HomeMy WebLinkAboutRetirement Committee - Minutes - 09/07/2000Retirement Plan •
City of Fort Collins
FORT COLLINS GENERAL EMPLOYEES RETIREMENT COMMITTEE
SEPTEMBER 7, 2000, MEETING MINUTES
COUNCIL LIAISON: Mayor Ray Martinez Approved with amendments on October 5, 2000
COMMITTEE MEMBERS
PRESENT: Terry Van Cleave, 221-6321 Bill Switzer, 221-6713
Dottie Nazarenus, 204-4429 Susan Lehman, 221-6813
Alan Krcmarik, 221-6788 Michele Hays -Johnson, 416-2158
OTHERS PRESENT: Sue Wilcox (Staff — Clerical) Greg Tempel (Staff Support — Legal)
Deb Weedman (Human Resources) Julie Depperman (Finance Staff)
Nancy Wagner & Gary Heaston, Miliiman & Robertson (the Plan's actuary)
Molly Nortier, Plan Member
CALL TO ORDER: Chair Susan Lehman called the meeting to order at 1:20 PM.
ITEMS OF NOTE: Michele Hays -Johnson notified Susan in writing that she will not attend the
October 5 meeting. To help meet the new Boards and Commissions policy on member's
attendance, Sue Wilcox is keeping a meeting attendance record for the Committee.
Susan, Deb Weedman, Julie Depperman, and Greg Tempel are planning to attend the Colorado
Public Pension Conference to be held September 13-15 in Breckenridge.
Minerva Lee of the Northern Colorado Water Conservancy District ("District") contacted Susan
about meeting with Plan representatives to discuss the conversion to a defined contribution
plan. Some members of the District's retirement plan have expressed interest in such a con-
version. Their board members would like some insight on how other plans have done
conversions. Susan, Deb, Julie, and Alan Krcmarik agreed to meet with them on September 19.
APPROVAL OF MINUTES: Alan distributed the draft minutes of the August 3 meeting. There
was one minor change. Bill Switzer moved to approve the minutes with the change. Alan
seconded the motion. The Committee members approved the minutes unanimously (6-0).
DISCUSSION TOPICS:
I. PLAN MEMBER COMMENTS: No comments.
2. BENEFIT PAYMENT FOR DECEASED PLAN MEMBER'S BENEFICIARY
The Plan had been holding a deferred vested retirement benefit for Riney Whitman, a deceased
employee, while a trust was created for the former employee's son. Staff completed a new
benefit calculation because more than 90 days had passed since the original calculation. Greg
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transmitted a survivor benefit check for the Gunnar Jay Whitman Trust to the family's attorney.
Greg also provided the Committee with a copy of the letter he sent to the family's attorney.
3. OCTOBER MEETING SITE CHANGED
MAIN POINTS: The next Committee meeting will be held in Conference Room A, 281 N College
Ave. at 1:15 PM on Thursday, October 5, 2000, because the Council Information Center (CIC)
will not be available. Staff will prepare the required notices.
4. DISCUSSION OF RETIREMENT PHILOSOPHY
MAIN POINTS: Nancy Wagner and Gary Heaston (the Plan actuary, "Milliman") had reviewed
the Committee's Retirement Philosophy. Nancy suggested that a more general philosophy be
created for the Plan, as she felt that the "replacement ratio" philosophy is an outdated concept
that no longer accomplishes what was originally intended. She advised that the previous goal of
ensuring that the retirement benefit and Social Security would be sufficient retirement income
was too narrow. She further explained that employees are now retiring earlier, leaving many
retirees without medical insurance coverage until they are eligible for Medicare. The trend now
is to offer employees such things as educational opportunities, opportunities for saving for
retirement and medical coverage, and access to disability insurance.
Alan briefly reviewed the history of the GER Plan, including the survey of members done some
years ago which guided the changes in the Plan that have occurred over the last 7 years.
The City offers a medical plan (besides COBRA) to retirees. The coverage is similar to the
coverage employees receive. The cost paid by the retiree is 103% of the premium the City pays
for employees. Deb Weedman will provide Nancy and Gary with information on the retiree
medical plan. Alan mentioned that ICMA Retirement Corporation and PEBSCO offer health
savings plans in addition to retirement savings plans. The actuary suggested that an employee
board should be created to provide direction for the 401 and 457 plans. The City Manager's
Office, Human Resources, Finance, and the City Attorney's office currently share responsibility
for these plans.
CONCLUSION AND NEXT STEPS: The Committee agreed to keep discussion of the
Retirement Philosophy on the agenda for the next few months and that a schedule of steps and
goal dates be created. Nancy and Gary will prepare a checklist of components to be discussed.
Alan will provide some historical information on how the original retirement philosophy was
prepared. Susan will contact a facilitator about working with the group.
5. DISCUSSION OF ACTUARIAL FIRM'S SCOPE OF WORK
MAIN POINTS: Nancy and Gary have reviewed the Plan and annual Valuation Reports from
previous years. The Valuation Reports were prepared using the "aggregate cost method",
which spreads projected unfunded liabilities over the future working lifetime of current active
members. The Plan is "closed" (no new members will be admitted), so covered payroll will
decline over time as members retire or leave City employment. At the same time, costs to the
Plan may increase as more deferred vested members and current employees begin receiving
monthly retirement benefits or single -sum distributions. Nancy stated that even using the
smoothing technique for valuing assets, the Plan will experience fluctuating investment returns
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September 7, 2000
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and fluctuating costs from year to year, making it difficult to establish a constant contribution rate
using the current method.
Nancy proposed that the Committee consider using an "entry age normal cost" method for the
Valuation Report. This method accrues a benefit as a constant percent of pay over the
member's lifetime. Nancy stated that this removes some of the volatility from the projection and
makes the calculations more consistent. She said they would get past years' employee data
from Watson & Wyatt (Watson) so they can duplicate the past projections prepared for the Plan.
Milliman will provide Alan a draft letter to Watson requesting the data. Milliman will provide a
comparison of the two actuarial methods. This comparison will be provided to the Committee.
Nancy also suggested using a smoothing method that spreads the market returns that vary from
the expected return using the actuarial assumed rate of return over a five-year period. The
advantage of this technique is that it makes the projection of future costs more predictable. To
prepare the new valuations, Gary and Nancy will need copies of the last four valuation reports.
Nancy noted the current actuarial assumptions for projecting benefit payments for 75 years
using long-term interest rates and using a discount rate of 7.5% is standard practice. [An
inflation rate of 3.5% is now used in the salary scale, but 4% is closer to the real rate.]
Currently, salary increase assumptions are age -related based on a table that includes merit and
inflation. Termination assumptions are based on age and use a separation rates table. The
Plan currently uses the standard 1983 Group Annuity Mortality Table. Some entities are
beginning to use the more recent 1994 Group Annuity Mortality (GAM) Table. This table shows
a longer life expectancy than the 1983 table. It is expected that when the IRS adopts the 1994
GAM table, more entities will follow suit. The current mortality table used for disabled pensioners
for the Plan is the 1983 Railroad Board Disabled Mortality Table.
Since the federal government has delayed the compliance deadline for retirement plans, Greg
suggested that the Plan Restatement be put on the January, 2001, agenda in order to be
implemented later that year.
CONCLUSION AND NEXT STEPS: Milliman will provide Alan a draft letter to Watson to
request the Plan data. When the data is received, Milliman will prepare a report to compare the
entry age method to our present method. She hopes to have this ready for the November
meeting. Staff will provide the previous years' valuation reports. Milliman requested a checklist
of the needs to be included in the Plan Restatement.
6. FULL-TIME EMPLOYEE — PART-TIME EMPLOYEE EQUITY EDUCATION PROGRAM
MAIN POINTS: Sue provided a summary with the comments and suggestions received from
Plan members regarding the full-time — part-time issue paper. This included verbatim comments
from individual members. The Committee reviewed each of the 57 responses, discussed any
comments from members, and determined who would contact those members who requested a
personal reply (approximately 27 of those responding). Requests relating to calculation of a
member's personal benefits were referred to the appropriate staff member for reply.
Several responses involve policy issues that are outside the scope of either the Plan or the
Committee and therefore cannot be addressed. Also, there were a number of general questions
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September 7, 2000
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and answers that may be of interest to all Plan members. Several respondents asked that the
comments and replies be made available to all Plan members.
CONCLUSION AND NEXT STEPS: Committee members and staff will follow up with the
members they agreed to contact. Sue will remove the personal information from the summary
and make available to the members the text of the comments, questions, and answers.
7. PROCEDURES TO CALCULATE BENEFIT CALCULATIONS
MAIN POINTS: Deb and the HR staff have entered the pay data for all current employees and
are working to complete the database from the files for the deferred vested Plan members.
Deb, Alan, and Julie met with Payroll Technician Linda Brown and Information Technology
representatives to review the reports and the report formats needed in order to capture payroll
data on the J. D. Edwards system at year-end.
CONCLUSION AND NEXT STEPS: Deb will continue to work on the database for deferred
vested members. Staff will continue creating and testing reports that will extract the necessary
year-end information from the JD Edwards payroll system.
8. MONTHLY INVESTMENT UPDATE
MAIN POINTS: Julie distributed the investment report for August and year-to-date. The Plan
had an annualized return of 6.43%. International mutual funds had only a 1.86% rate of return
so far this year. Domestic mutual funds are performing better: increasing 5.3% this year and
out -performing the Standard & Poor's 500 benchmark by 1.2%.
CONCLUSION AND NEXT STEPS: No action was needed
9. SCHEDULE FOR NEXT REGULAR MEETING
The next regular meeting will be Thursday, October 5, 2000, at 1:15 PM but has been moved to
Conference Room A at 281 N College. The tentative agenda includes:
1.
Citizen Participation and Plan Member Comments
2.
Consider approving the September 7, 2000, Minutes
3.
Report on Colorado Public Pension Conference
4.
Review of Standing Rules
5.
Discussion of Retirement Philosophy
6.
Continued Discussion with Actuarial Firm on the Scope of GERC Work
A. Discussion of Actuarial Assumptions
7.
B. Plan Restatement
Follow-up on Full-time — Part-time Concerns from the Education Program
8.
Benefit Calculation Procedures
9.
Monthly Investment Report
10.
Other Business
ADJOURNMENT: Susan adjourned the meeting at 3:40 PM.
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September 7, 2000
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GERC AND GERP WEB PAGE ADDRESS:
http://Watson.ci.fort-collins.co.us/CITY HALL/BOARDS_COMMISSIONS/RETIREMENT/index.htm
FUTURE MEETING SCHEDULE:
The Committee normally meets at 1:15 p.m. on the first Thursday of each month in the Council
Information Center, City Hall West. The next scheduled meeting will be Thursday, October 5,
2000, at 1:15 PM. The Committee will hold remaining meetings for 2000 as shown below:
THURSDAY, OCTOBER 5, 2000
THURSDAY, NOVEMBER 2, 2000
THURSDAY, DECEMBER 7, 2000