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HomeMy WebLinkAboutMinutes Fire Pension 012920CITY 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, January 29, 2020, at 1:OOPM TRUSTEES PRESENT: Ed Morejon Rick Rhodes Jon Currier Frank Spitalny Eric Bruns TRUSTEES ABSENT: None. OTHERS PRESENT: Doug Lozen, Foster &Foster Michelle Rodriguez, Foster &Foster Siera Feketa, Foster &Foster John Thinnes, AndCo Consulting Justin Elsesser, AndCo Consulting Pedro Herrera, Sugarman and Susskind Tom Murphy, Retiree Member of the public 1. Call to Order —Jon Currier called the meeting to order at 1:02pm. 2. Roll Call — As reflected above. 3. Public Comments a. Tom Murphy thanked the Board for their acknowledgment of his service on the Board. 4. Approval of Minutes The Board approved the November 06 2019 meetinq minutes upon motion by Rick Rhodes and second by Ed Morejon; motion carved 5-0 5. Reports a. AndCo Consulting, John Thinnes, Investment Consultant i. Quarterly report as of December 31, 2019 1. John Thinnes reviewed the letter from Mike Welker thanking the Board for their business. John Thinnes commented AndCo Consulting appreciated their relationship with the plan. 2. John Thinnes reviewed the organizational chart and the AndCo team, introducing Justin Elsesser. 3. Justin Elsesser reviewed the market environment for the quarter and the factors impacting performance. 4. Justin Elsesser reviewed the inverted yield curve commenting it had not been corrected. 5. John Thinnes commented the plan had now exceeded $120 million and reviewed the schedule of investable assets. John Thinnes explained how to read the schedule of investable assets for Frank Spitalny commenting $56 million was strictly cash flow. 1 6. John Thinnes reviewed the asset allocation by asset class commenting the plan was back on target and there was no need to rebalance at this time. 7. John Thinnes reviewed the financial reconciliation of the plan commenting the first quarter of the fiscal year had been better than the prior fiscal year's first quarter. 8. John Thinnes reviewed the comparative performance of the plan. 9. The market value of assets as of December 31, 2019, was $120,260,067. 10. The total fund gross returns for the quarter were 5.32°/x, slightly underperforming the benchmark of 5.83%. The total fund trailing gross returns for the 1, 3, 5 and 7 -year periods were 20.98%, 10.72%, 8.41% and 10.24% respectively. Since inception (5/1/98), total fund gross returns were 6.54%, slightly outperforming the benchmark of 6.32%. 11. The plan ranked in the first percentile amongst its peers for the seven-year period. 12. John Thinnes reviewed the returns of the investment managers. 13. Rick Rhodes and John Thinnes discussed the returns of Eaton Vance. 14. Ed Morejon and John Thinnes discussed the returns of Fiduciary Management. John commented AndCo could perform a manager search. Ed and John discussed how long the Board should wait before discussing a change in managers. John commented he would get a timeline together and a reason why each manager had been added to the portfolio. 15. Frank Spitalny and John Thinnes discussed the domestic equity returns and how to read the quarterly report. 16. Eric Bruns asked when the most recent change to any of the investment managers occurred. John Thinnes reviewed the most recently added investment managers. Note: Pedro Herrera arrived at 1:18pm. 17. The Board discussed the returns and the performance of the different investment managers. John Thinnes reviewed the factors that impacted the returns. 18. John Thinnes reviewed the returns of Templeton Global Bond Fund commenting Justin Elsesser and the AndCo team were watching the fund. John commented historically, when the fund performed in this pattern, they typically came back stronger and, therefore, he was not recommending any changes at this time. 19. Jon Currier and John Thinnes discussed the returns of BlackRock. John commented it was difficult to find a benchmark for the fund. 20. Eric Bruns and John Thinnes discussed the indexes in the report and how they were established. 21. Eric Bruns discussed the fees associated with the investment managers and asked John Thinnes if these were ever negotiated. John commented that was a discussion they could have if the Board requested. Eric Bruns and John Thinnes discussed the fees for the different investment managers. The Board reviewed previous discussions regarding the fees of the investment managers. 22. John Thinnes commented overall the plan was performing well. ii. DROP Update as of December 31, 2019 1. John Thinnes briefly reviewed the investments for the self-directed DROP accounts commenting there had been no significant changes. Investment Policy Statement (IPS) 1. John Thinnes briefly reviewed the IPS commenting it was not changed often and reviewed the information listed in the IPS. 2 2. John Thinnes reviewed the S&P 500 chart and reviewed the power of long- term investing. b. Foster U0 Q1 Doug LOzen, Plan Actuary i. October 01, 2019, actuarial valuation report 1. Doug Lozen gave a brief overview of the actuarial valuation report and its purpose for the new trustees. 2. Doug Lozen reviewed the contributions. The required contribution from the City and State sources for the year ending September 30, 2021, was 59.75% of the actual payroll realized in that year. As a budgeting tool, the City may contribute 51.01 % of each member's salary and then make a one-time adjustment to account for actual State Monies received. Doug reviewed the City's access to a prepaid contribution of $2,229,215.03 that was available to offset a portion of the stated requirements for the fiscal year ending September 30, 2020. 3. Plan experience was favorable overall based on the plan's actuarial assumptions. The primary source of actuarial gain was an investment return of 8.90% (Actuarial Asset Basis), exceeding the 7.25% assumption. This gain was offset in part by losses associated with unfavorable retirement and turnover experience. 4. The Board, Pedro Herrera, and Doug Lozen discussed the difference between the payroll reported for purposes of the annual report in comparison to the payroll reported for the actuarial valuation report. 5. Rick Rhodes and Doug Lozen briefly discussed the assumption used for payroll. Doug commented he would review assumptions later in the meeting. 6. Frank Spitalny asked Doug Lozen who determined the funded status of the plan. Doug commented the actuary calculated this information on an annual basis. Doug and Frank discussed the funded status of the plan. 7. Pedro Herrera, Doug Lozen, and Frank Spitalny discussed how the assumptions were made, who was responsible for funding the plan, and how the funding was made for the plan. Pedro commented if the plan was short on money for any reason, the City was required to make up the difference. 8. Rick Rhodes asked Doug Lozen to discuss where the plan was in comparison to their peers. Doug briefly reviewed the funded status of police and fire plans. 9. Doug Lozen reviewed the assumed rate of return. Doug commented by continuing to lower the assumed rate -of -return the Board was being more conservative. 10. Doug Lozen reviewed the Mutual Consent Agreement between the Membership and the City commenting there was a change in the amount of State Monies the City could utilize. Per a Mutual Consent Agreement between the Membership and the City, the City may use up to $750,072.76 annually in State Monies to meet its required contribution. Excess State Monies were split equally between the City as a funding credit and the Membership Share Plan. Doug commented the State Monies were $699,764.00 and therefore, there were no Share Plan allocations. 11. The Board and Doug Lozen discussed how the Share Plan interest was allocated to members. 12. Doug Lozen and Frank Spitalny discussed the goals of the plan. Doug reviewed the funded status commenting the funded status was more of an indicator. 13. Doug Lozen reviewed the plan changes since the prior actuarial valuation report. 3 14. Doug Lozen reviewed the funded ratio commenting it was 84.1%, which was a small decrease from the prior year. 15. Doug Lozen reviewed the assumptions for the plan commenting the assumptions had not changed since the prior actuary was working for the plan. Doug commented the plan was using outdated assumptions and therefore, he was recommending an experience study. The Board asked the cost of an experience study. Doug commented the cost could vary but would not exceed $10,000. Doug reviewed the recommended frequency of having an experience study prepared. 16. Pedro Herrera asked Doug Lozen when they would incorporate the change to the mortality table. Doug commented they would need to use the new mortality table next year and discussed the impact commenting it should be less than 1.0% of payroll. The Board voted to approve Foster & Foster to prepare an experience study, as re Doug Lozen, not to exceed a cost of $10,000 to be presented to the Board no later 2020, upon motion by Rick Rhodes and second by Ed Moreion; motion carried M. The Board approved the October 01, 2019, actuarial valuation report as presented, upon motion by Ed Moreion and second by Rick Rhodes; motion carried 5-0. The Board approved providing the City with the October 01, 2019, actuarial valuation report, upon motion by Ed Moreion and second by Rick Rhodes; motion carried 5-0. The Board declared the returns for the plan shall be 7.15% for the next year, the next several years, and the long-term thereafter, net of investment related expenses, upon motion by to Moreion and second by Eric Bruns; motion carried 5-0. ii. DROP Audit 1. Doug Lozen reviewed the DROP audit previously presented to the Board commenting this was the last piece of the DROP audit. 2. Doug Lozen reviewed the purpose of the DROP audit. 3. Doug Lozen reviewed the calculations prepared by the prior administrator in comparison to the calculations prepared by the actuary. Doug commented there were some inconsistencies in how the prior administrator applied interest. 4. Doug Lozen commented the Board could rely on the information provided historically, as it was just a difference in how the information was calculated. Doug reviewed the differences in how the information was calculated. 5. Doug Lozen commented if the Board ruled Foster & Foster's calculations to be correct, they may need to recover funds from some retirees and make distributions to others. Doug referred to Pedro Herrera for his opinion. Pedro commented they could not definitively say Resource Centers calculations were incorrect and relatively speaking they were small amounts of money. Pedro commented the Board could proceed with either decision but did not feel there was a strong argument to try to collect money from the four retirees. Frank Spitalny asked Pedro if the Board could decide to adopt Foster & Foster's method so they could pay the retirees owed money based on their calculation without seeking repayment from the other four retirees. Pedro commented the calculations would have to be applied uniformly. L� 6. Ed Morejon commented this audit was a result of the prior audit presented commenting the Board previously decided to adopt Foster & Foster's calculation method. The Board voted to approve the receipt and filinq of the report, upon motion by Rick Rhodes and second by Frank Spitalny; motion carried 5-0. 7. The Board, Doug Lozen, and Pedro Herrera discussed the differences between the calculation methods and the process they would have to go through to recover any funds. Ed Morejon commented there was a defined method to calculating this information. Doug commented this part of the Ordinance was silent, so there was some discretion used. 8. Ed Morejon requested discussion regarding the ICMA-RC DROP accounts. Doug Lozen commented the DROP monies were invested through ICMA-RC. Doug reviewed the frequency in which members received updates and the frequency in which funds were deposited. Doug commented when members were exiting the DROP, the monthly deposit did not cease when it should have and there was a deposit made to the member as well as to the member's self-directed DROP account. 9. The Board asked Doug Lozen for a rough estimate of how much was overpaid. Doug commented the information was not calculated, but a rough guess would be about $20,000.00. 10. The Board discussed the different members and briefly reviewed the situation with Gary Bussey. 11. The Board discussed the errors with the self-directed DROP accounts through ICMA-RC. Pedro Herrera commented the actuary would need to provide a breakdown of the overpayment, and he would need to determine the procedures with the administrator to determine where the liability was. Doug Lozen reviewed the breakdown he could provide for each member to determine what they were due in the last year directly and what was actually paid to the member. Ed Morejon requested further documentation from the Custodian to determine who requested the change. The Board voted to approve the receipt and filing of the information as presented upon motion by Rick Rhodes and second by Eric Bruns; motion carried 5-0. c. Sugarman and Susskind, Pedro Herrera, Plan Attorney i. Disability Application Update 1. Pedro Herrera commented they received a disability application and they were waiting on four physicians' statements. Pedro commented one physician was requesting prepayment and the administrator was working on that. Rick Rhodes asked who the applicant was. Pedro Herrera commented the applicant was Janet Rudd. Pedro Herrera reviewed the disability process. Jon Currier asked how long the process would take. Pedro commented it was usually three to six months, and the delay was usually in gathering the medical records. The Board discussed the member being terminated and if the member terminated prior to applying for a disability. 2. Pedro Herrera reviewed the Firefighters' Cancer Bill and the first case that claimed benefits under the bill. Pedro commented there were two or three other cases pending. Pedro commented based on the first case, it did not matter when they were diagnosed if it was one of the presumed types of cancers outlined in the bill. Ed Morejon and Pedro Herrera discussed the costs associated with becoming diagnosed with one of the presumed types of cancer and if those costs would be covered. Pedro commented his opinion was that the costs would be covered for anything after the diagnoses. ii. Legislative update 1. Pedro Herrera reviewed the SECURE Act commenting the most significant changes were to Defined Contribution plans, and the most significant change to Defined Benefit plans was the Required Minimum Distribution (RMD) age, which was now 72. Pedro commented if you reached 70 and a 1/2 on or after January 01, 2020, you would fall under the new rule. Pedro commented there would need to be a revision to the Ordinance to provide for the change. Pedro reviewed the impact to the 457 accounts under the SECURE Act. 2. Pedro Herrera commented there was a change to the notary law, commenting the State now allowed for remote notaries. Pedro reviewed the changes under the new law commenting the notary blocks would need to be updated on the forms. 3. Pedro Herrera reviewed SB1270 being proposed in the Senate commenting it sought to codify the fiduciary duty of the Boards to the entity in which they served. Pedro commented there was a potential for conflict. Pedro reviewed the training that would be required under SB1270. Pedro commented he was unsure if it would pass, but his firm had articulated their concern. 4. Jon Currier and Pedro Herrera discussed the proposed bill regarding the changes to the Medicare age for firefighters. Jon and Pedro discussed the actions that could be taken to encourage a bill to be passed. 6. New Business a. Election of 5th Trustee i. Michelle Rodriguez commented she confirmed Rick Rhodes' term expires April 07, 2020, not September 30, 2019. The Board discussed the different term dates and how they were determined by the City. Ed Morejon commented the term dates should not be floating. Ed Morejon commented the terms should be set by the Board, not by the City council. Jon Currier commented the terms did not bother him. ii. Pedro Herrera commented they would have to wait for each term to expire before making a change to provide for set term dates. The Board voted to set term dates to be: two council appointed seats to begin October 2 for four years, two member -elected seats to begin January 01 for four years, and the fifth trustee term to begin April 07 for a four year term, upon motion by Ed Moreion and second by Frank Spitalnv; motion carried 5-0. The Board voted to nominate Rick Rhodes for the 5t—" trustee position, upon motion by Jon Currier and second by Frank Spitalnv; motion carried 5-0. b. Election of Officers The Board voted to nominate Jon Currier as Chairman, upon motion by Frank Spitalnv; motion did not receive a second. The Board voted to nominate Rick Rhodes as Chairman, upon motion by Ed Moreion and second Jon Currier; motion carried 5-0. re The Board voted to nominate Eric Bruns as Vice -Chairman, upon motion by Ed Morejon and second by Jon Currier, motion carried 5-0. The Board voted to nominate Frank Sh! alny as Secretary, upon motion by Ed Morejon and second by Jon Currier; motion was not voted on. i. Michelle Rodriguez expressed concern with Frank Spitalny being Secretary as he did not use an email address. The Board voted to nominate Jon Currier as Secretary, upon motion bV Eric Bruns and second by Rick Rhodes; motion carried 5-0. c. Member Education i. Eric Bruns commented he wanted to bring this to the Board's attention as he had heard complaints regarding a lack of education of plan benefits to the members. ii. Jon Currier reviewed the previous educational sessions held for members. iii. Eric Bruns recommended an annual training for the members. iv. The Board agreed by consensus to schedule a training in conjunction with the City's training of other benefits offered through the City. d. Vested Terminated Member Calculation L Michelle Rodriguez reviewed the salary information collected from the annual reports commenting she needed the Board to approve using the salary information from the annual reports. The Board voted to have the calculation done with the salary information from the annual reports, uPon motion by Eric Bruns and second by Rick Rhodes; motion carried 5-0. 7. Old Business a. Approval of Cancer Bill Actuarial Impact Statement (AIS) and Ordinance Change i. Michelle Rodriguez briefly reviewed the Ordinance change to comply with the Firefighter Cancer Bill and the Actuarial Impact Statement (AIS) associated with the Ordinance. The Board voted to approve the Ordinance as presented, upon motion by Rick Rhodes and second by Eric Bruns; motion carried 5-0. b. Revised DF -4, DROP Change of Account Return Election Form i. Siera Feketa briefly reviewed the changes made to the Chane of Account Return Election form at the request of the Board at the previous quarterly meeting. 8. Consent Aoenda i. Payment ratification 1. Warrant #24 and #25 ii. Payment approval 1. None iii. Fund activity report for October 31, 2019 through January 22, 2020 The Board voted to accept the Consent Agenda as presented, upon motion by Rick Rhodes and second by Ed Morejon; motion carried 5-0. 9. Staff Reports. Discussions and Action a. Foster &Foster, Michelle Rodriguez, Plan Administrator i. Fiduciary Liability Policy Renewal 1. Michelle Rodriguez reviewed the policy commenting the annual premium was $9,700.00, which was an increase of $82.00. 7 2. Frank Spitalny asked if the policy was on a claims -made or occurrence basis. Pedro Herrera commented it was on a claims -made basis. Frank commented occurrence was better. 3. Pedro Herrera and Frank Spitalny discussed the policy and if the coverage was sufficient. Pedro commented the Board could discuss increasing the coverage. 4. Rick Rhodes suggested they could direct the staff to look into the items requested by Frank Spitalny but bind the current policy now. The Board voted to bind the policy, upon motion by Ed Moreion and second by Rick Rhodes; motion carried 5-0. ii. Educational Opportunities 1. Michelle Rodriguez reviewed the FPPTA Winter Trustee School from January 26 — 29, 2020, in Orlando, FL. 2. Michelle Rodriguez reviewed the FPPTA Wall Street 2020 Program from March 24 — 28, 2020, in New York, NY. 3. Ed Morejon commented the trustees usually bring back a report of what they learned. 4. Pedro Herrera reviewed the Division of Retirement School commenting they had not released the dates yet. iii. The Board and Michelle Rodriguez discussed how the COLA was reflected for DROP retirees on the portal. iv. Pedro Herrera commented Janet Rudd had 30 days following termination to apply for disability if she was terminated for medical reasons. Michelle Rodriguez commented she terminated on December 06, 2019, and she applied for disability on December 10, 2019. Pedro asked the Board if she was terminated for medical reasons. The Board confirmed she was. Pedro commented she was eligible to apply. v. Pedro Herrera reviewed the laws regarding gift giving. Pedro presented a holiday gift for the Board and commented they were not required to report the gift. 10. Trustee's Reports, Discussion and Action — None. 11. Adiournment — The meeting was adjourned at 4:02pm. 12. Next Meeting — April 29, 2020, at 1:OOpm, quarterly meeting. Re^pectfully submitted by: A d:K Digitally RichardKRhby odar,o,ou,d K es DN: cn=Richard K Rhodes, o, ou, e ma il=rrhodes@myffbenefits.com, Rhodes DatJe: 2020.04.30 11:49:47 -04'00' iera Feketa, Plan Administrator Rick Rhodes, Chairman Date Approved by the Pension Board: 04/29/2020 N.