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HomeMy WebLinkAbout05-14-2003 Minutes General Employees Pension Fund Board Meeting—May 14,2003 Page 1 Lie Minutes of the Quarterly Meeting of the CITY OF OCOEE GENERAL EMPLOYEES PENSION BOARD Held on May 14, 2003 At 150 N. Lakeview Drive Ocoee, FL 34761 Chairperson Tom Ison called the meeting to order at 10:00 a.m. He then called the roll. Those present were Chairperson Tom Ison, Trustee Ed Bishop, and Trustee Patricia Cornell. Trustee Mike Miller was absent. It was determined that a quorum was present. Attending the meeting by invitation were Attorney H. Lee Dehner, Tim Nash representing TRUSCO Capital Management, Larry Cole representing Merrill Lynch, Patrick Donlan,representing Foster&Foster, Inc., Jo Ann Lacey, Recording Secretary of the Meeting, and Fran Diedrich, HR Director. Trustee Cornell advised the Board Members, for the record, that John Vogt, former Trustee, had resigned from the Board. She advised that she had requested a letter of resignation from Mr. Vogt but it had not yet been received. She stated that the general employees had been advised of the Board vacancy caused by this resignation and a new Trustee, Jerry Sauerwein had been elected. Trustee Sauerwein was not yet at the meeting but was expected to arrive momentarily. (1..„ Chairperson Ison advised that the minutes of the meeting of the General Employees Pension Board held on February 12, 2003, had been circulated to all Trustees for review. The Trustees were asked if there were any corrections or additions to the minutes. Trustee Bishop advised that there was a change to page 2. The name"Tom Karr" should be changed to "Donald Carter." There being no other corrections or additions, it was, on motion made by Chairperson Ison and seconded by Trustee Cornell, unanimously RESOLVED, that the minutes of the Board of Trustees of the General Employees Pension Board of February 12, 2003, be and they are hereby approved as amended. Attorney Dehner reminded the Board Members of their obligation for filing the Form 1, Financial Disclosure form and asked Trustee Cornell to remind former Trustee Vogt that he would need to file two forms, one for the period from January 1, 2003 until the day he stepped down and one before July 1, as will all of the Trustees. He stated that this created some confusion but if not done, fines would be assessed. Chairperson Ison suggested that the Board move around on the Agenda items somewhat to accommodate the late arrival of Trustee Sauerwein, and called attention to Item 2B: Discussion, reassignment of Board duties. He called upon Trustee Cornell for her comments. General Employees Pension Fund Board Meeting—May 14,2003 Page 2 Trustee Cornell advised the Board that the duties needed to be more equitably distributed between the Board Members and, if not done, the people doing all of the work would get burned out by doing so much for so many. She stated that Trustee Ed Bishop had helped get documentation together for this particular meeting and she suggested to the Board that any bill paying or financial matters that have to do with the Board be directed to Trustee Bishop. He would be able to sign off for payment of bills and so forth and then make them a part of the Board package. Trustee Bishop agreed that he would do that if the Board so directed. Trustee Cornell said that she would continue putting the Agenda and Board packet together as she felt Trustee Sauerwein was too new to the Board to take on that responsibility, however, once he becomes more acclimated to what the Board does, she suggested that he get involved in some correspondence and possibly work with she and Trustee Bishop on sharing some of the Board responsibilities. Chairperson Ison asked Trustee Bishop if he would be willing to accept the duties as mentioned. Trustee Bishop responded that he had no problem with it and that he was, in fact, already keeping a check on the Board's drop mail box. Chairperson Ison thanked Trustee Bishop and then welcomed Trustee Sauerwein, who had just arrived at the meeting. Addressing Trustee Sauerwein, Chairperson Ison advised that the Board had been skipping around on the Agenda in order to allow time for his arrival and that Items 1A and 1B had already been covered. He stated that Item 2B was currently being discussed regarding dividing up the duties of the Secretary to make the task more equitable, that Trustee Bishop would be taking on the financial matters and bill payments, Trustee Cornell would be working on the Agenda packets and, at a future date, functions would be assigned to him to do also. Trustee Sauerwein indicated he would be pleased to do what was needed. Chairperson Ison then directed Trustee Cornell to delegate responsibilities to Trustee Sauerwein as she determined were needed. Returning to the Agenda, Chairperson Ison called upon Mr. Tim Nash for the Money Manager's Report. Prior to Mr. Nash's report, Attorney Dehner addressed Trustee Sauerwein to advise him of the requirements regarding financial disclosure filings for the Trustees of the Board. He stated that Trustee Sauerwein would need to file with the Supervisor of Elections, a Form 1 —Financial Disclosure, within thirty(30) days of the date he takes office, with this meeting being his official first day. He said that these filings have to be done before July 1 of each year for the prior calendar year. He recommended that Trustee Sauerwein file two. By filing within thirty(30) days he would be complying with the form required by July 1 and Mr. Denner suggested that he go ahead and file two of them, do the initial one as soon as possible and then do another one when the other Trustees do it before July 1. He stated that the law had been in effect for only a couple of years and fines were being meted out regularly. He also reminded General Employees Pension Fund Board Meeting—May 14,2003 Page 3 that a Trustee stepping down is required to file a Form 1-F Financial Disclosure within 60 days of stepping down. Chairperson Ison thanked Attorney Dehner for his comments and added a suggestion to Trustee Sauerwein that he keep a copy of the report for his records to use as a guide for the next year's filing. He then called upon Mr. Tim Nash for his report. Mr. Nash greeted the Board. For the benefit of the new Trustee, Mr. Nash explained that he is the investment officer representing TRUSCO Capital [a management firm owned by SunTrust Bank] who is the money manager for the Pension Plan. He then called attention to the report. He indicated that the report was dated for the end of March and the market had done much better recently. The S&P 500 was down 3.1% during the period. He called attention to the fact that there was significant volatility during that time period. He reported that at the beginning of January there was the uncertainty of whether we would go to war with Iraq,when we would strike, etc. From the second week of January through March 11,when the conflict began to be concluded, the market was actually down over 15%. During the last two weeks of March, the market improved quite a bit and the end of the quarter was only down 3.1%. Mr. Nash said that the consistent theme for over three years had been that part of the portfolio had been in equities and part of it had been bonds. Bonds had been a good place to be and for the quarter the bonds were positive. Over the last rolling twelve months,bonds were phenomenal performers with double-digit rates of return. He then explained the performance of the sectors of the equity market, stating that in the last year, all sectors of the S&P 500 were in negative territory. He stated that healthcare had been one of the few bright spots, up .9%. He advised that the Plan's growth fund and some of the other funds had a significant weight to overweight to healthcare and that helped during the quarter. He also discussed the telecom stocks,reminding the Board that during the quarterly report given at the last meeting,he had indicated that the telecom stocks had done poorly all year long but had a big rally in December. This Plan did not have any allocation to those telecom stocks. He said that they had given back almost all of the gains for the fourth quarter and were down 15%, so it had been good for this Plan to not have exposure to telecom. Mr. Nash stated that the market was encouraged since the conflict in Iraq had passed and the valuation of stocks is more realistic. He stated that in the 1998-99 period, stocks in general in the S&P 500 were trading at over 30 times earnings with the market norm being between 15 and 17 times earnings. Stocks were very expensive and his firm was now encouraged because stocks are in the normal range,with valuations more reasonable and are currently around 17 times earnings. He said that companies are reporting positive earnings and stock prices are expected to rise in calendar 2003. He said that the market as of the end of March was down 3% and as of last night [May 13, 2003] the S&P for calendar year to date was up about 7% and the Dow was up about 5%. He reported that bonds will be poorer performers in the future and stocks will be much better performers. He indicated that they had been adding more stocks and were approaching the max on the policy limit in the portfolio. He also said that there is now General Employees Pension Fund Board Meeting—May 14,2003 Page 4 more certainty in the market and around the globe and corporate bonds were beginning to do a little better. He advised that over the last year, investors continued to take huge sums of money out of the equity market,putting it into bonds. He said there is still a lot of money on the sidelines in cash which they believe, once the market has started improving,will begin to flow back in and it will flow back in to the equity funds and that will continue to fuel the equity markets over the next 12 to 18 months. He reported that the actual snapshot as of 3/31/03 showed on the gain/loss line,which is what the stocks and bonds really did, they actually went down $109,000. There was a small amount of interest and dividend income for the quarter, a positive $644, the combination of the two, a negative $108,000 for the quarter, closing out the second quarter with$7,833,830 in the Plan. He said the bright spot to focus on was that as of yesterday [5/13/03], the Plan closed at $8,352,625.48, up another$518,000. At the end of the quarter, the allocation of the Plan was 58% in stock funds, 41% in bond funds and a small amount of cash for payment of bills and pension payments. Mr. Nash continued on with a general report on the different sectors of the Plan. He reported that the growth fund was overweight in healthcare which helped significantly during the quarter and that it was also overweight in information technology and had a decent weight to energy stocks which had been doing well. He said that the High-Grade Equity fund buys large company stocks and had a dividend yield of 2.8%. He reported that the High Grade Relative Value fund which does not have a dividend yield component has a much lower yield. Mr. Nash then called attention the US Limited Cap Fund [Page 30 of the TRUSCO report]. He stated that his firm, in taking a look at the performance over the last two years of the fund, decided to make a change in the manager of the small and mid-cap fund and had hired a manager, Kevin Shea, with a three year contract. Mr. Shea has experience managing mid-cap assets having done so for Northwestern Life Insurance Company and he also managed some mid-cap assets at Invesco and now is part of a firm called DA Capital. He advised that there would be some change as to how the fund would be managed. It will still buy small cap and mid cap stocks but the benchmark had been changed. It used to be a blend of small and mid-cap stocks. Now it will be benched against the Russell mid-cap index and Mr. Shea will buy stocks a little bit larger than has been done in the past. The average market cap of the fund is currently about 3.2% and with the changes being made, it will probably be a little closer to the 4.5% like the Russell mid-cap index, so stocks will get a little bit bigger but there will still be exposure to small cap and mid cap. He explained that the process had not changed dramatically, there is a second layer of analysis that goes on in the portfolio in that there are models for each of the sectors that Mr. Shea will be buying stocks in and he will look for certain criteria for stocks in certain sectors that might be different than some of the stocks in other sectors. He added that the firm feels this will be a plus and they expect to see improved performance. L General Employees Pension Fund Board Meeting—May 14,2003 Page 5 Attorney Dehner asked Mr. Nash if Mr. Shea is an employee of TRUSCO. Mr. Nash replied affirmatively and stated that there is a contract with Mr. Shea to sub-advise the mid-cap fund. He is also an employee of DA Capital and runs other equity products there. Attorney Denner then asked Mr. Nash if TRUSCO would assume the fiduciary responsibility for Mr. Shea's management. Mr. Nash replied that they would. Attorney Dehner asked Mr. Nash to send documentation of the new arrangement with Mr. Shea to his office. Trustee Bishop asked when Mr. Shea started. Mr. Nash responded that he actually took over the portfolio in mid-February. Mr. Nash continued on with his report, commenting on the bond fund. He said TRUSCO thinks the U.S. economy is going to improve over the next 12 to 18 months and there will probably be some inflation and a rise in interest rates. With that thought in place, TRUSCO has continued to shorten up the duration of the portfolio, with that duration currently being a little over 4-1/2 years as compared to 5 years which was the duration six to eight months ago. He said that shortening up the duration makes it less sensitive to interest rate movements, so they have shortened up the portfolio, shifting away from treasury bonds, and bought Single A or better corporate bonds which gives the portfolio better yield. He said they are shifting to a very defensive posture on the bond funds. Attorney Dehner asked Mr. Nash about the significance of the duration at 4.6%, if the interest rates go up a percent, does the portfolio lose 4.6%? Mr. Nash said that was correct,plus the coupon. He explained that in a 1% rise there is the potential for the duration and the coupon added together to be down 9.5%, as a worst case scenario. He said the flip side of that would be if interest rates were to go down another percent, with those two added together, that would result in a positive 8.5%. He said TRUSCO's thinking is that is highly improbable and the interest rate rising scenario is the more probable. Mr. Nash concluded his report stating that TRUSCO did not recommend any changes in the asset allocation at present and that the Plan is close to its equity target, which is good. Trustee Cornell asked about the status of the proxy guidelines which had been talked about at the last quarterly meeting. Mr. Nash advised that those were still being worked on, that there are more changes that have come about as a result of some of the litigation regarding brokerage firms and research and they are trying to incorporate all of that type of information into the proxy policy. He said they are continuing to operate under the old proxy policy. Trustee Cornell stated that she did not have a copy of that policy. Mr. Nash said that he would get one to her. Trustee Cornell requested that be sent electronically. Chairperson Ison asked Mr. Nash if he thought there was positioning for thisr substantial improvement in the stock market. Mr. Nash said yes. Chairperson Ison then General Employees Pension Fund Board Meeting—May 14,2003 Page 6 asked if there was any hope for telecom stock. Mr. Nash said that telecom stocks are currently extremely inexpensive. He said that one of the stocks asked about frequently was Lucent. He said that their analysts have looked at that and said there is so much fiber in the ground right now that is not being used, over 60-70%, and the switches they were so famous for are outdated with other companies making them cheaper. So, he said, until there is a new product that can command more market share and higher pricing, Lucent is definitely on the back burner. Chairperson Ison then asked Mr. Nash about the statement he made earlier about the belief that the Fed would be raising rates rather than lowering them. Mr. Nash said that looking at the near term, looking at some of the stats on the economy, some of the economists are saying they could see the Fed making another move and at the last meeting of the FOMC, which they continued a no change to the interest rate policy, Greenspan indicated that while there was flexibility, if need be, to lower the rate. That would be in the near term. Looking out over the next year, it is believed they will start to rise as it is clearly near the bottom now. Trustee Cornell asked Mr. Nash what basis they had for anticipating the market to get better. Mr. Nash said that we are past the uncertainty on the conflict with Iraq. He said that is important because when the uncertainty comes out, investors feel more confident. Also, stock prices are really cheap and PE's are back to the normalized range of 15-17%. He said they also look at earnings, when companies are beginning to earn money, investors will be willing to pay more in the form of a share price to get the additional earnings. He mentioned another big thing is that consumers have benefited from refinancing or purchasing new homes in this low interest rate environment. He said that what they really think needs to happen is for companies to begin spending money on expansion—capital expenditures, and that is slowly happening. Companies are beginning to update their computers—it has been since the Y2K scare that that has been done. They now need computer upgrades, software, and system upgrades. That should all combine to help the marketplace. Chairperson Ison thanked Mr. Nash for his report and called upon Mr. Larry Cole for his report. Mr. Cole advised, for the benefit of Trustee Sauerwein, that the role of Merrill Lynch is to monitor the investment managers and oversee what they do. He said they see that everything done by the money managers is done it compliance with the investment policy. He said his firm does not manage any of the money,but they help determine how the money managers manage the money. He said that they do not tell the money managers what stocks to buy and they have a lot of leeway in the investment guidelines but there are parameters that they must go by and Merrill Lynch sees that they do that. He reported that most of the news was good, that TRUSCO has done a good job in protecting the Plan's assets. Mr. Cole confirmed the observations presented by Mr. Nash by saying that Merrill Lynch was also optimistic on stocks. He referred to an analyst who equated the General Employees Pension Fund Board Meeting—May 14,2003 Page 7 bond market's run in the last three years to the irrational exuberance of the stock market the previous three years and said he though that was a good analogy. He advised that the Plan's market value is getting back to the $8 million mark. He added that things had started to deteriorate in January 2002, and it has taken this long to recover. He said that he expected to see continued improvement. Mr. Cole said he would like to comment to the Board about the change of managers which Mr. Nash had mentioned. He advised that one of the responsibilities of his firm was to keep an eye on the managers and to research those managers when there are changes at the management firms. He said that there was a meeting with Kevin Shea and Chad Deacons, the two co-managers with Mr. Shea as the lead, in order for Merrill Lynch to get some idea of their discipline. Mr. Cole said that there was some concern because Mr. Shea did not have a very long track record—only about three years but during those years he had one great year and two years right on the Russell Index, so that all looked good. Mr. Cole indicated that Mr. Shea would be managing in a very different style—more of what is called a quantitative style of management, more computer driven than fundamental research driven on each individual stock. He said that there was some concern about the amount of support in terms of analysts that Mr. Shea would be using as he would be doing most of that himself. He said that Merrill Lynch would be keeping a very close eye on the performance, that the amount of the portfolio being handled by Mr. Shea is only about $600,000, so it is not a large portion of the assets,but it is enough that they want to see that it is handled right. He assured the Board that Mr. Shea would not be there on his own, that the right people would be overseeing him. He admitted that this was a very unusual structure but TRUSCO Capital Management always has everything reviewed by attorneys and they apparently have a lot of confidence in him as he is employed by TRUSCO and also by DA Capital, where he is helping run a hedge fund. He said Merrill Lynch had some concerns about potential conflicts between running a hedge fund there and a mid-cap fund for TRUSCO,but TRUSCO seemed to be comfortable with it. He also told the Board that if the fund did not improve, Merrill Lynch might look at some other alternatives. He added that there were some limitations because of the amount of money, but there are some other options. He went on to say that TRUSCO is currently the Plan's only manager and if it became necessary to break that up, the Plan's expenses would increase. He did not recommend any changes be made at present. Mr. Cole returned to his report indicating that 50.8%was the average held in stocks for other pension funds at the end of March where this Plan has 57.8%. He said that shows that this Plan has more stocks than the average fund but because of the diversification within the stocks, it does not translate into more risk. He pointed out that the total Fund was down 1.4% for the quarter and that in comparison to other public pension funds around the country, with 1 the best and 99 the worst, this Fund was in the top 26 percentile of public pension funds, even with the loss of 1.4%. He went on to explain that the fiscal year to date had been a struggle because of the first quarter, so this Fund is still in the 85th percentile. He pointed out that even though this Fund had more money in stocks,which drastically underperformed bonds, the total return was still above average. He indicated that was because of the way TRUSCO had managed the Fund. He General Employees Pension Fund Board Meeting—May 14,2003 Page 8 also indicated that when things in the market start turning, this Fund should do extremely well. He pointed out that all of the rankings were above the target index, which is spelled out in the investment policy,with a ranking in the top 50% for all periods. Mr. Cole called attention to the checklist page and indicated that everything was in compliance—no exceptions. He reiterated that TRUSCO had done a great job in protecting the assets in the very difficult market and it appeared that all was moving in the right direction. He reviewed the comparison of this Fund against the 87 Florida public pension funds they monitor and stated that this Plan has been 31st out of the 87 for the last year because of the compliance and allocation. As a matter of general information for the Board, Mr. Cole advised that the market had actually bottomed out on October 9, 2002, and that as of May 13, 2003, the Dow was up 19% from the low,NASDAQ up 38% and the S&P up 17-19%. He said this represented a significant rally and it is believed that corporate management will begin putting some of the cash they have been holding out back to work. Chairperson Ison thanked Mr. Cole for his good report and indicated he would be looking forward to an even better one at the next meeting. He then called upon Mr. Patrick Donlan, representing Foster&Foster, Inc., for discussion of correspondence dated May 14, 2003, which he had hand delivered to Trustee Cornell. He also asked Mr. Donlan to take the time to address Agenda Item 5A regarding Board responsibility to retirees with prior pension plan contributions. Mr. Donlan explained that Foster&Foster, Inc. is the actuary for the Plan and every year, as of October 1, they look at the assets in the Plan compared to everyone's future benefits and then they determine the gap and how much has to be funded for the current year and the next year and that is what determines what the City has to put in cash for the fiscal year. He added that when the Plan is considering benefit improvements, that changes the value of everyone's future benefits and so it is necessary to determine the impact on the annual funding requirements and that is the information shown in the letter of May 14, 2003. He said that the improvements which had been considered by the Board for the last year had been narrowed down to basically three items which were to be paid for with member contributions rather than City contributions. Findings were as follows: • Current Plan is that members make 7.4%contributions, the City makes 11.3%. That changes every year and the retirement age is 60, regardless of length of service. • Option A—Member would have to have five (5) years of service to retire,but could retire with 30 years of service, regardless of age, i.e., if hired at 18, retirement could be at age 48 with no reduction in benefits. The cost would raise contributions from the current 7.4%to 10.7%. The impact on a member making $400.00 a week, $20,800.00 a year,would be $20.00 in their bi- weekly pay check. General Employees Pension Fund Board Meeting—May 14,2003 Page 9 • The other items reviewed were all Cost Of Living Adjustments (COLAs). One was for a 3% increase every other year; the other was for an increase of 2% every year. • Costs were more expensive than last year because the members are a year closer to retirement. Every year the costs will go up a little. Chairperson Ison thanked Mr. Donlan for the information. Mr. Donlan then stated that he had not had a copy of the Agenda for the meeting and in regard to Item 5A of the Agenda which he was asked to address, he was not prepared to answer. Trustee Cornell addressed Ms. Diedrich for her comments regarding the same matter. Ms. Diedrich advised the Board that she had had some difficulty determining if a particular former employee had been enrolled in the Plan. She said that this particular gentlemen had been left off the reported submitted to Foster&Foster for a year's period. She added that there were a number of others,perhaps 18, which were actually caught between the current Plan and the previous Plan. She said this was a problem that had also happened on the Police &Firefighters Plan where that had been a number of discrepancies in names and spellings, etc. Trustee Cornell asked who has the responsibility for seeing that this is handled properly. Attorney Dehner stated that neither he nor Ward Foster had been involved with the prior Plan, that it had been done through a third party administrator, his recollection was that it was an insurance company. He advised that when he and Mr. Foster were brought in to establish the present Plan, the assets from the prior Plan were merged when the current one. He said that the documentation he had seen indicated there were 18 vested members in the prior Plan and to the extent that they are vested terminated, they would be eligible to benefits. He said he did not believe that annuities were purchased for any of them. Trustee Cornell asked for direction as to who to turn to when a situation occurs, such as the one being discussed,where a member comes to claim his benefits but is not in the program. Attorney Delmer responded that it appeared this gentleman was actually terminated before the new program was established, but he had a vested right and therefore would be entitled, assuming an annuity was not purchased, to all the assets and payments out of the Plan. A general discussion ensued in which Trustee Cornell asked if Foster&Foster had a list of individuals who merged from the old Plan to the new Plan. Attorney Dehner responded that they did have a list and that this individual had inadvertently been left off the list. Ms. Diedrich said that there was apparently only one year that that had happened and they were able to go back and find the member shown on previous lists, so they were able to get it handled. She stated that her concern was that if this one member had been lost, how many others there might be which had also been lost. Trustee Cornell said that she did not know where to go to get information to research for those individuals, stating that she did not know who they are, she did not know who was holding the money or when the money came over, etc., and she also indicated that she was not aware of General Employees Pension Fund Board Meeting—May 14,2003 Page 10 Foster&Foster's involvement in handling distributions to those people. Mr. Donlan stated that Foster&Foster does the calculation when somebody retires to which Trustee Cornell responded that she had even been unaware of that process. Ms. Diedrich asked Attorney Dehner how long records for taking money from employees for contributions were to be retained. She stated that Human Resources is required to keep records for 75 years after the employee leaves,but she did not know the requirement on the financial side. Attorney Dehner said that his office had just sent out the State's updated retention schedule for all types of records which indicates the minimum retention time. He said that schedule should be arriving within the next few days. Ms. Diedrich asked, according to Plan documents, who is the party responsible for pension information? Attorney Denner advised that would be the Board or whomever they delegate. Ms Diedrich stated that was a problem because they have no access to payroll information or any other information and it would be difficult to be responsible when they do not have that information available. She went on to say that it had been particularly difficult for her to conduct any research such as was needed for the former member who had been inadvertently left off the list. She said that Payroll had not been able to help, the Board could not help, Finance could not help—no one seemed to be able to help and it had been frustrating. Mr. Donlan advised that every year, somebody sends to Foster&Foster a list of all of the active people and their salaries and their hire dates and that is what is used to do the valuation and then they know of the old retirees and terminated vested, but in the case ihrif of the gentleman in question,he was from before the time Foster&Foster became involved. He said that information is at his office for the period beginning 1991 to date but that it is really the Board's responsibility to keep a record of all of the employees and their contributions. Attorney Denner stated that Foster&Foster is not the custodian. Ms. Diedrich again asked who is responsible for those records and added that if it is HR,then there is a problem. Ms. Diedrich indicated that Finance did not have any information, the archives had been searched, Trustee Cornell had also been involved in searching to no avail. Trustee Cornell asked Mr. Donlan if it would be possible to forward to her, a copy of the list of individuals enrolled in the Plan, in order that that may be made a part of the Board's records at this time. Mr. Donlan said he would send what is in the computer as of 10-01-02, active members with their hire dates and salaries, retirees and terminated vested and that could be checked against the City's records. Trustee Cornell thanked Mr. Donlan and said she would work with Ms. Diedrich to check every person on that list. Trustee Bishop said they had gone through the required audit reports and traced the kind of plan and applicable dates,but the specific information Ms. Diedrich was inquiring about was not available. Attorney Dehner said that the only people of concern would be the 18 members of the previous Plan, less those still currently employed because those still working are making contributions into the current Plan and are in the system. Trustee Cornell reminded that the concern was whether there were others out there who would come to gain access to their funds and were not on the list. Chairperson Ison suggested contacting Jean Grafton, City Clerk, about where some of General Employees Pension Fund Board Meeting—May 14,2003 Page 11 the old records might be because until the meeting this Board had with the new City Manager, the Pension Board records had not been kept in a specific place. Trustee Cornell advised that Ms. Grafton had been contacted in the process of this search. Attorney Dehner said that in the memo accompanying the minimum retention requirements, there was a recommendation of the appointment of a records retention officer by the Board. He said that could be the Clerk or anyone the Board should deem appropriate. Trustee Cornell asked Attorney Denner what the legal ramification to the Board might be for not being able to find information. Attorney Dehner answered that there are no benefits owed before application is made. He said that this gentleman had applied and the information was available, though it had been difficult to obtain, and should someone else fall through the crack as had happened here, that same data should be available. Chairperson Ison asked if this Board assumes any fiduciary responsibility for prior person's actions. Attorney Dehner said that there never was a municipal board until the Plan was created and that is where the responsibility begins. He said that,based on the discussion, unless there is a situation where someone does make application and salary data and years of service cannot be located, there would be no problem and he was certain the information could be captured and payment made because of knowing what the benefit provision for the old Plan were. Chairperson Ison asked Mr. Donlan to send the list he had available to Trustee Cornell as had been requested. Chairperson Ison then called the Board's attention to New Business. He (tio, extended a welcome to new Trustee Sauerwein. He asked Trustee Sauerwein for some introductory information. Trustee Sauerwein said that he works in the IT Department, working with computers throughout the City and that July 7 would be his one-year anniversary in that position. He said he has enjoyed working with the City so far, it had been a real pleasure. He said he had worked at Universal Studios for a year and a half, doing a Windows 2000 upgrade on all their rides and offices and prior to that he worked with American Classic Voyages, a subsidiary of Royal Caribbean Cruise Lines, working for a couple of years on cruise ships. Chairperson Ison thanked Trustee Sauerwein and advised that Trustee Cornell would be assigning some duties to him as he became more oriented to the Board. Trustee Bishop thanked Trustee Sauerwein for accepting the position. Trustee Cornell said that she had several documents to give him such as the investment policy,plan description and procedures to help him become acclimated. Attorney Denner reminded of the financial responsibility form. Continuing under New Business, Chairperson Ison called on Trustee Cornell regarding signatures for the SunTrust authorization forms. Trustee Cornell apologized to everyone who had not received payment for the past quarter. The reason had been because former Trustee Vogt was the one authorized to sign, there had been no one to sign for payment of bills after his resignation. She said that she had the authorized signature form from SunTrust which both she and Trustee Bishop had signed which would enable either one or the other of their signatures to allow bills and invoices to be paid without delay. Mr. Nash volunteered to hand carry that form to Ms. Garcia so this kor situation could be handled as soon as possible. Chairperson Ison thanked Mr. Nash for General Employees Pension Fund Board Meeting—May 14,2003 Page 12 that and said that this new authorization would allow for bills to be paid promptly, (v. regardless of absences. Under Old Business, Chairperson Ison asked Attorney Denner about the electronic copy of the Summary Plan Description. Attorney Dehner reminded the Board members that at the last meeting, the Summary Plan Description was reviewed and approved by the Board, subject to any Trustee input by March 1. No input was received. He pointed out that there was a hard copy for each Trustee in the Board package. He then asked if the copy which was emailed to former Trustee Vogt had been received and said if had not, he would see that it was sent again. Trustee Bishop said it would not be necessary as besides the copy, he had the original document. Attorney Dehner asked if anyone wanted to discuss anything else on this and if not, Exhibit B, which was delivered by Mr. Donlan from Foster&Foster, Inc., would need to be attached, Chairperson Ison should sign and then it should be distributed to the membership and to any new hires coming into the Plan. He then stated that Exhibit A, which is a list of Trustees, should be revised because of the recent change and then it would be as current as possible. Following a brief discussion about the revisions to the list of Trustees, Attorney Denner advised that, even though the duties of the Secretary had been distributed among several of the Trustees, there should still be one person for the office of Secretary for the purpose of attesting signatures on contracts and so forth. On motion made by Trustee Bishop and seconded by Trustee Sauerwein, it was unanimously RESOLVED,that Trustee Patricia Cornell would serve as Secretary for this Board. This position being in addition to her serving as Vice Chairman as previously named. Chairperson Ison then asked Trustee Cornell to Chair the next meeting, August 13, 2003, which would allow her to have that experience and to help insure that this Board continue on for the benefit of the Plan Members. Chairperson Ison then called upon Trustee Cornell for the pension survey results. Trustee Cornell reported than, as directed by the Board,Pension Enhancements Benefits, Incentive and Options were put together by a committee consisting of former Trustee Vogt, HR Director Diedrich and Trustee Cornell. She said that of the selections that were available to choose from, the top five (5)were chosen. She referred the Trustees to their Board packages for a copy of the actual survey. She said that survey had been sent out and all of the information or responses were tallied in a very strict and monitored manner. They results of the survey are also included in the Board packages. Those results clearly indicated that the employees do not want any change. 140 out of 168 responded [85%response] and 93 of those individuals opted for no change. She went on to explain that for the 30-and-out, which would be the issue for the next Commission meeting, 13 responded as to wanting that particular benefit. Regarding the next Commission meeting, she advised that the request to the City Clerk's office, requesting that this Board be put on the May 20th Agenda for the Commission meeting would be turned in. General Employees Pension Fund Board Meeting—May 14,2003 Page 13 Chairperson Ison respectfully requested all of the Trustees to attend that meeting. He said he would like to introduce all of the Board Members to the Commissioners. He then asked Trustee Cornell to make a presentation of the survey results. Trustee Cornell said she would prefer not to make that presentation. Chairperson Ison then said that he would handle it. Trustee Bishop addressed the Chairperson and advised that what had happened with the five options offered to the employees, there were staff meetings arranged, three different times, and HR Director Diedrich did a very good job in explaining the pension plan in its entirety, what the options were and so forth. She did emphasize that it was important to vote on this to indicate to the Board what they members really want. He stated that, in his opinion, the whole process was well though out and very well run. Trustee Cornell agreed with Trustee Bishop and said she thought this needed to be mentioned to the Commissioners, to share with them that Ms. Diedrich had done an excellent job in making sure the time was available for employees to attend the staff meetings, and in explaining each option. Chairperson Ison thanked Ms. Diedrich and asked if she would be able to attend the Commission meeting. Ms Diedrich responded that she would attend. Attorney Denner advised the Board that since more than one Trustee would be attending the Commission meeting, it should be noticed as a Board meeting and summary minutes should be kept just as is done for a regular meeting, this under Sunshine Law. Chairperson Ison then called upon Trustee Cornell to discuss payment of bills. Trustee Cornell advised that this has been covered earlier when she apologized for not being able to sign off on the bills,but did call the Board's attention to a bill for the upcoming insurance policy payment from Sihle Insurance Group. There being no further discussion, it was, on motion made by Trustee Bishop, seconded by Trustee Cornell, unanimously RESOLVED,that the all bills be approved and paid as presented. Chairperson Ison then asked if there was any correspondence to be reviewed. Trustee Cornell said the only thing to bring to the Board's attention was the one letter which had been sent out late to Mr. Slavin. There being no other correspondence to review, Chairperson Ison called upon Attorney Denner for his comments. Attorney Dehner advised that there was a bill that passed the Senate but did not make it out of Committee on the last day of the session in the House, Senate Bill 330 and House Bill 133,which could have an impact. He advised that it has to do with the interpretation of what would meet minimum standards of Chapters 175 and 185 for benefit improvements for firefighters and police officers. He said it has to do with insurance rebate monies. He went on to explain that the statute as passed in 1999 provided that additional money that came in over and above the 1997 amount would have to be used for extra benefits. He said there were two interpretations put forth, one by the General Employees Pension Fund Board Meeting—May 14,2003 Page 14 Division of Retirement, one by the Attorney General. The Division's position is that any additional dollars from the 1997 amount would be spent for police officers and firefighters. The Attorney General's position with respect to minimal compliance is that the actuary would determine the value differential benefits between the general plan and the fire and police plans and if that differential was equal to or greater than the total State money received for fire and police, it would be deemed to be in compliance and if any monies above that came in it wouldn't have to be spent for extra benefits for fire and police, it could be used for City contributions. The way that would impact this Plan is if the Attorney General position would ultimately be adopted, any time improvements to benefits in this Plan were considered, the City would have to review to see how that would impact the value differential and whether it would necessitate having to increase the fire and police benefits to keep that gap. The Division's decision would be more beneficial because if that is the position adopted and improvements to this Plan are considered, there is no worry about what happens on the police and fire side. If Plan improvements for this Plan are considered with the mandate of improvement of the police and fire plan, that might be a disincentive to the City to do so. There is a lawsuit pending,between the League of Cities and the Division of Retirement to resolve the issue. The lawsuit has been put on hold pending the termination of the bill because the bill codifies the Division position. If the bill would pass and become law, the lawsuit would be removed because the legislature will have spoken as to what their intent was. He said he did not know if it would get back in during the special session so this would just be something to keep an eye out for. He said that, should this not pass, it will probably go to next year's legislative session before there is a decision from the courts thw and whoever loses, there would be an appeal to the DCA so it would probably be a year or more before there is a definite answer as to whether it effects this Plan. Attorney Dehner then stated that there is also an issue which has to do with travel expense reimbursement. He said that the Attorney General this past January issued an opinion which turned the prior Attorney General position of 1974, 180 degrees the other way. He advised that in 1974, the Attorney General rendered an opinion saying that under home rule, the statute must be followed and that the City could adopt whatever is reasonable by local law and deviate from the statutory. In the Attorney General position in January, he said the City can still have a policy but you could not exceed the maximums that are provided for in the statutes for per diem, car allowance, and meals. The Auditor General issued an opinion advising compliance. He asked if Ocoee was liberalized? Trustee Bishop responded that they follow City policy. Attorney Delmer said we would know soon what happens to that. Attorney Dehner then called attention to another Attorney General opinion which came down in December with respect to the requirements for a quorum to conduct business which was another 180 degree turn from the prior opinion. Previously, if telephonic attendance by a Trustee or any other board official was required at a meeting to have a quorum, that could be done and could be so noted on the Agenda as telephonic attendance by a Trustee. The rule now is, you must have physical presence for the quorum in order to conduct business. Once that quorum is reached, then if one or two L General Employees Pension Fund Board Meeting—May 14,2003 Page 15 other Trustees would like to attend telephonically, it would be acceptable but it would have to be so noted on the Agenda. Chairperson Ison addressed Trustee Sauerwein and advised that this Board is a member of the Public Pension Board Association and they put on educational sessions once a year, sometime in Orlando, sometimes in Panama City and that when this trip was necessary, he would be reimbursed for expenses appropriately. Trustee Cornell asked Attorney Denner if he planned to do a similar program as he had done here once before. Attorney Dehner answered that it had probably been two years since the last one he had done here with Tim Nash also on hand to do the investment part. Chairperson Ison stated that when the Board met with the City Manager there was a specific question about getting excused time off instead of having to use vacation time and it was clearly answered that excused time off would be given with appropriate notice to supervision. He went on to say that, as far as the Board goes, expenses would be reimbursed when turned in on an expense voucher in accordance with the City guidelines, and this Board would then pay those expense. Trustee Cornell asked if Attorney Denner would do the program. Attorney Dehner said he could do that,probably sometime in July and he asked Trustee Cornell to contact his office to set up a schedule. He then asked the Board if they would have an interest in having other boards attending and split the cost. Chairperson Ison told Attorney Dehner that would be fine, for him to go ahead and set the date. He also invited Ms. Diedrich to attend if her schedule would allow. Chairperson Ison mentioned that Trustee Mike Miller had indicated that he might be resigning from this Board but that he had not sent a letter of resignation. Chairperson Ison said he would contact Trustee Miller in that regard and if that was indeed the case, he would try to get that resignation from him prior to the Tuesday Commission meeting and then they could put it on their Agenda as they desire, as this position is one that is appointed by the Commission. Chairperson Ison then called on setting the Agenda for the next meeting. He said he believed a standard meeting agenda should apply and possibly an item for welcoming a new member if that might be the case. He asked the Board for any comments. There being none, the meeting was adjourned at 12:08 p.m. Respectfully submitted, Jo Ann Lacey Recording Secretary of the Meeting Approved By: Tom Ison, Chairperson