HomeMy WebLinkAboutMinutes Fire Pension 022007PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND
MINUTES OF MEETING HELD
February 20, 2007
A meeting of the Board of Trustees was called to order at 9:40 A.M. at Station 3, Palm
Beach Gardens, Florida. Those persons present were:
TRUSTEES OTHERS
Richard Beladino
Ed Morej on
Tom Murphy (10:35 A.M.)
Steve Rogers
Philip Buttaravoli (10:50 A.M.)
MINUTES
Margie Adcock, Administrator
Robert Sugarman, Attorney
Joe Bogdahn, Investment Monitor (10:50 A.M.)
Brad Armstrong, Actuary
Steve Gordon, Auditor
Allan Owens, Finance Director
The Board reviewed the minutes of the meeting held November 13, 2006. A motion was
made, seconded and carried 3 -0 to accept the minutes of the meeting held November 13,
2006.
ANNUAL AUDIT
Steve Gordon appeared before the Board to present the audit for the period ending
September 30, 2006. He reviewed the Statement of Plan Net Assets. The total assets of
the Fund as of September 30, 2006 were $17,357,075 almost all of which were in
investments. Total liabilities were $34,735. Total net assets of the Fund as of September
30, 2006 were $17,322,340. Mr. Gordon reviewed the Statement of Changes in Plan Net
Assets. He reported that there was a total net investment income of $1,137,782. The total
contributions to the Fund were $2,751,596. 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 reviewed the notes to the financial statements. Mr. Gordon
stated that there was no unusual matter to discuss or disclose regarding the audit of the
Fund for the period ending September 30, 2006. .
ACTUARY REPORT
Brad Armstrong appeared before the Board to present the Experience Study on the
Assumptions and Methods as of September 30, 2005. He noted that the purpose of the
experience study was to try to bolster and stabilize the funded ration and trend towards
100 %. He discussed the primary areas of demographic and economic assumptions. He
first reviewed the demographic assumptions and began with the rates of withdrawal from
active membership. He stated that the previous actuary used certain rates, perhaps
because the Fire Department was young and there was turnover early on. However, he
noted that now the Department is more established. There were questions from the
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Trustees regarding the withdrawal assumptions used in the past. Mr. Armstrong stated
that it was his opinion that those rates were inconsistent with other firefighter groups.
There was a lengthy discussion on the rates used by the previous actuary. Mr. Armstrong
stated that he is unaware of a basis for the prior assumptions to be reasonable. He noted
that the prior actuary assumed more people would leave the Department than actually did.
From reviewing the reports he received, Mr. Armstrong stated that he thought the reason
why the funded ratio dropped so precipitously was because no one was actually
withdrawing. Mr. Armstrong reviewed the rates of retirement and discussed his proposed
change. He reviewed the rates of disability and stated that he was not proposing a change.
He felt that assumption was consistent with other rates he has seen and is reasonable so
there is no reason to change it. He reviewed the rates of pay. He reviewed the rates of
mortality and proposed a change to the RP 2000 for non - disabled lives and the RP 2000
Disabled for disabled lives.
Tom Murphy entered the meeting.
Mr. Armstrong reviewed the economic assumptions. He reviewed the rates of return. He
reviewed the historical patterns of investment returns, pay increases and inflation. He
stated that he was recommending a change from 8.5% to a gross 8.25 %. There was a
lengthy discussion on the mechanics of paying expenses.
Joe Bogdahn and Philip Buttaravoli entered the meeting.
Mr. Armstrong reviewed the comparison of curretn and proposed assumptions and
methods for the City contribution rates as of September 30, 2005. He reviwed the
amortization assumption. He recommended the amortization assumption be reduced by
one year increments each year until it reaches 25 years, which would represent the full
career of a firefighter. There was discussion on including the Share Account for purposes
of the funded ratio. Mr. Armstrong stated that he would like the changes to take effect
for the Plan Year beginning October 1, 2007. If that is the case, the Board would not see
whether the changes have an effect until the Valuation is done for the Plan Year ended
September 30, 2008. The Board asked Mr. Armstrong aobut other ways to excellerate
the funded ratio. Mr. Armstrong stated that the ultimate excellerator is a pension
obligation bond, although he was not a big fan of those. He thinks they are a lot more
costly and can backfire if there is a down market. Mr. Sugarman stated that the Board
can ask the City can put more money in the Fund; excellerate the 27 year amortization
schedule; or ask the City to make an additional contribution each year over a period of
time. There was a lengthy discussion on shortening the amortization schedule. A motion
was made, seconded and carried 5 -0 to adopt the actuarial assumptions recommended by
the Actuary based upon the Experience Study as of September 30, 2005 as explained by
Brad Armstrong to take effect in the September 30, 2006 Valuation. A motion was
made, seconded and carried 5 -0 to accept the audit for the period ending September 30,
2006.
Steve Gordon, Brad Armstrong and Allan Owens departed the meeting.
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INVESTMENT MONITOR REPORT
Joe Bogdahn appeared before the Board. He discussed the investment performance for
the quarter ending December 31, 2006. The Fund was up 4.73% for the quarter while the
benchmark was up 5.30 %. The total market value of the Fund as of December 31, 2006
was $18,826,000. The asset allocation at market was 59% in equities; 32% in fixed
income; 1% in REIT and 8% in cash.
Mr. Bogdahn reported that the fixed income portion of the portfolio was up 1.20% for the
quarter while the benchmark was up 1.03 %. He stated that they had a discussion with
Dana on how they were applying the fess on a balanced account. He stated that they were
not applying the fees incorrectly, but were not applying them in a way where they would
get a true representation. They revised the performance numbers based on a change in
how they are going to apply the fees and the revised performance show that the Fund was
up 1.32% for the quarter versus the benchmark which was up 1.03 %. He stated that Dana
has outperformed the gross bond benchmark each year out of the last three years. He
stated that they are seeing some bond manager fees going down and stated that they
received a concession from Dana to reduce their fee on the bond side to 25 basis points.
Mr. Bogdahn stated that Dana has a conservative portfolio using the Lehman
Government/Credit Intermediate Index. He stated that the Lehman Aggregate Index is a
broader benchmark. He stated that they do not recommend changing the entire portfolio
because as the duration is lengthened the risk increases. He thinks that the Intermediate
Index is the place to stay. The Aggregate Index is a little more risky although the Fund
could pick up some additional return. He thinks it is incrementally there is not a whole
lot of difference. He stated that while he does not recommend a wholesale shift, the
Board could put a portion of the portfolio in the Aggregate Index. He provided the Board
with information on two alternatives. He stated that he did not think it was prudent to put
all of the bond money in the Aggregate Index as that would be taking additional risk and
the reward would not be worth the risk. There was a lengthy discussion. He suggested
having an in -depth bond review. He would like to look at the Intermediate portfolio with
respect to other Intermediate managers, look at adding some Aggregate exposure, and
looking at a blend of the Intermediate and Aggregate. He feels more comfortable
looking at other managers relative to Dana now that the fees and numbers have been
straightened out.
Mr. Morej on stated that he would like to have monthly meetings as he felt there was a lot
of business to discuss that can not be done on a quarterly basis. A motion was made and
seconded to have monthly meetings. There was a discussion on the motion. It was noted
that perhaps meetings every other month versus monthly might be the place to start. A
motion was made and seconded to amend the previous motion to have meetings every
other month with the exception of next month. There was a lengthy discussion. The
amended motion was called and failed 2 -3 with Mr. Rogers, Mr. Morejon and Mr.
Murphy opposing the motion. The original motion was called and passed 3 -2 with Mr.
Beladino and Dr. Buttaravoli opposing the motion. The Board then set the meeting
dates for the monthly meetings.
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Mr. Bogdahn reported that the total market value of the total equity portfolio was
$11,073,000. Equities for the quarter were up 7.18% versus the benchmark which was up
7.61 %. The equity portfolio managed by Dana was up 6.03% for the quarter while the
benchmark was up 7.12 %. Mr. Bogdahn stated that he had no concerns on the way Dana
has managed the equity portfolio. The total market value of the equity portfolio managed
by Dana was $9,460,000. The international equities managed by Freedom was up
14.42% for the quarter while the benchmark was up 10.40 %. The total market value of
the international equity portfolio managed by Freedom was $1,614,000. The REIT
portfolio was up 1.66% for the quarter while the benchmark was up 1.94 %. The total
market value of the REIT portfolio was $216,000. Mr. Bogdahn noted that American
Realty has not called a whole lot of money for the REIT portfolio. He stated that he has a
conference call with them later this week to discuss whether the NCREIF is the right
index to use as the benchmark.
Mr. Bogdahn provided an update on his firm. He stated that they have 18 people in his
firm. They have an office in Milwaukee, Chicago and Winter Haven. He discussed their
use of Evare, a data collecting agency. He asked for authorization to have statements sent
to Evare from the Custodian to help facilitate the transmission of data for the Fund. He
stated that Mr. Sugarman has reviewed the authorization and they are tightening up some
of the language. A motion was made, seconded and passed 5 -0 to authorize the
Administrator, once the Administrator receives the approval from Mr. Sugarman, to
execute the authorization to allow the Custodian to provide Evare with the information
requested.
ATTORNEY REPORT
Mr. Sugarman provided the Board with a Records Retention Policy that was recently
changed to add specific language for pension plans. He recommended the Board adopt
Resolution GS1 -SL as the minimum period of time to keep records. A motion was made,
seconded and passed 5 -0 to adopt Division of Library and Information Service Schedule
Records Resolution GS1 -SL.
There was a discussion on the Florida Retirement System. Mr. Sugarman reviewed various
issues regarding the benefits provided by FRS. There was a lengthy discussion.
Mr. Sugarman provided Rules that were established regarding the Pension Protection Act.
He reviewed the Rules with the Board.
Dr. Buttaravoli departed the meeting.
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.
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Ms. Adcock provided the Board with a renewal for the Fiduciary Liability Insurance
Policy. A motion was made, seconded and carried 4 -0 to renewal the Fiduciary Liability
Insurance Policy.
OTHER BUSINESS
Mr. Rogers asked about the status of changing the multiplier from 3% to 3.5% which was
discussed at the last meeting. Mr. Morejon stated that Mr. Armstrong ran some numbers
and the approximate cost would be a 6% increase. It was noted that Mr. Morejon was
going with Mike Mayo to meet with the City Manager on the matter. A motion was
made, seconded and carried 4 -0 to recommend to the City to increase the multiplier from
3% to 3.5% for current active employees for all years of service.
There being no further business, the meeting adjourned at 1:45 p.m.
Respectfully submitted,
Ed Morejon, Secretary