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HomeMy WebLinkAbout08-13-2003 Minutes General Employees Pension Fund Board Meeting—August 13,2003 Page 1 Minutes of the Quarterly Meeting of the CITY OF OCOEE GENERAL EMPLOYEES PENSION BOARD Held on August 13, 2003 At 150 N. Lakeview Drive Ocoee, FL 34761 Vice Chairperson Patricia Cornell, as Acting Chairperson of the meeting called the meeting to order at 10:00 a.m. She then called the roll. Those present were Chairperson and Trustee Tom Ison, Trustee Ed Bishop, Trustee Sauerwein 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 Definer, Tim Nash and Diane Garcia representing TRUSCO Capital Management, and Fran Diedrich, HR Director. Acting Chairperson Cornell called the Board's attention to the two sets of minutes included with the Board Package. The first Minutes were for the quarterly meeting held on May 14, 2003. The second Minutes were from the meeting in which this Board attended a City Commission meeting. She advised that both sets of Minutes had been circulated to all Trustees for review. The Trustees were asked if there were any corrections or additions to the Minutes. There being none, it was, on motion made by Trustee Ison and seconded by Trustee Bishop,unanimously RESOLVED that the minutes of the Board of Trustees of the General Employees Pension Board of May 14, 2003 and the minutes of the Board attendance at the meeting of the City Commission and they are hereby approved. Acting Chairperson Cornell called upon Tim Nash of TRUSCO Capital Management for the Money Manager's Report. Mr. Nash advised the Board that he was pleased to announce that the Fund had made great headway in the portfolio, especially for the fiscal year to date. He called attention to the fact that the third fiscal quarter was above the actuarial assumption. He said that the marketplace had been very strong with much of that due to the equity markets. He stated that, across the board, equities were really strong. He reported that the S&P for the quarter was up 15%, the Dow was up 12.9%,NASDAQ was up over 21% and international stocks were up 18%. He reminded that those were actual numbers for the quarter only, not annualized. The smallest stocks within the S&P universe were the better performers and the large caps tended to lag. He said that had been the case for the quarter and the last couple of years, but in general,the equity market was doing very well. He added that when equity markets are strong, bonds end up going down but that was not the case for the most recent quarter or for the year as bonds also performed strongly for the quarter. The Lehman Aggregate Index was up 2.5% for the quarter. That Index includes treasury bonds, corporate bonds and mortgage- backed bonds. Mr. Nash added, on a more current note, that the Fed announced yesterday [August 12, 2003] that the interest rates would remain the same and that was a General Employees Pension Fund Board Meeting—August 13,2003 Page 2 big boost in the market. He indicated that it was a general consensus that the probability (60 of rates rising would be slim on the short term side, short term rates were expected to remain in the same range for quite some time which should result in a boost for the market. He advised that it had been a very low inflationary environment in the marketplace, short term interest rates on the monetary side and the government policy of reducing taxes on the fiscal side had been much of the stimulus put in place to move the markets for 2003. He said it takes a while for the economy to feel the effects of these moves, anywhere from 12 to 24 months. He said short-term interest rates are at a 45-year low and that is very helpful for corporations or city governments doing short-term borrowing. It helps them lower their overall funding costs. Additionally, the $300 to $600 year refund checks from the IRS, and changes in tax tables, which are being done on a graduated scale over a 5-year time period starting in 2001, are putting more money into the consumer's pockets. Mr. Nash called attention to the performance of the equity markets. He said the quarter that ended in June was the best quarter seen in the equity market in the last five years. In reviewing the rolling twelve-month plan period, there was a lot of negativity in the different sectors of the market place. For the quarter, all sectors did well in the S&P and one of the strongest performers was technology,which is overweighted in the growth fund. He said the industrial sector did extremely well as did financial stocks. He pointed out that Merrill Lynch had looked at 1,600 public companies in the U.S. and looked at their quality rating. The quality rating is a rating from S&P and is essentially based on how consistent they are with dividends and earnings. The ratings are from A+ on the high end to D at the low end of the range. Since inception, the strategy for this Plan has been to buy the better qualifying companies. He said there are instances where owning the lower end companies [C &D range] has produced higher dividends and there have been some owned in this portfolio, but in general the portfolios are much higher quality. Trustee Sauerwein asked for an example of the lower quality range stocks. Mr. Nash answered that Lucent Technologies would fall in that range. He said that even with the earnings strained issues; there are some of the major local phone companies currently owned such as BellSouth and SPC Communications. He stated that there was still zero exposure to telecom and utility stocks in the growth fund because their earnings growth is slowing down. He added, however, that on the value side,which is a completely different discipline and strategy, they look for companies that are somewhat beaten down on the stock price,have a very strong dividend and could potentially be a turnaround story, and there is some exposure there. He said that, in general, the overall mix of stock is light on those two sectors. Mr. Nash reported that the Plan closed out on June 30th with$8,558,782 and continued to look better at the end of July [value as of August 11 was $8,638,446]. He said the actual gain for the quarter was 7.85%. He reminded the Board that there has been a manager change in February and that the new manager was restructuring the portfolio. He expected the transition to be complete in August and then it would be possible to evaluate General Employees Pension Fund Board Meeting—August 13,2003 Page 3 his performance. He stated that the asset allocation was very near 60% equity and 40% fixed income. Mr. Nash called attention to the individual fund fact sheets and talked about the high- grade growth fund. He reminded that there was zero weight to telecom and utilities, which hurt the fund's performance during the quarter and calendar year to date. He also advised that there had been a little difficulty with Johnson&Johnson, which is in the top ten holdings—almost 3% of the portfolio. He said it has been in the portfolio for over a year and the issue for them during the quarter was related to heart stints. He explained that when a heart stint is put in it is supposed to support the artery and keep it open. They were getting scar tissue building up around the heart stints so one of the things Johnson & Johnson did to correct that was to put a chemical on the heart stint that would stop the artery from scaring over and that was an exciting development. He said that a problem arose because heart stints have a shelf life and Johnson&Johnson had expected the FDA to approve the heart stints with a shelf life of a year. The FDA denied that request, stating that the stints must have a shelf life of only six months. Johnson&Johnson had increased production for the proposed twelve-month shelf life and the FDA's ruling resulted in a lot of product that would have to be trashed, unable to be sold. That had negative income on the stock. Trustee Bishop asked if that meant Johnson &Johnson would probably not be a top ten holding for the next quarter. Mr. Nash responded that it still would be as it has been a solid performer for the last year and a half and had been at a lofty level so that news just gave back some of the gains. Mr. Nash reported that international stocks were starting to do better because earnings in foreign companies were a bit stronger plus their prices were significantly beaten down. He added that the dollar value had fallen and that had also helped some of the current earnings of international stocks. Explaining the high-grade bond picture, he said that interest rates had been influencing the bond portfolios. He reminded the Board that TRUSCO has been making changes within the portfolio to be prepared for a rising interest rate environment, and that has not yet happened. He stated that there is in place a bar bell strategy which means that the bulk of the portfolio, almost 70% is in bonds that mature in three months out to five years. He said there was a little bit of exposure on the other side with almost 20% of the bonds on the 20+time frame. He said that the reason for having the portfolio so short is that if interest rates go up, the portfolio will be less impacted as bond prices will not go down as much as if the bulk of the portfolio was out in longer term bonds. He said that is part of the strategy to help protect as interest rates start to move up over the next 12 to 24 months. Trustee Bishop commented to Mr. Nash that he had noticed the U.S. Treasury part had increased significantly from the last quarter and asked if that was because of what he had reported with regard to the rates. Mr. Nash answered, calling attention to the 5 to 7 year maturities, He said the thought was that the yield curve would flatten out a little bit from inflationary pressure as the long term rates go up or the short term rates come off and that the yield curve is currently upward sloping. As it starts to flatten, the bonds that get hurt General Employees Pension Fund Board Meeting—August 13,2003 Page 4 the most are the 4 to 8 year maturity, so if the 5 to 7 years bonds were emptied out and sold and some of those are put in the treasury bonds further out, it differentiates the change that occurred during the quarter. He reported that the Plan is still getting average coupons of about 5.2%, which for nearly four years in a row there had been double-digit gains in the bond portfolio. He said that was not expected going forward, that earnings should be closer to the coupon as interest rates rise and that over the next 2-3 years earnings are expected to be barely 5%. Mr. Nash asked for any questions or discussion. There being none, he closed his report by saying it had been nice to bring such a good report and hoped he would be able to bring an equally good report for the quarter ending September 30. Acting Chairperson Cornell thanked Mr. Nash for the good report and then asked him for the status of the proxy policy guidelines. Mr. Nash said it has taken a while to finalize the proxy policy because there have been some changes the FCC put into place at the beginning of 2003 which necessitated some additional changes but that it is finally done. He advised that the FCC required that as of August 6, 2003, all registered investment advisors, including TRUSCO and Merrill Lynch, had to have a proxy policy in place. He said that is something TRUSCO has had since the inception of the firm but now it is a mandate from the FCC. He added that the FCC also requires that the money managers be able to track client requests regarding proxy issues and that they give a timely turnaround for proxy issues. Now, based on FCC statutes, a response to client proxy requests must be made within 72 hours. He said this is a rather cumbersome task as far as paperwork so they are working with Institutional Shareholders Services [ISS]. That is a company that votes proxies on behalf of most money managers. They will be generating a lot of reports for TRUSCO such as the annual list of how proxies were voted on all the stocks in all of the portfolios of the Plan. He said that ISS has a corporate governance quotient where they, based on several factors, rank how well companies are rated for corporate governance. He said he did not know what the matrix was for the ranking but he would find out. He said that as of August 6, the letter regarding these guidelines went out and should be received shortly. He advised that it is a short quick summary, however, a copy of the entire policy [about 75 pages] had been ordered and should be out in the next couple of weeks. Acting Chairperson Cornell told Mr. Nash the Board looked forward to receiving all of the proxy information. She then advised that a representative from Merrill Lynch was unable to attend this meeting because of a scheduling conflict but that Mr. Larry Cole had left a message and made some comments. She said he commented that he did not feel that TRUSCO had a particularly good quarter in reference to the limited cap funds, that it was nothing to be concerned about but that it did not impress him at all. She then asked Mr. Nash if she had understood him to say he did not know what the current ranking for the Plan was. Mr. Nash said he had actually been speaking about the ISS Company that ranks other companies. He said he had a sense that most of the TRUSCO clients who have asset allegations similar to this Plan were near the bottom of the barrel for the quarter and for the last six months. However, he called attention to the fact that, over the last five years, the Plan should be near the top 25th percentile. He said the main reason General Employees Pension Fund Board Meeting—August 13,2003 Page 5 was the quality issue. He stated that he knew in their [Merrill Lynch] report, they had addressed the fact that the stocks that TRUSCO has a policy of buying, with the highest quality, did not perform well for the quarter but that's part of what has impacted the returns in the portfolio. He said that, while they are still good on the absolute basis among the peers in the Merrill Lynch universe benchmark, for the quarter and last six months, they were near the bottom of the pack. He reminded the Board that over the last three years,when the market has been ugly, that type quality emphasis has served this Plan quite well and the Plan is near the upper end of the range. He stated that TRUSCO thinks this is a temporary phenomenon, the issue of high quality stocks significantly under performing those lower quality stocks. In the limited cap fund, he said that Mr. Cole was right, the performance for the quarter relative to his benchmark was not good but he asked the Board to keep in mind that there is a new fund manager and he has been going through and changing the portfolio over the last couple of months. Trustee Bishop commented to Mr. Nash that he noted that the top ten holdings were completely different from the last quarter in the limited cap fund. Mr. Nash said there were a lot of technologies in the portfolio in the past that just were not strong performers and that is one of the things that is being reviewed by the fund manager and there are several that he does not feel should be in the portfolio at this time. He said that is also influencing the limited cap funds' performance for the quarter. He added that they do not feel that shows a true picture of the new manager's abilities, that by September 30, they should be better able to gauge how he is doing. Acting Chairperson Cornell asked if that meant that by the November meeting, there should be some changes in the numbers. Mr. Nash indicated they expected to see them improving. Acting Chairperson Cornell asked for any other questions or comments from the Board. Trustee Ison said he would like to point that in Larry Cole's report it showed that this Plan was in the bottom 11% of the public pension funds, earning 7.9%, in the long term the Plan is in the top 23%, and the last five years it was in the top 34%. He said that he feels comfortable with it because the focus is on the long term. Attorney Denner said that he had asked that the ISS corporate governance quotients, as mentioned by Mr. Nash, be provided along with the quarterly reports to the Board. He said this goes along with the new fiduciary responsibilities being set forth by the FCC and other organizations, that there are additional fiduciary standards and prudence to comply with. He said that is why this Board has discussed the proxy voting guidelines and receiving those and getting reports on proxies and, similarly now, fiduciaries such as TRUSCO are being mandated and institutional investors are more proactive with respect to corporate governance. If there were an unacceptable grade on corporate governance, the Board would not mandate a sale. That would not be within the authority of the Board but it would be on record that it had been discussed and, if it is being retained in the portfolio, the reason why. He said this is all very recent. He mentioned that he had attended a meeting in which the question came up about whether you could be assured there would not be a blow up in a company,which has high gain corporate governance. General Employees Pension Fund Board Meeting—August 13,2003 Page 6 The answer to that would be no and he used fraud as an example. He told the Board that liabilities for fiduciaries are determined by procedures that are implemented to administer Plans in following those procedures. He said that is what this is really all about for the standpoint as fiduciaries to be protected from liability because those procedures are put in place. He said it would not guarantee that there would be no lose of money in a company that has a high governance grade, but is simply a procedure that needs to be followed. Attorney Delmer next advised the Board that he had spoken with Diana Garcia of TRUSCO and asked her to look into combining the value of this Fund and the Police & Fire Funds for the purposes of application of the fee schedule. He said there is a break point of ten million dollars with 75 basis points for the first ten million and then it goes to 40-45 from there and by combining the assets of both Funds,both could get the benefit of a lesser fee. Trustee Bishop stated that the total assets of both funds would be 18 million. Trustee Ison asked if it would be necessary to adopt an ordinance for the City Commissioners to approve. Attorney Denner said this was strictly within the Board. Trustee Bishop thanked Attorney Dehner for making a point of the fee schedule with TRUSCO. Trustee Ison asked if both Boards would have to vote on some type of resolution to do this. Attorney Dehner said it would be a simple agreement and that he would be processing new contracts for each Fund anyway and, if agreed upon, he would put in the provision for combination of the two Funds just for application for the fee schedule and then he would provide that to Diane to have TRUSCO sign and send it back to Trustee Cornell so each Board can sign. He said this would certainly be something that both Boards would need to approve because of the availability to each of them. Acting Chairperson Cornell asked if there would be any combination of assets physically or mathematically between the funds. Attorney Dehner said there would be no co-mingling of funds; the funds assets total would be used for fee purposes only. Acting Chairperson Cornell thanked Mr. Nash for the report and directed the Board's attention to new business stating that Item A on the Agenda called for the appointment of a records retention officer. She advised that she had spoken with Trustee Sauerwein and that he had agreed to handle the position. She then called for a motion. On motion made by Trustee Ison and seconded by Trustee Bishop,it was unanimously RESOLVED that Trustee Jerry Sauerwein would serve as Records Retention Officer for this Board. Attorney Delmer suggested that the Board also,by motion, adopt the Records Retention Schedule he had included, referenced as GS 1 L. Trustee Bishop asked if this was something that was being done statewide. Attorney Dehner advised that was correct and said that the reason this Board needs to make this designation as well as other City Boards such as P&D and Code Enforcement is that by virtue of law each is an independent legal entity and would therefore be individually responsible. Acting General Employees Pension Fund Board Meeting—August 13,2003 Page 7 Chairperson Cornell called for a motion. On motion made by Trustee Ison and seconded by Trustee Bishop, it was unanimously RESOLVED, that the General Records Schedule, GS1L, be adopted as ordered by the State of Florida. Attorney Dehner advised Records Retention Officer Sauerwein that he would need to fill out the resolution form that is provided annually and confirm compliance with this and then the resolution form would needs to be sent to the Bureau of Archives and Records Management and a copy should be kept for the file. Trustee Ison asked if there was a time frame in which this procedure needed to be completed. Attorney Dehner advised that since it was adopted today, it should be done in a reasonable time, that there was not a deadline date. Acting Chairperson Cornell stated that she noticed there was a blank resolution number and asked if the number is something the City would need to put in. Attorney Delmer said this was probably the first Board Resolution number adopted and he recommended that it be 03-1. Attorney Dehner further commented about the Records Retention Schedules, advising that they showed minimum retention times by recommendation. He said that, in most cases, records were kept longer than those minimum times and should Records Retention Officer Sauerwein want to destroy any records, he would come to the Board and identify those specifically and that would be a Board decision before anything would be destroyed. Acting Chairperson Cornell then called the Board's attention to the term ending dates for two of the Board members and asked if anyone knew about Trustee Mike Miller. Trustee Ison said he had spoken with Trustee Miller and had been advised that Trustee Miller had already advised the Commissioner who had appointed him that he did not want to be reappointed and that the Commissioner was aware of it. Acting Chairperson Cornell said that had all been done verbally and asked about a letter of resignation. Trustee Ison said he would ask for one if Attorney Dehner said that would be appropriate to do. Attorney Denner said yes so Trustee Ison said he would contact Trustee Miller. Attorney Delmer said that upon receipt of that letter, the Board should request the City for another appointment. He suggested that if the Board knew of any individual that may want to serve, they could report that name to the City for consideration. Acting Chairperson Cornell stated that she knew of an individual who wants to serve who also happens to be an employee of the City so she asked Attorney Dehner if that would person would be eligible. Attorney Dehner advised that the Commission appointment could be a City employee and that person would have to be a resident. Trustee Sauerwein asked if there would need to be an election. Acting Chairperson Cornell said it would not be necessary for this particular position. She then said there would be two other positions expiring, those of Trustee Sauerwein and Trustee Ison. She asked Trustee Ison if he would be staying. Trustee Ison answered General Employees Pension Fund Board Meeting—August 13,2003 Page 8 that he was presently planning to stay two more years, until the Fund was up over ten million. She then asked Trustee Sauerwein if he would like to continue. Trustee Sauerwein responded that he would. Attorney Dehner asked if anyone knew if Trustee Miller had filed his Financial Disclosure and advised that the fines would start if not filed by September 1. He also reminded that when Trustee Miller officially stepped down, he would also have to file. New Trustees would be required to file a form within 30 days. Acting Chairperson Cornell said she would make a memorandum of the date this was covered so it would be in record form and would make it part of the next quarters correspondence. Acting Chairperson Cornell then called attention to a new form, courtesy of HR Director, Fran Diedrich. She called on HR Director Diedrich to explain the form. Ms. Deidrich said this form would be the one used to verify prior government or military experience and it was necessitated by the approval for the ability to buy back time for general employees either for military service or for other government service. She said the form would be completed by the employee and then sent to the former government entity to be verified. She said it was a standard form and asked Attorney Denner if he had had a chance to look it over. Attorney Dehner responded that he had and it looked good. HR Director Diedrich said it verified the background information and was needed before going to Foster& Foster. Acting Chairperson Cornell told the Board that HR Director Diedrich would like Board kiry approval of the form so it could be made part of the package. It was on motion made by Trustee Bishop and seconded by Trustee Ison, and it was unanimously RESOLVED, that the form presented by HR Director Diedrich be approved as presented and should become a part of the personnel package for purposes of buying back time for general employees for military service or for other government service. Moving on to the next Agenda Item, Acting Chairperson Cornell commented on the recent Trustee Seminar. She told those Board Members who had been unable to attend that this had been the best Seminar she had attended. She said it had been comfortable and a lot of information was passed back and forth, not only from the speaker but also from the audience. She directed the Board's attention to the signature sheet from the seminar, which she had included with the Board package. This showed that that were people from Winter Garden, Apopka and Oviedo attending and she advised that she had received gracious comments and thanks from those cities. Acting Chairperson Cornell returned to Section A, Item III of the Agenda regarding the distribution of the Summary Plan Description. She advised that process had begun and that everyone should now be receiving his or her updated Summary. Attorney Dehner commented that there were a few issues discussed at the Seminar and then were subsequently discussed by he and HR Director Diedrich and that the Board General Employees Pension Fund Board Meeting—August 13,2003 Page 9 may want to consider having him prepare a memorandum to be distributed separately to all of the Plan members on a few issues that may be of particular importance to them. The items specifically discussed were the manner in which pensions can be forfeited, the differences with respect to divorce and public plan members versus private plan, and the conditions needed to meet to have the presumption of inline illness in case of certain infectious diseases. He added that the last item was actually just for Police &Fire. He said that the items specifically with respect to this Plan, which were talked about, were the forfeiture of the divorce and special provisions. He asked the Board if there was anything else they thought would be beneficial. Acting Chairperson Cornell said that those were the two items she and HR Director Deidrich had discussed in depth and was in favor of having this memorandum generated by Attorney Denner. She asked if there could be a combined letter for General Employees and Police & Fire. Attorney Denner stated that he could do the memorandum either way but that there were actually two differences, the one related to inline presumption of infectious diseases and a second one regarding an additional forfeiture provision which is not in this Plan. Acting Chairperson Cornell said that it would be her suggestion to do the memorandums separately. After a brief discussion, she entertained a motion. It was, on motion made by Trustee Ison and seconded by Trustee Bishop, unanimously RESOLVED, that Attorney Lee Dehner be directed to produce a memorandum for distribution to all of the General Employees Pension Plan (lisv Members as a method of explanation of the manner in which pensions can be forfeited and the differences with respect to divorce and public plan members versus private plan members. The memorandum would be produced within three to four weeks from the date of this resolution. Distribution of the memorandum will be handled as a separate distribution, not included with paychecks, and will be done under the supervision of HR Director Fran Deidrich. Acting Chairperson Cornell called the Board's attention to correspondence from Foster &Foster regarding the employees who were in a prior plan. The correspondence, dated August 6, is on the subject of old terminated vested individuals. There was one particular person that had not been identified [later determined to be Susan Curry]. It also identified four additional members, one who is deceased and a gentleman by the name of Jerry Reid who is a firefighter and was a general employee prior to becoming a firefighter. Acting Chairperson Cornell advised HR Director Diedrich that she would email a copy to her for her files. Acting Chairperson Cornell called upon Trustee Bishop to discuss payment of bills. Trustee Bishop advised the Board that all of the bills had been forwarded to Diane Garcia for payment. Those bills included the attorney's bill and a bill from the City for copying costs. The payment of quarterly fees to SunTrust was deducted automatically from the account. After a brief discussion of the bills, it was on motion made by (bie Trustee Ison and seconded by Trustee Sauerwein, unanimously General Employees Pension Fund Board Meeting—August 13,2003 Page 10 RESOLVED, that all bills be paid as presented. Acting Chairperson Cornell then called upon Attorney Dehner for any comments. Attorney Dehner informed the Board that the update on Senate Bill 330 and House Bill 133 is that they have once again been put on the calendar for the special session that presently is in session. He said that the primary purpose of that was to try to get malpractice legislation passed since the Senate and the House had reached an agreement. He said if it did not pass this Session, there was another Special Session tentatively scheduled for October. Attorney Denner then gave the Board an update on the litigation between the Division and League of Cities on the issues of the proper use of extra State monies over 1997 for police and fire is proceeding forward. He said if the bill resolving the issue did not pass in the Session in October, he thought the regular Session 2004 would come and go before the litigation resolved the issue. He reminded the Board that if the Attorney General's interpretation of compliance were to be adopted, that would be negative for the General Employees Pension Fund because that would do a value differential measurement between this Plan and the Police and Fire to determine compliance and if this Plan would be improved under that interpretation,before improvements to this Plan, the City would have to look at Police and Fire and see what effect that might have on theirs because, depending upon the measurement, if this Plan were to improve, it might force the City to improve Police and Fire as well providing a disincentive of the certain cases that would approve this Plan. He stated that, on the other hand, if the Division position was to be adopted it would improve this Plan and have no impact on Police and Fire. He said he would continue to watch this and keep the Board informed. Attorney Dehner then addressed the amendment to 112, the Travel Expense Reimbursement. He reminded the Board that in January of this year, the Attorney General reversed what would have been the prior provision with respect to the ability of the City to revise and adopt its own travel reimbursement schedule irrespective of what is in 112, and this Board is to follow City policy. In January the Attorney General said the City could do that but could not exceed the maximums in the statutes. He said that was essentially undone by Statute 1426 of the Senate which passes this present Session and that allows the City to set its own travel reimbursement schedule. He added that this Board would then follow City policy. Attorney Denner reminded the Board about the situation regarding reemployment of retirees. He said this had been addressed in prior meetings and he had indicated that he had never before seen any situation in which someone who had retired wanted to come back to employment with the same employer. He went on to say that all of that has changed in the last year and people are wanting to come back to employment after early retirement or until time to start drawing benefits. He said this is probably because of the bad stock market and the bad economy. He reminded this Board and HR to be on the lookout for any situation where a retiree in this Plan or any of the other City Plans wants to come back to employment and the City wants to bring that person back, the first thing General Employees Pension Fund Board Meeting—August 13,2003 Page 11 that should happen is to give him a call because it would need to be structured in a way so that it does not violate Federal IRS rules against in-service distributions and also, if it is person coming back in the case of this Plan as a general employee and they would be in the Plan again, the Plan would need to be amended to address that situation. He said that amendment could be done now but he did not recommend going to the time and expense of doing it in the case that it might never be relevant. Trustee Ison asked if contributions could be retroactive for that employee if needed? Attorney Dehner said that what was provided in the Plan would determine what would happen. He said that probably what would be done is to provide the first day of reemployment as the second period with contributions beginning at that point and it would be an entirely separate piece of benefit from the first, completely segregated, then when the person retired after the second period of employment, that second piece would be calculated just based on those years of service salary average for that benefit rate and then they would be combined with two pieces for the benefit check. Acting Chairperson Cornell asked if she was correct in her understanding that it would be specific to those employees who were receiving a pension monthly amount, not for those that rolled over or were taking a lump sum distribution. Attorney Dehner told her she was correct. He said that anyone who had withdrawn their contributions from the Plan returning for a second period of employment, for that second period of employment they would be starting from day one just as they did on their first period of employment. HR Director Diedrich asked about part-time employees. Attorney Denner advised that part time would not be in this Plan because this Plan is full time employee participation �r only. There was a brief discussion between Attorney Dehner and the Board Members and HR Director Diedrich about the rules against in-service distributions, which has an IRS qualification requirement. Attorney Dehner said that if the requirement is violated, the Plan could be disqualified and that would be catastrophic for the Plan. In response to a question from HR Director Diedrich, he responded that under IRS rules with respect to gap the period of time between when retirement begins and an employee can come back there should be three months in between. Acting Chairperson Cornell directed attention to setting the Agenda for the November 12 meeting. Trustee Ison said there were two things he would suggest carrying over, the first being the virtual combination of this Fund with the Police and Fire for fee purposes and the second was in answer to a question from Commissioner Danny Howell with was brought up at the Commission meeting which this Board attended. Commissioner Howell had asked if there was a cafeteria plan for the employees where they could choose 10-and-out, 20-and-out, 30-and-out, 40-and-out, etc, versus the majority rules on the way things have been done in the past were there was basically one plan and all the employees vote to adopt it. He said he had asked Attorney Dehner to make some brief comment on whether this type of Plan could be run. Attorney Dehner said it could be, that if someone wanted a better benefit rate and was willing to put in more member contribution for that rate that would be a tier benefit and it could be if someone wanted an early retirement age and they were willing to fund additional contributions, this Plan (10 could do that. He said there are not many tiered plans in the State, but there are starting General Employees Pension Fund Board Meeting—August 13,2003 Page 12 to be more and more. He added that in order to assure quality in the benefits and there was no discrimination in terms of value in benefits between the different tiers, Foster& L Foster would need to do the calculation. He said that Foster & Foster had indicated to him at a meeting for another Plan that the administrative costs would go up because of a different kind of administration. He said he did not know about an increased cost for legal expenses. He then asked for any comments. Acting Chairperson Cornell said it would be something to put on the Agenda for further discussion. Trustee Ison said that this might be put on a general meeting and employees could at the meeting for discussion. He reminded that it is the employees' money. Trustee Bishop said that he felt that changes had been discussed this past spring and the results were that the vast majority of the employees wanted to stick with the Plan with no changes. After a brief discussion, it was determined that this could be discussed again at a later time. Trustee Ison asked Mr. Denner and Diane Garcia if they had clients with a cafeteria plan in place. Diane Garcia indicated that she was not aware of any. Attorney Dehner said that he knew of a couple with one in particular, Fernando Beach, which has had two tiers of benefits for a long time. Acting Chairperson Cornell asked if their work could be used as a model for this Plan. Attorney Delmer answered that he could provide copies of their Plan provisions if the Board thought that would be helpful. The Board members all indicated they thought that would be good to have. Acting Chairperson Cornell thanked Attorney Dehner and stated that this would be addressed in spring 2004. Acting Chairperson Cornell recognized one of the General Employee Pension Fund Members who was in attendance, Alex. He asked for clarification of the retirement age (by for the Fund and wanted to know if it would be as it is at 67 for Social Security. Acting Chairperson Cornell answered that these were two different things, that for Social Security, age 67 was correct, but for this particular Plan, early retirement is 55 and normal retirement is 60 once vested and an employee must be with the City for 5 years to be vested. Trustee Ison commended Acting Chairperson Cornell for the great job she had done on the Board package and on Chairing this meeting. Attorney Denner also commended her for the good organization she provided for the seminar for the required trustee education by saying that the one held here had been the best organized of any he had done this year. Acting Chairperson Cornell thanked everyone for their nice comments. She then asked if there was any other business for discussion. There being none, the meeting was adjourned. Respectfully submitted, Jo Ann Lacey Recording Secretary of the Meeting ie,(9 " Approved By: Patricia Cornell, Acting Chairperson L