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HomeMy WebLinkAbout05-08-1995 Minutes THE CITY OF OCOEE GENERAL EMPLOYEES' RETIREMENT TRUST FUND (PENSION BOARD MEETING) - May 8, 1995 In the absence of Chairman Miller, Acting Chairman Grafton called the meeting of the City of Ocoee General Employees' Retirement Trust Fund to order at 10:10 a.m. in the Commission Chamber Conference Room of City Hall. The roll was called and a quorum declared present. PRESENT: Acting Chairman Grafton, Members Oliver and Waldrop. Also present were Actuary Garrett, Attorney Christiansen, and Clerk/Stenographer Lewis. ABSENT: Chairman Miller and Member Dabbs. APPROVAL OF THE MINUTES Member Oliver. seconded by Member Waldrop, moved to approve the minutes of February 13, 1994 as presented. Motion carried 3-0. QUESTIONS/COMMENTS FROM AUDIENCE None RESOLUTION FOR NEW SIGNATURES Chairman Grafton presented a Resolution for New Signatures as a new member had been cry appointed to the Board. Member Oliver, seconded by Member Waldrop, moved to adopt the Resolution for New Signatures as presented. Motion carried 3-0. Actuary Garrett arrived to the meeting at 10:15 a.m. REPORTS ATTORNEY Attorney Christiansen explained that during the last meeting the Board had directed that he advise City Manager Shapiro of the Board's decision regarding a request to increase the benefit rate from 2 to 2.5% and he had prepared an ordinance reflecting that change along with the other changes required by law. The ordinance included the following changes: • $150,000 IRS Salary Cap - The IRS salary cap specified that if an employee made more than $150,000 in a year it would not use more than $150,000 in the calculation of the pension benefit. • Military Credit Section - The language of the credited service section in regard to the Military, was stricken and a separate section called Separation From Employment For Military Service was added to reflect the changes made by the Federal Government. A new law called the United Services Employment and Re-employment Rights Act took the place of the Veterans Re-employment Rights Act. Under the Veterans Re-employment The City of Ocoee General Employees' Retirement Trust Fund May 8, 1995 Rights Act, an employee could wait until just before retiring to buy back prior miliary time but the new Uniform Services Employment Re-employment Rights Act had a time period on which an employee could pay in the money, or contributions, within twice the period of time that they were gone, not to exceed five years; i.e. if an employee had been gone for two years in the military and came back, he would have four years to put in his contributions. If he were gone for three years then he would have five years. • That the Board intends to comply is included in the additional language, as there may be extensions of that time period if someone is wounded in action or in the hospital. Attorney Christiansen said that other changes were still needed in the plan. He had sent a letter to the City about the increase in funding that would be required on the 2 to 2.5% and asked the City to look at that at the mid-year budget. Chairman Grafton said that the City would be doing budget hearings in August for October 1, so it is not likely but it is possible that more changes may be made to the ordinance before it is adopted. Attorney Christiansen said that the Board may want to make other changes, such as the ones that he had put in the Police and Fire Ordinance. Actuary Garrett said that when Actuary Foster did the study figures, he had projected it out for the funding in the '96 fiscal year. If the City Commission approved the ordinance before Cor October, the State would not have a problem with it. They would have a problem if basing the numbers off a valuation that is more than 12 months old. Chairman Grafton said that the budget had to be adopted by September 30th, becoming effective October 1, and asked if those figures would stand that long. Attorney Christiansen said that the figures would probably get better, and that they would make it effective October 1st. Actuary Garrett said the changes should be minimal. In the original letter that had been sent to the City Manager in February, Attorney Christiansen said that he had pointed out that benefit improvements would increase the costs to the City from its current level of 9.9% of payroll to 13.6%, and that the most recent actuarial valuation from the Police Officers and Firefighters Plan provides that the City would fund at 16.9% of payroll. The Florida Retirement System was paying excess of 17% of payroll for their general employees, and, based upon these factors, the Board of Trustees felt it would be appropriate to recommend to the City that benefits for general employees be improved and the funding level of the City be increased to pay the additional costs associated with the benefit improvements. During a discussion about contracts, it was noted that the Board did not have a contract for the attorney or Foster and Foster, Inc., and Attorney Christiansen recommended contracts for both their Actuary and their Monitoring function. Lir 2 The City of Ocoee General Employees' Retirement Trust Fund May 8, 1995 RANKING OF CLIENT PERFORMANCE Actuary Garrett reported on the Ranking of Client Performance for the fiscal year ending September 30, 1994. The fund had ranked 14 out of 42 and was based on a one year total fund number. Actuary Garrett addressed details of a letter that had been sent to the Trustees informing them that two principal portfolio managers had departed SunBank. He said that while the people that were lost were important, a lot of depth remained, and he did not think it was going to change SunBank's performance. Chairman Grafton asked if the Board should reconsider the way they allocated the percentages of their investments. Actuary Garrett said they should discuss that with SunBank when they arrive for the meeting. Attorney Christiansen believed that the Fund should go to 50%. Actuary Garrett said that the Money Manager did not make any more money by the Fund making the changes, and it would not require a change in the ordinance which already allows going to 50%. Attorney Christiansen said that the Board could vote to do it and he would just change the Investment Policy that currently states that it'll get a maximum of 40%. cry In response to Chairman Grafton, Attorney Christiansen said that the Board only needed to make revisions to the current Policy Statement. Chairman Grafton preferred waiting until the full Board could be present before deciding upon such changes. Actuary Garrett said that as a General Employees Board, there were a lot of other options but he did not know if it would require a change in the ordinance. Attorney Christiansen said that the Police and Fire had voluntarily decided to stick with the guidelines of the police and fire plan with regards to their investments but the General Employees plan was not required to stick with those. The General Plan did not have the statutory requirements that govern the Fire/Police Plan but the ordinance would need to be changed. Chairman Grafton said that the Board needed to discuss its mission statement, and asked if the goal was to support only American stocks and bonds, to support their own pension plan, or if the Fund wanted to branch out. Attorney Christiansen agreed with Chairman Grafton, and believed that in the Police and Fire Plan that it was a flag waving provision. He thought that most people perceive international investing as a more volatile, risky type situation because of the currency fluctuations. Most investment people will say that it's just a further diversification of assets. Liv 3 The City of Ocoee General Employees' Retirement Trust Fund May 8, 1995 OTHER BUSINESS BILLS AUTHORIZED FOR PAYMENT Chairman Grafton requested approval of the Board to present to SunBank for payment, the following bills: 1. Christiansen & Dehner, P.A. Professional Services Rendered $ 1,291.50 Expenses $ 71.55 Unpaid Balance From 2/13/95 $ 202.25 TOTAL $1565.30 2. Foster & Foster, Inc. Actuarial services in support of the Retirement Plan Analysis and Report of Investments Performance of Trust Fund for the quarter ending March 31, 1995. $ 500.00 Actuarial services in support of Retirement Plan $ 1,190.00 TOTAL $1,690.00 cow 3. City of Ocoee January: Copies 564 $ 14.10 Postage $ 7.16 February: Postage $ 1.01 March: Copies 89 $ 2.23 Postage $ 1.28 April: Copies 343 $ 8.58 Postage $ 8.54 TOTAL $42.90 4. Judie Lewis, Recording Secretary February 13, 1995 Meeting $ 19.62 Preparation of minutes, agenda, etc. $ 29.43 TOTAL $ 49.05 Member Waldrop, seconded by Member Oliver, moved to approve payment of the bills as presented. Motion carried 3-0. 4 The City of Ocoee General Employees' Retirement Trust Fund coy May 8, 1995 RETURN OF CONTRIBUTIONS Chairman Grafton said that Christopher S. Bohnsack, who had worked from June 13, 1994 to February 14, 1995 therefore was not vested, and who was terminated with no intention of coming back, had requested a Refund of Contributions for $610.03 pretax and zero after taxes. Attorney Christiansen said that for the record the forms were in order. Member Waldrop, seconded by Member Oliver, moved to authorize pa ment from the Fund for a Return of Contributions in the amount of $610.03 to Christopher S. Bohnsack. Motion carried 3-0. VALUATION PAYMENTS Member Waldrop asked who kept up with what the City puts in to SunBank. Attorney Christiansen said that the actuary determines the amount that the City must pay and SunBank holds the money. Chairman Grafton said that the City's finance department takes care of the actual deposits. Attorney Christiansen explained that.how much the City has to put in is determined in the annual valuations. Actuary Garrett said that they also reconcile what had happened, the year prior, to say the City is required a certain amount and asked if they met that. Chairman Grafton pointed out that the people who do the payroll deduct from the employee's salary, and send the monthly check to the custodian. UPDATE ON OPERATING RULES AND PROCEDURES, AND SUMMARY PLAN DESCRIPTION Chairman Grafton asked if the Board had to do their Operating Rules and Procedures every two years, and Attorney Christiansen said that it was only the Summary Plan Description that must be done within that time period. Chairman Grafton expressed concern about the length of time taken to review the last changes and questioned at what point the Board needed to begin reviewing them for changes. Attorney Christiansen explained that it would be easier than the first time around as the Board had only to amend the document to include the changes in benefits. Actuary Garrett believed that the Summary Plan Descriptions would be taken off the checklist required for the State report. RECESS to the JOINT BOARD MEETING 10:50 - 11:05 A.M. a:\wp60\wpdocs\GE050895\jfl Akar 5 JOINT MEETING GENERAL EMPLOYEES'/POLICE OFFICERS'/FIREFIGHTERS' PENSION BOARDS Chairman Reed called the Police Officers/Firefighters' Pension Board to order at 11:05 a.m. in the Commission Chamber Conference Room of City Hall, and a quorum was declared present. PRESENT: Chairman Reed, Members Gledich (arrived at 11:08 a.m.), Williams, and Wilson. Also present were Actuary Garrett, Attorney Christiansen, Money Managers Garcia and Robert, and Clerk/Stenographer Lewis. ABSENT: Member Strosnider. Acting Chairman Grafton called the General Employees' Pension Board back to order. REPORTS ATTORNEY Attorney Christiansen said that he already had spoken with the General Employees' Board and preferred to give his report during the 1:00 Police/Fire meeting. Member Gledich arrived at 11:08 a.m. coy MONITOR Monitor Garrett representing Foster & Foster, presented an analysis of the investment performances of both of the Retirement Trust Funds for the period ending March 31, 1995. The reports continue to show the entire history back to May 1, 1992, and it had not been relevant to SunBank because they had only been managing for a quarter. The Monitors will be more concerned with SunBank and their dollar-weighing (which shows how a fund grows, and compares fund to fund while time-weighing compares more manager to manager). The Monitor would go forward with SunBank starting January 31, 1995, as SunBank did have 100% of the assets on January 31. PERFORMANCE REPORT - POLICE OFFICERS'/FIREFIGHTERS' FUND Monitor Garrett reported that the rate of return for the quarter was 7.0%. This rate of return outperformed the composite index of market indicators (40% S&P 500 Composite Stock Index, 55% Lehman Brothers Government/Corporate Bond Index, and 5% U.S. Treasury Bills) which registered a return of 6.7%. This rate of return ranked in the 9th percentile of the Cadence Universe of investment managers. The equity portion of the Fund underperformed the S&P 500 over the latest quarter (9.0% vs. 9.8%). However, this performance ranked in the 26th percentile of the Cadence Universe of investment managers. (Fixed income, the Police/Fire Plan lagged 5.5 % to 4.6% over the quarter as it caught a majority of the up spike.) 6 The Joint Meeting of the City of Ocoee General Employees' and Police Officers'/Firefighters' Retirement Trust Boards May 8, 1995 PERFORMANCE REPORT - GENERAL EMPLOYEES' FUND Monitor Garrett reported that the rate of return for the quarter was 6.7%. This rate of return matched the composite index of market indicators (40% S&P 500 Composite stock Index, 55% Lehman Brothers Government/Corporate Bond Index, and 5% U.S. Treasury Bills) which also registered a return of 6.7%. This rate of return was ranked in the 13th percentile of the Cadence Universe of investment managers. The equity portion of the fund outperformed the S&P 500 over the latest quarter (11.1% vs. 9.8%) and ranked in the 3rd percentile of the Cadence Universe. The Investment Council (ICC) had turned in a really good performance for the quarters ending September 30, 1994 and December 31, 1994, and had three winning quarters in a row but because of SunBank the Plans were riding a lot smoother. Actuary Garrett gave details of a letter that had been sent to each Board Member regarding the turnover at SunBank. Both plans had gone with SunBank because of their long term track record. Mr. Garrett said that SunBank had done an excellent job, and that all of their funds were very happy with them. While the people SunBank had lost were key he believed there was enough depth cor remaining to SunBank for there to be no reason to worry. The first report showed that the allocation of the Police and Fire were over allocated, just over the 40% mark. This was probably due to the differences when SunBank had been selling the equity pieces. Mr. Garrett explained that when SunBank sells the equity pieces at the market value, the Monitor does this on a cost value basis, when they sell it and buy back into the fund, they're swapping that market value for cost value. It was hard to allocate perfectly. With SunBank the Plans were going to have about 2% cash fully allocated to the equities, and takes a little bit of time to even out. Mr. Garrett said he believed that the Boards were going to be happy with the allocations. SunBank did a good job minimizing on a cash flow. There were pieces of cash inside of the co-mingled funds available as trades were taking place inside those co-mingled funds. SunBank did an outstanding job of monitoring so the Plans were never having to sell their funds in order to pay a check, and were never holding on to too much cash either. The Money Managers would keep close to the numbers as directed by the Board. Attorney Christiansen asked if this was going to correct itself, and Actuary Garrett responded that it would. Money Manager Robert said they were able to move the asset allocation around on the semi-monthly valuations, and believed that they would be back in line on the 15th. Actuary Garrett said that just enough inflow on funding side would probably fix that, buying more bonds, instead of stocks, from here on out. The General Board had discussed in their earlier meeting about requesting SunBank to change the asset allocations of the fund. Actuary Garrett said that the Police and Fire Board might like to The Joint Meeting of the City of Ocoee General Employees' and Police Officers'/Firefighters' Retirement Trust Boards May 8, 1995 discuss those changes as well. Chairman Reed said he believed that they had changed those a couple of years before, and Actuary Garrett said that they were changed from 30%. The Police and Fire Board had let it slip to 50% in the ordinance, but their guidelines limited the manager. The Board must decide but had the range to go to 50% without changing the ordinance. Mr. Garrett pointed out the importance of getting the Money Manager's input as they were the professionals. MONEY MANAGER Money Manager Robert introduced Ms. Garcia, and said that the Board had already gone through the numbers. He reviewed what SunBank had done for the quarter, and said he felt that the management changes would cause very little impact on the Funds. Money Manager Robert said that SunBank had a very good quarter, and pointed out that the market return for this quarter ranked in the top 15 percentile. That had been difficult to beat, particularly since there had been a little overflow of individual stocks in the portfolio, and had been hesitant to sell a lot of stocks into this latest two month period of the market rally. He said they planned to do that over the next month or two as they begin to see the pace of the market coming down. There were still approximately 10% in individual securities. The objective was to be completely in the funds, and have no individual securities in the portfolio. Mr. Robert said he believed it was important to use a blended return between the value and growth style. The Boards had talked about growth in the beginning of the meeting and it was the Money Managers' opinion that they continue to use both funds to diversify the fund's holdings, and to continue utilizing both styles, so as to not miss out on the fluctuations when one style does bad. Money Manager Robert said that it was nice to see a 5% quarter in bonds. The interest rates had stabilized during the time period, the economy had slowed down dramatically, and the Managers expected that to continue to moderate itself. On the flip side, there had been a very low inflation, and a combination of the two sets them up to have a very good year compared to 1994, '93, or '92, where there had been sub-par years relative to historical performance in the financial markets overall. The smaller stocks lagged and fortunately SunBank was predominately into large company stocks. Those were the areas that had done well this first quarter. Mr. Robert said that, on the fixed income side, it was their philosophy that they were going to be a little bit more conservative. For the most part, they had underperformed the index. They were emphasizing the multi-national companies that typically have more exposure to foreign markets, that also have had significant revenues coming in from outside the United States. Even as the domestic economy slows down, there were still very good revenue streams coming from outside the States. Owning international stocks multi-national companies gave them broad exposure to the overseas markets without a tremendous amount of risks. The weak dollar was a real concern and Mr. 8 The Joint Meeting of the City of Ocoee General Employees' and Police Officers'/Firefighters' Retirement Trust Boards May 8, 1995 Robert said that the Federal Reserve was tempted to raise interest rates once more to defend the dollar. Mr. Robert anticipated 12 to 20% in stocks would be reasonable for the year, and that would put the Fund more along the lines of historical norms. Ten percent to 12% were around the historical norms for stocks, and Mr. Robert said he believed that they were close to 8% for bonds already in the first four and a half months of the year so they were getting much better actuarial assumptions on times of return. He said that they were going to be a little bit more cautious on the stock markets since they had had such a good run. It gave them a great opportunity to shift those assets out of equities back into fixed income, and may be a safe haven during the soft period in the market. Mr. Robert said in looking back, the Money Managers were going to see that the first quarter of 1995 is the first time that they have had a 10% quarter, as that had been the biggest move in the market since the first quarter of 1991. Mr. Robert's goal was to liquidate the individual stocks within a reasonable time period. CHANGES AT SUNBANK Mr. Robert explained the changes that had occurred within SunBank, and said that while the people that had left were important to the firm, SunBank had done a great job in replacing those people. A lot of talent and depth remained within the organization. He said the firm had the full support of their Atlanta parent company and they had benefited from that support. Chairman Reed expressed concern about the newspaper accounts as far as the number of clients that might have left SunBank, and Mr. Robert said that the loss had been less than 10%. Many SunBank clients had been in to visit with them but, knowing their processing, had continued to be very loyal. They had been successful in maintaining a large portion of those assets and they were continually adding staff in that area so they did not become over burdened with that particular discipline. ASSET ALLOCATIONS Chairman Reed asked if, in their opinion, the monetary standard would be changed from the U.S. dollar in the International Market, going to a yen or marc. Mr. Robert said that they would be closely watching the trade talks between the U.S. and the Japanese, but he assumed that since almost everything has been tied to the dollar for a long, long time it would continue so. However, if there were a decision to be made, it would not be made for a while and that would give us some time to make some assumption decisions. Manager Robert asked if the Boards would like to discuss asset allocations, and Chairman Grafton asked that the discussion wait until the other Board members could be present. Mr. Robert distributed an Asset Allocation Chart by Iffson and Associates, long term market 9 The Joint Meeting of the City of Ocoee General Employees' and Police Officers'/Firefighters' Retirement Trust Boards May 8, 1995 researchers, for the Board's review, and spoke briefly on the topic. He said he would go into more details at a later date with the individual Boards. He then distributed a chart and spoke about risks over different periods of time. A Risk Reward Chart was something that could be addressed which would probably be beneficial over any given long time period. Actuary Garrett said that Attorney Christiansen had pointed out that that might be good to talk about in the valuation. He was sure that Actuary Foster had gone over it as part of the assets smoothing. In response to Chairman Grafton, Actuary Garrett said that it would not be necessary for the Board to approve another change in the methodology. The valuation had already been approved and he thought the Plan was set for the '94 valuation. APPEARANCE OF STATEMENTS Ms. Garcia said that the Board would notice a different look in statements as SunBank had gone to a new Trust Accounting System. A letter and tracking chart of the new statements, along with instructions on how to read them, will be sent to the Members. Chairman Reed asked about SunBank's billing process, and Ms. Garcia said she believed that when the account came in, that they were asked to send the Board a copy of the billing but to charge the account. Also, Ms. Garcia said that other payments such as attorneys, actuaries, etc., must be approved before being paid. Attorney Christiansen said that it was in the contract that SunBank is automatic withdrawal in arrears. Chairman Reed called a recess at 12:00 p.m. until 1:00 p.m. for the Police Officers'/Firefighters' Pension Board. RECESS (Police Officers'/Firefighters' Pension Board) 12:00 - 1:00 p.m. ADJOURNMENT FOR THE GENERAL EMPLOYEES' PENSION BOARD Chairman Grafton adjourned the General Employees' Pension Board at 12:00 p.m. Respectfully submitted, . 441i- 4--) J e F. Lewis lerk/Stenographer a:\wp60\wpdocs\OINT58.95\jfl tkiw 10