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HomeMy WebLinkAboutMinutes Fire Pension 042108PALM BEACH GARDENS FIREFIGHTERS' PENSION FUND MINUTES OF MEETING HELD Apri121, 2008 A meeting of the Board of Trustees was called to order at 10:00 A.M. at Council Chambers, Palm Beach Gardens, Florida. Those persons present were: TRUSTEES Ed Morejon Rick Rhodes Richard Hitchins Steve Rogers Tom Murphy MINUTES OTHERS Margie Adcock, Administrator Bob Sugarman, Attorney Dave West, Investment Monitor Brad Armstrong, Actuary The Board reviewed the minutes of the meeting held March 5, 2008. It was noted that there was a typographical error on the spelling of the last name of Mr. 011iff. A motion was made, seconded and carried 5 -0 to accept the minutes of the meeting held March 5, 2008 as corrected. The Board reviewed the minutes of the meeting held April 11, 2008. A motion was made, seconded and carried 5 -0 to accept the minutes of the meeting held April 11, 2008. ACTUARY REPORT Brad Armstrong appeared before the Board. He presented the September 30, 2007 Actuarial Valuation which determines contributions for the fiscal year beginning October 1, 2008. He stated that the principal sources of experience gains and losses were: a gain of approximately $.2 million due to the rate of return on the value of assets of 9.4% versus the assumption of 8.25% gross; a gain of approximately $3 million due to a 3.9% average salary increase versus an expected salary increase of 5.3 %; a loss due of approximately $.5 million due to 4 terminations versus the expected 6.1; and a gain of approximately $3 million due to the death of a retired member. Mr. Armstrong stated that he thought assumptions and methods should be reviewed again prior to the September 30, 2011 Valuation. He stated that he thinks that the Board should review some of the assumptions in the next three years again. He discussed the withdrawal assumption. He stated that it might not be the most conservative assumption. However, it was his opinion to leave it as it is now and review it in the next three years. Mr. Armstrong discussed the contribution requirement. He stated that the City contribution requirement increased to 31.18% of payroll versus 30.40% last year. He stated that the dollar amount is $3,180,731. He noted that the City previously infused $700,000 into the Plan. That amount is amortized and only effects the contribution by one -half of a percent at a time, although it is cumulative. He stated that the extra money put in the 2006 and 2007 numbers have not really come into the Plan to effect the contribution as of yet. The Plan is still in the process of receiving that money. He noted that it does not change the experience but rather just increases the assets and reduces contributions in that way. 2 Mr. Armstrong reviewed the revenues and expenditures. He stated that at market revenues overwhelmingly exceed expenditures. The total assets at September 30, 2007 were $22,791,087 versus last year of $17,322,340. He stated that positive cash flow was an important part of the investment policy and was a nice position to be in. He discussed the 4 -year smoothing. There was discussion on a market -to- market on an asset basis and the effect of using a fresh start in 2008. Mr. Armstrong stated that to go to a fresh start when there is unrecognized gain would likely be a wash. He did not think it was that influential at this point in time. However, if GASB forces them to report on market value on a liability basis, that will, generally speaking, make liabilities look higher than they are now. Mr. Armstrong reported that the funded ratio was 53.9% versus 46.8% last year. He stated that it was going in the right direction. There was discussion on the projected rate of return of 8.25 %. Mr. Armstrong stated that they are projecting over decades. The majority of members will be retiring in the future and will be paid out over their lifetimes. They assume that over longer periods of time the markets will correct and provide historical returns. There was then discussion regarding a request from Robert J. Boniewski for a total lump sum payout of his retirement benefit. Mr. Sugarman stated that there was no provision in the Plan for allowing such a payout. Mr. Armstrong stated that if there was such a provision, the funded ratio would be a little bit adversely affected. It would be moving out a 100% benefit and paying it all at once. If it was fair to the System on an actuarial basis it could work. However, the law of averages is that the people in the poorest health would take the lump sum. If that was the case, that could potentially expose the Plan to risks it does not presently have right now. Mr. Sugarman stated again that there was no provision in the Plan that allows for a lump sum payout. The Summary Plan Description was written incorrectly but in the SPD it states that if the SPD is contrary to the Plan, the Plan governs. Mr. Sugarman stated that if Mr. Boniewski is requesting a lump sum payout, the Board could not grant the request. However, the Board could grant a partial lump sum. Alternatively, Mr. Boniewski could always forfeit his right to a pension benefit and take back his contributions, although he would never recommend doing that. The SPD was written as an attempt to describe a partial lump sum, but was miswritten. There was a discussion on the partial lump sum option. It was noted that a Participant could get a partial lump sum option as long as they were eligible for normal retirement. The Board directed Mr. Sugarman to write a letter to Mr. Boniewski regarding his request for a total lump sum payout of his retirement benefit. It was noted that there was a typographical error on page A -2. A motion was made, seconded and carried 5 -0 to approve the September 30, 2007 Valuation as corrected. ATTORNEY REPORT There was discussion on the situation regarding Terry Petruzzi. Mr. Sugarman reviewed the options available to Mr. Petruzzi. He noted that he could not receive his Share Account monies as of yet. Section 38 -78 (6) provides that it is to be paid 30 days after the next Valuation date. There was discussion on the timing of the Share Account calculation. It was noted that the Actuary could calculate the Share Account balances about 60 -90 days after the close of the fiscal year, but then there was still the administrative time for the actual payout. Mr. Sugarman stated that the Board should approve this one before paying it out to make sure all issues are resolved. Ms. Adcock advised that the Share Accounts for two recent retirees were paid out, similar to the Account for Mr. Thurman. Mr. Sugarman stated that if it turns out they were paid too much, they will have to pay the difference back; if it is too little, the Fund will owe them more. Mr. Sugarman stated that they reviewed the agreement with Davis Hamilton Jackson and do not see a problem. He stated that he has other pension plans that have agreements with Agincourt and does not foresee any problems there. Mr. Armstrong departed the meeting. Mr. Sugarman stated that he received a disability application regarding Toby Bivins. He stated that they are in the process of obtaining the medical records. He noted that the City has expressed an interest in this matter. Mr. Sugarman stated that he would have the Resolution regarding use of social security numbers for the next meeting. He noted that they were working on moving forward to update the Fund's IRS Determination Letter. INVESTMENT MONITOR REPORT Dave West appeared before the Board. He provided a revised Investment Policy Statement based on the last meeting. It was noted that Mr. West felt that the Russell 3000 was still the most appropriate benchmark. He stated that they still recommended that the portfolio be expected to perform in the top 40'h percentile over a 3 -5 year time frame. If the Board moves to a higher standard, it must be recognized that no manager will be there all the time and there is a risk of churning managers inappropriately. There was discussion on the necessity of signature lines on the IPS and Schedule A. Mr. Sugarman stated that there could be a separate acknowledgment page for managers to sign. Mr. West stated that he would make the revisions to the IPS and forward to the Chairman for signature. Steve Rogers departed the meeting. There was discussion on Addendum B to the IPS for Dana. It was noted that the objective needed to be changed. The Board expressed concern that it has taken so long to try to change the IPS. There was discussion on having the Fund bar set at four consecutive quarters below the 50th percentile and the managers at a different percentile of being in the top 40th percentile. Mr. West stated that the intent is if the total Fund is below the 50th percentile then the Board needs to take a total look at all of the portfolios. The Board would look at all of the managers and if one was in the top percentile, they would be fine and the Board would look at the next manager. Mr. Sugarman stated that rather than Fund performance, it probably should be manager performance. Mr. West stated that the intent was to flag the total Fund and make the Board look at all of the individual component pieces. Mr. Sugarman stated that something needed to be added for the total Fund performance. The Board asked Mr. West to make the changes and e- mail them to the Board before the next meeting. Bob Sugarman departed the meeting. PRESENTATIONS BY FIXED INCOME MANAGERS DAVIS HAMILTON JACKSON & ASSOCATES Janna Woods and Gilbert Garcia appeared before the Board. Ms. Woods stated that she was the client service manager and Mr. Garcia was the head of the fixed income team and also a managing partner. The firm was founded in 1988 and is based in Houston. She noted that 59% of the firm's assets are in public pensions. The majority of their public fund business is in Florida. Mr. Garcia discussed their philosophy. They try to preserve principal; maintain liquidity; and provide high current income. He discussed the fixed income portfolio and noted that it was high quality; no big surprises; flexibility; and risk controls. They do not have any high yield securities, BBB rated securities, derivatives, leverage, or non - dollar denominated bonds. They are an old fashioned, long only, high quality manager. They have the flexibility to quickly adjust to changing market conditions and exploit smaller markets. They have proprietary modes and software as part of their risk controls. Mr. Garcia discussed the investment process and five factors: market sentiment, monetary policy, economic policy, valuation and inflation. He reviewed the fixed income aggregate portfolio characteristics. Ms. Woods reviewed performance. She stated that they were above the benchmark in the 1, 2, 3, 5, 6 10 and since inception of December 31, 1991. She discussed their fee noting that it was 25 basis points. She noted that Mr. Harrison had reviewed the contract and she provided signed contracts to the Board in the event the Board hired them. Janna Woods and Gilbert Garcia departed the meeting. AGINCOURT CAPITAL MANAGEMENT Brad Coats appeared before the Board. He stated that he was the managing director and portfolio manager. The firm is located in Richmond, Virginia. They are 100% employee owned. The firm was founded in 1999, but the partners have been together sine 1991. They have $3.6 billion in client assets. He reviewed their public client list. He reviewed the investment professionals in the firm. Mr. Coats discussed their investment philosophy and objectives. Consistency of returns is their primary goal. They have active, value - based strategies. They believe that yield wins over time and they provide below average risk. He discussed their investment process and investment strategies. He also discussed their macro factor analysis. Mr. Coats discussed their portfolio construction. He reviewed performance. He stated that for the first quarter they underperformed by about 90 basis points. It was their worst quarter ever. He believes they are set up now to do very well. He noted that their fee is 25 basis points. Brad Coats departed the meeting. There was a lengthy discussion on the presentations by the fixed income managers. The Board questioned whether they were going to move all of the fixed income money to Galliard or split with one of these other managers. Mr. West stated that he was comfortable with both. He stated that DHJ will make some changes if need be and is willing to move around the benchmark a lot more. He stated that Agincourt is fairly consistent. They look for income over time to be the driver, which was the reason for their underperformance in the first quarter. He stated that Galliard is steady over time and has no big shifts. Galliard and DHJ have contrasting approaches and areas of focus as far as market sectors. Mr. West stated that both DHJ and Agincourt would be 5 suitable. It was noted that DHJ took care of the contract as was requested. It was noted that DHJ beat the benchmark all 6 years whereas Agincourt was up and down. Mr. West stated that he was absolutely comfortable with DHJ. A motion was made, seconded and carried 4 -0 to hire Davis Hamilton Jackson and Associates as a fixed income manager. A motion was made, seconded and carried 4 -0 to have the Attorney review the contract, have the Chairman execute the contract, and have the Monitor rebalance to split the total bond portfolio 50% to Galliard and 50% to DHJ and move to the same benchmark. Mr. West provided an update on the investment performance for the quarter ending March 31, 2008. The asset allocation at market was 50% in equities; 38% in fixed income; 5% in REIT; 7% in international; and 0% in cash. Mr. West stated that he was recommending the Board to rebalance the portfolio in the aggregate to get the average of the equity back up to the target policy. He stated that he would recommend them take about 8% out of fixed income. He stated that the Board does not necessarily have to rebalance as it is still within tolerances. However, he would recommend it. He also suggested that DHJ assume the fixed income portfolio for Dana. A motion was made, seconded and carried 4 -0 to have the Monitor rebalance to the target allocations in Schedule A of the Investment Policy Statement. Dave West departed the meeting. ADNIMSTRATIVE REPORT Ms. Adcock provided the Board with an updated Trustee Handbook. She noted that Mr. Rhodes had requested copies of the contracts with the service providers of the Fund at the last meeting. She stated that she prepared a Handbook for all of the Trustees that included the contracts, as well as the Ordinance, SPD and other documents. Ms. Adcock provided an update on the progress of the online benefit calculator. Ms. Adcock presented the list of disbursements to be made. There was a question on the attorney bill regarding an entry for travel on February 11 to a meeting. It appeared to the Board that the cost for travel was not split with any other plan. Additionally, there was a question on the entry regarding a report on the social security number memo and why there would be a charge for just reporting the law. A motion was made, seconded and carried 4 -0 to approve the disbursements listed. OTHER BUSINESS There was discussion on the Investment Monitor. The Board stated that they had advised before at a meeting that they wanted Joe Bogdahn to attend these meetings. Mr. Morejon stated that he would discuss the matter with Mr. Bogdahn and ask him to attend the next meeting to address the Board. There being no further business, the meeting adjourned. Respectfully submitted, Tom Murphy, Secretary