Citation
A Model pension plan ordinance for Florida municipalities

Material Information

Title:
A Model pension plan ordinance for Florida municipalities
Creator:
Monath, Donald R., 1930-
Place of Publication:
Gainesville, Fla.
Publisher:
University of Florida
Publication Date:
Copyright Date:
1968
Language:
English
Physical Description:
ix, 205 leaves : ; 28 cm.

Subjects

Subjects / Keywords:
Annuities ( jstor )
Cities ( jstor )
City ordinances ( jstor )
Municipalities ( jstor )
Pension plans ( jstor )
Retirement ( jstor )
Retirement age ( jstor )
Retirement benefits ( jstor )
Retirement income ( jstor )
Retirement plans ( jstor )
Dissertations, Academic -- Finance, Insurance, and Real Estate -- UF
Finance, Insurance, and Real Estate thesis Ph. D
Municipal officials and employees -- Pensions -- Florida ( lcsh )
Genre:
bibliography ( marcgt )
federal government publication ( marcgt )
non-fiction ( marcgt )

Notes

Thesis:
Thesis - University of Florida.
Bibliography:
Bibliography: leaves 204-205.
Additional Physical Form:
Also Available on World Wide Web
General Note:
Manuscript copy.
General Note:
Vita.

Record Information

Source Institution:
University of Florida
Holding Location:
University of Florida
Rights Management:
This item is a work of the U.S. federal government and not protected by copyright pursuant to 17 U.S.C. §105.
Resource Identifier:
021877891 ( AlephBibNum )
13369275 ( OCLC )
ACX9065 ( NOTIS )
22109162 ( ALEPH )

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A MODEL PENSION PLAN ORDINANCE
FOR FLORIDA MUNICIPALITIES













By

DONALD R. MONTH













A DISSERTATION PRESENTED TO THE GRADUATE COUNCIL OF
THE UNIVERSITY OF FLORIDA
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE OF DOCTOR OF PHILOSOPHY











UNIVERSITY OF FLORIDA
1968



























































UNIVERSITY OF FLORIDA


3 1262 08552 3719












ACKNOWLEDGMENTS


I appreciate the encouragement of my committee chairman,

William M. Howard. Without his efforts this dissertation would

not have been possible. I also want to thank Irving J. Goffman,

Arnold C. Matthews, and Ralph H. Blodgett for the help and un-

derstanding that they have shown me in my work towards the doc-

torate. My sincere appreciation to John B. McFerrin and Clement

H. Donovan who helped direct me towards this goal and to the

other members of the faculty at Matherly Hall.












' PREFACE


The purpose of this dissertation is to present a model

pension plan ordinance for Florida municipalities and to ex-

plain the purpose of the various provisions of the suggested

ordinance.

At this writing, many Florida retirement plans are in

financial difficulties because of too liberal pension bene-

fits and inadequate financing. On April 21, 1965, this writer

received a letter from Ralph Turlington, Chairman of the Pen-

sions and Retirements Committee of the Florida House of Rep-

resentatives. Mr. Turlington wrote, "I am satisfied that

municipalities throughout the state are in serious difficul-

ties with their plans."

A real need exists in Florida for a model guide for pub-

lic employee retirement system administrators. This need be-

comes increasingly important with the growth of retirement

programs in the State as the benefits and financial security

of these pension plans are of concern to increasing numbers

of Florida municipal employees. On January 29, 1966, the

State Chamber of Commerce reported the combined financial

assets of retirement programs for state and local government

employees in Florida. By mid-1965 total assets held by these

programs reached $549 million--an increase of 93 percent over

1960. Payments and earnings for the various retirement accounts


iii






during the fiscal year 1964-65 totalled $107 million, while

benefits-and withdrawals to public employees during the year

amounted to $37 million.

Many of the problems faced by municipalities require

tailor-made solutions, but there are many facets of municipal

pension plans which are subject to model guidelines. While

the Model Ordinance illustrates a complete pension ordinance,

it is not intended as an absolute guide for pension planning.

The model should be carefully appraised, because many decisions

enter into the design of a pension program and every pension

plan must be constructed in the light of its own particular

situation. Hence, the explanations of the individual provi-

sions of the Model Ordinance will help to meet the specific

needs of a municipality and its employees.

One purpose of this dissertation is to present a pension

plan that could be adopted by a city. It is also the hope of

this writer to enlighten all public officials who are respon-

sible for the formulation of the provisions of a new plan or

the revision of an existing plan. With these readers in mind,

the dissertation has avoided the highly technical actuarial

aspects of pensions in favor of the elementary approach. The

general approach is to analyze--not to advocate; therefore,

attention is focused on the factors which should be considered,

not on absolute answers.

It is anticipated that this dissertation will merit the

support of responsible officials and'bring about a better un-

derstanding of sound pension planning by providing all public






officials-with a model guide to accomplish the desired re-

sults without placing undue burdens upon the financial resources

of taxpayers.












TABLE OF CONTENTS


Page

ACKNOWLEDGMENTS 1i

.PREFACE i1i

LIST OF TABLES ix


CHAPTER I

SOCIAL AND INSTITUTIONAL FORCES THAT INFLUENCE PENSION
PLANS 1 2

Introduction Social Forces Institutional
Forces Florida Statutes Local Law Cities -
Old Age, Survivor's, and Disability Insurance -
Federal Tax Policy Summary.


CHAPTER II

A MODEL PENSION PLAN ORDINANCE FOR FLORIDA MUNICI-
PALITIES 32

Index Definitions Establishment of the System -
Membership and Service Contributions and Funding -
Retirement and Retirement Benefits Leaves of
Absence and Military Service Administration of
the Plan Future Changes in the Operation of the
Plan Protection Against Fraud and Deceit Amend-
ment Separability and Construction Repeal of
Conflicting Ordinances Effective Date.


CHAPTER III

DEFINITIONS, EXPLANATION OF RELATED PROVISIONS AND
ESTABLISHMENT OF THE PENSION SYSTEM 57

Definitions Establishment of the Pension System









CHAPTER IV

MEMBERSHIP AND SERVICE

Membership Service.


CHAPTER V

CONTRIBUTIONS AND FUNDING

Funding Cost of the Plan Contributions.


CHAPTER VI

RETIREMENT AND RETIREMENT BENEFITS

Retirement Benefits Retirement Termination
Benefits.


CHAPTER VII

CHOICE OF FUNDING MEDIUM

Uninsured, Self-Administered Pension Trust -
Insured Pension Program Conclusion.


CHAPTER VIII

LEGAL PROVISIONS

Exemption of Funds from Assignment and Tax -
Protection Against Fraud Interpretation of
the Plan Supervision Administration -
Future Changes.


CHAPTER IX

SUMMARY AND CONCLUSIONS

Summary Conclusions.

APPENDIX "A"


Actuarial Data for Chapter
January 1, 1966.


175 Funds at


vii


Page


101


109


121


136


153


160


171







Page


APPENDIX "B"

Actuarial Data for Chapter 185 Funds at 188
January 1, 1966.

BIBLIOGRAPHY 204


viii











LIST OF TABLES


Tables Page

1 Contribution Rate Schedule 19
(Percent of Covered Earnings)

2 Illustrative Retirement Benefits 21
Chapters 175 and 185, Florida Statutes

-3 Illustrative Retirement Benefits 22
Model Pension Plan

4 Aggregate Termination Rates 107
(Raw Data) Florida Municipal Police
Pension Funds

5 Proportion of Normal Retirement Income 129
Available in Event of Early Retirement
at Various Ages

6 Actuarial Data for Chapter 175 Funds at 172
January 1, 1966

7 Actuarial Data for Chapter 185 Funds at 189
January 1, 1966

8 Progress Report to the 1967 Legislature on 203
the Municipal Police Officers' Retirement
Trust Fund


























We had better look to these problems and provide for
the aged as promptly, rationally, and as compassionately
as we can. Today, "they" are the aged; tomorrow, we shall
be they.1













CHAPTER I


SOCIAL AND INSTITUTIONAL FORCES THAT
INFLUENCE PENSION PLANS



The forces that move economic man are various and
often difficult to predict, but no motive in man's
history has been more constant or more obvious than
his quest for security. Pension trusts are but the
most recent attack human society has made upon its
age-old problem.2


Introduction

Much evidence exists to support the need for and advan-

tages of a pension program for municipalities. Of the various

methods of dealing with the problems of aged employees, the

pension plan is the best. This chapter will first of all

discuss the various alternatives for dealing with the aged,

and second, discuss the various economic advantages of a

pension plan. Last, the chapter will discuss the provisions

of the various institutional regulations, Florida Statutes

175 and 185, OASDI (Social Security) and the Federal Income

Tax Policy, which influence the establishment of a comprehen-

sive pension plan for municipalities in Florida. Since this

dissertation is directed toward Florida municipalities ex-

clusively, except where otherwise stated, the term employer

will be used synonymously with municipalities or a municipal

employer.






Social Forces

Any employer (municipal or private) must face the problem

of aged employees at some time. When this time arrives, the

employer can elect only one of the following alternatives re-

garding these employees:

1. He can discharge the employees--with or without a

gold watch and a farewell dinner.

2. He can keep them employed by leaving them on the

payroll.

3. He can supply them with a retirement income.

We may assume that acceptance of the first alternative, dis-

charge, would result in a group of needy aged whose existence

would be a denial of the philosophy that the elderly should

live with dignity and in a decent manner. Few would deny that

for those who have worked all their adult lives, an ample stan-

dard of living should be not a gift of charity, but a right.

Of course, employers desire to do "the right thing" for their

employees, and for humanitarian reasons discharging an em-

ployee is not acceptable.

Another more practical reason for eliminating the first

alternative is the unique nature of a municipality. The com-

munity is not a thing apart from its individual groups--it

is a summation of all the members. The municipality consists

not only of its aged employees, but also of their sons, daugh-

ters, nieces, nephews, grandchildren and friends who have a

meaningful stake in the financial well-being of the elderly

and the power through their votes to influence public officials




4

may be strong enough to eliminate the first alternative. The

indigent aged will live either through welfare receipts.or

support from their children. It is difficult enough to bring

up a family properly today without also supporting one's

parents. How long would these children vote for the local

elective officials while their income was overly stretched

in an attempt to support two families--one of whom gave many

years working for the municipality?

An abundance of economic reasons for eliminating this

first choice also exists. Any fancied savings by stinting

on funds to finance an adequate pension system will be spent

for public assistance programs--financed by tax revenues.

The deficiencies of the needy aged will have to be met one

way or the other, and because of the mild Florida weather,

these former employees are very likely to remain in the same

community where they have spent their working lives. No,

these men cannot be discharged and forgotten! Likely they

will reappear on the welfare roles, receiving the money that

was "saved" by not initiating a pension program.

The second alternative--to keep them employed by leaving

them on the payroll--can be very expensive. To retain em-

ployees beyond the time when their efficiency has begun to

decline would constitute a drag on the smooth operation of

the entire municipal organization. An employee whose effec-

tiveness has definitely deteriorated constitutes, at best, a

part-time worker at full-time pay. While some employees may

retain their abilities and effectiveness through the years






and others may continue to be effective in administrative

positions, these are a minority, and special provisions can

be made for them. The overwhelming majority of employees--

most of whom could not have filled administrative posts in

their younger years cannot be expected to do so later. An

employee retained in a supervisory position when he ceases

to pull his share of the load will harm efficient operations

and stultify the incentive of younger employees to do their

best work.

Again, there is nothing saved with this method, as re-

tirement costs are merely hidden in the current payroll.

There is little doubt that the third alternative of

supplying aged employees with a retirement income is the only

economic and efficient way to take care of the superannuated

worker.

A pension plan is a necessity for most employees. High

tax rates and living costs eat up most of their earnings.

Only through a retirement pension can he be assured that after

a lifetime of productive work he will not be forced into a

retirement period of poverty. Since most people have been

unable to save the funds necessary for the retirement needs

of themselves and their dependents, it is the pension plan

that will insure funds for retirement. Because our economy

would benefit from ample purchasing power in the hands and

pockets of the elderly, it would be profitable to the community

to insure that this is made possible. The advantages which

can accrue to an employer with a well-planned retirement





program run a lengthy gamut. It would be naive to think

that municipalities install a pension program for humanitar-

ian reasons alone.

As previously stated, a planned retirement program per-

mits employees, who are disabled or aged to leave employment

at no further cost to the municipality. Little doubt exists

among experts in this area that a planned retirement program

is the most.efficient way to take care of superannuated em-

ployees. Undoubtedly, a pension enables employers to replace

elderly employees with greater ease, as there is much less

resentment from employees and from the public. "Employers

today often look upon pensions as an orderly means of financ-

ing the removal of'the inefficient and permitting their re-

placement by those with greater capabilities."3 The employer's

reputation in the community will be enhanced by having def-

inite provisions for the retirement of aged employees with

long periods of service. Discussion with municipal pension

officials have convinced this writer that most employers sin-

cerely desire that their employees have adequate retirement

incomes. Many employees, who realize that their job perform-

ance is inadequate, would be favorably inclined to retire if

they were assured of an adequate income after retirement.

This is the basic purpose of pension plans--to provide in-

come to employees who have worked for a stated period and who

retire either from choice or necessity. As the older workers

are retired, they are systematically replaced by more vigorous

and more efficient workers. Thus, by keeping avenues of ad-

vancement open, the efficiency and morale of all employees






are improved. Younger employees would perform their best

work knowing that all avenues of advancement were continually

kept open. The case of Benjamin F. Fairless illustrates

this principle. When Benjamin F.*Fairless reached the age

of 65 and announced his retirement as chairman of the board

of the United States Steel Corporation, he clearly stated

the function of a pension plan in clearing promotional ave-

nues for younger men. Mr. Fairless said:

0. .1 am firmly convinced that there must always be
.room at the top of our management team for young men
with young ideas and a fresh, new outlook upon the
problems that our company must face if it is to keep
pace with its growing responsibilities toward a young
and growing nation.

Unless this chance for advancement is constantly
kept alive, at every level of management, it would
only be a matter of time until the most able of our
younger executives would seek opportunities elsewhere.

Thus our entire organization would soon become
stagnant--set in its ways, and dangerously unprogres-
sive in its views. And that, of course must never
never happen at U.S. Steel.4

This prospect of advancement would also encourage talented

and ambitious personnel to seek their opportunities within

the municipality. Undoubtedly, a pension plan not only will

hold employees, but also will help to attract others. An

adequate pension plan has still another distinct advantage.

Through the pension plan, a municipality induces long periods

of service. This gives the municipality a hold on progressively

more experienced, hence, more valuable employees. The reduc-

tion of employee turnover is important in minimizing expected

costs.






A study by the United States Department of Labor clearly

showed that private companies with pension plans had a more

stable work force than those without pension plans. The annual

separation rate per 100 employees-was only 34 for companies

with pension plans, compared to 62 for companies without pen-

sion plans.5 While these figures are based on data from pri-

vate firms and are eleven years old, this writer's unsub-

stantiated opinion is that they are proportionately typical

for present day municipal employers. As of this writing, no

comprehensive studies have been made in this area of munici-

pal pension plans in Florida; however, the State of Florida

is planning studies within these areas, and probably around

1969 will have sufficient data for pertinent conclusions.

Today-most pension experts recognize that management derives

definite advantages from a.pension program. Among the many

benefits a municipality derives from a pension program is

the advantage that it will help attract and hold competent

employees. The development and retention of an experienced

work-force must of itself decrease municipal costs while

promoting loyalty to the community and its administrators.

The municipality, and particularly the smaller govern-

mental units, cannot absorb the inefficiency resulting from

a rapid turnover of personnel. As the economy has moved up-

ward toward a situation in which skilled labor is at a premium

and efficiency is in great demand, employers feel that they

must provide inducements to keep their trained employees on

the job. The pension plan with its promise of reward for




9

long service is an excellent device to insure the continued

services of valued employees.6 In the competitive labor

market, the more an employer can offer prospective employees,

the more successful he will be in hiring proper help. A

pension plan will help the municipality to compete In the

labor market with other governmental units and with private

corporations. As one expert stated: "Probably one of the

most important arguments advanced for a planned pension pro-

gram is that it keeps the organization virile and able to

meet active competition."?

While economic reasons are most often the reason for

establishing pension plans, some municipalities may be ful-

filling a genuine desire to contribute to the welfare and

retirement security of their employees. Therefore, philan-

thropy may be another motivation for many pension plans.

However, philanthropic motivation is difficult to evaluate.

Likewise, systematic retirement, lower turnover and the re-

sulting improvement of employee morale are difficult to eval-

uate precisely. There are just too many secondary and ter-

tiary benefits to arrive at any reliable financial answers.

But when we add these benefits to the political stability

accruing from the improved community good will, it seems al-

most absurd for any Florida municipality not to have a proper

retirement program for its employees.


Institutional Forces

Many laws influence the establishment of a municipal

pension plan in Florida. Of these, probably the ones that







would influence the most are Chapters 175 and 185 of the

Florida Statutes which concern pension plans for firemen

and policemen. The federal plan for "Old Age, Survivor's,

and Disability Insurance" commonly known as "Social Security"

would also influence the pension plan. Last, the Federal

Tax Policy strongly encourages the pension plan.


Florida Statutes

The members of the Legislature of the State of Florida

showed an interest in pension plans for firemen with the pas-

sage of Chapter 175 of the Florida Statutes in 1939. Legis-

lation for a police officers' pension plan was passed in 1953

with the enactment of Chapter 185 of the Florida Statutes.

There are no statutory pension plans for city employees who

are not firemen or police officers. These statutes have had

a substantial impetus in the implication of retirement plans

for policemen and firemen. Some city charters enable the in-

dividual municipality to establish a pension program for its

employees without approval of the Florida Legislature. A

municipality without such charter authority must have its

local legislative delegation put through a special legisla-

tive act to establish the pension plan. In brief, if there

is no charter authority, a city may have the Florida Legisla-

ture pass an Act establishing a pension plan in that city.

The Statutes are set up in the following manner. Chap-

ter 175 provides that municipal pension plans for firemen may

receive one-half of the premium tax revenues on certain fire

and windstorm insurance risks within the municipality's







geographic-area. Chapter 185 provides one-half of the premium

tax revenues for police officers; this tax source, however,

derives only from automobile, fidelity bonding, burglary,

and plate glass insurance. Chapters 175 and 185 do not re-

quire any municipality to institute a pension plan. These

Statutes merely provide that if the municipality desires to

have a retirement program, and if this program meets certain

minimum requirements, the State will then turn over the stated

tax receipts to the individual pension funds. Those cities

that follow the e:,act provisions of the statutes are called

"175 Cities" or "185 Cities." The individually enacted pen-

sion plans are frequently called "local law" plans. Both

local law plans provide varying benefits to their covered

employees. "In general, local law plans provide benefits

that are somewhat more liberal than those written into Chap-

ters 175 and 185, though this need not be the case.,8 Under

provision of these statutes, the Municipal Firemen's Pension

Trust Fund was established in 1939 and amended at various

intervals by the State Legislature. The most recent amend-

ment was enacted in 1963. Of the 101 participating cities

in 1964, forty-seven follow Chapter 175 and fifty-four operate

their own plans. Generally, the larger cities have local law

plans and the smaller cities follow Chapter 175.9 Likewise,

the Municipal Police Officers' Retirement Trust Fund was es-

tablished in 1953 and amended in 1959. In 1964, of the

ninety-one participating cities, forty-five follow Chapter

185 and forty-six operate their own plans. Generally, the






larger cities have their own plan and the smaller cities

follow Chapter 185.10

Any incorporated city or town that owns and uses approved

and serviceable fire fighting equipment and apparatus valued

at more than $10,000 may have a Municipal Firemen's Pension

Trust Fund while an incorporated city or town may have a Po-

*lice Officers' Retirement Trust Fund if it owns 8500 of serv-

iceable police equipment. Once a municipality establishes a

Firemen's Pension Trust Fund, participation in the plan is

mandatory for all firemen (full-time and volunteer), however,

only full-time members of the police department are covered

under a Municipal Police Officers' Retirement Trust Fund and

it is not compulsory that all police officers be members of

the Fund as they may elect out of the Fund by a non-reversible

written request anytime during their first year of service.

As a result of these policies, the following regulations

determine benefits. A fireman or police officer is eligible

to receive the normal retirement benefits as outlined in the

Statutes when he has reached the age of sixty and has contri-

buted to the Fund for ten years. These employees contribute

5 percent of their salary to the Fund. If Social Security

coverage is provided, the contribution may be reduced to 3

percent of the employee's annual compensation for which he

receives reduced benefits. For those who contributed 5 per-

cent of their salary, the benefit formula is 1.67 percent of

the average cash salary of the ten best contributing years of

the last fifteen years prior to retirement. For those who







only contributed 3 percent of their salary, the benefit formula

is reduced to 1 percent. This percentage is multiplied by

the total number of years of service to arrive at the employee's

retirement pension. The pension is payable for the retiree's

life with a minimum guarantee of ten years should he die prior

to receiving 120 monthly checks. Optional forms of retirement

income at an equivalent actuarial value are available if the

police officer or fireman is in good health, or has prese-

lected an optional form of income at least three year's be-

fore retirement. There are varied benefit provisions to cover

early retirement at age fifty after ten years of contributing

service, and to cover disability retirement. Police officers

are not required to make contributions beyond the normal re-

tirement date and benefits do not increase for service per-

formed beyond this age.

The responsibility for the proper administration of the

Statutory Fund is vested in the local municipal Board of

Trustees. This board collects all receipts, invests the

Fund's assets, and makes all payments for legitimate claims.

The State of Florida conducts quinquennial actuarial valua-

tions for all "175, 185 Cities" and distributes premium tax

monies due these participating cities.


Local Law Cities

Municipalities with plans operating under their own

statutes administer their Funds in accordance with the provi-

sions of the local ordinance establishing the plans. In order






to receive their share of premium tax money, they must have

the following minimum standards under Section 175.351 of

Chapter 175, and Section 185.35 of Chapter 185:

A) Normal retirement age, if any, must be no more than

age 65.

B) Period of eligible service must not be more than

35 years.

C) The monthly benefit formula must be equal or greater

than one-twelfth of 1 percent of the fireman's or police offi-

cer's total earnings during his entire period of credited

service.

D) The monthly pension payment may have a maximum limi-

tation, but this cannot be lower than $.100.

E) Actuarial valuations must be conducted at least

quinquennially. These are-submitted and reviewed by the State

Treasurer's Office.

The.only requirement for a municipality to begin sharing

Sthe premium tax money with the State of Florida is the passage

of a local ordinance to establish the retirement fund which

will abide by State law. Usually, the same ordinance levies

the appropriate premium tax. Once a Fund is established,

notice should immediately be sent to the State Treasurer.

Only when this notification is received by the State can the

municipality participate in the distribution of its share of

premium taxes;

Even though local law cities establish their pension

plans in conformity with the minimum State requirements each




15

individual .ordinance may be different than the ordinance of

other municipalities. The many divergent types of plans in

operation in Florida produce no uniformity, because there

is no standardization of basic pension benefits. The variety

and complexity of these plans require special actuarial re-

ports for each local law city.

Of the many problems found in these divergent types of

plans, one of the most serious is proper funding. For pen-

sion plans covering firemen, the State of Florida has set

July 1, 1968, as the final date when all municipalities must

prove minimum funding as required by the statutes. If these

plans are not properly funded, they will stop receiving their

share of the premium tax money. Police Officers' Funds had

to comply by July 1, 1964.

The State of Florida uses compulsory disclosure, inspec-

tion, and inquiry to police the operation of municipal pension

plans. However, the Stetutes do not guarantee the effective-

ness of these plans. The State has only the power to cease

sharing the premium tax receipts when the plans do not main-

tain minimum standards. Since there is no legal requirement

to force municipalities to pay their contributions promptly,

the power of the State in this respect is weak. These plans

involve large sums of money and entail long-term municipal

obligations. The technicalities and complexities of pension

plans should be regularly studied by qualified actuaries and

other specialists. Only through sound funding can employees






be insured of the proper growth of reserves to a sufficient

amount that will adequately finance their pension benefits.

The pension movement is relatively young in this country,

but the State of Florida is one of several states which have

taken the lead in enacting legislation to provide a measure

of supervisory control and information about municipal plans

and their financial operations. Perhaps the greatest forma-

tive influence on municipal pension trusts has come from the

effect of Chapters 175 and 185 of the Florida Statutes.


Old Age. Survivor's, and Disability Insurance

While the State of Florida has aided the growth of muni-

cipal pension plans, "the chief impetus to pension fund growth,

however, was the establishment of Old Age and Survivor's In-

surance in the middle thirties. . ,)L The old age insurance

program which comprises only Title II of the Social Security

Act has become so popular that today it is commonly referred

to as "Social Security." This is a social insurance program.

There is no means test--benefits are received in proportion

to payroll taxes paid equally by the employer and employee.

Municipal employees in Florida may be covered by Social

Security under voluntary agreements between their employer

and the Federal.Government. The State Legislature has passed

laws enabling Florida municipalities to participate in OASDI.

Details on how to arrange Social Security coverage may be ob-

tained from the Florida League of Municipalities in Jackson-

ville.






Retirement benefits.-Under provisions of the program,

a fully insured worker and his wife- will receive monthly bene-

fits upon becoming 65 or over. Actuarially reduced benefits

can be received from age 62 to 64 if desired. A man (or woman)

can still work while receiving benefits. There is no limita-

tion on earnings after age 72. Generally, those younger than

72 may earn up to $1680 in a year and still receive their

full benefits. A municipal retirement pension is considered

income, and there is no limitation on the amount of income

received while collecting Social Security benefits.

The amount of the Social Security pension is figured

from average earnings under covered employment. The maximum

amount of Social Security earnings that can now be counted

for Social Security is $7,800. The monthly retirement bene-

fit at 65 will be somewhere between ?55 (the minimum) and

:218 (the maximum). A retiree's wife receives one-half the

amount of her husband's primary benefit.

Other benefits.-Disability benefits begin after a six-

month waiting period. The amount of the disability payment

is the same as the amount of benefits that would be received

at age 65 (62 if a woman). Just as with regular retirement

benefits, additional payments are made to certain dependents

of the disabled worker. An employee is genuinely concerned

for the welfare of his wife and children should he become

disabled. This, of course, can be adequately provided through

private insurance companies, but any meaningful disability pro-

tection is quite expensive and Workmen's Compensation is







hardly adequate for occupational disabilities. According to

Merton C. Bernstein, ". .over half the disabling injuries

that occur every year are not covered by Lorkmen's Compen-

sation."12 This is a national average, and it may be that

the average would be much higher for Florida municipal employ-

ees--since many of them are policemen and firemen who are

subject to energetic and fatiguing work for many hours during

each working day.

After the death of a worker, a lump sum death payment

is paid. This is three times his monthly retirement benefit

with a maximum of ".255. Any dependent unmarried child under

age 18 will receive a monthly income of three-fourths of

the worker's normal retirement benefit. A widow under 62

also will receive a similar benefit while caring for these

children. A widow over age 62 with no dependent children

will receive 871 percent of her husband's normal retirement

benefit. There is a maximum family payment of $434.40.

Usually, benefits for a widow and two eligible children will

reach this maximum. Additionally, benefits are available to

unmarried children over 18 who were permanently disabled be-

fore becoming 18. Dependent parents who are at least 62 are

also entitled to survivor's benefits.

Contributions.-In order to receive benefits, it is manda-

tory for every worker in covered employment to pay a tax based

on his earnings. This contribution is paid regardless of his

age and even when receiving Social Security benefits. Payments,

as shown in Table 1, are deducted from the employee's salary.







TABLE 1

CONTRIBUTION RATE SCHEDULE
(Percent of Covered Earnings)

_EmDloyees and Employers (Each)

For Retirement, For
Survivors, and Hospital
Years Disability Insurance Insurance TOTAL

1963-65 3.625 None 3.625
1966 3.850 .35 4.200
1967-68 3.900 .50 4.400
1969-72 4.400 .50 4.900
1973-75 4.850 .55 5.400
1976-79 4.850 .60 5.450
1980-86 4.850 .70 5.550
1987 and after 4.850 .80 5.650

Source: Social Security, U.S. Department of Health, Education
and Welfare, Social Security Administration, November,
1966, p. 34.

The Social Security System provides a form of savings

with free transferability of pension eligibility from job to

job--something not found in most private or municipal pension

plans. Except for a worker's early death with no survivors,

contributions are never lost.

Because of current financial problems or misunderstanding,

some municipal employees do not want to participate in Social

Security. With no Social Security, Chapters 175 and 185 of

the Florida Statutes require an employee to contribute 5 per-

cent of his salary to the pension fund. A policeman with a

gross salary of $6,000 will pay an annual contribution of

$300. But when Social Security coverage is added, the annual

contribution may be reduced to 3 percent plus 4.4 percent of

the employee's 1968 salary--a total annual contribution of






$L444-a much higher contribution. On the other hand, some

employees do not want Social Security because they do not re-

late their additional contributions to increased benefits.

Also, in many cases firemen prefer not to participate in

Social Security as firemen because they "moonlight" and are

thus covered by Social Security as self-employed persons.

They feel that if they were covered by Social Security as

firemen then their firemen's pensions would be reduced. By

keeping Social Security out of the city program, firemen (and

to a lesser extent policemen) expect to have a more liberal

pension and at the same time receive the benefits of Social

Security with full retirement pension benefits under the

statutes is illustrated in Table 2. For example, if an em-

ployee retires with average yearly earnings of '6,000 and no

Social Security coverage, his pension after thirty years will

be 1.67 percent per year or $250. Table 3 illustrates the

combination of Social Security benefits with pension bene-

fits of the model pension plan (Chapter 2). This same em-

ployee with Social Security coverage will receive a pension

of 1 percent per year of his average monthly earnings or

$150, plus $182 from Social Security--a total retirement pen-

sion of $332. This is why it may be reasonable for municipal

employees who are under Social Security to receive 1 percent

of earnings per year of service as a pension, while those

employees who do not participate in Social Security to receive

1.67 percent of earnings per year of service.























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While the dual benefits of Social Security insurance

argues strongly in its favor, OASDI does not provide a suffi-

cient retirement income to meet today's rising costs. Federal

Government efforts have been directed to provide some minimum

basic benefit through OASDI legislation. Between 1950 and

1968, OASDI coverage has been expanded. Children's benefits

have been improved and benefits for widows have been liberal-

ized. A cascade of amendments has improved the actual and

potential benefits for full-time, year-round workers. The

Medicare Bill has added hospital benefits and low-cost medical

insurance to the provisions of OASDI. As one pension expert

states: "With assurance of a minimum benefit, the employee,

through his own individual effort and supplemented by any

benefits his employer may provide, can seek to raise his old-

age income to an 'adequate' level."13

The labor unions which have been strong advocates of

Social Security seem to summarize their opinion of OASDI in

the following quote:

The Social Security system accomplished the aims
of vesting, continuity of coverage, adequate guarantees,
and equity of treatment much more economically, effec-
tively, and efficiently than is possible through a system
of scattered, fragmentary, limited and unrelated private
pension systems. A private plan should be regarded only
as a supplement to the Social Security program. It is
not, and never can be, a substitute for it.1'

A desirable allocation of resources varies from person

to person and from group to group. This variety of needs

would argue in favor of the present OASDI system being uti-

lized as a base on which to build municipal pension plans.




25

"From the point of view of the municipality--or the employee--

it is a bargain."15 Social Security will provide a basic

disability and retirement income that is weighted in favor

of lower income groups. Simultaneously, OASDI provides income

to survivors and dependents--at least during their young and

older ages. Medicare has added hospital and medical insurance

to protect the retiree from overburdening health costs. As

Professor William Howard stated: ". .it is a system that

may ultimately have to be subsidized by all taxpayers and

since residents of our municipalities pay taxes to the Federal

Government, they may as well share in the benefits.,"16


Federal Tax Policy

With the country's Social Security program providing the

basic impetus for the growth of pension plans, the Federal

Income Tax Law has played a major part in stimulating the

growth of municipal pension plans by permitting the tax free

earnings of pension trusts. The Federal Government has en-

couraged the growth of pension trusts through special pro-

visions of the Internal Revenue Code.

Since municipal governments do not pay federal income taxes,

it is only those provisions relating to the income of employees

and the pension trust itself that are of importance to this

paper.

As far as an employee is concerned, the main purpose of

his pension plan is to provide him an income when he retires

from employment'because of age. The Federal Government agrees

with this fundamental purpose. Probably, this agreement is







the reason for favorable tax treatment and protective legis-

lation.

Under the provisions of the Tax Law the municipality's

contributions to its pension plan are considered wages, but

they are not currently taxed to the employees as part of their

income for the year. Section 402 of the Internal Revenue

Code of 1954 specifically exempts the employee from taxation

on contributions made for him by the municipality. We might

say that employer contributions are the equivalent of a long-

term, tax-free loan to the pension fund. These contributions

are treated for income tax purposes as deferred income. The

benefits of the pension are taxable to the employees only

when actually received. Although all of the income resulting

from a pension is ultimately subject to taxation, the delay

in taxing pension income works very favorably for the employee.17

There can be a definite advantage in paying the tax on

this portion of his income after retirement--when he will be

taxed at a lower personal rate and may claim two exemptions

as a personal deduction. In certain cases, this can be a

much lower long-term capital gains rate. This exception oc-

curs when the employee or his estate receives the total amount

of his pension benefits in one calendar year.

On his death, an employee's beneficiary can receive up

to $5,000 in a lump sum from the deceased employee's pension

account (attributable to municipal contributions) free of in-

come tax.

In summary, only pension income derived from employer

contributions is taxable--and then only on benefits as they







are actually received or made available. These taxes are

paid as if the pension income were an annuity. Under Section

72(d) of the Internal Revenue Code, the employee may spread

his cost over the periodic payments of the annuity and the

difference between the annual prorated costs. Only the dif-

ference actually received is taxed as income. The one excep-

tion to this procedure occurs when the employee's total cost

is less than the annuity receipts of the first three years.

In this case, the initial payments are charged off against

his costs until the total cost is completely recovered. The

full amount of subsequent payments are then taxed as income.

In addition to municipal contributions, many pension

plans are financed through a combination of employer and em-

ployee contributions. Income tax is not payable on the por-

tion of pension plan benefits that were financed by the re-

tiree's contributions. In a plan which the employee contri-

butes to the cost, he is currently taxed for the amount of

his contribution. The reader should fully realize that even

though this contribution is withheld from the employee's

wages and paid directly into the pension fund, it still is

taxable to the employee. Pension experts agree that the net

effect of this tax system is that an employer can provide

a larger pension by contributing directly to the pension

fund from his own pocket and bypassing the employee. As

one expert states: "Since the total sum required to purchase

pension benefits comes ultimately from the employer anyway,

in most cases the tax advantages to the employee in a non-

contributory plan will outweigh the advantages of a contribu-







The advantages of a pension plan are further enhanced

by the fact that earnings and gains' on the trust funds are

completely exempt from all taxes until such time as the pen-

sion trust pays out benefits to the employees. Thus, the

funds compound tax-free during the accumulation period and

increase at a much greater rate than if they were subject

to tax.

The tax exemption allowed on the earnings of the
monies in the plan permits the employer, per dollar of
outlay, to buy a much larger benefit for his employees
-than would otherwise be possible. And the tax defer-
ment granted to the employee on the funds being accumu-
lated for him enables him to reap far larger benefits
than he could if the employer were to pay extra compensa-
tion directly to him rather than put it into the plan
for him.

The Internal Revenue Code permits tax-free earnings for

.the pension reserves of municipalities. This is approved

by the Florida Legislature which has exempted pension trusts

from the rule against perpetuities and the rule against ac-

cumulations.20 Employer contributions are not taxable to

.employees until they are received, and then usually under

favorable tax treatment. Employee contributions are deducted

from benefits in arriving at taxable pension income.


Summary

As has clearly been demonstrated, the best way to take

care of aged employees is to establish a pension plan. The

pension plan is the most practical, humanitarian and economic

plan to retire municipal employees who have devoted long

periods of service to their employer. Likewise, existing

Florida and Federal Legislation encourages this establishment.






The Florida Statutes concerning police officers and firemen

have provided a basic impetus toward establishment of a

plan to take care of all municipal employees. Moreover,

Federal OASDI legislation adds still further advantages for

the establishment of such a plan. Equally important is the

Federal Tax Policy which encourages the employer to finance

pension plans to the advantage of both employer and employee.

The need for a pension plan has been clearly shown, so we

will turn next to the actual pension ordinance suggested for

municipal implementation in Florida.











NOTES


Merton C. Bernstein, The Future of Private Pensions (The
Free Press of Glencoe, New York, 1964), p. 194.

2Paul P. Harbrecht, Pension Funds and Economic Power (The
Twentieth Century Fund, New York, 1959), P. 3.

3Bernstein, op. cit., p. 10.

Pension Plans and Trusts (Prentice-Hall, Inc., Englewood
Cliffs, New Jersey, March 5, 1965), Vol. XXI, No. 4, pp.
1572-1573.

5john I. Saks, "The Older Worker-II; Status in the Labor
Market," Monthly Labor Review (January, 1957), p. 20.

6Harbrecht, op. cit., pp. 9-10.

7S. S. Huebner and Kenneth Black, Jr., Life Inurance (Apple-
ton-Century-Crofts, New York, 1964), 6th Edition, p. 514.

8William M. Howard, "Retirement Plans for Police Officers
and Firemen in Florida," Economic Leaflets (University of
Florida, Gainesville, August, 1960), Vol. XIX, No. 8.

Interested readers will find an excellent summation of this
entire area in the above booklet and also in:

William M. Howard, "Retirement Plans for Small Municipali-
ties," Economic Leaflets (University of Florida, Gainesville,
June, 1958), Vol. XVII, No. 6.

9Broward Williams, "Report to the 1965 Legislature," The
Municipal Fireman's Pension Trust Fund (State Treasurer's
Office, Tallahassee), First Biennial Report 1963-1964, p. 1..

10Broward Williams, "Report to the 1965 Legislature," The
Municipal Police Officers' Retirement Trust Fund (State
Treasurer's Office, Tallahassee), Third Biennial Report
1963-1964, p. 1.







11Securities and Exchange Commission, Survey of Corporate
pension Funds, 1951-1954 (October, 1956), p. 1.

12
Bernstein, op, _it., p. 178.

13Huebner and Black, op. cit., p. 515.

14Harbrecht, np_._c.Lt., P. 95. Citing: AFL, "Pension Plans
Under Collective Bargaining, A Reference Guide for Trade
Unions," (no date), p. 86.

15Howard, Vol. XVII, op, cit.

16Howard, Vol. XVII, op. cit.

7Harbrecht, op. cit., p. 132.
18Dan M. McGill, Penslons: Problems and Tr_.As (Richard D.
Irwin, Inc., Homewood, Illinois, 1955), P. 76.

19Pension Plans and Trusts (January 22, 1965), loc. cit.,
p. 1511.

20Pension and Profit Sharinr Service (Prentice-Hall, Inc.,
Englewood Cliffs, New Jersey, 1957), Paragraph 6206.












CHAPTER II


A MODEL PENSION PLAN ORDINANCE FOR
FLORIDA MUNICIPALITIES

AN ORDINANCE ESTABLISHING A RETIREMENT AND PENSION
PLAN FOR EMPLOYEES OF THE CITY OF ANYTOWN, ANY COUNTY,
FLORIDA; PROVIDING FOR ITS ADMINISTRATION AND OTHER MATTERS
RELATING THERETO.


I INDEX

Page
Article 1. Definitions. . . . . . . . 34

Article 2. Establishment of the System. . . . 39

Article 3. Membership and Service . . . . . 39

3.1: Original Members . . . . . . 39
3.2: New Members. . . . . . . 39
3.3: Creditable Service . . . . . .. 39
3.4: Service Before the Effective Date of
the Plan . . . . . . . 39
3.5: Service of Policemen and Firemen Before
the Effective Date of the Plan . . . 40

Article 4: Contributions and Funding. . . . . 40

4.1: Cost of the Plan . . . . . . 40
4.2: City's Contribution. . . . . . 40
4.3: Gifts to the Fund. . . . . . . 40
4.4: Treasurer. . . . . . . . 40
4.5: Investment of the Fund . . . . . 41

Article 5. Retirement and Retirement Benefits . . 41

5.1: Normal Retirement. . . . . . 41
5.1(a): General Employees . . . . 41
5.1(b): Policemen and Firemen . . . 41
5.2: Pension Payments . . . . . . 42
5.3: Delayed Retirement . . . . . . 42
5.4: Retirement Prior to Normal Retirement
Date . . . . . . . . 43









5.5: Termination of Service Prior to Normal
Retirement. . . . . . . .
5.6: Death Before Retirement Date. . .
5.7: Death After Letirement Date . . .
5.8: hetirenent Annuity Option . . .
5.9: Social Security Option. . . . .
5.10: Member Records; Status Statements .
5.11: Benefits Unassignable and not Subject
Process . . . . . . . .
5.12: Errors, Corrections and Adjustments .
5.13: No Interest in the Fund . . . .
5.14: Payments in Case of Legal or Other
Disability. . . . . . . .


Article 6.

6.1:
6.2:
6.3:


Article 7:

7.1:
7.2:
7.3:
7.4:
7.5:
7.6:
7.7:
7.8:
7.9:
7.10:
7.11:
7.12:

7.13:
7.14:
7.15:

7.16:
7.17:
7.18:
7.19:

Article 8.


8.1:
8.2:


Leaves of Absence and Military Service.

Leaves of Absence . . . . . .
Military and Belated Service. . . .
Re-Employment; No Leave of Absence or
Military Service. . . . . . .


Administration of the Plan. . .

General Supervision . . . .
Compensation of the Commission. .
Meetings of the Commission. . .
Administrative Regulations. . .
Interpretation of the Plan. . .
Agents and Employees. . . .
Other Powers and Duties . . .
Secretary of the Council. . .
Duties of the Secretary . . .
Written Records . . . . .
Authority of Commission . . .
Annual Reports by the Trustee or
Insurance Company . . . .
Actuary . . . . . . .
Adoption of Tables. . . . .
Responsibility of Members and
Beneficiaries . . . ..
Interest on Delayed Payments. .
Personal Liability. . . . .


. . . 48


Small Annuities Lump Sum Payments .
Filing Defined. . . . . . .

Future Changes in the Operation of
the Plan. . . . . . . . .

General . . . . . . . .
Termination of Plan and Distribution of
Fund . . . . . . .. .


Page


. .





to
* .
. .
. .


. 46


* 0


* .
* .
* .







Page
Article 9. Protection Against Fraud and Deceit .. ... 54

9.1: Violations and Punishment. . . . . 54

Article 10. Amendment. . . . . . . . 55

10.1: Power to Amend . . . . . . . 55

Article 11. Separability and Construction. . . . 55

Article 12. Repeal of Conflicting Ordinances . . . 55

Article 13. Effective Date . . . . . 55



WHEREAS, The City Commission of the City of Anytown,

Florida, acknowledges that there are municipal employees who

have faithfully served the City, will reach the age of re-

tirement because of advanced age, and are deserving of re-

tirement pay:

WHEREAS, The Commission has determined that the City

will be better able, at prevailing wage scale to retain the

services of day laborers, as well as office and field em-

ployees and firemen and policemen if some provision is made

for a pension upon retirement at stated ages; and

WEHERAS, It is believed to be in the best interests of

the City to create a retirement and pension plan for all em-

ployees of the City; now, therefore,


THE CITY OF ANYTOWN DOES ORDAIN:


ARTICLE 1. DEFINITIONS

The following words and phrases, as used in this Ordi-

nance, unless a different meaning is plainly required by the

context, shall have the following meanings, and the same and







similar terms when used in connection with any Civil Service

System or any other ordinance of the City of Anytown shall

not necessarily apply to the members of the retirement system

hereby created except when specifically adopted.

1.1 Actuarial Equivalent: A benefit of equal value or

equal cost when computed on the basis of such interest rates,

mortality, and other actuarial tables as are in effect under

the Plan.

1.2 Annuity: Annual payments for life to be paid in

equal monthly installments on the last day of the month in

which the same accrue. Such payments shall be made on a calen-

dar month basis and the payment for any month may be prorated

if appropriate.

1.3 Annual Earnings: Gross earnings received by the

employee as compensation for services to the City, including

overtime pay. Bonuses shall be excluded.

1.4 Beneficiary: Any person in receipt of, or entitled

to, an annuity, retirement allowance, or other benefit as

provided by this Ordinance.

1.4 (a) Board of Trustees: For the purpose of this

Ordinance, Boa:rd of Trustees shall be construed to mean the

City Commission.

1.5 Charter: The Charter of the City of Anytown,

Florida, as amended.

1.6 City,: The City of Anytown, Florida.

1.7 City's Contribution: The annual contribution needed

to fund actuarially the liability for annuities credited to






employees on the basis of actuarial methods and assumptions

approved by the Commission.

1.8 Commission: City Commission of the City of Anytown.

1.9 Creditable Service: Service in the employment of

the City of Anytown for which credit is allowed under the terms

of this Ordinance. Such service shall be computed to the nearest

whole month of completed service but not including any frac-

tional parts of a month.

1.10 Effective Date of the Plan: The date on which the

operation of the Plan is to commence for the purpose of de-

termining eligibility, benefits and related matters, which

is hereby fixed as the first day of January, 1968.

1.11 Employee: All persons employed by the City and

so classified under rules and regulations and personnel re-

cords of the City, including probationall" or permanent em-

ployees. Any appointed officer shall only be qualified under

this Plan under one office and that office being the one from

which he receives the largest annual salary, compensation or

remuneration. Independent contractors are excluded. Part-

time employees are excluded.

1.12 Fund or Pension Fund: All sums of money paid into

the Plan by the City, and all gifts and contributions to the

Fund, accepted from other sources, together with earnings and

appreciation of the same, less disbursements made from said

money, in accordance with the Plan, or less any losses or de-

preciation, of asset value.

1.13 Gender: The masculine pronoun shall include the

feminine pronoun.







1.14 General Employee: A general employee shall in-

clude all employees as defined in 1.11 herein, other than

policemen and firemen.

1.15 Member: Any person employed by the City who is

included in the membership of the Plan as either an original

member or a new member. However, a member shall bc limited

and restricted to the definition of employee.

1.16 MJembershin Service: Service rendered as a full-

time permanent employee since last becoming a member of the

Plan. Such service shall be computed to the nearest full

month of completed service but not including any additional

fractional parts of a month.

1.17 LJew Member: Any permanent employee who becomes

a member of the Plan after the effective date of the Plan.

1.18 Normal Retirement Date: The normal retirement

date of a member shall be his normal retirement date as

determined in accordance with the terms of the Plan.

1.19 Original Member: Any permanent employee of the

City who becomes a member as of the effective date of the

Plan.

1.20 Past Service: Service rendered as a full-time

permanent employee from January 1, 1960 to the effective date

of the Plan.

1.21 Permanent Employee: An employee who has com-

pleted his probationary period, been approved for permanent

status by the department head under whom he is employed, or

the City Commission, if approved by it, and has been certified







by the City Clerk or City Manager as a permanent employee,

or according to the personnel records of the City pertaining

to such employee. Certification or approval for permanent

status shall be subject to the rules of the career service

system of the City of Anytown.

1.22 Plan, Pension Plan or Emoloyees' Pension Plan:

The system of retirement benefits provided under this Ordi-

nance.

1.23 Plan Year: A period of twelve consecutive months

measured from the effective date of the Plan, or from any

anniversary thereof.

1.24 Retirement: Withdrawal from active employment

by the City with retirement income granted under the pro-

visions of this Plan.

1.25 Retirement Annuity Option: An optional form of

retirement annuity as described in Section 5.8.

1.26 Retirement Income: Annual payments for life

payable in monthly installments, or the actuarial equivalent

paid in lieu thereof, in accordance with the Plan. It is

contemplated that separate actuarial tables may be used for

male and female employees to reflect the different life

expectancies.

1.27 Social Security Option: An optional forrf of re-

tirement annuity as described in Section 5.9.

1.28 Treasurer: The Treasurer of the Plan is the City

Finance Officer.







1.29 Truste.: Any Bank having trust powers which has

been designated as Trustee of the Pension Fund by the Com-

mission.

ARTICLE 2. ESTABLISHM- ET OF THE SYSTEM

2.1 A pension and retirement system for full-time per-

manent employees in the service of the City of Anytown,

Florida, is hereby established to provide retirement benefits

as provided by this Ordinance. It shall be known as the

EMPLOYEES' PENSION PLAN OF THE CITY OF ANYTOWN, FLORIDA.

ARTICLE I. MEMBERSHIP AND SERVICE

3.1 Original Members: All full-time, permanent City

Employees who had not reached age sixty (60) when originally

employed by the City.

3.2 New Members: New, full-time, permanent City Em-

ployees will become eligible to participate in the Plan on

the first day of the month following, or coinciding with the

date of their employment.

3.3 Creditable Service: Creditable Service for retire-

ment for the purpose of calculating benefits shall consist of

the membership service rendered by the employee since he last

became a member, plus Past Service rendered continuously since

the employee's last date of employment, to his normal retire-

ment date. Any employee will be given credit for service to

the City starting January 1, 1960, or his date of employment,

whichever is later.

3.4 Service Before the Effective Date of the Plan: No

credit will be given general employees for service to the City

before January 1, 1960.







ARTICLE 4. CONTRIBUTIONS AND FUNDING

4.1 Cost of the Plan: The cost of the Plan will be

borne entirely by the City and by State remittances to

finance retirement of firemen and policemen in accordance

with Chapters 175 and 185 of the Florida Statutes. Employees

will not contribute to the cost of the Plan.

4.2 City's Contribution: The City shall pay into the

Fund amounts required to provide the benefits under the Plan,

as shall be determined by an actuarial investigation as

provided in Article 7.

4.3 Gifts to the Fund: The City may accept gifts, de-

vises, bequests, or appropriations to or for the Fund from

any source, but shall have the right to reject the same if

they are so conditioned as to conflict with the Charter or

this Ordinance, or to make the administration of the same

unreasonably difficult.

4.4 Treasurer: Gifts, bequests, devises, or appropria-

-tions to the Fund shall be received by the Treasurer, who

shall be the Treasurer for the Council. The Treasurer shall

be liable for the safekeeping of funds received, and appropri-

ated by the Commission under his bond. The Treasurer shall

promptly deposit funds in banks or savings and loan associa-

tions designated by the Commission, or transfer to the

Trustee or the Insurance Company all funds received and funds

appropriated by the City Commission, including those funds

received by virtue of the provisions of Chapters 175 and 185

of the Florida Statutes.







4.5 -Investment of the Fund: All monies paid into and

held by the Pension Fund shall be promptly deposited with

the Trustee or the Insurance Company for the benefit of the

Pension Fund according to the terms of a Trust Agreement or

contract to be negotiated with the Trustee or the Insurance

Company.

ARTICLE 5. RETIREMENT AND RETIREMENT BENEFITS

5.1 Normal Retirement: An employee will normally

retire on the first day of the month following (or coinciding

with) the attainment of the ages shown in the following sched-

ule:

5.1 (a) General Emolovees:

Age at Entry into the Plan Retirement Age

55 and under 65
56 66
57 67
58 68
59 69
60 and over 70

5.1 (b) Policemen and Firemen:

Age at Entry into the Plan Retirement Age

50 and under 60
51 61
52 62
53 63
54 64
55 to 60 65
In the event of such normal retirement the retiring

employee shall be entitled to and shall be paid an annuity

payable monthly beginning with the month of retirement and

continuing until death. The amount of annuity to which a

retiring employee will be entitled will be calculated as

follows:






(a) The monthly pension for general employees is $2.00

for every year of credit service.

(b) The monthly pension for policemen and firemen is

1 percent of average monthly earnings, during the last ten

years of service, for every year of credited service.

5.2 Pension Payments: Pension payments will be made

monthly beginning with the first month of retirement and con-

tinuing until death, unless a retirement annuity option has

been elected in which case payments will be made in accordance

with the option.

5.3 Delayed Retirement: An employee who does not desire

to retire on his normal retirement date may make written ap-

plication to the City Clerk or City Manager for retention in

regular or part-time employment subsequent to the time of

normal retirement showing that the same is in the best in-

terests of the City by reason of his special knowledge, rela-

tive efficiency, difficulty of replacement, or other similar

or extraordinary factors. Upon the approval of the City Nana-

ger the employee may be retained by the City for a period not

to exceed one year following his date of normal retirement.

Nevertheless, similar additional applications for renewal of

retention in employment, may be made under the same procedure

in each of four successive years, or until the employee

reaches age 70, whichever is earlier. In the event of such

deferred retirement, the employee, upon retirement, shall re-

ceive the same amount of monthly retirement pension that he

would have received had he retired on his normal retirement

date.







5.4 Retirement Prior to Normal Retirement Date: A

general employee who has twenty years of credited service and

has attained his 60th birthday may make written application

for early retirement to the City Manager. A fireman or police-

man who has twenty years of credited service and has attained

his 55th birthday may make written application to the City

Manager for early retirement. With approval of the City Mana-

ger the employee may retire on the first day of any month

following, or coinciding with, his 60th or 55th birthday,

'whichever shall be applicable as stated above. In such event,

he shall be entitled to and shall be paid an annuity equal in

amount to the annuity computed on the basis of normal retire-

ment, except that the amount so computed shall be reduced by

five-twelfths of one percent of said amount for each month

that early retirement precedes his 65th birthday for general

employees or his 60th birthday for policemen and firemen.

5.5 Termination of Service Prior to Normal Retirement:

(a) Less than 20 years of credited service or

less than age 55: If a member of the Plan dies or ceases to

be a permanent employee prior to his normal retirement date

and has less than 20 years of credited service, or has not

yet attained his 55th birthday in the case of general employees,

or his 50th -birthday in the case of policemen and firemen,

all rights of the employee in the pension plan will terminate.

(b). Twenty years or more of credited service and

gge_ or more: If any member of the Plan terminates employ-
ment with the City prior to his normal retirement date and






has completed 20 years or more of credited service and has

attained the age of 55 years or greater in the case of general

employees, or 50 years or greater in the case of policemen and

firemen, the pension credit earned -at termination will be

fully credited to the employee. He may, when he reaches his

normal retirement date, make written application to the City

Manager for the pension earned, and in such an event, he

shall be entitled to, and he shall be paid, an annuity com-

puted on the same basis as that of other employees who retire

on their normal retirement date.

5.6 Death Before Retirement Date: The interest of an

employee who dies before his normal retirement date will

cease and no death benefit under the Plan will be paid to his

estate or to the beneficiary of such employee.

5.7 Death After Retirement Date: If an employee dies

after retirement no additional payments will be made unless

a retirement annuity option has been elected in which case

*payments will be made in accordance with the option.

5.8 Retirement Annuity Option: The member may elect to

receive annuity benefits payable under the Plan with the ap-

proval of the Commission in the form of a joint and survivor

annuity instead of the normal annuity form, which shall be

the actuarial equivalent of the annuity which he would normally

receive. Under the joint and survivor annuity, two-thirds

of the retirement annuity income continues to the surviving

contingent annuitant, until his or her death. The joint and

survivor annuity election must be requested by the employee

at least three years prior to date of retirement, including
*N







retirement prior to normal retirement date, and shall be sub-

ject to approval or disapproval by the Commission at the time

of election.

The election of a joint and survivor annuity shall be

deemed to be automatically cancelled in the event of the death

of either proposed annuitant prior to the member's actual re-

tirement.

5.9 Social Security Ontion: An employee who retires

before he is entitled to receive monthly benefits under the

Federal Social Security System may elect to have his retire-

ment annuity benefits increased before his Social Security

benefits begin, and decreased thereafter to obtain, insofar

as practical, a level total yearly retirement income from

the two sources. The amounts he will receive both before and

after he becomes eligible for Social Security payments shall

be the actuarial equivalent of the benefits to which he would

have been entitled had he not selected this option.

5.10 Member Records;, Status Statements: A separate

record of account shall be maintained for each member, which

among other things, shall show his service record, his exact

age, any designation of alternate or contingent beneficiaries,

together with any such information as is necessary for an

active and comprehensive determination of his status under

this Plan.

5.11 DeBefJits Unassignable and not Subject to Process:

The right of any member or any beneficiary to any benefits

under the Plan or any other right accrued or accruing to any







. persons under the provisions of this Ordinance shall not be

subject to execution, garnishment, attachment, the operation

of any bankruptcy or insolvency law or any other process of

law whatever, and shall.not be subject to assignment, pledge

or hypothecation unless expressly authorized in this Ordinance.

5.12 Errors, Corrections and Adjustments: Should any

change or error in the records of the Plan be discovered,

or any error in any calculation be made resulting in any mem-

ber or beneficiary receiving from the Plan more or less than

he was entitled to receive, the Council shall have the power

to correct such error, and as far as possible to adjust the

payments thereafter to be made in such a manner that the

actuarially equivalent of the benefit to which such member

or beneficiary was correctly entitled, be paid.

5.13 No Interest in the Fund: No member, employee,

beneficiary or other persons shall have any interest in, or

right in, or to the Fund or any part thereof, or any assets

comprising the same, except only as to the extent expressed

and provided in this Ordinance.

5.14 Payments in Case of Legal or Other Disability:

Whenever and/or as often as a person entitled to payments

hereunder shall be under legal disability, or, in the sole

judgment of the Commission, shall otherwise be unable to

apply such payments to his best interest and advantage, the

Commission in the exercise of its discretion may direct that

all or any portion of the benefits of such members payable

in any one or more of the following ways:







(1) Directly to such person;

(2) To his legal guardian or conservator;

(3) To his spouse, or to any person to be expended for

his benefit.

The decision of the Commission shall, in each case, be

final and binding on all persons including the affected mem-

ber of the Plan.

ARTICLE 6. LEAVES OF ABSENCE AND MITLIT&RY SERVICE

6.1 Leaves of Absence: Any member who has been granted

a leave of absence (except for vacations, extended vacations,

sick leave, extended sick leave, or leaves of absence of

benefit to the City and approved by the City Manager) shall

be allowed service credit earned prior to the start of leaves

of absence, and with service credit to resume upon return to

employment.

6.2 Military and Related Service: When any member is

inducted or enlists into any of the Armed Forces of the

United States, or enlists in any reserve component, enlists

in the United States Coast Guard, or in any other reserve

component, or enters upon active duty in the Armed Forces

of the United States, the United States Coast Guard, or the

United States Public Health Service in response to an order

or call to active duty, (hereinafter referred to as "military

or related service"), and is subsequently re-employed by the

City within 90 days after release from any such service, shall

again become a member of the Plan, and shall be given service

credit for the service before entering military or related







service, and if approved by the Commission for the period of

time spent in military or related service as well.

6.3 Re-Emnloyment; No Leave of Absence or Military

Service: When any former employee -of the City is re-employed,

and said employee has not been granted a leave of absence,

he may receive credit for prior service if and only if (1)

the period of prior employment was of at least one year's

duration, (2) the City Manager recommends that he be given

credit for prior service, and (3) the Commission approved

said recommendation.

ARTICLE 7. ADMINISTRATION OF THE PLAN

7.1 General Supervision: The general supervision of

the administration of the Plan shall be by the Commission.

7.2 Com-ensti.on of the Commission: The members of

the Commission shall serve without compensation for their

services.

7.3 Meetings of the Commission: This Plan or any

-matter herein may be considered and disposed of at any Com-

mission meeting. A majority of the membership shall constitute

a quorum and all decisions, acts, and resolutions of the Com-

mission shall be by affirmative vote of at least three members.

7.4 Administrative Regulations: The Commission by

resolution may promulgate written rules and regulations not

in conflict with the expressed terms of this Ordinance or

the Charter to cover the operation of any phase or part of

the Plan as provided by this Ordinance. Copies of such

rules and regulations shall be furnished to any member of







the Plan upon request and at least one copy thereof shall

be kept available in the office of the City Clerk for examina-

tion by any interested persons at any time during ordinary

business hours. Otherwise, a copy 'of this Ordinance shall

fully meet the provisions herein.

7.5 Interpretation of the Plan: The Commission has

the power to construe all terms, rules, conditions and

limitations of the Plan, and its construction made in good

faith shall be final and conclusive upon all parties' interests.

7.6 Agents and Employees: The Commission shall have

the power to select, employ and compensate, or cause to com-

pensate from time to time such consultants, actuaries, ac-

countants, attorneys, investment counsel and other agents

and employees as they may deem necessary and advisable in the

proper and efficient administration of the Plan.

7.7 Other Powers and Duties: The powers and duties of

the Commission or of any other persons as set out herein are

*not intended to be complete or exclusive but each such body

or persons shall have such powers and duties as are reason-

ably implied under the terms of this Ordinance. Where not

in conflict with this Ordinance, or the Charter, the Trust

Agreement or contract entered into with the Insurance Com-

pany, shall govern.

7.8 Secretary of the Council: The City Clerk or Deputy

Clerk shall be Secretary to the Commission under this Plan.

7.9 Duties of the Secretary: It shall be the duty of

the Secretary to keep accurate minutes and records of the




50

acts of the Commission under this Plan separate and apart

from the regular minutes of City Commission meetings. This

provision is made for the express purpose of having all pro-

ceedings in connection with this Plan in one set of books,

thereby saving going through all of the minutes of the

various Commission meetings. They shall be available to the

public, city officials, and employees under this Plan at all

times.

7.10 Iritten Records: All notices, elections, designa-

tions and changes of beneficiaries and similar writings per-

taining to the operation of the Plan shall be made and

preserved in writing on such forms as the Commission may direct.

The secretary shall maintain all records in segregated files

pertaining to the Plan and they shall not be intermingled

with other files of the City. Whenever there .is any notice,

election, designation, complaint, ruling, or other written

proceedings relating to a particular employee, the Secretary

shall furnish the Trustee or the Insurance Company, when

necessary, with a copy of same, as well as the employee.

7.11 Authority_ of Commission: The Commission shall

have authority to direct that pension plan funds be deposited

with banks and/or savings and loan associations or invested

in securities, to negotiate appropriate contracts with a

bank having trust powers, or an insurance company or companies,

under the terms of which trust agreements or contracts funds

will be deposited with the bank, company or companies, as

determined by the Commission and annuities may be provided








for members and their beneficiaries in accordance with the

terms of this Plan. The Commission may terminate such trust

agreements or contracts or negotiate amendments as it sees

fit. Any trust agreement shall be 'for investment purposes

only and the Commission acting as a Board of Trustees shall

at all times maintain administration of the funds.

7.12 Annual Renorts by the Trustee or Insurance Comoany:

The Trustee or Insurance Company or Companies with which a

trust agreement or contract or contracts are entered into

for the administration of the Plan shall submit a statement

of the condition of the funds on deposit to the credit of

the Plan at least once yearly, and may be required to supply

copies of such statements to an actuarial consultant desig-

nated by the Commission. The original shall be retained

among the records of the Secretary of the Commission.

7.13 Actuary: The Commission shall employ an actuary

to review the operation of the Plan at intervals of not more

than two years, and to make his recommendations to the Com-

mission as to the actuarial solvency of the Plan, the amount

of the City's contributions to the Fund which in his opinion

is necessary to be made for the current operation of the Plan,

what benefits the Plan can afford to pay on the basis of ac-

cumulated contributions to the Plan, and current rates of con-

tribution, and such other information as the Commission may

require. The Actuary's report shall be submitted in writing

and copies thereof shall be available to members of the Plan

upon request. The Commission may also retain said Actuary







or some other actuary as a consultant, and provide for com-

pensation for services.

7.14 Adoption of Tables: In making any actuarial

computation provided in this Ordinance, the tables, charts

and other statistical information shall be selected by the

Commission from standard sources in common use by other

annuity and pension plans, including but not limited to

those operated by governmental bodies in the United States

of America or by the United States Internal Revenue Service.

7.15 Resoonsibilities of Members and Beneficiaries:

Each member or beneficiary or other interested member shall

be responsible for advising the Commission of his current

mailing address, and promptly advising the Commission re-

lating to any error, in whosoever's favor, in connection

with the payment of benefit or any other payment under or

in connection with the Plan.

7.16 Interest on Delayed Payments: Pension payments,

*although not promptly paid for any reason, and any other

payments to be made out of the Fund, although not paid promptly

for any reason, shall not bear interest unless so ordered by

the Commission, who shall have discretion to fix the rate

and calculate any such interest, and in such event, the interest

to be paid shall not exceed the then current rate of interest

being returned on the funds on deposit with the Trustee or

the Insurance Company, or other financial institution.

7.17 Personal Liability: Each member of the Commission

shall use ordinary care and diligence in the performance of






his duties and shall not be liable for any loss unless re-

sulting from his own gross negligence, or his willful mis-

conduct; nor shall such members be personally liable upon or

with respect to any agreement, act, transaction or omission

executed, committed or suffered to be committed himself as

one or a member of said body or by any other member, agent,

representative, .or employee of any body; moreover said bodies

and members and agents thereof shall each be fully protected

in relying on the advice of the City Attorney or his assis-

*tants, or upon any other attorney employed by the City, or

said bodies, or either of them insofar as legal matters are

concerned, or any accountant similarly employed insofar as

accounting matters are concerned, and of any actuaries simi-

larly employed so far as actuarial matters are concerned.

Any person having any claim under the Plan shall look solely

to the assets of the Fund for the satisfaction of such claims.

7.18 Small Annuities Lump Sum Payments: Whenever any

retirement annuities shall be less than $10.00 per month, the

Commission may elect to have payments made quarterly. If

the annuity payable at quarterly intervals shall be less than
.10.00, the Commission may elect to pay the commuted value

of the same, calculated at regular interest, in one lump sum.

Such election shall be made within six months after the mem-

ber's retirement unless he consents in writing to a subse-

quent election by the Commission under this Section.

7.19 Filin Defined: Where'any notice, election or

other instrument is required or permitted by this Ordinance

to be filed with the Commission, the same may be filed with


its Secretary.




54-5

ARTICLE 8. FUTURE CHANGES IN THE OPERATION OF THE PLAN

8.1 General: It is contemplated, and all original and

new members of the Plan shall be deemed to have notice, that

the City Commission of this City may in the future decide

that it is in the best interests of the City and the members

of the Plan to modify or terminate Trust Agreements or con-

tracts entered into with an insurance company or companies,

to exercise options available to the City under the terms of

such Trust Agreements or contracts, to select another in-

surance company, trust, or other financial institution, as

the depository for pension funds.

8.2 Termination of Plan and Distribution of Fund: The

provisions of Florida Statute 185.37 pertaining to termina-

tion of the Plan and distribution of the Fund are hereby

incorporated by reference as the same would apply to the

rights of policemen and firemen under the terms of this Plan.

ARTICLE 9. PROTECTION AGAINST FRAUD AND DECEIT

9.1 Violations and Punishment: Whosoever with intent

to deceive shall make or cause to be made any statement, re-

port, certificate, election, notice, claim or other instru-

ment, authorized or required under this Chapter, whether of

the enumerated classes or otherwise, which shall be untrue,

or who shall falsely or cause to commit to be falsified any

record comprising any part of the operation or administration

of the Plan contemplated by this Ordinance, shall be as follows:

Punished by a fine, not exceeding '300.00, or by imprisonment

not exceeding 90 days, or by both such fine and imprisonment.







Any. such violation shall also be punishable as provided under

the laws of the State of Florida.

ARTICLE 10. AEFND?,E.NT

10.1 Power to Amend: The City Commission shall have

continuous power to amend this Ordinance as provided by its

Charter.

ARTICLE 11. SEPARABILITY AND CONSTRUCTION

11.1 In the event any section, sub-section, sentence,

clause or phrase of this Ordinance shall be held to be in-

valid or unconstitutional such adjudication shall not in any

manner affect the remaining portions of the Ordinance, which

shall be, and remain in full force and effect as fully as

if the portions so adjudicated invalid are unconstitutional

were not originally a part thereof. The articles and sec-

tion headings included in this Ordinance shall not be con-

strued to limit the text included hereunder.

ARTICLE 12. .REPEAL OF CONFLICTING ORDINANCES

12.1 All ordinances and parts of ordinances in conflict

herewith are hereby repealed to the extent of such conflict.

ARTICLE 13. EFFECTIVE DATE

13.1 This Ordinance shall take effect in accordance with

law and the Charter of the City of Anytown, Florida, as amended,

and shall become effective immediately upon its passage and

approval by the Commission.


Passed and adopted by the City Commission of the City of

Anytown, Florida, on the 4 day of .ay 1968.












Mayor


ATTEST:


City Clerk













CHAPTER III


DEFINITIONS, EXPLANATION OF RELATED PROVISIONS
AND ESTABLISHMENT OF THE PENSION SYSTEM



The pension ordinance should give complete details of

the entire pension program. A pension plan that is properly

drawn at the beginning can save many administrative headaches

in the future. It is far better to cover all probable even-

tualities at the outset than to amend or improvise later to

meet a situation that is not covered in the original provisions

of the ordinance. Because eventualities may not be properly

covered, the ordinance should contain provisions permitting

the municipality to amend or even discontinue the plan if

necessary.

Florida law requires that an ordinance be preceded by

a brief description of its intent. This enables any interested

party to determine the nature and purpose of the ordinance by

reading the brief description rather than the entire ordinance.

The following paragraph briefly describes the pension ordinance:

An ordinance establishing a retirement and pension
plan for employees of the City -of Anytown, Any County,
Florida; Providing for its administration and other mat-
ters relating thereto.2


egf_.nition s

The language of the plan must be precise and exact in






its meaning. From a review of legal cases, we can conclude

that "the courts have consistently found that the language

of the plan is the controlling consideration in ascertaining

employee rights, as if the plan were a contract whose terms

were decided upon by equals dealing at arm's length."3

Towards this goal of precise language, the City Attorney

should be instrumental when drawing up the proper wording

of the ordinance. Every proper plan contains a list of terms

and their definitions which is included to prevent any mis-

understanding of the provisions of the pension program. Def-

initions may also be useful when they eliminate lengthy repet-

itive descriptions throughout the ordinance.

The list of definitions in the ordinance is preceded by

the following paragraph:

The following words and phrases, as used in this
Ordinance, unless a different meaning is plainly re-
quired by the context, shall have the following mean-
ings, and the same and similar terms when used in con-
nection with any Civil Service System or any other
ordinance of the City of Anytown shall not necessarily
apply to the members of the retirement system hereby
created except when specifically adopted.4

Actuarial Equivalent:

A benefit of equal value or equal cost when computed
on the basis of such interest rates, mortality, and other
actuarial tables as are in effect under the plan.

It is necessary to define this term in order to eliminate

any possible ambiguity in the meaning of Section 5.8, 5.9, and

5.12. These subsections of the model-ordinance permit employees

to elect an optional annuity form and state that these options

should be the "actuarial equivalent" of the annuity which he

would normally receive. If there were a possible alternative







interpretation, an employee might argue that he should be en-

titled to a greater amount of monthly annuity pEyments by the

selection of an optional annuity form than if determined by

an actuary.

This term is used in Sections 5.8, 5.9, and 5.12 of the

model pension ordinance.

5.8) With the approval of the commission, the member

may elect to receive his annuity benefits in the form of a

joint and survivor annuity instead of the normal annuity form.

The joint and survivor annuity shall be the "actuarial equiva-

lent" of the annuity which he would normally receive.

5.9) An employee who retires before he is entitled to

receive monthly social security p&.yments may elect to receive

a higher annuity before social security benefits begin, and

a decreased annuity after receipt of social security payments.

The reduced amount of retirement annuity plus social security

would, insofar as practical, be the same in amount as that pro-

vided prior to receipt of social security. The amounts he will

receive from the city both before and after he becomes eligible

for social security payments shall be the "actuarial equiva-

lent" of the benefits to which he would have been entitled had

he not selected this option.

5.12) Should any error in the records of the plan be

discovered, the Council shall have the power to correct such

error, and to adjust the payments thereafter to be made in

such a manner that the "actuarial equivalent" of the benefit

to which such member or beneficiary was correctly entitled,

be paid.







Annuity:

Annual payments for life to be paid in equal
monthly installments on the last day of the month
in which the same accrue. Such payments shall be
made on a calendar month basis and the payment for
any month may be prorated if appropriate.

It is necessary to define the term "annuity" because

the benefits payable for the lifetime of a retired employee

will vary according to occupation, creditable service, and

annual earnings.

This term is used in Sections 5.1, 5.4, 5.5(b), 5.8,

and 7.18 of the model pension ordinance.

5.1) When an employee retires he shall be entitled to

receive an "annuity" payable monthly beginning with the month

of retirement and continuing until death. The amount of the

"annuity" to which a retiring employee will be entitled is

calculated in subsection a and b of Section 5.1.

5.4) When an eligible employee retires prior to his

normal retirement date, he shall be entitled to and shall be

.paid an "annuity" that is less than the "annuity" which he

would have received at normal retirement.

5.5(b) A member who has attained a minimum age and has

completed 20 years or more of credit service may terminate his

employment with the city prior to his normal retirement date

and still receive an "annuity" when he reaches his normal re-

tirement date.

5.8) A member may elect to receive the benefits payable

under the plan in the form of a joint and survivor "annuity"

instead of the normal "annuity" form.







7.18) Whenever any retirement "annuity" shall be less

than .;10.00 per month, the commission may elect to have pay-

ments made quarterly. If the "annuity" payable at quarterly

intervals shall be less than $10.00, the Commission may elect

to pay the commuted value of the same, calculated at regular

interest, in one lump sum.

Annual Earnings:

Gross earnings received by the employee as com-
pensation for services to the City, including overtime
pay. Bonuses shall be excluded.

It is necessary to define this term because pension bene-

fits for policemen and firemen are based on earnings. Because

the pension is computed on average monthly earnings, it is

necessary to define annual earnings so that we will have a

basis for determining pension benefits. For example, if the

term is not defined, an employee might claim that his pension

should be based on his regular compensation, plus any bonuses

received. This definition limits the salary scale to be used

.when calculating the costs and liabilities of the retirement

system.

This term is used in Section 5.16 of the model pension

ordinance.

5.1(b) The monthly pension for policemen and firemen

is 1 percent of average monthly "earnings," during the last

ten years of service, for every year of credited service.

Beneficiary:

Any person in receipt of, or entitled to, an
annuity, retirement allowance, or other benefit as
provided by this Ordinance.







This definition clarifies the person we are referring

to when discussing the plan benefits.

The term is used in Sections 5.6, 5.10, 5.11, 5.12,

5.13, 7.10, and 7.15 of the model'pension ordinance.

5.6) If an employee dies before his normal retirement

date, no death benefit under the plan will be paid to his

estate or to the "beneficiary" of such employee.

5.10) A separate record of account shall be maintained

for each member, which among other things, shall show any

designation of alternate or contingent "beneficiaries."

5.12) Should any change or error in the records of the

plan be discovered resulting in any member or "beneficiary"

receiving from the plan more or less than he was entitled to

receive, the Council shall have the power to correct such error.

5.13) Except as provided in this Ordinance, no member,

employee, "beneficiary" or other persons shall have any in-

terest in the Fund.

7.10) All designations and changes of "beneficiaries"

shall be made and preserved in writing on such forms as the

Commission may direct.

7.15) Each member or "beneficiary" shall be responsible

for advising the Commission of his current mailing address,

and shall promptly advise the Commission of any error in con-

nection with any payment under the Plan.

Charter:

The Charter of the City of Anytown, Florida, as
amended.

The use of this definition saves lengthy descriptions


within the ordinance.







4.3) The City shall have the right to reject gifts, de-

vises, bequests, or appropriations if they are so conditioned

as to conflict with the "Charter."

7.4) The Commission may promulgate written rules and

regulations not in conflict with the "Charter" to cover the

operation of any phase or part of the Plan.

10.1) The City Commission shall have continuous power

to amend this Ordinance as provided by its "Charter."

13.1) This Ordinance shall take effect in accordance

with law and the "Charter" of the City of Anytown.



The City of Anytown, Florida.

The use of this definition eliminates the complete des-

cription of the City of Anytown.

This term is used in Sections 3.1, 3.3, 3.4, 3.5, 4.1,

4.2, 4.3, 5.3, 5.5(b), 6.1, 6.2, 6.3, 7.10, and 8.1 of the

model pension ordinance.

3.1) Original members shall be all full-time, permanent

City Employees who had not reached age sixty when originally

employed by the "City."

3.3) Any employee will be given credit for service to

the "City" starting January 1, 1960, or his date of employ-

ment, whichever is later.

3.4) No credit will be given general employees for ser-

vice to the "City" before January 1, 1960.

3.5) Policemen and Firemen will be credited with all

years of service to the "City."







4.1) The cost of the plan will be borne entirely by the

"City" and by State remittances to finance retirement of fire-

men and policemen in accordance with Chapters 175 and 185 of the

Florida Statutes.

,.2) The "City" shall pay into the Fund amounts required

to provide the benefits under the Plan.

4.3) The "City" may accept gifts, devises, bequests, or

appropriations to or for the fund from any source.

5.3) An employee may make Written application for delayed

retirement showing that retention in regular or part-time em-

ployment is in the best interests of the "City."

5.5(b) If any member of the Plan terminates employment

with the "City" prior to his normal retirement date and has

completed 20 years or more of credited service and has attained

a certain minimum age, the pension credit earned at termination

will be fully credited to the employee.

6.1) Any member who has been granted a leave of absence

(except for leaves of absence of benefit to the "City" and ap-

proved by the City Manager) shall be allowed service credit

earned prior to the start of leaves of absence, and with ser-

vice credit to resume upon return to employment.

6.2) When any member is inducted or enlists into any mili-

tary or related service, and is subsequently re-employed by the

"City" within 90 days after release from any such service, shall

again become a member of the Plan.

6.3) When any former employee of the "City" is re-employed,

and said employee has not been granted a leave of absence, he

may receive credit for prior service if he meets certain condi-

tions of this subsection.







7.10) The secretary shall maintain all records in segre-

gated files pertaining to the Plan and they shall not be inter-

mingled with other files of the "City."

8.1) It is contemplated, and all original and new mem-

bers of the Plan shall be deemed to have notice, that the City

Commission of this "City" may in the future decide that it

is in the best interests of the "City" and the members of

the Plan to modify or terminate Trust Agreements or contracts

entered into with an insurance company or companies, to exer-

cise options available to the "City" under the terms of such

Trust Agreements or contracts, to select another insurance com-

pany, trust, or other financial institution, as the depository

for pension funds.

City's Contribution:

The annual contribution needed to fund actuarially
the liability for annuities credited to employees on
the basis of actuarial methods and assumptions approved
by the Commission.

Insurance principles govern the operation of a pension

plan. It is necessary to comply with actuarial requirements;

therefore the annual rate of contribution has to be predeter-

mined at levels which will insure the accumulation of suffi-

cient reserves to meet the liabilities accruing under the

Plan.

This term is used in Sections 4.2, and 7.13 of the model

pension ordinance.

4.2) The City shall pay into the Fund amounts required

to provide the benefits under the Plan.







7.13) An actuary shall be employed by the Commission
and he shall recommend the amount of the "City's contributions"

to the fund which in his opinion is necessary for the current

operation of the Plan.

Commission:

City Commission of the City of Anytown.

The Commission is charged with the general administra-

tion and policy direction of the plan. The definition elimi-

nates use of the complete title of the City Commission within

the ordinance.

This term is used in Sections 4.4, 5.8, 5.14, 6.2, 7.1,

7.2, 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.10, 7.11, 7.12,

7.13, 7.14, 7.15, 7.16, 7.17, 7.18, and 7.19 of the model

pension ordinance.

4.4) The Treasurer shall be liable for the safekeeping

of funds received, and appropriated by the "Commission" under

his bond.

5.8) The member may elect to receive annuity benefits

payable under the plan with the approval of the "Commission"

in the form of a joint and survivor annuity instead of the

normal annuity form.

5.14) In case of legal or other disability, the "Com-

mission" may direct that all or any portion of a member's

benefits be payable to someone other than the member. The

decision of the "Commission" shall be final and binding.

6.2) Under conditions of this subsection, a member shall

be given service credit for city service before entering mili-

tary or related service, and if approved by the "Commission"






for the period of time spent in military or related ser-

vice as well.

7.1) The general supervision of the administration

of the Plan shall be by the "Commission."

7.2) The members of the "Commission" shall serve with-

out compensation for their services.

7.3) This Plan or any matter herein may be considered

and disposed of at any "Commission" meeting, and resolutions

of the "Commission": shall be by affirmative vote of at least

three members.

7.4) The "Commission" by resolution may promulgate

written rules and regulations not in conflict with the ex-

pressed terms of this Ordinance or the Charter to cover the

operation of any phase or part of the Plan as provided by this

Ordinance.

7.5) The "Commission" has the power to interpret the

Plan, and its construction made in.good faith shall be final

and conclusive upon all parties' interests.

7.6) The "Commission" shall have the power to select,

employ and compensate such agents and employees as they may

deem necessary and advisable in the proper and efficient ad-

ministration of the Plan.

7.7) The powers and duties of the "Commission" as set

out herein are not intended to be complete or exclusive but

each such body or persons shall .have- such powers and duties

as are reasonably implied under the .terms of this Ordinance.

7.8) The Ciby Cleik shall be Secretary to the "Commission"

under this plan.







7.9) It shall be the duty of the Secretary to keep ac-

curate minutes and records of the acts of the "Commission"

under this Plan separate and apart from the regular minutes

of City Commission meetings.

7.10) All notices, elections, designations and changes

of beneficiaries and similar writings pertaining to the opera-

tion of the Plan shall be made and preserved in writing on

such forms as the "Cormmission" may direct.

7.11) The "Commission" shall have authority to direct

where pension plan funds be deposited or invested, and to

negotiate appropriate contracts with a bank-or an insurance

company. The "Commission" may terminate trust agreements or

contracts or negotiate amendments as it sees fit. The "Com-

mission" acting as a Board of Trustees shall at all times main-

tain administration of the funds.

7.12) The Trustee or Insurance Company or Companies with

which a trust agreement or contract or contracts are entered

-into for the administration of the Plan shall submit annual

reports which shall be retained among the records of the Secre-

tary of the "Commission."

7.13) The "Commission" shall employ an actuary to review

the operation of the Plan at intervals of not more than two

years, and to make his recommendations to the "Commission"' as

to the actuarial solvency of the Plan, and such other informa-

tion as the "Commission" may require. The "Commission" may:

retain the actuary as a consultant, and provide for compensa-

tion for services.






7.14) In making any actuarial computation provided in

this Ordinance, the tables, charts and other statistical

information shall be selected by the "Commission"' from stan-

dard sources in common use by other annuity and pension plans.

7.15) Each member or beneficiary or other interested

member shall be responsible for advising the "Commission"

of his current mailing address, and promptly advising the "Com-

mission" relating to any error in connection with the payment

of benefit under or in connection with the Plan.

7.16) Pension payments and any other payments to be

made out of the fund, although not paid promptly for any rea-

son, shall not bear interest unless so ordered by the "Com-

mission," who shall have discretion to fix the rate and cal-

culate any such interest.

7.17) Each member of the "Commission" shall use ordinary

care and diligence in the performance of his duties and shall

not be liable for any loss unless resulting from his own gross

negligence, or his willfull misconduct.

7.18) Whenever any retirement annuities shall be less

than 10.00 per month, the "Commission" may elect to have

payments made quarterly. If the annuity payable at quarterly

intervals shall be less than "10.00, the "Commission" may elect

to pay the commuted value of the same, calculated at regular

interest, in one lump sum.
7.19) Where any notice, election or other instrument is

required or permitted by this ordinance to be filed with the

"Commission," the same may be filed with its Secretary.




70

Creditable Service:

S Service in the employment of the City of Anytown
for which credit is allowed under the terms of this
Ordinance. Such service shall be computed to the
nearest whole month of completed service but not in-
cluding any fractional parts of a month.

Employee's retirement benefits are based upon their ser-

vice to the municipality. The conditions for retirement pre-

scribed in the model ordinance are the attainment of a certain

minimum age and the completion of a certain period of service.

It is important to clearly define employment that will be

credited for retirement so that both the employee and the

municipality can agree on computations of pension benefits.

This term is used in Sections 3.3, 5.1(a), 5.1(b), 5.4,

5.5(a), and 5.5(b) of the model pension ordinance.

3.3) "Creditable Service" for retirement for the pur-

pose of calculating benefits shall consist of the membership

service rendered by the employee since he last became a mem-

ber, plus Past Service subject to the limitations of this

section rendered continuously since the employee's last date

of employment, to his normal retirement date.

5.1(a) The monthly pension for general employees is

h2.00 for every year of "credited service."

5.1(b) The monthly pension for policemen and firemen

is 1 percent of average monthly earnings, during the last

ten years of service, for every year of "credited service."

5.4) A general employee who has twenty years of "cred-

ited service" and has attained his 60th birthday may make

written application for early retirement to the City Eanager.






A fireman or policeman who has twenty years of "credited ser-

vice" and has attained his 55th birthday may make written ap-

plication to the City Nanager for early retirement.

5.5(a) If a member of the Plan dies or ceases to be a

permanent employee prior to his normal retirement date and has

less than 20 years of "credited service," or has not yet at-

tained his 55th birthday in the case of general employees, or

his 50th birthday in the case of policemen and firemen, all

rights of the employee in the pension plan will terminate.

5.5(b) If any member of the Plan torninates, employment

with the City prior to his normal retirement date and has com-

pleted 20 years or more of "credited service" and has attained

the age of 55 years or greater in the case of general employees,

or 50 years or greater in the case of policemen and firemen, the

pension credit earned at termination will be fully credited to

the employee.

Effective Date of the Plan:

The date on which the operation of the Plan is
to commence for the purpose of determining eligibility,
benefits and related matters, which is hereby fixed as
the first day of January, 1968.

This definition fixes the date on which the operation of

the plan will co.raenc.e. This is necessary for the purpose of

determining eligibility, benefits, and related matters which

are computed from the effective date.

This term is used in Sections 3.4, and 3.5 of the model

pension ordinance.

3.4) With reference to service before the "effective

date" of the Plan, no credit will be given general employees

for service to the City before January 1, 1960.








3.5) Policemen and Firemen will be credited with all

years of service to the City before the "effective date"

of the Plan.

Employee:

All persons employed by the City and so classified
under rules and regulations and personnel records of the
City, including probationall" or permanent employees.
Any appointed officer shall only be qualified under this
Plan under one office and that office being the one from
which he receives the largest annual salary, compensa-
tion or remuneration. Independent contractors are ex-
cluded. Part-time employees are excluded.

Pension benefits must be kept within the financial limits

of the municipality. Keeping these benefits within reasonable

limits may be most equitably accomplished by eliminating cer-

tain classes of employees from the plan. The model ordinance

includes all permanent employees in the plan while eliminating

part-time employees and independent contractors. This elimina-

tion is accomplished by definition which excludes part-time

employees.

This term is used in Sections 3.3, 4.1, 5.1, 5.3, 5.6,

5.7, 5.9, 5.13, and 6.3 of the model pension ordinance.

3.3) Creditable service for retirement for the purpose

of calculating benefits shall consist of the membership ser-

vice rendered by the "employee" since he last became a member

plus past service. Any 'eemployee" will be given credit for

service to the City starting January 1, 1960, or his date of

employment, whichever is later.

4.1) "Employees" will not contribute to-the cost of the


Plan.







5.1) An "employee" will normally retire on the first

day of the month following (or coinciding with) the attainment

of the ages shown in the schedule presented in this subsection.

In the event of normal retirement the retiring "employee"

shall be entitled to and shall be paid an annuity payable

monthly beginning with the month of retirement and continuing

until death. The amount of annuity to which a retiring "em-

ployee" will be entitled is calculated in subsections (a)

and (b) of section 5.1.

5.3) An "employee" who does not desire to retire on his

normal retirement date may make written application to the

City Clerk or City Ilanager for retention in regular or part-

time employment. Upon the approval of the City MIanager the

"employee" may be retained by the City for a period not to

exceed one year following his date of normal retirement. In

the event of such deferred retirement, the "employee," upon

retirement, shall receive the same amount of monthly retire-

ment pension that he would have received had he retired on his

normal retirement date.

5.6) The interest of an "employee" who dies before his

normal retirement date will cease and no death benefit under

the Plan will be paid to his estate or to the beneficiary of

such "employee."

5.7) If an "employee" dies after retirement no additional

payments will be made unless a retirement annuity option has

been elected in which case payments will be made in accordance

with the option.







5.9) An "employee" may select the Social Security Option

so that he receives, insofar as practical, a level total yearly

retirement income from the two sources.

5.13) No member, "employee," beneficiary or other persons

shall have any interest in, or right in, or to the fund or any

part thereof, or any assets comprising the same, except only

as to the extent expressed and provided in this Ordinance.

6.3) When any former "employee" of the City is re-employed,

and said "employee" has not been granted a leave of absence,

he may receive credit for prior service if he meets the require-

ments of this subsection.

Fund or Pension Fund:

All sums of money paid into the Plan by the City,
and all gifts and contributions to the Fund, accepted
from other sources, together with earnings and apprecia-
tion of the same, less disbursements made from said money,
in accordance with the Plan, or less any losses or de-
preciation, of asset value.

Use of this definition eliminates lengthy descriptions

of the monetary assets accumulated to meet the obligations

of the retirement plan established by the model ordinance.

This term is used in Sections 4.2, 4.3, 4.4, 4.5, 5.13,

7.13, 7.16, 7.17, and 8.2 of the model pension ordinance.

4.2) The City shall pay into the "Fund:" amounts required

to provide the benefits under the Plan.

4.3) The City may accept gifts, devises, bequests, or

appropriations to or for the "Fund" from any source.

4.4) Gifts, bequests, devises, or appropriations to the

"Fund" shall be received by the Treasurer, who shall be the

Treasurer for the Council.







4.5) All monies paid into and held by the "Pension Fund"

shall be promptly deposited with the Trustee or the Insurance

Company for the benefit of the "Pension Fund" according to

the terms of a Trust Agreement or contract to be negotiated

with the Trustee or the Insurance Company.

5.13) No member, employee, beneficiary or other person

shall have any interest in, or right in, or to the "Fund" or

any part thereof, except as to the extent expressed and pro-

vided in this Ordinance.

7.13) The Commission shall employ an actuary to review

the operation of the Plan at intervals of not more than two

years. One of the recommendations that the actuary will make

to the Commission shall be the amount of the City's contribu-

tions to the "Fund" which in his opinion is necessary to be

made for the current operation of the Plan.

7.16) Pension payments, although not promptly paid for

any reason, and any other payments to be made out of the "Fund,"

although not paid promptly for any reason, shall not bear in-

terest unless so ordered by the Commission.

7.17) Each member of the Commission shall use ordinary

care and diligence in the performance of his duties and shall

not be liable for any loss unless resulting from his own gross

negligence or his wilful misconduct; therefore any person

having any claim under the Plan shall look solely to the assets

of the "Fund" for the satisfaction of such claims.

8.2) The provisions of Florida Statute 185.37 pertaining

to termination of the Plan and distribution of the "Fund" are







hereby incorporated by reference as the same would apply to

the rights of policemen and firemen Onder the terms of this

Plan.

Gender:

The masculine pronoun shall include the feminine
pronoun.

This definition is included for simplicity when draw-

ing up the pension ordinance.

General Employee:

A general employee shall include all employees
as defined in 1.11 herein, other than Policemen and
Firemen.

All full-time employees are included in the retirement

plan and all occupational groups of employees are included

within the model pension ordinance. The provisions of the re-

tirement plan differ according to the occupational require-

ments of the different classes of employees. For this reason,

it is necessary to define each class of employee.

This term is used in Sections 3.4, 5.1(a), 5.4, 5.5(a),

and 5.5(b) of the model pension ordinance.

3.4) Ho credit will be given "general employees" for

service to the City before January 1, 1960.

5.1(a) "General Employees" will normally retire on the

first day of the month following (or coinciding with) the

attainment of the ages shown in the schedule contained in

this subsection. The monthly pension for "general employees"

is ;2.00 for every year of credited service.

5.4) A "general employee" who has twenty years of credited

service and has attained his 60th birthday may make written







application for early retirement to the City Manager. In

such event, he shall be entitled to and shall be paid an

annuity equal in amount to the annuity computed on the basis

of normal retirement, except that the amount so computed shall

be reduced by five-twelfths of one percent of said amount for

each month that early retirement precedes his 65th birthday

for "general employees."

5.5(a) If a member of the Plan dies or ceases to be a

permanent employee prior to his normal retirement date and

has less than 20 years of credited service, or has not yet

attained his 55th birthday in the case of "general employees,"

all rights of the employee in the pension plan will terminate.

5.5(b) If any member of the Plan terminates employment

with the City prior to his normal retirement date and has

completed 20 years or more of credited service and has at-

tained the age of 55 years or greater in the case of "general

employees," the pension credit earned at termination will be

fully credited to the employee.

Member:

Any person employed by the City who is included
in the membership of the Plan as either an original
member or a new member. However, a member shall be
limited and restricted to the definition of employee.

Persons employed by the municipality should be able to

determine whether they will be eligible for the benefits of

the retirement system. This definition limits and restricts

members of the retirement system to the definition of employees.

This term is'used in Sections 5.5(a), 5.5(b), 5.8, 5.10,

5.11, 5.12, 5.13, 5.14, 6.1, 6.2, 7.4, 7.11, 7.13, 7.15, 7.18,


anCd 0.1 of the model pension ordinance.







5.5(a) if a "member" of the Plan dies or ceases to be

a permanent employee prior to his normal retirement date and

has less than 20 years of credited service, or has not yet

attained a certain age, all rights of the employee in the

pension plan will terminate.

5.5(b) If any "member'" of the Plan terminates employment

with the City prior to his normal retirement date and has com-

pleted 20 years or more of credited service and has attained

the ages specified in this subsection, the pension credit earned

at termination will be fully credited to the employee.

5.8) The "member" may elect to receive annuity benefits

payable under the Plan with the approval of the Commission

in the form of a joint and survivor annuity instead of the

normal annuity form. The election of a joint and survivor

annuity shall be deemed to be automatically cancelled in the

event of the death of either proposed annuitant prior to the

"member's" actual retirement.

5.10) A separate record of account shall be maintained

for each "member."

5.11) The right of any "'member" or any beneficiary to

any benefits under the Plan or any other right accrued or

accruing to any persons under the provisions of this Ordi-

nance shall be unassignable and not subject to process of law.

5.12) Should any change or error in the records of the

Plan be discovered, or any error in any calculation be made

resulting in any "member-" or beneficiary receiving from the

Plan more or less than he was entitled to receive, the Council






shall have the power to correct such error, and as far as

possible to adjust the payments thereafter to be made in

such a manner that the actuarially equivalent of the benefit

to which such "member" or beneficiary was correctly entitled,

be paid.

5.13) 1No "member," employee, beneficiary or other per-

sons shall have any interest in, or right in, or to the Fund

or any part thereof, or any assets comprising the same, ex-

cept only as to the extent expressed and provided in this

Ordinance.

5.14) Whenever and/or as often as a person entitled

to payments hereunder shall be under legal or other disabil-ity,

the Commission may direct that all or any portion of the bene-

fits of such "members" be payable in one or more of the ways

outlined in this subsection.

6.1) Any "member" who has been granted a certain leave

of absence shall be allowed service credit earned prior to the

start of leaves of absence, and with service credit to resume

upon return to employment.

6.2) When any "member" is inducted or enlists in the

military or related service in response to an order or call

to active duty, and is subsequently re-employed by the City

within 90 days after release from any such service, he shall

again become a membere" of the Plan and shall be given ser-

vice credit for this service before entering military or re-

lated service.

7.4) Copies of rules and regulations promulgated by

the Copmmission to cover the operation of any phase or part






of the Plan as provided by this Ordinance shall be furnished

to any "member" of the Plan upon request.

7.11) The Commission shall have authority to direct that

pension plan funds be deposited with banks and/or savings and

loan associations or invested in securities or an insurance

company or companies, as determined by the Commission and

annuities may be provided for "members" and their beneficiaries

in accordance with the terms of this Plan.

7.13) The Commission shall employ an actuary to review

the operation of the Plan, and his report shall be submitted

in writing and copies thereof shall be available to "members"

of the Plan upon request.

7.15) Each "member" or beneficiary or other interested

"member" shall be responsible for advising the Commission of

his current mailing address, and any other information in

connection with any payment under or in connection with the

Plan.

7.18) Whenever any retirement annuity payable at quarterly

intervals shall be less than $10.00, the Commission may elect

to pay the commuted value of the same in one lump sum provid-

ing such election is made within six months after the "member's"

.retirement unless he consents in writing to a subsequent elec-

tion by the Commission.

8.1) It is contemplated that the City Commission of this

City may in the future decide that it is in the best interests

of the City and the '"members" of the Plan to modify or terminate

Trust Agreements or contracts entered into with an insurance

company.or companies, or to select another insurance company,






trust, or other financial institution as the depository for

pension funds.

r1embershin Service:

Service rendered as a full-time permanent employee
since last becoming a member of the Plan. Such service
shall be computed to the nearest full month of completed
service but not including any additional fractional parts
of a month.

The formula for computing pension benefits is dependent

on the employee's service to the municipality. Part of the

employee's creditable service will be membership service

since last becoming a member of the retirement system.

This term is used in Section 3.3 of the model pension

ordinance.

3.3) Creditable service for retirement for the purpose

of calculating benefits shall consist of the "membership ser-

vice" rendered by the employee since he last became a member,

plus Past Service rendered continuously since the employee's

last date of employment, to his normal retirement date.

New Member:

Any permanent employee who .becomes a member of
the Plan after the effective date of the Plan.

It is important to differentiate between employees who

are hired after the effective date of the plan and employees

who are already in the employ of the municipality on the ef-

fective date of the plan. The definition of a "new member"

clarifies just whom we are talking about when referring to

employees hired after the effective date of the pension ordi-

nance.

This term is used in Sections 3.2, and 8.1 of the model

pension ordinance.






3.2) A "new member" will become eligible to participate

in the Plan on the first day of the month following, or coin-

ciding with the date of his employment.

8.1) It is contemplated, and all original and "new mem-

bers" of the Plan shall be deemed to have notice, that the

City Commission of this City may in the future decide that it

is in the best interests of the City and members of the Plan

to-modify or terminate Trust Agreements or contracts entered

into with an insurance company, or to select another insurance

company, trust, or other financial institution, as the deposi-

tory for pension funds.

Normal Retirement Date:

The normal retirement date of a member shall be
his normal retirement date as determined in accor-
dance with the terms of the Plan.

Normal pension benefits are payable when the member

reaches his normal retirement date. This may be at varying

ages because employees will be hired at different ages. Sec-

tion 5.1 contains a schedule listing the normal retirement

date for employees dependent upon their age at entry into the

retirement plan. This definition avoids confusion on the part

of the municipality and covered employees as to when they will

-retire and be eligible for benefits provided by this ordinance.

This term is used in Sections 3.3, 5.3, 5.4, 5.5(a),

5.5(b), 5.6, 5.7, and 5.8 of the model pension ordinance.

3.3) Creditable service for retirement for the purpose

of calculating benefits shall consist of the membership service

rendered by the employee since he last became a member, plus







past service rendered continuously since the employee's last

date of employment, to his "normal retirement date."

5.3) An employee who does not desire to retire on his

"normal retirement date" may make written application to the

City Clerk for deferred retirement. In the event of such

deferred retirement, the employee, upon retirement, shall re-

ceive the same amount of monthly retirement pension that he

would have received had he retired on his "normal retirement

date."

5.-4) An employee who has twenty years of credited ser-

vice and who has attained a minimum age may make written ap-

plication for retirement prior to his "normal retirement date."

5.5(a) If a member of the Plan dies or ceases to be a

permanent employee prior to his "normal retirement date" and

has less than 20 years of credited service, or has not yet

attained a certain age, then all rights of the employee in

the pension plan will terminate.

5.5(b) If a member of the Plan terminates employment with

the City prior to his "normal retirement date" and has com-

pleted 20 years or more of credited service and has attained

a certain age, then the pension credit earned at termination

-will be fully credited to the employee. He may, when he reaches

his "normal retirement date," make written application to the

City Manager for the pension earned, and in such event, he

shall be entitled to, and he shall be paid, an annuity com-

puted on the same basis as that of other employees who retire

on their "normal retirement date."







5.6) The interest of an employee who dies before his

"normal retirement date" will cease.

5.7) If an employee dies after his "normal retirement

date" no additional payments will be'made unless a retirement

annuity option has been elected in which case payments will

be made in accordance with the option.

5.8) The member may elect to receive annuity benefits

payable under the Plan with the approval of the Commission in

the form of a joint and survivor annuity which must be re-

quested by the employee at least three years prior to date

of retirement, including retirement prior to "normal retire-

ment date."

Original Member:

Any permanent employee of the City who becomes a
member as of the effective date of the Plan.

It is important to clearly define those employees who

are already in the employ of the municipality on the effective

date of the plan. The definition of an "original member"

clarifies just whom we are talking about when referring to

employees who are in the city's employ on the effective date

of the pension ordinance.

This term is used in Sections 3.1 and 8.1 of the model

pension ordinance.

3.1) "Original members" shall be all full-time, permanent

City employees who had not reached age -sixty when originally

employed by the City.

8.1) It is contemplated, and all 'original members" of

the Plan shall be deemed to have notice, that the City Commission







of this City may in the future decide that it is in the best

Interests of the City and the members of the Plan to modify

or terminate Trust Agreements or contracts entered into with

an insurance company, or other finanOial institution, as the

depository for pension funds.

Past Service:

Service rendered as a full-time permanent employee
from January 1, 1960 to the effective date of the Plan.

The pension ordinance gives consideration to employees

who are- in the employ of the municipality when the retirement

plan is established. The financial obligation for this past

service credit is assumed by the municipality and discharged

by city contributions over a period of years. This past ser-

vice liability for employee benefits which are payable on ac-

count of service rendered for the municipality before the ef-

fective date of the retirement plan can be rather large. It

is limited in amount by writing a maximum time limit on the

credits that may be allowed for past service.

This term is used in Section 3.3 of the model pension

ordinance.

3.3) Creditable service for retirement for the purpose

of calculating benefits shall consist of the membership ser-

vice rendered by the employee since he last became a member,

plus "Past Servicer rendered continuously since the employee's

last date of employment, to his normal retirement date.

Permanent employee :

An employee who has completed his probationary
period, been approved for perr'anrent status by the







department head under whom he is employed, or the City
Commission, if approved by it, and has been certified
by the City Clerk or City Manager as a permanent em-
ployee, or according to the personnel records of the
City pertaining to such employee. Certification or
approval for permanent status shall be subject to the
rules of the career service system of the City of Any-
town.

The model ordinance includes all permanent employees in

the retirement plan. The above definition very clearly states

the conditions that must be satisfied in order for an employee

to be certified as permanent. This leaves no doubt in regard

to their eligibility for benefits under the pension ordinance.

This term is used in Sections 2.1, 3.1, 3.2, and 5.5(a)

"of the model pension ordinance.

2.1) A pension and retirement system for full-time "per-

manent employees" in the service of the City of Anytown, Florida,

is hereby established to provide retirement benefits as pro-

vided by this Ordinance.

3.1) Original members shall be all full-time, "permanent

City employees" who had not reached age sixty when originally

employed by the City.

3.2) New, full-time, '"permanent City employees" will be-

come eligible to participate in the Plan on the first day of

the month following, or coinciding with the date of their em-

ployment.

5.5(a) If a member of the Plan dies or ceases to be a

"permanent employee" prior to his normal retirement date and

has less than 20 years of credited service, or has not yet at-

tained a certain age, all rights of the employee in the pen-

sion plan will terminate.







Plan, Pension Plan or Emnloyees' Pension Plan:

The system of retirement benefits provided under
this Ordinance.

Use of this definition shortens the wording of the ordi-

nance. We can use the term "plan" rather than Employees'

Pension Plan of the City of Anytown, Florida.

This term is used in Sections 4.1, 4.2, 5.5(a), 5.5(b),

5.8, 5.10, 5.11, 5.12, 6.2, 7.1, 7.3, 7.4, 7.5, 7.6, 7.8,

7.9, 7.10, 7.11, 7.12, 7.13, 7.17, 8.1, 8.2, anC 9.1 of the

model pension ordinance.

4.1) The cost of the "Plan will be borne entirely by

the City and by State remittances. Employees will not con-

tribute to the cost of the "Plan."

4.2) The City shall pay into the Fund amounts required

to provide the benefits under the "Plan."

5.5(a) If a member of the "Plan" dies or ceases to be

a permanent employee prior to his normal retirement date,

then under conditions of this subsection, all rights of the

employee in the "pension plan" will terminate.

5.5(b) If any member of the "Plan" terminates employ-

ment with the City prior to his normal retirement date and

has completed 20 years or more of credited service and has

attained a certain age, the pension credit earned at termina-

tion will be fully credited to the employee.

5.8) The member may elect to receive annuity benefits

payable under the "Plan" in the form of a joint and survivor

annuity instead of the normal annuity form with the approval

of the Commission.







5.10) A separate record of account shall be maintained

for each member, which shall show such information as is

necessary for an active and comprehensive determination of

his status under this "Plan."

5.11) The right of any member or any beneficiary to any

benefits under the "Plan'-' shall be unassignable and not sub-

ject to legal process.

5.12) Should any error or change in the records of the

"Plan" be discovered, the Council shall have the power to cor-

rect such error.

6.2) When any member is inducted or enlists into the

military or related service and is subsequently re-employed

by the City within 90 days after release from any such ser-

vice, he shall again become a member of the "Plan."

7.1) The general supervision of the administration of

the "Plan" shall be by the Commission.

7.3) This "Plan" or any matter herein may be considered

and disposed of at any Commission meeting.

7.4) The Commission by resolution may promulgate written

rules and regulations not in conflict with the expressed terms

of this Ordinance or the Charter to cover the operation of

any phase or part of the 'Plan" as provided by this Ordinance.

Copies of such rules and regulations- shall be furnished to

any member of the "Plan" upon request.

7.5) The Commission has the power to interpret the "Plan"

and its construction made in good faith shall be final and

conclusive upon all parties' interests.







7.6) The Commission shall have the power to select,

employ and compensate any agents and employees that they may

deem necessary and advisable in the proper and efficient ad-

ministration of the "Plan."

7.8) The City Clerk or Deputy Clerk shall be Secretary

to the Commission under this "Plan."

7.9) It shall be the duty of the Secretary to keep ac-

curate minutes and records of the acts of the Commission under

this "Plan" separate and apart from the regular minutes of

City Commission meetings. These records shall be available

to the public, city officials, and employees under this "Plan"

at all times.

7.10) All notices, elections, designations and changes

of beneficiaries and similar writings pertaining to the opera-

tion of the "Plan" shall be made and preserved in writing on

such forms as the Commission may direct.

7.11) The Commission shall have authority to direct

that "pension plan" funds be deposited with any financial

institution permitted by this Ordinance to provide members

and their beneficiaries the benefits provided in accordance

with the terms of this "Plan."

7.12) The Trustee or Insurance Company or Companies with

which a trust agreement or contract or contracts are entered

into for the administration of the "Plan" shall submit a

statement of the condition of the funds on deposit to the

credit of the "Plan" at least once yearly.







7.13) The Commission shall employ an actuary to review

the operation of the '"Plan" at intervals of not more than two

years, and to make his recommendations to the Commission as

to the actuarial solvency of the "Plan," and such other in-

formation as the Commission may require.

7.17) Any person having any claim under the "Plan" shall

look solely to the assets of the Fund for the satisfaction of

such claims.

8.1) It is contemplated, and all original and new mem-

bers of the "Plan" shall be deemed to have notice that the

City Commission may in the future modify agreement or con-

tracts with financial institutions, or select another financial

institution as the depository for pension funds.

8.2) The provisions of Florida Statute 185.37 pertaining

to termination of the "Plan" and distribution of the Fund are

hereby incorporated by reference as the same would apply to

the rights of policemen and firemen under the terms of this

"Plan."

9.1) Whosoever with intent to deceive shall falsely or

cause to commit to be falsified any record comprising any part

of the operation or administration of the "Plan" contemplated

by this ordinance, shall be punished or fined according to

this subsection.

Plan Year:

A period of twelve consecutive months measured
from the effective date of the Plan, or from any anni-
versary thereof.

It is necessary for the retirement system to maintain

orderly financial records based on a predetermineO calendar




Full Text

PAGE 1

A MODEL PENSION PLAN ORDINANCE FOR FLORIDA MUNICIPALITIES By DONALD R. MONATH A DISSERTATION PRESENTED TO THE GRADUATE COUNCIL OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY UNIVERSITY OF FLORIDA 1968

PAGE 2

UNIVERSITY OF FLOR'OA 3 1262 08552 3719

PAGE 3

ACKNO!aJLEDGMENTS I appreciate the encouragement of my committee chairman, V/llliam Vi, Howard. Without his efforts this dissertation would not have been possible. I also want to thank Irving J. Goffman, Arnold C. Matthews, and Ralph H. Blodgett for the help and understanding that they have shown me In my work towards the doctorate. My sincere appreciation to John B. McFerrin and Clement H. Donovan who helped direct me towards this goal and to the other members of the faculty at Matherly Hall. 11

PAGE 4

• PREFACE The purpose of this dissertation is to present a model pension plan ordinance for Florida municipalities and to explain the purpose of the various provisions of the suggested ordinance. . At this writing, many Florida retirement plans are in financial difficulties because of too liberal pension benefits and inadequate financing. On April 21, I965, this writer received a letter from Ralph Turlington, Chairman of the Pensions and Retirements Committee of the Florida House of Representatives. Mr. Turlington wrote, "I am satisfied that municipalities throughout the state are in serious difficulties v;ith their plans." A real need exists in Florida for a model guide for public employee retirement system administrators. This need becomes Increasingly important with the growth of retirement programs in the State as the benefits and financial security of these pension plans are of concern to increasing numbers of Florida municipal employees. On January 29 » 19^6, the State Chamber of Commerce reported the combined financial assets of retirement programs for state and local government employees in Florida. By mid-1965 total assets held by these programs reached ^5^9 million — an increase of 93 percent over i960. Payments and earnings for the various retirement accounts ill

PAGE 5

during the fiscal year 196^-65 totalled :-;107 million, while benefits and withdrawals to public employees during the year amounted to :";;37 raillion. Many of the problems faced by municipalities require tailor-made solutions, but there are many facets of municipal pension plans which are subject to model guidelines. V/hlle the Model Ordinance Illustrates a complete pension ordinance, it is not Intended as an absolute guide for pension planning. The model should be carefully appraised, because many decisions enter into the design of a pension program and every pension plan must be constructed in the light of its own particular situation. Hence, the explanations of the individual provisions of the Model Ordinance will help to meet the specific needs of a municipalitj'and its employees. One purpose of this dissertation is to present a pension plan that could be adopted by a city. It is also the hope of this writer to enlighten all public officials who are responsible for the formulation of the provisions of a nev; plan or the revision of an existing plan. VJith these readers In mind, the dissertation has avoided the highly technical actuarial aspects of pensions in favor of the elementary approach. The general approach is to analyze — not to advocate; therefore, attention is focused on the factors which should be considered, not on absolute ansvjers. It is anticipated that this dissertation will merit the support of responsible officials and bring about a better understanding of sound pension planning by providing all public Iv

PAGE 6

off Icialswith a model guide to acconplish the desired results without placing undue burdens upon the financial resources of taxpayers.

PAGE 7

TABLE OF CONTENTS Page ACKNOWLEDGMENTS 11 .PREFACE 111 LIST OF TABLES Ix CHAPTIi:R I SOCIAL AND INSTITUTIONAL FORCES THAT Il-IFLUENCE PENSION PLANS 2 Introduction Social Forces Institutional Forces Florida Statutes Local Lavj Cities Old Age, Survivor's, and Disability Insurance Federal Tax Policy Summary. CHAPTER II A MODEL PENSION PLAN OPxDINANCE FOR FLORIDA MUNICIPALITIES 32 Index Definitions Establishment of the System Membership and Service Contributions and Funding Retirement and Retirement Benefits Leaves of Absence and Military Service Administration of the Plan Future Changes in the Operation of the Plan Protection Against Fraud and Deceit Amendment Separability and Construction Repeal of Conflicting Ordinances Effective Date. CHAPTER III DEFINITIONS, EXPLANATION OF RELATED PROVISIONS AND ESTABLISHMNT OF THE PENSION SYSTEM 51 Definitions Establishment of the Pension System vi

PAGE 8

Page CHAPTER IV MEMBERSHIP AND SERVICE _ 101 Membership Service, CHAPTER V CONTRIBUTIONS AITO FUNDING 109 Funding Cost of the Plan Contributions. CHAPTER VI RETIREMENT AND RETIREMENT BENEFITS 121 Retirement Benefits Retirement Termination Benefits. CHAPTER VII CHOICE OF FUNDING I-IEDIUM 13 6 Uninsured, Self -Administered Pension Trust Insured Pension Program Conclusion. CHAPTER VIII LEGAL PROVISIONS 153 Exemption of Funds from Assignment and Tax Protection Against Fraud Interpretation of the Plan Supervision Administration Future Changes. CHAPTER IX SUMMRY AND CONCLUSIONS 160 Summary Conclusions. APPENDIX "A" . 171 Actuarial Data for Chapter 175 Funds at January 1, 1966, vil

PAGE 9

Page APPEITOIX "B" Actuarial lata for Chapter 185 Funds at 188 January 1, 1966, BIBLIOGRAPHY 20li. viH

PAGE 10

LIST OF TABLES Tables Page 1 Contribution Rate Schedule 19 (Percent of Covered Earnings) 2 Illustrative Retirement Benefits 21 Chapters 175 and 185, Florida Statutes -3 Illustrative Retirement Benefits 22 Model Pension Plan if Aggregate Termination Rates 10? (Raw Data) Florida Municipal Police Pension Funds 5 Proportion of Normal Retirement Income 129 Available In Event of Early Retirement at Various Ages 6 Actuarial Data for Chapter 175 Funds at 172 January 1, 19 66 7 Actuarial Data for Chapter 185 Funds at 189 January 1, 19 66 8 Progress Report to the 1967 Legislature on 203 the Municipal Police Officers' Retirement Trust Fund IX

PAGE 11

V/e bad better look to these problems and provide for the af-ed as promptly, rationally, and as compassionately as we^can. Today, "they" are the aged; tomorrow, we shall be they.-^

PAGE 12

CHAPTER I SOCIAL AND INSTITUTIONAL FORCES THAT IJJFLUENCE PENSION PLANS The forces that move economic man are various ana often difficult to predict, but no motive in man's history has been more constant or more obvious than his quest for security. Pension trusts are but the most recent attack human society has made upon its age-old problem. 2 Introduction Much evidence exists to support the need for and advantages of a pension program for municipalities. Of the various methods of dealing with the problems of aged employees, the pension plan is the best. This chapter will first of all discuss the various alternatives for dealing with the aged, and second, discuss the various economic advantages of a pension plan. Last, the chapter will discuss the provisions of the various Institutional regulations, Florida Statutes 175 and 185, OASDI (Social Security) and the Federal Income Tax Policy, which Influence the establishment of a comprehensive pension plan for municipalities in Florida. Since this dissertation is directed toward Florida municipalities exclusively, except where otherwise stated, the term emoloy^ev, will be used synonymously with municipalities or a municipal employer.

PAGE 13

>^oclal Forces. Any employer (municipal or private) must face the problem of aged employees at some time. When this time arrives, the employer can elect only one of the following alternatives regarding these employees: 1. He can discharge the employees — vjith or without a gold watch and a farewell dinner. 2 . He can keep them employed by leaving them on the payroll . 3. He can supply them with a retirement income. We may assume that acceptance of the first alternative, discharge, would result in a group of needy aged whose existence would be a denial of the philosophy that the elderly should live with dignity and in a decent manner. Pew would deny that for those who have worked all their adult lives, an ample standard of living should be not a gift of charity, but a right. Of course, employers desire to do "the right thing" for their employees, and for humanitarian reasons discharging an employee is not acceptable. Another more practical reason for eliminating the first alternative is the unique nature of a municipality. The community is not a thing apart from its individual groups — it is a summation of all the members. The municipality consists not only of its aged employees, but also of their sens, daughters, nieces, nephews, grandchildren and friends who have a meaningful stake in the financial well-being of the elderly and the povjer through their votes to influence public officials

PAGE 14

may be strong enough to eliminate the first alternative. The indigent aged will live either through welfare receipts or support from their children. It is difficult enough to bring up a family properly today without also supporting one's parents. How long vjould these children vote for the local elective officials while their income was overly stretched in an attempt to support two families — one of whom gave many years v;orking for the municipality? An abundance of economic reasons for eliminating this first choice also exists. Any fancied savings by stinting on funds to finance an adequate pension system will be spent for public assistance programs--f inanced by tax revenues. The deficiencies of the needy aged vjill have to be met one way or the other, and because of the mild Florida weather, these former employees are very likely to remain in the same community where they have spent their working lives. No, these men cannot be discharged and forgotten! Likely they will reappear on the welfare roles, receiving the money that was "saved"' by not initiating a pension program. The second alternative — to keep them employed by leaving them on the payroll — can be very expensive. To retain employees beyond the time when their efficiency has begun to decline vjould constitute a drag on the sm.ooth operation of the entire municipal organization. An em.ployee vjhose effectiveness has definitely deteriorated constitutes, at best, a part-time worker at full-time pay. While some employees may retain their abilities and effectiveness through the years

PAGE 15

5 and others rnp.y continue to be effective In administrative positions, these are a minority, and special provisions can be made for them. The overwhelming majority of employees — most of whom could not have filled administrative posts in their younger years cannot be expected to do so later. An employee retained in a supervisory position when he ceases to pull his share of the load will harm efficient operations and stultify the incentive of younger employees to do their best work. Again, there is nothing saved with this method, as retirement costs are merely hidden in the current payroll. There Is little doubt that the third alternative of supplying aged employees with a retirement income is the only economic and efficient way to take care of the superannuated worker. A pension plan is a necessity for most employees. High tax rates and living costs eat up most of their earnings. . Only through a retirement pension can he be assured that after a lifetime of productive work he will not be forced into a retirement period of poverty. Since most people have been unable to save the funds necessary for the retirement needs of themselves and their dependents, it is the pension plan that will insure funds for retii'ement. Because our economy vjould benefit from ample purchasing power in the hands and pockets of the elderly, it would be profitable to the community to insure that this is made possible. The advantages vjhich can accrue to an employer with a well-planned retirement

PAGE 16

6 program run a lengthy gamut. It v;ould be naive to think that municipalities Install a pension program for humanitarian reasons alone. As previously stated, a planned retirement program permits employees, who are disabled or aged to leave employment at no further cost to the municipality. Little doubt exists among experts in this area that a planned retirement program is the most. efficient vjay to take care of superannuated employees. Undoubtedly, a pension enables employers to replace elderly employees with greater ease, as there is much less resentment from employees and from the public. "Employers today often look upon pensions as an orderly means of financing the removal of ' the inefficient and permitting their replacement by those with greater capabilities. "3 The employer's reputation in the community will be enhanced by having definite provisions for the retirement of aged employees vjith long periods of service. Discussion with municipal pension . officials have convinced this writer that most employers sincerely desire that their employees have adequate retirement incomes. Many employees, who realize that their job performance is inadequate s would be favorably inclined to retire if they were assured of an adequate income after retirement. This is the basic purpose of pension plans — to provide income to employees vjho have v/orked for a stated period and who retire either from choice or necessity. As the older workers are retired, they are systematically replaced by more vigorous and more efficient workers. Thus, by keeping avenues of advancement open, the efficiency and morale of all employees

PAGE 17

are improved. Younger employees would perform their best work knowing that all avenues of advancement v;ere continually kept open. The case of Benjamin F. Falrless illustrates this principle. When Benjamin F. Fairless reached the age of 6^ and announced his retirement as chairman of the board of the United States Steel Corporation, he clearly stated the function of a pension plan in clearing promotional avenues for younger men. Mr. Falrless said: . , .1 am firmly convinced that there must alvjays be . room at the top of our management team for young men with young ideas and a fresh, new outlook upon the problems that our company must face if it is to keep pace with its growing responsibilities toward a young and growing nation. Unless this chance for advancement is constantly kept alive, at every level of m3.nagement, it would only be a matter of time until the most able of our younger executives vjould seek opportunities elsewhere. Thus our entire organization would soon become stagnant — set in its ways, and dangerously unprogressive in its views. And that, of course must never never happen at U.S. Steel. ^ This prospect of advancement would also encourage talented and ambitious personnel to seek their opportunities within the municipality. Undoubtedly, a pension plan not only will hold employees, but also vjill help to attract others. An adequate pension plan has still another distinct advantage. Through the pension plan, a municipality induces long periods of service. This gives the municipality a hold on progressively more experienced, hence, more valuable employees. The reduction of employee turnover is important in minim.izing expected costs.

PAGE 18

8 A study by the United States Department of Labor clearly showed that private companies with pension plans had a more stable vjork force than those without pension plans. The annu-dl separation rate per 100 employees -was only 3^ for companies with pension plans, compared to 62 for companies without pension plans. 5 While these figures are based on data from private firms and are eleven years old, this writer's unsubstantiated opinion is that they are proportionately typical for present day municipal employers. As of this writing, no comprehensive studies have been made in this area of municipal pension plans In Florida; however, the State of Florida is planning studies within these areas, and probably around 1969 v;lll have sufficient data for pertinent conclusions. Todaymost pension experts recognise tha.t management derives definite advantages from a pension program. Am.ong the many benefits a municipality derives from a pension program is the advantage that it will help attract and hold competent employees. The development and retention of an experienced work-force must of Itself decrease municipal costs vjhile promoting loyalty to the community and its administrators. The municipality, and particularly the smaller governmental units, cannot absorb the inefficiency resulting from a rapid turnover of personnel. As the economy has moved upward toward a situation in which skilled labor is at a premium and efficiency is in great demand, employers feel that they must provide Inducements to keep their trained employees on the Job. The pension plan with its promise of reviard for

PAGE 19

long service Is an excellent device to Insure the continued services of valued eniployees.^ In the competitive labor market, the more an eniployer can offer prospective employees, the more successful he will be In hiring proper help. A pension plan will help the municipality to compete in the labor market with other governmental units and with private corporations. As one expert stated: "Probably one of the most important arguments advanced for a planned pension program is that it keeps the organization virile and able to meet active competition."'^ While economic reasons are most often the reason for establishing pension plans, some municipalities may be fulfilling a genuine desire to contribute to the welfare and retirement security of their employees. Therefore, philanthropy may be another motivation for many pension plans. However, philanthropic motivation is difficult to evaluate. Likewise, systematic retirement, louer turnover and the resulting improvement of employee morale are difficult to evaluate precisely. There are Just too many secondary and tertiary benefits to arrive at any reliable financial answers. But when we add these benefits to the political stability accruing from the improved community good will, it seems almost absurd for any Florida municipality not to have a proper retirement program for its employees. Institutiona l Forces Many laws influence the establishment of a municipal pension plan in Florida. Of these, probably the ones that

PAGE 20

10 would Influence the most are Chapters I75 and I85 of the Florida Statutes which concern pension plans for firemen and policemen. The federal plan for "Old Age, Survivor's, and Disability Insurance" commonly known as "Social Security" would also influence the pension plan. Last, the Federal Tax Policy strongly encourages the pension plan. Florida Statutes The members of the Legislature of the State of Florida showed an interest in pension plans for firemen with the passage of Chapter 175 of the Florida Statutes in 1939. Legislation for a police officers' pension plan was passed in 1953 with the enactment of Chapter I85 of the Florida Statutes. There are no statutory pension plans for city employees who are not firemen or police officers. These statutes have had a substantial impetus in the implication of retirement plans for policemen and firem.en. Some city charters enable the individual municipality to establish a pension program for its employees without approval of the Florida Legislature. A municipality without such charter authority must have its local legislative delegation put through a special legislative act to establish the pension plan. In brief, if there Is no charter authority, a city may have the Florida Legislature pass an Act establishing a pension plan in that city. The Statutes are set up in the following manner. Chapter 175 provides that municipal pension plans for firemen may receive one-half of the premium tax revenues on certain fire and windstorm Insurance risks within the municipality's

PAGE 21

11 t geographic area. Chapter 185 provides one-half of the premium tax revenues for police officers; this tax source, hovjever, derives only from automobile, fidelity bonding, burglary, and plate glass Insurance. Chapters 175 anci 185 do not require any municipality to Institute a pension plan. These Statutes merely provide that If the municipality desires to have a retirement program, and if this program meets certain minimum requirements, the State will then turn over the stated tax receipts to the individual pension funds. Those cities that follow the er.act provisions of the statutes are called "175 Cities" or "185 Cities." The individually enacted pension plans are frequently called "local lavj" plans. Both local law plans provide varying benefits to their covered employees. "In general, local law plans provide benefits that are somewhat more liberal than those written into Chapters 175 sind. 185 > though this need not be the case." Under provision of these statutes, the I-lunicipal Firemen's Pension Trust Fund was established in 1939 and am.ended at various intervals by the State Legislature. The most recent amendment was enacted in 19^3 . Of the 101 participating cities in 196i|-, forty-seven follow Chapter 175 and fifty -four operate their own plans. Generally, the larger cities have local lavj plans and the smaller cities follov; Chapter 175*^ Likewise, the Municipal Police Officers' Retirement Trust Fund was established in 1953 and amended in 1959. In 196^, of the ninety -one participating cities, forty-five follow Chapter 185 and forty-six operate their own plans. Generally, the

PAGE 22

12 larger cities have their own plan and the smaller cities follow Chapter 185.^° Any incorporated city or town that owns and uses approved and serviceable fire fighting equipment and apparatus valued at more than 510,000 may have a Municipal Firemen's Pension Trust Fund while an incorporated city or tovm may have a Police Officers' Retirement Trust Fund if it owns 3500 of serviceable police equipment. Once a municipality establishes a Firemen's Pension Trust Fund, participation in the plan is mandatory for all firemen (full-time and volunteer) , however, only full-time members of the police department are covered under a Municipal Police Officers' Retirement Trust Fund and it is not compulsory that all police officers be members of the Fund as they may elect out of the Fund by a non-reversible written request anytime during their first year of service. As a result of these policies, the following regulations determine benefits. A fireman or police officer is eligible to receive the normal retirement benefits as outlined in the Statutes when he has reached the age of sixty and has contributed to the Fund for ten years. These employees contribute 5 percent of their salary to the Fund. If Social Security coverage is provided, the contribution may be reduced to 3 percent of the employee's annual compensation for v;hlch he receives reduced benefits. For those who contributed 5 percent of their salary, the benefit formula is 1,6? percent of the average cash salary of the ten best contributing years of the last fifteen years prior to retirement. For those vjho

PAGE 23

13 only contributed 3 percent of their salary, the benefit formula Is reduced to 1 percent. This percentage is multiplied by the total number of years of service to arrive at the employee's retirement pension. The pension is payable for the retiree's life with a minimum guarantee of ten years should he die prior to receiving 120 morthly checks. Optional forms of retirement income at an equivalent actuarial value are available if the police officer or fireman is in good health, or Vias preselected an optional form of income at least three year's before retirement. There are varied benefit provisions to cover early retirement at age fifty after ten years of contributing service, and to cover disability retirement. Police officers are not required to m.ake contributions beyond the normal retirement date and benefits do not increase for service performed beyond this age. The responsibility for the proper administration of the Statutory Fund is vested in the local m.unlcipal Board of Trustees. This board collects all receipts, invests the Fund's assets, and makes all payments for legitimaite claims. The State of Florida conducts quinquennial actuarial valuations for all "175 > 1S5 Cities" and distributes premium, tax monies due these participating cities. Local Law Citie s Municipalities with plans operating under their own statutes administer their Funds in accordance with the provisions of the local ordinance establishing the plans. In order

PAGE 24

to receive their share of premium tax money, they must have the following minimum standards under Section I75.351 of Chapter I75, and Section 185.35 of Chapter I85: A) Normal retirement age, if any, must be no more than age 65, B) Period of eligible service must not be more than 35 years. C) The monthly benefit formula must be equal or greater than one-twelfth of 1 percent of the fireman's or police officer's total earnings during his entire period of credited service. D) The monthly pension payment may have a maximum limitation, but this cannot be lower than .^lOO. E) Actuarial valuations must be conducted at least quinquennially. These are submitted and reviewed by the State Treasurer's Office. The. only requirement for a municipality to begin sharing the premium tax money with the State of Florida is the passage of a local ordinance to establish the retirement fund v;hich will abide by State law. Usually, the same ordinance levies the appropriate premium tax. Once a Fund is established, notice should immediately be sent to the State Treasurer. Only when this notification is received by the State can the. municipality participate in the distribution of its share of premium taxes; Even though local law cities establish their pension plans in conformity with the minimum State requirements each

PAGE 25

15 Individual ordinance may be different than the ordinance of other municipalities. The many divergent types of plans in operation In Florida produce no uniformity, because there is no standardization of basic pension benefits. The variety and complexity of these plans require special actuarial reports for each local law city. Of the many problems found in these divergent types of plans, one of the most serious is proper funding. For pension plans covering firemen, the State of Florida has set July 1, 1968, as the final date when all municipalities must prove minimum funding as required by the statutes. If these plans are not properly funded, they will stop receiving their share of the premium tax money. Police Officers' Funds had to comply by July 1, 196^. The State of Florida uses compulsory disclosure, inspection, and inquiry to police the operation of municipal pension plans. However, the St£tutes do not guarantee the effectiveness of these plans. The State has only the power to cease sharing the premium tax receipts when the plans do not maintain minimum standards. Since there is no legal requirement to force municipalities to pay their contributions promptly, the power of the State in this respect is weak. These plans involve large sums of m^oney and entail long-term municipal obligations. The technicalities and complexities of pension plans should be regularly studied by qualified actuaries and other specialists. Only through sound funding can employees

PAGE 26

16 be insured of the proper growth of reserves to a sufficient amount that vjlll adequately finance their pension benefits. The pension movement is relatively young in this country, but the State of Florida is one ofseveral states which have taken the lead in enacting legislation to provide a measure of supervisory control and information about municipal plans and their financial operations. Perhaps the greatest formative influence on municipal pension trusts has come from the effect of Chapters 175 and 185 of the Florida Statutes. Old Age, Surv ivor's,, and Disability Insurance V/hile the State of Florida has aided the growth of municipal pension plans, "the chief impetus to pension fund growth, however, was the establishment of Old Age and Survivor's Insurance in the middle thirties. . . .'H The old age insurance program which comprises only Title II of the Social Security Act has become so popular that today it is commonly referred to as "Social Security." This is a social insurance program. There is no means test — benefits are received in proportion to payroll taxes paid equally by the employer and employee. Municipal employees in Florida may be covered by Social Security under voluntary agreements between their employer and the Federal Government. The State Legislature has passed laws enabling Florida municipalities to participate in OASDI . Details on hovj to arrange Social Security coverage may be obtained from the Florida League of Municipalities in Jacksonville.

PAGE 27

17 petlrement benefits . -Under provisions of the program, a fully Insured worker and his wife will receive monthly benefits upon becoming 65 or over. Actuarially reduced benefits can be received from age 62 to 6^ if desired. A man (or woman) can still work while receiving benefits. There is no limitation on earnings after age 72. Generally, those younger than 72 may earn up to |>1680 in a year and still receive their full benefits. A municipal retirement pension is considered Income, and there is no limitation on the amount of incom.e received while collecting Social Security benefits. The amount of the Social Security pension is figured from average earnings under covered employment. TVie maximum amount of Social Security earnings that can now be counted for Social Security is .]|;7j800. The monthly retirement benefit at 65 will be somewhere between r'}^^ (the minimum) and ^|218 (the maximum). A retiree's wife receives one-half the amount of her husband's primary benefit. Other . benefits . -Disability benefits begin after a sixmonth waiting period. The amount of the disability payment is the same as the amount of benefits that vjould be received at age 6^ (62 if a woman) . Just as with regular retlrem-ent benefits, additional payments are made to certain dependents of the disabled worker. An employee is genuinely concerned for the welfare of his wife and children should he become disabled. This, of course, can be adequately provided through private Insurance companies, but any meaningful disability protection is quite expensive and Workmen's Compensation is

PAGE 28

18 hardly adequate for occupational disabilities. According to Merton C. Bernstein, " . . .over half the disabling injuries that occur every year are not covered by Uorkraen's Compen12 sation." This is a national average, and it may be that the average would be much higher for Florida municipal employees — since many of them are policemen and firemen vjho are subject to energetic and fatiguing vjork for many hours during each working day. After the death of a worker, a lump sum death payment is paid. This is three times his monthly retirement benefit with a maximum of ^"255. Any dependent unmarried child under age 18 will receive a monthly income of three-fourths of the worker's normal retirement benefit, A vjidow under 62 also vjill receive a similar benefit vjhlle caring for these children. A widow over age 62 with no dependent children will receive 87|percent of her husband's normal retirement benefit. There is a maxim.um family payment of (^k'}^,^0, Usually, benefits for a widow and two eligible children will reach this maximum. Additionally, benefits are available to unmarried children over 18 who wei^e permanently disabled before becoming 13. Dependent parents who are at least 62 are also entitled to survivor's benefits, pontribut ions . -In order to receive benefits, it is mandatory for every worker in covered employment to pay a tax based on his earnings. This contribution is paid regardless of his age and even when receiving Social Security benefits. Payments, as shown in Table 1, are deducted from the employee's salary.

PAGE 29

19 For

PAGE 30

20 ^^^.^ — a much higher contribution. On the other hand, some employees do not want Social Security because they do not relate their additional contributions to increased benefits. Also, in many cases firemen prefer not to participate in Social Security as firemen because they "moonlight" and are thus covered by Social Security as self-employed persons. They feel that if they were covered by Social Security as firemen then their firemen's pensions would be reduced. By keeping Social Security out of the city program, firemen (and to a lesser extent policemen) expect to have a more liberal pension and at the same time receive the benefits of Social Security with full retirement pension benefits under the statutes is illustrated in Table 2. For example, if an employee retires with average yearly earnings of .^6,000 and no Social Security coverage, his pension after thirty years will be 1.67 percent per year or $250. Table 3 illustrates the combination of Social Security benefits with pension benefits of the model pension plan (Chapter 2). This same employee with Social Security coverage will receive a pension of 1 percent per year of his average monthly earnings or 3150, plus §182 from Social Security--a total retirement pension of 5332. This is why it may be reasonable for municipal employees who are under Social Security to receive 1 percent of earnings per year of service as a pension, while those employees who do not participate in Social Security to receive 1.67 percent of earnings per year of service.

PAGE 31

M ft] § H Eh EH CO a 3 (I. a (C to » a> CO •p ;. D « 4J O OJ •H •P « p* p C.-O (0 C j= as o A) a E (C o u .H o q B M C P cc C U: 0) e V o P lU IC P c E cc

PAGE 33

Q>

PAGE 34

24 While the dual benefits of Social Security insurance argues strongly in its favor, OASDI does not provide a sufficient retirement income to meet today's rising costs. Federal Government efforts have been directed to provide some minimum basic benefit through OASDI legislation. Between 1950 and 1968, OASDI coverage has been expanded. Children's benefits have been Improved and benefits for widows have been liberalized. A cascade of amendments has improved the actual and poten-tial benefits for full-time, year-round workers. The Medicare Bill has added hospital benefits and low-cost medical insurance to the provisions of OASDI. As one pension expert states: "With assurance of a minimum benefit, the employee, through his own individual effort and supplemented by any benefits his employer may provide, can seek to raise his oldage Income to an 'adequate' level. "•'-3 The labor unions which have been strong advocates of Social Security seem to summarize their opinion of OASDI in the following quote: The Social Security system accomplished the aims of vesting, continuity of coverage, adequate guarantees, and equity of treatment much more economically, effectively, and efficiently than is possible through a system of scattered, fragmentary, limited and unrelated private pension systems. A private plan should be regarded only as a supplement to the Social Security program. It is not, and never can be, a substitute for it.^^ A desirable allocation of resources varies from person to person and from group to group. This variety of needs would argue in favor of the present O^.SDI system being utilized as a base on which to build municipal pension plans.

PAGE 35

25 ••From the point of view of the municipality — or the employee — It Is a bargain. "15 Social Security vjlll provide a basic disability and retirement Income that Is weighted In favor of lower Income groups. Simultaneously, OASDI provides income to survivors and dependents — at least during their young and older ages. Medicare has added hospital and medical insurance to protect the retiree from overburdening health costs. As Professor Hilliam Hovjard stated: ". . .it is a system that may ultimately have to be subsidized by all taxpayers and since residents of our municipalities pay taxes to the Federal Government, they may as vjell share in the benefits."-'-" Federal Tax Policy With the country's Social Security program providing the basic impetus for the growth of pension plans, the Federal Income Tax Law has played a major part in stimulating the growth of m.uulclpal pension plans by permitting the tax free earnings of pension trusts. The Federal Government has encouraged the growth of pension ti'usts through special provisions of the Internal Revenue Code. Since municipal governments do not pay federal Income taxes, it is only those provisions relating to the income of employees and the pension trust Itself that are of importance to this paper. As far as an employee is concerned, the main purpose of his pension plan is to provide him an Income when he retires from employment because of age. The Federal Government agrees with this fundamental purpose. Probably, this agreement is

PAGE 36

26 the reason for favorable tax treatment and protective legislation. Under the provisions of the Tax Law the municipality's contributions to its pension plan are considered vjages, but they are not currently taxed to the employees as part of their Income for the year. Section ^02 of the Internal Revenue Code of 195^ specifically exempts the employee from taxation on contributions made for him by the municipality. V/e might say that employer contributions are the equivalent of a longterm, tax-free loan to the pension fund. These contributions are treated for income tax purposes as deferred income. The benefits of the pension are taxable to the employees only when actually received. Although all of the income resulting from a pension is ultimately subject to taxation, the delay in taxing pension income vcorks very favorably for the employee.-'-''' There can be a definite advantage in paying the tax on this portion of his income after retirement — u'hen he will be taxed at a lower personal rate and nay claim two exemptions as a personal deduction. In certain cases, this can be a much lower long-term capital gains rate. This exception occurs when the employee or his estate receives the total am.ount of his pension benefits in one calendar year. On his death, an employee's beneficiary can receive up to 559000 in a luiTT[D svira from, the deceased employee's pension account (attributable to municipal contributions) free of income tax. ' In summary, only pension lncom.e derived from employer contributions is taxable--and then only on benefits as they

PAGE 37

27 are actually received or made available. These taxes are paid as If the pension income were an annuity. Under Section 72(d) of the Internal Revenue Code, the employee may spread his cost over the periodic payments of the annuity and the difference betv-;een the annual prorated costs. Only the difference actually received is taxed as income. The one exception to this procedure occurs when the employee's total cost is less than the annuity receipts of the first three years. In this case, the initial payments are charged off against his costs until the total cost is completely recovered. The full amount of subsequent payments are then taxed as income. In addition to m.unicipal contributions, many pension plans are financed through a combination of employer and employee contributions. Income tax is not payable on the portion of pension plan benefits that were financed by the retiree's contributions. In a plan which the employee contributes to the cost, he is currently taxed for the amou.nt of his contribution. The reader should fully realize that even though this contribution is vjithheld from the employee's wages and paid directly into the pension fund, it still is taxable to the employee. Pension experts agree that the net effect of this tax system is that an employer can provide a larger pension by contributing directly to the pension fund from his own pocket and bypassing the employee. As one expert states: "Since the total sum required to purchase pension benefits comes ultimately from the employer anyway, in most cases the tax advantages to the employee in a noncontributory plan will outweigh the advantages of a contribu-

PAGE 38

28 The advantages of a pension plan are further enhanced by the fact that earnings and gains' on the trust funds are completely exempt from all taxes until such tlm.e as the pension trust pays out benefits to the employees. Thus, the funds compound tax-free during the accumulation period and increase at a much greater rate than if they were subject to tax. The tax exem,ption allowed on the earnings of the monies in the plan permits the employer, per dollar of outlay, to buy a much larger benefit for his employees -than would otherwise be possible. And the tax deferment granted to the employee on the funds being accumulated for him enables him to reap far larger benefits than he could if the employer were to pay extra compensation directly to him. rather than put it into the plan for hlm.'^" The Internal Revenue Code permits tax-free earnings for •the pension reserves of municipalities . This is approved by the Florida Legislature which has exempted pension trusts from the rule against perpetuities and the rule against accumulation s. 20 Employer contributions are not taxable to employees until they are received, and then usually under favorable tax treatment. Employee contributions are deducted from benefits in arriving at taxable pension income. Summary As has clearly been demonstrated, the best way to take care of aged employees is to establish a pension plan. The pension plan is the most practical, humanitarian and economic plan to retire municipal employees who have devoted long periods of service to their employer. Likewise, existing Florida and Federal Legislation encourages this establishment.

PAGE 39

29 The Florida Statutes concerning police officers and firemen have provided a basic lmi:jetus tov/ard establishment of a plan to take care of all municipal employees. Moreover, Federal OASDI legislation adds still further advantages for the establishment of such a plan. Equally Important Is the Federal Tax Policy vjhich encourages the employer to finance pension plans to the advantage of both employer and employee. The need for a pension plan has been clearly shown, so we will turn next to the actual pension ordinance suggested for municipal implementation in Florida.

PAGE 40

NOTES Merton C. Bernstein, The Future of Private Pensions (The Free Press of Glencoe, Kew York, 196k) , p. 19U-, 2 Paul P. Harbrecht, Pension Funds and Economic Power (The Twentieth Century Fund, New York, 1959) » p. 3. •^Bernstein, op. cit . , p. 10. Pension Plans and Trusts (Prentice-Hall, Inc., Englev;ooa Cliffs, New Jersey, Karch 5, I965) , Vol. XXI, No. ij-, pp. 1572-1573. ^John I. Saks, "The Older Worker-II; Status in the Labor Karket," Monthl y Labor Review (January, 1957), p. 20. harbrecht, ov) . cit . . pp. 9-10. 7s. S. Huebner and Kenneth Black, Jr., Life Insurg^nce (Appleton-Century-Crofts, New York, 196^), 6th Edition, p. 51^. ^William M. Howard, "Retirement Plans for Police Officers and Firemen in Florida," Economic Leaflets (University of Florida, Gainesville, August, I960), Vol. XIX, No. 8. Interested readers vjill find an excellent summation of this entire area in the above booklet and also in: William M. Howard, "Retirem.ent Plans for Small Kuniclpalities," Economic Le aflets (University of Florida, Gainesville, June, 1958), Vol, XVII, No. 6. ^Broward VJilllams, "Report to the 1965 Legislature," TJi© Municipal Fireman.? s,. Pen ,!^ ion Trust Fund (State Treasurer's Office, Tallahassee), First Biennial Report 1963-196^1-, p. 1.^^Broward VJilllams, "Report to the 1965 Legislature," The Municipal Police Office rs* Retirement Trust Fund (State Treasurer's Office, Tallahassee), Third Biennial Report 1963-196^, p. 1. 30

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31 s ^^Secvirltles and Exchange Commission, Survey of Corporate Pension Funds. 19^1-195^ (October, 1956), p. 1. 12 Bernstein, op. clt .^ p. 178. ^Huebner and Black, op. clt .. p. 515, 14 Harbrecht, op. clt., p. 95. Citing: AFL, "Pension Plan Under Collective Bargaining, A Reference Guide for Trade Unions," (no date), p. 86. Howard, Vol. XVII, op . clt . ^^Howard, Vol. XVII, op. clt. '' 17 Harbrecht, op , , clt ., p. 132 . '•^Dan M. McGlll, p.gn s.l on s : ,„, Problems and Tr ends (Richard D. Irv;in, Inc., Homewood, Illinois, 1955) 1 P. ^^^ '^Pension Plans and Trusts (January 22, 19^5) » loc. clt. , p. 1511. ^'^Penslon and Profit Sharln? y Service (Prentice-Hall, Inc., Englewood Cliffs, Mew Jersey, 1957) j Paragraph 6206.

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CHAPTER II A MODEL PENSION PLAN ORDINANCE FOR FLORIDA I'UNICIP/XITIES AN ORDINANCE ESTABLISHING A RETIREMENT AND FElgSION PLAN FOR EMPLOYEES OF THE CITY OF AN^TCWN, ANY COUNTY, FLORIDA; PROVIDING FOR ITS ADMINISTRATION AND OTHER MATTERS RELATING THERETO. INDE>: Article 1. Article 2. Article 3. 3.1: 3.2: 3.3: 3.^: J^5' Article hi h.2', h.hx 4.5: Definitions Establishment of the System. Membership and Service . . . Original Members ..... Nev-; Members Creditable Service Service Before the Effective Date of the Plan . . , Service of Policemen anfl Firemen Before the Effective Date of the Plan . . . . , Contributions and Funding, Cost of the Plan . . . City's Contribution. . Gifts to the Fund. . . Treasurer Investment of the Fund Article 5. Retirement and Retirement Benefits . . . 5.1: Normal Retirement. . . . 5.1(a): General Employees . . 5.1(b): Policemen and Firemen 5.2 5.3 5.4 Pension Paym.ents Delayed Retirement Retirement Prior to Normal Retirement Date Page 34 39 39 39 39 39 39 40 40 40 40 40 40 41 41 41 41 41 42 42 43 32

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33 5^5' 5.6 5.8 5.9 5.10 5.11 5.12 5.13 5.1^1Article 6. 6.1 6.2 6.3 Article ?: 7.1 7.2 7.3 7.^ 7.5 7.6 7.7 7.8 7.9 7.10 7.11 7.12 7.13 7.1^ 7.15 7.16 7.17 7.18 7.19 Article 8. 8.1: 8.2: Page Termination of Service. Prior to formal Retircracnt ^3 Death Defore Retirement Date. . hk Death After Letireraent Date ^4 Betlrerient Annuity Option ^^ Social Security Option ^5 Member Hecorcl.'j; Status Statements ^5 Benefits Unassignable and not Subject to Process ^5 Errors, Corrections and Adjustments .... 46 No Interest in the Fund i\-C Payments in Case of Legal or Other Disability i|6 Leaves of Absence and Kilitary Service. . . k7 Leaves of Absence • ^7 Military and Related Service k-7 Re-Employment; No Leave of Absence or Military Service ^8 Administration of the Plan ^'8 General Supervision ^8 Compensation of the Commission ^8 Meetings of the Commission ^8 Administrative Regulations. 48 Interpretation of the Flan, k^ Agents and Employees ^9 Other Powers and Duties ^^ Secretary of the Council hS Duties of the Secretary i|-9 Written Records 50 Authority of Commission 50 Annual Reports by the Trustee or Insurance Company .... 5I Actuary 5I Adoption of Tables 52 Eesponsibllity of Members and Beneficiaries ..... 52 Interest on Delayed Payments 52 Personal Liability 52 Small Annuities Lump Sum Payments .... 53 Filing Defined 53 Future Changes In the Operation of the Plan ^kGeneral . ^k Termination of Plan and Distribution of Fund ^l\.

PAGE 44

3^ Article 9. Protection Against Fraud and Deceit ^^. 9.1: Violations and Punishment 5/4. Article 10. kraenCment ^^ *•••«•»«• 10.1: Pov7er to Amend. , , j-^ Article 11. Separability and Construction t^ Article 12. Repeal of Conflicting Orfilnances 55 Article 13. Effective Date ....... ct ......... ^5 whereas;. The City ConuTrisslon of the City of Anytown, Florida, acknowledges that there are municipal employees who have faithfully served the City, will reach the age of retirement because of advanced age, and are deserving of retirement pay: WHER2AS, The Commission has determined that the City will be better able, at prevailing v;age scale to retain the services of day laborers, as well as office and field employees and firemen and policemen if some provision is made for a pension upon retiiement at stated ages; and V7HEREAS, It is believed to be in the best Interests of the City to create a retirement and pension plan for all employees of the City; now, therefore, THE CITY OF AiJYTOKN DCES ORDAIN: ARTICLE 1 . DSFIHITIONS The following v;ords and phrases, as used in this Ordinance, unless a different meaning is plainly required by the context, shall have the following meanings, and the same and

PAGE 45

35 similar terms when used In connection with any Civil Service System or any other ordinance of the City of Anytown shall not necessarily apply to the members of the retirement system hereby created except when specifically adopted. 1.1 Actuarial Equivalent ; A benefit of equal value or equal cost when computed on the basis of such Interest rates, mortality, and other actuarial tables as are In effect under the Plan. 1.2 Annuity ; Annual payments for life to be paid In equal monthly Installments on the last day of the month in which the same accrue. Such payments shall be made on a calendar month basis and the payment for any month may be prorated if appropriate. 1.3 Ai^ti^a^ E-.rnlng-s ; Gross earnings received by the employee as compensation for services to the City, including overtime pay. Bonuses shall be excluded. 1.^ Ben e fi ciary; Any person in receipt of, or entitled to, an annuity, retirement allov?ance, or other benefit as provided by this Ordinance. 1.^ (a) Board of Trustees : For the purpose of this Ordinance, Board of Trustees shall be construed to mean the City Commission. ^•5 Charter; The Charter of the City of Anytown, Florida, as amended. 1.6 City; The City of Anytown, Florida. !•? City's Contrib ution ; The annual contribution needed to fund actuarially the liability for annuities credited to

PAGE 46

36 employees on the basis of actuarial methods and assumptions approved by the Commission. 1.8 . Commission ; City Commission of the City of Anytown. ^•^ Creditable Ser vice; Service in the employment of the City of Anytown for which credit is allowed under the terms Of this Ordinance. Such service shall be computed to the nearest whole month of completed service but not including any fractional parts of a month. ^•^° ?^ffective Date of the Pl^n ; The date on which the • operation of the Plan is to commence for the purpose of determining eligibility, benefits and related matters, which is hereby fixed as the first day of January, 1968. 1.11 Ivmp lo Yee : All persons employed by the City and so classified under rules and regulations and personnel records Of the City, including "probational" or permanent employees. Any appointed officer shall only be qualified under this Plan under one office and that office being the one from .which he receives the largest annual salary, compensation or remuneration. Independent contractors are excluded. Parttime employees are excluded. ^•^2 £ und or Pensi on Fund,; All sums of money paid into the Plan by the City, and all gifts and contributions to the Fund, accepted from other sources, together with earnings and appreciation of the same, less disbursements made from said money, in accordance with the Plan, or less any losses or depreciation, of asset value. 1.13 Sender.: The masculine pronoun shall include the feminine pronoun.

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37 1.1^1General ''\mplo.veG ; A general employee shall include all employees as defined in 1.11 herein, other than policemen and firemen, 1'15 Member ; Any person employed by the City who Is included in the membership of the Plan as either an original member or a nevj mernbei-. However, a member shall br, limited and restricted to the definition of employee. 1.16 J'!ember£h ip Service; Service rendered as a fulltime permanent employee since last becoming a member of the Plan. Such service shall be computed to the nearest full month of completed service but not including any additional fractional parts of a month. 1.1? New Member ; Any permanent employee who becom.es a member of the Plan after the effective date of the Plan. 1.18 Normal Betirement Date: The normal retirement date of a member shall be his normal retirement date as determined in accordance with the terms of the Plan. 1.19 Orlcrinal Member; Any permanent employee of the City who becomes a member as of the effective date of the Plan. 1.20 Past Service; Service rendered as a full-time permanent em;ployee from January 1, 196O to the effective date of the Plan. 1.21 Perma. nent Emplovee ; An employee who has completed his probationary period, been approved for permanent status by the department head under whom he is employed, or the City Commission, if approved by it, and has been certified

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38 by the City Clerk or City Manager as a permanent employee, or according to the personnel records of the City pertaining to such employee. Certification or approval for perma.nent status shall be subject to the rules of the career service system of the City of Anytovm. 1.22 Plan, Pension Plan or Employees * Pension Pla n; The system of retirement benefits provided under this Ordinance. 1*23 Plan Year ; A period of twelve consecutive months measured from the effective date of the Plan, or from any anniversary thereof. 1.2^ Retirement : V'lthdrawal from active em.ployment by the City with retirement Income granted under the provisions of this Plan. 1.25 Retirement Annuity Option : An optional form of retirement annuity as described in Section 5.8. 1.26 Retireme nt Incoijie; Annual payments for life •payable in monthly installments, or the actuarial equivalent paid in lieu thereof, in accordance v;ith the Plan. It is contemplated that separate actuarial tables may be used for male and female employees to reflect the different life expectancies , 1.27 Social S ecurity Option; An optional form" of retirement annuity as described in Section 5.9. 1.28 Treasurer; The Treasurer of the Plan is the City Finance Officer.

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39 1.29 Trustee : Any Bank having trust powers which has been designated as Trustee of the Pension Fund by the Commission. ijrnci,K__z. ESTA BLISH m ?:ht of the systkh 2.1 A pension and retirement system for full-time permanent employees in the service of the City of Anytown, Florida, is hereby established to provide retirement benefits as provided by this Ordinance. It shall be known as the EMPLOYEES' PENSION PLAN OF THE CITY OF ANYTOVJN , FLORIDA. ARTICLE 3 . MSHBER SHIP AND SERVICE 3.1 Original Members ; All full-time, permanent City Employees who had not reached age sixty (6o) when originally employed by the City. 3.2 New Members ; New, full-time, permanent City Employees will becom.e eligible to participate in the Plan on the first day of the month following, or coinciding with the date of their employment. 3.3 Creditable Servic e; Creditable Service for retirement for the purpose of calculating benefits shall consist of the membership service rendered by the employee since he last became a member, plus Past Service rendered continuovisly since the employee's last date of employment, to his normal retirement date. Any employee will be given credit for service to the City starting January 1, I960, or his date of employment, whichever is later. 3.^ Service B efore the Ef fective D ate of the Plan; No credit v;ill be given general employees for service to the City before January 1, 196O.

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ARTICLE 4 . CONTRIBUTIONS AND PUI'IDING k,l Cost of the Plan ; The cost of the Plan will be borne entirely by the City and by State remittances to finance retirement of firemen and policemen in accordance with Chapters 175 and I85 of the Florida Statutes. Employees will not contribute to the cost of the Plan. ^.2 City's Contribution ; The City shall pay into the Fund amounts required to provide the benefits under the Plan, as shall be determined by an actuarial investigation as provided in Article 7, ^.3 Gifts to the Fund : The City may accept gifts, devises, bequests, or appropriations to or for the Fund from any source, but shall have the right to reject the same if they are so conditioned as to conflict with the Charter or this Ordinance, or to make the administration of the same unreasonably difficult. H-.UTreasurer : Gifts, bequests, devises, or appropriations to the Fund shall be received by the Treasurer, who shall be the Treasurer for the Council. The Treasurer shall be liable for the safekeeping of funds received, and appropriated by the Commission under his bond. The Treasurer shall promptly deposit funds in banks or savings and loan associations designated by the Commission, or transfer to the Trustee or ;ie Insiirance Company all funds received and funds appropriated by the City Commission, including those funds received by virtue of the provisions of Chapters 175 and I85 of the Florida Statutes.

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kl 4.5 • Investmont of the Fund : All monies paid into and held by the Pension Fvmd shall be promptly deposited with the Trustee or the Insurance Company for the benefit of the Pension Fund according to the terms of a Trust Agreement or contract to be negotiated with the Trustee or the Insurance Company. AFTICLK 5 . RSTIREI-r^NT AHD RETIRT^MEIjT BENEFIT S 5.1 N prm.al Retirement ; An emploiree vjill normally retire on the first day of the month follovjing (or coinciding with) the attainment of the ages shovm in the following schedule: 5 • 1 ( E^ ) Gener al Em-oloyees ; A ge at Entry, into the , Plan Retirement Age ^S and under 6^ 56 66 57 67 58 68 59 69 60 and over " 70 5.1 (b) Policemen and Firemen : Age at E titry into the Flan Retirement Ac re 50 and under 60 51 '61 52 62 53 63 5^ 61^ 55 to 60 65 In the event of such normal retii-ement the retiring employee shall be entitled to and shall be paid an annuity payable monthly beginning with the month of retirement and continuing until death. The amount of annuity to which a retiring employee will be entitled will be calculated as follows:

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42 (a) The monthly pension for general employees Is $2.00 for every year of crealt service. (b) The monthly pension for policemen and firemen is 1 percent of average monthly earnings, during the last ten years of service, for every year of credited service. 5.2 Pension Payments : Pension payments vjill be made monthly beginning with the first month of retirement and continuing until death, unless a retirement annuity option has been elected in v^Jhich case payments will be ma.de in accordance with the option. 5-3 Dela yed Retirement : An employee who does not desire to retire on his normal retirement date may make written application to the City Clerk or City Manager for retention in regular or part-time employment subsequent to the tim.e of normal retirement showing that the same is in the best interests of the City by reason of his special knowledge, relative efficiency, difficulty of replacemient, or other similar or extraordinary factors. Upon the approval of the City Manager the employee m.ay be retained by the City for a period not to exceed one year following his date of normal retirement. Nevertheless, similar additional applications for renewal of retention in emiployment, may be m.ade under the same procedure in each of four successive years, or until tVie em.pl oyee reaches age 70, whichever is earlier. In the event of such deferred retirement, the employee, upon retirement, shall receive the same amount of monthly retirement pension that he would have received had he retired on his normal retirement date.

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^3 5 • ^tRetirement Prior to ? Tormal Retirement Date ; A general employee who has twenty years of creclitecl service and has attained his 60th birthday may m^ke written application for early retirement to the City Manager. A fireman or policeman who has twenty years of credited service and has attained his 55th birthday may make written application to the City Manager for early retirement. With approval of the City Manager the employee may retire on the first day of any month following, or coinciding with, his 60th or 55th birthday, whichever shall be applicable as stated above. In such event, he shall be entitled to and shall be paid an annuity equal in amount to the annuity computed on the basis of normal retirement, except that the amount so computed shall be reduced by five-twelfths of one percent of said amount for each month that ear]y retirement precedes his 65th birthday for general employees or his 60 th birthday for policemen and firemen. 5*5 Terminat ion of Serv i c e Prior to Normal R etirement: (a) Less than 20 ye ars of credited service or I^^s_t.han, age._ii; If a mem^ber of the Plan dies or ceases to be a permanent employee prior to his normal retlrem.ent date and has less than 20 years of credited service, or has not yet attained his 55th birthday in the case of general employees, or his 50th birthday in the case of policemen and firemen, all rights of the em.ployee In the pension plan will terminate. ^t>) . Tyjenty years or more of credited service and S^S_ii_or_niO£e: If any member of the Plan terminates employment with the City prior to his normal retirement date and

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l^li. has completed 20 years or more of credited service and has attained the age of 55 years or greater in the case of general employees, or 50 years or greater in the case of policemen and firemen, the pension credit earned at termination will be fully credited to the employee. He may, when he reaches his normal retirement date, make written application to the City Manager for the pension earned, and in such an event, he shall be entitled to, and he shall be paid, an annuity computed^ on the same basis as that of other employees who retire on their normal retirement date. • . ^-^ geatlLBefore Heti r enient_Date; The interest of an employee who dies before his normal retirement date will cease and no death benefit under the Plan will be paid to his estate or to the beneficiary of such employee. ^•^ ^Q^^ After P^t1rP.ment.J)ate: If an em.ployoe dies after retirement no additional payments will be made unless a retirement annuity option has been elected in which case paym.ents will be made in accordance with the option. 5.8 BeMrernent.Armui^ The member may elect to ' receive annuity benefits payable under the Plan with the approval of the Commission in the form of a joint and survivor annuity instead of the normal annuity form, which shall be the actuarial equivalent of the annuity which he would normally receive. Under the joint and survivor annuity, two-thirds of the retirement annuity income continues to the surviving contingent annuitant, until his or her death. The joint and survivor annuity election must be requested by the employee at least three years prior to date of retirement, including

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^5 retirement prior to normal retirement elate, and shall be subject to approval or disapproval by the Commission at the tlm.e of election. The election of a joint and survivor annuity shall be deemed to be automatically cancelled in the event of the death of either proposed annuitant prior to the member's actual retirement. 5.9 Social Security Ontion ; An employee who retires before he is entitled to receive monthly benefits under the Federal Social Security System may elect to have his retirement annuity benefits increased before his Social Security benefits begin, and decreased thereafter to obtain, insofar as practical, a level total yearly retirement income from the tK'o sources. The amounts he v;ill receive both before and after he becomes eligible for Social Security payments shall be the actuarial equivalent of the benefits to v;hich he would have been entitled had he not selected this option, 5.10 Kember Hecords; Status Stateme nts: A separate record of account shall be maintained for each member, which among other things, shall show his service record, his exact age, any designation of alternate or contingent beneficiaries, together with any such informa.tion as is necessary for an active and coiKprehonsive determination of his status under this Plan. 5.11 Benef lt-S_Una-Ss.iAnable and not Sub .iect to Process ; The right of any member or any beneficiary to any benefits under the Plan or any other right accrued or accruing to any

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46 persons under the provisions of this Ordinance shall not be subject to execution, garnishment, attachment, the operation of any bankruptcy or insolvency law or any other process of law x-jhatever, and shall, not be subject to assignment, pledge or hypothecation unless expressly authorized in this Ordinance. 5.12 Errors, Co rrection s, an d Ad.lus tm ents ; Should any change or error in the records of the Plan be discovered, or any error in any calculation be made resulting in any member or beneficiary receiving from the Plan more or less than he was entitled to receive, the Council shall have the power to correct such error, and as far as possible to adjust the payments thereafter to be made in such a manner that the actuarially equivalent of the benefit to which such member or benefioiai-y vias correctly entitled, be paid. 5.13 ' ^ o Inte rest, in the Fi.ind.; No membei', employee, beneficiary or other persons shall have any interest in, or right in, or to the Fund or any part thereof, or any assets comprising the sam^e, except only as to the extent expressed and provider in this Ordinance. 5.1^ Pay ments in Case of L egal or Othe r Disabilit y; Vj'henever and/or as often as a person entitled to payments hereunder shall be under legal disability, or, in the sole Judgment of the Commission, shall otherwise be unable to apply such payments to his best interest and advantage, the Commission in the exei^cise of its discretion m.ay direct that all or any portion of the benefits of such members payable in any one or more of the following viays:

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^7 (1) Directly to such person; (2) To his legal guardian or conservator; (3) To his spouse, or to any person to be expended for his benefit. The decision of the Commission shall, in each case, be final and binding on all persons incliiding the affected member of the Plan, APTICLE 6 . LEA\n?S OF ABSErlCE AlID TiILIT^RY SEF^nCE 6.1 Leaves of Absence ; Any member who has been granted a leave of absence (except for vacations, extended vacations, sick leave, extended sick leave, or leaves of absence of benefit to the City and approved by the City Manager) shall be allovjed service credit earned prior to the start of leaves of absence, and with service credit to resume upon return to employment. 6.2 Hilitar y and rielated Service ; When any m.ember is inducted or enlists into any of the Arm.ed Forces of the United States, orenlists in any reserve com.ponent, enlists in the United States Coast Guard, or in any other reserve component, or enters upon active duty in the Armed Forces of the United States, the United States Coast Guard, or the United States Public Health Service in response to an order or call to active duty, (hereinafter referred to as •'military or related service'') , and is subsequently re-employed by the City vjithin 90 days after release from any such sei-vice, shall again becom.e a mem.ber of the Plan, and shall be given service credit for the service before entering military or related

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^8 service, and if approved by the Commission for the period of time spent in military or related service as v;ell. 6,3 Re-Emoloyment; No Leave of Absence or Military Service ; When any former employee of the City is re-employed, and said employee has not been granted a leave of absence, he may receive credit for prior service if and only if (1) the period of prior employment was of at least one year's duration, (2) the City Manager recornxnends that he be given credit for prior service, and (3) the Commission approved said recommendation. ABTICLB 7 . ADMINISTRATION OF THE PL AN 7.1 General Supervision ; The general supervision of the administration of the Plan shall be by the Commission. 7.2 Compens^t -I on o f the Commission: The mem.bers of the Commission shall serve vjithout compensation for their services. ?.3 Meetinccs of the Commission ; This Plan or any matter herein may be considered and disposed of at any Coram.ission meeting. A majority of the mem.bership shall constitute a quorum and all decisions, acts, and resolutions of the Commission shall be by affirmative vote of at least three m.embers. 7.^ Admin istrative Regulations ; The Commission by resolution may prom.ulgate written rules and regulations not in conflict with the expressed terms of this Ordinance or the Charter to cover the operation of any phase or part of the Plan as provided by this Ordinance. Copies of such rules and regulations shall be furnished to any member of

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49 the Plan upon request anfl at least one copy thereof shall be kept available in the office of the City Clerk for examination by any Interestecl persons at any time during ordinary business hours. Otherwise, a copy of this Ordinance shall fully meet the provisions herein. 1*5 InterpretatiOD of the Plan ; The Commission has the power to construe all terms, rules, conditions and limitations of the Plan, and its construction made in good faith shall be final and conclusive upon all parties' interests, 7.6 An:ents and Employees ; The Commission shall have the poT'jer to select, employ and compensate, or cause to compensate from time to time such consultants, actuaries, accountants, attorneys, investment counsel and other agents and employees as they may deem necessary and advisable in the proper and efficient administration of the Plan, 7.7 Oth er Powe rs a nd ]>ities ; The povjers and duties of the Commission or of any other persons as set out herein are not intended to be complete or excliisive but each such body or persons shall have such powers and duties as are reasonably implied under the terms of this Ordinance. V/here not in conflict with this Ordinance, or the Charter, the Trust Agreement or contract entered into with the Insui^ance Company, shall govern, 7.8 Secretary of the Counci l; The City Clerk or Deputy Clerk shall be Secretary to the Comjinlssion under this Plan, IS Duties of the .Secretary; It shall be the duty of the Secretary to keep accurate minutes and records of the

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' 50 acts of the Commission under this Plan separate and apart from the regular minutes of City Commission meetings. This provision is made for the express purpose of having all proceedings In connection with this Plan in one set of books, thereby saving going through all of the minutes of the various Commission m.eetlngs. They shall be available to the public, city officials, and employees under this Plan at all times, 7«10 Written,, F-ecovid^: All notices, elections, designations and changes of beneficiaries and similar writings per, taining to the operation of the Plan shall be made and preserved in writing on such forms as the Commission may direct. The secretary shall maintain all records in segregated files pertaining to the Plan and they shall not be intermingled with other files of the City. Whenever there is any notice, election, designation, com^plaint, ruling, or other v;ritten proceedings relating to a particular employee, the Secretary shall furnish the Trustee or the Insurance Company, when necessary, with a copy of same, as well as the employee. 7 '11 Author 3tv of C ommi^sK,1 on : The Commission shall have authority to direct that pension plan funds be deposited with banks and/or savings and loan associations or invested in securities, to negotiate appropriate contracts with a bank having trust povjcrs, or an insurance company or companies, under the terras of which trust agreements or contracts funds villi be deposited v^lVa the bank, company or companies, as determined by the Com.mlssion and annuities m.ay be provided

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51 for members, and their beneficiaries in accorclance with the terms of this Plan. The Commission may terminate such trust agreements or contracts or negotiate amendments as it sees fit. Any trust agreement shall be 'for Investment purposes onlv and the Conmission acting as a Board of Trustees shall at all times maintain administration of tVie funds, 7.12 Ann ual Re^oorts by the Trustee or I nsurance. Comr>any; The Trustee or Insurance Company or Companies with vjhich a trust agreement or contract or contracts are entered into for the administration of the Plan shall submit a statement of the condition of the funds on deposit to the credit of the Plan at least once yearly, and may be required to supply copies of such statements to an actuarial consultant designated by the Commission. The original shall be retained among the records of the Secretary of the Commission. 7.13 Actuary; The Commission shall employ an actuary to review the operation of the Plan at intervals of not more than two years, and to make his recommendations to the Commission as to the actuarial solvency of the Plan, the amount of the City's contributions to the Fund v.'hich in his opinion is necessary to be made for the current operation of the Plan, what benefits the Plan can afford to pay on the basis of accumulated contributions to the Plan, and current rates of contribution, and such other Information as the Commission may require. The Actuary's report shall be submitted in writing and copies thereof shall be available to m.embers of the Plan, upon request. The Commission may also retain said Actuary

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52 or some other actuary as a consultant, and provide for compensation for services, 7.1^ Adoption , of Tables : In making any actuarial computation provided in this Ordinance, the tables, charts and other statistical information shall be selected by the Commission from standard sources in common use by other annuity and pension plans, Including but not limited to those operated by governmental bodies in the United States of America or by the United States Internal Revenue Service. 7.15 Kespons ibilities of , Member s and, Beneficiaries; Each member or beneficiary or other interested member shall be responsible for advising the Commission of his current mailing address, and promptly advising the Commission relating to any error, in vjhosoever's favor, in connection with the payment of benefit or any other payment under or in connection with the Plan. 7.16 Interest on, Dela yed P ayme,nts; Pension payments, although not promptljr paid for any reason, and any other payments to be made out of the Fund, although not paid promptly for any reason, shall not bear interest unless so ordered by the Commission, V'jbo shall have dlscretJon to fix the rate and calculate any such interest, and in such event, the Interest to be paid shall not exceed the then current rate of interest being returned on the funds on deposit with the Trustee or the Insurance Com.pany, or other financial institution, 7.17 Personal Liability; Each member of the Commission shall use ordinary care and diligence in the performance of

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53 his duties and shall not be liable for any loss unless resulting froE his own gross negligence, or his willful misconduct; nor shall such members be personally liable upon or with respect to any agreement, act, transaction or omission executed, committed or suffered to be com.mitted himself as ' one or a member of said body or by any other member, agent, representative, .or employee of any body; moreover said bodies and members and agents thereof shall each be fully protected in relying on the advice of the City Attorney or his assistants, or upon any other attorney employed by the City, or said bodies, or either of them insofar as legal matters are concerned, or any accountant similarly employed insofar as accounting matters are concerned, and of any actuaries sirai. larly employed so far as actuarial matters are concerned. Any person having any claim under the Plan shall look solely to the assets of the Pund for the satisfaction of such claims. 7.18 ^msll Annuities Lump Sum Payments: Whenever any retirement annuities shall be less than AlO.OO per month, the Commission may elect to have payments made quarterly. If the annuity payable at quarterly intervals shall bo less than ,'t^lO.OO, the Com.ralssion m^ay elect to pay the com.muted value of the same, calculated at regular interest, in one lump sum. Such election shall be made within six months after the member's retirement unless he consents in vn-iting to a subsequent election by the Comjnisslon under this Section. 7.19 Filin.-7 Defined ; Where' any notice, election or other instrument is required or permitted by this Ordinance to be filed with the Comniission, the sam.e may be filed with its Secretary.

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J I ARTICLE 8 . FUTUPiE CHANGES IN THE OPEHATTOT-I OF THE PLAN 8.1 Q^ner?.!'. It is contemplated, and all original and new members of the Plan shall be deemed to have notice, th^t I the City Commission of this City may in the future decide that it is in the best interests of the City and the members of the Plan to modify or terminate Trust Agreements or contracts entered into with an insurance company or companies, to exercise options available to the City under the terms of such Trust Agreements or contracts, to select another insurance com.pany, trust, or other financial institution, as the depository for pension funds. 8.2 Termination of Plan and Di stri bution of Fund ; The provisions of Florida Statute 185.37 pertaining to termination of the Plan and distribution of the Fund are hereby incorporated by reference as the sam.e would apply to the rights of policemen and firemen under the terms of this Plan. APTICLE 9 . PROTECTION AGAINST FRAUD AND DECEIT 9.1 Violations and Punishment ; Whosoever with intent to deceive shall make or cause to be made any statement, report, certificate, election, notice, claim, or other instrument, authorized or required under this Chapter, whether of the enumerated classes or otherwise, vjhich shall be untrue, or who shall falsely or cause to commit to be falsified any record comprising any part of the operation or administration of the Plan contemplated by this Ordinance, shall be as follovjs; Punished by a fine, not eMCoeding :^'300.00, or by imprisonment not exceeding 90 days, or by both such fine and imprisonment.

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55 Any. such violation shall also be punishable as provided under the lav;s of the State of Florida. ARTICLE 10 . AMEiJDi-T-I'JT 10.1 Power to Ar'-.end ; The City Commission shall have continuous power to amend this Ordinance as provided by its Charter. ARTICLE n . SEPA RABILITY AIID CONSTm TCTTni.T 11.1 In the event any section, sub-section, sentence, clause or phrase of this Ordinance shall be held to be invalid or unconstitutional such adjudication shall not in any manner affect the remaining portions of the Ordinance, v;hich shall be, and remain in full force and effect as fully as if the portions so adjudicated invalid are unconstitutional were not originally a part thereof. The articles and section headings included in this Ordinance shall not be construed to limit the text included hereunder. ARTICLE 12. REPEA L OF CONFLICTING O BDITIAIfCES 12.1 All ordinances and parts of ordinances in conflict herewith are hereby repealed to the extent of such conflict. ARTICLE 13 . EFFECTIVE DATE 13.1 This Ordinance shall take effect in accoi-dance with law and the Charter of the City of Anytown, Florida, as amended, and shall become effective immediately upon its passage and approval by the Commission. Passed and adopted by the City Comjnlsslon of the City of Anytovjn, Florida, on the h day of Kay I96S.

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5^ I-layor ATTEST: City Clerk

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CHAPTER III DEFINITIONS, EXPLANATION OF RELATED PROVISIONS AND ESTABLISHMENT OF THE PENSION SYSTEM The pension ordinance should give complete details of the entire pension program. A pension plan that is properly drawn at the beginning can save many administrative headaches in the future. It is far better to cover all probable eventualities at the outset than to amend or improvise later to meet a situation that is not covered in the original provisions of the ordinance. Because eventualities may not be properly covered, the ordinance should contain provisions permitting the municipality to amend or even discontinue the plan if necessary , Florida lav; requires that an ordinance be preceded by a brief description of its intent. This enables any interested party to determine the nature and purpose of the ordinance by reading the brief description rather than the entire ordinance. The following paragraph briefly describes the pension ordinance: An ordinance establishing a retirement and pension plan for employees of the City of Anytown, Any County, Florida; Providing for Its administration and other matters relating thereto. 2 i2e_£l;iltio^IiI The language of the plan must be precise and exact in 51

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58 Its meaning. From a review of legal cases, we can conclude that "the courts have consistently found that the language of the plan Is the controlling consideration in ascertaining employee rights, as if the plan were a contract whose terms were decided upon by equals dealing at arm's length."^ Towards this goal of precise language, the City Attorney should be instrumental when drawing up the proper wording of the ordinance. Every proper plan contains a list of terms and their definitions which is included to prevent any misunderstanding of the provisions of the pension program. Definitions may also be useful when they eliminate lengthy repetitive descriptions throughout the ordinance. The list of definitions in the ordinance is preceded by the following paragraph: The following words and phrases, as used in this ' Ordinance, unless a different meaning is plainly required by the context, shall have the following meanings, and the same and similar terms vjhen used^in connection with any Civil Service System or any other ordinance of the City of Anytown shall not necessarily apply to the mem.bers of the retirement system hereby created except vjhen specifically adopted.^ Actuarial Equivalent ; A benefit of equal value or equal cost v;hen computed on the basis of such interest rates, mortality, and other actuarial tables as are in effect under the plan. It is necessary to define this terra in orr.er to elim.inate any possible ambiguity in the meaning of Section 5'S> 5.?> s.Y)d. 5.12. These subsections of the model • ordinance permit employees to elect an optional annuity form and state that these options should be the "actuarial equivalent" of the annuity which he would normally receive. If there v.'ere a possible alternative

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59 Interpretytlon, an eniployee ml^ht argue tViat be should be entitled to a greater amount of monthly annuity payments by the selection of an optional annuity form than If fleterrninecl. by an actuary. This term is used In Sections 5.S, 5.9j and 5.12 of the model pension ordinance, 5.8) V/lth the approval of the commission, the member may elect to receive his annuity benefits in the form of a joint and survivor annuity instead of the normal annuity form. The joint and survivor annuity shall be the "actuarial equivalent" of the annuity vjhich he vjould normally receive. 5.9) ^n employee who retires before he is entitled to receive monthly social security paym^ents may elect to receive a higher annuity before social security benefits begin, and a decreased annuity after receipt of social security payments. The reduced amount of retlrem.ent annuity plus social security would, insofar as practical, be the same in am.ount as that provided prior to receipt of social security. The amounts he will receive from the city both before and after he becomes eligible for social security payments shall be the "actuarial equivalent" of the benefits to which he would have been entitled had he not selected this option. 5.12) Should any error in the records of the plan be discovered, the Council shall have the power to correct such error, and to adjust the payments thereafter to be made in such a manner that the "actuarial equivalent" of the benefit to which such member or beneficiary was correctly entitled, be paid.

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60 Annuity ; Annual payments for life to be paid In equal monthly installments on the last flay of the month In which the same accrue. Such payments shall be made on a calendar month basis and the payment for any month may be prorated if appropriate. It is necessary to define the term "annuity" because the benefits payable for the lifetime of a retired employee will vary according to occupation, creditable service, and annual earnings. This term is used in Sections 5.1* 5.^> 5'5i^)y 5.8, and 7.18 of the model pension ordinance. 5.1) When an employee retires he shall be entitled to receive an "annuity" payable monthly beginning with the month of retirement and continuing until death. The am.ount of the "annuity" to which a retiring employee will be entitled is calculated in subsection a aad b of Section 5«1. 5.^) VJhen an eligible employee retires prior to his norm.al retirement date, he shall be entitled to and shall be .paid an "annuity" that is less than the "annuity" which he would have received at norm.al retlrem.ent. ^,5i^) A member v^ho has attained a minimum age and has completed 20 years or more of credit service may terminate his employment with the city prior to his normal retirement date and still receive an "annuity" when he reaches his normal retirement date. 5.8) A member may elect to receive the benefits payable under the plan in the form of a joint and survivor "annuity" instead of the norm.al "annuity" form.

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61 7.18) Whenever any retirement "annuity" shall be less than :;;10.00 per month, the commission may elect to have payments made quarterly. If the "annuity" payable at quarterly Intervals shall be less than :^10.00, the Commission may elect to pay the commuted value of the same, calculated at regular Interest, In one lump sum. Annual Earnlnr^s ; Gross earnings received by the employee as compensation for services to the City, Including overtime pay. Bonuses shall be excluded. It is necessary to define this term because pension benefits for policemen and firem.en are based on earnings. Because the pension Is computed on average monthly earnings, It is necessary to define annual earnings so that we v;ill have a basis for determining pension benefits. For example, if the term is not defined, an employee might claim that his pension should be based on his regular compensation, plus any bonuses received. This definition limits the salary scale to be used .when calculating the costs and liabilities of the retirement system. This term is used in Section 5.16 of the model pension ordinance, 5.1(b) The monthly pension for policemen and firemen is 1 percent of average monthly "earnings," during the last ten years of service, for every year of credited service. Beneficiary ; Any person in receipt of, or entitled to, an annuity, retirement allowance, or other benefit as provided by this Ordinance.

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62 This fiefinitlon clerifies the person we are referring to vjhen discussing the plan benefits. The term Is used in Sections 5,6^ 5.10, 5.11, 5.12, 5. 13 J 7.10, and 7.15 of the model pension ordinance. 5-6) If an employee dies before his normal retirement date, no death benefit under the plan will be paid to his estate or to the "beneficiary" of such employee. 5.10) A separate record of account shall be maintained for each member, which among other things, shall show any designation of alternate or contingent "beneficiaries." 5.12) Should any change or error in the records of the plan be discovered resulting in any member or "beneficiary" receiving from the plan more or less than he was entitled to receive, the Council shall have the power to correct such error, 5.13) Except as provided' in this Ordinance, no member, employee, 'beneficiary" or other persons shall have any interest in the Fund. 7.10) All designations and changes of "beneficiaries" shall be made and preserved in writing on such forms as the Commission may direct. 7.15) Each member or "beneficiary" shall be responsible for advising the Commission of his current mailing address, and shall promxptly advise the Commission of any error in connection with any payment under the Plan. Charter; The Charter of the City of Anytown, Florida, as amended. The use of this definition saves lengthy descriptions within the ordinance.

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I 63 I I 4.3) The City shall have the right to reject gifts, de! vises, bequests, or appropriations if they are so conditioned } as to conflict with the "Charter." 7.^) The Cor.mlscion may promulgate written rules and regulations not in conflict with the "Charter" to cover the operation of any phase or part of the Plan. 10.1) The City Comtnisslon shall have continuous power to amend this Ordinance as provided by its "Charter." 13.1) This Ordinance shall take effect in accordance with law and the "Charter'^ of the City of Anytown. City; The City of Anytown, Florida. The use of this definition eliminates the complete description of the City of Anytown. This term is used in Sections 3.I, 3.3, 3.^, 3.5, l^.i, ^.2, '+.3, 5.3. 5.5(b), 6.1, 6.2, 6.3, 7.10, and 8.1 of the model pension ordinance. 3.1) Original members shall be all full-time, permanent City Hlmployees who had not reached age sixty when originally employed by the "City." 3.3) Any employee will be given credit for service to the "City" starting January 1, I96O , or his date of employment, vjhichever is later. 3.^!-) Mo credit will be given general employees for service to the "City" before January 1, 'i960. 3.5) Policemen and Firemen will ' be credited with all years of service to the "City."

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6^^ ij-.l) The cost of tha plan will bs borne entirely by the "City" and by State remittances to finance retirement of firemen ana policemen in accordance v;ith Chapters 175 s-^fl I85 of the Florida Statutes, k-,2) The "City" shall pay into the Fund amounts required to provide the benefits under the Plan, ^.3) The "City" may accept gifts, devises, bequests, or appropriations to or for the fund from any source. 5.3) An employee raay iiiake written application for delayed retirement showing that retention in regular or part-time employment is in the best interests of the "City." 5-5i^) If* any member of the Plan terminates eraployment with the "City" prior to hla normal retirement date and has completed 20 years or more of credited service and has attained a certain minimum age, the pension credit earned at termination will be fully credited to the employee. 6.1) Any member who has been granted a leave of absence (except for leaves of absence of benefit to the "City" and approved by the City Manager) shall be alleged service credit earned prior to the start of leaves of absence, and with service credit to resume upon return to employment. 6.2) V/hen any member is inducted or enlists into any military or related service, and is subsequently re-employed by the "City" within 90 days after release from any such service, shall again become a member of the Plan, 6.3) When any former eniployee of the "City" is re-employed, and said employee has not been granted a leave of absence, he may receive credit for prior service if he meets certain conditions of this subsection.

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e5 7.10) The Secretary shall maintain all records in segregated files pertaining to the Plan and they shall not be intermingled with other files of the "City." 8.1) It is contemplated, and all original and new members of the Flan shall be deemed to have notice, that the City Commission of this "City" may in the future decide that it is in the best interests of the "City" and the members of the Flan to modify or terminate Trust Agreements or contracts entered into with an insurance company or companies, to exercise options available to the "City" under the terms of such Trust Agreem.ents or contracts, to select another insurance company, trust, or other financial institution, as the depository for pension funds. C i t y * s Co n t r 1 'out ion; The annual contribution needed to fund actuarially the liability for annuities credited to employees on the basis of actuarial methods and assumptions approved by the Commission. Insurance principles govern the operation of a pension plan. It is necessary to comply v;ith actuarial requirements; therefore the annual rate of contribution has to be predetermined at levels which vjill insure the accumulation of sufficient reserves to m.eet the liabilities accruing under the Plan. This term is used in Sections 'J-.Z, and 7.13 of the model pension ordinance. ^.2) The City shall pay into the Fund amounts required to provide the benefits under the Plan.

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7.13) An actuary shall be employed by the Conunission and he shall recommend the amount of the "City's contributions" to the fund which in his opinion is necessary for the current operation of the Plan, Commission ; City Commission of the City of Anytown. The Commission is charged with the general administration and policy direction of the plan. The definition eliminates use of the complete title of the City Commission within the ordinance. This term is used in Sections ^.^, 5.8, 5.1^, 6.2, 7.1, 7.2, 7.3, 7.^, l'^', 7.6, 7.7, 7.8, 7.9, 7.10, 7.II, 7.12, 7.13, 7.1^, 7. 15 J 7.16, 7.17, 7.18, and 7.19 of the model pension ordinance. h.h) The Treasurer shall be liable for the safekeeping of funds received, and appropriated by the "Commission" under his bond. 5.8) The member may elect to receive annuity benefits payable under the plan with the approval of the "Commission" in the form of a joint and survivor annuity instead of the normal annuity form. 5.1^^) In case of legal or other disability, the "Commission" may direct that all or any portion of a mem.ber's benefits be payable to someone other than the raem.ber. The decision of the "Commission" shall be final and binding. 6.2) Under conditions of this subsection, a member shall be given service credit for city service before entering military or related service, and if approved by the "Commission"

PAGE 77

67 for the period of time spent in military or related service as well. 7.1) The gener£il supervision of the administration of the Plan shall be by the "Commission." 7.2) The members of the "Commission" shall serve vjithout compensation for their services. 7.3) This Plan or any matter herein may be considered and disposed of at any ••Commission" meeting, and resolutions of the "Commission" shall be by affirmative vote of at least three members. 7.^) The "Commission" by resolution may promulgate v.'ritten rules and regulations not in conflict vjith the expressed terms of this Ordinance or the Charter to cover the operation of any phase or part of the Plan as provided by this Ordinance. 7.5) The "Commission" has the povjer to interpret the Plan, and its construction made in good faith shall be final .and conclusive upon all parties' interests. 7.6) The 'Commission'^ shall have the pov;er to select, employ and compensate such agents and employees as they may deem necessary and advisable in the proper and efficient adm.inlsti'ation of tViC Plan. 7.7) The powers and duties of the "Commission'" as set out herein are not intended to be complete or exclusive but each such body or persons shall -havesuch powers and diities as are reasonably implied under the .terms .of this Ordinance. 7.G) The City Cler-1: shall be Secretary to the "Commission" under this plan.

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68 7.9) It shall be the duty of the Secretary to keep accurate minutes and records of the acts of the "Commission" under this Plan separate and apart from the regular minutes of City Cornraission meetings. ' , 7.10) All notices, elections, designations and changes of beneficiaries and similar writings pertaining to the operation of the Plan shall be made and preserved in writing on such forms as the ''Commission" may direct. 7.11) The "Commission'shall have authority to direct vjhere pension plan funds be deposited or invested, and to negotiate appropriate contracts with a bank or an insurance com.pany. The ''Commission" may term.inate trust agreements or contracts or negotiate amendm.ents as it sees fit. The "Commission" acting as a Board of Trustees shall at all times maintain administration of the funds, 7.12) The Trustee or Insurance Com.pany or Com.panies with which a trust agreement or contract or contracts are entered into for the administration of the Plan shall submit annual reports v>fhich shall be retained among the records of the Secretary of the "Commission . " -^ 7.13) The "Com.misslon" shall employ an actually to review the operation of the Flan at Intervals of not more than two years, and to make his recommendations to the "Commission" as to the actuarial solvency of the Plan, and such other inform^i.tion as the "Comniission" may require. The "Commission" may retain the actuary as a consultant, and provide for compensation for services.

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69 7.1^4-) In making any actuarial computation provided in this Ordinance, the tables, charts and otlier statistical Information shall be selected by the ''Commission" from standard sources in common use by otherannuity and pension plans, 7.15) Kach member or beneficiary or other interested member shall be responsible for advj.sing the "Commission" of his current mailing address, and promptly advising the "Commission" relating to any error in connection v;ith the payment of benefit under or in connection v/ith the Plan. 7.16) Pension payments and any other payments to be made out of the fund, although not paid prom.ptly for any reason, shall not boar interest unless so ordered by the "Commission," v;ho shall have discretion to fix the rate and calculate any such interest. 7.17) Each member of the "Commission" shall use ordinary care and diligence in the performance of his duties and shall not be liable for any loss unless resulting from his own gross negligence, or his vjillfull m.isoonduct. 7.16) Whenever any retirement annuities shall be less than .310.00 per month, the "Commission" may elect to have payments made quarterly. If the annuity payable at quarterly intervals shall be less than .''lO.OO, the ''Comxiission" may elect to pay the com.muted value of the same, calculated at regular interest, in one lump sum. 7.19) Where any notice, election or other instrument is required or permitted by this ordinance to be filed with the ••ComjQisslon," the sam.e may be filed vjlth its Secretary.

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70 Creditable Service ; i ] Service in the employment of the City of Anytown for which credit is allovjed under the terias of this Ordinance. Such service shall be computed to the nearest whole month of completed service but not including any fractional parts of a month. Employee's retirement benefits are based upon their service to the municipality. The conditions for retirement prescribed in the model ordinance are the attainment of a certain minimum age and the com/pletlon of a certain period of service. It is im^portant to clearly define employment that will be credited for retirement so that both the employee and the municipality can agree on computations of pension benefits. This term is used in Sections 3.3, 5.1(a), 5.1(b), 5 A, 5*5i^), and 5.5(b) of the model pension ordinance. 3.3) "Creditable Service" for retirement for the purpose of calculating benefits shall consist of the membership service rendered by the em.ployee since he last became a member, plus Past Service subject to the limitations of this section rendered continuously since the employee's last date of einploym.ent , to his normal retirement date. 5.1(a) The monthly pension for general employees is :fp2.00 for every year of •credited service." 5.1(b) The monthly pension for pollceffien and firemen is 1 percent of average monthly earnings, during the last ten years of service, for every year of "credited service." 5.^0 A general employee v/ho has twenty years of "credited service*' and has attained his 60th birthday may make written application for early retii"em.ent to the City Manager ,

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71 A fireman or policeman who has twenty years of "crocllted service" and has attalnGd his 55th birthday iray make written application to tVio City Mana£,-er for early retirement. 5.5(a) If a member of the Plan dies or ceases to be a permanent employee prior -^o his normal retirement date and has less than 20 years of "credited service," or has not yet attained his 55tb birthday in the case of g^eneral employees, or his 50th birthday in the case of policemen and firemen, all rights of the employee in the pension plan will terminate. 5.5(b) If any member of the Flan tornlnatcR employment with the City prior to his normal retirement date and has completed 20 years or more of "credited service" and has attained the age of ^^ years or greater in the case of general employees, or 50 years or greater in the case of policemen and firemen, the pension credit earned at termination will be fully credited to the employee. Effective Date of the Plan t The date on which the op ei^.ti on of the Flan is to commence for the purpose of determining eligibility, benefits and related matters, which is hereby fixed as the first day of January, 1968. This definition fixes the date on which the operation of the plan will conmenc--. Thic is necessary for the purpose of determining eligibility, benefits, and related matters which are computed from the effective date. This term is used in Sections 3.ii-, and 3.5 of the model pension ordinance, 3.'+) With reference to service before the effective date" of the Plan, no credit will be given general employees for service to the City before January 1, I96O.

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iz 3.5) Policemen and Firemen v;ill be creflitefi vjitb all years of service to the City before the "effective date" of the Plan. Smnloy ee; All persons eniployed by the City and so classified under rules and regulations and personnel records of the City, including "probatlonal" or permanent employees. Any appointed officer shall only be qualified under this Plan under one office and that office being the one from which he receives the largest annual salary, compensation or remuneration. Independent contractors are excluded. Part-time employees are excluded. Pension benefits m.ust be kept vjlthin the financial limits of the municipality. Keeping these benefits vjithin reasonable limits may be most equitably accom.plished by eliminating certain classes of employees from the plan. The model ordinance Includes all permanent employees in the plan while eliminating part-time employees and independent contractors. This elimination is accom.plished by definition v;hich excludes part-time employees. This term is used in Sections 3.3, ^.1, 5.1j 5-3 5 5-6, 5'li 5.9j 5. 13 J and 6.3 of the model pension ordinance. 3.3) Creditable service for retirement for the purpose of calculating benefits shall consist of the membership service rendered by the "employee'' since he last became a mtember plus past service. Any ''emiployee" vjill be given credit for service to the City starting January 1, I960, or his date of employmient, whichever is later. ii-.l) "Employees'" will not contribute tothe cost of the Plan.

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73 5.1) An "enrDloyee'will normally retire on the first day of the month follov/ing (or colnciainc with) the attalniiient of the ares shown In the scheaiile presented In this subsection. In the event of norm.?.! retirement the retiring "employeeshall be entitled, to and shall be paid an annuity payable monthly beginningwith the irionth of retirement and continuing until death. The amount of annuity to which a retiring "employee'' will be entitled Is calculated In subsections (a) and (b) of section 5.1. 5.3) An "employee'who does not desire to retire on his normal retirement date may make written application to the City Cleric or City Manager for retention in regular or parttime employment. Upon the approval of the City Manager the "employee" may be retained by the City for a period not to e-.:ceed one year following his date of norir.al retirement. In the event of such deferred retirement, the 'x-niployee," upon retirement, shall receive the same amount of monthly retirement pension that he would have received had he retired on his normal retirement date. ^,6) The interest of an "employee'^ who dies before his normal retirement date will cease and no death benefit under the Plan will be paid to his estate or to the beneficiary of such "employee." 5.7) If an "employee" dies after retirement no aSditional payments will be nade unless a retirem.ent annuity option has been elected in which case payments will be made in accordance with the option.

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7^ 5.9) An "employee" may select the Social Security Option so that he receives, insofar as practical, a level total yearly retirement income from the two soui'ces. 5.13) j^'J^o m.ember, "employee," beneficially or other persons shall have any interest in, or right in, or to the fund or any part thereof, or any assets comprising the same, except only as to the extent expressefl and provided in this Ordinance. 6.3) When any former "employee" of the City is re-employed; and said "employee" has not been granted a leave of absence, he may receive credit for prior service if he meets the requirements of this subsection., Fund or Pen s ion ?und : All sum.s of m.oney paid into the Plan by the City, and all gifts and contributions to the Fimd, accepted from other sources, together with earnings and appreciation of the same, less disoursem.ents m.ade from said money, in accordance v/ith the Plan, or less any losses or depreciation, of asset value. Use of this definition eliminates lengthy descriptions of the monetary assets accum.ulated to m.eet the obligations of the retii'-ement plan established by the m.odel ordinance. This term is used in Sections '4.2, U-.J), h.^y 4.5, 5-13 > 7.13, 7.16, 7.17, and S.2 of the m.odel pension ordinance. 4.2) The City shall pay into the "Fund'" amounts required to provide the benefits under the Plan. 4.3) The City may accept gifts, devises, bequests, or appropriations to or for the ''Fund" from any source. 4.4) Gifts, bequests, devises, or appropriations to the "Fund" shall be received by the Treasurer, who shall be the Treasurer for the Council.

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15 ^.5) All monies paicl Into and held by the "Pension Fund" shall be promptly deposited with the Trustee or the Insurance Company for the benefit of the "Pension Fund" according to the terms of a Trust Agreement or contract to be negotiated with the Trustee or the Insurance Company. 5.13) i'iO member, employee, beneficiary or other person shall have any interest in, or right in, or to the "Fund" or any part thereof, except as to the extent expressed and provided in this Ordinance. 7.13) Tl^e Commission shall employ an actuary to revievvj the operation of the Plan at intervals of not more than two years. One of the recommendations that the actuary will make to the Commission shall be the amount of the City's contributions to the "I'und-' v;hich in his opinion is necessary to be made for the current operation of the Plan. 7.16) Pension payments, although not promptly paid for any reason, and any other payments to be made out of the "Fund," although not paid prom.ptly for any reason, shall not bear interest unless so ordered by the Commission, 7.17) Each member of the Commission shall use ordinary care and diligence in the performance of his duties and shall not be liable for any loss unless resulting from his own gross negligence or his wilful misconduct; therefore any person having any claim under the Plan shall looV: solely to the assets of the "Fund" for the satisfaction of such claims. 8.2) The provisions of Florida Statute 185. 37 pertaining' to termination of the Plan and distribution of the "Fund" are

PAGE 86

76 hereby incorporated by reference as the same vjould apply to the rights of policemen and firemen under the terms of this Plan. Gender ; The masculine pronoun shall include the feminine pronoun. This definition is included for simplicity vjhen drawing up the pension ordinance, (^rener al Employee ; A general employee shall include all employees as defined in 1.11 herein, other than Policemen and Pirem.en. All full-tim.e employees are Included in the retirement plan and all occiipational groups of employees are included within the model pension ordinance. The provisions of the retirem.ent plan differ according to the occupational requirem.ents of the different classes of employeeir. For this reason, it is necessary to define each class of employee. This term is used in Sections 3.^, 5.1(a), 5.^, 5.5(a) j and 5.5(b) of the model pension ordinance. 3.^) Ho credit vjlll be given "general employees" for service to the City before January 1, I960. 5.1(a) "General Employees" will norm_ally retire on the first day of the month following (or coinciding with) the attainment of the ages shown in the schedule contained in this subsection. The monthly pension for "general employees" is :.':2.00 for every year of credited service. S.h) A "general em.ployee" who has twenty years of credited service and has attained his 60th birthday m.ay make written

PAGE 87

71 application foiearly retirement to the City Manager. In Buch event, he shall be entitled to and shall be paid an annuity equal in amount to the annuity cornputed on the basis of nor-rnal retirement, except that the amount so computed shall be reduced by five-twelfths of one percent of said amount for each month that early retirement precedes his 65th birthday for ''general employees," 5.5(a) If a mem.ber of the Plan dies or ceases to be a permanent employee prior to his normal retirement date and has less than 20 years of credited service, or has not yet attained his 55th birthday in the case of '-general em.ployees," all rights of the employee in the pension plan will terminate. 5.5(b) If any member of the Plan terminates employment with the City prior to his normal retirement date and has completed 20 years or more of credited service and has attained the age of S5 years or greater in the case of "general employees," the pension credit earned at termination will be fully credited to the employee. I'lem.ber ; Any person employed by the City vjho is Included in the m.embership of the Plan as either an original member or a new miem.ber. However, a mem.ber shall be limited and restricted to the definition of employee. Persons em.ployed by the m.uniclpality should be able to determine whether they will be eligible for the benefits of the retirement system. This definition limits and restricts mem.bers of the retirement system to the definition of employees. This term is used in Sections 5, Sis), 5.5(b), S >(^' > 5.10j 5.11, 5.12, 5.13: 5.1^^, 6.1, 6.2, 7.^^, 7.11, 7.13, 7.15, 7.18, £''id 3.1 of the model pension ordinance.

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78 5.5(a) . If a "member" of the Plan flies or ceases to be a permanent employee prior to his normal retirement date and has less than 20 years of credited service, or has not yet attained a certain age, all rights of the employee in the pension plan v;ill terminate. 5.5(b) If any •m.em.ber" of the Plan terminates employment with the City prior to his normal retlrem.ent date and has completed 20 years or more of credited service and has attained the ages speclfed in this subsection, the pension credit earned at termination will be fully credited to the employee. 5.8) The "member" may elect to receive annuity benefits payable under the Plan with the approval of the Commission in the form of a joint and survivor annuity instead of the normal annuity form. The election of a joint and survivor annuity shall be deemed to be automatically cancelled in the event of the death of either proposed annuitant prior to the "member's" actual retirement, 5.10) A separate record of account shall be maintained for each "member." 5.11) The right of any "member" or any beneficiary to any benefits under the Plan or any other right accrued or accruing to any persons under the provisions of this Ordinance shall be unassignable and not subject to process of lavj . 5.12) Should any change or error in the records of the Plan be discovered, or any error in any calculation be made resulting in any "m.ember" or beneficiary receiving from the Plan more or less than he was entitled to receive, the Council

PAGE 89

79 shall have the power to correct such error, and as far as possible to adjust the payments thereafter to be made in such a manner that tVie actuarially equivalent of the benefit to which such "member" or beneficiary was correctly entitled, be paid. 5.13) No "member,'employee, beneficiary or other persons shall have any interest in, or right in, or to the Fund or any part thereof, or any assets corcprising the same, except only as to the extent expressed and provided in this Ordinance. 5.1^^) Whenever and/or as often as a person entitled to payments hereunder shall bo under legal or other disability, the Commission may direct that all or any portion of the benefits of such, "members" be payable in one or more of the ways outlined in this subsection. 6.1) Any "raem.ber" who has been granted a certain leave of absence shall be allowed service credit earned prior to the start of leaves of absence, and with service credit to resume upon retiu-n to employment. 6.2) When any '-member'^ is inducted or enlists in the m.ilitary or related service in response to an order or call to active du.ty, and is subsequently re-employed by the City within 90 days after release from any such service, he shall again become a '-member-' of the Plan and shall be given service credit for this service before entering military or related service. 7.-^) Copies of rules and regulations "or omul ^a ted by the Commission to cover the operation of any phase or part

PAGE 90

80 of the Plan as provided by this Ordinance shall be furnished to any "member'of tte Plan upon request. 7.11) The Commission shall have authority to direct that pension plan funds be deposited with banks and/or savings and loan associations or invested in securities or an insurance company or companies, as determined by the Commission and annuities may be provided for "members'' and their beneficiaries in accordance vjith the terms of this Plan. 7.13) The Com.mission shall employ an actuary to revievj the operation of the Plan, and his report shall be submitted in ^^Jriting and copies thereof shall be available to '"members" of the Flan upon request. 7.15) Sach "member" or beneficiary or other interested "member" shall be responsible for advislnrr the Commission of his current mailing address, and any other information in connection with any payment under or in connection with the Plan . 7.18) Whenever any I'etireraent annuity payable at quarterly intervals shall be less than SlO.OO, the Commission m.ay elect to pay the commuted value of the same in one lump sura providing such election is made within six months after the "member's" .retirement unless he consents in vrrlting to a subsequent election by the Commission, 8.1) It is contemplated that the City Comm.lssion of this City may in the future decide that it is in the best interests of the City and the "members" of the Plan to modify or terminate Trust Agreements or contracts entered into with an insurance company. or companies, or to select anottier insurance company.

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81 trust, or other financial Institution as the depository for pension funds. Kenbei'shlp Service ; Service rendered as a full-time permanent employee since last becoming: a member of the Plan. Such service shall be computed to the nearest full month of conroleted service but not including any additional fractional parts of a month. The formula for computinpension benefits is dependent on the employee's service to the municipality. Part of the employee's creditable service will be membership service since last becoming a member of the retirement system. This term is used in Section 3.3 of the model pension ordinance. 3.3) Creditable service for retirement for the purpose of calculating benefits shall consist of the "membership service" rendered by the employee since he last became a member, plus Past Service rendered continuously since the employee's last date of employment, to his normal retirement date. Kew Member ; Any permanent employee who becomes a member of the Plan after the effective date of the Plan. It is im.portant to differentiate between employees who are hired after the effective date of the plan and em.ployees who are already in the em.ploy of the municipality on the effective date of the plan. The definition of a "new member" clarifies just whom we are talking about when referring to emiployees hired after the effective date of the pension ordinance. This term is used in Sections 3.2, and 8.1 of the model pension ordinance.

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82 3.2) A "new member'" will become eligible to participate In the Plan on the first clay of the month following, or coinciding with the elate of his employment. 8.1) It is contemplated, and all original and "new members" of the Plan shall be deemed to have notice, that the City Commission of this City may in the future decide that it is in the best interests of the City and members of the Plan to modify or terminate Trust Agreements or contracts entered into with an insurance company, or to select another insurance company, trust, or other financial institution, as the depository for pension funds. Normal Retirement Dat e; The norm.al retirement date of a member shall be his normal retirement date as determined in accordance with the term.s of the Plan. Normal pension benefits are payable when the member reaches his norm.al retirement date. This may be at varying ages because employees v;lll be hired at different ages. Section 5«1 contains a schedule listing the normal retirement date for em.ployees dependent upon their age at entry into the retlrem.ent plan. This definition avoids confusion on the part of the municipality and covered em.ployees as to -when they v;ill -retire and be eligible for benefits provided by this ordinance. This term is used in Sections 3i3> 5.3? 5.^j 5«5(a)s 5«5(b), 5«6j 5 >1 ^ ai^d 5«8 of the model pension ordinance. 3.3) Creditable service for retirement for the purpose of calculating benefits shall consist of the membership service rendered by the employee since he last becam.e a member, plus

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83 past service rendered continuously since the employee's last date of employment, to his "normal retirement date." 5.3) An employee i-jho does not desire to retire on his "normal retirement date" may make written application to the City Clerk for deferred retirement. In the event of such deferred retirement, the employee, upon retirement, shall receive the same amount of monthly retirement pension that he would have received had he retired on his ''normal retirement date." 5.^) An employee vjho has tv;enty years of credited service and who has attained a minimu.rn a;^'e may make v;rltten application for retirement prior to his "normal retirement date." 5.5i^) If ^ mem.ber of the Plan dies or ceases to be a perm.anent employee prioito his "normal retirem.ent date'' and has less than 20 years of credited service, or has not yet attained a certain age, then all rights of the employee in the pension plan vjill terminate. 5.5(^0) If ^ member of the Plan terminates employment with the City prior to his "normal retirem.ent date" and has completed 20 years or more of credited service and has attained a certain age, then the pension credit ea?:-ned at termination -will be fully credited to the employee. He ma.y, v/hen he reaches his "'normal retirement date," make written application to the City Kanager for the pension earned, and in such event, he shall be entitled to, and he shall be paid, an annuity computed on the same basis as that of other employees who retire on their '"normal retirement date."

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8Hf 5.6) The Interest of an employee who dies before his •normal retirement date" will cease. 5.7) If an employee dies after his "normal retirement date" no additional payments will be' made unless a retirement annuity option has been elected in which case payments will be made in accordance with the option. 5.8) The member ma.y elect to receive annuity benefits payable under the Plan with the approval of the Commission in the form of a joint and survivor annuity which must be requested by the employee at least three years prior to date of retirement, including retirement prior to "normal retirement date." Origina l Me mb e r : Any permanent employee of the City who becomes a member as of the effective date of the Plan. It is important to clearly define those employees who are already in the employ of the municipality on the effective date of the plan. The definition of an ''original member'clarifies just vjhom we are talking about vfncn referring to employees who are in the city's employ on the effective date of the pension ordinance. This terra is used in Sections 3.I and S.l of the model pension ordinance, 3.1) "Original members" shall be all full-time, pernanent City employees who had not reached age sixty v;hen originally employed by the City. 8,1) It is contemplated, and all '"original members" of the Flan shall be deemed to have notice, that the City Commission

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85 of this City may In the future decide that it is In the best interests of the City and the members of the Plan to modify or terminate Trust Asreements or contracts entered into with an insuranco company, or other financial institution, as the depository for pension funds. Past Servicp; ; Service rendered as a full-time permanent enDloyee from January 1, IQ60 to the effective date of the' Plan. The pension ordinance gives consideration to employees who are in the employ of the n.unicipality when the retirement plan is established. The financial obligation for this past service credit is assumed by the municipality and discharged by city contributions over a period of years. This past service liability for employee benefits which are payable on account of service rendered for the municipality before the effective date of the retirement plan can be rather large. It is limited in amount by writing a maximum time limit on the credits that may be allowed for past seivice. This terra is used in Section 3.3 of the m.odel pension ordinance. ?>.3) Creditable service for retirement for the purpose of calculating benefits shall consist of the m^embership service rendered by the employee since he last became a member, plus -Past Service'rendered continuously since the employee's last date of employment, to his normal retirement date. Per ma n en t ''^n.ioi py ee ; An em,ployee who has completed his 'n-obatj on^ry period, been approved for perr-anent status bv the

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86 department head under whom he is employed, or the City Commission, if approved by it, and has been certified by the City Clerk or City Ilanaser as a permanent employee, or according to the personnel records of the City pertaining to such employee. Certif icr^.tion or approval for perm.anent status shall be subject to the rules of the career service system of the City of Anytown. The model ordinance includes all permanent em.ployees in the retirem.ent plan. The above definition very clearly states the conditions that m.ust be satisfied in order for an employee to be certified as permanent. This leaves no doubt in regard to their eligibility for benefits under the pension ordinance. This term is used in Sections 2.1, 3.1, 3.2, and 5.5(a) of the model pension ordinance. 2.1) A pension and retirement system> for full-time "permanent employees" in the service of tho City of Anytovrn, Florida, is hereby established to provide retir^ement benefits as provided by this Ordinance. 3.1) Original m.em.bers shall be all full-tim.e, "perm.anent City em.ployees" v,'ho had not reached age sir.ty v;hen originally employed by the City. 3.2) Mevj, full-time, "permanent City em.ployees" vjill become eligible to participate in the Plan on the first day of the month follovjing, or coinciding v.'ith the date of their em.ployment. • 5.5(a) If a member of the Plan dies or ceases to be a "permanent employee" prior to his normal retirement date and has less than 20 years of credited service, or Ye.s not yet attained a certain age, all rights of the employee in the pension plan v^ill term-inate.

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87 plan. Pension Plan oi' 'Frnnloyeen* Penplon Plan : The Bystem of retirement benefits provided under this Ordinance, Use of this definition shortens, the wording of the ordinance. We can use the term "plan" rather than Employees' Pension Plan of the City of Anytown, Florida. This term is used in Sections ^l-.l, i}-.2, 5.5(a), 5.5(b), 5.8, 5.10, 5.11, 5.12, 6.2, 7.1, 7.3, 7.^, 7.5, 7.6, 7.8, 7.9, 7.10, 7.11, 7.12, 7.13, 7.17, 8.1, 8.2, and 9.1 of the model pension or-dlnance, 4.1) The cost of the "Plan V'jill be borne entirely by the City and by State remittances. Employees will not contribute to the cost of the "Plan," k,2) The City shall pay into the Fund amounts required to provide the benefits under the "Plan." ^ ^.5id-) If a member of the "Plan" dies or ceases to be a permanent employee prior to his normal retirement date, then under conditions of this subsection, all rights of the employee in the "pension plan" will terminate. 5.5 (b) If any member of the "Plan" terminates employment with the City prior to his normal retirement date and has completed 20 years or more of credited service and has attained a certain age, the pension credit earned at termination will be fully credited to the employee, 5.8) The member may elect to receive annuity benefits payable under the "Flan" in the form of a joint and survivor annuity instead of the normal annuity form with the approval of the Comm.lssion.

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88 5.10) A separate record of account shall be maintained for each member, which shall show such information as is necessary for an active and comprehensive determination of his status under this "Plan." 5.11) The right of any member or any beneficiary to any benefits under the "Plan'shall be unassignable and not subject to legal process. 5.12) Should any error or change in the records of the "Plan" be discovered, the Council shall have the power to correct such error. 6.2) When any member is inducted or enlists into the military or related service and is subsequently re-employed by the City within 90 days after release from any such service, he shall again become a member of the '"Plan." 7.1) The general supervision of the administration of the "Plan" shall be by the Comm.ission, 7.3) This "Plan" or any matter herein may be considered and disposed of at any Commission meeting. 7.^) The Com.ralssion by resolution may promulgate written rules and regulations not in conflict with the expressed terms of this Ordinance or the Charter to cover the operation of any phase or part of the "Plan" as provided by this Ordinance. Copies of such rules and regulations shall be furnished to any member of the "Plan" upon request. 7*5) The Commission has the power to interpret the '"Plan" and its construction made in good faith shall be final and conclusive upon all parties' interests.

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89 7.6) The Commission shell have the power to pelect, employ and compensate any agents and employees that they may deem necessary and advisable in the proper and efficient administration of the "Plan." 7.8) The City Clerk or Deputy Clerk shall be Secretary to the Commission under this "Plan." 7.9) It shall be the duty of the Secretary to keep accurate minutes and records of the acts of the Commission under this "Plan" separate and apart from the regular minutes of City Commission meetings. These records shall be available to the public, city officials, and employees under this "Plan" at all times. 7.10) All notices, elections, designations and changes of beneficiaries and similar writings pertaining to the operation of the "Plan" shall be m.ade and preserved in writing on such forms as the Cornmlssion may direct. 7.11) The Com.misslon shall have authority to direct that '-pension plan" funds be deposited with any financial institution permitted by this Ordinance to provide members and their beneficiaries the benefits provided in accordance with the terras of this '-Plan." 7.1^) The Trustee or Insurance Company or Companies with which a trust agreement or contract or contracts are entered into for the administration of the "Plan" shall submit a statement of the condition of the funds on deposit to the credit of the "Plan" at least once yearlv.

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90 7.13) '^he CotnmiEslon shall employ ?.n actuary to review the operation of the ''Plan^ at intervals of not more than tv.'o years, and to make his recornmenclations to the Commission as to the actuarial solvency of the "Plan,*' and such other information as the Commission may require. 7.17) Any person having any claim under the '"Plan" shall look solely to the assets of the Fund for the satisfaction of such claims. 8.1) It is contemplated, and all original and new m.embers of the "Plan" shall be deemed to have notice that the City Commission may in the future modify agreement or contracts with financial institutions, or select another financial institution as the depository for pension funds. 8.2) The provisions of Florida Statute 185.37 pertaining to termination of the •Plan" and distribution of the Fund are hereby incorporated by reference as the same would apply to the rights of policemen and firemen under the terms of this «Plan." 9.1) Whosoever with intent to deceive shall falsely or cause to commit to be falsified any record comprising any part of the operation or administration of the "Plan" contemplated by this ordinance, shall be punished or fined according to this subsection. Plan Ye ar; A period of twelve consecutive m.onths measured from the effective date of the Plan, or from any anniversary thereof . It is necessary for the retirew-ent system to maintain orderly financial records based on a pi'-edetermined calendar

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91 basis. The above definition determines the basis upon which the financial accounts of the retirement system are maintained. Fetl?'ement ; Withdravjal from active ernp.loymont by the City with retirement Income grantee under the pi'ovlslons of this Plan. To avoid confusion on the part of employees. It Is Important to specifically state the meanln£; of the word "retirement." As defined In the Ordinance, 'retirement" means the termination of employment from the municipality with eligibility for retirement benefits payable from the pension fund. This term is used In Sections 3.3, 5.I, 5.2, 5.3, S.k, 5.7, 5.5, and 7.18. 3.3) Creditable Service for 'retirement" for the purpose of calculating benefits shall consist of the mem.bership service, plus Fast Service rendered continuously by the em.ployee since he last became employed, to his normal retirement date. 5.1) An employee will normally "retire'' on the first day of the month following (or coinciding with) the attainment of the ages shown in the schedule contained in this subsection. 5.2) Pension paym.ents will be made monthly beginning with the first month of "retirement" and continuing until death. 5.3) An employee who does not desire to "retire" on his normal retirement" date may make written application to the City Clerk or City Manager for delayed "retirement." In the

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92 event of such deferred "retirement" the employee, upon "retirement," shall receive the same amount of monthly retirement pension that he would have received had he "retired" on his normal retirement date. 5 A) An employee v.'ho has tv?enty years of credited service and who has attained a certain age may make written application for early '"retirement" to the City 'Manager. With approval of the City Manager the employee m.ay "retire" on the first day of any month following, or coinciding with, his 60th or 55th birthday, whichever shall be applicable according to this subsection. 5.7) If an employee dies after "retirement" no additional payments will be made unle ss a retirement annuity option has been selected. 5.8) The joint and survivor annuity election m.ust be requested by the em.ployee at least three years prior to date of "retirement." The election of a joint and survivor annuity shall be deemed to be automatically cancelled in the event of the death of either proposed annuitant prior to the member's actual "retirement." 7.18) Whenever any retirement annuity shall be less than •flO.OO per month, the Commission may elect to have payments made quarterly. Such election shall be made within six monthsafter the member's "retirement' unless he consents in writing to a subsequent election by the Commission under this Section. Betire ment Annu.ltv Option : An optional form of retirement annuity as described in Section 5.8.

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93 If an employee dies after retirement no furtVier payments will be made under the terms of this ordinance unless the employee selects the "retirement annuity option" which Is a Joint and survivor annuity. This option permits a beneficiary of the member employee to continue to receive his pension benefits after his death. This term is used in Sections 5.2, 5.7, and 5.8 of the model pension oi^dinance. 5.2) Pension payments will be made monthly beginning v;ith the first month of retirement and continuing until death, unless a "retirement annuity option" has been elected in vjhich case payments v;lll be made in accordance with the option. 5.7) If an employee dies after retirement no additional payments will be made unless a "retirem.ent annuity option" has been elected in which case payments will be made in accordance V7ith the option. 5.8) The member may elect to receive annuity benefits payable under the Plan with the approval of the Commission in the form of a joint and survivor annuity Instead of the normal annuity form. Under the "retirement annuity option," two-thirds of the retirement annuity income continues to the surviving contingent annuitant, until his or her death. Retirement Income : Annual payments for life payable In monthly installments, or the actuarial equivalent paid in lieu thereof, in accordance with the Plan. It is contemplated that separate actuarial tables may be used for male and female employees to reflect the different life expectancies.

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9^ Use of tills definition shortens the vjording of the orflinance. We can use the term "retirement income" rather than a complete aescriptj.on of the monthlj'payment due to a retired employee member under the retirement plan. This term is used in Sections 5.8, and 5.9 of the model pension ordinance. 5.8) Under the joint and survivor annuity, two-thirds of the "retirement annuity incom.e" continues to the surviving contingent annuitant, until his or her death. 5.9) An employee who retires before he is entitled to receive monthly benefits under the Federal Social Security System may elect to have his retirement annuity benefits increased before his Social Security benefits begin, and decreased thereafter to obtain, insofar as practical, a level total yearly "retirement income" from the tvio sources. Social S ecurity Omtlon : An optional form of retirement annuity as described in Section 5 '9. The model pension ordinance is designed to supplement the benefits of Social Security v;lth the municipal pension benefits. This option enables a member v;ho retires prior to age 63, or vjhen the employee becomes entitled to Social Security payments, to receive the samie retirement benefit throughout his life. At age 65, or vjhen the employee becomes entitled to Social Security payments, the pension benefit vjould be recalculated and a lower amount of pension benefit would become effective. The reduced amount of retirement annuity after age $5, plus Social Security, vrould be approximately

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95 the same In value or amount as that pi-ovirlccl pi'ior to receipt of Social Security benefits. This option is a simple method to coordinate the benefits of the municipal retirement plan with Federal Social Security as it permits the municipality to operate its retirement program v;lth a minimum degree of dependence upon the Social Security pro£;rara. This term is used in Section ^ ,9 of the model pension ordinance. 5.9) The ''Social Security Option" permits an employee who retires before he is entitled to receive monthly benefits under the Social Security System to have his retirement annuity benefits increased before his Social Security benefits begin, and decreased thereafter to obtain, insofar as practical, a level total yearly retirement iticome fi'om the tvjo sources. TreaEi:trer ; The Treasu.rer of the Plan is the City Finance Officer. Some individual or group v;ill have the responsibility of safeguarding the assets of the pension system. By defining the v;ord "treasurer" v;e eliminate the need to repeat the complete title of the treasurer for the pension plan assets. This term is used in Section l-lA of the model pension ordinance. ^.k) Gifts, bequests, devises, or appropriations to the Fund shall be received by the "Treasurer," who shall be the "Treasurer'* for the Council. The "Treasurer"shall be liable for the safekeeping of funds received, and appropriated by the Commission under his bond. The '"Treasurer" shall promptly

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96 deposit funds in banks or savings ancl loan associations deslgnatec" by the Coraralssion, or transfer 'to the Trustee or the insurance coir.pany all funds received and funds appropriated by the City Commission. Trustee; Any Bank having trust powers which has been designated as Trustee of the Pension Fund by the Comraission. A financial institution shall handle the pension funds as a trustee acting for the Employees* Pension Plan of the City of Anytown. Use of this definition eliminates lengthy descriptions of the e::act name of the trustee and permits the City Comraission to designate or change the trustee as they see fit to do this under future conditions that may develop. This term is used in Sections h.U-, ^-.5, 7.10, 7.12, and 7.16 of the model pension ordinance. h-.k) The Treasurer shall transfer funds to the •'Trustee" or the insurance company as vjell as deposit funds as promptly as possible, ii-.5) All m.onies paid into and held by the Pension Fund shall be promptlj"deposited with the "Trustee'" or the Insurance Compan;/ for the benefit of the Pension Fund according to the terms of a Trust Agreem.ent or contract to be negotiated vjith the "Trustee" or the Insurance Company. 7.10) Whet-ever there is any notice, election, designation, complaint, ruling, or other written proceedings relating to a particular employee, the Secretary shall furnish the ''Trustee" or the Insurance Company, when necessary, vjith a copy of same, as vvell as the employee.

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97 7.12) The •••Trustee" or Insurance Company or Companies v^;ith which a trust agreement or contract or contracts are entered Into for the administration of the Plan shall submit a statement of the condition of the' funds on deposit to the credit of the Plan at least once yearly, and may be required to supply copies of such statements to an actuarial consultant designated by the Commission. 7.16) Delayed pension payments, and any other payments to be made out of the Fund, although not paid promptly for any reason, shall not bear interest unless so ordered by the Commission, who shall have discretion to fix the rate and calculate any such interest, and in such event, the interest to be paid shall not exceed the then current rate of interest being returned on the funds on deposit with the "Trusteeor the Insurance Company, or other financial institution. Establishment oiLthe_Pens ion Syst em Many cities are given the right by their city charters to establish a pension program by approving it on a local level while other cities must hE..ve the approval of the State Legislature. When a city draws up a pension plan and submits it to the Florida Legislature for enactment, this procedure would necessitate the addition of the following sentence: ••Be it enacted by the Legislature of the State of Florida." The following sentence is then added to the pension ordi nance:

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98 This Orainance shall take effect in accordance with lav7 and the Charter of the City of Anytown, Florida as amended, and shall become effective im_mediately upon its passage and approval by the Commission. Passed and adopted by the City Com.mission of the City of Anytown, Florida on the ^th day of Hay, 196c .3 Mayor ATTEST: City Clerk Passed on First Reading on the 6th day of April, 1968, To o-ive the municir>ality enoup;h time to familiarize its participating employees with the benefits they can expect, it may be good policy for the pension program to take effect sometime after its passage by the City Council. We must remember that the employee's role is primarily passive in determining pension policy--he has a minimum of influence in determining his own pension. The employee selects the benefits that suit him best. The municipality usually makes this decision for him and informs him that at a certain time (or event) in his life, he can expect a certain level of •benefits. When the plan is noncontributory ^ the new employee must generally accept it with his other conditions of employment. The choice for those working at the time th.e noncontributory pension plan is established is rather academic since

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: 99 the old employee can choose not to be covei-'ed, but In this case he Is merely saving the municipality its contribution vjithout improving his personal salary or retirement genefltf?, "Standing alone, monthly pension payments, compared to vjages or salary, are more apt to breed disappointment than satisfaction. The company pension needs to be related to a total plan for retirement. . . ."° With a viev/ towards improving employee relations, there are v;ays of "selling" employees on their pension plan. A descriptive brochure vjritten in a language that they v;ill easily understand is a primary step. Another is intradepartment and munlcipal-v.'lde meetings with employees to resolve any real or fancied misunderstandings. It vjould be helpful to have a pension consultant and imiDortant department heads in attendance at these open forums. The purpose of these steps is to convince employees (and other interested citizens) that they are going to receive benefits. These benefits, while they are real, may not be apparent to the average worl^ing man. Ask a wage earner his incomej and he's likely to tell you his hourly rate. He forgets v;hat many of us forget — that so-called fringe benefits are also part of his compensation. Fi^inge benefits (vacations, holidays, group insurance, pensions, etc.) have a definite dollars-and-cents value. So, in a very real sense, they are supplem.ental wages.* It is not wise psychology to have one's em.ployees feel that a plan has been foisted on them. Since m.ost employees vjant to believe that they have been consulted before the plan is put into effect, it vjould be useful to utilize this pei'iod of delay betv)een the passage of the ordinance and its effective date as a device to imv)rove employee relations.

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NOTES Section 8.2, Article 8: Chapter II. The ordinance includes all permanent, full-time employees. The municipality may exclude employees by department or occupation without infringing on the legality of the pension plan. ^Bernstein, op^ cit .. p. 130. Numbers refer to subsections of Article 1: Chapter II. Section 13.1, Article 13: Chapter II. Fred Rudge, How to Achieve M8.ximum Return on Pension Costs," Pensions & Profit Sharing (The Bureau of National Affairs, Washington, D.C., IS 6^), 3rd Ed., p. 263. 7 Republic Steel Company advertisement, Saturday Beviev; (December 17, i960), p. 5. 100

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CHAPTER IV HEHBERSKIP AND SERVICE Tvjo princip?.! considerations govern xvho shall be allowecT to participate in the municipality's pension plan — personnel policy and cost. In arldition, the plan may have to qualify for benefits under Federal and ^lorif, a Statutes. I'lepiber shin Membership can be limited by setting eligibility requirements based on service, or age, or both. By eligibility, the v/riter refers to the conditions that must be fulfilled before an employee may be covered by t'ns pension plan. Usually participation in a pension plan is made dependent upon completion of a certain number of years of continuous sei-vice, the age of the emplovee and/o2p the accu.iralation of a certain amount of' ernings.-^ " ^c-e limits. -A serious pi-oblem is determining the maximum age at which a miunicinality vjill permit a nev; employee to participate in its pension plan. The employer miust remem.ber that the ultimate cost of the plan is directly affected by the age of current employees 'and those who will be enrolled in Tutvxre years. There is a higher cost to fund tension plan for an older employee than for a younger one. The older m,an villi retire sooner, resulor.ing' in benefits bein-^ 101 a

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p 102 paid out eai^ller ancl, conseqiaeutly , fewer years In which to btillc! up the fund's assets. It is obvious that when city contributions are n-ade for a comparatively short period of future service, they l.^Jill not be adequate to build up anything approachinga satisfactory pension for the older ernloyee. Generallyj tvjo methods are used to minimize this cost. 1. Specify an upper age limit in the municipality's hiring policy. This v;ould exclude employees for whom the purchase of a pension would be too expensive. Various studies in this area have found that the hiring practices of business firms vjere definitely affected by their pension plans. For example, Jolm I. Saks, writing in the r'onthly jLab o r Hevievj , notes that "hires of v;orkers aged i;-5 and over constitute 1^ percent of all hires where a plan vjas In effect, as against 25 percent vjhere there was no coverage."^ The same study revealed that persons of ^5 smv. over had better chances of finding jobs in firms that had no pension plans, and that com,panles that provided pension coverage hired vjorkers over age ^S 9t only one-third the rate of younger job seekers looking for similar vvork.-^ 2, Set up eligibility conditions that are dependent upon a continuous span of city service and predetermining a required retirem.ent age. This length of service may be from. 5 to as high as 35 years. VJe can see in SGction 5.1(a) that in most cases general employees must continuously v;ork for the municipality at least ten years before eligibility for normal retirem.ent.'^

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103 This problem Is somewhat easecl vihen the amount of benefits depend on the nu.inber of years of credited service of each Indlvldxial employee. Usually this service must be continuous — beginning from the last hiring date. Thus, If the employee is fii-ed or quits, he would end his accumulation of credited service. Kls subsequent rehiring vjould start his accumulation of pension credits from, scratch. This has been accomplished by Section 6.3 of the model pension ordinance. Ee-Snrnl oyment; j'Jo leave of Absence or nilitary Service ; When any former employee of the City is re-employed, and said employee has not been granted a leave of absence, he may receive credit for prior service if and only If (1) tVie pei-lod of prior emplo;meiit was of at least one ye-ir^s duration, (2) the City Manager recomm.ends that he be given credit for prior service, and (3) the Commission approves said recoirmiendatlon. Prior service credit .-VHiile age limitations can be used to limit costs for future emiployees to be hired, vie can expect to find em.ployees v;ho have been working for the municipality for some period of time vjhen the pension plan is established. If these individuals vjere to begin their service credit on the effective date of the plan, their retlrem.ent benefit may very likely be quite sm.all. The usual solution to this Is to grant credit for past servlce--that is, service before the effective date of the plan. This has been accomrilished by including the folloi-jing in tVie ordinance: 5 Credit able S ervice ; Creditable Service for retirem.ent for the purpose of calculating benefits shall consist of the mem.bership service rendered by the em.ployoe since he last became a member, plus past service rendered continuously since the employee's last date of employment, to his normal retirement date. Any emiployee vjill be given credit for

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i t r service to the City starting January 1, i960, or his I date of employment, whichever is later. i The main purpose for granting this credit is to enable i • the older municipal employees to obtain pension benefits that are commensurate with their salary. Since no contributions have been made for their past service, the municipality immediately accrues a liability. This unfunded liability is usually referred to as an actuarial deficiency. This humanitarian goal must be balanced against the costs necessary to make ,this possible. The more that a municipality gives credit for past service, the more costly will be the plan. There are various methods of limiting these costs. One of the simplest ways is by giving credit for years of service only after a specified date (or age) . This date might be set some five or ten years before the effective date of the plan.° Service 3efore the ;^-ffective Date of the Plan ; No credit will be given general em.ployees for service to the City before January 1, i960. Service of Policemen and Firemen Before the Effective Date of the , Plan ; Policemen and firemen will be credited with all years of service to the City. Another simple method is to limit the number of years for which prior service credit is granted. Once these past service costs have been determined by an actuary, the miunicipality should decide on a plan to pay all of these costs by conferences vjith their consulting actuary and the City's financial officer. The State of Florida does require every municipality to establish some TDrogram to rieet these costs for -oension TDlans

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105 protectingfiremen ancl policemen. The pi'O^rain utilized to amortize the actuarial deficiency Is left up to the munlcipallty-flepencilng upon Its financial position and income but all pensions for firemen and policemen ai^e required to amortize their actuarial deficiency over a maximum forty year period by the State of Florida. V/hatever anorti:^ation program is decided, the soundest plan is to have a definite program for contributing to these liabilities, and to depart from this program only v;hen absolutely necessary. Service O ccuoation or , posit ion requir ement .-As mentioned earlier, the pension can be written to cover all employees, or only certain occupations. Kach occupation that will participate should be clearly described and defined. The State "subsidy" for policem.en and firemen has not been sufficient to fund their pension programs, so that if occupations which receive no financial aid from the State are included, the proportional .cost of the plan will increase. In addition to setting up eligibility requirements based on age, membership can be limited by basing it on occupation. All ftill-time employees are included in the Kodel Ordinance. ''' Or 1 g i ri a 1 ne'n ^.'oeT s : All full-time, permanent City enplo^/ees vjho had not reached age sixty vjhen originallv emiDloyed by the City. Ilevj r-'lembers ; New, full-time J permanent City employees will become eligible to participate in the Plan on the first day of the month following, or coinciding with the date of their employment.

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106 Term of service .-?roni the municipality's viewpoint, the pension plan should, be for permanent employees only. The retirement program's financial costs can be reduced by excluding transient and part-time employees from eligibility. If all permanent full-time employees Immediately participate in the plan, even though they may not be eligible for benefits until a number of years pass, reserves and accounts must be set up for some employees vjho will leave after a relatively short time. The municipality has to balance these bookkeeping expenses against the benefit of reducing employee turnover and improving personnel morale. The pension program should help to stabilise personnel when the new em.ployee has the feeling of belonging to the plan as soon as possible after employment. A study of temnination rates for policemen has found that most full-time employees remained on the job to rstiiement — at least those who were over 25 years old. If we can assume that approximately the same percentage of other municipal employees will remain on their jobs, this would argue strongly In favor of immediately allowing all eligible workers to participate. Every municipality must, hovvever, consider this decision In the light of its own personnel experience and employment practices. This period of probation can be accomplished when defining permanent employees.' P e y m.a n e n t I' m p 1 o y e e_: An em.ployee who has completed his probationary period, been approved for permanent status by the department head under v;hom. he Is employed, or the City Commission, if approved by It, ana has been certified by tVie Cltj^ Clerk or City Manager as a permanent em.ployee, or according to the personnel recoj^ds of the City pertaining to such emiployee. Certification or

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10? approval for permanent statu? shall be subject to the rules of the career service system of the City of Anyto-.vn. TABLE k AGGREGATE TERMINATION RATES (RAW DATA) FLORIDA MUNICIPAL POLICE PENSION FUNDS 5 Year Study I958 I963 Attained

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NOTES Harbrecht, o p. cit ., p. 51, 2 Saks, 02,A— Sii.. , p. 21, IMfl.., p. 20. ^Artlcle 5, Section 5.1(a): Chapter II. 5 Article 3, Section 3.3: Chapter II. 6 Article 3, Sections 3.^, 3.5: Chapter II, 7 Article 3, Section 3.I, 3.2: Chapter II. o Article 1, Section 1.21: Chapter II. 108

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CH/iPTER V C0:'IT3l3UTI0r:S ATTD FUMDIUG It is a serious financial decision to enter into an employee pension program. Certainly, the prime essential to success is that the cost of the plan should be v:ell within the amount of money that the municipality can afford. It may be much wiser to be£,in with as simple a plan as the municipality can afford to maintain as benefits can always be increased and elaborated at a future date. The financial advisor can siA^:o-est the maximum annual outlay that a municipality can afford. An actuary can then determine the approxIm.ate benefits that can be provided to those em/ployees who vjill be members of the plan. Fundincr A sum of money has to be budgeted or accum.ulated to provide the benefits of a pension program. These financial arrangements are usually referred to as funding m.ethods. The goal of the funding process is to accum.ulate sufficient assets to satisfy the liabilities of the pension plan. 'The ultimate true cost of a pension plan is in no v/ay affected by the choice of funding method. Yet, the funning method determines how miich of the ultimate cost of a plan is 109

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110 to be met clurlngany particularperiod of time."-'The State of Florida requires a rriunicipality to accumulate sufficient assets for all benefits creciitecl to firemen and policemen subsequent to the effective date of the plan, and over a inaxiEun forty-year period, to equal the present value of all benefits credited for past service — that is, service prior to the effective date of the plan. Therefore, a Florida municipality must use the advance funding technique in order to receive the insurance premium tax subsidy from, the State. "A d v a nee f u n d i n 2' . -P 1 a n s v.'hich follov; this approach annually set aside enough funds to pay benefits that have been credited during that year. In addition, a small part of their past service liability is paid into the fund so that all obligations i7ill be completely funded no later than forty years from, the effective date of the pension ordinance. According to Dan 11, KcGill, ". . .the concept of advance funding is based on the assumption that the pension plan will eventually term.inate. If it could be assumed that a plan vjould continue in perpetuity, no reserves vjould be necessary. Under the advance funding scheme, hcvjever, all employees, active and retired, enjoy the added m.easure of security afforded by a segregated fund dedicated to the payment of their retiremient benefits. If the plan is fully funded, on the basis of conservative assumptions, all benefits v.'hich have accrued as of a particular tim.e can be paid vjithout further contributions from the em.ployer. "^

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Ill Cost of th^ Plan For any given scheclulc of retirement benefits, the cost of a plan depends on many factors, principal among these factors is the number of employees v^hb v;ill become eligible for benefits. The exact am.ount that is to be contributecl to the retirement pr-ograra can be determined In advance by an independent actuary retained by the municipality. When determining cost, the actuary considers interest, turnover, T:)re-retlrem.ent and post-retirement mortality. He has tlie training to suggest the amounts wViich will be adequate to meet valid clairas in the normal course of the pension plan as they com.e due--in advance! According to Herton C, Bernstein: "Actuaries are 'natiirally' inclined to assumptions vjhich vjill avoid understating expected costs or required contributions." He concludes: "This propensity tov.'ard lov; tui-'nover, low interest rate, high cost estimates may not be universal, but, judging from, what actuaries v/rite and tell me, it probably is more comjiion than not. "3 This attitude may be sou.nd because being conservative Insures that assets vjill be adequate vjhen they are needed. It is not the purpose of this dissertation to present actuarial tables nor to attem.pt any predictions relating to the actuary's duties. Hovjever, a simplified explanation of assumptions will enable the m.unicipstl reader to better discuss its x^articular problem vn.th an actuary. T u.rnov e.r',. -The actuary must estitaate the employee turnover. This severance from em.Dlovnient before reaching benefit

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112 eligibility reduces the number of incUviduals vjlio v;ill eventually receive benefits. Employees are hired, they are laid off, they quit, they die, they become disabled. If replacements are hired, the new employeesthen nay be laid off, m.ay quit, etc. The previous chapter outlined a method of determining eligibility for benefits which required that an em.ployee attain a specific age and/or a specified number of years of credited service. Consequently, the larger the employee turnover, the lov/er should be the actual cost of the plan. Plain observation of personnel records v.'ill shov; that very young employees have the highest group rate of turnover. This is logical when we realize that they have almost no seniority, a comparative lack of slrill, and no real certainty as to their lifetime occupation. Also, the first year of em.ployraent produces the highest turnover rate of any em/oloyment period. There are many reasons v/hy a recently hired individual .may become dissatisfied with his new job. ''ith every successive year of employment, the turnover rate tends to diminish steadily. It is difficult to predict this rate, as it is dependent upon the selectivity of the miunicipallty and the employee at the time of hiring, 'fe ca-'j logically sssume that-, vjith the development of job ewpor-ienoe and seniority, the longer an employee is worhing at tlie sai;.'e occupation, t'ne greater are his ch-ances of not quitting or being fired. In addition, sex affects turnover, since mien oi'dinarily do not leave their i.'ork because of m.arrlage, or fam.ily reasons. Women m.ay leave for these reasons, or becaijse of pregnancy.

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113 Because of the aforercentloned i-easonc actuai-ies use separate turnover tables for men anf. for vionien. F^ch catej^'ory Is broi'en dotrn by a,^e groups and further subalvlclecl by len^^i'.h of service. To overslnipllfy this matter — Vil^:b", medliAin, bv.v lev.' turnover rates are as.supicrj. to fix the characteristics of the occupation. TVic mathematics of these tables is precise, but It is based on numerous assujr.ptlons. The actuary (no matter hov; experienced) must u.tilize his experience and Jud£;ment in constructing and adapting these tables to the situation in the individual municipality. These assu!nr)tion3, and perhaps city conti-ibiitlons, should be revievjed periodically with the intent of closing th.e gap between previous estimates and true experience of the group. When one estimates costs, turnover is discounted in determining contribution rates for a noninsured plan. Insured plans generally assurie that all participants vjill qualify. As turnover does occur, most of the amounts contributed for those ineligible employees are credited to the m.unlcipality 's future premiums . I'i pr t al i ty . -"ortal i ty tables are derived from verifiable experience. In the absence of survivor's benefits, retirem.ent plans pay benefits only v'hile the retiree is alive--from. the time he becomes eligible for these benefits. Vhile statistics vary on the m.ajor reasons for an employee's not reaching retirem.ent age with any one em.ployer, m.ost experts agree that a major reason is death. Dead m.en do not retire, bub their dependents do live on. Many observers feel that the

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11^ integration of Social Security vfoulci. at least provit'.e some benefits^ to these dependents. "Disability coverage and insurance for dependents should be covei-ed by Social Security I, wherever possible.""^ "Social Security should clearly be included J and all of the towns should adopt Social Security if they do not already have it. "-5 T-rhen Social Security is not provided, it remains the responsibility of the pension plan to provide some benefits to dependent survivox^s. C o n t r 1 b u 1 1 o n s At this tirae, the le^-al place of employer contributions is open to debate. *-It remains for the courts to recognize in pension cases that plan contributions are a kind of compensation. "° The municipality can either pay the entire cost of the pension plan or share the cost by having eligible employees contribute to it. This decision involves tvjo problems: a) vJhat factors are important in deciding whether the plan should be contributory? and B) If the plan is to be contributory, vjhat am.ount should be fixed as employee contributions? Sjj ould the "olja n be contributory? -Zmijloyee contributions can be used to reduce the cost of the plan to the rau.niclpallty . Alternatively, these additional contributions can be used to increase employee benefits. .Em.ployees do :iot suffer a financial loss by making conti'ibutlonsj since they are entitled to a full refund of all contributions (usually with interest) — either in cash or as retiiement benefits. The contributing eT'Tolo^ee's -nv-oblem is increased vjhen v;e observe the typical

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115 clerluctions fi-o::^ his payroll: v;iihholdln£; taxes, Social Security, group life Insurance, group hospitalization, etc. Historically, employers held the view that pensions should be contributory — so that employees v;ould be avjare of the factors of cost. "... In state and city funrlr, contributoi-'y plans are much more common, and fund inflov;s from, government and em.ployees are nearly equal. ""^ It vjould appear that any municipality having a fixed scale of benefits may have its pension plan costs reduced through em.ployee contributions. 3ut, many employees, particularly those in lovjcr salary brackets, simply cannot afford additional deductions regardless of any additional benefits that they mo.y obtain through contributions. Harry Boggs, the Director of the State of Florida Municipal Police Officers' and Fireman's Retirement Trust Funds, discussed four reasons for a contributory pension plan. A) A contributoi'y plan brings about an increase in employee benefits. B) a plan sustained only by city contributions generally gives minimal benefits — it doesn't provide the employee vjith enough incom.e to retire. C) Contributions from, em.ployees would increase benefits because of earnings on earnings. D) In a contributory plan, employees participate in discussions, they are avjare of pension problems and are concerned with the success of the retirement system.^ Kany pension experts vievj a municipality's contributions as an am.ount that e.mployees vjould othorvrise receive as a cash V7age or another fringe benefit. These experts vjould agree V'/ith this vjriter that in m.ost cases, employer contributions probably do not involve any additional cost to the basic

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116 amoiint that v;ould otberv;ise be payable for salary. "In 19^9 the Basic Steel Industry Fact Finding Board recommend noncontributory plans because, among other considerations, each dollar of tax-deductible employer contributions would result in more benefits than em.ployee dollars -which vjould first be taxed as income, and then, after subtraction of taxes, contributed."? Contributory plans can be changed to noncontributory plans by reducing an employee's v;ages exactly equal to his pension contribution. By having the municipality assume an employee's pension contribution each covered em.ployee can be given a "raise" equal to the federal income tax that he previously paid on his pension contribution. Conversion to a noncontributory plan m.eans an increase in take-home pay VJithout an increase in em.ployee income tax and, as a result, a raise which probably costs the miunicipality less than an eqiiivalent taxable wage increase. This is possible because employee contributions come from after-tax dollars, and employer contributions are free of incom:e taxes, therefore there would seem, to be little argument in favor of contributory plans. To quote '/Jilliam G. Huir, "Again as a generality I believe over the long rirn all pension plans should be noncontribvitory . Em.ployee contributions, particularly with the extremely high level of employee contributions required for Social Security, are burdensome on tlie lower paid people. Obviously, they are mxide v;ith aftertax money wherein the em.ployer contribution is before taxes. I thinl: it is fallacious to reason that m.aking employees contribute to a plan heightens

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117 their Interest In caid plan. T^ffectivo omployee conniunichtlons ana sellingof the plan to the employees vjlll do far more to make them aware of it on a pocltive basis than v;ill enforced contributions. ''^^ Until the Federal novcrnment accepts the thesis that all or part of employer contributions to noncontributory plans are a form of u'ages,, one argument in favor of contributory plans still has validity. When an employee receives his retirement income, that portion of his benefits which are attributed to the mamicipality 's contributions will be subject to income tax. While It is impossible to generalize on the tax savings that would result from a shift in contributions from employee to employer, the retiree, having a lower income (and double exemption if he is over 6^) , should pay either no tax or be taxed less than he vias du.ring his working years. Probably, the m.ajority of municipal em.ployeos over 6p are in the non-taxpaying category. The actual savings affected would also depend upon the federal tax rates in force vjhen pension benefits are received. The 196'-l'''6^-66 tendency is toward reduced rates — hence, postponing taxes to future years would probably represent a greater savin^-. At present, there are savings to employees through noncontributory plans. Howevei'j the savings may be negligible and can be more than cancelled out by a loss of all municipal contributions if the em.ployee leaves his job without the protection of vestin"^^ provisions.

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118 Unless vesting provisions give an ernployee credit for part of the municipal eir-ployer's contributions (in a noncontributory plan) , the loss of this credit may cancel out the extra tax pain by an employee on his contributions to a contributory plan. In the absence of more liberal vesting provisions, the fluty of protecting employees falls on the shoulders of the Federal Government. It has been suggested that a limited am.ount of em.ployee contributions be deductible vjhen calculating personal income tax. This can be legalized by Congress declaring all or a percentage of compulsory employee contributions to be non-taxable incom.e. -xcordlng to Merton Bernstein, in 196I this v.'ould have resulted in a revenue loss of less than :)200 million; this is not a formidable amount of federal revenue.--"• • If a plan is to be contributory, then the municipality must decide on the amount of funds that each em.ployee v^Jill contribute to the pension. This am.ount is generally stated as a percentage of covered salary vjith som.e or no maxim.um ceilino; placed on the contributions. In summary, it viould be best for the municipality to be reasonably sure that it will be able to meet the costs of the plan without going to the employees in the future and asking for contributions. A request for contributions or an increase in employee contributions may lead to employee discontent, and to increased political problems when the situation of "improper" funding becomes advertised to the local voters.

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119 For a new pension pro--rar.!, the noncontribwtoi-y plan can result in more funds beln^ accunulatec! for employee's benefits. "On the other hand, hov/ever, one must admit that i-jithout much question, taxpayer acceptance of the plan is likely to be more enthusiastic if the em.ployees do contribute. "12 In th.e noncontributory plan, it is not only the annual personal income tax saved, but also the incremental earnings on these funds over the years that make these savings quite substantial. Contributory plans already in existence can switch to noncontributory plans when increasing the salary of their em.ployees. In lieu of a pay raise equal to pension contributions, the municipality can assume all contributions to the plan, thereby eliminating em.ployee contributions com.pletely. It would seem, reasonable to utilize emiployee contributions by providing additional benefits to married employees. The plan might offer widows' or children's benefits on a contributory basis. This would partially remove som.e objections to inequality of treatment between single and married employees.

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NOTES Dan M. McGill, Funaamentals of Private Pensions (Richard D. Irwin, Inc., HomewooQ , Illinois, 1955), P. 126. 2 ibie. , p. 132. 3 Bernstein, op, cit ., p, i^3. Statement by Harry Boggs, Director, State of Florida Municipal Police Officers' and Fireman's Retirement Trust Funds, personal interview June 22, 1965, 5 Letter from William G. Kuir, Supervisor, Connecticut General Life Insurance Company, September 2?, 1965. Bernstein, op. cit .. p. 118, 'Victor L. Andrews, "Noninsured Corporate and State and Local Government Retirement Funds in the Financial Structure," Private Capital Markets (Prentice-Hall, Inc., Englewood Cliffs, New Jersey, 1964), p. kZJ . o Statement by Harry Boggs^. 9 Bernstein, OD.t_cit . , p. 21?, quoting Basic Steel Industry, 13 Lab, Arb. k6 (19^9), p. 90. Letter from William G. Kuir, H Bernstein, op. cit . , p. 219 , 12 Letter from William. G, Kuir. 120

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CHAPTER VI RSTIRSI'lHl.'T AI^ID RETIHEME-TT BEMEPITS It Is the purpose of this chapter to outline the benefit patterns of pension plans, indicating the varioiis arrangements and combinations that are generally available. "The benefit provisions of a pension plan constitute the verj'heart of the plan. They define the type of benefits that ^^Jill be paid, the size of the benefits that vjill be paid, the circuHistances under v/hich they will become payable, and the manner in vjhich tViey v.'ill bo paid.'"The purpose oi the pension plan is to enable the municipality to remove aged employees from the payroll in a morally and socially acceptable manner. The continuation of an income that vjill be large enough to sustain the retiree and his dependents on a decent standard of living is basic to this objective. It is eztrem.ely expensive to provide retirement benefits that are the continuation, in full, of a vjorker's salary at the time of his retirement. As a practical matter, the objective should be, rather, to provide retirement benefits that bear a reasonable relationship to the salary v;hich was earned by the employee during his years of em.ployment. According to Dan KcGill , most pension experts regard a plan 121

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122 that when added to Social Security will replace one-third to one-half of the employee's average earnings during the five or ten years preceding retirement as reasonably adequate. 2 This author agrees iNfith William G. -Muir that an ideal retirement income should replace 50 to 60 percent of the employee's average earnings during his last five or ten years before retirement.-^ Many benefit formulas can be used vjhen drawing up a pension plan. Whatever benefit schedule is selected, the formula for computing the retirement benefit should be simple and understandable to the average employee. Retirem.ent Be nefits. Money r^urchsse T^lan . -Using this form.ula, we base the retirem.ent incom.e upon the contributions accumulated to an employee's credit v;hen he retires. The rates of contribution by the municipality— and the employee, if the plan is contributory—are flx-ed at a level that will result in an am.ount, at an assum.ed rate of interest, sufficient to provide a desired retirement income at the employee's normal retirem.ent age. Since the accumulation which produced the pension will have been derived from contributions m.ade as a percentage of an em.ployee's earnings, the retirement benefit is related to a worker's earning during the entire period or his service. The contribution is fixed and the retirement benefit is treated .as the variable factor. In most money purchase plans, the m.unlclpal em.pl oyer matches the em.ployee's contribution. A typical plan might

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123 provide for a 5 percent contribution on tVie part of both employer and employee. V/lth the advahta.fj^e of fixed contributions, the money purchase formula is attractive because it simplifies the budgetin^^^ of funds for the municipality. The city knows in advance v;hat its outlay for pensions v\iill be by multiplying its projected payroll by the appropriate percentage. Many employees m.ay not be able to determine for themselves the amount of their retirement benefit because these employees v/ould be required to compute their benefits v;ith the use of a table of annuities and accu.mulated contributions. Fixed b enefit r^lan .-Another formula is to compute the employee's retirement benefit as a percentage of the average salary multiplied by years of service.^ Norm.al Reti r ement : The monthly pension for policemen and firemen is 1 percent of average monthly earnings, during the last ten years of service, for every year of credited service. Under this method, the municipality — and employee, if he is a contributor — pay in for the retirement benefit in previously agreed-upon proportions. There are many variations of this plan, but generally the retirement benefits are determined in advance by a formula and the contributions are treated as the variable factor, r^ven though v;e find little uniformity among the fixed benefit formulas, they can be broadly classified into the folloiring categories: A) Ben efits not r elated to earnings or servlee . This type of form.ula provides a flat benefit to the em^lovee vjho

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124 retires v^Jlth a specif lecl period of creclitecl service. Mo benefit is palcl unless the employee has accumulated a minimum periorl of credited service, typically fifteen to twenty years. In most cases, this benefit includes the primary Social Security benefit. An em.ployee who has credited service above the minimum but falls short of the basic reauirements receives a retirement benefit that is adjusted to his credited service. "The basic formula of this type provides 'i'lOO per month after 25 years of service but a few plans pay 0125.""^ . 3) Benefits related to earninc-s but not to service . Service is not ignored, because entitlement to benefits is based on a minimum period of service, generally twenty years. The philosophy is that those workers who remain with the municipality for twenty years, Oivfnatever is the minimum period, are entitled to the same consideration as those v/ho served for a lon£:er period. The salary base is normally the salary at retirement, but a career averag-e m-ay be used. ''A wide range of percentages is found. The distinctive feature of the plan is tliat the percentage is flat and does not vary •with 3'-ears of service. ''° Generally, the long-;er service em.ployee tends to have an earnings base that is higher than one v/ho barely qualifies for benefits. C ) .Benefits related to service but not to earning s. Norma l Bet i r omen t ; The monthly pension for general employees is ""2.00 for ever-j year of credited service.''^

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125 This type of plan is popular In pensions negotiated betv/een private coi'porations and unions. Frier service is cretlited V'jith the same benefits as future service. The General Kotors o Corporation. Pension Plan uses this formula.'-^ . . .the minimum monthly pension payable to any such pensioner, Including the Primary Insurance Benefit payable undei* the Fedei^al Social Security Act as determined in Article IV, shall be '^^ for each year of credited service to a rriaxiraum of 25 years. The monthly pension payable to an employee wVio Is retired pursuant to the provisions of Section 1 (a) of this Article II v;ith benefits payable commencint; on or after September 1, 195S, shall be: (1) .')2.^0 for each year of credited service prior to January 1, 1958; (2) ^i;2.i^3 multiplied by credited service accrued in the year 1958; and (3) j2.5^ ^or each year of credited service accru.ed subsequent to December "}!, 1958. D) Benefit s related to earn3n£-s and servi ce. This type of plan provides a larger benefit at retirement for an employee with a long period of service than to the employee v;ith a limited or short period of service. A careful definition of average earnings and *' credited service" is Important for the purpose of computing the benefit formula. 9 The formula in such a plan credits each employee at retirement with a benefit equal to a specified percentage of average monthly earnings multiplied by the number of years of credited service. Section 5.1(b) of the Kodel Ordinance in Chapter II suggests 1 percent. It is assumed that these earnings are subject to OASDI , but for municipalities that do not participate in Social Security, a percentage rate of I.67 percent can be used to produce approximately the sam.e retirement benefit, A significant number of pension plans do not use a careeraverage formula probably because use of the final average

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126 type of formula produces an earnings base that is higher than that of the career average. Since the long run trend of prices and vjages in the United States has been upward, use of the final average appears to be a partial hedge against the effects of inflation. We should not ovei-look the fact that a majority of pension plans give some recognition for prior service. Various forms of lim.i tat ions can be used to limit tVie cost of prior service benefits — an accrued liability borne by the municipality. The most common limitation Is to excliide all service over a miaximum number of years. •^'^ Service Before the Effective Date of the Plan t ITo credit vjill be given general em.ployees for service to the city before January 1, i960. In miany instances coordination of Social Security benefits U'ith a i^etirement plan offers a practical means of providing retirement benefits that are miore adequate for all employee classes — particularly those at the lower salary levels Municipalities are resorting to tViis arrangem.ent to augm.ent their retirement benefits. In addition, Social Security does provide benefits to vjidovjs and orphans and affords some income to disabled employees. ''Social Sectrrity should clearly be included, and all of the towns should adopt Social Security if they do not already have it.""^^ Retirement The conditions for retirement are the attainm.ent of a certain minim.un age, the com.pletlon of a certain period of service, or the combination of age and service. Eetirement

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127 benefits sliould be vlev;ed primarily as a provision for old a£;e and not as a revjard for services rendered to the municipality. For this reason, employees should not be permitted to retire after a fixed period of sej^vlce regardless of their age. ^2 i.'ormal retlrern ont . -The normal retii'ement age is the earliest age when eligible employees are permitted to retire vjith their full benefits. Generally, the normal retirement age is the autom_atic retir-einent age, unless employees have the option of continuing their em.ployment beyond th.e age designated as normal retirement age. It is not easy to determine the age at v;hich the ser'vlces of employees would be uneconom.ical . For instance, policemen and firemen may pass the stage of reasonable efficiency for their work at an earlier age than general employees. In addition, normal retirement age might vary in specific towns in Florida. For example, the police and fire departments of a city such as St. Petersburg could quite realistically work until attaining older ages than the police and fire departments of Jacksonville. The larger city with higher buildings and possibly a different type of demand on the police force m.lght retire these employees at an earlier age. It is genei-ally agreed that chronological age and ability to perform are not necessarily related. Therefore, to make allowance for these em.ployees, the plan should permit extensions beyond the compulsory retirement age upon permission of the vCity nanager.^3 In the opinion of one pension expert, the norm.al retirement age for policemen and flrem.en should

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128 be no higher than 60, while general employees can retire at 5^^1^There is a major cost factor Involved in the decision to retire employees at ages lower than 6$. Karry Boggs, Director of the State of Florida Kunlcipal Police Officers and Firemen's Retirement Trust Funds, informed this writer that less than 2 percent of policem.en are at vjork after age 60. Those em.ployed are mostly higher salaried administrative personnel. Kr . Boggs suggested that a provision be placed in the pension ordinance perm.itting employees to vjork beyond their compulsory retirement age with permission of their employer, and fixing retirem.ent benefits to those obtainable at normal retirement age. ^5 Farly r etirem.ent .-This provision establishes a mlnlm.um. age at which em.ployees may voluntarily retire. In many plans, this is about five years belovj the normal retirement age. A provision for early retirement is essential to provide flexibility to the retirement program.. A provision that permits early retirement at the option of the employee generally Imposes both age and service requiremients.-'-" The benefit received by an employee is less than the retirement benefit that vjould have been paid at normal retlremicnt age. Betlreraent , Prior to Tlormal Fetirem.ent p ate; An emrployee shall be entitled to and shall be paid an annuity ec[ual in amount to the annuity computed on the basis of normal retirement, except that the amount so computed shall be reduced by f ive-tvjelf ths of on_c nercent of said am.ount for each month that early retirement precedes his 65th birthday for general employees or his 60th birthday for policemen and firemen. ^7

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129 I 'ale T^nrolovees

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130 Kauager. A fii'eman or pollcenan vjho has tvjenty years of credited service and has attained his 55th birthday may make vjritten application to the City Kanag'er for early retirement. With approval of the City Tianager the employee may retire on the first day of any month f ollov.'in^;, or coinciding xvith, his 60th or 55th birthday, vjhichever shall be applicable as stated above. Delayed retirement .-In many plans provisions are m.ade under which an em.ployee m.ay continue in city service beyond the norm.al retiremient age.-? It should be clarified that although an em.ployee m.ay retire at his norma.l retirem.ent age, this provision permits him. to continue his employm.ent after that date only vjith his consent and vjith the approval of the City rianager. This provision is financially beneficial to the em.ployer and em.ployee as the municipality saves the paym.euts whichvjould have been made from, the em.ployee's normal retirem.ent age to the actual date of his retirem.ent vjhlle enjoying the services of a valuable employee. '//e can assum.e that the emiployee requests to continue in m.unicipal service because his full salary is more atti'active to him. than his retirem.ent benefits. , T e r m: i n a 1 1 o n 3 e n e.f_i t s. Every miunicipality miust recognize, the fact that only a percentage of employees vjho v.'orV: for the city vjill remain on the job until retirem:ent. Therefore, it is necessary for the pension ordinance to outline the rights of those em.ployees v;ho sever their connection vjlth the miunicipality before reaching retirement age. Today, employers view retirement plans as a method for Increasing the efficiency of their em.ployee's service. Since the municipality's contributions can be

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131 regarded as a necessary part of the current payroll, this rcco^;nltion leads to the vesting; of ri£;hts and benefits so that employees who work relatively short periods of time rnay accumulate pension benefits. By vesting, v;e mean the interest of an employee member in all or part of the contributions made by the municipality. This interest is usually guaranteed as an annu.ity payable at normal retirement ag'e.^^ Employees are always permitted to recover the contributions that they have personally m^ide toward trieir own retirement pensions. "I conclude, therefore, that the right of employees to the retujni or the value of their contributions is a minim.um right which, cannot be talccn away by legislative action in any jurisdiction. "^1 Court decisions in Florida adhere to the rule that pensions are a gratuity and may be modified or terminated prior to retirement .-^ ^t^q term vesting refers only to the employee's rights to retain the benefits which have accrued from, the municipality's contributions, Th.ls may be eitherlegal vesting or functional vesting. Legal vesting would place an undeniable guaranteed legal right to the employer's contributions in the employee for the earned and accrued pension expectancies of the mem.ber. Functional vesting refers to a provision In the retirement plan v/hich permits the employee to exercise his rights after a specified period of service (or under certain circum,stance3) , usually only in the case of vjithdrawal .^3 These rights becom.e available to members in the form of e<. deferred annuity payable upon the attainment of the age specified for normal retirement. Usually

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132 a minimum perloa of service, such as ten, or twenty years, is prescribed as a condition to be fulfillecl by the employee before the vested rights become effective. The inclusion of any substantial vesting provision in a pension plan increases the cost to the municipality; therefore, a m.iniraum amount of service should be required. ^^ Termination o f Servic e Prior to !Jorraal netirement ; If any member of the plan terrainates em.ploym.ent vjith the city prior to his norm.al retirement date and has com.pleted tv^enty years or more of credited service and. has attained the age of ^y years or greater in the case of general emiployees, or ^0 years or greater in the case of policemen and firemen, the pension credit earned at termination will be fully credited to the employee. In summary, vesting rights are usually conditioned on service or some com.oination of service and age, "Full, im.miediate vesting is extrem.ely rare. '"^-5 For the municipality, the purpose of these vesting conditions is to keep the cost of financing the retirement program from becoining vvnreasonably higVi in addition to being a useful device to counteract labor mobiliti'-. The labor unions have the follov.'ing opinion of granting vesting only after some long period of em.ployment: The lac>-: of vesting gives the employer a sort of invisible chain vrlth which to tie v.'orkers to theixjobs vJith a particular company, saiCi to prevent them from bettering them.selves elsev.'here, throi^gh the promise of a pension plan if they stay and the threat of its loss if' they leave. 2 6 ''Probably most vesting provisions apply to any separation for any cause. Some'lowever, do restrict vesting rights to those v;ho lose their jobs involuntarily ."^7 Article 5 of the I'odel Ordinance requires a m.inimum. of twenty years of credited service plus the attainm.ent of age

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133 ^^ In the case of general employees, or age 50 in the case of policemen and firemen in an effort to partially satisfy employee mobility vs. stability. Inasmuch as there is more to be g^^ined uncler this provision by staying vjlth the municipality, vestinr: pai'tly serves the employer's purpose of stability vjhile satisfying, at least in part, the employee's rights to pension creclits that he has earned — should he change Jobs. A glance at Table ^ reveals that the prospect of receiving vested benefits under the conditions of fne Hodel C'rdinance vjould seern to be e;:tremely high. Among the group of police officers hired at age 25} only CO percent are expected to be separated before completing twenty years of continuous credited service. According to Herton C. Bernstein, the absence of official dem.ands for the legislation of compulsory vesting leads to the conclusion that compulsory vesting is not a serious possibility in the foreseeable future. 2S ''Jhether the result of Federal prodding, or moral and social responsibility, pension authorities have increased vesting benefits voluntarily vjlthin the past ten years. "Successive studies made by the Banlcers Trust Company of the large number of i^ension. accounts they handle reveal a consistent trend toward liberalization of pension provisions. '-S?

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NOTESDan M, McGill, Fundamentals of Private Pensions (Rlchara D. Irwin, Inc., Horaewood, Illinois, 1955) » P. 3^. 2 KcGlll, OP. Git ,, p. 35. 3 Letter from William G. Mulr. h: Article 5, Section 5.1(b), Chapter II. ^McGill, OP. cit., p. 41. ^Ibid .. p. 40. ^Article 5, Section 5.1(a), Chapter II. o Harbrecht, op. cit., p. 292, reproducing The General Motors Hourly Rate Employees Pension Plan, Article II, Section 1(b) , 9 Article 1, Section 1.9» Chapter II, Article 3, Section 3.4, Chapter II, Letter from William G. Muir. 12 Article 5, Section 5.1, Chapter II. 13 Article 5, Section 5,3, Chapter II. 14 Statement by Harry Boggs, Article 5, Section 5.4, Chapter II. 134

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135 ''^Article 5, Section 5. if, Cliapter II. •^^Artlcle 5, Section 5.4, Chapter II. 19 Article 5, Section 5»3» Chapter II. 20 Article 5, Section 5.5(t'), Chapter II. 21 John J. Edman, "Contractual Rights In Public Pensions," public Employee Retiremen t , A(3mlnlstratlon (Municipal Finance Officers Association, Chicago, 1965) , Papers Delivered During 59th Annual MOA Conference— 1965 » p. 12. 22 Ibid., pp. 11, 12. Ball V The Board of Trustees . 71 N.J.L. 710, 58 ATL. Ill (1904) is the leading case follov;ed In Florida. The result of this development Is that there Is no restriction upon modification of pension statutes in respect to those employees covered on a compulsory basis but as to employees electing pension coverage there can be no change. 23 -^Article 5, Section 5.5(b), Chapter II. Article 5, Section 5.5(b), Chapter II. ^^KcGill, OP. clt. . p. 59. 2^ "Pension Plans Under Collective Bargaining, a Reference Guide for Trade Unions," American Federation of Labor (no date) , p. 70. 27 'Bernstein, p-p , pit . . p. 26. ^^Ibicl. 5 p. 259. 29 Harbrecht, op^ cit . , p. 78.

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CHAPTEH VII . CH0IC3 0? ?UNDi:iG I-EDIUK This chapter will briefly describe the legal arrangements under vjhich a pension plan may provirie the retirement benefits to eligible employees. These forms can be bro?rjly classifieri as insured, or self-aflministercd , There are various combinations of these tvjo classifications — partially insured and partially self-administered . Alth.ough the type of funding media m^ay have a definite effect on the Initial outlay, ultimate cost should not vary significantly in the long run. Over a numibeiof years, the cost of any pension plan ?.'ill equal the benefits paid, plus the er-roenses incirrred, less the interest eai^ned. Before ai choice is m.ade as to type of funding, the objectives and m.ain provisions oi" the pension pi an should be firmly decided. Every pertivient aspect of a municipality's financial position and desires should be completely analyzed, as all of these facts do have a definite bearing on the miost efficient and effective manner of funding. Because it is not our intention to vjrite an insurance mianual , only the essential features of these funding m.edia v.'lll be discussed in this chapter. The municipality can accomplish tVie primary purpose of its pension program (to provide for the futn.re security of 136

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137 employees) by achieving the follov;ln2 two objectives: A) To provide a definite lifetime benefit that usually depenrlG upon the employee's compensation, lenf;;th of service, and af;;e. B) Earmarl'.in^ contributions to the plan that vjill be actuarially sufficient to provide the planned benefits to employees. As the State of Florida v;lll not share premium tax monies v;ith municipalities unless their plans for firemen and policemen are adequately funded, It would be nonsense. to think about a pension that was not actuarially sound. An accepted definition of a fu.nded pension plan is one ' . . , under vfnich adequate contributions made by the employer (employees too, if tlie plan is contributory) must be deposited in a trust, or v;ith an Insurance com.pany, under some type of contract arrangement . 'This leads the mu.nicipality into the broad question of ivhether to fund its particular pension program^ by mieans of an insurance company, or to adm.lnister it as a pension tru.st in which an independent board of trustees manages the fund. 3y way of explaining the difference, the uninsured selfadm.inistered pension plan uses a trust. The municipality (and perhaps the em.ployees) , make contributions to this trust. TVjc trustee then invests these funds or contributions as the trust agreement prescribes.'^ It is the income arjd accumulations of the corpus that are used to make the pension payments. The trustee pays these benefits directly or msiy use the accum.ulated funds to buy annuities from, a life insurance company.

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138 If annuities are purchased j the insurance company vjould then make payments to the retlrea employees. Pension authorities refer to this type of plan as uninsured to distinguish it from the types of plans in which insurance contracts arc immediately purchased from a life insurance company. Uninsured, Self -Adminis tered P ension ':^rust A properly funded '^uninsured" pension trust is not accurately described by this term, because the plan is as sound as any "insured'' type of plan. The retirement benefits are in relation to the contributions according to actuarial principles vjhich are the same general methods that are used by insurance companies. To clarify this statement, let us assume that a municipal employee, J. B., is 35 years old. The city vjants to provide him with a monthly life income of ^100 at retirement. The tru.stee has two alternatives. A) When J. B. reaches the retirement age of 6^ , the trust can purchase an annuity for him with the accum.ulations in the fund. At that time a life insurance company will furnish an annuity paying .jlOO a month for about ;;';15,000. B) VJhen J. 3. reaches the retirem.ent age of 6^^, the trust can pay him jlOO per month for life directly from the accumulations in the pension f\rnd. Under both alternatives, the trust must accumulate about ;;;15,000 over a period of thirty years. Omitting interest to be earned on the accumulating fund, death before retirement, and termination of em.ploym.ent for som.e employees.

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139 then ''500 should be contrlbuterl each year for the retirement benefit of J. 3. Under alternative 3, the municipality and itr, trustee arc asnuniin^ the funotlonG of the insurance company. In reality, the municipality is a self-insurer and from this point of vievj the pension fund is insured. No plan administers itself; therefore, the term "selfadministered" is not an accurate description as a selfadininistered pension trust is administered by the municipality throu£:h its Board of Trustees. It is the municipality's job to attempt to make the retirement benefits available vjhen due. The security of a pension expectation under a noninsured plan thus depends on the solvency of the pension trust. And this, in turn, vjill depend upon vjhether or not the pension trust has been fu.lly funded and well administered duringthe active emoloyment of the t)ensloner.3 Some state and local plans are insured, but the majority are operated and administered by the governmental unit involved.^' Thus, most plans cannot be drs.stlcally changed to adjust to immediate problems because long term funding requires planning and contributions far in advance of actual needs. These financial operations are so complex that many trained actuaries and accountants find it difficult to agree on a proper assessment of liabilities and reserves. To oversim.plify the problem that an actuary faces, refer to the imaginary employee J. 3. It vjas prevloiisly assumed that .'SOO should be deposited annually on behalf of J. 3, When vye relax our assumptions of interest, death, and termination, this annual deoosit v;ill be reduced. Assuming a very conservative

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1^0 interest rate that vjill be received on the accumulating fund, this might reduce the required annual contributions to around v^OO. Additionally, there will be some employees who win not receive any retirement benefit Sj either because of death or severance. Since these employees will never receive retirement benefits, no funds need be accumulated for all eligible em.ployees. Therefore, the municipality may ultim.ately have to set aside only r;250 per year on behalf of J. B. after taking into account the factors of mortality, Interest, and severa'nce. Under an uninsured pension trust, the funds are turned over to a trustee (not an insvii-ance company) to conserve and invest against the future liabilities of tte pension program. The trustee may be a banh, a trust company, or a group of individuals. Usually it consists of responsible municipal legislators as these men are the people who have the best interests of all concerned and are intimately connected with the success of the program. Furthermore, since they generally serve without fee, these cash savings enhance the advantages of using the services of m.uniclpal officials. "Most banks have not been active in the administration of such plans, mostly because the m.unicipalitlos Involved have felt that the programs v;ere better administrated by their own controllers. "5 The trust indentui^e governing this arrangem.ent spells out the responsibilities to be borne by the triistees. These responsibilities are so varied that it is difficult to generalize them. It is of utmost Importance to point ou.t that employees'

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1^1 hopes for security cicpenci on the solvency and continued existence of the pension program. It is the duty of the trustees to protect these hopes. In select Inr a self -administered pension truf;t, the municipality vjill f^nd it a v;ise policy to consult v;ith a pension expert — he is best able to properly fuide the nunicipality in its choice of a funding; medium. "The decision. . .is a matter for the consideration of erroerts."" The type of fundinf^ medium need not be permanent, but v.'hen a change is exercised, one may expect some additional costs. These may be financial, or simply the misunderstandino; of employees. In either case, it may be best to avoid changes V7herever possible. I'owever, the ri~ht to change the method by vjhich a pension plan is funded should be retained by the m.unicipality ."^ Future Changes in the Operation of the Flan ; It is contemplated, and all original and nev; m.embers of the plan shall be deemed to have notice, that the City Commission of this city may in the future decide that it is in the best interests of the city and the members of the plan to m.odify or terminante trust agreements or contracts entered into uith an insurance company or com.panles, to exercise options available to the city under the terms of such trust agreemients or contracts, to select another insurance company, trust, or other financial institution, as the" depository for pension funds. The uninsured pension plan uses a trust to vjhlch the municipality, and possibly the employees, m.ake contributions. These contributions are invested by the trust administrators according to the manner prescribed in the ordinance. ° The ComKilssion shall have authority to direct that pension plan funds be deposited Kith banks and/or savings and loan associations or invested in securities.

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1^2 to negotiate appropriate contracts with a bank having trust powers, or an insurance conpany or companies, under the terns of which trust agreements or contracts funds will be cleposltecl with the bank, company or companies as determined by the Commission and annuities may be provided for members and their beneficiaries in accordance with the terms of this plan. The Commission may terminate such trust agreements or contracts or negotiate amendments as it sees fit. The pension assets are used to make all benefit payments required by the pension plan. The payment of benefits is iri3.de directly by the trustee unless the fund assets are used to buy annuities from a life insurance company. In this latter case, the benefits v/oi^ld be paid by the insurance company selling the annuity. The trust agreem.ent defines the duties and po'A'ers of the trustee. It provides for the m.ethod of investing the funds and describes hov; payments shall be made to eligible em.ployees or their beneficiaries. The plan details rec^ulrements for eligibility, describes the formula used to determine the amount of benefits and the m^anner of payment of these benefits, the rights of participating employees, provisions covering the costs of the pension programi (v.'hether the plan shall be conti'-ibutory or noncontributory) , details on the administration of the plan, and provisions as to the amendment and discontinuance of the program. The municipality retains an independent actuary to determine the amounts that m;ust be contributed so that the pro'oosed benefits are available when needed. At various intervals (at least every two years) the actuary will test his previous estimates against the actual e;-X)erience of the plan and adjust his figures.'

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14-3 The uninsured plan permits a great amount of flexibility. The klnc;3 of benefits, time of retli-emont, manner of funding, and tei-ms of vesting are all Initially determined by tVE municipality. Benefits are not guaranteed, they are anticipated. As the level of benefits foiretirees vjill depend on the amount of liquid assets in the pension fuaid v;hen the benefits become due, the security of employees is dependent on the previous funding and administration of the pension trust during their period of active employment. But if the actuary's suggestions are follov.;ed, a shortage can occur on.ly V)hen his com.putations fall short of providing the planned benefits. In this unlikely instance, the m.uniclpallty m^ay eithei' scale dovjn the benefits or m.ake additional contributions. Insured Pension Program Cnce a pension program, is arranged v/lth an insurance company, then depending on the contract, the Insurance company guarantees a certain level of benefits for employees upon thciiretirement. This, of course, depends upon predetermined premiums being paid to the insurance company v/hen due. Thei^c is a vjlde range of choices within the insured type of plan v;hich are basically the five following funding media: Individual Policy Pension Plan, Group Deferred Annuity Plan, Group Deposit Administration Annuity Plan, Group Permanent Pension Plan, Combination Pension Plan. Individual Pol-icy Pension Plan . -All in surabl e em.pl oy e e s are covered by a level annual premixu;! individual endowraent or retirem.ent-income policy. The retirement-inco.riie policy is

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m.1^ a combination of a retirement annuity contract and a decreasing term insurance feature. Most retirement-income policies provide .';1,000 for each -'jilO unit of monthly income or the cash value, v/hichever is larger. The Insurance element is represented by the excess j if any, of the death benefit over the cash value. This is the type of contract that automatically converts to an annuity at retirement. Employees who are not in good health (uninsurable) , are covered by a level premium deferred annuity contract. The individual policy pension plan may be particularly suitable for the very small municipality because there is no requirement as to a minim.um number of insured employees, and the funds generated by all contributions m^y not be large enough to warrant the em.ployment of a skilled actuary. When the employee's pay is raised, then additional insurance policies are purchased — so as to provide the planned retirement benefits. Annual contributions are the total amount needed to pay the annual prem.iums on all of the contracts held by the trust. Ifnile the individual policy pension plan is not very flexible, it does provide life insurance protection — at least during the eai^ly years of the insurable employee's participation. IT there are survivor benefits in the pension program, the em.ployee's beneficiary usually receives the proceeds of the insurance policy should he die during active employment. A slight variation of this method is to cover each insurable em.ployee with an ordinary life policy. Uninsurable

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lif'^ employees would still be covered by a defevTed. annuity contract, Tho Insurance conipanji guarantees to the trustee that It will convex't each ordinary life policy to an annuity contract at a stated adclltional premium. Tliis additional pi-emiua is g'Ofiranteed by contract st the time tVie ordinary life policy is originally purchased. The trustee accumulates the conversion cost by collectin^r and Investing contributions in excess of annual policy premiums, and accuraulatinfc these as an auxiliary fund. Siiould an employee die before retirement, the auxiliary fund that has been accumulated for his retirement is applied against the municipality's future cougribvitlons for the remaining employees. Under this method, the trustee ovms all of the insurance policies; the povjer to convert the ordinary life to an annuity contract is thus in the hands of the trustee. Nev/ employees vjho are not eligible for membership in the pension program may be permitted to participate initially by the purchase of low cost term life insurance policies on their lives. When these employees become eligible for full participation in the pension program, the term Insurance policy can then be automatically converted (v/ithout further medical examination) into the ordinary life policy purchased under this plan. Any type of vesting provision c^n be provided. If an employee quits before retirement, usually the trust gives him the insurance policy held on his life. If the plan is contributory, any excess employee contributions (over and above the insurance premium) is also returned to him. in one lump sura, and the balance In the conversion account to the employees credit is forfeited and kept by the trust.

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U6 Crrour) deferi-ep annuity Toian .-Instead of the trustee buying indlvifiual insurance contracts, he purchases group annuities. Since the trustee merely acts as an intermediary between the municipality and the insurance company, a trust is not necessary to administer the group deferred annuity plan. The municipality (or trustee) and an insurance company enter into a blanket agreement. This agreement contains the provisions of the pension plan and becomes a master contract betv,'een the two parties. Tach participating employee then receives a certificate outlining his rights under the pension plan. The municipality (or trustee) buys deferred annuities that will pay a predetermined retirement benefit to all ell<-lble employees. Every year a paid-up deferred annuity is purchased which will pay an annual income at retirement to each em.ployee that is equal to the pension unit earned dirring the previous year's service. A retiring employee's pension is the sum of all of the annuity units previously purchased for him under the group contract. The insurance company handles the investment of funds and provides all of the actuarial and legal services necessary for its contractual oblir-ations. 'hen the contract is initiated, premium rates are usually guaranteed for at least five years, but the insurance company jrenerally reserves the right to deter-iine nev; premium rates for all premium payments for each succeeding year after this period. Should an employee die before retirement, all premiums representing eaiployee contributions are returned

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1^? to hi.s benef iclr.i'y together with J.nterect. The irmniclpali ty' r: contribution.--^ which e.rc o. Inconntcd In advance for mortali.ty are forfelteci to tic Insurance company. Any type of vesting; provision can be provided. IT the employee qulty before retirement he nay keep the annuity units pur-chased foi\\ls credit. If Vie is not eli;^:^^^^^^^' this benefit, then the insurance company vjill return most of tV.c preniuin payments received to tre municipality as a credit against futui'e premiums. Employee contributions are then returned to him by his em/ployer, usually at no interest. Cne problesn of a grou.p annu.ity plan (or any true gi-oup insurance) is the si7;e of t'ne group. I'an.y insurance com/panies require a mitiimum: of tu!enty-five lives, although there is a trend toward reducing tlic m-ininnim. A fev/ large com.panles v.'ill v.'rite group insurance for employers v;ith as fev; as ten eligible employees. I'hen a plan is noncontributory almost all insurance com.panics require 100 percent participation. Most companies require 75 percent participation if the plan is contributory. According to George D. McDonald, the Deputy Insurance Com.missioner of tVie Florida Insurance Department, State Law requires 60 percent particii:)afcion in contributory group life insurance, covering a mlnim.um. of ten em.pl oyees. The State has no m.inlmjum requirements for groujj annuity contracts. Cnce the minimum, requirem.ents are satisfied, the individual insurance comipany uses its" ovjn particular undervjriting requirem.ents.

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Groun cler)Oslt aarainlstratlon annu.lty -o lan.-^hiR type of annuity plan is distinguished from the group fef erred annuity plan in the manner of purchase of the deferred annuitv Rather than imraediately using contributions to purchase annuities on particular lives (the deferred annuity) , under the .group deposit administration type of plan contributions are accumulated and deposited with an Insurance company for the eligible employees as a group, "hen an enyployee retires, a single premium immediate annuity is purchased to provide his pension benefits. The premium necessary for this is allocated from, the group fund and turned over to the Insurance com.pany. The principal difference, then, is the deferment of the use of contributions until the em.ployee actually retires. Annuity premiums and Interest on the cash held in the group fund are both guaranteed by the Insurance com.pany . Usually, the guarantee is for the first five years. After that time, the insurance company may change then for any nev; deposits to the accum.ulation account. The Insurance cop-oanv supplies actuarial, administrative, and legal services to the m.unicipallty . However, the employer c^-n retain his own pension experts if he desires. Vesting provisions are easy to fulfill since contributions are not used to purchase annuities until the actual retirement of employees. In this ti'-pe of arrangement, a trust is not necessary, since all details of the plan can be arj^anged in a master contract betvjeen the miunicipallty and the insurance company.

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When a trust Is createci. , It usually holcls the deposit admlnlstration conti-act. The trust can holcl. all .of the contributions and upon instructions of the municipality pay premiums to the insurance company for the annuities of retiring employees. The trustee may boar the responsibility of investing all funds not required to purchase annuities, or may relegate this to the insurance company. The larger the group, the greater the benefits that can be derived from this type of funding medium. In 19o5, life insurance companies were guaranteeing 5 percent for the larger groups and ^^ percent for others. 10 After the deposit administration contract becomes paid-up, the trustee vjould still have the responsibility to pay all benefits directly to retired em.ployees, if these benefits are not covered by the contract. The same minimum requirements that apply to other group plans also apply to d ep o s i t a d m i n i s t ra t i on cent ra c t s . One particular advantage of using a trustee is that it gives the municipality a choice of using the trustee or the insurance company in its investments. The city can decide which of the two woiild be most favorable. Another benefit is that should the municipality or the insurance company decide against their deposit administration contract, the trustee would make it possible to complete an orderly transfer from the insured to the trusteed plan. Groui^ -oermianent -oension p lan .-Thi c type of insured pension plan combines features of group life and annuity plans with the features of individual insurance, "o trust is

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150 necessary, as all of the terms of the plan are found in a master contract betvjeen the insurance company and the municipality. Every participating employee receives an insurance certificate that Gummarizes his rights under the plan. All benefit payments are made by the insurance com.pany and, as long as the level annual premiums ai'e paid, these benefits are guaranteed . One advantage of the group permanent pension plan is that life insurance coverage v;ithln the group limits can be purchased for employees without evidence of insurability. Employees can buy additional insurance protection only if they can pass a medical examination given by the insurance company. Additional coverage for uninsurable employees can be purchased through individual retirement annuity contracts. Combination "P ensio n 'olan .-Each of the previously mentioned types of insured plans have a certain degree of flexibility. Additional flexibility can be obtained by comroining these types as a combination ras\y be better suited for a particular mi-inicipality t'nan one specific type of insured plan. The goals of a miunicipality may best be sei'ved by using one funding media for part of its pension pz-ogran, and another for the rest. Sometimes a group annuity plan is piu-^chased to provide benefits for cutrrent service, and individual annuities purchased to pi^ovide for prior service credits. Another possibility is the purchase of group annuities to provide minimum benefits for all eligible employees with the use of individual annuities, or a self -administered trust for

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151 Increased benefits to hl£:hor salaried employees. The best CQitibinatlon for any one Florida municipality Is an Impossible decision to make unlessall pertinent data can be analyzed for the Individual municipality. Kach type of insured plan may have a place in the em.ployee benefit pictui^c. Conclusion It would serve no useful purpose to select the best funding media, as no one funding: medium is inherently superior to all others. It is £,xlorr.atic that vjhat Is £OOd for one person is not necessarily r;ood for another person. In pension plan desl£nin3 many persons are Involved and, consequently, many varyinginterests. Some employees are older and may not have the same interests as the younger employees. Some have long service, some sriort . There mxy be a wide variation in pay v;ithin the group or there may be a narrovj range. H One particular funding m.edlumi can be ideal for one set of circu.mstances and completely unsuitable for another. Each has Its particular advantages and disadvantages — these can .be decided only vjlth the advice of a consulting actuary after determining the m.u.nlcipallty ' s financial situation and particular clrcum.stances .

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NOTES ^Pension and Profit S haring Beport (Prentice-Hall, InC , Englewood Cliffs, New Jersey, 1963, March 8), p. I551. ^Article 7, Section 7.11, Chapter II. 3 -'Harbrecht, pp. cit., p. 79. private and Pu^lJ:C..Penslon_^la_n s in the UnitR^j^hpj^P^ (Institute of Life Insurance, New York, I963) , p. 17. 5 Letter from James P. Tlmoney, Assistant Trust Officer, mnufacturers Hanover Trust Company, September 17, 1965. 6 Harbrecht, op. clt .. p. 79. 7 Article 8, Section 8.1, Chapter II. o Article 7, Section 7.11, Chapter II. 9 Article 7, Section 7.13, Chapter II. Letter from Wallace E. Shaw, Vice President, State Mutual Life Assurance Company of America, to William J. Clapp, President, Florida Power Corporation, June 11, I965.' George B. Carlson, "Designing the 'Best' Pension Plan," 2!^2tbocQs_j:oiiJielfare.aJPxLias^^ stees„ajQ4_A„djnlnlst r ator s (National Foundation of Health, VJelfare and Pension"Plans", Inc., Elm Grove, V/isconsin, 196^), Vol. VI, 10th Annual Conference, p. 215. 152

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CHAPTER VIII LFGAI. PPOVISIONS ?>:crnr)tlon of Pimrl.? froin Asplr;^n!-npnt B uf^. Ta", Prom the standpoint of the municipal employee, the purpose o'f the retirement system is to enable him to retire with clircnity and enou£;-h income to sustain a reasonable standard of livin£;. Article 5j Section 5.^1 prevents creditors from attaching any benefits v;hlch have accrued to an employee or a beneficiary in order to satisfy claimis against debtor employees.. Benefit s Un assignable and not Su b.i ect to Pr oce ss; The right of any m.ember or any beneficiary to any benefits under the Plan or any other right accrued or accruing to any persons underthe provisions of this Ordinance shall not be subject to execution, garnishment, attachment, the operation of any bankruptcy or insolvency lav; or any other process of lav; vjhatever, and shall not be subject to assignment, pledge or hypothecation unless expressly authorised in this Ordinance. This section insures employees and beneficiaries that upon retirement, all credits to their account v;ill be intact-enabling tVien to receive their full retirement benefit. Protection A''';ai;ast Fraud Errors may be fouiid in the recoi'ds of the retiremient system. Section 5 'IS provides the method of adjusting the 153

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15^ recorcls of the Flan should any change or error be cliscoverecl. ^rrrors , Corrections and Adjustrnents ; • Should any change or error in the records of the Plan be discovered, or any error in any calculation be made resulting; in any member or beneficiary I'eceiving from the Plan more or less than he v;as entitled to receive, the Council shall have the povjer to correct such error, and as far as possible to adjust the payments thereafter to be made in such a manner that the actuarially equivalent of the benefit to which such member or beneficiary v.'as correctly entitled, be paid. In the event that someone attempts to deceive the retirement system by intentionally falsifying or changing any records, then this attempt to defraud the retirem.ent system shall be punished according to Section 9.1. Violations and Punishment.; Whosoever v'ith intent to deceive shall m.alce or cause to be ma.de any statem.ent, report, certificate, election, notice, claim or other instrum.ent, authorized or required under this Chapter, whether of the enumerated classes or otherv.'ise, vihich shall, be untrue, or vjho shall falsely or cause to commit to be falsified any record comprising any part of the operation or adrcinisti^ation of the Plan contemplated by this ordinance, shall be as follovjs: Punished by a fine, not exceeding .''300.00, or by imprisonment not e::ceeding: 90 days, or by both such fine and im.prisonm.ent . Any such violation shall also be punishable as provided under the lans of the State of Florida. Interpretation of the Plan. Section 7.5 states that the City Commission has the povjer to interpret the Ordinance which shall be binding upon all parties' interests. The Com.mission has the power to construe all terms, rules, conditions and limita.tions of the Plan, and its construction miade in good faith shall be final and conclusive upon all parties' interests.

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155 Supervision Since the municipality has established the pension plan, it should assume all obligations for the supervision of the retirement system. Article 7, Section 7.1 delegates this obllo:ation. General Su-pervisipn : The general supervision of the administration of the Plan shall be by the Conmission . Administration The most popular form of administration for a municipal retirement plan is a Board of Trustees or a Pension Board. The functions of the Pension Board are carried out by the City Commission, which places the responsibility for the plan's operation directly upon the mxinicipality . Additionally, the City finance officer is designated the treasurer of the Plan. It is not the function of the Board to deal with administrative detail or to hold frequent meetings for the purpose of resolving routine m.atters that ma.y arise in the administration of the pension fund. To avoid these problems, Article 7 clearly outlines the administrative duties and responsibilities of the Pension Board. Sectio n 7.2 . The members of the City Commission shall serve the pension plan v.'ithout com.pensatlon for their services. Section 7.3 • Anj^ m.atter pertaining to the pension ordinance m.ay be considered at any City Commission meeting. A majority of Commission members shall constitute a quorum and all Commission resolutions shall have the affirmative vote

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156 of at least three Commission members. Section 7.^ . The Commission may promulv;ate rules an5 regulations that are not in conflict v/ith the terms of the Pension Orclinance or the City Charter to cover the operation of any phase of the Plan. Section 7.6. The Commission has the pov.'er to select, employ and compensate any consultants , a^'ents an'tl em.ployees as they m.ay deem necessary for the proper and efficient administration of the Plan, Sections 7«'?^ 7«1P.. Accui-ate miinutes and records of the Commission acting as a Board of Trustees shall not be intermingled ;vith other m.unicipal records and these files shall be available to any interested person at all times. All notices pertaining to the operation of the Plan shall be preserved in writing in segregated files pertaining to the Plan. Section 7.11 . The Commission has the authority to direct that pension plan funds be deposited v;ith a bank and/or a savings and loan association, or invested in securities. Also, the Commission has the authority to negotiate contracts vjith ^he trust department of a bank, or an insurance company. These trust agreements are only for investment purposes and may be terminated or amended by the Com.mission. Sections 7 .12, 7.1'^.. Actuarial valuations should be maintained to insure the sound operation of the retirem.ent system.. The periodic actuarial valuations at intervals of not miore than tv;o years should be r.adeto establish and verify the financial solvency of the Plan and to note the effect of

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157 current devclopinents in economic and social conditionE on the operating results of the Plan. The actuary's report shall be submitted in v;ritin;^and copies shall be available to members of the Flan upon request. If a trust agreement or a contract has been negotiated, then the trustee or Insurance company shall submit an annual statement of the condition of tlie funds on deposit to the credit of th.e pension plan. Some larger municipalities may desire a periodic audit of the financial transactions of the retirement system by an independent accounting firm selected by the Board of Trustees. It is suggested that this independent audit be prepared for public distribution. It should include a balance sheet and income statement accompanied by the accountant's statements embodying information related to operating expenses and investment transactions, and such other tables and schedules which will properly and completely reflect the operating experience of the retirement system. This report should include a statement by the municipality's actuarial consultant, discussing the financial solvency of the plan — containing recommendations for any changes and revisions. .F u t ui" e C ha n ::e s Section C .1 . The City Commission may terminate or modify trust agreements and contracts entered into v,'ith an insurance company or a trustee. Section 10.1 . The City Commission shall have the pov/er to amend the Pension Ordinance.

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158 According to John J. Hdman, an attorney witli the firm Klrkland, Ellis, Kodson, Chaffetz and Masters of Chicago, there is a trend In court decisions throughout the country to deny pension plan changes vjhich adversely affect the pension rights of employees. "I suggest that if an amendment of a public pension plan is made, care should be taken if the amendment will adversely affect even a single employee's pension rights. It is preferable to include the change vgith a liberalizing am.endment if this is possible." Ke concludes that an amendatory change will probably be upheld by the court If it is Justified as actuarially sound, rather than relying solely upon the bare legal right of a municipality in arbitrarily changing or withdrawing pension benefits. 2

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NOTES Section numbers refer to the Model Pension Plan Ordinance, Chapter II . 2 Edman, op. clt .. pp. 13-1^. Private pension plans usually contain an absolute reserved right of the employer to revise or abolish the plan. Despite unequivocal language, courts are reluctant, and sometimes have refused, to recognize this right. See cases in ^2 A.L.R. 2d ^6l. One may question whether a statutory provision allov/ing any change in public pensions would be effective. 159

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CHAPTER IX • SUMI-IAHY AND CONCLUSIONS Summary. The primary purpose of this dissertation is to describe the nature and characteristics of a model pension plan ordinance for Florida municipalities. This paper may be helpful to many municipalities that decide to adopt a retirement program without being fully aware of the main objectives which they v;ish to achieve and the resulting long-term financial obligations that are the consequence of these pension programs. In order to help interested municipal officials arrive at a reasonable decision made on the basis of adequate information and a clear understanding of the objectives to be achieved s the author has attempted to list and discuss the various considerations involved and the ideas to be followed in arriving at the detailed provisions of a pension ordinance. Purpo se^ o f retire ment plans. -As mentioned so often in this dissertation, the primary purpose of a formal retirement program is to remove superannuated employees from the mu.niclpal payroll when reduced efficiency impairs their usefulness to the city. It has been shown that even though no formal retirement program exists, the cost of such a program is 160

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161 present— whether hidden in the payroll, in less efficient operation, or In lower employee morale. One can summarize the objectives of a retirement program as follows: 1. To effect retirement of superannuated and disabled employees in order to increase the efficiency of the municipality and reduce the local government payroll by avoiding payment of full-time salaries to part-time workers. 2. To provide retirement benefits as Incentives to attract new employees, induce present employees to remain in the service of the municipality during their productive years, and enhance the municipality's reputation among the electorate. 3. To provide opportunities for promotion among the younger, more vigorous employees by the orderly retirement of older employees as they become Ineffective. Systematic retirement keeps the avenues of advancement open, and thus improves employee morale and efficiency by maintaining a young and progressive organization. k. To fulfill the desire of an appreciative municipal employer to revjard faithful employees in the event of old age, disability, or termination of employment after meeting specified conditions of age and length of service. 5. To provide tax advantages to employees by providing part of their compensation in the form of deferred benefits. Although some municipal officials rna.y not be impressed by the advantages of a retirement plan, a m.unicipality which ignores the long-term benefits of such plans is in effect depriving itself of the least expensive means of handling its personnel problems in the long run, as well as depriving its

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162 employees of the Federal and State tax advantages. Furthermore, by postponing the solution of its retirement problem, the municipality is merely passing the responsibility of today's administration on to future city officials. Pensi on ordinance . -The model pension ordinance described in this dissertation contains the basic features of the various contractual arrangements under which the benefits of a pension plan may be provided. The provisions of the pension ordinance define eligibility, state the conditions that an eligible employee must satisfy in order to participate in the pension plan, state the benefits provided by the pension, and establish procedures for administering the plan. We may classify these as follows: 1. Requirements for employee participation--all fulltime employees must participate as a condition of employment. 2. Requirements for receipt of normal retirement benefits — completion of ten years of credited service and age 60 for police officers and firemen, or age 65 for all other employees. Police officers or firemen m.ay voluntarily retire at age 55, and other em.ployee members at age 60, if they have completed at least twenty years of service. 3. Statement of retirement benefits— the model pension ordinance provides for an annual retirement income (payable in equal monthly installments) beginning at normal retirement date in an amount equal to 1 percent of the policemen and firemen employee's '-average monthly earnings" multiplied by the employee's number of years of '^credited service" at retirement. The monthly pension for general employees is .^2.00

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163 for every year of "credited service." An Illustration of the monthly retirement income providedby the regular benefit formula and the primary Social Security income at age GS (excluding benefits for dependents) Is shown in Table 3, page 22 , ^. Statement of subsidiary benef its--Article 5 of the model ordinance outlines delayed retirement and early retirement benefits to members who meet certain specific conditions as provided in the ordinance. 5. Provisions for meeting the cost— this vjrlter recommends a noncontributory pension plan whose costs are to be met through municipal contributions. 6. Administrative provisions— to protect the municipality and its employees. The above provisions have been written in considerable detail in the model ordinance. The author has attempted to word these provisions in a simple and straightforward manner . in order to reduce any misunderstanding and misinterpretation on the part of either employer or employee. With due regard for the objectives of a pension ordinance, simple and clear provisions enable employees to understand the exact benefits to which they are entitled and under what conditions they are to receive these benefits. All types of pension plans must have a foundation of basic definitions, statements of benefits, and administrative provisions. While each pension play may be custom-built, it is believed that any subsequent tailoring to fit a specific

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161^ situation can more or less use the provisions in the model ordinance as a vehicle in the solution of any municipal pension goals. Contributions.. -Every pension plan must have adequate funds available for the payment of benefits to eligible employees. There is considerable variation in the financlnospecifications of municipal retirement systems in Florida while some are noncontributory , the employee often contributes toward the cost of the plan. The author has discussed the advantages and disadvantages of the contributory vs. the noncontributory plan. As it is true in most instances of pension planning, the final decision must depend upon the Individual situation, but in making the final decision on this question the follovving points should be carefully considered: 1. It is generally not feasible to require an employee contribution rate which is large enough to cover a high pro. portion of the total cost. This may be apparent in the case of the lower paid municipal em.ployee when one considers that a 5 percent contribution means a monthly deduction of t'15.00 for an employee earning .•!;300.00 a month. 2. The employee's contribution comes from income already taxed resulting in an unnecessary taxation of a portion of the employee's contribution made to a contributory pension plan. For example, if the em.ployee's salary were reduced by the amount of the contribution expected of him, a noncontributory plan would result in larger employee take-home pay.

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165 3. The return of the employee 's contribution Is assured on death or termination of service. Because of this, a dollar of employee contribution does not provide as much pension benefit at retirement as a dollar of municipal contribution. 4. Noncontributory plans guarantee full coverage of all employees. Full coverage is important, because even though an employee has excluded himself by refusing to make contributions, he v;ill still constitute a retirement problem to the municipality at som.e future date. 5. The provisions and benefits of the pension plan are probably more easily amended or adjusted in the futur-e if contributions from employees are not involved. The above points must, of course, be considered in relation to a municipality's ability to finance the whole structure of an adequate pension program. Retirement ag e. -The amount of contributions needed is affected by the retirement age as stated in the pension ordinance. From an economic point of view, employees should be retained in employment so long as they are willing and able to work effectively in some useful capacity. V/hile chronological age does not determine the best time for retirement in individual cases, it is necessary to set a retirement age for the purpose of estirnating costs and integrating municipal retirement benefits with Social Security. The author believes that retirement need not be compulsory at such an age, but should be kept entirely vjithin the control of the municipality— thus permitting a flexible administration of the retirement provisions in the pension plan.

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166 A fixed retirement age has been selected because of its ease of administration on the part of the municipality. Department heads are not required to make decisions as to who is to be kept and who is to be retired. This may be beneficial for employees because when they know that they will be retired at a given age, they will plan for it financially and psychologically. Retirement age affects costs of the plan, the scale of benefits, possible coverage, and the needs and desires of the •municipality and its employees. While cost, coverage, and benefits are interrelated functions of each other, retirement age is a critical factor in the pension program. Because no chronological age should be regarded as just right for retirement, the author has approached this problem by giving the municipality the choice of extending an employee's services beyond his normal retirement age, by permitting early retirement at reduced actioarial benefits, and by setting normal retirement ages different for general employees and for firem^en and policemen. y^sting.. -Employees may leave raunioipal service before reaching the age provided for retirement. The author believes that it is desirable to preserve pension credits but because of the cost considerations involved in full early vesting of pension benefits, a minimum period of municipal service should be required as a practical method of preserving pension credits at less expense than full early vesting. According to the model pension ordinance, an employee whose service is terminated

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16? for reasons other* than death or retiremetit prior to the date on which he completes twenty years of credited service will receive no benefits whatsoever when he reaches noriiial retirement age. Hence, all forfeitures of benefits by terminating employees will remain In the pension trust fund and be used to reduce the normal cost or the actuarial deficiency of the retirement program. I nvestments . -A municipality's pension costs will be further reduced by Its Investment Income. The anticipated return on Invested funds and the pension benefit formula may have a strong influence on the municipality's choice of funding medium. The legal instruments under which the funding arrangements operate are called funding media, while the budgeting arrangements are usually referred to as funding methods. The author has described the various techniques by v;hich the sums required to provide the pension benefits can be accumulated or budgeted. While no funding medium is inherently superior to all others, economies associated with size are to be had with large municipal pension programs while small municipal employers may have proportionately higher costs. It would be wise to com.pare the basic irreducible minimum actuarial, administrative, and legal costs of constructing and operating a self-administered pension trust to the commissions for insured pension plans and the fees charged by bank trustees. Generally, sm^ll municipal groups mean small funds and the problem of emphasizing yield or safety to the detriment

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168 of the other. Large municipal groups and the consequent large funds make diversification possible vjhich eases the problem of promoting both safety and yield. Small noninsured funds may overcome this problem by pooling investment funds either with a bank trustee or an investm.ent company. Such pooling is a practical way for these small funds to receive the services of a competent investment advisor. The major investments of self -administered, noninsured municipal retirement funds have been U.S. Government securities, state and local governm-?nt bonds, and non-government securities— the latter cor.prised m.ostly of corporate bonds. While there is an investment policy shift avjay from U.S. Government securities and state and local government debt, mortgages, stocks, and other investments are still small fractions of total assets. This shift may emphasize the need for able investment counselling. Although there is a tendency of investment managers to pair fixed monetary liabilities with fixed value assets, this author takes issue with the notion that pension liabilities are fixed. Our history of inflation, which forces upward adjustments in pension benefit levels, dictates the increased use of variable-valued assets. In defense against the falling purchasing power of the dollar and the threat of continued price rises, trust managers should turn to com.raon stock as an asset whose monetary val\ae would closely parallel movements in commodity prices over the long run. In addition, because the investment income of pension funds is exempt from federal

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169 Income taxation, the net yields frorn fully taxable corporate bonds are superior to those given by tax-exempt municipals. Pension funds should not be attracted by the normally inferior yields of m.unicipal bonds. While increased earnings may result from the proper choice of any of the funding media discussed in this dissertation, competent Investment advice should give a municipality a higher yield on its assets. This increase may be used to improve employee's pension benefits or to reduce municipal costs. The services of an independent consulting actuary may be helpful in enabling the municipality to make an inform9.1 choice. Conclusions Before a municipality can select a pension plan as being most suitable for its circumstances, many questions must be considered. In this dissertation a great deal of attention has been devoted to the factors which should be considered when making the selection, not on absolute orfinal answers. It should be em.phasi^ed that the model ordinance in this dissertation is based on a self-administered, fully trusteed, final pay, noncontributory retirement plan designed to supplement Social Security benefits. Various chapters of this dissertation have attempted to shed some light on these provisions. When deciding on the adoption of a retirement plan, the municipality might be vjell advised to give due consideration to the needs and desires of its perm.anent full-time employees if it wants the retirement program, to be a success.

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170 If thereader has read and fully understood the contents of this dissertation, it is reasonable to assume that the large municipal employer would vjant a self-administered, fully trusteed, noncontributory retirement plan (or deposit administration, group annuity, insured noncontributory plan), with benefits based on length of service and average monthly compensation for a reasonable number of years prior to retirement, with a reasonable schedule for the vesting of benefits upon termination of employment, with adequate retirement benefits, and with a short waiting period or no waiting period at all. But whether a municipality is large or small, a wise employer who wants to remain competitive in future years will plan ahead and gradually adopt a balanced program of employee incentives — including an adequate retirement program constructed in a well planned, conservative financial structure.

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APPENDIX A Actuarial Data For Chapter 175 B'unds at Janu&ry 1, 1966 Sourcg.: Broward Williams, "Report to the I967 Legi slature , " The_Municipal Fireirif) n « s £eJialon_Trust_Bnina, (State Treasurer*' s Office, Tallahassee), Second Biennial Report 1965-1966.

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TABLE 6 ACTUARIAL DATA FOR CHAPTER 175 FUIIDS AT JAI^RJARY 1, I966 coae 119 City Arcadia Effective Date of Ordinance S/'^AQ Number of Firemen Full-time members , illVolunteer members ., , 18 Total 22 Annual Compensation for active members $18,^27.00 Number of retired Firemen , Pensions being paid to retired members Normal cost retirement income $ 1,103,00 Current cost of disability benefits ..,, 307.OO Current cost of return of contributions at termination or death... 59.00 Total normal cost 1,^69,00 Actuarial deficiency Gross actuarial deficiency retirement income .-^^J-l ,889»00 Gross actuarial deficiency return of past members* contributions at termination or death 18.00 Gross actuarial deficiency for retired members Total gross actuarial deficiency 41,907.00 Assets in pension fund as of January 1, 1966 $16,837.00 Net actuarial deficiency $25,070.00 Annual amount necessary to pay the normal cost and amortize the net actuarial deficiency over kO years.. $ 2,52^.00 Contributions during calendar year 19^5 Member contribution $ 555*9^ State contribution..... 1,317.96 Total « 1 ,873 . 90 Annual deficiency to be made up by the municipality or other source ,....$ 65O .10 Cost as percent of total annual salary of plan members 13*7.'^

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173 Table 6 Extended TABLE 6 (Cont'd) 130 13^+ 191 •203 230 Boynton Auburndale Avon Park Beach Brooksville Chattahoochee 11/1 ^/S7 10/1/^3 1/lAO 2A AI 10/17/39 3 i^ 11 2 17 27 18 16 20 l^ 38 20 16 $ 16,611.00 B 17,iJ-60.00 ;:^ 63,837.00 ;:;; 10,215.00 .^ 5,738.00 $ 1,703.00 S 1,903.00 $ 8,^^0.00 $ 751.00 $ 605.00 52.00 271.00 118.00 3.00 27.00 132.00 116.00 512.00 82.00 if^.OO 1,887.00 2,290.00 9,070.00 836.00 676.00 $ 30,822.00 .') 39,198.00 § i^i^.,83if.oo $ 8,181.00 ^ ii,57A-.oo 15.00 1^.00 53.00 1/4-. 00 2.00 30,837.00 39,212.00 4^,887.00 8,195.00 11,576.00 $ 12,133.00 9,630.00 30,ij.6o.oo 11,555.00 7,0^^^3.00 $ 18,704.00 '4 29,582.00 § 14,427.00 $ ^,533.00 $ 2,674.00 i 3,535.00 e 9,677.00 836.00 .$ 867.00 $ 823.26 ^ 894.42 !| 2,775.26 t 512.65 ^ 286.90 1,111.26 918. 30 2,343.94 1,320.82 444.91 1,93^4-. 52 1,812.72 5,119.20 1,833.^7 732.81 No I 739.48 ^) 1,722.28 $ 4,557.80 Deficiency ^ 13^.19 16.1/^ 20.2,^ 15.2,^ 8.2,^ 15.1.^

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Table 6 Extended TABLE 6 (Cont'd) Code City .^51 Elf^ctAv^-Dateof Orfllnanr.f. cr/??/?Q Number of Firemen " ~—^ — -izJUZ^o — Full-time members, Volunteer members ••••• 1^ Total 17 Annual Compensation for active members $93,360.00 Number of retired Firemen Pensions being paid to retired members 1,200.00 Normal cost retirement income ^ f, ^ g^^ qq Current cost of aisability benefits 137.00 Current cost of return of contributions at termination or aeatn,.,,, ' , ^„ 1 ,503 .00 Total normal cost m ,'r^; rsr. • • 11,50^.00 Actuarial deficiency Gross actuarial deficiency retirement income .$62 32ij00 Gross actuarial deficiency return of past members' contributions at termination or death h9'? no Gross actuarial deficiency for retired membei's! ! ! ! ! ! .* 13,317:00 Tooal gross actuarial deficiency \\\\ 76^o68;oo /Assets in. pension fund as of January 1, 1966 $23,769.00 Net actuarial deficiency ^ ),i ^"^^^^•V7,677.58 annual deficiency to be made up^'%Hhe municipality or other source \^^^j. 5,028. 42 Jost as percent of total annual salary of plan members........ , ^.4.7/^

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175 Table 6 Extended TABLE 6 (Cont'd) 287 Dade City 296 Deerfield Bcacli 6/8/'J9 301 Delray Beach -10/2 5/39 316 Dunedin _10/8/57 327 Eau Gallie 12/ll /57_ 3 15 18 12 12 23 23 46 5 5 22 21 43 ^ 16,132.00 $ 69,094.00 .^121,203.00 .^ 21,990.00 $132,968.00 1 1 697.56 1,200.00 $ 1,959.00 fp 7,485.00 :|^ 12,672.00 $ 2,867.00 $ 13,950.00 178.00 46.00 1,015.00 49.00 55.00 203.00 2,340.00 1,078.00 1,201.00 143.00 2,439.00 8,609.00 14,888.00 3,059.00 16,444.00 18,401.00 $ 57,364.00 0244,049.00 $ 35,262.00 .^ 59,603.00 316.00 338.00 31.00 620.00 43.00 11,060,00 29,504.00 338.00 17,270.00 57,680.00 261,657.00 35,293.00 60,223.00 § 31,384.00 § 16,835.00 $131,174.00 ^ 17,091.00 $ 24,831.00 ^) 40,845.00 1130,483.00 .$ 18,202.00 § 35,392.00 $ 2,340.00 ;| 10,329.00 $ 20,381.00 § 3,825.00 $17,934.00 • 5 958.00 $ 3,446.67 $ 6,204.52 $ 1,072.29 S 5,646.59 1,787.89 1,942.89 4,556.10 2,088.85 ' 2,001.15 2,745.89 5,389.56 10,760.62 3, 161.14 7,647.74 No Deficiency $ 4,939.44 $ 9,620.38 | 663.86 $ 10,286.26 14.5/^ of 14.9 7" 16.8;^ 17.4.^ 13.5.^

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Table 6 Extended TABLE 6 (Cont'd) Code 365 City Florida City Effective D at e of Ordinance , 7/8/52 Number of Firemen Full-time members 3 Volunteer members , litTotal 17 Annual Compensation for active members i|^15,1^5,00 Number of retired Firemen Pensions being paid to retired members Normal cost retirement Income ,,. $ 858. 00 Current cost of disability benefits , 6.00 Current cost of return of contributions at termination or death 128 .00 Total normal cost , 992.00 Actuarial deficiency Gross actuarial deficiency retirement income ,.<:^10 5 070.00 Gross actuarial deficiency return of past members* contributions at termination or death ,,,. 32.00 Gross actuarial deficiency for retired members Total gross actuarial deficiency... , 10,102.00 Assets in pension fund as of January 1, 1966 «,».-'?l; 5j631«00 Net actuarial deficiency $ ^,^-1-71. 00 Annual amount necessary to pay the normal cost and amortize the net actuarial deficiency over ^1-0 years.. J^?; 1,180.00 Contributions during calendar year 1965 Member contribution ^^ 35^.02 State contribution. «....,....« 232.36 Total 586.38 Annual deficiency to be made up by the municipality or other source «..«.«.$ 593 •^2 Cost as percent of total annual salary of plan members « 7«8>o

PAGE 187

177 Table 6 Extended TABL7:; 6 (Cont'd) i^31 ^32 ^38 if58 1^61^Haines City Hallandale Havana Holly Hill Homestead 9/6/39 l/l5/5^t2/6/'?^ 8/26/39 3/7 AM 'f 5 15 30 12 17 3^ .5 12 17 15 $ 18,71^.00 e 26,260.00 $ Iji^ii-O.OO $ 3,16^.00 $ 77,022.00 $ 2,092.00 ^ 1,93^.00 $ 93.00 ^ /4-00.00 .s; 8,016.00 21.00 32.00 2.00 12.00 425.00 203.00 173.00 9.00 25.00 1,225.00 2,316.00 2,139.00 lOit.OO l^li6,00 9,666.00 $ 33,860.00 ^ 10,957.00 $ 1,398.00 § 4,73^.00 $ 99,122.00 58.00 26.00 5.00 373.00 33,918.00 10,983.00 1,398.00 4,739.00 99,495.00 $ 22,560.00 $ 21,911.00 $ 4,897.00 $ 11,942.00 $ 56,359.00 $ 11,358.00 $ 43,136.00 $ 2,794.00 $ 2,139.00 $ 104.00 $ 446.00 $ 11,482.00 !p 973.70 $ 772.25 $ 43.20 164.20 .$ 3,846.87 1,889.95 2,601.31 682.57 1,061.45 2,054.94 2,163.65 3,373.56 725.77 1,225.65 5,901.81 No No No I 630.35 Deficiency Deficiency Deficiency^, 5,580.19 14.9^ 8.1;i 7.2% 14.1,^ 14.9 t/

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Table 6 Extended TABLE 6 (Cont'd) Code 515 City Kissimmee Effective Da te of Ordinance 4/lAo Number of Firemen Full-time members ^ Volunteer members 17 Total 21 Annual Compensation for active members,, ...,$20,907,00 Number of retired Firemen 1 Pensions being _paid to retired members..,. S 1,176.00 Normal cost retirement income -^5 2,626.00 Current cost of disability benefits 77.00 Current cost of return of contributions at termination or death 189.00 Total normal cost 2 ,892 ,00 Actuarial deficiency Gross actuarial deficiency retirement income ^23,2^9.00 Gross actuj^rial deficiency return of past members' contributions at termination or death 20.00 Gross actuarial deficiency for retired members 11,10^,00 Total gross actuarial deficiency 3^*373.00 Assets in' pension fund as of January 1, 1966 :t;22,772.00 Net actuarial deficiency, ,.,,,,,<>,., ,$11,601,00 Annual amount necessary to pay the normal cost and amortize the net actuarial deficiency over kO years.. $ 3,380.00 Contributions during calendar year I965 Member contribution ...,,.$ 1,10^.30 State contribution, 1,4-96.63 Total ,.,.,,.... 2 , 600 , 93 Annual deficiency to be made up by the municipality or other source. .,,..,,.,,,««.. « ,,..,,..,.,8,,,,$ 779.07 Cost as percent of total anniAal salary of plan ^ members. ,,..ei..»,,,,,.,*.....«o«.«»»««. •«•»». •.»••. iD.<.5

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Table 6 Extended TABLE 6 (Cont'd) 530 Lake City 9 /l g/'^9 Lake Park 553 Largo 1/27/6 7 572 Live Oak 8/1/39 59^ Madeira Beach -1/1/53 11 11 1 1 13 18 6 7 13 3 3 $ 50,2^4-5.00 .:? 3,i+72.00 $ 15,585.00 ;^ 23,082.00 $1^^,680.00 1 " % 1,200.00 % 5,672.00 $ 386.00 $ 1,976.00 % 1,28^.00 $ 2,31i^.00 9.00 2.00 5.00 3^.00 75.00 638.00

PAGE 190

Table 6 Extended TABLE 6 (Cont'd) Code 595 City • Madison Effective Date of Ordinance 10/6/5^ Number of Fireiaen Full-time members , ^ Volunteer members 10 Total , 1^1 Annual Compensation for active members § 18,900,00 Number of retired Firemen Pensions being .paid to retired members Normal cost retirement income ^ 1,283.00 Current cost of disability benefits 9.00 Current cost of return of contributions at termination or death 112.00 Total normal cost 5 1,^0^4-. 00 Actuarial deficiency Gross actuarial deficiency retirement income $ 20,505.00 Gross actuarial deficiency return of past members* contributions at termination or death 21.00 Gross actuarial deficiency for retired members. .,«.. . Total gross actuarial deficiency , 20,526.00 Assets in pension fund as of January 1, 1966., § 5 > 778. 00 Net actuarial deficiency ^ 1^ » 7^8 .00 Annual araoiint necessary to pay the normal cost and amortize the net actuarial deficiency over ^o years.. J^ 2,025.00 Contributions during calendar year 19^5 Member contribution § 53^ .59 State contribution 836.39 Total c 1 , 372 .98 Annual deficiency to be made up by the municipality or other source $ 652 ,02 Cost as percent of total annual salary of plan members ,.,,.,.,..............».......»...»»••»•.«•«»» '-^ « • .

PAGE 191

181 Table 6 Extended TABLE 6 (Cont'd) 596 6^0 607 620 6SS Mount Maltland Milton Marianna Melbourne Dora _. 10/6/59 1/13/6^ 1/1/^0 9/2^ An 11/1/39 9 10 . 9 i^ 31 17 31 31 9 10 26 35 $ if, 389. 00 $ 37,380.00 $ 40,260.00 $ 47,557.00 «; 18,115.00 1 1 $ 1,079.66 * 900.00 $ 525.00 * 2,518.00 $ 4,566.00 -t^ 3,881.00 .1^ 1,284.00 5.00 5.00 145.00 56.00 6.00 63.00 . 417.00 428.00 240.00 111.00 593.00 2,9^0.00 5,139.00 4,177.00 1,401.00 % 2,432.00 .$ 5,818.00 $ 69,53^.00 % 27,702.00 I? 12,379.00 11.00 50.00 65.00 35.00 27.00 9,717.00 8,287.00 2,443.00 5,868.00 79,316.00 36,024.00 12,406.00 % 476.00 $ 15,264.00 % 46,461.00 $ 38,002.00 $ 18,804.00 $ 1,967.00 $ 32,855.00 $ 676.00 $ 2,940.00 $ 6,522.00 I; 4,177.00 $ 1,401,00 $ 223.45 ;i^ 898.67 t 1,692.17 $ 1,017.12 ^ 483.18 564.97 1,222.48 3,361.53 2,866.98 1,072,09 788.43 2,121,15 5,053.80 3,884.10 1,555.27 No No Deficiency $ 818 .85 % 1,468.30 $ 292.90 Deficiency 15.^/^ 7.9;^ 16.2^ 8.8^ 7,7%

PAGE 192

rable 6 Extended TABLE 6 (Cont'd) Code 666 City Naples Effective Date of Ordinance l/g5/5^„ Number of Firemen Full-time members 8 Volunteer members «... 18 Total 26 Annual Compensation for active members , f? il-2 ,^1-85.00 Number of retired Firemen Pensions being paid to retired members Normal cost retirement Income ^ ^,95^.00 Current cost of disability benefits 256. 00 Current cost of return of contributions at termination or death ^71. 00 Total normal cost ,...«c.cc»t€. 5; 681 -00 Actuarial deficiency Gross actuarial deficiency retirement income $ 50,821.00 Gross actuarial deficiency return of past Dembers* contributions at termination or death 7^.00 Gross actuarial deficiency for retired members Total gross actuarial deficiency c 5O; 895,00 Assets In pension fund as of January 1, 1966.,.o* § 32,203.00 Net actuarial deficiency.. .....o..». 18,692.00 Annual amount necessary to pay the normal cost and amortize the net actuarial deficiency over ^0 years.. $ 6,^66.00 Contributions during calendar year I965 Member contribution ....?? 1,658.27 State contribution, ,,«,,.tfttcc
PAGE 193

TABLE 6 ( Cont'd) 183 Table 6 Extended 728 Orniotjd Beach -6^1'?/39. 7 7 7ij'l Pahokee 10/1/39 776 Perry 8/22/39 2 10 12 5 8 13 J^ 36,^82.00 :1^ 12,^^39.00 i^ 22,909.00 ,^ 801 Port Orange 20 20 831 Rlvelra Beach 22 22 20.00 $109,881.00 ^ 3»699.00 $ 1,568.00 $ 2, J^77. 00 91.00 355.00 6^^.00 399.00 i^, 189. 00 68.00 1,991.00 285.00 2,826.00 ^ 55,039.00 § 33,33^.00 $ 26,019.00 ft 36.00 16.00 29.00 55»075. 00 33,350.00 25,oJ^8.oo $ 11,659.00 22.00 2,062.00 13,7^3.00 59.00 $ 3i<-,^90.oo ^33.00 59.00 3^,923.00 $ 26,581.00 S 18,682.00 $ 21, 31/4.. 00 I 3,2^^^.00 $ 30,088.00 28,^19^'. 00 1^4-, 668, 00 i|, 73-^4-. 00 ^,835.00 5,389.00 .^ 2,609.00 ^ 3,025.00 -1^ $ 1,598.62 !| 625. OJ^ $ 1,09^.96 2,^16.88 l,0^-7.6i^1,559.70 ii-,015.50 1,672.68 2, 6'^^. 66 2.00 ^ 13,9^7.00 $ 5,179.5^ 238.07 2,575.9^ 238.07 7,755.^^8 No $ 1,373.50 I 936.32 $ 370.3^-. Deficiency § 6,191.52 1^.8;^ 21.0,t 13.2^ ^ 10.0^ 12.7/^

PAGE 194

Table 6 Extended TABLE 6 (Cont'd) Code 8^+6 Saint City Augustine Effective D ate of Ordinance 2/7A0 Number of Firemen Full-time members 22 Volunteer members Total 22 Annual Compensation for active members. $106,322.00 Number of retired Firemen , , 3 Pensions being paid to retired Firemen ..»7^"'5»00 Contributions during calendar year I965 Member contribution.. ..,.„...,...,. ft 5,287.09 State contribution 2,752.80 Total ...ot*i.--,ic..w.. .,^>. ...^••. •«.'••««..•...• 8, 04-0 , 69 Annual deficiency to be made up by the municipality or other source t»..^ 15»70^»31 Cost as percent of total annual salary of plai5 members .« 22.3

PAGE 195

185 Table 6 Extended TABLE 6 (Cont'd) 89^ South Miami lOA/SQ 900 Starke g /20 /'::? 920 Tarpon Springs 1.1/2 6/39 9l|ii Vero Beach 8/l /'?9 985 Winter Haven 2/20/^0 16 16 5 15 20 3 15 18 18 18 21 11 32 e 95,108.00 $ 23,^51.10 $ 16,51/1.00 $ 89,76^.00 $103,796.00 1-2-2 $ 1,200.00 ^; 1,29^.20 $ 3,300.00 •1^ 10,'lii7.00 ^ 1,855.00 |; 1,307,00 (? 9,ll'J-.00 |f; ll,10i]..00 125.00 ^3.00 ^^4-35, 00 590.00 377.00 1,027.00 11,299.00 1^7.00 177.00 1,060.00 959.00 2,0^1-5.00 1,919.00 10,76^^.00 12,^^0.00 $128,652.00 $ 16,939.00 $ 6^,868.00 1:125,658. 00 C'207,735.00 36.00 15.00 286.00 282.00 12,99^.00 1^1,928.00 16,975.00 15.00 286.00 li+8.00 18,263.00 39,650.00 83,151.00 126,9^^^.00 2^^7.533. 00 $ 23,^30.00 $ 6,852.00 $ 11,023.00 $ 71,783.00 I; 78,35^.00 $118,498.00 $ 10,123.00 $ 72,128.00 $ 55,161. 00 $169,179.00 $ 16,288.00 $ 2,471.00 $ 4,956.00 $ 13,086.00 $ 19,662.00 $ 4,446.30 $ 677.65 $ 772.68 t 4,195.76 $ 4,932.40 2,150.06 839.93 1,323.90 4,113.46 4,579.15 6,796.36 1,517.58 2,096.58 8,309.22 9,511.55 $ 15,704.31 $ 9,491o64 $ 953.42 $ 2,859.42 $ 10,050.45 17.1^ 10.5=^ /= 30.0=^ /" 14.6/^ 18.8^

PAGE 196

Table 6 Extended TABLE 6 (Cont'd) Code 586 ^^^y Winter Park Effective Date of Ordinance ^ 8/7/39 Number of FlrcTiien — — ^.,-^_ ,__ Full-time members ,^ 3_5 Volunteer members ! ! I 'I! ' ! * ' ' ' 23 Total ^5 Anaiial Compensation for active members..,., ....-S 7^,763,00 Number of retired Firemen „...,, 2 Pensions being paid to retired members 2,100.00 Normal cost retirement income ^ 7 920,00 Current cost of disability benefits. 193.00 Current cost of return of ooatriVratlons at termination or death 979.00 Total normal cost ,».,,..,,,, 9,092.00 Actuarial deficiency Gross actuarial deficiency retirement Income ^, 85,^1-35,00 Gross actuarial deflcienoy retux-n of past members' contributions at termination or death 126.00 Gross actuarial deficiency for retired members Zi\-,k6l.00 Total gross actuarial def iclency ..,,,,.,,,,,_,,,,_ . 110,022.00 Assets in pension fund as of January 1, 1966..,.,.,....$; 63,135.00 Net actuarial deficiency c. . . c . cc.$ 41^,888.00 Annual amount necessary to pay the normal cost and amortize the net actuarial deficiency over ^0 years,. $ 10,982.00 Contributions during calendar year 1965 Member contribution , » , ^ 3,840,00 State contribution, , ^ , , / 4,00'4-,i}'3 Total ,. ,,.. ,,,..,,.,,,,,,,, 7^844,43 Annual deficiency to be made up by the municlpalitj'or other source .....c„c.^ 3j137.57 Cost as percent of total annual salary of plan members .,,.<,,. 14. 7/"^

PAGE 197

187 Table 6 Extended TABLE 6 (Cont'd) TOTAL FULL-TIKE FIREMEN... 3^2 AVERAGE COMPENSATION PER FULL-TIME MEMBER ...$ 5,007.i<-2 TOTAL PULL-TIME RETIREES . l6 AVERAGE PENSION PER FULL-TIME RETIREE $ 1, 190.3^4TOTAL ASSETS $ 1,136,072.00 TOTAL AMOUNT InIECESSARY to FUND....„o^ 268,1^-3.00 AVERAGE PERCENTAGE COST OF PAYROLL PER CITY.... 1^.6;^

PAGE 198

APPENDIX B Actuarial Data for Chapter 185 Funds at January 1, I966 Sou rce: Brov.'ard Williams, "Report to the 196? Legislature." The Municipal Police Officers' Betireaent Trust Fund (State Treasurer's Office, Tallahassee), Fourth Biennial Report 1965-1966.

PAGE 199

TABLE 7 ACTUARIAL DATA FOR CHAPTER 185 FUNDS AT JANUARY 1, 1966 Code ^^6 City Apopka ; Effectlve D at e of Ordin ance 9/7/5'? Number of Policemen Active members 7 Non-members Total 7 Annual compensation for active members .$ 31,200.00 Number of retired policemen Pensions being paid to retired members « ^ . c ., < 1. 1 ,|; Normal cost retirement income ..$ 3, 916.00 Current cost of disability benefits. 8.00 Current cost of return of contributions at termination or death e ^58.00 Total normal cost ^,383 ^OO Actt^arial deficiency > Gross actuarial deficiency retirement income. ...,, » ]'J,991.00 Gross actuarial deficiency return of past members' contributions at termination or death,..,. . 118.00 Gross actuarial deficiency for retired members Total gross actuarial deficiency .> . , t. « c c -. c ^ c 12,109.00 Assets in pension fund as of January 1, 1966 *? l6,59'+.00 Net actuarial deficiency .$ Annual amount necessary to pay the norri'al cost and amortize the net actu-arial deficiency over ^0 years.... c e c .f? i^-, 571. 00 Contributions during calendar year 1965 Member contribution. ..,<. e c < c « c c «*..... c « , . .t? 1 s50^.98 State contribution. ,..«.«.«<>. fer.rff<...c.. 3 »105 •0'-*' Total . c e . . e e . . ^1" , 6l0 .02 Annual deficiency to be made up by the mxinlciNo pality or other source. .....»,.. c ..«.«..«. Deficiency Cost as percent of total annual salary of plan ni& rnuCx5«*****«**c>e«ft*#«*ci«*«««e«e«*eec««r<>cftbecccc:« J^« ^/

PAGE 200

190 Table 7 Extended TABLE 7 (Cont'd) 130 Auburndale 11/1^/^7 2 8 1 1^8 179 190 191 Bartow Blountstown, Boynton Bradenton Beach 6/26/^)5 12/2 /^^7 1-0/1^33-. 2/iZ52_ 1^ 18 3 3 10 8 18 28 28 $ 10,119.00 $ 7^,503.00 ^ 11,100.00 ^ 52,070.00 ^13/+, 072. 00 $ $ $ $ 1,238.00 .$ 6,057.00 $ 1,537.00 • t 6,875.00 $ 17,763.00 67.00 229.00 72.00 961.00 55.00 ii-iif.oo 67.00 537.00 1,129.00 1,360.00 6,700.00 1,59^^.00 7j^8if.oo 19,853.00 ^ 25,336.00 S ^^-3,57^.00 $ 12,9^3.00 C' 39,9^1.00 !^217,799.00 5.00 112.00 38,00 180.00 695.00 19,892.00 63,563.00 9,93^.00 i^2,57l.00 1^4-7,865.00 $ 25,3i^l.OO ^ i4-3,686.00 ^ 12,981.00 f. 14-0,121.00 1^218 ,^^9^. 00 $ 5,11^9.00 f, I: 3,0^47.00 $ $ 70,629.00 $ 1,589.00 $ 6,700.00 ^ 1,722.00 ^ 7,^8^.00 ,<^ 22,826.00 I i^96.oo $ 2,880.51 $ ^4-05. 00 $ 2,903.^8 $ 6y775>7Q 2,891.33 ^,281.72 999.31 ^,58^!-. 53 1^,199.17 3,387.53 7,162.23 1,162.31 7,^52.01 20,97^.95 No No No Deficiency Deficiency $ 317.69 Deficiency $ 1,851.05 .15.7^ 9.0^ 15.5;^ ikAfo 11 M

PAGE 201

Table ? Extended TABLE 7 (Cont'd) Code POO ^^^^ . Brooksvllle Effectiv e Da te of Ordinance 10/l9/'ik Number of Policemen — Active members •..,,,, .c.. 6 Non-members .......... Total !!!!!!!!!!!!!!!!! 6 Annual compensation for active members...,. ^ 25,627.00 Number of retired policemen ..<._...,..,, . , . , . Pensions being paid to retired members ^ Normal cost retirement income ^ 3 335 qq Current cost of disability benefits .*! * ! .W* !!.* ! " 516*00 Current cost of return of contributions at termina-'* tion or death ,.. om nn Total normal cost .....!!.*!!!.*.*!!!.'!!!! ^-,205 00 Actuarial deficiency Gross actuarial deficiency retirement* in cirae .WW* ,'.*$ 42,078.00 Gross actuarial deficiency return of past members' contribtuions at termination or death,.... 77 OO Gross actuarial deficiency for retired members.. „ ' Total gross actuarial deficiency... _... i|-2, 155,00 Assets in pension fund as of January 1, 1966 ....$ 2i^,305.00 Net actuarial deficiency... .,..,,., __ ^ 17,850.00 Annual amount necessary to pay the normal cost and^amorti^e the net actuarial deficiency over ^+0 years.. ,............,..,,, ,^ ........,...,$ 4,956.00 Contributions during calendar vear 196^ ?o?a? ^°"^^^^^-^^°" ««• 2:2(9.77 • '^'^^ : ^ c. cc, cr 3,^91.47 Annual deficiency to be made up by the municipality or other source........................ ^ 1,464.53 Cost as percent of total annual salary of plan ^^^'^^^^ 19 ^3^

PAGE 202

255 Clewlston 10/1/'? 6 5 5 TABLE 7 (cont'd) 257 Cocoa 9/?/6^ 9 1 10 25 25 192 Table 7 Extended 258 287 Cocoa Beach Dade City -7/30/^6 5 5 10 296 Deerf leld Beach 6/8/^9 22 22 $ 22,980.00 -^ 52,937.00 $1^1-1,260.00 $ 20,827.00 .^27,722.00 1^ ^ 2,826.00 I 6,380.00 ,^ 18,363.00 $ 2,687.00 ;^ 11,760.00 22.00 300.00 3,1^8.00 60.00 642.00 7,082.00 71.00 2,216.00 20,650.00 8.00 280.00 2,975.00 69.00 1,318.00 13,147.00 ^ 9,871.00 $ 50,140.00 $ 49,845.00 $ 8,721.00 $ 69,694.00 102.00 164.00 350.00 81.00 437.00 9,973.00 50,304.00 50,195.00 8,802.00 70,131.00 $ 19,299.00 $ 47,832.00 ^ 1; 24,005.00 $ 51,571.00 $ ^ 2,475.00 i^ 50,195.00 $ . $ 18,560.00 $ 3,148.00 I 7,186.00 $ 22,763.00 $ 2,975.00 $ 13,928.00 $ 1,110.00 I; 2,922.00 ,^ 1^ 1,405.24 e 4,742.02 1,322.21 8,473.89 1,072.54 3,812.21 4,018.4'^ 2,432.21 11,495.89 1,072.54 5,217.45 8,760.47 No No I 715.79 Deficiency § 21,690.46 Deficiency ^ 5,167.53 13.7/^ 13.0;^ 16.1^' 14.3^ 10.9;^

PAGE 203

able 7 Extended TABLE 7 (Cont'd) 298 DeLand ode Ity f ff;!Qtlve Date. P.f g.CdJJiaflg^ ^ '}-/\/'i^ umber of Policemen Active members. ...4... *( Non-members • • ^ Total ...,.<.<<<.<« ^7 nnual compensation for active members % 75>8i4-0.00 umber of retired policemen, enslons being paid to retired members % ormal cost retlrem.ent income c . t rf^ Q,U'3D ,00 urrent cost of disability benefits ,.crrc.cc 105,00 urrent cost of return of contributions at termination or death c. . , c < . c. , < ??.nn otal normal cost « »,...,..*<... 10 ,^4-02 .00 ctuarial deficiency Gross actuarial deficiency retirement income. $ 61,903.00 Gross actuarial deficiency return of pasi; members' contributions at termination or death 36O.OO Gross actuarial deficiency for retired members..,.. Total gross actuarial def iciency, ....,,<. c .. c ... t . . 62j?.63.00 .ssets in pension fund as of January 1, I966, -f? 85,9^2.00 * fet actuarial deficiency « .nnvial amount necessary to pay the normal cost and amortise the net acti;.arlal def icl'.-'r'.ey overi|-0 years, ,,,,.,e..<>ect».<«««««tt«»««««*«c» ''«<<••»••.? 10 ,'4'o2 ,00 ;ontributions during calendar year 1965 Member contribution. ....»,.., ^^ ^ . ^ -•..->-. ^ •.« .$ 3 > 753. 83 State contribut ion, .. e ... e c «... e « o ..« e »«.«..««•«. c . 6, 220, 96 Tota.l ,e..»»...tt»«<'<^«<..».««'>'^'' >'«'-'' ''«*''''' »••.«• •>/' I ^ « ( • mnual deficiency to be made up by the municipality or other source, , , c <> c t <: t c r ,. , < < c ^ i i c t c c . « . . . «§ i]-87.21 ::ost as percent of total annual salary of plan members »,,,.,..«». «.»o»»»»..»«. ..•...«.»..... ..«»•<: ^j • '/^

PAGE 204

19^ Table 7 Extended TABLE 7 (Cont»d) 301 Delray Beach 316 Dunedin 3^9 Eustls ^32 Hallandale 22 22 $109,800.00 12,867.00 51.00 1,3^6.00 14,264.00 15 15 % 76,103.00 1 $ 371.70 $ 10,199.00 60.00 713.00 10,171.00 m's/'sk 1/i^.siL 8 8 27 27 459 Hollywood 12A5/5X. 124 44 164 $ 36,660.00 §148,070.00 $649,092.00 $ ^ $ 4,453.00 f: 19,397.00 ;;; 78,830.00 31.00 661.00 5*145.00 402.00 1,^^4^.00 21,253.00 1,625.00 8,281.00 88,736.00 to9,183.00 % 96,821.00 % 18,169.00 f,150,949.00 |54o,470.00 428.00 282.00 143.00 289.00 2,473.00 10,171.00 » ' -^ 159,611.00 107,274.00 18,312.00 150.949.00 651,943.00 ,^ 68,446.00 $ 47,525.00 § 31,175.00 % 75,674.00 .t?532 ,035.00 % 71,165.00 % 59,749.00 $ § 75,564.00 §119,908.00 17,260.00 § 13,487.00 % 5,145.00 (i; 24,432.00 § 93,784. 00 ^ «*???*on ^ ?'P^-?^ -^ 1,895.00 § 6,927.54 % 30,886.10 I?' o?n*?? 3,825.48 2,796.0^ 4,827.18 29,934.05 14,911.51 7,047.63 4,691.04 11,754.72 60,820.1^ % 2,348.49 % 453.96 § 12,679.28 .§ 12,963.85 § 32,963. 85 15.7/< 17.7^ 14,1^ 16.5'^ /o 14.4;^

PAGE 205

Table 7 Extended TABLE 7 (Cont'd) Code l^Sl]City Homestead Effective Date, of O rdinance 12/g/57 Nuitber of Pollcenen Active members , I5 Non-members ., , 3 Total 18 Annual compensation for active members $) 83,591.00 Number of retired policemen Pensions being paid to retired members .....,,.,„,,,, ,|^ Normal cost retirement lncom.e ,, ^ 10,17^.00 Current cost of disability benefits ' 97,00 Current cost of return of contributions at termination or death 925.00 Total normal cost.,... ^ l]»107.oo c # G 6 Q c cr Actuarial deficiency , Gross actuarial deficiency retirement income ...ft 98,lif'7.00 Gross actuarial deficiency return of past members' contributions at termination or death 27^.00 Gross actuarial deficiency for retired members..... Total gross actuarial deficiency ..,.. 98,i|-21.00 Assets in pension fund as of January 1, 1966 .^ 68,618.00 Net actuarial deficiency .*c «,.«.# 2° 80"^, 00 Annual amount necessary to pay the normal cost and amortize the net actuarial deficiency over ^0 years ,, ..,,.,..,,,,,. § 12,^^52,00 Contributions during calendar year 1965 Member contribution,...,.,,, .,, <^ Zj, 369,38 State contribution , !.!!!!!!!!, 6*0^0 .'66 Total ...,,... ....,......,...,...,,,,.,,, , , . , . . 11 ^310 '.OilAnnual deficiency to be made up by the munic ipality or other source. ...* = .... c ... c, c c c c c. . 4 1,1^11.96 Cost as percent of total annual salary of plan" members .,......,__, ..». ^ ...". .............. . 1^.9^

PAGE 206

515 Kissimmee .. 8/13 ^5210 10 TABLE 7 (Cont'd) 5^2 Lake Park 8 12 553 Largo 8/10 A^ 15 15 196 Table 7 Extended 560 Leesburg 3/22/6^ 7 12 19 572 Live Oak S/8/6^ 5 3 8 $ 51,636.00 $ 39,220.00 $ 72,213.00 $ 35,328.00 $ 23,100.00 1^ 356.88 $ $ 6,919.00 $ 6,166.00 $ 8,998.00 |; i+,332.00 $ 3,097.00 100.00 6^.00 59.00 325.00 5.00 571.00 7,590.00 222.00 6,^52.00 997.00 10,03^,00 427.00 5,079.00 231.00 3,333.00 $ 51,869.00 .|^ 18,913.00 e 66,684.00 § 56,386.00 $ 20,238.00 1^2.00 10.00 437.00 114.00 15.00 = 1,071.00 52,011.00 18,923.00 67,121.00 57,571.00 20,253.00 •f? 38,930.00 f^ 8,078.00 ,^ 49,837.00 ,f; 63,349.00 § 577.00 $ 13,081.00 $ 10,045.00 $ 17,284.00 I -. $ 19,676.00 $ 2,545.90 $ 2,374.74 fp 3,119.29 tp 2,124.91 ?r 577.42 3,181.59 2,110.84 12,200.42 6,069.08 ' 2,226.3^; 5,727.49 4,485.58 15,319.71 8,193.99 2,803.77 No No $ 2,413.51 $ 2,432,42 Deficiency Deficiency $ 1,357.23 15.8^ /" 17.6/^ 14.9,^ /" 14.4,^ 18.0,^

PAGE 207

Table 7 Extended TABLE 7 (Cont'd) Code 595 City Madison Effective Date o f Ord .lnanc.e. . ^._ ^ . . _ . , , ^O/'?/.'?.^.. Number of Pollceinen Active members ,,,,,.,,,,, «.e c. 6 Non-members * .o.. 299.60 Cost as percent of total airnual salary of plan

PAGE 208

TABLE 7 (Cont'd) 198 Table 7 Extended 607 Marlanna _2ZL6Z5i 9 9 6^1-0 Milton es5 Mount Dora 6/18/63 2/1'^/'^^ 7 2 9 8 8 % 35,928.00 $ 33,2^0.00 % 37,070.00 666 Naples -:i./25/5^$ 4,168.00 $ 2,159.00 33.00 19.00 525.00 267.00 I 4,726.00 $ 25445.00 $ 5,246.00 56.00 335.00 5,637.00 17 3 s^ 95,736.00 1 $ 1,200.00 1^ 11,670.00 83.00 1,365.00 $ 13,088.00 671 Neptune Beach 11./2.7/59 4 ;$ 21,600.00 ^ 2,869.00 3.00 182.00 % 3,05^.00 127.00 28,772.00 59,075.00 $ 30,176,00 § 22,695.00 C; 41,465.00 ,^ 61,614.00 % 46,780.00 29.00 119.00 403.00 38.00 15,168.00 22,724.00 41,584.00 76,568.00 46,818.00 $ 44,921.00 % 4,402.00 $ 34,273.00.^ 67,222.00 :5 13,610.00 $ 14,154.00 ^ 18,322.00 i;"; 7,311.00 $ 9,364,00 $ 33,208.00 ^ 5,322.00 g 3,216.00 •^ 5,945.00 .$ 13,482.00 $ 4,452.00 $ 1,787.67 $ 863.62 ^ 1,972,^.6 ^ 3,814.84 f. 1,053,17 3,361.53 3,234.19 1,904.05 6,087.60 1,018.73 5,149.20 4,097.81 3,876.91 9,902.44 2,081.90 No $ 172.80 Deficiency % 2,068.09 <^ 3,579.06 .^ 2,370.00 cf 14.8/^ 9.7^i 15.0; 14.15^ 20 . 6%

PAGE 209

Table 7 Extended TABLE 7 (Cont'd) Code 728 City Orrnond Beach Effective Date of Ordinance ll/l6/^^ Number of Policemen Active members • 1^ Non-members Total 1^ Annual compensation for active members C? 7^>919.00 Number of retired policemen Pensions being -paid to retired members , $ Normal cost retirement income ,,.,... S 9,108,00 Current cost of disability benefits 113.00 Current cost of return of contributions at termination or death 93^.00 Total normal cost 10,155.00 • »*«eec««**«*«***«*« Actuarial deficiency ............. Gross actuarial deficiency retirement income. . ,.o. .$ 75 $'^77*00 Gross actuarial deficiency return of past members' contributions at termination or death...... 288.00 Gross actuarial deficiency for retired members Total gross actuarial deficiency.,.. 75,i}-05.00 Assets in pension fund as of January 1, 1966... "^ 50»171«00 Net actuarial deficiency ..,..$ 25,23^.00 Annual amount necessary to pay the normal cost and amortize the net actuarial deficiency over Contributions during calendar year 19^5 Member contribution. ,, ,..........,....,......$ 3»356.12 Total o . c . 9 ,033 .i^O Anniaal deficiency to be made up by the municipality or other source. ,..,..........§ 2,183.60 Cost as percent of total annual salary of plan

PAGE 210

200 Table 7 Extended TABLE 7 (Cont'd) 752 Palmetto 811 Punta Gorda 10/27AJ llh^/5Z.. ^ 9 9 1 1 831 Riviera Beach 35 1 36 87^ Sebrlng 7/15/^8 900 Starke 6 7 13 7 2 9 ^ 4^,529.00 $ 5,579.00 *5197,791.00 $ 27,^20.00 $ 2^,20i^-.00 § .f 5,i^3^.00 $ 1,0/^2.00 $ 2^,685.00 .f; 3,123.00 $ 2,979.00 26.00 527.00 112.00 2^-6.00 595.00 ^0.00 2,^30.00 389.00 436.00 6,056.00 1,082.00 27,642.00 3,624.00 3,461.00 48,421.00 $ $182,183.00 $ 42,024.00 $ 11,207.00 709.00 66.00 106.00 — — „ „ $182,892.00 $ 42,090.00 $ 11,313.00 $ 42,905.00 $ 15,272.00 $129,781.00 $ 20,900.00 ^ 23,356.00 $ 45,040.00 $ ^ 53,111.00 $ 21,190.00 $ 353.00 39,171.00 $ 87,945.00 ^ ^ 7,952.00 $ 1,082.00 ,
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Table 7 ?:xt ended TABLE 7 (Cont'd) Code 920 City Tarpon Springs Effective Date of Ordinanc e 10/22 A? Number of Policemen Active members * 10 i\ion-mcmbers 1 Total 11 Annual compensation for active members ^ ^2,333.00 Number of retired policemen, Pensions being paid to retired members, o $ Normal cost retirem.ent income ....o .§ ^,952.00 Current cost of disability benefits I36.OO Current cost of return of contributions at terminati on or death , 630 .00 Total normal cost ..,. 5,718.00 Actuarial deficiency ..,....,. Gross actuarial deficiency reti:>-'ement income, $ ^8,932,00 Gross actuarial deficiency return of past members* contributions at teiTuirial-^cn or clf.^ath 193 '00 Gross actuarial deficiency for retired members Total gross actuarial deficiency,,,,,,.. ,,.. i<'9jl25.00 Assets in pension fund as of January 1, 1966,,,,,,.,.$ 30,076.00 Net actuarial deficiency , 4 1?,C)>^9^^^ Annual amount necessary to pay the noi-^nial cost and amortize the net actuarial deficiency over 'vU years ,c:eoi.>9««g>>»>3»j:>j)9>i>>}>>>}^'>>t....«,«,'j^ Dj_?/ivj,uu Contributions during calendar year I965 Membership contributions, , ,,,,.,. »o ..,.,.,.. , f> 2,2^^.96 State contribxition ,»»« ^ ..... .,,,0 ,,,,-,,,,,,,,.,,.,, , 2 ,879 •^O Annual deficiency to be made up by the municipality or other source ,»,,.., 00 >..., ^ v ...,, • c , , t 1 >395 • 6^ Cost as percent of total annual salary of plan

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202 Table 7 Extended TABLE 7 (Cont'd) 925 Temple Terrace 6/1^/59

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203 TABLE 8 PROGRESS REPORT TO THE 196? LEGISLATURE ON THE MUNICIPAL POLICE OFFICERS' RETIREMENT TRUST FUND No. of Cities Contributing : 185 ; Local-law 1959 9 31 1966 ^7 50 Cities Contributing Amount 185 $ 13,310 § 137,130 Assets : 185 236,36ij2,320 ,2( Had Actuarial Valuation : 185 : Local -lav; Police Officers Covered : 185 : Local-law None 1^ 1^2 50 332 2,628 785 ^-,167 Actuarially Funded : 185 : Local-law 8 6 ^7 ^9 Assets in a Few Cities Bartow Coral Gables DeLand Fort Lauderdale Holl^'-wood Homestead Jacksonville Miami Panama City St. Augustine Tampa West Palm Beach 1957 1959 8,281 256s72iJ11,529 6^^,717 ^8,801 None 1»35^,337 21,687,562 28,69141,^9^,592 303,587 1966 63,563 2,782,320 85,9^-2 2,629,158 532,035 68,118 2,85^,521 ^5,391,560 237,967 2Mi,933 2,18^,937 886, 47^^ Increase k22, 5 fo 61,3/0 930.3.^ 881.6^ 257.1/^ 136.0/^ 58.6,^ ^87.5/t 716.7,^ Increase 667. 6fo 983. 7 fo 61^5 Mo 307,8% 990, 2 fo 110. 8 fo 109.3/^ 252 . 7% 753.6% ^6,1% 192.0/ NOTE: It should be pointed out that the above reelected increase in assets is not alone the determining factor as to financial soundness in pension plans. The liabilities have to be considered along with assets to equally reflect financial stability. Time and space here does not permit such a detailed analysis.

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BIE'.LiaC-R^PHY Anclrews, Victor L., I:ilzeiS^^I>J^feJ^lla rliej:. s , Englewood Cliffs, Nev; Jersey, Prentice-Hall, Inc., 196^. Bernstein J ^^^rton C , / Thji^FiiUpj^j^^of^I-rl^ New York, The Free Press of Glencoe, 196^^. Carlson, George B,, Textbook.. for Welfare,. Pension Trustees, and. Admin i s,t r a.t o y a . '^:ini Gro%'e., U:t$;consin, iv'ational Foundation of Kealtt, Weafare and Pension Plans, Inc., 196^-5 Voliuae VI, lOtVi Annual Conference. Harbrecht, Paul P», Zmi&%ori^F^n6^^.u^_Econpmlc_Fovier_. New York, The T'/jentieth Century Fund, 1959. Huebner, S. S. and Kenneth Black, Jr, , Life Insurance . New York, Appletoa-Century-Crofts, 196^, 6th Edition, p. 51^. ' ' McGlll, Dan 14,, Si^J'2M!S^-m^Sl^^J^vl:m^.^QRslons, Konewood, Illinoiy, Hlchard D. Irwin, Inc., 1955. McGill, Dan M., 2&r^sXo^c,31.......2i:S^3m.^3nl^^S2LeM^» Homewood, Illinois, RicViard D. Irwin, Inc*, 1955. Pamphlets « Broch urgs ^^ Eep^or:t_s Howard, William M. , Eccnomic. Leaf 1 e t s . '•Retirement Plans for Police Officers and Firemen in Florida," Gainesville, University of Florida, I960, Volume XIX, Number 8. Howard, William M. , E_cp nomi c Leaflet s „ •^Retirement Plans for Small I'luniclpaiitles, " Gainesville, University of Florida, June, 1958, Volume XVII, Number 6. "Pension Plans Under Collective Bargaining, a Reference Guide for Trade Unions." American Federation of Labor, n.d, , p. 70. Private, and, P:al3l,lp.,,P,e,nsipn„,PJ,ans in, the United Stat.es . New York, Institute of Life Insurance, 1963. ZOk

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205 Ruclge, !'"'red, Pensions and Pi-oflt 3ha>>.i.ug. "Hov; to Achieve FiCixlnium Return on FeuBlon Co/'ts," lMao')'n.j^i:.c;:' , D.C.> The Bureau of National A:rfa.lr,''!-.^, It'o'i-, 3rci Edition . Securities cixiii Exchan^KO CoirDiij^siov), pu rY,e .y of Corpo;ry,te £e«Siou..nH:i:iI-^ni52ca^.5i:L. October, f956, p. 1. Social Securit.v.. U.S. Dep.'??:-t.P!e)'.t of Ho$tlth, rc'uc&tion, ana V/elfare, 1^66, Williams, Broward , !rVi3„i(iin^j5ix^J^.£1j?jQ];]^!r!^j2,^£^ Fu nd, . "Report to tiu^ I965 XeRlrJatrJi'ej" B'irat Biennial Report 1963-1964, p.'^l ann "Report to the 1967 Legislature J " Second Biennial Report i965~19hr-,_, State Ti'eafc-u]"eX''e Office, vallaViaBsee, Florida, V/illiaras, Broward, TVie F:u'1j ciic-rl Police Officers;* RetireIDfillt:_i!lWifd}..Jilinar "Eeport to the I965 Legislatui-e," Third Biennial Report 1963-.196-'4-, p, 1 and "Report to the 1915? Legislature," Fourth Biennial Report 19651966, State Treasurer's Office, TallaViassee, Florida. ZeriMicsis Edman, John, J., "Contractual Bights in Pviblic Pensions," EMbiic^Emplpyee, Retirement Adrainistra.tion, Chicago, Municipal Finance Officers Associatioii. 1965. Pension Plans., and Trusts, Prentice-Hall, Inc., Snglewood Cliffs, New Jerpey, March 5, 19^5, Volume XXI, Number 4, pp. 1572-1573. Pension and Profit Sharing Repoi-t. Prentice-Kail, Inc., Englewood Cliff s,""NeirJer Hey, March 8, 19^.35 p. 1551, Pension and Profit jS}\a r.l.ng_ Se J'jlyI ce. . Prentice-Hall, Inc.; Englewood Cliffs, New Jersey, 1957, paragraph 6206, Republic Steel Company advertisement, Sati-irday. R.e_vlevi. December 17, i960. Saks, John I., "The Older Worker-II; Status in the Labor Market," Monthly Labor Revievi. Janvary, 1957. ;gal C itations Ball V, The Board of Trustees, 71 N.J.L. 610, 58 ATL. Ill (1904) .

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BIOGRAPHICAL SKETCH Donald R, Monath vjas born September 1^, 1930, in Nev^ York City. In January, 19^8, he was graduated from William Hov;arfi Taft High School. In June, 1951, he received the degree of Bachelor of Arts from New York University. Following his graduation, he entered the life insurance field. In June, 1963, he received the degree of Master of Business Administration from the Graduate School of Business Administration of Nev7 York University. In I963, he enrolled in the Graduate Scbool of the University of Florida. He worked as a graduate assistant in the Department of Finance and Insurance. From 196'4-, until the present time he has pursued his work toward the degree of Doctor of Philosophy while teaching on the faculty of the University of South Florida. Donald R. Monath is married to the former Francine Rita Godfrey and is the father of two children— Scott and Nancy. He is a member of the American Finance Association.

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This dissertation was prepared under the direction of the chairman of the candidate's supervisory committee and has been approved by all members of that committee. It was submitted to the Dean of the College of Business Administration and to the Graduate Council, and was approved as partial fulfillment of the requirements for the degree of Doctor of Philosophy. August 1968 Dean, College of Business /Administration Dean, Graduate School Supervisory Committee: f. H. fMO.^

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