HomeMy WebLinkAboutOrdinance 23034-12-2017ORDINANCE NO. 23034-12-2017
AN ORDINANCE AMENDING ARTICLE I OF CHAPTER 2.5
"EMPLOYEES' RETIREMENT FUND," OF THE CODE OF THE CITY
OF FORT WORTH (1986), AS AMENDED, ADDING A DEFINITION
FOR BUY BACK INTEREST RATE; TO AMEND THE INTEREST RATE
REQUIRED WHEN PURCHASING PRIOR CREDITED SERVICE;
REDUCING THE TIME PERIOD FOR PURCHASING PRIOR
CREDITED SERVICE; PROVIDING THAT THIS ORDINANCE IS
CUMULATIVE; PROVIDING A SEVERABILITY CLAUSE;
PROVIDING THAT ALL CONDITIONS PRECEDENT FOR THE
ADOPTION OF THIS ORDINANCE HAVE BEEN MET; AND
PROVIDING AN EFFECTIVE DATE.
WHEREAS, the City of Fort Worth City Council ("City Council") adopted by Ordinance
Chapter 2.5, Article I of the Code of the City of Fort Worth, collectively called "Employees'
Retirement Fund"; and
WHEREAS, Article 6243i of the Texas Revised Civil Statutes applies to the City of Fort
Worth (the "City") and the Employees' Retirement Fund of the City of Fort Worth (the "Fund");
and
WHEREAS, the City and the taxpayers of the City currently have the State constitutional
obligation to honor earned benefits for employees should the Fund become insolvent and,
therefore, have a critical interest in the affordability of the benefits that are offered to employees;
and
WHEREAS, the City controls, within Constitutional constraints and as limited by
collective bargaining or meet and confer agreements, the Retirement Benefits that are offered to
employees; and
WHEREAS, the Board of Trustees for the Fund has the legal authority over the investment
strategy and management oversight of the contributions once remitted to them; and
Ordinance No. 23034-12-2017
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WHEREAS, the City has previously reduced Retirement Benefits for Members which was
upheld by the Courts; and
WHEREAS, the City adopted a 2% guaranteed cost of living adjustment (COLA) for
certain employees to more accurately project and book the cost of a COLA and to give those
employees a moi�e predictable COLA to facilitate long-term financial planning, but resulted in an
increase in the liability of the Fund; and
and
WHEREAS, the City recently reduced the regular interest rate for contribution refunds;
WHEREAS, the Fund has adopted more conservative and realistic actuarial assumptions
over the last two years which has led to an increase in the liability of the Fund; and
WHEREAS, the Fund has not consistently met its assumed rate of return in recent years,
which has led to an increase in the liability of the Fund; and
WHEREAS, the Fund has had at least three consecutive actuarial valuations that indicate
an amortization period of greater than 40 years; and
WHEREAS, State law requires a governmental entity to submit a Funding Soundness
Restoration Plan ("FSRP") when the Fund has had three consecutive valuations with an
amortization period greater than 40 years; and
WHEREAS, the FSRP requires that the Fund reduce the amortization period to below 40
years within a 10-year period; and
WHEREAS, the City is unwilling to make additional financial contributions to the Fund
due to risks to the City's long-term sustainability in terms of operations, staffing, infrastructure
and tax rate competitiveness; and
WHEREAS, additional benefit reductions are necessary to comply with the FSRP; and
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WHEREAS, currently, the interest rate for Members seeking to purchase prior credited
service is the regular interest rate; and
WHEREAS, it would be more beneficial to the Fund to change the interest rate for the
purchase of prior credited service to the assumed rate of return as adopted by the Fund for the
annual actuarial valuation of the Fund; and
WHEREAS, the City Council has provided 90-day notice to the Board of Trustees of the
Fund of its intention to make benefit changes and reductions in Retirement Beneiits.
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FORT WORTH,
TEXAS:
SECTION 1.
Chapter 2.5, Article 1, Division 1, Section 2.5- 1(Definitions) is amended by adding the
definition of "Buy Back Interest" to be effective for Members who request to purchase prior
credited service on or after January 1, 2018:
"Buy Back Interest." The Assumed Rate of Return as adopted by
the Board of Trustees of the City of Fort Worth Employees'
Retirement Fund for the Annual Actuarial Valuation of the Fund.
Chapter 2.5, Article 1, Division 1, Section 2.5-4(a) (Credited Service) is amended to be
effective for Members who request to purchase prior Credited Service on or after January l, 2018:
(a) Service breaks. Pension credits shall be granted for all credited service for which a
member of the fund receives employment compensation from the city, subject to the
following regulations pertaining to service breaks.
(1) Authorized service breaks of 90 or less consecutive calendar days without pay
shall not be deducted from credited service.
(2) Except as provided below, periods of absence in excess of 90 consecutive calendar
days without pay shall be deducted from credited service, and no contributions shall be made
by members or by the city during such periods.
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(3) a. An absence of any period shall be permitted without loss of prior credited
service, unless the member receives a distribution of his or her total contributions, plus
regular interest, and any period of absence shall cancel all prior credited service if the
member receives a distribution of the member's total contributions, plus regular interest;
however, if a member is absent, the member may regain prior credited service by repaying
the total amount of the refund, less the amount received from the member's cash balance
account, from the date of withdrawal to the date of repayment, pursuant to policies adopted
by the Board under one of the two following options:
1. Repay in a single lump sum payment within 90 days of reemployment,
including Buy • Back Interest on the date of repayment that also
includes Buy Back Interest for the period of absence on the date of the
repayment; or
2. Repay through a payroll deduction pay-back plan which commences
within 90 days of reemployment, and provides Buy Back Interest for
the period of absence and that Buy Back Interest will be charged
throughout the pay-back period and that the repayment period will not
exceed three years.
No other repayment option is authorized for the repayment of prior credited service.
SECTION 2.
This ordinance shall be cumulative of all provisions of ordinances and of the Code of the City
of Fort Worth, Texas, as amended, except where the provisions of this ordinance are in direct conflict
with the provisions of such ordinances and such Code, in which event conflicting provisions of such
ordinances and such Code are hereby repealed.
SECTION 3.
It is hereby declared to be the intention of the City Council that the sections, paragraphs,
sentences, clauses and phrases of this ordinance are severable, and, if any phrase, clause, sentence,
paragraph or section of this ordinance shall be declared unconstitutional by the valid judgment or
decree of any court of competent jurisdiction, such unconstitutionality shall not affect any of the
remaining phrases, clauses, sentences, paragraphs and sections of this ordinance, since the same
would have been enacted by the City Council without the incorporation in this ordinance of any such
unconstitutional phrase, clause, sentence, paragraph or section.
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SECTION 4.
The City Council finds that all acts, conditions and things required by provisions of the
Constitution of Texas and Charter and Ordinances of the City of Fort Worth precedent to and in
the adoption of this Ordinance have been done, have happened and have been performed in proper
and lawful time.
SECTION 5.
This ordinance shall be in full force and effective from and after its adoption.
APPROVED AS TO FORM AND LEGALITY: �
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La titia Colema , Brown, Assistant City Attorney Mary J. Kayse it Sec�i�etary
ADOPTED AND EFFECTIVE: December 12, 2017
Ordinance No. 23034-12-2017
Page 5 of 5
City of Forf Worth, Texas
Mayor and Council Communication
DATE: Tuesday, December 12, 2017 REFERENCE NO.: **G-19181
LOG NAME: 12PENSION CHANGE BUY BACK INTEREST RATE
SUBJECT:
Adopt Ordinance Amending Chapter 2.5, Retirement, Article I, Employees' Retirement Fund, of the City
Code to Create a Definition of the Buy Back Interest Rate, to Modify the Calculation of the Buy Back
Interest Rate for the Purchase of Prior Credited Service, and to Reduce the Payment Period for Purchases
of Prior Credited Service (ALL COUNCIL DISTRICTS)
RECOMMENDATION:
It is recommended that the City Council:
Adopt the attached ordinance amending Chapter 2.5, Retirement, Article I, Employees' Retirement Fund,
of the City Code to create a definition of Buy Back Interest Rate, to modify the calculation of the Buy Back
Interest Rate and to reduce the payment period for the purchase of prior credited service.
DISCUSSION:
In 1945 the City of Fort Worth established the Employees' Retirement Fund of the City of Fort Worth
(Fund) which is a tax-qualified government pension plan (Plan). The City picks-up and pays member
contributions on a pre-tax basis for the employee. Since 2007, the Fund has been governed by 6243i of
the Texas Revised Civil Statutes. The statute permits both the Retirement Fund Board and the City
Council to make rules governing the Fund. The Fund is also subject to Article 16, Section 66 of the Texas
Constitution, which prohibits accrued pension benefits from being decreased.
Section 2.5-4 of the Retirement Ordinance currently allows employees who terminate employment with the
City and receive a refund of their contributions to "buy back" their prior credited service if the employee
later returns to service with the City. The employee must repay the total amount of all contributions plus
Regular Interest (now calculated as the two-year Treasury Bill rate). The employee has (90) days from
their reemployment to elect to buy back prior credited service. An employee who elects to purchase prior
credited service is given seven years to complete the purchase of their prior credited service.
Staff is recommending that the Retirement Ordinance be amended to change the interest rate on the
purchase of prior credited service to the assumed rate of return in place on the date the employee elects
to purchase prior credited service. This will ensure that any purchase of prior service credit fully restores
the Fund by capturing the earnings that are assumed to have occurred if the withdrawal had not
occurred. Staff is also recommending that the payment period for the purchase of prior credited service
be reduced from seven years to three years for more efficient administration of the Fund.
Attached is the copy of ordinance that Staff is recommending be adopted. A red-line copy of the
ordinance is also attached for reference.
This M&C does not request approval of a contract with a business entity.
Logname: 12PENSION CHANGE BUY BACK INTEREST RATE Page 1 of 2
FISCAL WFORMATION / CERTIFICATION:
The Director of Finance certifies that the proposed change is designed to improve the long term funded
status of the Retirement Fund, which may have a positive impact on City funds in the future.
FUND IDENTIFIERS (FIDs):
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CERTIFICATIONS:
Submitted for City Manaqer's Office bv:
Originating Department Head:
Additional Information Contact:
ctivity� Budget I Reference # {Amo
Year (Chartfield 2) �
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Year (Chartfield 2)
Susan Alanis (8180)
Sarah Fullenwider (7623)
Laetitia Brown (6639)
Logname: 12PENSION CHANGE BUY BACK INTEREST RATE Page 2 of 2