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HomeMy WebLinkAboutMinutes_Pension General_09/18/2008SYNOPSIS OF GENERAL EMPLOYEES PENSION BOARD SPECIAL MEETING 9/18/08: Michelle Gload was sworn in as a new member of the Board, replacing Michael R. Couzzo, Jr., who had resigned. 2. Chair Rhodes indicated the frequency of having an actuarial evaluation done had been discussed at the last meeting and would be on the next quarterly agenda. 3. HR Director Reid indicated she would circulate the actual fiduciary liability policy to the board. 4. The budget was approved with additions to the line items of travel and expense and seminars, to allow Board Member Gload to attend a trustee school. 5. Dave West of Bogdahn Consulting and Attorney Jensen presented options for expanding the investment guidelines. 6. Mr. West agreed to make a presentation to Village Council on expanding the investment guidelines at a workshop meeting. 7. Consensus of the Board was to follow these steps in considering expansion of the investment guidelines: (1) To review paperwork before November 3 (this would be placed on the November 3 agenda); (2) Have a workshop with Village Council; (3) Depending on what happened at the Council workshop--they might want more information--might need to hold another special meeting; (4) once on the Council agenda there would be two readings of the ordinance; (5) the board might be able to sign a new investment policy guidelines at the February quarterly meeting; (6) Distribute to State, municipality and actuary; (7) if no changes within the 31 day period, investing could possibly begin by the middle of April, 2009, or signing the new investment policy guidelines might have to be delayed to the May quarterly meeting. 8. Mr. West, working with Attorney Jensen, was to provide a written document for each scenario -option one and option 2, with a precise investment policy, to be received by the Village in time to distribute with the November 3 meeting packet, by October 21 or 22. END OF SYNOPSIS TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MINUTES OF SPECIAL BOARD OF TRUSTEES MEETING September 18, 2008 I. Call to Order and Roll Call The Tequesta General Employees' Pension Trust Fund Board of Trustees held a special meeting in the Council Chambers of the Village Hall, 345 Tequesta Drive, Tequesta, Florida, on Thursday, September 18, 2008. The meeting was called to order at 9:01 a.m. by Chair Michael Rhodes. A roll call was taken by Betty Laur, Recording Secretary. Board members in attendance at the meeting were:. Chair Michael Rhodes, Secretary Carl Hansen, Board Member Deanna Mayo, and Board Member Michelle Gload. Board Member Archie Mangum, Jr. was absent. Also in attendance were Dave West and Jennifer Cute representing Bogdahn Consulting, LLC, Attorney Bonni Jensen, Pension Coordinator Lori McWilliams, and Senior Accountant Monica Rahim. II. Approval of Agenda MOTION: Board Member Hansen made a motion to approve the agenda as submitted. Board Member Mayo seconded the motion, which carried by unanimous 4-0 vote. III. Swearing In 1. New Board Member Michelle Gload was sworn in by Village Clerk Lori McWilliams IV. Approval of Budget 2. Senior Accountant Rahim reviewed the proposed budget which contained additional expenses as shown on the handout she provided, and verified that the 2009 budget included increased fees for investment services and for the attorney. Secretary Hansen asked the amount of the 2006/2007 budget, which was $35,912, and asked why there was such a large increase, since the 2008/2009 proposed budget totaled $50,235. Chair Rhodes noted the recording secretary and investment services were the biggest part of the increase. In response to a question, Attorney Jensen explained a fidelity bond was insurance to prevent funds being stolen; fiduciary liability insurance indemnified actions taken by the trustees. BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND SPECIAL MEETING MINUTES SEPTEMBER 18, 2008 PAGE 2 Secretary Hansen made a motion to approve the proposed budget. Board Member Gload indicated she had questions. Billing by consultants was explained for the benefit of new members. Consultants identified as follows: Dana Investments was the investment manager; Bogdahn Consulting monitored the investment manager; Salem Trust was the custodian bank who held the assets. HR Director Merlene Reid advised the officers and directors insurance for the Village did not cover fiduciary liability for the board, and she would circulate the actual policy to the board members. Board Member Gload was advised that an actuarial evaluation was done every other year; Ms. Gload indicated she would like to see a benefit statement every year. Pension Coordinator McWilliams reported the Public Safety Officers' Pension Board recently requested their actuarial evaluation each year. Chair Rhodes recalled this had been discussed at the last meeting and would be on the next quarterly agenda. Attorney Jensen explained this budget was different than the Village's budget; these expenditures were most appropriately looked at as a percentage of the fund's assets, as reported by the actuary; as the fund grew the expenses were expected to increase. Recording secretary fees for today's meeting were to be in the 2008 budget. Attendance at trustee schools was discussed; Ms. McWilliams and Board Member Mayo had previously been approved to attend; June seemed to be the best time for them to attend. Board Member Gload was interested in learning more about the trustee school and their certification program. Ms. McWilliams commented the budget could be changed based on need; so someone else was not precluded from attending. Mr. West provided information on the State school, which was geared toward Public Safety but would also provide general information for members of this board. The budget was increased so that Ms. Gload could also attend the school. MOTION Secretary Hansen re-stated his motion: To move approval of the budget with additions to the line items of travel and expense and seminars. Board Member Mayo seconded the motion. Motion carried 4-0. V. Discussion on possible expansion of the current investment policy to allow other types of investments 3. David West, Bogdahn Consulting, introduced Jennifer Cute with their firm. BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND SPECIAL MEETING MINUTES SEPTEMBER 18, 2008 PAGE 3 --------------------------------------------------------------------------------- Mr. West explained that this pension was modeled after the Public Safety pension, which was required to be more restrictive in their investment policy because they received funds from the State. Mr. West presented his proposal to expand the investment policy of the General Employees' pension plan in the Village's pension plan ordinance, explaining the Board could make suggestions for change but the ultimate approval must come from the Village Council. Mr. West explained they wanted to broaden the available product forum they could invest in, which was small because of the size of the fund. The equity manager had done very well, but the bond portion of the portfolio could be improved. It was very expensive to purchase small portions of a bond portfolio; mutual funds were not in the current ordinance and commingled funds were required to be administered by a State bank, which drastically limited the available bonds that could be purchased. Mr. West advised the Florida Retirement System used Florida Statute 215.47 as their investment policy, which was very broad, and allowed them to diversify. One objective in making the proposed change was to earn more and lower expenses. An asset class that would be very desirable would be treasury bonds which were too expensive under the present plan; an example would be to invest in Vanguard Index Bond Fund or something similar which would cost less and provide diversification, but it was not administered by a State bank and employed investments not allowed presently under the Village's ordinance. Mr. West recommended that the Board engage Attorney Jensen to work out language to remedy the issues he had discussed; to send that to the Village Council with the Board's intentions, to lower the cost of operating the plan and increase returns by being able to purchase the best investments. This objective was completely consistent with what the State had already approved for its own retirement system. Chair Rhodes clarified with Mr. West that his recommendation was to consider action to change the investment policy to allow for additional investment capability for fixed income. Mr. West advised he had no idea why these alternatives had originally been omitted; and they had been added by 95% of other municipalities his company worked with. The number one goal was reduction of costs. Mr. West commented the board should not be limited as far as the field of experts that could be brought in. Chair Rhodes asked if there would be more exposure with mutual funds-the response was yes, but diversity would provide protection from a single negative event. Mr. West used Vanguard mutual fund as an example which would provide BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND SPECIAL MEETING MINUTES SEPTEMBER 18, 2008 PAGE 4 diversification. Mr. West explained that if the board participated in a co- mingled fund and a large asset holder moved out, all members in that fund would share the costs involved. Mr. West noted the board could draft their policy statement. Chair Rhodes asked how much this fund had lost by not being able to invest in alternative vehicles. Mr. West responded that was unknown; however, although the investment management fees were very competitive, but half of the management costs of the bond portfolio might have been saved, and there would have been savings by being able to buy using economies of scale. Chair Rhodes wanted the language to provide flexibility, but not speculative on fixed income. Secretary Hansen asked if having the restrictions and being handcuffed on buying the best investments had protected the pension fund from the troubles on Wall Street, to which Mr. West responded, no, and the restrictions and policy he would recommend would still be strict, but the more diversification would better mitigate risk. Attorney Jensen recommended option (1) changing the ordinance to open it up as broadly as possible for legal purposes. Restrictions would then come from the investment policy guidelines. She advised she would recommend language that the fund was able to invest in anything they were able to invest in under the law in accordance with their fiduciary responsibilities tothe plan, to act in the best interests of their participants and beneficiaries, to defray reasonable expenses, to act prudently; but restrictions would be contained in the investment policy guidelines. If that was not acceptable, she would then recommend (option 2) mirroring provisions 1-6, 8 & 9, 11, and 17 in Statute 215.47. Mr. West agreed to make a presentation to the Village Council, and recommended holding a workshop. Pension Coordinator noted the Village Council was going to hold a workshop to re-assess the Public Safety Officers pension, and possibly this could be added to that meeting. Chair Rhodes encouraged a workshop with Village Council. Mr. West advised that 95% of the other municipalities their firm worked with had experienced cost savings by expanding their pension investment guidelines in the last couple of years. Attorney Jensen explained how her proposed recommendation would change the current investment language in the ordinance. Board Member BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND SPECIAL MEETING MINUTES SEPTEMBER 18, 2008 PAGE 5 Gload indicated she would like time to compare the new language with the existing language before making a decision. Chair Rhodes commented the investment policy needed to be very clear. Pension Coordinator McWilliams left the meeting at this point. Chair Rhodes stated he preferred Attorney Jensen's second option because it was quantified with flexibility-the board could not be handcuffed but they had the responsibility to protect the assets yet not have carte blanche. Attorney Jensen reported a couple of boards she worked with had adopted option one because they wanted to be able to make changes if their investment manager or monitor advised they needed "x"; if items were specifically listed and the investment manager or monitor advised they needed "x" then the board needed to have the ability to add "x". Mr. West added that if the manager had invested in a pool fund that decided to use a new product that was not delineated, then the whole process of going back to the Village Council must be repeated, and recommended availability of options. Chair Rhodes commented the other side of that was the Village Council would stay more involved. Board Member Mayo asked if Attorney Jensen felt one option was more advantageous than the other. Attorney Jensen responded option one had more flexibility; option two would have the Village Council's buy-in; either was good from a legal standpoint and would accomplish the goals Mr. West was setting out-to give more flexibility and more options to invest. Secretary Hansen asked how many regulations governed investments. Mr. West explained nothing illegal could be done; with option one State Statute 112 would regulate; under option two verbatim language would be used from the Statute and the investment manager would be restricted to only the verbatim items. The section that permitted mutual funds was item 11. The September 20, 2005 investment policy was distributed, and reviewed by Mr. West. Chair Rhodes noted Section 3 mentioned mutual funds. Mr. West advised that should not be there and this policy would be amended. Mr. West indicated one change needed was to allow participation in pooled or commingled funds, and with regard to specific limitations, supposing for example to participate In Vanguard Index Fund the policy would need to adopt the intent of their guidelines-at the end of the day it would be the investment policy of the mutual fund that would dictate. Mr. West suggested BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND SPECIAL MEETING MINUTES SEPTEMBER 18, 2008 PAGE 6 the present 60/40 benchmark might be changed to allow diversification, with permitted ranges of asset allocation. Mr. West recapped the reference to mutual funds would be removed and the Florida statute sections discussed would basically replace 3A, and keep certain restrictions, and add under 3A that the investment policy of the commingled fund would be adopted. Mr. West indicated his firm would draft the language which would then be approved by Attorney Jensen. The board would adopt the policy and would have to be approved by Village Council and by the State. There was a 31- day window for objections before the revised policy would be effective. It was clarified this applied to the whole fund, not just fixed income. Mr. West suggested not placing a limitation on how much could be invested in mutual funds; he was not suggesting using mutual funds for equities. Mr. West commented on Dana's management of stocks and bonds, domestic and international, and the benchmark might need to be changed to allow more international. If an international manager was brought in their investments would need a different benchmark. Chair Rhodes felt the investment guidelines needed to be specific, but the ordinance more broad. Chair Rhodes requested Mr. West provide a written document reflecting how he felt the investment guidelines should be changed. Mr. West commented that could be the tool used in the workshop with Village Council. Attorney Jensen advised the steps to betaken would be to review this before submittal to Village Council. To allow time for preparation, it was agreed to review the documents at the November 3 quarterly meeting, and holding the workshop after that so the board would be comfortable with the document and have a final product to present to Village Council. Chair Rhodes reviewed the steps to be taken: (1) To review paperwork before November 3 (this would be placed on the November 3 agenda); (2) Have a workshop with Village Council; (3) Depending on what happened at the Council workshop, they might want more information; might need to hold another special meeting; (4) once on the Council agenda there would be two readings of the ordinance; (5) the board might be able to sign a new investment policy guidelines at the February quarterly meeting; (6) Distribute to State, municipality and actuary; (7) if no changes within the 31 day period, investing could possibly begin by the middle of April, 2009, or signing the new investment policy guidelines might have to be delayed to the May quarterly meeting. BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND SPECIAL MEETING MINUTES SEPTEMBER 18, 2008 PAGE 7 Board Member Mayo asked, with the experts present advising option one was best, if that option could just be presented to Council. Chair Rhodes responded that going with that option, the investment policy needed to be very clearly spelled out and the document Mr. West would provide would do that. Attorney Jensen commented it would be better to have both proposed scenarios documented, but the investment policy would substantially be the same under both scenarios. Option A would give the most flexibility and the greatest opportunity to invest in the market. Mr. West was to provide a precise investment policy; if there was a conflict with Florida law, Florida law would prevail. The document was to be received by the Village in time to distribute with the November 3 meeting packet, by October 21 or 22. Attorney Jensen advised no motion was necessary; she and Mr. West were just taking the board's direction. XIII. ADJOURNMENT Board Member Mayo moved, seconded by Board Member Gload, to adjourn the meeting at 11:16 a.m. Respectfully s°ubmitt-ed,/ ~\u..~c~ ~~~ Betty Laur Recording Secretary