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HomeMy WebLinkAboutRetirement Committee - Minutes - 06/03/1999City of Fort Collins Retirement Plan 0 FORT COLLINS GENERAL EMPLOYEES RETIREMENT COMMITTEE JUNE 3, 1999, MEETING MINUTES Approved, as Amended, July 1, 1999 COUNCIL LIAISON: Mayor Ray Martinez COMMITTEE MEMBERS PRESENT: ABSENT: Alan Krcmarik, 221-6788 Jim Hume, 221-6776 Susan Lehman, 221-6813 Teny Van Cleave, 221-6321 Kevin Westhuis, 221-6156 OTHERS PRESENT: Ken Jamison, Watson Wyatt Worldwide, the Plan's actuarial firm Deb Weedman, Vincent Pascale (Staff Support — Human Resources) Greg Tempel, (Staff Support — Legaq Julie Depperman, (Staff Support — Investments) Sue Wilcox, (Staff Support — Clerical) Dottie Nazarenus, GERP Retiree and Committee appointee Fred Garth, GERP Retiree Jeff Matti, GERP member from Parking Services CALL TO ORDER: Chairperson Kevin Westhuis called the meeting to order at 1:20 p.m. ITEMS OF NOTE: A. Fred Garth thanked the Committee for getting the process started for a COLA for retirees. He has been receiving the meeting minutes and will be doing some traveling, so the minutes will be helpful. B. Jim Hume is attending a purchasing -related conference in Breckenridge today. C. Kevin introduced Dottie Nazarenus, formerly a member of the Utilities Department and the nominee for the newly -created GER Committee retiree member position. APPROVAL OF MINUTES: Alan Krcmarik distributed copies of the minutes for May 6, 1999. Alan noted that the complete Web Site address would be added to the final draft before it is sent to the members. Susan Lehman moved that the minutes be approved as distributed. Kevin seconded the motion, which passed unanimously (4-0). ADDITIONS TO AGENDA AND ITEMS FOR NEXT AGENDA: No changes. 300 LaPorte Avenue • P.O. Box 580 • Fort Collins, CO 80522-0580 • (970) 221-6788 • FAX (970) 221-6782 GERP Meeting Minutes June 3, 1999 Page 2 of 6 DISCUSSION TOPICS: 1. GERC PLAN MEMBER(S) COMMENTS AND CITIZEN PARTICIPATION: Kevin noted that a GER Plan member who works at Lincoln Center contacted him about the Deferred Benefit/Deferred Contribution selection process in the fall of 1998. The member was under the impression that the rollover amount he was given at that time was what he had in the GERP and he did not understand why the figures he received on the Personal Retirement Planning Statement this spring were less. Kevin explained the conversion process that was followed and sent him copies of the communications and documents distributed at that time. Kevin also kept a record of the copies he sent and will provide those for the permanent records. [Note: The copies will be kept on file at the Human Resources Department.] Debbie Weedman said she had provided the member with a benefit projection also. 2. APPEAL OF DEFINED BENEFIT TO DEFINED CONTRIBUTION CONVERSION DECISION MAIN POINTS: Following the procedure used in the original Defined Benefit to Defined Contribution conversion process, the Committee agreed to hear an appeal from Jeff Matti of Parking Services. Mr. Matti was sworn in and the proceedings were audio taped. Kevin read the conditions setting forth the appeal process and the reasons acceptable for approving the appeal. Mr. Matti said he had planned to convert to the money purchase plan, but he had not submitted his conversion forth to Human Resources prior to the deadline. Mr. Matti explained that the decision deadline had passed while he was in the process of buying a house and moving. He acknowledged that he did receive a reminder phone call around May 24 and had planned to meet the deadline. He also acknowledged that he did not meet the criteria for approving appeal requests which were outlined in the conditions Kevin read. There was discussion among the Committee members about the impact on the Plan if an exception were granted for Mr. Matti and whether it was still necessary to follow the original guidelines and conditions for approving an appeal. The Committee discussed Mr. Matti's appeal. It was pointed out that to approve his appeal would be inconsistent with the Committee's previous actions. It would also be unfair to the other members who had previously appealed for similar reasons as Mr. Matti, but had been denied. CONCLUSION AND NEXT STEPS: Kevin Westhuis moved that Mr. Matti's appeal be denied and Alan seconded the motion, which passed unanimously (4-0). 3. UPDATE ON DEFINED BENEFIT — DEFINED CONTRIBUTION CONVERSION PROCESS FOR 1998 HIRES MAIN POINTS: Of 72 employees eligible for the conversion process, 50 have requested that their benefits be rolled over to the Money Purchase Plan. Twenty-two have opted to stay in the GERP. The Committee had received a reply from one individual who has been on extended leave. He'll be back to work June 29, but since no forms were received for him, he will remain in the GERP. The total cost to the Plan of those moving to the MPP is • • GERP Meeting Minutes June 3, 1999 Page 3 of 8 $87,243. July 1, 1999, is the official conversion date. Between now and then staff will be monitoring the eligible employees for termination. Employees must be employed through June 30, 1999, in order to complete the conversion. Employees that begin employment after January 1, 1999, who successfully complete their first 6 months of employment, are automatically enrolled in the MPP as their pension plan. The Committee has not received any reaction from new employees about not being a part of GERP. New employees do not receive a pension contribution for those first 6 months, but they are immediately vested when they become part of the MPP. CONCLUSION AND NEXT STEPS: The final figures and the signed forms for those converting to the MPP must be sent to ICMA Retirement Corporation by June 15, 1999. The actual conversion will be July 1, 1999. 4. VALUATION REPORT UPDATE MAIN POINTS: At the last meeting Ken Jamison, the GERP actuarial consultant from Watson Wyatt, had advised the members that implementation of the new pay plan in late January, 1999, had a significant impact on the obligations of the Plan. Many GER Plan members are earning higher salaries due to the new play plan. When salary increases are higher than the assumptions used for the actuarial valuation, the pension benefit obligation of the Plan increases. To keep the plan adequately funded, the City needs to increase the contribution rate. The implementation of the second phase of the new pay plan in 2000 will mean another salary increase for some GER Plan members and will again increase the GERP contribution rate. The actuarial five-year projection of contribution rates shows 5.0453% in 2000, 4.8873% in 2001, and 4.7442% in 2002—all of which are over the current contribution rate of 4.5%. The Committee discussed the impacts of higher contribution rates and ways to mitigate them. If no change is made, an unfunded liability may occur, which will have to be addressed eventually. If the City does not fully fund the GERP liability and other factors do not offset the situation, the amount will likely become larger overtime. Alan reminded the group that the Committee members serve as the fiduciaries of the GER Plan. Members should not be concerned about the money purchase plan and its contribution rates. He would recommend that the City change the contribution rate to 4.8% for the current budget process (2000 and 2001). Ken also noted that the impact of changing the contribution rate would have been much greater had all those who converted to the MPP stayed in the GERP. The Committee discussed adjusting the other assumptions and reducing Plan expenses. CONCLUSION AND NEXT STEPS: Kevin Westhuis moved that the GERC recommend a change in the contribution rate from 4.5% to 4.8% for the 2000 and 2001 budget process. Alan seconded the motion, which passed 4-0. 5. COLA FOR RETIREES AND THE BUDGET PROCESS UPDATE MAIN POINTS: Alan reported that the Finance Committee had reviewed the proposed cost of living adjustment (for current retirees) based on the Consumer Price Index less 1 %, GERP Meeting Minutes June 3, 1999 Page 4 of H which would require $750,000 in one-time money. Chuck Wanner, Finance Committee chairperson, recommended that the Finance Committee support this COLA and ask City Council to deal with it this year. The budget emphasis this year is basic services, but the City Manager's Office has said there is no money available for new initiatives. Alternatives are to not take all of the cost from the General Fund but to look at other funds, or to phase this in over several years. However, future support for a COLA is uncertain and phasing it in over several years may actually cost more. The City Manager's budget recommendations to Council will come out in early August, with the final budget to be approved in November. CONCLUSION AND NEXT STEPS: Fred Garth, who has contact with a group of retirees from the Utilities area, asked to be kept informed. It would help if affected retired members talked to the new City Council members, as they were not seated on Council when the retirees presented their issues earlier this year. Alan will prepare additional information for the Finance Committee. 6. COMMITTEE MEMBERSHIP ISSUES MAIN POINTS: Kevin noted that the Council interview committee chose Dottie Nazarenus as the candidate for the newly -created retiree member position on the GER Committee. The appointments to boards and commissions will come before Council on June 22 for first reading. Mollie Mercer, former GERC support staff from Human Resources, was chosen as a back-up person. Kevin also noted that the Boards and Commissions Manual, which is adopted by a Resolution of City Council, contains a provision that "All persons appointed to, or serving on, any board or commission shall be residents of the city of Fort Collins or the Fort Collins Urban Growth Area.° Susan Lehman's residence is outside the Urban Growth Area, making her ineligible to serve under the present provisions. At this point in the meeting, Terry Van Cleave informed the Committee that his residence is just outside the Urban Growth Area (UGA) also. This provision was not included on the application for boards and commissions, nor was it mentioned during the interview process. The members acknowledged that the residency requirement made sense for those boards and commissions which formulate policy for other City and Urban Growth Area residents and for operation of the City entity. However, the GERC represents the 489 employees who are members of the GER Plan, many of whom live outside the UGA, with minimal impact on the City at large or its residents. It also was noted that it would be unfair to the GERP employee members to limit who can represent them and unfair to GERP members who wish to serve on the Committee, but who live outside the UGA. CONCLUSION AND NEXT STEPS: It was the consensus of the Committee members and staff that Kevin consult with Ray Martinez, GERC Council Liaison, about this matter and suggest that the provision in the Boards and Commissions Manual be amended to permit GERP members who live outside the Urban Growth Area to serve on the Committee. (Note: Greg Tempel drafted a resolution and Alan Krcmarik drafted an agenda item GERP Meeting Minutes June 3, 1999 Page 5 of 8 summary for the Council to consider on July 6, 1999, to make the residency requirements for Board and Commissions appointees not apply to applicants or members of the GERC. 7. MAY, 1999, INVESTMENT REPORT MAIN POINTS: Julie Depperman reported that she, Alan, and Jim Hume had discussed the disappointing returns of IAI Regional mutual fund and reviewed it through the Morningstar system. Alan and Julie recommend that the GERP investments in IAI Regional Fund be moved from that fund to a Mid -Cap index fund with lower risk and lower fees. Using dollar cost averaging, contributions to IAI Regional total about $1.7 million. The returns have been less than the actuarial assumption (7.5%) for the last three years, and even a new fund manager has not improved its performance. The GER Plan currently has $4 million in cash which is invested in repurchase agreements so that it is available for payment of lump sums and monthly pension benefits. Alan noted that at the end of the year, some firths offer a high interest rate for a few days in order to guarantee that they will have sufficient funds to carry over to the new year. CONCLUSION AND NEXT STEPS: Investment staff will prepare for the transition of the funds over the next few months. SPECIAL NOTE: Alan reported that Jerry Wagner of ICMA Retirement Corporation informed him that the total funds held by ICMA RC by the City and City employees exceeded $125 million during the middle part of May. Late in the month, the stock market took a dip and the value of the City's contributions went below $125 million. The Retirement Corporation will look at the figures at the end of August and if they again exceed that figure, the administrative overhead fee will drop from 0.57% to zero. SCHEDULE FOR NEXT REGULAR MEETING: The next regular meeting will be Thursday, July 1, 1999 at 1:15 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 June 3, 1999, minutes 3. Status of Defined Benefit to Defined Contribution for 1998 hires 4. Committee Membership Requirements Update 5. Valuation Report Presented and Contribution Rate Discussion 6. COLA Request and Budget Process Update 7. Regular Investment Review for June 8. Other Business GERP Meeting Minutes June 3, 1999 Page 8 of 6 ADJOURNMENT The meeting was adjourned at 3:05 p.m. GERC AND GERP WEB PAGE ADDRESS: www.d.fort-collins.co.us/CITY HALLBOARDS_COMMISSION/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. THURSDAY, JULY 1, 1999 THURSDAY, AUGUST 5, 1999 THURSDAY, SEPTEMBER 2, 1999 THURSDAY, OCTOBER 7, 1999 THURSDAY, NOVEMBER 4, 1999 THURSDAY, DECEMBER 2, 1999 Rescheduled to AUGUST 12, 1999 at 1:45 p.m.