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HomeMy WebLinkAbout03-16-2021 MinutesCITY OF SEBASTIAN POLICE PENSION BOARD MINUTES OF WORKSHOP MARCH 16, 2021 Call to Order -- Acting Chairman Tim Wood called the meeting to order at 10:10 a.m. II. Roll Call Present: Board Members: Tim Wood Paul Williamson (Zoom) Not Present: Andrea Ring -- Absent Albert lovino — Absent Also Present: Bonni Jensen, Klausner, Kaufman, Jensen & Levinson, Attorney for the Board of Trustees (Zoom) Ken Killgore, Plan Administrator Cynthia Watson, Human Resources Manager (Zoom) Andy Mcllvaine, Morgan Stanley (Zoom) Scott Owens, Morgan Stanley Doug Lozen, Foster & Foster Todd Wishnia, Highland Capital (Zoom) Barbara Brooke -Reese, MIS Manager Janet Graham, Technical Writer (Zoom) III. Since there is not a quorum present due to the COVID-19 pandemic, Ms. Jensen stated that there are two choices for the Board: (1) Stop the meeting now and reschedule it for another day; or (2) In a workshop fashion take in the reports that are available right now and not take any motions on those reports. Acting Chairman Wood suggested the second choice, as there are some who traveled to attend this meeting, and he does not want them to have traveled here for nothing. Ms. Jensen stated that there would be a workshop meeting today and the reports will be accepted. IV. Old Business B. Presentation of Study on the Anticipated Long -Term Rate of Return POLICE PENSION BOARD PAGE 2 MINUTES OF WORKSHOP DATED MARCH 16, 2021 Mr. Lozen stated that he did not plan to ask the Board to make a decision on the investment assumption at this meeting. He will plan to come to the June meeting, and he will resume the discussion on this matter. Acting Chairman Wood suggested this is an important subject, and he would like everyone to be present in order to hear the presentation. Mr. Williamson agreed. V. Public Input There being no one present in chambers who wished to speak and no one on Zoom, Acting Chairman Wood moved to the next item on the agenda. VI. New Business A. Report from Investment Monitor Mr. Owens stated his counterpart, Mr. Mcllvaine, is attending via Zoom, and he will have Mr. Mcllvaine talk about some of the action items that have taken place since the last meeting. There have been some manager changes, some asset allocation changes, and then Mr. Owens will talk about the market and the economy as well as the portfolio. Mr. Mcllvaine addressed the action items since last quarter: (1) They needed to get the IPS filed, which was done. The reason for the changes in the IPS is that they were implementing a new mix, which Included infrastructure and getting out of MLPs. That has been done, and they have moved forward with the Lazard infrastructure purchase on January 4, 2021. (2) During the last quarter, the Board approved a motion to get out of Highland Large -Cap Growth and replace it with a mix of both Polen and a Russell 1000 Growth Passive Index. There has been a lot of work that has been done behind the scenes, both from Ms. Jensen and Mr. Kilgore, and he is grateful for all their help. The authorization letters to terminate Highland were sent on March 8, 2021. The transition letters have been sent to Mr. Kilgore. That should be completed sometime this week or next for them to officially takeover the money. He then called on Mr. Owens for his report. Mr. Owens stated that this is a great quarter to report on. It is one of the best quarters that has ever been experienced. The year-to-date number is really good, and 2021 looks really good. He reviewed that the year 2020 is going to be a year that is going to be studied for decades to come. It is going to be studied by economists, by analysts, by market participants, by health care professionals, by policy makers across the board. Last year at this time the discussion was about how the market was at all-time highs, the unemployment rate was at all-time lows, and then the pandemic happened. At the beginning of the pandemic there was a lot of uncertainty. Consequently, governments across the globe decided to shut everything down, which caused a recession. The POLICE PENSION BOARD PAGE 3 MINUTES OF WORKSHOP DATED MARCH 16, 2021 uniqueness about that recession is that it was not an economic recession; it was a policy recession, and the market collapsed somewhere around the end of March 2020. His point is that the market is a leading indicator. The market goes in a direction before the economy goes. Even when the market low was the end of March, the market bounced right back. That is when everything was shut down. The reason the market bounced back is because the government intervened and said it was going to provide stimulus. So it was a policy recovery; it was not an economic recovery. The market came back, and the unemployment rate is still about 6.3, which is a lot better than at the peak when it was about 14.5. The election of 2020 had an impact. There was a lot of uncertainty in the market, but then came the vaccines. He went on to say that presently the market and the economy fundamentally is doing pretty well. The unemployment rate is moving in the right direction. Inflation right now is practically nonexistent. There is a big expectation that inflation is going to increase at approximately the rate of 2.5%. He stated that most analysts believe that it is going to be a really good environment for the market over the next year or so. He described the possible scenarios and their impacts on the market. It is expected that active investments are going to do well going forward, and it is also expected that value is going to be the clear winner. Mr. Owens reviewed the Summary Repots which were attached to the agenda packet (SEE ATTACHED). He then called on Highland for their report. Mr. Todd Wishnia reported that his firm was in touch with Salem Trust yesterday. All their trades have settled, and they have ceased trading. That should be taking place in the next day or so with the transition. A. Report from Investment Manaaer — Hiahland Capital Mr. Wishnia reviewed Highland's activity. He agreed with what Mr. Owens had reported on what was happening within the market environment. He stated that everything that had been hurting the portfolio over the last year or several years is now starting to help financials. They are up 26% in the index. Energy was up 28% in the value index. They underperformed by about 3% in the industrial sector. He described what has been happening in the international markets. For this quarter, internationals are outperforming 7.1% against the index at 3.7%. Fixed income also had a nice quarter, outperforming just over 1 % against the index at 0.67%. He opined that it is going to be a challenging year in the fixed income sector, as rates will be going up and down. He called for questions from the Board. POLICE PENSION BOARD PAGE 4 MINUTES OF WORKSHOP DATED MARCH 16, 2021 Acting Chairman Wood asked if there are issues with rising gas prices, cost of lumber or anything like that. Mr. Owens stated that is the inflation that he spoke about. C. Election Process to Replace the Police Officer Board Member Ms. Jensen said that the Board can talk about the election process, since there is not any action that the Board needs to take with regard to that. She reviewed that there is a policy that already exists in the rules. She suggested that she and Mr. Killgore could work together to flesh it out. But for the police officer trustee election, the police officer is elected from among the members of the fund. So there would need to be notification gotten out to them. There should be some place where notice can be posted stating that we are looking for someone who is interested in running. Then we ran get candidates, people who are interested. If there is only one person who is interested in running after a stated period of time to sign up, they are elected, and there is no need to go through the election process. If more than one person signs up, we would put together a ballot. She stated she would defer to Mr. Killgore as to the best way to do that. There can be an in -person election with a ballot box. That means that someone would need to man the ballot box for the period of time for which it is available. When there is shiftwork involved, either a 24-hour period or successive days is the plan that works the best in order to capture everyone. The policy provides that the election is by a majority vote. If there is no majority, if it is a tie, or if the votes are spread out so that no one gets a majority, then a runoff election would be held. There can be a mail ballot which would be sent out to everybody. She has had some funds who have done email ballots. Mr. Killgore added that the operating rules require, if there is a balloting, that the Board actually approves the ballot and certifies it. This might tie in with the need to have a special meeting of the Board. Depending on what the results are of our process, he would poll the consultants as far as during what time there could be a special meeting between now and the June 15th meeting. Officer Wood stated that that is assuming that there is more than one person interested. Mr. Killgore stated that is correct; if there is only one person interested, there would be no need for a special meeting. Mr. Killgore stated he Will coordinate with Officer Wood to see what works best. Officer Wood suggested sending an email out to all members would be the most efficient way to solicit candidates. He suggested that Mr. Killgore or himself would be a point of contact if anyone has questions regarding what the position entails. Mr. Killgore stated that the reason for having this election is because Jason Gillette, the Chairman, had resigned, and so the Board is left with a vacancy. Officer Wood clarified that Jason resigned from his job as a police officer with the City and went on to the private sector. Vill. Leaal Uodates POLICE PENSION BOARD PAGE 6 MINUTES OF WORKSHOP DATED MARCH 16, 2021 Ms. Jensen stated she has a few items, none of which requires a vote by the Board of Trustees: A. There is a new law that is applicable to public employers and requires them to register with and use E-Verify. The definition of public employers is more than just where someone is a governmental entity and hires people. They actually apply this law to entities that enter into contracts with persons or entities for services for money. So, because this Board enters into contracts with all of their service providers, it is subject to this law. So there are three things that have to happen: 1. The Board needs to be registered with the E-Verify system. 2. The service providers who work with the Board will need to be notified that, by virtue of entering into a contract with you, they are subject to this particular law. 3. Any future contracts will have to have the language in them that the individual manager is required to register with and use the E-Verify system. It was added to the Polen contract, so that contract is in compliance with the law. She has put together a packet which contains the information needed to register with the E-Verify system, as well as a letter that can be provided to the service providers, letting them know that they need to register with and use the E-Verify system. Her firm has provided Mr. Killgore with a letter indicating that the firm is registered with the E-Verify system. Highland is registered, and she thinks that Foster & Foster is working on it. She does not know about Graystone. She will reach out to everyone to make sure that everyone is aware. Officer Wood asked about the process when new officers become employed and will a packet be provided to them during an orientation period. Ms. Jensen stated that new officers will be checked by the City. This is really just for purposes of tying in all of the people that this Board enters into contracts with. So all of those who work for this Board will have to verify the work authorization status. Mr. Killgore stated that the City already is using E-Verify for all employee hires. Ms. Watson verified what Mr. Killgore stated. Ms. Jensen stated that the Pension Board will have to register as the Pension Board, even though the City administers the contracts on behalf of the Board. That means that they are a separate entity from the City. She further stated that the Board will have to get an EIN number in order to register. If the Board is using the City's EIN number for the purpose of paying the pension benefits, paying the taxes, and reporting on the W-9s, then that is a separate matter. She suggested she and Mr. Killgore talk about this. POLICE PENSION BOARD PAGE 6 MINUTES OF WORKSHOP DATED MARCH 16, 2021 B. The next item she covered was the fact that her firm put together a statement on best practices concerning locating missing or nonresponsive participants. There is a memo attached to the agenda that describes how to find people. This comes up with refunds of contributions. Members in this pension fund plan are permitted to leave their contributions in the plan for five years, even if they are not vested, pending the ability to rehire. But then the money is supposed to be distributed at that point. If the City has lost track of that person during the five-year period, this helps to find them, especially participants who are vested and have terminated and whom the City has lost track of between the time that they leave and the time that they are entitled to a benefit, particularly as they are approaching the age of 72. Then any kind of DROP distributions that need to be made once people reach age 72 is explained. C. She has attached a memo to the agenda packet which covers the IRS mileage rate. It has decreased this year to 56 cents per mile. She stated as the gas prices go up, the IRS may make a change. Ms. Jensen spoke regarding an item that is not on the agenda, which lathe matter of Jack Grimmich. She was contacted by the mother of the minor wanting to move this forward. Ms. Jensen stated she had reached out to Mr. Killgore and Ms. Watson to see If they were able to find some contact information for the daughter who is now at the age of majority. She thinks Mr. Grimmich's brother works for the Police Department, and maybe he is able to contact her. Agreements from those parties will be needed. The minor's mother indicated to Ms. Jensen that she would like to take a refund of contributions without going through the whole process for the forfeiture determination. That is the question that Ireland will be asked in order to find out if she is agreeable. If they are not both agreeable, then it will be necessary to go through the whole process. Ms. Watson stated that she did reach out to Officer Grimmich regarding this situation. She has not heard back from him. Officer Wood stated he will reach out to Officer Grimmich as well. Ms. Jensen stated that if it is possible to contact Ireland, then Ireland should reach out to Ms.Jensen. IX. Board Member Reports and Comments — None X. Plan Administrator Report and Comments A. Annual State Pension Report was filed Mr. Killgore updated the Board that, with the help of Foster & Foster, the Annual State Pension report has been filed. POLICE PENSION BOARD PAGE 7 MINUTES OF WORKSHOP DATED MARCH 16, 2021 B. Ordinance 0-21-02 on IRS Plan Amendments was approved by City Council Mr. Killgore described the IRS changes that were adopted finally by City Council during this last quarter. C. Budget report, Calendar of Board Activities and Other Administrative Matters Mr. Kilgore stated the budget report is in the agenda packets. There were no serious concerns or issues. The Calendar of Activities is being adhered to as scheduled. He stated there was nothing else he needed to report on. X. Next Scheduled Quarteriv Meetina — June 15.2021 Officer Wood asked Ms. Jensen If there would need to be a special meeting regarding the vote. Ms. Jensen stated she has a call in to the state to determine what they are requiring in this COVID period. She thinks that this workshop could count, but the Board will definitely need to approve the report that it was given today from Graystone for the quarterly report as well as Highland in order to be sure that we have gotten that accomplished. Unless she hears differently from the state, she is taking the position that we say we had a workshop for this quarter's meeting and it was stated in the Minutes that we were unable to get a quorum. XI. Adjourn There being no further business, the meeting was adjourned by Acting Chairman Wood at 11:02 a.m.. Bv: tr lC Date: 0612312-41 Jg