Subject: POLICE AND FIRE RETIREMENT SRBR ORDINANCE
REASON
FOR ADDENDUM
This item is being submitted as an addendum in order to have sufficient time for a second reading prior to Council’s recess.
RECOMMENDATION
Approval of Ordinance adding a SRBR Program to the Police and Fire Department Retirement Plan
In April of 2001, the Association of Retired Police Officers and Firefighters (the Association) presented a request to the Board of Administration of the Police and Fire Department Retirement Plan to consider establishing a Supplemental Retirees’ Benefit Reserve (SRBR). The Association requested that the Board establish a subcommittee to work out the details of a SRBR program. The committee consisted of the Firefighter representative of the Retirement Board, the Retiree representative of the Retirement Board, the President of the Association and Retirement Department staff. The committee presented its findings to the Retirement Board at its September 6, 2001, Retirement Board meeting. The Board approved the committee’s recommendation and authorized staff to forward the program to the City Council for its action. The request for Council action initially appeared on the October 16, 2001 Council agenda as item #3.5. The matter was deferred to October 30, 2001, and heard as item # 3.4. Based on a recommended modification to the SRBR program presented by the Mayor’s Office, Council approved the establishment of a SRBR program.
The proposed SRBR program allocates 10% of the Prefunded Actuarial Accrued Liability (PAAL) value as of June 30, 1999 as the initial funding for SRBR. The value of the PAAL on June 30, 1999 was $191,103,000. Additional funds are to be added to the initial funding on an annual basis based on the smoothed earnings rate of the Police and Fire Department Retirement Plan’s portfolio as applied to SRBR. The SRBR will also be increased by 10% of the earnings in excess of the assumed actuarial rate (8%) for the Retirement Plan. Any funds added to the SRBR will occur after the close of each fiscal year. Monies distributed from the retirement fund to eligible recipients will consist of the investment earnings only. Any excess earnings will be added to the initial principal and at no time does the ordinance permit distribution of the amount. The initial distribution proposed for early 2002.
Reductions in the SRBR, other than interest earnings distributed to eligible beneficiaries, will occur only to the extent that the City’s contributions rates will increase as a result of poor investment performance. Any one reduction based on increased contribution rates is limited to 5% of the balance (as of the date of the reduction) of the SRBR fund. The normal distribution to Plan participants is proposed to occur annually.
The ordinance provides that Council will approve the distribution methodology, as well as any subsequent changes. The distribution methodology is currently being developed and will be presented to the Retirement Board at its January 2002 meeting. Following Board review, it will be presented to Council for approval. While the distribution methodology has not been finalized, the committee’s initial recommendation will be to grant benefits based on a point system with a bonus payment for the lowest paid retirees.
PUBLIC OUTREACH
Not applicable.
This program has been coordinated with the Police and Fire Retirement Department Board, the City Attorney’s Office, the City Manager’s Office, IAAF Local 230, the Police Officer’s Association and the Association of Retired Police Officers and Fire Fighters.
It is estimated that the SRBR program will cost approximately 1% of covered payroll.
Not applicable.
Edward F. Overton
Director, Retirement Services