05/30/2006
TRUSTEES OF THE EMPLOYEES' PENSION FUND MEETING MINUTES
CITY OF CLEARWATER
May 30, 2006
Present: Frank Hibbard Chair
Carlen Petersen Trustee
Hoyt Hamilton Trustee
William C. Jonson Trustee
John Doran Trustee
Also Present: William B. Horne, II City Manager
Garry Brumback Assistant City Manager
Pamela K. Akin City Attorney
Cynthia E. Goudeau City Clerk
Brenda Moses Board Reporter
The Chair called the meeting to order at 1:55 p.m. at City Hall.
To provide continuity for research, items are in agenda order although not
necessarily discussed in that order.
Approval of Minutes – May 15, 2006
Trustee Jonson moved to approve the minutes of the May 15, 2006, meeting, as
motion
recorded and submitted in written summation by the City Clerk to each Trustee. The
carried
was duly seconded and unanimously.
Pension Trustee Items
Accept the Actuary's Report for the Employees' Pension Plan for the plan year beginning
January 1, 2006.
The January 1, 2006 actuary report for the Employees' Pension Plan indicates an
employer contribution of $15,438,360, equivalent to 20.31% of covered payroll, is required for
fiscal 2007. This is an increase from the fiscal 2006 required contribution of $14.5 million. The
current required contribution of $15.4 million, in accordance with Florida statutes, exceeds the
minimum required contribution per the plan ordinance of 7% of payroll, or $5.2 million.
The required employer contribution was affected by the following factors: (1) The
actuarial investment return (5-year weighted average) was 4.58% versus an assumed rate of
7.5%. This was due to three years of poor performance, 5.16%, 8.83% and 6.67% for
calendar years 2001, 2002, and 2005, respectively; partially offset by two years of good
performance, 20.08% and 9.73% for calendar years 2003 and 2004. The actuarial investment
return five-year average of 4.58% was an improvement from the January 1, 2005 return of
2.18% due to the dropping off of a negative return of (3.43%) for calendar 2000, replaced by
6.67% for calendar 2005. (2) Actual salary increases were 5.49% versus an assumed rate of
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6.0%. The plan has a current "credit balance" of $18,817,573, which can be used to subsidize
future employer contributions. The employer contribution for fiscal 2006 was budgeted at
10%, with the balance of the required 19.6% required contribution funded from the credit
balance. This reduced the credit balance from $24.1 million to the current $18.8 million level.
Staff recommends the fiscal 2007 employer contribution be funded (budgeted) at 13%,
with the fiscal 2008 and 2009 funding increasing to 16% and 20%, respectively. Any
difference between the budgeted funding and the required employer contribution would
continue to be funded from the credit balance.
In response to a question, Human Resources Director Joe Roseto said by the time
employer contribution equals 20%, the credit balance will be $10 million, if all assumptions are
met.
Pension Plan Actuary Steve Metz said all methods and assumptions are the same as in
prior years. The employer contribution is higher because the ROI (Return on Investment) was
less than expected. He recommended retaining a credit balance as a cushion for a rainy day.
Since employee contributions remain fixed, the City’s contribution fluctuates, when the market
goes up, the City’s contribution decreases, and visa versa.
In response to a question regarding the trend of defined benefit plans nationwide, Mr.
Metz said the private sector is moving away from defined benefit plans due to volatile costs.
Discussion ensued regarding actuarial assumptions and consensus was to maintain a
conservative assumption at 7.5%.Finance Director Margie Simmons said the plan earned
more than 7.5% during two of the previous three years and felt 7.5% is a good assumption.
Trustee Petersen moved to accept the Actuary's Report for the Employees' Pension
motion
Plan for the plan year beginning January 1, 2006. The was duly seconded and
carried
unanimously.
Investment Update of Employee's Pension Plan for Year Ending December 31, 2005.
Cash & Investments Manager Steve Moskun reviewed the plan’s performance,
reporting investments had substantially beaten benchmarks in last quarter with $548 million in
assets under management. A referendum, tentatively scheduled for November 2006, will be
necessary to address current restrictions and permit diversification. Staff will be bringing
forward a recommendation regarding a search for new money managers.
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.
.
.
Other Business - None.
Adiourn
The meeting adjourned at 2:29 p.m.
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Employee's Pension Plan Trustees
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