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HomeMy WebLinkAboutRetirement Committee - Minutes - 12/21/1989• 0 GENERAL EMPLOYEE RETIREMENT COMMITTEE MEETING MINUTES DECEMBER 21, 1989 COUNCIL INFORMATION CENTER MEMBERS PRESENT: MEMBERS ABSENT: Jerry Brown Mollie Mercer Alan Krcmarik Angelina Powell Dennis Sumner Sue Wilcox, Secretary Also present were Don Mazanec of Mercer Meidinger Hansen and Pam Stultz of Employee Development. CALL TO ORDER: Chairperson Dennis Sumner called the meeting to order at 1:10 p.m. APPROVAL OF MINUTES: Minutes of the October 26, 1989 meeting were reviewed. Jerry Brown moved that they be approved as written. Angie Powell seconded the motion and the vote was unanimous in favor of the motion. Mollie Mercer moved that the minutes of the November 21, 1989 meeting be approved. Angie Powell seconded the motion and the vote was unanimous in favor of the motion. ITEMS OF NOTE: Dennis explained briefly the purpose of the meeting and reviewed the questions listed in the November 21, 1989 meeting minutes and which Don Mazanec had been asked to reply to prior to this meeting. AGENDA REVIEW: Dennis distributed a prepared agenda. It was agreed to alter the order in which the agenda items would be addressed since some of the questions would require lengthier answers and more discussion. DISCUSSION TOPICS - OPEN ITEMS 1. AGE 65 RETIREMENT: IS 65 STILL THE "NORMAL" RETIREMENT AGE; IS RETIREMENT MANDATORY AT A CERTAIN AGE; AND IS OUR PLAN LINKED TO A MANDATORY RETIREMENT AGE? MAIN POINTS: Sixty-five is still used by Social Security as the "normal" retirement age, but Social Security is changing this to 67 years. Optional early retirement through Social Security is 62. There is no mandatory retirement age through the City's plan. DECISIONS: No decisions were required. NEXT STEPS: None required. For future information only. 2. COMPETITIVENESS OF GERC MAIN POINTS: Don reviewed the high p pages 1-3 of Actuarial Report for the P He felt that the ICMA voluntary contrit helped make our plan more complete. One nts of our retirement plan (see tion plan and matching City funds drawback to our plan might be that benefits are computed on an average of the highest five years of income, many plans are based on the final three years of salary. Using the final three years provides higher benefits to the employee. The lack of flexibility for early retirement may also be a weakness. See Rule of 80 below. DECISIONS: It was agreed to keep this information in mind as other changes are discussed and made in the plan. A more complete understanding of the relative competitiveness of the GERC would be desirable. NEXT STEPS: Don Mazanec will compute our liability based on using the three final years of employee's salary to compare with current liability. The GERC will ask Employee Development to include retirement in the total compensation survey currently being conducted. 3. SECURITY OF THE PLAN MAIN POINTS: As a result of the recent concerns about employees' medical coverage the GERC had received questions about the security of the retirement plan from the political process or other claims. DECISIONS/CONCLUSIONS: Don advised the Committee that vested benefits are a contractual obligation and not subject to the political process. Nonvested benefits are subject to change at any time. Funds held for retirement benefits are an:asset of the City and would be subject to any claim made against the City— .. NEXT STEPS: None required. For information only. 4. COST -OF -LIVING ADJUSTMENT FOR RETIREES MAIN POINTS: Don Mazanec distributed a summary table of his responses to the various proposed options in implementing a cost -of -living adjustment. Plan I would increase the amount a retiree receives by 1% per year for each year since the individual retired. The increase in total normal cost is $11,631 over the current costs to the plan. This would increase the cost of implementing the plan from the current 2.891% to 2.961% of payroll. Plan II would increase the amount a retiree receives by 2% per year for each year since the individual retired. The increase in total normal cost is $23,263 over the current costs to the plan. This would increase the cost of implementing the plan from the current 2.891% to 3.031% of payroll. Plan III would increase the amount a retiree receives by 3% per year for each year since the individual retired. The increase in total normal cost is $34,895 over the current costs to the plan. This would increase the cost of implementing the plan from the current 2.891% to 3.101% of payroll. DECISIONS: The consensus of the members was that the Committee did want to institute a cost -of -living adjustment as soon as possible. Jerry Brown moved and Alan Krcmarik seconded a motion to institute a Plan III (3%) cost -of -living adjustment for all current retirees effective 1-1-90. The vote was unanimous in favor of the motion. NEXT STEPS: Alan will draft the necessary materials for Council action. 5. DEATH BENEFIT TO DEPENDENTS 6. DEATH BENEFITS TO AN ESTATE MAIN POINTS: Since these two items are closely related, it was decided to discuss them together. They both concern distribution of retirement benefits earned by an employee vested in the plan, who dies before retirement and after age 55. The Plan currently provides for payment of one-half of the accrued benefit to a surviving spouse only. Now, in light of social changes and the advent of many single -parent families, the members feel that payment of death benefits to dependents or an estate should be added to the provision for payment to a spouse. Closely related is a change that has already been considered and approved which would allow designation of ANYONE as the beneficiary (as opposed to only a spouse). Mr. Mazanec suggested these settlements to an estate, with the option of either a 60-month payment or as an actuarially -equivalent lump -sum payment. As with the spouse benefit, this would be equal to 50% of the accrued benefit. The lump -sum payment would allow the settlement of the account from the retirement plan and employee's estate to be finalized in a timely manner. DECISION: It was agreed to include wording which would guarantee a spousal payment for life or at least equal to 60 months of benefit. This would also be available to an estate. The Committee also agreed that it would support all changes that can be accomplished within the current GERC budget of 3.53% of payroll. Other items, such as the Rule of 80 and deferred compensation, would be evaluated in context with the City and the employee total salary and benefit package. NEXT STEP: This change will be proposed to the City Council. 7. MAIN POINTS: Mr. Mazanec noted 5-year vesting is required by most employers and is an industry norm. The increase in the total normal cost for this change is $17,780 over the current costs of the plan. This would increase costs for the plan from 2.891% of payroll to 2.998%. DECISIONS: It was concluded that this change would be recommended. NEXT STEPS: This will be recommended to City Council as a part of the proposed package of changes. 5. RULE OF 80 MAIN POINTS: Don explained the Rule of 80. If would allow employees 55 years or older, whose age plus years of service is equal to or greater than 80, to retire at full earned benefits. This would address concerns with the equity of the current practice of discounting earned retirement benefits by an much as 50% for early retirement. It would also provide an option for employees in the Labor/Trades area to retire earlier. The total normal cost to implement this change would be $255,920. This would increase retirement costs from 2.891% to 4.432% of normal payroll. DECISIONS: The consensus seemed to be agreement with the principal of the rule of 80, but that because of the cost, it should be considered as part of the total compensation package currently being developed by Employee Development. NEXT STEPS: This will be studied further when the total compensation study is completed. 9. MEDICAL BENEFITS FOR RETIREES/DISABLED EMPLOYEES: MAIN POINTS: Mollie reported that there was no new information on this subject as the City is still wrestling with the rising cost of medical benefits for employees. DECISIONS: This topic will be kept for future discussion or will be turned over to the Total Compensation Study Group when it is formed. NEXT STEPS: The Committee will continue to follow this item when the total compensation study is completed. 10. CONFLICT OF INTEREST FOR BOARD MEMBERS MAIN POINTS: The possibility that employees serving on the GERC represent a conflict of interest is being looked at by Mary Crumbaker-Smith, assistant City Attorney. DECISION: None required. NEXT STEPS: Dennis will advise the members when Mary gives us an opinion. DISCUSSION TOPICS - NEW ITEMS 1. EMERGENCY SERVICES DISPATCHERS MAIN POINTS: The City Attorney requested the GERC propose a change in the retirement plan to change the definition of "employee" in Section 2(K) to exclude emergency services dispatchers in the Police Department. DECISIONS: There was confusion about this request. Mollie agreed to follow up with Pam Stultz, who had left the meeting by this time, to get a clarification on this issue. NEXT STEPS: This will be discussed at the next GERC Meeting. 2. POUDRE FIRE AUTHORITY CLERICAL & TECHNICAL PERSONNEL MAIN POINTS: Mr. Mazanec advised the GERC that the retirement membership statement should be revised to include these employees who are covered by the plan. This is a housekeeping change which can be made at the time other changes under consideration are made. DECISIONS: Committee members agreed with Don's suggestion. NEXT STEP: This revision will be proposed along with other changes being considered at that time. 3. READABILITY OF RETIREMENT PLAN MAIN POINTS: Mollie advised the Committee that Mary Crumbaker/Smith in the City Attorney's Office suggested it would be desirable to improve the readability of the retirement plan. Mary has offered to read through the plan and offer suggestions. DECISIONS: Committee members agreed with the suggestion. NEXT STEP: Mollie will ask Mary to review the plan and offer suggested changes to improve readability. 4. CHANGES BEING PROPOSED TO CITY COUNCIL MAIN POINTS: There are a number of changes which are being proposed for City Council consideration. These changes are: A. Provide a 3% per year since retirement cost -of -living adjustment for retired employees (reference 12/21/89 minutes). B. Provide a death benefit to vested employee's estates. (reference 12/21/89 minutes). C. Change the plan to provide full vesting after five years employment. (reference 12/21/89 minutes). D. State clearly in the plan that Emergency Dispatchers are not covered by the retirement plan. (This change is tentative, pending further clarification.) (reference 12/21/89 minutes). E. Make various changes in the verbiage contained in the retirement plan to improve its readability. (reference 12/21/89 minutes). F. Revise beneficiary definition given in Article 7, Section 5 (page 7-2) of the retirement plan to provide a broader definition of beneficiary. (reference 9/13/89 minutes). G. Revise retirement plan to permit a beneficiary to change the method of payment from monthly to quarterly, yearly, or lump -sum. (reference 12/26/89 and 7/27/89 minutes). H. Revise retirement plan to authorize lump -sum payment of retirement benefits to any retiring employee or any vested employee upon leaving City of Fort Collins employment, provided their benefits would not exceed $100 per month. (reference 12/26/89 minutes). DECISIONS: The GERC will start the process of presenting these changes to City Council for their consideration. It will also be noted that the Rule of 80 and medical benefits for retirees/disabled employees are additional areas of concern to the Committee. Any recommendations on these items will be submitted to City Council after the total compensation study has been completed. NEXT STEP: Alan Krcmarik and Dennis Sumner will meet with the GERC's Council liaison, Chuck Mabry, to review these proposed changes and obtain the benefit of his thoughts in preparing our proposals and presentation for City Council. ITEMS FOR FUTURE DISCUSSION 1. Defined Benefit Study: The Committee is still interested in pursuing this, but will wait until the changes to the current plan have been acted on by Council. 2. Investment Market Class: This will be done at a later time. AGENDA AND SCHEDULE FOR NEXT MEETING The next meeting will be January 25, 1990 at 1:00 p.m. in the Finance Conference Room. Discussion will center on the changes to be proposed to City Council. The meeting was adjourned at 3:30 p.m.