|HOME : MEETINGS AND NOTICES
Finance Committee MeetingOctober 10, 2018
Meetings & Notices
Finance Committee Meeting
October 10, 2018
The Finance Committee will hold a meeting on Wednesday October 10, 2018 at 6:00pm in City Council Chambers.
Review Council Paper 11,682-1 stipend for the Retirement Board.
Chair Finance Committee
FINANCE COMMITTEE MEETING
October 10, 2018
Members present Councilor Harpin, Councilor Wilkinson. Councilor Lamb absent.
Members of the Retirement Board present Beth Matson, Fred Thompson and Alan Marden.
Councilor Cohen and LaForest were also present.
Chairman Wilkinson called the meeting to order at 6:00pm.
The Chairman called upon Beth Matson from the Retirement Board to present the presentation she has prepared for the committee.
Ms. Matson explained a little history on how the retirement system started.
Social Security was established in 1935 and seven states chose not to have their governmental units join social security, Massachusetts is one of the seven. In 1937 the City chose to establish their own retirement system. There are 104 Local Retirement Systems, plus the State Board and Mass Teachers. From 1937 to the late 80’s, the Massachusetts Systems operated as pay as you go systems. They then realized the system was paying more than they took in, that is when the funding schedule was developed.
Beth outlined some of the responsibilities of the board; she referred to page 2 of the packet, which explains the disability retirement responsibilities. The board is responsible to review all of the information and have to conduct a hearing. They also have to investigate complaints of fraud. The board sets and votes on the funding schedule that is presented by the Actuary, as well as setting and voting on the budget.
Funding schedules are re-calculated every two years; our last schedule was developed in January 2017. Our unfunded liability was scheduled to be paid off in 2029 when the 2017 was developed. When the unfunded liability is fully funded, the annual appropriation will be only the normal cost.
Member contributions have incrementally increased from 5% to 9%+2% through 1996.
The board works with the City in many ways; we helped the City reduce short term appropriation payments by spreading the cost of the early retirement incentives throughout the life of the funding schedule, which was offered in 2003. This was at the request of the Mayor. At the request of the Mayor the board lengthened the funding schedule to reduce the total cost of percentage increase. The board encouraged the City to pay the appropriation bill on July 1st to avoid any interest charges. We also seek input from the Mayor during funding schedule calculation. We also have encouraged the City and School to pay the required 9% of grant funded employees and reduce the annual appropriation $ for $ but I have gotten nowhere with this. The benefit to the City is that it comes directly of the appropriation. It is in the law but we have never gotten a dime.
This money comes directly of the appropriation. The unfunded liability is $19,301,672, the assets are currently 74.1 million.
Councilor Wilkinson noted that since Councilor Lamb was not present but sent his concerns to Ms. Matson, perhaps she could answer them for him.
Beth thought her explanation on the funding schedule would answer Councilor Lamb’s questions.
The total cost 2018 was 3,066,221; this includes the City, Housing Authority and McCann’s. Employer normal cost is $710,676, the estimated retirement expenses $ for $ is $300,000, the majority of the expense is management fees $213,000, and net payments of $100,000. The board lowered the cost of these payments by $62,000 annually through modification which is a direct savings to the City.
Unfunded liabilities affected by assets and liabilities are $1,837,213. The funding schedule is recalculated every two years and recognizes assets and liabilities. When the schedule was developed in January 2017 our assets were $57,877,896 and as of September 2018 our assets are $74,100,000.
The stipend is less than ½ of 1% of our administrative expenses.
Beth noted the funding schedule will be developed for January 2019 and the fiscal 2020 appropriation will be maintained at the same level as it is on the 2017 schedule, and will increase at a rate to be determined by the board.
Councilor Cohen mentioned because of the gains and the work the board has done, the stipend would be absorbed in the schedule. Councilor Cohen felt the stipend is justified because of the work the board does, they are the decision makers.
Fred Thompson noted it is the board’s responsibility to be sure our employees are protected and we are held at high standards. The board is also accountable for their performance, every 5 years we are reviewed by the custodian. The return on our investment has increased 16% to date. Beth is the sounding board and she has a handle on it all.
Councilor Harpin said it does not directly affect the budget, it is a cost and the numbers could be changed. If you look at #4 the appropriation development it is a wash.
Councilor LaForest has reservation on the stipend noting it still does affect the City budget.
Funding schedule for 2018 was $3,066,221 this was not all the City’s expense, McCann School and the Housing Authority also had a part in that. Added to that is our administrative e cost of $300,000 $ for $.
Councilor Cohen said you are saying you cannot reduce the dollar amount, but you can increase the percentage of the total cost. If you change the % won’t that change the total cost. All of the gains we have will negate that.
Councilor Cohen said ultimately the $15,000 will be there but because of the work the board does, were not going to see it because the schedule is going to absorb it. Is it going to affect the budget, yes but the board is doing a fantastic job in making sure the City does not have to absorb any additional cost.
Councilor Harpin noted it does not directly affect the City budget; it affects the Retirement Boards costs. Normal cost which with the stipend would be in in one way if the total cost in the appropriation yes it is a cost, but the numbers can be changed or spread out, it is flexible with the scheduled to change the yearly total cost so the $15,000 in the normal cost, it is not directly affecting the City budget, it is affecting the appropriation, portion of it is the total cost. Councilor Harpin reminded the committee that City Council is not able to add to the budget per ordinance, however we are able to approve the stipend per ordinance. This means, if we are following ordinance, the retirement board stipend cannot be adding to the budget. Therefore based on the ordinances, the Retirement Board stipend does not directly add or affect the City budget. Councilor LaForest said it is still in the City budget as a line item. Councilor Harpin said the appropriation is a line item. The $15, 000 does not directly hit the budget as a line item
Councilor LaForest questioned if this increase, is an administrative expenses. Councilor Harpin said this is liquid, these number are going to change every two years, 2019 and 2020 are already decided. Councilor LaForest said this is still a burden on the tax payers. Councilor Harpin whether they get the stipend or not we are going to pay 3.3 million.
Beth Matson said the funding for 2020 budget is already set at 3,355,490 .
Councilor Wilkinson said this is all very confusing but the bottom line is how much this will cost the City. I would like to see the stipend not go into effect until July 1st, if it increases the budget or not. Councilor Wilkinson asked Mr. Thompson, if Council does not approve this would you resign the board and both Mr. Thompson and Mr. Marden echoed “no”. He also asked if they would be voting for the maximum amount and Mr. Thompson replied he would only be voting for the $3,000. Councilor Wilkinson noted the stipend may help to attract more interest in the board.
Councilor Harpin shared a chart that she received from the Mayor, showing who in the City receives stipends. She noted that the Board of Assessors members receive $1,920, which she feels is comparable to the Retirement Board.
Councilor Cohen said this was very complicated and she will support the stipend.
Councilor LaForest was apprehensive, but he does believe he will support the stipend.
Beth Matson noted the chairman of the board has indicated to her that, they would not vote for the maximum.
On motion of Councilor Harpin, duly seconded by Councilor Wilkinson it was voted to recommend the approval of the stipend to full Council.
Meeting adjourned at 7:00pm.
Attached is the report from Beth Matson for clarification and the table of stipend positions.
City Clerk & Clerk of the Council