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HomeMy WebLinkAboutMinutes - 04/25/2017 - Police Pension BoardtU l Police Pension Board of Trustees Regular Meeting April 25, 2017 1. A meeting of the City of McHenry Police Pension Board of Trustees was called to order at 3:30 PM in the City of McHenry Council Chambers, 333 S. Green Street, McHenry, IL. 2. Roll Call: President Jeffrey Foerster, Ormel Prust and Jon Meyer. Absent: Marc Fisher and Kelly Ducak. Others present: Jim Schmidt, LPL Financial; Gary Karshna, Capital Gains, Inc.; Dennis Dressel, Lauterbach & Amen, LLP; City Treasurer Carolyn Lynch, and recording secretary Marci Geraghty. 3. Public Input None. I... 4. Lauterbach & Amen, LLP Assumptions Update Dennis Dressel representing Lauterbach & Amen, LLP provided the board with an Actuarial Assumption Summary for the McHenry Police Pension Fund. Expected Rate of Return. Mr. Dressel reported the long-term rate of return of the fund assets is anticipated to be available to pay benefits (net of expenses). The prior assumption used was 7% and the proposed assumption is also 7% and is based on guidance from the fund's investment advisor Capital Gains regarding long term expectation of returns for each broad asset class in the fund and the long term anticipated asset allocation. Expected Pay Increases. The prior assumption used for expected pay increases was 4%. The expected increase in individual salaries proposed at 4% - 10.27% - long-term increases at 4% with additional step increases in the first seven years. Mr. Dressel explained service -based pay rates capture additional pay increases anticipated for employees early in their working careers in addition to cost of living adjustments for all employees. The prior assumption used to determine the long term expected increase in total payroll for active employees was 4%. This will now be assumed at 3.5%. The total payroll assumption should also take into consideration that over the life of a pension plan, as higher paid employees retire, they are replaced by lower paid entry-level employees. Consumer Price Index-U. The CPI-U rate that will be used to predict future COLA adjustments is proposed at 2.5%. In prior years, the rate used was 3%. Mr. Dressel explained that historically, CPI-U rates show an average increase over a 20-30 year period of 2.5%-3%. Percent Married. There is no change proposed in the 80% assumption for married employees. Mortality Rates. In past assumptions, the RP 2014 Mortality Table (BCHA) was used to predict deaths �-- that trigger a benefit for beneficiaries. This assumption was also used to estimate the amount of payments an individual is expected to receive when payments begin. Proposed is the L&A Assumption Study for Police 2016. These rates are experience -weighted with the raw rates as developed in the RP-2104 study, with Blue Collar Adjustment and Improved Generationally using MP-2016 Improvement Rates. Disability Rates. In past reports, this assumption was based on studies of the fund and the Department of Insurance. Proposed is 100% of the L&A Study for Police Officers in Illinois 2016 that ranges at Age 24 at a rate of 0.001 and steadily increases to Age 50 at a rate of 0.006. Retirement Rates. The probability is that members retire at any given age. The assumption used with active fund members to predict retirement dates that trigger a benefit payment were in prior years based on studies of the fund and data from the Department of Insurance (100% by age 70). Proposed is 100% of L&A Study Police 2016 ranging from Age 50 at a rate of 0.117% to Age 70 at 1 %. Termination Rates. This assumption is used with active members to predict termination that could trigger deferred retirement benefits or contribution refunds. In prior years, this assumption was based again on studies of the fund and the Department of Insurance. Proposed are rates from the L&A Police 2016 study that begin at Age 24 at a rate of 0.041 % to Age 50 at a rate of 0.003%. Mr. Dressel concluded his presentation and announced he will return with a draft actuarial study sometime after the City has concluded its financial audit. �- 5. Approval of Minutes a) Mr. Karshna recommend a correction on the first page, last paragraph, and second sentence of the first page noting the percent of taxable general obligation municipal bonds should be 29% not 929%. 0" O. Prust made a motion, seconded by J. Meyer to approve the regular meeting minutes from January 3, 2017 as amended and to hold them for audit. Ayes: Prust, Foerster, Meyer Nays: None Absent: Fisher, Ducak Motion carried 5. Semi-annual review of Executive Session Minutes All Executive Session minutes have been released. 6. Report of Investments and Accounts: a) Treasurer Report: Finance Director and Board Treasurer Lynch presented the Cash and Investments report as of March 31, 2017. She reported approximately $50,000 in cash is needed to pay bills through May. Motion by J. Meyer, seconded by O. Prust to approve the Treasurer Reports as of March 31, 2017, with total investments of $22,582,386.40, as presented. Ayes: Prust, Foerster, Meyer Nays: None Absent: Fisher, Ducak 2 Motion carried b) Cauital Gains Fixed Assets Investment Report: Fixed Assets Manager Gary Karshna presented the investment report for the period ending March 31, 2017, at which time the Market Valuation was $9,000,407 and Book Valuation $9,167,467. Mr. Karshna reported the barbell strategy is working well in the current global investment environment. The bond portfolio produced a 1.39% return versus -64% for the Barclays Intermediate Government Bond Index. c) Equities Investment Report: Jim Schmidt of LPL Financial presented the equities investment summary for the period of December 31, 2016 to April 24, 2017. Total market value of investments as of April 24, 2017 was $13,544,623.29; total percent rate of return is 7.50%. Mr. Schmidt also distributed a Performance Detail by Asset Class report. d) Motion to approve the capture of profits from investments and/or the sale of individual investments and deposit said funds into the Pension Fund checking account for paying bills: Mr. Karshna reported he would transfer profits from anticipated bond sales to provide the fund with the needed cash. Motion by O. Prust, seconded by J. Meyer to authorize the transfer of $50,000 from the fixed assets fund to the fund checking account for the payment of bills in May. Ayes: Prust, Foerster, Meyer Nays: None �- Absent: Fisher, Ducak Motion carried e) Semi-annual Review of Police Pension Fund Policv: No changes to the policy were recommended. 7. Unfinished Business: a) Motion to approve payment of bills as presented. Capital Gains Quarterly Invoice: $4,920 Capital Gains Quarterly Invoice (Dec) $4,941 IPPFA Annual Dues: $795 Reimbursement of Pension Contributions (Zachary Piekarski): $15,909.66 O. Prust made a motion, seconded by J. Meyer to approve the payment of bills as presented. Ayes: Prust, Foerster, Meyer Nays: None Absent: Fisher, Ducak Motion carried 8. Motion to approve Application for Participation in the Police Pension Fund from Officer Derek Schmidt: President Foerster reported Officer Derek Schmidt was sworn in on March 24, 2017. Motion by J. Meyer, seconded by O. Prust to accept the Application for Participation in the Police Pension Fund from Officer Derek Schmidt as presented. 3 M Ayes: Prust, Foerster, Meyer Nays: None Absent: Fisher, Ducak Motion carried 9. Additional items for discussion: President Foerster reported the results from the Pension Board Elections: Jeffrey Foerster was reelected as Beneficiary Representative. Active Members (2): Officer Marc Fisher was reelected and there is a tie between Officer Kelly Ducak and Sgt. Nicolas Clesen. A run-off election will be held on May Is'. Onnel Prust was reappointed as the Mayoral appointee. 10. Adjournment: O. Prust made a motion, seconded by J. Meyer to adjourn the meeting at 4:25 PM. Ayes: Nays: Absent: Motion carried Respectfully submitted, Prust, Foerster, Meyer None Fisher, Ducak Marci Geraghty, Recording Secretary 4