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03/14/2002PENSION ADVISORY COMMITTEE MEETING CITY OF CLEARWATER March 14, 2002 Present: Dick Fitzgerald Chair Whitney Gray Vice Chair/Commissioner John Schmalzbauer Committee Member Tom Jensen Committee Member Absent: Ed Hart Committee Member/Commissioner Bill Jonson Committee Member/Commissioner John Lee Committee Member Also Present: Paul O’Rourke Human Resources Director Lee Dehner Pension Advisory Committee Attorney Margie Simmons Finance Director Deb Ford Human Resources Analyst Patricia O. Sullivan Board Reporter The Chair called the meeting to order at 9:03 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 Two typos were noted in the February 14, 2002 minutes. Member Gray moved to approve the minutes of the regular meeting of February 14, 2002, as recorded and submitted in written summation to each board member. The motion was duly seconded and carried unanimously. ITEM #3 - Employees to be Heard – None. ITEM #4 - Action Items a) Review and Action on Employee Requests for Years of Service Pension 1) Charles J. Dunn, Jr. – Police Officer, Police Department 2) Charles S. Flowers – Fire Deputy Chief, Fire Department 3) Thomas H. Walbolt – Recreation Supervisor, Parks & Recreation Department 4) Patricia R. Buzek – Senior Accountant, Finance Member Jensen moved to approve Years of Service Pensions for Charles J. Dunn, Jr., Charles S. Flowers, Thomas H. Walbolt, and Patricia R. Buzek. The motion was duly seconded and carried unanimously. b) Review and Action on Employee Requests to Vest Pensions 1) Carla Collins – Police Service Technician, Police Department Carla Collins has resigned her position after being employed by the City for more than 15 years and will qualify to receive a reduced pension beginning May 1, 2011. Member Schmalzbauer moved to approve the request by Carla Collins to vest her pension. The motion was duly seconded and carried unanimously. c) Approval of New Hires as Pension Plan Members As of March 7, 2002, the City had 1710.15 FTEs out of 1834.7 budgeted positions. Lance Kielich originally was hired as permanent part-time; changed to full-time and pension eligible as of February 11, 2002. Robert Russell originally was hired as permanent part-time; changed to full-time and pension eligible as of January 26, 2002. Member Jensen moved to accept these employees into membership in the Pension Plan: Date of Pension Employment Elig. Date Kim Peterson, Field Service Rep. Customer Service 01/28/02 01/28/02 Raymond Galluccio, Maint. Worker II Police Department 02/11/02 02/11/02 Melanie Kindred, Police Information Tech. Police Department 02/11/02 02/11/02 Lance Kielich, Equipment Operator III Public Services 03/24/01 02/11/02 Edward Lear, Solid Waste Worker Solid Waste 02/11/02 02/11/02 Robert Russell, Marine Facility Operator Marine & Aviation 03/21/84 01/26/02 Ronald Francis, Network Support Tech. II Information Technology 02/15/02 02/25/02 ITEM #5 – Pending/ Business a) Edwin Feldhaus – Set Hearing Date for Non-job-connected Disability Pension Request Consensus was to schedule a hearing for Edwin Feldhaus’ request for a non-job-connected disability pension on April 11, 2002. b) PriceWaterhouse Coopers Contract On August 13, 2001, the Pension Trustees approved the FY (fiscal year) Pension Plan budget to include $30,000 for pension actuary and consulting services related to potential changes to the Pension Plan. The PriceWaterhouse Coopers, LLP, contract needs to be increased by $30,000, from $94,000 to $124,000, to conduct actuarial analyses on the costs of potential Pension Plan changes: 1) DROP (Deferred Retirement Option Plan); 2) “opt in” option for excluded employees; 3) purchase of prior government 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 of cost of living adjustment from 1.5% to 3%; 9) increase to benefit formula multiplier from 2.75% to 3.5%; 10) average final compensation from average salary of 5 best years of last 10 to three best years of credited service; and 11) formal actuarial impact statement, which must be prepared for the State prior to implementation of any changes. Human Resources Director Paul O’Rourke reviewed the approval schedule necessary for the issue to appear on the November 2002 ballot as a referendum item. Some items may be controversial and not considered this year. The City Commission will determine if items are listed together or separately. It was indicated Items #8, #9, and #10 will be the most expensive to fund. The actuary will determine actual costs. Necessary funds were earmarked for Pension Plan changes and are available Member Gray moved to recommend the Pension Trustees approve an increase in the amount authorized to be spent with PriceWaterhouse Coopers, LLP for actuary and other related pension consulting services related to potential changes in the Pension Plan by $30,000 for a total cost not to exceed $124,000 for the three-year period ending December 31, 2004. The motion was duly seconded and carried unanimously. To hasten the approval process, it was recommended related items be presented to the City Commission in July, following approval by the Pension Trustees. PAC (Pension Advisory Committee) Attorney Lee Dehner will submit separately for approval ordinance language to implement items to comply with the Economic Growth and Tax Relief Reconciliation Act of 2001. These changes are required by law and do not need approval via referendum. In response to a question, Mr. O’Rourke said the unions have been included in the process since the first draft was provided in August 2001. Three meetings with the unions have occurred and three more are planned. Staff will not negotiate changes with the unions until actuarial costs are determined. Mr. O’Rourke will report on union support for issues when the items are presented to the PAC, Pension Trustees, and City Commission for approval. Request for $40,000 Additional for Christiansen & Dehner for Remainder of FY 2001/02. The Pension Trustees approved a Pension Plan budget, which included an estimated $50,000 for legal services. To date, $30,000 has been committed to Christiansen & Dehner for legal services. Staff requests approval of an additional estimated $40,000 to Christiansen & Dehner for the remainder of FY (fiscal year) 2001/02 to cover: 1) increased number of applications being processed, with 8 pending; 2) late receipt of bills for expenses incurred in previous fiscal year with $5,777.71 bill for September 2001 paid in October; 3) attorney attendance at six meetings at $1,000 each with staff and unions to discuss proposed pension changes; and 4) disability medical expenses charged to legal services with 8 pending cases, estimated at $1,000 each. Mr. O’Rourke stated Christiansen & Dehner are billed and pay medical expenses related to disability cases. The firm also coordinates medical appointments and gathers documents necessary for presentation to the PAC. Additional funding for Christiansen & Dehner to oversee the Investment Committee and $5,000 for reviewing contracts is not part of this request. In response to a question, Mr. O’Rourke said costs for normal representation by Christiansen & Dehner averages $30,000 annually. Each disability case costs more than $1,000 to process. The request also covers meeting costs related to proposed Pension Plan changes. Mr. Dehner said added costs will cover work to restate the Plan and disability work, which has increased from 2 or 3 cases last year, to 9 pending ones. Mr. O’Rourke requested a cushion so that another request for additional funds will not be necessary. Finance Director Margie Simmons said without approval, staff cannot issue checks, even to cover medical expenses, once the $30,000 budget is spent. Mr. O’Rourke said currently, monthly legal expenses now average $5,500. In response to a question, Ms. Simmons said approximately $6,000 of the other $20,000 approved by the Pension Trustees was used for legal services provided by Cypen & Cypen. The remainder has not been spent and was not designated for Christiansen & Dehner. A new purchase order will cover next year’s expenses for Christiansen & Dehner. In response to a question, Ms. Simmons anticipated the City will receive Christiansen & Dehner’s bill for September’s services in October and will pay that bill from the next fiscal year budget. Member Jensen moved to approve an expenditure in the estimated amount of $40,000 to the law firm of Christiansen & Dehner for legal services for the remainder of FY 2001/02 budget. The motion was duly seconded and carried unanimously. Approval of Settlement Agreement with SunTrust SunTrust, one of the Pension Plan’s custodian banks, holds assets managed by 6 or the Plan’s 10 money managers. On May 31, 2001, the Pension Plan was funding a new international manager with $20-million taken from other money managers. A SunTrust employee incorrectly contacted money manager, Vanderbilt, and informed them to convert $20-million from bonds into cash. Staff has no reason or logic as to why SunTrust notified Vanderbilt, as Vanderbilt was not a party to this transaction. After noticing the cash remained in their account following the transfer date, Vanderbilt notified the City about the SunTrust directive. Staff directed Vanderbilt to reinvest the funds into the appropriate securities. Plan performance measurement consultant Callan and Associates has estimated the resulting damages to the plan. As interest rates moved significantly over the short period of time, actual costs are difficult to calculate. Callan and Associates estimated a market loss of $103,236.27 and transaction costs of $76,532.69 for a total estimated loss of $179,768.96. SunTrust calculated the City’s loss at $79,445.03. Staff has worked with SunTrust to resolve this problem without litigation. Due to the unique characteristics of the market at that time, staff feels $140,000 would be reasonable compensation. SunTrust has offered $109,959. Considering costs associated with litigation, staff recommends accepting the SunTrust offer. In response to a question, Ms. Simmons said the exact size of the loss is difficult to determine due to a large number of variables, including negotiations, which are required as part of the bond purchase process. In response to a question, Cash & Investments Manager Steve Moskun said this represents a good faith settlement. SunTrust makes only a minor profit acting as the City’s custodian bank. It was suggested the City threaten to take its business to another bank. Concern was expressed SunTrust had made the error and was unwilling to make the plan whole. It was felt it is in the best interest of the Plan to accept the settlement and avoid litigation costs. Member Jensen moved to recommend the Pension Trustees approve the settlement agreement with SunTrust for damages in the amount of $109,959 to be paid by SunTrust to the Employees’ Pension Plan. The motion was duly seconded and carried unanimously. ITEM #6 – Director’s Reports - None. The next PAC meeting is scheduled for April 11, 2002. ITEM #7 - Committee Members to be Heard – None. ITEM #8 - Adjournment The meeting adjourned at 9:54 a.m.