Palatka Pension Board Debates Retirement Plan Changes

The Palatka Pension Board convened to discuss a range of issues concerning the management and future of the city’s pension funds. Among notable topics was the potential restructuring of the pension plan, which included lengthy debates on the use of smoothing techniques, freezing retirees’ benefits, and the creation of a share plan with excess state monies to manage volatility in future funding.

A comprehensive presentation by Dwayne Madin from Capital City Trust laid the groundwork for the meeting’s discussions, detailing the firefighters’ pension fund performance in 2023. Key points included stock market returns, valuations, policy review, asset allocation, and the impact of economic conditions and Federal Reserve policies. Madin’s report underscored the strategic changes in the fund’s policy, which now favors domestic equities over non-U.S. companies. The presentation also saw a review of the fund’s historical performance, as well as a comparison with other pension plans, highlighting the program’s earnings and rankings.

The meeting delved into the need for an even distribution of earnings across different sectors, acknowledging the pension plan’s 7.73% return, which exceeded the 7.4% assumption. However, there was concern over a significant loss experienced in 2022 that necessitated smoothing out investment gains and losses in the coming years. The fund’s financial status was also impacted by turnover, including terminations and retirements, as well as by an increase in the unfunded actuarial liability by $691,000 from the previous year. The board considered the effects of a third-party administrator on administrative expenses and the potential influence of hiring additional staff on the plan’s financial obligations.

The board’s discussions included a review of the ACT evaluation report, which led to debates about the impact of various calculation methods on the pension fund. A proposal to use the smoothing technique for calculating the multiplier for members’ benefits stirred concerns about its potential impact on retirees and the city’s financial contribution. The actuary presented a handout explaining the calculation process for determining extra benefits provided using State monies, as mandated by state law.

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Further, there were discussions around an increase in the unfunded actuarial liability and strategies to address the $2.2 million liability, with current payments set at $276,000. The board compared Palatka’s contribution rate to other plans in Florida, noting that theirs was on the lower end but commending the trustees and staff for managing the plan’s finances efficiently. A motion was made and seconded to accept the valuation report as presented.

The debate over investment returns centered on the pros and cons of using a smoothing technique. While some members raised concerns about the adverse effects of the 2022 loss on retirees’ benefits, others pointed out the immediacy of gains that retirees could enjoy if smoothing was not applied. Freezing retirees’ benefits was another option considered, which could result in a more stable benefit for retirees but increased volatility for active employees.

The board also explored alternative approaches, like a share plan with excess state monies, involving fixed benefits for both active and retired employees. The potential negotiation of a new mutual consent document was debated, emphasizing the need for further discussions with the union and other stakeholders.

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During the meeting, public comments were heard, with questions about pension benefits and the implications of hiring new firefighters on the unfunded liability. The Resource Center, responding to the RFP, presented their approach to plan administration.

The board emphasized the use of technology to engage with members without compromising personal interaction. There were discussions on providing secure access to members’ information, the preparation of annual reports, and collaboration with HR and the city clerk for pension-related processes.

The meeting addressed the administration of “alive and well” letters to retirees and the verification process for benefit payments. Members expressed concerns about the potential disenfranchisement of those uncomfortable with technology and emphasized maintaining personal interaction.

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A significant decision made during the meeting was the unanimous motion to accept the sole RFP response. The board discussed the HR position, potential hiring of an outside organization, and the implications of transition periods and effective communication.

Additionally, the board considered the state’s request to lower the assumption for the investment return rate. Despite this, the board voted to maintain the expected return at 7.4%. They also reviewed a study on the financial implications of a one-time increase in benefits for retirees, ultimately debating between recommending a one-time 5% increase or a 1% per year increase with a cap at 10%.

Note: This meeting summary was generated by AI, which can occasionally misspell names, misattribute actions, and state inaccuracies. This summary is intended to be a starting point and you should review the meeting record linked above before acting on anything you read. If we got something wrong, let us know. We’re working every day to improve our process in pursuit of universal local government transparency.

Mayor:
Robbi Correa
Pension Board Officials:

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