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HomeMy WebLinkAboutRetirement Committee - Minutes - 01/06/1994FORT•COLLINS GENERAL EMPLOYEES RETIREMENT COMMITTEE JANUARY 6, 1994 MEETING MINUTES , COUNCIL LIAISON: Ann Azari, Mayor COMMITTEE MEMBERS PRESENT: ABSENT: None Jerry P. Brown Jackie Davis Dennis Sumner Dave Meyer Alan Krcmarik (Member & Staff Support) OTHERS PRESENT: Dave Agee, Staff Pension Oversight Committee Sue Wilcox (Staff Support - Secretary) Bob Eichem, Investment Officer, Treasury Division Sherrie Temple, Tax Auditor, Treasury Division CALL TO ORDER: Chairperson Dennis Sumner called the meeting to order at 1:20 p.m. in the 2nd Floor Conference Room of City Hall West on January 6, 1994, noting that Dave meyer would join them shortly. APPROVAL OF MINUTES: Jerry P. Brown moved to approve the minutes of December 9, 1993 as distributed and Jackie Davis seconded the motion. Dave Agee offered the insight that the City has its own Unclaimed Property ordinance and that in discussions with the City Attorney, Dave was advised that the City's ordinance takes precedence over the State act. Jerry Brown then offered to include that information as a "friendly" amendment and Jackie Davis seconded the motion to amend the motion. Both the amendment and the motion were approved unanimously. , REVIEW OF DISCUSSION TOPICS: Two items were added to the agenda: the ICMA- Retirement Corp. and discussion of survivor benefits for married and unmarried employees. DISCUSSION TOPICS: 1. MEMBER COMMENTS: There were no member comments. 2. JAD COMMITTEE REPORT MAIN POINTS: The JAD Committee (a subcommittee of the Pension Oversight Committee and the GERC) composed of Jerry Brown, Ann Turnquist, and Dave Agee) was formed to determine and address differences and inequities among the various pension and deferred compensation plans that the City operates. Dave Agee advised the GERC that the JAD Committee would receive the responses to their Request for Proposals (RFP) for an actuarial consultant tomorrow. They would immediately begin a one -week review period, followed by interviews, hopefully around January 21st. Work has begun on a contract document. Dave assured the Committee that JAD would look at other sources (besides the GER Fund) for funds to pay for the consultant's services. CONCLUSIONS/NEXT STEPS: Dennis thanked the Committee for their work and will place this item on next month's agenda for an update. -1- 3. RFP FOR GER PLAN ACTUARIAL SERVICES MAIN POINTS: Jackie Davis reported that the City of Greeley will send a copy of an RFP they did about a year ago for actuarial services. She also suggested she and Opal continue to gather information, but defer any activity on writing the RFP until the JAD actuary makes his/her report on February 17th and the preliminary JAD report is issued around March llth. Dave suggested it might be possible to modify the current RFP for JAD actuarial services to be used for the GERC's actuarial services. CONCLUSION/NEXT STEPS: The members agreed that this plan was reasonable. 4. EQUITY IN SURVIVOR BENEFITS MAIN POINTS: The Plan presently provides for survivor benefits if an employee is vested but dies before he/she retires. If the employee is married The benefit is paid for the spouse's lifetime. If the employee is unmarried, the benefit is paid to the beneficiary for five years. Some perceive this as an inequity and the rationale was questioned. Sue Wilcox also raised the question of whether all employees would have to designate a beneficiary and how this could be accomplished. CONCLUSIONS/NEXT STEPS: Dennis will contact Don Mazanec, the City's actuary, regarding the concerns about the equity. He will ask Don to be prepared to discuss this issue with the GERC and have some information on any costs for changes to reduce this apparent inequity. He will also mention to Don the question of how to designate beneficiaries. Discussion will continue. ICMA - RETIREMENT CORPORATION MAIN POINTS: Alan Krcmarik and Ken Bueche, executive director of the Colorado Municipal League have been asked by Girard Miller, president of ICMA-Retirement Corporation, to serve on a customer advisory board which will provide input to the Retirement Corporation board. It will involve surveys, conference calls, and meetings during major conferences of such groups as ICMA, IPWA, and GFOA. He asked the members to let him know if they had any concerns for him to forward. CONCLUSIONS/NEXT STEPS: Jerry felt that there was no apparent conflict of interest and that there could be benefits from Alan's participation. The Committee members agree and offered their thanks and support. 6. INTERNATIONAL EQUITY INVESTMENTS MAIN POINTS: Bob Eichem introduced Sherrie Temple, who is a tax auditor in the Treasury Division and does the inter -bank investment transactions in Bob's absence. Bob then proceeded to explain his request to begin adding international equity investments to the General Employees Retirement Fund. Because the bulk of City retirements will occur in 10-20 years, it is prudent to increase the amount of equity holdings now, in order to meet those long- term financial needs. Historically since 1926, common stocks, while more -2- 0 volatile than bonds, have outperformed bonds as long-term investments and in outpacing inflation. Bob showed the following table to illustrate how different rates of return affect long-term investments. The starting point used as an example is the approximately $25 million the Pension Fund will have at the end of 1994. Compound investing means that the interest rate divided into 72 tells how long it takes the portfolio to double. Rate of Return 10 Years 15 Years 20 Years 6% (current rates) $45 million $60 million $80 million 7.5% (GER Fund Goal) $51 million $74 million $106 million 10% (attainable) $64 million $104 million $168 million 15% (optimum) $101 million $203 million $409 million In May, 1992, Bob was authorized by the GER Committee to begin to,diversify the portfolio. This was to be done by dollar averaging $25,000 per month into each of four separate growth mutual funds. The target was to go up to a maximum of ten percent of the portfolio and reevaluate at the end of the year or when ten percent was reached. The dividends on these funds are reinvested automatically to promote compounding returns. Bob pointed out that equity investments held for longer periods of time have are less likely to lose their initial value: EQUITY FUNDS HELD % CHANCE OF LOSING INITIAL VALUE OF INVESTMENT i year 30% 5 years 10% 10 years 4% Don Mazanec had pointed out in previous meetings that the GER Fund is very low in its percentage of investments currently invested in equities. Comparable -sized funds often have as much as 50 percent in equity investments„ Research indicates that governmental, defined -benefit retirement plans hold from 29 to 45 percent in equities. Therefore, he recommended that the fund's equity stake be increased. Bob researched 10 foreign investment funds, keeping in mind the investment policies 5-star criteria for mutual funds. Only two (T. Row Price International Equity and T. Row Price New Asia) met the criteria and Bob proposed that he be authorized to make a one-time investment of $500,000 each and then $50,000 per month through 1994. The Committee would review the funds' progress in January, 1994. The Investment Officer also proposed keeping the Janus and IAI funds which are presently part of the domestic equity investments, but discontinue further investments in Nicolas and the SIT Growth fund, since the projections WI for these funds are for slower growth. The Mutual Fund Forecaster indicates that these funds will not have as good growth as they have had in the past. Bob did note that $83,000 in dividends from the four funds, which is a 6% return, have been reinvested, and the SIT Growth funds underwent a 4 to 1 stock split. Proposed as replacements for Nicolas and SIT were Royce Equity Income and Brandywine funds. They have the advantage of being rated as strong performing 5-star growth funds for the future. Bob also stated that he would make this recommendation whether the GERC chooses to change the type of plan or not. These investments can be incorporated into different types of plans and the diversity is needed no matter what the plan. It was suggested that up to 25% of the portfolio be invested in equities (domestic and foreign) by the end of 1994. Alan concurred with Bob's suggestions. CONCLUSIONS/NEXT STEPS: After discussion, Jerry Brown moved that the Investment Officer be authorized to discontinue investing in Nicolas and SIT Growth funds, begin investing in Brandywine and Royce Equity in their stead, and also begin investing in T. Row Price International Equity and T. Row Price New Asia foreign equity funds. Jackie Davis seconded the motion and it was approved unanimously. 7. SOCIAL SECURITY GUIDE MAIN POINTS: William M. Mercer, Inc offers a booklet as a guide to Social Security information. CONCLUSIONS/NEXT STEPS: It was agreed to buy a quantity of the booklets for distribution to GER Plan members upon request. Its availability will be advertised in FortNotes. 8. ANNUAL REPORT MAIN POINTS: Dennis advised the members that he would be sending out a draft of the annual report electronically and it would include the list that Sue creates each year showing employees who retired, former employees who received lump -sum payments, and retirees who died during the previous year. CONCLUSIONS/NEXT STEPS: Any members having comments or changes in the Annual Report should reply to Dennis as soon as possible. His deadline is Jan. 31. ITEMS FOR FUTURE DISCUSSION 1. Possible seminars or workshops to increase GER Committee members' knowledge of their roles and responsibilities. 2. GERP / Workers Comp / Disability Proposal to E-Team 3. Monitor progress by staff Pension Oversight Committee -4- AGENDA i SCHEDULE FOR NEXT MEETING The next meeting will be February 3 at 1:15 p.m. in the 2nd Floor Conference Room. The agenda will include: 1. Plan member comments 2. 4th Quarter, 1993 Investment Report 3. JAD Report 4. Actuary RFP Status Report 5. Equity Concerns with Don Mazanec 6. Identification of Beneficiaries for Survivor Benefits ADJOURNMENT The meeting was adjourned at 3:30 p.m. MEETING SCHEDULE: The General Employees Retirement Committee meetings are normally held at 1:15 p.m. on the 1st Thursday of each month in the 2nd Floor Conference Room, City Hall West. Any change from that will be noted. THURSDAY, FEBRUARY 3, 1994 THURSDAY, MARCH 3, 1994 THURSDAY, APRIL 7, 1994 THURSDAY, MAY 5, 1994 THURSDAY, JUNE 2, 1994 THURSDAY, JULY 7, 1994 THURSDAY, AUGUST 4, 1994 -5-