Title
Transitioning the Disability Benefit to the General Employees' Pension Plan (B)
This agenda item discusses the proposal to terminate the current City of Gainesville Employee's Disability Pension Plan and move administration of the same disability benefit to within the General City of Gainesville Employees' Pension Plan.
Explanation
Prior to 1998 there was no separate General Employees' Disability Plan Trust Fund. The plan was funded each year on a pay-as-you-go basis, with projected annual benefit expense included in the budget.
Beginning in 1998 the administrative structure of the Disability Plan was revised to model a traditional pension fund. A separate trust fund was established, periodic actuarial valuations were initiated, and contributions to the trust were based on the results of those valuations.
In the years since 1998 the funded status of the plan has grown steadily. There are several reasons for this growth in the funded status:
· The benefit provided in the Plan is fair and equitable, but not rich;
· Third party medical determination is required;
· The Disability Plan population has remained relatively level over the years; and
· The City has aggressively pursued the Social Security offsets provided for in the Plan.
The result is that as of October 1, 2014 the Disability Plan is 472% funded, with an actuarial value of assets of $8,442,616 and an actuarial liability of $1,788,069. These numbers are based on pre-audit financial statements and preliminary work by the City's actuary. The final numbers will be based on an actuarial valuation as of September 30, 2014 and the market value of the assets in the plan at the time of the plan termination. This $6,654,547 in overfunding is all City monies; the Disability Plan does not now and has never required employee contributions. Given the financial history of the Disability Plan, it is improbable that the bulk of this overfunding will ever be required to meet Disability Plan obligations. However, as long as the current Disability Plan Trust Fund is in place, these monies can be used only for Disability Plan obligations; therefore it is likely that this money will go unutilized.
To better utilize these funds and maintain the current disability benefit staff's proposal is to:
· Conduct a Termination Actuarial Study of the Disability Plan to value its assets and liabilities as of some specified date, which will be the plan termination date;
· Transfer the liabilities and requisite level of assets to cover the liabilities from the Disability Plan Trust Fund to the General Employees' Pension Plan Trust Fund, with any remaining assets to revert to the city, in accordance with the Termination Actuarial Study of the Disability Plan;
· Amend the General Employees' Pension Plan to add the current disability benefits set forth in the disability Plan. The disability benefits enacted in the General Employees' pension Plan will be the same as those that exist in the current Disability Plan - benefit levels will not be changed at all for current or future plan members; and
· Terminate the Disability Plan.
Fiscal Note
At this time, it is estimated that after transferring assets equivalent to 150% of existing liabilities from the current Disability Plan Trust Fund to the General Employees' Pension Plan Trust Fund, approximately $5.76 million in excess assets will revert to the City. Fifty-eight percent of these funds were contributed by GRU and will go to the Utility, and the remaining forty-two percent will go to the General Fund. These figures are estimates - the actual amount of assets to revert to the City will depend upon the Termination Actuarial Study of the Disability Plan.
Recommendation
The City Commission authorize the City Attorney to draft and the Clerk to advertise an ordinance to effectuate staff's proposal.