Policemen S Pension and Trust Relief Fund

Minutes

August 14, 2008

Page 1 of 7

MINUTES

Policemen’s Pension and Trust Relief Fund

Thursday, August 14, 2008

9:00 a.m.

On Thursday, August 14, 2008, at 9:00 a.m. a meeting of the Board of Trustees of the Policemen’s Pension and Relief Fund of the City of Little Rock, Arkansas was held in the Sister Cities Conference Room at City Hall.

PRESENT: Bruce Moore-Chairman

Farris Hensley-Secretary

Brad Furlow-Member

Lee Harrod-Member

Albert Miller-Member

ABSENT:Sara Lenehan-Treasurer

Mike Lowery-Member

Also present were Mr. Larry Middleton, and Mr. Alex Jordan of Stephens Capital Management who are Financial Consultants for the Fund, Mr. John Peace and Mrs. Erin Behring of the Dover Dixon Horne Law Firm who are Legal Consultants for the Fund, Mr. Roger Smith who is a Government Relation Lobbyists for the Fund, Mr. Scott Massanelli of the City of Little Rock Finance Department, and Mrs. Kathy Lindsey who is a Pension Fund Administrative Technician.

Mr. Moore called the meeting to order at approximately 9:00 a.m., certifying that a quorum of the Board was present, and that the Media had been properly notified in a letter of July 29, 2008 to the Arkansas Democrat-Gazette.

Copies of the July minutes had previously been submitted to Board members. During their review, Mr. Miller told the Board that he had gotten “a couple of phone calls from some people” that were concerned about the state of the Pension Fund, because of an exert from a USA Today article, and “they thought we were going broke”. He continued by saying that “they” were upset about it, and thought that we should not be putting such information in the minutes “to upset everybody”. However, Mr. Miller said that he was just repeating comments made to him, and that he did not “actually have an opinion one way or the other” in regard to the issue of publishing such information in the minutes of the meeting.

Mr. Harrod then addressed the matter, and said that he had received “two or three calls” himself, wanting to know what it was all about, and that one of them thought that the Fund was “going broke”. He (Mr. Harrod) continued by stating that it was the first time he could remember a newspaper article being “injected in the minutes”, and did not think that it was a good idea to do so.

Mr. Furlow said that he did not consider it an uncommon practice for other organizations, and did not have a problem with Board members submitting such information for discussion, and if it is discussed in a meeting then it becomes a matter of record.

Mr. Moore said that the issue seemed to be a question of, should an exert from a newspaper article that may not “directly” impact the Fund be included in future minutes, and further stated that some publications are more widely circulated than others, but if it is published in a newspaper then everyone has access to it.

Mr. Middleton briefly addressed the matter and said that the above referenced USA Today article was balanced in nature.

Mr. Hensley responded concerning the issue, and said that he believed all members of the Fund should be informed of Board meeting discussions including both favorable and unfavorable news that could potentially impact the long term financial stability of the Fund, and that censorship of unfavorable news or information is a dangerous precedent, and unhealthy to the Pension Fund and its members. He said that minutes of a meeting must be an accurate reflection of events of the meeting, and further explained that everyone has the option of agreeing or disagreeing with information, however he wanted to make it perfectly clear that he would under no circumstances be censored. He (Mr. Hensley) said that he had raised the issue himself, and thought it was rather “odd” that he or any other Board Member, with the exception of Mr. Miller and Mr. Harrod, apparently had not received a call in regard to it.

Following discussion, Mr. Miller made a motion to approve the minutes as submitted. Mr. Furlow seconded the motion and it passed unanimously, with an exception of Mr. Harrod who abstained from the vote.

During the previous discussion, Mr. Moore told the Board that he had not realized minutes from the previous meeting were being sent to the general membership prior to final Board approval, and he was not sure that the practice was a good policy. He said that as far as he was concerned the issue in regard to distribution of minutes had nothing to do with the previously discussed issue, because a member of the Board can read anything that they wish into the minutes of a meeting. He further explained that the issue concerning dissemination of monthly minutes was strictly a matter of standard practice.

Mr. Harrod made a motion to distribute draft copies of future minutes only to Board members, and wait for the Boards final approval before distributing them to the general membership. Mr. Miller seconded the motion.

During discussion Mr. Harrod said that he agreed with Mr. Moore, and that if minutes were approved prior to general membership distribution it would avoid him receiving such telephone calls that he had previously referenced. He also said that all members are just as important as Board members, who were elected, and that he believed it is the smoothest, and most effective way to take care of business.

Mr. Furlow said that he was in favor of the motion from a procedural perspective, and agreed with Mr. Moore in regard to it not relating to the previous issue of a Board members ability to discuss any particular issue as a matter of record.

Mr. Hensley said that even though it appeared that he would be the only one opposed to the motion, he would do so because of the importance of getting all members timely information in regard to business conducted by their Board, and in those rare instances that amendments to the minutes are made, members are always notified of them in a timely manner. He further stated that when elected to the Board approximately twenty-two (22) years ago, it was not at all uncommon for members of the Fund to receive absolutely no communication what-so-ever from the Pension Fund for years at a time. He said that a lot of hard work over the years had brought about the dissemination of timely information to all members, and that such an action at this time would be a step in the wrong direction.

A vote was taken on the previous motion, and passed unanimously with an exception of Mr. Hensley who voted against it.

Mr. Jordan and Mr. Middleton of Stephens Capital Management gave a July 2008 financial report, and said that on July 31, 2008, the market value of the total Fund was $58,646,194.50. Additionally, $1,135,771.74 was held in the Metropolitan Bank Checking Account. This represents a decrease in the account balance of ($581,438.50) since June 30, 2008. The component of this change was income of $152,610.98. There were net contributions/withdrawals of ($419,618.68). The Funds overall market rate of return for the month of July 2008 was a negative (.76%), and (4.71%) year-to-date through July 31, 2008. On July 31, 2008, $24,518,830.26 was allocated to DROP.

Mr. Middleton reported on the financial markets, and said that the sub-prime lending problems have now began to extend into the prime lending market, and that if the problem continues a market recovery could be delayed an additional year from the previously estimated recovery date of February 2008. He said that they would continue to closely monitor the financial markets, and keep the Board informed.

Mr. Smith reported concerning legislative matters, and said that he had been in contact with the attorney at the State Legislative Research Department who should have the proposed legislative drafts completed by September 2008. He then reviewed the following matters that will be drafted into a bill format for introduction:

Amend the current State Statute to make annual ethics reporting for Municipal Police Pension Fund Board Members consistent with State Ethics guideline reporting for other local, county, and State Boards and Commissions.

Amend the current State Statute, to provide specific language allowing stored property to be auctioned via internet sales.

Amend the current State Statute to establish an effective date of July 1, 2007, in regard to benefits paid, to former spouses upon the death of a member, via Qualified Domestic Relation Orders (QDRO).

Mr. Smith reported that the issue involving insurance premium tax allocations is currently pending in the Local Police and Fire Retirement System (LOPFI), Interim Study Committee of which Mr. Hensley is a member. He (Mr. Smith) said that the issue relating to local Police Pension Funds such as Little Rock is to capture a portion of Insurance Premium Tax money to financially assist Police Pension Funds who wish to voluntarily seek a three percent (3%) compound Cost of Living (COLA) merger with LOPFI. He recommended that the issue be postponed until the committee concludes their work, and makes a final recommendation.

Mr. Smith reported that statutory authority to withhold renewal of driver’s license until outstanding fines are paid currently exists, and in many instances the issue could be resolved by working with local courts to insure proper reporting to the appropriate state agency. Mr. Moore is currently researching the matter in regard to the City of Little Rock.

Mrs. Behring reported concerning the lawsuit in regard to past benefit increases, and said that they are currently working on stipulation of facts, and have forwarded to the plaintiffs’ attorneys what stipulations they are willing to make. They are now awaiting a response from the attorneys in regard to the matter. She said that they have now completed furnishing specific data that does not provide members names to plaintiffs’ attorneys in regard to past benefit increases. A date still has not been set for depositions or trial. The matter was tabled until September.

Mr. Peace reported on the matter concerning ten percent (10%) of probation fees, and said that they have met with a City Attorney representative, and is in the process of reviewing specific language to seek an Arkansas Attorney General (AG) opinion that will hopefully have been submitted by the September meeting. Mr. Massanelli of the City of Little Rock Finance Department informed the Board that the City has begun to set aside the above referenced portion of probation fees until the matter is fully resolved. The matter was tabled until September.

Mr. Peace had previously been asked to research the State Statutes to determine if the law had recently changed in regard to who specifically can seek an AG opinion. He (Mr. Peace) and Mr. Smith agreed that the statutes have not recently been amended, and only Directors of State Departments and State Legislators can seek a formal AG opinion.

Mr. Peace reported concerning the Qualified Domestic Relation Orders (QDRO) of Mr. Albert Miller, and said that he and his wife divorced in 1999, but subsequent to the divorce decree there were two QDRO’s entered. Mr. Adcock, who was Mr. Miller’s attorney at the time, had not approved the first QDRO which failed to address DROP benefits, however he (Mr. Adcock) came back approximately two years later and asked that a new QDRO be entered which made it clear that Mr. Miller’s former wife was not entitled to any of his DROP benefits. Mr. Peace said that, however both of the QDRO’s provided that Mr. Miller and his former wife would share in any benefit increases. Mr. Peace said that he had recently received a letter from Mr. Adcock stating that he (Mr. Adcock) had talked to all of the involved parties, and it was clearly their intent that only Mr. Miller would receive the benefit increases and not his former wife. Mr. Peace said that was not what was provided in the QDRO’s, however Mr. Adcock told him (Mr. Peace) that he (Mr. Adcock) would contact the court and get an amended QDRO. He (Mr. Peace) said that he thought an amended QDRO would solve the problem, therefore that would be his recommendation.

Mr. Miller apologized to the Board for having to again deal with the matter, and explained that at the time Mr. Adcock was also the Pension Board’s Attorney, and had told him (Mr. Miller) that a QDRO is only an instrument designed to carry out the will of the involved parties expressed in the divorce decree, and that when a conflict occurs the divorce decree will rule. Mr. Miller said that he would stipulate to the fact that there are two (2) QDRO’s and neither one of them are correct, but would identify the problem as Mr. Adcock having also been the Pension Board’s Attorney at the time and specifically told him that the divorce decree would rule, and that fact was also documented at the time in the minutes of the Pension Board meeting, and not to worry about the QDRO problem because the divorce decree is what “we go by”. Mr. Miller raised the question of what legal advice should the Board accept, that of Mr. Adcock who was the Boards attorney at the time or Mr. Peace who is currently the Boards Attorney. Additionally, Mr. Miller said that a letter from the Court Clerk was included in the file, and stated that the QDRO had been signed in error by the Judge.

Mr. Peace addressed the question posed by Mr. Miller, and told the Board that a QDRO supercedes the divorce decree, however in this case the QDRO is not inconsistent with the divorce decree, which was clearly in favor of the former spouse, and entitles her to one-half (1/2) of all benefit increases. He again explained that Mr. Adcock has agreed to correct the problem.

Mr. Harrod told the Board that he had gotten copies of the documents from Mrs. Lindsey, and referenced the Pension meeting minutes of March 8, 2001, page two (2), near the bottom, and read that “when such conflicts occur the divorce decree governs”. He said that had been the Boards past practice, and that the benefit increases had been going to Mr. Miller, until 2004 at which time Mrs. Debbie Helvey, the Pension Funds former Administrative Technician began giving one particular benefit increase to Mr. Miller’s former wife.

Mr. Furlow said that there appears to have been several past errors made, and that the best way to overcome them is to follow advice given by the Boards legal counsel, and get a corrected QDRO signed by the Judge.

When specifically asked if Mr. Miller was requesting that the Pension Fund pay him money which in his opinion was paid in error to his former wife, rather than for him to collect it from her, he said that the Pension Fund had made errors and overpaid members in the past, and did not go back and collect from them.

Mr. Hensley said that past overpayments were much different because none involved a former spouse that had received a portion of the members benefit increase in error; therefore there was no one to collect the overpayment from. He said that in this case it would seem that a correct QDRO should be entered allowing Mr. Miller to be reimbursed by his former spouse.

Mr. Furlow made a motion directing Mr. Peace to correspond with Mr. Adcock, and ask him to provide an amended QDRO to the Pension Board, and in the interim period, for the Pension Fund to set aside the additional $45.00 monthly that Mrs. Ross, the former spouse has been receiving until such time the matter is properly adjudicated. Mr. Hensley seconded the motion and the vote was recorded as, For: Mr. Moore, Mr. Furlow and Mr. Hensley, Against: Mr. Harrod, Abstained: Mr. Miller.

Mr. Harrod said that he voted against the motion because of the previously referenced statement made by Mr. Adcock in the March 8, 2001 minutes.

During the May meeting, Mr. Smith had reported that statutory authority currently exists for Police and Fire members to have their county real estate property taxes frozen in the same manner that currently exists for individuals on social security, and that a legislative resolution is not needed. He explained that the only requirement is for such an individual to provide proof of their disability retirement.

At the June meeting, Mr. Harrod had asked that Pension Fund Administrative personnel or the Funds Legal Counsel research the above referenced law in regard to providing a letter of certification to the members who have received disability pensions. There was a discussion in regard to members who have received a full medical pension versus members who retired during their DROP participation and asked that their retirement be documented for medically related purposes. The matter was then tabled until July to allow adequate time for legal counsel to review the matter.

Prior to the July meeting legal counsel had forwarded a memorandum to all Board members via email regarding legal issues surrounding the matter. During the meeting, Mrs. Behring’s summation concerning the matter, was that Arkansas State Statutes mandates that when a member begins participation in DROP, they are then considered for pension purposes to be retired, therefore when a member in the DROP terminates their employment due to disability that occurred after entering the DROP, it is not considered a disability retirement because of the prior retirement date of when they entered the DROP. She suggested however, that a member could provide documentation from a Physician to the CountyTax Collector regarding their disability.