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League of Arizona’s Cities and towns: Pension Task Force update

League of Arizona’s Cities and towns: Pension Task Force update. GFOAz Budget Forum October 17, 2014. Panel. René G. Guillen Jr ., Legislative Director, League of Cities and Towns Mike Townsend, Assistant County Manager, Coconino County

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League of Arizona’s Cities and towns: Pension Task Force update

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  1. League of Arizona’s Cities and towns: Pension Task Force update GFOAz Budget Forum October 17, 2014

  2. Panel • René G. Guillen Jr., Legislative Director, League of Cities and Towns • Mike Townsend, Assistant County Manager, Coconino County • Scott McCarty, Finance Director, Town of Paradise Valley

  3. Task force • Formed by League in June 2014 • Partnership with ACMA and GFOAz • 15 Members • Review all aspects of PSPRS, identify areas of improvement, and reform recommendations

  4. Pension Formula C + I = B + E Contributions Interest Benefits Expenses

  5. PSPRS: a combined responsibility

  6. Key questions • What should the Employee, Retiree, Employer, and Taxpayer get out of the System? • Howis this Accomplished? • Type of plan, cost sharing, annual pension increase (PBI), etc.

  7. Task force: Initial goals • Information and Education • 14 Presentations • Collaboration • Employers • State PSPRS Board • Arizona Firefighters’ Association • Arizona Fraternal Order of Police

  8. Key issues • Employer Management • Recommended Practices • “Know Your Numbers” • Unfunded Liability Trend? How much relates to Current Retirees? • Trend of Contribution Amounts and Rates? • Affordability-What Percent of your Operating Budget do your contributions represent?

  9. Payroll change impacts 2-year offset

  10. Payroll change impacts on rates

  11. Key issues (continued) • Employer Management (continued) • Recommended Practices (continued) • Local Board Independent Legal Support • Increase Interest Earnings by Making Fewer Contribution Payments • “Minimum Amount” • ER Contribution for DROP members

  12. Key issues (continued) • Appropriate Pension Amount • How much does a Retiree need? • Appropriate Retirement Age • PBI (Annual Pension Benefit Increase) • Share Wealth or Maintain Relative Value? • Dedicated Funding Source?

  13. Key issues (continued) • Financial Healthy Plan • “No One is Average” • Trends Are Critical • Funded Status • Contribution Amounts and Rates • Affordability-ER Contribution Amount as % of Operating Budget

  14. Key issues (continued) • Risk Sharing • Fixed Employee Contribution • Investment Strategy • Aggregate Liabilities • Plan Closure Options • Defined Contribution (DC) Plan

  15. Key issues (concluded) • Actuary Assumptions • Groups (Large vs. Small, PD vs. Fire) • Pension Obligation Bonds • Dedicated Revenues • Exists Only for Fire Plans • Legal Challenges

  16. Status of legal cases • Fields Case • Reinstated PBI Calculation • Retroactive Payments Made • Smoothed over 3 Years in 6/30/14 Valuations

  17. Status of legal cases (concluded) • Hall Case • Relates to Increased Employee Contributions • Ruling Expected in One Year • Impacts Excluded from 6/30/14 Valuations

  18. Upcoming events • October 22 PSPRS Board Meeting: 6/30/14 Valuations • Continued Public Discussions • Task ForceFramework Document

  19. Timing? • Firefighter State Association Proposal • Phoenix’s Proposition 487

  20. Comments and Questions

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