Pension Board. Regular Meeting. ~ Minutes ~ Thursday, April 12, :15 a.m. Pension Board Conference Room ORDER OF BUSINESS

Transcription

1 Pension Board Regular Meeting 917B E. Fifth Ave. Knoxville, TN ~ Minutes ~ Thursday, April 12, :15 a.m. Pension Board Conference Room ORDER OF BUSINESS 1. CALL TO ORDER Mayor Madeline Rogero called to order the April 12, 2012 meeting of the City of Knoxville Pension Board at 8:18 a.m. in the Pension Board Conference Room. 2. ROLL CALL Attendee Name Title Status Early Departure Mayor Rogero Mayor Present Greg Coker Police Representative Present Jim York Finance Director Present Jack Banks Fire Representative Present Stephen King General Government Representative Present Michael Paseur General Government Representative Present Finbarr Saunders City Council Representative Present Bud Gilbert General Counsel Present Michael Cherry Executive Director Present Others present at the meeting were: Mr. John Craig City Resident. 3. APPROVAL OF REGULAR MEETING MINUTES FOR MARCH 8, 2012 Mr. Banks made a motion to approve the March 8, 2012 meeting minutes. Mr. Saunders seconded the motion. The motion passed 6-0. Mr. Paseur was not present to vote at this time. 4. APPROVAL OF REVISED AGENDA - Exhibit 1 The Revised Agenda was accepted by the Pension Board without objection.

2 5. ADMINISTRATIVE MATTERS Legislation re: Death Master File Access Mr. Cherry advised the Board that he has identified four (4) bills regarding this subject matter that have been authored and were referred to the appropriate Congressional committee in October and November of last year. None of the bills has passed out of committee at this time. Mr. Cherry will continue to track the pending federal legislation regarding access to the SSA Death Master File. 6. EXECUTIVE DIRECTOR COMMENTS Request for Adjustment of Attorney Fees Exhibit 2 Mr. Cherry distributed to the Board a letter dated April 11, 2012 received in the Pension Office from Kennerly, Montgomery & Finley, P.C. enclosing a new hourly rate schedule for the firm s attorneys and other professionals effective January 1, As indicated in the letter, the adjusted rate schedule only applies to the Pension Board s general account with the law firm since the firm agreed to limit its hourly rates for the pending Frye Litigation matter to those hourly rates authorized by Traveler s Insurance Company, which is providing the Pension System with a defense on such litigation under the Pension Board s fiduciary liability insurance policy. The law firm s letter also indicated that no adjustments in hourly rates were being made on the G1 Litigation matter since that matter was in the process of being concluded. After a discussion by the Board with Attorney Gilbert, Mayor Rogero requested that the members of the Pension Board be provided an opportunity to review the current engagement letter between the Pension Board and Kennerly, Montgomery & Finley before taking any action on the law firm s invoices for the Pension Board s general account since those invoices are subject to the new hourly rate schedule.. 7. CONTRACTS Mr. Paseur arrived at 8:36 a.m. Custodian/Trustee Services Mr. Cherry informed the Board that he planned to contact the Board s Investment Consultant to initiate a Request for Proposals process for Custodian/Trustee services since the Pension System s custodial contract with State Street expires at the end of ENROLLMENTS a. The following General Government employees have filed applications to become members of the Plan G1 pension system: Dawn M. Foster Earl W. Johnson John Finbarr Saunders, Jr. Constance E. Spicer Joshua E. Tarver Motion: Mr. Coker made a motion to approve these applications for enrollment in the Plan G1 pension system. Mr. Paseur seconded the motion. The motion passed

3 9. WITHDRAWALS The following employee has filed an application to withdraw her employee pension contributions plus 4% interest and her supplemental retirement account balance as applicable in Plan G Option 1. Hannah Harris General Govt. Plan G1, non-vested Motion: Mr. Paseur made a motion to approve this application for withdrawal of employee contributions. Mr. Banks seconded the motion. The motion passed APPLICATION FOR NORMAL RETIREMENT: PLAN G2 CHARTER SECTION Larry M. Howard, General Government Option A-6 100% without reinstatement Date of birth, July 31, 1949: 62 years of age Total credited service: 26 years 22 days Average monthly salary for 2 highest 12 month periods, $3, x.021 = $68.66 x = $1, Mr. Howard chose Option A-6 100% Joint and Survivor without reinstatement to Patricia N. Howard, spouse. $1, x.795 = $1, pension effective April 1, Motion: Mr. Paseur made a motion to approve this application for normal retirement payable under Option A-6. Mr. King seconded the motion. The motion passed APPLICATION FOR NORMAL RETIREMENT: PLAN C CHARTER SECTION Roger A. White, Police Dept. - Uniformed Option A-9 100% with reinstatement Date of birth, March 27, 1962: 50 years of age Total credited service: 26 years 22 days Average monthly salary for 2 highest 12 month periods, $4, x.025 = $ x = $3, Mr. White chose Option A-9 100% Joint and Survivor with reinstatement to Dana L. White, spouse. $3, x.9299 = $2, pension effective April 1, Motion: Mr. Coker made a motion to approve this application for Normal retirement payable under Option A-9. Mr. Paseur seconded the motion. The motion passed

4 12. APPLICATION FOR PARTICIPATION IN THE DELAYED RETIREMENT OPTION PROGRAM (DROP): PURSUANT TO CHARTER SECTION PLAN G. The following employees have chosen a Delayed Retirement Option and will receive a one-time payment of their accumulated monthly benefits on termination of employment with the City of Knoxville. a. Mary Ann Blankenship, General Government Plan G1 No Option Date of birth, October 1, 1943: 68 years of age Total credited service: 6 years 5 months 22 days Average monthly salary for 2 highest 12 month periods, $3, x.0135% = $52.68 x = *$ pension (defined benefit) effective April 1, DROP complete March 31, *Ms. Blankenship chose to convert the supplemental retirement account (defined contribution), applicable in Plan G Option 1, into an additional, lifetime monthly annuity pending the quarter ended March 31, 2012, account value determination. Motion: Mr. Paseur made a motion to approve this application for DROP retirement. Mr. York seconded the motion. The motion passed 7-0. b. Jeffrey D. Caldwell, General Government Plan G1 Option A-4 50% without reinstatement Date of birth, November 10, 1960: 51 years of age Total credited service: 33 years 1 month 10 days Plan A benefit: Average base salary for 2 highest 12 month periods, $ x.0081% = $3.24 x = $59.40 plus average excess salary for 2 highest 12 month periods, $3, x.0162% = $59.00 x = $1,081.67; Total A benefit = $ $1, = $1, Plan G1 benefit: Average monthly salary for 2 highest 12 month periods, $4, x.0115% = $46.48 x = $ Plan A benefit $1, Plan G1 benefit $ = $1, Total benefit. Mr. Caldwell chose Option A-4 50% Joint and Survivor without reinstatement to Susan M. Caldwell, spouse. $1, x.946 = *$1, pension (defined benefit) effective April 1, DROP complete March 31, *Mr. Caldwell chose to convert the supplemental retirement account (defined contribution), applicable in Plan G Option 1, into an additional, lifetime monthly annuity pending the quarter ended March 31, 2012, account value determination. Motion: Mr. Paseur made a motion to approve this application for DROP retirement payable under Option A-4. Mr. York seconded the motion. The motion passed APPROVAL OF INVOICES FOR PROFESSIONAL SERVICES: Bryan, Pendleton, Swats & McAllister Actuary (Feb. 2012) 11, Kennerly, Montgomery & Finley Attorney (General Jan 2012) 6, Kennerly, Montgomery & Finley Attorney (G1 Jan 2012) 2, Kennerly, Montgomery & Finley Attorney (Frye Lit. Jan 2012) 3, State Street Trustee (Feb 2012) 3, Summit Strategies Consultant (1 st Qtr 2012) 31, Mr. Cherry, Executive Director, has reviewed the bills and certifies that they are consistent with the services provided and are within the budgeted figures of the system s financial plan. 4

5 Motion: Mr. York made a motion to pay these invoices with the exception of the Attorney s Invoice for the General matter (Jan 2012) in the amount of $6, pending a review of the Pension System s current engagement letter with Kennerly, Montgomery & Finley, P. C. and the law firm s new hourly fee schedule for Mr. Saunders seconded the motion. The motion passed INVESTMENT MATTERS: a. Investment Committee Minutes Mr. Cherry and Attorney Gilbert distributed to the Board the approved Investment Committee Meeting minutes for February and March and advised that the April Investment Committee meeting minutes would be completed and distributed soon. b. Investment Policy 15. OTHER: After a discussion by the Board of the need to continue the Investment Policy review which began at the Board s special called meeting on April 4, 2012, it was decided to schedule a continuation of that discussion during the Board s next regularly scheduled monthly meeting on May 10, 2012 from 9:00 a.m. 10:30 a.m., at which Investment Consultant Dan Holmes will attend. During such discussion the Pension Board also decided that the Pension System s actuary, Mr. Alan Pennington, should also be invited to attend. Statement of Board Member, Mr. Greg Coker regarding the Pension System and Its Sustainability Police Department, Uniformed Body Seat A Pension Board Representative, Mr. Greg Coker, requested the Board s indulgence in allowing him to read a prepared statement reflecting his personal opinion regarding the current funding status of the Pension System and pending efforts to change the systems benefit plan structure for future employees of the City. Mr. Coker also requested that following the reading of his personal statement that the Board take action, if considered appropriate by the Board, to include his statement, verbatim, in the minutes of the meeting. Mr. Coker then read the following statement to the Board members and others in attendance at the meeting: As an elected employee representative on the Pension Board, I feel that I represent not only those members of the Police Department who have elected me, but also the entire membership of the City of Knoxville employee s pension fund. As such, there are some facts that I believe should be made available to those employees and others who follow the progress and continuing business of the administration of the pension system. It is for these reasons that I make this statement for the record and to be entered into the minutes of today s meeting. Much has been said over the last 16 months about the current pension system for the City of Knoxville employees. From an outgoing mayoral administration to the pension study committee and some citizen and business groups, it is obvious there is great concern for the health of the system. While all the concern and long hours of work examining the system are appreciated by those within the system, the resulting conclusion that the current system is unsustainable has been reached without looking at all of the facts. The March 2009 end of month fund status report showed that the fund had reached a low of $341,000,000. This was the result of the stock market upheaval of As of February 2012, the assets under management had grown to $462,000,000. This reflects a growth of $121,000,000 in the three years following the stock market events that effected pensions across the country both private and public. With this positive performance the obvious question is how can the system be unsustainable? 5

6 Looking at the fund performance over the last twenty-five years (those numbers are available), it can be seen that while there have been eight years where the growth needed to meet the assumptions was not met, only three of those years were actually in negative percentages. It is also obvious that the years where assumptions were met far outperformed the down years. The overall positive performance shown over the twenty-five year period is another example of the sustainability of the system. Some have advocated the closing of the current plans. The negative result of this can be seen in the examination of the old teacher s plan and plan F. Those closed plans no longer have employee contributions and are totally funded by the city s input and fund performance. The results of closing the current plans with the numbers of employees in them would have a dramatically negative effect on the actuarially required input from the City of Knoxville in the future as employees retire out of the plans. Additionally, closing the current plans would not lower the amount of funding on the part of the city. With this in mind, why do those who ask for the plans to be closed want to see this happen? We are fortunate to have a city administration in place that is giving the situation a rational realistic look. Hopefully those who the Mayor has appointed to accomplish this task will see that the time for significant change is not in a time of the positive growth we are seeing now. While some change is needed and has been identified by the board long before the study committee, major changes or closure of the plan would not be a necessary action at this time. A common sense look will hopefully result in the decision to see where this growth takes the pension fund while allowing the Pension Board to continue the work we do on a monthly basis. That work is to examine the performance with the advice of our financial experts and continue to work toward the goal of achieving fully funded status in our pension fund. The advice we have received to date from these professionals is responsible for the growth I have pointed out. Upon the conclusion of the foregoing personal statement by Mr. Coker, the following motion was made: Motion: Mr. Banks made a motion to include verbatim Mr. Coker s personal statement in the Pension Board s April 12, 2012 meeting minutes. Mr. Paseur seconded the motion. The motion passed PUBLIC COMMENTS: Mr. John Craig Knoxville resident, Mr. John Craig addressed the Board regarding his concerns about what he called various structural flaws in the Pension System that he believed were primarily responsible for the recent conclusion of and final report from City Council s Pension Advisory Committee that the pension system was not financially sustainable in its current form. Mr. Craig also noted that similar challenges were being faced by the Knox County pension system, as well as other government pension systems throughout the country. In concluding his remarks to the Board, he also complimented the Board members on their conduct and continued efforts to better manage and operate the system. 17. ATTORNEY COMMENTS: Derrell Frye Litigation Attorney Gilbert provided a brief update on the Derrell Frye litigation without any discussion by the Board on the matter. 6

7 Legal Counsel Engagement Letter In response to the Board s request made earlier in the meeting, Attorney Gilbert distributed to the Board members for review a copy of Kennerly, Montgomery & Finley s current engagement letter dated December 26, 2002 as general counsel to the Pension Board and the Pension System and noted under the terms of such engagement letter, no prior notice was required for any adjustments to the hourly billing rates of his firm s attorneys and other professional, which adjustments were permitted on an annual basis under the terms of the engagement letter. Attorney Gilbert further explained that in accordance with his firm s prior practice over the recent years, hourly fees were generally only adjusted once each three years and as a result were originally scheduled for adjustment in That planned adjustment, however, was deferred by Attorney Gilbert or an additional year because of the poor economy and its affect on many of his clients. 18. ADJOURNMENT: There being no further business, the following motion was made: Motion: Mr. Saunders made a motion to adjourn the meeting at 9:03 a.m. Mr. Coker seconded the motion. The motion was approved unanimously by the members present. Chair Date M:\Board\minutes\2012\April.doc 7