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03-14-2011 Police Pension Board of Trustees Minutes - Quarterly Meeting March 14, 2011 Page 1 of 5 CITY OF EDGEWATER POLICE OFFICERS' PENSION BOARD OF TRUSTEES QUARTERLY MEETING MINUTES Monday, March 14, 2011 CALL TO ORDER/ ROLL CALL/DETERMINATION OF A QUORUM The Edgewater Police Officers' Pension Board held its quarterly meeting on Monday, March 14 2011 in the City Hall Conference Room at the City of Edgewater, Florida. Members Present: Ferd Heeb Gary Conroy Lawrence Leaf Vincent McCauley Dan Blazi Members Absent: None Plan Attorney: H. Lee Dehner Plan 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 Chairman Blazi called the meeting to order at 1:32 p.m. There was a quorum with all members present. APPROVAL OF MINUTES - December 13, 2010 Quarterly Meeting and January 5, 2011 Joint Special Meeting Member Heeb made a motion to approve the minutes of the December 13, 2010 Quarterly Meeting and January 5, 2011 Joint Special Meeting; Member McCauley seconded the motion, which passed unanimously on a roll call vote. 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 be 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, stating that the assumptions of the Plan are not met every year, which affects the City's cost. The Plan had a net actuarial loss for the last year based on the four -year smoothing of returns. The Plan did have 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 increases and higher than expected turnover. For the year ending September 30, 2011, the City's funding is 46.2% of payroll; for the year ending September 30, 2012, the City's cost will be 58.5% of Police Pension Board of Trustees Minutes - Quarterly Meeting March 14, 2011 Page 2 of 5 payroll. There is still a credit of over $438,000 to help defray the City's cost. The increased costs relate almost entirely to the four -year smoothed losses. Member Heeb expressed his concern about the FY11/12 total cost (all sources) of 76.3% and the need to control costs. The Actuary said that the Plan has been well funded and has a high funded ratio (87.23 %), exceeding 80 %, which is the desired level. Mr. Lozen said that funding may be affected by the separation from Principal, and F &F would recommend an experience study at that time. Chairman Blazi said the experience study will be a good idea to ensure that the assumptions are based on current factors. The market value of the assets increased by $500,000 from September 30, 2009 to September 30, 2010. The market value of the liabilities increased less than the assets did, which is good. Investment losses contributed to about 70% of the increased funding requirement and the increased entry age of new hires affected the other 30% of increased cost. The entry age of new hires increased to 28.6 years this year from the prior year's entry age of 27.8 years. The Administrator asked about the status of the Annual Report; Mr. Lozen said it should be completed soon. She requested that F &F mail the report, when finalized, to Chairman Blazi for his signature and that of Secretary Conroy for submittal to the State. Member Conroy made a motion to approve the 2010 Valuation; Member Heeb seconded the motion, which passed unanimously on a roll call vote. 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 Conroy 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 Leaf seconded the motion, which passed unanimously on a roll call vote. 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 with an overview of historical market conditions and the various asset classes, noting the downturn in bonds' returns. There has been a restoration of some balance in the markets. He then discussed the performance for the quarter: 4.67 %, and 12.66% for the last twelve months. The fund's assets were $7,670,153 as of December 31, 2010, compared to $7,394,260 as of September 30, 2010. 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. Mr. Evatt concluded with a discussion of the compliance checklist, and Attorney Dehner noted that it shows the Plan is PFIA compliant. The Board then discussed the need to review the IPS that the Board has adopted and to review the investment managers the Board has hired: ICC, Dana, and Integrity. Police Pension Board of Trustees Minutes - Quarterly Meeting March 14, 2011 Page 3 of 5 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. Mr. Evatt has asked Principal to address this but they said they didn't understand. He is currently working to resolve this. He said he thinks the expenses payments are made from a money market fund, and he does not recommend any changes until he has all the information from Principal. 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 up to $3000 /year) and said there has been no action on any changes in the regard. Mr. Dehner then discussed the State legislative efforts. SB 1128 has been filed; it 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. Excess State monies would have to be used to reduce unfunded actuarial liability, not benefit improvements. He said it would be good if there were proposals to allow some usage of the excess monies by the City to help maintain the 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. Member Conroy asked if the bill would apply to local law plans; Attorney Dehner said that if passed in its current form, it would apply to local law plans. Mr. Dehner also discussed HB303, which 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. The Attorney concluded by urging Trustees to monitor the FPPTA updates and legislative updates and make their opposition known. 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. Police Pension Board of Trustees Minutes - Quarterly Meeting March 14, 2011 Page 4 of 5 Member Conroy made a motion to approve Resolution #2011 -1 adopting the records management schedule GS1 -SL and designating Plan Administrator Sheila Hutcheson as RMLO; Member McCauley seconded the motion, which passed unanimously on a roll call vote. Sheila Hutcheson, Plan Administrator • Recommendation to City Council: reappointment of Trustee Ferd Heeb (current term ends on May 21, 2011) Member Conroy made a motion to recommend Member Heeb 's reappointment to another two-year term by the City Council (to May 21, 2013); Member Leaf seconded the motion, which passed unanimously on a roll call vote. PROCESSED DISBURSEMENTS/RETURN OF CONTRIBUTIONS and DEPOSITS • DISBURSEMENTS 1. Christiansen & Delmer, professional legal fees - $32.50, $1,518.73, $1,664.24 2. Sheila Hutcheson, plan administration fees, $3,300.00; postage /mileage expense - $20.44 3. The Bogdahn Group, performance consultant fees, 4 quarter, 2010 - $3,625.00 4. FPPTA membership dues, 2011 - $600.00 5. American Express (credit card statement) - $215.00, $450.00, $2,817.37 6. Timothy Webb, refund of non - vested member contributions - $1,689.33 7. Per Diem/mileage expenses for FPPTA Trustees School (Jan. 30 - Feb. 2, 2011) - Conroy: $216.86; Blazi: $216.86; Leaf: $216.84; McCauley: $217.37 8. William Bennett, commencement of retirement (lifetime option without refund of member contribution) and rollover of DROP account effective March 1, 2011 DEPOSITS 1. Vin McCauley, reimbursement of per diem for FPPTA Trustees School - $217.37 2. FPPTA reimbursement for Trustee McCauley's registration (to City) - $450.00 Member Conroy made a motion to approve the processed disbursements /return of contributions and deposits; Member McCauley seconded the motion, which passed unanimously, upon a roll call vote. STAFF REPORTS, DISCUSSION, and ACTION/TRUSTEES' REPORTS, DISCUSSION and ACTION; REQUESTS FROM THE PUBLIC/EMPLOYEES PRESENT 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' time charge while at training and the recommendation for additional documentation for travel forms. Additionally, there was a comment on the number of conferences attended and the number of Trustees attending the same conferences. Mr. Barlow advised that the Board could respond to the audit if desired. Chairman Blazi reported that he had received notification of certification as a Trustee from FPPTA as have Members Leaf and Conroy. The Administrator already had a copy of Member Leaf's documentation in this regard and Members Conroy and Blazi will send her a copy of theirs. Police Pension Board of Trustees Minutes - Quarterly Meeting March 14, 2011 Page 5 of 5 ADJOURNMENT The Chairman adjourned the meeting at 3:32 p. m. Respectfully Submitted: Approved: til.4(1-71"4' . Sheila Hutcheson Dan B Plan Administrator Chairman