Pension Committee Special Meeting Minutes - January 25, 2013 - FINAL
TOWN OF SIMSBURY
PENSION SUB-COMMITTEE
Minutes of Special Meeting
Friday, January 25, 2013
7:30 a.m. in the Town Hall Main Meeting Room
I. Call to Order
In attendance were Pension Committee Members Nick Mason and Paul Henault (Board of Finance), Mike Goman (Board of Education), Lisa Heavner (Board of Selectmen) and members-at large Paul McAlenney and Philip Schulz. Peter Askham, Board of Finance, Burke La Clair, business manager for the Board of Education, Thomas Cooke, Director of Administrative Services, Mary Ann Harris, Finance Director and Becky Sielman, consulting actuary from Milliman were also in attendance.
Mr. Cooke opened the meeting at 7:32 a.m.
II. Acceptance of Minutes
Mr. Mason made a motion to approve the draft minutes of the December 13, 2012 Pension Sub-Committee special meeting. Ms. Heavner suggested a correction be made to the last paragraph of item #IV. She then seconded the motion. There were two abstentions. Most were in favor of the amended minutes, and the motion was passed.
III. Presentation on recommended interest rate assumptions for pension plans by the town’s actuary, and possible recommendation from the Pension Sub-Committee to the Boards of Finance, Selectman, and Education, with respect to appropriate assumptions for use in connection with budget planning
In the last meeting, Mr. Cooke noted that the sub-committee looked at the initial report of the Milliman experience study. Today he said that the sub-committee was looking at the final set of recommendations to help the Boards of Education, Selectmen and Finance plan the budget for the upcoming fiscal year. Ms. Sielman reviewed the Experience Study recommendations.
Ms. Sielman reviewed a long range forecast chart for funding of the pension plans. She discussed the need to lower the pension plans’ interest rate assumption based on economic trends, noting that the decrease could range from 50 basis points (from 7.75% to 7.25%) to 100 basis points (7.75% to 6.75%). She stated that a move to 6.75% was too conservative in her view, and recommended changing the interest rate assumption to 7.00%. She added that a further downward adjustment could be made at a later date if warranted by market performance.
She also presented a 1-page printed report titled Town of Simsbury 2012 Experience Study: Impact of Proposed Assumptions Changes – 2012 Pension Plan Valuations (4th version, dated January 25, 2013)(Attachment 1). The printed report showed the financial impact of implementing the Experience Study recommendations (including a valuation timing adjustment, changes in demographic assumptions, and revised salary scale assumptions). The chart included 6 vertical columns which showed the totals for 2011, the baseline for 2012, and how figures would be affected if the interest rate went down by 25, 50, 75 or 100 basis points. (Columns D, F, H1, and I). Figures were shown for the three town pension plans which include government employees, the Board of Education and the police. All three plans were totaled at the bottom. While the basis points differed in columns D, F, H1, and I, all of these columns assumed proposed changes to valuation timing, demographic assumptions, and salary scales. The amortization period remained at the current rate of 21 years in all columns.
The sub-committee conducted an extensive discussion of the charts, including: 1. How other municipalities have stepped their assumption rate down over multiple years; 2. How the town might meet its unfunded liabilities over time; 3. How Simsbury has never underfunded its pension plans and always paid the full ARC as determined by Milliman; and 4. How moving to a 7% assumption rate would mean a significant increase in cost to the Town budget. After the discussion period, Mr. Henault recommended making one change now instead of a series of stepped changes. Mr. Henault made a motion that the Pension Sub-Committee recommend that the Boards of Selectmen, Education and Finance utilize the Experience Study and interest rate assumptions in column H1 of Attachment 1 in connection with pension plan budgeting for Fiscal Year 2014. Mr. McAlenney seconded the motion. All were in favor, and the motion was unanimously passed. Ms. Sielman acknowledged that changing the current assumption rate of 7.75% to 7.0% would be an actuarially sound and advisable move.
IV. Adjourn
Mr. Henault made a motion to adjourn the meeting. Mr. Mason seconded the motion. All were in favor. The motion was passed unanimously. The meeting was adjourned at 8:45 a.m.
The next regular Pension Sub-Committee meeting will be held at 7:30 a.m. on Valentine’s Day in the Board of Education conference room.
Respectfully submitted,
Lorrie McElligott
Commission Clerk