Item 7EAGENDA TTEM # 7E
JiJLY 14, 2008
CITY OF ATLANTIC BEACH
CITY COMMISSION MEETING
STAFF REPORT
AGENDA ITEM: Ordinance 58-08-34 ,Amending Chapter 2, Administration,
Article VI, Division 3, General Employee Retirement System,
providing for an increase in the vesting requirement from 5 to 10
years for employees hired on or after the first day of the month
following final adoption and passage of this ordinance; providing
for the ability to change a named beneficiary up to two times after
retirement; providing the purchase of limited credited service for
military service prior to employment with the City; and, providing
for the return to normal form of retirement for retirees where the
named beneficiary predeceases the retiree.
SUBMITTED BY: Nelson Van Liere
Finance Director, City of Atlantic Beach
DATE: June 30, 2008
BACKGROUND: In an effort to control the rising costs of providing a defined
benefit retirement plan to the General Employees, the City has
determined that it is in the best interest of the plan to increase the
vesting period from 5 to 10 years. This change would save the city
an estimated $14,500 per year in contributions according to the
Plan's Actuary, Gabriel Roeder Smith and Company. The
determination to increase the vesting period for new hires was
suggested by the benefit committee and headed by the City
Manager. After months of negotiating, the provision was finally
ratified into the bargaining unit contract on May 27, 2008.
In addition to the above provision, the City has proposed some
minor, no cost changes to the plan that make it more flexible for
the retirees. These changes are as follows:
1. Change of Beneficiary This provision allows for a retiree to
change the beneficiary after retirement up to two times. This
would be calculated to be the same as a normal retirement benefit,
adding no cost to the City.
2. Purchase of Credit Service This provides a member with the
opportunity to purchase years of service at the full actuarial cost
for years of service in the Armed Forces of the United States.
AGENDA TTEM # 7E
JULY 14, 2008
3. Pop Up Provision This provision allows a retiree, having
selected a survivor benefit, to receive the normal straight life
benefit if the designated beneficiary dies before the member.
BUDGET: The actuary's impact statement related to the change from 5 to 10
year vesting estimates an annual savings of $14,500. The current
year's expenditure budget was reduced by that amount. The other
changes have no impact on the City's budget.
RECOMMENDATION: Approve Ordinance 58-08-34
ATTACHMENTS: Ordinance 58-08-34
Gabriel, Roeder, Smith & Company Actuarial Impact Statements
REVIEWED BY CITY MANAGER:
AGENDA ITEM # 7E
JULY 14, 2008
ORDINANCE NO. 58-08-34
AN ORDINANCE OF THE CITY OF ATLANTIC
BEACH, FLORIDA, AMENDING CHAPTER 2,
ADMINISTRATION, ARTICLE VI, DIVISION 3,
GENERAL EMPLOYEE RETIREMENT SYSTEM,
TO PROVIDE THE ABILITY TO CHANGE A
NAMED BENEFICIARY UP TO TWO TIMES
AFTER RETIREMENT; PROVIDING THE
PURCHASE OF LIMITED CREDITED SERVICE
FOR MILITARY SERVICE PRIOR TO
EMPLOYMENT WITH THE CITY; PROVIDING
FOR AN INCREASE IN THE VESTING
REQUIREMENT FROM 5 TO 10 YEARS FOR
EMPLOYEES HIRED ON OR AFTER THE FIRST
DAY OF THE MONTH FOLLOWING FINAL
APPROVAL AND ADOPTION OF THIS
ORDINANCE; PROVIDING FOR THE RETURN TO
THE NORMAL FORM OF RETIREMENT FOR
RETIREES WHERE THE NAMED BENEFICIARY
PREDECEASES THE RETIREE; PROVIDING FOR
A SAVINGS CLAUSE; PROVIDING FOR
SEVERABILITY; PROVIDING FOR
CODIFICATION; AND PROVIDING FOR AN
EFFECTIVE DATE.
WHEREAS, the City of Atlantic Beach, Florida has an interest in the future
retirement of its employees and wishes to improve the retirement systems whenever
feasible; and
WHEREAS, the City of Atlantic Beach, Florida recognizes the advantage of
implementing certain enhanced benefits within its retirement systems; and
WHEREAS, the City has received and reviewed actuarial impact statements
related to these changes; and
WHEREAS, the City of Atlantic Beach, Florida hereby amends its retirement
systems to provide such benefits as follows:
AGENDA ITEM # 7E
JULY 14, 2008
NOW THEREFORE, BE IT ENACTED BY THE CITY COMMISSION OF
THE CITY OF ATLANTIC BEACH, FLORIDA, AS FOLLOWS:
Section 1. Section 2-262 of Chapter 2, Administration, Article VI, Division 3,
General Employee Retirement System of the Code of Ordinances is hereby amended as
follows:
Sec. 2-262. Definitions.
The following words and phrases as used in this division shall have
the following meanings unless a different meaning is clearly required by
the context:
Beneficiary shall mean any person, designated in writing by a member
who is being paid, or has entitlement to future payment, of a pension or
other benefit by the retirement system for a reason other than the person's
membership in the retirement system. A member may revoke such
designation b~ ning and filing with the board of trustees a new
designation of beneficiary form at an t~prior to retirement, however
after retirement, such designation of beneficiary may only be changed
twice. The board of trustees shall require and the amount of the retirement
income payable upon the designation of a new beneficiary shall be
actuarially re-determined to ensure that the benefit paid is the actuarial
equivalent of the present value of the member's current benefit, taking into
account the ayes and sex of the former beneficiary, the new beneficiary,
and the member.
Section 2. Section 2-272 of Chapter 2, Administration, Article VI, Division 3,
General Employee Retirement System of the Code of Ordinances is hereby amended as
follows:
Sec. 2-272. Credited service.
Service rendered by a member of the retirement system shall be
credited to the member's individual credited service account in accordance
with rules the board of trustees shall from time to time prescribe and in
accordance with the applicable provisions of the Florida Statutes. In no
case shall more than one (1) year of credited service be credited on
account of all service rendered by a member in any one period of twelve
(12) consecutive calendar months. Service shall be credited to the nearest
one-twelfth of a year. Service shall be credited for the total number of
years, and fractional parts of years, of service of the member.
AGENDA ITEM # 7E
JULY 14, 2008
A member mawpurchase up to five (5) years of credited service for
service in the Armed Forces of the United States prior to employment by
the city, by depositing the full actuarial costs of such years of credited
service that would have occurred had the member been employed by the
city, for the number ofdpurchased. Such payment for said prior
credited service may be made as a lump sum or in installments not to
exceed the years of service purchased; however, must be paid in full prior
to retirement. Installment payments shall require interest at the actuarial
rate of return for the years purchased. Such purchase of prior credited
service shall take effect upon vesting. If a member terminates service prior
to vesting and receives a refund of employee contributions, the amount
paid for such prior credited service shall also be refunded. Subject to the
following:
(1) Prior credited service shall not be granted for service where the
member is either receiving, entitled to receive, or was entitled to receive a
benefit from another governmental pension system.
(2) Prior credited service under this section shall only be provided for
service in the Armed Forces of the United States.
(3) Actual prior service credit purchased shall be added to the years of
service with the city.
(4) Election to purchase prior credited service for prior service in the
Armed Forces of the United States shall not exceed a total of five (S~years
and shall be made in writing_to the board of trustees. The cost of prior
credited service purchased for such prior service shall be the full actuarial
cost of all credited service purchased hereunder computed as a lump sum
payment into the plan. Actual payment may, at the member's option, be
extended over a period of time not to exceed the Years purchased and shall
be subject to interest at the assumed actuarial rate for the ,purchased.
Such payment may be by direct in service transfer from a participant's
deferred compensation account (457 accounts) pursuant to Section
457(e~) of the Internal Revenue Code or any other qualified plan. Full
payment of such purchased prior credited service must be completed prior
to the member's actual retirement.
Section 3. Section 2-273 of Chapter 2, Administration, Article VI, Division 3,
General Employee Retirement System of the Code of Ordinances is hereby amended as
follows:
AGENDA ITEM # 7E
JULY 14, 2008
Sec. 2-273. Loss of credited service.
A retirement system member's credited service shall be forfeited
and no longer in force if the member terminates city employment with less
than five (5) years of credited service. A retirement system member
employed by the City on or after (see note) who terminates city
employment with less than ten (10) nears of credited service shall forfeit
such credited service.
Section 4. Section 2-276 of Chapter 2, Administration, Article VI, Division 3,
General Employee Retirement System of the Code of Ordinances is hereby amended as
follows:
Sec. 2-276. Voluntary retirement conditions; employment after
retirement.
(b) The age and service requirements for voluntary retirement are:
(1) Normal retirement: The member has attained age sixty (60) years or
older, and has five (5) or more years of credited service in force. For a
retirement system member employed by the City on or after (see note),
normal retirement shall mean the attainment of ale sixt~60) or older, and
has ten (l0~or more years of credited service in force.
(2) Early retirement: The member has attained age fifty-five (55) years
or older, and has five (5) or more years of credited service in force. For a
retirement system member employed by the City on or after (see note),
early retirement shall mean the attainment of age fift -f~55) or older,
and ten (10) or more years of credited service in force.
Section 5. Section 2-278 of Chapter 2, Administration, Article VI, Division 3,
General Employee Retirement System of the Code of Ordinances is hereby amended as
follows:
Sec. 2-278. Deferred retirement upon separation from employment
(vesting).
(b) The credited service requirement for separation from city
employment with entitlement to deferred retirement is: five (5) years. For
a retirement system member employed by the City on or after (see note),
AGENDA ITEM # 7E
JULY 14, 2008
the credited service requirement for separation from cit~ployment with
entitlement to deferred retirement is: ten (10) years.
Section 6. Section 2-279 of Chapter 2, Administration, Article VI, Division 3,
General Employee Retirement System of the Code of Ordinances is hereby amended as
follows:
Sec. 2-279. Disability retirement--General conditions for eligibility.
(a.) A member having five (5) or more continuous years of credited
service and having contributed to the retirement system for five (5) years
or more, or a member hired on or after (see note having ten (10) or more
continuous years of credited service and having contributed to the
retirement system for ten (10) years or more, may retire from the service
of the city if he becomes totally and permanently disabled as defined in
subsection (b) by reason of any cause other than a cause set out in
subsection (c). Such retirement shall herein be referred to as "disability
retirement."
Section 7. Section 2-282 of Chapter 2, Administration, Article VI, Division 3,
General Employee Retirement System of the Code of Ordinances is hereby amended as
follows:
Sec. 2-282.Optional forms of pension payment.
A member of the retirement system may elect to be paid under one
(1) of the following optional forms of payment in lieu of the level straight
life form of payment. The election must be made in writing and filed with
the board of trustees prior to the date retirement is effective. Payment will
be made under the level straight life form of payment if a timely election
of an optional form of payment is not made. The amount of pension under
Option A and Option B shall be the actuarial equivalent of the amount of
pension under the level straight life form of payment. In no event may a
member's annual benefit exceed the lesser of:
(1) Option A; one hundred (100) percent survivor pension: Under
Option A, a retirant shall be paid a reduced pension for life with the
provision that upon the retirant's death, the reduced pension shall be
continued throughout the future lifetime of and paid to such person as the
retirant shall have nominated by written designation duly executed and
filed with the board of trustees at the time of election of the optional form
AGENDA ITEM # 7E
JULY 14, 2008
of payment. In the event the person nominated by the retirant predeceases
the retirant, the monthly benefit shall increase to the amount payable under
the normal form of payment for the remaining lifetime of the retirant.
(2) Option B; fifty (SO) percent survivor pension: Under Option B, a
retirant shall be paid a reduced pension for life with the provision that
upon the retirant's death, one-half of the reduced pension shall be
continued throughout the future lifetime of and paid to such person as the
retirant shall have nominated by written designation duly executed and
filed with the board of trustees at the time of election of the optional form
of payment. In the event the person nominated by the retirant predeceases
the retirant, the monthly benefit shall increase to the amount payable under
the normal form of payment for the remaining lifetime of the retirant.
(5) A deferred retirement option program (DROP), shall be established
and administered by the board of trustees of the City of Atlantic Beach
general employees' retirement system. Such DROP shall be aself-directed
program. A general employee may enter the DROP as set forth herein.
(a) Eligibility. A participant of the City of Atlantic Beach general
employees' retirement system may enter into the DROP on the first day of
the month following the attainment of age fifty-five (55) and five (5) years
of service with the City of Atlantic Beach. A participant of the City of
Atlantic Beach general employees' retirement system employed bathe
City on or after (see note~y enter into the DROP on the first day of the
month following the attainment of age f fty-five and ten (10) years of
service with the City of Atlantic Beach. However, a participant entering
the DROP prior to attaining age sixty (60) shall have their benefit
actuarially reduced for each year under the age of sixty (60). Participants
who attained eligibility prior to the enactment of the DROP shall be
afforded the option of participating immediately.
Section 8. Section 2-298 of Chapter 2, Administration, Article VI, Division 3,
General Employee Retirement System of the Code of Ordinances is hereby amended as
follows:
Sec. 2-298. Member contributions.
(c) If an employee leaves the service of the city before accumulating
aggregate time of five (5) years, or if employee was hired on or after (see
note) before accumulating aggregate time of ten (lOLyears toward
retirement and before being eligible to retire under the provisions of this
AGENDA ITEM # 7E
JULY 14, 2008
article he/she shall be entitled to a refund of all of his or her contributions
made to the city pension trust fund, plus any interest accumulated at a rate
of interest determined annually by the board of trustees, less any disability
benefits paid to him/her. If an employee who has been in the service of the
city for at least five (5) years, or if employee was hired on or after (see
note) and has been in the service of the city for at least ten (10) ~s and
has contributed to the pension trust fund as provided elects to leave his or
her accrued contributions in the trust fund, such employee, upon attaining
the age as required in section 2-278, may retire with the actuarial
equivalent of the amount of such retirement income otherwise payable to
him/her.
Section 9. The provision adopted herein shall prevail over any existing
sections of the Atlantic Beach Code to the extent said existing sections are contrary or
inconsistent herewith.
Section 10 Severability. If any section, sentence, clause, word, or phrase of
this Ordinance is held to be invalid or unconstitutional by a court of competent
jurisdiction then said holding shall in no way affect the validity of the remaining portions
of this Ordinance.
Section 11. Codification. Specific authority is hereby granted to codify this
ordinance.
Section 12. Effective Date.
Note: The modifications to the vesting requirement from 5 to 10 years include a
blank for the date of the change. Staff will insert the date that corresponds with the first
day of the month following final passage and adoption of this Ordinance.
This Ordinance, other than the provision referenced in the note above, shall take effect
upon its final passage and adoption.
AGENDA ITEM # 7E
JULY 14, 2008
PASSED by the City Commission on first reading this _ day of ,
2008.
PASSED by the City Commission on second and final reading this _ day of
2008.
John S. Meserve
Mayor/Presiding Officer
ATTEST:
Donna L. Bartle, CMC
City Clerk
Approved as to form and correctness:
Alan C. Jensen, Esquire
City Attorney
LEGEND: Underlining is new language.
AGENDA ITEM # 7E
JULY 14, 2008
VALUATION RESULTS
Proposal
Change from five year to ten year vesting for future actives.
Adoption of this proposal would require a contribution of:
Percent-of-Payroll FY 07/08 Dollars
General General
Normal Cost (0.53)
UAAL 0.11
FS112.64(5) 0.00
Total (0.42) % $ (14,540.00)
NOTE: The above percentages of payroll show the added City contributions needed to support the
proposed benefits. Because member contributions are potentially refundable, they have somewhat less
value for financing benefits.
COMMENT: Increases in unfunded actuarial accrued liability were amortized as level percents-of-
payroll over 30 years.
The preceding calculations were based on the same member data, methods, and assumptions used in the
September 30, 2006 annual actuarial valuation.
Note: An actuarial impact statement and cost estimate, in the format required pursuant to Chapter 112,
Florida Statutes, must be submitted to the Local Retirement Section, Division of Retirement, State of
Florida, prior to final action adopting a change to the Ordinance.
11/20/2007 Gabriel Roeder Smith & Company - 3-
AGENDA ITEM # 7E
JULY 14, 2008
CITY OF ATLANTIC BEACH
800 SEMINOLE ROAD
ATLANTIC BEACH, FLORIDA 32233-5455
TELEPHONE: (904) 247-5800
FAX: (904) 247-5819
SUNCOM: 852-5800
www.coab.us
CITY OF ATLANTIC BEACH GENERAL EMPLOYEE RETIREMENT SYSTEM
ACTUARIAL IMPACT STATEMENT, FEBRUARY 8, 2006
Description of Ordinance Change
• Allow a change of beneficiary after retirement with appropriate actuarial equivalent
reductions.
Funding Implications of Amendment
An actuarial cost estimate for the amendment is attached.
Certification of Administrator
The actuary has been furnished with a description of the amendment.
I believe the amendment to be in compliance with Part VII, Chapter 112, Florida Statutes and
Section 14, Article X, of the Constitution of the State of Florida.
~~ ~~ ~~~ ,Administrator
City of Atlantic Beach
General Employee Retirement System
AGENDA ITEM # 7E
JULY 14, 2008
CITY OF ATLANTIC BEACH GENERAL EMPLOYEE RETIREMENT SYSTEM
ACTUARIAL COST ESTIMATE, FEBRUARY $, 2006
Description of Proposed Ordinance Change
• Allow a change of beneficiary after retirement with appropriate actuarial equivalent
reductions.
Comments
The effect of the proposed change on contributions and obligations is de minimis.
Br d Lee Armstrong, ASA, M , EA [OS-5614)
Z~~ ~~o~
AGENDA ITEM # 7E
NLY 14, 2008
CITY OF ATLANTIC BEACH
800 SEMINOLE ROAD
ATLANTIC BEACH, FLORIDA 32233-5455
TELEPHONE: (904) 247-5800
FAX: (904) 247-5819
SUNCOM: 852-5800
www.coab.us
CITY OF ATLANTIC BEACH GENERAL EMPLOYEE RETIREMENT SYSTEM
ACTUARIAL IMPACT STATEMENT, FEBRUARY 8, 2006
Description of Ordinance Change
• Purchase of years of service for work performed during employment with other agencies,
with the member paying the full actuarial cost.
Funding Implications of Amendment
An actuarial cost estimate for the amendment is attached.
Certification of Administrator
The actuary has been furnished with a description of the amendment.
I believe the amendment to be in compliance with Part VII, Chapter 112, Florida Statutes and
Section 14, Article X, of the Constitution of the State of Florida.
~~-~-< <~, Administrator
City of Atlantic Beach
General Employee Retirement System
AGENDA ITEM # 7E
JULY 14, 2008
CITY OF ATLANTIC BEACH GENERAL EMPLOYEE RETIREMENT SYSTEM
ACTUARIAL COST ESTIMATE, FEBRUARY 8, 2006
Description of Proposed Ordinance Change
• Purchase of years of service for work performed during employment with other agencies,
with the member paying the full actuarial cost.
Comments
The effect of the proposed change on contributions and obligations is de minimis.
Brad Lee Armstrong, ASA, MAAA, A [OS-5614]
~~~/~~~
AGENDA ITEM # 7E
NLY 14, 2008
CITY OF ATLANTIC BEACH
800 SEMINOLE ROAD
ATLANTIC BEACH, FLORIDA 32233-5455
TELEPHONE: (904) 247-5800
FAX: (904) 247-5819
SUNCOM: 852-5800
www.coab.us
CITY OF ATLANTIC BEACH GENERAL EMPLOYEE RETIREMENT SYSTEM
ACTUARIAL IMPACT STATEMENT, FEBRUARY 8, 2006
Description of Ordinance Changes
~ Provide apop-up benefit as an actuarially equivalent optional form of retiree pension to
new retirees
Funding Implications of Amendments
An actuarial cost estimate for the amendments is attached.
Certification of Administrator
The actuary has been furnished with a description of the amendment.
I believe the amendment to be in compliance with Part VII, Chapter 112, Florida Statutes and
Section 14, Article X, of the Constitution of the State of Florida.
`~ ~/~i ~~~-( ,Administrator
City of Atlantic Beach
General Employee Retirement System
AGENDA ITEM # 7E
JULY 14, 2008
CITY OF ATLANTIC BEACH GENERAL EMPLOYEE RETIREMENT SYSTEM
ACTUARIAL COST ESTIMATE, FEBRUARY $, 2006
Description of Proposed Ordinance Changes
Provide apop-up benefit as an actuarially equivalent optional form of retiree pension to
new retirees
Comments
The effect of the proposed changes on contributions and obligations is de minimis.
~`~'
Brad ee Armstrong, ASA, MAAA, A [OS-5614]
-~ f ~' /tea ~
AGENDA ITEM # 7E
NLY 14, 2008
CITY OF ATLANTIC BEACH GENERAL EMPLOYEE RETIREMENT SYSTEM
ACTUARIAL COST ESTIMATE, FEBRUARY 8, 2006
See below three sample cases illustrating the cost to the employee of the various survivor
benefits. This is for illustrative purposes only. The cost varies for different retiree/beneficiary
age combinations.
Retiree Beneficiary Joint and po u
~ P
Benefit
Age Age Surviwr Benefit? factor Reduction
Percentage
62 67 100% yes 0.81892 18.11%
62 67 100% n o 0.84669 15
3 3
62 67 50% yes 0.90045. .
9.96%
62 67 50% no 0.91698 8.30%
65 65 100% yes 0.76247 23.75%
65 65 100% no 0.78871 21.13%
65 65 50% yes 0.86523 13.48%
65 _ 65 50% no 0.88187: 11.81%
56 51 100% yes 0.81953 ....18.05%
56 51 100% no 0.82888 17.11%
56 _51 50% yes 0.90081 9.92%
56 51 50% no 0.90643 9.36%
e.g. the first case is entitled to $1,000 per month straight life benefit, electing a J&S 50% with
pop-up, would get approximately $1,000*(100% - 9.96%) _ $900.40 per month