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HomeMy WebLinkAbout2009-11-19 MinutesBoard Members Mayor Jordan Chairman Sondra E. Smith Secretary Marion Doss Position 1/Retired Pete Reagan Position 2/Retired Gene Warford Position 3/Retired Ron Wood Position 4/Rctired Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes November 19, 2009 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes November 19, 2009 Page 1 of 10 A meeting of the Fayetteville Firemen's Pension and Relief Fund Board of Trustees was held at 3:00 PM on November 19, 2009 in Room 326 of the City Administration Building. Mayor Jordan called the meeting to order. Present: Mayor Jordan, Marion Doss, Ronnie Wood, Sondra Smith, City Attorney Kit Williams, Paul Becker Finance Director, Trish Leach, Audience and Press. Absent: Gene Warford and Pete Reagan. Approval of the Minutes: October 29, 2009 Meeting Minutes Marion Doss moved to approve the October 29, 2009 Firemen's Pension and Relief Fund Board of Trustees meeting minutes. Ronnie Wood seconded the motion. Upon roll call the motion passed 4-0. Gene Warford and Pete Reagan were absent. Approval of the Pension List: December, 2009 Pension List Sondra Smith: There are no changes to the list that I am aware of. Marion Doss: Except for Donald Miller or was that on the last one. Sondra Smith: That was on the last one. Marion Doss moved to approve the December, 2009 Pension List. Ronnie Wood seconded the motion. Upon roll call the motion passed 4-0. Gene Warford and Pete Reagan were absent. 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes November 19, 2009 Page 2 of 10 Old Business: Osborn, Carreiro & Associates, Inc. Actuarial Study Mayor Jordan: I've been scrambling around trying to read this so I might not be quit as versed on this as I probably need to be. I do apologize for that but we just got it today. Has anybody had a chance to look it over? Kit Williams: Why don't you give everybody a chance to read over it for a few minutes? Mayor Jordan: Does anybody need the actuarial report? Doesn't look much different from what I have seen before. Marion Doss: The first time he said 23% reduction and this time he said 22%. Mayor Jordan: Then he goes on to say, I believe toward the end, due to the market increase it might not be 22%. Paul Becker: Let's talk about that. He talks about what the market value was at the end of 2008. The market value now is less than it was in 2008 so that doesn't apply. Remember we have to pull money out of your invested assets to pay pension benefits. That part doesn't apply so you don't take a reduction there. On the worksheet Trish did for us you can see that the total market value of assets in 2008 was $5.8 million and they are currently $5.5 million. He is making an assumption here that the value of the investment portfolio would be larger than it was last year. That's not the case and if you really analyze it that's because we have had to pull money out of that to pay pension benefits. Marion Doss: Why would he not use current figures since we asked him to do this about a month or two ago? Paul Becker: And run it back through the scenario? Marion Doss: When did we make a request for this? Sondra Smith: It was early in the year. A copy of the letter is in the packet. The request was made April 29th. Kit Williams: He used $5.8 million and the market value of total reserves assets now are $5,576,000. It's within a couple hundred thousand less than what he said but it is still pretty close. Paul Becker: The thrust of the memo said that he was making an assumption that it would be UP. Kit Williams: He missed that by about a million. 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes November 19, 2009 Page 3 of 10 Paul Becker: He is making the assumption that it would be up because of the activity of the stock market. As we know in our situation we're pulling from those assets because the current income doesn't keep up with pensioners benefits. Kit Williams: Back in 2006 the market had been up very substantially and when I saw that our reserves were still down that's what made me concerned enough that I started writing you saying something has to be done because we're heading to liquidation. That was before the crash. That was after she had done a wonderful job in getting tremendous gains in the pension plan. Marion Doss: We received the answer to the questions we asked. I'm really not in favor of reducing widow's benefits. Scenario one is to leave this pretty much the way they are. That's my opinion. I would prefer to keep widows benefits the same as they currently are. I wouldn't like the idea of reducing future ones and have two different amounts there. Kit Williams: I would be concerned about that, if we tried to treat widows that are already receiving now one way and then new widows receiving less. I don't know if we could actually do that. Mayor Jordan: It doesn't seem right. Kit Williams: It might be an equal protection of the laws argument, that it would not be something that could be done. I haven't researched that but it does make me concerned. Marion Doss: That's one of the things that the family asks when a firefighter passes away. That's one thing they are concerned about with their mother or someone is if she is going to have a lot less to live on. I felt good with the fact that it stays the same. That's something they don't have to worry about. I would rather take more of a cut myself and leave widows benefits the same as they are. Kit Williams: Ronnie you are the only other pensioner here do you have any comments on that? Ronnie Wood: I would agree with Marion on that. I don't want to cut widows benefits. To me through the years that's been a big part of our pension. Mayor Jordan: Do you all want to wait until your other pensioners are here at the next meeting. Marion Doss: There is nothing we can do about it right now anyway. Mayor Jordan: We just got it today and I don't think you want to make a decision on this today. Kit Williams: I think you should look at what he's saying when he thought the fund would be going up and it says for every one million dollars in change then the benefits will change by 7% so if it's going down I would assume you will have to have a bigger decrease for every million it 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes November 19, 2009 Page 4 of 10 goes down you are going to lose another 7%. Instead of a 22% decrease it would be a 29% decrease and that is what has concerned the Mayor, City Clerk, and me for a long time is that the longer something like this is allowed to go on the bigger the cut would have to be. Marion Doss: We are very concerned about it too. We trusted the people at Pension Review Board and we made the request when we did the actuarial studies to see if we could do a benefit increase and so that is where that's at. Mayor Jordan: I know it has to be frustrating. New Business: Attorney General Opinion No. 2009-102 dated November 4, 2009 Kit Williams: I sent you a memo that I hope you got. I certainly agree with the Attorney General that the law in this area is not entirely clear. He couldn't give an absolutely definitively answer just like I can't. The thrust of his opinion was that there were certain things that made them concerned about whether or not you could legally reduce benefits. The statute doesn't expressly give you rights to reduce benefits except for one particular statute that the Attorney General and I disagreed on how it should be interrupted. The one that says benefits can be reduced pro rata to prevent the fund from running out of money. They say that because in another part of that same code section they talked about running out of money in a fiscal year, paying it all, and then paying nothing until the next money comes in. They interpreted that to mean that it affected that particular subsection also and therefore it was only at the last year, when you were about to run out of money, that you could reduce the benefits so you wouldn't run out of money. To me that does not make logical sense. It seems like if you can reduce benefits so that the fund will not run out of money you should be able to do it early enough so you don't have to cut the benefits so much. But, nobody will have an answer to this until the courts have spoken. It's going to be difficult to get this issue before the court. There are two ways to get it before the court, one is to do nothing and run the fund into the ground where you won't have money to pay all the benefits. Then maybe a disgruntled beneficiary will sue you and say that you didn't fulfill your fiduciary duties of protecting the fund and making sure it would remain viable, that you should have reduced benefits and you didn't do it. At that point they could sue and we will see what the courts would say. You certainly will have the Attorney General's opinions to rely on, that you followed what you believed the Attorney General's advice was in not reducing benefits and you didn't see a specific way to do it. You very well could win but if you lost the problem with that scenario is that there is no money in the funds to pay this beneficiary who has just won and claims he or she should be getting at least 50% of their ending pay. The only persons that could possibly pay that would be the board members, which you're not going to be an in position at that point, because you won't be getting benefits either. The other scenario is if you decided to attempt to reduce benefits then any pensioner out there that disagreed with that position could file a suit and say you are not allowed to do that and you 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes November 19, 2009 Page 5 of 10 have taken money away from me. They could sue the board for making that decision because it would be a board decision and then we would get into court. At that point I could defend the board's decision and their attorney would say that we breached a contract or something whatever their theory is. We could get into court at that point in time because there would be what's called an actual case in controversy. The judges won't just give you an advisory opinion. We can't just send this up to the judge and say tell us what to do. There has to be a case in controversy and there would be if you lowered benefits and somebody sued you. The down side on that is let's assume I'm wrong and that the court would say, kind of like what the Attorney General has said, that you can't reduce benefits, that you have to drive the pension plan right into the dirt. At that point in time the remedy would be or what the person would win is two things. He would win all the benefits he should have received if you hadn't reduced benefits so whatever that would be, a fairly small percentage, but he and all the other beneficiaries and probably you too would all get an extra check from the pension fund. The same amount as if you had never reduced benefits. The benefit of that is at that point in time at least there will be money in the fund to pay. In fact you will be basically in the same position you would have been if you would have never reduced benefits. Everybody would just get paid their benefits. The down side is you would probably owe attorney fees to the attorney representing that pensioner. I don't know how much that would be. It probably would not be a whole bunch, but if they waited a long time to sue so a lot of unpaid benefits accumulated, then it would be more. If they filed suit quickly and we got into court quickly then I don't think the attorney fees would be that much. That would be the one thing that would be in addition to you all getting benefits. The benefit of that is that at least there will be money in the pension fund to pay if you lose and you all would not be individually liable which you might very well be if this pension fund gets driven right into the dirt. I have written a lot of memos on this and the Attorney General has written opinions, I'm probably going to stop. I've tried to explain my position as carefully as I can. I know it's confusing. I've tried not to be as confusing but we are just in this situation where it's not crystal clear. I can't give you the right answer definitely either way so really the ball is going to be in your court to decide which course you want to take and either way you could get sued. Mayor Jordan: Which one do you like? Marion Doss: Personally I think the prudent thing to do is to reduce benefits to try to save the fund. I've said in the past that I think we should be attempting consolidation with LOPFI too. Kit Williams: I think those would go hand and hand although you could possibly reduce benefits just to save the fund, but you could also do it in order to try to convince the City Council to go ahead and consolidate you with LOPFI. Marion Doss: That's what I think would be the safest thing in the long run. That's what I would prefer. Another thing I was wondering about, the thought occurred to me, we had to write a letter to the Pension Review Board to have a study done to get an okay for the increase, and can we write a letter to them and see if we can do a decrease to save the fund. At least get something from them on that, they are the ones that let us do this. Ronnie Wood: Send that to PRB? 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes November 19, 2009 Page 6 of 10 Marion Doss: Yes, the Pension Review Board Kit Williams: You're right. In order to get any increase, which you have gotten several in the past, you have always had to send it down and get an actuarial study and usually a cash flow study, because that's the law. It's very clear in the statutes how you get increases. There's no procedure set for decreases except for that one section I talked about reducing everything pro rata which is really what would be your preferred way anyway. I don't know if they would feel like they had the right to do anything if we sent them down a letter requesting that, because there is nothing in the statutes that says they are supposed to do anything on that. The other thing would be to see if the legislature is going to change anything and make it clear but that means that you wait another couple years and the fund gets that much worse while we are waiting to see if the legislature is going to tell you how to do it. That's certainly a problem though, because if you just use that one section that I'm talking about that says reduce it pro rata, the court might say that's the wrong section, you should have sent a letter even though there is nothing in there. That's true this is uncharted area. I wish I had the perfect answer I certainly do not. Marion Doss: I would like to question them about that. I'm sure we can't be the only department in the state that has come up with this problem. Kit Williams: No, there are many pension plans that are in real problem areas right now and I don't know what the resolution of that is going to be for them. I don't know if anybody has done anything. Do you know anything about that Paul? Paul Becker: I go down to the Pension Review meetings and they haven't really addressed it per say but as Kit said probably the majority of the funds have been judged actuarially unsound as has yours. Certainly it isn't a unique problem to Fayetteville. Kit Williams: I think some funds are in worse shape. Paul Becker: I think Kit is right. I would assume the position they would take is there is nothing that statutorily allows them to do that but they could pass that on to their attorney. They do have an attorney that represents the Pension Review Board. Marion Doss: I would like to have that question asked of them. Kit Williams: You are the board. You decide what is done. Paul Becker: You could draft a letter and send it to David Clark who is the Executive Director of LOPFI and the Pension Review Board and ask him to pose that question to the Pension Review Board. Kit Williams: If you weren't going to reduce your benefits that would give you at least another person that you contacted in authority that would be telling you no. I think from some of his comments that he indicated that he didn't think there was an authority. I think you know what his answer is going to be. 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes November 19, 2009 Page 7 of 10 Marion Doss: I remember what he said. He said it had never been done before. He may be one of those that said if you do that I would recommend someone file a friendly suit to see if it is legal. He may have said it but I would still like to hear something from PRB. Kit Williams: Something in writing. Marion Doss: I think it is real important to save this fund. There is a bunch of people that rely on this. I don't know what else we can do. Ronnie Wood: Who would that letter need to come from? Kit Williams: It would need to come from the board. Sondra Smith: If you authorize it then I will draft it for the Mayor to sign it as chairman of the board. Marion Doss: I would appreciate it if you all would write that. Kit Williams: Are you asking that the Mayor write a letter that would request from them an opinion whether or not the pension benefits can be reduced and what would be the proper procedure for doing that? Marion Doss: I think and explain the background. Carreiro said in this report 22% and when he was up here a few weeks ago he said 23%. We are looking at about the same thing and just see what they say on that. They may say there is no way you can do that. There might be more background. What do you think about that? I would just like to get their opinion. Mayor Jordan: I will draft up a letter and I will send it to the Pension Review Board. Marion Doss: Okay. Paul Becker: Would it be appropriate for the Mayor to draft that Kit or would you be the proper one. Kit Williams: No, I think it should come from the Mayor as Chairman. I think it is too late to do a consolidation this year anyway. Paul Becker: Consolidation would have to be completed by October. Kit Williams: By next October this fund will probably be lower unless we have a giant run up in the market. Marion Doss: We don't expect that but if we could reduce and get down to that sustainable level, and I believe you were the one that said if we get it to a sustainable level it should be able to consolidate without any cost of the city. Is that right? 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes November 19, 2009 Page 8 of 10 Paul Becker: What we said was if we got it to a point that actuarially we could send it down at no cost to the city we would take it to the Council for consideration because they are the ones who would have to approve it. Mayor Jordan: Just so everybody knows that will probably take a decrease in benefits. Marion Doss: We know that. Kit Williams: They are looking at 22% now and if next year it goes down further, if its 7% for every million, it could be less or more of a reduction and less benefits to you. Sondra Smith: My only concern with drafting a letter is we said when we hear back from the Attorney Generals' opinion and when we get the Carreiro report. We've gotten both of those back and it seems like we keep delaying it and the longer we delay it the chance of you having to take a larger decease is likely. If we send this letter down and they come back and say we don't know if you can do that are we going to take some action or we just going to continue putting off taking action. My concern is for the people that are out there that don't have a nest egg. Some people may get upset with me for saying this but the people who received the DROP have a nest egg. They have money set aside or should have money set aside because they received a DROP. Not all pensioners received that DROP. I'm worried about all of them but the people that did not receive that big lump sum DROP payment are the ones that I am really concerned about. It's their future too and I think we need to look at what it could do to those people. It could be totally devastating to some of those people. Marion Doss: You're right and of course the thing about the Attorney General's opinion if I've got the jest of this right it says we can. Kit Williams: It was not crystal clear he did not specifically opine that but I think he was much more negative in saying you have a right to do it. There were certainly a lot of dangers out there. Sondra Smith: That's not what it says on page three. I didn't see the word you can't in the Attorney General's opinion. Kit Williams: No, but he was being more negative there's no question about it. He didn't make a definite opinion that you could not do that but he did point out the various problems and issues that he thought it might raise. He did not say we could either. Sondra Smith: On page three it says "I did not opine definitively that the Board cannot reduce benefits, the statutes are not entirely clear and no court has addressed the matter." That tells me they are not saying we can and they are not saying we can't. It's going to take court action to make that decision. Mayor Jordan: For that to occur somebody is going to have to make a decision. We can beat this around for a hundred years but somewhere along the line as a board we are going to have to make a call here. 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes November 19, 2009 Page 9 of 10 Marion Doss: I wish the full board was here. Mayor Jordan: I don't disagree with you on that. Marion Doss: I think that's right. I think we are going to have to do something. Sondra Smith: We have had several meetings recently where the full board hasn't been here. That's another thing that I'm concerned about, waiting on the full board to be here. I arrange my vacations and everything around our pension meetings because I'm a voting member. I try to attend all of them. Kit Williams: I have to apologize because I have a Planning Commission Agenda meeting I'm suppose to be at. Marion Doss: Kit I appreciate you being here and giving your insight and I hope you will continue to do that. Kit Williams: Thanks. Paul Becker: The next Pension Review Board meeting is December 8, 2009. They meet quarterly so the next meeting after that would be March. Mayor Jordan: I'm sure you all will want to look over the letter that we draw up. Marion Doss: You can just email that to us. I would really appreciate you doing that. I would like to know. I think that kind of puts the onus on them a little bit. I really think we are going to have to do something. I don't see what else we can do but reduce these benefits. When is our next meeting? Sondra Smith: The last Thursday in December. I think it is December 3151. We also handed out next years calendar so everyone can start planning their schedule around our meetings. Marion Doss: Good idea. Sondra Smith: Unless the board wants to vote to change the meetings again. We changed them from quarterly to monthly. Marion Doss: I think we need to keep them monthly so we can stay aware of what's going on. Mayor Jordan: I think you do. Marion Doss: Is city hall open December 31st? Mayor Jordan: I was thinking we were off that day. 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes November 19, 2009 Page 10 of 10 Paul Becker: We're here the 3lst Marion Doss: Okay. Sondra Smith: I think it is Friday the 1st that we are off this year. The 31st is not a holiday for the city. We have a meeting scheduled for 3:00 p.m. in Room 326. Longer Investments: Longer Investment — Investment Report A copy of the report was given to the Board. Meeting Adjourned at 3:35 PM 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316