HomeMy WebLinkAbout1989-11-22 MinutesMINUTES OF A MEETING OF A FIRE PENSION BOARD
A meeting of the Fayetteville Fire Pension and Relief Fund Board of Trustees was
held on Wednesday, November 22, 1989 at 1:30 p.m. in Room 313 of City Hall.
PRESENT: Chairman James Pennington, City Attorney Jerry Rose, Secretary
Sherry Thomas, Fire Chief Mickey Jackson, Ex -Officio Treasurer
Scott Linebaugh, and Firemen Pete Reagan, John Dill, and Mike
Bonaduce, and Retiree Carl Springston.
Also present were Richard Yada and Curtis Williams of Merrill
Lynch.
The meeting was called to order by the Chairman.
INVESTMENTS
Jerry Rose stated the contract Merrill Lynch had returned was basically what the
Board had wanted. He pointed out a few of the changes: Paragraph 8 under fees
has been changed somewhat, but the bottom line is that the same figure of "not
to exceed IA" is the maximum fee be charged. The final paragraph in paragraph
8 differs somewhat from what Rose proposed. Merrill Lynch may receive some money
from sources other than the pension fund, and that when they do, they will
disclose at the request of the Pension Board the amount of such fees and how they
were compensated. Merrill Lynch did not include Rose's paragraphs 10 and 11
stating that Arkansas law would apply to the contract and naming Merrill Lynch
a fiduciary for the purposes of the RESA Employment Benefit Program. However,
neither one of these losses are material because the State of Arkansas Law will
apply anyway without a clause contradicting that in the contract.
Basically, Rose stated there were no changes that materially affected the
contract. However, it will be up to the Pension Board to decide if the contract
is suitable to them.
Chief Jackson asked what would be an example of when Merrill Lynch would receive
funds outside the pension fund. Richard Yada stated the additional funds would
basically come from buyer incentives and discounts Merrill Lynch would get by
buying in bulk and allocating only part of the purchase to the Pension Fund, etc.
Themonthlystatements reflect each of these revenues by Merrill Lynch.
Rose pointed out that there are attachments to the contract --Schedule A which
is an appointment schedule which lists the people Merrill Lynch is bringing in
as investment managers, and Schedule B which tells the fund what specific assets
the individuals are managing. He further pointed out where the Pension Fund's
Investment Policy has to be complied with by Merrill Lynch.
Bonaduce, seconded by Reagan, made a motion to adopt the policy and contract with
Attachments A and B and the Pension Fund's Investment Policy. Upon roll call,
the motion passed unanimously.
M -L LEE ACCOUNT
Dill brought up discussion about the M -L Lee Account regarding the actual value
of the account based on a letter from Scott Linebaugh where independent prices
had been obtained from other investment houses. The per unit prices received
from the other investment firms solicited were substantially lower than those
stated by Merrill Lynch. The prices ranged from $500 to $578 per unit.
Curtis Williams stated the secondary market companies that supplied the prices
are "vulture" markets. In other words, they are willing to purchase the M -L Lee
units at the prices they quoted if someone wanted to sell them at that price.
He distributed a computer printout showing the unit value of the M -L Lee account
was as of 11/16/89 as being $1,000 to $1,050. This is the price where the M -L
Lee units have been trading.
Linebaugh asked why the Merrill Lynch secondary market would be higher than other
secondary markets. Williams stated the other secondary markets were trying to
make large profits where Merrill Lynch only makes 6%.
Dill asked how the Pension Board could ever determine how much the fund is worth.
Williams stated the general partner's net asset value estimate would be the best
bet in determining the worth.
Bonaduce asked how many dollars the fund had increased since being purchased.
Yada stated the amount of cash received this year on the account is $15,941.
Another quarter of earnings has been earned but will not be paid into the account
until February. The year before, the account earned about $8,000. Williams
stated this was an approximate annualized return of 17% for the year.
Bonaduce asked why Linebaugh was so worried about the M -L Lee Account when it
appears to be doing well. Linebaugh stated the article in the Wall Street
Journal pretty well summarizes all of the problems with the account. It is a
risky investment, and if the Pension Fund were to lose a major portion of the
investment, the fund would be very adversely affected.
Williams stated they had never said this account was without risk. As outlined
in the prospectus, M -L Lee indicated the ways they were trying to minimize the
risks.
Jackson asked if this was one of the plans that had been determined illegal for
the Pension Fund to invest in. Williams stated there had been several varying
opinions, but he understood that it was not illegal to invest in, but was illegal
to invest in without the aid of an advisor.
Williams pointed out this was a long-term investment, with long-term goals.
Also, only a portion of the pension fund's money is invested in this account.
OTHER BUSINESS
ROD LEWIS RETIREMENT
Chief Jackson stated Rod Lewis has tendered his resignation from the Department
and asked for retirement effective December 11, 1989. His pension will be
$878.33 per month.
Jackson, seconded by Dill, made a motion to accept the request by Rod Lewis to
be placed on retirement effective December 11, 1989. Upon roll call, the motion
passed unanimously.
Jackson further stated that Roy Cate had told him he would also be retiring, but
has filed no formal papers with the department at this time.
DARRELL JUDY REQUEST
Judy is requesting that his retirement be changed from a non -disability to a
line -of -duty disability because of a back injury. He has discovered that the
law allows him an increased benefit for line -of -duty disabilities. Judy has
provided dates and letters from his physician regarding his injury and is willing
to obtain additional information the Board might require. The Board has the
option of choosing the doctor to examine Judy or letting him use his own doctors.
Judy retired from the department of May 15, 1988.
Dill asked if this law was in effect when Judy retired. Jackson stated that it
was in force. Dill expressed his concern that if the Board allowed Judy to
change his retirement, this might open the door to many more of these type cases.
Reagan stated he felt documentation regarding Judy's back injury needs to be
submitted to the Pension Board. He asked if the Board could get an opinion from
City Attorney Rose regarding this matter and whether or not the Pension Fund
would have to pay for a medical exam if they designate the physician.
Dill asked if there was the option to cease the disability retirement benefit
if the disability ceases.
Springston stated if Judy deserves the disability benefit, it would be a shame
for him not to receive it, and he should have taken the benefit when he retired.
However, he agrees it could be opening a can or worms if the Board goes back and
changes his retirement.
Dill stated he would like to know if Judy was on light duty when he retired or
had he been cleared by his physician to return to full duty when he retired.
Jackson stated that he was not on light duty when he retired. There had been
discussions about his back problems and being careful.
ROY SKELTON RETIREMENT
Roy Skelton has also resigned from the department effective either February 15
or whatever date after that he decides. He is on sick leave from now until
February 15 at which time he will be eligible to draw the rest of his sick leave
in.,a lump sum. He wants to retain the option to decide his retirement date.
He will be seeking a line -of -duty disability retirement. Jackson has a letter
from his doctor stating Skelton's problem is stress and in the physician's
opinion, the stress is job related. There is no decision that needs to be made
on this until the January meeting.
WAYNE WATTS
Jackson stated that everything had been worked out on the Watts retirement date
and amount to be reimbursed to the fund.
Bonaduce stated he was not sure Watts should have been credited for the time he
was not in the military and before he came back to work for the City.
Dill stated he had no real problem with this, but he understood that Watts would
have to pay back into the fund the amount he had withdrawn plus the amount he
would have contributed during the period he waited before coming back to work
plus interest on the total figure.
Jackson stated he was paying interest for the waiting period, but only on the
amount of money he withdrew from the pension plan when he quit to enter the
military. Watts has not been told that he would have to contribute to the
pension fund for the time he was in the military or for the 283 days he waited
before going back to work. Those times are being given to him.
Dill stated since the Board gave Watts credit for those days toward his
retirement, he feels Watts should have to pay into the Pension Fund for those
days.
Reagan suggested that the amount be calculated that would need to be reimbursed
to the Pension Fund for further discussion at the next meeting.
RNC INVESTMENT
Reagan asked what would happen to the RNC investment. Williams stated especially
for the equity account, RNC would be replaced with another money manager. Reagan
asked if it was up to the Pension Board to vote to drop the equity account and
cash out of it. Williams stated they would keep presenting the Pension Board
with money manager possibilities until the Board found one they wanted to use.
Williams stated that would not recommend liquidating the RNC portfolio and moving
it to cash. They have presented the Pension Board with two managers at this
time, and if the Board would like to review them, they could be discussed in the
December meeting. He stated moving from one manager to another is a very quick
and easy process.
MEETING
The next meeting will be December 28, 1989.
ADJOURNMENT
The meeting adjourned at 2:48 p.m.