08-27-1973 Regular MeetingPENSION BOARD MEETING
A meeting of the Miami Shores Village Pension Board was held Monday
August 27, 1973 at Uncle John's Pancake House, Biscayne Blvd, at
8:00 AM.
The following were present:
Absent:
Mayor James Condit
John McIntyre
Michael Franco
John Fletcher
James Glaid
Chief Wayne Thurman
Dean Miller
Minutes of the previous July 26th meeting were not available.
A discussion was carried on regarding the intent of the old or
prior council in giving Steve Tong either 19 or 20 years credit
in figuring his vested pension amount. It was suggested that we
get an opinion from both the Actuary and the Attorney as to what
would be proper without causing future problems or setting precedent,
and what the options and alternatives are in this case.
A discussion was held on the Cost of Living increased benefits as
previously suggested and outlined in the Wyatt Company's August 6,
1973 letter. More information and figures were desired in the
following areas, with the Cost of Living increased based on Price
Index when:
1. The adjustment up or down not to exceed 1%
2. The adjustment up or down not to exceed 1
3. The adjustment up or down not to exceed 2%
4. One time 5% catch up adjustment
5. $10.00 per month minimum adjustment on item #4 above.
Meeting adjourned at 9:10 AM.
Ap oved ,�t
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Respectfully submitted
CHICAGO
CLEVELAND
DALLAS
DETROIT
FORT WORTH
HONOLULU
HOUSTON
LOS ANGELES
THE Waft COMPANY
ACTUARIES AND EMPLOYEE BENEFIT CONSULTANTS
9595 NORTH KENDALL DRIVE
MIAMI, FLORIDA 33156
(305) 274-8080
August 6, 1973
Mr. J. A. Glaid
Director of Finance
Miami Shores Village
10050 N.E. Second Avenue
Miami Shores, Florida 33131.
MIAMI
NEW YORK
PHILADELP¢IIA
SAN FRANCISCO
WASHINGTON
OTTAWA
TORONTO
Re: Possible Linking of Fixed Retirement Benefits to a Cost -of -Living Index
Dear Mr. Glaid:
The upward movement in prices over the last quarter century has led
to a decline in the purchasing power of fixed retirement benefits. We
have suggested below three alternatives that would help maintain the pur-
chasing power of retirement benefits for Miami Shores' retired employees.
Each alternative calls for some change in the amount of benefit which a
retired employee would receive after his retirement date.
1. Cost -of -Living Pension
• The more direct and responsive method of adjusting retirement benefits
is to vary the amount of income to offset variations in the cost -of -living.
This can be accomplished by stipulating that plan benefits will be modified
in accordance with a prescribed procedure to reflect variations in a speci-
fied index of prices. Three indexes of prices have been suggested with
which to link cost -of -living increases to; they are:
a. Consumer Price Index
b. Wholesale Price Index
c. Gross National Product Implicity Price Deflator
The index that has been most widely used in the past for this purpose
has been the Consumer Price Index. Each year at Miami Shores' valuation
date, the benefit being paid to each retiree would be increased or decreased
by the percentage change of the Consumer Price Index during the past year.
The Village could place a limit on the extent of change in benefits on any
one adjustment date. Four cost -of -living alternatives are listed below with
our estimated costs to the Village:
a. The plan could be amended to provide for adjusting retiree's bene-
fits yearly on Miami Shores' valuation date by the percentage change
Mr. J. A. Glaid August 6, 1973
Miami Shores Village Page Two
in the Consumer Price Index for that year, but such adjustment
shall not exceed 1% per year. If this change were adopted ef-
fective January 1, 1973, the increase in cost of the plan would
be from 5% to 15% of the total Village contribution.
b. A second alternative would be to adjust the benefits yearly by
the percent change in the Consumer Price Index for that year,
but such adjustment shall not exceed 2% per year. If this change
were adopted effective January 1, 1973, the increase in cost of
the plan would be from 15% to 25% of the total Village contribu-
tion.
c. A third alternative would be to adjust the benefits payable to
retirees yearly by the percent change in the Consumer Price Index
for the year, but such adjustment shall not exceed 3% per year.
This change would have the effect of increasing the cost of the
plan from 25% to 35% of the total Village contribution.
d. A fourth alternative would be to adjust benefits for retirees
yearly by the percent change in the Consumer Price Index for
that year, but not impose a maximum change. In light of the
large increases to the Consumer Price Index over the past few
years, this alternative would result in a 35% to 1.5% increase
in the current year's cost.
2. Variable Annuities
The so-called variable annuity plan is a less direct method of adjusting
retirement benefits to the price level changes. As each retiree attains re-
tirement, the single -sum value of his benefits are placed in a fund which
would be invested and reinvested in equities. The benefits that the retirees
would then receive under this program could be directly related to the per-
formance of the fund based on the current market value of the portfolio.
The theory underlying this plan is that over an extended period of time,
fluctuations in the market value of a representative group of common stocks
and other equity investments will tend to conform rather faithfully to changes
in the consumer price level. Experience, however, has shown that the market
value of a common stock portfolio can deviate sharply and for considerable
periods of time from the trends of prices, and not necessarily in the same
directions. During periods of the past few years, just when the Consumer
Price Index was rising sharply, the market value of a great many stocks was
falling. The participants, not Miami Shores, would be the ones who would bear
the risk inherent in the variable annuity plan. For these reasons, it is
suggested that if a variable annuity plan is considered, it be one where, at
most, only one-half of the value of the retiree's benefit be placed in a
common stock portfolio; the other half would remain in Miami Shores' Trust
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Mr. Dennis I. Clum, Vice President
First State Bank of Miami
8017 N. E. 2nd Avenue
Miami, Florida 33138
Dear Mr. Clum:
JOHN W McINTYRE
LA ,E MANAGER
July 26th
1 9 7 3
Enclosed is the Wyatt Company's certification on
the retirement of Clyde R. Blue starting August 1, 1973. This
was authorized at the Pension Board meeting of July 26, 1973.
His current address is as listed below:
JWM:v
Enc.
Clyde R. Blue
1001 N. W. 106th Street
Miami, Florida 33150
Thank you for your cooperation.
Very truly yours,
).\
, Village Manager
for: Pension Board