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HomeMy WebLinkAbout11-18-1999 Minutes THE CITY OF OCOEE POLICE OFFICERS'/FIREFIGHTERS' _ RETIREMENT BOARD MEETING — NOVEMBER 18, 1999 Acting Chairman WILSON called the meeting of the City of Ocoee Police Officers' /Firefighters' Trust Fund to order at 1:05 p.m. in the Commission Chambers Conference Room of City Hall. The roll was called and a quorum declared. PRESENT: Acting Chairman Wilson, Members Gledich (arrived late), Coschignano and Firstner. Also present were Attorney Dehner, Patrick Donlan for Actuary Foster, Money Manager Senderowitz, Performance Monitor Jeff Swanson from Merrill Lynch, Recording Secretary Judie Lewis and Brenda King for Recording Secretary Lewis. ABSENT: Member Williams (excused). APPROVAL OF MINUTES Acting Chairman WILSON presented the Police Officers' /Firefighters' Retirement Trust Fund Minutes of August 11, 1999, and September 24, 1999. Member COSCHIGNANO, seconded by Member FIRSTNER, moved to approve the Minutes of the August 11, 1999, and September 24, 1999, Police Officers' /Firefighters' Retirement Trust Fund meetings as presented. Motion carried 4 -0. ELECT OFFICERS CHAIRMAN SECRETARY Member GLEDICH asked if interest had been expressed for the two positions. She said it was important that those filling the two positions come from the ranks of the police officers and firefighters because of the need for communication between the two departments and with the City. Member FIRSTNER expressed interest in the position for secretary. Member GLEDICH, seconded by Member COSCHIGNANO, moved to nominate and elect Tony Wilson to chairman and Richard Firstner to secretary. Motion carried 4 -0. Attorney DEHNER recommended moving VIII. Other Business to the next item with V. Questions /Comments from the Audience to follow. Member GLEDICH, seconded by Member FIRSTNER, moved to place item VIII. Other Business to the next item with item V. Questions /Comments from the Audience to follow. Motion carried 4 -0. OTHER BUSINESS SCHEDULE 2000 BOARD MEETING DATES Attorney DEHNER advised the preferences given by the General Employees' Retirement Trust Fund were February 9, May 10, August 9 and November 8, 2000. He advised the General Employees' Retirement Trust Fund had chosen to have a membership meeting in conjunction with the February 9 meeting. The General Fund membership meeting was scheduled for 8:30 a.m. with the regular meeting scheduled at 10 a.m. Mr. Dehner suggested having the membership meeting follow the regular meeting for the Police Officers'/Firefighters' Pension Fund. Mr. Dehner asked Recording Secretary Lewis to confirm the dates with the General Fund. Police Officers'/Firefighters' Retirement Trust Fund 'tow November 17, 1999 AUTHORIZE /RATIFY PAYMENT OF BILLS Member GLEDICH, seconded by Member COSCHIGNANO, moved to pay the bills as submitted. Motion carried 4 -0. (The following item was not on the agenda.) RECORDING SECRETARY Recording Secretary LEWIS advised there had been a search for someone to serve in the role of Recording Secretary so she could resign. She said Brenda King was available and was interested in the position. If Brenda King were approved, Mrs. Lewis would submit her letter of resignation. Mr. Dehner suggested Mrs. Lewis give Mrs. King a copy of her contract, which outlines the duties and terms. Mrs. King could then address any concerns or questions with Mr. Dehner. Consensus was to accept the recommendation. QUESTIONS /COMMENTS FROM AUDIENCE Mike Reed, Ocoee Fire Department, distributed a memo he received from the Human Resources Department of the City about November 5, 1999, regarding disability coverage through the City. Because he had ten years employment with the City on October 11, 1999, his disability benefits with the City under the disability company standard insurance had been terminated. He was advised he was eligible for disability coverage through the Police Officers' and Firefighters' Fund. He said this had been addressed with the City several times when he was a trustee. He said because of this policy, he and 31 others no longer had short-term disability, which runs from the 31' day to the 90 day of disability. There also is no long -term disability. The only disability coverage is permanent disability through the pension. Mr. Delmer advised the Plan provides for permanent disability only, and anything else needs to be taken up with the City. Discussion ensued. Member GLEDICH, seconded by Member COSCHIGNANO, moved to have the Chairman write a letter to the City indicating the matter of short- and long -term disability had been raised with the Ocoee Police Officers' /Firefighters' Retirement Board. Motion carried 4 -0. Frank Carlsen, Ocoee Fire Department, asked about the cost of the two early retirement plans — one at 20 years and the other at 25 years. Actuary Donlan advised the numbers had been revised based on a new evaluation, and the costs were about the same as before, which were to be presented in his report later in the meeting. DISTRIBUTION OF MEMBERSHIP CERTIFICATES Membership certificates were distributed. *low 2 Police Officers'/Firefighters' Retirement Trust Fund November 17, 1999 DISCUSSION /APPROVAL OF SIGNATURE RESOLUTION No action taken. DISCUSSION /APPROVAL RE: CH. 175/185 LEGISLATION Attorney Dehner advised this referred to Chapter 99.1, which was the bill that passed amendments to Chapter 175/185, which was discussed at the August meeting, and tells the Board what needs to be changed. Some areas had been identified in the Board's plan that needed to be changed that did not require additional funding, which he reviewed. For the workers' compensation set -off provision, the Board is permitted to maintain the workers' compensation set -off but cannot reduce the Plan disability payments below a floor amount, which is the greater of the accrued benefit figured as a two - percent rate or years of service times two percent or 42 percent of average -filed compensation. The question was whether the Board wanted to keep the compensation set -off in with that limitation. It was either that or take it out entirely. He advised he had prepared a draft of an ordinance making the noncost changes. One change involved a funding cost, which was discussed at the August meeting and included in a letter. The change is the reduction factor for early retirement currently in the Plan. Currently the Plan provides that it is an actuarial reduction, which is six - and -a -half to seven percent for each year prior to normal retirement. The statute requires the Board to put a three- percent cap on the reduction, which is less than half of the present actuarial. The increase in State money received this year over last year's check, which was the 1997 amount —the baseline —was not enough to fund the improvement. The Statute provides the improvement does have to be made until there is additional State money above the 1997 amount. All the changes identified would be made with the exception of that one because it involves a cost that does not have State money to fund. He advised the ordinance must be adopted before July 1, 2000. Member COSCHIGNANO, seconded by Member GLEDICH, moved to direct Attorney Dehner to move the ordinance to the City of Ocoee for adoption. Motion carried 4 -0. Secretary Firstner referred to the legislative changes and said he had all the copies from the City Manager's office and Attorney Dehner's office that were forwarded to the former chairman. Mr. Dehner said custody of such could be the responsibility of either the chairman or secretary. Mr. Dehner presented the Merrill Lynch contract that had been fully executed by the Board and Merrill Lynch. He asked that either the chairman or secretary make a copy to send to him. Mr. Dehner advised he had prepared an outline from conferences he had attended regarding trustee responsibility and said it might be helpful to the new trustees. Discussion ensued %No' 3 Police Officers'/Firefighters' Retirement Trust Fund ti,,,„, November 17, 1999 regarding trustee school with the trustees being encouraged to attend one seminar during the first year and one every two years thereafter. REPORTS ACTUARY Actuary DONLAN advised the valuation was good. Costs as of October 1, 1998, were 25.9percent of total payroll for the total required, and that went down to 24.8percent this year. It went up as a dollar amount only because the City is growing, and the payroll went up. Most of the reason for the favorable experience is the investment gains. The actuarial investment gain was 12.8percent, and the assumption was only eight percent. Therefore the investment well out performed the actuarial objective, which caused the City contribution to go down by eight- tenths percent of payroll. Membership went from 95 to 101, which was the reason for the increase in payroll. Only one person terminated who was vested, and there were no retirees or disabilities for the year. Actuarial value of assets is $6.6 million, and the market value is $6.8 million due to value stored so that the Plan will not suffer regarding funding requirements in case the market takes a downturn. Total present value of accrued benefits is $5 million. Even if the Plan were to terminate now, everyone could be paid. The City and State requirement was $633,000, and the City and State actually contributed N `" $655,000. The average salary increases were eight and seven - tenths percent, and the actuary only assumed six percent, which hurt the Plan a little, but the 12.8 percent return more than compensated for it. The rest of the valuation was details and summaries. Member GLEDICH, seconded by Member FIRSTNER, moved to approve the valuation report. Motion carried 4 -0. Mr. Donlan referred to the study regarding 25 years and 20 years of service for retirement. Currently the retirement is 55 and 10 or 52 and 25. Option one, retirement after 25 years of service, would allow one to retire regardless of age with no reduction in benefits. The cost is about $26,000 or seven - tenths percent of payroll. Option two is to provide for retirement after 20 years of service regardless of age, which would be four and nine - tenths percent of payroll, which is about what it was last year. The dollar amount went up, but the percentages stayed the same. Option one would require an additional $26,637 yearly contribution from the City, and option two would require an additional $191,000 yearly contribution from the City. Discussion ensued. Mr. Dehner advised the drop plan was effective October 19, 1999. Member GLEDICH, seconded by Member COSCHIGNANO, moved that Attorney Dehner draft an ordinance for the implementation of the 25 year retirement option for review at the next Board meeting. Motion carried 4 -0. sti "' 4 Police Officers'/Firefighters' Retirement Trust Fund %,„ November 17, 1999 Reference was made to a letter from the City Manager in which he asked Actuary Foster to study an early retirement incentive. Actuary Foster talked to him and said since the valuation was finished, that issue could be addressed. Mr. Dehner said regarding the issue on early retirement incentive programs, there generally is a savings to the city. From the pension perspective, it typically increases pension costs because the incentive part comes out of the pension plan. The interest of the Board in the process is to be sure that the record shows that whatever additional amount it is be earmarked and identified as something the City wanted to do to achieve a personnel purpose which overall would save them money. He said it is appropriate to have the Board's actuary do all the calculations. The City would pay the extra costs for early retirement. Discussion ensued. Mr. Dehner referred to the City Manager's letter of October 11, 1999, part of which concerned the early retirement incentive. He asked to be contacted regarding the study by Foster and Foster. Actuary Foster responded October 18 and advised the study was being done in conjunction with the October 1, 1999, valuation, and the study results would be available November 18, 1999. However, the study was not complete. Discussion ensued. Now MONEY MANAGER Phillip Senderowitz, SunTrust, presented the Investment Performance Report of September 30, 1999. He said this was the third or fourth year in succession that the fourth quarter of the fiscal year was negative. The overall market was down six percent, and the decrease for the Plan was almost five and one - quarter percent. Large cap growth stocks have been the top performers. He said he thought there was more of a shift towards the value camp, but value has been trailing growth for the past five years. Last quarter value strongly out performed the growth. The value fund was down around 12 percent. Growth was down almost seven and three - quarters percent, so both were fairly negative. The small cap allocations outperformed the S &P 500, down around three percent. For the full year, the value was up 12'/2 percent versus growth up 29 percent. Both compared to the 27% percent gain in the S &P 500. Small caps were up 45 percent. The Plan was not in the small caps the entire year, but it has done very well for the Plan for as long as that position has been there. He explained the investment philosophy of SunTrust. They are charged with splitting the money between stocks and bonds. There is some cash to pay off the retirees. The equity money is split into different areas. The philosophy is to split money between growth and value. Looking over a long period of time, growth stocks and value stocks return about the same, but in any given year, one will outperform the other. In the past four years, growth stocks have been doing better. The difference between growth and value is that in growth stocks, the interest is earnings and sales growing faster than the market. The price to earnings ratio and other measures is typically Nair' 5 Police Officers'/Firefighters' Retirement Trust Fund N November 17, 1999 higher than the average stock. Growth stocks are expensive, and the philosophy is buy high, sell higher. Value stocks are in forgotten companies and undiscovered "gems." The interest is a reason for that company to turn around— possibly a change in management or interest in a takeover by another company. A value manager looks for undervalued companies. Buy low, sell high. The equity portion of the stocks are split so there can be participation in both sectors. Typically one sector will do significantly better than the other. About five percent of the money goes into limited cap funds. Smaller stocks typically are lot more volatile, but you want to be able to participate in the up side. If the smaller stocks do not do well, there is no significant damage, but if they do well, there is a plus in the performance. They also buy intermediate range bonds, seven to ten years, of investment grade companies trying to come close to the index as a whole. This is the conservative side of the portfolio. For the year, the bond side was down about one -third percent. The relative index was down a little more. He said they should never be more than one to one and one -half percent away from that return either on the plus or minus side. If they outperform by two percent, they are taking risks that the Board does not want them to take. If they under perform by two percent, they are taking undesired risks. Detailed information was included about each of the funds as well as information about the markets as a whole and the actual holdings in each of the funds. Nor. PERFORMANCE MONITOR Jeff Swanson, Merrill Lynch, advised Merrill Lynch is the new investment consultant with the responsibility to evaluate the investment program to make sure it is appropriate relative to the policy and that the manager is doing his job. He advised there was a dip in the growth the last quarter, but the entire loss in the stock market was made back in October. The fiscal year ended on a bad note, but the earnings are back on track. He said the Plan is in compliance with the investment policy. Relative to other public funds, the Plan is right in line with what they are doing. He said two tools are used to evaluate the manager —the target index and how well the Plan is doing relative to public funds across the country. Over the past year, both yardsticks were exceeded. He advised the manager had done a good job overall in the past year. Discussion ensued. Mr. Swanson advised he would like to review the investment policy with the Board at the next meeting with recommendations for enhancements. The performance of the Plan on a one -year basis was 30 out of 71 or slightly above average relative to immediate peers. He concluded his remarks by congratulating the Board for a super year. �'' 6 Police Officers'/Firefighters' Retirement Trust Fund ,,, November 17, 1999 ATTORNEY COMMENTS None. SET NEXT MEETING AGENDA The next meeting is scheduled for Wednesday, February 9, 2000, at 1 p.m. with a membership meeting following. Comments from members will be included in the agenda. ADJOURNMENT Member GLEDICH seconded b Member COSCHIGNANO moved to ad'ourn the meetin. at 2:53 p.m. Motion carried 4 -0. Brenda King for Judie Lewis Recording Secretary '�"• 7