Book 1 Page 8 02/24/16 9:00 A.M. MINUTES OF THE FEBRUARY 24, 2016 CITY OF SARASOTA FIREFIGHTERS PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING Present: Vice Chair Shelia Roberson, Secretary/Treasurer Pamela Nadalini, and Trustees Charles Joseph and Scott Snow Others: Attorney Robert Sugarman, Pension Plans Administrator Harry Ramphal, Senior Pension Analyst Anthony Ferrer, and Pension Specialist Chinyere Deehan Absent: Chair Michael Hartley 1. CALL THEI MEETING TOORDER: Vice Chair Roberson called the meeting to order at 9:02 a.m. 2. PLI EDGE OF CIMILITY: Vice Chair Roberson read into the record a memorandum from Mayor Willie Charles Shaw, dated February 13, 2015, entitled "City Commission and Advisory Board Meeting Protocols and Pledge of Civility'. 3. PUBLICINPUT: None CHANGE TO THE ORDER OF THE DAY: Secretary/Treasurer Nadalini sought Board consensus to add Agenda Item 5, Item No. 5, Continued Discussion Re: Trustee Education and Travel Expenses Policy Statement. Attorney Sugarman recommended that the Board Table this discussion until after his staff and the Pension. Administration review the matter together. Vice Chair Roberson stated that as related to Agenda Item 5, Item No. 4, Continued Discussion Re: Third Party Administration, at the January 27, 2016, City of Sarasota Firefighters' Pension Plan Board of Trustees Regular Meeting, the Board noted consensus to move the item to the March 23, 2016, City of Sarasota Firefighters' Pension Board and Annual Membership Meeting, and Secretary/Treasurer: Nadalini stated that she has no objections to Tabling the discussion until the March 23, 2016, City of Sarasota Firefighters Pension Plan Board and Annual Membership Meeting, that she has nothing further to add to the discussion regarding Third Party Administration, and Attorney Sugarman also agreed that the matter should be moved to March 23, 2016, City of Sarasota Firefighters' Pension Plan Board and Annual Membership Meeting, when all members of the Board are expected to be present. Vice Chair Robinson noted Board consensus to Table adding Agenda Item 5, Item No. 5, Continued Discussion Re: Trustee Education and Travel Expenses Policy Statement, and Agenda Item 5, Item No.4 4, Continued Discussion Re: Third Party Administration to the March 23, 2016, City of Sarasota Firefighters' Pension Plan Board and Annual Membership Meeting. 4. APPROVAL OFI MINUTES: 4.1. Approval Re: Minutes of the Firefighters' Pension Board Regular Meeting of January 27, 2016 Trustee Snow stated that the minutes of the January 27, 2016, City of Sarasota Firefighters' Pension Plan Board of Trustees Regular Meeting should be corrected to reflect Trustee Snow stated that the Plan Annual Actuarial Report is usually presented to the Board in January, not February. Secretary/Treasurer: Nadalini stated that the recording of the meeting will be reviewed and the necessary correction made, if deemed necessary A motion was made by Trustee Joseph, seconded by Trustee Snow, to approve the minutes of the January 27, 2016, City of Sarasota Firefighters' Pension Plan Board of Trustees Regular Meeting, with the noted correction, if deemed necessary upon further review of the recording. Motion carried unanimously(4-0). 5. UNFINISHED! BUSINESS: 5.1. Continued Discussion Re: Proposed Firefighter Pension Ordinance No. 16-5161, establishing Share Plan Attorney Robert Sugarman, Sugarman and Susskind P.A., and Assistant City Attorney Sarah Warren, Fournier, Connolly, Warren & Shamsey P.A., came before the Board to present the proposed draft Firefighter Pension Ordinance No. 16-5161, for establishing a Share Plan (Plan). Attorney Sugarman stated that the attorneys request the Board to recommend the Commission pass proposed Ordinance No. 16-5161, since they have the power to change the Ordinance; that Pension Plans Administrator Ramphal was very helpful in obtaining figures and working with the attomeys. Attorney Sugarman continued and reminded the Board of the recent Amendment and Collective Bargaining Agreement; whereas any City of Sarasota Firefighters' Pension Plan member who retired before April 7, 2003, received 1/185 of all of the Section 175 money which was received per year; that at the time Section 175 money was not needed to fund the Plan and was divided equally among the retirees, surviving spouses, and active firefighters; that a Share Account was set up and money went into the account each year which was divided into 185 shares and drew interest at the assumed rate of return; that only four active irefighters remain today and four Share Accounts still exist with all the others already paid out. Attorney Sugarman further stated that in 2003, the Firefighters' Union and County agreed that those share distributions would end and that money would be placed in the Plan; that firefighters that had previously retired had a vested, guaranteed lifetime benefit and the active firefighters who had money in the share account, continued to draw interest; that each firefighter who retired after 2003, received a payout of their share account; that the firefighters who retired previous to 2003, received an annual check of 1/185 of the Share Account. Attomey Sugarman stated that as the result of a recent change in the State Law, the collective bargaining took place again and now this State money is to be divided in the manner which the parties agreed to in the collective bargaining; that an Agreement was made that $781,422 of the Section 175 money would be divided under a set of guidelines and the remaining amount would be allocated under other rules; that the Agreement states the money was saved for additional benefits for the firefighters to be split; that half of the money is going into the Plan to reduce the unfunded liability and the other half of the money is going into the Share Fund, which would be distributed to firefighters who retired after 2003, that the $781,422 would be used to offset the share payments and the remainder would be used to reduce employer contributions; that the amount over $781,422 would be split again with half of the money going to the Share Fund and the other half of the money to be used to reduce employer contributions; that the Share Fund will be paid out to the post-2003, retired firefighters annually and the amount will be the same as the payments to the pre-2003, retired firefighters; that the pre-2003, retired firefighters have a guaranteed benefit while the post-2003, retired firefighters only receive the money from the Share Account if funding is available; that approximately $2 million will go into the Share Account initially and the other half of the money amounted over $781,422 should be enough to fund the annual payments; however if there is not adequate funding, the post-2003, retired firefighters will only receive the amount that the Share Fund has available. Book 1 Page 9 02/24/16 9:00 A.M. Book 1 Page 10 02/24/16 9:00 A.M. Discussion ensued regarding the details of proposed Ordinance No. 16-5161, the date that retirees would receive their yearly payment, and Attorney Sugarman indicating a new date of December 315t is being proposed to cover any funding contingency, which does not mean that payments could not be made before this date, assuming funds are made available. In response to a question from Secretary/Treasurer: Nadalini regarding the Commission passing proposed Ordinance No. 16-5161, at the March 7, 2016 Regular Sarasota City Commission Meeting, Attorney Sugarman stated that it would be preferable if the proposed Ordinance was passed at the March 7, 2016 Regular Sarasota City Commission Meeting. In response to a question from Secretary/Treasurer Nadalini asking if it would be helpful to have an Actuarial Impact Statement from the Actuary to accommodate the material that is to be presented to the Commission, Brad Armstrong, Actuary, Gabriel, Roeder, Smith & Company, came before the Board and stated that the Actuarial Impact Statement is required to be filed between the first and second reading of the proposed Ordinance at the March 7, 2016 Regular Sarasota City Commission Meeting. In response to a question from Secretary/Treasurer Nadalini asking about the receipt of the Actuarial Impact Statement, Mr. Armstrong stated that it should be included with the proposed Ordinance packet for receipt after the first reading of March 7, 2016, but no later than the second reading of March 21, 2016. Attorney Sugarman stated that the motion to be approved by the Board is to recommend passing proposed Ordinance No. 16-5161, as presented in the Agenda backup material with a deletion of any references to the Deferred Retirement Option Plan (DROP) along with correcting the typo's, and to authorize Pension Plans Administrator Ramphal, to order the Actuarial Impact Statement from the Plan Actuary upon the passing of proposed Ordinance No. 16-5161 at first reading. A motion was made by Trustee Snow, seconded by Trustee Joseph, to recommend passing proposed Ordinance No. 16-5161, establishing a Share Plan with a deletion of any references to the Deferred Retirement Option Plan (DROP) along with correcting the typo's, and to authorize Pension Plans Administrator Ramphal, to order the Actuarial Impact Statement from the Plan Actuary upon the passing of proposed Ordinance No. 16-5161 at first reading. Motion carried unanimously(4-0). 5.2. Presentation and Discussion Re: Audit Update fori the September 30, 2015 Year End Alison Wester, CPA, Mauldin & Jenkins, LLC, came before the Board to discuss the Govemmental Accounting Standards Board (GASB) No. 68 Engagement Letter, and stated that the City and County have engaged Mauldin & Jenkins to render an opinion regarding employer contributions; that the Plan Actuarial Report and the resulting allocations of the Plan's unfunded liability; that the City and the County will have to implement GASB No. 68 in the current year. Ms. Wester continued and discussed the audit objectives and informed the Board she has received clarification on the actuarial valuation and measurement date; that approval was received from both the City and the County to use September 30, 2014, as the measurement date which was the only thing needed in order to proceed with the Engagement Letter; that on the signature page of the Engagement Letter an "acknowledged by" section was added for the City and the County representatives. Attorney Sugarman stated that a clause should be included in the Engagement Letter to indicate that all the work performed by Mauldin & Jenkins will be performed in its Florida office, and all data obtained from the Plan will be stored solely within Mauldin & Jenkins domestic offices. In response to a question from Attorney Sugarman asking for reassurance that the employees confidential information will remain within her office, Ms. Wester reassured him that all confidential information will remain within the Mauldin & Jenkins' offices and no information will be shared internationally. A motion was made by Secretary/Treasurer: Nadalini, seconded by Trustee Snow, to approve the proposed Engagement Letter as presented by Mauldin & Jenkins with the proposed revisions related to clarification as discussed by the Pension Attorney. Motion carried unanimously(4-0). In response to a question by Secretary/Treasurer Nadalini, asking about the County contact regarding this matter, Vice Chair Roberson stated that the auditors should consult with the Director of Finance Niçole Jovanovski at the County Clerk & Comptroller Office, and Attorney Sugarman stated that the County can decide who will be the representative since all that is needed to proceed is a signature. 5.3. Presentation and Discussion Re: Preliminary 2015 Draft Results concerning Mortality Table, Assumptions, and Amortization Period(s) for the September 30, 2015 Actuarial Valuation Brad Armstrong, Actuary, Gabriel, Roeder, Smith & Company, came before the Board and stated that unfortunately there was not enough information to estimate the 2015 actuarial results; that the estimated numbers concerning the results and the current interest assumption for the Firefighters' Pension Plan (Plan)i is more conservative than the Police Officers' or General Employees' Plans. Mr. Armstrong continued that the Plan should be fully funded by September 2023, when the City and County Inter-Local Agreement expires. Discussion ensued regarding the seven-year Amortization Policy, and with Mr. Armstrong recommending the Board adopt the Florida Retirement System (FRS) Mortality Table now rather than awaiting another year since a delay will have a larger fiscal impact next year. In response to a question from Vice Chair Roberson asking about the funding impact of remaining at the same assumed rate of retumn and adopting the FRS change in Mortality Tables, Mr. Armstrong stated that this scenario would decrease the funded ratio by 5% while increasing the contribution requirement by $1,625,000. Vice Chair Roberson stated that the following three decisions should be considered: 1) 6y year or 7 year amortization 2) Florida Retirement System (FRS) Mortality Table adaptation 3) Assumed Rate of Return In response to a question from Trustee Joseph about the impact if the FRS Mortality Table was delayed until next year, Mr. Armstrong stated that the resulting fiscal impact would be larger next year if the policy is not changed to comply with the new standards this year, as the liability would be spread over fewer years. Secretary/Treasurer: Nadalini requested Board consensus to allow the City's Financial Administration Director to come before the Board and discuss any concems he mayl have. Financial Administration Director John Lege, III, Financial Administration Department, came before the Board and stated that upon review of the calculations, he determined that the 7.25% assumed rate of return, in conjunction with a seven-year amortization period as stated in FRS guidelines would result in an estimated $480,000 increase in the City's contribution; that currently the contributions are approximately $2.5 million annually, sO adaptation would result in a 20% increase in the contributions to the City; that he cannot yet quantify the impact that the new proposed share Ordinance would create; however the new proposed Ordinance would reduce some of the negative fiscal impact of adopting the seven-year amortization; that the Inter-Local Agreement between the City and County ceases in September 2023 and the County will stop contributing to the Plan on October 1, 2023; however, only the City would be contributing after that date. Discussion ensued regarding thei impact of adopting the FRS Mortality Table. Secretary/Treasurer: Nadalini stated that at the January 27, 2016, City of Sarasota Firefighters' Book 1 Page 11 02/24/16 9:00 A.M. Book 1 Page 12 02/24/16 9:00 A.M. Pension Plan Board of Trustees Regular Meeting, Kimberli Radtke from the County's Office of Financial Management, did not state or comment on any potential fiscal impact regarding the County's contributions; however it is important to know what financial impact any Plan changes would have to the County. In response to a question from Secretary/Treasurer: Nadalini asking if adoption of the FRS Mortality Table could be postponed, Vice Chair Roberson stated that the budget planning for the County closes in March 2016, and the Actuary would need to provide final figures as soon as possible for the County to review. In response to a question from Secretary/Treasurer: Nadalini asking about any possible legal issues should the Board decide to Table the adoption of the FRS Mortality Table at this time, Attorney Sugarman stated that the Board should take into consideration the advice of the Plan's Actuary. In response to a request for clarification from Trustee Snow about the FRS Mortality Table, Mr. Armstrong stated that his recommendation is for the Plan to maintain the assumed rate of retum of 7.25% and adopt and implement the new FRS Mortality Table. Trustee Joseph stated that his concern is lowering the assumed rate of return while at the same time adopting the FRS Mortality Table resulting in a large fiscal impact to both the City and the County; that the FRS mortality table will have to be adopted in the next fiscal year and it might be more prudent to wait instead of adopting it now simultaneous with lowering the rate of return, Secretary/Treasurer Nadalini stated that she agreed with Trustee Joseph; that although lowering the rate of return has been generally understood and accepted, implementing a lower the rate of return while adopting the new FRS Mortality Table at the same time would be a substantial burden on the employers' as sponsors of the Plan. In response to Trustee Snow asking if the Board was in agreement to initiate a seven-year amortization, Members of the Board indicated they were in agreement A motion was made by Trustee Snow, seconded by Trustee Joseph, to approve a decrease in the assumed rate of return to 7% and implement a seven- year amortization period for the Plan's unfunded liabilities for the Fiscal Year ending September 30, 2015, for the September 30, 2016 valuation, and the current Mortality Table would be changed to the State mandated Florida Retirement System (FRS) Mortality Table, per the recommendation of the Plan's Actuary. Motion carried unanimously (4-0). 6. NEW BUSINESS: 6.1. Presentation and Discussion Re: 2014 Firefighters' Supplemental Compensation Trust Fund Distribution Brad Armstrong, Actuary, Gabriel, Roeder, Smith & Company, came before the Board and stated that the fund distribution pertains to those firefighters who retired before 2003 of which there are 108 eligible participants; that a check for $445.39 should be paid out to the participants which will not affect the valuation and will only be paid out once. In response to a question from Trustee Snow asking if the Pension Plans Administrator will be submitting a cover letter to the participants with the checks, since this check will only be paid once and not repeated next year, Secretary/Treasurer Nadalini agreed, and stated that a cover letter will be sent out with each check; that Pension Plans Administrator Ramphal had indicated they will be ready for distribution in March 2016. In response to a question from Secretary/Treasurer: Nadalini asking if the share checks were not properly disbursed by previous Pension Plans Administrator, Mr. Armstrong stated that a portion of the supplemental distribution was not properly allocated as these funds were accrued prior to disbursement but not received until the month after the annual share distribution was made, and Secretary/Treasurer Nadalini stated that Pension Plans Administrator Ramphal will work with Mr. Armstrong and Attorney Sugarman to draft a cover letter to inform the Plan members of this special disbursement. A motion was made by Secretary/Treasurer Nadalini seconded by Trustee Joseph, to make an additional payment of $445.39 to each pre-2003 retiree to correct an underpayment which was made due to a misallocation of the supplemental distribution based on the recommendation of the Plan's Actuary. Motion carried unanimously/(4-0). 6.2. Presentation and Discussion Re: Retiree Benefit Plan Payments Alan Woodle and Edward Whitehead, retired Sarasota Police Officers and Members of the Retirees' Benefit Focus Group, came before the Board to present their request for tax deductions based as the result of health insurance being withdrawn from their pension checks. Mr. Woodle stated if the retirees' health insurance is paid without being withdrawn from the retirees' pension check, they are not eligible for a tax deduction offered under the Pension Preservation Act of 2006; that with the changes that the City has made regarding the health insurance plan, which includes the implementation of a stipend option for post-Medicare retirees, resulting with City retirees receiving a stipend from the City instead of from the City's health insurance; that this becomes an issue when the City pays out the stipend to the retirees and the retirees pay for their insurance that the health insurance is no longer tax-deductible for retired firefighters and retired police officers; that the request is for the Firefighters' Pension Plan Board approve a procedure where the cost for the health insurance would come out of the retirees' pension benefit and paid directly to the insurance company, which would maintain thet tax deduction. Mr. Whitehead stated that in 2014, the City's Human Resource (HR) Department made changes to the retirees' health insurance, whereas in some cases have resulted in premium increases of 300% to 400%; that it appears that the City wants to remove as many Medicare eligible retirees off of the City's health insurance plan as possible; that in January 2016, Medicare eligible retirees were offered a stipend to migrate from the City's provided health insurance to private insurance, which would cover the retiree only and not their spouse; that many retirees opted to move their spouses and dependents to a less expensive, private insurance plan while they remained on the City's health insurance plan; that due to this change, the retirees were unable to meet their deductible and were not eligible to receive a tax deduction under the Pension Protection Act of 2006; that if the retirees' health insurance is paid without being withdrawn from the retirees' pension check, they are not eligible for the tax deduction. Mr. Whitehead continued and stated that he and Mr. Woodle are requesting the Board to get involved in this process since the HR Department promised them this payment process could be administered by the City's Pension Administration; however the previous Pension Plans Administrator had indicated the process was not feasible. Secretary/Treasurer Nadalini stated that although Pension Administration is supportive of the request, there is nothing written in the current Fire Code giving Pension Administration authorization to accommodate the request; that each Pension Board and its Attomeys must review the Agreement between the City and its healthcare providers to see how the request may be accommodated; that she indicated the matter would have to be brought before the Boards and their Attorneys to be properly reviewed when this request was brought to her attention. Attorney Sugarman stated that the deduction is only applicable to Public Safety Officers and those that took disability retirement; that retirees took early retirement are not eligible; that the Ordinance can be amended because the request is permitted by State Law and there is no actuarial impact; that the Pension Administration can then set up the procedure, whereas the eligible retirees would inform Pension Administration as to where the healthcare payments should be sent and the Board or Pension Administration would not incur liability; that the final step would be completing the relevant section of the 1099-R; that the retirees can deduct up to $3,000 from their taxable income, however the payment must be made from their monthly pension benefit. Book 1 Page 13 02/24/16 9:00 A.M. Secretary/Treasurer Nadalini stated that Board is reminded and it is important to note, the Pension Administration is not in the business of healthcare administration and will not be the Liaison between the healthcare companies and the retirees. In response to a question from Secretary/Treasurer Nadalini about verification of information to the healthcare company, Attorney Sugarman stated that Pension Administration would not be responsible for advising on the health insurance of the retirees; that he would be able to submit the proposed Ordinance changes within a week's time, to afford Secretary/Treasurer Nadalini to submit the proposed Ordinance before the Commission at a Regular Sarasota City Meeting. Pension Plans Administrator Ramphal stated that Pension Administration is exploring the request to see if this is feasible with the Pension Administration Division's third-party payroll provider, Automatic Data Processing (ADP), while maintaining the system which is currently being utilized; that request will require the platform used to administer the payroll be changed to some degree and the results will become apparent once a cost analysis is performed. A motion was made by Secretary/Treasurer Nadalini, seconded by Trustee Snow to recommend to the Commission that the Firefighters' Pension Plan (Plan) be amended to submit deductions which would allow retirees to take advantage of the tax deduction benefit and for Pension Administration to work towards implementing this deduction. Motion carried unanimously(4-0). In response to a request from Secretary/Treasurer Nadalini or Attorney Sugarman to speak to the Police Officers' and General Employees' Pension Plans Attorneys, since they too may also want to approve this same process for their Members, Attorney Sugarman stated that he would contact Police Officers' and General Employees' Pension Plans Attorneys. 7. ATTORNEYMATTERS: Attorney Sugarman stated that correspondence with the Pension Administration third-party payroll provider, ADP was reviewed; that he is was satisfied with management's response to its year-end tax document error; that the Internal Revenue Service (IRS) came out with a new rule on retirement age which doesn't apply to the Plan retirees since these members are not permitted to work and receive a monthly pension benefit, and reminded Members to file their Form 1, Financial Disclosures prior to the July 1, 2016 deadline. 8. OTHERMATTERS: Discussion ensued about the Firefighters' Pension Plan Agenda binders provided to each Member by PensionAdminstration. 9. ADJOURN: Vice Chair Roberson adjourned the Firefighters' Pensions Board of Trustees Regular Meeting at 11:48 a.m. M - Sllddlu BNe Vice Chair Shelial Roberson Secretary/Treasurer Pamela M. Nadalini Book 1 Page 14 02/24/16 9:00 A.M.