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HomeMy WebLinkAbout1994-09-29 Minutes• • • MINUTES OF A MEETING OF THE FIRE PENSION BOARD A meeting of the Fayetteville Firemen's Pension and Relief Board was held on Thursday, September 29, 1994, at 11:00 a.m. in Room 326 of the City Administration Building, 113 W. Mountain, Fayetteville, Arkansas. PRESENT: Marion Doss, Pete Reagan, Retirees Darrell Judy and Howard Boudrey, Mayor Fred Hanna, City Clerk Traci Paul, Treasurer Glyndon Bunton, Administrative Services Director Ben Mayes and Personnel Director Don Bailey. CALL TO ORDER Mayor Hanna called the meeting to order. MINUTES Reagan, seconded by Judy, made a motion to approve the minutes of the July 28, 1994, meeting subject to requested corrections in the investment report. The motion was approved unanimously. PENSION LIST There were no changes in the pension list. Reagan, seconded by Doss, made a motion to approve the pension list for October, 1994. The motion was approved unanimously. OLD BUSINESS DROP PLAN Mayor Hanna requested the results of a meeting of Pete Reagan, Jerry Rose, Ben Mayes and Don Bailey regarding the Drop Plan. Reagan stated that Bill Lundy, firefighter representative on the Pension Review Board, asked that the Pension Board consider not asking the IRS for a letter of determination on our funds. It is a mutual understanding that the IRS will leave the old fire and police pension funds alone. There have been raises; and there are some retirees who are drawing more than 100% of retirement, which under Section 415 of the IRS Code, makes a taxable plan. If the board asks for a letter of determination, the IRS will start digging and will not stop with Fayetteville. Everyone in the state will wind up with a taxable pension plan. Bailey stated that adding the Drop just exacerbates the problem because it will be taxed as ordinary income. The City will have turned in a 1099 on that particular amount. The requirement is a 20% withholding, on the front end, from a qualified plan. This is an issue that is nationwide and is being kicked around in congress. There are so many priorities in the legislative efforts, it has not been to the floor for a vote It does not help the plan in terms of the qualifications of this Drop. The typical retiree looks at this Drop as a lump sum windfall. These tax issues need • • • September 29, 1994 to be analyzed. There is a possibility of ending up with less money by taking the Drop than the retirement benefit under the old plan. It is a catch-22 situation until congress modifies the IRS code. Reagan stated the International Association of Firefighters has two bills in congress, one is 415 and the other is 457. Municipal fire and police departments would be exempt from that section of the code. Bailey stated the safest thing would be to do nothing at this time. Bunton stated adopting the Drop could allow the IRS to come in and go over the existing plans. Adopting the Drop is not recommended. It is better to leave things alone than to invite scrutiny on the current plans. The participants in the plans are going to be better off until some legislation is passed to shelter this type of retirement. Adopting the Drop may jeprodize the entire state. Reagan asked if this would hurt the pension fund or the retiree. Bailey stated it would hurt the retiree. We are non-profit. We are not a tax paying entity, where the retiree is. In answer to a question from Mayor Hanna, Bunton agreed that adopting the Drop means retirees may be subject to paying tax on income they would not have had to pay tax on. Bailey stated if the plan is ruled out of compliance, the entire trust becomes taxable at that point and time. Mayor Hanna stated the IRS could ask people who have been retired for some time to pay taxes on retirement that previously they thought they didn't have to pay on. In reply to a comment from Reagan, Bailey stated there will only be one letter of determination issued because it is a state plan and everyone can be assessed on it. Reagan stated Little Rock got their actuary back and was assessed almost $6 million more in liability from last year. They did increase their widow's benefit last year. It has not been determined what part of that amount was for the Drop Plan. Reagan questioned giving the actuary some scenarios for review. Bailey stated under the situation that exists, the board could consider it; otherwise, the board would be spending the money for no good reason right now to ask the actuary to do the evaluations. It is recommended that the board take a look at that because Little Rock's plan may not mirror Fayetteville's plan due to the • September 29, 1994 demographics and all the actuarial information on the individual participants. Mayes stated it is premature to seek actuary information. The turn around time is not very long. Reagan, seconded by Boudrey, made a motion to table the Drop Plan until further information is available. The motion was approved unanimously. FEW BUSINESS INVESTMENT REPORT There was no investment report for this meeting. PENSION BOARD APPOINTMENT Reagan introduced Howard Boudrey, who will fill Richard Baird's unexpired term as a retired member. Boudrey was the only nomination. ADJOURNMENT • The meeting adjourned at 11:25 a.m. •