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PENSION ADVISORY COMMITTEE MEETING
CITY OF CLEARWATER
November 9, 1999
Present:
Brian Aungst
J. B. Johnson
Pat Greer
Pat Shepler
Ed Hart
John Schmalzbauer
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Absent:
Dick Fitzgerald
Also Present:
Paul O'Rourke
Margie Simmons
Lee Dehner
Debbie Ford
Patricia O. Sullivan
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Chair/Mayor
Vice Chair/Commissioner
Committee Member
Committee Member
Committee Member/Commissioner
Committee Member
Committee Member
Human Resources Administrator
Financial Services Administrator
Pension Advisory Committee Attorney
Administrative Analyst
Board Reporter
The Chair called the meeting to order at 9:30 a.m. at City Hall.
To provide continuity for research, Items are in agenda order although not necessarily
discussed in that order.
, ,,~ ITEM #2 - Aporoval of Minutes
Jt was noted Member ShepJer had not been present on October 14, 1999.
Member Johnson moved to approve the minutes of the regular meeting of October
.14, 1999, as corrected. The motion was duly seconded and carried unanimously.
ITEM #3 - Emplovees to be Heard - None.
ITEM #4 - Action Items
a) Review and Action on Employee Requests for Regular Pensions
1. James Marshall, Network Support Technician 11- Police Department
Member Greer moved to approve the request by James Marshall for a Years of
Servfce Pension. The motion was duly seconded and carried unanimously.
b) Review and Action on Employee Requests to Waive Vested Pension Rights:
1. Sabrina R. Chute, Network Support Technician II - Information Technology
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Sabrina R. Chute resigned her position on December 14, 1998, but withdrew her
resignation within 6 months, and returned to a position with the Information Technology
Department. Since Ms. Chute is in the Pension Plan, it is necessary for her to waive her
vested pension. Her original pension date will be adjusted by the number of days she was
gone.
AND
2. Cindi R. Juster, Administrative Analyst - General Support Services
Cindi R. Juster resigned her position on August 12, 1999, but withdrew her
resignation within, 6 months, and returned to a position with the General Support Services
Department. Since Ms. Juster is in the Pension Plan, it is necessary for her to waive her
vested pension. Her original pension date will be adjusted by the number of days she was
gone.
Member Greer moved to approve the request by Sabrina' R. Chute and Cindi R.
Juster to waive their vested Pension rights. The motion was duly seconded and carried
unanimously.
c) Review and Action on Employee Requests to Vest Pensions:
AND
2. Ravmond G. KavaJ, Wastewater Treatment Plant Operator A - Public Works
Raymond G. Kaval has resigned his position after being employed by the City for
more than 10 years. He will qualify to receive his pension beginning June 1, 2001.
AND
3. Michael Schaffn'er, Police Officer - Police Department
Michael Schaffner has resigned his position after being employed by the City for
more than 12 years. He will qualify to receive his pension beginning January 1, 2007.
Member Greer moved to approve the request by Teresa J. Finch, Raymond G. Kava!,
and Michael Schaffner to vest their Pensions. The motion was duly seconded and carried
unanimously. '
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c) Approval of New Hires as Pension Plan Members
As of November 9, 1999, the City had 1,671.2 FTEs and 1,778.8 budgeted
positions.
Marlon Mitchell was hired as part-time on January 6, 1997, and changed to full-time
on October 9, 1999. Pamela Bedford was hired as part~time on January 5, 1998, and
changed to fulHime on October 11, 1999. David Powers was hired as temporary on June
4, 1998 and changed to permanent on October 11, 1999. Full-time permanent employees
are pension eligible.
\ .
Member Schmalzbauer moved to accept the following employees into membership in
the Pension Plan:
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Patricia Post, Risk Management Spec. Finance
Marlon Mitchell, Custodial Worker Parks & Recreation
Andrew Hawkins, Firefighter Fire Department
JLilie Wykoff, Library Assistant Library
David Powers, Senior Accountant Solid, Waste
Pamela Bedford, Library Assistant Library
Scott Kurleman, Land Resource Spec. Planning & Develop.
Robert Perry, Customer Service/Field Rep. Customer Service
Claire Knafla, Sys. Analyst/Programmer II Information Tech.
Dragoljub Vitkovic, Mechanic II. General Services
Melissa Jackson, Library Assistant Library
Louis Pirman, Gas Technician I Gas
Bruce Vendetti, Gas Technician I Gas
Richard Zeron, Solid Waste Equip. Oper. Solid Waste'
The motion was duly seconded and carried unanimously.
ITEM #5 - PendinQ/New Business
a) Darold Brink - Request for Pension Service Credit
Date of Pension
Emplovment EliQ. Date
1 0/11/99
01/06/97
10/04/99
10/11/99
06/04/98
01/05/98
10/11/99
10/13/99
10/1 8/99
10/25/99
10/25/99
10/25/99
10/25/99
10/25/99
10/11/99
10/09/99
10/04/99
10/11/99
10/11/99
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10/11/99
10/13/99
10/18/99
10/25/99
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10/25/99
On June 8, 1983, the City hired Darold Brink as a part-time Marine Attendant 111.
Until November 19, 1984, when Mr. Brink's classification was changed to full-time, he
worked full-time for the Marine Department while classified part-time. Staff review of his
personnel records have determined Mr. Brink was classified improperly. Mr. Brink did not
contribute to the Pension until his status was changed to full-time. He has requested
pension service credit for June 8, 1983, to November 19, 1984. Staff has calculated Mr.
Brink would have paid $1,584.94 to the Plan during that time. The PAC must determine if
i he should be credited for this time, and, if so, how much of a contribution is required.
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In response to a question, Human Resources Administrator Paul O'Rourke said a
memorandum will be forwarded to department directors requesting they report on any staff
who may have been classified improperly. The payroll also needs to be reviewed. The
number of employees affected by this issue has not been determined.
Pension Plan Attorney Lee Dehner said the problem could be resolved in two ways.
While the Plan does not address this specific situation, it considers buy backs for
employees who resign and later return to work for the City. He said the issue is more
analogous to Plan provisions to correct over- and under-payments, which require a
contribution of the uncollected pension benefits plus interest. It was suggested the
employee should not be responsible for the payment as the City had made the mistake.
Mr. Dehner said the employee has had use of the money not contributed to the Plan. It
was indicated the employee's take home pay had been reduced by Social Security
deductions.
Mr. O'Rourke stated the City should have deducted $1,584.04 in Pension
contributions from Mr. Brink during that 17-month period. The principal plus 5% interest is
approximately $3,380. The actuarial value of these 17 months of service is $19,760. Mr.
Dehner said requiring a contribution of the actuarial value would be unfair, as the employee
is not responsible for the error. In response to a question, Mr. O'Rourke said the City had
violated the Federal Standards Labor Act by requiring a permanent part-time employee to
work full-time. Mr. Dehner said the Pension Trustees had approved adoption' of the 5 %
interest rate. He did not who had established that rate.
Member Schmalzbauer moved to approve Pension service credit for Darold Brink
from June 8, 1983, to November 19, 1984, and to require him to contribute $1,584.04,
without interest charges, to the Pension Plan. The motion was duly seconded.
Concern was expressed a precedent not be established as the pension service being
credited is valued at $19,760. Mr. Dehner said had Mr. Brink contributed to the Plan
during this time period, he would not have made payments to Social Security. Mr. Brink
will derive a benefit due to Social Security contributions from him and the City. Discussion
ensued regarding permanent and temporary employees.
The seconder rescinded the second. The motion died for lack of a second.
Member Johnson moved to approve Pension service credit for Darold Brink from
June 8, 1983, to November 19, 1984, and to require him to contribute $1,584.04, plus
5% interest, for an approximate total of $3,380 to the Pension Plan. The motion was duly
seconded. Members Johnson, Greer, Shepler, and Chair Aungst voted "Aye": Members
Hart and Schmalzbauer voted "Nay." Motion carried.
The Committee recessed from 9:52 to 10:00 a.m.
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, b) Changes to Pension Plan
Mr. O'Rourke reviewed proposed changes to Pension Plan benefits. AnnuallYI
employees contribute 8% of salaries, while the City co'ntrlbutes 7%. 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~rnillion 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 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, Lakeland, 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 plans 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.
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-milllon, with the credit balance stabilized at $8-million In 2006.
Option 2 provides a 1.5% ad hoc or automatic 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-mlllion, 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 computation of monthly compensation to the highest 3-year
average and requires City funding to increase by $1.2-million annually. Option 5 bases
monthly compensation on the highest 5-year average and requires no increase in City
funding.
Option 6 changes annuity benefits for vested employees who retire at age 65 with
less than 20 years of service from one based on actuarial equivalents to a normal
retirement benefit. The City contribution would increase by $177,000, or 0.36% of
payroll.
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Options 1 or 2 are affordable alone or combined with Option 5. Option 4 is
affordable only by itself. Option 3 is not affordable. Staff recommends approval of
Options 2, 5, and 6. Any change requires approval by the PAC, Pension Trustees, and
citizens in a March 2000 referendum.
Mr. O'Rourke will report on the cost to hold the referendum. In response to a
Question, Aon Consulting representative Mike Jones said the analysis assumes all
employees would work until retirement and collect Pension benefits. Vested employees are
considered a liability to the Plan.
Member Shepler moved to recommend approval of 1) Option 2 - provide a 1.5 % ad
hoc COLA for active employees and retirees; 2) Option 5 - base computation of monthly
compensation on the highest 5-year average; and 3) Option 6 M change annuity benefits for
vested employees who retire at age 65 with less than 20 years of service.
In response to a question, Mr. O'Rourke said the analysis of police and fire benefits
is based on current benefits. It was stated increased compensation should be based on,
.. merit, not COLAs. In response to a concern regarding future funding problems, Mr. Dehner
said the recommendation is based on conservative calculations. He expressed concern an
ad hoc provision could cause legal problems. Should an annual adjustment be reduced or
denied, Plan members could bring to question the administration of the Plan, the astuteness
of investments, etc. In response to a suggestion, Mr. Dehner recommended considering
these issues separately from pending redrafts of the plan. Concern was expressed Option
6 is not fair to employees who adhere to current Plan retirement standards. It was stated
the current plan is unjust for older employees. Pension Plan participation is mandatory for
qualified employees, regardless of their age.
The motion was duly seconded. Members Greer, Shepler, Schmalzbauer and Chair
Aungst voted " Aye": Members Johnson and Hart voted "Nay." Motion carried.
One Pension Plan member felt the comparative analysis of police and fire retirement
benefits should have considered only Pension Plan benefits.
ITEM #6 . Director's Reports
The next meeting is scheduled for December 9, 1999, at 9:00 a.m.
ITEM #7 - Committee Members to be Heard
Member Shepler recommended employees be allowed to choose a pension benefit
option prior to retirement. Vested employees, who die or are incapacitated, have only one
option when 6 options exist. This issue, will be addressed in December.
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ITEM ':08 .;' Adjournment
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The rpeei,lng ,adjourned a~ 1 ~:33 a.m.
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