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HomeMy WebLinkAboutMinutes Police Pension 012711City of Palm Beach Gardens Po /ice Officers' Pension Fund Minutes of the Meeting Held January 27, 2010 The regular meeting of the Board of Trustees of the City of Palm Beach Gardens Police Officers' Pension Fund was called to order at 1:03 PM by Chairman 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, Chair Brad Seidensticker, Trustee Jules Barone, Trustee OTHERS PRESENT Audrey Ross (Resource Centers) Bonni Jensen (Law Offices of Perry & Jensen) Steve Stack (ICC Capital Management) Donna Cannon (PBG Clerk's Office) John McCann (Thistle Asset Consulting) Steve Palmquist (GRS) Jim Burdick (CBH) Alan Knopf, ARK Consulting Associates PRESENTATION OF THE SEPTEMBER 30, 2011 AUDITED FINANICAL STATEMENTS Cherry, Bekaert & Holland (CBH) — Presented by Jim Burdick Mr. Burdick reviewed the audit engagement letter and stated that they issued an unqualified opinion which is the highest level that can be issued. There were no significant efficiencies found within the internal controls, or no material weaknesses found while performing the audit. Although he did note that they found one miscalculated benefit that is in the process of being corrected. Mr. Burdick also reported that they did not consult with any other CPA's during the audit. Mr. Burdick briefly discussed the management discussion and analysis letter which is a narrative overview of the audit process. The net assets increased to $41,403,852 in 2010 from $34,032,253 in 2009, and the employer contributions also increased to $3,955,968 from $3,349,679. But the employee contributions decreased to $779,843, which was primarily due to more members entering the DROP during the fiscal year. In addition the benefit payments increased as well as the refund of contribution payments during the fiscal year. Mr. Burdick reported that after all the additions and all the deductions the plan had a net increase of $7,371,599m which is compared to the net increase of $5,688,180 last year. Lastly Mr. Burdick reviewed the financial footnotes and stated that he added in a DROP table which separates out the plans designated benefits (for DROP benefits only) versus undesignated assets. He also briefly mentioned that the admin expenses decreased this year which is very beneficial to the plan. Ms. Jensen recommended that they need to go back and look at the changes in plan provisions in 2006, as there were more amendments then what is documented in this report. Mr. Burdick stated that he will revise that section to reflect all the correct amendments and will reissue a clean final copy of the report. MOTION: Mr. Seidensticker made a motion to approve the September 30, 2010 Audited Financials Statements as presented by the Auditor, with the one revision to the 2006 changes in plan provisions and actuarial methods. Minutes 1 -27- dog Page 1 of 7 SECOND: Mr. Barone seconded the motion. CARRIED: The motion carried unanimously 3 -0. Ms. Ross commented to the Trustees that this years audit went very smooth and we did not have any issues like we encountered last year. She commented that she thinks this is due to the personnel change the CBH recently had (in which she actually thought was not going to go over very well). Ms. Ross noted that the new person she works with relating to the field work on the audit is very knowledgeable and professional. Overall the audit process this year was very pleasant, and she stated that she looks forward to the same smooth process next year. PRESENTATION OF THE SEPTEMBER 30, 2011 ACTUARIAL VALUATION REPORT Gabriel, Roeder, Smith & Company (GRS) — Presented by Steve Palmquist Mr. Palmquist reviewed the participant data and commented that there were 11 new DROP members during the fiscal year, so therefore the employee contributions were less. He also noted that the payroll dramatically decreased because of less active members, and also the higher paid employees are retiring. Therefore, the City's contributions will decrease for the fiscal year beginning October 1, 2011. The City's contribution for the upcoming fiscal year is $3,785,539, versus the $3,885,572 they paid last fiscal year. He commented that with more members entering the DROP in 2011 it will probably have the same effect on payroll as it did this year. Mr. Palmquist reported that the Plan had an net actuarial loss of $348,981, which was primarily due to the investments being under the assumed rate of return of 7.5% (it was noted that the market value return on the investments on 9/30/2010 were 9.8 %, but according to the smoothing method the actuarial return was only 5.6 %). He reported that the plans funded ratio increased from 56.2% to 58.8 %, which is right on track. He commented that since the board changed their assumptions and mortality table 4 years ago it has only benefited them. If the board did not make those changes then the funded ratio would not be as high as it currently is. The total chapter revenue received for the fiscal year was $435,832, which means the plan now has $482,519 in their reserve account that can only be used to buy benefits. Mr. Palmquist reported that the plans unfunded liability as of October 1, 2010 is $29,393,731, which increased from $26,562,613 last year. He explained that they predicted 5 new retirees during the fiscal year and there were actually 11, so that is considered a negative experience for the plan. So for the next fiscal year they only expect to have 2 new retires, although there are already more then that that have applied. Therefore the plan will probably have another negative experience next fiscal year as well. Lastly Mr. Palmquist noted that the investment income fees are only about 62 basis points which are low and also a positive factor for the plan. MOTION: Mr. Barone made a motion to approve the September 30, 2010 Actuarial Valuation Report as presented by the Actuary. SECOND: Mr. Seidensticker seconded the motion. CARRIED: The motion carried unanimously 3 -0. BOARD DISCUSSION: Mr. Spencer asked Mr. Palmquist what the board and members can do today to keep things moving in a positive direction and to reduce the plan unfunded liability. Mr. Minutes 27- dog Page 2of7 Palmquist stated that you can lower the assumed rate of return which would help keep things cost neutral. Also by decreasing the expected number of disabilities will help save some cost, and by not allowing members to use their mustering out money in their FAS calculation. The board discussed different ideas that could help cut the plan unfunded liability cost and Mr. Spencer recommended lowering the assumption rate down to 5.5 %, but doing it gradually over a period of time. Mr. Seidensticker commented that he would like to table this discussion until they have the opportunity to speak to the City regarding the letter they sent out stating that they would like the Police and Fire pension board reps, City reps and Union reps to meet to discuss their unfunded liabilities. Lastly, Ms. Jensen commented that at this time the board should state what their anticipated return will be over the long term and short term. MOTION: Mr. Seidensticker made a motion that the Plan's Actuary and Consultant anticipate that the fund's long term and short term return will be 7.5 %. SECOND: Mr. Barone seconded the motion. CARRIED: The motion carried unanimously 3 -0. Ms. Jensen stated that she will send a letter to the Division of Retirement stating the long term goals. INVESTMENT MANAGER REPORT ICC Capital - Presented by Steve Stack Mr. Stack commented that 5 out of the 10 years the fund has outperformed their assumed rate of return, but it is unfortunate what happened in 2008 because that set back the fund. He explained that the last 10 years have been the most challenging for Cities and overall this fund has held up very well. Mr. Stack then reviewed the performance for the quarter and stated that the build America bond program is continuing so ICC will keep buying into them. The worst performer in the portfolio was US Treasuries, and the bond market is now more challenging then equities so they are keeping their duration low on all bonds. Mr. Seidensticker questioned what ICC is doing to protect the portfolio against a "bond burst ". Mr. Stack commented that they are moving away from Treasuries and moving more into Corporates, and right now they are actually seeing a rally in mortgage pools so that is where they would go if both Corporates and Treasuries sell off. INVESTMENT CONSULTANT REPORT Thistle Asset Consulting - Presented by John McCann Mr. McCann reviewed Callen Periodic table of investment returns and stated that this table proves that diversification is great. He then reviewed the funds compliance checklist for the quarter ending December 31, 2010 and stated that we are inline in all areas except that the total fund is trailing for the 3 year period. At the end of the quarter there was 62% in equities, 367% in fixed income and 1% in cash. Mr. McCann reported that that the total fund net of fees was behind the index for the quarter at 5.89% versus 6.97 %. The total fixed income was also behind at -1.86% versus - 1.28 %, although the total equities were ahead of the index at 11.59% versus 11.56 %. He then reviewed each mangers performance: Rhumbline S &P 500 — Slightly behind the index for the quarter at 10.73% versus 10.76 %. Rhumbline S &P 400 — Inline with the index for the quarter at 13.50 %. Minutes 1- 27- 11.dor Page 3of7 Rhumbline S &P 600 - Fell short of the benchmark for the quarter at 16.14% versus 16.24 %. ICC Large Cap Growth - Had a great quarter although they were behind at 11.65% versus the index at 11.83 %. ICC Fixed Income - It was a hard quarter for fixed income. The fund was negative and behind the benchmark at -1.78% versus - 1.29 %. International Equity - Outperformed significantly for the quarter at 7.48% versus the index at 6.65 %. International Fixed Income - Although it was a negative quarter, they still outperformed the benchmark at -1.37% versus - 1.45 %. Mr. McCann noted that the fund is below target in the S &P500 fund, and above in the fixed income account. Therefore he recommends to the board to rebalance by transferring $1.7M from fixed income to S &P500. MOTION: Mr. Seidensticker made a motion to rebalance according to the policy by transferring $1.7M from ICC Capital's fixed income account to Rhumbline's S &P500 account. SECOND: Mr. Barone seconded the motion. CARRIED: The motion carried unanimously 3 -0. Lastly Mr. McCann presented the board with a fee increase. He proposed to add in an additional $750 per quarter to manage and review the 2 new International mangers the Fund recently hired. The board discussed the proposal and the dollar amount. MOTION: Mr. Seidensticker made a motion to increase the plans Investment Consultant's (Thistle Assets) quarterly fee by an additional $500 per quarter for management of the 2 new International fixed income accounts. SECOND: Mr. Barone seconded the motion. CARRIED: The motion carried unanimously 3 -0. ATTORNEY REPORT Law Offices of Perry & Jensen - Presented by Bonni Jensen Ms. Jensen provided the board with the revised statement of policy regarding buyback of police /non- intervening military services. She reviewed the changes and briefly stated that she removed the vesting clause and added in the 90 day window language. MOTION: Mr. Seidensticker made a motion to approve and accept the revised statement of policy regarding buyback of police /non- intervening military services that was prepared by the Plan's Attorney. SECOND: Mr. Barone seconded the motion. CARRIED: The motion carried unanimously 3 -0. Ms. Jensen noted that the IRS mileage reimbursement increased by a penny to $.51. Minutes 1- 27- 11.doc Page 4of7 Ms. Jensen reviewed the summary of the responses that were received from the Custodians regarding the RFP that was issued on behalf of this board. She noted that Comerica did not state whether or not they purchase mutual funds on behalf of the board, and the boards intent is to move to a Custodian that does offer that service. The board discussed the responses and narrowed down their selection to 3 Custodians that they would like to invite to their next meeting for an interview. Their selections are: Comerica (depending on whether or not they purchase mutual funds on behalf of the board), Salem Trust and Wells Fargo. Ms. Jensen confirmed with the Trustees that their intent is for her to confirm with Comerica on whether of not they offer that service, and if they do not then they will not be part of the board's selection for an interview. If they do, then they will be invited to the next meeting as well. The Trustees concurred. Ms. Jensen updated the board on the proposed house bill 303. She briefly reviewed what the proposals were and stated that there are 3 pieces to it; one pertaining to FRS, one pertaining to Chapter 175 & 185 plans (which this fund is), and one related to all other Governmental plans. Also Ms. Jensen reported that there is a senate bill 290 out there that is applicable to the FRS only. It was noted by the end of the meeting that the house bill 303 was already withdrawn. ADMINISTRATOR REPORT Resource Centers — Presented by Audrey Ross Ms. Ross presented the board with the 2011 Fiduciary Liability insurance renewal. She explained that she received a quote for both the $1M policy (which is what the board has always purchased) and also the $3M as directed. The $1M policy can be renewed for $6,379.82, as the $3M premium is $18,013.64. The board discussed what coverage is necessary for this fund. MOTION: Mr. Barone made a motion to renew the Fund's 2011 Fiduciary Liability Insurance for $6,379.82 ($1M Policy). SECOND: Mr. Seidensticker seconded the motion. CARRIED: The motion carried unanimously 3 -0. Ms. Ross stated that they need to schedule the remaining 2011 meeting dates. The board scheduled them for the 3rd Thursday of the 1" month preceding the end of the quarter at 9AM (Thursday April 21, 2011 @ 9AM, Thursday July 21, 2011 @ 9AM and Thursday October 20, 2011 @ 9AM). Ms. Ross announced that she received a letter from FPPTA which states that the fund won a door prize and will receive 5 free Trustee registrations to the upcoming FPPTA summer conference at the SeaWorld Resort in Orlando. Ms. Jensen noted that any Trustee who attends will need to fill out a gift form. MINUTES MOTION: Mr. Barone made a motion to approve the minutes from the October 21, 2010 regular meeting. SECOND: Mr. Seidensticker seconded the motion. CARRIED: The motion carried unanimously 3 -0. Minutes 1- 27- 11.doc Page 5 of 7 DISBURSEMENTS APPROVALS MOTION: Mr. Seidensticker made a motion to approve the disbursements. SECOND: Mr. Barone seconded the motion. CARRIED: The motion carried unanimously 3 -0. BENEFIT APPROVALS MOTION: Mr. Barone made a motion to approve the applications to enter the DROP for Ernest Carr, George Betshca and Robert Thomas. SECOND: Mr. Seidensticker seconded the motion. CARRIED: The motion carried unanimously 3 -0. MOTION: Mr. Seidensticker made a motion to approve the application for a refund of contributions for Cokes Watson. SECOND: Mr. Barone seconded the motion. CARRIED: The motion carried unanimously 3 -0. FINANCIAL STATEMENTS The board reviewed and discussed the financial statements that were provided through December 2010. The board received and filed the financial statements through December 2010. OLD BUSINESS Ms. Jensen noted that Mr. Pierson and Mr. Seidensticker were reappointed to serve another 4 year Trustee term on this pension board. OTHER BUSINESS Mr. Spencer explained that a member by the name of George Smith was employed with the City back in 1992 and for some reason did not start contributing to the pension plan until sometime in 1996. With that said the Actuary did a calculation reflecting what his contributions would have been for that time period, and Mr. Spencer wants the board to consider allowing Mr. George the option to repay back his contributions for that time frame. Ms. Jensen recommended to the board that they should research this situation more as Mr. George may have been with the group of members who opted out of the plan and then reentered sometime in 1995. The board discussed Mr. George's situation and the letter from the Actuary and decided to table this discussion until more information is researched. Mr. Spencer explained that currently there are some retirees who are still paying into the VEBA through pension deductions. The Pension Resource Centers is deducting the member's premium from their monthly pension check and then sending it over to the VEBA fund. Currently there is a discrepancy on the amounts that are being deducted because of how the amount is calculated. Mr. Spencer explained that it is not the Pension Resource Centers or the pension board's responsibility to calculate the amounts to be deducted from the retiree's pension check for the VEBA, so he asked GRS to prepare a quote for the VEBA board so they can see how much it will Minutes 27- dog Page 6of7 cost them to have a calculation completed. Ms. Jensen noted that the board does not need to take any action on the letter and that it just needed to be forwarded to the VEBA Attorney and Chair. Mr. Spencer reviewed a letter that he received from the City Manager regarding the Police pension board's participation in a meeting with the City reps and Union reps. He stated that the City wants to get together with all parties to help find ways to cut City costs. Mr. Seidensticker briefly reviewed a letter that he put together in response to the City's letter. The Trustees discussed the letter and commented that at every meeting they always discuss ways to help reduce costs and save money. Also the board can not make or change benefits, they can only administer them as they are. The board understands the City's concerns and they look forward to meeting with all parties to help come up with plan saving ideas. PUBLIC COMMENTS Mr. Knopf introduced himself to the board and stated that he is a Consultant for the class action law firm Weiss & Laurie out of New York. He commented that he has done class action work for over 20 years with this firm and he brings in over 50% of their cases. Mr. Knopf explained that his office is local and that he does business with the Fire pension board. He stated that he would like to have the relationship with the board as he understands that most of this funds assets are in index funds so it would be very unlikely for them to be a lead plaintiff in a case. AJOURN There being no further business, and the future meetings are scheduled for the 3rd Thursday of the first month proceeding the quarter. The next regular meeting was scheduled for Thursday April 21, 2011 at 9AM; the Trustees officially adjourned the meeting at 5:31PM. Respectfully submitted, DAVID PIERSON, Secretary Minutes 1- 27- 11.doc Page 7of7