DATE: October 1, 2014
TO: Board of Mayor and Aldermen
FROM: Eric Stuckey, City Administrator
Russ Truell, Assistant City Administrator
SUBJECT:
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Consideration of Resolution 2014-74 To Adopt A Pension Funding Policy. (10/14/14 WS)
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Purpose
The purpose of this memorandum is to provide information to the Franklin Board of Mayor and Aldermen (BOMA) concerning the adoption of a Pension Fund Policy
Background
With the advent of Government Accounting Standards Board (GASB) statements 67 and 68, the historical precedent of pension funding has been altered. In the past, an actuarially determined contribution was considered a reliable amount for cities to pay for pension liabilities incurred in a given fiscal year. That amount was a "safe harbor" for cities in satisfying their obligations to the pension plan and for pension analysis by outside entities, such as the rating agencies and the IRS.
The new accounting standards separated the funding of pension plans from the accounting and financial reporting of the plans. Because the level of funding became uncertain, and because the Government Finance Officers Association and GASB made only recommendations and not requirements for annual funding, states like Tennessee have created legislation to define parameters and guidelines for what pension funding should be. In Tennessee, Chapter 990 of the recent legislative session articulates those requirements.
In response to the new law, staff has prepared a Pension Funding Policy statement that addresses the issues highlighted in Chapter 990. The proposed policy has been reviewed and recommended to BOMA by Employee Pension Committee.
Financial Impact
The City of Franklin has made regular contributions that match or exceed the amount calculated by an independent actuarial firm. For that reason, there will not be a significant financial impact resulting from the policy. Annual contributions will continue to vary, as befor...
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