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.
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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.
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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.
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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
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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 $800,000. For the year,
Roxbury is up only one-half of one percent, as compared to 1991
when they were up 40%. He explained profits gained in 1991 were
reinvested in 1992.
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In response to Reagan's question, Yada stated Merrill Lynch is not
happy with Roxbury at only one-half of one percent, as compared to
the Dow Jones Industrial average up 7$%, 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.