10-31-1979 }t ,
MUNICIPAL POLICE OFFICERS RETIREMENT FUND BOARD
REGULAR MELTING
OCTOBER 31, 1979
Chairman Mayor Robert L. Christy called the meeting to order at
3:15 p.m. in City Hall.
ROLL CALL
Mayor Christy
Police Chief Earl Baugh
Det. Sgt. William Rickelman
Patrolman William Lenz
Richard Watkins
Also Present:
Councilman Rotundo
Jack Asheral
Joe Herget
Nancy Blazi
Mayor Christy presented each member with a copy of the Florida Statute
185.05. According to the Board of Trustees under this statute, one of
the members is to be appointed as Secretary. The Secretary of the
Board shall keep a complete minute book of the proceedings. Trustees
shall not receive any compensation as such.
Chief Baugh made a motion that Patrolman Lenz be appointed Secretary.
Motion seconded by Det. Sgt. William Rickelman. MOTION CARRIED 5 -0.
Mayor Christy called for questions, before turning the meeting over to
Jack Asheral, the retirement fund advisor.
Chief Baugh asked how often the Board would meet?
Jack Asheral answered that the Board would have to meet at least once
a year, unless there is a reason to call additional meetings.
Patrolman Lenz asked if the City administers the pension fund?
Jack Asheral directed the members to turn to Page 808, 185.35; the
municipalities have their own pension plan for policemen. Bankers Life
provides all the requirements needed each year. The City requirement
is an annual statement to Tallahassee, filed by the Personnel Director.
Mayor Christy stated that Secretary Lenz will maintain his position,
receiving copies of all paperwork.
Mr. Watkins asked how long do you have to serve before you are eligible
for the fund?
Mayor Christy answered that the statute stipulates all detals, including
disability retirement. He then turned the meeting over to Jack Asheral
for background and basic knowledge of the Fund.
Mr. Asheral proceeded to explain the basic concepts of how the Pension
Fund works. The Police Department has one large pension fund like a
savings account. Deposits are made into this account each year. The
question is how much money does the Police Dept. have to have in this
account to meet the retirement obligations as they become due? There
are people of differing ages and retirements.
The pluses of the Fund are the deposits being made into it, earning
interest as additional credits to the savings accounts and refund$ which
stay behind when a person leaves the fund before he owns any of it.
The expenses of the Fund are the cost of operating, administrative costs
and retirement and death benefits paid out, drawing monies out of the
savings account.
There is no insurance in this plan - it is strictly a savings account.
Benefits are paid out of the account, not by the insurance company.
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When plan is first started, the question is how much money do we
have to put in? In order to calculate, we list how much each
employee is making, years of service and retirement years.
We then make the following assumptions: current pay will increase
at the rate of 4% a year; 3% turn -over rate; 1971 table of mortality,
6 1/2% interest rate and 5% expense factor.
Using these assumptions and facts, the insurance company determined
how much money we should put in this coming year (projected to re-
tirement of each individual). Mr. Asheral gave the following
"hypothetical" presentation:
First Year Second Year
Deposits $35,000 $36,000
Excess expenses - f 100
interest earnings - - 700
refunds - - 100
Net Deposit $35,000 $35,300
Each year, the insurance company and their actuaries take the current
data of the past year and do an evaluation of what should be deposited
for the coming year. As long as we keep on depositing what they tell
us, we will have a good solid plan.
Under the State regulations, Chapter 185, we are allowed to pay for
past service liability over the next forty years. With the Bankers
Life, we are earning in the 9% range. These monies are invested in
mortgages, CD Bonds, etc. The City is putting in the total contribu-
tion, along with monies coming from Tallahassee.
Joe Herget, City Clerk, joined the meeting at this time, 3:40 p.m.
Jack Asheral then went into the design of the plan, which meets the
minimum requirements of Statute 185.05: Three out of four employees,
upon retirement, can only look forward to Social Security. Therefore,
an employee - sponsored pension plan makes a big difference, as an
addition to Social Security benefits.
When the City makes a contribution for the employee, it is tax -free.
It is also a tax -free accumulation (net 9 %) with disability and death
benefits.
Mayor Christy stated that the major benefit to the employee is he is
not paying taxes on his money. Tax is paid when the employee receives
the benefit.
Plan Design (Two necessary to qualify for Statute 185.05):
1. Police (more benefits in order to qualify for State monies)
2. General
Eligibility:
Full -time employment
Minimum age - 21
3 months service
Mr. Ascheral went on to explain the formula: 2% of compensation, which
is average of last ten years, times the employee's years of service.
Patrolman Lenz asked the question: he's been with the City for approxi-
- mately three years and the pension plan has been in force for only two
years - does he receive credit for the other year?
Mr. Ascheral replied that all years of service are covered in the plan.
Explaining the formula further, he stated that: normal retirement for
the police is later of age 60 or ten years in the plan - but in no event
later than age 65.
Mr. Watkins asked if the Federal Government requirements regarding
discrimination at age 65 come into this?
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Mr. Ascheral replied that when this plan was put in, it was designed
to meet this requirement. Actually, all plans now are satisfying
Governmental requirements.
Early retirement for Police: Age 50 and 10 years in plan; late retire-
ment: no increase in benefit.
Regarding the death benefits (originally suggested by Jack Asheral:
Value of earned pension if qualified for early retirement - 10 years
in plan, age 50 -55 - same as if he retired on that day - receiving full
value of his account.
Chief Baugh asked if this would be in a lump sum?
Mr. Asheral replied that it would be in a 10 -year payout (options
available). He suggested 'insuring the benefit for $200 per month.
However, this was postponed.
The Disability Benefit: Earned pension or 25% of compensation, which-
ever is greater and five (5) years in plan. This is paid in addition
to Social Security. Workmen's Compensation coordinates with Social
Security.
Detective Sgt. Rickelman asked a hypothetical question: If an accident
occurred, injuring 6 or 7 men at one time, what would back up the plan
since it is not insured?
Mr. Asheral answered that the first fact is that we've had five years
to accumulate monies before any benefits are paid, which is a growth
factor. Iie made an arrangement with Bankers Life that we would not
purchase an annuity lump sum to buy the disability benefit but would
rather simply fund the disability benefit on a monthly payment plan.
The individual is paid directly from the fund's account. When the
individual reaches normal retirement, we purchase an annuity to buy it
out.
Retirement Pay-out: Life and 50% to the spouse (Social Security pay-
out) Your wife will continue to collect 50% of your retirement for the
rest of her life, after your death. When you reach retirement, there
are at least six different options you can take.
Vesting (Ownership): After ten (10) years in the plan, you own your
account. However, if you leave before ten years, the monies stay back
for the people who are still with the City. If you've been in the plan
for ten years and leave, you cannot collect the account until your
normal retirement.
Exit Benefits: You take early retirement if you qualify and receive a
reduced amount.
Company behind the plan: Bankers Life of Des Moines, Iowa; founded
1879; they are a leader in pension plans (more Florida municipalities
insured than any other company) $3 1/2 billion in assets, $20 billion
in insurance in force, A -rated company.
Example: Person reaches retirement with a final compensation of $1,000
a month; 2%,plus years of service, plus $400 Social Security.
In conclusion, Mr. Asheral stated that when the Board meets once a year,
they will have the following statements from Bankers Life: Contract
Holders Fund Statement (monies deposited, interest earnings, costs of
benefits paid out and net value of total account. Also, we will have an
annual evaluation statement from them. The plan was designed on the
theory of it costing about 10% of compensation.
Mayor Christy brought up the question of a police officer's request for
a change in his beneficiary, as stipulated in 208, necessitating a
meeting of the Board of Trustees.
Mr. Asheral answered that we do not get involved in this. The personnel
director handles this under an administrative kit.
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There was a general discussion about insuring the death benefit.
Mr. Asheral said that we can change the qualification in the plan to
provide that an employee who dies will always have the full value of
his account, regardless of years of service. The cheapest and easiest
way to do this is to insure the death benefit.
Councilman Rotundo said that we need the five years so the plan starts
paying for itself.
Mr. Asheral told the Board that their function is to make recommenda-
tions to the City, as they are paying for this. He said he would
provide the necessary paper work to the City Council on the 12th.
City Clerk Joe Herget asked why there was no City representative at
the meeting as he was only there for his own information? Mr. Asheral
had set the Board up under State requirements.
Mr. Asheral said that in compliance with 185, the Mayor, City Clerk,
two City employees and one outside person should be present at the
meetings.
Mayor Christy, at this time, called Nancy Blazi, Deputy City Clerk,
into the meeting to ask if there was any paper work, showing that the
City paid an additional $200 to insure the death benefit under the
plan?
Nancy Blazi answered that there is no paper work 'as this action was
never taken.
Mr. Asheral asked Nancy Blazi for a current list of employees so that
he can get the cost from Bankers Life.
Nancy Blazi gave Mr. Asheral the list of employees, telling him this
excludes the City Councilmen and City Attorney.
Mayor Christy asked for a motion to present to the Council an invest-
ment recommendation for a $10,000 death benefit, which is in addition
to the $10,000 accidental death benefit.
Patrolman Lenz made the motion; seconded by Mr. Watkins. MOTION
CARRIED 5 -0.
T. letter regarding this recommendation will be sent to the Council.
Joe herget suggested having an election for a General Employee Board
before the next City Council meeting. Mr. Watkins agreed to represent
both boards at the Council meeting.
Mr. Ascheral said that he will be happy to meet with the employees to
understand the plan better, if there are any questions.
Chief Baugh made a motion to adjourn. Mr. Watkins seconded the motion.
Meeting adjourned at 4:45 p.m.
Minutes submitted by: - 4 -
Phyllis Pernice