Loading...
HomeMy WebLinkAbout2007 02 26 EXEMPTION Consent 410 Approval of the February 5, 2007 Workshop (2) Minutes CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) FEBRUARY 5, 2007 CALL TO ORDER The Workshop (2) of Monday, February 5, 2007 of the City Commission was called to Order by Mayor John F. Bush at 7:06 p.m. in the Commission Chambers of the Municipal Building (City Hall, 1126 East State Road 434, Winter Springs, Florida 32708). Roll Call: Mayor John F. Bush, present Deputy Mayor Sally McGinnis, absent Commissioner Robert S. Miller, present Commissioner Rick Brown, present Commissioner Donald A. Gilmore, present Commissioner Joanne M. Krebs, present City Manager Ronald W. McLemore, present City Attorney Anthony A. Garganese, present REGULAR AGENDA REGULAR 300. Office Of The City Manager Requesting The City Commission Review The Pension Attorney's Revision And Update Of The City Of Winter Springs Defined Benefit Pension Plan Document. City Manager Ronald W. McLemore presented his opening remarks on this Agenda Item. Mr. Jim Linn, Esquire, Lewis, Longman & Walker, P.A., 125 South Gadsden Street, Suite 300, Tallahassee, Florida: as the City's Pension Attorney, Mr. Linn addressed the City Commission. Commissioner Joanne M. Krebs said, "Mr. Linn, back in January 2006, I believe, yes, it was you who prepared a summary plan description. Is that also changed from that?" Mr. Linn stated, "I think that the summary plan description will - still reflect the provisions of the revision, but I do think that the summary plan description can be simplified and I think that would be the next step after this Plan document is adopted. But as far as the benefit structure and how the Plan works, what's described in the summary plan description, I think is pretty close to this - because the intent of the re-write wasn't to change any provisions of the Plan." It;"" I.""", B~-~~~',~ CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 2 OF 15 Mr. Linn continued, "If you turn to page 15 on Administration, SECTION VII, makes it very clear that the Board of Trustees is the City Commission and that the City Manager is the Plan Administrator. And it does provide that the Board, City Commission, can designate a different Plan Administrator. But SECTION VII makes it clear that it's the Board, the City Commission, that is ultimately responsible for the Plan. And then going over to page 16, section 7.010, talks about the Retirement Committee which is provided, established to provide advice and recommendations to the Board." Discussion ensued on OPTION A and OPTION B. Commissioner Krebs then said to Mr. Linn, "Whose interests are you representing? You are representing the City's interest? Correct? Mr. Linn responded, "I am representing the City's interests but I also have been the Attorney for the Plan." Commissioner Krebs asked, "As far as liability is concerned, could you please explain what my liability personally is?" Mr. Linn replied, "You as a Board Member, and I would refer to page 18, bottom of page 18, top of page 19 - the Plan specifically provides that Board Members and other fiduciaries, because anybody who has discretionary authority over the Pension Fund is a fiduciary, must discharge their duties with respect to the Plan, solely in the interest of the Members and beneficiaries, for the exclusive purpose of providing benefits to Members and beneficiaries in defraying the expenses of administering the Plan. But the rest of this paragraph at the top of page 19, this is basically the prudent person's standard, and that would be applicable to you as in your role as Trustees. And we did have this discussion of hats. You know, if you have the fiduciary hat that you wear as a City Commissioner, with respect to the City and the City's funds. And you would put on your Pension Trustee hat as a Board Member of the Board of Trustees when you were dealing with Pension issues. What is your personal liability? It would be for violating this standard of fiduciary obligation, this prudent person's standard. In other words, what it basically means is that you would not act with care, skill, prudence, and diligence under the circumstances and that that would cause some injury or decrease to the Pension Fund. " Commissioner Krebs asked, "Right, so would I be personally liable?" Mr. Linn replied, "You certainly could as a fiduciary. Any fiduciary can be found personally liable." Commissioner Krebs asked, "Do we have any insurance for that?" Manager McLemore said, "We do." Commissioner Krebs asked, "Who would defend me?" Manager McLemore said, "The City would." f~':;~.," \ CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 3 OF 15 Mr. Linn said, "Normally the insurance carrier that provides the fiduciary coverage would also provide legal defense for the main fiduciaries if they're sued." Mr. Linn added, "As long as you were acting in good faith, the likelihood of you being found to have violated your fiduciary duty would be pretty small." Mayor Bush asked, "SECTION I, that is somewhat different?" Mr. Linn stated, "Really, the only difference there is in the definition of actuarial equivalence and - that's in 1.01, on page 1. And that was really revised in accordance with the recommendation of the Actuary and reflects what the current - the definition that's been applied." Mr. Linn continued, "If you look at the definition of normal retirement date in the current Plan document, it just talks about a member having to reach age sixty-five (65). The fifty-five (55) and ten (10) is really under the early retirement sections of the Plan. But, what it says is that if you reach fifty-five (55) with ten (10) years of service, you can retire, but there's no reduction in your benefit. Which means, essentially, that's normal retirement. I mean, in these Plans you have an early retirement benefit which means there's a reduction from what it would be if you waited to normal retirement. So, what we tried to do here is to say - 'Age fifty-five (55) with ten (10) years of service is going to give you an unreduced benefit, well, we're just going to call that normal retirement.' So that's why that changes." Mayor Bush asked, "Is there an early retirement?" Mr. Linn replied, "There is an early retirement. Back on page 2, and that remains the way it is in the current Plan which is twenty-five (25) years - you reach twenty-five years (25) of service prior to age fifty-five (55). And later on in the document, it talks about - you get a benefit at that point, but it is a reduced benefit based on the actuarial value of what the benefit would be, if you reached age fifty-five (55)." Commissioner Krebs asked, "What is the responsibility of the Plan Administrator?" Mr. Linn stated, "Normally, the Plan Administrator is the one (1) that retains the records for the Plan and canies out the administrative functions; making sure the Trustees direction as to where the Pension Funds are going, in terms of who has custody of the funds and also making sure that the benefit checks are going out. Now, it's not that he's going to be acting, that the Administrator acts as - doing the calculations, that's normally done elsewhere, but he would make sure that all of that is done so that the Plan, the provisions of the Plan are being canied out on a regular basis. The Plan Administrator also normally is the one (1) that responds to questions about the Plan and if the Plan Administrator can't answer them - he calls the Attorney, he calls the Actuary, gets the answer to the question." Manager McLemore noted, "The Plan Administrator is the one that executes your policies for you. Can't make Policy, it is just whatever Policy you decide and is executed on your behalf." ,.",;",,,,,,.~ fi\~~; .:J~;,j~:/~ ~ CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 4 0F 15 Commissioner Rick Brown asked Mr. Linn, "Going along those lines, when we are talking about the Board makeup, you made the comment that you didn't feel it appropriate, or a decision was made that it wasn't appropriate for representatives from Police, Fire, and General Employees to sit on that Board because of a direct interest. How do you reconcile that with the City Manager being Plan Administrator when - you said that you have the biggest interest in the Plan?" Mr. Linn replied, "I reconcile that by the fact that he's the Administrator carrying out the policies of the Board. Not voting on benefits of the Plan." Commissioner Brown then said, "But we just made them a non-binding Advisory Board." Mr. Linn said, "Right. And the City Manager - acts as Administrator, Staff to the Advisory Board, but not as a member of the Board." Manager McLemore remarked, "I have no authority over the budget Board other than to help them do what they are supposed to do under the policies that you establish. That is my sole responsibility and to make sure that those activities are in fact carried out." Mr. Linn said, "SECTION II - PARTICIPATION and this - basically again carries forward the substance of the current Plan with respect to the eligibility for membership in the Plan. The fact that you become a member after six (6) months of employment - this also carries forward the provisions on credited service. We did clarify something on page 5, (A), under 'Credited Service.', which was not made clear in the current Plan which is how to treat approved leaves of absence in terms of credited service. And so what this says is that all paid leave is going to be counted as well as approved leaves of absence of up to twelve (12) weeks in any calendar year. Where did that come from? And that's as long as contributions are made. The twelve (12) weeks is intended to mesh with the requirements of the Family and Medical Leave Act which allows employees to have up to twelve (12) weeks off and this would allow the employees who had to take that family and medical leave to continue to get service under the Plan as long as they make contributions for that period of leave." Commissioner Donald A. Gilmore pointed out, "Relative to survivor benefits, is there anything in the Plan that requires the - surviving beneficiary to sign off on the Pension Plan?" Commissioner Gilmore added, "I am wondering if it wouldn't be advisable to have something in here, that the survivor spouse, or spouse beneficiary would have to agree to this Pension Plan?" Mr. Linn replied, "Well, and, let me just respond by saying that is something that under Federal Law, ERISA (Employee Retirement Income Security Act) is required for private sector Plans. It is not a requirement for governmental Plans. Some governmental Plans do have the spousal consent provisions in them, some do not. This Plan, the rewritten Plan, does not have that. So, if you as a matter of your Policy, decide that you think you want that in here, we could certainly put it in here." ~ CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 5 OF 15 Discussion. Next, Mr. Linn said, "SECTION VI - DEATH BENEFIT, and this is where we have literally taken about six (6) pages in the current Plan and really boiled it down to say that if a member dies prior to commencement of their retirement benefits that the beneficiary will receive a death benefit equal to the present value of the member's non-profitable accrued benefit and then it provides that same type of distribution language. Which by the way - how did we get to the thirty five hundred dollars ($3,500.00) or less? That comes out of recent changes to Federal Law which you all adopted in amending your current Plan last year. But basically, the Federal Law provides that for death benefits, if the present value of the benefit is thirty five hundred dollars ($3,500.00) or less, it can be paid out in a lump sum. And if it's more, than the beneficiary can select the same type of options for receiving the benefit over time as the member could have." Mr. Linn said, "SECTION VIII starts on page 18 and has to do with Investments. And this was the language that we talked about earlier in terms of the making it clear that the Board Members, that is the Commissioners, are, and any other fiduciaries, must discharge their duties, in respect to the Pension Fund solely in the interest of the members and beneficiaries and in accordance with that prudent person standard." Commissioner Krebs inquired, "Well, you just said the Board Members and any other fiduciaries. Who are all of the fiduciaries of the Plan then, please?" Mr. Linn responded, "Fiduciaries are anybody who exercises discretion with respect to the Pension Fund. And so it wouldn't be someone who simply holds your money. That ordinarily is not a, custodian for example. I mean, they have a fiduciary responsibility with respect to making sure that the money doesn't get lost or stolen. But the folks that it really relates to are the Investment Managers who really exercise discretion over how the funds are going to be invested. And obviously, I mean, they don't have unbridled discretion in how they do that because you have an Investment Policy that you approve and periodically you revisit and update, and they are guided by that Policy. But on a day to day basis they can make investment decisions which are discretionary and if they make the wrong decisions, could subject them to liability." Discussion. Mr. Linn continued, "Now also, your Actuary is a fiduciary because he's making decisions that effect how you fund the Plan; how much you are putting into the Plan." CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 6 OF 15 Furthermore, Mr. Linn stated, "Because you can never be really precise in actuarial science - I mean, if they were unreasonably off, such that other Actuaries would come in and say, well, he's off his rocker. That would be another example of where there could be a breach in fiduciary duty. Your Attorney could be a fiduciary as well and advising you on investment matters or other matters that end up costing the fund. So all of those folks could be fiduciaries." Tape I/Side B Mayor Bush said, "One (1) question on the fiduciary responsibilities. So the Manager has some fiduciary responsibility - that he is obligated to carry out the administration?" Mr. Linn replied, "He could have. I mean, a lot of what he would do is in terms of administration probably wouldn't be greatly discretionary, because he'd be carrying out - your Policy." Mayor Bush added, "Unless he didn't carry them out correctly." Mr. Linn commented, "Well, that's correct. Of course." Mayor Bush asked, "And the same thing with the Finance Director?" Mr. Linn replied, "Yes." Furthermore, Mayor Bush inquired, "What about the Board? Not the Commission, but the Pension Board?" Mr. Linn said, "The Advisory Committee?" Mr. Linn continued, "Because they are not exercising final authority, probably they are not acting in a fiduciary capacity. However, if they made recommendations to you that you accepted and it turned out that those recommendations were - completely unreasonable, you know that no person would have ever reached the same recommendation, then it's possible that they could be found in some way liable too. I think though that would be pretty remote. I think that the Advisory Committee, because of their advisory role would probably not be subject to that fiduciary liability." Discussion. Manager McLemore mentioned that, "If you work more than thirty (30) years, that three percent (3%) can accrue to the average of the last three (3) years and those years over thirty (30) could be used for that purpose, couldn't they?" Mr. Linn replied, "Certainly. Your average final compensation is based on your highest three (3) years of service. So even though you might have thirty-three (33) years of service with the City, and your highest three (3) years are those last three (3) years - the formula takes into account your highest three (3) years. But you still can't get credit for more than thirty (30) years of service. It is two (2) different parts of the formula. You've got average final compensation, which any portion of your service counts towards that. But then you're credited service part, that's limited, that's capped at thirty (30) years." Further discussion. CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 7 OF 15 Manager McLemore said, my purpose is, as a City Manager or whoever would be the City Manager, as being the person who is solely accountable to you." Manager McLemore added, "Totally accountable to you, to make sure that this Board is supportive to coordinate all these things that have gone on, so these people can do what they are supposed to do, which is monitor the Plan and make recommendations to approve the Plan. " Commissioner Brown then said to Manager McLemore, "Since we have made this a non- binding Advisory Council into not a decision making organization, I really think these folks need to be directly represented." Commissioner Krebs stated, "I agree with Commissioner Brown that although they are voting, it is a non-binding vote for us. We can look at it as a whole." Additionally, Commissioner Krebs asked, "Well, it's under OPTION B, (C), 'The City Manager, Finance Director and General Services Director shall serve as administrative support for the Retirement Committee'. What is that?" Mr. Linn said, "It would be just simply to be the Staff people that would set up the Meetings, would be present at the Meetings, would make sure that the Agenda packages go out to the Committee Members." Mr. Linn added, "If questions come up, that they're there to answer questions, will get the answers." Continuing, Commissioner Krebs said to Manager McLemore, "I thought that you had said you weren't going to be part of that because some of the employees felt they were intimidated?" Manager McLemore remarked, "I said it doesn't really make a difference to me..." Commissioner Krebs stated, "...Right, okay." Manager McLemore continued, "My function is - really to help administer your rules and policies that you set out - and . that those policies really say to assist the Board in carrying out its functions, and really to ensure that they carry it out in the way that you set it out." Commissioner Krebs then commented to Manager McLemore, "But I thought you agreed that you would not be part of that Board in order that people didn't feel intimidated." Manager McLemore noted, "Personally, I would not prefer to be on the Board." Commissioner Krebs stated, "Right, okay." Manager McLemore then stated, "I think the Staff, as well as the employees should be outside the Board and be supporting the Board and providing input to the Board. Staff providing technical input and coordination. The e:p1ployees providing input relative to - what they feel like their needs are." Furthermore, Commissioner Krebs said to City Clerk Andrea Lorenzo- Luaces, "Whatever this Board decides, eventually the Board decides whether we have Voting members or Non-Voting Members, I really want that to be part of the Minutes. Every single one (1) of their feelings within those Minutes so that when I pick those up, if I don't have an opportunity to listen to the tapes, which I try to do, that that is given to us, as well. CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 8 OF 15 I know you do that, but I just want to know - like you know how you do 'A YE, AYE, AYE, AYE, AYE' on Voting; but I wanted also to know if someone specifically didn't- Voted - felt against something, somehow." Mayor Bush said, "Similar to what we asked P and Z (Planning and Zoning [Board/Local Planning Agency]) to do. We asked P and Z (Planning and Zoning [Board/Local Planning Agency]) to do the same thing." Commissioner Krebs continued, "Or somehow, somebody generate something to us to give us." Mayor Bush said, "Point of view..." Commissioner Krebs said, "...Yes, exactly." Commissioner Krebs added, "Now if they are a Voting Member, then that probably wouldn't be necessary, you can just read it, but - still nice to know." Commissioner Robert S. Miller asked, "Can any of our employees talk to Members of the Board?" Mr. Linn asked, "Meaning you all?" Commissioner Miller replied, No." Mr. Linn asked, "The Advisory Committee?" Commissioner Miller replied, "Yes." Mr. Linn said, "Sure." Discussion. Mayor Bush asked, "Right now, the General Fund pays all the expenses of the Pension Fund, is that COITect Mr. McLemore?" Manager McLemore replied, "Currently the General Fund pays expenses except for the bank services." Commissioner Brown said, "I have a brother-in-law who has an invested interest in my estate, but he certainly isn't going to execute any of the Agreements. I have a Trust Company in place for that, just to take any perception of conflict out of the situation completely." Commissioner Brown added, "So I am wondering if there is an advantage to doing it one (1) way or the other and if the cost doesn't, depending what the cost is, if that doesn't override some of those concerns." Mr. Linn replied, "Well, that certainly is a fundamental policy issue." Mayor Bush commented, "Well, that's covered in 7.02. The Commission can designate another person or entity as a Plan Administrator. So, it is a decision that the Commission can make at any time. It is already written in there. And the cost would have to be, well, at some point the Commission has to say, does the General Fund keep picking up this cost or should it be paid for by the Plan." Commissioner Krebs asked, "As a fiduciary, I have to take off my Commissioner hat and I have to totally apply myself to the Plan, is that not correct? I mean, do I sit and think, well, ultimately I am responsible to the taxpayers - as a Commissioner. But, when I become this person that I am making decisions on employee's benefits, do I not have to take off my Commissioner hat and totally, like I said, apply myself - into the Plan? Isn't that what a Trustee is?" b,~",,,,' CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE90F 15 Mr. Linn replied, "Your role as a Pension Trustee would require that you make your decisions as a Pension Trustee solely in the interest of the members and beneficiaries of the Plan. In many cases - what that really means is, that the decisions that you make as a Trustee, you want to make sure that the money is going to be there in that trust fund to provide the promised benefits. It doesn't mean that the sky's the limit, in terms of what the benefits are." Commissioner Krebs said, "But I can't think, well this isn't really benefiting, or this is going to cost the taxpayers and what if there was, what if there is something that is going to cost the taxpayers. I can't consider that, can I?" Mr. Linn replied, "You can't consider that as a Pension Trustee, but that's not when you're really going to be making the decisions that could cost the taxpayers. Because as a Pension Trustee, you're making decisions within the Plan document." Continuing, Commissioner Krebs asked, "But what if my Plan doesn't perform?" Mr. Linn said, "Certainly - in that instance your hat, your fiduciary hat is going to be exactly the same, because as City Commissioner you want the best performance with the most reasonable level of risk that you can have in the Pension Plan. You want that for the taxpayers of the City. And that's the same thing really that you want as a Pension Board Trustee too. You want the highest level of performance in those investments at a reasonable level of risk. So, I don't think there's going to be very many times when there's going to be an out and out conflict in those fiduciary interests. But, I also think that in terms of amending the Plan, putting new benefits in the Plan, you're not doing that as a Pension Board Member. You are taking your Pension Board Member hat off when you're voting on new benefits for the Plan and you're putting your fiduciary hat on as a City Commissioner because only the City Commission can amend the Plan. And that's where you have to take the taxpayers interest into account and that's separate from your duty, once you make a decision on what the benefits are going to be and how you're going to invest the Pension Fund assets." Commissioner Krebs asked, "7.06, all costs and expenses incurred in the administration of the Fund shall be charged to and, with the Board's approval, paid by the Fund.' That is a change, is it not? It is a change." Mr. Linn said, "And that may well be a change; and that provision is typical language for how Pension funded expenses are handled. And so, that was my understanding of how they were handled and I've just been corrected it. So, yes, that is a change." Next, Commissioner Gilmore said, "I get concerned about the Commission receiving advice on investments, the performance of investments, those types of things. We ought to remember, if you look at this, I believe they are charged with making eight percent (8%) per year. I think that is the number. Is that not correct?" Mr. Linn responded, "Yes, it is." ~;~,,'i.~ ~~~~;;a -- CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 10 OF 15 Commissioner Gilmore then said, "I would like to hand my Pension money to somebody and say, 'Guarantee me eight percent (8%) a year.' I am not sure I would get it." Commissioner Krebs asked, "Is it guaranteed?" Commissioner Gilmore added, "Well, that is what we are telling them." Mr. Linn commented, "It's the assumption that is used for the funding of the Plan. What that means is that long term, if you don't make the eight percent (8%) earnings assumption, the City is going to have to pay more into the Plan." Commissioner Krebs said, "So it's not guaranteed then." Continuing, Commissioner Gilmore said, "It is not guaranteed, but where I am going with this is the people that need to be looking at our investments, are the people who are handling the Plan investments, and have to have this kind of knowledge. They have to know what they are doing, working with money and that. And I don't necessarily believe that that is the expertise of the Members or the employees in the City, or the City Manager or - this Commission, so we have to look at Board Members who have an expertise in this field. And I know when it's my appointment for a Member of the Pension Board, I want to get somebody in there that understands all of these investments and understands what is required to get those returns." Tape 2/Side A Commissioner Gilmore said, "And I want to make sure that the people that are monitoring those things, know what they're doing with this, and are experts at this - I know we appoint them. So we need to appoint people that can handle this - and I feel very strongly that the way we're doing it now is pretty good and we ought to stick with that type of Policy. But it's incumbent upon each Member of this Commission who appoints a Member to that Board to pick people that are knowledgeable in this field." Commissioner Gilmore added, "I certainly support the Board being a selected group. I support employees of the City being Members of that group but non-voting members." Commissioner Brown commented to Manager McLemore, "I just wanted to request that whenever we do something like this in the future, it would really be a lot easier for me if we had an executive summary of the changes. Even if the documents are completely different. You know, what's changed in the Plan, what is different. So that we have something on the Record that says so; we're not trying to go through trying to piece line by line, section by section to double check and exercise our duty to make sure, and our due diligence to make sure that everything that is stated, that has changed, is really what changed. And I am not saying that anybody slipped anything through or was trying to. I am just saying it would make it easier if we had something in writing." Mr. Michael S Blake, 711 Canadice Lane, Winter Springs, Florida: commented that the Commission should be the final decision authority and spoke on benefits, and requiring an annual Audit of the Plan. Brief discussion. CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE II OF 15 Fire Chief Timothy J. Lallathin, Fire Department: spoke for the Record regarding some questions related to service. Mr. Don Chapman, Actuary, Retirement Plan Specialists, Inc., 2 Lawn Street, Oviedo, Florida: addressed questions. Chief Lallathin referenced "2.02, 'Participation upon Reemployment.' And noted, "I have one (I) of our employees who is in the audience tonight who was originally hired here - it was in December of 1977. He served with the City for a number of years and left service with the City for about a fifteen (15) month period - and returned, I believe in October - 1980; and has now served - faithfully with the City over that period of time. Is this saying that he loses everything prior to that second reemployment date, or not?" Mr. Linn said, "I really would need to look further at that because what you're reading here, doesn't address that situation as far as I can tell. What obviously - what we were trying to do here, since the Plan is rewritten effective of October 1, 2000, was to deal with the situation of somebody who may have terminated prior to October 2000 and come back after October 1, 2000. I really would need to look into that specific situation if the guy had a break in service a long time ago - and be happy to do that and get back to you. " Continuing, Mr. Linn remarked, "I would just like to suggest that before Don (Chapman) and I leave here tonight, that we talk to you and whoever the member is or you, specifically, so we can get some specifics." Chief Lallathin replied, "Not a problem with that. " Chief Lallathin went on to say, "Also in section 2.03, it talks about all paid leave and approved leaves of absence up to twelve (12) weeks in any calendar year shall be included as credited service. And, you were speaking that that is under the Family Medical and Leave Act. But if an employee happened to be out on an extended medical leave, however was still classified as an employee of the City after twelve (12) weeks, his service would actually terminate at that point in time. Is that correct?" Mr. Linn replied, "He would not get credited service for the time in excess of twelve (12) weeks, that's right." Chief Lallathin commented, "The problem that I have with that is that - an employee currently has to be out of work for six (6) months to be able to go on our current disability plan. So, I mean, they would actually possibly lose SOllie time in that. And I'm just making that as a statement. I don't know if that means anything. But if an employee, because of their medical condition, had to leave service of the City, they have to be out of work for six (6) months before they would be eligible to go on long term disability - so, just mentioning that." Discussion. ~",""~ ~~~.:~~~.~ 1l~,,::!1':- ;jll I*.,,::l;~~ ~~'l ~ ~ ~ ~~!~l Ilo''''''~ ~ ~!,;p -~- ~ CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 12 OF 15 Mr. Linn said, "And I will point out that there's a typo at the end of the very last thing in 3.03. It should be a reference to reduce in accordance with section 3.02, which is where it talks about, if you take that distribution of your employee contributions to the Money Purchase Plan, that your retirement benefit is going to be reduced by the value of which you took out earlier." Furthermore, Chief Lallathin asked, "On page 16 - right after 7.09, is 7.010, that should be like 7.10, right?" Mr. Linn replied, "Yes." Additional discussion followed. Chief Lallathin said, "I do still have a compelling argument that I would think, that in all services of the City, once a person reaches a certain amount of time, that they gave service to the City, I think that there should be a retirement without an actuarial reduction. I'll give a case in point. If I was a teacher at - any school system in the state of Florida; if I was a sign installer for the Department of Transportation, or any of the State agencies, as long as I served thirty (30) years, I would not have a reduction in my retirement based upon my age. And our retirement system is actuarially reduced, however that's quite extreme. A lot of people who have reductions, sometimes they set a limit on that reduction. Sometimes it's three percent (3%) for every year you leave early, five percent (5%). But mine equaled, you know, I'm forty-nine (49) years old. - served thirty-one (31) years with the City; but my reduction was probably around, about forty- eight percent (48%) of my retirement would be reduced ifl retired today." Manager McLemore commented, "I think one of the things that I had recommended to you in our final report was this Committee would look at benefits and see if there was anything they wanted to recommend to you, this new group after this, with this new, or revised Plan document. If there were any additional benefits that they wanted to recommend to the Commission, to address this and any other issues that would be out there. That was my recommendation to you. Now whether you accept that or not, is up to you." Mr. Byron Giltz, 1001 Troon Trace, Winter Springs, Florida: mentioned requesting a copy of the Insurance Policy for the City; and said he had not seen Pension Plan Financial Reports. Mr. Steve Molnar, : as the President of the Local 3296, Mr. Molnar spoke of having vested interests. Manager McLemore noted, "We have - fiduciary - insurance. If anybody wants to see it, it's here. We have forwarded it according to - Kevin's (Smith, Director, General . Services Department) memory, before. We'd be happy to forward it again." CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 13 OF 15 Mr. A. Mark Sardo, 997 Sequoia Court, Winter Springs, Florida: inquired as a citizen as to what fees are paid to our Attorney, our Actuaries, and our Investment Advisor. Tape 2/Side B Further comments. Mr. Vernon Rozelle, 648 Redwood Drive, Winter Springs, Florida: commented on the six (6) voting Members, and suggested that employees be able to provide input. Mr. Corey Green, : commented on soundness and voting rights. In summarizing the Commission's comments going forward, Mayor Bush referenced page 5 and stated, "I think Tim (Lallathin) brought this up; I thought it was a good point concerning of all paid leaves, concerning twelve (12) weeks before the disability doesn't kick in until much later, I think that is something that hopefully the Pension Committee Advisory Board - would make some kind of recommendation to the Commission on." Mayor Bush continued, "And on page 15 - that was in there and I don't think we - we don't do that. It is paid from the General Fund, it is not paid out of the Pension Fund so that is definitely an addition. Yes - just so everybody is aware of that. Commission - I think we would have to Vote to put that in, if they so choose." Continuing, Mayor Bush referenced page 17 and stated, "About reviewing the structure of the Plan, once every five (5) years, I would recommend you say at least once every five (5) years." Mayor Bush added, "As often as they need." Furthermore, Mayor Bush commented, "I think Corey's (Green) comments about Term Limits is - a very good comment." Commissioner Krebs said, "I do want us to look back at some of the notes we had regarding the administrative support for the Retirement Committee, the City Manager, Finance Director, and the General Services Director - as more or less agreed to in that last meeting. " Mayor Bush said to City Clerk Lorenzo-Luaces, if you could - make a little list of these things to give to each of the Commission, what we're talk d them, and also for Commissioner McGinnis, of course, who isn't here." Commissioner Krebs said, "I think you touched on it - I had brought up 7.06, that that was new. I had that circled, but you already brought that up." ~I~~~~1~~;:;}::;".:4 I!,'''~",..;'''~TI lJt~:11;;:;\~.2~1 ~~2171 C;:~ CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 14 OF 15 Commissioner Brown said, "I had seven (7) items here that 1 had written down. One (1) was Board definitions, which we talked about and seeing other options - in addition to the two (2) we have. The cost of outsourcing the Plan Administrator function - Tim (Lallathin) brought up the early retirement reduction, regular financials, and a clear cost of the Plan - not buried in the CAFR (Comprehensive Annual Financial Report), but actually something that is quick and easy to understand so that people don't have to go digging for it. 1 would like a copy, Ron (McLemore) of the Policy and so 1 can have it reviewed. Do we do anything as far as indemnifications or no?" Manager McLemore replied, "I have not reviewed the Plan in detail. 1 will be happy to do that for you. Meanwhile, I'll be giving you a copy of it. Indemnification from legal liability. " Commissioner Brown continued, "And then, I think we need to look at - the Pension limits and the disability that you talked about, and also the terms." Commissioner Miller said, "We have covered most of the points. If we have an annual Audit, most of the summary could include, on an annual basis, all of these associated expenses that are related to the Plan. I think that might be a better way to do it, than to list them all on the Budget. Because if we do it on the Budget, we are liable to get into all of the other millions of little sub-elements that go in there. 1 think it is probably better in the Audit, that way it would be a complete Report. This is everything that is related to that operation per year, including the General Fund disbursal." Commissioner Gilmore commented, "With the fiduciary responsibility of the Commission, I think we need to look at education for the Commission." Commissioner Gilmore then said to Manager McLemore, "I think we do need some type of education, continuing education as to what to look at, how to look at it, those types of things." Next, Commissioner Krebs said, "I would still like to explore or look at having the three (3) employees have a Vote. I look more at the Vote as a preference - or what a statement is more or less. When a person makes a statement, they make a Vote towards something, so, I would really like to see that." Mayor Bush said, "I was just thinking that all these points that we brought up, I would like to see them considered by the Advisory Committee..." Commissioner Krebs stated, ".. . Right. .." Mayor Bush continued, ".. . Because I kind of see that is kind of their job. And come back to the Commission with their recommendations on everything that we brought up tonight. So, 1 think, Andrea (Lorenzo-Luaces, City Clerk) make sure the Pension Advisory Committee has copies of this so that they can make a response." ~~ E:~1 CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 15 OF 15 Manager McLemore said, "This is not meant to be a recommendation or anything, but the rationale for putting limitations on the employee members was so that you would have a turnover of people who have that experience working in the system, rather than limiting it to a long, long time. Again, I'm not recommending one way or the other; but that was the thought process behind it." Manager McLemore then spoke on who is covered by the fiduciary Policy and explained, "Any past, present, or future Director, Officer, employee or Trustee of the sponsor organization - the City of Winter Springs, or sponsor Plan', which is our Plan." Manager McLemore then said to the City Commission, "You're a Trustee." Mayor Bush said, "The Commission's policy on appointing people to that Board can't disagree with what is in here, so make sure they are in sync. And I am not sure they are. The Commissioners - appoint people to this Board, to the Pension Advisory Board - and I am not sure that is exactly the way it is stated in here. Just so that we know that. That- they are appointed by the Commission and they have no term limits basically. And just so that's somehow in here." Mr. Linn remarked that such wording was noted. ADJOURNMENT Mayor Bush adjourned this Workshop at 10:00 p.m. RESPECTFULLY SUBMITTED: DANIELLE HARKER, ASSISTANT TO THE CITY CLERK AND ANDREA LORENZO-LUACES, CMC CITY CLERK APPROVED: JOHN F. BUSH MAYOR NOTE: These Minutes were approved at the , 2007 Regular City Commission Meeting. CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) FEBRUARY 5, 2007 CALL TO ORDER The Workshop (2) of Monday, February 5, 2007 of the City Commission was called to Order by Mayor John F. Bush at 7:06 p.m. in the Commission Chambers of the Municipal Building (City Hall, 1126 East State Road 434, Winter Springs, Florida 32708). Roll Call: Mayor John F. Bush, present Deputy Mayor Sally McGinnis, absent Commissioner Robert S. Miller, present Commissioner Rick Brown, present Commissioner Donald A. Gilmore, present Commissioner Joanne M. Krebs, present City Manager Ronald W. McLemore, present City Attorney Anthony A. Garganese, present REGULAR AGENDA REGULAR 300. Office Of The City Manager Requesting The City Commission Review The Pension Attorney's Revision And Update Of The City Of Winter Springs Defined Benefit Pension Plan Document. City Manager Ronald W. McLemore presented his opening remarks on this Agenda Item. Mr. Jim Linn, Esquire, Lewis, Longman & Walker, P.A., 125 South Gadsden Street, Suite 300, Tallahassee, Florida: as the City's Pension Attorney, Mr. Linn addressed the City Commission. Commissioner Joanne M. Krebs said, "Mr. Linn, back in January 2006, I believe, yes, it was you who prepared a summary plan description. Is that also changed from that?" Mr. Linn stated, "I think that the summary plan description will - still reflect the provisions of the revision, but I do think that the summary plan description can be simplified and I think that would be the next step after this Plan document is adopted. But as far as the benefit structure and how the Plan works, what's described in the summary plan description, I think is pretty close to this - because the intent of the re-write wasn't to change any provisions of the Plan." CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE20F 15 Mr. Linn continued, "If you turn to page 15 on Administration, SECTION VII, makes it very clear that the Board of Trustees is the City Commission and that the City Manager is the Plan Administrator. And it does provide that the Board, City Commission, can designate a different Plan Administrator. But SECTION VII makes it clear that it's the Board, the City Commission, that is ultimately responsible for the Plan. And then going over to page 16, section 7.010, talks about the Retirement Committee which is provided, established to provide advice and recommendations to the Board." Discussion ensued on OPTION A and OPTION B. Commissioner Krebs then said to Mr. Linn, "Whose interests are you representing? You are representing the City's interest? Correct? Mr. Linn responded, "I am representing the City's interests but I also have been the Attorney for the Plan." Commissioner Krebs asked, "As far as liability is concerned, could you please explain what my liability personally is?" Mr. Linn replied, "You as a Board Member, and I would refer to page 18, bottom of page 18, top of page 19 - the Plan specifically provides that Board Members and other fiduciaries, because anybody who has discretionary authority over the Pension Fund is a fiduciary, must discharge their duties with respect to the Plan, solely in the interest of the Members and beneficiaries, for the exclusive purpose of providing benefits to Members and beneficiaries in defraying the expenses of administering the Plan. But the rest of this paragraph at the top of page 19, this is basically the prudent person's standard, and that would be applicable to you as in your role as Trustees. And we did have this discussion of hats. You know, if you have the fiduciary hat that you wear as a City Commissioner, with respect to the City and the City's funds. And you would put on your Pension Trustee hat as a Board Member of the Board of Trustees when you were dealing with Pension issues. What is your personal liability? It would be for violating this standard of fiduciary obligation, this prudent person's standard. In other words, what it basically means is that you would not act with care, skill, prudence, and diligence under the circumstances and that that would cause some injury or decrease to the Pension Fund." Commissioner Krebs asked, "Right, so would I be personally liable?" Mr. Linn replied, "You certainly could as a fiduciary. Any fiduciary can be found personally liable." Commissioner Krebs asked, "Do we have any insurance for that?" Manager McLemore said, "We do." Commissioner Krebs asked, "Who would defend me?" Manager McLemore said, "The City would." CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 3 OF 15 Mr. Linn said, "Normally the insurance carrier that provides the fiduciary coverage would also provide legal defense for the main fiduciaries if they're sued." Mr. Linn added, "As long as you were acting in good faith, the likelihood of you being found to have violated your fiduciary duty would be pretty small." Mayor Bush asked, "SECTION I, that is somewhat different?" Mr. Linn stated, "Really, the only difference there is in the definition of actuarial equivalence and - that's in 1.01, on page 1. And that was really revised in accordance with the recommendation of the Actuary and reflects what the current - the definition that's been applied." Mr. Linn continued, "If you look at the definition of normal retirement date in the current Plan document, it just talks about a member having to reach age sixty-five (65). The fifty- five (55) and ten (10) is really under the early retirement sections of the Plan. But, what it says is that if you reach fifty-five (55) with ten (10) years of service, you can retire, but there's no reduction in your benefit. Which means, essentially, that's normal retirement. I mean, in these Plans you have an early retirement benefit which means there's a reduction from what it would be if you waited to normal retirement. So, what we tried to do here is to say - 'Age fifty-five (55) with ten (10) years of service is going to give you an unreduced benefit, well, we're just going to call that normal retirement.' So that's why that changes." Mayor Bush asked, "Is there an early retirement?" Mr. Linn replied, "There is an early retirement. Back on page 2, and that remains the way it is in the current Plan which is twenty-five (25) years - you reach twenty-five years (25) of service prior to age fifty-five (55). And later on in the document, it talks about - you get a benefit at that point, but it is a reduced benefit based on the actuarial value of what the benefit would be, if you reached age fifty-five (55)." Commissioner Krebs asked, "What is the responsibility of the Plan Administrator?" Mr. Linn stated, "Normally, the Plan Administrator is the one (1) that retains the records for the Plan and carries out the administrative functions; making sure the Trustees direction as to where the Pension Funds are going, in terms of who has custody of the funds and also making sure that the benefit checks are going out. Now, it's not that he's going to be acting, that the Administrator acts as - doing the calculations, that's normally done elsewhere, but he would make sure that all of that is done so that the Plan, the provisions of the Plan are being carried out on a regular basis. The Plan Administrator also normally is the one (1) that responds to questions about the Plan and if the Plan Administrator can't answer them - he calls the Attorney, he calls the Actuary, gets the answer to the question." Manager McLemore noted, "The Plan Administrator is the one that executes your policies for you. Can't make Policy, it is just whatever Policy you decide and is executed on your behalf." CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 4 OF IS Commissioner Rick Brown asked Mr. Linn, "Going along those lines, when we are talking about the Board makeup, you made the comment that you didn't feel it appropriate, or a decision was made that it wasn't appropriate for representatives from Police, Fire, and General Employees to sit on that Board because of a direct interest. How do you reconcile that with the City Manager being Plan Administrator when - you said that you have the biggest interest in the Plan?" Mr. Linn replied, "I reconcile that by the fact that he's the Administrator carrying out the policies of the Board. Not voting on benefits of the Plan." Commissioner Brown then said, "But we just made them a non-binding Advisory Board." Mr. Linn said, "Right. And the City Manager - acts as Administrator, Staff to the Advisory Board, but not as a member of the Board." Manager McLemore remarked, "I have no authority over the budget Board other than to help them do what they are supposed to do under the policies that you establish. That is my sole responsibility and to make sure that those activities are in fact carried out." Mr. Linn said, "SECTION II - PARTICIPATION and this - basically again carries forward the substance of the current Plan with respect to the eligibility for membership in the Plan. The fact that you become a member after six (6) months of employment - this also carries forward the provisions on credited service. We did clarify something on page 5, (A), under 'Credited Service.', which was not made clear in the current Plan which is how to treat approved leaves of absence in terms of credited service. And so what this says is that all paid leave is going to be counted as well as approved leaves of absence of up to twelve (12) weeks in any calendar year. Where did that come from? And that's as long as contributions are made. The twelve (12) weeks is intended to mesh with the requirements of the Family and Medical Leave Act which allows employees to have up to twelve (12) weeks off and this would allow the employees who had to take that family and medical leave to continue to get service under the Plan as long as they make contributions for that period of leave." Commissioner Donald A. Gilmore pointed out, "Relative to survivor benefits, is there anything in the Plan that requires the - surviving beneficiary to sign off on the Pension Plan?" Commissioner Gilmore added, "I am wondering if it wouldn't be advisable to have something in here, that the survivor spouse, or spouse beneficiary would have to agree to this Pension Plan?" Mr. Linn replied, "Well, and, let me just respond by saying that is something that under Federal Law, ERISA (Employee Retirement Income Security Act) is required for private sector Plans. It is not a requirement for governmental Plans. Some governmental Plans do have the spousal consent provisions in them, some do not. This Plan, the rewritten Plan, does not have that. So, if you as a matter of your Policy, decide that you think you want that in here, we could certainly put it in here." CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 5 OF 15 Discussion. Next, Mr. Linn said, "SECTION VI - DEATH BENEFIT, and this is where we have literally taken about six (6) pages in the current Plan and really boiled it down to say that if a member dies prior to commencement of their retirement benefits that the beneficiary will receive a death benefit equal to the present value of the member's non-profitable accrued benefit and then it provides that same type of distribution language. Which by the way - how did we get to the thirty five hundred dollars ($3,500.00) or less? That comes out of recent changes to Federal Law which you all adopted in amending your current Plan last year. But basically, the Federal Law provides that for death benefits, if the present value of the benefit is thirty five hundred dollars ($3,500.00) or less, it can be paid out in a lump sum. And ifit's more, than the beneficiary can select the same type of options for receiving the benefit over time as the member could have." Mr. Linn said, "SECTION VIII starts on page 18 and has to do with Investments. And this was the language that we talked about earlier in terms of the making it clear that the Board Members, that is the Commissioners, are, and any other fiduciaries, must discharge their duties, in respect to the Pension Fund solely in the interest of the members and beneficiaries and in accordance with that prudent person standard." Commissioner Krebs inquired, "Well, you just said the Board Members and any other fiduciaries. Who are all of the fiduciaries ofthe Plan then, please?" Mr. Linn responded, "Fiduciaries are anybody who exercises discretion with respect to the Pension Fund. And so it wouldn't be someone who simply holds your money. That ordinarily is not a, custodian for example. I mean, they have a fiduciary responsibility with respect to making sure that the money doesn't get lost or stolen. But the folks that it really relates to are the Investment Managers who really exercise discretion over how the funds are going to be invested. And obviously, I mean, they don't have unbridled discretion in how they do that because you have an Investment Policy that you approve and periodically you revisit and update, and they are guided by that Policy. But on a day to day basis they can make investment decisions which are discretionary and if they make the wrong decisions, could subject them to liability." Discussion. Mr. Linn continued, "Now also, your Actuary is a fiduciary because he's making decisions that effect how you fund the Plan; how much you are putting into the Plan." CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 6 OF 15 Furthermore, Mr. Linn stated, "Because you can never be really precise in actuarial science - I mean, if they were unreasonably off, such that other Actuaries would come in and say, well, he's off his rocker. That would be another example of where there could be a breach in fiduciary duty. Your Attorney could be a fiduciary as well and advising you on investment matters or other matters that end up costing the fund. So all of those folks could be fiduciaries." Tape I/Side B Mayor Bush said, "One (1) question on the fiduciary responsibilities. So the Manager has some fiduciary responsibility - that he is obligated to carry out the administration?" Mr. Linn replied, "He could have. I mean, a lot of what he would do is in terms of administration probably wouldn't be greatly discretionary, because he'd be carrying out - your Policy." Mayor Bush added, "Unless he didn't carry them out correctly." Mr. Linn commented, "Well, that's correct. Of course." Mayor Bush asked, "And the same thing with the Finance Director?" Mr. Linn replied, "Yes." Furthermore, Mayor Bush inquired, "What about the Board? Not the Commission, but the Pension Board?" Mr. Linn said, "The Advisory Committee?" Mr. Linn continued, "Because they are not exercising final authority, probably they are not acting in a fiduciary capacity. However, if they made recommendations to you that you accepted and it turned out that those recommendations were - completely unreasonable, you know that no person would have ever reached the same recommendation, then it's possible that they could be found in some way liable too. I think though that would be pretty remote. I think that the Advisory Committee, because of their advisory role would probably not be subject to that fiduciary liability." Discussion. Manager McLemore mentioned that, "If you work more than thirty (30) years, that three percent (3%) can accrue to the average of the last three (3) years and those years over thirty (30) could be used for that purpose, couldn't they?" Mr. Linn replied, "Certainly. Your average final compensation is based on your highest three (3) years of service. So even though you might have thirty-three (33) years of service with the City, and your highest three (3) years are those last three (3) years - the formula takes into account your highest three (3) years. But you still can't get credit for more than thirty (30) years of service. It is two (2) different parts of the formula. You've got average final compensation, which any portion of your service counts towards that. But then you're credited service part, that's limited, that's capped at thirty (30) years." Further discussion. CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 7 OF 15 Manager McLemore said, my purpose is, as a City Manager or whoever would be the City Manager, as being the person who is solely accountable to you." Manager McLemore added, "Totally accountable to you, to make sure that this Board is supportive to coordinate all these things that have gone on, so these people can do what they are supposed to do, which is monitor the Plan and make recommendations to approve the Plan. " Commissioner Brown then said to Manager McLemore, "Since we have made this a non- binding Advisory Council into not a decision making organization, I really think these folks need to be directly represented." Commissioner Krebs stated, "I agree with Commissioner Brown that although they are voting, it is a non-binding vote for us. We can look at it as a whole." Additionally, Commissioner Krebs asked, "Well, it's under OPTION B, (C), 'The City Manager, Finance Director and General Services Director shall serve as administrative support for the Retirement Committee'. What is that?" Mr. Linn said, "It would be just simply to be the Staff people that would set up the Meetings, would be present at the Meetings, would make sure that the Agenda packages go out to the Committee Members." Mr. Linn added, "If questions come up, that they're there to answer questions, will get the answers." Continuing, Commissioner Krebs said to Manager McLemore, "I thought that you had said you weren't going to be part of that because some of the employees felt they were intimidated?" Manager McLemore remarked, "I said it doesn't really make a difference to me.. ." Commissioner Krebs stated, "... Right, okay." Manager McLemore continued, "My function is - really to help administer your rules and policies that you set out - and that those policies really say to assist the Board in carrying out its functions, and really to ensure that they carry it out in the way that you set it out." Commissioner Krebs then commented to Manager McLemore, "But I thought you agreed that you would not be part of that Board in order that people didn't feel intimidated." Manager McLemore noted, "Personally, I would not prefer to be on the Board." Commissioner Krebs stated, "Right, okay." Manager McLemore then stated, "I think the Staff, as well as the employees should be outside the Board and be supporting the Board and providing input to the Board. Staff providing technical input and coordination. The eJ;11ployees providing input relative to - what they feel like their needs are." Furthermore, Commissioner Krebs said to City Clerk Andrea Lorenzo-Luaces, "Whatever this Board decides, eventually the Board decides whether we have Voting members or Non-Voting Members, I really want that to be part of the Minutes. Every single one (1) of their feelings within those Minutes so that when I pick those up, if I don't have an opportunity to listen to the tapes, which I try to do, that that is given to us, as well. CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 8 OF IS I know you do that, but I just want to know - like you know how you do ' AYE, AYE, AYE, AYE, AYE' on Voting; but I wanted also to know if someone specifically didn't- Voted - felt against something, somehow." Mayor Bush said, "Similar to what we asked P and Z (Planning and Zoning [Board/Local Planning Agency]) to do. We asked P and Z (Planning and Zoning [Board/Local Planning Agency]) to do the same thing." Commissioner Krebs continued, "Or somehow, somebody generate something to us to give us." Mayor Bush said, "Point of view..." Commissioner Krebs said, "...Yes, exactly." Commissioner Krebs added, "Now if they are a Voting Member, then that probably wouldn't be necessary, you can just read it, but - still nice to know." Commissioner Robert S. Miller asked, "Can any of our employees talk to Members of the Board?" Mr. Linn asked, "Meaning you all?" Commissioner Miller replied, No." Mr. Linn asked, "The Advisory Committee?" Commissioner Miller replied, "Yes." Mr. Linn said, "Sure." Discussion. Mayor Bush asked, "Right now, the General Fund pays all the expenses of the Pension Fund, is that correct Mr. McLemore?" Manager McLemore replied, "Currently the General Fund pays expenses except for the bank services." Commissioner Brown said, "I have a brother-in-law who has an invested interest in my estate, but he certainly isn't going to execute any of the Agreements. I have a Trust Company in place for that, just to take any perception of conflict out of the situation completely." Commissioner Brown added, "So I am wondering if there is an advantage to doing it one (1) way or the other and if the cost doesn't, depending what the cost is, if that doesn't override some of those concerns." Mr. Linn replied, "Well, that certainly is a fundamental policy issue." Mayor Bush commented, "Well, that's covered in 7.02. The Commission can designate another person or entity as a Plan Administrator. So, it is a decision that the Commission can make at any time. It is already written in there. And the cost would have to be, well, at some point the Commission has to say, does the General Fund keep picking up this cost or should it be paid for by the Plan." Commissioner Krebs asked, "As a fiduciary, I have to take off my Commissioner hat and I have to totally apply myself to the Plan, is that not correct? I mean, do I sit and think, well, ultimately I am responsible to the taxpayers - as a Commissioner. But, when I become this person that I am making decisions on employee's benefits, do I not have to take off my Commissioner hat and totally, like I said, apply myself - into the Plan? Isn't that what a Trustee is?" CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 9 OF 15 Mr. Linn replied, "Your role as a Pension Trustee would require that you make your decisions as a Pension Trustee solely in the interest of the members and beneficiaries of the Plan. In many cases - what that really means is, that the decisions that you make as a Trustee, you want to make sure that the money is going to be there in that trust fund to provide the promised benefits. It doesn't mean that the sky's the limit, in terms of what the benefits are." Commissioner Krebs said, "But I can't think, well this isn't really benefiting, or this is going to cost the taxpayers and what if there was, what if there is something that is going to cost the taxpayers. I can't consider that, can I?" Mr. Linn replied, "You can't consider that as a Pension Trustee, but that's not when you're really going to be making the decisions that could cost the taxpayers. Because as a Pension Trustee, you're making decisions within the Plan document." Continuing, Commissioner Krebs asked, "But what if my Plan doesn't perform?" Mr. Linn said, "Certainly - in that instance your hat, your fiduciary hat is going to be exactly the same, because as City Commissioner you want the best performance with the most reasonable level of risk that you can have in the Pension Plan. You want that for the taxpayers of the City. And that's the same thing really that you want as a Pension Board Trustee too. You want the highest level of performance in those investments at a reasonable level of risk. So, I don't think there's going to be very many times when there's going to be an out and out conflict in those fiduciary interests. But, I also think that in terms of amending the Plan, putting new benefits in the Plan, you're not doing that as a Pension Board Member. You are taking your Pension Board Member hat off when you're voting on new benefits for the Plan and you're putting your fiduciary hat on as a City Commissioner because only the City Commission can amend the Plan. And that's where you have to take the taxpayers interest into account and that's separate from your duty, once you make a decision on what the benefits are going to be and how you're going to invest the Pension Fund assets." Commissioner Krebs asked, "7.06, all costs and expenses incurred in the administration of the Fund shall be charged to and, with the Board's approval, paid by the Fund.' That is a change, is it not? It is a change." Mr. Linn said, "And that may well be a change; and that provision is typical language for how Pension funded expenses are handled. And so, that was my understanding of how they were handled and I've just been corrected it. So, yes, that is a change." Next, Commissioner Gilmore said, "I get concerned about the Commission receiving advice on investments, the performance of investments, those types of things. We ought to remember, if you look at this, I believe they are charged with making eight percent (8%) per year. I think that is the number. Is that not correct?" Mr. Linn responded, "Yes, it is." CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 10 OF 15 Commissioner Gilmore then said, "I would like to hand my Pension money to somebody and say, 'Guarantee me eight percent (8%) a year.' I am not sure I would get it." Commissioner Krebs asked, "Is it guaranteed?" Commissioner Gilmore added, "Well, that is what we are telling them." Mr. Linn commented, "It's the assumption that is used for the funding of the Plan. What that means is that long term, if you don't make the eight percent (8%) earnings assumption, the City is going to have to pay more into the Plan." Commissioner Krebs said, "So it's not guaranteed then." Continuing, Commissioner Gilmore said, "It is not guaranteed, but where I am going with this is the people that need to be looking at our investments, are the people who are handling the Plan investments, and have to have this kind of knowledge. They have to know what they are doing, working with money and that. And I don't necessarily believe that that is the expertise of the Members or the employees in the City, or the City Manager or - this Commission, so we have to look at Board Members who have an expertise in this field. And I know when it's my appointment for a Member of the Pension Board, I want to get somebody in there that understands all of these investments and understands what is required to get those returns." Tape 2/Side A Commissioner Gilmore said, "And I want to make sure that the people that are monitoring those things, know what they're doing with this, and are experts at this - I know we appoint them. So we need to appoint people that can handle this - and I feel very strongly that the way we're doing it now is pretty good and we ought to stick with that type of Policy. But it's incumbent upon each Member of this Commission who appoints a Member to that Board to pick people that are knowledgeable in this field." Commissioner Gilmore added, "I certainly support the Board being a selected group. I support employees of the City being Members of that group but non-voting members." Commissioner Brown commented to Manager McLemore, "I just wanted to request that whenever we do something like this in the future, it would really be a lot easier for me if we had an executive summary of the changes. Even if the documents are completely different. You know, what's changed in the Plan, what is different. So that we have something on the Record that says so; we're not trying to go through trying to piece line by line, section by section to double check and exercise our duty to make sure, and our due diligence to make sure that everything that is stated, that has changed, is really what changed. And I am not saying that anybody slipped anything through or was trying to. I am just saying it would make it easier if we had something in writing." Mr. Michael S. Blake, 711 Canadice Lane, Winter Springs, Florida: commented that the Commission should be the final decision authority and spoke on benefits, and requiring an annual Audit of the Plan. Brief discussion. CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE II OF IS Fire Chief Timothy J LaUathin, Fire Department: spoke for the Record regarding some questions related to service. Mr. Don Chapman, Actuary, Retirement Plan Specialists, Inc., 2 Lawn Street, Oviedo, Florida: addressed questions. Chief Lallathin referenced "2.02, 'Participation upon Reemployment.' And noted, "I have one (1) of our employees who is in the audience tonight who was originally hired here - it was in December of 1977. He served with the City for a number of years and left service with the City for about a fifteen (15) month period - and returned, I believe in October - 1980; and has now served - faithfully with the City over that period oftime. Is this saying that he loses everything prior to that second reemployment date, or not?" Mr. Linn said, "I really would need to look further at that because what you're reading here, doesn't address that situation as far as I can tell. What obviously - what we were trying to do here, since the Plan is rewritten effective of October 1, 2000, was to deal with the situation of somebody who may have terminated prior to October 2000 and come back after October 1, 2000. I really would need to look into that specific situation if the guy had a break in service a long time ago - and be happy to do that and get back to you. " Continuing, Mr. Linn remarked, "I would just like to suggest that before Don (Chapman) and I leave here tonight, that we talk to you and whoever the member is or you, specifically, so we can get some specifics." Chief Lallathin replied, "Not a problem with that. " Chief Lallathin went on to say, "Also in section 2.03, it talks about all paid leave and approved leaves of absence up to twelve (12) weeks in any calendar year shall be included as credited service. And, you were speaking that that is under the Family Medical and Leave Act. But if an employee happened to be out on an extended medical leave, however was still classified as an employee of the City after twelve (12) weeks, his service would actually terminate at that point in time. Is that correct?" Mr. Linn replied, "He would not get credited service for the time in excess of twelve (12) weeks, that's right." Chief Lallathin commented, "The problem that I have with that is that - an employee currently has to be out of work for six (6) months to be able to go on our current disability plan. So, I mean, they would actually possibly lose some time in that. And I'm just making that as a statement. I don't know if that means anything. But if an employee, because of their medical condition, had to leave service of the City, they have to be out of work for six (6) months before they would be eligible to go on long term disability - so, just mentioning that." Discussion. CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 12 OF 15 Mr. Linn said, "And I will point out that there's a typo at the end of the very last thing in 3.03. It should be a reference to reduce in accordance with section 3.02, which is where it talks about, if you take that distribution of your employee contributions to the Money Purchase Plan, that your retirement benefit is going to be reduced by the value of which you took out earlier." Furthermore, Chief Lallathin asked, "On page 16 - right after 7.09, is 7.010, that should be like 7.10, right?" Mr. Linn replied, "Yes." Additional discussion followed. Chief Lallathin said, "I do still have a compelling argument that I would think, that in all services of the City, once a person reaches a certain amount of time, that they gave service to the City, I think that there should be a retirement without an actuarial reduction. I'll give a case in point. If I was a teacher at - any school system in the state of Florida; if I was a sign installer for the Department of Transportation, or any of the State agencies, as long as I served thirty (30) years, I would not have a reduction in my retirement based upon my age. And our retirement system is actuarially reduced, however that's quite extreme. A lot of people who have reductions, sometimes they set a limit on that reduction. Sometimes it's three percent (3%) for every year you leave early, five percent (5%). But mine equaled, you know, I'm forty-nine (49) years old. - served thirty-one (31) years with the City; but my reduction was probably around, about forty- eight percent (48%) of my retirement would be reduced if! retired today." Manager McLemore commented, "I think one of the things that I had recommended to you in our final report was this Committee would look at benefits and see if there was anything they wanted to recommend to you, this new group after this, with this new, or revised Plan document. If there were any additional benefits that they wanted to recommend to the Commission, to address this and any other issues that would be out there. That was my recommendation to you. Now whether you accept that or not, is up to you." Mr. Byron Giltz, 1001 Troon Trace, Winter Springs, Florida: mentioned requesting a copy of the Insurance Policy for the City; and said he had not seen Pension Plan Financial Reports. Mr. Steve Molnar, as the President of the Local 3296, Mr. Molnar spoke of having vested interests. Manager McLemore noted, "We have - fiduciary - insurance. If anybody wants to see it, it's here. We have forwarded it according to - Kevin's (Smith, Director, General Services Department) memory, before. We'd be happy to forward it again." CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 13 OF 15 Mr. A. Mark Sardo, 997 Sequoia Court, Winter Springs, Florida: inquired as a citizen as to what fees are paid to our Attorney, our Actuaries, and our Investment Advisor. Tape 2/Side B Further comments. Mr. Vernon Rozelle, 648 Redwood Drive, Winter Springs, Florida: commented on the six (6) voting Members, and suggested that employees be able to provide input. Mr. Corey Green, : commented on soundness and voting rights. In summarizing the Commission's comments going forward, Mayor Bush referenced page 5 and stated, "I think Tim (Lallathin) brought this up; I thought it was a good point concerning of all paid leaves, concerning twelve (12) weeks before the disability doesn't kick in until much later, I think that is something that hopefully the Pension Committee Advisory Board - would make some kind of recommendation to the Commission on." Mayor Bush continued, "And on page 15 - that was in there and I don't think we - we don't do that. It is paid from the General Fund, it is not paid out of the Pension Fund so that is definitely an addition. Yes - just so everybody is aware of that. Commission - I think we would have to Vote to put that in, ifthey so choose." Continuing, Mayor Bush referenced page 17 and stated, "About reviewing the structure of the Plan, once every five (5) years, I would recommend you say at least once every five (5) years." Mayor Bush added, "As often as they need." Furthermore, Mayor Bush commented, "I think Corey's (Green) comments about Term Limits is - a very good comment. " Commissioner Krebs said, "I do want us to look back at some of the notes we had regarding the administrative support for the Retirement Committee, the City Manager, Finance Director, and the General Services Director - as more or less agreed to in that last meeting. " Mayor Bush said to City Clerk Lorenzo-Luaces, if you could - make a little list of these things to give to each of the Commission, what we're talking about here, so as to just remind them, and also for Commissioner McGinni mmissioner Krebs said, "I think you touched on it - I had brought up 7.06, that that was new. I had that circled, but you already brought that up." CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE 14 OF 15 Commissioner Brown said, "I had seven (7) items here that I had written doWfl. One (1) was Board definitions, which we talked about and seeing other options - in addition to the two (2) we have. The cost of outsourcing the Plan Administrator function - Tim (Lallathin) brought up the early retirement reduction, regular financials, and a clear cost of the Plan - not buried in the CAFR (Comprehensive Annual Financial Report), but actually something that is quick and easy to understand so that people don't have to go digging for it. I would like a copy, Ron (McLemore) of the Policy and so I can have it reviewed. Do we do anything as far as indemnifications or no?" Manager McLemore replied, "I have not reviewed the Plan in detail. I will be happy to do that for you. Meanwhile, I'll be giving you a copy of it. Indemnification from legal liability. " Commissioner Brown continued, "And then, I think we need to look at - the Pension limits and the disability that you talked about, and also the terms." Commissioner Miller said, "We have covered most of the points. If we have an annual Audit, most of the summary could include, on an annual basis, all of these associated expenses that are related to the Plan. I think that might be a better way to do it, than to list them all on the Budget. Because if we do it on the Budget, we are liable to get into all of the other millions of little sub-elements that go in there. I think it is probably better in the Audit, that way it would be a complete Report. This is everything that is related to that operation per year, including the General Fund disbursal." Commissioner Gilmore commented, "With the fiduciary responsibility of the Commission, I think we need to look at education for the Commission." Commissioner Gilmore then said to Manager McLemore, "I think we do need some type of education, continuing education as to what to look at, how to look at it, those types of things." Next, Commissioner Krebs said, "I would still like to explore or look at having the three (3) employees have a Vote. I look more at the Vote as a preference - or what a statement is more or less. When a person makes a statement, they make a Vote towards something, so, I would really like to see that." Mayor Bush said, "I was just thinking that all these points that we brought up, I would like to see them considered by the Advisory Committee..." Commissioner Krebs stated, "...Right..." Mayor Bush continued, "...Because I kind of see that is kind of their job. And come back to the Commission with their recommendations on everything that we brought up tonight. So, I think, Andrea (Lorenzo-Luaces, City Clerk) make sure the Pension Advisory Committee has copies ofthis so that they can make a response." CITY OF WINTER SPRINGS, FLORIDA MINUTES CITY COMMISSION WORKSHOP (2) - FEBRUARY 5, 2007 PAGE IS OF IS Manager McLemore said, "This is not meant to be a recommendation or anything, but the rationale for putting limitations on the employee members was so that you would have a turnover of people who have that experience working in the system, rather than limiting it to a long, long time. Again, I'm not recommending one way or the other; but that was the thought process behind it." Manager McLemore then spoke on who is covered by the fiduciary Policy and explained, "Any past, present, or future Director, Officer, employee or Trustee of the sponsor organization - the City of Winter Springs, or sponsor Plan', which is our Plan." Manager McLemore then said to the City Commission, "You're a Trustee." Mayor Bush said, "The Commission's policy on appointing people to that Board can't disagree with what is in here, so make sure they are in sync. And I am not sure they are. The Commissioners - appoint people to this Board, to the Pension Advisory Board - and I am not sure that is exactly the way it is stated in here. Just so that we know that. That- they are appointed by the Commission and they have no term limits basically. And just so that's somehow in here." Mr. Linn remarked that such wording was noted. ADJOURNMENT Mayor Bush adjourned this Workshop at 10:00 p.m. RESPECTFULLY SUBMITTED: DANIELLE HARKER, ASSISTANT TO THE CITY CLERK AND ~ \ A LORENZO-LUACES, CMC CLERK APPROVED: *t~~ F. BUSH YOR NOTE: These Minutes were approved at the February 26, 2007 Regular City Commission Meeting.