Police & Fire Retirement Board

REGULAR MEETING MINUTES OF THE STERLING HEIGHTS POLICE AND FIRE RETIREMENT SYSTEM, ACT 345 APRIL 18, 2013 FIRE DEPARTMENT CONFERENCE ROOM 41625 RYAN ROAD STERLING HEIGHTS, MI 48313 1. The regular meeting of the Police and Fire Retirement System was called to order by James Nash at 4:03 p.m. 2. Board Members present: Nash, Wellhausen, Lamerato, Varney. Absent: Solak (excused). Also present: Denise Jones representing Rodwan Consulting Company; Tom Michaud, Legal Counsel; and Nancy Duyck, Pension Technician. 3. APPROVAL OF CONSENT AND REGULAR AGENDAS Motion by Lamerato, supported by Varney, to approve the consent agenda as presented. Ayes: Lamerato, Varney, Nash, Wellhausen. Absent: Solak. The motion carried. The following item was added to the regular agenda: 10 a 7 Alan Byrd – partial DROP distribution - discussion Motion by Wellhausen, supported by Lamerato, to approve the regular agenda as amended. Ayes: Wellhausen, Lamerato, Nash, Varney. Absent: Solak. The motion carried. 4. APPROVAL OF MINUTES No corrections were made to the draft minutes of the regular meeting of March 21, 2013.  Motion by Varney, supported by Lamerato, to approve the minutes as presented. Ayes: Varney, Lamerato, Wellhausen. Abstain: Nash. Absent: Solak. The motion carried; the minutes of the regular meeting of March 21, 2013 are hereby approved. 5. CITIZEN PARTICIPATION There was no Citizen participation. 6. REPORT FROM LEGAL COUNSEL No formal legal report was presented. Mr. Michaud requested that the Board go into closed session to discuss litigation. Motion by Nash, supported by Varney, to go into closed session to discuss litigation. Ayes: Nash, Varney, Wellhausen, Lamerato. Absent: Solak. The motion carried. Motion by Wellhausen, supported by Varney, to ext closed session. Ayes: Wellhausen, Varney, Nash, Lamerato. Absent: Solak. The motion carried. The following motion was considered: Motion by Varney, supported by Wellhausen, to authorize execution of the letter re: Helix litigation, as recommended by Board Legal Counsel.  Ayes: Varney, Wellhausen, Nash, Lamerato. Absent: Solak. The motion carried. Mr. Michaud also commented on items of old business as they were considered. PRESENTATION ANNUAL ACTUARIAL VALUATION REPORT BY RODWAN CONSULTING COMPANY Denise Jones from Rowan Consulting Company was in attendance to present the revised 44th annual actuarial report dated December 31, 2012. The report was discussed at length. The Board reviewed the comments by the actuary. After discussion, the following resolution was considered: L 13-4-18-1 RE: APPROVAL OF 44TH ANNUAL ACTUARIAL VALUATION WHEREAS, the Board is in receipt of the 44th Annual Actuarial Valuation, dated December 31, 2012, which has been submitted by the actuary to the Board of Trustees for consideration and approval, and WHEREAS, representatives of the Board’s actuary have appeared before the Board at its April 18, 2013 meeting and presented and reviewed the valuation report with the Board, and WHEREAS, the Board of Trustees has the legal and fiduciary obligation to assure that employer contributions are in accordance with Article 9, Section 24 of the State of Michigan Constitution, and WHEREAS, Michigan Public Act 345 of 1937, as amended, requires the Board of Trustees to certify to the governing body the amount to be contributed by the employer, and WHEREAS, the Board has the duty to (1) to approve or disapprove the Actuarial Valuation dated December 31, 2012, and (2) to certify to the employer-City the amount of employer contribution required for the fiscal year beginning  July 1, 2013 (as reflected by the December 31, 2012 Actuarial Valuation), and WHEREAS, the Board notes that the Sterling Heights Police and Fire Retirement System is 66.0% funded as of the December 31, 2012 valuation, and THEREFORE BE IT RESOLVED, that the Board hereby approves the 44th Annual Actuarial Valuation, dated December 31, 2012, and further RESOLVED, the Board hereby certifies to the employer-City the employer contribution required for the fiscal year beginning July 1, 2013 (as reflected by the December 31, 2012 Actuarial Valuation) in the amount of $8,095,472.00, consisting of the City contribution and the 8% contained in the Police Officers Association contract, and the 8% contained in the Fire Fighters Association contract, and further RESOLVED, that the recommended transfer in the amount of $43,281,383.00 to the Reserve for Retired Benefit Payments from the Reserve for Employer Contributions be made, and further RESOLVED, that a copy of this resolution and the 44th Annual Actuarial Report, dated December 31, 2012, be forwarded to the employer-City. Motion by Wellhausen, supported by Lamerato, to approve the resolution as presented. Ayes: Wellhausen, Lamerato, Nash, Varney. Absent: Solak. The motion carried; the resolution is hereby adopted. CONSENT AGENDA 7. CORRESPONDENCE a. Correspondence from Intercontinental dated March 26, 2013 re: distribution from U.S. Real Estate Investment Fund. b. Other correspondence received from: 1. ING Investment Management 2. International Foundation of Employee Benefit Plans 3. Merrill Lynch – market value updates  4. Robbins Geller Rudman & Dowd LLP c. Magazines received: 1. Pensions & Investments for April 1 and 15, 2013. 2. Institutional Investor for April 2013 3. Plan Sponsor for April 2013 CONSENT AGENDA 8. BILLS AND EXPENDITURES b. Disbursements to retirees/members other than monthly benefit payments There were no disbursements to retirees/members other than monthly benefit payments this month. c. Checking Account Summary Beginning Balance $4,117.27 3/01/13 Additions (1) 1. 3/13 $5,000.00 Subtractions (6) $2,823.07 Check 1. 3/01 20.00 ND – postage reimbursement 1898 Check 2. 3/21 35.07 City of S.H. – printer charges 1899 Check 3. 3/29 39.27 AT & T phone bill – 3/16/13 1900 Check Contract Payment Nancy 4. 3/01 909.58 5240 Duyck Check Contract Payment Nancy 5. 3/15 909.57 5242 Duyck Check Contract Payment Nancy 6. 3/29 909.58 5243 Duyck Electronic withdrawals (4) $1,320.69 1. 3/04 461.54 IRA contribution  2. 3/06 377.40 IRS Fed. tax w/h 3. 3/20 377.41 IRS Fed. tax w/h 4. 3/20 104.34 Michigan St. tax w/h Ending Balance $4,973.51 3/31/13 d. Transmittal of Checks There were no checks transmitted this month. 9. FUNDS MANAGEMENT a. The current value of funds as of March 31, 2013 is detailed below: Clearing account $ 1,250,931.90 Intercontinental $ 9,089,716.60 McDonnell $ 16,050,012.31 Pimco $ 16,403,954.94 Wamco $ 16,501,027.27 Winslow $ 19,435,010.08 Janus $ 19,754,657.36 Eagle $ 20,146,420.61 Herndon $ 20,239,794.61 Earnest Partners $ 11,2471,72.83 NFJ/Allianz $ 16,122,860.42 AIM/Invesco $ 14,908,049.69 Checking account $ 4,973.51 TOTAL FUNDS $ 181,154,582.13 b. The Board received a copy of the Summary of Employer Contributions to the Police and Fire Retirement System for the 2012 tax year as of 4/11/13. The System has received $8,547,901.34 of the 2012/13 budget of $8,815,031.00, leaving a $267,129.66 balance. c. Benefit Register Listing as of April 1, 2013 from Comerica Bank showing 294 retirees/beneficiaries with a payout for April of $1,157,232.07 and a year-to-date of $4,844,941.70.  d. The current Merrill Lynch Bond index for March 2013 is 1.66%. 10. BENEFITS & PLAN ADMINISTRATION a. Old Business 1. Abel/Noser Reports for February 2013 Abel/Noser has supplied the February 2013 report. REGULAR AGENDA 8. BILLS AND EXPENDITURES a. Disbursements other than retiree benefit payments (bills) 1. Disbursement to Rodwan Consulting Company in the amount of $2,700.00 for actuarial and consulting services rendered for the quarter ended 3/31/13. 2. Disbursement to the City of Sterling Heights in the amount of $4,324.31 for accounting services rendered for the quarter ended 3/31/13 and $272.34 for EDRO preliminary calculation for Gary Choate for a total amount of $4,596.65. 3. Disbursement to Comerica Bank in the total amount of $2,998.43 for services rendered to the Clearing, Intercontinental, and McDonnell accounts for the quarter ended 3/31/13. 4. Disbursement to Merrill Lynch in the amount of $31,594.12 for the quarterly Herndon account UMA fee for the quarter ended 6/30/13. 5. Disbursement to Merrill Lynch in the amount of $29,903.27 for the quarterly Winslow account UMA fee for the quarter ended 6/30/13. 6. Disbursement to Merrill Lynch in the amount of $17,947.97 for the quarterly Earnest Partners account UMA fee for the quarter ended 6/30/13.  7. Disbursement to Merrill Lynch in the amount of $27,153.16 for the quarterly NFJ/Allianz account UMA fee for the quarter ended 6/30/13. 8. Disbursement to Merrill Lynch in the amount of $27,431.07 for the quarterly Pimco account UMA fee for the quarter ended 6/30/13. 9. Disbursement to Merrill Lynch in the amount of $27,560.87 for the quarterly WAMCO account UMA fee for the quarter ended 6/30/13. 10. Disbursement to Merrill Lynch in the amount of $12557.26 for quarterly SPA fee for the Eagle account for the quarter ended 6/30/13. 11. Disbursement to Merrill Lynch in the amount of $27,876.56 for quarterly Consults fee for the AIM/Invesco account for the quarter ended 6/30/13. 12. Disbursement to Merrill Lynch in the amount of $36,939.23 for quarterly Consults fee for the Janus account for the quarter ended 6/30/13. Motion by Wellhausen, supported by Lamerato, to approve the disbursements as presented. Ayes: Wellhausen, Lamerato, Nash, Varney. Absent: Solak. The motion carried. REGULAR AGENDA 10. BENEFITS & PLAN ADMINISTRATION a. Old Business 2. Service Provider Disclosure Policy resolution and forms – discussion Legal Counsel has supplied a draft resolution and forms for the Board’s consideration regarding the Act 314 Amendments. After discussion the following resolution was considered:  RESOLUTION 73 L 13-4-18-2 Adopted: April 18, 2013 RE: SERVICE PROVIDER DISCLOSURES WHEREAS, the Board of Trustees (“Board”) is vested with the authority and fiduciary responsibility for the administration, management and operation of the Retirement System, and WHEREAS, the Board recognizes that it is subject to the provisions of the Public Employee Retirement System Investment Act, (Michigan Public Act 314 of 1965, as amended), wherein the Board is required to act as a prudent investor in all transactions related to Retirement System funds and assets by discharging its duties solely in the interests of the participants and beneficiaries and shall act with the same care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a similar capacity and familiar with those matters would use in the conduct of a similar enterprise with similar aims; and with due regard for the management, reputation, and stability of the issuer and the character of the particular investments being considered, and WHEREAS, in light of its fiduciary responsibility, the Board recognizes that it is in the best interests of the Retirement System and its participants and beneficiaries to retain the services of qualified professional service providers, including, but not limited to: investment consultants, investment managers, investment banks/brokers, custodians, actuaries, auditors, attorneys, administrators, and physicians to assist in and oversee the investments and administration of the Retirement System, and WHEREAS, the Board is aware of the various disclosure requirements and “pay-to-play” restrictions imposed on its current and prospective service providers under the provisions of Act 314 and applicable federal law, and WHEREAS, the Board is required to withhold payment from service providers who violate the “pay-to-play” provisions of Act 314 and applicable federal law, and WHEREAS, several of the Retirement System’s professional service providers qualify as “service providers” and/or “investment service providers” as that term is defined under Act 314, and WHEREAS, the term “service provider” is defined in Act 314 as “a person retained to provide services to a system and includes investment advisers, consultants, custodians, accountants, auditors, attorneys, actuaries, administrators, and physicians. Service provider includes an investment service provider as defined in Section 13(7). Service provider does not include a regulated investment adviser”, and WHEREAS, the term “investment service provider” is defined under Act 314 as “any individual, third-party agent or consultant, or other entity that received direct or indirect compensation for consulting, investment management, brokerage, or custody services related to the system’s assets”, and WHEREAS, the Board is desirous of establishing a formal disclosure policy applicable to appropriate service providers in order to monitor said service providers’ compliance with Act 314 and other applicable laws, therefore be it RESOLVED, that every year in the month of May, the Board shall require each of its current “investment service providers” to disclose in writing all fees or other compensation associated with its relationship with the Retirement System for the previous calendar year, as required under Section 13(7) of Act 314 [MCL 38.1133(7)], by submission of the attached Fee Disclosure Form, and further RESOLVED, that prior to the transfer of any Retirement System assets to a prospective “investment service provider”, the prospective “investment service provider” shall be required to disclose all fees or other compensation to be associated with its relationship to the Retirement System through completion and submission of the Compensation Disclosure Form to the Board, and further RESOLVED, that every year in the month of May, the Board shall require all of its service providers to acknowledge that they are in compliance with Section 13e of Act 314 [MCL 38.1133e] and/or Rule 206(4)-5 under the Investment  Advisers Act of 1940 in the case of a regulated investment adviser, and further RESOLVED, that that any service provider’s failure or refusal to complete and submit either of the Retirement System’s disclosure forms shall be deemed a violation of the requirements of Act 314 and this Policy, and shall result in appropriate action by the Board, including the possible suspension of payment for services rendered and/or termination of the service provider’s relationship with the Retirement System, and further RESOLVED, that all services providers shall have an ongoing requirement to monitor all political contributions and, upon becoming aware of a violation, immediately disclose to the Board any and all political contributions that violate the restrictions of Section 13e of Act 314 and/or Rule 206(4)-5 under the Investment Advisers Act of 1940 in the case of a regulated investment adviser, including the date of the contribution, the name of the contributor, the name of the recipient, and the amount of the contribution, and further RESOLVED, that copies of this Policy shall be provided to all Retirement System service providers who shall be required to act in accordance with said Policy. Motion by Nash, supported by Wellhausen, to adopt Policy Resolution #73 as presented. yes: Nash, Wellhausen, Lamerato, Varney. Absent: Solak. The motion carried, the resolution is hereby adopted. REGULAR AGENDA 10. BENEFITS & PLAN ADMINISTRATION a. Old Business 3. Public Act 347 – Model Summary Annual Report - discussion  Legal Counsel supplied a new model Summary Annual Report format for the Board’s consideration. He stated that both the actuary and investment consultant were aware of the new format and would produce the appropriate appendixes to be included in the Summary Annual Report required under Public Act 347, which is due in August 2013. Motion by Wellhausen, supported by Varney, to adopt the new Summary Annual Report format as presented. Ayes: Wellhausen, Varney, Nash, Lamerato. Absent: Solak. The motion carried. 4. Frank Mowinski – partial DROP distribution – discussion Retired Captain Frank Mowinski of the Police Department terminated his DROP retirement as of January 2, 2009. He requested a partial DROP distribution from his DROP account. Motion by Nash, supported by Wellhausen, to approve the partial DROP distribution as presented. Ayes: Nash, Wellhausen, Lamerato, Varney. Absent: Solak. The motion carried. 5. May regular/quarterly meeting – discussion The Board discussed which managers, if any, should be brought in for the May regular/quarterly meeting on May 16, 2013 and the start time. Merrill Lynch will be attending. At this time, no additional managers will be requested to attend the meeting and the date and start time will remain the same.  No formal motion was made. 6. Account transfer for May 2013 benefit payments – discussion As of April 16, 2013, the Clearing Account had a balance of $141,217.67. An additional $1,104,000.00 is needed for the May 1, 2013 pension benefit payments and bills from the Clearing Account. Merrill Lynch has forwarded an e-mail that the additional amount needed should be taken from the Eagle ($361,675.46), Herndon ($361,675.46), Earnest ($361,675.46), and NFJ/Allianz ($18,973.62) accounts, based on the asset allocation targets. Motion by Lamerato, supported by Wellhausen, to approve the transfer of the appropriate amount of funds from the Eagle, Herdon, Earnest, and NFJ/Allianz accounts, based on the asset allocation targets, to provide for pension benefit payments and other disbursements on May 1, 2013. Ayes: Lamerato, Wellhausen, Nash, Varney. Absent: Solak. The motion carried. 7. Alan Byrd – partial DROP distribution – discussion Retired Lt. Alan Byrd of the Police Department terminated his DROP retirement as of June 18, 2008. He requested a partial DROP distribution from his DROP account. Motion by Nash, supported by Wellhausen, to approve the partial DROP distribution as presented. Ayes: Nash, Wellhausen, Lamerato, Varney. Absent: Solak. The motion carried. 11. Trustee Comments  Mr. Lamerato asked if the Board had fiduciary liability insurance. Since the Board does not have that type of insurance presently, the Board will be discussing it at the May regular/quarterly meeting. Mr. Nash requested approval for attendance at the Spring MAPERS conference. Motion by Wellhausen, supported by Lamerato, to also register Mr. Nash for the Spring MAPERS conference. Ayes: Wellhausen, Lamerato, Varney. Abstain: Nash. Absent: Solak. The motion carried. 12. ADJOURNMENT Motion by Lamerato, supported by Wellhausen, to adjourn at 5:19 p.m. Ayes: Lamerato, Wellhausen, Nash, Varney. Absent: Solak. The motion carried; the meeting is hereby adjourned. Mark Wellhausen Secretary