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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 2 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. 3 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. 4 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. G 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