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HomeMy WebLinkAboutCOMM - Meeting Minutes - 271 - 8-16-2018 - RETIREMENT47 MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA IMR I IMITFn FiRn7Q>QI n Minute No. 271 August 16, 2018 The quarterly meeting of the Washington County Retirement Board was held at approximately 10:40 a.m. on Thursday, August 16, 2018 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: Secretary Joyce Thornburg, Solicitor Lynn DeHaven, Director of Administration Scott Fergus, Barbara Miller representing the Observer -Reporter, Dave Reichert representing Korn Ferry Hay Group, and Lee Martin, Ph.D. representing Peirce Park. Approval of Minutes Mr. Maggi entertained a motion to approve Minute No. 269 SP dated May 16, 2018. The motion was moved by Mr. King and seconded by Mrs. Vaughan 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. Mr. Maggi entertained a motion to approve Minute No. 270 dated May 17, 2018. The motion was moved by Mrs. Vaughan and seconded by Mr. King 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 May, June, and July 2018, the bank balance was reconciled to zero. It was moved by Mr. King and seconded by Mr. Shober 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 May 1, 2018 $ 115,631.89 Add: ACH Credit 233,094.70 Add: Other Credits 756,711.07 Less: Cancelled Checks (165,767.45) Less: ACH Debits (736,270.03) Bank Balance as of May 31, 2018 $ 203,400.18 Less: Outstanding Checks (165,603.63) Less: Retirement Check Run (36,431.05) Less: ACH Return (1,365.50) Reconciled Balance as of May 31, 2018 $ Q Bank Balance as of June 1, 2018 $ 203,400.18 Add: Transfers In 687,847.00 Add: ACH Credit 921,432.33 Less: Cancelled Checks (228,838.60) Less: Other Debits (44,876.33) Less: ACH Debits (918331.80) Bank Balance as of June 30, 2018 $ 620,632.78 RETIREMENT BOARD IMR 1 IMITF:n F1Rn7WQ1 n MINUTE BOOK WASHINGTON COUNTY, PENNSYLANIA Add: Transfers to Bank Less: Outstanding Checks Less: Retirement Check Run Less: ACH Return Reconciled Balance as of June 30, 2018 Bank Balance as of July 1, 2018 Add: Deposits to Checking Account Add: ACH Credit Less: Other Credits Less: Cancelled Checks Less: ACH Debits Less: Funds Transfers Out Bank Balance as of July 31, 2018 Add: Transfers to Bank Less: Outstanding Checks Less: Retirement Check Run Reconciled Balance as of July 31, 2018 122.08 (72,725.00) (37,652.57) (510,377.29) $ -0- $ 620,632.78 1,397.27 935,892.84 708,230.94 (142,801.32) (1,277,732.37) (687,847.00) $ 157,773.14 1,397.27 (137,153.70) (22,016.71) $ -0- Requisitions Mr. Namie stated that requisitions for the months of May, June, and July 2018 totaled $2,822,225.98. It was moved by Mr. Namie and seconded by Mrs. Vaughan 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 Mav 2018 Check Payee Amount 1705 Derrick Caldwell $ 1,571.81 1706 William Cramer 29,783.68 1707 Kaitlyn Davenport 505.04 1708 Nicholas Dinardo 3,395.07 1709 Jody Johnson 4,351.09 1710 Lisa Kelley 5,974.87 1711 State Farm Bank FSB Cust as trustee of IRA of Justena 11,648.73 Kinney 1712 Nawal Qureshi 243.26 1713 Principal Trust Co FBO Laura A. Shaner 84,285.20 1714 Samantha Wingrove 5,069.90 1715 Washington County Regular Payroll Escrow Account 20,698.54 1716 Washington County Cash Disbursement Account 56,746.60 Transfer PNC Bank 57,241.61 Transfer Washington County Retirement Account 706,480.34 Total May 2018 Distributions S 987.995.74 1 F rel iLm RETIREMENT BOARD IMR I IMITFn F1R0799QI n MINUTE June 2018 BOOK WASHINGTON COUNTY, PENNSYLANIA Check Payee Amount 1717 Amy Johnson $ 18,679.72 1718 Tammy I. Hilderbrand 383.89 1719 Steffani Marie Stofik 383.89 1720 Michael Nicholas 383.89 1721 James Taylor 163.99 1722 Sharon L. Crothers 163.99 1723 Tamika Arnold 565.57 1724 Jed Berry 1,326.49 1725 Vanguard Fiduciary as trustee of IRA of Anthony Paul Bibbo 11,086.61 1726 Amber Gauthier 1,875.71 1727 Washington Financial as trustee of IRA of Nancy Regrut 11,870.21 1728 Anthony Sberna 7,891.50 1729 Washington County Regular Payroll Escrow Account 20,692.85 1730 Washington County Cash Disbursement Account 34,503.83 Transfer PNC Bank 53,015.28 Transfer Washington County Retirement Account 713.568.58 Total June 2018 Distributions S 876.556.00 Julv 2018 Check Payee Amount 1731 Robert M. Sestili $ 8.74 1732 Marlo M. Bradford 11,343.01 1733 Julie A. Burke 14,543.17 1734 Meghan Dillie 3,319.68 1735 Debra A. Ellefson 11,298.55 1736 Casey Fortuna 5,465.69 1737 Thomas Giles 5,089.53 1738 Sharon Harris 2,588.07 1739 Shelly Kincaid 11,207.92 1740 FTS International Services LLC FBO Bradley Martin 957.33 1741 Sally Michalski 6,919.27 1742 Jacob Mitchell 13,466.07 1743 LPL as trustee of IRA of Barbara Tennille Newome-Boyles 13,031.34 1744 Home Investment Services as trustee of IRA of Alison M. Pierson 7,903.16 1745 Stephanie Stimak 3,187.08 1746 Washington County Regular Payroll Escrow Account 21,086.12 1747 Washington County Cash Disbursement Account 39,423.32 50 MINUTE BOOK RETIREMENT BOARD INIR 1 IMITFn FiRf)7Q9QI n Transfer Transfer Old Business None. New Business WASHINGTON COUNTY, PENNSYLANIA PNC Bank 67,525.44 Washington County Retirement Account Total July 2018 Distributions 719,310.75 S 957.674.24 Mr. Maggi entertained a motion for the approval of a request by Christina Stefanick to purchase service credit for unpaid leave of absence time dated from March 31, 2006 to July 9, 2006, August 20, 2010 to August 26, 2010, November 6, 2012 to November 18, 2012, September 23, 2013 to January 15, 2014, and July 27, 2015 to August 16, 2015 in the amount of $2,950.68. 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. Mr. Maggi entertained a motion for the approval of a request by Maureen Griffin to purchase unpaid workers compensation time dated from March 5, 2018 to April 23, 2018 in the amount of $1,376.85. The motion to approve was made by Mrs. Vaughan and seconded by Mr. King. 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. Mr. Maggi entertained a motion for the approval of a request by Carrie Sprowls to purchase part time service credit dated from October 19, 2006 to January 5, 2009 in the amount of $2,457.19. The motion to approve was made by Mrs. Vaughan and seconded by Mr. Namie. 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 Actuary Presentation — Dave Reichert — Korn Ferry Hav Group Mr. Reichert began by sharing comments made by members of another County during his discussion with them regarding their pension fund. They mentioned that in addition to being a beautiful place to visit, Washington County was also a model for pension fund management. Mr. Reichert agreed, telling the Board that two of the main reasons that Washington County is in such a good place are that they continue to make the required annual contribution and that they keep benefits in line with what they can afford. The County's actuarially determined contribution for 2018 is just under $3.5 million. Lowering the assumed rate of return from 7% to a more conservative 6.75% resulted in an increased contribution of just under $400,000 and added $3.6 million in liabilities. As of January 1, 2018, the plan had $167 million in assets and $176 million in liabilities. The funded ratio is calculated using the actuarial value of assets, which is a 5-year smoothing method. Under this method the County's actuarial value of assets is $162 million, resulting in a funded ratio of 92%. The County's funded ratio has increased from 80% just eight years ago, another indication of good position. Mr. Namie asked Mr. Reichert to briefly compare a plan that has a 6.75% assumed rate of return and is 92% funded to a plan that has a 7.5% assumed rate of return and is 100% funded. Mr. Reichert responded that by lowering the assumed rate of return by 0.25%, the County added $3.6 million in liabilities. But an increase in the assumed rate of return to 7.5% would decrease the County's liabilities by $10 or $11 million and result in a funded ratio of 98%. On a market basis, the funded ratio would be over 100%. This illustrates the need to compare apples to apples when 1 E 51 MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA IMR I IMITFn F1607WP n looking at different pension funds. Mr. Namie pointed out that, although it may be difficult to understand, 92% funded may be better in some cases than 100%. Mr. Martin added that a better measure of comparison would be to look at current real assets versus current real liabilities. Mr. Reichert touched upon the calculation of the actuarially determined contribution stating that it is composed of two parts: the amortization of the unfunded liability for benefits earned in prior years, and the normal cost of benefits earned in the current year. Mr. Shober asked Mr. Reichert to explain how the sale of the Heath Center will factor into future contributions. Mr. Reichert stated that the savings from the Health Center sale did factor into the current calculation and going forward, there would be no more fluctuations in that regard. Mr. Maggi asked if there was a way to assign a dollar amount to the contribution savings. Mr. Namie responded that Mr. Martin had prepared an asset/liability study a few years ago and that the sale would result in approximately a $1.8 million contribution savings each year in years 2 through 15. Mr. Reichert stated that the effect of the sale can conversely be seen in cash flows. The cash flows into the fund from employees and the County equal about $8 million. The outflows in the past year equal just over $13 million, a significant portion of which is from the payment of Health Center refunds, but is also from the increased benefit payments from Health Center employees who chose to collect their pension. Benefit payments increased from $8.5 million to over $9 million. Because of the loss of employees from the Health Center, employee contributions went from $3.7 million to $3.6 million. The fund will not have as much money coming in but will be paying slightly more money out. This is something for the Board to keep an eye on, but Mr. Reichert reiterated his belief that the fund is in good shape. Portfolio Presentation — Lee Martin, Ph.D. — Marauette Associates Mr. Martin began by expanding on Mr. Reichert's report stating that while lowering the assumed rate of return did increase labilities and the required contribution this year, the County will be in a much better position going forward that other counties who still have a 7.5% assumed rate of return. Mr. Martin gave a brief market overview stating that GDP came in very strong for the second quarter, up 4.1 %. With the expected slowdown on consumer spending due to rising interest rates and the effects of the trade tariffs, however, GDP is projected to end the year at 3%. Internationally, GDP is still trending upwards in Europe and Asia. Trade volume was steady through the second quarter but is expected to drop in the second half of the year due to the trade tariffs. U.S. stocks were the best performer in the 2nd quarter, up 3.9%. International stocks were down 0.7%. Hardest hit by the trade tariffs, emerging markets saw a big sell-off. As inflation sensitive assets are starting to make a comeback, the Board's decision to add private real estate, timberland and farmland, and private infrastructure will help hedge against increasing inflationary pressure. Energy stocks finished strong for the quarter, but growth still led the market with consumer discretionary up 8% and technology up 6.7%. The expectation, however, is that value will begin to outperform growth. The County's portfolio ended the quarter at $165 million and rose to $167.5 million at the end of July, a 2.2% year-to-date return. For the quarter, the return was 1%, slightly behind the index of 1.3%. Over the past 5 years, the portfolio has gained just over $62 million and averaged an 8.3% return. Net of fees, the portfolio ranks in the top quartile of public funds. Reviewing manager performance, Twin Capital is lagging slightly this year, not surprising for a defensive type manager, but is up about 3% since the end of the quarter. Very strong performance came from Wellington, up 200 basis points for the quarter and 320 basis points through July. GW & K is ahead for the year, American Funds is up 2.4% compared to the benchmark of 0.5%, Acadian was behind slightly for the quarter but up 3.1 % since the end of the quarter, and Dodge & Cox was 40 basis points above the benchmark for the quarter. Real estate was up 7% for the year whereas fixed income was down 0.5% for the year. GTAA was quite a bit behind for the last quarter but is up 2.3% since the end of the quarter compared to a benchmark of 1.7%. Mr. King exited the meeting at this time due to a prior commitment. Mr. Martin concluded his presentation with a brief discussion of the OPEB portfolio stating that the fund balance is at about $17.5 million, a gain of 2.2% for the year. For the one-year, the portfolio gained 7.6%, translating into about $844,000. The portfolio has gained $4 million since inception. Eaton 52 RETIREMENT BOARD IMR I IMITFn FlAn799RI n MINUTE BOOK WASHINGTON COUNTY, PENNSYLANIA Vance Atlanta Capital was 200 basis points behind for the quarter but well ahead for the one-year. On the global side, Artisan, Dodge & Cox, and MFS were all ahead of the benchmark. Real estate was up 2% and fixed income was up about 0.2%. Mr. Martin suggested that the Board consider adding defensive equity to the OPEB portfolio as added protection against future downturns in the market and also to provide further diversification. To that end, he recommended moving 5% from U.S. equities into Parametric Defensive Equity Fund. The motion was made by Mrs. Vaughan and seconded by Mr. Shober that the above move be made per Mr. Martin's recommendation. Since the County does not currently have a separate OPEB Board, the vote is limited to the Commissioners. No discussion followed. Roll call vote taken: Mr. Shober — yes; Mrs. Vaughan — yes; Mr. Maggi — yes. Motion passed unanimously. By motion of Mrs. Vaughan and seconded by Mr. Namie, the meeting was adjourned at 11:50 a.m. THE FOREGOING MINUTES SUBMITTED FOR APPROVAL: 2018 ATTEST:�`'�,/d�> 1 1 j