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HomeMy WebLinkAboutDocumentation_Regular_Tab 08_08/11/2005 , � � � j TEQUESTA GENERAL EMPLOYEES' PENSIQN `� . TRUST FUND � SPECIAL BOARD OF TRUSTEES MEETING . JULY 7, 2005 I. CALL TO ORDER AND ROLL CALL T'he Tequesta General Employees' Pension Trust Fund Boazd of Trustees held a regulaz quarterly meeting in the Emergency Operations Center (EOC) of the Tequesta Public Safety Facility, 357 Tequesta. Drive, Tequesta, Florida, on July 7, 2005. The meeting was called to order at 8:14 a.m. A roll call was taken by Betty Laur, Recording Secretary. Boardmembers in attendance at the meeting were: Chair Jeff Newell, Secretary Tom Paterno, and Boazdmember Bob Garlo. Also in attendance were proposed new � boazdmember Anne Koch, Consultant Joe Bogdahn, Pension Coordinator Gwen Carlisle, and Finance Director JoAnn Forsythe. Boazdmember Carl Hansen was absent from the meeting. II. APPROVAL OF AGENDA MOTION: Boardmember Garlo made a motion to approve the agenda as submitted. Paterno. Boardmember Paterno seconded the motion, which carried by unanimous 3-0 vote. III. APPROVAL OF NEW MEMBER OF THE BOARD MOTION Boardmember Garlo made a motion to accept Anne Koch as new employee representative to fill the vacancy which was created by Carol Lux leaving the Village. Motion was seconded by Boardmember Paterno and carried by unanimous 3-0 vote. IV. APPROVAL OF MINUTES MOTION: Boardmember Garlo made a motion to approve the minutes of the May 10, 2005 regular quarterly meeting as submitted. Boardmember Paterno seconded the t BOARD OF TRUSTEES TEQUESTA GENERAI. EMPLOYEES' PENSION TRUST FUND SPECIAL MEETING MINUTES � J�Y 7� 2005 PAGE 2 motion, which carried by unanimous 4-0 vote. Boardmember Garlo made a motion to approve the minutes of the May 17, 2005 special meeting as submitted. Boardmember Paterno seconded the motion, which carried by unanimous 4-0 vote. REORDER AGENDA Boardmember Paterno made a motion to reorder the agenda to place New Business Item V(b) before Item V(a). Boardmember Garlo seconded the motion, which carried by unanimous 4-0 vote. V. NEW BUSINESS (b) CONSIDERATION OF AVAILABLE OPTIONS FOR APPOINTMENT OF A CUSTODIAN AND INVESTMENT OF THE PLAN ASSETS � Boardmember Paterno indicated he wished to have a discussion before hearing the scheduled presentations. He wanted to find out what Ms. Forsythe had learned in the last week and wanted to discuss the backup plan the board had had when they chose Rockwood, that they would go with Dana as second choice if Rockwood would not get rid of Hal Chappel as their representative for Tequesta. Ms. Forsythe provided a handout which indicated there was an unearned loss. Ms. Forsythe advised that she had spoken with Andy Holtgrieve at Rockwood and with Karen Russo with Salem Trust and learned that the amount of assets was so small that it must be pooled in order make any profits. Ms. Forsythe commented Mr. Holtgrieve had stated Rockwood was not the custodian, and Attorney Jensen had stated the fund was required by State law and by their own plan to have a custodian, so now the fund was in a non-compliance situation. Chair Newell commented at the last meeting the board had selected Salem Trust as custodian and authorized opening a checking account at Independent Community Bank, and asked if that had been done. Ms. Forsythe responded an attempt had been made, but Karen Russo with Salem Trust stated they could not be the custodian since they did not hold the pooled assets. They would have to get their legal counsel to change the custodian agreement to say this is what you have according to what Rockwood or A. G. Edwards is telling us. Ms. Forsythe stated the bills could be paid through A. G. Edwards. Joe Bogdahn commented the assets were in a commingted fund held at a trust company, so that requirement was met. Salem Trust did not have the custody of the . �� BOARD OF TRUSTEES � TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND SPECIAL MEETING MINUTES July 7, 2005 PAGE 3 underlying securities just a statement from Rockwood that Tequesta had a certain amount, so could only enter an amount on their form and Salem Trust's accounting would always be a month behind—it was the same as a mutual fund. � Boardmember Paterno commented the other companies making presentations would all handle funds the same wa�►. Mr. Bogdahn commented the funds were held at a qualified depository or frust company, so that requirement was met; Ms. Forsythe advised the funds were not in the name of the Village so therefore Rockwood failed the tests to be qualified under the State of Florida. Mr. Bogdahn advised he had talked �o Attorney Jensen and she had advised if the Village had an account at Salem Trust and the commingled funds were at a trust company, the requirements were met. Ms. Forsythe explained that the audit company asked if the account was in our name, were they responsible to us, and Rockwood was not. Salem Trust had � said no way would they be custodian. Mr. Bogdahn commented that Salem Trust could not verify those shares were ours, but over 100 of the 200 pension funds in the State used commingled funds and they were all held that way. Ms. Forsythe stated the funds must be in a qualified trust company or a qualified depository, which Rockwood was not. Boardmember Paterno discussed the fact that they were doing it the same way as others, but they were not qualified—Rockwood only had one company so could not transfer funds into their other investment side. If Rockwood had a separate trust company as a doorway to hand the investments off, they would qualify, and could also be the custodian. Mr. Bogdahn advised he only recommended investments and reviewed the investments, and was not aware of custody issues with other plans. Boardmember Garlo asked if the Village could be in a commingled fund and establish a custodial relationship that would satisfy the government's auditing requirements. Ms. • Forsythe explained that was what the Village had tried to do. Ms. Forsythe explained that A. G. Edwards would not even talk to her because this was not the Village's account—it was in Rockwood's name. Mr. Paterno summarized that A. G. Edwards had a relationship with Rockwood and by law could not disclose anything to us, but if Rockwood could establish sub accounts for each entity that had parts of the commingled fund and A. G. Edwards could tell the Village yes, you have this amount represented by this stock, that would do it. Boardmember Paterno advised that of the 12 investors in the Rockwood commingled fund, only two were in Florida, so they had not been pushed to make any changes. Mr. Bogdahn clarified that now there were seven in Florida. Mr. Bogdahn BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND SPECIAL MEETING MINUTES JulY 7, 2005 PAGE 4 commented the only hiccup in other accounts had been that State statutes for Police and Fire funds stated a commingled fund shall be administered by a state or national bank, so the local law ordinances had been changed to read "a commingled fund as selected by the board", and quite a few around the state had done that. The issue of a qualified depository or trust company had never come up ezcept here. Chair Newell asked what the solution was to fix the problem. 1VIr. Bogdahn responded the attorney should be reviewing this, and Attorney Jensen felt her hands had been tied because the board told her not to review it. Mr. Garlo commented that Mr. Bogdahn did not feel there was a problem; but Ms. Forsythe felt there was a problem. Mr. Bogdahn commented that a lot of other auditors and attorneys around the state had reviewed this and had not felt there was a problem. The issue as he understood it was that a qualified public depository requirement and the trust department requirement did not pertain to the custody of the pension fund, but was pertaining � to operating reserves and other areas, and that was what he had understood from others, but he was not an attorney. They had other commingled funds with SunTrust, Westwood Trust, and others that had been in place for some time, and were all reported the same way—like a mutual fund, and they only showed you own units, and there was no sub-level accounting. Boardmember Garlo asked if it would help if Rockwood came here. Ms. Forsythe commented she could pull out the statutes and her information, and that. Mr. Bogdahn was indicating the other funds he was talking about fell outside the requirements for some reason. Mr. Bogdahn commented from what he understood, the reference to a qualified public depository and trust company was referring to municipal funds and not pension funds, and pensioa funds were a separate entity from the municipality. Ms. Forsythe responded she knew the bureau chief at the state who reviewed everything for the police and fire pension, and she would call to see whether pension funds were required to be in a qualified public depository. Boardmember Garlo commented that was only one aspect of the issue. Ms. Forsythe agreed, stating right now we are still not getting statements that are set up well. Mr. Bogdahn commented his office also had ongoing issues about that, but his office absorbed those issues because Rockwood was still the best investment vehicle for the Village, but their administrative function was not good. Ms. Forsytlie eacplained that reconciliation could not be done satisfactorily—the Finance Department had to back into information. Boardmember�Paterno commented he understood the issue about i BOARD OF TRUSTEES � � TEQUESTA GENERAI. EMPLOYEES PENSION TRUST FUND ;� SPECIAL MEETING MINUTES ; J�Y 7� 2005 � PAGE 5 3 --------------------------------------------------------------------------------- + � � � the not-so-great administration, but what Ms. Forsythe wanted—none of the people ; were doing it that way—they would all have commingled funds, they would be the people reporting, and the fund would be in the same boat. Ms. Forsythe stated, she did not know that. Mr. Bogdahn commented they were wrapped programs, which did not have a place in public pension funds. Ms. Forsythe requested these presenters be asked that question, and anyt�iing else Mr. Bogdahn was aware of. Mr. Bogdahn stated, he would ask any manager he would bring to the board, will they accept fiduciary responsibility to the board for this fund and accept full discretion, so that they were the investment manager, not the board. From a custody standpoint and getting checks written, etc., those things were usually not in Mr. Bogdahn's realm because those things were administrative functions. Boardmember Paterno suggested making Ms. Forsythe the custodian; she responded she could not do that. Boardmember Garlo asked if the board was going to listen to these presenters on their administration rather than on what their returns were. Mr. Paterno commented fnd that out without telling them what the issues were, and see if they were the same as Rockwood. Ms. Forsythe commented there were a lot of issues with Rockwood, and when she spoke with Mr. Holtgrieve, his ezplanation was Mr. Bogdahn and some other people had gone to them and asked them to set this fund up, because they wanted something to offer to small plans. So, based on Mr. Bogdahn's requirement, they had set this up. Mr. Holtgrieve said that where they were located there were more requirements, and when he asked whether he should add those also, Mr. Bogdahn said the other requirements were not necessary in the State of Florida. When she said she had to know additional items, Mr. Holtgrieve said he could try to do that, but he had failed to accomplish what was needed. Chair Newell commented he wanted to hear the administrative side from the presenters regarding how they did business, and it was the same on the returns with everyone. During ensuing discussion, Boardmember Garlo stated he thought the retarn was a critical component in what the board was doing. Boardmember Paterno responded the numbers spoke for themselves—the board needed to pick the best combination. Boardmem6er Garlo asked what the administrative criteria was that the board was looking for---could they be in the commingled fund—and still have that comfort factor. Ms. Forsythe responded t6e presenters could be asked if they have other municipalities in the State of Florida, and she could then call the State and ask them specifically, and if Rockwood had not failed to supply the statements the Village needed to feel comfortable, if there had not been all the problems with the custodian, and if A. G. Edwards had given a subsidiary account, BOARD OF TRUSTEES TEQUESTA GENERAI� EMPLOYEES' PENSION TRUST FUND SPECIAL MEETING MINUTES ; JulY 7� 2005 � PAGE 6 i ---------------------------------------------------- ----------------------- ; everyone would not be here today. Mr. Bogdahn agreed with Ms. Forsythe, but explained there was a little disconnect in working with Rockwood that he would like to explain, and there were other custodians his company would rather deal with but they would make a custodian work for the Village. Mr. Bogdahn drew an ezample on the board of the process used by different companies. Ms. Forsythe asked why Mr. Bogdahn had not recommended a company Gke John Hancock; he responded that he had never recommended an insurance company. Mr. Bogdahn ezplained there were two things Rockwood had, asset allocation adjustment and investment, , and combining those two things, Rockwood did better than anyone else in that environment. Ms. Forsythe asked why create a new fund—why not use an existing one. Mr. Bogdahn responded their investment process for their new commingled fund was the same as they had been doing. Mr. Bogdahn explained the difference between Suntrust's process and Rockwood's process was that Suntrust's shares were valued by a company they owned and they told themselves the value because they owned the custody component; Rockwood's shares were valued by an outside auditing company hired by Rockwood and not under control of A. G. Edwards. The number of shares the Village had was reported based on what the auditing firm determined. It should not make a difference, and other than administrative reporting, Mr. Bogda6n commented he thought the Village was covered this way. There was another company, Westwood, that now had a commingled fund, but they owned a trust company instead of the trust company owning the investment manager. Because they were doing the values themselves and because Santrust was also doing that, they could provide statements real time, while A. G. Edwards was always a month behind. . Ms. Carlisle asked if in these examples the shares were in the client's name; Mr. � Bogdahn explained they were all the same—the underlying investments were never in your name--you owned ��x" number of shares just like a mutual fund. Mr. Bogdahn gave examples of other funds, and Boardmember Paterno gave an egample of his Merrill Lynch account. They were all the same. Mr. Paterno commented he would like to see who the auditors were for Rockwood. Ms. Forsythe commented they were only getting the value at trade. Mr. Paterno gave another example of Pu61ix stock he owned and how they reported _the value, and that everyone was relying on the same system. Mr. Bogdahn commented the situation this fund was in with A. G. Edwards, the auditors, and Rockwood, was far superior to Wachovia, and he had never heard an auditor raise the questions being raised here. . Ms. Forsythe commented the problem was whether the custodian was a qualified public depository—that was where Rockwood was failing, and A. G. Edwards was BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND i SPECIAL MEETING MINUTES � JulY 7� 2005 i PAGE � somebody's custodian, but not ours. Mr. Bogdahn stated A. G. Edwards was a hvst company, so the funds were being held by a trust company just not in the name of the Village: Ms. Forsythe stated, it was not in our name and we have no relationsl�ip with them. If the stocks were in our name we would be getting confirmations and buy and sell orders, etc. If now we had a third party custodian, they would say they were financially responsible, and we do not have that. Chair Newell requested that the presentations be heard at this point. It was decided to limit the presentations to 15 minutes with questions and answers to follow. (a) PRESENTATIONS Treasure Coast Financial and John Hancock Mr. Steve Scalici with Treasure Coast Financial made a presentation offering two options—a group annuity or a regular investment advisory option. A one-page handout summarized managed assets and individual funds of John Hancock lifestyle models as of 3/31/O5. Mr. Bogdahn asked who selected the funds. Mr. Scalici responded it could be him; for managed assets it would be done by John Hancock; if a group annuity contract was chosen, both could pick. Mr. Bogdahn asked if he would accept full discretion to pick, to which Mr. Scalici responded he could if the board gave it to him. Mr. Bogdahn explained the board did not want to be the investment manager, and asked who would be the person with full discretion. Mr. Scalici responded it would be him. Mr. Patemo asked who was custodian for the funds shown on the handout the answer was John Hancock. Mr. Paterno asked if Mr. Scalici was aware the best return shown for the last five years was less than the 8% this fund needed to make. Mr. Scalici responded he was aware now. Mr. Bogdahn asked who the custodian of the managed assets was the answer was Wachovia Trust. Mr. Scalici indicated he could provide referrals from other clients and explained he would pick different stocks by having some in large cap, mid cap, and small cap, plus bonds and real estate. They used Morningstar and Value Line for research, and were not working with any other governments Nationwide Retirement Services Peter Lucia, an independent advisor, explained he felt Nationwide would be the best fit for the Village. Once a solid plan was determined they would look for levels of support and a company to help the Village manage. There would be four levels of ongoing support Mr. Lucia locally, Nationwide, Wilshire, and the money managers who were BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND SPECIAL MEETING MINUTES JulY 7� 2005 PAGE $ running the accounf. Peter Crow, Nationwide representa.tive, made a presentation, and explained the part of Nationwide he worked for worked with plans like this. Trustees � were responsible for managing groups like Tequesta's and provided access to investments ' usually available only to lazge companies. The big plans had a 3-step process (1) esta.blish parameters for managing assets (2) create a model for diversifying, and (3) research investment managers to determine the 2 or 3 best and split the investments between them. They would use the same investment managers as large companies and work with Wilshire to retain those managers. Sample portfolios were reviewed. Wilshire would monitor and change investment managers if not perfornung well. A very solid foundation would provide protection from a fiduciary standpoint. Nationwide plans had a very defendable process, and everything would be accessible online. Investments were re- balanced quarterly. The type of reporting that could be expected was reviewed. At least once a year they would provide an annual review to the board. Mellon Bank would be the custodian. T'he Village would have an account with Nationwide, but underlying assets would be held at Mellon Bank. Discussion ensued. Mr. Bogdahn asked if they would accept full discretion; Mr. Crow responded they would work with the Village to help the boazd identify the right asset model and then they would implement it; the board would . have fiduciary responsibility. Boardmember Paterno asked regarding the fixed income guaranteed portion, if the only way to mal�e that work was to stay with it long term, so in a sense if the board went with Nationwide they would have to stay long term—Mr. Crow verified the fund could lose money if they took those funds out before seven years. Ms. Carlisle asked if the fixed income interest rate changed over the seven years, to which the response was that once a year it could go up or down, and there would probably only be 10% of the fund in the guaranteed account. Discussion ensued. Mr. Crow indicated performance was only one component of an investment manager, and described the history of how their plan had developed. Ms. Koch asked what the fees were. Mr. Crow responded the allocation chosen would determine the total charge, and there would be no other fees. Ms. Koch asked if an employee could go online to see their information. Mr. Crow commented employees did not have an account so normally did not have access. The account would be in the name of the Village and it would be up to the Village to say who would have access. Boardmember Gazlo asked if they had a cash management account to pay expenses from. Mr. Crow commented the Village would sign off on a form and send it in; they would write the check, and there were no per check fees and no wire transfer fees. Information would be needed from the actuary to pick the right model for this fund. Mr. Lucia noted all activity would be available on line so could be reviewed before the statement came out. i BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND SPECIAL MEETING MINUTES J�Y 7� 200� PAGE g MO_� Boardmember Paterno made a motion to adjourn for five minutes. Boardmember Koch seconded the motion which carried by unanimous 5-0 vote. � The meeting was reconvened at 10:14 a.m. Comparison of Investment Managers bv Joe Bogdahn Mr. Bogdahn presented a comparison of perfarmance for Dana, Rockwood, Nationwide, Treasure Coast Financial, Trustco and Westwood for their equity portions only. Highlights included the correlation among the companies, beta measurement of risk, up and down capture ratio, and standazd deviation,. All of the plans had gone up more than they went down. All of the plans were taking less risk than the benchmazk index, S&P 500; all were less volatile than the benchmazk index for 3-yeaz and 5-year terms. All risk parameters were similar. Nationwide had the lowest return for the past 5 years—all others were more opportunistic for a fund of this size. Rockwood had the highest returns over 5- � year, 3-year and 1-year periods, but were the worst for the past quarter. Dana's returns were second highest. Ms. Carlisle asked what had happened from January to n4w with Tequesta.'s funds at Rockwood. Mr. Bogdahn responded that from January through June they had a positive return and the index was negative. Mr. Bogdahn advised that the only criteria that could be.used to predict how a money manager would perform was to look at their past history, which would be the same for a commingled or any type of fund. Mr. Bogdahn expressed concern that Treasure Coast Financial was in a retail environment and did not belong to the auditing group that was the standard, so there was no way to confirm or verify their figures, no way to confirm they held the same stocks 5 yeazs ago, so no way to predict their performance. Ms. Forsythe asked why Rockwood's returns were so bad for the past quarter. Mr. Bogdahn explained they only traded once a month, so lagged behind, which had been to their favor in the past but because the market changed this quarter, they were down. Mr. Garlo noted their investment process did not address the problems. Ms. Forsythe stated she only had two problems—Rockwood's statements were terrible and she had been unable to work with them, and the custodian problem, but if the attorriey would just write a letter saying if we do not have a custodian or if the custodian is this, that we are in compliance with Florida statutes and our own plan documents, then Ms. Forsythe would . � , BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND SPECIAL MEETING MINUTES J'�Y 7� 2005 PAGE �o be comfortable. Boardmember Garlo stated she had said it verbally. Ms. Forsythe commented that now it was still in limbo--when the board made a final decision then Attorney Jensen could write a letter. As soon as the statements were received with a11 of the information and the board received that letter, she would be happy. � Boardmember Paterno asked IVIs. Forsythe's opinion: Did she think Rockwood operated differently than everyone heard from today. Ms. Forsythe responded from what they were , saying, no, she was sure Rockwood previously had the organiza.tion to put the records together to give the Village what they needed, but was not sure all that got transferred to this new account. Boardmember Paterno commented these presenters were all in the same positions as faz as custodians but their reporting was mueh better and fees were higher. The Village was cutting out the middlemen by dealing directly with Rockwood. Mr. Paterno indicated if the investment manager were changed, the Village would still be in the same boat. Ms. Forsythe commented it was up to Attorney Jensen to tell us- because otherwise there could be a bigger problem, on one hand the fund would have its own portfolio but fees would kill us. On the ather hand, if investing in an insurance type • fund was not allowed, the attorney should write the board a letter saying it was not allowed. Ms. Forsythe commented she would like that letter to be in the files, because when they talked to the attorney on the phone she said we had to have a custodian—that was in the plan document that we had to have a custodian. Mr. Bogdahn commented the plan documents might be changed. Ms. Forsythe responded the board just paid the attorney to change the plan documents to be in compliance with Florida statutes, and that was one of the changes--to be in compliance with Florida statutes, and if she wanted to write a letter giving her opinion that we aze in compliance, she was certainly a specialist in her field and able to do that. Boardmember Paterno commented what would make it easy was if Rockwood would just set up a custodian company—that would solve everything. Mr. Garlo asked the difference between Dana and Rockwood—not just the returns because those had been looked at but as far as the issues. Mr. Bogdahn responded that Dana would manage an individually managed portfolio. The difference would be in the fees; however he had seen some Dana accounts where Salem Trust was custodian and the fees were all included for $3,000. Ms. Forsythe advised they agreed to do it for $1,500 so long as they were able to also keep the Public Safety fund, but when they looked at it they said they could not do it because they did not hold the funds. Boardmember Paterno asked why not just jump on with Public Safety. Mr. Bogdahn explained that Public Safety was being managed on an individual account basis. Ms. Forsythe commented that Public Safety had said they did not want to be in a pooled fund. Mr. Paterno said they would not be in a pooled fund, this � BOARD OF TRUSTEES TEQUESTA GENER.AL EMPLOYEES' PENSION TRUST FUND SPECIAL MEETING MINUTES J�Y 7� 2OO5 PAGE 11 fund would just take advantage of the trades at the same time. Ms. Forsythe responded there would be the same fee problem then. Mr. Paterno commented they were doing it for Dana, to which Mr. Bogdahn responded the difference there was that the folks at , Rockwood would not manage an account of $500,000, but Dana would. The downside to Dana would be they would not be able to diversify bonds with such a small fund so it would be a drag on the total returns. This was the whole idea of using the commingled fund. Mr. Paterno commented if going with another fund, even Nationwide, they.would have to get into a risk area way above their norm to make 8% return. Mr. Bogdahn responded they would make it work but their risk would go up, and he was concerned with the fiduciary and discretion responses—you don't want someone to give you information so you can properly manage your assets or give you the tools to implement ; the investment process; the whole idea is you are trying to hire someone to do it for you. ; The only way to eliminate your fiduciary responsibility is to eliminate the plan. Then you can have other people act as fiduciaries—Mr. Bogdahn, Attorney Jensen, your actuary, and your investment manager—and you aze supposed to invest money as a prudent expert would. Maybe we are not prudent experts, so you are going to hire a prudent expert who will be the main fiduciary to our fund so if we do something incorrect because they did something incorrect, all fingers are pointed at them and the money comes from them instead of out of the board's pockets. Boardmember Paterno commented we would have to tell Attorney Jensen to find out what we can do—here is what we want, and we want . you to take care of it. Mr. Bogdahn advised that would be a motion to direct Bonni to review the current situation and alternatives, to be able to give the board back a letter that what they aze doing or if the alternatives would make it work to satisfy whatever the requirements are. Mr. Gazlo commented Rockwood was still not going to provide information. Mr. Bogdahn responded that his company was able to filter through the information that Rockwood was providing in order to do a reconciliation. Everyone was getting statement copies timely. Mr. Paterno commented if they could also get the copy of A. G. Edwards' statement they could see the individual stocks. Ms. Forsythe explained she was having trouble recording the activity in the pension fund. Mr. Bogdahn commented by Salem reporting the individual fund shazes they would then be showing the gain and loss reports. Ms. Forsythe advised Salem was saying in order to do that they had to have their legal counsel change the custodial agreement, but the pension boazd had to understand what they got from Rockwood was a month behind, so they would then be a month behind. Mr. Bogdahn stated that would be true—the cash would be current and the securities would be a month behind. Ms. Forsythe commented she did not know why • we would pay someone $1,500 who was not a custodian, because they were saying they were only reporting what Rockwood was telling them that the fund had. Mr. Patemo . commented the same thing would happen with Nationwide. Ms. Forsythe stated she had BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND SPECIAL MEETING MINUTES JuIY 7� 2005 PAGE 12 to know the unrecognized gains and losses because she had to know what came in when verifying. Ms. Paterno explained the gains and losses were based on the number of shares the Village had in that fund, the same as Nationwide—you could not have the underlying and never would. Ms. Forsythe commented it was not the underlying—when they backed out of it they had to verify contributions that were sent to them and those were not being seen, They were not recording things timelya Mr. Bogdahn commented it would always be a month behind. Ms. Forsythe commented she was not going to cook the books, she was not going to record anything unless she know what we actually had. The sheet she had passed out was what she believed was there and it was up to March at this point. A lot of things were in transit and they could not back into a beginning number and an ending number unless there were no trades and no contributions. They could say this is appreciation of the underlying investments, when in fact, the change might not be that. Boardmember Paterno asked Ms. Forsythe to forget about Rockwood for a minute�-just say Salem said you started out with $467,000, made contributions of $77,000, checks written totaled $48,000, etc., and this is your bottom portfolio, and Ms. Forsythe could . utilize that at the end of the yeaz. T'he only difference would be the equities would be behind one month. The worst that could happen would be you would have to wait until January 31 St to reconcile that other side. Ms. Forsythe commented she never knew month- to-month what the unrealized gain was. If we used Salem, it would be their problem to try to get the information out of Rockwood and we would be paying $1,500 or $3,000 for a custodian that would not really be a custodian. Boardmember Paterno commented the problem was that in order to do what Ms. Forsythe wanted, a fee would have to be paid, but Salem would not hold the underlying assets. If Rockwood would open a subsidiary account with Salem then they would know what was happening with the underlying assets. Boardmember Paterno commented A. G. Edwazds was holding the actual Rockwood account, they should provide the Village with a subsidiary account, and everything would work out.. Discussion ensued. The custodian had to be able to say what was in the fund, not what they were told was in the fund. If you hired a custodian who said they knew what was in the fund but you really knew they only knew what they were being told, then your fiduciary responsibility was really not passed to them you were really still responsible. Ms. Forsythe commented unless like Mr. Bogdahn said, it was really not required, or if A. E. Edwards would give a subsidiary account and be the custodian that would solve the problem. Unless Salem would agree to a flat rate to be custodian with Dana, but returns would be less, and the actuary might have to change from 8% to 6% with the Village paying more, so the Village Council would probably not a11ow the fund BOARD OF TRUSTEES ' TEQUESTA GENERAI� EMPLOYEES' PENSION TRUST FUND � SPECIAL MEETING MINUTES JuIY 7� 2005 PAGE �g . j , -------------------------------------_____�---------______--____-------__ _ to continue. Chair Newell commented he did not want to change anybody until the fund reached a million dollazs. Chair Newell sta.ted he liked Rockwood and was comfortable with them but acknowledged there were administrative problems that must be resolved. Boardmember Patemo recommended telling Attorney Jensen this is what we want, you are our lawyer, and you make it work. Mr. Paterno did not want to heaz what could or could not be done, but state what was wanted and ask if she could make it work. Ms. Forsythe asked if there was some reason A. G. Edwazds was not working with the � Village. Mr. Bogdahn advised that he had never tried calling anyone at A. G. Edwazds; but had someone at Rockwood—Andy or Tony—set it up to have them call him. Sometimes they did not respond until the next afternoon, but he had never called directly because they had no reason to talk to him since they didn't know him. However, if Andy or Tony called, and said we need to have a conference call with Joe Bogdahn in Florida, they would call. They were looking it not only as a privacy issue but also a fly in the ointment issue, and would talk to their client, which was Rockwood. Ms, Forsythe commented the Village was trying to be a client. Mr. Bogdahn summarized that as he saw it there were two questions, one, to have Bonni review the situation as it stands now using Salem to do check writing and pay bills and custody the cash account, and track the Rockwood investrnent, although it was understood it would be 30 days later that the gain and loss report would come out, and to find out if that would meet the statutory requirements; or to do something through A. G. Edwards Trust that would do the same thing for the fund. Ms. Forsythe suggested, or to go with an insurance company if that met State requirements. Mr. Bogdahn stated he did not recommend going with any of today's presenters just based on the risk/reward pazameters. Ms. Forsythe suggested then just putting the effort into trying to get A. G. Edwards to do this. Boazdmember Garlo recommended having Bonni work something out. Discussion ensued. Mr. Paterno commented third parties still had some responsibility. The situation was reviewed again for the benefit of new board member Koch. Ms. Carlisle suggested walking into an A. G. Edwards office to get something done instead of trying to do it over the phone. Mr. Bogdahn explained we were dealing with A. G. Edwazds Trust, and they were in St. Louis. We could not work with A. G. Edwards brokerage to accomplish this. Ms. Forsythe stated if Attorney Jensen wrote it in and we were happy with the reporting, i . . BOARD OF TRUSTEES TEQUESTA GENERAI, EMPLOYEES' PENSION TRLTST FUND ; SPECIAL MEETING MINUTES J�Y 7� 2005 PAGE �5 -------------------------------_---------------------------------_--_------ � that time to get their money when it was sitting there earning no interest. � � Mr. Bogdahn commented that most boards did it when it was administratively feasible ; and then approved it at the next meeting, Chair Newell noted that was what had been done previously, but what had happened was that an employee had been paid from the ' wrong fund. Mr. Paterno reminded the boazd that it had been voted on by the wrong board. Chair NewelI commented that had been what triggered this, so he was asking the pleasure of the boazd if they wanted to change it. Boardmember Koch commented she would hate to have to wait three months, and asked if it wasn't usually six weeks. Boardmember Paterno commented that if someone left two weeks after a quarterly meeting then they would be within the six weeks. Boazdmember Gazlo stated he had no problem with paying out in advance and did not see where there would be a problem with that; Chair Newell stated he had no problem but there should be some kind of check and balance, and if payment was going to be made from the wrong fund there should be some kind of check. Ms. Cazlisle commented that was an error in coordination and just an error , done at one point that was costing the board now. Ms. Carlisle stated she did not see a problem with getting it from the right account and paying it out ahead of time, and this had just been one time in a hundred. Mr. Garlo commented it had been the nature of being a police department employee which was why it slipped by. Ms. Cazlisle advised if there was any question we could ask Mr. Garlo where their contributions had been paid. Boaxdmember Paterno asked if Jody would have a problem giving it out without the approval of the board. Ms. Forsythe stated she had no problem so long as the board voted to do that. Ms. Carlisle commented it could still come at a quarterly meeting and if it was going to be a mistake, it was going to be a mistake. Ms. Forsythe stated that risk was very low. Mr. Bogdahn noted it had not been a disadvantage to this boazd because it was paid from the other pension fund and the money was out of their account for awhile. Mr. Paterno commented it would be bad for Bob in his relationship as HR Director because as soon as they put that paper in they wanted it, and the good thing for him administratively was he could say this is the process and you have to wait. Mr. Garlo explained that would not happen because there was already a process in place through payroll and they had to wait until the very last contribution was made and then the following paycheck was the one when they could expect payment. Ms. Forsythe commented the board could just set a policy that it would be 30 days. Mr. Paterno stated the board had set this policy, and it cleaned everything up and took the pressure off Bob, while under the old plan the pressure was on payroll. Boardmember Koch suggested it just be continued the way it was. It was clarified no motion would be needed to leave it the way it was. Chair Newell asked if it was also going to remain that paperwork must be submitted 15 days prior to a quarterly meeting. Discussion ensued. Consensus was that it could be any scheduled meeting and BOAKD OF TRUSTEES TEQUESTA GENERAI, EMPLOYEES' PENSION TRUST FUND SPECIAL MEETING MINUTES J�Y 7� 2oog PAGE 16 it did not have to be a quarterly meeting. Chair Newell commented that on the synopsis for May 14, 2005, item 8 spelled it out. Ms. Cazlisle pointed out if was not the same because item 8 stated a regulaz meeting. Boardmember Paterno advised that at any special meeting if there was someone to be paid out that the boazd could make a motion at that time, and the boazd could a�ways make a motion to change the policy. d) REQUEST FOR WITHDRAWAL OF CONTRIBUTIONS FOR CAROL LUX Chair Newell announced that withdrawal of contributions by Carol Lux into the pension fund had been requested. Ms. Lux had left the Village's employment on 6/17/O5. The total amount of contributions were $4,329.21. The net amount to Ms. Lux after withheld taxes was $3,463.37. MOTION Boardmember Paterno made a motion to pay out contributions for Carol Lux. . Boardmember Garlo seconded the motion, which carried by unanimous 5-0 vote. VI. ANY OTHER MATTERS Boardmember Koch asked if there were any upcoming classes for members of the pension board. Boardmember Gazlo responded that the local one had been held last week. Ms. Koch was advised that she would be notified regazding the FPTTA schedule. VII COMMUNICATIONS FROM CITIZENS . There were no comments from the public. VIII. ADJOURNMENT Boardmember Paterrio made a motion to adjourn, seconded by Boardmember Garlo, and unanimously approved. Therefore, the meeting was adjourned at 11:13 a.m. Respectfully submitted, ��k� � Betty Laur Recording Secretary