HomeMy WebLinkAboutA001 - Council Action Form dated May 6, 1986 ITEM # —
DATE: May 6, 1986
CITY OF AMES, IOWA
COUNCIL ACTION FORM
SUBJECT: Ordinance change to increase the amount of payment to Utility Retirement
System retirees after five (5) years of retirement.
BACKGROUND:
Based on the July 1, 1985 actuarial study, the cost to maintain the present
system was calculated to be 13.33% of covered payroll . This is a reduction of
2.79% from the 16.12% in effect since the July 1, 1983 actuarial study. The cost
requirements decreased due to the favorable experience of the fund during the
period July 1, 1983 to July 1, 1985. Investment earnings in excess of the assumed
62% and the inclusion of accrued interest as an asset accounted for a reduction of
2.17%. Other factors effecting either a decrease or increase were changes in the
membership active age, terminations, deaths and slary increases.
The Board requested a special study to determine the cost of a benefit
increase to retirees after 5 years or 10 years of retirement for current and future
retirees since there had not been a retiree increase since 1974. If the formula
was changed from 1.8% to 2% times years of service for current retirees, the cost
would be .55% after 5 years of retirement and .34% after 10 years of retirement.
The cost for future retirees would be 1 .72% after 5 years and .98% after 10 years.
Other options studied were for a $1 .00 per month per year of service for current
retirees after 5 years at a cost of .23% and for future retirees at a cost of .25%.
The Board proposal is that all retirees, after 5 years of service, be granted
an increase based on using 2.0% times years rather than 1.8%, or 11 .11% increase.
The cost would be 2.27% in addition to the actuarial 13.33% for a total of 15.60%,
which is a net reduction of .52% of covered payroll . The City share of this would
be 8.89%, based on the current ratio of City and employee contributions (Budget -
9.19%) .
ALTERNATIVES:
1. Adopt the ordinance as recommended to grant an increase to Utility Retirement
retirees after 5 years of service to be based on calculation of years of service
times 2.0% of average earnings. The cost of this increase to be shared by the City
and employee and funded from the present contribution with an overall .52%
reduction of covered payroll .
2. Not grant an increase to retirees and reduce the City and employees
contributions by a total of 2.79%.
MANAGER'S RECOMMENDED ACTION:
It is recommended by the City Manager that the Council adopt Alternative #1
and adopt the ordinance to grant an increase to Utility Retirement retirees after 5
years of retirement.
COUNCIL ACTION: