Fort Walton Beach Council agenda — 01-07-12 retreat — reading text

Packet Pg. 72  42. CITY OF FORT WALTON BEACH MEMORANDUM DATE: December 20, 2011 TO: Bob Meams, City Manager FROM: Brandy Wunker, Finance Director SUBJECT: Pension Plan Changes 1. Backeround 1. 1. The City of Fort Walton Beach has three separate defined benefit pension plans: the Police Officers' Pension Plan, the Firefighters' Pension Plan, and the General Employees' Pension Plan, currently closed to new hires. The Police and Fire Pension Plan' s are administered separately by individual Board of Trustees' as provided by Florida State Statutes. The City Council serves as the Board of Trustees' for the General Employees' Pension Plan. 1. 2. Each Plan has its own unique provisions, a summary of which is included as Attachment A. 1. 3. The decline in the funded ratio, the continued increase in the City' s annual required contribution, and upcoming Governmental Accounting Standards Board GASB) initiated changes that include a future requirement for a liability to be recorded in an amount equal to the Unfunded Actuarial Accrued Liability UAAL), currently $ 18. 6M, have necessitated that the City look closely at modifying the existing Plans. D1 ..... ......... Pension Plane - Funded Ratio 1: 120% _ _... _.... 110% 100% 90% 80% ment ro% , 60% FY FY FY FY FY FY FY FY FY FY FY FY FY 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 General — Pollee — Fire 1. 4. 7. Change to the computation of average annual compensation 1. 4. 8. Elimination of automatic COLA 1. 5. While considering changes to the Plans, the effective date( s) and employee status will need to be considered. These items will have a significant impact on the expected savings to be realized, and may vary, as appropriate. Some of the options arc: Packet Pg. 13  4.2.a 1. 5. 1. Allow change( s) to be effective only for employees who were hired after a certain date ( this will provide for the least amount of savings). 1. 5. 2. Allow changes) to be effective for all employees who are not yet vested in benefits, but no change( s) for those employees who are already vested. 1. 5. 3. Allow the change( s) to be effective immediately, except for those individuals within a certain number of years of retirement. 1. 5. 4. Allow the change( s) to be effective immediately for all employee participants. 1. 6. Changes to the General Employees' Pension Plan may be made by City Council, at its discretion. E 1. 7. Changes to the Firefighters' and Police Officers' Pension Plans will be subject to union negotiations. In addition, the City currently receives a State pension v subsidy provided under F. S. 175 ( for firefighters) and F. S. 185 ( for police officers). a 1. 7. 1. Under this subsidy program, the City Council is bound by extensive c conditions and controls the State of Florida imposes upon local pension plans that accept these monies. a 1. 7. 2. The city currently receives approximately $ 272K annually from the State, which may be an insignificant amount compared to the savings that the City could realize if changes were made to these two Plans, which would necessitate a withdrawal from the State subsidy. 1. 7. 3. It should be noted that changes to Chapters 175 and 185 have been proposed for consideration during the State Legislative Session, which may make it easier for the City to make changes to these Plans. 2. Financial Impact 2. 1. This report does not have a direct financial impact to the City at this time. 3. Recommendation 3. 1. Staff has begun discussions and preliminary analysis of the changes, each of which will require external analysis by the City' s Pension Attorney and/ or Aetuary( s). Staff requests City Council endorsement of exploring the pros and cons of the aforementioned Plan changes. Packet Pg. 14  wJOJaa ueld OOISUOd : BLSN XPleW UOISUQd : IUGW40e11V N( a aa Y Yu aNuN a L mU U L 0 0 Q o d U o 1 V LL LL o 0 d c o m o LL Q m o 0 0 Q o oN i inN s l0 N Qp O y N NN N N th N V N A Q m E ul c c 0 0 Nn 0a f+J U > N do m 0 0 OJ'.K D- C 3NN QQ N O U 0 d a a L Q OE L mN O c c N Q N N N c0 m0)CN I1 0 wTO NNC m N m A 7 E C7 LL m o a5 v E o N Lj E O O a o a d E v Ua Uw 00 N E m o N O 0 6 N mm C y W C N N O N N ti N E E0EE0E Q rn d c d U 0 d0 c x ww UU vv EE m o C Ed °o CyE C y o U E UK a V z LLQ C D: R1vmR1vm LLcdLLc(d( AA fLNNfL U m N ryEm m aZi U m U U