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PENSION AND INSURANCE COMMITTEE MINUTES
Wednesday, November 19, 2003
A101

The meeting was called to order at 3:08 p.m.

Committee Members Present: Richard Duquette(Mayor’s Designee), Gerald
Hamerlik, Curt Kreun, Vince Liddy, Maureen Storstad.
Committee Members Absent:
Staff Members: John Schmisek, Charlie Bunce

Hamerlik 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 the November 5, 2003 meeting.

Motion to approve the mintues by Duuette, second Liddy. Aye: All. Motion
carried.

Matter of Increase in Defined Contribution Plan Contribution Percentage.

Schmisek stated that at the last meeting the Committee approved a motion to
increase the required amount by 2% for both the employer and employee. He
stated that following the meeting, some participants expressed concerns about
being able to afford the increased contribution. A study was completed by
Deloitte and Touche, actuaries used by the City. Schmisek stated that earlier
he, Maureen Storstad, Shari Hensrude-Ellingson and Mark Hall had visited via
conference call this morning on the comparison of the contribution percentage
between the plans.

Hensrude-Ellingson distributed a handout to the committee which displayed the
information from Deloitte & Touche’s November 4 correspondence in a time line
format. She reviewed for the examples that were discussed in the memo with the
committee using the handout for illustration of the calculation process that
lead to the findings in the memo. She stated that the committee also has a
handout dated November 19 which they received on their desks this afternoon.
She stated that memo uses the same method, but with a 7% and an 8% investment
earning assumption. Hensrude-Ellingson pointed out that based on the 8%
return, which is the assumption used in our DB Plan, an increase in the Defined
Contribution Plan contribution percent would give participants in that plan a
greater assumed benefit at retirement than DB Plan participants.

The committee discussed that the intent in raising the percentage was to try
and make the contribution into and the benefit received at retirement in both
plans as equitable as possible. From the data provided it appears that more
study may need to be done to determine whether or not a change in the
contribution percentage is needed and if so what the appropriate amount of the
change should be. Schmisek stated that Deloitte & Touche has access to data on
what other municipalities with Defined Contribution Plans use as contribution
percentages and they should be able to provide that information to us within
the next week or two. He stated that they also would like some more time to
revise the calculations based on the conference call that occurred earlier.

Bunce stated that perhaps a decision matrix could be constructed showing the
effect of different contribution levels, as well as the compiling information
on other municipalities and a more comprehensive survey and education of
participants on this matter.

The committee inquired of Carol Diamond Gerszewski, President of the Employee
Reps Group, as to any comments that their group had. Gerszewski stated that
the employee reps had met this morning and made a motion to support exploration
of continued study of an equitable contribution level for the Defined
Contribution Plan.

Kreun made a motion to table this matter until the next meeting for further
research and discussion and that the motion made at the November 5 meeting
recommending an increase in the contribution percentage to 6% be held and not
brought forward to Committee of the Whole and City Council until after the
discussion at the next meeting. Aye: All. Motion carried.

Schmisek stated that there is a plan amendment that was previously passed by
the committee, but was being held until this matter was resolved. He stated
that he would request that the committee authorize the amendment without the
contribution increase to go forward to Committee of the Whole and City Council
to ensure that it is completed before the end of the year. The committee
concurred that the amendment should move forward as there motion passed at the
last meeting stated that the contribution increase could be separated into a
stand alone amendment if deemed to be more appropriate.

Matter of Request from Employees for Additional years of Service in the Defined
Benefit Plan.

Schmisek stated that the revised calculations for these individuals has not yet
been received from Deloitte & Touche, but should be completed very shortly. He
stated that also in regards to this item he had requested Dorsey & Whitney to
research whether or not the 10 affected employees could change their retirement
age election if they choose to participate in the program to purchase the
additional years of service. Dorsey & Whitney has been unable to find any IRS
rulings or case law to support the requested change, and have in fact found one
instance in a military pension where when the elected age was changed, the
contributions then became after tax contributions. He stated that they will be
providing a detailed written response to this question, but as their research
went until just shortly before this meeting, it had not yet been received, and
he would provide the committee with a copy of the memo prior to the next
meeting.

Schmisek informed the committee that Dorsey & Whitney has also found an
optional way of handling the financing of the purchase of the years of service
whereby a calculation is done to determine what additional percentage of
pension contribution would be required by the participant over the remainder of
their career to cover the total cost of the additional years of service. He
stated that if deemed feasible for our participants, it may make exercising the
option to participate in the program more affordable for the affected
employees, and may in fact be better for the plan. In order to determine
whether that option would work for our group of employees, he would need
authority from the committee to have Deloitte & Touche examine the option and
prepare calculations. He stated that the intent would be to arrive at the best
method for the plan and the affected employees in setting up the financing
method. The committee concurred that all methods should be explored before any
firm decisions are made and authorized Schmisek to continue the research in
this matter and that the earlier motion on this matter should be held from
Committee of the Whole discussion and Council action until after the next
meeting when any further research can be discussed and acted on.

The committee discussed potential meeting dates for the next meeting, with a
preference being for earlier in the month and a desire to send these items
forward prior to year end.

Respectfully submitted,


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