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10/14/1996 TRUSTEES OF THE EMPLOYEES' PENSION FUND MEETING October 14, 1996 The City Commission, meeting as the Board of Trustees of the Employees' Pension Fund, met in regular session at City Hall, Monday, October 14, 1996 at 1:20 P.M., with the following members present: Rita Garvey Chairperson J. B. Johnson Trustee Robert Clark Trustee Ed Hooper Trustee Karen Seel Trustee Also Present were: Elizabeth M. Deptula City Manager Pamela K. Akin City Attorney Cynthia E. Goudeau City Clerk ITEM #2 - Minutes: Trustee Hooper moved to approve the minutes of the September 30, 1996, meeting. The motion was duly seconded and carried unanimously. ITEM #3 - Ratify timing of City’s contribution into the pension plan which is to make contributions throughout the first 6 months of its fiscal year for the plan year that ends within that fiscal year Each plan year for the Employees' Pension Plan begins January 1 and ends December 31. After the end of each plan year, staff compiles data on investment activity, pension benefits, employee salary and statistics, and financial position and submits such data to the actuary, in February, for calculation of the required contribution. In April, the actuary completes the calculation which is required by Florida Statutes for the current plan year. As the City contribution is paid in October through March rather than the previous January through December, the required calculation includes 7% interest. The employee contribution rate, set by ordinance at 8% of payroll, is deducted from employee paychecks throughout the plan year. The ordinance specifies the City contribution be the difference between the actuary calculated required contribution less the employee share, but not less than 7% of payroll (6% for plan year 1996). If the required contribution is greater than 15% of payroll (8% from employees and 7% from City) (14% for plan year 1996), the additional contribution may be deducted from any available credit balance. If the required contribution is less than 15% of payroll, the excess will be added to the available credit balance. If no credit balance is available, amounts due above the City’s required 7% contribution (6% for plan year 1996) will need to be included in the City’s contribution. As the City’s required contribution is not known until April or May of the current plan year, it is difficult to budget for unexpected increases if the contribution is made in January through December. The current process provides the City with information regarding the required contribution prior to the budget process, allowing the City to make educated decisions regarding the amount to be contributed and to make plans to pay the required contribution. Advantages of the City making its contribution sooner (January through December of the Plan Year): 1) the City’s minimum required contribution would be reduced by the 7% interest currently included in the required contribution amount. As the City must contribute at least 7% of payroll (6% in plan year 1996), this advantage is not very valuable and likely would result in reducing the credit balance at a slower rate or increasing the credit balance, depending on the size of the City’s statutory contribution. If the contribution rate exceeds 7% after the credit balance is depleted, this method would reduce the City’s contribution; 2) the City’s contribution would be in the Plan and invested sooner. The Plan’s investment experience during the past several years has been excellent and this could increase the Plan’s funded status. The plan’s investments occasionally have not earned 7%, therefore, the plan could be in worse shape. Disadvantages of the City making its contribution sooner (January through December of the Plan Year): 1) the City would need to “double up” on Pension Plan contributions during one fiscal year or phase in the change over several years by another method; 2) the City's operating funds would have to transfer interest earning funds to the Pension Plan earlier, which would reduce interest earnings revenue in each operating fund. Operating funds may not have reduced pension funding costs due to the 7% payroll requirement; 3) the City would need actuarial valuation results sooner which would result in problems and the need to change a procedure that now works well. The current practice allows informed decisions regarding the size of the City's contribution and allows adequate time to plan for and budget any increases in required contributions. Finance Director Margie Simmons explained the methods of determining the amount of money the City must contribute each year and illustrated why the current method is preferred. She said the current plan is healthy and investments are doing well. Trustee Hooper moved to ratify the timing of the City’s contribution into the pension plan which is to make contributions throughout the first 6 months of its fiscal year for the plan year that ends within that fiscal year. The motion was duly seconded and carried unanimously. ITEM #4 - (Cont. at 9/16/96) Recommended budget for Fiscal Year 1996-97 for City of Clearwater Employees Pension Plan; authorize expenditure of funds for travel, printing & binding, memberships, and training in amounts not to exceed $2,300, $400, $3,000 and $250 respectively Previously, all expenditures required Trustee approval regardless of the amount. Staff recommends adoption of an Employee Pension Plan budget that allows expenditures within limited budget categories with appropriate management review. The Trustee still would need to approve all other expenditures. Travel Expenses and Training is for PIC (Pension Investment Committee) members to attend the Callan Institute, visit the Pension Plan’s Performance Measurement Firm, Callan, and visit one of the City's money manager during the same trip. Printing and Binding is for the distribution of annual information to Pension Plan members. Membership is in the “Association of Confederation Life Contract Holder,” an organization addressing the problem “Guaranteed Investment Contracts” the City owns. The biggest budget change is the addition of a Pension Administrator. Deputy City Manager Kathy Rice said the consortium, "Association of Confederation Life Contract Holder," is trying to resolve the "Guaranteed Investment Contracts" the City owns. In response to a question, Ms. Rice said the City formerly administered the Pension Plan but it now is more complicated. An RFP (Request for Proposals) has been distributed for a third party administrator. Trustee Clark moved to approved the recommended budget for the City of Clearwater Employees Pension Plan and to authorize expenditure of funds for travel, printing & binding, memberships, and training in amounts not to exceed $2,300, $400, $3,000 and $250 respectively. The motion was duly seconded and carried unanimously. ITEM #5 - Other Business: - None. ITEM #6 - Adjournment: The meeting adjourned at 1:41 p.m.