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.
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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
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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