HomeMy WebLinkAbout2014-08-12 NEERB MINUTESNONEMERGENCY EMPLOYEES RETIREMENT BOARD MEETING
August 12, 2014
Board Member Frank Gryglewicz called the regular meeting of the Englewood NonEmergency Employees Retirement Plan
Board to order at 3:30 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.
Agproval of Minutes
Frank Gryglewicz, Director of Finance and Administrative Services
John Moore, Council Appointee (by phone)
Mahendra Patel, Secretary, Employee Representative
James Phelps, Council Appointee
Jim Woodward, Council Appointee
Steven Yates, Council Member
Bradley Hagan, Chairperson, Employee Representative (with notice)
Wendy Dominguez, Innovest Portfolio Solutions
Jerry Huggins, Innovest Portfolio Solutions
Diane Hunt, Gabriel Roeder Smith and Company (GRS)
Joe Herm, Gabriel Roeder Smith and Company
* * * * *
MR. WOODWARD MOVED TO APPROVE THE MINUTES OF THE MAY 13, 2014 REGULAR MEETING. MR. PATEL
SECONDED.
Ayes:
Nays:
Absent:
The motion carried.
Gryglewicz, Moore, Patel, Phelps, Woodward, Yates
None
Hagan
Innovest Portfolio Solutions, LLC
Performance Evaluation Report
Ms. Dominguez presented the second quarter capital markets and market summary reports.
Mr. Huggins discussed the individual funds' second quarter performance compared to their benchmarks. The total fund return
for the quarter is 2.78% and 4.37% year to date. He reviewed the Manager Report Card noting the funds Innovest has concerns
with and the reasons for the concern. He said Innovest's position has been that quality matters and that investment managers will
go in and out of favor, but in the end quality managers will outperform lower quality managers. The evaluation begins with what
were the determining factors for hiring managers and when a manager will be back in favor and when there is a market correction
the quality of the manager will bring these funds back to favor.
Ms. Dominguez outlined the history of the Thornburg fund and understands that it is challenging to watch this fund under
perform, but Innovest is recommending patience with this fund. Innovest is not recommending changing any funds at this time.
Mr. Phelps inquired if the Plan has separate accounts with the managers or does the Plan own the mutual fund shares. Ms.
Dominguez explained that the Plan owns the mutual funds shares and that with the Principal is a limited partnership type of
account, but is still comingled assets.
Mr. Huggins referred the Board to the Expense Ratio columns on page 24 that illustrate that most of the funds are below the
median expense ratio which is to be expected because the funds are the generally "institution investment funds." The only fund
higher than the median expense ratio is Principal. Ms. Dominguez commented that all of the performance numbers in the report
are net of fees.
Mr. Yates asked what will happen if there is another decline similar to the 2009 decline. His understanding is the federal
government has pumped funds into the economy; creating a bubble that could potentially pop. What is in place to protect against
another drop in the market?
Ms. Dominguez said that bonds are a hedge against a drop in the market; while stocks can potentially to lose 30-50%, in a bad,
year bonds could lose 3%. She referred to the Investment Policy Summary on page 16. Innovest uses the asset allocation studies
to project the impact of various fluctuations in the market. The risk tolerances listed on page 16 are -13.7% to -16.7% per year
based on a statistical confidence level of95%. She commented that is difficult to know what might happen in every situation.
Portfolio diversification attempts to minimize risk. For example, different types of fixed income vehicles act as a hedge against '-,/
rising interest rates, as do physical assets, commodities and equity exposure to hedge against inflation.
Mr. Huggins commented that 2008 was a once in a hundred year occurrence and the only way to eliminate that risk is to stay
invested over the long-term. Capital markets may decline temporarily but not permanently.
Gabriel Roeder Smith and Company
At the May meeting the Board requested sample calculations using 7% as the interest rate used for calculating benefits and
adopting a more current mortality table. Ms. Hunt presented the sample calculations they prepared. She said the proposed
changes tie more closely to current interest rates and mortality tables used for the valuation. She suggested the interest rate and
mortality table might be adopted effective January I. She said this will require a Plan amendment.
Mr. Moore said the Society of Actuaries is expected to release the revised mortality tables before yearend. The Board might
consider delaying making a change until the next table is released rather than make a change now and again after the release.
Mr. Moore and Ms. Hunt discussed the revised table and Mr. Moore explained to the Board there will be a major update to the
most commonly used mortality table. The new table has been in development for the past few years.
Mr. Moore and Ms. Hunt agreed to recommend the Board postpone the changes. Ms. Hunt said that from the examples they
created there would not be a substantial change to the benefits and that it may be better to delay the amendment until the new
table is released.
The Board agreed to table further discussion of amending the Plan document regarding mortality tables and changing the interest
rate to 7.0% for optional benefit calculations until the revised information is available.
Review of Plan Amendment to Comply with State and Federal Laws
Mr. Gryglewicz explained the NERP amendment regarding the definition of "spouse" brought forward by Mary Brauer,
Attorney. Ms. Brauer's memo outlined the need to comply with federal guidelines and the Colorado Civil Union Act.
MR. PHELPS MOVED TO APPROVE SUBMITTING TO COUNCIL THE AMENDMENT OF THE DEFINITION OF
SPOUSE AS PRESENTED IN THE COUNCIL COMMUNICATION TO COMPLY WITH FEDERAL LAWS AND THE
COLORADO CIVIL UNION ACT. MR. WOODWARD SECONDED.
Ayes:
Nays:
Absent:
The motion carried.
Gryglewicz, Moore, Patel, Phelps, Woodward, Yates
None
Hagan
Retirement Approvals and Notifications:
a. Consideration of Regular Early Retirement Benefit for Mark Cranmer
b. Consideration of Regular Early Retirement Benefit for James Abshire
c. Consideration of Retirement Benefit for Josephine Hamil
d. Consideration of DROP Benefit Request from Randy Jarrell
e. Consideration of DROP Benefit Request from Mahendra Patel
f. Notification of DROP Benefit Request from Randy Pierce
MR. GRYGLEWICZ MOVED TO APPROVE THE ITEMS LISTED ON THE RETIREMENT APPROVALS AND
NOTIFICATIONS. MR. WOODWARD SECONDED.
Ayes:
Nays:
Absent:
The motion carried.
Gryglewicz, Moore, Patel, Phelps, Woodward, Yates
None
Hagan
2of3
NonEmergency Employees Retirement Board Meeting
Member Choice
Mr. Woodward req ues ted th e Board, at so me po in t, di scuss the fin ancial im pact furl ough days had on members' benefits who en tered
the DROP. Ms. Hunt com mented !here was minimal impact on t he monthl y benefit with the exceptio n of th ose whose final three yea rs
of co mpe nsation were th e ir hi ghes t thr ee years of co mp ensation that in clucl ecl mu ltiple furlou gh clays.
Ms. We scoa t sa id th e furloug h clays e ncl eel during 20 I I and th e re should be no impacts on members' be nefit ca lculations unless th e re
arc future furl ough days . She explained th at emplo yees covered by other plan s, such as a 40 I a, had no co ntri buti ons to th eir 40 I a for
furl ough days. To be equitable to all employ ees the C ity would have to mak e contributions for emp loyees with 40 I a plan s. She
furth e r exp lain ed how th e benefit calc ul ation s process provides the member wit h the greatest poss ibl e benefi t. She stat ed that during
th e tim e of fur loughs and th e yea rs imm ediately fo ll ow ing, severa l members entered th e DRO P or ret ired based on yea rs of
co mp e nsa ti on prior to the furl ough period for benefit calcu lations. Those years inclu ded salary freezes. Usi ng pri or ye ars' provides
th e great es t benefit for th e member because the actuari es se lect th e hi ghes t co nsec ut ive 36 month peri od of co mpe nsation to ca lculate
ben efit s.
Mr. Woodward asked about the DROP members who have 10 retire within thr ee years and the impact to them. Ms. Wescoat exp la ined
that th e DROP member's three pe rcent contribution goes 10 th eir DROP accou nt as well as their monthl y pens ion payment. DROP
parti c ipants elec t the ir benefi t opt ion and are re tired "on paper." There arc no emp loyer co ntri butions an d the ir reti remen t be nefit docs
not cha nge based if th e re furlou gh days durin g the DR OP period.
Mr. Woodward as ked if thi s will be the same for police officers and fir efight e rs and Ms. Wcscoa t sa id no and exp lain ed different
emp loyee grou ps have va ri ous plans with diffe rent benefits. Mr. Woodwa rd withd rew hi s requ es t fo r furth er d iscuss ion because hi s
quest ion s refer to police a nd li re e mployees.
The Board di scusse d the Nove mb er 18, 20 14 me etin g, confirm in g the 3:00 p.m. start ti me beca use of sc hedul e con fli cts.
MR. PH ELPS MOVED TO ADJO URN. MR. WOODWARD SECONDED.
Ayes:
Nays:
Absen t:
Th e mot ion carri ed.
Gryglewicz, Moore, Patel, Ph elps, Wo od ward , Yat es
None
Ha ga n
Th e Board adjourn ed at 4:30 p.m.
Caro l Wescoat
Reco rdin g Sec retary
3 of3
No nEme rge ncy Employees Retiremen t Board Mee ting