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Home My WebLink AboutRetirement Committee - Minutes - 11/06/1997Retirement Plan City of Fort Collins FORT COLLINS GENERAL EMPLOYEES RETIREMENT COMMITTEE TEE NOVEMBER 6,1997 MEETING MINUTES COUNCIL LIAISON: Mayor Ann Azari COIVII4IPITEE MEMBERS PRESENT: Tun Hume, 221-6776 Dave Agee, 221-6770 Alan Krcmarik, 221-6788 Kevin Westhuis, 224-6156 Patti Teraoka, 221-6715 OTHERS PRESENT: Russ Proctor, Watson Wyatt Worldwide, the City s actuarial firm Deb Weedman (Staff Support - Human Resources) Greg Tempel (Staff Support - Legal) Bob Eichem (Staff Support - Investments) Sue Wilcox (Staff Support - Recording Secretary) CALL TO ORDER Chairperson Kevin Westhuis called the meeting to order at 1: 20 p.m. in the Council Information Center of City Hall West. ITEMS OF NOTE: Kevin thanked Human Resources and ICS for creating electronic distribution fists for all GER Plan members who have access to E-mail. To be able to reach all members on the E-mail system, there are four lists: GERPI, GERP2, GERP3, and GERP4. They are located in the Public Groups list. APPROVAL OF MINUTES: Alan Krcmarik moved that the October 2, 1997 minutes be approved as distributed. Tun Hume seconded the motion, which passed unanimously. Sue Wilcox will use these new E-mail distribution fists to send out the minutes and meeting announcements. DISCUSSION TOPICS: 1. GER PLAN MEMBER(S) COMMENTS/Cr17ZEN PARTICIPATION: Judy Dahlgren of Light & Power Department discussed the findings of the recent focus groups. She represented GERP members from Light & Power and the Water Utilities. A number of GER Plan members had signed a petition asking the GER Committee to continue to pursue the option of a Deferred Contribution (DC) plan. Although participants in the recent focus group meetings were not overwhelmingly in favor of pursuing a DC plan, the petitioners felt the calculations of benefits for conversion should be determined and shared with the members. This topic will be discussed again under "Possible Options for the GF,RP". t 300 LaPorte Avenue • P.O. Box 580 • Fort Collins, CO 80522-0580 • (970) 221-6788 • FAX (970) 221-6782 GERC Minutes -November 6, . ioW 2. REPORT ON MEETING WITH GERP LIAISON MAIN POINTS Kevin Westhuis and Alan Krcmarik met with Mayor Ann Azari, the GERC Council Liaison, for an annual review. Mayor Azari's discussion of the focus group results indicated that the members should be offered choices. Her personal experience was that nationwide, the move is to DC plans. The other topic involved Cost of Living Adjustments (COLAs) for current retirees. The GERC had previously requested funding to cover the costs of a COLA provision in the 1998-99 budget process and suggested several ways to do this. The funding request was not included in the City Manager's recommended budget. Mayor Azari suggested revisiting this issue with the City Manager, Deputy City Manager, Budget Director, and Human Resources Director and to provide more information about how COLAs relate to Total Compensation and current employees. CONCLUSIONS/NEXT STEPS: Russ Proctor was asked to present the information about COLAs at the next GERC Meeting (December 4th). Kevin will contact the individuals to see if they can attend. 3. DISCUSSION OF POSSIBLE GERP OPTIONS MAIN POINTS: Following the distribution of the Focus Group results, Kevin received comments from several members by E-mail, phone, and personal contact. Most of the members asked him to reopen discussion of a possible DB-DC choice. Tim Hume reported that most of his contacts indicated that they wanted the GERP to stay the way it is. Many members wanting the DB-DC choice felt they would need to see the cash -out numbers before deciding. Russ estimated it would cost about $7,000 for Watson Wyatt to prepare individual calculations for each member. Various ways to do this without incurring a significant cost were discussed. The Committee generally agreed that providing the numbers without additional investment and risk education for the plan members would be inadequate. CONCLUSIONS/NEXT STEPS: After the discussion, it was agreed that the goal is to provide more education and individualized calculations of the cash -out value of the GERP benefit at the same time the Personal Retirement Planning Statements (PRPS) are distributed (usually in March). Members will need to attend an educational session to receive the individual calculation. The calculations could be accomplished by using a computer program the ICMA Retirement Corporation (RC) created. The RC model uses the GERP assumptions and formulas. The model will be combined with the annuity factors and formula from Watson Wyatt. As a DB plan, actual salary histories are not available for all plan members. The benefit can be estimated fairly closely with birth dates, hire dates, and current salary. Alan will set up a meeting between Russ and an ICMA representative in a couple weeks to work out the details. Russ will prepare a 2-3 page handout to accompany the calculation. Russ estimated that education sessions conducted by Watson Wyatt would be about $600 each, but he will send cost estimates for the handout and education sessions to Kevin prior to the December meeting. -2- GERC Minutes - Novembe•, 1997 • 4. WORK PLAN FOR 1998 MAIN POINTS: Kevin presented the revised Work Plan for 1998. Dave Agee moved that the Work Plan be approved as revised and Alan seconded the motion. It passed unanimously. CONCLUSION/NEXT STEPS: A copy will be sent to the City Clerk's office and to the GERC members. Jun Hume will post it on the Web Page and Sue Wilcox will add it to the minutes when they are distributed. S. FINAL DRAFT OF GERP INVESTMENT POLICIES MAIN POINTS: Alan presented the final draft of the Investment Policies for the GER Plan. He reviewed the changes relating to the funding agent and finance officer, the flex factor related to strategic allocation of assets (+/- 100/a of the stated goals), and the softening of "must" and "will" to language that permits rather than requires various actions. One correction to the chart on page 8 was noted. CONCLUSION/NEXT STEPS: Patti Teraoka moved that Resolution #97-1 adopting the Investment Policy Statement be approved. Jun Hume seconded the motion, and the motion carried. Kevin will add Investment Review to the agenda for future meetings. 6. PLAN DOCUMENT CHANGES MAIN POINTS: In an October 2, 1997 memo, Greg Tempel outlined some inconsistencies between the Plan document and the investment administration and management services which the City provides for the Plan, specifically relating to the "Funding Agent" and the "Funding Agreement". He suggested changes in the definitions, as well as clarifications in Articles XI and XII to insure consistency in responsibilities. If an outside entity is ever retained to perform the investment management and administration services, then a funding agreement and a funding agent would be appropriate. His memo also included a wording change to bring the Plan into compliance with new state law. Dave Agee asked if the entire GER Committee would serve as the Investment Committee. Greg Tempel stated that it could be, or the GERC members could designate a sub -committee to act in that capacity. Because the GER Committee only has five members, the consensus was that it would continue to provide general investment direction, review the performance of the investments, and review the quarterly investment reports as provided for in the investment policy. These review activities could include the current market activity and its affect on GERP investments and could be included in the monthly meetings, but not in as great a depth as the quarterly report. The Committee will proceed with this system for one or two quarters and then evaluate how it is working. Dave Agee asked if the GERC members would then be held to the standards of "prudent" investment advisors. Greg explained that "prudent" means 1) there is a process outlined for overseeing the investments and 2) the process is followed consistently. This process can include checklists, timetables, reports, and other summaries done at regular intervals, for example, -3- GERC Nfiinutes - November 6, 097 monthly, quarterly, or annually. These activities can provide consistency, education, and ease the transition when there is member turnover. Also discussed were other possible Plan changes. Greg will review these and also how QDROs (Qualified Domestic Relations Orders) are treated under the Plan and prepare a resolution for the GERC to consider. Greg needs to be notified of any QDROs received on behalf of the Plan after January 1, 1997. CONCLUSIONS/NEXT STEPS: Alan moved to approve the recommended changes and to take them to City Council for implementation. J'un Hume seconded the motion, which passed unanimously. Greg and Alan will present this resolution to City Council, probably on the Consent Agenda. 7. DRAFT INVESTMENT REPORT, 3RD QUARTER,1997 MAIN POINTS: Alan introduced a draft of the 3rd Quarter GERP Investment Report. He noted that the end of the quarter came just days before the adjustment in the stock market, so any changes that that event may have caused are not reflected in the report. For the quarter, the bond component of the plan portfolio was up 6.94%. Although this does not meet the 7.5% actuarial target for return on investments, it is better than its benchmark investment, 5-year Treasury bonds, which showed a 6.13% return. As of September 30th, the fixed -income investments are now 48.7% of the portfolio. The domestic mutual funds are now 42.8% of the portfolio and showed a 10.61% increase for the quarter. The international mutual funds were off 6.63%, compared with their benchmark EAFE Index which lost -.70%. The overall yield for the portfolio, if annualized, would be approximately 20% for the quarter. The value of the portfolio at the end of the third quarter was $35 million. Alan noted that long-term bond rates (6.2% for 30 year bonds) are very close to short-term treasuries and that extending the length of bond maturity does not add much in terms of return. Future investment strategies may include looking at one or two new international mutual funds. In line with the new investment policies, Bob Eichem has been working on some questions that the GERC can consider at its monthly meetings to be sure it is following the new investment policies. Alan said the reporting goal is to have the quarterly report available within 45 days of each quarter's end (generally by the second meeting after the end of the quarter). CONCLUSION/NEXT STEPS: Alan will have the final draft of the Third Quarter Investment Report by the December meeting. S. OTHER BUSINESS MAIN POINTS: Dave mentioned some educational opportunities for GERC members. One in February in New Orleans highlights fiduciary and administrative responsiblities of trustees. The other is a Pension Accounting Seminar sponsored by Government Finance Officers Association (GFOA) in December in San Antonio and will include the new GASB (Governmental Accounting Standards Board) provisions. The estimated cost for the accounting class would be $900 and .4- GERC Minutes - Novemb•6, 1997 L Dave would like to attend, as this directly impacts the Accounting Division's reporting of GERP funds. Accounting would be willing to share the cost. CONCLUSION/NEXT STEPS: Alan moved that up to $500 in matching finds be provided by the GERP to send Dave to the GFOA seminar. Jim Hume seconded the motion, which was approved unanimously. AGENDA & SCHEDULE FOR NEXT MEETING The next meeting will be Thursday, December 4th at 1:15 pm in the Council Information Center (CIC) of City Hall West. The agenda will include: 1. Plan Member Comments/Citizen Participation 2. Annual Report Draft 3. Current Retirees - COLA Background Information 4. Investment Review 5. Report on Education Presentations & Individual Calculations 6. Other Business ADJOURNMENT The meeting was adjourned at 4:00 p.m. THE GERP/GERC WEB PAGE is accessible at the following address: www.cLfort-coRins.co.us/CITY HALL✓BOARDS_CON3USSIONS/RETIRENMNT/mdex.htm 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, DECEMBER, 4, 1997 THURSDAY, JANUARY 8, 1998* THURSDAY, FEBRUARY 5, 1998 THURSDAY, MARCH 5, 1998 THURSDAY, APRIL 2, 1998 THURSDAY, MAY 7, 1998 THURSDAY, JUNE 4, 1998 THURSDAY, JULY 9, 1998** THURSDAY, AUGUST 6, 1998 THURSDAY, SEPTEMBER 3, 1998 THURSDAY, OCTOBER 1, 1998 THURSDAY, NOVEMBER 5, 1998 THURSDAY, DECEMBER 3, 1998 *Because the January meeting falls on New Years Day, it was moved to the next Thursday, January 8, 1998 **Because the July meeting falls so close to the observance of Independence Day (on July 3rd), it was moved to the next Thursday, July 9 th, 1998 -5- GENERAL EMPLOYEES RETIREMENT COMMITTEE 1998 Work Plan & Meeting Schedule Regular meetings of the General Employees Retirement Committee (GERC) are scheduled for the first Thursday of every month in the Council Information Center (CIC) of City Hall, 300 LaPorte Ave. at 1:15 pm. The 1998 GERC meeting schedule is: January 8" April 2 July 9'' October 1 February 5 May 7 August 6 November 5 March 5 June 4 September 3 December 3 "Jan. 1 is New Years Day; meeting moved to the 8th. I July 2nd meeting rescheduled to the 9th due to a holiday conflict. 1998 GERC Work Plan Discussion / Action Items and Issues • Prepare 1997 GERC Annual Report for City Council prior to the Jan. 31 deadline • Recommend and implement enhancements or changes to GERP • Address credit for part-time service • Revisit GERC's retirement philosophy and revise as needed • Develop employee education program to accompany GERP changes if needed • Recommend a Cost of Living Adjustment (COLA) for retirees, including background information • Review quarterly investment reports • Continue to review and assess the GERP's investment strategies and policies, with changes in policy or procedures, as necessary. • Provide education about fiduciary responsibility, and have the GER Committee respond to the education in the most prudent way • Provide educational opportunities for GER plan members • Review Legislative issues with our actuarial consultant and support staff • If necessary, revise Actuarial assumptions prior to April 1 • Distribute 'Personal Retirement Planning Statement' forms by April 1 • Review GERC standing rules in September • Conduct annual review of actuarial consultant services in October