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HomeMy WebLinkAboutMinutes Fire Pension Special Meeting 040319CITY OF PALM BEACH GARDENS FIREFIGHTERS' PENSION BOARD OF TRUSTEES SPECIAL MEETING MINUTES City Hall, Council Chambers 10500 North Military Trail Palm Beach Gardens, FL 33410 Wednesday, April 3, 2019 at 1:OOPM TRUSTEES PRESENT: Ed Morejon Rick Rhodes Jon Currier Marty Cohen Tom Murphy TRUSTEES ABSENT: None OTHERS PRESENT: Pedro Herrera, Sugarman & Susskind Michelle Rodriguez, Foster & Foster Siera Feketa, Foster & Foster Doug Lozen, Foster & Foster Allen Owens, City of Palm Beach Gardens Wade Sansberry, Mauldin & Jenkins Robert Bickel, Firefighter Members of the public 1. Call to Order — Ed Morejon called the meeting to order at 1:08pm 2. Roll Call — As reflected above 3. Reports a. Foster & Foster, Doug Lozen, Plan Actuary i. October 1, 2018 Actuarial Valuation Report 1. The required contribution from the combination of City and State sources for the year ending September 30, 2020, is 60.99% as a percentage of projected annual payroll. 2. As a budgeting tool, the City may contribute 54.19% as a percentage of projected annual payroll and then make a one-time adjustment to account for the actual State Monies received. 3. Doug Lozen commented that the plan's funded status had improved. Experience during the last twelve months was more favorable than expected, relative to the Plan's actuarial assumptions. The primary sources of favorable experience included average increases in Pensionable Compensation that were less than the assumption, and an 8.27% investment return (Actuarial Asset Basis), exceeding the 7.25% assumption. These gains were partially offset by unfavorable experience in turnover, retirement, and inactive mortality. There was an additional loss associated with the allocation of plan assets to the Membership Share Plan, based on board approval of the July 27, 2018, analysis. 4. Doug Lozen commented that there was a decrease in the unfunded liability. 5. Doug Lozen commented that the plan does not need to change their assumptions at this time. Doug reviewed how assumptions and mortality works. The board voted to approve the October 1 2018 valuation report as presented upon motion by Rick Rhodes and second by Marty Cohen motion carried 5-0 Doug Lozen reviewed the investment returns and the smoothing technique. Doug commented that the smoothed average was outperformed for the last four to five years, which strongly improved funded status of the plan. 7. Doug Lozen reviewed the partial history of the funded ratio of the plan. 8. Doug Lozen reviewed the assumed rate of return and what the average assumed rates of return were. 9. Marty Cohen discussed the assumed rate of return in plans that he knows of and the trends within those plans. Doug Lozen commented that the smaller plans tend to follow the larger plans, and this is a smaller plan. Doug commented that the discussion with John Thinnes indicated that the goal for this plan is to get to 7.00% eventually. Doug commented that the assumed rate of return for FRS is 7.40% and is dropping. Doug commented the plan can go down to 7.25% now and drop by 10-15 basis points each year for the next two years to ultimately get to 7.00%. 10. Ed Morejon asked Allen Owens his opinion on the assumed rate of return decreasing. Allen commented that he was in support of the decrease in the assumed rate of return. Ed and Allen discussed the changes in the upcoming union contract and the change to the default methodology with the State Monies. 11. Pedro Herrera commented that it was difficult to compare plans. Pedro commented the most common assumption was 7.50%. Pedro reviewed other common assumptions and stated the trend within the State is that the investment return assumptions are decreasing. The board approved decreasing the assumed rate of return by 10 basis points per year, effective with the October 1, 2019 actuarial valuation report until it reaches 6.75%, upon motion of Rick Rhodes and second by Tom Murphy motion carried 5-0 12. The board discussed the market. Rick Rhodes commented he would rather have a buffer with the assumed rate of return. 13. Tom Murphy asked Doug Lozen how the changes in the CBA along with the decrease in the assumed rate of return, would affect the valuation. Doug Lozen commented that the funded status would freeze in the 80s, more or less, for that period. Doug commented the board agreed to a more aggressive approach for paying down the unfunded liability. Doug commented he agreed with the decision to reduce the assumed rate of return and felt that it was proactive. 14. Pedro Herrera commented the decrease in the assumed rate of return would be effective with the next year's valuation. 15. The board and Doug Lozen discussed the drop in the funded ratio in 2016. ii. Public Comments 1. Robert Bickel asked how the average final compensation was determined. Jon Currier read the definition of average final compensation from the Summary Plan Description and commented the question from the members is regarding what is included in average final compensation. Pedro Herrera reviewed the definition from the Ordinance. Pedro and the board reviewed what is included in average final compensation. Jon commented they could sell back their sick time each year and asked if it could be counted as pensionable earnings each year. Doug Lozen and Pedro reviewed how other cities have paid out their sick time. Rick Rhodes commented the State statutes set the limit on the overtime and the sick time. Doug commented that Foster & Foster does the calculations based on the direction given. Pedro reviewed the "snapshot" of sick time for the purposes of average final compensation and how it should be applied. Pedro commented that the maximum amount of sick time for average final compensation was the maximum to be used in total, not annually. 2 2. Robert Bickel asked if the W-2 salary could be increased, but not by working overtime. Pedro Herrera commented that it could be if it is not from a conversion of sick time. 3. Robert Bickel mentioned Lance Logan had some concerns regarding his DROP and COLA. Ed Morejon and Doug Lozen reviewed the COLA provisions for the plan. 4. Robert Bickel commented he had purchased two years under the higher rate. Pedro Herrera commented that this was something that would need to be discussed and reviewed how it was done previously. Pedro further commented that it would be based on when the time was bought. 5. Ed Morejon reviewed the new portal with Robert Bickel. The board voted the declaration of returns for the plan shall be 7.25% for the next year, the next several years, and the long-term thereafter net of investment related expenses upon motion by Tom Murphy and second by Jon Currier, motion carried 5-0. iii. Discussion of DROP audit 1. Doug Lozen reminded the board that the actuarial side calculates the numbers, not the administrative side of Foster & Foster. Doug recommended they have an audit performed on the actuarial DROP balances that were provided by the prior administrator. 2. Ed Morejon commented he would like to discuss the share accounts. Doug Lozen commented the share account balances were being finished up with a review date of April 15, 2019, and a goal delivery date of a week after that. Doug commented they were picking up where the prior administrator left off and moving forward. 3. Doug Lozen and the board discussed some reasons to perform the DROP audit based on the transition with the prior administrator. Doug commented that Foster & Foster had not been calculating the DROP balances, rather they had been calculated by the prior administrator. Doug commented they would replicate the DROP balances as if they would have been doing it and then advise the board of the findings and let the board decide how to proceed. Doug clarified he was not questioning any work done by an actuary. 4. Doug Lozen and the board discussed how many members would have to be audited and the cost of the audit. Ed Morejon commented that the potential errors would have began when the prior administrator started doing the calculations themselves, which was October 1, 2014. The board discussed that there would only be about 25 members. Doug commented that the maximum cost would be $1,500.00, if it was about 25 members. Motion to have audit of the DROP statements performed by Foster & Foster beginning with October 1, 2014, with a maximum cost of $1,500.00, upon motion of Rick Rhodes and second by Jon Currier, motion carried 5-0. 5. Ed Morejon asked if Doug Lozen would have the share accounts at the next meeting. Doug commented he would have something at the next meeting, and he would be in attendance. Mauldin & Jenkins, Alison Wester, Plan Auditor i. Audit as of September 30, 2018 1. Wade Sansberry reviewed the statement of fiduciary net position and the statement of changes in net position. 2. Wade Sansberry reviewed the plan assets, liabilities, contributions, and deductions. Wade commented that this plan was doing very well. 3. Wade Sansberry commented the overall change in the net position for the year was just over $10 million, which is very good. 3 4. Wade Sansberry reviewed their process of verifying investments with a third party and commented that everything came back good and in accordance with the fair market value. 5. Marty Cohen and Wade Sansberry discussed Marty's concerns with GASB. 6. Wade Sansberry reviewed the plan fiduciary net position as a percentage of the total pension liability and commented he supports the board's decision to lower the assumed rate of return. Tom Murphy asked why the pension liability is different on the auditor's report from what is on the reported valuation. Doug Lozen commented that he used the asset smoothing technique, while GASB does not. 7. Wade Sansberry reviewed the Auditor's Discussion and Analysis Financial and Compliance Audit Summary for year ending in September 30, 2018. 8. Wade Sansberry commented they are independent of the plan. 9. Wade Sansberry confirmed for Rick Rhodes they compared Investment Policy Statements to assets to ensure the plan is in compliance. Motion to approve the auditor's report, upon motion of Rick Rhodes and second by Tom Murphy, motion carried 5-0. 10. Ed Morejon thanked Wade Sansberry. Allen Owens commented that for being a new firm for the plan, they really did a great job. c. Sugarman & Susskind, Pedro Herrera, Plan Attorney 1. Pedro Herrera commented there was nothing particular to report. 2. Pedro Herrera commented he had a discussion with PRC and Scott Bauer regarding the December invoice and asked that they sign off saying they turned all documents over to the new administrator. Pedro commented they were still having those discussions and would have something soon. 3. Pedro Herrera suggested tabling the discussion of the PRC November and December invoices until the next meeting. By consensus, the board agreed. Pedro suggested the board put the November invoice on the agenda for approval of payment. Michelle Rodriguez commented that Foster & Foster did not receive an invoice for the month of November. 4. Michelle Rodriguez and Ed Morejon discussed the issue of the minutes missing signatures. Pedro Herrera commented that if we have subsequent minutes stating that the minutes were approved, the secretary could sign them. 5. The board briefly discussed the PRC invoices further with Rick Rhodes commenting the PRC November invoice was approved on a prior warrant. 6. Ed Morejon discussed the CBA and asked if there needed to be an impact statement. Pedro Herrera and the board discussed the process to have an Ordinance approved by the City. Pedro commented an impact statement would be done and sent to the State between first and second reading of the Ordinance. 7. Pedro Herrera suggested that the board look at the Ordinance and bring it back to the May 1, 2019 meeting with suggestions so that they can update the Ordinance all at once. Pedro and Ed Morejon discussed some potential language changes. 8. Ed Morejon commented that he would like to discuss the Ordinance and DROP policy at the next meeting. 9. Doug Lozen requested a copy of the CBA, when it is signed. 10. Ed Morejon commented that the State report was completed and accepted. 11. Ed Morejon requested the board provide feedback on the portal at the next meeting. 4 12. Michelle Rodriguez commented that Foster & Foster was working on getting the login information sent out to the membership. 13. Jon Currier, Michelle Rodriguez, and Doug Lozen discussed some details regarding an upcoming workshop for members. The board nominated Jon Currier as Chairman, upon motion by Ed Morejon and second by Tom Murphy, motion passed 5-0. The board nominated Rick Rhodes as te-be Vice Chairman, upon motion by Tom Murphy and second by Marty Cohen, motion passed 5-0. The board nominated Tom Murphy as Secretary, upon motion by Ed Moreion and second by Marty Cohen, motion passed 5-0. 4. Old Business — None 5. Trustee Reports, Discussion, and Action — None 6. Adjournment — The meeting adjourned at 2:48pm 7. Next meeting — May 1, 2019 at 1:OOpm, quarterly meeting Respectfully sub fitted by: Michelle Rodriguez, Plan Admi isrator Appr by: n, Chairman T-C-urr;r- -- Date Approved by the Pension Board: 5/1/2019 5