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City of Palm Beach Gardens Police Officers’
Pension Fund
Minutes of the Meeting Held
April 23, 2013
The regular meeting of the Board of Trustees of the City of Palm Beach Gardens
Police Officers’ Pension Fund was called to order at 9:05 AM by Jay Spencer in the
Council Chambers at the Palm Beach Gardens City Hall at 10500 North Military Trail,
Palm Beach Gardens, Florida.
TRUSTEES PRESENT OTHERS PRESENT
Jay Spencer, Chairman Audrey Ross (Resource Centers)
David Pierson, Secretary Bonni Jensen (Law Offices of Perry & Jensen)
Brad Seidensticker, Trustee Donna Kramer (PBG Clerk’s Office)
Greg Mull, Trustee Max Cann (SSGA)
Marc Glass, Trustee Steve Stack (ICC Capital)
John McCann (Thistle Asset Consulting)
Pete Strong (GRS)
PRESENTATION OF THE 9/30/2012 ACTUARIAL VALUATION REPORT
GRS – Presented by Pete Strong
Mr. Strong reintroduced himself and stated that the first time he met the board was
late last year when Mr. Palmquist was retiring. He reviewed the valuation for the
fiscal year ending September 30, 2012 and stated that the City’s required
contributions for the fiscal year ending September 30, 2014 is $2,712,635 or
52.62% of payroll. He noted that this is a slight increase from this year’s
contributions of $2,700,762 or 44.93% of payroll. Mr. Strong explained that the
increase in the City’s contributions is mainly due to the salary increases being less
than expected by 15%. He reviewed the benefit changes and the assumption
changes that were made during the year and how they impacted the plan this year.
The plan lowered their investment assumed rate of return from 7.4% to 7.3% this
year and will continue to lower it by 0.1% each year until their goal of 6.5% is met.
Mr. Strong reported that the plan had a net actuarial gain of $751,599 this year due
to a mix of lower than expected salary increases and also a great investment year.
The plans funded ratio also increased this year to 69.1% from 66.4% last year. He
reviewed the Chapter 185 monies and commented that the plan received in
$455,534 from the State, which gives them a new amount of $538,552 that is being
held in the reserve account for future benefit improvements (after the base amount
of $412,644 is accounted for). The plans total unfunded liability this year is $22M
which is an annual payment of $1.9M. Mr. Strong noted that 2008 will now fall off
the 5 year smoothing chart. This will be very beneficial to the plan because 2008
was a bad investment year and we will now be replacing it with the 2012 numbers
which were much better. Mr. Strong reviewed the participant data and stated that
the active members decreased from 84 to 74 during the year and the DROP
members and retirees increased from 46 to 54. He also reported that this plan has
had an actuarial gain the last 4 years out of the last 6 years, in which Mr. Strong
noted he has not seen this with any of his other clients. Lastly Mr. Strong reviewed
the new reporting that is required under the SB 1128. The State now requires the
plan to report its present value of benefits compared to the FRS benefits. He noted
that this is not an accurate comparison because the FRS does not put in their
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required contribution amount each year and defined benefit plans are required to
fund fully each year.
MOTION: Mr. Seidensticker made a motion to approve the September 30,
2012 Actuarial Valuation Report as presented by the Plan’s
Actuary.
SECOND: Mr. Pierson seconded the motion.
CARRIED: The motion carried unanimously 5-0.
Mr. Strong reviewed his memo regarding the new GASB 67 changes that were
passed last summer and will be effective for the fiscal year ending September 30,
2014. The new GASB 68 changes are not in effect for City’s until the fiscal year
ending September 30, 2015. He stated that the new GASB 67 requirements
basically require additional footnotes and disclosures for the investment managers,
but they will not be incorporated in the regular valuation and will more than likely
require a separate valuation to be completed. This new valuation will be for
reporting purposes only and not for pension use. Mr. Strong noted that GRS will
more than likely come back in the near future with a proposed fee increase due to
the new reporting requirements.
Mr. Strong stated that his office prepared a response and a study in regards to the
letter that the Plan received from the Division of Retirement regarding the use of
their Chapter 185 revenue (know as the “Naples Letter”). He explained that based
on GRS’s findings, the plan should continue to receive the Chapter 185 monies. Mr.
Strong stated that this letter and study should be sent to the Division of Retirement
and if approved then the Chapter 185 money (base amount) will be sent to the City
to offset their contributions. Ms. Ross noted that she will send the letter to the State
and await a response.
PRESENTATION ON EMERGING MARKETS
SSGA – Presented by Max Cann
Mr. Cann introduced himself and stated that his firm is specializes in spider ETF’s.
SSGA works with many institutional clients and his job is to educate clients on ETF’s
and to make sure that they are using them properly. SSGA has a total of $2T in
assets with 27 offices and 10 investment centers country wide. SSGA is the second
largest ETF provider. Mr. Cann explained in great detail what an ETF is and how they
work. All ETF’s are managed by the same managers that mange the active funds as
well. Currently their ETF has 67 products within their fund and their returns can or
cannot be inline with the index. Mr. Cann explained how ETF’s are invested and how
they produce returns. ETF’s provide more diversification within a portfolio and they
are completely transparent. Mr. Cann reported that the 1 year return for ETF’s is
.8%, 3 years is 2.57%, and 5 years is 1.19%. Also the fee for ETF’s is 59 basis
points. The Trustees had a lengthy discussion on ETF’s and when it is a good time to
fund them. Mr. Cann noted that ETF’s are placed in a portfolio with long term
intentions and they are like mutual funds, but they can be traded on a daily basis if
needed. The Trustees thanked Mr. Cann for his time and presentation and stated
that they will discuss ETF’s with their Consultant.
Board Discussion:
The Trustees had a lengthy conversation regarding ETF’s and if they would be a fit
for their portfolio. Mr. McCann passed out information on other firms that offer ETF’s
as well (such as Vanguard) and compared it to SSGA’s product and noted that over
long term SSGA has outperformed. Mr. McCann noted that ETF’s are volatile no
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matter what company you go with, although it is a great industry to be in. The
Trustees concurred that they would like to revisit ETF’s at a later time because right
now they do not think it would be a good fit for their portfolio.
INVESTMENT MANAGER REPORT
ICC Capital – Presented by Steve Stack
Mr. Stack stated that during the quarter equities out performed bonds and the
amount of money that came from bonds into equities was tremendous. As of March
31, 2013 the total fund (fixed income) was negative but ahead of the benchmark at
-0.10% versus -0.17%, but for the fiscal year to date they are negative and also
behind the benchmark at -0.13% versus 0.21%. He noted that they are being very
conservative on the fixed income side. The growth fund had a better quarter and
outperformed the benchmark for the quarter at 12.38% versus 9.54%, and for the
fiscal year to date they are also ahead at 14.96% versus 8.10%. Their largest
weighting is in IBM and not apple. They are underweighted to the technology sector
and they are also keeping their duration low.
INVESTMENT CONSULTANT REPORT
Thistle Asset Consulting – Presented by John McCann
Mr. McCann noted that they currently have a lot of cash sitting on the side lines
because American Realty did not take the full amount during their recent capital call.
Therefore Mr. McCann is recommending that the board move the cash over to the
ICC Capital fixed income portfolio. The Trustees discussed and noted that they will
keep the money in cash until the next capital call from American Realty. Mr. McCann
reviewed the funds performance for the quarter ending March 31, 2013 and stated
that the total fund net of fees outperformed the benchmark at 6.98% versus 6.51%,
and for the fiscal year to date they are also ahead at 8.31% versus the benchmark at
7.61%. He reviewed the managers performance during the quarter and noted that
all managers either outperformed the benchmark or where inline.
ATTORNEY REPORT
Law Offices of Perry & Jensen - Presented by Bonni Jensen
Ms. Jensen passed out the memo regarding a retiree that recently passed away,
Charles K. Sharon. Mr. Sharon retired on May 1, 2004 with a 50% joint and survivor
option, naming his wife, Catherine Sharon as the joint annuitant. In June 2005, Mr.
Sharon was divorced from Catherine and in the final judgment she was not awarded
to her 50% if Mr. Sharon’s pension. Then in 2007 Mr. Sharon completed a
designation of beneficiary form listing his son as the beneficiary, but there was no
indication at that time to change his joint annuitant. Therefore his benefit was never
recalculated to take into account the younger age of the son. Ms. Jensen wanted the
Trustees to confirm that based upon the facts and provisions of the plan, no benefits
are payable to anyone as a result of Mr. Sharon’s death. The Trustees concurred.
Ms. Ross noted that she would explain this to Mr. Sharon’s son who was listed as the
beneficiary at the time of his death.
Ms. Jensen provided the board with the revised DROP distribution policy. The policy
now allows retirees to take DROP distributions on a monthly basis instead of a
quarterly basis. The policy does state that any distribution over $35K would need to
be approved by the board of Trustees before it is paid out. All other distributions
under $35K can be paid out in between meetings, but must be ratified by the board
of trustees at the next meeting.
MOTION: Mr. Seidensticker made a motion to approve the revised DROP
distribution policy as presented.
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SECOND: Mr. Mull seconded the motion.
CARRIED: The motion carried unanimously 5-0.
Ms. Jensen reviewed the memo regarding Senate Bill 458 and House Bill 1399. Both
bills have been stalled in the house and has not been approved as of yet. Ms. Jensen
noted that she will keep the board updated as more information is available.
ADMINISTRATOR REPORT
Resource Centers – Presented by Audrey Ross
N/A
MINUTES
MOTION: Mr. Mull made a motion to approve the minutes from the
January 31, 2013 regular meeting.
SECOND: Mr. Seidensticker seconded the motion.
CARRIED: The motion carried unanimously 5-0.
DISBURSEMENTS APPROVALS
MOTION: Mr. Seidensticker made a motion to approve the
disbursements.
SECOND: Mr. Mull seconded the motion.
CARRIED: The motion carried unanimously 4-0.
FINANCIAL STATEMENTS
The board reviewed and discussed the financial statements that were provided
through March 2013.
The board received and filed the financial statements through March 2013.
OTHER BUSINESS
Mr. Glass stated that Union and the City are currently in negotiations and he would
like the board to approve for GRS to complete a study reflecting what the costs
would be to change the normal retirement age to 55, or 25 years of service
regardless of age, and to also increase the multiplier from 2.75% to 3%.
MOTION: Mr. Glass made a motion to allow GRS to perform a study on
the cost of changing the normal retirement age to 55, or 25
years of service regardless of age and to also increase the
multiplier from 2.75% to 3% per the Union and the City’s
request.
SECOND: Mr. Pierson seconded the motion.
CARRIED: The motion carried unanimously 5-0.
Ms. Ross noted that the VEBA fund closed and all members have been refunded their
contributions.
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Ms. Ross explained that the board uses the carrier Ullico Insurance Group for their
fiduciary liability insurance. The plan just received communication that the parent
company of Ullico Insurance Group, Ullico Casualty Company went into a
rehabilitation order. Ms. Jensen commented that this order does not have any effect
on this plan because it is the parent company that received the order, it was just for
informational purposes.
PUBLIC COMMENTS
N/A
AJOURN
There being no further business, the Trustees officially adjourned the meeting at
12:08 PM. The next meeting is scheduled for Friday August 2, 2013 at 9AM.
Respectfully submitted,
_____________________________
DAVID PIERSON, Secretary