VERO BEACH — The Vero Beach City Council found out Tuesday that the city’s pension fund is in pretty bad shape, as compared to other cities and towns in Florida.
After noting that the Vero pension fund is only 61 percent funded — and $34.8 million underfunded — actuary Leon “Rocky” Joyner said “61 percent is not where you want to be. You’d prefer to be at 75 or 80 percent.” Joyner said the average for Florida plans is about 75 percent funded, and a few years ago the average was roughly 85 percent funded.
It was requested that Joyner analyze the city’s position in relation to cities of similar population with equivalent staffing.
“I don’t think there are any similar size cities with the same number of employees,” said Councilman Brian Heady, reflecting the criticism that Vero is heavy on staff.
The retirement contribution for the current year is 4.4 percent of pay, which is down from 7 percent in the previous year.
Joyner went on to say that the city’s funding level was around 80 percent until the plan took a huge hit during the “crash of 2008” and that it will take many years to recover.
“Your situation is challenging, but it’s not dire,” Joyner said. “Nothing happens overnight. You’ve made the right decisions going forward.”
In addition to making projections about the pension plan’s performance and funding requirements, Joyner was asked to run a scenario which would clue the City Council into what might happen to the plan if the city’s 113 electric employees — or at least the 87 electric employees not in the Customer Service Department — were rolled off the plan and into jobs with Florida Power and Light after a sale of the utility.
Joyner said he could do a pro forma for that possibility, but that he would need the identities of the individual employees to make a prediction about what their behavior might be in that situation. Some employees might stay and some might just retire. It was not asked how much that analysis would cost the city.
Last year, the previous council voted to spread that loss out over 30 years instead of 20 years.
“State law allows you to take a 30-year amortization period,” Joyner said. “You had done everything in 20 years.”
Vero in 2010 also increased the employee contribution from 2.25 percent to 3.25 percent and decreased the percentage of the benefit for new employees coming onto the plan from 2.25 percent to 1.6 percent.
If an employee joined the city at age 33, stayed 28 years and retired at 61, under the current plan he or she would receive about 45 percent of their top salary in the form of a pension. Plus a typical Social Security check, this would replace 70 to 75 percent of their income in retirement.
The City of Vero Beach currently has 407 employees paying into the pension plan and 250 retired employees receiving pension checks.
Council members also got some serious news about the city health plan and were given a few recommendations to cut costs.
Kurt Gehring of the Gehring Group and his associate gave the council a menu of alternatives, one of which was adding a less-robust Blue Cross Blue Shield Blue Options plan to the offering as baseline coverage, where the city currently has a Blue Choices plan in that slot.
Last year, employees were offered three different levels of insurance and about 80 percent opted to pay a higher premium for a plan with lower deductibles and copays and better terms.
It was stated that the average age of the employees and retired employees on the City of Vero Beach health plan was 52 years old. After employees retire, they are allowed to buy into the health plan at the same rate as an active employee. There is a cost to the city to subsidize this insurance, especially for older workers who would pay high premiums on the open market.
The consultants will come back to the City Council later in the year to propose some concrete recommendations for the fiscal year beginning in October as part of the budget process.
