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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 07/18/2000 - RESOLUTION 2000-90 AMENDING THE CITY OF FORT COLLI YVI 11 ,1 .. _ AGENDA ITEM SUMMARY ITEM NUMBER: 22 FORT COLLINS CITY COUNCIL DATE: July 18, 2000 STAFF: Alan Krcmarik SUBJECT: Resolution 2000-90 Amending the City of Fort Collins Firefighters' Pension Plan. RECOMMENDATION: The Firefighters' Pension Board and staff recommend adoption of the Resolution. The City Council's Finance Committee has previously discussed this issue and indicated its support provided that the annuities can be acquired without additional financial support from other City sources. FINANCIAL IMPACT: Since 1991 when all active members of the Firefighters' Pension Plan converted to a defined contribution plan, the remaining assets of this Plan have been invested to provide monthly payments to the retirees and beneficiaries. City staff has been monitoring market conditions for an opportunity to acquire annuities for the retirees and beneficiaries. When interest rates rose earlier this year, staff with the assistance of the Plan's actuary, developed an annuity buy-out plan that also provides a cost of living increase. All of the assets of the Plan, approximately $2.3 million, will be used to purchase the annuities. EXECUTIVE SUMMARY: In 1991, the City of Fort Collins authorized active members of the Firefighters' Pension Plan to convert to a money purchase defined contribution pension plan. The total assets of the Plan were } divided among the active members and the remaining retirees and beneficiaries. Since the active members left this Plan, the remaining assets of the Plan have been invested in order to provide <` ongoing monthly payments to the retirees and beneficiaries of the Plan. This Resolution provides the authorization for the City to acquire annuities for the retirees and beneficiaries. The annuities will include a "catch-up" cost of living adjustment for all retirees and beneficiaries. t ` Due to the recent rise in interest rates, the assets of the Plan were sufficient to also include an s annual cost of living adjustment of 1% per year, the first of which is to occur on September 1, 2001. Once the annuities are purchased, the Plan will be terminated. BACKGROUND: According to the records on file with the City Clerk, the Firefighters' Pension Plan traces its origin to the year 1917. Since that time, the Plan has undergone many changes. In the late .; 1970s, the State of Colorado passed legislation that separated fire department employees based on the date of hire. Firefighters hired before April 8, 1978, were generally referred to as "Old Hires" and those hired after the date were referred to as "New Hires." According to the State z . . ........ .... July 18 2000 2 ITEM NUMBER: 22 u DATE: y law, the State would assist cities in providing funding for the Old Hire plans for a limited period of time. The City of Fort Collins has operated two pension plans for fire department employees since 1980. Members of the City's new hire plan converted to a defined contribution plan in 1989. In 1991, Council approved a conversion plan for the active members of the Old Hire Plan. Since 1991, the City has maintained the Firefighters' Pension Plan for the benefit of the remaining retirees and beneficiaries of the Plan. When the active members of the Plan decided to convert to the money purchase plan, the City intended to acquire annuities for the retirees and beneficiaries of the Plan. However, the interest rates in the markets moved away from the high levels of the late 1980s and it was not financially feasible to purchase annuities for the remaining retirees and beneficiaries. Staff from the City's Finance Department have continued to invest the Plan's assets to provide the monthly payments to the retirees and beneficiaries. Additionally, staff has worked with the Plan's actuary to develop an appropriate annuity acquisition plan. Recently, interest rates have improved to the point where the Plan's assets are adequate to provide annuities. In addition to a one time "catch- up" increase to partially offset inflation, the Plan's assets are sufficient to include an on-going cost of living increase for the remaining retirees and beneficiaries of 1%per year. In June, Finance Department staff conducted a mail ballot of all retirees eligible to vote on Plan changes. The vote unanimously ratified the concept of purchasing annuities and providing the cost of living adjustments summarized in the paragraph above. The ballot also elected three members to serve on the Firefighters' Pension Board. On July 7, 2000, the Board convened to consider the draft of Resolution 2000-90, and after review the Board recommended adoption of the Resolution. In concert with the vote and the meeting of the Board,the Finance Department staff conducted a competitive bid for the annuities for the retirees and beneficiaries. Under the State law regarding police and fire pensions, only top-rated insurance companies may bid on the annuities. According to the bids submitted, it has been determined that the John Hancock Insurance Company is the top bidder. This company is rated AA+ by Standard & Poors' rating service, a full notch higher that the minimum required by the State law. Once the annuities are purchased, the Plan will be terminated. The City will remain liable for the payment of benefits in the event of default by the insurance company. RESOLUTION 2000-90 OF THE COUNCIL OF THE CITY OF FORT COLLINS AMENDING THE CITY OF FORT COLLINS FIREFIGHTERS' PENSION PLAN WHEREAS, on January 21, 1986, the City Council adopted the City of Fort Collins Firefighters' Pension Plan (as restated January 1, 1986) (the "Plan") for City of Fort Collins firefighters hired before April 8, 1978; and WHEREAS, in 1990, the City Council adopted an amendment to the Plan which allowed active employee participants in the Plan the option of converting to a separate money purchase pension plan; and WHEREAS, in 1991, all active employee participants in the Plan chose to convert to a separate money purchase pension plan,leaving only retired participants and beneficiaries in the Plan; and WHEREAS,the Board ofTrustees ofthe Plan has recommended that the City Council amend the Plan to provide a one-time cost of living benefit increase plus an annual cost of living increase in the amount of 1%each subsequent year to the remaining retirees and beneficiaries of the Plan;to utilize all of the assets of the Plan for the purchase of non-transferable annuities to fund all future benefits payable under the Plan, including the cost of living benefit increase; and to then terminate the Plan; and WHEREAS,the Plan participants have voted unanimously to approve the one-time monthly cost of living benefit increase and the annuitization of the Plan; and WHEREAS, the proposed amendments to the Plan will increase the benefits to the Plan retirees and beneficiaries without increasing the City's funding obligation; and WHEREAS,Articles XIV and XV of Plan specifically authorize the City Council to amend and terminate the Plan. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS, COLORADO as follows: Section 1. That the City of Fort Collins Firefighters' Pension Plan is hereby amended by adding thereto a new Article XVII, which shall read as follows: 1 .... ......._............. ... ARTICLE XVII Cost of Living Benefit 17.1 One-Time Cost of Living Benefit: Upon the annuitization of the Planassddsc bedinArticle3MII,them6nthlybenefitofeachretue#Part cipantand beneficu�ry who is then'receivmg a monthly pension bene fit undethe 1'an shad be mcreaised;by$I50 OU pIns an"amounrequal�a the product of the cipt�,, t"s eunrenf mpntFlty benefit amount and'10%of the cumulative yearly mfiaUon,asirieasurec hy, the DenverfBoulder`Consumer Price"Index;=from the year in whtch;ite recipient began teceiuing the l'lan's monthly pension benefit'through 1998.' 17 2 ` Annual:Cost of Living Benefit: Providing the anngitiza6on of the Plan as described in Aitiale XVIII oc_Curs, the monthly benefit of each retired Pgar anh anandbeneficiarywtaistheatcetvngamonthlypensiobeefitundetthe Ply ��.fi n increased by 1"/o per �eac,.6egmniiig one year 'frcsm"�e dat'e'.of nuitfabn;or Septeinbei 1;2001,whichever is later: taa lit Contingency he cost ,O&Dmg benefits described �,subsee idi�is 17 1 ancl�l d 2 shall natbe tmplementeduit ess and until the annurtreaU wor mePian � �nnenbed urAreleXVIR o�t§,I?�dn Tnthe�d�ent tha t� `whza �titi im o�th"` �, t, set forth ut"Article X�`IIl�i�determwet"a�be m al�t� � ,a co �a� come sdichoo ylte cost olx 'g i?enets dbed tr e Kona 1T acid+31 n.,_�tmpleniented,such cost of?",�n benefits shall be:termi „y d. DNS';"'' Sectrdf �That the city of Fort Collrns Firgfighters'Pension Plant ` ereby amended lid c_cmg theretq� giiew;Article XV III;;which shrill read'as iollOw§; ARTICLE:XVIII AiinwhAa n an eii ttnahon 3 thh}?ian use re�uIe,,effo�� "c e�n crab hes�tm�'" 3 • _ bsecdons�'T lad � e� t� r „ ur �n 2 18.2 :1 In the event that all assets of the Plan are not,exhausted'fo ptrchase the annuities described in subsection 18.1,the remaining assets ofthePlanshallbe used to purchase or enhance annuities to increase the cost of living benefit described in subsection;17.1 by increasing:the 100%;of cutnulaUve yearly tnfldtl'pn,factor.set forth in subsection 17.1 until all assets of the Plan aze exhausted In no„event shall any assets of the Plan be returnable to the City except as set forth rn suB'sect,'on 15.4; 18.3 Termination of Plan: Upon the annuitizatioii of the Plan;as'set forth in subsections 18.1 and 18.2,the Plan shall be terminated. Passed and adopted at a regular meeting of the Council of the City of Fort Collins held the I8th day of July, A.D. 2000. Mayor ATTEST: City Clerk • 3