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03-16-2015 CITY OF EDGEWATER POLICE OFFICERS' PENSION BOARD QUARTERLY MEETING MINUTES City Hall Council Chambers Monday March 16, 2015 at 1:30PM TRUSTEES PRESENT: David Arcieri Lawrence Leaf John Tarr Larry Brinson TRUSTEES ABSENT: James Morey OTHERS PRESENT: H. Lee Dehner, Board Attorney Ferrell Jenne, Plan Administrator Jack Evatt, Investment Consultant Doug Lozen, Board Actuary Brian Bizzell, Board Custodian Mark Rhein, Board Custodian 1. Call to Order John Tarr called the meeting to order at 1:35PM. 2. Roll Call-As reflected above. 3. Public Comment- None. 4. Approval of Minutes The minutes from the December 15, 2014 quarterly meeting were approved upon motion by Lawrence Leaf and second by David Arcieri motion carried 4-0. 5. New Business a. Discussion of Senate Bill 1128. i. Moved to later in the agenda until City representatives are present. b. Discussion of Martha Miles Calculation. i. Ms. Miles has been an active officer since November 13, 2006. Prior to this she had breaks in service. A refund of her contributions was taken for prior service of 2006. Typically if a refund is taken, prior service is gone; however, the current plan document is silent on this topic. ii. Doug Lozen stated that direction needs to come from the Board. The Board will need to decide if Ms. Miles is to receive a reduced benefit in the future or if her prior service is gone due to the refund. iii. Doug Lozen reviewed a benefit calculation done under two (2) scenarios. 1. "Block B"shows if she lost all service prior to 2006. 2. "Block A"commencement date and benefit amount is higher than scenario "A" due to the fact that prior service is accounted for. The member took a refund of contributions and decreased her benefit by the refund portion. This scenario also imputes. iv. Lee Dehner stated it is the Board's authority to interpret the plan document and give direction. An attempt was made to reach out to Principal and they are not cooperating. v. John Tarr responded that paperwork is needed from the City on what was signed by the member and then a decision can be made at the next meeting based on this documentation. 1 vi. Board directs Ferrell Jenne to work with the City to get copies of all paperwork that was filled out by Ms. Milles when she took her refund. c. Discussion of Salem Trust fees. i. Jack Evatt presented a cost evaluation of Salem and other custodians, and then briefly discussed each custodian, their services, and fees. 1. Custodians whose fees were too high and/or have received negative feedback have been excluded. ii. David Arcieri stated that he would like to start cutting costs somewhere. iii. Jack Evatt indicated that Key Bank doesn't handle many Florida plans and their presence is in the Midwest. Jack felt there might be some issues with contract language. iv. John Tarr asked if Salem would consider being more competitive with their fees. v. Mark Rhein of Salem Trust stated that they have depth of representatives locally and other competitors cannot compete with that. They are not the low cost provider because they are dedicated to providing local representatives. vi. Mark Rhein made an offer of$8,500 with a three(3)year fee guarantee. The Board voted to accept Salem Trust's amended fee of$8,500 with a three (3) year fee guarantee, upon motion by David Arcieri and second by Lawrence Leaf, motion carried 4-0. 6. Old Business - None. 7. Reports a. The Bogdahn Group, Performance Evaluator, Jack Evatt. i. Quarterly report as of December 31, 2014. 1. Net earnings for the quarter were 3.26% outperforming the policy benchmark of 2.48% by 0.78% points. 2. Since inception the fund is at 4.84%, underperforming the policy benchmark of 4.93% by-0.09% points. 3. Jack Evatt indicates a very strong quarter, well ahead of benchmark, in the 11th percentile compared to the peer sample. A really good start for the year. 4. No questions from the Board. ii. Discussion of change of internal control memo. 1. Joe Bogdahn sold the majority of his shares to Mike Welker. No change in operations, moving from a family owned business to an employee owned company. SEC requires that Bogdahn notifies the Board via a consent form. 2. Lee Dehner reviewed the documents and had no issues with the Board executing the document. The Board voted to approve and execute the Change of Internal Control Consent Form, upon motion by David Arcieri and second by Lawrence Leaf, motion carried 4-0. b. Foster and Foster, Board Actuary, Doug Lozen. i. Valuation Report as of October 1, 2014. 1. The Plan experienced a gain, meaning all actuarial assumptions were beat in total. The primary source of gain was due to a 10.32% investment return, exceeding the 7.5%assumption. This gain was partially offset by higher than expected retirement activity. 2. The total required contribution reduced from 63.9% of payroll to 58.7% of payroll. 3. The balance due from the City reduced from 47.6%of total annual payroll to 42.4% of total annual payroll. 2 4. Doug Lozen indicated there was a reduction in City funding and that the City has access to a $275,560 credit balance which can be used for funding requirements. 5. Doug Lozen stated that assets are growing faster than liabilities. There has been a $600,000 increase in assets since last year and liabilities grew only by $300,000 from the prior year. 6. The UAAL went from approximately$4.8 million down to approximately$4.4 million as of October 1, 2014. 7. The Board had no questions. The Board voted to approve the October 1,2014 Valuation Report as presented, upon motion made by Lawrence Leaf and second by David Arcieri, motion carried 4-0. 8. Jack Evatt recommended leaving the expected rate of return at 7.5%. The Board voted the declaration of returns for the Plan shall be 7.5%for the next year, the next several years, and the long-term thereafter net of investment related expenses, upon motion made by Lawrence Leaf and second by David Arcieri, motion carried 4-0. c. Christiansen & Dehner, Board Attorney, Lee Dehner. i. Legislative Update. 1. Lee Dehner discussed current bills that will be considered at the spring legislative session. a. Senate Bill 534 indicates the State will only post calculations on their website that are required by the statute. Mr. Dehner reminded the Board that they can post additional calculations on the City's website. b. Senate Bill 242, if passed, would require all local law plans to use the same mortality table as the FRS. The FRS table is more conservative than the current table being used. c. Senate Bill 172 deals with how state monies can be utilized. This bill is opposed by the Florida League of Cities. d. Senate Bill 224 pertains to public records notification when doing contracts with vendors. 2. John Tarr asked what mortality table is currently being used. a. Doug Lozen stated that the RP2000 is the table used. If the FRS mortality table was to be used it would probably add about 2% of payroll to funding. The new table would assume longer life expectancy. ii. Draft Plan Document. 1. Lee Dehner informed the Board that most plans allow for replenishment regarding Senate Bill 1128. Mr. Dehner gave a brief overview of the plan document and asks that the Board review it for further discussion at the next meeting. Mr. Dehner informed the Board that an impact statement is needed once the plan document is approved by the Board. This should be done before it goes for first reading. 8. Disbursements Disbursements were approved as stated on the agenda upon motion made by David Arcieri and second by Larry Brinson, motion carried 4-0. 9. Staff Reports, Discussion, and Action a. The Board discussed adding a Supplemental Benefit. i. Lee Dehner recommended having Doug Lozen do a cost study and then decide if it's something the Plan wants to move forward with. 3 ii. Doug Lozen will need direction from the Board on specifics of the supplemental benefit. iii. The Board discussed specifics for the proposed supplemental benefit and decided on the below guidelines. i. Prospective. ii. Normal Retirees. iii. Fixed Supplemental amount. iv. Temporary to Medicare age (currently 65). v. Cost 2% of payroll. 10. Adiournment The meeting adjourned at 3:OOPM. 11. Next Meeting June 15, 2015 at 1:30PM. pectfu ly sub fitted by: Approved by: ' d F r!)l Jenne, Ian Administrator Date Approved By the Pension Board: �� 4