HomeMy WebLinkAbout1997-01-30 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 30, 1997, at 11:00 a.m., in room 326,
of the City Administration Building, 113 W. Mountain, Fayetteville,
Arkansas.
PRESENT: Mayor Fred Hanna, Pete Reagan, Marion Doss, Ron Wood,
Darrell Judy, Howard Boudrey, City Clerk/Treasurer Traci
Paul, City Attorney Jerry Rose and Administrative
Services Director Ben Mayes.
CALL TO ORDER
Mayor Hanna called the meeting to order.
MINUTES
Reagan, seconded by Doss, moved to approve the minutes of the
December 12, 1996 meeting. The motion passed unanimously.
PENSION LIST
Paul reported one small change in Carl Springston's tax withholding
but that there was no change in the total figure.
Doss, seconded by Judy, moved to approve the February pension list.
The motion passed unanimously.
INVESTMENT REPORT
Curtis Williams, Merrill Lynch, distributed copies of the portfolio
performance as of December 31-, 1996.
Williams stated there will be a more comprehensive report presented
to the Board in February. The report distributed is a recap of
what the three major accounts did for 1996.
Williams stated 1996 was a good year. It was a far better year
from the U.S. than was expected. We were not particularly
optimistic about having a great year for the U.S. markets this time
last year.
Referring to the performance report, Williams stated the Dow Jones
Industrial Average is up 29% and the S & P 500 is up 220. That is
a big difference in those two indexes. They usually track each
other closer than that.
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January 30, 1997
New Mexico Capital Management is up 11.37% and Keystone is up
17.91%. They lagged the averages. In the latter months of 1996,
the indexes were setting new records almost everyday. There is a
big trend now towards index funds. Index funds buy the index which
makes the index go up
We have had two real good years back to back. If we have a third
year as strong as 1996, it will be the first time we have ever done
it. There is a wonderful environment for stocks out there right
now. We have low inflation, low interest rates, and an expanding
economy. Corporate earnings are growing. That is an environment
that is great for stocks.
Williams stated the market is paying up for stocks as if these
conditions are going to go on indefinitely. Certain changes could
have a very negative impact on the market. We know that things are
going to change sooner or later. We are cautious on the U.S.
markets. We want to set expectations lower than they have been the
last few years. We are not going to continue to compound at 20%.
We are going to have to have a cooling off period. Some type of
correction is due and would be healthy.
On the fixed income side, Long Term Treasury Bonds lost 1.21% for
the year. We had an uptick in interest rates and they are trending
up again. That would be one of the factors that could be negative
for the market next year. High Grade Corporate Bonds were up
1.61%. The Income Account was at 4.25%, outperforming both
indexes.
Williams explained that the U.S. market outperformed Japan and that
a more definitive report on the foreign investments will be
available at the next meeting.
Williams stated this year we would like to tone down the
expectations for the U.S. markets and at some point in the year
look at some type of a corrective phase. In that case the money
will have to go somewhere. If money comes out of our market, we
would expect the foreign markets to perform well and balance the
portfolio.
Williams concluded by stating 1996 was a great year.
The Board briefly discussed the portfolio performance report and
commented that they would be looking forward to a full report in
February.
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OLD BUSINESS
January 30, 1997
Proposed Benefit Increase
Mayor Hanna explained that the discussion on the proposed increase
was left on the table. Mayor Hanna expressed his concern about the
increase and stated he had several questions to ask.
Mayor Hanna expressed his concerned for the retired guys that were
making $300 to $600 per month. They have been given percentage
raises, and sometimes more, to get them up to where their
retirement is even half way decent. Some guys who are receiving
$400 per month have been given a 15% raise and some guys who are
receiving $1,400 per month have also been given a 15% raise. Mayor
Hanna explained that it does not seem fair.
Mayor Hanna stated some things have been done in the past to help
the retirement funds for fire and police. There was an increase in
the City's contribution. It was higher than the contribution given
to other City employees. Another one was the millage thing. At
the time those things were done it was to enable the police and
fire funds to stay at 50% retirement after 20 years. Are we
violating the public trust by increasing retirement to more than
50%? The public might question something like this. Are we
leaving ourselves open to look bad or to lawsuits?
Mayor Hanna stated City Attorney Jerry Rose and Administrative
Services Director Ben Mayes are here to discuss these issues with
the Board.
Mayor Hanna stated the Board needs to really think about these
things before passing an increase.
Mayor Hanna stated the investments have gone well. They always go
in cycles. We are. going to get back to a period where they aren't
going so well. What happens when we get caught in a really bad
year?
Also, we don't want anybody to think we are doing something for one
class of City employees that we are not going to do or don't intend
to do or can't do for others.
Administrative Services Director Ben Mayes explained that the
situation is unique because it is a closed plan. Mayes stated
there will never be any other participants coming in. Your numbers
are only reducing. As the numbers get smaller, the amount of money
continues to increase. The Board needs to consider what is
reasonable and fair overall to the taxpayers, firefighters, and
everyone when making a decision. Mayes explained there are several
ways the closed plan receives income. Mayes stated income comes
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January 30, 1997
through investment earnings, State insurance turnback money,
employer and employee contributions, and the millage. Someone
needs to decide how long to continue to put a millage in. All the
others are going down as the number of participants go down. But
the millage just stays there regardless of how the. participants
shift from this plan to the State plan. The way the retirement
plan works, 50% of a person's salary, is normal compared to many
other retirement plans. Mayes stated a person in the State plan
would have to have 32 1/2 years of service at age 65 to get to 65%
' of salary for retirement. Mayes asked do we wait until you all get
at 100% or more of your retirement salary before we start looking
at taking the millage and using it for some other purpose. It is
just a consideration that needs to be looked at. A retirement of
50% of salary seems to be normal. There are only two things that
anybody else decides on besides the Fire Pension Board, the millage
and the contribution level. The contribution level could be
reduced back from 12% to 6%. The millage brings in about $220,000
per year. Someone needs to look at this issue at some point in
time.
Mayor Hanna explained that the number of recipients of the
retirement will decrease over the years, investments could keep
going well, and income from taxes will continue to come in. He
stated somewhere along the line we are going to reach a point where
there are only a few people left drawing. What happens if there is
several million dollars left in the fund when the last person is
gone?
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City Attorney Jerry Rose stated even though there was one
individual, a Board would still be in existence and should that
Board agree to give that as a benefit and it did not ruin the
actuarial soundness of the plan that person would become your best
friend. You are running a retirement. What is the purpose of your
retirement? Is it to provide an equatable retirement for everyone
in the City or is everybody really on their own? The firemen have
been wise and prudent investors. You could say they should reap
the benefits of the advantages that came to them and the other
folks have their own opportunities and their retirement is their
business.
Rose explained that legally he had two guidances for the Board. He
stated the first is that there is not a doubt in his mind that as
long as the plan is actuarialy sound the Board may increase
benefits. The second is that he has no doubt that if the City, as
a matter of policy, wants to play with those amounts they may do
so. The most common way is the millage because it is the only one
that provides a reasonable amount of money. The employee
contribution is not all that much. Eventually, the State
Legislature may become involved if it does become a problem.
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January 30, 1997
Mayor Hanna stated the millage was passed to help all the firemen
and all the policemen that had retired since we had a semi-
retirement. Mayor Hanna expressed his concern that the people that
retired 15 to 20 years ago are getting the short end of the stick.
He stated some of them are making $500 per month. He explained his
feelings that the intention of the whole thing was the 50%
retirement. Mayor Hanna stated the Board should'look at equalizing
retirement pays before an increase is given.
Marion Doss expressed his concern about some retired firemen and
widows receiving the lower amounts each month. He stated he hoped
the Board could do something to give everyone an increase.
Mayor Hanna stated the millage has increased so much in the last
ten years. It was originally passed to insure the retirement
benefits for everybody who has been a fireman.
Pete Reagan asked if the Police Pension Fund gets a percentage of
the tickets written.
Mayes explained that he was not sure but could find out.
Mayes stated the way the new plan works is that they do a
calculation at the State level which determines the need for a
certain amount to keep the plan actuarialy sound. They just tell
you how much they need and a check is written. The employer still
does the contribution side of it but amounts are not identified by
a specific source.
In answer to a question from Reagan, Mayes stated the City is
paying less than 12% on its LOPFI employees.
Reagan stated the LOPFI fund for the whole state is 141% funded.
In answer to another question from Reagan, Mayes stated the police
and fire are each assigned a half mil. Reagan stated the State
gives the option to go up to one mil by referendum.
Reagan stated the LOPFI plan has a cost of living increase built
in. This plan does not have that kind of an increase built in.
That is the reason for the benefit increase. Reagan stated the
guys who retired a long time ago have been given more than a 100%
increase. Reagan explained that the increase will be given to
those who are not receiving over a certain percentage. That was a'
long time ago and we have discussed addressing that problem but
there is going to have to be a minimum dollar amount set on those.
Those who are not getting an increase this time have been receiving
increases. The first was in 1983; the second was in 1984; and the
third was in 1986. The increases were possible because the Board
took good care of the fund.
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January 30, 1997
Reagan stated he would like to see the income sources of the
millage and the City's contribution left as they are. That is a
good source of revenue for the fund.
Reagan commented that when the fund first went under management
with Merrill Lynch,• we had just given the pay raise in 1984.
Merrill Lynch asked us not to grant any more benefit increases for
8 to 10 years until they could build the fund. That has affected
the guys who have retired in that time. They just happened to
retire during that time and they have not had a benefit increase.
Mayes stated the State statutes only address the down side. It
says what happens if you don't make it. There is nothing that
addresses the success story.
Reagan pointed out that fire pension funds in Rogers and Springdale
have already increased their retirements to 65% and over.
Mayor Hanna expressed concern that the State may step in and use
some of the excess money in the fund in the future as the
participants decrease.
Reagan stated a new Federal law passed in the last legislative
session which states the money in the pension fund can only be used
for the benefits of that plan.
Rose stated there are two different philosophies. One philosophy
says let's set a fair retirement of 50%, 60% or whatever it might
be and we will find,money to fund that retirement. First you
determine what is fair then you figure out how to fund it. The
other philosophy says give us what you think is fair to contribute,
City, (the millage, the participation from the insurance, and the
participation from the contribution) and let us work with it. We
will set our own retirement once we get that money.
Mayes asked if State statute limits what you can do for the
existing retirees.
Reagan stated the cap was 100%. Now we can go over 100% as long as
the plan is.actuarialy sound.
In answer to a question from Mayes, Reagan agreed that the Board
could grant a 3% benefit increase in a year for existing retirees
to cover an increase in inflation. He stated there would have to
be an actuary study.
Reagan stated the Board does need to address the question of what
happens to the fund when we are all gone.
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January 30, 1997
Reagan made a motion to grant the benefit increase per the
resolution passed by the Board on July 25, 1996 and make it
retroactive to January 1, 1997. Boudrey seconded the motion. The
motion passed unanimously.
Pension Affidavits
Paul reported she has received all pension affidavits except for
Floyd Carl, Roger Lewis, and Dewain McChristian.
In answer to a question from Paul, Mayor Hanna stated he understood
that Floyd Carl is house bound.
Paul stated she would contact the retirees and ask them to return
their affidavits by February 15. If they do not return their forms
by that date, their pension checks will not be mailed out. If
Floyd Carl needs help, we can work with him.
Judy stated he could go by Carl's house and get his signature.
NEW BUSINESS
Roger and Marvie Lewis
The Board briefly discussed the situation of Roger and Marvie
.Lewis.
Mayor Hanna stated the issue should be reviewed and investigated by
Roger Lewis and his attorney.
The Board discussed their uncomfortable feelings about having to
pay Marvie Lewis half of Roger Lewis' retirement as stated in the
divorce decree. They expressed their feelings that the City should
not be paying Ms. Lewis, Roger Lewis should be responsible for
that.
Mayor Hanna suggested that Roger Lewis could bring all the
information down and sit down with the City Attorney and tell the
City Attorney that he thinks that is illegal for them to do. let
Jerry Rose make that decision on behalf of the City that is his job.
In answer to a question from Doss, Mayor Hanna explained that the
City Attorney should address any questions about the City doing
something illegal.
There being no further business, the meeting adjourned at 12:05
p.m.
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