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HomeMy WebLinkAbout2000-01-27 - Agendas - FinalFAYETTEVILLE TRE CITY OF FAYETTEVILLE, ARKANSAS FIRE PENSION AGENDA JANUARY 27, 2000 A meeting of the Fayetteville Fire Pension and Relief Board will be held on January 27, 2000 at 11:00 a.m. in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. 1. Approval of the pension list. 2. Approval of the minutes 1. Amend motion to include dollar amount to transfer to Merrill Lynch. 3. Investment Report 4. Approval of Retirement Application 1. Kenneth Miller -Benefit amount $2,129.57 per month 2. Thomas E. Warford- Benefit amount $1,659.70 per month 113 WEST MOUNTAIN 72701 501 521-7700 FAX 501 575-8257 • MINUTES OF A MEETING OF THE FAYETTEVILLE FIRE PENSION AND RELIEF FUND DECEMBER 30, 1999 A meeting of the Fayetteville Fire Pension and Relief Fund Board was held on December 30, 1999 at 11:00 a.m. in Room 326 of the City Administration Building located at 113 W. Mountain Street, Fayetteville, Arkansas. PRESENT: Mayor Hanna, Darrell Judy, Pete Reagan, Marion Doss, Ronnie Wood, and Heather Woodruff. ABSENT: John Dill. MINUTES Mr. Regan moved to approve the minutes. Mr. Judy seconded the motion. Upon roll call the motion carried unanimously. PENSION LIST • Mr. Reagan moved to approve the pension list. Mr. Judy seconded the motion. Upon roll call the motion carried unanimously • INVESTMENT REPORT No investments report. STATE INSURANCE TURNBACK Mr. Reagan requested a letter be written to the State questioning why they had not sent the Turnback monies earlier. He noted the Board normally received the money in August. Mr. Reagan moved to give the money to Merrill Lynch for them to manage. Mr. Doss seconded the motion. Upon roll call the motion carried unanimously. Mayor Hanna asked if they needed any of the money for the day to day operations of the fund. Mr. Reagan stated it looked like they had enough money to carry them until February of 2000. If not, it was easy for them to transfer more money. The meeting adjourned at 11:10 a.m. r ' D3 ARKANSAS FIRE & POLICE PENSION REVIEW BOARD • • MEMORANDUM TO: LOCAL PENSION FUND BOARDS OF TRUSTEES P0. DRAWER 34164 LITTLE ROCK, ARKANSAS 72203 TELEPHONE (501) 682-1745 FAX: (501) 682.1751 FROM: ARKANSAS FIRE AND POLICE PENSION REVIEW BOARD CATHYRN E. HINSHAW, EXECUTIVE DIRECTOR RE: INCREASING BENEFITS FROM LOCAL PENSION FUNDS DATE: January, 2000 There are two methods by which a local pension fund may increase benefits to its members. The first is legislation which mandates an increase. The second is by securing an actuarial valuation which demonstrates that a pension fund can support the cost of the increased benefit over a defined period of years. Police and fire pension funds are required by law to process all benefit increase requests through the Arkansas Fire and Police Pension Review Board. If you wish to process a benefit increase through the Pension Review Board, please use the following: 1. The local Board of Trustees must adopt a resolution to raise benefits to the new amount. The resolution must be signed by at least 6 of the 7 members of the Board of Trustees. Additionally, the Board of Trustees must submit a copy of the minutes of the pension board meeting at which the resolution was adopted, showing which members of the Board voted for applying for the benefit increase, and which voted against the resolution. The Secretary of the Board of Trustees must certify the minutes as correct. 2. The resolution must state how much the increase would be and to whom it would apply - current retirants only; future retirants only; current and future retirants; current surviving spouses and/or children; future surviving spouses and/or children; current and future spouses and/or children; current and future retirants, spouses, and children. (Police pension funds may include dependent parents.) 3 -The completed resolution should be mailed to: Arkansas Fire and Police Pension Review Board P. 0. Drawer 34164 Little Rock, Arkansas 72203 P • • 4. The pension fund'will be sent a bill for the actuarial valuation and the pension fund should return a check promptly for that amount to the above address, payable to "Arkansas Local Police and Fire Retirement System". If.a pension fund has never changed its benefits before, the fee is $475 for the first benefit proposal, and $250 for each additional proposal. If a pension fund has already made benefit changes, the fee is $675 for the first benefit increase proposal, and $250 for each additional proposal. A pension fund with 50 or more participants may use a cash flow projection valuation to secure a benefit increase. The cost of a cash flow analysis is $1,975. Regardless of the type of benefit increase request, no actuarial work will be processed until the fee is received. 5. Volunteer pension funds may, if they wish, submit a proposal to increase benefits to a specified amount and may also request that if the first proposal cannot be approved, that the actuary find the highest monthly benefit amount which can be paid by the pension fund. This is called the "random.search" proposal. The "random search" service is provided for two categories of volunteer plans: Standard benefit and non-standard benefit plans. • A. STANDARD BENEFIT PLANS (Never Raised Benefits) The requirements for this procedure are: 1) The first part of the proposal must request a new rate which is some multiple of $5, not to exceed $95 ($60, $65, $70, $75, $80, $85, $90, $95). 2) The resolution from the local board of trustees must state that if the first proposal cannot be approved, the board wishes the actuary to compute the next highest monthly benefit which can be paid. (The actuary will do the computation in increments of $5). 3) The fee for this type of proposal is $500. B. NON STANDARD BENEFIT PLANS The requirements for this procedure are: • 1) The resolution from the local board of trustees must state that if the first proposal cannot be approved, the board wishes the actuary to compute the next highest monthly benefit which can be paid. (The actuary will do the computation in increments of $5). • 2) The fee for this type of proposal is $975. • If the Board of Trustees implements a benefit structure resulting from a random search, the Board may not apply for another random search for a 4 year period. 6. Once a check and any additional information needed on the fund has been received, it will be submitted to the actuary. Actuarial valuations for benefit increases take 10-12 weeks. 7. When the valuation results are received, the Executive Director shall certify to the local Board whether or not the increased benefit can be given. 8. When an increase is granted, a copy of the resolution, actuarial valuation, and the Executive Director's certification must be filed by the local Board with the circuit and city clerks of the 'county and city in which the pension fund is located. 9. The standards by which a benefit increase proposal will be evaluated are attached (PRB Rule #4). ARKANSAS FIRE AND POLICE PENSION REVIEW BOARD BOARD RULE ff4 Date Approved : May 30, 1985 As Amended : July 18, 1995 DEFINITION OF "ACTUARIAL SOUNDNESS" Under law, the financial objectives of the local pension plans shall be to establish and receive contributions which will remain approximately level from year to year and will not have to be increased for future generations of citizens. The law specifies that this objective is achieved when contributions received each year by a pension fund are sufficient both, (1) to fully cover the costs of benefit commitments being made to employees for their service being rendered in such year and, (2) to make a level payment which, if paid annually over a reasonable period of fixture years, will fully cover the unfunded costs of benefit commitments for service previously rendered: • 1. The financial objectives discussed above must be met in order for a fund to be considered "actuarially sound". 2. All computations of actuarial condition shall be based upon assumptions of future financial experiences and funding methods which are either established by or approved by the Pension Review Board. 3. From the date of the adoption of this Board rule, the tests described below shall be used to evaluate benefit increase requests from the local funds and to determine if pension recipients are eligible for benefits mandated by law for pension funds which are "actuarially sound". A fire or police pension fund that is designated as "actuarially sound" must meet one of the following: 1. The Contribution Test and the Short Condition Test; or 2. The Contribution Test and the Funded Percentage Test; or 3. Cash Flow Projection Valuation. Contribution Test The contributions made to the Fund must be equal to or more than the actuarially computed contributions to pay for the Fund's proposed total benefits. Such computed contributions shall consist of • 1. Normal cost; and 2. An amortization of unfunded accrued liabilities over a period of future years, which period is defined in the table below. Arkansas Fire and Police Pension Review Board Board Rule #4 as amended July 18, 1995 - page 2 Short Condition Test The Pension Fund's current assets (cash and investments) must be sufficient to cover. 1. Active member contributions on deposit; and 2. The proposed total liabilities for future benefits to present retired lives and inactive members; and 3. A portion of the proposed total liabilities for service already rendered by active members. The portion is defined in the table below. Funded Percentage Test The Pension Fund's current assets (cash and investments) must be sufficient to cover a portion of the proposed total liabilities of all participants of the Pension Fund. The portion is defined in the table below. Testing Amortization of Amortization of Active Funded Dates as of Unfunded Active Unfunded Retiree Liability -Short Percentage January 1 . Liabilities LiabilitiesCondition Tcst DS 1994 18 9 55% 82% 199516 8 60% 84% 1996 14 7 65°i. 86% ... 1997 12 6 70% 88% 1998 10 5 75% 90% 1999 9 5 80% 92% 2000 8 5 85% 94% 2001 7 5 9034 95% 2002 6 5 95% . 96% 2003 &aier 5 5 100% 97% Cash Flow Projection Valuation If the Pension Fund has 50 or more participants, the Fund may show actuarial soundness using a Cash Flow Projection Valuation. This valuation will project the assets, future income, and future benefit obligations. of the Pension Fund. The assumptions used in this valuation shall be based upon the same assumptions used by the Pension Review Board for regularly scheduled valuations. The Cash Flow Valuation must show that the current assets projected with future income will.; always be sufficient to cover all benefit obligations. A Cash Flow Valuation is not required de' be done on a regular basis, but will only be completed when requested by the Fund and at the expense of the Pension Fund.