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Home My WebLink About2014-05-13 NEERB MINUTESNONEMERGENCY EMPLOYEES RETIREMENT BOARD MEETING May 13, 2014 Chairperson Hagan called the regular meeting of the Englewood NonEmergency Employees Retirement Plan Board to order at 3:01 p.m. in the Public Works Conference Room of the Civic Center, 1000 Englewood Parkway, Englewood, Colorado. Members Present: Members Absent: Others Present: A quorum was present. Approval of Minutes Frank Gryglewicz, Director of Finance and Administrative Services Bradley Hagan, Chairperson, Employee Representative John Moore, Council Appointee (by phone) Mahendra Patel, Secretary, Employee Representative James Phelps, Council Appointee Jim Woodward, Council Appointee Steven Yates, Council Member (arrived at 3:15 p.m.) None Wendy Dominguez, Innovest Portfolio Solutions Jerry Huggins, Innovest Portfolio Solutions Diane Hunt, Gabriel Roeder Smith and Company (ORS) MR. GRYGLEWICZ MOVED TO APPROVE THE MINUTES OF THE FEBRUARY 11, 2014 REGULAR MEETING. MR. PA TEL SECONDED. Ayes: Nays: Absent: The motion carried. Hagan, Gryglewicz, Moore, Patel, Phelps, Woodward None Yates lnnovest Portfolio Solutions, LLC Asset Allocation Study Ms. Dominguez reviewed the Asset Allocation Study. The study provided allocation options with varying returns and risks. The expected return with no change to the mix is 6.33%. This is less than the actuarial assumption of7.0%. Mr. Moore's call dropped. The Board discussed allocation options. Ms. Dominguez stated the Board can stay with the current mix with a slightly lower return expectation or Mix 1 with a bit higher expected return and a bit lower risk. Innovest does not recommend Mix 2 because the allocation change in domestic fixed income is too drastic. The change to Mix I would improve the return expectation slightly without a big reduction to the domestic fixed income allocation. Also, Mix I will not require updating of the Investment Policy Statement (IPS) and is expected to provide a return of 6.50%. Discussion followed regarding not changing the IPS because the changes fall within the allowable ranges. Ms. Dominguez said that if the Board did not want to change the JPS, there is the ability to work internally within the allowable ranges. She also commented that it would not hurt to update the appendix to reflect the new allocation. Mr. Yates arrived at 3:15 p.m. MR. GRYGLEWICZ MOVED TO APPROVE CHANGING THE ASSET ALLOCATION TO MIX I AS DEFINED BY THE ASSET ALLOCATION STUDY. MR. WOODWARD SECONDED. Ayes: Nays: Absent: The motion carried. Hagan, Gryglewicz, Patel, Phelps, Woodward, Yates None Moore Performance Evaluation Report Mr. Huggins reviewed first quarter portfolio performance. Innovest will update the expected return assumptions from 7.5% to 7.0% for the next report. He discussed the individual funds' first quarter performance compared to their benchmark. Mr. Moore called back at 3:36 p.m. Mr. Huggins continued to review the portfolio performance. Ms. Dominguez presented a single page report Mr. Gryglewicz requested. The report compares the Plan's annual returns to the custom benchmark since Innovest became the consultant for the NERP. She also commented on page 16 of the performance report that compares NERP fund performance to the S&P 500 Index since the inception of the Plan. The comparison shows the NERP funds averaging about two percent less than the S&P 500 Index with about one-half of the risk. This is a clear indication of the benefit of a diversified portfolio strategy. Mr. Huggins reviewed the Manager Report Card on page 18 noting the funds Innovest is concerned about and the reasons for the concern. Innovest is not recommending dropping any funds at this time. Gabriel Roeder Smith and Company -January 1, 2014 Actuarial Report Ms. Hunt reviewed the draft January I, 2014 Actuarial Report. The study indicates a total required contribution of23.7% of pay beginning 2015. The employer contributions will be 20. 7% and the employee is 3%. She explained that there was a substantial impact on the required contribution because of the assumption changes the Board adopted at the February 2014 meeting. She summarized the assumption changes which included investment return, mortality tables, salary increases, expected retirement age and change of amortization methodology to coincide with the GASB accounting standards requirements. Ms. Hunt outlined the various increases or decreases of liability based upon each of the assumption changes. The net liability to the Plan increased $2.8 million. Ms. Hunt said the current funding ratio is 79.5 % compared to 79.9% last year. She commented on the decline in Plan participants over the past five years and corresponding decline in payroll. This has resulted in retirees outnumbering active participants. Benefit payments are increasing significantly each year. Ms. Hunt referred to page eight, Estimated Investment Yields, that the since 1992 the actuarial value average return is 7.0% with a 6.8% average return in the market value. She commented the average return is approximates the new 7.0% assumption. Ms. Hunt continued reviewing factors impacting the NERP actuarial accrued liability. She stated it is normal to expect liabilities to increase about $1 million per year to account for benefit accrual increases. She indicated that there is a greater liability increase with this actuarial report because of the assumption changes. The increase was mainly due to the mortality table and investment return assumption changes. Because of the assumption changes, future reports should tie closer to reality over time. Page twelve of the summary compares old assumptions with the new assumptions. This page demonstrates employer contributions would be 14.2% compared to the 20.7% funding requirement with the assumption changes. These changes reflect what ORS thinks the plan will experience. Ms. Hunt reviewed how close projections were the Board analyzed last year prior to approving the assumption changes. She complimented the Board for changing assumptions that more accurately reflect the Plan's investment and demographic environment. MR. GRYGLEWICZ MOVED TO APPROVE THE JANUARY l, 2014 ACTUARIAL REPORT. MR. PATEL SECONDED. Ayes: Nays: Absent: The motion carried. Hagan, Gryglewicz, Moore, Patel, Phelps, Woodward, Yates None None Ms. Hunt told the Board that Ms. Brauer (Board's pension attorney) is drafting a required IRS amendment the Board will need to approve. At a previously meeting, the Board reviewed changing the 7.5% interest rate to correspond with the investment assumption and mortality table used for benefit calculations. The Board had determined to table further discussion until there was a need for other amendments because of the extensive plan amendment that had just been completed. Ms. Wescoat gave a brief review of the amendment Ms. Brauer is drafting to comply with the IRS notice and the Colorado Civil Union Act. Discussion followed regarding the impact of changing interest rates for calculations. Ms. Hunt said the change impacts joint and survivor benefits. MR. GRYGLEWICZ MOVED TO HA VE GRS PROVIDE A STUDY OF THE CALCULATION INTEREST FACTORS AND MORTALITY TABLE. MR. WOODWARD SECONDED. NonEmergency Employees Retirement Board Meeting 2 of3 u Ayes: Nays: Haga n, Gryglew icz, Moore, Patel. Phelps, Woodward , Yates None Absent: None The motion carried . Ms. Hunt sa id that GRS wi ll provide samp les of the impact on bene fi ts for participants from a change to the morta lity table and 7.0% interest rate. The Board agreed to have this is a study presented at the next meeting. Retire men t Approvals and Not ifica ti ons: a. Considerat ion of Retirement Be ne fit for Colleen Kranz b. Notifi cation of Beneficiary Death, Robert Fcde rlick c. Notifi cati on of Ret iree Dea th, Man uel Alca ntar d. Notifi cat ion of Ret iree Death, Gladys Remes c. Notifi ca ti on of Derik Caud ill 's e lect ion to tra nsfe r to the NonEmergency Employees Mo ney Purchase Pl an The spreads heet had a typo corrected to be that De ri k Caud ill 's se lected the NonEme rgency Em p loyees Money Purchase Pl an (NEM P) as the plan he will enter, not NER P. MR. GRYG LEW ICZ MOVED TO APPROVE THE ITEMS LISTED ON THE 13ENEF IT APP ROVALS AND NOTI FICA TI ONS WITH THE CORRECTION CHANGING MR. CAUDI LL 'S NEW PLAN TO T HE NEMP . MR. WOODWARD SECONDED . Ayes: Nays : Absent: The mo tion carried Hagan, Gryg lew icz, Moo re, Patel, Phelps, Woodward , Yate s None No ne Discussion Regarding Changing Meeting Date from November 11. 2014 (Veterans Dav) Th e Boa rd d iscussed changin g t he Novembe r mee ting ela te from November 11 , Veterans Day, to November 18, at 3 :00 p.m. and agreed the meet ing wou ld be adjourned by 4 :30 p.m . The Boa rd also di scussed a start time of 3 :30 p.m. or 4 :00 p.m. fo r the nex t meeting on August 12 , 20 14. Mem ber Choice Mr. Gryg lcwicz d istribu ted prel imin ary info rmation o n the Co lorado Publi c Plan Coal ition Annua l Confere nce in Beaver Creek , September 2 through September 5, 20 I 4. Ms. Wescoat needs notification no later than J ul y 31, 20 14, for any Board Member wish ing to attend. MR. GRYG LEW ICZ MOVED TO APPROVE THE COSTOMARY EXPENSES OF ANY BOARD MEMBER ATTEND ING THE COLORADO PUBLIC PL AN COA LI T ION ANNUAL CONFERENCE IF NOT IF ICATION IS PROVIDED TO MS. WESCOAT PRI OR TO JULY 3 1, 20 14. MR. HAGAN SECONDED . Ayes: Nays : Abse nt: T he motion carried Haga n, G ryglewicz, Moo re, Patel, Phelps, Woodward , Yates None None The Board adjourned at 4:25 p.m . &e-e w£4t&-M-r--'- Carol We scoat Recordin g Secretary NonEmcrgc ncy Empl oyees Retirem ent Board Mee tin g 3 of3