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HomeMy WebLinkAbout1995-01-26 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, January 26, 1995, 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, Ron Wood, and City Clerk/ Treasurer Traci Paul. ABSENT: Mayor Fred Hanna CALL TO ORDER Marion Doss called the meeting to order. MINUTES Boudrey, seconded by of December 1, 1994. PENSION LIST Reagan, made a motion to approve the minutes The motion was approved unanimously. Paul stated there were no changes in the pension list. Judy, seconded by Boudrey, made a motion to approve the pension list for February, 1995. The motion was approved unanimously. NEW BUSINESS PENSION FUND - LETTER OF DETERMINATION Reagan stated he had been in contact with a tax attorney regarding a letter of determination to find out if the fund is in compliance with IRS regulations. The attorney will charge $100 an hour for his services. The retainer fee would be waived. We would be responsible for supplying all information needed. Doss stated a letter of determination is necessary. In answer to a question from Wood, Reagan stated the letter is a certificate from the IRS saying that the plan abides by all the rules and regulations of the IRS. Reagan stated the attorney will give his legal opinion as to whether we need a letter of determination or not. The only opinion we have at this point is from the Personnel Director. In answer to a question from Boudrey, Reagan stated we do not need the letter to have the DROP Plan. The reason we need a letter is because the Personnel Director said we need one. Doss stated the Pension Relief Board recommends that fire departments in Arkansas have letters of determination. • • January 26, 1995 Reagan stated the letter of determination has nothing to do with the DROP Plan. Reagan stated getting a letter of determination is very expensive. possibly $2,500 up front. There are two areas in the plan that we could be penalized on. There are members who are drawing more than their retirement salary. Doss question whether the City Attorney thinks a letter is necessary. Reagan stated the plan is either in compliance or it's not. The tax attorney can give us his opinion. Judy asked if the plan is not in compliance, what has to happen to get in compliance? Reagan stated we would have to notify the IRS and ask them for a letter of determination on the fund. The IRS would review the books since 1921. Doss stated the people who are drawing more than their retirement salary could be affected. • In answer to a question from Judy, Reagan stated the fire fighters are trying to get legislation passed on 415 and 457. • In answer to a question form Doss, Reagan stated the attorney could not determine how many hours he would work. Doss suggested finding out if the plan is in compliance and if a letter of determination is necessary. He stated if we want to think about the DROP, we need to have an actuary done to see if that is going to effect it negatively. Reagan stated the actuary is not going to give any indication of what it is going to do to the fund. Reagan stated we have been asked not to get a letter of determination because it will create problems for every old plan in Arkansas. No other city has asked for a letter. Boudrey stated the department should not request a letter is a requirement. Reagan asked if the Board wanted the tax attorney to opinion. It will probably cost $500 to $600 minimum. Reagan, seconded by Judy, made a motion to have Gregory Jones research to determine if the fund is in compliance with IRS guidelines. The motion was approved by a vote of 5 to 1, with Boudrey voting no. until it give an • • • January 26, 1995 NEW BUSINESS PENSION AFFIDAVITS Reagan stated it was time to send out pension affidavits. Paul stated she would take care of it. INVESTMENT REPORT Curtis Williams, Merrill Lynch, distributed a asset allocation summary and a summary of the portfolio performance as of December 31, 1994. Williams stated 1994 was not the best year in the stock and bond markets. It was one of the worst bond markets in U.S. history. Williams reviewed figures in the distributed asset allocation summary. He stated in the targeted allocation, we have a higher cash position than we would normally keep. The second highest performing investment in 1994 was cash. When the markets were beginning to look bad, money was moved into three month bills, CDs, and money market funds to protect the portfolio. The cash flow on the fixed income fund was 7% this year. Williams reviewed figures in the distributed portfolio performance. He stated we did have a net gain in the stock fund for the year. In the income account, we ended the year a little down on the fixed income side. We outperformed the market because of the money that was moved. In answer to a question from Judy regarding 1995, Williams stated things are still rough. When the Fed is raising interest rates, it is bad for investments. The market is gong to remain unsettled as long as there is any doubt about what the Fed is going to do with interest rates. The yield curve is flat right now. That is an indication that rates are peaking. Rates have depressed a number of issues in this account so that they are undervalued. When rates stop going up they will rebound. We need to see the indexes catch up to the broad market averages. The latter half of 1995 should be much better. The average bare market lasts 18 months. In answer to a question from Reagan, Williams stated New Mexico is a value manager. They did well in this market because this market favored value stocks. The next cycle may not favor them as much. We will watch closely for needed adjustments. ADJOURNMENT The meeting adjourned at 11:40 a.m.