Loading...
HomeMy WebLinkAbout06-27-2017 Agenda CITY OF AUBURN INTEROFFICE MEMORANDUM TO: Fire Relief and Pension Board Mayor Nancy Backus; Chair Shelley Coleman, Finance Director Bill Petersen, Member Robert Wigley, Member FROM: Danielle Daskam, City Clerk DATE: June 16, 2017 SUBJECT: FIRE RELIEF AND PENSION BOARD AGENDA FOR TUESDAY, JUNE 27, 2017 AT 1:30 PM CONFERENCE ROOM 2, CITY HALL 2ND FL FIRE RELIEF AND PENSION BOARD JUNE.27, 20171:30 PM AGENDA I. CALL TO ORDER II. APPROVAL OF MINUTES A. Minutes of 4he June 28, 201.6 Fire Relief and Pension Board meeting.* (Recommendation: Board approve fhe June 28, 2016 minutes a.s distributed.) III. UNFINISHED BUSINESS IV. NEW BUSINESS A. Acfuarial Valuation B. Annual Affidavits Verifying Benefit Eligibility C. Fire Relief and Pension Cost of Living Benefit Adjustments (Reco.mmendation: Board approve the annual pension benefits to pensioners ahd beneficiaries.) D. Approval of Claims (Recommendation` Board approve the 2016 ezpenses.) E, Investment Authorization (Recommendation: Board authorize the Finance Director of the City to make such investments as may be appropriate from the Fire Relief and Pension Fund.) V. ADJOURNMENT Page 2 Fire Relief and Pension Board Agenda for Tuesday, June 27, 2017 Distribution List: Nancy Backus, Mayor Shelley Co.leman, Finance Director Bill Petersen, Member Robert Wigley, Member Dani Daskam, Cify Clerk * �oF �' * Interoffice Memorandum � WASHINGTON To: Shelley Coleman, Finance Director From: Ronda Stella, Payroll Accountant CC: File Date: June 15, 2017 Re: Fire Relief and Pension Benefds The following information is for the presen4ation to the Fire Relief and Pension Board at their annual meeting which is scheduled for Tuesday June 27, 2017. I have included information conceming the COL4 and other information below. • Actuarial Valuation Milliman Consuftants and Actuaries prepare an actuarial valuation of the Firefighters Pension Fund(FPF)eve.ry two years as required by the Goyemmental Accounting Staniia�ds Boa�d(GASB). The last report prepared is dated January 1, 2017. The plan experienced a liability increase due to excess behefits increasing more4han anticipated over the past Nvo years and a lower than expected mortality rate. Since January 1,2007 there have been no long-term care or other non-pension beneTits paid from 4his fund. • Annual Affidavits Verifvina Benefd Eliaibilitv In April 2017, all retirees and beneficiaries were sent affidavits requesting updated personal informa4ion. The City requested that 4he:affidavits be notarized and retumed to 4he Payrolf Department by May 4, 2017. Gurren4ly eleven of 4he affidavits have.been receiVed, out of thirteen sent. Eleven of the thirteen retirees and beneficiaries are receiving a monthly pension beneft from the City. One retiree and one beneficiary are not receiving a monthly pension benefit from the City, as their current monthly retirement allowance from the State covers the percentage of pension benefR required. Page 1 of 2 � t1VBURN * MORE THAN YOU IMAGINED • Pension Adiustments for Pensioners and Beneficiaries Every January 1 the City calculates the total pension payments due based on the salary schedules in the current Frefighter's union conVact.. On January 1, 2015, perthe corttract, pension payments increased by 2:2% for all fi�e ranks. January 1, 2016, per the conVad, pension payments increased by 5:335%o and 1.1%for the Battalion Chief rankand all other ranks, respecti0ely. The City adjusted'Rs portion of tlie payment to 4he retirees to reflect.4he Firefighter's union contract increases. Subsequently, on April 1 of each year,the State applies a COLA adjustment to fheir portion of the pension paymeMs to retirees. This results in an equal reduction in the pension paymen4s made by the Eity. The City's poRion of the pension payments, (as calculated in accordance with RCW 41.18)is reduced by 4hesame amoun4as the increase in the monthly retirement allowance tFiey receive from the State. Apqroval of Claims $187,004 was paid from the FPF, an increase in the amount of$9,332 attributed to an inc�ease in the retiree pension beneft payments, This increase was offset by decreased professional services supplied tiy the City's actuary, Milliman. A full actuarial valuation of the FRP Fund is performed every two years. $102,671 was paid from the General Fund for LEOFF 1 Firefighters' medical expenses who are covered by the FPF. The total 2016 ezpenses paid from the FPF Fund and General Fund are $289,675, a 13.8%decrease. The decrease is due to decreased medical insu�ancep[emiums and medical reimbursement requests submitted by retirees in 2016. Investment Authorization 2016 fund assets in the amount of$2,420,286 are invested in the Washington State Investment Pool, treasury notes, and bonds. The ayerage investment return in 2016 was approximately .46%, up :28%from the previo.us year. Page 2 of 2 CIVBURN * MORETHAN YOU IMAGINED crr�roF_ *��* * Interoffice Memorandum � WASHINGTON To: Fire Pension Fund Committee From: Shelley Coleman, Finance Director CC: Nancy Backus, Mayor Date: June 15, 2017 Re: Fi�e Pension Fund and Liability The City has a Fire Pension Fund (FPF)and it is obligated to pay retirement benefits to active members as of March 1, 1970. Currently the FPF has 13 retired members which includes four survivors as beneficiaries. Tlie Fund operates on a pay-as-you-go basis. For those retired after 1970,the City must pay the excess of the FPF benefit over the LEOFF benefit. The LEOFF benefds increase�rith the CPI forSeaUle;whiile most of the FPF benefrts _ .. increase with wages of the current active firefighters in the rank the members held at retirement, For this reason, the behefits are highly sensitive to the spread between wage increases and CPI increases. Wages have typically grown at a faster rate than CPI and are eicpected to continue to do so in the future. Example of the benefd calculation: Suppose that a member has an FPF benefd of$4;000 per month and a LEOFF benefd of $3;5Q0 per month. The City paid benefit is$500 per month. If wages increase at 3:25%, while the CPI increases at 2.25%,the benefd increases look like the following: ��._ , _.. , Lurrent� � � . F.ollowing"�� €v_ Year fncrease Year FPF $4,000.00 3.25% $4,130.00 LEOFF $3,500.00 2.25% 3,578.75 City Paid Benefit $ 500.00 10.25% $ 551:25 As of January 1, 2017,the actuarial present value of the future excess pension benefds to be provided by the City is$3,300,526, which was 10% higher 4han expected due to a 4% increase in demographic experience and 6% increase due to changes in benefit amo.unts compared to expectations. Page 1 of 3 The present value of total assets available to fund future excess pension benefr[s is $2;412,576 leaving an actuarial deficiency of$887,950. The shortfall is because the available assets do not include the state tax on fire insurance premiums,which is$75,000 peryear. This revenue stream may not be available in firture years and therefore was not included in the funding scenario in the most recent study.Preyious studies assumed fhis revenue stream through 2024. Derivation of ContributionsRequired for RensioaBenefifs - - --- --__ ------ 2015 2017 A. Actuarial PV of benefits not provided by LEOFF system 1 $ 3,130,000 S 3,300,526 B. Assets of the Fund Investments less Liabilities $ 2,609,000 S 2,412,576 C. PV of future fire insurance premiums(thru 2024) $ 741,000 $ - D. Total Assets(B+C) $ 3,350,000 $ 2,412,576 Actuarial deficiency(A- D not less than zero) $ - $ 887,950 The City requested the actuary to provide a contritiution scFiedule to address the deficR over a 5-year period at the assumed rate of retum of 3:5%and 2.00%. The required oontribution over5 years, beginning in 2017, would be$192,000 per year at a 3.5%rate of retum or $307,000 per year at a 2% rate of retum. Finance wilf be presenting this information to Council in August for their consideration in the 2018 budget discussions. Page 2 of 3 —v.__.__,.._�—____�__�— Total Estimated Payouts _� Fire Pension Fund szso,000 -_��_.______ � i k i Szoo,000 - - - —__.__�_.._________ E � siso,000 - - -- - - - - - - - - — - � i � � Sioo.000 - - - - - - - - - - - - - - - - - - - � Sso,000 - - _ _ _ _ _ - - - - - - - - - - - - - ' � ' � i5- - _ _ ._ _ _ _ _ _ ._ _ _ _ _ - - - - - - _. _ _ _ - - -- -_ - � r w m o .� n m a �n .c n co a o .� (v m a �n �c n m a� o .� rv m � �n �o � ,� ,.a ,y r.i rv rv ,•a rv r.i n N rv ev m m m m m m m m cn m v < a e e I� � o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 � o 0 0 0 0 N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N Currently there are 13 people receiving pension paymenfs from the FPF: - _ .. Disa6led _.__. m the Line of�uty Suniivors _.._ __..__..._. � _ ---______. ____._._.._--.. RetiredforServic'e Age Number Age. Number Age� Number 65-69 1 65-69 1 70-74 1 75-79 3 70-74 1 75-79 1 80-84 1 80-54 1 85-89 1 90-94 1 90-94 1 Page 3 of 3 City of Auburn, Washington STATEMENT OF EIDUCIARY NET POSITION _ _ ._ _. .. FIDUCIARY FU.NDS December 31, 2016 Fire Relief Pension Trust Fund ASSETS: Cash and Cash Equivalents $ 2,420,286 Receivables: Customer Accounts - Total Assets 2,420,286 LIABILITIES: CurrentPayables 7,710 Due to Other Governmental Units - Total Liabilities 7,710 NET POSITION Held in Trust for Pension Benefits and Other Purposes $ 2,412,576 Citjr of Auburn, Washington STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS For the Year Ended December 31, 2016 Fire Relief Pension Trust Fund ADDITIONS: Fire Insurance Premiums-Transferred from General Fund $ 76,569 Investment Earnings 10;454 Total Additions 87,023 DEDUCTIONS: Benefit Payments 173,534 Insurance Ezpense 500 Administrative F�cpenses 12,970 Total Deductions 187;004: Change in Net Position (99,981) Net Position -Beginning 2,512,557 Net Position -Ending $ 2,412,576 Actuarial Valuation of Firefighters' Pension Fund City of Auburn January 1, 2077 Part I — PENSION FUND VALUATION REPORT SECTION 1 Conclusions and Recommendafions The Citys obligations under the FPF are limited to the benefits provided to firefighters who retired prior to March 1, 1970, plus payments of excess retirement benefds to active members as of that date. To meet these obiigations, the C.ity may contribute annually to the Fund the amount raised by levying all or part of a tax of up to $0.45 (only$0.225 of which c.an be in excess of fhe property tax limit pursuant to Revised Code of Washington (RCV� &4.52.043) per $1,000 of true and fair market value, 4he maximum provided by law for maintaining the Fund. Contributions also include donations and income from the state fire insurance premium collection. The Fund is operating on a pay-as-you-go basis. As of J,anua .ry 1, 2017, the actuarial present value of future excess pension benefits to be provided bjr the City is $3,301,000. As of January 1, 2015 (the date of our last valua4ion), the present value of excess pension benefits was determined to be $3.130 million. The ezpected value as of January 1, 2017 based upon our 2015 valuation was $2.996 million. The actual present value of$3.301 million was 10%o higher than expected forreasons summarized in the following chart: ia i ity ncrease (Decrease) as a Reason Percenta e Demographic experience 4% Changes in benefit amounts compared to expectations 6"/0 Iotal___ ��°�^ Lowertlian expected mortality led to a liability increase. Further increasing liabilities was the fact that ezcess bene£ds increased more than anticipated over the past iwo years. The plan remains sensitive to demographic ezperience tHat deviates from expecta4ions due to the small size of the plan membership. The plan also remains sensitive to deviations in the excess benefit amounts from expectations. This woB product was prepared solely Por the City o(Aubum/or Me purposea Eascnbod herein Antl may not be L■ appropnate to use(or otherpurposes.Milliman dces not intend robanefi[en0 essumas no.dury or lieblliry ta aMer 9 � Milliman Parties who recaive this work. Milliman recommanda that third parties be aided by their own ectuery or other quali(etl pro(essional when reviewin9 the Milliman work producl. FprA022.tlocv 0003 FPC 98/409.FPC.10.201]I DRW/FNTIRFB/nlo