HomeMy WebLinkAbout2005-10-11 General employees pension board workshop City Commission Meeting Agenda Packet AGENDA
DANIA BEACH CITY COMMISSION
GENERAL EMPLOYEES PENSION BOARD WORKSHOP
TUESDAY, OCTOBER 11, 2005 - 5:00 P.M.
ANY PERSON WHO DECIDES TO APPEAL ANY DECISION MADE WITH REGARD TO ANY MATTER CONSIDERED AT THIS
MEETING OR HEARING WILL NEED A RECORD OF THE PROCEEDINGS, AND FOR SUCH PURPOSE MAY NEED TO ENSURE
THAT A VERBATIM RECORD OF THE PROCEEDINGS IS MADE WHICH RECORD INCLUDES THE TESTIMONY AND EVIDENCE
UPON WHICH THE APPEAL IS TO BE BASED,
LOBBYIST REGISTRATION REQUIRED-REGISTRATION AS A LOBBYIST IN THE CITY OF DANIA BEACH IS REQUIRED IF ANY
PERSON,FIRM OR CORPORATION IS BEING PAID TO LOBBY THE COMMISSION ON ANY PETITION OR ISSUE PURSUANT TO
ORDINANCE NO. 01-93. REGISTRATION FORMS ARE AVAILABLE IN THE CITY CLERK'S OFFICE IN THE ADMINISTRATION
CENTER.
IN ACCORDANCE WITH THE AMERICANS WITH DISABILITIES ACT, PERSONS NEEDING ASSISTANCE TO PARTICIPATE IN
ANY OF THESE PROCEEDINGS SHOULD CONTACT LOUISE STILSON, CITY CLERK, 100 W. DANIA BEACH BLVD., DANIA
BEACH,FL 33004,(954)924-3622,AT LEAST 48 HOURS PRIOR TO THE MEETING.
IN CONSIDERATION OF OTHERS,WE ASK THAT YOU:
A. PLEASE TURN CELL PHONES OFF,OR PLACE ON VIBRATE. IF YOU MUST MAKE A CALL,PLEASE STEP OUT INTO
THE ATRIUM,IN ORDER NOT TO INTERRUPT THE MEETING.
B. IF YOU MUST SPEAK TO SOMEONE IN THE AUDIENCE,PLEASE SPEAK SOFTLY OR GO OUT INTO THE ATRIUM, IN
ORDER NOT TO INTERRUPT THE MEETING.
1. Call to Order
2. Roll Call
3. Discussion of Recommended Changes to the General Employees Retirement System
4. Adjournment
CITY OF DANIA BEACH, FL
GENERAL EMPLOYEES
RETIREMENT FLAN
September 26, 2005
f
Mr. Ivan Pato, City-Manager
City of DaniOeachz
100 W. Dania Beach Blvd.
Dania Beach,FlAiO04
Dear Mr. Patio:
The attached report of recommended changes to the General Employees Retirement
System was approved by the Board of Trustees at their meeting on September 16, 2005.
The Trustees would like to discuss this with you and the City Commission. Please place
this item on the agenda for the next convenient Commission Workshop for review and
consideration.
You may direct any questions regarding presentation of this report to me at the address
below or to Chuck Cook, Chairman of the Board of Trustees.
Xab
ee
Administrative anager
Cc: C. Cook, Chairman
Louise Stilson, City Clerk
3210 NW 120 Way,Sunrise,Fl.33323
Phone(954)748-0077 FAX(954)748-0082 e-mail: mjabalee@ci.dania-beach.fl,as
GABRIEL., ROEDER, SMITH & COMPANY
Consultants&Actuaries
301 East Las Qlas Blvd.•Suite 200 o Ft.Lauderdale, FL 33301-2254 o 954-527-1616•FAX 954-525-0083
September 22, 2005
Ms. Marie Jabalee
Dania Beach General Employees
Retirement System
3210 N.W. 120 Way
Sunrise, Florida 33323
Re: Changes Recommended by Board of Trustees
Dear Marie:
As requested by the Board, we have prepared this Report discussing changes recommended by
the Board at its meeting of September 16'h. Recommended changes are as follows:
➢ For those who will be hired after passage of an amending ordinance:
-Terminate the 16.08% of pay that the City has been contributing to
the Plan. New hires will contribute 3.66% of pay, the same rate paid
by present members.
- Reduce the multiplier from 3% to 2.5%,
- Raise the normal retirement age from 55 to 62 and do away with
normal retirement at age 50 with 25 years of service.
Use the Entry Age Normal actuarial cost method instead of the
Aggregate method.
16.08% City Contribution
Pursuant to collective bargaining agreements going back at least 12 years, employees agreed to
forego salary increases in return for additional City contributions to the Plan. The current City
contribution under these agreements is 16.08% of each member's pay. This 16.08% is added to
each member's actual pay for purposes of calculating his/her pension benefit. The Board is
recommending that this practice should be terminated for new hires.
Ms. Marie Jabalee
Dania General
September 22, 2005
Page Two
In addition to this collectively-bargained City contribution rate, the City must also contribute the
rate determined by each year's actuarial valuation. For the fiscal year beginning October 1,
2005, this actuarially required rate is 15.33% of payroll. Therefore, the total City contribution rate
is 31.41% of payroll.
multipill
The following table shows the difference in pension as between the present multiplier and the
recommended multiplier. For simplicity, it is assumed in each case that the retiree's three year
average compensation is $4,000 per month:
4 �
8 $ 960 $ 800 17%
10 1,200 1,000 17
15 1,800 1,500 17
20 2,400 2,000 17
25 3,000 2,500 17
30 3,600 3,000 17
The recommended 2.5% multiplier is somewhat less than the multiplier for several other Broward
cities, but the Dania Beach employee contribution rate of 3.66% is also less than other cities.
The multiplier for members of the Florida.Retirement System (FRS) is 1.6%.
Hiaher Retirement Aoe
The Board's recommendation for normal retirement of age 62 with at least eight years of service
is similar to FRS and the earliest Social Security retirement age. There have been 27 Dania
Beach normal or DROP retirees since 1992. The average retirement age has been 60. Eight of
the 27 retired at age 62 or older.
Actuarial Cost Method
The cost method is used to provide a systematic allocation of required contributions to each year.
The cost method provides a way to bridge the gap between plan assets on hand and the value of
benefits that the plan is promising.
Ms. Marie Jabalee
Dania General
September 22, 2005
Page Three
Under the present cost method, the gap is bridged over the future working life of Plan members.
The average number of remaining working years is only about 10 or 11. Each year's difference
between actual and expected plan experience(i.e., the actuarial gain or loss) is spread over these
future working years. Since the number of remaining years is relatively small, there can be large
changes in cost from year to year.
The recommended method is used by the great majorlty of ,public plans, the Qania Beach
Firefighters Plan and FRS. The Entry Age Normal method produces an annual cost consisting of
two pieces. One piece is called the normal cost, which is the cost for service accruing in the
current year. For each Plan member, the normal cost is the level percent of his/her
compensation from age at entry into the Plan to the age of retirement that will completely fund the
Plan's obligations.
The other piece of annual cost is the payment on the unfunded actuarial liability. This liability is
the difference between the Plan's obligation attributable to past service and the Plan's assets.
This difference may be amortized over as long as 30 years.
At October 1, 2004, the Plan's unfunded actuarial liability under the Entry Age method is $3.4
million. The Board recommends 30 year amortization of this liability. The City's required
contribution starting October 1, 2005 would decline by$212,337, or 4.71% of payroll if this change
is made. The reason for the reduction is that the $3.4 million would be paid over 30 years rather
than 10 to 11 years.
Projection of Reguired City Contributions
In our September 16t" meeting with the Board, we reviewed our Special Report that included
projected City contributions. The projection takes into account the three Board recommendations
applicable to new hires (eliminate 16.08% contribution, reduce the .multiplier, raise the normal
retirement age), but does not take into account the recommended change in cost method. The
following table shows some of the results:
k
2006 $4.7 $1.4 30%
2009 5.5 1.3 24
2012 6.4 1.2 19
2015 7.4 1.2 16
2018 8.6 1.3 15
2021 9.4 1.4 15
Ms. Marie Jabalee
Dania General
September 22, 2005
Page Four
As indicated above, the Board's recommendations for new hires would gradually reduce the City's
cost as a percent of payroll by half from about 30% to 15%. The recommended change in
actuarial cost method would further reduce the cost in the first few years by about 5% of payroll,
but the ultimate cost will be about 15% of payroll as shown above.
We welcome your questions and comments.
Sincerely yours,
J. Stephen Palmquist
JSP/or
cc: Bob Sugarman