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HomeMy WebLinkAboutMinutes Fire Pension 042722CITY 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, April 27, 2022, at 1:OOPM TRUSTEES PRESENT: Rick Rhodes Mike Zingaro Jon Currier Thomas Topor Eric Bruns TRUSTEES ABSENT: None OTHERS PRESENT: Siera Feketa, Foster & Foster John Thinnes, AndCo Consulting Pedro Herrera, Sugarman and Susskind Janice Rustin, Lew Longman Walker (City Representative) Doug Lozen, Foster & Foster Alison Wester, Mauldin & Jenkins, LLC Karen Russo, Salem Trust 1. Call to Order— Rick Rhodes called the meeting to order at 1:OOPM. 2. Roll Call —As reflected above. 3. Public Comments a. Janice Rustin introduced herself commenting she was representing Chief Bryer. Janice reviewed the prior discussion with the Board where they had agreed Chief Bryer would continue to earn interest on his DROP and Share Plan accounts and would receive a benefit amount to include the Cost -of -Living -Adjustments (COLAs) upon separation as if he was collecting a monthly benefit upon his DROP exit. Janice commented Chief Bryer would like a letter or memo reflecting this decision was made so when he goes to separate this memo was in the file. Janice commented she would just like this in his file to reflect this. Rick Rhodes commented they were going to wait for the attorney to arrive to further discuss this and let her know. 4. Approval of Minutes The Board approved the Janua 26 2022 uarterl meetingminutes upon motion by, Jon Currier and second by Eric Bruns• motion carried 5 0 5. New Business a. Foster & Foster fee proposal i. Rick Rhodes commented he would like to add this under the "Staff Reports" section of the agenda. The Board agreed by consensus. 6. Old Business —None. 7. Reports a. Salem Trust Company, Karen Russo, Board Custodian i. Discussion of Pacific Gas & Electric class action 1. Karen Russo reviewed the company that filed the class actions for the Plan, Chicago Clearing Corporation (CCC), commenting they filed a class action for Pacific Gas & Electric (PG&E). Karen commented after the class action was filed, PG&E went into bankruptcy and the claim went to collections. Karen commented the company that filed the class actions went out and hired another firm, RKS, to handle the class action since it was in bankruptcy and CCC did not handle bankruptcies. Karen commented CCC negotiated a fee structure with them, and the fees were 15% of any settlement if the Board wanted to engage with RKS to handle the class action. Karen commented they did not have to engage with RKS if they did not want to proceed with the class action. Karen commented the settlement amount for this plan would only be about $100 as determined by CCC. 2. The Board discussed the fees and the class action suit. 3, Pedro Herrera reviewed the class action and the fee structure with this firm commenting it was just different than the fee structure they are used to. 4. Karen Russo commented CCC would still get 12% and RKS would get 15%. 5. The Board discussed the amount of damages and agreed by consensus not to engage with RKS as the damages were so little and the costs associated with filing were not worth it. ii. Pension portal introduction 1. Karen Russo reviewed the pension portal they would be offering through US Bank. Karen reviewed the enhancement to the retirees. Karen reviewed the items members could view/change on the portal. 2. Karen Russo commented if the members used the portal, they would no longer get the paper advice of credit. Karen commented if members did not want to use the portal, they would continue to get the paper advice of credit. 3. Karen Russo commented if any changes were made Foster & Foster could pull a report to see the list of changes made by the member. 4. Karen Russo commented there would not be any fees to the plan for this portal. 5. Mike Zingaro asked if Foster & Foster offered something like this. Siera Feketa commented this would be an enhancement for retirees as their portal was geared toward active members. 6. Pedro Herrera commented there were some that may have difficulty with it, but he felt more people would like it. The Board discussed the benefits on the portal. 7. Karen Russo asked if they wanted to allow people to make changes online. Mike Zingaro asked what the downside of that would be. Karen Russo commented fraud could be a concern anytime you allowed people to make changes online. Siera Feketa reviewed the current process for members to update their information and asked if members could still make those changes with Foster & Foster. Karen commented they could. 8. The Board discussed and agreed to allow members to use the online portal. Karen Russo commented she would add them to the queue and reviewed the process to rollout the portal. The Board approved moving forward with Salem's online pension portal and to allow members to make changes online, upon motion by Mike Zingaro and second by Eric Bruns motion carried 5 0 Mauldin & Jenkins, LLC, Alison Wester, Board Auditor i. September 30, 2021 audit report 1. Alison Wester reviewed the independent auditor's report. Alison commented in their opinion the financial statements referred to were presented fairly in all material aspects. Alison commented this was basically a clean opinion. 2. Alison Wester reviewed the statements of fiduciary net position. 3. Alison Wester reviewed the statement of changes in fiduciary net position. 4. Alison Wester briefly reviewed the notes to financial statements. 5. Alison Wester reviewed the required supplementary information. 6. Rick Rhodes asked about the audit adjustments on page eight and asked if those were just received later. Alison Wester reviewed commenting they were received later. 7. Alison Wester reviewed the auditor's discussion and analysis. 8. Alison Wester reviewed the required communications commenting there were no issues. 9. Alison Wester commented if the Board needed to meet education requirements, they could contact their education coordinator and hold a session for the Board. The Board voted to accept the Se tember 3 2021 audit report as presented. u on motion by Jon Currier and second by Mike Zingaro• motion carried 5 0 8. Public Comments (continued) a. Janice Rustin commented she was representing the City and they were concerned about how the Chief's benefits were being administered. Janice Rustin commented he would like a memo or something about how his benefit was being calculated. Pedro Herrera commented had he responded to her email with the information he received from Siera Feketa. Janice Rustin asked for a letter reflecting that his benefit was going to be administered like everyone else. Pedro commented he could draft that. 9. Reports (continued) a. Foster & Foster, Doug Lozen, Board Actuary i. October 1, 2021 actuarial valuation report 1. Doug Lozen commented as of September 30, 2021 they had great investment returns. 2. Doug Lozen reviewed the investment return assumption commented with this report they would be at 6.95%, whereas last year they were using 7.05%. 3. Doug Lozen reviewed the smoothing technique. 4. Doug Lozen reviewed the summary of the report and the required contributions. 5. The required contribution from the combination of City and State sources for the year ending September 30, 2023, would be 60.87% of the actual payroll realized in that year. As a budgeting tool, the City may contribute 52.96% of each Member's Salary and then make a one-time adjustment to account for the actual State Monies received. The City had access to a prepaid contribution of $44,494.17 that was available to offset a portion of the stated requirements for the Fiscal Year ending September 30, 2023. 6. Doug Lozen commented the Minimum Required Contribution showed a decrease when compared to the results in the October 1, 2020 actuarial valuation, which was attributable the net favorable actuarial experience. Doug commented this decrease was partially offset by a reduction in the investment return assumption from 7.05% to 6.95%. 7. Plan Experience was favorable overall on the basis of the plan's actuarial assumptions. The primary source of actuarial gain was an investment return of 9.64% (Actuarial Asset Basis) which exceeded the 7.05% assumption. This gain was offset in part by a loss associated with an average salary increase of 7.92% which exceeded the 4.41 % assumption, in addition to interest crediting on DROP and Share Plan Balances that exceeded the actuarial assumption for investment return. 8. Rick Rhodes and Doug Lozen discussed the actuarial losses associated with the salary increases and the interest crediting on the DROP and Share Plan balances exceeding the actuarial assumption for the investment return. Doug reviewed why the interest crediting being higher than assumed was an actuarial loss for the plan. 9. Doug Lozen reviewed the history of the funding progress commenting the funding status had been maintained and slightly growing over the last decade even with the reductions in the investment return assumptions. 10. Doug Lozen reviewed why the funding status in the valuation report was different than the funding status in the audit and commented GASB did not allow for smoothing. Doug commented they were at 85% funded now. 11. Rick Rhodes reviewed the average annual payroll growth commenting it appeared the payroll decreased by about two million dollars over the last decade. Rick reviewed his concerns about the payroll being lower and commented he felt someone in the fire department should look at the payroll to confirm it was being reported correctly. The Board discussed the payroll and the different factors that could impact the figures. Doug Lozen commented that section only included active firefighters. 12. Siera Feketa reviewed the payroll that was provided for the State Annual Report commenting that figure was about $13 million for the most recent Annual Report that was submitted. The Board and Pedro Herrera discussed the payroll and the fact that the valuation only included active members, but the Annual Report used all employees/staff. 13. Doug Lozen commented there were more firefighters added and reviewed the changes in the department. 14. Siera Feketa, Pedro Herrera, and the Board discussed what payroll items/employees were included in the payroll for the State Annual Report. Siera commented any employees that participated in Florida Retirement System (FRS) were excluded. Siera commented the payroll reported for the Annual Report increased this year from about $11.6 million to $13 million. Siera commented the payroll for the Annual Report was reported on a calendar year basis. 15. Rick Rhodes asked Jon Currier to get with the City and firefighters to confirm the payroll sounded accurate. 16. Doug Lozen commented with the approval of the valuation report they would be at 6.95% investment return assumption and reviewed the glidepath decrease the Board previously approved. Rick Rhodes asked if the Board wanted to discuss the investment return assumption at this time. The Board briefly discussed and agreed to the stick to the glidepath decrease. The Board approved the October 1 2021 actuarial valuation report, upon motion by Eric Bruns and second by Mike Zingaro• motion carried 5 0 17. Pedro Herrera reviewed the declaration of returns. John Thinnes commented 6.95% was reasonable. The Board declared the returns for the plans shall be 6.95% for the next ear the next several years, and the Iona -term thereafter, net of investment related expenses upon motion by Eric Bruns and second by Jon Currier motion carried 5 0 AndCo Consulting, John Thinnes, Investment Consultant i. Quarterly report through March 31, 2022 1. John Thinnes briefly reviewed the cash that was raised to make benefit payments. 2. John Thinnes reviewed the market environment for the quarter. 3. John Thinnes reviewed the schedule of investable assets. 4. John Thinnes reviewed the asset allocation 5. The Market Value of Assets as of March 31, 2022 was $142,750,736. 6. The total fund gross returns for the quarter were-4.90%, slightly underperforming the benchmark of-4.16%. The total fund trailing gross returns for the 1, 3, 5, 7, and 10-year periods were 5.66%, 10.38%, 9.48%, 8.40% and 9.54% respectively. Since inception (May 1, 1998), total fund gross returns were 6.76%, slightly underperforming the benchmark of 6.81 %. 7. John Thinnes reviewed the returns of the investment managers. John reviewed the performance of Dana and reviewed the factors that impacted their performance. John Thinnes commented he did not feel any changes were needed, but they would monitor Dana. 8. Mike Zingaro asked if John Thinnes could bring some options to the next meeting to be prepared just in case. John Thinnes commented he could 4 bring the Parnassus option at the next meeting, and they could discuss if they would eliminate Dana going forward. 9. Rick Rhodes asked what part of the portfolio was not rated based on what was presented in the audit. John Thinnes commented the auditor just looked at the individual securities that were rated. Alison Wester reviewed why it was disclosed differently on the financial statements and reviewed the leveling. ii. Updated Investment Policy Statement (IPS) 1. John Thinnes commented this policy gave them more flexibility. John Thinnes commented if they adopted this today, they did not have to make changes to the portfolio as it just provided for more flexibility. 2. John Thinnes reviewed the change he wanted to remove from Section IV.(A)(2) and commented he wanted to take this out because they had addendums with the managers that already stated this information so it was not necessary to be included here. The Board and John Thinhes briefly discussed the manager addendums. 3. John Thinnes reviewed the factors that impacted his recommendations for changes. 4. John Thinnes reviewed the remaining changes to the IPS. 5. John Thinnes reviewed the changes to the target allocations table. The Board approved adopting the Investment Policy Statement as presented by the investment consultant, upon motion by Eric Bruns and second by Mike Zmgaro• motion carried 5.0. C. Further discussion of direct lending i. John Thinnes reviewed the discussion from the last meeting commented they had everything prepared to move forward with Golub. John Thinnes reviewed the different amounts they discussed investing and recommended allocating five million dollars to Golub. John Thinnes commented five million dollars was appropriate based on their current market value. John Thinnes reviewed the different managers and the benefit of going with Golub. ii. Jon Currier asked where the funds would come from. John Thinnes commented generally fixed income, but it depended based on where their allocations were at the time the funds were called. John Thinnes commented any time he moved money it reflected back to the targets in the IPS iii. John Thinnes and Jon Currier discussed the liquid funds they could pull assets from. iv. Mike Zingaro asked if the current interest rate market affected the returns that were happening in that market. John Thinnes commented it should go up because they charged a higher rate. The Board approved committing five million dollars to Golub direct lending fund based on the recommendation of the investment consultant and havingthe attorneywork on a contract with Golub, upon motion by Mike Zin-garo and second by Jon Currier- motion carried 5 0 Sugarman and Susskind, Bob Sugarman, Plan Attorney i. Pedro Herrera briefly reviewed the conversations surrounding Golub commenting he did not foresee any issues from that perspective. ii. Legislative update 1. Pedro Herrera gave a brief update and discussed the proposed bill to add Covid as a presumption for an In -the -Line -of -Duty (ILOD) benefit. Pedro commented it did not move forward so no action was needed. 2. Pedro Herrera reviewed the financial disclosure forms commenting they needed to be filed by July 1, 2022. 3. Pedro Herrera commented the Department of Labor issued some guidance for ERISA plans for the private sector as it related to cyber security. Pedro commented it did not govern the plan, but they did develop a policy they thought their boards should adopt commenting if the Board was interested, he could present it at the next meeting. The Board expressed interest in having the policy presented at the next meeting. 10. Consent Agenda a. Payment ratification i. Warrant #51, #52, #53 b. Payment approval i. None c. Fund activity report for January 20, 2022, through April 20, 2022 The Board approved the Consent Agenda as presented upon motion by Jon Currier and second by Eric Bruns, motion carried 5 0 11. Staff Reports. Discussions and Action a. Foster & Foster, Siera Feketa, Plan Administrator i. Update on State Annual Report 1. Siera Feketa commented the State Annual Report was submitted on March 11, 2022. ii. Financial disclosure forms 1. Siera Feketa commented this was covered earlier in the meeting. iii. Upcoming educational opportunities 1. Siera Feketa reviewed the upcoming FPPTA Annual Conference from June 26-29, 2022, in Orlando, FL. iv. Update on collection of contributions on accrued unused leave 1. Siera Feketa commented all remaining contributions to be made had been deducted from the April 1, 2022 payment. Siera commented George Ferguson's was debited from his April 1, 2022 DROP deposit and Steve Rogers' was deducted between April 1 and May 1s' payments as his alimony deductions were too high to deduct it all from the April 1 sr payment. v. Siera Feketa asked if the Board wanted the option to upload documents to the pension portal presented by Salem Trust. The Board agreed they would like that option. vi. Foster & Foster, fee proposal 1. Doug Lozen briefly reviewed the fee letter and the reason for the requested fee structure. 2. Doug Lozen commented right now there was only one item they billed annually that had an automatic increase and that was the valuation report. 3. Doug Lozen reviewed the fees commenting all fees right now were about $76,000 to about $80,000. Doug commented the initial increase was just under 5%. 4. Doug Lozen commented there was a schedule for hourly rates, but those rarely apply since its just for when they did special projects. 5. Doug Lozen reviewed the fee increases. 6. The Board briefly discussed the proposed annual increase based on Consumer Price Index for All Urban Consumers (CPI-U). Mike Zingaro asked about how they determined the proposed fees. Doug Lozen commented it was based on the market rates. 7. Rick Rhodes commented he preferred to see a fixed rate for the annual increase and asked if Foster & Foster was willing to negotiate. Rick asked about the fees that were on the most recent actuarial invoice to just provide information to the auditor. Rick commented he did not like the CPI-U increase and expressed his concerns with it. Doug Lozen reviewed the fees for the most recent invoice. Doug commented his first desire was to have all plans approve the CPI-U as proposed, but they may be able to offer something if they wanted to negotiate. 8. Eric Bruns commented he did not like the automatic increase without a cap. 9. Rick Rhodes commented when they moved to Foster & Foster for the administrator, they were more expensive. Rick commented he believed 0 there were a lot of good things about the firm, and they had caught a lot of issues created by the prior administrator. 10. Rick Rhodes commented the CPI-U was a deal breaker. Rick commented he would not have an issue putting out a Request for Proposal (RFP) for both administrator and actuary if they were not willing to negotiate. Doug Lozen discussed and asked what they would like to see. Rick Rhodes commented he would be comfortable with 3%. Rick commented he liked the current structure with a two-year fee guarantee. Rick commented he thought Foster & Foster deserved the fee increase as they had done a great job, but he did not like the annual increase. Rick commented according to the actual expenses they paid Foster & Foster approximately $100,000 last year. 11. The Board discussed the fees and agreed they preferred to see CPI with a cap of 3%. Doug Lozen commented he would get back with the Board after discussing internally. 12. Trustee's Reports Discussion and Action a. Jon Currier commented they were going to try to do a pension seminar for the members the same date of the next meeting around 10AM. Jon asked if Pedro Herrera and John Thinnes were available. Both confirmed they were available. John Thinnes asked what they wanted him to cover during the seminar. Jon commented he would send out a questionnaire to the membership and gather questions ahead of time, so the consultants knew what the members were interested in learning. b. Pedro Herrera, Siera Feketa, John Thinnes, and the Board discussed the different topics they could cover at the seminar. 13. Adjournment,— The meeting was adjourned at 3:22PM 14. Next Meeting — July 27, 2022, at 1:OOPM, quarterly meeting. Respectfully submitted by: Approved by: s� sera Feketa, Plan Administrator Jo urrier, Secre Date Approved by the Pension Board: _ I2.� 12V2Z