HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 12/20/2005 - SECOND READING OF ORDINANCE NO. 159, 2005, APPROPR ITEM NUMBER: 18
AGENDA ITEM SUMMARY DATE: December20, 2005
FORT COLLINS CITY COUNCIL STAFF: Chuck Seest
SUBJECT
Second Reading of Ordinance No. 159, 2005, Appropriating Prior Year Reserves in the General
Employees' Retirement Fund.
RECOMMENDATION
Staff recommends adoption of the Ordinance on Second Reading.
EXECUTIVE SUMMARY
Retirement Plan in 1971 to provide a retirement
The City Council created the General Employees'
ty
benefit in addition to the Social Security system. Oversight is provided by a six-member committee,
five of whom are appointed by Council,the other being the Financial Officer.
The single-sum benefit, approved by City Council in 1998, is designed to be actuarially neutral to
the Plan. When an employee elects to receive a lump sum amount from the Plan, the liability of
providing a future pension benefit to the employee is removed from the Plan. Although actuarially
neutral voluntary elections of single sum payments reduce the uncertainty regarding the number of
employees for whom the Plan must provide an income over an unknown period of years. From that
standpoint, lump sum payments are considered financially favorable.
On November 29, 2005, Ordinance No. 159, 2005, was unanimously adopted on First Reading.
ITEM NUMBER: 6
AGENDA ITEM SUMMARY DATE: November 29, 2005
FORT COLLINS CITY COUNCIL STAFF: Chuck Seest
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SUBJECT
First Reading of Ordinance No. 159, 2005, Appropriating Prior Year Reserves in the General
Employees' Retirement Fund.
RECOMMENDATION
Staff recommends adoption of the Ordinance on First Reading.
FINANCIAL IMPACT
The assets of the General Employees' Rirem� �n== he " n ) are held in a trust fund. As of
January 1, 2005, the date of tH i nosl r4,ept «c aft E ctuarial r ort, the Plan assets totaled $36.6
million. This Ordinance appropriates $350,000 from prior year reserves in the trust fund.
EXECUTIVE SUMMARY
The City Council created the Plan in 1971 to provide a retirement benefit in addition to the Social
Security system. Oversight is provided by a six-member committee, five of whom are appointed
by Council, the other being the Financial Officer.
The single-sum benefit, approved by City Council in 1998, is designed to be actuarially neutral to
the Plan. When an employee elects to receive a lump sum amount from the Plan, the liability of
providing a future pension benefit to the employee is removed from the Plan. Although actuarially
neutral, voluntary elections of single sum payments reduce the uncertainty regarding the number of
employees for whom the Plan nprc vi 'tit iPco 11 e o• r, "untg own period of years. From that
standpoint, lump sum paymen are con ered n c' fa ible.
BACKGROUND
Although the actuary for the Plan does estimate the number of employees who are approaching the
expected retirement age of 65,the actuary also assumes that a majority of these individuals will elect
to receive their retirement benefit as an income over their lifetime as opposed to a one-time single-
sum payment. When reviewing the budget for the Plan, City staff noted that approximately
$600,000 of single-sum payments were paid during 2004 to nine Plan members as compared to
November 29, 2005 -2- Item No. 6
$460,000 paid during 2003 to ten Plan members. The other component of the Plan appropriation
is the amount of monthly income paid to retirees. As more Plan members retire, this amount has
grown from $84,000/ month at the beginning of 2003 to approximately $98,000/ month as of
October 2005.
As reflected on the attached tie P, an hs b erkni uded conservatively and included an
allowance for election of singl , um palueste
ents ' t m be Powever,the number and amount
of the individual single-sum p�`"m, ents �in l,005 was gmusual compared to the trend from
past years. Given the uncertain'i�nrelaied"to the Ci '•s budget, higher number of Plan members
than anticipated elected to receive their benefit as a single-sum payment this year. The attached
chart also reflects the City's annual appropriation and the related payments to Plan members over
the past two fiscal years, year-to-date during 2005, and projected final for 2005. The Plan has
distributed over $1.1 million in single-sum payments to fifteen Plan members through the end of
October 2005.
The requested$350,000 appropriation will be used to make payments to Plan members for single-
sum payment requests submitted to the Plan to be paidduring the fourth quarter of the current fiscal
year.
Staff recommends Council authorize the $350,000 supplemental appropriation from prior year
reserves in the General Employees' Retirement Plan Fund.
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ORDINANCE NO. 159, 2005
OF THE COUNCIL OF THE CITY OF FORT COLLINS
APPROPRIATING PRIOR YEAR RESERVES IN THE
GENERAL EMPLOYEES' RETIREMENT FUND
WHEREAS, Article V, Section 9 of the Charter of the City of Fort Collins (the
"Charter") permits the City Council to appropriate by ordinance at any time during the fiscal
year such funds for expenditure as may be available from reserves accumulated in prior years,
notwithstanding that such reserves were not previously appropriated; and
WHEREAS, the City has prior year reserves in the Fort Collins General Employees'
Retirement Plan; and
WHEREAS, the City Council unanimously approved Resolution 98-86 amending the
City of Fort Collins General Employees Retirement Plan to allow for a single-sum benefit for
vested former employees of the City; and
WHEREAS, the City Council unanimously approved Resolution 98-137 approving the
amendment of the eligibility and contribution provisions of certain employee pension plans; and
WHEREAS, it is necessary to appropriate funds to accommodate an additional $350,000
in single-sum benefit payment requests received during the current fiscal year; and
WHEREAS, the General Employees' Retirement Fund has Plan Assets of approximately
$36.6 million available for appropriation.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
FORT COLLINS that there is hereby appropriated from prior year reserves in the General
Employees' Retirement Fund, the sum of THREE HUNDRED FIFTY THOUSAND DOLLARS
($350,000) to be used for single-sum benefit payments.
Introduced and considered favorably on first reading and ordered published this 29th day
of November, A.D. 2005, and to be presented for final passage on the 20th day of December,
A.D. 2005.
Mayor
A_T'FFS1':
City Clerk
Passed and adopted on final reading this 20th day of December, A.D. 2005.
Mayor
ATTEST:
City Clerk