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HomeMy WebLinkAbout1997 08 19 Board of Trustees Regular Minutes MINUTES BOARD OF TRUSTEES - PENSION PLAN AUGUST 19, 1997 Vice Chairman Jim Ryan called the meeting to order at 7:30 p.m. ROLLCALL: Robert Nippes, present Ron Warble, present Jim Ryan, present Vernon Rozelle, absent Ron McLemore, City Manager, present Tom Allan, Attorney (for Tom Lang) Peter Hardy, SunTrust Representative Sandy Turner, Consultant Approval of Minutes of April 22. 1997: Warble moved to approve the minutes of April 22, 1997. Seconded by Nippes. Discussion. Vote: all aye. Motion passes. Ouarterly Review of Trust Finances with Peter Hardy/STI Capital Management: Hardy introduced himself as he is replacing Brian Ballew, who received a promotion. Hardy reviewed the 2nd Quarter earnings with the Board. Hardy stated that the asset allocation remains 60% stocks and 40% bonds. Hardy reviewed the Quarterly Cash Flow Report, the asset allocation, and reviewed the portfolio characteristics, the General Equity Overview and the Fixed Income Overview. Hardy stated that the City is in the High Grade Fund. Hardy said the City has come to them with an equity fixed blend and Hardy said they would like to reduce some of the exposure to large cap domestic stocks; in other words, reduce what the City has in equity funds and diversity among this. The City's investment objective if we were to reduce the bond portion, would get the City out ofline with the City's moderate balanced objective, we don't want to do that, we want to diversity the equity portion so that you stay within your objective, but are able to get more of a "bite" every year and see less of a spike. Discussion. Manager McLemore stated that he would be comfortable to go with a 70/30 as long as the investments that are chosen are very top grade investments. Discussion on the median age of the employees. Motion was made by Nippes to go with 70% stocks and 30% bonds. Seconded by Ryan. Discussion. Vote: All aye. Motion passes. Motion was made by Warble to diversify the equity funds in a proper mix with International not to exceed 10% of equity and no emerging. The mix being: 20/20 in high grade equity income; 25% in mid cap; 25% small cap; and 10% in international. Seconded by Nippes. Discussion. Vote: All aye. Motion passes. Board of Trustees - Pension Plan Aue:ust 19. 1997 Pae:e 2 Retirement Discussion: Manager McLemore gave his presentation. Manager McLemore introduced Sandy Turner, of Bates Turner, Benefit Management Group. Manager McLemore said in working with Ms. Turner and with Attorney Lang, we all agree that the plan documents have to be rewritten. Manager McLemore stated that he is going to ask the Commission to give him the authority to have a competent attorney do that - make the desired changes and rewrite and consolidate all the amendments into a new document. We are also recommending a number of basic plan design enhancements, such as vesting schedules. Then the questions is what type of retirement plan should we have; we have looked at three alternatives: maintaining the current defined contribution plan; a pure defined benefits plan; or a floor off set plan. We define the floor as 2% per year of service as ifit were a defined benefit plan. Manager McLemore explained the floor off set plan as "if an employee has 20 years of service, he would at least get 40% of his final year's income; if that same employee has 20 years at today's current 8% he would be getting a much bigger annuity, you can't make if a true equity situation, but you can approach equity. The employee in effect gets, at retirement, under a floor off set plan, the larger of the two annuities, that which the employee could get under his/her account value at that point in time or the floor. That give us the ability to bridge between the two, and it also gives us the ability, in 10 to 12 years to have gotten these people out of the system and then you have again a true defined contribution plan. Manager McLemore said in looking at those three alternatives, we had to look at three other options, "how do you pay a defined benefit portion of a floor off set or a true defined benefits plan"; (1) do it in cash, (2) to finance it over 10 years, (3) or finance it over 40 years. Manager McLemore said the plan has been discussed with the employees. There is the State Options for Police and Fire employees (uniformed, certified) and there is a great deal of interest with the police and firemen in that plan because they provide them an early retirement opportunity without any penalty or loss because of being able to retire with full benefits at (basically) 55 years of age. Manager McLemore explained the State Options plans. Discussion. Manager McLemore said in talking with the other employees they tended to favor the floor option plan, and express they think they should have an early retirement option and disability option. Manager McLemore stated that he asked Ms. Turner to look at a true unified plan that would give the early retirement benefit as well as disability option to all employees. Manager McLemore gave the Board members a schematic of the options and reviewed the information with the Board. Manager McLemore said a survivors benefit will also be provided for. Discussion. Ms. Turner explained an option that would give all employees an early retirement benefit and a disability coverage that would exceed what is given on the State Plan. Discussion on the benefits. Ms. Turner said she had gotten a quote from CIGNA and that was: $.34 per $100 of salary, that would buy a 60% replacement up to $5,000 a month; that means if you make $10,000, it's $5,000 a month, starting after a 6 month wait, it continues on to 65 with a reduction off set by social security Board of Trustees - Pension Plan AU2ust 19. 1997 Pa2e 3 after 65; it is based on whatever happens to you, it doesn't have to be a work related injury. Discussion. Manager McLemore said the only question is do we fund it past service liability, from a one time contribution, from a 40 year financing, or a 20 year financing or a 30 year financing; what is that, and it is probably some combination of that if we set a target of8-2 and do everything we are trying to do here. Discussion on a 15 year amortization. Manager McLemore stated that it seems like we are very close to do-able, for a unified plan with a 30 year max on the 2% with the disability, early retirement at 55 and with a floor off-set plan, that affects everyone, and that maybe agree that we should have a 15 year amortization period and it is possible that we may have to "kick" in a couple hundred thousand dollars; that's all do-able. Discussion on the benefit base. It was determined that it would be the highest 3 years. It was the Board's recommendation to the City Manager that he take this plan to the Commission. The meeting adjourned at 10:45 p.m. Respectfully Submitted, Margo M. Hopkins, City Clerk