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HomeMy WebLinkAboutRetirement Committee - Minutes - 04/07/1994r • • REVISED FORT COLLINS GENERAL EMPLOYEES RETIREMENT COMMITTEE APRIL 7, 1994 MEETING MINUTES COUNCIL LIAISON: Ann Azari, Mayor COMMITTEE MEMBERS PRESENT: ABSENT: Jerry P. Brown Jackie Davis None Dennis Sumner Dave Meyer Alan Krcmarik (Member & Staff Support) OTHERS PRESENT: Mary Crumbaker (Staff Support - City Attorney's Office) Brenda Traut (Staff Support - Acting Secretary) Don Mazanec of William M. Mercer, Inc. the City's actuarial firm. Russ Proctor, the Wyatt Company Ann Turnquist, JAD Committee, Employee Development Dave Agee, JAD Committee, Finance Lauri Harvey, Employee Development Pete Dallow, Administrative Services Angelina Powell, ICS Jaime Mares, Employee Development Rita DeCourcey, Finance CALL TO ORDER: Chairperson Dennis Sumner convened the meeting at 1:30 p.m. in the Employee Development Conference Room, 200 W Mountain Ave on April 7, 1994. APPROVAL OF MINUTES: Jerry P. meeting be amended as follows: the last paragraph should read same change should be made in Steps" paragraph; and the next later than May 3rd". Denni unanimously. DISCUSSION TOPICS: s Brown moved that the minutes of the March loth on page 2 the next to the last sentence in "...if employee is 55 or older"; on Page 3 the the first sentence of the "Conclusion/Next to the last sentence should end after "...no Sumner seconded the motion and it passed 1. MEMBER COMMENTS: Plan members present explained they were attending the meeting to hear the Wyatt Report. 2. THE WYATT REPORT ON CITY PENSION PLANS MAIN POINTS: Russ Proctor of the Wyatt Company presented the draft report of his firm's study of the City's retirement programs and alternatives for future changes. The JAD Committee (Dave Agee, Jerry P. Brown, Ann Turnquist, and Mary Crumbaker) has been working with Wyatt's personnel since February and focus groups and open houses have been conducted to receive information from the City employees about their concerns and what they would like in their retirement plans. -1- Russ summarized the City's plans currently in effect, including: GERP [General Employees Retirement Plan]; generally applies to classified employees. MPP [401(a) Money Purchase Defined Contribution Plans]; generally applies to unclassified management employees. 457 [457 Deferred compensation plan with assets currently invested with ICMA]; available with various levels of City contribution to all fulltime employees. Russ reviewed the scope of this study. He noted the purposes of the study and the findings: 1. COMPLIANCE: The current variety of plans offered by the City will fail the Internal Revenue non-discrimination requirements that will apply to the City in 1996. Specifically, the 401(a) Money Purchase Defined Contribution Plans (MPP) generally applicable to non -classified management employees, will fail because there are not the required minimum of 50 participants and because the contributions are higher for the highest -paid employees. 2. EQUITY: There are perceptions of inequities. The MPP benefits are portable, GERP benefits are not. MPP is immediately 100% vested; GERP is 100% vested after five years. Based on career service and retirement at age 65, the benefits are not equal: the upper management 13% 457/MPP plan has the greatest benefits; the GERP plus 3% 457/MPP plan is second; and the management 7.5% 457/MPP plan is third. 3. CHOICE: No employees have choice in the type of plan they participate in. MPP participants have a choice in how money is invested within the ICMA funds. 4. COST: The GERP plus 457/MPP costs the City 3.553% of salaries for the GERP and 2.7% of salaries for the available 3% 457/MPP matching. The 7.5% 457/MPP management plan costs the City 7.5% of salaries. The 13% 457/MPP management plan costs the City 13% of salaries. 5. ADMINISTRATION: Due to the variety of plans there are administrative difficulties in tracking and understanding the provisions of all plans. 6. EMPLOYEE EDUCATION: GERP participants benefit from the defined benefit aspect of the Plan. Participants can project retirement income using -the Plan's formula. The benefit is paid for life, so employees do not have to worry about outliving their income. MPP participants have the opportunity/ risk associated with personal investment decisions. Investment education and pre -retirement planning is important for these people. Russ explained that he will be presenting five alternatives in employee meetings to stimulate employee discussion and obtain a general sense of employee concerns and interests. The alternatives he presented are: 1. All employees would be members of the GERP with 3% City and employee matching contributions to the 457 plan. (All in GERP option) w1a E 2. All employees would be in the Money Purchase Plan (MPP) at 3.553% employer contribution with 3% City and employee matching contribution to the 457 plan. (All in MPP option) 3. The 3% match to the 457 plan for classified employees is reduced to 1.5%. The employee could then participate in the MPP with a required 1.5% employee contribution and a City contribution of 1.5% Thus, the employee still can get 3% city contributions, but they will be split between two plans. (Minimum Change option) 4. Current classified employees have one-time choice of having the 3% match to the 457 plan paid into the MPP with 3% required employee contribution. New employees will all participate in MPP with 3% required employee and 3% employer contribution. (457 versus MPP Choice option) 5. All employees have one-time choice among (Maximum Choice option): A. GERP plus 3% match in 457 plan; B. GERP plus 3% employer and 3% employee contributions to the MPP; C. 3.553% employer contribution to the MPP plus 3% match in 457 plan; D. 6.553% employer and 3% employee contribution to the MPP. Comments, questions, and concerns: Concern that once a decision is made, people are "locked in" for duration of City employment; conflict of "equities" - --older versus younger employees, long-term versus short duration employees, higher -paid versus lower -paid employees, single versus married employees; employees really want a choice [between GERP and another plan]; does total comp limit the choices; portability is very important to some; would portability involve a lump -sum payment; how will the final decision be made; how many GERP members would want to leave the Plan; how many non- members would want to join the Plan? CONCLUSIONS/NEXT STEPS: The GER Committee members complimented Russ on his presentation and on the report. The schedule of presentations to employees was reviewed. Input from employees may be used to make adjustments to the report. The Committee will receive the final report in time for discussion at the May meeting. 3. DEATH BENEFIT CHANGES A. Effective Date of Change in Death Benefits MAIN POINTS: There was discussion on when the proposed change related to death benefits from the Plan should take effect. Factors discussed included the death of an employee during the time period since the last change was made on January 1, 1994; the relatively large number of employees who terminated employment in the first quarter of 1994; and the need to have an effective date which could be effectively administered. CONCLUSION/NEXT STEPS: It was moved and seconded that the proposed change be retroactive to January 1, 1994, and that the clarification be noted that the death benefit change only affects active members of the Plan as of January 1, 1994. The motion was approved unanimously. WI B. Correction of Death Benefit Oversight MAIN POINTS: The Committee discussed the details of how the death benefit change should be corrected. CONCLUSION/NEXT STEPS: It was concluded that the death benefit should be based on an actuarial benefit related to 50% of the earned retirement benefit at the time of the employee's death. The benefit to a married or an un- married employee's heirs would be based on payments beginning when the employee would have been 55 years old (earliest possible date employee would have been eligible for any retirement benefit) or the date of the employee's death, if s/he were older than 55 at the time of death. It was also concluded that the death benefit calculation for the employee who died before this correction is made, should be based on the exact wording concerning the employee death benefit at the time of the employee's death. It was concluded that the death benefit is available only to employees who were active members of the Plan on January 1, 1994. Alan will work with Don Mazanec and Mary Crumbaker to prepare materials to formally submit this correction to the death benefit for City Council consideration. C. Vested status of former classified members of the Plan who had changed to non -classified status prior to January 1, 1994. "MAIN POINTS: Employees still employed by the City in a non -classified status are frozen in the vesting schedule in effect prior to the change. If the new vesting schedule would apply to these employees, they would have higher vesting percentages and have a greater benefit at the time of their retirement. The GERC has been concerned about the adequacy of the benefits provided by the Plan and this would provide a better retirement benefit for the currently -employed individual than if the vesting status is determined by the old plan. During the discussion of the issue, it was pointed out that employees deciding to leave the Plan did so at their own risk, and the rules in effect at the time of their decision are the ones that should be followed. They should not be able to receive future improved benefits from the Plan. They were not considered as part of the actuarial cost estimate that was provided before GERC members voted on the item. This situation was contrasted with an employee death. When an employee dies with less than 100% vesting, it is assumed that if the employee had been given a choice, s/he would have chosen to stay employed till 100% vested." Other members of the Committee felt that employees who still work for the City should be given some consideration and receive the benefit of the improved vesting. Very few employees would be affected. It would seem more equitable to allow these individuals to receive the benefit of the improved vesting. CONCLUSION/NEXT STEPS: Jackie Davis moved to not extend the vesting benefit to employees who left the Plan before January 1, 1994, but who are still -4- ITEMS FOR FUTURE DISCUSSION 1. Possible seminars or workshops to increase GER Committee members' knowledge of their roles and responsibilities. 2. GERP / Workers Comp / Disability Proposal to E-Team 3. Settlements with retired employees with low monthly benefit payments. 4. Method to Report Blended Yields (Bonds & Equities) on Investments AGENDA & SCHEDULE FOR NEXT MEETING The next meeting will be May 5, 1994 at 1:15 p.m. in the Second Floor Conference Room of City Hall West. The agenda will include: 1. Plan member comments 2. Wyatt Final Report Discussion 3. Actuary Services RFP Status Report (May 1 draft) 4. Standing Rules 5. Forms for designating beneficiary ADJOURNMENT: The meeting was adjourned at 3:30 P.M. %72