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09-14-2009 General Employees' Pension Board of Trustees Minutes - Regular Meeting September 14, 2009 Page I of5 CITY OF EDGEW A TER GENERAL EMPLOYEES' PENSION BOARD Regular Meeting MINUTES Monday, September 14,2009 CALL TO ORDER! ROLL CALLIDETERMINATION OF A QUORUM The Edgewater General Employees' Pension Board held its quarterly (regular) meeting on Monday, September 14, 2009 in the City Hall Conference Room at the City of Edgewater, Florida. Members Present: Gigi Bennington John Brackin Brenda Dewees Tyna Hilton Bobby Laramore Jonathan McKinney Tim Sopko None H. Lee Dehner Sheila Hutcheson Mike Welker, The Bogdahn Group Allen Smith, Principal (by telephone) Russ Anthofer, Principal (by telephone) Tonya Niday (by telephone) Julie Christine, Personnel Department Tracey Barlow, City Manager Members Absent: Plan Attorney: Board Administrator: Consultants: Principal: City Staff: Vice-Chairman Dewees called the meeting to order at 10:55 a.m. Members indicated their presence; there was a quorum, with all members present. ELECTION OF OFFICERS Member Hilton made a motion to nominate Member Bennington as Chairman; Member Sopko seconded the motion, which passed unanimously. Chairman Bennington then asked for nominations for Vice-Chairman and Secretary. Member Laramore made a motion to nominate Member Dewees as Vice-Chairman; Member Sopko seconded the motion, which passed unanimously. Member Laramore made a motion to nominate Member Hilton as Secretary; Member Sopko seconded the motion, which passed unanimously. APPROVAL OF MINUTES - Special Meeting: July 29, 2009; Quarterly Meeting: June 10,2009 Member Dewees made a motion to approve the minutes of the July 29 and June J 0, 2009 meetings; Member Hilton seconded the motion, which passed unanimously. General Employees' Pension Board of Trustees Minutes - Regular Meeting September 14, 2009 Page 2 of5 NEW BUSINESS Consideration/Approval of Summary Plan Description (SPD) from Principal Ms. Tonya Niday reviewed the changes included in the SPD, as follows: . The previous age requirements were removed; . New language was added regarding employee contributions; . New section was added on elective contributions and "law limits" was moved to its own section (to include 2009 limits). It used to be under a section titled "Adjustments"; and the meaning of elective contribution included new wording; . Pay year definition has changed to reflect the rolling twelve months' compensation basis approved by the Board; . Early retirement had a new sentence added for additional clarification; . Language was added to reflect Amendment #2 to the 1997 Plan Document, dealing with members who continued to work after taking retirement benefits; . Added requirement of five years' service for eligibility for disability; . Changed wording on small amounts being more than $1000 but less than $5000; . Added the IRA option; and . Added the 75% joint and survivor retirement option. Attorney Dehner advised Ms. Niday that the Board is in the process of having the pension plan documents adopted by ordinance. The amendments that have been approved since the October 1, 2008 restatement would need to be added to the SPD. Mr. Dehner also asked about the tax updates, etc., being added as Principal prepares the updated SPD. Ms. Niday said that she would update the SPD since the ordinance will just reflect the documents/amendments already prepared by Principal. Principal contract amendment (November 2008) for approval/execution (deferred from March 16, 2009 and June 10,2009 meetings) Attorney Dehner opened by noting that this contract is already being used by Principal and the investments specified are underway. Mr. Dehner and Performance Consultant Mike Welker asked why the Board would need to sign to authorize actions that Principal is already taking. Mr. Welker had advised the Board not to sign the contract without having more information for him to review than what has been provided. Mr. Anthofer, Principal, provided some information and said that, essentially, Principal makes the decisions as to the most appropriate accounts for investments as part of their duties. Mr. Welker asked why the Board would need to sign the contract, given Principal's position in this regard that they make the investment decisions unilaterally. Chairman Bennington asked how Principal could initiate the new investments without the Board's contract approval/signature and Principal said that is what they have been hired for. The Chairman then echoed Mr. Welker's statement that the Board need not sign since Principal had proceeded without approval anyway. She said approval now would just to be protect Principal. Attorney Dehner said the concern is that the Board should not sign off on the management decisions of Principal. It is the Board's position that since Principal has the authority to make the investment decisions, this contract does not require the Board's signature. Mr. Dehner reminded Principal that the plan monies need to be invested in investments allowed by State, Federal, and local law. Principal then said that they may have to remove new investments listed in the contract. The Board's Attorney stated that the Board is not going to join with Principal in the investment decisions, as the Board is not qualified to make investment decisions on their own. Principal advised that if the Board doesn't General Employees' Pension Board of Trustees Minutes - Regular Meeting September 14, 2009 Page 3 of 5 sign the contract, they will use the prior agreement and will make adjustments to the current investments based on the prior contract; i.e., they will rebalance and reallocate based on the previous agreement. The prior contract was signed in 1996 by the then City Manager and Jack Ascherl; there was also a contract signed in 2005 by then City Manager Ken Hooper. Mike Welker asked if Principal is ensuring that the investments are in compliance with State laws. The Principal representatives did not seem to understand the statutory limitations to which Mr. Welker referred. Attorney Dehner stated that Principal needs to divest in a manner to ensure no loss to the fund. If there is a loss, the fund will need to be made whole. Principal asked about Mike Welker's role, which was addressed by Attorney Dehner. Principal stated that they will make changes and will report back to the Board next quarter. Mr. Dehner again cautioned that Principal must not do anything to damage the fund, especially if they have breached an agreement by proceeding to initiate investments thinking that the Board would subsequently sign off on the agreement. He reiterated that whatever action is taken by Principal should be in the best interest of plan, should not involve any financial detriment to the Plan, and should be done in a prudent manner. Principal's response on investment direction by the Board There was no discussion with Principal on this. The Plan Administrator had provided the Board Principal's email message in this regard, which said that Principal would no longer be a named fiduciary to the Plan if investment direction was given by the Board. OLD BUSINESS - None. REPORTS (ATTORNEY/CONSULTANTS) The Bogdahn Group, Performance Consultant - Quarterly report - June 30, 2009 Mr. Welker stated that he had reviewed the quarterly performance at the July 29, 2009 special meeting, so he commented only on the historical underperformance of Principal, as documented in the June 30, 2009 report. H. Lee Dehner, Plan Attorney Mr. Dehner discussed again the process of separation from Principal, noting the information that will be needed: the initial agreement with Principal, changes to the agreement, and any relevant minutes of meetings with Principal. He also said that it will be important for him to review the documents and to be apprised of the personal recollections of staff as to Principal's representations regarding the benefit index and their failure to advise of the onerous contract termination provisions. The Administrator will work with Personnel Director Donna Looney in this regard. It will also be necessary to obtain releases from retirees to release Principal from any liability for their future retirement payments and then to get thar money back from Principal. There will be a meeting with retirees to review the information related to the releases so that as many releases as possible can be obtained. At that point, there will be the conference call with Principal and their Attorney to terminate the Plan. The Attorney's report continued with an update on the amendments (Rule 60T) that had been proposed by former State Actuary Charles Slavin, noting that the amendments are on the "back burner" at this time and that it is expected that the new proposals will be much different and better. Mr. Dehner concluded by reporting that the Federal legislation which provides up to $3000/year pre-tax retiree insurance premiums General Employees' Pension Board of Trustees Minutes - Regular Meeting September 14, 2009 Page 4 of 5 for public safety retirees (normal and disability retirees) now has a proposal to extend it to all public retirees, to remove the administrative burdens, and to index the $3000/year. Sheila Hutcheson, Plan Administrator Update on IRS filings submitted July 8, 2009 and August 27, 2009 in response to IRS questions The Administrator reported that the July 8 and August 27 responses were filed since the June 10, 2009 meeting in order to ensure timeliness. There has been another request for information dated September 2, 2009, in which the IRS questions the authority of the Board officers to sign documents on behalf of the Plan. The letter seems to state that the Mayor would be recognized by the IRS as an authorized signer; alternatively, some proof must be submitted of the authority of the Vice-Chairman to sign. Principal has indicated that, with the Board's concurrence, the simplest way to deal with this issue is to have the Mayor sign the documents. The Board concurred. Ms. Hutcheson had asked Principal, during the telephone conference earlier in the meeting, what mechanism would be needed to allow Principal to discuss the filings with the IRS; Ms. Niday said she would check on this and would let the Administrator know. Status Report: Submittal of plan restatement/amendments to City Council for adoption by reference The City Manager stated he would submit the October 1, 2008 Plan Document and recent amendments to the City Council for adoption by ordinance. He anticipated that the review of the documents and preparation of the ordinance would take about eight weeks. The Plan Administrator was asked to ensure that the Personnel Director has all of the documents. FPPTA Trustees' School in Bonita Springs (10/4-10/7/09) The Administrator advised Board members to contact the Finance Department to arrange payments if attending the School and that the forms for registration and lodging are available on the FPPT A website. Pension Fiduciary Insurance Renewal - $3,516.82 (same as last year's premium). Ms. Hutcheson reported that she will advise Florida League of Cities to renew the policy for the plan year October I, 2009 through September 30, 20 10. The City will pay the $175.00 premium for waiver of recourse endorsement. Service Agreement - Principal The Administrator recommended that Attorney Dehner review the updated (July, 2009) Service Agreement before it is approved for execution by the Board. She had provided a copy of the Agreement to him and Ms. Niday had been asked to send the prior Service Agreement, if available. This item will be on the next agenda. PROCESSED DISBURSEMENTS/RETURN OF CONTRIBUTIONSIDEPOSITS DISBURSEMENTS 1. Sheila Hutcheson, plan administration fees (June - August, 2009) - $2700.00 ($900/month); postage/mileage expense - $0.44 2. Christiansen & Dehner, professional legal fees, $116.00; $1311.84; $116.00 General Employees' Pension Board of Trustees Minutes - Regular Meeting _ September 14, 2009 Page 5 of5 3. The Bogdahn Group, performance consultant fees, 2nd quarter, 2009 - $2500.00 4. Principal, invoice for preparation of plan amendment (deducted from account) - $500.00 DEPOSITS None Member McKinney made a motion to approve the disbursements/return of contributions and deposits; Member Dewees seconded the motion, which passed unanimously. TRUSTEES', STAFF, EMPLOYEES', and PUBLIC REPORTS, DISCUSSION and ACTION Mr. Welker requested ajoint special meeting in October to discuss an Investment Policy Statement (IPS) and to review information on investment managers. He will coordinate with the Plan Administrator for scheduling. ADJOURNMENT Member Hilton made a motion to adjourn the meeting; Member Sopko seconded the motion, which passed unanimously. The Chairman adjourned the meeting at 12:55 p.m. Respectfully Submitted: Approved: Sheila Hutcheson, Plan Administrator