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07-21-2008 u o Q General Employees' Pension Board of Trustees Minutes - Regular Meeting July 21, 2008 Page I of5 CITY OF EDGEWATER GENERAL EMPLOYEES' PENSION BOARD Regular Meeting MINUTES Monday, July 21, 2008 CALL TO ORDER! ROLL CALLIDETERMINA TION OF A QUORUM The Edgewater General Employees' Pension Board held its quarterly (regular) meeting on Monday, July 21,2008 in the Conference Room at Edgewater City Hall, 104 N. Riverside Drive, Edgewater, Florida. Members Present: Brenda Dewees John Brackin Tyna Hilton Bobby Laramore Jonathan McKinney Tim Sopko Harriet Rhodes H. Lee Dehner Sheila Hutcheson Lisa Spanraft, Mike Welker The Bogdahn Group (by telephone) Donna Looney, Personnel Director Julie Christine, Personnel Department Members Absent: Plan Attorney: Plan Administrator: Consultants: City Staff: Vice-Chairman Dewees called the meeting to order at 11 :30 a.m. Members indicated their presence; there was a quorum, with five members present at the beginning ofthe meeting. Member Laramore arrived at 11 :45 a.m. APPROVAL OF MINUTES None at this time OLD BUSINESS None NEW BUSINESS Discussion - Plan Administrator Member Tyna Hilton made a presentation regarding the Plan Administration services of Sheila Hutcheson. Ms. Hilton summarized the search for a Plan Administrator by a committee comprised u General Employees' Pension Board of Trustees Minutes - Regular Meeting July 2],2008 Page 2 of5 of a representative from each Board, and stated that she had not been available for the committee review/interviews, but had met individually with Ms. Hutcheson in order to be able to advise the Board. Ms. Hilton continued by outlining Ms. Hutcheson's experience and recommended her hire. She presented the draft contract for plan administration services that had been prepared by Attorney Dehner and advised that she had contacted Mike Welker, with The Bogdahn Group, regarding Ms. Hutcheson's services. Mr. Welker had recommended Ms. Hutcheson and said that the fee schedule was reasonable. Ms. Hilton opened the discussion to Board Members for comments/questions. Trustee John Brackin, as a recent member of the Board, asked about the benefit of hiring an administrator and Member Dewees referred the Board to the list of duties in the draft contract. Member McKinney discussed cost and suggested the Board defer its decision until after a budget meeting in the next week. Member Hilton mentioned the "unbundling" from The Principal and the assistance needed in this regard. At this point, Ms. Hutcheson distributed sample agendas/minutes to the Board for their review of the format and brietly discussed her services, including procedures for processing invoices, member requests, retirements, etc. The Board then excused Ms. Hutcheson while they further discussed this matter; Ms. Hutcheson returned and the Board took action on the hire of an administrator. Q Member Hilton made a motion to retain the services of Sheila Hutcheson as Plan Administrator; to authorize Attorney Dehner to prepare a contract (the same as the Administrator's contract with the Police Pension Board) with an effective date of July 21, 2008; Member McKinney seconded the motion, which passed 5-1, upon a roll call vote, with Member McKinney dissenting. Attorney Dehner advised that he would prepare and send the contract for execution. The Bogdahn Group, Performance Consultant - Lisa Spanraft, Mike Welker The Bogdahn Group's presentation was via telephone due to a schedule contlict on the part of Mr. Welker. Ms. Spanraft began her report by noting that the quarter ending March 31,2008 was negative for all stock indices, with positive returns only in the fixed income investments (bonds). The S&P was down over 9%. She continued with a review of sector performance, all of which were negative, and discussed the asset allocation and sub-classifications. Mr. Welker noted that the mid- cap value decision by The Principal was a good decision. He also reported that the returns underperformed the benchmark, but outperformed the peer group. Ms. Spanraft then reviewed the investment returns by type and pointed out that the new reporting format shows the last six fiscal years' performance. The total plan assets (market value) as of March 31, 2008 were $ 13+million. The performance was as follows for the quarter ending March 31, 2008: . the total fund was 6.06% negative (underperforming the benchmark but still in the 70th percentile); . the total equity portfolio was negative 11.72%; . the real estate fund was positive 1.25% <.) Mr. Welker next discussed that the fixed income investments buffer the volatility of the equity portfolio, but with The Principal the Board does not have much tlexibility in investment allocations. Ms. Spanraft noted that the labels of recession or economic downtown are immaterial, but there will be a turbulent period for a while. She also stated that the plan will most likely not meet its actuarial u General Employees' Pension Board of Trustees Minutes - Regular Meeting July 21, 2008 Page 3 of 5 assumption this year based upon the fiscal year to date (through March 31) performance, which is down 6.27%. Discussing the three-year and five-year returns, Ms. Spanraft pointed out that the fund's risk/return measures have not been at the level recommended by The Bogdahn Group. She continued with a review of the up/down market ratios, which have not been good, pointing to more downside volatility than desired. As the plan is separated from The Principal, the Board will be able to make its own investment decisions to achieve improvement in this regard. Attorney Dehner said that the contract with Foster & Foster is on today's agenda and, if approved, the actuary will begin to prepare the calculations for the move from The Principal. Mr. Welker concluded the report by advising that once the plan is "unbundled," the Board will meet to develop its investment policy statement and establish a custodian account. The Bogdahn Group will coordinate this process with the Plan Administrator at that time. Execute Actuarial Service Agreement (Foster & Foster) o Vice-Chairman Dewees outlined the need for a separate agreement for actuarial services with Foster & Foster as the plan moves away from The Principal and discussed the unbundling process for new Trustee Brackin. Personnel Director Donna Looney mentioned the existing contract between Foster & Foster and the City (Member Hilton distributed copies of the contract to the Board); Attorney Dehner advised that it could be terminated, which Ms. Looney will handle. Attorney Dehner reported that he had sent the proposed agreement to Foster & Foster and had discussed the provisions with them. Foster & Foster responded with a counter-proposal that included a provision for an increased payment (5% contingency fee) based upon the negotiation ofthe separation from The Principal. Mr. Dehner noted that the provision for a payment based on the negotiation was unusual and would be difficult to quantifY as to which party was responsible. Member Hilton noted that the agreement as authorized by the Board had already been submitted to Foster & Foster and that since Foster & Foster is scheduled to attend the next meeting, this matter could be discussed further at that time, if necessary. The Attorney will contact Foster & Foster to advise that the Board wishes to proceed with the contract submitted that does not have the contingency fee. Member Sopko made a motion to reject the 5% contingency fee (counter-proposal from Foster & Foster); Member Laramore seconded the motion, which passed unanimously upon a roll call vote. MISCELLANEOUS Election of Secretary It was noted that the Board does not currently have a Secretary, which is needed for execution of contracts. Vice-Chairman Dewees nominated Member Hilton; Member Sopko seconded the motion, which o passed unanimously. Member Hilton, as Secretary, will send a notice to Plan Members advising that Sheila Hutcheson has been retained as Plan Administrator and providing Ms. Hutcheson's contact information. u General Employees' Pension Board of Trustees Minutes - Regular Meeting July 2\,2008 Page 4 of5 Procedure for Meetings -Tape Recording The next item of discussion was whether or not to tape record the Board's meetings. The Attorney advised that tape recording is not required and stated that well prepared minutes would be in the Board's best interest. Member Dewees suggested that tape recording be continued for a few more meetings; the Board agreed to defer this decision. Member McKinney left the meeting at 12: 12 p.m. REPORTS (ATTORNEY/CONSULTANTS) B. Lee Dehner, Attorney '-> Attorney Dehner opened his report with a discussion of certain Internal Revenue Code provisions that have been discussed and advised that The Principal should be responsible for research in this regard. He continued by stating that there has been no new guidance on in-service distributions since March. The effective date of the provisions will be October, 2009. The Attorney suggested that the Board inquire of The Principal if they are preparing amendments to comply with the Pension Protection Act of2006. Mr. Dehner continued his report by asking when The Principal had sent the last Summary Plan Description (SPD), which is required to be updated every two years by Florida Statutes. The last SPD was issued in 2003, so an updated SPD will need to be requested. The Attorney next advised that research needs to be performed by The Principal as to the determination that the plan's retirement ages are usual and customary, based upon the legislation in which age 62 is shown as the normal retirement age, but this can be lower if earlier ages are usual and customary for the relevant industry. Attorney Dehner recommended that the Plan Administrator prepare a letter to The Principal (for signature by the Chairman) addressing these issues. The Board concurred and Ms. Hutcheson will forward the letter to Personnel Director Donna Looney for signature by Chairman Rhodes and mailing to The Principal. The next item of discussion was the preparation of a Rules and Procedures Manual for the Board. Mr. Dehner will prepare the Manual for approval by the Board at the next meeting. Mr. Dehner continued his report with a reminder to the Board members that the deadline for filing annual Financial Disclosure Forms was July 1, 2008, with the Office of the Supervisor of Elections in the County in which each Trustee resides. He asked Mr. Brackin ifhe had filed the required form as a new Trustee; the Plan Administrator advised that she would send the form to Member Brackin in case he had not yet filed it. The Attorney also noted that former trustees need to file Form I-F. Julie o Christine said that she would advise former members of this reporting requirement. Mr. Dehner then reported that there is a proposal to extend to General Pension Plan retirees the annual pre-tax benefit for up to $3000 of retiree health insurance premiums (already enacted for u u (J . ' General Employees' Pension Board of Trustees Minutes - Regular Meeting July 21, 2008 Page 5 of5 PolicelFire retirees); he will keep the Board apprised in this regard. He concluded his report by noting that there was a change in the portion of Florida Statutes dealing with forfeiture of pension for certain felony convictions: convictions as a result of a felony against a minor (for crimes committed after October 1, 2008) will result in forfeiture of pension. This is in addition to the crimes already specified in the statute. Plan Administrator's Report - Sheila Hutcheson Ms. Hutcheson reviewed the proposed format and procedure for minutes, agendas, processing of invoices (bills pursuant to a contract would be processed for payment upon receipt and placed on the next meeting agenda for ratification by the Board). The Board concurred with the proposals. MISCELLANEOUS Member Hilton asked about training seminars sponsored by Christiansen & Dehner and The Bogdahn Group and Mr. Dehner advised that it is just a matter of scheduling it. Personnel Director Donna Looney reported that there will be a seminar in New Smyrna soon and she will notify the Board when the date is set. ADJOURNMENT Member Sopko made a motion to adjourn the meeting; Member Hilton seconded the motion, which passed unanimously. The meeting was adjourned at 1:20 p.m. Respectfully Submitted: Approved: ~~.- '1~~ 1~~ Harriet Rhodes Chairman Sheila Hutcheson Plan Administrator