HomeMy WebLinkAbout1997 08 25 Regular Item H
COMMISSION AGENDA
ITEM
H
REGULAR X
CONSENT
INFORMATIONAL
August 25. 1997
Meeting
MGR. ~
I
Authorization
REQUEST: The City Manager is requesting the City Commission discuss alternative
improvements to the City's Pension Plan
PURPOSE: The purpose of this Agenda Item is to have the Commission discuss pension plan
options and select an option for FY 97-98.
CONSIDERATION:
The Commission has directed the City Manager to provide retirement
improvement options for the Commission to consider.
These options are contained on the attached schedule, with one exception. The
Consultant is developing another alternative that I will provide to you during my
one-on-one meeting with you.
ISSUE ANALYSIS:
The Commission will need to decide the following issues:
1. Plan Design:
I
Does the Commission desire to make any amendments to the recommended plan
design features.
2. Number of Pension Plans:
Does the Commission desire to have:
a) One unified pension plan covering all employees?
b) A combined police and fire plan and a plan for all other employees?
c) Separate police and fire pension plans, and a plan for all other employees?
3. State vs. Local Law Police and Fire Plans:
If the Commission desires to have separate police and fire pension plans, does it desire
to:
a) Adopt the F.S. 175/185 State Plans, or
b) The F.S. 175/185 local law plans
4. Plan Types:
Does the Commission desire to continue the defined contribution plan, or
Does the Commission desire to adopt the defined benefit plan, or
Does the Commission desire to adopt the Floor Off Set Plan?
5. If the Commission desires to have separate police and fire local law pension plans, which
payment methods does it desire to choose:
a) One time contribution
b) 10 year amortization
c) 40 year amortization
6. If the Commission desires to adopt the Defined Benefit Plan or Floor Offset Plan, which
payment method does the Commission desire to choose:
a) The one time contribution plan
b) The 10 year amortization plan
c) The 40 year amortization plan
7. If the Commission desires to maintain the Defined Contribution Plan, does the Commission
desire to :
a) Maintain the current 7% City and 1% employee contribution, or
b) Increase the contribution to 8% City and 2% employee
RECOMMENDATION:
Police Department Recommendation:
Favored the Local Law Plan for the early
retirement and disability benefits.
Fire Department Recommendation:
Favored the Local Law Plan for the early
retirement and disability benefits.
Other Employees and Department Heads: Favored the Floor Offset Plan but desired
early retirement and disability offered to
police and fire.
CITY MANAGER REcOMMENDA nONS:
1) Adopt the Plan Design Features on page 1.
2) Adopt a Unified City Floor Offset Plan with a 30 year max, giving all employees early
retirement at age 55 with 10 years service and disability coverage.
3) If the Commission desires to have separate police and fire local law pension plans, it
is recommended that the pension committee be a combined police and fire pension plan;
for all other employees, it is recommended that the Floor Offset Plan with a 30 year max
be implemented with the early retirement and disability benefits, provided to police and
fire.
4) Authorize the City Manager to employ a competent attorney specializing in retirement
plans to draft a new set of pension documents, reflecting the new provisions approved by
the Commission.
5) Continue administration of the plan with Sun Trust until next year in order to
facilitate the immediate implementation of a new plan. Authorize the City
Manager to employ a competent consultant during FY 97-98 to prepare and
evaluate the results of an R.F.P. for plan administration and money management
services for the new plan.
IMPLEMENTATION SCHEDULE:
ATTACHMENTS:
Schedule pages 1-8
COMMISSION ACTION:
PLAN DESIGN ENHANCEMENTS
NEW
CURRENT
Vesting
Vesting
Vesting
Vesting
Vesting
Vesting
Vesting
Vesting
Vesting
Vesting
Vesting
7 Years
1 year - 0%
2 years - 0%
3 years - 20%
4 years - 40%
5 years - 60%
6 years - 80%
7 years - 100%
10 years
1 year - 0%
2 years - 0%
3 years - 0%
4 years - 40%
5 years - 50%
6 years - 60%
7 years - 70%
8 years - 80%
9 years - 90%
Waiting Period
6 months
1 year +
Plan Entry Date
First day of month
after 6 months of Service
First day of month
after 1 year of Service
Normal Retirement
Age 65
Age 65
Early Retirement
Age 55 - 10 years
Service actuarial reduction
None
Prior Service
Unlimited Governmental
Service at actuarial rate
None
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BASIC TYPES OF PENSION PLANS
I. DEFINED BENEFIT PLAN
A defined benefit plan is a retirement plan "other than an individual account plan." In other words, a plan that is not a defined contribution plan is classified as a
defined benefit plan. Under a defined benefit plan, retirement benefits must be definitely determinable. For example, a plan that entitles a participant to a monthly
pension for life equal to 3% percent of yearly compensation is a defined benefit plan.
If a plan is categorized as a defined benefit plan it has the following basic components:
I. plan formulas are geared to retirement benefits and not to contributions.
2. the annual contribution is usually actuarially detennined.
3. early tennination of the plan is subject to special rules.
4. forfeitures reduce the organization's cost of providing retirement benefits.
II. DEFINED CONTRIBUTION PLAN
A defined contribution plan is a retirement plan that "provides for an individual account for each participant and for benefits based solely upon the amount contributed
to the participant's account", Any income, expenses, gains and losses, and any forfeitures of accounts of participants may be allocated to such participant's
accounts.
If a plan is categorized as a defined contribution plan, it has the following basic components:
I. plan contributions are detennined by formula and not by actuarial requirements.
2. planeamings and losses are allocated to each participant's account and do not affect the organization's retirement plan costs.
III. FLOOR OFFSET PLAN:
A floor-offset plan is a hybrid arrangement in which the employer maintains a defined benefit plan and a defined contribution plan. The benefits provided under the
defined benefit plan will be reduced by the value of the participant's account in the defined contribution plan. In essence, the defined benefit plan provides a
guaranteed floor benefit, but the amount is offset by the benefit provided under the defined contribution plan.
If the value of the participant's account in the defmed contribution plan declines, the participant will be insulated from the risk of investment loss because the full
amount of pension benefits will be received under the defined benefit plan. Altematively, if the value of the participant's account exceeds the amount of the benefit
under the defined benefit plan, the participant will receive benefits exclusively from the defined contribution plan. In other words, the participant has the best of both
worlds; the participant is protected against any risk of adverse investment experience under the defined contribution plan.
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CITY WIDE PLAN
Comparison of Current and Proposed Plan Cost
in Descending Order
PLAN OPTIONS
PAYMENT OPTIONS
BENEFITS
One Time Contribution
One Time
Contribution
Annual
% Payroll
40 Year
Amortization
AN % P.R.
10 Year
Amortization
AN % . P.R.
Proposed Floor Offset - unlimited years 879,894 9.83 11.42 12.51 Greater of 2% Per Year or Value of D.C. Account at age 65.
Proposed Floor Offset - 30 year max 679,555 9.54 10.78 11.61 Greater of 2% Per Year up to 30 Years or Value of D.C. Account
at age 65.
Proposed Floor Offset - 25 year max 566,378 9.32 10.34 11.04 Greater of 2% Per Year Up to 25 Years or Value of D.C. Account
at age 65.
Proposed Defined Benefit - unlimited years 1,091,887 6.77 8.76 10.10 2% Per Year at age 65
Proposed Defined Benefit - 30 year max 736,976 6.02 7.36 8.26 2% Per Year Up to 30 Years at. age 65
Proposed Defined Benefit - 25 year max 491,999 5.48 6.37 6.97 . 2% Per Year Up to 25 Years at age 65
Current Contribution Plan N/A 7.00 7.00 7.00 Value of D.C. Account at age 65
Note: Does not include 1% Employee Contribution
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COMPARISON OF
CITY AND STATE FIRE PLAN
COST TO CITY
PLAN OPTIONS PA YMENT OPTIONS
One Time Contribution
40 Year 10 Year
One Time Annual Amortization Amortization
Contribution % Payroll AN %.P.R. AN % P.R.
Proposed Floor Offset - unlimited years 228,587 9,27 11,24 12,56
Proposed Floor Offset - 30 year max 128,033 8.74 9,85 10.60
Proposed Floor Offset - 25 year max 100,306 8.43 9,30 9.88
Proposed Defined Benefit - unlimited years 326,208 6.04 8,85 10.74
Proposed Defined Benefit - 30 year max 200,618 4,82 6.54 7,71
Proposed Defined Benefit - 25 year max 128,030 4.12 5.96 5.22
Proposed Chapter 175 Local Law Plan. 888,099 7.40 11.90 17.50
Proposed Chapter 175 State Plan. N/A N/A 17,06 N/A
Current Defined Contribution Plan N/A 7.00 7.00 7.00
. Less Insurance Rebate
Note: Does Not Include 1% Employee Contribution
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BENEFITS
Greater of 2% Per Year or Value of D.C, Account at age 65.
Greater of 2% Per Year up to 30 Years or Value of D.C, Account
at age 65.
Greater of 2% Per Year Up to 25 Years or Value of D.C. Account
at age 65,
2% Per Year at age 65.
2% Per Year up to 30 Years at age 65.
2% Per Year up to 25 Years at age 65.
2% Per Year at age 55 plus 10 Years of Service
or 30 Year of se,rvice regardless of age.
2% Per Year at age 55 plus 10 Years of Service
or age 52 and 25 Years of Service.
Value of D.C. Account at age 65
COMPARISON OF
CITY AND STATE POLICE PLAN
COST TO CITY
PLAN OPTIONS PAYMENT OPTIONS BENEFITS
One Time Contribution
40 Year 10 Year
One Time Annual Amortization Amortization
Contribution % Payroll AN %P.R. AN %P.R.
Proposed Floor Offset - unlimited years 118,989 9.32 10.10 10.69 Greater of 2% Per Year or Value of D.C. Account at age 65.
Proposed Floor Offset - 30 year max 85,974 8.94 9.58 10.00 Greater of 2% Per Year up to 30 Years or Value of D.C. Account
at age 65.
Proposed Floor Offset - 25 year max 66,304 8.79 9.28 9.61 Greater of 2% Per Year Up to 25 Years or Value of D.C. Account
at age 65.
Proposed Defined Benefit - unlimited years 185,594 6.21 7.58 8.50 2% Per year at age 65.
Proposed Defined Benefit - 30 year max 121,150 5.32 6.21 6.81 2% Per Year up to 30 Years at age 65.
Proposed Defined Benefit - 25 year max 78,490 4.70 5.28 5.67 2% Per Year up to 25 Years at age 65.
Proposed Chapter 185 Local Law Plan" 423,178 8.10 10.40 13.20 2% per year at age 55 plus 10 years of service
or 30 years of service regardless of age.
Proposed Chapter 185 State Plan" N/A N/A 14.40 N/A 2% per year at age 55 plus 10 years of service
or age 52 and 25 years of service.
Current Defined Contribution Plan N/A 7.00 7.00 7.00 Value of D.C. Account at age 65
. Less Insurance Rebate
Note: Does not include 1% Employee Contribution.
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CITY WIDE PLAN
Comparison of Current and Proposed Plan Cost
in Descending Order
PLAN OPTIONS PA YMENT OPTIONS SUGGESTED PARTICIPATION
One Time Contribution
40 Year 10 Year One Time 40 Year 10 Year
One Time Annual Amortization Amortization Contribution Amortization Amortization
Contribution % Payroll AN % P.R. AN % . P.R. City Employee City Employee City Employee
Proposed Floor Offset - unlimited years 879,894 9.83 11.42 12.51 8.00 1.83 8.00 3.42 8.00 4.51
Proposed Floor Offset - 30 year max 679,555 9.54 10.78 11.61 8.00 1.54 8.00 2.78 8.00 3.61
Proposed Floor Offset - 25 year max 566,378 9.32 10.34 11.04 8.00 1.32 8.00 2.34 8.00 3.04
Proposed Defined Benefit - unlimited years 1,091,887 6.77 8.76 10.10 5.77 1.00 7.76 1.00 8.00 2.10
Proposed Defined Benefit - 30 year max 736,976 6.02 7.36 8.26 5.02 1.00 6.36 1.00 7.26 1.00
Proposed Defined Benefit - 25 year max 491,999 5.48 6.37 6.97 4.48 1.00 5.37 1.00 5.97 1.00
Current Contribution Plan N/A 7.00 7.00 7.00 7.00 1.00 7.00 1.00 7.00 1.00
Note: Does not include 1% Employee Contribution under payment options.
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COMPARISON OF
CITY AND STATE FIRE PLAN
COST TO CITY
PLAN OPTIONS PA YMENT OPTIONS SUGGESTED PARTICIPATION
Qne Time Contribution
40 Year 10 Year One Time 40 Year 10 Year
One Time Annual Amortization Amortization Contribution Amortization Amortization
Contribution % Payroll AN %.P.R. AN % P.R. City Employee City Employee City Employee
Proposed Floor Offset - unlimited years 228,587 9.27 11.24 12.56 8.00 1.27 8.00 3.24 8.00 4.56
Proposed Floor Offset - 30 year max 128,033 8.74 9.85 10.60 7.74 1.00 8.00 1.85 8.00 2.60
Proposed Floor Offset - 25 year max 100,306 8.43 9.30 9.88 7.43 1.00 8.00 1.30 8.00 1.88
Proposed Defined Benefit - unlimited years 326,208 6.04 8.85 10.74 5.04 . 1.00 7.85 1.00 8.00 2.74
Proposed Defined Benefit - 30 year max 200,618 4.82 6.54 7.71 3.82 1.00 5.54 1.00 6.71 1.00
Proposed Defined Benefit - 25 year max 128,030 4.12 5.96 5.22 3.12 1.00 4.96 1.00 4.22 1.00
Proposed Chapter 175 Local Law Plan" 888,099 7.40 11.90 17.50 6.40 1.00 8.00 3.90 8.00 9.50
Proposed Chapter 175 State Plan. N/A N/A 17.06 N/A N/A 8.00 9.06 N/A
Current Defined Contribution Plan N/A 7.00 7.00 7.00 7.00 1.00 7.00 1.00 7.00 1.00
" Less Insurance Rebate
Note: Does Not Include 1% Employee Contribution under payment options.
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COMPARISON OF
CITY AND STATE POLICE PLAN
COST OT CITY
PLAN OPTIONS PAYMENT OPTIONS SUGGESTED PARTICIPATION
One Time Contribution
40 Year 10 Year One Time 40 Year 10 Year
One Time Annual Amortization Amortization Contribution Amortization Amortization
Contrlbutlo % Payroll AN %P.R. AN %P.R. City Employee City Employee City Employee
Proposed Floor Offset - unlimited years 118,989 9.32 10.10 10.69 8.00 1.32 8.00 2.10 8.00 2.69
Proposed Floor Offset - 30 year max 85,974 8.94 9.58 10.00 7.94 1.00 8.00 1.58 8.00 2.00
Proposed Floor Offset - 25 year max 66,304 8.79 9.28 9.61 7.79 1.00 8.00 1.28 8.00 1.61
Proposed Defined Benefit - unlimited years 185,594 6.21 7.58 8.50 5.21 1.00 6.58 1.00 7.50 1.00
Proposed Defined Benefit - 30 year max 121,150 5.32 6.21 6.81 4.32 1.00 5.21 1.00 5.81 1.00
Proposed Defined Benefit - 25 year max 78,490 4.70 5.28 5.67 3.70 1.00 4.28 1.00 4.67 1.00
Proposed Chapter 185 Local Law Plan. 423,178 8.10 10.40 13.20 7.10 1.00 8.00 2.40 8.00 5.20
Proposed Chapter 185 State Plan. NJA NJA 14.40 NJA NJA 8.00 6.40 NJA
Current Defined Contribution Plan NJA 7.00 7.00 7.00 7.00 1.00 7.00 1.00 7.00 1.00
. Less Insurance Rebate
Note: Does not include 1% Employee Contribution under payment options.
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