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08/09/2001PENSION ADVISORY COMMITTEE MEETING CITY OF CLEARWATER August 9, 2001 Present: Dick Fitzgerald Chair Whitney Gray Vice Chair /Commissioner John Lee Committee Member Ed Hart Committee Member/Commissioner departed 10:10 a.m. John Schmalzbauer Committee Member Bill Jonson Committee Member/Commissioner Tom Jensen Committee Member Also Present: Paul O’Rourke Human Resources Administrator Lee Dehner Pension Advisory Committee Attorney Debbie Ford Human Resources Analyst Patricia O. Sullivan Board Reporter The Chair called the meeting to order at 9:00 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 Member Jensen moved to approve the minutes of the regular meeting of July 12, 2001, as recorded and submitted in written summation to each board member. The motion was duly seconded and carried unanimously. ITEM #4 - Employees to be Heard - None. ITEM #5 - Action Items a) Review and Action on Employee Requests for Years of Service Pension 1. Alfred Harris Jr. – Solid Waste Equipment Operator, Solid Waste Member Lee moved to approve a Years of Service Pension for Alfred Harris Jr. The motion was duly seconded and carried unanimously. b) Review and Action on Employee Request to Vest Pension 1. Walter L. Davis – Solid Waste Equipment Operator, Solid Waste Walter L. Davis has resigned his position after being employed by the City for more than 19 years. He will qualify to receive his reduced pension beginning May 1, 2003. 2. William Emmott – Police Service Technician, Police Department William Emmott has resigned his position after being employed by the City for more than 14 years. He will qualify to receive his reduced pension beginning September 1, 2015. Member Jonson moved to approve the requests by Walter L. Davis and William Emmott to vest their Pension. The motion was duly seconded and carried unanimously. c) Approval of New Hires as Pension Plan Members As of August 2, 2001, the City had 1714.89 FTEs out of 1799.3 budgeted positions. Teresa Scrima originally was hired as permanent part-time; promoted to full-time and pension eligible as of July 16, 2001. Member Gray moved to accept the following employees into membership in the Pension Plan: Date of Pension Employment Elig. Date Andrea Davis, Public Information Spec. Gas 07/09/01 07/09/01 Matthew McLane, Police Recruit Police Department 06/04/01 06/04/01 Richard Ross, Public Utilities Tech I Public Utilities 07/02/01 07/02/01 Colleen Lau, Associate Customer Service Customer Service 07/16/01 07/16/01 Miguel Barroso, Custodial Worker General Support Services 07/16/01 07/16/01 Kelly Goolsby, Accounting Clerk Finance 07/16/01 07/16/01 Scott Durivou, Police Recruit Police Department 07/16/01 07/16/01 Christopher Ziermann, Police Recruit Police Department 07/16/01 07/16/01 Brian Rogers, Police Recruit Police Department 07/16/01 07/16/01 Roger Culler, Parks Service Tech I Parks & Recreation 07/16/01 07/16/01 Teresa Scrima, Library Assistant Library 12/06/99 07/16/01 Craig Tower, Mechanic I General Support Services 07/16/01 07/16/01 Leighton Wright, Accounting Clerk Gas 07/16/01 07/16/01 Maureen Owens, Parks Service Tech I Parks & Recreation 07/16/01 07/16/01 The motion was duly seconded and carried unanimously. ITEM #5 - Pending/New Business a) Selection of Member to Serve on Actuary Selection Committee Assistant Finance Director Jay Ravins said staff has issued a RFP (Request for Proposals) for actuary services. The current contract with Steve Metz expires this year. Mr. Metz has served as the Plan’s actuary for more than 10 years. There is no requirement to change actuaries. Mr. Ravins recommended bids be reviewed by a 5-member Actuary Selection Committee, with two Finance employees, two Human Resources employees, and a PAC (Pension Advisory Committee) appointed representative. After the bid review, the committee will interview finalists, probably in September. Mr. Ravins said historically, the unions have not been represented on the actuary review committee. It was recommended the committee have union representation. Human Resources Administrator Paul O’Rourke recommended the committee have no more than five members due to scheduling difficulties. It was noted many had disagreed with past actuarial computations. Mr. Ravins reviewed actuary functions. External auditors evaluate actuarial reserves to be certain they are adequate. Annually, the actuary calculates the amount of contributions necessary for the Plan to meet future obligations. He said Finance staff prefers conservative financial advice, not based on political pressure. In response to a question, he said the actuary recommends assumptions used for Plan computations. A review of the assumptions was recommended. Mr. Ravins said the PAC could review and the Pension Trustees approve new assumptions, but such action rarely occurs. Additional information was requested regarding the $21-million reduction in the Plan’s value and the $352,000 increase in expenses. Concern was expressed the same staff members seem to decide many issues. It was questioned if the PAC has the authority to determine committee membership. Mr. O’Rourke said the Finance Department welcomes suggestions. Concern was expressed labor has no representation on the management of its Pension Plan as committee membership consists solely of upper management. It was felt increasing the committee’s size would allow labor input and benefit staff by educating labor members. Mr. Ravins said accommodating seven members would be difficult. Discussion ensued regarding representation on the Actuary Selection Committee. Concern was expressed it may be difficult if a PAC appointee, as a union member, felt obligated to represent more than one interest. Pension Advisory Committee Attorney Lee Dehner said committee meetings would have to be noticed if more than one PAC member serves. It was suggested the Chair represent the PAC on the Committee, while the unions appoint three committee members to represent: 1) the fire unions; 2) the police unions; and 3) the CWA (Communication Workers of America) union. Member Gray moved for the PAC to recommend that the Actuary Selection Committee be expanded to eight members consisting of four staff representatives, a fire union representative, a police union representative, a CWA representative, and the PAC Chair as a PAC representative. The motion was duly seconded and carried unanimously. b) Letter from Bernard McKenna re Retiree Concern In his October 16, 2000, and July 12, 2001 letters to the City Manager, City retiree Bernard J. McKenna requested his pension benefit be recalculated to reflect the increased benefit adopted after his May 1992 retirement. Mr. O’Rourke reviewed the request and indicated the subject benefit resulted from collective bargaining and did not cover previous retirees. The unions lowered their demands in 1999 to provide a cost of living increase for all Plan members, including those who previously retired. The next opportunity to change the Plan is by referendum in March 2002. Consensus was for staff to respond to Mr. McKenna, explaining the enhanced multiplier does not affect his pension benefit. c) Pension Budget The FY (fiscal year) 2001/02 budget includes a line item for medical services authorized by the PAC (Pension Advisory Board). Previously, the Pension Plan reimbursed the General Fund for its payment for medical exams. Consultant projects include: 1) $10,000 – Pension Analysis Update; 2) $10,000 – DROP Modeling/Assessment; and 3) $10,000 –Retiree Health Subsidy Assessment. Travel covers costs related to Pension Investment Committee member attendance at the training seminar and visit to Callan, the Plan’s performance measurement firm. As staff due diligence trips will not be repeated next year, related costs are not included. Printing and Binding expenses cover statutorily required annual information distribution to Plan members. Training is statutorily mandated. A RFP (Request for Proposals) has been released for the actuary contract. An increase in miscellaneous consulting fees is anticipated. Increases to legal expenses reflect actual costs. Funding for the Integrated Disability Management project is $9,000 for Phase One and $10,000 for Phase Two. Money Manager, Safekeeping Service, and annual actuary report fees are set by Trustee approved contracts and are not included in this administrative budget. Reimbursement to the General Fund and Central Insurance Fund covers oversight costs and is recognized as revenue to the General Fund. Central Insurance Fund reimbursements have been updated to more accurately reflect costs, increasing reimbursements to $80,448: 1) $24,288 – Finance; 2) $13,980 – payroll; and 3) $41,180 - Human Resources. The reimbursement rate is $20,630 to the Central Insurance Fund and $59,818 to the General Fund. Medical exam costs will be charged directly to the Pension Plan and no longer reimbursed to the General Fund. Cash & Investments Manager Steve Moskun said during the recent market turndown, the Pension fund has performed better than benchmarks. During the quarter ending June 30, 2001, the Pension fund’s value increased by 4.34%. The value of the fund decreased by 2.9% during the fist half of the fiscal year. In response to a question, Mr. Moskun said changes to the way medical exams are paid streamlined the process. Mr. O’Rourke said staff is working to coordinate annual Police and Fire department physicals to establish baselines for new hires related to exposure to illnesses such as Hepatitis A, B, and C, tuberculosis, and meningitis. In response to a question regarding updating the Pension Plan analysis, Mr. O’Rourke said staff compares baselines with 10 similar labor markets and recommends adjustments. According to State law, during bargaining, the City is required to provide all requested information. Mr. Moskum reviewed which positions receive Pension Plan reimbursement to cover oversight costs. Mr. O’Rourke said staff is working on a referendum issue to allow employees to choose a benefit option at vesting, to avoid beneficiary problems that can occur following an untimely death. Member Jonson moved for the PAC to recommend approval of the proposed FY 2001/02 budget. The motion was duly seconded and carried unanimously. d) Integrated Disability Management Presentation Mr. O’Rourke reviewed integrated disability management. The goal of integrated disability management is to coordinate occupational disability, non-occupational disability, and other related programs, including group health, health promotion, and EAPs (employee assistance programs), to reduce costs, enhance productivity, improve workforce health, and increase customer satisfaction. Workers’ Compensation pays for medical treatment and 66 2/3% of lost wages arising from on-the-job injury or disease. Regarding non-occupational sickness and disability, sick pay provides 100% salary continuance during short periods of time. STD (Short-Term Disability) benefits pay 66 2/3% of wages during brief periods of one to 26 weeks. LTD (Long-Term Disability) benefits partially replace income for years, typically until death, following a disabling illness or injury. Direct costs related to worker disability are Workers’ Compensation, Sick leave pay, STD, LTD, and medical costs. Indirect expenses relate to overtime, replacement workers, job accommodations, turnover/operational instability, training, and morale issues. Based on information from 1999 - WBGH (Watson Wyatt Worldwide & Washington Business Group on Health), while the average direct cost of disability is 6.3% of payroll, the average indirect cost is an additional 8% of payroll. For the City, these costs total $8.75-million, 14% of payroll. The City has no overarching plan or policy design for disability management and no centralized management of job-connected and non-job connected disability cases and regulations related to Workers’ Compensation, ADA (Americans with Disabilities Act), and FMLA (Family Medical Leave Act). The number of “light duty” cases has increased and the workforce is aging. Non-vested employees have no employer-provided STD or LTD coverage for non-job connected disability. Morale and productivity are issues of concern as disabilities impact staffing levels, competence, and the budget. The City lacks integrated data collection, evaluation, and outcome measurement systems. WBGH identifies factors which increase disability costs in order of importance: 1) poor plan design; 2) lack of supervisory involvement in RTW (Return to Work); 3) sick leave abuse; 4) job dissatisfaction; 5) preventable health problems; 6) inadequate provider involvement for non-job connected RTW; and 7) poor performance. According to WBGH, national disability management activities, in order of popularity, are: 1) transitional RTW; 2) prevention; 3) health intervention; 4) case management; 5) IMEs (Independent Medical Exams); 6) medical provider education; 7) PTO (paid time off); 8) involved supervision; 9) work/family programs; and 10) vendor performance standards. Among organizations which use Integrated Disability Management, San Bernadino County, California, saved $434/participant from 1998 to 1999, reduced lost days by 6.8 days per case for a return on investment of $1.60 to $1.00. At Owens-Corning, disability rates decreased by 48% over 4 years and within 5 years, related costs decreased from $25-million to $14-million annually. Other firms nationwide have reported similar savings. To reduce the number of disability pensions awarded and to assign disabled employees to alternative positions, the ordinance related to disability pensions was changed. The current ordinance states, “A participant shall be considered disabled for purposes of the Plan if . . . (he/she is) unable to perform any useful, meaningful, and necessary work for the employer in an available position for which the participant is reasonably qualified or . . . may be reasonably trained to perform.” The ordinance requires alternate placement with no loss of pay. The number of job-connected disabilities granted was reduced from 51 in the 5 years before the change to 3 during the 5 years following the change. The number of non-job connected disabilities granted was reduced from 16 in the 5 years before the change to 9 during the 5 years following the change. Problems related to the ordinance include significantly higher costs to the City and increased attitude difficulties related to ability vs. the desire to carry out a job. Morale is undermined when salaries do not match skill and effort. In addition, the Pension ordinance disability provision requiring the placement of disabled workers in other positions has significantly increased Implementing disability management: 1) Stage 1 – Assessment - 6 – 12 months - prepare for disability management; 2) Stage 2 – Implementation – 12 – 24 months - implement disability management program; and 3) Stage 3 – Sustain & Evaluate – ongoing – ensure ongoing commitment to disability management. Disability management benefits include cost savings, a reduction in the number and duration of employee absences, improved employee health and wellness, reduced disability cases and costs, improved retention and productivity, enhanced customer service, administrative simplification, and development of an integrated data system. Integrated Disability Management provides a single system which integrates the: 1) intake and notification process; 2) medical case management system; 3) RTW program; 4) W/C, ADA and FMLA requirements; 5) data base; and 6) program/provider evaluation system. The Stage 1 Assessment will issue a final report to include: 1) executive summary; 2) direct and indirect costs of disabilities; and 3) major findings with opportunities and recommendations including an administration model, integrated process maps, program performance metrics, and supporting data. Discussion ensued regarding FMLA. Mr. Dehner indicated employees are entitled to 12 weeks of FMLA benefits each 12 months. Pension ordinance and FMLA legislation obligate the City to find a similar position for an injured employee upon their return. Mr. O’Rourke said Human Resources is ill-equipped to handle disability cases and suggested it may be better for a third-party to provide integrated disability management. The Stage 1 assessment is budgeted for $19,000. Before proceeding to Stage 2, the City will determine if it had received value for its investment. Staff will not recommend moving forward without proof of legitimate benefits. Mr. O’Rourke said the City had received three responses to staff’s RFP. Two firms were not up to the task. Phase 1 will collect significant data. Staff will report on the findings. The City will be self reliant after Stage 2 is implemented. In response to a question, Mr. O’Rourke said the City’s liability for sick time is $5.6-million. Pinellas County currently provides employees with time off, and does not differentiate between sick and other time. That issue must be decided during collective bargaining. He supported integrated disability management as the best way for the City to coordinate information related to staff absences. Stage 1 will determine the cost of further Stages. Re. Police Chief Sid Klein In his June 28, 2001 letter regarding the request to the City Attorney by Andra T. Dreyfus, attorney for Police Chief Sid Klein, Stephen H. Cypen, of Cypen & Cypen, opined that Chief Klein has no further administrative or other remedies concerning his claim to be included in the City’s Employee Pension Plan. Mr. Cypen recommended the Pension Trustees take no further steps in this matter. He indicated the Sunshine Law prohibits Trustees from participating in a “confidential pre-litigation mediation.” Chief Klein’s window to appeal the last decision closed after 30 days. Mr. O’Rourke has shared this information with Chief Klein and his attorney. Mr. Cypen remains steadfast in his recommendation. Human Resources periodically reviews options for exempted employees. Executives are included in the Pension Plans in seven of 10 local governments. In response to the Chief’s concerns that most jurisdictions do not exempt certain employees, staff will bring forward recommendations regarding this issue. Catherine Slack Mr. Dehner reported the PAC will consider Catherine Slack’s disability pension request, following City receipt of her IME. Tax Legislation Mr. Dehner reported recent federal tax legislation provides favorable benefits for the accumulation of retirement funds by increasing the IRA contribution limit. He reviewed changes to the tax consequences of rollovers and discussed portability issues. He recommended expanding the Pension Plan to allow employees to purchase prior service. He said buy back provisions will help recruitment, especially for those with previous government or military experience. It was requested Mr. Dehner distribute related language from other plans. No one can earn benefits for the same time period from different municipalities The next PAC meeting is scheduled for September 9, 2001. ITEM #7 - Committee Members to be Heard – None. ITEM #8 - Adjournment The meeting adjourned at 11:33 a.m.