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HomeMy WebLinkAbout2010 - Retirement Committee - Annual ReportGeneral Employees’ Retirement Committee 2010 Annual Report to City Council The General Employees’ Retirement Plan (GERP) is managed and administered by the General Employees’ Retirement Committee (GERC) in accordance with the terms of the Plan. The 2010 actuarial report prepared by Milliman Inc. indicates that as of January 1, 2010, there were 497 members in GERP of whom 212 were active members who continue to accrue benefits under the Plan, 149 retirees and 22 beneficiaries currently receiving benefits; and 114 vested terminated employees. One way to look at the adequacy of Plan funding is to compare the actuarial value of benefits earned to date ($50,300,314) under the Plan terms to the actuarial value of Plan assets ($39,577,509) as of the valuation date January 1, 2010. Utilizing this measure, the Plan’s progress toward becoming fully funded was reduced from the prior year since the actuarial value of plan assets covers 78.7% of the actuarial value of benefits as compared to 79.6% on January 1, 2009. A longer term measurement of the Plan’s funding status is obtained by comparing the present value of projected benefits ($53,400,744) to the Market Value of Assets is ($37,302,262). The Present Value of Projected Benefits includes benefits earned to date plus the value of benefits anticipated to be earned for all expected future service by current participants. It should be noted that while this variance is larger than the actuarial comparison above, a significant portion of that difference will be funded by ongoing contributions related to the future payroll of active members. According to the actuarial report and other information from Milliman, the Plan’s funded status has deteriorated from year 2009. The Council Finance Committee, at their April 19, 2010 meeting, stated they were committed to continuing the Plan. However, in light of the current economic and budgetary challenges facing the City, it appeared prudent to seek additional funding from the members to ensure the solvency of the Plan. The General Employees’ Retirement Committee (“Retirement Committee”), its actuary, and the City’s Finance Director have extensively studied and considered Plan design and funding alternatives that would strengthen and improve the long-term financial condition of the Plan, and have consulted with active Plan Members to seek input into such Plan design and funding alternatives. The best alternative to improve the Plan’s funding is to re-direct to the Plan, on a uniform percentage basis, employer contributions currently made on behalf of active Plan Members to other City retirement plans (i.e. the City’s 401(a) money purchase plans and 457 deferred compensation plan), effective as of January 1, 2011. The City also intends to make additional employer contributions to the Plan, effective January 1, 2011, with such contributions based on a percentage of compensation of active Plan Members, and with an initial targeted contribution rate of three percent (3%) of Member Compensation. At the request of the Retirement Committee, two alternatives to ongoing Membership in the GERP were provided to GERP Members—(1) terminating active Membership in the GERP, freezing the Member’s GERP benefit (for later distribution under the terms of the Plan at the election of the Member), and participating exclusively in other City retirement plans, or (2) ceasing Membership in the GERP and participating exclusively in other City retirement plans, with the Member’s GERP benefit to be rolled over into one such other City retirement plan. The options will limit the growth of the City’s liability for future benefits while allowing those employees flexibility with respect to ongoing participation in the Plan and with their Plan benefits. General Employees’ Retirement Committee Annual Report Page 2 of 2 Resolution 2010-062 adopting the Eighth Amendment to the City of Fort Collins General Employees’ Retirement Plan allowing active members to continue membership in the Plan or to cease membership in the plan and participate exclusively in other City Retirement Plans was approved by City Council at their October 5th meeting. It is estimated that in addition to the 2010 supplemental contribution of $700,000, future supplemental contributions of approximately $740,000 would be required through approximately 2034 to fully fund all benefit liabilities. In 2010, the Committee was composed of Rick Richter, Chair, Manager of Capital Projects for Engineering; Jim Lathrop, Vice Chair, citizen; Angelina Sanchez-Sprague, Customer and Administrative Services; Diane Toplyn, Sr. Budget Analyst; Dennis Freeburg, retired Plan member; and John Voss, Interim Finance Director. Staff support for the Committee included Heather Shepherd, Finance Department Administrative Assistant; Janie Appleton, Human Resources; Greg Tempel, Assistant City Attorney; Chris Donegon and Harold Hall, Finance Department. COMMITTEE HIGHLIGHTS FOR 2010: PERSONAL RETIREMENT PLANNING STATEMENTS (PRPS) The GERC had the PRPS prepared by the actuary, Milliman, and distributed them to individual members in April of 2010. RETIREMENT PHILOSOPHY The Committee continues to monitor investment returns and to have discussions with Milliman regarding our retirement philosophy. The Entry Age Normal cost method was used in the preparation of the 2010 actuarial report. INVESTMENT RESULTS The Annual Rate of Investment Return was 10.95% as of December 31, 2010 compared to 19.86% as of December 31, 2009. The Total Market Value of Assets was $38,432,347 as of January 1, 2011, compared to $37,302,262 as of January 1, 2010.1 The investment gain is $4,086,329. 2 Plan Member Changes Actives as of 1/1/10 212 Option 1 (Freeze): 20 Option 2 (Terminate): 8 Retired 9 Term Vested 6 Actives as of 1/1/11 169 1 Final results are subject to change pending reconciliation to the general ledger. Market values changes include investment gains / losses, contributions, retirement payments, and administrative expenses. 2 The investment gain / loss is for investments only.