HomeMy Public PortalAbout05-17-06 Police-Firefighters' Pension Workshop.tifMINUTES
POLICE OFFICERS'/FIREFIGHTERS' PENSION WORKSHOP
KEY BISCAYNE, FLORIDA
WEDNESDAY, MAY 17, 2006
COUNCIL CHAMBER
560 CRANDON BOULEVARD
The meeting was called to order by the Mayor at 7 00 p m Present were Councilmembers Enrique
Garcia, Steve Liedman, Jorge E Mendia, Thomas Thornton, Patncia Weinman, Vice Mayor Robert
L Vernon and Mayor Robert Oldakowski Also present were Village Manager Jacqueline R
Menendez and Village Attorney Stephen P Helfman
The following staff was also present Fire Rescue Chief, John C Gilbert, Police Chief, Charles
Press, Deputy Chief of Police Brett Capone and Mayor Rene Landa
The Mayor welcomed the public to the Police Officers'/Firefighters' Pension Workshop
Mr Robert Klausner with Klausner and Kaufman and Leon F (Rocky) Joyner, Jr with the Segal
Company, Actuary for the Village addressed the Council regarding the following analysis and
recommendations to the Village Council on funding of the Police and Fire Retirement Program
Valuation Purposes Develop annual employer contnbution requirement, monitor funding
progress, ensure State of Flonda funding standards are met and provide disclosure
information to the Village and its auditors
Valuation Objectives Maintain employer contnbution requirement rates as a relatively
level percent of pay, improve funded percentage over time, equitably allocate required
pension contributions to generations of taxpayers and periodically review assumptions to
assure they are in line with plan expenence
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Assumptions The valuation currently uses a 9% investment return assumption, 9% is higher
than is typically used for public sector actuarial valuations, 8% is the median assumption in
use as indicated by recent NASRA surveys of public sector pension plans and by a recent
survey by the Division of Retirement for Flonda plans, we note that over the history of the
plan only once was the 9% achieved (that is also the only time 8% was achieved), in light of
these facts as well as expected future investment expenence we recommend changing the
investment return assumption to 8%, the salary assumption is a flat 6% per year We suggest
this be compared to actual salary patterns, other assumptions include retirement, mortality,
disability and termination rates These should be penodically compared to actual plan
expenence
Funding Methods The basic funding method used to value the plan is the Aggregate
method (AGG), this method is most often used with a closed group or a group which has
only employee contnbutions, AGG is usually more conservative than the other most
commonly used methods, Entry Age Normal (EAN) or Frozen Initial Liability (FIL), under
AGG all plan liabilities are effectively amortized over the future working lifetime of the
active employees as the plan's normal cost (Typically 10 to 15 years), under either EAN or
FIL a normal cost is developed which essentially amortizes a portion of expected plan
liabilities over the future working lifetime of the active employees and the plan's normal
cost In addition an actuanal accrued liability (AAL) is developed which is offset by plan
assets resulting in an Unfunded AAL (UAAL) This UAAL is then amortized over a set
number of years Under Flonda law and GASB rules this can be no more than 30 years, the
amortization of the UAAL can be developed as either a level dollar or a level percent of pay,
in public sector plan assets are usually smoothed over a penod of years so that fluctuations
in market value are not fully recognized in the year they occur and for the plan, differences
between actual and expected returns are recognized over a five year penod
Current Valuation Results As of October 1, 2004, the required Village contnbution rate
was 13 15% Employees are required to contnbute 10 5%, this assumes $158,000 out of
about $266,000 is used to offset Village contnbutions, the State has indicated that about
$125,000 could be used to offset Village contnbutions if the employee contnbution rate were
set at 10 5%, additionally the State minimum benefit requirements appear to have been
adopted into the plan Benefits in excess of these have also been adopted Therefore it
appears to us that all State money may be available to offset Village contnbutions, this
should be reviewed with Fund Counsel and considered by the Board and Village for action
Possible Change in the Funding Method If the EAN funding method had been used in the
October 1, 2004 valuation, we estimate that the required Village contnbution would have
been reduced by about 4 8% of pay, we made this estimate by using certain numbers
available in the October 1, 2004 valuation
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May 17 2006
Estimated Impact of 8% We also developed an estimate on Plan liabilities and costs if the
investment return assumptions was changed from 9% to 8% and we estimate that this would
increase Village contnbutions by about 4% of pay
Estimate of Combined Changes We estimate that the combination of all the above
suggestions would result in the following required Village contribution rate 1) Current
Village rate = 13 15%, 2) Change due to additional State money = (2 13)%, 3) Change due
to EAN = (4 83)%, 4) Change due to 8% = 3 98% and 4) Estimated Village with all
changes = 10 17%, please note that the above are estimates based on numbers from the
October 1, 2004 valuation and by applying estimated averages to approximate the impact of
the various changes We have not gathered data to actually duplicate the plan actuary's work
and also note that changing to EAN and 8% is likely to have a smoothing impact on future
Village contribution rates
Mr Steve Palmquist with Gabriel, Roeder, Smith & Company, Consultant and Actuaries for the
Pension Board addressed the Council regarding the Plan
Fire Captain Michael Hanng, Chairman of the Pension Board, Dr Robert Maggs, Council
appointed Member to the Pension Board, Camille Guething, 260 Seaview Dnve, Marcos
Osono, President of the Key Biscayne Professional Firefighters Association and Adonis
Garcia, President of the Miami Beach Professional Firefighters Association addressed the
Council
There was extensive discussion from Council regarding the different ways to fund the plan
The meeting was adjourned at 9 05 p m
Respe tfully submitted
onchita H Alvarez, CMC
Village Clerk
Approved this 13th day of June
C a,(AIA- --....
, 2006
Robert Oldakowski
Mayor
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IF A PERSON DECIDES TO APPEAL ANY DECISION MADE BY THE VILLAGE COUNCIL
WITH RESPECT TO ANY MATTER CONSIDERED AT A MEETING OR HEARING, THAT
PERSON 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
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