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11/09/1999PENSION ADVISORY COMMITTEE MEETING CITY OF CLEARWATER November 9, 1999 Present: Brian Aungst Chair/Mayor J. B. Johnson Vice Chair/Commissioner Pat Greer Committee Member Pat Shepler Committee Member Ed Hart Committee Member/Commissioner John Schmalzbauer Committee Member Absent: Dick Fitzgerald Committee Member Also Present: Paul O’Rourke Human Resources Administrator Margie Simmons Financial Services Administrator Lee Dehner Pension Advisory Committee Attorney Debbie Ford Administrative Analyst Patricia O. Sullivan Board Reporter The Chair called the meeting to order at 9:30 a.m. at City Hall. To provide continuity for research, items are in agenda order although not necessarily discussed in that order. ITEM #2 - Approval of Minutes It was noted Member Shepler had not been present on October 14, 1999. Member Johnson moved to approve the minutes of the regular meeting of October 14, 1999, as corrected. The motion was duly seconded and carried unanimously. ITEM #3 - Employees to be Heard – None. ITEM #4 - Action Items a) Review and Action on Employee Requests for Regular Pensions 1. James Marshall, Network Support Technician II- Police Department Member Greer moved to approve the request by James Marshall for a Years of Service Pension. The motion was duly seconded and carried unanimously. b) Review and Action on Employee Requests to Waive Vested Pension Rights: 1. Sabrina R. Chute, Network Support Technician II - Information Technology Sabrina R. Chute resigned her position on December 14, 1998, but withdrew her resignation within 6 months, and returned to a position with the Information Technology Department. Since Ms. Chute is in the Pension Plan, it is necessary for her to waive her vested pension. Her original pension date will be adjusted by the number of days she was gone. AND 2. Cindi R. Juster, Administrative Analyst - General Support Services Cindi R. Juster resigned her position on August 12, 1999, but withdrew her resignation within 6 months, and returned to a position with the General Support Services Department. Since Ms. Juster is in the Pension Plan, it is necessary for her to waive her vested pension. Her original pension date will be adjusted by the number of days she was gone. Member Greer moved to approve the request by Sabrina R. Chute and Cindi R. Juster to waive their vested Pension rights. The motion was duly seconded and carried unanimously. c) Review and Action on Employee Requests to Vest Pensions: 1. Teresa J. Finch, Environmental Permitting Coordinator – Public Works Teresa J. Finch has resigned her position after being employed by the City for 15 years. She will qualify to receive her pension beginning December 1, 2004. AND 2. Raymond G. Kaval, Wastewater Treatment Plant Operator A – Public Works Raymond G. Kaval has resigned his position after being employed by the City for more than 10 years. He will qualify to receive his pension beginning June 1, 2001. AND 3. Michael Schaffner, Police Officer – Police Department Michael Schaffner has resigned his position after being employed by the City for more than 12 years. He will qualify to receive his pension beginning January 1, 2007. Member Greer moved to approve the request by Teresa J. Finch, Raymond G. Kaval, and Michael Schaffner to vest their Pensions. The motion was duly seconded and carried unanimously. c) Approval of New Hires as Pension Plan Members As of November 9, 1999, the City had 1,671.2 FTEs and 1,778.8 budgeted positions. Marlon Mitchell was hired as part-time on January 6, 1997, and changed to full-time on October 9, 1999. Pamela Bedford was hired as part-time on January 5, 1998, and changed to full-time on October 11, 1999. David Powers was hired as temporary on June 4, 1998 and changed to permanent on October 11, 1999. Full-time permanent employees are pension eligible. Member Schmalzbauer moved to accept the following employees into membership in the Pension Plan: Date of Pension Employment Elig. Date Patricia Post, Risk Management Spec. Finance 10/11/99 10/11/99 Marlon Mitchell, Custodial Worker Parks & Recreation 01/06/97 10/09/99 Andrew Hawkins, Firefighter Fire Department 10/04/99 10/04/99 Julie Wykoff, Library Assistant Library 10/11/99 10/11/99 David Powers, Senior Accountant Solid Waste 06/04/98 10/11/99 Pamela Bedford, Library Assistant Library 01/05/98 10/11/99 Scott Kurleman, Land Resource Spec. Planning & Develop. 10/11/99 10/11/99 Robert Perry, Customer Service/Field Rep. Customer Service 10/13/99 10/13/99 Claire Knafla, Sys. Analyst/Programmer II Information Tech. 10/18/99 10/18/99 Dragoljub Vitkovic, Mechanic II. General Services 10/25/99 10/25/99 Melissa Jackson, Library Assistant Library 10/25/99 10/25/99 Louis Pirman, Gas Technician I Gas 10/25/99 10/25/99 Bruce Vendetti, Gas Technician I Gas 10/25/99 10/25/99 Richard Zeron, Solid Waste Equip. Oper. Solid Waste 10/25/99 10/25/99 The motion was duly seconded and carried unanimously. ITEM #5 - Pending/New Business a) Darold Brink – Request for Pension Service Credit On June 8, 1983, the City hired Darold Brink as a part-time Marine Attendant III. Until November 19, 1984, when Mr. Brink’s classification was changed to full-time, he worked full-time for the Marine Department while classified part-time. Staff review of his personnel records have determined Mr. Brink was classified improperly. Mr. Brink did not contribute to the Pension until his status was changed to full-time. He has requested pension service credit for June 8, 1983, to November 19, 1984. Staff has calculated Mr. Brink would have paid $1,584.94 to the Plan during that time. The PAC must determine if he should be credited for this time, and, if so, how much of a contribution is required. In response to a question, Human Resources Administrator Paul O’Rourke said a memorandum will be forwarded to department directors requesting they report on any staff who may have been classified improperly. The payroll also needs to be reviewed. The number of employees affected by this issue has not been determined. Pension Plan Attorney Lee Dehner said the problem could be resolved in two ways. While the Plan does not address this specific situation, it considers buy backs for employees who resign and later return to work for the City. He said the issue is more analogous to Plan provisions to correct over- and under-payments, which require a contribution of the uncollected pension benefits plus interest. It was suggested the employee should not be responsible for the payment as the City had made the mistake. Mr. Dehner said the employee has had use of the money not contributed to the Plan. It was indicated the employee’s take home pay had been reduced by Social Security deductions. Mr. O’Rourke stated the City should have deducted $1,584.04 in Pension contributions from Mr. Brink during that 17-month period. The principal plus 5% interest is approximately $3,380. The actuarial value of these 17 months of service is $19,760. Mr. Dehner said requiring a contribution of the actuarial value would be unfair, as the employee is not responsible for the error. In response to a question, Mr. O’Rourke said the City had violated the Federal Standards Labor Act by requiring a permanent part-time employee to work full-time. Mr. Dehner said the Pension Trustees had approved adoption of the 5% interest rate. He did not who had established that rate. Member Schmalzbauer moved to approve Pension service credit for Darold Brink from June 8, 1983, to November 19, 1984, and to require him to contribute $1,584.04, without interest charges, to the Pension Plan. The motion was duly seconded. Concern was expressed a precedent not be established as the pension service being credited is valued at $19,760. Mr. Dehner said had Mr. Brink contributed to the Plan during this time period, he would not have made payments to Social Security. Mr. Brink will derive a benefit due to Social Security contributions from him and the City. Discussion ensued regarding permanent and temporary employees. The seconder rescinded the second. The motion died for lack of a second. Member Johnson moved to approve Pension service credit for Darold Brink from June 8, 1983, to November 19, 1984, and to require him to contribute $1,584.04, plus 5% interest, for an approximate total of $3,380 to the Pension Plan. The motion was duly seconded. Members Johnson, Greer, Shepler, and Chair Aungst voted “Aye”: Members Hart and Schmalzbauer voted “Nay.” Motion carried. The Committee recessed from 9:52 to 10:00 a.m. b) Changes to Pension Plan Mr. O’Rourke reviewed proposed changes to Pension Plan benefits. 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 plans 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. Option 1 provides a 2% ad hoc or automatic COLA for active employees only and requires City funding to increase by $5.5-million annually. The unfunded liability would increase by $39-million, with the credit balance stabilized at $8-million in 2006. Option 2 provides a 1.5% ad hoc or automatic COLA for active employees and retirees and requires City funding to increase by $5.3-million annually. The unfunded liability would increase by $44.2-million, with the credit balance stabilized at $9.3-million in 2006. Option 3 provides a 2% ad hoc COLA for active employees and retirees and requires City funding to increase by $7-million annually. The unfunded liability would increase by $59-million and the credit balance would be depleted by 2004. Option 4 changes computation of monthly compensation to the highest 3-year average and requires City funding to increase by $1.2-million annually. Option 5 bases monthly compensation on the highest 5-year average and requires no increase in City funding. Option 6 changes annuity benefits for vested employees who retire at age 65 with less than 20 years of service from one based on actuarial equivalents to a normal retirement benefit. The City contribution would increase by $177,000, or 0.36% of payroll. Options 1 or 2 are affordable alone or combined with Option 5. Option 4 is affordable only by itself. Option 3 is not affordable. Staff recommends approval of Options 2, 5, and 6. Any change requires approval by the PAC, Pension Trustees, and citizens in a March 2000 referendum. Mr. O’Rourke will report on the cost to hold the referendum. In response to a question, Aon Consulting representative Mike Jones said the analysis assumes all employees would work until retirement and collect Pension benefits. Vested employees are considered a liability to the Plan. Member Shepler moved to recommend approval of 1) Option 2 - provide a 1.5% ad hoc COLA for active employees and retirees; 2) Option 5 – base computation of monthly compensation on the highest 5-year average; and 3) Option 6 - change annuity benefits for vested employees who retire at age 65 with less than 20 years of service. In response to a question, Mr. O’Rourke said the analysis of police and fire benefits is based on current benefits. It was stated increased compensation should be based on merit, not COLAs. In response to a concern regarding future funding problems, Mr. Dehner said the recommendation is based on conservative calculations. He expressed concern an ad hoc provision could cause legal problems. Should an annual adjustment be reduced or denied, Plan members could bring to question the administration of the Plan, the astuteness of investments, etc. In response to a suggestion, Mr. Dehner recommended considering these issues separately from pending redrafts of the plan. Concern was expressed Option 6 is not fair to employees who adhere to current Plan retirement standards. It was stated the current plan is unjust for older employees. Pension Plan participation is mandatory for qualified employees, regardless of their age. The motion was duly seconded. Members Greer, Shepler, Schmalzbauer and Chair Aungst voted “Aye”: Members Johnson and Hart voted “Nay.” Motion carried. One Pension Plan member felt the comparative analysis of police and fire retirement benefits should have considered only Pension Plan benefits. ITEM #6 - Director's Reports The next meeting is scheduled for December 9, 1999, at 9:00 a.m. ITEM #7 - Committee Members to be Heard Member Shepler recommended employees be allowed to choose a pension benefit option prior to retirement. Vested employees, who die or are incapacitated, have only one option when 6 options exist. This issue will be addressed in December. ITEM #8 - Adjournment The meeting adjourned at 10:33 a.m.