Yes. And that was, again, for consistency purposes because originally, the fund was to start on July 1, 2000; therefore the fund basis would be as of July 1, 2000. When we made the change to establish the fund to July 1, 1999, then that date had to be changed in the fund basis definition. That was an error that was not caught; we caught it last night. Madame Chair, I'd like to proceed through the various sections or paragraphs of the 141 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 bill itself.
So now we can put aside yesterday's bill and concentrate on today's.
Councilman, you should destroy -- by any method you have, you should destroy what you received yesterday.
Yesterday, okay. I'll put it on Councilwoman Krajewski's desk. (Laughter.)
Which will only cause a problem when Councilwoman Krajewski comes in. Okay, I understand. So I'm now reading from the sheet that is the "Proposed Amendment to Bill 990001," with a date of 1/27/99, which includes, from the earlier discussion, changes that were made overnight. And as Councilman Cohen said, they're all technical in nature with the exception of a date change for consistency purposes. Section 131, and then subsection 131.1, the lump-sum increases. There was -- the primary purpose of this section mirrors the previous bill 24 which allows for a $1,000 base payment and $100 for each year over 10 that the member is retired. 142 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 It calls for a first bonus payment on July 15, 1999 and a second bonus payment on July 15th of the year 2000. Those are consistent with the previous bill. There is a provision that makes two changes from the past bill. First, the beneficiaries and survivors are included as eligible to receive the two lump-sum bonus payments, again, for July '99 and July 2000. Second, there was great concern at one of the briefings or meetings that we had about whether or not beneficiaries or survivors had to meet the 60-year-old age test. My recollection of that meeting is that virtually none of the Councilmembers believed that the beneficiaries or survivors should have to meet the 60-year-old test given circumstances of people's lives and who's at what age and the theoretical possibility that the survivor certainly could be under 60 years of age. One of the handouts that was given with the proposed amendment is a full explanation -- or I hope a full explanation of the proposed amendment to eliminate the age requirements for 143 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 survivors and beneficiaries in order to be eligible for lump-sum bonuses in 1999 and 2000. That is on a separate sheet of paper which was given out with the proposed amendment. Does everyone have a copy of the separate sheet? Councilman?
Could I ask a question on that just a hypothetical question? A police officer who retired at age 45 dies at age 58. The beneficiary is not entitled to survivor's benefits until two more years pass?
'Cause I think that's only in police and fire that we have that earlier age.
Right. Councilman, if I can ask you a further question about your hypothetical.
The police officer retired at 58. That's the first part of your --
No, he retires at 45. 144 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
For your example, 10 when did the retired officer pass away? 11
Well, what difference does that make? It could be any year.
The way the bill 20 reads, Councilman, is that the person is or would be 60 years of age by July 1, 1999.
Say he'd be -- say it happens at a time when he'd be 58? Is there a 145 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 two-year break in the period of benefits?
I believe the answer to your question is if we moved it into this year, let's say that that police officer retired at 45, dies at the age of 58 this year.
The deceased member would not be 60 years of age by July 1, 1999 which, is the trigger date for qualification for the two lump-sum payments.
Exactly. That person, or their beneficiaries or survivors, would not qualify. If the officer retired at 45, died at 58 three years ago, that person, had they lived, would be 61, depending on when their birth date is by July 1, 1999, and that person or their beneficiaries or survivors would qualify.
As to the one who would become 58 on July 1, 1999, does that -- do the beneficiaries become entitled to survivor's benefits when two more years pass, or are they, as 146 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 far as these bills, just out of the picture?
They would not be eligible. Naturally, there may be other provisions in the Pension Code that deal with beneficiaries and survivors whenever a member passes away. But in terms of this particular provision, the qualification for lump-sum bonuses, the person either has to be 60 by that date or would have been 60 by that date if they had deceased at some earlier point in time.
And if a beneficiary is not entitled to the first year, would the beneficiary automatically then not be entitled to the second year? Is it the same?
You're right because the eligibility date is July 1, 1999.
All right. I just wanted to understand it. I'm not taking any 147 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 position with respect to it.
Now, your example, I will, at the risk of. . . Okay, we can have a separate discussion about that.
You will also notice from the sheet that there are at least four examples of different scenarios that could play out for either the member or their beneficiaries or survivors. Again, this particular provision has to do with removing the age requirement for beneficiaries and survivors. I would like to read those into the record. The first example is if the deceased member had been 60 years or more and retired for 10 years or more by July 1, 1999, the survivor or beneficiary would automatically receive the bonuses for '99 and 2000. And the second example, if the deceased member would have been 60 years old by July 1, '99 148 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 and had been retired for ten years or more, the survivor or beneficiary will receive the bonuses for 1999 and 2000. If a member had been retired for 6 years and was 60 years of age and then died and 7 there is a survivor or beneficiary who had been 8 collecting survivorship benefits for one year, the 9 survivor or beneficiary would receive a lump-sum 10 bonus of $1500, which is calculated as follows: 11 it's the $1,000 plus 5 years times 100. 12
We're taking the person's -- I'm sorry. Well, in the third example, you're taking into account the fact that the retired member had him or himself been receiving benefits for 14 years, then passed away, and their survivor or beneficiary had then received benefits for one year, we're giving the survivor or beneficiary the credit for 15 years.
And then the last example on the sheet, which kind of went to part of the discussion that we had: Number 4, if a 149 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 member had died five years ago and was or would be 60 years of age by July 1, 1999 and had been retired for five years, meaning that the survivor had been receiving benefits for five years, then the survivor would receive the bonus because of the member's five years of retirement, plus the survivor's five years of receiving benefits, thus meeting the ten-year retirement criteria, and the survivor or beneficiary is then eligible to receive lump-sum bonuses for 1999 and 2000.
And the words "member" means a member of the pension system?
Yes. It was the person who actually worked for the City.
Councilman Cohen, do you have any other questions on that issue?
Does anyone else have a question on that issue? Councilman O'Neill, your light is on. 150 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Did you want to ask a question on this issue? (Councilman O'Neill responds inaudibly off mike.)
No, on this one amendment. We're going to go amendment by amendment.
I request to the Chair -- I know that we're going through each of the amendments, and I have no problem doing that.
But I do have a problem. I have asked, and Councilman Cohen has joined me, but even if it were just one of us, if we had some time deadline like tomorrow that this had to be done by, I could see not taking more time with it. I think a whole lot of information has come out here today, and I'm assuming that people haven't just dug in their heels that they got to be with one side or the other. We have learned today, if we didn't already know it -- and I didn't -- that the Pension Fund is not effective whether it's 9 percent or 10 percent. Bingo, all the talk about protecting the Pension Fund is gone. 151 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 What we are talking about, though, is that someone pays -- and it's the General Fund that eventually pays. And that it's roughly $5 million given the last ten years if we do 6 instead of 10 in addition to what the costs are 7 that already are in here to the General Fund. 8 And, naturally, if we're 9-1/2 or any other number 9 you want to split out, but at 9-1/2, the cost would be $2.5 million a year. We also have heard the enormous savings or cost avoidance that pension obligation funds have and will benefit the City with that dwarf any numbers we're talking about here. And if there is some pressing reason when we have one bill that goes four months and somehow passes by the pension bonds, they get done first, that we have to do this now, particularly today with at least a week left. So I'm not sure if the Administration understands the full impact of this, and I'd rather be talking about a bill 22 that's in committee with them rather than talking about a bill that's scheduled for a second reading. I don't mind -- I have no problem with 152 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 any of these amendments except percent. And I think that there's a valuable amendment in here, particularly going to July 1, 1999. But I don't see the rush to judgment on the percent from 6 any timing standpoint -- not a timing standpoint. 7 We haven't heard the Pension Fund -- Pension Board 8 say that you got to have this by tomorrow or we 9 can't get it ready for July 1st or anything like 10 that. Just as a common courtesy, I don't understand -- we've had this bill ten days, two weeks today I guess it is, and I just don't understand why it is that we're talking about getting this out when our differences, I think, are rather small. And I would just ask the courtesy of the Chair to get these amendments done and hold the 10 and 9 percent. That's the only issue that's left, as far as I can see. And I would like to see some serious discussions with the Administration about the small size of our difference. We originally heard there was a large size, that it was enormous. I believe we've learned today that it's very small. 153 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 And I would hate to see this Council factioned out like this over an issue that is so small, over who wins and who loses or somebody voting for pensioners or against unions when our differences are minute -- it's minute, it's not just small, it's minute.
And I do believe that a commitment was made in December that hopefully by the early part of February, the middle of February, the bill would be passed. If I'm wrong, I'd like somebody to correct me on that. I think that commitment was made to the unions in December.
But if the unions are opposed to what we're doing, what's the difference about a commitment to the unions? If you're telling me we're going to do something against what you believe your interest is, why are you rushing to do that? I think when the commitment was made, it was the understanding that this was going to be something favorable. All I'm asking even is if you just boil it down to a week, I don't think we need to talk about this for months. But when we've narrowed 154 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 down the differences to this small a number, I think four or five days would be plenty of time to see if there's any movement that can be gotten between the two sides, and we could all agree on it. I don't think we're that far apart. We're not arguing over the majority of this bill; we're arguing over a very small part, but I think it's a very significant part.
Thank you. The Chair recognizes Councilwoman Blackwell.
Thank you, Madame President. I was present during discussion of a mid-February or February 14th date. And certainly that discussion was with regard to whether or not a recall was being requested and granted. And we did not go that route, so it seems to me that that question is then moot. I believe that it is worth us trying to come together as a body. We did hear -- we noted Councilman Nutter talked about some changes, but we are for the first time really having a public discussion here about what these proposed amendments are. I think it would be a more fair 155 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 to everyone here that we have an opportunity to review it, that we also try to get some answer to the question about our differences versus what the Administration thinks in terms of costs. And for those reasons -- the opportunity for fairness and review and the opportunity to get a response from the Administration, I, too, request that we not have a vote on this bill today, but that we, since we do have until next week, I agree with Councilman O'Neill, and that we continue our discussion with the amendments today, but that we defer so that all of us have the time to review and hopefully come up with a consensus of opinion on this bill.
I just think this discussion is premature. We obviously at least have until next Thursday morning, a week away -- in fact, more than a week away before any Council action can occur. To go as fast as we want to go, all we have to be ready to do is to have the first reading at the next Council session on February the 5th. We have from now on until that day -- as 156 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 a matter of fact, we even have more than that time because the February 5th meeting could be extended for -- you know, recessed for a few hours if we weren't settled. I think we're going to be settled long before that so I don't know why we're discussing it. I would like to hear the amendments, I would like to have also the opportunity to propose amendments, and at that time, we can all make a decision. And I think if any member -- I don't think it ought to go to a vote -- if any single member requests time at a time when time doesn't delay anything, this body has always honored such requests. There's no need today; we don't advance our cause by acting today or tomorrow, as long as we're ready to act by next week, by the February 5th date; that's the next date that something could be done. And I would be delighted, and I think everybody would be, if we were ready to pass this bill by February the 12th. We ought to be ready to do it because I'm sure by next Thursday, a week from tomorrow, we're going to be -- is today Thursday? The days are moving so fast. Today's 157 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 only Wednesday, right.
So we have until a week from tomorrow before the next Council meeting and we have to be ready at that time to put the bill on the first-reading calendar so that it will be ready for action by February 12th. So I think all interests can be accommodated. There's plenty of time for that.
I understand. Just a quick check of the calendar, though, Councilman, just a minor point. Our next session days are February 4th and February 11th.
Fine, correct my record. I thank the Councilman for correcting me on the calendar.
It may be the only one I get in today, Councilman. Okay.
Excuse me, one other question, Madame President. Also the reason for the mid-February date was to try to come up with a bill. However, obviously, there was discussion afoot because the 158 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 new bill came up the next day. So it's obvious we don't have that same kind of deadline because the bill was, in fact, introduced last Thursday. So that February 14th -- that deadline was in response to getting a new bill ready from Wednesday so that we would -- so that there was no 8 rush from Wednesday to Thursday. But, apparently, there was already some move afoot, so there is in my judgment, again, no 11 need to adhere to any date unless we feel that we're ready.
Thank you, Madame Chair. You will see in the proposed amendment that the entire Section 131.2, entitled "Pension Adjustment Fund" has been bracketed and stricken and replaced by a new section, 131.2, "Pension Adjustment Fund." The essential elements of this new section are that the Pension Adjustment Fund is established on July 1, 1999. The term "fund basis" is a part of the section. It is defined 159 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 later on in the bill. As a result of the creation of the Pension Adjustment Fund on July 1, 199, effective June 30, 2000, which is at the end of that fiscal year, the Board shall make a determination as to whether or not the fund basis has been maintained and whether there are excess earnings available to be credited to the Adjustment Fund pursuant to the provisions of subsection 131.3. There is additional language added. I'm sorry?.
In this section, we have here that the Pension Adjust Fund is established in July '99.
But then in the next sentence or two down, you talk about effective 2000.
Now, the request was that when it's established, it begins 160 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 functioning as opposed to in terms of a different effective date.
The Board looks at the return of the Pension Fund for that fiscal year. They don't make a determination of how the fund has performed until July 30, 2000. That's the meaning of that section. Effective July 30, 2000, the Board shall determine whether the fund basis has been maintained and whether there are excess earnings available to be credited to the Pension Adjustment Fund pursuant to the provisions of Subsection 131.3.
But I think that's the question, that why could not the fund start on July 1991, which means we didn't deal with the back year in terms of the review so that the fund could begin immediately?
Councilwoman Blackwell, I had never thought of that. But why can't the Pension Fund say when it's established July 1, 1999 immediately take the last year --
Exactly. 161 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
-- and make the determination as to the year that ended, you know, as to the year that just ended. They will have the data very shortly so that you can gain a year in the beginning of the operation of the fund. Is there any legal -- I would know of no legal reason why that could not be. Is there anybody here that knows of any legal reason? The actuary? Couldn't we establish -- I'm just talking could we; I'm not talking with whether we should or not. But is there anything that would be wrong legally as far as you know if the Pension Fund immediately started on the previous fiscal year instead of waiting for the future fiscal year? I think it's a very interesting question and I think it would --
Councilman, I can make a note of that. I think that the general concept has been that you start something at the beginning of the fiscal year, you evaluate how that thing has performed during the course of that fiscal year, you look back at it, and decide whether there are any credits to be put into the 162 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 fund based on that year's performance.
And this is another reason for the view that we would like to put this on the table and we would like response back before we have the opportunity to vote on it, because we would like this starting date and this effective date for --
Let me make sure that I understand the question. Are you essentially asking -- it sounds like you generally agree that you would want the fund to start on July 1, 1999.
But you want the valuation of the previous year's return, which would mean 6/30/1999, to be used as the valuation starting point.
Whatever that is, because you have to then deal with the previous year, but if we begin the fund, we want 163 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 to begin it immediately so we can get input so that the pensioners can get some payback as quick as possible.
I think the other -- I mean, again, just for consistency's sake or some level of mirroring, if you look at the previous bill, it read: "Beginning in fiscal year 2000 and continuing each year thereafter, a portion of the assets of the Pension Fund representing one half of the previous year's actual annual return on investments over the actuarial investment return assumption in effect for that year shall be designated for cost-of-living increases and accounted for as such." Now, it very well could have been my error but I believe that that section of the previous bill would have you evaluating that year's annual return -- that year being FY 2000.
I think that -- we're pulling the bill, but I do believe that it --
I have a copy here, Councilwoman, if you'd like. 164 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
But I do believe that we would like to consider that so as to begin this immediately, to begin input into the fund, that we consider it as we requested.
Madame Chair, I don't think we need to have further discussion on that.
At this time, we'd like to hear from the Administration people what their response is. Maybe there is some legal impediment or --
I said I would like to -- before I reach a conclusion, I would like to hear from the Administration and from anybody else as to why this would not be a reasonable way of proceeding. I don't know why we want a delay on any of this. I think we want to put it into effect as 165 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 quickly as possible. And if there is a legal or an accounting reason or some other reason that, you know, indicates to the contrary, I'd like to hear it.
Why shouldn't we? The new fund would be ready to operate quickly, and they will have the statistics shortly available to them for the previous fiscal year. They consider that as Year 1.
Now, part of the problem here, Councilman Nutter, is we're still in the learning process. We were unable at the beginning of this discussion to even realize there might be these kinds of questions. As we're learning about this, we're learning, you know, how to deal with it.
And that's the reason some questions are coming up now for maybe the first time, because we're only beginning to 166 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 understand this area. None of us know what's really going on yet, but we're beginning to learn step by step. And I think if we're serious and we want the retirees to think we're really considering their interests, we ought to say we've not only established a Pension Fund, but it's an operation. It's not going to sit around for a year until the reports for that year come in.
Yeah. I mean, I've taken note of that. You want to basically talk about the previous year credit.
And so that would be June 30, 1999. The additional language in this section 21 tries to get at the heart of what the Pension Adjustment Fund is being created for. And there's express language here. It maintains that the Pension Adjustment Fund shall not be segregated from the assets of the Pension Fund. That's 167 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 consistent, I believe, with every person who's ever testified about this. The purpose of the Pension Adjustment Fund is for the distribution of benefits as determined by the Board for retirees, beneficiaries, or survivors. The Board shall make timely, regular, and sufficient distributions from the Pension Adjustment Fund in order to maximize the benefits of retirees, beneficiaries, or survivors. This additional new provision tries to deal with an issue that was raised a couple days. Within six months of the establishment of the Pension Adjustment Fund, the Board shall develop various plans that the Board shall consider for preliminary approval based on actuarial reports on the anticipated credits that may be transferred to the Pension Adjustment Fund after the actuarial certification for the fiscal year ending June 30, 2000. So as to ensure that if there are any funds available in the Pension Adjustment Fund on or after July 1, 2000, a distribution may be made within six months and without delay in accordance 168 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 with the provisions of Section 131.4.
Excuse me. On that question, Councilman Nutter, we know we have the date to contend with that you are reviewing. But if there is the actual payout to the retirees, why do we have that six-month review in the middle? It's supposed to be an automatic payout.
I understand. Based on the original wording here -- Councilwoman?
Based on the original wording, we had the other discussion about why don't we look at the previous year. But based on this wording, the six months is important in that -- the concern is if the fund started on July 1, 1999 --
-- and you only value it on June 30, 2000, and if there are 169 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 credits transferred to the Pension Adjustment Fund, say, for arguments's sake, in July or August of the year 2000, the concern was that the Board would then have to make a determination of what was there, they'd have to take a vote, they'd have to decide what plan of distribution they wanted to utilize. And all of that may take some time, and there could cause a delay in that year for any distribution. The reason for this particular language is that within six months of the establishment of the Pension Adjustment Fund based on the July 1, 1999 date -- so you're talking basically sometime in December '99 or January 2000. This section is saying that the Board should have already tried to make some decisions about what they would do with different sums of money that they would anticipate receiving sometime in July or August of 2000. So, for instance, if the Board's actuary said in July or August of 2000, you might receive $30 million or $40 million or $50 million or $60 million, we want the Board to go and make preliminary plans and preliminary approvals on what they would do if they had certain dollars, so 170 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 that they then don't have to make that decision all over again or go through that process after July 1, 2000 -- which could cause some delay in making a distribution. If they have already done all of the prework and made their analyses, then when the true number comes in, after the actuary certifies the following June 30th, the Board would literally be in a position to virtually immediately make a decision, and you would be able to get checks out, if there were funds available in the Pension Adjustment Fund, sometime in the fall of 2000. So that's all that six-month time period is. It's saying that immediately after creation, the Board has to start making preliminary plans and approvals on what they would do if they had money the following year.
There are two 171 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 definitions in this section which, I guess, whether we wanted to or not, we've learned a great deal about. At least one of these terms, out of the discussion in the caucus room, there was a request that the adjusted market of assets valuation method be written down, to be distributed as well as be included as a definition within the bill. I believe the other day, by way of a copy of a letter from Mr. Kent to Mr. Herkness, there was a definition provided that explains this terminology, and that explanation has also been included as one of the definitions in the bill. The fund basis is essentially recognizing that there is a particular actuarial funding level that's established as of the date of the establishment of the fund, and that level then becomes the level by which you measure in the future whether or not credits will go into the Pension Adjustment Fund or not. That, then, goes into the next section, 131.3, "Credits to the Pension Adjustment Fund," which has been the subject of a fair amount of discussion today. It is presently established as 172 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 in letter (a), the first 1 percent of the earnings go to the Pension Fund itself. In small letter (b), the percentage between 1 and 6 percent over the actuarial return rate -- which is, based on those numbers, is essentially 10 to 15 percent. Fifty percent of the excess earnings would go to the Pension Fund; the other 50 percent would go to the Pension Fund. And then letter (c), all earnings in excess of the 6 percent over the 9 percent rate go to the Pension Fund itself. On , letter (d), this was an item of some discussion earlier. Councilman Cohen raised an issue about terminology that I had inserted for consistency purposes. As I said on the record earlier today, I do not believe that there is any material need to have this language here. It was more for explanatory purposes than anything else, and I am certainly open, Councilman Cohen or any other member, to having that language removed. That has to be with "(or such other generally accepted valuation methodology as may be approved and adopted from time to time by the Board.)" It was a mere recognition that the Board 173 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 does decide what valuation method they used. And if there ever were a change, then the same method should be used to value the pension adjusted fund. I do not know what potential problems may be caused by using two different valuation methods; although, again, I will point out that since these assets are not technically separated from the Pension Fund, I literally do not know how you would have two different valuation methods going on for assets that are all in one place. This language is not, at least in my view, significant enough to have any dispute about, and I would gladly remove it.
All that's needed is to say, put a period after the word "method" and cross out the rest. We don't have to go through a formal amendment 'cause there's nothing to amend as of the moment.
The sole question is 174 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 whether you're going to introduce an amendment which, in turn, would have to be amended.
Right. I mean, these are the amendments that at some point in time would be offered, and so I would make a specific statement about that or ask that that language be stricken from the overall body of amendments being offered.
So I've made a note to myself. I don't know if anyone else feels particularly strongly about it. As I said, it could certainly come out; it was merely for recognition purposes that the Board does make this decision. On this particular point, I'm more than cooperative.
Thank you. I agree with Councilman Cohen on that point.
At amendment time, 175 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 I'll certainly go right back through it, but for this discussion, there would just be a period after the phrase "valuation method" and everything that's underlined and within the parentheses -- "or such other generally accepted valuation methodology as may be approved and adopted from time to time by the Board." At the appropriate time, I will ask that that be stricken from the amendments as offered. The next section, letter (e), is the section that reads, "No credit shall be made to the Pension Adjustment Fund for any fiscal year in which the total assets of the retirement system, as determined by the Board's actuary used in the adjusted value of assets valuation method are less than the fund basis established as of July 1, 1999." Again, as we know, the establishment the date of the fund is the date by which we will use the measurement of making the credits. And if the fund is -- whatever its value is on that particular day, that would be the bar that would have to be maintained for credits to go into the 176 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Pension Adjustment Fund. If the Pension Fund itself is funded at less than the level that it was on July 1, 1999, then no credits would go into the Pension Adjustment Fund.
Could I ask you to give us a for instance? I don't understand how it ever would come into action because the fund, on July 1, 1999, is always going to be lower than the fund will be at any later date. 'Cause even in the worst years, the fund gains assets. It may be technically a loss with respect to expectations, but the asset value of the funds has got to be higher any date after July 1, 1999 than it is now -- unless there's a catastrophic series of losses, none of which have ever been experienced by this Pension Fund. I'm just trying to figure out what that refers to.
Yeah, I'm sure you want to talk to the actuary, but it again at least tries to anticipate in a worst-case scenario if there were --
You use the term 177 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 "catastrophic"; I might use the term "potentially disastrous market impact" or activity on our Pension Fund that, at some particular point in time, could drive its funded level down below the level that it was at on July 1, 1999. Or if there were benefits subsequently given that somehow drove up our unfunded liability level. It's something you have to anticipate.
It seems to me like you have a half a dozen belts and a half a dozen suspenders that you're wearing to make sure everything holds in place. 'Cause I just can't conceive of a scenario in which --
-- that paragraph would be activated, but there may be, and --
Sure. In 131.4, "Distributions From the Pension Adjustment Fund," one of the changes here -- and it came directly out of some of our many meetings. In this 178 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 scenario, every year within 60 days of the end of the fiscal year, the Board will have to consider whether to provide an enhanced benefit distribution -- or, as we've more generally come to know them, just as a distribution from the Pension Adjustment Fund. In the original of the bill, it read that no later than the third anniversary of the creation of the Pension Adjustment Fund -- which certainly means that they could do something in less than three years, but there were many concerns that they would not do anything until three years. In response to that, the new provision requires the Board every year, within 60 days of the end of the fiscal year, to consider whether to make a distribution or not. There are some terms that have added to that section: lump-sum bonus payment, monthly pension payment increases, lump-sum ad hoc cost-of-living adjustments, continuous cost-of-living adjustments -- which all have become defined termed further down in the bill. (Councilman Cohen asks a question 179 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 inaudibly off-mike.)
Councilman, we'll hear more testimony about this. You've raised a very significant question, and you've also caught an error. In Section (e), it should read: "No 8 credit shall be made to the Pension Adjustment Fund for any fiscal year in which the total fund basis of the retirement system, as determined by the Board's actuary, using the adjusted value of assets valuation method, are less than the fund basis established on July 1, 1999." That was a word error -- or a term error.
I took out -- see the part, Councilman, the third line from the bottom of that Section (e) that starts to read, "Assets of the retirement system. . . "
The word "assets" 180 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 is incorrect.
That's the only change: you substitute the two words "fund basis" to replace the word "assets."
Right. Councilwoman, you see all the language that's been 181 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 stricken and that has brackets around it? Right after that is the phrase "assets of the retirement system." The word "assets" was incorrectly placed there. The correct term is "fund basis," which is a defined term.
And that will need to be amended subsequently. But you see the definitions there of ad hoc, cost-of-living adjustment, continuous cost-of-living adjustment, and lump-sum bonus payments? Those, again, came out of a letter from Ken Kent to Joe Herkness. We thought, just so that everybody's on the same page in terms of how these terms were used, we would also insert them in the bill. Letter (b). This is a new reporting requirement for the Board. "The Board shall report in writing to City Council, no later than 30 days after the end of the fiscal year, any distributions that have been made or are proposed to be made from the current balance of the Pension Adjustment Fund. If no distributions were made in the previous fiscal year, the Board will explain 182 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 in writing the reasons therefore. Subject to the availability of funds in the Pension Adjustment Fund, if no distributions have been made by no 5 later than 18 months after the creation of the Pension Adjustment Fund or any 18-month anniversary thereafter, and if the Board has not voted on and improved an enhanced benefit distribution plan at that time, the Board shall notify City Council of such inaction in writing and explain why no distributions have been made and provide a full financial report on the current balance of the Pension Adjustment Fund. The Council expressly reserves the right to provide by ordinance for enhanced benefit distributions from the Pension Adjustment Fund, if the Board fails to provide for any distributions during any period of 18 consecutive months. The Council shall follow the same procedures as are required of the Board pursuant to this section before any distributions may be authorized." This section comes as a result of a concern that the Board may not make distributions for some reason, for no reason, for malicious reason, or any other reason. And it is at least 183 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 my attempt or response to try to force the Board to adhere to the earlier statements that were made about what the purpose of Pension Adjustment Fund is and that they should make regular and timely distributions. Generally, I think we want the Board to take their Board actions seriously, but we are putting them on notice, by way of the legislation, that if there are no distributions and there is money in the Pension Adjustment Fund, one, we want to know about it; and, two, if an extended period of time passes, we are putting them on notice that we will take action of our own, and we reserve the right to do so. There is a further in (c), and this was inserted as an attempt to respond to the argument made by Councilman O'Neill and some of the union leaders which has to do with the valuation method and what goes into the Pension Adjustment Fund. "If any period of two consecutive fiscal years the Pension Adjustment Fund does not receive any credits, even though the Pension Fund's rate of return exceeds 10 percent using an adjusted market value of assets valuation 184 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 methodology, the Board shall make a report in writing within 30 days of the end of the two-year period to City Council to explain these circumstances. City Council reserves the right to make any amendments to the authorizations, directives, or provisions of this ordinance or to take any other action in order to correct this circumstance, as the Council deems proper." Again, the primary purpose of this section is to try to address if there is a worst-case scenario as presented and there was tremendous discussion about it, that City Council puts itself in a position and expressly reserves right to take actions necessary to correct the scenario as primarily laid out by Councilman O'Neill but also as discussed by other Councilmembers.
May I recommend for the sake of clarity that we've talked about 30 days, 6 months, 2 years, year. 25 Couldn't we have a yearly review. I mean, to keep 185 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 up with the 18 months, then the years, and then the 30 days, then the months, and back and forth, it's going to be very simple -- a lot clearer if the -- if the amendments deal with the yearly review.
Councilwoman, there is a provision for the yearly review.
I mean in terms of all this these times, could we revisit this and see if it won't be a lot clearer if like instead of months, we deal with a yearly review 13 so that we have a consistent period. 14
You will have a 15 yearly review, Councilwoman. You also get 16 information at the 18-month mark, you also get 17 information at a 2-year mark, but you will always 18 get a yearly review. That's covered by the first sentence on , letter (b). "The Board shall report in writing to City Council no later than 30 days after the end of the fiscal year any distributions that have been made or are proposed to be made from the current balance of the Pension Adjustment Fund. If no distributions were made in the 186 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 previous year, the Board will explain in writing the reasons therefore." So there is an automatic yearly reporting requirement by the Board of Pensions.
But it seems to me that it would be a lot clearer and simpler if we deal with that yearly period as opposed to 6 months here, 18 months here and then a year other places, and then 2 years other places. Then we can get a consistent understanding and a consistent policy that we have this yearly review every year, and it will make things a lot clearer for all of us.
And we could find out and have all of our reporting and all of that done in this yearly fashion, and then it would make -- I think it would make this bill a lot clearer, and everybody won't feel like we have to deal with it every second.
And it will add a lot of clarity to the issue. 187 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Councilwoman, I appreciate your point. I think the effort here was to have more reporting than less and not have extended periods of time pass by. And in some cases, an extended period of time could be another year before Council is informed as to what the bill is Board is doing or, in the alternative, what the Board is not doing. You have a yearly requirement. You also have the Board essentially having to make another report months later if they've not made 13 any distributions in an 18-month consecutive 14 period. I mean, the burden is on the Board of 15 Pensions and Retirement to make all of these 16 reports to us. There's no particular burden on 17 the Council other than reading the document coming 18 over from the Board. Again, it was just an effort to make sure that we get as much information as possible, that the Board is staying on top of what they're supposed to stay on top of, and that City Council is always in a position to take any action that may be necessary with good and timely information. That was the only purpose of adding 188 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 additional reporting requirements -- primarily because of scenarios that were expressed as a concern to me, some of which came out of the Sunday afternoon conversation and others from other meetings that we've had as a body.
Well, we'll consider what you say, we'll consider and review the whole issue and we will let you know.
Madame Chair, may I -- would you indulge me as a person certified to teach English and who did it one summer many years ago.
In Section (b), the end of the sentence on Line 4, I suggest that the word "therefore" has an (e) when it ought not to.
There are two therefore's, and this is the other one. It should read T-H-E-R-E-F-O-R, without the e at the end. 189 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Oh, okay. I'm sorry. I didn't mean to offend your English sensibilities. I think, apparently, spell-check considers that a word.