HomeMy WebLinkAboutAgenda GEPB 082508City of Palm Beach Gardens
10500 N. Military Trail
Palm Beach Gardens, FL 33410
GENERAL EMPLOYEES PENSION FUND
NOTICE OF MEETING AND AGENDA
Please take notice that the Board of Trustees of the City of Palm Beach Gardens will
conduct a meeting of the board at the above location on August 25, 2008 at 1:00PM in
Council Chambers.
Old Business: Approval of 2/11/08 minutes
Approval of 6/20/08 minutes
New Business:
Adjournment
Report from Rockwood
Report from Bogdahn Consulting
Report from Scott Christiansen
Approval of 2009 Meeting Dates
Approval of Bills
DISABILITY INFORMATION
In accordance with the Disabilities Act and F.S.S.286.26, persons with disabilities
needing special accommodation to participate in this proceeding should contact the
Human Resource Department no later then seven days subsequent to the proceeding at
(561) 799 — 4223 for assistance, if hearing impaired, telephone the Florida Relay Service
Number at 800 — 955 — 8770 (VOICE) for assistance.
APPEAL NOTICE
If a person decides to appeal any decision made by the Board, with respect to any matter
considered at such meeting or hearing, he will need to ensure that a verbatim record of
the proceedings is made, which record includes the testimony and evidence upon which
the appeal is to be based.
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CITY OF PALM BEACH GARDNES
GENERAL EMPLOYEE PENSION BOARD
QUARTERLY MEETING
FEBRUARY 11, 2008
The February 11, 2008 quarterly meeting of the General Employee Pension Board of the
City of Palm Beach Gardens, Florida, was called to order at 2:07 p.m. in the Council
Chambers of the Municipal Complex, located at 10500 North Military Trail, Palm Beach
Gardens, Florida by Allan Owens, Chair.
ROLL CALL
Members Present:
Members Absent:
Allan Owens, Chair
Dindial Laljie, Secretary
Kenneth Steele
Steve Parella
Jamie Smith
Additional Attendees: Andrew Holtgrieve — Rockwood Capital Advisors
David West — Bogdahn Consulting
Bradley R. Heinrichs — Foster & Foster, Board Actuary
Scott Christiansen — Board Attorney
Allan Owens, Finance Administrator, announced Foster & Foster had been involved in a
minor automobile accident while traveling to the meeting and hoped to arrive by
3:00 p.m.. In Foster & Foster's absence, the New Business section would be re- ordered as
necessary.
OLD BUSINESS
• Approval of Minutes
— Motion was made and seconded to accept minutes from the November 19,
2007 meeting and approved unanimously, 3-0.
NEW BUSINESS
• Bogdahn Consulting 4th Quarter 2007 Report was presented by David West.
— London Interbank Offering Rate (LIBOR) was high because no one wanted to
lend to each other.
— Rates have subsequently declined to 2.2 to 2.3 percent.
— Bond managers are beginning to act because the price of anything, except
Treasury, has become inexpensive.
— Performance overview was presented.
— Portfolio is approximately 65 percent equity.
— Due diligence trip was positive.
— Rankings for equity were provided.
— National and international equity was provided.
— Allan Owens, Financial Administrator, noted the report did not reflect the
increase in the market limitations in equities from 70 to 75 percent, which had
been voted on at the last meeting.
— Kenneth Steele inquired if the change can be made before the next ineeting
(May 12, 2008).
GENERAL EMPLOYEE PENSION BOARD PAGE 1
2.11.08
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— Reassurance was give
that the change would be effective before the next
meeting. David West,
Bogdhan Consulting, stated he would take care of the
transaction.
• Scott Christensen, Board
Attorney, suggested holding the Board election today
under New Business so th
business can be transacted.
• Rockwood Capital Advisors
4th Quarter 2007 Report was presented by Andy
Holtgrieve.
— Equity portfolio review.
— Discussed the subprim
mortgage situation.
— Account summary.
— Discussion ensued regarding
the General Motors decline, cash in the account
and Salem Trust being
the entity that cuts the checks and pays the bills.
— Allan Owens complim
nted Andy Holtgrieve on his handling of the account.
• Allan Owens, Finance Administrator,
welcomed Bradley Heinrichs, Foster &
Foster, to the meeting. Ho
proceeded to present the Foster & Foster Actuarial
Valuation Report.
— Two retirees passed a
ay, which helped reduce the plan cost.
— Salary increases were
.5 percent for active employees instead of the projected
6.5 percent.
— The four year average
return was 9.7 percent compared to the 8.0 percent that
is assumed. The actuarial
gains helped reduce cost.
— Only 2.0 percent is nee
led next year to meet the 8.0 percent goal.
— This is a closed plan. Only
two employees are active: Dindial Laljie and Jamie
Smith. There are 18 people
in the system.
— Discussion ensued reg
ding the values covered in the report.
• Motion was made by Keruieth
Steele and seconded by Dindial Laljie to accept the
actuary's report; carried b
a unanimous vote, 3-0.
• Allan Owens, Financial Administrator,
noted an increase in Foster & Foster's
fees: annual valuation fee
from $3,300.00 to $4,000.00; an automatic 5 percent
increase for subsequent va
ation; $250.00/hour for special requests.
• Motion was made by Din
lial Laljie and seconded by Kenneth Steele to approve
Foster & Foster's rate in
reases and for Scott Christiansen, Board Attorney, to
draw up the appropriated
uments. Motion passed by unanimous vote, 3-0.
• Scott Christiansen, Board
ttorney:
— Requested a motion b
sed upon the advice of the consultant, that there is an
expected rate of invest
ent return of 8 percent over the next year and several
succeeding years. Mo
on was made by Dindial Laljie, seconded by Kenneth
Steele, and passed by unanimous
vote, 3-0.
— Bradley R. Heinrichs,
Foster & Foster, Board Actuary, stated this is a closed
plan and in the not too
distant future there will only be retirees. He then asked
at what point restruc
ring would be considered? Scott Christiansen replied,
"When bonds get to 8
percent." Discussion ensued about future planning for
investments and return!;.
— Scott Christiansen has
not yet received the signed addendum for his contract,
but he is receiving the higher
rate of compensation.
— Scott Christiansen requested
that Allan Owens give an update on the Trustee
Composition Ordinance.
GENERAL EMPLOYEE PENSION BOARD
2.11.08
PAGE 2
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o Allan Owens stated the City considered turning over control of the General
Employee Defined Benefit Plan to the Florida League of Cities in an
attempt to control cost. However, the need for a Board would not have been
eliminated. The City Attorney is revising the drafted Ordinance to reflect a
change from quarterly meetings to semi - annual meetings. The makeup of
the Board would change from two member residents to three member
residents with one active employee and one retiree or a resident and the
fifth member would be the appointed member. Kenneth Steele requested
further discussion on the Board member issue.
— Scott Christiansen requested consideration be given to electing new Board
officers so business can be conducted effectively.
— Motion was made by Kenneth Steele, seconded by Dindial Laljie, nominating
Alan Owens as Chair and Dindial Laljie as Secretary. Motion passed by
unanimous vote, 3-0.
— Suggestion was made that everyone working for the Board provide their
Certificate of Insurance. Sarah Varga was asked to follow up.
— Discussion ensued regarding the new requirement that if Social Security
Numbers are requested from people they must be provided with documentation
of what will be done with them.
— If the new Ordinance passes, the May meeting may be cancelled. Allan Owens,
Chair, Finance Administrator, will keep the Board members apprised of the
status. All financial reports will be provided per contract and forwarded to
Trustees. Discussion ensued on this issue.
• Approval of bills:
— Bogdahn Consulting 4th Quarter statement $2000.00
— Sawgrass Asset Management 4th Quarter statement $827.00
— Rockwood Capital Advisors 4th Quarter statement $3,356.73
— Christiansen and Dehner statement $742.33
— Salem Trust, 4th Quarter statement $750.00
— Foster & Foster annual statement $6058.00
o Allan Owens questioned the amount of the bill. Bradley R. Heinrichs,
Foster & Foster, Board Actuary, explained the additional charges were for
earlier valuation revisions.
— Motion made in favor of payment of bills, seconded and passed by unanimous
vote, 3 -0.
(The remainder of this page intentionally left blank)
GENERAL EMPLOYEE PENSION BOARD
2.11.08
PAGE 3
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IV. ADJOURNMENT
With no further business to
3:52 p.m.
APPROVED:
Attest:
before the Board, the meeting was adjourned at
Allan Owens, Chair
Dindial Lal 'e, Secretary
Kenneth Stc ele
Jamie Smit
Steve P
Donna M. Cannon
Municipal Services Coordinator
NOTE: These action minutes are prepared in compliance with 286.011 F.S. and are not verbatim
transcripts of the meeting. A verbatirp audio record is available from the Office of the City Clerk.
All referenced attachments on file in khe Office of the City Clerk.
GENERAL EMPLOYEE PENSION BOARD
2.11.08
PAGE 4
I CITY OF PALM BEACH GARDNES
2 GENERAL EMPLOYEE PENSION BOARD
3 SPECIAL MEETING
4 JUNE 20, 2008
5
6 The June 20, 2008 special meeting of the General Employee Pension Board of the City of Palm
7 Beach Gardens, Florida, was called to order at 10:28 a.m. in the Council Chambers of the
8 Municipal Complex, located at 10500 North Military Trail, Palm Beach Gardens, Florida by
9 Chair Allan Owens.
10
11 I. ROLL CALL
12 Members Present: Allan Owens, Chair
13 Dindial Laljie, Secretary
14 Kenneth Steele
15
16 Members Absent: Jaime Smith
17
18 Additional Attendees: Sarah Varga, Accountant
19
20 II. OLD BUSINESS
21 • None.
22
23 III. NEW BUSINESS
24 • Chair Owens stated the special meeting was called for the Board's approval for payment
25 of the Gibson & Wirt bill for fiduciary liability insurance in the amount of $2,361.35.
26 — The policy has a $1,000,000.00 annual aggregate limit and a $5,000.00 deductible.
27
28 MOTION
29 A motion was made by Kenneth Steele for approval of payment of the Gibson & Wirt bill.
30 Dindial Laljie seconded. Motion was approved unanimously, 3 -0.
31 Member 6je Nay Absent
32 Allan Owens, Chair ✓
33 Dindial Laljie ✓
34 Jamie Smith ✓
35 Kenneth Steele ✓
36
37 • Kenneth Steele asked to open discussion on getting bids for next year's policy.
38 • Chair Owens agreed that lie and his staff will get bids for next year's policy.
39 • Sarah Varga stated the quote from Gibson & Wirt was for a three -year term.
40 • Discussion ensued about the length of time for renewal of the policy and the ability to
41 cancel after one year.
42 MOTION
43 A motion was made by Kenneth Steele for execution of a one -year term for the Gibson &
44 Wirt policy and getting bids from local insurance agencies in future years. Dindial Laljie
45 seconded. Motion was approved unanimously, 3 -0.
GENERAL EMPLOYEE PENSION BOARD SPECIAL MEETING PAGE
6.20.08
I Member
2 Allan Owens, Chair
3 Dindial Laljie
4 Jamie Smith
5 Kenneth Steele
6
7 IV. ADJOURNMENT
8 A motion for adjournment ww
9 motion was approved una
10 10:33 a.m.
11
12
13 APPROVED:
14
15
Ave
Nay Absent
made by Dindial Laljie. Kenneth Steele seconded. The
imously, 3 -0. The meeting was adjourned at
16 Allan Owens, 1
hair
17
18
19
Secretary
20 Dindial Laljie,
21
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24 Kenneth Steel
25
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28 Jamie Smith
29
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32 (Vacancy)
33
34
35 ATTEST:
36
37
38
39 Donna M. Cannon
40 Municipal Services Coordinator
41
42
43 NOTE: These action minutes are pre
44 transcripts of the meeting. A verbatim
45
46 All referenced attachments on file in th
in compliance with 286.011 F.S. and are not verbatim
record is available from the Office of the City Clerk.
Office of the City Clerk.
GENERAL EMPLOYEE PENSION BOARD SPECIAL JEETING PAGE 2
6.20.08
City of Palm Beach Gardens
General Employees
Retirement System
Quarterly Review
THE
2nd Quarter 2008 BOGDAHN
GRoup
W W W. B O G D A H N G R O U P. C O M simplifying your investment and fiduciary decisions
Investment Market Summary
2 "d Quarter 2008
A Tale of Two Markets
A quarter marked by contrast ended on a negative note with the S & P 500
erasing early gains of as much as 9% only to finish in negative territory
down 42.70 points, or -3.2 %. This marks the third straight quarterly
decline, and the worse second quarter since 2002. Market volatility
remained high with 40% of the trading days experiencing swings of more
than 1% so far this year. A period of contrast, the quarter began on a
positive note as Investor sentiment shifted with the perception that Fed's
innovative actions had dramatically reduced the risk of a financial system
collapse. As a result, credit market spreads tightened dramatically and
equity markets moved higher. This relief rally soon faded as the market
shifted the focus to the worsening macro economic environment. In a
dramatic rise oil spiked 38% to $140 a barrel registering the best quarterly
performance since the first quarter of 1999. Other commodities rose as
well with food stocks registering gains, led by corn rising 28 %. Gold
experienced its largest one -day move in 23 years finishing the quarter up
1.1%. Federal Reserve policy makers, on the heals of seven interest rate
cuts since last September, held rates steady and communicated a policy
stance that lead to speculation that there could be rate increases later in
the year to curb inflation. The quarter closed with investor angst over the
economies ability to withstand high energy and food prices placing the Fed
policy makers in a quandary between a weak financial sector and rapidly
growing inflation pressures. With negative implications for the financial
sector concerns of more write downs at financial institutions took center
stage once again, including the insolvency of Indy Mac, and prospects of a
tax payer lead bail out FNMA and FHLMC.
U.S. equities experienced a period best described as a tale of two markets.
Overall market breadth was exceptionally narrow with optimism
concentrated in the Energy sector (20.4 %), and extreme pessimism
continuing in Financials (- 16.4 %). Information Technology stocks provided
a boost for Growth stocks in aggregate which outperformed the financially
heavy value indexes. The average growth stock returned 1.25% as
measured by the Russell 1000 Growth Index, the Russell 1000 Value
composite was down 5.31 %. Style affect was consistent across
capitalization as small -cap growth stocks delivered 4.47% (Russell 2000
Growth Index) vs. an average decline of 3.55% for the Russell 2000 Value
Index. Within the value sector, financial institution woes were expressed
most acutely in the share prices of investment banks such as Lehman
Brothers Holdings Inc., Morgan Stanley, and Citigroup Inc. amid
announcements of more write -downs coming from illiquid and mortgage
related assets. Regional banks were also hit especially hard with shares of
Fifth Third Bancorp plummeting 51 % during the quarter, National City Corp.
e 2 of 27
falling 52 %, and Indy Mac Bancorp decling 87.5 %. Calendar year to date
results shows only two sectors in the S & P 500 delivered positive returns;
Energy 8.1 %, Materials 1.3 %. All other eight sectors experienced negative
returns despite reporting an average earnings growth rate of 12% for the
period. The Information Technology, and Consumer Stables sectors
reported solid earnings growth of 20% and 15 %, yet the average stock with
in the sectors has declined 13.2% and 7.5% respectively.
International equity markets: With inflation carrying global implications, and
financial repercussions spreading, international equities suffered. Both
developed and emerging markets declined in a market environment that
remains extremely narrow by historical standards. Viewed by sector,
Energy and Materials were the only areas to significantly outperform the
index over the last quarter. Like domestic equity, Financials continued to
perform poorly and were the worst performing sector in the quarter.
Developed country stocks declined 1.9 %, which brings the year to date
return to -7.4 %. Emerging markets, largely influenced by commodity
exporting countries faired better declining 0.8% as measured by the MSCI
EM Index.
The U.S. dollar managed to strengthen during the quarter diluting
international equity investment returns for U.S. investors. The dollar
managed a gain of 0.3% against the Euro and 6.5% against the Yen.
Tracked against a broader group of 26 currencies, the dollar was roughly
flat for the quarter. Remarks by Federal Reserve Chairman, Ben Bernanke
early in the quarter suggested U.S. policy makers have become more
concerned about the risks posed by inflation, raising the prospect for a rate
increase as early as August of this year. Prospects for changes in the
relationship between interest rates in the U.S. and Europe lead to
speculation that the U.S. currency may bottom after a six year decline.
Fixed income markets began the quarter with a sharp reversal of the flight
to quality trade. With prospects for a more restrictive interest rate policy,
risk free U.S. Treasuries declined in aggregate, 2.1%. The previous
quarters actions by the Fed to sure up liquidity alleviated investors' fears of
a systemic financial collapse. This resulted in a relief rally in markets for
riskier types of debt. The unwinding of the quality trade resulted in credit
spreads tightening dramatically reversing the effects of months of turmoil
and uncertainty in a bond market at the epicenter of the financial crisis.
The incremental yield or risk premium over U.S. Treasuries declined to 2.68
percentage points from 3.0% at the start of the quarter. Other signs of
market optimism included record issuance for new investment -grade bond
issues. In aggregate, the bond market declined 1.0 %.
Ill[
BOGDAHN
Ti 11
BOGDAHN
GROUP
MSCI EAFE
MSCI Emerg. Mkts.
S &P 500
Russell 3000
Russell 1000
Russell 2000
The Market Environment
Asset Class Performance
Period Ended: June 30, 2008
Quarter Performance
-2.3% - - -- - -- .6%
-2.7
-1.7%
Lehman US Agg.
Lehman MBS Fixed 6.6
Lehman US Credit o.s%
3mo8. T-Bill Jim 0.4%
-4.0% -2.0% 0.0%
Five Year Annualized Performance
MSCI EAFE
MSCI Emerg. Mkt8.
S &P 500
Russell 3000
Russell 1000
Russell 2000
2.0% 4.0%
Lehman US Agg. :3313% .9%
Lehman US Gov. 8%
Lehman MBS Fixed 4.6%
Lehman US Credit %
3mos. T-Bill
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
Source. MSCI Capital Markets, Russell Co., HFR, Lehman, & Bogdahn Consulting, LLC.
acre 3 of 27
Lehman US Agg. 1.1%
Lehman MBS Fixed 1.8%
Lehman US Credit -0.5/
3mos. T-Bill in 1.1%
-16.0% - 12.0 % -8.0% -4.0% 0.0% 4.0% 8.0°/: 12.0%
Ten Year Annualized Performance
MSCI EAFE
MSCI Emerg. Mkts.
S &P 500
Russell 3000
Russell 1000
Russell 2000
Lehman US Agg.
Lehman US Gov.
Lehman MBS Fixed
Lehman US Credit
3mos. T-Bill
0.0%
3.0% 6.0% 9.0% 12.0% 15.0%
THE
BOGDAHN
GROUP
Year -to-Date Market Performance
MSCI EAFE
- 11.01
MSCI Emerg. Mkta.
-127%
S &P 500
-11.9%
Russell 3000
-11.1%
Russell 1000
11.2%
Ru8 sell 2000
-9.4%
Lehman US Agg. 1.1%
Lehman MBS Fixed 1.8%
Lehman US Credit -0.5/
3mos. T-Bill in 1.1%
-16.0% - 12.0 % -8.0% -4.0% 0.0% 4.0% 8.0°/: 12.0%
Ten Year Annualized Performance
MSCI EAFE
MSCI Emerg. Mkts.
S &P 500
Russell 3000
Russell 1000
Russell 2000
Lehman US Agg.
Lehman US Gov.
Lehman MBS Fixed
Lehman US Credit
3mos. T-Bill
0.0%
3.0% 6.0% 9.0% 12.0% 15.0%
THE
BOGDAHN
GROUP
The Market Environment
Equity Sector Performance
Period Ended: June 30, 2008
ENERGY - -
MATERIALS
INDUSTRIALS
CONSUMER DISCR -28-3%
CONSUMERSTAPLES
HEALTH CARE
FINANCIALS
INFORMATIONTECH
TELECOM SVC
UTILITIES
,e4of27
Sector Performance
as of 6/30/2008
28.5%
7%
7.9%
5.4%
0.4 0
-10.7%
- 16.4%
-38.8%
3.5%
-2.5%
- 20.2%
7.7%
I 14.8%
Source: MSCIBarra & Bogdahn Consulting, LLC
[iiiiiiQTD o 1YR1
�^ 'I'm
` BOGDAHN
GROUP
Source: Russell Co.
tge 5 of 27
The Market Environment
Equity Style Performance
Period Ended: June 30, 2008
Russell All Cap Style Performance
16
8 7.6
8.4 9.0
5.9
1.6 � 3.6 6.1
1.1
0 1:
1.7
' •6.4
9.0
11.1
-16 13.3 -12.
19.0
-24
Qtr YTD lyr 3yr 5yr 10yr
O 3000 Growth ■ $000 Index ■ 3000 Value
Small Cap Style Performance
24
16 1
10.4 10.3 10.0
8 4.6 6.1
3.8
0.6 1.4
0
FA
8 3.6 EW
8.9 -9.4 -9.8
10.
16
16.
4
24 - -21 A
7.5
5.5
2.8
Qtr Y -CD lyr 3yr 53rr 10yr
0 2000 Growth ■ 2000 Index ■ 2000 Value
-1,1 11
BOGDAHN
`� GROUP
The Market Environment
Trends for Stocks and Bonds
Period Ended: June 30, 2008
Source: Frank Russell Co. & Bogdahn Consulting, LLC.
Growth vs. Value
Russell 1000 Excess Return Rolling 12 Month Periods
30,0%
20.0%
10.0%
0.0%
-10,0%
-200%
-30.0%
n m m m a`�o a°o m m m m ro m m m rn rn m m m m m °0 0 0 0 0° 0 0 0
rn m rn m rn m m rn m w m m m m rn m rn m m m m o 0 0 0 0 0 0 0
N N N N N N N N N N N N N N N N N N N N N N N N N N N N N
Value — Growth
Treasury Yield Curve
7
6-
5
4
3 Q/
2
1
0 Source: Federal Reserve
1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr
Source: US Dept. of Treasury --C.�-12/31 /2007 —O— 3/31/2008 —*— 6/30/2008
age 6 of 27
Ti I
BOGDAHN
GROUP
Total Fund Composite
June 30, 2008
Asset Allocation By Style as of Mar - 2008 Asset Allocation By Style - Current Quarter
March 31, II: :I June 30, 2008
Segments
Market Value
Allocation
Segments
Market Value
Allocation
■ Domestic Equity
1,725,995
63.3
■ Domestic Equity
1,801,777
65.9
■ International Equity
129,818
4.8
■ International Equity
129,264
4.7
■ Domestic Fixed Income
765,823
28.1
■ Domestic Fixed Income
720,899
26.4
■ Cash Equivalent
104,145
3.8
■ Cash Equivalent
82,639
3.0
Page 7 of 27
BOGDAHN
l GROUP
Total Fund Composite
June 30, 2008
March 31, 2008 : $2,725,780
June 30, 2008 : $2,734,579
Manager
Market Value
Allocation
Manager
Market Value
■ Rockwood Equity Portfolio
1,772,806
65.0
■ Rockwood Equity Portfolio
1,831,577
■ Sawgrass Fixed
785,693
28.8
■ Sawgrass Fixed
765,911
■ Rockwood International
136,103
5.0
■ Rockwood International
136,740
■ Receipt & Disbursement Account
31,178
1.1
■ Receipt & Disbursement Account
351
:e 8 of 27
Allocation
67.0
28.0
5.0
l,r BOGDAHN
GROUP
Palm Beach Gardens General Employees'
Asset Allocation
As of June 30, 2008
Asset Allocation History by Portfolio
Total Equity Composite
2,029,849
68.14
2,082,054
68.89
2,141,359
69.12
2,049,971
68.63
1,908,909
70.03
1,968,317
71.98
Rockwood Equity Portfolio
1,914,322
64.26
1,956,645
64.74
2,006,004
64.75
1,918,129
64.22
1,772,806
65.04
1,831,577
66.98
Rockwood International
115,527
3.88
125,409
4.15
135,355
4.37
131,842
4.41
136,103
4.99
136,740
5.00
Total Fixed Composite
947,794
31.82
940,294
31.11
933,543
30.13
936,260
31.35
785,693
28.82
765,911
28.01
Sawgrass Fixed
947,794
31.82
940,294
31.11
933,543
30.13
936,260
31.35
785,693
28.82
765,911
28.01
Receipt & Disbursement Account 1,262 0.04 - - 23,143 0.75 576 0.02 31,178 1.14 351 0.01
Historical Asset Allocation B-,- Seement
100.0
80.0
0
V
40.1)
7,
20.0
0.0
9/07 10/07 11/07 12/07 1/08 2/08 3/08 4/08 5/08 6/08
■ Domestic Equity International Equity Domestic Fixed Income 0 Cash Equivalent
age 9of27
�Pk,�; BOGDAHN
GROUP
Palm Beach Gardens General Employees'
Financial Reconciliation
As of June 30, 2008
Financial Reconciliation Quarter
Total Equity Composite
1,908,909
- 14,501 -
- -3,102
-526
9,758
67,780
1,968,317
Rockwood Equity Portfolio
1,772,806
- 14,501 -
- -3,102
-489
8,530
68,333
1,831,577
Rockwood International
136,103
-
-
-38
1,228
-553
136,740
Total Fixed Composite
785,693
-9,667 -
- -687
-215
9,441
- 18,654
765,911
Sawgrass Fixed
785,693
-9,667 -
-687
-215
9,441
- 18,654
765,911
Receipt & Disbursement Account 31,178 24,169 25,030 - 76,355 - -3,699 27 - 351
Total Fund Composite 2,725,780 - 25,030 - 76,355 -3,789 -4,440 19,227 49,126 2,734,579
Financial Reconciliation FYTD
Total Equity Composite
2,141,359
67,888 66
- 32,147
-9,969
- 1,043
24,328
- 222,165
1,968,317
Rockwood Equity Portfolio
2,006,004
55,037 66
- 32,114
-9,969
-972
19,524
- 205,999
1,831,577
Rockwood International
135,355
12,851 -
-33
-
-70
4,803
- 16,166
136,740
Total Fixed Composite
933,543
- 180,866 -
- 21,310
-2,330
448
40,769
-3,447
765,911
Sawgrass Fixed
933,543
- 180,866
- 21,310
-2,330
-448
40,769
-3,447
765,911
Receipt & Disbursement Account 23,143 112,978 105,170 - 228,466 -6,116 -6,441 100 -16 351
Total Fund Composite 3,098,045 - 105,236 - 281,923 - 18,415 -7,932 65,197 - 225,628 2,734,579
Page 10 of 27
'I'm
BOGDAHN
GROUP
Palm Beach Gardens General Employees'
Comparative Performance
As of June 30, 2008
Total Fund (Net)
Total Fund Policy
Difference
Mixed -Asset Target Alloc Moderate Funds (MF) Median
Total Fund (Gross)
Total Fund Policy
Difference
Total Equity Composite
2.35
-1.98
4.33
-0.99
2.49
-1.98
4.47
4.03
(1)
(79)
-5.95
-8.24
2.29
-7.05
-5.34
-8.24
2.90
-9.67
(33)
(67)
-1.92
-6.08
4.16
-5.55
-1.14
-6.08
4.94
4.95
(14)
(56)
6.26
4.02
2.24
3.55
6.98
4.02
2.96
7.26
(6)
(38)
6.01
4.25
1.76
4.33
6.71
4.25
2.46
7.90
(16)
(52)
5.98
4.89
1.09
4.93
6.70
4.89
1.81
7.60
(26)
(52)
6.95
6.07
0.88
6.01
7.70
6.07
1.63
9.88
(28)
(50)
8.15
8.72
-0.57
N/A
8.88
8.72
0.16
10.01
N/A 10/01/1994
N/A
10/01/1994
10/01/1994
EquityTotal Policy
-2.69
-14.71
-12.96
1 - ,
4.54
4.98
7.67
1i. r„
Difference
6.72
5.04
8.01
4.71
3.36
2.62
2.21
0.38
Rockwood Equity Portfolio
4.31
(5)
-9.74
(18)
-5.19
(1 1)
6.95
(10)
N/A
N/A
N/A
8.97
N/A I 1/0 1/ 20115
S&P 500
-173
(83)
-14.85
(76)
-13.12
2.36
(66)
4.41
(75)
4.88
(83)
7.59
(83)
4.24
N A
Difference
7.04
5.11
7.93
4.59
N/A
N/A
N/A
4.73
US Core /Large Cap Equity (SA +CF) Median
-1.20
-13.27
- 11.95
2.91
5.20
6.10
8.53
N/A
Rockwood International
0.49
(22)
-8.34
(25)
-1.04
(14)
N/A
N/A
N/A
N/A
11.22
N/A 11/01/2006
MSCIEAFE
-1.93
(59)
-12.11
(57)
-10.15
(57)
7.05
(58)
13.34
(61)
13.54
(63)
17.16
(62)
3.60
NIA
Difference
2.42
3.77
9.11
N/A
N/A
N/A
N/A
7.62
International Equity All (SA +CF) Median
-1.42
-11.32
-9.07
7.79
14.39
14.50
17.79
N/A
Total Fixed Composite
- 1.17
(70)
3.87
(52)
6.66
(53)
6.17
(61)
4.25
(32)
4.81
(46)
3.72
(69)
6.52
N/A 10/01/1994
Fixed lot,,l
-1.02
(59)
4.16
(44)
7.12
(44)
6.62
(45)
3.98.
(59)
4.79
(48)
3.67
(71)
6.76
N/A
Difference
-0.15
-0.29
-0.46
-0.45
0.27
0.02
0.05
-0.24
US Broad Market Core Fixed Income (SA +CF) Median
-0.94
3.91
6.83
6.47
4.09
4.77
3.93
N/A
Sawgrass Fixed
-1.17
(70)
3.87
(52)
6.66
(53)
6.17
(61)
N/A
N/A
N/A
5.10
N/A 11/01/2005
Sawgrass Fixed Policy
-1.02
(59)
4.16
(44)
7.12
(44)
6.62
(45)
N/A
NSA
N/A
' I
\ A \\
Difference
-0.15
-0.29
-0.46
-0.45
N/A
N/A
N/A
-0.11
US Broad Market Core Fixed Income (SA +CF) Median
-0.94
3.91
6.83
6.47
4.09
4.77
3.93
N A
Returns for periods greater than one year are annualized.
Returns are expressed as percentages.
I'm
Total Fund Policy = 60% S &P 500,5% MSCI SAFE, & 35% LB Aggregate
BOGDAHN
C-PnI Tn
Palm Beach Gardens General Employees'
Comparative Performance
As of June 30, 2008
Total Fund (Net)
15.50 (9)
7.79 (38)
8.15 (72)
9.26 (53)
10.57 (92)
-7.06 (37)
-4.26 (19)
11.96 (38)
Total Fund Policy
12.40 (38)
7.94 (37)
8.40 (67)
9.67 (46)
17.36 (31)
-9.13 (59)
-12.21 (53)
10.94 (47)
Difference
3.10
-0.15
-0.25
-0.41
-6.79
2.07
7.95
1.02
Mixed -Asset Target Alloc Moderate Funds (MF) Median
11.42
7.14
9.46
9.39
15.73
-8.28
-12.02
10.51
Total Fund (Gross) 16.15 8.41 8.96 10.09 11.40 -6.34 -3.54 12.61
Total Fund Polies 12.40 7.94 8.40 9.67 17.36 -9.13 -12.21 10.94
Difference 3.75 0.47 0.56 0.42 -5.96 2.79 8.67 1.67
Total Equity Composite
21.95
10.14
12.89
14.12
15.96
-15.09
-14.09
19.24
I-quitNT„tal Policy
16.68
10.79
1225
13.87
24.40
-20.47
-26.62
13.27
Difference
5.27
-0.65
0.64
0.25
-8.44
5.38
12.53
5.97
Rockwood Equity Portfolio
21.35
(11)
14.79
(4)
N/A
N/A
N/A
N/A
N/A
N/A
S&P 500
16.44
(i7)
10.79
(49)
12.2
(s2)
13.87
(60)
24.40
(44)
- 20.47
(75)
-26.62
(67)
13.27
Difference
4.91
4.00
N/A
N/A
N/A
N/A
N/A
N/A
US Core /Large Cap Equity (SA +CF) Median
16.60
10.77
14.44
14.27
24.11
-19.17
-25.79
15.20
Rockwood International
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N1SC1SAFE
25.33
(59)
19.65
(50)
26.32
(58)
22.2
(51)
26.54
(53)
-1526
(75)
-2827
(52)
3.42 (7v1
Difference
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
International Equity All (SA +CF) Median
26.33
19.60
27.17
22.57
27.07
-11.54
-27.87
10.51
Total Fixed Composite
4.92
(78)
4.77
(3)
2.66
(86)
2.85
(94)
5.33
(68)
7.76
(71)
14.75
(5)
3.27 (1001
Fixed Total Poliev
5.14
(53)
3.67
(74)
2.56
(90)
3.35
(80)
6.51
(26)
9.20
(27)
13.18
(60)
6.72 (741
Difference
-0.22
1.10
0.10
-0.50
-1.18
-1.44
1.57
-3.45
US Broad Market Core Fixed Income (SA +CF) Median
5.16
3.85
3.09
3.78
5.79
8.56
13.31
7.00
Sawgrass Fixed
4.92
(78)
4.78
(3)
N/A
N/A
N/A
N/A
N/A
N/A
- Fixed Policv
5.14
(53)
N A
N A
N A
NrA
N .-\
N A
N -A
Difference
-0.22
N/A
N/A
N/A
N/A
N/A
N/A
N/A
US Broad Market Core Fixed Income SA +CF Median
5.16
3.85
3.09
3.78
5.79
8.56
13.31
7.00
Returns for periods greater than one year are annualized.
Returns are expressed as percentages.
T.i i
Total Fund Policy = 60% S &P 500,5% MSCI SAFE, & 35% LB Aggregate
��
`
B O G DA H N
`
GROUP
ge 12 of 27
Palm Beach Gardens General Employees'
Total Fund Composite (Net)
June 30, 2008
Fiiiaricial Reconciliation I Quarter
Market Value Capital Market Value
As of Transfers Contributions Distributions Fees Expenses Income As of
;/31/2008 Apprec./ Deprec.
6/30/2008
Total Fund Composite (Net) 2,726 25 -76 -4 -4 19 49 2.735
Financial Reconciliation t Date I
Market Value Net Capital Market %'nine
As of Transfers Contributions Distributions Fees Expenses Income ApprecJ Deprec. As of
9/30/2007 613012008
Total Fund Composite (Net) 3.098 1(1� _1,_ -18 -8 65 -226 2.735
Peer Group Analysis - Mixed -Asset Target Alloc Moderate Funds (MF) Cumulative Performance
10.0
e
0.0
u
a
10.0-
-20.0
1 Oct -2007
Quarter To
Jun -2008
■ Total Fund Composite (Net) 2.3 (1) -6.0 (33)
• Total Fund Polic% -2.0 (79) -82 (67)
1 2
Year Years
-1.9 (14) 6.3 (6)
-6.I (56) 4.0 (38)
3 4
Years Years
6.0 (16) 6.0 (26)
4.3 (52) 4.9 (52)
5
Years
7.0 (28)
6.1 (50)
$300.0
$250.0
$200.0
$150.0
$100.0
$50.0
9/94 6/97 3/00 12/02 9/05 6/08
Median -1.0 -7.0
-5.6
3.5 4.3
4.9 6.0
-Total Fund Composite (Net) -Total Fund Policy
Comparative Perr t t
1
I
1
1 1
I
Quarter
Quarter
Quarter
Quarter Quarter
Quarter
Ending
Ending
Ending
Ending Ending
Ending
Mar -2008
Dec -2007
Sep -2007
Jun -2007 Mar -2007
Dec -2006
Total Fund Composite (Net)
-7.02 (90)
-1.18 (62)
4.29 (1)
2.07 (87) 4.49 (1)
3.84 (83)
Total Fund Policy
-5.42 (51)
-1.03 (58)
2.36 (32)
3.91 (21) 1.13 (80)
4.49 (60)
Mixed -Asset Target Alloc Moderate Funds (MF) Median
-5.41
-0.86
1.87
3.07 1.71
4.72
T11F
BOGDAHN
GROUP
Palm Beach Gardens General Employees'
Total Fund Composite (Net)
June 30, 2008
3 Yr Rolling Under/Over Performance - 5 Years 3 Yr Rollin- Percentile Rankin(, - 5 Years
20.0 - 0.0
14.0
e
8.0
z
e
2.0
a
E
�j -4.0
V
e
0
-10.0
0
10.0
F
-4.0 2.0 8.0 14.0 20.0
Total Fund Policy (% )
-W Over Per(onnance f Under Performance *-- Sep -2003 -0- Jun -2008
Y
25.0
z
50.0
a
c
750
z
100.0
9/03 9/04
9/05 9/06
9/07
6/08
Total Period 5-25
25- Median
Median -75
75 -95
Count
Count
Count
Count
■ Total Fund Composite (Net) 20 1 (5 %)
5 (25 %)
9 (45 %)
5 (25 %)
• Total Fund Policy 20 0 (0 %)
11 (55 %)
9 (45 %)
0 (0 %)
Peer Group Scattergram - 3 Years Peer Group Scattergram - 5 Years
1 L.5
10.0
7.5
5.0
2.5
a 0.0
-2.5
3.0 4.5
6.0
7.5
9.0 10 5
1 2.0
3.0 4.5
6.0
7.5
9.0
Risk(Standard
M%iation'7)
Risk(Standard Deviation %)
Return
Standard Deviation
Return
Standard Deviation
■ Total Fund Composite (Net)
6.0
7.2
■ Total Fund Composite (Net)
7.0
6.5
® Total Fund Policy
4.3
6.3
• Total Fund Policy
6.1
5.8
-- Median
4.3
6.4
- Median
6.0
6.1
Historical
Trackin g
Up
Market
Down
Market
Alpha
IR
Sharpe
Beta
Downside
Error
Ratio
Risk
Capture
Capture
Total Fund Composite (Net)
3.49
116.25
100.76
1.73
0.50
0.27
1.00
4.80
Total Fund Policy
0.00
100.00
100.00
0.00
N/A
0.04
1.00
4.44
Historical
Tracking
lip
Market
Down
Market
Alpha
IR
Sharpe
P e
Beta
ownside
Risk
Error
Capture
Capture
Ratio
Total Fund Composite (Net)
2.86
108.01
101.01
0.92
0.31
0.60
0.99
4.10
Total Fund Policy
0.00
100.00
100.00
0.00
N/A
0.52
1,00
3.75
Ige 14 of 27
'I'l lf
BOGDAHN
GROUP
Palm Beach Gardens General Employees'
Total Domestic Equity
June 30, 2008
Financial Reconciliation
Market Value Net Capital Market Value
As of Transfers Contribution, Distributions Fees Expenses Income A%Deprec As of
pprec
3/31/2008 . 6/30/2008
Total Domestic Equity 1.773 -15 -3 9 68 1,832
Market Value Net Capital Market Value
As of Transfers Contributions Distributions Fees Expenses Income ApprecJJ Deprec. As of
9/30/2007 6/30/2008
Total Domestic Equity 2,006 55 -32 o I 20 -206 1.832
Peer Group Analysis - US Core/Large Cap Equity (SA+CF) lCumu
10.0
$400.0-
5369.2
0.0 352.8
e
5300.0
e
u -10.0
O<
-20.0 5200.0
-30.0
1 Oct -2007 1 2 ; q 5 $100.0
Quarter To Year Years Years Years Years
Jun -2008
■ Total Domestic Equity 4.3 (5) -9.7 (18) -5.2 (II) 7.0 (10) 7.7 (16) 7.4 (24) 9.8 (23)
0 S &P 500 -2.7 (83) -14.8 (76) -13.1 (69) 2.4 (66) 4.4 (75) 4.9 (83) 7.6 (83) $0.0
9194 6/97 3/00 12/02 9/05 6/08
Median -1.2 -13.3 -12.0 2.9 5.2 6.1 8.5 -Total Domestic Equity - S &P500
Comparative
1 1 I 1 1 1
Quarter Quarter Quarter Quarter Quarter Quarter
Ending Ending Ending Ending Ending Ending
Mar -2008 Dec -2007 Sep -2007 Jun -2007 Mar -2007 Dec -2006
Total Domestic Equity -11.10 (86) -2.66 (44) 5.04 (6) 2.95 (98) 6.42 (1) 5.45 (87)
S &P 500 -9.45 (47) -3.33 (66) 2.03 (46) 6.28 (49) 0.64 (73) 6.70 (49)
US Core/Large Cap Equity (SA+CF) Median -9.47 -2.87 1.96 6.27 1.18 6.69
�pAN BOGDAHN
l GROUP
Palm Beach Gardens General Employees'
Total Domestic Equity
June 30, 2008
3 N r 1611hig, t . wier/oN er Ilerforniance - 5 Years Yr Rolling Percentile Ranking - 5 Years
30.0 0.0 F- - - -
18.0
6.0
r
fv -6.0
E -18.0
0
0
-30.0
a -30.0
-18.0 -6.0 6.0 18.0 30.0
S &P 500 ( %)
-WI !nderPerformance -W Over Perfomtance -A- Sep -2003 Jun -2008
e 25.0
n
C
e 50.0
b
d
a
e
75.0
`e
v
a
100.0
9/03 9104 9/05
9/06
9/07
Gros
Total Period 5-25
25- Median
Median -75
7-1-95
Count
Count
Count
Count
■ Total Domestic Equity 20 2 (10 %)
5 (25 %)
6 (30 %)
7 (35 %)
* S &P 500 20 0 (0 %)
0 (0 %)
14 (70 %)
6 (30 %)
I IIE
BOGDAHN
GROUP
ge 16 of 27
Group
Peer Group
20 0
25.0
15.0
20.0
10.0
15.0
m
5.0
10.0
-
0.0
u
5.0
z
04
-5.0
2.5 5.0
17.5
0.0
0.0
5.0
10.0
15.0
200
75 10.0
12.5 15.0
Risk (Standard Deviation %)
Risk (Standard Deviation %)
Return Standard
Deviation
Return
Standard Deviation
■ Total Domestic Equity
7.7
9.5
■ Total Domestic Equity
9.8
9.6
A S &P 500
4.4
9.1
O S &P 500
7.6
9.4
- Median
5.2
9.2
- Median
8.5
9.5
Historical Statistics - 3
Years
Down
P
Downside
TrackingUp
Market
Market
Alpha
IR
Ratioe
Beta
Risk
I.ri
Capture
Capture
Total Domestic Equity
Ss?
111.94
65.41
3.98
0.55
0.41
0.84
6.66
S &P 500
0.00
100.00
100.00
0.00
N/A
0.07
1.00
6.05
Historical
Up
Down
Sharpe
Downside
I racking
Market
Market
Alpha
IR
Ratio
Beta
Risk
Error
Ca lure
Ca cure
Total Domestic Equity
4.64
106.76
70.29
2.91
0.44
0.71
0.1.0
5.29
S &P 500
0.00
100.00
100.00
0.00
N/A
0.50
100
4.96
I IIE
BOGDAHN
GROUP
ge 16 of 27
Palm Beach Gardens General Employees'
Rockwood Equity Portfolio
June 30, 2008
Market Value Market Value Capital As of Transfers Contributions Distributions Fees Expenses Income App ec./ Deprec. As of
3/31/2008 6/30/2008
Rockwood Equity Portfolio 1,773 -15 3 9 68 1,832
Market Value Market Value
nsfers Contributions Distributions Fees Expenses Income AppecJiDeprec. As of
As of Tr
9/30/2007 6/3012008
Rockwood Equity Portfolio 2.006 55 -32 -10 -1 10 -206 1.832
Peer Group Analysis - US Core/Large Cap Equity (SA+CF)
10.0
0.0
e
z -lo.o
W
-20.0
-30.0
1 Oct -2007
Quarter To
Jun -2008
■ Rockwood Equity Portfolio 4.3 (5) -9.7 (18)
S S &P 500 -2.7 (83) -14.8 (76)
1 2
Year Years
-5.2 (I1) 7.0 (10)
-13.1 (69) 2.4 (66)
3
Years
iia $130.0
5120.0
i 1 $110.0
4 5
Years Years
117.8
107.6
N/A N/A N/A
4.4 (75) 4.9 (83) 7.6 (83) $100.0 - 1 1 1 1 1
12/05 6/06 12/06 6/07 12/07 6/08
Median -1.2
-13.3 -12.0
2.9 5.2
6.1 8.5
-Rockwood Equity Portfolio
- S &P 500
Comparative Performance
I
1
1
1
1
1
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter
Ending
Ending
Ending
Ending
Ending
Ending
Mar -2008
Dec -2007
Sep -2007
Jan -2007
Mar -2007
Dec -2006
Rockwood Equity Portfolio
-11.10 (86)
-2.66 (44)
5.04 (6)
2.95
(98) 6.42
(1) 5.45 (87)
S &P 500
-9.45 (47)
-3.33 (66)
2.03 (46)
6.28
(49) 0.64
(73) 6.70 (49)
US Core /Large Cap Equity (SA+CF) Median
-9.47
-2.87
1.96
6.27
1.18
6.69
THE
BOGDAHN
` GHOI TP
Palm Beach Gardens General Employees'
Rockwood Equity Portfolio
June 30, 2008
3 N'r Rolling Percentile Rankin(, - 5 N ears
0.0
Peer Group
6 /08
Median -75
75-95
Count
Count
N/A
20.0
14 (70 %)
6 (30 %)
-
- - -
Alpha
Sharpe
IR
15.0
Error
Capture
Capture
100.00
Ratio
Risk
Rockwood Equity Portfolio N A N/A
10.0
N/A
N/A N/A
N/A NIA
S &P 500 n -00 100.00
100.00
0.00
N/A 0.07
1.00 7.39
5.0
c
0.0
s
5.0
2.5
5.0
7.5
10.0
12.5
15.0 17.5
Risk (Standard Deviation %)
Return Standard Deviation
■ Rockwood Equity Portfolio N/A N/A
• S &P 500 4.4 9.1
- Median 5.2 9.2
W
25.0
m
b
E 50.0
Y
Y
L
Y
o.
c 75.0
c
a
100.0
9/03 9/04 9/05 9/06
Total Period 5-25 25- Median
Count Count
■ Rockwood Equity Portfolio 20 N/A N/A
S &P 500 20 0 (0 %) 0 (0 %)
25.0
20.0
15.0
e
� (0.0
i 5.0
C
0.0
9/07
6 /08
Median -75
75-95
Count
Count
N/A
N/A
14 (70 %)
6 (30 %)
0.0 5.0 10.0 15.0 20.0
Risk (Standard Deviation %)
Return Standard Deviation
■ Rockwood Equity Portfolio N/A N/A
• S &P 500 7.6 9.4
- Median 8.5 9.5
Historical
Down
I rackin
Market
Up
Down
Sharpe Downside
IR Beta
Capture
Capture
Trac ki ng
Market
Market
Alpha
Sharpe
IR
Downside
Beta
Error
Capture
Capture
100.00
Ratio
Risk
Rockwood Equity Portfolio N A N/A
N/A
N/A
N/A N/A
N/A NIA
S &P 500 n -00 100.00
100.00
0.00
N/A 0.07
1.00 7.39
Up
Down
I rackin
Market
Market
Alpha
Sharpe Downside
IR Beta
Capture
Capture
Ratio Risk
Rockwood Equity Portfolio N N
N/A
N/A
N/A N/A N/A N
S &P 500 nn nu
100.00
0.00
N/A 0.50 1.00 6 2'_
:e 18 of 27
Tl if
BOGDAHN
GROUP
Palm Beach Gardens General Employees'
Rockwood International
June 30, 2008
Financial Reconciliation
Market Value Capital Market Value
As of Transfers Contributions Distributions Fees Expenses Income ApprecJ Deprec. As of
3/31/2008 6/30/2008
Rockwood International 136 1 -1 137
Market Value Market Value Net As of Transfers Contributions Distributions Fees Expenses Income ApprecPrDeprec. As of
9/30/2007 6/30/2008
Rockwood International 135 13 5 -16 137
Peer Group Analysis -International Equity All (SA+CF)
45.0
30.0
15.0
� 0.0
ac
15.0
-30.0
I Oct -2007
Quarter To
Jun -2008
■ Rockwood International 0.5 (22) -8.3 (25)
0 MSCI EAFE -1.9 (59) -12.1 (57)
1 2 3 4 5
Year Years Years Years Years
-1.0 (14) N/A N/A N/A N/A
-10.1 (57) 7.0 (58) 13.3 (61) 13.5 (63) 17.2 (62)
Median -1.4 -11.3 -9.1 7.8 14.4 14.5 17.8
$120.0
$115.0
5110.0
S105.0
5100.0
$95.0
111.9
99.8
12/06 6/07 12/07 6/08
Rockwood International - MSCI EAFE
1
1
1
1
1
1
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter
Ending
Ending
Ending
Ending
Ending
Ending
Mar -2008
Dec -2007
Sep -2007
Jun -2007
Mar -2007
Dec -2006
Rockwood International -638 (18)
-257 (66)
7.% (8)
8.58 (26)
4.18 (41)
N/A
MSCI EAFE -8.82 (56)
-1.71 (54)
2.23 (49)
6.67 (62)
4.15 (42)
10.40 (64)
International Equity All (SA+CF) Median -8.55
-1.51
2.15
7.13
3.86
10.94
7 BOGDAHN
C:R(1T TTY
Palm Beach Gardens General Employees'
Rockwood International
June 30, 2008
3 Yr Rolling Under /Over Performance - 5 Years 3 1'r Rolling; Percentile Ranking - 5 N ears
t
Peer
Group
Scattergram - 3 Years
■ Rockwood International
N/A
N/A
t0
• MSCI EAFE
13.3
tt
z
10.0
0.0
-10.0
0.0
4.5 20 13.5 18.0 22.5
Risk (Standard Deviation %)
Return Standard Deviation
25.0
z
d
e 50.0
v
v
a
75.0
m
100.0
9/03 9/04 9/05 9/06 9/07 6/08
Total Period 5-25 25- Median Median -75 75-95
Count Count Count Count
■ Rockwood Intemational 20 N/A N/A N/A N/A
• MSCIFAFF 10 0 (0 %) 0 (0 %) 20 (100 %) 0 (0 %)
Peer Group Scattergram - 5 Fears
400
32.0
16.0-
.
tt
.
0.0 4.5 90 13.5 18.0 22.5
Risk (Standard Deviation %)
Return Standard Deviation
■ Rockwood International
N/A
N/A
■ Rockwood International
N/A
N/A
• MSCI EAFE
13.3
10.9
• MSCI EAFE
17.2
12,3
- Median
14.4
11.8
- Median
ZR
12.5
Historical
Tracking
Up
Market
Down
Market
Alpha
IR
Sharpe
Beta
Downside
Error
Capture
Capture
Ratio
Risk
Rockwood International \ .4
N/A
N/A
N/A
N/A
N'A
N/A
N/A
MSCI EAFE 0.00
100.00
100.00
0.00
N'A
0.76
1.00
8.07
Historical
Tracking
Error
Up
Market
Down
Market
Alpha
IR
Sharpe
Beta
Downside
Capture
Capture
Ratio
Risk
Rockwood International N/A
N/A
N/A
N/A
N/A
N/A
MSCI EAFE 0.00
100.00
100.00
0.00
N/A
1.18
100
I'm
BOGDAHN
,e 20 of 27 GROUP
Palm Beach Gardens General Employees'
Total Fixed Composite
June 30, 2008
Financial Reconciliation I Quarter
Market Value Net Capital Market Value
As of Transfers Contributions Distributions Fees Expenses Income ApprecJ Deprec. As of
3/31/2008 6/30/2008
Total Fixed Composite 786 -10 1 9 -19 766
Financial Reconciliation Fiscal Vear Tt Date
Market Value Net Capital Market Value
As of Transfers Contributions Distributions Fees Expenses Income Apprec./ Deprec. As of
9/30/2007 6/30/2008
Total Fixed Composite 934 -181 -21 -2 41 3 766
15.0 - - - - -- -
10.0
® azoo.o
e
s -o
L
r
a"
0.0
$150.0
-5.0 '
1 Oct -2007 1 2 3 4 5
Quarter To Year Years Years Years Years
Jun-2008
■ Total Fixed Composite -1.2 (70) 3.9 (52) 6.7 (53) 6.2 (61) 4.2 (32) 4.8 (46) 3.7 (69)
• Fixed Total Policy -1.0 (59) 4.2 (44) 7.1 (44) 6.6 (45) 4.0 (59) 4.8 (48) 3.7 (71) 5100.0
9/94 6/97 3/00 12/02 9/05 6/08
8.3
Median -0.9 3.9
6.8
6.5 4.1
4.8 3.9
-Total Fixed Composite
-Fixed Total Policy
Comparative 1
1
1
1
1
1
1
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter
Ending
Ending
Ending
Ending
Ending
Ending
Mar -2008
Dec -2007
Sep -2007
Jun -2007
Mar -2007
Dec-2006
Total Fixed Composite
234 (34)
2.69 (60)
2.69 (62)
-0.03 (5)
129 (96)
0.90 (97)
Fixed Total Policv
2.17 (44)
3.00 (38)
2.84 (50)
-0.52 (53)
1.50 (71)
1.24 (53)
US Broad Market Core Fixed Income (SA+CF) Median
1.98
2.89
2.84
-0.51
1.55
1.25
JTHE BOGDAHN
(-Dnl TP
Palm Beach Gardens General Employees'
Total Fixed Composite
June 30, 2008
3 Yr Rolling Under/Over Performance - 5 Years 3 Y r Rol ling Percentile Ranking - 5 Years
15.0
Over 0.0 - - -
P erform mcc
11.0 a 25.0
7.0
o
E 3.0
0
U
r
i=
-5.0
F -5.0 -1.0 ; 0 7.0 11.0
Fixed Total Policy(% )
-- Under Performance -W Ocer Perforn�nce -&- Sep -2003 Jun -2008
Under
Performance
tY
v
50.0
o.
e 75.0
`e
a
100.0
- 9i0 9/04
9/05 9/06
9/07
6/08
15.0
4.0
5.0
Fatal Period 5-25
25- Median
Median -75
75-95
Count
Count
Count
Count
■ Total Fixed Composite 20 0 (0 %)
7 (35 %)
7 (35 %)
6 (30 %)
• Fixed Total Policy 20 0 (0 %)
9 (45 %)
6 (30 %)
5 (25 %)
Peer Group Scattergram - 3 Years Peer Group Scattergram - 5 Years
t
it
/.J
6.0
4.5
e 3.0
e
r 1.5
a
0.0
1.0 2.0
3.0
40 5.0
6.0
2.0 3.0
4.0
5.0
6.0
Risk (Standard Deli ation
'U)
Risk (Standard Deviation %)
Return
Standard Deviation
Return
Standard Deviation
■ Total Fixed Composite
4?
2.9
■ Total Fixed Composite
3.7
3.2
• Fixed Total Policy
40
3.2
0 Fixed Total Policy
3.7
3.8
- Median
Historical
4 1
3.1
- Median
3.9
3.3
Tracking
Up
Down
Error
Market
Market
Alpha
IR
Sharpe
Beta
Downside
Capture
Capture
Ratio
Risk
Total Fixed Composite 0.80
93.74
73.15
0.71
0.31
0.04
0.88
Fixed Total Policy 0.00
100.00
100.00
0.00
N/A
-0.06
1.00
1.26
1.45
,Historical
Tracking
Up
Down
Error
Market
Market
Alpha
IR
Sharpe
Beta
Downside
Capture
Capture
Ratio
Risk
Total Fixed Composite 0.85
89.49
78.28
0.53
0.04
0.20
0.86
2.38
Fixed Total Policy 0.00
100.00
100.00
0.00
NIA
0.17
1.00
2.73
e 22 of 27
THE
BOGDAHN
GROUP
Palm Beach Gardens General Employees'
Sawgrass Fixed
June 30, 2008
Financial Reconciliation
Market Value Capital Market Value
As of Net Contributions Distributions Fees Expenses Income A ecJ De . As of
3/31/2008 Transfers pp r rec
p 6/30/2008
Sawgrass Fixed 786 -10 I -19 766
Reconciliation Financial
Market Value Capital Market Value
Net
As of Tr nsfers Contributions Distributions Fees Expenses Income Apprec./ Deprec. As of
9/30/2007 6/30/2008
Sawgrass Fixed 934 -181 _I -2 41 3 766
Peer Group Analysis - US Broad Market Core Fixed Income (SA +CF) Cumulative Performance
15.0
10.0
5.0
E
d
a
o.o -
-5.0
1 Oct -2007
Quarter To
Jun -2008
■ Sawgrass Fixed -1.2 (70) 3.9 (52)
Sawgrass Fixed Policy -1.0 (59) 4.2 (44)
2=��
1 2 3 4
Year Years Years Years
6.7 (53) 6.2 (61) N/A N/A
7.1 (44) 6.6 (45) N/A N/A
$110.0
$105.0
$100.0
5
Years
N/A
N/A $95.0
114:?
12/05 6/06 12/06 6/07 12107 6/08
Median -0.9 3.9
6.8
6.5 4.1
4.8 3.9
- Sawgrass Fixed
- Sawgrass Fixed Policy
Comparative t n
1
1
1
1
1
1
Quarter
Quarter
Quarter
Quarter
Quarter
Quarter
Ending
Ending
Ending
Ending
Ending
Ending
Mar -2008
Dec -2007
Sep -2007
Jun -2007
Mar -2007
Dec -2006
Sawgrass Fixed
234 (34)
2.69 (60)
2.69 (62)
-0.03 (5)
1.29 (96)
0.90 (97)
Sawgrass Fixed Policy
2.17 (44)
3.00 (38)
2.84 (50)
-0.52 (53)
1.50 (71)
1.24 (53)
US Broad Market Core Fixed Income (SA+CF) Median
1.98
2.89
2.84
-0.51
1.55
1.25
�r%� THE
BOGDAHN
CDl1T m
Palm Beach Gardens General Employees'
Sawgrass Fixed
June 30, 2008
3 N r Rollin; Under/Over Performance - 5 Years 3 Yr Rolling Percentile Ranking - 5 Years
t
Peer Group Scattergram - 3 Years
6.0
t
1.0 2.0 3.0 4.0
R isk(Sta nda rd Desi ation %)
Return Standard Deviation
■ Sawgrass Fixed N,A
O Sawgrass Fixed Policy \ A NiA
- Median 4.1 3.1
5.0 6.0
25.0
m
Y
50.0
Y
a
E 75.0
d
tY
100.0
9/03 9/04 9/05 9/06 9/07 6/08
Total Period 5-25 25- Median Median -75 75-95
Count Count Count Count
■ Sawgrass Fixed 20 N/A N/A N/A N/A
0 Sawgrass Fixed Policy 20 N/A N/A N/A N/A
Peer Group
Scattergram - 5 Years
.t
Tracking
Error
Up
Market
Down
Market
Alpha
I
Sharpe
Beta
e
3.0
l.s
a
0.0
2.0 3.0
■ Sawgrass Fixed
O Sawgrass Fixed Policy
— Median
LO
5.0 6.0
Risk (Standard Deviation % )
Return Standard Deviation
\ :\ N,A
A N/A
1") 3.3
Historical
Tracking
Error
Up
Market
Down
Market
Alpha
I
Sharpe
Beta
Downside
Capture
Capture
Ratio
Risk
Sawgrass Fixed
N/A
N/A
N/A
NiA
N/A
N/A
N A
N/A
Sawgrass Fixed Policy
N/A
N/A
NiA
N/A
N/A
N/A
N,A
N/A
Historical
Tracking
Error
Up
Market
Down
Market
Alpha
IR
Sharpe
Beta
Dovv nsidc
Capture
Capture
Ratio
Rick
Sawgrass Fixed
N/A
N/A
N/A
NSA
N,A
N/A
N/A
\ A
Sawgrass Fixed Policy
N A
N/A
N/A
N,A
N.A
N/A
NIA
N A
ae 24 of 27
�P%N BOGDAHN
l GROUP
Palm Beach Gardens General Employees'
Benchmark History
As of June 30, 2008
Historical Hybrid Composition Total Fund Policy
Passive Portfolios Weight
Effective Date: Oct -1994
S &P 500 Index 60.0
LBGC Bond Index 40.0
Effective Date: Jan -2006
LB Aggregate Index 40.0
S &P 500 Index 60.0
S &P 500 Index 60.0
LB Aggregate Index 35.0
MSCI EAFE 5.0
Historical Hybrid Composition Total Equity Polic
Effective Date: Oct -1994
S &P 500 Index 100.0
Effective Date: Jan -2007
S &P 500 Index 95.0
MSCI EAFE 5.0
TFIF
BOGDAHN
%'Tlli T"
26 of 27
Statistics
Return
Standard Deviation
Sharpe Ratio
Statistics Definitions
Description
-- Compounded rate of return for the period.
— A statistical measure of the range of a portfolio's performance, the variability of a return around its average return over a
specified time period.
-- Represents the excess rate of return over the risk free return divided by the standard deviation of the excess return. The result is
the absolute rate of return per unit of risk. The higher the value, the better the product's historical risk - adjusted performance.
-- A measure of the difference between a portfolio's actual returns and its expected performance, given its level of risk as measured
by beta. It is a measure of the portfolio's historical performance not explained by movements of the market, or a portfolio's
non - systematic return.
— A measure of the sensitivity of a portfolio to the movements in the market. It is a measure of a portfolio's non- diversifiable or
systematic risk.
x- squared
— The percentage of a portfolio's performance explained by the behavior of the appropriate benchmark. High R- Square means a
higher correlation of the portfolio's performance to the appropriate benchmark.
Treynor Ratio
-- Similar to Sharpe ratio, but focuses on beta rather than excess risk (standard deviation). Represents the excess rate of return over
the risk free rate divided by the beta. The result is the absolute rate of return per unit of risk. The higher the value, the better the
product's historical risk- adjusted performance.
Downside Risk
-- A measure similar to standard deviation, but focuses only on the negative movements of the return series. It is calculated by
taking the standard deviation of the negative quarterly set of returns. The higher
the factor, the riskier the product.
Tracking Error
— A measure of the standard deviation of a portfolio's performance relative to the performance of an appropriate market
benchmark.
Information Ratio
— Measured by dividing the active rate of return by the tracking error. The higher the Information Ratio, the more value -added
contribution by the manager.
Consistency
-- The percentage of quarters that a product achieved a rate of return higher than that of its benchmark. The higher the consistency
figure, the more value a manager has contributed to the product's performance.
Excess Return
— Arithmetic difference between the managers return and the risk -free return over a specified time period.
Active Return
— Arithmetic difference between the managers return and the benchmark return over a specified time period.
Excess Risk
— A measure of the standard deviation of a portfolio's performance relative to the risk free return.
Up Market Capture
— The ratio of average portfolio return over the benchmark during periods of positive benchmark return. Higher values indicate
better product performance.
Down Market Capture
— The ratio of average portfolio return over the benchmark during periods of negative benchmark return. Lower values indicate
better product performance.
Calculation based on monthly periodicity.
_ ` —• • - 1111
BOGDAHN
GROUP
Ti iE
Rnr,ne u�T
GROUP
simplifying your investment and tiduciaty decisions
340 West Central Ave Suite 300
Winter Haven, Florida 33880
Phone: 863.293.8289 • Fax: 863.292.8717
Law Offices
Christiansen & Dehner, P.A.
63 Sarasota Center Blvd. Suite 107 Sarasota, Florida 34240 • 941 - 377.2200 • Fax 941 - 377.4848
MEMORANDUM
TO: Boards of Trustees, all Retirement Plans, All Plan Actuaries
FROM: Christiansen & Dehner, P.A.
RE: Compliance with Section 415, Internal Revenue Code incorporating the
requirements of the Pension Protection Act of 2006
DATE: August 1, 2008
With the adoption of the Pension Protection Act of 2006, changes were made to Section 415
of the Internal Revenue Code to amend and clarify the requirements for compliance with this section.
As tax qualified, governmental pension plans, all of our clients' plans are required to comply with
and update the plan to reflect changes to this section. We are in the process of finalizing the
language that will need to be used to amend each plan to accomplish this compliance.
Benefits paid from the plan are subject to certain limitations found in Section 415 and all
benefits must be tested under the applicable rules. The attached "Florida 415(b), (c), and (n)
Compliance Strategy Report", contains the necessary rules for testing all benefits for compliance.
We are providing a copy of this report to your plan's actuary and we recommend that they be
directed to test all plan benefits pursuant to the guidance in this report.
FLORIDA
415(b), (c), AND (n) COMPLIANCE
STRATEGY REPORT
Christiansen & Dehner, P.A.
63 Sarasota Center Boulevard
Suite 107
Sarasota, FL 34240
941 - 377 -2200
I.
II
III
F
TABLE OF CONTENTS
Page
INTRODUCTION................................................................................. ..............................1
IMPORTANCE OF CODE SECTION 415 COMPLIANCE ............... ..............................1
A.
Qualified Governmental Plan ................................................... ............................... l
B.
Code Section 415 Limits .......................................................... ............................... l
C.
Final Regulations ....................................................................... ..............................1
OVERVIEW AND APPLICATION OF LAW WITH RESPECT TO DEFINED
BENEFIT LIMITATIONS ................................................................... ............................... 2
A.
Basic Benefit Limits ................................................................. ............................... 2
1. Current Limits - Plan Document Requirement .............. ..............................2
2. Application to Florida Plans ......................................... ............................... 2
B.
Limitation Year .......................................................................... ..............................2
1. General Rule ................................................................. ............................... 2
2. Application to Florida Plans ......................................... ............................... 2
C.
TAMRA Election ...................................................................... ..............................3
1. Description of Election .................................................. ..............................3
2. Application to Florida Plans ......................................... ............................... 3
D.
Optional Forms of Benefits — Benefits Other Than a Straight Life Annuity ..........3
1. 417(e)(3) Benefits and Non- 417(e)(3) Benefits ............ ..............................3
2. QJSA Benefits ............................................................... ..............................4
3. Application of Definition of the Annual Benefit for 415(b)
Testing to Florida Plans ................................................. ..............................5
E.
Testing with a DROP Benefit Involved — Application to Florida Plans ................. 5
F.
Cost-of-Living Adjustment of Code Section 4I5(b) Limits ..... ............................... 5
1. Basic Rule ...................................................................... ..............................5
2. Application to Florida Plans ......................................... ............................... 6
G.
Amounts Excluded from Testing ............................................... ..............................6
1. Ancillary Benefits .......................................................... ..............................6
-i -
2.
Application to Florida Plans ......................................... ............................... 7
3.
Pre - Retirement Death Benefits ...................................... ..............................7
4.
Application to Florida Plans ......................................... ...............................
7
5.
Allocation of Benefits to After -Tax Employee
Contributions................................................................ ...............................
7
6.
Application to Florida Plans ......................................... ...............................
9
7.
Picked -Up Contributions .............................................. .............................10
8.
Application to Florida Plans ......................................... .............................10
H. Rollovers /Transfers .................................................................. .............................10
1. Amounts Attributable to Rollovers ............................... .............................10
2. Amounts Attributable to Transfers between Qualified Plans ....................10
3. Plan -to -Plan Transfers from a 457(b) or 403(b) Plan . ............................... 11
4. Application to Florida Plans ......................................... .............................11
I. Restoration of Contributions .................................................... .............................11
1. Restoration .................................................................... .............................11
2. Application to Florida Plans ......................................... .............................12
J. Age -based Adjustments to Limits ............................................ .............................12
1. Benefits Before Age 62 .............................................. ............................... 12
2. Benefits Commencing After Age 65 ............................ .............................13
3. Application to Florida Plans ......................................... .............................13
K. Additional Special Rules .......................................................... .............................14
1. Small Benefits ............................................................... .............................14
2. Less than 10 Years of Participation .............................. .............................14
3. Application to Florida Plans ......................................... .............................14
L. Consideration of an Alternate Payee's Benefits For Testing Purposes For
FloridaPlans ............................................................................. .............................14
M. Testing of the Survivor Portion of a Benefit ............................ .............................14
1. Survivor Rules .............................................................. .............................14
2. Application to Florida Plans ......................................... .............................15
N. Aggregation of Total Benefits for Testing Purposes ................ .............................15
IV. OVERVIEW AND APPLICATION OF LAW WITH RESPECT TO DEFINED
CONTRIBUTION LIMITS .................................................................. .............................15
A. The Dollar Limit on "Annual Additions" ................................. .............................16
-ii -
I. Current Limits ............................................................... .............................16
2. The Limitation Year ..................................................... .............................16
3. Code Section 415(k)(3): Repayment of Cash - Outs ..... .............................17
4. Testing of USERRA Service Purchases ....................... .............................17
5. Application to Florida Plans ......................................... .............................17
6. Code Section 414(v) .......................................... ............................... . .....17
7. Application to Florida Plans ......................................... .............................18
B. Definition of Compensation ..................................................... .............................18
1. General Rule ................................................................. .............................18
2. Safe Harbor Definitions ................................................ .............................19
3. Application to Florida Plans ......................................... .............................19
4. Treatment of Workers Compensation ........................... .............................19
C. Plan Aggregation ...................................................................... .............................21
1. General Rule ............................................................... ............................... 21
2. Application to Florida Plans ....................................... ............................... 21
V. OVERVIEW AND APPLICATION OF LAW WITH RESPECT TO SERVICE
PURCHASES....................................................................................... .............................21
A. Employee After -Tax Contributions for Permissive Service Credit .......................21
1. Modified 415(b) Limit .................................................. .............................21
2. Modified 415(c) Limit .................................................. .............................21
3. Definition of Permissive Service Credit ....................... .............................22
4. Nonqualified and Qualified Permissive Service ........... .............................22
5. Effective Dates ............................................................. .............................23
6. Application to Florida Plans ....................................... ............................... 24
-iii -
I.
INTRODUCTION
Ice Miller LLP ( "Ice Miller ") has been retained by Christiansen & Dehner to provide
general information with regard to the limitations of the Internal Revenue Code of 1986, as
amended ( "Code ") generally applicable to local Florida qualified retirement plans under Code
Section 401(a).
This report pertains solely to Code Section 415(b) and 415(c), and to Code Section
415(n) as it relates to 415(b) and 415(c). It is "generic" in that it does not address the provisions
of any specific city's plan, but rather covers how certain types of benefits should be treated in
applying the 415 limits.
We hope that this report will be particularly helpful to the actuaries for the cities' plans.
II.
IMPORTANCE OF CODE SECTION 415 COMPLIANCE
A. QUALIFIED GOVERNMENTAL PLAN
Retaining "qualified plan" status under Code Section 401(a) is an important requirement
for retirement plans. The primary advantages in retaining "qualified" status are that (i) employer
contributions are not taxable to members as they are made (even when vested) and taxation only
occurs when plan distributions are made, (ii) earnings and income are not taxed to the trust or the
members; (iii) certain favorable tax treatments are available to members when they receive plan
distributions, e.g., ability to rollover amounts; (iv) employers may "pick up" employee
contributions; and (v) employer contributions to, and benefits from, the plan are never subject to
employment taxes (i.e., FICA taxes). These advantages would generally not apply to a non -
qualified plan.
B. CODE SECTION 415 LIMITS
One key qualification requirement applicable to qualified plans is the Code Section 415
limits. Code Section 415 benefit and contribution limits must be followed to protect the tax
qualified status of a retirement plan under Code Section 401(a). These limits must be met by all
plan members. If even one member is paid an annual benefit greater than Code Section 415
allows, or contributes more than Code Section 415 allows, theoretically, the entire plan will be
disqualified. However, the EPCRS program found in Revenue Procedure 2006 -27 provides
mechanisms for correction to avoid this result.
C. FINAL REGULATIONS
Final Regulations under Code Section 415 were issued by the IRS April 5, 2007. The
Final Regulations are effective for governmental plans for all limitation years that begin more
than 90 days after the close of the first regular legislative session of the legislative body with
authority to amend the plan that begins on or after July 1, 2007. In any event, a governmental
plan may apply the provisions of the Final Regulations as early as the limitation year beginning
on or after July 1, 2007.
III.
OVERVIEW AND APPLICATION OF LAW WITH RESPECT TO
DEFINED BENEFIT LIMITATIONS
This Section of our Compliance Strategy Report provides an overview of the federal law
with regard to Code Section 415(b), and a discussion of how this section will apply to Florida
City plans.
A. BASIC BENEFIT LIMITS
1. Current Limits - Plan Document Requirement
As amended by the Economic Growth and Tax Relief Reconciliation Act of 2001
( "EGTRRA "), the basic requirement of Code Section 415(b) is that the annual benefit in the form
of a single life annuity provided to a member who is between the ages of 62 and 65 may not
exceed the lesser of. (1) $160,000 as adjusted for inflation in $5,000 increments (the "Dollar
Limit "), or (2) 100% of average compensation (the "Salary Limit "). Code Section 415(b)(1).
The Salary Limit does not apply to governmental plans. Therefore, the following discussion and
our methodology do not include the Salary Limit.
2. Application to Florida Plans
Each Florida plan must make sure the plan document itself has adequate language
regarding 415. The Final Regulations allow incorporation by reference of the mandatory
provisions of Code Section 415 and the regulations. However, optional provisions must be
specifically adopted, and where the Code and regulations provide a choice as to
implementation options, the plan must specifically specify the options or the default will
apply.
B. LIMITATION YEAR
1. General Rule
The annual benefit is tested in a "limitation year." Unless an election is made by the
employer, the limitation year is the calendar year. Treas. Reg. § 1.4150) -l. An employer that
maintains more than one qualified plan may elect to use different limitation years for each such
plan. Treas. Reg. § 1.4150) -1(c).
2. Application to Florida Plans
Each plan will need to be sure the city, the plan, and the plan's actuary are clear on
what- -the plan'-s-iimitatro-ff-year -is. - Thelimit'atiw year will —be the calenlc ar year unless
provided otherwise in the "plan document." Treas. Reg. § 1.4150) -1. In other words, the
limitation year is the calendar year unless Christiansen & Dehner, P.A. advise you to the
contrary.
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C. TAMRA ELECTION
1. Description of Election
Section 415(b)(10) of the Code was added by the Technical and Miscellaneous Revenue
Act of 1988 (sometimes called TAMRA) to offer state and local government plans a means of
complying with the Section 415 limits without violating state anti - cutback laws. Under this
Section, the defined benefit limit for an employee who became a participant in the plan before
January 1, 1990, would not be less than his or her accrued benefit determined without regard to
any plan amendment adopted after October 14, 1987. However, for a state or local government
to take advantage of Section 415(b)(10), each employer maintaining the plan was required to
elect, before the close of the plan year beginning in 1990, to apply the defined benefit limits
applicable to private plans to employees who first became participants after 1990. However,
there were also special provisions for state -wide statutory changes. For plans that made a
TAMRA election, the qualified participants would still have their TAMRA protection.
Revocation of a TAMRA election is permitted pursuant to Code Section 415(b)(10)(C)(ii),
effective for all plan years to which the election applied and to all subsequent plan years,
provided the revocation is accomplished by the last day of the third plan year beginning after
August 20, 1996.
2. Application to Florida Plans
The TAMRA election was not made. That must be communicated to the actuary.
D. OPTIONAL FORMS OF BENEFITS — BENEFITS OTHER THAN A STRAIGHT LIFE ANNUITY
Benefits in a form other than a straight life annuity must be actuarially adjusted to a
straight life annuity beginning at the same age in accordance with the otherwise applicable rules.
For example, annuity benefit forms including a post- retirement death benefit or an annuity
providing for a guaranteed number of payments must be adjusted for purposes of applying the
Code Section 415(b) limit. See Treas. Reg. § 1.415(b) -1(c).
1. 417(e)(3) Benefits and Non- 417(e)(3) Benefits
Code Section 415(b)(2)(E)(i) provides that "for purposes of adjusting any limit under
subparagraph (C) [adjustment to dollar limit before age 62] and ... for purposes of adjusting any
benefit under subparagraph (B) [adjustment for other forms of benefits], the interest rate
assumption shall not be less than the greater of 5% or the rate specified in the plan." With
respect to adjusting a different form of benefit (under Code Section 415(b)(2)(B)), different
interest rate assumptions are used in the case of a form of benefit subject to Code Section
417�e�_3). Code Section 415(b)(2)�E)(ii). However, prior to the Final Regulations, because a
governmental plan is not subject to Code Section 417(e)(3), these different interest rate
assumptions were not considered to be applicable to governmental plans. Rev. Rul. 98 -1,
Q &A -3, concluded that plans that are not subject to Code Section 417(e)(3), such as
governmental plans, were not subject to the interest rate requirement under Section
415(b)(2)(E)(ii).
However, with the Final Regulations this position has been changed for governmental
plans on and after the effective date. The Explanation of Provisions to the Final Regulations
states that because Code Section 415(b)(2)(E) applies based on the form of the benefit rather
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than the status of the plan, the rules set forth in Treasury Regulations § 1.415(b)- 1(b)(c) that
dictate the manner of adjusting forms of benefit to which 415(e)(3) does or does not apply must
be used regardless of whether Code Section 417(e)(3) otherwise applies to the plan. Thus, a
governmental plan must follow these rules, presumably as if 417(e)(3) applied.
Code Section 417(e)(3) generally applies to full and partial lump sum distributions and
period certain annuities. In a governmental plan, this may include DROP distributions and level
income options which do not qualify as Social Security options. Treasury Regulation § 1.415(b)-
1(c)(2) provides that if 417(e)(3) does apply to the form of benefit, then the actuarially
equivalent straight life benefit is the greatest of.
• The annual amount of a straight life annuity beginning on the same date as the
form of benefit actually being paid and which has the same actuarial present value
as the benefit being paid, computed using the interest rate and mortality table (or
tabular factor) specified by the plan;
• The annual amount of a straight life annuity beginning on the same date as the
form of benefit actually being paid and which has the same actuarial present value
as the benefit being paid, computed using a 5.5% interest rate and the appropriate
mortality table from Treasury Regulation § 1.417(e)- 1(d)(2) for that starting date;
or
• The annual amount of a straight life annuity beginning on the same date as the
form of benefit actually being paid and which has the same actuarial present value
as the benefit being paid, computed using the interest rate specified in Treasury
Regulation § 1.417(e)- 1(d)(3) and the appropriate mortality table from Treasury
Regulation § 1.417(e)- 1(d)(2), divided by 1.05.
Code Section 417(e)(3) does not apply to straight -life annuities or qualified joint and
survivor annuities. If 417(e)(3) does not apply to the form of benefit, then the actuarially
equivalent straight life benefit is the greater of:
• The annual amount of the straight life annuity payable under the plan, if any,
starting on the same date as the form of benefit actually being paid; or
• The annual amount of a straight life annuity beginning on the same date as the
form of benefit actually being paid and which has the same actuarial present value
as the benefit being paid, computed using a 5% interest rate and the appropriate
mortality table from Treasury Regulation § 1.417(e)- 1(d)(2) for that starting date.
2. QJSA Benefits
No adjustment is required for the actuarial value of a qualified joint and survivor annuity
( "QJSA ") (a 50% -1.00% joint and survivor annuity with the spouse as designated beneficiary)
that is fully or partially subsidized. See Treas. Reg. § 1.415(b)- 1(c)(4).
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3. Application of Definition of the Annual Benefit for 415(b) Testing to Florida
Plans
Under Code Section 415(b), the benefit that is subject to testing is the benefit
payable annually in the form of a straight life annuity with no ancillary benefits to which
employees do not contribute and no rollover contributions are made ( "SLA "). Code
Section 415(b)(2)(A).
The benefit that will be tested is the SLA plus the value of any DROP benefit (if
applicable) converted to a straight life basis. The DROP must be converted under the Code
Section 417(e)(3) rules.
For purposes of calculating the SLA, the value of any subsidy provided as part of a
qualified joint and survivor annuity is included only when the beneficiary is other than a
qualified spouse.
E. TESTING WITH A DROP BENEFIT INVOLVED - APPLICATION TO FLORIDA PLANS
For a participant who receives a DROP benefit in a form to which 417(e)(3) applies, the
actuary must convert the DROP benefit to an annual benefit and reduce the 415(b) limit by that
value using the 417(e)(3) factors. The annuity that will be paid will be tested against that
reduced 415(b) limit. A DROP lump sum is not simply tested in the year distributed. A DROP
accrual may also not be tested as an annual addition under 415(c).
A DROP ACCRUAL SHOULD NOT BE TESTED AS AN ANNUAL ADDITION
UNDER 415(c).
F. COST -OF- LIVING ADJUSTMENT OF CODE SECTION 415(b) LIMITS
1. Basic Rule
Automatic benefit increases (, cost of living adjustments) to a member's benefits are
permitted under Code Section 415(d). However, unless the cost of living adjustment meets the
requirements of Treasury Regulation § 1.415(b)- 1(c)(5), the value of the future cost of living
adjustments must be included in converting the value of the total benefit to a straight life annuity.
That is, the value of all future cost of living increases must be annuitized over the recipient's life
expectancy for 415(b) purposes. This method is more likely to result in violations of the limit
than the method provided for COLAs which meet the requirements of Treasury Regulation
§ 1.415(b)- 1(c)(5). That method essentially permits annual testing of the benefit, as increased by
the COLA that year, against the 415(b) limit, as increased by 415(d) for that year.
- - Cost of living adju�men�s to which no adjustment is requiredor purposes of 4TSb)
testing are described as automatic, periodic adjustments applied in the following situations (these
meet § 1.415(b)- 1(c)(5)):
• The benefit is paid in a form to which 417(e)(3) does not apply (e.g., an annuity
form of benefit);
• The benefit satisfies 415(b) without regard to the COLA; and
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The plan provides that the benefit payable in any year will not exceed the 415(b)
limit applicable at the annuity starting date, as increased annually pursuant to
Code Section 415(d).
If the cost of living (or other post - retirement adjustment) is not automatic but rather is ad hoc,
then the above is not available and benefits must be re- tested annually. Under the Final
Regulations, automatic, periodic increases include annual increases according to a "specified
percentage or objective index" or automatic increases to "share favorable investment returns on
plan assets." Treas. Reg. § 1.415(b)- 1(c)(5)(ii).
2. Application to Florida Plans
Many Florida plans provide automatic fixed COLAs. Some have no COLAs and a
few have ad hoc post- retirement increases only. All these benefits must be treated as part
of the annual benefit for testing. This means the following:
■ A fixed automatic COLA may be tested under the simplified rule if it
simply increases the monthly benefit, the monthly benefit satisfies 415(b)
without regard to the COLA and the Plan provides that the benefit with
the COLA will be tested each year against the 415(b) limit for that year.
In other words, the simplified rule only applies to an annuity benefit. It
does not apply to a benefit that has a lump sum benefit component e2. ,
DROP).
■ A fixed automatic COLA that cannot be tested under the simplified rule
above must be tested by considering the value of the future cost of living
adjustments in converting the benefit to a straight life annuity. This will
generally result in significantly more 415 failures.
■ Ad hoc COLA increases must be tested each year on and after the benefit
commences based on a conversion of the COLA to a single life annuity.
G. AMOUNTS EXCLUDED FROM TESTING
For purposes of Code Section 415(b), the annual benefit means the benefit payable
annually in the form of a straight life annuity (with no ancillary benefits), without considering
payments made from a qualified excess benefit arrangement, after -tax employee contributions,
and any rollover contributions. Code Section 415(b)(2).
1. Ancillary Benefits
"Ancillary benefits" do not count toward the benefits subject to Code Section 415. As a
result, any benefit that is an ancillary benefit can exceed the 415 limits without the plan being
disqualified. Generally, "ancillary benefits" are benefits not directly related to retirement income
benefits. Ancillary benefits include "pre- retirement disability benefits and death benefits (such
as in- service death benefits)." Code Section 415(b)(2)(B); Treas. Reg. § 1.415(b)- l(c)(4).
M
2. Application to Florida Plans
Individuals who are receiving disability benefit payments that are not retirement
benefits will be excluded from testing. Therefore, do not test pre- retirement disability
benefits under 415(b) dollar limit. However, for the pre- retirement disability benefits,
apply the 100% of compensation limit.
If instead the disability benefits are simply an early retirement benefit, test the
benefit under 415. All such disability benefits must be taken into account for purposes of
complying with the Code Section 415 limitations, subject to the special rules under Code
Section 415(b)(2)(I) (providing an exemption from the age reductions to the limit) and the
reduction for less than 10 years of plan participation.
3. Pre - Retirement Death Benefits
Pre- retirement death benefits provided under a governmental plan are also exempt from
the Code Section 415 limits. Treas. Reg. § 1.415(b)- 1(c)(4)(i)(B). However, the Final
Regulations make it very clear that pre- retirement death benefits must meet the incidental benefit
requirements of Code Section 401 and the regulations thereto in order to be excluded from
415(b) testing.
4. Application to Florida Plans
Generally speaking, death benefits are incidental where the plan provides a pre -
retirement death benefit that is no greater than 100 times the monthly annuity benefit
provided under the plan, or the cost of the death benefit does not exceed 25% of the
total cost of all benefits for that participant. (This latter test would be one that would
be analyzed by an actuary.) Revenue Ruling 74 -307, 1974 -2 C.B. 126.
5. Allocation of Benefits to After -Tax Employee Contributions
Treasury Regulation § 1.415(b)- 1(b)(1)(ii) provides that the benefit attributable to
"Employee Contributions" is not included in the benefit which is tested against the 415(b)
limitation. In general, this is because these contributions are deemed to be annual additions and
subject to Code Section 415(c) limits (discussed below in more detail). Therefore, because the
benefits have already been tested under Code Section 415(c), any portion of a defined benefit
attributable to those after -tax contributions may be subtracted from the annual benefit before it is
tested under Code Section 415(b). However, it is important to note that benefits that would be
attributable to excess 415(c) contributions would not be "subtracted" from the annual benefit for
415(b) testing purposes.
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a. Definition of Employee Contributions
Only certain employee contributions are treated as Employee Contributions for purposes
of 415(b) testing. In particular, the following items are not treated as Employee Contributions
and therefore the benefit attributable to these items is included for purposes of 415(b) testing:
• Contributions picked up by the employer pursuant to Code Section 414(h).
0 Any repayment of a loan from the plan to the participant.
• Certain repayments amounts previously distributed upon the participant's
termination of participation in the plan.
• Certain repayments of a withdrawal of employee contributions.
b. Mandatory Employee Contributions
Treasury Regulation § 1.415(b) -I (b)(2)(iii) provides that the annual benefit attributable to
mandatory contributions is determined by using the factors described in Code Section
411(c)(2)(B) "regardless of whether the requirements of sections 411 and 417 apply to that plan."
Treasury Regulation § 1.411(c) -1(c) establishes the required method for allocating a portion of
the defined benefit to the after -tax employee contributions for purposes of excluding this amount
from the final annual benefit to be tested. The method requires calculation of the after -tax (not
picked up) employee contributions (both mandatory employee contributions and any voluntary
after -tax payments for service purchases unless tested under Code Section 415(n)), plus interest,
at rates specified by the regulations. See Treas. Reg. § 1.411(c) -1(c). Generally, interest is
computed at *the rate provided by the plan until the last plan year before Code Section 411(a)(2)
does not apply. Id. Thereafter, a plan should use a 5% interest rate factor.
In general, Code Section 411(a)(2) does not apply to a governmental plan. However, the
Final Regulations provide that Code Section 411 should be treated as applicable to this
calculation even if the section is not applicable to the plan. The Explanation of Provisions in the
Final Regulations states that a plan not subject to Code Section 411(a)(2), such as a
governmental plan, should determine what the effective date of Code Section 411(a)(2) would
have been if 411 applied to the plan and then apply the specific interest rates appropriately.
Therefore, only the benefit attributable to employer contributions using 411 factors can be
excluded from 415(b) testing.
Treasury Regulation § 1.415(b)- 1(b)(2)(iii) clearly indicates that the Code Section 411
_ factors should_ he applied . to-._a govemmentaL__plan -for- purposes Q£. dererminina-.the henefit
attributable to employee contributions for purposes of Code Section 415(b) testing. The
calculation is done in a two -step process. First interest is accumulated on the contributions using
the applicable interest rates specified in Code Section 411(c). The 411 interest rates are the
following:
➢ for contributions prior to 1976, use the interest rate in the plan document, if any;
➢ for contributions between 1976 -1987, use 5 %;
➢ for contributions from 1988 through the date the benefit commences or the
annuity starting date (the determination date), use 120% of the mid -term
applicable federal rate; and
➢ for contributions from the determination date to the normal retirement date (the
date at which unreduced benefits are paid), use the applicable 417(e) interest rate.
➢ For plan years beginning before January 1, 2008, the applicable 417(e) rate is the
annual rate on 30 -year Treasury securities for the month before the distribution.
➢ For plan years beginning on and after January 1, 2008, the applicable 417(e) rate
is the adjusted first, second and third segment rates for the month before the
distribution. The segment rates are based on the corporate bond yield curve based
on varying maturities. The IRS announces all rates monthly.
The second step is for the accumulated value of the contributions with interest to be
converted to an annuity value using the applicable 417(e) interest rate and the applicable 417(e)
mortality table.
6. Application to Florida Plans
Where a plan permits or requires after -tax employee contributions, the portion of
the plan to which such contributions are made is treated as a defined contribution plan.
Therefore, after -tax contributions are subject to the 415(c) contribution limits and not the
415(b) benefit limits. Treas. Reg. § 1.415(b)- 1(b)(2)(iv). The benefit attributable to
voluntary after -tax contributions is not subject to 415(b) testing. However for service
purchases, a plan may elect to test all benefits under 415(b) and not 415(c). See Section V.
The calculation of the value of that benefit is done using 411 factors described above. For
415(b) testing purposes, the portion of the annual benefit that is attributable to after -tax
employee contributions may be "subtracted" from the annual benefit for purposes of the
415(b) testing. In order to perform this calculation, the City would have to be able to
identify mandatory employee contributions that were made prior to any adoption of a pick-
up and any voluntary post -tax contributions (including after -tax contributions for service
purchases).
Each plan must determine what the effective date of Code Section 411(a)(2) would
have been, had that provision applied to the plan, and then apply the appropriate 411
factors from that date forward in order to determine the benefit attributable to after -tax
employee contributions, as explained above. For that purpose, the vesting rules of Code
Section 411(a)(2) were generally applicable to plan years beginning after September 1,
1976. However, for a plan in existence on January 1974, C_o_de_ Section 411(a)(2) was
applicable for plan years beginning after 1975.
This is the same approach that will be followed in testing the benefit attributable to
rollovers and transfers that are used to purchase service.
mom
7. Picked -Up Contributions
It is important to note that pre -tax contributions ( "picked -up contributions "), whether
mandatory or voluntary, are not treated as after -tax contributions under the rules in 6 above.
Instead, the benefit attributable to these contributions must be tested under the 415(b) limits.
8. Application to Florida Plans
The benefit attributable to picked -up contributions is subject to 415(b) testing.
Treas. Reg. § 1.415(b)- 1(b)(2)(ii)(A). The picked -up contributions are not subject to 415(c)
testing.
H. ROLLOVERS/TRANSFERS
1. Amounts Attributable to Rollovers
Rollovers to a defined benefit plan are treated similarly to pre -tax or picked -up employee
contributions for purposes of 415(b) testing. The amount of the annual benefit that is attributable
to rollovers may be excluded from 415(b) testing. As noted above, the benefit attributable to a
rollover must be calculated in a manner permitted by the IRS. The properly calculated benefit
attributable to the rollover could be "subtracted" from the annual benefit for testing purposes.
If the benefit under the plan is payable in any form other than the form described
in subparagraph (A), or if the employees contribute to the plan or make rollover
contributions (as defined in sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3), and
457(e)(16), the determinations as to whether the limitation described in paragraph
(1) has been satisfied shall be made, in accordance with regulations prescribed by
the Secretary, by adjusting such benefit so that it is equivalent to the benefit
described in subparagraph (A).
Code Section 415(b)(2)(B).
2. Amounts Attributable to Transfers between Qualified Plans
Under the Final Regulations, the treatment of transferred benefits for purposes of the
415(b) limits depends upon the types of plans involved and whether there is any relationship
between them. Where the transfer is from one defined benefit plan to another defined benefit
plan, the receiving plan must include the transferred benefits for purposes of applying the 415(b)
limitations. Treas. Reg. § 1.415(b)- 1(b)(3)(i)(C). With regard to transfers from a qualified
defined contribution plan, the amount attributable to the transfer would be excludible from
415(b) testing using IRS prescribed factors.
Where the transfer occurs between two plans which must be aggregated, (because, for
example, the plans are maintained by the same employer or related employers), the transferred
benefits must be included by the receiving plan for 415(b) testing purposes. Where the transfer
occurs between two plans which are not aggregated, the transferor plan is required to include the
transferred benefits by treating the benefits as if provided as an annuity from a separate plan
which must be aggregated with the transferor plan. Treas. Reg. § 1.415(b)- I(b)(3)(i)(A), (B).
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3. Plan -to -Plan Transfers from a 457(b) or 403(b) Plan
Amounts accepted in a plan to plan transfer from a 457(b) or 403(b) plan should be
treated in the same manner as a rollover, as discussed above.
4. Application to Florida Plans
• The Final Regulations treat rollovers in a manner similar to after -tax
contributions, so that the benefit attributable to the rollover must be
converted in accordance with prescribed 411 factors in order to be
excluded from 415(b) testing. This is true only to the extent the plan
provides for a benefit based upon the rollover contributions. That is,
if the benefit attributable to the rollover contributions is based upon a
separate account, in which the rollover contributions are credited
with actual earnings and losses, then the separate account is treated as
a defined contribution. Treas. Reg. § 1.415(b)- 1(b)(2)(v). It is our
understanding from you that there are no "free- standing" rollover or
transfer account — i.e., all rollovers and transfers are only accepted in
service purchase situations (which generally only include prior
military service, restoration provisions, other government service, and
only two plans allow "air- time" purchases). See Section 24 of Form
Plan Document. Thus, whenever a member receives a benefit based
in part on credited service, attributable to rollover and transfer
purchased service, the entire benefit, including this portion, could
initially simply be tested as part of the 415(b) test; and, if there is a
failure, then the portion of the benefit could be converted in
accordance with the prescribed 411 factors and then subtracted from
the member's benefit for 415(b) testing purposes.
• Consider if there are any "transferred" benefits. See 2 above.
• Amounts accepted in a plan -to -plan transfer from a 457(b) or 403(b)
plan should be treated in the same manner as a rollover, as discussed
above.
I. RESTORATION OF CONTRIBUTIONS
1. Restoration
Code Section 415(k)(3) provides that any repayment of contributions (including interest)
will- -not. _ be—taken -into _accQ-ui?L far _ Q At- _Section 415_ purposes _if the repayment is to__ a
governmental plan with respect to an amount previously refunded on a forfeiture of service credit
under that plan or any other governmental plan maintained by the state or any local
governmental employer within the same state. Thus, so long as the amount repaid does not
exceed the amount refunded, plus interest, Code Section 415 should not apply. However, the
Final Regulations do provide that the restored benefit is to be treated for 415(b) testing purposes
as the original benefit would have been treated.
- 11 -
2. Application to Florida Plans
Repayments of contributions under the above circumstances will not violate Code
Section 415(c), but do not remove the entire benefit attributable to those contributions
from the Code Section 415(b) testing. Instead, the restored benefit should be tested as the
original benefit would have been tested.
J. AGE -BASED ADJUSTMENTS To LIMITS
1. Benefits Before Age 62
When the benefit begins before the participant reaches age 62, the Dollar Limit benefit
limit generally must be actuarially adjusted so that the limit (as reduced) equals an annual benefit
that is payable when the retirement benefit begins, and which is the equivalent of the Dollar
Limit beginning at age 62. Code Section 415(b)(2)(C). The actuarial adjustments must be made
in accordance with Code Section 415(b)(2)(E). Treas. Reg. § 1.415(b) -1(d). Pre- EGTRRA,
Code Section 415(b)(2)(F) limited the actuarial reduction for governmental plans to a $75,000
benefit payable at age 55 or, if the benefit began before age 55, the actuarial equivalent of a
$75,000 benefit beginning at age 55.
a. Exception for Public Safety and Military
However, no age -based actuarial reduction is required for benefits beginning prior to age
62 for qualified participants. A "Qualified Participant" is defined as a participant:
(i) in a defined benefit plan which is maintained by a State, Indian tribal
government (as defined in section 7701(a)(40)), or any political subdivision of a
state or Indian tribal government,
(ii) with respect to whom the period. of service taken into account in determining
the amount of the benefit under such defined benefit plan includes at least 15
years of service of the participant —
(I) as a full -time employee of any police department or fire department
which is organized and operated by the State, Indian tribal government, or
political subdivision maintaining such defined benefit plan to provide
police protection, firefighting services, or emergency medical services for
any area within the jurisdiction of such State, Indian tribal government, or
political subdivision, or
(II) as a member of the Armed Forces of the United States.
Treas. Reg. § 1.415(b)- I(d)(3). Historically, there has been some concern over the interpretation
of the. statutory provision. For example, it was not entirely clear whether the qualified
participant had to be a sworn officer of a police department or whether any employee of a police
department would be covered by this provision. However, the Final Regulations offer some
clarification, making it clear that the application of the rule depends on whether the employer is a
police department or fire department of the state or political subdivision, rather than on the job
classification of the individual participant.
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This exception is very beneficial to public safety officers and to other employees of police and
fire departments, including non - public safety personnel. However, this definition does not cover
all public safety employees. The examples in the Final Regulations make it clear that an
employee of a police division of an agency may be a qualified participant, but that an ambulance
driver who works for an emergency medical services agency rather than a police or fire
department cannot. While the name of the agency is not important, it is necessary that the
employer (or at least the appropriate division of the employer) function as a police or fire
department. Also, it is helpful to note that the examples in the Final Regulations do make it clear
that the 15 years can be satisfied with a combination of police /fire service and military service.
b. Exception for Disability and Death Benefits
In addition, the actuarial reduction for benefits beginning before age 62 does not apply to
disability benefits or survivor benefits payable in the event of the disability or death of the
member provided under a governmental plan. Code Section 415(b)(2)(1). The benefit must be
paid "on account of the participant's becoming disabled by reason of personal injuries or
sickness, or as a result of the death of the participant." Treas. Reg. § 1.415(b)- 1(d)(4). This
provision will mitigate the IRS position that post- retirement disability benefits must be tested
under 415(b).
c. Exception for Permissive Service Credit Procedures
The benefit attributable to a purchase of permissive service credit may be tested under
Code Section 415(b) without regard to the reduction for early retirement.
2. Benefits Commencing After Age 65
For all members, if the retirement benefit under the plan begins after age 65 and is
actuarially increased due to the delayed starting date, the Dollar Limit is increased so that it is the
actuarial equivalent of an annual benefit beginning at age 65. Code Section 415(b)(2)(D). The
actuarial assumptions used to make this conversion are set forth in Code Section 415(b)(2)(E).
However, under the Final Regulations, this adjustment in the Dollar Limit is only available
where the benefit is also increased post age 65.
3. Application to Florida Plans
a. Benefits After Age 65
For all members whose retirement benefit begins after age 65, if the benefit is
actually increased, the Dollar Limit may be appropriately adjusted. However, if the post -
65 benefit is not increased, the Dollar Limit is not adjusted.
b. Benefits Before Age 62 — Other than Qualified Participants
For all members other than Qualified Participants whose retirement benefit begins
before age 62, the Dollar Limit must be appropriately adjusted.
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K. ADDITIONAL SPECIAL RULES
Code Section 415(b) has a number of additional special rules that may impact
governmental employers.
1. Small Benefits
Code Section 415(b)(4) provides that defined benefit limits will not be applied to reduce
a participant's benefits when total annual distributions are $10,000 or less. However, this
limitation only applies "if the employer has not at any time maintained a defined contribution
plan in which the employee has participated." Code Section 415(b)(4)(B); Treas. Reg. §
1.415(b) -1(f). The $10,000 test is measured against actual distributions — not the actuarial
equivalent of a straight life annuity.
2. Less than 10 Years of Participation
When an employee has less than ten years of participation in a defined benefit plan, the
basic Code Section 415(b) Dollar Limit (or the minimum $10,000 exemption from testing) is
reduced by 10% for each year less than ten in which the employee participated in the defined
benefit plan for other than death and disability benefits (but not below 1 /10th of the Dollar Limit).
Code Section 415(b)(5) and Treas. Reg. § 1.415(b) -1(g).
3. Application to Florida Plans
Each plan must identify those retirees who have fewer than ten (10) years of service,
exclusive of any reciprocity and exclusive of service purchases. Those retirees would have
a reduced 415(b) testing amount — for example, if the retiree only had five (5) years of
service (exclusive of reciprocity and service purchases), the retiree's age- adjusted limit
would be 50% of the age — adjusted limit. The limit can never be lower than 10% of the
otherwise applicable limit.
L. CONSIDERATION OF AN ALTERNATE PAYEE'S BENEFITS FOR TESTING PURPOSES FOR
FLORIDA PLANS
Benefits payable to an alternate payee under a qualified domestic relations order
are treated as part of the member's benefit for purposes of applying the benefit limits
under Code Section 415. IRS Notice 87 -21, Q &A -20; see also Announcement 95 -99, Q &A-
17.
M. TESTING OF THE SURVIVOR PORTION OF A BENEFIT
1. Survivor Rules
The rules which apply to a member's benefit also apply to a survivor's benefit. Under
Code Section 415(b)(1), the annual benefit may not exceed the applicable dollar limit ($170,000
for 2005). The Code defines "annual benefit" as "a benefit payable annually in the form of a
straight life annuity (with no ancillary benefits) under a plan to which employees do not
contribute and under which no rollover contributions ... are made." Code Section 415(b)(2)(A)
(emphasis added). If a benefit under the plan is payable in any form other than this form,
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the determinations as to whether the [415(b)] limitation ... has been satisfied shall
be made, in accordance with regulations prescribed by the Secretary, by adjusting
such benefit so that it is the equivalent to the benefit described in subparagraph
(A). For purposes of this subparagraph, any ancillary benefit which is not directly
related to retirement income benefits shall not be taken into account; and that
portion of any joint and survivor annuity which constitutes a qualified joint and
survivor annuity (as defined in section 417) shall not be taken into account.
Code Section 415(b)(2)(B).
2. Application to Florida Plans
The benefit that is subject to testing is a straight life annuity, and any other benefit
under a plan which is payable in a form other than a straight life annuity (other than a
qualified joint and survivor annuity) must be converted to a straight life annuity in order
to pass 415(b) testing. In essence, even if a benefit actually being paid is not a straight life
annuity, it still should be converted to a straight life annuity and tested under Code Section
415(b). Therefore, upon the death of the retiree, there would be no need for a
"conversion" of the survivor's benefit or a change to the existing 415(b) limit as applied to
the retiree's benefit. Rather, upon the death of a retiree, the survivor's benefit continues to
be tested against the retiree's benefit limit. (This would also be true of a qualified joint and
survivor annuity, even though it is not converted to a straight life annuity for testing
purposes, because such benefit is exempted from the conversion requirement.)
N. AGGREGATION OF TOTAL BENEFITS FOR TESTING PURPOSES
Under a multiple employer plan, two (2) or more employers that are not part of a related
group participate in the same plan. In applying the Code Section 415 limits to such multiple
employer plans, Treas. Reg. § 1.415(a) -1(e) provides that for a participant in a multiple employer
plan, benefits or contributions under the plan attributable to such participant from all of the
employers maintaining the plan and compensation from all the participating employ must be
taken into account. Generally, if the employers had maintained separate plans this rule would
not apply, and the Code Section 415 limits would be separately determined for each employer
because they are not part of a related group.
IV.
OVERVIEW AND APPLICATION OF LAW WITH RESPECT TO
DEFINED CONTRIBUTION LIMITS
Annual additions made or deemed to be made to a defined contribution plan are subject
to the limits under Code Section 415(c). This test is applied on an annual basis. Importantly,
this test is applicable to those governmental defined benefit plans that provide for after -tax
employee contributions or certain purchases of service. Thus, after -tax employee contributions
and after -tax payments for purchases of service are tested under the Code Section 415(c) limits,
in the same manner as contributions to a separate defined contribution plan. Treas. Reg. §
1.415(c) -1 (a)(2)(ii).
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A. THE DOLLAR LIMIT ON "ANNUAL ADDITIONS"
1. Current Limits
The defined contribution limits contain both a Dollar Limit and a percentage of
compensation limit ( "Percentage Limit "). EGTRRA increased the Dollar Limit for defined
contribution plans from $35,000 to $40,000 for plan years beginning in 2002. This $40,000
dollar limit is subject to more rapid indexing, with annual cost of living adjustments in $1,000
increments instead of the current $5,000 increments.
Under prior law, the Percentage Limit did not permit contributions to exceed 25% of
compensation. However, EGTRRA amended this limit for plan years beginning in 2002, and
permitted annual additions to defined contribution plans of up to 100% of the participant's
compensation, or $40,000 (as adjusted for inflation), whichever is less. For purposes of this
definition, "compensation" includes both elective deferrals to a 401(k) plan or 403(b) plan and
amounts contributed or deferred by the employer at the employee's election under a cafeteria
plan, qualified transportation fringe benefit plan, or a 457 deferred compensation plan.
Certain contributions are not included in the definition of "annual additions" that are
tested under Code Section 415(c). Mandatory employee contributions that are picked -up by an
employer, or service purchase payments paid for by pre -tax (picked up) installment payments,
simplify Code Section 415 testing because mandatory contributions or service purchase
installment payments picked up pursuant to Code Section 414(h)(2) are not required to be treated
as contributions to a separate defined contribution plan. However, the resulting benefit must be
tested under Code Section 415(b) upon separation.
Treasury Regulation § 1.415(c)- 1(b)(3) provides that rollover contributions are not
treated as employee contributions and thus are not "annual additions." Additional exceptions
from the 415(c) limits include USERRA contributions and restoration of forfeited benefits,
which are discussed below.
2. The Limitation Year
The limitation year for 415(c) testing purposes will be determined (see page 2) in the
same fashion as for 415(b) testing purposes.
The Final Regulations for Code Section 415(c) state the following with respect to the
impact of a change in the 415(c) limits in the case of a plan that has a Limitation Year that is not
the calendar year:
The adjusted dollar limitation applicable to defined contribution plans is effective
as of January 1 of each calendar year and applies with respect to limitation years
ending with or within that calendar year. Annual additions for a limitation
cannot exceed the currently applicable dollar limitation (as in effect before the
January adjustment) prior to January 1. However, after a Janum I adjustment
is made, annual additions for the entire limitation year are permitted to reflect the
dollar limitation as adjusted on January 1.
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3. Code Section 415(k)(3): Repayment of Cash -Outs
Section 415(k)(3) provides that any repayment of contributions (including interest) will
not be taken into account for Code Section 415 purposes if the repayment is to a governmental
plan with respect to an amount previously refunded on a forfeiture of service credit under that
plan or any other governmental plan maintained by the state or any local governmental employer
within the same state.
4. Testing of USERRA Service Purchases
a. General Rule
Special Code Section 415 testing rules apply to the payment of contributions covered by
the Uniformed Services Employment and Reemployment Rights Act of 1994 ( "USERRA ").
Pursuant to Code Section 414(u)(1)(A) and (B), payments made in the applicable USERRA
"make -up" period shall not be included in the Code Section 415(c) test for the limitation year in
which the payment is made, and shall instead be allocated to the limitation year for which it
relates. This rule exists to address a situation in which make up contributions permitted by
USERRA for multiple years, in addition to the regular on -going contributions, were all made at
once upon the return of a plan member on USERRA- approved leave. If the Code Section 415(c)
limits were applied to the sum of these contributions, then a member might exceed the applicable
limit.
5. Application to Florida Plans
In the case of USERRA contributions, the 415(c) limits that would be examined
would be the limits in place with respect to the period of covered service — not necessarily
the year of the payment.
6. Code Section 414(v)
Code Section 414(v) provides that an "applicable employer plan" may permit an eligible
participant to make additional elective deferrals in any plan year subject to certain limits. An
"applicable employer plan" includes a 401(a) plan, a 403(b) plan, a SEP or a SIMPLE IRA, and a
457(b) plan. An eligible participant means a participant in the plan who will attain age 50 in the
plan year and who would otherwise be "capped" out by other Code limitations. These additional
elective deferrals may not exceed the lesser of the "applicable dollar amount" (for 2006 and
thereafter this amount is $5,000) or the difference between the participant's compensation minus
all other elective deferrals. For purposes of applying this limit, all 401(a) plans, 403(b) plans,
SEPS and Simple IRAs of a single employer must be aggregated. Multiple 457(b) plans of a
single employer must be aggregated, but are not aggregated with the other types of employer
plans.
An additional elective deferral under Code Section 414(v) will not be subject to the
otherwise applicable limitation under Code Section 401(a)(30), 402(h), 403(b), 408, 415(c), and
457(b) (determined without regard to 457(b)(3)).
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7. Application to Florida Plans
Therefore, in determining whether a member who makes an after -tax employee
contribution is violating the 415(c) limits, the member's 415(c) limit is determined without
regard to any additional elective deferral made under Code Section 414(v).
B. DEFINITION OF COMPENSATION
1. General Rule
Code Section 415(c)(3)(A) defines "participant's compensation" as "the compensation of
the participant from the employer for the year." Code Section 415(c)(3)(D) includes as
compensation elective deferrals under Code Section 402(g)(3) and amounts contributed by the
employer at the election of the employee which are excluded from income under Code Sections
125, 132(0(4), or 457.
Treas. Reg. § 1.415(c) -2(b) provides the following definition of compensation:
For purposes of applying the limitations of section 415, except as otherwise
provided in this section, the term "compensation" means remuneration for
services of the following types:
(1) The employee's wages„ salaries, fees for professional services, and other
amounts received (without regard to whether or not an amount is paid in cash) for
personal services actually rendered in the course of employment with the
employer maintaining the plan to the extent that the amounts are includible in
gross income (or to the extent amounts would have been received and includible
in gross income but for an election under section 125(a), 132(f)(4), 402(e)(3),
402(h)(1)(B), 402(k), or 457(b))....
(3) Amounts described in sections 104(a)(3), 105(a), and 105(h), but only to
the extent that these amounts are includible in the gross income of the employee.
(4) Amounts paid or reimbursed by the employer for moving expenses
incurred by an employee, but only to the extent that at the time of the payment it
is reasonable to believe that these amounts are not deductible by the employee
under section 217.
(7) Amounts that are includible in the gross income of an employee under the
roles of section 409A or section 457(f)(1)(A) or because the amounts are
constructively received by the employee.
Code Section 104(a)(1) excludes from gross income amounts received under workmen's
compensation acts as compensation for personal injuries or sickness.
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2. Safe Harbor Definitions
There are at least three safe harbor options available to a plan for purposes of defining
compensation for Code Section 415(c):
(1) Define compensation on a person by person basis, including all taxable income
and certain items not included on Form W -2, imputed income items, etc. This
approach has the advantage of producing the highest possible compensation
amount for each individual, but is not administrable for a plan of any size. In
order to take this approach, it would be necessary for Florida City to determine
the tax treatment of domestic partner health coverage and various other items.
(2) Define compensation based on the number reported by the employer as gross
income in Box 1 of each employee's Form W -2. This approach results in a lower
number than method 1, but is much easier to administer.
(3) Define compensation based on amounts subject to federal income tax
withholding, as well as certain amounts that would be includible except for an
election under a cafeteria plan, a qualified transportation fringe benefit, a 401(k)
plan, a 403(b) plan, a simplified employee pension, a simple retirement account,
or a 457(b) plan. This approach also results in a lower number than method 1, but
is generally easily available from the employer or payroll service provider and is
therefore much easier to administer than an individualized approach.
3. Application to Florida Plans
The City, with the recommendation of the Board and the actuary, needs to select
one of the above definitions, document it in the "plan document" and communicate it to the
plan's actuary.
4. Treatment of Workers Compensation
Plans often question how to treat workers compensation payments for purposes of the
Code Section 415(c) definition of compensation. Generally, workers compensation payments
are excluded from gross income, provided they are paid under a workers compensation statute,
and therefore would not be includible as compensation under Code Section 415(c)(3). We
believe this is true regardless of whether the employer is funding the payments directly or has
paid for worker's compensation insurance, as in either case the amounts paid would (presumably)
be paid pursuant to a worker's compensation statute.
There is a special rule under Code Section 415(c)(3)(C) which provides as follows:
(C) SPECIAL RULES FOR PERMANENT AND TOTAL DISABILITY. In the case of a
participant in any defined contribution plan-
(i) who is permanently and totally disabled (as defined in section 22(e)(3)),
(ii) who is not a highly compensated employee (within the meaning of section
414(q)), and
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(iii) with respect to whorl the employer elects, at such time and in such
manner as the Secretary may prescribed, to have this subparagraph apply,
the term "participant's compensation" means the compensation the participant
would have received for the year if the participant was paid at the rate of
compensation paid immediately before becoming permanently and totally
disabled. This subparagraph shall apply only if contributions made with respect
to amounts treated as compensation under this subparagraph are nonforfeitable
when made. If a defined contribution plan provides for the continuation of
contributions on behalf of all participants described in clause (i) for a fixed or
determinable period, this subparagraph shall be applied without regard to clauses
(ii) and (iii).
Treasury Regulation § 1.415(b)- 1(b)(2)(iv) and Treasury Regulation § 1.415(c)-
1 (a)(2)(ii)(B) provide that the voluntary and mandatory employee contributions (but not picked
up contributions) under a defined benefit plan are treated as a separate defined contribution plan
maintained by the employer, subject to the limitations on contributions of Code Section 415(c)
and Treasury Regulation § 1.415(c) -1. Thus, while Code Section 415(c)(3)(C) specifies its
applicability to defined contribution plans, it could be argued that these provisions would be
applicable to that portion of a defined benefit plan that is to be treated as a defined contribution
plan.
Treasury Regulation § 1.415(c)- 2(g)(4) provides that, if certain conditions are satisfied,
then "compensation" for a defined contribution plan participant who is permanently and totally
disabled means "the compensation the participant would have received for the year if the
participant was paid at the rate of compensation paid immediately before becoming permanently
and totally disabled, if such compensation is greater than the participant's compensation
determined without regard to this paragraph." For this rule to apply, the following conditions
must be satisfied:
(1) Either the participant is not a highly compensated employee (as defined in
section 4140) immediately before becoming disabled, or the plan provides for
the continuation of contributions on behalf of all participants who are
permanently and totally disabled for a fixed or determinable period;
(2) The plan provides that the rule of this paragraph (g)(4) (treating certain
amounts as compensation for a disabled participant) applies with respect to the
participant; and
(3) Contributions made with respect to amounts treated as compensation
under this paragraph (g)(4) are nonforfeitable when made.
Treas. Reg. § 1.415(c)- 2(g)(4)(ii).
This special rule provides that in the case of an individual with a total and permanent
disability, Code Section 415(c) compensation would be deemed to be compensation at the rate
the employee was being paid prior to the disability. This then leads to the question of how this
provision is applied. Based on the Final Regulations, it appears that Code Section 415(c)(3)(C)
is definitional for 415 compensation purposes, thereby creating a base for applying the 415(c)
limit.
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C. PLAN AGGREGATION
1. General Rule
Code Section 415(g) requires the aggregation of all plans of an employer for 415 testing
purposes. Therefore, our other primary area of concern for 415 testing occurs with respect to the
other defined contribution plans that are maintained by a City — such as a grandfathered 401(k)
plan or a defined contribution 401(a) plan. Finally, please note that all plans which must be
aggregated for purposes of 415(c) testing must use the same definition of compensation for those
purposes. A City's 457(b) deferred compensation plan is not aggregated for 415(c) testing.
2. Application to Florida Plans
If the City sponsors other defined contribution -type plans such as a grandfathered
401(k), or a 401(a) defined contribution plan, those plans must be aggregated for purposes
of 415(c) testing.
V.
OVERVIEW AND APPLICATION OF LAW WITH RESPECT TO SERVICE
PURCHASES
A. EMPLOYEE AFTER -TAX CONTRIBUTIONS FOR PERMISSIVE SERVICE CREDIT
Code Section 415(n) establishes a limitation structure for "permissive service credit"
purchases, instead of relying on the existing Code Section 415(c) defined contribution
limitations. This subsection allows Code Section 415 to be satisfied by a purchase of permissive
service credit if either a modified 415(b) limit is met or a modified 415(c) limit is met. These
limits can be applied on a participant -by- participant basis rather than choosing to apply the limit
on a plan -wide basis. For example, some participants could satisfy the modified defined benefit
limit when making a purchase of permissive service credit, while others could satisfy the
modified defined contribution limit.
1. Modified 415(b) Limit
For purposes of Code Section 415(n), the defined benefit limit in Code Section 415(b)
may be met by treating the accrued benefit derived from all permissive service credit as part of
the member's annual benefit. Code Section 415(n)(2)(A) provides that, where the dollar limit
under 415(b) is reduced for retirement before age 62, "the plan shall not fail to meet the reduced
dollar limit under Subsection (b)(2)(C) [the age- reduced dollar limit] solely by reason of this
subsection." Thus, the plan will not fail to meet the age- reduced dollar limit solely because the
accrued benefit derived from the permissive service credit purchase is included in the 415(b) test.
2. Modified 415(c) Limit
For purposes of Code Section, only the dollar limit under Code Section 415(c) applies
($40,000 (adjusted for inflation)) by treating all permissive service contributions as an annual
addition under that limit.
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3. Definition of Permissive Service Credit
The special testing rules apply only if the service being purchased qualifies as permissive
service credit. Code Section 415(n)(3) defines "permissive service credit" as follows:
(3) PERMISSIVE SERVICE CREDIT. —For purposes of this subsection—
(A) IN GENERAL. —The term "permissive service credit" means
service credit-
(i) recognized by the governmental plan for purposes of calculating a
participant's benefit under the plan,
(ii) which such participant has not received under such governmental
plan, and
(iii) which such participant may receive only by making a voluntary
additional contribution, in an amount determined under such governmental plan,
which does not exceed the amount necessary to fund the benefit attributable to
such service credit.
Such term may include service credit for periods for which there is no
performance of service, and, notwithstanding clause (ii), may include service
credited in order to provide an increased benefit for service credit which a
participant is receiving under the plan.
Code Section 415(n)(3)(A). The proper interpretation of the Code Section 415(n) definition of
permissive service credit is not a settled term. The Final Regulations do not address 415(n)
issues. However, the PPA did clarify that benefit enhancement purchases (buying a higher
multiplier on service a member already has in a plan) or airtime purchases (buying service credit
for a period for which there is no performance of service) both qualify as permissive service
credit.
4. Nonqualified and Qualified Permissive. Service
Permissive service credit can be categorized into two types. First, the Code defines "non -
qualified service credit" as all permissive service credit that does not fall within one of the
itemized types listed in Code Section 415(n)(3)(C). Although the Code does not use this term,
we have termed the types of service included in this list as "qualified permissive service."
Code Section 415(n)(3)(C) defines "nonqualified service" as all permissive service except
for the following types -of service (which we -have designated "qualified permissive service "):
• Service (including parental, medical, sabbatical, and similar leave) for the US
government, any state or political subdivision thereof, or any agency or
instrumentality of any of the foregoing.
• Service (including parental, medical, sabbatical, and similar leave) for an
educational organization which is a public, private, or sectarian school which
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provides elementary or secondary education (through grade 12) as determined
under state laws.
• Service for an association of employees of the U.S., state or political subdivision
thereof, or an agency or instrumentality of the foregoing.
• Military service (non - USERRA covered) recognized by the governmental plan.
However, service under the first three (3) points above will be nonqualified service if
recognition of the service would cause the member to receive a retirement benefit for the same
service under more than one plan. Code Section 415(n) does not permit a plan to take more than
five (5) years of nonqualified service into account, or to give members credit for any
nonqualified service before the member has at least five (5) years of participation in the plan.
Code Section 415(n)(3)(B). The PPA clarified that these limits do not apply to trustee -to- trustee
transfers from a 457(b) plan or a 403(b) plan for the purchase of permissive service credit.
It is important to note that "nonqualified service" is still one type of permissive service
that is described in Section 415(n)(3)(A). Therefore, nonqualified service is available for
purchase and may be tested under Code Section 415(n) special testing provisions.
5. Effective Dates
The service purchase testing provisions for permissive service credit under Code Section
415(n) are subject to a transition rule. The transition rule provides that the defined contribution
limits of Code Section 415(c) will not be used to reduce the amount of permissive service credit
an "eligible participant" can purchase below what they were allowed to purchase under the terms
of the plan as in effect on the enactment date, August 5, 1997. An "eligible participant" is an
individual who first becomes a participant in the plan before the first plan year beginning after
the last day of the calendar year in which the next regular session (following the date of
enactment) of the governing body with authority to amend the plan ends.
Because the term "permissive service" is used in the grandfather provision, we believe
that the IRS would apply a consistent definition of permissive service credit to the transition rule.
As a result, the transition provision could permit greater purchases of nonqualified service and
could permit permissive service purchases that exceed 415(c) and (b) limits, but would not
extend to the purchase of service that did not meet the definition of permissive service credit.
A voluntary employee after -tax contribution is subject to 415(c) testing unless the more
advantageous provisions of Code Section 415(n) apply. However, the PPA has made 415(n)
much broader so that the more favorable limits would apply to many service purchases, subject
to 415(n) limits.
If an employee makes a contribution for a service purchase, the voluntary contribution
may be tested under more generous 415(c) limits or 415(b) limits. The 415(c) limits under
415(n) are as follows:
For purposes of Code Section 415(n) service purchases, only the dollar limit
under Code Section 415(c) applies ($40,000 (adjusted for inflation)) by treating
all permissive service contributions as an annual addition under that limit.
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6. Application to Florida Plans
With respect to the plans represented by Christiansen & Delmer, P.A.: First, there
are no installment contracts for after -tax contributions, except for payroll deductions
( "easy- pay ") programs with interest charges. Second, there are not any "picked -up"
service contracts. Third, this chart does not cover "air -time purchases," since only two
cities have that program. Fourth, this chart assumes all service is permissive service.
Employee Contributions for Service Purchases
415(c) Testing or 415(n) Testing
In- service transfers from defined contribution
415(c) limits (including 415(n) modified
plans (401(k), 403(b) plans, 457(b) plans)
limits) do not apply. Regular 415(b)
limits should be applied at distribution.
Lump sum after —tax employee contributions
415(n) limits apply. Therefore, purchase
and installment contracts for after -tax
can be tested under modified 415(b) limits
contributions if for permissive service
or under modified 415(c) limits.
Lump sum rollovers from eligible plans
415(c) limits (including 415(n) modified
(401(a), 457(b), 403(b), 401(k), 403(a) and
limits) do not apply.
IRAs)
Repayment of refunded contributions.
Under 415(k)(3), 415(c) limits will not
(Typically allowed within 90 days of return to
apply. 415(b) limits will apply at
restore distributed amounts plus interest
distribution.
(usually at the actuarial assessment rate).)
Lump sum transfers from 457(b)/403(b) plans
Limited to permissive service credit and
with another employer or the same employer.
restoration of service. 415(c) limits will
not apply. 415(b) limits will apply.
Lump sum after -tax employee contributions if
415(c) limits apply (lesser of $40,000
for non - permissive service or for nonqualified
(adjusted) or 100% compensation in the
permissive service credit in excess of limits
year of purchase).
We would like to acknowledge the efforts of the following individuals in the preparation of this
report:
Mary Beth Braitman
Terry A.M. Mumford
Katrina M. Clingerman
Ice Miller LLP
One American Square, Suite 3100
Indianapolis, IN 46282 -0200
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Rockwood Capital Advisors
Palm Beach Gardens
General Employees'
Pension Plan
Second Quarter
2008 Review
ROCKWOOD CAPITAL ADVISORS
Investment Policy
Objectives
2nd Quarter 2008
— The Board recognizes that the obligations of the Fund are long -term and that the investment policy should be made with a view toward performance and
return over a number of years. The general investment objective, then, is to obtain a reasonable total rate of return — defined as interest and dividend
income plus realized and unrealized capital gains or losses — commensurate with the Prudent Investor Rule and any other applicable statute.
— Reasonable consistency of return and protection of assets against the inroads of inflation are paramount. However, the volatility of interest rates and
securities markets make it necessary to judge results within the context of several years rather than over short periods of two years or less.
Performance
— The performance of the total Fund will be measured for rolling three and five year periods and compared to the return of a portfolio comprised of 60% S &P
500 Stock Index, 5% MSCI EAFE, and 35% Lehman Brothers Aggregate Bond Index. On a relative basis, performance for the combined portfolio over three
to five year periods is expected to be in the 40% of the Mobius Universe. Additionally, on an absolute basis, performance for the combined portfolio over
three to five year periods is expected to meet or exceed the actuarial earnings assumption of 8 %, and equal or exceed CPI plus 4% over three to five year
periods.
Authorized Investments
All investments made or held in the fund shall be limited to, obligations issued by the United States Government or guaranteed as to principal and interest by
the US Govt. or by an agency of the US Govt. Additionally, stocks, commingled funds administered by national or state banks, mutual funds and bonds or
other evidence of indebtedness, issued or guaranteed by a corporation organized under the laws of the United States, any state or organized territory of the
United States or the District of Columbia. Fixed income securities are to be ranked Investment Grade by S & P or Moody's and 90% of the equities shall be
rated by a major rating service in the top three quality grades. Not more than 5% of the Fund's assets shall be invested in the common stock, capital stock or
debt of any one issuing company, nor shall the aggregate investment in any one issuing company exceed 5% of the outstanding capital stock of the
company. Foreign securities shall not exceed 10% of the value at cost of the fund.
E
ROCKWOOD CAPITAL ADVISORS PAGE 1
Portfolio Summary
t�
2"d Quarter 2008
Palm Beach Gardens General Employees' Pension Plan
Domestic
Equities
98%
.4)
Short Term
Funds
2%
AM ROCKWOOD CAPITAL ADVISORS PAGE 2
Beginning
Market Value
Ending
Market Value
% of
Portfolio
Est Annual
Income
Current
Yield
Equities
$1,725,995
$1,801,777
98.5%
$25,234
1.4%
Short-Term Funds
$45,003
$27,884
1.5%
$641
2.3%
Accrued Income
1,714
$1,865
--
--
--
Total
$1,772,712
$1,831,526
100.0%
$25,875
1.4%
Domestic
Equities
98%
.4)
Short Term
Funds
2%
AM ROCKWOOD CAPITAL ADVISORS PAGE 2
Market Value Summary
Palm Beach Gardens General Employees' Pension Plan
Market Value Changes
Total $ Change this quarter I $58,814
2nd Quarter Summary
Beginning Market Balance
$1,772,712
Interest / Dividends
8,423
Contributions
0
Net Disbursements
- 18,092
Net Realized & Unrealized (G/L)
68,484
Ending Market Balance
$1,831,526
i
AROCKWOOD CAPITAL ADVISORS
2nd Quarter 2008
2 nd Quarter Retum I 4.3%
Fiscal Year Summary
Beginning Market Balance (101112007)
$2,028,332
Interest / Dividends
17,611
Contributions
89,892
Net Disbursements
- 77,847
Net Realized & Unrealized (G/L)
- 226,461
Ending Market Balance
$1,831,526
PAGE 3
`?l
Equity
Time For Contrarian Thinking
2nd Quarter 2008
Despite a challenging market environment, we are pleased to report positive results for the second quarter of 2008. The same cannot be said for most major
market indices. For the quarter, the Rockwood Strategic Equity portfolio was UP 4.7% vs. the S &P 500 Index, which slipped 2.7 %. The Russell 3000 Index
depreciated 1.7 %. Bond investors performed relatively well, although they too lost capital as the Lehman Brothers Aggregate Bond Index decreased 1.0 %. The
Balanced Composite Index fell 2.0 %.
First the bad news; the equity markets have slipped into bear market territory, declining some 20% from their recent highs in October 2007. The collapse of the
housing market and subsequent impact on the credit markets have left investors reeling. It is the unknown depth of the collapse that has equity investors so
nervous. Financial stocks have been decimated, declining some 44% from the June '07 top!!! In addition, commodity inflation (oil, steel, gold) has combined to
hamper rescue efforts. Does the Fed cut rates to stimulate the economy or does the Fed raise rates to stem inflation? We are in the midst of a financial "catch -22 ".
Now the good news; at this point sentiment is almost uniformly negative and there is virtually no positive news in the media. This may seem like a toxic
combination but as contrarians we recommend leaning against that sentiment during extremes. Despite the correction, we think it is highly likely that the market will
recover during the third and fourth quarter. It is important to remember that after a bear market stocks typically recapture losses in a matter of months.
First and foremost, our results have benefited from a very limited concentration in the financial sector, which continues to feel the aftermath of the subprime crisis.
Portfolio exposure to the strengthening materials and energy sectors as well as an overweighting within the defensive consumer staples sector has also contributed
to our positive second quarter performance. We will continue our search for dominant themes in the market and monitor your portfolio to take advantage of any
opportunities that become evident during the upcoming months.
20%
10%
0%
-10%
-20%
Pfff0miance
2nd Qtr 2008 Fiscal YTD One Year Two Years Since Inception (10/05)
ROCKWOOD CAPITAL ADVISORS
Palm Beach
Gardens GE
M S&P 500
PAGE 4
7.0%
8.5%
4.3%
2.4%
4.6%
-2.7%
-5.1
-9.7%
- 14.8%
-13.1%
2nd Qtr 2008 Fiscal YTD One Year Two Years Since Inception (10/05)
ROCKWOOD CAPITAL ADVISORS
Palm Beach
Gardens GE
M S&P 500
PAGE 4
.A,)
Equity Podolio
Portfolio Summary
# of Stocks
37
Beta
0.9
Yield
1.4%
P/E
18.9x
We Box
Val Cr Grw
Large Cap - 68.5%
Mid Cap - 31.5%
Small Cap - 0%
Average Market Cap $50.9 billion
Median Market Cap $29.4 billion
Top 10 Holdings
1. United States Steel
4.0%
2. Verisign Inc.
3.5%
3. T. Rowe Price Group
3.4%
4. Anheuser Busch Companies
3.2%
5. Baxter Int' I Inc.
3.2%
6. Thermo Fisher Scientific
3.1%
7. Stericycle Inc.
2.9%
8. Hewlett Packard Co.
2.9%
9. Intl Business Machine
2.9%
10. PPL Corp.
2.9%
2nd Quarter 2008
Five Best Impact
1.
United States Steel Co
+45.4%
2.
Anheuser Busch Companies
+31.7%
3.
Loews Corp.
+25.6%
4.
Schlumberger Ltd
+23.7%
5.
1.
Freeport- McMoran +22.3%
Five Worst Impact
Archer Daniels Midland -23.2%
2.
Smith & Nephew Plc
-16.5%
3.
Coca Cola Co
-14.0%
4.
Unilever N V
-13.9%
5.
Energizer Holdings Inc
- 12.0%
ROCKWOOD CAPITAL ADVISORS PAGE 5
e. .I
Equity Analysis and Attribution
Health
Staples Discretionary Care
24%
20%
16.0
16%
12% 9.5 9.6 9.9 10.3
8% 6.8
i
i
4%
0% -- —
30%
20%
10% 1.5
0%
-10% _5.3 -5.8-4.
-20% 1 -11.0
Staples Discretionary Health
Care
.AL)
Sector Allocation
Info
Materials Tech Energy Industrial Tel/Util Finance
201
19.2
14.5
7.6
11.1
16.2
2.8
Performance
27 5
20.5 19.9
13.4
7.2 5.2 5.2 3.6
1.1 _
-2.2
-7.2
-15.8
Materials Info Energy Industrial Tel/Util Finance
Tech
2nd Quarter 2008
® Rockwood
Russell 3000
40&ROCKWOOD CAPITAL ADVISORS PAGE 6
e,- .l
Equity Analysis and Attribution
40%
35%
30%
25%
20%
15%
10%
5%
0%
20%
15%
10%
5%
0%
-5%
-10%
-15%
Value
Style Distribution
Large Cap Mid Capp Small Cap
Value Core Grow th Value Core Grow th Value Core Grow th
Performance
9.6
5.6 3.4 6.0 4 7
-0.1
-2.8 -3.0
Core Grow th Value
Large Cad
.AL)
0.0 1.2
0.0 0.0
MOM
-2.3 -3.3 -1.5
Core Grow th Value Core Grow th
Mid Cap Small Cap
2nd Quarter 2008
® Rockwood
Russell 3000
JokROCKWOOD CAPITAL ADVISORS PAGE 7
Equity Transactions
Sold
Stock
April VCA Antech Inc.
Waters Corp.
May Aetna Inc.
Cigna Corp.
Precision Castparts
Rockwell Collins Inc.
June Energizer Holdings Inc.
Loews Corp.
EBay Inc.
2nd Quarter 2008
Purchased
Commissions Paid
2"d Qtr Fiscal
2008 Year-to-Date
Lynch, Jones & Ryan $322 $1,117
ROCKWOOD CAPITAL ADVISORS PAGE 8
Stock
Mkt Cap
Sector
Description
April
Costco Wholesale Corp.
LCap - Blend
Cons Staples
Super center warehouse retailer
Entergy Corp.
LCap - Val
Utilities
Southern US electric utility
May
Archer Daniels Midland
LCap - Blend
Cons Staples
Food & agricultural products
Medco Health Solution
LCap — Blend
Health Care
Largest US pharmacy benefit manager
Oracle Systems Corp.
LCap — Grw
Info Tech
Leading supplier of software systems
Suncor Energy Inc.
LCap — Blend
Energy
Canadian oil & gas producer
June
Nike Inc.
LCap — Grw
Cons Disc
Worlds leading high - quality athletic footwear
Sigma Aldrich Corp.
MCap — Grw
Materials
Specialty Chemicals
Agnico Eagle Mines
MCap — Grw
Materials
Canadian gold mining
Commissions Paid
2"d Qtr Fiscal
2008 Year-to-Date
Lynch, Jones & Ryan $322 $1,117
ROCKWOOD CAPITAL ADVISORS PAGE 8
�4
Equity Holdings
Exchange
Ticker
Company Name
Shares
Avg
Cost
Total
Cost
Price
Market
Value
Percent of Mkt
Val ( %)
Current Yield
(%)
Annual Income
ISS CGQ
Cash
27,884
1.00
27,884
1.00
27,884
1.5
2.3
627
NA
AEM
AGNICO EAGLE MINES
670
66.70
44,689
74.37
49,828
2.7
0.2
121
--
BUD
ANHEUSER BUSCH COS
940
46.99
44,173
62.12
58,393
3.2
2.1
1,241
0.75
ADM
ARCHER DANIELS MID
1,060
44.11
46,760
33.75
35,775
2.0
1.5
551
0.87
T
AT &T INC
1,440
33.85
48,743
33.69
48,514
2.6
4.8
2,304
0.78
BAX
BAXTER INTL INC
900
58.88
52,994
63.94
57,742
3.2
1.4
783
0.35
BAYRY
BAYER A G
615
54.24
33,355
84.04
51,685
2.8
1.9
1,005
-
CVX
CHEVRON CORP
400
85.62
34,249
99.13
39,652
2.2
2.6
1,040
0.69
KO
COCA COLA CO
740
61.79
45,725
51.98
38,746
2.1
2.9
1,125
0.68
COST
COSTCO WHSL CORP N
690
66.91
46,170
70.14
48,397
2.6
0.9
442
0.40
EIX
EDISON INTL
870
56.45
49,110
51.38
44,966
2.5
2.4
1,061
0.81
ETR
ENTERGY CORP NEW
420
111.76
46,937
120.48
50,602
2.8
2.5
1,260
0.92
FCX
FREEPORT- MCMORAN C
380
97.99
37,235
117.19
44,532
2.4
1.5
665
0.24
HNZ
HEINZ H J CO
1,055
42.28
44,603
47.85
50,920
2.8
3.5
1,751
0.85
HPQ
HEWLETT PACKARD CO
1,210
32.86
39,759
44.21
53,591
2.9
0.7
387
0.53
IBM
INTL BUSINESS MCHN
452
109.57
49,524
118.53
53,576
2.9
1.7
904
0.24
AHONY
KONINKLIJKE AHOLD
3,640
16.10
58,619
13.46
48,976
2.7
1.5
717
-
LMT
LOCKHEED MARTIN CO
500
63.62
31,808
98.66
49,330
2.7
1.7
840
0.12
MDR
MCDERMOTT INTL
690
49.94
34,456
61.89
42,704
2.3
0.0
-
-
MCD
MCDONALDS CORP
680
52.93
35,992
56.22
38,230
2.1
2.7
1,020
0.56
MHS
MEDCO HEALTH SOLUT
930
50.05
46,544
47.20
43,896
2.4
0.0
-
0.27
MTD
METTLER TOLEDO INT
531
102.31
54,325
94.86
50,371
2.8
0.0
-
0.77
NIKE
NIKE INC
670
67.83
45,445
59.61
40,093
2.2
1.5
616
0.30
ORCL
ORACLE SYSTEMS COR
2,190
21.59
47,276
21.00
45,990
2.5
0.0
-
0.45
PEP
PEPSICO INC
540
70.15
37,879
63.59
34,339
1.9
2.7
918
0.92
PPL
PPL CORP
1,000
33.97
33,970
52.27
52,605
2.9
2.6
1,340
0.55
PX
PRAXAIR INC
500
64.06
32,031
94.24
47,120
2.6
1.6
750
0.75
HSIC
SCHEIN HENRY INC
790
46.22
36,515
51.57
40,740
2.2
0.0
-
0.77
SLB
SCHLUMBERGER LTD
470
97.21
45,690
107.43
50,591
2.8
0.8
395
-
SIAL
SIGMA ALDRICH CORP
820
58.39
47,881
53.86
44,165
2.4
1.0
426
0.31
SINN
SMITH & NEPHEW PLC
844
59.69
50,380
54.75
46,209
2.5
1.1
501
-
SRCL
STERICYCLE INC
1,040
32.65
33,958
51.70
53,768
2.9
0.0
-
0.40
SU
SUNCOR INC
840
57.37
48,187
58.12
48,821
2.7
0.3
166
-
TROW
T.ROWE PRICE GROUP
1,090
34.34
37,431
56.47
61,552
3.4
1.7
1,046
0.54
TMO
THERMO FISHER SCIE
1,014
48.67
49,355
55.73
56,510
3.1
0.0
-
0.31
UN
UNILEVER N V
1,510
34.15
51,561
28.40
42,884
2.3
3.4
1,457
-
X
UNITED STATES STL
400
105.25
42,098
184.78
73,912
4.0
0.5
400
0.63
VRSN
VERISIGN INC
1,691
29.03
49,090
37.80
63,920
3.5
0.0
-
0.20
Portfolio Total
$ 1,642,401
$ 1,831,526
100.0
1.4
$ 25,859
2nd Quarter 2008
ROCKWOOD CAPITAL ADVISORS PAGE 9
r
Proxy Voti ng Record
Company
Shares
Voted
Meeting Date
Agenda Item
Mgmt
Rec
I Vote
Cast
Aetna Inc. (AET)
670
5/30/2008
Elect Directors
For
For
Ratify Auditors
For
For
Provide for Cumulative Voting
Against
Against
Require Director Nominee Qualifications
Against
Against
Ahok1 Kon Nv (AHONY)
3,640
4/23/2008
Approve Financial Statements and Statirtory
Reports
For
For
Approve Dividends of EUR 0.16 Per Share
For
For
Approve Discharge of Corporate Executive
Board
For
For
Baxter Intl Inc. (BA)Q
900
5/6/2008
Approve Discharge of Supervisory Board
For
For
Elect K Ross b the Corporate Executive
Board
For
For
Bayer AG (BAYRY)
615
4/2512008
Elect P.N. Wakkie b the Corporafo
Executive Board
For
For
Elect R. Dahan b Supervisory Board
For
For
Elect K.M.A. de Segundo b Supervisory
Board
For
for
Elect M.G. McGrath to Supervisory Board
For
For
Ratify Debilfo Accountants as Auditors
For
For
Amend Articles Re: New Legislation and
Technical Amendments
For
For
Approve Preparation of Regulated
Information in 'English"
For
For
Grant Board Authority to Issue Shares Up
To 10% of Issued Capital
For
For
Auth Board b Exclude Preemptive Rights
from Issuance (Item 16)
For
For
Aulh Repurchase of Shares of Issued Share
Capital
For
For
Anheuser -Busch
940
4/23/2008
Elect Directors
For
For
(BUD)
Approve Omnibus Stock Plan
For
For
Chevron Corp. (CVX)
400
5/28/2008
Ratify Auditors
For
For
Report on Charitable Contributions
Against
Against
Amend Articles /By law s /Charter — Call
Special Meetings
Against
Against
Advisory Vote to Ratify Named Executive
Officers' Compensation
Against
Against
�ROCKWOOD CAPITAL ADVISORS
2nd Quarter 2008
Company
Shares
Voted
Meeting Date
Agenda Item
Mgmt
Rec
vote
Cast
AT &T Inc (T)
1,440
4/2512008
Elect Directors
For
For
Ratify Auditors
For
For
Report on Political Contributions
Against
Against
Exclude Pension Credits from Earnings
Performance Measure
Against
Against
Require Independent Lead Director
Against
Against
Establish SERP Policy
Against
Against
Advisory Vote to Ratify Named Executive
Officers' Compensation
Against
Against
Baxter Intl Inc. (BA)Q
900
5/6/2008
Elect Directors
For
For
Ratty Auditors
For
For
Bayer AG (BAYRY)
615
4/2512008
Rec Finl Stints /Stat Reports; Approve Albc
of Inc & Div for Fiscal 07
For
For
Approve Discharge of Management Board
for Fiscal 2007
For
For
Approve Discharge of Supervisory Board for
Fiscal 2007
For
For
Aulh Share Repurchase Prog & Reissue or
Cncl of Shares
For
For
Appr Issuance of Warrants /Bonds
w/Warrants Attached /Conv Bonds
For
For
Appr Creation of EUR 195.6M Pool of
Capital b Guar Conv Rights
For
For
Appr Issuance of Warrants /Bonds
w/Warrants Attached /Conv Bonds
For
For
Appr Creation of EUR 195.6M Pool of
Capital to Guar Conv Rights
For
For
Appr Agreements with Subs Fuenfle Bayer
W GmbH, Sechste Bayer W GmbH, and
For
For
Ersle Bayer W Aktiengesellschaft
Ratty PricewalerhouseCoopers AG as
Auditors for Fiscal 2008
For
For
Chevron Corp. (CVX)
400
5/28/2008
Elect Directors
For
For
Ratify Auditors
FoFor
Increase Authorized Common Stock
F
Require Independent Board Chairman
Adopt Human Rights Policy
Agaigainst
PAGE 10
Proxy Voting Record (con't)
Company
Shares
Voted
Meeting Date
Agenda Item
Mgmt
Rec
Vote
Cast
Chevron Corp. (CVX)
400
512812008
Report on Env ironmentallm pact ofOil
Sands Operations in Canada
Against
Against
Adopt Ouantitativ a GHG Goals for Products
and Operations
Against
Against
Adopt Guidelines for Country Selection
Against
Against
Report on Market Specific Environmental
Laws
Against
Against
CIGNACorp. (C0
880
4/23/2008
Elect Directors
For
For
Ratify Auditors
For
For
Eliminate Class of Preferred Stock
For
For
Reduce Supennajorily Vote Requirement
For
For
eBay Inc. (EBAY)
1,453
611912008
ElectDirecbrs
For
For
Approve Omnibus Stock Plan
For
For
Ratty Auditors
For
For
Edison Infl (EIS
870
4/24/2008
Elect Directors
For
For
Ratty Auditors
For
For
Adv isory Vote b Ratty N amed Ex ecutiv e
Officers' Compensation
Against
Against
Henry Schein, Inc.
(HSIC)
790
511412008
Elect Directors
For
For
Ratify Auditors
For
For
Infl Business Machines
(IBM)
452
4129/2008
Elect Directors
For
For
Ratify Auditors
For
For
Restore or Provide br Cumulative Voting
Against
Against
Review Ex ecutv e Com pensation
Against
Against
Amend Bylaws b Establish a Board
Committee on Human Rights
Against
Against
Amend Bylaw — Call Special Meetings
Against
Against
Advisory Vote b Ratify Named Executive
Officers' Compensation
Against
Against
Lockheed Martin
(LMT)
500
4/24/2008
Elect Directors
For
For
Ratty Auditors
For
For
Provide for Simple Majority Voting
For
For
Amend Articles /Bylaws /Charter -Non-
Routine
For
For
Amend Omnibus Stock Plan
For
For
Approve Non - Employee Director Stock
Option Plan
For
For
ROCKWOOD CAPITAL ADVISORS
2"d Quarter 2008
Company
Shares
Voted
Meeting Date
Agenda Item
Mgmt
Rec
Vote
Cast
Lockheed Martin
(LMT)
500
412412008
Increase Disclosure of Executive
Compensation
Against
Against
Report on Nuclear Weapons
Against
Against
Advisory Vote ID Ratify Named Executive
Officers' Compensation
Against
Against
Loews Corp. (LTR)
1,095
5/13/2008
Elect Directors
For
For
Ratty Auditors
For
For
Provide for Cumulative Voting
Against
Against
Pay For Superior Performance
Against
Against
Adopt Principles for Health Care Reform
Against
Against
Amend Tobacco Marketing Strategies
Against
Against
McDermott Infl, Inc.
(MDR)
690
5/9/2008
Elect Directors
For
For
Appr amndt to articles of inc b chg period
which brd sets record dt
For
For
Ratify appt of independent reg public acct
firm for they rend 12/08.
For
For
McDonald's Corp.
(MCD)
680
5/2212008
Elect Directors
For
For
Ratify Auditors
For
For
Mettler - Toledo Intl
(MTD)
531
4124/2008
Elect Directors
For
For
Ratify Auditors
For
For
Pepsico Inc. (PEP)
540
5/7/2008
Elect Directors
For
For
Ratify Auditors
For
For
Report on Recycling
Against
Against
Report on Genetically Engineered Products
Against
Against
Report on Human Rights Policies Relating to
Water Use
Against
Against
Report on Global Warming
Against
Against
Advisory Vote b Ratify Named Executive
Officers' Compensation
Against
Against
PPL Corp. (PPL)
1,040
5/21/2008
Elect Direcbrs
For
For
Eliminate Superrnajony Vote Requirement
For
For
Ratify Auditors
For
For
Praxair, Inc. (P1)
585
412212008
ElectDirecbrs
For
For
Require Majority Vote for Non - Contested
Election
For
For
Ratty Auditors
For
For
PAGE 11
Proxy Voting Record (con't)
Company
Shares
Voted
Meeting Date
Agenda Item
Mgmt
Rec
Vote
Cast
Schlumberger Ltd.
470
4/9/2008
Elect Directors
For
For
Adoption and approv al of financials and
div idends
For
For
(SLB)
Against
Against
Unilever N.V. (UN)
1,510
5115/2008
Appov al of adoption of the Schlumberger
2008 Stock Incentive Plan
For
F a
Approval of independent regislared public
For
For
accounting firm
For
For
Smith & Nephew pic
844
51112008
To adopt the report and accounts
For
For
(SNN)
To approve the remuneration report
For
For
To confirm the interim dividends
For
For
To re-elect directors
For
For
Ratify Auditors
For
For
Auth the directors b delemrine the
remuneration of the auditors
For
For
To approve the proposal b change the
For
For
To renew the directors authority to allot
For
For
shares
Designate the board as company body aulh
to issue shs in company
For
For
Renew directors authority for the
disapplicaion of pre-emption rights
For
For
Authorise board b purch shs & depositary
receipts in the company.
For
For
Renew directors Ito auth b make mkt purch
of Company own shares
For
For
To adopt the revised articles of ass ociabon
For
For
Appr the inc of initial mkt v alue of awards
For
For
US Suet Corp. (X)
524
4/29/2008
under the perf sh plan
For
For
Slericycle, Inc. (SRCL)
1,040
5129/2008
Elect Directors
For
For
VeriSign, Inc. (VRSN)
1,691
5/29/2008
Approve Omnibus Stock Plan
For
For
Ratify Auditors
For
For
T. Rowe Price Grp.
1,090
4/10/2008
Elect Directors
For
For
(TROW)
Increase Authorized Common Stock
For
For
Ratify Auditors
For
For
Omer Business
For
For
The Coca -Cola Co.
740
4/1612008
Elect Directors
For
For
(KO)
Ratify Auditors
For
For
Approve Stock Option Plan
For
For
Advisory Vote to Raby Named Ex ecutiv e
Officers' Compensation
Against
Against
ROCKWOOD CAPITAL ADVISORS
e.
2"d Quarter 2008
Company
Shares
Voted
Meeting Date
Agenda Item
Mgmt
Rec
Vote
Cast
The Coca -Cola Co.
740
4/1612008
Require Independent Board Chairman
Against
Against
(KO)
Amend Bylaws b Establish a Board
Commitlee on Human Rights
Against
Against
Unilever N.V. (UN)
1,510
5115/2008
Adopt annual accts & appropriation of profit
for 2007
For
F a
Discharge Exec Dies in office in 07 for the
fulfilment of their task.
For
For
Discharge the non -Exec Dies of in 07 for the
For
For
fulfilment of their task.
Tore- appointexecutivedirectors
For
For
To appoint Mr. J A Lawrence as an
ex ec utiv a director
For
For
To increase GSIP Award and bonus limits
for Mr. J A Lawrence
For
For
To re-appoint non-ex ecutivedirectors
For
For
Ratify Audibrs
For
For
To approve the proposal b change the
For
For
reporting language.
Designate the board as company body aulh
to issue shs in company
For
For
Authorise board b purch shs & depositary
receipts in the company.
For
For
Approve proposal to reduce the capital
For
For
through cancellation of shs.
US Suet Corp. (X)
524
4/29/2008
Elect Directors
For
For
Ratify Auditors
For
For
VeriSign, Inc. (VRSN)
1,691
5/29/2008
Elect Directors
For
For
Ratify Audibrs
For
For
Waters Corp. (WAT)
823
5/14/2008
Elect Directors
For
For
Ratify Auditors
For
For
PAGE 12
i
�l
Proxy Footnote
2"d Quarter 2008
Rockwood Capital Advisors, through our equity sub - adviser, Contravisory Research & Management Co., has retained Institutional Shareholder Services ( "ISS ") to
coordinate and vote proxies with respect to client securities. Proxy voting is an important right of shareholders and reasonable care and diligence must be undertaken
to ensure that such rights are properly and timely exercised. When the Adviser has discretion to vote the proxies of its clients, they will be voted by ISS in accordance
with their Proxy Voting Guidelines in effect from time to time. The Adviser believes that having proxies voted by a professional proxy voting service which has the staff
and resources to carefully evaluate voting issues is in the best interests of its clients and will remove the possibility of encountering conflicts of interest on the part of the
Adviser with respect to the voting of proxies.
The Compliance Officer has reviewed the most recent ISS Proxy Voting Guidelines and believes that having proxies voted in accordance with such guidelines is
consistent with the best interests of the Adviser's clients. The Chief Compliance Officer has also determined that ISS, as a leading proxy voting firm, has the capacity
and competency to adequately analyze proxy issues. The Compliance Officer has also received information from ISS demonstrating to the satisfaction of the
Compliance Officer that ISS has adopted procedures to ensure that it is independent with respect to its proxy voting decisions, including using "Chinese wall" and other
procedures to segregate its proxy voting operations from its corporate servicing operations. ISS has agreed to notify the Adviser if it believes ISS faces a material
conflict of interest with respect to voting the proxies of a particular issuer. The Compliance Officer will monitor ISS to ensure that all proxies are being properly voted by
periodically engaging in "spot reviews" of votes made by ISS. The Compliance Officer will also have ISS confirm annually that it is maintaining appropriate records as
set forth below.
Client quarterly reports contain information with respect to each voted proxy about which the client portfolio held during the period, including (a) the name of the issuer,
(b) the proposal voted upon, and (c) how ISS voted the client's proxy. Additionally, the Compliance Officer will maintain files relating to the Adviser's proxy voting
procedures in an easily accessible place. Records will be maintained and preserved for five years from the end of the fiscal year during which the last entry was made
on a record, with records for the first two years kept in the offices of the Adviser. Records of the following will be included in the files:
• Copies of this proxy voting policy and procedures, and any amendments thereto.
• A copy of each written client request for information on how ISS voted such client's proxies, and a copy of any written response to any (written or oral)
client request for information on how ISS voted its proxies.
The Adviser has arranged with ISS to have ISS maintain and make available promptly upon request (i) copies of each proxy statement that is received for one of
Adviser's clients, provided however that ISS and the Adviser may rely on obtaining a copy of proxy statements from the SEC's EDGAR system for those proxy
statements that are so available, (ii) a record of each vote that ISS casts for one of Adviser's clients and (iii) a copy of any document ISS created that was material to
making a decision how to vote proxies, or that memorializes that decision.
ROCKWOOD CAPITAL ADVISORS
PAGE 13
Rockwood Capital Advisors, LLC
721 Emerson Road, Suite 565
St. Louis, MO 63141
314 - 962 -8336 • toll-free 1 -888- 962 -8336
rockwoodcapital.com
_ -J
- Aug-25, 2008 9:27AM Deerfield Beach Salem Trust No,8457 u, 2
rV/ -
455 Fairway Drive, Suite 103
Deerfield Beach, FL 33441
(954) 725 -4490
Palm Beach Gardens General
Atten_ Sarah Varga
City of Palm Beach Gardens
10500 N. Military Trail
Palm Beach Gardens, Florida 33410
Fee Advice for Period
Total Market Value for Fund:
Detail of Calculation:
Market Value
Market Value Fee
January 1, 2008
$ 2,716,588.50
April 16, 2006
to March 31, 2008
Basis Point Rate Annual Fee
0.0004 $ 1,086.64
Fee for Quarter
Minimum Annual Fee $3,000 $750.00
bifference Btw,Qtrly & Minium
TOTAL FEE for QUARTER
Breakdown of Fee by Account
Account # Name A/C Market Value
M.V. Fee
180105112 R &D $
31,138.48
J•
8 105108 Rockwood $
1,770,810.91
$4888.85
0105109 Sawgrass $
T
778,925.73
$215.03
0105402 ETF $
G
O H
P A
N y
$750.00
455 Fairway Drive, Suite 103
Deerfield Beach, FL 33441
(954) 725 -4490
Palm Beach Gardens General
Atten_ Sarah Varga
City of Palm Beach Gardens
10500 N. Military Trail
Palm Beach Gardens, Florida 33410
Fee Advice for Period
Total Market Value for Fund:
Detail of Calculation:
Market Value
Market Value Fee
January 1, 2008
$ 2,716,588.50
April 16, 2006
to March 31, 2008
Basis Point Rate Annual Fee
0.0004 $ 1,086.64
Fee for Quarter
Minimum Annual Fee $3,000 $750.00
bifference Btw,Qtrly & Minium
TOTAL FEE for QUARTER
Breakdown of Fee by Account
Account # Name A/C Market Value
M.V. Fee
180105112 R &D $
31,138.48
$8.62
8 105108 Rockwood $
1,770,810.91
$4888.85
0105109 Sawgrass $
T
778,925.73
$215.03
0105402 ETF $
135,713.38
$37.50
$
2,7.16,588.50
$750.00
THM IS NOT AN INVOICE — PLEASE DO NOT SEND PAYMENT UNLESS YOU
2,` iSH TO REIMBURSE THE ACCOUNTS.
Quarterly Fee
$271.66
$271.66
$478.34
$750.00
Amount
$8.62'/
$488.85
$215.03
$37.50
$750.00
These fees will be charged to the accounts referenced in the month following the period end. If you have any
questions call your account administrator: Karen Russo at (954) 426 -5770
455 Fairway Drive, Suite 103
Deerfield Beach, FL 33441
(954) 725 -4490
Palm Beach Gardens General
Atten: Sarah Varga
City of Palm Beach Gardens
10500 N. Military Trail
Palm Beach Gardens, Florida 33410
Fee Advice for Period
Total Market Value for Fund:
Detail of Calculation:
Market Value
Market Value Fee
Breakdown of Fee by Account
July 12, 2008
April 1, 2008 to June 30, 2008
S 2,725,082.67
Basis Point Rate Annual Fee
0.0004 $ 1,090.03
Fee for Quarter
Minimum Annual Fee $3,000 $750.00
Difference Btw Qtrly & Minium
TOTAL FEE for QUARTER
Quarterly Fee
$272.51
$272.51
$47749
$750.00
Account # Name A/C Market Value Amount
80105112 R &D $ 350.75 $010
80105108 Rockwood $ 1,829,662.59 $503.56
80105109 Sawgrass $ 758,337.33 $208.71
80105402 ETF $ 136,732.00 $37.63
$ 2, 725, 082.67 $750.00
THIS IS NOT AN INVOICE - PLEASE DO NOT SEND PAYMENT UNLESS YOU
WISH TO REIMBURSE THE ACCOUNTS.
These fees will be charged to the accounts referenced in the month following the period end. If you have any
questions call your account administrator: Karen Russo at (954) 426 -5770
000caQlSAI QOp /fQ�J►
loth
�
,1987 �
St. Louis,��
Ile J*
Icy
Quarterly Statement of Fees
March 31, 2008
City of Palm Beach Gardens General Employees' Pension Plan
Quarter - ending Market Value (Equity): $ 1,772,806.40
0.70% on $ 1,772,806.40 = $ 12,409.64
$ 1,772,806.40 $ 12,409.64 (annual)
Period Covered: December 31, 2007
Management Fees Due Rockwood:
Please remit to:
to March 31, 2008
$ 3,102.41
Rockwood Capital Advisors
attn: Accounts Receivable
721 Emerson Road, Suite 565
St. Louis, Missouri 63141
314 - 962 -8336
314 - 962- 1254(Fax)
888 - 962 -8336 (Toll free)
We appreciate your business! Please call with any questions.
cc: Sara Varga
(For your records. Original to Linda Bookstein @ Salem Trust)
COPY
Quarterly Statement of Fees
June 30, 2008
City of Palm Beach Gardens General Employees' Pension Plan
Quarter- ending Market Value (Equity): 1 $ 1,831,576.95
0.70% on $ 1,831,576.95 = $ 12,821.04
$ 1,831,576.95 $ 12,821.04 (annual)
Period Covered: March 31, 2008
Management Fees Due Rockwood:
Please remit to:
to June 30, 2008
$ 3,205.26
Rockwood Capital Advisors
attn: Accounts Receivable
721 Emerson Road, Suite 565
St. Louis, Missouri 63141
314 - 962 -8336
314 - 962 -1254 (Fax)
888 - 962 -8336 (Toll free)
We appreciate your business! Please call with any questions.
cc: Sara Varga
(For your records. Original to Linda Bookstein @ Salem Trust)
THE
BOGDAHN
GROUP
340 West Central Avenue Suite 300 Winter Haven, FL 33880
C •
Salem Trust - Deerfield Beach
Att: Karen Russo
455 Fairway Drive
Suite 103
Deerfield Beach, Fl 33441
Invoice
Date Invoice #
3/28/2008 3023
Description
Amount
Palm Beach Gardens General
2,000.00
Performance Evaluation and Consulting Services
01/01/08 - 03/31/08
Balance Due $200.00
THE
BOGDAHN
'14,1 GROUP
340 West Central Avenue Suite 300 Winter Haven, FL 33880
C •
Salem Trust - Deerfield Beach
Att: Karen Russo
455 Fairway Drive
Suite 103
Deerfield Beach, Fl 33441
Invoice
Date Invoice #
6/27/2008 3157
Description
Amount
Performance Evaluation and Consulting Services
04/01/08 - 06/30/08
2,000.00
Balance Due $23000.00
04 -02 -2008
Ms. Karen Russo
City of Palm Beach Gardens General Employees Pension Plan
c/o Salem Trust Co.
455 Fairway Drive Suite 103
Deerfield Beach, FL 33441
Sawgrass Asset Management
STATEMENT OF MANAGEMENT FEES
For The Period 1 st Quarter Ending 03 -31 -2008
Portfolio Valuation with Accrued Interest as of 03 -31 -08 785,705
785,705 @ 0.3500% per annum 687
Quarterly Management Fee 687
TOTAL DUE AND PAYABLE 687
SAWGRASS ASSET MANAGEMENT, L.L.C.
07 -02 -2008
City of Palm Beach Gardens General Employees' Pension Plan
Attn: Ms, Karen Russo
CIO Salem Trust Company
c/o Salem Trust Co.
455 Fairway Drive Suite 103
Deerfield Beach, FL 33441
Sawgrass Asset Management
SUMMARY OF MANAGEMENT FEES
For The Period 2nd Quarter Ending 06 -30 -2008
Portfolio Value with Accrued Interest as of 06 -30 -08 765,834
765,834 @ 0.3500% per annum 670
Quarterly Management Fee 670
TOTAL DUE AND PAYABLE 670
Christiansen & Dehner, P. A.
63 Sarasota Center Boulevard
Suite 107
Sarasota, FL 3424
941 - 377 -2200
Phone
City of Palm Beach Gardens
General Employees' Ret. Plan
10500 North Military Trail
Palm Beach Gardens, FL 33410
ATTN: Mr. Alan Owens
941 - 377 -4848
Fax
July 31, 2008
Invoice No. 14993
In Reference To: General Employees' Retirement Plan 9322
Professional Services
Hours
Amount
7/7/2008 Review and revisions to Administrative Forms Package to comply with Florida law
2.00
580.00
regarding use of social security numbers.
7/29/2008 Research and coordination with Ice Miller Law Firm regarding Internal Revenue
0.60
174.00
Code section 415 compliance; review and revise compliance report and memo to
Board and Board Actuary.
For professional services rendered
2.60
$754.00
Additional Charges
Qty
7/7/2008 Copies
39
9.75
Postage
1
2.19
Total additional charges
$11.94
Total amount of this bill $765.94
Previous balance $29.00
Balance due $794.94
City of Palen Beach Gardens
July 31, 2008
Please note that the "Balance Due" figure at the end of this bill reflects both "Total New Charges - Current Period" and
any previous balances due. In most cases, if the previous balance(s) have already been approved for payment but not yet
received in our office, you should be paying only the "Total New Charges - for services and /or expenses" . Thank you.
Please Indicate account number(s) with payment.
(Please Deduct any payments not reflected in Balance due)
Christiansen & Dehner, P. A.
63 Sarasota Center Boulevard
Suite 107
Sarasota, FL 34240
941 - 377 -2200
Phone
City of Palm Beach Gardens
General Employees' Ret. Plan
10500 North Military Trail
Palm Beach Gardens, FL 33410
ATTN: Mr. Alan Owens
941 - 377 -4848
Fax
In Reference To: General Employees' Retirement Plan 9322
Professional Services
3/13/2008 Research and telephone conference with S. Varga re: terminated vested benefit.
3/31/2008 Preparation of Actuarial Services Agreement with Foster & Foster, Inc.
For professional services rendered
Additional Charges:
3/31/2008 Copies
Postage
Total additional charges
Total amount of this bill
Previous balance
Balance due
any.
rec(
L
March 31, 2008
Invoice No. 14373
_ Hours
Amount
0.30
87.00
_ 2.00
580.00
2.30
$667.00
—q—ty
14 3.50
1 2.45
$5.95
$672.95
$1.01695
$1,689.90
figure at the end of this bill reflects both "Total New Charges - Current Period" and
as, if the previous balance(s) have already been approved for payment but not yet
ng only the "Total New Charges - for services and /or expenses" . Thank you.
.use indicate account number(s) with payment.
(Please Deduct any payments not reflected in Balance due)
Christiansen & Dehner, P. A.
63 Sarasota Center Boulevard
Suite 147
S asota, FL 34240
941- 377 -2200
Phone
City of Palm Beach Gardens
General Employees' Ret. Plan
10500 North Military Trail
Palm Beach Gardens, FL 33410
ATTN: Mr. Alan Owens
941 -377 -4848
Fax
In Reference To: General Employees' Retirement Plan 9322
Professional Services
2/7/2008 Telephone conference with A. Owens.
2/11/2008 Preparation and attendance at Board Meeting.
Travel time
For professional services rendered
Additional Charges :
2/11/2008 Car expense
Food expense
iotai additional charges
Total amount of this bill
Previous balance
Accounts receivable transactions
3/4/2008 Payment - thank you. Check No. 309287
Total payments and adjustments
1 f
V�
February 29, 2008
Invoice No. 14219
Hours Amount
0.10
29.00
1.80
522.00
2.50 --...362.50
4.40
$913.,50
OtV
1 95.95
1 7.50
S103.4a
51,016.95
558.00
($58.00)
($58.00)
C;;y of Palm Beach Gardens
Balance due
February 29, 2008
Amount
E
Please note that the 'Balance Due" figure at the end of this bill reflects both "Total New Charges - Current Period" and
any previous balances due. In most cases, if the previous balance(s) have already been approved for payment but not yet
received in our office, you should be paying only the 'Total New Charges - for services and/or expenses" . Thank you.
Please Indicate account number(s) with payment.
(Please Deduct any payments not reflected In Balance due)
Christiansen & Dehner, P. A.
63 Sarasota Center Boulevard
Suite 107
Sarasota, FL 34240
941 - 377 -2200 941 - 377 -4848
Phone Fax
City of Palm Beach Gardens
General Employees' Ret. Plan
10500 North Military Trail
Palm Beach Gardens, FL 33410
ATTN: Mr. Alan Owens
In Reference To: General Employees' Retirement Plan 9322
Professional Services
1/4/2008 Memo to Board regarding Annual Reporting of Insurance Coverage.
1/14/2008 Memorandum to Board regarding social security number reporting.
For professional services rendered
Previous balance
Accounts receivable transactions
1/31/2008 Payment - thank you, Check No. 308535
Total payments and adjustments
Balance due
January 31, 2008
Invoice No. 14064
Hours
Amount
0.10
29.00
0.10
29.00
0.20
$58.00
$742.33
($742.33)
($742.33)
Z of
* Please note that the "Balance Due" figure at the end of this bill reflects both "Total New Charges - Current Period" and
any previous balances due. In most cases, if the previous balance(s) have already been approved for payment but not yet
received in our office, you should be paying only the "T I New Charges - for services and /or expenses" . Thank you.
_--
Please indicate account number(s) with payment.
(Please Deduct any payments not reflected in Balance due)