11/18/1999 - Special
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PENSION
(TRUSTEES)
Board of Trustees of the Employees'
Pension Fund
Minutes
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, A~TION AGENDA SPECIAL MEETING
Board of Tr~stees of the Employees. Pension Fund
. November 18, 1999
1:' . Call to Order
6:28 p.m.
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:2. Approve changes to City of Clearwater Employees' Pension Plan; authorize staff to
'proceed' with ordinance revision and referendum Approved. Authorized.
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3. Adjourn ~ 7:01 p.rn:
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TRUSTEES OF THE EMPLOYEES' PENSION FUND SPECIAL MEETING
. CITY OF CLEARWATER
November 18, 1999
Present:
Brian J. Aungst
Ed Hooper
J. B. Johnson
Robert Clark
Ed Hart
ChairlTrustee
Vice.ChairlTrustee
Trustee
Trustee
Trustee
Also present: Michael J. Roberto
Pamela K. Akin
Lee Dehner
Paul O'Rourke
Sue Diana
Patricia O. Sullivan
City Manager
City Attorney
Pension Trustees Attorney
Human Resources Administrator
Assistant City Clerk
Board Reporter
The Chair called thf:f special meeting to order at 6:28 p.m. at City Hall.
ITEM. ADorove chanaes to City of Clearwater Emolovees' Pension Plan: authorize staff to
oroceed with ordinance revision and referendum
,Mr. O'Rourke reviewed the following recommended plan changes: 1) add an ad hoc
cost of Jiving ICOLA) of 1.5% for active employees and retirees; 2) change average
monthly compensation from final to highest five years of service: and 3} change plan so
that vested employees retiring at age 65 with less than 20 years of service would get a
unormal" retirement instead of an actuarial equivalent or "reduced" benefit.
Annually, employees contribute 8% of salaries, while the City contributes 7%. The
plan's total projected actuarialliability,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 Florid~ Statutes, the minimum total contribution required for
1999 is 6.5% of payroll which is met by employees' contributions. The City's contribution
increases the credit balance.
A pension benefit survey compared City pension benefits with 29 pension plans,
including those of the Florida Retirement System, lake/and, Orlando, St. Petersburg,
Tallahassee, etc. Required employee contributions range from 2% to 8% of salary while
required employer contributions range from 1.1 % to 57.6% of salaries. The majority of
plans provide automatic or ad hoc COLAs (Cost of Living Adjustment), from 1 % to 4%.
Ad hoc COLAs allow the COLA to be reduced or suspended if the plan cannot support it.
During the last 10 years, Federal Retiree and Social Security COLAs have averaged 3%.
Clearwater also has the only plan based on the final 5~year average.
Pension change assumptions are based on City contributions not exceeding 7 % of
payroll, a 7% investment rate of return, and 5% salary increases annually.
mpf11 b99
11/18/99
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. Any changes to the Employees Pension Plan require approval by the PAC, Pension
Trustees, and citizens in a referendum election. The PAC has already approved the
changes.
Mr. O'Rourke said staff is recommending the 1.5% COLA be automatic to avoid
possible legal problems related to an ad hoc provision. The PAC, concerned about future
costs, had approved the ad hoc provision without considering legal issues.
Discussion ensued regarding if the Trustees should consider the proposed changes
together or separately. As changes are part of contractual negotiations, it was felt all
changes should be considered as a package. Concern was expressed the changes had
been presented without adequate time for deliberation and clarification of Impacts to the
plan. Reference was made to the plan's excellent return on current investments. In
response to a question, Financial Services Administrator Margie Simmons said each year,
one-fifth of actuarial reserves are transferred back to the plan. Actuarial reserves are
increased annually with investment returns that exceed projections. She spoke in support
of the proposal.
It was felt change #3 provides an unfair benefit not available to younger employees
who must meet age and employment length guidelines. Concern was expressed in
Increasing benefits for employees affected by previous career decisions. It was stated
change #3 will provide benefits to older employees who do not have a choice and are
required to participate in the plan rather than add to their Social Security credits.
Trustee Hooper reported the City Attorney had opined his status as a Pension Plan
recipient creates no conflict of interest.
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In response to a question, Mr. O'Rourke said the plan currently is funded at 174%
of required levels.
Trustee Hooper moved to approve the following changes to the City of Clearwater's
Employees Pension Plan: 1) provide a 1.5% automatic COLA for active employees and
retirees; 2) base computation of monthly compensation on the highest 5~year average; nnd
3) change annuity benefits for vested employees who retire at age 65 with less than 20
years of service and authorize staff to proceed with drafting the ballot question
incorporating all three changes.
Mr. O'Rourke reported the plan would adopt conditions related to State 185/175
legislation, which includes a 55/10 provision. The City Attorney noted the agenda item
states change #1 provides for an ad hoc COLA. Mr. O'Rourke said staff agreed with
counsel's concerns regarding liability issues related to an ad hoc provision and his
recommendation that it be automatic. Pension Trustees Attorney Lee Dehner said potential
legal risks of the ad hoc provision relate to plan members who may take action if an
adjustment is not received. The plan's actuary Steve Metz supports the recommendatIon.
Mr. Oehner said the Trustees could reduce benefits by referendum if they become too
expe.1sive. Opposition to COLAs was stated.
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11/18/99
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The motion'was duly seconded. Trustees Hooper, Clark, and Hart, and Chair
Aungst voted "Aye"; Trustee Johnson voted "Nay." Motion carried.
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The meeting adjourned at 7:01 p.m~
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ATTEST:~'
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