Fort Walton Beach Council agenda — 09-11-2007 regular agenda — reading text

reconvened at 7: 49 p. m. GENERAL EMPLOYEES PENSION FUND cont Discussion continued on composition of the advisory committee and whether or not to expand the role on ~. - investment advice. Comments included that one of the functions of the advisory committee is to perform other duties as and that Council should not assign the committee investment decisions; the assigned belief was expressed that Council has not assigned that to the committeeand that Council should not so when assign that to the committee; that the committee needs the experts to ask the right questions Council would be confident they getting a filtering of the they come with a recommendation, are information from Merrill Lynch. the current Mr. Tierney explained if Council wants investment advice from someone other than investment advisor, who is independent, he recommends it not be part of the committee. He did not think Council needs to have that. He said the key decision is whether Council wants to listen to Merrill He said if Lynch or whether Council wants to have someone else listen and give a recommendation. if Council wants a filter, Council would rather hear it from Merrill Lynch, they are the independent expert; the filter; if want to listen to both, it maybe redundant. He thought they probably want to listen to they Council might wa'nt to have a periodic second opinion about the financial advisor, which is a way to feel comfortable with the advisors being used to make sure they are on track rather than setting up a financial separate committee. He said that is assuming Council still wants to listen to the Merrill Lynch advisor to give recommendations on action. He said Council is using that expert already to provide the advice and if that is the model they want to continue rather than have someone else listen to Merrill Lynch, then what they are doing is fine and maybe just get periodic second opinions. included that During further discussion on the composition of the current advisory committee, comments a decision did not need to be made at this time, and that Council can think about it for a later discussion; that there is no problem with the composition of the committee but they should not have responsibility for financial matters relating to the pension fund; confidence was expressed on the actions ofthe committee in reaching decisions about benefits, but they have somehow gotten in too deeply into the pension fund; it to else; and that it is Council' s responsibility to be the overseers of the fund and not delegate someone and that it is not seen as delegating responsibility, that it is getting the absolute best advice more information. The question was asked of the City Attomey whether there is anything that would prohibit Council from when Merrill Lynch is bringing in outside advisory committee members from different investment groups already on contract and whether there would be an issue with it. The City Attorney advised Council can the is vJ1ether or not the current ordinance that set up any board or committee they want but question has set up the Pension Board would be in conflict, and they just need to make sure that those are clarified if Council chose to do that. is that it be Mr. Linn stated if the decision is made to have an investment committee, his recommendation into the ordinance so that it is very clear on the intent vvith respect to that committee. put pension with Merrill The City Manager mentioned that the role of the Finance Director is to be actively involved to be actively involved with Merrill Lynch and ask the Lynch and Ms. Absher has the skills and the ability Council is periodically reviewed and is questions. She also said that the investment policy approved by updated, dictates the types of investments permitted to invest in and sets out parameters, asset allocations, etc., so there is a framework in which to operate. the issue; that the Finance During further discussion comments included that closure is needed on that it is not the Director is the person to oversee the pension; that another committee is not needed; and role of the committee to o\ersee the investments.  Special Council 8- 22-07 103 GENERAL EMPLOYEES PENSION FUND cont Discussion turned to recommendation 3 that a second- opinion of the Actuarial information should be obtained. Mr. Tierney mentioned all advisors agree that is a good thing to do periodically of the advisors. The question was asked on how often a periodic evaluation should be conducted. The Finance Director mentioned it had never been done and recommended every five years. l Mr. Minich moved to approve the recommendation that a second- opinion of the Actuarial information should be obtained every five years. Mr. Reeves seconded motion. The Human Resource Director reported that the advisory committee did undertake a review and received quotes on doing a peer review. He said if it is the pleasure of Council to proceed, everything is in motion to proceed at a cost of approximately $9, 200 for a peer review and the competitive survey. He said it can be placed on the next Council agenda for consideration. Mr. Tierney mentioned that second- opinions do not have to be complete valuation reports, they can be a review of the work, the methodologies, including the work paper and give an opinion about whether or not they are good with that is a much lesser cost version of a peer review. The Mayor called for the vote on the motion and it carried unanimously with Holmes, 'Miller, Reeves, Garvie, Pullen, Hartwell, and Minich in favor. Discussion turned to recommendation 4 that the City contributions should be fixed and promptly remitted. Mr. Linn commented he was unsure of the intent of the recommendation but the law requires the City contribute the annual required contribution (ARC). He commented to decide to have a fixed contribution above the ARC is fine but the idea to have a fixed contribution without regard to the ARC would not be, in his opinion, consistent with what the law requires. It was commented that the earlier vote on using the delayed payment method makes the issue a moot point since now there will be an established amount for the budget. Mr.Tierney noted the intent is to get stability of contributions and reduce volatility. He said technically it cannot be fixed but they can have stability if funds are set up to cushion the amortization fluctuations. He said the normal costs has its own built in stability and they only have to manage the volatility of the amortizations so that is the key is to set up a stabilization fund so when the amortization charges go up they can take from the stabilization fund to pay that years payment rather than increase the cash requirement from the City. The question was asked about the suggestion in the recommendation that contributions should be directed to investment 26 times per year. Mr. Tierney explained that the suggestion has to do with the timing of when the money is put in and to put it in consistently over the year. J The question was asked on how much should be invested to build up stability. Mr.Tierney stated his first recommendation would be to always pay at least the normal cost. He explained the City is currently paying normal cost plus amortization so in years when there is no amortization; they would pay normal cost and in years where there would be a surplus credit instead of reducing the normal cost, put that in the stabilization fund. He said that can be set up in the policy currently even though nothing happens currently because now there would be a plan; and every year there is a little extra money in the budget, think of the pension stability fund also. The City Manager mentioned a reserve fund of sorts was established in 2004 for the pension where 500, 000 or $ 600, 000 was designed for pension costs. She said that is when the fund balance was growing and there was extra money at the end of the year so it was designated in the fund balance of the general fund, but the only difference is that it did not go directly to the pension fund to be invested, it was invested more conservatively with other city funds.  Special Council 8- 22- 07 1 04 GENERAL EMPLOYEES PENSION FUND conl Ms. Balent was requested to explain the comment in her report that the contributions are currently being directed as required by the Plan documents. She explained if the timing is changed they may receive more investment returns on the contributions but the city may lose interest earnings in the general fund. Mr. Tierney stated his recommendation is let the Finance Director and City Manager make the decision on how best to put the money into the plan. The question was asked if contributions are placed in a separate account from where the retirees are ~.." paid. Mr. Tierney stated when the city puts the money in and when the checks are put out is independent. The Finance Director explained it has been past practice to use the contributions to fund the outgoing payments and a very small amount, if any, of the current contributions goes toward investment.