Final
STAFF SUMMARY OF MEETING

POLICE OFFICERS' AND FIREFIGHTERS' PENSION REFORM COMMISSION

Date:09/30/2013
ATTENDANCE
Time:01:33 PM to 03:12 PM
Buck
X
Court
X
Place:HCR 0112
Dore
X
Duran
A
This Meeting was called to order by
Hudak
*
Senator Tochtrop
King
A
Peniston
X
This Report was prepared by
Rosenthal
X
Damion Pechota
Schafer
X
Scott
X
Tochtrop
X
Ulibarri
A
Wright
X
Morse
A
Labuda
A
X = Present, E = Excused, A = Absent, * = Present after roll call
Bills Addressed: Action Taken:
FPPA Update
Volunteer Firefighters' Plan
Bill 1
Bill 2
Memorandum to the Commission
Witness Testimony and/or Committee Discussion Only
Witness Testimony and/or Committee Discussion Only
Move to Refer Bill 1 to Legislative Council
Move to Refer Bill 2 to Legislative Council
Witness Testimony and/or Committee Discussion Only

Senator Tochtrop presided over the committee in the absence of Representative Labuda (chair) and Senator Morse (vice-chair).

01:35 PM -- FPPA Update

01:35 PM --
Dan Slack, Chief Executive Officer of the Fire and Police Pension Association (FPPA), introduced himself to the commission and discussed the background of the FPPA. He provided an overview of the Comprehensive Annual Report for the fiscal year ended December 31, 2012, and the Annual Update, dated September 30, 2013 (Attachment A and B). Specifically, Mr. Slack highlighted the Fire and Police Pension Association Board of Directors and administration. He discussed the Statewide Defined Benefit Plan discussed on pages 5 through 7 of the Annual Update. Mr. Slack discussed and summarized the various plans and assets administered under the FPPA, specifically the state-assisted old hire fire and police pension plans.

Attachment A.pdfAttachment A.pdf Attachment B.pdfAttachment B.pdf

01:47 PM

Mr. Slack discussed the actuarial studies described on page 12 of the Annual Update, specifically addressing the Statewide Hybrid Plan, the Statewide Defined Benefit Plan, and the Statewide Death and Disability Plan.

Mr. Slack discussed the pension plan member task force, created by the FPPA in 2011, that recommended the FPPA hold an election to increase contributions from individual members. The election will not affect employer contributions. The FPPA board accepted the recommendation to hold an election and passed a resolution to increase contributions by 0.5 percent each year for eight consecutive years, with a cumulative increase of 4.0 percent. The election will be held in April 2014 and requires the approval of 65 percent of pension enrollees. A majority of employers must also approve the plan. Mr. Slack answered questions from the commission regarding alternatives if the contribution increase is rejected.

02:00 PM --
Kevin Lindahl, FPPA General Counsel, answered questions from the committee regarding the election process and the 65 percent approval requirement.

Mr. Slack discussed the investment programs and distributed assets of the FPPA. He said that net investment assets totaled $3.7 billion at the close of 2012. These assets are held in the Fire and Police Members' Benefit Investment Fund ($3.40 billion) and the Fire and Police Members' Self-Directed Investment Fund ($0.32 billion). Net investment returns are up 7.1 percent and 11.9 percent for the two funds respectively, resulting in higher investment fund balances.

Mr. Slack discussed the impact of the financial crisis in 2008, which resulted in a 29.4 percent decrease that year. The FPPA has changed the structure of the investment program portfolio in order to protect against downside risk by limiting purchasing participation during high and low periods of the markets. Mr. Slack answered questions from the commission regarding the Public Employee Retirement Association (PERA) and how its returns compare with the FPPA plans. He answered questions regarding annual audits and the input of the audit reports.

02:13 PM --
Kim Collins, Chief Operations Officer of the FPPA, discussed current accounting standards and the Governmental Accounting Standards Board (GASB). She said that the FPPA is working with a variety agencies to assist local pension plan boards to address new requirements. Ms. Collins discussed the two different standards used for reporting requirements in future audits.
02:18 PM -- Volunteer Firefighter' Plans

02:18 PM -- Mr. Lindahl distributed a memorandum from the FPPA concerning volunteer firefighter plans (Attachment C). Mr. Lindahl said that the FPPA and consultants, have identified issues related to volunteer firefighter pension plans: improvement of pension plan's tax code in relation to IRS requirements; current incentives for the defined benefit plans regarding the needs of volunteer firefighters; expense of complying with GASB; and efficiency of GASB for reporting requirements for local authorities. Mr. Lindahl reported that the requirements of the study are beyond the statutory scope and financial resources of the FPPA and that the General Assembly should conduct the study.


Attachment C.pdfAttachment C.pdf

Mr. Lindahl said that changes in GASB standards have increased services required to administer plans.

Mr. Lindahl said that the FPPA has identified areas in statute that may be revised to address volunteer firefighter pension plans. Currently, Colorado Revised Statute has: no requirements for actuarial studies; no requirements for minimum contributions; and no process to close or transfer a volunteer firefighter pension plan.


The commission asked questions regarding years of service. Mr. Lindahl discussed the details of eligibility for volunteer firefighters and said that very few volunteers meet the requirements.

02:24 PM

Representative Rosenthal asked about the role of volunteer firefighters. Mr. Lindahl said that volunteers firefighters protect properties and lower insurance rates for communities that can't afford a paid firefighting system. He said that some departments use a combination of volunteers and career firefighters.


Senator Tochtrop discussed the importance of volunteer firefighters in relation to wildfires.

02:31 PM -- Bill 1

02:31 PM --
Mr. Lindahl discussed and summarized Draft Bill 1 (Attachment D) concerning the responsibilities of certain entities in managing volunteer firefighter pension plans that are affiliated with the Fire and Police Pension Association. The bill amends existing statutes related to the administration of volunteer firefighter plans affiliated with the FPPA. Specifically, the bill: directs the Department of Local Affairs to directly distribute to FPPA state moneys for affiliated volunteer firefighter pension plans; specifies the responsibilities of the volunteer firefighter pension plan governing body that is affiliated with the FPPA; specifies the responsibilities of the FPPA in connection with the affiliated volunteer firefighter pension plans; and specifies how the volunteer firefighter pension plan governing body may terminate its association with the FPPA.

Attachment D.pdfAttachment D.pdf

Mr. Lindahl discussed the delineation of responsibilities for the FPPA in regards to the assets of volunteer plans. He also discussed the provision that allows the Department of Local Affairs to directly make payments to the FPPA on behalf of a volunteer firefighter plan.


BILL:Bill 1
TIME: 02:34:10 PM
MOVED:Tochtrop
MOTION: Moved to refer Bill 1 to Legislative Council. The motion passed on a vote of 10-0.
SECONDED:Court
VOTE
Buck
Yes
Court
Yes
Dore
Yes
Duran
Absent
Hudak
Yes
King
Absent
Peniston
Yes
Rosenthal
Yes
Schafer
Yes
Scott
Yes
Tochtrop
Yes
Ulibarri
Absent
Wright
Yes
Morse
Absent
Labuda
Absent
YES: 10 NO: 0 EXC: 0 ABS: 5 FINAL ACTION: PASS

Senator Tochtrop and Representative Scott were assigned as the prime sponsors of the bill.

02:36 PM -- Bill 2

02:36 PM --
Mr. Lindahl discussed and summarized Bill 2 (Attachment E) concerning modifications to the administration of old hire police officers' and firefighters' pension plans. The bill amends existing statutes related to the administration of an employer's old hire pension plans. Specifically, the bill: clarifies the acceptable use of plan moneys when none of the plan members are active participants in the plan; repeals provisions regarding the transfer of money from the state General Fund; repeals provisions regarding the annual distribution of state moneys; modifies requirements for actuarial studies of old hire plans; specifies the FPPA's and the old hire pension plan board's responsibilities in connection to plans affiliated with the FPPA; clarifies that an employer's resolution to affiliate with a plan must be approved by the FPPA; and specifies that the amount of annual contributions to state assisted plans must be in amounts that are sufficient to achieve a specified authorization period.

Attachment E.pdfAttachment E.pdf

Mr. Lindahl discussed five old-hire plans that have not reached full funding with state assistance. Mr. Lindahl said that Colorado statue may be amended to require the five plans to make actuarial required contributions instead of level dollar funding, and specifically addressed the North Washington Fire Plan and the Pueblo Fire Plan as examples.

Representative Court asked about funding for North Washington Fire and Pueblo Fire. Mr. Lindahl said that the money comes from the general fund of the municipality or special districts.

Representative Dore asked about the different numbers allotted to the North Washington Fire Plan and the Pueblo Fire Plan. Mr. Lindahl said that the unfunded liability was increasing over time despite the fact that no new members were being added to the plan. He further explained that the rate increase is higher than the actuary study predicted in 1994.

02:48 PM --
Kevin Bommer, representing the Colorado Municipal League, discussed underfunded plans and old hire plans such as North Washington Fire and Pueblo Fire. He said that the bill is not ready to be adopted and needs more time to address all concerns. His organization would prefer the bill be amended prior to introduction.

Representative Court asked for suggestions on possible amendments to the bill. Mr. Bommer said that more discussion is needed before finalization of the legislation.

Mr. Lindahl discussed his work with North Washington Fire to address contribution requirements. He discussed the role of the FPPA in recommending changes to the implementation of contribution requirements.

BILL:Bill 2
TIME: 02:59:19 PM
MOVED:Court
MOTION: Moved to refer Bill 2 to Legislative Council. The motion passed on a vote of 7-3.
SECONDED:Rosenthal
VOTE
Buck
No
Court
Yes
Dore
No
Duran
Absent
Hudak
Yes
King
Absent
Peniston
Yes
Rosenthal
Yes
Schafer
Yes
Scott
No
Tochtrop
Yes
Ulibarri
Absent
Wright
Yes
Morse
Absent
Labuda
Absent
YES: 7 NO: 3 EXC: 0 ABS: 5 FINAL ACTION: PASS
Senator Tochtrop and Representative Rosenthal were assigned as the sponsors of the bill.


03:02 PM -- Memorandum to the Commission

03:02 PM --
Nicole Myers, Office of Legislative Legal Services, introduced a letter from the Office of Legislative Legal Services to Representative Foote (Attachment F). Ms. Myers discussed the letter regarding whether Colorado statute allows a retired member of a municipal fire department to serve on a volunteer firefighter pension plan board. She said that Representative Foote wanted this letter distributed to the commission because it addresses potential legislation.

Attachment F.pdfAttachment F.pdf

03:04 PM --
Mr. Lindahl discussed statutory clarification that would clearly allow a retired volunteer firefighter to serve on a municipal volunteer pension board. He stated that it is not specified whether the retiree had to be a paid member of a fire department.

Representative Buck asked for clarification regarding the requirements for a retiree to sit on a pension board. Ms. Myers said that Representative Foote would need to decide if it would be a requirement for the board to have a retiree or if it would be permissible for a retiree to serve on a board. Mr. Lindahl said the current requirements of a board member do not clarify these requirements.

03:09 PM --
Alex Schatz, Legislative Council Staff, discussed the procedure and funding needed for the Police Officers' and Firefighters' Pension Reform Commission to conduct a study of the volunteer firefighters' pension plans. He said that either a bill or legislative appropriation for a specific purpose would be necessary in the next legislative session to allocate funding for the study. Representative Court asked for clarification on the estimated cost for the study. Based on preliminary estimates from FPPA, Mr. Schatz stated an appropriation of at least $20,000 in warranted.

03:12 PM

The committee adjourned.