Loading...
HomeMy WebLinkAbout2009-04-09 MinutesSpecial Firemen's Pension & Relief Fund Lioneld Jordan Chairman Board of Trustees Meeting Minutes Sondra E. Smith Secretary April 9, 2009 Marion Doss Position 1/Retired Page l of 11 Pete Reagan Position 2/Retired Ile Gene Warford Position 3/Retired Ron Wood Position 4/Retired a e e ARKANSAS Special Firemen's Pension and Relief Fund Meeting Minutes April 9, 2009 A special meeting of the Fayetteville Firemen's Pension and Relief Fund was held at 11:00 AM on April 9, 2009 in Room 326 of the City Administration Building. Mayor Jordan called the meeting to order. Present: Mayor Jordan, Marion Doss, Pete Reagan, Gene Warford, Ronnie Wood, Sondra Smith, Trish Leach, Accounting, City Attorney Kit Williams, Paul Becker, Finance and Internal Services Director and members of the audience. Unfinished Business: Scenario's for Actuary study Mayor Jordan: Who has this? Sondra Smith: At the special meeting that we had we approved money to be spent for a study but we did not determine the scenarios. We need to determine the scenarios. Mayor Jordan: That's right. Somebody came up after that meeting and wanted to know what the scenarios were and I really could not tell them until we talked about what they are. Pete Reagan: Jody Carreiro, the Actuary with Osbom, Carreiro, and Associates in the first meeting that we had with him and David Clark said he could do four scenarios for $2,200. Really that would not get us to a bottom line of what would be revenue neutral for the City of Fayetteville in the cost determination of consolidating with LOPFI. I called Jody and asked him what it would cost for him to determine what the number would be to be revenue neutral to the City to consolidate with LOPFL He said he could do that. His hourly rate is $120 per hour but it would not exceed $3,000. That is a possible $800 jump but I doubt that it will be that high because he already has our current numbers so I don't think it would be that much. Do you, Paul? Paul Becker, Finance & Internal Services Department Director: I have no idea. He has the current numbers. Pete Reagan: I think it would actually be less than that. I asked him to give us a dollar amount that we could approve at this meeting and let him get the ball rolling on it. Special Firemen's Pension & Relief Fund Board of Trustees Meeting Minutes April 9, 2009 Page 2 of 11 Mayor Jordan: So that would be our scenario then? Pete Reagan: According to you, Sondra, and Paul for the consolidation effort to start with LOPFI we would need to determine a number that would be revenue neutral to the City. Is that correct? Mayor Jordan: Right. Paul Becker: That's what we suggested at the last meeting. Pete Reagan: Unless you have found $50 million since our last meeting. Ronnie Wood: I think that is going to have to be our starting point. Marion Doss: It is kind of the same thing that we had talked about. We had these four different scenarios that he presented and what their approximate cost would be. What we are going to have to come up with is four different scenarios for that $2,200 and variations. The only thing I don't like on this is the widow's benefits. I would like to see those stay the same as they are currently. I would like to see spousal benefits say the same. Mayor Jordan: Is that a LOPFI decision? Marion Doss: No. City Attorney Kit Williams: I think if the plan goes down with particular benefits those benefits can remain as is. Even though the later LOPFI plan does not have the widow benefits like this. Although it is something they can choose if they reduce their benefits. I think that could be one of the scenarios that you look at and if that is a scenario that you want them to look at then I think that is what you can go forward with. Pete Reagan: I requested that. That is my own personal request to Jody to see if it was legal and to see what the actual cost of that was. Paul Becker: The plan would stay intact the way it was sent down. We did have one question that I was asked to follow up on at the last meeting. If it was sent down with no COLA could the City request a COLA at a later point in time if they wished? The answer was yes the City could request one. Pete Regan moved to approve the amount of not to exceed $3,000 for the actuary study by Osborn, Carreiro, and Associates of Little Rock to determine the amount of decrease necessary to make it revenue neutral for the City for the purpose of consolidation with LOPFI. Gene Warford seconded the motion. City Attorney Kit Williams explained the motion to member of the audience that could not hear the motion. Special Firemen's Pension & Relief Fund Board of Trustees Meeting Minutes April 9, 2009 Page 3 of 11 John Jenkins: I want to make sure I understand. You are talking about six months for the actuary study and then once the results of that is back it has to be presented to the LOPFI Board and then they make a decision on it. Is that correct? Mayor Jordan: It has to be run through the City Council too. City Attorney Kit Williams: First this Board would have to decide if they want to lower the pension benefits to the amount that the actuary says would be revenue neutral for the City. Pete Reagan: I don't think that is going to be a six month process. I think in less than 60 days we can have something back. Mayor Jordan: I think you are right. City Attorney Kit Williams: If the Board then does that it would go to the City with the new benefits that are supposedly revenue neutral to the City. The City Council then would determine to consolidate it with LOPFI under the new plan. I don't know if there is a formal acceptance that LOPFI has to do or not. There might be. I think the City Council is the key actor once this Board has acted. Paul Becker: Once it goes to the Council, depending on if the Council agrees to send it to LOPFI, they look at it between April 1 and they must make a decision by the end of October. It needs to be accepted by the LOPFI Board. Those procedures have to take place. Depending on the actuarial study, what this Board decides, and the membership, then it goes to the Council and then it would be sent to LOPFL They would have another actuarial study done, have the Council agree to it if acceptable, and then the actual LOPFI Board votes to accept it. That would be the procedures. Pete Reagan: There are actually two actuary studies that need to be done but once we apply for consolidation to LOPFI the actuary firm for LOPFI will set the final numbers. What we are getting here is the number that will get us real close or in the ballpark. City Attorney Kit Williams: Does somebody know if they use the amount of money in our fund as of December 31, 2008? Pete Reagan: Yes sir. It will be a 2008 actuary. City Attorney Kit Williams: I was going to suggest that we use the April 1, 2009 number for this study but not if the other one is not used. I think using the January 1, 2009 number is the proper number to use even though the market obviously goes up and down in the interim. Pete Reagan: The reason for that is the LOPFI actuary will run the numbers and that is what the LOPFI Board determined because the change over date is January 1. Sondra Smith: Is this in addition to the $2,000 that we have already approved? Pete Reagan: No. Special Firemen's Pension & Relief Fund Board of Trustees Meeting Minutes April 9, 2009 Page 4 of 11 Sondra Smith: Then I would suggest that we amend the motion to do an additional $1,000 on top of what we have already approved. City Attorney Kit Williams: Right. Sondra Smith: We have already approved $2,000. In the future it will look like we approved $2,000 and $3,000 for a total of $5,000. The motion on the floor was withdrawn by Pete Reagan and Gene Warford withdrew the second. City Attorney Kit Williams: There are two ways to handle this. One is to reconsider the previous motion and then you can make a new motion or you can try to add to the original motion. I think probably the better way is to reconsider the previous motion and start again. Pete Reagan moved to reconsider the previous motion to authorize the expenditure of $2,200 for an actuary study. Gene Warford seconded the motion. Upon roll call the motion passed unanimously. Dennis Mullens: If you miss the deadline for the results what happens if it was not completed. City Attorney Kit Williams: You could try it again in the future. If they denied it or if for some reason it was not there in time then you would have to wait a year. Dennis Mullens: Is it just once a year that you can do this? Pete Reagan: It's just once a year that you can consolidate. The actual date of transfer of assets is December 31 or January 1. Paul Becker: Not necessarily. It is whenever they accept the plan. Pete Reagan: Is it. Paul Becker: Yes. The period of analysis would be between April and October for them to make a decision. If you miss that you would have to wait until the next April. Mayor Jordan: I didn't know that. Paul Becker: So if you want to do that there is a time frame where you want to get it started. City Attorney Kit Williams: Basically as stated in this email. Pete Reagan: Yes. City Attorney Kit Williams: This replaces the one you reconsidered. You are replacing the current one that had $2,000, which is now before the Board and amending it to this. Mayor Jordan: To $3,000. Is everyone clear on this? I want to be sure everyone is on board with this. Special Firemen's Pension & Relief Fund Board of Trustees Meeting Minutes April 9, 2009 Page 5 of 11 Gene Warford: When they do the scenario, when we do reduce benefits, at whatever point it is, and the widows if they have to take a decrease, I want to know what the difference is with keeping them at 100% or taking a decrease. Most retirement systems the widows benefit is not 100% of what he is drawing. There are some firemen that do not have wives and I do not think they should be penalized if they do not have a wife to support my wife. That would be cutting his retirement to cover somebody else's wife. I would like to know what that figure is. City Attorney Kit Williams: I think we are going to get a few scenarios here so let's talk about what we want from the actuary. A discussion followed on the different scenarios. The following scenarios were discussed: 1. Widow benefits at 50% what would be the rate for the pensioners 2. Widow benefits at 75% what would the rate be for the pensioners. 3. Widow benefits at the current rate what would the rate be for the pensioners Jan Judy, widow: Are you talking about leaving the existing widows at the same rate the fire fighters are but any new widows that retire would be the different rate or are you talking about all widows period? City Attorney Kit Williams: I don't think legally we can treat widows differently or survivors differently. Pete Reagan: I asked Jody if he could clarify that and he said he would research state statutes and find out if that is legal. My intention was future widows but I do not know if that is legal. I would like to have your opinion on that too Kit. The only time it addresses, in state statutes that I can find, a reduction of benefits is when the fund is completely depleted then all pensioners will be prorated at the same rate. That is the only time it addresses that. That is the reason I asked Jody to research that and I also asked David Clark for his opinion on it. City Attorney Kit Williams: Regarding the widows I think when you are talking about a class of beneficiaries I don't think you can probably treat them differently. I think everybody in the same class has to be treated the same way. I think for this study you should look at it that way and see what the figures come out. Mayor Jordan: In other words all the widows would all be in one scenario City Attorney Kit Williams: Yes. I think so. Pete Reagan: I do not want to reduce widow's benefits to current widows. It is inevitable that we are going to have to take a reduction. We all know that. The widows are going to take the reduction just like we are. I wanted to see if there was any way we could save any money with reducing the benefit for future widows to 50%. Mayor Jordan: What you are saying is existing widows their percentage will remain the same as the pensioners but new widows may draw less. Special Firemen's Pension & Relief Fund Board of Trustees Meeting Minutes April 9, 2009 Page 6 of 11 City Attorney Kit Williams: I do not think that would be allowed but I have not researched that. Mayor Jordan: I guess there is only one way to find out and that is to send it down there and see if it floats or not. Pete Reagan: I look forward to Kit's opinion on it too. Marion Doss: So anyone that is alive now when they die their widow would get a lower amount. That really does not seem right. City Attorney Kit Williams: I think that is probably not allowed under normal pension law but I have not specifically researched it. Even if it is legal, it is still up to you all to decide if that is fair. Mayor Jordan: I would leave it like it is and send it down. I see what Kit is saying because when you start to differentiate from one widow to another one I do not know if we can do that. Pete Reagan: All we are doing is asking the actuary to cost it. We know there is a cost to it. I would like to know what that cost is. It is not going to cost us a dime more to get it done. The following additional scenario was discussed: 1. The reduction for the widows would only be for widows that are not currently drawing in their own name now. Pete Reagan: Correct. That will influence the bottom line. City Attorney Kit Williams: It would probably be a significant influence because the younger members including members of this board who retired later and were able to get more salary before they retired their pension benefits are higher. You are probably going to be survived by your widows and therefore they would be drawing a lot more money out of the pension fund if they are getting a 100% or 50%. That could make a significant difference in the amount. A discussion followed on the wording of the scenarios. Imogene Stout, widow: What if the husband and wife are divorced and the children are out of the nest and out on their own would that widow go ahead and draw his pension? City Attorney Kit Williams: Most of rules state that if there is a divorce then the spouse is no longer a surviving spouse and she does not draw benefits. We will send the board a copy of the letter that we are sending to Jody outlining the various scenarios and if you have any questions or think that we have not represented what you want then please let us know and we will adjust the letter. Pete Reagan: Can we get a copy before you send it. Special Firemen's Pension & Relief Fund Board of Trustees Meeting Minutes April 9, 2009 Page 7 of 11 City Attorney Kit Williams: Sure. Mayor Jordan: We will make sure everyone is on the same page. Paul Becker: I would suggest one of the trustees be appointed to follow up on this study. Time is of the essence and someone is going to have to follow up and make sure it moves forward. Sometimes it takes a while to get these done. Gene Warford: I would recommend Pete or Marion. Pete Reagan: I will be glad to. City Attorney Kit Williams: We have members of the trustees here too, the Mayor and the Clerk and I think we will make sure it gets going and keep everyone informed. The scenarios were reviewed to make sure they were correct. Jan Judy: I thought you were saying that it was lowering widows to 50% or 75% of base pay. So the widows could go below the 50% of base pay. Pete Reagan: No. Never. Jan Judy: That is the way it was read. If the pensioners draw 65% of the current level then the widows would only get 50% of that. Pete Reagan: For clarification I do not want any scenarios with the widows drawing less than 50% of base pay. City Attorney Kit Williams: The bottom scenario should probably state that then, instead of 50% of what your benefits would be. Sondra Smith: It should state no less than 50% of the retiree benefit. Pete Reagan: We can't go below that according to state statutes. Pete Reagan moved to approve a not to exceed amount of $3,000 for an actuarial valuation to determine a reduction in benefits for the old Fire Pension Plan for the purpose of consolidation with LOPFI based on the four scenarios discussed at this meeting. Gene Warford seconded the motion. Upon roll call the motion passed unanimously. Attorney General Opinion Sondra Smith: We have not received a reply. A copy of the letter we sent is included in your packet. The opinion that was voted on does not state or ask if we can do a benefit decrease. Gene Warford: If it does not ask that what opinion are we getting? Special Firemen's Pension & Relief Fund Board of Trustees Meeting Minutes April 9, 2009 Page 8 of 11 Sondra Smith: I do not know. That is the reason I did not vote for the opinion. The Attorney General's opinion that was requested says "if the Fayetteville Firemen's Pension and Relief Fund Board takes action to reduce pension benefits to retirees will that violate their rights protected under Article 2 Section 17 of the Arkansas State Constitution as interpreted by the Arkansas Supreme Court? If so will members of the Pension Board and the City of Fayetteville be exposed to liability should a lawsuit be filed on behalf of any retiree? " It is just asking if we will be sued. It is not saying can we reduce benefits. City Attorney Kit Williams: The basic problem with this request is that it is limited really to Article 2 Section 17 of the Arkansas State Constitution rather than saying can you do it period or is it illegal period. Article 2 Section 17 of the Arkansas Constitution talks about you can't pass certain laws that would be an Ex post facto law. Nothing this board does is a law. Therefore that particular constitutional provision is not applicable to what this board does because this board does not pass laws. If you wanted to have a more general request about that then certainly we could do that or you could do that. If you asked us to we could ask one of our state representatives to do that but we were informed that this is what the question was and so that is why we followed what the board voted on and we sent the question down exactly as the board had passed. John Jenkins: That is not what we asked for. City Attorney Kit Williams: That was the terminology of the board and Pete confirmed that when he gave this statement to Sondra to send down. If you want us to we can ask a follow up question to the Attorney General that I would draft up to be much more general in response to what my opinion was that we could do it. I could ask a much more general question of the Attorney General so they would look at statutes to see if the statutes prohibited any reduction rather than this provision in the constitution which I think is clearly not going to answer the question. Pete Reagan: That is the reason this is a great country because we all have opinions and this is exactly what I asked for. City Attorney Kit Williams: That is correct and it is down there. Pete Reagan: The board passed it. Sondra Smith: I think the concern has been can we reduce benefits and I don't think that is going to be the answer that we are going to get back from the Attorney General's opinion. I could be wrong. City Attorney Kit Williams: My question to the board is would you want me to send a second question down that would be more general in nature and ask about whether it is legal to reduce benefits. Ronnie Wood: I don't see why that would hurt. Pete Reagan: I don't either. Special Firemen's Pension & Relief Fund Board of Trustees Meeting Minutes April 9, 2009 Page 9 of 11 Ronnie Wood: We want all the answers we can get don't we. City Attorney Kit Williams: Then I will draft up something that will be much more general asking about whether is illegal, improper, or unconstitutional for the board to reduce benefits as long as they are not reduced below 50%. I think we all agree that right now that can't be done unless the fund is broke. Ronnie Wood: Will that be part of this or will it be totally separate? Marion Doss: It will be totally separate won't it? City Attorney Kit Williams: I will ask for another one. Senator Madison has already sent the other one in. We will just ask for a second one. Mayor Jordan: He may send back something that answers that question in his first opinion. We don't know but if you send the other one that assures you that question will be asked. Marion Doss: All these benefit increases had to go through PRB. We had to submit everything and request permission. Does the local pension board have the power to change benefits or reduce them without it going back to PRB since they gave the okay to do the increases. City Attorney Kit Williams: Obviously there is no provision within the statutes that talks about how you do that. One answer to that might possibly be the reason you have to get permission from PRB to raise benefits is that can have an adverse affect on your pension plan. If you reduce benefits that can only have a positive affect and therefore you might not need permission if you can not hurt your pension fund. I don't know. They have no provision within the law about how you are suppose to do it. I will try to incorporate than in my question. John Jenkins: I want to clarify that I was not accusing Pete or anyone else. I think the majority of people understood that the Attorney General's opinion would be on could we do the pay cut. That was the point I was trying to make. I don't want anyone to walk out here thinking that I said that Pete did not do the right thing or anyone on this board. I definitely was under the understanding that is not what we asked for in he Attorney General's opinion. I can tell you that was the understanding the majority of us had. Sondra Smith moved to have Kit get an Attorney General's opinion about the legality of reducing benefits. Marion Doss seconded the motion. Upon roll call the motion passed unanimously. PRB letter dated February 2, 2006 regarding Cash Flow basis benefit increase Sondra Smith: In 2006 I had some concerns about a benefit increase that the policemen's pension was proposing so I drafted a letter to David Clark at PRB with several questions one of them was "what happens if benefits are increased due to a cash flow study and in the future that plan can not sustain the increase due to a deduction in the net income of the plan." David Clark sent back the following answer "the board would need to prorate benefits. The board should refer A.C. A. 24-11-416 and legal counsel for guidance on this matter. Special Firemen's Pension & Relief Fund Board of Trustees Meeting Minutes April 9, 2009 Page 10 of 11 All the large benefit increases were done on a cash flow basis so that tells me that PRB has answered the question on whether or not we can do a benefit decrease. Pete Reagan: I think this is under the proration of benefits that is when the fund is depleted where there is not sufficient money in the fund to make yearly payments to the pensioners that is when there is proration. There is nothing in state statutes that addresses the reduction in benefits unless the fund is insufficient and does not have funds to pay for a year. City Attorney Kit Williams: The statute you are talking about is when the fund runs out of money. Pete Reagan: Right. City Attorney Kit Williams: As you see he also says you should ask your legal counsel for guidance and my guidance on that is that even though there is not a specific provision within those statutes to talk about lowering benefits there are other statutes in there including the one for funds that are in danger and want to be helped by the emergency fund that LOPFI has. That requires the funds have benefits that are no more than 50% which is the beginning amount that the fund started with. Because that is a requirement to take advantage of that kind of saving protection and for the other reasons I stated before I think that indicates that you must have the power to lower benefits because this statute would not help any fund that had increased benefits above 50% if you could not go back to 50%. Even though as Pete says there is no provision in the statute that says this board can lower benefits I think it has to be understood that is the legislative intent that you would have to be able to have that power. There was another case that I sited to you all that was not dealing with state pension funds but it was private pension funds and an argument had been made that this pension fund could not lower these benefits and the state said there was inherent right of the trustees to do that in order to maintain the solvency of the pension fund even though it was not within the document. I think because of that you do have inherent rights as trustees to try to make sure your fund does not go broke. You are right Pete there is nothing specifically in the statute that says that. Sondra Smith: With all due respect my specific question was what happens if benefits are increased due to a cash flow study and in the future that plan can not sustain the increase due to a deduction in the net income of the plan. It does not say if the net income of the plan goes all the way down to a certain level, it says just a deduction in the net income of the plan which is where we are at today. City Attorney Kit Williams: I will specifically ask the Attorney General about that and we will get an opinion. New Business: Updated revenue/expense report Sondra Smith: Trish in Accounting has been really nice to do this spreadsheet for this. This is the current revenues and expenditures through February 28, 2009. Trish did not have the market value of the plan at the time she did this report. The report shows years 2004 to 2008 and the drop in your market value during that time frame from $9.3 million to $5.8 million. Special Firemen's Pension & Relief Fund Board of Trustees Meeting Minutes April 9, 2009 Page 11 of 11 Change meeting time Sondra Smith: We have been meeting quarterly and this room was available for those quarterly meetings. We have a conflict with another meeting for the use of this room at this time. It would be more convenient for the City if you could change the board meeting time to afternoon. Pete Reagan: I am scheduled out of town for the next three meetings. Is there a possibility of changing meeting dates to fit the Board's schedule? I think it is very important that all the Board members be at the meetings. There is no way I can change what I have for the next three months. A discussion followed on the date of the next meeting. It was decided to have the next meeting at 10:00 am on May 14, 2009. The April 30th meeting will be canceled. Longer Investments Market Update March 20, 2009 Mayor that is a letter that Elaine Longer sends to us about the market. 2009 First Quarter Report A copy of the report was given to the board. Meeting adjourned at 12:20 pm