MINUTES
HULL CONTRIBUTORY RETIREMENT BOARD MEETING
March 30, 2005
The regular meeting of the Hull Contributory Retirement Board, duly posted to be held in the Selectmen’s Meeting Room, Town Hall, Hull, MA on the above date was called to order at 9:01 a.m. Present were Leonard Colten, Chairperson, Members Donald Brooker, Arthur Flavin and Ann MacNaughton and Retirement Administrator Marcia Bohinc.
On a motion by Donald Brooker, seconded by Ann MacNaughton, the Board attested to the minutes of the February 23, 2005 regular Board meeting without changes.
The Board signed all bill warrants for March 2005.
The Board signed the March 2005 contributory payroll.
The Board signed the Annual Statement for the Year Ended December 31, 2004 without discussion or comment.
Chairman Lenny Colten reported that he and Administrator Marcia Bohinc appeared before the Hull Advisory Committee regarding the submission of the article relative to the eligibility of the retirement system to elected officials.
Pension Reserves Investment Management (PRIM) Senior Client Services Officer Michael Reardon and Executive Director Michael Travaglini delivered the annual performance review through December 31, 2004.
Mr. Reardon and Mr. Travaglini began by thanking the Board for their decision and confidence in the PRIM Board to invest all of the Hull Retirement System assets in the Pension Reserves Investment Trust (PRIT). To support the Board’s decision, Mr. Travaglini again stated the with the investment in PRIT, the Board has added 20 dedicated full time employees to their staff from an investment prospective, and the buying power of a now $36 billion fund which has a direct impact on available assets and fees.
Mr. Reardon began with an administrative update, noting that the PRIM Board has, as expected, added the Hedge Fund investment with five fund managers. He also remarked that PRIT now has 52 local retirement systems, along with the state teachers and the state employees retirement fund, equating to over 50% of the systems in the state investing in some portion of PRIT. This is up from 39% just two years ago. Mr. Reardon attributed this increase to the performance and the long-term history of the PRIT fund, and believes increases in PRIT investment is a trend that will continue. Mr. Reardon and Mr. Travaglini provided a review of the PRIM Board, Advisory Committees and Staff. Anticipating information in investment publications, they commented on the change of the external fund advisor from long
term Wilshire Associates to Cliffwater.
They explained that because Wilshire’s CEO and the Managing Director left to form Cliffwater, the PRIM Board wanted to keep the strong ties to these individuals, not necessarily the specific consulting firm. However, this change was made after a full RFP and search.
Mr. Reardon continued with a review of the asset allocation, both the actual and the target investments. He attributed the current investment returns to the dedicated effort to lower the allocation of domestic equity and the investment in the hedge fund (absolute return). He also reviewed the management fees and operating costs as a percentage of the average net assets, remarking that he expects the PRIT fees to go up slightly, but that they will stay under 50 basis points (bps). The total 2004 fees were 42 bps.
The remainder of the presentation centered on PRIT’s overall performance. 2004 finished at 14.44%, well above the 8.25% actuarial target of the state pension funding schedule rate of return assumption. This further exceeded Hull’s 2004 actuarial target of 7.75%. PRIT continue to maintain its excellent national ranking relative to public pension funds with over $1 billion in assets, finishing for the periods ending December 31, 2004 in the 9th percentile for one year, the 3rd percentile for two years and the 8th percentile for ten years. The main general message was that the PRIT core fund has continually outperformed the benchmarks for all historical periods. This message was continued with a review and discussion of the individual portfolios,
which included the style of investment (active or indexed), the investment managers and expense ratios.
Satisfied with the review and the results, as well as a brief outlook for the current year, the Board thanked Mr. Reardon and Mr. Travaglini for their time and efforts on Hull’s behalf, and invited them back to Hull in warmer weather.
Retirement Allowance Calculation
In attendance for the discussion of a potential change in retirement allowance for former Police Officer David Leary were Retirement Board Attorney Michael Sacco, Town Counsel James Lampke, retiree David Leary and his attorney Terrace Coles.
Speaking for the Board, D. Brooker presented a brief background of the police contract, both current and immediately preceding this contract regarding the payment of benefits while on injured on duty status, how the contract was negotiated, and the fact that Officer Leary was paid appropriately according to the contact. He also pointed out that if Officer Leary did not agree with the payment, that under the contract he had the opportunity to follow the grievance procedure - an avenue he opted not to pursue. Once again, Mr. Brooker concluded that based on the contract, grievance process and the fact that the payment by the Town was for an unpaid debt at Town Meeting, that Mr. Leary is not entitled to the additional compensation and that the Retirement Board should not increase the retirement
allowance.
At the request of the Chairman, Mr. Lampke briefly summarized his opinion as to whether Officer Leary was entitled to the calculation of the Quinn Bill pay while on 111F (M.G.L chapter 41 §111F, leave with pay for incapacitated employees). He stated that after significant research, he concluded that Officer Leary was entitled to the payment. Mr. Lampke agreed with Mr. Brooker that this issue could have been grieved as a contractual matter, however this does not preclude the parties from other means to bring a resolution. Although Mr. Leary did not follow the procedure, it is a mute issue because the Town chose to not require him to do so. In the end, the Town and the employee resolved the dispute by the Town determining that he was entitled to the compensation and he was duly paid.
Mr. Sacco agreed with Mr. Lampke that it is not relevant that Officer Leary did not pursue his rights to a grievance procedure. It has become a mute point because the Town has already made the determination that he was entitled to, and subsequently allocated the money. He stated that the Board must look at what has happened, simply that there were payments earmarked as educational incentive under the Quinn Bill. Mr. Leary received educational pay - is this considered regular compensation. As stated in the PERAC regulations, there is no question that education payments are considered regular compensation, therefore need to be included in the calculation for retirement.
He went on to say that the Board has been put in a position where they must react. There are two interactions. The first is the employee/employer relationship. Here there was a determination initially made that Officer Leary was not entitled to the educational incentive pay. That determination was then changed and the Town paid that money. The second relationship, for the payment of the retirement benefit, is between Mr. Leary and the Retirement System. The question in front of the Board is - was the compensation paid regular compensation. The Town made the initial determination the Mr. Leary was entitled. That was the Town’s job to determine. The Retirement Board determines whether it is pensionable. Since this type of compensation is deemed as regular
compensation under the PERAC regulations and case law of the Commonwealth, then it should be included as retirement allowance.
After more discussion regarding the grievance procedure and Mr. Leary’s decision to not follow it, D. Brooker read a case note from M.G.L. chapter 108L regarding the settlement of disputes concerning statutes in a collective bargaining agreement. Again, Mr. Lampke agreed, however stated that the grievance procedure is just one mechanism used to resolve disputes. In this case, management (the Board of Selectmen) chose another way of settlement. And again, Mr. Lampke stated that at this point, this is not relevant, and further not a concern of the Retirement Board.
On behalf of his client, Mr. Coles stated that Town Counsel and the Retirement Board Counsel summarized his position nicely, but added that when Officer Leary went out on 111F in 2001, the contract that made the educational benefit payable at the chief’s discretion was not effective until July 2002. Regarding the contract and the grievance procedure, as Town Counsel has explained the compensation has been granted, and it is not for the Retirement Board to decide whether this was correct – it happened, therefore accordingly under retirement laws the Board must decide if this is to be included.
On that, L. Colten made a motion that based on the advice of Town Counsel and the Board Counsel’s recommendation that the compensation made to Mr. Leary be included in his pension calculation as appropriate. Seconded by Art Flavin. Voted L. Colten, yes, A. Flavin, yes, A. MacNaughton, yes, D. Brooker, no. Motion passed. Mr. Leary’s retirement allowance will be recalculated and any amount due paid forthwith.
The Board reviewed the current year-to-date trial balance and cash accounts’ reconciliation without discussion.
Investments
The following monthly investment materials were provided to the Board:
Investors Fund Performance – February 28, 2005
PRIT – Calendar Year 2004 Statements
PRIT – Hull Profile Inception to Date
PRIM Board Update – February 28, 2005
PRIT – Summary of Plan Performance – February 28, 2005
Old Business
With Attorney Sacco in attendance, the Board asked him for background on the current restoration to service directive from PERAC due to the Massachusetts Appeals Court decision in 2004. He concurred with PERAC’s statement that this member must be reappointed to the position from which he retired prior to any other appointment in that position, that age was irrelevant, and that if the member reached age 65 (mandatory retirement for group 4), then the new pension calculation would be based on the last period, plus the required time prior to the original retirement to make the three years. As far as training, normally the municipality has a ‘retraining’ program in place. That is an issue for the Town and Town Counsel. However, the member cannot be fully reappointed unless the
physical aptitude test is passed. It is up to the employer to put something in place and coordinate with the Commonwealth’s Human Resources Division (HRD). At this point, the Retirement Board is just the messenger to initiate the process and report the outcome to PERAC.
The Superior Court Decision Pelonzi and PERAC v. Beverly Retirement Board and The Contributory Retirement Appeals Board was distributed to the Board
The chairman and appropriate Board members signed PRIT’s indemnity documents.
The Board read all informational mail:
PERAC Memo #12/2005 – Overview of Investment Regulation Issues
PERAC Memo #13/2005 – Buybacks subject to Buyback Interest
PERAC Pension News – March 2005
Pension & Investments – March 7, 2005 – California’s maverick wave (2 views)
Babson Staff Letter, February 25, 2005
Babson Staff Letter, March 11, 2005
Segal Bulletin – February 2005
Middlesex Retirement System – Spring Seminar information
The Board scheduled the next regular Board Meeting for Wednesday, April 20, 2005 at 9:00 a.m. in the Selectmen’s Meeting Room.
The Hull Contributory Retirement Board meeting adjourned at 11:11 a.m.
| 
