2012-05-07_Supplemental Agenda Packet--Dossier de l'ordre du jour supplémentaire r� '
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City of Saint John
Common Council Meeting
Monday,May 7th,2012
Location: Common Council Chamber
Supplemental to Agenda
12.6 City Manager: Pension Reform Update
City of Saint John
Seance du conseil communal
Le Lundi 7 mai,2012
Lieu : Salle du conseil communal
Ordre du jour supplementaire
12.6 Directeur General: Reforme de retraite
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May 7, 2012 � `
rhe�isy�r sai��x�O�n
His Worship Mayor Ivan Court anc!
Members of Common Council
Your Worshi{� and Counciflors:
SUBJECT: Pension Reform Update
Staff continue to work with the plan actuaries and the Office of the
Superintendent of Pensions and have, as of Friday, submitted updated
stochastic projections based on a more aggressive reform proposal
(additionai benefit reductions, lower assumed rate of retum). It will of
necessity take several days for the Superintendent's office to complete their
required review and we have not as yet received a response.
The development of various reform options is a rigarous and time
consuming exercise. There is no guarantee that the Superintendent will be
able fio respond to the City regarding our latest submission while still
providing sufFicient time for the City to meet the timefines of the spring
legislative session. The timelines to participate in the spring sitting are very
tight as can be seen by the attached schedule. There is also a possibility
that some aspect of the proposaf will not meet the sustainability
requirements of the Superintendent and in turn require more refinement and
additional time.
In order to proceed on a timely basis, it would be necessary for Common
Council to approve the attached revisions and to authorize staff to proceed
wit� the necessary ad�ertising.
lZeport to Common Council Page 2
May 7,2012
Re: Pension Reform Update
The benefits changes are as set out in the attached documenf. Tf�e primary
difference from the Scenario 7 adopted by Common Councif in November of
2011 are Frozen Service based on Final Average Earnings { 3 years) at the
date of reform (June 30, 2012) and the retention of the rule of 85 for new
hires. The discount rate would also be reduced to 5.25%.
RECOMMENDATION:
It is recommended that:
1. Common Council approve the benefit changes as set out in the
attached summary; and further that
2. Staff be directed to initiate advertising as required by the Private Bills
Committee �rocess_
Respectfufly sub - e ,
Grego J. eomans, CGA, MBA
Com is oner of FinaRCe a�d Administrati�e Services
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atrick Woods, CGA
City Manager
City Solicitor's O�ce �
Bureau de 1'Avocat Municipal
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}� �E: City of Sair•t�oEn ?ension Act
Re: 2010-2011 Propose4 Amendments
�ile No.: 2083(C)
FR�N: ,iohn IVugen`
CATr.: May 4,2p12
RE: '*'i�eline`or Legislature's consideri�g proposed amend-x�ents
to#�e :;ity o±'Saint John�ession Act
May 7,2012 Common Council appro�al of proposed changes.
May 8,2012 (1) Notice of Appiication respecting proposed changes
delivered to the Royal Gazette(provide electronic copy to
Nancy Moar who will deal with the Royal Gazette Office).
(2) Notice of Application delivered to four Provincial
newspapezs for pu�*lication in three succes5it�e weeks
(Nancy will also l�ok a�}er that) and it involves the daily
newspapers published in 5aint John, Fredericton antl
Moncton as well as L'Acadie Nouvelle.
May l 6,2012 Notice of Application published in Royal Gazette.
May 34,2012 The conciusion of the two week publication period required
in the Gazette.
J�zne 1,2012 Bill introduced into the House and first zeading given (this
assumes that there is still a sponsor for the Bill}.
Fage � �
lune 7,2012 Standing Committee holds Hearing and if the Committee ss
prepared to report favourably to the House, daes so on this
�ate.
June 8, 2012 Sa;ond and third reading given by the Leg�slature.
John L. Nugent
City Solicitur
J LN/bm
CfTY OF SAINT-JOHN PENSION PLAN
SUMMARY OF FINANCIAL IMPLICATIONS OF ASSUMPTfONS CHANGES,
BENEFITS CHANGES AND RELIEF MEASURES AS AT DECEMBER 31, 2011
S7 b)at 5.25% with
S7 b) at 5.75% S7 b) at 5.25% a Revised
Investment Polic
Actuarial assumptions
-Valuation Discount Rate 5.75% 5_25% 5.25%
- Mortality table no loading no loading no loading
-Valuation of assets Market Vaiue Market Value Market Value
- Provision for fees (6%) None None None
Investment Policy
- Cash 5.Q0% 5_00°!0 5.00°/a
- �ong Term Bond 30 OQ°/e � 3Q OQ% 45 O(3%
- Canadian Equity 2p.00% 20_00% �5.50%
- US Equity 10.00°l0 10.00% 7.75%
- International �quity 10.00% 1Q.00% 7.75%
- Hedge Funds 12.50% 12.50% 9.50%
- Real Estate 12_50% 12.50°/o 9.50%
Expected Long-Term Return 8 fC!% 6 10°/v ! 5 fi4%
Benefit changes
- Current members and retirees
- Past service (prior ta Jan 1 2012)
- Frozen FAE 3 3 3
- Post retirement indexation suspended sus�ended suspended
- Unreduced retirement age no change no change no change
- Salary definitio� no change no change no change
- Future accruals
- FAE 5 S 5
- Post retirement indexation no indexation no indexation no indexation
- Unreduced retirement age no change no change no change
- Employee contribution 9% 9% 9%
- Salary definition no o�ertime no overtime na avertime
Relief ineasures
-consolidation of 2010 deficits yes yes yes
- amortization period 15 15 15
CITY OF SAINT-JOHN PENSION PLAN
SUMMARY OF FINANCIAL IMPLICATIONS OF ASSUMPTIONS CHANGES,
BENEFITS CHANGES AND RELIEF MEASURES AS AT DECEMBER 31, 2011
S7 b) afi 5.25%with
S7 b) at 5.75°/a S7 b) at 5.25% a Revised
Investment Polic
Estimated Financial Position as at December 31, 201'f
Assets 368,556 368,556 368,556
Liabilities: 469,916 499,364 499,364
(Deficit) -101,360 -130,808 -�30,808
Funding ratio 7$,4"! 73 8% 73 8%
CSC Employer{$000) 4,604 5,768 �,768
CSC Employer(°/o payroll) 7.9% 9.9% 9.9%
Deficit payment ($000) 8,101 10,339 10,339
Deficit payment(% of payroll) 13.9% 17.7% 17.7%
Total Ernpfoyer($000} I 12,iu� I 16,107 �h 107
Total Employer(% payroll) 21 8% � 27 6% � ?16%
2012 Estimated Payroll 58,284 58,284 58,284
Minimum Employer Contribution 27.0°I� 27.0% 27.Q%
Probability of full funding after 25 years 94.3°la 93.4% 95.p°/a
Probability of 1 Q5% after 25 years 91.8°l0 92.1% 92.7%
Minimum employer contribution to meet
Superintendant Requirements
Express in % of payrofl:
50th percentiie - 905% funded in 12 years 21.0% 23.0% 30.0%
75th percentile- 105% funded in 20 years 21.0% 21.0% 25.0%
95th percentile - 105%funded in 29 years 27.0% 27.0% 2fi.0°/o
97.5th percentile- 105%funded in 29 years 30.0% 31.0% 29.0%
Express in $M (2012):
SOth percentile - 105% funded in 12 years 92,240 13,405 17,485
75th percentile - 105% funded in 2d years 12,240 12,240 14,57�
95th percentile- 905% funded in 29 years 15,737 15,737 15,154
97.5th percentile- 105% funded in 29 years 17,485 18,068 16,902
Number of years to meet the target with a
Minimum contribution of 27%
50th percentile - 105%funded 10 11 14�
75th percentile- 105% funded '16 17 18
95th percentile- 105% funded zg 2g Zg
97.5th percentile- 105% funded
Probability of being funded below
70% 0.1% 0.1% 0_0%
80% 1.1% 0.9% 0_4%
90% 2.4% 2.8% 1.4%
100% 5.7% 6.6% 5.0%
CITY OF SAINT-JOHN PENSION PLAN
SUMMARY QF FINANCIAL IMPLICATiONS OF ASSUMPTIONS CHANGES,
B�NEFITS CHANGES AND RELIEF MEASURES AS AT DECEMBER 31, 2Q11
S7 b) at 5.25% with
S7 b)at 5.75% S7 b} at 5.25% a Revised
lnvestment Polic
125% 13.7% 16.0% 19.3%
150% 28.9% 32.3% 43.5%
Average employer contributions (25 years�
5% 27.a% 27_0% 27.0%
25% 27.0% 27.0% 27.0%
50% 27.�% Z7.1% 27.1°�v
75% 27.1% 27.8% 27.8%
95% 29.0% 3�.6% 29.9°/a
Mean 27.3% 27.7% 27.6%
Standard devia#ion 1.Q% 1.5% 1.1%
CITY OF SAIN7-JOHN PEN510N PLAN
SUMMARY OF FINANCIAL IMPLICATIONS OF ASSUMPTIONS CHANGES,
BENEFITS CHANGES AND RELIEF MEASURES AS AT DECEMBER 31, 2011
S7 b) at 5.25%with
S7 b) at 5.75% 57 b) at 5.25% a Revised
Investment Polic
Average employer contributions
First 5 years
5% 27.0% 27.1°/a 27.1%
25% 27.0% 27.1% 27.1°/a
50% 27_0% 27_4% 27.5%
75% 27.d% 28.9% 28.8%
95% 28.8% 32.4% 31.5%
First 10 years
5% 27.0% 27.1% 27.�%
25% 27.0% 27.1% 27.1%
50% 27.Q% 27.3% 27.3%
75% 27.1% 2$.7% 28.8%
95% 30.1% 33.4% 32.5%
First 95 years
5% 27.0% 27.0% 27.0%
25% 27_0% 27.0% 27.0%
50% 27.d% 27.2% 27.2%
75% 27.1% 28.3% 28.3%
9`�% 30.1% 32.8% 31.$%