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Home My WebLink AboutCOMM - Meeting Minutes - 251 - 5-15-2014 - RETIREMENT329 Sold By IMR Limited Form 825 E00102204 Minute No. 251 Washington County Retirement Board Washington, PA May 15, 2014 The quarterly meeting of the Washington County Retirement Board was held at approximately 10:48 a.m. on Thursday, May 15, 2014 in the Public Meeting Room with the following members being present: Commissioners Larry Maggi, Harlan Shober, and Diana Vaughan, Controller Michael Namie, and Treasurer Francis L. King. Also present: Chief Clerk Mary Helicke, Secretary Joyce Thornburg, Director of Administration Scott Fergus, Director of Finance Roger Metcalfe, Solicitor Lynn DeHaven, Director of Human Resources Kathleen Bali, Chief Clerk Secretary Paula Jansante, concerned citizen Frank Byrd, Barbara Miller representing the Observer - Reporter, Lee Martin, Ph.D. and Sarah Wilson representing Peirce Park, and Geoffrey Gerber, Ph.D. representing Twin Capital Management. Approval of Minutes Mr. Maggi entertained a motion to approve Minute No. 250 dated February 20, 2014. The motion was moved by Mrs. Vaughan and seconded by Mr. Shober that the above mentioned minutes be approved as written. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Vaughan — yes; Mr. Maggi — yes. Motion passed unanimously. Public Comment None. Treasurer's Report Mr. King stated that for February, March, and April 2014, the bank balance was reconciled to zero. It was moved by Mr. King and seconded by Mrs. Vaughan that the report be approved. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Vaughan — yes; Mr. Maggi — yes. Motion passed unanimously. Retirement Allowance Report Bank Balance as of February 1, 2014 $ 59,425.50 Add: Deposits to Checking Account 3,876.54 Add: ACH Credits 257,687.25 Add: Other Credits 439,240.84 Less: Cancelled Checks (102,046.24) Less: ACH Debits (459,311.53) Bank Balance as of February 28, 2014 $ 198,872.36 Less: Transfers into Checking Account (652.52) 3 !3 0 Less: Outstanding Checks Less: Retirement Check Run i Reconciled Balance as of February 28, 2014 Bank Balance as of March 1, 2014 Add: Deposits to Checking Account Add: ACH Credit Add: Funds Transferred In Less: Cancelled Checks Less: ACH Debits Bank Balance as of March 31, 2014 Less: Outstanding Checks Less: Retirement Check Run Reconciled Balance as of March 31, 2014 Bank Balance as of April 1, 2014 Add: ACH Credit Add: Other Credits Less: Cancelled Checks Less: ACH Debits Bank Balance as of April 30, 2014 Less: Outstanding Checks Less: Retirement Check Run Reconciled Balance as of April 30, 2014 (177,346.90) (20,872.94) $ A= $198,872.36 43,858.06 253,331.43 361,387.56 (252,237.64) (473,298.60) $ 131,913.17 (15,049.12) (116,864.05) $2 $ 131,913.17 258,511.21 627,410.45 (181,281.36) (478,126.54) $ 358,426.93 (334,723.21) (23,703.72) M Requisitions Mr. Namie stated that requisitions for the months of February, March, and April 2014 totaled $2,243,786.27. It was moved by Mr. Namie and seconded by Mr. King that the requisitions be approved. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Vaughan — yes; Mr. Maggi — yes. Motion passed unanimously. Distributions February 2014 Check Payee Amount 845 William Carter $ 1,775.42 846 Robin L. Powell 1,775.42 I 331 Sold By IMR Limited Form 825 E00102204 847 Etrade Clearing as trustee of IRA of Vanessa 1,310.38 Borkowski 848 Danielle M. Colbert 4,049.92 849 Christopher Erickson 4,280.05 850 Capital Bank & Trust Co. as trustee of IRA of 117,847.79 Jacqueline J. Forte 851 Aaron Pascazi 442.36 852 Leslie Pescatore 886.86 853 Sandra Wagner 41,561.99 854 Washington Co. Regular Payroll Escrow Account 7,624.18 855 Washington County Cash Disbursement Account 35,853.04 Transfer PNC Bank 39,724.92 Transfer Washington County Retirement Account 441,837.04 Total February 2014 Distributions S 698.969.37 March 2014 Check Payee Amount 856 Washington County Cash Disbursement Account $ 49,619.82 857 Melinda A. Jones 148.39 858 Ameriprise Brokerage as trustee of IRA of 56,950.07 Denise Calabro 859 Frances Chappel 6,877.54 860 Megan Beekman 1,997.75 861 Katy S. Dawkins 483.74 862 Melissa Finney 9,368.40 863 Vanguard Fiduciary Trust Co. as trustee of 3,756.59 IRA of Joshua C. Hausman 864 Ernest Heinrich 141.07 865 Conor Malinowski 3,572.44 866 Lilianne Snyder 1,949.42 867 Todd Snyder 6,858.03 868 Michelle Stoner 530.82 869 Christina Tatar 15,404.23 870 Sherry L. Wilk 8,326.38 871 Washington Co. Regular Payroll Escrow Account 7,688.86 Transfer PNC Bank 41,363.19 Transfer Washington County Retirement Account 444,192.83 Total March 2014 Distributions $ 659.229.57 April 2014 Check Payee Amount 872 Katy S. Dawkins $ 492.60 873 Brenda Saver 59,719.37 3132 t 874 Capital Bank and Trust as trustee of IRA of 54,642.94 4 FBO Deborah L. Stacy E 875 Diane E. Terrant 7,716.22 876 Primerica Shareholder SVC as trustee of IRA 47,677.07 of George Winter 877 Citizens Bank as trustee of IRA of Thomas Welsh 163,975.83 4 i 878 Washington Co. Regular Payroll Escrow Account 7,665.66 879 Washington County Cash Disbursement Account 44,338.01 Transfer PNC Bank 45,475.93 Transfer Washington County Retirement Account 453,883.70 Total April 2014 Distributions $ 885.587.33 Old Business None. New Business Mr. Maggi entertained a motion for the approval of a request from Jay S. Green to buy back per diem time dated March 25, 1996 to July 7, 1996 in the amount of $346.21. The motion to approve was made by Mr. Namie and seconded by Mr. Shober. No discussion followed. 4 Roll call vote taken: i Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Vaughan — yes; i Mr. Maggi — yes. Motion passed unanimously. Mr. Maggi entertained a motion for the approval of a request from Joan Haines to buy back per diem time dated July 24, 2006 to February 13, 2007 in the amount of $837.44. The motion to approve was made by Mrs. Vaughan and seconded by Mr. Shober. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Vaughan — yes; Mr. Maggi — yes. Motion passed unanimously. Presentations € 4 Peirce Park - Lee Martin, Ph.D. Mr. Martin began with an economic overview, stating that although GDP was ! 4 up last year, it dropped for the 1 st quarter of 2014 leading to a slowdown in the i markets. However, the U.S. is expected to have the highest growth this year in the developed world. Car sales are up, personal consumption is up; both are indicators 1 1 1 333 Sold By [MR Limited Form 825 E00102204 that people are spending again. Job growth is also expected to be up for the year. For the quarter and the year, the U.S. market outperformed most of the rest of the world, up 22.6%. Emerging markets were negative for the quarter and also for the year. Interest rates went down and the yield curve flattened during the quarter, meaning that longer duration bonds outperformed for the first time in a while. Moving on to the County's portfolio, the fund gained just under $3 million for the quarter, up 2.2%, outperforming the benchmark by 1.8% and putting the fund in the top 9th percentile of all public funds. Over 5 years, the fund has gained over $71 million, more than half the fund's total value. C.S. McKee's large cap value was down, not unusual in the current market environment and not overly concerning. With the projected market trend, performance is expected to improve. Twin Capital and Wellington outperformed by more than 1% since inception, Emerald and MFS Global outperformed by 2% since inception, American Funds outperformed by 3% since inception, and Dodge & Cox has outperformed 5% since inception. Real estate has come back strongly, 10% for the quarter and 13.7% for the year-to-date. Both fixed income managers have also performed above their benchmarks. Looking forward, there are a few areas that Mr. Martin feels would be beneficial for the Board to address. One is the future asset class return assumption and revisiting the asset allocation of the fund. The second is addressing the amount of cash in the portfolio and having a cash flow management plan. The third, due to asset growth, is the completion of the required paperwork to switch the County to the institutional share class of real estate. This switch will save a few basis points, or about $1,000, annually. The final item is switching Twin Capital's mandate. Twin Capital has a low volatility product which could potentially bring the County's beta in line to where it should be. To discuss this product, Mr. Martin turned the presentation over to Mr. Geoffrey Gerber. Twin Capital Management — Geoffrev Gerber, Ph.D. Mr. Gerber began his presentation illustrating how the risk of an investment, or standard deviation, affects the value of the investment assuming the same rate of return. Lowering the standard deviation with the same return will add more value to the investment, resulting in a higher compounded rate of return. Twin Capital has developed a low volatility product, Dividend Select, which will not only provide dividends but will also provide protection when the market fluctuates. Dividend Select will add value, but not outperform, when the market is up, but will also add value when the market is down. Mrs. Vaughan made a motion to move the money currently invested in Twin Capital's Prime Strategy to Twin Capitals's Dividend Select at the new fee schedule. The motion was seconded by Mr. Namie. No discussion followed. 134 Roll call vote taken: Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Vaughan — yes; Mr. Maggi — yes. Motion passed unanimously. Peirce Park — Lee Martin, Ph.D. Mr. Martin wanted to discuss asset allocation with the Board, beginning with a summary of future market expectations. Over the next 10 years, fixed income returns are expected to average 2.5%, U.S. equity returns 7%, international equity returns 9.5%, REITS 6.5%, and inflation is expected to be 2.25%. Using these assumptions, the County's return is predicted to be just under 6% over the next 10 years. Right now, the actuarial assumption for the County is 7.5%. Considering the market, there is not a lot that the County can do to close this gap on the asset side. On the liability side, the County can consider reducing the assumed rate of return. This will result in a higher actuarially required contribution (ARC) in the short run, but is more fiscally responsible in the long run. Mrs. Vaughan made a motion to reduce the County's assumed rate of return from 7.5% to 7%. The motion was seconded by Mr. Shober. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Vaughan — yes; Mr. Maggi — yes. Motion passed unanimously. In conjunction, Mrs. Vaughan also made a motion to change the current asset allocation of 48% domestic equities, 16% international equities, 32% fixed income, 4% real estate, and 0% cash, to 46% domestic equities, 18% international equities, R 31 % fixed income, 4% real estate, and 1 % cash. The motion was seconded by Mr. t , Shober. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. King — yes; Mr. Shober — yes; Mrs. Vaughan — yes; Mr. Maggi — yes. Motion passed unanimously. The meeting was adjourned at 12:05 p.m. THE FOLLOWING MINUTES SUBMITTED FOR APPROVAL: L/�-X 3 ATTEST: ,2014 n I 1