pension history 018

8/3/2019 Pension History 018

1/16

"The City of Fort Lauderdale Police andFirefighters' Retirement System"

One of the primary benefits of employment with the City of FortLauderdale in either the Fire or Police Departments is theemployees' participation in the retirement system established in1973. This system was developed by concerned firefighters andpolice officers who were determined to establish a viableretirement for employees of either department. The result ofthis combined effort was the creation of the City of FortLauderdale Police and Firefighters' Retirement System.

Our retirement system is a one hundred ninety two million dollartrust administered by a seven member Administrative Board. TheBoard is composed of two firefighters and two police officerselected by the membership in their respective departments, andthree civilian members selected by the Mayor and approved by theCity Commission. The term of office is three years. The electedmember is not restricted to a set number of terms, however, theappointed member is limited to two terms. The Board has anannual election of officers for the position of Chairman,Vice-chairman and Secretary/Treasurer. It is important to notethat this is an administrative board and not an advisory board asall other City Boards are. This factor has caused many adverseand awkward situations in the relationship between theAdministrative Board, City Commision and the City Manager'sOffice regarding the authority of the Board.

The Board administers the Trust and hires money managers toinvest the funds. At this time, three money managers areemployed by the Board. Prior to the hiring of these managers,


2/16

page 2

the fund was managed by a local bank and the annual rate ofreturn consistantly was below what the Board considered necessaryto properly fund the Trust. It was determined by the Board thathaving three managers with diverse management styles, would be inthe best interest of the Trust. Actuarial services and a monitorservice that reports the progress of the money managers are alsoemployed by the Board. A local bank is retained as custodian forthe funds and the individual Board members are Trustees of thePlan and bound by fiduciary responsibility. Legal services areprovided by an attorney hired by the Board, and the City'sFinance Director is an ex-officio member. Regular meetings areconducted monthly and additional meetings are scheduled on an "asneeded" basis. These meetings are publicized to comply withprovisions of Florida's "Sunshine Law".

The Plan is financially and administratively secure, and thePolice Officer or Firefighter is assured of a guaranteedretirement. However, this was not the situation prior to theenactment of this retirement system.

Prior to 1973, retirement benefits were paid by the ProvidentLife and Accident Company of Chattanooga, Tennessee. "Provident'sassociation with the City began in 1955 when a group ofdepartment heads, Commissioners and employees formed a committeeto formulate some method of providing retirement benefits to Cityemployees. By the late 1960's, it became apparent to manyemployees that the benefit paid by Provident was far belowcomparable benefits paid by other retirement systems.

Under Provident, the retirement plan was composed of a series of


3/16

page 3

insurance policies. These policies were issued annually andon an individual basis, rather than a group rate. A new policywas also issued when the employee received a raise; in the late60's it was common to receive frequent raises. Each time apolicy was issued, the issuing agent received a commission. Thisagent also received an annual commission of 1% of the face valueof all policies that were in force. In 1971, this commission wasover $100,000.00. Obviously, the commissions paid by Providentwere quite lucrative and were a significant reason for thebenefit return to the Plan being lower than comparable plans.

Between 1955 and 1973 the pattern of the benefit program wasconsistant: (1) the employee received insurance policies ratedon an individual basis, (2) policies were issued annually andalso when an employee received a raise, and (3) commissions werepaid when policies were issued. This was an inadequateretirement system to the employee who received minimal benefitsand a lucrative arrangement to those receiving commissions.On June 16, 1971, the police officers and firefighters formed ajoint committee to investigate the feasibility of establishing aseparate retirement system. Several months prior to theformation of the joint committee, the City Commission and otherCity Officials sensed that the police officers and firefighterswere concerned about the Provident system. In an attempt toalleviate the rising concern they disbanded their pensioncommittee, a "rubber stamp" committee that held infrequentmeetings, and created a new committee. At a City Commisionmeeting in January, 1971, this new committee was established


4/16

page 4

that consisted of department heads and non-employee members.The issue, however, was not the various committees that wereformed; the issue was Provident and an inadequate retirementbenefit. The Joint Committee was convinced that keeping aretirement system that provided minimum benefits, at maximumcost, was not in the best interest of the employee.

The newly-formed Joint Police Officer and Firefighter PensionCommittee decided to proceed with a study of retirement plans andcontacted several actuarial firms to make a presentation beforethe committee. From the firms accepting the proposal and makingpresentations, the committee hired the actuarial firm of Kruse,O'Connor and Ling. In addition, an attorney was hired, and eachmember of the Police and Fire Departments was asked to contribute$20.00 to off-set expenses.

As this joint committee was relatively new to the pension field,Mr. Phil Rosenthal of the City of Miami Beach Retirement Systemwas invited to advise the committee of procedures necessary tothe formation of a retirement system. Mr. Rosenthal provided alengthy and informative report on methods used by the City ofMiami Beach when forming their plan, anticipated expenses, andpitfalls that lay ahead. He also outlined two methods of settingup the mechanics of the Plan. The first, by City Ordinance, wasthe fastest and cheapest method but also subject to change at thewhim of the Commission. The second, by State Legislation, wasthe longest, most expensive, but safest method of implementation.

On July 1, 1971, the City Commission was formally notified of theintentions of the Joint Committee to pursue the formation of a


5/16

page 5

separate retirement system.The actuarial firm of Kruse, O'Connor and Ling presented theirreport to the committee on December 16, 1971. The following areexamples of those recommendations:

(1) A separate Plan and Trust for fire and policepersonnel be created with appropriate investmentpowers.

(2) A 6 3/4% actuarial assumption be forcast to reducethe projected cost to the City. (The actuarialassumption is a percent of payroll contributed by theCity, after contributions and earnings are factoredin, to off-set the projected unfunded liability.The actuary takes several factors, i.e. administrativecost, life expectencies, benefits and disabilities,and projects an overall cost for a 40 year period.Forty years is considered the necessary time frame foractuarial assumptions. The assumption rate isdesigned to keep the plan sound and not allow anyportion of the liability to become unfunded.)

(3) The percent of payroll of other Florida citiesand the investment of their pension should becompared and analyzed.

(4) Differentiate between service incurred and non-serviceincurred disability benefits.

There also was a discussion on future courses of action whichincluded: (1) forming a committee to draw up a Final Purpose


6/16

page 6Plan, (2) approach the City as a unified front, and (3)legislative action.

Subsequently, several additional meetings took place before theissue was placed on the City Commission Conference Agenda of May16, 1972. The request to form a separate plan was refused. Ata meeting of the Joint Police and Fire Committee on May 31, 1972,concerns were expressed over the Commission's refusal. The Jointcommittee discussed four options: (1) sit tight and wait to seewhat happens, (2) file an injunction immediately, (3) wait forthe June 20th Commission meeting and then decide a course ofaction and (4) make public Provident's dual role as administratorand trustee. After much discusion, the committee decided to waituntil a supportive Commissioner returned, apply additionalpressure, show overt support for the general employees in theirquest for a new pension plan, and choose an investment counselor.

Several allegations were made by members of the Joint Committeeregarding the relationship between the City and Provident. TheJoint Committee's position on the issue was that should the CityCommission reject the proposed plan then the Security Commissionand the State Attorney General would be contacted. The generalunderstanding was that the Joint committee had solid evidencethat two members of the City Commission and several cityofficials were receiving gratuities from Provident. In fact, thegeneral agent for Provident was the son-in-law of one of theCommissioners. The City accepted the determined effort of theJoint committee and decided it was in the best interest of allconcerned to authorize the plan. At a workshop meeting onDecember 14, 1972, the Joint Police and Fire Committee finalized


7/16

page 7

the procedures for the new pension system.

A primary concern was the repayment of monies owed the Plan byProvident. A repayment schedule was devised and the finalpayment was accepted by the City in late 1973. With theacceptance of Provident's final payment, the City and theAdministrative Board of the pension system relinquished the rightto initiate legal action against Provident for additional moniesbelieved owed. The Board was convinced that Provident owedconsiderably more than the amount returned, but there was littlethat could be done about it. Subsequently, it was learned by theBoard that the State Insurance Commissioner's Office wasconsidering issuing an order that Provident cease and desist fromdoing business in the State of Florida.

A "perceived" adversarial relationship soon developed between theCity and the Administrative Board. This was caused largely bythe wording of the Pension Ordinance which stated theAdministrative Board was an administrative and not an advisoryboard as all other City Boards are. The City had greatdifficulty accepting the administrative position of the Board andcontinued to treat the Plan and the Board in the same manner ittreated its advisory boards.

The entire year of 1973 represented an important time in thecreation and operation of the newly formed retirement system.The year began with the first meeting of the Plan, progressedthrough the election of officers, determination of the Chairman'sresponsibilities, and the selection of a local bank as Trustee.Revisions of disibility procedures and retirement age were


8/16

page 8

necessitated to bring the Plan in line with state and federallaws regarding pension systems.

Another controversial item was an aHedged conflict between thePension Ordinance and the City Charter concerning residencyrequirements. The City Charter, in Sections 146 thru 151, dealsspecifically with advisory boards, and states that city residencyis reguired to be eligible to serve on these boards. There is noprovision for members of administrative boards. The PensionOrdinance, however, requires active membership in the Plan andcompliance with the City personnel rules pertaining toemployment. The employment rules specified that an employee mustreside in Broward County - not Fort Lauderdale. Therefore, itwas the position of the Administrative Board that an employeewould be eligible to sit on the Board as long as they were activemembers of the Plan.

The apparent conflict between Ordinance and Charter was nothingmore than a subdued controversey until a Fire Departmentemployee, not residing within city limits, was elected to theBoard. As a Fire Department employee, he was in compliance withemployment guidelines reguiring county residency, and as anactive member of the Plan, he was in compliance with theOrdinance. However, since he did not reside within city limits,the employee was in violation of the City Charter. The Policeand Fire Administrative Board sought a ruling from their legalcouncil, the City Attorney, and subsequently was informed thatthe Charter prevailed. The Board's hands were tied. "The newlyelected member, however, took matters into his own hands andfiled suit. On October 16, 1975, his position on the Board was


9/16

page 9

revoked by the City Commission. An injunction to prevent a FireDepartment election was filed on November 20, 1975. The Court

and the City Attorney, however, agreed that there would be noelection until after the final hearing. Shortly thereafter, theCourt heard the argument, and the firefighter was reinstatedprior to the next scheduled meeting of the Board.

Now that the initial turmoil of organization was completed, itwas time for the Plan to stretch its wings and see whether this"new" retirement system was going to fly. One thing was readilyapparent, based on previously discussed past experiences with theCity, if the Plan was going to succeed, constant monitoring was anecessity.

The actuarial firm of Kruse, O'Connor and Ling, who had been withthe Plan since the creation of the Joint Police and Fire

Committee, was replaced in September, 1975, by the firm of A.S.Hansen Company. Ironically, A.S. Hansen was the first firmselected by the Joint Committee but they turned down the positionbecause of an apparent conflict of interest. Now they activelysought and won the position by offering to perform the actuarialservice at two-thirds of Kruse, O'Connor and Ling's fee. ThePlan had reached a milestone and was not aware of it. For thefirst time, various firms openly courted the Board hoping thattheir service would be selected. This was the start of activepoliticing by actuarial and investments firms wishing torepresent the Plan.

On March 18, 1976, the City Manager requested that the Boardchange from a calander year to a fiscal year, October 1 through


10/16

page 10

September 30, to coincide with the City's fiscal year. Therequest was granted, however, after realizing there would be ashortfall in the City's contribution the Board returned to acalander year at the request of the actuary.

The City Manager's Office proposed in May, 1976, that anadministrative aide act as liason between the City and theAdministrative Board. The idea was that the aide would beemployed by the City but permanently assigned to the Board. Itwas proposed that the aide would be better able to controlday-to-day activities of the Plan as compared to the monthlymeetings of the Administrative Board. Initially, the idea wasfavorably accepted by the Board and a motion was passed toproceed with the hiring process. However, it soon becameapparent that there was an underlying purpose to having anadministrative aide assigned to the Board. Past and presentinvolvement with City Officials had caused the Board to becomecautious in matters presented to the Board by the City. Althoughthe relationship appeared trustworthy it was also consideredsomewhat adversarial. Several experiences with the City had lefta distinct impression with the Board that the best interest ofthe Plan was not always the City's primary consideration. Theseexperiences included: (1) the City's proposal to purchaseinsurance coverage for disability payments at a premium threetimes larger than the disability payments - this time the generalagent was the brother-in-law of a city official and (2) a reguestby Risk Management that the Board allow the City to pay lump sumdisability benefits instead of monthly benefits. Since monthlybenefits offset payments by the Plan to the employee and lump sum


11/16

page 11

payments cost the Plan the difference between the offset and thebenefit, the Board asked why would they consider a proposal thatwould increase cost to the Plan. Risk Management answered thatit would be in the best interest of the City.

The Board discussed the administrative aide at great length andover a considerable amount of time, and decided that the aidewould have to be employed by and responsible only to the Board.Since this was not to the City's liking, it was decided to turndown the offer.

Another request closely aligned to the hiring of the aide was theBoard's request to hire outside legal counsel. Since itsinception, the Board was provided legal counsel by the CityAttorney's Office. There were several instances where the legaladvice given the Board was prejudiced toward the City. Thiscreated an adverse and difficult situation for the Board.Numerous requests were made by the Board to hire private legalcounsel, but the City Commission constantly refused as they feltthat there was no conflict of interest regarding the Plan. TheCommission relied on the Ordinance which stated that should aconflict arise, the Commission was empowered to hire legalcounsel for the Board. Obviously, this created a uniquesituation that placed the Board in the position of listening tolegal advice provided by the City Attorney's Office and going tothe City should a discrepency arise.

On April 12, 1979, the Board invited a private attorney toaddress the legality of hiring private counsel. The attorneystated that upon reading the Ordinance and additional state


12/16

page 12

material, it was his opinion that such technical assistance couldbe hired by the Board without the approval of the Commission.

Subsequently, a motion was passed that private council.beretained. Various letters followed between the Commission andthe Board regarding this issue. The eventual outcome was thefiling of a legal suit, by the Board, to hire legal counsel.This was partially resolved in November, 1982, when the Ordinancewas changed to authorize the Board to hire counsel in conflictsituations. But it was not until 1987 when the Board finallyhired outside legal counsel on a full time basis.

For several years, a secretary was "lent" to the Board by theFinance Department. The word "lent" is used as the secretary wasassigned to the Finance Department, but her salary was supposedto be reimbursed by the Administrative Board. Since the FinanceDepartment did not request the annual payment, the Board did notfeel a desire to pay it. The City's proposal, somewhat tied tothe administrative aide proposal, was to remove the secretaryfrom her physical location, adjacent to the Board Chairman, andplace her in the Finance Department. It was also proposed thatthe secretary be directly accountable to the Finance director,and have otther duties in addition to her pensionresponsibilities.

On September 4, 1980, the City Manager's office outlined threesuggestions to the City Commission regarding the AdministrativeBoard's secretary:

(1) The Pension Board will hire its own secretaryas an employee of the Board and not as a City


13/16

page 13

employee or a member of the Civil Service System.(2) The city will provide a secretary for the Board

as a City employee and a member of the Civil ServiceSystem. However, the City Manager and CityAdministration should be specifically relieved of anyresponsibility for or authority over this employee, ifthis is legally possible.

(3) The City Manager will designate the Finance Departmentas being responsible for insuring that the Board hasadequate administrative and clerical support. TheFinance Director will assign and supervise Cityemployees for this purpose.

The City Manager's Office further stated that suggestion threewould most likely be recommended to the City Commission. Thisset the stage for subsequent actions not resolved until May,1981. At that time it was agreed that the secretary would remainwith the Board Chairman. Since the Chairman was a policeofficer, the secretary would be transferred to the PoliceDepartment and her salary reimbursed by the Plan.

In March, 1981, the City Manager proposed a second tier pensionplan for new employees. The proposal was presented to theCommission who voted to hire a consultant to prepare a studyregarding the creation of a "new" plan.

The Board voted in April to have their actuary conduct a completeand in-depth study of the effect that a dual pension system wouldhave on the existing Plan. On October 14, 1981, he presented hisreport to the Board. In essence, the report blasted the proposed


14/16

page 14new plan as not only undermining the existing Plan, but that italso offered minimal incentive to attract new employees. The newplan offered benefits far below the existing Plan's benefits.The Police and Fire Administrative Board agreed with theactuarial report and requested the City Commission to discard theproposed plan. However, on November 12, 1981, the Board wasadvised that the Commission had accepted the City Manager'srecommendation to create a separate plan for new employees.The second tier pension plan lasted until 1992. Through thenegotiation process, the Police and Fire bargaining units wereable to remove the second tier and revert back to a one-tiersystem.

Since the inception of the Police and Firefighter's RetirementSystem the major difficulty has been the City's lack ofrecognition of the autonomy of the Board. Although suchprovisions are in the Ordinance, the City has felt that sincethey contribute a large amount of money to the Plan they shouldhave the ultimate authority. Their difficulty lies incomprehending that they are sponsors of this Plan; the Plan is atrust fund and therefore guided by applicable State and Federaltrust fund legislation. The money that the City contributescomes from the taxpayers, but once that money is placed into thePlan, it becomes part of the Trust and is administered solely bythe Trustees. The City contributes a significant amount of moneyinto the Plan, but the employees contribute more through payrolldeduction and assignment of monies that are collected by theState. These "State" monies are paid by automobile and fireinsurance companies for the privilege of doing business in the


15/16

page 15

State. Under Florida Chapters 175 and 185, the insurancecompanies pay a small percentage of written business to the Statewho disburses it to the individual firefighters and policeofficers via the municipality. Members of the City of FortLauderdale Police and Firefighters' Retirement System arerequired to sign this money over to the Plan.In April, 1985, the Board voted to hire an administrator, but theCity Manager contended that it was not a big enough job for afull time administrator. Several suggestions were resurrected,similar to previous ones, that an administrative aide undercontrol of the Finance Department could handle the tasks that theretiring Chairman had been doing.This resulted in the City and the Plan equally funding a$10,000.00 consultant study which confirmed the fact that a fulltime administrator was needed. It also confirmed that theadministrator should be hired as a contract employee by theBoard. The study alo suggested other operating andadministrative safeguards that should be implemented to insurethe fiduciary responsibility vested in the Board of Trustees.Legal counsel to represent the Board was hired in 1987. In June,1990, the Board felt that it was time to move from the PoliceDepartment building and leased office space on South AndrewsAvenue. The retirement age of 50 with 20 years service waschanged in 1993 to age 47 with 20 years service for policecrf-ricers and firefighters.

I

Staffing has increased and we now have an administrator, anassistant to the administrator, and a part-time pension records


16/16

page 16

clerk. There are three money managers; Invesco CapitalManagement (Balanced Fund), SunBank Capital Management(Equities), and Sovran Capital Management (Bonds). ResourceAdvisory Service has been hired to monitor the fund, and legalcounsel is provided by the firm of Cypen and Cypen.

Since January, 1973, the City of Fort Lauderdale Police andFirefighters' Retirement System has grown from 4.7 milliondollars to over 192 million dollars. Many individuals haveserved on the Administrative Board that guides the Trust. Thissignificant increase in assets is a tribute to the vigilence andprofessionalism demonstrated by these members. What began as asmall group of employees who were dissatisfied with their pensionplan, has grown into a successful retirement system.

pension history 018

Documents