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HomeMy WebLinkAboutRetirement Committee - Minutes - 11/04/199311 FORT COLLINS GENERAL EMPLOYEES RETIREMENT COMMITTEE NOVEMBER 4, 1993 MEETING MINUTES COUNCIL LIAISON: Ann Azari, Mayor COMMITTEE MEMBERS PRESENT: ABSENT: Jerry P. Brown Jackie Davis Dennis Sumner Dave Meyer Alan Krcmarik (Member & Staff Support) OTHERS PRESENT: Dave Agee, Staff Pension Oversight Committee Sue Wilcox (Staff Support - Secretary) Bob Eichem (Staff Support - Investment Officer) Don Mazanec of William M. Mercer, Inc. the City's actuarial firm. Ann Turnquist, Employee Development Janet Meisel, Planning Department CALL TO ORDER: Chairperson Dennis Sumner called the meeting to order at 1:22 p.m. in the 2nd Floor Conference Room of City Hall West on November 4, 1993. APPROVAL OF MINUTES: Jerry P. Brown moved and Dave Meyer seconded a motion to approve the minutes of the meeting on October 11, 1993 as distributed. The motion passed unanimously. ITEMS OF NOTE: Mayor Ann Azari, Council Liaison to the General Employees Retirement Committee, was unable to attend the meeting, but was in the building and stopped in on the meeting twice to see if we needed her input. The GERC very much appreciates her interest and availability. Dennis Sumner mentioned that a management group on early retirement, led by Mr. Richard Shannon, Utilities Director, was working on that issue. Those City employees age 50 and older as of January 1, 1994, received an invitation to dialogue regarding possible early retirement options. There will be follow-up focus groups. The initial indication is that the City may consider offering early retirement if it is in the City's best economic interest. Call Employee Development Director Jaime Mares for further information. REVIEW OF DISCUSSION TOPICS: Jerry P. Brown asked for a clarification on the two proposed pension changes approved by the GERC at the last meeting with regard to eligiblity for participation in the changes. This discussion will be added to agenda item #4 "Finance Committee Presentation". DISCUSSION TOPICS: 1. MEMBER COMMENTS: Janet Meisel also requested clarification regarding eligiblity for participation in the recently recommended GER Plan changes. Bob Eichem asked about "reverse equity" of those employees who are not allowed to participate in a defined benefit plan, and because of their circumstances it may be more advantageous rather than a defined contribution plan. This discussion will be added to agenda item #3 "JAD Committee Report". -1- 2. THIRD QUARTER INVESTMENT REPORT MAIN POINTS: Treasury Administrator and Investment Officer Bob Eichem reported that the annual rate of return (ROR) for the GERP through the Third Quarter of 1993 was 8.09 percent. The actuarial report assumes an investment ROR of 7.5 percent, which we exceeded by 59 basis points. At this time, one basis point equals $2,202. Bob noted that longer -term investments are at their lowest since the mid-19601s. During the third quarter we had $2,400,000 of higher -yielding securities mature or pay off, which then had to be reinvested at today's lower rates. In addition, we had $1,400,000 in liquid funds from the last quarter that needed to be invested. The types of securities purchased were diversified in nature. Because of the low return rates, it is possible that we may fall below the 7.5 percent yield. We are in a normal economic cycle, and our investment in mutual funds helped us to achieve greater earnings. Bob stated that GERC may want to consider at a future time expanding our investments beyond the $2,000,000 cap for the purchase of mutual funds. (We currently have $1,600,000 invested.) As we go into the Fourth Quarter the economy continues to give conflicting signals of recovery or continued downturn. We will continue to stay short with funds that are called or paid off to bridge the lower rates, but not be stuck with long-term, low -yielding securities. Bob will also continue to research investing in international mutual funds and expanding our invest- ments in additional five-star mutual funds for discussion in early 1994. Dennis Sumner asked a question regarding the risk involved with funding our newly -recommended Plan enhancements. Since we are using deferred capital gains as our primary source of funding, Bob does not feel it is much of a risk during the next 15 years or so. Bob also answered a question from Jerry regarding the short-term bridging investments. CONCLUSIONS/NEXT STEPS: Dave Meyer moved that the Third Quarter, 1994 Investment Report be approved as submitted. Jackie Davis seconded the motion and it passed unanimously. Copies of the report are available by calling Sue at -6788. 3. JAD COMMITTEE REPORT MAIN POINTS: The JAD Committee, a sub -committee of the Pension Oversight Committee (POC) is composed of Jerry P. Brown, Ann Turnquist, and Dave Agee. It is working on developing an RFP (Request for Proposals) to help the City determine and address the differences and possible inequities of the various pension plans offered by the City. Through this RFP, the City will hire an independent actuary to do an audit/review of the City's retirement and deferred compensation programs. Don Mazanec prepared a draft RFP as based upon the problem statements/issues identified by the JAD. The committee will continue to refine the scope of services, and plans to send out the RFP as soon as possible. The idea is to have a preliminary report from the consultant by March 1, 1994, with input from potentially affected interests (PAI's) and report re -writes through April, with a deadline not later than May 31, 1994 for the final report. -2- 0 Jackie Davis asked about the City using an existing benefits consultant that ,had performed similar retirement research work for the City of Loveland. Ann said JAB would discuss this matter with Purchasing. Dennis Sumner asked who will be paying for this consultant, as he feels GERP members would be paying twice, and non-GERP members would not pay anything for this report if GERP members were forced to contribute. He feels the Benefits Fund should probably pay, rather than the GER Fund. Ann will discuss this matter with Pete Ballow. Jerry P. Brown asked about the reverse equity issue brought up by Bob Eichem. When equity is addressed, both sides need to be looked at, as there may be folks wanting to opt into a defined benefits plan, but have not been allowed to participate previously. The point is well -taken and will be a part of the JAD Committee work. CONCLUSION/NEXT STEPS: The JAD Committee will continue to keep the GERC members informed of their progress and will provide a proposed timeline for their activities and deadlines. 4. FINANCE COMMITTEE PRESENTATION MAIN POINTS: Jerry P. Brown asked Don Mazanec for clarification on participation eligibility in the proposed changes to the GER Plan which will be considered first by the City Finance Committee and then by City Council for adoption. Don stated that service with the City always begins at the date of hire, that any termination must occur after the date of the new benefit for eligibility, and that the enhancements only apply to the current active members of the GER Plan. This means that if January 1, 1994 is the effective date of the Plan enhancements, someone has to be actively employed as of that date in order to fully participate in the changes. The City Finance Committee is scheduled to review the proposed changes to the GER Plan as recommended by the GERC at the last meeting. These two minor changes include: 1) Additional survivor benefits for vested employees who die before age 55; 2) earlier vesting in retirement benefits, beginning with 40 percent after two years of service, 60 percent after three years, 80 percent after four years, and 100 percent after five years of service. CONCLUSIONS/NEXT STEPS: On a motion by Jerry P. Brown, seconded by Jackie Davis, the GERC voted unanimously to make January 1, 1994, the implementation date for the proposed enhancements to the GER Plan. Ann Turnquist, Dennis Sumner, and Alan Krcmarik will make the presentation to the Finance Committee, with the hope that the changes will be sent to City Council for first reading of the ordinance on December 7, with Plan changes to take effect January 1, 1994. Don Mazanec will provide a draft ordinance to Mary Crumbaker by November 16. Alan will coordinate the writing of the agenda item summary (AIS). DAVE NEVER'S REPORT ON PENSION SEMINAR MAIN POINTS: Dave Meyer attended a two-day seminar sponsored by the Colorado Public Pension Coordinating Council in Keystone. Most of the seminar focused on the importance of choosing a pension fund manager and how to choose a financial consultant. Although neither of these issues directly affects the -3- GER Plan, it was interesting that the speakers emphasized the importance of increasing investment in stocks because of the consistent long-term gains they achieve. This supports the direction the GERC has been moving. Dave suggested the Committee may want to consider raising the cap on mutual fund investments from its present 8% of total investment funds. Don Mazanec noted that most pension funds invest about 40-50% in stocks. CONCLUSIONS/NEXT STEPS: The Committee will ask Bob Eichem to discuss raising the cap on stock investments when he discusses international stocks. It was also suggested that the Committee ask how it would affect present investments should the GERP eventually move to a defined contribution plan. 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 EL Team 3. Settlements with retired employees with low monthly benefit payments. AGENDA li SCHEDULE FOR NEXT MEETING The next meeting was moved to December 9th at 1:15 p.m. in the Finance Conference Room. The agenda will include: 1. Plan member comments 2. JAD Report 3., GER Actuary RFP Status Report 4. Followup on Council Action ADJOURNMENT The meeting was adjourned at 3:45 p.m. 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. Any change from that will be noted. **THURSDAY, DECEMBER 9, 1993** THURSDAY, JANUARY 6, 1994 THURSDAY, FEBRUARY 3, 1994 THURSDAY, MARCH 3, 1994 THURSDAY, APRIL 7, 1994 THURSDAY, MAY 5, 1994 THURSDAY, JUNE 2, 1994 -4-