C4I-Ref- FCWPC - BAC�s Proposed Policies And Guidelines For The City�s Pension Pof Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 331
IO:
FROM:
DATE:
SUBJECT:
Budget Advisory Committee (BAC)
the plans in an
of
costs to budget within
set guide!!nes and for
Over the year, held twenty to accomplish by
developing an approach following components:
Agenda
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• Develop an understanding of the City's current pension plans benefits and costs
for the Fire and Police Pension Plan and the Miami Beach Employees'
Retirement Plan (for General employees) from the perspective of legal counsel,
the City's actuary, the City Manager and the pension plan administrator for each
of the City's pension plans (the Fire and Police Pension Plan and the Miami
Beach Employees' Retirement Plan -MBERP).
• Solicit input from the City's collective bargaining groups and employees.
• Survey comparative jurisdictions in the region regarding pension plan costs and
benefits.
• Develop draft policies and guidelines to guide management of the City's pension
plans into the future, (a copy of which is attached for your review).
• Identify and review options of potential changes to the Fire and Police Pension
Plan based on 6 major categories, namely:
o Florida Retirement System (FRS)
o Defined Benefit similar to FRS, including a Social Security equivalent
o Hybrid Plans with both, a defined benefit and a defined contribution
component
o Changes to the existing plan with a combination of past service benefits
and benefits earned prospectively
o Freezing the existing plan and defining new benefits based on Florida
Statute Chapter 175 and 185 minimum benefits to continue receiving
premium taxes
o Changes to the existing plan to reflect the savings associated with plan
changes included in the 2010 collective bargaining agreements with the
International Federation of Fire Fighters (IAFF) and the Fraternal Order of
Police (FOP) that have not yet been implemented by the Fire and Police
Pension Board
• Evaluate the cost impacts of potential options
• Develop Recommendations
On April 17, 2012, by a majority vote of 7-2, the BAC approved a motion for the
Committees' final recommendation on pension reform for the Fire and Police Pension
Plan which are currently being discussed through the bargaining process. In addition,
the BAC recommended a set of policies and guidelines. The GFOA best practices for
developing policies for retirement plans state the following:
• Purpose of the retirement plan (e.g., level of replacement income and purchasing
power retention);
• Ability of public retirees to contribute to the economic viability of their community
and not become a financial liability to the community in which they live due to
inadequate retirement income;
• Organization's philosophy regarding employer and employee responsibilities in
preparing for retirement;
• Availability of Social Security, retiree medical benefits, disability and survivor
benefits and supplemental (e.g. 457) savings plans;
• Costs, including the employer's ability to sustain payments and perhaps increase
benefits over time and cost predictability;
• Labor market considerations such as competitive environment, workforce
mobility, length of employee service and recruitment and retention of employees;
• Investment risk and control, including how investment risk is allocated between
employer and employee;
• Portability of benefits;
• A plan design that can be communicated to and understood by plan participants;
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• Employee educational efforts; and
• Advantages of the different types of plans (e.g., defined benefit, defined
contribution and hybrid).
CITY OF MIAMI BEACH RECOMMENDED POLICIES AND GUIDELINES
As part of the evaluation for Pension Reform in the City of Miami Beach, the Budget
Advisory Committee (BAC) is recommending policies for long term pension reform. The
BAC is also recommending guidelines for the City to adopt which establish thresholds
which if surpassed will require the City to take prompt and appropriate measures to meet
the guideline criteria.
The policies and guidelines address four perspectives: (1) Affordability and
Sustainability, (2) Appropriate Benefits to Provide to Employees, (3) Recruitment and
Retention, and (4) Management of Risk/Risk Sharing.
These policies and guidelines were adopted unanimously by the BAC.
Affordability and Sustainability
• GUIDELINE STATEMENT: If the City's portion of the total annual cost of
retirement benefits contribution exceeds 25 percent of payroll for general
employees and 60 percent of payroll for high risk employees, the City should
review and evaluate potential changes to the collective bargaining agreements
between the City and the Unions, applicable towards the next contract
negotiations, in order to identify potential approaches to reduce the contributions
to these levels over the long term.
• POLICY STATEMENT: The City shall fund at least the normal cost of pension. If
this exceeds the amount of the actuarially determined annual required
contribution, the excess should be placed in a pension stabilization fund, to be
made available for future pension shortfalls.
• POLICY STATEMENT: The City should strive to maintain a funded ratio of at
least 80 percent for each of its defined benefit pension plans.
• GUIDELINE STATEMENT: If the funded ratio (actuarial value of assets minus
actuarial liabilities) of either of the City of Miami Beach's pension plans falls
below 70 percent, the City should strive to implement approaches to increase the
funded ratio to that level over five (5) years.
• POLICY STATEMENT: Salary growth should not exceed the average actuarially
assumed salary growth in each of the City's pension plans.
• POLICY STATEMENT: The City should require 5, 1 0 and 20 year projections of
required pension contributions as part of the annual actuarial valuations for each
of the City's pension plans. These projections shall be based on the current
actuarial assumptions for each plan. The projections shall be updated to reflect
the cost of any proposed benefit enhancement before the City Commission
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agrees to the enhancement. The cost of these studies shall be funded
separately from the annual contribution to the pension plan.
• POLICY STATEMENT: There shall be an experience study of each of the City's
pension plan's actuarial assumptions performed by an actuary that is
independent from the pension board. The experience study should be conducted
at least once every three (3) years, to compare actual experience to the
assumptions. The independent actuary shall make recommendations for any
changes in assumptions based on the results of the experience study, and any
deviations from those assumptions by the pension board shall be justified to the
City Commission.
• POLICY STATEMENT: Once pension reform is implemented, a 5/7th vote of the
City Commission should be required for any further pension changes.
Appropriate Benefits to Provide to Employees
• POLICY STATEMENT: The City of Miami Beach should strive to provide a
retirement benefit that provides for a replacement of salary at a level at least
equivalent to Social Security plus a supplemental retirement benefit.
• POLICY STATEMENT: The City of Miami Beach retirement benefits should be
adjusted periodically after retirement to reflect the impacts of inflation, with rates
no more than the Consumer Price Index for All Workers-CPI{W), that is subject
to City Commission approval and with a maximum of 3 percent annually.
Recruitment and Retention
• POLICY STATEMENT: The City of Miami Beach should strive to provide
retirement benefits that ensure that the City is competitive in the recruitment and
retention of employees.
Management of Risk/Risk Sharing
• POLICY STATEMENT: The City of Miami Beach should strive to share some
portion of retirement benefit risk with employees.
• GUIDELINE STATEMENT: If the City's contribution to a defined pension benefit
plan exceeds 25 percent of payroll for general employees and 60 percent of
payroll for high risk employees, the employee contribution should be reviewed.
The Supporting Rational and Data for the Proposed Guidelines and Policy Statements
are provided in the attachment.
KGB:CG/pw
Attachment
t:/agenda/2012/commission pension memo
67
Supporting Rationale and
Data for Proposed
Guidelines and Policy
Statements
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City of Miami Beach
Budget Advisory Committee
Pension Reform:
Policy and Guideline Statements
AFFORDABILITY AND SUSTAINABILITY
GUIDELINE STATEMENT:
• If the City's portion of the total annual cost of retirement benefits contribution exceeds 25 percent
of payroll for general employees and 60 percent of payroll for high risk employees, the City should
review and evaluate potential changes to the collective bargaining agreements between the City
and the Unions, applicable towards the next contract negotiations, in order to identify potential ..,
approaches'to reduce the contributions to these levels over the long term.
POLICY STATEMENT:
• The City shall fund at least the normal cost of pension. If this exceeds the amount of the
actuarially determined annual required contribution, the excess should be placed in a pension
stabilization fund, to be made available for future pension shortfalls.
Background/Rationale:
Pension plans require annual contributions from plan sponsors (i.e., municipal governments) and
participants in order to maintain their funding levels. Ideally, those contributions are only necessary to
pay for future benefits that were earned by participants in the current year. That amount is referred to
as the normal contribution. Normal contributions increase as plans provide more generous benefits,
make benefits available to more individuals and reduce the number of years someone needs to work
or lower the age when the plan will begin to pay benefits.
Underfunded pension plans require an additional contribution in order to eventually eliminate their
unfunded liabilities. When pension plans are underfunded, annual contributions need to include the
normal contribution and an additional contribution to pay down the unfunded portion of the liability.
Therefore, if two pension plans have equal benefit policies and equal employee characteristics but
one is 75 percent funded and the other is 100 percent funded, the plan that is 75 percent funded will
require a larger annual contribution in order to pay down its unfunded liability. Plan sponsors do not
have to make up the entire unfunded portion of the liability in a single year. In most cases, that
amount would be too costly for governments to pay in full. Instead, a professional actuary establishes
a payment schedule that allows the sponsor to pay off the unfunded portion of the liability over as
many as 30 years. In short, plans with large unfunded liabilities will pay more in annual pension costs.
The combination of the normal cost funding requirement and the payment for amortization of the
unfunded liability results in a combined annual required contribution (ARC) that the City is required to
pay to each pension plan for the next fiscal year. Typically, this is expressed as a percent of the
payroll applicable to the particular pension plan to allow comparability from year to year, as well as, to
other pension plans.
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Current Conditions:
City of Miami Beach
Budget Advisory Committee
Pension Reform:
Policy and Guideline Statements
The City of Miami Beach pension contributions as a percent of payroll as of the 1 0/1/10 valuation
reports:
Fire and Police Pension Plan: 72.76%%
Miami Beach Employees Retirement Plan: 25.02%
Fire and Police Pension Plan Normal Cost: 32.59%%
Miami Beach Employees Retirement Plan Normal Cost: 10.80%
At this time, the negotiated changes to the Fire and Police Pension Plan are under litigation.
However, the projections provided by the Fire and Police Pension Plan actuary regarding the impact
of changes collectively bargained for new employees were minimal. In addition, assuming all actuarial
projections were met from FY 2010/11 forward, the ARC as a percent of payroll is projected to
increase to 81.05% by Fiscal Year 2017 contribution.
The Miami Beach Employees Retirement Plan (MBERP) Actuary projected that the 2010 changes to
the plan for new employees would decrease the unfunded liability payment by approximately $6
million -5. 78% of payroll after 10 years. Even with this decrease, and assuming all actuarial
projections were met from FY 2010/11 forward, the ARC as a percent of payroll is projected to
increase to 37.12% by Fiscal Year 2017, declining each year thereafter.
Comparison to Florida Retirement System and Comparative Local
Jurisdictions:
T t I o a annua emp oyer cos t f f o re 1remen t b ft t "b f f ene 1 s conn u 1on as a percent o payro II
Jurisdiction High Risk Employees General Employees
Boca Raton 52.72% 19.81%
Coral Gables 49.1%
Coral Springs Police: 87.98%
Fire 28.02%
Fort Lauderdale 49% 32.75%
Plan closed for new hires
10/1/2007-3/5/2008
Now defined contribution
Hialeah
32.59%
Hollywood Police: 84.41% 36.14%
Fire 127.03% (Plans are now frozen for
(Plans are now frozen and new General Fund Employees and
plans with lower benefits new plans with lower benefits
became effective 10/1/11) became effective 10/1/11)
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North Miamt
North Miami Beach
Pom~=>ano
Tamarac
FRS
(Includes Coconut
City of Miami Beach
Budget Advisory Committee
Pension Reform:
Policy and Guideline Statements
30.21% 32.14%
55.3% 25%
38.59% 21.39%
55.45% 28.8%
14.1% 7/1/11 4.91%7/1/11
Creek, 19.56% 7/1/12 6.58%7/1/12
Cooper City, Miami Gardens,
Miami-Dade County, Miami
Lakes, Pinecrest and Wilton
Manors)
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POLICY STATEMENT:
City of Miami Beach
Budget Advisory Committee
Pension Reform:
Policy and Guideline Statements
• The City should strive to maintain a funded ratio of at least 80 percent for each of its defined
benefit pension plans.
GUIDELINE STATEMENT(S):
• If the funded ratio (actuarial value of assets minus actuarial liabilities) of either of the City of Miami
Beach's pension plans falls below 70 percent, the City should strive to implement approaches to
increase the funded ratio to that level over five (5) years.
Background/Rationale:
Each year, the City receives independent actuarial reports for each of the City's two pension plans.
The actuarial valuation of the pension plan is a mathematical determination of the financial condition
of the plan, which includes: the computation of the present monetary value of benefits payable to
present members, the present monetary value of future employer and employee contributions,
considering the expected mortality rates among employees and retirees, rates of disability, retirement
age, withdrawal from service, salary increases, investment earnings and value of assets.
As part of the annual actuarial valuation for each plan based on plan data as of October 1, the
Actuary evaluates how the actual data for the preceding year compared to the actuarial valuation for
that year. Any differences are reflected as gains or losses in unfunded liability. The unfunded liability
for a plan is the difference between the benefits earned (accrued) and the assets of the plan on a
given date, and is typically amortized and funded over 30 years. The amortization methodology
varies by plan. In the Fire and Police Pension Plan, the amortization is based on increased payments
in proportion to assumed future payroll growth. In the MBERP, an assumption of level amortization
payments is used.
The unfunded liability of the plan is the actuarial accrued liability less the plan actuarial assets. This
amount is expected to have year-by-year fluctuations; however, if the plan's assumptions are consistent
with the plans long-term experience, the changes in the unfunded liability should be offsetting over the life
of the plan. In contrast to the market value of the pension plan assets, the actuarial value of the pension
plan assets is equal to the market value of the assets at a specific data, adjusted to reflect a five-year
phase-in (or smoothing) of any asset experience gain or loss. The five-year smoothing of pension plan
asset value means that only 20 percent of the experience gain or loss that the fund experiences in any one
year is recognized immediately for the purpose of determining the actuarial value of the plan and the
annual required contribution.
The percent of the actuarial accrued liability funded is a measure of a pension fund's fiscal health. It
compares assets to pension obligations. A percentage over 100% means that the fund has more money
than it needs to meet its obligations at that point in time.
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Current Conditions:
City of Miami Beach
Budget Advisory Committee
Pension Reform:
Policy and Guideline Statements
City of Miami Beach funding levels as of the 10/1/10 valuation reports:
Fire and Police Pension Plan: 64.3%
Miami Beach Employees Retirement Plan: 74.4%
Comparison to Florida Retirement System and Comparative Local
Jurisdictions:
Funded Ratio
Jurisdiction High Risk Employees General Employees
Boca Raton 70.26% 91.38%
Coral Gables 57.5%
Coral Springs Police 77.77%
Fire: 79.65%
Fort Lauderdale 77.4% 70.7%
Plan closed for
1 0/1/2007-3/5/2008
new
Now defined contribution
Hialeah 75.03% 75.03%
Hollywood Police 53.5% 63.78%
Fire 37.6% (Plans are now frozen
hires
for
(Plans are now frozen and new General Fund Employees and
plans with lower benefits new plans with lower benefits
became effective 1 0/1/11 ) became effective 10/1/11)
North Miami 68.6% 75.6%
North Miami Beach 61.6% 70.3%
Pompano 69.8% 74.2%
Tamarac 63.3% 77.96%
FRS
(Includes Coconut Creek, 87.1%
Cooper City, Miami Gardens, (7/1/11)
Miami-Dade County, Miami
Lakes, Pinecrest and Wilton
Manors)
Other Information:
The United States Postal Service Office of the Inspector General (June 18, 201 0) concluded that 80
percent prefunding of pensions is reasonable based on the following:
• The Standard and Poor's companies' (S&P 500) median prefunding level for pensions in 2009
was 79 percent of liabilities. From 2001 through 2009, S&P SOD's pension median prefunding
ranged from 73 to 112 percent.
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City of Miami Beach
Budget Advisory Committee
Pension Reform:
Policy and Guideline Statements
• The aggregate prefunding for states' pensions in 2008 was also 79 percent. From 2001
through 2009, state governments' aggregate pension prefunding ranged from 59 to 90
percent.
The Government Accountability Office (GAO) reported that many experts consider at least 80 percent
prefunding to be sound for government pensions. (Source: The GAO's State and Local Government
Retiree Benefits Current Funded (5); The GAO's State and Local Government Retiree Benefits
Current Funded Status of Pension and Health Benefits, January 2008.)
The Pension Protection Act of 2006 considers pensions prefunded at less than 70 percent as being
"at risk" and attempts to protect such plans by commencing restrictions on corporate pension funds
only when prefunding is below 80 percent.
The 2011 report prepared by the Leroy Collins Institute at Florida State University for pension
systems across Florida assigned the following grades to pension plans based on percent funded.
GRADE PERCENT FUNDED
A More than 90% funded
B 80 to 90% funded
c 70 to 80% funded
D 60 to 70% funded
F Less than 60% funded
The following cities scored an "F" grade, according to the institute's study: Boynton Beach, Cooper
City, Fort Myers, Hollywood, Homestead, Jacksonville, Miramar, Oakland Park, Ocala, Oviedo, Palm
Beach Gardens, Panama City, Parkland, Plant City, Port Orange, Tamarac, Temple Terrace, Venice
and Winter Haven. The highest rated was Melbourne's general employee plan with 190.1 percent
funding, while Cooper City's general employee and police pension fund sat at the bottom with 35.48
percent funding. Pension funds that exceeded the 100% funded mark --Tallahassee's general,
Clearwater's firefighters, Gainesville's general, Key West's general, Palm Coast's firefighters,
Plantation's firefighters and Rockledge's general and police funds --have more than enough money
in the bank to cover projected payouts to former and current employees.
The federal government has funded its combined Civil Service Retirement System (CSRS) and
Federal Employee Retirement System (FERS) pension obligations at only 41 percent of liabilities
and the military's prefunding for pensions is only 24 percent (Source: US Postal Service Office of The
Inspector General Report of Pension Funding, 201 0).
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City of Miami Beach
Budget Advisory Committee
Pension Reform:
Policy and Guideline Statements
POLICY STATEMENT(S):
• Salary growth should not exceed the average actuanally assumed salary growth in each pension
plan.
Background/Rationale:
Each year, the City receives independent actuarial reports for each of the City's two pension plans.
The actuarial valuation of the pension plan is a mathematical determination of the financial condition
of the plan, which includes: the computation of the present monetary value of benefits payable to
present members, the present monetary value of future employer and employee contributions,
considering the expected mortality rates among employees and retirees, rates of disability, retirement
age, withdrawal from service, salary increases, investment earni_ngs and value of assets.
Each year, experience "gains" in the prior year reduces the actuarial accrued liability. Experience
"losses" for the prior year, conversely, increases the actuarial accrued liability. To the extent that
salary growth is more than the actuarial assumption for the plan, this would result in an experience
"loss" and add to the unfunded liability of the plan.
Salary growth can result from merit increases, automatic step adjustments to salaries annually, cost
of living adjustments impacting all employees or subsets or employees (COLA's), adjustments to
salary ranges based on compensation studies, etc.
Current Conditions:
Projected salary rate increases vary by age.
For the Fire and Police Pension Plan, the average long-term assumption across all ages is 6 percent
per year.
For the Miami Beach Employees Retirement Plan, the assumed increases are as follows:
Years of Service Merit and Seniority Base (Economic) Total Increase
1 4.0% 4.0% 8.0%
2 3.9% 4.0% 7.9%
3 3.8% 4.0% 7.8%
4 3.7% 4.0% 7.7%
5 3.6% 4.0% 7.6%
6 3.5% 4.0% 7.5%
7 3.0% 4.0% 7.0%
8 2.9% 4.0% 6.9%
9 2.8% 4.0% 6.8%
10 2.7% 4.0% 6.7%
11 2.6% 4.0% 6.6%
12 2.5% 4.0% 6.5%
13 2.4% 4.0% 6.4%
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15
16
17
18
19
20
21+
City of Miami Beach
Budget Advisory Committee
Pension Reform:
Policy and Guideline Statements
2.3% 4.0%
2.2% 4.0%
2.1% 4.0%
2.0% 4.0%
1.9% 4.0%
1.8% 4.0%
1.7% 4.0%
1.5% 4.0%
6.3%
6.2%
6.1%
6.0%
5.9%
5.8%
5.7%
5.5%
The pension board for MBERP recently approved a decrease in the salary growth assumption for the
10/11/11 valuation to reflect the downturn in the economy and the lower economic increases in recent
years and likely into the future.
Comparison to Florida Retirement System and Comparative Local
Jurisdictions:
Not Applicable
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City of Miami Beach
Budget Advisory Committee
Pension Reform:
Policy and Guideline Statements
POLICY STATEMENT(S):
• The City should require 5, 10 and 20 year projections of required pension contributions as part of
the annual actuarial valuations for each of the City's pension plans. These projections shall be
based on the current actuarial assumptions for each plan. The projections shall be updated to
reflect the cost of any proposed benefit enhancement, before the City Commission agrees to the
enhancement. The cost of these studies shall be funded separately from the annual contribution
to the pension plan.
• There shall be an experience study of each of the City's pension plan's actuarial assumptions
performed by an actuary that is independent from the pension board. The experience study
should be conducted at least once every three (3) years, to compare actual experience to the
assumptions. The independent actuary shall make recommendations for any changes in
assumptions based on the results of the experience study, and any deviations from those
assumptions by the pension board shall be justified to the City Commission.
• Once pension reform is implemented, a 5/th vote of the City Commission should be required for
further pension changes.
Background/Rationale:
Changes to plan benefits can affect the actuarial accrued liability of a plan, either positively or
negatively. If plan benefits are increased, the mathematical calculations will result in more benefits
anticipated to be paid to plan members in the future, which will need to be recognized all at once,
although payments would be amortized over the long-term. Conversely, if plan benefits are reduced,
with all else being equal, the plan will see a reduction in the actuarial accrued liability.
Current Conditions:
Not Applicable
Comparison to Florida Retirement System and Comparative Local
Jurisdictions:
Not Applicable
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77
City of Miami Beach
Budget Advisory Committee
Pension Reform:
Policy and Guideline Statements
APPROPRIATE BENEFITS TO PROVIDE TO EMPLOYEES
DRAFT POLICY STATEMENT(S):
• The City of Miami Beach should strive to provide a retirement benefit that provides for a
replacement of salary at a level at least equivalent to Social Security plus a supplemental
retirement benefit.
Background/Rationale:
In the United States, 96 percent of workers are covered by Social Security. The benefit payment is
based on how much is earned during your working career. Higher lifetime earnings result in higher
benefits. If there were some years when you did not work or had low earnings, your benefit amount may
be lower than if you had worked steadily. Social Security replaces about 40 percent of preretirement
income for the average worker. The average replacement rate for lower-paid workers equals about 55
percent of their pre-retirement earnings. The average replacement rate for highly paid workers is about 25
percent.
Windfall Elimination Provision
Before 1983, people who worked mainly in a job not covered by Social Security had their Social Security
benefits calculated as if they were long-term, low-wage workers. They had the advantage of receiving a
Social Security benefit representing a higher percentage of their earnings, plus a pension from a job where
they did not pay Social Security taxes. Congress passed the Windfall Elimination Provision to remove that
advantage.
Government Pension Offset
If you receive a pension from a federal, state or local government based on work where you did not pay
Social Security taxes, your Social Security spouse's or widow's or widower's benefits may be reduced by
two-thirds of your government pension.
(Source: Social Security website: http://www.ssa.gov/pubs/1 0035.html
http://www.ssa.gov/pubs/1 0045.html http://www.ssa.gov/pubs/1 0007.html)
Current Conditions:
The City of Miami Beach currently does not participate in Social Security. In evaluating proposed
changes to the City's pension plans, the fact that the City does not participate in Social Security must
be taken into account.
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City of Miami Beach
Budget Advisory Committee
Pension Reform:
Policy and Guideline Statements
Comparison to Florida Retirement System and Comparative Local
Jurisdictions:
p art1c1pat1on m OCia . S . IS ecunty
Jurisdiction General Employees
Boca Raton Yes
Coral Gables Yes
Coral Springs Yes
Fort Lauderdale Yes
Hialeah Yes
Hollywood Yes
North Miami Yes
North Miami Beach Yes
Pompano Yes
Tamarac Yes
FRS Yes
(includes Miami Dade County,
Miami Lakes, Pinecrest, Wilton
Manors)
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City of Miami Beach
Budget Advisory Committee
Pension Reform:
Policy and Guideline Statements
POLICY STATEMENT(S):
• City of Miami Beach retirement benefits should be adjusted periodically after retirement to reflect
the impacts of inflation, with rates no more than the Consumer Price Index for All Workers (CPI-
W), subject to Commission approval, and with a maximum of 3 percent annually.
Background/Rationale:
Most people are aware that there are annual increases in Social Security benefits to offset the effects of
inflation on fixed incomes. These increases, now known as cost-of-living adjustments (COLAs), are such
an accepted feature of the program that it is difficult to imagine a time when there were no COLAs.
Before 1975, beneficiaries had to await a special act of Congress to receive a benefit increase.
Beginning in 1975, Social Security started automatic annual COLAs. The change was enacted by
legislation that ties COLAs to the annual increase in the CPI-W.
(Source: Social Security website: http://www.ssa.gov/pubs/1 0035.html
http://www.ssa.gov/pubs/1 0045. html http://www.ssa.gov/pubs/1 0007. html)
Current Conditions:
Fire and Police Pension Plan
Employees hired before 1 0/1/1 0 -2.5%
Employees hired on or after 10/1/10 -1.5% with first adjustment deferred to 1 year after the
end of DROP or 2 mandatory 0 DROP COLAs*
Miami Beach Employees Pension Plan
Employees hired before 10/1/10-2.5%
Employees hired on or after 10/1/10-1.5%
*Subject to current litigation
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City of Miami Beach
Budget Advisory Committee
Pension Reform:
Policy and Guideline Statements
Comparison to Florida Retirement System and Comparative Local
Jurisdictions:
OS 0 IVInQ IJUS men C t f L' . Ad' t ts
Jurisdiction High Risk Employees General Employees
Boca Raton Not required -reviewed every Not required -reviewed every
odd year odd year
Coral Gables If investment returns are over 10%, then equal to half of CPI-
catch-up clause capped at 8%
Coral Springs 2.5% 1% commences 5 years after
retirement or DROP entry
Fort Lauderdale COLA .. repealed Very Infrequent -only if actual prOVISIOn
7/15/2008 investment earnings exceed
assumptions
Plan closed for new hires
10/1/2007-3/5/2008
Now defined contribution
Hialeah 2% for 10 years
Hollywood Police: None Only Enterprise employees
Fire None hired prior to 7/15/2009
(Plans are now frozen and new (Plans are now frozen for
plans with lower benefits General Fund Employees and
became effective 1 0/1/11) new plans with lower benefits
became effective 10/1/11)
North Miami 1.92% with 1 year elimination 1.92% with 1 year elimination
period or 3% with 5 year period or 3% with 5 year
elimination period elimination period
North Miami Beach 2.5% Annually after 3 Years of 2.25% Annually
Retirement
Pompano 2% fixed Tier 1 2%
1% variable Tier 2 5 year waiting period
tiered 0-2% based on age
Tamarac Employees retiring before Up to 2% -solely funded from
3/1/07 = 2% after 3 years of actuarial gains
retirement
After 3/1/07 -2.25%. after 3
years of retirement
FRS
(Includes Coconut Creek, 3% for benefits earned prior to 7/1/11
Cooper City, Miami Gardens, None for benefits earned thereafter
Miami-Dade County, Miami
Lakes, Pinecrest and Wilton
Manors)
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City of Miami Beach
Budget Advisory Committee
Pension Reform:
Policy and Guideline Statements
RECRUITMENT AND RETENTION
POLICY STATEMENT(S):
• The City of Miami Beach should strive to provide retirement benefits that ensure that the City is
competitive in recruitment and retention of employees.
Background/Rationale:
Salary ranges for job classifications in City of Miami Beach are periodically reviewed to ensure
internal equity and external competitiveness. Internal equity refers to the relationships (duties, level of
responsibilities, salary, tenure, etc.) between positions within the same organization. External equity
refers to the relationships (duties, level of responsibilities, salary, tenure, etc.) between positions to
the external labor market. in both, the public and private sectors. Benefits, including pension, are
also periodically reviewed.
Current Conditions:
In the past, particularly during periods of low unemployment rates when competition for employees
has been tight, the City has targeted to set salaries in the 75th percentile of neighboring jurisdictions,
and to provide benefits similar to neighboring jurisdictions.
Comparison to Florida Retirement System (FRS) and Comparative Local
Jurisdictions:
See survey of pension benefits provided by neighboring jurisdictions
In addition, the 2009 Classification and Compensation Study prepared by Condrey and Associates for
the City of Miami Beach concluded that "the City's retirement benefit, while generous, appears
appropriate considering the employee 8 percent contribution to the fund (based on a comparison to
other jurisdictions locally and throughout Florida).
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City of Miami Beach
Budget Advisory Committee
Pension Reform:
Policy and Guideline Statements
MANAGEMENT OF RISK/RISK SHARING
POLICY STATEMENT(S):
• The City of Miami Beach should strive to share some portion of retirement benefit risk with
employees.
GUIDELINE STATEMENT(S):
• If the City's contribution to a defined pension benefit plan exceeds 25 percent of payroll for
general employees and 60 percent of payroll for high-risk employees, the employee contribution
should be reviewed.
Background/Rationale:
With the City of Miami Beach's two pension plans, the City bears 100 percent of the risk of the
volatility of the equity market; whereas, with private sector pension plans, the risk is born by the
employee.
Current Conditions:
Fire and Police Pension Plan:
Employee Contribution Rates - 1 0%
Miami Beach Employees Retirement Plan
Employee Contribution Rates for employees hired prior to early 1990's-12%
Employee Contribution Rates for employees hired after early 1990's -10%
Comparison to Florida Retirement System and Comparative Local
Jurisdictions:
mp oyee on n U 10n a es E C t "b f R t
Jurisdiction High Risk Employees General Employees
Boca Raton 10.2% Plans A&B 9.65%
Plan C 6%
Coral Gables 5% 5-10%
Coral Springs Police 9.875%
Fire 8.75%
Fort Lauderdale I Hired before 4-18-10 8.25% 6% Plan closed for new hires
I Hired after 4-18-10 8.5% 10/1/2007-3/5/2008
Now defined contribution
Hialeah 0%
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Hollywood
North Miami
North Miami Beach
Pompano
Tamarac
FRS
(Includes Coconut Creek,
Cooper City, Miami
Gardens, Miami-Dade
County, Miami Lakes,
Pinecrest and Wilton
Manors)
City of Miami Beach
Budget Advisory Committee
Pension Reform:
Policy and Guideline Statements
Police 9.25% 9%
Fire 7.5% -8% (Plans are now frozen for
(Plans are now frozen and new General Fund Employees and
plans with lower benefits became new plans with lower benefits
effective 1 0/1 I 11 ) became effective 10/1/11)
11.51% or 9.51% 7%
12% 7%
11.6% Tier 1 10%
Tier 2 7%
9% 7%
3% 3%
Note: Employees m Social Secunty also contnbute to Social Secunty.
See page 1 for additional comparatives related to percent of payroll.
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