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HomeMy WebLinkAbout1992-12-21 Minutes• MINUTES OF A MEETING OF THE FIRE PENSION BOARD A meeting of the Fayetteville Fire Pension and Relief Fund Board of Trustees was held on Monday, December 21, 1992, at 11:00 a.m. in Room 362 of City Hall. PRESENT: Mayor Fred Hanna; Firemen Marion Doss, Danny Farrar, and Pete Reagan; Retirees Richard Baird and Darrell Judy; City Attorney Jerry Rose; City Clerk Sherry Thomas; Director of Administrative Services Ben Mayes; Fire Chief Mickey Jackson; and Merrill Lynch Representative Richard Yada. CALL TO ORDER The meeting was called to order by Mayor Hanna. MINUTES The minutes from the October Fire Pension & Relief Fund Board meeting was reviewed. Reagan, seconded by Farrar moved to approve the minutes of the October Fire Pension & Relief Fund Board meeting. The motion was approved by a unanimous vote. PENSION LIST • City Clerk Sherry Thomas reported no changes to the Pension List for December from the previous months' Pension List. • Reagan, seconded by Doss made a motion to approve the Pension List for December. The motion was approved by a unanimous vote. OLD BUSINESS ROY SKELTON City Attorney Jerry Rose updated Mayor Hanna on the Roy Skelton Disability Retirement case. He explained that Roy Skelton was eligible for 20 years retirement. At that time, Skelton decided to apply for disability retirement as well, claiming a service connected disability. He alleged that his tenure with the Fire Department had created some mental and nervous disorders; however, Skelton's application for disability retirement benefits was turned down by the Fire Pension and Relief Fund Board. Skelton's appeal to the Circuit Court for a new trial was successful and Skelton was awarded service connected disability benefits, a higher retirement pay than with normal twenty year retirement. Rose continued to explain under the law, the Fire Pension and Relief Fund Board is entitled to request Skelton receive a yearly examination, to assess whether he continues to have such a disability, up until Skelton reaches normal retirement age. Normal December 21, 1992 • retirement age is not defined in the statute under which Skelton retired. • • Roy Skelton claims normal retirement age ought to be anytime after he has done his twenty years of service, even at age 45. City Attorney Rose expressed his position that normal retirement age is defined by an old statute and City policy. The Fire Pension Board requested Skelton receive an examination by a doctor, which he refused since he believes he has reached normal retirement age. Attorney for Skelton, Lamar Pettus has asked for a declaratory judgment for the definition of normal retirement age. The City answered Skelton's complaint, after which he asked for some discovery, which has been filed. Attorney Rose stated the discovery was probably helpful to the City, and not supportive of Skelton's position. Requested in the discovery were a lot of old personnel policies back to 1960's for both the City, Civil Service Commission, and the Fire Department, and virtually all policies contain a retirement age provision much higher at 65 to 70, than Skelton's of 45. No trial date or schedules have been set on this case. City Attorney Rose predicted it would be taken up after the first of the year. In addition, he believes the case can be handled by briefs, since there are no real disputed facts or issues. In response to Reagan's question, City Attorney Rose stated the main point being argued by the City is the retirement age, which Skelton is maintaining is anytime past twenty years of service. Mayor Hanna asked the difference between line of duty disability retirement benefits and regular retirement benefits. Chief Jackson responded there is a 15% difference or in Skelton's case, $300 per month. He explained there were three types of retirement, regular retirement, disability retirement, and line of duty disability retirement. Normal retirement would have allowed him 50% pay from the 20 year period forward; for every year of service over 20 years, there is an additional $20 per month per year added. Normally, Skelton's retirement benefits would be 50% of his salary plus $60 per month. He is currently drawing under line of duty disability retirement 50% of his salary, plus $60 per month, plus 15% of his salary due to the line of duty disability. The current dispute is over whether Skelton should continue to draw the additional 15% of his salary. Reagan stated Arvle King, also on line of duty disability, reported his appointment with Dr. McDade, a Neurosurgeon in Ft. Smith, has been canceled by the doctor on three different occasions, and if it happens again, he would be looking for another doctor. Reagan reported the Arkansas Statutes require those who have filed under December 21, 1992 • disability to have an examination once a year for the first three years. • FIDUCIARY RESPONSIBILITIES Ben Mayes reported on a question raised at the last meeting regarding fiduciary responsibilities. He stated Richard Yada has brought copies of the government contract for each Board member and would be available to answer questions at that meeting. Richard Yada of Merrill Lynch addressed the Board stating that unfortunately during their move, the box with the Fire Department Plan was in storage. Yada stated that they had ordered this carton to be returned; however, it will most likely not occur until after the first of the year. He recalled the last time seeing a copy of the government contract, City Attorney Jerry Rose provided a copy for review at a meeting. City Clerk Sherry Thomas stated that she has a rough draft copy of the contract with Merrill Lynch in the file which contain no signatures. City Attorney Rose recalled reviewing the lengthy contract, but was unsure of its location. CONTRIBUTIONS City Clerk Sherry Thomas reported that Beulah Davis, widow of Ray Davis, made a contribution to the Fire Pension and Relief Fund in his memory. In addition, Ruth Parker from Lincoln, made a contribution, as well as Kathryn Stout. PENSIONERS' AND WIDOWS' PENSION AFFIDAVITS City Clerk Sherry Thomas further reported that beginning in January 1993, the widows' and pensioners' benefit affidavits would need to be mailed out, and it should be approved by the Board. She explained affidavits are sent to those currently drawing the pension, listing their beneficiaries, Social Security number, and address. The affidavits mailed to widows asked for verification of their date of birth as well. Reagan, seconded by Baird, made a motion to approve the widows' and pensioners' benefit affidavit program for 1993. The motion passed unanimously. NEW BUSINESS FINANCIAL STATEMENTS Doss stated the Finance Department sends him a quarterly financial 411 statement on the Fire Pension Fund, and requested City Clerk Thomas • • • December 21, 1992 make copies for the other Pension Board members. Clerk Thomas asked Doss to provide her with a copy of the financial statement he receives, and she will make the necessary copies. Ben Mayes explained this quarterly financial statement on the Fire Pension Fund is more summarized document. He further explained when the Fire Pension Fund receives its yearly insurance turn back, as well as its portion of County property tax, reports are presented to the Board. The remaining money in the Fire Pension Fund is held by Merrill Lynch who reports every other month on earnings. INVESTMENT REPORTS Richard Yada from Merrill Lynch addressed the Fire Pension Board and Mayor Hanna explaining he would be addressing the old pension plan, which covers those hired prior to January 1983. As of January 1, 1993, all fire fighters and police officers hired will be placed on a new pension plan run by the State. He stated some recent changes in law regarding disability and benefit increases has brought the actuary standing down somewhat; however, the old Fire pension plan remains in good shape. In 1985, they started placing money in bonds and treasuries, and in 1986 a money manager was hired who started investing in stocks. Yada reported the current stock portfolio recap which shows a total of $6,644,207, made up of the New Mexico Capital Management Account of $2,688,064, Roxbury Management Account with strictly stocks of $801,118, the Income Account of $2,961,366. He further pointed out withdrawals from the Income Account to pay benefits and deposits, which sums are closely monitored. In 1992, the sum of $84,000 was withdrawn and $100,000 was reinvested, for a net gain of $16,000. Up until last year before so many people retired, there was more money coming in than being paid out in benefits, and this situation now beginning to narrow. In response to Baird's question, Yada stated the Fire Pension Fund's checking account is handled through the City and as of the end of November 1992, this account totalled $35,698. All receipts are deposited into the checking account, and enough money is maintained to pay benefits. The balance of the funds are forwarded to Merrill Lynch to be invested. Ben Mayes further explained they maintain enough money in the checking account to cover one to two months' pension checks, and any excess is forwarded onto Merrill Lynch for investments. This account is guaranteed 'up to $100,000. Yada stated the Fire Pension Fund is not currently actuarially sound; however, some progress was made last year and the fund should reach actuary soundness by the next actuary report at the end of 1993. December 21, 1992 • Yada addressed the Roxbury Account which started in 1986 with total investments of $507,657 and RNC Capital Management as investment advisor. In 1990, RNC Capital Management was dismissed, and hired Roxbury Capital Management and New Mexico Capital Management, which has been a good decision. The Roxbury Account currently has little activity and holds $801,118. Yada reported Roxbury sold 1000 shares in the Clorox Company in November 1992 with profits of $3,100 on the two holdings purchased in 1991. He reported long term gains of $63,247 and short term gains of $5,314, with total gains in 1992 of $68,500. In addition, there were $14,434 in dividends and interest paid into this account, for a total income gain of $82,000, which is in excess of 10% earned in this account in 1992, with the portfolio value of $800,000. For the year, Roxbury is up only one-half of one percent, as compared to 1991 when they were up 40%. He explained profits gained in 1991 were reinvested in 1992. • • In response to Reagan's question, Yada stated Merrill Lynch is not happy with Roxbury at only one-half of one percent, as compared to the Dow Jones Industrial average up 7$%, and Standard and Poor 500 up 6.31%, which reflects Roxbury under -performing the market by 6%. Taking into account the figures from 1991 when Roxbury was up 40% and outperformed the market by 10% to 15%, this low return for 1992 is nothing to be concerned about. Baird further questioned the one-half of one percent gained by Roxbury in 1992, Yada responded you cannot look at an investment portfolio and take a segment out of context without looking at the total portfolio period. Baird further stated when they made the change to Roxbury, they were promised a 15% return and the best received was 111% in the initial year with lower returns ever since. He further questioned how they could every become actuarially sound at this rate. Yada stated they look for Roxbury to make in excess of 2% above inflation over the long term, then the account will reach actuary soundness. Richard Yada reported the New Mexico Capital Management portfolio shows a balance of $2,688,064. This account sold 1000 shares of Federal National Mortgage for a $40,000 profit over a 3 year time frame, on a $34,000 investment; 1500 shares of Trinity Industry were sold at a $10,000 profit; and purchased 400 shares of Rykoff Sexton, Inc. Year-to-date interest and dividends in the New Mexico Capital Management Account are at $123,611, and they have taken gains of $136,500, for total gains of $260,111 for 1992. For the year, New Mexico Capital Management Account is up 61%, and for a balanced account, is a little ahead of the market. Stocks make up 53% of the portfolio. December 21, 1992 Yada further reported the Income Account shows a value of $2,961,366, with cash flow averaging 6.9%. He explained the Hyperion were triple-A rated mutual funds which have different rates of return. The highest rate of return on the interest rate are between 5 and 10 years. Merrill Lynch believes these are good investments as long term CD substitutes, paying high rates of return, and the income from these investments are being reinvested. The Income Account is not showing much activity and is up 4.39%. Compared to short term rates, it is a little under average. Reagan inquired about ML LEE with a market value of $63,000. Yada explained this account is adjusted based on its value if sold. Since its inception, approximately $36,000 to $37,000 income has been received, and once the economy starts going, the value should increase. Yada reported on asset allocation as of November 30, 1992, has stocks at $2,400,105, bonds and CDs at $3,571,468, cash including the checking account at $566,134, and the other category which includes the Europe and ML LEE funds at $106,500. Merrill Lynch tries to maintain ranges on the investments of cash at 5% to 25%, with an ideal target of 8%; fixed income account portfolio between 15% and 75%, with a current target of 50%; stocks at 25% to 50%, with a current target of 40%; with the other categories from 0% to 10%, with a current target of 2%. He reported currently the cash account is at 8.52%, fixed income at 53.75%, stocks at 36.12%, and the other category at 1.61%. Based on the market, Yada stated this is a good mix in asset allocation. They would like to have more in the stock market, and a correction is expected in 1993. Yada stated the majority of cash which Merrill Lynch has no control over is in New Mexico Capital Management at $209,000, and Roxbury at $54,000, which is over half of total available cash. He explained New Mexico Capital Management is a little more cautious than Roxbury Capital Management. These managers are being paid to make the decision whether to keep cash or invest. They always need to keep at least 5% in cash to pay retiree distributions. Yada stated Merrill Lynch follows an investment policy guide and looks at asset allocations, investment rates, with no more than 15% in any one investment. ADJOURNMENT The meeting was adjourned at 12:06 p.m.