Police & Fire Pension

POLICE & FIRE PENSION BOARD MEETING DATE: January 24, 2017 CITY HALL, ROOM 112 TIME: 10:03 A.M. Present: Doug Bagwell, Gail Budrow-Bradstreet, Stan Chubinski, John Hausman and Joe Newman. Absent: None. Also Present: Dori Drayton, Plante Moran Financial Advisors (PMFA); David Hoffman, Gabriel Roeder Smith and Company; Nancy Mullett, Labor Attorney; and Linda Morrison, Finance and Revenue Services Director. Chair Newman asked for approval of the agenda. Motion Chubinski, seconded Bagwell to approve the agenda. On a voice vote, motion carried. Presented minutes of the regular meeting of December 19, 2016. Motion Bagwell, seconded Chubinski to approve the minutes as presented. On a voice vote, motion carried. Presented a summary of assets prepared by Comerica Bank. As of 12/31/16 the market value of the portfolio was $132,617,888, a gain of $2,922,207 since 11/30/16. As of today the market value of the portfolio is $133,637,097, presently a gain of $1,019,209 since the 12/31/16 month end. Motion Bagwell, seconded Chubinski to accept the financial report as submitted. On a voice vote, motion carried. June 30, 2016 Actuarial Valuation Presentation: David Hoffman reviewed the June 30, 2016 actuarial valuation report the purpose of which is to develop a contribution rate for future years. Highlights include:  Fiscal year 17/18 – total employer rate is 30.91% of payroll; system funded at 78.8% of liability;  Normal cost generally to be level year to year by using a 5-year smoothing of investment returns;  If payroll growth assumption is not realized the calculation for pension funding will be off;  As of 6/30/16 the payroll had actually gone down from the prior year - about 4/10th of annual payroll from the prior year, and this will impact contribution requirements;  Market value return was 1.82% versus assumption return 6.75%;  Still have 3.4 million in investment losses over the next four (4) years; expect this to drive up contribution requirements;  Every year actuary is supposed to review assumptions and made recommendations; what they are seeing – price inflation assumption is 2.7% and we are using 3.25%. Hoffman is certain we want to drop this to 3% or 2.75%. If lowered to 3% possible 6.75% investment assumption would be okay. GRS will review our asset allocation, compile a blend from others and recommend a new investment assumption. If the Board is comfortable with this method, it will not be necessary to have a full experience study. We had our last experience study done as of 6/30/14 and usually these are done every 5 years or so. January 24, 2017 Page 2 of 3 - Official Board Reports Bagwell – none. Budrow-Bradstreet: Edward Marshall in to pick up DROP forms; actuary and audit on web site; working on annual report. Chubinski – none. Hausman – none. Newman – none. Old Business Service Retirement Policy – Review by legal counsel regarding unpaid medical leave complete; included in policy; presented for final approval. Talked about changes to contracts in the future to either require the employee make contributions equivalent to his/her regular pay while on unpaid medical leave or unpaid medical leave not included in service credit. Morrison and Mullett aware. Motion Chubinski, seconded Bagwell to approve service retirement policy. On a voice vote, motion carried. Drop Program – forms presented for approval with minor changes by City, which was also review by P&F legal counsel. Motion Budrow-Bradstreet, seconded Hausman to approve DROP program forms. On a voice vote, motion carried. Additional discussion on when the retiring member must select his/her retirement option. The new service policy allows employee to make the selection once the actuarial calculation of benefit is received. Police and Fire Pension Handbook – to be reviewed at February/March meetings. New Business PMFA Update Drayton provided a brief update on the market changes and portfolio value.  Executed advisory agreement to reflect new fee schedule approved at the last meeting – signed document on file.  Provided data on how unusual the last quarter was for bond returns and how bond returns do not vary as much as equities;  Month to date returns – fixed income Barclays Aggregate index up 2.6% for the year;  Small cap domestic equities (Russell 2000) up 21.3% for the year; a lot has to do with Trump policies as president; S&P 500 up 12 %; MSCI EAFE up only 1% - harder to do well with strengthening dollar; Emerging markets up 11%; last year they were suffering;  Time Weighted Return (TWR) year to date thru 12/31/16 – portfolio returns 6.25%  TWR FY to date return is 4.09%; annualized to 7.81%; direct reverse of last fiscal year;  Asset allocation still on target. Public Comment – Linda Morrison: along with annual financial audit the P&F Retirement System received an unmodified opinion, which is the best one can have. The management letter, in which the auditors provide suggestions for process improvements, recommended an January 24, 2017 Page 3 of 3 - Official independent individual review the pension data submitted to GRS. Linda suggesting Kourtney in the Finance be the person to do this review. Next regular meeting: Tuesday, February 21, 2017 at 10:00 a.m. Meeting adjourned at 11:01 a.m. Respectfully submitted, Gail Budrow-Bradstreet, Secretary __________________________________ _________________________________ Board Member signature Board Member signature