HomeMy WebLinkAbout1999-06-24 Minutes•
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MINUTES OF A MEETING
OF THE
FAYETTEVILLE FIRE PENSION AND RELIEF FUND
JUNE 24, 1999
A meeting of the Fayetteville Fire Pension and Relief Fund was held on June 24, 1999 at 11:00
a.m. in Room 326 of the City Administration Building located at 113 West Mountain Street,
Fayetteville, Arkansas.
PRESENT: Mayor Fred Hanna, Assistant Fire Chief Manon Doss, John Dill, Ron Wood, and
City Clerk Heather Woodruff.
MINUTES
Mr. Dill moved to approve the minutes. Mr. Wood seconded the motion. Upon roll call the
motion carried unanimously
PENSION LIST
It was noted that Eddie Bachman and Ron Wood's retirement amounts were switched on the
pension list
Mr. Doss moved to approve the pension list as amended. Mr. Dill seconded the motion. Upon
roll call the motion carried unanimously.
INVESTMENT REPORT _
Mr. Curtis Williams explained the investment report. He stated there was a growing sense in the
investment community that they many be entering a phase where there would be a shift in
interest rates not only in this county, but around the world. Historically, interest rates went up
for twenty to thirty years then down for twenty or thirty years. Last summer they hit a thirty-year
low in treasury bonds. Many believed interest rates were going to start back up. If interests rates
were going to start long secular up trends, then what they were doing the fixed income account
would not work They had been managing the account as an income and growth account for
thirteen years. They could still manage for income, but there would be no growth because
everything they purchased would be worth less for a long time. , With the long term security they
should still be able to exceed the two percent above inflation. From an actuarial point of view it
would not look good. monitory it would not affect their pensions.
if they continued what they were doing the impact would be negative for the auctorial report,
although it would not hurt the fund monitory. For the time the interest rates are rising they
would not get any growth out of the fixed income portfolio. One alternative was to manage the
portfolio for a rising interest rate environment. They would purchase six month maturities, CDs
and treasuries. If rates rise they would go down, but because they had such a short life they did
not down much. So the portfolio value would remain relatively stable Unfortunately they
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would not be able to exceed the two percent inflation. Historically short term fixed income
secunties did not exceed the rate of inflation by two percent. While their portfolio value would
remain relatively constant, it would have a negative impact on the actuarial condition of the fund.
He thought under either style of investment their benefits would not be affect, however, they
would not receive any increases.
The third alternative was to rethink their investment policies and guidelines. The guidelines had
worked well for them. They had put together a very conservative and restrictive policy and
guidelines so they would not have to much risk and bulk of the money would always be in fixed
income, conservatively invested. A decision would have to be made to continue or to look at
income from a different perspective. They would not be getting growth from fixed income, they
were going to get growth from equities A nsmg inflation environment was not good for
investments, but equities performed better in that environment than the fixed income did. Equity
was a better hedge against inflation than fixed income.
He thought they should have several meetings on the subject before they made any changes.
OLD BUSINESS
DROP ACCOUNTS.
Mayor Hanna stated he had called a meeting with Marilyn Crammer, Jerry Rose, Don Bailey,
and Kevin Crosson on the Drop Fund. They went over it thoroughly. When the Drop Plan was
instituted it was understood at the time that it was not a qualified plan. An individual should get
tax advise from their accountants. It was required law that if they changed from a non-qualified
plan the city had to withhold twenty percent. What they had decided was when the take the
money out there would be a 1099R form sent out. It would be marked liabilities unknown. All
they needed to protect the city was a letter from the retirees accountant stating that the money
was going into a qualified plan and that the Drop plan was a qualified plan.
Marion Doss stated they had looked to the PRB for guidelines. They had replied they had been
holding 20% out if they wrote the check to the individual. If they wrote it to the investment
company they did not with hold the tax.
Mayor Hanna added if the IRS challenged the decision they could state that it was not a qualified
retirement plan. No one has ever receive a qualifying letter from the IRS on this Drop Plan.
Mr. Doss added the entire pension plan did not have a letter of determination. Because the
pension plan was older than the letter of determination from the IRS. The plan was covered by
State Statute.
Meeting adjourned at 11:40 a.m.
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