HomeMy WebLinkAbout2004-10-21 - Agendas - Final I
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Police Pension and Relief Fund Board of Trustees
Agenda
Actober 21, 2004
A meeting of the Fayetteville Policemen's Pension and Relief Fund Board will be held on
July 15, 2004 at 1 :30 p.m. in Room 326 of the City Administration Building located at
113 West Mountain Street, Fayetteville, Arkansas.
1 . Roll
2. Approval of the Minutes of the July 15, 2004 Meeting
3 . Approval of Pension List for August, September and October 2004
4. Investment Report
5. 2003 Actuarial Valuation Report
6. Policemen's Pension Board Term End Date Change
7. Procedure for Notification of Deaths
8. Fire & Police Academy Conference
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Policemen's Pension & Rdief Fond Board of Trustees
Meeting Minutes
July 15, 2004
Page 1 of 11
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Police Pension and Relief Fund Board of Trustees
Meeting Minutes
July 15, 2004
A meeting of the Fayetteville Policemen's Pension and Relief Fund Board was held on July 15,
2004 at 1 :30 p.m. in room 326 of the City Administration Building located at 113 West
Mountain Street, Fayetteville, Arkansas.
PRESENT: Randy Bradley, Jerry Friend, Dr. James Mashburn, City Clerk Sondra Smith, City
Attorney Kit Williams, Shelly Turberville, Chief Rick Hoyt and Eldon Roberts.
ABSENT: Mayor Coody, Tim Helder and Jerry Surles.
Randy Bradley called the meeting to order.
• Approval of the April 29, 2004Meeting Minutes:
Dr. Mashburn moved to approve the minutes. Jerry Friend seconded the motion. Upon
roll call the motion passed 4-0. Mayor Coody, Tim Helder and Jerry Surles were absent:
Approval of Pension List for May, June and Julv 2004•
Sondra Smith: The difference between the June report and the July report is the supplemental
amount. The supplemental amount is not on the July Pension Report because our accounting
department has not received the check from the State; therefore the July amount paid to the
pensioners is less than the amount paid in June.
Eldon Roberts: That is retroactive to when it comes in so nobody losses anything.
Dr. Mashburn: How does this work I noticed you have Federal and State tax listed is that
deducted from the amount the pensioners receive?
Sondra Smith: Yes sir, the pensioner fills out the forms to make the necessary deductions.
Jerry Friend: That doesn't necessarily reflect what you have to pay.
• Dr. Mashburn: That is just on the amount of pension fund they are receiving from the City.
Sondra Smith: Yes sir, it is just like a payroll check you let them know how much you want to
have deducted.
Policemen's Pension 6 Relief Fund Board of Trustees
Meeting Minutes
July 15. 2004
Page 2 of J I
Jerry Friend moved to approve the Pension List for May June and July. Dr. Mashburn •
seconded the motion. Upon roll call the motion passed 4-0. Mayor Coody, Tim Helder and
Jerry Surles were absent.
Supplemental Benefits Letter:
A copy of the letter that was sent to the pensioners letting them know that we had not received
the supplemental benefit funding amount for this year was given to the Board.
Chief Rick Hoyt Retirement:
Dr. Mashburn moved to approve Chief Hoyt's retirement. Sondra Smith seconded the
motion. Upon roll call the motion passed 4-0. Mayor Coody, Tim Helder and Jerry Surles
were absent.
Frank Skelton Death Certificate — Benefits now go to spouse Frieda Skelton:
Sondra Smith: The death benefit check has been sent. His spouse Frieda is now drawing 50%
of his benefits.
Jerry Friend: 1 thought the windows benefits had changed to 90%.
Eldon Roberts: That is something this board needs to look at.
Jerry Friend: Kit pretty much told us that you can't increase the amount to 90% but I thought
that had changed.
Kit Williams: The last time we looked at it the amount was 501/o. Whether they have changed
the law since then 1 am not sure. If you did increase the benefit to widows you would have to
ask your actuaries to see if that would be actuarially sound to do that because that would be a
benefit increase.
Jerry Friend: I may have taken a nap and had a dream but I thought that it was mandatory.
Kit Williams: We had a case on it and the judge found as I thought the judge would that there
were options on this. Whether the legislature has changed it now or not I do not know that has
been a couple of years ago when we did that.
Sondra Smith: I think Kit received an Attorney General's Opinion on the amount of benefits.
Jerry Friend: I thought his opinion said we could not lower the widow benefits to 50%.
Sondra Smith: According to Kit's memo it had to be 50%.
Policemen's Pension & Relief Fund Board of Trustees
Mating Minutes
July 15, 2004
Page 3 of 11
• Kit Williams: The case I was speaking of involved dependents not a wife, the wife was
divorced from the pensioner at the time of his death. She was not allowed to draw his pension
his children are receiving the pension instead of her.
Jerry Friend: I think I went home and told my wife the good news that she would get 90%.
Randy Bradley: I don't think we have changed it.
Eldon Roberts: I know you haven't changed it but I'm not so sure that this board hasn't got the
authority now to change it. The benefit increase study has already been done on that salary
increase. When we did our benefit increase proposal to go to 90% of salary or whatever we
could have gone to 100% of salary, they granted us 1001/o of salary. They included widows in
that, they went on to say that they would prefer that we do 90% because it would be more
financially responsible. It might not pass today but it did then. I think there is a new law that
was passed at the last legislative session that allows you to do that if your board votes to do that.
Kit Williams: I think that is correct, I think they did open the door on that.
Dr. Mashburn: You have to show that it is financially sound to do that.
Kit Williams: 1 I think you would still have to go back to the actuaries even though it might have
been that way in the past.
• Eldon Roberts: And that might cause a problem.
Jerry Friend: I thought we covered this ground.
Eldon Roberts: That might cause a problem now to be actuarially sound. We just got the new
report from the actuary and all three of those columns were checked no. Are we fully funded,
are there enough liabilities on hand, and is this plan considered actuarially sound no.
Kit Williams: Well let's not ask for an increase in benefits then because it is not going to
happen.
Election Results: Jerry Friend and Jerry Surles:
Sondra Smith: The winners are Jerry Friend and Jerry Surles.
Police Pension Fund Deposited at the City — Email from Patricia Leach, Accounting:
Shelly Turberville: We have three different places the money is deposited.. Arvest Bank is the
fust place and we usually try to keep around $2,000 in that account unless we know that the 15a'
• is nearby and we are going to cut checks then we might let that stay in the account for a week or
two. Once the account has around $4,000 to $5,000 in it then we move some of that money to
Gamer. We can keep up to $ 100,000 in Garner and then the next time we cut the pension check
instead of drawing it down from Longer we draw it down from Gamer.
Policeman's Pension .@ Relief Fund Board of Trustees
Meeting Minutes
July 15, 2M4
Page 4 of I I
Kit Williams: Does Garner give you a better rate?
Shelly Turberville: It depends, right now I believe so.
Eldon Roberts: So the only question that we would have is all the different places that we are
keeping this money whatever it earns is that coming to the pension fund?
Shelly Turberville: Exactly.
Eldon Roberts: I assume it earns some interest at every one of those places.
Shelly Turberville: It does.
Dr. Mashburn: is it transferred routinely?
Shelly Turberville: The interest is paid monthly from Arvest Bank and Gamer. The interest
rate in June for your allocation of the money was $335.00.
Randy Bradley: That goes where?
Shelly Turberville: It goes back into your police investments that the city is holding.
Randy Bradley: Our pool here at the City? •
Shelly Turberville: Yes.
Eldon Roberts: Is there other City funds involved in this?
Shelly Turberville: When we send money to Gamer yes, but we allocate the interest depending
on how much money you have in Gamer, you get your portion and it stays in your account, it
doesn't go to anyone else's account but yours.
Randy Bradley: Then once you reach $100,000. . . ..
Shelly Turberville: Then we draw it down to pay for the next set of pension checks. We can
not put it in Garner and send it directly to Longer if you so choose. That was the guidelines that
were given to me when I took over this position.
Randy Bradley: This is money in addition to the $ 100,000? What is still being paid in?
Shelly Turberville: No, what builds up is the amount of money that is taken out of the checks
that the existing police have and then any tax money that we receive.
Kit Williams: Tum back money.
Shelly Turberville: Yes.
Jerry Friend: So we don't bring enough in anymore to have an excess to send to Longer
Policemen's Pension & Relief Fund Board of Trustees
Meeting Minutes
July 15, 2004
Page 5 of 11
• Shelly Turberville: We are getting more money from Longer and I think that is the way it is
going to be from now on.
Eldon Roberts: Are we paying Gamer anything to handle these funds.
Shelly Turberville: It is kind of in the pool of the entire City's money their fee is adjusted into
that and fhen the interest is allocated appropriately to the amount of money each account has.
Eldon Roberts: How would we be any better off in giving it to Garner than giving it to Longer?
Shelly Turberville: I think right now with the stock market Garner is making a little bit better
interest rate. I don't have those figures with me.
Kit Williams: It is also more liquid as Longer does much longer term investments. .
Elaine Longer. It sounds to me like they can handle those smaller inflows and outflows. We
would prefer to handle bigger inflows and outflows. It sounds to me if it is $ 100,000 on down it
is really like a checking account. If there was going to be coming and going out fairly quickly,
the things that we buy I would pretty much have to allocate it as cash on the books to be able to
have the cash ready as you need it. That gets you into short term interest rates so we wouldn't be
able to get excess return over what you are getting because this sounds like its just liquid money
that has to stay liquid.
• Jerry Friend: Why would Gamer charge a fee?
Kit Williams: Because they handle most of the cash for the city.
Jerry Friend: The banks hold cash and pay you.
Shelly Turberville: Gamer has some in money market but they are also investing money too. I
really think they are doing okay. I would have to come back with the exact figure of how much
it's making.
Jerry Friend: So it is not in an interest bearing account.
Kit Williams: They do a lot better than just a bank.
A discussion followed on the amount of money banks pay and the amount that Garner pays.
Shelly Turberville: At the end of May in Gamer the Police had $77,554 and the interest that
was made was $335 on that money.
Jerry Friend: I though it was just like a saving s account, the fees come from the trades.
• Elaine Longer: It sound to me if that is the interest rate on it for a month then you are probably
buying into a pool fund. Among all of that you have some liquid funds there to allow for
distributions. It sounds to me like you are buying into a bond portfolio that has more interest
than investments so you are getting a higher interest rate and you still have liquidity.
Policemen's Pension & Relief Fund Board of Trustees
Meeting Minutes
July 15, 20C4
Page 6 of 11
Dr. Mashburn: Is Gamer the agent. •
Kit Williams: It is a company.
Dr. Mashburn: Elaine what do you do with your spare cash? Do you keep it invested?
Elaine Longer: We don't have spare cash usually. We keep it invested. We have some cash
now but close to the quarter we won't have much cash. Usually we don't deal with cash except
what we need to.
Kit Williams: So it is really a pretty good three tier system, you have your checking account,
your short term money and then your long term money.
Jerry Friend: Who keeps all the book work on this for the City?
Shelly Turberville: The City and Gamer. Garner sends us a report and then we go over their
report.
Investment Report:
Elaine Longer: We will go through the reports and then I would like to talk a little bit about the
outlook as we go into the second half of the year. •
There are a lot of cross currents in the markets right now. We have a lot of good things
happening as far as economic growth, the earnings, capital spending and productivity
improvements are running higher than usual. You have a lot of good news but then on the other
side of the equation you have some of the risk that we detailed in our year end newsletter relating
to higher energy prices, weaker dollar, political risk, with an incumbent president that may be
threatened and geopolitical risk with what is going on internationally. Those things keep
popping up to the front page and it is offsetting the good news about what's going on in the
economic in earnings. So we are at an absolute dead stand still.
Through yesterday's trading every market index is down year to date even though earnings in the
first quarter were up 25% and for the year they will probably come in up 17%. The NASDAQ is
down about 5%, the DOW is off about 2 '/z% and the S&P is down about I %. You have sort of
a stalemate as the good news keeps coming. Some of the negatives are holding people back from
being very aggressive. I really think this could go on until we get some clarification in the
election results and also in Iraq before people will get back on the band wagon and start feeling a
little more like risk takers again.
The market typically moves in advance of what it's discounting so 1 think that sometime this
summer we will discount a Kerry election. That is not to say that he is going to be elected but I
think the markets will move to fully discount that and then trade up into the elections. I would
think that by the time the elections come we will probably already hit our low. That is not a
political statement that is just historical fact. An incumbent president that gets reelected causes
the market to have a much better year than an incumbent president of either party that doesn't get
elected. That's because the market likes certainties and it does not like uncertainties. There are
a lot of policy differences .between the two parties in this presidential election that do have an
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Policemen's Pension & Relief Fund Board of Trustees
Meeting Minutes
July 15, 2004
Page 7 of 11
• impact on the stock market and the valuation attached to stocks. The tax rate passed by the Bush
Administration on dividend income and capital gains taxes will lapse this year so they have to be
reinstated to go forward with those same tax rates. If you have a Kerry administration you
probably will not have the push to have those tax cuts reinstated. What that means basically is
that you have to apply a higher discount rate to the markets earnings and dividends to account for
the higher tax rate which means lower price. So, in this particular presidential election there is a
big difference between the two administrations as far as stock market valuation is concerned.
The first report is the combined portfolio stocks and bonds. At the end of the quarter you ended
at 47.6% stock which is right up by your 50% limit. Since then we've had a few positions that
we've taken profits on. I've talked about this in previous meetings where we are holding core
positions of stocks at about 40% of total portfolio and then around that we will occasionally add
on trading positions in the DOW, S&P and the NASDAQ index proxies. That allows us to
increase asset allocation to equities by using those tools when we feel that it is advantageous to
do so. If the market looks a little bit slippery we can take off those investments very quickly and
not have to subject the portfolio to trading 10 or 15 different stocks and lighten up across
different industries sectors. We keep our core at 40% of stocks and then we can add to it or
subtract from it with the diamonds, spiders and the QQQ's which are the index traded funds that
we use that are traded interday. At the end of the quarter you had a position of 47.6% but that
included some of the indices that we use such as Standard & Poor's 500 and the NASDAQ 100
Index. Those have both been removed at this time and we are sitting with cash reserves.
You have 5,500 shares of what's called the I-Share Lehman 20 plus year Treasury Bond Fund.
We wrote about that at the start of the year the fact that we were defensively postured in our
bond portfolios, sort of hugging to the shorter maturities anticipating a rise in interest rates, well
we got it_ From March of this year where the ten year treasury was trading at 3.7% the yield rose
to about 4.9% in June. We extended maturities by buying this particular fund that holds 20 year
plus treasuries. The reason I use the fund instead of an actual treasury bond is because you have
a higher income yield than we could get just buying a straight treasury in that same maturity.
Also this is a fund that trades interday on the exchange, it is very liquid and so you have 4% of
the total portfolio in the extended maturity bond fund. You are making about 5.35% interest and
then as interest rates have backed off we've made about 2 '/2% capital gain appreciation on that.
If we get back to about a 4% ten year yield we'll be taking profits on this position. This is a
level also on the fixed income side of the portfolio where when the opportunity arises we were
able to extend maturities, take on more of that price risk to get higher yield, but it keeps it liquid
enough that we can also capture the gain as interest rates come back down.
You have some bonds such as the 300,000 Federal Home Loan Bank with the 7 1 /8 coupon that
matures in February 2005 that is essentially cash we can convert that to cash any time we want
to. If you look at the positions that are near cash in the bond portfolio, they equal about 5% of
total portfolio plus we have about 5% cash reserves. We really have 10% to use if the market
backs off between now and the election either on the fixed income side or the equity side.
Page 6 lists the stocks, we have the stock account and the bond account separated on our books
for no particular reason that I can think of I am sure it dated back to where we first started and
they were probably 50/50 and now they are about 60/40. This gives you the stock portfolio and
Page 9 shows your five largest holdings, Johnson & Johnson, Intel, Pfizer, Cephalon, and
Caterpillar. Even your largest holdings are just 2.3% of equity exposure and 1 .5% of total
portfolio so you have a good diversification in your stocks.
Policemen's Pension & Relief Fund Board of Trustees
Meeting Minutes
July 15, 2004
Page a of J I
We reduced Intel last week to about 1 .9% because of the fact that the technology sector is •
showing some weakness. Some of the comments coming out of the software manufactures and
some of the technologies indicate that corporations have sort of pulled back a little bit on their
capital spending in June and it is starting to be reflected in this quarter's earnings numbers. Intel
reported this week and was down 10% on the earnings report. I always like to hear the
comments the management is making and the comments are getting a little bit more cautious
than what we heard in the forth quarter and the first quarter. This all really hit about mid June.
We didn't see so much caution and the consumer has started to pull back it is kind of like every
day you get another piece of the puzzle dropped in. People are sort of retrenching and I don't
know if it is the higher energy prices the geopolitical uncertainness or the political uncertainness
but there is something out there that hit about mid June that you can pick up in the numbers that
is putting a cautious tone over the economic outlook.
On your industry ratings, we have been underweight consumer at 9.7% versus 18 '/z% on the
S&P 500 for the whole year and the consumer sector really not done very well this year and you
are starting to see some signs in the market discount six months in advance. We are starting to
see signs of the consumer pulling back and that's been discounted by the stocks since about
January. Our concern coming into the year was the fact that we had not seen the impact of the
higher gasoline prices yet. That is one thing that is hitting the consumer the second thing is we
had anticipated higher interest rates which factor into home mortgage rates. A lot of what has
been financing consumer spending in a period where we've had really flat job growth has been
the refinancing bonanza, if you haven't refinanced yet it's over, now you have mortgage rates
back up. That was providing a lot of cushion to stretch the family budget because every time
they refinanced they could come up with another $300 a month to spend. With interest rates
rising you've really clipped that and so you have the combination of rising energy prices, rising
food prices the refinance bonus is gone. We will anniversary the tax cuts in this quarter and
therefore the comparisons year to year are going to be soft. We have been under weighted in
consumer and we are going to stay under weighted to see bow this all sorts out.
A discussion followed on the supply and demand over the next few years of oil from around the
world and the energy options that we may have to look at.
We are over weighted on energy we have 11 .4% versus about 6.3% in the index. I still like
energy even though we have had a really good move in so far, they pay good dividends most of
them pay over a 3% dividend yield. You have inflation protection and then you also have some
protection as far as the outlook in the Middle East. Whenever we have tensions over there the
price of oil goes up so it's kind of a nice stabilizer in the portfolio.
Morgan Stanley is at 2500 shares and I wanted to talk about that. We have talked about how we
use stocks in putting on new positions especially if we are buying close to a very important
technical support level. This minimizes the downside rise. Sometime we will buy stock and it's
very close to a level that's maybe 2% away or 3% that we don't want to have violated, we will
place a stop there and that stock was stopped out at $50. It is a slight loss but now it' s trading at
$485 I think it will go down to about $42 given the technical break down in the stock and what's •
happening in the stock market. I just wanted to use that as an example, that happened within
about three trading days and over time this has really saved us a lot on the down side of stocks
but against the realized gains that you have this year it's good to just continue to use that down
side discipline.
Policemen's Pension & Relief Fund Board of Tnntees
Meeting Minutes
July 15, 2004
Page 9 of I 1
• You are over weight on healthcare mostly though in the medical supplies and what I call parts
and pieces, the companies that are making the knees and hips all the things that we are going to
need as age.
That's how your industry ratings break down we are under weight technology we've been under
weight technology since 4d' Quarter. We are at 10% versus 16% in the index and I keep looking
for the right time to increase that to get back to being index neutral but we just still haven't seen
the conditions that would make me brave enough to take on that volatility. The technology
stocks are getting hit a lot harder than the market over all so maybe at some point we will have
that opportunity in the next quarter.
Your average yield to maturity. is 5.7%, your average maturity is only 5.4 years and to give you a
comparison the 5 year treasury right now is trading at about a 3 .66. We have extended maturities,
this does not include the purchase of the I shares or the 20 year treasury fund that we bought
because that's not listed as a bond on our portfolio reports but we did put about 4% of total
portfolio into that 20 plus year maturity when interest rates got so high in June. That represents
about 8% of the bond portfolio.
The realized gains year to date through June 30 are $145,000. Net income which is just
dividends plus interest is $ 153,000. The total income on the portfolio just dividends plus interest
is now running at about $361 ,000 and that is still a 3.6% yield on the total portfolio.
• The summary of withdraws year to date shows there are no contributions coming in but there is
money going out to meet the payments for pensioners. The final report is the performance
report. Basically last year we delivered about a '28% return on stocks even though the Federal
Reserve did not increase short term interest rates the bond market increased the longer .term
interest rates, so we had a rising interest rate year as far as the bond portfolio was concerned so
the total return was 2.2%. You still earn the 5.7% interest income. but some of that price
appreciation we had had in the prior three years was taken away in a rising interest rate
environment, so that your total return was 11 . 1 %. Year to date the stock part is up 4% and
through June 30th the S&P is up about 2% the DOW is flat and the NASDAQ is down so you are
running a little bit ahead of the market. I think that is mostly due to the way we've weighted the
portfolio plus the fact that we are using part of your funds opportunistically to add to the stock
positions when we get to the lower part of the trading range and take it off when we get a little
bit higher. . Your total return year to date is 1 .6% and compound annual return on the total
portfolio is 7.2. What interesting is your stock return have been 6.8, bonds have been 6.3, but
your total has been 7.2. That is due to asset allocation that is so important. I went back to look
at that because what happens is during the down cycle where we had three years back to back of
negative returns we were very light on stocks and heavily weighted on the fixed income side and
during those years you had 9% bond return, 7.9 and 9.6. Last year we got more heavily weighted
on the stock side where you had a 28% return less weighted on the bonds so your total return was
11 , more upside potential given that stock return than you had down side risk when stocks were
down 28%. The reason that number is higher than the individual asset classes is the asset
• allocation decision, how to weigh between bonds and stocks.
In 1999 before we entered into a 3 year bear market the annual return compounded on stocks was
15.4% and the total was 12.82. After three years of negative return even though your total
account was only down about 4. 1% during those three years just standing still for that long
Policemen's Pension @ Relief Fund Board of Trustees
Meeting Minutes
July 15, 2004
Page 10 of 1 I
reduced the annualized return from 12.8 to 6.5, that was at the lowest point coming off that bear
market but still meets your actuary assumptions of 6%. Since then with two good years back to
back so far that's brought your annualized return back up to 7.2. That is a little bit safer distance
from that 6%.
Your investment policy is attached the most important thing that we always want to consider is
the asset allocation which in your case is equities 35 to 50 percent. I don't see any reason to
change that but I always like to review that and make sure it is still appropriate with the client. It
gave us enough flexibility in the bear market that we could get real light but then last year we
were able to get back up to the 50% and participate. I think it is a nice range and we had felt
comfortable in the past when we dipped below the 35% to come to you and say I don't see any
reason to push the petal to the metal, we can do that again if we see the circumstances change but
in the meantime I think it is a wide enough range it gives you the flexibility that you need.
Eldon Roberts: I 've been noticing on the balance sheets that I receive; we are staying right up
there. We keep maintaining pretty much a straight balance. We are up to $ 100,000 a month on
pension liability.
Jerry Friend: Did we get a copy of the actuary report?
Eldon Roberts: The City surely did.
Sondra Smith: We haven't gotten the 2003 one yet.
Jerry Friend: I would like to have a copy when you get it. The actuary several years ago said if
we maintain 6% even with our 90. . . ..
Eldon Roberts: No, that is what I want to touch on, I have mentioned this before and I am not
100% sure that I am right. When that information was complied and the actuary said if you can
maintain 6% a year on your money you are going to be fine. You will eventually be actuary
sound and you will eventually be fully funded. I am almost positive that was if we maintained a
50% rate of pay.
Jerry Friend: But then when we asked to go to 100% they couldn't purposely put us in the red.
The actuary study to allow us to do that had to figure it would last.
Eldon Roberts: Whenever they did that they didn't give us any ruling on what percent of return
we should have every year to be able to keep this going. We are not growing now we are just
maintaining. If we were only paying 50% of benefits we would be growing and we are not
growing any right now. I think when that was complied I am almost positive that was paying
50% of benefits.
Jerry Friend: We have to ask permission to increase the benefits we can't just do it.
Elson Roberts: They did a cash flow not an actuarial study. •
Policemen's Pension & Relief Fund Board of Trustees
Meeting Minutes
July 15, 2004
Page 11 of 11
Revised description of Policemen's Pension Board:
A copy of the revised description of the Policemen's Pension Board was given to the Board.
Sondra Smith: The term end dates for the Pension Board need to be changed to the end of May.
We will put that on the next agenda.
Northern Trust Option Account — Signed Copy:
A signed copy of the Northern Trust Option Account was given to the Board.
Meeting Adjourned at 2:30 pm.
•
•
POLICE PENSION FUND
August 2004 6900.9800 6800.9800
5335-00 533505 Future
EMP# NAME GROSS YTD Wages Suppl. YTD Suppl. Suppl. Fed Tax ST. TAX NET
rALLEN, CHARLES 2,296.42 16.074.94 100.00 300.00 649.80 220.00 66.89 2,759.33
ARNOLD, WILLADEAN 863.14 6,041.98 ' 100.00 300.00 649.80 1,612.94
130 BAYLES, DON 1,410.39 9,872.73 100.00 300.00 649.80 2,160.19
107 BLACK, JOE P 1 ,000.12 7,000.84 100.00 300.00 649.80 100.00 20.00 1,629.92
120-BOWEHffJ'R�z 616:10 4,312.98 100.00 300.00 649.80 10.00 1,355.94
147 BRADLEY, GERALD 4,282.59 29,978.13 100.00 300.00 649.80 940.53 217.32 3.874.54
139 BRADLEY, RANDALL 2,541 .22 17,788.54 100.00 300.00 649.80 382.00 100.00 2,809.02
167 BROWN, JOHN 3,875.58 27,129.06 100.00 300.00 649.80 600.00 200.00 3,825.38
157 CARROLL,RONALD L 1 ,871 .19 13,098.33 100.00 300.00 649.80 250.00 105.00 2,265.99
151 COLE, RUSTON . 2,723.87 19,067.09 100.00 300.00 649.80 600.00 200.00 2,673.67
109 COOPER, ADRIAN 567.23 3,970.61 100.00 300.00 649.80 1,317.03
108 DENNIS, WARREN 1 ,223.34 8,563.38 100.00 300.00 649.80 0.00 1 ,973.14
160 DUGGER,GARY 2,810.94 19,676.58 100.00 300.00 649.80 300.00 120.00 3,140.74
125 FLOWERS, HAROLD 766.42 5,364.94 100.00 300.00 649.80 1 ,516.22
140 FOSTER, BILLIE D. 2,849.68 19,947.76 100.0 300.00 , 649.80 300.00 120.00 3,179.48
148 FRIEND, JERRY 2,801.12 19,607.84 100.00 300.00 649.80 725.00 150.00 2,675.92
161 HANNA, JANICE 1 ,739.21 12,174.47 - 175.00 50.00 1,514.21
145 HANNA, MARK 692.74 4,849.18 100.00 300.00 649.80 1,442.54
162 HASKINS, IRENE 386.10 2,702.70 100.00 300.00 649.80 1 ,135.90
169 HELDER. TIM 5.187.10 36,309.70 100.00 300.00 649.80 750.00 250.00 4,936.91)
180 HOYT, RICK 6,628.13 1,100.00 410.00 5,118.13
146 HUTCHENS, BERNICE 901 .10 6,307.70 100.00 300.00 649.80 130.00 1 ,520.90
143 JOHNSON, CHARLES 2,181.68 15,271 .76 100.00 300.00 649.80 42.67 2,888.81
103 JOHNSON, WENDELL 695.82 4,870.74 100.00 300.00 649.80 1 ,445.62
118 JONES, BOB 2,932.41 20,526.87 100.00 300.00 649.80 0.00 3,682.21
144 KILGORE. DONALD 1 ,818.27 12,727.89 100.00 300.00 649.80 19.72 2,548.35
129 LAWSON, FORREST 1 ,393.05 9,751.35 100.00 300.00 649.80 350.00 1,792.85
650 LITTLE, PATSY R 360.50 2,523.50 100.00 300.00 649.80 1,110.30
3 LORCH, DONNA G 360.50 2,523.50 100.00 300.00 649.80 1 ,110.30
- • 156 MARTIN, KENNETH 3,281.05 22,967.35 100.00 300.00 649.80 500.00 140.00 3,390.85
128 MCCAWLEY, LARRY 1 ,505.80 10,540.60 100.00 300.00 649.80 180.00 40.00 2,035.60
116 MCCHRISTIAN, MARIE 360.50 2,523.50 100.00 300.00 649.80 1 ,110.30
126 MCWHORTER, KAREN . 499.57 3,496.99 100.00 300.00 649.80 1 ,249.37
136 MITCHELL, MICHAEL 2,048.22 14,337.54 100.00 300.00 649.80 150.00 2,648.02
LL
141 MUEER, ROSEMARY 1,833.79 12,836.53 100.00 300.00 649.80 2,583.59
158 MUNSON,ANGELA 3,730.00 26,110.00 100.00 300.00 649.80 500.00 183.00 3,796.80
112 MURPHY, JAKE 360.50 2,523.50 100.00 300.00 649.80 0.00 1,110.30
137 PERDUE, LARRY 2,063.66 14,445.62 100.00 1300.00 649.80 200.00 25.00 2,588.46
164 PERSHALL, ROBIN 1,355.00 9,485.00 - 190.00 67.00 1,098.00 .
132 PHILLIPS, HOMER GENE 1 ,558.80 10,911.60 100.00 300.00 648.80 300.00 2,008.60
105 PRESTON, GEORGE DAVID 1 ,422.81 9,959.67 100.00 300.00 649.80 100.00 100.00 1 .972.61
135 RICKMAN. LOREN 1,982.28 13,875.96 100.00 300.00 649.80 230.00 65.00 2,437.08
104 RIGGINS, RAYMOND C 1,483.21 10,382.47 100.00 300.00 649.80 125.00 25.00 2,083.01
159 SCHUSTER,JOHN H. 2,769.74 19,388.18 100.00 300.00 649.80 340.00 - 110.00 3,069.54
122 SKELTON, FRANK (DECEASEDY 2,940.32 200.00 000
178 SKELTON, FRIEDA T. 367.54 1 ,102.62 100.00 100.00 649.80 1,117.34
168 STANLEY, MELVIN 4,335.87 30,351.09 100.00 300.00 - 649.80 1,100.00 300.00 3,685.67
155 STOUT, BETTY 427.71 2,993.97 100.00 300.00 649.80 0.00 1 ,177.51
133 SURLES, JERRY 2,417.93 16,925.51 100.00 300.00 649.80 450.00 150.00 2,567.73
142 TAYLOR, DENNIS 1 ,933.79 12,836.53 100.00 300.00 649.80 105.00 40.00 2,438.59
106 UPTON, FRANKLIN 939.20 6,574.40 100.00 300.00 649.80 10.00 1,679.00
163 WATSON, RICHARD 7,015.33 49,107.31 100.00 300.00 649.80 1 ,950.00 400.00 5,415.13
149 WILLIAMS, JOYCE 1 ,253.58 8,775.06 100.00 300.00 649.80 217.07 1,786.31
134 WITT, DON 1 ,569.81 10,988.67 100.00 300.00 649.00 115.00 64.00 2,140.61
127 WOOD, PAUL J 1,404.63 9,832.41 100.00 300.00 649.80 0.00 2,154.43
105,596.32 694,247.49 5,100.00 15,300.00 33,139.80 13,694.60 3,780.60 126,360.92
'6200Cealtt bane6is pBN M Mey
6900.9800 68009900
5335-00 5335-05 TMeI
Year to Date 694,447.49 15,300.00 709,747.49
POLICE PENSION FUND
September 2004 6800-9890 6800-9890
5395-00 5375-05 Future
EMP# NAME GROSS YTD Wages Suppl. YTD Suppl. Suppl. Fed Tax ST. TAX NET
154 ALLEN, CHARLES 2,296.42 18,371.36 50.00 400.00 649.80 220.00 66.89 2,059.53
152 ARNOLD, WILLADEAN 863.14 6,905.12 50.00 400,00 649.80 913.14
130 BAYLES, DON 1 ,410.39 11 ,283.12 50.00 400.00 649.80 1,460.39
107 BLACK JOE P 1,000.12 8,000.96 50.00 400.00 549.80 100.00 20.00 930.12
120 BOWEN, J R (DECEASED)" 4,929.12 400.00 649.80 0.00
147 BRADLEY, GERALD 4,282.59 34,260.72 50.00 400.00 649.80 940.53 217.32 3,174.74
139 BRADLEY, RANDALL 2,541 .22 20,329.76 50.00 400.00 649.80 382.00 100.00 2,10922
167 BROWN, JOHN 3,875.58 31,004.64 50.00 400.00 649.80 600.00 200.00 3,125.58
157 CARROLL,RONALD L 1 ,871 .19 14,969.52 50.00 400.00 649.80 250.00 105.00 1 ,566.19
151 COLE, RUSTON 2,723.87 21 ,790.96 50.00 400.00 649.80 600.00 200.00 1 ,973.87
109 COOPER, ADRIAN 567.23 4,537.84 50.00 400.00 649.80 617.23
108 DENNIS. WARREN 1 ,223.34 9,786.72 50.00 400.00 649.80 0.00 1 ,273.34
160 DUGGER,GARY 2,810.94 22,487.52 50.00 400.00 649.80 300.00 120.00 2,440.94
125 FLOWERS, HAROLD 766.42 6,131 .36 50.00 400.00 649.80 816.42
140 FOSTER, BILLIE D. 2,849.68 22,797.44 50.00 400.00 649.80 300.00 120.00 2,479.68
148 FRIEND, JERRY 2,801.12 22,408.96 50.00 400.00 649.80 725.00 150.00 1,976.12
161 HANNA, JANICE 1 ,739.21 13,913.68 175.00 50.00 1 ,514.21
145 HANNA, MARK 692.74 5,541 .92 50.00 400.00 649.80 742.74
162 HASKINS, IRENE 386.10 3,088.80 50.00 400.00 649.80 436.10
169 HELDER, TIM 5,187.10 41,496.80 50.00 400.00 649.80 750.00 250.00 4,237.10
180 HOYT, RICK 6,628.13 6,628.13 50.00 1 ,100.00 410.00 5,168.13
146 HUTCHENS, BERNICE 901 .10 7,208.80 50.00 400.00 649.80 130.00 821 .10
143 JOHNSON, CHARLES 2,181 .68 17,453.44 50.00 400.00 649.80 42.67 2,189.01
103 JOHNSON, WENDELL 695.82 5,566.56 50.00 400.00 649.80 745.82
118 JONES, BOB 2,932.41 23,459.28 50.00 400.00 649.80 0.00 2,982.41
144 KILGORE, DONALD 1,818.27 14,546.16 50.00 400.00 649.80 19.72 1 ,848.55
129 LAWSON, FORREST 1 ,393.05 11 ,144.40 50.00 400.00 649.80 350.00 1 ,093.05
150 LITTLE, PATSY R 360.50 2,884.00 50.00 400.00 649.80 410.50
153 LORCH, DONNA G 360.50 2,884.00 50.00 400.00 649.80 410.50
156 MARTIN, KENNETH 3,281 .05 26,248.40 50.00 400.00 649.80 500.00 140.00 2,691 .05
128 MCCAWLEY, LARRY 1 ,505.80 12,046.40 50.00 400.00 669.80 180.00 40.00 1 ,335.80
116 MCCHRISTIAN, MARIE 360.50 2,884.00 50.00 400.00 649.80 410.50
126 MCWHORTER, KAREN 499.57 3,996.56 50.00 400.00 649.80 549.57
136 MITCHELL, MICHAEL 2,048.22 16,385.76 50.00 400.00 649.80 150.00 1 ,948.22
141 MUELLER, ROSEMARY 1,833.79 14,670.32 50.00 400.00 649.80 1,883.79
158 MUNSONANGELA 3,730.00 29,840.00 50.00 400.00 649.80 500.00 183.00 3,097.00
112 MURPHY, JAKE 360.50 2,884.00 50.00 400.00 649.80 0.00 410.50
137 PERDUE, LARRY 2,063.66 16,509.28 50.00 400.00 649.80 200.00 25.00 1 ,888.66
164 PERSHALL, ROBIN 1,355.00 10,840.00 190.00 67.00 1,098.00
132 PHILLIPS, HOMER GENE 1,558.80 12,470.40 50.00 400.00 649.80 300.00 1,308.80
105 PRESTON, GEORGE DAVID 1 ,422.81 11 ,382.48 50.00 400.00 649.60 100.00 100.00 1 ,272.81
135 RICKMAN, LOREN 1 ,982.28 15,858.24 50.00 400.00 649.80 230.00 65.00 1 ,737.28
104 RIGGINS, RAYMOND C 1 ,483.21 11 ,865.68 50.00 400.00 649.80 125.00 25.00 1 ,383.21
559 SCHUSTER,JOHN H. 2,769.74 22,157.92 50.00 400.00 649.80 340.00 110.00 2,369.74
122 SKELTON, FRANK (DECEASED)' 2,940.32 200.00 0.00
178 SKELTON, FRIEDA T. 367.54 1 ,470.16 50.00 200.00 649.80 417.54
168 STANLEY, MELVIN 4,335.87 34,686.96 50.00 400.00 649.80 1,100.00 300.00 2,985.87
155 STOUT, BETTY 427.71 3,421 .68 50.OD 400.00 649.60 0.00 477.71
133 SURLES, JERRY 2,417.93 19,343.44 50.00 400.00 649.80 450.00 150.00 1,867.93
142 TAYLOR, DENNIS 1,833.79 14,670.32 50.00 400.00 649.80 105.00 40.00 1,738.79
106 UPTON. FRANKLIN 939.20 7,513.60 50.00 400.00 649.80 10.00 979.20
163 WATSON, RICHARD 7,015.33 56,122.64 50.00 400.00 649.80 1 ,950.00 400.00 4,715.33
149 WILLIAMS, JOYCE 1,253.58 10,028.64 50.00 400.00 649.80 217.07 1 ,086.51
134 WITT, DON 1 ,569.81 12,558.48 50.00 400.00 649.80 115.00 64.00 1 ,440.81
127 WOOD, PAUL J 1 ,406.63 11 ,237.04 50.00 400.00 649.80 0.00 1 ,454.63
104,980.18 799,843.81 2,550.00 20,400.00 33,139.80 13,684.60 3,780.60 90,064.98 •
5800-0900 6e00-9800 6600-9800
533500 5335-05 53354M TOW W00 deampeaefils pal0ln May
Year to Date 800,443.81 20,400.00 33,139.80 853,983.61 " wo deam bemft pap in Au"
ts90.aoertaw.msdeembam che&
POLICE PENSION FUND
October 2004 6800.9800 6900.9800
5335-00 533505 Future
EMP# NAME GROSS YTD Wages Suppl. YTD Suppl. Suppl. Fed Tax ST. TAX NET
ALLEN, CHARLES 2,296.42 20,667.78 50.00 450.00 649.80 220.00 66.89 2,059.53
ARNOLD. WILLADEAN 863.14 7,768.26 50.00 450.00 649.80 913.14
130 BAYLES, DON 1,410.39 12,693.51 50.00 450.00 649.80 1 ,460.39
107 BLACK, JOE P 1,000.12 9.001.08 50.00 450.00 649.80 100.00 20.00 . 930.12
120 BOWEN, J R (DECEASED)" 4,929.12 400.00 649.80 0.00
147 BRADLEY, GERALD 4,282.59 38,543.31 50.00 450.00 649.80 940.53 217.32 3,174.74
- 139 BRADLEY, RANDALL 2,54122 22,870.98 50.00 450.00 649.80 382.00 100.00 2,109.22
167 BROWN, JOHN 3,875.58 34,880.22 50.00 450.00 649.80 600.00 200.00 3,125.58
157 CARROLL.RONALD L 1 ,871 .19 16,840.71 50.00 450.00 649.80 250.00 105.00 1 ,566.19
151 COLE, RUSTON 2,723.87 24,514.83 50.00 450.00 649.80 600.00 200.00 1 ,973.87
109 COOPER, ADRIAN 567.23 5,105.07 50.00 450.00 649.80 617.23
108 DENNIS, WARREN 1,223.34 11 ,010.06 50.00 450.00 649.80 0.00 1,273.34
160 DUGGER,GARY 2,810.94 25,298.46 50.00 450.00 649.80 300.00 120.00 2,440.94
125 FLOWERS, HAROLD 766.42 6,897.78 50.00 450.00 649.80 816.42
140 FOSTER, BILLIE D. 2,849.68 25,647.12 50.00 450.00 649.80 300.00 120.00 2,479.68
148 FRIEND, JERRY 2,801.12 25,210.08 50.00 460.00 649.80 725.00 150.00 1,976.12
161 HANNA, JANICE 1 ,739.21 15,652.89 175.00 50.00 1 ,514.21
145 HANNA, MARK 692.74 6,234.66 50.00 450.00 649.80 742.74
162 HASKINS, IRENE 386.10 3,474.90 50.00 450.00 649.80 436.10
169 HELDER, TIM 5,187.10 46,683.90 50.00 450.00 649.80 750.00 250.00 4,237.10
180 HOYT, RICK 6,628.13 13,256.26 50.00 50.00 1 ,100.00 410.00 5,168.13
146 HUTCHENS, BERNICE 901.10 8,109.90 50.00 450.00 649.80 130.00 821.10
143 JOHNSON, CHARLES 2.181.68 19,635.12 50.00 450.00 649.80 42.67 2,189.01
103 JOHNSON, WENDELL 695.82 6,262.38 50.00 450.00 649.80 745.82
118 JONES, BOB 2,932.41 26,391 .69 50.00 450.00 649.80 0.00 2,982.41
144 KILGORE, DONALD 1 ,818.27 16,364.43 50.00 450.00 649.80 19.72 1,848.55
129 LAWSON, FORREST 1 ,393.05 12,537.45 50.00 450.00 649.80 350.00 1,093.05
oLITTLE, PATSY R 360.50 3,244.50 50.00 450.00 649.80 410.50
LORCH, DONNA G 360.50 3,244.50 50.00 450.00 649.80 410.50
MARTIN; KENNETH 3,281 .05 29,529.45 50.00 450.00 849.80 500.00 140.00 2,691.05
128 MCCAWLEY, LARRY 1 ,505.80 13,552.20 50.00 450.00 649.80 180.00 40.00 1 ,335.80
116 MCCHRISTIAN, MARIE 360.50 3,244.50 50.00 450.00 649.80 410.50
126 MCWHORTER, KAREN 499.57 4,496.13 50.00 450.00 649.80 549.57
136 MITCHELL, MICHAEL 2,048.22 18,433.98 50.00 450.00 649.80 150.00 1,948.22
141 MUELLER, ROSEMARY 1 ,833.79 16,504.11 50.00 450.00 649.80 1 ,883.79
158 MUNSON,ANGELA 3,730.00 33,570.00 50.00 450.00 649.80 500.0D 183.00 3,097.00
112 MURPHY, JAKE 360.50 - 3,244.50 50.00 450.00 649.80 0.00 410.50
137 PERDUE, LARRY 2,063.66 18,572.94 50.00 450.00 649.80 200.00 25.00 1,888.66
164 PERSHALL, ROBIN 1 ,355.00 12,195.00 190.00 67.00 1 ,098.00
132 PHILLIPS, HOMER GENE 1,558.80 14,029.20 50.00 450.00 649.80 300.00 1 ,308.80
105 PRESTON, GEORGE DAVID 1 ,422.81 12,805.29 50.00 450.00 649.80 100.00 100.00 1,272.81
135 RICKMAN, LOREN 1,982.28 17,840.52 50.00 450.00 649.80 230.00 65.00 1 ,737.28
104 RIGGINS, RAYMOND C 1,483.21 13,348.89 50.00 450.00 649.80 125.00 25.00 1 ,383.21
159 SCHUSTER.JOHN H. 2,769.74 24,927.66 50.00 450.00 649.80 340.00 110.00 2,369.74
122 SKELTON, FRANK (DECEASED)' . 2,940.32 200.00 0.00
178 SKELTON, FRIEDA T. 367.54 1 ,837.70 50.00 250.00 649.80 - 417.54
168 STANLEY, MELVIN 4,335.87 39,022.83 50.00 450.00 649.80 1,100.00 3D0.00 2,985.87
155 STOUT, BEVY 427.71 3,849.39 50.00 450.00 649.80 0.00 477.71
133 SURLES, JERRY 2,417.93 21,761 .37 50.00 450.00 649.80 450.00 150.00 1 ,867.93
142 TAYLOR, DENNIS 1 ,833.79 16.504.11 50.00 450.00 649.80 105.00 40.00 1 ,738.79
106 UPTON, FRANKLIN 939.20 8,452.80 50.00 450.00 649.80 10.00 979.20
163 WATSON. RICHARD 7,015.33 63,137.97 50.00 450.00 649.80 1 ,950.00 400.00 4,715.33
149 WILLIAMS, JOYCE 1 .253.58 11 .28222 50.00 450.00 649.80 217.07 1 ,086.51
134 WITT, DON 1,569.81 14,128.29 50.00 450.00 649.80 115.00 64.00 1 ,440.81
127 WOOD, PAUL J 1,404.63 12,641.67 50.00 450.00 649.80 0.00 1 ,454.63
104,980.18 904,823.99 2,550.00 22,950.00 33,139.80 13,684.60 3,780.60 90,064.98
68004M 6800-9800 6800.9800
5335-00 5335-05 5335-06 TOW *$200 death benefits paid In May
Year to Date 905,223.99 22,950.00 33,139.80 961 ,313.79 ^ s2oo deem benefits paw in Agmt
ARKANSAS FIRE & POLICE PENSION REVIEW BOARD
P.O. DRAWER 34164
LITTLE ROCK, ARKANSAS 72203
TELEPHONE: (501 ) 682 - 1745
FAX: (501 ) 682 - 1751
email: info@lopfi-prb.com
To: Board of Trustees website: wwwlopfi-prb.com
FAYETTEVILLE Police Pension and Relief Fund
From: David B. Clark RECEIVED
Interim Executive Director
Re: 2003 Actuarial Valuation
CITY o, lETrEVILLE
Date: June 10, 2004 O�T� CURK'S OFFICE
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 2003 actuarial study for
your fund is enclosed. The financial tests for the fund are designed to answer the
following questions:
• YES NO
1 . Is there enough income to the pension
fund to fully fund it (see page 4)?
2. Are current assets sufficient to cover 97%
of all accrued actuarial liabilities (see page 10),
OR are there enough assets to cover all active
member contributions, all payments to current
beneficiaries and 100% of future payments /
earned by active members (see page 11 )?
3 . Is the pension fund considered actuarial
sound under State law?
Osborn , Carreiro & Associates , Inc . One Union National Plaza,Suite 1690
124 West Capitol Avenue
• ACTUARIES CONSULTANTS • ANALYSTS Little Rock, Arkansas 72201
(501 )376-8043
June 4, 2004
Board of Trustees
Fayetteville Police Pension Fund
Gentlemen :
This report presents the results of our actuarial valuation of the assets and liabilities of the Fayetteville
Police Pension Fund as of December 31 , 2003 .
This valuation is required by Arkansas Code Annotated 24-11 -205. The purpose of this report is to ( 1 )
evaluate the actuarial status of the Fund, (2) determine the level contribution requirement needed, (3)
review the development of the Fund over the past several years, and (4) present certain actuarial items
on page 9 for disclosure under Governmental 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. We did not audit this information, although we did review it for
reasonableness and consistency.
1 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,
Steve Osborn, F.S.A., M.A.A.A.
Actuary
s
TABLE OF CONTENTS
EXHIBIT 1 CONTRIBUTIONS
EXHIBIT 2 COST AND LIABILITIES
EXHIBIT 3 SUMMARY OF FINANCIAL INFORMATION
EXHIBIT 4 COMPARISON WITH PRIOR YEARS
EXHIBIT 5 SHORT CONDITION TEST
EXHIBIT 6 EMPLOYEE AND RETIREE PROFILES •
EXHIBIT 7 PRINCIPLE PROVISIONS OF THE PLAN
EXHIBIT 8 ACTUARIAL 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 6-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.
2004 Necessary Annual Contribution to pay:
1 Normal Cost, plus $ 797766
2 Pay off the Unfunded Actuarial
Accrued Liability 1 ,598,416
3 Total necessary $ 1 ,678,182 '
Less
4 Expected Employee Contribution 0
(6.00% of salary)
Necessary Employer Contribution $ 126782182
(This is the amount needed in
addition to investment income)
Covered Payroll $ 219,008
Necessary Employer Rate 766.27%
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 2003 contribution was $817,538 from the employer.
4
EXHIBIT 2
COSTS AND LIABILITIES
December 31 , 2003
A Normal Cost Dollar Percent
(Cost to fund current active members) Amount of nay
I Regular Retirement Benefits $ 75 ,833 34.63%
2 Voluntary Termination Benefits 457 0.21 %
3 Survivors' Benefits 1 ,715 0.78%
4 Disability Benefits 19761 0.80%
TOTAL $ 79,766 36.42%
B Actuarial Accrued Liability
1 Active Lives
Regular Retirement Benefits $ 2;5243156 •
Voluntary Termination Benefits 0
Survivors' Benefits 0
Disability Benefits 0
TOTAL ACTIVE LIVES $ 2,5241156
2 Inactive Lives
Retirees $ 117684,786
Disability Retirees 3,7031407
Widows & Children 684,626
TOTAL INACTIVE LIVES $ 165072,819
3 Total Liability $ 18,596,975
C Assets $ 11 ,125,006
D Unfunded Actuarial Accrued Liability $ 75471 ,969
5 s
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 /2001 12/31 /2002 12/31 /2003
I Employee Contributions $ 24,363 $ 21 , 142 $ 141287
2 Employer Contributions
Employer/Court Fines%Other 178, 168 173,414 157,643
Insurance Tax 151 ,366 147,282 385,039
Local Millage 2272374 261 ,384 2749856
3 Other Income
Guarantee Fund 0 0 0
LOPFI Subsidy 0 0 0
Police Supplement (Act 1452 of 1999) 20,415 29,800 30,500
Future Supplement (Act 1373 of 2003) 0 0 17,236
Other Income/Donations -45,920 11827 3,478
Adjustment to prior year 0 0 0
asset value
- 4 Net Investment Income 441 ,400 - 111 ,908 36809
TOTAL INCOME $ 9979166 $ 522,941 $ 1 ,251 ,928
B. EXPENSES
1 Administrative $ 33032 $ 222364 $ 3, 121
2 Benefits Paid
Monthly Benefits 9457121 1 ,010,277 1 ,141 ,685
Police Supplements 20,415 293750 30,500
Future Supplements 0 0 17,236
DROP Payouts 0 0 0
3 Refunds 00 0
TOTAL EXPENSES $ 9682568 $ 1 ,062,391 $ 1 ,192,542
• 6
EXHIBIT 3 (Continued)
C ASSETS (at book value) 12/31 /2001 12/31 /2002 12/31 /2003
1 Cash & Checking Accounts $ 0 $ 0 $ 0
2 Bank Deposits 71461 55220 27,996
3 Savings and Loan Deposits 0 0 0
4 Other Cash Equivalents 188,276 94,050 364,098
5 US Govt. Securities 4.3143961 5,341 ,421 4,370,229
6 Non-US Govt Securities 0 0 0
7 Mortgages 0 0 0
8 Corporate Bonds 1 ,812,057 934, 182 630,893
9 Common Stocks 4,202,728 3,615,591 4,689,678
10 Other 123,609 118,778 86,434
11 Pavables -15,075 -14,675 -159375 •
TOTAL ASSETS $ 10,634,017 $ 10,094,567 $ 10,153,953
D. RATIO OF ASSETS TO
ANNUAL EXPENSES: 11 .0 9.5 8.5
E. NET INVESTMENT RETURN: 4.2% -1 . 1 % 3.7%
(Book Value Basis)
7 •
• Exhibit 3 (Continued)
12/31 /1999 12/31/2000 12/31 /2001 12/31/2002 12/31/2003
F. TOTAL MARKET VALUE
1 . Market Value, end of year 11 ,665,225 11 ,412,261 10,7803521 10, 155,283 10,937,721
(Used for GASB calculations, page 9)
2. Market Value, beginning of year 11,374,032 112665,225 1134123261 10,7801521 1031552283
G. DEVELOPMENT OF ACTUARIAL VALUE OF ASSETS
I . Actuarial Value of Assets, beginning of year 9,692, 117 10,572,573 11 ,137,375 115353,563 . 11 ,215,486
2. Non Investment Net Cash Flow -71302 -247,899 -412,802 -427,542 -309,503
3. Development of Investment Income
(a) Total Market Investment Income (Fl -F2-G2) 298,495 -53065 -218,938 -19706 12091 ,941
(b) Amount for Immediate Recognition (6% G1 ) 581 ,527 634,354 668,242 681 ,214 672,929
(c) Amount for Phased In Recognition (a-b) -283,032 -6392419 -887,180 -8785910 419,012
(d) Phased In Recognition
Current year : 20% of 3(c) -565606 -127,884 -177,436 -1755782 83,802
First Prior Year 1452960 -563606 -127,884 -1775436 -175,782
Second Prior Year 1769714 145,960 -56,606 - 127,884 -177,436
Third Prior Year 40,163 176,714 145,960 -563606 -1273884
Fourth Prior Year 40,163 176,714 1453960 -56,606
Total Phased In Recognition 306,231 178,347 -39,252 -391 ,748 453,906
(e) Actuarial Value Investment Income 8873758 812,701 16282990 2899465 2195023
( 3(b) +. 3(d) )
4. Actuarial Value of Assets, End of year
( 1 + 2 + 3(e) .) 105572,573 11 ,137,375 11 ,353,563 11 ,215,486 11 ,125,006
5. Net Investment Return on the 9.2% 7.8% 5.8% 2.6% 2.0%
Actuarial Value of Assets
Note: 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. 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)
2002 _ 2003 _ 2004
1 . Actuarially Required Contribution 1 ,092,437 ] ,092 ;437 1 ,718,246
2. Interest on NPO - 153 ,789 - 104,721 -75,667
3. Adjustment to ( 1 ) -461 ,224 -314,067 -2695779
4 . Annual Pension Cost ( 1 )+(2)-(3) 1 ,399,872 1 ,301 ,783 11912,358
5 . Actual Contribution Made 582,080_ _ 817,538
6. Increase in NPO (4)-(5) 817,792 4845245
7. NPO Beginning of Year -2,563, 150 -1 ,7457358 - 1 ,261 , 112
8. NPO End of Year - 1 ,745,358 - 1 ,261 , 112
REQUIRED SUPPLEMENTARY INFORMATION
(a) (b) (c) (d) (e) (f) (g)
Unfunded
Entry Age Accrued UAL as a %
Actuarial Market Actuarial Liability Funded Annual of Covered
Valuation Value of Accrued (UAL) Ratio Covered Payroll
Date Plan Assets* Liability (c)-(b) (b)/(c) Payroll (d)/(f)
12/31 /1995 7, 187,710 8, 177,365 989,655 87 .9% 518,643 190. 8%
12/31 /1997 9,970,550 8,870,503 - 1 , 100,047 112.4% 491 ,422 -223.8%
12/31 /1999 11 ,665,225 15,3615180 3,695,955 75.9% 482,457 766. 1 %
12/31 /2001 101780,521 15,902,803 55122,282 67.8% 3843312 1332.8%
12/31 /2003 I03937,721 185596,975 7,659,254 58.8% 219,008 3497.3%
Note: 12/31 / 1995 are at amortized cost value.
9 •
f
EXHIBIT 4
COMPARISON WITH PRIOR YEARS
This exhibit compares current valuation results with those of prior years.
Full Paid Actuarial Computed
Active Members Employer Contribution Total Plan
Unfunded Normal
Valuation Annual Percent Dollar Actuarial Cost Funded
Date No. Payroll of Pay Amount Assets Liability Percent Percent
12/31 /1982 * 48 7755875 30.8% 2393145 1 ,968196 115645043 23 .5% 55.7%
12/31/1984 38 691 ,245 32.9% 227,671 2,637,566 . 1685,881 23.7% 61 .0%
12/31/1986 29 604,566 35.5% 214342 352515235 1 ,712,937 23.9% 65.5%
12/31/1987 * 28 666,941 37.8% 252,114 33374250 2,065775 24.6% 62.0%
12/31 /1989 25 6345711 38.8% 246132 40095866 2, 175,493 27.2% 64.8%
12/31 /1991 24 675,900 35.9% 242,541 57144,950 1 ,632,194 28.2% 75.9%
12/3.1 /1993 17 536,070 37.2% 199,314 62293,999 1 ;232,923 27.8% 83.6%
12/31/1995 * 15 518643 37 .5% 194517 7,187,710 989,655 27.7% 87.9%
12/31 /1997 12 4915422 15. 1 % 74142 9,126,449 -255946 26.9% 102.9%
12/31 /1999 * 11 482,457 175.7% 847,558 101572,573 4,788,608 45.2% 68.8%
12/31/2001 7 384,312 252.4% 969,851 1133535564 4,549,239 41 .6% 71 .4%
12/31/2003 * 3 219,008 766.3% 12678182 11 ,125,006 7,471 ,969 36.4% 59.8%
* Benefits or assumptions changed
Note: Normal cost prior to 12/31/89 is net of 0% employee contributions.
10
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:
Computed Actuarial Liabilities Portion of Liabilities
covered by Assets
(1 ) (2) (3)
Active Retirees Actives-
Valuation Members and Employer Valuation
Date Contributions Inactives Financed Assets ( 1 ) (2) (3)
12/31 /1982 141 ,635 1 ,538,508 1 ,8525096 1 ,968, 196 100% 100% 16%
12/31 /1984 186,492 2,220,660 1 ,916,295 2,6379566 100% 100% 12%
12/31 /1986 200,487 27982,120 1 ,7815565 3,251 ,235 100% 100% 4%
12/31 /1987 229,457 3,095,232 251I5,336 3,374,250 100% 100% 2%
12/31 /1989 266,726 3,719388 29199,245 4,0099866 100% 100% 1 %
12/31/1991 336,940 3,674,180 21766,024 5, 1441950 100% 100% 41 %
12/31 /1993 299,612 4,8341716 2,392,594 61293,999 100% 100% 48%
12/31 /1995 319,728 5,358,162 2,499,475 71187,710 100% 100% 60%
12/31 /1997 317,594 5,944,842 2081067 9, 126,449 100% 100% 110%
12/31 /1999 347,267 10,047,770 4,966, 144 10,572,573 100% 100% 4%
12/31 /2001 291 ,291 113488,981 41122,531 11 ,353,564 100% 96% 0%
12/31 /2003 155,251 16,0729819 2,368,905 11 , 125,006 100% 68% 0%
] 1
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 _
30 and
Age 0-5 5- 10 10- 15 15-20 20-25 25-30 Over Total
Under Count 0 0 0 0 0 0 0
25 Salary 0 0 0 0 0 0 0 'art
25-29 Count 0 0 0 0 0 0 0
Salary 0 0 0 0 0 0 0 i0
30-34 Count 0 0 0 0 0 0 0 ' ;
Salary 0 0 0 0 0 0 0
35-39 Count 0 0 0 0 0 0 0
Salary 0 0 0 0 0 0 0 fl
40-44 Count 0 0 0 0 1 0 0 •' , -
Salary 0 0 0 0 591,782 0
4549 Count 0 0 0 0 0 0 0
Salary 0 0 0 0 0 0 0
50-54 Count 0 0 0 0 0 1 0 ` • _ '� '
Salary 0 0 0 0 0 81 ,342 0 2
55-59 Count 0 0 0 0 0 0 1 r ,
Salary 0 0 0 0 0 0 77,883 9
60-64 Count 0 0 0 0 0 0 0 '
Salary 0 0 0 0 0 0 0 t,,
65 & Count 0 0 0 0 0 0 0
Over Salary 0 0 0 0 0 0 0
Unknown Count 0 0 . 0 0 0 0 0 fl
Age Salary 0 0 0 0 0 0 0
Total Count 1:
-01
Salary 0 10 , , . , 04 g_ a mal
i12
EXHIBIT6
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
10 and
Age 0- 1 1 -2 2-3 3-4 4-5 5-10 Over Total
Under Count 0 0 0 0 1 0 0
40 Benefit 0 0 0 10 15,786 0 0 1'57786 ,
40-44 Count 0 1 0 0 0 0 0 1
Benefit 0 45, 152 0 .0 0 0 0 _ 45;132 ;
45-49 i Count 0 1 0 1 1 2 2 7
Benefit 0 60.432 0 320269 211800 52,918 _28,334 ;]95;753
50-54 Count 0 0 0 .0 1 1 1 3 .
Benefit 0 0 0 0 435456 499894 2_1 ,365 1UJI5
55-59 Count 0 1 0 1 0 2 3 . . 7
Benefit 0 503515 0 32,749 0 70,860 79,067 ., 23_3;191
60-64 Count 0 0 0 0 0 1 12 : - - . 3
Benefit 0 0 0 0 0 26,754 198,234 224988:
65-69 Count 0 0 -10 0 0 6 '
Benefit 0 0 81 ,732 0 0 0 101 ,775
70-74 Count 0 0 0 0 0 0 6
Benefit 0 0 0 0 0 0 855301
75-79 Count 0 0 0 0 0 0 3
Benefit 0 0 0 0 0 0 16,361 "'�-'46 3'6V
80-84 Count 0 0 0 0 0 0 4 : 4
Benefit 0 0 0 0 0 0 33,991 3MO1.
85 & Count 0 0 0 0 0 0 1 `"'*r'` ;.":1•
Over Benefit 0 0 0 0 0 0 8,564 : ' '. '8;564
Unknown Count 0 0 0 0 0 0 0 - 0
Age Benefit 0 0 0 0 0 0 0 0
Total ` Count !#w� �; rat z 3 : 4a 53
Benefit i0g 15;099 m 81,77 -31J,41 ;65 01S 81;02 200,42b 572;992 r 1,157 3q9
This includes 30 retirees with annual benefit of $800,486 .
This includes 14 disableds with annual benefit of $293,763 .
This includes 9 survivors with annual benefit of $63,060 .
13
• EXHIBIT 7
PRINCIPLE PROVISIONS OF THE PLAN
EMPLOYEE Member of Police Department
EMPLOYER Fayetteville Police Department
MEMBERSHIP Condition of Employment. Police officers hired after 1982 must join the
statewide Local Police and Firefighters Retirement System
CREDITABLE SERVICE Determined on basis of service since employment
CONTRIBUTIONS
Employee 6.00% of salary. Refundable if member terminates before retirement
eligibility.
Employer 1 . Matching contribution equal to employee contribution
2. State Insurance Premium Tax turnback
3 . Local Millage
4. 10% of all fines & forfeitures collected by the Police Department.
FINAL SALARY Highest salary for any continuous twelve-month period of time worked
prior to retirement.
RETIREMENT BENEFITS
Eligibility 20 Years of Service regardless of age.
Benefit 90% of Final Salary, but not less than $4,200. If service exceeds 20 years,
the annual benefit is increased by $240 for each year over 20, up to $ 1 ,200/
year extra.
If service is more than 25 years, member receives an extra 1 .25% (for each
year over 25) of Final Salary, payable once the retiree reaches age 60. The
benefit cannot exceed 100% of Final Salary.
DEATH BENEFITS
Eligibilily Death of an active member or member receiving benefits.
Benefit 1 . Widow receives same amount as member is receiving or eligible
to receive, excluding the 1 .25% additional formula for service
over 25 years.
2. Each child under age 18 (23 if still in school) receives $ 1 ,500/year.
If no surviving spouse, children receive spouse's benefit to age
18.
3 . If no widow or children, widowed mother receives $1 ,500/year.
• 14