2009-12-07 City Council Study Session

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money to be used for other City operational purposes. The funding level dropped to 93.9% in 2005 when the City again began contributing to the plan. Once the annual contribution was not budgeted, the City found it difficult to add it back into the budget when needed. The actuary, Stephen Siepman with Buck Consultants, prepared a ten-year projection of the City’s anticipated financial liability for contributions to the Non-Uniformed Plan. The actuary projected the costs of the plan, assuming slow growth of assets, which caused the annual cost projection to increase substantially over the next ten years. Previously the plan had a 6.9% cost of current payroll and if investments do not re-gain value quickly the cost of the plan will eventually level out at 11.5%. It was noted that these projections are only estimates. The actuary also reported that the current economy is a poor time for plan assets to convert from a defined benefit to a defined contribution plan due to the need to sell assts at near market lows. Two options were viewed by the actuary:  Option 1 – beginning in 2010, new employees would not participate in the current plan but would receive a 6% City contribution to a 401A defined contribution plan with a mandatory 3% employee contribution.  Option 2 – In addition to the new employees outline in Option 1, employee currently in the plan but not vested would cease to accrue and be eligible for benefits under the current plan and would move into the 401A plan with a rollout of determined plan assets into their own 401A investment account. The projections showed there is no savings in the first ten years of both options and there could actually be additional cost with the new defined contribution plan. The Board understood this to be very important and a difficult issue made more complex with the economic downturn. The Board explored the subject within the Boards understanding of its role and responsibilities, but could determine no substantial reason to change the plan at this time. The Board did feel strongly that the portion of the current defined benefit plan covering vested and retired employees be retained in its current state. Mr. Wagner wanted a projection made farther out than ten years. There was a brief discussion of what is a hybrid risk. With a hybrid, the risk is shared by both the City and the employee. Ms. Ricci asked for administration to give her GFOA’s recommendations, the Elected Official Guide, and the Mortality Rate. Council consensus was to be invited to the next Pension Board meeting, which is the fourth Tuesday in January 2010, in the EOC room at 6:30 p.m. Additional information asked for by Council was how many are not invested and a report on any municipality that did a conversion. After attending the Pension Board meeting, the Council plans are to have another study session. The meeting was adjourned at 6:25 p.m. Submitted by