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03-18-2013 General Employees'Pension Board of Trustees Minutes-Regular Meeting March 18,2013 Page 1 of 4 CITY OF EDGEWATER GENERAL EMPLOYEES' PENSION BOARD Regular Meeting MINUTES Monday, March 18, 2013 CALL TO ORDER/ROLL CALL/DETERMINATION OF A QUORUM The Edgewater General Employees' Pension Board held its quarterly (regular) meeting on Monday, March 18, 2013 in the City Hall Council Chambers at the City of Edgewater, Florida. Members Present: Brenda Dewees Tim Sopko John Brackin John McKinney Tyna Hilton Bobby Laramore Members Absent: Gigi Bennington Plan Attorney: H. Lee Delmer Board Coordinator: Julie Christine, Personnel Department Consultant: Jack Evatt,The Bogdahn Group Doug Lozen, Foster&Foster City Staff: Tracey Barlow, City Manager Donna Looney, Personnel Director City Board Coordinator Julie Christine called the meeting to order at 11:00 a.m.; there was a quorum with six members present. APPROVAL OF MINUTES - Quarterly Meeting—December 10,2012 Member Hilton made a motion to approve the minutes of the December 10, 2012 quarterly meeting; Member Laramore seconded the motion, which passed unanimously. NEW BUSINESS/OLD BUSINESS-None. REPORTS (ATTORNEY/CONSULTANTS) Doug Lozen, Foster& Foster,Actuary Presentation: October 1, 2012 Actuarial Valuation Mr. Lozen presented the 2012 Actuarial Valuation report using a one page document titled Select Valuation Results as of October 1, 2012. He will present the results of valuations this way throughout the year, as it focuses on the points. The Valuations is done as of October 1, 2012; it sets up the City's funding for the 2013/2014 year. Big changes happened this year with the separation of Principal Financial Group in January. A portion of liability left the plan meaning future checks to retirees and assets. Some other changes, large number of retirements during the year, meaning payroll went down and the plan is a General Employees'Pension Board of Trustees Minutes-Regular Meeting March 18,2013 Page 2 of 4 lot smaller than the last valuation. The return on market value of assets for Fiscal year ending September 30, 2012, 18.30%, after you take out investment expenses for money managers, smooth out assets over a 4 year average, don't fund based on a one year period of time. Return on Actuarial Value of assets 5.32%, the assumption investment return is 7.50% to get the assumption going forward that should exceed the 7.5% on the rolling 4 year average and should began generating some investment gains. The 2012 market value of assets is $11,351,560, and the actuarial value of assets (four year average) $10,795,757. The FASB 35 funded ratio (current ratio) 70.2%, ideally it would be 100% but by losing liabilities and assets that help drag down the funded ratio. The GASB 25 funded ratio (long term funded ratio - 4 year average) 63.0%, the drop is primarily related to Principal separation. Average increase pensionable pay 1.2%, the long term assumption in pensionable pay is 5.5%. The employees that are accruing benefits are getting very low pay increases which is helping to offset the low funded ratios. The Estimated City Contribution requirement for the current year is 77.5% of payroll, for the next year 154.2%. A year ago there were 22 active members in the plan, now there are 12 active members. When there is a big decrease in payroll for example, payroll a year ago was million dollars, now it is down $600,000. The City's has a prepaid contribution of approximately $93,347, this amount is held out to the side so that the City has access to it for the upcoming funding year. Member Dewees asked a question on the 5.5% increase in pensionable pay of 12 active members wondering how that 5.5% comes about. Mr. Lozen explained there has to be an assumption for pay increases and it comes from a table that was created. He advised it might be time to do an updated experience study and not only look at the salary increase but, look at turn over, how often do members terminate employment before retiring, do members take early and normal retirement when their first eligible or are they deferring it. Member McKinney explained there was a 3% pay increase in 2008, 0% - 2009, 0% - 2010, 2% - 2011, 2% - 2012 which is an average of 1.4 % if we were to drop it down from 5.5% to 2% would that have a positive or negative impact in payroll. Mr. Lozen stated the City's contribution would drop and the funded ratio would go up however,he does not think it could go down as low as 2%. To do an experience study would take 2 months and the cost would not exceed$7,000.00 and will also provide the difference between dollar funding and percent in payroll and what the assumption change is. Mr. Lozen also suggested that at some point you'll have to go to dollar funding because when the last 12 active members are retired then you can't have a percent in payroll funding because there is no payroll. Member McKinney made a motion not to accept the 2012 Actuarial Valuation and recommended Foster and Foster to provide an experience study showing fixed and percent amount not to exceed$7,000.00 and present at the meeting on June 17, 2013; Member Laramore seconded the motion, which passed unanimously. Jack Evatt, The Bogdahn Group, Performance Consultant Quarterly Report-December 31, 2012 Jack Evatt opened by discussing the report he distributed to the Board, and noted that it had been a strong and good quarter. He reported that we ended the fiscal year at$12,650,938 and ended the calendar year at $12,599,536. In percentage terms the quarter was good, 1.59% and 1.59% for the fiscal year. He distributed a one page letter on various Vanguard funds, showing what is invested now. Mr. Evatt then discussed the Review of Investment Manager Evaluation, Core Fixed Income, 1st Quarter 2013 and recommended to sell the Vanguard Total Bond Market and transfer to Integrity (local Orlando shop). General Employees'Pension Board of Trustees Minutes-Regular Meeting March 18,2013 Page 3 of 4 Member McKinney made a motion for the Bogdahn Group to provide a letter to sell the Vanguard Total Bond Market and have Salem Trust open up a custodial account for Integrity and liquidate Vanguard Total Bond Market and transfer all the proceeds to Integrity and have them manager the money. H. Lee Delmer will make amendment for 3 year fee; Member Hilton seconded the motion, which passed unanimously. Mr. Evatt then discussed the Review of Investment Manager Evaluation, International Equity, first Quarter 2013. He explained the different funds varying on a one year standpoint. He said that the objective is to be in the top half or the top fourth percentile over a long period of time. He would like to be third or fourth every year over a long period which would equate into long term results. Mr. Evatt said he prefers EuroPacific, he likes the fact that it has the highest emerging market exposure it also gives the most positions in the portfolio and they have done a very good job has a big fund. Mr. Evatt recommended to sell the Vanguard Total International Stock Index and transfer to EuroPacific Growth. Member McKinney made a motion to transfer Vanguard Total International Stock Index to EuroPacific Growth;Member Brackin seconded the motion, which passed unanimously. Mr. Evatt next discussed Salem Trust receipts and disbursement account letter, it gives them the ability to raise cash when we need it to pay bills; it gives them the authority to put it in the market based on the current asset allocation. It is basically a safety net. Member Hilton made a motion to accept the letter to Brian at Salem Trust with the corrections that Jack Evatt, The Bogdahn Group, will do and mail off Member McKinney seconded the motion, which passed unanimously. Mr. Evatt next discussed the Salem Trust cash management sweep authorization, it chooses for the receipts and disbursement account, a money market sweep vehicle and there are three choices, the prime obligations fund, the treasury obligations fund and the government fund. Mr. Evatt recommended the most conservative investment option which is the treasury obligations fund. Member Hilton made a motion to choose the Goldman Sachs Financial Square Treasury Obligations Fund;Member McKinney seconded the motion, which passed unanimously. H.Lee Dehner, Plan Attorney Mr. Delmer opened his report stating he is creating a new plan restatement which will completely replace the Principal documents and ultimately be adopted in ordinance form by the City and also is incorporating the new IRS requirements which are not in the current plan but required to be in the plan now. The plan update should be completed by the September 16, 2013 meeting. Legislative update: There are companion bills pending which will impact the General Pension fund. These are not good bills for the pension funds and not good bills for the City. The House Bill 599 and Senate Bill 534 are imposing on defined benefit plans in Florida additional filing and disclosure requirements which will result in significantly increase administrative expenses to the plan. Mr. Delmer wanted to remind the board to do their financial disclosures by July 1, 2013. Member Dewees ask a question, regarding the draft operation rules done back in 2008. If she remembers correctly we were going to make it finalized once we were done with Principal. Delmer recommended the board review the document and put it on the June agenda for discussion and adoptions by the board or any General Employees'Pension Board of Trustees Minutes-Regular Meeting March 18,2013 Page 4 of 4 amendments. RAFTIFICATION OF PROCESSED DISBURSEMENTS/RETURN OF CONTRIBUTIONS, DISBURSEMENTS, and DEPOSITS DISBURSEMENTS 1. Christiansen& Delmer,professional legal fees - $820.41, $2,222.10 2. The Bogdahn Group,performance consultant fees, 4b quarter, 2012 - $3,625.00 3. Foster&Foster, actuarial services - $29,998.76, $19,855.00 DEPOSITS-none Member McKinney reviewed the fees and he questioned the actuarial services fees on an annual basis and wanted to make sure that they are reasonable fees and wondered if we need to go out for bid,just to make sure they are comparable to others. For the record member McKinney is satisfied with Foster and Foster and asked the board there opinion. Member McKinney also added maybe the board needs to look over all the disbursements for professional legal services,performance consultant services and actuarial services. Member Hilton stated we have to be concerned with the City but,we also have be concerned that the consultants have our backs as far as the plan goes. Member Hilton standpoint is, it's not broke. Member McKinney stated it is an opportunity to make sure that we are in the benchmark and make sure the fees are equitable amongst others. Member Sopko said now is not the time during the transition that just occurred. Member Laramore,Member Brackin, and Member Dewees concurred. This can be brought back up at the June meeting. Member Hilton made a motion to approve the processed disbursements/return of contributions and deposits;Member Sopko seconded the motion, which passed unanimously. TRUSTEES', STAFF, EMPLOYEES', and PUBLIC REPORTS, DISCUSSION, and ACTION Member Hilton discussed hiring a board plan administrator; Member McKinney would like to address this at the next quarterly meeting. Member Sopko made a motion to authorize H. Lee Delmer to present a list of Board Plan Administrator and send out an RFP (Request for Proposal) utilizing no more than 213 hours of H. Lee Delmer's time and then discuss at the next quarterly meeting on June 17, 2013; Member Hilton seconded the motion, which passed unanimously. ADJOURNMENT-There was no further business and the meeting was adjourned at 1:07 p.m. Respectfully Submitted: Approved: Donna Looney, Personnel Director Gigi Bennington, Chairman