Retirement Board

MINUTES OF REGULAR RETIREMENT BOARD MEETING Thursday, September 12, 2019 Falls Church City Hall, Dogwood Conference Room, 300 Park Ave. 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, Charles Collier, Larry Little, Marshall Jarrett, Ryan Davis and Jason Widstrom Absent: Richard Campbell Staff Present: Cindy Mester, Kiran Bawa and Meaghan DeCelle Also Present: Mary Nye, AndCo Consulting Tammy Dixon, Chad Brown and Melanie Clark, Segal Consulting 3. Introductions and Welcome: The Segal Consulting team introduced themselves, gave a brief summary of their professional backgrounds and the status of the transition of actuarial services from former consultants, Cheiron. Mr. Brown and Ms. Clark exited following the introduction; Tammy Dixon remained for the rest of the meeting. 4. Receipt of Petitions: None 5. Review and approval of draft Minutes from May 14, 2019 meeting: Ryan Davis moved and Marshall Jarrett seconded to approve the minutes of May 14, 2019 as presented. The motion passed 6-0-1 (Rick Campbell absent). 6. Fiduciary training—Mary Nye of AndCo Consulting This required annual Board training focused on challenges facing retirement plans, Defined Benefit plan basics and understanding the investment program. Mary Nye defined the roles of the Board as trustees of the Plans, the decision-making responsibilities and strategies for protecting plan funding. Trustees greatly influence the health of the Plans through prudent asset allocations and diversification. Regular review of investment policies is imperative and an asset allocation study will be done for the Falls Church plans in 2020. Tammy Dixon added actuarial insight on the discussion of risk factors and mitigation for Defined Benefit Plans. 7. Review of the Investment Performance for the Second Quarter of 2019 for the Basic and Police Pension Plans and OPEB –Mary Nye of AndCo Consulting Market Performance: Broad asset class returns were positive in the 2nd quarter of 2019 amid high volatility in both US and international markets. Fixed income returns were also positive this quarter and showing over 7% returns for the past 12 months. Growth stocks outperformed value stocks as they have for 9 out of the last 10 quarters. 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 second quarter was $109.6 Million, net flows totaled $1.12 million out of the plan, and return on investment was over $4.5 million. Thus the ending market value for Q2 was $113 Million. Market Value for the Police Plan at the start of the second quarter was $34.99 Million with net flows of $104.9K out of the plan, positive $1.44 Million return on investment, and an ending market value of $36.33 Million.  Return on Investment for the Fiscal Year 2019 was $7.73 Million and $2.53 Million for the Basic and Police Plans, respectively. Asset Allocations in the Basic Plan: Total domestic equities are above target but within the policy range, International Equity is barely below target and Total Fixed Income is within range, just below target. Real Estate was out of target range for the second quarter of 2019. As of August 1, the buy-in to Principle Real Estate is complete and total Real Estate is within target range. Comparative performance for the Basic Plan showed the Total Fund in the top decile, ranked 9th for the quarter. In the three-, five-, seven- and ten-year comparative performances, the plans showed rankings in the top two percentile. SKBA struggled again this quarter and was ranked in the bottom quartile of investment manager performance. Asset Allocation in the Police Plan is very similar to the Basic Plan with total Real Estate showing out of policy for the Quarter and reported in range following the buy-in to Principal Real Estate. OPEB funds showed return on investment of $504.9 Thousand for Q2 with an ending market value of $15.76 Million. Return on investment for Fiscal Year 2019 was $943.3 thousand, with $0 net cash flows. All OPEB asset allocations are within policy range and returns are tracking their underlying indices. . 8. Investment Manager Research Follow Up—Mary Nye, AndCo Consulting Mary Nye presented a Manager Evaluation Report so the Board may evaluate options for the replacement of SKBA Capital Value Plus. Five alternatives to for the US Large Cap Value Equity management were compared: Aristotle Value Equity, Bridgeway Large Cap Value, JP Morgan Equity Income Fund, Vanguard Equity-Income Fund (an active manager), and Vanguard Value Index Fund (a passively managed index fund). The Board reviewed performance history, strategy and fees for each manager. There was Board concensus that the data presented by AndCo was sufficient to make an investment manager decision and it would not be required for the managers to present to the Board. Marshall Jarrett moved and Ryan Davis seconded to remove SKBA as the US Large Cap Value manager for the Basic and Police pension plans. The motion passed 6-0-1 (Rick Campbell absent) Marshall Jarrett moved and Ryan Davis seconded to replace the US Large Cap management with two firms, JP Morgan Equity Income Fund and Vanguard Equity-Income Fund, splitting the investment between them equally, for the Basic and Police pension plans. The motion passed 6-0-1 (Rick Campbell absent) 9. 2019 Training Plan update—Cindy Mester Cindy Mester and potentially Charles Collier will complete an online certification with IFEBP. Connie Rydberg will attend the American Academy of Actuaries Annual Meeting and Public Policy Forum in November. Ryan Davis will attend the IFEBP International Conference in October. 10. Water Sale Proceeds Administrative Manual The Water Sale Proceeds (WSP) Admin Manual is being reviewed by the City’s Finance team, Segal actuaries and legal review by Williams Mullen. AndCo has assisted with the setup of a cash account for holding the City’s reserved earnings on the WSP. Completed manual is anticipated before the November Board meeting. 11. Investment Policy Revision—Cindy Mester  Ms. Mester presented the draft of revisions to the Investment Policy for the City of Falls Church Basic and Police Pension Plans. The proposed changes include adding an allowable range of cash to the mix of asset classes. Target for cash was proposed as 1%, by way of decreasing the target of Total Domestic Equities from 52% to 51%. Any adopted revisions to the Investment Policy will be presented to City Council for approval at a regular Council meeting. Ryan Davis moved and Jason Widstrom seconded to adopt the revised Investment Policy for the City of Falls Church Basic and Police Pension Plans as presented. The motion passed 6-0-1 (Rick Campbell absent). 12. 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. Steve Mason will be permanent HR Director, starting September 19, 2019. Ms. Mester will stay on as the Pension Plan Administrator. Major Rick Campbell has announced his retirement from the Falls Church Police Department effective November 8, 2019. He will continue to serve his current term on the Retirement Board and will be eligible to run in future elections as a beneficiary of the Police Plan. The Board had consensus to permanently move the first fiscal year quarterly meeting from August to September. The topic of adding additional meetings in order to shorten meeting duration was addressed. It was decided to maintain the once-quarterly schedule. 13. Other business not on the agenda: none 14. Adjournment: Ryan Davis moved and Marshall Jarrett seconded to adjourn the meeting at 8:55 PM. The motion passed 6-0-1 (Rick Campbell 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.