CITY OF KNOXVILLE PENSION BOARD
MINUTES
Thursday – August 13, 2009
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 August 13, 2009.
Present were: Mayor Bill Haslam, Mr. Greg Coker, Mr. Joe Hackney, Mr. Jim Hutchens, Ms. Barbara Pelot, Ms. Robin Shelton, Mr. Jim York, Mr. Michael Cherry and Attorney Bud Gilbert.
Also present: General Government employees, Mr. Norman Bragg, Ms. Lisa Chambers, Ms. Valerie Coleman, Ms. Carol Mahler, Ms. Polly Maples, Ms. Zephyree Porter, Mr. Tim Schade and Mr. Scott Williams; Mr. Al Holifield, Attorney and Ms. Katie Dotson, Paralegal representing General Government employees; Mr. Dan Holmes, Summit Strategies.
CALL TO ORDER:
Ms. Pelot presided and called the meeting to order at 8:16 a.m.
APPROVAL OF REGULAR MEETING MINUTES FOR July 9, 2009.
Mr. York made a motion to approve the July 9, 2009, meeting minutes. Mr. Hackney seconded the motion. The motion carried unanimously by the members present.
Mayor Haslam arrived at 8:17 a.m. and presided.
APPROVAL OF REVISED AGENDA: - Exhibit 1
CONTRACTS: None
ADMINISTRATIVE MATTERS:
Schedule Pension Board Meetings for Fourth Quarter 2009
Thursday, October 8, 2009 – 8:15 a.m.
Thursday, November 12, 2009 – 8:15 a.m.
Thursday, December 10, 2009 – 8:15 a.m.
The Pension Board meeting schedule was accepted without objection.
Fiduciary Insurance Policy
Mr. Cherry informed the Board that the Fiduciary Insurance Policy had been renewed through June 30, 2010, with Mowery Insurance Agency, for a premium of $27,835, a slight increase from last year’s amount.
EXECUTIVE DIRECTOR COMMENTS: - Exhibit 2
Knox County Plan A – Actuarial Valuation
Mr. Cherry presented the Board a copy of the Executive Summary of Knox County’s annual actuarial valuation as of January 1, 2009. Mr. Cherry advised the Board that the county was appropriately funding their portion of the Plan A benefits for certified teachers.
ENROLLMENTS:
The following General Government employees have filed applications to become members of the Plan G1 pension system.
Peter Beers
Nicholas Bradshaw
Charles E. Thomas
Kimberly Thompson
Joseph L. Williams, Jr.
Motion: Mr. Hutchens made a motion to approve these applications for enrollment in the Plan G1 pension system. Ms. Pelot seconded the motion. The motion carried unanimously by the members present.
WITHDRAWALS:
The following employees have filed an application to withdraw employee pension contributions plus 4% interest and the supplemental retirement account as applicable in Plan G Option 1.
Patricia B. Chessher, Schools – Plan A; Non-vested
Terra Clotfelter, General Govt. – G1; Non-vested
Dannica Hickey, General Govt. - G1; Non-vested
Charles Hucklebee, Fire Dept – Plan C; Vested
Randall A. Webb, General Govt. – G1; Non-vested
Motion: Mr. Hutchens made a motion to approve these applications for withdrawal of employee contributions. Ms. Pelot seconded the motion. The motion carried unanimously by the members present.
DISABILITY
APPLICATION FOR INJURY IN LINE OF DUTY: PLAN C – Exhibit 3
CHARTER SECTION 1390.11
Norman L. Rickman, Police Dept. – Uniformed Option A-6
100% without reinstatement Date of birth, December 14, 1962: 46 years of age
Total credited service: 20 years 3 months 7 days
Average monthly salary for 2 highest – 12 month periods, $4,003.40 x 50% =
$2,001.70. Mr. Rickman chose Option A-6 – 100% without reinstatement to Glenda Marie Rickman, spouse. $2,001.70 x .9357 =
$1,872.99 pension effective August 1, 2009.
Motion: Mr. Coker made a motion to approve this application for Injury In Line of Duty pension, based on Dr. Kelly Walker’s medical report and Mr. Cherry’s Disability Recommendation Report. Ms. Pelot seconded the motion. The motion carried unanimously by the members present.
APPLICATION FOR RETIREMENT: PLAN A
CHARTER SECTION 1360.12
Stephen Backiel, Schools Certified Option A-6
100% without reinstatement
Date of birth, August 1, 1944: 65 years of age
Total City credited service: 8 years
Total County credited service: 22 years
Total credited service: 30 years
Last date of employment with City: June 1987
Last date of employment with County: June 2009
Average base earnings for 4 years, $400.00 x 88% = $3.52
Average excess earnings for 4 years, $1,022.44 x 1.76 = $18.00
making a total of $21.52 benefit per year of service. $21.52 x 8 =
$172.16. Mr. Backiel chose Option A-6 – 100% without reinstatement to Terry Charles Vanderplas. $172.16 x .8600 =
$148.06 pension effective August 1, 2009
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 and County benefit is $2,516.79.
Motion: Ms. Pelot made a motion to approve this application for retirement payable under Option A-6. Ms. Shelton 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 1390.22 – PLAN C.
The following employees have 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.
Gregory A. Taylor, Police Dept. - Uniformed No Option
Date of birth, November 25, 1956: 52 years of age
Total credited service: 30 years 5 months 24 days
Average monthly salary for 2 highest – 12 month periods, $4,457.11 x .025 =
$111.43 x 30 =
$3,342.90 pension effective August 1, 2009.
DROP complete July 31, 2011.
Motion: Mr. Coker made a motion to approve this application for DROP retirement. Mr. Hackney 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.
David S. Ballard, General Government – Plan G2 Option A-7
50% with reinstatement
Date of birth, January 2, 1949: 60 years of age
Total credited service: 35 years 8 months 19 days
Average monthly salary for 2 highest – 12 month periods, $4,941.77 x .021 =
$103.78 x 35.71872 = $3,706.89. Mr. Ballard chose Option A-7 – 50% with reinstatement to Carolyn S. Ballard, spouse. $3,706.89 x .8926 =
$3,308.77 pension effective August 1, 2009.
DROP complete July 31, 2011.
Motion: Mr. Hutchens made a motion to approve this application for DROP retirement payable under Option A-7. Ms. Pelot seconded the motion. The motion carried unanimously by the members present.
Carol E. Russell-Kirksey, General Govt. – Plan G2 Option A-4
50% without reinstatement
Date of birth, June 22, 1944: 65 years of age
Total credited service: 40 years 18 days
Average monthly salary for 2 highest – 12 month periods, $3,170.29 x .021 =
$66.58 x 40.04932 = $2,666.48. Ms. Russell-Kirksey chose Option A-7 – 50% without reinstatement to Ken Kirksey, spouse. $2,666.48 x .8801 =
$2,346.77 pension effective August 1, 2009.
DROP complete July 31, 2011.
Motion: Mr. Hutchens made a motion to approve this application for DROP retirement payable under Option A-4. Ms. Pelot seconded the motion. The motion carried unanimously by the members present.
APPROVAL OF INVOICES FOR PROFESSIONAL SERVICES:
Bryan, Pendleton, Swats & McAllister – Actuary (June 2009) 186.00
State Street – Custodial (May 2009) 8,433.14
State Street – Custodial (June 2009) 8,418.09
State Street – Trustee (June 2009) 4,344.49
AQR Capital Management – Money Manager (2nd Qtr – 2009) 52,767.00
Aberdeen Asset Management – Money Manager (2nd Qtr – 2009) 30,105.87
Calamos – Money Manger (2nd Qtr – 2009) 28,371.00
INTECH – Money Manager (2nd Qtr – 2009) 4,980.94
Pinnacle – Money Manager (2nd Qtr – 2009) 40, 430.00
STW – Money Manager (2nd Qtr – 2009) 31,555.74
UBS – Money Manager (2nd Qtr – 2009) 13,701.31
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.
Motion: Ms. Shelton made a motion to pay these invoices. Mr. Hackney seconded the motion. The motion carried unanimously by the members present.
INVESTMENT MATTERS:
Dan Holmes – Summit Strategies
Attorney Gilbert arrived at 8:26 a.m.
2Q 2009 Performance Report
Mr. Dan Holmes made a presentation of the 2nd Quarter 2009, Performance Report. Copies of his reports are on file in the Pension Office.
ATTORNEY COMMENTS:
Plan G1 Member Benefit Calculation – Exhibits 4 and 5
Attorney Gilbert distributed to the Board a legal memorandum (exhibit 4) he had prepared at Attorney Al Holifield’s request, relating to a Pension Board member’s voting rights in situations where the member may have a conflict of interest and the resulting effects on quorum and voting requirements for the remainder of the Board. The memorandum specifically addresses such issues in the context of the pending request for relief from a group of General Government employees who believe they should be given an opportunity to elect a transfer from Option 1 to Option 2 within Plan G.
Although this matter was not scheduled on this morning’s meeting agenda, the Board did permit Mr. Holifield to speak on behalf of 31 Plan G option 1 members, who made their decision to remain in Option 1 prior to the Charter amendment to include a “Rule of 80” in the definition of Normal Retirement within Plan G. Some of the affected employees were in attendance with Mr. Holifield. Mr. Holifield distributed to the Board a draft of a complaint (exhibit 5) which may be filed in Chancery Court. Attorney Gilbert advised the Board that he was hesitant to address the complaint with the Board until he had an opportunity to study the complaint, do any necessary research and prepare and recommend an appropriate response for the Board. A copy of the draft complaint is on file in the pension office.
Stone Energy Litigation – Exhibit 6
Attorney Gilbert distributed to the Board a memorandum summarizing the initial pleadings filed in the Stone Energy Corporation litigation, which Attorney Gilbert requested each member to review so they would be familiar with the background of the case.
Contested Case Hearings – Exhibit 7
Attorney Gilbert informed the Board about a meeting he and Mr. Cherry recently attended with the City’s Law Department at which they requested the department’s assistance in representing the Executive Director in contested case hearings since Attorney Gilbert serves as general counsel to the Pension Board, which sits as the fact finder in such cases. Attorney Gilbert informed the Board of the Law Department’s initial determination that it might not be ethical for them to represent the Executive Director because they often have previous involvement with the cases as the employer’s counsel, but recommended that Mr. Cherry be represented by outside council. Attorney Gilbert then presented a set of revised Rules for Contested Case Hearings, in which he recommended several changes that would allow Mr. Cherry to actively represent the Pension Fund or be appointed to represent the City’s interests in such cases and retain counsel for that purpose.
Motion: Ms. Pelot made a motion to approve the revised document titled “Rules for Contested Case Hearings” authorizing the Executive Director to represent the Pension Fund’s interests or be appointed to represent the City’s interests, and to retain independent council at the Pension Systems’ expense. Mr. Hackney seconded the motion. The motion carried unanimously by the members present.
Glenda Fields’ Litigation
Attorney Gilbert advised the Board that he was still awaiting a decision from Chancellor Weaver on Glenda Fields’ litigation.
INVESTMENT MATTERS: - cont’d.
Asset Allocation/Rebalancing Discussion – Exhibit 8
Investment Consultant Mr. Dan Holmes, discussed with the Board a plan for rebalancing and asset allocation which included the following:
Mayor Haslam left the meeting at 9:09 a.m. and Ms. Pelot presided.
1) Redeem $5.2 million, every month for five months, from Silchester International Investors. Funds to be used for administrative expenses as necessary and the funding of the international emerging market mandate.
2) Redeem $5 million from Bond Managers, STW and Aberdeen to fund
a High-Yield Bond mandate.
3) Liquidate SSGA to fund Treasury Inflation Protected Security mandate
Motion: Mr. Hutchens made a motion to approve the rebalancing plan
as presented and recommended by Mr. Holmes, and authorized Mr. Cherry to proceed with all necessary administrative procedures to put into effect this rebalancing plan upon advice and consultation with Mr. Dan Holmes of Summit Strategies. Mr. Coker seconded the motion. The motion carried unanimously by the members present.
Investment Policy Amendments – Exhibit 9
Motion: Mr. York made a motion to schedule for review and consideration, Mr. Holmes recommendations on changes to the Investment Policy and that any comments and corrections be inserted in the draft for the Board’s review after the review of the same by the Investment Committee at its next meeting. Mr. Hackney seconded the motion. The motion carried unanimously by the members present.
Mr. Holmes reviewed with the Board his suggested revisions to the Investment Policy and planned to have an Investment Policy with the revisions completed and delivered to the Investment Committee before their September 1, 2009, meeting.
Potential Investments Review
Mr. Holmes gave a presentation to the Board on potential future investments, including MLP (Master Limited Partnership), DIP (Debtor in Possession) and PPIP (Public Private Investment Program). Copies of Mr. Holmes presentations are on file in the Pension Office.
OTHER: Personnel Committee Recommendation
[NOTE: This following motion was reconsidered and withdrawn by action of the Pension Board at its September 10, 2009 meeting].
Mr. Coker reported that the Personnel Committee had recently reviewed salary levels of the Pension Board’s administrative staff in light of the City of Knoxville’s implementation of various pay and job classification reforms based on a city initiated study performed by the Mercer consulting firm. Mr. Coker then presented the Committee’s recommendation for specified salary adjustments for the Pension Board’s two administrative staff positions effective July 1, 2009, which he indicated were consistent with the Mercer plan.
Motion: Mr. Coker made a motion to implement the Personnel Committee’s recommendation providing for various salary adjustments effective July 1, 2009 for the Pension Board’s two administrative staff positions. Ms. Shelton seconded the motion. The motion approved unanimously by the members present.
PUBLIC COMMENTS: None
ADJOURNMENT:
There being no further business Ms. Pelot adjourned the meeting at 10:46 a.m.
_________________________
Chair
___________________________
Date
M:\Board\minutes\2009\august.doc