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07-31-1987 Regular MeetingMIAMI SHORES VILLAGE PENSION BOARD MEETING The meeting of the Miami Shores Village Pension Board was called to order on Friday July 31, 1987 8:10 a.m. by Mayor Spero Canton with the following in attendance: Board Members: Also Present: Mayor Spero Canton Dr. Robert Butler Mr. William Walker Sargeant Jack Ulmer Mr. Elly Johnson Mr. William Fann,Village Attorney Ms, Gail Macdonald,Plan Administrator Mr.. Jim Rizzo, Kruse O'Connor & Ling Mr. Jim Linn, Carson & Linn Absent: Mr. William Heffernan Mr. Melvin Moore 1. Report on Police union demands Mr. Jim Linn reported that the PBA negoiations with regard to pension demands are as follows: 1. Increasing the benefit accrual rate from 2% to 2.4% per year. 2. Including disability benefits that are not now included in the Pension Plan, but are covered on a seperate insurance policy. Sargeant Ulmer added to Mr. Ltnn.'s report that an automatic cost of living adjustment on a yearly basis should be implemented for all employees. 2. Discussion on personal liability and indemnification Mr. Linn reported to the Board that Section 18-38E of the Pension Plan provides immunization from liability for Pension Board members but that the provision should include the "prudent man" statement to clarify the standards of the provision and to come into compliance with the State Statute. Ms. Macdonald reported that Adjustco will add a clause under their General liability policy for coverage in a fiduciary capacity for Pension Board Members for approximately $2,000 premium on a yearly basis. • A motion was made by Dr. Butler to appoint Ms. Macdonald to look into the possibility of this coverage with other insurance companies along with the limits of liability coverage applicable to the Pension Board and to report back to the Pension Board. The motion was seconded by Mr. Walker. The motion passed unanimously. 3. Written record of rules and decisions Jim Linn requested that he be allowed to review Pension Board minutes to insure their adequacy. The Board members concurred. (After the meeting, Mr. Linn conducted his review and pronounced the records adequate.) 4. Proposed Ordinances Changes Ordinance 18-38 - Definitions: a. Compensation - A motion was made by Sargeant Ulmer to define the term "Compensation" to include only base pay, longevity which is included in base pay and state supplement. The motion was seconded by Mr. Johnson The motion passed unanimously. b. Employee - Dr. Butler made a motion to delete the word "fireman/ firefighter" from the definition of employee throughout the Pension Plan. The motion was seconded by Sargeant Ulmer. The motion passed unanimously. 5. Ordinance 18-41 Employment of legal counsel Dr. Butler made a motion to amend this section to read: "The attorney for the Village shall be the legal advisor to the Pension Board and the Pension Board may, at its discretion elect to employ other legal counsel." The motion was seconded by Sargeant Ulmer and passed unanimously. 6. Ordinance 18-42 Clarification of our position regarding asset allocation Dr. Butler moved to table the discussion until Ms. Macdonald was able to obtain pertinent information from Mr. Marvin Clayton in Tallahassee that would clear up any questions that would arise. 7. Ordinance 18/44 - 18/55 Plan amendments Mr. Walker made a motion to by-pass the recommendations of Mr. Linn on this subject. (See attached copy of executive summary of recommendations) In- his opinion, changing the terminology would change the intent of the paragraph. The motion was seconded by Dr. Butler and passed unanimously. 8. Ordinance 18/45 - 18/46 Falsification penalties/forfeiture Dr. Butler made a motion to accept Mr. Linn's recommendation that follows: 1. That the Plan be amended to include a clear and concise statement that wilful falsification of pension -related documents and the making of wilful false statements in an effort to obtain benefits under the Pension Plan are strictly prohibited. 2. Any Plan member determined by the pension board to have wilfully falsified a document or wilfully made a false statement in an effort to obtain pension benefits shall forfeit any right to receive benefits under the Plan. 3. Any person found to have wilfully made such a false statement or falsified documents shall be entitled to receive only a refund of his/her accumulated contributions to the pension fund. The motion was seconded by Sargeant Ulmer and passed unanimously. LEONARD A. CARSON JAMES W. LINN JOHN D.C. NEWTON, II MICHAEL WM. MORELL Section 18-38 18-39 CARSON & LINN, P. A. LAWYERS MAHAN STATION 1711- D MAHAN DRIVE TALLAHASSEE, FLORIDA 32308 (904) 878-2057 TELECOPIER (904) 877-1000 LEGAL REVIEW OF MIAMI SHORES PENSION PLAN Executive Summary May 26, 1987 Findings/Recommendations Definitions — Recommended that each defined term be separately numbered. Recommended that the definition of compensation be clarified to state exactly what types of compensation are included in "compensation" for pension purposes (e.g., base pay, longevity pay, overtime pay, incentive pay, payment for accumulated sick and/or annual leave, payment for off-duty employment, etc.). Recommended that the definition of employee be modified to delete the reference to "fireman" if appropriate, or to state that firefighters are no longer employed by the Village and thus cannot become members of the Pension Plan. Pension Board — Section 18-39. was amended by Village Ordinance No. 496-86 to provide for the election of one police employee to the pension board. Ordinance No. 496-86 brings the pension board membership -requirements into -compliance with Section 185.35(4), Florida Statutes. Personal Liability — Pension board trustees should be aware that the immunization from personal liability contained in Section 18-39(e) of the Plan may not be enforceable. Section 112.66(3), Florida Statutes, states: Any provision in a legal agreement, contract or instrument, which purports to relieve a fiduciary of a retirement system or plan from responsibility or liability is void as being against public policy. Under federal law, pension plan fiduciaries are held to the "Prudent Man" standard, under which a fiduciary must act: With the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and like aims. The "Prudent Man" standard is a higher standard than that contained in Section 18-39(e) of the Miami Shores Pension Plan. Indemnity — Florida law specifically provides that a public retirement system may purchase insurance for its named fiduciaries to cover liability or losses incurred by reason of an act or omission of a fiduciary. If the Village has not obtained such "acts or omissions" coverage for its pension plan fiduciaries, it is recommended that such insurance be considered. Pension Board Powers and Duties — It is extremely important that the pension board maintain a written record of its rules and decisions concerning the Plan. 18-41 Pension Board Legal Adviser — Section 18-41 states that the Village attorney shall be the legal adviser to the pension board. A 1986 amendment to Chapter 185, Florida Statutes (the state statute governing municipal police pension plans), provides that the pension board may elect to employ independent legal counsel. It is recommended that the language of Section 18-41 be amended to state that the attorney for the Village shall be the legal adviser to the nsion board unless the • - nsion board elects to em •lo ' inde • ndent eg: counsel. 18-42 - Trust Indenture/Trustee — Section 18-42 contains generalprovisiona for the operation of the Pension Plan as a trust. There are -no restrictions or limitations oir investments contained in the Pension Plan itself. Section 185.06, Florida Statutes, contains a number of restrictions on police pension fund investments. These investment restrictions apply to all pension plans receiving state premium tax revenues pursuant to Chapter 185, Florida Statutes. The statute permits a municipality with a "local law" pension plan, like the Miami Shores Pension Plan, to vary the statutory investment restrictions by ordinance. Therefore, if the investment terms contained in the Plan's trust indenture(s) do not comply with the restrictions contained in Section 185.06, - Florida Statutes, it is recommended that the terms of the trust indenture(s) be incorporated by ordinance into the Pension Plan. - 18-44 Amendments — Section 18-44 provides that the Village Council. may amend the Plan, but "no amendment shall be adopted which would reduce the then -accrued benefits of Plan members or Plan beneficiaries to which they would otherwise be entitled by reason of assets then held in the trust fund." It is well-established under Florida law that the act of one legislative body cannot bind its successors. Moreover, a -2- CARSON & LINN, P. A. LAWYERS technical reading of Section 18-44 may well conflict with other provisions of the Pension Plan regarding vested rights. It is recommended that the lan age__,_of this section be modified to be consistent with the ten-year vesting provision of Section 18-55. ^- 18-45/18-46 False Statements/Falsifying Records/Penalties -- These sections set forth penalties for persons who knowingly make false statements or falsify pension records. It is recommended that the language of Sections 18-45 and 18-46 be clarified to include a clear and concise statement that wilful falsification of pension -related documents and the making of wilful false statements in an effort to obtain benefits under the Pension Plan are strictly prohibited. Further, any Plan member determined by the pension board to have wilfully falsified a document or wilfully made a false statement in an effort to obtain pension benefits shall forfeit any right to receive benefits under the Plan. 18-47 Membership — Section 18-47 contains minimum and maximum entry age requirements for membership in the Plan. An employee must be at least 21 and not more than 55 years of age, and have at least one year of service, to be eligible for membership. Discrimination in employment, including employee benefit plans, based on age is prohibited by federal and state law. Unless there is a legally justifiable explanation for the minimum and maximum entry age restrictions, it is recommended that they be eliminated from the Plan. 18-48 _ Creditable Service — This section contains several references to the 21 - year -old minimum entry age requirement discussed above in connection with Section 18-47. If the minimum and maximum entry age restric- tions contained in Section 18-47 are eliminated, the references to the minimum entry age in Section 18-48 should also be revised or eliminated. 18-49 Service Retirement Allowance — Section 18-49(a) sets forth the normal retirement age under the Plan. The normal retirement age for police officers is upon completion of 25 years -of creditable service, and for general employees the normal retirement age is age 62. Section 18-49(c) states that in calculating pension benefits, members can accrue no more than thirty years of creditable service. This maximum benefit accrual limitation may violate the federal Age Discrimination in Employment Act (ADEA).__ It is recommended_ that .the thirty year maximum limitation on creditable service contained in Section 18-49 be modified or eliminated. 18-53 Contributions by Members — The reference to the thirty year maximum limitation on credited service contained in Section 18-53 should be revised in accordance with the recommended revision of Section 18-49. 18-54 Contributions by State and Village — Section 18-54(b) provides that the Village's annual contribution to the Pension Plan shall not exceed the amount of one mill on all taxable property in the Village. Section -3- CARSON & LINN, P. A. LAWYERS 112.64(2), Florida Statutes, requires that total contributions to a public retirement system must be sufficient to meet the normal cost of the system and to amortize any unfunded liability within forty years. If the one mill limitation contained in Section 18-54 resulted in a contribution by the Village of less than that required by Section 112.64, Florida Statutes, the higher contribution required by state law would have to be paid. • 18-55 Vested Rights — This section provides that the payment of salary, less required pension contributions, shall, together with "such special vested rights" be a full and complete discharge of all claimed payments for service rendered by a member to the Village during the period covered by any such payment. Because this general discharge of claims provision pertains to matters unrelated to the Pension Plan, it should appropriately appear in the general employment provisions of the Village Code. Disability Pension Benefits for Police Officers (not currently in Plan) — Section 185.18, Florida Statutes, provides a disability retirement benefit for police officers. Although the state statute does not specifically provide that it is applicable to local law plans like the Miami Shores Pension Plan, the Department of Insurance has taken the position in a proposed rule that the disability retirement provision applies to all police pension plans under Chapter 185. Because the Department's proposed rule has not been filed for adoption, the state of the law with respect to whether the Miami Shores Pension .Plan must comply with the disability retirement provisions of Section 185.18, Florida Statutes, is unclear. It is recommended that the Village investigate the possibility of providing disability retirement benefits to police officers in accordance with Section 185.18. • [Al Forfeiture Provision ---The- Miami Shores P-ension Plan contains no forfeiture of benefits provision for employees who are convicted or discharged for misconduct . involving a breach of the public trust. Section 112.3173, Florida Statutes, provides that any public officer or employee who is convicted or terminated by reason of an offense involving a breach of the public trust (i.e., embezzlement of public funds, theft from employer, bribery, commission of a felony involving the wilful intent to defraud the public or a public agency) shall forfeit all rights and benefits under any public retirement system of which he is a member, except for the - return of his accumulated contributions. though a forfeiture of benefits provision need not be included in the Pension Plan, the -Village and the pension board should be aware of the state statute requiring such a forfeiture. -4- CARSON & LINN, P. A. i.WYERS 15/18/hhp 9. Ordinance 18/47 - 18/48 - 18/49 Remove age limits Mr. Linn requested that any further discussion on the above provisions be tabled until he researches the Federal Law and the State law with regard to age discrimination and how it would affect the Pension Plan. The discussion was deferred by Mayor Canton. 10. Ordinance 18-50 Designation of joint annuitant Mr. Johnson made a motion to change the wording for the ordinance to state the "designated beneficiary" and that the designated beneficiary could not be changed more than two (2) times as per State law. The motion was seconded by Sargeant Ulmer. Mayor Canton has requested Mr. Linn to revise Mr. Johnson's recommendation to comply with State statutes. The motion passed unanimously. 11. Ordinance 18-54 Village contributions Mr. Linn recommended to add at the end of the ordinance a statement saying that if the State required a larger contribution, than a greater contribution shall be made. Mr. Walker made a motion to accept Mr. Linns recommendation and the motion was seconded by Sargeant Ulmer and the motion passed unanimously. 12. Ordinance 18-55 Vested rights A motion was made by Mr. Walker to let the Ordinance remain as it is and that it was in compliance with the State statute. The motion was seconded by Mr. Johnson and passed unanimously. 13. Approval of the Minutes of May 11, 1987 Mr. Johnson made a motion to accept the minutes of the May 11, 1987 meeting. Mr. Walker seconded and the motion passed unanimously. 14. Approval of Payment for legal study Mr. Johnson made a motion to pay the invoice submitted by Carson & Linn on the legal study of the Pension Plan as of this date (July 31, 1987). The motion was seconded by Mr. Walker and passed unanimously. 15. Approval of proposed actuarial fee for required impact studies The Plan Administrator requested the Board to authorize Mr. Rizzo to get a figure on the cost of the disability required. Ms. Macdonald will get the insurance cost and Mr. Rizzo will obtain the actuarial impact figure and than the Board could determine the proper method in funding the disability benefits that are required. The Board moved on Ms. Macdonalds' recommendation and appointed Mr. Rizzo.to obtain the information. • • A motion was made by Mayor Canton to approve the proposed actuarial fee required for the impact study by Mr. Rizzo. The motion was seconded by Mr. Johnson and was passed unanimously. 16. Adjournment Mr. Walker made a motion to adjourn and the motion was seconded by Mr. Johnson. The meeting was adjourned at 11:32 a.m. —474 Spero Canton Mayo Elly ohnson Villag- ManaSecretary