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Agenda 11-25-13 CBB ITY OFOYNTONEACH BTGE’ PP OARD OFRUSTEESENERALMPLOYEESENSIONLAN Quarterly Board Meeting Monday November 25, 2013 Location:Commission Chambers, City Hall 100 E. Boynton Beach Blvd. Boynton Beach, FL 33435 Plan Administrator: (561) 624-3277 Time: 1:30 PM A GENDA I.Call to Order II.Approval of Agenda III. Approval of Minutes A. Regular August 26, 2013 IVInvestment Report . A. Southeastern Advisory Services: Jeff Swanson (Investment Consultant) 1. Quarterly Investment Performance Report V. Presentations A. Gabriel Roeder Smith & Company: Peter Strong 1. Actuarial Assumptions Study as of 10-01-12 with Impact of SB1128 Ordinance 2. Letter from State re: Actuarial Valuation Report 3. GASB No. 67 Implementation Package VI.Correspondence 1. Cherry Bekaert LLP- Engagement Letter (Audit FY2013). VIIOld Business . No Old Business VIII.New Business A. Attorney Report 1. DROP and SB 1128 Ordinance Amendment 2. Proposed Ordinance Amendment re: Change of Primary Beneficiary After Retirement 3. Fee Increase 4. General Rules & Procedures for Public Comments B. Administrative Report 1. PRC Agreement Renewal & Fee increase 2. Warrant for Invoices 3. Benefit Approvals (08-26-13 & 11-25-13) 4. 2014 Meeting Schedule 5. Alliance Bernstein – update signature card C. B oard Issues IX. Public Comments X. Adjournment NEXT QUARTERLY MEETING DATE: Monday, February 24 at 1:30 p.m. If a person decides to appeal any decision made by this Board with respect to any matter considered at this meeting, he/she will need a record of the proceedings, and that, for such purpose, he/she may need to ensure that a verbatim record of the proceedings is made, which record includes the testimony and evidence upon which the appeal is to be based. (F.S. 286.0105) Notice: The City shall furnish appropriate auxiliary aids and services where necessary to afford an individual with a disability an equal opportunity to participate in and enjoy the benefits of a service, program, or activity conducted by the City. Please contact the City Clerk’s office at (561) 742-6060 at least 24 hours prior to the program or activity in order for the City to reasonably accommodate your request. Meeting Minutes General Employees’ Pension Fund Boynton Beach, FloridaAUGUST 26, 2013 MINUTES OF THE GENERAL EMPLOYEES’ PENSION PLAN QUARTERLY BOARD MEETING HELD ON MONDAY AUGUST 26 AT 1:30 PM IN COMMISSION CHAMBERS, CITY HALL, BOYNTON BEACH, FLORIDA TrusteesJerry Taylor, ChairOthers:Jeff Swanson, Southeastern Advisory ( : 1:40 p.m) Michael LowBonni Jensen, Perry & Jensen, LLC Cathy McDeavittDixie Martinez, Resource Centers Lisa Jensen (Janna Hamilton, Garcia Hamilton & Associates 1:42 p.m.) Laurie FasoloDaniel Vallas, Garcia Hamilton & Associates Lori LaverriereJ.D. Sitton, JP Morgan Asset Management Matthew GrahamGreg Pittenger, JP Morgan Asset Management Members of Public I.OPENINGS: A. Call to Order – Chair Jerry Taylor. Chair Jerry Taylor called the meeting to order at 1:32 p.m. II. AGENDA APPROVAL: A. Additions, Deletions, Corrections The following item was added to the Agenda; VIII.C.1. FPPTA Fall Trustee School. Motion Mr. Low moved to approve the Agenda as amended. Ms. Fasolo seconded the motion that unanimously passed 6-0. III. APPROVAL OF MINUTES A. Regular Meeting May 28, 2013 Attorney Bonni Jensen had the following revisions to the May 28, 2013 Minutes; pg. 6 first thth paragraph 6 sentence, change “Ms. Jensen” to Attorney Bonni Jensen; 10 sentence add “expected” to …..otherwise “expected” early or normal retirement date. 1 Meeting Minutes General Employees’ Pension Fund Boynton Beach, FloridaAugust 26, 2013 Motion Ms. McDeavitt moved to approve the minutes of the regular meeting on May 28, 2013 as amended. Ms. Fasolo seconded the motion that unanimously passed 6-0. IV. INVESTMENT REPORT A. Garcia Hamilton & Associates – Janna Hamilton and Daniel Vallas (Investment Manager). Janna Hamilton appeared before the Board. She provided an update of the Fund’s Fixed Income portfolio performance as of quarter ending June 30, 2013. She reported that due to the increase in rates, the bond market delivered negative performance for the quarter with a return on the Barclays Capital Aggregate Index of -2.32% and a return on the Barclays Capital Intermediate Government Credit Index of -1.70%. She reported that the total market value of the Fund Fixed Income portfolio was $16,105,901.56. For the quarter the Fixed Income portfolio was down - 2.1% versus the Barclays Capital Aggregate at -2.3%. Ms. Hamilton provided an update of the Fund’s Equity portfolio performance as of quarter ending June 30, 2013. She reported that the total market value of the Fund’s Equity portfolio was $24,596,207.54. She reported that for the quarter the Equity portfolio underperformed 0.9% versus the benchmark at 2.1%. She reported that domestic stock markets finished the quarter with modest gains. She reported that investment styles did not play a big role in performance. Growth lagged Value among large caps, with the Russell 1000 Growth Index increasing 2.1%. Daniel Vallas briefly reviewed the equity market environment during the quarter ending June 30, 2013. B. J.P. Morgan Asset Management Global Real Assets J.D. Sitton & Greg Pittenger (Investment Manager). 1. JPMCB Strategic Property Fund Mr. Sitton and Mr. Pittenger appeared before the Board. Mr. Sitton explained who the portfolio managers are and their experience in the field. He reported that all assets are valued internally quarterly. He reported that all client transactions are executed at a current fair market value. He reported that core pricing is broadly fair, but full and underwriting IRRs are stabilizing, fundamentals are in their favor and construction remains historically low outside apartments. But, by and large, appreciation has generally been driven by NOI growth, not multiple expansion. He reported that as of June 30, 2013 the Plan’s Strategic Property Fund market value was $8,773,673. He briefly reviewed the Strategic Property Fund investment strategy. He reviewed the Strategic Property Fund performance for the quarter and the year. The Plan is st currently in queue for $1 million which will be called in the 1 quarter in 2014. 2.JPMCB Special Situation Property Fund 2 Meeting Minutes General Employees’ Pension Fund Boynton Beach, FloridaAUGUST 26, 2013 Mr. Sitton reviewed the JPMCB Special Situation Property Fund investment strategy as well as the fund’s overview. He reviewed the fund’s performance overview over for the last five years as well as since inception. He reviewed the first quarter 2013 acquisition and disposition. The Board asked several questions to which he responded accordingly. The Plan is currently in st queue for $2 million which will be called in the 1 quarter in 2014. C. Southeastern Advisory Services: Jeff Swanson (Investment Consultant). 1. Quarterly Investment Performance Report Mr. Swanson briefly reviewed the performance of the market environment for major market indexes as of June 30, 2013 He reported that for quarter ending June 30, 2013 the Plan’s return was 0.6% and for Fiscal Year to date the Plan’s return is 8.4%. He reviewed the allocation of assets for the quarter; Domestic Equity 52.1%, International Equity 13.0%, Real Estate 7.7%, Fixed Income 23.0% and Cash 4.2%. He reported that the total value of the plan as of June 30, 2013 including the R&D account was $115,187,509. He reported that for the quarter the Total Fund-Gross of Fees was 0.6% versus the index at 0.8%; Total Domestic Equity was at 2.1% versus the index at 2.6%; Total International Equities were at -1.0% versus the index at -1.0%; Total Real Estate was at 3.9% versus the index at 3.9% and Total Fixed Income was at -2.5% versus the index at -2.3%. Mr. Swanson reviewed each manager individually. He reported that Garcia Hamilton has had a couple of difficult quarters; therefore they have been placed under review. However he is confident that Garcia Hamilton will improve going forward. Mr. Swanson reviewed the performance of the Fixed Income managers. Mr. Swanson reported that once the Plan receives the annual employer contributions the portfolio will need to be rebalanced. He explained that instead of following the standing instructions for depositing the employer contributions he recommends that the employer contributions be allocated according to the investment policy so that the portfolio can be rebalanced. Motion Ms. Lisa Jensen moved to direct Mr. Swanson and Ms. Martinez to deposit the employer contributions in accordance with the Investment Policy in order to rebalance the portfolio rather than the standing directions that are in place.Ms. Fasolo seconded the motion that unanimously passed 7-0. V.CORRESPONDENCE There was no correspondence VI. OLD BUSINESS There was no old business. 3 Meeting Minutes General Employees’ Pension Fund Boynton Beach, FloridaAugust 26, 2013 VII. NEW BUSINESS A. Attorney Report: 1. Memorandum SB 534 Attorney Bonni Jensen reported that on Friday, May 31, 2013, the Governor signed into law SB 534 providing for reporting requirements for Pension Funds. She reviewed her memo in regards to the important pension disclosure amendments to Chapter 112 (SB 534). She explained there are 3 additional reporting requirements that the Division of Retirement will start requesting effective October 1, 2014. She noted that The Plan’s Actuary will be working on a plan of action to implement the requirements of SB 534. She reviewed the requirements to post data and reports on-line. She reported that copies of the Plan’s most recent financial statement, actuarial valuation, and a link to the Division of Retirement’s fact sheet shall be posted on the Plan and Plan sponsor’s website. 2. IRS Favorable Determination Letter Attorney Bonni Jensen reported that the Plan received a favorable determination from the IRS. She reported that this favorable determination letter expires on January 31, 2014 and the fund will need to file again to have the tax qualification determination continued. She reported that the Plan can file in Cycle C, which is between February 1, 2013 and January 31, 2014 or Cycle E which is between February 1, 2015 and January 31, 2016. She reported that at this time the Board does not have to take any action to elect either Cycle other than file in that Cycle. If the Fund elects Cycle E, the expiration date of the determination letter is extended to January 31, 2016. 3. DROP and SB1128 Ordinance Amendment - Update Attorney Bonni Jensen reviewed the most up to date version of the Ordinance Amendment. She reviewed the changes made to the Ordinance Amendment. She explained that she has been in contact with the City’s attorney and discussed the definition of annual earnings. She reported that there are different ways that this can be implemented. She explained different ways that this can be implemented. She reported that she is waiting for an effective date and there is nothing further to report on this matter at this time. 4. Change of Primary Beneficiary After Retirement – Discussion Attorney Bonni Jensen reported that the administrator for the Plan has received several inquiries from retired members in regards to changing primary beneficiary after retirement. Currently the Ordinance does not offer this opportunity. She explained that not all Pension Plans offer this. Administrator, Dixie Martinez, reported that her biggest concern in regards to 4 Meeting Minutes General Employees’ Pension Fund Boynton Beach, FloridaAUGUST 26, 2013 this matter is HB 401. Attorney Bonni Jensen explained that in 2012 the Florida Statute was changed which essentially provided that upon someone’s divorce the designations of a members beneficiary or as a joint annuitant is null and void. Ms. Martinez explained that in order for someone to change their designated beneficiary if the member elected a joint and survivor option at the time of retirement, the members benefit needs to be recalculated according to the new beneficiary/joint annuitant’s date of birth. She explained that there is a cost to the Plan for a recalculation of benefits. The Board discussed this matter. The Board would like to know from the actuary of the Plan if there is a cost to the Plan, if the option of changing beneficiary after retirement is available to members. Attorney Bonni Jensen reported that this would require an Ordinance change. The Board discussed who would bear the cost of the recalculation of benefit due to a change in beneficiary/joint annuitant. The Board agreed that should this option become available to members the Plan should pay for the first recalculation of benefit and the member should pay for any others. Motion Ms. Laverriere moved to authorize attorney Bonni Jensen and the administrator to explore this option and to bring back the information to the Board at their next Pension Board meeting. Should the option of changing beneficiary/ joint annuitant after retirement become available to members, the Plan will pay for the first recalculation of benefit; thereafter the member will have to bear the cost. Ms. Lisa Jensen seconded the motion that unanimously passed 7-0. B. Administrator Report 1. Warrant for Invoices The Board reviewed the Disbursements presented for approval by the administrator. Motion Ms. Laverriere moved to approve the invoices that were presented by the administrator. Mr. Low seconded the motion that unanimously passed 7-0. 2. Benefit Approvals Ms. Martinez reported that it had come to her attention that the Benefit Approval listing, in error, had not been included in the meeting packet. Therefore she asked that this item be tabled to the next meeting so that the Board can have time to review. Motion Mr. Low moved to table the August 26, 2013 Benefit Approval to the next Pension Board 5 Meeting Minutes General Employees’ Pension Fund Boynton Beach, FloridaAugust 26, 2013 meeting. Ms. Fasolo seconded the motion that unanimously passed 7-0. Ms. Martinez reported that the Plan has a large pending distribution due to the beneficiary of former employee Charles Magazine. She explained that Mr. Magazine’s beneficiary has the following two options: a life annuity benefit commencing on March 1, 2013 or he can elect to take the value of Mr. Magazine’s pension as a lump sum single distribution. She reported that in the Ordinance there is no limitation as to how long someone can take to make an election of benefit however since we are approaching the fiscal year end she needs direction from the Board. The Board discussed this matter. The Board agreed that the beneficiary needs to make an election by September 15, 2013. C. Board Issues 1. FPPTA Trustee School Trustee McDeavitt as well as Trustee Fasolo explained that they would like to attend the FPPTA Trustee School scheduled for September 29 through October 2 and they asked the Board if they would approve the expense. Trustee Low may also attend the FPPTA Trustee School. Motion Ms. Laverriere moved to approve the expense for the Trustees who are interested in attending the FPPTA Trustee School. Mr. Low seconded the motion that unanimously passed 7-0. VIII. PUBLIC COMMENTS There were no public comments. IX. ADJOURNMENT There being no other business and the next meeting having been previously scheduled for Monday, November 25 at 1:30 p.m., the Trustees adjourned the meeting at 2:58 p.m. MINUTES APPROVED: November 25, 2013 __________________________________ Jerry Taylor, Chair Boynton Beach General Employees’ Pension Board _____________________________ Dixie Martinez, Administrator Boynton Beach General Employees’ Pension Board 6 4 SUPPLEMENTAL ACTUARIAL VALUATION REPORT Plan City of Boynton Beach Pension Plan for General Employees Valuation Date October 1, 2012 Date of Report October 4, 2013 Report Requested by Board of Trustees Prepared by Peter N. Strong Group Valued All active and inactive General Employees Plan Provisions Being Considered for Change The amount of overtime pay that is included in pensionable salary would be limited to 300 hours per year effective June 18, 2013. Effective June 18, 2013, unused accumulated sick and vacation leave would not be included in pensionable salary. Actuarial Assumptions and Methods Being Considered for Change Lower the investment return assumption from 8.0% to 7.5%. Update the assumed mortality rates from the 1983 Group Annuity Mortality table to the RP 2000 Combined Healthy Generational Mortality table, using Scale AA for future mortality improvements after the year 2000. Please see the enclosed table for a comparison of future life expectancies at various ages to the current mortality assumption. Change the salary scale assumption to reflect 2.8% increases for each of the next three years and a new service-based table going forward. Please see the enclosed exhibit showing the proposed new salary increase assumption rates. Lower the payroll growth assumption used to amortize the Unfunded Actuarial Accrued Liability from 3.5% to 2.8%. Under the Florida Statutes, this assumption is limited each year to the actual 10-year average payroll growth. To reflect the elimination of unused accumulated sick and vacation leave from pensionable salary effective June 18, 2013, the 10% load on projected retirement benefits for future normal and early retirees has been removed. However, the benefit payable at retirement would not be less than the accrued benefit as of June 17, 2013, including the balance of unused accumulated sick and vacation leave as of that date. Unused accumulated sick and vacation leave balances as of June 21, 2013 were provided by the City. All other actuarial assumptions and methods are the same as October 1, 2012 Actuarial Valuation Report. Amortization Period for Changes in Actuarial Accrued Liability Attributable to Assumption Changes 30 years 5 Summary of Data Used in Report See attached page. Actuarial Impact of Proposal(s) See attached page(s). Special Risks Involved with the Proposal That the Plan Has Not Been Exposed to Previously None 6 Comparison of Future Life Expectancies under Current Mortality Table and Proposed Mortality Table - 1983 Group Annuity Mortality Table Current Mortality Table Future Life Sample Expectancy AgesMaleFemale 5029.2334.72 5524.8730.12 6020.6825.72 6516.7321.51 7013.2217.50 Proposed Mortality Table - RP-2000 Generational Mortality Table, Using Scale AA for Future Mortality Improvements After Year 2000 Future Life Expectancy Sample201220172022 AgesMaleFemaleMaleFemaleMaleFemale 5034.0835.5234.5335.7834.9736.02 5528.9630.5729.4030.8029.8231.04 6024.0425.7924.4626.0224.8626.25 6519.4521.3119.8321.5320.2021.75 7015.2817.2015.6117.4115.9317.61 7 Comparison of Annual Assumed Rates of Salary Increase under Current Assumption and Proposed Assumption Current Salary Increase Assumption Rates % Increase in Salary SampleMerit and Base Total AgesSeniority(Economic)Increase 203.5%7.8%4.3% 303.5%6.7%3.2% 403.5%6.1%2.6% 503.5%5.1%1.6% 603.5%4.2%0.7% Proposed Salary Increase Assumption Rates % Increase in Salary* Years ofMerit and Base Total ServiceSeniority(Economic)Increase 1 - 22.8%8.6%5.8% 3 - 92.8%5.8%3.0% 10 - 142.8%4.5%1.7% 15 - 192.8%4.0%1.2% 20+2.8%3.5%0.7% * Salary increases are assumed to be equal to 2.8% for each of the next three years (through October 1, 2015). Salary increases after three years are based on the rates shown above. 8 ANNUAL REQUIRED CONTRIBUTION (ARC) A.Valuation DateOctober 1, 2012October 1, 2012October 1, 2012 ValuationProposedProposed OrdinanceOrdinance with Assumption Changes B.ARC to Be Paid During Fiscal Year Ending9/30/20149/30/20149/30/2014 C.Assumed Date of Employer Contrib.10/1/201310/1/201310/1/2013 D.Annual Payment to Amortize Unfunded Actuarial Liability$4,913,085$4,507,952$5,177,277 E.Employer Normal Cost1,657,0791,456,5981,676,117 F.ARC if Paid on the Valuation Date: D+E6,570,1645,964,5506,853,394 G.ARC Adjusted for Frequency of Payments6,570,1645,964,5506,853,394 H.ARC as % of Covered Payroll31.35%28.46%33.10% I.Assumed Rate of Increase in Covered rN/A%N/A%N/A% Payroll to Contribution Yea J.Covered Payroll for Contribution Year*21,629,26121,629,26121,629,261 K.ARC for Contribution Year: H x J6,780,7736,155,6887,159,285 L.ARC as % of Covered Payroll in Contribution Year: K ÷ J31.35%28.46%33.10% M.Change in ARC from Valuation resultsN/A(625,085)378,512 Change from Valuation results as % of Covered Payroll N/A(2.89)%1.75% * Estimated provided by the City. 9 ValuationProposedProposed OrdinanceOrdinance with Assumption Changes 10 CALCULATION OF EMPLOYER NORMAL COST A.Valuation DateOctober 1, 2012October 1, 2012October 1, 2012 ValuationProposedProposed OrdinanceOrdinance with Assumption Changes B.Normal Cost for 1.Service Retirement Benefits$2,483,488 $2,283,007 $2,491,629 2.Vesting Benefits302,125 302,125 346,059 3.Disability Benefits- - - 4.Preretirement Death Benefits105,871 105,871 56,365 5.Return of Member Contributions97,382 97,382 96,208 6.Total for Future Benefits2,988,866 2,788,385 2,990,261 7.Assumed Amount for Administrative Expenses135,172 135,172 135,172 8.Total Normal Cost3,124,038 2,923,557 3,125,433 As % of Covered Payroll14.91%13.95%15.10% C.Expected Member Contribution1,466,959 1,466,959 1,449,316 As % of Covered Payroll7.00%7.00%7.00% D.Net Employer Normal Cost: B8-C1,657,079 1,456,598 1,676,117 As % of Covered Payroll7.91%6.95%8.10% 11 Projected City Contribution (as a $ amount)