12/17/2012 TRUSTEES OF THE EMPLOYEES' PENSION FUND MEETING MINUTES
CITY OF CLEARWATER
December 17, 2012
Present: Chair/Trustee George N. Cretekos, Trustee Paul Gibson, Trustee
Doreen Hock-DiPolito, Trustee Bill Jonson, and Trustee Jay E.
Polglaze.
Also Present: William B. Horne II - City Manager, Jill S. Silverboard -Assistant City
Manager, Rod Irwin - Assistant City Manager, Pamela K. Akin - City
Attorney, Rosemarie Call - City Clerk, and Nicole Sprague - Official
Records and Legislative Services Coordinator.
To provide continuity for research, items are listed in agenda order although not
necessarily discussed in that order.
Unapproved
1, Call to Order hair Ge ore Cretekos
The meeting was called to order at 1:07 p.m. at City Hall.
2. Approval of Minutes
2.1 Approve the minutes of the November 13, 2012 Pension Trustees meeting as
submitted in written summation by the City Clerk.
Trustee Bill Jonson moved to approve the minutes of the November 13, 2012 Pension
Trustees meeting as submitted in written summation by the City Clerk. The motion was
duly seconded and carried unanimously.
3. Pension Trustee Items
3.1 A rove the request of the new hires for acceptance into the pension flan as
listed
Pension
Name, Job. Class, & Dept./Div .. Hire Date Elig. Date
Pension Trustees 2012-12-17 1
Nikolas Papadoupolos, Parking Tech, Engineering Dept 10/01/12 10/01/12
Robert Skinner, Parking Technician, Engineering Department 10/01/12 10/01/12
Carlos Cardenas, Electrician, General Services 10/08/12 10/08/12
Darryl Scott, Solid Waste Worker, Solid Waste Dept 10/08/12 10/08/12
Tayna Reed, Police Officer, Police Department 10/22/12 10/22/12
Tomislav Marjanovic, Police Officer, Police Department 10/22/12 10/22/12
Michael Leonardo, Police Officer, Police Department 10/22/12 10/22/12
Kelly Adkisson, Admin. Analyst, Police Department 06/23/97 10/22/12*
Robert Willms,Parks Service Tech I, Parks and Recreation 10/22/12 10/22/12
Jameel Zabadi, Public Utilities Tech I, Public Utilities 10/22/12 10/22/12
Daniel King, Public Utilities Technician I, Public Utilities 10/22/12 10/22/12
*Employee originally hired on 6/23/97, rehired on 10/22/12 and is pension eligible on
10/22/12.
Trustee Doreen Hock-DiPolito moved to approve the request of the new hires for
acceptance into the pension plan as listed. The motion was duly seconded and carried
unanimously.
3.2 Aggrove the request of employee Stephen Logan of the General Services
Department for a regular pension as provided by Sections 2.397 and 2.398 of
the Employees Pension Plan.
Stephen Logan, Fleet Mechanic, Solid Waste/General Services Department, was
employed by the City on December 17, 1979, and his pension service credit is
effective on that date. His pension will be effective January 1, 2013.
Based on an average salary of approximately $52,318.21 per year over the past
five years, the formula for computing regular pensions, and Mr. Logan's selection
of the Joint and Survivor Annuity, this pension will approximate $47.494.80
annually.
Section 2.397 provides for normal retirement eligibility when a participant has
completed thirty years of credited service, has reached age 55 and completed
twenty years of credited service, or has reached age 65 and completed ten years
of credited service. Mr. Logan qualifies under the thirty years of service criteria
Trustee Jay Polglaze moved to approve the request of employee Stephen Logan of the
General Services Department for a regular pension as provided by Sections 2.397 and
2.398 of the Employees Pension Plan. The motion was duly seconded and carried
unanimously.
Pension Trustees 2012-12-17 2
3.3 Approve the request of employee Linda McPherson of the Solid Waste/General
Services Department to vest her pension as provided by Section 2.397 of the
Employees Pension Plan.
Linda McPherson, Senior Accountant, Solid Waste/General Services Department,
was employed by the City on January 8, 1996, and began participating in the
Pension Plan on August 14, 1999. Ms. McPherson will be terminating from City
employment on December 14, 2012.
The Employees' Pension Plan provides that should an employee cease to be an
employee of the City of Clearwater or change status from full-time to part-time
after completing ten or more years of creditable service (pension participation),
such employee shall acquire a vested interest in the retirement benefits. Vested
pension payments commence on the first of the month following the month in
which the employee normally would have been eligible for retirement.
Section 2.397 provides for normal retirement eligibility when a participant has
reached age 55 and completed twenty years of credited service, has completed
30 years of credited service, or has reached age 65 and completed ten years of
credited service. Ms. McPherson would have completed at least 10 years of
service and will reach age 65 on September 25, 2014. Her pension will be
effective October 1, 2014.
Trustee Paul Gibson moved to approve the request of employee Linda McPherson of
the Solid Waste/General Services Department to vest her pension as provided by
Section 2.397 of the Employees Pension Plan. The motion was duly seconded and
carried unanimously.
3.4 Approve contracts hiring Manning and Napier; and Eagle Capital anagement
as large cap value money managers for the pension plan, and authorize the
appropriate officials to execute same.
The plan's large cap value manager was terminated earlier this year due to poor
performance. The funds were transferred into the Northern Trust Russell 1000
Value Index Fund pending the hiring of replacement manager(s). The plan's
Pension Investment Committee determined a preference for a replacement large
cap value manager or managers that would provide above average downside
protection in declining markets, while providing a competitive return during
markets. The Committee requested Cap Trust, the plan's investment performance
consultant, to conduct a manager search with this guidance. The screening
process and the due diligence review produced a short list of three managers, as
Pension Trustees 2012-12-17 3
follows, that were interviewed by the Pension Investment Committee.
Eagle Capital Management
Manning and Napier
O'Shaughnessy Asset Management
The Committee elected to hire both Eagle Capital Management and Manning and
Napier to fill the large cap value space. The managers are very different in style,
qualitative versus quantitative, and are non-correlated. Each of the new managers
will get about $30 million to manage with a like amount remaining in the Northern
Trust Russell 1000 value index fund. Eagle Capital charges an annual
management fee of 1% on the first $5 million and 0.75% on balances over $5
million, payable quarterly in arrears. Eagle's process is a very fundamental,
bottoms up approach, which requires a highly labor-intensive process (expensive)
to identify buying opportunities. Eagle's fee is about average for this style of
manager. Manning and Napier charges an annual management fee of 0.35%
payable semi-annually in advance. Manning's process is highly quantitative and
computer driven (cheaper) at the level of identifying buying opportunities. Manning
is a very large organization and is able to spread these costs across a larger client
basis. Manning's fee is slightly less than the average for a manager of this style.
The Pension Investment Committee feels that hiring these two large cap value
managers, with significantly different styles and fees, will best achieve the desired
down-side protection and competitive up-side returns, and is in the best interest of
the plan.
In response to questions, Cash and Investment Manager Steve Moskun said the
Trustees have terminated two large cap value managers in 2012. Cap Trust
representative John Griffith said the organization looks for managers that have been in
place for several years with consistent long-term performance. Mr. Moskun said 12% of
the Plan's portfolio is large cap.
Trustee Bill Jonson moved to approve contracts hiring Manning and Napier; and Eagle
Capital Management as large cap value money managers for the pension plan, and
authorize the appropriate officials to execute same. The motion was duly seconded and
carried unanimously.
3.5 Accept the actuary's recommendations for changes to flan actuarial
assumptions and methods, der the Experience Investigation completed by
Gabriel Roeder Smith and mber
31, 2011.
It is recommended to have a pension plan experience study conducted by an
actuarial firm at least every five years to assure that reasonable and relevant
assumptions and methods are in effect to calculate the annual actuarially required
Pension Trustees 2012-12-17 4
contribution necessary to properly fund the plan. It has been approximately six
years since completion of the last experience study for the Clearwater Employees'
Pension Plan. The Plan's actuaries, Gabriel Roeder Smith and Company (GRS),
have completed an Experience Investigation study for the pension plan and have
provided recommendations of changes to the assumptions and methods used in
the plan's annual actuarial valuation.
The net effect of all proposed changes increases the annual required contribution
to the plan by an estimated $1,665,000, or 2.28% of covered payroll. These
changes include changes to the salary increase assumption, assumed rates of
future employee terminations, assumed rates of future retirements, assumed rates
of future disability, assumed mortality rates, and a change in the investment return
assumption, as listed on the attachment. These changes are also described in
more detail by the actuary in the Experience Investigation report.
Staff recommends approval of all recommended changes to more accurately
determine the pension plan liability and required funding levels, per the
professional advice of the plan's actuaries.
GRS representative Steve Palmquist reviewed findings of the Experience Investigation
study.
In response to questions, Mr. Palmquist said RP 2000 is the latest mortality table. The
Society of Actuaries is in the process of creating a new mortality table, which will be in
place by 2014. The percentage increase in the salary increase correlates to the length
of service. The lower expected investment rate return assumption is currently 7.5%
gross before subtracting investment expenses, which are approximately half of 1%. Mr.
Palmquist said the study recommends a 7% net investment rate return assumption.
Trustee Doreen Hock-DiPolito moved to accept the actuary's recommendations for
changes to plan actuarial assumptions and methods, per the Experience Investigation
completed by Gabriel Roeder Smith and Company for the five-year period ending
December 31, 2011. The motion was duly seconded and carried unanimously.
4. Other Business — None.
Pension Trustees 2012-12-17 5
5. Adjourn
The meeting was adjourned at 1:54 p.m.
Ckoortt I\ Cre\-a()S
Chair
Attest Employees' Pension Plan Trustees
pLofry
City Clerk
I
'
Pension Trustees 2012-12-17 6