MINUTES OF THE JANUARY 27, 2016 CITY OF SARASOTA FIREFIGHTERS PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING Present: Chair Michael Hartley (arrived at 9:05 a.m.), Vice Chair Shelia Roberson, and Trustees Charles Joseph and Scott Snow Others: Attorney Pedro Herrera, Pension Plans Administrator Harry Ramphal, Senior Pension Analyst Anthony Ferrer, and Pension Specialist Chinyere Deehan Absent: Secretary/Treasurer Pamela Nadalini 1. CALL" THE MEETING TO ORDER: Vice Chair Roberson called the meeting to order at 9:04 a.m. 2. CHANGES TO THE ORDER OF THE DAY: Pension Plans Administrator Ramphal sought Board consensus to add Agenda Item 6, Item No. 4, Presentation and Discussion Re: Governmental Accounting Standards Board Statement Number 68, Accounting, and Agenda Item 6, Item No. 5, Presentation and Discussion Re: USF Affiliate Services, Inc., Independent Service Auditor's Report. Chair Hartley sought Board consensus to move Agenda Item 7, Item No.1, Continued Discussion Re: Third Party Administration to follow Agenda Item 8, Item No.3, Presentation and Discussion Re: Investment Performance. Chair Hartley noted Board consensus to accept the Changes to the Order of the Day. 3. PLEDGE OF CIMILITY: Chair Hartley read into the record a memorandum for Mayor Willie Charles Shaw, dated February 13, 2015, entitled City Commission and Advisory Board Meeting Protocols and Pledge of Civility. 4. ANNUAL UPDATE ADVISORY BOARDS COMMITTEE: Deputy City Auditor and Clerk Karen McGowan, Office of the City Auditor and Clerk, came before the Board, distributed to the Board a form entitled "Information Technology (IT) Division - Workplace, Email, Internet, and Internet Acceptable Use Policy", and requested the form be completed and returned to the Board's Liaison upon the meeting adjourning, and provided a brief overview on and referenced from sections of "Florida Govemmentin-fe-Sumahine Law" manual and stated that the requirements of the Sunshine Law are three-fold as follows: 1. All public Boards must be open to the general public, for example, no luncheon or dinner meetings are to be held among members, but the Sunshine Law does not apply when meeting with a member(s) from a different Board. 2. Reasonable Notice must be given for all meetings, generally considered to be three business days in advance or one day for emergency posting. 3. Minutes of the meeting must be taken and promptly posted on the City's webpage once approved; however no specific format is required. Deputy City Auditor and Clerk McGowan continued that the Sunshine Law applies to Boards or Commissions of any State agency or municipal authority within the State of Florida; that Fact-Finding Committees are limited to discovering facts only while making no recommendations based upon the facts; that all written correspondence is subject to the Sunshine Law along with the use of personal computers and cellular telephones; that the same applies to using Staff or Liaisons as message carriers, which is a violation; that the Public Records Act applies to all material made or received in connection Book 1 Page 1 01/27/16 9:00 A.M. Book 1 Page 2 01/27/16 9:00 A.M. with official business of the public entity, including but not limited to documents, maps, any notes taken at meetings, and data processing software; that all emails and telephone records in connection with official business are subject to disclosure in the absence of a specific statutory exemption. Deputy City Auditor and Clerk McGowan provided a brief overview and references from the recently revised 11h edition of "Robert's Rules of Order" related to quorums in Boards and Committees, and proceedings in the absence of a quorum, and the manner of enforcing the quorum requirement, and provided a brief overview of the "Florida Commission on Ethics Guide to the Sunshine Amendment and Code of Ethics for Public Officers and Employees", and explained the use of "Form 8B - Memorandum of Voting Conflict for County, Municipal, and other Local Public Officers", and concluded with the distribution of folders to each Board Member which contained the information discussed for reference and their reading pleasure. Chair Hartley on behalf of the Board thanked Deputy City Auditor and Clerk McGowan for her presentation. 5. PUBLIC INPUT: None 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the Firefighters' Pension Board Membership Meeting of November 17, 2015 Vice Chair Roberson stated that the minutes of the November 17, 2015, City of Sarasota Firefighters' Pension Plan Board of Trustees Special Meeting, under Unfinished Business, Agenda Item III, Item No. 3, Presentation and Discussion Re: Bobbitt, Pittenger & Co., P.A., should be corrected as related to the question regarding the Procurement Office to show the question was asked by Chair Hartley, and Trustee Joseph stated that he has to redo Form 8B - Memorandum of Voting Conflict for County, Municipal and Other Local Public Officers as the result of checking the Elective instead of Appointive box. Pension Plans Administrator Ramphal stated that the recording of the meeting would be reviewed and a new Form 8B = Memorandum of Voting Conflict for County, Municipal and Other Local Public Officers was provided to Trustee Joseph, which was properly completed by him. A motion was made by Trustee Joseph, seconded by Vice Chair Roberson, to approve the November 17, 2015, City of Sarasota Firefighters' Pension Plan Board of Trustees Special Meeting, with the noted corrections. Motion carried unanimously(4-0). 6.2. Approval Re: Minutes of the Firefighters' Pension Board Membership Meeting of December 02, 2015 Trustee Joseph stated that the minutes of the December 02, 2015, City of Sarasota Firefighters' Pension Plan Board of Trustees Regular Meeting, under Approval of Retirement Requests, Agenda Item IV, Item Number 4, Re: Retirement Request of Charles Joseph, should be corrected to read age "50" instead of age "51". A motion was made by Trustee Joseph, and seconded by Vice Chair Roberson to approve the December 02, 2015, City of Sarasota Firefighters' Pension Plan Board of Trustees Regular Meeting, with the noted corrections. Motion carried unanimously (4-0). 7. NEW BUSINESS: 7.2 Presentation and Discussion Re: Supplemental Actuarial Report as of September 30, 2014 Brad Armstrong, Actuary, Gabriel, Roeder, Smith & Company, came before the Board to present the City of Sarasota Firefighters' Pension Fund Actuarial Valuation Report of September 30, 2014 and gave a brief overview of the results of the supplemental valuations, and indicated what the September 30, 2014 valuation results were if the proposed assumption changes were adopted on that date. Mr. Armstrong recommended that in the next year the Board address what action to take when the amortization policy reaches five years while realizing that Plan gains or losses would be reflected in the contribution requirements. He also discussed the contribution requirements in terms of various years of amortization, and stated that there is a statutory requirement which the Board must adopt as related to the Florida Retirement System mortality tables in 2016; that the Board can decide whether the new Florida Retirement System mortality tables should be implemented for 2015. Mr. Armstrong provided an outline of the financial effects of the proposed assumptions and the amortization up to a ten year period. In response to a question from Vice Chair Roberson regarding the proposed changes that would occur if the Board decides to adopt the Florida Retirement System mortality tables in 2015, Mr. Armstrong stated that the impact of that decision to change from the current base to the new tables would be about $1.7 million greater than the $7 million from the 2014 valuation. Discussion ensued regarding whether the Board should vote to change to a ten year amortization plan. In response to a question from Chair Hartley requesting Gabriel, Roeder, Smith & Company's recommendation on whether to change to a ten year amortization plan, Mr. Armstrong stated that he would not advocate for any new base period to be less than five years and further recommended changing to a ten year amortization plan in conjunction with a change in the interest rate assumption resulting in a nominal impact in the 2015 actuarial valuation. Vice Chair Roberson stated that there are three decisions that have to be made by the Board: the amortization period, when to adopt the Florida Retirement System mortality table, and when to consider any change to the assumed rate of return. Attomey Herrera stated that the Board needs to ensure that they work closely with both the City and the County in making these decisions as they are partners in the Plan. Chair Hartley noted Board consensus to place on the Agenda of the February 24, 2016, City of Sarasota Firefighters' Pension Plan Board of Trustees Regular Meeting, and the following three items for consideration: 1) Amortization 2) Florida Retirement System Mortality Table 3) Assumed Rate of Return Financial Administration Director John Lege, Financial Administration Department, came before the Board and provided further details regarding the 2015 actuary valuation. Mr. Lege stated that Sarasota County contributes approximately 67% towards the plan and the City of Sarasota contributes the remaining 33% and he advised that the inter-local agreement with the County and the City ends in 2023. He advised that after that date, the City and County will no longer fund the plan. Mr. Lege advised that the actuarial report that was presented by Mr. Armstrong was from 2014, and the report from 2015 is expected to be different, possibly showing a loss. Mr. Lege recommended that the Board wait for the 2015 numbers to be presented before making any further decisions. Discussion ensued regarding the plan and the contributions from the City. Book 1 Page 3 01/27/16 9:00 A.M. Book 1 Page 4 01/27/16 9:00 A.M. 7.3. Presentation and Discussion Re: Quarterly Investment Performance Report as of December 31, 2015 Charlie Mulfinger, Managing Director, Graystone (Graystone) Consulting, came before the Board to present the Quarterly Performance Summary for the quarter ending December 31, 2015, provided a market update, and stated that the market has been very volatile this quarter. Mr. Mulfinger continued and gave a brief explanation of the Summary of Relevant Facts and stated that the current portfolio value is $131 million which is a gain for the quarter of over $3 million, and discussed the breakdown of returns between the managers, and stated that the portfolio's total return is 2.52% versus index at 2.91%. 7.4. Presentation and Discussion Re: Proposed Firefighter Pension Ordinance Number 16-5161, establishing a Share Plan Attorney Herrera advised the Board about a recently ratified collective bargaining agreement between the County and the Firefighters' Union, and stated that Sarasota County has requested the City of Sarasota Amend its Firefighter Pension Plan to conform to this Agreement, and stated that he has been working with the City Attorney's Office to draft a final version of the Pension Ordinance, and requested Board approval to continue discussion of the proposed Ordinance at the February 2016, City of Sarasota Firefighters' Pension Plan Board of Trustees Regular Meeting. The following people spoke: Eric Devon, Retired City Firefighter, asked if there are three groups of firefighters that retired pre and post 2003. In response, Chair Hartley confirmed that in the past there were three groups of retired firefighters; those that retired pre-1998, those that retired between 1998 and 2003, and those that retired after 2003. Currently there are only two classes of retired firefighters, those that retired pre-2003 and those that retired post-2003. In response to a question from Mr. Devon asking about the allocation of investment funds that would go to each class of retired firefighter, Attorney Herrera responded that any amount over $781,422 of insurance funds will be divided 50/50 between pension liability and share allocation for the members of the plan. Mitch Thorne, Retired City Firefighter, asked for the amount of last year's funds and Trustee Snow advised that last year's amount was $38,000 from the State and that ordinance has to pass before any distributions are allocated. Attorney Herrera stated that further Board discussions regarding proposed Ordinance Number 16-5161 will continue at the February 2016 City of Sarasota Firefighters' Pension Plan Board of Trustees Regular Meeting as a copy of the proposed Ordinance will be presented. Chair Hartley noted Board consensus to continue discussions regarding proposed Ordinance Number 16-5161 at the February 2016 meeting. 7.5. Presentation and Discussion Re: Governmental Accounting Standards Board Statement Number 68, Accounting and Financial Reporting for Pensions Jennifer Ruffino-Cook, CPA Manager, came before the Board and Alison Wester, Partner, Mauldin & Jenkins, LLC, was teleconferenced into the Board to discuss the amendment of Governmental Accounting Standards Board Statement Number 68. Trustee Snow left the Chambers at 10:51 a.m. and retured at 10:57 a.m. Ms. Wester stated that Governmental Accounting Standards Board Number 68 applies to either multi- employer or a single-employer plans; that the Plan had previously been identified as a single-employer plan, but under the new guidance, the Plan is being classified as a multi-employer plan because of the nature of contributions coming from both the City and the County; that this will impact how the liability is booked on both the City and County's financial statements. In response to Vice Chair Roberson asking for clarification as to whether it is necessary for the Board to comply with the Governmental Accounting Standards Board Number 68 for audit standards, Ms. Wester stated yes; that it is necessary to comply with these new audit standards. Chair Hartley noted Board consensus for Mauldin & Jenkins, LLC, to continue auditing the plan to avoid delays; however assertion from the County is necessary to pay half of the invoice fee along with the City. Kim Radtke, Director of Financial Management, Sarasota County and John Lege, Financial Administration Director, City of Sarasota, came before the Board. Ms. Radtke stated for the record that the County would pay its portion of the invoice fee of $5,500 regarding the audit services performed by Mauldin & Jenkins. Mr. Lege stated that the Board should not incur the cost of $5,500 for the audit services performed by Mauldin & Jenkins and the City will come up with an equitable solution to cover the cost. In response to a question from Pension Plans Administrator Ramphal asking if Mauldin & Jenkins should bill the City and County separately, Ms. Radtke stated that the details will have to be worked out, and Mr. Ramphal stated that he will follow up with a telephone call. Ms. Wester stated that the firm will work with Mr. Ramphal and Ms. Radtke to figure out a billing process by submitting an Arrangement Letter. 7.6. Presentation and Discussion Re: USF Affiliate Services, Inc., Independent Service Auditor's Report Bradley Rinsem, President and Chief Executive Officer, and Lynn Skinner, Vice President, Salem Trust Company, came before the board to discuss the auditor's report and issues pertaining to Salem Trust's recent software conversion. Mr. Rinsem advised that during this process, Salem Trust encountered several issues that affected its ability to provide sufficient services to their clients. Public accounting firm Crowe Horwath conducted a Statement on Standards for Attestation Engagements Number 16 audit, and issued a report in Feb 2014 which showed that Salem Trust's procedures were not in compliance with existing policy. Crowe Horwath conducted another Statement on Standards for Attestation Engagements Number 16 audit on Salem Trust's operations in 2015 and reported that there were no exceptions and that all serious issues had been resolved. Mr. Rinsem discussed this audit report and confirmed there were three low level concerns. Mr. Rinsem concluded that Salem Trust is now fully competent to serve clients. Vice Chair Roberson left the Chambers at 11:04 a.m. and returned at 11:06 a.m. In response to a question from Chair Hartley asking what other City of Sarasota Boards Salem Trust Company services, and if any of the other Boards have ceased service, Mr. Rinsem stated that Salem Trust Company also serves the Police Officers' and General Employee's Pension Boards. He further advised that the Police Officers' Pension Board just recently reviewed a Request For Proposal regarding Salem Trust. Mr. Rinsem stated that his hope is that Salem Trust will continue to serve the Board and that Salem Trust Company will not change its current pricing as a sign of its commitment to the City. 8. UNFINISHED BUSINESS: 8.2. Presentation and Discussion Re: Trustee Education and Travel Expenses Policy Statement Attorney Herrera discussed combining the City's policy with the Plan's policy regarding the Trustee Education and Travel Education Expenses Policy Statement, and stated that the policy is flexible and able to be changed if necessary. Book 1 Page 5 01/27/16 9:00 A.M. Book 1 Page 6 01/27/16 9:00 A.M. In response to a question from Trustee Joseph asking about the reimbursement of out-of- pocket expenses, Attomey Herrera stated that language in the policy can be changed as needed to outline how travel expenses would be reimbursed. Discussion ensued regarding which travel expenses are reimbursable and Attorney Herrera assured the Board that the policy can be revised to accommodate the needs of the Members. 9. ATTORNEY MATTERS: 9.1. Presentation and Discussion Re: Internal Revenue Service Determination Letter Attorney Herrera discussed the Internal Revenue Service determination letter, advising the Board that the letter involved the Board's decision to file for a determination with the Internal Revenue Service. He stated that the letter includes a draft of the ordinance amendment that will be filed with the application. Attomey Herrera stated that certain amendments need to be added to the letter and once it is filed with the Internal Revenue Service and the examiner will be able to add comments or adjustments until it is satisfactory. 9.2 Presentation and Discussion Re: Proposed Voluntary Correction Program IRS Compliance Ordinance Attorney Herrera briefly discussed the proposed Voluntary Correction Program Compliance Ordinance and stated that for a fee, the Voluntary Compliance simplifies and corrects the Internal Revenue Service Determination Letter. 9.3 Presentation and Discussion Re: OM Group Litigation Attorney Herrera stated that the Board has approved proceeding with the OM Group Litigation and an Affidavit was required; that another Amendment was submitted to approve the filing which SecretarylTreasurer Nadalini signed and the Amended Complaint was filed; that he will keep the Board updated on further developments. 10. OTHER MATTERS: Attorney Herrera stated that the Division of Retirement has announced the 2016 dates for its school and members of the Board should apply if they wish to attend. Attorney Herrera briefly discussed Florida Pension Plan Trustees Association certification with the members of the Board. 11. CHANGES TO THE ORDER OF THE DAY: 7.1 Continued Discussion Re: Third Party Administration Chair Hartley expressed concerns with regards to employee's changes in the Pension Administration Office within the last few months; that he has discussed his concerns with the Deputy City Manager and with individual Commission members; that he is not comfortable with the way the Pension Administration Office is being run; that not being involved with hiring new employees, which has occurred in the past, is of concern. Attorney Herrera stated that the decision to hire or fire employees within the Pension Administration Office is not the Board's decision to make; that the decision lies with the City of Sarasota, Florida. Discussion ensued regarding the issues the Board has with the Pension Administration such as not being involved in the hiring process, receipt of late material or items being added late to the Agenda, not receiving correspondence in a timely manner, and the unavailability of a pension notebook which was made available by the previous staff. Chair Hartley stated that he would like to discuss a Request for Proposal to investigate the costs for a Third Party Administrator and having the item placed on the February 2016 Agenda; however he would not be present at the February meeting. Trustee Joseph stated that before terminating the long-term relationship the Board and the retirees have with the City of Sarasota, he would like for the Board to have a discussion with Secretary/Treasurer Nadalini and go over the detailed issues presented by the Board. Attorney Herrera recommended tabling the discussion until the March 2016, City of Sarasota Firefighters' Pension Plan Board of Trustees Regular meeting where all Members of the Board will be present. Chair Hartley noted Board consensus to Table the item and place the item on the March 2016, City of Sarasota Firefighters' Pension Plan Board of Trustees Regular meeting Agenda. In response to a question from Vice Chair Roberson asking when the Board will receive the Valuation Reports from the Actuary, Trustee Snow stated that normally the Valuation Reports from the Actuary are presented at the January 2016, City of Sarasota Firefighters' Pension Plan Board of Trustees Regular meeting. 12. ADJOURN: Chair Hartley/ adjourned the Firefighters' Pensions Board of Trustees Regular meeting at 12:24/p.m. Chair Michael Hartley Pension Plans Admninistrator Harry Ramphal Book 1 Page 7 01/27/16 9:00 A.M.