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HomeMy WebLinkAbout2011-11-15 NEERB MINUTES._, • • • NONEMERGENCY EMPLOYEES RETIREMENT BOARD MEETING November 15 , 2011 Chairperson Bowman called the regular meeting of the Englewood NonEmergency Employees Retirement Plan Board to order at 3:02 p.m. in the Public Works Conference Room of the Civic Center, 1000 Englewood Parkway, Englewood, Colorado. Members Present: Members Absent: Others Present: A quorum was present. Gary Bowman, Chairperson, Council Appointee Frank Gryglewicz, Director of Finance and Administrative Services Bradley Hagan, Secretary, Employee Representative John Moore , Council Appointee Mahendra Patel , Employee Representative Jim Woodward , Council Member James Jordan , Council Appointee (notice) Gordon Tewell , Innovest Portfolio Solutions Jerry Huggins , Innovest Portfolio Solutions (arrived at 3:30 p .m.) Joe Herm , Gabriel Roeder Smith and Company Diane Hunt, Gabriel Roeder Smith and Company Daniel Brotzman, City Attorney, City of Englewood (left at 4 : 15 p .m.) Mary Brauer, Reinhart Boener Van Deuren Norris & Reiselbach, PC (left at 4: 15 p.m .) * * * * * Approval of the Minutes of the August 2, 2011 Regular Meeting MR. GRYGLEWICZ MOVED TO APPROVE THE MINUTES OF THE AUGUST 2 , 2011 REGULAR MEETING. MR . PATAL SECONDED. Ayes: Nays: Absent: The motion carried. Bowman, Gryglewicz, Hagan , Moore, Patel , Woodward None Jordan Discussion of Proposed Plan Document Amendments: The Board reviewed the list of thirteen amendments and noted that amendments nine and eleven have been approved by the Board and City Council. The Board agreed that the October 1, 2011 date shown in the amendments will be changed to the date the City Council approves the amendments . a . Mortality Table Amendments Ms. Hunt and Ms . Brauer outlined the basis for amending the 1983 Mortality Tables to the 1994 Mortality Tables. There is precedence for updating the mortality tables by prior amendment to the mortality tables. The Board discussed the use of seven and one half percent as the interest rate , its purpose was clarified and the percentage is based on the long-term nature of Plan investments . MR. GRYGLEWICZ MOVED TO APPROVE AMENDMENTS TO SECTIONS 3-4-2-2.3.a AND b AND 3-4-18- 3 USING THE 1994 MORTALITY TABLE TO MAKE THE PLAN CONSISTENT WITH ACTUARIAL STANDARDS. MR. PATEL SECONDED. Ayes: Nays: Absent: The motion carried . Bowman , Gryglewicz, Hagan , Moore, Patel , Woodward None Jordan b. Beneficiary Amendments The Board reviewed proposed amendments numbered two through eight that are intended to clarify a member's ability to name a non-spouse beneficiary for the pre-retirement death benefit. For married members it is necessary fo~ the spouse to consent to the non-spousal beneficiary for the death benefits . MR. GRYGLEWICZ MOVED TO APPROVE AMENDMENTS TO SECTIONS 3-4-7-5 , 3-4-8-1 , 3-4-8-7 , 3-4-9- 1, 3-4-9-2 , 3-4-9-3 and 3-4-9-5 TO CLARIFY THE LANGUAGE ALLOWING A MEMBER, DEFERRED VESTED MEMBER OR DISABLED MEMBER TO DESIGNATE THEIR BENEFICIARY OF CHOICE AND REQUIRE SPOUSAL W AIYER IF MARRIED . MR. WOODWARD SECONDED. Ayes: Nays: Absent: The motion carried . Bowman , Gryglewicz, Hagan, Moore , Patel , Woodward None Jordan . . • Ms . Brauer explained the amendment to change the wording "Accrued Pension" to "Accrued Benefit" is necessary because Accrued Pension is not defined in the Plan document. She said the wording change from Accrued Pension to Accrued Benefit in section 3-4-14-2 is need ed to facilitate changes to the actuarial assumptions . The purpose of the amendment is to eliminate any ambiguous language, state there is a protected benefit for all members of the Plan and clarify that the normal form of benefit is ten year certain and lifetime. The alternate forms of payments may fluctuate in value based on the actuarial assumptions, but every member 's benefit is equal to the ten year certain and lifetime benefit and this normal form of benefit wi II not be reduced due to changes of actuarial assumptions. Ms. • Hunt agreed with the change because the term Accrued Pension is not defined and the change is consistent with the way the Plan has historically been administered. Ms. Hunt said it is a good housekeeping amendment to adopt. MR. GRYGLEWICZ MOVED TO APPROVE AN AMENDMENT TO .SECTION 3-4-14-2 REPLACING THE TERM "ACCRUED PENSION" TO "ACCRUED BENEFIT." MR. PATEL SECONDED . Ayes: Nays: Absent: The motion carried. Bowman, Gryglewicz, Hagan, Moore , Patel , Woodward None Jordan The Board reviewed amendment number ten . It is intended to clarify rules for members rejoining the Plan after transferring money to the money purchase plan . Members rejoining the Plan will not be allowed to transfer or repay the funds from the defined contribution plan to purchase service credits. All members who rejoin the Plan after a break in service and receive a distribution of their accrued cash value of benefit begin accruing service credits from the point they reenter the Plan. Members rejoining after a period of more than five years since leaving the NERP are required to vest by earning five years of service credits from the point the member .rejoins the Plan . Members returning to the Plan with les s than a five year br~ak are not required to start the five year vestin~ requirement again : I. j MR. GRYGLEWlCZ MOVED TO APPROVE AN AMENDMENT TO SECTION 3-4-18-2 DEFINING A MEMBER WILL NOT REPAY PREVIOUSLY DISTRIBUTED FUNDS UPON REJOINING THE PLAN AFTER A BREAK OF FIVE YEARS AND WILL BEGIN ACCRUING SERVICE CREDITS AT THE POINT Of.RE- ENTRY TO THE PLAN. IF THE BREAK OF PLAN PARTICIPATION IS MORE THAN FIVE YEARS , THE MEMBER WILL BE REQUIRED TO COMPLETE A FIVE YEAR VESTING PERIOD TO RECEIVE BENEFITS AT RETIREMENT FROM THE NERP . MR. WOODWARD SECONDED . NonEmergency Emp loyees Ret ire men t Boa rd Meeting 2 of6 • .. • • • Ayes: Nays : Absent: The motion carried. Bowman, Gryglewicz, Hagan, Moore, Patel , Woodward None Jordan i. Beneficiary change form discussion Ms. Wescoat explained that the Board had discussed the revised beneficiary form prepared by Ms . Brauer at the last meeting. The Board has not approved the new form. The Board agreed to postp·one approving a revised beneficiary form until all amendments related to employee contributions are completed. c. Mandatory Employee Three Percent Contribution Issues The Board discussed issues related to requiring a three percent employee contribution to the Plan . Ms . Brauer reviewed the issues listed in the memo that must be considered when setting rules for the Plan when requiring a three percent employee contribution. Definition of Compensation . The Board reviewed the definition of compensation to determine if changes are required . Mr. Hagan stated that the definition should be the same as what is currently used for benefit calculations. Ms . Hunt said it is consistent with what is used for benefit calculations. Ms . Wescoat clarified that examples considered "extra pay", include standby pay, premium pay, and call back pay. The various forms of pay are subject to being renamed by Human Resources, but will not change their status as "extra pay." The base pay includes only what is paid for a typical 40 hour work week. Ms. Brauer asked for clarification ifthe contribution would apply to each payroll period or does it apply to the calendar year compensation because there might be variations. Payroll is scheduled every two weeks. Ms . Wescoat requested that the Plan specify retro pay be only for the 36 consecutive months used for the benefit calculation. Any retro pay for prior years shall not be included for the benefit calculation to prevent inflating · compensation for the year. Interest Rate . The Board must determine if interest will be paid on mandatory contributions when an employee leaves employment prior to vesting. If interest is paid, will the rate vary from year-to-year or be fixed. Ms. Wescoat suggested a fixed interest rate be set because a variable rate will be very complicated to track in the payroll system. Ms. Hunt said it is unusual to not provide some minimal interest rate , however there are counties that have provided a generous interest rate but they are reducing the rate. Since the contributions are mandatory it provides an employee some return given the Plan has held the money for a period of time. This will generally only affect people with less than five years of service. Ms. Hunt said the rate should be defined, but it is possible to change the rate. Discussion ensued relating to other circumstances that would be considered involving a calculated interest return to insure that the benefit the recipient receives is more than the · accumulated contributions plus interest. Tax Law Requirements for Pre-Tax Contributions. Ms. Brauer would like the contributions to be considered as "pickup" contributions to allow the contributions to be on a pre-tax basis. She requested confirmation that the optional NonEmergency Employee Money Purchase Plan (NEMP) has the same three percent employee contribution rate. Ms. Brauer's concern is providing employees a choice of two plans , one with a mandatory contribution and one without. Her concern is the IRS may see that choice as saying the Plan's contribution is not mandatory and will not allow the pickup contribution to be pre-tax. Ms. Wescoat confirmed the current mandatory contribution rate to the NEMP Is three percent. Ms. Brauer suggested the Board be aware that although current contribution rates will be the same for the NERP and the NEMP, if one Plan makes changes in the future, the IRS may determine that it no longer is a mandatory contribution and would · not allow it to be a pickup provision. I . NonEme rgenc y Employe es Retirement Board Meeting 3 of6 · Ms. Wescoat said that at the point when the NEMP became an option for NERP employees, the NEMP had . a three percent mandatory employee contribution and the NERP none. Since that time the two Plan~, . . . contributions have differed. Ms . Brauer commented that adding the employee contribution will bring, parity to the Plans. .. ,; •l Death Benefits . Ms . Brauer queried the Board ifthe Plan will guarantee ifthe minimum accumulation of the contributions and interest, if any, will exceed total benefits paid to the recipient. Disc.ussion foll<;>~ed . ipdicfll~g that in the scenario where benefits paid are less than accumulated contributions and interest; a lump sum is typically,di.stributed to the estate to compensate for the differenc\?,. _Ms ,,Bn1m:r: also aske<;I the Board to , determine if amounts will be paid in a lump sum to make up the differeni::~ orjf.it will t?e pai~ over a period of. time. Additional discussions followed regarding the forms that may b,~, necessary to clarify the beneficiary of the accumulated contributions. "· Payment Options Upon Termination of Employment. Ms . Brauer reviewed the option of providing a refund of contribut~ons for employees who do not vest. Ms. Wescoat commented about the need to be flexible on the Plan's required: date for disbursement of , . eontribiition~ to a former employee. She gave an example of a former employee who terminated employment during March 20 I I and is still in the process of applying for long term disability . Ms. Brauer said there wi ll be more discussions regarding long term disability issues as it relates to the Plan. Ms. Brauer requested the Board determine if vested employees will be able to withdraw contributions and forego ·henefits from the Plan . • Timing of payment of lump sum payouts . Ms. Brauer explained the distribution variables when contribution amounts exceed $1,000 or $5,000 and the required guide lin es according to federal law that may be necessary to consider for distribution and the likelihood that forms must be created for processing the distribution. If the Plan requires distribution of amounts less than $5,000, the Plan must provide for a rollover to an IRA with specific types of investments. Ms . Brauer said if the Board requires distribution of amounts less than $1,000, • there is no requirement to provide IRA rollover accounts. The member is allowed to request the funds go to an IRA Rollover, but the required action typically is only for non-responsive, non-vested Members . If a member has more than the minimum amount subject to IRA rollover , albeit $1,000 or $5,000 and the member does not respond , the Plan must maintain the contributions until the Members Normal Retirement Age. Chairperson Bowman said the items will be added to the next agenda for consideration. Ms. Wescoat requested instructions as to what will be necessary to aid the discussion at the next meeting. Mr. Brotzman said that proposed language be prepared to aid the Board with approving the changes . Ms. Brauer suggested that it would be very confusing to provide optional blanks for each variable. Mr. Moore inquired what issues the Board is undecided on the list and needs additional time to make 'decisions . He suggested agreeing to the issues that can be determined to allow the process to move forward. He suggested that the definition of compensation was right because it is tied to what the benefit calculation uses. On number two , regardin g a rate of interest on contributions to be refunded , he thinks it should be a required at a fixed rate of three and one-half percent. Discussion related to when the Member makes the election of the NERP or NEMP-their ability to leave the Plan during employment and the qualifying circumstances according the Plan document. The Board discussed the issues. i. The Board agreed to a fixed interest rate of three and one-half percent on the refund of contributions and no refund of contribution after vesting unless otherwise provided for in the Plan ; an example would be as a lump sum death benefit. The members or beneficiaries will receive , at a minimum, the .to tal contributions back in the form of benefit payments. Ms. Wescoat asked for a clear definitiqn of .what Ms . Brauer should be :drafting for the timing of the distributions of the non-vested contributions equal to $1,000 or less . Ms . Brauer said the language will attempt to pro vide flexibility with the administration of the distribution. NonEmergen cy Employees Retire ment Board Meeting 4 of6 • '• . ' • • • Discussion will continue at.the next Board meeting regarding the effect of the employee contributions on disabled members and what amendments may be necessary . ,. ,, Mr. Brotzman, and Ms . Brauer left at 4: 15 p.m. frm<'i vest Portfolio Solutions, L'LC ·1' \. Jl \ { ~ ' , J ". Mr. Huggins revie:wed the performance of.the funds· for the quarter. He also reviewed individual fund' activities , including any funds that are of concern or will be subject to additional scrutiny. The customized benchmark for the quarter and the overall fund return for the year to date were reviewed. The Board had not requested 'a product search for an emerging market equity fund. Innovest recommended :, '· · dedicating three percent of the current twelve percent allocation to international funds to emerging markets . This change will not impact asset classes. Mr. Tewell presented the results of an analysis of three emerging market funds for the Board's consideration . The funds presented for consideration are Virtus Emerging markets Opportunity Fund, Wells Fargo Advantage . _, , Emerging Markets Equity, Dimensional Fund Advisors Emerging Markets . Innovest reco~ends V,irtus Erm:rging Markets Opportunity Fund as a good fit for the allocation. ' The Board discussed the recommendation by lnnovest. MR. MOORE MOVED TO APPROVE TRANSFERRING THREE PERCENT OF THETWELVE PERCENT INTERNATIONAL FUNDS ALLOCATION TO VIRTUS EMERGING MARKETS OPPORTUNITY FUND . MR. GRYGLEWICZ SECONDED. Ayes : Nays: ·Absent: The motion carried. Bowman, Gryglewicz, Hagan, Moore , Patel , Woodward None Jordan Retirement Approvals and Notifications : a. Notification of Retirement Benefit for Michael Norris b . Consideration of Retirement Benefit for Eric Geizen c. Consideration of DROP Benefit for Gilbert Anderson d. Benefit Approval for the Beneficiary of Connie Janney MR. GRYGLEWICZ MOVED TO APPROVE THE ITEMS LISTED ON THE BENEFIT APPROVALS AND NOTIFICATIONS . MR. PATEL SECONDED MR. PATEL SECONDED .. Ayes: Nays: Absent: The motion carried. '.Bowman, Gryglewicz, Hagan , Moore, Patel, Woodward ·None . Joi:dan Discussion of Board Members' Term Limitations ,. ' '.1 ... , t~ <", _ • • 1 I ' Chairperson Bowman stated the voter approved initiative requires term limits be restricted to three terms for Board Membets. He was appointed· by City 1;ounc11l in 1985 and his current term expires January 31 , 2012 .. Be has completed rhany more than three· terms. · . , .... ·:. · The Board discussed possible guidance that may be coming from the City Attorney's office. NonEme rge ncy Employees Retirem ent Board Meeting 5 of 6 Chairperson Bowman determined that he will not apply for another term. The Board thanked Chairperson Bowman for his knowledge and dedicated service to the Board. Member 's Choice The next meeting is scheduled for February 14, 2.012. MR. MOORE MOVED TO ADJOURN. MR. PATEL SECONDED . Ayes : Bowman , Gryglewicz, Hagan , Patel , Moore , Woodward Nays : None Absent: Jordon The motion carried . The Board adjourned at 5 :05 p.m. tkd u )~tkd- carol Wescoat Recording Secretary 6 of 6 NonEmergency Employees Reti re me nt Boa rd Meetin g , . • • •