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Home My WebLink About2016-02-09 NEERB MINUTES• NONEMERGENCY EMPLOYEES RETIREMENT BOARD MEETING February 9, 2016 Board Member John Moore called the regular meeting of the Englewood Non Emergency Employees Retirement Plan Board to order at 3 :31 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. David Henderson , Employee Representative John Moore, Council Appointee Mahendra Patel, Employee Representative James Phelps, Council Appointee Jim Woodward, Chairperson, Council Appointee (arrived 3:33 p.m.) Steven Yates, Council Member Shelley Becker, Director of Finance and Administrative Services (with notice) Wendy Dominguez, lnnovest Portfolio Solutions Jerry Huggins, lnnovest Portfolio Solutions Leslie Thompson , Gabriel Roeder Smith and Company Joe Herm , Gabriel Roeder Smith and Company Paul Wood, Gabriel Roeder Smith and Company Eric Keck, City Manager * * * * * • Seating of Mahendra Patel, Employee Elected and Reappointment of James Phelps, Council Appointee • The Board congratulated the Mr. Patel and Mr. Phelps and thanked them for their continued service. The agenda items were taken out of order. Approval of Minutes MR. PHELPS MOVED TO APPROVE THE MINUTES OF THE NOVEMBER 10 , 2015 REGULAR MEETING. MR. HENDERSON SECONDED. Ayes: Nays: Absent: The motion carried. Phelps, Patel , Henderson , Moore, Yates None Becker, Woodward Mr. Keck and Mr. Woodward arrived at 3:33 p.m . Mr. Moore requested that Chairperson Woodward conduct the meeting. Election of President/Chairperson MR. PHELPS NOMINATED JIM WOODWARD AS PRESIDENT/CHAIRPERSON. MR. PATEL SECONDED. Ayes: Nays: Absent: Phelps, Patel , Henderson, Moore, Yates None Becker Abstention: Woodward The motion carried. lnnovest Portfolio Solutions, LLC a. Update on Change of Custodial Services At the November meeting the Board approved pursuing changing the custodial services from Wells Fargo to Charles Schwab. Mr. Huggins explained that there are continuing negotiations regarding contract language with the Acting City Attorney and Charles Schwab. b. Performance Evaluation Ms. Dominguez reviewed the 2015 market conditions highlighting the incidents that had an impact during the year. Mr. Huggins reviewed the performance of the funds for the quarter and year as compared to the fund's benchmark. There was a rebalancing of the Real Estate fund after the beginning of 20 I 6, so it is not reflected on the yearend report. Although 2015 was not a stellar year, the Plan's funds performed so mewhat better than the custom benchmark. • C hairperson Woodward asked for clarification on the Oppenheimer Steelpath MLP fund's earnings • reported since the Plan did not acquire the fund until closer to mid-year. Ms . Dominguez said the report shows the fund's earnings for the year including the period prior to the Plan's acquisition. Mr. Moore inquired about the historical earnings of the commodities fund and if there is a potential buying opportunity with a favorable rebalancing opportunities. Ms. Dominguez explained the typical process is to review the position about mid-quarter and thought there was a purchase of the commodities with the rebalancing of the real estate fund. She also commented that with the declining cost of oil , which dropped about I 0% in one day, that when commodities move there is often a big jump in price. Innovest believes that commodities offer a diversification benefit and a hedge against inflation , although there has been very little inflation. Since the commodities are basically at about a ten year low, it would difficult to present a case to se ll at this point. Mr. Huggins referred to the Manager Score Card page to address the rating changes for each of the funds and those changes that may be of major concern . He noted that there are two upgrades since the last report. The one point of major concern is People for the PIM CO Unconstrained Bond Fund. The current portfolio manager, Marc Sneider, is the third manager in the past 14 months after Bill Gross left . Mr. Huggins said that Thornburg International Value Fund exemplifies a fund that was a concern with a prior evaluation even to the point of considering an alternative fund. The Board determined to stay with Thornburg and the fund has turned around and is not at the same level of concern because of outperforming its benchmark. Gabriel Roeder Smith and Company (GRS) a. Discussion of Studies to include with the January I , 2016 Actuarial Report NonEmerge ncy Empl oyees Retirement Board Meet in g 2 of 4 • • • Ms . Thompson reviewed some of the past studies the Board requested. She outlined the difference in the 7% actuarial assumption rate compared to the projected 6 .5% rate of return by lnnovest. She explained that the difference in inflation rates and the assumed investment horizon allows GRS, as the actuary, to be comfortable with the assumed rates of return being used . Ms . Thompson discussed the release of the most recent mortality tables (RP 2014) and the correspondin g mortality improvement projection scales (MP 2014 and MP 2015). She said when the MP 2014 was released; it suggested improvements on the life expectancy. When MP 2015 was released it appeared that the life expectancy is not improving as fast as previously thought. She al s o said the public sector mortality data was not used in the development of RP2014 so the Society of Actuaries ha s commission ed a s pecial stud y for the public sector. She does not know when the public sector study will be released . Ms . Thompson said it is important that the Plan is currently using a generational mortality table and she is not recommending that the Board consider changing the mortality table for this upcoming valuation , but that changes may be necessary in the future. Mr. Moore asked which mortality table is being used. The Plan is on RP 2000 with projection Scale BB . The prior study performed by GRS using RP 2014 with MP 2014 indicated the City contribution could increase about two percent of payroll. Ms . Thompson recommended that if the Board decides to complete another mortality table study, it should be with RP 2014 that is the table and the proj ection scale to be MP 2015 . The MP 2 015 reflects most recent data and the Board has already seen the MP 2014 study. Mr. Moore said he would like the Plan to continue moving toward using the most recent mortality table . He would like to see the impact of a 6.5% return . Discussion followed regarding the consideration of including inflation or salary scale changes. Mr. Moore asked Mr. Keck ifthere is the potential of merit pay increases beyond the base of the 2.5% inflation factor. Mr. Keck said that would be a good factor. Mr. Moore commented that his conservative preference is to leave the inflation factor and look at lowering the real rate of return. Ms. Thompson agreed that it is the more conservative approach becau se if the salarie s do not keep up with inflation , the Plan benefits because the Plan costs are lower. MR . MOORE MOVED TO APPROVE ACTUARJAL STUDIES WITH THE JANUARY 1, 2016 REPORT THAT SHOW THE FOLLOWING FACTORS: • THE RA TE OF RETURN BE 6.5 PERCENT WITH A 2.5 PERCENT INFLATION FACTOR • CHANGING THE MORTALITY TABLE TO RP 2014 TABLE WITH THE MP 2015 PROJECTION SCALE WITH THE CHANGES BE MEASURED INDEPENDANTLY AND TOGETHER RESULTING IN THREE STUDIES. MR. PHELPS SECONDED . Ayes: Nays: Absent: The motion carried . Phelps, Patel , Henderson, Moore , Woodward , Yates None Becker R eview of 2015 Board Attendance • The Board reviewed the 2015 attendance. The Board agreed the attendance was satisfactory . No nEme rge ncy Empl oyees Retire me nt Boa rd Meetin g 3 of 4 Retirement Approvals and Notifications: a. Consideration of Retirement Benefit for Wayne Niles b. Consideration of DROP Application for Patricia Herron c. Consideration of Retirement Benefit for Emily Anderson d . Notification of Death of Raymond Chapman, Retiree MR. PATEL MOVED TO APPROVE THE BENEFIT APPROVALS AND NOTIFICATIONS. MR. HENDERSON SECONDED. Ayes : Nays: Absent: The motion carried. Member Choice Phelps , Patel , Henderson , Moore , Woodward , Yates None Becker No further items were discussed. The next Board meeting will be May I 0 , 2016. The start time will be 3 :00 p .m . since there will be presentations of the asset allocation study and the 2016 actuarial report. The Board adjourned at 4:22 p.m. (Juq.f U) t4c o--J- Carol Wescoat Recording Secretary No nE me rge nc y E m p loyees Retirement Board Meetin g 4 o f 4 • • •