Retirement Board

MINUTES OF REGULAR RETIREMENT BOARD MEETING Thursday, November 14, 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 Richard Campbell Absent: Jason Widstrom Staff Present: Cindy Mester, Kiran Bawa and Meaghan DeCelle Also Present: Kristen Michael, FCCPS COO; Steve Mason, General Gov’t HR Director; Mary Nye, AndCo Consulting; Tammy Dixon, Chad Brown and Melanie Clark, Segal Consulting 3. Introductions and Welcome 4. Receipt of Petitions: None 5. Review and approval of draft Minutes from September 12, 2019 meeting: Ryan Davis moved and Marshall Jarrett seconded to approve the minutes of September 12, 2019 as presented. The motion passed 6-0-1 (Jason Widstrom absent). 6. 2019 Basic, Police and OPEB Valuation Reports—Segal Consulting Team Segal Consulting presented their valuation of the Plans as of June 30, 2019. Segal reported that the City Plans are well-managed and over 100% fully funded and that City contributions are in line with actuarial recommendations. The valuations showed that the Preliminary actuarially determined contributions (Preliminary ADC, which is the ADC prior to reflecting Water Sale Proceeds) for the Basic Plan decreased from 4.3% to 4.11% and for the Police Plan from 14.8% to 10.3%. Segal recommended that the Board consider the performance of an Experience Study on all plans, a Risk Analysis and the development of a Funding and Risk Policy. The OPEB Plans valuation showed that all Plans, City, NVCJA, and Schools, are all over 100% funded. Segal’s healthcare cost assumptions for the OPEB valuation generally decreased liabilities and the ADC. The total OPEB liability over all three plans decreasing by about 15% ($1.9 million) from last year, including $1.7 million reduction due to changes in the healthcare cost aging factor assumptions, $0.6 million decrease due to changes in the healthcare trend assumptions and $0.9 million decrease due to favorable healthcare cost in FY2020, offset by other factors increasing the liability. The Board discussed and agreed to these reductions in the liabilities, but expressed caution that future adverse experience could reverse the reductions. The ADCs for OPEB plans showed negative, but the employer contributions will not be less than $0. The Board expressed interest in exploring whether a minimum contribution override should be added for the OPEB plans, similar to the minimum override included in the funding policy for the Pension Plans. Segal recommended an Experience Study for OPEB and consideration of an asset smoothing method. And, in light of the negative ADC for OPEB, Segal recommended revisiting the funding policy.  Segal presented the status of the assets from the Water Sale Proceeds, including the balance in the City Reserve Account. Water Sale Assets held in City Reserve Account are not recognized in the Actuarial Value of Assets until City has elected to use allocated investment earning as a “contribution” to the Pension Plan. Chair Rydberg concurs with the recommendations for Experience Studies but expressed reservations about the need for a Risk Assessment. Ryan Davis moved and Rick Campbell seconded to request Segal perform Experience Studies for the Pension and OPEB Plans. The motion passed 6-0-1 (Jason Widstrom absent). 7. Review of the Investment Performance for the Third Quarter of 2019 for the Basic and Police Pension Plans and OPEB –Mary Nye of AndCo Consulting Market Performance: Broad asset class returns were mixed in the 3rd quarter of 2019. International markets showed negative performance while domestic stocks had positive gains, with the exception of US Small Cap. Fixed income returns were positive this quarter with a surprising 10+% returns for the past 12 months due to low interest rates. Basic and Police Plan Market Values, Net Flows and Returns on Investment were presented in a consolidated chart. The Police Plan at the start of the third quarter was $36.3 Million, net flows totaled $332 thousand out of the plan, and the ending market value for Q3 was $36.15 Million. Thus the gross return for the quarter was 0.39. Market Value for the Basic Plan at the start of the third quarter was over $113 Million with net flows of $1.49 Million out of the plan, and an ending market value of $112.1 Million. Thus the gross return for the Basic Plan in Q3 was 0.46. Gross returns for the 12-month period were 3.36 for the Police Plan and 3.4 for the Basic Plan. 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 is back in policy range now that the Principle Real Estate buy-in is complete. It was noted that SKBA equities were liquidated and the Plans bought in to two new domestic equity fund managers, as directed by the Board at the September meeting, after September 30, 2019. The new managers will show on the next quarter’s report. Comparative performance for the Basic Plan showed the Total Fund ranked 69th for the quarter. In the three-, five-, seven- and ten-year comparative performances, the plans showed rankings in the top two percentile. Asset Allocation in the Police Plan is very similar to the Basic Plan. OPEB funds showed return on investment of $84.3 Thousand for Q3 with an ending market value of $15.84 Million. Return on investment for the 12-month period was $418.6 thousand, with $0 net cash flows. All OPEB asset allocations are within policy range and returns are tracking their underlying indices. Mary Nye shared AndCo’s review of Templeton International following their recent changes in staffing and leadership. AndCo remains comfortable with the changes at Templeton and has no concerns that changes will negatively impact the funds’ performance. 8. October 28, 2019 City Council Meeting Report—Connie Rydberg  Ms. Rydberg shared the Retirement Board Annual Report that was presented to Council on October 28, 2019. Council expressed thanks to the Retirement Board for their prudent oversight of the Plans. 9. 2019 Training Plan update—Cindy Mester Cindy Mester is working to complete an online certification with IFEBP. Connie Rydberg attended the American Academy of Actuaries Annual Meeting and Public Policy Forum in November. Ryan Davis attended the IFEBP International Conference in October. Ms. Rydberg shared anecdotes learned from the AAA meeting regarding COLA increases in pension payments being linked to fund performance in some plans in the nation. 10. 2020 Meeting Calendar: Dates for quarterly meetings in 2020 were proposed. Ryan Davis moved and Rick Campbell seconded to aadopt the 2020 meeting schedule as presented. The motion passed 6-0-1 (Jason Widstrom absent). 11. Water Sale Proceeds Administrative Manual The Water Sale Proceeds (WSP) Admin Manual review is on-going. Another update will be given at the February Board meeting. 12. Plan Administrator’s Report—Cindy Mester Cindy Mester presented the Administrative Quarterly Report, summarizing pension participant changes, training and administrative expenses. Investment Instrument Changes were made this quarter with the liquidation of SKBA assets and funding of JP Morgan Equity Income Fund Class & Vanguard Equity- Income Fund Admiral Services. The Plan Administrator presented a draft of the 2020 Retirement Board Work Plan, listing staff projects, Board trainings and administrative services planned for the next calendar year. Board Chair recommended a review of the City of Falls Church administrative fee; the item will be listed on the next meeting agenda. Staff was directed to work with Segal on the Experience Studies to be presented in February rather than May. Ryan Davis moved and Rick Campbell seconded to adopt the Retirement Board Work Plan as amended to be a set of guidelines for 2020 fiduciary duties and staff projects. The motion passed 6-0-1 (Jason Widstrom absent). 13. Other business not on the agenda: none 14. Adjournment: Ryan Davis moved and Charles Collier seconded to adjourn the meeting at 8:29 PM. The motion passed 6-0-1 (Jason Widstrom absent). THE CITY OF FALLS CHURCH IS COMMITTED TO THE LETTER AND SPIRIT OF THE AMERICANS WITH DISABILITIES ACT. 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