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06/14/1993 TRUSTEES OF THE EMPLOYEES' PENSION FUND MEETING June 14, 1993 The City Commission, meeting as the Board of Trustees of the Employees Pension Fund, met in regular session at City Hall, Monday, June 14, 1993 at 9:04 A.M., with the following members present: Rita Garvey Chairperson Sue Berfield Trustee Arthur X. Deegan, II Trustee Fred Thomas Trustee Absent: Richard Fitzgerald Trustee Also Present were: Michael J. Wright City Manager Milton A. Galbraith, Jr. City Attorney Cynthia E. Goudeau City Clerk ITEM #2 - Minutes: Trustee Deegan moved to approve the minutes of the June 1, 1993, meeting. The motion was duly seconded and carried unanimously. ITEM #3 - Request for Acceptance into Membership: The City Manager presented the recommendation of the Pension Advisory Committee to approve membership for the employee(s) listed below: a) Rick F. Guilliame b) Martyn Baker Trustee Berfield moved to accept the recommendation of the Pension Advisory Committee. The motion was duly seconded and carried unanimously. ITEM #4 - Request for Pension: The City Manager presented the recommendation of the Pension Advisory Committee that Robert A. Maute be granted a regular pension under Section 2.396 of the Employees' Pension Plan. Mr. Maute was employed on January 24, 1972 and began participating in the Pension Plan on that date. His retirement will be effective on February 7, 1994 at the end of the day. Mr. Maute's pension was approved by the PAC at their meeting of May 19, 1993. Based on an average salary of approximately $32,438 over the past five years and the formula for computing regular pensions, Mr. Maute's pension will approximate $17,841 annually. Charts from Finance which take into consideration mortality rates and age reflect the "present value cost of financing" this pension will be approximately $143,131. Trustee Berfield moved to accept the recommendation of the Pension Advisory Committee. The motion was duly seconded and carried unanimously. ITEM #5 - Authorization of reduction of employee's contribution percentage from 8% to 6%, effective pay period ending 6/27/93 and designate a City contribution for fiscal 1994 which is exactly equal to the employee contributions for 1993 The employees Pension Plan Ordinance provides for a minimum 6% contribution by the employees, and further grants the Trustees the authority to increase the contribution up to an additional 2%, providing the City contributes a like amount. Due to phenomenal asset growth in 1991, a 9.2% total contribution would have been sufficient to meet the state required minimum contribution for calendar year 1992. At staff suggestion however, on July 13, 1992, the Trustees authorized a continuation of the 8% employee contribution for calendar year 1992, and designated a like dollar amount to be contributed by the City during the first six months of fiscal 1993. This action resulted in a total fiscal year '93 City contribution of $3,322,566 which was $2,874,676 greater than the actuarially determined minimum contribution. This excess contribution, when added to an existing "credit" balance resulting from a previous excess contribution in 1991, gives the City a combined credit balance of approximately $3.8 million. This amount can be applied, at the discretion of the Trustees, to reduce the City's contribution to equal the employees' contribution in any year in which the City's contribution would otherwise have exceeded the employees' contribution. On December 13, 1992, the Trustees authorized a continuation of the 8% employee's contribution rate through 1993, with a like dollar amount contributed by the City for fiscal 1994. This recommendation was justified based on the uncertainty surrounding asset performance, and also based on continuing discussions with the unions relative to adding "annual benefit adjustments" to the pension plan. Better than anticipated 1992 asset returns, together with lack of firm progress on annual benefit adjustments and budgetary considerations for fiscal 1994 have caused staff to re-evaluate this earlier recommendation. By reducing the employee's contribution to 6%, employee's take home pay can be increased by approximately $420,000 for the remainder of 1993, and a like amount can be saved from the City's 1994 contribution (approximately 60% of which is General Fund). Approval of this recommendation will provide a current benefit to the employees and to the City without impacting the fiscal stability of the existing pension plan. In the unlikely event the upcoming actuarial report indicates a required City contribution in excess of the employees' total 1993 contribution, this would be an appropriate time to use a portion of the available credit balance. Although this recommendation will impact City ability to negotiate additional pension benefits without contribution increases, it will not impact the continuing effort to "IRS qualify" the pension plan, so that employee contributions can be made on a pre-tax basis. Dan Deignan, Finance Director, reviewed the history of the contributions to the fund. He emphasized that the plan is not overfunded. Excess contributions have been made that can be used to offset contributions required in the future. He stated this reduction is an integral part of balancing next fiscal year's budget. Kathy S. Rice, Deputy City Manager, reported there have been meetings with employees to inform them of the recommendation and its impact. She stated there were some concerns expressed due to the pension plan still being bargained. Trustee Thomas expressed concern regarding disability being a part of the pension plan and questioned if the actuary had taken this into account. He did not feel this change should be made prior to disability being removed from the plan. The City Manager emphasized this proposal is an integral part of balancing the budget. Trustee Thomas stated to do this now would provide the union with no incentive to bargain in good faith. The Deputy City Manager stated the pension plan has been on the table for a year. She stated all the unions must agree, it then has to be sent to the IRS. If they make changes it has to go back to the unions and finally must go for referendum to Clearwater voters. The City Manager questioned how this proposal would affect bargaining. Trustee Thomas felt it would be taking something off the table. He also felt that if at some point the contribution had to be raised, that would be bad. The Deputy City Manager and Mr. Deignan stated it was hoped that if an increase was needed, it would occur at the same time the plan becomes IRS qualified, allowing the contributions to be made on a pre-tax basis, resulting in little difference to employee take home pay. Mr. Deignan stated the actuary does take into account that disability is included in the plan. Trustee Deegan questioned the difference between the credit balance and being overfunded. Mr. Deignan stated the City has to make contributions each year to fully fund the plan and for the past two years excess contributions have been made. He stated the plan is $22,000,000 short of being fully funded. Trustee Deegan stated he has requested an examination of the pension funding as he felt this was a possible way to save money. He stated he is in favor of this proposal as it will save several hundred thousand dollars without jeopardizing pay to the employees or the actuarial soundness of the plan. Ed Hooper, President of IAFF, stated the administration has met with City employees and he believes most are comfortable with the proposal. He stated regarding bargaining on the plan, that this is the first time all the unions are trying to "get on the same page", and they acknowledge the concern regarding disability being a part of the plan. He stated the employees are not going to view this as a permanent pay raise. Trustee Thomas questioned whether the employees would be comfortable going back to an 8% contribution. Mr. Hooper indicated they would. Trustee Berfield moved to authorize a reduction of the employee's contribution percentage from 8% to 6%, effective with the pay period ending 6/27/93 and designate a City contribution for fiscal 1994 which is exactly equal to the employee contributions for calendar year 1993. The motion was duly seconded and carried unanimously. ITEM #6 - Other Business: The City Manager indicated he would be requesting the City Commission set a special closed meeting, after June 30, to discuss the Snair lawsuit. Consensus was to place this on the City Commission meeting Thursday night. ITEM #7 - Adjournment: The meeting adjourned at 9:30 a.m.