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HomeMy WebLinkAbout03-21-1994 Minutes GENERAL EMPLOYEES' RETIREMENT TRUST FUND (PENSION MEETING) March 21, 1994 The meeting was called to order at 9:10 a.m. in the Community Center by Chairman Miller. PRESENT: Chairman Miller, Members Grafton, Oliver, Shiver, and Waldrop. Also present were Attorney Christiansen, Actuary Foster, and Clerk/Stenographer Lewis. ABSENT: None Chairman Miller welcomed Mickey Shiver and said this Board would benefit from his expertise and experience. APPROVAL OF MINUTES Member Oliver, seconded by Member Waldrop, moved to approve the minutes of February 9, 1994 meeting as presented. Motion carried 5-0. QUESTIONS AND COMMENTS FROM THE AUDIENCE None REPORTS ATTORNEY Attorney Christiansen said the Summary Plan is a laymen's version of the Plan document which includes the benefits, the names of the trustees, and a short statement of actuarial information of interest to the members. As the Board has been reviewing potential benefit improvements and changes in the Ordinance which include the cross-over between Plans. He suggested waiting to revise the Summary Plan until after the Ordinance has been adopted by the City Commission. Secretary Grafton asked if it is the responsibility of the Board to locate beneficiaries of an unvested employee who dies after terminating employment with the City. Attorney Christiansen said he did not think the Board had a duty to be on the lookout all the time for someone who has money in the Plan. The Ordinance covers the time frame and if it is not requested within three (3) years the credited service will be lost. Secretary Grafton asked if the City must contribute the City's portion if an employee who has been on Family Medical Leave elects to buy back at the end of 12 or 24 months that portion which was not contributed as a salary deduction because of the leave. Attorney Christiansen said the employee will pay the entire cost. Chairperson Miller and Secretary Grafton requested that the Summary Plan include the employee responsibility of the buy-back and stressed language clarification. Secretary Grafton said that page one was contradictory regarding opt out provisions. Member Shiver asked which employees can opt out and how long that person must be in the Plan before allowing them the option. Attorney Christiansen explained the Plan, not the Summary Plan, included the opt out provision for certain employees who may opt out within 90 days after General Employees' Retirement Trust Fund (Pension Meeting) March 21, 1994 coming to work for the City. Secretary Grafton, supported by Member Shiver, said the opt out provision should be considered for revision when the other changes are incorporated because of the change in the Ordinance. It should be more specific, clear, and at least, not contradictory. Ms. Grafton said she had wanted the Plan to be accurate when it is distributed. She had also wanted it distributed soon. Attorney Christiansen said the cross-over credit should be included in the Summary Plan description. ACTUARY Actuary Foster said the Board had been concerned about the historical performance of The Investment Counsel Company but the last quarter had been good and he was hopeful this was a turn around in the performance. He reviewed The Investment Performance Report since the company became investment manager with the Board in April, 1992 to December, 1993. A description of the comparative information was given. He said last year had shown poor performance which had improved in the last quarter. He also said The Investment Council Company was a good bond manager but they had been holding a lot of cash in the fund which has diluted the return somewhat. After today's report the Board might find they are investing some of the cash in the stock markets. This is a bright spot that the Board has been looking for and he did not think it was appropriate to consider alternative managers until they have a three to five (3-5) year track record behind them. He also said on the basis of this quarter it would be premature to consider replacing the manager unless the Board has strong feelings about looking to see what else is available. This quarter has been a real turn around for The Investment Counsel. The Ranking of Client Performance was presented by Actuary Foster and he explained that his firm did regular performance monitoring for 34 Florida Municipal Funds. These funds are ranked based on the performance of the total fund over one year ending September 30, 1993. The performance of this Board was thirty-two out of the thirty-four. The funds that have not done as well do not have as much money and do not have as much diversification. Actuary Foster explained the Board had directed the preparation of an Analysis of Benefit Improvements for this meeting. A special actuarial Study had been performed to assess the costs associated with implementing the following benefit improvements: 1. Increase the benefit rate from 2.0% to 2.25%,2.5%, 2.7% or 3.0%. 2. Provide an additional $100 per month supplement for retirement for all future retirees. 3. Change the definition of Average Final Compensation from the best 5 years out of the last 10 to the best 3 years out of the last five. 4. Provide for Normal Retirement upon the attainment of age 55. Actuary Foster then explained the results of this analysis with cost variations. Discussion 2 General Employees' Retirement Trust Fund (Pension Meeting) March 21, 1994 ensued concerning an increase in benefit rate and whether the City, or a combination of employee and City, would contribute toward the increased costs. Mr. Foster said that all things being equal, the benefit rate is the most non-discriminatory type improvement. Member Shiver asked if it is the general feeling of the employees that there is a benefit increase. He also asked if there had been any discussion on their part that the cost obligation be born by the employee or the employer. He also asked what the opinion was from City Hall as to the costs of this improvement and whether it should be born either by the taxpayer, the employee, or shared costs. Member Waldrop said many employees have talked about early retirement, instead of 60 (years of age)to 55, or increase from 2.0% to 2.25% - 2.50%. He would like to see if the City will bear the costs. He said the Board has discussed meeting with members to discuss it. Secretary Grafton said that the attorney had said the proper order for the Board was to find out and be able to weigh the advantages and present possible benefit increases to the employees in an informed way. Member Shiver asked if the Board had considered requesting a "phased in" increase of benefits from 2.0% to 2.25% - 3.0% over a period of five (5) years. He said it might be a little easier for those paying the bills if it is phased in rather than all at once. He also pointed out that the Plan is only a couple of years old and only in its infancy. It may be appropriate to chip away at it a little at a time. Crof Chairperson Miller asked if the Board should hold a meeting with the City staff as they will soon be formulating the budget. Member Oliver suggested approving the Ordinance and at a later date consider the benefit improvements issue as this was not something that could be resolved overnight. She pointed out the City staff should look only at the benefit rate, not at the three (3) and five (5) years, and not retiring at 55 years and 60 years old which it would not accept across the Board. Attorney Christiansen explained that the Board would make a recommendation to the City, and the Attorney and Actuary would take it to staff and explain what the Board is recommending so they understand it, and they are in a position to make a recommendation. Hopefully they would be able to convince staff to recommend it when going to the City Commission. Member Shiver suggested that Chairperson Miller meet and discuss the issue with the Administrative Services Director and the City Manager in hopes of getting their blessing and to inform them that this Board is taking this action to the Board of City Commissioners for discussion at their level. Member Waldrop said he was drawing on conversations with several employees over the years (about these changes) and would improve even better but to take a little bit at a time. Member Waldrop, seconded by Member Shiver, moved that Chairperson Miller meet with the City Manager, Personnel Director, and Administrative Services Director and discuss the proposed change in the benefit rate from 2.0% to 2.25% at five (5) years at the normal retirement age of 60, with a 1.8% increased costs to the City in one year. Motion carried 5-0. RECESS 10:25 - 10:30 A.M. 3 General Employees' Retirement Trust Fund (Pension Meeting) (isw March 21, 1994 Consideration/Adoption Of Amendments To OPERATING RULES AND PROCEDURES And Selected Provisions Attorney Christiansen presented the amended Operating Rules and Procedures and said it contains the changes requested during the February 9, 1994 meeting. He advised a change to paragraph 10.6, Written Contracts to read "investment advisor" instead of investment manager referring to registration under the Investment Advisors Act. The Selected Provisions will be revised by taking excerpts verbatim from the Operating Rules and Procedures after Board approval. Member Shiver questioned page four (4), Educational Requirements and asked who pays for the educational requirements. He also asked when and where educational sessions are held. Attorney Christiansen said the Board pays the fees for each member to attend conferences covering investment, fiduciary and legal issues each year. Member Oliver, seconded by Secretary Grafton, moved to adopt the Operating Rules and Procedures for the City of Ocoee General Employees' Pension Fund as presented on March 21, 1994 by the Fund's attorney. Motion carried 5-0. Secretary Grafton, seconded by Member Oliver, moved to direct the attorney to excerpt sections from the Operating Rules and Procedures as adopted today to go into the Selected Provisions to be distributed to the membership. Motion carried 5-0. Discussion/Adoption Re:PROPOSED REVISIONS TO PERMIT EMPLOYEE TRANSFERRING TO FIRE/POLICE FUND FROM GENERAL FUND TO RETAIN VESTING CREDITS EARNED IN GENERAL FUNDS Attorney Christiansen said the proposed revisions to amend Ordinance 91-08 included a rollover provision, Section 3, direct transfers of eligible rollover distributions; Section 2, the Family Medical Leave Act, which had been approved and changed to the twenty-four(24)month buy back period (Each March an employee may buy back Family Medical Leave Time which an employee might have lost during the previous two (2) year period); and Section 1, changes "...in the event that..." and said this allows someone who has credited service in one plan who transfers to the other plan to utilize that credited service in determining vesting and eligibility for benefits. This did not include benefit calculation. This same provision will be in the Police/Fire Plan. There was discussion on clarification of Section 23, Family Medical Leave Act and who is responsible for paying both the employee and City contributions while on leave. The Board directed Attorney Christiansen to restructure this paragraph to read more in laymen terms. Attorney Christiansen said the employee is paying the entire costs of getting the credited service while on Family Medical Leave. Member Oliver, seconded by Member Waldrop, move to approve and recommend adoption b the Board of Cit Commissioners the iro•osed amendments to Ordinance 91-08 the Ci of 4 General Employees' Retirement Trust Fund (Pension Meeting) March 21, 1994 Ocoee Municipal General Employees' Retirement Trust Fund: 1) amend Section 1 to provide that credit for vesting accumulated in other City Pension Plans may be transferred; 2) add Section 23 to provide for purchase of credited service for Family Medical Leave Time; 3) add Section 24 to provide for direct transfers of eligible rollover distributions. Motion carried 5-0. Member Grafton, seconded by Member Oliver, moved to direct the attorney to excerpt from the amended Ordinance the necessary portions to upgrade the Summary Plan Description. Motion carried 5-0. MONEY MANAGER Terri McClung of The Investment Counsel Company, introduced Chief Executive Officer Grant McMurry who explained how the Company operates and calculates commissions. He explained that they were totally independent of brokerage organizations and could not contract with a brokerage firm. He gave examples from the Wall Street Journal and compared a rate table on how and why one commission yield was higher than another. A number of sources are contacted for the best price. There are institutional brokerage organizations called "soft dollar" firms that provide two plan sponsors but there is a risk of not getting the best price. He wanted to leave it to the Attorney and Actuary to mention the names of the people. All that the Company dealt with had done a good job. Any time there is a direction to use that type of organization they also request freedom to not use them if in fact they can get better execution elsewhere. If the combination of the price of buying and the commission is cheaper somewhere else they will trade away from that directed broker. That is to protect them. The SEC looks at their records and The Counsel is audited every two (2) years. The SEC reviews on a random basis all the trades, looking for inconsistencies, or evidence that they are showing favor to a brokerage firm. If they are using a brokerage firm for all the trades the Board posts, a letter is needed in their file so the SEC can see that the arrangement has been made by their clients and not by The Investment Counsel Company. Chief Executive Officer McMurry recommended the Joint Boards consult with the Attorney and Actuary to arrange a meeting with several brokerage organizations. The Board directed Attorney Christiansen to invite several recapture people to a meeting with the Joint Boards at 10:30 a.m., Monday, May 16, 1994. Actuary Foster asked the Money Manager how things where going since December 31, 1993, adding he thought there had been a great quarter. Chief Executive Officer McMurry said it had been continuing, although the market was riddled through the first part of 1993 by some seemingly non-fundamental factors, cash flows, interest rates, and so forth and the money had gone into a lower quality stocks. This reversed the last quarter of last year as interest rates began moving up a little bit. People had been concerned about the exposure they had to some of the hi-fying stocks and concerned that the stock market might be a little pricie. He said as short terms rates go up to 5.0% to 5.5% much of that money that had gone into the stock market during the last eighteen months is money that came out of CD's which are the key to short term 5 General Employees' Retirement Trust Fund (Pension Meeting) March 21, 1994 rates. It is easy to pull money out of a CD when it is only getting 2.5% after you have ridden the stock market up by putting into mutual funds for two (2) years. You're looking around and now a short term rate six (6) months from now might be 5.5%. It may be time to pull the money out now and put it back into the CD's. That is already starting to happen. When that happens the kind of stocks the Company traditionally invested in, which haven't moved that much, stocks that are undervalued fundamentally strong but don't benefit from momentum, don't benefit necessarily from lower interest rates. Just good strong companies are the beneficiaries of the movement of cash. That has happened for the fourth quarter of 1993 and has happened the first quarter of 1994. The Company will do better than the indexes but the indexes are probably not going to do that well. Interest rates are moving up a little bit and bond portion of the Board's portfolio should hold its own because of the way the portfolio is postured with the absence of the intermediate portion of the exposure in the portfolio. Actuary Foster said as of the end of December, 1993 on a cost value basis there was about a twenty percent exposure to cash and asked the Money Manager if this had included bonds. Chief Executive Officer McMurry confirmed it included bonds and a portion of cash which is a bond investment. Their structure has been in the bond portfolio to invest out in longer maturity issues and keep a lot short. Short rates on bonds between one (1) year and ten (10) years are going up in yield and down in principle. You will lose money. Ms. McClung said that there was 15% in cash and around 7% of that is bond cash. The only reason they put money in cash is because that is the best place to put it. OTHER BUSINESS BILLS AUTHORIZED FOR PAYMENT Secretary Grafton requested approval of the Board to present to Key Trust for payment the following bills: 1. Christiansen and Dehner $1,205.70 2. Foster and Foster, Inc. $2,780.00 Secretary Grafton, seconded by Member Oliver, moved to pay Christiansen and Denner the amount of $1,205.70 as presented. Motion carried 5-0. Member Waldro I seconded b Member Oliver moved to a, *rove for i a ment to Foster & Foster, Inc. the amount of $2,780. as presented. Motion carried 5-0. Secretary Grafton explained that Shawn Willis has requested a return of contributions in the amount of$281.34. He worked from August 19, 1993 to December, 1993 and does not expect to return because of the circumstances of the termination. ttliew 6 General Employees' Retirement Trust Fund (Pension Meeting) March 21, 1994 Secretary Grafton said that Ronald Harry has requested a return of contributions in the amount of $3,496.14, subject to completing the appropriate forms. Secretary Grafton, seconded by Member Oliver, moved to refund employee contributions based on figures from City Finance Department in an amount of$281.34 to Shawn Willis, and $3,496.14, subject to the completion of the appropriate forms, to Ronald Harry. Motion carried 5-0. Secretary Grafton said that Attorney Dehner was preparing a contract for the recording secretary. Attorney Christiansen said he did not have the contract and will be in contact with her regarding the details. Chairperson Miller said the Florida Pension Trustees Association (FPPTA) will be meeting in Daytona in June. Members interested in attending should contact Secretary Grafton to make the proper reservations. Secretary Grafton, seconded by Member Waldrop, moved to authorize payment for the registration, lodging, and travel expenses for any of the General Employees Pension Board to attend the FPPTA Annual Conference in Daytona Beach in June, 1994. Motion carried 5-0. ADJOURNMENT The meeting was adjourned at 11:55 a.m. Respectfully submitted, Judie F. Lewis Clerk/Stenographer