HomeMy WebLinkAbout2002-10-17 - Agendas - Final FAYETTEVILLE
THE CITY OF FAYErTEVILM ARKANSAS
POLICE PENSION AND RELIEF FUND
AGENDA
OCTOBER 17, 2002
A meeting of the Fayetteville Policemen's Pension and Relief Fund Board was held on
October 17, 2002, at 1 :30 p.m. in room 326 of the City Administration Building located
at 113 West Mountain Street, Fayetteville, Arkansas.
1 . Approval of the minutes
2. Review of the pension list
3 . Investment report
4. Other business
• II
113 WEST MOUNTAIN 72701 479621-7700
FAX 4798798257
Police Pension Minutes
July 18, 2002
Page 1 of 4
• MINUTES OF A MEETING
OF THE
POLICE PENSION AND RELIEF FUND
JULY 18, 2002
A meeting of the Police Pension and Relief Fund Board was held on July 18, 2002 at
1 :30p.m. in Room 326 of the City Administration Building located at 113 West Mountain
Street, Fayetteville, Arkansas.
PRESENT: Mayor Coody, Eldon Roberts, Hollis Spencer, Jerry Friend, Randy Bradley,
Heather Woodruff, Kit Williams and Marsha Farthing.
MINUTES
Mr. Bradley moved to approve the minutes. Mr. Roberts seconded. The motion carried
unanimously.
PENSION LIST
Ms. Woodruff stated Chief Watson had been added to the retirement list.
OTHER BUSINESS
Mr. Roberts stated there had been some miscommunication on how the widows are being
treated on the fund. In 1999 when they went for a benefit increase, they had opted to
• make the benefit increase a non-spousal benefit because of the cost. When the benefit
increase was granted in 1999 they moved everyone to 90% of salary. They had all been
under the assumption that the widows would revert back to 50% of salary. The actuaries
had been counting the widows at the same benefit level that they were after the police
officer passed away. The law had two parts to it. The actuaries were operating off the
one premise of the law that says that a spouse that becomes a widow after the raise in
benefits she would continue to draw the same amount. There was one person that they
had not treated that way. The actuary was telling them that if her husband and been alive
and received the 90% benefit, then she should receive that too.
Mr. Williams stated he will ask the Attorney General for an opinion.
Dr. Mashburn moved to have Mr. Williams ask the Attorney General for an opinion on
24- 11 -425. Mr. Roberts seconded. The motion carried unanimously.
INVESTMENT REPORT
Ms. Elaine Longer, Longer Investment, stated the S&P and the NASDQ was down and
the Dow was off about fifty. She thought a lot of companies that were coming under
increased scrutiny would be restating earnings. She had been concerned about some of
the actuary assumption behind some the defined benefit plans, were really to high.
During the ten years where the bull market was getting 20% the pension plans became
over funded based on their actuary assumption of 10%. The companies recaptured those
• overfunded pension gains back into their corporate earnings. Now that they were sitting
there 9 to 10% return assumption and the market was saying 6% is here they should be.
Police Pension Minutes
July 18, 2002
Page 2 of 4
• The corporations that did not adjust downward are going to be accused of not being quiet
honest with their shareholding public. . She thought they were going to see the push to
adjust these pension assumptions downward so that they could create greater returns, so
that would work in reverse on the earning side because of the unfunded pension liability.
Mr. Friend asked how some retirements have become over funded.
Ms. Longer stated they could recapture that back into their earnings because their liability
is the discounted present value of their future obligations. When they were using a
discount rate of 10% and the market was clicking along at 20% they can get over funded.
They technically can bring that back in and recapture it in eaming because their only
liability was what they were obligated for. Conversely, when they get the 10% discount
rate that gave them a lower present value. if they take the discount rate to 6%then it
really pushes up what their present value is under future liability.
She had talked with Eldon earlier this month because they had dropped below the
weighting range of equity. They had been holding at 35% to 33%, trying to hold that
lower range. They had been using options and hedgings. They had a very strict sale
discipline, which has really helped them to get through this bear market. Technically,
they were under their policy guidelines. They had the opportunity to sell right and they
felt that the reserves are prudent at this time. As conditions improve they could go back
up to policy range. It would take a motion by the board to allow them to be in violation
of the policy on the equity side until they feel that the condition is right. Their second
• option, if they wanted to stay within their policy range, would be to use the S&P Index
Fund to get them back up into range. There was some much single issue stock risk out
there right now, that she thought it was best to accomplish it through an index fund.
Their equity range was 35% to 50%. They were currently at 20%. Approximately 15%
under weighted. The money was currently mostly in bonds. They had 5% in cash
reserves. They were earning about a 6.2% income rate of return. They felt that as long
as they could keep putting it into bonds, they could always pull back out of bonds. She
thought there would be a time to go back in and start rebuilding the equity side, but right
now the equity markets were off 9% on the S&P and about 9% on the NASDQ, so they
were not loosing anything by not being in there.
Mr. Friend moved allow Longer Investment to be in violation of their investment policy
until Longer Investment felt that the environment was conducive to increasing the equity
weighting. Mr. Roberts seconded. The motion carried unanimously.
Ms. Longer stated looking at their account from where the still market started, 12/31/99
through June 30 of this year. During that time the S&P was down about 33%, the
NASDAQ was off about 64%. Their stocks have gone down about as much as the S&P
stocks about 36%, but the asset allocation has held the portfolio together. From that point
through June 30 their total portfolio was down 4.4%. When they look at their historical
returns, in the good times they had 29%, 19.6%, 19.6%. A 4% decline in a terrible
market like this is not unrecoverable. When they get through this, they had every bit of
flexibility in this portfolio to run again. At this point they had the defensive team on the
field. Their income that came in on just interest and dividends off bonds and stocks was
Police Pension Minutes
July 18, 2002
Page 3 of 4
• their cash flow that comes in regardless of the market is about $481 ,000 on the total
portfolio. That represented an income yield of 5%. That was on the whole account for
the years, which was approximately $40,000 per month. That did not include the
turnback and the matching funds etc.
Mr. Roberts stated he doubted that they were bringing in what they were spending.
Ms. Longer stated their distribution ran between $55,000 and $65 ,000 per month. Their
income cash flow on their bond part of the portfolio was approximately $40,000 per
month. To satisfy their actuary assumption they had to achieve a 6% rate of return.
Their historical rate of return has run about 7.5%.
Their combined portfolio was at 20% equities. Their corporate bonds represented
about 15% of the portfolio and the yield on the corporate bonds was about 6.5%. They
had been very cautious on the corporate bond market. They had seen an increase tide of
corporate credit risk. Very thing that was in the bond portfolio is high investment grade.
Government bonds and government agencies. The treasuries represented about 15% of
the portfolio with a 6.2% yield on treasuries. Government agencies which was a
combination of federal home loans, federal national mortgage, represented about 42% of,
the portfolio with a yield of about 6%. They had a very good yield. The way that they
had been able to manage that was by a ladder approach. The income yield on their bonds
has not changed over the last three years. The stock portfolio, there was a lot of reserves
in there. they were yielding 6%, with very few exception all of their bonds that had been
• purchased are trading above the purchase price. So they had earned not just the fixed
6.2% coupons, but also a capital appreciation while they wait out the storm. Realized
Gains year to date, market was at $81 ,000, net income was at $171 ,000, the bond
portfolio, in the fixed income side of the account their yield was at 6. 1 %. weighted
average maturity, yield on cost was 6.2%. their weighted average maturity. The average
annual return has been about 9% on equities, and 7. 1% on fixed income and 7.5%. This
three year period that they were going through was a once in a generation type of an
event. The last time that they had three years back to back of negative market was in the
30's. The equity return year to date was -18%. That compares to the S&P of - 14.5%.
NASDQ was down 25%. Total was 2.3%. The stock part of the portfolio where they had
allocated reserves to the actual stock component of the portfolio was down 8.5%.
-In response to questions, Ms Longer stated that a couple of years ago they had
asked for an update on the cash flow analysis that lead to the increase of benefits, there
were two way in which the fund can be evaluated. One was the actuary report, which is
done by the State, it was more of a static picture. The other was a cash flow analysis
which takes in more of the cash flows coming in from all the various sources and by that
valuation model, they actually had 5 million dollar over funding.
Mr. Roberts stated the actuary evaluation showed them to be in a sad state of affairs.
Carrio had refigured all of figures using the cash flow method and Carrio had stated that
they were alright. There was two different ways of doing this.
• Ms. Farthing stated she would like to know if they would be making up the short fall. To
her it looked like they were going to be taking out money than they were putting in.
Police Pension Minutes
July 18, 2002
Page 4 of 4
• Ms. Longer stated she was not involved in their projections. She did not know all of the
assumptions or projections.
Meeting adjourned at 2: 15
•
•
FAYE'T``T'EVILLE
THE CITY OF FAYETTEVILLE, ARKANSAS
• KIT WILLIAMS, CITY ATTORNEY
DAVID WFDTAKER, ASST. CITY ATTORNEY -_ -- -
LEGAL DEPARTMENT
DEPARTMENTAL CORRESPONDENCE
TO: Police Pension Board Members
FROM: Kit Williams, City Attorney
DATE: September 3, 2002
RE: Letter from Representative Jan Judy .
Attached is a letter from Representative Jan Judy concerning the
Attorney General's Opinion that widow's benefits " shall not exceed
one-half of the salary . . . . " Please let me know your response to her.
• inquiry about trying to change the law.
err - r 1
I
�� •
i
STATE OFF 7A(RKANSAS
REPNESENTATlI'E \��% // `/ //J �I���
Jan A. JuAy
7 0fZ6e t//,//' j2VOW
202 West Maple Street
Fayetteville, AR 72701 -4132
Phone:
501 -527-2408 Legislative Office
501 -521 -4194 Residence
501 -582-2207 FAX August 29, 2002
e-mail: jjudy@arbleg.stale.ar.us
DISTRICT 7
Counties:
Parl of Washington County
Mr. Kit Williams, Esq.
COMMITTEES 113 W. Mountain, Suite 302
Public Health, Welfare and Labor Fayetteville, AR 72701 -6083
Labor and Environment
Subcommittee Dear Kit:
Aging, Children and Youth, Legislative
and Military Affairs I have received the Attorney General's Opinion that the Fayetteville
Chairperson, •
Children and vnatb Subcommittee, Police Pension Board requested. Please find it enclosed.
Joint Committee onInfor The Attorney General's Opinion was in the favor of the amount that,
Communications and nformaa tion
Teebnology "shall not exceed one-half of the salary" If the Pension Board is
unhappy with this decision, I would be willing to support legislation that
would increase this amount paid to surviving spouses. Please let me
know if they would like for me to do this.
If I may be of any further assistance in the matter or any other, please do
not hesitate to contact me.
With Friendship.
�
Jan Judy
State Representative
Enclosure
JJ:jwa
•
KIT WILLIAMS
FAYETTEVILLE CITY ATTORNEY
DAVID J. WHITAKER
�sistant City Attorney
Judy Housley -
Office Manager THE CIN OF FAYETTEVILLE, ARKANSAS
Phone (479) 575-8313 - 113 W. Mountain, Suite 302
FAX (479) 575-8315 Fayetteville, AR 72701-6083
August 22, 2002
Honorable Shannon L. Poore
Ball & Mourton, LTD., PLLC
P.O. Box 1948
Fayetteville, AR 72702-1948
RE: Ronald Carroll Pension Rights
Dear Shannon:
Please understand that neither the City of Fayetteville nor the
Police Pension and Relief Board will attempt to determine the
validity of any dispute between your client and Ms. Storey's client. I
evidentially mistakenly believed that the pension rights had been
agreed to by the parties as stated in paragraph 14 of the Chancellor's
Amended Decree of Divorce filed for record on May 26, 1999. That
paragraph states in part:
"The parties agree, and the Court accordingly orders, that one
hundred percent (100 %) of the defendant/ counterplaintiff's interest
in his pension relief fund is marital and, as such, the plaintiff/
counterdefendant is entitled to one-half interest in said retirement
plan as accrued through April 8, 1999."
If you and Ms. Storey cannot now agree upon what percentage
of the benefits of Mr. Carroll's pension relief plan that his former wife
• is entitled to, then you will need to allow a Chancellor to decide this
dispute. The Police Pension Board will abide by and follow any
proper Order or Decree that complies with the state statutes
governing administration of the pension relief fund .
With kindest regards,
Kit Williams
Fayetteville City Attorney
KW/jh
cc: Honorable Elizabeth Storey
Police Pension Board
KIT WILLIAMS
FAYETTEVILLE CITY ATTORNEY
DAVID J. WHITAKER
Assistant City Attorney
Judy Housley
Office Manager THE CITY OF FAYETTEVILLE, ARKANSAS
Phone (479) 575-8313 . 113 W. Mountain, Suite 302
FAX (479) 575-8315 - Fayetteville, AR 72701-6083
August 7, 2002
Honorable Elizabeth Storey
Everett Law Firm
P.O. Box 8370
Fayetteville, AR 72703-8370
Honorable Shannon Poore
Ball & Mourton, LTD, PLLC
112 W. Center Street .
Fayetteville, AR 72701
RE: Ronald Carroll Pension Rights
• Dear Counselors:
Today the City's Accounting Division showed me your letter of July 12,
2002, with attached QDRO and Amended Decree of Divorce. The Police Pension
Board is bound by state law in their administration of the Police Pension and
Relief Funds. Please see A.C.A. §24-11-401 et. seq.
Because of the applicable state law, the Police Pension Board is
unfortunately not legally able to comply with the Qualified Domestic Relations
Order entered in this case. Paragraph 2 of the QDRO directs the administrator
(the Police Pension Board) to "establish a separate account for the benefit of
Robin Carroll. I do not think we can legally comply with that provision. The
pension is a defined benefits plan, with benefits dependent not upon the
contributions of the officer, but upon the officer's length of service.
The Police Pension Board can directly pay Robin Carroll 50% of the
pension benefits of Ron Carroll for as long as he is entitled to receive said
benefits (his lifetime). Upon his death, no further benefits can be payable to
either Ron Carroll or his ex-wife. If he still has minor children surviving him,
they would receive pension benefits.
•
II
•
This very issue was litigated last year by the ex-spouse of a firefighter. I
have enclosed a copy of Judge Smith's Letter Opinion on this issue. Also
enclosed is a copy of A.C.A. §24-11-425 that addresses this issue for police
officers.
If both attorneys agree, I will advise the Police Pension Board that the
QDRO means that 50% of Ron Carroll's pension benefits shall be paid to Robin
Carroll as long as both he and she are alive. If Robin predeceases Ron Carroll,
Ron would then be entitled to 100 % of his pension. Once Ron dies, Robin would
not be entitled to any further pension benefits. Please let me know if this is okay.
If either attorney disagrees with this analysis, you will probably need to
get another QDRO approved that complies with the Arkansas Police Pension and
Relief Funds Act.
l With kindest regards,
-� t W Williams •
Fayetteville City Attorney
KW/jh
cc: Police Pension Board
Enclosures
•
STATE OF ARKANSAS
> FOURTH JUDICIAL CIRCUIT - SECOND DIVISION
• WASHINGTON COUNTY COURTHOUSE KAREN S. MORROW
r P. O. BOX 1206 OFFICIAL COURT REPORTER
FAYETIEVILLE, AR 72702-1206 E-MAIL: kmomw@w.washingtonar.us
KIM M. SMITH TELEPHONE: (501) 4441552
CIRCUIT JUDGE FAX: (501) 4441752 JOAN LESTER
E-MAIL: ksmith@w.warhington.ar.us CASE COORDINATOR
E-MAIL: jluter@mwashington.w.us
December 21 , 2001
Ms. Donna Hayden Lyles
Attorney at Law
112 South East Avenue
Fayetteville, AR 72701
Mr. Kit Williams
Fayetteville City Attorney
113 W. Mountain Street, Suite 302
Fayetteville, AR 72701
• RE: Kathy D. Skelton vs. Board of Trustees of Fayetteville Fireman's Relief and
Pension Fund, Washington County No. CIV 2001 -544
LETTER OPINION
Dear Attorneys:
This case is presented to the Court by means of the stipulated facts filed for
record on September 28, 2001 . The parties have agreed that this Court has
proper jurisdiction to decide this controversy. The briefing schedule was
expanded after Ms. Lyles was hired as attorney for the plaintiff and the Court now
has all briefs completed.
The stipulated facts show that the plaintiff was married to Roy Skelton on
September 6, 1974 and divorced from him on September 9th, 1998. Roy Skelton
retired from the Fayetteville Fire Department on February 15th, 1990. Upon
divorce, the Qualified Domestic Relations Order filed in case number E-98-804
provided that Kathy Skelton was entitled to receive 33.035 percent of Roy A.
Skelton's regular retirement pay, so long as Roy Skelton might be entitled to
receive said benefit. Of course, upon his death Roy Skelton was not entitled to
• receive any benefit, however, pursuant to ACA §24-11 -820, a child enrolled in an
`4
Page 2
December 21 , 2001
institution of higher education as a full time student and under the age of 23 can
receive Mr: Skelton's benefits. The QDRO also provided that the Order does not
require the Firemen Relief and Pension Fund to provide any type of benefit to
Roy or Kathy Skelton which was not otherwise provided by law. Since Kathy
Skelton is not spouse of Roy Skelton, she is not entitled to receive any benefit as
a surviving spouse, since she is not a surviving spouse. Her right to
approximately one-third of Roy Skelton's retirement benefit was contingent on
Roy Skelton being alive and receiving a retirement pension. When Roy Skelton
died , she no longer was eligible to receive any pension, however, his two eligible
children will be allowed to split his pension until they no longer qualify pursuant to
Arkansas Code Annotated §24-11 -820(b)(2)(A).
Therefore, this Court affirms the decision of the Board of Trustees of the
Fayetteville Fireman's Relief and Pension Fund denying appellant Kathy D. •
Skelton pension benefits following the death of Roy Skelton. You will please find
enclosed herein and attached hereto an Order denying the appeal and dismissing
this case.
Thanking you for the excellent briefs you have provided, I remain,
Sincerely,
lim . Smith
Circu Judge
I �
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24- 11-425 RETIREMENT AND PENSIONS 102
M The sum total of the pension to be paid the surviving spouse orthe •
qualifying child of the deceased police officer shall not exceed one-half
NO of the salary attached to the rank the police officer held at the time
of his or herdeath,
(g) If any surviving spouse or child shall marry, he or she shall
thereafter receive no further pension under this subchapter, except that
if he •or she is a surviving spouse of a police officer who is killed while in
the official performance of his or her duties, then any such surviving
spouse's benefits may be restored to the spouse whose benefits had been
terminated prior to or after August 1, 1997, upon his or her application
to and approval by the board.
(h)(1)' When entitled to a pension as provided by this subchapter, a
surviving spouse, child, or dependent parent shall make application' to
the board through the -secretary of the board on a form to be provided by
the board.
(2) Accompanying the application shall be proof of the marriage of
the decedent to the surviving spouse claimant.
(3) Proof of the birth of children shall be shown by the baptismal dor
board of health certificates .
(4) All applications and ,proof shall be retained in the custody of"the
board, and due notice of that action shall be registered by the secretary
in his or .hier office.
{i) Every member of the department must file with the secretary the
names of those persons to whom death benefits are to be paid and the . •
relationship of the beneficiary to the decedent.
FIistory, Acts 1937, No. 250, §§ 8, 13, or dies in the course of his employment
19;' Pope's Dig., §§ 9863, 9868, 9874 Acts
and is survived by a spouse, or has surviv-
1953, No. "86, § 2; 1965, No. 413, § 1; ing dependents actively drawing a benefit ;
1967, No. -127, § 1; 1981, No. 582, § 1; from those municipal retirementaystems, ;
1983, No. 44, ,§ 1; 1985, No. 1027, § 1; then the surviving spouse . or . surviving
"s A:$A. 1947, §§ 19-1808, 19-1813, 19- dependents may continue to participate in
F 1819; Acts 1987, No. 618, § 1; 1993, No.
!._ 1197, '§ 2; 1997, No. 1138, § 1; 1997, No. the.municipality shealth care plan asdong
1241, §. 1; 1999, No. 978, § 1; 1999, 'No. as the aur v l g sPcuse or surviving ile-
1.4b8,, §§ ..1 2 pendents pay both employer and em-
AXILC, Notes, Acts 1993, No. 1197, ployee contributions to the health care
§ 6,, Provided: The .increased benefits Plan.
provided for under the provisions of this "(b) Provided, however, a surviving
act shall only be paid provided the retire- spouse or surviving dependent may qual-
ment 'funds are actuarially sound after the ify to continue on the health care plan
increase as determined by the actuary for only so long as they remain an eligible
theArkansas Fire and Police Pension Re- beneficiaries under the retirement sys-
� ; � vieW.$oard-" tem." 1 .
Acts 1997, No. 6953 § 1, codified as ' Publisher's Notes. Acts 1999, No.
§ 24-10-617, provided: "(a) When a mu- 1458, § 2 provided: "The provisions of this
nicipal employee who is vested in a mu- act shall apply retroactively to allow cer-
nicipal. retirement system under the Ar- tain surviving spouses who lost benefits
' kansas •Local Police and Fire Retirement because of re-marriage to have those be
System, § 24:10.101, et seq., or under a efits restored if their member spouses
local police Pension and relief fund, § 24- were killed while in performance of his or
11-401, et seq., or under a fire pension and her of ficial duties before Act 1241 of 1997 •
relief fund, § 24-11-801, ,et seq., is killed became effective."
l
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1
RESOLUTION NO. 140-02 .
IA RESOLUTION AUTHORIZING THE TRANSFER OF THE ,
SWORN OFFICERS OF THE FAYETTEVILLE POLICE
DEPARTMENT FROM LOPFI BENEFIT PLAN #1 TO LOPFI
BENEFIT PLAN #2, EFFECTIVE OCTOBER 1, 2002.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
FAYETTEVILLE, ARKANSAS:
Section 1 . That the City Council hereby authorizes the transfer of the
• sworn officers of the Fayetteville Police Department from LOPFI Benefit Plan #1
to LOPFI Benefit Plan #2, effective October 1, 2002.
PASSED and APPROVED this 3rd day of September, 2002.
APPROVED:
✓ FhrEl ,
' c
By. C '
{ � DAN COODY, M r
+ : ti 0
Bv:`=
ATHER WOODRUFF, City Clerk
•
FAYETTEVILLE
THE CITY OF FAYETTEVILLE, ARKANSAS
•
DEPARTMENTAL CORRESPONDENCE
MEMORANDUM
TO: Mayor Dan Coody and Members of the City Council
FROM: Rick Hoyt, Chief of Police
DATE: August 7, 2002
SUBJECT: Police Pension System — LOPFI Benefit Program 2
Attached you will find a resolution authorizing the Police Department to improve its
pension plan benefits by taking advantage of a State retirement plan called Benefit
Program 2.
All police officers hired since 1981 are required to participate in the statewide retirement
system known as LOPFI (Local Police and Fire).
• The basic provisions of the current plan are this:
Final benefits are based upon the officer's number of years of service multiplied by a
factor of 2.2% and the result is the percentage the officer would draw of their final
average salary. Example: 20 years of service X 2.2% = 44% of final average pay.
Officers with less than 28 years of service must wait until age 55 to draw any benefits.
Benefit Program 2 will increase the multiplier to 3 .0%. With that multiplier, an officer
with 20 years of service would draw 60% of final average pay. A worksheet is attached
that shows various examples of the retirement amount differences between Program I
and Program 2.
The idea for going to Program 2 was first advanced by the Local Fraternal Order of
Police Lodge who contacted Mayor Coody. The mayor requested a cost valuation from
LOPFI to see what additional costs the City would have if this plan were approved.
Police Department administration has been fully in support of this idea from the
beginning and advanced it further with a funding request in the 2002 budget process and
rated it a # 1 priority on our list of Target Overruns. However, because of budget
shortfalls it was unfunded.
In December of 2001 , the City was notified LOPFI was reducing the normal percentage
• to submit to LOPFI on a monthly basis. LOPFI reduced the amount to 6% of payroll .
The City had expected to pay the usual percentage of 8. 83% of payroll and the Police
• Department had budgeted that greater amount. What this means is; adequate funds are
already available in the Police budget to cover the additional cost of moving to Benefit
Program 2 for the last 3 months of 2002 and no budget adjustment is necessary.
Retirement benefits are an important part of the total employee compensation package.
We believe a move to Benefit Program 2 is a positive one for the City and will enhance
our ability to attract and retain the best employees. We have an above average work
force and changing to the best retirement plan the State has available will further enhance
officer satisfaction and continued professionalism.
Attachments (2)
•
•
LOPF1
Illustrations of benefit amounts for paid service
not covered by Social Security
LOPFI Benefit LOPM Benefit
Final Average Pay Program 1 * Program 2**
28 Years of Service
$ 1 , 000. 00 $616. 00 $840 . 00
20 Years of Service
$ 1 ,000 . 00 $440 .00 $600.00
15 Years of Service
$ 1 , 000 . 00 $330.00 $450.00
• LOPFI Benefit Program 1 equals years of service times 2.2%
times final average pay.
** LOPFI Benefit Program 2 equals years of service times 3%
times final average pay.
FILE No . 656 07/25 ' 01 PM 0224 ID : LOPFI FaX : 5016821751 PAGE 1
• DD I D a
P.O. DRAWER 34164
ARKANSAS LOCAL POLICE & FIRE RETIREMENT SYSTEM UTTLE RocK, ARKANsAs 72203
TELEPHONE: (501 ) 682 - 1745
ARKANSAS FIRE & POLICE PENSION REVIEW BOARD FAX: (501 ) 682 - 1751
email: info ®lopll-prb.com
website: www.lopri-prb.com
June 26, 2001
Mayor Dan Coody
City of Fayetteville
113 West Mountain
Fayetteville, AR 72701
Dear Mayor Coody:
Enclosed is the cost valuation for implementing Benefit Program <: for your police
department. You will notice the valuation was computed using only one beginning date
of adoption of Benefit Program 2 that date being January 1, 2002. As it turned out the
• statute governing Benefit Program 2 does not allow for adoption to be retroactive. I am
hopeful this fact has not caused a problem for you.
On page 2 of the valuation you will find the cost of implementing Benefit
Program 2. The computed increase in the Employer contribution rate is 4. 06% of payroll.
Keep in mind the Employee contribution rate will not change. For budgeting purposes,
the statute that limits the increase in an Employer' s contribution rate from one year to the
next, 24- 10-405(h), does not apply when adopting Benefit Program 2.
If you decide to adopt Benefit Program 2 for your police officers please provide a
copy of the resolution from your City Council meeting that approves this action. Should
you have questions regarding this valuation feel free to contact me at 501 -682- 1745.
Respectfully,
David B. Clark
Assistant Director
Encl :
•
FILE No . 656 07/25 ' 01 PM 0224 1D : LOPFI FAX : 5016R?1751 PAGE 2
•
GA13RIELo ROEDER, SMITH & COMPANY
Ccnsult tm & Actuaries
Moo Town Canter • Suite tfp0 • SMtntie:d. Michigan 4K7!) • 249-7A&90(`1 . 600.521-049a fax 248-7gC-9020
June 25 , 2001
Mr. David B. Clark, Assistant Director
Arkansas Local Police and
Fire Retirement System
P.O. Drawer 34164
Little Rock, Arkansas 72203
Re: Fayetteville Police, Cost for Adoption of Benefit Program 2
Dear Mr. Clark:
As requested, we have computed the expected increase in employer contribution rates associated
• with adoption of Benefit Program 2. The following table compares the :urrent provisions of
Benefit Program 1 and Benefit Program 2 for paid service members not a so covered by social
security. The adoption of Benefit Program 2 provides for a 3.0% benefit multiplier only for
service rendered after the adoption of Benefit Program 2 (which is assumed to be January 1 , 2002).
Benefit Multiplier Used
Benet Program 2 Benefit Program
(Before start of (After start of
Benefit Program 1 Program 2) Program 2J
2,20% 2.20% 3.00%
The date of the study was. December 31 , 2000- This means that the results of the supplemental
valuation indicate what the December 31 , 2000 valuation would have shown if the proposed benefit
changes had been in effect on that date. This supplemental valuation does not predict the result of
the December 31 . 2001 valuation or of any other future actuarial valuation. (Future activities can
affect future valuation results in an unpredictable manner.) Rather, the supplemental valuation
• gives an indication of- the probable effect of only the benefit change on fntlre valuations without
comment on the complete end result of the future valuations.
FILE No .6756 0725 ' 01 PM 02 : 25 tD : LOPFI FAX :5016PO1751 PAGE 3
•
Mr. David B. Clark ,lune 25, mom
Page 2
Exccpt as noted, actuarial methods and assumptions were the same ss those used in the
regular valuation as of that date. In particular the economic assumptions used in the
supplemental actuarial valuations were net investment return of 7 .5% per year and wage
inflation of 5 .0% per year ( tier paid service plans). Changes in actuarial accrued liabilities
were amortized as a level percent of payroll over a 30-year 'period.
The December 31 , 2000 actuarial valuation covered 87 paid service members with a payroll
of $2,973,475 . The computed employer contribution rate from the December 31 , 2000 was
8 , 83% of member payroll .
• The impact on employer cost is illustrated in the following table:
Increase in
Employer Accrued Liabilities
Normal . I 30 year
Cost $ millions Amortization Total
1
4.O6% $0.00 0.00°/) 4.06%
Comment A: please note that 24- 10-602( f) states that the limit on uicrease in employer
contributions from one year to the next provided by 24- 10-405 ( h) does not apply in the case of an
employer adopting Benefit program 2.
•
GABRIEL, ROEDER, SMITH & COMPANY