"The City of Fort Lauderdale Police and Firefighters' Retirement System" One of the primary benefits of employment with

the City of Fort Lauderdale in either the Fire or Police Departments is the employees' participation in the retirement system established in 1973. This system was developed by concerned firefighters and

police officers who were determined to establish a viable retirement for employees of either department. The result of

this combined effort was the creation of the City of Fort Lauderdale Police and Firefighters' Retirement System.

Our retirement system is a one hundred ninety two million dollar trust administered by a seven member Administrative Board. The

Board is composed of two firefighters and two police officers elected by the membership in their respective departments, and three civilian members selected by the Mayor and approved by the City Commission. The term of office is three years. The elected

member is not restricted to a set number of terms, however, the appointed member is limited to two terms. The Board has an

annual election of officers for the position of Chairman, Vice-chairman and Secretary/Treasurer. It is important to note

that this is an administrative board and not an advisory board as all other City Boards are. This factor has caused many adverse

and awkward situations in the relationship between the Administrative Board, City Commision and the City Manager's Office regarding the authority of the Board.

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

employed by the Board.

page 2 the fund was managed by a local bank and the annual rate of return consistantly was below what the Board considered necessary to properly fund the Trust. It was determined by the Board that

having three managers with diverse management styles, would be in the best interest of the Trust. Actuarial services and a monitor

service that reports the progress of the money managers are also employed by the Board. A local bank is retained as custodian for

the funds and the individual Board members are Trustees of the Plan and bound by fiduciary responsibility. Legal services are provided by an attorney hired by the Board, and the City's Finance Director is an ex-officio member. Regular meetings are

conducted monthly and additional meetings are scheduled on an "as needed" basis. These meetings are publicized to comply with

provisions of Florida's "Sunshine Law". The Plan is financially and administratively secure, and the Police Officer or Firefighter is assured of a guaranteed retirement. However, this was not the situation prior to the

enactment of this retirement system. Prior to 1973, retirement benefits were paid by the Provident Life and Accident Company of Chattanooga, Tennessee. "Provident's association with the City began in 1955 when a group of department heads, Commissioners and employees formed a committee to formulate some method of providing retirement benefits to City employees. By the late 1960's, it became apparent to many

employees that the benefit paid by Provident was far below comparable benefits paid by other retirement systems. Under Provident, the retirement plan was composed of a series of

page 3

insurance policies.

These policies were issued annually and A new policy

on an individual basis, rather than a group rate.

was also issued when the employee received a raise; in the late 60's it was common to receive frequent raises. Each time a This

policy was issued, the issuing agent received a commission.

agent also received an annual commission of 1% of the face value of all policies that were in force. over $100,000.00. In 1971, this commission was Obviously, the commissions paid by Provident

were quite lucrative and were a significant reason for the benefit return to the Plan being lower than comparable plans. Between 1955 and 1973 the pattern of the benefit program was consistant: (1) the employee received insurance policies rated

on an individual basis, (2) policies were issued annually and also when an employee received a raise, and (3) commissions were paid when policies were issued. This was an inadequate

retirement system to the employee who received minimal benefits and a lucrative arrangement to those receiving commissions. On June 16, 1971, the police officers and firefighters formed a joint committee to investigate the feasibility of establishing a separate retirement system. Several months prior to the

formation of the joint committee, the City Commission and other City Officials sensed that the police officers and firefighters were concerned about the Provident system. In an attempt to

alleviate the rising concern they disbanded their pension committee, a "rubber stamp" committee that held infrequent At a City Commision

meetings, and created a new committee.

meeting in January, 1971, this new committee was established

page 4 that consisted of department heads and non-employee members. The issue, however, was not the various committees that were formed; the issue was Provident and an inadequate retirement benefit. The Joint Committee was convinced that keeping a

retirement system that provided minimum benefits, at maximum cost, was not in the best interest of the employee. The newly-formed Joint Police Officer and Firefighter Pension Committee decided to proceed with a study of retirement plans and contacted several actuarial firms to make a presentation before the committee. From the firms accepting the proposal and making presentations, the committee hired the actuarial firm of Kruse, O'Connor and Ling. In addition, an attorney was hired, and each

member 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 System was invited to advise the committee of procedures necessary to the formation of a retirement system. Mr. Rosenthal provided a

lengthy and informative report on methods used by the City of Miami Beach when forming their plan, anticipated expenses, and pitfalls that lay ahead. He also outlined two methods of setting The first, by City Ordinance, was

up the mechanics of the Plan. whim of the Commission.

the fastest and cheapest method but also subject to change at the The second, by State Legislation, was

the longest, most expensive, but safest method of implementation.

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

page 5

separate retirement system. The actuarial firm of Kruse, O'Connor and Ling presented their report to the committee on December 16, 1971. examples of those recommendations: (1) A separate Plan and Trust for fire and police personnel be created with appropriate investment powers. (2) A 6 3/4% actuarial assumption be forcast to reduce the projected cost to the City. (The actuarial The following are

assumption is a percent of payroll contributed by the City, after contributions and earnings are factored in, to off-set the projected unfunded liability. The actuary takes several factors, i.e. administrative cost, life expectencies, benefits and disabilities, and projects an overall cost for a 40 year period. Forty years is considered the necessary time frame for actuarial assumptions. The assumption rate is

designed to keep the plan sound and not allow any portion of the liability to become unfunded.) (3) The percent of payroll of other Florida cities and the investment of their pension should be compared and analyzed. (4) Differentiate between service incurred and non-service incurred disability benefits. There also was a discussion on future courses of action which included: (1) forming a committee to draw up a Final Purpose

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

legislative action. Subsequently, several additional meetings took place before the issue was placed on the City Commission Conference Agenda of May 16, 1972. The request to form a separate plan was refused. At

a meeting of the Joint Police and Fire Committee on May 31, 1972, concerns were expressed over the Commission's refusal. committee discussed four options: The Joint

(1) sit tight and wait to see

what happens, (2) file an injunction immediately, (3) wait for the June 20th Commission meeting and then decide a course of action and (4) make public Provident's dual role as administrator and trustee. After much discusion, the committee decided to wait

until a supportive Commissioner returned, apply additional pressure, show overt support for the general employees in their quest for a new pension plan, and choose an investment counselor. Several allegations were made by members of the Joint Committee regarding the relationship between the City and Provident. The

Joint Committee's position on the issue was that should the City Commission reject the proposed plan then the Security Commission and the State Attorney General would be contacted. The general

understanding was that the Joint committee had solid evidence that two members of the City Commission and several city officials were receiving gratuities from Provident. In fact, the

general agent for Provident was the son-in-law of one of the Commissioners. The City accepted the determined effort of the

Joint committee and decided it was in the best interest of all concerned to authorize the plan. At a workshop meeting on

December 14, 1972, the Joint Police and Fire Committee finalized

page 7 the procedures for the new pension system. A primary concern was the repayment of monies owed the Plan by Provident. A repayment schedule was devised and the final With the

payment was accepted by the City in late 1973.

acceptance of Provident's final payment, the City and the Administrative Board of the pension system relinquished the right to initiate legal action against Provident for additional monies believed owed. The Board was convinced that Provident owed

considerably more than the amount returned, but there was little that could be done about it. Subsequently, it was learned by the

Board that the State Insurance Commissioner's Office was considering issuing an order that Provident cease and desist from doing business in the State of Florida. A "perceived" adversarial relationship soon developed between the City and the Administrative Board. This was caused largely by

the wording of the Pension Ordinance which stated the Administrative Board was an administrative and not an advisory board as all other City Boards are. The City had great

difficulty accepting the administrative position of the Board and continued to treat the Plan and the Board in the same manner it treated its advisory boards. The entire year of 1973 represented an important time in the creation and operation of the newly formed retirement system. The year began with the first meeting of the Plan, progressed through the election of officers, determination of the Chairman's responsibilities, and the selection of a local bank as Trustee. Revisions of disibility procedures and retirement age were

page 8 necessitated to bring the Plan in line with state and federal laws regarding pension systems. Another controversial item was an aHedged conflict between the Pension Ordinance and the City Charter concerning residency requirements. The City Charter, in Sections 146 thru 151, deals

specifically with advisory boards, and states that city residency is reguired to be eligible to serve on these boards. provision for members of administrative boards. There is no

The Pension

Ordinance, however, requires active membership in the Plan and compliance with the City personnel rules pertaining to employment. The employment rules specified that an employee must Therefore, it

reside in Broward County - not Fort Lauderdale.

was the position of the Administrative Board that an employee would be eligible to sit on the Board as long as they were active members of the Plan. The apparent conflict between Ordinance and Charter was nothing more than a subdued controversey until a Fire Department employee, not residing within city limits, was elected to the Board. As a Fire Department employee, he was in compliance with

employment guidelines reguiring county residency, and as an active member of the Plan, he was in compliance with the Ordinance. However, since he did not reside within city limits, The Police

the employee was in violation of the City Charter.

and Fire Administrative Board sought a ruling from their legal council, the City Attorney, and subsequently was informed that the Charter prevailed. The Board's hands were tied. "The newly

elected member, however, took matters into his own hands and filed suit. On October 16, 1975, his position on the Board was

page 9 revoked by the City Commission. An injunction to prevent a Fire The Court

Department election was filed on November 20, 1975.

and the City Attorney, however, agreed that there would be no election until after the final hearing. Shortly thereafter, the

Court heard the argument, and the firefighter was reinstated prior to the next scheduled meeting of the Board. Now that the initial turmoil of organization was completed, it was time for the Plan to stretch its wings and see whether this "new" retirement system was going to fly. One thing was readily

apparent, based on previously discussed past experiences with the City, if the Plan was going to succeed, constant monitoring was a necessity. The actuarial firm of Kruse, O'Connor and Ling, who had been with the 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 firm

selected by the Joint Committee but they turned down the position because of an apparent conflict of interest. Now they actively

sought and won the position by offering to perform the actuarial service at two-thirds of Kruse, O'Connor and Ling's fee. Plan had reached a milestone and was not aware of it. The

For the

first time, various firms openly courted the Board hoping that their service would be selected. This was the start of active

politicing by actuarial and investments firms wishing to represent the Plan. On March 18, 1976, the City Manager requested that the Board change from a calander year to a fiscal year, October 1 through

page 10 September 30, to coincide with the City's fiscal year. The

request was granted, however, after realizing there would be a shortfall in the City's contribution the Board returned to a calander year at the request of the actuary. The City Manager's Office proposed in May, 1976, that an administrative aide act as liason between the City and the Administrative Board. The idea was that the aide would be It

employed by the City but permanently assigned to the Board. was proposed that the aide would be better able to control day-to-day activities of the Plan as compared to the monthly meetings of the Administrative Board.

Initially, the idea was

favorably accepted by the Board and a motion was passed to proceed with the hiring process. However, it soon became

apparent that there was an underlying purpose to having an administrative aide assigned to the Board. Past and present

involvement with City Officials had caused the Board to become cautious in matters presented to the Board by the City. Although

the relationship appeared trustworthy it was also considered somewhat adversarial. Several experiences with the City had left

a distinct impression with the Board that the best interest of the Plan was not always the City's primary consideration. experiences included: (1) the City's proposal to purchase These

insurance coverage for disability payments at a premium three times larger than the disability payments - this time the general agent was the brother-in-law of a city official and (2) a reguest by Risk Management that the Board allow the City to pay lump sum disability benefits instead of monthly benefits. Since monthly

benefits offset payments by the Plan to the employee and lump sum

page 11 payments cost the Plan the difference between the offset and the benefit, the Board asked why would they consider a proposal that would increase cost to the Plan. Risk Management answered that

it would be in the best interest of the City. The Board discussed the administrative aide at great length and over a considerable amount of time, and decided that the aide would have to be employed by and responsible only to the Board. Since this was not to the City's liking, it was decided to turn down the offer. Another request closely aligned to the hiring of the aide was the Board's request to hire outside legal counsel. Since its

inception, the Board was provided legal counsel by the City Attorney's Office. There were several instances where the legal This

advice given the Board was prejudiced toward the City.

created an adverse and difficult situation for the Board. Numerous requests were made by the Board to hire private legal counsel, but the City Commission constantly refused as they felt that there was no conflict of interest regarding the Plan. The

Commission relied on the Ordinance which stated that should a conflict arise, the Commission was empowered to hire legal counsel for the Board. Obviously, this created a unique

situation that placed the Board in the position of listening to legal advice provided by the City Attorney's Office and going to the City should a discrepency arise. On April 12, 1979, the Board invited a private attorney to address the legality of hiring private counsel. The attorney

stated that upon reading the Ordinance and additional state

page 12 material, it was his opinion that such technical assistance could be hired by the Board without the approval of the Commission. Subsequently, a motion was passed that private council.be retained. Various letters followed between the Commission and The eventual outcome was the

the Board regarding this issue.

filing of a legal suit, by the Board, to hire legal counsel. This was partially resolved in November, 1982, when the Ordinance was changed to authorize the Board to hire counsel in conflict situations. But it was not until 1987 when the Board finally

hired outside legal counsel on a full time basis. For several years, a secretary was "lent" to the Board by the Finance Department. The word "lent" is used as the secretary was

assigned to the Finance Department, but her salary was supposed to be reimbursed by the Administrative Board. Since the Finance

Department did not request the annual payment, the Board did not feel a desire to pay it. The City's proposal, somewhat tied to

the administrative aide proposal, was to remove the secretary from her physical location, adjacent to the Board Chairman, and place her in the Finance Department. It was also proposed that

the secretary be directly accountable to the Finance director, and have otther duties in addition to her pension responsibilities. On September 4, 1980, the City Manager's office outlined three suggestions to the City Commission regarding the Administrative Board's secretary: (1) The Pension Board will hire its own secretary as an employee of the Board and not as a City

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 Service System. However, the City Manager and City

Administration should be specifically relieved of any responsibility for or authority over this employee, if this is legally possible. (3) The City Manager will designate the Finance Department as being responsible for insuring that the Board has adequate administrative and clerical support. Finance Director will assign and supervise City employees for this purpose. The City Manager's Office further stated that suggestion three would most likely be recommended to the City Commission. This The

set the stage for subsequent actions not resolved until May, 1981. At that time it was agreed that the secretary would remain Since the Chairman was a police

with the Board Chairman.

officer, the secretary would be transferred to the Police Department and her salary reimbursed by the Plan. In March, 1981, the City Manager proposed a second tier pension plan for new employees. The proposal was presented to the

Commission who voted to hire a consultant to prepare a study regarding the creation of a "new" plan. The Board voted in April to have their actuary conduct a complete and in-depth study of the effect that a dual pension system would have on the existing Plan. report to the Board. On October 14, 1981, he presented his

In essence, the report blasted the proposed

page 14 new plan as not only undermining the existing Plan, but that it also offered minimal incentive to attract new employees. The new

plan offered benefits far below the existing Plan's benefits. The Police and Fire Administrative Board agreed with the actuarial report and requested the City Commission to discard the proposed plan. However, on November 12, 1981, the Board was

advised that the Commission had accepted the City Manager's recommendation to create a separate plan for new employees. The second tier pension plan lasted until 1992. Through the

negotiation process, the Police and Fire bargaining units were able to remove the second tier and revert back to a one-tier system. Since the inception of the Police and Firefighter's Retirement System the major difficulty has been the City's lack of recognition of the autonomy of the Board. Although such

provisions are in the Ordinance, the City has felt that since they contribute a large amount of money to the Plan they should have the ultimate authority. Their difficulty lies in the Plan is a

comprehending that they are sponsors of this Plan;

trust fund and therefore guided by applicable State and Federal trust fund legislation. The money that the City contributes

comes from the taxpayers, but once that money is placed into the Plan, it becomes part of the Trust and is administered solely by the Trustees. The City contributes a significant amount of money into the Plan, but the employees contribute more through payroll deduction and assignment of monies that are collected by the State. These "State" monies are paid by automobile and fire

insurance companies for the privilege of doing business in the

page 15 State. Under Florida Chapters 175 and 185, the insurance

companies pay a small percentage of written business to the State who disburses it to the individual firefighters and police officers via the municipality. Members of the City of Fort

Lauderdale Police and Firefighters' Retirement System are required to sign this money over to the Plan. In April, 1985, the Board voted to hire an administrator, but the City Manager contended that it was not a big enough job for a full time administrator. Several suggestions were resurrected,

similar to previous ones, that an administrative aide under control of the Finance Department could handle the tasks that the retiring 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 full It also confirmed that the

time administrator was needed.

administrator should be hired as a contract employee by the Board. The study alo suggested other operating and

administrative safeguards that should be implemented to insure the 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 Police Department building and leased office space on South Andrews Avenue. The retirement age of 50 with 20 years service was

changed in 1993 to age 47 with 20 years service for police crf-ricers and firefighters.
I

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

page 16 clerk. There are three money managers; Invesco Capital

Management (Balanced Fund), SunBank Capital Management (Equities), and Sovran Capital Management (Bonds). Resource

Advisory Service has been hired to monitor the fund, and legal counsel is provided by the firm of Cypen and Cypen. Since January, 1973, the City of Fort Lauderdale Police and Firefighters' Retirement System has grown from 4.7 million dollars to over 192 million dollars. Many individuals have This

served on the Administrative Board that guides the Trust.

significant increase in assets is a tribute to the vigilence and professionalism demonstrated by these members. What began as a

small group of employees who were dissatisfied with their pension plan, has grown into a successful retirement system.