HomeMy WebLinkAboutAgenda - Pension Advisory Committee - 07/11/2023_____________________________________________________________________________________
Pension Advisory Committee (PAC) Quarterly Meeting Tuesday, July 11, 2023 | 2:00 p.m. City Hall Conference Room 301, 180 Market Street
Attend Virtually: https://meet.goto.com/SouthBurlingtonVT/pensionadvisorycommitteemeeting07-11-2023
You can also dial in using your phone. Access Code: 413-534-901: +1 (408) 650-3123
A G E N D A
1) Welcome & Introductions
2) Appoint member to record minutes
3) Additions, deletions, or changes to agenda
4) *** Approve prior meeting minutes from April 25, 2023 PAC Meeting
5) SEI review of Q2 Net Performance Report.General overview of the investment plan-Dan CappellDiscuss performance and status of asset allocation- Dan Cappell
6) *** South Burlington pension plan overview – Erik Schait, Newport Group
7) Other business
8) Next scheduled meeting- October 24, 2023 at 2pm
9) Adjourn
*** Attachments Included
Pension Advisory Committee (PAC)
Quarterly Meeting
Tuesday, April 25, 2023, 2:00 – 3:30 pm
City Hall Conference Room 301, 180 Market Street
DRAFT MINUTES
______________________________________________________________________________
Attendees: Martha Machar, Daisy Brayton, Dan Chappell, Dan Boyer, Donna Kinville,
Steve Locke, Brad Datillio, Marc Hachey and Spencer Baker. Absent: Tim Barritt, Larry
Kupferman, Todd Gregory, and Pat Blizzard.
1)Welcome & Introductions
2)Additions, deletions, or changes to agenda – There were no additions, deletions or
changes to the agenda.
3)Approve prior meeting minutes – Minutes were approved as presented.
4)Appoint member to record minutes – Daisy Brayton, agree to record the minutes.
5)SEI review of Q1 Net Performance Report – Dan Cappell, SEI Representative, gave
an overview of the 2021 First Quarter.
Overview – In the first quarter 1 of 2023 the City of South Burlington Pension Plan
generated a positive absolute return of +4.33%. The Plan’s assets were
$41,048,538 as of March 31, 2023.
Market Performance Overview – All markets are positive except for Commodities.
It is very difficult to predict markets. Fixed income markets were very volatile, we
need to remain focused on the long-term and not the short-term.
6)Other business – It was discussed that the October 21, 2021, PAC minutes were
never approved. The committee reviewed the minutes, and they were approved as
submitted.
7)Next Meeting – The next meeting was scheduled for July 11, 2023, from 2:00 – 3:30
pm.
8)Adjourn – Meeting was adjourned at 2:37 pm
Respectfully submitted,
Daisy Brayton, Human Resources Director
1
City of South Burlington
Retirement Income Plan
Erik Schait, ASA, EA, MAAA
Actuarial Consultant
2
The plan is a defined benefit plan
The plan defines what benefit the participant will receive
at retirement, based on service and pay
The return on plan assets does not affect benefits (unlike
457 plans or IRAs)
The City is responsible to ensuring funds are available to
pay benefits.
Defined Benefit Plan
3
Plan is closed to new entrants. New employees who are not already in the plan will become eligible to participate.
Eligibility
4
All benefits in the plan are initially calculated at the Normal Retirement Age as a life annuity.
•Non-Public Safety Age 65
•Public Safety Age 50
Normal Retirement Age
5
X% of Average Monthly Pay times Total Years of Service
•NPS factor is 1.75%
•PS factor is 2.50%
•PS is limited to 25 years in calculation.
Retirement Benefit Formula
6
The average of the 3 highest consecutive years of compensation, prior to retirement or termination
Average Monthly Pay
7
City Hall Department & Public Works
•Total Compensation
»Includes:
•Overtime
•Commissions
•Bonuses
»Excludes:
•Payments to group life insurance
•Hospitalization and like benefits
Compensation
8
Water Pollution Control Department
•Total Compensation
»Includes:
•Schedule and unscheduled overtime pay
»Excludes:
•Payments to group life insurance
•Hospitalization and like benefits
Compensation
9
Fire Department
•Base Pay Rate for 56 hours per week
•Includes overtime up to 25% of base compensation
Compensation
Police Department
•Base Pay Rate for 40 hours per week
•Includes overtime up to 25% of base compensation
10
Full year credit: 2,000 hours
Partial year credit:
1,000 –1,499 hours = ½ year credit
1,500 –1,999 hours = ¾ year credit
No credit for less than 1,000 hours
Years of Service for Benefits
11
Benefit Increase Post Retirement
For Public Safety participants retiring on or after Normal
Retirement Age, but before Social Security benefits paid benefits
are increased by 3% per year until Social Security benefit
commences.
Once Social Security benefits are paid to the participant, then
future Cost of Living increases stop, and a one-time offset is
applied.
12
Social Security Benefit Offset
Upon Social Security commencement, benefit from
Plan reduced, based on following table:
Years of service % of SS as offset
25 or fewer 50%
26 45%
27 40%
28 35%
29 30%
30 or more 25%
13
Social Security Benefit Offset
Offset of plan benefits may be based on Social
Security benefit derived from earnings at the City of
South Burlington.
•The retiree will need to provide outside earnings to determine the
portion of the benefit attributed to City earnings.
•The City will calculate a ratio of City to Total earnings and apply
that to the total Social Security Benefit of the participant.
•It is possible for a retiree to obtain earnings by year from their
online SSA account, which may be printed to pdf free of any
charges.
•The retiree may propose their own calculation of what portion of
the benefit is from the City so long as it contains an explanation of
how they reached their numbers with applicable backup
information so that the City can decide whether to accept it.
14
•Life annuity, no death benefit
•Life annuity, with 120 payments guaranteed
•Joint and 50% survivor annuity
•Joint and 100% survivor annuity
•Pop-up option (NPS only)
•Lump Sum if valued under $25,000
Optional Payment Forms
15
Benefit based on years service at termination
Benefit payable at Normal Retirement Age is reduced for
earlier payment, benefit reduced:
•6.67% for each of the first 5 years (33.3%)
•3.33% for each of the next 5 years (16.7%).
Does not apply to public safety since Normal Retirement Age is 50.
Early Retirement 55 or Later (NPS)
16
Your spouse is automatically your beneficiary
•Spousal consent for another beneficiary
•If you are single, you choose beneficiary
Death benefit is the lump sum value of your
accrued benefit, earned at date of death
Pre-Retirement Death Benefit
17
Total and permanent disability as defined by
Social Security
Disability must occur while employed and continues for at least 6 months
Benefit equal to 100% of accrued (earned) benefit, reduced for payment at date of disability if prior to Normal Retirement Age
Disability Benefit
18
VESTING is ownership of the benefit accrued (earned)
under the plan.
Vesting Schedule
Years of service Percent
less than 3 0%
3 20%
4 40%
5 60%
6 80%
7 100%
Termination of Employment
19
City contribution is determined by actuarial
calculations each year. Valuation date is July 1 for
calculation of contributions
Employees make contributions from payroll based on
rates established in bargaining agreements
City makes bond payments outside of the plan to a
pension obligation bond in addition to contributions
to the plan
Plan Contributions
20
Applying for Benefits
Notification to the City»60 business days from 1st day of the month
City gathers data for final benefit calculation
City provides distribution packet to participant
Participant makes elections
City notifies SEI to start payment
21
Applying for Benefits
Annuity starting dates may only be on the 1st of a month.
Payments may only be made following separation from service with the City.
A Public Safety Participant must notify City when Social Security starts.
The form of annuity and/or the beneficiary on an annuity may not be changed after payments have begun.
22
Actuarial Funding Methods
There are many different ways for valuing future liabilities. The primary difference
in these methods is the method of attributing liability to the past and to the future.
Two primary methods to review when discussing funding of public pension plans:
•Unit Credit –This cost method does not reflect expected future pay increases. The
liability today is based on the present value of benefits based on current compensation
and service earned to date. This is the method used for single employer private
pension plans. This method was used by the City of South Burlington prior to July 1,
2014.
•Entry Age Normal -The benefit funded is based on projected compensation. In
addition, liability is assigned to periods of time based on compensation. Ultimately, the
annual liability for an employee is designed to be an even percentage of their
compensation each year. This is the method mandated for use in GASB financials.
23
Present Value of Accrued Benefit (PVAB) –The present value of retirement benefits
accrued to date. This is a unit credit (UC) funding method.
Entry Age Normal (EAN) Liability –The liability used for funding to determine the
recommended contributions and for financial statements under GASB.
•All expected benefits are projected to assumed retirement date.
•The present value of expected benefits is allocated to the past and future as a
percentage of compensation.
•Evenly attributes liability over the compensation of an employee.
PVAB does not consider future compensation increases. However, it does represent
the present value of benefits for employees, assuming they all terminated
employment on 7/1.
EAN anticipates future compensation increases. EAN also leads to greater liability
attributed to the past, but less accumulation of future liabilities.
Ultimately, the liability of both will be the same for a participant, at their retirement
date.
Funded Status –PVAB(UC) vs. EAN
24
Comparison of Funded Ratios
City of South Burlington -82.73% as of June 30, 2022. (7.25% discount rate)
Average public plan -74.00% (decrease from 85%), as of June 30, 2022 by Milliman(1)
VMERS –73.60% as of 6/30/2022, from 86.29% on 6/30/2021. (7.00% discount rate)
VSTRS –54.81% as of 6/30/2022, from 58.83% on 6/30/2021. (7.00% discount rate)
City of Burlington –80.10% as of June 30, 2021. (7.20% discount rate)
City of St. Albans –61.80% as of June 30, 2021. (6.07% discount rate)
(1) Data from 2022 Milliman public funding study.
Based on Entry Age Normal Liabilities and Market Value
25
95%91%
82%84%84%84%82%
99%
83%
50%
57%
107%
101%
106%
120%
109%
99%102%102%100%97%
113%
95%
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
6/30/2009 6/30/2010 6/30/2011 6/30/2012 6/30/2013 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022
EAN PVAB
Historical Funded Status
EAN vs PVAB, Based on Market Value of Assets
(1) $8.168 Million loan with local bank used to fund the plan during fiscal year end 6/30/11.
(2) Large asset experience loss during 6/30/15 to 6/30/16. Updated mortality tables.
(3) Positive asset experience offset by change in discount rate between 6/30/16 and 6/30/17.
(1)
(2)(3)
26
Participant Count by Year and Status
48 45 52 55 59 62 64 68 67 75 79 82 89 93
22 27
39 38 44 43 45 45 51 44 46 44 47 52
129 128
112 105
105 110 112 116 115 104 95 92 78 68
-
50
100
150
200
250
6/30/09 6/30/10 6/30/11 6/30/12 6/30/13 6/30/14 6/30/15 6/30/16 6/30/17 6/30/18 6/30/19 6/30/20 6/30/21 6/30/22
Retirees Deferred Vested Actives