Police & Fire Retirement Board

REGULAR MEETING MINUTES OF THE STERLING HEIGHTS POLICE AND FIRE RETIREMENT SYSTEM, ACT 345 MAY 15, 2014 FIRE DEPARTMENT CONFERENCE ROOM 41625 RYAN ROAD STERLING HEIGHTS, MI 48313 The Board welcomed Randall Schwarb as the new Police Representative Member who is filling the unexpired term of Kenneth Solak. 1. The regular meeting of the Police and Fire Retirement System was called to order by Chairman Lamerato at 3:36 p.m. 2. Board Members present: Lamerato, Schwarb, Wellhausen, Maleszyk, Varney. Also present: Tim Brice, representing Merrill Lynch Private Client Group; Tom Michaud, Legal Counsel; and Nancy Duyck, Pension Technician. 3. APPROVAL OF CONSENT AND REGULAR AGENDAS Motion by Wellhausen, supported by Maleszyk, to approve the consent agenda as presented. Ayes: All. The motion carried. The following item was added to the regular agenda: 10 a 6 Alan Byrd – partial DROP distribution – discussion Motion by Wellhausen, supported by Maleszyk, to approve the regular agenda as amended. Ayes: All. The motion carried. 4. APPROVAL OF MINUTES No corrections were made to the draft minutes of the regular meeting of April 17, 2014. Motion by Maleszyk, supported by Lamerato, to approve the minutes as presented. Ayes: All. The motion carried; the minutes of the regular meeting of April 17, 2014 are hereby approved as presented. 5. CITIZEN PARTICIPATION There was no Citizen participation. 6. REPORT FROM LEGAL COUNSEL Mr. Michaud commented on the legal issues update dated April 28, 2014. He will supply an update of the specific cases for next month. Mr. Michaud commented on items of old business as they were considered. CONSENT AGENDA 7. CORRESPONDENCE a. Notice of Election for Police representative and results b. Updated listing of Board Members c. Other correspondence received from: 1. International Foundation membership information 2. Merrill Lynch – market value updates 3. Robbins Geller Rudman & Dowd LLP d. Magazines received: 1. Institutional Investor for May 2014 2. Plan Sponsor for May 2014 3. Pensions & Investments for April 28 and May 12, 2014. 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 $2,494.83 4/01/14 Additions (1) 1. 4/4 $5,000.00 Subtractions (9) $3,252.36 1. 4/21 Check 1932 75.00 KS 1-day MAPERS seminar 2. 4/02 Check 1934 500.00 MAPERS reg. 3. 4/02 Check 1935 500.00 MAPERS reg. 4. 4/02 Check 1936 100.00 MAPERS reg.  5. 4/25 Check 1938 42.84 AT & T phone bill – 4/16/14 6. 4/11 Check 5286 910.14 Contract Payment Nancy Duyck Check 5287 VOID 7. 4/17 Check 5288 136.03 St. of MI UIA 8. 4/11 Check 5289 78.20 Contract fee – Gurin & Gurin 9. 4/25 Check 5290 910.15 Contract Payment Nancy Duyck Electronic withdrawals (5) $1,696.39 1. 4/02 376.83 IRS Fed. tax w/h 2. 4/14 461.54 IRA contribution 3. 4/16 376.85 IRS Fed. tax w/h 4. 4/21 104.34 Michigan St. tax w/h 5. 4/30 376.83 IRS Fed. tax w/h Ending Balance $ 2,546.08 4/30/14 d. Transmittal of Checks There were no checks transmitted this month. 9. FUNDS MANAGEMENT a. The current value of funds as of April 30, 2014 is detailed below: Clearing account $ 1,300,307.27 Intercontinental $ 9,322,182.05 Winslow $ 22,663,348.32 Janus $ 22,407,747.83 Eagle $ 23,292,031.57 Herndon $ 23,236,462.46 Earnest Partners $ 13,380,917.51 NFJ/Allianz $ 17,130,614.22 AIM/Invesco $ 17,633,098.84 Pimco $ 22,496,357.95 Wamco $ 23,617,883.79 Checking account $ 2,546.08 TOTAL FUNDS $ 196,483,497.89 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 May 1, 2014 from Comerica Bank showing 302 retirees/beneficiaries with a payout for May of $1,192,309.36 and a year-to-date of $6,201,525.69. d. The current Merrill Lynch Bond index for April 2014 is 2.11%. 10. BENEFITS & PLAN ADMINISTRATION a. Old Business 1. Abel/Noser Reports for March 2014 Abel/Noser has supplied the March 2014 report. REGULAR AGENDA 8. BILLS AND EXPENDITURES a. Disbursements other than retiree benefit payments (bills) 1. Disbursement to Merrill Lynch in the amount of $14,542.01 for the SPA fee for the Eagle account for the second quarter 2014. 2. Disbursement to Merrill Lynch in the amount of $32,452.40 for the Consults fee for the AIM/Invesco account for the second quarter 2014. 3. Disbursement to Merrill Lynch in the amount of $42,939.63 for the Consults fee for the Janus account for the second quarter 2014. 4. Disbursement to Eagle Capital Management in the amount of $46,513.98 for investment management fees for the first quarter 2014. Motion by Varney, supported by Wellhausen, to approve the bills as presented. Ayes: All. The motion carried. 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, first quarter 2014 AIM Market Focus report. Also included was an executive summary of the Composite, Allianz, Eagle, Earnest, Herndon, Intercontinental, Invesco, Janus, Pimco, Wamco and Winslow reports. The following manager specific comments were discussed: Pimco a. The total portfolio return in the first quarter was 1.4%, ranking in the 54th percentile of the BofAML Domestic Fixed Income Sample. It trailed the Custom Index and the BofAML Broad Market Bond index (1.9%). b. Their total portfolio return was 2.7% since inception (6/30/11). This trailed the Custom (3.0%), and the BofAML Broad Market Bond index (3.3%). c. Cash on hand at first quarter ending was within guidelines. Western Asset Management a. The total portfolio return in the first quarter was 2.6%, ranking in the 15th percentile of the BofAML Domestic Fixed Income Sample. It exceeded the Custom Index and the BofAML Broad Market Bond index (1.9%). b. Their total portfolio return was 4.3% since inception (6/30/11). This exceeded the Custom (2.9%), and the BofAML Broad Market Bond index (3.3%). c. Cash on hand at first quarter ending was within guidelines. Herndon Investment Counsel a. The total portfolio return in the first quarter was 1.4%, ranking in the 86th percentile of the BofAML Domestic Large Cap Value Equity Sample. It trailed the Custom Index and the Russell 1000 Value Index (3.0%). b. Their total portfolio return was 20.7% since inception (9/30/12). This trailed the Custom (23.7%), and the Russell 1000 Value Index (24.3%). c. Cash on hand at first quarter ending was within guidelines. Eagle Investment Counsel a. The total portfolio return in the first quarter was 1.9%, ranking in the 76th percentile of the BofAML Domestic Large Cap Value Equity Sample. It trailed the Custom Index (3.1%), and the Russell 1000 Value Index (3.0%). b. Their total portfolio return was 26.2% since inception (9/30/12). This exceeded the Custom (23.5%), and the Russell 1000 Value Index (24.3%). c. Cash on hand at first quarter ending was within guidelines. Winslow Investment Counsel a. The total portfolio return in the first quarter was -1.2%, ranking in the 91st percentile of the BofAML Domestic Large Cap Growth Equity Sample. It trailed the Custom Index and the Russell 1000 Growth Index (1.1%). b. Their total portfolio return was 14.5% since inception (3/31/12). This trailed the Custom (16.1%), and the Russell 1000 Growth Index (16.5%). c. Cash on hand at first quarter ending was within guidelines. Janus Investment Counsel a. The total portfolio return in the first quarter was -1.6%, ranking in the 94th percentile of the BofAML Domestic Large Cap Growth Equity Sample. It trailed the Custom Index (1.0%), and the Russell 1000 Growth Index (1.1%). b. Their total portfolio return was 14.0% since inception (12/31/09). This trailed the Custom (15.0%), and the Russell 1000 Growth Index (15.8%). c. Cash on hand at first quarter ending was within guidelines. Earnest Partners a. The total portfolio return in the first quarter was 4.0%, ranking in the 8th percentile of the BofAML Domestic Small Cap Equity Sample. It exceeded the Custom Index (2.2%), and the Russell 2500 Index (2.3%). b. Their total portfolio return was 9.8% since inception (9/30/06). This exceeded the Custom (8.7%), and the Russell 2500 Index (9.0%). c. Cash on hand at first quarter ending was within guidelines. AIM/INVESCO Capital Management The total portfolio return in the first quarter was 1.2%, ranking in the 42nd percentile of the BofAML International Equity Sample. It exceeded the Custom Index and the MSCI AC World ex US Growth Index net (0.3%). Their total portfolio return was 8.6% since inception (12/31/10). This exceeded the Custom (5.6%), and the MSCI AC World ex US Growth Index net (4.7%). Cash on hand at first quarter ending was above guidelines. NFJ/Allianz Global Investors a. The total portfolio return in the first quarter was -0.1%, ranking in the 63rd percentile of the BofAML International Equity Sample. It trailed the Custom Index and the MSCI All Country World ex US-net (0.5%). b. Their total portfolio return was 6.6% since inception (12/31/10). This exceeded the Custom (4.8%), and the MSCI All Country World ex US-net (4.9%). c. Cash on hand at first quarter ending was above guidelines. The following table details the Investment Performance Review for the first quarter ending March 31, 2014. Market value of the funds under management as of March 31, 2014 was $198,236,601.00. The total fund return for the first quarter was 1.1%, ranking in the 57th percentile, as summarized below: 12/13 3/13 3/11 3/09 3/04 12/91 to 3/14 to 3/14 to 3/14 to 3/14 to 3/14 to 3/14  Total fund* 1.1/57 13.7/22 8.4/55 12.7/69 5.7/93 7.4/n/a *Ranked against the BofAML Domestic Balanced Sample – Total Total Portfolio Returns - Equity Sample Domestic# 0.6/72 21.2/36 11.3/45 18.2/69 7.3/80 8.8/n/a #Ranked against the BofAML Domestic Equity Sample Total Portfolio Returns - Fixed Income Sample F.I.# 2.1/31 -0.8/73 4.0/45 5.2/52 2.4/99 5.4/n/a #Ranked against the BofAML Domestic Fixed Income Sample 12/13 3/13 3/11 3/09 6/04 to 3/14 to 3/14 to 3/14 to 3/14 to 3/14 Real Estate 3.7 9.0 3.3 6.9 12.7 The following manager specific return information is detailed separately from the other long- term data: 12/13 3/13 6/11 Pimco to 3/14 to 3/14 to 3/14 Total Fund* 1.4/54 -1.8/92 2.7/75 *Ranked against the BofAML Domestic Fixed Income Sample - Total 12/13 3/13 6/11 Wamco to 3/14 to 3/14 to 3/14 Total Fund* 2.6/15 1.0/28 4.3/29 *Ranked against the BofAML Domestic Fixed Income Sample – Total 12/13 3/13 9/12 Herndon to 3/14 to 3/14 to 3/14 Total Fund* 1.4/86 19.6/82 20.7/86 *Ranked against the BofAML Domestic Large Cap Value Equity Sample - Total  12/13 3/13 9/12 Eagle to 3/14 to 3/14 to 3/14 Total Fund* 1.9/76 25.3/29 26.2/35 *Ranked against the BofAML Domestic Large Cap Value Equity Sample - Total 12/13 3/13 3/12 Winslow to 3/14 to 3/14 to 3/14 Total Fund* -1.2/91 23.8/51 14.5/81 *Ranked against the BofAML Domestic Large Cap Growth Equity Sample - Total 12/13 3/13 3/11 12/09 to Janus to 3/14 to 3/14 to 3/14 3/14 Total -1.6/94 23.1/60 14.4/40 14.0/74 Fund* *Ranked against the BofAML Domestic Large Cap Growth Equity Sample – Total 12/13 3/13 3/11 3/09 9/06 Earnest to 3/14 to 3/14 to 3/14 to 3/14 to 3/14 Total Fund* 4.0/8 25.0/61 14.0/58 25.7/54 9.8/48 *Ranked against the BofAML Domestic Small Cap Equity Sample – Total 12/13 3/13 3/11 12/10 to to to Invesco to 3/14 3/14 3/14 3/14 Total 1.2/42 17.2/44 8.2/42 8.6/41 Fund* *Ranked against the BofAML International Equity Sample - Total 12/13 3/13 3/11 12/10 to to to to Allianz 3/14 3/14 3/14 3/14 Total -0.1/63 8.3/74 5.5/70 6.6/64 Fund* *Ranked against the BofAML International Equity Sample – Total Mr. Brice suggested that Winslow be brought in to the June 19, 2014 to discuss their performance. REGULAR AGENDA 10. BENEFITS & PLAN ADMINISTRATION a. Old Business 2. Glenn Garwood - DROP retirement termination information - discussion FEO Glenn Garwood of the Fire Department terminated his DROP retirement as of April 30, 2014. All required paperwork is on file in the Pension Office. Motion by Wellhausen, supported by Schwarb, to approve the disbursement for the regular pension and process the retirement certificate as submitted. Ayes: All. The motion carried. 3. Kenneth Solak – DROP retirement termination information – discussion Sergeant Kenneth Solak of the Police Department terminated his DROP retirement as of May 5, 2014. All required paperwork is on file in the Pension Office. Motion by Wellhausen, supported by Schwarb, to approve the disbursement for the regular pension and process the retirement certificate as submitted. Ayes: All. The motion carried. 4. Rodney Damm - EDRO approval resolution – discussion The Board is in receipt of an Eligible Domestic Relation Order dated January 28, 2014 which purports to grant Alternate Payee, Sherie Damm, part of the monthly pension benefit normally payable to Rodney Damm. Legal Counsel has opined that the EDRO is consistent with the provisions of the Retirement System and applicable law. After discussion, the following resolution was considered: L 14-5-15-1  Re: RODNEY A. DAMM v. SHERIE A. DAMM Macomb County Circuit Court Case No. 12-4814-DM WHEREAS, the Board of Trustees is in receipt of an Eligible Domestic Relations Order (EDRO) dated January 28, 2014, wherein Sherie A. Damm, the Alternate Payee, is awarded certain rights to the retirement benefit of Rodney A. Damm, the Participant, and WHEREAS, the Alternate Payee is entitled to claim a portion of the Participant’s retirement benefit from the Defined Benefit Plan, and WHEREAS, the payments from the plan to the Alternate Payee of the Participant’s benefits shall begin when the Participant commences benefits from the Retirement System, unless the Alternate Payee elects to receive benefits at any time after the Participant reaches his earliest retirement date, but not later than when the Participant actually commences benefits, and WHEREAS, the Board’s policy is to require that the cost for the actuary’s calculations are to be borne by the parties to the domestic relations proceedings, and the order provides that the Participant and the Alternate Payee shall be responsible for any and all additional costs for actuarial services, and that the Alternate Payee’s share of said costs shall be in proportion to the Alternate Payee’s share of the Participant’s retirement allowance awarded to her pursuant to the Order, and WHEREAS, said matter has been discussed with Legal Counsel who has opined that the applicable terms of said court order are consistent with the provisions of the Retirement System and applicable law including Public Act 46 of 1991 (MCLA 38.1701) as amended, therefore be it RESOLVED, that the Board of Trustees acknowledges receipt of said court order, will pay pension benefits consistent with said order subject to an application being filed by either the Participant or the Alternate Payee seeking payment, and further RESOLVED, that upon application of either the Alternate Payee or the Participant, this file be forwarded to the Board’s actuary for calculation of the benefits, and further Regular Meeting Minutes – May 15, 2014 Page Twelve RESOLVED, that a copy of this resolution be immediately attached as the top sheet of the Participant’s pension file and other appropriate records be kept for the Retirement System relative to this matter, and further RESOLVED, that copies of this resolution be sent to Rodney A. Damm, the Participant; Deborah F. O’Brien, Esq., Attorney for the Alternate Payee; Sherie A. Damm, the Alternate Payee; and the Board’s actuary. Motion by Wellhausen, supported by Lamerato, to adopt the resolution as presented. Ayes: All. The motion carried; the resolution is hereby adopted. 5. Account transfer for June 2014 benefit payments – discussion As of May 12, 2014, the Clearing Account had a balance of $159,772.58. An additional $1,214,000.00 is needed for the June 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 Pimco and WAMCO accounts equally, based on the asset allocation targets. Motion by Varney, supported by Wellhausen, to approve the transfer of the appropriate amount of funds from the Pimco and WAMCO accounts, based on the asset allocation targets, to provide for pension benefit payments and other disbursements on June 1, 2014. Ayes: All. The motion carried. 6. Alan Byrd – partial DROP distribution – discussion 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. All required paperwork is on file in the Pension Office. Motion by Wellhausen, supported by Schwarb, to approve the partial DROP distribution as presented. Ayes: All. The motion carried. 11. Trustee Comments None. 12. ADJOURNMENT Motion by Varney, supported by Wellhausen, to adjourn at 4:25 p.m. Ayes: All. The motion carried; the meeting is hereby adjourned. Mark Wellhausen Secretary