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Minute No. 246
Washington County Retirement Board
Washington, PA February 21, 2013
The quarterly meeting of the Washington County Retirement Board was held at
approximately 10:57 a.m. on Thursday, February 21, 2013 in the Public Meeting Room with the
following members being present: Commissioners Larry Maggi, Harlan Shober, and Diana Irey
Vaughan; Controller Michael Namie; and Treasurer Francis L. King. Also present: Chief Clerk
Mary Helicke; Secretary Joyce Thornburg; Director of Finance Roger Metcalfe; Director of
Administration Scott Fergus; Solicitor Lynn DeHaven; concerned citizen Frank Byrd; Observer -
Reporter representative Barbara Miller; WJPA representative Tony DiPalma; Lee Martin
representing Peirce Park; and Gene Natali, Sr. representing C.S. McKee.
Approval of Minutes
Mr. Maggi entertained a motion to approve Minute No. 245 dated November 15, 2012. The
motion was moved by Mrs. Irey Vaughan and seconded by Mr. Namie that the above mentioned
minutes be approved as written.
No discussion followed.
Roll call vote taken:
yes.
Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Irey Vaughan — yes; Mr. Maggi —
Motion passed unanimously.
Public Comment
None.
Treasurer's Report
Mr. King stated that for October 2012, November 2012, December 2012, and January 2013,
the bank balance was reconciled to zero. It was moved by Mr. King and seconded by Mrs. Irey
Vaughan that the report be approved.
No discussion followed.
Roll call vote taken:
yes.
Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Irey Vaughan — yes; Mr. Maggi —
Motion passed unanimously.
Retirement Allowance Report
Bank Balance as of October 1, 2012
$ 111,941.56
Add:
Deposits to Checking Account
582,686.14
Add:
ACH Credit
121,050.38
Less:
Cancelled Checks
(165,936.60)
Less:
ACH Debits
(418,584.87)
Less:
Other Debits
(146,550.90)
Bank
Balance as of October 31, 2012
$ 84,605.71
Add:
Transfers into Checking Account
23.11
Less:
Outstanding Checks
(67,818.06)
Less:
Retirement Check Run.
(16,810.76)
Reconciled Balance as of October 31, 2012
$ $
s
300
Bank Balance as of November 1, 2012
$ 84,605.71
Add: ACH Credit
713,576.16
Less: Cancelled Checks
(120,990.79)
Less: ACH Debits
(413,791.50)
Other Debits
(137,079.29)
Bank Balance as of November 30, 2012
$ 126,320.29
Less: Outstanding Checks
(109,532.66)
Less: Retirement Check Run
(16,787.63)
Reconciled Balance as of November 30, 2012
$ Q
Bank Balance as of December 1, 2012
$ 126,320.29
Add: Deposits to Checking Account
114,119.19
Add: ACH Credit
714,179.79
Less: Cancelled Checks
(168,721.26)
Less: ACH Debits
(412,938.99)
Other Debits
(344,550.55)
Bank Balance as of December 31, 2012
$28,408.47
Transfers into Checking Account
(2,465.54)
Less: Outstanding Checks
(16,008.61)
Less: Retirement Check Run
9 9f 34.32)
Reconciled Balance as of December 31, 2012
$ 4
Bank Balance as of January 1, 2013
$ 28,408.47
Add: ACH Credit
241,785.61
Add: Other Credits
330,112.79
Less: Cancelled Checks
(86,855.10)
Less: ACH Debits
(427,451.21)
Bank Balance as of January 31, 2013
$86,000.56
Transfers into Checking Account
(4,000.00)
Less: Outstanding Checks
(73,017.92)
Less: Retirement Check Run
(8,982.64)
Reconciled Balance as of January 31, 2013
$ -0-
Requisitions
Mr. Namie stated that requisitions for the months of November 2012, December 2012, and
January 2013 totaled $1,627,277.55.
It was moved by Mr. Namie and seconded by Mrs.
Irey Vaughan that the requisitions be
approved.
No discussion followed.
Roll call vote taken:
Mr. Namie — yes; Mr. King — yes; Mr. Shober
— yes; Mrs. Irey Vaughan — yes; Mr. Maggi —
yes.
Motion passed unanimously.
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Distributions
November 2012
Check
Payee
Amount
629
Estate of Diane Tatar
$ 217.02
630
Kathy Jo Bresnock
8,117.60
631
Jacqueline Campbell
11,255.94
632
Heather Dubina
2,024.91
633
Scott Smiechowski
11,518.10
634
Linda A. Wussick
7,128.49
635
Jackson National Life Ins. Co. as trustee of IRA of
75,429.48
David Shaw
636
Washington County Regular Payroll Escrow Account
5,800.30
637
Washington County Cash Disbursement Account
23,290.51
Transfer
PNC Bank
35,479.23
Transfer
Washington County Retirement Account
396,212.18
Total November 2012 Distributions
December 2012
Check
Payee
Amount
639
Louis Mazza
$ 217.39
640
Debra L. Sicilia
4,552.94
641
Ray A. Price
173.70
642
Allison Marsteller
5,128.29
643
Aaron Patterson
2,919.95
644
Gina Reese
2,873.99
645
Erin Snedeker
9,939.72
646
Washington County Regular Payroll Escrow
5,693.31
Account
647
Washington County Regular Payroll Escrow
257.64
Account
648
Washington County Cash Disbursement
22,981.13
Account
Transfer
PNC Bank
32,007.99
Transfer
Washington County Retirement Account
394,025.37
Total December 2012 Distributions
January 2013
Check
Payee
Amount
649
Estate of Nevada Johns
$ 119.84
650
Dawn M. Dowling
11,974.83
651
Holly Christie
2,188.93
652
Fidelity as trustee of IRA of Christina Fox
6,248.13
Grasso
653
Shannon L. Gazvoda
1,763.71
654
Rhonda C. Hiller
3,917.05
655
Jennifer L. Konosky
390.08
656
Amanda B. Kraft
2,917.53
302
657
Tricia L. Maley
293.63
658
z
Michelle Menozzi
39,016.66
659
James Palmer
11,952.66
660
Jessica M. Potter
469.08
I
661
OHIO PERS FBO Kimberly A. Province
3,886.97
662
Heather L. Smith
4,024.77
663
Washington County Cash Disbursement
34,447.78
Account
664
Washington County Regular Payroll Escrow
7,546.03
Account
Transfer
PNC Bank
44,063.72
Transfer
Washington County Retirement Account
394,810.97
i
Total January 2013 Distributions
570,032.37
Old Business
None.
New Business
Mr. Maggi noted for the record an agreement with Sherril A. Stein to purchase service credit
dated December 1, 1994 to February 1, 1999 in the amount of $7,435.18.
Mr. Maggi entertained a motion for the adoption of the 2013 Retirement Fund budget. The
budget was also approved and adopted by the Board of Commissioners. The motion was moved by
Mrs. Irey Vaughan and seconded by Mr. King.
No discussion followed.
Roll call vote taken:
Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Irey Vaughan — yes; Mr. Maggi —
yes.
Motion passed unanimously.
Mr. Maggi entertained a motion for the purchase of Employee Benefit Statements from the
Hay Group at a cost of $1.85 per statement for a total approximate cost of $2,020.20. The cost per
statement remains unchanged from 2012. The motion was moved by Mrs. Irey Vaughan and
seconded by Mr. Shober.
No discussion followed.
Roll call vote taken:
Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Irey Vaughan — yes; Mr. Maggi —
yes.
Motion passed unanimously.
Mr. Maggi addressed the required Cost of Living Adjustment with the Board. There was no
discussion and no action was taken.
Presentations
C.S.McKee —Gene Natali, Sr.
Mr. Natali began with a performance review stating that although large cap value was up
16% for the year, performance was negative relative to the benchmark of 17.51%. All of C.S.
McKee's underperformance came in the 4'f' quarter, primarily due to market uncertainty over taxes,
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the flight to quality on the bond side, lower quality stocks not owned in the portfolio paying higher
dividends, and slow growing companies, also not in the portfolio, advancing dividends to take
advantage of the tax situation. C.S. McKee's goal has always been to pay less for higher future
earnings; this strategy did not work in the 4th quarter of 2012. Performance on the fixed income side
remained very strong, up 4.52 for the year against the benchmark of 3.89. Unfortunately, Mr. Natali
does not feel that fixed income returns of this magnitude will continue into 2013. Instead, he
believes that equities, primarily domestic equities, are the place to be going forward. Because of the
flat performance expected on the fixed income side, returns from equities will be especially
important for defined benefit plans such as Washington County's.
Mr. Shober asked Mr. Natali if he felt that the improvement in the housing and construction
market was an indicator of economic recovery. Mr. Natali stated that he did not feel that in and of
itself it was a reliable indication. There has been no increase in real wages nor in the employment
rate to support any long-term projections based on the housing market.
Mr. Martin observed that in the past, C.S. McKee has always done a good job protecting in a
down market on the equity side. However, over the past 3 years, the portfolio now moves with the
market, capturing all of the upside and also all of the downside. He asked Mr. Natali to explain if
there was a fundamental change at C.S. McKee causing this or if it was because of the market cycle.
Mr. Natali responded that because of where the economy currently is in the market cycle, active
managers such as C.S. McKee are being punished. However Mr. Natali also believes that we are at
the end of this cycle and that things will begin to improve.
Peirce Park — Lee Martin
Mr. Martin began with a synopsis of the past year, stating that Washington County's
performance was very strong with the total portfolio up 13.6%, the highest among Peirce Park's
County clients. Also over the past year, the Board added managers, thereby increasing
diversification and reducing volatility, rebalanced back to targets, and added Peirce Park's
Consulting Plus option for future rebalancing. One of the goals looking forward is to prepare for
GASB 67/68 accounting changes and the extra volatility that may be associated with their
implementation. .
For the year, the U.S. Market was up 16.4% and Europe was up 21.3%. For 2013, early
positive indicators are growth in the housing market, consumer spending, and to a lesser extent,
employment. Concerns are the economic weaknesses in Europe, U.S. exports continuing to drop, a
lack of business investment in the U.S., and a rise in interest rates. Because of this potential rise in
interest rates, Mr. Martin recommended that the policy index be amended to allow for a shorter
duration for fixed income. Currently, the policy allows for 25% greater or lesser than the average
duration of the benchmark. Mr. Martin recommended 25% greater or 50% lesser of the average
duration to help to immunize against the shock of spiking interest rates. Mrs. Irey Vaughan made a
motion to amend the policy index to reflect this change. The motion was seconded by Mr. King.
No discussion followed.
Roll call vote taken:
yes.
Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Irey Vaughan — yes; Mr. Maggi —
Motion passed unanimously.
Moving on to performance, the portfolio was up 1.4% in the O quarter, gaining $1.65
million for a total gain of $13.6 million for the year. To date, the fund value is just under $120
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million. Also for the year, the portfolio finished 0.7% above policy index and ranked in the top 15fl'
percentile of all public funds. On the equity side, C.S. McKee was behind its benchmark by 2.2%
for the quarter and 1.3% for the year. Twin Capital was on benchmark for the quarter and year but is
ahead of benchmark by 1.4% since inception. Emerald was behind for the quarter but matched
benchmark for the year and Wellington had very strong performance, up 80 basis points since
inception. Both global and international managers had outstanding performance for the quarter with
American Funds New Perspective and Dodge and Cox International up 1.4% and 2.6% over index.
Looking at the relatively newly added GTAA, MFS was behind a bit in the 4t' quarter but at
benchmark since inception. On the fixed income side, both C.S. McKee and Federated Investors
outperformed for the quarter by 0.2%.
Mr. Martin stated that in a rising interest rate market, fixed income is not going to be able to
provide the yield necessary for the fund. With 68% of the portfolio already in equities, adding more
equities is not without risk. To this end, Mr. Martin suggested looking to real assets. Real assets
will provide protection in a rising interest rate and rising inflation rate market. Real assets are
tangible, such as real estate, farmland, gold, and timberland. Securities can also be linked to real
assets, such as energy, infrastructure, and natural resources. Real assets can provide purchase power
protection against inflation and help to offset the real return losses associated with increasing
inflation. Peirce Park is looking at the best fit of what real assets to include, when to include them,
and how much to allocate before a formal recommendation is made to the Board.
The meeting was adjourned at 12:10 p.m.
THE FOLLOWING MINUTES SUBMITTED FOR APPROVAL:
2013
ATTEST: C
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