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02-18-2009 Minutes Minutes of the Regular Meeting of the CITY OF OCOEE GENERAL EMPLOYEES' PENSION BOARD Held on February 18, 2009 At 150 N. Lakeshore Drive Ocoee, FL 34761 AGENDA ITEM I. CALL TO ORDER- Chairman Wagner A. Chairman Russ Wagner called the meeting to order at 10:02 a.m. in the Commission Chambers in City Hall. The roll was called and a quorum declared present. Present were Trustees Jean Grafton, Russ Wagner, Tom Hendrix and Wendy West. Trustee David Wheeler arrived at 10:04 a.m. Also present were H. Lee Denner, Attorney; Jim Carnicella, Human Resources Director/Plan Administrator; Daniel Johnson and Joseph Bogdahn, Bogdahn Consulting; and Andrew Holtgrieve, Rockwood Capital. B. Approval of Minutes from Regular Session dated August 6, 2008, Approval of Minutes from Special Session dated October 21, 2008 and Approval of Minutes from Regular Session dated November 5, 2008 Chairman Russ Wagner called for review of the Minutes as stated. Trustee Grafton advised there was a misspelled word in two places on page 2 (pursing instead of pursuing) in the Minutes of the November 5, 2008 Regular Meeting. There being no other corrections or additions, it was, on motion made by Trustee Grafton, seconded by Trustee Hendrix, unanimously RESOLVED that the Minutes of the Regular Session of the Board of Trustees of the General Employees' Pension Board of August 6, 2008, the Minutes of the Special Session of the Board of Trustees of the General Employees' Pension Board of October 21, 2008 and the Minutes of the Regular Session of the Board of Trustees of the General Employees' Pension Board of November 5, 2008, be and are hereby approved as amended. Plan Administrator Carnicella advised the Board that the approved Minutes from prior Board Meetings were already in the binder book put together for all the Board Members and said he would later go over where to insert the Minutes the Board just approved. Chairman Wagner announced that Trustee David Wheeler had arrived. AGENDA ITEM II. NEW BUSINESS A. Investment Consultant Report—Dan Johnson and Joe Bogdahn, Bogdahn Consulting Dan Johnson advised that Andy Holtgrieve from Rockwood Capital was present and would talk about his piece later in the meeting. Mr. Johnson then introduced himself and told the Board Mike Welker would not be present at the Meeting today but that Joe Bogdahn was on his way. General Employees'Pension Board Quarterly Meeting,February 18,2009 Page 2 of 7 Dan Johnson then began to go over the report for the Fourth Quarter of 2008. He stated this was a very difficult quarter because there were very sharp declines in October and November and a lot of volatility in the market which creates a lack of confidence but said December was a little more positive. Mr. Johnson spoke about Bonds, which he said Treasury Bonds represented the least riskiest asset. He went over the year-to-date performance, which he said was a very difficult year. He then continued going over the report. He said Growth and Value stocks were down about the same and went on to explain. Mr. Johnson reported that Large Cap funds were down less than Small Cap. He then spoke about Fixed Income and Treasury Bonds. He explained why there was no opportunity in Treasury Bonds any longer and why Corporate Bonds were better. Dan Johnson then went on with the presentation. He stated the fund assets were at 12.9 million and went over the asset allocations as well as the individual Money Manager's performance. He explained why Voyager was not funded at this time. Mr. Johnson reported that the total portfolio for the quarter was down 9.58%but that we did well relatively to the market place. He said over the one year period the return was down 20.80% versus the benchmark of 25%, which put us in the top 20th percentile and that the portfolio had done well protecting the assets in the down market. He then moved on to the International piece. He said the International Index was down but the total Fixed Income was up 4.12%, reducing the risk and overall volatility. Dan Johnson then spoke about the exposure to the Lehman Brothers bond under Agincourt and reminded the Board that is why they diversify the portfolio. He mentioned the letter Agincourt sent concerning the Lehman bond but said it was less than 1% of their assets. Plan Administrator Carnicella confirmed Agincourt sent a letter, which he forwarded to Bogdahn, but said they might want to wait until Joe Bogdahn or Mike Welker speaks directly about it as he thought they would have some recommendation to the Board about how to watch Agincourt in the near future. Trustee Wheeler asked for a copy of the letter. After brief discussion, Joe Bogdahn stated they did talk about this issue at the November Board meeting and went on to explain why he advised the Board not to sign the letter. Chairman Wagner said he was pleasantly surprised with the report, given the market. Dan Johnson stated they hate seeing the negative numbers but wanted to make sure the Board knew the portfolio had done well in the down market and was in the top 16th percentile for the quarter and the top 20`h percentile for the year, which was due to a good compliment of Money Managers. Chairman Wagner asked if there were any questions. Trustee West asked about all the down numbers on the report. Dan Johnson reported those were the trailing numbers but said there were positive numbers in the last three fiscal years and went on to explain. He said if they make any rash change to the asset allocation it would jeopardize the integrity of the portfolio over the long term and explained why keeping the weighting to the asset classes accordingly was important. Trustee West asked if there was a fund they could get involved in when the market was going down. Dan Johnson said the Investment Policy prohibits short selling. He then spoke about what the idea was of the Hedge Fund, which he said wouldn't be the best way to go over the long term of the Plan. Discussion ensued. Trustee Wheeler advised that on page 16 of the report the October 2007 to September 2008 column was not included, to which Mr. Johnson said it was an oversight and would make sure it was added to the next report. Chairman Wagner said if there were no further questions they would move on to Rockwood. General Employees'Pension Board Quarterly Meeting,February 18,2009 Page 3 of 7 Andy Holtgrieve passed out the Fourth Quarter 2008 review for Rockwood and introduced himself as well as the company he represents. He thanked the Board for hiring Rockwood as one of their Equity Managers but said the timing couldn't have been worse. He said Dan Johnson did a very nice job of summarizing some of the things they have been dealing with. He said it all started with the Fixed Income side due to real estate. He told the Board he wanted to outline some of the things they would see in the quarterly reports and went on to explain. He briefly spoke about Treasury Bonds. Mr. Holtgrieve reported that volatility, economic uncertainty and investor anxiety was at historical levels, which in their view was brought on a lot by the haphazard way the government looked to intervene concerning how they were going to bail out everybody. He said it has given investors and Wall Street in general a lack of confidence. Andy Holtgrieve said this time has been somewhat different in that unfortunately there was no place to hide. He then continued going over the report and explained why Rockwood was buying certain stocks they felt would do well in this environment. Mr. Holtgrieve asked if there were any questions, there being none, he continued by going over the transactions for the quarter and the holdings of the portfolio. Andy Holtgrieve finished by saying the crisis is teetering on decisions being made in Washington concerning how they are going to deal with the depressed assets on the books of financial firms. Chairman Wagner thanked Mr. Holtgrieve for coming and asked if there were any questions. There being none, the Board moved on. Chairman Wagner asked Plan Administrator Carnicella for an update at some point during this meeting on where they were at with the City Commission regarding the term length Trustees serve. Mr. Carnicella said he planned to discuss this issue in another part of the meeting but did want to let the Board know the reason the Actuary was not in attendance. Jim Carnicella ,, reported that Foster&Foster did not have the Plan's Valuation Report done yet but would mail it out in the next month and then report to the Board at their May meeting. Chairman Wagner asked about the individual Member Statements. Discussion ensued about the time frame of getting the data to Foster & Foster and about Foster & Foster getting the Statements produced to be given out to the employees. B. Discussion regarding possible RFQ for all services (i.e. Attorneys, Actuary, Investment Consultant) Plan Administrator Carnicella explained the issue regarding doing RFQs came up because the Commission and the City had a discussion concerning when to do one for consultants assisting the City and said he and Chairman Wagner talked about putting this item on the agenda. Chairman Wagner concurred and went on to say that when the Board attended a recent school they were re-exposed to their fiduciary responsibility and he believes it came to mind in some of the classes that a lot of Boards do have a reoccurring schedule to do RFQ/RFPs, which the City already does for several services and went on to explain why the Board should address this. Trustee Wheeler spoke about ones the City does and agreed it would be a good idea for the Board to do this for their consultants. Discussion ensued and it was agreed that this issue could be addressed at a Workshop meeting, which a date and time should be set by the end of this meeting. Plan Administrator Carnicella said since they are talking about a Workshop, one of the issues that came up at the Commission meeting when he presented the last Ordinance change concerning Board term limits was that the Commission challenged the rule about becoming certified within a certain period of time and he suggested that the Board also address this issue General Employees'Pension Board Quarterly Meeting,February 18,2009 Page 4 of 7 during their Workshop meeting. Discussion ensued about the Board Members becoming certified and why it was a good idea at this point because of their increased responsibility and knowledge needed to be on the Board. Chairman Wagner spoke about the binder book Plan Administrator Carnicella put together for the Board and suggested they may want to have two books due to the amount of information and documentation it should contain. Chairman Wagner continued speaking about the book and about the Board attending Commission meetings. He said the Board needed to take their job seriously and needed to be real careful going forward to protect the employee's interest and could discuss this subject further at the Workshop. Trustee Grafton said this was a great idea and looked forward to having the Workshop. Chairman Wagner suggested in the future the whole Board go in front of the City Commission at least once a year to update them, which could make them better understand what the Board was doing. Plan Administrator Carnicella mentioned the consolidated document that Attorney Dehner was putting together with all of the Ordinance Amendments and said this may be something the Board could discuss during their Workshop meeting in order to finalize it before going in front of the Commission. C. Discussion regarding possible Workshop Meeting to review Operating Rules & Procedures of the Plan—Jim Carnicella, Plan Administrator Chairman Wagner said he believes the Board determined they could discuss this issue at the Workshop meeting. D. Discussion/Clarification of Summary Plan Description (i.e. Death Before Retirement, "Buy Back" of Service, Forfeiture of Pension) Chairman Wagner said he had a couple of questions regarding the Summary Plan Description. Jim Carnicella suggested the Board look at all three of these items (Operating Rules, Summary Plan Description and the consolidated document from Attorney Dehner) and then he deferred to Attorney Dehner regarding when the consolidated document would be ready. Attorney Denner said they have completed drafting the revisions with respect to the Pension Protection Act provisions and are now integrating them into the Plan. He said they were shooting for this to be completed by the end of March. Discussion ensued about having a Workshop to discuss issues prior to getting the consolidated document from the Attorney and about setting a date and time for the Workshop meeting. Chairman Wagner suggested holding the Workshop meeting in the Commission Conference Room. Trustee Wheeler said the Board should hold the Workshop away from City Hall, to which Jim Carnicella said they could possibly hold it at the Ison Center. Further discussion ensued about the date and the Board agreed to hold the Workshop Meeting on Monday, March 9, 2009 at 9:00 a.m. or possibly earlier at the Ison Center if it was available. The Board then moved on to the next item. AGENDA ITEM III OTHER BUSINESS Cry A. Payment of Invoices General Employees'Pension Board Quarterly Meeting,February 18,2009 Page 5 of 7 Jim Carnicella said he would like to discuss at the Workshop, the issue of allowing the Plan Administrator to pay bills that are regular reoccurring things like the Attorney bill, fees the Plan pays and have Fifth Third write out the check then present the bills to the Board at their next meeting so they didn't have to chase down Board Members to sign the bills each time. Chairman Wagner asked about giving the Board information ahead of time with the Agenda so they could review it before their Meeting. Discussion ensued. The Board then moved on to approving the invoices that were included in the packet. On motion made by Trustee Wheeler, seconded by Trustee Hendrix, unanimously RESOLVED to approve that the bills and other charges and fees be and are hereby approved for payment as presented. B. Merrill Lynch lawsuit—Jim Carnicella, Plan Administrator Plan Administrator Carnicella said at the last Board meeting there was a discussion about how to go forward regarding Merrill Lynch. He said since that meeting they received information from Attorney Dehner's office and so he wanted to wait until today's meeting to have a discussion with the Board about the direction they are going in. Jim Carnicella went on to explain and said he also wanted to discuss the possibility of filing a class action suit instead of going forward with the analysis. Attorney Denner said the procedure they discussed previously was to have this analysis done which was at no expense to the Fund in order for Beggs & Lane to provide a report and at that point the Board would determine whether to move forward. Mr. Carnicella said after reading the material Attorney Delmer sent them regarding what the SEC found about Merrill Lynch and their activities along with consulting with other Plan Administrators he was hard pressed to figure out how the analysis would help identify the value of the case and went on to explain why. Attorney Dehner said he has actually scheduled a meeting to discuss the class action situation and could report back to the Board on it. Discussion ensued regarding moving forward with the analysis vs.joining a class action suit. Jim Carnicella suggested Attorney Dehner come back and report to the Board after his meeting, then recommend what direction the Board should go in. Further discussion ensued. Mr. Carnicella said if the Board still wanted to go ahead with providing the information to the law firm, Beggs & Lane, that Attorney Dehner brought to speak at their November meeting, he would do so. Discussion ensued. Chairman Wagner spoke about the conversation he had with Plan Administrator Carnicella regarding providing the information and the issue concerning how much time this would take. Chairman Wagner said the Board should have the Plan Administrator gather what information he could so that firm can go over it quickly in order to make a determination and then the Board would decide at that point what to do going forward. AGENDA ITEM IV. PLAN ADMINISTRATOR COMMENTS—Jim Carnicella A. Fiduciary Liability Insurance Plan Administrator Carnicella stated even though he talked to the Board previously about the City being self insured and covering them for the fiduciary liability, he found out the only way to get the waiver of recourse was to buy the fiduciary policy and went on to explain. He also said General Employees'Pension Board Quarterly Meeting,February 18,2009 Page 6 of 7 the Board and the Fund could not buy the waiver of recourse, which would protect them personally, but the City could so he would recommend the City pay for it and said the cost was roughly$25.00 per Board Member. Discussion ensued. On motion made by Trustee Hendrix, seconded by Trustee West, unanimously RESOLVED that the Fiduciary Liability Insurance Policy hereby be approved for payment as presented. B. Certificates of Insurance This item was put on the Agenda because at a previous meeting the Board asked if the Plan Administrator could give them an update on where they were at with obtaining the Certificates of Insurance from companies they do business with. Plan Administrator Carnicella provided copies of the Certificates in the book he had given to the Board Members. Mr. Carnicella said the book was something they could discuss during their Workshop meeting, which they agreed and moved on to the next item. AGENDA ITEM V. ATTORNEY COMMENTS—H. Lee Dehner, Esq. Attorney Dehner stated that once the Plan consolidation Ordinance is adopted the Board should have a discussion about whether they want to file with the IRS for issuance of a Favorable Determination Letter, which he said is not required for the Plan to be deemed as a qualified plan by the IRS and went on to explain the potential benefit of filing it. He said since their firm represents several plans they are exploring whether they could do a group filing, which would obviously be more cost efficient. Discussion ensued. Chairman Wagner asked if the consolidated Ordinance included the prior service amendment. Plan Administrator Carnicella stated that Ordinance had not gone to the City Commission and went on to explain. Discussion ensued. Attorney Dehner explained why the Ordinance regarding prior service was different from the one regarding buying back airtime. Attorney Dehner asked if the two items not passed by the Commission (the term length and prior service) would need to be included in the consolidated Ordinance, to which Plan Administrator said no. Attorney Dehner advised that regarding the Pension Protection Act there was a proposal to extend the benefit to all public employees of up to $3,000 exclusion for payment of health and long-term care premiums and said he would keep the Board posted. He mentioned Charles Slavin's proposal regarding amendments to the Administrative Code, which sets the actuarial standards, practices and guidelines. He said this was the first time he had seen everyone on one side of the issue oppose the rules as they were in their original form and since then they have had two workshops regarding making changes to proposed rules. Attorney Dehner said this may take a while but would keep them posted. He then reminded the Board about filing their financial disclosures. Chairman Wagner asked if they could file it at any time, to which Attorney said yes the forms were available and they could file it between now and July 1, 2009. General Employees'Pension Board Quarterly Meeting,February 18,2009 Page 7 of 7 AGENDA ITEM VI. COMMENTS FROM TRUSTEES Chairman Wagner asked if there were any comments from the Board. Being none, the Board moved on to the next item. AGENDA ITEM VII. SET AGENDA FOR NEXT MEETING Chairman Wagner said they have established several items to discuss at the Workshop and asked if the Attorney needed to be present. Plan Administrator said he didn't believe it was necessary since they cannot vote at the Workshop meeting. Chairman Wagner inquired as to whether anyone was planning on attending the Boca Conference. Plan Administrator Carnicella said he could reach out to the Board and firm up which Board Members would be attending. Trustee Grafton indicated she would be attending, Trustee Wheeler said he would like to attend, Chairman Wagner said he was also planning on attending, Trustee Hendrix said he had planned on going and Trustee West said she was going and should be getting her certification at the Conference. Jim Carnicella said he would get working on this as soon as the forms came out. Trustee Grafton asked if they could see the details of how the calculations are done for their expenses (such as how much per mile, meals etc.). Plan Administrator said he would get that information for this Conference as well as the last one. tor AGENDA ITEM VIII. ADJOURN There being no other business, the meeting was adjourned at 12:36 p.m. Respectfully submitted by App d by: Debbie Bertling HR Analyst Russell B. Wagner, Ch rman