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10-15-1996 \ I ...... ...., Edgewater Firefighters' Pension Fund Regular Meeting Tuesday, October 15, 1996 6:32 p.m. Call to Order: The Regular Meeting of the Firefighters Pension Board was called to order on October 15 1996 by Ms. Landreville at 6:32 p.m. in the Fire Administration Office. Members present were: Bill Vola, Fred Munoz and Jill Landreville. Secretary Patricia Richards arrived at 6:30 p.m. Chairman Nancy Williams was absent. Also present were Steve Burkhalter from Smith Barney and Beth Lang and Dave Russo from ICC Capital Management, and Lisa R. Miller, Recording Secretary. Minutes: The Regular Minutes from the August 28, 1996 meeting were submitted for approval. Mr. Vola moved to approve the minutes as submitted. Mr. Munoz seconded. Motion CARRIED 3-0. Investment Report: Beth Lang gave her presentation at this time. There was discussion regarding investments and where the market stood at this time and also the growth portfolio and the value portfolio. There was discussion regarding bond cash. There was discussion regarding investment ratios for stocks to bonds. This pension plan has a ratio of 30% stocks to 70% bonds. Dave Russo talked about the volatility of the bond portfolio. There was discussion regarding the actuarial assumption. Mr. Russo stated that they had not met the 8% actuarial assumption and they would probably not make it for the next five years. He stated the reason for this was the asset allocation of 30% stocks and 70% bonds and that since 1946 it has shown this ratio has not been successful. There was discussion regarding options to change this. One option discussed was to change the assumption, another option was to change the investment ratio, or possibly a combination of both. It was noted if the investment ratio was upped to 50/50, it did not mean that they had to invest that way unless the board wanted to. It was noted the plan was a local option plan and any changes would have to be approved through council and Attorney Sugarman for proper wording. Mr. Burkhalter stated that if they changed the ability to asset allocate that doesn't mean they have to invest that way it means that they have the flexibility to invest that way. Mr. Burkhalter suggested that if everyone agrees to go 60/40. He added that this change would cost the board so they might want to make it large enough so they wouldn't have to pay to change things again any time soon. The Board thanked Ms. Lang and Mr. Russo for coming and took a brief recess at 7: 15. Meeting resumed at 7:20 p.m. Mr. Vola asked Mr. Burkhalter for guidance on the 70/30 investment ratio. He asked Mr. Burkhalter how comfortable he felt with this allocation and how does the Board protect itself from a claim of fiduciary irresponsibility. Mr. Burkhalter stated he was very comfortable with the 70/30% ratio since they were looking at long term investments since our people were younger. He added as far as fiduciary responsibility that it could be argued both ways. He stated the Board has a fiduciary responsibility to have some flexibility if their advisors think that it is appropriate and that Board agrees to go more into equities with the potential to make higher returns. There was discussion regarding investments and investment ratios. Mr. Burkhalter stated Mr. Sugarman would have to draft the change for the board to present it to Council, and there would be a slight expense factor for it to be done. He added that City Council would have to ratify the change before the board could act on it. Mr. Vola moved that the Board pursue a request through legal counsel and ultimately through City Council to amend the pension ordinance to allow the Board to authorize an asset allocation up to a maximum of 70% in equity and 30% in bonds for the funds investment portfolio. Secretary Richards seconded. There was discussion regarding the change and how it would be made. This change would be an amendment to Chapter 175. It was noted that the firefighters did not come to the meetings. There was discussion regarding the actuarial assumption. Motion CARRIED 4-0. It was noted that the next step would be to contact Mr. Sugarman to see what hoops needed to be jumped to put this in motion. It was also noted that a request should be made to ICC Capital Management to get copies of the investment ratio paperwork they had provided to the Board, be provided to the City Council when it was presented. The Board thanked Mr. Burkhalter and he left at this time. Old Business: Ordinance 95-0-13 which is the changes in the Ordinance that hadn't gone through yet. It was noted that all items had been sent to the parties that needed to respond to the State's questions. Medical Benefits: A letter had been sent to Foster & Foster to get the cost of doing a study to include medical benefits from the last meeting. New Business: Mr. Munoz moved to pay ICC Capital Management bills in the amounts of $101.48 and $266.80. Mr. Vola seconded. Motion CARRIED 4-0. 1 \.~- '-" ...., Firefighter Pension Fund Regular Meeting 10/15/96 Page 2 There was a request from the membership to check into having the same risk classification as firefighters under the Rorida State retirement system for anyone in service on or after 1/1/93. It became 3% for them and ours is 21/2%. There was discussion regarding upping the percentage for our firefighters to have the same rate. It was noted the Rorida State retirement system was going bankrupt. Mr. Vola moved to request authorization to send a similar letter to the one that addressed health care benefits to Foster and Foster to get the costs related to doing the study that would up it to 3%. Secretary Richards seconded. There was discussion regarding whether or not the additional benefit would come from the membership or the City. Motion CARRIED 4-0. Mr. Munoz stated he voted yes with reservations. There was discussion regarding the upcoming actuarial valuation with Foster & Foster. Mr. Munoz brought up the subject that the Finance Department was doing more work for a plan of $293,000 than when they were doing with the Police Pension Board for $1.6 million. He asked what the Board was trying to accomplish or whether one company would do everything. Mr. Munoz asked if they were getting any value from all the moving around of the funds. Mr. Munoz stated maybe in a year from now or earlier the Board would have to look into the performance with the new flexibility and is it worth the effort. He asked to what end was it they are doing all this shuffling of paperwork, if they were not adding any value, then why are we doing it. It was noted if the fund did well it did not mean that there would be any extra money for an extra benefit for the membership it just means the City's contribution is less. There was discussion regarding how the cost would compare between having Principal Mutual or another larger firm manage the fund with how the Board was investing now through ICC Capital Management and Smith Barney. Mr. Munoz stated the costlbenefit between the two options needed to be considered and that the fund was very labor intensive for the Finance Department whereas the Police Department fund that was much larger took less work as it was being handled through Principal Mutual. Mr. Munoz stated the Board should get a copy of the Police Dept. actuarial report to see how they compared. There being no more business to come before the Board at this time, Mr. Vola moved toeadjourn. Secretary Richards seconded. Meeting adjourned at 8:23 p.m. Minutes respectfully submitted. Lisa R. Miller Recording Secretary. 2