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FMTF06-19-07 BOAF:D OF TP:USTEES Florida Municipal Trust Fund F,etirement Plan and Trust for the Firefighters and Police Officers Longwood City Commission Chambers 17~ West War?•c,n Avenue Longwood, Florida REGULAR M]~ETING MINUTES June 19, 2007 7:00 p.m. Present: Jack Smythers, Chair Robert Redditt, Secretary Jeremiah Brown, Member Chris Kempf, Member H. Lee Dehner, Board Attorney (via conference call) Carol Rogers, Director of Financial Services Linda F. Goff, Recording Secretary 1. Call to Order. Chair Smythers called th~° ii~eeting to order at 7:00 p.m. 2. Election of Officers. A. Chair. Chair Smythers opened the floor for nominations of Chair. Secretary Redditt nominated Jack Smythers. I\?omination carried by a unanimous voice vote. B. Vice Chair. Chair Smythers opened the floor for nominations of V ice Chair. Chair Smythers nominated Christ Kernpf. Nomination carried by a unanimous voice vote. C. Secretary. Chair Smythers opened the floor for nominations of Secretary. Vice Chair Kempf nominated Jeremiah Brown. Nomination carried by a unanimous voice vote. 3. Approval of Minutes March 20, 2007 Regular Meeting. ~ ~ Secretary Brown moved to approve the minutes as submitted. Seconded by Vice Chair Kempf and carried by a unanmous voice vote. 06-19-07/1 4. Appointment of ~cn Trustee. Chair Smythers inquired if any of the members had a reconunendation for appointment of the 5`h Trustee. Secretary Brown moved to appoint Marc McLarnon. Seconded by Vice Chair Kempf and carried by a unanimous voice vote. Secretary Brown said Mr. McLai7ion was currently a member of the Board of Adjustment and he would submit his resignation if appointed. Review of Agenda Pacl~et Material. A. Plan Account Statements. The Plan Account Statements for January, February, March and April 2007 were reviewed. B. Investment Performance Review. The Investment Performance Review for the period ending IVlarch 31, 2007 was reviewed. Secretary Brown said when looking a.t the overview, they mentioned the drop in the housing market. He suggested they may want to look at diversifying funds from that sector. Vice Chair Kempf inquired how the board would go about reconunending this change. Ms. Rogers advised they would need to discuss this with Paul Shamotui. Chair Smythers referenced page 39 where the asset allocations are shown in a graph. He said there was 29% invested in bonds. He stated they were very conservative. 6. Other Business. Secretary Brown asked Mr. Definer if he has reviewed the Plan. Mr. Definer responded in the affirmative. Secretary Brown said a plan member asked him if the supplemental benefit fund was by definition a true share plan. Mr. Definer said he has reviewed the most: recent valuation report, the adoption agreement and ordinance. He said it looks like all of the state money is not diverted for that purpose. 06-19-07/2 Secretary Brown said he was referring to the part of the Plan which is the ~ supplemental benefit that is given as a lump sum. He said the question was does it fit the Statute definition of a true shared plan. Mr. Dehner responded in the negative. He said their state money is deposited v~~ith the rest of the fund to help fund the defined benefit. He said a shared plan, as defined in the Statutes, would be a plan ghat the majority of the members would vote in which to have future excess state money paid. He stated the supplemental benefit provision is not a statutory shared plan. 7. Board Attorney Report. Mr. Dehner said he would like to mention a couple of housekeeping items first. With respect to Marc McLarnon; his name will need to be submitted to the City Commission for acclamation as a ministerial duty and once that occurs his appointment will be official. He reminded the board members to file their financial statement forms. He recommended they obtain proof of filing with thf; Supervisor of Elections. He advised Mr. Seibert would need to file the Form 1 by July for 2006 and then the 1-F Final Disrlosure form for the period of time from January 1, 2007 through his resignation date. Mr. Dehner said he has reviewed the Plan documents provided to him and he has a number of recommendations he would like the board to consider for the Plan. ~ He advised he was very familiar with the: Plan provisions and there are some compliance provisions that resulted from changes in the Federal law. He said there were some optional provisions they may want to consider and he will present those at a future meeting. He staged there were a few legislative matters of which he would make the board aware. During the Regular Session in Tallahassee there was a House Bi113 and a companion Senate Bill 198. This passed the House, but. did not make it to the floor oi.'the Senate prior to adjournment. He reported this Bill would have permitted extending the length of Trustees servinl; from 2 years to 4 years. He said this legi;~lation did not pass this year, but they will probably see it back next year. Another thing of significance to the money managers was a proposal in the legislation to increase the maximum investment in foreign securities from the current limit of 10% to 20%. Again, that did not pass. He said Longwood's plan does not have any retirees as of yet. He said for information purposes, the Federal provision that came from the Pension Protection Act last year whereby public :safety retirees who retire with normal retirement or disability retirement are eli,ible for payment of health premiums or long term care up to $3,000 a year pre-taxed. The Federal Statute requires for this provision that a payment be made directly from the pension fund to the insurance company in order for a retiree to obtain insurance on their own apart from the City. He advised currently under the pro~risions of 175 and 185 we are not permitted to do that. He said the Senate I3i11 198 would have taken care of that problem. This pre-taxed benefit does not apply to early retirees or vested terminated retirees. 06-19-07 3 Mr. Definer reported another provision under Federal Legislation in the Pension Protection Act, for information purposes; is that it allows the purchase of service credit for air time. He explained the reason it is called air time is that it allows a purchase to add on to the years of credited service for time you have actually worked. He said a lot of plans have buyback for fire service or police service with other agencies or military service. He sa%d there were two reasons he does not tlzinlc the air time is good for the plan; 1) it is almost like purchasing an amiuity and this is not the way these plans are designed to operate, and 2) more importantly, p~lilosophically, the reason most employers have Defined Benefit Plans are for improvement of retention. However, under Chapters 185 and 175 we camiot give credited service in the plan for time that was not served as a certified firefighter or police officer or military service to be purchased. He said if they would ever be interested. in allowing the buy-up of a benefit rate on an individual basis they would have to allow abuy-up of the benefit rate in an amount that would be equivalent to purchasing 5 years of credited service. He reiterated, at this point, this is just a matter of information. Ms. Rogers said buyback has been discu;~sed. Secretary Brown said there was currently no provision in the plan for military buyback and there have been questions raised in implementing this. He inquired if a buyback such as military would be cost: neutral to the plan. ~ Mr. Delmer responded in the affirmative. He said this was one of the optional provisions he would like to discuss with the Board of Trustees. He said most plans. have buyback provisions for military buyback or prior service buyback provisions. As mentioned, the cost is neutral and results in no additional cost to the fund. The entire value is paid by the member receiving the credit. Member Kempf inquired if this would be up to ~ years. Mr. Delmer advised this would be detern-~ined by the Plan provision. He said the military time camiot go over 5 years. He stated if they wanted to consider a buyback for fire or police service served ;somewhere else, they could provide for that as well. The limit of the service buyback would be determined by ordinance. Secretary Brown inquired if they could increase the multiplier. Mr. Delmer responded in the affirmative. He inquired if they would like to discuss military acid prior service buyback at a future meeting. It was the consensus of the Board to discuss this at a future meeting. Mr. Deluler said another item being discussed often lately was a partial lump sun option. Essentially it is another optional i:orm of benefit that would enable a person retiring or a person planning early retirement to take a lump sum in addition to the monthly amluity. He advised in most of the plans, they allow an option to provide to the member anywhere from 5% to 20% lump sum payment. 06-19-07/x: If one of these were chosen then that percentage of the accrued current value of the benefit would be paid in a lump sum upon retirement and the monthly amiuity amount would be calculated on the remainder. He stated most people have a DROP plan and he asked if there was an interest in discussing this further. Chair Smythers responded in the aff nnative. Mr. Delmer said the DROP was a good f,ature to have in the Plan and it would bring them in line with what most plans have. He advised the partial. lump sum option can be combined with the DROP. Member Brown inquired ifthis could be discussed at the next meeting. Mr. Definer said lie would like to discuss these options in person. He stated the Board's quarterly meetings conflict with meetings he had prescheduled. He inquired if the dates could be changed so he could attend in person. He said if it was amenable with the Board, he would contact the Recording Secretary to come up with some alternative dates for the quarterly meetings. It was the consensus of the Board for Mr. Delu~er to contact the Recording Secretary regarding the schedule of meetings. Mr. Deluler reviewed the documents he had received. He said he did. not have a ~ copy of the Summary Plan Document and asked if it would be possible to receive a copy. Ms. Rogers said she would send him a copy. Mr. Definer inquired if the Board had adopted any Rules and Procedures regarding the administration of tl?e Plan or for claims procedures. Ms. Rogers advised they did not have a claims procedure. Mr. Deluler said he would strongly recommend developing some rules and procedures that are necessary in some cases and helpful in others. He said it was critical to have and with the direction of the Board he will draft a document for review. Mr. Smythers inquired if they would need. a motion. Mr. Delmer advised they could just give him the direction and he would draft the document. He said the Rules and Procedures would be adopted by motion. Mr. Delmer said he did notice in the optional forni of a benefit provision in the plan, it specif es a third option. Tlus option has appeared in many plans in the past, but it has been reconunended that it be removed from plans. He said this is the "catch-all-option" a~ld it states a member may have the option, if approved by the board, to be in the best interest of the member. He would recommend 06-19-07/5 considering to delete this from the plan.:He stated where they have existed it has often caused problems for boards. He said the less discretion the board has in administering the plan; the less likely they are to have a f duciary problem. He said in looking at the assets in the plan, lxe noted the valuation report under actuarial value of assets in the October 1., 2006 valuation was indicated to be $1.9 million. However, on the State report it was shown to be $4. l million. He inquired why there was that discrepancy. He said it looks as if the .Plan actually has over $4 million. Chair Smythers responded in the affirmative. Ms. Rogers said there were two pieces and the difference might be where it is broken out. Mr. Deluzer inquired if the City had learned what the aniount of their state money was for the first payment of this year. Ms. Rogers responded in the negative. Mr. Delmer inquired if they were aware t:he excess amolu~t of the state money did not go strictly for the supplemental benefit. Ms. Rogers said she had the breakdown of what was required, but did not have it with her at the meeting. She said she had that discussion with the actuary a couple of months ago. Mr. Delu~er inquired if Ms. Rogers could send that information to him. He said it sounds like a certain amount of the state money was going into the defined benefit plan to fund the level of the defined benefit that was in effect in 1997 and anlounts over that may be segregated out for the supplemental He said if that was the case, then that is the statutory share plan. He stated in ternls of how the money is divided and in what ways they want to use it is determined by the ordinance. Ms. Rogers responded in the affirmative. She said she would send the breakdowns and the Summary Plan Description. 8. Member Comments. None. 9. Public Participation. Matt Jalrunes, Longwood Police Officer, :;aid he has asked questions before and now that the attorney is on board he has reviewed some of the documents received by Paul Shanloun. He said they were able to get all of the questions answered in regards to how the one fund was split. He said it was his understanding that under that field there were three accounts, the dFfined benefit, the city reserve, and the overflow fund which is where the excess state money goes. He stated he went back and tallied some of the numbers and went over some of the information Mr. Shamoun had provided. He said he totaled. some of the numbers and the State 06-19-07/6 contribution was $2.6 million plus, the employee contribution was $91,700 plus ~=y- and the City contribution was $389,600 plus. He inquired how exactly they split the funds, with the City's contribution back in 1999 or 2000, because the City reserve had not been established yet and there were some changes with Chapters 175 and 185. He asked if they pooled everything out of the defined benefit and whether it was allowed to be pulled out once it was in the defined benefit. Ms. Rogers said she would have to refer back to the actuary report from that time. Mr. Jairunes said he had the actuary report from 1999 and. the report does not sa.y how the money was split. He said he was curious because now the City's overflow account, if he understands it correctly, has approximately $1.4 million. He said if the City only contributed $389,681.38 that was a rather large jump as compared to what the defined benefit has in it. He stated those nwlibers did not seem right to him and inquired if anyone has looked at this as to how much is in. the City's overflow compared to what is in the defined. Ms. Rogers said she did not have an ans~~~er. She stated it was not really the City's fund, it is the City's contribution and all earnings go uito the fund. Mr. Januiles asked why this was designated as the City's reserve instead of going into the supplemental account or the defined account. He asked why there was a separate entity. Ms. Rogers explained at the time Chapters 175 and 185 was created there were certain rules on how the allocations were made. She believes it was credited as the City's contribution to be used in the future to off set any required actuarial contributions. Mr. Janunes inquired if that Statute was in place at the time the retirement was created or did it happen later. Ms. Rogers advised this happened later. She said the Pension Fund was established in 1996, but it was changed in 2000 to comply with 99-1. Mr. Janu~~es inquired how the fund was split. Ms. Rogers said whatever was actuarially required to be contributed to the various components was how it was split. She explained nothing was moved out, it was just how the contributions were credited. Mr. Jarmnes said when he spoke to Mr. Shamoun he said the accounts were split and the monies were divided into 3 accowlts under the one fund, the defined, City reserve, and the overflow. He asked if he was correct in saying nothing was moved from the defined benefit account a~t that time. Ms. Rogers said it was her understanding that the original character of the contributions was how the split was made,. If it was more than the City was 06-19-07/7 required to contribute, that amount stayed for the City's benefit to be applied to future required contributions. Mr. Jarnmes inquired if the interest from. the overflow account went back into the City's fund or the defined. Ms. Rogers said she could not answer without looking at how the calculations were done. She said that would be the actuary's call. She advised there have been several IRS changes that need to be mad.:, and these will be brought forward with an ordinance. Mr. Janunes said he was the one asking about the military buyback. He said DaS~tona Beach offset some of the burden to the former soldier so he could afford to buyback that time and he would like this to be considered in the ordinance. F[e said his continents regarding the overflow, it seemed like with the City's total contribution of $389,000 and if $1.4 million is what was in the overflow account, these numbers seemed off and he asked if anyone on the Board had ever paid attention to that. Ms. Rogers explained the anlount he is calling an overflow was the City's contribution and they continue to regularly contribute more than required and that money goes in as an overpayment amow-~t. Secretary Brown said the numbers Mr. Janunes was referring to were numbers Mr. Shamoun had supplied him. They were the City's contribution, State's contribution, and Employee's contribution to the fund. The City's contribution from 1997 to 2006 totaled $389,000, but now that account has $1,4 million in it. The State's contribution, which is the dei~ined benefit fund, was $2 million plus and the balance was showing as $1.9 million. He said the fund the City would be allowed to use in a shortage, if the total deposit was $389,000, how it could have $1.4 million when the defined benefit by the State had supplied over $2 million and was now $1.9 million. He reiterated 1:hat was the concern. Mr. Delmer asked Ms. Rogers if she could send him the documents for that period of time that accomplished this after 99-1 was implemented. He said he would review them and hopefully be able to help explain this. Ms. Rogers responded in the affirmative and said to the best of her ability. She explained she did not start with the City unti12003 and Mr. Cohen handled the split. Mr. Dehner inquired if there were documents that indicated the funding for the excess state money for the supplemental benefit, and h.ow the supplemental benefit will accrue and be paid. . Ms. Rogers responded in the affirmative. Mr. Dehner requested she send that information to him. 06-19-07/8 Jeff Caiida~e, Teamsters Union, Loca1385, inquired if these were tluee separate accounts or separate accounting for pooled money. He said this might help with the misconception of part of the members and give a degree of comfort. Ms. Rogers said it was separate accounting for pooled money. Mr. Candace said in reading the Florida League of Cities report, he assumed their bench mark was 7.5. It does not show what their rate of retui-~i is over the first four months for the calendar year of 2007. He asked if she could capture that infoi-~nation and distribute this to the members. Ms. Rogers said she was not sure they calculated this quarterly. She believes they do this over an annual basis, but she would check to see i:Fthat information can be obtained. 10. Adjournment. Chair Smythers adjourned the meeting at 8:.07 p.m. . Jack Smythers Chair ~ ATTEST: >C,inda F. Goff, Recordi Secretary 06-19-07/~~