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Pension04-17-12Min 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 April 17, 2012 7:00 p.m. Present: Robert Redditt, Chair Peter Katauskas, Vice Chair Derek Chenoweth, Member Marc McLarnon, Member Scott Christiansen, Board Attorney Dustin Heintz, Florida League of Cities Sarah M. Mirus, Recording Secretary Absent: Chris Kempf, Secretary 1. Call to Order. Chair Redditt called the meeting to order at 7:03 P.M. 2. Pledge of Allegiance. Chair Redditt led in the Pledge of Allegiance. 3. Certify Re- Election of Trustee- Firefighter Chris Kempf. Ms. Mirus noted with the adoption of Ordinance No. 11 -1980 by the City Commission, Firefighter Kempf would serve on the Board for a four (4) year term from March 4, 2012 to March 3, 2016. Vice Chair Katauskas moved to certify the re- election of Trustee - Firefighter Chris Kempf. Seconded by Member Chenoweth and carried by a unanimous roll call vote with Secretary Kempf absent. 4. Approval of Minutes: April 19, 2011 Regular Meeting, August 23, 2011 Special Meeting and October 1S, 2011 Regular Meeting. Member McLarnon moved to accept the Minutes as presented. Seconded by Vice Chair Katauskas and carried by a unanimous roll call vote with Secretary Kempf absent. 5. Review of Agenda Packet Material. A. Plan Account Statements (December 2011, January 2012 and February 2012). Pension 04 -17 -12/1 The Board reviewed. the Plan Account Statements in detail. Chair Redditt noted for the December Statement the Beginning Balance was $7,515,195.17, the Contributions were $17,035.33, the Earnings were $26,805.94, the Distribution was $0, the Fees/Expenses were ($3,772.61) and the Ending Balance was $7,555,263.83. Chair Redditt noted for the January Statement the Beginning Balance was $7,555,263.83, the Contributions were $25,623.22, the Earnings were $239,931.56, the Distributions were $0, the Fees/Expenses were ($3,583.22) and the Ending Balance was $7,817,235.39. Chair Redditt noted for the February Statement the Beginning Balance was $7,817,235.39, the Contributions were $17,952.95, the Earnings were $215,492.46, the Distributions were $0, the Fees /Expenses were $0 and the Ending Balance was $8,050,680.80. Mr. Heintz introduced himself to the Board and said he was with the Florida League of Cities (FLC) and stated he took Mr. Paul Shamoun's position as head of the pension plan. He stated Mr. Shamoun was still with FLC but he was now the Manager for the pension and investment plans. He stated he would be coming to the meetings, and the meetings he would not be attending, he would always be available by telephone. He then explained the expenses /fees that were charged by the FLC and how they were charged. He then described his job responsibilities in detail with the FLC and listed the investment managers who were. handling the funds. Discussion ensued regarding the fees that were being, charged to the plan and the return on the investment plans. Member McLarnon moved to accept the Statements as presented. Seconded by Member Chenoweth and carried by a unanimous roll call vote with Secretary Kempf absent. B. Quarterly Performance Review (October 2011 to December 31, 2011). Mr. Heintz reviewed the Quarterly Performance ending on December 31, 2011 in detail and then answered questions from the Members of the Board. He stated if they have any questions to please contact him. Chair Redditt noted the Beginning Balance for the Quarter was $6,994,662.85, the Contributions were $83,242.92, the Earnings were $484,503.67, the Distributions were $0, the Expenses were ($7,145.61) and the Ending Balance as of December 31, 2011 was $7,555,263.83. Discussion was held regarding the returns for the current fiscal year. Pension 04 -17 -12/2 Member McLarnon moved to accept the Quarterly Statement as presented. Seconded by Vice Chair Katauskas and carried by a unanimous roll call vote with Secretary Kempf absent. C. Invoices. Chair Redditt noted there were no invoices included in the Agenda Packet. Mr. Heintz said there was an outstanding invoice from December which was for the impact statement for the Ordinance, and he believed it had not been paid. He said he did not have the information with him. Ms. Mirus said she could check with Mr. Williams tomorrow, but he had stated there were no invoices to include in the Agenda Packet. Attorney Christensen stated the Board had adopted Operating Rules and Procedures for the day -to -day operation of the plan as to how to handle administration. He said one of the things they approved was a provision in the Operating Rules and Procedures to allow for the payment of bills between meetings. He said if bills came in, they had a contract and staff could look at the bill and say it was in line with the fees that were supposed to be charged. He said that bills could be sent in for payment between meetings, and would come back to the Board at the next meeting and they would see it and approve it after the fact. He said most of the plans handle things that way and someone would not have to wait three (3) months to get the bill paid. He said the provision that they put into the Operating Rules and Procedures was that the authorization to make the payments from the fund had to be made and signed off by two (2) Trustees. He said he understands that really was not what they were doing and Mr. Williams was approving the - payments. He said he was the Finance Director when he paid those bills and asked the Board to consider a change assuming they were comfortable with that methodology that allowed the Finance Director to pay those bills when they come in and authorize the payment. He suggested changing the Operating Rules and Procedures to reflect what they were actually doing and what they want to authorize. He said if they were okay with that change, he would put together a one (1) page Addendum for the Board to approve at the next meeting to authorize the Finance Director to authorize those payments rather than to require the two (2) Trustees. Discussion ensued regarding the proposed change to the Operating Rules and Procedures and capping the authorization to pay the expenses. It was the consensuses of the Board to amend the Operating Rules and Procedures and to allow the Finance Director to approve the bills that did not exceed $5,000 and to have Attorney Christiansen bring that change Pension 04 -17 -12/3 forward at the next meeting. D. 2011 Annual Report for Longwood Police and Fire. Attorney Christiansen asked if they were looking to approve the Annual Report or had it been submitted. Mr. Heintz said it had already been submitted and did not know if they had received the approval letter yet from the State. Attorney Christiansen asked if the Board had to take any action on it. Mr. Heintz said it was included in the Agenda Packet for informational purposes. Vice Chair Katauskas said it was a matter of routine and standard practice. Attorney Christiansen said it was a reporting requirement. Mr. Heintz discussed the process to receive the approval of the Annual Report from the State. Chair Redditt inquired if the report was based on a calendar year. Mr. Heintz said it was based on a fiscal year. Chair Redditt inquired if they needed a motion for the Item. Attorney Christiansen responded in the negative. 6. Other Business. A. Appointee of the Fifth Trustee. Ms. Mirus stated Member McLarnon did express an interest in reappointment. Member McLarnon said he was the Fifth Trustee and said he was fine to stay on and serve or if the Board would like to have someone else step -on he was fine with that and stated it was totally up to the Board. Vice Chair Katauskas moved to accept Member McLarnon's kind offer and have him continue as the Fifth Member. Seconded by Chair Redditt. Ms. Mirus stated Member McLarnon's term would begin on June 3, 2012 thru June 2, 2016. Pension 04 -17 -12/4 Motion was approved by a unanimous roll call vote with Secretary Kempf absent. 7. Board Attorney Report. Attorney Christiansen stated at the last meeting they approved the actuarial evaluation and did not do the Declaration of Return. He said State law requires when the actuarial evaluation was approved, they were required to declare an expected rate of investment return for the next year, the next several years and the long -term thereafter. He said it was a State requirement and they were required to do it. He said he thinks the reason they waited was because .Mr. Heintz was going to be attending this meeting, and he was the appropriate person to ask for an expectation of the return going forward. He said the idea behind this was the State wants to make sure every time they approve an actuarial evaluation that they have considered the portfolio and the asset location that they have in the plan as it might apply towards the assumption. that they were using in the actuarial evaluation for investment returns going forward. He said he thought they were using seven and one -half (7'/2 %) percent. Mr. Heintz responded in the affirmative. Attorney Christiansen said they were using a seven and one -half (7'/2 %) percent investment return assumption in the actuarial evaluation, and that they approved that evaluation at the last meeting. He suggested asking Mr. Heintz what he would recommend they declare as an expected rate of return for the next year, next several years and the long -term. thereafter. Mr. Heintz said they have been seeing with the trend there had been a lot of pension plans that have been in excess of eight (8 %) percent and the trend seems to be going down. He said the expected return was not reaching those levels, especially given some of the limitations that the public investing typically has on it. He said the seven and one -half (7'/2 %) percent return has been right in line with the expected ten (10) year return that would be on this portfolio. He said there was room to be cautious and there was always room to lower. He noted a lot of their plans were trying to drift towards a seven (7) or a seven and one -half (7'/z) return. He said once they get. down the path a little, the expectation between a seven (7 %) or a seven and one -half (7' /Z %) percent was pretty good. He said the actuary comes in and talks about his report, and said he would not oppose anyone lowering an investment return, and that had ramifications. He said when lowering an investment return, it was going to increase the required funding ratio for the City. He said it had to be coupled at a time with other factors, if they were strong investment gains or if there were some actuarial gains in the plan, then that would drive the cost down, and then they lower the investment rate and would drive the cost up to off -set it, and it tends to be a good opportunity to keep the plan cost neutral and make it more conservative in the long -term. He stated seven and one - half (7'/2 %) percent was a very reasonable rate to continue to assume, and he would not recommend increasing it, but he would not be opposed to the idea of Pension 04 -17 -12/5 decreasing it. He said being as conservative as possible was going to help make the pension plan look stronger in the future. Discussion ensued regarding using the seven and one -half (7'/2 %) percent was a reasonable expectation based on the 60 -40 asset allocation. Attorney Christiansen said they were premature in doing the Declaration of Return and apologized. He said they would be doing that at the next meeting if they get the valuation, and would revisit then and would have his recommendation with regard to the assumption. Vice Chair Katauskas said they would discuss this at the next meeting as indicated. He inquired how often the valuation was completed. Mr. Heintz said the valuation was required by the State every three (3) years and accounting rules required it every two (2) years. He said most plans have it done every year and at a minimum every two (2) years. Attorney Christiansen said he apologized and they would be talking about it at the next meeting when they do the evaluation. Attorney Christiansen reminded everyone they had to turn in their Financial Disclosure (Form 1) form by July 1St to the Supervisor of Elections Office and if they do not file their Form 1 by July 1 St, then they would have until September 1St and after September 1S they would be fined $25 for each day it was late. Attorney Christiansen said at the next meeting he would be out of the Country and Attorney Lee Dehner would be in attendance at the next meeting. He stated the Ordinance was adopted in February and wanted to confirm it was sent to Ms. Patricia Shoemaker and Mr. Keith Britton at the State. Ms. Mirus said she would check on that and Mr. Williams was handling the matter. Attorney Christiansen referred to the Summary Plan Description, and said now that they have the new Ordinance in place, they need to revise the Summary Plan Description. He stated that could be done in two (2) ways. He said the last one that was completed was in 2006. Mr. Heintz responded stating they had completed it yesterday. Attorney Christiansen inquired if it was going to be distributed to them. Mr. Heintz responded in the negative. He said they used it today for the plan meetings using the most recent information. Attorney Christiansen said they had already distributed it.. Pension 04 -17 -12/6 Mr. Heintz responded in the affirmative. He said he would bring it back for approval. Attorney Christiansen had asked for a copy of the Summary Plan Description from Mr. Heintz. He said the Summary Plan Description was a document that summarizes the provisions of the plan and who the Trustees were. He said the FLC had already done it and prepared it in accordance with the new Ordinance, and he would take a look at it and let everyone know if it was done right at the next meeting. He inquired if it was distributed to the members and noted they were going backwards. Mr. Heintz responded in the affirmative. He said that it was an oversight on his part and the fact they did not have one, and the one they did have was out of date and knew they were having meetings today on what the information was. Attorney Christiansen said that he would get his copy and they would approve it after the fact at the next meeting. Mr. Heintz noted in Florida Statutes it required the Summary Plan Description to have actuarial information. He said the Legislation last year required the State to produce forms for each public pension plan and put it on the State website, and it also requires the City to post it on their website. Attorney Christiansen said the next matter he wanted to discuss was the Mr. John Zeh situation that was brought up. He said he did review the records, and he sent out a letter to him indicating they were scheduling a hearing to determine whether they had probable cause to find that his benefit should be forfeited. He thought that what he read gives the Board a basis for the forfeiture, based on what was done. He said his conviction was not final because he could appeal his conviction and noted he was in jail. He said the fact that his conviction is not final was not the only basis for forfeiture. He said it was either a conviction of given offenses or having his employment terminated because he did certain things. He said he understands Mr. Zeh was given the opportunity to resign in lieu of termination, but that does not get around the fact that bottom line was, he would have lost his job but for this activity, so as a result, his employment was terminated. He said he received a letter from him and then he got a call from his mother. He said in the letter from him he asked that they delay their decision on the forfeiture until he gets out of jail, which would potentially be in a couple of years. He stated he did not see any reason to delay the decision until that point. He does not have a problem with waiting until his conviction is final. He said he was not aware that he had appealed it, but what he had done at this point was to send a follow -up letter and said they have postponed consideration of the forfeiture until the meeting they have scheduled in October. He said that would give time for any appeals. He said if there was no appeal, he can send a representative if he wanted to, but the basis for forfeiture was, if they do certain things, the Board was required to forfeit the pension. He said they have it scheduled for October and if the Board wanted to wait until he gets out of jail so he could appear before the Pension 04 -17 -:12/7 Board, he was okay with that too. He noted he had all the records together. Chair Redditt inquired why he wanted them to wait. Attorney Christiansen said he thought he wanted to come and plead his case. Vice Chair Katauskas said Attorney Christiansen had stated this was not final and he had been convicted at the Circuit Court level, but had the right to appeal. He inquired if there was a Statute of Limitations on how long he had to appeal. Attorney Christiansen said he had a certain amount of time to appeal. He said if he does not appeal, they would know his conviction was final. Vice. Chair Katauskas said if he did appeal within the proper time frame, it could carry on.for a while. Attorney Christensen said he was not on paid status, but he was terminated vested, which meant he had a right to receive a benefit years in the future. He noted he had not requested his contributions yet, but has that right. He said they would be revisiting this situation. He then answered questions from the Members of the Board regarding this matter. Member Chenoweth asked if they had fiduciary liability insurance in place. Attorney Christiansen responded in the affirmative. He said the answer was the recourse premium was $125 and it was paid and he asked if it was paid out of the plan. He said the Fiduciary Liability Insurance was to be paid out of the plan and there was a Waiver of Recourse that the insurance company offers as an additional premium and it was $125 a year. He said it was designed to make the plan whole in the event there is a breach of fiduciary responsibility and provided an example. He said if they have Fiduciary Liability Insurance, the City or a member could make a claim against the Board saying they breached their fiduciary responsibility and there was a loss associated with that. He said they could make a claim to the Fiduciary Liability Insurance Company to have the plan made whole for the breach of liability insurance and the insurance company would pay to make the plan whole. He said the insurance company would look to see who was responsible for that claim, and they go back to those who were responsible in order to recover the loss they had to pay. He stated the insurance company could go back at them personally because they want to get their money back because they had to pay a claim and the Board caused it. He said they offer the Waiver of Recourse; the insurance company would give up their right to go back against the individual Trustees to recoup that loss. He stated from the Board's standpoint, that was the most important part of the policy. He said the problem was that the $125 cannot be paid from the fund, and if it was, it was not effective. He said it had to be paid from an outside source, be it a labor union or the City paying it, or even individual Trustees. Pension 04 -1.7 -12/,8 Ms. Mirus noted at the October 2011 Pension Board Meeting, the motion was to approve all the invoices, except the $126.63 invoice, which the City would pay, and it was the Recourse invoice. Attorney Christiansen said they needed to follow -up and see that the $126.63 invoice was paid by the City. 8. Member Comments. Chair Redditt said the only comment he would make was to proceed with their continuing education and going to the Pension Board School. He asked how many present have not been to the School, and asked if they could get a list of potential, local opportunities. He said it was required to attend one of these schools if they sit on the Board. Mr. Heintz noted the State was having a meeting on May 14 15th and 16 in Tallahassee. Ms. Mirus stated the Florida Public Pension Trustee Association (FPPTA) was holding their annual conference on .Tune 24 through the 27 at the Hilton Disney, Lake Buena Vista. 9. Public Participation. None. 10. Adjournment. Chair Redditt adjourned the meeting to order at 8:36 p.m. Robert Redditt, Chair ATTEST: Sarah M. Mirus, MMC, M_ BA, Recording Secretary Pciision 04 -17 -12/9 This Page Left Blank Intentionally. Pension 04 -17 -12/10