HomeMy WebLinkAboutResolution 3504-07-2007A Resolutllon
No 3504-07-2007
TO NOTIFY THE BOARD OF TRUSTEES OF THE EMPLOYEES' RETIREMENT FUND
CITY OF THE FORT WORTH THAT THE FORT WORTH CITY COUNCIL INTENDS TO
CONSIDER AND VOTE ON AMENDMENTS TO THE RETIREMENT ORDINANCE THAT
WOULD REQUIRE AN AD HOC COST OF LIVING ADJUSTMENT FOR NON VESTED
AND FUTURE EMPLOYEES, AND THAT WOULD PERMIT VESTED EMPLOYEES AND
THOSE CURRENTLY RECEIVING BENEFITS UNDER THE RETIREMENT ORDINANCE
TO MAKE A ONE TIME, IRREVOCABLE SELECTION OF THE AD HOC COST OF
LIVING ADJUSTMENT, AND THAT WOULD PLACE A 12% ANNUAL CAP ON HIGH
THREE INCLUDED PENSIONABLE EARNINGS IN DETERMINING PENSION
BENEFITS
WHEREAS Article 62431 of the Texas Revised Statutes applies to the Employees
Retirement Fund of the City of Fort Worth and
WHEREAS, Section 4 03 of Article 62431 of the Texas Revised Civil Statutes requires the
City Council to notify the Board of Trustees of the Employees Retirement Fund of the City of
Fort Worth of City Council s intent to consider and vote on any amendment to the Administrative
Rules governing the City of Fort Worth Retirement Fund that would reduce a benefit provided by
the retirement system and
WHEREAS the City Council intends to consider and vote of an amendment to the
Retirement Ordinance that would remove the guaranteed 2% annual cost of lrvmg adjustment on
pension benefits for all non vested and future employees and would instead require an Ad Hoc
Cost of Living Adjustment of 0 2% 3% or 4% based on the Fund s amortization period and
WHEREAS the City Council also intends to consider and vote on an amendment to the
Retirement Ordinance that would permit vested members of the Fund and those currently
receiving benefits under the Retirement Ordnance to make a one time irrevocable selection to
be subject to the Ad Hoc Cost of Living Adjustment, and
WHEREAS the City Council intends to consider and vote on an amendment to the
Retirement Ordinance that would place a 12% annual cap on the includible pensionable earnings
earned during a member s highest three years of earnings
NOW THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF FORT WORTH, TEXAS
1 That this Resolution serve as Notification to the Board of Trustees of the Employees
Retirement Fund of the City of Fort Worth that the Fort Worth City Council intends to
consider and vote on an amendment to the Retirement Ordinance that would reduce a
non accrued benefit provided by the retirement system by requiring all employees who
vest or are hired after December 31 2007 to be subject to the Ad Hoc Cost of Living
Adjustment on pension benefits Those currently receiving benefits under the
Retirement Ordinance would be allowed to make a one time irrevocable selection of
the Ad Hoc Cost of Living Adjustment
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2 That this Resolutton serve as Notification to the Board of Trustees of the Employees
Retirement Fund of the City of Fort Worth that the Fort Worth City Council intends to
consider and vote on an amendment to the Retirement Ordtnance that would reduce a
non accrued benefit provided by the rettrement system by placing a 12% annual
earnings cap on a member s highest three years of includible pensionable earntngs for
consideration of pension benefits
3 That the Ctty Council intends to consider and vote on the Ad Hoc Cost of Ltvtng
Adjustment and the 12% annual earnings cap at a City Council Meeting scheduled on
or after October 16 2007
4 That a certified copy of this Resolution be sent to the Board of Trustees of the
Employees Rettrement Fund of the City of Fort Worth forthwith
Adopted this 17`h day of July 2007
APPROVED AS TO FORM AND LEGALITY
City Attorney
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APPROV~t~
CITY CO~JI~CIL
JUL ~. 7 2007
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City Secretary of the
City of Fort Worth, Texas
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City of Fort Worth, Texas
Mayor and Council Communication
COUNCIL ACTION Approved on 7/17/2007 Resoluation #3504
DATE Tuesday July 17 2007
LOG NAME 14ERF REFERENCE NO G-15788
SUBJECT
Adoption of Resolution Notifying the Board of Trustees of the Employees Retirement Fund of the
City of Fort Worth of City Council's Intent to Consider Benefit Reductions
RECOMMENDATION
It is recommended that the City Council adopt the attached resolution notifying-the Board of Trustees of the
Employees' Retirement Fund of the City of Fort Worth (ERF) of its intent to consider benefit reductions at
the City Council meeting on or after October 16 2007 pertaining to
1 Placing a limit on the amount of increases in earnings in compensation for the retirement formula at 12
percent annually
2. Removing the guaranteed two percent annual COLA on pension benefits for all non-vested and future
employees and requiring all non-vested and future employees hired after December 31 2007 to be subject
to an Ad Hoc COLA, and
3 Permitting vested members of the fund and those currently receiving benefits under the Retirement
Ordinance to make cone-time irrevocable selection on choosing the Ad Hoc COLA rather than the
guaranteed COLA.
DISCUSSION
During the City Council Budget retreat in June 2007 the City Council discussed several strategies to
address the $411 million Unfunded Actuarial Accrued Liability (UAAL) in the ERF
The discussion involved controlling the use of overtime for employees that spike or earn large amounts of
overtime prior to retirement in order to significantly increase their retirement pension and implementating an
Ad Hoc Cost of Living Adjustment (COLA) benefit for retirees. The City Council expressed interest in taking
action to proceed with changing the benefit formula for overtime earnings and implementing an Ad Hoc
COLA.
An earnings cap on the amount of earnings eligible for consideration in the retirement formula calculation
would limit the growth rate on compensation in the retirement formula A 12 percent annual earnings cap
would limit the effect of spiking on all income including overtime and reduce the UAAL by $8
million Eliminating overtime completely on a prospective basis would reduce the UAAL by $70 million
The implementation of the Ad Hoc COLA would result in a COLA of zero percent, two percent, three
percent, or four percent based on the fund's amortization period The implementation of the Ad Hoc COLA
allows the fund to avoid accounting for the liability associated with the current guaranteed COLA of two
percent.
Therefore it is recommended that the City Council adopt the attached Council Resolution as its notice of
intent to consider and vote on an amendment to 1) place a limit on the amount of increases in earnings in
http.//www cfwnet.org/council~acicetlReports/mc~nnt.asp 7/17/2007
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compensation for the retirement formula at 12 percent annually 2) remove the guaranteed two percent
annual COLA on pension benefits for all non-vested and future employees and require all non-vested and
future employees hired after December 31 2007 to be subject to an Ad Hoc COLA, and 3) permit vested
members of the fund and those currently receiving benefits under the Retirement Ordinance to make a one-
time irrevocable selection on choosing the Ad Hoc COLA rather than the guaranteed COLA.
FISCAL INFORMATION/CERTIFICATION
The Finance Director certifies that the proposed changes will not have an adverse actuarial impact on the
ERF based on actuarial reports from Gabriel Roeder Smith and Company (GRS)
TO Fund/Account/Centers
FROM Fund/Account/Centers
Submitted for City Manager's Office b~ Karen Montgomery (6222)
Originating Department Head. Karen Marshall (7783)
Additional Information Contact: Mark Washington (8058)
http.//www cfwnet.org/council~acket/Reports/mc~nnt.asp 7/17/2007