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.
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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.
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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 %.
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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.
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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.
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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
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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
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