tcg ppt financial planning
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EmploymenEmployment t
AgreementAgreements and s and
Financial Financial Planning Planning for City for City
ManagersManagers
Presented by
Today’s Topics
TCMA Financial Planning Services Project Service Providers for Project Financial Planning Concepts City Manager Compensation Statistics and
Construction of Packages Employment Agreements Summary and Conclusions
TCMA Project
One year project to offer:Financial PlanningCompensation Package AssistanceEmployment Agreement AssistanceImproved Sample Employment Agreement
TCMA Project
Service ProvidersTCG Consulting, LP a subsidiary of TCG Advisors, LP
• Fee-based consultants• Fee-based investment advisor through
Regulated by the Securities & Exchange Commission
• Work with many public school Superintendents and School Boards across the nation on compensation packages and contracts
Adams, Lynch & Loftin, P.C.• Neal Adams – General Counsel to the Texas Association of School
Administrators• John Lynch – Former Assistant City Manager; works extensively with
public law in Texas
Financial Planning Concepts
Total Financial PicturePublic Officials Have a Very Different
Retirement Picture
Social Security2%
Investments29%
State / Municipal Retirement
System69%
Financial Planning:Looking at Your Total Financial Profile
State Retirement System
Insurance
Employment Agreement
Severance Agreement
Estate Planning
Social Security
Working After Retirement
Investments*
*Remember: For Public Officials, this is usually much less important than in the private sector
Steps to Investment Success1. Know what rate of return
you must achieve to meet your goals
Goals for your heirs Goals for your retirement Other goals
2. Choose portfolio allocation designed to achieve investment return needed
Only take the risk you need to meet the goal
3. Choose investments within your portfolio to meet goals4. Monitor your investments – are they performing?
So – You develop an investment plan as a part of your Financial Plan . . .
What you don’t know about
investment products can hurt you
Who is looking out for You?
Securities Exchange Commission
Federal Agency in charge of oversight of the investment industry National Association of Securities Dealers
“Self Regulatory Agency” (SRO) – How effective is self regulation?
Current Market Issues
Mutual Fund Industry Fee Disclosure Market Timing (Hedge Funds in VA’s)
After Market Trading Insider Trading Lawsuits Spitzer/Marsh McLennan Issue
Types of Investments Typically Purchased by Public Employees
Fixed Annuities Variable Annuities Mutual Funds Wrap Products Trust Platform
Public Employees are Often Easy Targets
Do you know exactly what you are paying in fees on your 457(b) accounts, IRAs accounts and other investments each year?All fees not typically shown on statementsFees can be hidden
• Example: Buried in unit values
Do you know how to examine a product and determine the fees?
Sale of Investment Products to Public Employees is typically a “glamour contest” – lots of glossy material and little meaningful disclosure
Fee Comparison ExamplesAnnual Fees in One RFP Process Conducted by TCG
(Approximately $200 per month @ 6.00% Earnings After Fees)
Avg Ann Fees - 5 Yrs
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
The Bottom Line: What you have at Retirement(Approximately $200 per month @ 6.00% Earnings After Fees)
$0.00 $10,000.00 $20,000.00 $30,000.00 $40,000.00 $50,000.00 $60,000.00 $70,000.00 $80,000.00
Co 25
Co 24
Co 23
Co 22
Co 21
Co 20
Co 19
Co 18
Co 17
Co 16
Co 15
Co 14
Co 13
Co 12
Co 11
Co 10
Co 9
Co 8
Co 7
Co 6
Co 5
Co 4
Co 3
Co 2
Co 1
Value of Account at End of 20 Years - Fee Illustration Only
How can you assure that you pay the lowest fees?
Become educated Convert all fees to percentage
Ignore the “fluff”
Consider use of unbiased fee-based Investment AdvisorAsk for examples of workAsk for references
Compensation Statistics and
Construction of Packages
Compensation Statistics
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
$200,000
1 - 2,000 2,001 - 5,000 5,001 - 10,000 10,001 -15,000
15,001 -20,000
20,001 -25,000
25,001 -30,000
30,001 -50,000
50,001 -75,000
75,001 -100,000
100,001 -200,000
200,001 -350,000
500,000 +
Size of City (Population)
City Manager Average Salaries
Compensation Statistics
$0$25,000$50,000$75,000
$100,000$125,000$150,000$175,000$200,000$225,000$250,000
1 - 499 500 -999
1,000 -1,599
1,600 -2,999
3,000 -4,999
5,000 -9,999
10,000 -24,999
25,000 -49,999
50,000+
Size of District (Enrollment)
Superintendent Average Salaries by Size of District
Compensation Statistics
$0$25,000$50,000$75,000
$100,000
$125,000$150,000$175,000$200,000
$225,000$250,000
1 2 3 4 5 6 7 8 9 10 11 12 13Size of Agency
Superintendent & City Manager Average Salaries
Superintendent Salaries City Manager Salaries
The Compensation PackageMarket Value of Contract
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
Current Salary Market Value ofPosition
CreativeCompensation
Compensation
Compensation Ideas
Supplemental Retirement Plan/Deferred Compensation
Payment of State Retirement Plan Contributions
Fully Paid Family Medical Benefits
Automobile Automobile Allowance Advanced Degree Stipend Labor Relations Stipend Physical Exam
Extra Personal / Vacation / Consulting Days Paid at Daily Rate
Salary Increases Tied to Other Staff
Expense Allowance Life Insurance Supplement
Do not use as Retirement Plan Disability Insurance Supplement
Buy After-Tax Dues and Associations Severance Agreement Structured Agreement Post Retirement Healthcare
Summary of Employer Paid Plans 401(a):
Defined Contribution• Employer: $42,000• Not Affected by TMRS – a Defined Benefit Plan under
Federal Tax Rules Defined Benefit
• Actuarial Cost of Benefit• Must Coordinate Benefit with TMRS
457(b):Employer and/or Employee: $14,000 to $28,000Use Carefully for Employer $ if Funds “Vest”Over
Time 457(f):
BAD unless carefully structured
Plan Documents Many Tax and Other Issues
Document not required – but:• What happens if disagreement with Council
arises?• Low Tolerance by Councils for Lengthy
Employment AgreementsDocument Defines
• Type of Plan (401(a), 457, etc.)• Vesting• Investment of Funds• Timing of Contributions• Many Other Important Provisions
Be Careful with Deferred Compensation
American Jobs Creation Act of 2004 ("AJCA") Added Internal Revenue Code Sec. 409A
Aimed at abusive deferred compensation of corporations Includes 457(f) arrangements Examples of effect on deferred compensation under 457(f):
Distributions must be made only upon separation from service, death, disability, change in ownership or effective control of the employer, unforeseeable emergency, or at a specified date
The initial deferral election must be made prior to the beginning of the year in which the compensation is earned
Must report on W-2 even if not taxed Violation = Immediate taxation + 20% penalty
Employment Agreements
Employment AgreementsA Win-Win for the City and the Manager
Why Agreements are Increasingly Used in the Public and Private SectorJob Security for individual when the job may
bring controversial decisions• Particularly when the City Council or other governing
body is subject to change for emotional/political reasons
• Helps ensure good decisions in the midst of controversy
Why Agreements are Increasingly Used in the Public and Private SectorAttracting the best candidates
• Moving family, looking at best job – stability is a major factor
• When competition reaches across states, industries, etc.
• The best professionals will look for the best deal – and this often involves an employment agreement
Employment AgreementsA Win-Win for the City and the Manager
Why Agreements are Increasingly Used in the Public and Private SectorOrganizational Stability
• When organizations are in great change, stability at the top is a key factor
• Holding on to top talentThe best talent is always being recruited in any field;
employment agreements can provide incentives to stay with the City
Structures Compensation• No surprises, minimizes disagreements after the
individual is hired• Subjects the individual to less financial pressure due to
changes in oversight body (e.g., City Council)
Employment AgreementsA Win-Win for the City and the Manager
Additional Benefits to the City Getting Ahead of the Trend
In school districts and some other public agencies a Contract is now the Norm
Cities share many characteristics in budgets, staffs, managerial responsibilities, and educational needs
Agreements should be a mutually beneficial document that benefits both parties
Councils and Managers should not shy away from the subject;Managing a city is a business...in many cases the largest
enterprise in the city It makes sense to cover such an important relationship with a
mutually beneficial legal documentIn today’s world, would you buy a house on a hand-
shake?
Summary & Conclusions
How Would You Answer These Questions? Do you have a financial plan?
What are the gaps in your financial plan? In what ways are you and your family "at risk" financially?
When was the last time you reviewed your financial plan? Have your career goals changed? Has your family situation changed? Has your financial plan stayed abreast of these changes?
Do you have an employment agreement? If not, is it time for you to consider one?
Can your current employment agreement be improved? If you were fired Monday, how vulnerable financially would your
family be?
Goals of Our Service
This service is NOT about positioning TCMA members to gouge their citiesIt IS about FAIRNESS
It is NOT about preferential treatment for City Managers It IS about recognizing the UNIQUENESS of the City
Manager position In the end, this is about “not being forced to trade
integrity and professionalism for stability and security"
4201 Bee Caves Road, Suite C-101Austin, TX 78746
Phone: (512) 306-9939 Fax: (512) 306-9959Email: [email protected]
[email protected]: www.pension-consulting.com
THANK YOU