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09/15/2008TRUSTEES OF THE EMPLOYEES' PENSION FUND MEETING MINUTES CITY OF CLEARWATER September 15, 2008 Present: Frank Hibbard Chair Carlen Petersen Trustee John Doran Trustee George N. Cretekos Trustee Paul Gibson Trustee Also Present: William B. Horne, II Jill S. Silverboard Rod Irwin Pamela K. Akin Cynthia E. Goudeau Patricia O. Sullivan City Manager Assistant City Manager Assistant City Manager City Attorney City Clerk Board Reporter The Chair called the meeting to order at 1:36 p.m. at City Hall. To provide continuity for research, items are in agenda order although not necessarily discussed in that order. 2 - Approval of Minutes 2.1. Approve the minutes of the August 18, 2008 Pension Trustees meeting as submitted in written summation by the City Clerk. Trustee Cretekos moved to approve the minutes of the Pension Trustees meeting of August 18, 2008, as recorded and submitted in written summation by the City Clerk to each Trustee. The motion was duly seconded and carried unanimously. 3 - Pension Trustee Items 3.1. Discuss the Klausner and Kaufman review of Retirement Options and Analysis of Defined Benefit-Defined Contribution Issues. In their August 2008 memorandum, Pension Attorneys Klausner & Kaufman, P.A. reviewed retirement in the City and academic literature comparing Defined Benefit and Defined Contribution plans. They summarized implications of moving from a Defined Benefit plan to a Defined Contribution plan. They focused on advantages and disadvantages of both approaches and set forth practical considerations and theoretical arguments. In their final analysis, counsel believed maintenance of the current Defined Benefit system was the optimum means of providing a meaningful retirement to City employees and represented the most effective tool to insure a stable, well-trained, dedicated workforce. Pension Trustees 2008-09-15 In their Executive Summary, counsel reported while City benefits are competitive, they are not excessive when compared with the relevant marketplace. Each feature should be evaluated in the context of specific plan objective(s). While there is no single best plan for all employees or employers, counsel concluded maintenance of the current Defined Benefit retirement plan was the best alternative for the welfare of the City and employees. Counsel said abandonment or radical curtailment of the City's defined benefit retirement program would be directly contrary to sound employment practices. Pension Plan Attorney Robert Klausner said taxpayers pay 28 cents on the dollar under a Defined Benefit plan, versus the entire dollar under a Defined Contribution plan. Clearwater is not a participant in Social Security. If the plan were closed, plan obligations would shorten its funding life by half. At the same time, the City would have to replace the plan, plus contribute 6.5% to Social Security while employees contribute 7%. A study on terminating Los Angeles' plan indicated costs would double for 14 years, with no savings realized for 24 years. Actuarial gains are lost when retirees take money out of the plan and no employees contribute. Mr. Klausner said the biggest bargain taxpayers receive is local government. He said canceling the plan would be bad economic planning. A Defined Benefit plan attracts people to work and stay here. Jurisdictions that tried Defined Contribution plans have experienced significant attrition. Under the City's Defined Benefit plan, people who know what they are doing, handle investments extremely well and efficiently manage the plan, which is a fair one. While Defined Contribution plans work best for short-term professionals, Clearwater's goal has been to retain a stable work force. Mr. Klausner said a Congressional Ways and Means Committee meeting will address local government concerns regarding IRS interest in benefit packages. He will report on that meeting as well as rules proposed by the State Division of Retirement. Discussion ensued with comments that maintaining the plan's health is important and reducing employees would lower pension costs. The cyclical nature of investments was noted as well as the City's minimum contributions during many years. The City's actuary will provide a numerical comparison of the City's Defined Benefit plan with a Defined Contribution plan during the annual report in May 2009. 3.2. EmDlovees listed below be accepted into membership in the Citv of Clearwater's Employee's Pension Plan as approved by the Pension Advisory Committee. Pension Eligible Name, Job Class, & Dept./Div Hire Date Date Kimberly Pierce, Police Com. Operator Trainee/Police 07/07/08 07/07/08 Christopher Mears, Solid Waste Equip. Operator/Solid Waste 07/07/08 07/07/08 Peter Pulfer, Solid Waste Equipment Operator/Solid Waste 07/07/08 07/07/08 Louis Cobb, Solid Waste Worker/Solid Waste 07/21/08 07/21/08 Todd Deerwester, Solid Waste Worker/Solid Waste 07/21/08 07/21/08 Pension Trustees 2008-09-15 Maria Roldan, Customer Service Rep./Customer Service 07/02/08 07/02/08 Trustee Petersen moved to accept the listed employees into membership in the City of Clearwater's Employees' Pension Plan. The motion was duly seconded and carried unanimously. 3.3. Dennis Olmstead, Public Service Technician I, Public Services Department; Thomas Chaplinsky, Senior Plans Examiner, Development & Neighborhood Services Department; and Philip Jackson, Police Officer, Police Department, be granted regular pensions under Section(s) 2.393 and 2.397 of the Employees' Pension Plan as approved by the Pension Advisory Committee. Dennis Olmstead, Public Services Technician I, Public Services Department, was employed by the City on July 6, 1981, and his pension service credit is effective on that date. His pension will be effective September 1, 2008. Based on an average salary of approximately $51,886 per year over the past five years, the formula for computing regular pensions, and Mr. Olmstead's selection of the Joint & Survivor Annuity, this pension will approximate $38,735 annually. Thomas Chaplinsky, Senior Plans Examiner, Development & Neighborhood Department, was employed by the City on June 10, 1974, and his pension service credit is effective on that date. His pension will be effective October 1, 2008. Based on an average salary of approximately $60,884 per year over the past five years, the formula for computing regular pensions, and Mr. Chaplinsky's selection of the 100% Joint & Survivor Annuity, this pension will approximate $55,163 annually. Philip Jackson, Police Officer, Police Department, was employed by the City on September 1, 1986, and his pension service credit is effective on that date. His pension will be effective October 1, 2008. Based on an average salary of approximately $68,325 per year over the past five years, the formula for computing regular pensions, and Mr. Jackson's selection of the 100% Joint & Survivor Annuity, this pension will approximate $40,809 annually. These pensions were approved by the Pension Advisory Committee on August 14, 2008. Section 2.393 provides for normal retirement eligibility when a participant has reached age 55 and completed twenty years of credited service, has completed thirty years of credited service, or has reached age 65 and completed ten years of credited service. Section 2.393 also provides for normal retirement eligibility when a participant has completed twenty years of credited service or has reached age 55 and completed ten years of credited service in a type of employment described as "hazardous duty" and further defines service as a Police Officer as meeting the hazardous duty criteria. Mr. Olmstead qualifies under the 20 years of service and age 55 criteria. Mr. Chaplinsky qualifies under the 30 years of service criteria. Mr. Jackson qualifies under the hazardous duty criteria. Trustee Doran moved that Dennis Olmstead, Public Service Technician I, Public Services Department; Thomas Chaplinsky, Senior Plans Examiner, Development & Neighborhood Services Department; and Philip Jackson, Police Officer, Police Department, be granted regular pensions under Section(s) 2.393 and 2.397 of the Employees' Pension Plan as Pension Trustees 2008-09-15 4 - Other Business 5 - Adjourn The meeting adjourned at 2:00 p.m. ~~ -erlair Employee's Pension Plan Trustees Attest: ~~ {Jab fPl City Clerk Pension Trustees 2008-09-15 4