title
CONSOLIDATED POLICE OFFICERS AND FIREFIGHTERS RETIREMENT PLAN (B)
Ordinance No. 0-07-22
An ordinance of the City of Gainesville, Florida, amending provisions relating to the Consolidated Police Officers and Firefighters Retirement Plan, Article VII, Division 8 of Chapter 2 of the Code of Ordinances, by amending section 2-596, Definitions; 2-598, Eligibility and participation; section 2-599, Contributions; section 2-600, Retirement dates and benefits; section 2-601, Optional forms of retirement income; section 2-602, Administration of the plan, section 2-606, Miscellaneous relating to beneficiaries; section 2-607, Cost of living adjustment of benefits; and section 2-633(d) of Article XI, Retiree Health Insurance Program and Trust Fund, of Chapter 2 of the Code of Ordinances; providing directions to the codifier; providing a severability clause; providing a repealing clause; and providing an immediate effective date, and limited retroactive effect.
recommendation
The City Commission adopt the proposed ordinance, as amended.
explanation
The attached ordinance is a result of lengthy negotiations between management and police and fire union representatives regarding mostly state-mandated changes to the benefit structure of the Consolidated Police Officers and Firefighters Retirement Plan. Prior to legislation adopted by the state in 1999, most cities throughout the State of Florida who operated defined benefit plans for police officers and firefighters took advantage of provisions contained in Chapters 175 (firefighters) and Chapter 185 (police officers), which allowed cities to impose taxes on property and casualty insurance premiums for policies issued within their jurisdiction. This tax (collected by the state) is remitted to the cities for the purposes of providing funding for police officer and firefighter retirement benefits. Prior to 1999, chapters 175 and 185 had provided a benefits structure for such plans, which could be adopted verbatim by a participating municipality, and these were called "chapter plans." Most municipalities, however, utilized provisions that allowed them to create their own plan design while meeting a few specific, mandated minimum requirements. These were called "local law plans." These latter plans often provided for greater benefits, i.e., multiplier, in one area than did the chapter plans, but might not provide one or more of the non-mandated chapter plan provisions.
The 1999 legislation modified chapter plan requirements and mandated that each and every one of these requirements as minimum benefit requirements for municipalities who wished to participate in receipt of the tax monies. While municipalities were now required to provide benefits that they had not previously provided and/or at levels they had not previously provided, the municipalities were not allowed to decrease benefits that were presently being provided at a higher than minimum level in order to offset the new benefits. Part of the 1999 legislation, however, provided that the municipalities did not have to provide the new mandated minimum benefits until additional increments of tax monies, i.e., increases in annual receipts above that which was in effect in 1997, could provide funding for the new minimums. That incremental increase since 1997 has finally allowed the City to fund amendments to the Police Officers and Firefighters Consolidated Plan, which provides the minimum benefits, and at least the amounts required. Part of this ability is based upon an agreement by the city, the state, and union representatives on the base amount to be used to calculate additional incremental premium tax for the purpose of providing future extra benefits for members. Most of the ordinance involves changes to adopt all the new mandated minimum standards. A section by section analysis follows.
Section 1 of the ordinance updates the definitions, including providing for a slight increase in the multiplier, for months of service after October 1, 2005. This increase is not part of the "minimums" but instead a negotiated increase. Service credit rules are modified to generally conform to the "chapter minimums" regarding when such would be earned for service other than as a certified police officer or firefighter, bought back in the event of break in service, and when employee contributions may be left in the plan during a break in service.
Section 2 involves technical changes regarding administration of the reverse DROP, discussed infra, and new benefits to be available to employees at some point in time after they separate from service prior to eligibility for immediate early or normal retirement.
Section 3 again deals with one aspect of the reverse DROP. It also recognizes the effect of these changes meeting the minimum benefit requirements under the 1999 legislation, and memorializes the agreed upon "base amount" for future "extra benefits." There has been a minor amendment between first and second reading to utilize language preferred by the Plan Actuary, by now referring to the base "amount," rather than base "year."
Section 4 adds the "Rule of 70" as a basis for normal retirement and details the new "minimums" by first changing the standard form of benefit from a life annuity to a 10 year certain and life annuity. An early retirement benefit is added as well. Technical changes to disability benefits to meet the minimum standards are further reflected in Section 4. Section 4 provides for specific death benefit and varying benefits available to an employee who terminates prior to retirement eligibility, as well as benefits available to such persons should they become re-employed. Section 4 also includes some updates attributable to recent federal legislation regarding plan qualification standards. Section 4 also modifies the deferred retirement option program (DROP), to provide for a "reverse" DROP and to provide that future regular and reverse DROP accounts will be accounted for separately within the plan with an assumed rate of return, rather than as accounts independently invested, administered by third party administrators. In a reverse DROP an employee who has already met the years of service and/or age requirements declares his or her intention to resign and have the period of employment since becoming eligible for a DROP to be treated as if he or she had already entered the DROP. The DROP benefit is calculated as if he or she had entered the DROP at this date in the past. Section 4 also provides the opportunity for plan members to "purchase" credited service under the City's plan for time spent in other public safety or military service prior to employment with the City. Members need to meet certain technical requirements and pay the full actuarial cost of such service, and are limited to purchasing up to a total of five years. Members may purchase such service using funds from other qualified plans, such as, for example, the City's 457 deferred compensation plan.
Section 5 provides for the optional forms of benefit (other than the standard 10 year certain and life) to meet the "minimum standards." These optional forms are the actuarial equivalent of the value of the 10 year certain and life benefit. Subsequent to the first reading of this ordinance, the City Manager requested that the Joint Annuity Option currently available to members be retained as an additional optional form of benefit. For this reason, and changes to a few dates within the ordinance to reflect two weeks continuance caused by the police union's failure to ratify the changes, the recommendation is to adopt the proposed ordinance as amended.
Section 6 makes minor technical changes to plan administration and specifically authorizes that payments may be made from the plan to various entities, including provisions intended to take advantage of favorable tax treatment of premium payments that retired public safety officers may make to health insurance plans.
Section 7 provides for "minimum" standards regarding beneficiary designation and distributions.
Section 8 provides for a COLA beginning at age 62 for employees who retire under the Rule of 70, with less than 20 years of service.
Section 9 clarifies calculation of retiree health insurance subsidies for employees utilizing the reverse DROP.
The ordinance changes are effective prospectively, applying to employee members who have not entered a regular DROP as of ordinance adoption.
fiscal impact
The annual cost of the benefit improvements proposed is $343,554. These proposed benefit improvements include changes that enable the City to meet of all the minimum benefit requirements outlined in Chapters 175 and 185 of Florida Statutes. This incremental cost is funded through the increase in the actuarial value of the Consolidated Plans' assets related to meeting these statutory minimums.