HomeMy WebLinkAboutMinutes Fire Pension 022805PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND
MINUTES OF MEETING HELD
February 28, 2005
A meeting of the Board of Trustees was called to order at 11:07 A.M. at Station 3, Palm
Beach Gardens, Florida. Those persons present were:
TRUSTEES
Ed Morejon
Philip Buttaravoli
Steve Rogers
Richard Beladino
Tom Murphy (11:45 A.M.)
OTHERS
Margie Adcock, Pension Resource Center,
Administrative Manager
Mike Welker, Bogdahn Consulting,
Investment Monitor
Steve Gordon, Accountant
Patrick Donlan, Actuary
Robert Sugarman & Pedro Herrera,
Attorney (11:45 A.M.)
It was noted that Tom Murphy went to pick up Robert Sugarman and Pedro Herrera as their
car broke down on the Turnpike.
MINUTES
The Board reviewed the minutes of the meeting held January 12, 2005. A motion was
made, seconded and carried 4 -0 to accept the minutes of the meeting held January 12,
2005.
AMSOUTH: DISCUSSION ON FEE INCREASE
Margie Adcock reported that she received a call from Kimberly Kutlenios from AmSouth
Bank who advised that they were not going to increase the fee at this time. Ms.
Kutlenios stated that they decided to forgo any increase on any of the accounts where
Bogdahn Consulting was the Investment Monitor.
ANNUAL AUDIT
Steve Gordon appeared before the Board to present the audit for the period ending
September 30, 2004. The total net assets of the Fund as of September 30, 2004 were
$10,134,987 of which most were in investments. This compares to the total net assets of
the Fund as of September 30, 2003 which were $7,724,389. The net assets in the defined
benefit portion of the Fund were $8,261,650 while the net assets in the share accounts
were $1,873,337. There was a total net investment income of $824,760. The total
contributions to the Fund were $1,765,263 of which $739,310 was from the City;
$618,962 was from the employees; and $406,991 was from the premium tax revenues.
Mr. Gordon then discussed the schedule of funding progress that he is required to include
in the Audit but that is provided for in the Actuarial Valuation. He stated that as of
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October 1, 2003 the funded ratio was 41.19 %. He noted that this is an important measure
of the financial health of a pension plan. Patrick Donlan, the Actuary for the Fund, was
in attendance and noted that the Board had made a change in the funding method from
October 2001 to October 2002 and that the smoothing technique changed from October
2002 to October 2003. Mr. Donlan noted that these changes affected the funded ratio.
There was then a lengthy discussion with Mr. Donlan on the funded ratio. Mr. Donlan
stated that a 4 year smoothing is the most common smoothing period currently used.
There was a discussion on the differences between the Fund having an independent
auditor doing the audit and having the City do the audit. Mr. Gordon discussed the
difference in the level of materiality used and noted that sometimes there can be an
adversarial situation. It was noted that generally the Fund is better off having an
independent auditor doing the audit. A motion was made, seconded and carried 4 -0 to
retain Steve Gordon to perform the audit for next year. A motion was made, seconded
and carried 4 -0 to accept the audit for the period ending September 30, 2004.
Steve Gordon departed the meeting.
ADMINISTRATIVE REPORT
Margie Adcock advised that Steve Rogers was reappointed for another two year term.
Ms. Adcock presented the list of disbursements to be made. Ms. Adcock noted that she
received an invoice from the Actuary right before the meeting which totaled $8,261. A
motion was made, seconded and carried 4 -0 to approve the disbursements listed with the
addition of the invoice for the Actuary.
Tom Murphy, Robert Sugarman and Pedro Herrera entered the meeting.
Ed Morejon asked Robert Sugarman about the certification program offered by the
FPPTA. Mr. Sugarman stated that the Board is required to have a continuing education
policy which has note been interpreted as to what that means as far as how often. Mr.
Sugarman stated that he recommends each Trustee attending one conference per year. He
stated that with respect to the FPPTA certification program offered, a Trustee can do it
but does not have to. He further noted that he can do a one or two hour educational
program for the Board at the last meeting of the year if the Board feels that it has not
meet the continuing education requirements.
ACTUARY REPORT
Patrick Donlan appeared before the Board to present the Actuarial Valuation as of
October 1, 2004 which is applicable to the City's fiscal year ending September 30, 2006.
He noted that the City's required contribution went up by 2% of payroll from 17.1 % to
19.1%. He stated that the total contribution needed is $2,187,718 or 27.1% of payroll.
He noted that the investment return was a negative 1.26% due to the 4 year smoothing.
He stated that they will be dropping off a bad year next year but will still probably be
under the 8.5% assumed rate because of the negative year in 2002. There was then
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discussion on the 8.5% assumed rate of return and whether that still seems reasonable.
Mr. Donlan stated that he thinks it seems reasonable especially in light of the asset
allocation of the Fund. He noted that equities at market value were 66% of the portfolio
and over the long term equities return 10% and bonds return 8 %. Mike Welker agreed
that an assumed rate of 8.50% was reasonable long term. There was discussion on the
current disability retirements of the Plan and how they affect the Valuation. Mr. Donlan
noted that the total cost of the three disabilities is $686,391 which is spread out over 15
years. Mr. Donlan stated that they were not proposing nay changes in the methods or
assumptions at this time. He stated that the disability assumptions seem to be in line with
actual experience. Mr. Donlan discussed the salary increases. He stated that last year
there was hurricane related overtime. They reduced the actual overtime to take that into
account. He reviewed the changes in net assets available for benefits. It was noted that
there were three terminations during the year and there was a discussion on whether they
should receive a refund of contributions on the extra 2% contribution that is going to the
share account. Mr. Sugarman reviewed the Ordinance and noted that Section 38 -59 states
that a terminated member will receive a return of their own accumulated contributions.
He noted that accumulated contributions are a member's own contributions which can be
interpreted as the one a member makes himself rather than any contributions made on
their behalf. It was determined that a member that is not vested and terminates will
receive a refund of their own contributions made to the Plan and not the 2% contributions
made to the share accounts on their behalf. Mr. Sugarman will prepare an opinion letter
for the Board to that effect. Mr. Donlan noted that the funded ratio is 38.33 %. The
Board asked Mr. Donlan to include information on historical rates of return for the Fund
and to add a paragraph that they are not recommending any changes in the assumptions
or methods. A motion was made, seconded and carried 5 -0 to approve the Actuarial
Valuation as of October 1, 2004 as amended.
DISABILITY APPLICATION: KATHLEEN BUSH
Bob Sugarman provided an introduction concerning the disability application process.
He stated that Ms. Bush has applied for a service connected disability. Mr. Sugarman's
office gathered the medical records and employment records of Ms. Bush and set her up
to have an IME. He noted that this is now at the informal hearing level. Mr. Sugarman
discussed with the Board the issues that must be determined and the possible choices of
action that the Board has. Ms. Bush was then asked about her injury. She stated that she
was hired in June 2000 and worked as a firefighter /emt for 1 'h years before her injury
and then worked on light duty for 1 'h years. She stated that she was terminated because
the collective bargaining agreement provides that they have one year to return to work.
She then described her injury that occurred on December 16 or 17, 2002. She stated that
she ran a call and had to lift a very heavy gentleman and felt a pull. The next morning
she woke up in excruciating pain and went to the hospital. She said that there was
nothing else that she did that would have caused her injury. The shift where the injury
occurred was her last shift. She then discussed the treatment she underwent such as
steroid packs, physical therapy, and trigger injections. She also discussed the light duty
work she had been doing at the Department. She did note that Dr. Sherman's report
referred to a prior neck injury in 2000. She stated that she was not sure what he was
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referring to. She noted that she was rear -ended by a Federal Express truck and urged by
the police officers to go to the hospital and take it easy for the day but never had any
problems and never filed any claims regarding the incident. She did not consider it to be
an injury of any kind. She stated that she is now seeing a neurologist as her migraines
have almost tripled since the accident. She is receiving no other treatments currently. She
advised that workers compensation put her on MMI in April or May. She then discussed
what she cannot do now that she could do before the injury such as play tennis, clean the
house, work in the yard. She stated that she does not do things that she knows will cause
pain in her arm. She stated that she has not worked since she left the City and is currently
going to school.
Patrick Donlan departed the meeting.
The City terminated her on July 3, 2004. The City offered her a 911 position which is not
part of the Fire Department. She chose not to take that position because they would not
provide her with a schedule which would accommodate her going to school. It was noted
that there was no prehire MRI. The Trustees then asked various questions. It was further
noted that she was fired because she could not recover to the extent she could do the job
within the time limit specified in the collective bargaining agreement. Mr. Sugarman
noted that that does not mean she is permanently disabled. The Board then reviewed the
questions that the Attorney said had to be answered in the affirmative in order to grant the
application. The Board felt that the core issue here was whether the injury was permanent
and some of the Trustees did not feel comfortable answering that in the affirmative and
felt more can and should be done before that answer can be determined. Ms. Bush made
some comments on the report from Dr. Sherman. She noted that on page one the first
paragraph refers to her left shoulder and it should be her right shoulder. Additionally on
page five it states that she had MRIs at different centers and they were both at the same
center and done by the same doctor. The Board asked her if she could get back to her
prior physical ability and agility and be pain free, would she like to return to work. She
stated that for two years she has had no physical workout at all. Mr. Sugarman noted that
Dr. Sherman has not definitely said that even with further treatment she will not be able
to return as a firefighter. Mr. Sugarman stated that the Board can make a decision today
based on the evidence before them or they can table the matter and see if Ms. Bush is
willing to try what Dr. Sherman has suggested and come back with the results. Ms. Bush
asked the Board to table the matter. A motion was made, seconded and carried 5 -0, with
the agreement of Ms. Bush, to table the matter pending receipt of Ms. Bush's
investigation in pursuit of the recommended medical treatments.
Kathleen Bush departed the meeting.
DISABILITY REVIEWS
Mr. Sugarman reviewed the Ordinance. He discussed with the Board what they needed
to do with respect to the disability reviews of Richard Hodgkins and Kevin Mitchell. It
was noted that Richard Hodgkins was sent to Emory for an IME. The Board reviewed
the report and discussed whether his disability has ceased to exist so as that he is able to
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render useful service as a firefighter. Mr. Sugarman stated that the Board can decide to
either continue his disability pension or start the process to discontinue his disability
pension. A motion was made, seconded and carried 5 -0 to continue the disability pension
of Richard Hodgkins based on the IME.
The Board reviewed the report of Kevin Mitchell and discussed whether his disability has
ceased to exist so as that he is able to render useful service as a firefighter. A motion was
made, seconded and carried 5 -0 to start the process to discontinue the disability pension
of Kevin Mitchell based on the IME. There was a discussion on what would happen if
the City says he is physically unable to do the job. Mr. Sugarman stated that the Board
would be estopped based on the Gaines case. If the City does not hire him based on other
reasons, then he will lose his pension. It was determined that Mr. Sugarman would
correspond with Mr. Mitchell about the Board's decision.
There was a discussion on the ability to use surveillance. Mr. Sugarman stated that the
Board should authorize any Trustee to contact him if they believe a pension recipient
should be put under surveillance. A motion was made, seconded and carried 5 -0 to
authorize any Trustee to contact the Fund Attorney if they believe a pension recipient
should be put under surveillance
INVESTMENT MONITOR REPORT
Mike Welker appeared before the Board. He discussed real estate investments. He noted
that they do not recommend putting money into a publicly traded REIT. However, they
do recommend putting 10% of the bond portfolio into a private placement REIT. It was
noted that they do not receive any fee from anyone except a hard fee from the Fund. He
reviewed the options available to the Board. The Board could have CNL come in and
discuss a private placement REIT; ask Dana to come back with an international
component; or look at specific managers to match up with Dana. He recommended that
they ask Dana what they can do to fully diversify the portfolio or look at other managers
to complement Dana.
Philip Buttaravoli departed the meeting.
Mr. Welker reviewed the performance of separate managers that would be a good
complemetn to Dana. He suggested that the Board perhaps go with someone who is more
oportunistic rather than a large cap growth manager. He reviewed the index relative reisk
statistics and the market capture ratios. He noted that blending another manager with
Dana would enhance the portfolio. Mr. Welker then reviewed internatioanl managers and
their performance. He discussed the advantages to international investing. Mr. Welker
reviewed the revised Invesetmetn Policy Statement. It was noted that the assumed rate
of return is 8.5 %. Additionally the benchmark should be changed to the the Russell 3000
from the S &P because the Russell 3000 has international in it. Mr. Welker stated that
they were recommending diversifying the porfolio. To do so, he recommneded tha they
talk to Dana, look at intervieing two other managers to blend with Dana, and looking at
an international manager. There was further discussion on the benchmark of the Russell
3000. It was noted that the Russell 3000 was all encompassing versus the EAFE. He
noted that they would only break out to the EAFE if they Board hires a specialezed
intematinoal manager. A motion was made, seconded and carried 4 -0 to have Mr. Welker
invite 6 managers to make presentations on April 7.
There was then discussion on the last time the Board interviewed Actuaries. The Baord
decided that in order to fulfill their fiduciary duty, they should send out a RFP for an
Actuary. A motion was made, seconded and carried 4 -0 to have the Administrator to send
out the RFP for responses to be reviewed at the May meeting.
Mike Welker discussed the investment performance for the quarter ending December 31,
2004. The Fund was up 5.89% for the quarter while the benchmark was up 6.10 %. The
Fund was up 8.52% for the year while the benchmark was up 8.05 %. The total market
value of the Fund as of December 31, 2004 was $10,832,000. The asset allocation at
market was 67% in equities; 29% in fixed income; and 6% in cash. The fixed income was
up .38% for the quarter while the benchmark was up .43 %. The total market value of the
fixed income portion of the portfolio was $3,141,000. Mr. Welker advised that for the
past two years the fixed income has underperformed by I%. He stated that he talked to
the portfolio manager last week and noted that they are very defensive. Equities for the
quarter were up 8.78% versus the S &P 500 which was up 9.23 %. The total market value
of the equity portion of the portfolio was $7,264,000.
OTHER BUSINESS
There being no further business, and the next meetings being scheduled for Thursday,
April 7, 2005 at 11:00 A.M. and Monday, May 16, 2005 at 11:00 A.M., the meeting
adjourned at 4:25 P.M.
Respectfully submitted,
Ed Morejon, Secretary