General Employees Retirement Board

OFFICIAL MINUTES OF REGULAR MEETING OF THE STERLING HEIGHTS GENERAL EMPLOYEE’S RETIREMENT SYSTEM Thursday, February 20, 2014 ___________________________________________________________________ __ _ __ _ Location: Room #201 40555 Utica Road, Sterling Heights, MI 48313 (586) 446-2331 Chairperson Weiler called the meeting to order at 1:32 p.m. BOARD MEMBERS PRESENT: Richard Weiler, Chairperson Brian Baker, Secretary Jennifer Varney, Treasurer Paul Henig, Trustee Todd Marsh, Trustee BOARD MEMBERS ABSENT: None ALSO PRESENT: Walt Hessell, Pension Administrator; Mark Buis, FSA, EA, MAAA and Francois Pieterse, ASA, MAAA, Gabriel Roeder Smith & Company APPROVAL OF AGENDA: Motion by Baker, supported by Varney, to approve 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 December 19, 2013. Ayes: All. Motion carried unanimously. COMMUNICATION FROM CITIZENS: None PRESENTATION OF 2013 ACTUARIAL REPORT BY GABRIEL ROEDER SMITH & CO Buis and Pieterse presented the December 31, 2013 (44th Annual) actuarial valuation for the retirement system to the Board and reviewed the funding status of the closed plan. The funding ratio of the plan is 84.2% that compared favorably to the national average of approximately 75%. Buis commented that based upon actual market asset values, the plan was nearly 90% funded. The actuarial experience gain for the year totaled $117,545 primarily due to the first year smoothing of the 2013 market gains. Further reductions to benefits from contract concessions were also noted as a contributing factor. During 2013, the actuarial recognized rate of return on a market value basis was 17.14% thereby creating a positive smoothing for the next four years. Buis stated that future market earnings volatility should be mitigated based upon the existing five- year phase-in and projected layers. The increased rate of retirements did increase the overall liability for the year. Pieterse reported that the City required contribution for fiscal 2014/2015 would be $2,610,074 after netting a projected $659,265 in employee member contributions. He noted that all bargaining units were now making employee contributions at 8% of gross pay. The unfunded actuarial liability was amortized over the remaining 16- year period and amounted to $2,217,811 for the current year. Looking forward, it was anticipated that future City required contribution amounts would approximate $2.6 million per year given market returns achieve the 8% assumed rate of return. Hessell asked Buis to comment as to the reasonableness of the 8% assumed rate of return especially given that the fund has returned over 9% since inception. Hessell stated that the update to the formal annual market study was underway and that the new report would incorporate the newest capital market outlook data from Merrill Lynch. Hessell believed the current 8% assumption to be appropriate unless proven otherwise by the pending study. Buis said that if necessary, the assumed rate of return could be revised in small increments such as 10 basis points and that the rate could be revised for the next actuarial valuation without the requirement of an experience study. The Board thanked Mr. Buis and Mr. Pieterse for their report and efforts on behalf of the system. Motion by Baker, supported by Varney, that the Board hereby certifies to the employer – City, the employer contribution required for the fiscal year beginning July 1, 2014 (as reflected by the December 31, 2013 Actuarial Valuation) in the amount of $3,269,339, consisting of the $2,610,074 City contribution and the $659,265 general employee contribution, and further that the recommended transfer in the amount of $9,845,283 to the Reserve for Retired Benefit Payments from the Reserve for Employer Contributions be made, and further that a copy of this motion and the 44th Annual Actuarial report, dated December 31, 2013, be forwarded to the employer – City. Ayes: All. Motion carried unanimously. REPORT FROM LEGAL COUNSEL: Tom Michaud had contacted the Pension Administrator earlier in the week with regard to his excused absence and he requested that the PA 347 memo be tabled until the March regular meeting for consideration. Motion by Baker, supported by Varney, to table the Public Act 347 Compliance Checklist until the March 2014 regular meeting. Ayes: All. Motion carried unanimously. CONSENT AGENDA: Motion by Baker, supported by Varney, 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 February 1, 2014 from Comerica Bank showing 345 active retirees with a payout for January 2014 of $832,134.88 and a year-to-date payout of $1,669,831.31. B. Cash and Asset Statements as of January 31, 2014 from Comerica Bank and Merrill Lynch showing a total market value of $113,416,249.74 comprised as follows: Desired Actual Bank/Money Market Allocation Percentage Manager Value 0% 0.06% Comerica Bank $68,899.65 21.33% 16.13% PIMCO 18,295,416.84 10.67% 7.69% McDonnell 8,720,427.71 15% 14.69% Earnest Partners 16,659,916.57 8% 8.67% Herndon Capital 9,837,913.90 8% 9.21% MFS 10,441,738.32 5.33% 7.46% Victory 8,461,745.85 5.33% 7.87% Winslow 8,920,368.59 5.33% 7.81% Janus Capital 8,857,098.57 8.5% 7.45% Thornburg 8,453,561.05 8.5% 8.94% Allianz - NFJ 10,136,970.66 Cohen & Steers – 4% 4.02% 4,562,192.03 REIT C. Correspondence 1. November 29, 2013 Monitoring Report – Robbins Geller Rudman & Dowd LLP. 2. Herndon Capital’s Annual Disclosures for 2013 dated December 19, 2013. 3. Email correspondence and letter sent to Merrill Lynch dated December 19, 2013 regarding the transfer of funds for the payment of benefits. 4. Wire transfer confirmation received form Merrill Lynch dated December 24, 2013. 5. December 27, 2013 Monitoring and Settlement Reports – Robbins Geller Rudman & Dowd LLP. 6. Q3 2013 Merrill Lynch AIM reports in CD-ROM format. 7. Email correspondence and letter sent to Merrill Lynch dated January 15, 2014 regarding the transfer of funds for the payment of benefits. 8. Form ADV Part 2A Brochure – Thornburg dated January 22, 2014 received from Merrill Lynch. 9. Email correspondence dated January 23, 2014 regarding Janus Capital’s manager track record. 10. Wire transfer confirmation received form Merrill Lynch dated January 24, 2014 11. Email correspondence dated February 5, 2014 received from Comerica Bank regarding new lump sum distribution request form. 12. “Pension & Investments” magazines dated December 23, 2013, January 20 & February 3, 2014. 13. “Institutional Investor’s Real Estate Letter” magazine dated January 2014. 14. “Institutional Investor” magazine dated February 2014. D. Approve Invoices for Payment 1. Payable from System Assets for the quarterly service period ending March 31, 2014: Quarterly management fees from Merrill Lynch Consults - MFS in the amount of $20,110.99; from Merrill Lynch Consults SPA – McDonnell in the amount of $1,679.82; from Merrill Lynch Consults – Janus in the amount of $16,904.04; from Merrill Lynch Consults – Winslow in the amount of $15,007.60; from Merrill Lynch Consults – Victory in the amount of $14,331.16; from Merrill Lynch Consults – Herndon in the amount of $17,085.14; from Merrill Lynch Consults – NFJ in the amount of $18,897.04; from Merrill Lynch Consults – Thornburg in the amount of $14,604.68; from Merrill Lynch Consults – PIMCO in the amount of $20,618.03 and from Merrill Lynch Consults – Earnest in the amount of $31,885.12. 2. Payable from City Assets for the service period ending December 31, 2013: Quarterly investment consultant fees from Merrill Lynch Consulting Services in the amount of $6,485.33; quarterly custodian banking fees from Comerica Bank in the amount of $4,658.80 and annual actuarial fees from Gabriel Roeder Smith & Co. in the amount of $5,400.00. REGULAR AGENDA: II. NEW BUSINESS: A. Application for Service Retirement for Debra Taylor, Administrative Secretary, Police Department Motion by Baker, supported by Varney, to receive and file the application for service retirement for Debra Taylor, Administrative Secretary, Police Department. Ayes: All. Motion carried unanimously. B. Application for Deferred Vested Retirement for William Hodson (subject to EDRO), DPW Field Unit, Department of Public Works Motion by Henig, supported by Baker, to receive and file the application for deferred vested retirement for William Hodson (subject to EDRO), DPW Field Unit, Department of Public Works. Ayes: All. Motion carried unanimously. C. Application for EDRO Alternate Payee Benefit, Lynn Bowman (f/k/a Lynn Hodson) Motion by Henig, supported by Marsh, to receive and file the application for EDRO alternate payee benefit, Lynn Bowman (f/k/a Lynn Hodson). Ayes: All. Motion carried unanimously. D. Pension Administration Comments – Hessell commented that one suspended pension benefit due to non-compliance with the annual verification remained open as of the meeting date. E. Trustee Comments – Marsh inquired as to the status of the Spring MAPERS Conference. Hessell replied that the email invitation had just been receipted and that the matter would be brought before the Board at the March 2014 regular meeting. ADJOURN: Motion by Varney, supported by Weiler, to adjourn the meeting at 2:09 p.m. Ayes: All. Motion carried unanimously. Respectfully Submitted, ___________________________________ Brian Baker, Secretary