02/14/2002PENSION ADVISORY COMMITTEE MEETING
CITY OF CLEARWATER
February 14, 2002
Present: Dick Fitzgerald Chair
Whitney Gray Vice Chair /Commissioner
John Lee Committee Member
Ed Hart Committee Member/Commissioner
Bill Jonson Committee Member/Commissioner
Tom Jensen Committee Member
Absent: John Schmalzbauer Committee Member
Also Present: Paul O’Rourke Human Resources Director
Lee Dehner PAC Attorney – arrived 9:03 a.m.
Deb Ford Human Resources Analyst
Margie Simmons Finance Director
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 Lee moved to approve the minutes of the regular meeting of January 10, 2002, as recorded and submitted in written summation to each board member. 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 Years of Service Pension
1) James L. Little – Police Officer, Police Department
2) Dean N. Edwards – Fire District Chief, Fire Department
Member Jensen moved to approve Years of Service Pensions for James L. Little and Dean N. Edwards. The motion was duly seconded and carried unanimously.
b) Review and Action on Employee Requests to Vest Pensions
1) Terry Ann Webber – Development Review Technician II, Planning & Development Services
Terry Ann Webber has resigned her position after being employed by the City for more than 20 years and will qualify to receive a reduced pension beginning August 1, 2004.
2) James Powell – Public Services Technician II, Public Services
James Powell has resigned his position after being employed by the City for more than 19 years and will qualify to receive a reduced pension beginning October 1, 2002.
3) Gregory B. Howe – Recreation Programmer, Parks & Recreation
Gregory B. Howe has resigned his position after being employed by the City for more than 13 years and will qualify to receive a reduced pension beginning June 1, 2015.
Member Gray moved to approve the requests by Terry Ann Webber, James Powell, and Gregory B. Howe to vest their pensions. The motion was duly seconded and carried unanimously.
c) Approval of New Hires as Pension Plan Members
As of February 7, 2002, the City had 1708.75 FTEs out of 1834.7 budgeted positions.
Member Jonson moved to accept these employees into membership in the Pension Plan:
Date of Pension Employment Elig. Date
Corey Lenczden, Police Recruit Police Department 12/03/01 12/03/01
James Phelps, Police Recruit Police Department 12/17/01 12/17/01
Thelma Catio, Recreation Leader Parks & Recreation 04/03/95 12/17/01
Judy Hill, Library Assistant Library 01/02/02 01/02/02
Debra Caputo, Management Intern City Manager Office 01/07/02 01/07/02
Steve Ussery, Tree Trimmer Public Services 01/14/02 01/14/02
Rhonda Gracie, Landscape Architect Parks & Recreation 01/14/02 01/14/02
Joannis Kourmoulakis, Gas Technician I Clearwater Gas System 01/14/02 01/14/02
Robert Fahey, Engineer I Engineering 01/28/02 01/28/02
Raghu Thanjavur, Systems Analyst Information Technology 01/28/02 01/28/02
ITEM #5 – Pending/ Business
a) Actuarial Assumption Report
Pension Plan Actuary Steve Metz, of Price Waterhouse Coopers, reviewed the report to assist the City in evaluating the appropriateness of current actuarial assumptions. Actuarial assumptions
used in the report: 1) economic assumptions: a) expected return on investments and b) annual rate of salary increases and 2) demographic assumptions: a) employee turnover; b) mortality;
c) retirement rates; and d) disability rates.
In regard to economic assumptions, while the expected return on assets has been assumed to be 7%, the actual rate of return since 1986 has averaged 11.7%. While the expected increase
in salaries has been assumed to be 5%, the actual rate has averaged 6.1%.
In regard to demographic assumptions, turnover rates reviewed for the past 9 years indicate trends: 1) total turnover low compared to most other groups; 2) total turnover lower than
assumptions would predict; and 3) turnover is increasing gradually, from 2.3% to 6.3%. The analysis indicates that years of service had little impact on turnover. Meaningful differences
based on sex and hazardous duty status do exist. The number of female hazardous duty employees was too low to provide meaningful information by age. The turnover rate for non-hazardous
duty males averages 6%, for non-hazardous duty females averages 9%, and for hazardous duty staff averages 2%.
While the current actuarial assumption is that all employees will retire when they become eligible for unreduced benefits, that is not the case. The City’s mortality experience over
the past 9 years is lower than would be expected. The City currently uses the 1983 Group Annuity Table for Males, with a 6-year setback for females. This table is widely used and required
by the IRS for private plans for some purposes. The Society of Actuaries recently published the 1994 Group Annuity Reserving Table, which will be required by the IRS in many cases and
likely will be the most common table in use. The State Division of Retirement also may recommend or require it. During the past 6 years, 12 disability pensions have been approved.
Actuarial assumptions would predict approximately 5 disabilities annually, with 100% of them line-of-duty.
Mr. Metz reviewed assumptions used by other Florida government plans and made recommendations: 1) economic assumptions: a) expected return on investments – range between 7% and 8.5%
and b) annual rate of salary increases – at least 6%; and 2) demographic assumptions: a) employee turnover: i) under age 25, 15% non-hazardous duty males/females, 5% hazardous duty all;
ii) ages 26 – 30, 10% non-hazardous duty males, 15% non-hazardous duty females, 3% hazardous duty all; iii) ages 31 – 35, 5% non-hazardous duty males, 10% non-hazardous duty females,
3% hazardous duty all; iv) ages 36 – 40, 5% non-hazardous duty males, 10% non-hazardous duty females, 2% hazardous duty all; v) ages 41 – 45, 5% non-hazardous duty males/females, 2%
hazardous duty all; vi) ages 46 – 50, 5% non-hazardous duty males/females, 0% hazardous duty all; vii) ages 50 – 54, 2% non-hazardous duty males, 5% non-hazardous duty females, 0% hazardous
duty all; and viii) ages 55+, 0% all classifications; b) mortality – adopt 1994 Group Annuity Reserving Table; c) retirement rates: i) up to age 45, 0% non-hazardous duty 20% hazardous
duty; ii) ages 50 and 51, 20% non-hazardous duty, 50% hazardous duty; iii) ages 52 – 54, 25% non-hazardous duty, 75%
hazardous duty; iv) ages 55 - 59, 50% non-hazardous duty, 100% hazardous duty; and v) ages 60+, 100% non-hazardous and hazardous duty and d) disability rates – no change.
Mr. Metz stated the Pension’s investment advisors would best determine the expected return on the investment assumption. It was noted benefits are inadequate for hazardous duty employees
to retire after 20 years. Mr. Metz recommended against discussing benefits at this time. Recommended salary increase assumptions are based on a review of past trends. In response
to a question, Mr. Metz said the expected return on investment assumptions considers the next 60 years. It was noted while higher costs to the plan would occur in the short-term if
returns do not improve, the recommendation considers the long-term. PAC (Pension Advisory Committee) Attorney Lee Dehner stated the actuary is not involved in the plan’s investment
policy. Mr. Metz recommended return on investment and salary costs be tied together.
In response to a question, Mr. Metz said hazardous duty employees have lower turnover rates as they are career oriented. It was stated without a portable pension, hazardous duty employees
cannot transfer to other departments in other municipalities. While turnover is greater in the Police Department than the Fire Department, employees of both departments have disincentives
to leave as they must start elsewhere on the bottom rung.
In response to a question, Mr. Metz said it took several years to gather data prior to the release of the 1994 Group Annuity Reserving Table. He recommended assumptions reflect best
estimates and that the new standard be adopted before it is required. It was requested Mr. Metz discuss this assumption with Charles Slavin with the State Division of Retirement. Mr.
Metz will send the recommended changes for review. Finance Director Margie Simmons said the new standard is more conservative as it assumes people will live longer.
In response to a question, Mr. Metz said the approaching wave of retirements has been considered. In response to a question, Ms. Simmons said Mr. Dehner had recommended the expected
return on investments be between 6% and 7.5%. She recommended the rate be 7.5%. It was noted the proposed assumptions are conservative and the fund’s overfunded status will continue.
It was recommended plan assumptions be reviewed every five years.
Member Gray moved to approve the proposed actuarial assumptions with a 7.5% expected return on investments. The motion was duly seconded.
In response to a request, Member Gray amended the motion to require Mr. Slavin’s endorsement of the 1994 Group Annuity Reserving Table for mortality rates. The seconder agreed.
Concern was expressed regarding the accuracy of the assumed rate of return.
Upon the vote being taken, Members Hart, Gray, Jonson, Jensen, and Chair Fitzgerald voted “Aye”; Member Lee voted “Nay.” Motion carried.
ITEM #6 – Director’s Reports - None.
The next PAC meeting is scheduled for March 14, 2002.
ITEM #7 - Committee Members to be Heard
Mr. Dehner reviewed amendments to State law related to the treatment of lump sum distribution and tax deferred vehicles. The City’s ordinance will need to reflect the changes. A referendum
related to the changes is not required
Member Jonson reported he has requested the City Commission replace him on the PAC as the meeting time conflicts with his TBRPC (Tampa Bay Regional Planning Council) sub-committee appointment.
The Investment Committee meeting will convene following this meeting.
ITEM #8 - Adjournment
The meeting adjourned at 10:13 a.m.
_________________________________
Chair
Pension Advisory Committee
Attest:
________________________________________
Board Reporter