HomeMy WebLinkAboutMinutes Fire Pension 110613PALM BEACH GARDENS FIREFIGHTERS’ PENSION FUND
MINUTES OF MEETING HELD
November 6, 2013
A meeting of the Board of Trustees was called to order at 1:01PM at Council Chambers,
Palm Beach Gardens, Florida. Those persons present were:
TRUSTEES OTHERS
Rick Rhodes, Chairman Scott Baur, Administrator
Mark Joyce, Vice Chair (departed 4:41PM) Audrey Ross Administrator
Tom Murphy, Secretary Troy Brown, Investment Consultant
Ed Morejon Dan Johnson, Investment Consultant
Martin Cohen Bob Sugarman, Attorney
Doug Lozen, Actuary
PUBLIC COMMENTS
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MINUTES
The Board reviewed the minutes of the regular meeting held on September 9, 2013.
A motion was made by Martin Cohen to approve the minutes of the September 9,
2013 regular meeting as amended. The motion was seconded by Ed Morejon and
carried 5-0.
INVESTMENT MONITOR REPORT: THE BOGDAHN GROUP (TROY BROWN
& DAN JOHNSON)
Mr. Brown announced that he was recently promoted to the Director of Consulting for
the Bogdahn Group. Due to this new position, Mr. Brown explained that he will need to
scale back on the amount of client meetings that he attends because traveling has become
an issue for him. He introduced Mr. Dan Johnson to the board and stated that Mr.
Johnson will be attending the future board meetings in his place. Mr. Brown explained
that he and Mr. Johnson have worked together since Merrill Lynch, and now as Director
of Consulting Mr. Brown has personally chose Mr. Johnson to serve this plan. He
commented that he will still be involved with this plan in a lot of ways behind the scene,
but just not physically attending the meetings anymore. Mr. Johnson personally
introduced himself to the board and stated that he is very excited to be working with this
plan.
Mr. Brown reviewed the September 30, 2013 report and noted that this plan is his highest
return client for the fiscal year end at 14.56% net of fees. American Realty was the only
manager that underperformed for the fiscal year. Mr. Brown reviewed the market
outlook during the quarter and stated that overall it was a very strong. He briefly
discussed the government shut down and how it actually drove the market higher. For
the quarter ending September 30, 2013 they slightly underperformed that index net of
fees at 4.90% versus 5.14%. Mr. Brown noted that they are keeping their cash account at
$350K, which is used to pay out benefits and disbursements. He reviewed the funds
financial reconciliation for the fiscal year and noted a total gain of $7.5M, and the plans
assets are now up to $57.8M. Fixed income is still a volatile place to be in and Mr.
Brown commented that this plan has done very good job in trimming back in that area as
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much as they can. Overall this portfolio had a very great fiscal year ending September
2013.
Mr. Brown briefly reviewed the funds performance as of October 31, 2013 and noted that
they are up 3% for the new fiscal year (which is a gain of $1.7M). He commented that
both American Realty and Intercontinental will be issuing their capital calls soon. Lastly
he noted that he does have a recommendation in regards to rebalancing and stated that he
would like to transfer the additional $140K from the cash account to the Templeton
Global Bond account to be back inline with the policy.
A motion was made by Mark Joyce to approve and authorize the transfer of $140K
from the Plan’s cash account (R&D account) to the Templeton Global Bond account
per the recommendation of the plan’s investment consultant. The motion was
seconded by Ed Morejon and carried 5-0.
Mr. Brown explained that the Templeton Global Bond Mutual fund account has launched
a new share class. The new R6 shares (retirement class) are exactly the same underlying
fund as what is currently in the portfolio, however, the R6 share class is offered at a
lower cost. Mr. Brown stated that he has no objection to this share class transfer because
there are no costs associated with the transfer, it has the same benefits of the share class
that we are currently in, and the new share class will actually save the plan some money.
A motion was made by Mark Joyce to approve and authorize the transfer of the
Templeton Global Bond Mutual Fund’s share classes, from the current “advisor
shares” to the new “R-6 class shares” as recommended by the plans investment
consultant. The motion was seconded by Tom Murphy and carried 5-0.
ACTUARY REPORT: FOSTER & FOSTER (DOUG LOZEN)
Mr. Lozen stated that he was here today to present the two reports that he completed for
the board per their request. The first report is the experience study in regards to the plans
investment rate of return and also the salary increase assumption rate. Mr. Cohen noted
that the experience study is not in depth as he would have liked to seen. Mr. Lozen stated
that he only researched the items that were requested by the board and did not do a full
blown experience study (as it was not requested). Mr. Lozen also commented that the
two assumptions that they are reviewing today have the largest impact on the plan.
-INVESTMENT RATE OF RETURN ASSUMPTION: Mr. Lozen explained that the
Division of Retirement has come out and stated that the assumption rate of return of
8.25% is not a reasonable anymore and is too high. The Trustees had a lengthy
discussion on what rate they would feel comfortable with and Mr. Lozen stated that his
recommendation is to lower it to at least 7.75%; that is where the Division of Retirement
feels comfortable at and the is what the FRS currently has.
-SALARY INCREASE ASSUMPTION RATE: Mr. Lozen stated that he would
recommend lowering the salary increase assumption rate from the current of 5.1% to
4.6% because that has been more practical in the past.
The Trustees reviewed the different scenarios which reflect lowering the investment rate
of return as well as lowering the salary increase assumption rate. When decreasing both
components at the same time, it can cause an increase to the City’s contributions so that
is something the Trustees should be aware of when discussing. Mr. Lozen stated that
finding a practical investment rate of return can be difficult because it involves historical
data and a lot of service providers input as well. Mr. Brown commented that at the end of
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every fiscal year he reviews the fund and has spoken to the board a couple of times
regarding their investment rate of return. He has relayed to the board more than once that
he does think the current rate of return of 8.25% is too high. Mr. Brown’s
recommendation to the board would be to decrease their assumed rate of return down to
7.78%, and he explained that he got to this number solely based off his calculations that
he did using the plans historical data. He noted that if the plan did go down to 7.75% or
even a little lower, then it still would have no impact on the investments. Mr. Lozen
explained that if the plan lowered their investment rate of return to 7.75% and also
lowered their salary rate of return to 4.6%, then it would save the City about $100K per
year; although it would increase the plan’s funded ratio to 72.5% (from 71%) for the
short term. He noted that all the scenarios discussed would also tie into the plan’s
unfunded actuarial accrued liability (UUAL). The Trustees had a very lengthy discussion
on what they should reduce the rate of return too as well as the salary assumption
increase, noting that they know they have to make some changes. Mr. Brown
recommended reducing the rate of return over a period of time (ex. 1/10 per year) no
matter what number they go with. Mr. Rhodes explained that he has done a lot of
research and calculations in regards to these topics and stated that he would recommend
reducing the investment rate of return to 7.25% over 5 years and also lowering the salary
increase assumption rate to 4.6%. The Trustees also discussed lowering the amortization
schedule and Mr. Lozen stated that they will already be lowering it from 25 years to 20
years with the changes discussed above, but only for the current UUAL and not going
forward. The Board will discuss changing the amortization schedule for the future gains
and losses in the next part of the report that Mr. Lozen compelted. Lastly Mr. Lozen
stated that whatever changes are made today, he will need clarification as to when they
should be implemented (with the October 1, 2012 valuation that he would have to revise
if so, or going forward with the October 1, 2013 valuation).
A motion was made by Tom Murphy to approve and authorize lowering the plans
investment rate of return to 7.25% (from 8.25%) in increments over 5 years, leaving
the salary assumption rate at 5.1%, and reducing the amortization schedule to 20
years (from 25 year) for the current UUAL effective the October 1, 2013 Actuarial
Valuation. The motion was seconded by Mark Joyce and carried 5-0.
Mr. Lozen explained that now that he has direction in regards to the current UUAL, he
will now need the board’s direction in regards to the future gain and losses and how they
should be posted against the account. Currently the plans amortization schedule period is
25 years and he thinks that is too long. Mr. Lozen commented that he would like to see
the board lower the period to somewhere between 10-15 years. This change has to do
with how long the plans new losses and gains will be amortized each year. Lowering the
schedule may cause larger contributions if there is a loss to the plan, but paying down the
UUAL quicker causes less interest to be paid. Mr. Lozen reminded the Trustees that this
change would apply to all future gain and losses only, not past ones. The Trustees had a
very lengthy discussion on how long they should shorten the amortization period too and
what impact it can have on the plan and the City.
A motion was made by Martin Cohen to approve and authorize lowering the plans
UAAL amortization schedule from 25 years to 10 years for all future gains and
losses. The motion was seconded by Ed Morejon and carried 4-1.
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ATTORNEY REPORT: SUGERMAN & SUSSKIND (BOB SUGARMAN)
Mr. Sugarman explained that the Plan’s current class action Attorney, Jane Goldstein, has
changed monitoring firms and is now at Pomerantz, Grossman, Hufford, Dahlstrom &
Gross LLP. Therefore it is his recommendation that the Board of Trustees’ retain Ms.
Goldstein and sign an agreement with her new firm.
A motion was made by Tom Murphy to continue their class action monitoring
services with Jane Goldstein at her new frim; Pomerantz Grossman Hufford
Dahlstrom & Gross LLP. The Trustees’ also authorized the Chairman to execute
the new agreement on behalf of the board. The motion was seconded by Mark
Joyce and carried 5-0.
Mr. Sugarman stated that the IRS determination letter that the plan received a couple of
months ago is going to expire by the end of 2016. Therefore the board will need to
reapply for their determination letter before it expires in 2016 (the 2016 letter will be
effective for 5 years). He noted that the Attorney’s fee to reapply for the letter now is
$5,100 (with an additional $2,500 payable to the US Treasury for the filing fee), but if
they wait closer to 2016 to reapply then the fee will only increase. The Trustees had a
lengthy discussion on whether or not they wanted to reapply for the IRS determination
letter now or closer to 2016.
A motion was made by Tom Murphy to authorize Sugarman & Susskind to file the
Plan’s 2016 IRS Determination letter now, for a fee of $5,100 with an additional
$2,500 to the US Treasury. The motion was seconded by Mark Joyce and carried 5-
0.
Mr. Sugarman stated that another bill was filed by the Senator ring for the 2014
legislative session regarding 175/185 plans. This bill would repel Senate Bill 538 that
was passed last year. He commented that the legislative session has not begun yet, so he
will updated the board as more information does becomes available.
Mr. Sugarman explained to the board that the Division of Retirement has yet again
changed their interpretation regarding the “Naples letter”. The Division of retirement is
now saying that the City’s and pension plans can now have the right to determine what
interpretation they want to use in regards to keeping the Chapter 175 money. Mr. Lozen
stated that the September 30, 2013 valuation will remain the same as if the plan had never
received the “Naples letter” to begin with.
ADMINISTRATIVE REPORT: RESOURCE CENTERS (AUDREY ROSS &
SCOTT BAUR)
DISBURSEMENTS
The Board reviewed the disbursements presented for approval by the Administrator.
A motion was made by Mark Joyce to approve the disbursements as presented by
the Administrator. The motion was seconded by Martin Cohen and carried 5-0.
BENEFIT APPROVALS
The Board reviewed the application for distribution of DROP (final payout) for Peter
Bergel.
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A motion was made by Martin Cohen to approve the application for final
distribution of DROP Peter Bergel. The motion was seconded by Tom Murphy and
carried 5-0.
Ms. Ross passed out the 2014 meeting dates.
OLD BUSINESS
Mr. Morejon explained that he meet with Mr. Baur & Ms. Ross in between meetings
regarding the self directed DROP accounts. They came up with some additional options
in regards to the investment rate of return. Some alternative options where to set up an
account at Regions and have them host a model for the portfolio as recommended by
Bogdahn’s office. If Regions were to host this model for the plan then they would make
the DROP deposits each month for the plan, but they would also charge $350 per year for
each additional account they set up (each DROP member would have their own
individual account). Mr. Morejon stated that the other investment alternative they came
up with was a mutual fund account. Mr. Baur explained that he knows of a product out
there through Met-Life which is a stable mutual fund account; similar to an annuity
account. This product offers a fixed rate with a guaranteed stable value return. He
reviewed the funds recent performance and noted that for the last 12 months the return
was 2.35%, and for 3 years they were up 3.25%. Mr. Baur commented that this is a more
conservative fund compared to the plans return, and it also has daily liquidity and is held
in a QUSIP. Mr. Baur explained that he did speak to Mr. Sugarman in advance regarding
this investment because in the past some Attorney’s did have some legal issues with the
provisions of the investments. Mr. Sugarman briefly shared his thoughts on this product
and stated that at this time he has no objection because it would be hosted at Regions
Bank. Mr. Brown stated that he has not had time to review this product but he does not
think this investment is allowed under the plan due to the investment provisions that are
outlined in the Plan’s Ordinance. The Trustees discussed some other alternatives and Mr.
Johnson stated he will reach out to his contact at ICMA to see if there is anything that
they may be able to offer to this fund (Mr. Johnson noted that he was aware that the plan
had previously done and RPF for self-directed DROP accounting and that ICMA did not
respond). Mr. Johnson commented that he has a contact at ICMA that has offered
products to other plans of this size in the past. He stated that he will ask ICMA to come
to the next meeting to present their product. The Trustees concurred. Mr. Johnson
commented that we will work on setting up the self directed DROP account and then they
will move on to the Share accounts. The Trustees concurred and tabled the Share account
discussions until further notice.
Ms. Lozen stated that he will revise the COLA example in the proposed summary plan
description to make it less complicated. He will have this to Ms. Ross for the next
meeting.
NEW BUSINESS
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OTHER BUSINESS
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There being no further business, the meeting adjourned at 5 PM.
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Respectfully submitted,
Tom Murphy, Secretary