Common Council

SPECIAL MEETING OF THE COMMON COUNCIL MIDDLETOWN CONNECTICUT MAY 30, 2017 The Special meeting Questions to Directors of the Common Council of the City of Middletown was held in the Council Chamber of the Municipal Building on Tuesday, May 30, 2017 at 7 p.m. Present Mayor Daniel T. Drew, Corporation Counsel Daniel B. Ryan, Councilman Eugene Nocera, Councilman Thomas J. Serra, Councilwoman Mary A. Bartolotta, Councilman Gerald E. Daley, Councilman Robert P. Santangelo, Councilman Carl R. Chisem, Councilman Robert Blanchard, Councilman Grady L. Faulkner, Jr., Councilman Sebastian N. Giuliano, Councilman Philip J. Pessina, Councilwoman Deborak Kleckowski, Councilwoman Linda Salafia; Sargent-at-arms, and Council Clerk Marie . Norwood. Absent Mayor Daniel T. Drew, Corporation Counsel Daniel B. Ryan. 1. Mayor calls meeting to order. (Pledge of Allegiance) (Council Clerk Reads the Call of the Meeting and Mayor declares call a legal call and meeting a legal meeting.) 2. Workshop Opens: A. Presentation on the changes to the Pension Ordinance and Pension Documents. Atty. Wisneski Wisneski introduces the retirement plan documents. She states we began the process more than 3 years ago to make sure the plans constitute a trust. They wanted to make sure they follow the IRS Code and that it is what we are doing on the day to day business. Atty. Barth Atty. Barth is here from Robinson and Cole. There is a pension plan and changes to the ordinance. The Retirement Board determined to make one stand-alone plan. It is to have an organized and clear document with everything in one place. There are appendices for the bargaining units and the nonbargaining individuals to show what they are due. Noted for the Record Councilman Blanchard takes his seat at 7:03 p.m. Atty. Wisneski continues a lot of work went into this with the Retirement Board; we have met internally many times with Finance and the unions. John Milardo is the Union member on the Retirement Board. They raised questions and issues and incorporated changes in the documents along with Atty. Barth Atty. Barth. She draws their attention to 3 documents at their chairs. At the time this started, the Retirement Board had a different make up and to go into the plan was to insure everything was in one document and to make changes at a lower level. As the Board is made up today, they want it similar to today; it will go through the board, but ultimately the decision will be up to the council to make the changes. As I reviewed it, I noticed we left in a paragraph and in line with the current Board and what I think is appropriate, I propose to strike the second paragraph. In the Ordinance on pages 3 - 4 I have mirrored the language of the plan under Retirement Duties. One more document is one of the appendices dealing with Police, Appendix B; I am adding a definition. We have two types of disability plans here; one is a general employee, like Social Security disability, but under the Police Contract they are disabled if they can no longer operate as a police officer. She has defined it for them. There is a way for the Board to go back to see if that person is disabled; the Board can send them for an exam and request documentation to show if that employee is employed anywhere and for a general employee it is different than police. The police is as an officer or a job comparable. Carl Erlacher and Diana Doyle are here and if you have questions for Carl, he can respond. B. Questions from the Council Councilman Serra states, after this, it goes back to the Pension Board and then will come back to us. Atty. Wisneski responds that is correct; they have to endorse it. The intent is to go back and reconvene and it is fine with her and then it will go to the Council agenda. Councilman Serra asks if they have seen the amendments you have today. Atty. Wisneski states no they have not and the changes are based on their desires. Councilman Serra asks where the plan document is; is it in the contracts and where is it. Atty. Wisneski it is in the ordinances and the collective bargaining agreements. We are taking what is in the ordinances and put it in a pension document. It will be filed MAY 30, 2017 SPECIAL COMMON COUNCIL MEETING PAGE 2 with the Town clerk and Finance Department and the CBA's will be part of the Pension Plan. Councilman Serra states with this new trust set up, there will be no reduction of benefits and we do not have the authority to do that. With the new setup whatever they retire at is what they will get. He reads the language in the ordinance. He states this solidifies nothing can be taken away. Atty. Wisneski replies that is the intent here. Councilman Serra states you are reflecting the State Statute with doing this. He states this Trust is because of IRS, etc. and the basic is no reduction of rights and the obligation of the Pension Board to recommend what we need to contribute. He asks if there is language in the trust that says this; he asks about certain language about no liability. From his past, they have always put money in as recommended. Atty. Wisneski states it does talk to that. Atty. Barth states there is no provision that says they are not liable to the pension. If there is not sufficient monies, the retirees could sue. Councilman Serra states if it fails, the City is responsible and we are liable as well. Atty. Barth states it is on page 12. Councilman Serra states he wants the city to make it a solid fund and we should contribute. He wants language that the City is liable. Atty. Wisneski states 3.05 and she reads what they will put in the pension. There is a provision in the ordinance that has similar language. Councilman Serra asks why we are doing it and what is the benefit to Middletown. Atty. Wisneski states I can defer to Atty. Barth on the IRS issues but it was clear it had not been looked at in years and they wanted it updated with IRS code. They also wanted the document to show how we handle it day to day. Atty. Barth states there are limitations on compensation and benefits received and when benefits must commence and they were not in the ordinance but they are required to be in the Plan document. Councilwoman Bartolotta is happy to see the changes and she asks about the new retirees can you put it in the ordinance. Atty. Wisneski states it is incorporated by reference. It talks about the plan and 74-33b being maintained in the offices of the Town Clerk and Director of Finance. The concern is the 57 page document. The intent was to refer to it as a legal document and have the plan as reference. Councilwoman Bartolotta states she sees the reference; is there stronger language that we will abide by it or am I missing something. She asks what it means maintained and it doesn't say anything about abiding by it. Atty. Wisneski reads that the plan is set forth in following documents; she thinks they are sufficiently covered, but she will do what they ask. Councilwoman Bartolotta asks if anywhere in the document about the city not being liable in Section 11. Atty. Barth states they did put it in the plan and it is only the plan that pays and not the City is liable. Atty. Barth states if there is no money in the trust and participants are entitled with benefits and the City hasn't put money in the fund contractually, the participants have the right to sue the City contractually. Councilwoman Bartolotta asks why this is here and if the fund is depleted you would have to sue us. Atty. Barth states you don't want to go after the city now and not wait for the pension to pay. You are required to pay the actuarial recommendation and if you do that, then the plan will have funds to pay anyone. Atty. Wisneski it is for the protection of the City and we don't want to take on liability that we don't want and language is in there to protect the retirees. We don't want language to have retirees to come after the City. Councilwoman Bartolotta asks why not take it out and they can't come after us until the plan is depleted and it wasn't there before, why is it there now. Councilman Serra states I can't believe you told me it wasn't there. The bottom line is the plan is solvent and why to change the language. I agree with Councilwoman Bartolotta to change that language. This council and mayor have been responsible for this plan; he asks if it was endorsed by the Retirement Board. Atty. Barth yes; Councilman Serra asks if you recommended this. Atty. Barth I can’t recall who proposed that language. Councilman Serra asks what happens if something happens that the Board is not investing properly, the pensioners have to get lawyers to sue the City. Atty. Barth states if the plan wasn't funded properly, they would. . . You have one of the best funded pension plans in the State. Councilman Serra states it is solid and strong. Atty. Barth that is why you have a trust and you have funded it as well as you have. There is a source of funds put away to pay those benefits; paying out of the City's assets, you might not have that. This is a specific trust put aside and with a bond you don't have the funds to pay it back. Councilman Daley states his understanding is the Trust does for the city and retirement members it ensures those funds are separate and segregated from City funds. The City has been responsible to fund the plan and if the City fell on hard times, right now there is nothing to prohibit us from declaring an emergency and take money out of the retirement fund and the trust prohibits that. Councilwoman Bartolotta states that is the question at hand. I don't think there is disagreement about having a trust and I don't agree with the language and will recommend that the language be removed. Councilman Daley states he is not in favor of that because the language protects the City and the retirees. I don't see a problem with this. It protects the city from a retiree suing the City for benefits. Councilman Bartolotta states you are saying that the City would be sued if the funds are depleted or is it the City would be sued without the funds depleted. Atty. Barth is worried about the city being sued now; Councilman Bartolotta states why would they sue. Atty. Barth because they can sue and because they want to. Atty. Wisneski states the language of 11.01 is to show it is a trust and that elected officials are not responsible for the fund. Councilwoman Bartolotta states I only have the one concern of liability for the city. She asks 74-35, there is a new statute out from the State that affects 2017 and does it conflict with 74-35. It is Chapter 113 Section 4-152. Atty. Barth is not sure of the change. Carl Erlacher brings forward the provision. Atty. Barth states we can't reduce the benefits; Atty. Barth states the language is in the plan because of the IRS Code. Councilwoman Bartolotta asks that we include that language. Councilwoman Bartolotta asks about QDRO. Atty. Wisneski states the City has recognized qualified orders that if someone is divorced, you can go to the court and get an order that part of the benefits go to your spouse. QDRO’s are time consuming and expensive and employees don't like them. We have put it in the plan that we don't have to recognize QDRO’s. We have talked to all of the unions and they have not heard any objection from the Union MAY 30, 2017 SPECIAL COMMON COUNCIL MEETING PAGE 3 and that is in the plan and represents something different. Councilwoman Bartolotta states it was agreed upon at the Board. Councilman Giuliano states he has some basic questions. If the pension board is in favor and unless finance says it’s a bad idea for the City I won't substitute my thoughts for them. He asks where in the Charter they have the authority to do this and it doesn't fit neatly into the Charter. If it is an ordinance, it fits; if it is a contract it might work, but if it is a document outside the legislative process and interpreted outside the legislative process, he wouldn’t want this challenged as an ineffective use of our authority. If this is a trust and the City is the settler and the board is the trustee and the retirees are the benefactors. If the trust goes belly up and the City did all it was supposed to do, how is the city liable and not the Trustees. Atty. Wisneski states they would have fiduciary liability with the City in terms of insurance. Councilman Giuliano states they are not city employees and are not covered by our insurance; who will you get to serve on the Board. Atty. Wisneski states under State Statute they would be indemnified. Councilman Giuliano states by who are the indemnified. If it is a trust we are taking the fiduciary responsibility and giving it to the Trustees; where is the settler’s liability. Atty. Wisneski they are acting on behalf of the City as members of the Retirement Board. Councilman Giuliano asks they are either trustees or city employees acting under direction of the City. Atty. Barth states if they are negligent, you are required to indemnify them; there is a statute that says this. If they were acting outside their authority, then maybe they have personal liability. Atty. Barth going back to the Charter, I am not an expert, but this is a contract and this document is incorporated in the ordinance effectively through 7-33. Councilman Giuliano we are effectively adopting an ordinance and the Mayor can veto and we can override and then has force of law. Councilman Daley states on the QDRO, can you elaborate on that; we had to deal with that before and that may complicate the lives of some of the spouses of the employees. If we don't recognize them, the State has basically a pro forma document that they will accept and if you are going through the divorce, the divorce attorney will make sure it follows the State format. How do they resolve that and will it cost the employees and spouse more. Atty. Barth states private employers have to recognize them, but governments are exempt from the rules and may recognize them. Most defined benefit plans are not recognizing them from an administrative area. If there was someone divorcing, they would have to get it from another source. Councilman Daley states their alimony payment would be bumped or there would be another clause in their divorce. Atty. Barth correct. Councilman Daley states the scenario he foresees if you don't have a cause of action against the city because the plan is administered through the trust. An employee retires, what if they think they should be getting more per month, how does that work. Atty. Barth if there is any dispute, they can appeal to the Retirement Board. Atty. Wisneski states 14.08 and reads it. Atty. Barth states that is the appeal to the retirement board. Councilman Daley asks 74-32, the last part about contributions; what does it mean. Employees are contributing 6% and they leave before vesting and want to withdraw their funds does this do that. Atty. Barth states in order to pay their contributions with before tax; they are picked up as pretax contributions. All of those go into the trust and under the terms if not vested they have the right to withdraw them with interest. It is 3.03. Councilman Daley states Police are after tax and what is the benefit. Atty. Barth states after tax, the benefits going in are not taxable. Councilman Daley states the change on appendix B, where is this. Atty. Wisneski responds 5.05 and 5.06 of the pension plan. 5.05C she reads and explains how they determine if disabled and when you can stop a disability retirement board and it is when they are engaged in a substantially occupation. Councilman Daley for police that language changes. Atty. Wisneski responds correct. Councilman Daley asks why police are the only ones that have something other than totally disabled. Atty. Wisneski correct; there is a slight difference for Firefighters. Police and nonbargaining also get disability. Councilman Daley states a police officer can get disability retirement and go out and be fully employed and make more than a police officer and still get their disability. Atty. Wisneski yes, so long as they are not a police officer and can get 66.67% of their pay. Councilman Daley asks if there are offsets; Atty. Wisneski states there is Worker's compensation, 6.06. It talks about the monies received and what is deducted from the retirement. There is something in the duties and disability section as well. Councilman Daley states there is no offset for outside earnings. Atty. Wisneski responds no. 5.04 And reads benefits from Worker's Compensation and that is what we currently do. Councilman Daley states as a matter of practice, there is provision that allows for the retirement Board to inquire, is there a system for that to be done for anyone requesting disability and are we inquiring regularly about that. Atty. Wisneski we don't do that; we have not done it. Councilwoman Bartolotta states the Board has requested that it be done. Councilman Daley states I have no problem if someone is disabled and entitled a disability retirement, but this is an area ripe for abuse. Councilwoman Bartolotta states this came up when they requested a hard copy of the trust because some other language was asked to be in there, but it is already there and the Board should be doing this. Councilman Daley asks have we had anyone's pension benefit exceed IRS limit. Mr. Erlacher states no. Councilman Nocera thanks Atty. Wisneski for her work. He thanks the pension board for their hard work and trust they looked at these and analyzed them. I have two questions. Has there been a cost analysis on the financial impacts on next year's budget. Atty. Wisneski states there should not be any financial impact. Atty. Barth states there are no changes in benefits. Councilman Nocera and no language changes to trigger that. Atty. Barth no. Councilman Nocera in collective bargaining, how are changes approved as we move forward with contracts. Atty. Wisneski states her intention is if there is a CBA agreement and it comes to council, if there are any changes to the Pension plan she would bring it forward and have the appendices approved for the plan at the time the contract is approved by the Council. MAY 30, 2017 SPECIAL COMMON COUNCIL MEETING PAGE 4 Councilman Pessina states under 74-34c, and he reads about the members of the pension board. Pessina states it puts the board under our purview. Atty. Wisneski yes. Councilman Pessina if a police officer is found totally disabled does the city try to give him another position in the city or just cut the tie. Atty. Wisneski states we have an obligation to have an interactive process; there are some discussions but most go through the disability pension and that is the option usually chosen. Councilman Giuliano states if the pension fund is mismanaged, what authority does the city have to step in and remedy that. Atty. Wisneski states under the ordinances, the biggest right you have is under 74-34 to change the membership of the pension board. As everything is currently written, there is an obligation to submit the amount of money from the actuary and you have outside help to the board and they rely on that. Atty. Barth states you have an actuary to determine what funds need to be put in and then you have advisors to invest the money. Councilman Giuliano states if there is a failure in the system either the Board is unwilling or unable to remedy that, does the Council have the ability to step in and remove them and take the measure to remedy the harm. Atty. Wisneski there is nothing there. Councilman Giuliano asks can it be put in so we can act in that situation. Atty. Wisneski if I hear you it is for cause to remove the Board. Councilman Giuliano states the fund managers the Board has hired is mismanaging the fund, can the Council step in if the Board doesn't want to act. Mr. Erlacher states 11.05. Councilman Serra states some of the language doesn’t make sense; he reads 11.01 where it says no liability, the trust no liability for payments and 74-36 states the plan should be funded by contributions; why have the language in 11.01? Why confusing and conflicting language. Atty. Barth states the language in the plan has it as well about the contributions. Councilman Serra why this language? Atty. Barth the actuarial funding is in the plan and ordinance. Councilman Serra states but the trust says no liability of payment of benefits which when we contribute it is part of the assets. Atty. Barth states he disagrees; the contributions you put in the plan and once in the plan are assets of the trust. The provisions are in the ordinance and article 3 of the plan. The language in 11.01 is the payment of benefits and what comes out of the trust and it only comes out of the trust and not the City. Councilman Serra states it is conflicting language. Atty. Wisneski states the language is to reiterate the intent of the trust. We wanted to ensure there was a trust and you made sure you adopted a trust so the city and retirees are protected. The trust is a separate fund. Councilman Serra states you tell us to put in $300,000 for the police but then we don't have to pay the benefits. There is a liability to us as a City to the actuary who tells us what to fund. Atty. Wisneski states I understand what you are saying. Atty. Barth the language only speaks to the Trust not the City. It is in the Trust, not the City. Atty. Wisneski states this language is liability on the back end; it is coming from the trust and it is making sure it is separate and we are not comingling funds. Councilman Serra states there is liability to the city. Atty. Wisneski asks is there a better way to say that. Councilman Serra responds I don't know. We do have a liability and if something happens we are still responsible; we have a fiduciary responsibility. Acting Chair Santangelo asks if other questions; hearing none 3. Workshop Closes. Acting Chair Santangelo asks if other questions; hearing none he closes the workshop. 4. Meeting adjourned. Councilman Serra moves to adjourn the meeting; Councilman Giuliano seconds the motion. There is no discussion. The Chair calls for the vote and it is unanimous to approve. The Acting Chair declares the meeting adjourned at 8:17 p.m. ATTEST: MARIE O. NORWOOD COMMON COUNCIL CLERK