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City of Houston V Board of Trustees of The Houston Firefighters' Relief and Retirement Fund
City of Houston V Board of Trustees of The Houston Firefighters' Relief and Retirement Fund
City of Houston V Board of Trustees of The Houston Firefighters' Relief and Retirement Fund
CAUSE NO. _______________ THE CITY OF HOUSTON, TEXAS v. THE BOARD OF TRUSTEES OF THE HOUSTON FIREFIGHTERS RELIEF AND RETIREMENT FUND
Filed12 May 16 A11:49 Chris Daniel - District Clerk Harris County ED101J016882176 By: Angellia Dozier
ORIGINAL PETITION FOR WRIT OF MANDAMUS The City of Houston, Texas [Houston] complains of the Board of Trustees of the Houston Firefighters Relief and Retirement Fund [Board] and shows the Court: DISCOVERY LEVEL 1. Houston intends that discovery will be conducted under a Level 3 Discovery
Control Plan pursuant to Rule 190 of the Texas Rules of Civil Procedure. PARTIES 2. Houston is a Texas home-rule city operating under a municipal charter pursuant
to Article XI, Section 5, of the Texas Constitution.1 3. The Board is the governing body of a public retirement system created by
Article 6243e.2(1) of Vernons Annotated Texas Civil Statutes [Article 6243e.2(1)].2 The Board may be served with process through its Executive Director and Chief Investment
See TEX . CONST . art. XI, 5. In accordance with Section 9.008(b) of the Texas Local Government Code, Houston requests the Court to take judicial notice of its published charter and status thereunder as a home-rule city. See TEX . LOC. GOV T CODE 9.008(b).
2
Officer, Christopher E. Gonzales, at the Boards usual place of business located at 4225 Interwood North Parkway, Houston, Texas, 77032, or wherever he may be found. JURISDICTION AND VENUE 4. This Court has subject-matter jurisdiction pursuant to Chapters 24 and 802 of
the Texas Government Code and Article 5, Section 8 of the Texas Constitution. 5. The Boards immunity from suit is waived by Section 802.003 of the Texas
Government Code. 6. Venue is proper in Harris County, Texas, under Section 802.003 of the Texas
Government Code and/or Section 15.002 of the Texas Civil Practice and Remedies Code. FACTS 7. Like many other governmental employers, Houston sponsors defined benefit
public retirement pension plans designed to attract and retain quality employees. 8. Houston taxpayers contribute significantly each year to fund the three public
retirement systems for Houston employees: the Houston Municipal Employees Pension System [HMEPS]; the Houston Police Officers Pension System [HPOPS]; and the Houston Firefighters Relief and Retirement Fund [Fund].3 9. firefighters.
3
The Board is the governing body of the public retirement system for Houston
The Texas Government Code defines public retirement system to mean a continuing, organized program of service retirement, disability retirement, or death benefits for officers or employees of the state or a political subdivision, or of an agency or instrumentality of the state or a political subdivision.... See TEX . GOV T CODE 802.001(3). 2
10.
Houston did not create and does not control the Fund. Rather, the Fund was
created by the Texas Legislature through enactment of Article 6243e.2(1). 11. Houston is the Funds plan sponsor and is required to make contributions for
the benefit of Houston firefighters as their employer. As with most public pension plans, plan beneficiaries, in this case, Houston firefighters, contribute a portion of their salary toward their future retirement benefits. Houston taxpayers make the remaining direct contributions to the Fund in an amount exceeding the contributions of Houston firefighters. The Board invests monies that exceed current demands on the Fund. 12. Houstons annual contributions to Houston employee pension plans (including
the Fund) currently represent over 9% per cent of Houstons overall yearly budgetan amount greater than $164,000,000 every year. 13. The Texas Constitution requires that the financing of state and local retirement
systems and benefits be based on sound actuarial principles and assumptions.4 In assessing
See TEX . CONST . art. 16, 67(a), (f). An actuary is a business professional who analyzes the financial consequences of risk using mathematics, statistics, and financial theory to study uncertain future events (such as those of concern to a pension plan), evaluate the likelihood of those events, and develop ways to reduce the likelihood and decrease the impact of adverse events. Actuarial soundness is a professional term that refers the ability of a provider in a financial security system (such as a pension plan) to satisfy its obligations given the actuarial risks. The goal is to identify circumstances where combinations of considerations and assets are not compatible with satisfying the providers obligations to pay benefits and expenses. A providers practices, such as risk selection, rate structures, or funding levels, can affect the risk that the provider will not be able to satisfy its obligations. Practices that increase the likelihood that the provider will satisfy its obligations increase the degree of actuarial soundness of the provider. 3
the actuarial soundness of a pension plan, one primary factor must necessarily be whether or not funding its benefit obligations imposes fiscal stress upon the plan sponsor. 14. Under traditional retirement adequacy models, the general goal for post-
retirement income is an amount equal to about 70 to 90% of the retirees pre-retirement income. Under sound actuarial principles and assumptions, the general standard for pension plan contribution rates designed to meet and maintain this post-retirement income goal is, for employees, about 9% of their salary and, for employers, from about 15 to 18% of the employees salary. 15. It is estimated that by 2015, Houstons contribution rate to the Fund for the
benefit of Houston firefighters will approximate 31%. It is currently 23.9%. 16. Houston has developed significant concerns about the Funds ability to meet
its future retirement benefit obligations to Houston firefighters. 17. The Boards lobbying efforts have resulted in the enactment of special laws
that apply only to the Fund and that grant the Fund preferential treatment and selfgovernance. The Board exercises control over administration of the Fund and establishes firefighter benefit levels with virtually no accountability to Houston taxpayers or their elected officials. The Board unilaterally establishes the Houston taxpayer contribution rate for purposes of funding benefitswithout any requirement for approval by Houston taxpayers or their elected officials, and without regard for Houstons ability to pay the contribution rate, or the impact of the contribution rate upon Houston and its citizens.
18.
The Fund was originally established in 1937 through lobbying efforts that
resulted in creation of Houstons first firefighter retirement pension plan.5 19. In 1958, the Legislature changed the composition of the Board to require a
controlling majority of firefighters.6 20. In 1975, the Legislature granted the Board even greater autonomy and the
power to make specific plan changes.7 Because the pertinent statute applied only to municipalities with populations of no less than 1.2 million, Houston was the only city subject to the statute.8 This use of population as a means of obtaining separate privileges for the Fund was a common strategy in the Boards legislative battles for control of the Fund.9 21. of the Fund.10 In 1988, the Board voted unanimously to take full control over administration
The Fund was created through enactment of a statute that has been amended over time and today governs public retirement systems for firefighters in cities with populations of less than 350,000 (subject to other limitations). See TEX . REV . CIV . STAT . ANN . art. 6243e (Texas Local Fire Fighters Retirement Act). As noted above, the Fund is now governed by Article 6243e.2(1). And there are also several other statutes that govern public retirement systems for firefighters. See TEX . REV . CIV . STAT . ANN . art. 6243e-2 (Firemens pensions in cities of 350,000 to 400,000); TEX . REV . CIV . STAT . ANN . art. 6243e.1 (Firefighters relief and retirement fund in cities of 450,000 to 500,000); TEX . REV . CIV . STAT . ANN . art. 6243e.3 (Firemens death and disability benefits; heart or lung disease).
6 7 8 9 10
See https://www.hfrrf.org/admin_History_1958Changes.asp. See https://www.hfrrf.org/admin_History_1975SepLegAuthority.asp. See https://www.hfrrf.org/admin_History_1975SepLegAuthority.asp. See https://www.hfrrf.org/admin_History_1975SepLegAuthority.asp. See https://www.hfrrf.org/admin_History_1988FullControl.asp. 5
22.
In 1997, the Legislature enacted Article 6243e.2(1), the statute that currently
governs the Fund, and its baseline contribution rates and benefit levels. Houston is the only city in the State of Texas subject to Article 6243e.2(1), as the statute applies only to municipalities with populations of at least 1,600,000. Article 6243e.2(1) also specifies that the controlling majority of the Board must be composed of firefighters. 23. In addition, and significantly, Article 6243e.2(1) empowers the Board to
increase both firefighter benefit levels and Houstons contribution ratewithout any requirement for Houstons assent or approval. 24. In 2000, the Board unilaterally made plan changes that increased firefighter
benefit levels and also immediately increased Houstons long-term funding contribution obligations to the Fund by over 60%. In seeking approval from the State Pension Review Board and support from Houstons then-Mayor, the Board presented erroneous and misleading information indicating that the changes could not reasonably be viewed as posing a material risk of jeopardizing the Funds ability to pay firefighter benefits. 25. In the 12 years since the Board significantly increased Houstons contribution
rate to the Fund, the rate of return on the Funds investments has been almost 30% less than its projected 8.5% return rate. 26. The Funds actuary projects that Houstons contribution rate beginning in 2015
will approximate 31% of firefighter payroll. This projected contribution rate more than doubles the rates that fell between 15.0 and 15.4% of payroll from about 1990 to 2000.
27.
approximately $27 million more than the contributions projected by the Funds actuary for those years. 28. Further, the basic benefit formula under Article 6243e.2(1) provides Fund
retirees with 30 years of service an initial retirement income of 80% of their pre-retirement income. However, firefighter retirees may, in some cases, utilize Article 6243e.2(1)s Deferred Retirement Option Plan provision to increase their retirement income to an amount well over 100% of pre-retirement income. 29. Notwithstanding the Boards power, or perhaps because of it, Texas law now
allows Houston taxpayers to monitor the actuarial soundness of the Fund through their elected officials so that they can evaluate the effect of the plan benefit levels and contribution rates on both the Funds ability to pay future retirement benefits to Houston firefighters and Houstons budget and ability to meet its payment obligations. 30. Chapter 802 of the Texas Government Code [Code], which governs
administrative requirements for public retirement systems (including the Fund), requires periodic valuations, studies, reports, and audits both by and of public retirement systems. See T EX. G OVT C ODE 802.001-802.305. 31. Section 802.101 of the Code requires the Board to have a valuation of the
Funds assets and liabilities prepared by an actuary at least every three years: (a) The governing body of a public retirement system shall employ an actuary, as a full-time or part-time employee or as a consultant, to make a 7
valuation at least once every three years of the assets and liabilities of the system on the basis of assumptions and methods that are reasonable in the aggregate, considering the experience of the program and reasonable expectations, and that, in combination, offer the actuarys best estimate of anticipated experience under the program. T EX. G OVT C ODE 802.101 (emphases added). 32. Section 802.102 of the Code also requires the Board to have the Funds
accounts audited by a certified public accountant at least every year: The governing body of a public retirement system shall have the accounts of the system audited at least annually by a certified public accountant in accordance with generally accepted auditing standards. T EX. G OVT C ODE 802.102 (emphasis added). 33. Section 802.1012 of the Code further requires Houston to have the Funds
actuarial valuations, studies, and reports audited by an actuary at least every five years: (a) In this section, governmental entity means a unit of government that is the employer of active members of a public retirement system. * * * Every five years, the actuarial valuations, studies, and reports of a public retirement system most recently prepared for the retirement system as required by Section 802.101 or other law under this title or under Title 109, Revised Statutes, must be audited by an independent actuary who: (1) is engaged for the purpose of the audit by the governmental entity; and (2) has the credentials required for an actuary under Section 802.101(d). T EX. G OVT C ODE 802.1012 (emphases added).
34.
The Texas Legislature enacted Section 802.1012 on June 15, 2007, with an
effective date of September 1, 2007. See Acts 2007, 80th Leg., ch. 733, 1, 3. 35. The Legislature required Houston to prepare its first audit under Section
802.1012 by no later than September 1, 2008, covering the prior five years: The first audit required under Section 802.1012, Government Code, as added by this Act: (1) shall be conducted not later than September 1, 2008; and
(2) must include an audit of each actuarial valuation, study, and report of the public retirement system that was prepared for that retirement system in the preceding five years. See Acts 2007, 80th Leg., ch. 733, 2 (emphases added). 36. Houstons first Section 802.1012 audit was, due to the nature of information
made available by the Fund, necessarily an attempt to replicate the results of the Funds latest audit based on its publicly disclosed valuations, studies, reports, and audits for the prior five years. Houstons audit involved reliance on the quality of the disclosures and undisclosed source materials/data and conclusions drawn by the Funds actuary. 37. In preparation for its next Section 802.1012 audit, Houston has requested the
Board, on at least two separate occasions, to provide the underlying documents, information, and/or electronic data for the Funds valuations, studies, reports, and audits.11 Houston is not able obtain these underlying materials from any other source.
11
See Exhibit A (letter dated November 1, 2011, from Houston to Fund); Exhibit C (letter dated February 6, 2012, from Houston to Fund). 9
38.
The Board has refused to provide the requested underlying materials, but has
not identified a single principled reason or legal basis for its refusal.12 Rather, the Board relies on several illusory argumentsnone of which supports its refusal. 39. First, the Board expressed concern about preserving the confidentiality of
individual member data. However, both Article 6243e.2(1) and the Texas Public Information Act [TPIA] specifically authorize release of information or records of a public retirement system to the municipality or other governmental entity with a legitimate need for the information to perform, implement, or advance the purposes of the system 13 and provide that such a release does not waive any confidentiality protection.14 40. These statutes alleviate any confidentiality concerns and confirm that
disclosure of the underlying materials to Houston, so that it can perform, implement, and advance the purposes of the system through its Section 802.1012 audit, is both appropriate and legitimate. Indeed, if the audit requirement is to have meaning, the Fund must provide access to the source materials relied upon by the Funds actuary and those materials an actuary would seek to consider. Only through the Funds transparency can Houston monitor and assess the actuarial and financial soundness of the Fund, the Funds ability to pay future
12
See Exhibit B (letter dated January 5, 2012, from Fund to Houston); Exhibit D (letter dated February 22, 2012, from Fund to Houston); Exhibit E (letter dated March 19, 2012, from Fund to Houston).
13
See TEX . REV . CIV . STAT . ANN . art. 6243e.2(1), 17(d); TEX . GOV T CODE 552.0038(d)(2). See TEX . REV . CIV . STAT . ANN . art. 6243e.2(1), 17(d); TEX . GOV T CODE 552.0038(f). 10
14
retirement benefits to Houston firefighters, and evaluate the risks to Houston associated with making its required contributions. 41. Houston has previously attempted to accommodate the Boards confidentiality
concerns by offering to accept group data for review as opposed to individual member data.15 However, the Board declined to provide data in this form.16 42. The Board has also stated that it does not believe it is an ordinary practice of
Texas municipalities to replicate plan valuations and that [t]here does not appear to be any plan purpose behind supporting such an effort.17 Houston stands apart as the only city in the State of Texas governed by Article 6243e.2(1)a statute that provides no tools for monitoring or assessing the actuarial and financial soundness of the Fund. However, Section 802.1012 provides a tool to enable Houston to protect both its taxpayers and firefighters the independent audit; and by so doing, it imposes upon the Fund a level of transparency . The materials underlying the Funds valuations, studies, and reports, must be made available so that Houston can independently monitor and assess the actuarial and financial soundness of the Fund. Indeed, disclosure of the underlying materials for purposes of Houstons audit is particularly important because the Boards assumptions, conclusions, and ordinary practices cannot be thoroughly assessed without review of such materials.
15 16
See Exhibit F (minutes of February 16, 2012 Board meeting); Exhibit G (minutes of March 8, 2012 Board meeting); Exhibit H (minutes of March 8, 2012 Board meeting).
17
43.
The Board has further stated that it did not find the words at least [every five
years] ... in the language of the statute, that the Board considers it is reasonable to believe that the legislature deliberately intended the five-year interval specified in the statute, that [t]he five year period has not yet elapsed, and that Houstons next audit is not due to commence until five years has elapsed since the initial one. 18 These and other statements by the Board suggest that the Boards passion for secrecy will continue and that it will object not only to providing the requested materials now, but to providing them at all. However, Houston has a present need for, and is entitled to, the materials. Houstons access to the materials is vital to the performance of its next statutorily required audit and should not be encumbered by the very Board managing the subject of the audit. 44. Should the Board object only to providing the underlying materials at the
present time, the Board has failed to articulate a valid reason for requiring Houston to wait until some unspecified time in the future. Indeed, the purpose of the audit requirement under Section 802.1012 is better served by requiring disclosure of the underlying materials to Houston upon requestor concurrent with the Funds completion of its own annual valuations, studies, reports, and audits. There can be little or no benefit to be derived from shielding for any length of time the true nature and adequacy of the information contained within the Funds underlying materials and which may have served as the basis for the conclusions of the Funds actuary.
18
45.
Should the Board object to providing the underlying materials at any time, there
is no principled or legal basis for placing such a limitation on Houstons actuary or to restrict the scope of Houstons audit in such fashion. Indeed, the legislature having specified that an actuary be used, it only stands to reason that the actuarial professional will be permitted to perform an actuarial auditan actuarial audit being a professional term of art that means scrutiny of one actuarys work by another to ensure that actuarial valuations are performed correctly and that the methods and assumptions used are reasonable. This includes a critique of the plan actuarys judgment concerning the plans exposure to risk based on independent analysis and calculations using the same data, assumptions, and actuarial methods used by the plans actuary. The purpose of such an audit is to verify that the actuarial work is accurate and the advice is soundand the goal is to replicate the results of actuarial valuations to ensure the long-term soundness of the plan. 46. The Board has not wavered in its refusal to disclose the requested underlying
materials.19 By its refusal to disclose these materials, the Board seeks to further cloak its dealings in secrecy, argues against transparency and disregards Houstons statutory authority and ability to monitor the actuarial soundness of the Fund. The Boards attempt to control when and how Houston prepares the audit required by Section 802.1012 is improper and without support under the law.
19
See Exhibit E (letter dated March 19, 2012, from Fund to Houston). 13
REQUEST FOR WRIT OF MANDAMUS 47. Section 802.003 of the Code authorizes a district court to issue a writ of
mandamus compelling the governing body of a public retirement system to comply with any requirement of Chapter 802 where it fails or refuses to do so: (a) Except as provided by Subsection (b), if the governing body of a public retirement system fails or refuses to comply with a requirement of this chapter that applies to it, a person residing in the political subdivision in which the members of the governing body are officers may file a motion, petition, or other appropriate pleading in a district court having jurisdiction in a county in which the political subdivision is located in whole or in part, for a writ of mandamus to compel the governing body to comply with the applicable requirement. T EX. G OVT C ODE 802.003 (emphases added). Houston is a person within the meaning of Section 802.003. See T EX. G OVT C ODE 311.005(2) (Person includes corporation, organization, government or governmental subdivision or agency, business trust, estate, trust, partnership, association, and any other legal entity.). 48. Houston is entitled by law to obtain and evaluate all underlying documents,
information, and electronic data for the Funds valuations, studies, reports, and audits for each year since at least 2000 to ensure a full and thorough audit of the Fund that includes evaluation of the effects of the Boards unilateral plan changes in 2000. 49. The Boards failure and refusal to disclose the underlying materials necessary
for Houston to conduct a Section 802.1012 audit frustrates Houstons ability to conduct a full and thorough audit.
14
50.
As the Board has a ministerial duty to release the underlying materials for the
Funds valuations, studies, reports, and audits to Houston, it has no discretion to refuse to comply with Houstons request for these materials. 51. Houston is therefore entitled under Section 802.003 to a writ of mandamus
compelling the Board to disclose the requested underlying materials so that Houston can comply with Section 802.1012 and conduct a full and thorough audit. CONCLUSION AND PRAYER FOR THESE REASONS, Houston respectfully requests that citation be issued and served upon the Board and that, upon trial hereof, this Court issue a writ of mandamus under Section 802.003 of the Texas Government Code compelling the Board to provide to Houston all underlying documents, information, and/or electronic data for all the Funds valuations, studies, and reports for each year since at least 2000.
15
Respectfully submitted,
DAVID M. EELDMAN
900 Bagby Street, 4th Floor Houston. Texas 77002 832.393.6491 (telephone) 832.393.6259 (facsimile)
ATTORNEYS FOR PLAINTIFF CITY OF HOUSTON, TEXAS
Exhibit A
K;J
November 1,2011 Dear Mr. Clark:
ClTY OF HOUSTON
Annise P. Parker
Mayor
P.O. Box 1562 Houston, Texas 77251-1562 9O1Bagby 3 " Floor Houston, TX 77002
Todd Clark, Chairman Houston Fire Fighters Relief and Retirement Fund 4225 Interwood North Parkway Houston, Texas 77032
As you know, Texas Government Code Section 802.1012 requires the City to have an actuarial audit done on each of the three City sponsored pension plans at least every 5 years. The initial actuarial audits under this legislation focused on the actuarial valuations as of July 1, 2007 and consisted of a broad review of the actuarial assumptions and methods being used by the respective actuarial firms. In order to continue to comply with the legislation, the City has engaged an actuarial firm to conduct a more thorough audit by replicating the actuarial valuation results of the July 1, 2011 actuarial valuations. In order to replicate the actuarial valuation results as of July 1, 2011, we request that you furnish the City with the information related to the July 1, 2011 actuarial valuation as outlined on the attachment. Please forward all information to: Kelly Dowe, Finance Director City of Houston, Finance Department 611 Walker, 10th Floor ' Houston, Texas 77002 Phone: 713-221-0935 Email: Kelly.Dowe@houstontx.gov Sjncerely, ^^^
Annise D. Parker Mayor cc: Chris Gonzales - Executive Director David Feldman, City Attorney
Attachment
Council Member*:
Brenda Stardlg Jarvfc Johnson Anne CluttertHK* Wanda Adam* MfteSuSvan AJHoang Oliver Panningtort Edward Gonzalez James G. Rodriguez Stephen C. Costelo Sue LovoH Melissa Noriega CO. "Brad" Bradford Jolanda "Jo" Jones Controller Ronald C. Green
Inactive Data: Please provide a census of inactive participants (ASCII or Excel format) included in the actuarial valuation as of July 1, 2011. The exact order of the fields is not critical, as long as you provide a data layout: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Record Identification Number (see note below) Member Plan Code (Plan 1, Plan 2, Plan 3) Status Code (Service Retirement, Disabled Retirement, Terminated Vested, Surviving Spouse, Beneficiary) Sex Code Date of Birth Date of Term i nati on Date Benefit Payments Commence Spouse/Beneficiary Sex Code, if applicable Spouse/Beneficiary Date of Birth, if applicable Monthly Benefit Amount eligible for future COLA Additional Monthly Benefit Amount not eligible for future COLA (if applicable) PROP Balance as of 6/30/2011 (if applicable) Any other employee data relevant to the valuation (please describe)
Record Identification Number: To protect member identity, the census data provided should not include the individual's name. Social Security number, Employee number or Member number, but rather a unique record identification number assigned by the actuary to facilitate data review and editing. ActumialAssMff!MiiSiM' Please provide the full table of rates (all ages or years of service) for the termination and disability decrements used in the actuarial valuation as of July 1, 2011.
Exhibit B
January 5 , 2 0 1 2
Board of Trustees Todd E. Clark Chair Ted Downing Vice Chair Harold W. McDonald Secretary Craig T. Mason City Treasurer Designee Fred Robertson Mayor's Representative Kevin James Brolan Member Gary M. Vincent
The Honorable Annise Parker Mayor, City of Houston P.O.Box 1562 Houston, Texas 77251-1562 Dear Mayor Parker:
BY HAND DELIVERY
This is in reply to your letter to me dated November 1. 2011. Houston Firefighters' Relief and Retirement Fund ("HFRRF") has studied your letter concerning Texas Government Code Section 802.1012 and also a follow-up e-mail from Mr. Craig Mason in which he stated that he expected the Mayor's letter might be taken to the HFRRF board for review. HFRRF also ^examined its records concerning the last actuarial audit conducted by the City during 2008. Texas Government Code section 802.1012 (House Bill 2664 of the 2007 regular session) states that "every five years, the actuarial valuations, studies and reports of a public retirement system most recently prepared for the retirement system... must be audited by an independent actuary... who is engaged for the purpose of the audit " HFRRF did not find the words "at least" that appear in your letter in the language of the statute itself and HFRRF considers it is reasonable to believe that the legislature deliberately intended the five-year interval specified in the statute. Our records show that Retirement Horizons, Inc. started the initial audit specified under the 2007 statute in late April or early May of 2008 and completed the audit in September of that year. HFRRF has not accumulated the five more years' of valuations, studies and reports that would be the subject of the next audit. The five year period has not yet elapsed. Moreover, HFRRF has no reason not to be confident in the accuracy of the 2011 actuarial valuation performed by Buck Consultants and docs not believe it is an ordinary practice of Texas municipalities to replicate plan valuations. There does not appear to be any plan purpose behind supporting such an effort.
Member
Francis "Frank" X. Maher Member Honorable Helen Huey Citizen Member Albertino "Al" Mays Citizen Member Executive Staff Christopher E. Gonrales Executive Director/ Chief Investment Officer Jonathan W. Needle Chief Legal Ofticer Glenna Hicks Deputy Director of Member Services
Todd E. Clark Chair Mr Kelly Dowe Mr. Craig Mason Mr. David Fcldman
4225 iMtKWCXJl) NORTH PARKWAY HOUSTON, TX 77032-3866 281.372.5JOO T H 281.372.5101 FAX 1.800.666.9717 www.hfrrf.org
Exhibit C
February 6, 2012 Todd Clark, Chairman Houston Firefighters Relief and Retirement Fund 4225 Interwood North Parkway Houston, Texas 77032 Dear Mr. Clark:
______~~_
In response to our previous request for data to enable the City to perform an actuarial audit of the actuarial valuation results as of July 1, 2011 completed by Buck Consultants for HFRRF, you expressed concern over (1) preserving the confidentiality of individual member data and (2) compliance with the timing provision of the independent audit required under Section 802.1012 of the Texas Government Code. To address your concern regarding the confidentiality of individual member data, we have revised our data request to provide group data (see attached) so that it would not be possible for an individual member's data to be identified. The disclosure of the data requested is consistent with the Attorney General's interpretation of the relevant statute. See OR 2011-07009. To address your concern regarding compliance with the independent audit law, this is to assure you that the City will comply with Section 802.1012 of the Texas Government Code. The City's audit of the July 1, 2011 actuarial valuation is in compliance with the law's timing requirement, as interpreted by the State Pension Review Board, which, as you know, is charged by law with overseeing the actuarial soundness of all public retirement systems and their compliance with State law. In view of the above, we look forward to scheduling a meeting with you and the City's actuary, Retirement Horizons, Inc, within the next couple of weeks to effect the transfer of the requested data by March 1, 2012, We appreciate your cooperation in this important project. Sincerely,
Annise D. Parker
Attachment
Active employees not in DROP No additional information is required. An average age, average service, and average pay within each age/service/salary grouping provided in the 2011 actuarial valuation report will be used. Active employees in DROP Within each age/service grouping provided in the 2011 actuarial valuation report, please provide the total amount of the DROP balances and the average annuity amount being credited to the DROP accounts for members in each grouping. In order to further protect the confidentiality of individual information, if there is less than 5 members in the grouping, combine that grouping with another grouping and indicate the combined group and its numbers. Inactive members Sort each type of payment (Service, Disability, etc) into 5 year age groupings and provide the total amounts being paid as an annuity and the total PROP/DROP balance in each group. Again, if there is less than 5 in a particular age grouping, combine with another group and provide the combined numbers.
Exhibit D
Board oi' Trustees Todd E. Clark Chair Gary M. Vincent Vice Chair Francis "Frank" X. Maher Secretary Harold W. McDonald Trustee Kevin James Brolan Trustee Craig r. Mason City Treasurer Designee Fred Robertson Mayor's Representative Albertino "Al" Mays Citizen Member Honorable Carroll G. Robinson Citizen Member
The Honorable Annise Parker Mayor, City of Houston P.O.Box 1562 Houston, Texas 77251-1562 Dear Mayor Parker:
Certified Mail, Return Receipt Requested No. 7099 3220 0001 2484 7228
This is in reply to your letter to me dated February 6, 2012. Please be advised that your request has been provided to the Board and is under consideration by the Board. Yours very truly,
Executive Staff Christopher E. Gonzales Executive Director/ Chief Investment Officer Jonathan W. Needle Chief Legal Officer Glenna Hicks Deputy Director of Member Sen. ice*
4225 NttRwooD NORTH PARKWAY HOUSTON, TX 77032-3866 281 ..J72.5TOO TTL 281.372.5101 FAX* 1.800.666.9737 www.hirrf.org
Exhibit E
Gary M. Vincent
Vice Chair
The Honorable Annise Parker Mayor, City of Houston P.O. Box 1562 Houston, Texas 77251-1562 Dear Mayor Parker: This is in reply to your letter to me dated February 6, 2012.
Harold W. McDonald
Trustee
Craig T. Mason
City Treasurer Designee
Fred Robertson
Mayor's Representative
Houston Firefighters' Relief and Retirement Fund ("HFRRF") has studied your letter concerning Texas Government Code Section 802.1012 and has also examined its records concerning the last actuarial audit conducted by the City during 2008. HFRRF believes that the next actuarial audit pursuant to Section 802.1012 is not due to commence until five years has elapsed since the initial one. HFRRF notes that it has not accumulated the five more years of valuations, studies and reports that would be the subject of the next audit. Please refer to my letter to you of January 5, 2012 for further detail on this score.
Christopher E. Gonzales
Executive Director/ Chief investment Officer
You state that the intended project "is in compliance with the law's timing requirement, as Honorable Carroll G. Robinso n interpreted by the State Pension Review Board..." HFRRF, however, has not discovered any Citizen Member interpretive rule either promulgated or finalized by the Pension Review Board on this subject. HFRRF is not aware of a notice and comment period for such a proposed rule. if Executive Staff you have been shown such a final interpretive rule, please forward it to me for HFRRF's consideration.
Jonathan W. Needle
Chief Legal Officer
Glenna Hicks
Deputy Director of Member Services
The computation project you request from HFRRF involves various calculations. We believe that undertaking such series of calculation exercises does not serve any evident plan purpose. Your interest appears to center around deferred retirement option plan benefits. The exact statutory provision, related policies and description of those benefits is provided in the HFRRF Summary Plan Description which can be viewed on the website www.hfrrf.org.
75--f2e'
dirr
Todd E. Clark Chair
4225 INTERWOOD NORTH PARKWAY HOUSTON, TX 77032-3866 281.372.5100 TEL 281.372.5101 FAX 1.800.666.9737 www.hfrri.org
Exhibit F
MINUTES OF THE HOUSTON FIREFIGHTERS RELIEF AND RETIREMENT FUND A meeting of the Houston Firefighters Relief and Retirement Fund Board of Trustees convened at the Fund offices at 4225 Interwood North Parkway on Thursday, February 16, 2012, at 10:22 a.m. Trustees present were Todd E. Clark (Chair), Gary M. Vincent (Vice Chair), Francis Frank X. Maher (Secretary), Harold W. McDonald, Kevin Brolan, Craig T. Mason, Fred S. Robertson, Albertino Mays and Carroll G. Robinson. Others present were staff members Christopher Gonzales (Executive Director/Chief Investment Officer), Jonathan W. Needle (Chief Legal Officer) and Glenna Hicks (Deputy Director of Member Services). The Chair called the meeting to order at 10:22 a.m. The Board recited the Pledge of Allegiance and observed a moment of silence. Fund Member William Bill Hausinger thanked the Board and acknowledged them for their hard work. There was a motion by Carroll G. Robinson, seconded by Gary M. Vincent, to approve the minutes of the Board meeting held on January 19, 2012. The motion carried. There was a motion by Albertino Mays, seconded by Kevin Brolan, approving the Board resolution to move the March 2012 regular Board meeting from Thursday, March 15, 2012 to Thursday, March 22, 2012. The motion carried. There was a motion by Kevin Brolan, seconded by Albertino Mays, to approve the following: The report of the Pension Benefits Committee meeting held on January 26, 2012, the minutes of the Investment Committee meeting held on January 19, 2012; and the minutes of the Legislative Committee meeting held on January 19, 2012. The motion carried. The report of the Pension Benefits Committee meeting held on January 26, 2012 noted the following: A determination of the status of an applicant as a spouse through claim of informal marriage as shown on Exhibit "PB1", was not proven as provided in the Texas Family Code, in support of the application; approval of five Deferred Retirement Option Plan (DROP) applications, effective February 1, 2012; approval of eleven Post Retirement Option Plan (PROP) applications, effective February 1, 2012; approval of an application for General On-Duty Disability benefits under Sections 6(c) and 6(d) of Article 6243e.2(1) (the Statute) as shown on exhibit "PB4" (1), with a re-examination in one year; approval of an application for General OnDuty Disability benefits under Sections 6(c) and 6(d) of the Statute as shown on exhibit "PB4" (2), with a reexamination in one year; continuation of a General On-Duty disability benefit under Sections 6(c) and 6(d) as shown on exhibit PB5 (1), with no further re-examinations required; continuation of a General On-Duty disability benefit under Section 6(c) as shown on exhibit PB5 (2), with no further re-examinations required; continuation of a General On-Duty disability benefit under Sections 6(c) and 6(d) as shown on exhibit PB5 (3), with no further re-examinations required; and approval of exhibit "PB6" regarding an application for transfer of prior service credit. The Chair noted the Committee assignments for calendar year 2012.
Board Minutes February 16, 2012 Page 2 of 3 The Chair announced that the Board was going into closed session pursuant to Government Code Section 551.071 to receive confidential advice of legal counsel regarding the release of confidential information to an individual Trustee. The Board went into closed session at 10:28 a.m. The Board resumed open session at 11:21 a.m. The Chair noted there would be discussion on release of various types of confidential information to an individual trustee at a future meeting. The Chair gave an update on his attendance to the City of Houston Long-Range Financial Planning Task Force meetings. He then noted the Task Force Majority and Minority reports of menu options submitted to the Mayor and Council on February 8, 2012, an event that he did not attend. Francis Frank X. Maher noted two-thirds of Board member attendance at the National Conference on Public Employees Retirement Systems (NCPERS) 2012 Legislative Conference in Washington, DC and associated Capitol Hill visits in divided groups on the same date as the City of Houstons council meeting prevented presence at the meeting. Harold W. McDonald further commented that Union officials were made aware in advance that HFRRF Trustees would be in Washington, DC when the Task Force report was submitted to the Mayor. The Board discussed a letter request to the Chair from Mayor Parker dated February 6, 2012, for information to be created by the Fund and provided to the City to assist the City in its project to replicate the Funds July 1, 2011 actuarial valuation in connection with an actuarial audit. It was noted that the actuarial audit statute cited by the Mayor provided for a five year collection of reports in order for such audits to be performed on five-year cycles, and that the last actuarial audit had been performed in 2008. There was a motion by Craig T. Mason, seconded by Fred S. Robertson, to provide information to the Mayor as requested in her correspondence. The motion failed. There was a motion by Carroll G. Robinson, seconded by Gary M. Vincent, for the Chair and Fund staff to prepare a response, asking the Mayor to disclose to the Fund the information that is in dispute and whether the City has difficulty in reconciling their own payroll information as it relates to the Fund. The motion failed. There was a motion by Kevin Brolan, seconded by Francis Frank X. Maher, for the Chair and Fund staff to prepare a response to the Mayor similar to a discussed response with discretionary adjustments. The motion failed. There was a motion by Gary M. Vincent, seconded by Carroll G. Robinson, for the Chair and Fund staff to prepare correspondence to the Mayor acknowledging receipt of her request and informing her that her request is under consideration by the Board. The motion carried, with Craig T. Mason opposed. There was a motion by Harold W. McDonald, seconded by Gary M. Vincent, to accept the invitation extended to Carroll G. Robinson to attend the Information Management Network (IMN) 17th Annual Public Funds Summit, to be held on March 26-27, 2012 in North San Diego, California, with complimentary conference registration. The motion carried. There was a motion by Harold W. McDonald, seconded by Albertino Mays, to accept the invitation extended to Gary Vincent, Frank Maher and Carroll G. Robinson to attend the Klausner Kaufman Jensen & Levinson Client Conference, to be held on March 18 -21, 2012 in Ft. Lauderdale, Florida, with complimentary conference registration. The motion carried.
Board Minutes February 16, 2012 Page 3 of 3 The Board reviewed the monthly reports of the Chair, Executive Director, Chief Legal Officer and the Deputy Director of Member Services. The following items were noted for a future agenda: Gary M. Vincent request more discussion on the Boards response to Mayor Parker concerning her February 6, 2012 request for information in connection with an actuarial audit. Craig T. Mason requested discussion and Board input on a policy regarding release of confidential information to an individual trustee. There being no further business, the meeting adjourned at 12:26 p.m. on a motion by Gary M. Vincent, seconded by Harold W. McDonald. The motion carried. Respectfully submitted,
Exhibit G
MINUTES OF THE HOUSTON FIREFIGHTERS RELIEF AND RETIREMENT FUND ! A meeting of the Houston Firefighters Relief and Retirement Fund Board of Trustees convened at the Fund offices at 4225 Interwood North Parkway on Thursday, March 8, 2012, at 10:00 a.m. Trustees present were Todd E. Clark (Chair), Gary M. Vincent (Vice Chair), Francis Frank X. Maher (Secretary), Harold W. McDonald, Kevin Brolan, Craig T. Mason, Fred S. Robertson, Albertino Mays and Carroll G. Robinson. Others present were staff members Christopher Gonzales (Executive Director/Chief Investment Officer), Jonathan W. Needle (Chief Legal Officer) and Glenna Hicks (Deputy Director of Member Services). The Chair called the meeting to order at 10:00 a.m. The Board recited the Pledge of Allegiance and observed a moment of silence. Fund Member Nick Salem asked if the Fund files a federal tax return. The Board discussed a letter request to the Chair from Mayor Parker dated February 6, 2012, for information to be created by the Fund and provided to the City to assist the City in its project to replicate the Funds July 1, 2011 actuarial valuation in connection with an actuarial audit. There was a motion by Harold W. McDonald, seconded by Gary M. Vincent, to decline to provide actuarial audit calculations to the Mayor as she requested, in that the last actuarial audit had been performed in 2008 and another was not due to be performed until 2013 and for the Chair and the executive management team to prepare a letter to the Mayor so stating. The motion carried, with Craig T. Mason and Fred S. Robertson opposed. The Chair announced that the Board was going into closed session pursuant to Government Code Section 551.071 to receive confidential advice of legal counsel regarding a Fund policy on the release of non-public Fund information to a Trustee. The Board went into closed session at 10:04 a.m. The Board resumed open session at 10:19 a.m. There was a motion by Harold W. McDonald, seconded by Gary M. Vincent that under its statutory powers to manage the fund according to Article 6243e.2(1) ("the statute"), including the power to adopt rules, policies and procedures not inconsistent with the statute, to interpret and construe the statute, to correct any defect, supply any omission and reconcile any inconsistency in the statute to the extent the Board considers expedient to administer the statute for the greatest benefit of all members and to determine all questions, whether legal or factual, relating to the administration of the fund to promote the uniform administration of the Fund for the benefit of all members, (in accordance with Texas Civil Statutes Article 6243e.2( 1) sections 2(p )( 1 ), 2(p)(2), 2(p)(3) and 2(p)(5)), the Board determines to adopt a new Section IX of its Code of Ethics as drafted with one amendment and to re-designate the (pre) existing Section IX as Section X. The motion carried. There being no further business, the meeting adjourned at 10:22 a.m. on a motion by Harold W. McDonald, seconded by Albertino Mays. The motion carried. Respectfully submitted, Francis Frank X. Maher Secretary
Exhibit H