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HomeMy WebLinkAboutRetirement Committee - Minutes - 07/01/1999Generffmployees Retirement Plan - r City of Fort Collins FORT COLLINS GENERAL EMPLOYEES RETIREMENT COMMITTEE JULY 1, 1999, MEETING MINUTES Approved, As Amended, August 12, 1999 COUNCIL LIAISON: Mayor Ray Martinez (attended meeting) COMMITTEE MEMBERS PRESENT: Jim Hume, 221-6776 Alan Krcmarik, 221-6788 Terry Van Cleave, 221-6321 Kevin Westhuis, 224-6156 ABSENT: Susan Lehman, 221-6813 Dottie Nazarenus, 484-7592 OTHERS PRESENT: Mark Sanford for Ken Jamison, Watson Wyatt Worldwide, Plan's actuarial firm Vincent Pascale (Staff Support — Human Resources) Greg Tempel, (Staff Support — Legal) Julie Depperman, (Staff Support — Investments) Sue Wilcox, (Staff Support — Clerical) CALL TO ORDER: Chairperson Kevin Westhuis called the meeting to order at 1:23 p.m. ITEMS OF NOTE: Kevin noted that Dottie Nazarenus' appointment to the GER Committee took effect June 25, but that a previous commitment prevented her attendance today. According to the Plan, four members constitutes a quorum for the conduct of official business. Council Liaison Mayor Ray Martinez was welcomed when he joined the meeting a few minutes after the start. APPROVAL OF MINUTES: Alan Krcmarik distributed copies of the minutes for the June 3, 1999, meeting. Alan noted that the complete Web Site address would be added to the final draft before it is sent to the members. A small change was suggested and Kevin moved that the minutes be approved as corrected. Alan seconded the motion, which passed unanimously (4-0). DISCUSSION TOPICS: 1. GERC PLAN MEMBER(S) COMMENTS AND CITIZEN PARTICIPATION: A. Kevin reported that he had spoken again with the employee from the Lincoln Center who was concerned that there was a large difference between the actuarial value and the lump -sum transfer amount and felt that this was not clearly explained. 300 LaPorte Avenue • P.O. Box 580 • Fort Collins, CO 80522-0580 • (970) 221-6788 • FAX (970) 221-6782 GERP Meeting Minutes July 1, 1999 Page 2 of 6 Kevin had given him copies of the information provided at the education sessions and directly explained the difference in the two calculations and though the member was not happy, he understood the situation better. B. Alan reported that former GER Committee member Jackie Davis suggested that the GERC contract the work of investing the Plan's assets to a private firm. This was based on information she had about another government defined benefit plan and she felt that the GER Plan could increase its returns by hiring an investment firm. Alan noted that the Committee has considered this option at various times and now as the assets are growing toward $40 million the Committee may reconsider. Vincent Pascale questioned the cost effectiveness of contracting for an investment adviser, as such advisers usually receive a percent of the Plan's returns. The Committee decided that the topic be put on a future agenda to be studied. 2. 1999 PLAN ACTUARIAL VALUATION REPORT MAIN POINTS: Watson Wyatt had been asked to provide revised 5-year projections of the contribution percentages needed to maintain the Plan at fully funded normal cost. Previous projections had shown a significant increase in contribution percentages as a result of implementing the New Pay Plan in 1999 and 2000. Mark explained that the original projections were based on 1998 expenses, which included the $9 million DB/DC conversion. The conversion would be considered an "extraordinary expense" which tended to skew the projections. When the prior year's (1997) expense figure was used instead of 1998's, then corrected for inflation and new calculations made, the new contribution rates were more reasonable. At this time of the meeting, Mayor Martinez, City Council Liaison, joined the Committee. Currently, the amounts earned on the equity portion of the portfolio are distributed over a five- year period. The actuary recommends this practice to avoid large fluctuations in the value of the assets. Due to the large rises in the value of the equity portion of the portfolio, this tends to understate the year to year value of the assets. The remaining gains are deferred. Mark said that by removing the extraordinary expenses of 1998 (for the conversion education process) also served to reduce required contribution rate. At the June meeting the Committee passed a motion changing the contribution rate from 4.5% to 4.8% for two years in order to cover the expenses resulting from the Pay Plan increases. Alan advised the group that from a financial reporting perspective, it would be acceptable to have a few years where the normal cost contribution would not be achieved. A multi -year trend of not achieving funding at the normal cost would be cause for concern. Vincent supported consistent adequate funding. Jim Hume recommended leaving the contribution rate at 4.8% and evaluating it next year. He pointed out that it could always be adjusted downward if not needed. Alan noted that the City Manager will submit his recommended budget (currently without an increase) to City Council in September and City Council will have an opportunity to adjust it at that time. There was some discussion of whether raising the GERP contribution rate would have any effect on the contribution rate for those who converted to the defined contribution plan. While that may be the case, Alan reminded members of the Committee that their fiduciary • • GERP Meeting Minutes July 1, 1999 Page 3 of 6 responsibility is to the GER Plan members. The Committee is not responsible for those who chose to receive pension benefits through the money purchase plan. CONCLUSION AND NEXT STEPS: Alan Krcmarik moved that the table entitled "Analysis of Changes in Contribution - Effect of Pay Increases on Projected Results" presented by Mark Sanford be approved as presented. Jim Hume seconded the motion, which passed unanimously (4-0). Mark Sanford will include this chart in the Valuation Report and send 15 copies of the Final Report to Sue for distribution before the next meeting. 3. CLARIFYING WATSON WYATT COSTS FOR ACTUARIAL SERVICES MAIN POINTS: There have been questions about charges for various Watson Wyatt services. Mark explained that their standard practice is to send out a "budget" of costs each year. But from his research, the only mention of the budget for the GERP was on billing statements and contained only five items: valuation report, personal retirement planning statements, benefit calculations, attending meetings, and, review of QDROs using the model format that was worked out. Mark transmitted the budget of charges in June, but neither staff nor Committee members were aware of the schedule's existence before that. Alan advised the Committee that 2000 is the last year on the 5-year contract for actuarial services with Watson Wyatt Worldwide. Watson Wyatt will complete the valuation report and personal retirement planning statements for 2000. The Committee needs to begin the request for proposal (RFP) process for actuarial services late this year or early next year. Criteria for the services already exist and RFPs from other cities are available for review in order to prepare the request documents. Our legal advisor will need to review these documents also. A committee composed of representatives from Human Resources, the GER Committee, and Purchasing will review the proposals received. Usually, the top 3 firms are interviewed. CONCLUSION AND NEXT STEPS: Members of the Committee present at the meeting agreed that written estimates of costs for items not included in the schedule of costs should be reviewed and approved by the Chairperson before the work is performed. 4. RESTATEMENT OF PLAN DOCUMENT MAIN POINTS: Restatement of the GER Plan document involves incorporating all changes approved by City Council into one document. The current Plan document was last restated in 1992 and all amendments are appended to it, making it cumbersome to work with and more open to misinterpretation. Restatement is usually done every six to eight years. Greg revealed that he had already had the Clerk's Office scan the document into the computer and he had incorporated the Council -approved amendments into the Plan. He said that the Committee and staff members should review this draft and make suggestions. Greg also suggested that the Committee may wish to submit it for review by an attorney who specializes in pensions plans for any recommended changes or corrections. The final document would be recommended to City Council for its approval. The approved document can then be used for the actuarial consultant RFP process and will have to be submitted to the Internal Revenue Service for its approval also. The IRS will either issue a GERP Meeting Minutes July 1, 1999 Page 4 of 6 "determination letter' confirming that it is a "tax qualified" plan or they will give the City a "remedial amendment period" in which to bring it into compliance. CONCLUSION AND NEXT STEPS: Mark Sanford said that Watson Wyatt would review the restated Plan at no cost. Greg will provide everyone with electronic copies for review. Comments can be sent to Greg before the next meeting. 5. FULL-TIME AND PART-TIME EQUITY ISSUE MAIN POINTS: Some time ago a former Committee member brought to everyone's attention an equity question related to employees who move from full-time positions to part-time positions and employees who make the opposite switch. The GERP benefit is calculated using the highest 60 months of the last 10 years of employment. If an individual worked 10 years as a full-time employee and then moved to a part-time position, the retirement benefit would begin to erode as their part-time employment exceeded five years. Conversely, a part- time employee who has worked for five years and moved to a full-time position, might have a retirement benefit that more heavily reflected the full-time work. Two alternative ways of calculating the retirement benefit are possible which would more accurately reflect the employee's earned benefit: Use the number of hours worked each year in the calculation, or calculate the dollars earned as though they were full-time workers. Greg pointed out that the Plan is now closed to new members and for budget purposes it is not revenue -neutral. If a change is made, it should not be retroactive, but be effective from a set date forward. A list of GERP members separated into full-time and part-time positions and percent of time worked was suggested as a starting point to assess the Plan's risk and the members' risk. CONCLUSION AND NEXT STEPS: Human Resources will obtain a list of Plan members, along with their full-time and part-time status and the percent of full-time worked. 6. BOARDS AND COMMISSIONS RESIDENCY REQUIREMENT CHANGE MAIN POINTS: Currently, only residents of the City of Fort Collins or the Urban Growth Area (UGA) are eligible to be appointed to boards or commissions. On July 6'h City Council will consider amending the Boards and Commissions Manual to include a clause exempting members of the General Employees Retirement Committee from the residency requirement for other Boards and Commissions members. The Committee felt that since the GERC is meant to represent City employees and retirees, who do not have a residency requirement, their representatives should not be restricted. CONCLUSION AND NEXT STEPS: This item is on the Council's consent calendar and is not expected to be opposed. 7. REDUCTION OF ICMA-RC MANAGEMENT FEES MAIN POINTS: Jerry Wagner, West Territory Director for ICMA Retirement Corporation, had advised Alan that if the value of the City's contributions to the ICMA Retirement Corporation • • GERP Meeting Minutes July 1, 1999 Page 5 of 6 CRC") plans exceeded $125 million at the end of a certain period, that RC would drop the management fee currently charged (0.56%) on RC accounts. There may be confusion about the exact period of time that contributions will be reviewed. One discussion set the end of May and the end of August as decision dates, but another conversation mentioned June 30 as the date for the decision. During May the value of the contributions exceeded the $125 million mark, but at the end of May when the stock market dropped, so did the RC accounts' total value. However, as of June 30, the value of the City's RC contributions exceeded the target. Alan noted that the City is one of the top ten contributors to RC in the U.S. CONCLUSION AND NEXT STEPS: Alan will check with Jerry Wagner to see what the status is on dropping the fee for City -contributed funds in ICMA Retirement Corporation. 8. COST OF LIVING ADJUSTMENT REQUEST FOR RETIREES MAIN POINTS: Although the City Manager's preliminary recommended budget does not include supporting the cost of living adjustment (COLA) for retirees, the Finance Committee representatives from City Council seemed favorable to including it. Suggestions included splitting the costs among the various departments and phasing it in over 4 years. Alan noted that City Council reacted favorably when the retirees appeared at the Council meeting and Fred Garth spoke in favor of a COLA. Alan suggested that perhaps it would be to the benefit of retirees to repeat their presentation to City Council, since three of the Council members are new and did not hear the original presentation. CONCLUSION AND NEXT STEPS: Kevin said he would convey this information to the retirees about the status of the COLA request. 8. CHANGE OF AUGUST MEETING DATE AND TIME MAIN POINTS: Both Jim Hume and Alan Krcmarik have conflicts with the August 5 meeting. CONCLUSION AND NEXT STEPS: Kevin will send an e-mail to all members to determine an alternative date. Linda Gula in the City Manager's Office needs to be notified of this change so it can be included on Mayor Martinez's calendar. SCHEDULE FOR NEXT REGULAR MEETING: The next regular meeting was changed to Thursday, August 12, 1999, and the time changed to 1:45 p.m. in the Council Information Center (CIC) of City Hall West. The agenda will include: 1. Citizen Participation and Plan Member Comments 2. Consider approving the July 1, 1999, minutes 3. Status of Restatement of Plan 4. Status of Change in Residency Requirement for GERC Members GERP Meeting Minutes July 1, 1999 Page 6 of 6 5. Valuation Report Presented 6. Discussion of Determining Costs for Actuarial Services 7. COLA / Budget Update 8. Full-time and Part-time Employee Benefit Equity 9. Regular Investment Review 10. Other Business ADJOURNMENT The meeting was adjourned at 3:10 PM. GERC AND GERP WEB PAGE ADDRESS: www.ci.fort-collins.co.us/CITY HALL/BOARDS COMMISSIONS/RETIREMENTfindex.htm FUTURE MEETING SCHEDULE: The General Employees Retirement Committee normally meets at 1:15 p.m. on the first Thursday of each month in the Council Information Center, City Hall West. This Meeting Only: THURSDAY, AUGUST 12, 1999 at 1:45 PM. THURSDAY, SEPTEMBER 2, 1999 THURSDAY, OCTOBER 7, 1999 THURSDAY, NOVEMBER 4, 1999 THURSDAY, DECEMBER 2, 1999