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BOOK 108 PAGE 260 TO: Honorable Board of County Commissioners THROUGH: James E. Chandler, County Administrator FROM: Doug Wright, Director of Emergency Services DATE: January 3, 1999 SUBJECT: Proposed Benefit Changes to the Firefighters Relief and Pension Fund and Realignment of the Investment Guidelines Authorized in Changes to Chapter 175, Florida Statutes, Pertaining to Municipal Fire Pension Plans On December 29, 1998, staff received the attached correspondence from Thomas R. Nason, Chairman of the Board of Trustees of the City of Vero Beach Firefighters Relief and Pension Fund. The correspondence alluded to proposed changes to the Firefighters Relief and Pension Fund as well as realignment of the investment guidelines authorized in recent changes to Chapter 175, Florida Statutes, and was submitted for consideration and approval by the Board of County Commissioners. The Pension Fund Board of Trustees proposes the following changes: 1. Changing the monthly supplemental benefits from the existing rate of $10.00 per month per year of service to $25.00 per month per year of service. This benefit is to apply to the already retired members as well as members who will retire in the future. 2. For those members who have not yet retired, the definition of compensation upon which their pension annuity is based be changed to a percent of total cash compensation including wages, salaries, bonuses, overtime pay and other compensation as reported to the United States Internal Revenue Service on each firefighter's annual W-2 Form. Excluded from this calculation are the lump sum payments received at retirement for accumulated vacation and sick leave payments. The currently defined compensation is calculated on the annual base pay of each firefighter. The average compensation used to determine each employee's benefits is based on the highest three years' compensation received as a firefighter at the time of his/her retirement. Lump sum payments for sick and annual leave are exempted from this determination. In accordance with Chapter 175, Florida Statutes (revised) that became effective on October 1, 1998, the Pension Trustees are changing the existing investment guideline to conform to the new statutory requirements. This includes memorializing existing equities investment limit, at cost, to 50% of the value of the portfolio and further allowing the Investment Manager to invest up to 10% of the plan assets in foreign securities. A copy of the suggested new Statement of Investment Policy is attached and it simply updates the prior Statement along with the addition of the ability to invest in selected high quality foreign equities when it is advantageous to do so. In support of the proposed change in benefits, Chairman Nason submitted the following information or documentation: A. An Actuarial Impact Statement provided by the plan actuary demonstrating that the State revenue received by the plan front insurance premium taxes exceeds the cost of the requested benefits by $17,042.00 (Actuarial Plan Valuation dated October 1, 1997). It is noted in the documentation proved by Chairman Nason that this payment increases as the number of insurance policies increases was well as the valuation of the properties covered by fire insurance policies increases. B. As of October 1, 1997, the plan owned stocks, bonds, cash and other investments with a market value of $6,267,334.00. As of October 1, 1998, this market value increased to $6,682,790.00. As of November 30, 1998, the investments had grown to $7,185,980.00. This extraordinary growth is in addition to the financial assumptions used by the actuary. in the October, 1997 valuation study. The market value of the assets has grown by $918,646.00 in the period of 13 months. C. In addition to the growth, the plan received a check from the Division of Retirement for $64,371.23. These monies were from the surplus in funds taken by the State of Florida, from local plans, for the administrative cost of running the Division of Retirement over the previous years. FEBRUARY 2, 1999 -36- • 0