HomeMy WebLinkAboutRetirement Committee - Minutes - 08/03/1995FORT COLLINS GENERAL EMPLOYEES RETIREMENT COMMITTEE
AUGUST 3. 1995 MEETING MINUTES
COUNCIL LIAISON: Ann Azari, Mayor
COMMITTEE MEMBERS PRESENT: ABSENT:
Jerry P. Brown Jacci Peterson
Gary Ellis Dave Meyer
Alan Krcmarik (Member & Staff Support)
OTHERS PRESENT:
Sue Wilcox (Staff Support - Secretary)
Laurie Harvey (Staff Support - Benefits Administrator)
Russ Proctor of The Watson Wyatt.Company, the City's actuarial firm
CALL TO called
he
to
er
1:25 p m. ORDER:
nEthe Finance Conference Room ofncity Hall tWest eon�August 3,d1995t
ITEMS OF NOTE: 1. Resolution 95-101 dealing with death benefit equity and
several housekeeping items was passed unanimously on the consent agenda by
City Council on July 18th. Sue Wilcox passed out copies of the final
resolution and agenda item summary.
2. At the same meeting, Council recognized Dennis Sumner (former 8-year GERC
member and chairperson) with a plaque. Several GERC members attended.
3. Jerry attended a meeting on July 10th with Human Resources where the
possibility of providing medical benefits to retirees was discussed. It
looks promising for retirees to be able to participate in the City's medical
benefits program for approximately $100 per month. Inclusion of spouse or
dependents for an additional fee may be possible also. Discussion continues
on the feasibility of deducting the premiums from GER Plan benefit checks.
Russ Proctor will review this also.
4. The Early Out option would not be economically feasible for the City, so
the Early Out proposal has been withdrawn.
5. Mayor Azari asked to meet with Jerry on August 17th to discuss cost -of -
living increases (COLA) for retirees.
6. Bobbie Burnette, Assistant City Attorney, and Dave Agee, Comptroller,
were unable to attend this meeting.
APPROVAL OF MINUTES: Jacci Peterson moved and Dave Meyer seconded a motion
to approve the July 6, 1995 meeting minutes as distributed. The motion passed
unanimously.
DISCUSSION TOPICS:
PLAN MEMBER/CITIZEN COMMENTS: There were no member or citizen comments.
Be
2. REVISED PERSONAL RETIREMENT BENEFIT REPORT FORM
As part of the preparation of the Valuation Report each year, an individual
report form showing each employee's retirement benefits is annually prepared
and distributed. At the March meeting, the GER Committee reviewed the
current form and another one presented by Russ Proctor. The pros and cons of
changing to the proposed form were discussed and reviewed. An earlier
estimate from Watson Wyatt put the cost of producing the current benefit
report form at $2400 and the proposed form at $7500.
Questions arose regarding confidentiality of ICMA information, cooperating
with ICMA, information on 401(k) and 457 plans, interfacing City payroll
information with Watson Wyatt's system, and sharing costs. Additional policy
questions included the role of education in the GERC's "mission", legal
questions about using GERP money for this information dissemination, and cost
versus benefit. In order to implement a new form next year, everything needs
to be in place by February, 1996.
CONCLUSIONS/NEXT STEPS: The consensus was that the sample form from Watson
Wyatt would 1) provide a clearer picture of the employee's projected benefits
at retirement (GER Plan, Social Security, and ICMA), in relation to expected
retirement income needed; 2) provide concrete options for increasing
retirement income; and 3) might stimulate employees to be better educated
about retirement issues. The group decided to investigate the questions
about a new yearly statement form; if it looks feasible, implement the new
form; and evaluate these new yearly statements afterwards. Laurie Harvey
will contact Karen Stevison of ICMA with questions about confidentiality,
feasibility, and sharing costs. Jerry will talk to Bobbie Burnette about
legal requirements. Russ will correct some errors on the form and provide an
updated draft.
3. BREAK IN SERVICE POLICY
MAIN POINTS: A request for reinstatement was received from a vested Plan
member who left classified City employment after 13 years to return to
college. While a student, she continued to be employed by the City in
various hourly and contractual positions and in April, 1995 she was rehired
as a fulltime, classified employee at a higher job classification and pay
range. However, a total of five years and seven months has elapsed since her
original classified employment ended. Under the current Plan, any separation
from credited City employment greater than five years constitutes a break in
service, meaning she starts a new employment service when she returned to
classified employment.
During the time between her original termination and re-employment in a
classified position, the break in service provision was changed from one year
to five years, and the vesting period was changed from 10 years to five years
for full vesting.
The employee has asked to be reinstated and not have to fulfill a second
vesting period. Questions were raised about the effects of the Plan changes
on this situation and on several legal issues, as well as the financial
-2-
impact reinstatement would have on the Plan funds. Russ Proctor noted that
private plans often have a phrase allowing reinstatement up to five years "or
employee's length of previous service, whichever is greater" that would allow
this employee's request. Although the current Plan does not allow
reinstatement after five years, the employee's benefits from her initial
employment are not affected.
CONCLUSION/NEXT STEPS: The employee and her supervisor plan to attend the
September meeting to present her appeal. In the meantime, Jerry will contact
Bobbie Burnette so that she is aware of the issues raised.
4. INVESTMENT REPORT, SECOND QUARTER, 1995
MAIN POINTS: The yield for the bond component of the City's General Employee
Pension Plan portfolio for the second quarter of 1995 was 7.17%. The yield
of the benchmark 5-year Treasury Note was 6.41%, so earnings exceeded the
target by 76 basis points. The year-to-date yield (7.34%) exceeded the
target (6.88%) by 53 basis points. The mutual fund portion of the portfolio
had an 8.69% rate of return for the second quarter and a 17.55% return for
the last 12 months. Bob Eichem noted that there is still a lot of volatility
in both the stock and bond markets. Finance staff will continue to work on
refining the blended yield of bond and stock mutual funds.
CONCLUSION/NEXT STEPS: Russ Proctor will consult with his staff to see if
they have suggestions to improve the process for combining bond and equity
investment returns. Bob, Alan Krcmarik, and Sherrie Temple will continue to
look for higher -yielding, longer -term investments and will resume investing
in domestic mutual funds already approved by the GERC.
5. EXPANDED LIST OF POTENTIAL INVESTMENT OPPORTUNITIES
MAIN POINTS: Bob reviewed the criteria in the investment policies that is
used to choose the mutual funds for the portfolio, one of which was a 5-star
(highest) rating by Morningstar. This rating reflects the rate of return and
the amount of risk involved in the mutual fund's investments. Primarily
because of the drop in rate of return, some of the original mutual funds
chosen are now rated 4-star or lower and investment in these funds for the
GER Plan has been capped at current levels. If the funds return to 5-star
status, investment could be resumed.
Since there are very few international mutual funds which currently carry the
5-star rating, Bob suggested that the GERC consider amending the investment
policies to allow 4-star funds. A 4-star rating does not mean that the fund
is more risky. In fact the opposite can be true. A fund could be 5-star
because it took a lot of risk and achieved high returns. It is more
important to determine what the degree of risk is and how the fund has
performed over the long term. He also discussed some funds that are 5-star
rated, but are not currently on the approved list. Some of these have a
"load" (a fee associated with their purchase), but the "load" might be waived
for public pension plans. Others do not have the 5-year track record current
policies require.
5ca
CONCLUSIONS/NEXT STEPS: Gary Ellis moved and Jacci Peterson seconded his
motion to amend the investment policies to allow for these circumstances.
Bob will bring suggested changes to the Committee before they go to City
Council.
6. VALUATION "SHORTFALL" FUNDING OPTIONS - PRELIMINARY DISCUSSIONS
MAIN POINTS: Russ Proctor provided the finalized valuation report and
discussed the $125,000 "shortfall"' in the current funding formula. If
nothing is changed, this deficit will continue to grow. Options include
asking for a one-time $125,000 infusion to eliminate the current deficit;
increasing the current contribution rate to the GERC from 3.553% (set in
1985) to 4.093% for future contributions; increasing the contribution rate
beyond 4.093%, which would gradually eliminate the deficit; and study and
revise the assumptions used for the fund (turnover rate of employees,
investment return rate, and rate of inflation).
CONCLUSIONS/NEXT STEPS: The Committee intends to have any changes in place
in time for the 1997 budget process. Alan and Jerry will prepare information
to present to the Executive Lead Team and the city manager as part of the
Total Compensation discussions. Jerry will discuss this item with Mayor
Azari when they meet.
AGENDA it SCHEDULE FOR NEXT MEETING
Jerry advised that he is unable to attend the Octgzber 5th meeting and asked
the members to consider changing the meeting date . This will be discussed
at the next meeting, which will be September 7th at 1:15 p.m. in the 2nd
Floor Conference Room of City Hall West. The agenda will include:
Plan Member/Citizen Comments
Election of GERC Officers for 1995/96
3. Annual Review of GERC Standing Rules
4. Update on "Planning for Your Retirement" Pamphlet
Request for Reinstatement from Virginia (Ginger) Purvis
6. Suggestions for "GERC History" Format
'The shortfall was created by a combination of events: world-wide decrease
in investment returns, changes in the Plan which changed vesting from 10 years
to 5 years and allowed a death benefit before age 55, and discovery of a number
of employees who chose to remain in the Plan after their positions became
unclassified.
2POST NOTE: Future meetings will return to the Second Floor Conference Roon
beginning with the September meeting. We regret any confusion about this change.
-4-
7. Request to Change October 5th Meeting Date
8. Update on "Pension Benefits Report Form" revisions.
ADJOURNMENT
The meeting was adjourned at 4:05 P.M.
FUTURE MEETING SCHEDULE:
The General
1st Thursday of each
monthrineCommitteent the 2 dFloor Conferemeets nceRoom, City P.m. the
THURSDAY, SEPTEMBER 7, 1995
THURSDAY, NOVEMBER 2, 1995
THURSDAY, JANUARY 4, 1996
THURSDAY, OCTOBER 5, 1995*
THURSDAY, DECEMBER 7, 1995
THURSDAY, FEBRUARY 1, 1996
*The October meeting may be changed to another date.
-5-