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HomeMy WebLinkAbout4416 Firefighters Retirement SystemOrdinance No. 4416 An Ordinance of the City of Sanford, Florida, amending Chapter 66, pensions and retirement, Article III, of the Code of Ordinances of the City of Sanford relating to the Firefighters' Retirement System; amending Section 66-72, and Section 66-79 and adding Section 66-87 relating to supplemental benefit component for special benefits/Chapter 176 share accounts; providing for legislative findings and intent; providing for conflicts; providing for a savings provision; providing for codification; providing for severability and providing for an effective date. Be it Enacted by the People of the City of Sanford, Florida: Section 1. Legislative findings and intent. (a). The City Commission of the City of Sanford hereby adopts and incorporates into this Ordinance the City staff report and City Commission agenda memorandum relating to this Ordinance. (b). The City of Sanford has complied with all requirements and procedures of Florida law in processing and advertising this Ordinance. Section 2. Firefighters' Retirement System. Chapter 66, Article III, Code of Ordinances of the City of Sanford, is hereby amended by amending Section 66-72, Membership, subsection (1), Conditions of Eligibility, to read as follows: (1) Conditions of eligibility. (a)- All firefighters as of the efferative date April 9, 1984, and all future new firefighters, shall become members of this system as a condition of employment. Notwithstanding the preceding sentence, this system shall be closed to new members on October 1, 2017. Firefighters hired on or after October 1, 2017 shall become compulsory members of the Florida Retirement System (FRS) and shall not be eligible for membership in this system. For the purposes of this Ordinance, underlined type shall constitute additions to the original text, * * * shall constitute ellipses to the original text and stFikethmugh shall constitute deletions to the original text. Firefighters hired before October 1, 2017 who are members of this system on September 30, 2017 may elect to participate in FRS or continue participating in this system. Eligibility for participation in the FRS, as well as FRS benefits and contributions, will be determined in accordance with Chapter 121 tdoran(a-doranlaw.com, as that statute now exists and as it may be amended in the future. Section 3. Firefighters' Retirement System. Chapter66, Article III, Code of Ordinances of the City of Sanford, is hereby amended by amending Section 66-79, Miscellaneous Provisions, by adding a subsection (12) to read as follows: In -Service Distributions. The plan may make in-service distributions if otherwise permitted under applicable law. Section 4. Firefighters' Retirement System. Chapter 66, Article III, Code of Ordinances of the City of Sanford, is hereby amended by adding Section 66-87, Supplemental Benefit Component for Special Benefits; Chapter 175 Share Accounts, to read as follows: Sec. 66-87. Supplemental Benefit Component for Special Benefits; Chapter 175 Share Accounts. There is hereby established an additional plan component to provide special benefits in the form of a supplemental retirement, termination, death and disability benefit to be in addition to the benefits provided for in the previous sections of this Plan such 2 For the purposes of this Ordinance, underlined type shall constitute additions to the original text, * * * shall constitute ellipses to the original text and strikethraugh shall constitute deletions to the original text. benefit to be funded solely and entirely by Chapter 175, Florida Statutes, premium tax monies for each plan year which are allocated to this supplemental component as provided for in Section 175.351, Florida Statutes. Amounts allocated to this supplemental component ("Share Plan") shall be further allocated to the members and DROP participants in a manner to be agreed upon. Section 6. Savings. The prior actions of the City of Sanford relating to the administration of the firefighters' retirement system and related matters are hereby ratified and affirmed. Section 6. Conflicts. All Ordinances or parts of Ordinances in conflict with this Ordinance are hereby repealed. Section 7. Severability. If any section, sentence, phrase, word, or portion of this ordinance is determined to be invalid, unlawful or unconstitutional, said determination shall not be held to invalidate or impair the validity, force or effect of any other section, sentence, phrase, word, or portion of this Ordinance not otherwise determined to be invalid, unlawful, or unconstitutional. Section 8. Codification. Sections 2, 3 and 4 of this Ordinance shall become and be made a part of the Code of Ordinances of the City of Sanford, Florida; provided, however, that all other sections shall not be codified. 3 For the purposes of this Ordinance, underlined type shall constitute additions to the original text, * * * shall constitute ellipses to the original text and stFikethrough shall constitute deletions to the original text. Section 9. Effective Date. This Ordinance shall become effective immediately upon enactment by the City Commission. IV Passed and Adopted this1f4th day of September, 2017. City Commis ion of the City of Sanford, Flori _.0 Attest: CynthiA Porter, City Clerk Approved as to form and legal sufficiency: .,-- �Ize William L. Colbert, Esquire City Attorney 4 For the purposes of this Ordinance, underlined type shall constitute additions to the original text, * * * shall constitute ellipses to the original text and stFikethreugh shall constitute deletions to the original text. --1877- WS RM X Item No. t CITY COMMISSION MEMORANDUM 17-264 SEPTEMBER 11, 2017 AGENDA To: Honorable Mayor and Members of the City Commission PREPARED BY: Cynthia Porter, City Clerk Cynthia M Lindsay, Director f Finance SUBMITTED BY: Norton N. Bonaparte, Jr., City Manag SUBJECT: City of Sanford Fire Fighters' Retirement stem Proposed Ordinance STRATEGIC PRIORITIES: ❑ Unify Downtown & the Waterfront ❑ Promote the City's Distinct Culture ❑ Update Regulatory Framework ❑ Redevelop and Revitalize Disadvantaged Communities SYNOPSIS: Ordinance No. 2017-4416, to amend City Code, Sections 66-72, 66-79, and 66-87 of the Fire Fighters' Retirement System, is being submitted for second reading and adoption. FISCAL./STAFFING STATEMENT: The Fire Pension Board's actuary, Foster & Foster, Inc., advised there is no cost associated with the adoption of this ordinance. BACKGROUND: At the May 4, 2017 Fire Fighters' Pension Board meeting, the board unanimously recommended amending the following sections of the Fire Fighters' Retirement System in accordance with recent changes to the City's union contracts with employees. • Section 66-72, Conditions of eligibility, is being amended to close entrance to new members effective October 1, 2017. • Section 66-79, In -Service Distributions, is being amended to allow for in-service distributions. • Section 66-87, Benefit; Chapter 175 Share Accounts is being added to abide by F.S. 175.351 establishing a share plan component to the plan. This amendment is not currently being funded due to the union contract allowing the City to use all Chapter 175 premium tax monies to pay down the unfunded liability that are in reserves and going forward. The City Commission approved the first reading of Ordinance 2017-4416 on August 28, 2017. The City Clerk published notice of the public hearing in the Sanford Herald on August 27, 2017. LEGAL REVIEW: The ordinance was prepared by the Fire Fighters' Pension Board attorney. RECOMMENDATION: The Fire Fighters' Pension Board recommends that the City Commission adopt the ordinance. SUGGESTED MOTION: "I move to adopt Ordinance No. 2017-4416." Attachments: Cover letter from the Law Offices of Christiansen & Dehner, P.A. Actuarial Impact Letter from Foster & Foster Actuaries Ordinance No. 2017-4416 Law Offices Christiansen & Dehne r9 P.A. 63 Sarasota Center Blvd. Suite 107 Sarasota, Florida 34240 ® 941-377-2200 O Fax 941-377-4848 May 22, 2017 Mr. Norton N. Bonaparte Jr. City Manager City of Sanford Post Office Box 1788 Sanford, Florida 32772-1788 Re: City of Sanford Firefighters' Retirement System - Proposed Ordinance Dear Mr. Bonaparte: As you know, I represent the Board of Trustees of the City of Sanford Firefighters' Retirement System. Enclosed please find a proposed ordinance amending the City of Sanford Firefighters' Retirement System which is recommended by the Board for adoption by the City Commission. This ordinance provides language to close the plan to new members as of October 1, 2017, in accordance with a recently negotiated union agreement. We have also included language to allow in-service distributions, as well as a section to add the Supplemental Benefit Component which is now required for all firefighter plans under Chapter 175, Florida Statutes. There is no cost associated with this addition. By copy of this letter to the Board's actuary, Foster & Foster, Inc., I am requesting that they provide you with the necessary actuarial impact statement that must accompany this ordinance upon consideration and adoption by the City Commission. If you or any member of your staff have any questions with regard to this ordinance, please feel free to give me a call. In addition, if you feel it would be appropriate for me to be present at the meeting at which this ordinance is considered by the City Commission, please contact my office to advise me of the date that the ordinance would be considered. Yours ve ly, Scott R. Christiansen SRC/dm enclosure cc: Patrick Donlan, with enclosure Susy Pita, with enclosure F FOSTER & FOSTER . t� 14�AVit.G ES AND CONSULTANTS July 27, 2017 VIA MAIL AND E-MAIL Ms. Susy Pita, Plan Administrator 21629 Stirling Pass Leesburg, FL 34748 Re: City of Sanford Firefighters' Retirement System Actuarial Impact Statement Dear Susy: Enclosed is the following material, which has been prepared in support of the proposed benefit change to the above referenced Fund: 1. Three (3) copies of the required Actuarial Impact Statement, which outlines the costs associated with implementing the change. 2. Draft of transmittal letters to the Bureau of Local Retirement Systems and the Bureau of Firefighters' Retirement Trust Funds. Signed copies of the Impact Statement and corresponding ordinance should be forwarded to the two Bureaus. If you have any questions concerning the enclosed material, please let us know. Sincerely, A arine M. O'Nea1, FSA, EA, MAAA Enclosures Cc (via email): Scott Christiansen, Board Attorney Cynthia Lindsay, Director of Finance 13420 Parker Commons Blvd., Suite 104 Fort Myers, FL 33912 • (239) 433-5500 • Fax (239) 481-0634 • www.foster-foster.com Ms. Sarah Carr Police Officers' and Firefighters' Retirement Trust Funds Department of Management Services, Division of Retirement Post Office Box 3010 Tallahassee, FL 32315-3010 Re: Actuarial Impact Statement Dear Ms. Carr: The City of Sanford is considering the implementation of amended retirement benefits for its Firefighters. The changes are described in the enclosed material. Pursuant to the provisions of Chapter 175, we are enclosing the required Actuarial Impact Statement and a copy of the proposed Ordinance for your review. If you have any questions or if additional information is needed, please contact us. Sincerely, Mr. Keith Brinkman Bureau of Local Retirement Systems Division of Retirement Post Office Box 9000 Tallahassee, FL 32315-9000 Re: Actuarial Impact Statement Dear Mr. Brinkman: The City of Sanford is considering the implementation of amended retirement benefits for its Firefighters. The changes are described in the enclosed material. Pursuant to Section 22d-1.04 of the Agency Rules, we are enclosing the required Actuarial Impact Statement (AIS) and a copy of the proposed Ordinance for your review. If you have any questions or if additional information is needed, please contact us. Sincerely, CITY OF SANFORD FIREFIGHTERS' RETIREMENT SYSTEM ACTUARIAL IMPACT STATEMENT July 27, 2017 Attached hereto is a comparison of the impact on the Total Required Contribution (per Chapter 112, Florida Statutes), and the Required City Contributions, resulting from the implementation of the following changes: o The retirement system shall be closed to new Members on October 1, 2017. Firefighters hired on or after October 1, 2017 shall become compulsory members of the Florida Retirement System (FRS). o Firefighters hired before October 1, 2017 who are Members of this system on September 30, 2017 may elect to participate in FRS or continue participating in this system. ■ For the purpose of this impact statement, we assumed all Members will stay in this system. The actual experience will be recognized once the elections are known. o The plan is allowing in-service distributions if otherwise permitted under applicable law. o A share plan is established. In addition to the changes above, mutual consent was reached regarding the use of State Monies. It is our understanding that the agreement entails the use of the entire $1,142,947.38 Excess State Monies Reserve to be used to offset the Unfunded Actuarial Accrued Liability (UAAL). The City will continue to be able to use the $168,686 to offset their annual contribution and the excess will be used to pay down the URAL. Since the use of the Excess Reserve was part of the benefit changes, we amortized the resulting base over 30 years. The Plan closure also required us to lower the payroll growth assumption from 1.56% to 0% as the anticipated payroll is expected to decrease overtime. CITY OF SANFORD FIREFIGHTERS' RETIREMENT SYSTEM ACTUARIAL IMPACT STATEMENT July 27, 2017 (Page 2) The cost impact, determined as of October 1, 2016, as applicable to the plan/fiscal year ended September 30, 2018, is as follows: Proposed Current Total Required Contribution % of Total Annual Payroll 37.2% 39.0% Less Member Contributions % of Total Annual Payroll 7.0% 7.0% Equals Required City & State % of Total Annual Payroll 30.2% 32.0% State Contribution* 168,686 168,686 % of Total Annual Payroll 4.6% 4.6% Balance from City % of Total Annual Payroll 25.6% 27.4% * The City may use the State Monies up to $168,686 per year, if received, to offset their required contribution. Amounts received in excess of this amount are used to pay down the URAL. The changes presented herein are in compliance with Part VII, Chapter 112, Florida Statutes and Section 14, Article X of the State Constitution. The undersigned is familiar with the immediate and long-term aspects of pension valuations, and meets the Qualification Standards of the American Academy of Actuaries necessary to render the actuarial opinions contained herein. All of the sections of this report and the October 1, 2016 valuation report are considered an integral part of the actuarial opinions. Christine M. O'Neal FSA, EA, MAAA Enrolled Actuary #17-7916 STATEMENT OF PLAN ADMINISTRATOR The prepared information presented herein reflects the estimated cost of the proposed changes. Chairman, Board of Trustees COMPARATIVE SUMMARY OF PRINCIPAL VALUATION RESULTS New Assump Old Assump 10/1/2016 10/1/2016 A. Participant Data Actives 67 67 Service Retirees 31 31 DROP Retirees 9 9 Beneficiaries 8 8 Disability Retirees 5 5 Terminated Vested 2 2 Total 122 122 Total Annual Payroll $3,672,217 $3,672,217 Payroll Under Assumed Ret. Age 3,672,217 3,672,217 Annual Rate of Payments to: Service Retirees 1,008,226 1,008,226 DROP Retirees 444,416 444,416 Beneficiaries 156,442 156,442 Disability Retirees 119,954 119,954 Terminated Vested 30,677 30,677 B. Assets Actuarial Value (AVA)29,412,146 29,412,146 Market Value (MVA)' 29,069,903 29,069,903 C. Liabilities Present Value of Benefits Actives Retirement Benefits 15,738,705 15,738,705 Disability Benefits 672,248 672,248 Death Benefits 296,502 296,502 Vested Benefits 1,090,985 1,090,700 Refund of Contributions 96,982 97,267 Service Retirees 10,135,793 10,135,793 DROP Retirees' 6,673,651 6,673,651 Beneficiaries 1,248,931 1,248,931 Disability Retirees 1,135,545 1,135,545 Terminated Vested 203,498 203,498 Excess State Monies Reserve 0 1,142,947 Total 37,292,840 38,435,787 New Assump Old Assump C. Liabilities - (Continued) 10/1/2016 10/1/2016 Present Value of Future Salaries 29,333,377 29,333,377 Present Value of Future Member Contributions 2,053,336 2,053,336 Normal Cost (Retirement) 537,187 537,187 Normal Cost (Disability) 52,781 52,781 Normal Cost (Death) 22,777 22,777 Normal Cost (Vesting) 57,385 57,361 Normal Cost (Refunds) 18,367 18,391 Total Normal Cost 688,497 688,497 Present Value of Future Normal Costs 5,345,818 5,345,818 Accrued Liability (Retirement) 11,496,542 11,496,542 Accrued Liability (Disability) 276,574 276,574 Accrued Liability (Death) 127,658 127,658 Accrued Liability (Vesting) 626,815 626,796 Accrued Liability (Refunds) 22,015 22,034 Accrued Liability (Inactives) 19,397,418 19,397,418 Excess State Monies Reserve 0 1,142,947 Total Actuarial Accrued Liability (AL) 31,947,022 33,089,969 Unfunded Actuarial Accrued Liability (UAAL) 2,534,876 3,677,823 Funded Ratio (AVA / AL) 92.1% 88.9% D. Actuarial Present Value of Accrued Benefits Vested Accrued Benefits Inactives ' Actives Member Contributions Total Non -vested Accrued Benefits Total Present Value Accrued Benefits (PVAB) Funded Ratio (MVA / PVAB) Increase (Decrease) in Present Value of Accrued Benefits Attributable to: Plan Amendments Assumption Changes New Accrued Benefits Benefits Paid Interest Other Total New Assump 10/1/2016 19,397,418 5,845,000 2,103,039 27,345,457 492,912 27,838,369 104.4% 0 0 0 0 0 0 0 Old Assume 10/1/2016 19,397,418 5,845,000 2,103,039 27,345,457 492.912 27,838,369 104.4% New Assume Old Assump Valuation Date 10/1/2016 10/1/2016 Applicable to Fiscal Year Ending 9/30/2018 9/30/2018 E. Pension Cost Normal Cost (with interest) % of Total Annual Payroll 2 19.5 19.5 Administrative Expenses (with interest) % of Total Annual Payroll 2 1.7 1.7 Payment Required to Amortize Unfunded Actuarial Accrued Liability over 21 years (as of 10/1/2016, with interest) % of Total Annual Payroll 2 16.0 17.8 Total Required Contribution % of Total Annual Payroll 2 37.2 39.0 Expected Member Contributions % of Total Annual Payroll 2 7.0 7.0 Expected City and State Contribution % of Total Annual Payroll 2 30.2 32.0 ' The asset values and liabilities for DROP Members include accumulated DROP Balances as of 9/30/2016. 2 Contributions developed as of 10/1/2016 are expressed as a percentage of total annual payroll at 10/1/2016 of $3,672,217. Mortali1y Rate ACTUARIAL ASSUMPTIONS AND METHODS Healthy Lives: Female: RP2000 Generational, 100% Annuitant White Collar, Scale BB Male: RP2000 Generational, 10% Annuitant White Collar/ 90% Annuitant Blue Collar, Scale BB Disabled Lives: Female: 60% RP2000 Disabled Female set forward two years / 40% Annuitant White Collar with no setback, no projection scale Male: 60% RP2000 Disabled Male setback four years / 40% Annuitant White Collar with no setback, no projection scale The above assumption rates were mandated by Chapter 2015- 157, Laws of Florida. This law mandates the use of the assumptions used in either of the two most recent valuations of the Florida Retirement System (FRS) for special risk participants. The above rates are those outlined in Milliman's July 1, 2015 FRS valuation report for special risk employees. We feel this assumption sufficiently accommodates future mortality improvements. Interest Rate 8.00% per year, compounded annually, net of investment related expenses. This is supported by the target asset class allocation of the trust and the expected long-term return by asset class. Retirement Age Earlier of. 1) age 55 and 10 years of service, or 2) the completion of 25 years of Service, regardless of age. In addition, members who are eligible to retire on the valuation date are assumed to retire one year later. This is based on the results of an actuarial experience study issued May 4, 2007. Early Retirement Commencing with the earliest Early Retirement Age (age 45), members are assumed to retire with an immediate subsidized benefit at the rate of 2.00% per year. This is based on the results of an actuarial experience study issued May 4, 2007. Disabilily Rate See table below (5 times 1202 table); 75% of disabilities assumed to be service -incurred. This is based on the results of an actuarial experience study issued May 4, 2007. Termination Rate See table below. This is based on the results of an actuarial experience study issued May 4, 2007. Salary Increases 6.00% per year until the assumed retirement age; see table below. This is based on the results of an actuarial experience study issued May 4, 2007. Payroll Increases 0% (prior 1.56%). Administrative Expenses $61,121 per year. This assumption is equal to the amount paid out of the trust in the prior year. Funding Method Entry Age Normal Actuarial Cost Method. Actuarial Asset Method Each year, the prior Actuarial Value of Assets is brought forward utilizing the historical geometric four-year average Market Value return (net of fees). It is possible that over time this technique will produce an insignificant bias above or below Market Value of Assets. Current Salary % Terminating % Becoming Disabled as % of Salary Age During the Year During the Year at age 50 20 12.00% 0.15% 17.41% 30 5.20 0.20 31.18 40 2.80 0.35 55.84 50 0.90 0.90 100.00 Effective Date of New Plan Latest Amendment Credited Service Earnings Average Final Compensation Normal Retirement SUMMARY OF CURRENT PLAN (Through Ordinance 4339) January 1, 1984. June 8, 2015. Total years and fractional parts of years of service with the City as a full-time Firefighter excluding service for which Member contributions have been refunded. Base pay, including Education Incentive, Engineer Incentive, Paramedic Incentive, and Specialty Pay. Average of Earnings paid during the 5 best years during the 10 years preceding termination. Date Earlier of age 55 and the completion of 10 years of Credited Service or completion of 25 years of Credited Service regardless of age. Benefit Amount Form of Benefit Early Retirement Date Benefit Disability Benefit Service Incurred Eligibility Benefit 3.08% of Average Final Compensation times Credited Service. 10 Year Certain and Life thereafter (options available). Age 45 and 10 years of Credited Service. Accrued benefit, reduced 3.00% for each year that early retirement precedes normal retirement. Covered from Date of Employment. Benefit accrued to date but not less than 60% of base pay in effect on date of disability. Non -Service Incurred Eligibility Benefit Amount 5 years of Credited Service. Benefit accrued to date. Duration Benefit commences upon Board approval and is paid for life (with 120 payments guaranteed) or until recovery (as determined by the Board); optional forms available. Death Benefit Pre -Retirement If vested, the value of the accrued benefit is payable on a monthly basis to the beneficiary for 10 years. If not vested, member contributions are refunded. Minimum Monthly Benefit if on Duty Death Greater of the following, payable immediately: (a) Unreduced accrued benefit, or (b) 40% of Average Final Compensation. Post -Retirement According to option selected, if any. Vesting (Termination) Less than 10 years of Credited Service Refund of Member Contributions (including amounts contributed by the City for the member between 10/l/1976 and 6/30/1998). 1.0 years or more Accrued benefit payable at the Member's election, on his otherwise Early or Normal Retirement Date or Refund of Member Contributions (including amounts contributed by the City for the member between 10/1/1976 and 6/30/1998). Contributions Employee Premium Tax 7.00% of Earnings. 1.85% tax on premiums for fire insurance. City Remaining amount necessary for payment of Normal (current year's) Cost and amortization of the accrued past service liability as provided for in Part VII of Chapter 112, Florida Statutes. (Minimum of 10% of base pay of Members.) Board of Trustees Deferred Retirement Option Plan Eligibility Participation (a) Two legal residents appointed by the City Commission, (b) Two Firefighters (selected by a majority of Department Members), (c) Fifth Member elected by the other four Board Members and approved by the Commission. Satisfaction of Normal Retirement requirements, defined as the earlier of the following: (a) Age 55 with 10 years of Credited Service, or (b) 25 years of Credited Service. Not to exceed 60 months. Rate of Return Actual net rate of investment return (total return net of brokerage commissions, management fees and transaction costs) credited each fiscal quarter. Form of Distribution Cash lump sum (options available) at termination of employment.