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05-14-1986 - Special o Q CITY OF EDGEWATER JOINT PENSION MEETING MAY 14, 1986 MINUTES Mayor Baugh called the meeting to order at 2:15 P.M. in the Community Center. ROLL CALL Police Retirement Board Mayor Earl Baugh Chief Lawrence Schumaker Sergeant Larry Westfall Officer Ray Frazee Reverend Lawrence Tee General Employees Retirement Board Present Present Arrived Later Excused Present Mayor Earl Baugh City Clerk Connie Martinez Mrs. Susan Wadsworth Mrs. Karen Rickelman Mr. David Pettit Reverend Harvey Hardin Also present was Mr. Jack Ascherl, the insurance carrier for the City employees. Mayor Baugh turned the meeting over to Mr. Ascherl for his review of the City's pension plans. Mr. Ascherl distributed copies of the actuarial valuation reports for both plans for the period as of October 1, 1985. Mr. Ascherl reviewed the General Employees report first. He reviewed how the account is set up with Bankers' Life and each year they do a valuation of the employees in the plan to show their retirement dates in the future, the amount of money they make now, and projected earning increases over the years to try to determine what they have to put in now to be on track to develop the fund necessary to payout the retirement fund benefits. He pointed out this year they have to put in $45,122 to stay on track. Present Present Present Present Excused Present Mr. Ascherl said the Emerging Retirement Liability shows the amount of pension liability coming due the various years and all employees are in the plan and are being calculated in the same manner. Mr. Ascherl then reviewed the Census Data page which shows the number of active and inactive participants in the various age groups. He pointed out there are five inactive participants now. Mrs. Rickelman asked if the two in the lower age group have left now and Mr. Ascherl replied yes. Mayor Baugh asked if they can draw a pension and Mrs. Rickelman replied when they reach age 65, but they were vested when they left and are eligible when they come of age. Mr. Ascherl noted they aren't employed now but it's in reserve and is due them. Reverend Hardin asked what would happen if they die before retire- ment age and Mr. Ascherl said the surviving spouse gets it. Q o Mrs. Rickelman noted that the projected monthly pension is calculated at 7.5% increases and asked if they don't get it, if the City will have to contribute less. Mr. Ascherl replied yes, and noted they have to have some assumptions and there's an 8% assumption built in and a mortality table and disability assumption. He added that each year they recalculate. Mr. Ascherl reviewed the Summary of Plan Provisions, noting the vesting is 100% with five years in the plan, and if they have less than five years, it stays in the plan to help reduce the costs. He pointed out that disability benefits require five years of plan participation also. Mrs. Rickelman asked if they become disabled with five years in the plan, can they retire now. Mr. Ascherl reviewed that it's 25% of the average compen- sation or accrued amount. He added they also collect social security and this would supplement it. There was a discussion about the monthly average and Mr. Ascherl said it would be averaged for the last 10 years or less. He noted that they can change the average compensation but it will cost more. Mrs. Rickelman asked if the attained age on page 6 was changed to age 18 from 21. Mr. Ascherl said it's 18 on the Police plan and asked how they administer it. Mrs. Rickelman said she thinks it's age 18. Mr. Ascherl noted that three months of service is required. Mrs. Rickelman said the eligibility date is the date the plan starts, three months from the hire date. Mr. Ascherl noted it's age 65 and 10 years of service, but no later than 70. Mrs. Rickelman asked about a retirement age of 55 or 60 and Mr. Ascherl said he can develop it. There was a discussion about the years of service for the Police Department. City Clerk Martinez noted that there's a City employee who will not have five years vested at age 70. Mr. Ascherl said the employee will be vested at age 70 as it's not beyond age 70. City Clerk Martinez asked if she'll be vested with 4~ years and Mr. Ascherl replied yes. Mrs. Rickelman pointed out she'll get a smaller amount. Mr. Ascherl noted it's 2% times years of service, and earlier retirement is age 55 with 10 years with a reduction of 6-2/3% for each year up to five and 3-1/3% for each year between five and ten. Mrs. Rickelman asked about someone who was 55 or over in 1978 when they started the plan and if he can get early retirement even if he hasn't worked for awhile. Mr. Ascherl said he has to have 10 years of service and 5 years in the plan. There was further discussion about this. Mr. Ascherl said they need to change that to correspond with the 5 years vested at age 65, and years of service to collect retirement would be the same as vested. He added this won't change the cost factor at all since the vesting is there already. Mrs. Rickelman pointed out they have someone already like that and he's not getting anything, but has his 5 years in. Mr. Ascherl said with 5 years of service, he would be able to collect the normal retirement amount. City Clerk Martinez said he'd apply at age 65. Mrs. Rickelman said Morris Sherman will not be 65 yet and didn't have the 10 years, but was vested. Mr. Ascherl said that has been changed and when they changed the 5 years of vesting, it should change and if he had 5 years in, he can collect at 65. -2- Joint Pension Meeting Minutes May 14, 1986 ~ o Mrs. Rickelman asked if Mr. Sherman can get early retirement and City Clerk Martinez asked if he can apply now. Mr. Ascherl replied yes and noted that he'll get more since he's a little older and will have less penalty. City Clerk Martinez suggested they have Mr. Sherman contact Mr. Ascherl. Mr. Ascherl said he'll call Banker's to find out about it. Mr. Ascherl said retroactive will apply if they want it to. He added that late retirement has no maximum age and the benefits will accrue accordingly. Mr. Ascherl said death benefit is only if they reach age 55 and with 5 years of service, and one half is payable to the spouse. He added that it's very weak in this area. Mrs. Rickelman asked what happens if there's no spouse and Mr. Ascherl replied that no benefit is allowed. Mr. Ascherl pointed out this was a new plan with 10 years to accumulate some money and there were one or two men that wanted to. be fair: to. Mr. Ascherl reviewed the general investment fund account, noting that some of this is in stocks, and some is diversified to real estate mortgages and shopping center investments. Mrs. Rickelman asked if it could be any combination and Mr. Ascherl replied yes. Mr. Ascherl noted that the annual rate of return for 1985 was 12.33%, with cash received of $35,000. He stated that $48,233 of the general investment fund was reinvested due to rollover of the principal. He reviewed the interest rates for the different quarters, pointing out that it's about 9.5% currently. He noted that cash invested was $35,000 and interest earned was $39,376 with withdrawals of $1,927 and expenses charged of $2,677 for an ending balance of $378,847. He said the last page is a breakdown of the charges and reviewed each item, noting that the charges aren't even 1% of the total. Mr. Ascherl then reviewed the Police fund. He noted they don't have to make a deposit to the account this year, but he recommended it be done because it goes in for investments. He referred to 20-year funding versus the 40-year funding that was selected. Mrs. Rickelman asked about the total normal cost and Mr. Ascherl replied it's the cost not counting the past service liability and they're paying those they paid off at the beginning over a 40-year funding. Mrs. Rickelman noted they put casualty in this and Mr. Ascherl said it has to go in. Mr. Ascherl reviewed the Emerging Retirement Liability, pointing out there's no retirement scheduled until 1998. Mrs. Rickelman noted if they hire someone older, that would change and Mr. Ascherl agreed. Mr. Ascherl then reviewed the Census Data, pointing out they have nobody in the department now over age 49. He said they need to change these from 10 years to 5 years of service also. Mr. Ascherl reviewed the early retirement benefit at age 50, noting it costs more for that five years earlier. He pointed out the disability benefit does not require five years of service. He said the definition in the plan is if you cannot perform your occupation, you're considered disabled. He referred to how this can be a problem area if the person can still work but not in the same occupation as before. Reverend Tee stated that if someone in the service is disabled, they get a pension and are dismissed from the service, and if they later do some kind of work, the disability is adjusted. Mayor Baugh said they have to go for a physical or test every so often but he can earn as much as he wants and still get that disability. Mr. Ascherl asked if there's anyone on dis- ability benefits and City Clerk Martinez replied no. There was a discussion about a required follow up procedure at a stipulated time. City Clerk Martinez questioned if they would spend more in pursuing this then what they receive in payments. Mr. Ascherl noted the benefits will be larger as time goes by. -3- Joint Pension Meeting Minutes May 14, 1986 o o Mr. Ascherl pointed out that Chapter 185 provides for Police and they'll have the option for an annual review. Mrs. Rickelman stated they have someone who's been unable to work for a year on worker's compensation and he's still in the pension plan as an employee. Mr. Ascherl pointed out he's not earning anything so no contribution is being made. He asked how long he's been working for the City and City Clerk Martinez replied it's been about two years. Mr. Ascherl noted that he has no disability benefits. Mrs. Rickelman asked if they have to continue him and Mr. Ascherl replied yes, but with no benefits. City Clerk Martinez asked if his one year out of service goes toward the 5-year vesting and Mr. Ascherl replied yes. City Clerk Martinez asked if the City's required to pay his hospitalization. Mr. Ascherl said if a person's disabled while working, they can terminate him and group insurance plans must provide extended benefits for that illness for 90 days, and possibly beyond that. Mrs. Rickelman asked if they can legally terminate him on a worker's compensation injury and Mr. Ascherl replied yes, if he's totally disabled. City Clerk Martinez noted that he's gone back to work to see if he can handle it. Mr. Ascherl said that worker's compensation isn't his area and whoever handles it can answer these questions. There was further discussion about the average compensation being 5 years instead of 10. Mrs. Rickelman said they need to consider it and it will cost more. Mr. Ascherl said the general investment fund is $190,728 with an average annual rate of 12.34% for this account. Mrs. Wadsworth left the meeting at this time, 3:10 P.M. Mr. Ascherl noted that cash added was $16,933, interest credited was $20,052, payments to retirees was $3,305, and expenses charged were $1,785. He noted that expenses were broken down on the following page, and he's tried to get the cost for consultant broken down between the two accounts. Mr. Ascherl said the current account is at approximately 12% and there's new money going in and currently it's about 9.75%. He referred to interest earned in other accounts. He said in the past they've been conservative but they can go in the market and gamble, but it's risk related to the potential return. He noted that they're required to keep the plan funded and if the market goes down, there could be a problem. He suggested they might want to put a little bit in it for diversification. There was a dis- cussion about future interest rates fluctuation. Mayor Baugh asked if they use a portion of the funds and Mr. Ascherl said the new money would rollover there. Mayor Baugh said he feels stock market is better. Mr. Ascherl said it will go down again, and they can diversify with a small amount but they're safe where they are. City Clerk Martinez said she feels they're too small. Reverend Tee said they're doing well where they are, even at 9%. Mayor Baugh agreed it might be best where it is. Chief Schumaker noted that an increase in money doesn't increase the benefits and they should leave it where it is. Mr. Ascherl noted that earning more money means the amount is reduced that the City puts in, but they can increase the benefits if they put more money in. -4- Joint Pension Meeting Minutes May 14, 1986 ~ o o Mrs. Rickelman suggested they consider lowering the age. Sergeant Westfall arrived at this time, 3:22 P.M. Mrs. Rickelman asked about lowering the age for general employees and Mr. Ascherl said they try to be competitive with the market and most are at age 65. He said average compensation will be looked at, and 5 years before disability is not unusual. He added that he will look at some options and run some for consider- ation, which will be at no charge. City Clerk Martinez suggested they consider costs on age 62. Sergeant Westfall stated they're trying to come up with something for a lower retirement for Police officers to be with 20 years of service to give individuals the option to retire then if they choose to do so. Mr. Ascherl said he'll do something up and the formula is 2% times years of service. Sergeant Westfall asked if that's City-wide and City Clerk Martinez said it's Police only. Sergeant Westfall said they need to address the more time you serve, the greater liability can become, especially if they're on the street. Mr. Ascherl suggested they call him if they have something in their Department. City Clerk Martinez stated they need from the members of the Police Board that Reverend Tee had volunteered to Chief Schumaker seconded the motion. to by motion appoint a secretary per the State Statutes, and do this. Mayor Baugh so moved. Motion CARRIED 4-0. Mrs. Rickelman referred to a contact made by another company about contributing so much money that would go into the pension. Mr. Ascherl suggested the Senate bill will determine this and they might wait and see. There was a discussion about IRA's and 401(K). Mrs. Rickelman asked if they need a plan to start this and Mr. Ascherl said it's a profit sharing plan and they can have both plans. Reverend Hardin said he believes in being conservative in investing funds that belong to the City. Mayor Baugh asked for a motion to adjourn. Reverend Tee so moved. Mrs. Rickelman seconded the motion. Meeting was adjourned at 3:33 P.M. Minutes submitted by: Lura Sue Koser -5- Joint Pension Meeting Minutes May 14, 1986