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HomeMy WebLinkAboutRetirement Committee - Minutes - 01/07/1999Retirement Plan 40 City of Fort Collins FORT COLLINS GENERAL EMPLOYEES RETIREMENT COMMITTEE JANUARY 7, 1999, MEETING MINUTES COUNCIL LIAISON: Mayor Ann Azari COMMITTEE MEMBERS PRESENT: Jim Hume, 221-6776 Alan Krcmarik, 221-6788 Kevin Westhuis, 221-6156 OTHERS PRESENT: Minutes Approved on February 2, 1999 ABSENT: Susan Lehman, 221-6813 Russ Proctor, Watson Wyatt Worldwide, the City's actuarial firm Deb Weedman, (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 1:27 p.m. ITEMS OF NOTE: Patti Teraoka has resigned as a GERC member because both she and Kevin Westhuis converted to the ICMA Retirement Money Purchase Plan and only one appointed Committee member can be a non -Plan member. Susan Lehman was absent. Greg Tempel advised the Committee that three Committee members constituted a quorum and that a majority of the quorum present was sufficient for official actions. APPROVAL OF MINUTES: Alan distributed draft copies of the minutes for December 3, 1998, and the special meeting on December 17, 1998. The Committee noted that the date of the last cost of living adjustment should be 1990. The Committee decided to postpone approval of the minutes until the February 4th meeting. APPROVAL OF 1998 ANNUAL REPORT: Kevin distributed copies of the 1998 GERC Annual Report. Russ Proctor advised that in the first paragraph, the "future" benefits referred to should actually be "accrued" benefits. Alan Krcmarik moved to approve the 1998 Annual Report as corrected and Jim Hume seconded the motion. The motion passed 3-0. Kevin will send the corrected version to Jim to place it on the Web site and to Sue for the City Clerk's office. Members will be notified that it is available on the Web. ADDITIONS TO AGENDA/ITEMS FOR NEXT AGENDA: Two items were added: Qualified Domestic Relations Orders and filling the vacant Committee position. Filename: GMIN0107.doc 300 LaPorte Avenue • P.O. Box 580 • Fort Collins, CO 80522-0580 • (970) 221-6788 • FAX (970) 221-6782 General Employees Retirement Committee January 7, 1999, Minutes Page 2 of 6 DISCUSSION TOPICS: 1. GERC PLAN MEMBER(S) COMMENTS/CITIZEN PARTICIPATION: No plan members or citizens provided comments. 2. DEFINED BENEFIT TO MONEY PURCHASE PLAN CONVERSION REPORT MAIN POINTS: Julie Depperman presented a summary of the transfer of 368 GER Plan members who elected to convert from the Plan to a 401(a) Money Purchase Plan through ICMA Retirement Corporation. The culmination of a year's work by the Committee and staff resulted in $9,044,967 being transferred to the Money Purchase Plan on December 31, 1998. The converting members were able to access their funds on January 1, 1999. There was no blackout period. Russ Proctor, actuary for Watson Wyatt, presented a letter dated December 17, 1998 confirming that the transfer of funds would not have an adverse affect on the funding needs or actuarial soundness of the GERP for those members who have chosen to remain in the Plan indicating the Plan will be able to meet its near -future benefit obligations. Julie reported that the Dow Jones average was 9,181 on December 31, 1998, and closed at 9,471 on Wednesday, January 6, 1999. Many of the converting members may have increased the value of their holdings depending on their investment choices. GERC members confirmed that those who stayed in the GERP and who might terminate City employment after January 1, 1999 would be eligible to receive the higher of either the transfer balance they were quoted in June, 1998 or their lump -sum benefit as of their date of termination. CONCLUSION/NEXT STEPS: The members who converted to the Money Purchase Plan will receive confirmations of the funds transferred to their accounts from the ICMA Retirement Corporation by January I Ith. The Retirement Corporation will also provide a report to Julie showing the allocations by fund and by individual. Anyone who terminated employment with the City before December 31, 1998, was not eligible for this conversion and no funds were transferred for those people. 3. DEFINED BENEFIT TO MONEY PURCHASE PLAN CHOICE FOR THOSE HIR D IN 1998 MAIN POINTS: During 1998, the City hired approximately 45 people. They were automatically included in the GER Plan. Anyone hired l/l/99 or after is automatically a member of the ICMA 401(a) Money Purchase Plan, which is a defined contribution plan. The Committee and staff will now begin the process of offering the 1998 hires the opportunity to convert to the Money Purchase Plan. The tentative timeline is: April 15th (approximately) - Provide two information sessions for those employees May 15th (approximately) - Employee election deadline. June 30 - Transfer of funds Tapes of the previous education sessions are available for those who cannot attend the sessions, and answers to the "frequently asked questions" will also be available. CONCLUSION/NEXT STEPS: Deb Weedman will provide the names of those eligible for the conversion and Watson Wyatt will calculate the transfer amounts for them after the data from the last transfer is confirmed and the data from Payroll is reviewed. Anyone who terminates their employment Genera7Employees Retirement Committee January 7, 1999, Minutes Page 3 of 6 with the City before the June 30th transfer date is not eligible for this conversion or for a lump sum at termination because their participation in the General Employees Retirement Plan was less than the two years required for vesting. 4. GENERAL EMPLOYEES RETIREMENT COMMITTEE MAIN POINTS: Karla Smith of the City Clerk's Office is beginning the process of recruiting members for all City boards and commissions, with appointments to be made in June and effective in July. She had asked that the GERC defer appointing someone to fill the vacant Committee member position until that time. The Committee discussed the issue. Because of pending work, the Committee would like to proceed with the appointment as soon as possible. Kevin Westhuis's seat on the Committee is up for reappointment in June. He must reapply if he is interested in retaining it. Members made a number of suggestions regarding future Committee appointments: Appoint a retiree as a regular member or to act as an advisor. The question was raised whether a retiree could be appointed to the GERC. Greg advised, under the present Plan provisions, a retiree, as a tax- paying elector of the City, could serve as one of the four appointed members on the Committee (Article XI). Ask Council to appoint a non -voting alternate to the Committee. (NOTE: The City Clerk's Office advised that Council no longer appoints alternates to any board or commission.) Amend the Plan (and City Code, if necessary) to make a retiree(s) a permanent member. The Plan is now "closed" (not admitting new members) and more of those remaining in the Plan will become retirees over time. In the past the possibility of reorganizing the GERC to make it an oversight committee for the GER Plan, the 401(a) Money Purchase Plan, and the 457 Deferred Compensation Plan has been discussed. Because there are actually three separate 401(a) plans for separate groups of employees, this would involve the issue of proportional representation of each group and other political concerns, so this probably is not a viable altemative. CONCLUSION/NEXT STEPS: Alan will discuss the alternatives for appointing someone to the vacant position with the City Clerk's Office. (NOTE: The person who was City Council's second choice for the last GERC appointment is still available and interested in serving on the Committee. Karla Smith will investigate the possible appointment of this person to the GERC.) 5. CITY GERP CONTRIBUTIONS MAIN POINTS: Kevin brought up a question from an unclassified manager who has a vested benefit in the GERP. When he opted out of the Plan when he became an unclassified manager, his former GERP contribution began to go to his 457 plan. He asked if that contribution could now be contributed to his 401(a) plan in order to allow him to defer more income to his 457 plan. At the time the unclassified managers were given the option to get out of the GERP, the decision was made by the City to put that benefit in the 457 plan. There was no 401(a) plan at that time. Greg reported that ICMA-RC had General Employees Retirement Committee January 7, 1999, Minutes Page 4 of 6 concluded that a switch from the 457 to the 401(a) money purchase plan was not possible based on Internal Revenue Code regulations. General pension portability is an issue that will come up again in proposed federal legislation and which may affect this question. Other possible options include hiring a pension attorney to look at this issue, or for the GER Committee to consider suggesting that the 401(a) plan be amended in 1999. CONCLUSION/NEXT STEPS: The issue is really not one the GERC can address. It may impact what some GERP members will do with their allocations. It was suggested that the employee discuss this issue with Theresa Myers, the ICMA Retirement Corporation regional representative. 6. COST OF LIVING ADJUSTMENT FOR CURRENT RETIREES MAIN POINTS: Jim Hume suggested that when the new GERC member is appointed, it will be a different Committee that will address the cost of living adjustment issue. He suggested that the Committee consider sending City Council a letter of concerns to formalize this issue. Alan suggested that it be done as part of the budget process. The two-year budget cycle will begin again in March or April and a formal request at that time would be appropriate. CONCLUSION/NEXT STEPS: Russ Proctor was asked to review the previous cost of living adjustment request process and he will update the various options which were proposed at that time. Alternatives include: bring benefit payments up to date from the date of individual's retirement and bringing the benefits up to date from the last COLA (1990). 7. QUALIFIED DOMESTIC RELATIONS ORDERS (QDROs) MAIN POINTS: Greg Tempel prepared a draft of some QDRO documents which Russ Proctor has reviewed. State law has changed to allow state and local pension boards to prepare and approve sample forms and a process for handling QDRO-related requests. Greg said possible options for handling this include: A. Send all QDRO requests to Watson Wyatt for their review (with a $1,000+ price tag for each); B. Russ and Greg would develop a model, which the GERC would adopt and require applicants to use. Individual requests would still require individual Watson Wyatt reviews, but because the format would be standardized, it would be at a lower cost. Russ has already given Greg a 30+ page generic outline to review. To have Russ customize it for the GER Plan would cost between $2,500 and $3,500; C. Refer the issue to an attorney who specializes QDRO matters (cost unknown, but probably high); or D. Contact PERA and get their information to use as a model. Greg also has a copy of the Fire and Police Pension Association's QDRO packet, which Russ could review. CONCLUSION/NEXT STEPS: Jim Hume moved to direct Russ Proctor to review the QDRO process and documents, compare it with PERA, and customize the package for the GER Plan for the February meeting at a cost of up to $3,000 and to submit it to Greg for review. Alan seconded the motion, which passed unanimously 3-0. This will allow the GERC to administer QDROs in-house and save money. 8. 1998 VALUATION REPORT MAIN POINTS: Russ suggested that the payment projections and the projected assets in the 1998 Valuation Report be compared. At the current time, member contributions are covering the cost of paying the benefits. The GERP is now a "closed" plan. The Plan will not add new members. At some General Employees Retirement Committee January 7, 1999, Minutes Page 5 of 6 time in the future, it will be necessary to use investment earnings to pay the benefits. Other options at that time might be to purchase annuities with the funds in the Plan or to cash out the remaining members. The 1999 Valuation Report will probably show that the average age of the approximately 450 remaining members has risen. CONCLUSION/NEXT STEPS: Russ will bring the assumptions for the 1999 valuation report to the Committee in March for review. The Committee might want to review its mission at that time also. 9. MULTIPLE PENSION BENEFIT CALCULATIONS BY WATSON WYATT MAIN POINTS: After Watson Wyatt prepares and verifies pension benefit calculations, plan members have asked for several more calculations with additional or changed information (that is, changing date they wish to begin receiving benefits). Each of the calculations verified by Watson Wyatt costs the Plan $100. In some cases, the service is being over -used. Should the Committee limit the number of pension benefit calculations or should a fee be imposed for multiple calculations? CONCLUSION/NEXT STEPS: No action was taken, but the Committee suggested Deb encourage the members to use her preliminary calculations (which use the computer program prepared by Watson Wyatt) until the member sets a definite benefit commencement date. It was also suggested that after the disabled individuals who wish to begin receiving benefits or a lump -sum at this time have made their decision, that the calculation program be updated to provide all four retirement options (life annuity, 10 years certain or life, 50% and 100% joint and survivor). 10. REGULAR INVESTMENT REVIEW MAIN POINTS: Julie is working on the year-end report for next month's meeting, but preliminary information shows that the GERP will close out the year with a 9-10% return. She also noted that after providing for the funds to be transferred to ICMA Retirement Corporation for the conversion, the portfolio had been re -balanced to meet the 60%-40% investment policy target between equities and bonds . The total portfolio's market value at December 31, 1998, after the conversion is $29,662,389. CONCLUSION/NEXT STEPS: The full year-end report will be presented at next month's meeting. 11. EDUCATION MAIN POINTS: Alan provided information about two investment conferences that are coming up in February and March and which are specifically related to retirement and pension plans and how to direct firms in managing investments. He asked the Committee for financial support from the Plan (up to $750) in splitting the cost of attending these conferences, with the Finance Department picking up the other half. CONCLUSIONINEXT STEPS: Kevin Westhuis moved that the Plan provide half the cost of attending these conferences, up to $750. Jim Hume seconded the motion, which passed 2-0. Alan abstained from voting as it may be perceived as a conflict of interest. General Employees Retirement Committee January 7, 1999, Minutes Page 6 of 6 SCHEDULE FOR NEXT REGULAR MEETING: The next regular meeting will be Thursday, February 4, 1999, at 1: IS p.m. in the Council Information Center (CIC) of City Hall West. The agenda will include: 1. Citizen Participation / Plan Member Comments 2. Consider approving the December 3 and December 17, 1998, minutes 1998 Hires Conversion Plan 4. Appointment of Committee Member Update 5. Review of 1990 Cost Of Living Adjustment & Update of Costs for a 1999 COLA 6. Qualified Domestic Relations Orders (QDRO's) Draft Quarterly and Year -End Investment Report 8. Other Business ADJOURNMENT Kevin adjourned the meeting at 3:14 PM. GERC/GERP WEB PAGE ADDRESS: www.ci.fortcollins.co.us/CITY HALL/BOARDS COMMISSIONS/RETIREMENT FUTURE MEETING SCHEDULE: The General Employees Retirement Committee normally meets at 1:15 p.m. on the 1 st Thursday of each month in the Council Information Center, City Hall West. THURSDAY, FEBRUARY 4, 1999 THURSDAY, MARCH 4, 1999 THURSDAY, APRIL 1, 1999 THURSDAY, MAY 6, 1999 THURSDAY, JUNE 3, 1999