Fort Walton Beach Council agenda — 08-22-2007 special agenda — reading text

Managerand/ or Finance Director approval, and it does not need to come back to Council. She asked if Mr. Tierney could come forward to answer the question. 18 Regular Meeting 6- 12- 07 REVIEW OF PENSION PLANS cont. The Mayor also asked Mr. Linn to answer the question on whether they have violated some pension law by not transferring the entire 8% into the Pension Fund. Mike Tierney, Plan Actuary, stated so the Finance Director can finish the presentation, the short answer is there was no violation, the budget amount is not the requirement, it is whatever is in his report and the City can choose to do with it whatever th.ey want as long as it is at least that much. The Finance Director first spoke about what other Cities do and stated there are a lot of Pension Best Practices. She referenced a book called Recommended Practices for state and Local Governments by the Governments Finance Officers Association, the highest authority on good/ best practices for pension funds second to Standard and Poors or any other rating company in regards to what is the best practice for a pension fund. She mentioned the book o says that contributions should be level based on a percentage of payroll, they should be committed to and stuck with over time. The Finance Director then continued with the presentation which reported that City Council, as the Board of Trustees would set 8% or 6% contributions in the Budget document, that City Council was not advised of lower actuals, and the employees received " Employee Benefit Statements" showing 8% or 6%. The Finance Director then went over six recommendations for improvements to the General Employees Pension Plan, as follows: 1. The roles of the City Council as the Board of Trustees vs. the General Employee Pension Plan Advisory Committee should be re- evalucl;ted. a. There should be increased clarificatiQn of responsibilities between City Council as the Board of Trustees and the Advisory Committee. b. There should be a clear differentiation between when City Council is taking action as the Board of Trustees or as City Council. c. City Council should appoint the members of the Advisory Committee. d. City Council should consider increasing the independence of the Advisory Committee. 2. The Advisory Committee membership. should be changed. a. The Finance Director and Human Resource Director should be removed as voting members of the Advisory Committee. b. These members should be replaced with two ( 2) non- employee members who can contribute outside expertise to the Plan. c. Members should be appointed with staggered terms, and should consider term limits. 3. A second- opinion of the Actuarial information should be obtained. a. A- peer-review that includes an experience study and a check of the computer contributions and liabilities should be performed. b. A comparison of the General Employees Plan to other Plans should be performed. c. Periodic independent critique { peer-review} should be performed every five ( 5) years. d. The amortization period used to smooth overpayments or underpayments should be reviewed. Note: A second- opinion of the current Actuarial Valuation has been recommended theby Advisory Committee. 4. City contributions should be fixed and promptly remitted. a. City contributions to the Plan should be set and remitted based on a percentage of active member payroll. b. The City contribution rate should be set on a long- term basis. A stable contribution rate should be designed to fairly allocate ( accrue) pension costs across several years. c. City contributions should be directed to investment without haste, preferably on a bi- weekly basis ( 26 times per year). d. The Plan should take measures to reduce the volatility of City contributions. e. Changes in the City contribution rate should be recommended by the Advisory Committee and require specific approval by the Board of Trustees.  19 Regulai' Meeting 6~12- 07 REVIEW OF PENSION PLANS cont. Tn.e Finance Director continued with the recommendations: 5. . The Plan should retain professional experts who act in a fiduciary capacity. a. . A competitive selection process should be used for all external service providers. b. Cost of services should be reviewed and 'specifically approved by the Board of Trustees. c. The Plan' s current directed brokerage program should be revieWed. 6. Continuing education for the Advisory Committee and/ or Board of Trustees should be made a J priority. . a. Travel to public retirement trustees seminars should be encouraged. She reported as a vision for the future that swift action for change in Advisory Committee and Board of Trustees policy is needed and three years will be needed to see the results of conclusion she reported the General Employees Plan can be improved and change is changes. In needed. Mr. Minich commented that the Finance Director had commented three weeks ago the report was done and wished. to know why it was not turned in to anyone but staff until last Friday after the agenda was distributed. The Finance Director stated the reasons were she wanted to go over all the recommendations she was making with the Pension Plan Attorney 'and the external auditors before she proceeded to make sure they blessed off on what she was proposed. She stated she did as fast as humanly possible, it was completed as of Friday and she provided it to the City Manager for review and when the City Manager did not get back to her on Monday she went ahead and sent it out because she did not want to wait any longer. Mr. Minich asked if the briefing was shared with anyone else. The Finance Director replied no. Mr. Minich received confirmation, for the record, that the Finance Director sent it via email to the City Manager around 2: 30 afternoon and sh'e had until Friday 11 :30 Monday to respond, and that is when the Finance Director sent it to Council at 11 : 23 ,a. m. Mr. Minich asked if the Finance Director had consulted with anyone else, any City Councilman, when preparing the report as it was said that Mr. Miller pointed something out her. The Finance Director replied that Mr. Miller, on his own behalf, looked at the Pension minutes and pointed out there was a period of time where the City Manager had been sitting on the Board and reporting to the Board. Mr. Miller stated as a matter of-record he asked the City Clerk for a list of information about the pension funds going back to November 2006 and she provided that information to him and in reviewing that it came to his attention. Mr. Garvie wished to know where the 19% contribution came about. The Finance Director replied that amount is the required actuarial contribution, ARC, which is expressed in the annual actuarial valuation each year. Mr. Garvie received confirmation that in the past prior to the 19% figure that the actuarial provided numbers lower than the 6% or 8% then all of a sudden it jumped to 19%. Dr. Pullen asked if there were anything that would prevent the Finance Director from talking with individual Council members whenever she wanted. The Finance Director deferred comment on the question. Dr. Pullen asked if the reports were given to the employees that the City had contributed more to their retirement than what was actually given. The Finance Director replied in the affirmative. Dr. Pullen commented then that the employees were led to expect something that was never there. J The Finance Director explained a report goes out to the employees in January that is penned by the Human Resource Director that gives an explanation of the employee benefits and the cost to the City for that year. She described a situation where an employee buying back service in the Plan had brought to her his statements which did not make sense, which caused her to stumble into the past history. Dr. Pullen stated he was briefed on it yesterday afternoon at 4:00 for the first time. Mr. Reeves commented there are some legitimate things that might be reasonable to make changes' to, that there is a $ 1. 6 million shortfall and possibly $ 1. 8 million next year and possibJy $ 2 million past that and something needs to change because it is a burden on the City. 20 Regular Meeting 6- 12- 07 RECESS The meeting recessed at 9: 20 p. m. RECONVENE The meeting reconvened at 9: 30 p. m. REVIEW OF PENSION PLANS cont. Mr. Garvie wished to know if the fund would be better off if it was