HomeMy WebLinkAbout02-13-2002 Minutes Minutes of the Quarterly Meeting of the
(ow CITY OF OCOEE GENERAL EMPLOYEES PENSION FUND
Held on February 13,2002
At 150 N.Lakeshore Drive
Ocoee,Florida 34761
Chairperson Tom Ison called the meeting to order at 10:00 a.m. Present for roll call were Trustees Bob
Smith,Pat Cornell,and John Vogt and it was noted that a quorum was present. Trustee Mike Miller
arrived a few minutes after the meeting began,therefore all Trustees were in attendance. Also present by
invitation were H. Lee Dehner,Attorney,Fran Diedrich,Human Resources Director,Diane Garcia and Tim
Nash representing TRUSCO Capital Management,Larry Cole representing Merrill Lynch,and Jo Ann
Lacey,Recording Secretary of the Meeting.
Chairperson Ison advised that the minutes of the previous meeting had been circulated to all Trustees for
review. He called for any corrections or additions to those minutes. Trustee Vogt had a list of minor
corrections. Those were as follows:Page 1,last line,space between"page 11"and"shows";Page 2,
paragraph beginning with"Ms. Garcia"states"she reminded",should be changed to"she reminded the
Board that...";Page 3,paragraph starting with"continuing"halfway down the page, sentence which states
"Page 5 shows the comparison to a live universe or public pension funds",should be changed to read"of
pension funds);Page 5,last paragraph,there should be a space in front of"15.9%";Page 6,last paragraph,
on the line that begins"she would like to which[know] way those costs are figured," the word"know"
needs to be inserted;third line,same page,capitalize"I";Page 8,comma needs to be inserted after"Naval
Officer"; last line,same paragraph,"tried to make a contribution to the employees' "and have"_a positive
effect on the employees; Page 9,the paragraph that begins with Attorney Dehner...", at the end of the first
line,"he reminded the Board that Ms. Lacey is the contracted recording secretary"; same paragraph"was
planning under old business",needs to have a comma placed between"planning"and"under"; Page 10,
last line,"they could vote to adopt,amend,continue[,] or make the effective date",needs to have a comma
placed after"continue"; Page 11,six paragraphs down,"entitled to tack[it] onto the City's insurance",
needs to have the word"it"inserted between"tack"and"onto". Two more paragraphs down,"asked about
[the]beneficiary or beneficiaries"needs to have the word"the"inserted between"about"and
"beneficiary";six paragraphs from the bottom of the page,"Attorney Dehner asked[a]beneficiary needs to
be distinguished." "A"needs to be inserted. Page 12,third paragraph down,last line"would end[comma,
space]"should be changed to space,comma. Page 13,four paragraphs down,second line toward the end,
take out the"of''in front of have. Page 14,the large paragraph that begins with"Ward Foster",the words
"no where"should be changed to"nowhere." Page 15,four paragraphs down, second line,toward the end,
"passed by the commission"should be followed by a comma and lower case"i". Page 16,fifth paragraph
down, second line from the end of the paragraph,"Marilyn John"should be changed to"Marilyn Johnson."
The next suggested correction changes the meaning. "Trustee Vogt asked if there was anyone on the Board
who disagrees with Terry." Two words should be added after this sentence,"Nobody disagreed." Page
17,third paragraph down,"Brenda Maxwell asked if that is why..."Take out the words"she said"and the
period so it reads,"Brenda Maxwell asked if that is why there seems to be a big push to get this done." The
paragraph that begins with"Ward Foster",five lines down at the end,remove one"if'. Page 17,second
paragraph from the bottom, statement from"Trustee Smith"that"he said he doesn't want[to]push this out
forever,"the word"to"needs to be inserted. Last paragraph,last line,"We want to vote for it." Page 18,
third paragraph down, "commissioners"should be capitalized. Same paragraph, "Trustee Smith said he
doesn't want surprises for anyone..."At end of sentence add,"That would be a surprise." Page 19,
"Chairperson Ison moved to the next agenda." Add"item"after"agenda",as there was only one agenda
that day. Page 22,"Ison noted that there were a lot of employee[s]interested in this." Add an"s"to
employee. "Even more so [than]the$100 supplement." Add"than".
Chairperson Ison asked if there were any other additions or corrections to the minutes. There being none,
it was,on motion made by Trustee Cornell and seconded by Trustee Smith,unanimously
RESOLVED,that the minutes of the meeting of the Board of Trustees of the
General Employees Pension Board,as amended,be and they are hereby approved.
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Chairperson Ison moved on to the next Agenda Item,the Money Manager's Report,for which he called
on Tim Nash and Diane Garcia. Tim Nash addressed the Board regarding the results for the investment
program for the quarter ended December 31,2001. He explained to the Board that it had been an excellent
quarter for the equity market. He continued,advising that the Plan did not own any Enron,Global
Crossings,TICO,or K-Mart in the portfolios,which was good news as were the excellent investment
results. Attorney Dehner asked Mr.Nash if Arthur Anderson was still the accounting firm being used to
which Mr.Nash responded that there had been a switch over to Price Waterhouse Cooper as their new
auditors.
Mr.Nash called the Board's attention to the Trusco Capital Management Report. While making references
to specific pages in the Report,Mr.Nash commented that it had been a great quarter for the stock market,
with international stocks even ending up in positive territory. However, for the twelve-month period
ending December 31,it was a different picture,still in negative territory for most of the equity components.
He indicated that bonds,once again for the second calendar year in a row,have been one of the best
performing asset classes. A significant portion of the Plan's portfolio has been invested in bonds,which
has helped weather the storm in the marketplace that has occurred over the last two years. Bonds for the
year were up 8-1/2%. He went on to say that the reason for so much of the volatility in the market is that
the National Bureau of Economic Research announced that a recession officially began in the U.S.in
March of 2001. He reported that,in looking at all of the recessions going back to 1926,the average
recession lasted eleven(11)months. If,therefore,that average can be applied to the current recession,that
eleven(11)month period has been reached and we should begin to see the economy start to improve and
there should definitely be continued improvement in the market by the third and fourth quarters of 2002.
One of the factors,which can be considered as assisting this improvement,is the very low inflationary
environment. In 1998 the inflation was running at 1.8%. It got as high as 3.75%in 2000-2001 and has
now dropped back down to 1.6%. Therefore the investment committee is encouraged that inflation is very
benign. Another factor is that energy costs,which were at a 30-year high 18 months ago,have fallen
dramatically so that helps corporate America as well with their transportation and energy costs going down.
There is also the fact that there has not been a lot of pricing pressure from any corporation. Another help
has been the Fed action that has included eleven short-term interest rates. Those interest rates are now at 1-
3/4%,which is the lowest that it has been seen since 1962. This means that corporations and consumers are
seeing some debt come down because their interest costs have been declining. It is expected that there will
be another'/4 point decrease that will probably occur in April.There is also the$200 Billion Federal
stimulus package. All of these items are expected to spur the economy,especially toward the end of 2002.
Continuing on with his report to the Board,Mr.Nash advised that consumer discretionary stocks were up
18.9%and technology stocks were up 34%for the quarter in the S&P 500 for the quarter. Bond rates have
been falling rather dramatically as is indicated in the Treasury Yield Curve [on page 17 of the report]. In
December 2000 they were in the 6%range and now down in the 1-3/4%range. He went on to point out
that those bonds with five to ten year maturity dates had yields a little bit higher during that time period.
On those bonds,when yields go up,prices fall. They did not perform very well for the quarter. Bond
maturing in six months had a return of 3/4%,but those with the five to ten year maturity are in negative
territory. Over half of the bonds held in the Pension Fund's portfolio were in bonds that matured,bonds
that had maturity of five years or less,which benefited the Plan during the quarter.
The Plan portfolio increased$470,840 during the quarter,which represented a 6.61%rate of return. This
was a very strong return that resulted in a 12/31/01 balance of$7,849,000. Stocks returned 11.71%for the
quarter. The Growth Fund was up 12.33%. Value oriented names,of which this Plan has two funds,were
up 7.6%and 8.1%respectively. The Limited Cap Fund,which is the small and mid Cap option that has
been added to the Plan,was up 24.5%during the quarter. International stocks showed some positive
improvement during the quarter. They were up 3.9%and this Plan's index was up 4.1%.In those bonds,
the Plan's fixed income portfolio was down about 18 basis points and the high rate bond fund was down
.09%. The portfolio was down a bit more because,during the November 15,2001 valuation date, 5%of
the bond portfolio was shifted into the stock portfolio. By moving those dollars from the bonds to the
(riw stocks,the Plan earned about 60 basis points more than would have been earned had the shift not been
made,therefore the move was a real positive for the Plan during the quarter. Over the last three years the
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Plan has earned 4.2%. This does not look as good as double-digit returns,but is a very good relative
performance. The S&P was negative for that time period,down 1.3%,and the Plan's bonds were at about
5.9%during that same period. Over the last five years,the Plan has earned on average each year,9.93%;
stocks have earned 11.50%and bonds 7.64%.
Trustee Vogt asked Mr.Nash about his comments related to the chart regarding the Treasury Yield Curve
he referred to on Page 17. He indicated that he was not sure how to read the chart in order to interpret that
change. Mr.Nash answered that the 6%is represented by the broken black shaded line on the chart which
shows where things were as of December 2000. It was an inverted yield curve,which typically signals that
there might be a move into a recessionary type time period. He went on to say that the dark blue shaded
line represents December 2001 for comparison to 2000. He explained that the maturity years are on the
bottom of the chart,starting with zero and going out. The percentage yield is on the vertical axis and that
will be added on future reports in order to make the chart less confusing.
Trustee Vogt thanked Mr.Nash for his explanation and then posed another question. He indicated that he
had understood Mr.Nash to say the gain for the quarter to be$480,000 although the reports says$474,327
and asked if the$480,000 is the combination of both gain and interest and dividends.Mr.Nash responded
that it was the total of all,that the Gain(Loss)line represents the price change in the securities and the
Interest and Dividends represents the income received from money market or bond portfolio or dividends
from the grown and income funds.
Trustee Vogt indicated that it certainly appeared to have been a good quarter. He then asked Mr.Nash if
the shift of 5%from the fixed income bonds to the equities was the exact amount. Mr.Nash stated that it
was 4-1/2%to 5%. Trustee Vogt asked if that percentage stayed within the limits for the asset allocation.
Mr.Nash said that during the time the money managers were mindful of the limits,the equities have done
well,and there is a slight overage on the cost limit which will be pointed out by the consultant. He said
that 50%at cost is their limit and they are 50.2%so they will need to take some of the gain from the
equities and put it back in the bond sector. Trustee Vogt thanked Mr.Nash and said he had no other
questions at the moment.
Chairperson Ison asked for any other comments or questions. There being none,he asked Mr.Nash to
continue on with his report.
Mr.Nash directed the Board's attention to the pie chart on page 21 to view the overall asset allocations. He
stated that,at market,there are about 61%of the portfolio in equities,39%in bonds. He then directed the
Board to some positive press from Baron's. The press reported the findings of a study that ranked mutual
fund families as had been determined by Baron's. STI Classic Funds were ranked as the 3`d best fund
family in the United States for calendar year 2001;stock funds managed by the STI Classic Complex were
shown to be the 4th best performing stock funds;and,the bonds were 15th best.
The next portion of the report to be explained by Mr.Nash was the High Grade Growth Fund. He indicated
that there had been a change to the way this report had previously been shown. The purpose of the change
was to provide more information. The report shows the top ten holdings for the Growth Fund and the
percentage of the portfolio that each of these top ten represented. It also shows the industry concentration
chart,which is the Plan's portfolio compared to the other funds. He reminded the Board that he had
indicated the consumer discretionary type names were some of the best performers during the quarter along
with the telecom stocks. In the Plan's top ten holdings on the tech side,Microsoft was up over 40%for the
quarter and,on the consumer discretionary side,Best Buy was up 60%for the quarter,so there were some
strong gains. He directed the Board to look to the left side of the page to see the Manager's quarterly
commentary in which the Fund Manager will usually talk about two stocks that out-performed and one that
under-performed. There are also,at the bottom of the page,the MPT Statistics[Modern Portfolio Theory].
This shows the Plan's fund compared to an index,which in this case is the S&P 500. This is looking back
over a three year time period that includes calendar year 99. The market has a Beta of 1.00 and the Plan's
portfolio took a lot less risk than the market. It has a Beta of.81,so it took less risk and had higher rates of
return than the market. It was up 5.3%compared to the S&P,which was down 1.
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Mr.Nash then referred to the page regarding the High Grade Equity Income Fund. He stated that this is
L. one of the two large cap value funds managed for the Plan. This had a dividend requirement that stocks in
the portfolio pay a dividend greater than or equal to the S&P 500. The second value fund,the Grown and
Income Fund,does not have that dividend component. He explained that this is basically how the two
funds differ and that the value fund is a little more diversified,participating in all sectors with it's highest
weighting in financial stocks. He then discussed the Large Cap Growth and Income Fund and said that
one of the main differences with this fund,because it doesn't have a dividend component,has some
exposure to technology names. This is about 16%of the portfolio and its performance for the quarter was
up about 8%. This is a little stronger than the deep value fund and that is partially due to the performance
of the technology stocks. The next part of the report was regarding the Limited Cap Fund. This is the
small and mid cap option. The concentration in this fund and the Large Cap Growth Fund with the
consumer discretionary type names and the information technology sector in health care in these small
company stocks have done very well for the quarter. He mentioned that Rex Stores is one of the top ten
holdings under the consumer discretionary sector. He indicated that it was up 103%for the quarter,which
was a very strong performance.
Trustee Vogt indicated he saw the name of SouthTrust Corp. on the list and asked if that was a competitor
of SunTrust. Mr.Nash indicated that they invest in many banking competitors and that one did not do so
well for the quarter as it was actually down.3%,however,it is a potential take-over target.
Mr.Nash then discussed the International Fund,indicating that the Plan has two;the STI Classic
International Equity Fund,which actively manages and tries to beat the Morgan Stanley EFT Index;and the
STI Classic International Index,which is actually an international index fund. There is a combination of
these two funds,however,Mr.Nash mentioned that,over the next two quarters,there will probably be a
shift toward just exposure to the index fund. He mentioned that the investment committee goes through
and looks for asset classes that are undervalued and international is clearly undervalued at this point as it is
very beaten down. He said that they are looking at the possibility of increasing the exposure,however,they
would like to see the U.S.economy improve a little before they shift any more dollars into that market.
The target is to revisit the issue to increase international exposure in the portfolio in either May or June.
Mr.Nash moved on to report on the High Grade Bond Fund. Reminding the Board that he had previously
pointed out that bond with maturities of three year or less were the best performers for the quarter. He
called attention to the"Distribution By Maturity"section which shows that over 54%of the bond portfolios
invested in bonds that mature in five years or less so that significantly helps the portfolio. The
"Distribution by Market"sector shows that the Plan had 49.6%in corporate bonds,substantially more than
the Merrill Lynch index,and there was also heavy weighting in mortgages. This is part of the reason the
fund has done well as corporate bonds were the best performers during the quarter.
Chairperson Ison asked the Board for any questions or comments. There were none. Chairperson Ison
thanked Mr.Nash and said that this was a much better quarterly report than the last one. He indicated that
he knows the Board feels more comfortable and hopes all the City employees in attendance feel much
better about where the Plan is going.
Mr.Nash thanked the Board for the time to make his report. He went on to say that these have certainly
been good results and things have vastly improved over the last few months.
Trustee Vogt stated that at the last meeting the report had included a sheet that showed how this Plan
stacks up as compared as a percentile against the others and asked if that sheet was included for the past
quarter. Mr.Nash answered that Mr.Cole would cover that in his report.
Chairperson Ison asked Ms.Garcia if she had any comments. Ms.Garcia said she would like to let the
new members know that,on a quarterly basis,she brings in an outline of the expenses that actually came
out of the Trust. This breaks out the itemized expenses for review and ties into the amount reflected on the
report. This allows the Board to know how much of the money spent represents distributions,payments to
attorney,etc.
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Chairperson Ison thanked Mr.Nash and Ms. Garcia for the nice positive report and a good quarter. He
Lye then called on Larry Cole for his report.
Mr. Cole greeted the Board. When some of the Board members indicated they did not have copies of his
report,Mr.Cole said he had understood they had been mailed directly to the Board members'homes,
however it occurred to him that the list he was working from had the old Board members addresses and he
said he would see that was corrected for future reports. He then went on with his report,indicating that the
report from Tim Nash had been very thorough. He said the report was basically all pretty good news,it had
been a very strong quarter and it was good to see some positive numbers showing up again. He asked the
Board members to turn to page 4 of the report to review the asset allocation. He said that in the last five
years the importance of diversification has been seen more than in a long time. He went on to say that it
was just two years ago that,after coming off five years of the S&P 500 giving 20%a year returns and the
only thing that was working was technology. Those who did not own technology were not making 20%
returns and were probably not so happy. SunTrust was in that position and a lot of clients were not happy
with them because they didn't own enough technology and their rankings,compared to a lot of other
mangers,were looking pretty poor. Things have changed dramatically over the last couple of years. Tech
stocks have plummeted. During the past five years,large cap growth stocks led the way for a while. Large
cap value stocks led the way for a while. Small cap stocks led the way last year and the year before that,
international led the way which didn't get a lot of publicity but it actually had a good year overall relative
to domestic markets. With all of this,the importance of diversification has been proven. He told the Board
that one of the big advantages with TRUSCO is that they have several investment disciplines,equity
disciplines,and fixed income,but several equity disciplines under one shop that are all managed by
separate teams,separate individuals. They have split out into teams and that diversification has been very
important and beneficial to this Plan as has been evident over the last couple of years in particular. The one
area in which TRUSCO is questioned about overweighting or underweighting is the International Asset
class. The guidelines of this Plan allow up to 10%of the portfolio to be invested in international and as of
the end of the year there was only 2%exposure to the international market. International is believed to be
an important asset class to have even though it has been a few years since international has added value to
portfolios. The main benefit is lower volatility in the overall portfolio.The correlation between domestic
markets and international markets have gotten much closer to one,meaning that they are moving much
more in tandem than they every did before. Another reason is because nearly 2/3's of the world's
investible securities now lie outside of the United States. It is becoming much more difficult to define what
is a U.S.company and what is a foreign company. Examples are that Coca Cola is a U.S. company but
they get 80%of their earnings outside of the U.S. and Nestled is not a U.S.company but they get 80%of
their income from the U.S. There are a lot of situations like that,certainly in the auto industry it is hard to
keep up with who owns which make.
Chairperson Ison asked about the risk of international. There is now the Euro, South American countries
are thinking of devaluing their money,plus there is the threat of global war action,all of which would
appear to make the risk greater. Mr.Cole answered that the risk for that particular asset can be greater,but
reminded the Board that this is one of the reasons professionals are hired to manage the Plan. Those
professionals base their decisions not only on the stock and the company itself but the economic or political
environment of that particular home country and should be able to avoid problems. There are some
tremendous valuation opportunities in international because there are a whole lot of companies,very good,
well-managed,respected companies that are available and the market is by far the cheapest,relative to
domestic stock,that is has been in two to three decades. He went on to say that there is definitely more risk
but when you define risk as the chance of owning a company that is going to go down because of a
takeover of their government,that is a different story. But,when you define risk as volatility in returns,it
is something that you definitely want to add to the portfolio.
Trustee Vogt asked Mr.Cole if he understood correctly that the Plan asset allocation allowed up to 10%.
Mr.Cole answered that was correct. Trustee Vogt then asked if that meant,since the investment was now
at 2%,that TRUSCO had the latitude to do up to 8%more. Mr.Cole responded that was correct,however,
it was not the role of Merrill Lynch to direct TRUSCO to do so. He stated that it was their role to consult
the Board and ask if there is any asset class they feel is overweighted or underweighted. He went on to say
that another asset class being reviewed in all of the Plans at year-end is to make sure there is exposure to
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small or mid cap stocks. This Plan does have that exposure with 13%of the equity fund exposure. He
4110, mentioned that 13%returned 26%for the quarter and historically,looking back at past recessions,small
caps stocks have significantly outperformed large cap stocks in a recovery period. That is taken into
consideration. Since that exposure is included in the Plan,the only thing that appears low is international.
He stated that,up to this point,being low has helped this Plan,so there is no criticism of TRUSCO,Merrill
Lynch is just asking that they be aware of it because the Plan allows for more and it is currently at only 2%.
TRUSCO has an asset allocation committee that makes decisions and looks for undervalued sectors of the
market or undervalued markets and international certainly falls into that category. Mr. Cole added that
there is also the option of hiring,in addition to TRUSCO,other international managers to manage that
portion of the assets if the Board feels the expertise might be better in another area. Presently they have the
Index Fund,which is a very low cost way and perhaps a lower risk way to get exposure into the
international arena. Some of what is there is going to be moved as indicated by Mr.Nash in his report. He
went on to say that would be good. Merrill Lynch is very familiar with TRUSCO's actively managed fund
and Mr.Cole said it doesn't have a lot of depth in their actively managed portfolio managers and their
analysts there. He again said that international is a very undervalued asset class,and though there was no
specific recommendation to the Board at this time,he wanted to make them aware that this may need to be
reviewed more closely in the future. He added that TRUSCO indicated they were going to be increasing
the exposure and,if so,that is good news.
Trustee Vogt asked about the distribution,the asset allocation comparing the bond allocation to the equity
portfolio allocation. He noted that on page 4 of the report,the equity portfolio was shown to be 61.2%and
the bond portfolio 38.2%. He indicated that he was not sure how those percentages related to the 50-50
target of the Plan. Mr. Cole answered that the target is the established objective of the Plan. Within that,
the portfolio manager has a range they can go up to. They can go up to 70%in market value of the
portfolio in equities. This is a very important decision they make and have recently moved some money
out of bonds. Bonds have had a tremendous run over the last two years but TRUSCO and others feel there
is not a whole lot left there so they took some of that investment and moved it over to equities which have
underperformed rather significantly over the past several years. The only way to get a premium return in
bonds is if rates continue to go down and the market value of the bonds go up. TRUSCO does not make
these changes in drastic moves. They are not market timers,they are just taking some money off a good
performing asset class in increments of 5%or 10%at a time and moving it over into the underperforming
asset class. If huge moves are made in the portfolio,it gets very risky.
Continuing on with his report,Mr.Cole explained,as indicated on Page 5,how this Plan stacks up against
other public pension funds across the country in any allocation category. This Plan is slightly more
aggressive than others. The median fund has about 55-1/2%in equities. This Plan has about 61%. The
risk is not significantly higher because the Plan is so well diversified in the types of stock owned. He went
on to say that it was good to see this Plan's comparison against other funds,that not all public pension
funds are as well diversified. He directed the Board's attention to Page 6 for a look at returns,not only on
an absolute basis and against the target index,but also how the Plan has done relative to other public
pension funds across the country. This Plan was in the top third of all other pension funds across the
country for the quarter,in the 33`d percentile with a 6.6%return. The one-year return of 1-1/2%is
obviously low,but it did rank in the top 20%relative to other funds. It was a bad environment. The market
in general had a lot of land mines but this Plan weathered the storm very well. The equity performance was
in the top third relative to most equity managers across the country,even though the return for the year was
—3.5%. He directed the Board's attention to the bond fund which gave 8.4%for the year. He stated this
was possible,even though interest rates were 3%to 4%,because it includes the market value and
appreciation of the bonds that were held for the period. That return ranked a little above average. Dealing
with the objectives of longer term,going out three years the return is 4.1%which is in the 35th percentile.
Equities were just about average or slightly below average for the three-year period. Bonds were slightly
above average. He went on to explain that,though the total of the two was slightly below average,there
was a total fund return above average. The reason for that is the flexibility the Board gives to TRUSCO in
the asset allocation decision. They made the decision to go higher in equities and in this particular three-
year period,equities underperformed bonds. Going on to the five and six year categories,the total returns
are also in the top quartile. The last two years have pulled the entire fund's longer term returns up even
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though we have recently endured the most difficult stock market environment in recent history. Everything
has held up well.
Trustee Vogt stated that it appeared the one-year,two-year and three year figures had been annualized. He
then asked if the 6.6%for the quarter was a solid 6.6%or if it had been annualized. Mr.Cole stated that
the yearly figures had been annualized and the 6.6%was an actual number. Trustee Vogt then asked if that
would mean a return of over 25%if annualized. Mr.Cole said yes,however he cautioned the Board not to
do that,though there has been a strong stock market. He went on to say that most analysts,including
Merrill Lynch's analysts and strategists,predicted that this would be a typical stock year which in long
term numbers would mean 10%to 12%for the year. It will just be a matter of waiting to see what occurs.
Mr. Cole then directed the Board to page 8 of the report. He advised that this is one looked at in terms of
risk. There was not too muck risk taken. Risk is the bottom line measured by standard deviation as a
measure of volatility of the portfolio. This report indicates that the fund is really a little bit above the target
index in terms of return. There has been less risk and higher returns. You want to be able to get a little
more without taking additional risk. This is the ideal place to be. This is where fund managers want to be.
He then moved on to Page 10 for a look at the funds'diversification of portfolio in terms of how they are
actually broken down and looked at in detail to make sure the fund managers are doing what they say.
Though several stocks are considered to be value funds,Merrill Lynch oversees the portfolio to be sure
they are really value funds. There are no problems but it is something that is reviewed every quarter in
terms of characteristics to be sure they are well diversified. This fund does have a well-diversified
portfolio,which has been the key to its success. Merrill Lynch does the same type review on bonds and
there were no discrepancies there.
The report card for the Fund is located on Page 16. The report indicates compliance with all of the
investment policy guidelines. Everything is in compliance with the slight exception of the equity portfolio.
Mr. Cole indicated that he would check on one item,that there was a 60%at cost. Trustee Vogt indicated
(se that was what he had been trying to determine when he questioned this earlier. Mr. Cole stated there is a
70%market and a 60%cost value. Trustee Vogt said that on Page 4 of the report,the graph shows 61.2%
for the equity portfolio but Page 16 confirms the number provided by Mr.Nash of 50.2%. Mr. Cole
advised that would be cost versus market. The fund is at 61%market value. There is also a cost basis limit
in the policy,which he thought to be 60%. He indicated he did not bring that information with him but that
he would double check on that figure. Chairperson Ison mentioned that he thought when the market value
went up to 70,the cost basis went up to 60. Mr. Cole said that he did not believe there was any violation,
however,it was missed on the checklist. Continuing on regarding the objectives,Mr. Cole indicated that
for the most part the answer to all of the questions was yes,particularly for the most important one
regarding the total portfolio. When broken down in the stocks and bonds,there were a couple that were not
in the top third but,overall,everything has improved and there was nothing to cause any concern.
Mr.Cole concluded his report by saying that the list showing the ranking of this fund as compared to the
other 88 pension funds Merrill Lynch oversees in the State of Florida was not completed at the time the
books were sent out. He stated that he would mail the list to the Board members. He went on to say he
thought this fund would probably be a little above middle of the pack. Though the rankings discussed
earlier indicated the fund being in the top third in the national database,that would not mean the fund
would be ranked so high in Florida as all of the funds did fairly well.
Trustee Ison stated he would like to see the portfolio value to be in the vicinity of$8.2 million at the end
of the next quarter. He then asked the Board members if there were any questions or comments to Mr.
Cole. There being none,he indicated that he would move on into the New Business Agenda Item,
however,he first wanted to add something to that Item. He then asked that each of the Board members
reintroduce themselves and that each of the professionals introduces themselves to the new members. He
asked Fran Diedrich,Human Resources Director,to include herself in these introductions and went on to
say that Ms.Diedrich has pledged to work with this Board to help educate the employees and help with
administrative matters of the Board. Trustee Smith interjected that Ms.Diedrich was already helping.
Chairperson Ison called on Trustee Pat Cornell,the"new"Board member with previous experience.
7
Trustee Cornell stated her name to be Pat Cornell and advised that this was her second term on this Board.
Trustee Bob Smith stated that he is the Public Works Director for the City of Ocoee and is still in his first
term and that he had been encouraged to accept the position of Trustee by Trustee Pat Cornell.
Trustee John Vogt stated that he is 3-1/2 year City employee with a degree in life and health insurance
called FLMI. He said he had previously served on the Board of the Lake Olympia Homeowners
Association so he has had some past Board experience and hopes all of that experience will provide
beneficial input to the Board and its policies.
Trustee Mike Miller introduced himself as a local business owner whom had also been solicited to be a
Trustee by Trustee Pat Cornell.
Chairperson Ison advised that Trustee Smith and Trustee Vogt were elected by their peers and the
Board was free to appoint a third member. Pat Cornell was appointed by the Board and she accepted.
Trustee Miller was appointed by the City Commissioners. Chairperson Ison then asked Attorney Denner
how long he had been involved.
Attorney Delmer stated that he had been involved since the inception about twelve years ago. He and Ward
Foster had been contacted by Ellis Shapiro not long after he came to the City. It had been a top priority to
develop a good defined benefit pension for all of the employees of the City. They presented the initial
design of the Plan's for this group along with Police and Fire,and made them comparable with some of the
other plans of the State.
Chairperson Ison asked Tim Nash and Diane Garcia how long TRUSCO has been involved. Mr.Nash
stated that SunTrust and TRUSCO work together and always have two individuals assigned to a
relationship. He indicated that he is on the investment side and has been with TRUSCO Capital since 1994
(1110, and has had the opportunity to work with the City of Ocoee General Employees Pension Plan since the end
of 1997. He said he has been with the fund through the good times and then the more recent rough time
and hopes that the good times are back again. Diane Garcia stated that she works with SunTrust Bank on
the administrative side. She is the one responsible for the reports that go out,the quarterly statements,
bringing in contributions,and paying out to the retirees and has been on the account since it came to
SunTrust in 1994.
Chairperson Ison then called on Larry Cole,advising this his firm is rather new with this Fund. He
mentioned that a few years ago the Board began searching for another advisor. There were presentations
from different firms and the Board had selected Merrill Lynch. Larry Cole said he has had 26 years in the
business,25 actually on the investment side. He had actually worked for TRUSCO when it was SunBank
Capital Management and STI Capital Management and then TRUSCO. He was with them eleven years.
He joined Merrill Lynch on the consulting side just over one year ago. The Merrill Lynch group he is with
are consultants only,doing work of pension funds,foundations,and endowments. They do not sell Merrill
products or sell at all. They are not a retail brokerage.The office for his firm is in Jacksonville,although
he works from his home in Orlando. He indicated this was his fourth meeting with the Board.
Chairperson Ison indicated that he thinks this is a good group.
Attorney Denner said he had been checking his file and thought it would be of interest to the Board that the
effective date of the original General Employees Department Benefit Fund was October 1, 1991. The work
started on this six to nine months prior to that so the twelve-year estimate was close. He added that the
fund became effective and has come a long way in a fairly short period of time. Trustee Vogt stated that
former Board member,Joyce Oliver,had indicated the same time frame and that she had been there from
the very beginning.
Chairperson Ison next called on Fran Diedrich. Ms.Diedrich stated that she is the new HR Director and
that she has been in government for twelve years and has been in benefit management most of that time.
8
She indicated she hoped to get her staff a little more into working with the particular problems of the
(imov
Pension Board.
There was one additional City employee in attendance. Chairperson Ison reminded the Board that this is
who they were all working for and he asked that employee to introduce himself and asked him if there were
any concerns about the pension Plan or the Board that he would like to say. The employee,Robert
Howell,introduced himself and stated that he had begun working with the City of Ocoee in 1977 and that
he is really interested in what is going on with the Pension Plan.
Trustee Smith addressed Chairperson Ison and asked if the appointment of Trustee Cornell had to be
confirmed by the City Commission. Chairperson Ison answered yes. Trustee Smith said he did not think
it would be necessary for them to approve the appointment but they would need to be notified. Attorney
Dehner said it would not be an approval,merely an administrative duty.
Chairperson Ison asked if there were any other comments. Trustee Vogt mentioned that there had been a
special meeting of the Board on December 5,2001 and that those minutes would need be to approved.
Chairperson Ison then added to the Agenda under New Business the approval of the minutes of the Special
Session held on December 5,2001. He asked for any additions or corrections to the minutes. There being
none,he asked for a motion to approve. It was,on motion made by Trustee Vogt,seconded by Trustee
Cornell,unanimously
RESOLVED,that the minutes of the meeting of the Special Session of the General
Employees Pension Board held on December 5,2001,be and they are hereby approved.
Chairperson Ison then moved on to the Agenda item regarding the new tax law. He indicated there was a
packet which came with that which puts an obligation on the Board to inform the members of their
obligation for taxes and there are some forms they are to fill out. He asked if there was any discussion on
this item or if it is mainly for information only. Trustee Smith stated this was for information only unless
Attorney Dehner wanted to discuss it. The packet had been used on one employee already and there was
no problem.
Attorney Delmer said that this would be a good spot to discuss the required ordinance amendments to be
made and then some of the other items which have been under discussion,particularly 30-and-out. He
stated that,with respect to the special tax notice package which was discussed before some of the present
Board members where involved,the Economic Growth&Tax Relief Reconciliation Act of 2001 and
specifically some of the provisions of that legislation that bear on the administration of this Plan,it was
noted that,among other things such as increased contributions into IRA,deferred cost,reduced tax rate
schedules,most people got a$300 to$600 tax rebate. He indicated that he was specifically interested in
discussing the requirements that pertain to the administration of this Plan. There are several mandatory
Provisions. They impose two requirements. One is to amend the Ordinance and the second is to do an
amended tax notice package.He said these are pursuant to guidance from the IRS on January 2°d which was
interesting to note as those changes became effective January 15`. He went on to say that the changes were
drafted right away. The significant amendments mandatory with respect to the Plan deal with lump sum
distributions from the Plan. Since January 1, 1993,when a lump sum distribution subject to tax has been
made,the tax notice package has had to be provided to the Plan member. The package in this Plan where
there would most often be a lump sum distribution subject to tax was the return of pre-tax member
contributions. The tax benefits package explained to the member what the tax treatment for the return of
that money would be depending upon what he chose to do with it. It informed them that if they took a
direct distribution to themselves,20%would be withheld and if they then did not roll it over to a tax-
deferred vehicle qualifying within 60 days,an additional 10%penalty for early withdrawal would be
assessed for their taxes within that year. It further explained that if they directed this Board to do a direct
roll over to designated tax qualified vehicles,they could avoid both the withholding and the penalty. There
are two significant amendments under the Economic Growth Act to these provisions. One is the vehicles
that a member could roll money over to so as to avoid the withholding and the penalty has been increased
to include 457 deferred comp,obviously important to all employees,and 403B plans which are for
educational institutions and non-profit organizations. Each of these items needs to be reflected in the
9
Ordinance and he recommended that this would be the time to do that. Each of those items are reflected in
the new tax package which will replace the prior tax package in its entirety so that anybody who requests a
lump sum distribution,actually from January 1st forward,should receive that package. If anyone prior to
January 1st requested a lump sum distribution and return of contributions and has not received it yet and got
the old package,they should get the new package so they can avail themselves of these new opportunities.
He went on to say that the second significant change to be reported and addressed in the Plan's Ordinance
as well as in the new tax notice package,is that as of January 1st,after-tax lump sum distributions can also
be rolled over directly to a tax-deferred vehicle. Prior to January 1s`,that could not be done so that is
important for the members to know as well.
Attorney Definer advised that those packages are done and the Board needs to discuss moving on with the
Ordinance. It has to be done. The legal requirement for amendment of the Ordinance is the end of this
Plan year which is September 30,however,he stated that he did not want to wait until the last minute for
that. He then asked,with respect to the Ordinance,if the Board would like to have separate Ordinances or
would they like to have several items in one Ordinance. He also reminded that there is still pending the 30-
and-out Ordinance,which he said he would do,and the Board would get the cost on that from Ward Foster.
He then asked whether the Board would like to have that provision for the amendment of the normal
retirement age adding the 30-and-out to this compliance Ordinance,or have it done as two separate
Ordinances.
Chairperson Ison said that he would suggest having this done on separate Ordinances but encouraged each
of the Trustees to say what they would like. Trustee Smith said he would prefer separate Ordinances.
Trustee Cornell said she would prefer separate Ordinances also,as it would be easier for reference.
Attorney Definer said he would do them separately. He then asked about the 30-and-out Ordinance stating
that the procedure will be to prepare the Ordinance and then go to Ward Foster to do a cost. Because there
had been discussion on two items on this he wanted to be certain that everyone was on the same page. He
reminded the Board that there had been some discussion about whether these amendments should be sent
directly to the City or back to the Board. Chairperson Ison responded that it had been previously agreed
that the Board would like to see the Ordinance,discuss it to see if it should be adopted and then send it to
the City Commission.
Attorney Dehner said that in that regard the amendment to the Ordinance is a very minor matter. It will
probably be one page and is simply going to amend that particular section which applies to the normal
retirement date,to add 30-and-out. He stated that he knew the Board would be interested in the cost of the
30-and-out from Ward Foster before the Ordinance. He indicated that,though the fee would be nominal,
he did not want to see the Board pay for an Ordinance unless it has been determined,based on the cost,that
an Ordinance is needed. He stated that the Ordinance is a very short item and if the cost is acceptable,it
can go very quickly.
Chairperson Ison asked Attorney Dehner if the City Commission doesn't adopt the 30-and-out Ordinance
until July,if it could be made retroactive to January. Attorney Dehner said yes. Chairperson Ison stated,
in that case,he would like to see due process take place. He would like to see the cost,discuss it,maybe
forward it through Fran Diedrich to the City Commission to see if they even want to take a look at it before
an Ordinance is done.
Trustee Vogt said the he thought he remembered that Ward Foster had stated that this experience
had been done before and that the Ordinance which came out didn't match what he costed. So,if you get
the cost first and then the Ordinance and the Ordinance doesn't match the way Ward costed it,then there is
a disparity between what the Ordinance says and how much it is actually going to cost when submitted to
the Commission. Chairperson Ison said that there was an error made in communication last time. There
was not a mistake between the Ordinance and what Ward Foster had costed. It had been miscommunicated
which was why there had been a disparity. The Commission was told something that wasn't accurate.
Ward Foster's monetary estimate was correct. Attorney Dehner interjected that there were more issues
involved in that particular item. Trustee Vogt then asked if part of the step by step process would be to
have Ward look at the Ordinance once it is finished to be sure it matches what he costed prior to sending it
to the Commission? Attorney Dehner said that his recommendation would be that Ward Foster be
10
contacted and asked to prepare a cost estimate,not an impact statement at this point. The cost estimate will
be received in letter form. It will say 30-and-out and what it will cost. Then the Board can direct having
the Ordinance prepared. The Board may want Fran Deidrich to go to the Commission and get an indication
of their interest before directing the Ordinance to be done. Once decided the Ordinance should be
prepared,it would then be taken back to the Commission.
Chairperson Ison stated that, at the last meeting,there were numerous employees with certain concerns
and it was discussed whether surveys were done. He mentioned that he felt this information,whatever the
costs,and the Plan should be discussed again at one of the Board meetings where the employees will have
an opportunity for input,and then move forward with it. He indicated that since it could be retroactive
there was no urgency so he would appreciate having a good informative job done all the way by the Board
and the employees before it is put in front of the Commission. Trustee Cornell said that if there was going
to be a cost to the employees,they should have the option of voting on it. Trustee Vogt said that he was
not sure how 30-and-out could be made retroactive. Attorney Dehner said that if there is an individual who
has more than 30-1/2 years at that retroactive date,he could go on that date. Chairperson Ison said that an
eligible employee may have his/her retirement date delayed,but they could work a couple of extra months,
so both the employee and the City benefit. He then asked the Board if this would be acceptable. Trustee
Cornell and Trustee Smith voiced their acceptance. Trustee Vogt asked if that meant the Board is getting
the cost first? Chairperson Ison said that was right. He then advised that,if Ward Foster gets the cost
estimate back soon,the Board might want to call a Special Session to discuss it. If the Board decides that is
appropriate,it could be done and set up in order to move forward prior to the May meeting. Trustee
Cornell stated she thought there would have to be a Special Session because of the cost issue,that if there
is a cost issue to the employee,it has to be set up to make the information available so they can vote on it.
On motion made by Trustee Cornell and seconded by Trustee Smith,it was unanimously
RESOLVED,that Ward Foster of Foster&Foster,Inc.will be directed to do a cost
study on 30-and-out. This study should report the cost to the City of Ocoee as well as the
cost to the employees.
Attorney Dehner said he would like to discuss another issue,pension Ordinance related described in the
mandatory amendments for rollovers out of the Plan. He advised the legislation provides options for the
plans that are permissive if the Board chooses to recommend that the City adopt the service buy-back plan.
If that is done,what it does is accept rollover distributions into the Plan from qualifying vehicles which
include a 401-A plan which is the one which focuses on the prior service credits for the purpose of funding
prior service credits. There are currently in effect some prior service buy-back opportunities with this
Pension Plan,specifically with prior service with Ocoee and Family Medical Leave. He recommended that
the provision be incorporated along with the mandatory rules. This should not be controversial with
anyone and it doesn't have a cost to the fund. It just provides an additional opportunity for someone who
wants to do the buy-back. There is another item that was in the law which this Board may want to adopt to
take maximum advantage as a part of this Ordinance. He mentioned the Board might want to make this a
separate Ordinance because it will require some discussion. He recommended that the Board consider it for
adoption in a follow-up Ordinance to the compliance Ordinance. That is the consideration of expanding
prior service buy-back opportunities to include an opportunity to buy prior public service with employers
other than Ocoee. It would assist with recruitment.
Trustee Smith interjected that the Police and Fire Department already have the provision.Attorney Dehner
stated that they are looking at expanding that provision as that is what gives portability between different
employers. He said that if this Board would like to examine the possibility,he could provide some
suggestions for consideration,a basis for discussion,on a future Agenda. He suggested that the Board not
hold up the compliance Ordinance for this as it requires full discussion and the input of employees. This
prior service could include other municipalities,the State of Florida,or government service outside of the
State of Florida. There could also be the allowance for purchase of service credit for prior military service.
This is more prevalent in Police and Fire plans but it can be put into the Plan for general employees. He
L, went on to say that if the Board is interested in discussing this,he will provide the factors in writing. He
mentioned that those include a determination of the cost. He would recommend an actuarially calculated
11
amount so the individual purchasing the retirement will pay the entire value of that. If done for anything
less,it is effectively subsidized by the Plan members which you generally do not want to do. For non-
Ocoee service particularly,you would put some kind of cap on the maximum number of line years that
could be purchased. The idea of this is that you do not want someone to buy into this Plan so many years
without actually providing service to Ocoee. What is most typical is a combination of the two,with a four
or five year cap. Another issue is what you are going to count the purchase toward and there are three:
vested credit,eligibility for retirement,and benefit calculation. If the service is to an outside employer
other than Ocoee,typically you would not allow them to purchase into the vested service if they had not
been here to vest. It can be decided if you want to allow the purchase to be at any time during employment
or whether you want to create a window for employment or re-employment within which the person wants
to do it. They notify that they want to do it and then pay the money. Lump-sum payments are
recommended. Legally you can take installments but that leads to administrative nightmares in a situation
where somebody hasn't completed the installments and leaves employment. He again stated that if the
Board was interested in discussing this he would put all of these items in writing and send them over for
review.
Trustee Vogt asked if there is any sample of this or if the presentation is so new that there is no sample
available. Attorney Denner said that right now this is in the works at this same stage throughout the State.
Prior service buy-backs,as in this Plan,were limited in many plans. This additional funding opportunity is
to have portability,which allows purchase from other employers. It is becoming very prevalent. Trustee
Vogt asked if someone either comes into this Plan with a rollover from another qualified plan or rolls out of
this Plan to rollover to another qualified Plan,are the rules that these are specifically just their own
contributions,not the portion the City retains as if they were to cash out personally,they would only cash
out their contribution? Attorney advised that is correct unless there is a payment for commuter value which
is a very small value amount, subject to the same rules as a lump sum distribution.
Trustee Cornell advised that,with the help of Fran Deidrich, she had gone through some of the issues on
pension benefits. It was not included on the sheet of paper,which the Chairperson has for distribution,but
there are other things that the Board may want to look at as well. Addressing Trustee Vogt regarding his
question of what had been implemented,she said that the Florida Retirement System, Chapter 121, 1115-
1122,is a basic synopsis of what has Attorney Dehner has said. Attorney Dehner recommended that he
could draft a number of the provisions,not in Ordinance form,but just as an example of what
municipalities are adopting in terms of buy-backs. Trustee Vogt asked what the next step would be.
Chairperson Ison suggested it be put on the May 8 meeting Agenda. Attorney Dehner said he could draft
the exact language and suggested it then be discussed. Trustee Cornell stated that this should be kept
under the benefit portion of the pension Plan because it is a benefit.
Chairperson Ison stated this would be taken up under Agenda Item IV C,which would be added today.
Attorney Dehner stated that,at the Board's direction he would send over some draft language as a basis for
discussion. It requires that the Board make the decision. Chairperson Ison asked Attorney Dehner to
send that to Trustee Smith for distribution. Trustee Smith advised that would be the correct thing to do,
that he now has the capability of scanning and emailing to everyone.
Attorney Delmer advised the Board that the Ordinance he will be preparing now is all mandatory with one
exception and that is that rollovers into the Plan from other qualifying vehicles be allowed. He added a
caveat with respect to accepting rollovers into the Plan. That can be done once it is in this Plan from 457
deferred comps from other employers. He said he is a member of the National Association of Public
Pension Attorneys. This Association has requested a written ruling from the IRS on whether 457 deferred
comp will qualify. They have been told verbally by the representatives of the Service that it will be
permitted,but they want to have in it writing before it is done. Chairperson Ison asked the Board if there
were any other comments. There were none. He asked Attorney Dehner to proceed as directed.
Chairperson Ison then went on to Old Business regarding the scheduling of an education session for the
Board Members. Trustee Cornell reminded that there was also the transfer of the work involved for
(00 employees leaving the City over to Human Resources. Chairperson Ison acknowledged that and said they
would discuss the education session first. Trustee Smith said he remembered they were going to try to
12
have a joint session with Police and Fire and that there was the legal side and the financial side to be
addressed. Attorney Definer indicated that there was a preference expressed for doing investment and legal
at one time with the combination of the Boards. This was attempted in January but some of the parties
were not present or available. He suggested that he would try,between this Board and the Police and Fire
Board to set a date. He listed some dates he could attend: March 21 in the afternoon,March 25 either
morning or afternoon,March 26 in the morning,or Thursday March 28,morning or afternoon.
Chairperson Ison asked if the Board Members had any preference. Trustees Smith and Vogt indicated
no preferences,no conflicts. Chairperson Ison asked Attorney Dehner for an idea of the length of time
required for the session. Attorney Definer that it usually took a total of three hours,an hour and a half each
for both investment and legal. Trustee Vogt stated that he realizes it is the goal to have as many people
attend the session as possible,but asked if the same people as were unavailable for the last session were
unavailable again,would it be permissible to go ahead with the session with the people who do show up?
Attorney Delmer said yes. He then asked if there was one person who could coordinate between this
Board and the investment people and since he is meeting with the Police and Fire Board,perhaps assist
with setting a firm date. Trustee Smith said he would do that. Trustee Cornell said they would need to
know in order to reserve the Commission Chambers. Trustee Smith said he would let her know of the
date as soon as it was set and Trustee Cornell said she would reserve the Chambers.
Chairperson Ison turned to the next item under Old Business. This was to have a discussion or direction
on the interview process that members of this Board were having to do at one time for employees as they
are getting ready to retire or upon retirement which the Board agreed should be a function of Human
Resources. He asked Fran Deidrich if her department was ready to or had already taken this on. Ms.
Deidrich said that they have not yet taken it on. She stated that they must do the training session that was
just discussed. She was to have attended the last meeting but it had been cancelled. Chairperson Ison
asked if that would mean the present process would continue on until perhaps April. Ms.Deidrich said yes,
as she needs to have her staff trained and they must understand the process which they have decided is
some terrible thing to learn. Trustee Smith said that it is not a difficult process. Ms.Deidrich said that she
has been doing this sort of thing for a long time but she wants her staff to be secure in what they are doing.
Trustee Vogt suggested that she encourage one of them to attend the training session. Ms.Deidrich said
she would be bringing each one of them.
Trustee Cornell asked if the training session with the legal and financial people is going to speak
specifically to the needs of any employee leaving the City and what needs to be done clerically or
administratively. Attorney Denner said no,that it would be directed at the Trustees and the responsibility
of the administration of the Plan. Trustee Cornell suggested then that the Board may need to set up a
special training session with the Human Resources Director and her staff to orientate them to the paper
work,aside and away from the legal and financial education session. Trustee Vogt said he would like to
attend that training session,not to give it but to attend it. Trustee Cornell said that she and Board
Secretary Smith would work with Ms.Deidrich to set up a time before April that is convenient for her
staff to attend. Trustees Vogt and Miller would be advised of the date and time and it would be just the
administrative functions that would be discussed.
Chairperson Ison suggested that they put down as an Agenda item for the next meeting the output from
Attorney Dehner and another Agenda item for the transfer of administrative functions to the Human
Resources Department. Moving on,he suggested that the Board take up other business. The next item
being the approval of the bills.
Trustee Smith said that he had two bills that did not get included in the Agenda packet. One was from
West Orange Secretarial Services and one was from Christensen and Dehner,P.A. He went on to propose,
if not in violation of the Charter,that it be possible to authorize the payment of recurring bills as is done
when someone leaves the City at which time it takes only the signature of two trustees. Some of the bills
are three months old because they were not available at the time of the last Board meeting.Attorney
Dehner advised that there is a new draft for rules and procedures which is pending for review and adoption
which will be moved over to the next Agenda,but in the existing rules,there is a section which provides
coo that bills received making charges pursuant to agreements which are in place,such as with the attorney,the
actuary,or a contractor for a certain rate times the number of hours,can be paid prior to the next meeting
13
and brought to the next meeting as in information item. Trustee Vogt asked if that means no signature at
(Dv all. Trustee Smith said it would need just one signature. Chairperson Ison explained that would mean
that Trustee Smith could pay the regular recurring bills as they come in. Trustee Cornell indicated she
would agree to it as long as each one of the bills that are paid in that manner are included in the Board
package. It was,on motion made by Trustee Vogt,seconded by Trustee Cornell,unanimously
RESOLVED,that bills from firms for which Agreements and/or Contracts are in
existence which specify rates for work completed,can be authorized for payment by the
Board Secretary as they are received. Invoices paid in this manner are to be included in the
Board package as an information item for the next regularly scheduled meeting.
Chairperson Ison asked Trustee and Board Secretary Smith if there was any other correspondence to be
taken care of. Trustee Smith advised that there was one additional letter which was just received from
SunTrust which advises that there has been a revision in the carrier. The current policy is in effect for the
period from 10/01/01 through 10/01/02 and is through Lloyd's of London,C.N.A.,Gulf Insurance
Company. The policy coverage amount has not changed. It still remains at$100 million. SunTrust
continues to carry the financial institution's bond and errors and omissions coverage. He advised there was
also a Certificate of Insurance which he will copy and provide for the Board. There was no other
correspondence.
Chairperson Ison passed out copies of some information that Trustee Cornell provided about
improvements or benefits that the State of Florida employees have. This is to be added to the Agenda as
Section IV,Item C. He called on Trustee Cornell for review. Trustee Cornell first expressed her thanks
to Fran Deidrich for her direction. This is as a follow up from a meeting that was held with this Board,the
City Manager,and the Human Resources Director. These benefits are from the Florida Retirement System.
They have been approved and have gone through the IRS approval. The first one is the 30-and-out benefit.
This was listed specifically for those members who really don't understand what the 30-and-out means.
The second item is Disability Retirement benefit. This benefit is for people who are 100%disabled. This
situation came up recently with an individual who was disabled due to a medical condition. All of these
things can be found in Florida Chapter 121. Copies of that chapter or those particular subsections in that
chapter can be provided if the Board would like. The third item is the Cost of Living Adjustment Benefit.
That is for the annual cost of living benefit. As City employees get their COLA,the retirees would also,
but in this particular version of the COLA,the annual percentage adjustment does not exceed 3%. The
fourth item is supplemental insurance. That was taken from a different chapter of the Florida Statutes,
112.0804. This is where the Board or the agency itself goes out and gets bids from insurance companies
for their retirees to cover the period from when they retire until they are actually eligible for Medicare or
Medicaid.Once they reach the Medicare or Medicaid age,the insurance would stop.
Attorney Dehner stated that all of these items are appropriate for consideration by the Board. He added that
there are a lot of disability benefits that are required for Police and Firefighters who receive State money,
not in general employment funds,but many general plans do self-insure disability. The Cost of Living
Adjustment is limited to 3%,the first adjustment being made one year after normal retirement. It is an
expensive benefit but is one that is being introduced into greater numbers of municipal plans all of the time.
He said that oftentimes it is not affordable to go to the 3%with the first adjustment being one-year after
normal retirement. Where that is the case,Ward Foster,if you are interested in this one,can cost variations
for the Board to look at. One example to make it affordable is to do the first adjustment five years after
normal retirement or ten years and then reduce the deferral period. Trustee Vogt asked if this would be
something that would be done to all people that have retired,even ones who were retired prior to the
enactment of this Cost of Living adjustment? Attorney Dehner advised that these provisions are for active
employees,those persons who retire after it is enacted. He went on to say that if the Board considers this
option,he recommends that they look at different combinations. Some are affordable and some are not,
then work toward the better benefit. He said that with respect to supplemental insurance as has been
previously discussed,the most frequently used method is to provide an additional flat dollar supplement
each month for the unstated purpose of medical premium. The structure in 112 could not be done in this
defined benefit Plan because it would not be possible to know the value of the premiums when they change
from year to year. The issue,which this Board hopes to address again is whether there can be a flat dollar
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supplemental benefit such as$100 or$200 per month,added to each check. Some funds provide specific
cer dollar amounts for each year of service,paid on a monthly basis. This can be put into the Plan for the
purpose of paying medical premiums. Most plans do not handle it this way because if it is put in the Plan
as being for that purpose,there is a responsibility to see that it is actually used as a premium. That requires
extra administration and if there is a situation where,for some reason,a member doesn't need the money to
pay health insurance premiums,their contributions helped fund it but they are not getting any of the benefit
from it.
Trustee Cornell said this list is for review to see what is of interest,that these items are what are available
and in place. Attorney Dehner said that these are all good candidates for consideration in the Plan.
Chairperson Ison said he would like to have an understanding that sometimes these Board meetings are
quite lengthy and that there is an Agenda to go by,but he would be open if any particular Board Member
wants to propose improvements to the Plan,it can be put on the Agenda,discussed,and starting with the
educational part of it to the employees,it can be done one or four at a time,and can be moved forward.
Trustee Vogt said that he agrees with that statement up to the point of starting with the educational part of
it to the employees because the first place to start has to be with the cost as that is what the employee is
going to want to know. Chairperson Ison stated that they would get that first and before anything is sent
out,the Board has to be educated. That would include the cost,then the members are educated,then the
impact with the Commission is determined,an Ordinance is typed up and then it is adopted and sent to the
City Commission for their process. He said that is the entire process,however,communicating it to the
employees is the most important thing to be done. It is necessary to have accurate information to do that.
This entire process will be followed to insure that nothing has been skipped. Trustee Cornell said she
would take the Board's direction. She asked Ms.Deidrich if she would work with her on this. Fran
Deidrich answered that the parameters would need to be defined as had been discussed by Attorney
Dehner. She continued on to say that,under the health insurance subsidy,there are a variety of ways to do
it. It can be done,as an example,by saying that the retiree gets a flat amount depending on the number of
years served in the program. In the Florida Retirement System,retirees receive$5 for each year served.
For ten years,the retiree gets$50 each month. For twenty years,the retiree gets$100 each month. Since
this is based on the amount of time the retiree was in the program this is more admirable than the flat$100
for everyone.
Trustee Cornell suggested that a presentation to educate the Board on each of these plans be done and let
them decide if they are interested and then get an accounting of how much the ones of interest would cost.
Trustee Vogt asked HR Director Deidrich if she was saying that prior to submitting this to Ward Foster for
a cost estimate,he would have to know what he would be pricing? Trustee Cornell interjected that was
wrong,that the Board would have to know if Ward Foster has to know. Ms.Deidrich agreed and stated
that the Board may want to go with only one of the selections or they may want to go with all four. It
would depend on cost. There must first be a decision on which of them the Board wants and how long you
might want to do it for,then get it to the actuary so he can make a study of each cost before it goes to the
employee. The Board must do this process. It would not be good to go to the employee and present several
different scenarios to them. She said the Board must first get the scenarios they want and then she would
work with the Board to educate the employees. Trustee Miller asked if he was correct in his
understanding that they were moving forward with the 30-and-out at this time? Trustee Vogt answered
that they were going ahead with the cost estimate. Trustee Miller stated that,going along with what has
been said and the frustration that was heard from the employees at the last meeting,all four things appear to
be very good but he expressed his opinion that perhaps only one monster at a time should be tackled. He
suggested that they get the 30-and-out program put together and look at that cost. Trustee Cornell said
that there are actually two things that can be done. One is the 30-and-out and the other is the buy-back
package that had been mentioned before because there is no cost to the employee or the City. Trustee
Miller said he was just talking about the four that were presented here. He indicated he liked the medical
insurance supplement because of the ever-increasing costs. Trustee Cornell said the$100 insurance
supplement was something that many employees were interested in. Trustee Miller said he agreed with
all of the suggestions,particularly the Cost of Living Adjustment. He said he just wants to be sure that one
piece of the puzzle was together and in place for the employees instead of giving them false hopes,and
then move on to the next step after that.
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Chairperson Ison asked Fran Deidrich if she had a comment. She answered that the question really is,
what do the employees want? She indicated that most of the employees coming in now will serve in five or
six municipalities so 30-and-out might not be a very popular option for those persons. The buy-back
option,where an employee has been with one municipality for three years and was unable to vest there,the
option to bring that time and buy it back may be something they would appreciate. The Cost Of Living
Adjustment is for everyone. It is an option,however,3%per year is pretty rich. Again,it is important to
determine what is of interest to the employees as a whole. Trustee Vogt asked if he understood correctly
that it is a good idea to get the employees'input on all for items simultaneously but not present them with a
half-baked plan. Ms.Deidrich recommended that the employees not be given so many choices. They
should be presented with a plan and asked for their input.
Chairperson Ison suggested that there be placed on the next Agenda,under New Business,a topic for
discussion and report on improvements to the Pension Fund. This will include the items that Attorney
Dehner is going to bring forward and then,secondly,any work that Trustee Cornell has done working
with HR Director Deidrich on the four plans that have been discussed. This Board can,at the same
meeting,direct Ward Foster to attend so we can direct him to get cost estimates so this can be speeded up
and,if we get costs back from him within thirty(30)days,we can call a Special Session and then prepare a
ballot,an education package,or whatever the next thing you choose to do to proceed. He asked the Board
if this would be acceptable. Trustee Smith commented that he thought it was a good plan.
Chairperson Ison said that would be put on the Agenda for the next meeting under New Business.
Trustee Vogt stated that he would encourage Trustee Cornell to provide more detail on each of the
options,trying to be more specific so the employees are not presented with so many choices within one
option. Trustee Cornell answered that the specifics,what parameters we are working within,are
something the Board will have to determine. Chairperson Ison stated that he wanted to make sure
everything was kept legal.He suggested to Trustee Cornell that perhaps she and the HR Director could
have some discussions on this and then the whole thing could be reviewed during a workshop session.
There could be a meeting called on the same day or shortly thereafter. This would be in an effort to move it
forward for the May meeting and then generate from that the process to move any of the items forward. He
then asked Attorney Dehner what the appropriate process of the Board should be. If the Board is interested
in 30-and-out,should the members be surveyed,should they vote on it,or how should it be handled?
Attorney Denner recommended a survey. He said the procedure most generally utilized when there are a
number of items to consider is to identify the ones believed to be the best from the Plan design standpoint.
Have those items costed out and then make a presentation to the membership of two or three items.
Everyone will be overwhelmed,but generally you go to a membership meeting with two or three items,get
input on those items,ultimately have a ballot and a vote and base your recommendation on that input.
Trustee Miller suggested that perhaps a meeting of the Board,open to employees,outside of working
hours could be arranged to allow for presentation and feedback. Chairperson Ison said that could be done.
General discussion suggested that the employees might not attend a meeting after working hours. HR
Director Deidrich suggested that the Board Members are the people who have been voted in to lead the
issues,not make the issues. She recommended the Board discuss these items as a group and then go the
employees with a survey. She said a survey could be done numerous ways including working with
Information Systems to allow the employees to go on a computer and do a survey. There are a lot of
different ways the survey can be done. She said the parameters just have to be kept narrow and there must
be good information from the Board as a group before going to the employees.
Trustee Cornell stated that this Board did a very comprehensive survey on the 30-and-out and also the
$100 supplement. There were charts and percentages of employees based on age groups who would
benefit. That survey is available for those Board Members who did not receive copies. She went on to say
that surveys are important,however there must be a decision made as to what is to be on the survey.
Trustee Vogt stated that he had the survey with him,not the comprehensive one she had referred to,but
the one-page survey. He then indicated that he was in favor of having Information Systems conduct the
survey by some kind of logging in procedure through the computer. Chairperson Ison asked Trustee
Cornell or Trustee Smith if one of them would prepare just the concept of the four improvements and the
things which may need to be asked of Ward Foster so it can be brought forth as an Agenda item for the next
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meeting. He said he would like to see things presented in a more comprehensive manner than the last time,
Low with specifics such as, "If you make$350 a week,this option will cost you 'x'number of dollars." After a
general discussion it was,on motion made by Trustee Vogt,seconded by Trustee Cornell,unanimously
RESOLVED,that the four options for proposed improvements to the City of Ocoee
General Employees Pension Fund be presented for consideration at the next regularly
scheduled meeting of the Board in conceptual format for discussion and direction in order to
provide for a cost analysis for those items determined to be best suited to the Fund with an
eye toward preparation of a comprehensive survey for presentation to the Fund members.
Chairperson Ison called on Attorney Denner for any comments. Attorney Delmer said he would like to
ask for clarification if it was the pleasure of the Board that he bring the compliance Ordinance to the next
meeting. Chairperson Ison confirmed that. Attorney Dehner said he would like to confirm that the
financial disclosures required for the Trustees who stepped down were filed. Trustee Vogt said he would
ask if this has been done. Attorney Dehner said he had distributed the new Rules and Regulations at the
November meeting and recommended that it be set at the next meeting for consideration for adoption.
Chairperson Ison asked how that should be worded for the Agenda. Attorney Denner said it should read
"Discussion and/or Adoption of Revised Rules and Procedures."
Chairperson Ison asked the Board if there were any questions for the Attorney. There being none,he
again addressed the Board, stating that if he were working for the City,he would feel very good about this
Board. He said President Bush had recently asked Americans to come out and volunteer. He said these
Board Members are doing that and it is appreciated. He commended the Trustees, saying that it looked as
if this would be the Board's year and if so,then it would be an employee's year.
Trustee Smith said he would like to compliment Diane Garcia on the assistance she has provided
administratively,especially over the last couple of months. There have been a couple of very short notice
retirements. Everything was handled quickly and efficiently.
Chairperson Ison reminded everyone of the next meeting to be held on May 8th,2002. There being no
other business,the meeting was adjourned at 12:20 p.m.
Respectfully submitted,
Jo Ann Lacey,
Recording Secretary of the Meeting
Accepted:
Tom Ison,Chairperson
(re
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