Legislative Action:  On September 3, 2020, the City Commission passed the ordinance on first reading 4-0.  The ordinance as approved on first reading was submitted to the Florida Division of Retirement, along with the Actuarial Impact Statement prepared by the pension plan's actuary and signed by the plan's chairman.  Should the ordinance be approved on second reading, the plan's board administrator will the disbursement process to retirees and beneficiaries.  

Issue Statement:  The Board of Trustees for the City’s Police, Firefighters and Public Safety Officers Retirement System (the Plan) recommends that the City modify the Police Cost-of-Living-Adjustment (COLA) Reserve Fund for retired police employees. The fund was created in 1998 and provides for an additional, 13th check to be sent to retirees if certain criteria are met.  Due to State requirements no benefits have been paid out since 2000 and there is no reasonable assurance that the Plan will lawfully be able to do so in the future due to State regulations.  Modification of the plan language will allow eligible police retirees to receive a one-time payment of $4,000 from the balance of Police COLA Reserve Fund. The proposed modification was requested by the elected police trustee for the plan, Mr. James Wilson.  This item only pertains to police retirees and plan provisions affecting them.

Recommended Action: Conduct a public hearing and adopt on second reading the proposed ordinance to modify the plan's COLA Reserve Fund for police retirees, allowing for liquidation of the plan and the payment of $4,000 to each eligible police retiree/beneficiary.

The City's local Police, Fire and Public Safety Officer Pension Plan includes provisions for a conditional, non-guaranteed "13th Check" cost-of-living adjustment (COLA).  Retirees receive pension payments on a monthly basis.  Under the 13th Check provision, retirees would receive an additional check under certain circumstances that would provide for an additional 13th check. 

There are two separate COLA Reserve Funds, one for firefighters and one for police.  These COLA Reserve Funds were established for 1998/1999 plan year. A share of the plan's annual actuarial gains would be placed into these funds; from 1999 to 2012, only four years had actuarial gains that allowed for funding to be allocated to these funds.  No gains have been allocated to the funds since 3/1/2013 in accordance with amendments to the pension plan.  The balance of the Police Fund is $983,626.

Section 112.61, Florida Statutes, places regulatory restrictions on when a payment can be made from the COLA Reserve Funds.  Specifically, benefits can be paid from the 13th Check COLA  only if the present value of such benefits does not exceed the net actuarial experience accumulated from all sources of gains and losses.  In other words, the 13th Check COLA cannot be paid from a single year of investment gains where there are years of cumulative actuarial losses.

Unfortunately, notwithstanding recent actuarial gains, years of actuarial losses preceding gains have prohibited the Plan from making a 13th Check COLA payment. Since the COLA Reserve Funds were established for the 1998/1999 plan year, only a single payment has been allowed under these requirements - this payment was made in September 2000.

As no payment to retirees has been made in almost two decades, the Police & Fire Pension Board of Trustees has been discussing options to utilize the funding of  Police COLA Reserve in a way that would benefit retired police members and help stabilize the plan's finances.  The Board recommends that the City approve liquidating the Police 13th Check/COLA Reserve fund, with each of the 76 retired police members receiving $4,000 and the remaining balance being applied at the City's direction to reduce the pension fund costs.  City approval would require a modification of the pension plan ordinance.  These modifications are only in reference to police retirees; the 13th Check/COLA Reserve Fund for firefighters is not affected as any changes to it must be collectively bargained.

In order to lawfully liquidate the 13th Check COLA Fund, the 76 retired police members/beneficiaries had to unanimously agree on the aforementioned liquidation and apportionment.  In August 2020, the City received written consent from all 76 members.  A copy of the letters sent to retirees and the signed agreements are attached as Exhibit A to this item.

The ordinance for consideration was prepared by the pension board's attorney and reviewed by the City's legal counsel.