11/15/1999 (2)
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......... . PENSION
.. (TRUSTEES)
Board of Trustees of the Employees'
Pension Fund
, Minutes
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ACTION AGENDA
Board of Trustees of the Employees I Pension Fund
November 15, 1999
1.
Call to Order - 9:55 B.m.
2.
Approval of Minutes: 10/4/99 - Approved as submitted.
3.
Request for acceptance into membership: Mark Wallace, Duane Miller, Cindy Geary,
Francis Whitney, Edith Jones, John Evans, Eric Kleinman, Scott Suba, Jonas Majerski,
Joseph Farrar, Martin McCarthy, Natalie Pehote, Matt Daerr, Gerard Devivo, Michael
Faulkner, James Horning, Jason Lynn, Steven Smith, Shawn Taber; Absolom Young,
Chad R. Reed, James R. Butterfield, & Matthew 8. Dupree - Approved.
4.
Pension{s} to be vested: Antonia Babski, Nicolas Rivera-Ruiz, Carol Tresca, & Michael
E. Harrell. Approved.
5. Authorize expenditure not to exceed $25,000 to Thompson, Sizemore & Gonzalez
regarding Krieger' v. City and Pension Trustees - Approved.
6. Approve changes to City of Clearwater Employees' Pension Plan; authorize staff to
proceed with ordinance revision and referendum - Scheduled for Special Meeting
11/18/99.
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7. ,Other Business - See minutes.'
8. Adjourn - 10:46 8.m.
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TRUSTEES OF THE EMPLOYEES' PENSION FUND MEETING
CITY OF CLEARWATER
November 15, 1999
, Present:
Brian J. Aungst
Ed Hooper
J. B. Johnson
Ed Hart
Chair
Vice-Chair/Trustee
Trustee
Trustee
Absent:
Robert Clark
Trustee
Also present: Michael J. Roberto
, Pamela K. Akin
Lee Dehner
Paul atRourke
Cynthia E. Goudeau
Patricia O. Sullivan
City Manager
City Attorney
Pension Trustees Attorney
Human Resources Administrator
City Clerk
Board Reporter
The Chair called the meeting to order at 9:55 a.m. at City Hall.
,To provide continuity for research, items are in agenda order although not necessarily
discussed in that order.
ITEM #2 ~ AODroval of Minutes:
Trustee Johnson moved to approve the minutes of the October 4, 1999, meeting,
as recorded and submitted in written summation by the City Clerk to each Trustee. The
motion was duly seconded and carried unanimously.
ITEM #3 ~ Reauest for Acceptance into Membership:.
The City Manager presented the recommendation of the PAC (Pension Advisory
Committee) to approve membership for these employees:
Mark Wallace
Duane Miller
Cindy Geary
Francis Whitney
Edith Jones
John Evans
F.ric Kleinman
Scott Suba
Jonas Majerski
Joseph Farrar
Martin McCarthy
Natalie Pehote
Matt Oaerr
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Gerard Devivo
Michael Faulkner
James Horning
Jason Lynn
Steven Smith
Shawn Taber
Absolom Young
Chad R. Reed
James R. Butterfield
Matthew B. Dupree
Trustee Hooper moved to accept the PAC recommendation. The motion was duly
seconded and carried unanimously.
ITEM #4 - ReQuest to Vest Pension:
The City Manager presented the PAC recommendation that Antonia Babski, Nicolas
Rivera-Ruiz, Carol Tresca, and Michael E. Harrell be allowed to vest their pensions under
Section(s) 2.397 and 2.398 of the Employees' Pension Plan.
Antonia Babski was employed on April 27, 1988, and her pension service credit is
effective on that date. Nicolas Rivera-Ruiz was employed on October 19, 1984, and his
pension service credit is effective on that date. Carol Tresca was employed on April 8,
1985, and her pension service credit ;s effective on that date. Michael Harrell was
employed on October 22, 1988, and his pension service credit is effective on that date.
The Employees' Pension Plan provides that should an employee cease to be an
employee of the City after completing 10 or more years of creditable service (pension
participation), then such employee shall acquire a vested interest in the retirement benefits.
Vested pension payments commence on the first of the month following the month in
which the employee normally would have been eligible for retirement.
Section 2.393 (p) provides for normal retirement eligibility when a participant has
reached age 55 and completed 20 years of credited service or has completed 30 years of
credited service. Section 2.393 (p) also provides for normal retirement eligibility when a
participant has completed 20 years of credited service in a type of employment described
as I'hazardous dutytl and further specifically defines service as a Police Officer as meeting
the hazardous duty criteria.
Ms. Babski would have completed 20 years of service and reached age 55 on April
27, 2008. Her pension will be effective on May 1, 2008. Mr. RiveraMAuiz would have
completed 20 ,years of service and reached age 55 on March 20, 2007. His pension will be
effective on April 1, 2007. Ms. Tresca would have completed 20 years of service and
reached age 55 on July 26. 2011. Her pension will be effective on August 1, 2011. Mr.
Harrell would have completed 20 years of service as a Police Officer on October 22, 2008.
His pension will be effective on November 1, 2008. The PAC approved these requests on
October 14, 1 999.
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In response to a question, Human Resources Administrator Paul O'Rourke said
employees who transferred to the County will fall under the Pinellas County pension plan.
Trustee Johnson moved to accept the PAC recommendation. The motion was duly
seconded and carried unanimously.
ITEM #5 - Authorize expenditure not to exceed $25.000 to Thompson. Sizemore &
Gonzalez reoardina Krieaer v. Citv and Pension Trustees
In her October 22, 1999 memorandum, the City Attorney indicated on August 16,
1999, the Pension Trustees had approved hiring the law firm, Thompson, Sizemore &
Gonzalez, to handle the defense for the case, Krieger versus the City and Pension Trustees.
The City Attorney requested approval for the expenditure of not more than $25,000 to
Thompson Sizemore's for legal services related to this case.
Trustee Hart moved to approve the expenditure of not to exceed $25,000 to
Thompson, Sizemore & Gonzalez to handle the defense for the case, Krieger versus the
City and Pension Trustees. The motton was duly seconded and carried unanimously.
ITEM #6 - Aporove chanaes to City of Clearwater Emolovees' Pension Plan: authorize staff
to proceed with ordinance revision and referendum
Mr. O'Rourke reviewed proposed changes to Pension Plan benefits. Annually,
(~") employees contribute 8% of salaries, or $3.9-million, while the City contributes 7%, or
$3.5-million. The Plan's total projected actuarial liability is $370-million, or a $23.7-million
unfunded actuarial liability. The actuarial value of Plan assets is $354-million and the
market value of Plan assets is $416-million. The Plan has actuarial reserves of $ 62-million
and a credit balance of $6.8~million.
Pursuant to Florida Statutes, the minimum total contribution required for 1 999 is
$3.2-million, or 6.5% of payroll. This year, Florida law requires a minimum City
contribution of $0. Employee's 8% contribution fully meets the minimum contribution
requirement. The City's 7% contribution, required by the City's pension ordinance, adds to
the credit balance.
A pension benefit survey compared City pension benefits with 29 pension plans,
including those of Bradenton, the Florida Retirement System, Gainesville, Largo, Lakeland,
Orlando, Pinellas Park, Sarasota, St. Petersburg, Tampa, and Tallahassee. Ten were non-
hazardous and general employee plans, while 19 were hazardous/Police/Fire plans.
Seventy percent of non~hazardous plans provide automatic or ad hoc COLAs (Cost
of Living Adjustment), which range from 1 % to 4%. Ad hoc COLAs allow the Pension
Trustees to reduce or suspend the COLA if the Plan cannot support it. Fifty~eight percent
of hazardous duty plans provide COLAs, ranging from 2% to 4%. During the last 10 years,
Federal Retiree and Social Security COLAs have averaged 3%.
y
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Clearwater has the only hazardous and non~hazardous duty Plans based on the final
5~year average. Regarding non-hazardous plans: 1) 3 average 5-year high and 2) 6 average
3-year high. Regarding hazardous plans 1) 1 averages 2-year high~ 2) 4 average 5-year
high; and 3) 13 average 3-year high. Clearwater's pension benefits rank 7th, in the bottom
third for non~hazardous duty, 6th, in the top third for Police Officers, and 5th, in the top
third for firefighters.
Pension change assumptions are based on City contributions not exceeding 7% of
payroll, a 7 % investment rate of return, and 5 % salary increases annually.
Option 1 provides a 2 % ad hoc or automatic COLA for active employees only and
requires City funding to increase by $5.5-million annually. The unfunded liability would
increase by $39-million, with the credit balance stabilized at $8-million in 2006.
Option 2 provides a 1.5% ad hoc COLA for active employees and retirees and
requires City funding to increase by $5.3-million annually. The unfunded liability would
increase by $44.2-million, with the credit balance stabilized at $9.3~million in 2006.
Option 3 prOVides a 2 % ad hoc COLA for active employees and retirees and requires
City funding to increase by $7-million annually. The unfunded liability would increase by
$59-million and the credit balance would be depleted by 2004.
Option 4 changes the computation of monthly compensation to the highest 3-year
average and requires City funding to increase by $1.2-million annually. Option 5 would
base monthly compensation on the highest 5~year average and require no increase in City
funding.
Option 6 would change annuity benefits for vested employees who retire at age 65
with Jess than 20 years of service. The benefit would change to a normal retirement
benefit from an actuarial equivalent one. The City contribution would increase by
$177,000, or 0.36% of payroll.
Options 1 or 2 are affordable alone or combined with Option 5. Op~lon 4 is
affordable only by itself. Option 3 is not affordable. The Pension Advisory Committee
recommended approvDI of Options 2 (with the ad hoc provision), 5, and 6. The change
would require approval by the citizens in a March 2000 referendum.
Mr. O'Rourke reported the March 14, 2000, referendum to revise the pension
ordinance would cost the Plan between $3,000 and $5,000. He said while the PAC had
recommended approval of Option 2 with an ad hoc COLA, the Plan's actuary, Steve Metz,
and Plan counsel, Lee Dehner, recommend approving an automatic COLA to avoid potential
legal consequences. Should an annual adjustment be reduced or denied, Plan members
could bring to question the administration of the Plan, the astuteness of investments, etc.
Should problems arise related to a permanent COLA, the City can extricate itself by
amending Plan benefits. It was recommended the board have more time to consider the
issues. Mr. O'Rourke said the Commission must approve both readings of a related
ordinance by December for the issue to appear on March's referendum. in response to a
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question, Pension Plan Actuary Steve Metz said the analysis projects costs over the next 8
years. ' Beyond that, projections are less reliable. He reported a Plan liability of
approximately $850,000 will expire in 6 years. He stated the analysis is based on
conservative assumptions. A sizable credit balance wilt remain at the end of 8 years. The
assumptions disregard the Plan's actuarial reserves of $62-million.
Member Hooper reponed the City Attorney had opined his status as a Pension Plan
recipient creates no conflict of interest, as the subject class is too large for him to receive a
special benefit.
In response to a question, Mr. Metz said for several years, it has been the Plan's
practice to set aside investment returns greater than 7%. Every year, one-fifth of that set
aside is transferred into the Plan. In response to a question, Mr. O'Rourke said the majority
of participants in the surveyed plans do not contribute to Social Security. It was stated ' '
many pension recipients do not qualify for Social Security benefits. The minimum monthly
pension benefit is $300 while health related costs are high. It was indicated without
Option 6, those with less than 20 years of service who need to collect a pension at age 65
are penalized by up to 70% of their benefit.
As the difference between a 1.5% COLA and a 2% COLA is negligible, concern was
expressed the margin of error seems thin when the higher COLA is rated too expensive for
consideration while the lower COLA is rated affordable. Mr. Metz said the number of Plan
members significantly increases the difference between the cost of each option. Concern
was expressed the PAC had recommended an ad hoc COLA. Mr. O'Rourke said the
committee had supported a safety valve, but did not discuss all legal and fiscal
consequences related to an ad hoc benefit. ,
In response to a suggestion, Mr. O'Rourke recommended considering these issues
separately from redrafts of the Plan which are scheduled over the next year. He said these
proposed changes are substantial and should not be deferred. Mr. Dehner said there is no
advantage to presenting all Plan issues on one referendum. In response to a question, Mr.
O'Rourke said the changes incur no other obligations. The changes affect ongoing
negotiations with the unions.
Concern was expressed benefit increases should be based on merit. It was felt the
changes may cost too much in the future. As Trustee Clark is absent, it was
recommended a decision regarding these issues be continued. Financial Administrator
Margie Simmons said she is satisfied the conclusions of the analysis and projections are
correct. She reviewed the conservative approach used in the computations. It was noted
City employees contribute 8 % of their salaries to the Plan while employers are the sole
contributors to the Florida System, which is portable
Consensus was to continue consideration of this issue to a special meeting of the
Pension Trustees following Public Hearing Items during the November 18, 1999, City
Commission meeting scheduled to begin at 6:00 p.m.
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ITEM #7 .. Other Business:
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Regarding employees who were classified as part-time when they worked full time, ,
c information was requested regarding identifying all affected employees and a review of
total impacts. A legal review and discussion of associated liability was requested. Mr..
O'Rourke said the Issue will be discussed at the December 9, 1999 PAC meeting. The City,
Attorney reported legal staff is researching the issue.
ITEM #8 - Adjournment:
The meeting adjourned at 10:46 a.m.
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