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HomeMy WebLinkAbout1989-03-02 MinutesMINUTES OF A MEETING OF THE FIRE PENSION BOARD OF TRUSTEES A meeting of the Fayetteville Fire Pension and Relief Fund Board of Trustees was held on Thursday, March 2, 1989 at 1:30 p.m. in Room 313 of City Hall, 113 W. Mountain Street. PRESENT: Chairman James Pennington, Ex -Officio Treasurer Scott Linebaugh, Secretary Suzanne McWethy, Fire Chief Mickey Jackson, Retiree Carl Springston, and Firemen Mike Bonaduce, John Dill, and Pete Reagan; also present were Accounting Supervisor Zelda Parson and Curtis Williams and Richard Yada of the Merrill Lynch firm CALL TO ORDER The meeting was called to order by the Chairman, with seven members present. MINUTES Scott Linebaugh requested the following phrase - "from the inception of the Plan" - be added to the end of the second paragraph on page two of the January 26, 1989 minutes. In the third paragraph on page two, Linebaugh stated that "13.6%" should actually read "9%". With those corrections, it was moved by Dill, seconded by Bonaduce, and unanimous, to approve the minutes of the last meeting. PENSION LIST McWethy reported revisions were made to the March pension list, at the request of retiree Paul Logue who wished to increase his withholding by $10, and at the request of Randall Wright who wished to increase his withholding from $67 to $150. REQUEST FOR RETIREMENT Chief Jackson said Larry Poage's retirement was effective February 25, 1989, and his pension will be $1201.98 per month, or $14,423.74 per year. Jackson said Poage wished to have his checks mailed directly to a bank, and gave that address to Zelda Parson. With the addition of Poage to the pension list, it was moved by Bonaduce, seconded by Reagan and unanimous to approve the pension list. Fire Pension Board Minutes March 2, 1989 Page 2 INVESTMENT POLICY Linebaugh said the staff was asked to answer some questions from the last meeting which were raised during a review of the proposed investment policy. In reference to Section IV.C.3. of the proposed policy - "Investment counsel shall be retained under contract awarded on the basis of competitive bid. Award of the contract will not be required to be solely on lowest bid. All contracts shall include a 30 day cancellation." - Linebaugh said, according to Cathyrn Hinshaw, "they amended the Police and Fire Act to have the State retirement rules followed by the Act." He said those rules require that brokers take bids on trade. He said the State Review Board has interpreted that to mean that we must bid out brokerage services at least once a year, and we must bid out money manager services once a year. Linebaugh said he has asked City Attorney McCord to provide him copies of the statutes relating to this issue. Reagan asked if LOPFI bid out each transaction. Linebaugh said they do not bid out each transaction but, according to Cathyrn Hinshaw, they are going to bid out services once a year on both brokerage services and money manager services. It was moved by Reagan and seconded by Dill to table the investment policy until statutes are received from the City Attorney. PENSION RAISE REQUEST In reference to the request at the last meeting made by Springston on behalf of the retirees, for an increase in pension benefits, Zelda Parson distributed the following information prepared by the staff: (1) a schedule of fire pension benefits with cost -of -living increases applied annually from the year of retirement. Linebaugh explained this schedule showed that total pension benefits would be $6,107.58 higher than they are now, if we had granted cost -of -living increases every year based on the Consumer Price Index; (2) a schedule of proposed monthly benefits reflecting a $50 increase for full-time retirees; (3) a schedule of proposed monthly benefits reflecting a $25 increase for full-time retirees; and (4) a schedule of proposed monthly benefits reflecting a $50 increase for full-time and a $25 increase for part-time retirees. .It was moved by Reagan and seconded by Jackson to table this item. The _motion passed unanimously. Fire Pension Board Minutes March 2, 1989 Page 3 NEW BUSINESS RNC FEES Linebaugh reported he received a call from Tim Reuling of RNC to inform him a letter was being sent from RNC in reference to fees they would charge. Linebaugh said his understanding is that RNC is dropping its fee down to 1%. He said he has not yet received the letter. DISABILITY RETIREMENT REQUEST Chief Jackson reported Arvil King has requested disability retirement. Jackson said King would remain on the payroll through May 15 (give or take five days). He said his pension would be 65% by statute, rather than 50%. He said his pension would become effective immediately after he goes off the payroll. In discussion about claims for disability in general, Reagan asked if the Board should set a policy for reviewing disability cases every six months. Pennington recommended the Board at least do a periodic check on such cases, if they do not have a policy. It was moved by Dill, seconded by Reagan, and unanimous, to establish a policy or semi-annual review of disability cases. RNC RESPONSE TO REQUEST FOR SCATTERGRAM Pennington said he had received material yesterday from RNC but had not yet had an opportunity to read it. Richard Yada of Merrill Lynch said that material addresses the request for the scattergram, and each Board member would be mailed a copy. Pennington recommended everyone read the material prior to the next meeting. PORTFOLIO EVALUATION INCOME ACCOUNT Richard Yada reported on the status of the Income Account, reporting the account began with $1,000,000 and subsequently had $647,000 added to it. He reported its value as of yesterday was $2,011,791. He reported 1988 performance to be at a rate of 12.53%. Fire Pension Board Minutes March 2, 1989 Page 4 EQUITY ACCOUNT Yada reported the value of the Equity Account to be $518,595, noting the account began with an investment of $507,000. M -L LEE INVESTMENT Yada reported the January statement on the M -L Lee investment indicates the M -L Lee Fund had a distribution on February 15 of $2,682, which he said was a rate of 10.73% for the quarter. MONEY MARKET FUND Yada reported the money market fund, containing ready asset funds, had a value of $11,715.43, an effective annual yield yesterday of 9.08%. 1987 PENSION FUND ACTUARIAL VALUATION Yada said he had reviewed the Arkansas Fire & Police Pension Review Board's 1987 Pension Fund Actuarial Valuation. He said the valuation,. showed that the fund was considered to be actuarially sound. Yada distributed materials in reference to the actuarial valuation. He said that our pension plan was a closed pension plan, with no new members coming into the plan. He said benefits would go up while membership would go down over the life of the plan, meaning that income would be decreasing. He said millage would be the only constant income producer. Yada said the valuation showed reported accrued assets at December 31, 1987 to be $4,460,948, and liabilities to be $1,455,161 at that time. He said the portion of accrued liabilities covered by assets (funds in place to pay those who will retire) is shown to be 49% at 12/31/87. He said this figure should be 100% to be fully funded. He said the State consider your Plan to be actuarially sound if you are at 25%. He said we were not gaining ground towards being fully funded because we were shown to be at a 49.4% level in 1981. Williams said if we don't increase that percentage over the next six years we won't be actuarially sound anymore. Jackson asked if the benefit increase now being requested could adversely affect our situation. Williams said any money taken out of the fund now will not be there to compound for - the future. He also recommended that any increase approved should be granted to every member, or at least by class. Jackson pointed out that any increase approved by the Board would have to be approved by the Pension Review Board as well. Fire Pension Board Minutes March 2, 1989 Page 5 OTHER BUSINESS Reagan asked Linebaugh to tell the Board what the Police Pension Board had done recently as far as their selection of an investment advisor. Linebaugh reported the Police Pension Board had terminated their contracts with RNC and A. G. Edwards. He said they interviewed several investment firms and narrowed them down to three top firms - Elaine Longer, Shearson Lehman and Dean Witter, and ended up selecting Shearson Lehman. He said they selected Oppenheimer and Liberty Capital as two money managers, with Shearson handling the asset monitoring. He said a 1% fee covers asset monitoring, brokerage services and money management. He said they would invest their total fund. Reagan moved the Board pursue going under total management with Merrill Lynch at a rate to be 1% or less annually. Linebaugh asked Reagan if he was proposing Merrill Lynch and RNC. Reagan said he was not happy with RNC's handling of the Equity Account. He said he thought it was time to make a move and be more aggressive in our growth period while we have a chance. Pennington said he thought the Board should go through a selection process and solicit proposals before making its final decision. Linebaugh advised the Board to adopt an investment policy also, so that it can have guidelines to give to the investment firm. Dill said he thought the investment policy should be worked out with whomever is selected as money manager. Reagan agreed, stating that if the Board adopted a policy now, it would have to re- do it if the money manager has a different strategy. Jackson noted that the managers selected by the Police Pension Board are required to work under the guidelines of the Board's investment policy. Reagan said that Merrill Lynch has been here any time they are needed, the Board knows them, and he thought they had done a real good job. In answer to a question from Dill, Williams said his firm would guarantee a fee of 1% or less. Williams pointed out, however, that someone is going to get paid for every transaction which is made for the account. He said they would come to the Board each month and list every transaction to show if the Board paid a commission and, if so, how much. Reagan asked what our commission charges were last year. Yada said commission charges were less than 9.96% on the Equity Account, and about .36% on the Income Account. Dill said if the Board could get a 1% fee from a firm we have been dealing with for three years, without going through the selection process, he did not want to go through the selection process. Pennington said he could not agree with that, stating he believed the process should be open. He said he could not face the City Board without saying that every firm had a fair chance. Linebaugh pointed out that, besides the question of the fee, there were other considerations such as performance in the selection process which was used by the Police Pension Board. Fire Pension Board Minutes March 2, 1989 Page 6 Pennington said the Board ought to have a policy based on solid outside input, and whomever the Board retains should be guided by that policy. He said any policy can be changed. He added that he did not disagree with the idea of total management. Dill said part of the proposed investment policy was unrealistic, making reference to a portion of the policy which states that the long term goal is to realize an annual real rate of return of 5% above inflation, and a maximum of 40% invested in stocks. Dill asked how many presentations the Board would have to hear. Pennington said that was up to the Board, noting that normally five or six proposals are selected for presentations. Williams said he believed the formulation of an investment policy was imperative before a manager is selected, but thought the Board's advisor should be involved in the formulation of the investment policy. Jackson asked if Merrill Lynch had any problems with the proposed investment policy. Williams said that, from conversations they have had with some Board members, the proposed policy will not accomplish what those Board members want to accomplish. Pennington asked Merrill Lynch to provide the Board with feedback from Merrill Lynch regarding the investment policy. Williams said he was under the impression Merrill Lynch had been appointed as advisor to the Board. Pennington said he was operating under that assumption as well. Williams said Merrill Lynch would like to exercise a greater role as advisor, in formulating an investment policy and doing a manager search. Pennington said the City Board wants to make sure the pension boards are acting in a financially acceptable manner. Pennington pointed out that the Board has been discussing the need for an investment policy since he has been on the Board and we still don't have one established. He asked Merrill Lynch to give the Board their comments and recommended the Board set aside time at the next meeting to consider an investment policy. Williams said, based on historical performance of the market over the last 60 years, the goal in the proposed investment policy was unachievable. He said the asset allocation would have to be changed, or the expectations of the fund would have to change. Pennington said the Board needed to get copies of the statutes as mentioned earlier, they needed to consider an investment policy which is easily understood, and they needed comments from Merrill Lynch for discussion at the next meeting.. Fire Pension Board Minutes March 2, 1989 Page 7 Williams said Merrill Lynch will need more than the normal amount of time to present their ideas, and asked for 1 1/2 to 1 3/4 hours at the next meeting. Because Pennington and Linebaugh were to be out of town on the date of the next meeting, it was agreed to meet on April 6 instead of on March 30, from 1:30 p.m. to 4:00 p.m. Pete Reagan asked if it was known whether all the retirees on the pension list were still alive. Carl Springston said he felt sure they were all still alive, but thought Essie Barnes lived out of town. Williams recommended an affidavit be submitted once a year to make sure the retiree is still alive. Suzanne McWethy was asked to draw up a form based on a sample she was given of one used by North Little Rock. The meeting was adjourned at 3:10 p.m.