HomeMy WebLinkAbout11-07-2001 Minutes Minutes of the Quarterly Meeting of the
(mp, CITY OF OCOEE GENERAL EMPLOYEES PENSION BOARD
Held on November 7,2001
At 150 N.Lakeshore Drive
Ocoee,Florida 34761
Tom Ison,Acting Chairperson called the meeting to order at 10:12 a.m. Present were Trustees Oliver,
Smith,newly elected Trustee John Vogt,and newly appointed Trustee Mike Miller. It was noted that a
quorum was present. Also present by invitation were:H.Lee Dehner,Attorney,Diane Garcia representing
TRUSCO Capital Management,Larry Cole representing Merrill Lynch,Ward Foster representing Foster&
Foster,Inc.,and Jo Ann Lacey,Recording Secretary of the Meeting.
Acting Chairperson Ison welcomed the two new Trustees and asked them to introduce themselves to the
Board. Newly elected Trustee John Vogt stated that he has been a City employee for three years. He is
an Ocoee resident. He has a degree in Life and Health Insurance and has previously served on the Board of
Lake Olympia Homeowners Association. He hopes that his insurance experience will provide beneficial
input to the Board and its policies. Newly appointed Trustee Mike Miller stated that he has helped with
the Ocoee Founders'Day,serving as committee chairman and has been involved with the Boy Scouts and
active in the community in many ways. He has two senior parents living on retirement funds and hopes he
can be actively involved with this Board by providing a different point of view. Thanking Trustee Vogt
and Trustee Miller,Acting Chairperson Ison asked each of the persons at the meeting to give their
names,who they represent,and some information about themselves and/or their companies in order to
allow the new trustees to become acquainted with those participating and their purpose before the Board.
Acting Chairperson Ison advised that the minutes of the meeting of the Board of Trustees held August 8,
2001 had been circulated to all Trustees for review. The Trustees were asked if there were any corrections
(lor or additions to the minutes. On page 4 of the minutes there was to be a correction to the resolution which
reads: "RESOLVED,an ordinance be made for a retirement 30-Year and Out plan,irrespective of age,and
that it be presented to the City to be included in the 10/01/01 budget." This date should be changed to read
"10/01/02." After a brief discussion,there being no additional corrections or additions,it was,on motion
made by Trustee Smith and seconded by Trustee Oliver,unanimously
RESOLVED,that the minutes of the meeting of the Board of Trustees
of the General Employees Pension Board held on August 8,2001,be and they are hereby
approved.
The money manager's report from TRUSCO Capital Management was called for from TRUSCO's
representative Diane Garcia. Quarterly reports were distributed to those present. Ms.Garcia that she
works with SunTrust as custodian of the assets of the Plan and deals with the day-to-day hands-on
operations. TRUSCO,a subsidiary of SunTrust,acts as the Investment Manager of the Plan. Normally
Tim Nash would be making this report for TRUSCO,but he asked her to relay his comments as he was
unable to attend this meeting. Ms.Garcia directed attention to Tab II,Page 2 of the Report which shows
the Market Snapshot as of September 30,2001. In the Equity Stock Market there are almost all negative
numbers. There was nowhere to hide from negative numbers for this period,however,the bonds did well.
There has been nothing like this for the bond market since 1995. Continuing on to Page 4 which reports
nine rate cuts through the date of the Report,she indicated that again yesterday,November 7,2001,the Fed
had made another one-half percent reduction which makes a total of ten decreases in eighteen months. This
puts interest at its lowest rate since 1960. This is a definite indication that the government is aggressively
trying to promote economic stimulus.
Page 5 of the Report further indicates that the government is trying to kick-start the economy with the tax
cut package(rebate checks)which was to be completed by September,and a$200 Billion stimulus package
for rebuilding and defense spending,an infusion into the airline industry and other general stimulus. While
all of this should help,it will still take some time to recover. Page 7 shows the Consensus Forecast. This
indicates a flat line for inflation which may go lower. Page I lshows Market Decline. Stocks(shown on
(0, lower left chart)indicated the volatile market and shows that there was no way to get away from anything
negative. Page 13 shows that Bonds are where everybody should have been. The chart on the upper left
indicates that rates have dropped significantly. Two to five years bonds have performed well and are good
for keeping the Plan positioned well.
Tab III of the Report,Page 2,this report shows the performance comparisons over the last 3 months,9
months and for the fiscal year. Equity is down 15.93%with Russell 1000 Growth Index down 45.64%and
S&P 500 Index down 26.62%. Fixed Income is up 14.45%. Overall the Plan has performed quite well.
The Asset Allocation shows the Plan to have investments of 46%in High Grade Bonds. Tab IV shows the
Fund fact sheets broken down for convenience into different sectors and equity types. Tab V shows the
Statement of Assets of the Fund. This shows the portfolio is well-positioned and well-diversified and has
done quite well over the last twelve months.
Trustee Vogt asked the implications of discontinuing the 30-year bonds. Ms.Garcia stated that Mr.Cole
would answer this during his presentation. Acting Chairperson Ison asked that the Board look again
under Tab III of the report and state that on June 30 the Portfolio Value was$7,393,784 and on September
30 it was$7,252.041,a decrease[loss]of$446,573. This was to be certain that the Board was aware of the
loss in the Fund,due to recent events of the stock market,and this is a loss,even though all indications are
the Fund has done well. Trustee Miller stated that it is hard to tell a working man that losing this amount
of money is good and asked how the Plan can be positioned to shelter from these losses in the future and
how does this impact the 65-year-old potential retiree. Again,Ms.Garcia indicated that Mr.Cole would
respond to these questions.
Ms.Garcia continued on with her report and stated that diversification is the key. She stated that knee-jerk
reactions are not good,that two years ago the equities were up 20%. Bonds were questioned then but they
were kept for a cushion which has proved to help weather this market. TRUSCO has a diversification in
sectors and in investment styles. Growth is good now,value is not. This trend reverses over time and
again supports diversification. She reminded that retirement plans are long term and though there has been
a 4.17%decrease in the fund over the past twelve months,it is up 9.45%over the past 60 months.Over the
last 22 days,the market has been rebounding and the expectation is that growth over the long term is
expected,with the results of the stimulus beginning to be seen by mid-2002.
Acting Chairperson Ison thanked Ms.Garcia for her report and called upon Mr.Larry Cole from Merrill
Lynch for the Money Monitor's report. Mr.Cole advised that Merrill Lynch are not retail brokers. They
do not sell any products. They do not employ any Merrill Lynch products. They won't put a Merrill Lynch
investment manager or a Merrill Lynch investment product in the Plan. They are independent consultants
who work with the Plan. He stated that his offices are out of Jacksonville,however,he has an office in
Orlando and lives nearby. Merrill Lynch does this same work for 87 public pension funds in the state of
Florida in addition to other accounts outside of Florida,but this is the primary focus of what they do. He
advised that his background is 24 years of investment management experience,dealing all 24 years in the
institutional market with pensions and endowments and foundations,tax-exempt entities by their nature. A
few months ago he moved over from TRUSCO(formerly STI Capital management)to become a consultant
and hopes to put his experience to good use to help the various pension boards. He advised also that he is a
registered investment advisor and a registered rep.
Mr.Cole continued on with his report and stated in answer to the question previously posed by Trustee
Vogt,about what might happen regarding the discontinuance of the 30-year bonds. He stated that there is
no way to know what is going to happen as this is something that has not ever happened before. The good
news on that is that it actually drove long term rates down slightly because there is now what is perceived
as a limited supply. He added that it might not make as much of an impact as it may have been years ago in
that in the investment market,the peg over the last five or six years went from most investors watching the
30-year bond to the 10-year note. A lot of loans and other things are tracked to that 10-year note.
The Fed also made another dramatic move on November 6 by dropping the rate by 50 basis points. That is
ten drops in the past eighteen months. Rates are down to unbelievable levels that haven't been seen in 40
years on the short end with all indications that they might not be done. People are calling for the Fed rates
to be down to the 1.5%or possibly the 1.25%range before all is said and done. He stated that he is not
quite as optimistic as TRUSCO about when the economy will begin to rebound. He bases this on the fact
that stock prices are ultimately driven by earnings and he does not believe we have seen the worst of the
earnings reports yet. The trickle down from this economy and the impact of 9/11 hasn't been fully felt. He
feels it will be the latter part of next year before things begin to turn around. He cautioned that because we
live here in Central Florida,43-45%of the economy is based on tourism and so there is no place in the
country that would feel the impact like we will feel it,including New York City. He reminded that we
should not be misled because earnings reports are coming out saying that they are better than expected,
however,they are beating much lower expectations. Though there is still good news, most companies are
really struggling right now.
Mr.Cole addressed Trustee Miller's question about how this Plan can be protected. Referring to Page 2
of the Merrill Lynch report,it shows the loss of$441 thousand shown in the TRUSCO report. He agreed
with Trustee Miller that loss is not a pretty figure. He added that there are a lot of Plans who did a lot
worse during the period. On Page 4 of the report,a look at the Asset Allocation,covers the question of
what can be done to protect the Plan from a disaster,a September 11th kind of catastrophic market event.
The answer,partially,is that this Plan has already been protected somewhat. At September 30,2001,
bonds were 45%of the portfolio,so stocks represented the other 55%. The bonds were in there to protect
and to stabilize the returns of the pension fund over the long term. He reminded the Board that pension
plans are long term and that this is a defined benefit plan. It is not a profit sharing or 401(k)plan. He
further advised that the impact of one bad year is not necessarily felt by the retiree. There is a smoothing
effect over several years,but the bottom line is that even in a down year like we have just had,the retiree is
still getting his/her check. A bad year may have an impact on the funding status. It may have an impact on
the money required from the City. It may have an impact on improving benefits for the future,but the
immediate impact should not affect the retiree other than with his/her own personal investments.
Continuing on with Page 4 of the report,Mr.Cole calls attention to the smaller circle on the right which
represents the breakdown of the stocks and how they are invested. He advised that TRUSCO is unique
compared to some investment managers in that they have multiple investment styles or investment
disciplines. There is not one person doing the investing. There are separate teams that are shopping for
different types of companies with different characteristics so the Plan is well diversified. That has actually
paid off very well in the last couple of years. Page 5 shows a comparison to a live universe or public
pension funds around the country. This comparison shows that this Plan is slightly above the average fund
in terms of the equity allocations. He stated that this Plan is more diversified than most pension funds with
the style TRUSCO has employed using multiple disciplines. So,the risk level is not any higher because
this Plan has a little more stock.
Page 6 shows an analysis of the performance of this fund against that public fund peer group across the
country. The total fund for the quarter was down 5.8%. The target index is listed at the bottom and this is
spelled out in the investment policy of the fund. This is the target index to match or beat. That is,50%
S&P 400,45%Merrill Lynch Government/Corporate Bonds,and 5%in cash. The target index for the
quarter was down 5.1%. The number in parenthesis represents the percentile ranking against that public
fund universe with 1 being the best and 99 being the worst. In this particular quarter,the—5.8%was
slightly below average in the 54 percentile. Continuing on Page 6,he indicated that since the Fund's fiscal
year end is September 30,the fiscal year to date and the one year column are the same for this reporting
period. For one year,there is—4.4%. Though this is an ugly figure,given the market conditions for the
year that has just passed,that loss ranked in the 34th percentile,almost the top third of all pension funds
around the country. Equity returns werel5.9%[35th percentile]. He reminded that things were ugly even
before September 11t. It was not a pretty market environment then.Earnings were in trouble,earnings and
gross estimates were coming down for a lot of companies and the September 11th events made things much
more difficult for the rest of the quarter. Minus 26%for the S&P. The Russell 3000 was down also at
—27.9%. This is a broader index which includes large cap stocks,mid cap stocks and some smaller
company stocks. The BARRA Growth and the BARRA Value is the S&P 500 broken into stocks that we
identify either as growth stocks or value stocks. The dominant sector in the growth industry over the last
few years has been tech stocks and growth stocks are stocks where the earnings per share growth is
expected to exceed that of the market,generally stocks that have been superior in the market over the last
several years and are thought to be still superior in the market. Value stocks are where you consider
looking for companies that have been beaten up a little that are priced at book value or perhaps are priced
to cash flow or something that is much less than the market. When buying one of these companies there is
some catalyst out there that you think is going to get recognized by the market such as a management
change,a product cycle,the selling off of an unprofitable unit,or something going on with the company
that the manager thinks is a catalyst for it to turn around and get revalued. The fact that this plan is well
diversified should help smooth the ride. This Plan has an actuarial assumption rate of 8%. This will not be
reached by having all bonds. There has to be some exposure to stocks on the long term as this is a long
term plan and over the last five years,the total fund including the bond portion has given 9.3%which is in
the top 33 percentile. The six year number is up 10%. That is per year,over the last six years. The
TRUSCO team has done a very good job for the plan over almost all time periods.
Page 7 looks at this a different way. There was a wide range of returns in public pensions funds for the last
twelve months and some of them were down as much as 17-18%for the year. These were typically funds
that had growth managers and two years ago they were probably on the top of the list and looked like
heroes but they were subjecting themselves to a lot more volatility by having only one style of manager.
Page 8 takes a look at the returns which appear to be good relative to the peer group. There was not a lot
of risk. Risk is measured by standard deviation on the bottom and total returns measured on the left. There
was a lot of volatility in the returns and this plan is actually in a good position as it is almost right on top of
the target index and that is looking over the last six years.
Mr.Cole advised that the portfolio is analyzed every way to make sure it is properly diversified. Merrill
Lynch makes sure that the managers for each of the funds are doing what they say they are doing and that
there is not a lot of risk exposure by them not doing so. The same is done for the bond portfolio. The
checklist for the quarter is shown on Page 16.This demonstrates that the plan is in compliance according to
the investment guidelines and policy. The performance objectives as laid out in the investment policy have
been met for the most part. Almost all,but not all. It has been a difficult market environment but there is
no recommendation for any changes to the overall long term plan. The plan is well diversified and the
asset allocation is appropriate given the current circumstances.
Referring to the Florida Client ranking list for the 87 public pensions funds in the State of Florida that
Merrill Lynch works for,Mr.Cole stated that this plan is ranked slightly above average at 28 out of the 87
for the past year. This was due to a lot to the asset allocation and also to the style of the manager. This
plan will never be in the top 10 or 15 in the list and will never be in the bottom 10 or 15 of the list because
of the diversification of the TRUSCO employees in their portfolio.
Acting Chairperson Ison thanked Mr.Cole for his report and called on Mr.Ward Foster of Foster&
Foster,Inc.for the actuarial report. Mr.Foster stated that his firm has provided actuarial support to the
retirement program since it was originally established. He went on to explain that this is a defined benefit
plan. The benefits are provided based upon three components. It is a formula that takes into account the
length of service with the City,salary that is paid and a benefit rate. The benefit rate in this plan is 2.5%.
So,upon retirement,the benefit is computed by applying the 2.5%benefit rate,times the years of service,
times a salary average which is defined as the best five years of salary out of the last ten years of
employment.In the case of the retirement of someone who is with the City 30 years,the benefit is 2.5%
times 30 years,or 75%of that 5 year salary average and that benefit is paid for as long as the retiree lives.
If the retiree selects the form of payment that represents the formula benefit,then there is a 10 year
guarantee on that payment. That form of payment is called a Ten-year Certain and Life Annuity. When
someone retires,seven or eight different optional forms of payment are calculated. Some forms of payment
provide the retiree and the beneficiary of the retiree with the same monthly benefit amount as long as either
one of them is living. That is called a 100%Joint Survivor Annuity. All the optional forms calculated
represent the actuarial equivalent of that normal form of payment. Retirees can select an option according
to their expectations. To get that 100%Joint Survivor Annuity form,which is the most expensive form of
payment,the retiree will take a reduction in the formula benefit amount. If the formula produces a$2,000
per month benefit,for example,and the retiree and the beneficiary are approximately the same age, instead
of getting a$2,000 per month payment for as long as the retiree lives,it might be$1,900 per month but is
paid for as long as the retiree or the beneficiary,either one of them,is living. If the retiree is 60 years old
a
and the beneficiary is 18 years old,then there may be a very significant reduction in the formula benefit
Ce because it is likely that the beneficiary is going to live a lot longer than the retiree. Those are the benefits
that are being funded in the plan.
Mr.Foster went on to explain that the work done by his firm is never accurate because it can never be
accurately estimated what retirement benefits are going to be 20 or 30 years in the future. Those benefits
are based upon salaries that have to be guessed at. The results are always being fine tuned to reflect actual
experience and so the actuarial report not only develops the funding requirements to the problem,but also
reviews the experience of the Plan and points out where certain assumptions were made and the
assumptions are either met or not but it is very rare that the assumptions are exact.
Referring to the Actuarial Valuation Report as of October 1,2001,Mr.Foster advised that this year's
actuarial evaluation of the Plan and the contributions developed in this evaluation are shown under the
10/1/-1-9/30/03 column. 10/01/01 means that on October 1,2001,Foster&Foster took a snapshot of the
condition of the Plan and are developing contribution requirements for the City's fiscal year that begins
10/01/02. The costs are projected out two years so the City will have plenty of time to budget the funding
requirement for the upcoming fiscal year. Comparing those numbers to the ones developed during the
10/01/00 evaluation,there has been significant increase in the total required contribution. It went for
$829,625 to$1,071,896. 40%of that increase in the dollar amount just reflects the increase in payroll. The
payroll of active members was up 19%between 2000 and 2001. The total required expressed as a
percentage of the annual payroll of active members covered under the plan has increased from 16.1%to
17.5%. The increase in the percentage is an indication that the actuarial experience during the past year
was less favorable than expected. The fact that this percentage is 17.5 is a red flag that it was not a good
year. After subtracting the anticipated member contributions to the Plan,the balance to the City for the
fiscal year is$617,788. This is the precise contribution amount that has to be made by the City during the
2002-2003 year to systematically fund the promised benefits in the Plan as of the valuation date and meet
the minimum funding requirements of Chapter 112,Florida Statutes. Florida is one of the few states in the
Cs, country that imposes minimum funding requirements on municipal retirement programs.
Page 13 of the report shows how actuarial assets are developed for funding purposes for measuring how
much of the liability is covered by the assets in the fund. The assets are developed by looking at the
investment returns achieved by the fund in that last four years and the figures shown are the market value
returns net of investment related expenses. The goal is for the investment manager to achieve an 8%return
after their fees are paid. This was achieved in 1999 and 2000. In the other two years shown,there was a
problem. The average is 5.04%for the four-year period. Therefore,last years' actuarial assets are brought
forward not with the actual negative 5.16%return but with the 5.04%return. This has a smoothing effect.
What the smoothing technique does is store up excess investment earnings in the good years to be applied
in a year when a little help is needed and that was definitely the case this last year. On page 3,Item B,the
Assets Actuarial Value is$7,940,937. The Market Value is$7,226,899.The actuarial value is more than
$700,000 bigger than the market value. In two years the exact opposite could be the case. That is what
was seen a couple of years ago. There was a significant accumulation of excess investment earnings that
were set aside on a bookkeeping basis and the actuarial valuation was actually significantly less that the
market value. Under the 10/01/01 column on this same page,there is a total figure of$16,676,080. That
number represents the single sum value of all the benefits ever expected to be paid to members of this plan
including all of the future service benefits. The contribution amounts back on Page 1 represent systematic
funding and the difference between$16,676,080 and the$7,940,937 in assets that are recognized for
funding purposes. This means that there is$8.7(+/-)million to go. The fund is very sound. This is a very
well funded retirement program. There is a measure of soundness that compares the value of benefits that
members have earned for the service credits up through 10/01/01. That's called the Present Value of
Accrued Benefits. Every active member of the plan has benefit credit for all years of past service back to
date of employment. The plan is holding a liability for anybody who is in pay status,anybody who is
receiving benefits and those who are entitled to future benefits. The single sum value of all those benefits
that have been accrued is about$5.9 million but there is,even on a market value basis,$7.2 million in the
fund so there is about a$1.3 million cushion between the value of the accrued benefits and the value of the
(law
assets in the fund. When the plan was actually established,the plan document provided that members
would receive benefit back to date of employment in the new plan. At that time,there were few assets in
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that predecessor plan and there was a situation where there was less money in the fund than the value of the
(iry accrued benefits that members were entitled to under the new program. The plan has come up to the point
now where,not only are those past benefits funded,there is over a$1 million cushion.
Page 5,Item F shows the funding requirements for the year ending September 30,2001. The total required
contribution(this was developed in the 1999 actuarial evaluation projected out two years)the fund
requirement was$832,400 and between member and City contributions the fund actually received
$888,502. As previously mentioned,these programs are subject to minimum funding requirements in the
Florida statutes and the plan has met these requirements for the year. Every time an actuarial report is
done,once it is approved by the Pension Board,it is sent to the Division of Retirement. There is an actuary
up there who reviews the report and issues a state acceptance letter.
Acting Chairperson Ison called attention to the bottom line on page 5 of the report to point out that for the
next year the City Commissioners and Mayor in preparing their budget have taken into consideration the
increase of$170,000 to the retirement fund due to new employees and payroll increases.
Trustee Vogt questioned if the increase in the City's contribution is the result of the new benefits more
than the bad experience or a combination of the two.
Mr.Foster's answer was no. He indicated that this is a snapshot of what the program looked like on
10/01/01. There was a proposal pending to improve the retirement program,but the additional cost
attributable to that improvement was not considered in this actuarial evaluation report because those benefit
improvements were not in place on October 1. There was a formal actuarial impact statement done
outlining the costs associated with the proposed improvement and that was approved by the Board and
submitted to the State. The fiscal impact on the City attributable to that improvement would probably be
$22,000 a year and even though the dollar amount has gone up as a result of additional people,it's about
half due to growth in payroll,half is due to unfavorable experience and that is the$170,000. The
(to additional cost to fund the proposed improvements is probably going to be in the$25,000 range.
Acting Chairperson Ison asked if this is for the$100 per month supplement.
Mr.Foster answered yes and went on to say that what is important is that $100 a month supplement was
not completely funded by the City. It was a sharing arrangement. Half of it was funded with additional
member contributions. He does not think the results of this valuation are going to change the allocation of
that cost between the membership and the City.
Acting Chairperson Ison interjected when this particular issue was first brought up before the Board,the
language and discussion centered on the employee and the ordinance actually read,"Joint beneficiary and
beneficiaries." He asked if the$21,000 would cover all three of those. Mr.Foster said yes.
Several City employees in attendance at the meeting asked to be addressed in order to ask questions
regarding the plan.
Terry Rosenburg,who works in the Finance Department,stated that the employees were told when voting
on this that if this took effect they would be entitled to the benefit if they left employment at the City but
left their funds in the Plan. If vested,they would be entitled to this additional benefit since they would be
making payments in it while still employed with the City. According to what was brought up at the City
Commission meeting on November 6,the wording of what was presented was that only those people that
actually retire with the City would be entitled to this benefit. On the projection of cost,Ms.Rosenberg said
she would like to which way those costs are figured and also which is correct for the employee because it
would change how people voted if that was the case,it was her belief that none of the employees knew that
because when asked they were told that if the employee left and was vested they would be entitled to that
benefit.
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Trustee Vogt read from the survey the relevant paragraph which says,"This improvement would provide
(11r9 you with a$100 monthly benefit supplement paid to you for life if you retire under the plan's normal
retirement provisions,attainment of age 60,regardless of years of service with the City."
Ms.Rosenberg stated that she had asked former Trustee Cornell about this and was told specifically that
any employee who left their money in the Plan and had retirement vested with the City,would be entitled
to this,not that the employee had to work until retirement age and then draw it. She requested a definite
answer to what this supplement really meant.
Attorney Dehner answered that this does not apply to vested terminated employees. It just applies to
retirees from the plan,including disability retirees,but not vested terminated employees. Ms.Rosenberg
asked specifically if she would have to retire from the City to achieve that benefit. Attorney Dehner
answered yes. Ms.Rosenberg then stated that she felt the employees needed to be resurveyed.
Acting Chairperson Ison stated that this would be brought up under old business but that he had wanted to
get into the financial part to see what was in the$21,000 figure and what was not. Mr.Foster responded
by saying that the four year investment return assumption is for an 8%return. The fund had only a 5%
return so that means that fewer dollars came in that were recognized for funding purposes than expected.
But,the reduction in the actual invested earnings recognized for funding purposes is not all recognized in
one year. So,if there is a$7 million dollar fund looking for an 8%return,it is looking for$560,000. If
only $460,000 is received,that doesn't mean that the City's cost goes up$100,000 in the next year. That
underperformance is just like any other actuarial experience. It is spread out over the average future
working lifetime of the membership. This plan is being funded with two safeguards. One is the smoothing
technique that takes out those bumps and the other is the mechanism within the funding method that
spreads gains and losses out into the future,so there is plenty of protection to minimize the impact of one
bad year on the funding requirements. The other component of unfavorable experience ... which is only an
unfavorable experience for pension funding purposes, is there were salary increases among those members
that were included in this valuation and last valuation. The only people who were looked at were those
who are called continuing participants in both valuations. The average increase in reported salaries was
reviewed and that average was well above the 6%assumption that was expected. What that means is when
last year's valuation was done,it was projected that everyone's salary would increase 6%per year. In the
last year,the average increase was greater than that which means last year the benefits that were needed to
fund for in that particular year were underestimated and now the projected benefits are increased for
everyone on the average and that has generated a little cost pressure. Not as much as the effects of the
investment income,but that's the other component of unfavorable experience. There were 23 new people
who came into the plan with no past service. Unfortunately,those 23 people on the average were older
than the existing membership and the average age of the membership increased from 42.7 years to 43.3
years,so there has been over a half a year increase in the average age of the membership and since these
benefits are funded over the average future working lifetime,when the average age goes up a little bit that
also creates a little bit of cost pressure.
Trustee Miller asked if the 8%figure for the actuarial assumption for growth would still be used. Mr.
Foster answered yes. He went on to say that there were a lot of Boards suggesting three to five years ago
that it be raised to 9%or 9-1/2%. There was resistance to this increase because,again,this is a long term
proposition. There is an asset allocation which will support an 8%return long term. Over the long term it
is reasonable to expect that things will get back on track and,fortunately,there are mechanisms in place to
help. He added that it would be nice to get a 10-12%return this year and get the average back up to 8%,
but that we would just have to wait and see. Mr.Foster then reminded the Board that it needs to accept the
report before it can be sent off to the State.
On motion made by Trustee Smith and seconded by Trustee Vogt,it was unainmously
RESOLVED,that the City of Ocoee Municipal General Employees'Retirement
Trust Fund Actuarial Valuation Report as of October 1,2001 with contributions applicable
Civ to the City's Fiscal Year Ending September 30,2003 as presented by Foster&Foster,Inc.be
accepted as presented.
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Attorney Dehner reminded the Board that as a requirement of Senate Bill 372,the Board is required to
determine with each actuarial valuation report,the total expected annual rate of return for the current year,
each of the next several years,and the long term thereafter. The Board will need input from its investment
consultants and Ward Foster on what that number should be. It is necessary that this be adopted by motion
and put in a letter to Charles Slavin,State Actuary.
On motion made by Trustee Oliver and seconded by Trustee Vogt,it was unanimously
RESOLVED,that the Board has determined,based on the recommendations of its
consultants,that the total expected annual rate of return for the current year,each of the
next several years and the long term thereafter,will be 8% net of investment related
expenses.
Recording Secretary Jo Ann Lacey was directed by Acting Chairperson Ison to prepare a letter to be sent
to Charles Slavin,Department of Management Services,to be signed by Chairperson Ison with a copy to
the City and a copy to Ward Foster,Actuary to advise of this figure. The verbiage in the letter will be the
same as last year and Ms.Lacey was advised that a copy of that letter could be obtained from former
Trustee Cornell.
Acting Chairperson Ison returned to agenda items and,under New Business,began with the item of the
Calendar for 2002. As information for the benefit of the new members, he advised that this Board
generally holds their meetings on the same day that the Police Officers and Firefighters Retirement Board
hold their meetings. This meeting in the morning and theirs in the afternoon. He then called on Attorney
Dehner for suggested dates.
Attorney Dehner stated that he had received some proposed dates from the Police and Fire Board. The
suggested dates for the first three quarterly meetings for next year are February 13th,May 8th,and August
8th. The date they proposed for the November meeting was the 7th,however,there were conflicts to that
date and Attorney Dehner proposed alternate dates of November 4`h, November 18`h or November 19`h.
The Board members were polled and after some discussion,the following dates were set:
February 13,2002 (Wednesday)
May 8,2002 (Wednesday)
August 8,2002 (Thursday)
November 19,2002 (Tuesday)
Acting Chairperson Ison officially certified newly elected Trustee John Vogt and newly appointed
Trustee Mike Miller as members of the Board. He then asked Trustee Oliver and Trustee Smith to tell a
little about themselves to these new members.
Trustee Oliver introduced herself and stated that she is retired from SunTrust Bank and that she has been
on this committee since it started. She went on to say that she thought that was about 11 years and that she
had enjoyed it,learned a lot,appreciated the opportunity and now feels it is time to give someone else the
opportunity as this would be her last meeting.
Trustee Smith introduced himself and stated that he is the Public Works Director for the City of Ocoee. A
retired Naval Officer he had done 25 years in the military,worked for the State Department for a while
building embassies in South America and is now back home and glad to be a member of this Board and to
try to make a contribution to the employees and a positive effect on the employees.
Acting Chairperson Ison then introduced himself. He stated that he was Mayor of the City of Ocoee
from 1983 through 1989. He advised that this retirement plan was a thought process brought by one of the
Cor late Commissioners,Commissioner Bateman. He pushed for it and the Commission very happily adopted
it and have seen the plan grow from no money to the money available today. The benefits are being
improved periodically,and he mentioned that he is really proud of Trustee Oliver and the other founding
members,Milton West and Paul Lewis and all those folks who have,throughout the years,including
Trustee Dabbs who has been involved for ten years,really made this plan a successful endeavor for the
employees. He went on to say there are nine more years in this decade and he thinks it will be necessary to
do a lot of work in the next nine years.
Acting Chairperson Ison moved on to say that it would now be necessary to appoint a Chairman. He
added that he feels there is a need to appoint a Vice Chairman. He called for a motion for the Chairperson
and said he would then have a motion for Vice Chairperson to serve at the pleasure of the Board of
Trustees.
On motion made by Trustee Smith,seconded by Trustee Oliver,it was unanimously
RESOLVED,that Trustee Tom Ison would serve as Board Chairman for the Plan
year ended September 30,2002.
Chairperson Ison graciously accepted the position and went on to suggest either Trustee Oliver or Trustee
Smith to be considered by the members for the position of Vice Chairperson. Trustee Oliver reminded the
Board that this would be her last meeting.
On motion by Trustee Vogt,seconded by Trustee Miller,it was unanimously
RESOLVED,that Trustee Robert Smith would serve as Vice Chairperson for the
Board for the Plan year ended September 30,2002.
Trustee Smith graciously accepted the position.
Attorney Dehner reminded the Board that the position of Secretary needed to be filled. He reminded that
Ms.Lacey is the contracted Recording Secretary but there would also be a Board position of Secretary.
Chairperson Ison stated that at the last meeting after discussion from former Trustee and Secretary Pat
Cornell,there was supposed to have been a meeting between Trustee Dabbs,Trustee Ison,and the City
Manager to discuss administrative secretarial support services. He advised that meeting did not take place,
so he was not certain if this could be done. He mentioned that he was looking for suggestions and that he
was planning under Old Business,to ask this Board if it would like to have a workshop session with the
City Manager and perhaps their HR Representative and the City Clerk,all who have had the experience of
doing this job to see if a satisfactory arrangement can be worked out so a secretary can be retained once
they have the job because it has not been a workable solution to date.
Attorney Dehner advised that the Board can contract with a person to perform the services being referred
to but in addition to that there needs to be a Trustee who holds the office of Secretary. Typically,their
official function is to be the overseer of the records,delegated by the Board and also to attest the
Chairman's signature on certain documents.
Discussion of this position ensued. Trustee Smith advised that he has had all of the records since former
Trustee Cornell's term had expired.Chairperson Ison advised that he had been told by Attorney Dehner
that Trustee Smith could be the Vice Chairman and Secretary. He asked Trustee Smith if that would be too
much.
Trustee Smith responded that it did not because he also has the benefit of having Ms.Judy Henry as his
administrative assistant. He mentioned however,that there are questions as to confidentiality and things of
that manner. He mentioned that as long as he would be allowed to have Judy assist him,then there were no
reservations. He further stated that as Department Director of one of the largest departments in the City he
would be unable to handle this position without assistance.
Trustee Smith stated again his concerns about confidentiality because some of the paperwork that he
assists an employee filling out when they decide to retire includes home addresses,social security numbers,
4
on certain occasions even bank account numbers,and copies of voided checks where their retirement check
is going.
Attorney Dehner advised that for general employees there is no problem. Those records are not
confidential. For Police Officers and Firefighters,home address information and family members is
confidential,but not for general employees.
Trustee Vogt questioned whether the Board was leaning toward getting some of these responsibilities that
Trustee Smith will be having his assistant do,transferred to a staff person.
Chairperson Ison stated that he would like to have a meeting with the former secretaries,existing new
secretary and this Board with the City Manager to receive input and discuss these duties,trying to arrange a
solution and any compensation that may need to come from this Board for that person so the City is not
incurring any expense directly with that. He went on to say that having a meeting with the City Manager
would be a beginning point and he would try to see if this could be done prior to the next meeting.
Trustee Vogt asked if it was the plan also to get some of that load off of Trustee Smith's administrative
assistant over time. Trustee Smith answered that what they are talking about are administrative duties,not
legal functions of the Board. There is a gray area right now when a new employee starts with the city.Is it
HR's goal or duty or is it this Board's duty to apprize that new employee of our pension plan,the benefits
of it,the cost of it? Trustee Smith said he feels that's as important or almost as important as an exit.
Right now an employee has essentially two exit interviews,one with Human Resources and possibly the
City Manager,and another one with him. He said it would seem logical to him to combine those two and if
it costs us some dollars to help fund part of the position then so be it. He stated the sanitation fund as an
example. It is an enterprise fund yet the sanitation fund pays the city an administrative fee for the building
and legal fees.
(mor Chairperson Ison noted that what is being done here needs to be changed relative to the secretarial duties
and that it is his intention to get this resolved within the next sixty days,at the Board's pleasure,with the
Board's input,and the Board's approval,whatever that turns out to be. Trustee Vogt asked if the essence
of this is that the position of Secretary now being considered would be an interim position. Chairperson
Ison responded"no". He went on to state that this position as Secretary will fulfull the legal requirements
always. Those duties will be to keep a complete minute book of the actions and proceedings or hearings of
the Board. After further discussion,on motion made by Trustee Vogt,seconded by Trustee Oliver,it
was unanimously
RESOLVED that Trustee Smith would serve as Secretary for the Plan Year ended
September 30,2002.
City Clerk Jean Grafton,recognized by Chairperson Ison advised that she had a message from Judie
Lewis. She said that Mr.Gleason wants to meet with the Human Resources director and Ms.Grafton to
work out some of the details and then he wants to meet with the Board so they can be prepared to know
what can be offered. Chairperson Ison stated that his intention is to ask the City Manager if he could
meet with the Board when he is ready and hopefully this could be resolved during the month of December.
He then thanked Trustee Smith for taking on this position of Secretary and promised to work for a
resolution to the problems as soon as possible.
Chairperson Ison addressed the ordinance that came up before the City Commission on November 6
regarding the$100 insurance supplement. He went on to state for the enlightenment of the Board and other
consultants that he had appeared before the Commission at that meeting and asked this to be continued due
to some questions that he had and other questions some employees had directed towards him as to who was
covered. He did not have any answers and thought that was something this Board needed to consider. He
stated he had not seen the finished ordinance here nor had he seen the actuary statement that was going to
Mr.Slavin,so he couldn't answer anything and did not want to answer anything and they did agree for a
continuance to the next meeting. Their next meeting is scheduled for November 20. They could vote to
adopt,amend or continue to continue or make the effective date something other than October. Their
in
attorney pointed out last night that the effective date of the Ordinance was supposed to take place October
Cov 1. He said now it would have to be changed to a later date so at least that ordinance is going to have to be
modified. Chairperson Ison asked for any employee who would like to make any comments about this
$100 in order to put this into perspective.
Jean Grafton: Judie Lewis left a list for me to get questions answered. One of the questions is that
several of our employees are covered by their spouse's insurance instead of by the City's insurance. The
question is, if that is so,will you still have this$100 credited toward your insurance?
Attorney Dehner answered that this actually is a supplemental flat dollar amount benefit for the unstated
purpose of post-retirement expenses. It is not specified that it has to be used for payment of health
insurance premiums. It is added to each retirement benefit for service retirees,irrespective of what they
may use it for.
Jean Grafton: They don't have to give any proof or anything for this coverage? It will just be$100
tacked on to their retirement check?
Attorney Dehner answered that was correct.
Jean Grafton went on to say that is entirely different from what the employees were told. She stated that
she was told that it would be credited to the insurance payment from the City and that the retirees would be
entitled to tack onto the City's insurance and be required to pay the balance of it.
Attorney Dehner stated that was not correct. It is just a supplemental retirement benefit.
Jean Grafton continued on to ask about beneficiary or beneficiaries. She stated that her understanding
was that you could have several beneficiaries but was informed by former Trustee Cornell that when you
(ire sign up for your pension,you are only permitted one.
Chairperson Ison answered that he had looked this up and found that under the rules that have been
adopted here to work under,he looked up the definition of beneficiary. A beneficiary is the person that the
retiring person designates to be their beneficiary at the time they retire or apply for their pension and it says
failing to do so,it could go to the person's estate. This is retirement benefit. It has nothing to do with this
Ordinance but he said he wanted to see what it meant by beneficiary. He further stated that this needed to
be clarified in some way and raised the question if he had a 14-month-old child and he was 67 years old,
retires and the child is the beneficiary,does the child get the$100 allotment for life?
Attorney Dehner answered that whoever the designated beneficiary is at the time your death would occur
would receive the benefits. A beneficiary can be changed from time to time so long as benefits are being
received. Beneficiary is to be destinguished from joint pensioner who is also mentioned. A joint pensioner
specifically is a person who would be the retiree's joint pensioner if he/she chose the joint survivor benefit
of the plan. They would be included and the beneficiary is going to be whomever is designated in the
beneficiary designation.
Jean Grafton stated that she personally has five.
Attorney Dehner told her that she could designate a portion to go to each of the five.
Jean Grafton then stated that she understood that we would not be obligating another person to be on our
insurance program.
Attorney Dehner stated that this is completely separate and apart from insurance.
Chairperson Ison asked if that continues on as long as that beneficiary is alive.
11
Attorney Dehner responded that it would be as long as the retirement benefit—if they are entitled to
receive the retirement benefit.
Chairperson Ison asked Ward Foster if this beneficiary was inclusionary in the$21,000 projection. Mr.
Foster answered yes.
Trustee Vogt asked if that beneficiary is not the actual retiree is it also covered under the ten-year period
certain. In other words,at the end of ten years that$100 would end just as the regular retirement benefit
would end,if it's not the actual retiree. If it is a 14-month-old child is it still only going to go for 10 years.
Attorney Dehner responded that was correct. If the benefit is under the life and ten-year period certain
and the plan member dies after five years,the beneficiary will receive another five year payment which will
include the$100,but at the end of ten years, it all terminates.
Trustee Vogt queried if technically,the joint pensioner is the 14 month old child then will that$100
supplement continues for as long as that joint pensioner is living.
Attorney Dehner answered that it just continues along as a retirement.
Jean Grafton brought up the issue of vested terminated persons. She asked if that is vested people who
are fired or involuntarily terminated or is that anybody who leaves the City?
Attorney Dehner responded that it is anybody who leaves employment with the City prior to attainment of
an eligibility for a service retirement.
Jean Grafton asked as a matter of clarification,if a person is 30-years-old and has worked for the City for
15 years or 20 years,and then goes on to another whole career,when that employee gets to be retirement
age and files for this pension,will he be entitled to that$100.
Attorney Dehner answered no,that would be a vested terminated benefit by virtue of the fact the
employee terminated employment before attaining one of the service retirement ages.
Jean Grafton then asked for what reason would an employee want to increase the amount being
contributed to the pension if that is what the employee plans to do.
Attorney Dehner responded that if the plan is to be a vested terminated employee and not work to service
retirement,he would not think the employee would want to.
Jean Grafton then stated that participation in the pension plan is not voluntary. It is a condition of
employment. Whatever is done here,whatever the Commission says we are going to do,if the amount
that's coming out of our salary is increased because they believe that all of us want to do this,there are
those who have other plans that will be contributing to my welfare but they will never have the benefit of
that. Is that a calculated risk you take when you come to work for the City?
Chairperson Ison said that he could answer that it is a matter of what you want to do with your life. If it
is mandatory participation and it is your goal to be here only 20 years,and that's the City rules and you
understood that on the day of your employment that's just the way it is. Whether it is fair and equitable,he
said he did not know. The pension plans are part of what is done to encourage people to stay. There are
improvements to the plan to make it as good as anybody else's. That's the whole purpose of it.Attorney
Dehner addressed the question. He went on to say that these conditions are something he thinks the
Commission needs to be appraised of before they pass this Ordinance,unless they had this information on
some sort of fact sheet he was not aware of.
Jean Grafton advised that they didn't have anything—no explanation about anything.
(or
Trustee Vogt asked,whether contributing 7.4%or 7.8%,all of the contributions count 100%toward the
total contribution and when the employee is 30 and when he is vested and decides to cash out and take the
one lump sum,wouldn't that lump sum total include all of the 7.8%contribution? The employee gets a
contribution sheet that says what the total contributions are that says so far you have put in"x"number of
dollars. If that goes up to 7.8%,isn't that going to be reflected in this grand total as well?
Attorney Dehner responded that the employee is always entitled to a refund of 100%of the contributions
in lieu of other plan benefits. If the employee draws other plan benefits there is no refund of the
contribution. But should he terminate at any time,vested or not vested,and requests his contributions back,
he would receive 100%of the contributions.
Trustee Miller commented that he could understand the employees' concerns regarding investing their
money. He stated that he was aware that supplemental insurance had gone up drastically on a monthly
basis,that in the last 24 months the insurance has almost quadrupled in price and in most retirement
packages,those things aren't being covered. He said he respected the fact that young employees don't
want to invest,but at the same time,they can cash out and have their money.
Chairperson Ison thanked Trustee Miller for his observations. He stated that he and Attorney Dehner had
been discussing how this was impacting across the City and how all these many comments ahave been
coming up from the employees. Should we recommunicate this information to the employees prior to
enactment of the ordinance? The pension board attorney says that we should.
Patricia Cornell,Utilities Department stated that she would like to remind everyone that the information
regarding this$100 insurance supplement came from a survey,not a vote. She then asked if this would be
put before the employees as an official voting type situation and stated that she felt it should be done in the
form of a ballot.
Chairperson Ison stated that he had a tendency to think not. But added that it is all at the pleasure of the
Board of Trustees if they want to impose a vote on it. He went on to say he thinks it should be given due
process and some additional input and have the employees come in and speak to it and try to ingest as
many questions as possible. He reminded the Board and employees present that this is only a
recommendation from this Board for the City Commissioners to sign,so a lot of the things that this panel
could even say or direct to be in that Ordinance,is not for this Board to adopt. The Board certainly does
not want to circumvent the City Commission process or anything that they want to do,but he stated that he
would like to recommend to the Mayor and Commissioners if this Board approves,a further continuation of
this Ordinance until the employees formally receive more information concerning it and have the ability to
input. If this means bringing it forth on our agenda or hashing this thing out before it goes any further to
them or if they want to go ahead and take it up,then they would be lacking the input that we could provide
them here in an open meeting.
Patricia Cornell: How would you provide that information to the employees if not through a ballot?
Chairperson Ison said that one thing that could be done is to put it on the agenda for the Board's regular
February meeting,and hopefully get the word out that it is going to be one of the agenda items and have the
employees or the representatives of the employees attend,and in the meantime try to get as many questions
as we can. On the other hand,if someone wants to ballot it,he stated that he did not see how it could be
done to ballot something on which there is not even correct information about. He said he thought this
could only be decided once there is some basic information as to the impact. He said he would ask the
Commission to pull this from their meeting of November 17th and in conjunction with that this Board will
put it on the next Board meeting to get employee input and clarification to these questions. They can then
tell us the way they feel about it and then this Board will have the responsibility to recommend the changes
and specificness of the Ordinance as it applies to the impact and then we can go on to the Commissioner
process again.
Patricia Cornell said there was one other thing she needed clarification on and referred back to the
beneficiary. She stated that she was a little bit confused because in the Municipal General Employees
Summary Plan description,it refers to beneficiary in the singular. Is it true that the retiree can designate
more than one beneficiary?
Attorney Dehner answered yes,in fractions.
Trustee Vogt added that it is common for the contracts,even by State sample,to say beneficiary in the
singular even though you can divide it.
Chairperson Ison assured Ms.Cornell that if everything goes as he has proposed and the employees come
here to enter their input,he will ask if they want to put this to a vote,because it is their pension. We will
get the feeling from them as to whether they feel comfortable with it enough to say we are not interested in
it or get a consensus.
Patricia Cornell responded that the reason she brought it up is that there has been so much
miscommunication out there,that by balloting the item,you could be more specific with it by saying what
the conditions are and then as they are voting they can look at it in hand and say,yes I want this or no,I
don't want it.
Jean Grafton asked if it would be possible to fast track it instead of waiting until the February meeting to
have a work session with the employees some time soon so that this could be moved forward. She said her
thought would be if a Trustee could go to each department where all of the employees for that department
could be assembled and explain what this means. My experience with balloting is that people do not
necessarily pay attention to what is written.They need to hear it from someone three times.
Chairperson Ison stated that that is precisely one of the things he wants to cover in the meeting. He stated
that he doesn't know if that is a function of one of the members of the Board or a function of the Human
Resources department. He also stated that he is ready to meet with the City Manager as soon as possible.
He further stated that just as soon as the meeting date is set with the City Manager and notice has been sent
to everyone he would like the full Board to attend,or at least have a quorum of the Board present.
Ward Foster stated that technically the financial impact of the proposed change should probably be
updated because now that we have done the October 1,2001 valuation,we are going to need a hard
number for the 2002-2003 year,so if it looks like this is going forward he would need direction to update
those study results. He also offered the observation in defense of the Board that he had looked at the
survey information and no where does it say anything about insurance and it says clearly,that to be eligible
for the$100 supplement,you need to retire under the plan's normal retirement provisions and those
provisions require you to work to age 60 or beyond. It doesn't say anything at all about terminated vested
people.
Trustee Smith asked about early retirees.
Ward Foster answered no. This is only for people that retire under the normal retirement provision.
Attorney Dehner said that the ordinance actually covers service retirees only.
Ward Foster responded that wasn't valued.
Chairperson Ison addressed Mr.Foster and said that what is being discussed now is going to be up to the
City Commission. They could vote to enact this on their next meeting,November 20,regardless of
anything that takes place here.
Trustee Vogt asked if they would want to do that,with the knowledge that valuation isn't based on what
the ordinance says?
Chairperson Ison stated that what he was planning to do was to be sure that we have a representative or
that we have a communication to the Board of Commissioners,as to the meeting today and perhaps get
is
(Ibie them a copy of our minutes so they can read it and comprehend the area of concern we have and will then
ask for a continuance so we can do this informative process that the City Clerk has pointed out to us needs
to be done.
Attorney Dehner commented that in light of being caught up here with a new fiscal year,a new valuation,
and,based on what we've heard,rather than continuing,based on the change in the basis for the valuation
based on the new impact Mr.Foster referred to,he recommended the Board get the input from all of these
meetings and that basically start from scratch,do a new ordinance,change the dates,do a new impact
statement on the new ordinance and then go for the first or second meeting,if that be the judgement of the
Board.
Trustee Smith added that he agreed because right now he knows of two employees whose retirement or
how much they are going to earn is in limbo based solely on this$100 supplement so he thinks it needs to
be decided once and for all because he has talked to Doug at Foster&Foster concerning several people
who have submitted their papers to retire and they can't tell them how much they are going to earn because
they are waiting on this$100 supplement.
Attorney Dehner responded that with respect to anybody that has a pending retirement request there is no
way they can be assured of receiving this benefit until the Ordinance is passed by the Commission. If they
retire prior to that time and if the Board recommends retroactivity. As previously mentioned by
Chairperson Ison this Board can only recommend. Retroactivity cannot be assured,so,anybody that enters
retirement status before this benefit improvement passes cannot be assured they will receive the benefit.
The only way to assure that they will receive this benefit,if it passes,is to delay their retirement until after
the Ordinance will pass.
Trustee Smith asked if the Commission approves this on the meeting of the 20th,can they legally make it
retroactive to the 1St
Attorney Dehner responded that,based on the discussion,it would not appear this will happen on the 20th.
Certainly the Commission on that date,or a later date,has the authority to make it retroactive,but there is
no assurance that will occur,so if an individual wants to retire,they are taking a chance that the benefit will
be retroactive,understanding that if it does not pass or does not turn out to be retroactive,they will not
receive the benefit,then that's fine but they need to understand that before they enter retirement status.
Trustee Vogt asked it this would be retroactive to what point?
Chairperson Ison answered that it could be to any point that serves the Commissioner's pleasure,to when
this thing could have been enacted which was the 1st of October or to any date they desire.
Patricia Cornell commented that at the Commission meeting of November 6th, it was stated that the
effective date would be December 1st. The reason for that is because if it is made retroactive,you've got to
go back and take that percentage out of the employees' paycheck,so it was recommended to the
Commission that it be effective December 1st
Chairperson Ison acknowledged Marilyn Johnson for comments. Ms.Johnson stated her concern was
that what went out to the employees was a survey. It didn't say ballot or anything else. It went out in
August before the budget was finished. She stated that the employees have taken a hit this year. They have
raised the insurance which had to be done and the amount available for merit increases has decreased. She
went on to say she thinks the employees should have the opportunity to fully understand and realize the
cost because maybe it's only a few dollars per month but there is also the insurance increase and so much
for this and so much for that each month. The raises aren't going to be as high and the employees need to
be able to rethink it because it was put out as a survey. There was a good response and maybe the response
will be the same. She said she thinks the whole picture should be presented again and put to a vote. She
said she doesn't think that the Commissioners saying the employees want it is fair as they may not want it
now because they did not know of all of the other changes that were coming when they were surveyed.
15
(ftor Chairperson Ison responded that Ms.Johnson's point was well made and that's more of a reason to ask
for a continuance.
Jean Grafton asked if anyone had calculated how many pennies this would be.
Marilyn Johnson stated that someone in her department had calculated her increase in insurance and
retirement and it added to$1,100 a year. Ms.Johnson added that she wants the retirement and is probably
closer to it than 75%of the employees but that she also knows when the employees come in with their
check stubs and ask why all the money is being taken out of their check. Insurance has increased and the
new employees have to pay 100%of dependent insurance. So they need to be given another chance to
voice their opinion.
Chairperson Ison said that he was in agreement with Ms.Johnson and stated that more information needs
to be given to the persons that this is going to impact and hopefully the City Commission will feel the same
way.
Terry Rosenberg said that the information communicated to the employees in the survey did not spell out
everything and that she called Former Trustee Patricia Cornell as her representative. Ms.Cornell was
under a different impression because she is the one who told me and the only one who was available when I
voted and when other people in my department voted to give us a response. Ms.Rosenberg continued on to
say that she did not know where she would be in 20 years. She may not be in Orlando in 20 years and does
not know how she can decide now what she wants for her retirement age,that she would probably still be
here in five years,but who knows about 20. She said she would like to have a voice in where her money
goes and since this is forced,she has no choice. It is a condition of employment. She continued on to say
that when she signed up for employment,this additional .4%was not in there and she stated that personally,
she is not in favor of it in the way it was played out at the Commission meeting or the way it was presented
in the Ordinance to the Commission because that is not what she and probably 90%of the employees were
or what they assumed when they signed up for. She stated that she thinks the employees need to vote for
this because it impacts them. It impacts their paycheck and as Marilyn Johns said,there have already been
two hits this year. She said that she personally could not afford another one.
Trustee Vogt asked if there was anyone on the Board who disagrees with Terry?
Chairperson Ison said that on a future Agenda,the Board can move to put it on a ballot and ask the
employees to vote for it. They can do another survey,whatever is their pleasure.
Terry Rosenberg said that her thought is if you meet as a general group to have a discussion with the
employees,that you are going to base it on that,you are going to get a very slanted picture,one way or the
other.
Chairperson Ison said he wants to have a minimum of that. We want to have it on the Agenda and you
can feel free to come here and discuss it,when we have Ward Foster and the Pension Board Attorney,
people who know things,because he personally cannot answer every question they are going to come up
with and does not know that the new Human Resources Director can either,so it would be better to have a
public meeting with the employees invited,try to get as many of their questions answered and then let this
Board decide how they want to proceed with polling whether the employees favor it or not. It's their
decision to make. He suggests that when the meeting is held,the employees be allowed to address that and
it will be brought up whether they want to vote on it.
Chairperson Ison recognized Brenda Maxwell,City Clerk's Department for her comments. Ms.Maxwell
asked as an example, if this is retroactive or is made in December and someone retires in February,or
January,are they still entitled to that$100 their whole retirement life even though they did not pay into it?
Trustee Vogt answered that they did pay into it. They would have paid into it from the time it was enacted
Lir until February.
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Brenda Maxwell: For one month?
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Trustee Vogt responded that's the point of actuarial studies. Although there will be one person that gets
the benefit immediately even though they didn't contribute to that contribution to the plan, it does balance
out over employees we haven't even hired yet. So,in the long run,you're going to have somebody who
really gets it and you can imagine that those employees would be in favor of this plan right away.
Brenda Maxwell asked if that is why. She said there seems to be a big push to get this done and that's
what she had an issue about but would not go into that because it had already been said that there would be
more study into it.
Chairperson Ison stated that there is not a hurry to get this done and that he spoke at the Commission
meeting of the 6th to delaying the process.
Brenda Maxwell responded that she wasn't sure and then thanked Trustee Vogt for making the point that it
would all balance out.
Trustee Vogt stated that it does all balance out because it has to be based on the grand total big picture.
Ward Foster said that when there is a benefit improvement that's partially or fully funded with additional
member contributions,the people that go out two months later get a windfall. The people that work 30
years and pay that extra.4%are subsidizing those people who worked two months and went out. That's an
important point that needs to be made. Also,there was some discussion earlier about if you were vested
and put in 7.8 for part of your time instead of 7.4 you can always cash out and get that money back but if if
you are a vested person that you have five or more years of service,it is important to know that if you take
a lump sum of your own contributions,that represents a significant actuarial gain to the fund and the best
thing to do in most cases,other than hardship cases or something like that, is to leave your money in the
fund and receive that monthly benefit upon retirement age,because you are putting in 7.4%now but the
City is currently putting in over 10%,so that's a pretty good investment on your 7.4%. So a refund for
vested people is something as actuaries that we get excited about because that means all that City money
that was accumulated to provide that benefit is left behind but it is not necessarily the best thing for the
member.
Chairperson Ison asked for any other comments on this matter. He then asked the Board members if they
would enact a motion to put this forward on our workshop agenda with the intentions and then put it
forward on our future agenda for the first meeting in February and the same thing to communicate to the
City Commissioners and the City Manager that we ask if they continue this on until this process works its
way through.
Trustee Smith said that he had a concern that it appeared as if this has been budgeted by the City and was
on the verge of approval at the Commission meeting of the 6th and he did not want to run the risk of losing
this. The$100 supplement is going to be rather substantial to some people so he said he doesn't want push
this out forever because of some people that are kind of hanging in the noose right now that have already
submitted their paper with their intention to retire and some of those people that have counted on getting
this and if we push this back to February,if you will,those people will not benefit because they will,in
fact,retire before this is enacted.
Chairperson Ison said that what he hoped to accomplish prior to the next meeting,before the agenda is
made up,that the City Manager and the City Commissioners are advised of the discussions to this day.
They can certainly call a workshop meeting prior to their next meeting if they want to discuss the time
sensitivity of this because the enactment of this is in their hands,not our hands. So that is where the
ultimate thing is going to be decided. All we can do is propose. They actually accept.And if they want to
continue this on,they want to deal with it,they can. We are not stopping them from doing that at all. He
added that he knows that in order to get information out to the employees,a face to face meeting where
they can have their individual questions asked is a good way of doing it and then if the Board here feels like
we want to vote it then that is fine,we can do that. We cannot process this within our control. We can't do
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it today or tomorrow. And I doubt if we could do it by the November 20th session,so I am looking at doing
something in a December time frame. The money has been budgeted according to the information received
last night. The$21,000 is in the budget for this cause. And the new impact on the valuation might change
the numbers. He asked Ward Foster if he thought they would go up.
Ward Foster answered yes.
Chairperson Ison asked if this Board should communicate something to the commissioners and ask for
continuance and try to work on this?
Trustee Smith said that he didn't see that there is any choice given that the number that was given to the
City Manager or the budget team as far as funding this next year now is not a valid number and knowing
how tight this year's City budget is he can see where there is no choice but ask them to postpone this and
get an up to date report from Foster&Foster. We have a moral and legal obligation to at least give them a
valid number and apparently the$21,000 number now isn't valid.
Ward Foster said that the number was valid as of October 1,2000. The problem is now factoring in some
unfavorable experience in the twelve months ending September 30,2001 so,just like the cost of the current
plan,the cost of this additional benefit is going to go up as a result of the unfavorable experience and it will
probably go up in proportion to the general increase in the pension cost,so a$25,000 number is probably a
reasonable estimate.
Trustee Vogt asked Mr.Foster if he had already said early retirement has not been valued into it either.
Ward Foster answered yes and said that was a good point. That is probably something we need some
direction on. We were funding the$100 supplement to be a full benefit supplement at the normal
retirement date. If you provide that$100 supplement as early as age 50 which is the earliest early
retirement age,then you are really giving a significantly subsidized benefit to early retirees and we value
that$100 supplement to be actuarially reduced for payment to early retirees,just as a regular normal
retirement benefit is reduced to reflect the fact that that benefit is going to be paid over a longer period of
time. So if you would like us to value an unreduced$100 supplement for somebody that's age 50 with 5
years of service,we'll do that. But,that represents a significant increase in their benefit as a percentage as
opposed to providing an actuarially reduced supplement.
Attorney Dehner said that when somebody works to service retirement and there's a supplement,it's
appropriate for him or her to get it. Maybe an early retiree should receive a proportionately reduced benefit
to reflect the fact that their service retirement benefit is also reduced.
Trustee Smith asked if the way the ordinance is written right now service retirement includes early
retirees? He cited himself as an example stated that he would be vested 1 June of next year. The way the
ordinance is written right now,he would draw early retirement plus the$100 supplement.
Ward Foster responded that's the way it was valued and that he doesn't think it's going to make a
significant difference in the numbers but they will have to be run to see.
Trustee Smith said he just doesn't want any surprises for anyone. If the City Commission or the City
Manager is told this is only going to cost the City$21,000 a year and it's$41,000. He said that knowing
how difficult this budget year is going to be,he doesn't want to get in the position of surprising them and it
end up costing someone their job.
Attorney Dehner recommended,in light of all of the discussion we have had and procedurally,a new
valuation report with the additional items to be covered. The discussion about who's covered,who's not
covered,who receives,what's the benefit for,does it have to be for health premiums,that the Board
consider just pulling this ordinance from the Commission for consideration,receive the input from the
membership,specifically on each of these items as to who is going to be covered,normal service retirees,
early service retirees,vested terminated,no vested terminated and then based on that input,prepare a new
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ordinance specifically identifying based on the input received,have Foster&Foster do a cost on these
specifics and then move forward the first or second meeting,if that be the pleasure of the Board.
On motion made by Trustee Vogt,seconded by Trustee Smith,it was unanimously
RESOLVED to pull this Ordinance from the City Commission for consideration,
receive input from the membership and prepare a new Ordinance specifically identifying benefits
and beneficiaries based on input received and to authorize Foster& Foster,Inc.to do a cost on these
specifics. This resolution to be handled in a timely manner in order to be addressed at the first or
second meeting in 2002.
Chairperson Ison asked if it would be possible to have this communicated to the City Attorney,Paul
Rosenthal,so he will be aware of it prior to the next meeting.
Attorney Dehner said he would call the City Attorney and also suggested a short letter over the
Chairman's signature be sent asking that it be withdrawn. He then asked Jean Grafton,City Clerk who
would be the one to communicate with for having this withdrawn. Ms.Grafton advised it should be the
City Manager. Chairperson Ison agreed to communicate it to the City Manager.
Chairperson Ison moved to the next agenda,under old business. He moved over the agenda item
regarding record storage and moved it over until the next meeting. He then called on Attorney Dehner
regarding the Rules of Procedure,Rule 372.
Attorney Dehner handed out a draft of revised rules of procedure that have been prepared in accordance
with the direction of the Board,which will completely,when adopted by the Board,take the place of the
Rules and Procedures adopted in 1999. He stated that primarily the changes in this document are those
required to put in as a result of Senate Bill 372 which is the reference on the Agenda,which is now Section
112.661 of the Florida Statutes.This draft is for the Board to take with them and review for the next
meeting. He mentioned that for the new trustees,this would all be new and he asked them to spend some
time with it and he would certainly be available to answer any questions that they may have. For the
benefit of the other Trustees he called attention to the Table of Contents,and identified either significantly
revised sections or new sections which can be zeroed in on since they are familiar with many of the other
provisions. Those sections are: 1.9, 1.10,5.3,5.4,5.5,5.6, 10.11, 10.12, 12.3,and 16.1. He asked them
all to review this and at the February meeting,plan discuss any comments or questions with an eye toward
having it adopted as the Rules and Procedures to replace the prior Rules.
Chairperson Ison stated that he is putting this on the February meeting agenda.
Trustee Vogt asked if this is something that was written over time from all different sources.
Attorney Dehner advised that he drafted the document originally and the prior documents that were
adopted by the Board and they are updated periodically.
Attorney Dehner commented,as per the request from Chairperson Ison,about himself. He introduced
himself and stated that he has represented public pension funds in Florida since 1979. His partner is Scott
Christensen and representing municipal pension plans in the State of Florida is all they do. Their office is
in Sarasota but they travel throughout the State representing plans. They represent approximately 150
plans similar to this one in over 90 cities through the State. He went on to say that he and Ward Foster had
the pleasure in 1991 to help establish this defined benefit plan for the City and working with Jean at that
time and City officials so has been here since the inception representing the plan and this is,as a matter of
information on a relative basis,particularly for a fairly young plan,this is an excellent plan for your general
employees in Ocoee,relative to others. He said that for almost the entire time that he has practiced in this
area,he has spoken at conferences around the state each year on Trustee education. It's typically five
conferences a year and in conjunction with that he prepares materials on Trustee responsibilities which he
will provide to be distributed to the new trustees and maybe it will help jumpstart your responsibilities and
how this Board is administered. He advised that Chairperson Ison has also asked him to participate in an
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education session,probably in January. He stated that is what he does at the conferences and as a matter of
fact one of the requirements that came through the legislation is now a requirement for trustee education
under Senate Bill 372.
Chairperson Ison stated that what he would like to do,Board members,in the second or third week of
January,is have a workshop session with the primary speaker to be our Pension Board attorney,to give us
the information for new members and some of us existing members. He said he would also like to see that
perhaps Human Resources would be invited or anyone from the city government to hear his education
session. He advised that he had heard it once and it is very educational. He asked Attorney Dehner about
setting a date for the session.
Trustee Vogt asked if this would be for the purpose of meeting the Trustee Education requirement as
required by Senate Bill 372.
Attorney Dehner responded yes and recommended that,in light of that requirement,the specific
requirement calls for education in two areas:board responsibilities which he will cover,and also
investment related responsibilities,the Board consider having the investment consultants at the same
meeting and then that will cover the requirements.
Chairperson Ison told the Board it could be done this way or they would have to travel to Port St.Lucie or
somewhere and spend three days getting the same information over time and having it done here would be
a quicker,better solution.
Trustee Vogt asked about the expense and whether that cost more than going away to a formal education
process.
Chairperson Ison responded that the cost would be less. He stated that it saves money and it's a better job
and it's close to home.
Attorney Dehner added that,if the Board would like,they have done in-house training throughout the
state,when it is not always convenient for particular community trustees to attend the conference based on
where it is or time of year or whatever it might be,so by doing this, it will meet the requirement and if it
meets the pleasure of the Board,he offered to mention it to the Police Officers and Firefighters Board at
their meeting later this day to see if they may want to attend and that way it would split the cost of it with
them.
Chairperson Ison asked Attorney Dehner to set a date.
Attorney Dehner suggested that,in light of the fact the investment people are coming,he through his
office would schedule the time for the meeting and contact the investment consultants and maybe the other
board to come up with something.
Trustee Vogt asked about the time frame for this meeting.
Attorney Dehner advised that generally the sessions would run three to four hours,an hour and a half to
two hours each for the legal and investment.
Trustee Vogt asked that it be done on any day but Tuesday. Trustee Miller said that later in the month
would be good for him.
Chairperson Ison suggested going on from Wednesday the 23`d and forgetting Tuesday,the 29th,and went
somewhere the 24`h,25`h,28th,30`h and 31st of January.
Attorney Dehner said he would try for that week and asked if it would still suit if it had to be backed up a
week. Affirmatives were received from the Board
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Attorney Dehner reminded that because of the change of Trustees,it is necessary to comply with the
Financial Disclosure Law which will now impact Trustee Vogt and Trustee Miller. It is a requirement that
you must file within 30 days of taking the office of Trustee. Those official 30 days start today. The
information required is very general and then you will file,on or before July 1,each year that you are a
Trustee. It is important. If you do not do that you will receive a notice from the Supervisor telling you of
have a grace period to file until September 1. If you then don't file,a fine begins to accrue on September 1
at the rate of$25.00 a day up to$1,500.00,so you want to be sure that doesn't happen. And with respect to
Trustee Oliver,Trustee Dabbs,and former Trustee Cornell, if they haven't they will need to file a final
disclosure,Form 1-F,within 60 days of stepping down. And that would be from the period January 1st of
this year until the date they step down.
Jean Grafton pointed out that since this is Trustee Oliver's last meeting,it would be up to the other
Trustees to choose whom they request as the fifth Trustee. That is the position that Trustee Oliver filled.
She was not appointed by the Commission,but selected by the Pension Board.
Chairperson Ison thanked Ms.Grafton for pointing that out because it wasn't on the agenda. He said he
would address that. At this point under other business the agenda item is for approval of payment of bills.
The bills have been provided in the packets passed out to the Trustees. There is one to be added from
Foster&Foster,Inc. It was just presented today in the amount of$7,796.00,having been developed on
November 5th. He advised the new Trustees that there is routinely a motion to authorize payment of the
bills.
On motion made by Trustee Smith,seconded by Trustee Oliver,it was unanimously
RESOLVED that the list of bills presented as well as the$7,795.00 due to Foster&
Foster,Inc.which has been presented separately,is approved for payment.
Chairperson Ison stated that under correspondence on the Agenda,he did not have anything other than a
letter from TRUSCO Capital Management which is for information purposes and does not require a reply.
He then asked Attorney Dehner for his comments.
Attorney Dehner stated that there was just one additional item,in the last meeting he was directed to
prepare an ordinance to add a normal retirement age or 30 years of service and out irrespective of age and
to send that in February,2002 to Ward Foster for an impact statement and then on to the City. His question
to the Board,would you like him to continue with direction,or in light of all of the discussion today,would
the Board like to consider that further at a later date?
Chairperson Ison asked Trustees Smith and Oliver for their opinions.
Trustee Smith said that he would still like to proceed with that. He added that there are a good number of
employees in the Public Works Department who started with the City of Ocoee right out of high school,
some as early as 17 years old. There are now a good number of employees who will have 40 plus years of
service before they can achieve full retirement. He added that 40 years seems to be a little much and he
thinks it would not only benefit them but also would benefit the City to come up with some other
mechanism other than achieving age 60 to allow these people to retire and get some fresh thought and
blood into the work force. He mentioned the fact that there is a very mature work force here in the City of
Ocoee and he would still like to proceed on with it.
Trustee Oliver agreed that it should be done,just to see what the cost might be.
Trustee Smith said he has heard some numbers kicked around that it would cost the city a million dollars
or so,and he would like to really know what it would cost the City and/or the employees.
Chairperson Ison said that what we are leaning to is the process of where we are with the$100
supplement in gathering the information,costs and putting it forth to the Commissioners that they can
enact. It is something that this Board has deliberated on throughout this year and is already in the process.
So,having heard their recommendation,he asked for a motion to answer Attorney Dehner's question.
Attorney Dehner asked Trustee Smith for clarification as he had mentioned getting a cost from Foster&
Foster. His question of direction was for him to do the Ordinance,send it to Foster&Foster for an impact
statement and then on to the City in February. This raises the issue of whether the Board wants to look at a
cost on it before the Ordinance is prepared.
On motion made by Trustee Smith and seconded by Trustee Oliver,it was unanimously
RESOLVED that Attorney Dehner proceed with preparation of the Ordinance for
the 30 and out.
Attorney Dehner advised he would get it out in February's meeting.
Chairperson Ison noted that there were a lot of employee interested in this,even more so that in the$100
supplement so,moving forward on one,postponing the other may not be all bad. Continuing on he said
that everything on the Agenda had been covered as well as a lot of things that were not on the Agenda. He
apologized to all in attendance for the lengthiness of the meeting but added that the Board is never in so big
a hurry that it cannot communicate to the employees its business because that is our business and the reason
for being here.
Trustee Vogt asked about finding a replacement for Trustee Oliver.
Chairperson Ison said he wanted to ask the Pension Board attorney whom we might appoint in this
position. Can we appoint an employee of the city or does this person have to be a non-employee of the
City or can it be anybody we want?
Attorney Dehner advised that it could be anybody.
Chairperson Ison advised that motions would be accepted for the Trustee appointed member of the Board.
Trustee Smith asked Trustee Oliver if she was certain she did not want to be reappointed.
Trustee Oliver responded that she was certain and thanked Trustee Smith for asking.
Trustee Smith told Trustee Oliver that he was not trying to push her off,that people like her are a blessing
to the City and to the employees by giving of their own time without compensation and he offered his
personal thanks. Trustee Smith nominated Patricia Cornell to be the Board appointed member. A brief
discussion ensued;Trustee Vogt seconded the nomination. On motion made by Trustee Smith,seconded
by Trustee Vogt, it was unanimously
RESOLVED,that Patricia Cornell be named as the Trustee appointed Board
member to fill the position vacated by long time Trustee Joyce Oliver.
Chairperson Ison commended the Board for its selection and stated that he knows Ms.Cornell will serve
the Board well.
There being no further business to come before the meeting,it was,on motion duly made and seconded,
unanimously adjourned at 1:04 p.m.
Respectfully submitted,
Jo Ann Lacey
Recording Secretary of the Meeting