06/16/2008
PENSION TRUSTEES AGENDA
Location: Council Chambers - City Hall
Date: 6/16/2008- 1 :30 PM
1. Call to Order
2. Approval of Minutes
2.1 Approve the minutes of the May 13, 2008 Pension Trustees meeting as submitted in written summation by
the City Clerk.
~ Attachments
3. Pension Trustee Items
3.1 Employees listed below be accepted into membership in the City of Clearwater's Employees' Pension Plan
as approved by the Pension Advisory Committee.
I@l Attachments
3.2 Approve the recommended administrative expenditures totaling $330,500 for fiscal year 2008-09.
~ Attachments
3.3 Martha Pages, Engineering Department; Varghese Jolly, Public Utilities Department; and Gregory Smith,
Gas Department, be granted regular pensions under Section(s) 2.393 and 2.397 of the Employees' Pension
Plan as approved by the Pension Advisory Committee.
~ Attachments
4. Other Business
5. Adjourn
Meeting Date:6/16/2008
Pension Trustees Agenda
Council Chambers - City Hall
SUBJECT / RECOMMENDATION:
Approve the minutes of the May 13,2008 Pension Trustees meeting as submitted in written summation by the City Clerk.
SUMMARY:
Review Approval: 1) Clerk
Cover Memo
Item # 1
Attachment number 1
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TRUSTEES OF THE EMPLOYEES' PENSION FUND MEETING MINUTES
CITY OF CLEARWATER
May 13, 2008
Unapproved
Present:
Frank Hibbard
Carlene Petersen
John Doran
George N. Cretekos
Paul Gibson
Also Present:
William B. Horne, II
Jill S. Silverboard
Rod Irwin
Pamela K. Akin
Cynthia E. Goudeau
Brenda Moses
Chair
Trustee
Trustee
Trustee
Trustee
City Manager
Assistant City Manager
Assistant City Manager
City Attorney
City Clerk
Board Reporter
The Chair called the meeting to order at 2:24 p.m. at City Hall.
To provide continuity for research, items are in agenda order although not
necessarily discussed in that order.
2 - Approval of Minutes
2.1 - Approve the minutes of the April 14, 2008 Pension Trustees meetinQ as submitted in
written summation by the City Clerk.
Trustee Cretekos moved to approve the minutes of the Pension Trustees meeting of
April 14, 2008, as recorded and submitted in written summation by the City Clerk to each
Trustee. The motion was duly seconded and carried unanimously.
3 - Pension Trustees Items
3.1 - Accept the Actuary's Report for the Employees' Pension Plan for the plan year beQinninQ
January 1, 2008.
The January 1, 2008 actuary report for the Employees' Pension Plan indicates that a
minimum City employer contribution of $10,074,978, equivalent to 12.54% of covered payroll, is
required for fiscal 2009. This is a decrease from the fiscal 2008 required contribution of $12.5
million, or 15.77% of pay. The current required minimum contribution, per State Statute, of
$10.1 million exceeds the minimum required contribution per the plan ordinance of 7% of
payroll, or approximately $5.6 million.
The decrease in the required employer contribution was primarily due to an actuarial
investment return (5-year weighted average) of 10.68% versus the prior year's 5-year weighted
average return of 7.87% and the expected return of 7.5%. Also contributing to the decrease
was a decrease in the number of active employees participating in the plan, from 1,692 for the
prior year valuation to the current level of 1,641.
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The improvement in the actuarial investment return is the result of three years of
investment performance that exceeded the 7.5% assumed rate - 20.08%, 9.73%, 11.80%, for
calendar years 2003, 2004, and 2006, respectively; partially offset by two years of investment
earnings below the assumed rate - 6.67% for calendar year 2005 and 7.29% for calendar 2007.
The actuarial investment return five-year average of 10.68% was a significant improvement
from the January 1, 2007 report's average return of 7.87%, due to the "dropping off" of a
negative return of (8.83)% for calendar 2002 from the five-year average, replaced by 7.29% for
calendar 2007.
The plan has a current "credit balance" of $14,031,276, which can be used to subsidize
future City employer contributions. During fiscal 2008, the employer contribution was budgeted
across City departments at 13% of covered payroll, with the balance of the 15.77% required
contribution funded from the credit balance. This effectively reduced the credit balance from
$15.0 million to the current $14.0 million level.
Staff recommends funding the employer contribution for fiscal 2009 at the same
budgeted level of 13% versus the legally required minimum requirement of 12.54%, which
would increase the credit balance by an estimated $400,000. Due to a significant downturn in
the investment markets during calendar 2008 to-date, in addition to the fact that a very
significant 20.08% return for calendar 2003 will be dropping out of the five-year investment
return average, to be replaced by the yet-to-be determined 2008 rate, a substantial decrease in
the average investment return, and a resulting significant increase in the required contribution
rate is a major concern for fiscal 2010. Consequently, staff recommends maintaining the 13%
contribution rate for fiscal 2009. The actuary report states that ultimate long-term cost of the
plan is expected to be around 20% of payroll.
Donna White, PricewaterhouseCoopers said the underlying cost of the plan is 20% of
payroll. The actuary report was based on four assumptions: investment returns, withdrawal
tables (rate of employees leaving), salary scale, and retirement dates. She said the report also
anticipates a 6% salary increase comprised of 3% cost of living increases and 3% merit
increases. In response to a question, Ms. White said the normal employer defined contribution
rate in the private sector is between 4% - 7%. Private sector employers also are required to
make social security contributions.
Trustee Gibson moved to accept the Actuary's Report for the Employees' Pension Plan
for the plan year beginning January 1, 2008. The motion was duly seconded and carried
unanimously.
3.2 - Approve a new aQreement between the City of Clearwater and the law firm of Klausner &
Kaufman, P.A., to serve as outside counsel to the Pension Advisorv Committee and Pension
Trustees and authorize the appropriate officials to execute same.
The law firm of Klausner & Kaufman, PA, has acted as outside counsel to the Pension
Advisory Committee and Pension Trustees since 2003 at a rate of $250 per hour. At this time,
Klausner & Kaufman is asking for a rate increase to $300 per hour.
The service provided by the firm since 2003 has been exceptional. The total paid to the
firm for the last two years was approximately $153,000. The majority of these expenses are
related to the processing of disability applications for plan participants.
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City staff recommends the approval of a new agreement with Klausner & Kaufman at
the rate of $300 per hour.
It was remarked that as it has been five years, a salary increase is appropriate, and that
real cost savings are in time management.
Trustee Cretekos moved to approve a new agreement between the City of Clearwater
and the law firm of Klausner & Kaufman, P.A., to serve as outside counsel to the Pension
Advisory Committee and Pension Trustees and authorize the appropriate officials to execute
same. The motion was duly seconded and carried unanimously.
3.3 - Authorize staff to proceed with a search for a consultant to perform an Asset Allocation
Studv.
At the Trustee's meeting of August 13, 2007, the Trustees expressed an interest in
having a new asset allocation study performed once the recommendations in the current asset
allocation were complete. The pension plan is currently in the final stage of implementing the
current asset allocation study with the averaging in of the funding for the emerging market and
REIT managers.
Staff will issue a RFQ to as wide an audience as possible using trade publications, trade
reference information and to consultants who have expressed interest in the search.
In addition to the asset classes that the plan currently uses, the following asset classes will be
included in the asset allocation study to see if they will provide a benefit to the Plan.
Master Limited Partnerships
Income
Long Duration Bonds
Timber
Non US Fixed
Bank Loans
Private Equity
Absolute Return
Cash Equivalents
Micro Cap
Alpha Overlays
I nfrastructu re
Active Alpha
Real Estate
130-30
Hedge Funds
I nflation Bonds
Options
Active Duration Fixed
Core Equities
Puts/Calls
Cash & Investments Manager Steve Moskun said the cost for the last asset allocation
study was $15,000. Staff will bring a contract to the Trustees for approval.
Trustee Petersen moved to authorize staff to proceed with a search for a consultant to
perform an Asset Allocation study. The motion was duly seconded and carried unanimously.
3.4 - Extend the contract for pension investment performance measurement and consultinQ
with Callan Associates until June 1, 2009 and authorize the appropriate officials to execute
same.
Callan Associates was hired as a result of an RFQ (Request for Qualifications) process
and was awarded a three-year contract with the Pension Plan to provide performance-reporting
services to the Plan. The contract can be renewed for additional periods of time with the
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consent of both parties. Staff is requesting and Callan has agreed to renew the contract at the
same price and terms until June 1, 2009. Staff has been very satisfied with the services
provided by Callan.
Due to the fact that the investment specifics of the Plan have expanded (more
investment classes, additional managers, etc.), the Pension Investment Committee is in the
process of reviewing the Callan contract for any appropriate changes and in the near future will
bring back a recommendation to approve a longer contract with Callan or to go out for a RFQ.
Trustee Doran moved to extend the contract for pension investment performance
measurement and consulting with Callan Associates until June 1, 2009 and authorize the
appropriate officials to execute same. The motion was duly seconded and carried unanimously.
3.5 - Approve the QrantinQ of a reQular pension to Nancy Yankus effective March 1,2008.
Nancy Yankus was hired on June 30, 1987, as a part-time employee and did not
become full-time and pension eligible until November 26, 1990. Her original part-time hire date
of June 30, 1987, was entered into the payroll system as her pension effective date. Ms.
Yankus terminated employment on July 10, 1999. At that time the incorrect date of June 30,
1987, was erroneously used on her Application for Vested Pension Rights. Since Ms. Yankus
was not eligible to participate in the Pension Plan while a part-time employee, the pension date
should have been November 26, 1990. Consequently, she did not have ten years of creditable
pension service upon her termination.
After consulting with Klausner & Kaufman, the City's pension attorneys, they
recommended that Ms. Yankus be allowed to make the required pension contribution on the
salary she received as a part-time employee from June 30, 1987, through November 25, 1990.
During that time she earned $35,256.71. The 8% employee contribution required at that time
would have amounted to $2,850.54.
Upon payment of the pension contributions, Ms. Yankus would be eligible to receive a
pension based on 12 years and 10 days of service. Her base benefit would amount to $673.59.
Additionally, Ms Yankus would be required to sign a waiver stating she will seek no further
action against the City of Clearwater's Employees' Pension Plan. Ms. Yankus has agreed to
these terms and has provided payment and the signed waiver. Upon approval of the Trustees,
her benefit will be paid retroactively to March 1, 2008.
Trustee Gibson moved to approve a regular pension for Nancy Yankus, effective March
1, 2008. The motion was duly seconded and carried unanimously.
3.6 - Employees listed below be accepted into membership in the City of Clearwater
Employees' Pension Plan.
Name, Job Class, Department/Division
Salvatore Accomando, Police Officer/Police
Patrick Pongon, Field Service Rep./Customer Service
Joseph Doiron, Electronics Technician /Engineering
Penny Johnston, Senior Payroll Technician/Finance
Date
3/3/08
2/19/08
3/3/08
3/17/08
Pension
Elig.
Date
3/3/08
2/19/08
3/3/08
3/17/08
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Michael Billian, Fleet Mechanic/Solid Waste-General Services
3/17/08
3/17/08
Trustee Petersen moved to accept the listed employees into membership in the City of
Clearwater's Employees' Pension Plan. The motion was duly seconded and carried
unanimously.
3.7- Review of the Pension investment performance for the year ended December 31, 2007.
The following is the performance for the Pension Plan for the period ending December
31,2007:
Last Year
Last 3 Years
Total Fund
Public Funds
7.22%
8.30%
8.54% Benchmark 6.30%
9.90%
7.64%
These numbers show that the City has beaten its benchmark (which is based upon the
allowable investments for which it had permission to invest in during these time periods), but
has not beaten the midpoint of other public pension plans. This under performance compared
with other public pension plans was caused by our investment restrictions. The City is in the
final phases of adjusting the restrictions that staff believes were a major cause of these
performance issues. Fundamental changes have occurred to the plan with the implementation
of the Asset Allocation Study. The following are some of the highlights.
During the last calendar year the following investment styles were added:
Small Cap Growth Manager - Independence Capital
Mid Cap Value Manager - Wedge Capital
During the last calendar year the following new managers were added:
Aletheia Research & Management - Large Cap Value
HTGI Russell 1000 Value Index - Large Cap Value
Since the first of this year the following investment styles were added:
Emerging Markets
Emerging Markets
REITs
Active EAFE
Active EAFE
Eaton Vance
Wellington Trust Company
Security Capital
Earnest Partners
Wentworth Hauser
Partial Funding
Partial Funding
Partial Funding
Fully Funded
Fully Funded
The averaging-in funding (for the above partial funded managers) will be completed in
the near future. Once this is completed the Asset Allocation Study will have been implemented
except for the High Yield portion. Given the problems with sub-prime mortgages and structured
investment vehicles this implementation has been put on hold.
Discussion ensued regarding the many issues that need to be addressed regarding
changing the Pension Plan. It was suggested a workshop be scheduled to do so. Concerns
were raised regarding the low percentile of investment returns. Ms. Simmons reported some
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of the regulatory restrictions impacting performance in the past, have been removed and staff
anticipates improved results in coming years. It was suggested out-sourcing be investigated to
reduce future pension costs.
3.8 - James McGee, Solid Waste/General Services Department; Kathy Faye Chetoka, Gas
Department; and Mary Stuart, Police Department, be Qranted reQular pensions under Section(s)
2.393 and 2.397 of the Employees' Pension Plan as approved by the Pension Advisory
Committee.
James McGee, Solid Waste Supervisor II, Solid Waste/General Services Department,
was employed by the City on November 23, 1971, and his pension service credit is effective on
May 23, 1972. His pension will be effective June 1, 2008. Based on an average salary of
approximately $53,291 per year over the past five years, the formula for computing regular
pensions, and Mr. McGee's selection of the 100% Joint & Survivor Annuity, this pension will be
approximately $51,737 annually.
Kathy Faye Chetoka, Gas Program Coordinator, Gas Department, was employed by the
City on July 6, 1984, and her pension service credit is effective on March 11, 1985. Her
pension will be effective June 1,2008. Based on an average salary of approximately $58,521
per year over the past five years, the formula for computing regular pensions, and Ms.
Chetoka's selection of the 100% Joint & Survivor Annuity, this pension will be approximately
$36,046 annually.
Mary Stuart, Police Officer, Police Department, was employed by the City on April 9,
1975, and her pension service credit is effective on that date. Her pension will be effective April
1, 2008. Based on an average salary of approximately $62,559 per year over the past five
years, the formula for computing regular pensions, and Ms. Stuart's selection of the 100% Joint
& Survivor Annuity, this pension will be approximately $56,099 annually.
These pensions were approved by the Pension Advisory Committee on April 10, 2008.
Section 2.393 provides for normal retirement eligibility when a participant has reached age 55
and completed twenty years of credited service, has completed thirty years of credited service,
or has reached age 65 and completed ten years of credited service. Section 2.393 also
provides for normal retirement eligibility when a participant has completed twenty years of
credited service or has reached age 55 and completed ten years of credited service in a type of
employment described as "hazardous duty" and further defines service as a Police Officer as
meeting the hazardous duty criteria. Mr. McGee qualifies under the 30 years of service criteria.
Ms. Chetoka qualifies under the age 55 and 20 years of service criteria. Ms. Stuart qualifies
under the hazardous duty criteria.
Trustee Doran moved that James McGee, Solid Waste/General Services Department;
Kathy Faye Chetoka, Gas Department; and Mary Stuart, Police Department, be granted regular
pensions under Section(s) 2.393 and 2.397 of the Employees' Pension Plan as approved by the
Pension Advisory Committee. The motion was duly seconded and carried unanimously.
3.9 - Arthur SpraQue, Jr., Gas Department, be allowed to vest his pension under Section(s)
2.397 and 2.398 of the Employees' Pension Plan as approved by the Pension Advisory
Committee.
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Arthur Sprague, Jr., Sales Representative, Gas Department, was employed by the City
on November 18, 1996, and began participating in the Pension Plan on that date. Mr. Sprague
terminated from City employment on March 18,2008.
The Employees' Pension Plan provides that should an employee cease to be an
employee of the City of Clearwater or change status from full-time to part-time after completing
ten or more years of creditable service (pension participation), such employee shall acquire a
vested interest in the retirement benefits. Vested pension payments commence on the first of
the month following the month in which the employee normally would have been eligible for
retirement.
Section 2.393 (p) provides for normal retirement eligibility when a participant has
reached age 55 and completed twenty years of credited service, has completed 30 years of
credited service, or has reached age 65 and completed ten years of credited service. Mr.
Sprague would have completed at least 30 years of service on November 18, 2026. His
pension will be effective December 1, 2026. This pension was approved by the Pension
Advisory Committee on April 10, 2008.
Trustee Petersen moved that Arthur Sprague, Jr., Gas Department, be allowed to vest
his pension under Section(s) 2.397 and 2.398 of the Employees' Pension Plan as approved by
the Pension Advisory Committee. The motion was duly seconded and carried unanimously.
4. - Other Business - None.
5 - Adjourn
The meeting adjourned at 3: 11 p. m.
Chair
Employee's Pension Plan Trustees
Attest:
City Clerk
Pension Trustees 2008-05-13
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Meeting Date:6/16/2008
Pension Trustees Agenda
Council Chambers - City Hall
SUBJECT / RECOMMENDATION:
Employees listed below be accepted into membership in the City of Clearwater's Employees' Pension Plan as approved by the Pension
Advisory Committee.
SUMMARY:
Name, Job Class, and Department/Division
Hire Date
Pension
Elig.
Date
Catherine Lee, Planner I/Planning
Cameron Moeller, Sr. Marine Lifeguard/Mar. & Aviation
Scott Starkey, Fleet Mechanic/Solid Waste/General Ser.
Shane O'Neill, Planner IIPlanning
3/19/08
3/30/08
3/31/08
4/14/08
3/19/08
3/30/08
3/31/08
4/14/08
Review Approval: 1) Clerk
Cover Memo
Item # 2
Meeting Date:6/16/2008
Pension Trustees Agenda
Council Chambers - City Hall
SUBJECT / RECOMMENDATION:
Approve the recommended administrative expenditures totaling $330,500 for fiscal year 2008-09.
SUMMARY:
The Employees' Pension Plan does not have a legal requirement to have a budget. The Trustees must approve all expenditures. The
following are routine expenditures that staff is requesting approval for the sake of efficiency.
These expenditures involve routine business matters and are mostly small dollar amounts.
Printing and binding is for the statutorily required annual information distribution to the members of the pension plan.
Postage is for certified mailings required under a new rule passed by the Pension Trustees and other pension related materials.
Membership dues are for the annual dues for the Florida Public Pension Trust Association.
Training and travel are for the estimated cost of training required by state statute. The total paid for training and travel for FY07 was $0
and for FY08 YTD is $2,162.01.
Klausner & Kaufman is our pension attorney firm. Annual attorney's fees also include medical bills that are for the medical services
authorized by the Pension Advisory Committee. Total paid in FY07 was $59,818.16 and FY08 YTD is $30,069.27
Reimbursement to the General Fund and the Self Insurance Fund is for the cost of the oversight of the Plan and is recognized as revenue
to the general and insurance funds. This reimbursement covers the services provided by Human Resources, Payroll, and Finance.
At this time we are not budgeting for a Referendum for the next year. If a referendum is needed, approval will be sought at that time.
Money manager, safekeeping, actuary, and pension administration fees are all set by contracts approved by the Trustees and are not
included in this request.
Type:
Current Year Budget?:
Budget Adjustment Comments:
Current Year Cost:
Not to Exceed:
For Fiscal Year:
Appropration Code
0646-various
Operating Expenditure
None
Budget Adjustment:
None
$330,500
1011/08 to 9/30/09
Annual Operating Cost:
Total Cost:
$330,500
Amount
$330,500
Appropriation Comment
Review Approval: 1) Financial Services 2) Office of Management and Budget 3) Clerk
Cover Memo
Item # 3
Attachment number 1
Page 1 of 1
City of Clearwater
Employees' Pension Plan
Administrative Expenses
Increase/
Description FY 08/09 FY 07/08 Decrease
Printing & Binding 400 $ 400
Postage 400 400
Memberships 600 500 100
Misc 100 200 (100)
Training 5,000 5,000
Travel Expense 5,000 5,000
Reimbursement to Self Insurance Fund (Human Resources) 44,000 45,000 (1,000)
Physicals 41,000 42,000 (1,000)
Reimbursement to General Fund (Accounting & Finance) 22,000 24,500 (2,500)
Reimbursement to General Fund (Payroll) 72,000 71,500 500
Klausner & Kaufman (including Medical Bills) 140,000 140,000
$ 330,500 $ 334,500 (4,000)
Item # 3
Meeting Date:6/16/2008
Pension Trustees Agenda
Council Chambers - City Hall
SUBJECT / RECOMMENDATION:
Martha Pages, Engineering Department; Varghese Jolly, Public Utilities Department; and Gregory Smith, Gas Department, be granted
regular pensions under Section(s) 2.393 and 2.397 of the Employees' Pension Plan as approved by the Pension Advisory Committee.
SUMMARY:
Martha Pages, Customer Service Representative, Engineering Department, was employed by the City on May 2, 1994, and her
pension service credit is effective on that date. Her pension will be effective June 1, 2008.
Based on an average salary of approximately $40,504 per year over the past five years, the formula for computing regular pensions, and
Ms. Pages' selection of the IO-Year Certain & Life Annuity, this pension will approximate $14,858 annually.
Varghese Jolly, Water Plant Operator A, Public Utilities Department, was employed by the City on October 19,1987, and his
pension service credit is effective on that date. His pension will be effective June 1,2008.
Based on an average salary of approximately $56,688 per year over the past five years, the formula for computing regular pensions, and
Mr. Jolly's selection of the 100% Joint & Survivor Annuity, this pension will approximate $36,046 annually.
Gregory Smith, Gas Specialist, Gas Department, was employed by the City on December 4, 1976, and his pension service credit is
effective on that date. His pension will be effective July 1,2008.
Based on an average salary of approximately $48,085 per year over the past five years, the formula for computing regular pensions, and
Mr. Smith's selection of the Joint & Survivor Annuity, this pension will approximate $41,713 annually.
These pensions were approved by the Pension Advisory Committee on May 8, 2008. Section 2.393 provides for normal retirement
eligibility when a participant has reached age 55 and completed twenty years of credited service, has completed thirty years of credited
service, or has reached age 65 and completed ten years of credited service. Ms. Pages qualifies under the 10 years of service and age 65
criteria. Mr. Jolly qualifies under the age 55 and 20 years of service criteria. Mr. Smith qualifies under the age 55 and 20 years of
service and the 30 years of service criteria.
Review Approval: 1) Clerk
Cover Memo
Item # 4