General Employees Retirement Board

OFFICIAL MINUTES OF REGULAR MEETING OF THE STERLING HEIGHTS GENERAL EMPLOYEE’S RETIREMENT SYSTEM Thursday, August 17, 2017 ___________________________________________________________________ __ _ ___ Location: Room #201 40555 Utica Road, Sterling Heights, MI 48313 (586) 446-2331 Chairperson Weiler called the meeting to order at 1:34 p.m. BOARD MEMBERS PRESENT: Richard Weiler, Chairperson Jennifer Varney, Secretary Mary Jaganjac, Treasurer Todd Marsh, Trustee Paul Henig, Trustee BOARD MEMBERS ABSENT: None. ALSO PRESENT: Walt Hessell, Pension Administrator; Thomas Michaud, Legal Counsel, VanOverbeke, Michaud & Timmony, P.C.; Stephanie Crawford and Francois Pieterse, ASA; Gabriel Roeder Smith & Company APPROVAL OF AGENDA: Motion by Henig, supported by Varney, to approve the agenda as amended for the inclusion of invoices for actuarial services under Consent Agenda Item D. 3. Ayes: All. Motion carried unanimously. APPROVAL OF MINUTES: Motion by Marsh, supported by Henig, to approve the minutes of the regular meeting held July 20, 2017. Ayes: All. Motion carried unanimously. COMMUNICATION FROM CITIZENS: None PRESENTATION OF ANNUAL ACTUARIAL VALUATION REPORT JUNE 30, 2017 – GABRIEL, ROEDER, SMITH & CO. Francois Pieterse and Stephanie Crawford presented the June 30, 2017 (48th Annual) actuarial valuation for the retirement system to the Board and reviewed the funding status of the closed plan while noting that this was the second full year issued under the revised valuation date in order to coincide with the City’s fiscal year. The funding ratio of the plan is 79.1% that compared favorably to the national averages. Pieterse commented that based upon actual market asset values, the plan was 77.6% funded. The actuarial experience gain for the year totaled $34,510. Contributing factors included less than expected wage inflation and an increase in mortality over the year. Changes from revised actuarial assumptions and methods as recommended in the five year actuarial experience study resulted in an overall increase to the 1 UAAL of $6,023,738. The introduction of updated morality tables coupled with the lowering of the investment rate of return assumption from 7.75% to 7.50% were the primary reasons for the increase in liability. Pieterse commented that the current 7.50% rate was within the average of the reasonable assumptions range as determined by Actuarial Standards of Practice No. 27. Due to contract negotiations, one bargaining unit recovered their multiplier for new unit members which contributed to an increase in total accrued pension liability of $21,314. During the June 2017 fiscal year, the actuarial recognized rate of return on a market value basis was a positive 11.1% thereby creating a positive smoothing layer for the next four years. 7.05% was the recognized rate of return on a funding value basis due to previous years’ net negative year smoothing. Pieterse reported that the City required contribution for fiscal 2018/2019 would be $3,612,059 after netting a projected $517,031 in employee member contributions. The unfunded actuarial liability was amortized over the remaining 15- year period (reset) and amounted to $3,155,779 for the current year. The annual UAAL amortization amount will continue to increase each year due to the closed fund declining amortization period. The Board thanked Mr. Pieterse and Ms. Crawford for the report and efforts on behalf of the system. Motion by Marsh, supported by Weiler, that the Board hereby certifies to the employer – City, the employer contribution required for the fiscal year beginning July 1, 2018 (as reflected by the June 30, 2017 Actuarial Valuation) in the amount of $4,129,090, consisting of the $3,612,059 City contribution and the $517,031 general employee contribution, and further that the recommended transfer in the amount of $4,635,808 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 48th Annual Actuarial report, dated June 30, 2017, be forwarded to the employer – City. Ayes: All. Motion carried unanimously. PRESENTATION OF GASB STATEMENTS NO. 67 & 68 PLAN REPORTING AND ACCOUNTING SCHEDULES JUNE 30, 2017 – GABRIEL, ROEDER, SMITH & CO Pieterse and Crawford reviewed the GASB No. 67 & 68 report with the Board and described the differences between the numbers reported for the funding valuation report and those figures that were incorporated into the GASB report. The most common denominator was that the market value assets in the valuation report agreed to the plan fiduciary net position – ending as presented in the GASB report in the amount of $110,237,923. The net pension liability for the GERS system that would be recorded as a liability amounted to $31,735,319. Discussion ensued with the appropriateness of the required expense and liability to the proprietary water and sewer fund as required under GASB. It was determined that said allocations were consistent with the allocation methodology as documented in the budgetary allocation process for expensing the City employer annual contribution. Pieterse pointed out that the total pension liability in the amount of $141,973,242 was identical in both the valuation report and the GASB report due to the fact that both the assumptions and time frame for each report were the same. Because of the declining amortization of the UAAL in the funding valuation, the full 7.50% rate of return can be utilized in the GASB report and a lesser blended rate of return can be avoided thereby resulting in a lower reportable total pension liability overall. Consistent with the revised assumptions from the five year experience study, the corresponding updates were made to the GASB 67 & 68 report as well. The Board thanked Mr. Pieterse and Ms. Crawford for the GASB report. Motion by Henig supported by Marsh, to receive and file the GASB No. 67 and No. 68 Accounting and Financial Reporting for Pensions Report, dated June 30, 2017 and further that a copy of this motion and 2 the GASB No.67 and No. 68 Accounting and Financial Reporting for Pensions Report, be forwarded to the employer – City. Ayes: All. Motion carried unanimously REPORT FROM LEGAL COUNSEL No formal report. Michaud commented on items as they appeared on the agenda. CONSENT AGENDA: Motion by Marsh, supported by Henig, to receive and file consent items I A through I D-3. Ayes: All. Motion carried unanimously. I. RECEIVE AND FILE: A. Benefit register listing for August1, 2017 from Comerica Bank showing 362 active retirees with a payout for July 2017 of $909,568.48 and a year-to-date payout of $7,230,559.78. B. Cash and Asset Statements as of July 31, 2017 from Comerica Bank and Morgan Stanley showing a total market value of $111,565,670.36 comprised as follows: Desired Allocation Asset Class / Percentage 0% Cash 0.02% Comerica Bank $ 24,035.48 12% Fixed Income 11.81% Boyd Watterson 13,173,338.95 12% Fixed Income 12.53% WAMCO 13,976,368.11 17% Small Cap 16.47% Earnest Partners 18,378,630.85 5% Large Cap Value 4.55% Confluence 5,080,476.66 5% Large Cap Value 4.53% MFS 5,056,279.46 1% Large Cap Value 2.20% iShares Val Index 2,455,926.00 4% Large Cap Growth 4.04% AMI 4,507,675.16 3% Large Cap Growth 2.37% Winslow 2,639,071.00 4% Large Cap Growth 2.94% Janus Capital 3,283,277.45 1% Large Cap Growth 1.93% iShares Gr Index 2,156,645.70 7% Large Cap Core 7.00% London 7,805,246.59 5% Large Cap Core 4.32% iShares S&P Index 4,814,906.34 8% Large Cap Global 8.87% INVESCO 9,895,116.17 8% Large Cap Global 9.07% Cambiar 10,125,173.71 2% REITS 2.24% Principal REIT 2,497,496.32 6% MLP’s 5.11% Cushing Asset Mgt 5,696,006.41 C. Correspondence 1. Email and letter correspondence with Morgan Stanley dated July 21, 2017 regarding the transfer of funds for the payment of benefits. 3  2. Confirmation of transfer of funds received from Morgan Stanley dated July 26, 2017 for the payment of benefits. 3. Settlement Report – June 30, 2017 securities litigation. 4. Fee Information dated July 21, 2017 from Morgan Stanley. 5. Email correspondence with Morgan Stanley dated July 21, 2017 regarding reduction of manager fee rate from 0.15% to 0.12% for fixed income manager Boyd Watterson. 6. Email and letter correspondence with Morgan Stanley dated August 1, 2017 regarding asset allocation to Emerging Markets. 7. Class Action Notice – Rayonier Inc. Securities Litigation 8. “Pension & Investments” magazines dated July 24 & August 7, 2017. D. Approve Invoices for Payment 1. Payable from System Assets for the quarter ending June 30, 2017. Quarterly management fees from Morgan Stanley in the amount of $162,728.10 and from Boyd Watterson in the amount of $4,914.00. 2. Payable from City Assets for the quarter ending June 30, 2017 Quarterly custodial banking fees from Comerica Bank in the amount of $4,867.63. 3. Payable from City Assets for the services rendered August 4, 2017 Actuarial fees from Gabriel Roeder Smith & Co. for the June 30, 2017 annual actuarial valuation in the amount of $14,800.00 and for the GASB Statement Nos. 67 & 68 report in the amount of $8,500.00. REGULAR AGENDA: II. OLD BUSINESS: A. Request City Clerk to Conduct an Election of Trustees to a Three-Year Term Due to the expiration of Todd Marsh’s Term on October 15, 2017 (three year term) Motion by Henig, supported by Varney to adopt a resolution which provides for the conducting of an election by the City Clerk and the acceptance of candidates who are active members of GERS and who may live outside the City limits but within 20 miles of the City boundaries as required by State Law, due to the expiration of Todd Marsh’s term on October 15, 2017 (three year term). Ayes: All. Motion carried unanimously. III. NEW BUSINESS: A. Pension Administration Comments - None 4 B. Trustee Comments – None. ADJOURN: Motion by Varney, supported by Weiler, to adjourn the meeting at 2:16 p.m. Ayes: All. Motion carried unanimously. Respectfully Submitted, ___________________________________ Jennifer Varney, Secretary 5