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03-14-2011 General Employees’ Pension Board of Trustees Minutes - Regular Meeting March 14, 2011 Page 1 of 4 CITY OF EDGEWATER GENERAL EMPLOYEES’ PENSION BOARD Regular Meeting MINUTES Monday, March 14, 2011 CALL TO ORDER/ ROLL CALL/DETERMINATION OF A QUORUM The Edgewater General Employees’ Pension Board held its quarterly (regular) meeting on Monday, March 14, 2011 in the City Hall Council Chamber at the City of Edgewater, Florida. Members Present : Brenda Dewees Bobby Laramore Tim Sopko John Brackin Members Absent : Tyna Hilton Gigi Bennington John McKinney Plan Attorney : H. Lee Dehner Board Administrator : Sheila Hutcheson Consultant : Jack Evatt, The Bogdahn Group Plan Actuary: Doug Lozen, Foster & Foster City Staff: Julie Christine, Personnel Department Tracey Barlow, City Manager Vice-Chairman Dewees called the meeting to order at 11:00 a.m.; there was a quorum, with four members present. APPROVAL OF MINUTES - December 13, 2010 Quarterly Meeting and January 5, 2011 Joint Special Meeting Member Sopko made a motion to approve the minutes of the December 13, 2010 Quarterly Meeting and January 5, 2011 Joint Special Meeting; Member Laramore seconded the motion, which passed unanimously. NEW BUSINESS/OLD BUSINESS - None REPORTS (ATTORNEY/CONSULTANTS) Foster & Foster, Actuary - Doug Lozen Presentation: October 1, 2010 Actuarial Valuation Mr. Lozen opened by advising the Board that he will serve as the Foster & Foster (F&F) representative to the Board, other than for the issues related to the separation from Principal, which will continue to be handled by Brad Heinrichs. He then began the review of the 2010 valuation, noting that the Plan had a good year for just the past year, but the three years’ prior losses continued to have an adverse impact on the City’s funding requirement. Other factors that affected the Plan were lower than expected salary General Employees’ Pension Board of Trustees Minutes - Regular Meeting March 14, 2011 Page 2 of 4 increases. For the year ending September 30, 2011, the City’s funding requirement is 39.3% (about $450,000, compared to about $358,000 for year ending September 30, 2010) and for the year ending September 30, 2012, the City’s cost will be 52.3% (about $620,000). The increased costs related almost entirely to the four-year smoothed losses. The City has a pre-paid contribution of $147,624.86 available to offset future funding costs. He noted that having funded the extra amount helps offset volatility in the City’s costs. Mr. Lozen said that funding may be further affected by the separation from Principal, and F&F would recommend an experience study at that time. Next, he addressed the four-year historical returns, which have had a loss of $1.2million. The plan’s funded ratio is 77.89%; a funded ratio of 80% is the desired point. The Plan’s ratio is very good, however, on a comparative basis to other plans. The market value of the assets increased by $400,000 from September 30, 2009 to September 30, 2010, while the market value of the liabilities stayed the same. This is a positive factor: assets increasing to a greater extent than liabilities. Member Sopko made a motion to approve the 2010 Valuation; Member Laramore seconded the motion, which passed unanimously. Declaration of returns The Attorney explained the statutory requirement that the Board declare the expected returns based on advice from its investment consultants in conjunction with the valuation. In this regard, Jack Evatt, Performance Consultant with The Bogdahn Group, was asked to provide his recommendation, which was that it is reasonable that the 7.5% actuarial assumption will be reached in the next year, over the next several years, and over the long term. Member Laramore made a motion to accept the consultant’s recommendation for the declaration of returns: that the 7.5% actuarial assumption will be reached in the next year, over the next several years, and over the long term thereafter; Member Sopko seconded the motion, which passed unanimously. The Administrator said she had the letter in this regard for execution and distribution to the State Division of Retirement, City Manager, and Actuary. The Bogdahn Group, Performance Consultant Quarterly Report - December 31, 2010 Jack Evatt opened by discussing the very good returns for the portfolio’s equities for the quarter ending December 31, 2010, but noted that the fixed income investments had a downturn in the quarter. January’s performance was good, but the returns in February and March have not been very good. The fund’s assets were $12,677,312 as of December 31, 2010, compared to $12,174,742 as of September 30, 2010. The return for the quarter was 5.53% (net and gross, since it cannot be determined what Principal’s fees are), outperforming the index.The past year’s returns (13.61%) were good despite the lack of the Board’s control over the portfolio. However, the longer-term performance has been below the benchmark. Principal has continued its over-weight in fixed income investments. Mr. Evatt discussed the recent information provided by Principal as to the investment options that the Board might choose for investments. He noted that Principal has many managers in each category, which results in over- diversification. This may be a contractual issue with Principal, but their reasons are unknown. Mr. Evatt said he will continue to review the investment options for a change in the options with Principal. However, he may not recommend any changes, depending on the time frame for separation from Principal. Next, he discussed the international investments and fixed income investments, noting that the General Employees’ Pension Board of Trustees Minutes - Regular Meeting March 14, 2011 Page 3 of 4 latter had not performed as it should have over the long term, but there must have been some change in the last year, as fixed income performance has had considerable improvement. Principal’s real estate investments are not liquid and would result in a delay in the refund of that portion of the assets that would be transferred to the Plan upon separation from Principal. He concluded with an overview of the compliance checklist. Discussion: investment options with Principal Mr. Evatt reported that he is still reviewing information in order to make recommendations to the Board as to changes he might recommend, but changes may or may not be made depending on the time frame for separation from Principal. He is also trying to determine how the bills and expenses of the plan are paid. H. Lee Dehner, Plan Attorney Legislative update Attorney Dehner opened his report with an update of HELPs-2 (pre-tax status of retiree insurance premiums) and said there has been no action on any changes in the regard. Next, he discussed proposed Florida pension legislation, noting that HB303 had been filed and withdrawn. This bill had drastic changes and would have been an infringement on home rule. Some of HB303’s provisions were:  limited the benefit multiplier;  eliminated DROP in 2012;  limited the employer’s cost to no more than 15% of payroll each year; and  required Pension Boards to budget administrative expenses for submittal to the City for approval. Currently, SB1128 has been filed; it also has some significant changes, including closing all defined benefit plans to new members in the future (after July, 2011), having a five-year average of earnings, and only considering base pay for benefit calculation purposes, as well as other provisions. The bill has a number of inconsistencies. It seems that the underlying effort by the Legislature is to steer cities to defined contribution pension plans. Mr. Dehner said some amendments to this bill have been submitted that are favorable, such as not having to close defined benefit plans. If these proposals are passed, they likely would force many employees to leave public service. The bills are in committees, and the legislative session isn’t until May, but there will certainly be some changes enacted. FRS will also be affected by the changes that may be enacted. RMLO Mr. Dehner reported that each agency is required by Florida statutes to designate an individual to oversee the public records of the entity and to adopt a records retention schedule. The Administrator can be named to serve as the RMLO. The Attorney recommended that the Board adopt the State’s records retention schedule. This information is included in a resolution (#2011-1) that the Board needs to execute and file with the State. Member Laramore made a motion to approve Resolution #2011-1 adopting the records management schedule GS1-SL and designating Plan Administrator Sheila Hutcheson as RMLO; Member Brackin seconded the motion, which passed unanimously. Sheila Hutcheson, Plan Administrator - no separate report. General Employees' Pension Board of Trustees Minutes - Regular Meeting March 14, 2011 Page4of4 PROCESSED DISBURSEMENTS/RETURN OF CONTRIBUTIONS/DEPOSITS DISBURSEMENTS 1. Sheila Hutcheson, plan administration fees - $3,300.00 ($1100 /month); postage /mileage expense - $20.44 2. Christiansen & Dehner, professional legal fees, $32.50, $1,193.73, $2,024.04 3. The Bogdahn Group, performance consultant fees, 4 quarter, 2010 - $3,625.00 4. FPPTA membership renewal for 2011 - $600.00 5. FPPTA Trustees' School (February, 2011): Trustee Dewees - Registration - $450.00; lodging - $567.00; mileage, per diem - $180.00 6. Richard Shockley, terminated, vested member - commencement of early retirement as of Feb. 1, 2011 - retiree's lifetime with 100% joint survivor option (without refund of member contribution) 7. Donna Looney, commencement of retirement as of December 1, 2010 - retiree's lifetime with 100% survivor option, with refund of member contribution DEPOSITS None Member Sopko made a motion to approve the processed disbursements /return of contributions and deposits; Member Laramore seconded the motion, which passed unanimously. TRUSTEES', STAFF, EMPLOYEES', and PUBLIC REPORTS, DISCUSSION and ACTION The City Manager distributed a handout of the recent audit of the pension plan operations conducted by the City's auditors. This will be submitted to the City Council in April in conjunction with the CAFR. He pointed out the items related to the Plan, such as tracking employees' absence from work (charge on time cards) while at training and the recommendation for additional documentation for travel forms. Member Dewees reported that she had attended the recent FPPTA Trustees' School, which she said was excellent training. She recommended it to other Trustees and distributed a handout from the School that would be helpful to the Board (Glossary of Finance & Investment Terms). ADJOURNMENT There was no further business and the Vice - Chairman adjourned the meeting at 12:40 p.m. Respectfully Submitted: Approved: A *■_ _ Sheila Hutcheson, Plan Administrator Gigi : n tnjChairm.