Firefighters' Pension Board

Edwardsville Firefighters Pension Board 410 North Main Street Edwardsville, Illinois 62025 618-692-7541 618-692-7567 Fax ____________________________________________________________________________ Regular Pension Board Meeting – April 28, 2015 Attendance Board members present: Whiteford, Paschall, Anderson, McCracken Board members absent: Hampton Guest: Craig Larsen of AHC Consulting via phone, Cole Schrage Meeting Called to Order Whiteford called the meeting to order at 0913. Approval of Minutes Paschall presented the minutes from the January 27, 2015 meeting. McCracken made a motion to accept the minutes. Anderson offered the second on the motion. Whiteford called for a vote. All members voted “aye”. The motion passed. Public Comment None Communications and Bills Paschall presented the DFA ballot for directors. No action was taken. Paschall presented a notice for the IPPAC training on May 14-15, 2015. Paschall presented a notice for the IPFFA training May 1, 2015. Treasurer’s report Not presented Old business The Gateway Commerce Center tax pass through TIF district – McCracken presented to the board that 10% of the monies received is divided among various taxing districts. This was received by the board and acknowledged at the previous meeting. It was deposited. Paschall and Whiteford presented an update of the IDOI Audit and that the board as heard nothing from the state as of yet. Anderson made a motion to accept the economic and investment presentation by Craig Larsen of AHC Advisors at the January 27, 2015 meeting at training for one hour. Whiteford provided the second. Whiteford called for a vote. All members voted “aye”. The motion passed. New Business IRS 945 update – Whiteford presented that he received and email from L&A which advised that the IRS sent a letter saying that the IRS was showing a late payment again. L&A confirmed that this was corrected by filing a corrected 945X. Whiteford presented that the fire department had hired a new fire fighter. Anderson made a motion to accept the application of Ryan Anderson, the new hire, in absentia without an application being completed, as long as there are no irregularities for accounting purposes. McCracken provided the second. Whiteford called for a vote. All members voted “aye”. The motion passed. Craig Larsen called and joined the meeting. Paschall made a motion to accept the death certificate of retiree David West. Anderson provided the second. Whiteford called for a vote. All members voted “aye”. The motion passed. Anderson made motion to provide Phyllis West with a survivor benefit calculated by L&A pending receipt of marriage certificate and completion of survivor information packet. Paschall provided the second. Whiteford called for a vote. All members voted “aye”. The motion passed. Anderson made a motion to approve the refund request of former fire department employee Jeffery Bone. McCracken provided the second. Whiteford called for a voted. All members voted “aye”. The motion passed. GASB 67, 68 require new data for the municipality’s auditors. Craig Larsen says he has been supplying his portion of the data to the auditors for the past year already. Other information comes from actuarial studies. Much of the info is not available from the state study. Kevin Teppen of C.J. Slosser, the city’s auditor, stated that the IDOI uses Projected Unit Credit (PUC) to calculate funding needs and GASB 67, 68 requires Entry Age Normal. The state follows state statute of using the PUC but the city wants to follow GASB to satisfy its creditors. Teppen opines that the GASB method would result in a higher tax levy requirement. Whiteford asked McCracken if the city would share the cost of a private actuarial to be GASB compliant. McCracken stated that question should be sent to the city’s finance committee. Craig Larsen suggests sending out Requests For Proposal from L&A, Foster & Foster, and Tim Sharp regarding actuarial services and then make a decision on how to proceed. Anderson made the motion to send out RFP’s for a GASB 67, 68 compliant actuarial study. McCracken provided the second. Whiteford called for a vote. All members voted “aye”. The motion passed. L&A Contract – Received a proposal for a 1 year and 5 year contract with L&A. Whiteford brought up some problems we have been with L&A. Craig stated that he has not heard of other funds having issues. He said that the group has grown greatly with clients and have hired professional staff to compensate. They may have some communication issues with remote clients. Craig says he cannot say as to why we are having the issues. Anderson made motion to sign a contract with L&A for 1 year from May 1, 2015 to April 30, 2016 and put them on notice regarding our issues and are expecting a significant improvement in their services. Paschall provided the second. Whiteford called for a vote. All members voted “aye”. The motion passed. Annual election results – There were 28 ballots available and 12 ballots cast. Whiteford stated the unused ballots were accounted for. Anderson counted cast ballots with the following results: Cole Schrage – 11 Ed Burnley – 1 Anderson motion to accept the results of the election as presented with Cole Schrage as board member. Paschall provided the second. Whiteford called for a vote. All members voted “aye”. The motion passed. Whiteford abdicated his position as board president and turned meeting over the secretary Paschall. Paschall opened the floor for nominations for board president. Anderson motion to nominate Whiteford for president. Paschall called for nominations three times. Paschall closed nominations. Anderson made a motion to elect Whiteford as board president by acclimation. McCracken provided the second. All members voted “aye”. The motion passed. Whiteford opened floor for nominations for secretary. Whiteford made a motion to nominate Anderson as board secretary. Whiteford called for nominations three times. McCracken made motion to close. Paschall made a motion to accept Anderson as secretary by acclimation. McCracken provided the second. All members voted “aye”. The motion passed. Fund Investment Actions Fund investment action – Craig provided fund status. Monthly cash need is $70,000, current cash balance is $275,619. Craig thinks the account will get low before the next meeting in July and recommends rebalancing. Craig recommends selling $80,000 of Vanguard REIT and $70,000 Fidelity Spartan 500 and transferred to Fidelity Money Market. Anderson made a motion to sell $80,000 of the Vanguard REIT and $70,000 of the Fidelity Spartan 500 and place the earnings in the Fidelity Money Market account. Whiteford provided the second. Whiteford called for a vote. All members voted “aye”. The motion passed. McCracken left at 1055. Adjournment Paschall made a motion to adjourn. Anderson provided the second. Whiteford called for a vote. All members voted “aye”. The motion passed. Meeting ended at 1101 Investment education Started at 1102 The fund value is $12,219,502. The return was 1.88% for the quarter. 3.41% for the year. Almost all from equities. The PNC account trailed the benchmark. PNC is conservative in the event that rates rise, but rates are falling and depressing returns. Craig is visiting PNC in June and will talk about their future plans. The equity portfolio is performing well for the long term, 5 year return is at 12.08% compared to benchmark at 11.60%. The reason that in the short term we are trailing the benchmark is that the value and small stocks are inverted in their returns of which our portfolio is positioned to capture their premiums. The rising dollar puts negative pressure over the year on international stocks and returns are less due to the higher cost of the dollar exchange. But the most recent quarter shows positive international returns. This demonstrates the expected ebb and flow of the market. Factors in the difference in expected risk are Market Equity Premium – stocks vs bonds; Company size – Small vs large; Relative price – value vs growth; and Profitability – high vs low profitability. Diversification helps capture what global markets offer. The risk in big international companies is similar to those in the US. That is why exposure to emerging markets brings a higher premium as well as growth. We don’t know what the premium is going to be, but there should be a premium between value/small over growth/large and we don’t know the time frame of when that premium will emerge. There will be inversions but we don’t know when or for how long. Stocks are labeled with 2 labels; large vs small and value vs growth. The global stock market is weighted to large companies. Small/value has the most risk but also has the most return potential. The inversion of returns on small/value time frame is unknown so diversification is critical to weather the depressions. Price to book is a measure of a company’s value. The ratio of the stock price vs their asset value. Facebook has a high stock price but if they were to sell their assets, the price would be much less, they have a high price to book value. DFA is more expensive than Vanguard as an example so you would pick Vanguard if you did not look under the hood. Under the hood DFA captures higher premiums and therefore higher returns. The 15 year return is always higher for DFA than Vanguard in all categories. The fund holds 2 index funds because they are very low cost. Training ended at 1207 _________________________________________ Respectfully submitted by Jeremy Paschall, Secretary