M&C Review


COUNCIL ACTION:  Approved on 12/11/2018 - Ordinance No. 23516-12-2018 & Resolution No. 5008-12-2018

CONTINUED FROM A PREVIOUS WEEK
DATE: 11/13/2018 REFERENCE NO.: G-19423 LOG NAME: 14PENSIONAMENDMENTS
CODE: G TYPE: NON-CONSENT PUBLIC HEARING: NO
SUBJECT:  

Adopt Ordinance Amending Chapter 2.5, Retirement, Article 1, Employees' Retirement Fund, of the City Code to Make Pension Modifications, to Increase Contributions for Participating Members of the Fort Worth Employees' Retirement Fund Contingent on a Successful Vote by the Participating Members to Increase Contributions, and to adopt Resolution calling a Special Election of the Participating Members of the Fort Worth Employees' Retirement Fund to vote to increase their contributions to the Fund (ALL COUNCIL DISTRICTS)


RECOMMENDATION:

It is recommended that the City Council:

1. Adopt the attached ordinance amending Chapter 2.5, Retirement, Article I, Employees' Retirement
    Fund, of the City Code to:

        a. Make pension modifications for active and retired members of the Fort Worth Employees'
            Retirement Fund ;

        b. Increase City and Member contributions contingent upon a successful election of Participating
            Members of the Fund to approve the increases; and

2. Approve the attached Resolution calling for an election by Participating Members of the Fort Worth
    Employees' Retirement Fund to vote to increase their contributions to the Fund.

 
DISCUSSION:

In 2015 the City Manager formed a Pension Review Committee to define and assess the long-term sustainability of the Fort Worth Employees' Retirement Fund (the Fund), and evaluate options to improve the current position of the Fund. Members of the committee include: Michael Glynn (Fire), Rick Van Houten (Police), Manny Ramirez (Police), Joelle Mevi (Fort Worth Employees' Retirement Fund), Todd Cox (Fort Worth Employees' Retirement Fund), Glenn Balog (General Employees), Marsha Anderson (Retirees), Laura Alexander (the City of Fort Worth financial advisor), and Mike Ward (citizen representative).

Due to the financial reality that the Fund is poised to run out of money by 2050 without significant changes, the purpose of the Committee was to:

• Discuss and agree on how long-term sustainability will be defined;
• Evaluate the competitiveness of the City' s pension plan in the context of total compensation with the
  goal of maintaining competitive recruitment and retention;
• Evaluate the pension marketplace to include other Texas stand-alone plans and the Texas
  Municipal Retirement System; and
• Submit a report to the mayor and City Council detailing the results of the evaluation and identifying
  options that the City Manager may recommend to the City Council to improve the condition of the
  Fund.

The overarching goal of the proposed solution had to meet financial obligations to taxpayers; ensure employees' and retirees' ability to rely on their pensions; and recruit and retain top talent for the organization.

The Committee began meeting in November 2015 and adopted the following guiding principles:

        1. Reforms should be sustainable and structured to lessen the need for further interventions
        2. Costs should be shared equitably between the City and its employees;
        3. Costs should be shared equitably between employee groups;
                A. Employee groups should contribute fairly based on the cost structure of their group
                B. Employees should contribute fairly based on the benefit structure of their service
        4. Further reductions in benefits for future service should be avoided at this time in order to
            maintain competitive compensation and secure retirement, but if recommendations are not
            implemented then this may be required; and
        5. Manage the risk of the plan and improve the overall financial condition on a go-forward basis.

After almost three years of meetings, the Pension Review Committee was unable to reach a consensus on a plan to address the pension issues. On August 17, 2018, the City Manager presented his recommendation to the City Council. Following additional presentations and deliberation, City Staff is recommending that the City Council adopt amendments to the Retirement Ordinance to do the following:

Pension Modifications for Current Retirees or members approved for retirement as of November 13, 2018 with 25 years or more of service and their beneficiaries:

1. Effective with the January 1, 2020 pension checks, eliminate the future award of the 2% simple and the
    Ad Hoc Cost of Living Adjustments (COLA);
2. Create a 2% COLA on up to $30,000 on the base pension; and
3. Create a 1% COLA on the base pension in excess of $30,000.


Pension Modifications for Current Retirees or members approved for retirement as of November 13, 2018 with fewer than 25 years of service and their beneficiaries:

1. Effective with the January 1, 2020 pension checks, eliminate the future award of the 2% simple and the
    Ad Hoc Cost of Living Adjustments (COLA); and
2. Create a 1% COLA on the base pension.


Pension Modifications for Group I, Group III and Group V members who have not retired or been approved for retirement as of November 13, 2018 and their beneficiaries:

1. Eliminate the future award of the 2% simple and the Ad Hoc Cost of Living Adjustments (COLA); and
2. Create a 1% COLA on the base pension for service earned through June 21, 2019. There is no COLA
    for service on or after June 22, 2019.

Minimum retirement age for Group I, Group II, Group V and Group VI members:

1. Maintain a minimum retirement age of 55 for Group II members; and
2. Add a minimum retirement age of 55 for future service of Group I, Group V and Group VI members for
    service earned beginning on June 22, 2019.

Elimination of Service Credit for Unused Major Medical sick leave/sick leave for all Members:

Eliminate service credit for accruals of unused major medical sick leave/sick leave earned on or after December 22, 2018 from the pension calculation for credited service.

Contribution Modifications:

1. For the pay period beginning June 22, 2019, increase contributions for Group I General Members
    by 1.1% of earnings, plus an additional .7% each year for the number of years of credited service the
    Group I General Member has prior to October 1, 2013;
2. For the pay period beginning June 22, 2019, increase contributions for Group II General Members
    by 1.1% of earnings;
3. For the pay period beginning June 22, 2019, increase contributions for Group III and Group IV Police
    Members by 4.7% of earnings to be phased in over three years;
4. For the pay period beginning June 22, 2019, increase contributions for Group V and Group VI
    Firefighters by 3.8% of earnings to be phased in over two years; and
5. Increase the City' s contributions by 4.5% of payroll upon a successful election by the Participating
    Members of the Fund to approve an increase in Member contributions. City contributions will be
    effective retroactively for the pay period beginning on December 22, 2018. Any City contribution for
    the period prior to the employee election, and as necessary for contributions for service through
    June 21, 2019, may be made as a lump sum to the Fund as directed by the City.

Staff' s recommendations are based on the following key attributes:

Preserves 1% COLA for all current retirees with less than 25 years of service and for past service for
  active employees, and preserves the 2% COLA on base pensions up to $30,000 for retirees with 25
  years of service or more

• Begins to smooth out benefits for active employees by suspending COLA' s for future service for
  members that have a high 3 years of service pension calculation; and

Reasonable contribution increases for employees, with phasing in of employee contribution increases
  for Police Officer and Firefighters.

The attached resolution will call the special election for Participating Members to vote to approve an increase in their contributions to the Fund. The City' s contribution increase is contingent upon a successful vote by the Members to increase their contributions.

This M&C does not request approval of a contract with a business entity.
 
FISCAL INFORMATION/CERTIFICATION:

The Director of Finance certifies that funds are available, as appropriated, in the various operating budgets and will require departments to implement cost-saving measures to absorb 1.5% of the increase into existing appropriations.

TO
    Fund Department
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Program Activity Budget
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FROM
    Fund Department
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Account Project
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Program Activity Budget
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(Chartfield 2)
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Submitted for City Manager's Office by:
Susan Alanis (8180)
Originating Department Head:
Brian Dickerson (7783)
Additional Information Contact:
Brian Dickerson (7783)

 
 
ATTACHMENTS
  11-13-18 Resolution Calling Election on Contribution Increase v. 5.doc
  Ordinance.pdf