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http://www.fppta.org/docvault/2011/2/380.pdfTRANSCRIPT
Providing trustee education and industry information in an effort to Protect
defined benefit Plans.
FPPTA Florida Public Pension Trustees Association
February 2011
message from the ceoraymond t. edmondson, Jr.
It’s a dark, lonely night. You are working solo without a backup due to budget cuts. You stop a car for speeding. As you approach the vehicle, you notice movement inside. The windows are tinted so you really don’t know what is in store for you. You are young, just starting a family, and have limited savings. Unknown to you there is an armed, convicted felon in the vehicle who has an outstanding warrant, and who has vowed never to go back to prison. You want to pull your weapon, but you don’t want to cause a problem. You know, at least, that you have a defined benefit
pension plan to help take care of your family. Now you are at the side of the vehicle. You reach the driver’s side window and you state, “I am a Florida State Legislator. May I see your driver’s license and proof of insurance?”
How many Florida state lawmakers would take that assignment? How many have? Possibly a few, but not enough evidently to make the body understand how critical defined benefit pensions are to public employees – especially first responders.
Last month I attended the funeral for two police officers in St. Petersburg. The entire event was very professionally planned. As I stood with the masses, the thought came to me, “We have become very professional at burying our fallen.” Florida ranks 4th in the nation for police officers killed in the line of duty, and 49th in education.
To Governor Rick Scott and the Florida Legislature here is a real challenge for you: Make Florida 49th in police officer killings and 4th in education! Florida legislators should work to reform something that really is broken instead of wasting time making political points at the expense of public employees.
Governor Scott wants us to be more like the private sector. He did quite well there. His latest proposal is to take FRS, one of the most funded plans in the United States and close it (very expensive), in favor of moving to a 401(k) type savings account. But let’s take a moment to look at the real numbers and the actual consequences of this money-saving scheme.
If the employer currently pays 20 percent of payroll into its defined benefits plans, all employees are guaranteed retirement benefits, and that includes disability payments, death benefits, and survivorship benefits. The real cost for the city is just 20 cents on a dollar. Don’t forget that for every $1.00 invested in a plan, there will be $1.40 returned to the economy by retiree spending.
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Now the employer wishing to create a defined contribution account also will be paying 9 percent of payroll into that new savings account. There is no disability coverage, no death benefit, no survivorship benefit.
•So,theemployerisnowpaying29percentofpayrollfortwoplansofunequalvalue. •Withnonewhirescomingintothedefinedbenefitplan,thecitymustcontributeagreatershareeachyearuntilthe plan closes – which could be 25 years down the road.
Where are the savings?
Public pensions average just 3 percent of municipal budgets nationally, and in Florida the average is 2.27 percent. Clearly there are other places to look for savings; and telling taxpayers they will save money this way is not a clean truth. The truth is that defined contribution 401(k) type vehicles are not a viable retirement source.
The public sector is a well-oiled machine. The private sector is a train wreck. Instead of doing away with public sector defined benefit retirement plans, let’s try to find ways to allow private sector employees to have a defined benefit retirement plan too. It will take some changes and some creative thinking, for example pooling small businesses into a single investment entity; but that legislation would truly serve the state of Florida and allow lawmakers to spend time fixing what’s really broken.
In this month’s e-newsletter, our PR Consultant, Susan Marden will offer you a two page document that contains some of the very important facts and myth busters we are trying to share with the public. I urge you to take that document and copy it onto your letterhead and then deliver it to your local municipal officials and newspapers. Tell them you are concerned the public and even some elected officials aren’t fully aware of all the facts, and that you hope they will read through it. We would be happy to take any calls or answer any questions that come up as a result.
Raymond Edmondson, Jr., CPPT, CEOFlorida Public Pension Trustees Association
Contact your State and National Legislators
The FPPTA knows its membership takes their role as trustees seriously but we also need you to help in carrying out theFPPTAmission.Weareaskingourmembershiptogobeyondtheirfiduciaryresponsibilitiesandusetheknowl-edgetheyhavegainedastrusteestoeducatethelawmakersinapositiontointerferewithdefinedbenefitplans.
Pleasetakethetimetowriteyourlegislatorsandinformthemoftheimportanceandsoundnessofdefinedbenefitplans. The FPPTA website has an easy to use directory so contacting your legislator is easy. Please visit the link below to use the FPPTA’s legislative directory.
Legislative Directory: http://www.floridavoterfile.com/FPPTA/
*Click on the link or the title text in this box
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message from the cooKimberlie ryals, chief operating officer
Oneofourlargestschoolsever!WehadaterrificattendanceattheTrusteesSchoolinSt.Augus-tine. Thank you all for attending and a special thanks to all our presenters. We appreciate the time it takes out of your schedule to attend the school and to produce a top notch presentation. We had our second broadcast from the “FPPTA Network”. If Oprah can do it so can the FPPTA! It is a great way for us to reach all of our attendees at one time. The schools are designed in such a way that wehavethefour,sometimesfiveconcurrentsessionssogettingamessageacrosstoeveryoneisachallenge. We have tried doing this at lunch but honestly that is your time to recharge and network with the other trustees. We had a current and well thought out agenda with subjects like “Manager
Selection Process: How Important Is it?” and “Impact of Euro Implosion on the US Dollar” and many more. The CEU sessions were very well attended with at least 150 to 200 each day. We had overall 104 people taking exams on Wednesday morning. While they were taking exams the CEU session with Tom Lussier, Ray Edmondson, Al-lison Beiler and Brad Armstong was packed. Everyone wanted to hear the FPPTA Pension Industry Forum. The presentation was about The National Attack on Public Pensions…The Threat is Real…How Will We Respond? I also want to thank the staff at Renaissance Resort at World Golf Village. They have a beautiful property that works so well for us.
The scanning at the school went very well. It seems most of you are getting the hang of it. Again, as I mentioned in previous articles we certainly are not trying to be “big brother”, just trying to keep if fair. We do appreciate your efforts to follow the guidelines that we have set forth.
New York, New York here we come. The Wall Street Program is our next event. This is currently full with a wait-ing list. Initially we took 30 trustees plus a guest. A few years ago we had to raise the attendance to 35 and now we are considering raising it to 40 trustees. This event is so popular and we always have so many folks on the waiting list. We want to do our best to accommodate as many as possible. Please keep in mind you can register for the 2012 program at the upcoming 27th Annual Conference’s CPPT Breakfast.
Our 27th Annual Conference will be here before we know it. Online registration will open April 1st. Information will be mailed mid April. The Conference will be held at the Renaissance Sea World Resort in Orlando, June 26 – 29, 2011.
Thank you for your support of the FPPTA.
Sincerely,
KimberlieRyals,ChiefOperatingOfficerFlorida Public Pension Trustees Association
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“FACTS ARE STUBBORN THINGS” -John Adams, December 1770susan marden, Public relations consultant
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We have been working hard the last two years to communicate and educate people (and especially thepress)abouttheimportanceofsavingdefinedbenefitpensionplans.We’vemadesomeim-portant gains, but we need your help in carrying on the mission.
At the most recent Trustee School, held in St. Augustine, we were provided with a list of the sena-tors serving on Senator Jeremy Ring’s Government Oversight & Accountability Committee. It has fallen to this committee to assess Governor Rick Scott’s calls for pension reform in the Florida Retirement System. There has been a very strong push to take this opportunity to drive a stake
throughtheheartofdefinedbenefitpublicpensions.Butweknowthisisn’tjustaboutsavingmoney,becauseweknow the average pension plan represents less than 3 percent of any municipal budget.
Inaneffort to reachout toelectedofficials,wehaveprepared thedocument, “PensionReformMythBusters”.Pleasetakethistwo-pagedocumentanddistributeittoalltheelectedofficialsandlawmakersinyourmunicipal-ity and district. Real contact, from real voters and taxpayers who happen to be public employees will give us the bestchancetosharethegoodnewsaboutdefinedbenefitpublicpensions.Asapensionboardtrustee,youhavetheopportunity to serve as a respected resource about what it really costs to run a DB pension plan, and what it would really cost to eliminate them. We will be pleased to help you answer any questions that arise as a result of your efforts. Contact Ray Edmondson, Fred Nesbitt, or myself if you need any assistance in providing additional facts, figuresorviewpoints.
You can view or download the document by clicking the title or link in the box below*
*PENSION REFORM MYTH BUSTERS – BY THE NUMBERS
Our lawmakers have been inundated with negative – and inaccurate – statistics about municipal pension plans (not to be confused with the state’s FRS plan), and now are under tremendous pressure to take action, imple-mentreformsandeliminatedefinedbenefitplans.
Thefactisthestrengthofdefinedbenefitplansvastlyoutweighsthecostsoftheiroperation.Theyaresustain-able. The fact is public employees in the state of Florida still lag behind their private sector counterparts in earningsandbenefits.Thefactisthatdefinedbenefitpublicpensionsareakeyreasonwhymunicipalitiesareabletorecruitandretainqualifiedandtalentedemployeesprovidinggreatcostsavings.
http://www.publicpensionsonline.com/public/images/Mythbusters_FPPTA.pdf
news clipsfred nesbitt, media consultant
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/fppta.html
*Click on a title to view the entire article
Two local bills make way to TallahasseeBy David Chapman, Financial News & Daily Record, January 24, 2011A widely discussed submission, J-Bill 2, related to the power of the Jacksonville Police and Fire PensionFundboardtoinvestupto25percentofpensionassets,atcost,infixedrealestate.Cur-rently, the board is allowed to invest up to 20 percent of such assets. Fund Executive Director John Keane lobbied for support of the measure. He said the increase would bring the total to that allowed under state statutes, although plans weren’t to invest at the potential 25 percent maximum.
Following criticisms from two members of the public, State Sen. Steve Wise asked colleagues if the issue was premature, given that the Legislature would be looking at the pension issue at the state level.
Palm Tran hopes pensions stayWest Palm Beach News Channel 5, January 20, 2011At a time when some argue that pensions are bankrupting local government, the board that oversees pensions for PalmTranhopestalkingaboutfinancialresponsibilitywillhelpcleartheairforboththeiremployeesandthetax-payer. “There’s some misconceptions. Hopefully it will be alleviated today,” said Palm Tran/ATU 1577 member Dwight Mattingly.Editor’s Note: This is coverage of an FPPTA town hall meeting in West Palm Beach.
Rise in police deaths a key backdrop for pension reformEditorial, Sun-Sentinel, January 8, 2011Pensions for public employees in many ways have gotten out of hand over the years, and the mounting costs have become an onerous, unaffordable burden for cash-strapped local governments trying to keep the lights on without crippling tax increases. It is an unsustainable situation. So pension reform is a must for the future health and vitality of government operations. But those who will be charged with the job of shaping that reform, and the public keeping watch, must be careful to keep the rhetoric to a minimum. We all must also remember that not all public employees are created equal, and so should not be subject to the same, cookie-cutter retirement age or benefitrestrictions.Decisionsmadeinredesigningpublicworkerbenefitsshouldbenuanced,reflectiveofnotonlythecompetivenessofthejobandtheexperiencerequired,butoftherisksandsacrificesthatcomewiththework. No job should be exempt from the pension reform effort, but some public employees need added perks more than others. If anyone deserves a healthy pension plan compared to others, it’s the street cop who counts himself lucky just to reach retirement age.
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Legislators eye pension plan cutsSt. Augustine Record, January 27, 2011Withastateshortfalllikelytotop$3.6billioninthecomingfiscalyearandpledgesfromlegislativeleadersnottoraisetaxestofilltheshortfall,lawmakersareincreasinglylookingatthestate’spensionplanasoneavenuetoreducespend-ing. Legislative committees have already begun weighing changes to state and local pensions, which are also facing deficitsafterfundvalueswerehammeredbythestockmarketfall.Andwhiletheproblemsatthecityandcountylevelare worse, lawmakers say they want to address the issues with the state fund now. Lawmakers are weighing an array of options,includingpushingallnewemployeesintoadefined-contributionplan,likea401(k),asopposedtoadefined-benefitplan,likeatraditionalpension;forcingstateemployeestocontributetotheirownretirement;boostingthenum-berofyearsittakesforthepensionplantovest;andrevampinghowthebenefitsarecalculatedtodrivebenefitsdown.
Retirement fund near 2008 levelsFort Myers News Press, January 27, 2011 State investments supporting the Florida Retirement System have bounced back to within about $1 billion of their pre-market collapse level. Ash Williams, director of the State Board of Administration, said the “acid test” unfunded liability factor - the ratio of assets to liabilities - is also in good shape. Williams said the ratio of assets to liabilities in the $126 billion FRS fund was 87.9 percent last July 1. He said 80 percent is generally considered a healthy fund ratio, so Florida is not setting off any alarms on Wall Street.
State to tackle pension reformBy Derek Catron, Daytona Beach News Journal, January 2, 2011Former Ormond Beach Mayor Fred Costello made no secret of his hope to reform the state pension plan when he ran for theFloridaHouse,andhewaschallengedforit--facingapoliceunionofficialintheRepublicanprimaryandaformerschooldistrictofficialintheNovembergeneralelection.Hisvictories,despitestaunchpublicunionopposition,leaveCostello feeling like he has a mandate as he looks ahead to 2011. The freshman legislator already has started writing a billthathehopeswillgivestateandlocalpensionboardstheflexibilityto,amongothersteps,convertfuturebenefitsfrom a traditional pension to something more like a corporate 401(k).
HowtoCutFlorida’sDeficit:SavingsCanBringBalanceEditorial, The Ledger, January 27, 2011There is growing support for making state employees contribute to their pension plan. While it is reforming its retire-ment system, Florida also needs to change its Deferred Retirement Option Program. DROP offers employees who promisetoretireinfiveyearsa6.5percentrateofreturn.Thegroupsuggestedabouthalfthatasamorerealisticfigure.
*Click on a title to view the entire article
Trouble Ahead: Florida Local Governments and Retirement Obligation
The current recession plaguing Florida and other states has revealed an unexpected and unwantedfiscalreality:manyofourlocalgovernmentshavepromisedmoreinretirementbenefitstotheiremployeesthanisfiscallyprudent.TheresultispotentiallyatickingtimebombforFloridacitizens unless the state and localities act to recognize and alleviate obligations they cannot afford
to keep.
http://www.publicpensionsonline.com/public/images/ToughChoiceTroubleAheadReport.pdf
state legislative updaterandy touchton, state legislative consultant
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The Governor’s Recommended Budget has now been submitted to the Legislature and the budget sub-committees of both legislative bodies have begun the task of bringing everything together. This past week, the majority of their time has been consumed by the Governor’s staff presentations and explana-tions as to Governor Scott’s recommendations.
Although there were reports that his recommended proposal would address all pension plan issues (FRS and local plans) that didn’t materialize. His 213 pages entitled “Governor’s Recommendations on Pen-
sion Reform”, only address the Florida Retirement System. It is now evident, that the forthcoming changes to the local plans will be a legislative initiative, and as I reported last month, Senator Ring will lead those efforts in the Senate. Based on his comments in committee, I would suspect we will see something shortly.
TheGovernor’smostsignificantFRSrecommendationsareasfollows:
• closethedefinedbenefitplaneffectiveJuly1,2011toallnewhiresafterthatdate,• establish a 5% pre-taxed employee contribution,• eliminate the DROP plan effective June 30, 2011 (all current DROP plan participants would be allowed to continue
until they exhaust their entitlement), • eliminate the 3% COLA effective June 30, 2011, however, current employees would receive credit for their years
of service up until that date and a formula is used to calculate service thereafter,• eliminate or phases out the Health Insurance Subsidy program effective on June 30, 2011, however, current em-
ployees would receive credit up until that date at the current rate of $5.00 for each year of service up to a maximum of $150.00, and,
• reducetheaccrualrateforSpecialRiskmembersfrom3%to2%,reducesElectedOfficersClassmembersfrom(judges3.3%)(stateandlocalpublicelectedofficials(3%)to1.6%,andreducestheSeniorManagementClassmembers from 2% to 1.6%.
Additionally, there has been an additional report just completed by the Leroy Collins Institute entitled “Trouble Ahead: Florida Local Governments and Retirement Obligations”. I know Fred has mentioned this report and if you haven’t accessed it yet, I would highly recommend that you do so. Interestingly, many of the provisions of House Bill 303 by Representative Costello (which has been withdrawn from consideration) are recommended in this report. I also believe that after your perusal you will quickly recognize a continuing misconception trend.
TOWN HALL MEETINGS “BY THE NUMBERS” ARE MAKING AN IMPACTPublic Pension Forum Meetings Now a Steady Draw for Municipal Leaders
Town Hall Meetings, presented by the Florida Public Pension Trustees Association, and hosted by local and munici-pal pension plan trustee boards have started to gain traction in explaining why politicians’ claims that public pension
plans are unaffordable are based on false assumptions.
http://www.publicpensionsonline.com/public/images/townhall%20press%20release.pdf
*Click on the title or link above to view the entire article
Pete Prior, CPPTChairman
George Farrell, CPPTVice Chairman
Ann Thompson, CPPTSecretary
Steve Aspinall, CPPTTreasurer
Brenda Clanton, CPPTDirector
Gary Clark, CPPTDirector
Joe Liguori, CPPTDirector
Renee Lipton, CPPTDirector Emeritus
Ken Harrison, CPPTDirector Emeritus
board of directors
fPPta staff
Ray Edmondson , CPPT Chief Executive Officer
Peter Hapgood , CPPT Education Consultant
Kim Ryals , CPPT Chief Operating Officer
CPPT [email protected]
Fred Nesbitt, PhD FPPTA Media [email protected]
Lois Edmondson Senior Executive Assistant
Membership and Event Registration Specialist
Susan Marden Public Relations Consultant
Randy TouchtonState Legislative Consultant
Howard Bos, CPPT, ChairpersonRichmond Capital Management
W.O. Bell, Vice-ChairpersonWestwood Distributors
Brad Rinsem, SecretarySalem Trust
Michael Spencer, CPPTRBC Global Asset Management
Bruce Feiner, CPPTConvergEx Group
Janna Hamilton, CPPTGarcia Hamilton & Associates
Joe BogdahnThe Bogdahn Group
Grant McMurry, CPPTICC Capital Management
Tracy MusserThompson, Siegel & Walmsley, Inc.
Joe WhiteSaxena White, PA
Katie Byrne, CPPTDePrince, Race & Zollo
Tom CapobiancoLee Munder Capital
Chad LittleFreiman Little Actuaries
Jerry NavaretteThe Boston Company
Mary McTagueAtlanta Capital Management
Chris GrecoSawgrass Asset Management
Bob PodgornyDow Jones Indexes
Tom FranzeseLazard Asset Management
Richelle Hayes, CPPTAmerican Realty Advisors
Alison BielerCypen & Cypen
Allison CorballyState Street Global Advisors
Peter Hapgood, CPPT, ChairpersonFPPTA Education Consultant
Ray Edmondson, CPPTFPPTA Chief Executive Officer
Kimberlie E. Ryals, CPPTFPPTA Chief Operating Officer
Pete Prior, CPPT, ChairpersonHialeah Gardens Police Pension Fund
Steve Aspinall, CPPT, Board TreasurerSt. Petersburg Police Officers Pension Fund
Joe Liguori, CPPT, DirectorDelray Beach Police & Fire Pension Fund
Ann Thompson, CPPT, Board SecretaryVero Beach Police Pension Fund
Dennis Hole, CPPTFt. Lauderdale Police & Fire Pension Fund
Steve Corbet, CPPTSt. Petersburg Police Pension Fund
Richard Grover, CPPTPensacola Firefighters Pension Fund
Tim Olsen, CPPTMelbourne Fire Pension Fund
Mike Spencer, CPPTRBC Global Asset Management
Jack Farland, CPPTPublic Pensions, Inc.
Grant McMurry, CPPTICC Capital Management
Katie Byrne, CPPTDePrince, Race & Zollo
fPPta education committee
fPPta advisory board
FPPTA2946 Wellington circle east
tallahassee, fl 32309Phone: 800-842-4064
fax: 850-668-8514e-mail: [email protected]
www.fppta.org
Michael SmithJP Morgan