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HomeMy WebLinkAboutMinutes Fire Pension 031609PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND MINUTES OF MEETING HELD March 16, 2009 A meeting of the Board of Trustees was called to order at 9:10 A.M. at Council Chambers, Palm Beach Gardens, Florida. Those persons present were: TRUSTEES Tom Murphy Rick Rhodes Richard Hitchins Ed Morej on Roy 011iff MINUTES OTHERS Margie Adcock, Administrator Bob Sugarman, Attorney Joe Bogdahn, Investment Monitor Brad Armstrong, Actuary The Board reviewed the minutes of the meeting held January 12, 2009. It was noted that the vote on the actuarial study requested by the City passed 3 -2 with Mr. Rhodes and Mr. Morejon opposing the motion. A motion was made, seconded and carried 5 -0 to accept the minutes of the meeting held January 12, 2009 as corrected. The Board reviewed the minutes of the meeting held February 2, 2009. It was noted that there was a typographical error in that Hurst tool was misspelled. A motion was made, seconded and carried 5 -0 to accept the minutes of the meeting held February 2, 2009 as corrected. ACTUARY REPORT Brad Armstrong appeared before the Board. He presented the September 30, 2008 Actuarial Valuation which determines contributions for the fiscal year beginning October 1, 2009. He stated that the news is not good in this particular report. He also noted that the report does not reflect any investment activity after October 1, 2008. He stated that the principal sources of experience losses were: a loss of approximately $.9 million due to the rate of return on the value of assets of 3.8% versus the assumption of 8.25% gross and a loss of approximately $.7 million due to a 6.7 average salary increase versus an expected salary increase of 5.3 %. Mr. Armstrong discussed the contribution requirement. He stated that the City contribution requirement increased by 2.55% of payroll to 33.73% of payroll. The Share Accounts totaled $4,236,245 as of September 30, 2008. The funded ratio increased from 53.9% to 56.8% excluding the Share Accounts. If the Share Accounts were included, the funded ratio increased from 59.1% to 61 %. There was discussion on including the Share Accounts in the funded ratio. Mr. Armstrong stated that the Share Accounts were part of the Fund and increase the 120% corridor limitation. Mr. Armstrong noted that the Fund is in a more favorable position than most of the other pension plans in the State because there are positive cash flows and future cash flow requirements are not going to emerge rapidly. There was discussion on whether people 2 in the DROP count for payroll in the report to the Share Accounts. It was noted that 2% of payroll comes off the top and people in the DROP receive Shares, so it is included for those in the DROP. Mr. Armstrong noted that the Board had previously decided to trend down amortization to 25 years and keep it at 25 years. The shorter amortization period means higher contribution rates. He stated that 25 years is reasonable and prudent and corresponds to a firefighters career. He noted that the difference between 25 and 30 years is pretty modest. However the difference between 25 and 15 or 20 years is substantial. It was noted that the 25 -year amortization period was adopted in response to the unfunded ratio situation several years ago when the City hired Bolton Partners to review the pension plans and that was one of their recommendations. Mr. Armstrong stated that the total normal cost was 24.90 %; the total unfunded actuarial accrued liability cost was 14.36 %; the administrative and investment expenses were 2.38 %, leaving the total calculated contribution requirement to be 41.64 %. He noted that the member contribution was 6% and the 175 contributions was 1.91% (based on the 2% member portion with a one -year lag). Mr. Armstrong reported that the City's contribution was 33.72% or $3,550,238 to be contributed during the fiscal year beginning October 1, 2009 versus the amount of $3,180,731 last year. Mr. Armstrong reviewed the derivation of funding value of assets and discussed the four - year smoothing. He stated that for the fiscal years ending 2009, 2010 and 2011 the Fund would have negative experience from the investment loss in 2008. He provided a projection of employer contributions under varying investment returns as requested by the City. He reviewed the various scenarios with the Board. There was a lengthy discussion. It was noted that the City was looking at FRS. It was also noted that FRS has had huge losses. Mr. Armstrong stated that if there is no drastic and quick market recovery, that will have a significant impact on FRS. A motion was made, seconded and carried 5 -0 to approve the September 30, 2008 Valuation. There was discussion on the 2% deduction from the Share Accounts and the effect of someone entering the DROP. Mr. Sugarman reviewed the Ordinance. He stated that the 2% is an employee contribution. He further noted that the DROP Plan provides that employee contributions cease once someone enters the DROP. Therefore, the 2% for DROP members is no longer deducted from their Share Account because it is an employee contribution and they no longer make employee contributions once they go into the DROP. There was then discussion on the PLOP and how that effects the 2% deduction from the Share Accounts. It was noted that the Fund would get the 2% throughout a person's entire career. It was also noted that if someone does the PLOP, the employee continues to put in the 6% employee contribution as well. For someone considering the PLOP, all of the pay in their career will be considered. The PLOP does not cost the City any more money, as it is just an optional form of payment. It was noted that with the PLOP, a person is giving up the COLA on the lump sum payment. 3 ATTORNEY REPORT There was a discussion on the two Share Accounts with a negative balance. It was noted that Mr. Armstrong had provided some questions to Mr. Sugarman, which he responded to. A couple people were paid out early and the value of their Share Account went down. Mr. Sugarman stated that the Board needed to decide whether it wanted to stop making advance payments. The Board could stop making payments early and make people wait for a distribution. He stated that the Board also needed to decide how to recover the amount owed by the two people with a negative balance. There was a lengthy discussion. A motion was made, seconded and carried 5 -0 to provide that for people who terminate for whatever reason, the distribution of their Share Account will be limited to 50% of the Share Account value as of the most recent Valuation date. A motion was made, seconded and carried 5 -0 to direct the Administrator to send a demand letter for the amount of the overpayment with payment to be received by May 1, 2009 with no interest accruing from September 30, 2008 to the date of payment, or to have the amount deducted from their monthly checks payable to them or their survivor for 24 consecutive months covering June 1, 2009 plus interest from May 1, 2009 at the actuarial assumed rate of return of 8.25 %. If either person disagrees, they have the right to appear at the May meeting, where they should call the Administrator to secure a place on the Agenda. Brad Armstrong departed the meeting. INVESTMENT MONITOR REPORT Joe Bogdahn appeared before the Board. He provided the quarterly report for the period ending December 31, 2008. He reviewed the major market index performance. All equities were negative for the quarter and year to date. They are starting to see some positive corporate bond returns so they think the market is very near or at the bottom. Mr. Bogdahn reviewed the investment performance for the quarter ending December 31, 2008. The total market value as of December 31, 2008 was $21,214,548. He noted that the contract with Manning & Napier is pretty much ready. The asset allocation as 37,4% in domestic equities; 3.9% in international; 32.1% in domestic fixed income; 4.9% in real estate; and 21.7% in cash. The Fund was down 10.73% net of fees for the quarter while the benchmark was down 14.45 %. The equity portfolio managed by Dana was down 23.88% for the quarter while the benchmark was down 22.78 %. The international portfolio managed by Voyageur was down 15.97% for the quarter while the EAFE was down 19.90 %. The real estate portfolio managed by American Realty was down 7.78% for the quarter while the NCREIF was down 8.29 %. Agincourt was up 7.37% for the quarter while the benchmark was up 4.58 %. DHJ fixed income was up 4.66% for the quarter while the benchmark was up 3.58 %. Mr. Bogdahn stated that they are working on one product with Dana regarding an option within a commingled fund. He stated that they might be able to provide a presentation at the May meeting. Mr. Sugarman stated that the contract with Manning & Napier is completed. He is just waiting on a signed original Agreement from Manning that the 4 Board can then execute. Mr. Bogdahn provided a firm update. He stated that they are bolstering their research department, hiring two additional people. ATTORNEY REPORT (CONTINUED) There was discussion on the DROP Interest Election Option and Form. Mr. Sugarman stated that someone entering the DROP could do one of two things: they can elect interest to be the net investment return of the Fund or elect a net fixed income return. It was noted that Mr. Bogdahn would be in charge of the fixed income component. There was a lengthy discussion. Mr. Bogdahn suggested putting the fixed income component in the Fund. Mr. Sugarman stated that because the Ordinance provides that it will be a "net" fixed income return, so they need to prevent any decline in value. Mr. Bogdahn suggested then putting it is the money market fund with the Fund. Mr. Sugarman stated that until there are a large number of people in the DROP, the money market is probably the only option. Mr. Bogdahn suggested using the money market fund, as the Board is not trying to enhance the return but rather just trying to stop the bleeding. There was a discussion on the FRS fixed rate of 6.5% on the DROP. Mr. Sugarman stated that the Ordinance would need to be changed to get a guaranteed fixed rate. Mr. Bogdahn stated that he could have the Custodian set up a separate money market account for the DROP. It was noted that the Ordinance provides for a fixed rate money market fund. However, because there is no fixed rate money market fund, it would be a fixed income return. It was noted that the language in the Ordinance is problematic. It was also noted that the Ordinance provides that an administrative fee shall be charged. There was further discussion. Fire Chief Bergel entered the meeting. The Board discussed the issues with the Chief. It was noted that the Ordinance provides that a DROP participant can elect a fixed rate money market fund as may be available by the Board but the Board cannot find one. The Board can find a money market fund and can pass on whatever rate the Fund gets, which is pretty low right now. It was noted that they could either change the Ordinance, which will take a lot of time and is questionable as to whether it is a possibility or just put the money in a money market fund. It was noted that the Palm Beach Gardens Police Pension Plan and FRS have a guaranteed rate, but the Board would need to bring that before City Council in order to get a guaranteed rate for this Fund. There was discussion on the administrative fee and the calculation of the DROP account balances. A motion was made, seconded and carried 4 -1 to charge $1 a year for the administrative fee on the DROP accounts. Mr. Morejon opposed the motion. Richard Hitchins departed the meeting. Mr. Sugarman stated that he would draft an Ordinance regarding the interest rate election for the DROP. There was a discussion on the provision of the Ordinance. A motion was made, seconded and carried 4 -0 that having been advised by the Investment Monitor that a "fixed rate money market fund" as called for in the Ordinance is not available, the Board chooses not to make that option available to future Participants in the DROP at this time. A motion was made, seconded and carried 4 -0 that with respect to the current Participant in the DROP, because an amendment in the Plan has been proposed offering a fixed rate option, the Board will give him an opportunity to have his DROP deposits placed into the Plan's money market fund until such time as the proposed amendment is adopted or rejected by the City Council. ADMINISTRATIVE REPORT Ms. Adcock presented the list of disbursements to be made. A motion was made, seconded and carried 4 -0 to approve the disbursements listed. OTHER BUSINESS Mr. Murphy stated that he would like for the Board to approve the payment for a gift of recognition of service for Steve Rogers for all of his years of dedication to the Board. It was noted that the Board had provided a prior Trustee, Dr. Philip Buttaravoli, with an axe when he resigned from the Board. A motion was made, seconded and carried 4 -0 to authorize Mr. Rhodes to make arrangements for a gift of recognition of service for Steve Rogers not to exceed $300. There being no further business, the meeting adjourned. Respectfully submitted, Tom Murphy, Secretary