Minutes 10/25/2016 - Laserfiche WebLink

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October 25, 2016 Ayes: Cherry, Edmonds, Meeks, Moody, Whitaker, Wright Nays: None Councilwoman Psimas was absent during the vote. 16 - 342 - Adoption of an ordinance to amend Chapter 30 of the Code of the City of Portsmouth, Virginia (2006) pertaining to the Portsmouth Supplemental Retirement System and Fire and Police Retirement System. Vision Principle: Efficient Service Delivery. Background:  The city has two retirement systems that it is responsible to administer, the Portsmouth Supplemental Retirement System which was essentially closed Dec 1, 1984 and the Fire and Police Retirement System which was closed June 30, 1995.  Per city code, City Council responsibilities for the two systems include approving city code, appointing board members, determining benefits and appropriating funding  The Board of Trustees is responsible for administering the system by paying the benefits, investing funds, employing appropriate consultants including actuaries, medical examiners and custodians of fund and revising the actuarial basis of the rates of the employee contributions. They also have certain requirements to ensure there is an annual valuation of the assets and liabilities, having a 5-year experience study conducted and maintaining records of the meetings.  The systems, in total, have 1,131 members of only 51 are current active employees.  As of June 30, 2016 the systems had $230 million in assets and are 77% and 74% funded, and the city made a contribution of $7.6 million to the systems and a debt service payment on pension obligation bonds of $10.9 million, for a total expenditure of $18.5 million. Discussion:  The retirement systems represent a major liability and a significant contribution from the city is made every year to properly fund the systems. The use of pension obligation bonds to increase the funding of the systems increased the city’s debt substantially and a review and update of the systems’ city codes, governance and investment policies need to be completed on a routine basis.  The systems have been closed for 33 and 21 years so the number of active members is declining and will continue to decline. There are challenges in finding active employee members to be board members and the board continually struggles to obtain quorums. This is critical as detailed investment and actuarial information needs to be heard by the entire board; when a quorum cannot be obtained decisions may be postponed and retirements may be delayed.  Therefore the city is recommending changing the requirements of membership to be on an at large basis so that City Council can choose active or citizen representatives as it deems fit. As membership declines this will be necessary. Trustees have a fiduciary responsibly to safeguard the assets and ensure benefits and payments are completed properly.  The Supplemental System allows City Council members to join the system. Since the system has been closed for over 33 years, it is recommended that this be changed so that new council members do not become members of the system.  The proposed changes also include updating the conflict of interest sections of Chapter 30 to reflect recent changes to state law.  In addition to the amendments proposed with this ordinance, Chapter 30 needs to be updated to reflect IRS tax code changes. This is necessary required to maintain a tax exempt status for the system. The City has submitted proposed amendments to the IRS for approval. It is anticipated that approval will be received within the next month and that this second set of amendments to Chapter 30 will be brought for Council consideration in November or December 2016. Financial Impact  Closing the Supplemental System to new members will reduce the liability and annual funding contribution to the system by the city.