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HomeMy WebLinkAboutCOMM- Meeting Minutes - 285 - 12-1-2021 - RETIREMENT137 MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA IMR LIMITED E1316649LD Minute No. 285 December 1, 2021 The quarterly meeting of the Washington County Retirement Board was held at approximately 2:51 p.m. on Wednesday, December 1, 2021, in the public meeting room with the following members being present: Commissioners Diana Irey Vaughan, Nick Sherman: and Larry Maggi; Treasurer Tom Flickinger and Controller Michael Namie. Also present: Finance Director Joshua Hatfield; County Solicitor Jana Grimm via teleconference; Chief Clerk Cindy Griffin; Secretary Paula Jansante; Controller - Elect April Sloane; Lee Martin, Ph.D. representing Marquette Associates; and Joseph Jasek representing WJPA. Approval of Minutes Mrs. Vaughan entertained a motion to approve Minute No. 284 dated September 16, 2021. The motion was moved by Mr. Sherman and seconded by Mr. Maggi that the above -mentioned minutes be approved as written. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. Flickinger — yes; Maggi — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously. Public Comment None. Treasurer's Report Mr. Flickinger presented the September and October 2021 statements stating that all months are in order. It was moved by Mr. Flickinger and seconded by Mr. Sherman to accept the reconciliations of the above -mentioned statements. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. Flickinger — yes; Mr. Maggi — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously. Retirement Allowance Report Bank Balance as of September 1, 2021 $ 112,627.39 Deposits to Checking Account 1,425.47 Transfers In 799,789.04 Add: ACH Credit 288,536.14 Less: Cancelled Checks (147,189.00) Less: ACH Debits (860,677.48) Bank Balance as of September 30, 2021 $ 194,511.56 Less: Outstanding Checks (153,976.93) Less: Retirement Check Run (40,534.63) Reconciled Balance as of September 30, 2021 $ Q 138 RETIREMENT BOARD MINUTE BOOK WASHINGTON COUNTY, PENNSYLANIA Bank Balance as of October 1, 2021 $ 194,511.56 Transfers In 875,038.67 Add: ACH Credit 408,651.42 Less: Cancelled Checks (305,686.41) Less: ACH Debits (879,023.39) Bank Balance as of October 31, 2021 $ 293,491.85 Less: Outstanding Checks (251,998.89) Less: Retirement Check Run (41,492.961 Reconciled Balance as of October 31, 2021 $--0-- Requisitions Mr. Namie stated that requisitions for the months of September, October and November 2021 totaled $3,331,831.30. It was moved by Mr. Namie and seconded by Mr. Sherman that the requisitions be approved. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. Flickinger — yes; Mr. Maggi — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously. September 2021 Check Payee Amount 2241 Monica Adams $ 435.44 2242 Charles Schwab & Co -Trustee -Cheryl Amodei-Mascara 12,626.96 2243 Deanna Bevan 6,652.65 2244 Christoper Bioni 18,087.10 2245 Goldstar Trust Co as Trustee of IRA of Brooke Blackman 7,637.12 2246 TD Ameritrade as Trustee of IRA of Diane Bova 60,409.10 2247 Shana Bradbury 4,175.57 2249 First Federal Savings & Loan as Trustee of 25,000.00 IRA of Glenn A Furbee 2250 Glenn A Furbee 33,783.05 2251 Denise Stepney 1,539.80 2252 Washington County Cash Disbursement Account 3,122.64 2253 Washington County Regular Payroll Escrow Account 21,857.22 Transfer PNC Bank 71,559.48 Transfer Washington County Retirement Account 820,340.40 Total September 2021 Distributions 1.087.226.53 u 1 139 MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA IMR LIMITED E1316649LD October 2021 Payee Check Janet M Johnson Amount 2254 Robert Orsatti Sr $ 724.37 2255 Jules Bioni 47.42 2256 Earl C Dean III 1,217.53 2257 Fidelity Investment as Trustee of IRA of Jodi N Dunkle 4,632.15 2258 Ada Ezech Hill 407.83 2259 First Clearing as Trustee of IRA of Marie Maza Higgins 6,363.64 2260 Kimberly A Jackson 163,048.20 2261 Tiffiny Mahland 17,117.36 2262 Mariko Marshman 6,483.78 2263 Zachary Nimal 884.33 2264 Jacqueline Schmalz 722.39 2265 Amber N Shipley 3,973.55 2266 Alana Staniszewski 4,113.62 2267 Kelly Stutzman 1,701.66 2268 Carolyn Shaw Arent 4,543.92 2269 2270 Washington County Regular Payroll Escrow Account Washington County Cash Disbursement Account 48,844.10 21,789.58 2271 PNC Bank 92,662.16 Transfer Washington County Retirement Account 79,725.33 Transfer Total October 2021 Distributions 824,687.17 S 1,283,690.09 November 2021 Check Payee Amount 2272 William S Vilcheck $ 6.33 2273 Ronald Behanna II 2,346.50 2274 Schwab 4 ACI FBO Kaitlin Engle 6834 17,498.24 2275 David Finder 4,653.98 2276 Savanna Jimenez 9,775.75 2277 Paige King 1,412.38 2278 Gaitens, Tucceri & Nicolas, PC FBO Charlee Rosini 6,306.36 2279 Kristina Roup 5,665.97 2280 Nicole Skidmore 2,161.77 2281 Washington County Regular Payroll Escrow Account 21,610.00 2282 Washington County Cash Disbursement Account 2,859.00 Transfer PNC Bank 62,386.28 Transfer Washington County Retirement Account 824,232.12 Total November 2021 Distributions 960,914.68 140 MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA [MR LIMITED E1316649LD Old Business None. New Business Mrs. Vaughan entertained a motion to remove Item 7A request to purchase prior service time from the agenda as the employee resigned effective November 29, 2021. It was moved by Mr. Sherman and seconded by Mr. Namie to remove the item from the agenda item. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. Flickinger — yes; Mr. Maggi — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously Mrs. Vaughan explained that the Board is obligated by law to consider a cost -of -living increase for retirees once every three years. No discussion followed and no action was taken. Mrs. Vaughan moved on to the Investment Policy Update introducing Lee Martin of Marquette Associates to briefly explain the update to the Investment Policy Statement (IPS). Mr. Martin stated that IPS update brings in all of the addendums for the past ten years into one document and includes the updates to Act 96, delegation of responsibilities, standard of care, objectives, guidelines, etc. into one comprehensive document. Mrs. Vaughan stated that the updated document included no changes to the investment policy, and she entertained a motion to approve the IPS update. It was moved by Mr. Sherman and seconded by Mr. Maggi that the Investment Policy Statement update be approved. No discussion followed. Roll call vote taken: Mr. Namie — yes; Mr. Flickinger — yes; Mr. Maggi — yes; Mr. Sherman — yes; Mrs. Vaughan — yes. Motion passed unanimously After some discussion with regard to changing the OPEB Custodian from BNY Mellon to another custodian and reviewing the options which included U.S. Bank, PNC Bank, a local bank, etc., Mrs. Vaughan entertained a motion to change the custodian. It was moved by Mr. Sherman to change the custodian from BNY Mellon to PNC Bank. Mr. Maggi seconded the motion. No discussion followed. Roll call vote taken: Mr. Sherman — yes; Mr. Maggi — yes; Mr. Vaughan — yes Motion passed unanimously. 141 MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA Portfolio Presentation — Lee Martin, Ph.D. — Marquette Associates Mr. Martin began the discussion reminding the Board that on the last meeting of each year, Marquette prepares the Pennsylvania County Pension Plan Report which is now in its fourteenth year. Marquette compiled, free of charge, the data from 52 participating Pennsylvania counties out of 65 as a way for counties to compare, determine and follow best practices. Mr. Martin pointed out that Washington County is really well ahead of the rest of the counties in its conservative assumptions which will help to ensure that the retirement fund will be well funded in the future. The report shows that Washington County is the only county with the actuarial assumed rate of return at 6.5% with most still at 7.0 to 7.5%. He explained that the lower ARR generates a higher liability, but it results in earlier funding with a more realistic projection of future returns. Mr. Martin directed attention to the salary increase assumption stating that the key is to stay as close to 300 basis points between the ARR and the salary increase assumption as possible pointing out that Washington County is at that point with its salary increase assumption at 3.5%. Furthermore, Washington County's mortality assumption uses the Society of Actuaries Pub-2010 Public Retirement Plans Mortality Tables which considers public retirement plan mortality separately from the private sector which is also the most conservative of the three tables presented. Moving to the cost -of -living adjustment (COLA), Mr. Martin stated that only 6 of 52 counties awarded a COLA adjustment in 2021 and that the COLA would cost even much more today due to the increase in inflation and the link to CPI. He reminded the Board that the COLA only needs to be revisited once every three years which was revisited today. Mr. Martin continued with the County Pension Report stating that all but two counties are using the 5-year smoothing for the asset valuation method. Marquette Associates named the method the "W" method after Washington County, which was one of the first, and is now the standard in the actuarial field for 5-year smoothing which recognizes 20% of gains or losses and applies over a 5-year window. With regard to returns, Mr. Martin noted that the County is yielding 5 and 10-year returns above median while maintaining its relatively conservative approach. Wrapping up the County Pension Report portion of the presentation, Mr. Martin stated that the County's funded ratio was approximately 90-95%. However, because the County's assumptions are conservative, the comparison to counties with less conservative assumptions cannot be made without normalizing the assumptions. To normalize, Marquette Associates assumes that all counties use the same actuarial assumptions, specifically 4.5% salary increase and 7.5% investment return which adjusts the County's funded ration to 100-105% well above the average of 95.5%. Lastly, Mr. Martin wanted to mention that the percentage of active participants is just above 40% and that there are now more retirees than active participants meaning that there is less money coming in from an employer's contribution point of view, yet the benefits continue to grow. Mr. Martin began the review of the performance report with a review of the U.S. economy. He stated that the GDP slowed quite a bit by the end of Q3 coming in at around 2%. He explained that the drop was mainly due to the slowdown in consumer spending which makes up approximately 70% of the U.S. GDP. Mr. Martin stated that this slowdown coincides with the expiration of unemployment benefits as well as the issues with the global supply chain which 142 MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA [MR LIMITED E1316649LD brought him to the topic of inflation. He explained that with the supply constraints, a tight labor market, home price appreciation and the high commodity prices that inflation has really spiked in 2021. Mr. Martin emphasized the amount of money that companies are needing to spend to attract good employees. Mr. Martin stated that, unlike commodity prices, wage inflation and home appreciation are less transitory. He conveyed that the expectation may be that inflation will come down later in 2022. The expectation is that inflation levels will come back in line with what it has been historically at 2-2.5% rather than revert back to where it has been for the past 10 years as a result of Fed policy. Moving to the global economy, Mr. Martin stated that the global growth has come in below expectations. He explained that the pandemic is global and developed market economies are experiencing issues such as supply chain disruptions and inflation, similar to the U.S., whereas developing markets are struggling to a greater extent with the pandemic and low vaccination rates. Mr. Martin directed attention to the global asset index performance stating that equities were slightly negative for Q3 and that emerging markets were down 8.1 % mainly due to the new tech regulations issued by the Chinese government and China's Evergrande real estate crisis as China represents 35% of that index. Fixed income was flat again for the quarter slightly negative YTD at -0.9%. Finally, Mr. Martin stated that it is no surprise that TIPS were up 1.8% for the quarter, well above core bonds, as inflation -sensitive assets continued to outperform in Q3. He also noted that commodities were up 6.6% for the quarter and 42.3% YTD and that REITs had a great year returning 31.5% for the year. He explained that the private core real estate markets lag public markets by about a year and would expect a strong performance in the private real estate markets. to a pretty strong performance by the private real estate markets. Moving to the County's pension fund, Mr. Martin presented the pension fund's observations with the pension fund finishing the 3rd quarter at $204 million. The fund returned 0.1 % for Q3, outperforming the policy index of 0.0%. He noted that as of the end of October the fund was at approximately $210 million for the year. Positive attribution came from domestic equities, defensive equity (VRP), real estate and private credit. Negative attribution came from equity structure (underweight value and small cap). Over the past year, the fund gained $33.5 million returning 19.5%, outperforming the policy index of 18.5%. Longer term, the fund gained $138 million over the past 10 years with a return of 10.2%, slightly under the policy index of 10.3%. Looking ahead, Mr. Martin noted a change in the global strategy managers replacing Acadian Global Low Volatility with MFS Global Low Volatility. On the real estate side, TA Realty replaced J.P. Morgan. He also mentioned that IFS Infrastructure, after sitting in the que for two years, finally got called and put to work increasing the diversification within the infrastructure portfolio. Mr. Martin explained that the fund now has 20% of the total investment in real estate, timberland/farmland, infrastructure, private equity and private credit that will not move with the day-to-day volatility reducing the equity risk overall. Mr. Martin noted that the County's high funded ratio allows for a higher quality of investments with higher yields. He also noted that even though some of the funds top holdings including Microsoft, Meta Platforms, Alphabet and Apple are tech stocks, the County is underweighted, therefore, lowering risk exposure. To summarize, 143 MINUTE BOOK RETIREMENT BOARD WASHINGTON COUNTY, PENNSYLANIA IMR LIMITED E1316649LD Mr. Martin explained that the County's portfolio is more defensive in equities in this environment and more aggressive in fixed income. Moving on to the managers, Mr. Martin stated that U.S. equities is 50 basis points ahead for the quarter driven by GW&K Small -Mid Cap Core up 2.2% overperforming the bench at -2.7%. Also, in U.S. equities, Twin Capital Dividend Select, the local large cap defensive manager returned 0.1% for Q3 underperforming the bench at 0.6% as expected in this environment. On the global side, Mr. Martin noted the addition of Artisan, and Acadian switched out with MFS Global Low Volatility. Dodge & Cox Global Stock, the value manager, brought in 45.1% for the 1-year relative to 31.3%. Turning to the Non-U.S. Equity Composite, Schroder Int'l Mult-Cap Equity Trust yielded 12.8 YTD outperforming the bench at 9.1 % with GQG Emerging Markets' return at negative 6.0% for the quarter but outperforming the bench at negative 8.1 %. Moving to the Defensive Equity Composite, Parametric continues to do well yielding 19.4% for the 1-year relative to the 14.4% bench. The Real Estate Composite brought in 7.0% for the quarter and 15.2% for the 1-year noting that the TA Realty Core Fund returned 11.2% for Q3. Mr. Martin also noted that Timberland/Farmland returned 3.7% for the 1-year, and Infrastructure had a great year bringing in 8.2% for the 1-year relative to 7.6%. He noted that the newly funded Private Credit Composite delivered 1.2% for the quarter. He reminded the Board that the funding came from Fixed Income which is at zero right in line with bench. The meeting was adjourned at 3:36 p.m. THE FOREGOING MINUTES SUBMITTED FOR APPROVAL: ATTEST: 1 26z2 a ©a 3