Fort Walton Beach Council agenda — 06-24-08 regular agenda — reading text

determine the effective date of the separation of employment which shall not be later than September 30, 2008 unless specifically approved by the City Manager. 4. Employees who elect and are approved for either incentive program are not eligible for re -hire by the City for 5 years from the date of separation. Early Retirement Incentive Program 1. Members of the General Employees' Retirement Plan who are 52 years of age or older as of June 1, 2008 and have at least 10 years of credited service as of this date would be eligible. 2. Members of the Police Officers Pension Plan who 1) are 50 years of age or older as of June 1, 2008 and have at least 10 years of credited service as of this date or 2) who have 25 years of credited service would be eligible. 3. Members of the Firefighters Pension Plan are not eligible. Those members have a separate incentive program under consideration as part of the collective bargaining agreement. 4. Eligible employees could elect to receive the following based on years of service with the City: a. 10 up to 15 years of credited service 50% of base salary not to exceed $ 15, 000. b. 15 up to 20 years of credited service 50% of base salary not to exceed $ 20, 000. c. 20 up to 30 years of credited service 50% of base salary not to exceed $ 25, 000. d. 30 plus years of credited service 50% of base salary not to exceed $ 30, 000. Voluntary Separation Incentive Program 1. Any full time, regular employee with at least one full year of service would be eligible. 2. Eligible employees would receive one ( 1) week pay for the first year of employment and two ( 2) weeks of pay for each full year of employment thereafter up to a maximum of sixteen ( 16) weeks. Policy Impact 1. Staff estimates a possible cost of $ 274K for the early retirement incentive program plus $ 235K for payment of accrued vacation and sick leave. Estimated payroll savings would be $ 392K. 2. The cost of the voluntary separation incentive program is unknown. 3. Fund balance would be used to fund both programs. 26 of 34 FY 2008 -09 Budget Policy Meeting Recommendation 1. Authorize an Early Retirement Incentive Program as identified above and authorize the City Manager to execute agreements with employees approved and disburse incentive payments in accordance with the program offerings. 2. Authorize a Voluntary Separation Incentive Program as identified above and authorize the City Manager to execute agreements with employees approved and disburse incentive payments in accordance with the program offerings. 27 of 34 Special Council 5- 20--08 143 BUDGET POLICY ISSUES cont. Strategic Plan Goal: Defined Contribution Plan Policy Decision: Should the City offer a defined contribution plan to new General Employees in lieu of a defined benefit plan? The presentation included information that the Defined Benefit Plan pension benefit is calculated based on years of service, the multiplier, and final average compensation; the Defined Contribution Plan pension benefit is a result of investment performance rather than a calculated dollar amount; the General employees contribute 5% of wages, the City is budgeted to contribute 14% of general employees wages in FY 2007 -08; the City expense to the existing plan could be reduced by increasing employee contributions or decreasing the benefit multiplier; and the Police and Fire Pension Plans receive State contributions and cannot have different benefits for new hires. Staff recommendation is to authorize staff to explore the possibility of a General Employees Defined Contribution Plan. During some discussion it was noted there would be the need for an actuary to do a study to help with calculations and will take several months to complete so it may be a mid -year adjustment for the 2008 -09 budget year. Staff will provide an estimate on the cost of a study for Council approval. Kabe Woods, 240 Brooks Street, voiced support of a Defined Contribution Plan and mentioned one of the benefits to the employees is the ability to move their retirement plan as they move through jobs. Mr. Garvie moved to authorize staff to explore the possibility of a General Employees Defined Contribution Plan and how much it would cost to move forward. Mr. Minich seconded motion and it carried unanimously with Holmes, Reeves, Garvie, Pullen, Hartwell, and Minich in favor (Miller absent). RECESS The meeting -recessed .- at 7: 27 p. m. RECONVENE; The meeting-;reconvened at 7:40 p.m. BUDGET POLICY ISSUES cont. Other Issue: Separation Incentives Policy Decision: Should the City offer incentives to encourage employees to voluntarily separate? The presentation included information that in light of property tax reform and declining revenues, it is necessary to reduce personnel costs which account for 53% of total expenses and 74% of General Fund expenses; payroll savings would be derived from a reduction of the salary and associated payroll taxes for a new hire versus the existing employee, reclassification of the position once vacated, or elimination of the position altogether; the early retirement incentive would vary from $ 15K - $ 30K depending on years of service; and the voluntary separation incentive would be 1 week pay for the first year of service and 2 weeks pay for each year thereafter, up to 16 weeks max. Staff recommendation is to authorize an Early Retirement Incentive Program, and authorize a Voluntary Separation Incentive Program. The City Manager mentioned that the City would have complete discretion on who is allowed to go and when they leave and added that they have not targeted any specific employee. She said if this is approved tonight staff will begin the process, and will not bring it back to Council. Mr. Minich moved to authorize an Early Retirement Incentive Program and to authorize a Voluntary Separation Incentive Program. Mr. Garvie seconded motion and it carried unanimously with Holmes, Reeves, Garvie, Pullen, Hartwell, and Minich in favor (Miller absent).  CITY COUNCIL MEETING June 24, 2008 Special Presentation Presentation by Foster & Foster of the Independent Peer Review and Actuarial Experience Study Finance Director) Council Action 1st 2nd Vote: Agenda Item Number: 6  CITY OF FORT WALTON BEACH MEMORANDUM DATE: June 17, 2008 TO: Joyce Shanahan, City Manager FROM: Brandy Wunker, Interim Finance Director SUBJECT: Foster & Foster Independent Peer Review & Actuarial Experience Study Background The City of Fort Walton Beach has three separate pension plans: the Police Officers' Pension Plan, the Firefighters' Pension Plan, and the General Employees' Pension Plan. The Police and Fire Pension Plans 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. The City has retained Actuarial Concepts since 1989 to prepare an annual valuation report on the General Employees' Pension Plan. The Actuarial Valuation presents a statement of the estimated financial position of the Plan. The use of the actuarial valuation is for financial, budgetary, and / or administrative purposes. The Actuarial Valuation provides the estimated liabilities for the benefits The provided by the retirement fund and the contributions required to fund these liabilities. Actuary takes into account the following items when preparing the valuation: The provisions of the plan ( attached) The actuarial assumptions and actuarial cost method (attached) The statement of trust fund assets ( as of 9/ 30/ 07 attached) The member data Finance Officers' Association According to recommended practices by the Government GFOA), the actuarial valuations received should be subject to a peer review at least once every ten ( 10) years. At their August 22, 2007 meeting, City Council approved a recommendation to obtain a second - opinion ( peer review) of the Plan' s actuarial information every five ( 5) years. In response to this direction, Foster & Foster was retained to perform an independent peer review and actuarial experience study for the General Employees' Pension Plan. The results of the peer review are attached. Discussion: Foster & Foster performed their analysis based upon a review of the plan documents, data provided to the Plan actuary, several benefit calculations performed by the Plan actuary, and the last five ( 5) actuarial valuations. Overall, the firm concluded that the data collected for the valuation was complete, the individual benefit calculations were performed appropriately, and Standards of Practice. that the funding requirements were developed according to the Actuarial The firm has recommended revising some of the actuarial assumptions used by the current Plan actuary. The findings of Foster & Foster are summarized below. 1. Salary Scale Assumption — "current salary increase assumptions are somewhat aggressive relative to the actual increase over the last 5 years." The actuary concludes that, based upon historical evidence, there appears to be justification for increasing the salary scale by 1. 0% for each age bracket. The impact of this change would be an additional cost to the City of $128, 302. 2. Investment Return — " the net of fees investment returns during the last 8 years have averaged approximately 6. 4% per year. This is less than the currently assumed 8. 0 %." The actuary recommends that, before a decision is made to adjust this assumption, the advice of the performance / investment advisor is sought. The actuary states that a 0. 25% decrease in this assumption could result in a 2. 5% increase in the City' s funding requirements per year. 3. Turnover Ratio — " the Plan' s non -retirement termination rates have been higher than expected since October 1, 2002." Based on this information, the actuary is proposing changes to this assumption. Depending on the changes made, the City could realize annual cost savings between $ 211K - $372K. 4. Retirement Rates — due to the number of early retirements ( only 13 out of 100