Loading...
HomeMy WebLinkAbout2004-03-25 - Agendas - FinalFiremen's Pension and Relief Fund Meeting Agenda March 25, 2004 A meeting of the Fayetteville Firemen's Pension and Relief Fund will be held at 11:00 a.m. on March 25, 2004 in Room 326 of the City Administration Building. 1. Approval of the Minutes: • February 26, 2004 2. Approval of the Pension List: • April 2004 Pension List 3. Longer Investments: • Report • Northern Trust Option Account Application 4. Old Business: • Resolution Number 02-03 - Enacting a 10 Year DROP • Resolution Number 04-03 — Working after DROP 5. New Business: • Eddie Bachman Retirement • Danny Farrar 20 Years of Service • Retired Fire Fighters — Increase/Widows • Dennis Mullens Letter From Dr. Mark F. Olsen • Budget Information • NCPERS 2004 Annual Conference w 0 a c 0 0 5 c W c c 0 c c O) a 0) ca lL w T co LL, 0 N N 3 Motion To: c 0 0 5 0 0 IOC c 0 0 O N0 T 0 0 U `0 T 2 O 0 0 m 2 Danny Farrar Robert Johnson c 01 0f m CC 0 N a Ronnie Wood Sondra Smith Motion To: c O 0 5 0 0 O 0 N y 0 O O 2 Marion Doss R R LL c c CO 0 Robert Johnson Ronnie Wood Sondra Smith 0 0 Motion To: 1 >. m c 0 0 2 Seconded: Po 0 0 0 U `0 of 2 Marion Doss 1- 1- 1- u. LL c c m 0 Robert Johnson m d M 0 a 0 O 3 C c CC O Sondra Smith Motion To: T c O 0 2 0 0 m Marion Doss c O N c 0 O t N 0 O Ronnie Wood Sondra Smith • Firemen's Pension and Relief Fund Meeting Agenda February 26, 2004 Fire Pension Minutes February 26, 2004 Page 1 of 7 A Special meeting of the Fayetteville Firemen's Pension and Relief Fund was held at 1 1:00 a.m. on February 26, 2004 in Room hof the City Administration Building. 5.24 Present: Pete Reagan, Robert Johnson, Marion Doss, Ronnie Wood, Sondra Smith, Secretary, City Attorney Kit Williams, Marsha Farthing, Fire Chief Bosch. The meeting was called to order by Marion Doss. Approval of the Minutes: Pete Reagan moved to approve the minutes. Ronnie Wood seconded the motion. Upon roll call the motion passed. 5-0. Mayor Coody and Danny Farrar were absent. Approval of the Pension List: • February 2004 Pension List approval with 3% Temporary COLA added and March 2004 Pension List approval. • Pete Reagan moved to approve the pension lists. Ronnie Wood seconded the motion. Upon roll call the motion passed. 5-0. Mayor Coody and Danny Farrar were absent. Longer Investments: Marion Doss: We have a copy of the Longer Investment report; do we have any discussion on their report? Pete Reagan: This is just an informational item. Page 6 shows the total of our portfolio, it shows,a 3.3% increase for the month of January. We are very proud of the performance level of Longer Investments. Old Business: Resolution Number 02-03, Enacting a 10 Year DROP and Resolution Number 04-03, Working after DROP: Marion Doss: We have Resolution 02-03 and 04-03 written and ready to go before the City Council. Sondra Smith: It has not gone before the City Council yet. • Kit Williams. I think it started to go then it was tabled. Pete Reagan: Do we know why it was tabled. Sondra Smith: It did not make it on the City Council's agenda. • Fire Pension Minutes February 26, 2004 Page 2 of 7 Chief Bosch: I asked to take a look at those resolutions. I realized the actuarial impact those proposed changes will have on the retirement system it self is nothing. There is no negative impact on the system. My concern was will these changes have other additional impacts on the department as a whole. I took a look at the resolutions and I drafted a memo. Let me summarize it for you and you can read this at your leisure. I have two primary concerns, the first concern that I have is that by extending the DROP plan we will in essence stifle the opportunity for promotions within the department. The nine people that are eligible on the DROP plan currently hold the ranks of 1 Assistant Chief, 5 Captains and 3 Driver/Operators. This will actually have an impact and stifle about 7 key promotions within the department. That is a true concern that I have, it kind of kills the initiative of some of these folks that want to move up in the organization. My concern is that as the Fire Chief I am suppose to look out for the overall physical impacts on the department. I think that by changing the plan we won't see a negative hit on the department, it won't cost us any more money which we understand, but we won't be able to show any type of salary savings through the normal attrition process. That comes to about the equivalent of five salaries for entry level fire fighters. As we discuss the need to add additional personnel and expand the department a change like this is totally contradictory to our ability to do that. That is basically where this goes. I am declined not to support this recommendation, however it is a Pension Board decision and you have the ability to take this to the City Council. Kit Williams: I think they have already made that decision. They have already voted that way and it will be before the City Council. Is that the meeting of March 16, 2004? Sondra Smith: Yes it is suppose to be presented to the City Council on March 16, 2004. Pete Reagan: To go before City Council at agenda session or to go before them at a Council meeting. Kit Williams: That is the City Council meeting date. Chief Bosch: I might add that I think the 3% temporary COLA is a good idea. Chief Bosch handed out a copy of his memo that was addressed to the Mayor. Chief Bosch: My primary concern is that when we make a decision and again this is good for 10% of the department, but I am trying to look out for the whole 100%, I have to look at this from the overall picture. When we try to move a decision forward like this if l don't take all those factors into consideration then I am not doing my job. To make a decision based specifically on the actuarially soundness without looking at the other factors I think really challenges the issue. Marion Doss: As a Pension Board member it is a benefit that is allowed by state law and a benefit that the actuaries say we can do and the Arkansas Fire and Police Pension Review Board says we can do it. That's the way I have to look at it. It is a benefit to our members and we Fire Pension Minutes February 26, 2004 Page3 of 7 • represent those members. If it is allowable and we can do it I think we should offer that benefit if they want it. I am glad you put some thought into this and I want to read your memo. Chief Bosch: I appreciate and respect your opinion. I respect all of your opinions. Kit Williams: People are wearing different hats. The Pension Board has one hat you have a different hat and the City Council has another hat. Pete Reagan: Chief, I don't see any thing in here where you have addressed the cost of a new hire coming on and what it is going to cost to train him to the level that we currently have. I also don't see anything in here addressing the experience of a 20 year firefighter or a 20 year captain versus an entry level firefighter. I think that that needs to be addressed. Basically what this is looking at is dollars and I fully understand that, that is your job as head of the budget for the Fire Department, but I also think that you have not addressed that issue. Chief Bosch: The experience factor and the cost for training and the start up cost. Pete Reagan: Yes. Chief Bosch: Those are two excellent points. I didn't draft those in here, let me discuss that a little bit and then I will do some homework on that. I think as far as the cost for training goes that is built into the initial salary, we are going to have that cost for training whether it is an experienced employee or a new employee. Granted there is going to be a little bit more training on the front end that we would incur for minimum standards requirements. We are looking at addressing that in a different avenue, with some policy changes on minimum standards for hiring. That would kind of get that cost off our plate. The actual cost for that is about $700 to $800 to actually train them to the entry level firefighter one, firefighter two and then the EMT training is a little more than that. Pete Reagan: But that's minimum right? Chief Bosch: That is minimum that is entry level, granted that doesn't compensate for the experience factor and I don't know how you can quantify the experience factor. It is an excellent point and I agreed with you, I think you have a very sound and valid point but I don't know exactly how we would quantify that. There is no way to put a dollar amount on your level of experience opposed to other levels of experience. I guess we probably could but I don't know how we would do it. It would be a very difficult calculation because everyone has different experiences. Would that lead us into the argument that we should address our pay schedule based on levels of experience? Kit Williams: To some extent it is because longevity, the longer you are here you go to different steps. Marion Doss: I think it is to your credit that some of these guys want to stay here longer now. I think there are some of them that at one point in their career they were trying to tough things out. • I think they see that the department is changing and growing and I think they see that as a real positive thing. Fire Pension Minutes February 26, 2004 Page 4 of 7 Pete Reagan: On page four your recommendation on the 3% COLA, the City Council does not have to approve that. Chief Bosch: Yes, 1 understand that, I did not understand that when I drafted this. Kit Williams: I think the only reason the City Council is even addressing this issue is that it does have a potential impact upon the Fire Department, so I think that is why the legislation has the City Council's approval for this. Pete Reagan: 1 was in the room when this was voted on and the Municipal League was not going to support this unless they had approval by City Council and that is the reason that it is in there. Has the Mayor seen this? Chief Bosch: He received a copy of it yesterday, I don't know if he has read it or not. • Pete Reagan: So we don't know if this is going to be the Mayor's position, I guess we could ask him. Kit Williams: Yes, I would ask him. Pete Reagan: Can we draft a memo from this board to him asking him if this is his position and we would like to know what his position is going to be. It sounds like by Chief Bosch's memo that we are going to take this to the City Council and be on opposing sides. Sondra Smith: We can meet after this meeting and draft a memo and I will get the memo to him today. Pete Reagan: Okay. Copy of the Summary from Martin and Kieklak: Marion Doss: This is a copy of what they handed out at the last meeting. Sondra Smith: I think Chief Bosch had some questions on the make up of the Firemen's Pension Board. 1 asked Kit if he would answer your questions. Marion Doss: We received an Attorney General's opinion that everyone that is on DROP is considered retired as far as the Pension Board make up. Danny Farrar is the only active member that is not on DROP, if he goes on DROP he will be considered retired so he will have to run for election. Pete Reagan: He will have his 20 years in tomorrow. Chief Bosch: He has submitted an inquiry about the DROP plan and what his benefits would be. • Sondra Smith: The other question that was asked is if everyone that is serving is considered retired then how is Marion serving without being elected? Fire Pension Minutes February 26, 2004 Page of IP Kit Williams: The statue lists who is going to serve. The statue states, the Fire Chief or if the Fire Chief is not a member of the plan then the highest ranking member of the Fire Department who is a member. The statue does not say active or retired, it just says member. Therefore Marion does qualify as long as he is a member of the plan and a member of the Fire Department and the highest ranking member. • Sondra Smith: Without having to be elected? Marion Doss: I think you researched that before I signed up on DROP. Kit Williams: We have elections coming up, whose term is up? Pete Reagan: Mine is. Sondra Smith: Danny Farrar, but he is automatically reelected as the active member. Kit Williams: Unless he retires or goes on DROP. Pete Reagan: We have to have nominations in April. Election of Board Sondra Smith: I have a copy of the nomination forms that I am proposing to send out attached to the agenda for you to review. I would like to send this out March 1, 2004 but if Danny Farrar signs up that position will be an elected position. Pete Reagan: I would think he could continue to serve until his term is over. Sondra Smith: His term will be up May 31, 2004. That means that position would have to be elected. Pete Reagan: We can touch base with him. Marion Doss: Go ahead and send the nomination forms out. Kit Williams: I don't know if someone's status changes during their term if we would have to do something different at that time or not. Pete Reagan: We haven't in the past. When I signed up on DROP I continued to serve. Marion Doss: Should we list who is currently serving on the Board. Sondra Smith: The nomination forms states that Pete Reagan is currently serving in the retired member's position. I can send out with the nomination form a copy of everyone that is currently serving on the Board at this time if you would like for me to. Kit Williams: If you do that you need to show when their terms are up. • • • Fire Pension M inules February 26, 2004 Page 6 of 7 Sondra Smith: It shows their terms under their name. Kit Williams: I think it would be good to have the board listed so the retirees will know who is currently serving on the Board. Sondra Smith: We do not send the nomination forms to the widows or dependents that are drawing, just the retired firefighters. Pete Reagan: Yes, just the retirees and the members on DROP. Kit Williams: It doesn't really say in the statue who is allowed to elect but I know it is just the actual retirees and not the survivor's or beneficiaries. New Business: Kelly Skelton College Registration Marion Doss: You received the enrollment from Kelly Skelton. Sondra Smith: I stressed to her and Accounting also stressed to her that she has to get the Proof of Enrollment turned in sooner: I always send her a reminder notice. NCPERS 2004 Annual Conference Pete Reagan: If any of the Board members can go to this conference it is an excellent conference. I will be unable to attend. I have attended two of these. They have a pre -conference for new trustees. I would encourage anyone that can go to do so because it is a wealth of knowledge. Robert Johnson: Is that a major cost to our plan to send someone? Pete Reagan: No. Kit Williams: When you went Pete did the plan pay for the cost. Pete Reagan: Yes. I would love to go but I am going to be at the National Fire Academy. Pensions & Investments Publication Audit Sondra Smith: Do you want to continue receiving this publication? Marion Doss: It doesn't cost anything. Why don't we have it sent to the entire Pension Board. Fire Pension Minutes February 26, 2004 Page 7 of 7 The Monitor Sondra Smith: A copy of the Monitor is attached to the agenda. Ashland Management Kit Williams: Ashland Management still has not responded to my letter that I sent them. Pete Reagan: I think you did an excellent job in drafting that letter. Kit Williams: I will let you know if they ever respond. Pete Reagan: Kit, do you have the Resolutions for the 10 year DROP and Working after DROP that will go before the Council completed? Sondra Smith: The agenda item never went around. It was stopped by the Mayor, I sent it for his signature and that is where it stopped. Kit Williams: He has to forward it to the Council whether he likes it or not. Sondra Smith: He wanted the Chief to write a memo and the Chief just finished the memo. I have a copy of the staff review form and the backup documentation. I will get you a copy so you can do the resolutions. Kit Williams. Some of you Board members need to present your side of the issue and present why the Board believes this is the right thing to do. Meeting Adjourned at 11:40 AM. LONGER INVESTMENTS INCORPORATED A Registered Invatrnmt Advisor March 5, 2004 City of Fayetteville Fire Pension and Relief Fund Attn: Sondra Smith 113 West Mountain Fayetteville, Arkansas 72701 Dear Sondra: Northern Trust has notified our office that they have changed the company through which they clear security trades. They have further requested that we provide an updated Option Account Application for the Fayetteville Fire Pension and Relief Fund account in order to complete the system changes. The use of options for hedging purposes has been approved in the investment policy for the account. Will you and the other members of the board please sign the enclosed form where indicated and return it to our office in the envelope provided? We will submit the form to Northern Trust for processing. The income and net worth information on the Option Account Application is based on the annual income and value of the account. The investment experience information is based on the trading history of the account. Thank you for your assistance in this matter. Please feel free to call our office if you have questions regarding the enclosed form. Sincerely, LAA Tina M. Lamb Client Services Manager Enclosure P.O. Bac 1269 liayellrvillr, Arkansas 72702 Trlq'hone: 501-443-5851 lol! free:800-827-7710 Fax: 501-443-7129 RECEi`.!ED MAR 0 8 2004 CITY OF FAYETTEVILLE CITY CLEF.K s it Northern Th t Option Account Application Northern Trust Securities, Inc. Please complete the information a d sign where indicated 1. CUSTOMER INFORMATION • • First Name Middle Name Age Joint Tenant Name Marital Status NT9000558 Longer Investments Inc Last Nar Fayetteville Fire Pension & Relief Fund PO Box 1269 No. of Dependents Fayetteville AR 72702-1269 0259 Have you granted trading authorization to another parry? % Yes D No Age Mantel Status If so: 1) Your agent must also complete an Options Account Agreement; 2) Please attach the trading authorization unless you have previously provided it to us. Please indicate the rdarionship between you and your agent (Investment advisor, family member, trustee, etc 1.9SwSri'c484 d\SDt 2. EMPLOYMENT AND FINANCIAL INFORMATION Employer Type of Business Business Address City Occupation/ Position State If you are retired or NOT currendy employed, please provide the source of your income here: Zip Code 3. ANNUAL INCOME All this information must be provided in accordance with the requirements of the National Association of Securities Dealers, Inc. and the Options Exchange. Approximate Annual Income from All Sources: (For joint account check your combined income.) D Under $25,000 O $25,000-$50,000 • O $50,000-$100,000 g Over $100,000 Please state amount $ x01 I b I Estimated Net Worth: (cvclueive ofhome and farm) D Under $50,000 0 $50,000-$100,000 0 $100,000-$500,000 $Over $500,000 Please state amount $ I0,SEai r %'l 4 Investable Assets: (including cash and securities) O Under $50,000 0 $50,000-$100,000 0 $100,000-$500,000 IQOver $500,000 Please state amount $ 1 0, 567 , Tf \ y Tax Bracket: 0 15%. D 28%. 0 31n%' 0 36% 0 39.6% Personal Information: Marital Sra us: 0 Single 0 Married Number of Dependents Date o Birth 1 Age For assistance, please contact the Investor Services Center at (800) 621-4482. Please mail your form to: Northern Trust Securities, Inc., 801 South Canal C4S, Chicago, 11.60607. 3. ANNUAL INCOME'(Continted) • Bank Reference: Name of Bank Acco nt Number' Branch / City State Zip Code 4. TRADING PLANS Level 1 Level 2 ❑ Covered Call Writing, Purchases, Straddles and Combinations (Purchase Only) Level 3 0 'Covered Call Writing, Purchases, Straddles and Combinations (Purchase Only), Spreads Level 4 0 *Covered Writing, Purchases, - Straddles and Combinations, Spreads, Uncovered Writing Level 5 0 *Covered Writing, Purchases, Spreads, Straddles and Combinations, Uncovered Writing 'Margin account. required Equity Options Covered Call Writing Index Options Not. applicable Purchases .Purchases Straddles and Combinations (Purchase Only) Purchases Straddles arid Combinations (Purchase Only) Purchases Straddles and Combinations Spreads, Uncovered Writing Trading Experience ❑ None O Moderate )extensive O None 0 Moderate 0 Extensive O None ❑ Moderate ❑ Extensive O None 0 Moderate O Extensive ❑ None ❑ Moderate 0 Extensive 5. INVESTMENT OBJECTIVES *Preservation of Capital. (iM) )1 Income (02), IF:Capital Appreciation (03) , ❑Speculation (04) ❑ Trading Profits (05) ❑ Other (06) (Please specify) Optional Information Risk Tolerance: O Conservative 0 Moderate 0 Aggressive 0 Combination General Investment Knowledge:0 Extensive 0 Good 0 Limited Specific Investment Knowledge: 0 Stocks O Bonds 0 Options ❑ Variable Contracts 0 Mutual Funds ❑ Limited Partnerships Time Horizon: 0 Short (0-5) 0 Intermediate (6-10) 0 Long (over 10 years) 0 Combination 6. INVESTMENT EXPERIENCE • Investment knowledge:. • 0 Limited 0 Good eirExtensive Number of years trading: 16 Frequency of option transactions Stocks 16 Bonds Current option accounts with other brokerage firms: Commodities )6 Equity Options 1 6 Index Options Size of transactions: $ 475b ($1,000, $5,000, $10,000, etc.) Name el Finn Cunene Positions —2— 7. OPTION ACCOUNT AGREEMENT 1 agree with and represent to Northern Trust Securities, Inc. ("NTSI") as follows: 1. 1 understand that my account is tarried by National Financial Services LLC ("NES") and that all terms of this Agreement also apply berween me and NFS. 2. All transactions shall be subject to the constitutions, rules, regulations, customs and usages of The Options Clearing Corporation and any exchange or other market- place where executed. In addition, I am aware of, and agree to be bound by, the rules of the National Association of Securities Dealers, Inc. (NASD) and the New York Stock Exchange, Inc (NYSE) applicable to option contracts. 3. Any securities and funds held by you in any of my accounts may be held and used by you as security for the performance of my obligations to you under this agree - mens. 4. In ase of my insolvency, death or the attachment of myproperty, you may, with respect to any open options contact position, rake such steps as you may consider necessary or appropriate to protect yourself against loss. - - 5.1 will not enter any order for options until I have received, read and understood the appropriate Options Disclosure Document(s) of The Options Clearing Corporation. I specifically affirm the following disclosures as set forth in said Document(s): A. That both the purchase and the writing of options contacts involve a high degree of risk, are not suitable for many investors and, accordingly, should be entered into only by Investors who understand the nature and extent of their rights and obligations and are fully aware of the inherent risk involved, especially during extreme market volatility or trading volumes. B. That I should not purchase any option unless 1 am able'to sustain a total loss of the premium and transaction costs and (i) that I should not write a all option unless I either own the underlying security (or a security convertible, exchangeable or exercisable into such underlying security) or am able to sustain substantial financial losses and (ii) that 1 should not write a put option unless I am able to sustain the loss resulting from purchasing the underlying security at the exercise price. C. Thar the price of an options contact is affected by various factors such as the relationship between the exercise price and the market price of the underlying secu- rity, the expiration date of the option and the price fluctuations or other characteristics of the underlying stock. D. That the exchanges or other regulatory bodies may restrict transactions in particular options or the exercise of options contacts in their discretion from time to time. E. That all index option exercises are settled by cash payment and not by the delivery of securities; and that all index option exercises are based on the closing index value and that any "in the money" :index options;exercised prior to the availability of the dosing index value face the risk of closing out of the money due to a sub- sequcnt adverse change in the index-valuc: --• _ - 6. 1 have noted particularly those sections of The Options Clearing Corporation Disclosure Document(s) which summarize the risk factors involved in options trading and I have determined that, in view of my financialsituation and investment objectives, options trading is suitable for me. 1 shall advise you of any changes in my investment objectives; financial situation and needs insofar as such changes are material to my options transactions. The financial and other information listed on the reverse side is accurate. 7. 1 am aware of your requirements and time limitations for accepting an exercise notice. In the event that I fail to instruct you not to exercise an option "in the money" by 3/4 of a point or more by 2:30 p.m. (Eastern rime) on the business day immediately preceding the expiration date of the option, I understand that you will use your best efforts to exercise such option and liquidate the underlying securities for my account and at my sole risk for which I shall be charged two commissions. I agree to pay the full aggregate exercise price for rhe underlying securities covered by the option contract. I understand that 1 will be charged at last one commission in connec- dotion with the exercising of any option. I further understand that you reserve the right to exercise any option which would not be profitable to me, for your own account. 111 fail to instruct you not to exercise an option "in the money" by 3/4 of a point or more by the rime sated above and you, for whatever reason, do not exercise an option on my behalf, I hereby agree to waive any and all claims for 'damage or loss which 1 might have at the time or any time thereafter against you arising out of the .. fact that the option was not exercised. 8. I understand that before writing any option 1 must have in my account a minimum equity or appropriate position in such amounts as you may specify from rime to rime, and that no withdrawals of cash or securities will be permitted from the account which would reduce either the equity or position below your requirements. 1 fur- ther understand that any orders ro sell any securities held in my account pursuant to such minimum maintenance requirements may be refused by you at your sole dis- cretion, and I shall not hold you liable for any loss that I may sustain duc to your refusal ro permit the sale of said securities during such period. 9. Regarding any margin transactions 1 may make and supplementing the terms and conditions of my Margin Account Agreement, in the event 1 do not meet your mar- gin calls promptly, you are authorized in your sole discretion, and without notification ro me, to take any and all steps necessary to protect yourself in connection with put or call transactions made kr my account, induding without limitation the right to buy or sell short, or short exempt, for my account and risk any part or all of the shares represented by options endorsed by you for my account, or to buy, sell or exercise any put or call options as you may deem necessary ro fully protea yourself. Any and all losses and expenses, including attorneys' fees, incurred by you in this connexion will be reimbursed by me. 10. 1 shall have the sole responsibility to exercise, in a proper and timely manner, any right, privilege or obligarion of ail pui option call option or other option which you may purchase, handle, endorse or carry for my account(s). You shall not be liable in connexion with rhe execution, handling, selling, purchasing, or endorsing of options for my account. 11 -1, alone or in concert with others, will nor violate the position limits or the exercise limits of the options exchanges and the NASD or NYSE as set forth in The Options Clearing Corporacion Disclosure Document(s). 12.1 understand and acknowledge that, when transactions on my behalf are ro be executed in options traded in more than one marketplace, in the absence of my specif- ic instructions, you may use your discretion in selecting the market in which to enter my orders. 13. Securities in accounts carried by National Financial Services LLC ("NFS"), a Fidelity Investments company, are protected by the Securities Investor Protection Corporation ("SIPC") up to $500,000 (induding cash daims limited to $100,000). NES has arranged for additional unlimited insurance protection for cash and securi- ries to supplement its SIPC coverage. Neither coverage proiects against a decline in the market value of securities. 14. Them is Agreement and its enforcement shall be governed by the laws of the Commonwealth of Massachusetts, its provisions shall inure to the benefit of yourr present corporation and its successors, and shall inure to the benefit of and be binding upon my estate, executors, administrators, successors and assigns. 15. Except to rhe extent to which they conflict with this Agreement, the provisions of my Margin Account Agreement are incorporated herein by reference. In the event of a conflict, rhe provisions of this Agreement shall control. 16. With reference to the ?Iloarion of exercise notices assigned, I understand that you will use the random selection method of allocation. This method randomly selects from all customers short option positions, including positions established on the day of assignment, those option contracts which are subject to exercise. I further under- stand that all short option positions are liable for assignment ser any rime. A derailed description of this method is available upon written request. • 3— 7. OPT?ON ACCOUNT AGREEMENT (conr:,rued) • r, - .. NOTICE TO CUSTOMER: • Payment for Order How: NTSI or NFS transmits cuskomer orders for execution to various exchanges or market centers based on a number of factors. These include: size of order, trading characteristic of rhe security, favorable execution prices (including the opportunity for price improvement), access to reliable market data, availabil- ity of efficient automated transaction processing and reduced execution costs through price concessions from the market centers. Certain of the market centers may exe- cute orders at prices superior to the publicly quoted market in accordance with their rules or practices. While a customer may specify that an order be directed to a par- ticular marker center for execution,* the order -routing policies, raking into consideration all of the factors listed above, arc designed to result in favorable transaction processing for customers. Please note: Orders placed through any telephone, electronic, or on-line trading systems cannot specify a particular market center for execution. NTSI and/or NES receives remuneration, compensation or other consideration for directing customer orders for equity securities to particular broker/dealers or market centers for execution. Such consideration, if any, takes the form of financial credits, monetary payments or reciprocal business. New York Stock Exchange Rule 382 requires that NTSI and NFS allocate between them certain functions regarding the administration of your brokerage account. The Following is a summary of the allocation services performed by NTSI and NFS. A more complete description is available upon request. NTSI is responsible for (1) obtaining and verifying brokerage account information and documentation, (2) opening, approving and monitoring your brokerage account, (3) transmitting timely and accurate instructions to NFS with respect to your brokerage account, (4) determining the suitability of investment recommenda- tions and advice, (5)•operating and supervising your brokerage account and its own activities in compliance with applicab e laws and regulations, including compliance with margin rules pertaining to your margin account (if applicable), and (6) maintaining the required books and records for the services it performs. NFS shall perform the following tasks at the direction of NTSI: (1) execute, clear and settle transactions processed through NFS by NTSI, (2) prepare and send transaction confirmations and periodic statements of your brokerage account, (unless NTSI has undertaken to do so). Certain pricing and other information may be provided by NTSI or obtained from third panics, which has not been verified by NFS, (3) act as custodian for funds and securities received by NFS on your behalf, (4) follow the instructions of NTSI with respect to transactions and the receipt and delivery of funds and securities for your brokerage account, and (5) extend margin credit for purchasing or carrying securities on margin. NTSI is responsible for ensuring than your brokerage account is in compliance with federal, industry and NFS margin rules, and for advising you of margin requirements. NFS shall maintain the required books and records for the services it performs. • 8. PLEASE READ THE OPTION ACCOUNT AGREEMENT AND SIGN BELOW I REPRESENT THAT I HAVE READ THE TERMS AND CONDITIONS GOVERNING THIS ACCOUNT INCLUDING THE SPECIAL STATEMENT FOR UNCOVERED OPTION WRITERS AND AGREE TO BE BOUND BY SUCH TERMS AND CONDITIONS AS CURRENTLY IN EFFECT AND AS MAY BE AMENDED FROM TIME TO TIME. THIS ACCOUNT IS GOVERNED BY A PRE -DISPUTE ARBITRATION AGREEMENT WHICH APPEARS BELOW. I ACKNOWLEDGE RECEIPT OF THE PRE -DISPUTE ARBITRATION AGREEMENT. In consideration of your accepting one or more accounts, I (we) hereby acknowledge that 1 (we) have read, understand and agree to the terms set forth in the Option Account Agreement above. Customer's Signature Joint Tenant's Signature (J any) Joint Account Holders (it any) Joint Account Holders (if any) In the case of joint account, all tenants must sign. Dale Date Date Dale TT" nu n For Internal Use Only Approval to level _ Approval HOP Date Options Disclosure Document sent Investment Consultant Date Date 1 l • 8..PkEASE READ THE OPTION ACCOUNT AGREEMENT AND SIGN BELOW (Continued) PLEASE KEEP THIS DOCUMENT FOR YOUR RECORDS. Dear Customer(s), Inaccordancewith the rules of the New York Stock Exchange and rhe National Association of Securities Dealers, following is a SPECIAL STATEMENT FOR UNCOVERED OPTION WRITERS. After reading the STATEMENT, please sign on page 4, tear at the perforation, and return the signature portion to us in the enclosed envelope. - Thank you. 9. SPECIAL STATEMENT FOR UNCOVERED OPTION WRITERS There are special risks associated with uncovered option writing which expose the investor to potentially significant loss. Therefore, this type of strate- gy may hot be suitable for all customers approved for options transactions. 1. The potential loss of uncovered call writing is unlimited. The writer of an uncovered call is in an extremely risky position, and may incur large losses if the value of the underlying instrument increases above the exercise price. 2. As with writing uncovered calls, the risk of writing uncovered put options is substantial: The writer of an uncovered put option bears a risk of loss if the value of the underlying instrument declines below the exercise price. Such loss could be substantial if there is a significant decline in the value of the underlying instrument. 3. Uncovered option writing is thus suitable only for the knowledge- able investor who understands die risks, has the financial capacity and willingness to incur potentially substantial losses, and has suf- ficient liquid assets to meet applicable margin requirements. In this regard, if the value of the underlying instrument moves against an uncovered writer's options position, the investor's broker may request significant additional margin payments. If an investor does nor make such margin payments, the broker may liquidate stock or options positions in rhe investor's account, with little or no prior notice in accordance with the investor's margin agreement. 4. For combination writing, where the investor writes both a put and a call on the same underlying instrument, the potential risk is unlimited. 5. If a secondary market in options were to become unavailable, investors could not engage in closing transactions, and an option writer would remain obligated until expiration or assignment. 6. The writer of an American-style option is subject to being assigned an exercise at any time after he has written the option until the option expires. By contrast, the writer of a European -style option is subject to exercise assignment only during the exercise period. NOTE: It is expected that you will read the booklet entitled "Characteristics and Risks of Standardized.Options" available from NTSI. In particular, your attention is directed to the chapter entitled "Risks of Buying and Writing Options." This statement is not intended to enumerate all of the risks entailed in writing uncovered options. • • 10.r.&ROKERAGE ACCOUNT PRE -DISPUTE ARBITRATION AGREEMENT I AM AWARE OF THE FOLLOWING: (A) ARBITRATION IS FINAL AND BINDING ON THE PARTIES (B) THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO JURY TRIAL (C) PRE -ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT PROCEEDINGS. (D) THE ARBITRATORS AWARD 15 NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED. (E) THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY. • I AGREE THAT ALL CONTROVERSIES THAT MAY MUSE BETWEEN US CONCERNING ANY ORDER OR TRANSACTION, OR THE CONTINUATION, PERFORMANCE OR BREACH OF THIS OR ANY OTHER AGREEMENT BETWEEN US, WHETHER ENTERED INTO BEFORE, ON, OR AFTER THE DATE THIS ACCOUNT IS OPENED, SHALL BE DETERMINED BY ARBITRATION BEFORE A PANEL OF INDEPENDENT ARBITRATORS SET UP BY EITHER THE NEW YORK STOCK EXCHANGE, INC., OR NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC., AS 1 MAY DESIGNATE. IF 1 DO NOT NOTIFY YOU IN WRITING WITHIN FIVE (5) DAYS AFTER I RECEIVE FROM YOU A WRITTEN DEMAND FOR ARBITRATION, THEN I AUTHORIZE YOU TO MAKE SUCH A DESIGNATION ON MY BEHALF. I UNDERSTAND THAT JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT OF COMPETENT JURISDICTION. No person shall bring a putative or certified class action to arbitration, nor seek to enforce any pre -dispute arbitration agreement against any person who has initiated in court a putative class action; who is a member of a putative class who has not opted out of the class with respect to any claims encompassed by the putative class action until: (i) the class certification is denied; (ii) the class is decertified; or (iii) the customer is excluded from the class by the court. Such forbearance to enforce an agreement to arbitrate shall nor constitute a waiver of any rights under this agreement except to the extent stated herein. Northern Trust Securities, Inc., member NASD, SIPC clearing through National Financial Services LLC, Member NYSE, SIPC (11/00) 114335 P6-017-939 1.747211.100 (01/04) • • FAYETTEVILLE THE CITY OF FAYETTEVILLE, ARKANSAS DEPARTMENTAL CORRESPONDENCE To: Firemen's Pension and Relief Fund Board of Trustees Sondra Smith2 City Clerk From: Dan Coodgl Date: Subject: March 3, 2004 Fire Pension Board Resolution 02-03 — Enacting a 10 year DROP Fire Pension Resolution 04-03 — Working after DROP When the issue of the 10 year DROP plan and working after DROP first surfaced at the Pension Board meeting, some concerns were voiced by a couple of the members stating they did not think it would be good for the department. At that point I asked Chief Bosch to do some research and give me a report on his findings Chief Bosch determined that the two plans would not be in the best interests of the department. Since I rely on Chief Bosch to manage the Fire Department and keep it running as well as possible, I will concur with his conclusions. Please note that I supported the temporary 3% COLA which was the third item on the agenda. I will work for the continued improvement of the department as a whole at every opportunity. • • ry G • FAYETTEVILLE THE CITY OF FAYETTEVILLE, ARKANSAS DEPARTMENTAL CORRESPONDENCE To: Firemen's Pension and Relief Fund Board of Trustees Sondra Smiths City Clerk From: Date: Subject: Dan Coodl$ March 3, 2004 Fire Pension Board Resolution 02-03 — Enacting a 10 year DROP Fire Pension Resolution 04-03 — Working after DROP When the issue of the 10 year DROP plan and working after DROP first surfaced at the Pension Board meeting, some concerns were voiced by a couple of the members stating they did not think it would be good for the department. At that point I asked Chief Bosch to do some research and give me a report on his findings. Chief Bosch determined that the two plans would not be in the best interests of the department. Since I rely on Chief Bosch to manage the Fire Department and keep it running as well as possible, I will concur with his conclusions. Please note that I supported the temporary 3% COLA which was the third item on the agenda. I will work for the continued improvement of the department as a whole at every opportunity. hi/ Lea 3/it /aq CITY COUNCIL AGENDA MEMO • To: City Cecil Meeting of March 16, 2004 Mayor and City Council From: Chris Bosch, Fire Chief atti\ Date: February 25, 2004 Subject: Proposed Council Resolutions 02-03, 03-03 & 04-03. RECOMMENDATION Staff recommends the City Council approve Resolution 03-03 allowing for the implementation of a 3% temporary Cost of Living Allowance for members of the Firemen's Pension & Relief Fund. Staff recommends City Council denial of proposed Resolutions 02-03 and 04-03, which would extend the current DROP Retirement Plan from 5 to 10 years and allow those employees currently signed up for the DROP Retirement Plan to work past their agreed upon DROP retirement date. BACKGROUND During the 2003 session of the Arkansas State Legislature, State Policy Makers received two pieces of proposed legislation that, if passed, would change the conditions of the current Deferred Retirement Option • Plan (DROP). With approval from the local Board of Trustees and the City Council Act 1369 will change the terms of the current DROP to allow participants to .extend the original DROP agreement from a maximum 5 -year term to a maximum 10 -year term. With approval from the local Board of Trustees and the City Council, Act 1372 will allow participants to continue to work beyond the end of the 10 -year drop plan. These proposed changes also recommend the implementation of a temporary 3% Cost of Living Allowance (COLA) for current and retired members of the fund. DISCUSSION The Board of Trustees of the Fayetteville Firemen's Pension & Relief Fund approved these proposed changes in December 2003. Once the Local Board of Trustees approved these changes, the Arkansas State Fire and Police Pension Review Board received the changes and approved them in January 2004. The final approval rests with the Fayetteville City Council. The attached information identifies the actuarial soundness of the current fund and highlights the fact that these changes will cause no harm to the soundness of the fund balance; however, prior to this report very little research was conducted regarding the other impacts theseproposed changes will have on the Department as a whole. It is certain these changes will provide a true benefit for those employees covered under this retirement system; however, currently there are only nine members of the Fayetteville Fire Department who are • eligible to participate in this fund and stand to benefit from these changes. Each of these nine employees 1 1 • • 410 City Citcil Meeting of March 16, 2004 holds ranking positions within the Department. Further, these nine members only constitute ten percent of the entire organization. The breakdown of these nine positions is as follows: IMPACTS One (1) Assistant Chief Five (5) Captains Three (3) Driver/Operators. After a careful review of the proposed retirement dates for the individuals covered under the current DROP agreement, my Staff and I believe that changing the current guidelines of the DROP plan will be detrimental to the Department is several ways. I have listed the two primary impacts of these changes in the following paragraphs. The implementation of these changes will hold up approximately seventeen (17) promotions within the organization and will indefinitely restrict the opportunity for upward mobility throughout the ranks. For example, if my Assistant Chief decides to extend his DROP date he will hold up four promotions by eliminating the need to replace the Assistant Chief, a Battalion Chief, a Captain and a Driver Operator, which are all progressive promotional steps within the organization. These changes will stifle promotional opportunities and will hurt the Department's overall morale, creating even greater problems for the organization in the very near future. The implementation of these changes will also prohibit the Department from recognizing any projected salary savings attained through attrition. Under the current DROP guidelines, over the next five years the Department will realize an annual salary savings equivalent to the salary of five entry-level Fire Fighters. This salary savings can be used to either hire additional Fire Fighters or offset the cost of salaries for the Fire Fighters for Fire Station 7. By changing the rules of this plan, those savings will no longer be available. Keep in mind that these savings projections include the cost of hiring replacement personnel and the cost of promoting personnel to fill vacancies in the existing rank structure, which will occur through normal attrition. CONCLUSION As previously stated, these proposed changes will offer a wonderful enhancement to the current retirement benefit for the nine individuals currently eligible to take advantage of the DROP retirement; however, these individuals represent only ten percent (10 %) of the overall Fire Department. As the Fire Chief, it is my responsibility to look out for the welfare of the entire organization and I firmly believe the implementation of these changes you will be creating a situation that could be detrimental to the overall morale and welfare of the entire Fire Department. Further, as the Fire Chief, this City Council has entrusted me with the responsibility of operating the Fire Department in the most cost effective manner possible. This governing body has also instructed me to look for budgetary savings in all aspects of my organization and to operate in such a way that allows me to meet and exceed the community's needs in the most cost-effective manner. I believe that by implementing these proposed changes it will be difficult for my Staff and me to recognized potential savings in our current and projected budgets. My Staff and I have identified a progressive annual salary savings, which could 2 • • City C•cil Meeting of March 16, 2004 adequately fund the annual salaries for five additional Fire Fighters; however, if approved these proposed changes will not allow us to realize those savings. Further, changing the terms of the plan, at this point will cause the Department to wait an additional five years before it can begin to realize those savings, which will help to enhance service delivery. In closing, I believe that by extending the DROP Plan from 5 to 10 years, and allowing these employees to continue working past those agreed upon dates will be detnmental to the overall morale of the Department and therefore must be rejected at this time. By basing the decision to change the current benefits program solely on quantitative data provided by the actuary, without considering the qualitative impacts these changes will have on the Department leads to ineffective decisions and I believe these changes will certainly prove to be detrimental to the overall welfare of the organization BUDGET IMPACT Currently, based on the information provided by the Osborn, Carreiro & Associates, the overall impact to the current fund is insignificant; however, this change in retirement benefits will not allow the Department to recognize the estimated salary savings normally provided through the attrition process 3 • • From the Desk of the Fire Chief Memo To: Dan Coody, Mayor From: Chris Bosch, Fire Chie CC: Firemen's Pension & Relief Board Date: February 25, 2004 Re: Changes to the DROP Plan Fayetteville Fire Dept 303 W. Center St. Fayetteville, AR. 73701 (479) 575-8365 Introduction As you know, on February 2, 2004 I requested that Council Agenda Items 02-03 and 04-03 be pulled from the Council Agenda so I could have an opportunity to review them and determine the level of impact these items would have on the Fire Department as a whole After a careful review of these items I have developed the following response to these items. BACKGROUND During the 2003 session of the Arkansas State Legislature, State Policy Makers received two pieces of proposed legislation that, if passed, would change the conditions of the current Deferred Retirement Option Plan (DROP). With approval from the local Board of Trustees and the City Council Act 1369 will change the terms of the current DROP to allow participants to extend the original DROP agreement from a maximum 5 -year term to a maximum 10 -year term With approval from the local Board of Trustees and the City Council, Act 1372 will allow participants to continue to work beyond the end of the 10 - year drop plan. These proposed changes also recommend the implementation of a temporary 3% Cost of Living Allowance (COLA) for current and retired members of the fund: 1 • DISCUSSION The Board of Trustees of the Fayetteville Firemen's Pension & Relief Fund approved these proposed changes in December 2003. Once the local Board of Trustees approved these changes, the Arkansas State Fire and Police Pension Review Board received the changes and approved them in January 2004. The final approval rests with the Fayetteville City Council The attached information identifies the actuanal soundness of the current fund and highlights the fact that these changes will cause no harm to the soundness of the fund balance; however, pnor to this report very little research was conducted regarding the other impacts these proposed changes will have on the Department as a whole. It is certain these changes will provide a true benefit for those employees covered under this retirement system; however, currently there are only nine members of the Fayetteville Fire Department who are eligible to participate in this fund and stand to benefit from these changes. Each of these nine employees holds a ranking position within the Department. Further, these nine members only constitute ten percent of the entire organization. The breakdown of these nine positions reveals that these employees also hold ranking positions within the organization The positions discussed in the proceeding paragraph are as follows: One (1) Assistant Chief Five (5) Captains Three (3) Dnver/Operators. Impacts After a careful review of the proposed retirement dates for the individuals covered under the current DROP agreement, my Staff and I believe that changing the current guidelines of the DROP plan will be detnmental to the Department in several ways. I have listed the two primary impacts of these changes in the following paragraphs The implementation of these changes will hold up approximately seventeen (17) promotions within the organization and will indefinitely restrict the opportunity for upward mobility throughout the ranks. For example, if my Assistant Chief decides to extend his DROP date he will hold up four promotions by eliminating the need to replace the Assistant Chief, a Battalion Chief, a Captain and a Driver Operator, which are all progressive promotional steps within the organization. I believe these changes will stifle promotional opportunities and will hurt the Department's overall morale, creating even greater problems for the organization in the very near future. The implementation of these changes will also prohibit the Department from recognizing any projected salary savings attained through attntion. Under the current DROP guidelines, over the next five years the Department will realize an annual salary savings • Page 2 • • • equivalent to the salary of five entry-level Fire Fighters. This salary savings can be used to either hire additional Fire Fighters or offset the cd§f bf salaries for the Fire Fighters for Fire Station 7. By changing the rules of this plan, those savings will no longer be available Keep in mind that these savings projections include the cost of hinng replacement personnel and the cost of promoting personnel to fill vacancies in the existing rank structure, which will occur through normal attntion. CONCLUSION As previously stated, these proposed changes will offer a wonderful enhancement to the current retirement benefit plan for the nine individuals currently eligible to take advantage of the DROP retirement, however, these individuals represent only ten percent (10 %) of the overall Fire Department. As the Fire Chief, it is my responsibility to look out for the welfare of the entire organization and I firmly believe the implementation of these changes will create a situation that could be detrimental to the overall morale and welfare of the entire Fire Department. Further, as the Fire Chief, the City Council has entrusted me with the responsibility of operating the Fire Department in the most cost effective manner possible. This governing body has instructed me to look for budgetary savings in all aspects of my organization and to operate in such a way that allows me to meet and exceed the community's needs in the most cost-effective manner. I believe that by implementing these proposed changes it will be difficult for my Staff and I to recognized potential savings in our current and projected budgets My Staff and I have identified a progressive annual salary savings, which could adequately fund the annual salaries for five additional Fire Fighters; however, if approved these proposed changes will not allow us to realize those savings. Further, changing the terms of the plan, at this point will cause the Department to wait an additional five years before it can begin to realize those savings, which will help to enhance service delivery. In closing, I believe that by extending the DROP Plan from 5 to 10 years, and allowing those employees to continue working past the onginally agreed upon dates will be detrimental to the overall morale of the Department and therefore must be rejected at this time. Basing the decision to change the current benefits program solely on quantitative data provided by the actuary, without considering the qualitative impacts these changes will have on the Department, leads to ineffective decisions and will certainly be detnmental to the overall welfare of the organization. BUDGET IMPACT Currently, based on the information provided by the Osborn, Carreiro & Associates, the overall impact to the current fund is insignificant; however, this change in retirement benefits will not allow the Department to recognize the estimated salary savings normally provided through the attrition process. • Page 3 • RECOMMENDATION • • It is the recommendation of myself and my Staff that the City Council approve the temporary 3% Cost of Living Allowance (COLA); but deny the proposed Resolutions 02- 03 and 04-03, which would modify the current terms of the existing DROP Retirement Plan. • Page 4 • • From the Desk of the Fire Chief Memo • Fayetteville Fire Dept 303 W. Center St. Fayetteville, AR. 73701 (479) 575-8365 To: Board of Directors, Firemen's Pension and Relief Fund From: Chris Bosch, Fire Chie Hugh Earnest ChiefAdministiative Officer' CC: Sandra Smith, Crty Clerk Dan Coody, Mayor Date: February 2, 2004 Re: Resolutions 02-03 and 04-03 On Monday February 2, 2004, I received notice of your proposed changes to the DROP Retirement System. These changes consist of implementing Acts 1369 and 1372, as approved by the Arkansas State Legislature dunng the 2003 session. I have requested these two items be held from the February 17, 2004 City Council Agenda so I may have an opportunity to review them and identify any potential impacts, which could arise because of these proposed changes I will be conducting this review over the next 30 days and will prepare a report for the City Council and the Firemen's Pension and Relief Fund Board pnor to our placing them on the Council's March 16, 2004 agenda. If you have any questions regarding my request, please feel free to contact me. I will be happy to visit with you at your convenience. Thank you. • • Fayetteville Firemen's Pension and Relief Fund City of Fayetteville Arkansas Resolution Number 132c03 A Resolution to allow the Fayetteville Firemen's Pension and Relief Fund to enact the Act 1369 of 2003 instituting a 10 year DROP. Whereas; The Fayetteville Firemen's Pension and Relief Fund met on December 18th, 2003 and passed a resolution to enact Act 1369 of 2003, for it's members. And, Whereas; The Actuarial Firm of Osborn, Carreiro and Associates, have reported that these increases in benefits, would be considered actuanally sound under the rules of the Arkansas Fire and Police Pension Review Board. And, (See page 2, 1st paragraph of actuarial report dated November 20th) • Whereas; Act 1369 of 2003 requires the Pension Board to pass a resolution, as well as City Council. Therefore be it resolved; That the Fayetteville Firemen's Pension and Relief Fund, City of Fayetteville Arkansas, pass this resolution, increasing the five year DROP plan to a ten year DROP plan. A copy of this resolution has been forwarded to the City Clerk, Fayetteville Arkansas, and The Arkansas Fire and Police Pension Review Board office in Little Rock Arkansas. PASSED and APPROVED this 18'" day of December, 2003. • • ARKANSAS FIRE & POLICE PENSION REVIEW BOARD PR January 21, 2004 Board of Trustees Fayetteville Fire Pension Fund 113 West Mountain Fayetteville, AR 72701 Dear Board of Trustees: RECEIVED JAN 2 3 2004 ACCTG. DEPT. P.O. DRAWER 34164 LITTLE ROCK, ARKANSAS 72203 TELEPHONE: (501) 682- 1745 Fax: (501) 682 - 1751 email: info I@ lopfi•prb: com website: www.lopli-prb.com This letter is in response to your letter ofJanuary 14th regarding resolutions for three benefit increase proposals. The resolutions include the provisions under Act 1369 of 2003, which extends the DROP to 10 -years; implementing a temporary 3% COLA for all pensioners; and Act 1372 of 2003, which allows Fund members to remain employed after the DROP period ends. Based on the letter from the actuary dated November 20, 2003 and a follow-up email dated January 21, 2004 your Fund is able to implement these proposals and still remain actuarially sound. Therefore, your benefit increase proposals are approved. To properly implement the provisions under Act 1369 of 2003 and Act 1372 of 2003, it is necessary to seek approval from your governing body i.e. City of Fayetteville via an ordinance. Once this action is approved please forward a copy of the City's approval to the PRB. My decisions are subject to review by the PRB. The next meeting is scheduled for March 10, 2004 in Little Rock. However, this letter serves as authorization that, based on the results from the actuary, the temporary 3% COLA may be implemented effective January 1, 2004 and Acts 1369 and 1372 of 2003 may be implemented after approval of your local goveming body. Please contact me at 682-1745 with any questions you may have. Respectfully, David B. Clark Executive Director Cc: PRB Chairman Bill Lundy FAYETTELLE • THE CITY OF FAYETTEVILLE, ARKANSAS • January 14, 2004 Arkansas Fire & Police Pension Review Board (PRB) PO Box 34164 Little Rock, AR 72203 RE• Fayetteville Fireman's Pension Board Resolution No. 02-03 Enacting a 10 Year DROP Resolution No. 03-03 Enacting a Temporary 3% COLA Resolution No. 04-03 Enacting Working after DROP Dear Sirs: The Fayetteville Fireman's Pension Board passed the enclosed resolutions at a regular meeting of the board on December 18, 2003. I have also enclosed a copy of the minutes from the December. 18, 2003 meeting and a copy of the actuarial report. It is my understanding that the resolutions must be approved by the Arkansas Fire & Police Pension Review Board before they can become effective. If you have any questions or need any further information from the board please contact me at 479-575-8323. I look forward to your reply. Sincerely, Sondra Smith City Clerk Firemen's Pension Board Secretary 113 WEST MOUNTAIN 72701 479-521-7700 FAX 479-575-8257 0 11/20/2003 11:08 50137 847. ii OSBORN CARREIR — PAGE 02 Osborn, Carreiro & Associates, Inc. • ACTUARIES • CONSULTANTS • ANALYSTS November 20, 2003 Mr. Steve Davis Finance and Internal Services Director City of Fayetteville 113 West Mountain Fayetteville, AR 72701 Dear Mr. Davis: One Union National t'fara.Sulte 1690 124 West Capitol Avenue LIMB Rncli, ANisniai 72201 (SO1137618043 This report presents the results of our January 1. 2003 actuarial study of the assets and liabilities of the Fayetteville Firefighters Pension and Relief Fund (thc "Old Plan"). This report is .a supplement to our report of August 5, 2003 providing information you have requested. The purpose of this supplement is to project the old Plan costs under three scenarios: (1) No change is made. The Old Plan remains' as is. This will correspond to the information on page 6 of the August 5, 2003 report. (2) The effect that either i51tOP extended from 5 years to l0.years or Continued Employment after DROP. 1 (3) A temporary 3 year, 3"4 compound COLA is added to the Old Plan. COMMENTS A projection of the income, expenses, assets and stabilities of the Oid Plan arc shown on the three attached pages: These projections are for the Old Plan only and do NOT include the effect of a merger with LOPFI. The process, method, and assumptions are described fully in the August 5t 2003 report. Please consider this infomtation in ecnlunetton With the full report. The current plan as is (scenario 7) will be fully funded in 15 - 20 years. The plan is projected to • always have assets sufficient to mcct the benefit obligations.