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HomeMy WebLinkAboutMinutes Fire Pension 02210605/03/2006 12:31 5616243278 RESQ.tRCE CENTER PAGE 03/08 PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND MINUTES OF MEETING HELD February 21, 2006 A meeting of the Board of Trustees was called to order at 9.42 A.M. at Station 3, Palm Beach Gardens, Florida. Those persons present were: TRUSTEES OTHERS Richard Beladino Margie Adcock, Administrator Philip Buttaravoli Robert Sugarman & Pedro Herrera, Attorney Tom Murphy David West, Investment Monitor Ed Morejon Steve Gordon, Accountant Brad Armstrong, Actuary Alan Owens, Finance Director Chris Tatum, City Attorney Ray Ellis, City Clerk's Office Hal Valeche, City Council Member MINUTES The Board reviewed the minutes of the meeting held November 28, 2005. A motion was made, seconded and carried 4 -0 to accept the minutes of the meeting November 28, 2005. ANNUAL AUDIT Steve Gordon appeared before the Board to present the audit for the period ending September 30, 2005. He reviewed the statement of Plan .net assets. The total assets of the Fund as of September 30, 2005 were $13,735,141 almost all of which were in investments. Total liabilities were $45,963. Total net assets of the Fund as of September 30, 2005 were $13,689,178. Mr. Gordon. reviewed the statement of changes in Plan net assets. He reported that there was a total net investment income of $1,431,612. The total contributions to the Fund were $2,283,520. Mr. Gordon then discussed the schedule of funding progress that he is required to include in the Audit but that is provided for in the Actuarial Valuation. He stated that as of October 1, 2004 the funded ratio was 38.33 %. He noted that this is an important measure of the financial health of a pension plan. Mr. Gordon noted that the assets did increase in the Fund. The investment .return was better than in the prior year but the funded ratio went down a bit. He noted that the funded ratio for this Plan is the .lowest of his clients. Most of his clients are in the Wx4, to 70% ratio. A motion was made, seconded and carried 4 -0 to accept the audit for the period ending September 30, 2005. Steve Gordon departed the meeting. 175/83/2806 12:31 5616243276 RESOURCE CENTER PAGE 04/06 ATTORNEY REPOR Mr. Sugarman .reported on the status of the proposed real estate ordinance. He stated that his office contacted the City Attorney and she was here to discuss the status with the Board. Chris Tatum stated that there was some miscommunication. She stated that the City did receive the proposed ordinance last year but the City Manager was unaware of any required action needed by the City. She stated that the City Manager would like someone from the Board to set up a meeting with him to talk about it. Mr. Sugarman stated that real estate is regulated by State law and the Board needs a specific provision in the ordinance to allow for investments in real estate. He stated that the Investment Monitor. is .recommending exposure to real estate. Ms. Tatum asked if the Investment Monitor could provide something in writing on his recommendation. Ms. Tatum stated that she would see that this matter is put on the City's agenda most likely in March. Chris Tatum departed the meeting. Tom Mtuphy departed the meeting. ACTUARY REPORT Brad Armstrong appeared before the Board to present the Actuarial Valuation as of October. 1, 2005 which is applicable to the City's contributions for fiscal year beginning October 1, 2006. He stated that they collected data as of September. 30, 2004 and ran a parallel on the prior Valuation. He stated that they uncovered one problem. He noted that the three primary objectives in his report are to explain what happened, determine the contribution rate and determine the funded ratio. Mr. Armstrong stated that the Board should be looking for two red flags. The first one is cash flow. He noted that there are four disabled retirees and one regular retiree. The benefits paid are about $1.00,000 a year and the Fund receives over $1,000,000. Therefore the cash flow is very positive. Illiquidity of the investments is not a problem here at all. The second red flag concerns the amount and timing of the contributions. He noted that there is not a problem .here as the contributions are being made in the amount recommended and on the timing recommended. Mr.. Armstrong reviewed the observed experience. From March 2000 to March 2003 there was a period of negative returns. To the extent the Fund uses smoothing, all of the losses have been recognized so. there was a gain of $100,000 on that assets. The rate of return was 9.9% versus the expected rate of 8.5 %. There was a loss of approximately $2 million due to an increase in the average salary of 12.8% versus the expected increase of 6.5 %. There was a loss due to the fact that there were no terminations, unrecognized disability retirements, changes in actuarial methodologies, and a lag between the valuation date and the .receipt of contributions. There was a lengthy discussion on the salary increase assumption. Mr. Armstrong advised that the total contribution about required is 32.09% of payroll with the employee contribution of 6 %, the 175 monies of 1.94% and a City contribution of 24.15 %. He stated that the funded ratio will almost double in the next 15 years if all else remains equal. He reviewed the actuarial balance sheet. The actuarial present value of expected future benefit payments and reserve is 538,982,455. He reviewed the accounting information and the revenues and expenditures. He discussed the four year smoothing teciuiique and OD/ 03/ Z00b 1Y: dl nb1bY4jY /tl RESOURCE CENTER PAGE 05/06 reviewed the Participant data. He discussed disabilities noting that the experience in the Fund is higher than expected. There was a lengthy discussion. City Council Member Valeche expressed concern here. He noted that he was .recently made aware of this issue, noting that the Police Pension Plan has this issue as well. Mr. Armstrong reviewed the contributions required and the schedule of funding progress. He noted that the funded ratio is 38.4 %. if the Share Account is included then the funding progress is 43.5 %. He did not include it as historically it has not been included although he thinks it should be. Mr. Armstrong stated that what concerns him the most is the withdrawal assumption. He thinks the salaries are coming under control. Disabilities may be a problem but it will not have as much of an impact as no one is leaving. Mr. Armstrong stated that be would advise the Board for the Valuation next year on terminations. Tom Murphy reentered the meeting. A motion was made, seconded and carried 4-0 to approve the Actuarial Valuation as of October 1, 2005. FIDUCIARY (LIABILITY Margie Adcock advised that there was an issue regarding the renewal of tine Fiduciary Liability Insurance. She stated that she was informed at the end of last week that Travelers did not renew the insurance due to underwriting guidelines. She advised that the funded ratio is impacting the ability to renew the insurance. There was a discussion on the ability to increase the funded. ratio. Mr. Armstrong stated that he could change the cost method to the aggregate cost method and that should increase the funded ratio. He is comfortable with changing it to the aggregate cost method and the State has accepted such changes in the past when there is a change in the actuary of a plan. Ms. Adcock stated that she is still waiting on additional information for possible quotes. The Board determined that it would hold a special meeting when a quote is obtained. Mr.. Armstrong would review what changes could be made to increase the funded ratio and would discuss his findings with the City. A motion was made, seconded and carried 4-0 to withdraw the motion. approving the Actuarial Valuation and table the approval of the Actuarial Valuation until the matter of the fiduciary liability insurance can be resolved. MONITOR REPO David West appeared before the Board. The Board reviewed a memorandum regarding a fee adjustment. The Board questioned whether they would incur another manager search fee for real estate when the search they initially performed did not materialize. Mr. West responded in the negative. He stated that the onus was on them to bring forward a suitable product. There was discussion on conflicts for manager searches. He stated that he believed the process was objective. A motion was .arcade, seconded and carried 4 -0 to accept the fee adjustment. Mr. West discussed the investment performance for the quarter ending December 31, 2005. The Fund was up .93% for the quarter while the benchmark was up 1.78 %. The G5I173/ 21 Ub 12:31 5616243276 RE9Q.RCE CENTER PAGE 06/06 total market value of the Fund as of December 31, 2005 was $13,922,000. The asset allocation at market was 67% in equities; 30% in fixed income; and 3% in cash. He noted that since the end of the quarter, Freedom Capital was funded. There was discussion about investments in China. Mr. West stated that they Board could put a restriction on China but they have the ability to go there and China is represented in the index. The Board asked Mr. West to provide a comparison on the Dana ishare product the Fund was invested in before it moved to Freedom Capital. Mr. West reported that the fixed income portion of the portfolio was up .1$% for the quarter while the benchmark was up .52 %. The total market value of the fixed income portion of the portfolio was 54,176,000. Mr. West noted that fixed income has not been a big contributor to returns. He stated that for the one year period the fixed income portion was up 1.08% which was in the 96th percentile. He stated that they would be meeting with the Dana fixed income managers to see if they can come up with some solutions. The Board noted that in seven years Dana fixed income has never been in the 501h percentile and questioned why Mr. West was still recommending to keep them. Mr. West stated that they are trying to identify a problem here and he believes that they need to broaden the benchmark. The Board noted that .Dana is supposed to be the manager here and questioned if it was time to look for a new fixed income manager. Mr. West responded that they were getting close and noted that there are additional products out there that are more cost effective but he wanted an opportunity to meet with Dana first. The Board stated that they wanted a written letter after meeting with Dana on the results. Mr, West stated that they recommended the Board stick with Dana at this time. The Board stated that they wanted alternatives to be brought to the next meeting. It was .noted that the Board spent a lot of time and effort on ING and in the end a deal could not be put together. The Board does not want to go through that again and wants to be able to do something at the next meeting if necessary. Mr. West stated that he would bring a. fixed income manager search to the next meeting and would provide the Board with the results of his meeting with Dana and their recommendation. Mr. West responded to the concern of ING. He stated that a search was done and there was a technical or legal problem. They view the situation as still open and need to bring it to closure. Mr. Sugarman stated that they sent ING the side letter that was done for Freedom Capital and ING said they would not sign it. As such, Mr. Sugarman. stated that he could not recommend the contract and the monitor needs to bring another alternative. Mr. West continued with his report. He stated that equities for the quarter were up 1.35% versus the S &P 500 which was up 2.41 %. The total market value of the equity portion of the portfolio was $9,275,000. Tom Murphy stated that a securities lawyer keeps calling him about certain stocks the Fund is holding. Mr. Sugaman discussed securities litigation. He stated that he would send a Request for Proposal to three firms and invite them to attend the next meeting. ATTORNEY REPORT CONTINUED There was a discussion on the disability application of Shawn Thurman. It was noted that the Fund is in the process of obtaining his records and will send them to a cardiologist 05/03/2006 12:31 5616243278 RESOURCE CENTER PAGE 07/08 once they are received. There was a discussion on the definition of heart disease. Margie Adcock advised that she has sent requests to obtain the medical records. She noted that Palm. Beach Gardens Medical Center has advised that they want $1000 in advance for the records. It was noted that he .had a prolonged hospital stay there_ It was determined that the Fund really only needs the admission summary and discharge summary for each hospital stay, the results of any surgical reports, CT reports, pathology reports, the echocardiogram and EKG reports. The Board also noted that they needed to obtain the City workers' compensation records and exposure reports. ADMINISTRATIVE REPORT Margie Adcock presented the list of disbursements to be made. A motion was made, seconded and carried 4 -0 to approve the disbursements listed. OTHER BUSINESS The Board discussed the Summary Plan Description. It was noted that it has not been revised in some time. A motion was made, seconded a9d carried 4 -0 to authorize Brad Armstrong to update the Summary Plan Description. There being no fwthcr business, the meeting adjourned at 2:00 pion. Respectfully submitted, Ed Morejon, Secretary