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1978.04.05_BTRB_Minutes_Regular t''h, TOWN OF HIGHLAND BEACH, FLORIDA BOARD OF TRUSTEES RETIREMENT PLAN REGULAR QUARTERLY MEETING April 5, 1978 1:00 P.M. Mrs . Mumford, Secretary of the Board of Trustees of the Retirement Plan, Town of Highland Beach, Highland Beach, Florida , presided in the absence of Mayor Horton and called the Regular Quarterly Meeting to order at 1:00 P.M. In attendance were: Mrs . Mumford, Commissioner Clark, Maree Birkbeck, Sergeant Cecere and Jane E. Barker. Also attending the meeting was Mr. Donald A. MacDonald, President of MacDonald, Minor, McAnany & Associates Corporation. It was decided to dispense with the reading of the minutes of the last meeting. Maree Birkbeck, Treasurer, gave the Treasurer ' s report for the quarter ended March 31, 1978. (Attached) Commissioner Clark moved that the Treasurer' s report be accepted as read and Sergeant Cecere seconded the Motion. The vote was unanimous. Vice Mayor Mumford then called on Mr. MacDonald to proceed with his report. By way of introduction, Mr. MacDonald stated that Mr. Stewart, of the Town' s Auditing Firm, had asked him to look over our Retirement Plan and make suggestions or recommendations . Mr. MacDonald also gave a brief summary of his background. He explained that our Plan has some contradictions in it and, consequently, minor amendments are necessary in order to conform with the requirements of a "Defined Contribution Plan" . Our Plan is a "Defined Contribution Plan" . Mr. MacDonald further explained that some of the language in our Trust Document had apparently been lifted from a fully insured Pension Plan, and our Plan does not have any insurance policies connected with it . / \1 Board of Trustees Retirement Plan n Regular Quarterly Meeting April 5, 1978 Page 2 of 2 He then referred to his letter dated December 29, 1978 addressed to Mrs. Roberts questioning several items in our Plan, and he distributed a list of his recommendations (Copy attached) . These items were discussed individually. Mr. MacDonald suggested that, to conform with ERISA (Employees ' Retirement Income Security Act passed in 1974) the Town should change the Plan to allow employees to come into the Plan after six months of employment . ERISA states that you must have employees in the Plan after eighteen months ' service, rather than the way it is now, i.e. , the employee must have been employed 12 months prior to the anniversary date - October 1. Mr. MacDonald further stated that a section needs to be added that says "Non-vested forefeitures shall be used to reduce future employer contributions" . The Plan, at this time, is overfunded. At this point, Commissioner Clark made a Motion that the Document be corrected in toto, presented to the Board, then be voted upon. Sergeant Cecere seconded this Motion. Maree Birkbeck questioned the Board as to their wishes regarding the investing in CD' s out of funds now being held in the Savings Account, which amount to $10,831.36. It was agreed that Miss Birkbeck would refrain from investing any of this money in CD' s at this time. Maree Birkbeck made the Motion that the meeting be ADJOURNED and Commissioner Clark seconded the Motion. Meeting ADJOURNED at 2 :30 P.M. APPROVED: (Absent) Mayor Louis Y. Horton, Chairman ecr-A, 272'e- Vfi34% ua Mayor Ruth E ford,Secy. C'Rert D. Clark, Commissioner ATTEST: , � (. Q �� - Maree Birkbeck, Treasurer cording Secretary / / iii 010 Dated: April 7, 1978 Sergeant William Cecere I TOWN OF HIGHLAND BEACH RETIREMENT PLAN FINANCIAL STATEMENT - Q/E MARCH 31, 1978 Opening Balance - January 1, 1978 $ 46, 542.31 Receipts: Employees ' Contributions $ 1, 275.30 Town' s Contributions 1,275.30 Voluntary Contributions 720.85 Interest -Savings A/C & CDs 846.56 Total Receipts 4,118.01 Balance $ 50,660.32 Disbursements: -0- Balance - March 31, 1978 $ 50,660.32 n Summary , ,wry Savings A/Cs & CDs 1255-4 10,831.36 - S OC'�' , I 1255-5 5,917.76 1523-6 5, 736.05 1635 5,610.49 0 /S 03192 5,919.01 ll// 51503603 5,457.17 40-000-866 5,277.03 80-372-86 5,911.45 $ 50,660.32 Respectful) mitted, _ 1 r M. Maree Birkbeck Treasurer, Board of Trustees in April 5, 1978 r C DONALD A. MacDONALD, JR., C.L.U. rI�'14 MacDonald,Minor,McAnany&Associates Corporation ll Forum III uFE s CJ su..,s' S_ 1 1655 Palm Beach Lakes Boulevard/Suite 312 West Palm Beach,Florida 33401 Telephones:686-9311 or 683-5286 December 29 , 1977 Mrs . Elaine Roberts , Town Manager Town of Highland Beach Highland Beach , Florida 33444 Re :• Town of Highland Beach , Pension Trust Dear Mrs . Roberts : Following our conversation last Monday , I have reviewed the Trust Document , and I believe there are some questions we need to raise and discuss . I would like to raise my questions paragraph by paragraph , and there are 'three overall issues to raise that are not necessarily attributable to certain paragraphs : I , 13. Normally, a participant 's "normal retirement • date" in this area of Florida is age 65 . I am curious if you really want normal retire- ment date to be age 62 . IV , 1 . This paragraph calls for the "employer' s cash value of any insurance contributions" , which seem to imply that some insurance is to be purchased out of the employer' s contribution to the Plan . If you wish to purchase a Convertible Ordinary Insurance Plan , you could do so ; and secure , at that point in time , the contract for an annuity provision to be activated later. Thus far , you have not purchased any insurance ; and if that is your continued desire , then maybe the reference to the insurance should be deleted. IV , 3. ERISA would call for a Joint and Survivor Annuity Benefit to be available , and the ten- years Certain and Continuous to be an option . Conformity to ERISA will be discussed later. V , 1 . I would question whether the employee ' s beneficiary "in the event of employee ' s death" w shouldn ' t receive the entire account. This paragraph says the employee ' s beneficiary will receive the employee ' s contribution , plus 1.1921.5 ,Etna Life Insurance Company/.'Etna Variable Annuity Life Insurance Company Mrs . Elaine Roberts December 29 , 1977 Page 2 interest , and only the vested portion of the employer' s contribution. VI , 2 . Evidently , there should have been a contribu- tion made by the employer (without matching contribution from the employee) equal to 5% of the employee ' s past service , less the • eligibility period. I suspect tills deposit has not been made . VI , 3. Article 4 , paragraph 6 , permits • an employee to continue employment beyond his normal retire- ment date. If age 62 is to be the normal retirement date , then we would find ourselves in a position whereby an employee could elect to work to age 65 ( as an example) in order to maximize their Social Security income ; but not be in a position to make contributions to the Pension Plan during these last three years . These presumably could be the employee ' s highest earning years , probably with most of • family responsibilities already paid for; and this paragraph prohibits participants during the years when it is probably best affordable on the part of the employee. VIII , 3. I would question this , but need more time to research the authority. X , 1 . This paragraph might normally be found in a Defined Benefit Plan , in order to determine each year' s deposit ; but it is unusual to find it in a Defined Contribution Plan . The " amount of deposit" is set as 5% and 5% . X , 2(h) . In a Defined Contribution Plan , annual actuarial values are not normally required. I question the word "actuarial " . I think it is a good idea to have an annual valuation . XV , 2 . Here , again , the word " insuror" is mentioned ; and to the best of my knowledge , insurance has not been purchased. XV , 3. Again , the word "insuror" . XV , 7. Again , a reference to "insuror" . Mrs . Elaine Roberts December 29 , 1977 Page 3 XV, 15. Bonding is a good idea , and probably can be accomplished by a Rider to existing insurance , without premium. Do we really want to permit this at the "discretion" of the employer? Nothing appears to be said in the document about the non- vested portion of forfeitures . I would suspect , even though I have not done a person-by-person review of present and former participants in the Plan , that the Plan is over-funded. The contributions on the part of the Town that were made during the employment period of a former employee are probably still in the Trust Fund. Some provision needs to 'be made for these non- vested forfeitures . There is some question about the Plan ' s status as a qualified Plan. As I understand it , you have already written to the IRS to ask for a clarification of your Determination Letter. I don ' t think •any more should be done until a reply is received from the IRS . Lastly , what effect should the Town give to this Plan in light of .the recent amendments required by ERISA? In general , Government Plans are exempt from ERISA ; and I suspect this Plan could be exempt. However, as an employer in the community , does this employer wish to meet the standards of the community. This Plan could be brought into conformity with ERISA, with very minor amendments , and probably at. no cost to the Town . There might be additional cost involved in offering the Plan to an employee between their 6th and 18th month of employment , as opposed to the present situation , which offers participation between the 12th and 24th month of employment. I am trying to say that an employee might come in a few months earlier, if ERISA standards were used ; but in no other way can I envision additional costs to the employer. I would be glad to discuss any of these items with you. Sincerely yours , • Donald A. MacDonald , Jr. , C . L. U. President DAMjr/pb I\i LUnn...11 n i sONS I , 13 Amend so that Normal Retirement Date follows a participant ' s 65th Birthday. IV , 1 If no Insurance is to be purchased , delete the words "cash" and "Insurance" in the fourth sentence , and incert in sentence six after the word "time" the words "of retirement age" . If Insurance is to be purchased by the employer' s contribution , there will be no necessity to amend the Article . IV , 3 Amend the second sentence so that a Joint and Survivor Annuity Benefit shall be the primary option , and Ten-Years Certain and Continuous an alternant. V , 1 In a Money Purchase Plan , the death of a participant accelerates the vesting from all contributions to 100% ; so that this needs to be amended so that the beneficiary will receive total value of the employee ' s account , regardless of who made the contribu- tions . VI , 2 No change in the Trust is required ; and as I understand it , a deposit of $5 ,000 was made during that year. I suggest that this $5 ,000 deposit be allocated to cover these deposits . Based on a review of employees , the $5 ,000 would more than adequately cover the deposits required . VI , 3 Assuming we amend paragraph 13 in Section 1 , it would not be necessary to change this paragraph . VIII , 3 If it is desirable to retain this feature , the forfeitures must be limited to the first ten years of participation . X , 1 I would amend this paragraph to state that the amount for deposit shall be the contributions made equally by the employer and the employee , realizing these may change from year to year as the compensation of the employees changes from year to year. X , 2 (X) I would delete "h" and rename "i " as "h" . XV, 2 , Here , again , is a reference to an "insuror" , and I believe 3 & 7 these references should be deleted if we are not going to be . _ purchasing insurance. XV , I5 I would remove the words that made it "at the discretion of the employer" , so that each of the Trustees has the assurance that he or she is Bonded in that capacity. ADDITIONAL COMMENTS A Section needs to be added that states that non-vested forfeitures shall be used to reduce future employer contributions . Our review indicates that the plan is substantially overfunded , and the adoption of this provision should result in lower employer contributions .