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 – July 28, 2015 Attendance Board members present: James Whiteford, Cole Schrage, Rich Hampton, Dennis McCracken Board members absent: James Anderson Guest: Craig Larsen and Kevin Ryan of AHC Consulting, Jeremy Paschall, A.J. Weber and Todd Schroder of Lauterbach & Amen Meeting Called to Order Whiteford called the meeting to order at 0900. Approval of Minutes Motion made by Schrage to accept the minutes of April 28, 2015 meeting. Whiteford provided the second. Whiteford call for a vote. All members voted aye. The motion passed. Motion made by Whiteford to accept the minutes of June 18, 2015 meeting. Schrage provided the second. Whiteford call for a vote. All members voted aye. The motion passed. Public Comment None Communications and Bills The IPPFA is offering a pension education seminar and conference on October 6, 2015. Treasurer’s report Hampton pointed out that the Bank of Edwardsville account is now closed and the funds were transferred to the BMO Harris Bank account. The amount was about $30,000. Tax revenues are coming in as normal. Old business Motion to approve AHC Advisor training provided at the Jun 18, 2015 meeting by Hampton. Schrage provided the second. Whiteford called for a vote. All members voted aye. The motion passed. An update to the Dave West’s passing. His wife’s information was received by L&A and is receiving her benefit. Actuarial – Schroeder present that the GASB 67,68 report will be completed this week and will be available for the city’s auditors. New Business The pension fund will be receiving a tax pass through for the North Main Street TIF district due to a mistake in accounting. McCracken stated the amount will be a little less than $400. The city audit is expected to be finished in September. No update regarding the IDOI records audit. Weber stated the IDOI report will be ready for signature on July 31, 2015. McCracken joined the meeting at 0921. McCracken wanted a discussion of the actuarial assumption differences. Schroeder presented the draft of the valuation. The 3 steps for an actuarial study 1st Data is collected – current active members, retired members, assets. 2 nd – Estimation of what payments will be drawn upon the fund in the future. Data regarding when people are retiring, how often disability retirements occur taken from a study of the fire departments every 3-4 years that L&A services to create good estimates for actuarial studies. The IDOI updated their assumption in 2011. The last time they were updated was in the early 1980’s. Also an investment return tier system was created so not all funds were assumed to receive 7%. 3 rd – How to pay for the benefits. This includes actuarial cost methods and unfunded liability. L&A is providing the Entry Age Normal (EAN) and the Projected Unit Credit (PUC) payment methods. The state requires the PUC method while GASB 67, 68 requires EAN. They both get to the same result just with different payment plans. L&A is waiting for the city’s auditors to provide a last minute asset changes and board approval to take it out of the draft stage. Current funding recommendation is $878,401. The increase is due to using the EAN cost method which front loads the cost and becoming 100% funded by 2040. The statutory minimum is $542,743. The IDOI may be different due to differences in assumptions. Last year’s the IDOI contribution was $675,000. Whiteford stated he is confused about how the L&A statutory minimum is different from the IDOI’s number. Schroder stated the various assumption will cause the change. He will send the board a presentation that shows how the calculations can be different. The differences in calculations can be a big jump and Schroeder recommends developing a plan that will transition to one way to perform calculation so each year the numbers are more consistent. Also the state can change funding policy at any time. Schroeder recommends developing a standard funding policy to prevent unexpected annual funding changes. McCracken left at 0955. Whiteford presented that PNC has updated the fee schedule which provided a discount. Larsen states he asked PNC to review their fee policy regarding funds that are joined such as the Edwardsville Fire and Police. Larsen said we just need to file the changes. Whiteford presented that the board had some concerns regarding some issues with the L&A service. He presented Weber the board’s thanks for addressing and correcting the issues. Hampton also stated the L&A monthly report is very good and comprehensive. Fund Investment Actions Larsen presented that expenses were greater than revenue this past quarter due to waiting for tax revenues. This causes the fund to lose money despite investment gains. At the last meeting the board raised cash that should cover expenses for the rest of the year. The investments are currently balanced. Larsen does not recommend any investment action. Adjournment Schrage made a motion to adjourn. Whiteford provided the second. Whiteford called for a vote. All members voted aye. The motion passed. Meeting ended at 1009 Investment education Started at 1030 Present: Whiteford, Paschall The fund balance is at $12,065,314. The strength of the dollar has pushed down returns in international funds. If not for that the returns would have been very positive. Greece nearly ran out of money. Empty food shelves and lack of medicine was a high motivator for the government to make a deal. These items are usually purchased with financing. An example is insulin. Sellers of insulin know that it will sell, so the risk is low. However Greece is so risky that financers were not willing to lend. This is the third time that Greece has needed financial aid. The lenders are demanding financial reforms. If the deal does not go through then Greece will have to leave the Euro and create their own currency. Our portfolio would not be greatly impacted however this would affect other markets that would have greater impact on our portfolio. Geo-political issues also come into play. The Greek prime minister has also been meeting with Russia president Putin. The idea is that Greece may sell Mediterranean ports to Russia which gives Russia more military power in the region. Otherwise the Euro market is improving. The Chinese market has sold off 25-30% since mid-June. For the past year China was in a great market value rise. But now investors have been having to pay off the margin and that has caused the sell-off. China’s debt is growing and their production demand is slowing. This brings us to the Fed. The meeting starts today and will end tomorrow with their outlook statement. There is a possibility of a rate increase but not likely. On Thursday the 2nd quarter economic growth will be released and it is expected to be 2%. For the past 5 years we have been expecting a rise in rates but have not seen it yet. The recovery is the slowest in a very long time. The labor picture has not improved. The unemployment rate has dropped but it is because people have left the workforce. Inflation is low. If rates go up then the dollar strength will increase as well. The Fed has to act globally. Foreign banks are keeping rates down, so the Fed cannot just raise rates as they like to control inflation. Internationally the strong dollar to foreign currency has slowed growth for US companies trying to sell globally because it costs more to purchase US goods than from other countries. The Fed may raise rates just to get it over and let the dollar strength jump up. Larsen thinks that would be a bad reason to raise rates. Historically the Fed has been too late and missed market moves. This may cause them to raise rates to keep ahead. If the economic growth is slow the dollar will drop in value. If the growth is higher the dollar will rise in value. US companies are holding a large amount of cash and will invest if they see a good deal. If growth is slow, then they will hold their cash. Training ended at 1054 _________________________________________ Respectfully submitted by Jeremy Paschall Assistant to the Secretary