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HomeMy WebLinkAboutRetirement Committee - Minutes - 05/02/1996Citv of Fort Collins COUNCIL LIAISON: yees Retirement Plan FORT COLLINS GENERAL EMPLOYEES RETIREMENT COMMITTEE MAY 2, 1996 MEETING MINUTES Ann Azari, Mayor COMMITTEE MEMBERS PRESENT: ABSENT: Jerry P. Brown, 221-6350(w), 226-0800(h) Dave Meyer, 221-6927 Jacci Peterson, 221-6692 Gary Ellis, 221-6700 Alan Krcmarik, Member/Staff Support OTHERS PRESENT: Sue Wilcox (Staff Support - Secretary) Russ Proctor - Watson Wyatt Worldwide, the City's actuarial firm Dave Agee (Staff Support - Controller) Bob Eichem (Staff Support - Investments) Bobbie Burnette (Staff Support - Assistant City Attorney) Laurie Harvey (Staff Support - Benefits Administrator) Jaime Mares (Staff Support - Human Resources) CALL TO ORDER: Chairperson Jerry P. Brown called the regular GERC meeting to order at 1:15 pm in the Council Information Center of City Hall West on May 2, 1996. ITEMS OF NOTE: There were no items of note. APPROVAL OF MINUTES: Jerry noted that the "Items of Note" should follow the "Call to Order" in the minutes. This will be corrected beginning with these minutes. Jacci Peterson moved and Dave Meyer seconded her motion to approve the April 4, 1996, minutes as distributed. They were unanimously approved. DISCUSSION TOPICS: 1. GER PLAN MEMBER COMMENTS & CITIZEN INPUT: There were no comments. 2. DRAFT OF VALUATION REPORT MAIN POINTS: Russ Proctor, the GER Plan's actuarial consultant, presented the 1/1/96 GER Plan Valuation Report. He pointed out that the final calculations included some data changes and the effects of the new death/survivor benefits provision. This resulted in the cost for 1996, originally estimated at 4.8% for budget purposes, will actually be 4.4%. As a result of the "smoothing technique" which spreads the impact of investment highs and lows over five years, the contribution as a percent of pay for 1997 will need to be 4.345. This should remain fairly stable for the next few years, if no major changes are made in either the Plan or the assumptions used in the Plan valuation. Dave Agee will note the changes and the reasons -1- 300 LaPorte Avenue • P.O. Box 580 • Fort Collins, CO 80522-0580 • (970) 221-6788 • FAX (970) 221-6782 GERC Minutes May 2, 1996 for them in the audit disclosure statement. There were a number of questions discussed and a few corrections noted. CONCLUSIONS/NEXT STEPS: The draft was accepted and the final version is expected at the next meeting. Russ will provide Bob Eichem with a 20-year projection of expected benefit payments, allowing him to better plan investment strategies. Russ will also look into the availability of newer mortality tables. 3. SURVEY OF RETIREMENT PLAN CHARACTERISTICS AND PHILOSOPHY MAIN POINTS: Last month the Committee members and support staff completed a survey as a first step in determining a retirement plan philosophy for use in providing future Plan benefits. Russ had tallied the survey responses and explained the implications of the statistics. The Committee discussed the impact and influence that the 3% matching contributions to the 401(a) fund (and previous contributions to the 457 fund) have on retirement benefits, as well as how to allow for inflation. The connection between the retirement benefit and the Total Compensation policy is another difficult area. The desirability of COLAs and other ways to mitigate inflation for both current and future retirees was discussed. Alan mentioned that in Europe, Japan, and some South American countries, it is mandatory that workers contribute to retirement plans. Their retirement contributions are portable from job to job, and they cannot be withdrawn before retirement. This system encourages a "savings ethic". CONCLUSION/NEXT STEPS: The group reached a consensus that at age 65, the GER Plan benefit and Social Security should provide 70% of the employee's pre - retirement income. Because the other topics required more thought and discussion, it was decided that the topic of a philosophy would continue for several more meetings. Before the next meeting, Russ will summarize what was discussed and decided, and will provide a list of questions for future discussion. 4. EXECUTIVE LEAD TEAM RESPONSE TO SURVEY OF RETIREMENT PLAN CHARACTERISTICS MAIN POINTS: Alan and Russ had met with the Executive Lead Team on April 10th to explain the survey and solicit the Team's input to provide some direction for the GERC. However, the EL Team members did not seem very interested and their response was described as confused and defensive, as though providing a retirement plan philosophy could somehow be used against them. The impression was given that the EL Team did not feel any responsibility for the retirement plans of the employees they supervise. Jerry commented that it appeared to him that the EL Team members "did not give a damn about the GER Plan members, but were more concerned about themselves and their own benefits". He didn't think the GERC would get any -2- GERC Minutes May 2, 1996 help from the EL Team. In defense of the EL Team members, Jaime Mares noted that they may have felt that they would be unduly influencing a plan which did not directly affect them. However, some EL Team members have sought to influence changing the GER Plan to a defined contribution plan. It was a surprise that about 9 of the 13 or 14 EL Team members completed and returned the survey. However, they requested that any tabulation of the EL Team's responses be given only to them. Jerry pointed out that technically, the EL Team has no direct relationship to the GER Plan. The GERC makes recommendations directly to City Council, which then has the authority to change the Plan. CONCLUSION/NEXT STEPS: Several options were discussed, but it was decided that the GER Plan would not pay to tabulate these survey results unless the EL Team showed an interest in acting on them and/or the results were shared with the Committee. 5. INVESTMENT POLICY CHANGES MAIN POINTS: Alan updated the GERC members on the investment policy changes, which are a part of the overall City Financial Policy. The aim is to open up the investment options in mutual fund index funds. The Finance Committee has reviewed and approved the proposed changes and they are now under legal review. CONCLUSIONS/NEXT STEPS: City Council should have an opportunity to consider the whole Finance Policy package in the near future. 6. PRELIMINARY FIRST QUARTER, 1996 INVESTMENT REPORT MAIN POINTS: A preliminary one -page summary'of the First Quarter, 1996 investment report showed that two-thirds of the portfolio earned about 7%, which is the target amount for the GER Plan and also where the stock market is currently operating. The mutual funds returned about 3.59% for the quarter (multiply by 4 for a full -year return). Short-term investments are earning 5.48%. Alan pointed out that as interest rates go up, the market value of investments goes down, meaning that if all Plan investments were liquidated at this time, their value would be less than when they were purchased. However, retirement investments are made for the "long haul" and over time are expected to provide good returns. Purchase of three new mutual funds (Fidelity Value, Mutual Shares, and Fidelity Equity Income II) is being made on a regular basis. The international funds have been capped. CONCLUSION/NEXT STEPS: The complete Investment Report will be available at the next meeting. 9cE GERC Minutes May 2, 1996 7. JUNE MEETING DATE CHANGED MAIN POINTS: Because of a schedule conflict, the June meeting will be held on the 5th Thursday in May, May 30th, at 1:15 p.m. in the Council Information Center (CIC). CONCLUSIONS/NEXT STEPS: Sue will make sure that notice is given in these minutes, via a special notice on the City Hall West Public Notice Board, and through Groupwise messages. B. POTENTIAL PLAN ENHANCEMENTS MAIN POINTS: The Committee had asked Russ Proctor to prepare information about the costs of adding a "Rule of 80" (or 85) to the GER Plan. (The "Rule of 80" means that employees could retire with full benefits starting at age 55 when an individual's age and years of service combined equal 80.) Russ presented figures showing that instituting a "Rule of 80" would result in a Plan contribution rate of between 7.405% and 10.433%, depending on the number of people who retired as soon as they were eligible under a "Rule of 80". The contribution rates for a "Rule of 85" ranged from 6.658% to 8.776%. New information about the rule of 80 plan instituted in Broomfield reveals that the earliest an employee can use their rule of 80 is age 65, which makes it virtually the same as the GER Plan's present provision of full retirement benefits at age 65. CONCLUSIONS/NEXT STEPS: It was agreed that the Committee would complete the work on the Retirement Plan philosophy before proceeding with any enhancements or changes. AGENDA d SCHEDULE FOR NEXT MEETING THE NEXT MEETING HAS BEEN CHANGED TO THURSDAY, MAY 30TH AT 1:15 P.M. in the Council Information Center (CIC) of City Hall West. The agenda will include: 1. Plan Member/Citizen Comments 2. Final Investment Report for 1st Quarter, 1996 3. 1-1-96 Actuarial Valuation Report 4. Philosophy of the GER Plan Discussion 5. Fees for Actuarial Services 6. Possible article on Social Security changes for FortNotes -4- GERC Minutes May 2, 1996 ADJOURNMENT The meeting was adjourned at 3:46 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, MAY 30, 1996* THURSDAY, JULY 11, 1996** THURSDAY, AUGUST 1, 1996 THURSDAY, SEPTEMBER 5, 1996 THURSDAY, OCTOBER 3, 1996 THURSDAY, NOVEMBER 7, 1996 THURSDAY, DECEMBER 5, 1996 *In place of June meeting **Rescheduled because of holiday %I!