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