CITY HALL 201 WEST PALMETTO PARK ROAD BOCA RATON, FLORIDA 33432-3795 PHONE: (561) 393-7700 (FOR HEARING IMPAIRED) TDD: (561) 367-7046 SUNCOM: (561) 922-7700 INTERNET: www.myboca.us DATE: TO: FROM: RE: April?, 2015 Mayor and City Council Leif J. Ahnell, C.P.A., C. G. City Manager ORDINANCE NO. 5299 (REVISED) TO AMEND THE CODE OF ORDINANCES RELATING TO THE POLICE AND FIREFIGHTERS' RETIREMENT SYSTEM TO PROVIDE FOR BENEFIT CHANGES TO THE PENSION PLAN RECOMMENDATION: Attached for adoption is revised Ordinance No. 5299, which amends the Code of Ordinances relating to the Police and Firefighters' Retirement System, to provide for changes to the pension plan as a result of new collective bargaining agreements between the City of Boca Raton, the Firefighters of Boca Raton, Local 1560, International Association of Firefighters (IAFF), Inc. and the Fraternal Order of Police, Lodge #35 (FOP). BACKGROUND: Recently the City concluded negotiations with the IAFF and FOP for new collective bargaining agreements effective October 1, 2014. The Police and Firefighters' Retirement System Board of Trustees reviewed the proposed ordinance at their regular meeting of February 26, 2015 and the plan attorney provided comments to the City. The City also provided the proposed ordinance to the IAFF and the FOP and they also provided comments and suggested changes. The City reviewed the comments and suggested changes and where appropriate, revised the proposed ordinance. Those areas that changed have been shaded. According to the Police and Firefighters' Retirement System's actuary the pension benefit changes will result in first year annual savings of $1,055,000 for firefighters and $878,000 for police officers as detailed in the actuarial impact statement (attached) with three year savings of $3,523,000 and $2,799,000 respectively for a total reduction in pension costs of $6,322,000. The Police and Firefighters' Retirement System's actuary projects, for firefighters, a 30 year savings of $49 million, which has a net present value of $18 million. The actuary projects, for police officers, a 30 year savings of $43.9 million, which has a net present value of $15 million. In summary, if the Police and Firefighters' Retirement System actuary projections are accurate, the proposed agreement should result in total pension cost reductions of $92.9 million over 30 years, which has a net present value of $33 million. The Board of Trustees has scheduled a special meeting on April 13, 2015 to review the revised ordinance along with the actuarial impact statement that has been prepared by the actuary to the pension plan, Foster and Foster, Inc. The pension plan actuary has also prepared 30 year projections, which is also attached. The revised ordinance and actuarial impact statement have also been submitted to the Florida Division of Retirement. FISCAL IMPACT: The pension plan actuary prepared an actuarial impact statem t detailing the fiscal impact which is attached. DOCUMENT ORIGINATED BY: Attachments Linda C. Davidson, C.P.A., ~w~~~ Financial Services Director. l ro 'C6~ Printed on recycled paper. - AN EQUAL OPPORTUNITY EMPLOYER-
CITY OF BOCA RATON POLICE AND FIREFIGHTERS' RETIREMENT SYSTEM ACTUARIAL IMPACT STATEMENT March 20, 2015 (Page 2) E.) Average Monthly Earnings will be the highest 3-year average prior to retirement, provided that the Average Monthly Earnings for any officer who retires prior to October 1, 2017 shall be the greater of the arithmetic average of the highest 2 years preceding actual retirement and the arithmetic average of annual earnings for the 3 consecutive years immediately preceding retirement. F.) No overtime shall be included in Average Monthly Earnings for those Members hired after the effective date. G.) For Members who enter the DROP on or after Aprill, 2015, the automatic COLA will begin the earlier of termination of employment and 3 years after DROP entry. H.) On and after the effective date, the calculation of all retirement benefits, election, adjustments, and any other payments/calculations shall include the actuarial impact of the COLA (including, but not limited to, any optional forms of pension benefits and buy backs). * Please note that there will be no reduction in any Member's accrued benefit. For example, if a Member retires on May 1, 2015 and their calculated benefit using the new structure is $1,900 per month, but the benefit that they had accrued as of the effective date was $2,000 per month, then their benefit would be $2,000 per month. * Please also note that there will be no changes to the benefits at all (past or future) for any Member who is eligible for Normal Retirement on April I, 2015. Their retirement benefit calculations will have actuarially equivalent options including the cost-of-living adjustments. 1 For the purpose of this Impact Statement, we assumed that the cap on benefits would only apply to the base benefit and not to the Supplemental Benefit. For example, a Member could receive a Normal Retirement Benefit of $100,000 and on top of that receive a Supplemental Benefit of$10.50 per month per year of Credited Service. It was also our understanding that COLA's could increase the benefit above $100,000.
Police Officers New Benefits 0 ld Benefits Valuation Date 10/112013 10/1/2013 Applicable to Fiscal Year Ending 9/30/2015 9/30/2015 E. Pension Cost Normal Cost 2 % of Covered Annual Payroll 28.39 30.99 Administrative Expense 2 % of Covered Annual Payroll 1.57 1.57 Payment Required to Amortize Unfunded Actuarial Accrued Liability over 30 years (as of 10/1/2013) 2 % of Covered Annual Payroll 14.99 17.04 Total Required Contribution % of Covered Annual Payroll 44.95 49.60 Expected Member Contributions %of Covered Annual Payroll 11.50 10.20 Expected City & State Contribution % of Covered Annual Payroll 33.45 39.40 1 The asset values and liabilities for DROP Members include accumulated DROP Balances. 2 Includes Interest.
Total Plan C. Liabilities - (Continued) New Benefits Old Benefits 10/1/2013 10/1/2013 Present Value (PV) of Future Salaries 292,001,289 290,350,869 PV of Future Member Cont. 33,580,148 29,615,789 Normal Cost (Entry Age Normal) Retirement Benefits 6,644,176 7,492;169 Disability Benefits 221,520 201,213 Death Benefits 193,309 187,177 Vested Benefits 828,736 926,325 Total Normal Cost 7,887,741 8,806,884 PV of Future Normal Costs 75,804,626 86,266,698 Actuarial Accrued Liability Retirement Benefits 114,507,882 125,499,649 Disability Benefits 871,195 1,121,776 Death Benefits 986,045 1,190,967 Vested Benefits 6,044,357 6,871,919 Inactives 1 244,635,796 244,635,796 Excess State Monies Reserve 0 0 Total Actuarial Accrued Liability 367,045,275 379,320,108 Unfunded Actuarial Accrued Liability 83,739,901 96,014,734 D. Actuarial Present Value of Accrued Benefits Vested Accrued Benefits Inactives 1 244,635,796 244,635,796 Actives 49,677,697 49,677,697 Member Contributions 25,717,354 25,717,354 Total 320,030,847 320,030,847 Non-vested Accrued Benefits 15,909,149 15,909,149 Total Present Value Accrued Benefits 335,939,996 335,939,996 Increase (Decrease) in Present Value of Accrued Benefits Attributable to: Plan Amendments 0 Assumption Changes 0 New Accrued Benefits 0 Benefits Paid 0 Interest 0 Other 0 Total: 0
Total Plan New Benefits Old Benefits Valuation Date 10/1/2013 10/1/2013 Applicable to Fiscal Year Ending 9/30/2015 9/30/2015 E. Pension Cost Normal Cost 2 % of Covered Annual Payroll 27.78 31.15 Administrative Expense % of Covered Annual Payroll 1.51 1.51 Payment Required to Amortize Unfunded Actuarial Accrued Liability over 30 years (as of 10/1/2013) 2 % of Covered Annual Payroll 23.65 26.13 Total Required Contribution % of Covered Annual Payroll 52.94 58.79 Expected Member Contributions % of Covered Annual Payroll 10.82 10.20 Expected City & State Contribution % of Covered Annual Payroll 42.12 48.59 1 The asset values and liabilities for DROP Members include accumulated DROP Balances. 2 Includes Interest.
SUMMARY OF PLAN PROVISIONS A. Eligibility Requirements Employment by the City as a sworn Police Officer or Firefighter upon satisfactory physical and attainment of age 18. All Members are presumed to execute the waiver related to claims concerning State monies and are therefore eligible for the modified benefits under the Code of Ordinances, as reflected below. B. Continuous Service Uninterrupted service (except for leave and military service) as a qualifying employee measured in years and completed months, excluding service for which Member contributions were refunded and not repaid within 6 months of rehire. C. Earnings Firefighters: Fixed remuneration, including basic wages, regular longevity, EMT, paramedic, fire inspection, hazardous materials, assignment, acting in a higher capacity, standby, pickup contributions, and IRC Section 457 deferred compensation, but excluding overtime, holiday, state incentive, bonuses, Time Pool pay, accumulated sick time and annual leave, and any other payments. Police Officers: Total cash remuneration, including regular longevity, assignment, crash-free bonus, pickup contributions, and Section 457 deferred compensation, and including up to 300 hours of overtime compensation per 12-month period (with a limited lookback provision), but excluding other bonuses, accumulated sick time and annual leave, and any other payments. D. Average Monthly Earnings (AME) Average Monthly Earnings (AME) during the highest 2 years preceding the date on which the Member retires or terminates. E. Normal Retirement 1. Eligibility Attainment of age 55 and 10 years of Continuous Service, or completion of 20 years of Continuous Service. 2. Benefit Police Officers: 3.5% times AME times years of Continuous Service, subject to a maximum of the greater of 87.5% of AME or 2% of AME times years of Continuous Service. Firefighters: 3.4% times AME times years of Continuous Service, subject to a maximum of 100% of AME. 3. Form of Benefit for This and Other Retirement and Termination Benefits Regular Pension: 1 0-year certain and life monthly payments. Supplemental: Life monthly payments.
Actuarially equivalent optional forms may be elected for one or both benefits, and need not be the same. Actuarial equivalence is based on mortality in accordance with the GAM~1983 Male mortality table for Members and the GAM~1983 Female mortality table for joint annuitants, and 7. 5% interest. F. Regular Early Retirement 1. Eligibility: Age 50 with 10 years of Continuous Service. 2. Benefit: Computed as for Normal Retirement based upon Continuous Service and AME as of Early Retirement Date, but reduced by 0.25% for each month Early Retirement precedes Normal Retirement. G. Disability Retirement 1. Eligibility: Service Incurred: Total and permanently disabled in the line of duty, meaning incapacity to perform regular duty a Firefighter or Police Officer. Non~service Incurred: Total and permanently disabled not in the line of duty; meaning incapacity to perform regular duty as Firefighter or Police Officer, and completion of at least 1 0 years of Continuous Service. 2. Benefit Service Incurred: 75% of AME as of the date of disability, or the accrued benefit if greater. May be offset by other disability benefits. Non- Service Incurred: 3.25% of AME per year of Continuous Service or the accrued benefit, minimum of 25% of AME (per State requirements) on the date of disability. H. Pre~Retirement Death Benefit 1. Eligibility Service Incurred: Death in the line of duty. Non-service Incurred: Death other than in the line of duty after 5 years of Continuous Service. (If less than 5 years, only a $5,000 lump sum is payable; if less than 1 year, only a $2,500 lump sum.) 2. Benefit Service Incurred: If the designated beneficiary is the spouse, the greater of A orb, plus C, plus D, below; otherwise B, plus C, plus D, below: A. To spouse. 75% of AME payable for life, beginning immediately. B. Ifthe Member had at least 10 years of Continuous Service, the accrued benefit, payable for 10 years certain only, beginning when the Member would have reached Early or Normal Retirement Age.
FOSTER & FOSTER ACTUAl~! SAND C<.HJSULTANT March 23,2015 VIA EMAIL AND MAIL Linda Davidson City of Boca Raton 201 West Palmetto Park Road Boca Raton, FL 33432, Re: City of Boca Raton Police and Firefighters' Retirement System Special Actuarial Analysis Dear Ms. Davidson: As requested, we have performed a special actuarial analysis to determine the change in funding requirements resulting from certain proposed changes to the above referenced Plan for the Police Officers and Firefighters. Please note that the results of this analysis are based on the Plan information and actuarial assumptions displayed in the most recent actuarial valuation (performed as of October 1, 2013 ). The requested Plan changes that were studied, are as follows: Firefighters A.) For Members retiring on or after April 1, 2015, the maximum Normal Retirement Benefit shall be the lesser of $100,000 or 90% of average monthly earnings. This maximum benefit would increase by 2.0% Qer year ($102,000 for a Member retiring October 1, 2015). 1 B.) On and after the effective date, the calculation of all retirement benefits, election, adjustments, and any other payments/calculations shall include the actuarial impact of the COLA (including, but not limited to, any optional forms of pension benefits and buy backs). C.) For Members retiring on or after October 1, 2014, for that pmtion of the retirement benefit that accrues on or after April 1, 2015 the COLA shall be based on a two and one half percent (2.5%) annual increase (COLA) in their retirement benefit with no change on when the COLA is payable 2 D.) The supplement for Terminated Vested Members will freeze as of April 1, 2015. E.) The entire Terminated Vested benefit will be payable after attainment of Age 55 (or Age 50 reduced 5 years for Early Retirement). F.) On and after the effective date, pensionable Earnings shall include fire inspector certification pay, fire company officer certification pay, fire instructor certification pay and technical rescue technician certification pay. 13420 Parker Commons Blvd., Suite 104 Fort Myers, FL 33912 (2.39) 433 5500 Fax (239) 481 0634 www.foster-foster.com
The usable annual State Monies received throughout the projection period were assumed to increase by 2.5% per year. It is important to note that deviations in future Plan experience relative to the assumptions stated above may have a dramatic impact upon future contribution requirements. Please note the contents of this analysis and the October 1, 2013 actuarial valuation report are considered an integral part of the actuarial opinions. 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. Hopefully the results of this analysis will lead to good discussions. If you have any questions, concerns, or would like to discuss any of these items in greater detail, please do not hesitate to contact us. Best Regards,
starting at the later of the member's 2-year anniversary of retirement or age 52 and annually 2 thereafter. 3 3. Members with 22 or more years of continuous service shall receive a cost of 4 living increase equal to 3 percent of the benefit paid the preceding month starting at the later of 5 the member's 1-year anniversary of retirement or age 52 and annually thereafter. 6 (d) Notwithstanding the provisions of paragraph (c) above, eligible members who did 7 not attain the normal retirement date prior to [insert effective date of ordinance] shall receive a 8 cost of living increase in an amount as provided in paragraph (c), above, except for the portion 9 of the member's benefit based on continuous service earned on or after [insert effective date of 10 ordinance], the annual increase shall be 2.5 percent. 11 * * * 12 (8) Retirement supplement. Employees who retired from the employ of the city under 13 this system and began collecting benefits after July 19, 1999 and before October 26, 2010, will 14 receive a monthly lifetime retirement supplement of $10.00 per month times completed years of 15 continuous service. Commencing October 26, 2010, employees who retire from the employ of 16 the city under this system and begin collecting benefits on or after October 26, 2010, or who are 17 in the DROP and still employed by the city on that date, will receive, upon leaving the employ of 18 the city, a monthly lifetime retirement supplement of $10.50 per month times completed years of 19 continuous service. DROP participants shall not receive the retirement supplement while 20 actively employed by the city. Active service as a firefighter while participating in the DROP shall 21 be counted as continuous service for purposes of determining the amount of the retirement 22 supplement, up to a maximum of 5 years. Members who receive the retirement supplement may 23 elect a survivor option in accordance with section 12-132, which option may differ or may be the 24 same as the retirement option chosen for the member's pension benefit, in which case the 25 amount of the retirement supplement shall be actuarially adjusted. Notwithstanding the 26 foregoing, any member who is employed on [insert effective date of ordinance] who terminates 12
of 75 percent of average monthly earnings. In no event, however, shall a member's normal 2 retirement benefit be less than 2 percent of average monthly earnings multiplied by years of 3 continuous service. 4 (c) For members retiring or terminating employment on or after October 1, 1999 and 5 before October 1, 2004, the amount of normal retirement benefit shall be 3.25 percent of 6 average monthly earnings multiplied by years of continuous service, subject in any event to a 7 maximum of 75 percent of average monthly earnings. In no event, however, shall a member's 8 normal retirement benefit be less than 2 percent of average monthly earnings multiplied by 9 years of continuous service. 10 (d) For members retiring or terminating employment on or after October 1, 2004 and 11 prior to October 1, 2007, the amount of normal retirement benefit shall be 3.5 percent of 12 average monthly earnings multiplied by years of continuous service, subject in any event to a 13 maximum of 84 percent of average monthly earnings. In no event, however, shall a member's 14 normal retirement benefit be less than 2 percent of average monthly earnings multiplied by 15 years of continuous service. 16 (e) For members retiring or terminating employment on or after October 1, 2007, the 17 amount of normal retirement benefit shall be 3.5 percent of average monthly earnings multiplied 18 by years of continuous service, subject in any event to a maximum of 87.5 percent of average 19 monthly earnings. In no event, however, shall a member's normal retirement benefit be less 20 than 2 percent of average monthly earnings multiplied by years of continuous service. 21 (f) Notwithstanding paragraph (e) above, the maximum normal retirement benefit 22 (when applied to the normal form of benefit) for members who did not attain the normal 23 retirement date prior to [insert effective date of ordinance] shall be 77 percent of average 24 monthly earnings; provided, if a member's accrued benefit as of [insert effective date of 25 ordinance] exceeds 77 percent of average monthly earnings, the member shall retain the 14