HomeMy WebLinkAboutMemo-City Manager-Substitution for EM.2 9.25.12CITY OF MIAMI, FLORIDA
INTER -OFFICE MEMORANDUM
TO: Honorable Mayor and
Members of the City Commission
FROM: Johnny Martinez,
City Manager
DATE: September 25, 2012
SUBJECT: Substitution for'EM.2 - FIPO
Pension Ordinance
Please be advised that as a result of ongoing negotiations, the Ordinance amending The City of
Miami Firefighters' and Police Officers' Retirement Trust ("FIPO") Pension and Retirement Plan,
scheduled for the September 27 2012 City Commission meeting, has been revised and
substituted as follows:
(4/5 THS VOTE)
AN EMERGENCY ORDINANCE OF THE MIAMI CITY COMMISSION AMENDING CHAPTER
40/ARTICLE IV/DIVISION.2 OF THE CODE OF THE CITY OF MIAMI, FLORIDA, AS AMENDED,
ENTITLED` PERSONNEU/PENSION AND RETIREMENT PLAN/CITY OF MIAMI FIREFIGHTERS' AND
POLICE OFFICERS' RETIREMENT TRUST;" TO PROVIDE FOR A CHANGE IN SECTION 40-196
RELATED TO MEMBER CONTRIBUTION FOR POLICE OFFICERS HIRED DURING CERTAIN TIME
PERIODS AND TO PROVIDE FOR CHANGE IN THE ACTUARIAL FUNDING METHOD; FURTHER
PROVIDING FOR A. BACKDROP' BENEFIT OPTION AND A DESCRIPTION OF ITS APPLICABILITY;
CONTAINING ASEVERABILITY CLAUSE AND. PROVIDING FOR AN IMMEDIATE: EFFECTIVE DATE.
BE IT ORDAINED BY THE COMMISSION OF THE CITY OF MIAMI, FLORIDA.
Section 1. Chapter 40/Article IV/Division 2 of the Code of the City of Miami, Florida, as
amended, is amended in the following particulars: {1}
"CHAPTER 40
PERSONNEL
01
ARTICLE IV. PENSION AND RETIREMENT PLAN
DIVISION 2. CITY OF MIAMI FIREFIGHTERS' AND POLICE OFFICERS' RETIREMENT TRUST
Sec. 40-196. - Contributions.
(a) Member contributions.
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*
*
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(7)(a) Effective the first full oav period following October 1, 2012, the member contribution for police
officers hired prior to October 1, 2012 shall be ten percent of earnable compensation; and effective
September 30, 2014, the member contribution for police officers hired prior to October 1, 2012 shall be
seven percent of earnable compensation. The member contribution for police officers hired on or after
October 1, 2012 shall be three percent of earnable compensation greater than the member contribution
for police officer members hired prior to October 1, 2012.
(7)(b) Mh' fi stifdll ak erlodlfoloW
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(b) City contributions. Effective October 1, 1993, the city's annual fiscal contribution to the retirement
system shall provide for the following: (1) noninvestment expenses of the retirement system; and (2)
required actuarial normal- costs of the retirement system.
(2) The city's contribution to nermaloests-fer the retirement system shall be determined by applying the
individual entry age actuarial funding method, as such method is defined by the American Academy of
Actuaries, to the protected liabilities of the system as of October 1, 2011, using an assumed system
payroll Growth rate of 3% and using an unfunded liability amortization period of 25 nears, or such other
reasonable payroll growth rate and amortization period as agreed by the retirement system's actuary and
the citv's actuary
The contribution shall be determined as of October 1 of each year
(based on the valuation payroll and the program provisions in effect at that time) for the fiscal year
beginning on the subsequent October 1, adjusted for interest for one year, based on the actuarial
assumptions.
as of the date of the amended final judgment by the American Academy of Actuaries.
Sec. 40-203. Benefits.
(a) service retirement.
*
*
(4) Notwithstanding any other provision of this retirement system, any participant who is
employed and not participating in the DROP on September 30, 2010, may elect to receive his/her
accrued benefit .as of that date, determined in accordance with the provisions of the .system in
effect on September 29, 2010, and .payable on the ''date and in the manner .provided by the
provisions of the System in effect on September 29, .201.0. Such participants who elect to receive
their accrued benefit as of September 30, '2010, at a date prior to the normal retirement age
provided in 'subsection (3), shall be eligible to receive that portion of their retirement allowance
based on creditable service on or after October 1, 2010, on -the date and in the manner provided
by the provisions of the system in effect on the earlier of retirement or separation from service.
A'hfi' iart`tfcl IM`vi'iTi is err'OR `ed and riot a"rtiolbfiaci' ifi ligi ROi -` h SepterrSbefli3f?,'20'f 0>sliall
T a a r^� r a� t' "s �. a x �,�s° -. cxrxa _� ar s. r j ;t��r�rs,,.tiuit b s H �tas.�.�. t s' -h''
be re1f i S to feat the�DROP fo be "eft s Geer edYpr�ler., ta.that:' N ,lri« aecd dance-_i iffitl e
3* r• s�k.. y,'�1r'��#15i S 4 �d.1' Y cE f:� a-s b?:. r Ie+±C!:j fi ` . 'U 1 3
bfo�isloi�s.�ofitti&.S stern iri.effect,ont obtember�2 .:25I'0;
*
*
*
(14) 'grAZKORCiPP.615titTON:11g610'6151.1561Vefittbbilailifgll'bezini ferrientecl bn January 1 `2013
t!¢� `£aY SY i{ ,J. i§l 1. 'Sa, .0. v }i "5 � v`41 x 4 Y i3ss. f� ]it `R 1 idi�.� % v" -- i � `� 1 4 )
The Baclfdrop=ot tionTshall rreplace thefexistirici DiROP,proprram Em loyees who}have not attained
.A :.. #, 4`.e+c ) Y'T3 t �' � gc'° 1 k'[ t F:. i-h*'S4 +.v' f�... Ina ii9`+ < (LF 3 R -
normal;`retlrement eliaibifi i slof Jana 1F, 2013for" ve °1iot vested bv,October 1, 2010'and all
!. VS ', Y °Q F E # �Y 1 A"` "Y '�.I 5• 5' ,hi i ti Y' t ; + F i - � f�
errtploVees hired on or�Aafter Jar ttsri� 1 201-3,}will be elf lble for�the Backdrop o tion. bill will not
p
be.;eiidibieffor the DROPr„''Anvonr6Iidfble.forYtt a forwa d DROP as'ofTJanuary 1. •20.13 remains
Submitted into the public
record in connection with
item EM.2 on 09-27-12
Priscilla A. Thompson
City Clerk
YL r-x �xrw r'2 , sx�a 3=� iss� , a �u4 �� �xe�,c �' ."ls+� s >r} 1's tY9-3 �e
eT( (13(eifogthelforwa ar Ra as lttp` esehttMlstsrand:aliVeif e�elic)ible foie fife forwar CDR Pas
.r ��z� •,� •".�'�^ �t.,s. _ sxs,t.,r..rd.+e ,�ds� �.e - tt �c.�a_.-�,� � �• ..u-:,ate ,f..ry :,,r � sa:
ofh gtraar :1, 20:1'3.Viiho7 chiooses;not £o enter:f•e forwar f DROP remaits eligiBie for;tlie
1'Baakd`.
(a) An eligible employee who elects the Backdrop option shall receive a monthly benefit
payable on the employee's actual retirement date (date of retirement and separation from City
employment) based -on the benefit the employee would have received if he/she had left City
employment and retired on an earlier date after attaining normal retirement eligibility (the
"Backdrop date"). In addition, an eligible employee who elects the 'Backdrop option will receive a
lump sum payment equal to the accumulation of monthly retirement benefit payments he/she
would have received during the period following the Backdrop date through the actual retirement
date ("Backdrop period"), plus interest at the rate of 3% per year, compounded annually. An
eligible employee may elect a minimum Backdrop period of one year and maximum Backdrop
period of •up to seven years. An eligible employee who elects the Backdrop option must select
the normal form of .benefit or an optional form of benefit in accordance with section 40-203(m) at
the time of electing the Backdrop option. The employee's monthly 'benefit as well as the lump sum
payment under the Backdrop option is based on the form of -benefit selected.
(b) Employees are eligible to elect the Backdrop option after completing one year of
creditable service following the normal retirement date. .A 'Backdrop election must be made within
ten wears after -becoming eligible for normal retirement. The maximum Backdrop period is seven
years. Eligible •employees who wish to elect the Backdrop option must provide written notification
to the Department Director and the 'Department of Human Resources at least eight months prior
to the employee's retirement date; provided a'Iesser notice period may be approved by the City
Manager due to special circumstances •.imp :ove. sal be ti e to eyoi e#fF e r B ledroj eleotioln
ohe:'i tf ie b Gv hin one nlatiM ei e�ieoll6n w NIMIemp� v�ee is;gran ed lesser
Wilreg e TI INTB ana e eE o��speoi lt.are msianees,. a em o ee'wii rnottlbe eiigfbl:e
.foci L e one time Baeirdt eleonion r�.euonirri-..Emplovees are not required to -elect the Backdrop
option.
(c) All or a portion of the lump sum payment under the Backdrop option may be rolled over to
an eligible retirement plan or IRA in accordance with federal law ilh t`oII er of bROP``i±iiTidIMto
rsa,<- x � s •s:- �: � r rqx:"m} a�,^s� �+� � xa � � ar � �� �� r��r .a� ^�zxy�
# iniism leglcfhre AIMI �EBST6iMMI�(IIMAIll be'al� d�ifir lto ehs of ` to t�le,are
ap`ro dli tiie_Ni riiTFl eiOISI ?i?eINKI e'r sio i `�d t TPIT e` s( ardi.
(d) If the Backdrop option is ever terminated, for any reason, the rights of all persons then in the
DROP shall not be diminished or impaired. Additionally, if the Backdrop is ever terminated, all
persons who are then eligible for the Backdrop option will still be eligible for a 7 year Backdrop.
The board of trustees of shall develop operational rules for the implementation of this provision.
*a1
Section 2. If any section, part of section, paragraph, clause, phrase or word of this
Ordinance is declared invalid, the remaining provisions of this Ordinance shall not be affected.
Section 3. This Ordinance is declared to be an emergency measure on the grounds of
urgent and public need for the preservation of peace, health, safety, and property of the City of Miami,
and upon the further grounds of the necessity to make the required and necessary payments to its
employees and officers, payment of its debts, necessary and required purchases of goods and supplies,
and to generally carry on the functions and duties of municipal affairs.
Section 4. The requirements of reading this Ordinance on two separate days is dispensed
with an affirmative vote of not less than four -fifths (4/5ths) of the members of the Commission.
Section 5. This Ordinance shall become effective immediately upon its adoption and
signature of the Mayor.{2}
Submitted into the public
record in connection with
item EM.2 on 09-27-12
Priscilla A. Thompson
City Clerk
Footnotes
{1) Words and/or figures stricken through shall be deleted. Underscored words and/or figures shall
be added. The remaining provisions are now in effect and unchanged. Asterisks indicate omitted and
unchanged material.
{2} If the Mayor does not sign this Ordinance, it shall become effective at the end of ten (10) calendar
days from the date it was passed and adopted. If the Mayor vetoes this Ordinance, it shall become
effective immediately upon override of the veto by the City Commission.
Alice Bravo, P.E., Assistant City Manager/Chief of Infrastructure
Luis Cabrera, Assistant City Manager/Chief of Operations
Janice Larned, Assistant City Manager/Chief Financial Officer
Daniel Alfonso, Director, Budget and Management
Elvi Gallastegui, Agenda Coordinator
Submitted into the public
record in connection with
item EM.2 on 09-27-12
Priscilla A. Thompson
City Clerk
Management Advisors
Benefits ccpeciafcts
September 25, 2012
Ms. Janice Larned
Assistant City Manager/Finance Director
City of Miami
444 S.W. 2nd Avenue
Miami, Florida 33130
Dear Ms. Larned:
CITY OF MIAMI FIREFIGHTERS' AND POLICE OFFICERS' RETIREMENT TRUST
(FIPO) - ACTUARIAL IMPACT STATEMENT
Attached is the requested statement of actuarial impact measuring the effect of changes
to the following sections of the Plan ordinance:
• Member contributions
• Actuarial funding method
• Backdrop option
In accordance with State procedures, please sign the impact statement in the space
provided and send to Mr. Douglas Beckendorf, Actuary, Bureau of Local Retirement
Systems, Department of Management Services, Division of Retirement, P.O. Box 9000,
Tallahassee, Florida, 32315-9000. We would appreciate receiving a copy of the signed
statement for our files.
After you have had a chance to review this information, please let us know if you have
any questions.
Sincerely,
ernd%
Michael J. Tierney
2950 Halcyon Lazne, Suite 402, Jacksonville, FL 32223
Phone: (904) 262-3020, Fax: (904) 268-3374
E-mail: acaGaactua rialconcepts.com
Submitted into the public
record in connection with
item EM.2 on 09-27-12
Priscilla A. Thompson
City Clerk
CITY OF MIAMI FIREFIGHTERS' AND POLICE OFFICERS' RETIREMENT TRUST
(FIPO)
Statement of Actuarial Impact
Proposed Changes
The City is considering the submission of a proposed ordinance amending the City of
Miami Firefighters' and Police Officers' Retirement Trust. The Ordinance would contain
the following changes in Plan provisions that differ from those that serve as a basis of
the latest actuarial review of the Plan. The changes would be effective as of the date of
Ordinance adopting those changes. The Statement of Actuarial Impact measures the
impact on the contribution requirements .of the Plan of making the proposed changes as
described below:
Member contributions
Effective the first full pay period following October 1, 2012, the member
contribution for police officers hired prior to October 1, 2012 shall be 10% of
earnable compensation; and effective September 30, 2014, the member
contribution for police officers hired prior to October 1, 2012 shall be 7% of
earnable compensation. The member contribution for police officers hired on or
after October 1, 2012 shall be 3% of earnable compensation greater than the
member contribution for police officer members hired prior to October 1, 2012.
Effective the first full pay period following October 1, 2012, the member
contribution for firefighters shall be 10% of earnable compensation; and effective
September 30, 2014, the member contribution for firefighters hired prior to
October 1, 2014 shall be 7% of earnable compensation. The member contribution
for firefighters hired on or after October 1, 2014 shall be 10% of earnable
compensation.
Actuarial funding method
The city's contribution to the retirement system shall be determined by applying
the individual entry age actuarial funding method (changed from the aggregate
actuarial cost method), as such method is defined by the American Academy of
Actuaries, to the projected liabilities of the system as of October '1,, 2011, using an
assumed system payroll growth rate of 3% and using an unfunded liability
amortization period of 25 years, or such other reasonable payroll growth rate and
amortization period as agreed by the retirement system's actuary and the city's
actuary.
Backdrop option
A Backdrop benefit option shall be implemented on January 1, 2013, and shall
replace the existing DROP program. Employees who have not attained normal
retirement eligibility as of January 1, 2013, and all employees hired on or after
Submitted into the public
record in connection with
item EM.2 on 09-27-12
Priscilla A. Thompson
City Clerk
Cone pts
that date, will be eligible for the Backdrop option, but will not be eligible for the
DROP. Employees who have attained normal retirement eligibility as of
January 1, 2013 and are thus eligible to elect the forward DROP as of January 1,
2013, shall remain eligible to elect the forward DROP as it presently exists, and
employees who are eligible to elect the forward DROP as of January 1, 2013 who
choose not to enter the forward DROP shall also remain eligible for the
Backdrop. Any employee with accrued pension benefits vested prior to
October 1, 2010 will remain eligible to exercise the existing DROP program
option for those accrued benefits.
Eligibility
• All members are eligible to elect Backdrop after completing one year of
service after eligibility for normal retirement.
• A Backdrop election must be made within 10 years after becoming eligible for
normal retirement. Members who work more than 10 years after retirement
would not be eligible for the Backdrop option.
• The maximum Backdrop period is 7 years.
• Members who wish to elect Backdrop must provide at least 8 months notice
to separate, or a lesser period could apply if approved by the City Manager
(due to special circumstances).
Distribution Options
• The lump sum portion of the Backdrop benefit option is payable as a cash
option, rollover to another tax deferred account option, or combination of
cash and rollover.
• The annuity portion of the Backdrop benefit option is payable according to
the annuity form elected.
For purposes of the study it was assumed that all members would elect the Backdrop
option and that all members would elect a 5-year Backdrop period. (Although it is
expected that some members will elect a shorter Backdrop period and others would
elect a longer Backdrop period, it was assumed the average Backdrop period would be
5 years.) The assumed retirement rates in use by the plan were adjusted to reflect these
assumptions. The current plan assumptions are based on plan benefits including a
"forward" Drop. We have assumed the plan's current rates were developed in
accordance with the State's funding policy that requires actuarial funding to the
beginning of the Drop period, not to the end of employment. Thus, the current rates
were "moved forward" 5 years to reflect the ability to fund up to when the Backdrop
option is elected (at the end of employment).
Submitted into the public
record in connection with
item EM.2 on 09-27-12
Priscilla A. Thompson
City Clerk
Since we are not responsible for preparing the official 2011 actuarial review, this study
presents an independent actuarial analysis of the current plan as well as the proposed
change to the current plan applicable to active members. We developed separate pro
forma results for both the current plan and the study based on actual individual data.
The impact of implementing the changes outlined above is based on the latest actuarial
review of the Plan (October 1, 2011). However, the contribution amounts have been
adjusted to be applicable to the 2012-2013 fiscal year. Results are as follows:
Submitted into the public
record in connection with
item EM.2 on 09-27-12
Priscilla A. Thompson
City Clerk
CITY OF MIAMI FIREFIGHTERS' AND POLICE OFFICERS' RETIREMENT TRUST
(FIFO)
Statement of Actuarial Impact
Proposed Changes
1. Member Data
(a) Active Members
(b) Total Anticipated Payroll for Next 12 Months
(c) Actuarial Present Value (APV)
of Future Valuation Payroll
2. Assets
(a) Market Value
(b) Actuarial Value
3. Liabilities
(a) APV of Future Benefits
(1) Active Members
--Retirement
--Withdrawal
—Disability
--Death
--Refund of Contributions
--Total
(2) DROP Retirees
(3) Retirees and Beneficiaries
(4) Disabled Members
(5) Vested Terminated and Limited Members
(6) Total
(b) Present Value of Future Employee Contributions
(c) City Present Value of Future Normal Cost, Net of Assets:
i3(a)(6)-3(b)-2(b)l
(d) Actuarial Accrued Liability (AAL)
(e) Unfunded AAL (UAAL)
4. Contribution Requirements* for Year Ended
(a) Plan Normal Cost (including expenses)**
(b) Amortization Payment
(c) Total City Requirements*
5. Percent of payroll
(a) Plan Normal Cost
(b) Amortization Payment
(c) Total City Requirements*
10/1/11 Pro
Forma. Aggregate
Method
(1)
1,196
$ 82,236,805
$ 1,027,031,493
987,084,959
1,150,318,373
366,329,067
17,058,195
28,372,442
2,923,833
2,076,869
$ 416,760,406
Included Below
1,341,422,264
32,338,742
3,855,757
$ 1,794,377,169
102,703,149
541,355,646
N/A
N/A
09/30/13
46,809,335
N/A
$ 46,809,335
56.92%
N/A
56.92%
Assumed payable quarterly starting October 1, 2012.
Includes a payroll growth rate of 3%.
There is an additional COLA fund minimum payment of $4,971,206 required.
Includes expense normal cost.
Submitted into the public
record in connection with
item EM.2 on 09-27-12
Priscilla A. Thompson
City Clerk
10/1/11 Pro
Forma Entry Age
Method
(2)
1,196
$ 82,236,805
$ 1,064,648,541
987,084,959
1,150,318,373
366,329,067
17,058,195
28,372,442
2,923,833
2,076,869
$ 416,760,406
Included Below
1,341,422,264
32,338,742
3,855,757
$ 1,794,377,169
106,464,854
N/A
1,584,616,807
434,298,434
09/30/13
12,680,051
28,616,865
$ 41,296,917
15.42%
34.80%
50.22%
10/1/11 Study
Entry Age
Method
(3)
1,196
$ 82,236,804
$ 1,139,723,647
987,084,959
1,150,318,373
343,252,205
17,058,195
34,133,695
4,933,761
1,951,858
$ 401,329,714
Included Below
1,341,422,264
32,338,742
3,855,757
$ 1,778,946,477
113,972,365
N/A
1,568,261,164
417,942,791
09/30/13
10,244,673
27,539,157
37,783,830
12.46%
33.49%
45.95%
Net Changes
(4)=(3)-(1)
Same
$ (1)
$ 112,692,154
Same
Same
(23,076,862)
Same
5,761,253
2,009,928
(125,011)
(15,430,692)
Same
Same
Same
(15,430,692)
11,269,215
(36,564,662)
(9,025,505)
-44.46%
-10.98%
Conc pts
This Statement of Actuarial Impact has been prepared pursuant to Chapter 112, Section
112.63(3) of Florida Statutes, and in our opinion, the proposed changes are in
compliance with Part VII, Chapter 112, Florida Statutes, and Section 14, Article X, of the
State Constitution.
eut.71:0461,
Date: September 25, 2012 By:
Michael J. Tierney
ASA, MAAA, FCA, EA #11-1337
The proposed changes, as described above, were provided to the plan actuary and, to
the best of our knowledge and belief, are in compliance with Part VII, Chapter 112,
Florida Statutes, and Section 14, Article X, of the State Constitution.
Date: By:
City of Miami
Firefighters' and Police Officers'
Retirement Trust
Submitted into the public
record in connection with
item EM.2 on 09-27-12
Priscilla A. Thompson
City Clerk
Concepts