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HomeMy WebLinkAbout2012-01-26 MinutesBoard Members Mayor Jordan Chairman a e evl e Sondra E. Smith Secretary Marion Doss Position 1/Retired Pete Reagan Position 2/Retired Dennis Mullen Position 3/Retired A R K A N S A S Ronnie Wood Position 4/Retired Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 26, 2012 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 26, 2012 Page l of 12 A meeting of the Fayetteville Firemen's Pension and Relief Fund Board of Trustees was held at 3:00 p.m. on January 26, 2012 in Room 326 of the City Administration Building. Mayor Jordan called the meeting to order. Present: Dennis Mullens, Marion Doss, Mayor Jordan, Kit Williams, Sondra Smith, Lisa Branson, Trish Leach, and Kim Cooper, Longer Investments. Absent: Pete Reagan and Ronnie Wood Approval of the Minutes: • November 3, 2011 meeting minutes. Marion Doss stated there is a name typo in the minutes. Sondra Smith: We will correct that. Marion Doss moved to approve the November 3, 2011 meeting minutes with the typo corrected. Dennis Mullens seconded the motion. Upon roll call the motion passed 4-0. Pete Reagan and Ronnie Wood were absent. Pension List Changes: • Wayne Counts deceased November 12, 2011 and his spouse Geraldine Counts deceased on November 10, 2011 Merlin Layer deceased December 29, 2011 Approval of the Pension List: • Re -approval of the December 2011 Pension List (Wayne Counts deceased) • Re -approval of January 2012 Pension List (Wayne Counts and Merlin Layer deceased) • Approval of the February, March, and April 2012 Pension Lists Marion Doss moved to approve the Pension Lists. Dennis Mullens seconded the motion. Upon roll call the motion passed 4-0. Pete Reagan and Ronnie Wood were absent. New Business: 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 January 26, 2012 Page 2 of 12 Date Firemen's Pension was organized Sondra Smith: I found information on when the Pension Plan was organized. Kit Williams: When was it? Sondra Smith: According to the minutes it was August 26, 1924. It was formed under the provisions of Act 491 of the State of Arkansas. There is a copy of the minutes from 1924 in the agenda. Kit Williams: When was the millage passed? Marion Doss: I think it was the mid fifties but I'm not sure. I saw some old newspaper clippings one time wherein the mid fifties they were trying to get a millage. It may have been just an increase. At that time there were only nine or ten paid firemen. All the rest were volunteers. Kit Williams: Even though this might have been done in 1924 some of the pension funds were found unconstitutional. That is why they had an amendment later on to make it clear that pension plans would be allowed and set up a millage for them. There was a case that said you can't do it. Immediately after the Supreme Court made that decision they went to a constitutional amendment to allow it. Local pension fund report to the Council A copy was given to the Board Sondra Smith: This is a copy of the report that the Mayor gives to the Council in January every year regarding the Policemen's and Firemen's Pension Fund. Revenue & Expense Report 12/31/11 A copy was given to the Board Sondra Smith: This is a report that Trish does. Trish Leach: Toni does it now. We have to give her credit. Board contact information Sondra Smith: I would like everyone to look at the contact information for the Board and make sure that we have the correct information for you. We also need your email address. Dennis Mullens: Where is that at? Sondra Smith: It's the page after the Revenue and Expense Report. Mayor Jordan letter to the pensioners regarding projected insolvent status and investment advisor change 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 January 26, 2012 Page 3 of 12 Mayor Jordan: This is a letter we sent out to all the pensioners. Was it sent before we made all the changes or was it after we made the changes Sondra? Sondra Smith: It was after Longer Investments resigned. Mayor Jordan: We were going through that transition. Sondra Smith: Yes sir. Marion Doss: Thank you for sending that out. You sent it to all the retirees? Mayor Jordan: We sent it to everybody. Osborn, Carreiro & Associates, Inc. letter Estimated 2012 Premium Tax Allocation A copy was given to the Board Sondra Smith: We received this information from PRB. It came from Osborn, Carreiro, & Associates and is the proposed estimated premium tax allocation for 2012. Marion Doss: What is it exactly? Sondra Smith: It is the estimated 2012 premium tax allocation or the tumback amount. Marion Doss: Yes. Sondra Smith: It is all estimated at this time. Marion Doss: Then later in the year we get the checks. Kit Williams: Looks like it is going up, maybe. Marion Doss: It looks like it is more than last year. PRB Projected Insolvent Status letter dated December 8, 2011 1. Please describe the discussions your fund had with the officials of your governing body (city council, board of directors, etc.) to explore solutions. If no discussions occurred, please explain why. 2. What actions (additional funding, etc.) have occurred since the Special Report was issued? 3. Given the importance of this matter, were all participants of the pension fund notified of the projected insolvent status? If not, why? 4. Is there any analysis or advice that can be provided by the PRB or its actuary that will assist your fund in your work at this time? 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 January 26, 2012 Page 4 of 12 Sondra Smith: That's the letter we received from PRB. We answered one of these letters about a year ago. Mayor Jordan: We are going to have to make a few decisions because we have to get a letter back to them before the end of the year. Sondra Smith: We have a copy of the letter we sent almost a year ago and what we answered at that time if that would be useful to everyone. Mayor Jordan: Sondra and I have some answers to their questions but we want approval from you all before we send it off. I will read the questions and see if you agree with how we answered them and if you want to make any changes we will do that today. 1. Please describe the discussions your fund had with the officials of your governing body (city council, board of directors, etc.) to explore solutions. If no discussions occurred, please explain why. A. In previous discussions with the City Council they indicated that they were not interested in assisting the Firemen's Pension unless benefits were reduced. B. A report of the condition of the Firemen's Pension Fund and the Policemen's Pension Fund was presented to the City Council in open session at the January 3, 2012 City Council meeting. A copy of the report is attached. Sondra Smith: It's the same report you have in your packet. Marion Doss: I haven't read that completely yet. Mayor Jordan: Would you like to make any changes to that? Marion Doss: Basically we haven't done anything since then. Mayor Jordan: I just stated what I knew. Marion Doss: We made a motion at one of the meetings about asking to consolidate with PRB but I guess there weren't enough people here. Sondra, myself and the Mayor voted for it and everyone voted against it. So I guess it did not pass. Kit Williams: It did not pass. The Council as a whole has not really taken any action. Mayor Jordan: Right, that's what I'm saying. Sondra Smith: I think this board is going to have to reduce benefits before we can step forward to the Council. Marion Doss: I would like to know again what it would cost the City to consolidate. Then how much we would have to reduce benefits to consolidate, at no cost to the City, with the hopes that maybe we can negotiate something. 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 January 26, 2012 Page 5 of 12 Mayor Jordan: Okay. Sondra Smith: That would take a report from the actuary again. Marion Doss: Right. Kit Williams: The last time we asked them you were in the 70% range. It would have to be cut down to somewhere within 70% to 80% in order for it to be no cost initially to the City. Marion Doss: I don't know if I said it clear enough with the motion I made the last time but that is what I meant with the motion and maybe we can negotiate something. Since the motion didn't pass it's neither here or there I guess. That could be included in their information too. Mayor Jordan: We can do that. Sondra Smith: Include that in the information. Marion Doss: That particular motion was made but it didn't pass. It might show that we were trying to do something. Mayor Jordan: I want to be sure that we are clear on your language that you want in there. I don't want to just make an assumption and speak for you Marion. Just tell us what you want to put in there and we will put it in there. Marion Doss: I will have to refer back to the minutes but I meant to make a motion to ask the City to consolidate. I would like to know what it would cost the City with current benefits and how much benefits would have to be reduced to make it happen. Mayor Jordan: Do you have enough summary information on that? Kit Williams: To get that figure this board would have to authorize payment to Jodi Carreiro to come up with an actuarial study. Marion Doss: Since he did those figures a couple of years ago it should be basically the same thing with a few less names in it. Sondra Smith: That report is not going to be as favorable as it was a few years ago. Marion Doss: Probably not. Kit Williams: I agree with Sondra. The longer you wait the worse its going to be. Sondra Smith: The longer we wait, because now we had to change our investments, the more unfavorable it's going to be. Marion Doss: I agree, I think you're right. Sondra Smith: The sooner we step forward and do something the sooner it's going to help the plan. 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 January 26, 2012 Page 6 of 12 Mayor Jordan: Right now what I'm trying to get established is what we are going to send to PRB in a letter that we have to get out by the end of this month. Sondra Smith: We've made at least two motions if not more to reduce benefits and those have all failed too. Kit Williams: Are you trying to answer question number two, Mayor? Mayor Jordan: We are down to the end of the month and I have to get a letter sent to PRB because they have given us a deadline. Sondra you have sent a lot of this information out to the board already, have you not? Sondra Smith: Yes. Mayor Jordan: We have come to a point we are going to have to make some decisions on what we send out. Marion Doss: Number two says what actions. It says additional funding. Mayor Jordan: Are we satisfied with answering question number one? Sondra Smith: Marion do you want us to add the motion that you made to question number one as item C? Kit Williams: This is talking about the board as a whole. Unless something passes it's really not the board moving as a whole. The way I would try to answer number one is "we have not had any,further discussions after the joint meeting when Jodi Carreiro was here. " Sondra Smith: I think they need to know that we gave a report to Council in open session. Mayor Jordan: I don't think that is a bad idea either. Kit Williams: That's the Mayor; it's not this board doing it. Sondra Smith: It's a part of state statute. Kit Williams: He has to do it by the statute but it says "please describe discussions your fund had. " The Mayor did that because it's his job as Mayor to report by statute. He wasn't reporting for the fund. You didn't ask the Mayor to tell the City Council. Sondra Smith: I don't agree with that. Mayor Jordan: What would it hurt if we leave it in there? Kit Williams: That's fine. I don't have a problem with it. Mayor Jordan: Is everybody good with that? Marion Doss: The report to the City Council has been made on the state of the fund. 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 January 26, 2012 Page 7 of 12 Mayor Jordan: That's correct. Kit Williams: I would say the Mayor made that. Mayor Jordan: That will be fine if you want to phrase it that way. Are we good with number one? Marion Doss: I can't think of anything else to say. The report to the City Council is the most informational thing we have done. 2. What actions (additional funding, etc.) have occurred since the Special Report was issued? A. The investment manager has been changed to Garrison Financial because the fund fell below $5 million. B. No additional funding has been approved. 3. Given the importance of this matter, were all participants of the pension fund notified of the projected insolvent status? If not, why? A. Yes. A copy of the letter is attached. 4. Is there any analysis or advice that can be provided by the PRB or its actuary that will assist your fund in your work at this time? Kit Williams: This is where your idea would be able to be Marion. Marion Doss: That's what I was thinking. Mayor Jordan: We can fill in what you were proposing in question four. Marion Doss: That sounds good. I would like to ask PRB what it would cost the City to consolidate and how much we would have to reduce benefits to consolidate. Dennis Mullens: Whatever they decide to do, does it at all determine like our particular situation, the age of these people? Kit Williams: They look at everything. They look at deaths and all this kind of stuff. Dennis Mullens: We have some old guys. Kit Williams: The older guys are usually not getting nearly as much money as the more recently retired people. Dennis Mullens: That's true. Kit Williams: That's why even though there will be actuarially more likely to be deaths coming on but it will be more likely that it will be people not receiving as much money. Therefore it won't be as helpful to the pension fund in its attempt to survive. 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 January 26, 2012 Page 8 of 12 Dennis Mullens: I don't know how many but I think 35% of the guys right now are over 65 and some over 70. Marion Doss: Like Kit said there are so many of them that are drawing higher retirements they are the ones that retired in the past several years. Dennis Mullens: But you don't have a lot of them. Trish Leach: There is a report that we prepare for PRB every year. As soon as all the affidavits are received by Sondra, she sends them to us and we update to make sure no spouses have deceased and the things they look for. We send the report to PRB and they update their records based on the ages of the participants, the income levels, and that type of thing. We normally have that done by the end of February. Whatever you do I think they would want to wait until they get the up to date data on all the members. Kit Williams: When they are making their actuarial projections they take into account the age of the people receiving and how much they are getting. Dennis Mullens: They don't put any significance on their health issues at all? We have a couple firemen that are bed ridden. Kit Williams: When you look over a broad spectrum of people instead of trying to get that detailed they just use the age and that would be healthy or non healthy people. The actuarial people feel like it just all comes out and it is going to be part of the projection and will all work out the same in most circumstances. I think that's what the actuarial does but you would have to ask them to be sure. Dennis Mullens: We have one that's just been diagnosed and he is terminal. Sondra Smith: The other thing you have to realize about that is they may have a spouse that's going to get that pension amount. Just because you have a pensioner they are going to get the same amount as what the pensioner was drawing. You can't depend on someone being ill to help your plan out. Kit Williams: They don't collect after they divorce. They are only collecting through the divorce because he is still collecting. Once he no longer collects she won't collect anything. If you are still married when you die then your surviving spouse will collect. Sondra Smith: You only have two or three divorcees on this plan. What I put is "what would it cost the City of Fayetteville to consolidate with LOPFI" Part B would be "how much would benefits have to be reduced to send the plan to LOPFI at no additional cost to the City of Fayetteville? " Kit Williams: I would say "this is the advice we would like. " Mayor Jordan: And let them answer it. Sondra Smith: Number one I will put "to LOPFI with no reduction in benefits. " Is that okay Marion? Marion Doss: Yes. 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 January 26, 2012 Page 9 of 12 Kit Williams: They will probably say we are not doing it unless you pay us. Sondra Smith: I agree I think we need to move forward with reducing benefits. I would be happy to make that motion today but the Mayor won't support it because everyone is not here. Mayor Jordan: I would like to have a full board here before we do something like that. Sondra Smith: In order to do that we're going to have to have some type of study. What we are going to have to do now is different than what we were going to have to do a year or two years ago. Mayor Jordan: That's right, Sondra. Kit Williams: I think it was around 22% last time if I remember right. Mayor Jordan: I think you made a motion of 20% once. Sondra Smith: 20% or 25%. Marion Doss: I think Sondra has made two motions about that over the past few years and they failed. I think I made that motion for consolidation last time which didn't fly. I think the full board should be here too. Kit Williams: You can't make a final decision like that. Mayor Jordan: It's not that I don't support reducing the funds. I want that perfectly clear. I have a little issue with passing that without having the full board here because you are representing the whole pension and you are making decisions without a full board. Kit Williams: I think you could make a good argument because you cannot raise benefits without a super majority. You are probably sitting in the same situation when you reduce the benefits. Even though it's not spelled out in the statute how you would do it. It's a tough issue. I think if it takes all but one to increase benefits, then it would take all but one to decrease benefits, if you decided to treat it as the same kind of power that the trustees have. Marion Doss: When we increased benefits we had to have the board ask for that and PRB had to approve it. To me it looks like the board could do the same thing the other way to save the fund. Kit Williams: I think that needs to be the procedure. Marion Doss: It looks like that should be on PRB's back. They are the ones that approved increasing it. They will say they can't because of the Attorney General's opinion. Kit Williams: If they did that then it's possible that they would be the ones on the hook, if the fund actually went totally under the water, when this board had attempted to do the things to save the fund. They have a fiduciary duty also just like this board does. They owe a fiduciary duty to this board and the pensioners that are relying upon the trust fund. They better think real hard in my opinion before they just don't allow you to do that. Sondra Smith: That is a motion we need to make very quickly in the future 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 January 26, 2012 Page 10 of 12 Kit Williams: Again I think it should require five out of the six just like you would have to get all but one to raise the benefits. I think that is the way it was. Sondra Smith: Yes, all but one. Did we decide on question number one? Are we going to leave it as you have it? Mayor Jordan: The City Attorney said if we wanted to leave it we could leave it that way. Do you want to rephrase it, Kit? Kit Williams: I would say by the Mayor. Mayor Jordan: That will be fine. Kit Williams: The condition of the Firemen's Pension Fund was presented by the Mayor to the Council. Marion Doss: Is City Council aware? Mayor Jordan: Yes, they are very aware. We've been very forth right with keeping it before the City Council. They know. Marion Doss: I thought so. Mayor Jordan: That's the reason I do that report every year. Kit Williams: Statutorily you have too. They have been told for several years as it has gotten worse. Mayor Jordan: Is everyone good with the letter? Do we need a motion for the letter, Sondra? Sondra Smith: We probably do. Marion Doss moved to approve the letter to PRB. Dennis Mullens seconded the motion. Upon roll call the motion passed 4-0. Pete Reagan and Ronnie Wood were absent. Garrison Financial: Charles Schwab account setuo complete Sondra Smith: The Charles Schwab account has been setup with Garrison Financial. We still have not got everything worked out between Northern Trust and transferring the funds. I talked to Northern Trust today and verified that we do want to transfer the funds. Kerry sent an email and said it maybe as late as the end of February before we can finally get the transfer taken care of. We have been working with Accounting and Trish to make sure we have funds to cover checks when they go out and making sure all of our ducks are in a row. It's taken longer than what we anticipated. Kit Williams: That seems strange, doesn't it? Sondra Smith: Yes. Marion Doss: I thought Garrison would be here to give a report today. 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 January 26, 2012 Page 11 of 12 Sondra Smith: There is nothing for them to report. Kit Williams: Hopefully by the next quarterly meeting they will be here and they will have money. Informational: Loner Investments Report. Kim Cooper, Longer Investments gave a final pension report. We have a short report for you to show where you closed out the year and to give you your final performance. Page one is the portfolio appraisal as of December 31 ". As of the end of the year you were about 47% equities, 37% of that was in individual equities and about 10% was in an index fund that we used as we sold securities on the equity side. We used that to fill in the equity exposure. Your individual equities were yielding 4.36% as of year end. That compares to the yield on the ten year treasury of 1.9%. On the next page you will see your fixed income investments. There is a government agency that is listed there, that is callable as of January 3, 2012 and that was indeed called on January 3rd. You received the proceeds from that and that is in you money market account. The current yield on your portfolio as of year end was 4.12%. That's the over all yield on everything that you own, your fixed income and your stocks. Your yield on the portfolio with fixed income and with a 47% growth component was again much higher than what you can get with a flat ten year treasury which is yielding 1.9%. Page three is a report of your realized gains, income and expenses for the year. Your realized gains were $150,209. Income and expenses which were dividends and interest net of expenses was $109,887. Page four is a final performance report. Your equities were up 5.1% and that compares to the 2011 return on the S&P 500 which was down .1% on a cash basis and up about 2% with reinvested dividends. The reason we were able to achieve that kind of out performance for you was because we have been focusing on the high dividend stocks. They out performed the indices by quite a bit during the year. We have been concentrating your equity exposure in those areas. Your fixed income for the year was up 7.5%. Cash was down 1.1%. That's because of the allocation of fees and your total account was up 5.2%. Your total annualized return on a compounding basis over the time we have managed your account has been 5% which meets your actuarial assumptions. Page five is a detailed report of your contributions and withdrawals since the account started. Contributions have been $1,121,000 and distribution of $9,712,000. The final report is a reconciliation of the returns since inception. Your net investment return since we have been managing the account has been $3,568,000. That investment return compares to the distribution rate. Finally there is a copy, for your records, of the investment policy that was signed at the last meeting Mayor Jordan: Are there any questions? 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 January 26, 2012 Page 12 of 12 Kim Cooper: On behalf of me and Elaine and everyone at Longer Investments we have enjoyed working with all of you. We are sorry that it had to end like this but we understand there are state laws that we all have to follow. We appreciate your business for the last ten years. Mayor Jordan: Thank you for all your work as well. Kit Williams: The numbers look like you have done a pretty good job the past several years. Kim Cooper: Thank you. Meetine Schedule A copy was given to the Board Meeting adjourned at 3:40 p.m. 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316