Committee Minutes

PENSION AND INSURANCE COMMITTEE
Tuesday, March 16, 2004
Council Chambers


The meeting was called to order at 1:30 p.m.

Committee Members Present: Richard Duquette (Mayor’s Designee), Curt Kreun,
Vince Liddy, Maureen Storstad.
Committee Members Absent: None
Staff Present: John Schmisek, RaeAnn Burger, Sherie Lundmark

Duquette announced that if anyone wishes to speak to any issue to please do so
before the vote is taken on that item by asking to be recognized by the chair,
coming to the front podium, and giving their name and address for the record.

Matter of Approval of Minutes from November 19, 2003 meeting.

Motion by Kreun, Second by Storstad to approve the minutes as distributed.
Aye: All. Motion Carried.

Matter of Increase in Defined Contribution Plan Contribution Percentage.

Schmisek stated that at the November 5, 2003 meeting the committee had passed a
motion to recommend that Council approve an increase in the contribution
percentage. Subsequently, more information came to the committee that led to a
committee request to hold their motion from movement to Council pending more
research. Schmisek continued that the committee had before it correspondence
from Deloitte & Touche dated December 5, 2003 which revised calculations that
had been previously done to use assumed data that is more representative of an
actual average starting employee at the City of Grand Forks. Schmisek further
stated that he believed that Liddy had also received information from Alerus
Financial, plan manager and trustee, as well as from conversations with some
employees on this matter.

Liddy stated that he had visited with the staff at Alerus Financial, reviewed
the Deloitte & Touche correspondence, and spoke with some of the employees that
had requested the increase. Upon this further review it appears that the
current rate of 4% may be a comparable rate for an employee planning on
retiring at age 62 or 65, but seems to fall short for those employees that
utilize the age 55 retirement. He further stated that an increase to the 6%
rate may overcompensate and put those participants ahead of Defined Benefit
participants. The committee also discussed making the motion more concise now
that more information was available. Motion by Liddy, second by Storstad, to
reconsider the motion previously passed on November 5, 2003 which read “to
recommend an increase in the Defined Contribution Plan to 6% effective January
1, 2004, pending availability of funding, with a stipulation that if adequate
funding is not available, the increase will be to 5% on January 1, 2004, and a
subsequent increase to 6% on January 1, 2005 to be paid from cash carryover in
2004 or other appropriate available revenue streams as determined by the
Finance Director. Aye: All. Motion Carried.

Motion by Liddy, second by Storstad, to recommend that Council approve an
increase in the Defined Contribution Plan contribution rate to 5%, effective
May 1, 2004, with funding to come from cash carryover. Aye: All. Motion
carried.

Matter of Request from Group of 10 employees to purchase additional years of
service in the Defined Benefit Plan.
Option 1 – that an employee be able to elect to purchase individual years of
service as an option to all years.
Option 2 – that an employee be allowed a longer period of time for the
purchase than the 5 year time period that was previously used.

Duquette stated that this item was brought back to the Committee at the request
of the affected employee group. He stated that the cost numbers were
substantial and that the employees were asking that the original motions made
on November 5, 2003 be modified to include two options which would make
participation in the purchase more affordable for the employees.

Motion by Storstad, Second by Kreun, to reconsider the following motion: “to
recommend that Council authorize changes in the plan document and city
ordinance to accommodate the currently qualified employees as of January 1,
2003, to allow for credit for years of service in the Defined Benefit Plan back
to January 1, 1995.” Aye: All. Motion carried.

Duquette reviewed with the committee the chronology of when the benefits were
awarded to this group of employees. The committee expressed a concern in
general with modifying the plan document to accommodate only a certain group of
employees. They also discussed whether it was appropriate to allow each
individual employee to structure the number of years of service they wanted or
if uniform buy back terms for all members in the group was more appropriate.

Duquette made a motion to modify the earlier motion to allow employees to elect
their own start date for the buy back between now and January 1, 1995 in one
year increments. Motion failed for lack of a second.

Duquette stated that the original motion from November 5, 2003 will stand.

Motion by Liddy, Second by Kreun, to reconsider the following motion: “to
recommend that Council allow employees designated in the prior motion to be
accommodated by participation in a buy back to January 1, 1995 with a pay back
period of 5 years, with option to elect to participate in this buy back until
January 2, 2004, at a cost of 8% interest, with the employee responsible for
the entire cost and that there be no cost to the City.” Aye: All. Motion
Carried.
Duquette stated that given the large cost for the employees, they were
requesting that the pay back period be extended from the 5 years to a longer
time period, perhaps 10 years. Storstad inquired as to what would happen if an
employee had not completed paying for their buy back at the time of their
retirement. Schmisek stated that their benefit would be calculated using a
proration to give them credit for the share they had paid in. Duquette stated
that in previous buy backs, such as when employees were allowed to change from
age 62 to 55, the time period of 5 years had been established. He stated that
while some participants then also had significant costs, they were still quite
a bit smaller than the costs that some of these employees are looking at trying
to pay.

Motion by Kreun, Second by Liddy to restate the earlier motion to read “up to
10 years” instead of a “5 year” pay back period, to make the date by which
employees would need to elect to participate in this buy back May 15, 2004, and
to authorize drafting of a plan amendment to incorporate these changes into our
plan document and grant authority to appropriate staff to execute such
amendment. Aye: All. Motion carried.

Matter of Request for City to Offer IAFF Deferred Comp Program.

Schmisek stated that this item was on the agenda at the request of an
employee. He stated that he had received no information to provide to the
Committee. RaeAnn Burger, Human Resources, stated that she had also contacted
Tom Jones and Carmen Toman of Nationwide Retirement Solutions, who have been
contracted to represent this plan, in regards to any fees or additional
administrative work that would be required of the City in order to offer this
as an option and has not yet received a response from them.

This item will be held and placed on the next agenda for discussion and that
information on this item be provided to the Committee prior to the next meeting.

Other Items.

Schmisek stated that the items from today’s agenda will be moved forward to the
Committee of the Whole Meeting on Monday, March 26, 2004 and to City Council on
Monday, April 5, 2004.

Duquette stated that he wished to thank the Committee for their time in
listening to the requests from the employee group and for the time they have
spent reviewing information in regards to the agenda items today.

Motion to adjourn Kreun, Second by Liddy. Aye: All. Motion carried.

Respectfully submitted,

John M. Schmisek, CPA
Director of Finance and Administrative Services