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PENSION ADVISORY, COMMlnEE MEETING
CITY OF CLEARWATER
February 14, 2002
ITEM #3 - Emolovees to be Heard - None.
~~~
Present:. ,Dick Fitzgernld
Whitney Gray
John Lee
Ed Hart
, Bill Jonson
, < Tom Jensen
Chair
, Vice Chair /Commissloner
Committee Member
Committee Member/Commissioner
Committee Member/Commissioner
Committee Member
Absent:,
, John Schmalzbauer" Committee Member
Also Present: Paul O'Rourke
Lee Dehner
, Deb Ford
Margie Simmons
Patricia O. Sullivan'
Human Resources Director
PAC Attorney - arrived 9:03 a.m.
Human Resources Analyst
Finance Director
Board Reporter
The Chair called the meeting to order at 9:00 a.m. at City Hall.
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. To p,rovlde continuity for research. items are in agenda order although not
. necessarily discussed in that order.
ITEM #2 - Acoroval of Minutes
Member Lee m6~ed to approve the minutes of the regular meeting of January 10, ,
2002, as recorded and submitted in written'summation to each board member. The motion
was duly seconded and carried unanimously.
ITEM #4': Action Items
'a) Review and Action on Employee Requests for Years of Service Pension
1) James l. Littlo - Police Officer, Police Department
2) Dean N.' Edwards - Fire DistriCt Chief, Fire Department
Memb'er Jensen moved to approve Years 'of Service Pensions for James L. Little and
Dean N. Edwards. The motion was duly seconded and carried unanimously.
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02/14/02
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b) Review and Action on Employee Requests to Vest Pensions
1) Terry Ann'Webber - Development Review Technician II, Planning & Development
Services
Terry Ann Webber has resigned her position after being employed by the City for
more than 20 years and will qualify to receive a reduced pension beginning August' 1 ,
2004.
2) James Powell - Public Services Technician II, Public Services
, '
James Powell has resigl!ed his position after being employed by the City for more
than 19 'years and will qualify to re~eive a reduced pension beginning October 1, 2002.
3) Gregory B. Howe - Recreation Programmer, Parks & Recreation
Gregory B. Howe has resigned his position after being employed by the City for
more than 13 years and will qualify to receive a reduced pension beg'inning, June 1 t 2015.
Member Gray moved to approve the requests by Terry Ann Webber, James Powell,
and Gregory B. Howe, to vest their pensions. The motion was duly seconded and carried
unanimously. . ' ,
c) Approval of New Hires as Pension Plan Members
As of February 7, 2002, the City had 1708.75 FTEs out of 1834.7 budgeted
positions.
, Member Jonson moved to accept these employees into membership in the Pension
Plan:
Corey Lenczden, Police Recruit
'James Phelps, Polic8'Recruit
Thelma Catio, Recreation leader
Judy Hill, Library Assistant
Debra Caputo, Management Intern
Steve Ussery, Tree Trimmer
, Rhonda Gracie, landscape Architect
Joannis Kourmoulakls, Gas Technician I
Robert Fahey, Engineer I'
Raghu Thanjavur, Systems Analyst
mpac,0202
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Date of Pension
Emplovment EliQ. Date
Police Department 12/03/01
Police Department 12/17/01
Parks & Recreation 04/03/95
library , 01/02/02
. City Manager Office 01/07/02
Public Servic'es 01/14/02
Parks & Recreation ' 01/14/02
Clearwater Gas System 01/14/02
Engineering, 01/28/02
Information Technology 01/28/02
2
1 2/03/01
12/17/01
12/17/01
01/02/02
01/07/02
01/14/02
01/14/02
01/14/02 ,
01128/02
01/28/02
02/14/02
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ITEM #5 - Pendina/ Business
a) Actuarial Assumption Report
Pension Plan Actuary Steve Metz, of Price Waterhouse Coopers, reviewed the report
to assist the City in evaluating the appropriateness of current actuarial assumptions.
Actuarial assumptions used in the report: 1) economic assumptions: a) expected return on
investments and b) annual rate of salary increases and 2) demographic assumptions: a)
employee turnover; b) mortality: c) retirement rates: and d) disability rates.
In regard to economic assumptions, while the expected return on assets has been
assumed to be 7%~ the actual rate of return since 1986 has averaged 11.7%. ,While the
expected increase in salaries has been assumed to be 5%, the actual rate has averaged
'6.1%. '
In regard to demographic assumptions, turnover rates reviewed for the past 9 years
indicate trends: 1) total turnover low compared to most other groups: 2) total turnover
lower than assumptions would predict; and 3) turnover is increasing gradually, from 2.3%
to 6.3%. 'The analysis indicates that years of service had little impact on turnover.
Meaningful differences based on sex and hazardous duty status do exist. The number of
fem,ale hazardous duty employees was too low to provide meaningful information by age.
The'turnover rate for non-hazardous duty males averages 6%, for non-hazardous duty
females averages 9%, and for hazardous duty staff averages 2%.
While the current actuarial assumption is that all employees will retire when they
become eligible for un'reduced benefits, that is not the case. The City's mortality
experience over the past 9 years is lower than would be expected. The City currently uses
the 1983 Group Annuity Table for Males, with a 6-year setback for females. ' This table is
widely used and required by the IRS for private plans for some purposes. The Society of
Actuaries recently published the 1994 Group Annuity Reserving'Table, which will be
required by the IRS in many cases and likely will be the most common table in use. The
State Division of Retirement also may recommend or require it. During the past 6 years,
12 disability pensions have been approved. Actuarial assumptions would predict
approximately 5 disabilities annually, with 100% of them line-of~duty.
Mr. Metz reviewed assumptions used by other Florida government plans and made
recommendations: 1) economic assumptions: a) expected return on investments - range
between 7% and 8:5% and b) annual rate of salary increases - at least 6%; and 2)
demographic assumptions: a) employee turnover: i) under age 25, 15% non-hazardous duty
males/females, 5 % hazardous duty all; ii) ages 26 - 3D, 10% non-hazardous duty males,
15% non-hazardous duty females, 3% hazardous duty all; iii) ages 31 - 35, 5% non- .
hazardous duty males, 10% non-hazardous duty females, 3% hazardous duty all; iv) ages'
36 - 40, 5% non-hazardous duty males, 10% non-hazardous duty females, 2% hazardous
duty all; v) ages 41 - 45, 5% non-hazardous duty males/females, 2% hazardous duty all: '
vl)ages'46 - 50, 5% non-hazardous duty males/females, 0% hazardous duty all; vii) ages
50 - 54, 2% non~hazardous duty males, 5% non-hazardous duty females, 0% hazardous
duty all; and vlll) ages 55 +, 0% all classifications; b) mortality - adopt 1994 Group
mpac0202
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02/14/02
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Aflnuity Reserving Table,; c) retlrelllenfrates: i) up to age 45, 0% non~hazardous duty 20%
" ha.zardous duty; il) ages 50 and 51, 20% non.hazardous duty, 50% hazardous duty; UH
ages 52 - 54, 25% non~hazardous duty, 75% hazardous duty; Iv) ages 55 - 59, 50% non-
hazardous duty, 100% hazardous duty; and v) ages 60 +, 1 00% non~hazardous and
hazardous duty and d) disability rates - no change.
Mr. Metz stated the Pension's investment advisors would best determine the
expected return on the investment assumption. It was noted benefits are inadequate for
hazardous duty employees to retire after 20 years. Mr. Metz recommended against
discussing benefits at this time. Recommended salary increase assumptions are based on a
review of,past trends. In res.ponse to a question, Mr. Metz said the expected return on
investment assumptions considers the next 60 years. It was noted while higher costs to
the plan would occur in the short.term if returns do not improv'e, the recommendation
c'onsiders the long-term. PAC (Pension Advisory Committee) Attorn,ey Lee Dehner stated
the actuary is not involved in the plan's 'investment policy. Mr. Metz recommended return,
on'lnvestment and salary costs be tied together.
In response to a question, Mr. Metz said hazardous duty employees have lower
turnover rates as they are career oriented. It was stated without a portable pension,
, hazardous duty employees cannot transfer to other departments in other municipalities.
While turnover is greater in the Police Department than the Fire Department, employees of
both departrt:lents have disincentives to leave as they must start elsewhere on the bottom
rung.
In response to a question, Mr. Metz said it took several years to gather data prior to
the release of the 1994 Group Annuity Reserving Table. He recommended assumptions
reflect best estimates and that the new standard be adopted before it is required. It was
requested Mr. Matz discuss this assumption with Charles Slavin with the State Division of
Retirement. Mr. Metz will send the recommended changes for review. Finance Director
Margie Simmons said the new standard is more conservative as it assumes people will live ,
longer.
In response to a question, Mr. Metz said the approaching wave of retirements has'
been considered. In response to a question/ Ms. Simmons said Mr. Dehner had
recommended the expected return on investments be between 6% and 7.5%. She
recommended the rate be 7.5%. It was noted the proposed assumptions are conservative
and the fund's overfunded status will continue. It was recommended plan assumptions be
reviewed every five years.
. mpac0202 , '
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02/14/02
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Member Gray moved to approve the proposed actuarial assumptions with a 7.5 %
, expected return on investments. The motion was duly seconded.
, ,
In response to a re,quest, Member Gray amended the motion to require Mr. Slavin's, "
endorsement of the 1994 Group Annuity Reserving Table for mortality rates. The seconder
agreed.
Concern was expressed regarding the accuracy of the assumed rate of return.
Upon the vote being taken, Members Hart, Gray, Jonson, Jensen, and Chair
. Fitzgerald voted "Ay'e"; Member Lee voted "Nay." Motion carried.
, "
ITEM #6 -, Director's Reports - None.
The next PAC meeting is scheduled for March' 14, 2002.
ITEM #7 - Committee Members to be Heard
, 'Mr. Dehner reviewed amendments to State law related to the treatment of lump
sum'distribution and tax deferred vehicles.. The City's ordinance will need to reflect the'
changes. A referendum related to the changes is not required
Member Jonson reported he has requested the City Commission replace him on the
PAC as the meeting time conflicts with his TBRPC (Tampa Bay Regional Planning Council)
sub-committee appointment.
The Inve~tment Committee meeting will convene following this meeting.
, ITEM #8 - Adiournment
The meeting adjourned at 10: 13 a.m:
~4..~~
Chair "
Pension Advisory Committee
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