HomeMy WebLinkAbout1999-09-30 - Agendas - Final2
FAYETTEVILLE
THE CITY OF FAYETTEVILLE, ARKANSAS
FIRE PENSION
AGENDA
SEPTEMBER 30,1999
A meeting of the Fayetteville Fire Pension and Relief Fund Board will be held on September 30,
1999 at 11:00 a.m. in Room 326 of the City Administration Building located at 113 West
Mountain Street, Fayetteville, Arkansas.
1. Approval of the minutes
2. Approval of the Pension List
3. Investment Report
4. Other Business
113 WEST MOUNTAIN 72701 501 521-7700
FAX 501 575-8257
•
•
MINUTES OF A MEETING
OF THE
FAYETTEVILLE FIRE PENSION AND RELIEF FUND
AUGUST 26, 1999
A meeting of the Fayetteville Fire Pension and Relief Fund was held on August 26, 1999 at
11:00 a.m. in Room 326 of the City Administration Building located at 113 West Mountain
Street, Fayetteville, Arkansas.
PRESENT: Mayor Hanna, Ron Wood, Darrell Judy, Pete Reagan, Marion Doss, and Heather
Woodruff.
ABSENT: John Dill.
APPROVAL OF THE MINUTES
Mr. Doss asked that Mr. Dill be noted as absent at the last meeting. Mr. Reagan moved to
approve the minutes with the correction. Mr. Judy seconded the motion. Upon roll call the
motion carried unanimously.
PENSION LIST
Ms. Woodruff stated corrections needed to be made to the list. Mr. Bonaduce had withdrawn
from the Drop. He had cashed out of the drop plan. He would need to be added to the retired
list. In addition the amount would have to be changed on Eddie Bachman and Ronnie Wood.
Mr. Doss noted Eddie Bachman and Ronnie Wood had been switched several times. He asked to
get a total for each account to make sure the right amount was going to the correct account.
Mr. Reagan moved to approve the pension list with the corrections. Mr. Wood seconded the
motion. Upon roll call the motion carried unanimously.
INVESTMENT REPORT
Mr. Reagan noted they were still down. Ashland was doing the best of all the funds. He noted
they were strictly stock. During their last meeting they had discussed increasing their portfolio
on the equity side because bonds were not doing that well. They were scheduled to have a
meeting with the Ashland managers next month. He asked if anyone had a problem meeting in
the evening.
There was a general consensus that late afternoon or early evening would be best.
Meeting adjourned at 11:20 a.m.
•
)ARKANSAS FIRE & POLICE PENSION REVIEW BOARD
P.O. DRAWER 34164
.. LITTLE ROCK, ARKANSAS 72203
TELEPHONE (501) 682-1745
FAX: (501) 682.1751
Agenda
Arkansas Fire and Police Pension Review Board
10:00 a.m., Tuesday, September 28, 1999
Suite 940, One Union National Plaza Building
Little Rock, Arkansas
1. Call to Order
Recognition of a Quorum and Notification of the News Media
2. Approval of Minutes of the June 29, 1999 Meeting
3. SPECIAL ORDER OF BUSINESS: ADMINISTRATIVE HEARING REGARDING
AMENDMENTS TO PRB RULE #1, RULE #3, RULE #7, AND PROMULGATION OF
NEW RULE # 11
Old Business
a) Recommendation of Administrative Services Committee to upgrade
Executive Director's salary, effective July 1, 1999 payroll
b) Response to Blytheville Fire Pension Board of Trustees June 17 letter
c) Seating of Proxies on PRB
d) Request of Ms. Kathleen Bourne for assistance with receipt of
benefit payment
5. New Business
a) Review of Staff Actions Regarding Benefit Increase Requests:
- Fayetteville Police Pension - Approved 90% and 100% of salary,
pursuant to a cash flow study.
- Russellville Police Pension - Approved 100% of salary to retirees.
- Salem Fire Pension - Approved $165/month for 20 years of service,
pursuant to random search; denied $300/month base benefit
6. Opinions of the Actuary
Budget Request
Other Business
Election of Chair, pursuant to PRB Rule #1
8 Approval of Guest Parking
9 Set Next Meeting Date and Adjourn
•
•
PRB Minutes
June 29, 1999.
Page 1 of 8
Minutes
The Arkansas Fire and Police Pension Review Board
Regular Meeting
The Arkansas Fire and Police Pension Review Board met on Tuesday, June 29,
1999 at 10:00 a.m., in their offices in the Union Plaza Building, 124 West Capitol, Suite 940,
Little Rock, Arkansas.
Members Present: Bill Lundy, Fire Employee Member, Chair
Cathenne Cook, Employer Member
David Evans, Employer Member
Jim Gates, Fire Employee Member
Fams Hensley, Police Employee Member
David Johnson, Public Member
Tim Randolph, Police Employee Member
Staff Present: Cathyrn Hinshaw, Executive Director
Mildred Webb, Assistant Director
Elizabeth Stephens, Administrative Assistant
Others Present: Steve Osborn, PRB Actuary, Osborn, Carreiro & Associates
Bnan West, Osborn, Carreiro & Associates
Lee Harrod, Pension Board Member, Little Rock Police
James Dickson, Pension Board Member, Little Rock Police
Carol Stapleton, Legislative Analyst, Bureau of Legislative
Research
Johnny Reep, Trustee, Little Rock Fire Pension Board
John R. Turbeville, Consultant, Blytheville Fire Pension Fund
Ed Jaros, Legislative Chair, APFF & IAFF Local 34
Chairman Lundy called the meeting to order at 10:00 a.m. He recognized a
quorum and notification of the news media. The first order of business was review
and approval of the Apnl 27, 1999 minutes. Mr Hensley asked for clarification about
which question was answered on the second page of the minutes under the Act
1171 heading. There was a typo on page 8 in the next to last paragraph. In the
second paragraph on page 7, a word was left out. There were no other additions or
corrections to the minutes. Chairman Lundy asked for a motion on the minutes. Mr.
Evans made the motion to accept the minutes as corrected. Mr. Johnson seconded
the motion, and it passed unanimously.
Under old business, the board received an update from Ms Hinshaw about
Act 1452 of 1999, the retired police officer's supplement fund. Ms. Hinshaw told the
board that she had talked to Mr. Shelby McCook, the head of DFA accounting. He
told her that DFA would cut one check to the PRB, who will in tum have to have to
disburse the money to the cities, who will pay their retirees Ms. Hinshaw said it was
•
PRB Minutes
June 29, 1999
Page 2 of 8
unclear how much DFA will allocate to the PRB in July. Chairman Lundy asked Ms.
Hinshaw if she had a proposal of how to distribute the supplement fund money to the
local plans. Ms. Hinshaw she would like for the actuaries to sort retiree information
by pension amounts, then our data processor can cut checks to the cities based on
the actuaries' lists, and staff will send the money to the cities for them to disburse to
their retirees.
Chairman Lundy said that the act states that each retiree has to file an
application with the PRB in order to receive his or her money, and that it insinuates
that the money is to be distributed monthly What happens if the member dies during
the year? Ms. Hinshaw said that under police law, spouses are eligible to receive
the same pension amount as the retiree received. After further discussion, the board
directed staff to set up a policy for the police supplement program, make the
distnbution, and report back to the board about it at the next meeting. The board can
formally adopt the procedure for the next year. Ms. Hinshaw said the staff would use
the actuary's database, cut one check to each pension board, with a cover memo
and a copy of Act 1452. The memo will direct the pension boards to distribute the
money to their retirees by July 315'. Mr. Randolph said this assumes that everyone
who is eligible will apply for the money. Mr. Randolph made the motion to approve
this method. Mr. Hensley seconded, and the motion passed unanimously.
The board reviewed the actuaries' recommendations for amendments to
Board Rule #10, and to implement Act 1293 of 1999. Act 1293 will allow the board to
use different asset valuation methods for local plans. Mr. Osborn referred to his
June 21, 1999 letter in the board packet regarding asset valuation methods. He said
that when he and his staff do an actuarial cost projections of what local plan
employers and employees should be contributing to the plan, one component the
actuaries look at are the plan's assets. The actuanes consider aspects such as how
much the assets are worth and how they should be valued. Under law, the board is
allowed to use the amortized cost basis, or book value, regardless of the market
value of assets. Act 1293 allows the PRB to determine a different asset valuation
method.
Mr. Osborn said he would not recommend using the pure market value of
assets as an asset valuation method. The main reason is that by 2002, all local plan
members should have at least 20 years of service and be eligible to retire. Since this
2002 is only three years away, using a pure market value would mean wide cost
fluctuations, which would make it difficult for plans trying to get totally funded during
the next three years. DROP interest rates are based on the cost basis. Members of
some plans think rates ought to be based more on market value. The act is not
effective yet, and Mr. Osborn said it would probably only affect 1999 DROP rates at
the earliest. Part of Mr. Fields' opinion on DROP was that if DROP interest rates
were based solely on the market value, then the plan would not be tax qualified,.
This would cause many problems for the local plans.
There are three areas under "actuarial considerations" in the letter for the
board to consider. First ,the current asset valuation method does not recognize
PRB Minutes
June 29, 1999
• Page 3 of 8
market value. Secondly, until now, local plans could not invest in stocks unless they
had at least $500,000 in assets. This amount has been lowered to $100,000. This
will allow about 100 more plans to hire investment managers and invest in areas
other than CD's and gbvemment bonds: And the third area, previously touched on, is
that the life cycle of the local plans is getting shorter, because everybody should be
eligible for retirement soon.
The other statewide systems all use the same cost method. Mr. Osbom
explained the LOPFI smoothing method of assets. The actuaries for LOPFI take the
total market return that is in excess of the assumed retum. They amortize it over a
five-year penod. This is called the smoothing method. State Highway Retirement
also uses the five-year method APERS and Teachers smoothing method recognize
the excess monies over a four-year penod instead of five:
Mr. Osbom gave the board a handout on alternate valuation methods.
Mr. Osbom said he believes that the asset valuation method ought to remain
conservative for two main reasons: there are many local plans that are limited in
their investment options, and the local plans are mature The actuaries suggested
maintaining what the board uses now, the five-year smoothing method similar to
what LOPFI uses, or some combination of the two. Mr. Osbom said he thinks the
act can be interpreted as allowing the board to apply different cost methods to
different kinds of local plans. The board could use a smoothing method for plans that
have $5 million or more, and use the cost basis method for the other plans.
Chairman Lundy asked Mr. Osbom to explain the difference between the
five-year smoothing method and five-year averaging. Mr. Osborn said it is the same
thing. But there is a difference between the LOPFI method and the private sector
method, as illustrated in his letter. In the LOPFI method the actuaries take the total
retum that is in excess of the assumed return and spread that out over a five-year
penod. In the private sector method they consider all appreciation; real and
unrealized gains, even if it is more or less than the assumption, and amortize it.
Chairman Lundy asked the other board members if they had any comments.
Mr. Evans and Ms. Cook said they favored the LOPFI smoothing method.
Mr. Osbom said the board might consider keeping the prior cost method for plans
with assets of less $5 million, which would include most of the big plans. Chairman
Lundy asked for a vote on the previous motion; it passed unanimously.
Referring to his letter, Mr. Osborn said the board asked him to review all of
the PRB Rules to see how the new laws impact them. The actuaries found several
changes that needed to be made:
Board Rule #1 pertains to board composition. Mr Osbom said the wording
was changed to reflect that the board composition has changed from seven voting
members to nine voting members. A sentence was added to show that an employer
representative and the director of the Department of Finance and Administration are
• the new board positions. Chairman Lundy asked Ms. Hinshaw if the board has to
hold a public hearing to consider the changes in Board Rule #1.
Jr
•
PRB Minutes
June 29, 1999
Page 4 of 8
Ms. Hinshaw said no, because the changes in the board rule reflect changes in the
law; it is not something the board has a choice about. Chairman Lundy asked if there
was any discussion about the change in Board Rule #1, or a motion. Mr. Gates
made the motion to accept the recommended changes from the actuary for Board
Rule # 1. Mr. Randolph seconded the motion and it passed unanimously.
Board Rule # 3: Mr. Osborn said this rule was changed by two acts -- Act
711 and Act 573 One of the acts eliminated many of the reporting requirements on
the annual financial disclosure form, and the other act allowed additional city officials
to complete the annual financial disclosure form. Chairman Lundy asked
Ms. Hinshaw if the change in Board Rule # 3 requires a public hearing. After some
discussion, Chairman Lundy suggested that if the board members were unsure
about holding a public hearing, then they should schedule one for the next board
meeting to discuss the changes. Chairman Lundy asked for a motion that the board
adopt these changes and discuss them at a public heanng. Mr. Randolph made the
motion, and Mr. Hensley seconded The motion passed unanimously. Discussion
about changes in Board Rule # 3 will be conducted during the public heanng at the
next board meeting.
Board Rule #7: Mr. Osborn said that this rule addresses how benefits are
calculated and the definition of salary. In the board rule, it is stated that the minimum
pension for a police officer is $250 per month The change would state that the
minimum is $350 per month, if the officer is eligible under Act 1197 of 1995
Chairman Lundy asked Ms. Hinshaw if these changes were okay with her.
Ms. Hinshaw said yes, the changes are recitation of fact and law, and should not
require a public heanng. Chairman Lundy asked for a motion to adopt the actuaries'
recommendation for changes on Board Rule #7. Mr. Randolph made the motion and
Mr. Johnson seconded. The motion passed unanimously.
Board Rule #10: Mr. Osbom handed out a marked -up copy of changes that
has the new language underlined. The actuanes added a new section on the
ten-year DROP, which was passed two sessions ago and amended this session.
There is a zero percent interest rate floor on the second five years of the DROP.
Act 1457 defines how member and employer contributions are split between the
local plan and the DROP, which is a new option for cities that have populations of
more than 20,000. Ms. Hinshaw said all underlined language is new, except the
underlined formula of the three distribution amounts in section 10, which reflects
current law. Chairman Lundy said the changes reflect direct language in law, so the
board should not need to hold a public hearing. He asked for a motion on Board
Rule #10. Mr. Gates made the motion to adopt the actuaries' recommendations for
changes to Board Rule #10. Mr. Randolph seconded and discussion followed.
Chairman Lundy asked the other board members if they wanted to hold a
hearing on Board Rule #10. Mr. Hensley said he would prefer to, since the board is
going to have one anyway. Chairman Lundy asked if any board members objected
to this; there were none. The Chairman asked for a motion that the board members
discuss changes in Board Rule #10, as proposed, in a public hearing.
4
PRB Minutes
June 29, 1999
• Page5of8
Mr. Hensley made the motion and Mr. Randolph seconded. The motion passed
unanimously. There was no vote called on the previous motion for Board Rule #10,
because it is going to be discussed in a public. hearing.
Chairman Lundy asked Mr. Osbom if the board had to do anything about
investment returns and how interest is certified, as they relate to DROP accounts.
Mr. Osbom said that for 1999 and forward, the board probably does not have to do
anything. If the board wants to make a change for certifying interest for 1998, they
should probably run it by their attorney. Mr. Osbom said he and his staff are
certifying interest for '98 now, and most DROPs have received their certifications.
Chairman Lundy asked if it would be a problem to go back and re -certify the interest.
Mr. Hensley said during the previous discussion he understood that the board would
go back to '96 through '98. Mr. Osborn said that while the board goes back to start
the smoothing method, it is a different situation as to whether the board can go back
and credit a different interest rate for DROPs for 1998. Mr. Osborn said the law is not
effective until July 31st, which means that the board does not have to go back further
than '98.
•
Mr. Osborn said the actuaries are going touse the smoothing method for the
December 31, 1999 actuarial valuations. They will also calculate the '99 smooth
return that plans can credit for '99 to their DROPs. But because the law was not
effective in 1998, Mr. Osborn said that he thinks that the DROP rates for '98 are as
they stand, unless the board does something different. Mr. Gates confirmed with Mr.
Osborn that he has certified most of the DROPS for 1998. Mr. Osborn said yes, but it
would not be too difficult to re -certify them, unless the plans have already
implemented the interest rates or the members have taken their distributions. Ms.
Cook questioned why the board would want to change its focus in midstream. Mr.
Hensley asked when the change becomes effective -- at the end of '98 or the end of
'99?
Chairman Lundy asked what would happen if the board had to tell some local
plans that their rate of return was lower than the one certified. Mr. Osbom replied
that he did not think that this would be the situation with any of the plans. Chairman
Lundy asked what the preference of the board was. Mr. Johnson said he did not see
any reason why the board needs to go back to '98, since the actuary has already
certified the rate to the plans. If it is not required of the board, then the board should
not do it. Ms. Cook agreed with Mr. Johnson. She said she understands the
viewpoint of the employee members, but since the certification has been partially
completed the board should finish it, and implement the new policy for 1999. The
board should not go back and apply it to 1998. Mr. Hensley said if it would benefit
hundreds of people to backtrack to '98 and does not hurt anyone, then why not? Mr.
Evans said if the board can legally do it, then he does not have a problem with it.
After further discussion, Chairman Lundy ruled that unless a board member
made a motion, the board would not go back and pick up 1998, but move forward
and implement the change for the 1999 reports. Mr Hensley made a motion that the
board go back and implement the interest rate change for DROPs for 1998. The
PRB Minutes
June 29, 1999
• Page 6 of 8
motion died for lack of a second. The board took a break from 11:50 to noon. When
they reconvened, Chairman Lundy thanked Mr. Osborn for his help on guiding the
board through their last discussion.
Under new business, the board reviewed staff action regarding benefit
increase requests. Mr. Hensley made a motion to approve staff action for each
benefit increase, with the exception of Blytheville Fire, which was discussed
separately. Mr. Gates seconded the motion, and it passed unanimously.
Blytheville Fire — approval of 62% of salaiy/base. Ms. Hinshaw said the
benefit increase was approved at a benefit percent that the plan did not want. As a
courtesy, the actuaries approved a benefit increase for 62% of salary, so that the
plan members could receive.a small increase. Plan members were previously at
60% of salary. Mr. John Turbeville represented the Blytheville Fire Pension Fund.
He said that the members of the Blytheville fund wished to appeal the decision
regarding their benefit increase request. Mr. Turbeville referenced two letters. The
first letter is one to Ms. Hinshaw from the actuaries dated May 3. In the letter, the
reason for the denial of the benefit increase to 65% of salary is explained by the fact
that the actuaries discovered that the fund had underreported DROP balances by
$238,000. The Blytheville plan, like all other local plans, has an annual financial
report prepared by a CPA The report is then sent to the PRB for review and filed.
Mr. Turbeville said that the members of the Blytheville fund are at a loss as to why
the DROP balance was underreported, and why the error was not caught, since the
DROP balances are certified every year. The second letter to Ms. Hinshaw from
assistant fire chief Bill Crowder, also has a couple of other questions regarding the
benefit increase. One of the questions is about "active lives" and "unfunded accrued
liabilities. The members of the Blytheville plan do not understand why the unfunded
accrued liabilities and active lives liabilities would increase so dramatically for a 70%
of salary benefit increase The plan currently pays 60% of salary; the proposed
increase was for 70%. The liability for active lives and unfunded liabilities would
increase from $5,900 to $123,000 and the employer rate would increase from 33%
to 104%. Net employer contributions would increase from $61,000 to $190,000,
which is almost triple for a 10% increase in benefits.
Mr. Osbom said the answer to all of Blytheville's questions is the same. Going
from a 60% of salary increase to a 70% of salary increase is a 14 15% increase in
employer contributions. If a plan has $4 million in liabilities, then 14% is going to be
added to that, which is about $500,000 to $600,000 more in liabilities. There is not
much difference between Crossett's benefit increase request to go from 70% to 90%
of salary, which was denied. Crossett's employer rate would have increased to
almost 100% of pay. Chairman Lundy asked Mr. Osbom how long of a time penod a
plan has to pay back or amortize additional liabilities under current standards. Mr.
Osborn said at least five years, which makes a big impact now, because these are
closed plans. When a plan accrues a new liability, it has to be paid off for active
members and current retirees between now and the time the fund is closed.
•
t
•
PRB Minutes
June 29, 1999
Page 7 of 8
The chairman asked Mr. Osborn if he knew why the DROP balance was
underreported by $238,000. Mr. Osborn said he did not know. He gave the board
members a copy of the financial report for the Blytheville Fire Pension Fund, which
shows that the member DROP balances as $43,000. The person who filled out the
report did not list -individual DROP balances, which is normally how the actuanes
would have venfied the total DROP balance. Chairman Lundy asked Ms. Hinshaw
and Mr. Osborn if they had responded to the June 17`h letter from Blytheville. Ms.
Hinshaw said no. Mr. Osborn said the Blytheville board should address questions
about the DROP balances to their auditor or whoever filled out the report and ask
him where he got his figures. Chairman Lundy asked Mr. Osborn and Ms, Hinshaw
to respond to Chief Crowder's letter. Mr. Osborn said he would respond that
numbers for the benefit increase are not disproportionate to amount of the raise.
Chairman Lundy said the plan also asked why the error in the DROP balance was
not caught. Mr. Osbom said his staff checks many things on 280 plan reports, and
sometimes they miss some things. They also send back a lot of reports that do not
balance.
Mr. Turbeville said that however the error occurred, the Blytheville plan is not
trying to hold someone accountable for an omission of a fact. What they are trying to
do is get some clanfication so that they are comfortable with the benefit increase
they are entitled to. They are not expecting any more than or any less than what they
are entitled to. They just need some understanding on how the figures were arrived
• at. Chairman Lundy said the plan's questions should be responded to in writing. Mr.
Hensley made a motion for Ms Hinshaw to respond in wnting to the Blytheville Fire
Pension Fund. Mr. Gates seconded the motion and it passed unanimously.
Booneville Fire — approval of $195 per month
Crossett Fire — denied 90% of salary to paids/$75 per month to volunteers.
Mr. Gates asked if the plan had asked for the random search. Mr. Osborn said they
can do a random search on paid plans, but Crossett did not ask for it. Even with a
random search, Mr. Osbom said he did not think Crossett could qualify for an
increase to 80% of salary.
Mena Fire— approval of $90 per month base to volunteers
Pine Bluff Police — approved minimum benefit to current retirants and
beneficiaries to $650 per month.
Texarkana Police — approved increase of $200 per month to all retirants,
beneficiaries, and DROP members.
Ms. Hinshaw gave the board an update on the 1999-2000 Guarantee Fund
allocation. She said the money is available, and applications have been mailed to the plans.
The Pension Review Board Mission Statement was noted by the board. Ms.
Hinshaw said the statement is required by law. The board noted submission of DROP rules
from Bella Vista Fire, Malvern Police, and Pine Bluff Police. Ms. Hinshaw said that Board
• Rule #10 requires that local plans submit copies of their DROP rules to the board.
%/
•
•
•
PRB Minutes
June 29, 1999,
Page 8 of 8
Attomey General opinions were noted by the board. Ms. Hinshaw said that most of
the opinions were not in response to board requests, but did affect local plans. After some
discussion, the board asked that Ms. Hinshaw seek clanfication on opinion 99-039, because
the last page is confusing. Mr Evans asked Ms. Hinshaw to send him a copy of the
clanfication as soon as she receives it.
Under other business, the board went back and reviewed the actuaries' letter about
maximum benefits. Mr. Osborn said the law addresses 100% of pay for paid firefighters,
but since volunteers are not paid, his opinion is that the maximum is $30 or $50 for Act
1197 plans, plus $10 per month for every year of service over 20 years, which would be up
to a $50 maximum or a $70 maximum. This amount can be increased to any amount using
the benefit increase procedure. For full paid firefighters, the actuaries believe that the
maximum is 100% of pay plus $100 per month for a person with 25 or more years of
service. For part -paid firefighters they think that it is the greater of the benefit if the member
was a volunteer, or 100% of pay plus $50 per month for a person with at least 235 years. If
a member has less than 25 years, it is a little bit lower. For police members, the maximum is
100% of pay.
Chairman Lundy asked for a motion on guest parking. Mr. Hensley made the motion
for approval and Ms. Cook seconded. The motion passed unanimously.
There was no other business to discuss. The next board meeting is set for
Tuesday, September 28, 1999 at 10:00 a.m. in the board's offices. The meeting
adjourned at 12:30 p.m.
Respectfully Submitted,
Elizabeth Stephens
Recording Secretary
to the Board
r.
FAYETTEVILLE
•
THE CITY OF FAYETTEVILLE, ARKANSAS
September 13, 1999
Merrill Lynch
Richard Yada
2200 N. Rodney Parham Rd.
Suite 300
Little Rock, Arkansas 72212
Dear Mr. Yada:
On behalf of the Fayetteville Fire Pension and Relief Fund, please transfer by wire fifteen
thousand dollars ($15,000.00) to the Bank of Arkansas. Credit to Fayetteville Fire Pension.
082901392 routing ABA Account number 1063401.
•
Please complete the transfer today or tomorrow morning.
Sincerely,
Heather Woodruff
City Clerk/Treasure
red Hanna
Mayor
anon Doss
Assistant Fire Chief
113 WEST MOUNTAIN 72701 501.521-7700
FAX 501 575-8257
09/13/99 14:55
V1 501 575 8257
City of Faye
01001
TRANSMISSION OK
ACTIVITY REPORT e*:$
TX/RX NO. 3862
CONNECTION TEL 915012287431p5897
CONNECTION ID
START TIME 09/13 14:55
USAGE TIME 00'29
PAGES 1
RESULT OK
•
•
•
F1
VETT EVE]
THE CITY OF FAYETTEVILLE, ARKANSAS
September 13, 1999
Merrill Lynch
Richard Yada
2200 N. Rodney Parham Rd
Suite 300
Little Rock, Arkansas 72212
Dear Mr. Yada:
•
On behalf of the Fayetteville Fire Pension and Relief Fund, please transfer by wire fifteen
thousand dollars ($15,000.00) to the Bank of Arkansas. Credit to Fayetteville Fire Pension.
082901392 routing ABA Account number 1063401.
• Please complete the transfer today or tomorrow morning.
Sincerely,
AltaTz ad/
Heather Woodruff
City Clerk/Treasure
red Hanna
Mayor
anon Doss
Assistant Fire Chief
113 WEST MOUNTAIN 72701 501 521-7700
FAX 501 575-8257
Post -it® Fax Note
7671
COJOePI.
THE CITY OF FAYETTEVILLE, ARKANSAS
September 13, 1999
Merrill Lynch
Richard Yada
2200 N. Rodney Parham Rd
Suite 300
Little Rock, Arkansas 72212
Dear Mr. Yada:
•
On behalf of the Fayetteville Fire Pension and Relief Fund, please transfer by wire fifteen
thousand dollars ($15,000.00) to the Bank of Arkansas. Credit to Fayetteville Fire Pension.
082901392 routing ABA Account number 1063401.
• Please complete the transfer today or tomorrow morning.
Sincerely,
AltaTz ad/
Heather Woodruff
City Clerk/Treasure
red Hanna
Mayor
anon Doss
Assistant Fire Chief
113 WEST MOUNTAIN 72701 501 521-7700
FAX 501 575-8257
Post -it® Fax Note
7671
COJOePI.
F4YETTE R ILLE
•
THE CITY OF FAYETTEVILLE, ARKANSAS
•
•
September 1, 1999
Richard Yada
Memll Lynch
2200 N. Rodney Parham Road
Suite 300
Little Rock, Arkansas 72212
Dear Richard:
On behalf of Fayetteville Fire Pension and Relief Fund, please pay Ashland Management
$4,406.97 for management fees. Our account number is 56305G88.
Thank you,
eather Woodruff
City Clerk
113 WEST MOUNTAIN 72701 501 521-7700
FAX501 575-8257
.11
RB eip.
ARKANSAS FIRE & POLICE PENSION REVIEW BOARD
•
•
P.O. DRAWER 34164
Lmte Root, AwuwsAs 71203
Tae to (501) 682 -1745
FAx (501) 682 -1751
email: infoOlopfrprb.00m
website: www.lopfi-ptb.com
TO: The Board of Trustees
Fire Pension and Relief Fund of FAYETTEVILLE
FROM: Arkansas Fire and Police Pension Review Board
RE: 1999 Pension Fund Actuarial Valuation
DATE: September 13, 2000
In accordance with State law, the actuary under contract to this
office periodically tests all local fire and police pension funds for
actuarial soundness. The 1999.actuarial study of your pension fund is
attached. The financial tests for the pension fund are to answer the
following questions:
1. Is there enough annual income to the pension
fund to fully fund it? (See page 4 of the
actuary's report.)
2. Are there enough assets in the pension fund
to cover all active member contributions, all
payments to current retirees, and at least
85% of future payments earned by active
members (See page 11 of the actuary's report),
OR are current assets sufficient to cover 94%
of all accrued actuarial liabilities (See page
10 of the actuary's report).
3. Is this pension fund considered actuarially
sound under State law?
RFrFIVED
SFP 27; 2000
ciYC.E aCFFwE
YES NO
B
•
•
FAME 11 EVILLE FIREFIGHTERS PENSION FUND
ACTUARIAL VALUATION
AS OF DECEMBER 31, 1999
•
1
•
•
Osborn, Carreiro & Associates, Inc.
• ACTUARIES • CONSULTANTS • ANALYSTS
•
September 11, 2000
Board of Trustees
Fayetteville Firefighters Pension Fund
One Union National Plaza,Sulte 1690
124 West Capitol Avenue
Little Rock, Arkansas 72201
(501)376-8043
Gentlemen:
This report presents the results of our actuarial valuation of the assets and liabilities of the
Fayetteville Firefighters Pension Fund as of December 31, 1999.
This valuation is required by Arkansas Code Annotated 24-11-205. The purpose of this report is to
(l) evaluate the actuarial status of the Fund, (2) determine the level contribution requirement needed,
(3) review the development of the Fund aver the past several years, and (4) present certain actuarial
items on page 9 for disclosure under Govemmental Accounting Standards. This report is not
intended for any other purpose.
The member and financial information used in this report was supplied by the Arkansas Fire &
Police Pension Review Board, whose cooperation is appreciated. We did not audit this information,
although we did review it for reasonableness and consistency.
I certify that this report has been prepared in accordance with generally accepted actuarial principles
and practices. In my opinion, the actuarial methods used are appropriate and the actuarial
assumptions produce results which, in the aggregate, are reasonable.
Sincerely,
04,
Steve Osborn, F.S.A., M.A.A.A.
Actuary
•
•
•
EXHIBIT 1
EXHIBIT 2
EXHIBIT 3
EXHIBIT 4
EXHIBIT 5
EXHIBIT 6
EXHIBIT 7
EXHI IT 8
TABLE OF CONTENTS
CONTRIBUTIONS
COST AND LIABILITIES
SUMMARY OF FINANCIAL INFORMATION
COMPARISON WITH PRIOR YEARS
SHORT CONDITION TEST
EMPLOYEE AND RETIREE PROFILES
PRINCIPLE PROVISIONS OF THE PLAN
ACTUARIAI, METHODS AND ASSUMPTIONS
•
•
EXHIBIT 1
CONTRIBUTIONS
The following contribution level reflects the payment of the current year Normal Cost for benefits
attributable to said year (see Exhibit 2) plus an amount sufficient to pay off the Unfunded Actuarial Liability
over a 8 -year period (5 -year period for any unfunded retiree liability). These costs DO NOT include the
contributions due to the Local Police and Firefighters Retirement System ("LOPFI") for persons hired after
1982.
2000 Necessary Annual Contribution to pay:
1 Normal Cost, plus
2 Pay off the Unfunded Actuarial
Accrued Liability
Full Volunteer or
Emil Part -Paid
$ 138,448
80,898
3 Total necessary $ 219,346 $
• Less
4 Expected Employee Contribution - 22,031 -
(6.00% of salary. $12 per active volunteer)
Necessary Employer Contribution
(This is the amount needed in
addition to investment income)
Covered Payroll
Necessary Employer Rate
0 $ 138,448
0 • 80,898
0 $ 219,346
0 22,031
$ 197,315 $ 0 $ 197,315
$ 367,188 N/A $ 367,188
53.74% $ N/A 53.74%
These contributions assume that the dollar contribution grows at a rate of 4% per year. The contributions are
assumed to be made continuously throughout the year.
The actual 1999 contribution was $514,019 from the employer.
4
•
•
EXHIBIT 2
COSTS AND LIABILITIES
A Normal Cost
(Cost to fund current active members)
1 Regular Retirement Benefits
2 Voluntary Termination Benefits
3 Survivors' Benefits
4 Disability Benefits
TOTAL
B Actuarial Accrued Liability
•
1 Active Lives
Regular Retirement Benefits
Voluntary Termination Benefits
Survivors' Benefits
Disability Benefits
TOTAL ACTIVE LIVES
2 Deferred Retirement Option
DROP Accounts
Future DROP Payments & Pensions
TOTAL DROP
3 inactive Lives
Retirees
Disability Retirees
Widows & Children
TOTAL INACTIVE LIVES
4 Total Liability
C ssets
D Unfunded ActuariaiAccrued Liability
5
December
Dollar
Amount
128,798
3,100
3,096
3,454
138,448
$ 2,920,335
0
1,065
2,261
$ 2,923,661
536,713
3,602,298
4,139,011
31 1999
Percent
of pay
4,750,833
622,995
504,343
5,878,171
12,940,843
12,352,475
588,368
35.08%
0.84%
0.84%
0.94%
37.70%
•
•
EXHIBIT 3
SUMMARY OF FINANCIAL INFORMATION
(Items D -E, and G determined by Osborn, Carreiro and Associates, Inc.)
Year Ended Year Ended Year Ended
A. INCOME 12/31/1997 12/31/1998 12/31/1999
1 Contributions
Employee $ 44,797 $ 48,397 $ 45,668
Donations 0 300 1,792
Employer/Court Fines/Other 89,593 97,650 91,337
Insurance Tax 154,075 154,468 158,596
Local Millage 237,469 246,287 264,086
Adjustment to prior year
asset value
2 Net Investment Income
TOTAL INCOME
0
877,202
0 0
418,145 789,774
$ 1,403,136 $ 965,247 $ 1,351,253
B. EXPENSES
1 Administrative $ 3,000 $ 4,583 $ 3,000
2 J3enefitg 452,558 452,558 520,122
3 Re nds 0 0 0
TOTAL EXPENSES $ 455,558 $ 457,141 $ 523,122
6
•
EXHIBIT 3 (Continued)
C ASSETS (at book value) 12/31/1997 12/31/1998 12/31/1999
1 Cash & Checking Accounts $ 0 $ 0 $ 0
2 Bank Deposits 66,202 69,621 244,627
3 Savings and Loan Deposits 0 0 0
4 Other Cash Equivalents 650,784 1,735,365 1,013,861
5 US Govt. Securities 2,184,012 2,226,356 2,110,212
6 Non -US Govt Securities 0 0 0
7 Mortgages 0 0 0
8 Corporate Bonds 2,377,472 2,514,935 2,691,957
9 Common Stocks 5,401,209 4,605,621 5,932,541
10 Other 118,007 153,894 140,725
11 Payables 0 0 0
TOTAL ASSETS $ 10,797,686 $ ' 11,305,792 $ 12,133,923 '
D. RATIO OF ASSETS TO -
ANNUAL EXPENSES: 23.7 24.7 23.2
E. NET INVESTMENT RETURN: • 8.9%
(Book Value Basis)
7
3.9% 7.0%
• Exhibit 3 (Continued)
•
•
F. TOTAL MARKET VALUE
I. Market Value, end of year
(Used for GASB calculations, page 9)
2. Market Value, beginning of year
12/31/1995 12/31/1996 12/31/1997 12/31/1998 J2/31/1999
8,870,878 9,826,212 11,225,602 11,854,130 12,880,300
8,870,878 9,826,212 11,225,602 11,854,130
G. pEVELOPMFNT OF ACT'UARIAT. VAT TE OF ASSETS
1. Actuarial Value of Assets, beginning of year
2. Non Investment Net Cash Flow
3.
(a)
(b)
(c)
Development of Investment Income
Total Market Investment Income (Fl -F2 -G2)
Amount for Immediate Recognition (6% Gl)
Amount for Phased In Recognition (G3a-G3b)
(d) Phased In Recognition
Current year • 20% of 3(c)
First Prior Year
Second Prior Year
Third Prior Year
Fourth Prior Year
Total Phased In Recognition
(e)
Actuarial Value Investment Income
(3(b)+3(d))
4. Actuarial Value of Assets, End of year
(1+2+3(e))
Note:
Net Investment Return on the
Actuarial Value of Assets
8,897,591
108,269
9,602,357
70,376
847,065 1,329,014
533,855 576,141
313,210 752,873
0 62,642
0
10,462,091 11,375,162
89,961 38,357
538,567 987,813
627,725. 682,510
(89,158) 305,303
150,575 (17,832) 61,061
62,642 150,575 (17,832)
0 62,642 .150,575
0 62,642
0
62,642 213,216 195,385 256,445
596,497 789,358 823,110 938,955
•
8,897,591 9,602,357 10,462,091 11,375,162 12,352,475
6.7% 8.2% 7.8% 8.2%
The Pension Review Board's Board Rule #11 first applies this methodology to determine the Actuarial Value
of Assets for the 12/31/99 actuarial valuation report. Different methods were used to determine the Actuarial
Value of Assets for the 12/31/98 and earlier reports.
8
•
•
EXHIBIT 3 (Continued)
ACCOUNTING INFORMATION
This page is included to provide the information required by the Governmental Accounting Standards Board
Statement No. 25 and 27, effective January 1, 1998. The values below are based on the assumptions contained
in Exhibit 8.
The Annual Pension Cost disclosed in this exhibit will almost always differ from the actual cash contribution to
the fund. We must emphasize that these disclosures are shown in the city's financial statements; Sound
actuarial projections should be used to determine the actual cash contribution requirements.
•
RECONCILIATION OF NET PENSION OBLIGATION (NPO)
1: Actuarially Required Contribution
2. Interest on NPO
3. Adjustment to (1)
4. Annual Pension Cost (1)+(2)-(3)-
5. Actual Contribution Made
6. Increase in NPO (4)-(5)
7. NPO Beginning of Year
8. NPO End of Year
(a)
Actuarial
Valuation
• Date
12/31/1993
12/31/1995
12/31/1997
12/31/1999
(b)
Market
Value of
Plan Assets*
7,271,255
8,897,591
11,225,602
12,880,300
r Note:
** Note:
1998
292,026
(94,050)
(175,639)
373,615
498,405
(124,790)
(1,567,498)
(1,692,288)
REQUIRED SUPPLEMENTARY INFORMATION
(c)
Entry Age
Actuarial
Accrued
Liability
7,816,034
9,045,983
12,093,450
12,940,843
(d)
Unfunded
Accrued
Liability
(UAL)
(c) -(b)
544,779
148,392
867,848
60,543
(e)
• Funded
Ratio
. (b)/(c)
93.0%
98.4%
92.8%
99.5%
1999
292,026
(101,537)
(189,622)
380,111 .
514,019
(133,908)
(1,692,288)
(1,826,196)
(t)
Annual
Covered
Payroll**
620,116
676,847
608,602
367,188
•
2000
124,741
(109,572)
(251,093)
266,262
(1,826,196)
(g)
UAL as a%
of Covered
Payroll
(d)/(f)
87.9%
21.9%
142.6%
16.5%
12/31/93 and 12/31/95 are at amortized cost value.
For volunteer/part paid members, Annual Covered Payroll is $200 for such
active members
9
•
•
•
EXHIBIT 4
COMPARISON WITH PRIOR YEARS
This exhibit compares current valuation results with those of prior years.
Valuation
Date
12/31/1982
12/31/1984
12/31/1986
12/31/1987
12/31/1989
12/31/1991
12/31/1993
12/31/1995
12/31/1997
12/31/1999
Full Paid
Active Members
Annual
No. Payroll
50 810,926
45 807,438
37 723,894
38 788,348
27 639,962
23 585,898
22 620,116
21 676,847
17 608,602
10 367,188
Actuarial Computed
Employer Contribution
Percent
of Pay
Total Plan
Unfimded Normal
Actuarial
Liability
Dollar Cost Funded
Amount Assets Percent Percent
22.1% 179,271 2,202,969 811,186 18.5% 73.1%
27.7% 223,455 3,078,619 1,193,660 22.1% 72.1%
29.6% 213,935. 4,006,484. 1,379,340 21.8% 74.4%
31.3% 246,479 4,460,948 1,455,161 23.4% 75.4%
36.0% 230,328 5,189,846 1,976,463 26.6% 72.4%
33.3% 195,273 5,999,964 . 1,427,422 25.5% 80.8%
25.2% 156,484 7,271,255 544,779 25.4% 93.0%
25.6% 173,401 8,897,591 148,392 29.8% 98.4%
55.9% 339,974 10,797,686 1,295,764 38.0% 89.3%
53.7% 197,315 12,352,475 ' 588,368 37.7% 95.5%
• *Benefits or assumptions changed
Note: Normal cost prior to 12/31/89 is net of 6% employee contributions.
Valuation
Dalt
12/31/1982
12/31/1984
12/31/1986
12/31/1987
12/31/1989
12/31/1991
12/31/1993
12/31/1995
12/31/1997
12/31/1999
Part -Paid/
Volunteer
Active
Members
1
1
0
0
0
0
0
0
0
0
Actuarial
Computed
Employer
Contribution
10
227
274
0
0
0
0
0
0
0
0
•
•
•
•
EXHIBIT 5
SHORT CONDITION TEST
The Arkansas General Assembly has stated that the funding objective for these plans is to pay for
benefits with contributions that remain level as a percentage of employee payroll. Thus, the long-term
condition test is met when the actual contributions are fairly level and are paid when due.
A short condition test can be used to measure a plan's progress. Under the short condition test, the
fund's assets are compared with:
1) Active member contributions;
2) The liabilities for future benefits to the present retirees and inactive members;
3) The liabilities for service already rendered by active members.
If the plan has been following level cost funding, liability (1) and liability (2) above will almost always
be fully covered by the rest of the present assets. In addition, liability (3) above will at least partially .
funded. The larger the funded portion of liability (3), the stronger the condition of the fund.For a closed
fund i.e., one like yours, where no new members are admitted), the funded portion of liability (3) should
be steadily increasing.
The following table illustrates the history of the short condition test for this plan:
Valuation
Date
12/31/1982
12/31/1984
12/31/1986
12/31/1987
12/31/1989
12/31/1991
12/31/1993
12/31/1995
12/31/1997
12/31/1999
• Computed Actuarial Liabilities
(1)
Active
Meinbers
Contributions
160,669
236,541
263,129
308,829
274,405
292,477
353,891
418,412
401,937
267,239
(2)
Retirees,
Inactives,
and DROPS
898,272
1,464,696
2,753,772
2,754,276
4,560,672
5,072,169
5,005,131
5,101,995
7,315,705
10,017,182
(3)
Actives -
Employer
Financed
1,955,214
2,571,042
2,368,923
2,853,004
2,331,232
2,062,740
2,457,012
3,525,576
4,375,808
2,656,422
Portion of Liabilities
covered by Assets
•
Valuation
Assets . (1) (2) (3)
2,202,969
3,078,619
4,006,484
4,460,948
5,189,846
5,999,964
7,271,255
8,897,591
10,797,686
12,352,475
100% 100% 59%
100% 100% 54%
100% 100%. 42%
100% 100% 49%
100% 100% 15%
100% 100% 31%
100% 100% 78%
100% 100% 96%
100% 100% 70%
100% 100% 78%
•
A
Exhibit 6
Employee Profile
Employee data needed for the valuation was obtained from the records furnished by
the Arkansas Fire and Police Pension Review Board. The following table shows a
detailed breakdown. of the present participants by the number of participants and
total salary.
Actives
Years of Service
20-25
25-30
30 and
Over
Total
Se
Under
25
Count 0
Salary 0
0 0 0 0 0
0 0 0 0 0 0:
25-29
Count 0 0 0 0 0 0 0
Salary 0 0 0 0 0 0 0
'.
3034
Count 0 0 0 0 0 0 0`
Salary 0 0 0 0 0 0 0
€4
35-39
Count 0 0 0 0 0 0• 0,�
Salary 0 0 0 0 0 0 0
40-44
Count 0 0 0 6 2 0 0
Salary 0 0 • 0 197,724 72,780 0 0
$*%k
45-49
Count 0 0 0 1 0 0 0a
Salary 0 0 0 36,582 0 0 _ 0
ff
50-54
Count 0 0 0 0 0 0 0
Salary 0 0 0 0 0 0 0'�h
55-59
Count 0 0 0 0 0 0 1
Salary 0 0 0 0 0 0 60,104
f,�Cyr-
.�, I• ,I
60-64
Count 0 0 0 0 0 0 0
0 • 0 0 0 0 0 0-=
?c
Salary
65 &
Over
Count 0 0 0 O 0 0 0
Salary 0 0 0 0 0 0 0
rv' l
u
Unknown
Age
Count 0 0 0 . 0 0 0
Salary 0 0 0 0 0 0 0
°'
Total
Count* 10
'`�y'•k n„Qw'
a 0 '.0,
�r
.0 r -0 '''<
N '
z3 all3D
Salary -�.
�t� �_
12
•
Age
Exhibit 6
Employee Profile
Employee data needed for the valuation was obtained from the records famished by the
Arkansas Fire and Police Pension Review Board. The following table shows a detailed
breakdown of the present participants by the number of participants.
Volunteers/Part-Paid Actives
Years of Service
0-5
Under
25
25-29
Count
Count
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65 &
Over
Unknown
Age
Total
5-10 10-15 15-20 20-25
25-30
30 and
Over
Total
Count 0
Count 0
Count
Count 0
Count 0
Count 0
Count 0
Count 0
Count 0
Count
0 0 0
0 0 0
0
0 0 0
0 0 0
13
•
•
A
Exhibit 6
Inactive Profile
Employee data needed for the valuation was obtained from the records furnished by the
Arkansas Fire and Police Pension Review Board. The following table shows a detailed
breakdown of the present payees by the number of payees and total annual benefit.
Retirees and Survivors
Years Since Retirement
0-1
1-2
2-3
3-4
4-5
5-10
10 and
Over Total
This includes
This includes
This includes
39 retirees with annual benefit of $368,861 .
5 disableds with annual benefit of $56,403 .
12 survivors with annual benefit of $49,382 .
14
Under
40
Count
Benefit
0
0
0
0
0
0
0
0
u
0
v
0
v y4# ,3
O' `II
40-44
Count
0
0
.0
0
0
0
0
4i,
°r..1.
Benefit
0
.0
0
0
0
0
0
*
45-49
Count
1
0
0
0
0
1
0
;i k
Benefit
23,705
0
0
0
0
5,014
0.'
50-54
Count
0
0 .
0
0,
0
4
4:
d `.
Benefit
0
0
0
0
0
61,295
58,453`+
55-59
Count
0
0
0
0
0
3
7i
i ie
Benefit
0
0
0
0 ".
0
33,454
• 107,278
r
1
60-64
Count
0
0
0
0
0
0
6
1%
Benefit
0
0
0
0
••
0
0
53,725
65-69
Count
0
0
0
0
0
0
7
Benefit
0
0
0
0.
0
0
64,378
70-74
Count
0
0
0
0:
0
0
3
x qx-Kt/. t ala
Benefit
0
0
0
0
0
0
12,39639
. y'
75-79
Count
0
0
0
0
0
0
8
,, -
Benefit
0
0
0
0•
0
0
26,118
- K1n3.
80-84
Count
0
0
0
0•
0
0
8 E r y i
Benefit
0
0
0
•
0
0
0
14,370:.,14'
85 &
Count
0
0
0
0
0
0
4g'
Over
Benefit
0
0
0
0•
0
0
14,460 s 1.
Unknown
Count
0
0
0
0
0
0
0
Age
Benefit
0
Total
Count
Benefit
k
a.
fa#
w
O
-„0
4 1
'
R% 4
h
as
a
rs.df7
5 1_ ,
Y�F l
This includes
This includes
This includes
39 retirees with annual benefit of $368,861 .
5 disableds with annual benefit of $56,403 .
12 survivors with annual benefit of $49,382 .
14