Fort Walton Beach Council minutes — 06-12-07 regular minutes — reading text

b. The City contribution rate should be set on a long- term basis. A stable contribution rate should I 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.  Regular Meeting 19 6- 12- 07 REVIEW OF PENSION PLANS cont. The 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 provider~. 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 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 changes. In conclusion she reported the General Employees Plan can be improved and change is 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 around 2: 30 Friday afternoon and she had until City Manager 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 Director preparing the report as it was said that Mr. Miller pointed something out to her. The Finance and pointed out there replied that Mr. Miller, on his own behalf, looked at the Pension minutes was a of time where the City Manager had been sitting on the Board and reporting to the Board. period 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 the City had contributed question. Dr. Pullen asked if the reports were given to the employees that 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. the The Finance Director explained a report goes out to the employees in January that is penned by Human Resource Director that gives an explanation of the employee benefits and the cost to the City had for that year. She described a situation where an employee buying back service in the Plan which caused her to stumble into the past brought to her his statements which did not make sense, 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 possibly $ 2 million past that and something needs to change because it is a burden on the City. 20 6- 12- 07 Regular Meeting 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 receiving the 6% or 8% City contribution the same way the employee' s contribution is going in on a two- week basis. The Finance Director replied the City' s portion of the contributions was done quarterly and the recommendation on ..", dollar- cost averaging would average out the risk on investment, and the fund would be better off. Jim Linn, City' s Pension Attorney with Lewis, Longman and Walker, Tallahassee, said he represents approximately 30 Cities and Pension Boards around the State in pension matters. He said he has not had a great opportunity to review the Finance Director' s recommendations; they were sent to him the first time onFriday and the rest of the materials referred to were given to him tonight so he will be unable to comment much on the recommendations. He said, in response to the question asked earlier on whether the City had violated the law by contributing the required contribution amount as opposed to the budgeted amount, that the answer is no. He said what the law required for defined benefit plans is that the City contribute the amount that the actuary determines is required to fund the pension plan on a sound actuarial basis. He said that is in the Constitution of the State, in State Statute, and a number of other Statutes that bear on that and there is simply no basis in law for saying that this City should have contributed more than the required contribution amount. He said some Cities choose to contribute more but in his experience that does not happen very often, and in his experience the Actuary determines the required contribution amount and that is exactly what the City law requires is that that pays. He said different Cities have different ways of contributing but what the contribution amount be contributed during that planned year that it is applicable so that by the end of the planned year the full required amount is contributed. He has not seen or heard anything that has indicated to him that the City has done otherwise. He said the Council needs to look at the problem, as it has been characterized, with the General Pension Plan in context. He said certainly no city likes to look at required pension contributions of 15% or 20%, but he can say there are a lot of cities in the State that are making employee pension contributions of 30%, 40% even 50% of payroll. He said one thing he would urge before taking any action on the recommendations is to have someone take a look at the bigger picture in terms of how the Plan in Fort Walton Beach compares with the universe of Plans out there. He said, to put the General Plan in context which has been characterized as having these problems, he would point out that if they just look at their own Police and Fire Plans and look at the total required contributions for those Plans for this year, the total required contribution for Fire is 25. 7% which is the combined employee/ employer stake, the total required contribution for Police is 23. 9%, the total required contribution for the General Plan is 20. 95%. He said no one likes to see contribution levels even that high but he would urge before taking action on any of the recommendations to look at it in terms of what the other Plans are doing and what other Plans around the state are doing. He concluded by saying that much of what the Finance Director presented to Council has merit, there are things said that are certainly worthy of Council' s consideration, they are ~, i"...'.... policy issues. He said whether Council wants to give more independence, more authority to the .. .. General Pension Board is a policy issue that ultimately Council would decide. He pointed out a lot of things said he could not follow the basis and some of the recommendations, one in particular, would violate the law and because they did not have an opportunity to talk about it in advance of the presentation he was not able to convey that to the Finance Director before he conveyed it to Council. Mr. Minich wished to know how long it would take Mr. Linn, after his review of the recommendations, to come up with his recommendations on the recommendations. Mr. Linn replied two to three weeks.  21 Regular Meeting 6- 12- 07 REVIEW OF PENSION PLANS cont. Mr. Hartwell asked Mr. Linn to enlighten Council on which recommendation is illegal. Mr. Linn replied, based on his understanding on the recommendation that the City needs to have. a fixed contribution amount and needs to stick to that fixed contribution amount, that is really not the way that defined benefit plans work and it is not the way the law works for defined benefit plans. He said a fixed contribution amount is fine if there is a defined contribution plan like a 401 K where the employer decided they will put in 5% and that is it and whatever the employee wants to contribute that is it and then what ever the account value is, that is what the benefit is. He said in a defined benefit plan there is a promise of benefits, there is a formula to get X percent per year and when you retire you can calculate what your benefit is worth. He said