Retirement Board

CITY OF MIDDLETOWN MINUTES OF THE RETIREMENT BOARD Regular Meeting Monday, May 16, 2022 at 9:00 am via WebEx Board Members Present: Carl Erlacher, Steve Gomes, Sandy Pasculano, Vinny Loffredo, Linda Salafia, John Milardo Board Members Absent: Mayor Florsheim, Joe Serra City Employees/Public/Others Present: Diana Doyle, Michael Lepore (GYL), Rob Lessard (Hooker & Holcombe), Steve Lemanski (Hooker & Holcombe); retirees and members of the public  Meeting Called to Order at approximately 9:10 am  No Public Comments on the Agenda  Approval of February 14, 2022 Regular Meeting Minutes  John motioned to approve the minutes and was seconded by Linda  All in favor  Vinny requested that Hooker & Holcombe provide copies of the 2021 (Pension) Valuation Report to the Common Council (provided on 5/20/22)  Increase of monthly transfer from $1,000,000 to $1,225,000 o Discussion regarding the increase; Diana explained that the number of retirees has increased and monthly distributions have grown; stating the transfer to the City comes from (Pension Fund) Fixed Assets investments, managed by SLC  Linda motioned to increase the monthly transfer in from $1,000,000 to $1,225,000 and was seconded by Vinny  All in favor  GYL Review o The Pension Fund value at the end of the 1st quarter was $506,692,079, down 8.18% o Michael stated most of underperformance came from International Markets, as well as direct & indirect exposure to Emerging Markets; Michael stated that international markets have been under pressure for a variety of reasons including: Russian invasion of Ukraine, resurgence of Covid in China (lockdown policies contributing to supply chain issues); exposure to Eastern European/Russian consumers o Emerging Markets underperformance contributed from exposure to China’s Covid policy & lockdowns weighing on consumer recovery; overweight (holdings) in Russia – which have been marked down to zero (cannot be traded); underlying holdings still have value, but  cannot currently be traded; portion of portfolio has shifted to Latin America toward commodity producing countries o Positives for emerging markets include: trading at low valuations and continues to be driver of growth around globe; volatility is part of emerging market investing, which was compounded during quarter because of Russia and China; GYL watching closely, but not recommending changes and expects recovery relatively quickly o Steve asked about growth at a reasonable price; Michael noted that Conning does include growth, core and value names; stated that the recent move in portfolio to Vanguard/JustInvest Large Cap Growth (implemented in March) was to value; portfolio is positioned at growth with a reasonable price o Cohen & Steers top performer in Equities for year; underperformance in quarter due to underweight to office (holdings) and overweight to data centers o SLC outperforming benchmark in High Yield assets; has consistently added value to the pension plan with Fixed Income o The OPEB Trust value at the end of the 1st quarter was $26,388,839, down 6.32% o Michael reviewed the performance of the Trust noting the move to higher quality tilt with domestic equities - Vanguard/JustInvest All Cap (implemented in March) o International space shares active and passive strategies; Fixed Income: Mainstay (high yield mutual fund) focused on additional return by purchasing lower credit quality bonds, outperformed benchmark o GYL not recommending significant changes; asset allocation designed around setting up portfolio to have short term assets v. short term liabilities; allowing long term assets to appreciate over time o Discussion of updated investment policy statements, from GYL; decision to get legal opinion from OGC to determine the Board’s authorization to approve proposed amendments of statements  Vinny motioned to table (all) documents to discuss at a Special Meeting, after review of and recommendation from OGC, and was seconded by John  All in favor  Hooker & Holcombe – approval of retirement plan Experience Study o Diana clarified that the Board authorized Hooker & Holcombe to perform an Experience Study at the February 2022 meeting; seeking Board approval to spend up to $9900 to perform the study (sample report included in agenda material)  Vinny motioned to approve expenditure up to $9900 for Plan Experience Study to be completed by Hooker & Holcombe and was seconded by John  All in favor o Steve Lemanski advised Board that last report was performed in 2015-2016; stated that GFOA best practices states special study be done every 5 yrs; Hooker & Holcombe will review plan actual experience including all assumptions (economic & non-economic); provide recommendations to make changes or not; presentation will be made to Board during summer 2022, with formal report; any changes approved by Board/City will be implemented in annual actuary report  Cost of Living Adjustment (COLA) o John stated he has been contacted by numerous retirees regarding the annual COLA increase; proposed an annual increase to 5% o Discussion stated current Ordinance reflects 0-3%, based on March 31st CPIU; discussion of how the COLA percentage is determined and how it is implemented in the Pension Ordinance  Linda motioned to send recommendation to Common Council to raise retiree COLA (max) from 3% to 5% and was seconded by John  Linda amended her motion to reflect a +2% COLA (increase to 5%) for this year (only) and was seconded by John o Discussion of Board’s authorization to suggest to Common Council that COLA be increased; suggestion to move request to OGC or Ordinance Review; question about fiscal impact; Steve Lemanski stated that there would be an impact on the fund and that State Statute requires a review & analysis to determine impact on fund, for benefit improvements; suggestion to get detailed financial analysis before moving to Common Council o Carl suggested that Board authorize Hooker & Holcombe to study the impact of COLA increase; Steve Lemanski stated an analysis of one time increase (ad hoc) and permanent adjustment to COLA would be performed at cost not to exceed $2500  Linda accepted the Friendly Amendment to authorize Hooker & Holcombe to perform analysis, not to exceed a cost of $2500, for a one time CPI adjustment and permanent CPI adjustment and was seconded by Vinny  All in favor  Reports: (informational) o Treasurer’s Report  Carl referenced ending balance on report, supporting the need to increase the monthly transfer in from $1,000,000 to $1,225,000 o Pension Management Fee Report  Applications for Membership Start Date Department/Union Adam Buglgajewski 02/07/2022 BOE/466 Fabricia Carvalho 03/28/2022 BOE/466 Bailey Cook 03/28/2022 Police Officer/Police David Cyr 03/28/2222 Police Officer/Police Briana Gagnon 02/14/2022 Library/Library Cody Harlow 03/28/2022 Police Officer/Police Thomas Hazel 04/04/2022 Zoning Enforcement/UPSEU Elizabeth Horbock 02/22/2022 BOE/466 Carmello Morello 04/11/2022 Public Works/466 Ryan Newton 03/28/2022 Police Officer/Police Jenny Royer 03/28/2022 BOE/466  Requests to Retire/Collect/Vest Yrs of Svc Age Department/Union Catherine Ahern 32 yrs 67 Library/Library Gary Canzoni 23 yrs 68 BOE/466 Elizabeth Cyranowicz 22 yrs 71 Public Works/466 Adrienne DeLucca 10 yrs 65 OGC Non-Barg Jeffrey Doherty 39.5 yrs 63 BOE/466 Patricia DiStefano 24 yrs 69 BOE/466 Joan Marchese-Haake 29 yrs Library/Library Sara Kennedy (pension refund) Registrar of Voters Janet Parmelee 21 yrs 63 BOE/466 Marcy Poppel 15 yrs BOE/Non-Barg *** note: missing ages of Retirees to be included on subsequent agenda  Deceased Pensioners Emanuela Barone (benefits to spouse) Robert Eastwood David Messer (benefits to spouse) Violet Woolard  Adjournment of Meeting o Vinny motioned to adjourn and was seconded by John o All in favor