HomeMy WebLinkAboutMinutes Fire Pension 080719CITY OF PALM BEACH GARDENS
FIREFIGHTERS' PENSION BOARD OF TRUSTEES
QUARTERLY MEETING MINUTES
City Hall, Council Chambers
10500 North Military Trail Palm Beach Gardens, FL 33410
Wednesday, August 07, 2019, at 1:OOPM
TRUSTEES PRESENT: Ed Morejon
Rick Rhodes
Jon Currier
Tom Murphy
TRUSTEES ABSENT: Marty Cohen
OTHERS PRESENT: Michelle Rodriguez, Foster & Foster
Doug Lozen, Foster & Foster
John Thinnes, AndCo Consulting
Bob Sugarman, Sugarman and Susskind
Donna Wisnewski, Member of the Public
1. Call to Order — Jon Currier called the meeting to order at 1:04pm.
2. Roll Call — As reflected above.
3. Public Comments
a. Donna Wisnewski introduced herself and stated she had a few questions. She first asked
about the participation levels of the membership and Rick Rhodes commented over the
last five years, there had been approximately 113 to 125 active members. She then asked
what percent of the portfolio would be affected by the reduction in the discount rate. John
Thinnes commented the plan's fixed income funds responded positively with one fund
increasing by 8.0% and another by 5.0%. Lastly, Donna asked about the makeup of the
portfolio and John Thinnes advised her it was currently in line with the plan's Investment
Policy Statement (IPS).
4. Approval of Minutes
a. Ed Morejon commented although the content of the meetings was correct, the information
regarding the Share Plan was incorrect. Rick Rhodes suggested the board discuss this
issue in the New Business section of the agenda.
The board voted to accept the May 01, 2019 meeting minutes as presented, upon motion by Rick
Rhodes and second by Ed Moreton; motion passed 4-0.
5. Reports
a. AndCo Consulting, John Thinnes, Investment Consultant
i. Quarterly report as of June 30, 2019
1. John Thinnes reviewed the market environment over the last quarter and
commented although it was a volatile quarter, domestic stocks
outperformed international stocks, and fixed income markets were also
positive during the quarter.
2. John Thinnes commented the self-directed DROP account was doing well
and the participants accounts were benefiting, so there were no
recommended changes at this time.
3. John Thinnes advised the board that Fiduciary Trust calculated its fees in
error for the last quarter in 2018. John explained their quarterly fees
should have been calculated based on an average of the monthly
balances. However, they only used the December 2018 balance to
calculate fees for the last quarter in 2018. Since the plan benefited from
the error, Fiduciary chose not to adjust the fee and would bill accordingly
moving forward.
4. John Thinnes commented the transaction fees charged by Salem Trust
were a part of their contract with the board and were therefore accurately
displayed on their invoices.
5. John Thinnes advised the board the quarter ended higher after the Federal
Reserve moved towards lowering the interest rates. John reviewed the
treasury yield curve and commented it continued to invert as a result of
short-term maturities continuing to fall.
6. The market value of assets as of June 30, 2019, was $109,581,676.
7. The total fund net returns for the quarter were 3.73%, underperforming the
benchmark of 3.48%. The total fund trailing net returns for the 1, 3, 5 and
7 -year periods were 7.50%, 10.01%, 7.06% and 9.73% respectively. Since
inception (5/1/98), total fund net returns were 5.83%, slightly
overperforming the benchmark of 6.14%.
8. John Thinnes reviewed asset allocation and commented it was a well -
diversified portfolio and there were no recommended changes at this time.
9. John Thinnes advised the board he made one formatting change to the
report which was to add the total equity policy return in the Comparative
Performance section of the report. Ed Morejon asked if it was a gross or
net return and John said it was a hybrid because the individual funds were
reported differently.
10. Rick Rhodes asked if the fees for Dana were coming out of the Salem
Trust R&D account. John Thinnes stated they were taken from Dana's
separate fund and not the R&D account.
11. John Thinnes reviewed the investment manager's fee schedule. Jon
Currier asked if the fees were in line with their peers and if they were
negotiated. John Thinnes commented the fees were reasonable and
AndCo's size and experience allowed them to negotiate fees with many of
the managers. John added that Fiduciary's fees were not negotiable, and
Vanguard's fees were always significantly cheaper than everyone else.
12. Ed Morejon asked John Thinnes if there were any investments on the
watchlist. John Thinnes commented that although Dana was closely
monitored by their research team, they were not on an official watch list.
R&D Rebalance Procedure
1. John Thinnes explained the process of raising money for Salem Trust to
make benefit payments each month. Salem Trust notified him when there
was not enough money in the R&D account, he researched the current
market environment and determined which fund to liquidate. He then
directed the administrator to execute a direction letter with his instructions
for Salem.
2. John Thinnes advised the board for now it was easy to determine the
monies should come from the Vanguard fund, but the plan would benefit
if there were a standing rebalancing procedure in place with Salem Trust.
John stated he would bring recommendations for a domestic bond fund
the board could use for this purpose to the next board meeting.
Note: Rick Rhodes left at 1:38pm
3. Bob Sugarman clarified the process for adding a fund to the portfolio and
commented John Thinnes must follow the guidelines of their IPS.
Note: Rick Rhodes returned at 1:40pm
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iii. Fee Discussion
1. John Thinnes reviewed the summary of the proposed fee increase memo,
which detailed the accomplishments and policy level changes AndCo had
made for the plan over the last five years.
2. John Thinnes was proposing a $45,000 flat quarterly fee. This did not
increase the fee as a percentage since the plan's market value had
increased from $68,006,558 in July 2014 to $109,581,676 in June 2019.
John added this fee would be guaranteed for three years.
3. Ed Morejon commented he appreciated the service AndCo had provided
but felt the board needed to make sure they were paying a reasonable fee.
4. Bob Sugarman commented they could either accept the proposal as
presented, conduct a full RFP or ask the administrator to send a letter
asking other investment consultants what they would charge for a fund of
this size that required quarterly report presented in person. Bob added
since the board was satisfied with AndCo's performance, it was not fair to
go through the process of conducting a full RFP because it was very time
consuming and costly.
5. Rick Rhodes commented he was prepared to accept the fee increase in
consideration of what AndCo had accomplished in growing the fund and
taking on extra work with no additional charges. Rick added AndCo had
not increased their fees in the last six years.
6. Ed Morejon commented he would feel better conducting research and
asked for a list of fees charged by other investment consultants. Bob
Sugarman advised the board that generic list of fees did not exist because
the services provided significantly vary from plan to plan.
The board voted to accept the proposed fee increase as presented, upon motion by Rick Rhodes
and second by Thomas Murphy; motion carried 3-1 with Ed Moreion opposing.
Note: Bob Sugarman left at 1:58pm
7. The board agreed to wait for Bob Sugarman to return before continuing
the meeting and Rick Rhodes suggested they move on to the proposed
budget while they were waiting.
8. Michelle Rodriguez commented the proposed budget was required by the
State and was only used as a spending guideline for the board. Michelle
advised the board the individual categories could be adjusted; however,
they could not go over the total proposed amount. Ed Morejon commented
some of the categories had significantly increased from last year's budget.
Michelle explained the investment consultant's fee increase was included
and there was a large cushion added for the attorney's category because
it was hard to predict.
Note: Bob Sugarman returned at 2:01 pm
The board voted to accept the proposed budget as presented, upon motion by Rick Rhodes and
second by Thomas Murphy; motion carried 4-0.
Foster & Foster, Doug Lozen, Plan Actuary
i. DROP Audit
1. Doug Lozen reviewed the audit of participant's DROP balances that were
calculated by the prior administrator, Pension Resource Center (PRC),
through 9/30/18. The results were materially correct except for one
member, Eugene Bryer. Doug commented the differences in each
member's account was less then 1.0%, which could have been caused by
the timing of interest applied. Doug advised the board Foster & Foster's
calculation of Eugene Bryer's DROP balance was $33,666.82 more than
PRC's calculation.
2. Doug Lozen recommended the board accept the revised balance for
Eugene Bryer and leave everyone else's balance at the amount reported
by PRC.
3. Bob Sugarman asked if they used the same calculation method for
everyone on the list and Doug Lozen confirmed they had. Bob Sugarman
advised the board they were tasked to pay everyone's benefits using the
same methodology, so all of the adjustments on the list must be made.
4. Ed Morejon commented that there were some DROP participants not
included in the audit and Doug Lozen commented those who were in the
self-directed account and those still active as of 9/30/18, were not included
in the audit. Bob Sugarman advised anyone who had money in the DROP
account during the period PRC was calculating their balances should be
included in the DROP audit. This included those who cashed out prior to
9/30/18 or moved their money between the self-directed account and the
plan account.
The board voted to accept the results of the DROP audit as presented and directed the actuary to
make the appropriate corrections to all the accounts listed, upon motion by Ed Moreion and second
by Rick Rhodes; motion carried 4-0.
5. Rick Rhodes asked Bob Sugarman to allow the board to initiate their own
motions in order to avoid confusion.
The board directed Foster & Foster to audit the accounts of members who cashed out or moved
their money between the self-directed and the plan account and bring the findings to next meeting,
upon motion by Ed Moreion and second by Jon Currier; motion passed 4-0.
6. Michelle Rodriguez asked when updated DROP statements would be
completed and Doug Lozen said in approximately one month. Michelle
advised the board there were participants waiting to cash out their DROP
account, and Doug said to send a list of members to prioritize and they
would get those completed first.
c. Sugarman & Susskind, Bob Sugarman, Plan Attorney
i. Ordinance 12, 2019 — 175 Share Plan
1. Michelle Rodriguez advised the board the Ordinance had passed the
second reading and was sent to the State along with the actuarial impact
statement.
ii. Ordinance 21, 2019 — Cancer Bill
1. Bob Sugarman commented the cancer bill was a victory for firefighters and
would have a very small impact on the plan. Bob commented many of the
cancers on that list were not permanent and after treatment, it may be
possible for someone in remission to return to work. Bob reviewed the
proposed Ordinance that would incorporate the State law and commented
the actuary would have to provide an impact statement. One of the
stipulations of the bill was that no cost could be passed on to the members,
only to the City or the plan.
2. Doug Lozen commented the report from the State's actuary, Milliman,
indicated the impact was less than 1.0% of payroll.
The board voted to authorize Foster & Foster to conduct an impact statement based on proposed
Ordinance 21, 2019, upon motion by Ed Moreion and second by Thomas Murphy; motion passed 4-
0.
3. Bob Sugarman clarified it would not be a conflict of interest for Ed Morejon
to vote on the DROP audit even though he was part of the DROP because
there were others on the list as well.
4. Ed Morejon asked Bob Sugarman if a firefighter was diagnosed with
cancer after they retire, would they be eligible for benefits under the
Cancer Bill. Bob commented he would need to research the question.
6. New Business
a. Proposed 2019-2020 Budget
i. This item was discussed and voted on earlier in the meeting
Ed Morejon commented during the May 01, 2019 meeting, it was incorrectly stated that
Michael Southard was 25% vested and that his Share Plan distribution he received was
$4,000 or $5,000 too much. He reached normal retirement age and therefore was eligible
for 100% of his Share Plan allotment and was not overpaid.
i. Ed Morejon commented during the same meeting, it was incorrectly stated that
members must commence benefits before receiving a distribution of the Share
Plan monies. Bob Sugarman commented the Ordinance was silent on this issue,
but when he and Ed wrote the Ordinance, their intent was for members to be
eligible for payout when they terminated employment.
The board voted that members were not required to commence benefits before they were eligible
to receive their Share Plan account balances upon termination of employment, upon motion by
Rich Rhodes and second by Thomas Murphy; motion passed 4-0.
ii. Doug Lozen asked if Share Plan balances automatically were to be distributed
upon termination and Bob Sugarman stated no, and commented members could
leave their money in the plan where it was subject to the plan's earnings. Bob
added their Share Plan money was secure from creditors and bankruptcy while it
was left in the plan.
iii. Ed Morejon commented the Ordinance specified Share Plan calculations should
not include unpaid leave or buyback time. Bob Sugarman advised the board
Chapter 175 money was based on payroll numbers and there was no payroll for
that period. Doug Lozen said he would look into whether or not those periods had
historically been included in the Share Plan calculations.
iv. Ed Morejon commented the board voted to accept the opinion of the attorney
regarding Casey Beeler's Share Plan distribution. Doug Lozen reminded the board
the question was could a vested terminated member take a refund of their
contributions and still be eligible for their Share Plan money. Ed commented the
vesting schedule spoke to the percentage of a benefit that a member was eligible
for.
Note: Thomas Murphy left at 3:OOpm
v. The board discussed the past practice of allowing members to receive both a
refund of their pension contributions and their Share Plan money. Doug Lozen
commented it was not industry standard that members were eligible to receive
both.
Note: Thomas Murphy returned at 3:03pm
vi. Bob Sugarman commented the Share Plan Ordinance used the word "additional"
in describing the benefit and that would suggest both benefits were payable. Bob
added there was nothing to stop a terminated employee from receiving their Share
Plan distribution and then coming back later to get their pension refund. The board
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discussed the motion approved in the previous meeting and agreed by consensus
to accept the attorney's recommendation to allow members to do both.
c. Trustee term expirations
L Michelle Rodriguez advised the board two of the City appointed seats, Thomas
Murphy and Martin Cohen, expired on September 30, 2019, and the City Clerk
advised her the City Commission would make the appointments at their October
3, 2019 meeting. Michelle commented the 5th trustee seat held by Rick Rhodes
also expired on September 30, 2019. Rick Rhodes commented he was elected on
April 7, 2016 and therefore his seat would not expire until April 7, 2020. Michelle
verified this information was posted on the City's website and corrected her notes.
She advised the board she would put the 5th trustee seat election on the agenda
for the first meeting in 2020.
ii. Bob Sugarman commented the retiree Ed Morejon asked about earlier would not
be eligible for a disability retirement but might be eligible for other benefits provided
by the Cancer Bill and suggested they speak with the Union attorney.
iii. Ed Morejon commented the member elected seat held by Jon Currier would expire
December 31, 2019 and the board directed the administrator to conduct an election
October 1St, so they could ratify the results at the next meeting in November.
7. Old Business
a. Amended DROP Distribution Policy
i. Ed Morejon commented both the Share Plan and DROP accounts were valued
annually and adjusted quarterly. Ed asked if the interest adjustments were based
on when the distribution was asked for or when the distribution occurred. Doug
Lozen commented typically a plan would use the previous quarter's earnings and
that it was very complicated to calculate daily returns.
ii. The board agreed by consensus that if DROP balances were based on the
previous quarter's earnings, there was no reason to holdback 20% of the final
DROP distribution.
iii. Bob Sugarman commented the Ordinance stated distributions were to be made at
the end of the quarter following the member's termination date. Doug Lozen
commented depending on the termination date and the fact that the plan earnings
were typically not available for 30 days after the end of the quarter, a participant
would possibly have to wait up to five months for their final DROP balance. Bob
commented the Ordinance only allowed payments to be made 30 days after the
end of the quarter and allowed for members to put money in a money market.
iv. Ed Morejon stated he thought the number of days for payments in excess of
$50,000 should be 15 and not 30.
Note: Jon Currier left at 3:59pm
v. Ed Morejon asked if the amount held back would be subject to earnings and losses.
Note: Jon Currier returned at 4:OOpm
vi. Doug Lozen stated the Share Plan Policy indicated any money held back was not
subject to earnings or losses and added the final earnings were typically based on
the previous quarter's earnings. The board directed the administrator to add this
language to the DROP policy as well.
The board voted to accept the DROP Distribution Policy with the discussed changes, upon motion
by Thomas Murphy and second by Rick Rhodes; motion passed 4-0.
vii. The board agreed by consensus the DROP Distribution Policy would be effective
October 1, 2019.
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Amended Share Plan Policy
i. The board reviewed the amended the Share Plan Policy and directed the
administrator to change the 30 -day period for payouts to 15 -days to mirror the
DROP Policy.
The board voted to accept the Share Plan Policy with the discussed changes, upon motion by
Thomas Murphy and second by Rick Rhodes; motion passed 4-0.
c. Travel Policy
i. The board discussed the $60 per diem. Bob Sugarman advised the board they
were not bound by the City's Travel Policy and that a $60 per diem was reasonable.
The board voted to accept the Travel Policy as presented, upon motion by Thomas Murphy and
second by Ed Moreion; motion passed 4-0.
d. Consent Agenda
i. Payment ratification
1. Warrant #15, #16, #17, #18
ii. Payment approval
1. None
iii. Fund activity report for 4/25/2019-7/31/2019
The board voted to accept the Consent Agenda as presented, upon motion by Rick Rhodes and
second by Thomas Murphy; motion passed 4-0.
iv. Ed Morejon asked if Clayton Hayes received interest on his pension contribution
refund and Michelle Rodriguez verified he did not receive interest on his refund.
The board voted to accept the Fund Activity Report as presented, upon motion by Rick Rhodes and
second by Thomas Murphy; motion carried 4-0.
8. Staff Resorts. Discussions and Action
a. Foster & Foster, Michelle Rodriguez, Plan Administrator
i. Update on State Annual Report
1. Michelle Rodriguez advised the board the annual report was submitted on
June 10, 2019.
ii. Upcoming Educational Opportunities
1. Michelle Rodriguez reviewed upcoming educational opportunities
available to the board. Thomas Murphy asked to be registered for the
FPPTA Fall School. Michelle advised the board that Ed Morejon, Jon
Currier, and Rick Rhodes were all chosen for the FPPTA Wall Street
Program in February 2020.
The board voted to allow Ed Moreton, Jon Currier, and Rick Rhodes to attend the FPPTA Wall Street
Program in February of 2020, upon motion by Thomas Murphy and second by Rick Rhodes; motion
passed 4-0.
9. Trustee's Reports, Discussion and Action
a. Ed Morejon asked Michelle Rodriguez if PRC contacted Foster & Foster regarding the
partial payment of their December 2018 invoice. Michelle stated they did not.
10. Adjournment — The meeting was adjourned at 4:22pm.
11. The meeting was called back to order at 4:28pm
a. A quorum was determined.
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i. Ed Morejon commented he would like the board to recognize Martin Cohen with a
plaque and present it to him at a commission meeting.
The board voted to allocate $125 for the purchase of a commemorative plaque for Martin Cohen
and delegated Jon Currier to purchase the plaque upon motion by Ed Moreion and second Tom
Murphy, motion passed 4-0.
12. Adiournment — The meeting was adjourned at 4:30pm.
13. Next Meeting — November 06, 2019, at 1:00pm, quarterly meeting.
Res ectfully submitted by:
T
Siera Feketa, Plan Administrator
Date Approved by the Pension Board: I I lei 1
T
N.
Appro ed by:
Jo�,durrier, Chairman