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.
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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
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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
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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
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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