History & Update of the City of Fort Worth Employees’ Retirement Fund Presented by Laetitia Brown, Senior Assistant City Attorney, Department of Law May 4, 2010

2 Relevant Laws Article 16, Section 66 of the Texas Constitution (Proposition 15) Article 6243i of the Texas Revised Statutes (SB 976)

3 Article 16, Section 66 of the Texas Constitution Passed by Texas voters in September, 2003 Applies only to a public retirement system that is not a statewide system Does not apply to the City of San Antonio Police and Firefighter pension plan Makes the ERF and the City insurers of the Fund Prohibits reductions in “accrued” retirement benefits earned to date Prohibits any reduction in benefits for members who are retired Permits reduction in benefits prospectively for new hires and non-vested employees There is a question as to vested employees

4 Article 6243i of the Texas Revised Civil Statutes (SB 976) Effective in 2007 Applies only to the City of Fort Worth Governs many aspects of the City’s Employees’ Retirement Fund The bill’s author stated the legislation had two goals: –“First, the fiscal soundness of the fund is more stable since significant changes to it must go through several processes before being finalized. –Second, accountability to the taxpayer is improved due to oversight by the legislature.” (source: Bill Analysis, Senate Research Center)

5 Key Provisions of Article 6243i  Changes to Benefits  Any amendment to the administrative rules proposed by the ERF Board of Trustees that would increase a benefit must be reviewed and approved by the Fort Worth City Council.  Only the City Council is authorized to adopt an amendment to the administrative rules that reduces a prospective benefit  City Council is required to give notice to the ERF Board at least 90 days prior to a vote of its intention to consider and vote on an amendment to the administrative rules that would reduce a benefit.  Amendment Changes  The ERF Board of Trustees may adopt amendments to the administrative rules if a qualified actuary performs an actuarial analysis of the fiscal impact of the proposed amendment and determines that the amendment will not impact the actuarial soundness of the retirement fund.  This does not include changes to benefits

6 Key Provisions of Article 6243i – Board of Trustees  Board Make-Up Required by Article 6243i  Board of Trustees is now composed of 13 members: 4 Active employees –2 General, 1 Firefighter, 1 Police Officer 3 Retired members –1 General, 1 Firefighter, 1 Police Officer 6 Council Appointees – including Fort Worth’s Chief Financial Officer Board Make-Up Prior to Article 6243i  11 Members:  7 Active employees  4 General, 2 Police, 1 Fire  2 Retired members  1 General and 1 Civil Service  2 Council Appointees

7 Key Provisions of Article 6243i  Actuarial assumptions  City Council should receive detailed analysis of the proposed actuarial assumptions and their effects on the ERF at least 30 days before the date the Board of Trustees adopts the actuarial assumption to be used. The ERF Board of Trustees has the sole responsibility for the adoption of “sound actuarial assumptions to be used by the plan.” (Article 16, Section 67 of the Texas Constitution)

8 Key Provisions of Article 6243i  Contributions  City Contribution  City Council can increase City contributions to the Fund at any time  Any decrease in City contribution must be approved by the Members of the ERF and the ERF Board of Trustees  Employee Contribution  Any increase in employee contributions to the Fund must be approved by a majority of active employees

9 City Manager’s Ad Hoc Pension Committee Committee Charge Make recommendation as to the lump sum aside in FY2010 – total $7m M&C G is before Council on the recommendation of the Pension Committee Review and make recommendations on : the current plan design City & Employee contribution levels Reccommnedations may range from significant modifications to simple fine tuning

10 City Manager’s Ad Hoc Pension Committee Timeline Jan 20, 2010Begins meeting Feb - AprilMeets bi-weekly May 5Reviews the 2010 Actuarial Valuation Focuses on Options / Develop Scenarios May 19Finalizes Scenarios and Recommendations ___________________________________________________________ June 3Employee Retirement Fund Presents 2010 Actuarial Valuation to Audit & Finance Advisory Committee Aug 10City Manager presents Proposed FY 2011 Budget to City Council (consideration of Ad Hoc Committee recommendations) Aug City Council Budget Retreat Aug - SeptCity Council Budget Study Sessions Sept 7City Council Adopts FY 2011 Budget

History & Update of the City of Fort Worth Employees’ Retirement Fund Questions/Comments/Conclusion