HomeMy WebLinkAbout2001 09 24 Regular E Defined Benefit Pension Plan
COMMISSION AGENDA
ITEM E
CONSENT
INFORMATIONAL
PUBLIC HEARING
REGULAR X
09/24/01
Meeting
MGR. ~ . fDEP~
Authorization
REQUEST: It is requested that the City Commission approve the 100% vesting of
the mandatory 3% of employee salary contributions to the pension fund, from date of
contribution.
PURPOSE: This agenda item is offered to request Commission approval of a change
in the administration of the employee Defined Benefit Pension Plan to allow for 100% vesting
of the 3% of salary that each employee contributes to the pension fund, with vesting to be
effective from date of contribution.
CONSIDERATION: On July 24, 2000, the Commission endorsed the results of an
employee referendum, and authorized changes to the employee pension program effective
October 1, 2000. Those changes eliminated the Defined Contribution provisions of the
program in favor of, and continuing with, a Defined Benefit Program only. In addition,
mandatory employee contributions to the Defined Benefit program fund were increase
from 2% of salary to 3%.
Since then, employees have expressed dismay that this 3% contribution is
intermingled with all other funds and not a separate employee asset as in a Defined
Contribution program. In effect, it is essentially "lost" if the employee leaves the city
before it is partly or fully vested under the vesting schedule.
Through the city's pension actuary, staff researched the possibility of a "payout"
provision, similar to that which applies to the 2% of salary that was contributed by
employees up to October 1, 2000. Such a provision would mean an additional .5%
employer contribution, or approximately $25,000 per year, and current budgetary
allowances did not seem to warrant such a step at this time.
September 24, 2001
City Commission Regular Agenda
Item "G"
At no additional cost to employees or the city, however, the 3% can be 100%
vested from date of contribution, thereby assuring a benefit at normal retirement age,
even if the employee leaves city employment before normal vesting can occur.
The Board of Trustees considered these alternatives at its regular meeting of July
31, 2001, and voted to recommend to the Commission that plan provisions allow for
100% vesting of the mandatory 3% employee contribution from date of contribution.
FUNDING: None required.
RECOMMENDATION: Staff and Board of Trustees recommend approval of a change
in the provisions of the Defined Benefit Pension Program to allow for 100% vesting of the
mandatory 3% of salary employee contribution to the pension fund from date of
contribution.
ATTACHMENT: Letter from Donald D. Chapman, Consulting Actuary
Retirement Plan Specialists, Inc.
COMMISSION ACTION:
'. RetirerneJtlt Plan Specialists, I~'
Employee Benefits Administrators & Consultants
eLf: "
2 Lawn Street
P.O. Box 622857
Oviedo, Florida 32762-2857
407-365-3490 (office)
407-366-5154 (fax)
J -8 00-618-1813 (tollfree)
Visit us at www.srturne'fJE,..rr-wlrn1TC"JD)
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June 13, 2001
JUN 1 8 2001
Mr. Ronald W. McLemore, City Manager
City of Winter Springs
1126 East State Road 434
Winter Springs, FL 32708
CITY OF WINTER SPRINGS
City Manager
RE: Defined Benefit Pension Plan and Trust
For Employees of the City of Winter Springs
Dear Mr. McLemore:
As requested, we have calculated the expected increase in employer annual contributions if
the 3% mandatory employee contributions are 100% vested when contributed under the plan.
If the plan is amended to provide a terminated participant with 100% vesting on mandatory
employee contributions, but defer payment until the vested terminated participant reaches
normal retirement age, there should be no change in the annual employer contribution.
However, if the plan permits 100% vesting of mandatory employee contributions payable in a
lump sum at the time of termination, the annual employer contribution as a percentage of total
covered compensation would increase by .5% or $25,000.
Our cost estimates are based on a T-7 turnover assumption and an expected investment
return on the fund of 9%. We will review the actuarial assumptions each year to determine if
changes are appropriate to more accurately reflect the actual experience under the plan.
Please feel free to contact us if you have any questions regarding the valuation report or study.
Donald D. Chapman E.A., M.
Consulting Actuary