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HomeMy WebLinkAbout2013-11-12 NEERB MINUTES• • • NONEMERGENCY EMPLOYEES RETIREMENT BOARD MEETING November 12 , 2013 Chairperson Hagan called the regular meeting of the Englewood NonEmergency Employees Retirement Plan Board to order at 3:36 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 Jim Woodward , Council Member James Jordon , Council Appointee (no notice) Gordon Tewell , lnnovest Portfolio Solutions (left at 4 : I 0 p.m.) Jerry Huggins, lnnovest Portfolio Solutions (left at 3 :55 p .m .) Diane Hunt, Gabriel Roeder Smith and Company (GRS) Joe Herm, Gabriel Roeder Smith and Company * * * * * MR. GRYGLEWICZ MOVED TO APPROVE THE MINUTES OF THE AUGUST 20 , 2013 REGULAR MEETING. MR. WOODWARD SECONDED. Ayes : Nays : Absent: The motion carried. Gryglewicz, Hagan , Moore, Patel , Woodward None Jordan lnnovest Portfolio Solutions. LLC Mr. Huggins reviewed market conditions for the third quarter and highlighted factors impacting markets during the period. Mr. Tewell reviewed the Plan 's investment performance for the past quarter. Mr. Huggins left at 3 :55 p.m. Mr. Tewell presented the Manager's Score Card on page 22 indicating any funds that may have issues of concern that Innovest is monitoring. Mr. Tewell reviewed the changes on the revised Investment Policy Statement (JPS). The changes are necessary because of the fund changes to Appendix A. MR. GRYGLEWICZ MOVED TO APPROVE THE AUGUST 2013 REVISED INVESTMENT POLICY . MR. PATEL SECONDED. Ayes: Nays: Absent: The motion carried. Gryglewicz, Hagan , Moore, Patel , Woodward None Jordan Discussion followed regarding lnnovest providing Fiduciary Training to the Board. The training will take approximately 45 minutes. The Board agreed to have the training prior to the February 11 , 2014 regular meeting . Mr. Tewell left at 4: I 0 p.m. Gabriel Roeder Smith and Company At the August meeting the Board requested a fee quote for providing a study of the capital market analysis assumption review . Ms. Hunt said the quote is $1 ,750 . Discussion ensued regarding changing the actuarial assumption from 7 .5% to 7% and the possibility ofreducing it more ifthe study indicates it should be lower. Mr. Moore suggested going to 7% as a starting point and see where the market goes in the future. Ms. Hunt stated the trend seems to be to reduce the assumptions noting there does not seem to be many plans going below 7% at this point other than plans that are closed to new entrants. Mr. Gryglewicz and Mr. Moore agreed that it would be helpful to see the results of the study and determine if7% is too high . Mr. Moore commented that he is comfortable with7% and is open to seeing how aggressive that is when input from lnnovest and the actuary is considered. Mr. Moore inquired ifthere is a more cost efficient time to request the capital market report, such as with the annual actuarial valuation or is the cost the same no matter when it is prepared . Ms. Hunt said that it is independent of the valuation and commented that the new capital market updates should be completed in March with new manager expectations . In March of2014 there would be new data and it may be worthwhile delaying the study until the new data is prepared next spring. Discussions followed with the proposal of going to 7% for the January valuation and obtain independent information from lnnovest as well as GRS 's study. MR. MOORE MOVED TO CHANGE THE ACTUARIAL ASSUMPTION FROM 7.5 % TO 7 .0% AND LOOK AT A CAPITAL MARKET ANALYSIS ASSUMPTION STUDY SOMETIME DURING 2014 . MR. GRYGLEWICZ SECONDED. Ayes: Nays : Absent: The motion carried . Gryglewicz, Hagan, Moore, Patel , Woodward None Jordan The Board agreed to discuss the possibility of the capital market study at the May meeting when Innovest presents the asset allocation study . Ms . Hunt presented a question from Mr. Moore to GRS regarding the new Government Accounting Standards Board (GASB) rules. The new GASB accounting rules are effective for 2014 and 2015 and will impact accounting for the plan and City in 2015 and 2016 because of the one year lag . Ms. Hunt described some of the required accounting changes and the impact on accounting results. She further explained that there are some funding policy issues that the Board may choose to make so that accounting and the valuation can use the same discount rate to value liabilities . Smoothing of assets cannot be used for accounting purposes, so the numbers will still be different, but the liabilities can be based on the same discount rate if certain funding policies exist. As an example of a change to the funding policy, the unfunded is currently amortized over ten years, which is reset to ten years each year. The change could be to close it so that this year the unfunded is amortized over ten years , then the following year over nine years and so on. This would help in the attempt to keep the same discount rate for both funding and accounting. The City and the Board need to determine if it is important that the discount rates be the same to avoid confusion . Mr. Moore clarified that what he is proposing has no real effective change from the current method that every year we amortize the unfunded liability over ten years and each year for the valuation the Plan would take the new gain or loss and amortize it over ten years . The goal would be to take care of the current unfunded in ten years from today and this allows the discount rate and the expected return rate to be the same. This should not make a major difference in the level of contribution. This is a move Mr. Moore would like to see-that the liabilities for accounting and the valuation are similar. Ms. Hunt further explained that there are two different ways to amortize the unfunded liability. Currently the NERP is using a ten year amortization period that gets reset to ten years each year. The second way provides, as an No n Emergency Empl oyees Retirement Board Me etin g 2 of 4 • • • • • • example, the current unfunded of approximately seven million be setup as the first base and a schedule is set to pay off this base so that it becomes similar to paying off a mortgage. If the following year the Plan has positive returns , it creates another new base that is amortized over ten years. And the first base would have nine years left. Ms . Hunt referred to this second approach as a tiered approach (base per year). This tiered method reduces the volatility level over a method that would use a closed ten year period for amortization . This funding policy decision would simplify the accounting calculation and reduce accounting fees because the complex projection methodology for the accounting results would not need to be done annually once there is a comfort level that the same discount rate can be used for both accounting and funding. Mr. Gryglewicz asked ifthere is a question that the Board needs to address now. Ms. Hunt said the plan accounting goes into effect 2014 plan year and would show in the fiscal year 2015 Comprehensive Annual Financial Report (CAFR) and Boards now are setting the funding policy so the decision is done . MR MOORE MOVED TO CHANGE TO A TEN YEAR CLOSED TIERED AMORTIZATION METHODOLOGY, RATHER THAN A TEN YEAR OPEN AMORTIZATION , WITH THE 2014 VALUATION . MR . GRYGLEWICZ SECONDED. Ayes: Nays: Absent: The motion carried . Gryglewicz, Hagan, Moore, Patel , Woodward None Jordan Ms . Hunt requested clarification on the motion . Mr. Moore said putting in the closed amortization method will begin tiering the bases with the January I , 2014 (ten year) valuation so the second base will be developed in the following year. Retirement Approvals and Notifications : The Board was provided a revised listing of approvals and notification. Mr. Black was able to complete the paperwork for the DROP after the Board 's packet wa s sent out. a. Consideration of Retirement Benefit for Janet Grimmett b . Consideration of Retirement Benefit for Dennis Stowe c. Notification of DROP Benefit for James Black (changed to approval) d . Notification of DROP Benefit for Jerry Cobb e . Notification of Death of Irene Jungck, Retiree f. Notification of Death of Wilma Fleming, Beneficiary MR . GRYGLEWICZ MOVED TO APPROVE THE ITEMS LISTED ON THE BENEFIT APPROVALS AND NOTIFICATIONS . MR. PATEL SECONDED. Ayes: Nays : Absent: The motion carried. Member Choice Hagan, Gryglewicz, Moore , Patel , Woodward None Jordan This is his last meeting for Mr. Woodward , Council liaison. He thanked the Board for the opportunity of serving on the Board . His City Council term ends November 18, 2013 . The Board in turn thanked Mr. Woodward for his efforts with the Board. NonEme rge ncy Empl oyee s Retirement Board Meetin g 3 of 4 The Board discussed James Jordan's unexcused absence for this meeting. Mr. Jordan 's attendance was also discussed at the August meeting. MR. GRYGLEWICZ MOVED TO APPROVE NOTIFYING CITY COUNCIL THAT JAMES JORDAN 'S SEAT • ON THE BOARD IS VA CANT AND REQUEST A NEW BOARD MEMBER BE APPOINTED TO FILL THE VACANCY . MR. PATEL SECONDED. Ayes : Nays : Absent: The motion carried. Gryglewicz, Hagan, Moore, Patel , Woodward None Jordan The next Board meeting will be February 11, 2014 . The start time may be adjusted based on the estimated time needed to complete the agenda . The Board adjourned at 4:43 p.m. Caro 1 W escoat Recording Secretary No n Emergency Empl oyees Retire ment Bo ard Me etin g 4 of 4 • •