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HomeMy WebLinkAboutFin Revised Pension Funding PolicyC,ry n. 1 O'k Agenda Item No: 3. i Meeting Date: September 8, 2015 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: FINANCE DEPARTMENT Prepared by: Mark Moses, Finance Director City Manager Approval: TOPIC: CITY'S PENSION FUNDING POLICY SUBJECT: RESOLUTION ADOPTING A REVISED PENSION FUNDING POLICY RECOMMENDATION: ADOPT RESOLUTION BACKGROUND: The City of San Rafael is committed to adopting sound practices and policies in its management of fiscal issues. On June 17, 2013, the City Council adopted a Pension Funding Policy whose purpose is to provide reasonable assurance that the cost of the City's defined benefit pensions will be funded in an equitable and sustainable manner. At its meeting of July 23, 2015, the City Council Finance Committee discussed this policy and asked staff to return with recommended changes pertaining to compliance with pension laws and regulations. Staff returned with revised language on August 20, 2015, at which time the Finance Committee requested that the revisions be submitted to the City Council for consideration. ANALYSIS: The Government Finance Officers Association recommends that public agencies formally adopt a policy that governs the funding of its defined benefit pensions. The City's current policy fulfills this purpose. The recommended revisions to the policy add explicit statements regarding the City's conformance with all relevant federal and state laws and applicable regulatory requirements in the administration of its defined benefit plans, and describe the City Manager's role in ensuring that any changes to the plan are fully consistent with the requirements of the California Public Employees' Pension Reform Act of 2013, as well as any and all applicable laws and regulations. RECOMMENDATION: Staff recommends that City Council adopt the proposed policy. ATTACHMENTS: Resolution with changes tracked Resolution FOR CITY CLERK ONLY File No.:446 Council Meeting: q Disposition:�u RESOLUTION NO. 14003 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL ADOPTING A REVISED PENSION FUNDING POLICY WHEREAS, the City of San Rafael is committed to adopting best fiscal practices, in order to fully use the knowledge, resources and experience available throughout the industry; and WHEREAS, Public agencies that offer defined benefit pensions to their employees should fund the cost of those benefits in an equitable and sustainable manner; and WHEREAS, the City desires to demonstrate accountability and transparency by communicating all of the information necessary for assessing the City's progress toward meeting its pension funding objectives; and WHEREAS, the City Council adopted a Pension Funding Policy by Resolution No. 13556 on June 17, 2013, and now, after consideration and discussion desires to revise that policy. NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of San Rafael does hereby rescind Resolution No. 13556 and approves and adopts the following Revised Pension Funding Policy: Purpose: The purpose of this policy is to provide reasonable assurance that the costs of the City's defined benefit pensions will be funded in an equitable and sustainable manner, and that the City will comply with all relevant federal and state laws and applicable regulatory requirements in the administration of its plans. It codifies the City's commitment to fund these benefits based on regular actuarial valuations, and to measure and report them in accordance with generally accepted accounting principles (GAAP). Adhering to a funding policy that embodies these funding and accounting principles is a prudent governance practice, and helps achieve intergenerational equity among those who financially support the plan. It also ensures that resources are available to fulfill the City's contractual promises to its employees, and minimizes the chance that funding of these benefits will interfere with the City's ability to provide essential services to the public. In order to achieve the purpose of thisop licy, the City will take the following actions: 1. The City will use the actuarially determined contribution (ADC) provided by MCERA to serve as the basis for its pension contributions. 2. The City supports an ADC that is calculated in a manner that fully funds the long-term costs of promised pension benefits, while balancing the goals of a) keeping contributions relatively stable; and b) equitably allocating the costs over the employees' period of active service. 3. The City supports a policy of funding the full amount of the ADC each year and making the full contribution as determined by MCERA. In the event the City is unable to fund the full amount of the ADC in a given year with current resources (i.e., without borrowing or using reserves), the Finance Director and City Manager will identify a reasonable period to return to full funding. 4. The City will demonstrate accountability and transparency by communicating all of the information necessary for assessing the City's progress toward meeting its pension funding objectives. This will be achieved, in part, by ensuring full and accurate implementation of GASB Statement No. 68 beginning with fiscal year 2014-2015. 5. As part of the annual budget adoption process, the Finance Director and City Manager will report to the City Council on the following: a) most recent actuarially determined pension contribution (ADC) b) relationship between ADC and budgeted pension contribution c) projected ADC for next three years d) impact of funding full ADC over the three-year planning horizon e) any other significant issues associated with funding the defined benefit pension in a stable and equitable manner as described in #2 above. 6.) Staff will monitor changes to and expansions of pension funding best practices, as well as any additional guidance provided by the Government Finance Officer's Association that relate to the funding of defined benefit pensions. Staff will return to City Council with modifications to this policy as needed. 7.) The City Manager will ensure that any recommended changes to the defined benefit pension plans are fully consistent with the requirements of the California Public Employees' Pension Reform Act of 2013 (PEPRA), Marin County Employee Retirements Association, the County Employees Retirement Act of 1937 (Gov. Code §§ 35120 et seq,), and any and all other applicable federal and state regulations, and that the City Attorney's Office is assigned or other qualified legal counsel are retained to provide advice on all public notice, procedural and other legal requirements required in connection with any recommended changes to such plans. I, ESTHER C. BEIRNE, Clerk of the City of San Rafael, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of the Council of said City on Tuesday, the 8th of September 2015, by the following vote, to wit: AYES: COUNCILMEMBERS: Bushey, Colin, Gamblin, McCullough & Mayor Phillips NOES: COUNCILMEMBERS: None ABSENT: COUNCILMEMBERS: None �Zs'*_19 c . 91, r2a� ESTHER C. BEIRNE, City Clerk RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL ADOPTING A REVISED PENSION FUNDING POLICY WHEREAS, the City of San Rafael is committed to adopting best fiscal practices, in order to fully use the knowledge, resources and experience available throughout the industry; and WHEREAS, Public agencies that offer defined benefit pensions to their employees should fund the cost of those benefits in an equitable an sustainable manner; and WHEREAS, the City desires to demonstrate accountability and transparency by communicating all of the information necessary for assessing the City's progress toward meeting its pension funding objectives µarid WHEREAS, the City Council adopted a Pension Funding Policy by Resolution No. 13556 on June 17, 2013, and now, after consideration and discussion desires to reviseamend thate policy. NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of San Rafael does hereby rescind Resolution No. 13556 and approve and adopt the following Revised Pension Funding Policy: Purpose: The purpose of this policy is to provide reasonable assurance that the costs of the City's defined benefit pensions will be funded in an equitable and sustainable manner, and that the City will comply with all relevant federal and state laws and applicable regulatory requirements in the administration of its plans. It codifies the City's commitment to fund these benefits based on regular actuarial valuations, and to measure and report them in accordance with generally accepted accounting principles (GAAP). Adhering to a funding policy that embodies these funding and accounting principles is a prudent governance practice, and helps achieve intergenerational equity among those who financially support the plan. It also ensures that resources are available to fulfill the City's contractual promises to its employees, and minimizes the chance that funding of these benefits will interfere with the City's ability to provide essential services to the public. In order to achieve the purpose of thisop licy, the Cily will take the following actions: 1. The City will use the actuarially determined contribution (ADC) provided by MCERA to serve as the basis for its pension contributions. 2. The City supports an ADC that is calculated in a manner that fully funds the long-term costs of promised pension benefits, while balancing the goals of a) keeping contributions relatively stable; and b) equitably allocating the costs over the employees' period of active service. 3. The City supports a policy of funding the full amount of the ADC each year and making the full contribution as determined by MCERA. In the event the City is unable to fund the full amount of the ADC in a given year with current resources (i.e., without borrowing or using reserves), the Finance Director and City Manager will identify a reasonable period to return to full funding. 4. The City will demonstrate accountability and transparency by communicating all of the information necessary for assessing the City's progress toward meeting its pension funding objectives. This will be achieved, in part, by ensuring full and accurate implementation of GASB Statement No. 68 beginning with fiscal year 2014-2015. 5. As part of the annual budget adoption process, the Finance Director and City Manager will report to the City Council on the following: a) most recent actuarially determined pension contribution (ADC) b) relationship between ADC and budgeted pension contribution c) projected ADC for next three years d) impact of funding full ADC over the three-year planning horizon e) any other significant issues associated with funding the defined benefit pension in a stable and equitable manner as described in #2 above. 6.) Staff will monitor changes to and expansions of pension funding best practices, as well as any additional guidance provided by the Government Finance Officer's Association that relate to the funding of defined benefit pensions. Staff will return to City Council with modifications to this policy as needed. 7.) The City Manager will ensure that an recornmcndc cls ......mohdefined benefit ..i_pe�non pians_are fully consistent with the require_ ents_o the California Public Err�Irx�eese Pension Reform Act of 2�13�i'11PRA� M ink���r�t! �rnnioee 1[�etirernents_sa�eati_a��tic ea�.nt lam_ptoyees Retirement Act ef_1937_ � V. 'ode § _35i2�Dctse __.._ d any arr nll anther __ app icable federal_ and state re ulatiorIs,_an that the ityttorne_y's Office pr cathcr qualified_legal_counsel arebe retained to provide adviceonern ------------------------laleik�iienotice2 al procedural and other le al ea uire__ent e�uire e- a in connie_ction.with. p recommended chanes -.to such plans", -------_._ __. ..___ I, ESTI IER C. BEIRNE, Clerk of the City of San Rafael, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of the Council of said City on Tuesday, the 8th of September 2015, by the following vote, to wit: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ESTHER C. BEIRNE, City Clerk ROUTING SLIP / APPROVAL FORM INSTRUCTIONS: Use this cover sheet with each submittal of a staff report before approval by the City Council. Save staff report (including this cover sheet) along with all related attachments in the Team Drive (T:) 4 CITY COUNCIL AGENDA ITEMS 4 AGENDA ITEM APPROVAL PROCESS 4 [DEPT - AGENDA TOPIC] Agenda Item # 3, Date of Meeting: 9/8/2015 From: Mark Moses Department: Finance Date: 8/25/2015 Topic: CITY'S PENSION FUNDING POLICY Subject: RESOLUTION ADOPTING A REVISED PENSION FUNDING POLICY Type: N Resolution ❑ Ordinance ❑ Professional Services Agreement ❑ Other: APPROVALS N Finance Director Remarks: self -approved N City Attorney Remarks: Approved with minor edits to Staff Report and Resolution. ETD. 8/26/15 N Author, review and accept City Attorney / Finance changes Remarks: done - 8/26 i9 City Manager Remarks: