TO: Mayor and Commissioners
FROM: Jack Warner, Chief Financial Officer
Janice Rustin, Interim City Attorney
THROUGH: Donald B. Cooper, City Manager
DATE: September 20, 2016
Title
ORDINANCE NO. 17-16 AMENDING THE CITY’S POLICE AND FIREFIGHTERS RETIREMENT PENSION SYSTEM (SECOND READING)
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Recommended Action:
Recommendation
Motion to Approve Ordinance No. 17-16 amending the City’s Police and Firefighters Retirement Pension System.
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Background: This proposed ordinance amends the existing ordinance for the combined police and fire pension system (and board) by creating, effective October 1, 2016 two separate pension boards for Police and Fire respectively. In addition, this ordinance implements the negotiated changes to the recently approved Collective Bargaining Agreements.
The major elements of the Ordinance are summarized below. The Police portion of the ordinance incorporates most of the changes in the recent PBA Collective Bargaining Agreement. Changes from the existing code are shown by strike through and underlining.
The Fire portion of the ordinance is all “new” since the City is creating a separate pension board for Fire, for this reason the entire Fire portion is underlined; but most of the provisions are identical to the existing code. Changes from existing Fire code language are shown with double underlining or double strike through for new language and new deleted sections.
Key terms include the following:
• Amends the current ordinance for the combined Police and Fire pension plan (and board) into two separate pension plans (and boards) for Police and Fire.
• Creates a new section 33.58. This section provides direction for separating the existing pension plan into two plans, and allocating the assets and liabilities to the new plans. Subsection (D) incorporates the current Pension Board’s actuary recommended option for dividing the assets.
• Makes it clear that the existing pension plan (and board) will cease to exist on 9/30/16 (except for a transition period not to exceed 60 days for the purpose of transferring assets and other administrative actions), and the new pension plans and boards will become effective 10/1/16.
• Directs the current and new boards as well as the pension plan administrator to take all necessary and appropriate action to implement and facilitate the plan changes, and ensure that benefit payments are not interrupted.
• Provides that all existing contracts of the current pension plan shall become contracts of the new plans, and directs the new boards to work with each contractor to revise the contractor’s fees and other contract terms, as appropriate.
• Eliminates outdated “miscellaneous” language on pages 22 and 51 that the pension board actuary found problematic concerning the transfer of assets from the old Chapter 175 and 185 plans to the current pension plan. This language apparently dates back to when the current pension plan was originally established in 1974.
Police Ordinance
• Creates a separate police pension plan with new pension board consisting of 2 residents appointed by City Commission, 2 police officers elected by active plan members, and a 5th member selected by the other 4.
• Provides that all annual Ch. 185 premium tax revenue up to the 2013 amount ($606,595) will be used to reduce the city’s annual pension contribution (currently $306,927 can be used for this purpose).
• Allocates all the accumulated excess premium tax reserve money ($1.625 million as of 10/1/14) plus any premium tax money not allocated to pay for benefits, to pay down the unfunded liability.
• Contains the substantive benefit changes that were previously implemented in Ordinance 10-15 (these are not underlined).
• Revises the retirement benefit enhancement to keep the existing 1% guaranteed COLA benefit, but eliminates the variable COLA based on the new allocation of premium tax revenues.
Fire Ordinance
• Creates a separate firefighter pension plan with new pension board consisting of 2 residents appointed by City Commission, 2 firefighters, and a 5th member selected by the other 4.
• Provides that all annual premium tax revenue up to $1.2 million will be used to reduce the city’s pension contribution (currently $198K can be used for this purpose).
• Revises the retirement benefit enhancement to reflect the new allocation of premium tax revenues. We will need to discuss how the existing retirement benefit enhancement will work when premium taxes in excess of the 2013 amount are placed in a share plan.
• Contains benefit changes per CBA:
Ø 3.0% multiplier for future service - current employees (now 3.5%)
Ø 2.75% multiplier for new hires
Ø Normal form of benefit -- 10 years certain & life for future service (now 60% joint survivor annuity)
Ø Maximum benefit cap: $100K with 2% annual adjustment
Ø New normal retirement age for new hires - 25 years of service (now 20 years of service)
Ø COLA delayed to one year after separation from service
Ø Average final compensation for new hires - highest 5 of last 10 years of service (now highest 3 years of service)
Implementation of the changes to be effective October 1 requires several steps, which are underway. By separate agenda item, the City Commission will appoint its members to the two newly created Boards. Similarly, the police and fire memberships will name their board members. After the two City and two PBA/Fire members are selected, the respective boards can meet to appoint the fifth member. The current combined board actuary is finalizing asset split calculations using the method agreed by the combined board at its August 17 meeting. The current investment advisor is developing a detailed plan to implement this split. The combined board has scheduled a meeting for September 14 to review these plans and provide implementing steps.
City Attorney Review:
Approved as to form and legal sufficiency.