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HomeMy WebLinkAboutCOMM - Meeting Minutes - 272 - 12-6-2018 - RETIREMENT53 MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA IMR I IMITF:n F1A07Q9Q1 f) Minute No. 272 December 6, 2018 The quarterly meeting of the Washington County Retirement Board was held at approximately 10:40 a.m. on Thursday, December 6, 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 Paula Jansante, Solicitor Lynn DeHaven, Chief Clerk Cindy Griffin, Director of Finance Joshua Hatfield, David Rice representing Fusion Investments, and Lee Martin, Ph.D. representing Marquette Associates. Approval of Minutes Mr. Maggi entertained a motion to approve Minute No. 271 dated August 16, 2018. The motion was moved by Mrs. Vaughan and seconded by Mr. Namie 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 August, September, and October 2018, the bank balance was reconciled to zero. It was moved by Mr. King and seconded by Mr. Namie 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 August 1, 2018 $ 157,773.14 Add: Transfers In 470,231.43 Add: ACH Credit 224,554.37 Add: Other Credits 200,000.00 Less: Cancelled Checks (221,033.84) Less: ACH Debits (749,667.00) Bank Balance as of August 31, 2018 $ 81,858.10 Add: Transfers to Bank 1,397.27 Less: Outstanding Checks (54,872.57) Less: Retirement Check Run (28,382.80) Reconciled Balance as of August 31, 2018 $ -(Z 54 MINUTE RETIREMENT BOARD IMRI IMITFII F16079991 1l BOOK WASHINGTON COUNTY, PENNSYLANIA Bank Balance as of September 1, 2018 $ 81,858.10 Add: Transfers In 621,591.80 Add: ACH Credit 268,399.86 Less: Cancelled Checks (87,672.89) Less: ACH Debits (765,091.29) Bank Balance as of September 30, 2018 $ 119,085.58 Add: Transfers to Bank 0.10 Less: Outstanding Checks (89,314.48)` Less: Retirement Check Run (29,695.20) Less: ACH Return (76.00) Reconciled Balance as of September 30, 2018 $ Bank Balance as of October 1, 2018 $ 119,085.58 Add: Deposits to Checking Account 7,195.96 Add: Transfers In 798,949.69 Add: ACH Credit 247,750.77 Less: Cancelled Checks (120,471.82) Less: ACH Debits (791,492.07) Bank Balance as of October 31, 2018 $ 261,018.11 Less: Outstanding Checks (230,563.54) Less: Retirement Check Run (30,454.57) Reconciled Balance as of October 31, 2018 $ -0- Requisitions Mr. Namie stated that requisitions for the months of August, September, October, and November 2018 totaled $3,726,229.36. 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 E August 2018 Check Payee Amount 1748 Estate of Edward M. Paluso $ 750.61 1749 Hayden Crow 8,240.48 1750 Marjorie Duerr 1,597.84 1751 Dorothy Martinelli 1,103.73 1752 David Reynolds 65083.10 55 11 1 E MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA IMR I IMITFn FiAn799AI n 1753 Transamerica as trustee of IRA of Rachel Schmelzlen 14,153.05 1754 Donald Stone 1,715.18 1755 Washington County Regular Payroll Escrow Account 21,164.54 1756 Washington County Cash Disbursement Account 66,351.81 Transfer PNC Bank 50,037.14 Transfer Washington County Retirement Account 723,588.32 Total August 2018 Distributions $ 894.785.80 September 2018 Check Payee Amount 1757 Natalie Barrett $ 979.79 1758 Morgan Bonekovic 3,874.28 1759 Russell Clem 22,349.13 1760 Bryan Hoag 789.31 1761 Jesica Kauffman 982.89 1762 SERS FBO Kayla Kaydo 1,464.98 1763 Mackenzie Langford 2,819.29 1764 Bernard Miller 8,868.17 1765 Kaleah Rose 2,710.92 1766 State Farm as trustee of IRA of Ashley N. Verno 2,873.38 1767 Tara C. Wilson 21,399.25 1768 Washington County Regular Payroll Escrow Account 21,247.58 1769'` Washington County Cash Disbursement Account 3,178.45 Transfer PNC Bank 62,879.30 Transfer Washington County Retirement Account 732,101.77 Total September 2018 Distributions S 888.518.49 October 2018 Check Payee Amount 1770 Hilliard Lyons as trustee of IRA of Patricia A. Briner $ 25,064.65 1771 Robert C. Davis 35,523.67 1772 Robert C. Davis, Jr. 35,523.67 1773 Constance Dezardo 55.58 1774 Patricia Antol 1,754.16 1775 Kelsey Leigh Binder 2,757.49 1776 Daniel L. Chunko 30,897.90 1777 Jason Erickson 11,367.50 1778 Mollie Goodman 24,712.95 1779 Danielle Howard 98.52 0 RETIREMENT BOARD IMP I IMITFn F1Rn7Q9Q1 n MINUTE BOOK WASHINGTON COUNTY, PENNSYLANIA 1780 PNC Bank as trustee of IRA of Jennifer Mengle 4,558.23 1781 Jesse Star 1,137.26 1782 Washington County Regular Payroll Escrow Account 21,173.69 1783 Washington County Cash Disbursement Account 44,626.32 Transfer PNC Bank 81,870.57 Transfer Washington County Retirement Account 731,420.95 Total October 2018 Distributions S 1.052.543.11 November 2018 1784 Andrew Forshey $ 719.64 1785 Noah Lolley 754.85 1786 Tiffiny Mahland 2,790.56 1787 Vanguard Fiduciary Trust Co. as trustee of IRA of 8,508.10 Harley Maupin 1788 Pershing LLC as trustee of IRA of Sara E. Reese 9,634.74 1789 Brandee Nicole Zelensky 4,152.07 1790 Meghan Dillie (replaces check # 1734) 3,319.68 Check # 1734 Voided (3,319.68) 1791 Washington County Regular Payroll Escrow Account 20,069.27 1792 Washington County Cash Disbursement Account 65,882.72 Transfer PNC Bank 48,314.74 Transfer Washington County Retirement Account 729,555.27 Total November 2018 Distributions S 890.381.96 Old Business None. New Business Mr. Maggi noted for the record an agreement with Daniel Chunko to purchase prior service time credit dated from October 3, 1977 to January 3, 1982, and February 11, 2002 to June 28, 2002 in the amount of $5,433.88. Mr. Chunko purchased his service time credit prior to his retirement on October 10, 2018. Mr. Maggi entertained a motion for the approval of a request by Steven Wright to purchase unpaid leave of absence time dated from September 4, 2014 to February 8, 2015, May 9, 2016 to August 22, 2016, and September 13, 2017 to January 16, 2018 in the amount of $7,035.30. The motion to approve was made by Mr. Namie and seconded by Mrs. Vaughan. 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. 1 1 I 57 MINUTE RETIREMENT BOARD BOOK WASHINGTON COUNTY, PENNSYLANIA IMR I IMITFR F16079991 n Presentations Portfolio Presentation — Lee Martin, Ph.D. — Marauette Associates Mr. Martin began by presenting the results of the Marquette Associates annual County Database Report. This report includes data from 50 Pennsylvania counties and was first compiled after the financial crisis ten years ago. Ten years ago, the actuarial assumed rate of return of all reporting counties was 7.5%. Since then, many counties have begun to decrease this percentage. Washington County, only one of two counties below 7%,'leads the pack at 6.75%. Ten years ago, the salary increase assumption was 4.5%; today this number is 3.5% - 4.5%. Mortality tables have also been updated over the past ten years from the 1983 tables to the 2013 tables. The number of counties granting cost of living adjustments is virtually unchanged over the past ten years, with very few counties choosing to do so. The asset valuation model has changed from using market value divided by cost value to the current industry standard method of 5-year smoothing. Comparing returns, Washington County was up over 15% in the pension fund and over 16% in the OPEB fund last year, placing among the top counties for returns over the ten-year period. To compare funding ratios between the counties, Marquette Associates uses the same assumptions for each county: a 7.5% actuarial assumed rate of return, a 4.5% salary increase assumption, and the market value of the plan. Using this criteria, Washington County is over 100% funded. Lastly, Mr. Martin wanted to bring to the Board's attention the ratio of active employees to retired employees. Washington County, unlike ten years ago, now has more retired employees than active employees. At some point the Board may want to consider the addition of a liability driven investment strategy, such as bond ladders, to manage cash flows. Mr. Martin gave a brief market overview stating that GDP slowed slightly in the 3rd quarter but still remained relatively strong. The tight labor market, pressure on income growth, strong economic growth, tariffs, and growing deficit all combine to form an inflationary environment. One big issue right now is the interest rate. With the shape that the markets are in, the Federal Reserve will not increase the rate. Since the financial crisis, the actual real adjusted Federal funds rate has been lower than the neutral interest rate. The neutral rate is the interest rate that can support a full economy at work but does not impact inflation. It is the ideal position at which to be. The actual interest rate has been trending upwards and has surpassed the neutral rate. The Federal Reserve cannot control this trend. This rate is expected to continue to increase leading to a much more restrictive environment. Historically, this increase ends in a recession. Current models predict that the U.S. will be in a recession in the next two or so years. Globally, markets are beginning to slow and most countries, with the exception of Asia, have revised their GDP growth downward. The effects of the U.S. tariffs will hurt th? U.S. more than China, but in the end, tariffs benefit no one. Looking at the indices for the 3rd quarter, U.S. stocks were up 7%, international markets were up 1 %, and emerging markets were down 1.1 %. Emerging markets were down 7.7% for the year, but are expected to come back strongly once the tariff issue is resolved. At the end of September 2018, the markets were at the longest bull run ever recorded. Growth stocks have been the top performers, with technology stocks up over 20% and consumer discretionary up over 17%. More defensive type stocks have been negative for the year. So far in the 4th quarter, however, the opposite has been true with value outperforming growth. 9 • MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA IMR I IMITFII FiAMWAI n At the end of the 3rd quarter, the County's portfolio was just under $170 million, a gain of $5 million and right on benchmark at 3.3%. What worked well were the new asset classes, the defensive equity, and the new small cap manager. What was negative for the quarter was the value tilt and the large cap defensive type stocks. Over 5 years, the portfolio gained $61 million and over 7 years, the portfolio gained $95 million. The return over 7 years is close to 8%, well above the County's assumed rate of return. The market value of the portfolio is higher than the actuarial value, giving some cushion for down periods. Highlighting 3rd quarter performance, Twin Capital was behind about 1%, Wellington was up 200 basis points, GWK was up 100 basis points, Acadian was on benchmark, GTAA was up 1% and Parametric was up 50 basis points. In fixed income, both managers slightly outperformed for the quarter. Mr. Martin presented the Board with the option to move the management of the pension fund from a traditional model to an outsourced chief investment officer (OCIO) model. Under an OCIO model, Marquette Associates would be able to rebalance and make tactical decisions as necessary, interview and hire managers, and put managers on watch without waiting for quarterly Board meetings. The Board would be advised of all actions and would retain all asset class decisions. As always, Marquette Associates would remain independent and make all decisions in the best interest of the pension fund. The motion to move Marquette Associates from a traditional model to an OCIO model was made by Mr. King and seconded by Mrs. Vaughan. 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. Martin concluded his presentation with a brief discussion of the OPEB portfolio stating that the fund ended the 3rd quarter slightly above index. Since inception, the fund has gained $4.5 million and returned an average of 8.2% per year. By motion of Mr. Maggi and seconded by Mr. Namie, the meeting was adjourned at 11:36 a.m. THE FOREGOING MINUTES SUBMITTED FOR APPROVAL: 2019 ATTEST. 6'''