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Pension10-19-10Min 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 19, 2010 7:00 p.m. Present: Marc McLarnon, Chair Robert Redditt, Vice Chair Chris Kempf, Secretary Peter Katauskas, Member H. Lee Dehner, Board Attorney Jon C. Williams, Financial Services Director Sarah M. Mirus, 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. - 3. Approval of Minutes: April 20, 2010 Regular Meeting. Chair McLarnon moved to approve the April 20, 2010 Minutes as presented. Seconded by Vice Chair Redditt and carried by a unanimous roll call vote. 4. Review of Agenda Packet Material. A. Plan Account Statements (May 2010, June 2010, July 2010, and August 2010). The Board reviewed the Plan Account Statements in detail. Chair McLarnon noted on May 1, 2010, they had a beginning balance of $6,132,553.64 and an ending balance of $6,110,903.61. He said in August 2010, they made a lot of ground and the total. Contributions were $254,294.24. The Board reviewed the Earnings/ (Losses) that were included in the Plan Account Statements for May 2010, June 2010, July 2010, and August 2010. Chair McLarnon noted they were down by five percent (5 %). He said during that timeframe, there was the State Contributions of $230,000, the Pension 1.0- 19 -10 /1 average Contributions of the Employer was $15,000, and the average Employee Contributions was about $3,000 per month. Vice Chair Redditt noted it was down about $137,794 was what he came up with. Secretary Kempf asked for an explanation on how they arrived at those figures. Chair McLarnon explained how they arrived at those figures. Secretary Kempf noted there was nothing that could be done about the market right now. He said in comparison to other funds, inquired if the fund was drastically under or over. Chair McLarnon said he personally did not know how they compared to other funds. He said if they look at the overall, he noted they were a little underwater. He said they have to look at where do they stand with the market and were they meeting their investment market objectives, which they were not. He said if their goal was seven percent (7 %), they were not there and neither was anyone else. He said the good news for them was the investment portfolio was fairly heavily weighted towards a bond fund, which gives a certain level of security going forward. He stated nowhere was anyone doing great right now. Vice Chair Redditt said if you compare the Beginning Balance on May 1St and then look at the Ending Balance on August 31 St, the difference was only $21,650. Secretary Kempf noted the State Contributions were being lumped together at that time and that's been their only saving grace. He stated if they did not have that come in, then they would really be in the negative. Chair McLarnon said the fortunate thing they have going for them was the type of plan and the State's contribution. He said that was the real benefit and if you shopped around in the private market right now, no one was making their pension contributions or 40 t K contributions. He stated according to these documents, the fund itself was very well funded, very secure as compared to most, and they do have a surplus in the fund to make up for any shortfalls from the State as they occur. He said there were enough money managers looking at the investment that they have and they would have to defer to their expertise as best as we can. Vice Chair Redditt said they know they're conservatively invested too. Secretary Kempf inquired how much did the City contribute. He said he knew the City put in over and above State Contributions and asked Mr. Pension 10 -10 -10/2 Williams what the number was. Mr. Williams said he did not have the actuarial evaluation in front of him and said it was in the.heighborhood for a total of a $500,000 figure. He affirmed this was for the year. He said the State premium tax money, as a result of the last evaluation, was projected to be $302,000 coming from the State and then the difference to come from the City. He said anything below the $302,000 base level; the City had to make up that difference. He said he did not have actuarial evaluation and would not be able to provide him with a definitive number right now. Secretary Kempf asked how you would know what the overall balance was. Mr. Williams said each year they have an evaluation done and then the evaluation comes back and tells what the annual required contribution was to be. He said the variables that come into play would be the premium tax moneys that you would receive to make up that difference. He said it was something that needed to be watched annually, once they do receive the evaluations and then adjustments made accordingly throughout the year. Discussion was held regarding when the City contributes to the pension and where it was listed on the statements. Member Katauskas stated he added the numbers while they were talking and said it was five percent (5 %) down. He said you would want to check the number and how was this portfolio performing against other portfolios like it. He said this was down five percent (5 %) over a four (4) month period. Chair McLarnon stated the goal was an increase of seven percent (7 %). He said it was a combination of all resources to include: Contributions, Income, and Fund Earnings. Discussion was held regarding the checks being received and then being . deposited into the fund. Secretary Kempf said when he looked at the Contributions and it was so variable. He said he knows they take a fixed amount out of their paychecks and inquired how you derive at what you contribute. Mr. Delmer said the statutory requirements were the member contributions and were to be deposited immediately after each pay period; and the City contributions were to be deposited at least quarterly. He said the State contributions have to be deposited five (5) days after being received by the City. Pension 10 -19 -10/3 Secretary Kempf stated he understands that, but the number changes all the time. Mr. Williams said it would fluctuate with the level of payroll, and provided an example. Chair McLarnon said with no further questions, they would approve Section A, the Plan Account Statements. B. Memorandum 2009 Annual Report. Mr. Delmer said the Memorandum indicates the State accepted the Annual Report. Mr. Williams said this was for informational purposes for the Board that the Report had been reviewed and approved by the State. C. Invoices. Discussion was held regarding the Invoice submitted by the Florida Municipal Trust Fund for the Actuarial valuation and individual benefit statements as of October 1, 2009, submitted April 9, 2010. Chair McLarnon moved to approve the Invoices as submitted for payment. Seconded by Member Katauskas and carried by a unanimous roll call vote. D. Quarterly Performance Review. Chair McLarnon said the quarter ending numbers were not significantly different than what they already know from looking at the actual fourth (4 month period. He said fortunately, they were able to see August, which showed a nice improvement. He said again it showed forty percent (40 %) in the bond fund and what they have in the other diversified funds. He said there being no questions, they would move -on to accept these numbers as presented. E. 2009 Firefighters' Supplemental Compensation and the 2009 Premium Tax Distribution. Chair McLamon inquired what the Premium Tax Distribution was. Mr. Williams said it's an annual revenue source. It is down somewhat from prior years. Chair McLarnon said basically it is the two checks we have received that have been forwarded on to the fund. Pension 10 -19 -10/4 Mr. Definer said with respect to the police distribution, there was one distribution that was attributable to the police officers, which was the 0.85% tax on casualty policies written within City limits. He said for the firefighters they were on property insurance, but they have two (2) distributions. He said the first distribution was capped at the greater of six percent (6 %) of the payroll for one half (' /2) of monies collected.i He said the supplemental distribution was provided from amounts that were collected over the cap that were not needed to go to the State Educational. Fund. Chair McLarnon noted the supplemental was the $39,000. Mr. Dehner responded in the affirmative. He noted this year; the collections were down Statewide on the average. Chair McLamon thanked him for placing the information in thei packet. F. Compliance with Identification and Divestiture of Securitized Companies Under Sections 175.071 (8) and 185.06 (7), Florida Statutes. Chair McLarnon said this had to do with the Trust Fund itself. He said this was basically for investment purposes or for informational purposes. Mr. Dehner said this was an amendment to the Statutes 175 and 185 last year. He said it was protecting Florida's Investments Act and essentially provides that we cannot be directly invested in non- domestic companies who were doing certain businesses primarily military and energy- related businesses in Sudan or Iraq. He said if they did have those businesses, then they were required to divest last month of any direct investments. He said if they owned a mutual fund of any those companies, then the statutory requirement was that they communicate with the Administrator of the pooled funds and ask that they divest of these scrutinized companies, or alternatively establish another fund without the scrutinized companies. He said that in every case that he was aware of, the responses to those communications have been "no" and "no ". He stated once they have done that, however, they do not have to divest of the pooled funds and mutual funds. He said the Administrator would need to communicate with us that they have complied with the statutory requirements. He said the report of compliance needs to be in the minutes when they receive that communication. He said the requirement of the statute were identification of the scrutinized companies and public notice. He said reading the Division's position to meet the public notice requirement, they need to receive a report of compliance from the investment consultant and it needed to be recorded in the minutes. He said it was important this year that the Division was not withholding money for non- compliance of this, but next year they will. Pension 10 -19 -10/5 5. Other Business. A. Review of Ordinance Amending and Restating Ordinance No. 03 -1671 as Subsequently Amended, and Restating the City of Longwood Police Officers' and Firefighters' Pension Trust Fund. Mr. Dehner said that he was prepared to discuss any issues and to answer any questions. He said the two (2) issues that were outstanding in his mind was the definition of salary firefighters and this reflects going back to fixed compensation. He said this provides for total compensation, which the police officers have. Secretary Kempf noted this would clear -up everything and that was why he was trying to get to the next step. Mr. Dehner agreed that was an outstanding issue. He said the only other one was to include the DRAGO provisions in this document or to leave it as a standalone document. Chair McLarnon questioned if there was something at the last meeting where it was discussed about changing how the compensation was defined and it was part of the Collective Bargaining Agreement. He asked if that had to go before the City first and the Union. Secretary Kempf said it was a Board issue. Mr. Dehner said the Terms and Conditions of Employment by the Constitution in Florida was subject to Collective Bargaining. He said the issues don't necessarily have to go to the table. He said the Board could recommend an improvement to the Plan such as the compensation definition, and do not interfere with the process and the union would have to sign -off on that change pursuant to its rules. Secretary Kempf stated they were just voting on the issue and they would have to sign -off on it. Mr. Dehner said if they were going to improve the compensation definition, the union would have to sign -off on the page. He noted the Actuary would have to do an impact statement on that and the funds would have to be provided for. Secretary Kempf inquired about the status of the total compensation. Mr. Dehner provided an update regarding total compensation. Chair McLarnon asked were they not going to ask the Actuary to give the Board an impact number that they could talk to the City about prior to making any recommendations. He said he would hate having to make Pension 10- 19 -10 /6 another change to the document if they don't know what it's really going to cost. Mr. Williams said back in April when Mr. Paul Shamoun was present at the Pension Board Meeting, he presented a letter from the Actuary and didn't recall it being a full impact or actuarially impact analysis that described what the cost would be in making that change based upon the 2009 earnings. He said as he recalls it was a very minimal impact at that point in time. He said obviously the wages have been frozen and, overtime, as wages were unfrozen and increases were given, that impact was going to change. He said it was a little tough to predict and if he recalled correctly, it was in the three percent (3 %) range and was a very minimal number. Secretary Kempf inquired if they would have to do another Cost: Study. Mr. Williams responded stating they would have to be an actuarial impact analysis performed on that change and were currently awaiting an impact analysis on the Ordinance as exists on this present day. He said if the Board wanted to take action to make that recommendation to change that definition, they could call the Florida League of Cities (FLC) tomorrow and make them aware of the Ordinance change. He said they can provide them with the new definition of salary and they could bundle that into the current actuary. Secretary Kempf inquired if they could make the change before the actuary study. Mr. Williams said based upon the electronic mail that he provided to the Board tonight, they have to perform one on the Ordinance as its exists this present day. He noted this has not begun as of October 15, 2010. Mr. Delmer said they copied the Consolidated Restatement on June l O and had asked for an impact and that had not been done. He said if the Board directs, they could change the Total Compensation to the same definition as the police officers for the firefighters and send it to them for an impact statement on the entire document. Secretary Kempf stated they have been discussing this since 2008 and he would like to get it completed. I Discussion was held regarding the impact the excess funds to service the projected funding needed coming out of the surplus and not necessarily out of the City's General Fund or any other funds. Mr. Williams said if the Board took action tonight and did decide they wanted to make the change in the definition and that would be the trigger Pension 10 -19 -10/7 1 for staff to go back to the FLC and tell them they need to include this provision of the Ordinance in the Actuarial Impact Analysis. He said they can bring it all back and present the cost to the Board of the Actuarial Evaluation and the impact that it's going to create. He said that recommendation can be moved forward to the Commission and they would have all the information to be able to provide it at one point in time. Discussion ensued regarding changing the Total Compensation for the firefighter to match the police officers and outlined the costs increases. Mr. Dehner said his recommendation would be if the Board wanted to move forward with this that the Board directs him to change the Salary Definition for the fighters to mirror the Definition for the police officers and he would resend the document to Mr. Williams and copy the Actuary and ask them for the study. He said the change would be in the document and bring it back to them. Discussion was held regarding Mr. Dehner's recommendation. Chair McLarnon moved to direct Mr. Dehner to redraft the Ordinance to mirror the Definition of Compensation for the firefighters to match -up of that with the police. Seconded by Vice Chair Redditt. Discussion was held regarding the pending motion. Motion carried by a unanimous roll call vote. Mr. Dehner said that he was reviewing his notes and inquired if they wanted the DRAGO provisions in the document or to let that be a standalone Ordinance as it currently was. Chair McLarnon recommended leaving the DRAGO Ordinance as a whole separate Ordinance. Mr. Williams said he would notify the Lee Adjustice tomorrow morning to stop on the current Actuarial Impact as they have made the change, and the change would be forthcoming. 6. Board Attorney Report. Mr. Dehner reviewed the Healthcare Enhancement for Local Public Servants (HELPS) Legislation and said the Legislation for Public Safety Officers became effective January 1, 2007. He said it provided for normal and disability retirees a $3,000 Federal income tax deduction if the program were to be implemented. He noted it was not mandatory and it was permissive for the payment of health, long- term care, and accident insurance premium. He said some plans have adopted it nationwide, but most have not. He stated the reason was due to the administrative Pension 10 -19 -10/8 burden and said the Board was ultimately responsible for the administration of the Program. He further explained the Program in detail and said they were monitoring the Legislation to see what happens. He outlined the changes if the Program passed and said he would keep the Board posted on the matter: Mr. Dehner said the next item was the internal revenue and said this relates to the Memorandum he had sent. He said it was for the Board to determine whether or not they want to file with the Internal Revenue Service (IRS) for the issuance of a Favorable Determination Letter. He said if so, they were in Cycle E filing and would have to file by January 31, 2011. He said the filing was not required in order for us to be treated by the IRS as a qualified plan and to derive the tax benefits of that which were primarily pre -taxed contributions to the Plan. He said the members do not pay an annual income tax of the value of the accrued benefits increase in the plan and they would not pay tax in the earning of this plan. He said it was not required to file for the Favorable Determination Letter. He said they notified him stating they were going to be more interested in public sector plans to provide better guidance and assistance. He noted they were stepping up audits on city plans, which they have never done before. He said the Ordinance would need to be adopted before they file. He stated the downside was the expense ;and provided a cost estimate. He then outlined some of the problems and noted the IRS recognized these problems. Discussion ensued regarding the City pensions being audited by the IRS. Chair McLarnon moved to choose not to file for a Favorable Determination Letter, primarily due to cost. Seconded by Vice Chair Redditt and carried by a unanimous roll call. vote. 7. Member Comments. Secretary Kempf inquired if a member from the police would be on the Board at the next meeting. Ms. Mirus responded in the affirmative. 8. Public Participation. Charles "Chuck" Kordan Firefighter, inquired about the $50,000 life insurance plan for the employees and asked if it applied to other employees who were not under the FLC Plan. Mr. Williams said he would go back and look into the matter and get back with him. Pension 10 -19 -10/9 II 9. Adjournment. Chair McLarnon adjourned the meeting at 8:25 p.m. Robert Redditt, Chair ATTEST: r Sarah M. Mirus, MMC, MBA, Recording Secretary Pension 10- 19- 10 /1.0