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HomeMy WebLinkAboutMinutes Fire Pension 012523CITY 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 25, 2023, at 1:OOPM TRUSTEES PRESENT: Rick Rhodes Eric Bruns Jon Currier Mike Zingaro Thomas Topor TRUSTEES ABSENT: None OTHERS PRESENT: Siera Feketa, Foster & Foster John Thinnes, AndCo Consulting Pedro Herrera, Sugarman and Susskind Doug Lozen, Foster & Foster 1. Call to Order — Rick Rhodes called the meeting to order at 1:01 PM. 2. Roll Call — As reflected above. 3. Public Comments — None. 4. Approval of Minutes a. October 26, 2022, quarterly meeting i. Rick Rhodes recommended two revisions, the first being on page 2, Section 7(a)(ii)(5) should reflect that the gross returns slightly outperformed rather than underperformed. Rick Rhodes commented the second revision was the last motion approving the FPPTA membership should have the word "approved" added to the motion. The Board approved the October 26 2022 quarterly meeting minutes with revisions upon motion by Jon Currier and second by Thomas Topor• motion carried 4-0 Note: Mike Zingaro arrived at 1:03PM. 5. New Business a. Election of Officers (Chairman/Vice-Chairman/Secretary) i. Siera Feketa reviewed commenting this was scheduled to be done annually at the first meeting of each year. Siera commented the current Chairman, Vice -Chair, and Secretary were Rick Rhodes, Eric Bruns, and Jon Currier respectively. Siera commented they could reelect the same officers or elect new ones. The Board voted to reelect the current officers upon motion by Jon Currier and second by Eric Bruns: motion carried 5-0. b. Actual expenses as of September 30, 2022 i. Siera Feketa reviewed the requirement for the actual expenses commenting the plan was under budget. The Board approved the actual September 30 2022 expenses as presented upon motion by Jon Currier and second by Eric Bruns; motion carried 5-0 Review of Request for Proposals (RFPs) i. Pedro Herrera reviewed the RFPs that were sent out for plan administration and actuarial services. ii. Pedro Herrera reviewed the discussion the Board had at the July meeting regarding the Foster & Foster fee proposal resulting in the RFP. Pedro commented Foster & Foster presented fee proposals and the Board felt it was beneficial to do their due diligence and see what other options were out there. iii. Actuarial services 1. Rick Rhodes commented this stemmed from Foster & Foster's request for an annual consumer price index (CPI) increase. Rick commented they extended the current contract with a CPI increase with a minimum of 1 % to a maximum of 5%. Rick asked Siera Feketa if it would have hit the maximum this year. Siera commented that figure was not yet available as CPI was determined as of June 30th. Rick commented it would have been over 5% for 2022 if it was in place then. Siera commented they proposed the CPI increase effective 10/1/2023. Doug Lozen commented this was the first year of increases, but if it would have been effective 10/1/2022 it would have been over the 5%. Rick commented that was his concern with inflation so that was why they sent out the RFPs. Rick reviewed the options Foster & Foster previously presented commenting they offered a fixed 4% annual increase or CPI with a minimum of 1 % and maximum of 5%. 2. Eric Bruns asked if the Board was familiar with the other firms. Rick Rhodes commented he was not and asked Pedro Herrera if he was. Pedro reviewed commenting he works with the other firms. Pedro commented Foster & Foster has the most Florida pension funds that he was aware of, and GRS probably has the next most. Pedro commented they were the most prevalent, but they have worked with all the firms. 3. Rick Rhodes commented they have not been unhappy with any services, and they have done a bang-up job with both services, but he was just not happy with the CPI increase. Rick commented he worked with CPI in another contract, and they terminated the contract. Eric Bruns reviewed the non -quantifiable costs associated with switching service providers. Eric commented he just does not like CPI and was not comfortable with an automatic increase. Rick commented none of the other providers put in an increase and guaranteed the fees for three years. 4. Eric Bruns commented they put it out there and he does not like the CPI, but he would bite the bullet to have good service. 5. Jon Currier commented when they switched administrators it was difficult. 6. Mike Zingaro asked if Foster & Foster would consider a fixed rate over a three- year period without the automatic increase. Doug Lozen commented they came up with the additional options they presented with a minimum and maximum and a fixed rate option. 7. Eric Bruns commented he was most comfortable with the CPI with floor and ceiling as that was more tied to reality than a fixed increase. Thomas Topor commented he likes the lesser of two evils. 8. Rick Rhodes asked the Board if they would rather stay with Foster & Foster. The Board agreed to stay with Foster & Foster. The Board voted to continue with Foster & Foster for actuarial services upon motion by Eric Bruns and second by Thomas Topor; motion carried 4-1 Rick Rhodes opposed iv. Plan administration services 1. Rick Rhodes commented there were some he was not familiar with. Rick asked if Pedro Herrera was familiar with these firms. 2. Pedro Herrera commented they were familiar with all the firms and Foster & Foster was the largest. Pedro reviewed HYN Consulting commenting they were a smaller shop and they do a nice job. Pedro discussed L&A commenting they were probably similar to Foster & Foster, but they only have one client in Florida. Pedro stated they were based out of Michigan, but they were familiar with the work as they do 2 similar work for many plans up north. Pedro commented they have a great administrator now and he does not see a need for a change, but that was up to the Board. 3. Jon Currier commented he has been happy with Foster & Foster and the switch to someone else would be difficult. Jon commented the fee structure was not preferable, but the better option. Eric Bruns commented he has similar feelings as he does with actuarial. Jon commented he thinks it was not worth the change. Thomas Topor commented he was trying to get perspective by getting proposals. Thomas commented maybe if it was not broken do not fix it. Jon commented plus the one firm was considerably more than the others. Rick Rhodes commented his concern was the out years as the cost continues to grow. Rick commented it was a good exercise and they did their due diligence. The Board agreed. The Board voted to continue with Foster & Foster as plan administrator, upon motion bV Jon Currier and second by Eric Bruns: motion carried 4-1 Rick Rhodes opposed 4. Rick Rhodes commented he never had a problem with Foster & Foster aside from the contract. 5. Pedro Herrera commented he would work to finalize the addendums with the fee schedule. 6. Old Business — None. 7. Reports (Attorney/Consultants) a. Foster & Foster, Doug Lozen, Board Actuary i. October 1, 2022 actuarial valuation report 1. Doug Lozen reviewed the summary of the report and funding requirements commenting the City's required contribution decreased to 51.47% for fiscal year ending September 30, 2024 from 52.39% for fiscal year ending September 30, 2023. Doug Lozen commented the decrease was attributable to net favorable actuarial experience but was offset in part by a reduction in the investment return assumption from 6.95% to 6.85%. 2. Plan experience was favorable overall on the basis of the plan's actuarial assumptions. Sources of actuarial gain included interest crediting on DROP and Share Balances and inactive mortality experience. This gain was offset in part by losses associated with an investment return of 3.87% (Actuarial Asset Basis) which fell short of the 6.95% assumption and an average salary increase of 10.97% which exceeded the 4.54% assumption. 3. Mike Zingaro asked how they know when people pass away. Doug Lozen commented they were notified by the administrator or they see the payment stopped when reviewing custodial statements. 4. Doug Lozen discussed the share plan and the Mutual Consent Agreement with the City commenting they were starting to have some allocations for the share plan as the State monies exceeded $750,072.76. 5. Doug Lozen reviewed the shortfall commenting the $213,103.38 was due in addition to the stated funding requirements for fiscal year end September 30, 2023. Rick Rhodes asked if the credit was gone. Doug confirmed it was. 6. Eric Bruns asked what the deadline was to make the contribution. Doug Lozen commented the sooner the better. Doug commented by March would be best since the Annual Report was due March 15th and that deposit date needs to be in the Annual Report. Rick Rhodes commented would he send this to the City once approved. Doug commented he would send the report to the City. 7. Doug Lozen commented the investment return assumption was reduced from 6.95% to 6.85% and there was one more reduction scheduled to go to 6.75% and then they would stay there unless the Board approves further direction. Doug commented the Florida Retirement System (FRS) just decreased. Doug commented they were close to FRS and their 6.85% was a little lower than the average throughout the State. 8. Doug Lozen reviewed the history of funding progress commenting they have been steady for the last decade commenting with this report they were about 86% funded. Doug commented the fact that the funded status has remained steady as they have lowered the investment return assumption was great news. Doug commented it was a win to be more conservative on the investment return assumption and still maintain funding progress. 9. Doug Lozen reviewed the Reconciliation of Unfunded Actuarial Accrued Liabilities and the schedule of payments being made to unfunded liability. Doug commented they were all paid off over different periods of time. Doug reviewed the items that would fall of next recommending a consolidation of the unfunded next year. Doug reviewed the impact of consolidating the unfunded. 10. Eric Bruns asked why they have not consolidated in the past. Doug Lozen commented the only reason to recommend it was when the list gets too big and when credit pieces start to fall off. Doug commented they have not had credits of magnitude falling off in the past. 11. Rick Rhodes asked if the State would question it. Doug Lozen commented no they do it all the time. The Board voted to approve the October 1 2022 Valuation Report as presented upon motion by Eric Bruns and second by Jon Currier; motion carried 5-0 The Board voted to approve consolidating the unfunded liability with the October 1 2023 valuation upon motion by Mike Zingaro and second by Jon Currier; motion carried 5-0 12. Pedro Herrera reviewed the declaration of returns and the requirement to have the returns declared. Pedro commented it mirrors the investment return assumption. Pedro commented it does not have to be the same, but the State would question it if it was not the same as what was reported in the valuation report. 13. Eric Bruns asked if it should be 6.75% since that was what they were changing to next year. Doug Lozen commented for this purpose they recommend using 6.85% and then next year they would declare 6.75%. The Board voted the declaration of returns for the plan shall be 6.85% for the next year, the next several years, and the long-term thereafter net of investment related expenses upon motion by Eric Bruns and second by Jon Currier; motion carried 5-0. b. AndCo Consulting, John Thinnes, Investment Consultant i. Quarterly report through December 31, 2022 1. John Thinnes reviewed the market charts and the market reversions over time. 2. The preliminary Market Value of Assets as of December 31, 2022 was $131,053,562. 3. John Thinnes reviewed the asset allocation by asset class. John Thinnes reviewed the changes the Board has made to the portfolio over the last year. 4. The total fund preliminary gross returns for the quarter were 5.45%, slightly outperforming the benchmark of 5.40%. The total fund trailing gross returns for the 1, 3, 5, 7, and 10-year periods were-13.86%, 3.15%, 5.08%, 7.07% and 8.06% respectively. Since inception (May 1, 1998), total fund gross returns were 6.12%, slightly outperforming the benchmark of 6.10%. 5. John Thinnes reviewed the performance of the investment managers and how they impacted the portfolio. John reviewed Dana commenting they had a good quarter, but he thinks they made a good decision with moving funds from them. 6. Rick Rhodes and John Thinnes briefly discussed the real estate market. 4 7. John Thinnes commented they were off to a good start of the fiscal year, but their fiscal year ends on September 30th so they still have a ways to go. John reviewed their outlook on the market and inflation. 8. Eric Bruns asked what the turnaround was to get their money from American Realty Core Property Fund and Intercontinental Real Estate. John Thinnes briefly discussed commenting if they asked for a redemption, they would get it back in two quarters and they could not take all of it. Mavik Capital Management Review 1. John Thinnes commented he discussed this at the last meeting. John commented it was a debt fund and reviewed how they invest. 2. John Thinnes commented they have raised about 60% of their goal and have other deals pending. 3. John Thinnes commented they would be locking money up, but it was a shorter deal than other funds. John commented most funds like this lock up the funds for 10 years and this one was much shorter. John reviewed the performance and expected returns. John commented they were already investing so they would hopefully earn returns right away. 4. John Thinnes commented it was different and this was a growing plan. John reviewed the other plans that have committed to this fund. John commented he thinks he could afford $2 million, which would probably get called quick. 5. John Thinnes and the Board discussed the fund and the possible risks associated with it. John commented the fee was 1.5% on invested capital. Rick Rhodes asked if they get any bonuses. John commented it was 8% preferred commenting they get a 20/80 split of anything above 8%. The Board and John discussed the preferred performance fee. 6. Jon Currier asked how they want to fund this. John Thinnes commented their portfolio was fluid. John commented he thinks traditionally it would come from bonds, but he would invest in line with the Investment Policy Statement (IPS) to keep the plan close to targets. 7. John Thinnes commented he wants to do $2 million, but he thinks $1 million was fine. John commented it would be committed for about five years but could be longer. 8. The Board and John Thinnes discussed the fund and the pros and cons. 9. Rick Rhodes commented he noticed they changed their name and they used to be TerraCap, which they changed in 2021. Rick asked if they had issues as TerraCap. John Thinnes commented not that he knows of. 10. Eric Bruns asked what the biggest selling point was. John Thinnes commented the plan was going to grow and he thinks it was going to be successful and if they open a second fund, they would be grandfathered in to participate. 11. John Thinnes commented the recommendation would be to commit $1 million to Mavik upon legal review. 12. Thomas Topor commented he trusts AndCo so he likes it. Eric Bruns commented he has issues with itjust because itwas private. John Thinnes commented he likes the idea but concerned about it being a new type of investment. Jon Currier commented it sounds exciting, but he thinks it was more emotional than anything else. Mike Zingaro commented he was in favor of diversification. Rick Rhodes commented he agreed with the diversification. Rick commented it was riskier, but they were bigger now and they need to diversify more. Rick commented he thinks the fund needs to do it to grow more and keep them ahead of the game like they were last year. Rick commented he was in favor of it. Eric commented $1 million was not too significant so those were great points and would allow them to dip their toe in. 13. The Board and John Thinnes discussed the fund further. 14. John Thinnes commented long term he would like to see the 10-15% of the fund be invested in assets like this. John commented they could afford to, but right now he only recommended $1 million because they have so much in real estate. 5 The Board voted to approve at the recommendation of AndCo to move $1 000 000 to Mavik Capital subiect to legal review and fund at his discretion to remain in line with the Investment Policy Statement, upon motion by Mike Zingaro and second by Thomas Topor• motion carried 3-2 Eric Bruns and Jon Currier opposed. 15. Pedro Herrera commented they would work on getting the documents completed. Pedro commented when ready he would send it to Siera Feketa to send to Rick Rhodes for signature. Pedro commented he just confirmed with John Thinnes the Investment Policy Statement does not need to be amended. c. Sugarman and Susskind, Pedro Herrera, Plan Attorney i. Pedro Herrera commented he thinks they covered most of his items already. ii. Pedro Herrera commented there was a Secure Act that passed a couple years ago. Pedro commented two months ago the Secure Act 2.0 passed. Pedro commented the original Secure Act increased the RMD age to 72 and this one increases it another year but was contingent upon when they retire. Pedro commented they would be providing a special report. Pedro commented they would likely need to amend the Ordinance to comply with the change. Mike Zingaro asked if that means they need to start taking money at that age. Pedro confirmed it does. iii. Pedro Herrera reviewed the FPPTA trustees school commenting they would be there. iv. Pedro Herrera reviewed the typical Division of Retirement school in Spring. Siera Feketa commented she heard they may not continue due to a lack of attendance in the past. Siera commented between her and Pedro they would keep the Board updated. The Board discussed who was attending FPPTA. 8. Consent Agenda a. Payment ratification i. Warrants #57, #58 b. Payment approval i. None c. Fund activity report for October 20, 2022 — January 18, 2023 d. Jon Currier asked if its normal for Mike Zingaro to have two FPPTA fees. Siera Feketa commented that was because one was for the CPPT program. e. Rick Rhodes made note the COLA was on the fund activity report. The Board approved the Consent Agenda as presented upon motion by Eric Bruns and second by Jon Currier; motion carried 5-0. 9. Staff Reports, Discussions and Action a. Foster & Foster, Siera Feketa, Plan Administrator i. Fiduciary liability policy renewal 1. Siera Feketa reviewed commenting the policy expires on March 10, 2023. Siera commented the renewal quote was $9,962.34, which was a base of $9,767.00 plus a $195.34 FIGA surcharge. Siera commented the base premium was $37.00 more than last year. The Board voted to renew the Fiduciary Liability policy as presented upon motion by Eric Bruns and second by Thomas Topor; motion carried 5-0. ii. Upcoming educational opportunities 1. Siera Feketa reviewed the FPPTA 39'" Annual Conference from June 25, 2023 through June 28, 2023 in Orlando, FL. iii. Siera Feketa reviewed the meeting location and the issues with the room if someone needs to attend by phone. Siera commented she was not sure if they want to change rooms or have Pedro Herrera reach out to the City. iv. Rick Rhodes asked Pedro Herrera to send the City a letter. Pedro commented he thought he sent an email, but he would send a letter and hopes to resolve this. Pedro commented 6 he would work on that and then update the Board at the next meeting. Pedro commented if they need to change locations before the next meeting, they have time to do that, but he thinks they could resolve it. 10. Trustee's Reports, Discussion and Action — None. 11. Adiournment — The meeting was adjourned at 2:48PM. 12. Next Meeting — April 26, 2023, at 1:OOPM, quarterly meeting. Respectfully submitted -�by: Apprued-by- Siera Feketa, Plan Administrator 'Jar Urrier, Secretary `"> Date Approved by the Pension Board: 2 7