HomeMy WebLinkAboutRetirement Committee - Minutes - 07/11/1996City of Fort Collins
COUNCIL LIAISON:
Retirement Plan •
FORT COLLINS GENERAL
JULY 119
Mayor Ann Azari
COMMITTEE MEMBERS PRESENT:
Jerry P. Brown, 221-6350(w),
Jim Hume, 221-6776
Jacci Peterson, 221-6692
Gary Ellis, 221-6700
Alan Krcmarik, Member/Staff
CORRECTED
EMPLOYEES RETIREMENT COMMITTEE
1996 MEETING MINUTES
226-0800(h)
Support
ABSENT:
OTHERS PRESENT:
Sue Wilcox (Staff Support - Secretary)
Russ Proctor - Watson Wyatt Worldwide, the City's actuarial firm
Laurie Harvey (Staff Support - Benefits Administrator)
Bob Eichem (Staff Support - Treasury Administrator)
CALL TO ORDER: Chairperson Jerry P. Brown called the regular meeting to order
at 1:20 p.m. in the Council Information Center of City Hall West.
ITEMS OF NOTE: Jerry noted that Assistant City Attorney Bobbie Burnette was
unable to attend, but was available by phone, if necessary. The Committee
members also noted Jerry's recent 50th birthday and presented him with a mug.
Jerry welcomed new member Jim Hume of Purchasing, who assumes Dave Meyer's place
on the Committee. After eleven years with the City's Equipment Division, Jim
joined Purchasing last year. He said that he has always been interested in the
Retirement Committee, but that his interest was strengthened when he began
raising a granddaughter and new questions about retirement began to surface.
A Welcome/Farewell luncheon for departing and newly -appointed members is planned
for August 1st at 11:30 a.m. at Coopersmith's Restaurant.
APPROVAL OF MINUTES: Several changes/clarifications to the May 30, 1996 minutes
were proposed:
1. Alan Krcmarik asked for clarification on page 1 under "Items of Note",
paragraph 4 regarding the rewriting of the GER Plan Summary Booklet. It
will be reworded to make the intent clearer.
2. In the same paragraph, the last sentence, Alan also questioned whether
staff support persons had been polled for their feelings on this
affirmation. They had not.
3. Alan asked Jacci Peterson if, on page 2 item 2, she meant she did not feel
it was worthwhile for the Committee to proceed with any part of the
analysis of the retirement survey. She confirmed this.
4. Bobbie Burnette advised Jerry via Groupwise that on page 2, item 2,
paragraph 4 there was NO AGE LIMIT in the latest "Early Out" proposal;
only a minimum of 20 years of City service was required.
5. Russ Proctor of Watson Wyatt stated that on page 2, the first sentence in
the next -to -the -last paragraph would be better stated as "Burnout is a
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300 LaPorte Avenue • P.O. Box 580 • Fort Collins, CO 80522-0580 • (970) 221-6788 • FAX (970) 221-6782
more significant reason for reduced productivity, rather than age."
6. On page 4, item 3, the first line in the last paragraph should say
"'defined benefit' plan, such as the GER Plan.....".
7. The date on each page should read May 30, 1996.
Alan Krcmarik moved and Gary Ellis seconded a motion to approve the minutes as
corrected. Because of the number of changes, the minutes will be corrected and
re -issued. (NOTE: Anyone wishing an individual copy of revised May 30, 1996
minutes can call Sue at-6788.)
DISCUSSION TOPICS:
1. GER PLAN MEMBER COMMENTS/CITIZEN PARTICIPATION: There were no member or
citizen comments.
2. DISCUSSION OF RETIREMENT PHILOSOPHY
MAIN POINTS: Items indirectly related to the philosophy discussion:
1. Laurie Harvey reported that there had been discussion on a possible increase
in contributions to the 401(a) plans for unclassified managers and division
heads. No decisions have been made, but many options are being reviewed. Any
changes would require a favorable vote by the members of that plan and must
comply with the IRS equitability requirement.
2. Jerry noted that the City Manager did not include the GERC's recommendation
for a benefit increase for current retirees in his budget message to City
Council. Jerry then suggested that Council consider a $125,000 per year budget
item for six years to pay for a COLA for current retirees.
3. Because of the probable appointment of two new GERC members, it may not be
possible to implement any Plan changes by 1-1-97, but changes with a later
effective date may be possible.
Russ Proctor had prepared and distributed to the Committee a summary of previous
retirement philosophy discussions and understandings reached at the last meeting.
The members agreed to continue the discussion, feeling that the present mix of
experienced and newer GERC members would bring new viewpoints and ideas.
Russ explained that for several years GER Plan members have made conflicting
requests for Plan enhancements. The GERC wants to develop a philosophy outlining
the main objectives of a retirement Plan to guide potential future Plan changes.
Russ's first discussion question related to how much more should employees be
encouraged to contribute toward retirement and how to change the current
programs to accomplish that? Russ presented two graphs showing what percentage
the GER Plan plays in the overall retirement plan/Social Security/deferred
compensation portion of Total Compensation, both in term of contribution before
retirement and benefits after retirement.
Jim Hume pointed out that the GERP is only a small portion (4.3% of total salary)
of the overall City and employee contributions toward retirement. The GERC has
no control over the other parts: the employee's and employer's required
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July 11, 1996
contributions of 6.2% for Social Security; the employee's option to contribute
3% to the 401(a) Money Purchase Plan, which is administered by Administrative
Services and Human Resources; and additional funds which may be contributed to
the 457 plan. There is also an unknown in what assets an employee has (i.e. home
equity, savings, personal investments, etc.) that will contribute to retirement
income. The recent implementation of the 401(a) loan provision has the potential
to lessen retirement funds, since loaned funds earn only a small rate of return.
Jim then stated that many employees feel the GERC should be responsible for
educating employees about the 457 and 401(a) plans, even though the Committee has
no control and little impact on these plans. The GERC has no financial or legal
responsibility for such education, but may have a moral responsibility. In the
past, the GERC and Human Resources have shared the costs of educational efforts.
Jacci pointed out that the Newsletter for Non -Profit Organizations, which the
GERC subscribes to, stated that employees in organizations that educate them in
finances, showed more productive allocation of investments. Laurie says it is
possible to get a report showing which asset allocations City employees tend to
direct their ICMA investments to. (This breakdown would be for all funds from
City employees as a block, not from individuals.)
History of benefits affecting retirement:
1970 City has no retirement plan.
1971 GER Plan implemented
1982 Decision made for City to stay in Social Security system.
457 deferred compensation plan is begun thru ICMA.
1985 Some unclassified managers and division heads withdraw from
GER Plan and create 401(a) defined contribution plan.
1995 401(a) MPP created as more flexible alternative to 457 plan.
Bob Eichem pointed out that if a person began contributing $2000 a year at age
18 to growth stocks, which have a historic return of 10%, it would grow to $6
million by age 65. Alan reported that in countries with forced retirement
contribution programs, a person typically contributes about 20% of income.
Laurie reported that any of the Cafeteria Benefits allotment not used for
benefits can be contributed to 457 savings. More education is needed in City
publications, perhaps with some information on how to allocate investments. ICMA
provides such information, but that can be perceived as self-serving.
The possibility of providing an alternative to ICMA was discussed. ICMA has been
the City's only provider of this service and consequently the City is one of
ICMA's top clients. In order to further cement this relationship, ICMA has been
moving toward lowering its administrative and annual fees. However, other firms
are anxious for the City's business. Poudre Fire Authority currently has its
401(a) plan with Prudential and its 457 with ICMA.
Another of Russ's questions involves 1) the best understood and 2) the least
understood aspects of the current retirement programs and how understanding can
be improved:
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GERC Minutes
July 11, 1996
Misunderstandings:
1. Many members don't understand the differences between a 401(a) and a 457
plan.
2. Defined contribution/defined benefit differences are fuzzy.
3. Many feel a retirement information overload, especially if dealing with
finances is uncomfortable for them.
4. With the implementation of shorter vesting and the addition of 401(a)
benefits, there has been some "them VS us" feeling expressed between long-time
employees toward shorter -term employees.
5. Since longer -term employees require more on -going overhead costs, why would
the City want to encourage employees to remain with the City?
Solutions:
1. Perhaps a "dose of
selection time.
2. Information needs to
3. It should be pointed
term employees since it
retirement" training could be included at benefits
be repeated/updated from time to time.
out that the GER Plan has essentially rewarded longer -
has existed.
CONCLUSIONS/NEXT STEPS: Laurie will request a report showing how funds are
allocated in the various types of ICMA investments. The Committee agreed to
close discussion of the philosophy for this meeting and proceed to other agenda
items. The topic may or may not be continued at the next meeting, depending on
the status of appointments to the Committee.
3. RESULTS OF PERSONAL RETIREMENT PLANNING STATEMENT (PRPS) SURVEY
MAIN POINTS: A short survey form accompanied the newly -revised Personal
Retirement Planning Statement" (PRPS) forms when they were distributed in June.
About 10% of the surveys were returned and a summary of the results, which were
almost unanimously favorable, was distributed, along with many of the verbatim
comments. There were suggestions for changes, including using dollar figures
instead of percentages on the graph. Russ explained that using dollars makes the
amounts look too inflated and optimistic. Laurie reported that as a result of
the "If you have a shortfall" notation, about 30 people contacted Human Resources
about increasing or reallocating their 457 or 401(a) contributions.
When revising the form was originally proposed, the cost was estimated to be
about $1500 per year more than the cost of producing the old form. Because of
this, it was suggested that the new form only be issued every other year. In
light of the increased educational value and employees actively responding to the
"shortfall" suggestion, the members felt that the new form should be issued every
year and as early as possible in the calendar year.
CONCLUSION/NEXT STEPS: The members were very pleased at the overwhelming support
for the new form. Jacci moved and Gary seconded her motion to issue the PRPS
every year by April 1st or earlier. The motion passed unanimously. Laurie
Harvey will discuss with ICMA representatives the possibility of sharing costs.
Jim Hume was asked to work with Laurie and Sue on revising the form for 1997.
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July 11, 1996
4. EFFECT ON GERP BENEFITS FOR EMPLOYEES SWITCHING TO PART-TIME STATUS
MAIN POINTS: About a year ago Jacci Peterson switched from full-time to part-
time status. She discovered when calculating her possible future GER Plan
benefits that long-term, part-time employment might actually decrease the amount
of the retirement benefit already earned. Since she has resigned from the City,
her benefits are not in question, but she expressed concern that other employees
who have moved or who will move to part-time positions could be impacted. Russ
stated that in the private sector it would be illegal for vested benefits already
earned to be diminished because of subsequent work. The effects that the reverse
situation (part-time employee becomes a vested, full-time employee) might have
on retirement benefits was also questioned. The uncertainty seemed to center
around the Plan's provision that the highest five years income, out of the last
10 years of employment, are used to calculate benefits. Out of approximately
1100 classified City employees, 88 are currently listed as part-time.
CONCLUSION/NEXT STEPS: Russ will research the Plan's provisions and what affects
they would have on either a change from full-time to part-time, or a change from
part-time to full-time employment. He will create a report for the Committee
and, if necessary, list options to the present Plan wording.
DRAFT OF ARTICLE ON SOCIAL SECURITY
MAIN POINTS: Recent changes in Social Security eligibility and payments have
been instituted because of diminishing funds in the Social Security system.
Since many City employees are unfamiliar with these changes, Sue was to draft an
article for Fort Notes or the Benefits Newsletter explaining the changes.
CONCLUSIONS/NEXT STEPS: The draft is not ready to be presented to the Committee,
but Sue will have it for the next meeting.
6. ELECTION OF NEW MEMBERS(S)
MAIN POINTS: Member Jacci Peterson, whose term expires June 30, 1998, has
submitted her resignation effective July 19, 1996, in order to assume a greater
role in her husband's business. She decided not to reapply for appointment as
a citizen (non -employee) member of the Committee. The difficulty of keeping in
touch with someone who is not in the regular communication flow of the City
(Groupwise, Fort Notes, etc.) was also considered.
Member Gary Ellis confirmed that he has applied for disability retirement from
the City. He will submit his letter of resignation from the Committee to Mayor
Azari on July 12th. Various ways to alert GER Plan members about the vacancies
and recruiting applicants was discussed.
CONCLUSIONS/NEXT STEPS: Jerry will discuss these resignations, as well as ways
to encourage employees to apply for the positions, with Committee Liaison Mayor
Azari and the City Clerk's Office.
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July 11, 1996
7. ELECTION OF INTERIM VICE -CHAIRPERSON
MAIN POINTS: Dave Meyer was the vice -chairperson of the General Employees
Retirement Committee, but his expired membership leaves a vacancy until regular
elections are held in September. Jacci's resignation and Gary's imminent
resignation leave only Jerry (chairperson), Alan (permanent ex-officio staff
member), and Jim (newly -appointed member). None of the three felt comfortable
being a candidate for vice -chairperson at this time.
CONCLUSION/NEXT STEPS: Since it would take all three members to make a quorum
for a meeting, the election of a new vice -chairperson will be deferred until one
or two new members are appointed.
B. OTHER BUSINESS
MAIN POINTS:
1. Russ distributed final copies of the Annual Valuation Report.
2. Laurie Harvey will not be able to attend the August meeting or luncheon.
CONCLUSIONS/NEXT STEPS: Russ will provide more copies of the valuation report
for other staff members.
AGENDA i SCHEDULE FOR NEXT MEETING
The next meeting will be August 1st at 1:15 P.M. in the Council Information
Center (CIC) of City Hall West. The agenda will include:
1. Plan Member Comments/Citizen Participation
2. Investment Report for 2nd Quarter, 1996
3. Credit for Service (part-time) Issue Update
4. Review Draft of Social Security Article
5. Continued Discussion on Retirement Philosophy
ADJOURNMENT
The meeting was adjourned at 4:00 p.m.
FUTURE MEETING SCHEDULE:
The General Employees Retirement Committee normally meets at 1:15 p.m. on the 1st
Thursday of each month in the Council Information Center, City Hall West.
THURSDAY, AUGUST 1, 1996
THURSDAY, SEPTEMBER 5, 1996
THURSDAY, NOVEMBER 7, 1996
THURSDAY, JANUARY 2, 1997
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THURSDAY, OCTOBER 3, 1996
THURSDAY, DECEMBER 5, 1996
THURSDAY, FEBRUARY 6, 1997