General Employees Retirement Board

UNOFFICIAL MINUTES OF REGULAR MEETING OF THE STERLING HEIGHTS GENERAL EMPLOYEE’S RETIREMENT SYSTEM Thursday, December 20, 2012 __________________________________________________________________ Location: Room #201 40555 Utica Road, Sterling Heights, MI 48313 (586) 446-2331 Chairperson Weiler called the meeting to order at 1:39 p.m. BOARD MEMBERS PRESENT: Richard Weiler, Chairperson Brian Baker, Secretary (arrived 1:56 p.m. - excused) Jennifer Varney, Treasurer Paul Henig, Trustee Todd Marsh, Trustee BOARD MEMBERS ABSENT: None. ALSO PRESENT: Walt Hessell, Pension Administrator; Thomas Michaud, Legal Counsel, VanOverbeke, Michaud & Timmony, P.C. APPROVAL OF AGENDA: Motion by Marsh, supported by Henig, to approve the agenda as presented. Ayes: All. Motion carried unanimously. APPROVAL OF MINUTES: Motion by Henig, supported by Marsh, to approve the minutes of the regular meeting held November 15, 2012 and the special quarterly meeting held November 15, 2012. Ayes: All. Motion carried unanimously. COMMUNICATION FROM CITIZENS: None REPORT FROM LEGAL COUNSEL: Michaud presented his formal report on Public Act 347 of 2012 that was signed into law by Governor Snyder on December 5, 2012 with an effective date of April 1, 2013. The new legislation substantially amends Public Act 314 – the Public Employee Retirement System Act with regard to investment limitations, transparency rules, "pay-to-play" restrictions, board governance requirements, trustee education / travel, retirement system summary annual reports and procedures for the removal of board members. Michaud provided a compliance checklist for the board to act on so that compliance with PA 347 could be achieved by the April 1st date. A copy of the report is being sent to Investment Consultant Tim Brice of Merrill Lynch for follow up and review. Michaud also commented on issues as they appeared on the agenda. CONSENT AGENDA: Motion by Baker, supported by Marsh, to receive and file consent items I A through I D-2. Ayes: All. Motion carried unanimously. I. RECEIVE AND FILE: A. Benefit register listing for December 1, 2012 from Comerica Bank showing 369 active retirees with a payout for November 2012 of $772,814.95 and a year-to-date payout of $10,294,674.81. B. Cash and Asset Statements as of November 30, 2012 from Comerica Bank and Merrill Lynch showing a total market value of $106,239,055.01 comprised as follows: Desired Actual Bank/Money Market Allocation Percentage Manager Value 0% 0.75% Comerica Bank $795,549.35 16% 16.15% PIMCO 17,156,665.12 16% 15.40% McDonnell 16,367,826.09 15% 13.12% Earnest Partners 13,935,120.45 8% 7.38% Herndon Capital 7,838,423.82 8% 7.38% MFS 7,836,920.35 5.33% 6.08% Victory 6,458,496.08 5.33% 6.35% Winslow 6,745,803.58 5.33% 6.57% Janus Capital 6,984,157.46 8.5% 8.28% Thornburg 8,800,051.52 8.5% 8.66% Allianz - NFJ 9,201,022.53 Cohen & Steers – 4% 3.88% 4,119,018.66 REIT C. Correspondence 1. Portfolio Monitoring Report quarter ended September 30, 2012 2. Email correspondence received from the Brice Group dated November 14, 2012 regarding McDonnell – Natixis Assignment. 3. Email correspondence sent to Merrill Lynch dated November 15, 2012 regarding the authorization of payment of money manager fees. 4. Email correspondence and letter sent to Comerica Bank dated November 15, 2012 regarding authorization of payment of money manager fees.  5. Email correspondence and letter sent to Merrill Lynch and Comerica Bank dated November 15, 2012 regarding the transfer of funds for the payment of benefits. 6. Fax correspondence with McDonnell Investment dated November 15, 2012 regarding assignment to Natixis. 7. Wire transfer notification received from Merrill Lynch dated November 27, 2012 confirming the transfer of funds for the payment of benefits. 8. Class Action Settlements Claims Due January 2013. 9. "Employee Benefit News" magazines dated November and December 2012. 10. "Pension & Investments" magazines dated November 26 & December 10, 2012. D. Approve Invoices for Payment 1. Payable from City Assets for the 2013 Calendar Membership Year; MAPERS membership renewal invoice in the amount of $100.00 2. Payable from System Assets for the service period ending December 31, 2012 Quarterly SPA initial fee for McDonnell Investments in the amount of $2,485.99 REGULAR AGENDA: II. OLD BUSINESS:  A. Comerica Custody and Benefits Payments Fee Schedules Hessell updated the Board with the results of the custodian banking fee study. Michaud provided comparables that Hessell was able to review and evaluate in relation to the revised fee schedule from Comerica Bank. It was determined that the revised fee schedule fell within an acceptable cost range. Baker and Varney inquired about the possibility of a RFP and Hessell informed them that Comerica would be up for the five- year review process in May of 2013. Motion by Baker, supported by Varney to approve and execute the Comerica Custody and Benefits Payments Fee Schedules with an effective date of January 1, 2013. Ayes: All. Motion carried unanimously. B. Public Act 728 Compliance – Pension Plan Changes Due to new collective bargaining agreements and memorandums of understanding having been ratified during the year, a number of pension benefit changes were made that required analysis by the system’s actuary and acknowledgement by the system’s board in compliance with Public Act 728. The pension benefit changes where a formal actuarial report was required and prepared are summarized as follows: 70-point retirement qualifier for special ERIP GERS candidates – supplemental actuarial valuation prepared by GRS with a report date of January 20, 2012. 2.0% benefit multiplier for service accrued after July 1, 2012 for UAW Supervisors – supplemental actuarial valuation prepared by GRS with a report date of April 11, 2012. The pension benefit changes where a formal actuarial report was not required but confirmed by the system actuary in an email correspondence dated November 28, 2012 that the changes will not increase the overall cost to the system are as follows:  MAP Police Clerical - Members participating in the DB plan will†have their pension multiplier reduced from 2.3% to 2.15% for service earned on and after July 1, 2012. MAPE Technical\Office - Members participating in the DB plan will†have their pension multiplier reduced from 2.3% to 2.0% for service earned on and after July 1, 2012. DPW Field -††Members participating in the DB plan will†have their pension multiplier reduced from 2.3% to 2.15% for service earned on and after July 1, 2012. DPW Supervisors -††Members participating in the DB plan will†have their pension multiplier reduced from 2.3% to 2.15% for service earned on and after July 1, 2012. MAPE Executive - Members participating in the DB plan will†have their pension multiplier reduced from 2.3% to 2.0% for service earned on and after July 1, 2013. (note- 2013 is not a typo) Motion by Varney, supported by Henig, to receive and file the pension benefit changes pursuant to the supplemental actuarial valuations and email correspondence as prepared by the system actuary – Gabriel, Roeder, Smith & Company. Ayes: All. Motion carried unanimously. C. Closure of Securities Lending Program – Comerica Bank Motion by Baker, supported by Varney, to receive and file the operational activity summary on the security lending program – Comerica Bank with a duration from May 2001 through October 2012 reflecting revenues of $250,506.91 and defaults in the amount of $64,493.81 for a net profit of $186,013.10 with future recoveries to be determined under the pending class action suit. Ayes: All. Motion carried unanimously. III. NEW BUSINESS: A. Change in Retiree Status – Stella Phillips (Deceased)  Motion by Baker, supported by Weiler, to approve termination of straight life option benefits for retiree, Stella Phillips, due to her death on November 1, 2012. Ayes: All. Motion carried unanimously. B. Pension Administration Comments – Rescheduling of February 28th, 2013 Special Meeting Due to various calendar conflicts, various members of the Board requested a rescheduling of the special quarterly meeting of February 28th, 2013 preferably to the February 21st regular meeting for a consolidation of the two meetings. Hessell stated that he would need to corroborate the rescheduling with The Brice Group and then confirm the rearrangement with the Board. C. Trustee Comments - None ADJOURN: Motion by Varney, supported by Baker, to adjourn the meeting at 2:27 p.m. Ayes: All. Motion carried unanimously. Respectfully Submitted, Brian Baker, Secretary