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HomeMy WebLinkAboutPension & Audit Committee November 20, 2018 PENSION & AUDIT COMMISSION CHAMBER COMMITTEE November 20, 2018 PRESENT: Hons. Hardie Davis, Jr., Mayor; Mary Davis, Mayor Pro Tem; Sean Frantom, Finance Committee Chairman; Janice Jackson, Administrator; Donna Williams, Finance Director; Tim Schroer, Asst. Finance Director; Ben Hasan and Sammie Sias, Commissioners; Andrew MacKenzie, General Counsel; Nancy Morawski, Deputy Clerk of Commission. The Mayor called the meeting to order. 5. Consider request to amend definition of public safety employees in GMEBS Plan to include post-certified employees of the coroner’s office. Ms. Jackson: We had a request from the Coroner’s Office to include his pro-certified personnel under the definition of public safety. We believe that request is worthy of consideration. We did have an actuarial study done on that as well that they are prepared to present at this time. Is that right? Mr. Mayor: All right, what I’d like to do from this body is I think what I just heard was that there is support for that and certainly well within our confines from a budgetary standpoint. There are five people who this would affect including the Coroner. Do we have support for that, concurrence for that? Members of the committee give their concurrence. Mr. Mayor: All right, fantastic. All those give us the normal sign. All right, that’s unanimous. 2. Receive as information update on RFP for Investment Management Services for 1945 and 1949 Plan assets. Mr. Tim Schroer: Good afternoon, everyone. The RFP has been issued. The bid opening thth. is December 6. We have tentatively scheduled the evaluation committee to meet December 13 We’ll evaluate that and then we’ll make invitations for firms to come in and make presentations probably the first part of January due to the holidays and then we should be back the next Pension meeting in February to make a recommendation. Mr. Mayor: All right, any questions? Okay. We’ll receive as information. Mr. Schroer: Thank you. 3. Request to add Roth Contribution Amendment to Nationwide 457 Plan. (Jennifer Disrud, Nationwide) Ms. Disrud: Good afternoon. My name is Jennifer Disrud and I work with Nationwide Solutions and we are the 457 provider for Augusta Richmond County. One of the most frequent 1 requests that we get from your employees is to be able to invest on an after-tax basis so what I wanted to do was to take just a moment and to introduce the Roth with the idea of allowing your employees to have a choice between investing on a pre-tax basis as you already are and on a post- tax basis. Currently the employees have the traditional 457. The money goes in pre-tax, before taxes are paid. That money is going to grow and grow and grow over time and hopefully your employees will have a large amount to supplement their pension and social security. As the money comes out, that’s when they are going to be paying the taxes on the larger amounts that that money has grown to. The Roth 457 works in almost exactly the opposite way. It allows your employees to contribute after taxes have been paid so that money is going to go in with their after-tax money and it’s going to grow and grow and grow over time and since they paid taxes on the money going in, that money and everything it has grown to will never be taxed again. So it does allow for tax- free withdrawal of contributions and for those folks who have a longer time horizon that can be very, very advantageous. Currently the limits will increase in 2019; your employees will be able to contribute $19,000 per year if they are under 50 and $25,000 if they are over 50. There is an age 50 catch up limit which allows your older employees to increase their contributions. If you look at the Roth 457 this is a little bit about how their monies would be taxed. I can make this presentation available electronically if you like. The real difference comes when we look at how much money we have to spend in retirement. Just as a traditional 457 plan considering all the contributions and tax rates are the same, we would have over a 20-year period a $34,957 amount to spend and if you look at the contributions with Employee A who used a Roth that spendable amount at retirement increases to $39,000 and Employee B had a larger tax burden and he ended up with $30,296 and Employee C who had a medium tax burden ended up with $34,957. So you can see for those folks who had a lower tax bracket or expect to be in a lower tax bracket at retirement having that flexibility to invest on an after-tax basis can really make a difference to what they can spend in their retirement years. The Roth is actually beneficial for folks who expect to be in a higher tax bracket upon retirement, who would like to take advantage of tax-free withdrawals, who are younger with many, many years ahead of them as are many of your employees and are unable to contribute to a Roth IRA because of income limitations. High income earners are not able to invest in a Roth IRA. There are certain income exclusions. Are there any questions? Ms. Davis: So if an employee is involved in the traditional, do they have the option to make that change? Ms. Disrud: Absolutely and if someone wanted to get involved in mid-year they can. If they are an existing participant in the 457, they can change for future contributions from the pre- tax to the Roth. Ms. Davis: So what they have had in the past continues? Ms. Disrud: I’m going to say yes. I believe there is a conversion possibility but I believe it’s a very, very small group of folks who that would benefit. Ms. Davis: Do a lot of folks make that option and have both? 2 Ms. Disrud: In other counties I work with that do have the Roth option, I do see very often a 50/50 split or for those folks in their 20s and 30s they will go all with the Roth until they start seeing a benefit with the pre-tax. Mr. Sias: When we have folks who are using the kind of things they’re supposed to use for retirement, what is the counseling that’s being done because folks are kind of used to social security even though it may not be guaranteed to be there, but what kind of counseling is being done to ensure that these people don’t kill their retirement income by consistently borrowing out of it or making early withdrawals prior to actually retiring? Ms. Disrud: Richmond County does not have a loan provision in its 457 so there is no borrowing of funds as there is in a traditional IRA. As far as withdrawals prior to retirement, those are limited by the IRS to unforeseeable emergencies. A hurricane putting a tree through your house would be an unforeseeable emergency. If your child needs braces, that would not be an unforeseeable emergency so there would be no distribution for that. Mr. Sias: In this industry do you see that as a problem? Ms. Disrud: There is no age based requirement for distributions in a 457 so there are no additional penalties whether an employee is 35 or 55. The trigger for distributions is going to be separation from service whether they retire, get fired or quit. Ms. Jackson: I wanted to advise the members of the Pension Board that I have met with the Nationwide team previously as they brought this idea to our attention and we’re supportive of any efforts to assist our employees with better management of their financial situations. Mr. Mayor: I’ll entertain a motion to add this Roth contribution amendment. Mr. Frantom: Motion to add the Roth contribution amendment. Ms. Davis: Second. Motion carries unanimously. The Program Director for Nationwide, Roland Wilson, discussed some of the numbers in Richmond County that have been produced. Mr. Mayor: We will formalize this at the full Commission. 4. Presentation of GMEBS Actuarial Study dated July 1, 2018. Ms. Michelle Warner from the Georgia Municipal Association introduced Mr. Malichi Waterman with the Segal Company who made a presentation concerning the study. Mr. Waterman: We were here earlier in the year and you can see that the recommended contribution is up quite a bit from $4.5 million to $7.4 million. That’s about what we expected 3 from the study we did in February. It’s now 7.49% of payroll and the net amortization has increased to 14 years. Most of the demographics were nothing unexpected there. Your payroll is fairly flat, it has increased about .7% and the average payroll went up about 2.8%. The average age is up slightly and the average service is also. The recommended contribution has increased steadily at first and then decreased up until the plan changes and we also did some changes last year. Everything was on track until we made a few changes and that was to be expected. Active employees have increased slightly over that entire time as has the payroll and the average salary also. The plan changes in 2018, the benefit multiplier went to 2% for most employees and the contribution rate for employees increased as well. We show where the plan is today. The benefit multiplier went to 2% in July and the contribution increase will go into effect in January, 2019. We recognized a half a year for that. We then show the impact of the assumption changes and the plan changes. If we had stuck to the old plan, the recommended contribution would have been almost $4.5 million dollars but the changes in assumptions, it went up to $4.9 and then the plan changes jumped that up to $7.1 so you’ve got about a $2.2 million dollar increase. That’s actually lower than we expected when we did the study in February. If the employee contributions had kicked in in full, that 7.49% would have been about 6.55% so next year I would expect that 7.49 to go down by about a percentage, maybe more, as a full year employee contribution kicks in. In the study we had an actuarial funded percentage expected of 81.95. Instead it’s 82.69 so these results are better than what we expected in that regard. Page 7 shows where we expect you to go in the next 30 years. Right now you are at 7.94 and then there is a dip in the percentage and then farther out it’s a smooth line. After about 20 years if the plan is expected or at least projected to be fully funded if everything goes as planned, at 100% funded the only thing you’re paying is normal costs. It’s a pretty healthy plan and is looking good in my opinion. Ms. Williams: Can you tell them the number of retirees that are currently drawing benefits on this plan? Mr. Waterman: I have 516 retirees with an average monthly benefit of $860. I also have 49 disabled participants at about $872 and there are 58 surviving spouses that are beneficiaries. Ms. Williams: Did we note an uptick as of July 1 of this year when the multiplier changed? Was that a higher number of retirees than you would normally see at that time of year? Mr. Waterman: I didn’t notice it. We collect data for the July 1 valuation as of April 30 of the year before so this would not have been in effect. We’ll see it pop out next year. Ms. Davis: All right, anything else? So we’ll receive this as information. Thank you so much. 1. Presentation of October 31, 2018 investment reports for 1945 and 1949 Pension Plans (Heather Seigler, Morgan Stanley). Ms. Seigler presented an investment report on the 1945 and 1949 Pension Plans. At the close of the presentation, Ms. Davis: We’ll just receive this as information and thank you so much. Madam Administrator and Ms. Williams, do you have anything else? 4 Ms. Jackson: I don’t have any additional items. Ms. Williams: Probably just to note that items #3 and #5 will go forward at some point to the full Commission because those will require amendments to the plan and GMEBS will help us craft the amendment to add the Coroner’s Office sworn officers and Nationwide will give us documentation (inaudible). Ms. Davis: Do you need to do that today or wait until the next Commission? Ms. Williams: I think we can wait. Ms. Davis: So if we can make sure that’s added to the next Commission then we’ll bring those up for a vote. Sometimes it gets kind of complicated when we add stuff at the last minute so we’ll just go ahead and add it to the next full Commission meeting in two weeks. Thank ya’ll so much. So this meeting is adjourned and we’ll reconvene at 2:00. ADJOURNMENT: There being no further business, the meeting was adjourned. Nancy W. Morawski Deputy Clerk of Commission 5