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09-14-2009 Police Pension Board of Trustees Minutes - Quarterly Meeting September 14,2009 Page I of5 CITY OF EDGEWATER POLICE OFFICERS' PENSION BOARD OF TRUSTEES QUARTERLY MEETING MINUTES Monday, September 14,2009 CALL TO ORDER! ROLL CALL/DETERMINA TION OF A QUORUM The Edgewater Police Officers' Pension Board held its quarterly meeting on Monday, September 14, 2009 in the City Hall Conference Room at the City of Edgewater, Florida. City Staff: Ferd Heeb Gary Conroy Dan Blazi Lawrence Leaf Jeanne DelNigro H. Lee Dehner Sheila Hutcheson Mike Welker, The Bogdahn Group Allen Smith, Principal (by telephone) Russ Anthofer (by telephone) Tonya Niday (by telephone) Donna Looney, Personnel Director Tracey Barlow, City Manager Members Present: Members Absent: Plan Attorney: Plan Administrator: Consultants: Principal: Chairman Blazi called the meeting to order at I :34 p.m. Members indicated their presence; there was a quorum, with four members present. APPROVAL OF MINUTES - Special Meeting, July 29,2009; Quarterly Meeting, June 10,2009 Member Conroy made a motion to approve the minutes of the July 29 and June 10, 2009 meetings; Member Leaf seconded the motion, which passed unanimously, upon a roll call vote. NEW BUSINESS Presentation: Milberg Law Firm (Ariana J. Tadler, Christopher S. Polaszek, and Anita B. Kartalopoulos) - securities fraud monitoring Mr. Polaszek outlined an overview of his experience and the firm, and said the firm offers financial oversight for pension plans at no cost to the fund. Their services help Trustees meet their fiduciary responsibilities. He discussed their role as a free portfolio monitoring service to track and ensure against losses due to securities fraud, and to provide a program to report on class action cases (specifying claims' deadlines). The firm provides information so that the Board can make an informed decision as to participation in litigation. The Milberg Law Firm makes their money only from cases that are litigated. If retained, the firm would provide reports on a quarterly basis. Member Heeb asked about the mechanics of the service and Mr. Polaszek highlighted the steps of their portfolio monitoring process. Attorney Dehner discussed that the reports from Milberg serve as a back up to the custodian and benefit the Trustees. The more funds Milberg monitors, the more likely they will find plans with large losses; the firm receives contingency fees from the lead plaintiff. Having more clients increases the size of the potential recovery. Attorney Dehner recommended that the Board engage the services of the Milberg Firm, stating that he Police Pension Board of Trustees Minutes - Quarterly Meeting September 14, 2009 Page 2 of5 would review the retainer agreement and would work with Milberg. Chairman Blazi said that engagmg the servIces of Milberg would be a beneficial step to take. Member Heeb made a motion to engage the Milberg Firm subject to Attorney Dehner's review of the aweement; Member Conroy seconded the motion, which passed unanimously. The Board took a recess at 2:29 p.m. and reconvened at 2:35 p.m. Consideration/Approval of Summary Plan Description from Principal Principal contract amendment (November 2008) for approval/execution (deferred from June 10, 2009 meeting) The conference call to Principal, regarding the two items above, was after the proposed time and the conference line was no longer available. Therefore, Attorney Dehner summarized the information from the conference by the General Board at their morning meeting (since the issues were the same) with Principal, reporting that it was not very productive. The Attorney recommended that the Board take the same actions as the General Board: request that Principal update the SPD to include the recent amendments (since the October 1,2008 Plan Restatement); advise Principal that the Board's position is that the contract amendment will not be signed. It is Principal's responsibility to make investment management decisions; the Board is not equipped to make those decisions. Attorney Dehner stated that Principal must divest investments in a prudent manner. Member Heeb asked about the status of the process of terminating the contract with Principal. Attorney Dehner outlined the process of separation from Principal, noting the information that will be needed: the initial agreement with Principal, changes to the agreement, and any relevant minutes of meetings with Principal. He also said that it will be important for him to review the documents and to be apprised of the personal recollections of staff as to Principal's representations regarding the benefit index and their failure to advise of the onerous contract termination provisions. It will also be necessary to obtain releases from retirees to release Principal from any liability for their future retirement payments and then to get that money back from Principal. There will be a meeting with retirees to review the information related to the releases so that as many releases as possible can be obtained. At that point, there will be the conference call with Principal and their Attorney to terminate the Plan. Member Heeb said he would contact Mr. Barnhill who was on the Board in 1998/1999 and who might have information on the benefit index and other representations from Principal. No one recalled Principal ever discussing the contract termination provisions. Chairman Blazi recommended that Member Conroy and former Trustee Brett Titlebaum attend the conference call to terminate the contract with Principal. Mr. Barnhill may also participate if Member Heeb can contact him. Member Heeb asked about the time frame for the termination and Mr. Dehner said it depends upon the time necessary to obtain documents and the personal recollections of those employees/Board members who have relevant information. Mr. Dehner asked that a written recollection be prepared by Brett Titlebaum and Member Conroy and sent to him. Following that, the conference call will be scheduled, he hopes, in a few weeks, with the termination finalized before the next quarterly meeting. Principal's response on investment direction by the Board - The Plan Administrator had provided the Board Principal's email message in this regard, which said that Principal would no longer be a named fiduciary to the Plan if investment direction was given by the Board. Approval of 2008 Annual Report (filed with Division of Retirement on June 10, 2009) - The Board acknowledged its acceptance that the Report had been filed. Police Pension Board of Trustees Minutes - Quarterly Meeting September 14, 2009 Page 3 of 5 Discussion: Wall St. Journal Article on public pensions (Trustee Ferd Heeb) Member Heeb had sent this article to the Administrator, who had forwarded it to the Board. He has long had concerns as to the assumed returns and the extent to which the actual returns fall short of that. Phil Niebieski's DROP election - selected member refund (held in DROP account) with reduced monthly benefits Goint and 100% survivorship option). The Board did not have to take any action as the amendment conforming the language in the Plan to correctly reflect past practice will be included in the submittal to City Council for adoption by ordinance by reference. REPORTS (ATTORNEY/CONSULTANTS) The Bogdahn Group, Performance Consultant - Quarterly report - June 30, 2009 Mr. Welker stated that he had reviewed the quarterly performance at the July 29, 2009 special meeting, so he commented on the historical underperformance of Principal, as documented in the June 30,2009 report. He then reviewed allocation, and advised that the fund had $6+million as of June 30, 2009. He noted that the decision at the earlier joint special meeting with regard to selection of a custodian bank was the first step for the Boards to make in preparation for the termination of the contract with Principal. He said the next step is to have a joint special meeting to discuss the Investment Policy Statement and investment managers. The Administrator will coordinate a joint meeting in October with the General Employees' Board. Chairman Blazi discussed the report compiled by Foster & Foster regarding the plans the firm works for (the Administrator had forwarded the report to the Board). He questioned the 10.6% increase in salaries shown for the Police Department and said that he would like to have Actuary Brad Heinrichs discuss this at the next meeting. H. Lee Dehner, Plan Attorney The Attorney opened his report with an update on the amendments (Rule 60T) that had been proposed by former State Actuary Charles Slavin, noting that the amendments are on the "back burner" at this time and that it is expected that the new proposals will be much different and better. Mr. Dehner continued by reporting that the Federal legislation which provides up to $3000/year pre-tax retiree insurance premiums for public safety retirees (normal and disability retirees) now has a proposal to extend it to all public retirees, to remove the administrative burdens, and to index the $3000/year. He then discussed the recent amendments to F.S. Chapter 185, among which is the latitude to invest up to 25% of the portfolio in international stocks, but this doesn't really mean anything with Principal. He also advised that the Statute allows the Board to have four-year trustee terms, and has expanded the buy-back of prior law enforcement experience to include out-of-state comparable service; these are both permissive options, which the Board may wish to include when the plan is separated from Principal and a new governing ordinance is written. Member Conroy discussed that Member DelNigro has not attended a number of meetings; the Attorney said that the rule that would be considered after the termination from Principal would allow a trustee to have two unexcused absences, following which the trustee would be asked to resign from the Board. However, since Ms. DelNigro is a City Council appointee, this would be the City Council's decision. Chairman Blazi asked if he could contact her as to her attendance; Mr. Dehner said he should not because of the prohibition against Board members discussing matters when not at a publicly noticed meeting. He suggested that the Administrator contact her to see if she wishes to continue serving on the Board and report back to the Board; it was noted that if Ms. DelNigro decided to resign, the Board, at the next meeting, would recommend a trustee to the City Council. Police Pension Board of Trustees Minutes - Quarterly Meeting September 14,2009 Page 4 of 5 The Attorney concluded his report by advising that the IRS is paying attention to public plans. In this regard, the IRS is sending out surveys to public plans and it is mandatory that agencies respond. Sheila Hutcheson, Plan Administrator Update on IRS filings submitted July 9, 2009 and August 27, 2009 in response to ms questions These responses were filed since the June 10, 2009 meeting in order to ensure timeliness. There is another request for information dated September 2, 2009, in which the IRS questions the authority of the Board officers to sign documents on behalf of the Plan. The letter seems to state that the Mayor would be recognized by the IRS as an authorized signer; alternatively some proof must be submitted of the authority of the Chairman to sign. Principal has indicated that, with the Board's concurrence, the simplest way to deal with this issue is to have the Mayor sign the documents. The Board concurred. Status Report: Submittal of plan restatement/amendments to City Council for adoption by reference, including opt-out amendment for Police Chief The City Manager stated he would submit the October I, 2008 Plan Document and recent amendments to the City Council for adoption by ordinance. He anticipated that the review of the documents and preparation of the ordinance would take about eight weeks. The Plan Administrator was asked to ensure that the Personnel Director has all of the documents. FPPTA Trustees' School in Bonita Springs (10/4-10/7/09); Annual PolicelFire Conference in Orlando (10/21-10/23/09) The Administrator advised Board members to check the websites to access the forms for registration and lodging (for FPPT A), if interested in attending either or both conferences. Members Conroy and Blazi said they would like to attend the FPPTA Trustees' School. Member Conroy said he would use American Express points (if sufficient) to rent a car, rather than paying mileage for two trustees. Member Heeb said he would attend the Police/Fire Conference in Orlando and other Trustees could ride with him. Pension Fiduciary Insurance - extension to October 1,2010 (current policy ends on July 16,2010) The City is working on this extension so that next year's policy renewal will be at the same time as the General Employees' Board; in this manner, both Boards may be eligible for a lower premium cost if renewed jointly. Service Agreement - Principal The Administrator recommended that Attorney Dehner revIew the updated (July, 2009) Service Agreement before it is approved for execution by the Board. She had provided a copy of the Agreement to him and Ms. Niday had been asked to send the prior Service Agreement, if available. This item will be on the next agenda. OLD BUSINESS - None PROCESSED DISBURSEMENTS/RETURN OF CONTRIBUTIONS and DEPOSITS I. Christiansen & Dehner, professional legal fees - $116.00; $1282.84; $464.00 Police Pension Board of Trustees Minutes - Quarterly Meeting September 14,2009 Page 5 of 5 2. Sheila Hutcheson, plan administration fees, June - August, 2009 - $2700.00 ($900/month); postage/mileage expense - $3.32 3. The Bogdahn Group, performance consultant fees, 2nd quarter, 2009 - $2500.00 4. American Express (credit card statement) - $1,208.02 (lodging expense for Trustees Blazi, Conroy, and Leaf - FPPTA conference June 28 - July 1,2009) 5. Florida Municipal Insurance Trust (fiduciary liability insurance) - $2,617.92 6. Brian Mallard, refund of member contribution (terminated, vested member) - $13359.58 . DEPOSITS - None Member Leaf made a motion to approve the processed disbursements/return of contributions and deposits; Member Conroy seconded the motion, which passed unanimously, upon a roll call vote. STAFF REPORTS, DISCUSSION, and ACTIONITRUSTEES' REPORTS, DISCUSSION and ACTION; REQUESTS FROM THE PUBLIC/EMPLOYEES PRESENT - None ADJOURNMENT Member Heeb made a motion to adjourn the meeting; Member Leaf seconded the motion, which passed unanimously. The meeting was adjourned at 4: 18 p. m. Respectfully Submitted: Sheila Hutcheson Plan Administrator