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HomeMy WebLinkAbout05-14-1996 Minutes THE CITY OF OCOEE POLICE OFFICERS' /FIREFIGHTERS' RETIREMENT TRUST FUND (PENSION BOARD) MEETING May 14, 1996 Chairman Reed called the Police Officers' /Firefighters' Pension Board to order at 1:15 p.m. in the Commission Chambers Conference Room of City Hall, and a quorum was declared present. PRESENT: Chairman Reed, Members Williams and Wilson. Also present were Attorney Definer, Actuary Garrett, Administrative Officer Garcia, Money Manager Ballew, and Clerk /Stenographer Lewis. ABSENT: Members Gledich and Strosnider. CHAIRMAN REED ASKED THAT AGENDA ITEM V. OTHER BUSINESS BE HEARD AT THIS TIME AS MEMBER WILSON MUST LEAVE THE MEETING EARLY. OTHER BUSINESS BENEFITS IMPROVEMENT PLAN Chairman Reed explained that due to budgetary timing that the Board should have something to present to the City in the way of benefit improvements to the Plan. Actuary Garrett said they had updated the study from the 1995 Valuation in going to a 2.75 % accrual rate, $100 a month for future retirees, and in addition, $100 a month for all current retirees. The costs increase required from the City to go to a 2.75 % benefit rate would be 2.3% of payroll or roughly $52,000. It was a lot less than what most Plans would have to pay for this improvement. Chairman Reed said that the Board had decided last fall during their benefits meeting to see if the City would split 50 -50 the increase of the multiplier or if the City's costs went up 1% that the members would take the 1.3% as the saving in their before tax dollars would be greater than what the members were now paying. He said that our total would be 6.3%. It would be coming out of our payroll or if the City rejected it totally, that the members would take the whole (by Board approval). The City Manager had met with Chairman Reed earlier that day and Chairman Reed said that things had improved but he was unsure how much dollar -wise. Attorney Dehner advised the Board that they must do it now to make the budget process and be effective October 1. If they missed out on the timing then it would have to be effective October 1, 1997. Actuary Garrett suggested that if they were looking at splitting the costs by having the member pick up something, then it would be more equitable for the membership if only future benefits are paid for by increasing member contributions. He said that this way the member that had 15 years of service or one who could retire within the next five (5) years would only feel the impact of the increase in member contribution for a short period of time. What they were paying for Police Officers' /Firefighters' Retirement Trust Fund Now May 14, 1996 was actually what they were still going to accrue and what everyone else was paying for was also the same thing. Then, if the City picks up the piece that is credited toward past service, which was going to be funded in the UAL, it would be cheaper to fund this way. He said that he had not broken the numbers out at that time with that contingency but it looked like an increase in the UAL for the 2.75% benefit rate would be about $17,000 (about 1/3 by the City) of the $52,000 should they want to do it that way. If the City picked up more than the 1/3 contribution, it was still equitable to all the members. They were paying no more than what their future service liability was but it was fair to everyone. So if the City agrees to contribute at least what it would take to pay the increase of the amortization payment on the UAL then there was no reason why the membership was not getting an equal benefit for what they would be paying everyone across the board (even the employee that had 20 years left to contribute at a higher rate would get this benefit). Actuary Garrett explained that he would return with a report showing it as a minimum increase required by the City to pay for that past service liability. The intent of this funding method was that UAL was there to spread past service liabilities over a longer funding period in that these liabilities would have accrued while other taxpayers were here, and had not made these an increased payment. The City was not funding for it during that past period of time. He said that now the benefits were in place, why make the current taxpayers pay for all of that at the same time. The State likes the use of a UAL for past service liabilities or for when a Plan starts low the initial past service line of liability startup. Actuary Garrett said that they will break it out this way to show what as a percent of payroll dollar amount would be required to pay off the past service, what was left to fund the future, and do a letter to Chairman Reed showing what the impact was for 2.75 % multiplier. Chairman Reed suggested that they stop looking at the $100 a month supplement at the present time. There were a lot of people who would rather see the 2.75%, and he thought they had a better shot at getting the 2.75 % if they did without the $100. He said that all of their people wanted medical (insurance) but it was not financially feasible at this time for the City to carry it. Attorney Dehner said that the Board must: 1) Vote to recommend the improvement. 2) If approved, schedule a meeting to present the recommendation to the City, and if successful proceed on to the City Commission from there. Member Wilson inquired as to whether they should provide the City with more than one proposal. Actuary Garrett said that the worst case scenario was that members would be paying for all of the multiplier (2.5 % of pay rather than 2.3%). Attorney Dehner inquired if the membership was willing to pay the entire costs, and Chairman Reed said that he may have to take it back to membership. 2 Police Officers' /Firefighters' Retirement Trust Fund May 14, 1996 Ilarsy Member Wilson, seconded by Member Williams, moved to recommend a Plan amendment increasin . the accrual rate to 2.75 % with the increase funded half b the Members and half b the City, and for Actuary to do a revised study, and for the Actuary. Attorney and Chairman Reed to meet with the Cit Mana . er Finance Director and an other interested Cit officials. Motion carried 3 -0. STATUS OF PROPOSED ORDINANCE Attorney Dehner advised the Board that they must move quickly on the benefit recommendation if they were to approach the City in time to make the proposed budget. He said that he had met with the Chairman Reed, Personnel Director, and Administrative Services Director who had been in accord with this. They had been ready to move forward but shortly thereafter they had learned of the significant amendments that were being proposed in (Chapters) 175 and 185 so it had been placed on hold until the Legislature had made a decision. He had recently learned that the Legislation had not passed. There were no terms with the Statutory provisions and mandates, and the Board could move forward with this, plug in the benefit improvement and one additional issue which was a new position taken by the Division with respect to the quality standards of the Plan's investments. We were always held to the top three (3) quality restrictions but the Division was now interpreting the Statute to mean that we could deviate from that if the ordinance permits the Plan to do so. Mr. Dehner recommended that they consider the issue of whether or not they wanted to give the Fund the ability through an amendment of the ordinance to invest in stocks that have a rating of less than the three highest ranking classifications which were the current limits. He said that to propose that in the ordinance did not mean that they were necessarily directing them to do it, it only meant that they would have the ability, now or later, through the policy or simply on action as a Board. Money Manager Ballew said that it would give their manager more flexibility and latitude to buy the stocks he or she really wanted to buy, that they were lining up to handle the new law. He said that there would be a transition as the Money Managers would need to setup other portfolios as many participants would not want to be in just the high grade, and many would want to be in a fund that has less restrictions. Mr. Ballew recommended that they open the ordinance to allow this option even if the Board did not ever change the Policy. Performance Monitor Garrett supported this change in the ordinance as the Board would not have to go before the City Commission if they wanted to go with the smaller cap. Their view of opening up only to those corporations below the top three (3) ratings was that they were talking small cap stocks and some mid cap stocks. There was a risk reward potential of possible gain but it only increased the total risk of the Fund also. Whereas, ADR's (American Depository Receipts) in foreign securities gave them the possibility of not only enhancing their return but also reducing risk as they operate independent of the S &P 500 runs. Their activity was in different cycles, and by only adding small cap, even though the historical returns of small cap were less than the S &P 500, the amount of risks there involved the volatility and was about twice the amount. Something that was more risk was not off - setting risk in the Funds, it was 3 Police Officers' /Firefighters' Retirement Trust Fund May 14, 1996 Now just increasing the risks. He said that they thought that the full blown strategy was that someday it was going to get to that, that the Legislation House Bill would open ADR's and not talk about the top three. The State had now given the o.k. for those classifications below the top that the • ADR Legislation would allow even Police and Fire Funds to buy ADR which was a foreign security traded in U.S. dollars. This would then give the Board the full strategy and they would have all pieces to make the same choices now made by the General Employees' Fund. Right now if they could only add the small cap, they were saying that they could take the risk at higher reward but it was also to only increase the risks, too. If they were comfortable with the risks situation that they now had which was a 50% exposure to equities by going to small caps they would have to re- adjust. They would have to say that we are comfortable with the amount associated with 50% equities and then, of course, comes with that a higher risk level in small caps. He said that he thought that if they would get the whole strategy where they could add ADR's also and small caps, then that was the one that he thought all managers will be more comfortable in dealing with. Attorney Dehner recommended that they change the ordinance but not the Investment Policy at this time. He asked if it was the Board's recommendation to delete or any restrictions to quality. He asked if they were just going to delete the restrictions as to quality on the equity but they were going to leave it in place on the Bond side, top three. Chairman Reed said that he thought they were only talking about the Equity. Attorney Dehner said that under the Statute they could now deviate from that. Money Manager Ballew said that they were not trying to be a hero on Fixed Income, that they were going to get 5.5% to 6% over long term but where they were hoping to make the spread and give the Plan a better than 8% return was in Stocks. He did not think that it was all that critical to open it on the Fixed side. Upon recommendation from the Money Manager and the Performance Monitor, Member Williams, seconded by Member Wilson, moved to amend the Investment Section in the ordinance to delete the quality restrictions on Equity Investments. Motion carried 3 -0. AUTHORIZE PAYMENT OF BILLS Member Williams, seconded by Member Wilson, moved to authorize and ratify payment of the bills. Motion carried 3 -0. (See Exhibit "A ") APPROVAL OF MINUTES This item consisted of the minutes of the February 13, 1996 Police Officers' /Firefighters' Retirement Trust Fund meeting. Member Williams corrected the motion under Approval of Minutes on page one to read "...3 -0" rather than "...4 -0" Also, Attorney Dehner corrected under Reports - Attorney to read "No Report." rather than "None," and under Attorney Comments should read "Attorney Christiansen" rather than "Attorney Dehner." Member Williams, seconded by Member Wilson, moved to approve the Minutes of the February 13, 1996 Police Officers /Firefighters' Retirement Trust Fund meeting as corrected. Motion carried 3 -0. 4 Police Officers' /Firefighters' Retirement Trust Fund May 14, 1996 Clerk Stenographer Lewis advised the Board that she may have to resign due to serious illnesses in the family. Member Wilson left the meeting at 2:00 p. m. QUESTIONS /COMMENTS FROM AUDIENCE None OTHER BUSINESS WAS HEARD AT THIS TIME DURING THE MEETING 1) MEMBERS PLANNING TO ATTEND FPPTA CONFERENCE Chairman Reed announced that he, Members Wilson and Williams would be attending the FPPTA Conference at the Hilton on June 30 - July 3. 2) Discussion ensued about Police Officer Randy Conyers leaving the Police /Fire Plan and going with the General Plan. Officer Conyers would be eligible to receive a benefit in the Police /Fire Plan upon the age he would have attained normal retirement which would be 52 or 55, depending on the years (obtained 25 years of service), however, he could not begin to draw that until he retires from the City. Once he retires from the City, he will receive a check from each Fund. Now 3) Chairman Reed said that Andy Gailitt had inquired about early retirement. Actuary Garrett said that Officer Gailitt would have to wait until he is 52 years old (with 31 years of service). He could take early retirement at age 45 using the reduction factor. MONEY MANAGER Money Manager Ballew presented the Board with the following: 1) Charts of Relative Performance by Sector. 2) The analysis of the investment performance of the Police Officers' /Firefighters Retirement Trust Fund for the period ending March 31, 1996. PERFORMANCE MONITOR Performance Monitor Garrett presented an analysis of the investment performance of the Police Officers' and Firefighters' Retirement Trust Fund for the period ending March 31, 1996. ACTUARY Earlier in the meeting, the Board had requested that the Actuary prepare a new study per improved benefits, and a meeting has been schedule with Attorney Dehner, Chairman Reed, and the City Manager and Staff to discuss improvements to the Plan. ATTORNEY COMMENTS Attorney Dehner gave a Legislative update regarding the presumption. In response to Attorney 5 Police Officers' /Firefighters' Retirement Trust Fund Draft May 14, 1996 „ Dehner, Chairman Reed said that the Board had distributed details about the presumption to every members. ADJOURNMENT The next meeting will be Tuesday, August 13, 1996, 1:00 P.M. Items to be included on this agenda are: 1) Notify retirees for confirmation of address. 2) Election in September. 3) Incorporate new provisions in the Summary Plan Description. At 2:58 P.M. the meeting was adjourned. Respectfully submitted, Judie Lewis, Clerk/Stenographer a: \wp60 \wpdocs \PF51496.M \jfl 6