11/18/1999
TRUSTEES OF THE EMPLOYEES' PENSION FUND SPECIAL MEETING
CITY OF CLEARWATER
November 18, 1999
Present: Brian J. Aungst Chair
Ed Hooper Vice-Chair/Trustee
J. B. Johnson Trustee
Robert Clark Trustee
Ed Hart Trustee
Also present: Michael J. Roberto City Manager
Pamela K. Akin City Attorney
Lee Dehner Pension Trustees Attorney
Paul O'Rourke Human Resources Administrator
Sue Diana Assistant City Clerk
Patricia O. Sullivan Board Reporter
The Chair called the special meeting to order at 6:28 p.m. at City Hall.
changes to City of Clearwater Employees' Pension Plan
ITEM - Approve ; authorize staff to
proceed with ordinance revision and referendum
Mr. O’Rourke reviewed the following recommended plan changes: 1) add an ad hoc
cost of living (COLA) of 1.5% for active employees and retirees; 2) change average monthly
compensation from final to highest five years of service; and 3) change plan so that vested
employees retiring at age 65 with less than 20 years of service would get a "normal" retirement
instead of an actuarial equivalent or "reduced" benefit.
Annually, employees contribute 8% of salaries, while the City contributes 7%. The
plan’s total projected actuarial liability is $370 million, or a $23.7 million unfunded actuarial
liability. The actuarial value of plan assets is $354 million and the market value of plan assets
is $416 million. The plan has actuarial reserves of $62 million and a credit balance of $6.8
million. Pursuant to Florida Statutes, the minimum total contribution required for 1999 is 6.5%
of payroll which is met by employees’ contributions. The City’s contribution increases the
credit balance.
A pension benefit survey compared City pension benefits with 29 pension plans,
including those of the Florida Retirement System, Lakeland, Orlando, St. Petersburg,
Tallahassee, etc. Required employee contributions range from 2% to 8% of salary while
required employer contributions range from 1.1% to 57.6% of salaries. The majority of plans
provide automatic or ad hoc COLAs (Cost of Living Adjustment), from 1% to 4%. Ad hoc
COLAs allow the COLA to be reduced or suspended if the plan cannot support it. During the
last 10 years, Federal Retiree and Social Security COLAs have averaged 3%. Clearwater also
has the only plan based on the final 5-year average.
Pension change assumptions are based on City contributions not exceeding 7% of
payroll, a 7% investment rate of return, and 5% salary increases annually.
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Any changes to the Employees Pension Plan require approval by the PAC, Pension
Trustees, and citizens in a referendum election. The PAC has already approved the changes.
Mr. O’Rourke said staff is recommending the 1.5% COLA be automatic to avoid
possible legal problems related to an ad hoc provision. The PAC, concerned about future
costs, had approved the ad hoc provision without considering legal issues.
Discussion ensued regarding if the Trustee should consider the proposed changes
together or separately. As changes are part of contractual negotiations, it was felt all changes
should be considered as a package. Concern was expressed the changes had been
presented without adequate time for deliberation and clarification of impacts to the plan.
Reference was made to the plan’s excellent return on current investments. In response to a
question, Financial Services Administrator Margie Simmons said each year, one-fifth of
actuarial reserves are transferred back to the plan. Actuarial reserves are increased annually
with investment returns that exceed projections. She spoke in support of the proposal.
It was felt change #3 provides an unfair benefit not available to younger employees
who must meet age and employment length guidelines. Concern was expressed in increasing
benefits for employees affected by previous career decisions. It was stated change #3 will
provide benefits to older employees who do not have a choice and are required to participate
in the plan rather than add to their Social Security credits.
Trustee Hooper reported the City Attorney had opined his status as a Pension Plan
recipient creates no conflict of interest.
In response to a question, Mr. O’Rourke said the plan currently is funded at 174% of
required levels.
moved
Trustee Hooper to approve the following changes to the City of Clearwater's
Employees Pension Plan: 1) provide a 1.5% automatic COLA for active employees and
retirees; 2) base computation of monthly compensation on the highest 5-year average; and 3)
change annuity benefits for vested employees who retire at age 65 with less than 20 years of
service and authorize staff to proceed with drafting the ballot question incorporating all three
changes.
Mr. O’Rourke reported the plan would adopt conditions related to State 185/175
legislation, which includes a 55/10 provision. The City Attorney noted the agenda item states
change #1 provides for an ad hoc COLA. Mr. O’Rourke said staff agreed with counsel's
concerns regarding liability issues related to an ad hoc provision and his recommendation that
it be automatic. Pension Trustees Attorney Lee Dehner said potential legal risks of the ad hoc
provision relate to plan members who may take action if an adjustment is not received. The
plan’s actuary Steve Metz supports the recommendation. Mr. Dehner said the Trustees could
reduce benefits by referendum if they become too expensive. Opposition to COLAs was
stated.
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motion
The was duly seconded. Trustees Hooper, Clark, and Hart, and Chair Aungst
carried
voted “Aye”; Trustee Johnson voted “Nay.” Motion .
The meeting adjourned at 7:01 p.m.
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