HomeMy WebLinkAbout2003 01 27 Regular H - 1 Pension Plan - Interest Rate Policy
012703 REGULAR H I PENSION PLAN
Page J 0[2
COMMISSION AGENDA
ITEM
H-l
CONSENT
INFORMATIONAL
PUBLIC HEARING
REGULAR X
January 27,2003
Meeting
MG~ IDEPT
Authorization
REQUEST: City Manager requesting the City Commission to reconsider a decision made on
December 9, 2002 related to Regular Agenda item "C" amending the benchmark earnings rate
for employee contributions in the City Pension Plan from the thirty year Treasury to the twenty
year Treasury.
PURPOSE: This agenda item is needed to give the Commission the opportunity to reconsider
its decision on the above referenced interest rate policy based upon new information.
CONSIDERATIONS:
On December 9, 2002 the Commission approved Commissioner Blake's recommendation that
the interest payout on benchmark earnings on employee contributions be changed from the thirty
year treasury securities to twenty year treasury securities based upon its belief that its twenty
year security would be more reflective of reality.
Subsequent review by staff indicates that the Treasury Department discontinued the computation
and publication of 20 year treasury securities rates in December 1986 due to the discontinuance
of the issuance of the twenty year treasury bond,
Staff believes the interest rate applied to employee contribution must be benchmarked against a
credible published benchmark recognized by the financial community. The most often
recognized and published benchmark of earnings is the thirty year treasury and the ten year
treasury, The ten year treasury would actually lower current interest earnings. Based upon this
new information staff is recommending that the Commission reverse and reinstate the thirty year
treasury as the official earnings rate for employee contributions in the City's Pension Plan.
It should be noted that many pension plans do not provide any interest earnings for employee
contributions returned to employees.
012703 REGULAR H I PENSION PLAN
Page 2 of2
FUNDING: Not Applicable.
RECOMMENDATIONS:
It is recommended that the Commission adopt the thirty year treasury rate as the official earning
benchmark for employee contributions in the City's Pension Plan, and that the Pension Plan
Resolution (Number 2002-39) and the Pension Plan Document be amended accordingly.
ATTACHMENTS:
Donald Chapman Email of January 23,2003
COMMISSION ACTION:
Page 1 of 1
Jan Palladino
From: Donald Chapman [dchapma6@tampabay.rr.com]
Sent: Thursday, January 23, 2003 10:41 AM
To: Ron McLemore; Louise Frangoul
Subject: Fw: Treasury 30 yr question
The 20 year treasury was dropped in December 1986. The attached word file gives the history of 30 & 10
year treasury rates.
I still recommend the 30 year treasury.
You can check them out for yourself at:
www.federalreserve.govLreleaseLh 15/update
1/23/2003
Treasury 30 year (go to:
www.federalreserve.gov/release/h15/update)
HO.RIFLGFCY30 N.A:
HO:Historical version 0
R.*:Rate
R.I.*:Rate of interest in money and capital markets
R.I.F,*:Federal Reserve System
R.I.F.L, :Long-term or capital market
R,I.F.L.G, : Government securities
R.I.F.L.G.F, : Federal
R.I.F.L.G.F,C.*:Constant maturity
R,I.F,L.G.F.C.Y30, : Thirty-year
_N, :Not seasonally adjusted
.A:Twelve months ending December
YIELDS ON TREASURY SECURITIES AT CONSTANT, FIXED MATURITY ARE
CONSTRUCTED BY THE TREASURY DEPARTMENT, BASED ON THE MOST
ACTIVELY TRADED MARKETABLE TREASURY SECURITIES. YIELDS ON
THESE ISSUES ARE BASED ON COMPOSITE QUOTES REPORTED BY U.S.
GOVERNMENT SECURITIES DEALERS TO THE FEDERAL RESERVE BANK OF
NEW YORK, TO OBTAIN THE CONSTANT MATURITY YIELDS, PERSONNEL AT
TREASURY CONSTRUCT A YIELD CURVE EACH BUSINESS DAY AND YIELD
VALUES ARE THEN READ FROM THE CURVE AT FIXED MATURITIES.
Released on 01/21/2003
tcm30y
1977 7.75
1978 8.49
1979 9.28
1980 11. 27
1981 13,45
1982 12.76
1983 11.18
1984 12,41
1985 10.79
1986 7.78
1987 8.59
1988 8.96
1989 8.45
1990 8.61
1991 8,14
1992 7.67
1993 6.59
1994 7.37
1995 6,88
1996 6.71
1997 6.61
1998 5,58
1999 5.87
2000 5,94
2001 5.49
2002 5.43
Treasury 20 year
HO.RIFLGFCY20 N.A:
HO:Historical version 0
R.*:Rate
R,I,*:Rate of interest in money and capital markets
R.I.F.*:Federal Reserve System
R.I.F.L. : Long-term or capital market
R.I,F.L.G. : Government securities
R,I,F,L,G.F. : Federal
R,I.F.L.G.F.C.*:Constant maturity
R,I.F.L.G.F,C.Y20, : Twenty-year
_N. :Not seasonally adjusted
.A:Twelve months ending December
COMPUTATION OF THE 20-YEAR CONSTANT MATURITY YIELD
WAS DISCONTINUED BY TREASURY AFTER DECEMBER 1986
BECAUSE THE 20-YEAR BOND WAS NO LONGER BEING ISSUED,
Released on 01/21/2003
hcm20y
1962 3.99
1963 4,05
1964 4.19
1965 4.27
1966 4.77
1967 5,01
1968 5.45
1969 6.32
1970 6.87
1971 6,12
1972 6,01
1973 7.12
1974 8,06
1975 8.20
1976 7,86
1977 7,67
1978 8.48
1979 9,32
1980 11. 36
1981 13.72
1982 12.92
1983 11.34
1984 12.49
1985 10.97
1986 7,84
Treasury 10 year
RIFLGFCY10 N,A:
R.*:Rate
R,I,*:Rate of interest in money and capital markets
R,I.F.*:Federal Reserve System
R.I,F,L, : Long-term or capital market
R.I.F.L.G. : Government securities
R,I.F.L.G.F, : Federal
R,I.F.L.G.F.C.*:Constant maturity
R,I.F.L.G.F.C.Y10. :Ten-year
_N. :Not seasonally adjusted
.A:Twelve months ending December
YIELDS ON TREASURY SECURITIES AT CONSTANT, FIXED MATURITY ARE
CONSTRUCTED BY THE TREASURY DEPARTMENT, BASED ON THE MOST
ACTIVELY TRADED MARKETABLE TREASURY SECURITIES. YIELDS ON
THESE ISSUES ARE BASED ON COMPOSITE QUOTES REPORTED BY U.S.
GOVERNMENT SECURITIES DEALERS TO THE FEDERAL RESERVE BANK OF
NEW YORK. TO OBTAIN THE CONSTANT MATURITY YIELDS, PERSONNEL AT
TREASURY CONSTRUCT A YIELD CURVE EACH BUSINESS DAY AND YIELD
VALUES ARE THEN READ FROM THE CURVE AT FIXED MATURITIES.
Released on 01/21/2003
tcm10y
------
1962 3.95
1963 4.00
1964 4.19
1965 4,28
1966 4.93
1967 5.07
1968 5.64
1969 6,67
1970 7.35
1971 6.16
1972 6.21
1973 6.85
1974 7,56
1975 7.99
1976 7.61
1977 7.42
1978 8,41
1979 9,43
1980 11.43
1981 13,92
1982 13.01
1983 11,10
1984 12.46
1985 10.62
1986 7.67
1987 8,39
1988 8,85
1989 8.49
1990 8.55
1991 7.86
1992 7,01
1993 5.87
1994 7.09
1995 6.57
1996 6.44
1997 6.35
1998 5.26
1999 5,65
2000 6.03
2001 5,02
2002 4.61