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HomeMy WebLinkAbout2007-04-26 MinutesFiremen's Pension and Relief Fund Board of Trustees Meeting Minutes April 26, 2007 Page 1 of 10 Firemen's Pension and Relief Fund Meeting Minutes April 26, 2007 A meeting of the Fayetteville Firemen's Pension and Relief Fund was held at 11:00 AM on April 26, 2007 in Room 326 of the City Administration Building Mayor Coody called the meeting to order Present: Mayor Coody, Marion Doss, Gene Warford, Pete Reagan, Ron Wood, City Clerk Sondra Smith, City Attorney Kit Williams, Chief Johnson, Paul Becker, Amber Wood, Trish Leach, Wendy Moore Accounting and Kim Cooper Longer Investments. Absent: Marshall E. Mahan Approval of the March 29, 2007 Meeting Minutes: Pete Reagan moved to approve the March 29, 2007 Meeting Minutes. Gene Warford seconded the motion. Upon roll call the motion passed 6-0. Marshall E. Mahan was absent. Approval of the Pension List: Approval of the May, 2007 Pension List There were no changes to the pension list. Pete Reagan moved to approve the May, 2007 Pension List. Gene Warford seconded the motion. Upon roll call the motion passed 6-0. Marshall E. Mahan was absent. Old Business: Dennis Mullens retirement classification Pete Reagan: That was tabled at the last meeting. I move that we keep it on the table. Dennis Mullens wasn't able to be here he had a doctor's appointment at the VA Hospital. Gene Warford: I talked to my accountant about this and he said it is normal. The Social Security department does it all of the time. There is nothing unusual about this whatsoever. Mayor Coody: Is that right. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 26, 2007 Page 2 of 10 Gene Warford: He said you need to get it done and get it approved. Mayor Coody: Who is your accountant? Gene Warford: Dan Downing and Associates. Mayor Coody: I don't know them. Gene Warford: In Springdale. Kit Williams: You said Social Security does this all the time? Gene Warford: Yes. Paul Becker: I don't know what Social Security does or does not do I can't answer to that. However we contacted the Internal Revenue Service with the question as we had agreed to do. Their response was based on a tax situation they said he would have to be reported as retired. Based on all the facts that I have evaluated it would fraudulent not to. I can't speak for Social Security but that is in fact what we got back from the Internal Revenue Service. Pete Reagan: Is that in the form of a letter? Paul Becker: Did we get an email? It was a telephone conversation. Trish Leach: Because we could get an answer faster. Gene Warford: I trust the Internal Revenue Service about as far as I can throw them. You can ask ten different people the same question and get ten different answers. Pete Reagan: I'll agree with that. Gene Warford: Like I said my tax accountant said there shouldn't be any problem with it whatsoever. Even if we approved it it's still going to be up to Dennis' accountant, Dennis and the City to get this paperwork done right. Paul Becker: What we were asked to do is send a 1099-R in. We were asked to change the filing status, if I understand that correctly. Mayor Coody: So when you called the IRS and they said it was not kosher to do this and we were to do it anyway I wonder how that would... Paul Becker: They said based on the fact scenario he would have to be reported on a 1099-R. Mayor Coody: Okay. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 26, 2007 Page 3 of 10 Pete Reagan: Dennis asked me to table this he plans on being at the next meeting with his accountant. Mayor Coody: Kit what do you have to say about all of this? Kit Williams: I always thought that his accountant should be here and try to explain to us what he's requesting and what kind of power we have to do it. I'm some what concerned. I've seen the rules about granting disability of course that is concerning someone who is working and wants to go get disability instead of waiting until his retirement age to get it and there are things that have to be done. The doctor has to certify it and you are supposed to have a doctor. Maybe we had a doctor on the board at one point but we don't have one anymore. The Police don't have one either. That makes me a little concerned about whether we have the power to do it or not. I guess we will hear from his accountant. Marion Doss: Can we write a letter to the IRS instead of a phone call and get a letter back in response? I would feel a lot better about a letter on anything rather than a phone conservation. Sometimes it's a lot easier to explain things in a phone conversation but on the other hand it's nice when it's in black and white. Kit Williams: We can certainly ask but that doesn't mean that we will get one from them. We can't force them to write back. Pete Reagan: I think we would be better off waiting on Dennis and his accountant to see what the particulars are on it. Sondra Smith: I do too because we may be asking for the wrong thing since we have never really had anything specific as to what is requested. Paul Becker: Social Security is a whole different ball game. Kit Williams: The accountant might say "this is the form you need file." Let's hear from the accountant. He might be able to give us the form we need to send in. Marion Doss: Looks like there's surely precedence somewhere. I'm sure it's not the first time this has happened. Gene Warford: With all the asbestos cases and all that stuff. Sondra Smith: When we think about taxes and we think about the IRS. If it's the Social Security Administration we're dealing with the wrong people. That's the reason he needs to be here and his accountant to explain exactly what he's wanting. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 26, 2007 Page 4 of 10 Pete Reagan moved to table to the May meeting. Gene Warford seconded the motion. Upon roll call the motion passed 6-0. Marshall E. Mahan was absent. Appointment of Pension Board representative for the Baxter International lawsuit case (Tabled from the March 29, 2007 meeting.) Pete Reagan: Mr. Chairman if I could I'd like to move that we suspend the agenda and allow our general council to go on followed by our investment folks so they don't have to set here through the whole meeting. Mayor Coody: That suits me. Kit Williams: This is related to what Mark is going to talk about this is an updated letter from Cauley Bowman and Darrin Williams on the Baxter case. Basically he says that their on appeal and nothing is going to happen in this case until the Seventh Circuit rules. They have already had to go there once to reverse the trial judge and that's what they are trying again. The reason I wrote to Mark and asked him to be here is because I thought maybe he needed to further explain to you the need for a personal representative. Mark Martin: Thank you Kit I appreciate the opportunity to come and update you all on the status of our litigation. You have a letter from our co -council Darrin Williams which sets forth what has occurred since this has been appealed and where we are at present. The short version is we filed a joint petition asking for a class certification and lead plaintiff status back in October. That was denied in January by Judge Blanche Manning who is the District Court Judge in the northern district of Illinois. We appealed that, the decision came back in January denying only the lead plaintiff portion of the case and at that point in time we had filed a joint petition with the Labors Pension Board out of Alaska. After Judge Manning handed down her adverse decision denying lead plaintiff status for both our group and the Alaska group in January the Alaska group dropped out of the litigation which left just this board to pursue the litigation. Judge Manning only made the decision on the issue of lead plaintiff status and not class certification so we requested an opportunity for clarification from Judge Manning. You can't proceed with a class action without a lead plaintiff and so she clarified her option in March and denied not only the lead plaintiff issue but the class certification issue and that decision was recently received on March 27th. Two weeks ago we appealed this case once again to the Seventh Circuit Court of Appeals on both issues the issue of lead plaintiff status and class certification. Recall that this is a case that has already been to the Seventh Circuit Court of Appeals on the facts of this case Judge Manning was reverse previously in her efforts to dismiss this case for not having significant facts. We won that time around but we now have to go back once again on the issue of class certification lead plaintiff status. We feel very optimistic, very strong about the facts of our case and law that supports it which is the good news, the bad news is it simply is going to take more time. An appeal to the Seventh Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 26, 2007 Page 5 of 10 Circuit Court of Appeals will take certainly months and possibly and very probably over a year. However we are moving forward with briefs and that's what it takes at this stage. I new that I needed to come here also today to address the issue of once we win. I like to talk about it in terms of "once we win" not if we lose because if we lose there is no need for a representative but we are very optimistic about this and we fell we have a very good chance of getting this reversed. Once that occurs we will need a representative of this board to offer when depositions occur again that will be months from now and possibility a year but that will occur. I knew I needed to come here today to answer any questions that you might have about what that might entail. Kit Williams: I think the firm would cover the expenses and stuff so the representative would not be out any expenses. I think it would probably take some time. Mark is here to answer what kind of time it might take and I think to ask that someone be willing to volunteer. Gene Warford: I'll be the representative. I have talked to Mark about it and he thinks he can get me up to speed on it if it ever comes to that point, if I'm still on the board at that time I will be the representative. Kit Williams: I appreciate that and I would ask that the board make a motion to official appoint you as the representative. Pete Reagan moved to approve the appointment of Gene Warford as representative for the Class Action Lawsuit for the Pension Board. Marion Doss seconded the motion. Upon roll call the motion passed 6-0. Marshall E. Mahan was absent. Kit Williams: Thank you Gene. I appreciate you being willing to do this it would take some time. The only other thing I wanted to add is that we had the Police Pension meeting at 9:00 AM and I noticed as part of the report that we had from our financial advisor that we had three checks that come in to them from settlements from cases just like this where some other person had been the plaintiff but had prevailed and the pension board received money from that. So if they have merit to them and we believe they do these things do occasionally send money out to the people that own stocks if management or whoever of a corporation were not telling the truth or withholding facts or whatever they get that was improper. I just wanted to let you know that in fact this does work. Mark Martin: We also thank you Gene and appreciate the opportunity to be here today. Unless there are any more questions I will excuse myself. Mayor Coody: Are there any questions? Thanks Mark. Sondra Smith: Thank you. Mayor Coody: Thanks Mr. Warford for your help on this. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 26, 2007 Page 6 of 10 Pension Protection Act (Tabled from the March 29, 2007 meeting.) Pete Reagan: Motion to table. Mayor Coody: Remind me what this is again? Pete Reagan: This is the Pension Protection Act of 2007 which allows this fund to pay a portion of a retirees benefit directly to a health care provider. Mayor Coody: Oh yes. So the reason for tabling it is? Pete Reagan: I don't have the information that I requested from NCPERS and there is a bill being generated in the 110 Congress to clarify some of these issues. Sondra Smith: Table to when Pete? May meeting? Pete Reagan: Yes, that would be fine. Pete Reagan moved to table to the May meeting. Gene Warford seconded the motion. Upon roll call the motion passed 6-0. Marshall E. Mahan was absent. Longer Investments Monthly Report Kim Cooper: I'm sorry that Elaine is not here to give the presentation but we are in the middle of earning season this week and we have had several companies that reported this morning. She felt it was better use of her time to be in front of her computers watching what was going in the market than being here. I'll deliver your reports and if you have any questions that I can answer I will relay them to Elaine and get those answers for you. Page one of the March 31" portfolio appraisal you will see that your current allocation to domestic stocks is 45.8%. Page two your foreign allocation is 7.4% so your total foreign as a percent of your equity exposure is about 14%. Your total equities are 53.2% which is in that range of 50% to 55% that we need approval to be at. Pete Reagan moved to approve the equity overage. Ron Wood seconded the motion. Upon roll call the motion passed 6-0. Marshall E. Mahan was absent. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 26, 2007 Page 7 of 10 Going on down your corporate bonds are listed. Page three your current yield on corporate bonds is 6.8%. The yield on your government bonds is 5.4%. Your government agencies are listed on page three and page four. Your government agency yield is 5.4%. Your total portfolio value as of March 31 st was $8,657,000 that included restricted cash that you will see in your money market balances of $95,000 and that was cash that we were holding to go out right after the first of April for your distribution. Since we've had a lot of change since March 31st we went ahead and included a report through April 20th. I'll just page over to the end of that report so you can see the bottom line. Page nine as of April 20th the account value was $8,789,000 after the $95,000 went out. Through Friday just for the month of April your domestic stocks were up 5.2% your foreign stocks were up 3.5% and the total accounts for April was 2.7%. We have had a good month so far. This doesn't include the appreciation we have seen in the market for this week. Page 10 is a summary of your realized gains and income. Your realized gains year to date have been $77,825 and your net income is $56,297. Page 11 is a summary of your bonds the weighted averages table shows as of March 31st your average yield on the bonds that are in your account was 5.6%. Average maturity is 5.7 years and that compares to a five year treasury which has a yield of 4.5%. So you have about the same level of maturity as a five year treasury but you have over a full point more yield than the treasury would have. The lower part of that page shows the distribution by maturity. Your bonds that mature in under one year and one to three years total 35% of your portfolio. So you have 35% of your portfolio that will mature in less than three years and that gives us a lot of flexibility. Page 12 lists your current largest holdings General Electric, Newmont Mining, US Bancorp, Johnson & Johnson and Coca-Cola. Page 13 is your Industry Weightings right now you are overweight in capital goods, consumer non-cyclical, cyclical and energy. You're underweight in consumer cyclical and the reason for that is we are still concerned about housing market, there's still weakness there. The mortgage equity extractions have slowed down considerably and that's what has been popping up consumer spending. So we don't want to get real aggressive on the consumer cyclical side. We are also underweight in health care. We are even weighted in financial stocks the banks, insurance and in technology. Page 14 is a report of your contributions and withdrawals since inception. So far year to date you haven't had any contributions to the account and your year to date distributions have been 305,000. Page 15 is a summary of your performance since inception. Your 2007 performance (through 3/31) your equities were down 0.4% your equity mutual funds which are your foreign stocks were up 2.2%. Your bonds were up 1.4% and total account through March 31st was up about 0.5%. Your annualized return through the 1st quarter stocks up 9.6%, bonds 3.8% and your total Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 26, 2007 Page 8 of 10 account performance since inception on an annualized basis has been 6.6%. Which compares to the 6% that's used in your actuary reports so we are exceeding that return. The equity performance of about flat or down just slightly compares with the index returns through March 31st, some up some down but basically flat for those two. Through April 20th just to give you an idea of what your year to date returns have been. The S&P through April 20th was up 4.42%. Your stocks are up 4.8% for your domestic stocks. Foreign stocks are up 5.8% and your total account year to date through April 20th is up 3.1%. The lower section of the report shows your beginning value, deposits, withdrawals, and investment return since inception which has been $2,818,000. We have a copy of your investment policy. The policy that you just signed didn't have any changes on it. It was just to reflect the new members of your board so we have all the current signatures on it. Behind the policy are detailed reports of your realized gains and income. The stock market has gone through 13,000 as of yesterday and that was kind of a number that everyone was watching for. Elaine said that that was a very good number because not only did the DOW break through 13,000 but also the Dow Utility Index and the Transport Index and the NASDAQ over the counter index hit a six and a half year new high. So it is very broad based it's not just the DOW Industrials that are hitting new highs. The advance has been confirmed by both the technical which is the price of the stocks but also fundamentals which is the earnings. The earnings that have been reported this earning season have been very good much better than most companies had predicted and the analysis had expected. It has been good news that we have seen the last couple of weeks. We might see the market take a bit of a breather from this 13,000 level but Elaine still thinks that stocks are more attractive than bonds here. Elaine thinks there will be some slowing in the second half in the economy probably to a 2% rate. We just wanted to reiterate that the earnings picture is very good. Mayor Coody: Any questions? Thank you very much for a very good report. Kim Cooper: You're very welcome. It's fun to deliver those. Quarterly Report Informational NCPERS 2007 Conference and Educational Opportunities Kit Williams: Is the election coming up for this board to? Sondra Smith: Yes. Kit Williams: How many positions are open? Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 26, 2007 Page 9 of 10 Sondra Smith: There are two positions open, Ronnie Wood and Gene Warford. Kit Williams: Do they need to do anything in particular? Sondra Smith: No, this board has me send out nomination letters I get the nominations back and then we send out for elections. Pete Reagan: Our next meeting is scheduled for May 31st is that correct? Sondra Smith: Yes, May 31st. Gene Warford: Can we get the election done that quick? Sondra Smith: Yes. Pete Reagan: I'm scheduled to be in Alabama the 31st. Does anyone have a problem with me not being here or move the meeting date. Kit Williams: Statutorily don't we have to have a meeting in May? Isn't that what the statue says? Pete Reagan: The statue says they have to be elected at the May meeting. Kit Williams: That is the last day in May. Marion Doss: We need to the have time to get those letters out and get the nominations back in and then get the ballots out. We probably need ever bit of that time. Kit Williams: Pete were you saying you wanted to have it earlier than that? Pete Reagan: If we had it on the fourth Thursday which would be the 24th if no one has a problem with that. That would give us a full month. That would give us four full weeks from today. Will that push you Sondra? Sondra Smith: I will do what ever the board would like. Kit Williams: Will you have time to get the election done without any problem? Sondra Smith: Yes. I don't know if we can do the meeting on that date. I'll check the calendar. We can do it, I won't be here but someone else can run the meeting, I`m scheduled off at that time. Mayor Coody: I don't know what my calendar looks like. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 26, 2007 Page 10 of 10 Gene Warford: What is the holiday coming up? Kit Williams: Memorial Day but that is the Monday before the 31st. Gene Warford: I will be gone too. I have a trip scheduled. Pete Reagan: So the 24th will be ok with you? Gene Warford: The 24th will be fine with me. Kit Williams: That's before Memorial Day. Mayor Coody: Okay, I'll be here. Sondra Smith: I will be here to. It is the week before that I will be off. Gene Warford: Do we need a motion on that? Kit Williams: Yes, to change the meeting date. Gene Warford made a motion to change the meeting date to May 24, 2007. Pete Reagan seconded the motion. Upon roll call the motion passed 6-0. Marshall E. Mahan was absent. Meeting Adjourned at 11:35 AM