HomeMy WebLinkAboutMemo a�.y
RECOMMENDATIONS TO IMPROVE
THE
TRUCKEE-DONNER PUBLIC UTILITY DISTRICT RETIREMENT PLAN
1 . REASONS FOR OUR RECOMMENDATIONS :
THE PRIMARY REASONS ARE TO SAVE ON PLAN COSTS AND TO
PROVIDE FLEXIBILITY FOR FUTURE DECISIONS . TODAY 'S
MARKETPLACE OFFERS A WIDE CHOICE OF SOUND, HIGH YIELD
INVESTMENTS FOR RETIREMENT PLANS, NOT TO MENTION LOW
COST LIFE INSURANCE ALTERNATIVES .
PERHAPS OF GREATER IMPORTANCE, IS THE ABILITY TO MOVE
WITH CURRENT TRENDS . TODAY, PRODUCTS, SERVICES AND
INVESTMENTS FOR PLANS ARE CHANGING RAPIDLY, AND FOR
THE BETTER . MANY INSURANCE COMPANIES, WHICH HAVE
TRADITIONALLY SERVED RETIREMENT PLANS, ARE SEEING
THEIR PRODUCTS BECOME OBSOLETE DUE TO THESE RAPID
CHANGES .
OUR ROLE AS YOUR PLA,, CONSULTANT AND SERVICING AGENT,
IS TO SHARE IDEAS WHICH WILL NOT ONLY SAVE YOU MONEY,
BUT WILL ALSO KEEP YOUR PLAN CURRENT BY TODAY ' S STANDARDS ,
FOLLOWING, IS A SUMMARY OF THE FINANCIAL STATISTICS OF
YOUR PLAN ANI) OUR SUGGESTIONS ON IMPROVEMENTS . . . . . . . . .
Z . INVESTMENT RETURN ON PLAN ASSETS :
INTEREST EARNINGS ON PLAN ASSETS PLAY A LARGE PART IN THE
ULTIMATE COST OF AN EMPLOYEE ' S RETIREMENT BENEFIT. IN THE
CASE OF A DEFINED BENEFIT PLAN, THE HIGHER THE RETURN OVER
THE YEARS, THE LOWER THE ULTIMATE COST IS TO THE EMPLOYER ,
A. CURRENT RATE OF EARNINGS FOR YOUR PLAN IS :
RETIREMENT FUND : CAL WESTERN CURRENTLY PAYS 11% PER ANNUM-
CURRENT MONTH GUARANTEE . GUARANTEED RATES
ARE 4% THRU 1986, 32% THEREAFTER .
INSURANCE RESERVES : 312% PER ANNUM
B. CURRENT YIELDS AVAILABLE TO YOUR PLAN ARE :
RETIREMENT FUND : THE CURRENT GUARANTEE FROM NATIONWIDE LIFE
IS 11 . 5% THRU 1986 ON TRANSFERED ASSETS ,
LOWER GUARANTEES ON MONTHLY DEPOSIT::- . THE
ACTUAL EARNINGS RATE IS PAID IF HIGHER ,
INSURANCE RESERVES : CURRENTLY OVER 10% IS BASFD ON THE
CURRENT 1? WEEK AVERAGE YIEL. `S OF
TREASURY BILLS .AND 3 YR TREA.S(JRY F NDS ,
WE WILL OBTAIN INVESTMENT-ONLY PROPOSALS FROM FfA, )R LIFE
INSURANCE COMPANIES REGULARLY INVESTING PENSION ASSETS ,
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3 . USE OF CURRENT PLAN ASSETS : AS OF .JA.NUARY 1 , 1983
INVESTMENT FUND INS CASH VALUES
CURRENT ASSET VALUES : $224, 420 $ 23, 914
CURRENT RETURN AT : 1i7 — 31%o ? i, 686 837
VERSUS
CURRENT RETURN AT : 11% NET $ <<i, 636 $ 2,636
DIFFERENCE : $ 0 $ 1, 79-4
EXPECTED ADDITIONAL RETURN ON INVESTMENT EARNINGS THE FIRST
YEAR COULD TOTAL $ 1, 793
THIS ,ADDITIONAL RETURN WILL REDUCE PENSION PLAN CONTRIBUTIONS
OVER FUTURE YEARS , THE EXACT REDUCTION IN EACH YEAR WOULD BE
DETERMINED B` AN ACTUARY .
NOTE : STATE LAW MANDATES AN AUDIT OF THE RETIREMENT PLAN, IF
ALL ASSETS ARE NOT HELD BY AN INSURANCE COMPANY , WE
HAVE OTHER, SAFE INVESTMENTS AVAILABLE, YIELDING 140+
THAT COULD BE USED IF DESIRED, ALTHOUGH THEIR USE WOULD
MANDATE AN AUDIT .
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4 . THE COST OF LIFE INSURANCE PROTECTION :
COMPETITION ON THE PART OF LIFE INSURANCE C01".PANIES OVER
THE LAST FEW YEARS HAS RESULTED IN MAJOR IMPROVEMENTS IN
THE COST AND STRUCTURE OF LIFE INSURANCE PRODUCTS FOR PLANS ,
THE SAVINGS IN COST FOR SUPERIOR, UP-TO-DATE COVERAGES
FROM A COMPETITIVE COMPANY CAN BE SUBSTANTIAL !
Y
A. THE CURRENT COST EACH YEAR FOR LIFE INSURANCE BENEFITS
BENEFITS UNDER YOUR PLAN is $14, 877
B. WE CAN LOWER THAT COST TO $ 9, 877 ,
THIS AMOUNTS TO SAVINGS OF $ 5, 000 IN THE FIRST YEAR
ALONE, OR A REDUCTION OF 337 .
C . A NEW GUARANTEED ISSUE LIMIT EQUAL TO THE FOLLOWING :
1 ) $100, 000 FOR EACH PLAN PARTICIPANT .
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5 . ADMINISTRATIVE AND REPORTING SERVICES PROVIDED TO PLAN :
A. CURRENT PARTIAL SERVICES PROVIDED BY CAL WESTERN $2,215
B. REPLACEMENT SERVICES BY 'W. R. C. I . :
COMPLETE ANNUAL SERVICES $1, 390
ONE TIME CHARGE FOR NEW
DOCUMENTS, IRS FILING, ETC . $ 845
6 . SUMMARY OF SAVINGS OVER PRESENT PLAN STRUCTURE :
ESTIMATED ADDITIONAL INVESTMENT RETURN . . . . . . . $ 1, 793
ESTIMATED SAVINGS ON INSURANCE PREMIUMS . . . . . . . 5,000
DIFFERENCE IN THE COST OF ANNUAL SERVICES .
LESS ONE-TIME, DOCUMENT & CHANGEOVER CHARGE . (84 -)
ACTUARIAL SAVINGS . . . . . . . . . . . . . . . . . . 10,000 (EST)
ESTIMATED FIRST YEAR IMPROVEMENT : $16, 773
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