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HomeMy WebLinkAbout1998 01 27 Board of Trustees Regular Minutes MINUTES BOARD OF TRUSTEES - PENSION PLAN JANUARY 27, 1998 - REGULAR :MEETING 1. Call to Order The Board of Trustees - Pension Plan Regular Meeting was called to order by Vice- Chairman Jim Ryan, Tuesday, January 27, 1998 at 7:30 p.m. in the Municipal Building (City Hall, 1126 East State Road 434, Winter Springs, Florida 32708). 2. Roll Call Jim Ryan, Vice-Chairman, present Larry Nadrowski, present Robert Nippes, present Vernon Rozelle, arrived at 7:31 p.m. Ron Warble, present Also Present Ronald W. McLemore, City Manager John Drago, Administrative Assistant T om Lang, Attorney 3. Approval of the October 28. 1997 Minutes Motion by Robert Nippes. Seconded by Larry Nadrowski. It was agreed that the motion to approve the minutes of October 28, 1997 was carried by consensus of the Board. Motion passed. Approval of the December 16. 1997 Minutes Motion by Larry Nadrowski. Second by Robert Nippes. It was agreed that the motion to approve the minutes of December 16, 1997 was carried by consensus of the Board. Motion passed. .. Aporoval of the January 13. 1998 Minutes It was agreed by the Board, that the following addendum, offered by Mr. Nadrowski, be added to the January 13, 1998 minutes: 1) "That there's...maybe potential unfounded additional liabilities over and above what the Actuary provides under the Defined Benefit plan. MINUTES BOARD OF TRUSTEES - PENSION PLAN JANUARY 27,1998 - REGULAR MEETING PAGE20F5 2) The additional cost to the City on a dollars per year format, over and above the 1996 face year, for the next fifteen years, for both plans. Including, both the funding costs and the administrative costs. And... 3) All the Actuarial assumptions that were used to provide all the numbers in Number Two". It was then moved and seconded to approve the minutes. Motion passed. Mr. Nadrowski asked if the minutes from each meeting could be distributed at an earlier time interval rather than ten days before the next meeting. Mr. Ronald W. McLemore, City Manager said that "We'll try to get them to you within thirty days of the meeting". 4. Review of SunTrust's December Report with an STI Representative Mr. Peter Hardy, STI Representative first addressed a concern with record-keeping fees. He handed out a document entitled "Fees For Trustee With Investment Responsibility/Custodian With Investment Responsibility/Investment Management". He stated that the Investment Management Fee is 1 % on all assets under one million dollars; and 75 basis points on anything over one million dollars. Mr. Hardy further explained that Administrative Fees are a much more complicated issue and based on what is requested of STI. ~ Mr. Hardy asked the Board if just one person could contact STI with any concerns over administrative issues. Mr. McLemore, City Manager addressed this issue by saying that "On this Board, people have questions, they bring them to the Chair. The Chair recognizes those questions, and then...we will see that they get answered". He further added, "If you have a question, you forward it in to us - we'll get you an answer. We'll try to write it up, then give it back, then everyone gets the information and gets the benefit of that person's question. So, if I could make that request of you, I'd appreciate it". There was further discussion about administration matters, fees, deposits, and if all previous concerns about administrative services had been resolved. Mr. Hardy handed out copies of the "City of Wmter Springs Money Purchase Pension Plan Investment Performance Report" dated December 31, 1997. While reviewing this document, Mr. Hardy began by saying that "What has occurred over the last three months, has a...been a...fairly significant change in the environment...before we had three phenomenal years of stock market performance, and probably the three greatest...second greatest three year run in history." He added that "The last three years, you've had great corporate earnings growth, coupled with low, low interest rates and...and inflation. And, anytime you have low inflation, something called Price Earnings Multiple MINUTES BOARD OF TRUSTEES - PENSION PLAN JANUARY 27, 1998 - REGULAR MEETING PAGE 3 OF.5 Expansion occurs - it's just a fancy way of saying, when interest rates are low, stock prices go up, because there's no other place to put your money". He further spoke of a "change" - that inflationary concerns now are relatively small, compared with concerns about growth, which has been fueled by the economic (currency) problems in Southeast Asia. Mr. Hardy also explained that the volatility felt in the market, due to the above mentioned problems, would probably continue for about six months. He added, "Do not expect another thirty percent (30%) year in stocks, or...a fantastic year...is what I am getting at here is - we... our allocation is still prudent, but we... we don't feel that stocks are going to do as well as they have done in the past. There will be some volatility that you'll have to stomach, probably into the first six months". Mr. Hardy then reviewed the current asset allocations with those in attendance. He said that what is usually accurate about every index, is that "The biggest stocks really did the best...over the past three years". In discussing the International Fund, he said "Relative for the twelve months, relative to its index, did very well. The worst performing equity fund, in your...your...portfolio, still returned 13.35% - that's...respectable. The reason we put together this portfolio with these different funds is for diversity, and this year, the International Fund kind of pulled you down. Over time, that diversity will benefit you...it'll smooth the ride out". Mr. Hardy also mentioned bond performance, and indicated that it had been a good year for bonds. .. Regarding the Cash Flow Report, Mr. Hardy stated "That most of the money was...contributed to your gain on the bottom line, was a contribution...a contribution of $136,000. We actually made about $10,000 for you. With the Interest and Dividends and Gain (Loss) - if you add those together, you come up with $10,000. Please do not interpret this to mean that all your money came from dividends...for that quarter. What happened, was in the Capital Gain distribution, and some of our mutual Funds, does not affect you...because you are a qualified plan. But, that is the Gain or Loss we paid out of Capital Gains distribution, and then the funds went down a little bit, so that looks like you had a huge loss. That is not actually the case, it was just a transfer from one line to the other". In a brief market overview, Mr. Hardy spoke about the yield curve, and said that "Yields have come down, and...they're at historic low's...25-year low's...and, that is very good for your Bond portfolio". Board Member Vemon Rozelle asked Mr. Hardy if there were any recent Management changes with SunTrust. Mr. Hardy responded by praising the excellent Management team that they had, and that in fact they have added a Latin American Specialist to their International Management team. MINUTES BOARD OF TRUSTEES - PENSION PLAN JANUARY 27, 1998 - REGULAR MEETING PAGE40F :5 Attorney Torn Lang asked about any recommendation or changes? Mr. Hardy spoke of still being pleased with the long-term allocation, and that it should continue to improve. Mr. Hardy mentioned to the Board that a new representative from STI who specializes in Municipal Accounts, will soon be handling our account. Mr. Hardy hopes to introduce him to the Board at the next meeting. 5. Election of Officers Board Member Ron Warble made a motion to nominate Jim Ryan as Chairman. Mr. Nippes seconded the motion. It was agreed that the motion to approve the nomination of Jim Ryan as Chairman was unanimous. Motion passed. Newly elected Chairman Jim Ryan made a motion to nominate Robert Nippes as Vice-Chairman. It was agreed that the motion to approve the nomination of Robert Nippes as Vice-Chairman was unanimous. Motion passed. In other business, Mr. Nadrowski asked for further information to be given to the City Commission, based on an example that Sandy Turner (Actuary) had provided to him. The information that he is asking for is as follows: 1) "The additional cost to the City, dollars per year format, for the next fifteen years, including the funding costs, and then, all the Administrative Costs, using 1996 as the Base year. 2) A chart relating groups of ages of City employees. 3) What percentage of the Fire and Police Departments in the State of Florida have a Defined Benefit Plan. 4) Regarding the old plan - how long has that plan been in effect, and indicate the percentages input by both the City and employee, since the inception of that plan". Discussion followed. .. Mr. Rozelle asked about Sandy Turner. Mr. McLemore responded that she was the Actuarial Consultant that did the work for this plan. She is affiliated with Sandra R Turner & Associates, Inc., Post Office Box 621582, Oviedo, Florida 32762-1582 - they are Actuarials and Financial Consultants. Mr. Warble apologized for missing the last meeting, and clarified for the record, "There were several things that we had to accomplish when we...when we looked into this benefit plan, and one was...the...gross inequity, if not injustices that were being done to people who ere... at, or very near to retirement age, at...or had recently retired, who really MINUTES BOARD OF TRU5fEES - PENSION PLAN JANUARY 27, 1998 - REGULAR MEETING PAGES OF S had...nothing....that they were going to. So, we had to...we had to address that, because there are stiIl...although the...the plan was not...full of near retirement numbers, it's a relatively young group, there was still a number of people that were going to be nearing retirement... that... that... that... the contribution plan just was not going to be affixed to...that...that was one issue. And...and if not, the most important, certainly very important to me - the second issue was...we had collective bargaining units that were fast...after the State Plans, that when we looked at them, appeared to have...be much more costly...to...to the City, than the plan...we... Please believe me, I come from the private sector - this is rich for the private sector...for this is not the private sector. We have collective...I don't have collective bargaining in...my company and therefore...this...it's not...we have Fire and Police, who were sitting out there...ready to begin hammering on collective bargaining units and this...this was like a...a stop-gap measure to that, as well as trying to protect the employees that weren't in...and that is my understanding, after...we were here 'tillike...twelve o'clock one night, going through this plan, and that's we came to this decision. We came...to...in terms of our representation". There was further discussion regarding turnover; competition factors with regard to Police and Fire Services; and how it is much better to have one single plan, as opposed to three separate plans, in terms of effectiveness and cost savings. Also discussed - the proposed Pension Plan had to be tabled from last evening's City Commission meeting, due to the fact that the legal documents have not yet been completed. John Drago, Administrative Assistant also explained that "Because it's a Defined Benefit Plan, the...it needs to go up to the State for blessing, so, we've kind of decided we want the State to look at it first, and if they've got any problems with...Actuarial assumptions, or any of the benefits in there, we want to know ahead of time, so we can correct it, prior to it going to the Commissionll. '. . Newly elected Chairman Jim Ryan adjourned the meeting at 8:35 p.m. .. Minutes respectfully submitted by: Andrea Lorenzo-Luaces, Deputy City Clerk City of Winter Springs, Florida BOAR.DSltrusteeslfY97981minuteslO 12798.doc