Title
Revised Fiscal Year 2016 - 2019 Actuarial Valuation Reports for the City of Gainesville General Employees’ Retirement Plan (B)
Revised City of Gainesville General Employees’ Retirement Plan Actuarial Valuation Reports for Fiscal Years 2016 - 2019 to the Board of Trustees for the General Employees’ Retirement Plan for approval.
Explanation
The General Employees’ Retirement Plan (the Plan) Actuarial Valuation Reports present the financial position of the Plan. The actuarial valuation process evaluates the Plan’s assets and liabilities to calculate the Plan’s funded status, and determines required annual contributions to the Plan, expressed as a percentage of the expected upcoming pensionable payroll of active Plan members.
In 2018, the Florida Division of Retirement (the DoR) rejected the FY 2016 Actuarial Valuation for the City’s General Employees’ Retirement Plan due to the use of an actuarial payroll growth rate assumption that was higher than the Plan’s historical 10-year average payroll growth rate. Subsequently, the DoR also rejected the Plan’s FY 2017 - 2019 Actuarial Valuations for the same reason. The City’s cost in additional employer pension contributions to reduce the payroll growth rate assumptions in the Plan’s FY 2016 - 2019 Actuarial Valuations as required by the DoR was estimated by the Plans’ actuary to be $8,499,340.
Attorney Robert Klausner worked with City staff and Plan actuaries to develop a City Proposal to gradually reduce actuarial payroll growth rate assumptions over several years. Despite the submission of supporting material, and numerous discussions, the DoR ultimately refused all City proposals, and notified the City of Final Agency Action in November 2019. In December 2019, the City petitioned the Florida Department of Management Services, for a formal administrative hearing concerning the DoR’s non-acceptance of FY 2016 - 2019 Actuarial Valuations. The Department of Management Services submitted the City’s petition to the Division of Administrative Hearings in February 2020, and the Administrative Hearing process was initiated. That Administrative Hearing Process was stayed in March 2020 due to COVID-19 considerations.
In September 2020, the City issued a Special Revenue Bond for purposes reducing the City’s pension contribution expenses, and more fully funding the General Employees’ Retirement Plan and the Police Officers and Firefighters’ Retirement Plan. Because the bond proceeds reduced the Plans’ Unfunded Actuarial Accrued Liabilities by approximately 95%, the City’s cost in additional pension contributions to accept the Division of Retirement’s payroll growth rate reduction demands were dramatically reduced.
Although staff and the Plans’ actuaries strongly believed that the payroll growth rate assumptions used in the FY 2016 - 2019 Actuarial Valuations were appropriate and legally defensible, it was recommended that the City accept the Division of Retirement’s payroll growth rate reduction demands since the costs of doing so would be less than the costs of continuing a legal dispute with the State.
In December 2020, attorney Robert Klausner drafted a Settlement Agreement for the City and the Division of Retirement, which the City Manager executed as Plan Administrator. The Settlement Agreement required the City to submit revised FY 2016 - 2019 Actuarial Valuations using payroll growth rate assumptions dictated by the Division of Retirement. The Plans’ actuary has completed the required revisions to the General Employees’ Retirement Plan FY 2016 - 2019 Actuarial Valuations, and the DoR has requested that the Board of Trustees approve the revised Actuarial Valuations prior to the DoR’s review.
Strategic Connection
This item is connected to Goal 5 “Best in Class” Neighbor Services.
Fiscal Note
The 2020 Special Revenue Bond proceeds of $158,672,341 for the General Employees’ Retirement Plan were deposited into the Plan as employer contributions at the end of FY 2020. The FY 2020 bond proceeds contribution satisfied all FY 2018 - 2020 City pension contribution increases related to the Division of Retirement’s requirements, and the City’s FY 2021 General Employees’ Retirement Plan contributions increased by $10,988.
The revision of the Plans’ FY 2016 - 2019 Actuarial Valuations required by the State Division of Retirement has incurred additional actuarial fees as outlined below.
FY Valuation Actuarial Valuation Revision Fee
2016 $10,000
2017 $7,500
2018 $5,000
2019 $5,000
Total $27,500
Recommendation
Recommended Motion: The Board of Trustees for the City of Gainesville General Employees’ Retirement Plan: 1) approve the revised Fiscal Year 2016 - 2019 Actuarial Valuation Reports for the City of Gainesville General Employees’ Retirement Plan.