Retirement Board

APPROVED MINUTES RETIREMENT BOARD MEETING Thursday, November 13, 2014 City Hall Dogwood Room 6:00 p.m. 1. Call to Order: The meeting was called to order by Chair Connie Rydberg at 6:00 p.m. 2. Roll Call Present: Connie Rydberg, Richard Campbell, Charles Collier, Ryan Davis, Elizabeth Hanson, Larry Little, and Jason Widstrom Staff Present: Richard Parker, Richard LaCondre, Persephone Robinson and Beverly Reich. 3. Review and approval of the June 12, 2014 and August 14, 2014 draft minutes. Ryan Davis moved and Elizabeth Hanson seconded to approve the minutes of June 12, 2014 and August 14, 2014. The motion passed 7-0. 4. Receipt of Petitions: None 5. Presentation on the June 30, 2014 Actuarial Reports for the Basic and Police Pension Plans and the June 30, 2014 OPEB Report by Elizabeth Wiley, Kathy McGugan and Margaret Tempkin of Cheiron. Elizabeth Wiley, Margaret Tempkin and Kathy McGugan from Cheiron presented the 2014 Valuation Draft Report to the Board reviewing the historical trends, 2014 valuation results, projections, water funds overview and the 2014 OPEB preliminary results. The participation in the plans is constant therefore the numbers of actives are constant but more of the populations (retirees) are moving out of the fund. There is less than one active participant for every vested and retiree participant. The growth in assets in the Basic plan increased from $67M to $74.5M in 2014 and in the Police plan increased from $18.4M to $20.7M. In 2014 there was a 92.2 % funding ratio based on the actuarial value of assets (102.5% market value to assets) in the Basic plan and 87.8% funding ratio based on actuarial value of assets in the Police plan (98.1% market value of assets). The projected FY 2016 contributions rate decreases from 14.11% to 12.86% for the Basic Plan and increases from 27.34% to 29.55% for the Police plan. The 2014 proposed assumption is that by lowering the discount rate from 7.5% to 7% from last year will cause approximately $4.2M increase in the actuarial liability. The Actuarial Value of Assets for 6/30/2014 in the Basic Plan increased from $66.9 million to $74.4 million (13.10% return) and the Actuarial Value of Assets for 6/30/2014 in the Police Plan increased from $18.4 million to $20.6 million (13.41% return). For the combined actuarial results for July1, 2014 there was  $9.2 million unfunded accrued liability which is a 28.8% reduction from July 1, 2013. The OPEB contributions for the period ending 6/30/14 were approximately $1.1 million, with an additional contribution due to the water sale of $2.5 million. The assets returned between 13-15% for FY 2014. The plan currently shows liability percentages based on use of a discount rate of 7% and market value of assets. On Cheiron’s preliminary review, they anticipate that the plan will be able to use the 7% funding rate as the discount rate given the current funding policy. On an actuarial basis, the funding ratio increased from 21.4% as of June 30, 2012 to 44.7% as of June 30, 2014. Ryan Davis moved and Rick Campbell seconded that the Board accept the 7% funding rate as the discount rate given the current funding policy that is recommended by the actuarial service. The motion passed 6-0 with Jason Widstrom absent. 6. Discussion about the Administrative Policy that will be implemented to Track the Additional $9.2 Million from the Sale of the City’s Water System that is Invested in the City’s Pension Plans. The Board discussed ways to specifically track the $9.2 Million and concluded that the tracking would be proportionate in the performance of the entire plan as the monies will be invested within the guidelines of the plans’ mix. 7. Discussion and Decision on When to Invest the Additional $9.2 Million in the same Manner as other Pension Funds. The Board discussed options of investing the $9.2 Million in entirety or in stages. It was concluded that the Board would be prudent to invest half of the amount at this time and the remaining half in 6 months. Howard Pohl advised that timing would not be an issue with the exception that real estate investments are completed quarterly. If a decision to invest in real estate was delayed till next spring, the investment would not happen until September 2015. Ryan Davis moved and Rick Campbell seconded that the Board direct the Administrator to invest half of the $9.2 Million from the Sale of the City’s Water System into the Retirement Board’s investment funds in accordance to the mix with the exception that 100% of the $9.2 Million allocation to the Real Estate mix be completed now; and that the remaining half of the $9.2 Million minus the part of the 100% Real Estate allocation be invested into the funds after the May 14, 2015 Retirement Board Meeting. The motion passed 6-0 with Jason Widstrom absent. 8. Review of the Investment Performance for the Third Quarter of 2014 for the Basic and Police Pension Plans by Howard Pohl of the Bogdahn Group.  Howard Pohl reported that the 3rd Quarter of 2014 was not a good quarter. Large cap companies made it through the quarter unscathed compared to their mid and small cap peers; with a strong 4% August return more than offset the minor declines in both July and September. Small cap stocks experienced their worst quarter in three years as the Russell 2000 declined by -6% in July, followed by an increase of 5% in August, only to decline by -6% in September. The international market outperformed the developed markets for the quarter. Domestic bonds were flat during the third quarter, rising at 0.2%. The asset mix was close to the targets. Overall, the Basic Plan had a return of -1.81% for the quarter and the Police Plan had a -1.77% return. Those returns compare to a median return of - 1.4% for the quarter. The Basic Plan assets decreased from $82.7 million to $80.8 million for the quarter (-$1.4 million return on investments) and this was mostly due to a decline in the international funds. Not a good quarter on returns however absolute growth has been strong for the last year as the assets one year ago were $76.9 million. 9. Review of the Retirement Board’s Ethics Policy. Connie Ryberg requested Ryan Davis acknowledge that he had read the Ethics Policy as all Board members had done at the last meeting. Ryan stated that he has read the policy. Discussion followed regarding the concerns of the Penalties section. The City Attorney had responded to the inquiry of whether the Retirement Board is permitted to hold a closed session to hear from a potential member in ethics violation before holding the normal public meeting. The City Attorney feels that the Board is not permitted to do so as the board members do not meet the definition of appointee or employee under the Virginia Code Section 2.1- 3711.A.1. She did feel that a Board member and the plan administrator could meet with the potential member in ethics violation as this would not constitute a public meeting. Board members felt that the Chair of the Retirement Board and the Plan Administrator would be the two persons who would meet with the potential member. If the violator is the Chair, then the Vice-Chair and Plan Administrator would be the ones designated to meet. Discussion continued regarding the clarification and understanding of the City Attorney’s opinion and for the procedure to be taken by the Retirement Board. Connie Rydberg requested for two volunteers to research this further with the City Attorney and report to the Board at the next meeting. Charles Collier and Richard Parker volunteered. Rick Campbell moved and Ryan Davis seconded to defer this discussion until Richard Parker and Charles Collier have been able to meet and further research this issue with the City Attorney. The motion passed 6-0 with Jason Widstrom absent. 10. Brief Reports from Board Members Richard Campbell and Larry Little about Information Learned from their Attendance at the International Foundation Conference in October. Larry Little distributed a brief summary from his sessions attended at the October conference in Boston and Rick Campbell spoke briefly. Both commented on the heavy union presence in Boston that also influenced the conference and the presentations. 11. Plan Administrator’s Report: None 12. Other business not on the agenda: None 13. Adjournment Richard Campbell moved and Elizabeth Hanson seconded to adjourn the meeting at 8:45PM. The motion passed 6-0 with Jason Widstrom absent. THE CITY OF FALLS CHURCH IS COMMITTED TO THE LETTER AND SPIRIT OF THE AMERICANS WITH DISABILITIES ACT. TO REQUEST A REASONABLE ACCOMMODATION FOR ANY TYPE OF DISABILITY, CALL 703-248-5128, TTY711.