Loading...
07/15/2004 . . . PENSION ADVISORY COMMITTEE MEETING CITY OF CLEARWATER July 15, 2004 Present: Vice-Chair Committee Member Committee Member/Commissioner Committee Member/Commissioner Committee Member Committee Member/Commissioner John Lee Tom Jensen Hoyt P. Hamilton Frank Hibbard Nathan Hightower Carlen Petersen Absent: John Schmalzbauer Committee Member Also Present: Joe Roseto Patricia O. Sullivan Human Resources Director Board Reporter The Vice Chair called the meeting to order at 9:00 a.m. at City Hall. To provide continuity for research, items are in agenda order although not necessarily discussed in that order. 2 - Selection of Chair Member Jensen moved to appoint John Lee as PAC (Pension Advisory Committee) Chair. The motion was duly seconded. Discussion ensued. Member Jensen moved to amend his motion to appoint John Lee as PAC Chair for a one-year term. The seconder agreed to the amendment. Upon the vote being taken, the motion, as amended, carried unanimously. 3 - Approval of Minutes Member Petersen moved to approve the minutes of the regular meeting of June 10, 2004, as submitted in written summation to each board member. The motion was duly seconded and carried unanimously. 3 - Emplovees to be Heard - None. 4 - Action Items a) Review and Action on Employee Requests for Years of Service Pension: 1. Susan M. Doel - Library Pension Advisory 2004-07-15 1 . . . 2. William B. Gillette - Fire Department 3. Michael V. Metcalf - Police Department Member Hibbard moved to approve Years of Service Pensions for Susan M. Doel, William B. Gillette, and Michael V. Metcalf. The motion was duly seconded and carried unanimously. b) Review and Action on Employee Request to Vest Pension: Catherine J. Nalven, Police Department, has resigned her position after being employed by the City for more than 13 years. She will qualify to receive her reduced pension beginning October 1, 2010. Member Petersen moved to recommend approval of the request by Catherine J. Nalven to vest her pension. The motion was duly seconded and carried unanimously. c) Approval of New Hires as Plan Members: As of June 30, 2004, the City had 1790.14 FTEs out of 1895.4 budgeted positions. Member Hamilton moved to accept the following employees into membership in the Pension Plan: Diane Faulk, Police Comm. Operator Trnee Police Department Victor Demicco, Police Officer Police Department Terrance Woulard, Solid Waste Worker Solid Waste Barry Slack, Solid Waste Worker Solid Waste Erick Colindres, Solid Waste Worker Solid Waste James Hawkins, Parks Service Technician I Parks & Recreation Jeffrey Walker, Plans Examiner Development Services Martin Bollinger, Police Comm. Oper. Trnee Police Department Sean Hailey, Police Comm. Operator Trnee Police Department Eric Lewis, Parks Service Technician I Parks & Recreation Kerry Nelson, Gas Technician I Gas Rebecca Melendez, Human Res. Analyst Human Resources The motion was duly seconded and carried unanimously. 5 - Pendina/New Business Date of Pension Emplovment Elia. Date 05/17/04 05/17/04 06/01/04 06/01/04 06/01/04 06/14/04 06/14/04 06/14/04 06/14/04 06/28/04 06/28/04 06/28/04 05/17/04 05/17/04 06/01/04 06/01/04 06/01/04 06/14/04 06/14/04 06/14/04 06/14/04 06/28/04 06/28/04 06/28/04 a) Virginia Ford/David Ford - Hearing for Job-connected Disability Pension (Cont'd) Human Resources Director Joe Roseto reported the attorney for Virginia Ford, the surviving spouse, is not ready to move forward. The item is continued automatically. Pension Advisory 2004-07-15 2 . b) Ronnie White - Set Hearing Date for Job-connected Disability Pension (Cont'd) Mr. Roseto stated the attorney for Ronnie White is not ready to move forward. The item is continued automatically. c) Approval of Administrative Expenditures for FY 2004/05 The Employees' Pension Plan does not have a legal requirement to have a budget. The Pension Trustees must approve all expenditures. For the sake of efficiency, staff requests approval of the following routine expenditures. These expenditures involve routine business matters and are mostly small dollar amounts. Medical Bills are medical services that the PAC authorizes. Travel is for two trips: 1) attendance for two people at a training seminar for a due diligence visit and 2) training for two people with the plan's custodian, Northern Trust. Printing and Binding is for the statutorily required annual information distribution to members of the pension plan. Training is for mandatory training required by State statute. Included with these numbers is the annual authorization for the plan's pension attorneys, Klausner & Kaufman. Money Manager, Safekeeping, and Pension Administration fees are set by contracts approved by the Trustees and are not included here. Reimbursement to the General Fund and the Self Insurance Fund is the cost of Plan oversight and is recognized as revenue to the funds. This reimbursement covers the services provided by the Human Resources Department (some of these employees are paid out of the Self Insurance Fund), Payroll and Finance Departments. . Description Printing Misc. Training Travel Expense Medical Bills Reimbursement to Self Insurance Fund Physicals Reimbursement to General Fund Klausner & Kaufman Amount $ 750 750 2,500 4,500 7,000 24,000 35,000 84,000 $140.000 $298,500 In response to a question, Finance Director Margie Simmons stated the Pension Fund provides the source of income for these expenses. According to the Plan's actuary, these expenses are part of the assumptions used and are in line with expected costs. The amounts requested are estimated. In response to a question, Cash & Investments Manager Steve Moskun said staff prefers traveling to Chicago for Northern Trust training on use of on-line software. Staff may request the firm travel to Clearwater to provide additional training. . Pension Advisory 2004-07-15 3 . . . In response to a question, Ms. Simmons said the attorney fees are in line and include disability related expenses, such as IME (Independent Medical Exam) costs. Staff is watching these expenditures carefully. Mr. Roseto said attorney fees increase significantly for each disability case. The firm is very professional and informative, and turns around bills quickly. In response to a question, Ms. Simmons indicated the Plan requires all new employees to receive physicals. The firm separates charges in its bills for fees, costs, airfare, and taxis. The firm makes its own travel arrangements. In response to a suggestion that staff pay IME costs to save added attorney fees, Ms. Simmons suggested that arrangement would end up costing more as staff would need to pay the firm for each interaction regarding related billing information. Member Hightower moved to approve the recommended administrative expenditures for FY (Fiscal Year) 2004/05, totaling $298,500. The motion was duly seconded and carried unanimously. d) Termination of Vanderbilt Capital Advisors Contract For the year ending March 31, 2004, Vanderbilt Capital Advisors placed in the 72nd percentile. For the last three-year and five-year periods, Vanderbilt placed 96th and 95th. The Investment Committee has been monitoring the performance of Vanderbilt very closely. At this time, the Investment Committee recommends termination of Vanderbilt. The plan's two advisors, John Willoughby and Paul Troup, concur with this recommendation. The assets under Vanderbilt's management will be transferred to a new manager, Western Asset Management Company (WAMCO). WAMCO is being hired under a separate agenda item. Ms. Simmons reported the Pension Trustees had already approved this item. In response to a question, she said it is expected that international investments soon will outperform domestic investments. There is no guarantee regarding the investments. Member Hightower moved to authorize the termination of Vanderbilt Capital Advisors as a fixed income money manager, and that the appropriate officials be authorized to execute same. The motion was duly seconded and carried unanimously. e) Amendment of Fund Custody Agreement with Northern Trust Investments With the termination of Invesco, the Pension Fund has been under-weight with respect to International Equity investments. The best available estimates have International Equity returns out performing Domestic Equity returns in the near future. Staff recommends the addition of Northern Trust Global Investments Weekly Enhanced EAFE Index Fund. "Weekly" references the fund's weekly valuation. "Enhanced" means the fund may make limited use of futures and/or options for the purpose of maintaining equity exposure. The fund also may participate in securities lending. Pension Advisory 2004-07-15 4 . . . The following is the performance of the Northern Trust EAFE Index Fund V.S. the Benchmark: Northern Benchmark 1 Year 57.59% 57.54% 3 Years 3.89% 3.43% 5 Years 1.27% 0.52% 10 Years 5.57% 4.55% Northern Trust charges a fee of 35 basis points (.35 of 1 %). This fee is reasonable fee for this type of product. Ms. Simmons reported the Pension Trustees had not approved this item, but had requested additional information. Trustee Hightower moved to amend the collective fund custody agreement with Northern Trust Investments by adding the HTGI-QM Collective Weekly Enhanced EAFE Index Fund- Lending, and that the appropriate officials be authorized to execute the same. The motion was duly seconded and carried unanimously. f) Approval of Contract with Western Asset Management Company Under a separate agenda item, the plan has terminated Vanderbilt Capital Advisors. Last summer, when the Plan conducted a search for a fixed income manager, the top three ranked firms were: Dodge & Cox Funded February 1, 2004, with $75 million Western Asset Management Company (WAMCO) PIMCO Callan has updated their search information and WAMCO still appears very favorable. WAMCO finished a very close second to Dodge & Cox in last year's search. Staff has updated it's research and noticed a number of plan sponsors have been moving assets to WAMCO because of problems with other fixed income managers. WAMCO has informed staff they are able to accept additional assets without difficulty. The minimum funding for WAMCO is $75 million. Funding will come from the termination of Vanderbilt and rebalancing the portfolio. WAMCO changes a fee of 0.30 of 1 % for the first $100 million and 0.15 of 1 % on all amounts over $100 million. This rate is competitive with what other money managers charge for this type of product. Ms. Moskun said last February, the Investment Committee decided to search for a new fixed income manager. With the authorization of the PAC and Pension Trustees, Callan began a search in April, and recommended 12 firms to the Investment Committee in May. The committee reviewed the list, requested presentations from the top three firms, then visited the top two firms in August. In October, the Pension Trustees approved the PAC recommended firm, Dodge and Cox. That account was funded in February. Pension Advisory 2004-07-15 5 . . . Staff also had concerns regarding Vanderbilt Capital Advisors. During the earlier search, staff also was impressed with WAMCO (Western Asset Management Company) and decided to give them another look. Callan updated its data, which rated WAMCO in the top six. Based on a review of the top six, data, firm philosophies, and the comfort level felt by staff during their visit, staff recommended opening an account with WAMCO, which has a $75-million minimum. Plan advisors concurred. After fees, WAMCO outperforms the index three out of four times. In response to a question, Ms. Simmons said, as proposed, the Fund would have 40% of its fixed income invested through WAMCO. Pension Attorney Stuart Kaufman had reviewed the contract and included language that restricts investment in junk bonds, per Plan requirements. Concerns were expressed the proposal would invest nearly all Pension funds with two money managers and that WAMCO's portfolio, being more volatile, should outperform the benchmark. It was suggested the firm's charge of 30 basis points is high. In response to a comment, Mr. Moskun said PIMCO currently is fighting the SEC (Securities & Exchange Commission) regarding alleged improprieties. Member Jensen moved to recommend approval of the contract with Western Asset Management Company as a fixed income manager and that the appropriate officials be authorized to execute the same. The motion was duly seconded and carried unanimously. 7 - Director's Reports Mr. Roseto reported staff is beginning the process to release a RFP (Request for Proposals) for a Pension Plan actuary. He recommended a PAC member serve on the committee that reviews the RFP and bids that are received. Ms. Simmons recommended hiring an actuary to handle Pension Plan actuarial requirements and those related to a new requirement related to post employment benefits. While the City does not pay toward the cost of retirees on the City's health care plan, the City does subsidize the rates. The City will be required to accrue for that expense on City books. The RFP is ready for review and issuance. The Pension Plan and City will fund the actuary position. Member Hamilton moved to appoint Member Hibbard to the committee reviewing the RFP and bids for the actuary position. The motion was duly seconded and carried unanimously. 7 - Committee Members to be Heard Committee members wished Member Hamilton a Happy 22nd Wedding Anniversary. Member Hiahtower questioned how long the City is required to retain records related to pension disability requests. Staff will report. Member Hiahtower questioned the use of "(continued)" on the agenda. That language indicates the item will not be heard at the subject meeting. Pension Advisory 2004-07-15 6 . . . Member Hightower requested a review of Investment Committee members. Ms. Simmons said members include herself, Assistant Finance Director Jay Ravins, Mr. Moskun, union representatives, two consultants, and staff members, for training. The PAC is not represented. 8 - Adiournment The meeting adjourned at 9:34 a.m. ~ft~ Pension Advisory Committee Attest: Pension Advisory 2004-07-15 7