HomeMy WebLinkAboutResolution 4102-07-2012A Resolution
NO. 4102 -07 -2012
TO NOTIFY 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 AMENDMENTS TO THE
RETIREMENT ORDINANCE FOR NON -CIVIL SERVICE EMPLOYEES HIRED
BEFORE JULY 1, 2011, POLICE OFFICERS HIRED BEFORE JANUARY 1, 2013,
AND POLICE OFFICERS HIRED ON OR AFTER JANUARY 1, 2013, THAT WILL
REDUCE A NON - ACCRUED BENEFIT PROVIDED BY THE RETIREMENT
SYSTEM — COST OF LIVING ADJUSTMENTS
Whereas, Article 62431 of the Texas Revised Civil Statutes applies to the City of Fort Worth and the
Employees' Retirement Fund of the City of Fort Worth ( "the Fund "); and
Whereas, Section 4.03 of Article 62431 of the Texas Revised Civil Statutes requires of the City Council
to notify the Board of Trustees of the Fund of City Council's intent to consider and vote on any
amendment to the administrative rules governing the Fund that would reduce a benefit provided by the
retirement system; and
Whereas, the City's analysis projects the Fund to have an infinite funding period for the accrued
unfunded liability (market value) if more conservative investment returns are assumed even without
booking future potential ad hoc cost -of- living- adjustments (COLAs); and
Whereas, the City and the tax payers of Fort Worth 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 and
meet and confer agreements, the retirement benefits that are offered to employees; and
Whereas, the Employee Retirement Fund Board has the legal authority over the investment strategy and
management oversight of the contributions once remitted to them; and
Whereas, the City Council has endorsed the goal of preservation of a defined benefit plan for
employees; and
Whereas, the City Council has demonstrated its commitment to this goal by increasing the City's
contributions to the Fund by 5% of payroll in 2007, by 4% of payroll in 2010 and by making a one -time
contribution of $7 million in 2010; and
URTWO
No. 4102 -07 -2012
Whereas, these funding commitments have nearly doubled the City's annual financial commitment to
the Fund over a period of four years, representing a $39 million increased annual expense in FY2012
compared to FY2007; and
Whereas, the City Council reduced retirement benefits for General employees hired after July 1, 2011,
with a pledge to consider the same for Police Officers and Fire Fighters during their subsequent contract
negotiations; and
Whereas, the City may not unilaterally reduce the funding commitment to the Fund per State law; 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, one of the impediments to improving the health of the Fund is the structure of the ad hoc cost -
of- living adjustment (ad hoc COLA) option that was offered in 2007; and
Whereas, the ad hoc COLA was originally intended to allow retirees to share in the risk and reward of
investment returns with an annual adjustment of 04% depending on the amortization period of the
unfunded liability each year; and
Whereas, ad hoc COLA's to date have been triggered by the City's subsequent contribution increases
and benefit reductions for future General employees - - -not investment returns as intended - -- diluting the
effectiveness of those efforts to improve the health of the Fund; and
Whereas, there will be no ad hoc COLA awarded for 2013 based on the recent actuarial valuation of
the Fund, and based on projections by the Fund's actuary an ad hoc COLA will not be awarded for the
next 21 years even if current Fund assumptions are met and no other changes are made; and
Whereas, current retirees who have the Ad Hoc COLA would have been materially the same since the
inception of the program with a simple 2% COLA and all employees would be well - served from a
predictable COLA during retirement; and
Whereas, the Fund will be able to more accurately project and book the cost of a simple 2% COLA to
allow more accurate analysis of benefit modifications that can improve the health of the Fund; and
Whereas, in principle, the City believes it is important for employees to have a predictable COLA to
facilitate long -term financial planning; and
Whereas, the opportunity for any additional attempts to improve the health and security of the Fund for
the members and the City cannot be considered until the ad hoc COLA dilemma is resolved, and
Whereas, the City Council intends to consider and vote at a meeting, to be held on or after October 16,
2012 on an amendment(s) to the Retirement Ordinance that will reduce benefits.
&UNOM
II is
Resolution No. 4102 -07 -2012
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF FORT WORTH, TEXAS:
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 amendments
to the Retirement Ordinance, at a meeting to be held on or after October 16, 2012, as follows:
That, in the event the City Council adopts benefit reductions outlined in Resolution 4103 -07 -2012:
1. The City intends to modify benefits to assign a 2% guaranteed annual adjustment for
future accrued years of service for the following employees who are currently under the ad
hoc COLA:
a. Active General Employees hired before July 1, 2011;
b. Active Police Officers hired before January 1, 2013;
2. All active General Employees hired before July 1, 2011 and all active Police Officers hired
before January 1, 2013 who are subject to the ad hoc COLA will be offered the opportunity
to select the 2% simple guaranteed annual adjustment for their past service accrual;
3. All Retirees (General, Police and Fire) and beneficiaries who are subject to the ad hoc
COLA will be offered the opportunity to select the 2% simple guaranteed annual
adjustment based on their starting pension amount with the first payment occurring in
January 2014;
4. All Police Officers hired on or after January 1, 2013 will be assigned a 0% annual
adjustment;
5. In recognition of the current Collective Bargaining Agreement with the International
Association of Firefighters Local 440 that represents Fort Worth Fire Fighters, the City
will enter into new contract negotiations with the Local 440 beginning after October 1,
2012 with the intent to allow their members to participate in the above changes thereafter,
subject to the results of the negotiations.
ADOPTED this 10th day of July, 2012.
AT'I
Mar
R- TWOm