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Home My WebLink AboutM-80-0336Joseph R. Grassie City Manager 34mes E. Gunderson 'Director of Finance l/ ;NTER•Ot=FICF. MCM01RANDUM DATE May 2, 1980 FILE -3,_:.: r Funding Cost of Living Increase to Retirees RLFEPENCL:� :NCL (Di U 4F'.: The City Commission, on April 24, 1980, requested a report outlining the funding for a Cost of. Living Increase for Retirees. This memo outlines the considerations necessary to implement that request. Actuarial Soundness of Retirement Svstems It was the intent of the legislature in implementing the provision of Section 14, of Article X, of the State Constitution relating to governmental retirement systems, that such retirement systems or plans be managed, administered, operated, and funded in such a manner as to maximize the protection of public employee retirement benefits. ' Under Chapter 112.64(4), of the Florida Statutes of 1979, the net increase, if any, in unfunded liability under the plan arising from significant plan amendments adopted shall be amortized within 30 plan years. (Emphasis supplied.) The proposed application of 112% increase for the first $300 of monthly retirement compensation, has been amortized over 32 years by the actuaries. This would appear to be in violation of that provision. There is a further problem associated with the adoption of any increase in benefits. This arises out of the new statutory requirement under Chapter 112.63(3), which provides: "No unit of local government shall agree to a proposed change in retirement benefits unless thw administrator of the system, Liar to adtion of the change by the governing body, and prior to the last public hearing thereon, has issued a statement of the actuarial impact of the proposed change upon the local retirement system, consistent with the actuarial review, and has furnished a copy of such statement to the division. Such statement shall also indicate whether the proposed changes are in compliance with Section 4, Article X, of the State Constitution, and with Section 112.64." No such filings have been made by the administrator of the pension programs. Commission Policy The City Commission, on September 27, 1979, adopted a policy limiting the City's contribution to S% of the 1979 contributions. The City Commission would be exceeding its policy limitation by increasing the retirees contribution at this time. P)0-336 Joseph R. Grassie May 2, 1980 Page - 2 - Pension Board Actions The System Board meeting of August 30, 1979, and the Plan Board meeting of August 31, 1979, both recommended to the City Commission to deny the cost of living increase to retirees. (Attached.) Pending Litigation The Mandamus actions filed by the Trustees of the System and Plan would require an additional 4.2 million dollars in excess of current Commission Policy funding of the pension programs. Without disposing of that funding requirement, the City Commission would be adding approximately 1.6 million dollars to the unfunded liability of the pension programs by providing a 1/2% increase for the first $300 monthly retirement amount. (Attached.) Budget Limitations The City is being slowly strangled from the effects of reduced revenues and the ravages of inflation. The voluntary additions of pension costs to the budget by the City Commission beyond its ability to meet city service requirements, can only be met by agonizing reappraisals later. Social Security Increase. In addition, you should be apprised of the 14.4% increase to Social Security recipients commencing in July 1980. Most retirees are probably receiving social security. Recommendation That any consideration of a cost of living increase to retirees be made during the FY-81 budget review by the City Commission. 80-336 Joseph R. Grassie March 10, A80 City Manager Cost of Living Increase to Retirees Elena Rodriguez Administrator The Miami City Employees Retirement System & Plan I was asked by both Boards, the Miami City Employees' Retirement Plan on March 7, 1980, and the Miami City Employees' Retirement System on March 6, _ 1980 to write to the City Commission and reiterate their prior position regarding the Cost of Living Increase to Retirees. I respectfully request that my package be aided to the other material you have coming up on aarch 27, 1980 regarding the Cost of Living, Increase to Retirees. ERijs City Commission March 10, 1980 Cost of Living Increase to Retirees Elena Rodriguez Administrator The Miami City Employees' Retirement System & Plan We are enclosing copies of the last memo that was submitted to the City Commission by us in reference to the Cost of Living Increase to retirees. Enclosed also are copies of the actuaries studies on this subject. Both Boards, the ',Iiami City Employees' Retirement Plan and the :Miami City Employees' Retirement System, have asked me to write you and reiterate their position. At the Systcm's meeting of August 30, 1973, and in light of the present Budget constraint being faced, a motion was made by Gary Houck to recommend to the City Commission not to grant the cost of living increase. This motion was seconded'- by Carlos Garcia and passeci by a 7 to 1 vote. "Yes" votes: J. Bertzel, C. Garcia, V. Grimm, G. Houck, E. Jaremko, B. Jennings, J. Reese. Dissenting: D. March. The Plan, at their meetin;7 of August 31, 1979, had James Gunderson make a motion to recommend to the City Commission to deny the cost of living increase to retirees. His motion was seconded by Howard Gary and passed by a 5 to 2 vote. "Yes" votes: C. Arauz, C. E. Cox, L. JeJesus, J. Gunderson. Dissenting: A. Harris, P. Joffre. ER:js 80-336 CITY OF MIAMI. FLORIDA INTEROFFICE MEMORANDUM ,o: City Commission sIROM: Elena Rodriguez, Gtecretary The Miami City Empl. Retirement System & Plan DATE September 12, 1979 P,'LE subjECT: Cost of Living Increase To Retirees "Crt"ENCEs ENCLO{URCS Attached, please find a copy of the motion made by the City Comniss'_cr., at their meeting of July 11, 1979. Also find ccries of the stuty bv E. F. Friend & Co. for the Plan, and Alexander & Alexander for the Systen, of the implact of a .5`' (one half of one percent) increase for each ful! year since retirement for all re`.'rec e" _c•ee. with percentar-e liTMSted to the first ;2�C, @V or --f present r:cnthly benefits. At the s reetirg of' August 3", 197c, and in lig'r.t of the present ecnztraint being faced, a motion was made ty Gar;, Yc•.:cr:Jtc recc:-_ er.: to the City Cc= issien rct tc grant the "cost of living" increase. lihis mcticn was seccnde:: by Carlos Garcia a-c passe t; a 7 to 1 ��cte. "yes" votes: J. Bert -el, C. Garcia, `ti . Grim-., G. Hcack, Jare:.r:c, B. Jennings, J. Reese. risFent_n' . r. 1•;ar_h. The Fla-, a- their meeting of August ?1, 1979, had James Gunderson mare a r..cticn to recor.:^:end to the City Co.:.riszicn to der.;,; the "cost of Irvin." increase to retirees. His motion was seconded. by Howard Gary and passes tp a 5 to 2 vote. "Yes" votes: C. Arauz, C.F.Cox, L. De Jesus, H. Gary, J. Gunderson. Dissenting-: A. Harris, F. JCf''re. I i CETY OF WLEArzi f MEETING DATE: J= 11. 1979 CITY MALL -DINNER KEY T A `".OTION AL'THOY1'Z:NG AND DIRECTING THE CITY MANAGER TO COOPERATE IN Tri DISTRIEU7:0N OF PROMOTIONAL MATERIALS TO ENCOURAGE PAF.TI- CIPATION BY CITY F : LOYEES IN THE U. S. SAVINGS BOND PROCF.&M. A MOTION AUT4i'-vl7IA2 AND DIRECTING THE CITY MANAGER TO REQ:'EST AN AC7VA.RIAL SILLY JF THE IF2ACT OF A .ST (ONE HALF OF ONE PERCEN III: k ASE FOR L.CA f ULL YEAR SINCE RETIRE'MNT FOR ALL RETIREQ VCLO:EES 1+':71H PERCENTAGE LIMIitD TO THE FIRST $200, $300 or $400 C? PFP.SEN'i Y.ONTHLY BEnFITS AID TO REPORT HIS FINDINGS TO THE CIT cb!^ lSSIO". A Y.:.:;G': �'r :.:ZING AND DIRECTING THE CITY MANAGER TO Gri'E THE DOLP!:1.; Trig OPPORTUNITY TO BEER IN THE ORANGE BOp7_ L^,:Ir. T►;E EXPIRATION OF THEIR PRESENT LEASE (JULY 1, 1980 CO::DITIO;�ED U?�,% NC EXPENSE WHATSOEVER BEING INCUF.RED BY THE CITY OF YLOC IN CO::`,:;;TION WITH SAID BEER SALE: FURTHER CON'DITION'ED UF:,2, T'FT PAT: W:'T OF 32% ON BEER SALES TO THE CITY OF MIAKI IF BEER IS SOLD IN AHE ORANGE BOWL STADIVY THIS YEAR. A MOTION INSTRUCTING THE CITY MANAGER TO IF'M DIAT'ELY DRAFT GUIDE- LINES AND LECA.L LANGUACE TO PUT 071 FOR PUBLIC BID THE CONCESSION AT 'THY. Ow.cr EOM:. STADIUM FOR THE PERIOD BECIA'NING JU1Y 1980 THRO::GY. JULY, 1986 AND TO COKE BACK TO THE CITY COv.vISSION FOR FIt:AL APPROVAL OF THE EXACT WORDING OF SUCH BIDS; TURTHIR IN- STRUCTING THE CITY-HANACER TO AFFECT THE ADVERTISING OF THESE BIDS AS QUICKLY AS POSSIBLE (EARLY 1980) 60 THAT INSTALLATION OF A1,Y NEEDED EQUIPlZNT MAY BE 'ACCOX.PLISHED; FURTHER PROVIDING THAT THE EXPENSE OF SUCH INSTALLATION SHALL BE BORAX Eh?IRELY BY THE CONCLL'SIONAIRE; PROVIDING THAT MINIMUM BIDS FOR FOOD. BEVERAGE AKD BLEB BE A MINIH'JY. OF 35%; FURTHER PROVIDING FOR POSTING OF A ¢100,000 BID BOND AND FURTHER PROVIDING THAT ACCORDING TO A CON- Titl►CT SIGNED IN 1977 BETWEEN THE KIWI DOLPHINS AND THE CITY OF Y.ZAY.I. PARAGRAPH 12, THAT THE CITY SHALL GIVE MR. ROBBIE 30 DAYS ' ACCEPT OF REJECT THE HIGHEST BID TENDERED; FURTHER PROVIDING THAT IF MP.. ROBBIE ELECTS TO ACCEPT THE SIGH BID THAT THt ESCAPE CL1US PRESV`TLY CONTAINED IN HIS CONTRACT BE -CHANCED FROM 3 YEARS TO 4 YEARS; FUP.THER PROVIDING THAT IF MR. ROBBIE REJECTS SUCH BID PROPOSAL WITHIN THE 30 DAY PERIOD PURSUANT TO PARAGRAPH 12. TtM CITY OF MLAMI SHALL THEN AWARD 7dZ CONCESSION TO TkM HIGHEST BIDDER. A MOTION TO ACCEPT THE PROPOSED RESOLUTION (PACICFT ITEM. B) CON- CZ?LNING THE ORANGE BO•.Z. SCOREBOARD AND INSTRUCTING THE CITY MANAGER TO A?O:A'D THE PROPOSED AGREDIMN'T, GIVING PRIORITY TO TYM CONCESSIONAIRE FOP THE ADVERTISING ON THE ORANGE BO'v'L SCOREBOARD GRANTING A !RI.MARY RIGHT FOR USE OF THE SCOREBOARD TO INSLW THAT CO.r'ET_ '_VE PR'JDJCTS NOT SOLD BY T'P.F ORA.NCE B0 1. CONCESSIONAIRE Y. 79-476 Gi/Go Y 79-477 ) P1/Ci M 79-490 To NOES: Pl. Go. M 79-491 Fe/La NOES: Go. !l. 79-492 iEs: !1 1. EDWARD H. FRIEND S COMPANY COIISULTINO 6QTU60IItS • 9615`60Ttt VIENE"IT PLAN CONSULTANTS ' C6SUALTT AISM CONSUL+ANTS L Do's a: M •DIC%* ► S a.. C 6.56[s.ot NT .4.01. Or 9.1 a.1. Co. •Call.. OI •f •... It .00-% S Pto&tC•. st.a.GR VICE •PREl DLNT .00«N • r•c Do.Ga"..0R,► ! a.► C A. 6tw-OR V.Ct-0099frc%1 .last. o• 1.1 •.1• Ca. aC.DI.• s• •C•..• It •.[I[R- Peat 3-1, A s a.► r •, V-Ct -ootS it �• .1..1. Cr ..l •.f•:• •C.DI.• Or •C•.•. [ aysT•.e • •o•�s[. r C • a a C a. VICE • DOES :C'It .t.H. Or ..l •.I. C...f •D1 .' Or •I'..• 1 ! • -t It to C VEo..1 ass v C[ • awe 5 Vest, .1-.r. C•--f..f•c....__C• ...Is Da. r r at•.c .1w:.. • a a. ass r Ct-Pots JaNt r P•{La 6 a. as5'T VICE - Pots ttr.- .l..I . C • .1 •.1 • C" •: • 01• • C• •. ... t • Gt �•�[ . eta S., r • a., ASS" v Ct-RoL5-0[NT ..nl• c• •.1 •.o f•..: •cI.• o• •c•.•. u Ms. Elena Rodriguez Secretary Miami City General Employees' Retirement Plan Post Office Box 330708 Coconut Grove Station Miami, Florida 33133 Dear Elena: INTt ANAVIONAL CLUS SJILDING Su-Tt $00 I000 it STREET. N w waSNINOTON, 0 C. 10006 Igoe TSs•60a0 110St RT.0 6019 as r 6 a.r C ►S.► C • 0109t. 0• •.f •.1. C.• aC.&I.• O• .: •rM I t P•yC a vYCoD r C • ! .1.0t. p. •.{ Mla f.. •. •:I.• C� •...•.It August 16, 1979 Re: Miami City General Employees' Re- tirement Plan; Actuarial Study on Proposed Ad Hoc Cost -of -Living In- creases for All Retirees (6000) Pursuant to your request dated August 8, 1979, this actuarial study evaluates proposed ad hoc cost -of -living increases for all retirees of the Miami City General Employees' Retirement Plan. The proposed ad hoc increases are equal to 1/2% for each full year since retirement for all retirees, with percentage increases limited to the first $200, $300, or $400 of present monthly benefits. The attached table presents the results of the study. The increase in the unfunded past service liability as a result of each proposed ad hoc increase is displayed in item D. The recommended additional annual City contribution is displayed in item F, expressed both as a dollar amount and as a percentage of payroll. It is an indisputable fact that inflation erodes the benefits of re- tirees on a fixed income. Any arguments based upon the needs of re- tirees for protection against such erosion are convincing. COWA06 M. rMIC140 i CGMPANr Ms. Elena Rodriguez August 16, 1919 Page Two However, it is also an indisputable fact that the current financial status of the Plan is in serious condition. In order to meet its.cur- rent level of benefit payments, the Plan has had to liquidate assets in addition to using every dollar of City and member contributions made to the Plan. Any additional benefit payments, such as the proposed ad hoc cost -of -living increases, would likely necessitate the liquida- tion of additional assets. This process could only go on for so long before the Plan would be bank- rupt, placing even the current level of benefit payments in jeopardy. Consequently, for this reason and also since the funding of the Plan is presently under discussion (and, likely, a resolution will be em- braced before the end of this fiscal year), we strongly recommend that the consideration of the granting of any ad hoc cost -of -living increase be postponed to a later date. Sincerely, David F. Bencivenga DFB:sf Attachment MIAMI CITY GENERAL EMPLOYEES' RETIREMENT PLAN Evaluation of Proposed Ad Hoe Cost -of -Living Increase for All Retirees Increase Equal to 1/2% for Each Full Year Since Retirement on Monthly Benefits Up to: 200 5JUU $400. A. Retirees—L 1,255 1,255 1,255 t� I S. Total Annual Benefits of Retirees $5,946,439 $5,946,439 $5,946,439 C. Increase in Annual Benefits as a i Result of the Ad Hoc Cost -of- ' Living Increase $ 73,700 $ 94,364 $ 109,536 !� D. Increase in Unfunded Past Service Liability as a Result of the Ad Hoc Cost -of -Living Increase E. Increase in Amortization Pay- ment as a Result of the Ad Hoc Cost -of -Living I�crease: 1.0739000 x (I))]— F. Rec-i ended Additional Annual City Contribution as a Result of the Ad Hoc Cost -of -Living In- crease Expressed as a: a. Dollar Amount (greater of (C) or (E)J b. Percentage of Payroll (F(a) + $29-,169,114) $ 595,914 $ 765,428 $ $89,998 $ 44,038 $ 56,565 $ 65,771 $ 73,700 $ 94,364 $ 109,536 .253% .324% .376': I� �i y "Retirees" includes retired participants, beneficiaries, and disabled partici- pants. I ?� The Ordinances call for the amortization of the unfunded past service liability. over 35 years from October 1, 1976. :i jI i 1 i Alttander i Alelander Inc. Consulting Actuarial Division Alexander Two P,eomont Ceote, lexander 3565 P,eomont Roar N E Atlanta Geoig,a 3G3 % telephone 40a 261• 3.:'n 7WX B10.751.8:33 August 23, 1979 Ms. Elena Rodriquez, Secretary Miami City Employees' Retirement System Retirement Office Post Office Box 330708 Miami, Florida 33183 BENEFIT INCREASE FOP. RETIREES Dear Elena: The purpose of this letter is to provide the increase in annual Retirement System costs for a one-time adjustment in benefits to currently retired em- ployees, as outlined in the City Commission Motion 79-477. Our understanding of the adjustment is that present retirement benefits world be increased by .5% on the first $200, $300, or $400 of current monthly benefits for each full year since retirement as of January 1, 1979. There will be no increases for partial years. Following are the costs and cost components for each chanoe: Current $400 S 5 S S A. Unfunded Supplemental Liability B. Increase in (A) C. Amortization of (B) over 35 years from 10/1/76 D. Annual Benefits E. Increase in (D) 70,366,000 70,967,000 71,248,000 71,511,000 - +599,000 +880,000 +1,143,000 + 47,365 + 69,584 + 90,384 6,594,764 6,660,406 - + 65,662 6,690,530 6,716,291 + 95,746 + 123,507 Consistent with our recommended funding approach for the 1978 increases, we recommend that the additional contributions for this benefit liberalization be at least equal in magnitude to the amount of initial increase in annual benefit payments. These are the amounts shown in line E, the level annual payments of which would amortize the increased liabilities over approximately a 16-year period. rr, Page Two Ms. Elena Rodriques, Secretary Miami City Employees'atetirement Systam August 23, 1979 iexandf�- 1exande- The actuarial basis used for calculation of the additional liabilities and amortization of the additional costs is the same as that adopted for the year beginning October 1, 1977 (i.e., 7% interest and 1951 Group Annuity Mortality Table). We feel that two points should be noted with respect to the proposed chances. The first is that the form of the change does not reflect the pattern of inflation since a participant's retirement. For exanple, an individual who had been retired 10 years would have received an increase of about 5% both last year and this year, while one who had been retired 5 years would have received only half that amount in each year. Since sore increases were granted last year, perhaps a better approach would be to consider a flat percentage increase for all participants who had been retired at least one year. The second point to be noted is that the additional deposits associated with the cost -of -living increases are included in the total System costs for cc:n-parisor, to the 4 mills linit, in the analysis and proposal of the Finance Director. If you have cuestions, or if we may help further, please let us know. Sincerely, Randall L. Stanley, F.S.A. Assistant Vice President RLSsjm