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03-18-2013 Police Pension Board of Trustees Minutes-Quarterly Meeting March 18,2013 Page 1 of 5 CITY OF EDGEWATER POLICE OFFICERS' PENSION BOARD OF TRUSTEES QUARTERLY MEETING MINUTES Monday, March 18, 2013 CALL TO ORDER/ROLL CALL/DETERMINATION OF A QUORUM The Edgewater Police Officers' Pension Board held its quarterly meeting on Monday, March 18, 2013 in the City Hall Conference Room at the City of Edgewater,Florida. Members Present: John Tarr Ferd Heeb Lawrence Leaf Members Absent: Jim Morey David Arcieri Plan Attorney: H. Lee Delmer Consultant: Jack Evatt,The Bogdahn Group Doug Lozen, Foster&Foster City Staff: Donna Looney, Personnel Director Bonnie Wenzel, City Clerk Member Tarr called the meeting to order at 1:33 p.m.; there was a quorum with three members present. APPROVAL OF MINUTES - Quarterly Meeting - December 10,2012 Member Heeb made a motion to approve the minutes of the December 10, 2012 quarterly meeting; Member Leaf seconded the motion, which passed unanimously. NEW BUSINESS Board Plan Administrator Member Tarr opened by discussing a Board Plan Administrator, since the previous Plan Administrator retired. H. Lee Delmer, Plan Attorney, explained that earlier at the General Employee's Pension Board meeting they directed him to do an RFP (Request for Proposal) for Plan Administrators and send to all the firms in the State that provide those services for Municipality Plans. When the returns are received, they will be distributed to the members prior to the next pension board meeting on June 17, 2013 for an opportunity to review. He noted during that meeting, the board can determine whether to do personal interviews or make a decision. Delmer recommended the Police Pension Board follow the same procedure. Member Heeb commented that in the past there was a contract between the board and the City for all Plan Administrator services with Principal. After speaking with the City Manager it was his understanding that the City was going to hire a Plan Administrator for all three plans, General, Police and Fire. Donna Looney, Personnel Director stated the City wants to evaluate the costs on whether it would be beneficial to hire a City Employee or an outside Plan Administrator. She mentioned that the City would also receive copies of the RFP's and present their cost evaluation to the board to make a decision. Police Pension Board of Trustees Minutes-Quarterly Meeting March 18,2013 Page 2 of 5 Member Heeb made a motion to authorize H. Lee Delmer to present a list of Board Plan Administrator and send out an RFP (Request for Proposal) and then discuss at the next quarterly meeting on June 17, 2013;Member Leaf seconded the motion, which passed unanimously. Member Heeb discussed preparing a letter of understanding/resolution between the board and the City that the Personnel Department is continuing the services performed by previous Plan Administrator, Sheila Hutchinson. Member Heeb made a motion to authorize H. Lee Delmer to prepare an assignment letter outlining that the Personnel Department is continuing the duties performed by previous Plan Administrator and send to Personnel Director for signature and approval by the City and the board,- Member Tarr seconded the motion, which passed unanimously. Military and Police Services Buyback Member Tarr asked what the cost and calculations would be if employees would like to buy back some prior military and police time. Donna Looney stated there is not a buy back provision for the Police Plan. Mr. Delmer said he would have to amend this provision into the plan. Doug Lozen, Actuary, stated that once this is amended into the plan the calculation is $200.00.The cost is hard to determine, for example the more you make the more you have to pay for a buy back. A ballpark figure would be if an employee makes an average of$40,000/$50,000 and they wanted to buy a year and were close to retirement it would roughly cost$25,000. If an employee is in there twenty's coming right out of the military then it would roughly cost$5,000/$10,000 for a year.Mr. Delmer will review the Police Principal document for a buy back provision and if it is not in the plan then he will place it in the new plan document. Ms. Looney believed that the Fire Pension implemented a buyback provision and the Police piggy back off of their ordinance. She will double check to see if an ordinance was done. Member Heeb suggested after we reinstate this plan and have a new plan document,he would like something for the Trustees to use as a reference. Mr. Delmer acknowledged after the new plan document is finalized he will provide a summary plan description for a quick reference. 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 from 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 because it has the highlights for both 2011 and 2012. This way you will be able to see the changes from one year to the next. The Return on Market Value of Assets is the fair market, net of investment management expense, return on a one year basis as of September 30"' each year. The earnings during the period ending September 30, 2012 were 17.78%, Foster & Foster assumed 7.5%. The Return on Actuarial Value of Assets is a 4 year smooth average which is entirely based on market, deferring gain and loses over a 4 year period of time. The earnings over a 4 year average for fiscal year 2009, 2010, 2011, and 2012 were 6.12%. Going forward that should exceed the 7.5% on the rolling 4 year average and should begin generating some investment gains. The 2012 Market Value of Assets is Police Pension Board of Trustees Minutes-Quarterly Meeting March 18,2013 Page 3 of 5 $6,445,568, and the Actuarial Value of Assets (four year average) $6,132,725. The FASB 35 funded ratio (current ratio) 63.2%, ideally it should be 100%however the funded ratio is beginning to recover. The GASB 25 funded ratio 79.3%, the desired percentage is 80. Average Increase in Pensionable Pay is 9.10%. Assumed Increase in Pensionable Pay is 5.9%. The Estimated City Contribution Requirement for the current year is 73.0%. For the 2013/2014 year, 54.4%. This is for the funding beginning October 1, 2013, which has a lot to do with the pay increases. Mr. Lozen explained the active number of employees in the Police Department was 22 in 2011 and now it is 25. The department is bigger and on average everyone received a pay increase. When you see payroll increase that's when percentages drop. Member Heeb asked if that percentage is high for a plan like this. Mr. Lozen stated 54.4% is a little high for Police and Fire plans. Member Tarr questioned what does it takes to reduce that percentage. Mr. Lozen suggested that if you want to lower your percent of payroll then you should double your department (expand), then you will see that percent drop. Mr. Lozen's final update is the credit balance, last year it was $385,000 and this year $113,625,the City used over $200,000 last year to fund the plan. Member Heeb made a motion to accept the 2012 Actuarial Valuation and the Estimated City Contribution Requirement of 54.4%;Member Leaf seconded the motion, which passed unanimously. Declaration of returns Mr. Delmer, Plan 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 to leave it at 7.5% for the next year, over the next several years, and over the long term thereafter. Member Heeb 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. Under discussion, it was noted that Jack Evatt, Performance Consultant will prepare the letter for execution and distribution to the State Division of Retirement, City Manager, and Actuary. The Bogdahn Group, Performance Consultant- Quarterly report- December 31, 2012 Jack Evatt opened by discussing the Investment Performance for the 4"' quarter, and noted that International markets were very strong. Also domestic markets and fixed income markets performed very well. He reported the Fund's Assets ended the fiscal year, September 30, 2012 at $8,216,654 and the calendar year, December 31, 2012 at $8,279,579. The return for the quarter was 1.6%. Mr. Evatt then discussed the Investment Manager Evaluation, International Equity, first Quarter 2013 and recommended to sell the Vanguard Total International Stock Index and transfer to EuroPacific Growth. Member Heeb made a motion to transfer Vanguard Total International Stock Index to EuroPacific Growth;Member Tarr seconded the motion, which passed unanimously. Mr. Evatt next distributed and discussed the Salem Trust receipt and disbursement account letter, it gives the custodial the ability to raise cash between meetings to make benefit payments; he set it up at $200,000 as a baseline amount. He estimated it on a quarterly basis, the current benefit amount of distributions last quarter$247,000 and contributions of$180,000 so that's about$75,000 we will have some level of income from dividends and from the fixed income portfolio. Police Pension Board of Trustees Minutes-Quarterly Meeting March 18,2013 Page 4 of 5 Member Heeb made a motion to accept the receipt and disbursement account management letter to Brian at Salem Trust;Member Leaf 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 Heeb made a motion to choose the Treasury Obligations Fund,- Member Tarr seconded the motion, which passed unanimously. H.Lee Dehner, Plan Attorney Military and Police Services Buyback The Plan Attorney established after scanning over the Principal prepared documents that there is an amendment to the plan. It is called Amendment#2, effective October 1, 2005,buyback of Military and Police Services up to a total combined of five years. His copy is not signed and recognized that there is another amendment#2 that refers to the drop plan and retirement benefit options which is signed. Mr. Delmer requested Donna Looney, Personnel Director to verify which amendment is correct. Mr. Delmer discussed 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. Legislative update There are companion bills pending now which will impact the Police 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 reported that the Division conference is coming up in May that is jointly sponsored with Florida State located in Tallahassee. Member Tarr discussed statutory educational requirements; Delmer stated that the City can host and provide a joint meeting with other surrounding boards in the area. Delmer can perform the legal section and Jack Evatt the investment element. Once a date and time is established then Delmer can send out notifications. Member Tarr suggested sometime in June 2013. Mr. Delmer wanted to remind the board to do their financial disclosures by July 1, 2013 and provide proof of the filing. RATIFICATION of PROCESSED DISBURSEMENTS/RETURN OF CONTRIBUTIONS and DEPOSITS DISBURSEMENTS 1. Christiansen& Delmer,professional legal fees - $888.01, $2,222.10 2. The Bogdahn Group,performance consultant fees, 4th quarter, 2012 - $3,625.00 3. Foster&Foster, actuarial services - $39,032.19, $17,549.00 • DEPOSITS-none Police Pension Board of Trustees Minutes-Quarterly Meeting March 18,2013 Page 5 of 5 Member Heeb asked who audited the actuary's relative to their fees. Mr. Lozen, Foster & Foster is requesting backup support of the invoices for the actuarial services. Member Heeb made a motion to approve the processed disbursements/return of contributions and deposits subject to review by John Tarr of the actuarial services; Member Tarr seconded the motion, which passed unanimously. Member Heeb questioned when the invoices are being paid, Ms. Looney stated there are forms from Salem Trust that the Chairman will sign and all disbursements will be on the agendas. Member Heeb made a motion to approve the processed disbursements/return of contributions and deposits;Member Tarr seconded the motion, which passed unanimously. STAFF REPORTS, DISCUSSION, and ACTION/TRUSTEES' REPORTS, DISCUSSION and ACTION; REQUESTS FROM THE PUBLIC/EMPLOYEES PRESENT ADJOURNMENT There was no further business, and the meeting was adjourned at 3:11 p.m. Respectfully Submitted: Approved: Donna Looney, Personnel Director David Arcieri, Chairman