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HomeMy WebLinkAbout11-09-2005 Minutes Minutes of the Regular Meeting of the CITY OF OCOEE GENERAL EMPLOYEES PENSION BOARD Held on November 9, 2005 At 150 N. Lakeshore Drive Ocoee, FL 34761 AGENDA ITEM I. CALL TO ORDER— Chairman Swickerath A. Chairman Mary Anne Swickerath called the meeting to order at 10:10 a.m. in the Commission Chambers in City Hall. She called on Secretary Jean Grafton to call the roll. Present were Trustees Tom Hendrix, Mary Anne Swickerath, Russ Wagner, Terry Reed and Jean Grafton. All Trustees were present and it was declared that a quorum was present. Also present were Attorney H. Lee Denner, Recording Secretary of the Meeting Jo Ann Lacey, Human Resources Director Jim Carnicella, Mike Sebesta and Diane Garcia representing Trusco Capital Management, Mike Callaway representing Merrill Lynch, and Ward Foster representing Foster& Foster. B. Approval of Minutes from Regular Session dated August 10, 2005 and Special Session of September 9, 2005. Chairman Swickerath called for review of the Minutes as stated. Secretary Grafton advised that Mr. Callaway's name had been spelled incorrectly as "Callahan." She advised that she had already made that correction on the minutes that were to be signed upon approval. There being no other additions or corrections, it was, on motion made by Trustee Grafton, seconded by Trustee Hendrix, RESOLVED that the Minutes of the Regular Session of the Board of Trustees of the General Employees Pension Board of August 10, 2005, and the Special Session of September 9, 2005,be and they are hereby approved as amended. AGENDA ITEM II. NEW BUSINESS A. Money Manager's Report—Michael Sebesta, Managing Director, Trusco Capital Mr. Sebesta reported that the economy had continued to grow despite the facts of the hurricanes and high interest prices. He stated that the feeling was that the growth would continue at a very moderate pace described by some as a"Goldilocks" economy, not too fast, not too slow. He said that the Federal Reserve continued to raise short-term interest rates at a regular pace and it was expected that the rate would be 4-1/2%by the time Greenspan retired in January of 2006. He said that early indications are that the economy picked up after the hurricanes hit in the summer; and that would be good for the economy, as the Federal government had tried to trim their budget deficits in the last couple of quarters. He said they would soon be in a position to start spending again because of the hurricane cleanup. He stated that the hurricanes had a very temporary impact on the economy but overall the effect would be positive. Calling attention to the account summary, Mr. Sebesta reported that 9/30/05 was the end of the Fiscal Year for the plan. He said that at the beginning of the Fiscal Year the value of the plan General Employees Pension Board Quarterly Meeting, November 9,2005 Page 2 of 12 was $10-1/2 million and at the end was just shy of$12 million, so it had been a very solid year from the growth standpoint. He reported that the Fiscal Year had a return of 9.3%, which exceeded the 8% actuarial assumed rate. He reported that the total equity number for the Fiscal Year was up 13.6%, which exceeded the S&P 500 of 12.4%. He said that the high-grade growth fund was about 26% of the portfolio and that it continued to drag the performance down; however, outside that fund there was good performance in the large cap value portfolio. He reported there was also good performance in the mid-cap fund, small-cap fund, and international. He said they had been very much disappointed in the high-grade growth fund and that it did continue to trail the benchmarks. Mr. Sebesta asked if there had been an approval for increasing the international allocation that had been discussed at the last meeting. Trustee Grafton informed him that it was, but the attorney's signature had not been on the Ordinance so it couldn't be forwarded. Mr. Sebesta stated that at the last meeting he had been asked by the attorney to get some information on the commissions and the commission recapture plan. He said that there are a couple of different parts to the formula and that they do not have all of the pieces put together yet. He said that the issue had come up because the commission recapture dollars had run a bit lower than had been originally expected; and that their Atlanta office was doing an analysis that would be available later. He added that expenses had also been going up as a result of new legislation and Trusco and some of the consultants have had to hire new analysts. Attorney Dehner reminded that this had been discussed at the previous meeting, and that they had asked for the analysis,because when it was presented to the Board it was said that it would be beneficial to have the separate management to be able to recapture some of the commissions, and that overall it would be a financial benefit to the fund. He said that it now appeared that might not be the situation and so he had asked for the analysis, and when it becomes available, the Board should discuss at that time whether or not to go back to the co-mingled funds, as it had not worked out as presented. Mr. Sebesta promised to have the analysis available for the next meeting. Attorney Dehner asked that it be provided to the Board in advance in order that they would have a chance to review it for discussion purposes. B. Monitor's Report—Michael Callaway, Merrill Lynch Mr. Callaway reported the fund value at 9/30/05 as $11,986,110 per their evaluation that reflected a net of$2.6 million in earnings over the period since beginning in 1999. He reported earnings over the last quarter of$244,495 and $987,622 for the entire fiscal year. He stated that on an absolute basis these were good numbers; however, on a relative basis when compared with results of other public pension funds whether in Florida or nationwide, this fund was below average for the Fiscal Year. Mr. Callaway explained how the asset allocation affected the funds. He reported that the international portfolio was up 27% for the fiscal year; however, this plan had only 6% invested in it, although Trusco could have invested 10% according to the limit. He then reported that the retirement mid-cap fund which had only 4% invested in it was up 27% for the year. He said that General Employees Pension Board Quarterly Meeting, November 9,2005 Page 3 of 12 there currently is only the most modest limit in this policy but hasn't come close to reaching that limit. He stated that the core/growth portfolio is the one that has the most investment but has done the poorest job recently. He said that it had done a good job over a 5-year period-- outperforming its peers --but of the more recent period during this past fiscal year, it had underperformed its peers and had a very modest 6%return yet there was continually 26-27% of the fund's money invested in it. He expressed his concern about Trusco's performance and their focus on that one single fund, however, that is not the only issue to be considered. Trustee Wagner mentioned that in one of the recent retirement seminars there was a segment about risk and returns and a counter-intuitive theory that sometimes when you are more conservative you are actually more risky. He said he got out of the seminar that you are better off diversifying even though there may be down years where things are more volatile but over the long term you are able to grab the profits when they are there, and over the long haul you are going to get more money. He stated that if the money manager is so focused on one segment it appears that they are not doing a good job of diversifying. Mr. Callaway indicated his agreement. He stated that he had never seen anyone anticipate accurately which one of the categories of investments would be doing the best next, so what they typically try to do is establish a good long term diversification including each one of the categories, and if something is not working, you take money away from it and if it is working, you add money to it and you stick to that strategy for a long term decision. He said that under the present arrangement with Trusco, they are the sole manager and they have been given the sole discretion regarding portfolio allocations within the policy guidelines. He cited the example that for the last three years foreign stocks have averaged 27%per year; and although the policy guidelines give them up to 10% available for investment, Trusco has taken the strategy that relative to US stock that it should be underweighted, even below that limit. He said Trusco did not take advantage of what was happening with the market because they did not think it was as good as all of the others. That was their decision on their part to allocate. He added that Trusco probably does asset allocation as well as anyone; however, in this case it did not seem to be terribly successful. Mr. Callaway returned to the report of the Fiscal Year To Date returns and the 9.3% overall return. He stated that is better than the actuarial assumption rate of 8%but ranked only in the 77th percentile in a ranking of 99 with 1 being the best return and 99 being the worst. He went on to explain about the target index and the fact that if the funds had just been put in an index fund for the year and Trusco had not actively tried to manage the portfolio, the return on the fiscal year would have been 11.0% instead of the 9.3%. He explained that the crux of the problem over time has been due to the asset allocation decisions. He said that this is a very conservative portfolio. He said there were issues of style and poor stock selection. He did, however, call attention to previous years where, versus this same universe of large cap growth managers, when the index was down 2.5%, Trusco was up 2.5%, ranking in the top 18th percentile, so long term performance has been good but near term performance has definitely been poor. There was a general discussion about the importance of protecting the assets even during a down market and the fact that Trusco has continually done that. Mr. Callaway called attention to the handout he had distributed and went into an explanation of what was being reported. He then expressed his contention that the performance in the various funds was always determined by the General Employees Pension Board Quarterly Meeting, November 9,2005 Page 4 of 12 allocation between the various funds and then, in the longer term, the allocation between stocks and bonds. Attorney Dehner asked Mr. Callaway for more explanation, as he said he had understood him to say earlier that the primary reason for underperformance was poor stock choice in the growth funds and that it now seemed he was referring to diversification asset allocation as the problem. Mr. Callaway answered that probably 70% of the problem is the allocation among funds. Trustee Wagner mentioned that he was looking at the reports and noted that looking at the 6 year target it did not appear to him that the targets had ever been reached, that it had come close every year but always seemed to be 2%to 3% off. He asked how direction could be given to Trusco to let them know the Board would want them to at least reach the target index. Mr. Callaway answered that Trusco has taken a more conservative approach and he felt that the reason they have not made changes to the allocations now is because they think there may be a more opportune time to buy and are making that decision. He said that he could see the rationale for what they are doing, and Merrill Lynch's advice has always been to be as diversified as possible, stick with the plan and don't try to call the market. Trustee Wagner asked why there would be a target index if they were not going to try to meet it. He said that it would be one thing if the results were over a little bit one year and under a little bit the next, but somehow closer to the target, however, these results are consistently under the target. He said he understood the idea of being relatively conservative; but in over six years the target has not been hit, it seemed to him that was a long time to wait for the market to turn back. He then asked what needed to be done to get closer to the target. Attorney Dehner reminded the Board that it would not be prudent for them to give the manager any more specific direction with respect to management than what is contained in the investment policy. Mr. Sebesta explained that as a manager you would expect to exceed the benchmark over a period of time. He said you increase your rate of return and lower the risk in the portfolio so that you have a more efficient portfolio and that is exactly what they are trying to do. He referred the Board to Page 8, under Tab I of the Trusco book for a summary of how they approach the asset allocation process. He confirmed that it is the asset allocation that drives performance. He stated that using the word `conservative' can mean different things. He said that their large cap portfolios are somewhat conservative as they have a bias toward higher quality names and that has certainly underperformed recently. He added that if you look at a 65%-35%mix, it is actually progressive. He said that international can be considered conservative but the portfolio was set actually to lower the risk. Mr. Sebesta advised the Board that he was taking away from this discussion the fact that Trusco was seriously on probation and that the consultant had already informed them of the need to improve their performance. He said they are focusing their attention on getting it turned around. He said he knows they need to get a better core under their belts. He stated that style has a lot to do with it and he expects it to turn in the next quarter. He assured the Board that they are making their best effort. Attorney Dehner asked for specifics on what is being done to improve growth performance. Mr. Sebesta responded that they are going to be sticking to their style and were not going to chase returns. He said their feeling is that by sticking to their style they would be coming back, that they had focused a lot of additional resources on that fund and think they will start to see those additional resources pay off on that fund. General Employees Pension Board Quarterly Meeting, November 9,2005 Page 5of12 Trustee Wagner mentioned that he remembered at a prior meeting that they had been shown a comparison by funds managed by Trusco and that this fund had been below the average even of the other funds within their own company. He asked whether those funds had a different style. Mr. Callaway advised that, several years ago, it became evident to Merrill Lynch that Trusco was handling clients differently and it had to do with their different disciplines. He reported that over the last couple of years, they have spent a great deal of effort trying to insure consistency for all clients and they are much closer than before. Mr. Callaway informed the Board that they have two choices. One is to give Trusco the discretion to continue to make the management decisions. The other is to hire a firm to do what is called `manager of managers." He said they do that at their firm but there are large fees associated with it and then you have to go out and hire other managers to handle the portfolios. He said that is a complicated issue and suggested, because of the size of the fund, to stay with one firm that give the diversification needed and handle it effectively. Mr. Carnicella mentioned that there might be one other option, which would be to go with a firm that pools funds such as this one together with other small clients and then performs as Trusco is doing with different managers within the firm who specialize in the asset allocation between the different funds. There was a discussion among all parties regarding the disciplines and styles of investing, and Mr. Callaway ended the discussion by stating that the vast majority of managers are most (1111, concerned with long-term allocation, no matter the discipline or philosophy. C. Actuary Report and Distribution of Annual Statements to Membership—Ward Foster, Foster & Foster Mr. Ward Foster called the attention of the Board to the report of the annual actuarial activity of the fund. He advised that the actuarial valuation is really a snapshot of what the program looked like on the valuation date of 10/01/2005, and that the projection of contribution requirements is for the City's fiscal year that begins 12 months after the valuation date and gives the City actual numbers to use for budgeting purposes for the 2006-07 year. He reported that total contribution is $1,176,453 which represents 18.3% of the annualized payroll of active members covered in the plan, $476,648 of which was expected be to contributed by employees leaving a City funding requirement of just under $700,000. He stated that the dollar amount for employee contributions went up slightly, which reflects the fact that there is a bigger payroll this year than last. He reported that the benefits provided to the members of the plan are tied directly to the salaries that are paid so, if there are more people with higher salaries and higher payroll, the contribution rate will go up based on that payroll. The funding rate went down from 18.9% to 18.3%which indicates the actuarial experience for the year was more favorable than expected. He stated that another component in reducing the funding rate was that a lot of people terminated employment and took their member contributions. The total of member contribution refunds during the year were $212,000, (which included several vested members) and the payment of those refunds freed up the City funded portion of their indirect benefit and that was a gain for the fund. General Employees Pension Board Quarterly Meeting, November 9,2005 Page 6 of 12 Mr. Foster gave a detailed explanation of the techniques that are allowed to be used in developing assets for funding purposes when using a smoothing technique. He explained that because of the several negative numbers that had been used based on prior year investment results, and now the turnaround in the investments, some of the averages determined have produced some bumps in the process; but all of that should be corrected now that the last negative numbers are being eliminated. He stated that the State Actuary, Charles Slavin, may send a letter expressing some concern about using an 8% investment return assumption; however,be advised the Board that if that should happen, his firm would be pleased to respond. He said their response is that the actuarial assumption has been developed on their best guesstimate of anticipated annual return, based on a long history of anticipated returns in this fund, going back to inception. He reported that they have easily made the 8% assumption and investment managers and asset consultants feel very comfortable with the prospect of the 8% assumption going forward. He added that in the last 3 years the 8% assumption has been beaten and there is an actuarial practice standards statement that says you choose assumption not based on short term experience but on long term expectation and long term historical information. Mr. Foster explained the process of the value of the assets for determining contributions. He stated that the fund is currently storing up favorable experience, which will help in any year when some help might be needed. That would allow a cushion, not impacting the funding rates by changing the actuarial value. He stated that in terms of how well funded the plan is, the value of benefits that all of the members have earned for their service up to the valuation date including all of the liability for holding for inactive people, retirees, dropped, and beneficiaries, the single sum of all of the assets that all of the people have credit for is about $9 million and there is $12 million in the fund so the fund is in a very sound position. Mr. Foster continued on with his report and noted, as a point of observation about Trusco, that there has been a lot of talk about how conservative they are but even though there was a negative 6%one year and a negative 5% one year, a lot of funds had double digit negatives in those bad years and that this fund has weathered the unfavorable years. He added that he did not know how Trusco does in favorable years but they weathered the storms well. He said there were a lot of funds for which the 4-year average last year was a negative number. In summary of the report, he stated that the investment experience was favorable and the City funding requirement was down slightly and that once the 4-year returns are above the assumption rates, there should be a nice pattern evolving. Trustee Grafton asked Mr. Foster if he would say that this fund is fully funded. Mr. Foster responded yes, adding that that term is hard to interpret. He said this fund is in a situation where checks could be written to everyone for benefits they have earned, vested or not, and there would still be money left over, so he would call that fully funded. Trustee Wagner expressed his concern that he had heard in this report that some of the members who had left the City had cashed out of the plan early. Trustee Grafton quickly responded that it appeared that someone had been giving out bad information to these members about what they would get if they left their money in. Trustee Wagner stated that though it was not a negative for the fund, it did not seem sensible for someone who had been in the program for years to cash out. It was suggested that Mr. Carnicella might want to check into the information being given to members who were leaving because a lot of the folks leaving are not General Employees Pension Board Quarterly Meeting, November 9,2005 Page 7 of 12 familiar with the program and if they are being given bad information, it is in the best interest of everyone to see that that is corrected. Trustee Wagner asked about the provision in the plan that would allow a new-hire member between the ages of 55 to 60 being entitled to a fully vested benefit at age 60 and whether or not that had a negative financial impact on the fund. Mr. Foster advised that that particular instance was insignificant in the big scheme of things. Trustee Wagner then asked about the current multiplier of 2.5% and whether that could be raised if the municipality contributed a set percentage of payroll every year, as opposed to the different annual amount currently required. Mr. Foster answered that that particular type of funding is called 'floor funding' and that, first of all, regardless of what fixed percentage the City might be contributing by Ordinance, the City still has to fund the plan to actuarial soundness. He explained, citing this year for an example, the City's funding requirement was 10.9% of payroll and, had the funding floor been 10%, the City would still have had to contribute 10.9%. He said that one of the nice things about a funding floor is that if you are in a climate where you are generating actuarial gains from favorable investment experience going forward, the impact on the City is going to be a reduction in their funding rate, all other things being equal. He added that with a funding rate of 8%, the City would be contributing amounts over and above what is needed to maintain actuarial soundness. He said that makes the fund healthier but it also gives the Board the opportunity to recommend benefit improvements and be able to make a presentation that requests the favorable experience be shared with the members in the form of a benefit improvement. He said this would afford the opportunity to implement benefit improvements without having to battle it out, because you could say that this is not going to really impact your current rate of contribution and in the good years (which hopefully will be experienced going forward again like in the 80s and 90s), there can be a lot of benefit improvements implemented through this mechanism. He said that he thinks it is a good thing. He added that it helps to save from a budgeting standpoint and if the Board diligently monitors the performance on the investment return, this is the only area of actuarial experience that the Board has any control over. Mr. Carnicella recommended the Board give some direction to the Actuary to cost out some of the things the Board members have mentioned. He then entered a brief discussion with Mr. Foster requesting clarification of why certain percentages were used in making their actuarial valuations and an explanation of the difference between the City's contribution to this plan and to the Police &Firefighters plan. Following further discussion, it was on motion duly made by Trustee Wagner, seconded by Trustee Hendrix, unanimously RESOLVED, that Foster& Foster, Inc. be and they are hereby directed to research the benefit improvement alternatives: 30-and-out regardless of age; increasing the benefit rate per year of service [multiplier] to a rate higher than 2.5%; and, gain sharing benefits,with a report available at the next regularly scheduled quarterly Board meeting, if at all possible. Mr. Foster then called the Trustees' attention to the memorandum he had distributed. He stated that its purpose is to provide a document that emphasizes that the Board of Trustees is the client General Employees Pension Board Quarterly Meeting, November 9,2005 Page 8 of 12 of Foster&Foster, and all of the work that is done that has anything to do with the retirement program should result from a directive or instructions from the Board and not from any other party. He reported that they constantly get calls, particularly during times of divorce, from either the plan member's attorney or their spouse's attorney, wanting to know single sum value of their benefit entitlement from the plan so it can become part of their settlement. He said that for any work such as that, the work must be initiated by the Board and the Board should notify his firm, and they will do what needs to be done at the request of the Board. He added that if there are items that the Board determines are not an appropriate expense of the fund it would then be appropriate for the Board to seek reimbursement of the expenses from the members. He reiterated that they work for the Board, not the city, not the members, nor any bargaining unit, and calculations are done only because of their involvement with the Board of Trustees. Trustee Grafton mentioned that the Board had received directions from the attorney to not be involved with any member regarding a divorce proceeding, to give that member Mr. Dehner's name and phone number. Attorney Dehner advised that there are two aspects of the dissolution of marriage situation. One is that if a member is getting a divorce, he or she should contact a Board member with their attorney's name and address and he should be notified and he will send the appropriate materials to the attorney in hopes of not receiving a court order that we cannot comply with, and having to spend money to go into court to get it amended or talking to the attorney, and that has been a very effective policy. He suggested that the Board consider an amendment to the Ordinance which would provide that, with respect to the compliance of our policy on notification of plan members getting into a dissolution of marriage, if that policy is violated and does result in an expense to the fund, that the plan member would reimburse the plan that amount for non-compliance with policy. He said the other issue is if the plan has to spend money for him or Mr. Foster to go to court, if it is for one individual plan member, that member should be required to reimburse the fund the expenses associated with that. Following a brief discussion, it was on motion made by Trustee Grafton and seconded by Trustee Hendrix, unanimously RESOLVED, that the City of Ocoee Municipal General Employee's Retirement Trust Fund Actuarial Valuation Report as of October 1, 2001, reporting Contributions Applicable to the City's Fiscal Year Ending September 30, 2007, as presented by Foster & Foster, Inc., be and is hereby approved as presented. Chairman Swickerath, following direction from Attorney Denner, asked Mr. Foster for his recommendation on what the expected annual rate of return will be. Mr. Foster answered that would be 8%. She then asked the money manager and monitor for their recommendations. Mr. Callaway answered that 8% was feasible and Ms. Garcia agreed. Following a brief discussion, it was on motion made by Trustee Grafton and seconded by Trustee Hendrix, unanimously RESOLVED, that the Board has determined, based on the recommendations of its consultants, that the total expected annual rate of return for the current year and each of the next several years and the long term thereafter will be 8% net of investment related expenses. L General Employees Pension Board Quarterly Meeting, November 9,2005 Page 9 of 12 Attorney Denner reminded Secretary Grafton that the language of this motion should go into correspondence to be signed by the Chairman, to Charles Slavin, the State Actuary, with copies to the City and to Mr. Foster. AGENDA ITEM III. OLD BUSINESS A. Review/Direction re Ordinance amending Plan to include City Manager and others and revising the titles of some Directors—H. Lee Dehner, Esq. Attorney Dehner said that, in accordance with the direction from the Board at the last meeting, he had prepared a draft Ordinance for discussion purposes stating that all general employees according to the plan definition of general employee will participate in the plan as a condition of employment, and has provided, however, that the City Manager, Assistant City Manager and Directors would have an opportunity to opt out of participation in the Plan. He said the generic `directors' deletes specific office references. He said that there was one issue not discussed at the last meeting—that was in respect to a time frame for those designated offices for the opt-out to occur, whether there should be a 90-day window or if there should be a window at all. Following was a lengthy discussion in which it was determined that the 90-day window be deleted and it was on motion made by Trustee Wagner, seconded by Trustee Grafton, unanimously RESOLVED that Attorney be and he is hereby directed to amend the Plan to allow for the City Manager,Assistant City Manager, and Directors, using the generic term `Directors' instead of specific office references, and to delete the 90- day window for those employees to opt-out of participation in the Plan and, once those changes have been completed, to send the Ordinance directly to the Plan Administrator in order to expedite the move toward an Agenda with the City and approval of the Ordinance. B. Discussion/Adoption: Rule Changes concerning Human Resources Director as Plan Administrator. Attorney Dehner advised the Board that the draft of the operating rules and procedures which had been distributed to them at the beginning of this meeting incorporates all of the changes which had been discussed over the course of the last couple of meetings but does not incorporate any provisions with respect to the Plan Administrator; because he and Mr. Carnicella had not yet had the opportunity to meet to identify what his duties will be, and were not prepared to make a recommendation to the Board for the Plan Administrator position. Trustee Grafton expressed her concern that Mr. Carnicella could not be hired as the Plan Administrator until this was incorporated into the rules. Attorney Dehner advised that there is a provision in the rules that actually covers Human Resources and the HR Director as liaison and it specifies certain activities that are allowed. Mr. Carnicella stated that he would continue to act as the rules currently allow. Attorney Dehner said that it appears that Mr. Carnicella will be doing more than L. has been done in the past and that is what would require elaboration. Trustee Grafton again expressed her concern that Mr. Carnicella would not be able to do anything except be the liaison between the Board and the city until after it was adopted. Attorney Denner assured her that he General Employees Pension Board Quarterly Meeting, November 9,2005 Page 10 of 12 can perform duties as discussed with the Board at this time because he is not being paid for the tor duties. He further explained that if the Board were paying Mr. Carnicella, it would be necessary to have listed the services provided just as any other person providing services to the Board, but since that was not the case, he could continue to act as he had been and then reflect the actual duties in the Rules once they are determined. C. Discussion/Revisions re Investment Policy Chairman Swickerath stated that she knew the City Commission had approved the Ordinance for discussion of revisions regarding investment policy, and asked Attorney Denner what the Board's position is at this point. Attorney Dehner informed the Board that the Ordinance gives the Board legal authority to act within the new parameters and consider any recommended policy changes, but before any direction could be give to the manager, the investment policy would have to be amended. He stated that this is based on the manager's direction to do that as indicated within the investment policy. There was a lengthy discussion and it was determined it would be advantageous to have a special session in which to discuss the possible changes about investments and investment strategies, have a discussion with Mr. Callaway about different options, and vote on Ordinance changes related to the Plan Administrator's position and responsibilities. A Special Meeting was tentatively scheduled for Wednesday, January 18, 2006, at 10:00 a.m., in the Commission Conference Room. D. Review/Approval of Revised Documents—H. Lee Dehner, Esq. a. Operating Rules and Procedure 1. Consideration of Letter of Agreement with City and Human Resources Director This item was covered in the general discussion regarding the changes to the Rules and Procedures. Attorney Dehner reiterated that this could not be completed until he and Mr. Carnicella had had a chance to meet to discuss the options. b. Summary Plan Description Attorney Denner stated that he had distributed to the Board Members today the draft of the Summary Plan Description and asked that they take that for review. He reminded that the one item which he recommended be added to it is the opt-out provision which had been discussed. Trustee Grafton mentioned to the Board that the Summary Plan Description should have been revised with revisions approved in May, 2005 and that it now appeared it would be at least February, 2006 before it was done. Attorney Dehner responded that this delay would allow it to be as current as possible. AGENDA ITEM IV. OTHER BUSINESS A. Payment of Invoices Secretary/Trustee Grafton reviewed the invoices, copies of which had been distributed in the packets including invoices from Foster& Foster, Inc., Christiansen &Dehner, Merrill Lynch, Trusco and West Orange Secretarial Services, Inc. Following a brief discussion, it was on motion by Secretary/Trustee Grafton, seconded by Trustee Wagner, unanimously General Employees Pension Board Quarterly Meeting, November 9,2005 Page 11 of 12 RESOLVED, that all invoices be and they are hereby approved for payment as presented. B. Reports and Correspondence—Jean Grafton, Trustee/Secretary Trustee/Secretary stated that her report was actually in two sections. She said the larger one lists everyone who has left since the program's inception in 1991, everyone who took their contributions with them or rolled them over or is on a pension and she knew where they were. She said the smaller one is the one which shows anyone who may have slipped through the cracks, who left without talking with anyone, did not advise what to do with their contributions, or cannot be located. She asked Attorney Dehner for clarification of the new law requiring an IRA be set up for funds abandoned by employees. Attorney Denner advised that that law is in effect, effective January 2006, but that he is currently drafting amendments to the Ordinance to address that situation which came as tax notice 2005-5. He explained that the Ordinance provides for either a mandatory lump sum distribution from the plan for which direction is not given, to either make a distribution to the member or roll over to a qualified vehicle, then it is required that an IRA be opened in a bank and that the roll over must be done to that. He stated that, in order to avoid that, he recommends drafting a mandatory distribution out of the Plan. He said that can be done simply using different language such as that the distribution will be done upon written request and that makes it a non-mandatory distribution, so the amendment he is drafting is going to eliminate the need for this Board to deal with the IRA. He added that once the change is made, there would need to be a written receipt that is already a part of the required procedure. Trustee/Secretary Grafton stated that the Rules indicate an account for $200 or less would not be subject to the 20%tax, 10%penalty and asked if just a few dollars over $200 would be included. Attorney Dehner confirmed that the IRS actually means anything over$200.00 exactly. Trustee/Secretary Grafton returned to the second report on which is listed all of the former employees to whom distributions had not been made. She said she needed help from any of the Board Members who might know how to contact the 40 people on the list. There was discussion about sending out a form to the last known address and asking that they sign and return the form and then their funds could be disbursed. Diane Garcia advised that they have a program available through which their social security numbers could look up persons and that she would be pleased to assist with the process of locating these individuals. Trustee/Secretary Grafton thanked her and advised that the list had already been emailed to her and that any help she could give would be greatly appreciated. AGENDA ITEM V. ATTORNEY COMMENTS—H. Lee Dehner, Esq. Attorney Denner advised that, other than the amendments already discussed, he was also drafting amendments based on IRS regulations that change the minimum distribution rules. AGENDA ITEM VI. COMMENTS FROM TRUSTEES No comments. AGENDA ITEM VII. SET AGENDA FOR NEXT MEETING Not addressed. General Employees Pension Board Quarterly Meeting, November 9,2005 Page 12 of 12 AGENDA ITEM VIII. ADJOURN There being no other business, the meeting was adjourned at 12:55 p.m. Respectfully submitted by Approved by: Jo Ann Lacey, � - Recording Secretary of the Meeting Mary e Swickerath, Chair