Police & Fire Retirement Board

REGULAR MEETING MINUTES OF THE STERLING HEIGHTS POLICE AND FIRE RETIREMENT SYSTEM, ACT 345 FEBRUARY 20, 2014 FIRE DEPARTMENT CONFERENCE ROOM 41625 RYAN ROAD STERLING HEIGHTS, MI 48314 The Board welcomed Robert Maleszyk as a new member who is filling the unexpired term of James Nash. 1. The regular meeting of the Police and Fire Retirement System was called to order by President Solak at 2:03 p.m. 2. Board Members present: Solak, Wellhausen, Lamerato, Maleszyk. Absent: Varney and Tom Michaud (excused). Also present: Tim Brice, representing Merrill Lynch Private Client Group; and Nancy Duyck, Pension Technician. 3. APPROVAL OF CONSENT AND REGULAR AGENDAS Motion by Wellhausen, supported by Lamerato, to approve the consent agenda as presented. Ayes: Solak, Wellhausen, Lamerato, Maleszyk. Absent: Varney. The motion carried. Motion by Wellhausen, supported by Lamerato, to approve the regular agenda as presented. Ayes: Solak, Wellhausen, Lamerato, Maleszyk. Absent: Varney. The motion carried. 4. APPROVAL OF MINUTES No corrections were made to the draft minutes of the regular meeting of January 16, 2014.  Motion by Lamerato, supported by Solak, to approve the minutes as presented. Ayes: Solak, Wellhausen, Lamerato. Abstain: Maleszyk. Absent: Varney. The motion carried; the minutes of the regular meeting of January 16, 2014 are hereby approved as presented. 5. CITIZEN PARTICIPATION There was no Citizen participation. 6. REPORT FROM LEGAL COUNSEL No formal legal report was presented. Mr. Michaud was excused from this meeting. CONSENT AGENDA 7. CORRESPONDENCE a. Updated listing of Board Members b. Other correspondence received from: 1. Eagle Capital Management - Form ADV Part 2A 2. Merrill Lynch – market value updates 3. NCPERS - annual conference 4. P & I Conferences 5. Robbins Geller Rudman & Dowd LLP 6. UNC Conferences c. Magazines received: 1. Institutional Investor for February 2014 2. Plan Sponsor for February 2014 3. Pensions & Investments for January 20 and February 3 and 17, 2014. 8. BILLS AND EXPENDITURES c. Checking Account Summary Beginning Balance $3,909.39 1/01/14 Additions (1) 1. 1/14 $5,000.00  Subtractions (7) $3,136.93 Check 1. 1/02 39.88 AT & T phone bill – 12/16/13 1928 Check 2. 1/17 250.00 ND – postage reimbursement 1929 Check 3. 1/30 39.97 AT & T phone bill – 1/16/14 1930 Check Contract Payment Nancy 4. 1/03 910.14 5274 Duyck Check 5. 1/08 76.64 Contract fee – Gurin & Gurin 5275 Check Contract Payment Nancy 6. 1/17 910.15 5276 Duyck Check Contract Payment Nancy 7. 1/31 910.15 5277 Duyck Electronic withdrawals (4) $1,319.56 1. 1/06 461.54 IRA contribution 2. 1/08 376.85 IRS Fed. tax w/h 3. 1/21 104.34 Michigan St. tax w/h 4. 1/22 376.83 IRS Fed. tax w/h Ending Balance $ 4,452.90 1/31/14 d. Transmittal of Checks There were no checks transmitted this month. 9. FUNDS MANAGEMENT a. The current value of funds as of January 31, 2014 is detailed below: Clearing account $ 1,322,536.97 Intercontinental $ 9,306,841.78 Winslow $ 22,969,016.87 Janus $ 22,662,667.68  Eagle $ 22,157,280.05 Herndon $ 21,589,383.01 Earnest Partners $ 12,555,088.18 NFJ/Allianz $ 16,121,180.82 AIM/Invesco $ 16,362,291.51 Pimco $ 23,409,708.70 Wamco $ 24,399,495.30 McDonnell $ 1,825.00 Checking account $ 4,452.90 TOTAL FUNDS $ 192,861,768.77 b. The Board received a copy of the Summary of Employer Contributions to the Police and Fire Retirement System for the 2013 tax year as of 2/13/14. The System has received $7,192,467.43 of the 2013/14 budget of $8,095,472.00, leaving a $903,004.57 balance. c. Benefit Register Listing as of February 1, 2014 from Comerica Bank showing 300 retirees/beneficiaries with a payout for February of $1,192,137.73 and a year-to-date of $2,414,061.25. d. The current Merrill Lynch Bond index for January 2014 is 2.11%. 10. BENEFITS & PLAN ADMINISTRATION a. Old Business 1. Abel/Noser Reports for December 2013 Abel/Noser has supplied the December 2013 report. REGULAR AGENDA 8. BILLS AND EXPENDITURES a. Disbursements other than retiree benefit payments (bills) 1. Disbursement to Comerica Bank in the total amount of $2,784.24 for services rendered to the Clearing, McDonnell and Intercontinental accounts for the quarter ended 12/31/13.  2. Disbursement to Rodwan Consulting Company in the amount of $300.00 for actuarial services rendered for an actuarial calculation for the Patricia Fawaz EDRO benefit. 3. Disbursement to Merrill Lynch Private Client Group in the amount of $3,150.00 for consulting services for the period of 1/1/14 through 6/30/14. 4. Disbursement to Eagle Capital Management in the amount of $44,183.60 for investment management fees for the quarter ended 12/31/13. 5. Disbursement to Merrill Lynch in the amount of $14,148.08 for quarterly SPA fee for the Eagle account for the quarter ended 3/31/14. 6. Disbursement to Merrill Lynch in the amount of $31,758.13 for quarterly Consults fee for the AIM/Invesco account for the quarter ended 3/31/14. 7. Disbursement to Merrill Lynch in the amount of $43,251.69 for quarterly Consults fee for the Janus account for the quarter ended 3/31/14. Motion by Wellhausen, supported by Lamerato, to approve the bills as presented. Ayes: Solak, Wellhausen, Lamerato, Maleszyk. Absent: Varney. The motion carried. b. Disbursement to retirees/members other than monthly benefit payments 1. Christopher Kolinski - refund of contributions Fire Fighter Christopher Kolinski was hired on September 11, 2011 and was laid off on June 30, 2012. Mr. Kolinski has requested a refund of his contributions and interest. Walt Hessell has calculated the amount of the refund in the amount of $4,244.55. All required paperwork is on file in the Pension Office.  Motion by Wellhausen, supported by Solak, to approve the refund as presented. Ayes: Solak, Wellhausen, Lamerato, Maleszyk. Absent: Varney. The motion carried. REGULAR AGENDA 9. FUNDS MANAGEMENT e. Quarterly Performance Report 1. Merrill Lynch Tim Brice reviewed the summary report of manager performance. Enclosed in this report was the Board’s summary of investment policies and objectives, fourth quarter 2013 AIM Market Focus report. Also included was an executive summary of the Composite, Allianz, Invesco, Janus, Winslow, Earnest, Intercontinental, Herndon, Eagle, Pimco, and Wamco reports. The following manager specific comments were discussed: Pimco a. The total portfolio return in the fourth quarter was -0.6%, ranking in the 94th percentile of the BofAML Domestic Fixed Income Sample. It trailed the Custom Index and the BofAML Broad Market Bond index (-0.2%). b. Their total portfolio return was 2.4% since inception (6/30/11). This trailed the Custom (2.5%), and the BofAML Broad Market Bond index (2.8%). c. Cash on hand at fourth quarter ending was within guidelines. Western Asset Management a. The total portfolio return in the fourth quarter was 0.4%, ranking in the 40th percentile of the BofAML Domestic Fixed Income Sample. It exceeded the Custom Index and the BofAML Broad Market Bond index (-0.2%). b. Their total portfolio return was 3.7% since inception (6/30/11). This exceeded the Custom (2.5%), and the  BofAML Broad Market Bond index (2.8%). c. Cash on hand at fourth quarter ending was within guidelines. Herndon Investment Counsel a. The total portfolio return in the fourth quarter was 12.3%, ranking in the 5th percentile of the BofAML Domestic Large Cap Value Equity Sample. It exceeded the Custom Index (9.8%), and the Russell 1000 Value Index (10.0%). b. Their total portfolio return was 24.0% since inception (9/30/12). This trailed the Custom (26.0%), and the Russell 1000 Value Index (26.8%). c. Cash on hand at fourth quarter ending was within guidelines. Eagle Investment Counsel a. The total portfolio return in the fourth quarter was 10.4%, ranking in the 43rd percentile of the BofAML Domestic Large Cap Value Equity Sample. It exceeded the Custom Index (9.9%), and the Russell 1000 Value Index (10.0%). b. Their total portfolio return was 30.2% since inception (9/30/12). This exceeded the Custom (25.8%), and the Russell 1000 Value Index (26.8%). c. Cash on hand at fourth quarter ending was within guidelines. Winslow Investment Counsel a. The total portfolio return in the fourth quarter was 10.9%, ranking in the 51st percentile of the BofAML Domestic Large Cap Growth Equity Sample. It exceeded the Custom Index (10.2%), and the Russell 1000 Growth Index (10.4%). b. Their total portfolio return was 17.6% since inception (3/31/12). This trailed the Custom (17.9%), and the Russell 1000 Growth Index (18.3%). c. Cash on hand at fourth quarter ending was within guidelines. Janus Investment Counsel a. The total portfolio return in the fourth quarter was 11.3%, ranking in the 33rd percentile of the BofAML Domestic Large Cap Growth Equity Sample. It exceeded the Custom Index (10.1%), and the Russell 1000 Growth Index (10.4%). b. Their total portfolio return was 15.4% since inception (12/31/09). This trailed the Custom (15.7%), and the Russell 1000 Growth Index (16.5%). c. Cash on hand at fourth quarter ending was within guidelines.  Earnest Partners a. The total portfolio return in the fourth quarter was 9.3%, ranking in the 48th percentile of the BofAML Domestic Small Cap Equity Sample. It exceeded the Custom Index (8.3%), and the Russell 2500 Index (8.7%). b. Their total portfolio return was 9.5% since inception (9/30/06). This exceeded the Custom (8.7%), and the Russell 2500 Index (9.0%). c. Cash on hand at fourth quarter ending was within guidelines. AIM/INVESCO Capital Management a. The total portfolio return in the fourth quarter was 6.2%, ranking in the 54th percentile of the BofAML International Equity Sample. It exceeded the Custom Index (4.2%), and the MSCI AC World ex US Growth Index net (4.7%). b. Their total portfolio return was 8.9% since inception (12/31/10). This exceeded the Custom (6.0%), and the MSCI AC World ex US Growth Index net (4.9%). c. Cash on hand at fourth quarter ending was above guidelines. NFJ/Allianz Global Investors a. The total portfolio return in the fourth quarter was 4.4%, ranking in the 79th percentile of the BofAML International Equity Sample. It trailed the Custom Index (4.7%), and the MSCI All Country World ex US-net (4.8%). b. Their total portfolio return was 7.2% since inception (12/31/10). This exceeded the Custom (5.0%), and the MSCI All Country World ex US-net (5.1%). c. Cash on hand at fourth quarter ending was within guidelines. The following table details the Investment Performance Review for the fourth quarter ending December 31, 2013. Market value of the funds under management as of December 31, 2013 was $198,741,126.00. The total fund return for the fourth quarter was 6.4%, ranking in the 11th percentile, as summarized below: 9/13 12/12 12/10 12/08 12/03 12/91 to 12/13 to 12/13 to 12/13 to 12/13 to 12/13 to 12/13 Total fund* 6.4/11 18.2/26 9.3/53 11.5/60 6.0/89 7.5/n/a *Ranked against the BofAML Domestic Balanced Sample – Total Total Portfolio Returns - Equity Sample  Domestic# 9.8/44 30.1/69 13.0/75 15.7/78 7.8/71 8.6/n/a #Ranked against the BofAML Domestic Equity Sample Total Portfolio Returns - Fixed Income Sample F.I.# -0.5/93 -2.8/89 3.5/60 4.7/58 2.5/99 5.3/n/a #Ranked against the BofAML Domestic Fixed Income Sample 9/13 12/12 12/10 12/08 6/04 to 12/13 to 12/13 to 12/13 to 12/13 to 12/13 Real Estate 2.1 7.1 1.7 4.1 12.6 The following manager specific return information is detailed separately from the other long-term data: 9/13 12/12 6/11 Pimco to 12/13 to 12/13 to 12/13 Total Fund* -0.6/94 -3.1/88 2.4/77 *Ranked against the BofAML Domestic Fixed Income Sample - Total 9/13 12/12 6/11 Wamco to 12/13 to 12/13 to 12/13 Total Fund* 0.4/40 -1.2/55 3.7/34 *Ranked against the BofAML Domestic Fixed Income Sample – Total 9/13 12/12 9/12 Herndon to 12/13 to 12/13 to 12/13 Total Fund* 12.3/5 30.9/81 24.0/82 *Ranked against the BofAML Domestic Large Cap Value Equity Sample - Total 9/13 12/12 9/12 Eagle to 12/13 to 12/13 to 12/13 Total Fund* 10.4/43 36.3/33 30.2/32 *Ranked against the BofAML Domestic Large Cap Value Equity Sample - Total  9/13 12/12 3/12 Winslow to 12/13 to 12/13 to 12/13 Total Fund* 10.9/51 36.8/25 17.6/62 *Ranked against the BofAML Domestic Large Cap Growth Equity Sample - Total 9/13 12/12 12/10 12/09 Janus to 12/13 to 12/13 to 12/13 to 12/13 Total Fund* 11.3/33 31.4/77 15.6/53 15.4/61 *Ranked against the BofAML Domestic Large Cap Growth Equity Sample – Total 9/13 12/12 12/10 12/08 9/06 Earnest to 12/13 to 12/13 to 12/13 to 12/13 to 12/13 Total Fund* 9.3/48 32.1/89 15.9/64 23.0/42 9.5/55 *Ranked against the BofAML Domestic Small Cap Equity Sample – Total 9/13 12/12 12/10 Invesco to 12/13 to 12/13 to 12/13 Total Fund* 6.2/54 19.2/63 8.9/47 *Ranked against the BofAML International Equity Sample - Total 9/13 12/12 12/10 Allianz to 12/13 to 12/13 to 12/13 Total Fund* 4.4/79 12.4/80 7.2/71 *Ranked against the BofAML International Equity Sample – Total Mr. Brice suggested that the Board bring NFJ/Allianz in at the April meeting to discuss performance. 2. Strategic Allocation Modeling Study - discussion Mr. Brice reviewed the expanded mixes in the allocation modeling study with the Board. The Board will continue to monitor the current allocations in the various sectors. No action was taken. 10. BENEFITS & PLAN ADMINISTRATION  a. Old Business 2. Amanda Post – Option I pension benefit – discussion Active Fire Fighter Eric Post passed away on January 10, 2014. Amanda Post is the wife/beneficiary of Eric Post and is entitled to an Option I pension benefit. She has chosen the benefit without annuity withdrawal. A copy of Mr. Post’s death certificate has been received. All required paperwork is on file in the pension office. After discussion, the following resolution was considered: L 14-2-20-1 WHEREAS, the Board of Trustees is vested with the authority and fiduciary responsibility for the administration, management and operation of the Retirement System, and WHEREAS, the Board of Trustees has been advised that active Fire Fighter eric C. post passed away on January 10, 2014 from a non-service connected illness, and WHEREAS, upon his death on January 10, 2014, eric C. post was on long-term disability, and WHEREAS, Fire Fighter Eric C. Post has been credited with a total of 13 years, 6 months and 11 days of service credit, and WHEREAS, Amanda C. Post is the designated wife/beneficiary of ERIC C. POST per beneficiary designation form dated May 4, 2012, and WHEREAS, amanda C. post, the surviving spouse of FIRE FIGHTER ERIC C. POST, Is eligible to be paid an Option I pension benefit, according to Public Act 345 of 1937, as amended, Section 38.556, Sec. 6 (1)(i), and said benefit to continue for the surviving spouse’s life, and WHEREAS, Amanda C. post, has reviewed the data provided by the Board regarding the lump sum annuity withdrawal option available to her regarding her pension benefits and has not requested the withdrawal of the balance of the defined contribution plan, therefore be it RESOLVED, that Option I benefits be granted to amanda C. post, and further RESOLVED, that Amanda C. Post shall be paid an annual Option I pension benefit without annuity withdrawal of $32,925.00, or $2,743.75 monthly, to continue for the surviving spouse’s life in accordance with Act 345 and that Amanda C. Post be paid the appropriate monthly benefit amount effective January 9, 2014, and further RESOLVED, that the Board of Trustees wishes to express its condolences to the family and friends of Eric C. Post, and further RESOLVED, that a copy of this resolution be forwarded to Amanda C. PosT. Motion by Wellhausen, supported by Maleszyk, to adopt the resolution as presented and process the disbursement. Ayes: Solak, Wellhausen, Lamerato, Maleszyk. Absent: Varney. The motion carried, the resolution is hereby adopted. 3. Patricia Fawaz – EDRO benefit resolution - discussion Patricia Fawaz, Alternate Payee of Jimmy Fawaz, has supplied the necessary paperwork to start receiving her monthly benefit as stipulated in the EDRO as of February 1, 2014. All required paperwork is on file in the Pension Office. After discussion, the following resolution was considered: L 14-2-20-2 Re: PATRICIA FAWAZ EDRO BENEFIT RESOLUTION WHEREAS, the City of Sterling Heights Police and Fire Retirement System consists of a defined benefit plan which is a qualified plan under applicable provisions of the Internal Revenue Code, and WHEREAS, the Retirement System is generally subject to Public Act 46 of 1991 of the State of Michigan statutes (MCLA 38.1701, et seq.), and WHEREAS, the Board of Trustees previously received an Eligible Domestic Relations Order (EDRO), dated May 25, 2011, purporting to grant Patricia Fawaz with certain rights and claims regarding Retirement System benefits normally payable to JIMMY FAWAZ, and WHEREAS, the Board, at its regular meeting of June 16, 2011, approved the Eligible Domestic Relations Order, dated May 25, 2011, wherein PATRICIA FAWAZ, the former spouse of the member, was granted certain rights to the Defined Benefit Plan benefit of the aforesaid member, therefore be it RESOLVED, that the Board hereby acknowledges receipt of the Eligible Domestic Relations Order, dated May 25, 2011, and shall pay pension benefits consistent with said Court Order, and further RESOLVED, that in accordance with the EDRO, PATRICIA FAWAZ shall be paid a yearly regular retirement pay in the amount of $28,894.32 or monthly benefits of $2,407.86. That the Treasurer shall immediately calculate and pay PATRICIA FAWAZ the appropriate amount as of MARCH 1, 2014, and further RESOLVED, that pension benefits, consistent with the elections herein and in accordance with the provisions of the May 25, 2011 EDRO, be paid to the former spouse, PATRICIA FAWAZ. Motion by Solak, supported by Wellhausen, to adopt the resolution as presented and process the disbursement. Ayes: Solak, Wellhausen, Lamerato, Maleszyk. Absent: Varney. The motion carried. 4. Mark Ostin – partial DROP distribution – discussion Mark Ostin of the Police Department terminated his DROP retirement as of September 7, 2011. He requested a partial DROP distribution from his DROP account. Motion by Solak, supported by Wellhausen, to approve the partial DROP distribution as presented. Ayes: Solak, Wellhausen, Lamerato, Maleszyk. Absent: Varney. The motion carried. 5. 2013 STD/LTD report - discussion The Board received a listing of Police and Fire members who were off on short-term/long term disability during 2013 from the City Human Resources/Risk Management Department. Persons affected by periods of STD/LTD were sent correspondence detailing the preliminary findings according to the report and the amount of time that may be lost net of the sixty-day allowance permitted by Act 345. Total Total Total Adjusted Member Name Days Off Days Credited Lost Time Ret. Date Cook, Julie 69 60 9 3/14/96 Fett, Antoinette 37 37 0 N/A Kitchen, Michelle 45 45 0 N/A Kovalcik, Robert 40 40 0 N/A Sarvello, David 27 27 0 N/A Shippy, Randall 77 60 17 5/24/96 Saintonge, Tiimothy 169 60 109 1/27/04 Motion by Solak, supported by Wellhausen, to approve the 2013 short-term disability report with credits and adjustments as listed. Ayes: Solak, Wellhausen, Lamerato, Maleszyk. Absent: Varney. The motion carried. 6. Proposed 2014/15 budget – discussion The Secretary reviewed a mid-year spreadsheet for actual expenditures with percentages of budget spent. He also reviewed recommendations for the 2014/15 budget. During discussion, the following budget center amounts were considered: 2014/15 PROPOSED BUDGET ITEM BUDGET 2013/14 PROPOSED 2014/15 SUPPLIES 729.000 Postage 600 630 (5.00% change) 730.000 Publications 0 0 (No change) 751.000 Operating Supplies 250 150 (-40.00% change) 758.000 Computer Software 0 0 (No change) Total Supplies 850 780 (-8.24% change) OTHER CHARGES 802.000 Audit/accounting 22,800 19,500 (-14.47% change) 806.000 Legal Services 12,000 12,000 (No change) 807.000 Medical Services 1,000 1,000 (No change) 826.000 Other Contracted 1,142,620 1,300,000 (13.77% change) 903.000 Printing 200 200 (No change) 922.000 Telephone 450 480 (6.67% change) 956.000 Local Meetings 0 0 (No change) 957.000 Memberships 100 100 (No change) 959.000 Education/Training 5,650 7,550 (33.63% change) 1,184,820 1,340,830 (13.17% change)  TOTAL ACTIVITY 1,185,670 1,341,610 (13.15% change) CAPITAL EQUIPMENT 979.000 Computer Equipment 0 1,500 (100% change) Motion by Solak, supported by Maleszyk, to approve the 2014/15 budget as presented. Ayes: Solak, Wellhausen, Lamerato, Maleszyk. Absent: Varney. The motion carried. 7. Account transfer for March 2014 benefit payments – discussion As of February 18, 2014, the Clearing Account had a balance of $1,186,639.85. An additional $125,000.00 is needed for the March 1, 2014 pension benefit payments and bills from the Clearing Account. Merrill Lynch had forwarded an e-mail that the additional amount needed should be taken from the Janus account, but the Board chose to take the additional amount from the WAMCO account, based on the asset allocation targets. Motion by Solak, supported by Wellhausen, to approve the transfer of the appropriate amount of funds from the WAMCO account, based on the asset allocation targets, to provide for pension benefit payments and other disbursements on March 1, 2014. Ayes: Solak, Wellhausen, Lamerato, Maleszyk. Absent: Varney. The motion carried. 11. Trustee Comments The Board briefly talked about the preliminary actuarial report. 12. ADJOURNMENT Motion by Lamerato, supported by Wellhausen, to adjourn at 3:48 p.m. Ayes: Solak, Wellhausen, Lamerato, Maleszyk. Absent: Varney. The motion carried; the meeting is hereby adjourned. Mark Wellhausen Secretary