Date: 09/19/2012
Final
Update From The FPPA
POLICE OFFICERS' AND FIREFIGHTERS' PENSION REFORM COMMISSION
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09:12 AM
The commission chair, Senator Morse, called the meeting to order and made opening comments to the commission members. The commission members received the annual update from the Colorado Fire and Police Pension Association (FPPA) (Attachment A) and the 2011 Annual Report published by FPPA (Attachment B).
09:14 AM -- Update From The FPPA
Mr. Dan Slack, Chief Executive Officer, FPPA, began by discussing the current members of the FPPA Board of Trustees and presented a history of the FPPA's statewide pension fund. He explained that the role of the board is to be the primary governing fiduciary of pension funds for the FPPA and noted that the board has worked to achieve a fully-funded status for the FPPA pension plans which serve all members of the FPPA.
Mr. Slack discussed the investment returns of the retirement plans maintained by the FPPA, specifically the Statewide Defined Benefit (SWDB) Plan and the Statewide Death and Disability Plan. Mr. Slack discussed the recent Actuarial Experience Study conducted in 2011 and some of the recommendations resulting from the study. One recommendation was the reduction of the normal investment return assumption from 8.0 percent to 7.5 percent. Another recommendation included the revision of the post-retirement mortality tables to reflect increased longevity. Mr. Slack noted that longer life-spans have a significant impact on the costs and liabilities for younger active members who are enrolled in FPPA plans. He also discussed the need to reassess the cost of living adjustment (COLA) for retired police officers and fire fighters.
09:29 AM
Mr. Slack continued by saying that the FPPA board created a task force of the membership to study the status of member contributions and to recommend to the board whether it should hold an election on this issue. The task force began meeting in 2011 and continued to meet through August 2012. Mr. Slack noted that the task force recommended that the board authorize an election on the issue of increasing member contributions at the rate of one-half percent of pay per year for eight years so that the increases could fund a COLA increase of 2.0 percent to keep up with normal inflation. He closed by noting that a 65 percent majority vote by members would be required to implement the recommendations of the task force.
Mr. Slack continued by discussing the impact of the economic downturn that occurred to the FPPA Members' Benefit Investment Fund in 2008, which resulted in a 29.4 percent decline on investment performance. Mr. Slack explained that a question will be submitted to members during the 2013 election to authorize a member-contribution increase to improve funding levels of the pension fund. He also discussed the need for fund stability to protect against the risk of economic downturns.
Mr. Slack discussed the history of the old hire plans and the changes to the state contribution under recent legislation. He noted that the purpose of the initial reform in 1978 was to ensure that local police and fire pension plans were actuarially sound. Mr. Slack noted that the state currently provides assistance to eight old-hire plans under the management of the FPPA. In response to the recent recession, the General Assembly adopted Senate Bill 11-221, which reduced state expenditures made to the FPPA by $20 million in FY 2011-12 and $15.3 million in FY 2012-13. The old hire plans will continue to receive state contributions through FY 2018-19. Total estimated payments for state contributions for the old hire plans are $186.0 million. Mr. Slack noted that the FPPA estimates that a "lump sum" payoff would require a state-funded payment of $142.0 million if full payment is made by April 2013.
09:44 AM
Mr. Slack and Mr. Kevin Lindahl, General Counsel, FPPA, responded to questions from commission members concerning hiring freezes by local police and fire departments and changes to the Statewide Death and Disability Plan for injured police officers and firefighters who returned to duty. Mr Lindahl discussed death and disability claims and a temporary disability program which has decreased the number of long-term disability claims.
Mr. Slack explained that local police officers and firefighters have the option of joining any plans administered by the FPPA and talked about the upcoming 2013 election for the FPPA members.