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02-12-1998 Regular MeetingMIAMI SHORES VILLAGE PENSION BOARD FEBRUARY 12, 1998 The regular meeting of the Miami Shores Village Pension Board was held on Thursday, February 12, 1998 in the Chamber of the Village Hall. The meeting was called to order at 8:10 A.M. with the • following members present: Present: Louis S. Imburgia, Jr., Acting Chairman Joseph Charles Officer Timothy Dearden Ellen Friberg Michael R. Couzzo, Jr. Absent: Mary Ross Agosta Richard Trumble Also Present: Patricia Varney, Plan Administrator EMERGENCY AGENDA ITEM - APPOINTMENT OF ACTING CHAIRMAN Due to Mrs. Ross Agosta's absence, Mr. Charles moved to appoint Mr. Imburgia as Acting Chairman for today's meeting. Mr. Couzzo seconded the motion. The vote was unanimous in favor. la. INVESTMENT REPORT FROM MR. MICHAEL ALOIAN, STI CAPITAL MANAGEMENT Mr. Aloian reported that the total yearly return for the fund was 22.1%. The quarterly return on the fixed income fund was 3.5% above the Lehman Gov't Corp of 3.2%. The equity fund return was just under the S&P 500 return of 2.9% with 2.1%. lb. INVESTMENT REPORT FROM MR. CRAIG HAMILTON, MERRILL LYNCH Mr. Hamilton reported that the fund's total market value as of December 31, 1997 was $15,273,434 with a total return of 19.8% for the year. The equity portfolio was up 26.9% for the year, but came in below the S&P 500 return of 33.4%. The fixed income return of 9.3% was just under the ML Govt Corp return of 9.8%. The portfolio ranked 52nd for the year in comparison to other Florida Municipal clients. Mr. Hamilton commented on the Board's decision to consolidate the pension funds with SunTrust noting it was a good decision. Due to the takeover of Barnett Bank by NationsBank, there is question as to whether they will remain in the investment arena. Pension Board February 12, 1998 Page 2 ITEM #2 PRESENTATION OF ACTUARIAL REPORT - J. STEPHEN PALLY QUIST Mr. Palmquist stated that the experience of the plan was good this year. The Village cont#ibutions decreased by 1.23% to a rate of 5.61% of total covered payroll, bringing a favorable actuarial • experience for the year. The reason for this was due to salary increases being lower than the assumed actuarial rates, more employees terminated employment, and investment earnings were above the assumed rate creating an actuarial gain. Mr. Palmquist suggested that the salary assumption be lowered as the current assumption is conservative. The assumption should reflect anticipated inflation and salary promotion. He asked the Board to consider a rate of 5.5% in lieu of the current 6.5% assumption. Mr. Couzzo noted that changing the rate would be a considerable factor in reducing the Village's contribution costs to the plan. Implementing the smoothing method has allowed the fund a cushion of 20% of it's market value should there be a significant future impact on the fund. Mr. Charles inquired as to the inequity in the amounts received by the older retirees. Mr. Palmquist replied that the inequity is mainly due to the impact of inflation. Mr. Couzzo noted that an internal evaluation could be performed to assess the impact of an ad hoc increase in pension benefits for older retirees. Mr. Couzzo informed the Board of several options currently being considered by administration such as the defined contribution plan and early retirement. ITEM #3 DISCUSSION AND POSSIBLE ACTION REGARDING DEFERRED RETIREMENT OPTION PLAN - MICHAEL R. COUZZO, JR. Mr. Couzzo explained that the Village administration has been in negotiations with the Police Department regarding the Deferred Retirement Option Plan (Drop Plan). The proposed ordinance allows police officers with twenty-five years of continued service the option of continuing to serve in the same capacity. However, the pension monies normally received by the officer would be set aside in a "drop". The Village would no longer have to contribute to the plan for that officer thus lowering costs. Officer Kevin Reed explained how the plan is a win - win situation as the Village retains veteran ® leadership while reducing costs to the Village. Mr. Palmquist further explained that upon completing twenty-five years of service, a police officer will have a choice of either letting pension benefits increase or entering the DROP plan. Entering the DROP plan freezes pension benefits, i.e. there are no further increase in pension benefits. The pension that would have been collected is put in the DROP account for up to five years. The DROP account is accumulated in the pension plan and receives the same earnings as the plan net of fees. The police officer then obtains a lump sum or quarterly payment as well as a pension when retiring. Pension Board February 12, 1998 Page 3 Mr. Charles questioned the difference in remaining employed for an additional five years versus the DROP plan option. Mr. Palmquist responded that it would depend on the rate of pay increase over the last five years. Actuarially, using normal assumptions, it is a balanced, neutral situation. The biggest benefit is the police officer retains employment earning the additional monies normally contributed into the pension plan which is currently a rate of 9% of pay. This would essentially give the officer a 9% salary increase. Mr. Couzzo moved to adopt and recommend to the Village Council, for approval, a Deferred Retirement Option Plan for police officers of Miami Shores Village. Mrs. Friberg seconded the motion. Officer Dearden noted that the ordinance should read for sworn police personnel rather than municipal employees. Discussion regarding retirement benefits for the general employees ensued. The vote was called and was unanimous in favor. ITEM #4 REQUEST APPROVAL OF RETIREMENT BENEFITS FOR EDWARD WALKER Mrs. Varney explained that Mr. Edward Walker has requested retirement benefits in the amount of $1,492.78 effective April 1, 1998 choosing the 50% joint survivor annuity. Officer Dearden moved to approve retirement benefits for Edward Walker with a second by Mr. Charles. The vote was unanimous in favor. Mr. Couzzo recommended that employees be professionally counseled as to the retirement options in order to maximize their benefits. Mrs. Varney noted that she does review the options with the employees. Officer Dearden suggested that a financial planner be available or a one day seminar be held for all employees. Mrs. Friberg agreed that retirement counseling should be available for employees be it through the plan administrator, outsourcing or educational brochures. ITEM #5a. REQUEST APPROVAL OF PAYMENT TO SUNTRUST. Mr. Charles moved for approval of payment to SunTrust in the amount of $25,320.11 for quarterly management fees for the period ending December 31, 1997. Officer Dearden seconded the motion. The vote was unanimous in favor. ITEM #5b. REQUEST APPROVAL OF PAYMENT TO GABRIEL, ROEDER, SMITH & COMPANY Officer Dearden moved for approval of payment to Gabriel, Roeder, Smith & Company in the amount of $6,409.00 for payment of annual services and preparation of an actuarial impact statement provided by Gabriel, Roeder, Smith & Company. Mrs. Friberg seconded the motion and the vote was unanimous in favor. • • Pension Board February 12, 1998 Page 4 ITEM #5c. REQUEST APPROVAL OF REIMBURSEMENT TO MIAMI SHORES VILLAGE Officer Dearden moved for approval of reimbursement to Miami Shores Village in the amount of $3,716.64 for payment of Florida Public Pension Trustees Association membership and attendance at the various Pension Conferences. Mr. Couzzo seconded the motion. The vote was unanimous in favor. ITEM #6 APPROVAL OF THE NOVEMBER 13,1997 MINUTES Mr. Charles moved for approval of the November 13, 1997 minutes as submitted. Officer Dearden seconded the motion and the vote was unanimous in favor. ITEM #7 OTHER BUSINESS Mr. Couzzo commended SunTrust on their performance. He also thanked Merrill Lynch for their continued support and guidance. ITEM #8 ADJOURNMENT The February 12, 1998 meeting of the Pension Board was adjourned at 9:40 A.M. Ellen Friberg, Secret Louis S. Imburgia, Jr., Actin airman