Police & Fire Retirement Board

REGULAR MEETING MINUTES OF THE STERLING HEIGHTS POLICE AND FIRE RETIREMENT SYSTEM, ACT 345 FEBRUARY 19, 2015 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 President Lamerato at 3:28 p.m. 2. Board Members present: Lamerato, Wellhausen, Schwarb, Varney. Absent: Maleszyk (excused). Also present: Tim Brice, representing The Brice Group/Morgan Stanley Graystone Consulting; Aaron Castle, Legal Counsel; and Nancy Duyck, Pension Technician. 3. APPROVAL OF CONSENT AND REGULAR AGENDAS Motion by Schwarb, supported by Wellhausen, to approve the consent agenda as presented. Ayes: Lamerato, Wellhausen, Schwarb, Varney. Absent: Maleszyk. The motion carried. The following item was added to the regular agenda: 10 a 4 - 2015 Spring MAPERS Conference - discussion Regular Meeting Minutes – February 19, 2015 Page Two 3. APPROVAL OF REGULAR AGENDA – cont. Motion by Schwarb, supported by Wellhausen, to approve the regular agenda as amended. Ayes: Lamerato, Wellhausen, Schwarb, Varney. Absent: Maleszyk. The motion carried. 4. APPROVAL OF MINUTES No corrections were made to the draft minutes of the regular meeting of January 15, 2015. Motion by Schwarb, supported by Varney, to approve the minutes as presented. Ayes: Lamerato, Wellhausen, Schwarb, Varney. Absent: Maleszyk. The motion carried; the minutes of the regular meeting of January 15, 2015 are hereby approved as presented. 5. CITIZEN PARTICIPATION There was no Citizen participation. 6. REPORT FROM LEGAL COUNSEL Legal Counsel supplied the Board with a notice regarding lump sum distributions (Rollover Notice) with a draft resolution and revised form. After discussion, the following resolution was considered: RESOLUTION 59 L15-2-19-1 Amended February 19, 2015 L12-3-15-2 Amended: March 15, 2012 L09-11-19-2 Amended: November 19, 2009 L07-1-30-1 Amended: January 30, 2007 L02-2-27-4 Adopted: February 27, 2002 Regular Meeting Minutes – February 19, 2015 Page Three 6. REPORT FROM LEGAL COUNSEL – cont. RE: NOTICE TO RECIPIENTS OF LUMP SUM DISTRIBUTIONS FROM THE RETIREMENT SYSTEM WHEREAS, the Board of Trustees of the City of Sterling Heights Police and Fire Retirement System is vested with the authority and fiduciary responsibility for the administration, management and operation of the Retirement System, and  WHEREAS, the Board of Trustees acknowledges that Section 402 of the Internal Revenue Code requires the Board to provide notice to recipients of lump sum distributions from the Plan, and WHEREAS, applicable tax law and regulations require said notice to be provided at least thirty (30) days in advance of such distributions, and WHEREAS, Legal Counsel has prepared a distribution notice and form consistent with IRC Section 402, and WHEREAS, the Board of Trustees has discussed this matter, therefore be it RESOLVED, that the Retirement System is hereby amended to comply with and shall be administered in accordance with the requirements of Notice 2014-54, with respect to the rollover of distributions to multiple destinations, and further RESOLVED, that the Board of Trustees hereby adopts the distribution notice and form, and further RESOLVED, that the Retirement System shall be administered consistent with said notice and IRS Notice 2014-54, and further RESOLVED, that the distribution notice and form be provided to recipients of lump sum distributions from the Retirement System consistent with the Internal Revenue Code, and further RESOLVED, that a copy of this resolution shall be provided to all appropriate parties. Motion by Wellhausen, supported by Schwarb, to approve the resolution and the updated Form 16 as presented. Ayes: Lamerato, Wellhausen, Schwarb, Varney. Absent: Maleszyk. Regular Meeting Minutes – February 19, 2015 Page Four 6. REPORT FROM LEGAL COUNSEL – cont. The motion carried; the resolution is hereby adopted. Resolution 59 adopted March 15, 2012 is hereby amended. Mr. Castle commented on items of old business as they were considered. CONSENT AGENDA 7. CORRESPONDENCE a. Correspondence from The Bogdahn Group dated September 25, 2014 re: investment consulting. b. Other correspondence received from: 1. Pomerantz LLP 2. Robbins Geller Rudman & Dowd LLP c. Magazines received: 1.Institutional Investor for October 2014 2. Pensions & Investments for October 27 and November 10, 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 $ 6,801.87 1/01/15 Additions (1) 1. 1/27 $ 5,000.00 Subtractions (6) $2,864.38 1. 1/02 Check 1962 25.83 AT & T phone bill – 12/16/14 2. 1/29 Check 1963 28.17 AT & T phone bill – 01/16/15 3. 1/02 Check 5316 910.72 Contract Payment Nancy Duyck 4. 1/05 Check 5317 78.20 Contract fee – Gurin & Gurin 5. 1/16 Check 5318 910.73 Contract Payment Nancy Duyck 6. 1/30 Check 5319 910.73 Contract Payment Nancy Duyck Electronic withdrawals (4) $1,318.40 1. 1/05 461.54 IRA contribution 2. 1/07 376.27 IRS Fed. tax w/h Regular Meeting Minutes – February 19, 2015 Page Five CONSENT AGENDA 8. BILLS AND EXPENDITURES c. Checking Account Summary – cont. 3. 1/20 104.34 Michigan St. tax w/h 4. 1/21 376.25 IRS Fed. tax w/h Ending Balance $ 7,619.09 1/31/15 d. Transmittal of Checks $12,266.27 refund received from Abel Noser Corp. 9. FUNDS MANAGEMENT a. The current value of funds as of January 31, 2015 is detailed below: Clearing account $ 5,663,253.42 Intercontinental $ 10,545,076.94 Winslow $ 15,596,742.88 Janus $ 15,632,961.27 Eagle $ 10,565,061.40 Herndon $ 20,652,257.93 London Co. $ 30,096,962.39 Earnest Partners $ 13,730,254.70 NFJ/Allianz $ 15,241,874.03 AIM/Invesco $ 16,598,073.81 Western $ 23,367,549.22 Met West $ 25,691,647.02  Checking account $ 7,619.09 TOTAL FUNDS $ 207,391,116.10 b. The Board received a copy of the Summary of Employer Contributions to the Police and Fire Retirement System for the 2014 tax year as of 2/12/15. The System has received $7,663,800.00 of the 2014/15 budget of $7,953,970.00, leaving a $290,170.00 balance. c. Benefit Register Listing as of February 1, 2015 from Comerica Bank showing 318 retirees/beneficiaries with a payout for February of $1,291,473.31 and a year-to-date of $2,915,446.71. d. The current Merrill Lynch Bond index for January 2015 is 1.82%. Regular Meeting Minutes – February 19, 2015 Page Six CONSENT AGENDA – cont. 10. BENEFITS & PLAN ADMINISTRATION a. Old Business None. REGULAR AGENDA 8. BILLS AND EXPENDITURES a. Disbursements other than retiree benefit payments (bills) 1. Disbursement to Comerica Bank in the total amount of $1,972.19 for services rendered to the Clearing and Intercontinental accounts for the fourth quarter 2014. 2. Disbursement to Rodwan Consulting Company in the amount of $300.00 for actuarial services rendered for the Gary Choate EDRO benefit. 3. Disbursement to Morgan Stanley in the amount of $500.00 for ten new accounts opened from 9/1/14 through 12/31/14. 4. Disbursement to VanOverbeke, Michaud & Timmony, PC in the total amount of $13,447.50 for legal services rendered for the period of 7/1/13 through 12/31/14. 5. Disbursement to the City of Sterling Heights in the amount of $664.32 for accounting services rendered for the fourth quarter 2014. 6. Disbursement to Eagle Capital Management in the amount of $50,022.14 for investment management fees for the fourth quarter 2014. Motion by Varney, supported by Wellhausen, to approve the bills as presented. Ayes: Lamerato, Wellhausen, Schwarb, Varney. Absent: Maleszyk. The motion carried. Regular Meeting Minutes – February 19, 2015 Page Seven REGULAR AGENDA 9. FUNDS MANAGEMENT e. Quarterly Performance Report 1. The Brice Group 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 2014 AIM Market Focus report. Also included was an executive summary of the Composite, Allianz, Eagle, Earnest, Herndon, Intercontinental, Invesco, Janus, Pimco, Western and Winslow reports. The following manager specific comments were discussed: Pimco a. The total portfolio return in the fourth quarter was 0.9%, ranking in the 43rd percentile of the BofAML Domestic Fixed Income Sample. It trailed the Custom Index (1.7%) and the BofAML Broad Market Bond index (1.8%). b. Their total portfolio return was 3.0% since inception (6/30/11). This trailed the Custom (3.5%), and the BofAML Broad Market Bond index (3.8%). Western Asset Management a. The total portfolio return in the fourth quarter was 1.9%, ranking in the 10th percentile of the BofAML Domestic Fixed Income Sample. It exceeded the Custom Index and the BofAML Broad Market Bond index (1.8%). b. Their total portfolio return was 4.9% since inception (6/30/11). This exceeded the Custom (3.5%), and the BofAML Broad Market Bond index (3.8%). Herndon Investment Counsel a. The total portfolio return in the fourth quarter was -1.6%, ranking in the 99th percentile of the BofAML Domestic Large Cap Value Equity Sample. It trailed the Custom Index (4.8%) and the Russell 1000 Value Index (5.0%). b. Their total portfolio return was 14.2% since inception (9/30/12). This trailed the Custom (20.2%), and the Russell 1000 Value Index (20.7%). Regular Meeting Minutes – February 19, 2015 Page Eight REGULAR AGENDA 9. FUNDS MANAGEMENT e. Quarterly Performance Report  1. The Brice Group – cont. Eagle Investment Counsel a. The total portfolio return in the fourth quarter was 5.1%, ranking in the 33rd percentile of the BofAML Domestic Large Cap Value Equity Sample. It exceeded the Custom Index (4.8%), and the Russell 1000 Value Index (5.0%). b. Their total portfolio return was 22.1% since inception (9/30/12). This exceeded the Custom (20.0%), and the Russell 1000 Value Index (20.7%). Winslow Investment Counsel a. The total portfolio return in the fourth quarter was 5.4%, ranking in the 38th percentile of the BofAML Domestic Large Cap Growth Equity Sample. It exceeded the Custom Index (4.7%) and the Russell 1000 Growth Index (4.8%). b. Their total portfolio return was 14.9% since inception (3/31/12). This trailed the Custom (16.0%), and the Russell 1000 Growth Index (16.3%). Janus Investment Counsel a. The total portfolio return in the fourth quarter was 7.1%, ranking in the 8th percentile of the BofAML Domestic Large Cap Growth Equity Sample. It exceeded the Custom Index (4.6%), and the Russell 1000 Growth Index (4.8%). b. Their total portfolio return was 14.5% since inception (12/31/09). This trailed the Custom (15.1%), and the Russell 1000 Growth Index (15.8%). Earnest Partners a. The total portfolio return in the fourth quarter was 5.6%, ranking in the 80th percentile of the BofAML Domestic Small Cap Equity Sample. It trailed the Custom Index (6.7%), and the Russell 2500 Index (6.8%). b. Their total portfolio return was 9.9% since inception (9/30/06). This exceeded the Custom (8.5%), and the Russell 2500 Index (7.8%). Regular Meeting Minutes – February 19, 2015 Page Nine REGULAR AGENDA 9. FUNDS MANAGEMENT e. Quarterly Performance Report 1. The Brice Group – cont. AIM/INVESCO Capital Management a. The total portfolio return in the fourth quarter was -0.4%, ranking in the 13th percentile of the BofAML International Equity Sample. It exceeded the Custom Index (-2.1%) and the MSCI AC World ex US Growth Index net (- 2.3%). b. Their total portfolio return was 7.2% since inception (12/31/10). This exceeded the Custom (3.8%), and the MSCI AC World ex US Growth Index net (3.0%). NFJ/Allianz Global Investors  a. The total portfolio return in the fourth quarter was -3.9%, ranking in the 70th percentile of the BofAML International Equity Sample. It trailed the Custom Index (-3.7%) and equaled the MSCI All Country World ex US-net (-3.9%). b. Their total portfolio return was 4.1% since inception (12/31/10). This exceeded the Custom (2.7%), and the MSCI All Country World ex US-net (2.8%). The following table details the Investment Performance Review for the fourth quarter ending December 31, 2014. Market value of the funds under management as of December 31, 2014 was $203,494,640.00. The total fund return for the fourth quarter was 2.7%, ranking in the 28th percentile, as summarized below: 9/14 12/13 12/11 12/09 12/04 12/91 to 12/14 to 12/14 to 12/14 to 12/14 to 12/14 to 12/14 Total fund* 2.7/28 8.7/26 13.5/22 10.0/46 5.7/96 n/a *Ranked against the BofAML Domestic Balanced Sample – Total Total Portfolio Returns - Equity Sample Domestic# 2.8/30 7.3/22 18.6/17 12.5/28 6.7/70 n/a #Ranked against the BofAML Domestic Equity Sample Total Portfolio Returns - Fixed Income Sample F.I.# 1.5/30 6.5/27 3.4/49 4.8/57 2.6/99 n/a #Ranked against the BofAML Domestic Fixed Income Sample Regular Meeting Minutes – February 19, 2015 Page Ten REGULAR AGENDA 9. FUNDS MANAGEMENT e. Quarterly Performance Report 1. The Brice Group – cont. 9/14 12/13 12/11 12/09 12/04 6/04 to 12/14 to 12/14 to 12/14 to 12/14 to 12/14 to 12/14 Real Estate 9.0 49.3 17.3 10.4 10.5 15.7 The following manager specific return information is detailed separately from the other long-term data: 9/14 12/13 12/11 6/11 Pimco to 12/14 to 12/14 to 12/14 to 12/14 Total Fund* 0.9/43 4.5/45 2.9/56 3.0/71 *Ranked against the BofAML Domestic Fixed Income Sample – Total 9/14 12/13 12/11 6/11 Western to 12/14 to 12/14 to 12/14 to 12/14 Total Fund* 1.9/10 8.0/8 4.8/22 4.9/20 *Ranked against the BofAML Domestic Fixed Income Sample – Total 9/14 12/13 9/12 Herndon to 12/14 to 12/14 to 12/14 Total Fund* -1.6/99 3.1/99 14.2/97 *Ranked against the BofAML Domestic Large Cap Value Equity Sample - Total 9/14 12/13 9/12 Eagle to 12/14 to 12/14 to 12/14 Total Fund* 5.1/33 12.7/43 22.1/31 *Ranked against the BofAML Domestic Large Cap Value Equity Sample - Total 9/14 12/13 3/12 Winslow to 12/14 to 12/14 to 12/14 Total Fund* 5.4/38 10.4/67 14.9/72 *Ranked against the BofAML Domestic Large Cap Growth Equity Sample - Total 9/14 12/13 12/11 12/09 Janus to 12/14 to 12/14 to 12/14 to 12/14 Total Fund* 7.1/8 10.9/64 21.8/24 14.5/67 *Ranked against the BofAML Domestic Large Cap Growth Equity Sample – Total Regular Meeting Minutes – February 19, 2015 Page Eleven REGULAR AGENDA 9. FUNDS MANAGEMENT e. Quarterly Performance Report 1. The Brice Group – cont. 9/14 12/13 12/11 12/09 9/06 Earnest Part. to 12/14 to 12/14 to 12/14 to 12/14 to 12/14 Total Fund* 5.6/80 12.3/1 21.3/30 17.1/40 9.9/38 *Ranked against the BofAML Domestic Small Cap Equity Sample – Total 9/14 12/13 12/11 12/10 Invesco to 12/14 to 12/14 to 12/14 to 12/14 Total Fund* -0.4/13 2.2/11 12.3/40 7.2/24 *Ranked against the BofAML International Equity Sample - Total 9/14 12/13 12/11 12/10 NFJ/Allianz to 12/14 to 12/14 to 12/14 to 12/14 Total Fund* -3.9/70 -4.6/67 9.2/74 4.1/66 *Ranked against the BofAML International Equity Sample – Total Mr. Brice discussed with the Board the performance of NFJ. It was decided to bring NFJ in for the April 16th meeting to further discuss their performance. Asset allocation for small/mid cap and international equity will also be discussed at the April meeting. Mr. Brice updated the Board on real estate investment and when the fund matures. The Board will review alternative investments in the future. The Board requested that Mr. Brice provide a monthly update on Herndon. 10. BENEFITS & PLAN ADMINISTRATION a. Old Business 1. 2015/16 Proposed Budget – discussion  The Secretary reviewed a mid-year spreadsheet for actual expenditures with percentages of budget spent. He also reviewed recommendations for the 2015/16 budget. During discussion, the following budget center amounts were considered: Regular Meeting Minutes – February 19, 2015 Page Twelve REGULAR AGENDA 10. BENEFITS & PLAN ADMINISTRATION a. Old Business 1. 2015/16 Proposed Budget – discussion – cont. 2015/16 PROPOSED BUDGET ITEM BUDGET 2014/15 PROPOSED 2015/16 SUPPLIES 729.000 Postage 630 650 (3.17% change) 730.000 Publications 0 0 (No change) 751.000 Operating Supplies 150 160 (6.67% change) 758.000 Computer Software 0 0 (No change) Total Supplies 780 810 (3.85% change) OTHER CHARGES 802.000 Audit/accounting 19,500 25,000 (28.21% 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 1,300,000 1,460,000 (12.31% change) 903.000 Printing 200 200 (No change) 922.000 Telephone 480 360 (-25.0% change) 956.000 Local Meetings 0 0 (No change) 957.000 Memberships 100 100 (No change) 959.000 Education/Training 7,550 7,550 (33.63% change) 1,340,830 1,506,210 (12.33% change) TOTAL ACTIVITY 1,341,610 1,507,020 (12.33% change) CAPITAL EQUIPMENT 979.000 Computer Equipment 1,500 0 (-100% change) Motion by Wellhausen, supported by Schwarb, to approve the 2015/16 budget as presented. Ayes: Lamerato, Wellhausen, Schwarb, Varney. Absent: Maleszyk. The motion carried. Regular Meeting Minutes – February 19, 2015 Page Thirteen REGULAR AGENDA 10. BENEFITS & PLAN ADMINISTRATION a. Old Business 2. Computer – discussion The Board discussed replacing the 2008 computer in the Pension Office. This would also cause the need for an upgrade to the 4 D pension software. The Board would need to contract with Bob Dumas, who designed the 4 D pension software, for the upgrade as well as buying the appropriate new computer. Motion by Wellhausen, supported by Schwarb, to approve the purchase of a new computer as well as contracting with Bob Dumas to upgrade the 4-D pension software for the new computer at a rate of $95.00 per hour. Ayes: Lamerato, Wellhausen, Schwarb, Varney. Absent: Maleszyk. The motion carried. 3. 2014 STD/LTD report - discussion The Board received a listing of Police and Fire members who were off on short- term/long term disability during 2014 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 Abram, Natalie 49 49 0 N/A Dwojakowski, Dale 35 35 0 N/A Langenderfer, Todd 92 60 32 9/25/98 Selewski, James 1 1 0 N/A Sypniewski, Lynn 35 35 0 N/A Walleman, Jeremy 17 17 0 N/A Allen, Shawn 74 60 14 12/4/95 Nelson, Jason 107 60 47 3/09/03 Slezak, Christopher 2 2 0 N/A Walker, Will 12 12 0 N/A Bauss, Michael 3 3 0 N/A Regular Meeting Minutes – February 19, 2015 Page Fourteen REGULAR AGENDA 10. BENEFITS & PLAN ADMINISTRATION a. Old Business  3. 2014 STD/LTD report – discussion – cont. Motion by Wellhausen, supported by Schwarb, to approve the 2014 short-term disability report with credits and adjustments as listed. Ayes: Lamerato, Wellhausen, Schwarb, Varney. Absent: Maleszyk. The motion carried. 4. 2015 MAPERS Spring Conference – discussion The Board has received registration information for the 2015 MAPERS Spring Conference. It is scheduled for May 17-19, 2015 at the Soaring Eagle Resort in Mt. Pleasant, MI. Four members are budgeted to attend this conference. Motion by Schwarb, supported by Wellhausen, to register three members for the 2015 Spring MAPERS conference. Ayes: Lamerato, Wellhausen, Schwarb, Varney. Absent: Maleszyk. The motion carried. Ms. Varney and Mr. Maleszyk will not be attending the conference. 11. TRUSTEE COMMENTS None. Regular Meeting Minutes – February 19, 2015 Page Fifteen 12. ADJOURNMENT Motion by Wellhausen, supported by Schwarb, to adjourn at 4:35 p.m. Ayes: Lamerato, Wellhausen, Schwarb, Varney. Absent: Maleszyk. The motion carried; the meeting is hereby adjourned. Mark Wellhausen Secretary