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HomeMy WebLinkAbout05-29-2019 MinutesCITY OF SEBASTIAN POLICE PENSION BOARD MINUTES OF SPECIAL MEETING MAY 29, 2019 I. Call to Order -- Chairman Jason Gillette called the meeting to order at 10:03 a.m. Present Board Members: Jason Gillette Randy Moyer Paul Williamson Tim Wood Absent Christine Vicars -- Excused Also Present Bonni Jensen, Klausner, Kaufman, Jensen & Levinson, Attorney for the Board of Trustees Ken Killgore, Plan Administrator Cynthia Watson, Human Resources Manager Janet Graham, Technical Writer II. Initial Hearing on Disability Application from Mr. Ms. Jensen described the purpose of this hearing and stated that the application has been processed, and Mr. has been seen by the independent medical examiner (IME). Ms. Jensen stated that Mr. was injured while he was motorcycle training during his employment for the City. The motorcycle dropped to the ground, and he struck his left hip. His handcuff case was on that hip. He underwent treatment and received a hip replacement in April of 2017. He returned to light-duty work in June of 2017. From November of 2017 to January of 2018 he was on medical leave due to the hip injury. From January 2018 to May 2018 he was on light duty. In May 2018 he received a second hip replacement due to the mechanism loosening of his internal left hip prosthesis to joint. He was then again returned to light duty on July 6, 2018. The City of Sebastian received notice in November 2018 that he had a permanent impairment rating of 6%t, the body part being 14%. According to the City's physician's MMI, he could no longer perform the duties of a police officer. Mr. was terminated by the City due to his medical injury. POLICE PENSION BOARD PAGE 2 MINUTES OF SPECIAL MEETING OF MAY 29, 2019 Ms. Jensen stated case law determines basically that, since the City has determined that he is disabled from performing his functions as a police officer, the Board is basically bound by that determination. The IME doctor further concludes that he is unable to perform his functions as a police officer. There is some indication that the doctor would like him to go to see a physiatrist, who is a doctor who can tie work to job responsibilities but indicates that Mr. cannot perform the functions of a police officer. The Board's duty under the State statute and the City's ordinance is to determine whether he is able and capable of performing the functions of a police officer. The City has terminated him, and Ms. Jensen is not aware of whether the City made any reasonable accommodation for his disability at the time that he was terminated from his employment. The IME doctor has indicated some level of capability to perform some functions which are not heavy physical activity. A police officer's duties are considered heavy physical activity. As part of the doctor's report, he completed a questionnaire, and that questionnaire states that the doctor cannot determine whether there is a reasonable accommodation and recommended Mr. see a physiatrist. Ms. Jensen stated that this case is ready for a decision by the Pension Board as to whether they recommend the granting of disability or whether they require further information by having a physiatrist examine Mr. The physiatrist's job would be to determine whether Mr. could perform duties other than as a police officer. Officer Gillette called for questions or comments from the Board. Mr. Williamson asked for some clarification, and Ms. Jensen further elucidated what the duties of the Board are regarding the case. Officer Gillette asked whether it is the opinion of the IME doctor that Mr. is permanently disabled, and Ms. Jensen said that is his opinion. Mr. Moyer asked if there is anything else the Board should consider. Ms. Jensen said Mr. is present, and he can answer any questions the Board may have. Mr. came up to the microphone. Mr. Williamson inquired of Mr. if he had had any problems with this hip before the injury that is the subject of this hearing. Mr. stated he had not. He then described in detail how the accident occurred. OLICE PENSION BOARD PAGE 3 MINUTES OF SPECIAL MEETING OF MAY 29. 2019 Mr. Williamson also asked Mr. Parker if he had pain immediately after the accident. Mr. Parker stated he did. Mr. Williamson inquired if Mr. Parker saw a doctor right away. Mr. Parker stated he waited to see if it was just a bruise, and after a month or so of continuous pain, he saw a doctor. Mr. Williamson asked what doctor the City sent Mr. Parker to. Ms. Jensen stated it was Dr. Powers in Port St. Lucie. She further stated Orlando Orthopedics sent a second - opinion letter which stated that, even though Mr. Parker had some preexisting arthritis, the fall more than likely created an aggravation of the underlying issue, and that letter recommended that Mr. Parker continue treatment. She stated Mr. Parker has gone through physical therapy and also received cortisone injections intraarticularly. The letter went on to state that Mr. Parker would need a total hip arthroplasty. This letter was in October of 2016. Mr. Moyer inquired of Mr. Parker if the motorcycle involved was a police bike, and Mr. Parker stated it was, and it's a very heavy bike. Chairman Gillette asked if there were any further questions of the Board. Hearing none, he asked for a motion. A motion to approve the granting of disability to Mr. Parker was made by Mr. Moyer, seconded by Mr. Wood, and passed unanimously by voice vote. Ms. Jensen will have an Order prepared granting the disability, and the benefit will begin as of this date, May 29, 2019. Chairman Gillette called for any further business. Hearing none, the meeting was adjourned at 10:17 a.m. By: i/a,,w.. �. 7 .E'.C'/,L rk/ O Jason Gillette 19 CITY OF SEBASTIAN POLICE PENSION BOARD MINUTES OF REGULAR QUARTERLY MEETING MAY 29, 2019 I. Call to Order -- Chairman Jason Gillette called the meeting to order at 10:18 a.m. II. Roll Call Present Board Members: Jason Gillette Randy Moyer Paul Williamson Tim Wood Absent Christine Vicars -- Excused Also Present Bonni Jensen, Klausner, Kaufman, Jensen & Levinson, Attorney for the Board of Trustees Ken Killgore, Plan Administrator Cynthia Watson, Human Resources Manager Theodore Loew, Morgan Stanley (via telephone connection) Steve Stack, Highland Capital Mindy Johnson, Salem Trust Janet Graham, Technical Writer III. Vote to Excuse Absent Board Member Motion to excuse absentee was made by Mr. Gillette and seconded by Mr. Moyer. Motion carried unanimously by voice vote. IV. Approval of Minutes -- Regular Meeting of March 12, 2019 Chairman Gillette asked if there were any changes or corrections to t he Minutes of March 12, 2019. Mr. Wood noted that in those Minutes where the name of appears, that should be Motion to accept the Minutes of the meeting with that correction was made by Chairman Gillette and seconded by Mr. Moyer. Motion carried unanimously by voice vote. V. Old Business POLICE PENSION BOARD PAGE 2 MINUTES OF REGULAR MEETING OF MAY 29, 2019 A. Approval of Payments 1. Brookfield Public Securities Group $ 802.15 2. Klausner, Kaufman, Jensen & Levinson – March/April 7,093.69 3. Graystone Consulting – January to March 3,375.00 4. City of Sebastian – April/May/June 6,000.00 Motion to approve the payments as listed above was made by Mr. Williamson, seconded by Mr. Moyer, and passed unanimously by voice vote. VI. Public Input -- None VII. New Business A. Report from Investment Monitor (via Telephone Connection) -- Theodore Loew, Morgan Stanley Mr. Loew began his report by talking about what has occurred regarding investments during the first quarter. He reviewed that the 4th quarter of 2018 was one of the worst quarters since 2011. Coming out of that was the best January that's been seen in years and one of the best quarters. So there was a strong rebound. During the 4th quarter there was a lot of uncertainty about the tariffs, what the Fed would do going forward, etc. A few of these concerns have been resolved, including the Federal Reserve who said they would pause before increasing interest rates. There were strong growth numbers in the first quarter, with GDP coming in at 3.2%, stronger than what was expected. Trade tension still remains unresolved, which created market volatility going into the second quarter. He reviewed the US Equity Market Returns. There have been strong economic returns even with the volatile fourth quarter. Large-cap equities continue to outperform small-cap equities. Growth stocks continue to lead the market. All sectors were positive for the first quarter. There have been negative returns in the international markets. There continue to be positive returns in the fixed- income markets. Interest rates have continued to decline. Other countries have lower interest rates than the US, so there is a demand for US investment products. The highest returns are on the long-term investments. Regarding the pension portfolio, the total portfolio is $15,243,163.00 with a total gain net of fees of $1,292.209.00 or 9.21% return – a very strong return to start the year. It was slightly underweight total equity of 63.7% versus the target of 65%. Regarding cash, our POLICE PENSION BOARD PAGE 3 MINUTES OF REGULAR MEETING OF MAY 29, 2019 target was zero, but we are at 3.06%, so we are slightly overweight with cash. There is no need to rebalance, as we are in range for all of our managers. So there is no action needed to be taken from an asset-allocation standpoint. Regarding the individual managers and total performance, Highland Capital still has a strong return, although a little bit behind the index. There is still seen outperformance long term of 6.81% versus 5.94% on the index. Stock selection was the reason for underperformance, and that was due to health care. The plan still has downside protection which helps over the long term to outperform. On the growth side, performance for the quarter is up 14.68% versus the benchmark at 16.1%. This was due to sector selections and an overweight of health care. Regarding the next two managers, Boston Partners and Fiera Capital, those two managers are paired together, one being a little bit more volatile than the other. Boston Partners mid-cap value – they are more volatile. They were up 13.72%, the index being up 13.12%. Boston Partners will continue to be monitored. Fiera Capital was up 19.17% for the quarter outperforming the 18.99% benchmark. Highland International slightly underperformed for all time periods. For the quarter, they were up 7.97% versus the index of 9.98%. The Renaissance International manager outperformed for the quarter, up 11.0% versus a 10.31% benchmark. On fixed income, Highland has done very well for all time periods measured, up 2.97% versus 2.94%. Regarding the alternative managers, Center Coast was up 19.73% for the quarter. Intercontinental private real estate outperformed for all periods, up 1.98% versus 1.8%. The plan was negative 1.72% at the end of March, so the plan has not recovered fully from the fourth quarter of 2018. Market volatility has picked up since then as well. He stated that since the changes were made in reallocating funds, there have been mixed results. Active managers have started to outperform over the last six to eight months, and it is hoped that will continue going forward. Decision has been made to move away from fixed income and diversify out, adding two alternative investments. He asked if there were any questions from the Board. Hearing none, he stated that they will work on getting the updated materials and will bring research materials to the next meeting. POLICE PENSION BOARD PAGE 4 MINUTES OF REGULAR MEETING OF MAY 29, 2019 B. Report from Investment Managers – Highland Capital Mr. Stack then spoke regarding Highland Capital. He stated that Mr. Loew covered a lot of the same information that he planned to present. He pointed out that the first quarter was the best quarter since 2009. He also mentioned that health care has started to rebound, so that is helping. For this quarter, both growth and value are outperforming on the negative side of the market, which means the plan is protected on the downside, and that's what they're trying to accomplish. They are comfortable with the way the portfolio is structured, but they are being defensive in the portfolios. He does not expect a big increase in housing due to the fear of the trade wars, tariffs, etc. He described the conditions in the international markets and how they affect the US market. He asked for questions from the Board. Mr. Williamson inquired whether Highland does their own research. Mr. Stack stated the products he described are all researched internally. They also have outside research that they subscribe to. He went on to give a brief description of how they do their research. C. Declaration of Intent to Utilize Deferred Retirement Option Plan (DROP) Mr. Killgore called the Board's attention to a document from Deputy Chief Gregory Witt, which is in the Agenda packet, declaring his intention to enter the DROP on October 27, 2019. Ms. Jensen explained that once his benefit is calculated, he would make a selection, and the Board would approve his entry into the DROP at that time. Mr. Killgore said he would target the September 17th meeting to present the Board with the actual calculations and ask the Board for approval of the entry into the plan. Deputy Chief Witt will be the first participant in the DROP plan. Ms. Jensen said that 1.3% per annum is the fixed rate of return that is credited to the member's account. D. Application/Contract to Buy Back Military Service Mr. Killgore described that this procedure is also the initial application to this Board. Officer Eric Antosia has made arrangements to obtain the money that the actuary calculated in order to buy back three of the four years that are available under the plan. Ms. Jensen's office has supplied the City with a contract agreement that Mr. Antosia will have to execute. The amount Mr. Antosia will need is $52,749.00 in order to enter into the plan, payable in one lump sum within six months of his request. She stated that money will go into the pension plan. She also explained the guidelines for this program. POLICE PENSION BOARD PAGE 5 MINUTES OF REGULAR MEETING OF MAY 29, 2019 Mr. Killgore asked for a motion on accepting this Declaration. A motion to approve the Application/Contract to buy back military service was made by Mr. Williamson, seconded by Mr. Moyer, and passed unanimously by voice vote. E. Legal Updates – Klausner, Kaufman, Jensen & Levinson – Bonni S. Jensen 1. House Bill 265 on Disclosures (Withdrawn) Ms. Jensen reported that this bill, which would have required a lot of work on the administrative side, did not pass. She reminded the Board members that the rules governing ADA compliance are still in effect for the five documents that the Board still has to file, and she is learning more about that, which she will share with the Board. She suggested that going forward the contractors that we do business with should be asked to help make sure that we are in ADA compliance. 2. Changes in Tax Rules for Alimony Ms. Jensen stated the Pension Board can be subject to paying alimony for members through an income-withholding order. Because of the substantial change in the way alimony is treated for tax purposes, we should make sure that participants are aware of that. For divorces that are entered into after January 1, 2019, members have to pay the taxes themselves. So that alters the amount that a member would pay in alimony, because the payer of the alimony would be paying the taxes on the alimony. She suggested that a packet be prepared that can be given to members who are entering into a divorce. It would have information about we as a governmental pension plan are not subject to qualified domestic relations orders. Actually, this pension plan has a provision in it that, if we have to go to court and challenge the order because they are not following our rules, they are required to pay our attorney fees that it costs to get that put into place. Letting them know all of that information, we can give them a sample order. There is a way that's been developed where members can split their pensions for purposes of either alimony or equitable distribution of their pension that doesn't involve the Pension Board at all; the two divorcing parties can work it out. Her firm will prepare the sample order and send it to the Board for review at the next meeting. Mr. Moyer asked if that rule is retroactive. Ms. Jensen said it can be retroactive if the parties agree to it. 3. Statement of Financial Interest Annual Form 1 Ms. Jensen reminded the Board that it is the time of year that the Board members must POLICE PENSION BOARD PAGE 6 MINUTES OF REGULAR MEETING OF MAY 29, 2019 file their Form 1s. If the form 1s are not timely filed, penalties begin to accrue September 1st. But the forms themselves are due on July 1st. She recommends that the form be filed in a manner by which you can prove that it has been filed, such as Certified Mail, FedEx, UPS, etc. The form itself indicates that it can be filed via email. Last year, there were many places where it could be filed via email, and there was an immediate response from the Supervisor of Elections. She has heard that that is not necessarily the case this year, as some of the supervisors are refusing to accept it via email. She has a sample form in the agenda packet for anyone who has not yet received his/her form. They can also be obtained online. 4. Tax Treatment of Duty-Related Disability Pensions Ms. Jensen stated, in general, disability payments that are in the nature or workers compensation are not subject to tax. It is paid according to a schedule. Also regarding this subject, the Board has to make the determination that the disability occurred in the line of duty. It is still her recommendation that boards of trustees do not make the determination of whether something is or is not taxable, and that you continue to mark the box, "Taxable Not Now Determined" for people who are entitled to disability. The issue is then between the individual and the IRS. Copies of the minutes where the decision was made and copies of the order can be provided when desired. This issue has been complicated in Florida, as the State of Florida has just passed a presumption for firefighters, and there are 21 cancers that are presumed to have occurred in the line of duty. 5. Other Legal Matters Ms. Jensen stated she had nothing further, but she informed the Board that her firm is having their conference on June 10-12, 2019 in Fort Lauderdale, and the Board members are invited to attend. Anyone wishing to go can go to Klausner, Kaufman's website and register. VIII. Board Member Reports and Comments -- None IX. Plan Administrator Reports and Comments 1. Update on 2018-2019 Budget/Actual Expenses Mr. Killgore reviewed the budget and actual expense sheet that is included in the Agenda packet, which covers payments disbursed over this fiscal year. He pointed out that the POLICE PENSION BOARD PAGE 7 MINUTES OF REGULAR MEETING OF MAY 29, 2019 legal fees are higher because of the disabilit ies and other activities, which are already over budget. Also, the functional capacity assessments were budgeted at $1,350.00, and the actual amount was $2,700.00. Other than those two items, everything else is in line. There is a contingency fund of $15,000.00, and he suggested that can be used to cover these unexpected costs. 2. Review of Annual Calendar of Board Activities Mr. Killgore stated that the summary plan description is a work in process , and that will be presented to the Board, as well as the financial disclosure form, which will also be provided to the Board. 3. Notice of Change in Ownership of Salem Trust Mindy Johnson, representing Salem Trust, reviewed the change of ownership. Salem was bought by TMI Trust, which is looked upon in a positive light by Salem. She stated that TMI services their clients the same as Salem does and has the same types of clients. It has been confirmed that they will not be going through a systems conversion . She added that from an operating standpoint, there will be very little change seen. She reviewed the quarterly service report. Ms. Johnson was asked to provide an analysis of the impact of the addition of all the separately managed accounts. She provided an in-depth review of how their fees are calculated, the rise in fees having occurred due to the addition of the new managers. Mr. Williamson asked if Salem/TMI makes block trades. He also inquired if there is a program to get the costs of all the trades down. Ms. Johnson stated she would run this plan through some models to see what a basis-point plan would look like to help cover the additional costs. She will also research the subject of block trades. Mr. Gillette asked for some clarification on the history of how this change to several managers occurred, which has resulted in significantly higher operating costs. Ms. Jensen gave some additional information on how this change occurred and the dates involved. She stated this is being monitored for comparison, but it will take some more time to clearly define the impact on the account. Ms. Johnson stated she would delve into the matter and will send her findings to Mr. Killgore. 10. Scheduled Quarterly Meetings September 17, 2019 December 10, 2019