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12-14-2009 Police Pension Board of Trustees Minutes - Quarterly Meeting December 14,2009 Page 1 of5 CITY OF EDGEW A TER POLICE OFFICERS' PENSION BOARD OF TRUSTEES QUARTERLY MEETING MINUTES Monday, December 14,2009 CALL TO ORDER! ROLL CALLIDETERMINATION OF A QUORUM The Edgewater Police Officers' Pension Board held its quarterly meeting on Monday, December 14, 2009 in the City Hall Conference Room at the City of Edgewater, Florida. Members Present: F erd Heeb Gary Conroy Lawrence Leaf Kevin Seymour Dan Blazi H. Lee Dehner Sheila Hutcheson Mike Welker, Tyler Grumbles, The Bogdahn Group Donna Looney, Personnel Director Tracey Barlow, City Manager Julie Christine, Personnel Department Members Absent: Plan Attorney: Plan Administrator: Consultants: City Staff: Secretary Conroy called the meeting to order at I :32 p.m. Members indicated their presence; there was a quorum, with four members present. APPROVAL OF MINUTES - September 14, 2009 Joint Special and Quarterly Meetings; October 12, 2009 and December 3, 2009 Joint Special Meetings Member Leaf made a motion to approve the minutes of the September 14, 2009 joint special and quarterly meetings; October 12, 2009 and December 3, 2009 joint special meetings; Member Heeb seconded the motion, which passed unanimously. NEW BUSINESS Investment manager - allocation of funds for investment by ICC MultiCap and Dana Consultant Mike Welker, The Bogdahn Group, recommended a 50/50 split of assets between the two firms. Member Heeb asked if Dana would be a good choice for the fixed income investments, and Mr. Welker said there are other firms that would be better in this area, referring to the report he had presented at the December 3,2009 special meeting. Member Heeb made a motion to allocate the investments 50/50 with Dana and ICC MultiCap; Member Leaf seconded the motion, which passed unanimously. Mr. Welker then advised that he recommends the Board's consideration of Davis Hamilton and Integrity for fixed income investments, with Integrity as his top choice. Member Heeb made a motion to select Integrity for fixed income investments, subject to contract negotiations by Attorney Dehner; Member Seymour seconded the motion, which passed unanimously. The report continued with Mr. Welker's recommendation that the overall portfolio should be split Police Pension Board of Trustees Minutes - Quarterly Meeting December 14, 2009 Page 2 of5 60/40 in stocks and bonds; additionally, an international manager should be selected for investment of about 15% of the equity portion of the portfolio. He discussed several international funds, including a mutual fund, EuroPacific (his top choice) and Manning & Napier, among others. Member Heeb made a motion to select the EuroPacific Fund (R5 share class) for international investments; Member Leaf seconded the motion, which passed unanimously. Consideration/Approval of Principal Service Agreement (July 2009) Attorney Dehner recommended that the Board not sign any documents with Principal except the Pension Protection Act (PPA) amendment. Consideration of Pension Protection Act (pP A) amendment from Principal Attorney Dehner said this amendment is necessary and he had requested it from Principal at a previous meeting. He recommended that the Mayor should be the official signing the amendment, based on the request from the IRS on other amendments. Member Heeb made a motion to approve the P P A amendment for signature by the Mayor; Member Seymour seconded the motion, which passed unanimously. Approval of quarterly meeting dates - 2010 (all meetings begin at 1:30 p.m.) March 15,2010 June 7, 2010 September 13, 20 I 0 December 13,2010 The Board's consensus was to approve the 2010 meeting dates as listed. Consideration of Summary Plan Description (SPD) from Principal Attorney Dehner recommended issuance of the SPD to plan members if the Board approves it. Member Seymour made a motion to approve the SPD for distribution to all Plan members and new hires; Member Heeb seconded the motion, which passed unanimously. The Administrator will notify Principal and request that the SPD's be sent to Personnel Director Donna Looney for distribution. OLD BUSINESS - None. REPORTS (ATTORNEY/CONSULTANTS) I. The Bogdahn Group, Performance Consultant . Quarterly report - September 30, 2009 Mr. Welker opened his report by stating that returns have been strong for aggressive stocks during the last six months, but this trend is starting to decline for the aggressive managers. He continued by noting that A-rated stocks are starting to perform better than lower quality stocks. The fund had $6,039,442 on June 30, 2009 and increased to $6,767,820 on September 30, 2009, with the quarter return at 10.45%. Next, he reviewed the asset allocation by Principal, noting that it is not very good, because of an overweight to bonds. The portfolio has been hurt by Principal not increasing the percentage of investments in equities. Police Pension Board of Trustees Minutes - Quarterly Meeting December 14,2009 Page 3 of 5 Member Conroy requested that Mr. Welker send the quarterly reports to him for distribution to the Board in advance of the quarterly meetings. Attorney Dehner asked if Mr. Welker will monitor Principal on the scrutinized companies' list (Florida Statutes' requirement) and Mr. Welker said he will do this by a letter to Principal. Consideration of fee increase Mr. Welker distributed an analysis of Consultants' fees, which showed that the proposed fee increase is very reasonable compared to other consultants and to Principal's fees (as best can be determined). The firm's fees (guaranteed for three years) will increase from $10,000 per year to $14,500 per year (if all three Boards meet on the same day) and $15,500 per year, if the meetings are on different dates. Member Heeb made a motion to approve the fee schedule, all inclusive, as of January 1, 2010 (guaranteed for three years) and to authorize the Attorney to prepare the contract amendment for execution by the Chairman; Member Leaf seconded the motion, which passed unanimously. H. Lee Dehner, Plan Attorney Report on status of Principal contract termination Mr. Dehner first discussed the letter from Principal that had just been emailed to his office after 5:00 p.m. on December 1 I (the Administrator had distributed the letter to the Board for his discussion). The Attorney said he had made several calls and also emailed the Principal Attorney trying to get a response, which did not arrive till this letter after business hours on December I I. In the letter, Principal states that the circumstances are not the same as in the other contracts that Attorney Dehner has successfully terminated. Mr. Dehner said the next step should be a discussion with Attorney Konrad at Principal to try to see how determined Principal is to maintain this position. This may lead the Board to consider litigation. Attorney Dehner said he would call to check on litigation attorneys if he doesn't hear from Principal by mid-January. In preparation for the teleconference in January with Principal, Mr. Dehner asked the Administrator to have Foster & Foster update the benefit index analysis for both plans for the past fiscal year and to analyze the amount of money lost by their investment strategy assuming the plan had terminated as of October 1, 2008, with investments 50% Russell 3000 and 50% BarcIays Aggregate (from October 1,2008 - September 30,2009). He said that it may be necessary to set a special meeting in mid-February (or move the next quarterly meeting to mid-February) with Actuary Brad Heinrichs attending. Member Heeb asked about the benefit index and which retirees are included; the report from Principal will provide this information. Next, Attorney Dehner reported that the contract with Milberg is still under review; the firm has said they don't want the contract subject to Florida law and any court proceedings to be in our venue. The Attorney said this is not a "deal breaker," but requested the Board's authorization to proceed. It was the consensus of the Board to proceed with the contract with the changes requested by Milberg. The Attorney's report continued by advising that the federal legislation on pre-tax treatment of insurance premiums has a proposal that would eliminate the direct funding requirement for premium deductions and also contains a proposal to index the current $3,000 cap on the amount of premium that would not be subject to income tax. He next reported that Florida Division of Retirement Rule 60T is still on the "back burner" and, if implemented in the future, it will be much better than what was originally proposed. He concluded with a reminder that an IRS survey may be sent and it is mandatory to respond within a certain time frame. Both Principal and Attorney Dehner would have to be involved, along with the City, in the response to the survey. Police Pension Board of Trustees Minutes - Quarterly Meeting December 14,2009 Page 4 of5 Sheila Hutcheson, Plan Administrator The Administrator reported on the following items. . Fee schedule - $ I, 100/month effective January I, 20 I 0 Member Leaf made a motion to approve the $l,JOO.OO/monthfee schedule as of January 1,2010 and to authorize the Attorney to prepare the contract amendment for execution by the Chairman; Member Seymour seconded the motion, which passed unanimously by Members Seymour, Conroy, and Leaf (Member Heeb was out of the room during the roll cafO. . FPPT A membership dues for 20 I 0 would be paid - $600.00 . Member Leafs (fifth member) and Member Conroy's (elected) terms end on March 17,2010 Member Heeb made a motion to appoint Larry Leaf as the fifth member for a term from March 18, 2010 through March 17, 2012 and to submit the appointment to the City Council for ratification; Member Seymour seconded the motion, which passed unanimously. The Administrator said she would coordinate the notice and election process for Member Conroy's position. . Preparation of ordinance by Attorney Dehner (City Manager) The Administrator advised that the City Manager, Personnel Director Donna Looney, and she would work on this to send it to the City Council as soon as possible. . F ASB does not apply to public plans, per discussion with Actuary Brad Heinrichs . The Actuary will discuss the salary issue on the 2008 Valuation that Chairman Blazi asked about at the last quarterly meeting when he presents the 2009 Valuation in March. . $13 1,228.05 State monies were received. OLD BUSINESS - None PROCESSED DISBURSEMENTS/RETURN OF CONTRIBUTIONS and DEPOSITS . DISBURSEMENTS I. Christiansen & Dehner, professional legal fees - 408.38; $2262.21; $290.00 2. Sheila Hutcheson, plan administration fees, September - November, 2009 - $2700.00 ($900/month); postage/mileage expense - $2.88; $11.00 3. The Bogdahn Group, performance consultant fees, 3rd quarter, 2009 - $2500.00 4. American Express (credit card statement) - $3,624.61(registration expense for Trustees Blazi, Conroy, and Leaf and gas for trip); $2,215.79 (lodging, gas, meals) - FPPTA school/certification program October, 2009) 5. Principal, invoice for preparation of plan amendments/VCP (deducted from Police Pension Board of Trustees Minutes - Quarterly Meeting December 14,2009 Page 5 of 5 account) - $2,320.00 6. Foster & Foster - $6,276.00 7. Ratification of William Bennett's DROP election - lifetime option (without member contribution refund) 8. Michael Stavris, refund of member contribution - $3,420.35 . DEPOSITS - None Member Seymour made a motion to approve the processed disbursements/return of contributions and deposits; Member Leaf seconded the motion, which passed unanimously, upon a roll call vote. ST AFF REPORTS, DISCUSSION, and ACTIONffRUSTEES' REPORTS, DISCUSSION and ACTION; REQUESTS FROM THE PUBLICIEMPLOYEES PRESENT Member Conroy advised the Board that he had renewed the post office box for the Board for another six months. He also discussed with new Trustee Seymour the FPPT A Trustees' School in February and said that if he is able to attend, he can use the Board's American Express card to make the arrangements. The City Manager reminded the Board to follow the City's purchasing policies. The Board said to consider the Rules Manual that had previously been prepared by Attorney Dehner at the next meeting and asked Ms. Hutcheson to email the Manual to the Board. The City Manager said he would email the City's purchasing policy to the Administrator and the Board. ADJOURNMENT The meeting was adjourned at 3: 14 p.m. Respectfully Submitted: Approved: Sheila Hutcheson Plan Administrator GA~ G:Jn~{ ~~-tz; :3&-~