Police & Fire Retirement System

CITY OF MADISON HEIGHTS POLICE & FIRE RETIREMENT SYSTEM REGULAR SCHEDULED TRUSTEE MEETING October 17, 2023 The regular meeting of the City of Madison Heights Policemen & Firemen Retirement System Board of Trustees was held on Tuesday, October 17, 2023, at 8:40 a.m. at 31313 Brush Street, Madison Heights, Michigan. Present: Chairperson, Jeff Geralds Board Members: Eric Bissinger, Linda Kunath, Anthony Roberts, Gary Strongarone Others Present: Retirement System Attorney Thomas Michaud Morgan Stanley\Graystone investment advisors Brian Brice Gabriel, Roeder, Smith & Company actuary services Kevin Noelke, Heidi Barry Also present, Amy Misczak, Carey Spangler 14-24 Amend Agenda Motion by Trustee Roberts and supported by Trustee Bissinger to amend the agenda to review of disability retirement procedures, appointing a medical director, and request for disability pension benefits – Spangler C., after the meeting is open to the public. Yeas: Bissinger, Geralds, Kunath, Roberts, Strongarone Nays: None Motion Carried. 15-24 Approval of Minutes of the Regular Meeting of September 19, 2023 Motion by Trustee Bissinger and supported by Trustee Strongarone to approve minutes of the regular meeting of September 19, 2023. Yeas: Bissinger, Geralds, Kunath, Roberts, Strongarone Nays: None Motion Carried. Meeting Open to the Public No items were discussed. 16-24 Disability Retirement Procedure Retirement System Attorney Tom Michaud reviewed the Disability Retirement Procedure document provided to the Board. This document is an outline for when members submit a written application to the Retirement Board requesting disability retirement based on being mentally or physically injured from performing job related duties. The injury may be duty or non-duty related and there is reliance on expert, the Medical Director, to certify if the member meets the requirements. Disability pension is 50% of final average compensation (FAC) until age 55 or as otherwise negotiated in union agreement. A disabled member is subject to re-exam every year for 5 years and every 3 years thereafter, until eligible for regular pension. The Board reviewed forms included with the Procedure document. The Medical Director is an independent body from the City, appointed by the Board. If the Medical Director and the applicant’s physician(s) examination determinations disagree, a third-party examiner is mutually agreed upon by the two examiners. In cases of on-duty disability when workers compensation amounts are paid to the disabled member, the disability pension amount are reduced accordingly. Motion by Trustee Bissinger and supported by Trustee Roberts to approve Disability Retirement Procedure document. Yeas: Bissinger, Geralds, Kunath, Roberts, Strongarone Nays: None Motion Carried. 1 10/17/2023 17-24 Appointment of a Medical Director Motion by Trustee Roberts and supported by Trustee Bissinger to appoint a Medical Director as provided by the Retirement System administrator. Yeas: Bissinger, Geralds, Kunath, Roberts, Strongarone Nays: None Motion Carried. 18-24 Request for Disability Pension Benefits – Spangler C. The Board was advised that the City and Union have agreed to allow Carey Spangler to submit an application for disability retirement. An application for disability retirement and the Disability Retirement Procedure was provided to Mr. Spangler at the meeting. Motion by Trustee Bissinger and supported by Trustee Strongarone to process the disability application regarding Carey Spangler upon receipt. Yeas: Bissinger, Geralds, Kunath, Roberts, Strongarone Nays: None Motion Carried. 19-24 GRS Retirement System Actuarial Valuation Report June 30, 2023 Gabriel, Roeder, Smith & Company (GRS) actuaries Kevin Noelke and Heidi Barry presented the Police and Fire Retirement System Actuarial Valuation Report, dated June 30, 2023. The City’s Normal Cost of Department Heads, Police, and Fire total is 11.57%, the Unfunded Actuarial Accrued Liabilities for Retiree and beneficiaries and Active members total is 44.55%, which brings the City’s Total Contribution to 56.12% of payroll. This contribution amount equates to $3,47,219 for fiscal year 2024-2025. The overall actuarial experience was more favorable than expected, with an additional employer contribution of $3.45 million, which generated a gain; higher retiree mortality than expected, which generated a gain, lower benefits at retirement than expected for 5 new retirees, which generated a gain, unfavorable investment experience on the basis of the Funding Value of Assets, which generated a loss. The Plan has a funded ratio of 55.0%, which is 3.9% more than last year, which is still below the State P.A. 202 recommended ratio of 60%. The amortization period of 21 years exceeds the average expected future lifetime of the current retired members of 20 year. GRS recommends that the Board consider lowering the amortization period for at least the portion of the unfunded liability attributable to retiree liability. The lower the amortization period, the higher the annual funding requirement will be. GRS noted the assets in the Plan are not sufficient to cover current retiree liabilities, which are 79.1% funded. The ratio of assets (Market Value) to retiree benefit payroll is approximately ten. This means that approximately ten years of retiree benefit payments can be paid from current assets; the ability to make such payments beyond that period is heavily dependent upon future contributions and future investment return. Investment income is phased-in over four (4) years, which results in more stable contributions, by smoothing out the peaks and valleys of market returns. If not for smoothing, the funded ratio would be 52.4%, rather than 55.0%. Motion by Trustee Roberts and supported by Trustee Bissinger to receive and file the June 30, 2023 GRS Retirement System Actuarial Valuation report. Yeas: Bissinger, Geralds, Kunath, Roberts, Strongarone Nays: None Motion Carried. 2 10/17/2023 20-24 Morgan Stanley\Graystone Consulting Investment Report Morgan Stanley Brian Brice discussed the Plan’s asset allocation, percentage of portfolio and differences to policy target. Investments in U.S. equities S&P 500 are down 3.3% quarter to date and up 13.1% up year to date, strongly supported by strong returns from the magnificent 7 (Apple, Microsoft, Amazon, NVIDIA, Google, Tesla, and Meta Platforms), which aer 65%-70% of S&P returns. NASDAQ investments are up 27.1% year to date. Emerging markets are up year to date 2.1% and China is down 7.2%. Cash earnings are around 5.3%. The retirement system portfolio is diversified so as to balance investments. The federal reserve target of 2% inflation has not yet been met. The risk of economic recession has increased modestly for 2023. The federal reserve is expected to discuss possible rate increases at the November meeting. Hedge fund investment with Brevin Howard began September 27, 2023, funded from cash in the amount of $1,250,000. The policy targets 3%, about $1.3 million, to invest in hedge funds. Private Investments have not yet been funded. September 30, 2023 assets held at Morgan Stanley were $46,866,791.13, returns were down net of fees 2.18% quarter to date, up net of fees 4.92% calendar year to date, up 12.4% the last 12 months, and up 4.34% the last 5 years. The total assets as of October 6, 2023 were $47,025,113 and were $48,982,140 at September 11, 2023. Motion by Trustee Roberts and supported by Trustee Strongarone to receive and file the investment report. Yeas: Bissinger, Geralds, Kunath, Roberts, Strongarone Nays: None Motion Carried. 21-24 Discuss Proposed Meeting Dates 2024 The third Tuesday of the month from February through November 2024 were discussed to schedule Regular meetings of the Police and Fire Retirement System Board. Motion by Trustee Bissinger and supported by Trustee Strongarone to adopt proposed meeting dates 2024. Yeas: Bissinger, Geralds, Kunath, Roberts, Strongarone Nays: None Motion Carried. 22-24 Approval of Invoice Motion by Trustee Roberts and supported by Trustee Strongarone to approve payment of an invoice from VanOverbeke Michaud & Timmony, P.C. in the amount of $5,870.50, for the period of 01/01/2023 thru 06/30/2023. Yeas: Bissinger, Geralds, Kunath, Roberts, Strongarone Nays: None Motion Carried. New Business. No items were discussed. 23-24 Adjournment Motion by Trustee Bissinger and supported by Trustee Strongarone to adjourn the meeting. Yeas: Bissinger, Geralds, Kunath, Roberts, Strongarone Nays: None Motion Carried. Meeting was adjourned at 10:07 a.m. Respectfully submitted, Linda A. Kunath, Secretary 3 10/17/2023