8.5. SR 03-21-1994
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AGENDA ITEM 8.5.
MEMORANDUM
FROM:
MAYOR & CITY COUNCIL
LORI JOHNSON, FINANCE DIRECTOR ~
MARCH 17, 1994
TO:
DATE:
SUBJECT: FIRE COMPENSATION TASK FORCE
REQUEST TO HIRE ACTUARIAL
On October 19, 1993, the Fire Department Compensation Task Force held its
first meeting. Since that time, the Task Force has made considerable
progress in evaluating the department's compensation, both in terms of
hourly pay and the pension benefit amount.
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The main focus of the Task Force has been on the Fire Relief Association
benefit plan and changing from a defined benefit to a defined contribution
method of payment. Staff has provided the Task Force members with
estimates (based on numerous assumptions) of what the beginning balance of
each firefighter's pension account would be under the defined contribution
method. There are several firefighters whose account balance is less under
the defined contribution method. However, the difference is not substantial
and it is felt that this issue can be resolved so that the firefighters in that
position maintain their current benefit amount.
Of course, the membership is concerned that all firefighters benefit from the
change. The Fire Department membership has to approve the change to the
by-laws in order to change from defined benefit to defined contribution. There
has been discussion that the members would be more likely to approve the
change if there are no benefit reductions and if they have an idea of what
their pension balance would be upon retirement under the two plans. The
Task Force agreed that it is appropriate at this time to have an actuarial
provide projections on future retirement account balances. The Task Force
members representing the Relief Association and Fire Department feel that it
will be much easier to explain and ultimately sell this proposal to the
membership if that information is available.
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At Monday's meeting I will have a list of possible consultants who could
perform the actuarial work requested by the Task Force. I have spoken with
Rick Holtz of Wyatt Companies; Mr. Holtz did similar but more extensive
studies for the New Hope and Edina Fire Relief Associations. Based on our
P.O. Box 490 · 13065 Orono Parkway · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425
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conversation, he estimated that the project could be completed for $1,000. I
will try to get a second estimate by Monday. However, given the fact that
Mr. Holtz has completed similar studies, it may be best to utilize his
experience in this area. It is the Task Force's understanding that the City
Council is willing to pay certain legal and other costs necessary in order to
facilitate a change from the defined benefit to defined contribution benefit
plan.
ACTION REQUESTED
The Cou'ncil is asked to authorize the Fire Department Compensation Task
Force to interview and hire a consultant to perform the actuarial work
necessary to provide ending pension account balances at a cost not to exceed
$1,000.
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