for City Council and to approach them about discussing the topic at a study session or referring it to the budget process. Kevin will again invite Doug Smith and Diane Jones to our next meeting. The Committee will decide who will work on the draft at the next meeting. . 4. REVIEW OF PORTABILITY ISSUE MAIN POINTS: For some employees, especially those in fields where advancement may mean frequent job changes, portability of benefits is a significant issue. Some employees want to take their GERP retirement funds with them or roll them over to other qualified plans. At the last meeting, Russ proposed a formula for calculating a lump -sum benefit at termination from the City which would not have an adverse affect on the GER Plan. Such a benefit would require Council approval of a GER Plan change. Russ can send suggested wording to Greg Tempel for review and possible Committee action at the next meeting. One provision would require that the employee give six months notice, both to assist with the cash flow and also to lessen the likelihood of employees leaving City employment solely to receive the lump -sum benefit. It may be possible to put this on the Council agenda for the first meeting in May. Dave stressed the importance of employee education about the issue of lump -sum payments. CONCLUSION/NEXT STEPS: Mark will have Russ send the suggested wording for a lump - sum plan change to Greg for preparation for the next GERC meeting. If the Committee finds the plan change acceptable, this hem can be included on the May 5 City Council Agenda. 5. GERC ACTING AS 401(a) BOARD MAINPOINTS: Currently, the 401(a) money purchase plans do not have an oversight board and there is no provision for such a board. Laurie Harvey and ICMA-RC staff supervise these Plans. Laurie noted that in addition to the 401(a) money purchase plan for classified employees (by far the biggest group), there are several smaller groups with their own 401(a) money purchase plans: service directors, unclassified managers, police, and fire chiefs. All of these plan have many things in common and could be supervised by one board. CONCLUSION/NEXT STEPS: The consensus of the members seemed to be to table this issue until August to see what happens with the other items under discussion that may significantly impact the Plan and the Committee. .4- GERC Minutes - March 5, 19988 • 6. WATSON WYATT - FEES AND CONTRACT MAIN POINTS: Dave Agee stated that the actuarial firm of Watson Wyatt was chosen in 1994 through the Request for Proposal (RFP) process to assist the GERC. The fees at that time were $8,000 to provide the annual actuarial valuation report and $450 to attend each monthly GERC meeting. Prices have increased and in 1998 are projected to be $9,600 for the valuation report and $600 per meeting, which is greater than cost projections. In 1997 the national average for these services was $8,470 and $475 respectively. Under the terns signed in 1994, the contract (which runs for five years) could be canceled with 15 days written notice. The fees need to be set soon so that a requisition can be issued for the valuation report. CONCLUSION/NEXT STEPS: Tim Hume suggested that Watson Wyatt send a letter to Purchasing Agent Tun O'Neill explaining the reasons for the fee increases. If he decides that they are justified, the GERC can consider the fee increase at a meeting. Dave will provide Greg with a copy of the contract and related payments and charges. 7. REGULAR INVESTMENT REPORT MAIN POINTS: During February, all of the mutual funds showed positive rates of return. Janus was up 12.6%, Vanguard was up 10.4a/o, and even the New Asia fund was up 6.45%. (The New Asia fund was capped recently and another international fund was chosen to receive the GERC investment funds.) The rate of return on bonds is 6.9%, but the yield is relatively flat. The new investment custodial service (Bank of New York) is now in place. The new system will make monthly and quarterly updates much easier. CONCLUSION/NEXT STEPS: No action required at this time. S. STANDING RULES MAIN POINTS: The standing rules are normally reviewed in September, but it was postponed last year. The only suggested change was to add a sentence allowing the January and July meetings to be rescheduled without a vote of the Committee when they conflict with holidays. CONCLUSION/NEXT STEPS: It was the consensus to leave the standing rules as they are. 9. WEB PAGE FOR THE RETIREMENT PLAN MAIN POINTS: Tim Hume noted that the City Clerk's Office has updated all the boards and commission web pages using a similar format for all of them. CONCLUSION/NEXT STEPS: Tim will probably create links from the GERC web site to such things as the Investment Report and Mmutes sites. AGENDA & SCHEDULE FOR NEXT MEETING The next meeting will be Thursday, April 2nd at 1:15 pm in the Council Information Center .5- GERC Minutes - March 5, 1998 (CIC) of City hall West. The agenda will include: 1. Plan Member Comments/Citizen Participation 2. Report on COLA Pros & Cons 3. Discussion of Member Education & Defined Benefit -Defined Contribution Choice 4. Consideration of amending GER Plan to allow greater availability of lump -sum distribution. 4. QDROs Procedure & Forms Finalized 5. Watson Wyatt Fees & Contract Discussion 6. Regular Investment Review 7. Other Business ADJOURNMENT The meeting was adjourned at 3:58 p.m. FUTURE MEETING SCHEDULE: The General Employees Retirement Committee normally meets at 1:15 p.m. on the I st Thursday of each month in the Council Information Center, City Hall West. **Because the July meeting falls so close to the THURSDAY, APRIL 2, 1998 observance of Independence Day (on July THURSDAY, MAY 7, 1998 3rd), it was moved to the next Thursday, THURSDAY, JUNE 4, 1998 July 9 th, 1998 THURSDAY, JULY 9, 1998** THURSDAY, AUGUST 5, 1998 THURSDAY, SEPTEMBER 3, 1998 THURSDAY, OCTOBER 12, 1998 THURSDAY, NOVEMBER 5, 1998 THURSDAY, DECEMBER 3, 1998 -6-