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HomeMy WebLinkAbout1996 04 23 Board of Trustees Regular Minutes MINUTES BOARD OF TRUSTEES/PENSION REGULAR MEETING APRIL 23, 1996 1. Call to Order Chairperson Hoffinann called the meeting to order at 7:30 p.m. in the conference room of the Winter Springs Municipal Building. 2. Roll Call Also present Art Hoffmann, Chairperson, present Brian Fricke, absent Ralph Bowman, present Si Berman, present Jim Ryan, present Ron McLemore, City Manager Tom Lang, City Attorney John Ketteringham, Gen. Servo Director Harry Martin, Finance Director 3. Approval of February 27. 1996 Special Meeting Minutes Chairperson Hoffmann asked if there were changes that needed to be made. There were no comments. Chairperson Hoffmann stated that the minutes stand approved as written. 4. Ouarterly Review of Trust Finances with Brian Ballew ofSTI Capital Management Ballew distributed copies of the portfolio. He reviewed figures of the various funds for the last quarter, the fiscal year-to-date, and the 31 month period. Chairperson Hoffmann asked about the value figure in the portfolio differing by about $100.00 from the statement. Ballew said it is because of accruals. He also explained that the low interest in dividends in the reconciliation is because of it being a common trust fund, not a mutual fund. It doesn't payout quarterly like mutual funds. The flow through is not seen; just the increase in the value. Attorney Lang asked Ballew, "As a professional, is there any change in the mix that you would recommend if they were prudent and reasonable trustees working for a pension fund?" Ballew said he thinks it is a very prudent mix. Chairperson Hoffmann asked Ballew if he saw an advantage in dropping investments in stocks and shifting towards bonds. Ballew said you could do that, but no one really knows. In the short term, it may not be a bad move if the long rates come back down to 6 Y:z or 6 1/4 percent, but if they go up past 7 percent then that could be a mistake. Discussion. Ballew mentioned that last meeting he said even though the equities are up, they did change the mix a little. They moved from a position where they had their growth style overweighted to a style neutral position so now there is equal amounts of money in growth and value, as shown on the Asset Allocation Page. Manager McLemore agreed that they made the right decision, and stated that it is the place to be for the next twelve months. Minutes Board of TrusteeslPension Plan April 23, 1996 Meeting Page 2 of 4 Ballew displayed a chart that plotted returns by mixes for the last 25 years. He brought up that the city doesn't have exposure to International Equities, then displayed a chart of historical data on the mix between u.s. and International equities. Discussion. Ballew stated that the city's mix is fine, and added that SunTrust continues to add products. He continued reviewing the portfolio. He welcomed any input on changes to the portfolio. Chairperson Hoffinann told Ballew that ifthere was an emergency change in the market, the city would expect to be alerted. Ballew said sure, the city has hired them to manage the city's money, but understand that if the market crashed they can't get on the phone to everyone the next day. Ballew said that he will be here whenever we needed him. He's just a phone call away. 5. Discussion of Improvements to the Pension Plan Manager McLemore said that he will be meeting with the Commission on Tuesday so a decision can be made on what alternatives they want to embrace relative to Pension Plan Improvements. The city has looked at plans from other communities, and a goal of a 10% contribution has been set. The issue is whether the 10% contribution will be 100%-employer, or a portion-employee. The City Manager has independently discussed the issue with of all of the Commissioners and the Mayor. He also advised the Commission that the Pension Board should make a recommendation. The 8% Employer/2% Employee would start this year. The full 10% would be done over a two year period (8% this coming fiscal year, and 2% more the following year). The City Manager said that a question was raised in a previous discussion. Why not go ahead and have the old plan (from the vesting schedule) comply with the new law, or do we want to defer it to another time? Attorney Lang said the city is grand fathered so it does not have to make a change. The new federal law fully vests at 7 years. Berman mentioned that Ms. Garcia (SunTrust) said there would be no additional cost if the city went with the straight 10%, but the 8%/2% she would have to find out the cost. Attorney Lang stated she said there would be a nominal cost because of creating a new accounting system. The legal costs for changing the plan to an 8%/2% would be $5,000 to $7,500. The 10% would be about $200.00. Current employee handouts will have to be revised if the 8%/2% is used. Attorney Lang would have to get with Mary Wilson to find out what all is handed out to employees. Manager McLemore said that he didn't know if the plan could be voluntary with a defined contribution plan. Attorney Lang said that it is possible, but according to Attorney Lang's People it's a nightmare, and they Minutes Board of Trustees/Pension Plan April 23, 1996 Meeting Page 3 of 4 suggest not doing a voluntary contribution. Manager McLemore said from a voluntary point of view, they can still put it anywhere they wanted. (Deferred Comp) Chairperson Hoffmann asked what percentage of employees participate in the 401K plan. Martin answered, probably 25 percent. The Chair also asked what cities plans were checked out. Ketteringham said that total average contribution was 8.4%. There are about 48 defined contribution plans. Manager McLemore said that the numbers he received from the City Manager's Association was a nationwide average of approximately ten percent-defined contribution plan. Chairperson Hoffinann mentioned that one percent is roughly $40,000. Martin added, that goes up the longer the employees are employed, and the more salaries that are given. Manager McLemore said he thinks the Commission is ready to commit, and the city is able to show them that it is possible. The plan would assure that they get at least a two percent pay increase this year so there would be no out of pocket expense for the employees. The income tax on the two percent would be deferred, but the FICA would apply. Manager McLemore said that the employees prefer the 10 percent according to all of his discussions with them. Chairperson Hoffmann said that some may say that it is overweighted on the people who can invest more if it is voluntary. Attorney Lang said that having witnessed what John Govoruhk and Mary Norton got, the more you can add to the plan, the better off you'll be. It's pretty tragic to have someone work for 26 years and retire on a couple hundred a month. Chairperson Hoffinann asked what percent of employees are fully invested now. Martin said, 25 or 30 percent. The Chair asked what cost would be involved in changing the vesting period down to 7 years. Attorney Lang said he didn't think that many changes would be involved. Probably $500 to $600. Chairperson Hoffinann what percentage of people left voluntary before 10 years. Martin said that the fact that one doesn't start vesting until they have been in the plan for four years; In the 1995 plan year there was probably 25 or 30 people who left with less than four years service, and as many as ten who left with greater than four years. The most turnover is in the Police Department. Chairperson Hoffmann asked if you go down to 7 years, does that mean you start vesting sooner. Attorney Lang said it does accelerate faster, but he will have to look into it. The Chair said that may want to be looked at as well as an improvement in the plan. Attorney Lang suggested deferring that issue to the next meeting. Chairperson Hoffinann stated that the board's mission is improvements within the plan. What the City Manager and Commission are proposing is something we can discuss, but as far as our recommendation goes, it only carries the weight of our opinion, not our expertise. Minutes Board of TrusteeslPension Plan April 23, 1996 Meeting Page 4 of 4 The City Manager said it could be done over four years. (1 percent each year) He said he feels the city can do the 2 and 2. In his meetings with employees, they have basically said to him that they are willing to reduce their merit pay in order to get this done for their retirement. The City Manager stated that the merit plan will have to be reduced in order to get this done. Attorney Lang said he would look into the adjustments to the vesting format. Chairperson Hoffinann said that the commission this year cannot legislate what the upcoming commission does. Manager McLemore said that the next commission is not mandated to carry out that act. Attorney Lang said the next commission could repeal it. Motion: The board recommends that the City Commission consider increasing the employers contribution to 10% as soon as it is economically possible. Motion by Berman. Second by Bowman. Vote: Hoffmann, aye; Berman, aye; Ryan, aye; Bowman, aye. Motion Passed. 6. Unfinished Business No comments. 7. New Business No comments. 8. Adjournment Chairperson Hoffmann adjourned the meeting at 8:45 p.m. /mj