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HomeMy WebLinkAboutMinutes Fire Pension 011314PALM BEACH GARDENS FIREFIGHTERS’ PENSION FUND MINUTES OF MEETING HELD JANUARY 13, 2014 A meeting of the Board of Trustees was called to order at 9:03AM at Council Chambers, Palm Beach Gardens, Florida. Those persons present were: TRUSTEES OTHERS Rick Rhodes, Chairman Scott Baur, Administrator Mark Joyce, Vice Chair Audrey Ross Administrator Tom Murphy, Secretary Dan Johnson, Investment Consultant Ed Morejon Pedro Herrera, Attorney Martin Cohen Fernando deAguero, ICMA Steven Feigelis, ICMA Cary Scaglione, ICMA PUBLIC COMMENTS N/A MINUTES The Board reviewed the minutes of the regular meeting held on November 6, 2013. A motion was made by Ed Morejon to approve the minutes of the November 6, 2013 regular meeting as amended. The motion was seconded by Tom Murphy and carried 5-0. SELECTION OF CHAIRMAN, VICE CHAIR & SECRETARY Ms. Ross stated that the board needs to select a Chair, Vice Chair, and Secretary according to their policy. A motion was made by Ed Morejon to nominate Rick Rhodes as Chair. The motion was seconded by Tom Murphy and carried 5-0. Mr. Rhodes accepted the nomination as Chair. A motion was made by Mark Joyce to elect Rick Rhodes as Chair. The motion was seconded by Tom Murphy and carried 5-0. A motion was made by Tom Murphy to nominate Martin Cohen as Vice Chair. The motion was seconded by Mark Joyce and carried 5-0. Mr. Cohen accepted the nomination as Vice Chair. A motion was made by Tom Murphy to elect Martin Cohen as Vice Chair. The motion was seconded by Mark Joyce and carried 5-0. A motion was made by Ed Morejon to nominate Tom Murphy as Secretary. The motion was seconded by Mark Joyce and carried 5-0. Mr. Murphy accepted the nomination as Secretary. 2 A motion was made by Mark Joyce to elect Tom Murphy as Secretary. The motion was seconded by Ed Morejon and carried 5-0. 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 Martin Cohen to approve the disbursements as presented by the Administrator. The motion was seconded by Ed Morejon and carried 5-0. BENEFIT APPROVALS The Board reviewed the application for distribution of Share Account (final payout) for Glen Aitken and the application to enter the DROP for Michael Dunaway. A motion was made by Tom Murphy to approve the application for final distribution of Share account for Glen Aitken and the application to enter the DROP for Michael Dunaway. The motion was seconded by Mark Joyce and carried 5-0. The Board reviewed the 2014 COLA increase for the retirees. The board asked the Actuary to prepare the same kind of list for the active DROP members as well for approval at the next meeting. A motion was made by Ed Morejon to approve the 2014 COLA increases for the retirees effective 1/1/2014. The motion was seconded by Mark Joyce and carried 5- 0. Ms. Ross noted that Mr. Cohen has a conflict with the May and November 2014 meetings dates. Therefore those dates will be rescheduled and Ms. Ross will notify the board as soon as possible. ICMA PRESENTATION: FERNANDO DEAGUERO, STEVEN FEIGELIS & CARY SCAGLIONE Mr. deAguero explained that ICMA is here today to help the board with a self directed DROP account as an alternative for their DROP investments. He noted that the City also uses ICMA for their 457 account. Mr. deAguero reviewed ICMA as a company and stated that they were founded in 1972 and they currently have a 96.7% client retention rate. ICMA is non-profit organization with close to $50B in assets. ICMA administers over 2,100 defined contribution plans and over 4,900 457 plans, and they also have quite a few DROP plans that they administer locally as well. Mr. dAguero introduced Mr. Feigelis and stated that he is ICMA’s retirement specialist. Mr. Feigilis will be the one who will help the plan’s administrator get set up on their computer program, EZ Link. He explained that this software will allow the plan administrator to set up new DROP members and also choose their investments. Mr. Feiglis will also be assisting with the transition and he also puts on educational seminars for the members once the transition is complete. Mr. deAguero reviewed the products that ICMA invests in and noted that most of these investments can be traded daily, except for the few that have restrictions. The pension board will work with their consultant and ICMA to narrow down the investment list to a couple of options to offer the members, and then from there the board would 3 create their own policy regarding distributions, etc. Mr. deArgues reviewed the transition process and stated that the entire process takes about 90 days from start to finish. The Trustees discussed the fee with ICMA and asked if they would consider giving them a discount since ICMA would be the manager for both the Pension Plan and the 457 Account with the City of Palm Beach Gardens. Mr. deArgues stated that they could not offer a discount to the ongoing monthly fee at this time because they are two totally separate accounts with different assets, but ICMA will not charge the pension board the start up admin fee because of the relationship (the start-up admin fee is 55 basis points). The proposed ICMA fee is 29 basis points for the stable market value fund and then each investment has their own fee built into their stock price. The Trustees discussed the IRS’s outlook on DROP accounts and if ICMA would tie into that “variable account” situation. Mr. Herrera stated that from a legal standpoint the IRS has not passed anything in regards to the variable rate on DROP accounts versus the fixed rate, and what is consider a defined contribution account versus a defined benefit account. Although with ICMA there are so many different investment options that they offer that they can deal with the IRS situation in the future if it was to ever come forth, but in the meantime the plan has a qualified IRS determination letter as well. Lastly the Trustees asked ICMA if they would consider offering the same service to members on their 175 (Share) account. Mr. deArgues stated that ICMA could also administer the Share accounts as well, but it would be a separate account. The Trustees noted that they wanted to deal with setting up the DROP accounts first before they move on with the Share accounts. BOARD DISCUSSION: The Trustees had a lengthly discussion on the ICMA presentation and also what steps they need to take to move forward. Mr. Herrera confirmed with the Trustees that if the board where to hire ICMA, then they will be replacing the plans current money market option. A motion was made by Ed Morejon to hire ICMA to administer the self-directed DROP accounts and to authorize the Plan’s Attorney to review the ICMA contract. The motion was seconded by Mark Joyce and carried 5-0. Mr. Johnson reviewed the process from there. He stated that he will work with ICMA to come up with a list of investments, he will prepare a draft IPG, and he will also get a written fee proposal from Bogdahn reflecting the additional cost to administer and report on the ICMA accounts. Ms. Ross stated that she will also check with her firm to see if there will be any additional cost on their end as well. Mr. Johnson stated that after all the contracts are signed between the board and ICMA, then they can start working on putting together a policy surrounding the administration of the self-directed DROP accounts. INVESTMENT MONITOR REPORT: THE BOGDAHN GROUP (DAN JOHNSON) Mr. Johnson reviewed the December 31, 2014 flash performance report. Fiscal year to date the fund is up 6.6%, which was a gain of $3.8M for the quarter. He explained that the market continues to be in a positive rebound and therefore all the managers outperformed their index for the quarter. Mr. Johnson stated that he will have the full December 31, 2014 quarterly report at the next meeting. 4 Mr. Johnson reviewed the revised investment policy guidelines (IPG). He noted the changes that were made including the change to the plans assumed rate of return. The board had a brief discussion on the assumption rate and Mr. Cohen commented that he does not think that 7.75% is a reasonable rate. A motion was made by Tom Murphy to approve and accept the revised investment policy guidelines as presented. The motion was seconded by Mark Joyce 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. ATTORNEY REPORT: SUGERMAN & SUSSKIND (BOB SUGARMAN) Mr. Herrera reminded the Trustees of the upcoming continuing education programs for the Trustees and also of the Division of Retirement school in May. OLD BUSINESS The board reviewed the revised COLA example from the Actuary that will be incorporated into the Summary Plan Description (SPD). The Trustees concurred that the example was readable and that they can move forward with the SPD. A motion was made by Martin Cohen to approve and accept the revised summary plan description as presented with the revised COLA example. The motion was seconded by Tom Murphy and carried 5-0. NEW BUSINESS Ms. Ross presented that board with the September 30, 2013 audit engagement letter from Cherry, Bekaert (CB). She noted that CB did propose a fee increase from $13,750 to $14,050. The Trustees discussed the fee increase and noted that it was too late to go out for an RFP at this time. A motion was made by Martin Cohen to approve and accept the September 30, 2013 audit engagement letter with the fee increase to $14,050. The motion was seconded by Mark Joyce and carried 4-1 (Ed Morejon opposed the vote). OTHER BUSINESS Mr. Cohen discussed the responsibility of a Trustee and noted that he thinks this board is doing a great in regards to the investments and all, but he stated that he thinks they should be more focused on paying down the plans unfunded liability. Mr. Morejon reviewed the history of this board and stated that this plan is a fairly new defined benefit plan compared to other defined benefit plans around. Every year the City and the pension plan contribute their required contributions to make the plan whole. This pension plan is unfunded like most plans around here, but they are not underfunded. Mr. Cohen commented that he would like to speak directly to the pension plans Actuary and the City officials regarding some of his concerns about the plans unfunded liability. He would also like to have the Actuary run some scenarios in regards to paying down or paying off 5 the plans unfunded liability. Mr. Morejon explained that making more changes to the plan right now could have a negative impact on the plan and the City because of the recent changes that were just made to the plan. Mr. Murphy stated that he does no think the plans unfunded liability is unreasonable, as the board consults with their professional service providers each year in regards to paying down the unfunded liability (which happens over many of years). The Trustees noted that Mr. Cohen is more then welcome to speak to the City officials and the plan’s Actuary in regards to coming up with ways to pay off the plans unfunded liability as long as there is no fee incurred to the plan. Mr. Rhodes stated that he will provide Ms. Ross with Brandon Zace’s phone number in regards to his share account balance that he is entitled to. There being no further business, the meeting adjourned at 12:14PM. Respectfully submitted, Tom Murphy, Secretary