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<br />benefits plan was in a deficit position they could not convert to a defined contribution plan. <br />He asked how it worked and what the rules were. <br /> <br />Mr. Siepman noted he would not be speaking in favor of one plan over the other. He said <br />defined benefit plan has the investment risk. If continued the investment risk will always <br />be there. In a defined contribution plan, the investment risk was transferred to the <br />employee. The key reason why cost were as high as they were now was the fact that the <br />present value of the obligation the City accumulated as compared to the assets, was what <br />was now being amortized over thirty years. If it would not be for that, what the City was <br />paying each year would be the cost for the employees earning the benefits and would be a <br />substantially lower dollar amount than what was being contributed presently. If the City <br />would say the defined benefit plan goes away at some future date and would be replaced <br />by a defined contribution plan, the City would keep their commitment to try to make the <br />plan whole and be able to pay the benefits that people earned. Therefore, there would be <br />a commitment over time in order to make up the funding shortfall. What would be changed <br />were the benefits going farther into the future by current employees. In place the City <br />would provide some percentage of pay into a defined contribution plan. The key opponent <br />“would not go away” but even if there was a switch the City would still have to plan a way <br />to deal with the shortfall. <br /> <br />Mr. Glickert asked if Mr. Siepman saw any future changes with GASB as related to the <br />funds to achieve the objectives of 6½%. Secondly he asked from an actuary standpoint <br />was there a correlation between where a fund was at, the number of employees relative to <br />the years of service and stakeholders receiving the pension funds now. <br /> <br />Mr. Siepman stated the new GASB standard will require certain numbers to be disclosed. <br />The differential between the obligations and the market value of the plan, the unfunded <br />obligation would be required to go on the City’s books. He said the numbers will be larger <br />as the 6½% assumption rate was based on over a period of years. Mr. Siepman said from <br />the standpoint of funding and perspectives, it would not be of help to the City. He said <br />generally speaking the baby-boom generation has to be taken into consideration and a <br />number of plans were seeing the number of retirees compared to active employees <br />growing, which will put some pressure on the City’s cash flow. <br /> <br />Mr. Price noted that there were years when the plan was not funded and asked if the good <br />times rolled again, would it be wise to continue funding. Mr. Siepman stated that some <br />sort of funding should continue. <br /> <br />Mr. Sharpe asked if there was any advantage of infusing any funds into the plan. Mr. <br />Siepman said the better funded the plan was the more secure the benefit would be for the <br />participants. <br /> <br />Ms. Carr asked if the City put in the 1.2 million dollars into the plan and the market goes <br />down, would the City essentially loose its money. Mr. Siepman agreed. <br /> <br />Mayor pro tem Sharpe stated that the meeting for this discussion had run out of time. The <br />next topic to be reviewed was the Parkview Gardens’ Plan. <br /> <br />A summary of the planning process and the amended draft plan for Parkview Gardens was <br />given by Dr. John Hoal and Tim Breihan with H3 Studios. <br />4 <br /> <br />