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
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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
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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
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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
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$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
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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
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