2013-07-13
Minutes – Pension Committee Meeting – 2nd Quarter Review
July 30, 2013
Attendees: Pension Committee members Gail Erickson, Denise McNair, Denise Parsons
and Jim Wren
Tyler Polk and Chris Rowlins, FIA
Laura Hanson, ICMA
Meeting was convened at 10:07 AM.
There were some questions about recent lump sum payouts from Prudential and it was
clarified that there is an option of lump sum payouts versus annuities with most current
retirees selecting lump sum.
Laura Hancock from ICMA indicated that she has met with 75 employees individually
since she came on board. She has also met with paraprofessionals as mandatory training
and that has addressed some of the under-participation issues of that group. A Brain
Shark was sent out about the Roth IRA and other options. This will be repeated in the fall
to try to get more people educated. Laura has conducted group meetings with
departments not resident at Town Hall. Forty new accounts have been set up since Laura
came on board. Of these, nineteen are Roth IRA accounts. Tyler Polk asked whether
there is a benefit to incorporate the Roth option into the 457 plan for those unable to
participate due to income limits, Laura indicated that the rules of having this in the 457
plan would be a bit more restrictive than for the 401. This would require an amendment
to the plan. Denise Parsons will look into this for BOE administrators. Tyler Polk asked
whether ICMA can handle Roth conversions. Laura believes that ICMA can handle it and
will confirm.
Denise Parsons brought up a vesting issue in which the ICMA statements show people as
vested from date of hire even if they do not participate in the plan immediately. There
was some discussion about whether we should use hire date or participation date. Tyler
Polk indicated that most clients use hire date. This is up for further discussion.
There was some discussion that the pension plan will be revisited in upcoming contract
negotiations as the protection in all contracts except police expires in 2014. Once all the
changes are made, we will look at going to ICMA’s plan document.
Laura Hancock would like to increase her presence in Town to more frequently than
quarterly and issue more Brain Sharks for participant education. Denise Parsons
suggested Laura present to top managers and administrators.
FIA has reviewed the town’s Investment Policy Statement and is comfortable that it is
still effective and is being followed.
Regulatory Watchlist:
-More fee disclosure being required
-Lifetime Income – DOL proposal to show lifetime income on the pension
statements. A benchmark will need to be developed. ICMA has a calculator tool
currently, but the information is not currently disclosed on the quarterly
statements. There has been a recent trend to move into the lifetime income funds.
Many of these are people close to retirement.
-In-Plan Roth Conversions – IRS guidance coming out
-Fiduciary Investment Advice – Fiduciary definition may be expanded to anyone
giving advice, even an outside broker giving advice.
-Target Date Funds – Ratio of stocks to bonds vary depending on type of fund;
DOL is targeting more education on these types of plans. This will have a definite
impact on Berlin.
There was a discussion of committee best practices. Berlin is in compliance with most of
the best practices including taking minutes of all committee meetings.
Fiduciary insurance – Protects the committee members from being held personally
responsible for investment performance. FIA recommends exploring this insurance with
CIRMA. Jim Wren will follow up on this.
Second Quarter Results: (refer to attached detail)
The overall investment environment was volatile in May and June. US Markets did much
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better in the 2 quarter than international markets. The one exception was Japan who
announced a quantitative easing resulting in a sharp rise in equities in that country (many
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of these gains have been reversed so far into the 3 quarter). Commodity rich markets
like Russia and Brazil did not do well. Fixed income investments had negative returns for
the quarter due to slight changes in interest rates.
Overall July has been a strong month overall in the market including a substantial rise in
S&P and the housing market.
401A plan assets increased to $28.7 million in 2Q. 37% of funds are still invested in
PLUS fund, consistent with plan history. FIA believes there is a healthy balance in the
target date funds. They are also of the opinion that the investment menu is still
appropriate.
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457 plan assets are at $7.3 million for the 2 quarter which is a decline from the previous
quarter due to a $300K distribution.
Performance Overview: (Refer to detailed presentation attached).
Mixed results; some underperformance due to volatility of international markets.
Vantagepoint Milestone funds generally did well since there is a concentration in equity
markets. Jim Wren questioned Goldman Sachs mid-cap which had a significant manager
change. FIA’s opinion is that the new manager has appropriate experience and is
displaying a consistent strategy with the previous manager.
Overall, there are no recommended changes. There is also no change to the ICMA rebate
program of $10,000 per quarter which covers the FIA fee.
Third quarter meeting will be Tuesday, October 22, 2013 and will be participant-focused.
Laura Hancock should have the PSR report for that meeting.
Meeting was adjourned at 11:12 AM.