06/13/2002 (2)
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,PAC
Adyisory Committee
Minutes'
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PENSION ADVISORY COMMITTEE MEETING
, CITY OF CLEARWATER
, 'June 13, 2002
Not Approved
. ',Present:' Whitney Gray
Hoyt P. Hamilton
Frank Hibbard
'John Lee
John Schmalzballer
Tom Jensen
Acting Chalr/Commlssloner
Committee Member/Commissioner
Committee Member/Commissloner
Committee Member
Committee Member
Committee Member
Also Present: Rick Ebelke
Scott Christiansen
Margie Simmons
Deborah Ford
Brenda Moses
Interim Human Resources Director .
Pension Advisory Committee Attorney
Finance Director
Human Resources Analyst
Boa'rd Reporter ,
'Th~ Acting Chair called the meeting to order at 9:00 a.m. at City Hall.
, ,
, To provide continuity for research; items are In agenda order although not
necessarily discussed In that order.
ITEM' #2 - Selection of Seventh Member
, , '
Member Jensen moved to appoint Joseph Egger as the seventh member of the PAC
IPension Advisory Committee). The motion was duly seconded and upon the vote being " ,
taken~ Members Hamilton, Lee, Jensen and Schmalzbauer and Acting Chair Gray voted
"aye"; Member Hibbard voted "nay". Motion carried.
ITEM #3-Aoproval'of Minutes of Mav 9. 2002
Member Hamilton moved to approve the minutes of the regular meeting of May 9,
2002, as,recorded and submitted in written summation to each board member. The
m()tion' was duly seconded and carried unanimously.
" ITEM #4 - Emplovees to be Heard - None.
'ITEM #5 - Action Items ,
" a. Review and 'Action on Employee Requests for Years of Service Pension:
, 1 . Benjamin Sturgis, Police
. '
Member Lee moved to approve the Employee Request for Years of Service Pension
. for Benjamin Sturgis. The motl.on was duly,seconded and carried una nimously.
mpac0602
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6/13/02
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Review and Action on Employee Requests to Vest Pension:
1 . Donald Beckman, Solid Waste/General Services
, Member Schmalzbauer moved to approve the Employee Request to Vest Pension for
qonald Beckman. The motion was duly seconded and carried unanimously. '
c. Approval of New Hires as Plan M,embers:
As of June 6, 2002, the City had 1709.35 out of 1834.7 budgeted positions.
Joanne' Bunton was originally hired as permanent part-time; promoted to full-time
and pension eligible as 'of April 29, ,2002. Mary Anne Fetuuaho was originally hired as
, permanent part-time; status changed to full.time and pension eligible as of April' 20, 2002.
In response to a question, Human Resources Analyst Debbie Ford said newly hired
Firefighter Schwartz would be on the next list, as his medical examination has not been
, received.
Member Hamilton moved to accept these employees into membership in the
Pension Plan: '
Name. Job. Class. & Deot./Div.
Delaney Mulholland, Gas Tech I/Gas
Joanne Bunton, Library Assist'ant/Library
Mary Anne Fetuuaho, Library Assistant/Library
Itay Seigel, Utilities Chemist/Public Utilities
Theresa Irby, Police Comm. Operator Trainee/Police
Jim Halios, Rec. Program Support Tech/Parks & Rec.
joey Sprecher~ Accounting Clerk/Gas
Debey David, Police Communications Operator/Police
Juan Santos, TV Prod. Specialist/Public Comm.
Brent Peters, Sys. Programmer/Information Technology
Alex Rakita, Solid Waste Worker/Solid Waste
Silnor, George, Electro-Mechanical Tech/Pub. Utilities
Christopher Varnis, Mtce Worker II/Bldg. & Mtce.
, Daniel Holcomb, Solid Waste Worker/Solid Waste
John Klinefelter, Firefighter/Fire
Anthony Gomillion, Firefighter/Fire
Kevin White, Firefighter/Fire,
ITEM #6 - Pendlnq/New Business
Hire Date.
4/29/02
4/23/01
7/30101
5/6/02
5/6/02
5/6/02
5/20/02
5/6102
5/20/02 '
5/20/02
5/20/02
5/20/02
, 5/18/02
5/20/02
6/3/02
6/3/02
6/3/02
Pension Elig.
, 'Date
4/29/02
4/29/02
4/20/02
, 5/6/02
5/6/02
5/6/02
5/20/02
5/6/02
5/20/02
5/20/02
5/20/02
5/20/02
5/18/02
5/20/02
6/3102
6/3/02
6/3/02
a. Edward Kutta - Set Hearing on Job-con~ected Disability Request
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Discussion ensued regarding Members~ schedules and the length of the July 11,
2002, PAC meeting. Human Resources Analyst Debbie Ford said the City is not contesting
the request, therefore, the hearing is not anticipated to be lengthy. , Consensus was to
schedule the hearing on Edward Kutta' s job-connected disability request for the July 11 /
2002, meeting.
b. ' Acceptance of the Actuary' s Report
The January 1, 2002, actuarial report for the Employees' Pension Plan indicates
that a 3% City contribution is required 1$1,766,058). This is an increase from the 2001
valuation, which required no City contribution. However, the City Ordinance governing the
pension plan requires that the City contribute at least 7 % of the compensation of all
employees participating In the plan (estimated at $4,125,071).
The minimum City contribution was affected by the following factors: 1) Changes
in actuarIal assumptions (this reduced the actuarial required contribution from 4.5 % to
, 3%); 2) 'actuarl~1 investment return 01'7.4% in comparison to an assumed rate of 7% for
plan year 2001 (2000 actuarial investment return was 12.42%); 3) actual salary increases
of 5.9% in comparison to an assumed rate of 5% for plan year 2001 (2000 actual salary
increases were 5.8%); 41 amortization of the plans initial unfunded liability was reduced
due tq the final partial year payment towards this liability; and 5) actual expenses for the
. plan year were $239,578 more than expected.
The difference between the ordinance required contribution of $4/125/071 and the
actuarial determined contribution of $1,766/0'58 will increase the existing credit balance,
which is currently $21/360,525. This credit balance can be used to pay additional
actuarial required City contribution above the ordinance required 7%.
The Plan uses a phase-in approach of prior asset gains (losses) through a rolling
five-year average used to "smooth" investment performance. The market value basis
performance for the last five years (1.997, 1998, 1999/ 2000, and 2001/ respectively) has'
been 17.49%, 16.74%,/ 18.61 %/ (3.431%, and (5.16)%. As a result of the last 2 years'
poor investment market performance, the actuarial value of the assets of the plan exceeds
the market value by almost $50 million. This deficit will be included in the actuarial value
'and' will gradually increase the fu nding requirements. This is expected to result in the City
required contributions exceeding the current 7% required in the next 4 to 6 years, even
after taking advantage of the credit balance.
The funded status of the plan (ratio of assets at market value to the actuaria'l
present value of accumulated plan benefitsl decreased from 162% at '1/1/00 to 148% at
1/1/01 to 137% at 1/1/02/ primarily due to the poor plan investment performance for'
calendar years 2000 and 2001. The plan experienced a negative 3.43% investment return
in 2000 and'~, negative 5.1 6 % in 2001 due to the downturn in the stock market.
Steve Metz, City actuary with Price Waterhouse Coopers, reviewed the Actuary's
Report for the City of Clearwater Employees' Pension Plan for the Plan Year January 1, ,
mpac0602 .
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6/13/02
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2002 - December 31, 2002 in order to determine the contribution requIrements for the
2002 - 2003 fiscal year. Since the last actuarial valuation of the Plan on January 1, 2001,
there have been no changes in the Plan provisions or the actuarial cost method. The
actuarial assumptions were changed in several respects: 1) The investment return was
increased from' 7% to 7.5%; 2) the salary scale was increased from 5% to 6%; 3)
employee turnover rates were revised for male and female employees and separate rates
were adopted for hazardous duty employees; 4) the mortality table was changed from the
1983 Group Annuity Mortality Table to the 1994 Group Annuity Reserving Table; 'and 5)
the retirement ,age assumption was changed from 100% retirement at first eligibility for
unreduced benefits to a table of decrements at different ages.
The minimum required City contribution pursuant to Florida Statutes for the 2002
Plan year is $1,766,058 (excluding the credit balance of $21,360,525) compared to $0
. for 2001. Prior to the changes in actuarial assumptions, the mInimum for 2002 was
, $ 2, 641,788. Although' State law does not require any contributions for this fiscal year,
the City ordinance establishing the Plan requires the City to contribute at least 7 % of
payroll. The minimum required contrib'ution was affected by'the following factors: 1)
Changes in the actuarial assumptions; 2) an actuarial investment return of 7.40% in
comparison to an assumed rate of 7% (for the 2001 Plan year); 3) actual salary increases
of 5.9% in comparison to an assumed rate of 5% (for the 2001 Plan year); 4) amortization
. of the Plan's initial unfunded liability was reduced due to the final partial year payment
towards this liability; and 5) actual expenses for the year were $239,578 more than
expected.
The Plan's credit balance is currently equal to $21,360,525, providing a cushion
against future c,ontributions. On the negative side, however, the actuarial value of assets
of the Plan exceeds the market value by almost $50 million. Over the next four years, this
deficit will be included in the actuarial value and will gradually increase the funding
requirements.
The funded status of the Plan decreased compared to the prior year, primarily due
,to less than expected returns on the market value of assets. The ratio of assets at market
value to the actuarial present value of accumulated Plan benefits decreased from 148 % at
January 1, 2001, to 137% at January 1, 2002.
The employer contributiqn is assumed to be made uniformly during the first two
quarters of the fiscal year beginning on October 1, 2002. Differences in the investment
return due to contributions actually being made at any other time will be recognized as an
actuarial gain or less in the following valuation. The minimum required contribution
represents a funding level, which will satisfy the minimum funding requirements under part
VII, Chapter 112, Florida Statutes.
Mr. Metz said Clearwater's Employee Pension Plan is in better shape than most
other cities' pension plans. In response to a question, Mr. Metz said the intent to change
the 7% funding level to 7.5% was made after discussions with an investment consulting
firm used by Price Waterhouse Cooper, the City's investment Committee, and review of all
mpac0602
4
6/13/02
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assumptions.' Ms. Simmons said this is a long-term assumption. If, over the next two to
three year~, it appears returns would be bleak, it may be necessary to review these
assumptions again. Mr. Metz explained how salary scales and ,investment return ratios are
derived.
In response to a question, Finance Director Margie Simmons said the Fireman's
Relief Pension Fund would require approximately four to five more years of funding, as'it
was originally under~funded. There are: no active employees in that plan, just beneficiaries.
Mr. Metz summarized the highlights of the actuary report, explained how excess
" funds are kept in the Plan as a credit balance, which is co.mingled into the asset value,
and responded to questions. 'He said the Pension Plan is operated on a'calendar year; the
City operates on a fiscal year.
It was requested that staff provide detailed expenses for calendar years 2000 and
2001.
Member Hibbard 'moved to accept the Actu,ary Report as submitted. The motion
was duly seconded and carried unanimously.
c. Discussion of Pension Changes
Interim Human Resources Director Rich Ebelke said the City is in negotiations with
._) labor unions regarding pension changes. He presented and reviewed proposed changes to
"'''''' the plan and items under consideration. In response to a question, Pension Advisory
Committee Attorney Scott Christiansen said his firm suggested some changes be made
based upon discussion from union representatives and the City administration. The goal
was to make the Plan more understandable and user-friendly. 'The normal retirement
benefit and the joint annuity survivor benefit have been changed.
C;;J
, Mr. Ebelke reviewed: 1) Timeline of events that may occur through a City
referendum from May 7, 2002 to January 1, 2003; 2) goals of the Plan; 31 re-employment
provisions; 4) membership provisions; 5) Board of Trustees; 6) average final compensation;
7) retirement benefit multiplier; 8) cost of living increase; 9) pre-retirement death benefit;
10) normal retirement benefit; 11) current benefit comparison between married and single
members; 12) 1 5-year certain & life benefit comparison between married and single
members; 13) extra duty assignment; 14) vesting; 15) comparing public and private
vesting periods; 16) benchmark agencies vesting periods; 17) pensi'on refund; 18) optional
form of benefits; 19)conditions for false, misleading, or fraudulent statements; 20) prior
governmental service including prior police, fire, or military service;' 21) prior service buy*
back; 22) deferred retirement option plan (DROP); and 23) public pension plan governance
and structure by plan type. Mr. Christiansen noted those items that are currently in the'
,Plan and those that are required by the State. Mr. Ebelke, Mr. Christiansen, and Ms.
Simmons responded to questions from the PAC.
The meeting recessed from 10:44 to 10:56 a.m.
mpac0602
5
6/13/02
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Di,scussion continued regarding the presentation. Ms. Simmons said she would
bring back a request for increased cost for Mr. Metz's services,. as any reiterations of the
, plan requires payment.
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ITEM #7 - Director's Reoorts' - None.
ITEM #8 - Committee Members'to be Heard
"Member Lee request~d that Mr. Householder's case be heard as quickly as possible
in order to prevent' a no-pay status. Ms. Ford said. staff is working on that case.
,\ '
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'Me~ber Jensen requested that new Member Egger be provided with all pertinent
PAC, information, including' today's presentation materials. Ms. Simmons will brief Mr.
Egger on these issues.
, , " Discu'ssion ensued regarding 'the seventh' member. Mr. Christiansen said that
'meJ'!1ber could' have beeh another City Commissioner or a citizen. It ,was remarked 'that 3
" ,
, 'of the PAC members are to be elected; 3 appointed; and 1 selected by the other 6 PAC
members. ~veryofle shared t~eir reasons for voting for Mr. Egger as the seventh member. '
Mr. Christiansen said the PAC's responsibility is to all the Pension Plan members; not the
City or ti,e unions.
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, . ITEM #9 - Adjournment'
'The meeting adjourned at 11 :53 a.m.
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Discussion continued regarding the presentation. Ms. Simmons said she would
bring back a request for increased cost for Mr. Metz's'se'rvices, as any reiterations of t'he
. pl~n requires payment: " .
, ITEM #7 - Director's Reports - None.
ITEM #8 - Committee Members to be Heard
Memb~r Lee requested that Mr. Householder's case be heard as quickly as possIble
'in order to prevent a, no-pay status. ,Ms. Ford said staff is working on that,case.
, Member Jensen requested that new Member Egger be provided with all pertinent
PAC in~ormation, including today's presentation materials. Ms.' Simmons will brief Mr.
Egger on these issues. .
'. . ,
Discussion ensued r~garding the seventh member. Mr. Christiansen said that ,
member could have been another City Commissioner or a citizen. It was remarked that ,3
of the PAC members are to be elected; 3' pppointed; and 1 selected by the other 6 PAC "
'members. Every,one shared their reasons for voting for Mr. Egger as the seventh member.
Mr.' Christiansen said the PAC's responsibility is to all, the Pension Plan members; not the
'City or the unions. '
',:: ITEM:#9 - Adiournment
The meeting adjourned at 11 :53 a.m.
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