CITY OF KNOXVILLE PENSION BOARD
MINUTES
Thursday – April 8, 2010
8:15 A.M.
917B E. 5TH AVENUE
The regular meeting of the City of Knoxville Pension Board was held in the Pension board conference room at 917 E. 5th Avenue at 8:15 a.m. on April 8, 2010.
Present were: Ms. Barbara Pelot, Mr. Greg Coker, Mr. Joe Hackney, Mr. Jim Hutchens, Ms. Robin Shelton, Mr. Jim York, Mr. Michael Cherry and Attorney Bud Gilbert
Also present: General Government, Plan G1 employees – Mr. Clarence Norman Bragg, Ms. Lisa Chambers, Ms. Valerie Coleman, Mr. Brent Johnson, Ms. Susan Kay, Mr. Stephen J. King, Ms. Carol Mahler, Ms. Fannie Maples, Ms. Debbie Moore, Ms. Sandra Schade, Mr. Joe Walsh and Mr. Scott Williams. Lt. Cheri Matlock, Police Department – Plan C employee;
Mr. Al Holifield, Attorney and Ms. Katie Dotson, Paralegal representing General Government employees.
CALL TO ORDER:
Ms. Pelot presided and called the meeting to order at 8:15 a.m.
APPROVAL OF REGULAR MEETING MINUTES FOR March 11, 2010:
Ms. Shelton made a motion to approve the March 11, 2010, meeting minutes. Mr. Coker seconded the motion. The motion carried unanimously by the members present.
APPROVAL OF REVISED AGENDA: - Exhibit 1
The Revised Agenda was approved without objection.
CONTRACTS:
CastleArk and IRM
Mr. Cherry and Attorney Gilbert informed the Board that the contracts with Large Cap Growth Equity Fund Manager, CastleArk Management and Treasury Inflation Protection Fund Manager, Income Research Management (IRM) were almost ready for execution by the parties.
Pugh and Company
Mr. Cherry informed the Board that he had not yet received from auditors, Pugh and Company, the engagement letter for the three year contract with two, one year option extensions, but would follow up with Pugh and Company on the matter.
Mr. Hutchens arrived at 8:22 a.m.
ADMINISTRATIVE MATTERS:
RREEF America II
Investor Proxy Vote
Mr. Cherry informed the full Board about the recommendation of the Investment Committee, which was based upon Summit Strategies’ recommendation on the matter, to vote yes on a RREEF proxy vote to reverse a governance provision that prevents RREEF from purchasing any new properties.
Redemption Cue
Mr. Cherry also informed the Board that he had been contacted by RREEF and informed that the manager was now in position to issue redemptions to investors in the redemption cue.
Motion: Mr. Hackney made a motion, based upon the recommendations of Summit Strategies and the Investment Committee, to rescind the Board’s previous action to redeem its holdings with the RREEF America II fund. Mr. Hutchens seconded the motion. The motion passed unanimously.
EXECUTIVE DIRECTOR COMMENTS: None
ATTORNEY COMMENTS:
Master Calendar
Attorney Gilbert informed the Board that he had not yet completed the Master Calendar requested by the Pension Board, but he hoped to complete the task next week.
City Council Workshop
Attorney Gilbert reminded the Board about the workshop requested by City Council with the Pension Board on Thursday, April 15 at 5:00 p.m. Ms. Pelot informed the Board that she would be on vacation and thus unable to attend the workshop.
November Charter Referendum
Attorney Gilbert advised the Board that no proposed pension charter amendments had been submitted to the Pension Board by the required deadline under City Charter § 1355 for the August referendum. He noted, however, that the process starts soon for the November referendum, which has a June 17, 2010 deadline for filing all proposed pension charter amendments with the Pension Board for review and comment to City Council.
Stone Energy Class Action Litigation
Attorney Gilbert informed the Board that the court had signed the settlement memorandum on the Stone Energy Class Action litigation and he would be able to give a more complete report to the Board on the matter next month.
Richard Woodby Appeal – Exhibit 2
Attorney Gilbert distributed to the Board a draft response to Mr. Woodby’s concerns regarding the Board’s interpretation of the charter section covering reemployment and reinstatement issues. Mr. Cherry and Attorney Gilbert advised the Board that the letter will be sent to Mr. Woodby prior to his appearance before the Board at its May 13, 2010 meeting.
Plan G1 Member Complaint – Exhibits 3 through 6
Attorney Gilbert updated the Board on the status of the litigation claim that had been informally raised for review by 31 Plan G1 members, who are represented by Attorney Al Holifield and who have requested that they be allowed a one-time opportunity to elect a Plan G, Option 2 benefit. Much of the potential claim was based on the group’s contention that several plan members favored by the former administration were provided “guidance” or “favored information” that resulted in them making illogical option elections to Plan G2 at its inception in 1997. Mr. Cherry prepared a data base for these select employees based on member data that would have been applicable at the time and which included certain retirement assumptions that were believed to be reasonable for the members. Contrary to Mr. Holifield’s contention, an analysis of the data base supported a conclusion that almost all of the select employees appeared to have made logical elections into Plan G2 at its inception. The data base was then shared with Attorney Holifield in a recent meeting and Attorney Gilbert expressed his initial conclusion that the subject litigation claim was not well grounded based on the evidence and legal analysis advanced to date by the claimants.
At this time Attorney Holifield and several of the Plan G1 members entered the meeting. Several members addressed the board including Ms. Carol Mahler, Mr. Clarence Norman Bragg, Ms. Valerie Coleman, Mr. Scott Williams, Ms. Debbie Moore and Ms. Lisa Chambers and explained how they arrived at their decision to remain in Plan G Option 1 upon its inception in 1997.
Attorney Holifield then distributed to the Board several documents (see Exhibit #3 – City of Knoxville Charter Article XIII, Exhibit #4 – Personal Statement of Carol C. Mahler, Exhibit #5 – City of Knoxville Informational Brochure, Exhibit #6 – G1 “Gap” Employees) in support of the plan members and reviewed with the Board three possible avenues for providing relief to the claimants including:
1) Litigation, which would need to be decided by a court or settled by the parties;
2) Charter amendment, which would require referendum approval; or
3) Correction of error under City Charter §1352.2, which would require the Pension Board to determine that an error had occurred.
After a lengthy discussion of the above options, the following motion was made:
Motion: Ms. Pelot made a motion, based on the Pension Board’s authority under City Charter §1352.2, to find that an error had been made and to allow the 31 affected members a one-time opportunity to elect to transfer from Option 1 to Option 2, Plan G. Mr. Coker seconded the motion.
Mr. Hutchens stated to the Board that he supported letting those Plan A members who elected to remain in Plan A at the inception of Plan G to also take advantage of the opportunity to change plans if such relief was granted to the Plan G1 affected members.
Attorney Gilbert advised the Board that no decision was required today and he was not prepared to recommend a course of action for the Pension Board under the correction of error approach because, up until this morning, he had only been focusing on the claimants’ possible litigation claims. As a result, he cautioned the Pension Board against proceeding too hastily and informed the Board that he needed more time to examine this scenario and properly advise the Board.
At Mr. Coker’s request, the meeting was recessed at 10:36 a.m. without objection, and then called back to order at 11:00 a.m.
Following additional discussion by the Board of its options and Attorney Gilbert’s observation that he believed the Plan G, Option 1 employees’ claim was sufficient to justify an Executive Session of the Board, the following motion was made:
Motion: Mr. Coker made a motion that the Board go into an Executive Session at 12:10 p.m. Mr. Hackney seconded the motion, which was approved and the Plan G1 members left the meeting along with Attorney Holifield and Ms. Dotson. Mr. York and Ms. Shelton did not leave the Executive Session after consultation with Attorney Gilbert.
Mr. Hutchens called for a recess at 12:43 p.m.
After the recess the meeting was called back into session and the G1 plan members, along with Attorney Holifield and Ms. Dotson, entered the meeting again.
Mr. Coker advised the Board and all those in attendance that the matter could not be resolved today and stated that he intended to move for a recess of the meeting to a date certain in approximately two weeks, at which time he hoped a final vote on the matter would be taken. At that time, the G1 members, Attorney Holifield and Ms. Dotson left the meeting.
DISABILITY – Exhibits D1 through D8
APPLICATION FOR INJURY IN LINE OF DUTY: PLAN G2
CHARTER SECTION 1360.22
Ernest Smith, General Government Option to be determined
Date of birth, July 5, 1953: 56 years of age*
Total credited service: 11 years 8 months 26 days**
*Computed as if 62 years of age
**Computed as if worked until age 62 (18 years 6 months 25 days)
$1,042.99 pension effective November 1, 2008.
NOTE: Benefit will be adjusted if alternate retirement option is elected.
The Executive Director’s Disability Recommendation Report concludes that the Applicant is not eligible for an Injury Not In Line of Duty Retirement
Motion: Mr. Hackney made a motion to deny this application for injury in line of duty pension, based on Dr. Fred A. Killeffer’s medical report, the medical records and Mr. Cherry’s Disability Recommendation Report and to further authorize Mr. Cherry to issue a denial letter to the applicant containing the basis for the Board’s decision on the claim. Mr. Coker seconded the motion. The motion carried unanimously by the members present.
ENROLLMENTS:
The following Fire Department employees have filed applications to become members of the Plan C pension system.
Jordan D. Adcox
Robert D. Bolen
Anthony D. Bradley
John F. Buckner
Larry D. Coleman
Michael S. Curl
Cory A. Darnell
Scott K. Dorrycott
David A. Dyer (transferring from General Government)
Jeffrey L. French
Joshua J. Gilliland
Emily C. Hindman
Christopher T. Hinkle
Cody L. Hoover
Doyle R. Hunter (transferring from General Government)
Brian J. Irwin
Kevin E. Johnson (transferring from General Government)
Mark W. Lane
Joseph C. Mason
Dustin B. McCroskey
Benjamin R. McLain
Jeffrey L. McSwain, Jr.
John W. Perry
Russell G. Pickel
Adam M. Schuelke
Zachery R. Skeen
Harry A. Spence
Robert C. Stallings
Jason L. Stokely
Motion: Mr. Coker made a motion to approve these applications for enrollment in the Plan C pension system. Mr. Hackney seconded the motion. The motion carried unanimously by the members present.
WITHDRAWALS:
The following employee has filed an application to withdraw his employee pension contributions plus 4% interest and the supplemental retirement account as applicable in Plan G Option 1.
Mark Kolander, General Govt. - Plan G1; non-vested
Motion: Mr. Hackney made a motion to approve this application for withdrawal of employee contributions. Mr. Coker seconded the motion. The motion carried unanimously by the members present.
APPEALS:
Gillis Barbee – Exhibit 7
Last year Mr. Barbee appealed Mr. Cherry’s administrative determination letter denying the employee’s claim for reinstatement of two weeks of prior service time, which he lost on a leave of absence during the TVA & I Fair. That appeal was originally scheduled for the Board’s March 12, 2009 meeting, but the Board took no action on the matter pending Attorney Gilbert’s review of the matter. Attorney Gilbert issued a legal memorandum on the subject dated June 11, 2009 (Exhibit 7), which affirmed Mr. Cherry’s administrative determination.
Motion: Mr. York made a motion to affirm the executive director’s administrative determination denying Mr. Gillis Barbee’s claim for the reinstatement of two weeks of prior service, to deny Mr. Barbee’s appeal to the Pension Board on the matter, and to authorize Mr. Cherry to issue the Board’s denial of appeal letter to the claimant containing the basis for the Board’s decision. Mr. Coker seconded the motion. The motion carried unanimously by the members present.
APPLICATION FOR DEFERRED RETIREMENT: PLAN A
CHARTER SECTION 1360.28
Geraldine Pippin, Schools Certified No Option
Date of birth, December 17, 1950: 59 years of age
Total City credited service: 12 years 6 months
Total County credited service: 14 years
Total credited service: 26 years 6 months
Last date of employment with City: June 1987
Last date of employment with County: May 2001
Average base earnings for 4 years, $400.00 x 75% = $3.00
Average excess earnings for 4 years, $1,105.99 x 1.50% = $16.59
making a total of $19.59 benefit per year of service. $19.59 x 12.50 =
$244.88 x ER Factor .7513 =
$183.98 pension effective January 1, 2010
The City benefit payment is determined using City only salaries and City service time.
The City benefit does not include any County service.
The total amount of the combined City & County benefit is $908.87.
Motion: Mr. Hutchens made a motion to approve this application for deferred retirement. Ms. Shelton seconded the motion. The motion carried unanimously by the members present.
APPLICATION FOR NORMAL RETIREMENT: PLAN G2
CHARTER SECTION 1360.12
Jack D. Martin, General Government No Option
Date of birth, June 24, 1947: 62 years of age
Total credited service: 14 years 5 months 8 days
Average monthly salary for 2 highest 12 month periods, $2,245.32 x .021 =
$47.15 x 14.43858 =
$680.78 pension effective April 1, 2010
Motion: Mr. York made a motion to approve this application for retirement. Mr. Hutchens seconded the motion. The motion carried unanimously by the members present.
APPLICATION FOR PARTICIPATION IN THE DELAYED RETIREMENT OPTION PROGRAM (DROP): PURSUANT TO CHARTER SECTION 1371.8 – PLAN G.
The following employee has chosen a Delayed Retirement Option and will receive a one-time payment of the accumulated monthly benefits on termination of employment with the City of Knoxville.
Harold Grooms, General Government – Plan G2 No Option
Date of birth, April 1, 1959: 51 years of age
Total credited service: 32 years 19 days
Average monthly salary for 2 highest 12 month periods, $2,989.18 x .021 =
$62.77 x 32.05205 =
$2,011.91 pension effective April 1, 2010.
DROP complete March 31, 2012.
Motion: Mr. Hutchens made a motion to approve this application for DROP retirement. Ms. Shelton seconded the motion. The motion carried unanimously by the members present.
Mary A. Maples, General Government – Plan G2 No Option
Date of birth, June 20, 1946: 63 years of age
Total credited service: 24 years 6 months 8 days
Average monthly salary for 2 highest 12 month periods, $2,762.44 x .021 =
$58.01 x 24.52192 =
$1,422.52 pension effective April 1, 2010.
DROP complete March 31, 2012.
Motion: Mr. Hutchens made a motion to approve this application for DROP retirement. Ms. Shelton seconded the motion. The motion carried unanimously by the members present.
APPROVAL OF INVOICES FOR PROFESSIONAL SERVICES: - Invoice copies in folder
Bryan, Pendleton, Swats & McAllister – Actuary (February 2010) $ 16,499.00
Kennerly, Montgomery & Finley – Attorney (February 2010) 4,463.10
State Street - Custodial (February - 2010) 8,440.56
State Street – Trustee (February – 2010) 3,384.59
State Street Global – Money Manager (4th Qtr – 2009) 1,641.42
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.
Motion: Mr. Coker made a motion to pay these invoices. Mr. Hutchens seconded the motion. The motion carried unanimously by the members present.
INVESTMENT MATTERS: None
OTHER: None
PUBLIC COMMENTS: None
Mr. Coker made a motion at 1:20 p.m. to recess the meeting until Tuesday, April 20, 2010 at 8:30 a.m. at the same location. Mr. Hackney seconded the motion. The motion carried with all members voting yes except for Ms. Shelton and Mr. York, who both abstained.
RECONVENED MEETING: April 20, 2010 at 8:30 a.m.
Ms. Pelot called the meeting back in order at 8:40 a.m. on April 8, 2010.
Present were: Ms. Barbara Pelot, Mr. Joe Hackney, Mr. Jim Hutchens, Mr. Larry Martin, Ms. Robin Shelton, Mr. Jim York, Mr. Michael Cherry, Attorney Bud Gilbert and Attorney Bill Mason.
Also present: General Government, Plan G1 employees – Ms. Lisa Chambers, Ms. Valerie Coleman, Mr. Brent Johnson, Mr. Stephen J. King, Ms. Carol Mahler, Ms. Fannie Maples, Mr. Joe Walsh and Mr. Scott Williams. Mr. Al Holifield, Attorney and Ms. Katie Dotson, Paralegal representing General Government employees.
Plan G1 Member Complaint – Exhibit 8
Attorney Gilbert introduced Mr. Bill Mason, an attorney from his firm who specializes in pension law. Attorney Gilbert distributed and discussed with the Board several handouts that he had prepared since the recessed April 8 meeting, which included
1) Timeline of Key Events Related to Plan G, Option 1 Employees’ Claim;
2) E-mail dated April 15, 2010 from Attorney Gilbert to Attorney Holifield including a list of six questions that Mr. Gilbert requested Mr. Holifield to answer; and
3) A three page handout entitled “City of Knoxville Pension Board Benefit Claims Procedures.”
Attorney Gilbert shared with the Board recent information he obtained on a phone conversation with Attorney Holifield the previous day wherein Mr. Holifield identified the error for which his clients were seeking City Charter § 1352.2 relief to be the Knoxville City Council’s failure to provide a new option election period for Plan G1 employees in 2000 when city council approved The Rule of 80 and increased the benefit accrual rates in Plan G. Mr. Holifield alleged that this oversight resulted in an inequity between the Plan G1 and Plan G2 options that could be, if so determined by the Board, an error as contemplated by Section 1352.2 and which could then be remedied as provided by such section.
Attorney Gilbert then recommended to the Pension Board and Mr. Holifield that one way to proceed on the matter was to request that Mr. Holifield file a formal written claim with the Pension Board and allow Mr. Cherry to first issue an administrative determination on the claim, which could then be appeal to the Board if adverse to the claimants.
Attorney Mason next reported to the Board the work he had performed researching any alternate courses of action the Board might have available to remedy such a claim, keeping in mind at all time the Board members’ fiduciary responsibilities to the fund. He discussed, at length the following options:
1) IRS Qualified Plan of Corrections; and
2) Correction of Error under Charter Section 1352.2.
As a result of his research, Mr. Mason concluded that in his opinion the Pension Board has the authority to correct errors that occur in the administration of the pension plan. He discussed considerations for the Pension Board for determining what error occurred in this particular situation and how such error might be corrected by the Board.
Motion: Mr. Martin made a motion for a 20 minute recess and also moved that the Board enter in to an Executive Session. Mr. Hutchens seconded the motion. The motion carried. Ms. Shelton and Mr. York did not vote.
Ms. Pelot called the meeting back in to session at 10:35 a.m. and the meeting was reconvened.
Attorney Holifield reported to the Board that he would file a formal claim with the City of Knoxville Pension Board on behalf of the affected Plan G1 members.
Motion: Mr. Hutchens made a motion requesting the Executive Director, upon receipt of the claim, to make a determination and recommendation to the Board, for its review, in response to the expected claim. Mr. Martin seconded the motion. The motion carried. Ms. Shelton and Mr. York did not vote.
Motion: Mr. Martin made a motion to enter in to an Executive Session at 10:41 a.m. Mr. Hackney seconded the motion. The motion carried. Ms. Shelton and Mr. York did not vote.
Mr. Coker arrived at 10:50 a.m.
ADJOURNMENT:
Motion: Mr. Martin made a motion to adjourn the meeting following the conclusion of the Executive Session at 10:54 a.m. Mr. Hackney seconded the motion. The motion carried unanimously by the members present.
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Chair
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Date
M:\Board\minutes\2010\april.doc