Retirement Board

MINUTES OF REGULAR RETIREMENT BOARD MEETING Tuesday May 14, 2019 Falls Church City School Board Office, 800 W. Broad St. 6:00 p.m. 1. Call to Order The meeting was called to order by Chair Connie Rydberg at 6:04 PM 2. Roll Call Present: Connie Rydberg, Richard Campbell, Larry Little, Marshall Jarrett, and Jason Widstrom Absent: Ryan Davis and Charles Collier Staff Present: Cindy Mester, Kiran Bawa and Meaghan DeCelle Also Present: Mary Nye, AndCo Consulting 3. Introductions and Welcome 4. Receipt of Petitions: None 5. Review and approval of draft Minutes from February 21, 2019 meeting: Rick Campbell moved and Larry Little seconded to approve the minutes of February 21, 2019 as presented. The motion passed 5-0-2 (Ryan Davis and Charles Collier absent). 6. Review of the Investment Performance for the First Quarter of 2019 for the Basic and Police Pension Plans and OPEB –Mary Nye of AndCo Consulting Market Performance: Returns were positive in the 1st quarter of 2019 with international markets averaging 10% growth. Federal reserve has held increases to interest rates which will likely increase future fixed income returns. Growth stocks strongly outperformed value stocks for the last year. Basic and Police Plan Market Values, Net Flows and Returns on Investment were presented in a consolidated chart. The Basic Plan at the start of the first quarter was just over $99.5 Million, net flows totaled $1.09 million out of the plan, and return on investment was over $11.2 million. Thus the ending market value for Q4 was $109.6 Million, showing over 6% growth to the fund. Market Value for the Police Plan at the start of the first quarter was $31.6 Million with net flows of $218K out of the plan, positive $3.56 Million return on investment, and an ending market value of $34.99 Million. Return on Investment over the past 12 months was $6.39 Million and $2.03 Million for the Basic and Police Plans, respectively. Asset Allocations in the Basic Plan: Total domestic equities are on the high end of the policy range, International Equity is slightly above target and Total Fixed Income is just below target. Real Estate is out of target range, awaiting the buy-in to Principle Real Estate. Asset Allocation in the Police Plan is very similar to the Basic Plan with total Real Estate showing out of policy. When Principal Real Estate is funded, there will be a rebalance to correct the sectors that are out of range. Any further correction, if necessary, can be addressed at the next quarterly meeting. Investment performance for the quarter ranked the Plans in the top two percentile for the overall universe. In the three-, five-, seven- and ten-year comparative performances, the plans showed rankings in the top decile.  The Board commented on the under-performance of SKBA. Mary Nye noted that a full market cycle has not completed but that in general she has concerns with SKBA. At the last quarterly meeting, it was suggested that SKBA be brought to the Board at the September 2019 meeting of the Retirement Board. Mary Nye shared that the firm has not made any changes in terms of their practices and that SKBA would likely not have different information to present. The Board could take action by replacing SKBA with another Large Cap manager or with a Large Cap index fund. Mary Nye presented AndCo’s Index Analysis that compared Index funds and actively managed funds. Data shows that Index funds are most efficient in the U.S. Large Cap sector. Active manager funds have outperformed the Small Cap Index consistently. The Board decided not to invite SKBA and requested AndCo to compile an analysis of other U.S. Large Cap Value Equity Managers to be presented at the next quarterly meeting in order to make an educated decision for potential action on SKBA. OPEB funds showed return on investment of $1.45 Million for Q1 with an ending market value of $15.25 Million. All OPEB asset allocations are within policy range and returns are tracking their underlying indices. . 7. Election of Retirement Board Officers: Marshall Jarrett moved and Larry Little seconded to nominate Rick Campbell as the Vice-Chair of the Retirement Board. Rick Campbell moved and Marshall Jarrett seconded to nominate Connie Rydberg as the Chair of the Retirement Board. The motion passed and officers were elected as slated 5-0-2 (Ryan Davis and Charles Collier absent). 8. 2019-2020 Training Plan: Cindy Mester presented the Board Training Plan for the coming year. AndCo Consulting will conduct the annual mandatory Fiduciary training at the next quarterly meeting. Connie Rydberg will attend the American Academy of Actuaries Annual Meeting and Public Policy Forum in November. Ryan Davis and a staff person (to be determined) will attend the IFEBP International Conference in October. 9. Plan Administrator’s Report: Cindy Mester and Meaghan DeCelle provided the Board with a quarterly operational report providing information on administrative activities, training summary and pension administration fees. The Board was also briefed on the results of the Retirement Board elections and provided an updated member roster. Ms. DeCelle noted the estimated time expended on each administrative action. The requested increased liability insurance coverage for Board members has been executed and is in effect. Suggested discussion of meeting frequency was tabled to the next meeting to allow absent members to weigh in. City Council adopted the FY20 budget that includes funding for a full-time permanent HR Director. Ms. Mester will stay on as the Pension Plan Administrator. Subscription agreement for Principal is in the queue and likely to be called for purchase in July. 10. Water Sale Proceeds Methodology Update: Ms. Rydberg summarized the final methodology and report by Cheiron to document the tracking and utilization of the 2014 Water Sale Proceeds to offset the City’s Actuarially Determined Contribution. Cheiron’s analysis confirmed that the new methodology remains consistent with the intent, and outcomes, of the 2014 plan amendment and therefore is a reasonable change from a fiduciary perspective, while improving transparency and clarity of the methodology. Legal review from Williams Mullen confirmed that an additional plan amendment was not needed and that the written methodology is in compliance with the plan document. Connie Rydberg is drafting an administrative manual to  document the tracking and usage method. The draft manual will be reviewed by Segal Consulting. Using the final methodology, Cheiron was able to finalize the 2018 OPEB and Pension valuations. 11. Actuarial Services RFP: Segal Consulting is now under contract to serve as the Pension Plans’ actuarial service; the contract agreement was executed by the Plan Administrator. The scope of the Actuarial Services contract includes the tracking of Water Sale Proceeds earnings and City’s use of the funds. Segal will attend the next quarterly meeting to introduce the City’s dedicated team of actuaries and will present the 2019 valuations at the November 2019 meeting. 12. Pension Plan Amendments: Research continues for a potential change to the plan provisions for purchase of prior public service. Segal Consulting will provide a calculation tool to assist City staff in estimating the member cost of service purchase. 13. Other business not on the agenda: none 14. Adjournment: Rick Campbell moved and Larry Little seconded to adjourn the meeting at 8:11 PM. The motion passed 5-0-2 (Ryan Davis and Charles Collier 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 703-248-5129, TTY711.