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HomeMy WebLinkAboutRetirement Committee - Minutes - 05/06/1999t Retirement Plan City of Fort Collins FORT COLLINS GENERAL EMPLOYEES RETIREMENT COMMITTEE May 6, 1999, MEETING MINUTES Approved June 3, 1999 COUNCIL LIAISON: Mayor Ray Martinez COMMITTEE MEMBERS PRESENT: ABSENT: Jim Hume, 221-6776 (after 1:42 p.m.) Alan Krcmarik, 221-6788 Susan Lehman, 221-6813 Terry Van Cleave, 221-6321 Kevin Westhuis, 221-6156 OTHERS PRESENT: Ken Jamison & Mark Sanford, Watson Wyatt Worldwide, the Plan's actuarial firm Jerry Wagner, ICMA Retirement Corporation, West Territory Director Deb Weedman, Vincent Pascale (Staff Support — Human Resources) Greg Tempel, (Staff Support — Legal) Julie Depperman, (Staff Support — Investments) Sue Wilcox, (Staff Support — Clerical) Fred Garth, GERC Retiree Greg Rael, Plan member & Fleet Division employee CALL TO ORDER: Chairperson Kevin Westhuis called the meeting to order at 1:23 p.m. ITEMS OF NOTE: Newly elected Mayor Ray Martinez is the Council Liaison to the GERC. Jim Hume is working on the new financial system and will be late joining the Committee. Susan Lehman will have to leave at 2:30 for a medical appointment. Mark Sanford and Deb Weedman will be making the defined benefit plan conversion to defined contribution plan presentation in the Council Chambers at 2 p.m. APPROVAL OF MINUTES: Alan Krcmarik distributed copies of the minutes for April 1, 1999. Alan noted that the complete Web Site address would be added to the final draft before it is sent to the members. A typo was noted and Greg Tempel requested a clarification in the draft valuation report section. Alan Krcmarik moved that the minutes be approved as corrected. Susan Lehman seconded his motion, which passed unanimously (4-0 with Jim Hume not yet present). ADDITIONS TO AGENDA AND ITEMS FOR NEXT AGENDA: No changes. DISCUSSION TOPICS: 300 LaPorte Avenue • P.O. Box 580 • Fort Collins, CO 80522-0580 • (970) 221-6788 • FAX (970) 221-6782 GERP Meeting Minutes May 6, 1999 Page 2 of 5 1. GERC PLAN MEMBER (S) COMMENTS AND CITIZEN PARTICIPATION: There were no Plan member or citizen comments. 2. UPDATE ON DEFINED BENEFIT TO DEFINED CONTRIBUTION CONVERSION FOR 1998 HIRES MAIN POINTS: GERP members who were hired during 1998 were not eligible for the original Defined Benefit plan to Defined Contribution conversion process. These employees are eligible for the second conversion scheduled for July 1, 1999. The second conversion process began this week to provide them with two opportunities to hear Watson Wyatt explain the GERP and Money Purchase Plan (MPP) options. In addition ICMA Retirement Corporation representatives made a short presentation explaining the 401(a) MPP. Twenty-four employees attended Tuesday's presentation. Several eligible employees who could not attend either session contacted Deb Weedman about meeting with her to get the information. The Committee noted that they should view the video presentation before signing the selection form. CONCLUSION AND NEXT STEPS: Susan Lehman volunteered to help with personal phone calls to the remaining members who did or will not attend a session. Support staff will e-mail reminders to those who have not responded as the May 28 deadline approaches. The goal is to have signed selection forms for each person in their personnel file. Deb will provide a list of those who need to be called. NOTE: Near the end of the meeting, Deb returned to report that 21 employees had attended today's presentation, leaving about 21 who would need individual contacts. Kevin volunteered to show the videotape of last year's presentation on Thursday, May 13 at 1 p.m. in the Utilities Training Room for any of those who can attend. 3. CLARIFYING THE CALCULATION OF LUMP SUM DEATH BENEFITS MAIN POINTS: Mark Sanford of Watson Wyatt prepared the calculations for those eligible to convert to the MPP. GERP members eligible to make the conversion will receive the greater of the Actuarial Calculation or the MPP Opening Balance Amount. Mark asked which calculation would be used in the following scenario: a short-term employee who elected to stay in GERP, but dies not long after the conversion occurs. Would the beneficiary have the option to choose? CONCLUSION AND NEXT STEPS: Greg Tempel said that in Article 18, Section 5 of the Plan it states that the employee can make the selection, but it does not say the beneficiary has the option to receive the money purchase plan opening balance amount. So the answer is that the beneficiary would receive a death benefit equal to 47% of the Actuarial Calculation. Mark will update the software program that Deb uses for preliminary calculations. Jim Hume joined the meeting at this point. 4. EXCESS FUNDS AT PLAN TERMINATION EXPLANATION MAIN POINTS: A GERP member who elected to stay in the Plan asked Kevin what would happen to any funds left in the GERP fund when the last benefit payment is made from the fund. In prior conversion of a plan sponsored by the City, excess assets were divided between the City and members of the plan that elected to convert to a money purchase plan. The Plan provides that once liabilities of the Plan have been met, the excess assets would revert to the City. • GERP Meeting Minutes May 6, 1999 Page 3 of 5 CONCLUSION AND NEXT STEPS: No action is necessary at this time. 5. GERC RETIREE MEMBER UPDATE MAIN POINTS: Applications for the retiree General Employees Retirement Committee member position were sent to about 78 of the 117 retirees. The Boards and Commissions manual adopted by City Council requires that board and commission members must live within the Urban Growth Area prevents the other retirees from serving on the Committee. However, they also received a letter explaining the new member position and the eligibility requirements. Retirees have rill May 10 to apply for the four-year position. Fred Garth suggested that an alternate member also be chosen, but Alan explained that it is Council policy not to appoint alternate members to serve on committees. However, applications from retirees who aren't chosen will be kept on file in case the person chosen cannot complete the regular term of appointment. CONCLUSION AND NEXT STEPS: Sue will provide a list of the applicants after May 10. In response to a question, Greg stated that a quorum for a six -member GERC will be four. 6. DRAFT VALUATION REPORT MAIN POINTS: Ken Jamison of Watson Wyatt provided the draft figures for the valuation report. The GERP contribution rate for 1999 had been set at 4.5% based on the projected benefits for employees who remained in the Plan. This rate was calculated using employee salaries under the old pay plan. With the implementation of the new pay plan at the end of January, many GERP members received increases higher than the actuarial assumption. This translates to higher benefits at retirement. When retirement benefit projections were calculated using the new salaries, the contribution rate to fund the Plan increased to 4.716% for 1999. Although the projected contribution rates drop to 4.303% in 2000 and 3.966% in 2001, those projections did not take into account the second phase of the pay plan implementation in 2000, which involves additional pay increases for those who are not yet to the top of their ranges. The difference between the present contribution rate and 4.716% amounts to $36,000 for 1999. A number of options were reviewed briefly discussed, including changing the contribution rate, recognizing some of the investment gains now (instead of the current practice of using the five- year smoothing technique), purchasing annuities to cover liabilities, and the null (no action) option. Another factor which could affect the calculation is the action of the stock market and the resulting returns on pension investments. Related questions: A. What will be the affect on the calculations if a large percentage of the 72 eligible Plan members choose to convert to the MPP? Ken replied that it probably would not affect the situation significantly. B. Would adjusting the contribution rate for the GERP have any affect on the defined contribution rate for those whose retirement plan is now the MPP? The conclusion was that since they are two different plans, what affects one would not necessarily impact the other. CONCLUSION AND NEXT STEPS: Although no action is required at this time, it was agreed that a long-term strategy is needed. As a first step, Alan, Jim Hume, and Julie GERP Meeting Minutes May 6, 1999 Page 4 of 5 Depper man will provide figures for the cost of implementing the second phase of the pay plan so Ken can run new projections for the next five years. The final valuation report should be presented at the next meeting. 7. COST OF LIVING ADJUSTMENT FOR RETIREES UPDATE MAIN POINTS: Alan reported that there are several Council members who are interested in the issue of a Cost of Living Adjustment (COLA) for current retirees. Mayor Martinez understands the issue and has responded to many letters from retirees. Staff will brief the Council Finance Committee at its May 19 meeting. The question is what level of COLA the Committee wants to recommend to City Council. After some discussion, Kevin moved to forward all three options to City Council and make a strong argument for the Denver -Boulder Consumer Price Index (CPI) less 1%. Kevin felt this was the most equitable of the three options. Alan seconded Kevin's motion. It was pointed out that providing all three options could divide Council members and after some discussion, it was voted down unanimously. (4-0, with Susan having left the meeting). CONCLUSION AND NEXT STEPS: Jim Hume then proposed that they recommend only the CPI less 1% option. Kevin moved to recommend the CPI less 1% option for a COLA for GERP retirees and to make a strong argument for it, with only passing mention that the other two options were considered. Alan seconded the motion, which passed 4-0. Alan will prepare the agenda item summary and forward it to the Finance Committee for consideration before it is submitted for the Budget process. 8. FIRST QUARTER, 1999, INVESTMENT REPORT MAIN POINTS: Julie Depperman reported that the First Quarter, 1999, Investment Report showed that despite the prediction of economists that bond yields would go down, in fact bond yields rose. The GERP fixed income investments earned an annualized yield of 6.02% for the quarter. Julie also noted that the regular monthly investment update form has been revised to more easily show how the fixed income portfolio and each of the mutual funds performed during the month, compared with their benchmark investments. A fourth column presents the current market value of each investment and its percent of the total market value of the portfolio. Copies of the monthly update or quarterly report are available upon request from GERC members or staff. The members reviewed the mutual fund portfolio analysis report generated using Morningstar. The report provides a risk and reward analysis, as well as an analysis of the fund's current investment classifications. Julie noted that in following up on a Committee member's question, she researched the value of non -domestic funds held by domestic mutual funds. When added to the non -domestic funds in the portfolio, the total non -domestic funds comprise 16% of the GERP investments ---still within the limit for non -domestic funds set by the Committee. The first quarter also saw over $500,000 paid out in lump sum payments to former employees and retirees. Letters have been sent to former employees and current employees who have left the plan informing them of their option to receive a lump sum distribution. The current sum of this liability to the Plan is approximately $1.3 million, but most of these individuals have not indicated a desire to receive a benefit at this time. Alan advised the Committee that he will be preparing a supplemental appropriation to City Council for funds for the 1998 hires who convert to the MPP and for potential lump -sum payments in 1999. • GERP Meeting Minutes May 6, 1999 Page 5 of 5 CONCLUSION AND NEXT STEPS: No further action is necessary. SPECIAL NOTE: Jerry Wagner of ICMA Retirement Corporation reported that the total funds contributed to Retirement Corporation by the City and City employees have exceeded $125 million. If that can be sustained through the end of June, the Retirement Corporation will reduce the administrative fees it charges the City currently. SCHEDULE FOR NEXT REGULAR MEETING: The next regular meeting will be Thursday, June 3, 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 May 6, 1999, minutes 3. Status of Plan Conversion for 1998 Hires 4. Committee Retiree Member Update 5. Valuation Report Presented/Contribution Rate Discussion 6. COLA / Budget Update 7. Regular Investment Review 8. Other Business ADJOURNMENT The meeting was adjourned at 3:22 p.m. GERC AND GERP WEB PAGE ADDRESS: h=://www.ei.fort-collins.co.us/CITY HALLBOARDS COMMISSIONS/RETIREMENT/index.htm Ill: UI I 71 011ie The General Employees Retirement Committee normally meets at 1:15 p.m. on the fast Thursday of each month in the Council Information Center, City Hall West. THURSDAY, JUNE 3, 1999 THURSDAY, JULY 1, 1999 THURSDAY, AUGUST 5, 1999 THURSDAY, SEPTEMBER 2, 1999 THURSDAY, OCTOBER 7, 1999 THURSDAY, NOVEM 3ER 4, 1999 THURSDAY, DECEMBER 2, 1999