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HomeMy WebLinkAboutMinutes Police Pension 031419City of Palm Beach Gardens Police Officers' Pension Fund Minutes of the Meeting Held March 14, 2019 The regular meeting of the Board of Trustees of the City of Palm Beach Gardens Police Officers' Pension Fund was called to order at 9:03 AM by Jay Spencer in the Council Chambers at the Palm Beach Gardens City Hall at 10500 North Military Trail, Palm Beach Gardens, Florida. TRUSTEES PRESENT Jay Spencer, Chairman Brad Seidensticker, Secretary Marc Glass, Trustee Greg Mull, Trustee Allan Owens, Trustee OTHERS PRESENT Denise McNeill (Resource Centers) A.C. Lovingood (Resource Centers) Bonni Jensen (KKJ&L) John McCann (AndCo Consulting) Steve Stack (Highland Capital) Brian Liffick (Cherry Bekaert & Holland) Peter Strong (Gabriel Roeder Smith) AUDIT PRESENTATION —CHERRY BEKAERT Brian Liffick appeared before the Board to present the Audited Financial Statement for the period ending September 30, 2018. Mr. Liffick started his presentation by reviewing the required communications section. He noted that there is an unmodified opinion to be expressed with regards to the financial statements prepared by management. There were no material weaknesses identified and no significant deficiencies reported. And finally there were no reportable noncompliance issues. Mr. Liffick continued and reviewed the financial highlights, noting that there has been a consistent and positive change from 2017. During 2018, the Fund's investment portfolio returned gains of approximately 11.27%. There were less DROP payments processed in Fiscal Year 2018 as compared to Fiscal Year 2017 and the plan is strongly funded at 89.51%. He explained the accounting funded ratio is on a gross basis and slightly higher than the actuarial funded ratio. Trustee Allan Owens asked Mr. Liffick when the annual audit is started. Mr. Liffick stated that his firm cannot start the audit without a signed engagement letter. Trustee Owens stated that he would like to start the annual audit no later than mid- November. The Board and Mr. Liffick then discussed the timing for the engagement letter and Mr. Liffick will provide the audit engagement letter to the board the first week of September accordingly. Greg Mull made a motion to approve the Audited Financial Statement for the Years Ended September 30, 2018 and 2017. The Motion received a second from Marc Glass and was approved by the Trustees 5-0. Mr. Liffick departed the meeting at 9:21 AM. ACTUARIAL VALUATION REPORT - GRS Pete Strong appeared before the Board to present the Actuarial Valuation Report for the period ending September 30, 2018. Mr. Strong began his presentation by Minutes 03/14/2019 Page 1 informing the Board that contributions were up approximately $200,000, mainly due to increased participation. City and State required contribution of Payroll for Fiscal Year End 2018 was $2,834,931.00 and $569,925.00 respectively, for a total of $3,404,856.00. The investment return assumption has been lowered from 6.7% to 6.6%; this rate will be lowered to 6.5% next year. The end result was a change of employer normal cost as a percentage of covered payroll from 20.32% to 20.77%a Mr. Strong noted that the Plan's assumed rate of return (ARR) is one of his lowest with his client base, however with the market forecasts; the Plan is in a better position than other clients with higher assumption rates. There was a net actuarial experience gain of $1.69 Million, resulting in a more favorable than expected actuarial experience. This was primarily due to the recognized investment return of 10.7% being above the assumed rate of 6.7%. Mr. Strong noted that the investment return rate of 10.7% resulted in a 9.1% smoothed rate of return for valuation purposes. Chairman Jay Spencer Asked if the assumption rate change needed to be expedited as compared to what the Board previously decided upon. Mr. Strong stated that he doesn't think that the assumption rate change needs to be sped up and that the current annual adjustment is sufficient. It was noted that there was a slight loss on the mortality assumption since there were no deaths within the year. The funded ratio for the plan was 77.8% versus the prior year's rate of 75.4%. Mr. Strong explained how smoothed values work with regards to the Pension Plan. The new ASOP requirements were reviewed for the Pension Plan when determining the accrued liability and actuarially determined contribution. Mr. Strong then reviewed the Actuarially Determined Employer Contribution and the Actuarial Value of Benefits and assets with the Board in addition to the cumulative actuarial fains and losses. He reminded the Board that in 2001 there was a provision passed to offer the retirees an annual COLA contingent upon the cumulative actuarial experience being positive. The negative balance has been decreasing consistently since 2010. If the market continues to grow, this trend will result in the balance going positive, thus triggering the COLA payments. Brad Seidensticker made a motion to approve the 2018 Actuarial Valuation Report as presented. The Motion received a second from Allan Owens and was approved by the Trustees 5-0. Marc Glass made a motion based on the recommendation of the investment consultant; to set the expected rate of return to 6.6% as the Board expects to receive 6.6% for the short-term, mid-term and long-term thereafter. The Motion received a second from Brad Seidensticker and was approved by the Trustees 5-0. INVESTMENT MANAGER REPORT —HIGHLAND CAPITAL Steve Stack presented the Investment manager Report for Highland Capital for the period ending December 31, 2018. Mr. Stack reported the following: Fixed income is holding in good form. Highland has increased the maturity of the portfolio slightly in mortgage pools and lowered their exposure to corporate debt. They exited GE bonds due to issues that are expected to continue for a while. The fourth quarter of 2018 was bad, The S&P lost 4.39%, International Developed markets dropped 133%, small caps fell 11%, and Emerging Markets were off 15%. No equity category was left unscathed, and most asset classes were negative for the quarter. There was an exception of a few bond categories. The causes of the turmoil were due to the Fed tightening, trade war fees escalating, and global growth slowing. The Minutes 03/14/2019 Page 2 Fed projects that there will be two interest hikes in 2019, however given the continued flatting of the yield curve and the recent equity market weakness globally, t is expected that the Fed increases will be on hold for now. Mr. Stack stated that China is experiencing lower growth, partly due to the trade war with the United States that is not expected to be resolved in the near future. The Fed is likely to pause interest hikes for the time being and he expects China to stimulate their economy to keep their growth rate in the mid -single digits. Mr. Stack then reviewed the 8 major S&P declines of greater than 15% since 1945 without a recession, noting the current period feels very much like the late 2015 into mid-February 2016 when the S&P fell 15%. He noted the primary difference between today and early 2016 are that we are later in the economic cycle; this requires a more defensive stance in the approach to managing the portfolios. Normally the cash positions are very low, however the cash positons are a bit higher as a result of some profit taking and tax loss selling in taxable portfolios. This higher cash positon affords the opportunity to take advantage of some of the volatility in the market. There is no concern with how the portfolio is structured and they do not expect to see a recession in 2019. INVESTMENT CONSULTANT REPORT - ANDCO John McCann presented the Investment Consultant Report for AndCo for the period ending December 31, 2018. Mr. McCann reviewed AndCo's Mission Statement and reviewed AndCo's company highlights regarding the firm's reinvestment in targeting additional hires in research, software development, content creation, and client solutions group. He also informed the Board that there will be a questionnaire going out to all of their clients and asked that the Trustees please answer the questions honestly so that AndCo can make improvements in areas that they may be deficient in. Mr. McCann stated that the quarter was horrible, however things have improved some. For the quarter ending December 31, 2018, there was an overall loss of approximately 10%. However from January through February, the market regained 7%. The upside to this is that the losses occurred in the first quarter of the current fiscal year which allows nine months for the markets and investments to recover and mprove. Mr. McCann stated that he is comfortable with how the Plan is positioned. The Asset Allocation & Performance for the quarter and running five years was reviewed, reminding the Board that the goal for the rate of return is 6.6% net, which he believes is possible. Mr. McCann also noted that there is $8 million in unrealized gains in the portfolio that can be used as a cushion to offset any future losses in the Plan. Trustee Marc Glass inquired into the Real Estate allocation. Attorney Bonni Jensen informed the Board that the fund has an additional 5% maximum allowance over the set rate before a rebalance would be required. Mr. McCann explained he may recommend increasing the real estate allocation in the future. ATTORNEY REPORT MEMO HOUSE BILL 265 PROPOSED: Attorney Bonni Jensen presented a Memo to the Board regarding the proposed House Bill 265. This proposed Bill would amend Florida's Open Meeting Law and impose additional procedural requirements. Mrs. Jensen stated that this law would require the Board to publish their agenda and all materials and/or attachments to be distributed at the meeting, at least three days before the scheduled meeting. Mrs. Jensen stated that she sees two issues with the Bill. There is no clarification with regards to ADA compliance and much of the documentation in their packets includes graphs and charts which are very difficult to convert into a format that is ADA complaint. The second issue is that the Bill does Minutes 03/14/2019 Page 3 not address how the Board should handle disability reviews due to the member's medical records and HIPPA Compliance, Mrs. Jensen stated that this proposed law clarifies that emergency meetings need at least a 24 hour advance notice. There would be a requirement that at least two full copies of the agenda and supporting materials be available to the public for inspection at the meeting location. This law aIso has clear instructions regarding public participation and requirements of the Board in giving responses to the public's questions. Boards would be required to create a public participation form for members of the public requesting to speak at a meeting, at least three minutes shall be available for public participation for each member of the public and it will need to be listed as either the first or last item on the agenda. If there are more than twenty people that wish to speak on an item, the time can be limited to one minute per person. Groups can allow one individual to speak on behalf of the group and pool their time together. Board responses to questions from the public, in writing or at the meeting, would require the Board to give a written response within ten days and the written response would become incorporated into the minutes of that meeting. MEMO POWER OF ATTORNEY - FL STATUTE 709: Mrs. Jensen provided the Board with a memo regarding Power of Attorney (POA). She informed the Board that when they are presented with a POA, it must confirm that the POA is valid prior to disclosing information or taking particular action. In addition, the Board has 30 days to review the POA in order to determine if it is valid. Mrs. Jensen stated that the POA must comply with the laws of Florida as of the date that it was executed. On October 1, 2011, the Florida law regarding POAs changed substantially, if the Board receives a POA executed in another state, the POA must comply with that state's law n existence on its date of execution in addition to complying with Florida state law. Mrs. McNeill confirmed the administrator will continue to send all POA requests to the attorney immediately upon receipt. MEMO PUBLIC RECORD LAW: Mrs. Jensen presented a memo to the Board regarding Florida's Public Records Law. She reminded the Board that some personal information is considered confidential and privileged and some types of information is exempt from public inspection which therefore, must be removed prior to the dissemination of any public record. She reviewed the checklist of items which would need to be redacted. Mrs. Jensen reminded the Board that active and former Public Safety Officers' (Police Officers' and Firefighters'), their spouses, and children have the ability to request for confidentially to have their home address, phone numbers, dates of birth, photographs, pleases of employment, and names and locations of schools and day care facilities attended by the children be redacted from public records per the Florida Statutes. There was an amendment to the Florida Public Records Law in 2018 which now requires the address of a victim of an incident of mass violence and any portion of a meeting revealing fire safety system plans to be redacted. Mrs. Jensen informed the Board that there is a state Firefighter Cancer Bill in the works that would cover several different types of cancers. RESOURCE CENTERS FINANCIAL STATEMENT FEE REQUEST: Denise McNeill presented a memo to the board requesting to increase the monthly fee for processing the monthly financial statements for the Plan. Mrs. McNeill informed the Board that this original request was presented in August of 2017 and after much discussion, there was an agreement to keep the monthly financial statement fee of Minutes 03/14/2019 Page 4 $500 for the remainder of the 2018 fiscal year, which expired October 2018. That allowed the Plan's attorney time to do an RFP to find a vendor to the financial statements for them. At this time, the Resource Centers is requesting the original fee increase to $750 monthly for the processing of the interim financial statements effective October 1, 2018. Mrs. McNeill explained in detail the process followed to complete financial statements, adhering to GAAP Compliance Standards, and the costs associated with providing this service to the Board. Trustee Brad Seidensticker asked if the monthly financial statements were something that the auditor did. Mrs. McNeill explained the auditor has explained that they cannot create the financial statements they are auditing. Trustee Allan Owens stated that he would like to be included with the reports on a quarterly basis for the city's accounting and requested that the annual report be delivered by November 151h. The Board and Mrs. McNeill had a detailed discussion regarding how other Pension Plans are handling the production of financial statements. In some cases, the municipality has taken the reporting back and in other scenarios, Boards have tried to contract with an outside accounting firm to produce the statements; however the attorney attempted to find a firm to handle the financial statements separately and received no response from two RFP submissions. Marc Glass made a motion to approve the Resource Centers request to increase the monthly Financial Statement Processing Fee rate of $500 to $750 effective October 1, 2018, The Motion received a second from Allan Owens for discussion. Mr. Owens requested the financial statements and detailed general ledger be sent to the City quarterly and for the target date for the fiscal year end interim financial statements to be November 15th. The motion was called for a vote and was approved by the Trustees 5-0. MINUTES The December 2018 minutes were presented in the Trustee packets for review. A typo was noted in reference to a trustee's name. • Brad Seidensticker made a motion to approve the December 2018 Minutes as amended. The Motion received a second from Marc Glass and was approved by the Trustees 5-0. The Disbursements through March 14, 2019 were presented in the Trustee packets for review. • Marc Glass made a motion to approve the Disbursements as presented. The Motion received a second from Brad Seidensticker and was approved by the Trustees 5-0. Mrs. McNeill addressed a refund to an active member who was initially instructed to pay for a buyback calculation. The administrator realized the Plan rules had been changed to allow for one free buyback calculation; however that was not realized until after the member had issued a payment for the calculation. As such, he was refunded the cost of the calculation accordingly which was noted in the disbursement list. Discussion followed regarding service purchases and Mrs. McNeill reminded the Trustees that members who participated in the FRS Investment account and who receive both employee and employer contributions cannot purchase that time in this pension plan. The member receiving the employer contributions in their refund is considered constructive receipt of pension benefits and therefore such employment time is no longer eligible to be purchased in another pension plan. Mrs. Jensen Minutes 03/14/2019 Page 5 informed the Board that the only way to purchase time from another department is if the member only takes a distribution for his or her contributions that they paid into the pervious employers Pension Plan. If the employer's contributions are distributed to the member then they are not able to purchase that time. FINANCIAL STATEMENTS The interim financial statements from October 2018 through January 2019 were provided for informational purposes. BENEFIT APPROVALS The Benefit Approval Listing was presented in the Trustee packets for review. Mrs. McNeill informed the Board that they completed an internal audit of the Benefit Approvals submitted in 2018. They found that several DROP distributions were identified as not having been reported to the Board previously. 'Mrs. McNeill informed the Board that at the beginning of this year The Resource Centers had changed the process for processing Benefit Approval Requests and explained the checks and balances that have been put into place to prevent errors like this from happening in the future. The Board requested that "Current Account Balance" be changed to reflect the balance is "Prior to Disbursement" in order to give a more accurate picture of the member's balance. Trustees Brad Seidensticker and Greg Mull asked for clarification of the allowable DROP distribution amount that does not require advance Board approval. The administrator will review the rules and address with the Board at the next meeting. • Greg Mull made a motion to approve the Benefit Approvals as presented for both the current report and the retro 2018 Benefit Approvals, The Motion received a second from Brad Seidensticker and was approved by the Trustees 5-0. OTHER BUSINESS Mrs. McNeill explained Wanda Gordon was released from Salem Trust upon the closing of their Deerfield Beach office and Ms. Gordon has been hired by the Resource Centers as a Plan Administrator, PUBLIC COMMENTS There were no public comments at this time. AJOURN There being no further business, the Trustees officially adjourned the meeting at 11:15 AM. The next meeting is scheduled for Thursday, June 13, 2019 at 9:00 AM. Respect sub it�� , 4 B ad eidensticl r, Secretary Minutes 03/14/2019 Page 6