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HomeMy WebLinkAboutRetirement Committee - Minutes - 05/01/1997City of Fort Collins Services Finance Administration FORT COLLINS GENERAL EMPLOYEES RETIREMENT COMMTTEE MAY 1, 1997 MEETING MINUTES COUNCIL LIAISON: Mayor Ann Azari COMMITTEE MEMBERS PRESENT: Jerry P. Brown, 221-6350(w), 226-0800(h) Jim Hume, 221-6776 Dave Agee, 221-6770 Alan Krcmarik, Member/Staff Support Kevin Westhuis, 221-6156 OTHERS PRESENT: Sue Wilcox (Staff Support - Secretary) Russ Proctor - Watson Wyatt Worldwide, the City's actuarial firm Laurie Harvey (Staff Support - Human Resources) Greg Tempel (Staff Support - Legal) John Lamprey, deferred vested GER Plan member Michael L Griffith, attorney for Mr. Lamprey CALL TO ORDER Chairperson Jerry P. Brown called the regular meeting to order at 1:20 p.m. in the Council Information Center of City Hall West. ITEMS OF NOTE: Jerry advised the members that Bob Eichem is at a conference and on vacation this week..... The deadline for applying for Jerry's GERC position has been extended to 5:00 p.m. on Tuesday, May 6th..... Copies of the Lump -Sum Payment Policy, which was approved at an earlier meeting, were distributed. APPROVAL OF MINUTES: At the March GERC meeting, the members agreed to a new procedure for revising and approving the GERC minutes. The draft April 3, 1997 meeting minutes generated a number of changes to Item 3 - "Credit for Part-time Service", Item 4 - "Investment Strategies", and Item 6 - "Conference on Converting a Defined Benefit Plan to a Defined Contribution Plan". Alan Krcmarik moved that the April 3, 1997 minutes be approved as corrected and Kevin Westhuis seconded the motion. The minutes were approved unanimously. Discussion continued about attaching major changes to the minutes, rather than incorporating them into the minutes before approval. The Committee directed that the minutes be an accurate record of what was discussed and reflect the intent of the Committee, recognizing that they are not meant to be verbatim minutes. DISCUSSION TOPICS: 1. GER PLAN MEMBER(S) COMMENTS/CITIZEN PARTICIPATION: There were no member or citizen comments. 300 LaPorte Avenue • P.O. Box 580 • Fort Collins, CO 80522-0580 • (970) 221-6788 • FAX (970) 221-6782 GERC Minutes - May 1, 1997 • • 2. SERVICE CREDIT DETERMINATION MAIN POINTS: Jerry introduced John Lamprey and his attorney Michael L. Griffith. In 1990 John Lamprey requested and received clarification from the General Employees Retirement Committee of his eligibility to earn service credit during a 75-day gap between Mr. Lamprey's termination from City employment and the granting of coverage by Worker's Compensation. Mr. Lamprey is now requesting that the GERC clarify his eligibility to earn service credit now that he is receiving Social Security Disability Income benefits and is recognized as totally permanently disabled by Worker's Compensation. Alan Krcmarik moved and Kevin Westhuis seconded his motion to adjourn to Executive Session to discuss this personnel matter with staff and legal counsel. The vote, which requires a 2/3 majority to pass, was approved unanimously 5-0. The meeting was adjourned to Executive Session at 1:35 p.m. and Mr. Lamprey and Mr. Griffith left the room. At 1:55 p.m. Mr. Lamprey and Mr. Griffith returned to the room and the regular meeting was reconvened. Dave Agee moved that, as Article XI, Section 2 of the 1985 and 1992 General Employees Retirement Plans provides that the General Employees Retirement Committee has the power to interpret the provisions of the Plans and to determine any and all questions arising under the Plans, and based upon the fact that former City employee John Lamprey has been determined to be permanently totally disabled pursuant to the provisions of the Worker's Compensation Act of Colorado, the General Employees Retirement Committee finds that Mr. Lamprey is, at this time, entitled to the accrual of service credit pursuant to the provisions of the 1985 Plan. Tim Hume seconded the motion. The vote was 5-0 in favor of the motion. It was clarified that Mr. Lamprey is not required to verify his disability on a regular basis, but that he may be required to provide proof of continued disability when he applies for his retirement benefit. Such proof may, at the discretion of the Committee at that time, be in the form of an affidavit from the applicant. CONCLUSIONS/NEXT STEPS: As confirmation of this action, Mr. Griffith will be provided with copies of these minutes after the GERC approves them. Copies will also be included in Mr. Lamprey's files with the City of Fort Collins at that time. 3. ACTUARIAL VALUATION REPORT MAIN POINTS: Russ Proctor of Watson Wyatt Worldwide distributed copies of the 1997 Actuarial Valuation Report. Additional copies are available for review from Sue in Finance Administration, ext. -6788. Dave asked several questions related to GASB (Governmental Accounting Standards Board) requirements: he asked that the 10 years of information that is required by GASB #25 on page 45 (or as many years of information as are available), be included in the 1998 Actuarial Valuation Report. Also, he asked how the Government Finance Officers Association (GFOA) requirement of showing the GERP benefit both as a dollar amount and as a percent of pay would be implemented? Also, Laurie Harvey noted that a benefit payment is not reflected on page 28. Russ will check into this and make the correction. CONCLUSION/NEXT STEPS: Dave will contact GFOA and ask for clarification of how to handle the reporting requirement under GASB #25. Dave Agee moved to accept the 1997 Actuarial -2- GERC Minutes - May 1, 1997 • • Valuation Report an complimented Watson Wyatt Worldwide, Russ, and Mark Sanford for their work on the report. Alan Krcmarik seconded the motion, which was approved unanimously, 5-0. 4. INVESTMENT REPORT: FIRST QUARTER, 1997 MAIN POINTS: Alan stated that the First Quarter Investment Report is not complete. He reported that despite the significant stock market tumble at the end of the first quarter, the rate of return on the bond portion of the portfolio was 6.5%, compared with earnings of 6.3% for the benchmarked Treasury bonds. Mutual funds were down 1% compared with Standard and Poor's return of 2.6%. The international portion of the mutual funds was down 2%, compared to its index, the European, Asian, & Far East (SAFE) Index, which lost 1.6a/o. The good news is that the stock market bounced back to its previous high during the last week and fortunately, the City's regular acquisitions were made just before it made the jump. CONCLUSIONS/NEXT STEPS: Alan will distribute the First Quarter Investment Report as soon as it is complete. 5. INVESTMENT POLICIES & STRATEGIES MAIN POINTS: At the last meeting, members had discussed the lack of 5-star rated index funds (funds which are managed to match the stock market and usually contain the same mix of fiords as a recognized index such as the Standard & Poor's 500). The City's financial policies allow investment only in 5-star funds and during the last month several index funds were given 5-star ratings, meaning they are in the top 12.5% of all funds, with outstanding performance for the last 3 years. Finance staff will research them further for possible inclusion in the GERP portfolio. Alan mentioned that there are several things he wants to include in the investment policies being drafted for the GERP. These include guidelines and indices on when to "cap" and/or sell certain investments which are not performing satisfactorily and a cap on investments in each mutual fund. Alan also discussed the possibility of asking the companies we currently invest in, to lower our costs by classifying the City as an "institution". The City currently pays 6.5% in fees. At the current rate of investment, the GERP portfolio should contain 50% equities by the end of 1997, with 10% of that being international. Jim cautioned that some of our domestic equities may be "global" and could contain up to 8% in international funds, but that international funds should be purely international. CONCLUSIONS/NEXT STEP: Kevin Westhuis moved and Jim Hume seconded the motion asking Alan to present the GERC with recommendations on index funds that match the criteria required for the City's equity investments, which currently comprise 43% of total GERP investments. The vote was 4-0, with Alan Krcmarik abstaining. Alan will discuss these issues with some investment advisors. 6. DRAFT GERP INVESTMENT POLICIES MAIN POINTS: Alan has made some preliminary changes to the draft GERP Investment Policies and will send these to the members and staff via Groupwise. He asked that questions and suggested changes be sent to him. The GERC will review and revise the draft and then the Council Finance Committee will have an opportunity to review it betbre the full City Council acts on it. -3- GERL Minutes - May 1, 1997 • • CONCLUSIONS/NEXT STEPS: Alan asked that this item be placed on the June 5th agenda for discussion. 7. PENSION PLAN AMENDMENTS & VESTING ISSUE MAIN POINTS: At the April 3, 1997 meeting, the topic of credit for part-time service was deferred until February, 1998 because legal advice on several points was not immediately available and there is a moratorium on changes to the current payroll/personnel system. In the meantime, Jerry asked Greg Tempel to provide some legal direction on a proposal to Annualize Pay and Prorate Years of Service (AP/PYS) retroactively. Greg provided a confidential memorandum whichdiscussed the legal issues surrounding vesting, limited vesting, and retroactive changes to a pension plan. Several members felt a retroactively -applied change to the Plan would probably not be a viable alternative. Even though there is a moratorium on changes to the current payroll/personnel system, it would be possible to implement a AP/PYS system and track the changes manually until a new financial system is up and running. Using AP/PYS is more equitable than the current system and there are more employees moving to part-time as they approach retirement. If an AP/PYS method change is considered, it would be necessary to educate employees before it is implemented. There are currently about 80 employees who have moved from part-time to full-time or vice versa. Laurie Harvey advised that the work involved in tracking this manually would be significant. Also, if a defined contribution plan were implemented, the question of part-time and full-time would be minimized by any participants who opted out of the GERP altogether. CONCLUSION/NEXT STEPS: Jerry thanked Greg, who with Russ's help, addressed the question in an understandable way. The topic is again deferred to February, 1998. 8. DEFINED BENEFIT/DEFINED CONTRIBUTION UPDATE MAIN POINTS: Russ provided some preliminary figures on the effects of creating a Defined Contribution (DC) plan and giving GERP members the choice of remaining in the GER Plan or moving to the DC plan. Russ's calculations showed that if most of the young/newer employees elected to go to a DC plan, it would actually involve removing a relatively small amount of money from the GERP, leaving the larger portion of the money and the olderAonger-vested employees in the GER Plan. Some factors discussed: what rate of return on investments would be assumed in calculations for a DC plan; instead of using a fixed rate of contribution, use the percent of income needed at retirement to set the contribution rate; if there is no set retirement age required, would employees stay indefinitely; having a one-time choice of benefit payment; a possible need to establish a DC board of directors; and providing on -going investment education for DC members. CONCLUSIONS/NEXT STEPS: Russ will provide calculations based on more refined individual contributions and graphs for individuals at ages 45, 55, 62, and 65. He will look at salary scale differences also. 9. FEEDBACK ON PERSONAL RETIREMENT PLANNING STATEMENTS (PRPS MAIN POINTS: The Personal Retirement Planning Statements (PRPS) were distributed with the April 25th paychecks and a couple of hitches were noted and are being corrected. The tape sent to -4- GERC Minutes - May 1, 1997 • • Watson Wyatt did not contain updated location codes for some reason, but this will be corrected for next year's tape. A number of people have contacted Laurie for further information on their benefits and increasing other forms of retirement savings. CONCLUSIONS/NEXT STEPS: The Committee was satisfied with the PRPS and the present system will continue next year. 10. OTHER BUSINESS A. Spread Sheet for Calculation of DB and DC Benefits: Alan was asked to Groupwise his spreadsheet that can calculate both DB and DC benefits to the GERC and support staff. B. Restatement of GER Plan: Jerry stated that working on the restatement of the GER Plan is a group effort involving Greg Tempel and Mark Sanford of Watson Wyatt to outline initial changes, with review by the GERC members and staff. The goal for implementation is January 1, 1998, so suggested changes should come to the Committee in September. AGENDA & SCHEDULE FOR NEXT MEETING The next meeting will be Thursday, June 5 at 1:15 p.m. in the Council Information Center (CIC) of City Hall West. The agenda will include: 1. Plan Member Comments/Citizen Participation 2. Community Service Officers (PD) Request to Roll Out of GER Plan 3. Employee Request re: Service Credit for Lump -Sum Settlement from LTD Carrier 4. View "Nightline" Video on DB/DC Issue 5. Final Investment Report for I st Quarter, 1997 6. Draft of GERP Investment Policies 7. DB/DC Study Update & Details of Design of Retirement Philosophy 8. Update on GERC Web Page ADJOURNMENT The meeting was adjourned at 4:25 p.m. FUTURE MEETING SCHEDULE: The General Employees Retirement Committee normally meets at 1:15 p.m. on the 1st Thursday of each month in the Council Information Center, City Hall West. The remaining meetings are: -5- GERC Minutes - May 1, 1997 * • THURSDAY, JUNE 5, 1997 THURSDAY, JULY 10,1997"Date changed because of holiday* THURSDAY, AUGUST 7, 1997 THURSDAY, SEPTEMBER 4, 1997 THURSDAY, OCTOBER 2, 1997 THURSDAY, NOVEMBER 6, 1997 THURSDAY, DECEMBER, 4, 1997 -6-