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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.