Police Officers' and Firefighters' Pension Reform Commission (08/19/2014)

Final
STAFF SUMMARY OF MEETING

POLICE OFFICERS' AND FIREFIGHTERS' PENSION REFORM COMMISSION

Date:	08/19/2014	ATTENDANCE

Time:	01:32 PM to 03:40 PM	Balmer	X
		Buck	X
Place:	HCR 0107	Court	*
		Dore	A
This Meeting was called to order by		Ginal	X
	Senator Tochtrop	Jones	X
		King	E
This Report was prepared by		Melton	X
	Alex Schatz	Peniston	X
		Rosenthal	E
		Scott	*
		Ulibarri	X
		Wright	X
		Labuda	A
		Tochtrop	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
Opening Comments Fire and Police Pension Association (FPPA) Update Consideration of Proposed Legislation Public Testimony Committee Discussion		Comments from PRC Chair, Senator Tochtrop Witness Testimony and/or Committee Discussion Only Bills Approved No public comments were offered The PRC recognized Senator Tochtrop's service

01:33 PM -- Opening Comments

Senator Tochtrop opened the Pension Reform Commission meeting. At the beginning of the meeting, members of the commission were presented with materials for consideration, including the 2013 Comprehensive Annual Financial Report of the Fire and Police Pension Association (FPPA), an update from FPPA, a packet of five bills, and a table of these bills prepared by Legislative Council Staff (Attachments A through H).

Attachment H.pdf

01:34 PM -- Fire and Police Pension Association (FPPA) Update

Dan Slack, Executive Director of the Fire and Police Pension Association, presented a general overview of activities of the FPPA. The presentation is based on the update presented to the Police Officers' and Firefighters' Pension Reform Commission. Mr. Slack discussed the composition of the FPPA board, status of FPPA-administered plans, and investment strategies and explained that over 99 percent of old hire plan members are currently in retirement. Among current firefighters and police officers, FPPA administers retirement plans for over 75 percent of career police and fire departments in the state, as well as a portion of the state's volunteer fire departments. Almost all of the state's police and fire departments participate in the FPPA Statewide Death and Disability Plan.

01:49 PM

Mr. Slack continued his overview of FPPA benefits. He discussed the FPPA board's approach to studying and implementing cost-of-living increases. Following the financial crisis of 2008, the FPPA board determined to seek legislation to allow members, by election, to increase contributions, enhancing the FPPA's ability to support cost-of-living and related benefit increases. That legislation passed, and an FPPA task force recommended an election by members. A current election process (June and August 2014) is expected to result in an increased contribution rate, with cost-of-living increases of at least 2 percent annually to result.

01:59 PM

Mr. Slack answered questions from the commission concerning plan options for members (defined benefit versus money purchase plans), as well as transfer of benefits from out-of-state and other non-FPPA plans.

02:01 PM

Scott Simon, Chief Investment Officer of the FPPA, presented an update regarding the FPPA investment program. The FPPA's asset allocation and liabilities are reviewed with the FPPA board on an annual basis. Approximately 113 asset managers work with FPPA to manage the long-term asset allocation determined in the FPPA's annual review. Following the 2008 financial crisis, the FPPA board implemented strategies to reduce overall risk in the FPPA's investment portfolio. The performance of FPPA investments relative to targets and "peers" (other public pension organizations) has been within the organization's goals.

02:14 PM

Mr. Simon answered questions from the commission regarding legal constraints to FPPA investments. For example, the FPPA cannot currently make investments with entities involved in Sudan.

02:17 PM -- Consideration of Proposed Legislation

Kevin Lindahl, General Counsel for the FPPA, presented bills recommended to the commission by the FPPA. The first four bills on the agenda (Bill 1 through Bill 4) represent internally identified issues to improve FPPA administration and benefits available in FPPA statewide plans. Bill 5 affects volunteer firefighter plans statewide, including FPPA plans and other plans not administered by the FPPA.

02:20 PM

Mr. Lindahl explained Bill 1, which concerns the transfer of member funds and service credit from another pension plan to a FPPA plan (Attachment C). He stated that the current process to achieve a single pension for a member in this situation is more complicated than it needs to be.

02:23 PM

Senator Balmer asked about fiscal impact of the bills. Alex Schatz, Legislative Council Staff, stated that past FPPA-related bills typically carried a statutory public entity fiscal impact, but that no formal analysis is done for interim committee meetings and no specific analysis had been performed on the current bills.

02:24 PM

With regard to Bill 1, Mr. Lindahl discussed the purchase of service credit and obstacles to transferring service credit between volunteer plans and other FPPA-administered plans. Federal tax law creates a distinction in the purchase of service credit that is not contemplated under current Colorado law; Bill 1 addresses this issue. A police officer who cannot currently purchase service credit when transferring to a FPPA plan due to either residual benefits or lack of adequate funding in the pension plan of a previous employer will have options to purchase service credit under Bill 1.

02:36 PM

Mr. Lindahl explained that Bill 2 concerns the FPPA board's authority to accept late payments, and to account for and fund the administrative costs of plans (Attachment D). He explained that recently adopted accounting standards, such as GASB 67, prompt the need for this legislation. In response to a comment regarding potential fiscal impacts, Mr. Lindahl stated that most FPPA bills would not generate state government costs, while some legislation may impact local governments. For example, Bill 2 may require local governments to conform to accounting standards, but many of these standards are otherwise applicable to local governments. Audit costs are typically in the range of $100 per employer affiliated with the FPPA, which is currently considered de minimus by the FPPA board. The commission discussed language concerning social security payments in Section 3 of the bill.

02:47 PM

Mr. Lindahl explained that Bill 3 concerns a trend in the last 5 to 10 years, where merging fire departments bring in new members, typically older than new members to an FPPA-administered plan, to the statewide defined benefit plan (Attachment E). This causes an actuarial impact, and Mr. Lindahl explained that Bill 3 is intended to create a process for these members similar to reentry.

02:52 PM

Mr. Lindahl explained that Bill 4 concerns nontraditional hires to police and fire departments, such as a fire chief who has already earned a pension in a prior job (Attachment F). Bill 4 provides flexibility to local governing boards to offer benefits to such hires. To comply with federal law, the bill requires local departments to implement a FICA replacement plan. The bill identifies specific pension plans that are consistent with the FPPA Statewide Death and Disability Plan. Bill 4 also provides direction to social security employers (e.g., police departments that historically evolved from a marshal, as opposed to a police chief), making certain FPPA benefits to these employers if they participate in the Social Security Supplemental Retirement Plan.

03:04 PM

Mr. Lindahl explained that Bill 5 concerns various issues that affect volunteer firefighter pension plans (Attachment G). For example, many departments have small volunteer firefighter pension plans with relatively heavy administrative costs; some of these plans are administered by the FPPA (approximately 175 of 225 plans) and some are not. The bill provides a basis to develop alternatives to current plans. Mr. Lindahl stated that the bill is likely to require state funding for the study in the range of $50,000.


BILL:	Consideration of Proposed Legislation
TIME:	03:16:39 PM
MOVED:	Ulibarri
MOTION:	Refer Bill 1 (LLS 15-0067) to the Legislative Council Committee. The motion passed on a vote of 11-0, with 3 members excused and 1 absent.
SECONDED:
		VOTE
	Balmer	Yes
	Buck	Yes
	Court	Yes
	Dore	Absent
	Ginal	Yes
	Jones	Yes
	King	Excused
	Melton	Yes
	Peniston	Yes
	Rosenthal	Excused
	Scott	Yes
	Ulibarri	Yes
	Wright	Yes
	Labuda	Excused
	Tochtrop	Yes
YES: 11 NO: 0 EXC: 3 ABS: 1 FINAL ACTION: PASS

03:19 PM

Bill 1 will start in the Senate, with Senator Jones as a prime sponsor; Representative Melton will be the prime sponsor in the House. Senators Balmer and Ulibarri, and Representatives Court and Ginal were added as cosponsors.


BILL:	Consideration of Proposed Legislation
TIME:	03:20:26 PM
MOVED:	Ulibarri
MOTION:	Refer Bill 2 (LLS 15-0069) to the Legislative Council Committee. The motion passed on a vote of 10-1, with 3 members excused and 1 absent.
SECONDED:
		VOTE
	Balmer	Yes
	Buck	No
	Court	Yes
	Dore	Absent
	Ginal	Yes
	Jones	Yes
	King	Excused
	Melton	Yes
	Peniston	Yes
	Rosenthal	Excused
	Scott	Yes
	Ulibarri	Yes
	Wright	Yes
	Labuda	Excused
	Tochtrop	Yes
YES: 10 NO: 1 EXC: 3 ABS: 1 FINAL ACTION: PASS

03:20 PM

Bill 2 will start in the Senate, with Senator Ulibarri as a prime sponsor; Representative Court will be the prime sponsor in the House. Senators Balmer and Jones, and Representatives Ginal and Melton were added as cosponsors.


BILL:	Consideration of Proposed Legislation
TIME:	03:22:56 PM
MOVED:	Balmer
MOTION:	Refer Bill 3 (LLS 15-0068) to the Legislative Council Committee. The motion passed on a vote of 11-0, with 3 members excused and 1 absent.
SECONDED:
		VOTE
	Balmer	Yes
	Buck	Yes
	Court	Yes
	Dore	Absent
	Ginal	Yes
	Jones	Yes
	King	Excused
	Melton	Yes
	Peniston	Yes
	Rosenthal	Excused
	Scott	Yes
	Ulibarri	Yes
	Wright	Yes
	Labuda	Excused
	Tochtrop	Yes
YES: 11 NO: 0 EXC: 3 ABS: 1 FINAL ACTION: PASS

03:22 PM

Bill 3 will start in the Senate, with Senator Balmer as a prime sponsor; Representative Ginal will be the prime sponsor in the House. Senator Ulibarri and Representatives Court and Melton were added as cosponsors.


BILL:	Consideration of Proposed Legislation
TIME:	03:24:34 PM
MOVED:	Melton
MOTION:	Refer Bill 4 (LLS 15-0070) to the Legislative Council Committee. The motion passed on a vote of 11-0, with 3 members excused and 1 absent.
SECONDED:
		VOTE
	Balmer	Yes
	Buck	Yes
	Court	Yes
	Dore	Absent
	Ginal	Yes
	Jones	Yes
	King	Excused
	Melton	Yes
	Peniston	Yes
	Rosenthal	Excused
	Scott	Yes
	Ulibarri	Yes
	Wright	Yes
	Labuda	Excused
	Tochtrop	Yes
YES: 11 NO: 0 EXC: 3 ABS: 1 FINAL ACTION: PASS

03:24 PM

Bill 4 will start in the Senate, with Senator Balmer as a prime sponsor; Representative Ginal will be the prime sponsor in the House. Representatives Court and Melton were added as cosponsors.

03:26 PM

Nicole Myers, Office of Legislative Legal Services, discussed concerns of the Office of State Auditor related to Bill 5. She explained that Page 6, line 10 of the draft bill identifies a timeframe for the completion of the study that may be difficult to achieve. Ms. Myers suggested an amendment to strike line 10 and the first two words of line 11 of Page 6 of draft Bill 5, and replace with "As soon as practicable after the receipt of the report required in subsection (2) of this section, [but not less than forty-five days after...]".


BILL:	Consideration of Proposed Legislation
TIME:	03:26:49 PM
MOVED:	Court
MOTION:	Amend Bill 5 (LLS 15-0081) to strike line 10 and the first two words of line 11 and replace with "As soon as practicable after the receipt of the report required in subsection (2) of this section". The motion passed without objection.
SECONDED:
		VOTE
	Balmer
	Buck
	Court
	Dore
	Ginal
	Jones
	King
	Melton
	Peniston
	Rosenthal
	Scott
	Ulibarri
	Wright
	Labuda
	Tochtrop
YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: Pass Without Objection


BILL:	Consideration of Proposed Legislation
TIME:	03:35:00 PM
MOVED:	Ulibarri
MOTION:	Refer Bill 5 (LLS 15-0081) to the Legislative Council Committee, as amended. The motion passed on a vote of 8-3, with 3 members excused and 1 absent.
SECONDED:
		VOTE
	Balmer	No
	Buck	No
	Court	Yes
	Dore	Absent
	Ginal	Yes
	Jones	Yes
	King	Excused
	Melton	Yes
	Peniston	Yes
	Rosenthal	Excused
	Scott	No
	Ulibarri	Yes
	Wright	Yes
	Labuda	Excused
	Tochtrop	Yes
YES: 8 NO: 3 EXC: 3 ABS: 1 FINAL ACTION: PASS

03:35 PM

Bill 5 will start in the Senate, with Senator Ulibarri as a prime sponsor; Representative Melton will be the prime sponsor in the House. Representatives Court and Ginal were added as cosponsors.

03:38 PM -- Public Testimony

No testimony was offered.

03:38 PM -- Committee Discussion

Senator Tochtrop offered closing comments, thanking the FPPA and their membership for service to the state. Members of the commission recognized Senator Tochtrop for her service in the General Assembly.

03:40 PM

The committee adjourned.