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TRUSTEES OF THE EMPLOYEES' PENSION FUND MEETING
CITY OF CLEARWATER
July 15, 2002
Present: Brian Aungst Chair
Whitney Gray Vice-Chair/Trustee
Hoyt Hamilton Trustee
Frank Hibbard Trustee
William C. Jonson Trustee
Also Present: William B. Horne II City Manager
Pamela K. Akin City Attorney
Rick Ebelke Interim Human Resources Director
Margie Simmons Finance Director
Lee Dehner Pension Trustees Attorney
Cynthia E. Goudeau City Clerk
Brenda Moses Board Reporter
The Chair called the meeting to order at 9:05 a.m. at City Hall.
To provide continuity for research, items are in agenda order although not
necessarily discussed in that order.
ITEM #2 - Approval of Minutes: 6/17/02
Trustee Jonson moved to approve the minutes of the June 17, 2002, meeting, as
motion
recorded and submitted in written summation by the City Clerk to each Trustee. The
carried
was duly seconded and unanimously.
ITEM #3 - Request for acceptance into membership:
Request for the Pension Advisory Committee to approve membership for the
employees listed below:
Delaney Mulholland, Joanne Bunton, Mary Anne Fetuuaho, Itay Seigel, Theresa Irby,
Jim Halios, Joey Sprecher, Debey David, Juan Santos, Brent Peters, Alex Rakita, Simon
George, Christopher Vamis, Daniel Holcomb, John Klinefelter, Anthony Gomillion, and Kevin
White.
Trustee Gray moved to accept the request for membership in the Employees’ Pension
Plan for Delaney Mulholland, Joanne Bunton, Mary Anne Fetuuaho, Itay Seigel, Theresa Irby,
Jim Halios, Joey Sprecher, Debey David, Juan Santos, Brent Peters, Alex Rakita, Simon
George, Christopher Vamis, Daniel Holcomb, John Klinefelter, Anthony Gomillion, and Kevin
motioncarried
White. The was duly seconded and unanimously.
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ITEM #4 – Regular Pension(s) to be granted: Benjamin Sturgis
Benjamin Sturgis, Police Officer, Police Department, was employed by the City on
March 27, 1974, and his pension service credit is effective on October 7, 1974. His pension
will be effective June 1, 2002.
Based on an average salary of approximately $54,526 per year over the past five
years, the formula for computing regular pensions, and Mr. Sturgis’ selection of the 100% Joint
& Survivor Annuity, this pension will approximate $40,493 annually.
This pension was approved by the Pension Advisory Committee on June 13, 2002.
Section 2.393 (p) provides for normal retirement eligibility when a participant has completed
twenty years of credited service in a type of employment described as “hazardous duty” and
further specifically defines service as a Police Officer as meeting the hazardous duty criteria.
Mr. Sturgis qualifies under the hazardous duty criteria.
Trustee Hamilton moved to approve the request for Benjamin Sturgis for regular
motioncarried
pensions. The was duly seconded and unanimously.
ITEM #5 – Pension to be vested: Donald Beckman
Donald Beckman, Air Conditioning Technician, Solid Waste/General Services
Department, was employed by the City on January 6, 1986. Mr. Beckman terminated from City
employment on May 31, 2002.
The Employees’ Pension Plan provides that should an employee cease to be an
employee of the City of Clearwater after completing ten or more years of creditable service
(pension participation), then 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.
Beckman would have completed twenty years of service and reached age 55 on January 6,
2006. His pension will be effective February 1, 2006. This pension was approved by the
Pension Advisory Committee on June 13, 2002.
Trustee Jonson moved to approve the request for a pension to be vested for Donald
motioncarried
Beckman. The was duly seconded and unanimously.
ITEM #6 – Authorize staff to conduct a search for a “small capitalization value equity” style
manager for the Employees Pension Fund, authorize Callan & Associates to assist in the
search, authorize the cost of the search, including staff travel of approximately $3,500 and
Callan’s fee of $25,000 to be paid from the pension fund.
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For the 12-month period ending March 31, 2002, the Employees Pension Plan had a
rate of return of 2.14% versus a custom benchmark of 2.08%.
On the equity side, common stocks are defined by the market size of a company into
three main categories. The market sized being defined as the numbers of shares of common
stock multiplied by the market price per share. Generally defined large capitalization (cap)
stocks are those with a market value of $15 billion and higher. Mid cap stocks with a value of
$1 to $15 billion. Small cap stock has a market value under $1 billion.
Over time the sector with the highest historical rate of return is the small cap value
sector. One of the reasons for this is that these stocks are generally not followed or
understood by “Wall Street”. When Wall Street starts to follow these stocks the value of the
stock tends to increase. Most companies start out as smaller companies and become larger.
Finding these small cap companies requires more work and research than finding larger
companies and thus the fees tend to be higher. However in this case, the higher fees result in
a higher rate of return.
At March 31, 2002, the plan had investments with a market value of $443.8 million.
Three breakdowns of the investment styles are as follows:
Domestic Large Cap Value 23% Large Cap Stocks 42%
Domestic Large Cap Growth 11% Mid Cap Stocks 18%
Domestic Mid Cap Growth 18% Fixed Income 40%
International Large Value 4% Total 100%
International Large Growth 4%
Fixed Income 40% Value Stocks 27%
Total 100% Growth Stocks 33%
Fixed income 40%
Total 100%
The cost of committee member travels to investigate/research the top ranked firm(s) is
estimated at $3,500. The actual amount will be affected by the location of the investment
manager(s) and the number of firms that need to be researched.
The Investment Committee and the plan’s advisors recommend the addition of a “small
cap value ” style manager to better diversify the investments. This diversification will reduce
the risk to the pension plan while increasing the probability of a higher rate of return.
The City contracts with Callan & Associates to provide performance measurement and
to provide information on investment managers.
Callan’s fee for the search will be $25,000. By directing investment trades through a
selected broker, the Bank of New York, pays Callan’s fees. Our money managers use this
selected broker only if they cannot get better execution someplace else.
Staff will bring back the results of the small cap value manager search in the fall.
In response to a question, Investment Manager Steve Moskun said $10 million would
be allocated to the small cap value fund.
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Trustee Gray moved to authorize staff to conduct a search for a “small capitalization
value equity” style manager for the Employees Pension Fund, authorize Callan & Associates to
assist in the search, authorize the cost of the search, including staff travel of approximately
motion
$3,500 and Callan’s fee of $25,000 to be paid from the pension fund. The was duly
carried
seconded and unanimously.
ITEM #7 – Approve an increase in the amount authorized to be spent with
PriceWaterhouseCoopers, LLP for actuary and other related pension consulting services by
$20,000 for a not-to-exceed cost of $144,000 for the three-year period ending December 31,
2004.
PriceWaterhouseCoopers is the Employees’ Pension Plan actuary. A contract was
approved on November 13, 2001 for a three-year contract ending 12/31/04 for a not to exceed
cost of $94,000. This contact included:
1/1/02 Actuary Report $19,000
1/1/03 Actuary Report $19,500
1/1/04 Actuary Report $20,000
Actuary Assumption Study $20,000
Miscellaneous Consulting $15,500
Total $94,000
In addition, a review has been underway looking at some potential changes to the
pension plan. On March 18, a $30,000 increase to the contract was approved by the Trustees
for a new not-to-exceed amount of $124,000. This amount was to conduct an actuarial
analysis on the cost of the following alternates:
1. Deferred Retirement Option (DROP)
2. “Opt in” option for excluded employees
3. Purchase of prior governmental service credit
4. Designation of beneficiary and joint pensioner option
5. Normal retirement conversion benefit
6. Disability presumption for “extra duty” assignments
7. Reemployment option
8. Increase to cost of living adjustment (1.5% to 3%)
9. Increase to benefit formula multiplier (2.75% to 3.5%)
10. Average final compensation calculation (high 5 to high 3)
The $30,000 included a formal impact statement for the State for any changes
implemented.
All of the above changes were analyzed and annual costs were provided. After these
costs were provided, $10,060 in additional services related to potential plan changes were
necessary.
These additional costs combined with any additional analysis required prior to the
resolution of potential plan changes will exhaust the amount already approved for
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miscellaneous consulting over the three-year contract. This agenda item requests an additional
$20,000 to cover the $10,060 above plus any additional services needed directly related to
potential plan changes.
In response to a question, Interim Human Resources Director Rich Ebelke suggested
as no agreement has been finalized, the Special Pension Trustees meeting scheduled for July
19, 2002, be cancelled. Although no bargaining sessions have been scheduled, negotiations
are expected to continue. He said in order to have met the timeline to place pension changes
on the November 2002 ballot, an agreement was to be reached and ratified by all 5 labor
unions, presented to and approved by the PAC (Pension Advisory Committee) last week,
approved by the Pension Trustees on July 19, and scheduled for first and second readings in
August. The City intends to move forward with language changes as required by Federal
regulations. Those changes do not require a referendum.
It was commented that it was ambitious to try to reach an agreement in time for the
November ballot. Assistant City Manager Garry Brumback said the City is focusing on the
operational contract. In response to a question, Pension Trustees Attorney Lee Dehner said
the current contract will remain in effect until a new one is ratified
Trustee Jonson moved to approve an increase in the amount authorized to be spent
with PriceWaterhouseCoopers, LLP for actuary and other related pension consulting services
by $20,000 for a not-to-exceed cost of $144,000 for the three-year period ending December
motioncarried
31, 2004. The was duly seconded and unanimously.
ITEM #8 – Other Business – None.
ITEM #9 – Adjourn
The meeting adjourned at 9:17 a.m.
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