Exh 8HAgenda Item:
Date: 2- ~ - 40 _
CITY OF ATLANTIC BEACH
CITY' COMMISSIONER MEETING
STAFF REPORT
ITEM: Request Commission guidance on implementation of State
mandated changes to the Police Pension Benefits, City's Code of
Ordinances, Article VI, Employee Benefits, Division 3, Retirement
System.
SUBMITTED BY: George Foster, Human Resource Manager
DATE: February 8, 2000
BACKGROUND: On March 12, 1999, the State substantially amended Chapters 175
and 185, Florida Statutes dealing with Fire/Police Pension Funds.
The City Commission conducted a first reading to implement these
changes based upon our assumption that they would result in no
additional costs to the City since the City's Police pension benefits
were currently equal to, or greater, than those mandated.
However, based upon the "legal" wording of these changes, an
actuarial impact cost statement has been received indicating the
cost for these changes would be 1.06% of Police payroll or
approximately $12,528.00 annually. (See attached)
These changes are not mandatory until sufficient additional Chapter
185 fiends become available from the State; therefore, the City may
delay implementation until additional State funds are received.
_ Based upon receipt of $70,289.46 Section 185 funds for 1997 (the
base year) and receipt of $68,047.84 Section 185 funds for 1998,
the date that these changes would need to be implemented is not
known.
CHANGES & STAFF The State has mandated three major changes to the City's Police
RECOMMENDATIONS: Pension Plan as indicated below.
Staff recommendation would be to delay implementation of these
mandated changes until sufficient additional Section 185 funds
become available. However, any, or all, of the mandated changes
maybe implemented prior to receipt of additional State Chapter
185 funds.
Change 1. Addition of a normal retirement eligibility of age 55 with
10 years of service. Annual cost of .3% or $3,056.
Comments. The City Police Pension Plan currently has retirement
eligibility as follows:
1. Age 50 with 20 years of service, or
2. Age 60 with 5 years of service, or
3. Any age with 30 years of service.
Recommendation. Delay implementatin until additional State
Section 185 funds become available.
Change 2. Addition of an early retirement of age 50 with 10 years
of service. Annual cost of .27% or $2,750.
Comments. The City could implement this change with a reduction
to benefits for the early retirement; however, the State has limited
the reduction to be no greater than 3% for each year by which the
member's age, at retirement, preceded the member's normal
retirement age. Therefore, there will be an annual cost to
implement this change even with the reduction factor. -
Recommendation. Delay implementation until additional State
Section 185 funds become available.
Chance 3. Addition of a normal retirement under the standard
form of payment which is payable for life and 10 years certain.
Annual cost of .66% or $6,722.
Comments. This will become the City's Police Pension Plan's
"standard'' retirement benefit; however, a retiree may select an
alternative method of payment such as "employee life only" or a
retirement option with a survivor benefit. This option maybe able
to be implemented with an actuarial reduction in benefit while
retaining the current benefit of 3% times length of service times
final average salary as an optional benefit.
Recomrr~endation. Implement the benefit with current 3%
multiplier which will be actuarially reduced based upon age/sex but
not less than the State mandated 2% multiplier. The 3% multiplier
will be retained as an optional benefit that employees may select.
This should provide a no cost method of implementation and not
change (increase) the current benefit provided.
FITNDING: If changes are implemented prior to receipt of additional Chapter
185 funding from the State, then funds would be required from the
City.
ATTACHMENT: Actuarial Impact Statement
_ ~
CITY MANAGER: ----.-
;'
GABRIEL, ROEDER, SMITH & COMPANY
Consultants & Actuaries
1000 Town Center • Suite 1000 • Southfield, Michigan 48075 • 248-799-9000 • 800-521-0498 • fax 248-799-9020
December 7, 1999
Mr. George A. Foster
Human Resource Manager
City of Atlantic Beach
800 Seminole Road _
Atlantic Beach, Florida 32233-5445
Re: Proposed Benefit Changes for Active Police Members
Dear George:
Enclosed are 10 copies of the supplemental valuation done to determine the
individual costs associated with proposed benefit changes for the City of Atlantic
Beach Police Officers' Retirement System. The results do not add to 1.06% shown
in the November 8, 1999 Impact Statement due to overlap of the 55 & 10 and the
50 & 10 when combined. If you have questions or comments regarding these
results, please call.
Respectfully submitted,
r~ ~ ~,
Brad L. Armstrong, ASA, EA
BLA:cg
Enclosures
5
CITY OF ATLANTIC BEACH
POLICE OFFICERS' RETIREMENT SYSTEM
PROPOSALS UNDER CONSIDERATION
SUBMITTED TO: The Board of Trustees
DATE: ~ December 7, 1999
SUBMITTED BY: Brad L. Armstrong, ASA, EA
Gabriel, Roeder, Smith & Company
BACKGROUND
This report contains the results of supplemental actuarial valuations requested to determine the
individual costs associated with changes under consideration for all active Police members. The
proposed changes for Proposals 1, 2 and 3 were valued to be funded entirely by additional Employer
contributions from additional funds through Chapter 185.
Except as other wise noted, valuation data, methods and assumptions were the same as those used for
the annual actuarial valuation as of September 30, 1998. Increases in unfunded actuarial accrued
liability were amortized as level percent of payroll over 30 years. The member data as of
September 30, 1998 can be summariz°d as follows:
Police
No. of active members 23
Annual payroll $940,002
Averages -age 36.1 years
- service 7.9 years
- pay $ 40,870
EXPLANATION OF TERMS
The term "Normal Cost" in this report refers to the on-going cost of providing the changes for each
year of credited service. This cost continues for the working life of current and future active members,
if they are to be included in this change.
The term "UAAL" (unfunded actuarial accrued liability) in this report refers to the temporary cost of
providing the changes to each year of service already rendered by active members as of September 30,
1998. This cost is scheduled to continue for 30 years.
The amounts shown are the level percents of payroll applicable to all current and future active
members present during the amortization period. All items cover death and disability (where
applicable) benefits paid from the pension fund, including post-retirement survivor benefits, if
applicable age, duration and service requirements are met.
VALUATION RESULTS
Proposal l -The addition of a normal retirement eligibility of age 55 with 10 years of service.
Adoption of this proposal would require an additional Employer contribution of:
Percent of Payroll FY 99/00 Dollars
PoliceX Police*
Normal Cost 0.22% $2,241
UAAL 0.08 815
Total 0.30% $3,056
__ _ * These results are not additive to those presented in Proposals 2 and 3.
Proposal 2 -The addition of an early retirement eligibility of age 50 with 10 years of service.
Adoption of this proposal would require an additional Employer contribution of:
Percent of Payroll FY 99/00 Dollars
Police* Police*
Normal Cost 0.18% $1,833
UAAL 0.09 917
Total 0.27% $2,750
* These results are not additive to those presented in Proposals 1 and 3.
Proposal 3 -The addition of a normal retirement benefit payment under the standard form of payment
which is payable for life and 10 years certain.
Adoption of this proposal would require an additional Employer contribution of:
Percent of Payroll FY 99/00 Dollars
Police* Police*
Normal Cost 0.40% $4,074
UAAL 0.26 2,648
Total 0.66% $6,722
* These results are not additive to those presented in Proposals.l and 2.
COMMENT: The additional contribution rate needed to support this proposal is sensitive to the
utilization of retirement rates for the proposed retirement conditions. The cost shown above could
change if utilization (retirement) rates are different than assumed. Please refer to the next page for
these rates.
r
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, 1998 annual actuarial valuation except as follows:
The retirement pattern used in Proposal 1 and Proposal 2 were adjusted to reflect utilization of
provisions allowing Police active members to retire at age 55 with 10 years of service or age 50 with
10 years of service. The patterns used were as follows:
55&10 50&10
Retirement Percent of Eligible Early Percent of Eligible
Ages Persons Retiring Retirement Ages Persons Retiring
55 10% 50 20%
56 10 51 15
57 10 52 10
58 10 53 10
59 20 54 10
60 100 55 10
56 10
57 10
58 10
59 20
60 100
Note: An actuarial impact statement and cost estimate, in the format required pursuant to Chapter 112,
Florida Statutes, must be submitted to the Department of Administration, Division of Retirement, State
of Florida, prior to final action adopting a change to the Ordinance.