05/16/2011
TRUSTEES OF THE EMPLOYEES' PENSION FUND MEETING MINUTES
CITY OF CLEARWATER
May 16, 2011
Present: Chair/Trustee Frank Hibbard, Trustee George N. Cretekos, Trustee
John Doran, Trustee Paul Gibson, and Trustee Bill Jonson.
Also Present: William B. Horne II - City Manager, Jill S. Silverboard - Assistant City
Manager, Rod Irwin - Assistant City Manager, Pamela K. Akin - City
Attorney, Rosemarie Call - City Clerk, and Nicole Sprague – Official
Records and Legislative Services Coordinator.
To provide continuity for research, items are in agenda order although not
necessarily discussed in that order.
1. Call to Order – Chair Frank Hibbard
The meeting was called to order at 9:03 a.m. at City Hall.
2. Approval of Minutes
2.1 Approve the minutes of the April 18, 2011 Pension Trustees meeting as
submitted in written summation by the City Clerk.
Trustee George N. Cretekos moved to approve the minutes of the April 18, 2011
Pension Trustees meeting as submitted in written summation by the City Clerk. The
motion was duly seconded and carried unanimously.
3. Pension Trustee Items
3.1 Accept the Actuary's Report for the Employees' Pension Plan for the plan year
beginning January 1, 2011.
Per the January 1, 2011 actuary report for the Employees' Pension Plan, a
minimum City employer contribution of $18,886,567, or 24.69% of covered
payroll, is required for fiscal year 2012. Though the dollar amount is a decrease
from the required fiscal 2011 contribution of $19.4 million, the contribution rate as
a percentage of covered payroll, is an increase from 24.07% for fiscal 2011. The
anomaly of a decrease in the required dollar contribution versus an increase in the
required contribution rate is due to a decline in the covered payroll from $80.4
million as of 12/31/09 to $76.5 million as of December 31, 2010. This decrease is
primarily due to the elimination of positions due to budget cuts.
Pension Trustees 2011-05-16 1
The plan's investments realized a return of 17.5% for calendar 2010, which is well
in excess of the plan's assumption of 7.5%. However, the actuarial return was
5.98%, which underperformed the 7.5% plan assumption. The actuarial return is a
five-year smoothing of investment returns and asset values, subject to a cap of
120% of the market value of assets and a floor of 80% of the market value.
Also providing negative performance for calendar 2010 was a 17.7% increase in
investment expenses. This increase was primarily due to the corresponding
17.5% investment return and related increase in plan assets. Money manager
fees are typically a percentage of managed assets and an increase in assets due
to investment performance will normally translate to a similar increase in money
manager fees.
The negative impact of actuarial investment performance below the assumed rate,
along with the increase in investment expenses, was partially offset by a gain due
to actual salary increases of 1.27% versus an assumed rate of 6%. The plan's
credit balance, which reflects actual contributions in excess of actuarially required
contributions for prior years, decreased by $1.3 million during calendar 2010. The
credit balance decreased from $8.4 million to $7.1 million due to employer
contributions that were $1.9 million less than required, partially offset by $0.6
million in interest earnings on the credit balance.
Employer contributions were $1.9 million less than required due to the City's
decline in covered payroll resulting from staff reductions. The Plan's actuary
calculated a required contribution rate of 24.07% per the January 1, 2010
actuarial calculation, which assumed covered payroll at that date. However actual
contributions to the plan occurred from October 2010 thru March 2011 at 24.07%
of payroll at that time. Due to the decrease in covered payroll from January 2010
to the actual payment period of October 2010 thru March 2011, the 24.07% rate
resulted in a contribution deficiency. This deficiency is expected to continue in
future years, resulting in similar use of the credit balance, as long as covered
payroll continues to decrease and the City continues to use the actuarially
calculated contribution percentage. Historically the credit balance has also been
used to subsidize employer contributions during periods of volatility such as
investment market downturns. The Plan's funded ratio is 97.2% versus 96.9% for
the prior year. For comparability to other plans, the actuary notes in his report that
the current funded ratio is 96.2% based on the more commonly used Entry Age
funding method.
The Market Value of Plan Assets exceeds the Actuarial Value of Assets by $23.4
million as of the valuation date. If Market Value has been the basis for the
valuation, rather than the Actuarial Value, the City's required contribution rate for
fiscal 2012 would have been 20.67% versus the calculated 24.69%, and the
funded ratio would have been 100.7%. In the absence of other gains and losses, it
Pension Trustees 2011-05-16 2
is expected that the City's contribution rate will decrease to approximate this
20.7% level over the next several years.
Staff recommends funding the employer contribution at the actuarially required
rate of 24.69% of covered payroll for fiscal year 2012. Assuming a further
decrease in covered payroll, this would again require the use of the credit balance
to subsidize the required employer contribution amount. Staff currently estimates
that this deficiency will be approximately $700,000 (versus the $1.9 million deficit
for fiscal year 2011), and will be offset by approximately $530 thousand in interest
earnings on the credit balance. This would decrease the credit balance from $7.1
million per the current valuation to approximately $6.9 million.
In response to questions, Gabriel, Roeder, Smith and Co. representative Stephen
Palmquist said the proposed GASB (Government Accounting Standards Board)
standards requiring the plan sponsor to reduce the assumed rate of investment return
would not impact the City due to current state legislation that requires the plan sponsor
to pay the actuarially required contribution. The unfunded liability is $19 million and will
not impact the budget next year as it is paid off over time. Finance Director Jay Ravins
said the unfunded liability is by design as the City took advantage of an option to
amortize plan changes over a 30-year period. The $19 million is the remaining
amortization of the changes the City has made in the plan. The City’s plan has
outperformed the Florida Retirement System due to a well-diversified portfolio and
professional investment managers who have outperformed their market peers.
Trustee Paul Gibson moved to accept the Actuary's Report for the Employees' Pension
Plan for the plan year beginning January 1, 2011. The motion was duly seconded and
carried unanimously.
3.2 Approve new hires for acceptance in the Pension Plan as listed.
Pension
Name, Job. Class, & Dept./Div. Hire Date Elig. Date
Zachary Taylor, Wellness Specialist/Parks & Recreation 2/28/11 2/28/11
William Howard, WWTP Operator/Public Utilities 2/28/11 2/28/11
Kelli Dacey, Marine Facility Operator/Marine & Aviation 7/22/06 2/27/11 *
Matthew Holderness, Public Utilities Tech. I/Public Utilities 3/14/11 3/14/11
Christopher Bennett, Custodial Worker/Parks & Rec. 3/28/11 3/28/11
Pension Trustees 2011-05-16 3
*originally hired as part-time on 7/22/06; changed to full-time and pension eligible
as of 2/27/11
Trustee John Doran moved to approve new hires for acceptance in the Pension Plan as
listed. The motion was duly seconded and carried unanimously.
3.3 Recommend approval of the request of employee Eleanor Scharf, Library
Department; Isaac Hinson, Parks and Recreation Department; Thomas Madley,
Customer Service Department; George Memmer, Solid Waste/General Services
Department; Jerry Absher, Solid Waste/General Services Department; Thomas
Glenn, Solid Waste/General Services Department; Eddie Adams, Engineering
Department; Harry Williams, Fire Department; and Michael Stewart, Police
Department, for a regular pension as provided by Sections 2.397 and 2.398 of
the Employees Pension Plan.
Eleanor Scharf, Library Assistant Director, Library Department, was employed by
the City on April 14, 1981, and her pension service credit is effective on that date.
Her pension will be effective May 1, 2011. Based on an average salary of
approximately $64,190 per year over the past five years, the formula for
computing regular pensions, and Ms. Scharf's selection of the 50% Joint and
Survivor Annuity, this pension will approximate $54,116 annually.
Isaac Hinson, Custodial Worker, Parks and Recreation Department, was
employed by the City on June 12, 1989, and his pension service credit is effective
on April 22, 1991. His pension will be effective May 1, 2011. Based on an average
salary of approximately $31,824 per year over the past five years, the formula for
computing regular pensions, and Mr. Hinson's selection of the 100% Joint and
Survivor Annuity, this pension will approximate $17,523 annually.
Thomas Madley, Senior Systems Analyst, Customer Service Department, was
employed by the City on May 6, 1991, and his pension service credit is effective
on that date. His pension will be effective June 1, 2011. Based on an average
salary of approximately $65,818 per year over the past five years, the formula for
computing regular pensions, and Mr. Madley's selection of the Joint and Survivor
Annuity, this pension will approximate $36,200 annually.
George Memmer, Tradesworker, Solid Waste/General Services Department, was
employed by the City on February 11, 1991, and his pension service credit is
effective on that date. His pension will be effective June 1, 2011. Based on an
average salary of approximately $43,894 per year over the past five years, the
formula for computing regular pensions, and Mr. Memmer's selection of the 100%
Joint and Survivor Annuity, this pension will approximate $23,619 annually.
Pension Trustees 2011-05-16 4
Jerry Absher, Tradesworker, Solid Waste/General Services Department, was
employed by the City on February 1, 1999, and his pension service credit is
effective on that date. His pension will be effective June 1, 2011. Based on an
average salary of approximately $31,679 per year over the past five years, the
formula for computing regular pensions, and Mr. Absher's selection of the Life
Annuity, this pension will approximate $12,799 annually.
Thomas Glenn, Solid Waste Program Coordinator, Solid Waste/General Services
Department, was employed by the City on October 19, 1987, and his pension
service credit is effective on that date. His pension will be effective July 1, 2011.
Based on an average salary of approximately $55,464 per year over the past five
years, the formula for computing regular pensions, and Mr. Glenn's selection of
the Joint and Survivor Annuity, this pension will approximate $36,145 annually.
Eddie Adams, Drafting and Mapping Technician, Engineering Department, was
employed by the City on June 3, 1991, and his pension service credit is effective
on that date. His pension will be effective July 1, 2011. Based on an average
salary of approximately $44,619 per year over the past five years, the formula for
computing regular pensions, and Mr. Adams' selection of the Life Annuity, this
pension will approximate $28,700 annually.
Harry Williams, Fire Lieutenant, Fire Department, was employed by the City on
December 29, 1990, and his pension service credit is effective on that date. His
pension will be effective April 1, 2011. Based on an average salary of
approximately $70,811 per year over the past five years, the formula for
computing regular pensions, and Mr. Williams' selection of the 100% Joint &
Survivor Annuity, this pension will approximate $38,599 annually.
Michael Stewart, Police Officer, Police Department, was employed by the City on
September 24, 1990, and his pension service credit is effective on that date. His
pension will be effective June 1, 2011. Based on an average salary of
approximately $71,680 per year over the past five years, the formula for
computing regular pensions, and Mr. Stewart's selection of the 100% Joint &
Survivor Annuity, this pension will approximate $40,411 annually.
Section 2.397 provides for normal retirement eligibility when a participant has
completed thirty years of credited service, has reached age 55 and completed
twenty years of credited service, or has reached age 65 and completed ten years
of credited service. Section 2.397 also provides for normal retirement eligibility
when a participant has completed twenty years of credited service or has reached
age 55 and completed ten years of credited service in a type of employment
described as hazardous duty and further defines service as a Fire Lieutenant and
Police Officer as meeting the hazardous duty criteria. Ms. Scharf, Mr. Hinson, Mr.
Pension Trustees 2011-05-16 5
Madley, Mr. Memmer, Mr. Glenn, and Mr. Adams qualify under the age 55 and
twenty years of service criteria. Mr. Absher qualifies under the age 65 and ten
years of service criteria. Mr. Williams and Mr. Stewart qualify under the hazardous
duty criteria.
Trustee George N. Cretekos moved to approve the request of employee Eleanor
Scharf, Library Department; Isaac Hinson, Parks and Recreation Department; Thomas
Madley, Customer Service Department; George Memmer, Solid Waste/General
Services Department; Jerry Absher, Solid Waste/General Services Department;
Thomas Glenn, Solid Waste/General Services Department; Eddie Adams, Engineering
Department; Harry Williams, Fire Department; and Michael Stewart, Police Department,
for a regular pension as provided by Sections 2.397 and 2.398 of the Employees
Pension Plan. The motion was duly seconded and carried unanimously.
3.4 Approve the request of employee Georgina Ata, Library Department, to vest her
pension as provided by Section 2.397 of the Employees Pension Plan.
Georgina Ata, Librarian III, Library Department, was employed by the City on
October 3, 1993, and began participating in the Pension Plan on that date. Ms.
Ata will terminate from City employment on June 2, 2011.
The Employees' Pension Plan provides that should an employee cease to be an
employee of the City of Clearwater or change status from full-time to part-time
after completing ten or more years of creditable service (pension participation),
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 2.397) provides for normal retirement eligibility when a participant has
reached age 55 and completed twenty years of credited service, has completed
30 years of credited service, or has reached age 65 and completed ten years of
credited service. Ms. Ata would have completed at least 10 years of service and
reached age 65 on December 6, 2013. Her pension will be effective January 1,
2014.
Trustee Paul Gibson moved to approve the request of employee Georgina Ata, Library
Department, to vest her pension as provided by Section 2.397 of the Employees
Pension Plan. The motion was duly seconded and carried unanimously.
4. Other Business – None.
Pension Trustees 2011-05-16 6
5. Adjourn
The meeting was adjourned at 9:46 a.m.
• his
Chair
Attest Employee's Pension Plan Trustees
City Clerk
Pension Trustees 2011-05-16 7