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HomeMy WebLinkAboutRetirement Committee - Minutes - 10/02/1997DRAFT FORT COLLINS GENERAL EMPLOYEES RETIREMENT CObIIMIITTEE OCTOBER 2, 1997 MEETING MINUTES COUNCIL LIAISON: Mayor Ann Azari COMbIITTEE MEMBERS PRESENT: Jun Hume, 221-6776 Dave Agee, 221-6770 Alan Krcmarik, Member/Staff Support, 221-6788 Kevin Westhuis, 224-6156 COAU IITTEE MEMBERS ABSENT: Patti Teraoka, 221-6715 OTHERS PRESENT: Russ Proctor & Jeff Kraft, 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) CALL TO ORDER Chairperson Kevin Westhuis called the meeting to order at 1: 20 p.m. in the Council Information Center of City Hall West. ITEMS OF NOTE: On behalf of the Committee and staff members, Kevin expressed appreciation to the GERP members who participated in the Focus Groups, to Laurie Harvey and Sue Wilcox for organizing them, and to Jeff Kraft and Russ Proctor of Watson Wyatt for their preparation and presentation of the information and the follow-up work on the questionnaire. Kevin also noted that Patti Teraoka is on vacation and unable to attend today's meeting. Laurie Harvey introduced Debbie Weedman of Human Resources. Debbie will attend the GERC meetings and be responsible for Laurie's GERP-related activities until Laurie returns from maternity leave early in 1998. APPROVAL OF MINUTES: Alan Krcmarik moved that the minutes of the September 4th GERC meeting be approved as distributed. Jim Hume seconded his motion and the vote was 4-0 in favor of the motion. DISCUSSION TOPICS: I. GER PLAN MEMBER(S) COMMENTS/CITIZEN PARTICIPATION: Jun Hume advised the members that he had received a letter from a GERP member who had worked for the GERC Minutes - October 2, 1997 City as a contractual employee for three years (without retirement benefits), before accepting a permanent position in another departmern. He said that after he left his initial position, it was made a permanent position with retirement benefits and another individual was hired to fill it. He felt that his three years should be counted toward retirement. Tim had replied to the employee that the GERC had reviewed similar situations previously, and had found that not granting retirement benefits was consistent with both the provisions of the GER Plan and the conditions of the individual's contract. 2. REPORT ON FOCUS GROUP MEETINGS & QUESTIONNAIRES MAIN POINTS: Jeff Kraft distributed bound copies of the summary of the responses from the focus groups held on September 17th and 18th. The main points include: • Out of 200 employees invited to one of eight focus group meetings, 81 (41%) attended. (This compared to 401 members who attended one of 30 focus group/education pre- sentations in 1993 and to approximately 100 Plan members who attended six general - invitation focus group presentations on a proposed money purchase plan option in 1994.) • Although almost evenly balanced between male and female, those attending tended to be in the 36-55 age group (800/*) with 11-20 years of service (52%). Laurie Harvey confirmed that these percentages of older, longer -service attendees roughly paralleled the demographics of the general employee population. • The overall responses of those attending and completing the questionnaire showed general approval of the existing retirement mix (GER Plan, Social Security, 457 Plan, and 401(a) Plan). • There was significant support for a lump -sum provision at retirement or separation from City employment. • After being provided information, alternatives, and consequences, there was no groundswell of support from those who attended for offering: a. A choice between a defined benefit and a defined contribution plan, b. Cost -of living adjustments (COLAs), or c. Death -benefit enhancement. • Participants felt their retirement package mix was better than average in Northern Colorado. Based on the survey and focus group results, the GERC discussed possible next steps. Russ Proctor will provide some information for Greg Tempel's review about the lump -sum at retirement or separation option. At this time, the lump -sum option is the major change the GERC will explore. It did not appear that there was any groundswell of support for any of the other options discussed. CONCLUSIONS/NEXT STEPS: Kevin and Alan Krcmarik will meet with Committee Liaison -2- GERC Minutes -October 2, 1997 • Ann Azari to discuss the options presented in the focus groups and the information from focus group participants. Kevin will draft a memo outlining the focus group process and including the "General Participant Reactions" and "Overview of Results" sections of the report to be sent to City Council and the focus group participants. A summary of the information presented and the results will be made available to all members via Groupwise and published in the next issue of FortNotes. The FortNotes article will include what the GERC plans to do. A copy of the full report is available in the City Clerk's Office or by calling Sue Wilcox at -6788. 3. DRAFT WORK PLAN FOR 1998 MAIN POINTS: Kevin distributed a draft Work Plan for the Committee in 1998. Tun suggested that when the Standing Rules are reviewed next September, that a provision be added to allow moving regular meetings which fall on or near a holiday to the next week, so that this item doesn't have to be voted on each time it occurs. CONCLUSION/NEXT STEPS: Members were asked to comment on the Work Plan, so a final draft can be voted on at the November 6th meeting. The deadline is December 1. 4. INVESTMENT POLICIES DISCUSSION MAIN POINTS: Alan presented a draft of the Investment Policies incorporating comments from Watson Wyatt, Bob Eichem, and Greg Tempel. Susan Clark of Watson Wyatt felt that some of the wording was too specific and that using "may" instead of "will" would not require the costly or time-consuming activities that were not necessary. Bob's comments primarily addressed the mix of equities and fixed income investments, as well as new information showing that increased diversification in the types of investments actually lowers overall risk. In March, 1992, investment in equity mutual funds was authoriied by the GERC, with a target amount of $2 million. In April, 1993, asset allocation was again addressed, since new Committee members had joined and Bob discussed adding international funds to the mix. Two international funds were added in January, 1994. The following November, Committee members and staff decided to address asset allocation again in 1995. In July, 1995, the Committee approved 50% in equities and agreed to look at increasing it to 60% at a later date. It was estimated it would take 34-38 months to reach the 5010 goal, but in fact it was reached in 26 months (September, 1997), due to larger gains in the stock market. In the current volatile market, a fixed percent target would require frequent buying and selling of investments in order to be in compliance. This is contrary to the current long -tern investment strategy the GERC has adopted and could result in the Retirement Fund losing money. It was proposed that the new policies contain a provision for a set percentage with a plus or minus (+/-) factor. This would allow the value of the investments held by the GER Plan to fluctuate from day to day without resulting in short -tern buying and selling. Bob pointed out that since various types of investments seldom all move up (or down) in value at the same time, this diversity protects the fund from large losses. Bob also related that historically since 1900, the stock market has had a moderate (10%) decline, .3- GERC Minutes - October 2. 1997 on an annual basis, but we have not experienced one for six years. Ilistory also has shown that the stock market has experienced a bear market (20% decline), every three years, but it has not had one for the last nine years (1987). In answer to a member's questions, Bob said the 7.5% return on investment assumption which the GERP has used for many years is still valid. While .1994 was one of the worst years for the stock market in general since the 1960's and the overall value of the Retirement Fund declined; 1995, 1996, and 1997 have been years of exceptional growth. Dave Agee raised a number of questions related to the funding agent's role and whether the Finance Officer is the funding agent or the money manager. He also was unclear on whether the GERC is acting as the investment committee. Greg Tempel provided a confidential mein suggesting amendments to the Plan document to clarify the roles of the Funding Agent and the City's financial officer. Greg asked that Commitee members discuss the suggested changes at the November meeting and consider recommending the changes to City Council. Any changes to the Plan docuyment must be made by resolution of the City Council. Greg also suggested that the draft investment policies remove any reference to the financial, officer as the policies are intended to be more generic and allow for the appointment of an entity other than the financial officer as the Funding Agent " CONCLUSION/NEXT STEPS: Kevin Westhuis moved that the GERC adopt a +/- 10% "flex factor" for the 60% of investments in equities, to allow for stock market fluctuation in value of investments. This motion died for lack of a second. Further discussion directed staff to include the "flex factoe' and other changes in the revised investment policies and to bring the revised policies to the Committee for approval. Greg provided Alan with a draft resolution for the Committee's consideration at final approval of the policies in November. 5. OTHER BUSINESS MAIN POINTS: Kevin will be attending the 5th Annual Mid -Sized Pension Management Conference in Chicago this month, which should provide a lot of retirement -related information. CONCLUSIONS/NEXT STEPS: No action required. AGENDA & SCHEDULE FOR NEXT MEETING The next meeting will be Thursday, November 6th at 1:15 pm in the Council Information Center (CIC) of City Hall West. The agenda will include: 1. Plan Member Comments/Citizen Participation 2. Report on Meeting with GERC Liaison 3. Final Work Plan for 1998 4. Review/Approval of Investment Policies -4- GERC Mirmtee - October 2, 199 5. Consideration of changes to Plan document relating to the Funding Agency. 5. Other Business ADJOURNMENT The meeting was adjourned at 3:39 p.m. FUTURE MEETING SCHEDULE: The General Employees Retirement Committee normally meets at 1:15 p.m. on the 1 st Thursday of each month in the Council Information Center, City Hall West. THURSDAY, NOVEMBER 6, 1997 THURSDAY, DECEMBER, 4, 1997 THURSDAY, JANUARY 8, 1998* THURSDAY, FEBRUARY 5, 1998 THURSDAY, MARCH 5, 1998 THURSDAY, APRIL 2, 1998 THURSDAY, MAY 7, 1998 THURSDAY, JUNE 4, 1998 THURSDAY, JULY 9, 1998** *Because the January meeting falls on New Years Day, it was moved to the next Thursday, January 8, 1998 "Because the July meeting falls so close to the observance of Independence Day (on July 3rd), it was moved to the next Thursday, July 9th, 1998 -s.