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Pension10-20-09Min BOARD OF TRUSTEES Florida Municipal Trust Fund Retirement Plan and Trust for the Firefighters and Police Officers Longwood City Commission Chambers 175 West Warren Avenue Longwood, Florida REGULAR MEETING MINUTES October 20, 2009 7:00 p.m. Present: Marc McLarnon, Chair Chris Kempf, Secretary Peter Katauskas, Member Robert Redditt, Member H. Lee Dehner, Board Attorney (Arrived at 7:10 p.m.) Jon C. Williams, Financial Services Director Linda F. Goff, Recording Secretary 1. Call to Order. Chair McLarnon called the meeting to order at 7:05 p.m. 2. Pledge of Allegiance. Chair McLarnon led in the Pledge of Allegiance. Chair McLarnon welcomed Member Katauskas to the Board. He also announced that Matthew Jammes had resigned and the Police Plan Members will be electing a new member to the Board. 3. Election of Vice Chair. Chair McLarnon moved to nominate Member Redditt for Vice Chair. Seconded by Member Katauskas and carried by a unanimous roll call vote. 4. Approval of Minutes - July 21, 2009 Regular Meeting. Chair McLarnon moved to approve the Minutes of July 21, 2009 as presented. Seconded by Vice Chair Redditt and carried by a unanimous roll call vote. 5. Review of Agenda Packet Material. A. Plan Account Statements. The Plan Account Statements for June, July, and August 2009 were reviewed. Mr. Lee Dehner arrived at this point in the Meeting. B. Investment Performance Review. The Plan Information for the Quarter Ending June 30, 2009 was reviewed. Pension 10-20-09/1 Chair McLarnon commented there have been good increases across for this quarter. C. Invoices. Chair McLarnon moved to approve payment of the invoice from Christiansen & Dehner as submitted. Seconded by Vice Chair Redditt and carried by a unanimous voice vote. 6. Other Business. Chair McLarnon said there were some issues raised by Secretary Kempf at the last Meeting concerning contributions relating to percentages of income and what was included as far as salary. The Board requested the City to investigate this matter and also asked for guidance from the Board Attorney in regards to where this Plan stood as compared to other municipalities with similar Plans. Mr. Williams thanked the Trustees and Plan Members for their patience in allowing him the opportunity to complete the budget process prior to researching the contributions regarding total versus fixed remuneration. He advised he met with the staff in the Department of Financial Services to gain an understanding of what they understood regarding the total versus fixed remuneration. The Payroll Clerk provided him with a copy of a note she had been working from in which Police includes everything and Firefighters excludes fire incentive, paramedic pay, and separation pay. He said he reviewed the Plan and the Adoption Agreement from 2003 and looked at the definition of salary. He stated it was clear under Section D of the Adoption Agreement that there are two distinct meanings of salary for Police and Firefighters. He advised he had sent an electronic mail to the Florida League of Cities (FLC) in regards to the definition, how this was communicated, and if there were any other Adoption Agreements. He was told that would have been communicated by the City and would be defined by the City and/or Board. He said he has discussed this with Mr. Dehner and had additional discussions with the FLC. He recommended the Board consider appointing someone from the Board or a Plan Member to work with him and the City Administrator on what the definition of total versus fixed really means and have a cost analysis done for what it would cost the Fund to bring Firefighters up to the same level of benefits as the Police. Member Katauskas inquired if he had any idea of what it would cost to engage that kind of outside help. Chair McLarnon said a rough number of $500 was provided at the last Meeting for an impact study. He stated the Board chose not to move forward on doing the study until they had a closer understanding of where the City’s position was on this contribution. He said it was not necessarily clear regarding the City’s contribution. Mr. Williams said it was vague at best. He stated contributions were being made Pension 10-20-09/2 at this time on behalf of the City and the employee under the direction of the former Finance Director. Chair McLarnon said the City was contributing for any overtime pay that the Firefighters incur and the Firefighters were contributing one percent (1%) of their total compensation, less two items, paramedic and incentive pay. He inquired if the City was also contributing less those two items. Mr. Williams responded in the affirmative. Secretary Kempf said the total compensation would be those two items, paramedic and incentive pay, added on. He stated they were asking for that to be considered and for the cost study. Chair McLarnon asked the Board Attorney what was typical of most other municipalities concerning these items. Mr. Dehner advised most municipalities have the same compensation definition for pension purposes for Firefighters and Police Officers. He said it typically was total W-2 compensation. He explained there was a difference in the minimum requirement that needs to be met by Chapters 175 and 185 of the Florida Statutes in order to be entitled to receive State monies. Police Officers are required to have total compensation and Firefighters fixed compensation. He reiterated that most Plans in the State, the contribution was on total compensation. Secretary Kempf said now it was the wording that was obscured regarding the fixed compensation and the Firefighters receiving total compensation. He stated if the cost study is done to determine whether it is feasible, and the money was in the State Funds, then they can make it total compensation. Member Katauskas said it seems the Board needs more information and perhaps the study was feasible. Chair McLarnon said the cost analysis was warranted. Member Katauskas said if he understood correctly, most municipalities have the definition for making contributions the same for both groups with no differentiation, and it is total compensation. Secretary Kempf said he was suggesting they do the cost study first to see if it is feasible and if there is enough from the State money, they can just change the wording. Mr. Dehner said his recommendation, due to the numerous amendments this Plan has had over time, would be to restate and consolidate all of the Plan Ordinances into one document, incorporating the Federal requirements and the new provisions from the State, as one Plan Document. He stated you typically do this periodically and as part of this process it would be appropriate to incorporate Pension 10-20-09/3 clarification on any ambiguous item. Mr. Williams said they were getting ready to do the Actuarial Valuation. He inquired if the Board wanted to look at it for all Plan Members from this point forward or retroactive. Mr. Dehner recommended this to be for active employees and not include retirees. He further recommended getting a study that applies all years of service. Chair McLarnon clarified the intention of the Board was to move forward with a cost study, providing the Board with the numbers on what it would be to engage with the start point of all current employees on the Plan starting today as well as what it would be to go back to the original start date and what that cost would be to the City, and City employee. Secretary Kempf said it wasn’t so much of the City expense, but taking it out of the Fund or the excess State money. He stated Mr. Paul Shamoun, FLC, had explained to him there were excess funds to pay for this. Mr. Dehner said the first issue was what it is going to cost and the second issue is how it will be paid. He stated if there were excess State monies, this could be an available source. Otherwise, then they could request additional City funding. He said if there was enough excess State money to fund the additional cost, then it could be utilized for that purpose with no additional City funding. Chair McLarnon suggested the Board vote on the cost study and at the same time they need to discuss who will work with Mr. Williams, the FLC, and Mr. Dehner to investigate this matter further. He asked Secretary Kempf if he would be willing to participate with this. Secretary Kempf responded in the affirmative. Vice Chair Redditt moved to approve the cost study analysis. Seconded by Secretary Kempf and carried by a unanimous roll call vote. Secretary Kempf handed out a copy of a statement received by the FLC. He inquired as to the meaning of the wording on the statement of “ten years certain and life thereafter” meant. He said with the Florida Retirement System (FRS) there were four different sections you can apply for at retirement. He stated there was nothing in their paperwork that stated they could have joint survivorship or any other options. Mr. Dehner said this statement refers to the normal form of benefit for the Plan, which is the benefit that would be received if no optional form of benefit is chosen. This means the normal form of benefit is payable to the Member of the Plan upon retirement for their lifetime with ten years guaranteed. He explained if the Member did not live ten years, the beneficiary would receive the remainder of the ten years of payment. Mr. Dehner reviewed the typical various options. Pension 10-20-09/4 Secretary Kempf said he did not see any options listed in their paperwork. Mr. Dehner said he would look into this matter. He stated if the Board gives him direction to restate and consolidate the Plan, all of these typical options will be included. He pointed out that the optional forms of benefits were listed under Article 10 of the Defined Benefit Plan Document. He recommended changing the third option that states: “Such other amount and form of retirement benefit payment that, in the opinion of the Board, will meet the circumstances of the Participant and the Trust.” He said this could leave the Board open for potential liability and he recommended this be changed in the restatement of the Plan. Chair McLarnon moved to ask Mr. Dehner to restate the Plan and clarify the questionable issues. Seconded by Vice Chair Redditt and carried by a unanimous roll call vote. 7. Board Attorney Report. Mr. Dehner said they had discussed previously Senate Bill 538 that passed this st Session and became effective July 1. Some of this Bill is mandatory and he will include these in the restated document. He stated other items were permissive. One of the permissive items is the term provisions allowing the Board to go from two year to four year terms for Trustees. He said, in his experience, the case was more compelling for four year terms. He stated a Trustee can still resign mid- term, but felt this was something for the Board to consider. He said the other change that is mandatory under the Statute is the Foreign Security Investment limitation of twenty five percent (25%) of market value rather than the prior limitation of ten percent (10%). He advised this was mandatory and he would incorporate it. He advised with respect to Firefighters and Police service buybacks they can now incorporate a provision in the Plan that would enable members to purchase prior service time served outside of the State and Federal service provided it is comparable to the requirements. He stated there would be no additional funding cost to the Plan because the actuarial cost would be paid by the individual doing the buy back. However, where there will be a financial impact would be if they improve the Plan at some point in the future, the cost to improve the Plan would be more than what it would be without the buy back. Chair McLarnon said he was inclined to have Mr. Dehner include those elements, including the four year term, in the Plan and then the Board could decide if they desire to make changes or adopt it as presented. Member Katauskas said several of the items were mandatory. Mr. Dehner said the mandatory item was the twenty five percent (25%) maximum in Foreign Security at market value. The two optional items were the four year Trustee terms and the expanded buy back. Member Katauskas inquired if they incorporate the four year term into the Pension 10-20-09/5 document, does that mean it is giving the Board the latitude to do either two year or four year terms, or was it tying them into four year terms. Mr. Dehner advised if the four year term was in the Ordinance, it would be mandated with the proviso that any Trustee can resign mid-term. Chair McLarnon said they would move forward to have Mr. Dehner progress with these items to be presented to the Board. A. Meeting Dates for 2010. Mr. Dehner said he had submitted a Memorandum regarding the Proposed 2010 Meeting Dates for January 19, 2010, April 20, 2010, July 20, 2010, and October 19, 2010. As per the Longwood City Code, all meetings will be at 7:00 p.m. in the Commission Chambers, 175 West Warren Avenue. Chair McLarnon moved to approve the Meeting Dates as proposed. Seconded by Vice Chair Redditt and carried by a unanimous voice vote. B. Pre-tax Treatment of Health Insurance Premiums. Mr. Dehner said the Federal Legislation enables Public Safety Officers to take a tax exclusion up to $3,000 for payment of Health, Long Term Care, and Accident insurance premiums. One of the requirements to that Legislation, in order to take advantage of the $3,000 exclusion is that there is a direct transfer of money from the retiree’s check to the insurance provider. He stated until Senate Bill 538, they have not been permitted to make a direct transfer from the Pension Plan to an insurance company. He advised this was permissive, and not mandatory. He said by virtue of the State Statutory Amendments, they could provide the opportunity for normal service and disability service retirees to take advantage of the pre- tax premiums. He stated this would only be available if the Board implements the program and part of the implementation would be to do a direct transfer of money from the custodian to their insurance provider. He advised a number of Plans have not implemented it because they didn’t want to provide it to some and not all or it has not been implemented due to the administrative burden of making a transfer to so many different carriers. Mr. Williams said he would inquire to the cost associated with this type of service from the FLC. Member Katauskas said if they implement this, the con would be an administrative issue. Mr. Dehner said they would have to have in the Agreement that the retiree acknowledges they will have an amount deducted to cover the cost for the Pension 10-20-09/6 benefit of having this done. He stated the documents required for implementation have been provided to Mr. Williams. He reviewed these documents and said the most important document is the authorization signed by the retiree to make the deduction for this purpose. He stated the most important part of this authorization was that the retiree waives any right to liability against the Board or City. He advised, if provided, this provision would have to be specified in the ordinance. Mr. Williams inquired if the Board wanted Mr. Dehner to implement the pre-tax provision in the document. Mr. Dehner said it was his understanding the Board did not want to implement the program at this time, but he would incorporate this provision in the document and Mr. Williams can report back at the next Meeting on the cost. Mr. Dehner said the Internal Revenue Service (IRS) was going to be conducting more audits and they began this year by sending out surveys to twenty (20) Plans nationwide. He stated one of their clients received one of the surveys and it was very comprehensive. He advised the IRS would be sending out another two hundred (200) surveys and they were mandatory to respond to. 8. Member Comments. Secretary Kempf said a while ago it was voted on by the Board that he could make quarterly telephone calls to the Board Attorney and asked if this was still in effect. Chair McLarnon responded in the affirmative. 9. Public Participation. None. 10. Adjournment. Chair McLarnon adjourned the meeting at 8:09 p.m. Marc McLarnon, Chair ATTEST: Linda F Goff, CMC, Recording Secretary Pension 10-20-09/7