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HomeMy WebLinkAboutCORRESPONDENCE - RFP - P926 PUBLIC SECTOR RETIREMENT PLAN, INVEST CONSULT (5)1 INVESTMENT POLICY INVESTMENT POLICY FOR POUDRE FIRE AUTHORITY NEW HIRE MONEY PURCHASE PENSION PLAN POUDRE FIRE AUTHORITY OLD HIRE MONEY PURCHASE PENSION PLAN Adopted on January 27, 1999 Amended August 13, 2003 2 TABLE OF CONTENTS I. Statement of Purpose II. Background III. Responsibilities of Parties IV. Investment Goal and Guidelines V. Plan Administration Selection, Review, and Responsibilities VI. Investment Options Selection and Review 3 I. Statement of Purpose The purpose of this policy is to clearly prescribe suitable and professional management procedures for the Poudre Fire Authority=s 401(a) retirement investment process. To foster reasonable standards of due diligence and procedural prudence, this policy will outline the responsibilities of all parties involved, the methods of meaningful communication among the parties, clearly delineate the investment goal and guidelines, and set forth performance standards for all investment options. II. Background The Plans are exempt alternative Plans and offer participant-directed investments consistent with C.R.S. ''31-30.5-803 and 31-31-602. Participants in the Plans are responsible for making their own investment decisions, and may select from an array of investment alternatives. Neither the Trustees nor the employer(s) sponsoring the Plans are liable for any loss or breach of duty resulting from a participant=s direction of the investments in his or her individual account. The employer and employee each contribute 8% of the employees= salary to the employees= retirement account. Participants may self-direct their investments as soon as they become eligible to participate in the Plans, have a balance in their accounts, and complete and return an investment election form. If no election form is returned, participants= accounts will be invested in Guaranteed Interest until the election form is received. Participants may select from a range of investments, change investments, and will receive financial and activity statements as prescribed by state law. The Boards of Trustees are composed of both employee and employer representatives. The Trustees are elected or appointed as prescribed in the retirement Plan documents. Any questions concerning this investment policy should be directed to a member of the Boards of Trustees. III. Responsibilities of the Parties A. Responsibilities of the Boards of Trustees 1. The Trustees possess those powers and responsibilities set forth in Article VIII of the Poudre Fire Authority New and Old Hire Plans and Article IX of the District Old Hire Plan. The Trustees shall manage the Plan assets pursuant to the terms and conditions of the Plans and solely in the interest of the beneficiaries. 2. The Trustees shall exercise reasonable care, skill, and caution in making investment alternatives available to participants under the Plans. 4 3. The Trustees shall (i) select at least three investment alternatives, each of which is diversified in itself, that allow the participant a broad range of investments and a meaningful choice between risk and return in the investment of the participant=s accrued benefit; (ii) allow the participant to change investments at least once each calendar quarter; and (iii) provide the participant with information describing the investment alternatives and the nature, investment performance, fees, and expenses of the investment alternatives and other information to enable a participant to make informed investment decisions. 4. The Trustees may delegate management and administrative functions and fiduciary responsibilities that prudent trustees of comparable skills could properly delegate under the circumstances. 5. The Trustees shall exercise reasonable care, skill, and caution in selecting agents, establishing the scope and terms of the delegation consistent with the purposes and terms of the Plans, and periodically reviewing the agents= actions in order to monitor the agents= performance and compliance with the terms of the delegation. B. Responsibilities of Agents 1. In performing a delegated function, an agent owes a duty to the Plans to utilize the same care, skill, prudence and due diligence under the circumstances then prevailing that experienced investment professionals acting in a like capacity and fully familiar with such matters would use in like activities for like retirement plans with like aims, in accordance and compliance with all applicable laws, rules and regulations from local, state, federal and international political entities as they pertain to fiduciary duties and responsibilities. C. Responsibilities of Participants 1. Each participant shall provide timely input to the Trustees concerning his or her level of satisfaction with the Plans, the Trustees= management of the Plans, and any agent=s performance. 2. Each participant shall take advantage of investment education opportunities and written materials provided by the Trustees and agents to become fully informed as to the nature of the Plan investment option alternatives, the investment option performance, fees, and expenses of the investment option alternatives, and other information to enable a participant to make informed investment decisions. 5 3. Each participant shall take responsibility for his or her investment decisions and realize that each participant is responsible for his or her own retirement planning. IV. Investment Goal & Guidelines The paramount goal of this policy is to enable employees to utilize sound investment practices to develop an investment portfolio tailored to their own risk, return, and time-line preferences. To meet this goal the following guidelines will be applied to the selection of investment alternatives and to administration of the investment process: A. Diversification within investment categories and with regard to the range of investment options. B. Timely investment performance information. C. Meaningful range of risk and return options. D. Readily available investment educational opportunities. E. Full disclosure of investment costs. F. Procurement of competent professionals to help administer the retirement investment process including assisting the Boards on management matters and providing educational opportunities to Plan participants. V. Plan Administration Selection, Review, and Responsibilities A. The Boards may select one or more agents as plan administrators to provide services to the Boards. The plan administrator shall be a bank, insurance company, investment management company, or an investment advisor as defined by the Registered Investment Advisors Act of 1940. The Boards shall periodically review the performance of the plan administrators to ensure that the plan administrators are competently and professionally performing their duties as delegated to them by the Boards. The frequency of such periodic review shall be as determined by the Boards, but shall not be less frequent than biennially. Such review may include, but is not limited to, the following criteria: 1. Ability to and record of satisfactorily satisfying those responsibilities set forth in subsection B of this Article V. 2. Level and quality of services provided to the Boards and participants. 6 3. Cost of services provided. 4. Nature, quality, and costs of investment options offered. 5. Quality and frequency of educational opportunities offered. 6. Quality of advice provided to the Boards. 7. Financial stability and integrity of the plan administrator and its personnel. B. Unless otherwise specified by the Boards, the plan administrator shall be delegated the following responsibilities: 1. Provide advice to the Boards concerning the selection and retention of mutual funds and other investment options based upon the criteria set forth in Article VI A of this policy. 2. Provide data, analysis, and recommendations to the Boards in order to allow the Boards to conduct the annual review of investment options as described in Article VI B of this policy. 3. Notify the Boards when any of the criteria set forth in Article VI C of this policy indicate the need for a review of an investment option pursuant to said provisions. 4. Promptly inform the Boards of all significant and/or material matters and changes pertaining to any investment option offered by the Plans, including, but not limited to any of the following: a. Investment strategy; b. Portfolio structure; c. Tactical approaches; d. Ownership; e. Organizational structure; f. Financial condition; g. Professional staff; h. Recommendations for guideline changes; i. All legal matters and regulatory agency proceedings affecting the investment option. 5. Implement, maintain, and document a Plan participant communication system which assures Plan members easy and efficient access to information concerning: investment options and alternatives; risk and return associated with the investment options; the nature, investment performance, fees, and expenses of the investment option alternatives; and other information to enable a participant to make informed investment decisions. 7 6. Implement, maintain, and document a Plan participant education program which assures Plan members of easy and efficient access to understandable retirement investment education concepts and information. VI. Investment Options Selection and Review A. General Criteria. In its selection and retention of mutual funds or other investment options to be offered to Plan members, the Board may consider, but is not limited to, the following: 1. performance of the investment option; 2. an examination of the return and risk history; 3. the reputation and the financial stability of the investment option and investment option manager(s) in the industry; 4. the quality of the investment option management company; 5. size of the investment option; 6. name recognition by the public; 7. rating and rankings by independent investment option tracking and monitoring services; 8. review of investment option operating expense information; 9. the prospectus of the investment option; 10. the compatibility with other investment options available in the Plan, and; 11. review of the investment style and composition of the investment option. B. Annual Review of Investment Options. 1. An annual review of investment options performance will be conducted in April of each year, or as soon thereafter as deemed reasonable by the Board, to test progress toward the attainment of longer term goals. Morningstar, Inc. will be used for performance data for any openly traded investment option. Proprietary investment options will be required to provide the necessary data to the Board for review prior to the April performance review. It is understood that there are likely to be short-term periods during which performance deviates from market indexes. During such times, 8 greater emphasis shall be placed on peer-performance comparisons with managers employing similar styles. 2. The annual review by the Board will, at a minimum, focus on: a. Investment option manager adherence to the Policy guidelines; b. material changes in the investment option manager=s organization, investment philosophy, and/or personnel; c. Comparisons of the investment option manager=s results to appropriate indexes and peer groups, specifically: Asset Category Domestic Large Capitalization Equities: Value Yield Growth Core Domestic Small Capitalization Equities International Equities: Core Domestic Fixed Income: Bond Guaranteed Income Funds Index S&P 500 S&P500 S&P500 S&P500 S&P500 Russell 2000 MSCI EAFE Lehman/Government/ Corporate Intermediate 5 Year Treasury Peer Group Universe Total Equity Database Value Equity Style Yield Equity Style Growth Equity Style Core Equity Style Small Capitalization Equity International Equity Core Fixed Municipal Bond Fund Database Intermediate Style Any other types of funds or other investment options adopted by the Boards of Trustees will use Peer Group Universe and Index used by Morningstar, Inc. in their reporting of the specific investment option=s performance, to the extent reasonably possible. 3. The risk associated with each investment option=s portfolio, as measured by the variability of annual returns (standard deviation), should not exceed that of the benchmark index and the peer group without a corresponding increase in performance above the benchmark and peer group. 9 4. Each investment option is expected to perform in the upper half of the respective style universe. Investment options not meeting these expectations will be reviewed again at the meeting of the Board of Trustees 6 months from the initial review, or as soon thereafter as deemed reasonable by the Board. C. Other Review of Investment Options. 1. The Boards are aware that the ongoing review and analysis of investment options is just as important as the due diligence implemented during the initial selection process. The Boards may, in their discretion, take corrective action by replacing an investment option if they deem it appropriate at any time. Accordingly, a thorough review and analysis of an investment option will be conducted if: a. an investment option performs in the bottom quartile (75 percentile) of the peer group over an annual period; b. an investment option manager falls in the southeast quadrant of the risk/return scattergram for three year time periods as compared to the appropriate index as listed in Section VI.B.2.c. [amended 8/13/03]; c. an investment option has a five-year risk-adjusted return that falls below that of the median within the appropriate peer group. 2. Performance that may require the replacement of an investment option includes: a. an investment option or investment option manager that performs below the median (50th percentile) of the peer group over rolling three year periods for more than three quarters; b. an investment option or investment option manager that performs below the median (50th percentile) of the peer group over a five year period; c. an investment option or investment option manager with a negative alpha for three and/or five year periods. 3. Major organizational changes or events that may warrant review of an investment option, include: a. change in professionals; b. significant account losses in relation to the peer group or general market conditions; c. significant growth of new business; d. change in ownership; e. the investment option manager or other associated professionals being named in significant legal action related to the operation of the 10 investment option.