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HomeMy WebLinkAboutPension & Audit Committee April 15, 2014 PENSION & AUDIT COMMISSION CHAMBER COMMITTEE April 15, 2014 PRESENT: Hons. Deke Copenhaver, Mayor; Corey Johnson, Mayor Pro Tem; Wayne Guilfoyle, Finance Committee Chairman; Tameka Allen, Interim Administrator; Donna Williams, Finance Director; Jody Smitherman, Staff Attorney; Nancy Morawski, Deputy Clerk of Commission. Mayor Copenhaver called the meeting to order. 1.Discuss request of Richmond County 1945 retirees for increase in retirement benefits. Mr. Lester Newsome: I’d like to pass out to you a copy of a list of the retirees that we have. On this sheet it gives 22 retirees. Four of those are spouses and anything ya’ll grant to us they get 50% of it. There are four on this list, two of them, four of them were given extra credit for ten years and two of them were given $25,000 each which we never had that given to us. We are asking now. I would be glad to answer any questions. Ms. Williams: I’ve made a list of these retirees that is similar to Mr. Newsome’s list. The ones in yellow are the ones that retired under plan amendments to the existing pension plans at the time of consolidation. The Commission at that time offered what was called an enhanced early retirement benefit. The plans were amended so that employees who had reached a certain age and a certain number of years of service at a particular point in time had from October of 1996 until December 23 of 1996 to take this election to retire at that point. Those that did and met the criteria and made this election were given an additional ten years of service towards their credited benefit calculation. There are six individuals that took that and those are the ones that are highlighted in yellow. Their benefit start date was November to January. There were only those six. This was also done in the 1949 pension plan and I did not compile any of that additional information because the request was geared toward the ’45 plan and that’s the information that I’ve provided. What Mr. Newsome is speaking about about the $25,000, that was offered to department directors on either the city or county side at that time that chose to leave. Those funds were not paid out of pension monies; those were paid out of the general fund. I just need to clarify that. That was a one-time enhanced early retirement amendment that was done to the existing plans at that time. Mr. Newsome’s request on behalf of the 1945 pensioners was for an additional $500 per month for each retiree that did not retire under the enhanced benefit or did not retire after consolidation. There are two that have retired after consolidation and they are listed there in green. So if you took the $500 per month which is $6,000 per year and applied it across the board to the existing retirees, the annual increased cost to this plan and ultimately to the city would be $90,000 per year. Mr. Guilfoyle: I know that we have other retirement packages besides this one. What happens with the other packages if this one moves forward? Ms. Williams: I would expect that you would see a request for the same benefit. I don’t know. Each plan exists on its own and has to be amended separately. If something was done 1 outside the plan which this request is you gave the cost of living increase was done March 1 which was included in the plan document. It allows that to happen but this particular request or anything that is not included in the plan document would require an amendment to the existing plan to be able to do anything that doesn’t already exist within the plans. Mr. Mayor: So this request is to do something now that we did in 1996 – Ms. Williams: It’s a stand-alone request. Mr. Mayor: But to mirror what was given – Ms. Williams: This is a flat increase per retiree. The thing that was done in 1996 was when during budget times lots of times you’ll hear, “What if we offered an early retirement package?” That tends to get bounced around a lot. This was an early retirement package that was offered for a three-month window at the time of consolidation. It has not, this package has not been done since. Ms. Smitherman: With the vote today there wouldn’t be able to be an actual change made today. What the vote would be today would be task legal to get together with our outside pension counsel and to draft an amendment to the plan to implement an increase in the benefit would require us to amend the plan which would then come back in front of you as a change and then you could vote to approve that actual plan change. The one thing that we need to be considerate of is that the funding source, currently I think there is already about $300,000 per year that is being paid into this fund to keep it fully vested. You want to keep all your funds fully funded so that in the event that something were ever to go bad with the government and we were to become a separate entity or whatever, you want your plan separately funded so that the retirees always have their money. This would add an additional approximate $100,000 per year to the $300,000 that you’re already paying. The way the plan is currently written there is not enough funds in the plan the way the plan is currently written to fund this increase. If we were to amend the plan to increase the benefits by another $500 a year, that would increase the debt obligation of the general fund per year by approximately $100,000 a year. Mr. Newsome: Would you repeat that? Ms. Williams: The calculation is about $90,000 per year. That’s just a straight $500 per person drawing benefits excluding those individuals that you requested to be excluded. Mr. Williams: I understand the legal side of it and I appreciate Ms. Smitherman for sharing it. But we got 20 people in this plan, is that how many is left? Ms. Williams: You have 23 drawing benefits and two that have yet to retire that have not yet begun to draw. Mr. Williams: Okay, but I understand the legal ramifications so we can get in line to do this but as far as the city is concerned, you’re saying about $90,000 additional – 2 Ms. Williams: Per year. Ms. Smitherman: Per year that will have to come from the general fund to fund this plan. Mr. Newsome: Is that the ’49 plan? Ms. Smitherman: That’s the ’45. Ms. Williams: That’s the plan you’re under. Mr. Williams: With 20 people left on there will there be an impact out of the general fund or is that a possible impact and that’s what I need to be clear on because you’re talking about being solvent. Ms. Williams: We’re legally required to keep this funded at a certain level by the State of Georgia. We have always been in compliance with that. The second sheet that I passed out that has the two columns, expenses of the plans, the middle part of the sheet says what it takes from the general fund currently to keep this plan as well as the ’49 plan fiscally solvent. Currently it is taking about $229, $300,000 to keep the ’45 plan legally at the level it is required to be funded. It’s about $2 million dollars for the 1949 plan. The GMEBS plan which the rest of the employees are under, it’s about $5.2 million. But there is a large pool of employees that are still active in that plan because the plan is the only open plan. These two plans are closed. Mr. Williams: What’s been in the plan now because it sounds like if we give an increase of the $500, is there no increase that you’re saying, we need to keep this plan exactly as it is because we give an increase, I’m asking, is there any room for anything because what I’m hearing is we need to go back to legal, make sure that we’re doing things in order and come back and vote on it but if we do, we’re going to have to come up with $100,000 for the city’s budget. Ms. Williams: The plan is currently requiring $300,000 per year and that is budgeted. It is in the general fund budget that was adopted for 2014. Any increase to any level of benefits for any plan is going to require additional funds be set aside in your budget to be compliant with the legal level of funding. Mr. Mayor: And the plan would have to be amended. Ms. Williams: And the plan would have to be amended before you did that. Mr. Mayor: If we go down this road with one plan then people in other plans will say we want the same consideration. Ms. Allen: Can you legally exempt the other ones that are highlighted from that increase? Ms. Smitherman: Yes. 3 Ms. Allen: Without any repercussions? Ms. Smitherman: Yes. Ms. Allen: Do we know how many retirees are in the ’49 plan? Ms. Williams: The ’49 plan currently has 198 retirees with 50 active. The GMEBS plan has 393 retirees, 96 that are terminated but vested in the plan and 2,047 active and this was as of June 30, 2013 which was out last actuarial valuation. Mr. Newsome: It was my understanding that we had $6,200,000 or something on that order. Ms. Williams: That is correct, sir. There was $6.4 million as of December 31. We put in an additional $300,000 per year. The cost for the plan on this sheet is about $900,000 so every year just at status quo with no interest calculations or anything fancy there’s about a $600,000 decrease in the assets so if you took that $600,000 and you just divided it into the $6.4 million you’ve got about six and a half years and that doesn’t do anything fancy with investments. It’s just straight math. Mr. Newsome: Our average age now is around 85. How is that going to affect the $6 million dollars if we live three years more. Ms. Williams: The average age may be the 85 but you have still got to pay out for the 63 year old on there, the 63 year old spouse. I’m not arguing. I’m just forced to give the cold hard facts about dollars. Mr. Newsome: We’re not right now married to the $500 each month. We’re at ya’ll’s mercy and trying to help these people. Mr. Mayor: I understand and feel for you completely but if we do it for the ’45 plan and it’s got to be coming out of the general fund at $90,000 a year and then I don’t see how you can tell the people in the ’49 plan that want to be treated the same way, when we made an exception for the ’45 plan but we’re not going to do it for the ’49 plan – Mr. Newsome: But Mr. Mayor, look at the amount of money involved in the ’49 plan and involved in the ’45 plan. How much is it? Ms. Williams: The ’49 plan requires a contribution from the city of $2,000,000 over the additional amount of its investments. It has $68 million dollars but it has -- Mr. Newsome: We have $6 million. Ms. Williams: -- proportionate to the 250 folks that are in it versus the 25 to the $6 million. 4 Mr. Mayor: But what I’m saying is that in good conscience how can you say we’ll do it for you guys and not do it for this plan and the annual economic impact of doing the same type action for the ’49 plan, what would that be coming out of the general fund? Ms. Williams: $1.2 million. Mr. Mayor: So if you did the same thing for both plans, you’re looking at $1.3 million dollars of recurring expense going to, coming out of the general fund yearly and that’s the reality of the situation. Mr. Newsome: What has the members of the ’49 plan requested? Mr. Mayor: They haven’t but we‘ve got the media in the room and I’d say everybody’s phones are going to be ringing pretty quickly. Mr. Williams: How much money does the investment that we’re doing? What does the $6.something million dollars that they’ve got already bring in from whatever investment? Ms. Williams: All the investments are rolled back into the plan. None of that money goes anywhere else. It stays in the plan. For forecasting purposes for what we refer to as the actuarial study, there is forecasted that you earn 8% per year. Now there have been some years notably that the 8% has not been met but this past year as Mr. May reported, it was quite a good year. There was a market recovery from a lot of the investments that were held to kind of offset the tanking out, if you would, in 2008/2009 so the plan has recovered but I don’t have a crystal ball either to know what will happen for the next ten years. It’s forecast for 8% and that’s all rolled into what we are, all those assumptions are rolled into this calculation that tells us what we’re required to pay into the plan on any given year. These actuarial studies that we do every year, we’re only required to do them every two years but we do them every year so that we will have not as big a correction should one be required to the level of contributions that the city needs to budget for. Mr. Newsome: We haven’t had a substantial increase since ’98 and I don’t know about the other plans, what kind of position they are, but I still say we’re at the age of going up or down. Mr. Mayor: The difficult part that we’re in right now is we’re in a very difficult budgetary situation and we’ve been asked to fund the Sheriff’s Department, but as we get into the budget cycle this summer, when our margins are already very thin, there’s not a big will on the commission at this point to increase taxes so we’ve got a deficit to overcome and then we’re going to put the potential for another $1.3 million cost annually so I wish you could view everything independent in and of itself. If we take this action, it has repercussions throughout – Mr. Newsome: We’re looking at the ’45 plan. We don’t care anything about the ’49. Mr. Mayor: But as I say if you’re going to be fair, you’re going to do it for one, I don’t see why – 5 Mr. Newsome: I don’t see why they can’t stand on their own. Oscar Baker used to represent the ’49 plan and he didn’t speak for us and we don’t speak for theirs. Mr. Mayor: But I guarantee you if we do this for the ’45, the ’49 is going to come asking. Mr. Newsome: Well, that’s a decision you’ve got to make. Mr. Mayor: I don’t disagree. Mr. Guilfoyle: If we reflect back when these gentlemen signed up for the ’45 plan, in the documentation was there any variance in there for the cost of living or any wording? I’m just asking because I have not seen the documentation. Was there any variance in the amount of pay, retirement pay that was given in or was it just plain black and white based on your current salary at the time of retirement? Ms. Williams: All the plans to my knowledge have a set level to calculate benefits in which it’s always a function of years of service by a percentage that is specified in the plans. They all allowed for cost of living adjustments and that provision was modified several years ago to make it a lot simpler. It relied on some indexes that were outdated approximately twenty something years ago so we changed, both plans were changed to give the cost of living increase to tie in to, as published by the Bureau of Labor and Statistics which closely mirrors those given by Social Security but anything outside the plan documents that existed at the time has had to be an amendment to each existing plan as anything like this would be also. To answer your question, I’m not aware of any different method of calculations for different people. Mr. Guilfoyle: Last year their pension money did considerably good. Is there anything in writing that fluctuates? Ms. Williams: What is done by the actuary, the guy that computes what it costs, what we have to put in the plan, when the huge market losses from 2008/2009 occurred, he did what is commonly known in the calculations as used a smoothing technique whereas he did not calculate into the cost to the city absorbing the entire amount of that loss in one year. What he did was amortize that loss, I believe he used a 15-year period. He is doing the same thing with the gains and the recoveries so to some degree those are offsetting each other. Otherwise in 2009/2010 instead of contributing $300,000/$400,000 for each plan we may have been putting in $3 to $5 million to offset the decrease in the market. Those are just estimates to try to explain how that smoothing is done. He amortizes it out and it is a common and accepted industry practice and it is legal to smooth those huge fluctuations in the value of assets and try to assure a constant funding stream. Mr. Williams: What happens if we all go up or down today or tomorrow? What happens to those funds then? 6 Ms. Smitherman: Legally the way all of our plans are written is that every single retiree gets back at minimum what they contributed. So if everybody were to go up or down tomorrow and we would do a calculation and anybody who has not already received end benefits which they contributed to the plan, that would go to their estate. But for this particular plan most everybody has gotten what they have contributed to the plan except for the people who are still active obviously who haven’t started to and for the people who retired more recently, if at the time everybody goes up or down and everybody has received all of the funds that they contributed to the plan, the money is returned to the governing authority with specific restrictions on what we can and cannot do with those funds. Mr. Williams: And do you know what those are? Ms. Smitherman: I don’t know them off the top of my head. Mr. Lockett: Donna, I think you mentioned the fact that some of these plans are based on cost of living allowances and I think others indexes. If you make a change, a positive change for one of the plans, is it automatically made for all the other plans? Ms. Williams: No, sir. Each plan stands on its own. Mr. Lockett: So if the formula was changed for one plan that’s going to enhance the quality of the plan for those pensioners, we don’t consider making it for all the other plans and how would the other plans be impacted? Would they have to actually come in and request it? Ms. Williams: The change for the methodology for the cost of living, I brought that forward for all the plans because the methods in these two plans were outdated and in fact sometimes were to the detriment of the retirees. Because of those outdated indexes which we don’t use anymore, there was one year that because of having to use that methodology, the retirees did not get a cost of living whereas social security that year I think got about 5.6%. It was a huge difference. I had recommended making the change one time previously but it was not done but shortly after that very good example of why it was a good idea to do it, we changed to mirroring the index put out by the Bureau of Labor and Statistics for the southeast region and that has worked and as we have followed that, it has more closely mirrored those increases given to other government employees, most notably those on social security. Mr. Johnson: If we can, I understand the bureaucracy in it at this point especially with the budget projection and deficit that we’re facing, I think if we can potentially revisit this after we get this budget worked out, I think it would be an opportunity at that time to see what’s feasible and what’s not. I do know that we need to tie up the budget first before we can see exactly if it’s got to be money coming out the general fund to offset the difference in what we advance it every year. It would make more sense to look at the budget and see what can be done after the fact because depending on what the commission decides to do come July, that would determine – Mr. Mayor: In the budgeting process factor it in and see how it would – 7 Mr. Johnson: Right. Mr. Mayor: -- adjust the numbers. Mr. Johnson: I mean it’s worth a shot to see what we’re looking at and then I think also we can also take into consideration the ’49 act as well and see exactly what is needed to do to that one because it could potentially be – Ms. Williams: We have another plan too. Mr. Johnson: GMEBS. Ms. Williams: We have three plans. Mr. Johnson: But that’s the most recent plan. Ms. Williams: It is. Mr. Johnson: Which we don’t have as many retirees on that. Ms. Williams: We have 393 retirees on GMEBS. Mr. Johnson: On GMEBS? Ms. Williams: Yes, sir. Mr. Mayor: My recommendation would be to take that holistic approach and Ms. Allen? Ms. Allen: No, she was just telling me the numbers for the GMEBS. It would be $5.2 million. Mr. Mayor: It should be holistic because honestly if you do it for one, I don’t see any way that you can’t say you’re not going to do it for everybody else. Mr. Johnson: I think that would be the most suitable approach at this point but I understand his point. He has a very valid point and you look at the others, what they are as far as receiving – Mr. Mayor: Would you like to make a motion to receive this as information? Ms. Williams: We are currently in the process of having the plan valuation done by the actuaries. If this group wanted to provide a couple of scenarios to the actuaries at this time while they’re doing the existing calculations, I would think that they could do some cost estimates for us at no more cost to us than doing the actuarial study that exists whereas by taking something to them later when they have finished the study and asking them to redo their calculations, it might be an incremental cost that would be greater than just having it done now. So if this group had 8 any suggestions on to what levels and for what plans and what group of people needed to be affected, anything like that could be crafted and handed to the actuaries and they could kick out the numbers for the increased costs and whether or not they believe, if it’s a small amount, whether or not it might could be absorbed by the plan. Mr. Guilfoyle: Let’s look at half the face amount, $250. It’s better than and as a matter of fact ask the actuary, because I know this ain’t the first rodeo on this when retirees had asked and requested for. Let’s find alternative ways and let’s look at the original paperwork documentation that they signed to see if there was any wording in there that’s different from the ’49 to this – Ms. Williams: But if the two plans are different, there’s a different level of benefits, there’s a different retirement age, there’s a different everything. They are different plans so each one exists on their own. The only thing that this body would be doing would be attempting to look at increasing a level of benefits concurrently from both plans and it could be calculated but Okay, we can do the $250 per month per retiree on both each one does things differently. plans. The same actuary does the ’49 and the ’45. GMEBS does their own; they contract out and administer that plan. Mr. Mayor: To begin with do the ’49 and ’45. Ms. Williams: Are there any inclusions, exclusions? Mr. Speaker: As requested by the ’45. Mr. Freddie Lott: I don’t quite understand. You said you were going to recommend that both plans get $250. Mr. Mayor: We’re going to get the actuary to project on that. Can we get a motion to that effect? Mr. Johnson: So move. Mr. Guilfoyle: Second. Mr. Williams: I just want to ask a question. I mean I understand there’s a possibility for the ’49 plan to come and ask for but they haven’t said a word. Ms. Williams: I think he just did. Mr. Lott: We’ve been asking for it for the last eight years and hadn’t got it. Mr. Williams: I’m not against that. I’m just saying you know we’re looking at taking care of one at a time is what I was thinking about and if we look at doing them both, then what about the third one? 9 Mr. Mayor: Because we have the actuary that’s doing those two plans – Mr. Williams: At the same time. Mr. Guilfoyle: Right, because that plan is self-sustaining. It’s not handled by this committee. Ms. Williams: The city of Augusta puts $5.2 million dollars in that plan. That is the level that is required by law to be funded. Ms. Smitherman: And any amendments to that plan are also done through this same body. Mr. Guilfoyle: Okay. Mr. Mayor: We have a motion that’s been made and properly seconded. All in favor vote by the sign of “aye”. Motion carries unanimously. Mr. Newsome: I’d like to read for the record I don’t know how many years ago but you were Mayor and Don Grantham was a commissioner, Joe Bowles and Jerry Brigham and Jimmy Smith, Joe Jackson, J. R. Hatney, Betty Beard, Danny Craig, I don’t know how he got in there, Jesse Redd, (inaudible) Scott, Jack Long, I don’t know how he got there, Corey Johnson, Calvin Holland, Alvin Mason and Steve Shepard and Fred Russell. Jesse Redd put this into my files here. They were requesting $250 a month back then and they had, three of them were hot, seven of them were mild. So – Ms. Williams: That was probably the year that the there was an amendment to the plan and what it did was there was a graduated level of benefits that any retiree that was receiving less, $20,000 or less got 3%. There was another tier that went to 2%, there was another tier that got 1% and I believe anybody making over $45,000 didn’t get anything that year. But that was an amendment to the plan and I remember Mr. Jesse coming. Mr. Newsome: I just thought I’d bring it up for your benefit. Mr. Mayor: Thank you, sir. Do we have any other business to come before the body? Hearing none, we standing adjourned. ADJOURNMENT: There being no further business, the meeting was adjourned. Nancy W. Morawski Deputy Clerk of Commission 10