Loading...
HomeMy WebLinkAbout1992-11-12 FPB INFORMATIONAL MEETINGFIREFIGHTER'S PENSION INFORMATIONAL MEETING November 12 , 1992 An informational meeting of the Englewood Firefighter's Pension Board and general membership was called to order by Chairperson Chris Olson at 7 :04 p .m. in the Training Room of the Englewood Police/Fire Complex, 3615 South Elati Street. Members Present: Members Absent: Others Present: Chris Olson, Chairperson Willis "Shorty" Resley, Council Appointee Loren Ward . Employee Representative Bill Young , Employee Representative Lorraine Hayes , Director of Financial Services Clyde Wiggins, Mayor Richard Edison, Brian Bruns, Walt Groditski, Keith Lockwood, Chuck Renner, Patrick McCoy, John Blanchard, Carol Wescoat Mr. Olson introduced Willis Resley, Council's appointed representative to general membership . General introductions were made of all present. Ms. Hayes reviewed topics discussed at the April informational meeting. One of the topics at the April meeting was concern with the unfunded liability of the pension . The membership was given a spreadsheet of the financial history of the Firefighter's Pension Fund . Ms. Hayes reviewed the financial history accounting for all revenue and expenditures in the fund and outlined the continual growth of assets in the fund . Currently there is not sufficient money to fund all the future benefits that are promised through the plan . She explained that part of what accounts for an unfunded liability is the addition of benefits that were not previously included in necessary funding calculations . Every year, the "normal costs" of the plan are funded completely . Normal costs are the amounts participants earn in future pension benefits each year that they are employed based on salary and years of service. Unfunded liability is created by changing a plan and granting benefits that have not been funded previously . A hand-out was distributed listing a synopsis of plan changes that contributed to the unfunded liability . The largest single increase in fund liability was tlle increase in the percentage of final salary which could be included in pension payment calculations from 50% to 65%. Ms . Hayes was asked whether the fact that a firefighter working past the age of 50 and continuing to contribute to the fund during those extra years offsets the l % increase in additional pension calculations, since during those working years he's not drawing anything out of the fund , but still contributing to it. Ms . Hayes responded that she would put the question to the actuary. Ms . Hayes next addressed a question that had arisen at the last group meeting concerning the time period over which the City is funding the unfunded liability . Per the State statutes, we are supposed to fund it over 27 years from January 1, 1982, and the City is doing that. One of the members brought up the question, shouldn't that be funded already . Basically the answer to that is , no . The plan never provided for any advance payment of those benefits, only scheduled payment of those benefits upon each of your retirements. There is no reason for the City to fund for benefits that is doesn't provide, only for benefits that it does provide . A point was made that the City, rather than the membership, would potentially reap the benefits of improved performance of the pension fund investments in narrowing that liability gap . If no unfunded liability existed, then improved investment performance might allow for increased plan benefits . Ms. Hayes explained that the City has been funding the unfunded liability a bit faster than the 27 years from 1982 that are required by State statutes. Mr. Edison suggested the City contributing $100,000 as an on going agreement regardless of how the fund performs. Ms. Hayes stated that in 1990 and 1991, the City contributed $158,456 for the normal costs and $174 ,894 for the unfunded liability for a total annual contribution of $333,250 . Mr. Olson reminded everyone that there are other changes affecting the fund. Life expectancy projections tend to go up (in small increments, but they are going up), as well as rates of pay. The one constant tends to be the 7 .5% estimate for annual investment earnings . This could fluctuate considerably; this year it has been less than that by quite a bit. Last year it was way above it. Mr. Resley reminded membership that the City is not obligated for X amount of dollars. They are obligated for the promised benefits only . If the fund improves, it is not the result of what the City has done, it is just the unfunded liability being decreased. Funding is not a set amount, it varies as the fund does . We could not rightfully say just because the fund does well, we should take it away from the City . That's not the way it is set up. Ms Hayes stated that the City was putting in over 28%, which is a lot more than it is putting into other pension funds. When we get closer to full funding there will be more room to talk about changes and increased benefits . The Non-Emergency Plan for general employees, doesn't have any escalator clauses, but they are almost fully funded right now , and last year they adopted a cost of living increase for the first time in eight years. Part of the reason they were able to do that is that they are in physically good condition . Ms . Hayes said that we had covered the issues raised at the last meeting. She offered to entertain questions about the plan or liability of the funding . The question was raised whether the liability partially included the situation with the Sheridan volunteers . Ms . Hayes gave a synopsis of what has transpired with Sheridan: The Board sent an offer to Sheridan saying that we believe that State statutes do not require us pay the pe nsions of any of the volunteers that have not already retired with us, except for one person . Because Sheridan does have six volunteers who previously volunteered for Englewood , in the spirit of cooperation and doing what is best for the firefighters , we would like to offer to pay you $51,289 for their future benefit obligations . That offer is on the table . Sheridan initially requested all the assets of the volunteer pl a n, which is substantially more than the $51 ,289. We put quite a bit of information into the letter saying we didn't think that we owed them anything. If they do accept this offer, then the statutes allow that any excess amounts in the volunteer plan are available to fund the unfunded liability of the Old Hire Plan. It would be good for the plan if we could get this settled with Sheridan . Ms . Hayes mentioned the nominations for the Board. Loren Ward's term on the Board expires 12/31/92 . Mike Gruninger and Loren Ward were nominated for the next term. Ballots will be sent out some time this month or next, to be completed and returned by the end of the year. Surveys on expanded retirement pay-out options were sent out based on interest apparent at April's meeting. Four surveys were returned . Of those, three preferred no change. The board will have to consider this at the next meeting , but it seems that there is just not that much interest in c hanging it. If members felt that not to be the case , they were encouraged to let the board know . Concern was stated over the possibly of these options affecting the unfunded liability. The options are all calculated to be actuarially equivalent. The confusion with the wording of the term first class or third class firefighters that was mentioned . Mr. Olson suggested that this be handled internally by changing City classifications to correspond with the State statute's wording . Interest was expressed for changing the plan benefits to include a cost of living increase and medical benefits if the Sheridan volunteer issue were settled and/or if the fund were actuarially sound . Ms Hayes stated that the board discussed during its last two meetings that these issues be considered when the next actuarial report is completed. Mr. Olson commented that the consensus from everybody was to spend the money to study these issues, then there was not a problem , but the board had received criticism before for spending money on studies . The cost comes directly out of tl1e fund . He stated everybody has to realize that adding a COLA will increase the unfunded liability again. The City will be in the position of funding a substantial portion of it, if our earnings are not doing tllat. We can look at it and see what would happen. The consensus was that members present would be willing to increase their contribution rates from 5% of covered earnings to 6 or 8% if this would bolster their fund and possibly enable assistance with paying health insurance after retirement. Ms. Hayes commented that increasing employee contributions would make your package much more attractive to City Council. Right now old hire fire and police have a 5% contribution and all the other employees have 7 or 8%. That would be something that Council considers . Mr. Edison mentioned that most members think medical benefits are very important and worth looking into. Mr. Olson asked that the board address it at the next regular meeting . He also recommended that tllose members who have not seen the alternative pay-out options review. These are actuarially adjusted so their adoption would not impact the fund . Ms. Hayes reminded the membership tllat the board meets every quarter, on the second Thursday of the quarter at 3 :00 p .m. The next meeting is January 14th. We meet upstairs in the Fire conference room. One of the tilings we did at our last meeting was talk about affiliation with FPPA . The old hire police are interested in looking at that and so we thought we might share tile information with this board as well in case there is interest here. Basically what that me ans is that FPPA would take over administration of plan . We would have an election to opt in or not ; if the election fails , we could never try to affiliate again. Ifit passed then your plan would be affiliated witll FPPA and there would be another election process where each person in the plan would make his own designation as to whether he wanted to stay with the benefits of the current plan or go with the FPPA plan benefits . which are the same as those the new hires have . If you are affiliated , FPPA would do a study and would tell us how much money we had to pay over to them to fund the current plan to get your accounts started in the FPPA new hire plan. The advantages of going with FPPA are that they have an option where you can purchase health, life and dental insurance at group rates . They also offer Special Retire ment Accounts, and so if the 8% that you would have to contribute under the FPPA plan and 8% that the City contributes under the FPPA plan is ever more than enough to fund the plan, the excess amount can go into a special separate account for you. FPPA said that at this point of the valuation that it is not that likely that would happen, but theoretically it could happen . FPPA would assume all the check writing, all of the accounting, all of actuarial studies, and all other administration of the plan . Potential drawbacks of affiliating include the actuarial evaluation that they do at the outset of the affiliation process . The current plan would have to fully fund any unfund ed liability before affiliating . Participants would also be required to contribute 3% more than they do under the current plan. Another drawbacks is the age of retirement. Members would have to work until age fifty-five before reaching eligibility for retirement. Affiliation with FPPA is permanent. It is a money purchase plan, so this could be a benefit or a drawback depending on the economy. Unlike the current plan, there is no guarantee of future benefit amounts. You and the City each contribute 8% of your pensionable earnings to the plan . Your future retirement payments depend on how well the invested contributions do. We have only one chance to elect to affiliate with FPPA , but there is no deadline as to when we could make decision . It can be done at any point. Ms . Hayes discussed the procedures for affiliating. Mr. Olson encouraged everyone to talk to with the other membership to get support for the costs of studying the plan options and changes previously discussed. He emphasized that the board needed their input. Meeting was adjourned 8:00 p.m . Respectfully submitted, ww~ Carol Wescoat, Administrative Assistant II Department of Financial Services