Loading...
HomeMy WebLinkAboutRetirement Committee - Minutes - 02/02/199546 FORT COLLINS GENERAL EMPLOYEES RETIREMENT COMMITTEE FEBRUARY 2, 1995 MEETING MINUTES COUNCIL LIAISON: Ann Azari, Mayor COMMITTEE MEMBERS PRESENT: ABSENT: Jerry P. Brown Jacci Peterson Dennis Sumner Dave Meyer Alan Krcmarik (Member & Staff Support) OTHERS PRESENT: Sue Wilcox (Staff Support — Secretary) Bobbie Burnette, (Staff Support - Asst. City Attorney) Russ Proctor of The Wyatt Company, the City's actuarial firm CALL TO ORDER: Chairperson Jerry P. Brown called the meeting to order at 2:00 p.m. in the 2nd Floor Conference Room of City Hall West on February 2, 1995. This meeting was preceded by a presentation by Russ Proctor of the Wyatt Company entitled "Retirement in the 21st Century - The Sleeping Giant Awakens". Part of the information shared at that meeting will be included in these minutes. A complete Wyatt Co. report will be available after March 2. APPROVAL OF MINUTES: Dennis Sumner noted that in the January 12, 1995 minutes, Item 2-B regarding the Early -Out Program, the words "who are at least 50 years old" in the fourth sentence should be stricken. Also in Item 3 regarding the Money Purchase Plan, the words "new, separate" in the last sentence should be stricken. Dennis moved and Jacci Peterson seconded a motion to approve the minutes as corrected. The motion passed unanimously. ITEMS OF NOTE: Jerry noted that the 1994 Annual Report was submitted to the City Clerk's Office on time and it included the blended yield figures for bonds and mutual funds. He also noted that a formal request had been made of Human Resources to study alternatives for health care coverage for retirees. Jaime Mares acknowledged that the subject was included in the Human Resources 1995 Work Plan. Jaime also acknowledged receipt of Dennis Sumner's 1992 memo about studying a possible connection between reduced benefits at early retirement and older workers incurring costly injuries. DISCUSSION TOPICS: 1. PLAN MEMBER/CITIZEN COMMENTS: During The "Sleeping Giant" presentation, a number of Plan members or citizens commented about the Early -Out Program, putting aside income in a 401(h) plan for medical benefits during retirement, and the solvency of the GERC. The Early -Out Program will be summarized later in these minutes. The other questions were explained or answered. 2. INVESTMENT REPORT - 4TH QUARTER/YEAR-END PRELIMINARY REPORT Alan Krcmarik presented a preliminary 1994 investment report showing the bond portion of the portfolio earned 6.99% of cost during the year. Alan noted that interest rates rose in 1994, and bonds held on the last day of the year -1- had a bond equivalent yield of 7.28%. The mutual funds in the portfolio showed a drop in market value in 1994. Although Staff did not have a yield calculation for the mutual funds, when combined with dividends and capital gains recorded in December, the blended yield for bonds and mutual funds for 1994 was estimated to be 7.0%. Alan provided an update of current market conditions. The yield curve showed a difference of 1/4% between 3-year treasury bonds and the 30-year. As this provides very little incentive to extend maturity (and risk), investments should stay in the short-term area. Major mutual fund forecasters are not suggesting large investments in stocks in 1995. Alan explained that although the Committee had authorized taking an investment loss in 1994, the amount of time required to actually sell investments prevented this from happening. This may be revisited in 1995 for some bonds with less than a 5.0% return. CONCLUSIONS/NEXT STEPS: The Committee expressed its pleasure at the 7.0% return rate in what has generally been a bear market. 3. EARLY -OUT PROGRAM UPDATE MAIN POINTS: In response to questions about the Early -Out Program, Dennis Sumner addressed the group of Plan members attending the Wyatt Company presentation. Dennis explained that a management team had been drafting an early -out option that would be favorable to both the City and the employees. To be eligible an employee must have worked for 20 years or more. As an incentive to leave, an offer combining pay and benefits and based on years of service had been drafted. The proposal had been approved by the Executive Lead Team and is now waiting to be discussed by the Council Finance Committee. A meeting is scheduled for Monday, February 13th at 6:00 p.m. If the Finance Committee agrees to the proposal, information will be supplied to eligible employees, who can then indicate their interest (not commitment). At that time, calculations will be prepared to determine if benefits would apply to the City as well as employees. If the outcome is favorable, offers may be made. If it is not favorable to the City, no offers will be made. Dennis pointed out that a medical benefit could be included so that retirees would be able to buy into the City's medical insurance program at 130% of the current cost to the City. Retirees could do this for up to 10 years or until eligible for Medicare. There might be a variety of pay -out options, including monthly payments and a lump -sum provision. CONCLUSION/NEXT STEPS: When the Finance Committee meeting reaches its conclusions, information will be made available to Plan members via future minutes. SEE POST NOTE. 4. MERCER-WYATT TRANSITION UPDATE MAIN POINTS: Russ worked with Gary Pollock of William M. Mercer, Inc. and was able to match their figures more closely once their method of calculation was understood. One error was found in the 1995 valuation report. In the narrative, William M. Mercer, Inc. discussed post -termination deaths, but -2- 1 this item was not included in the calculations. This probably accounts for 75% of the difference in the results the two companies obtained. The valuation completed for 1/1/96 will probably show a loss, although changing the assumptions for salaries could help off -set it. The Early -Out Program might impact the valuation report also. The event that is most beneficial for the Fund is when individuals retire and draw benefits at age 55. Next most beneficial is if the employee leaves at age 55, but doesn't begin receiving benefits until age 65. Least beneficial to the Plan are employees who work till age 65. CONCLUSION/NEXT STEPS: Russ feels that the sources of the disparity in calculations have been narrowed as much as they can be. No further effort will be made to reconcile Mercer calculations with those of the Wyatt Co. 5. RECOGNITION OF DON MAZANEC MAIN POINTS: Jerry discussed with the Committee members a way to acknowledge Don Mazanec's 20+ years of service to the GER Plan. He plans to present Don with a set of walnut bookends with the City's logo laser -etched on them. CONCLUSION/NEXT STEPS• The other members agreed that recognizing Don in this way was appropriate and they expressed their desire to participate also. 6. CASH ADVANCE ON RETIREMENT BENEFIT PAYMENT MAIN POINTS: In October, 1994 a retiree requested a cash advance on his/her monthly retirement benefit. The request was transmitted by a third party and details were not provided. The GERC felt it lacked precedents, sufficient documentation of the need, other alternatives explored, etc. The Committee followed City practice for such requests of regular City payroll and denied the request in November. The members wish to address the issue now so that if it arises again, there would be policy to provide them with direction. CONCLUSIONS/NEXT STEPS• The Committee members suggested that this issue be formally presented to Bobbie Burnette, assistant City Attorney, for a legal review before any more requests are received. Alan Krcmarik will see that this issue is brought to Bobbie's attention. 7. VALUATION OF RETIREMENT BENEFITS IN A DIVORCE MAIN POINTS: Members also discussed how the GER benefits are valued and handled when an employee/member divorces. Russ explained that normally they provide the value of the accrued retirement benefit at age 65 to the member. The Plan has assumed the cost of these calculations. Jerry circulated a flyer explaining the City's retirement benefits. The flyer was 10+ years old, but the members felt that it had value and could be revised and re -issued for the members. Alan mentioned a Government Finance Officers Association book called Your Pension Rights at Divorce which is available through the GFOA Pension Center. The GER Plan document was modified several years ago to include the requirements of the QDRO. -3- modified several years ago to include the requirements of the QDRO. Jacci Peterson, referring to the information provided in the Sleeping Giant presentation, was concerned that Plan members are not aware of the need to commit to saving for retirement and asked if there were ways to encourage this through the GERC. She suggested that the GERC and Human Resources consider various education methods, show how to calculate retirement needs, and provide a financial planner to assist employees. She urged that younger employees be targeted, as they still have time to accumulate retirement funds. The classes Mollie Mercer conducted targeted the 50+ age group. CONCLUSIONS/NEXT STEPS: Jerry Brown will take the flyer and concerns about educating employees to Human Resources and discuss some options. Russ suggested he may be able to bring some ideas about how the Committee could provide personal financial education as a service to the GER members. AGENDA 6 SCHEDULE FOR NEXT MEETING The next meeting will be March 2nd at 1:15 p.m. in the 2nd Floor Conference Room of City Hall West. The agenda will include: 1. Plan Member/Citizen Comments 2. 1994 Investment Reports, Final 4th Quarter and Year -End 3. Early Out Task Force Update 4. Options for Further Education for Plan Members 5. How Retirement Benefits are Handled in Divorce Cases 6. Update on Valuation Report (Russ Proctor) ADJOURNMENT The meeting was adjourned at 3:35 p.m. POST NOTE: The Finance Committee met on February 13th, reviewed the Early - Out Proposal, and directed staff to continue with the process. FUTURE MEETING SCHEDULE: The General Employees Retirement Committee meetings are normally held at 1:15 p.m. on the 1st Thursday of each month in the 2nd Floor Conference Room, City Hall West. THURSDAY, MARCH 2, 1995 THURSDAY, MAY 4, 1995 THURSDAY, JULY 6, 1995 THURSDAY, SEPTEMBER 7, 1995 THURSDAY, NOVEMBER 2, 1995 -4- THURSDAY, APRIL 6, 1995 THURSDAY, JUNE 1, 1995 THURSDAY, AUGUST 3, 1995 THURSDAY, OCTOBER 5, 1995 THURSDAY, DECEMBER 7, 1995