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HomeMy WebLinkAbout2011-08-02 NEERB MINUTES• • • • NONEMERGENCY EMPLOYEES RETIREMENT BOARD MEETING August 2 , 2011 Chairperson Bowman called the regular meeting of the Englewood NonEmergency Employees Retirement Plan Board to order at 3:00 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. Gary Bowman, Chairperson , Council Appointee Frank Gryglewicz, Director of Finance and Administrative Services Bradley Hagan, Secretary, Employee Representative John Moore, Council Appointee James Jordan, Council Appointee Mahendra Patel, Employee Representative (arrived at 3:05) Jim Woodward , Council Member None Wendy Dominguez, Innovest Portfolio Solutions Gordon Tewell , lnnovest Portfolio Solutions Jerry Huggins, Innovest Portfolio Solutions Joe Herm, Gabriel Roeder Smith and Company Diane Hunt, Gabriel Roeder Smith and Company Daniel Brotzman, City Attorney, City of Englewood (arrived at 3 :20 and left at 4 :30 p.m.) Mary Brauer, Reinhart Boener Van Deuren Norris & Reiselbach , PC (arrived at 3 :10 and left at 4:30 p.m.) Sue Eaton, Human Resources Director (left at 4:30 p.m.) * * * * * Seating of Council Board appointment, James Jordan The Board welcomed James Jordan , newly appointed to the Board by City Council. Mr. Jordan's term will expire February I, 2015. Approval of the Minutes of the May 10, 2011 Regular Meeting and June 7, 201 1 Te lephone Poll MR. GRYGLEWICZ MOVED TO APPROVE THE MINUTES OF THE MAY 10 , 2011 REGULAR MEETING AND JUNE 7, 2011 TELEPHONE POLL. MR. HAGAN SECONDED. Correct Brad Hagan's title by deleting "Council Appointee". Ayes: Nays: Absent: The motion carried. Bowman, Gryglewicz, Hagan , Jordan , Moore , Woodward None Patel Mr. Patel arrived at 3:05 p.m. Innovest Portfolio Solutions, LLC Ms. Dominguez outlined topics for discussion with the Board and introduced Mr. Huggins, who is new with Jnnovest, and reviewed his professional experience. She presented the product analysis search information for the Board's consideration of two new funds. The Board had not requested the product search. Ms Dominguez explained that the recommended funds are a better fit going forward with continued market volatility. Eaton Vance Floating Rate Corporate Rate Fund performance has not been a concern ; however, changing the funds may potentially lower risk . Innovest recommends transferring one hundred percent of the Eaton Vance • Floating Rate Corporate Loans to Eaton Vance Floating Rate Advantage . This change will not impact asset classes. Ms . Brauer arrived at 3: 10 p.m. MR. GRYGLEWICZ MOVED TO APPROVE TRANSFERRING 100% OF THE EA TON VANCE FLOATING RATE CORPORATE LOANS TO THE EATON VANCE FLOATING RATE ADVANTAGE. MR. MOORE SECONDED. Ayes : Nays : Absent: The motion carried. Bowman, Gryglewicz, Hagan , Jordan , Patel , Moore, Woodward None None Ms. Dominguez recommended an additional change transferring fifty percent of the Pimco Commodities Fund to JP Morgan Highbridge Dynamic Commodities Strategy . She reviewed the current Pimco Commodities Fund strategy. She compared the two funds strengths . Discussion ensued regarding the fees , percentage of assets allocated to commodities and dollars involved in the fund . MR. GRYGLEWICZ MOVED TO APPROVE TRANSFERRING 50% OF THE PIMCO COMMODITIES FUND TO JP MORGAN HIGHBRIDGE DYNAMIC COMMODITIES STRATEGY. MR. PATEL SECONDED. Ayes: Nays : Absent: The motion carried . Bowman, Gryglewicz, Hagan , Jordan , Patel , Moore , Woodward None None Mr. Brotzman arrived 3 :20 p .m. Ms. Dominguez reviewed the performance of the funds during the quarter and how the performance relates to market fluctuations. Mr. Tewell reviewed the individual fund activities , including any funds that are of concern or will be scrutinized more closely. The customized benchmark for the quarter and the overall fund return for the year to date were reviewed as well. Gabriel Roeder Smith and Company CGRS) Ms. Hunt stated the Board packet contained the final copy of the 2011 actuarial report that was approved by the June '7, 2011 phone poll. The Board received a copy of the Mr. Moore 's concerns that were addressed by GRS before finalizing the report . Discussion of Necessary Plan amendments and the Three Percent Employee Contribution Beginning in 2013 Chairperson Bowman introduced Ms. Brauer and Mr. Brotzman to the Board . Ms . Brauer reviewed the amendment that is required prior to year end 2011 and the additional amendments requested by • the Board regarding the change of mortality assumptions and related affected verbiage, clarification of naming a non-• spousal beneficiary and eliminating any ambiguous language. Ms . Brauer reviewed the beneficiary designation form and made recommendations to demonstrate that it is not in the member's best interest to name a non-spousal beneficiary Non Emergen cy Emplo yees Retirement Board Meetin g 2 of 5 \ .. • although the Plan allows, prior to retirement, the member's spouse to waive his or her right to the benefit and name a non-spousal beneficiary. An unmarried member may name a non-spousal beneficiary . The Board discussed the proposed amendments and agreed to review detailed sample scenarios to illustrate the impact the change will have on benefits as a result of changing mortality assumptions before proceeding. The Board will review the scenarios at the next meeting. Additional discussion ensued regarding the term ACCRUED PENSION impact on the change of assumptions might be corrected to be ACCRUED BENEFIT in as much as ACCRUED PENSION is not a defined term and appears to be an error. A point was brought forward by Ms. Hunt that changes were made previously from the 1977 mortality table to the 1983 mortality table and therefore set a precedence that would allow the proposed change to the current mortality assumptions. This precedent allows the use of an updated mortality table without grandfathering the previous table and moving forward with continued consideration of the amendments. The Board discussed the clarification of the benefits for non-spousal beneficiaries and Ms. Brauer indicated that the information she had did not provide a clear direction . A copy of the original Council Communication stated the intent to provide members the option to name non-spousal beneficiaries will be provided for the next discussion of the amendments. Ms . Brauer presented a new beneficiary form that provides more detail regarding the difference between spousal and non-spousal benefits . The Board continued discussion related to the additional amendments. MR. GRYGLEWICZ MOVED TO APPROVE THE PLAN AMENDMENTS TO CORRECT THE PLAN NAME IN SECTION 3-4-11-1 AND ADD THE VERBIAGE TO SECTION 3-4-17-3b.2 PERMITTING DIRECT ROLLOVER OF A LUMP SUM TO A ROTH IRA. MR. MOORE SECONDED . Ayes: Nays: Absent: Bowman, Gryglewicz, Hagan, Jordan, Patel, Moore, Woodward None None • The motion carried . • Mr. Gryglewicz explained that the NonEmergency Employees Retirement Plan is the only City plan does not require employee contributions . It has been determined that the employees will contribute three percent beginning in 2013 to help offset the cost of funding the benefit. The Board is charged with providing proposed language changes to the Plan to implement the employee contribution and any subsequent refunds or Plan design changes . The Board discussed the proposed change, the impact on the Plan, whether the intent is to fund additional benefits or ifthe employee contribution will be in addition to the City 's contribution or as part of the overall required contribution. Mr. Gryglewicz stated the Plan had required employee after-tax contributions for a few years prior to 1976 and his understanding was that the employee union at the time negotiated the Plan contribution be discontinued in lieu of a wage increase . The new contribution will be on a pre-tax basis . Ms . Brauer will provide a list of potential issues and potential language changes to be discussed at the next Board meeting. Mr. Brotzman , Ms . Eaton and Ms. Brauer left at 4:30 p .m. Prior to reviewing the next agenda items , Ms . Wescoat presented three variations of a possible data sheet that might be used to provide details of retirements, deaths or other benefit items that the Board either needs notification of or to approve a benefit. This will provide a "consent agenda" type of format. The data sheet will reduce paper use . Ms . Wescoat reviewed the details for the retirements and deaths on the cmTent agenda . She clarified that Mr. Brotzman requested all names be listed on the agenda ifthe Board uses the consent format. The Board agreed the consent form will not be binding ifthere is a conflict because of a typo or other errors on the consent form. The participant 's election form or other source documents will be the official document and will overrule any types of errors on the consent summary. The Board agreed to a use the spreadsheet format. Discussion followed regarding the checks and balances that the staff is using to maintain a secure process . Non Emerge ncy Empl oyees Retirement Board Meetin g 3 of5 The following items were addressed: 1. Approval of DROP Retirement Benefit for Ellis Slater 2. Approval of Retirement Benefit for Larry Medina with possible correction of Date of Birth 3. Approval of Retirement Benefit for Duane Davidson 4. Notification of Death of Connie Janney-Travis and Benefit for the Beneficiary 5. Notification of Death of Clara Culp 6. Approval of Retirement Benefit for Carol McGuigan 7. Approval of Benefit for the Beneficiary of Vernon Elder 8 . Approval of DROP Retirement Benefit for Gilbert Anderson 9. Notification of Death of Carolyn Mattrass 10. Approval of Early Retirement Benefit for Aurora Mammen MR. GRYGLEWICZ MOVED TO APPROVE THE ITEMS LISTED ON THE CONSENT SPREADSHEET. MR. PATEL SECONDED. Ayes: Nays: Absent: The motion carried Bowman, Gryglewicz, Hagan, Jordan, Patel, Moore, Woodward None None Consideration of Date Change from November 8 to November 15 to accommodate scheduling The Board agreed to change the date of the November meeting November 15, 2011 to accommodate scheduling issues. Member Choice Ms. Dominguez explained that there have been changes in the way revenue sharing is allowed to be allocated. Revenue sharing is a portion of the expense ratio that a mutual fund company is willing to share with a record keeper or a trust company because they recognize that the company is doing some of the recordkeeping work for the mutual fund . An example is that instead of having to account for each of the Plan participants, they only have one account for the Plan . The current custodian , Wells Fargo is only sharing 12bl fees. Charles Schwab (Schwab) is willing to share additional revenues with the Plan sponsor. Innovest periodically evaluates how products and services have changed in the market and try to find ifthere is additional value or advantages that the Plan sponsor can gain from the changes occurring in the market. One of the changes is the revenue recapture as well as fees on the custodial services. Mr. Huggins outlined the advantages ofusing Schwab for custodial duties and the dollar value of the revenue sharing. He reviewed the current fee arrangements and the potential value by changing to Schwab as custodian . Moving to Schwab would require changing from the Wells Fargo Index Fund to Schwab's equivalent fund. The other funds will transfer to Schwab without requiring a redemption and purchase of a fund . The Plan can use the revenue in excess of the custodial fees from Schwab in a couple of ways. The excess can be used to pay other Plan expenses or reduce the expense ratios in the current investments to reduce the total costs to the Plan. The estimated revenue to be generated by making this change is approximately $22 ,000 per year. As the portfolio balance increases, revenue should increase . Mr. Gryglewicz inquired iflnnovest looked at others beside Schwab . Mr. Huggins said they reviewed other custodial firms such as Fidelity. Some will provide custodial services at no cost, but are not providing any revenue recapture or revenue sharing. Ms Dominguez said the big brokerage supermarkets like Schwab have the clout to negotiate with the mutual funds for better revenue sharing. Ms . Dominguez stated that there would be a minor change in the operation of the monthly transfers. Currently, Wells Fargo provides a letter each month stating what fund should be sold to keep the asset balances at the levels determined by the investment policy. In the future Innovest will step into that role by providing a rebalancing report depending on how much is needed to be raised to cover outflows from the Plan . Instructions to Schwab about the monthly sales would come from Englewood unless authorization is given to Innovest. Non Emerge nc y Emplo ye es Retirement Board Meeting 4 of 5 I .. • • • \ • • • Innovest agreed to continue monitoring changes in the market that may provide future opportunities if at some point there is a better revenu e sharing provider for the Plan to consider. Mayor Woodward asked about FDIC insurance with Schwab since Wells Fargo is a bank and if there is any effect. Mr. Tewell explained that the Plan is working with trust banks with both Wells Fargo and Schwab and the assets are held in trust so there is no FDIC coverage . MR. GRYGLEWICZ MOVED TO CHANGE CUSTODIAL SERVICES TO CHARLES SCHWAB AS SOON AS ADMINlSTRA TIVE L Y POSSIBLE. MR. MOORE SECONDED . Ayes : Bowman , Gryglewicz, Hagan , Patel , Moore , Woodward Nays : None Absent: None The motion carried. MR. GRYGLEWICZ MOVED TO ADJOURN . MR. MOORE SECONDED . Ayes : Bowman , Gryglewicz, Ha gan , Patel , Moore, Woodward Nays : None Absent: None Th e motion carried . The Board adjourned at 5:03 p.m. Caro 1 W escoat Recording Secretary 5 of 5 No nEmerge ncy Empl oyees Ret irement Bo ard Mee tin g