SPECIAL MEETING
OLD SAYBROOK PENSION BENEFITS BOARD
Wednesday, July 17, 2013
Town Hall Conference Room at 1:00 p.m.
Present: Suzanne Taylor, Gary Lehrman, Carol Voigt, Steve Sheehan, Raymond Moratori, Carl Fortuna and Eileen Torrenti (via speaker phone)
Also Present: Sharon Migliaccio, Tom Forma and Kevin Nichols– Merrill Lynch, George Stanevich – Neuberger Berman, Steve Lemanski – Milliman, J.T. Dunn-OSFD, and Police Chief, Michael Spera
The Special Meeting of the Old Saybrook Pension and Benefits Board was called to order at 1:12 p.m. by the Chair, Suzanne Taylor She welcomed the Board and all present to the Board meeting. Suzanne recommended that concerns or questions from non board members be brought up at the beginning of the meeting and pertain to the agenda. No questions will be addressed at the end of the meeting. She also asked that discussion and deliberations consider congeniality, i.e. cooperation as well as focusing on analysis for solutions to problems.
Fire Chief, J.T. Dunn requested that items pertaining to the Fire Department be addresses as he had other commitments to attend to. The progress of the fire department’s valuation was moved forward from the agenda. The Chief reported that almost all the data has been assembled except for the difficulty of determining the hours for those who are part time volunteers as well as for those who are eligible for the Officer Incentive program. This should be ready shortly.
Another related agenda item was also moved forward pertaining to the fire department’s concern with the potential of a defined contribution pension plan. At that time members were directed to the page in the contract of the recently settled collective bargaining agreement with the Dispatchers Union where language provides for the next contract in 2015 to have a defined contribution plan subject to approval of the Pension and Benefits Board. Chief Dunn felt that the members would not wish to have such a plan. There was some discussion and J.T. left for his other commitments.
Investments
Merrill Lynch -Kevin Nichols and Tom Forma of Merrill Lynch distributed copies of the Town’s portfolio to those present. As of July 15, 2013 there is $17,626,618 in the town pension plan and $959,577 in the healthcare fund.
Tom recommended replacing Alliance Bernstein as one of our managers due to major personnel changes in the company. He said that the town would do better with another manager for the three million plus they invest. Kevin Nichols presented several options for replacement for the Boards consideration.
- The first proposal was a combination of London Company Small Cap Core and Davidson Investment Advisors All Cap Core. Kevin explained a chart which showed how our portfolio would have done historically with our funds under this management system.
- The Second manager proposed was The London Company-Dividend Focused. A chart showing how the Town’s portfolio would have done if The London Company had been our manager instead of Alliance Bernstein was presented. There was some discussion about why this manager had not been proposed the last time the Board selected a new manager. Tom Forma explained that the manager he selected before was very similar to London.
- A third possibility of a combination of two other managers, Zachs Investment Management, an all cap management firm, and Fuller and Thaler, a small cap value manager were also presented with an accompanying example of how they would have fared in past years.
Some discussion ensued with several questions. Tom Forma told the Board his suggestion is to split the $300,000 plus between Davidson and The London Company. After more discussion a motion was made by Stephen Sheehan to take the 3.5 million from Alliance Bernstein and split it between Davidson Investment Advisors and The London Company-small cap core while preserving our investment policy ration of no more than 70 percent in stocks. The motion was seconded by Ray Moratori. The motion passed unanimously.
Neuberger Berman – After distributing copies of the Town’s portfolio first quarter, George Stanevich of Neuberger Berman talked about reducing risk in relation to the variable bond market. George told the Board that the Mortgage market is an attractive investment now. He talked about core bonds, Intermediate Maturity, and Limited Maturity. He also emphasized that Neuberger is attempting to manage the variables mostly with intermediate bonds. The Board thanked George for his presentation.
Other Benefit Issues
Discussion of the definition of full time and part-time School Resource Officers ensued. Chief Michael Spera was present to explain retiree Tim McDonald’s forthcoming fall employment as SRO for the Town Board of Education. The Boards concern is that if he works 180 days as SRO he will work over the 1200 hours required to be eligible for pension and thus be considered full time. Reference was made to the legal opinion letter from Atty. Pat McHale. The problem is with the probability that Lt. McDonald might work more hours than the definition of full time specifies as either 10 months or 1200 hours. Some discussion ensued on how to correct this. A possible solution would be to change the hours per year from 1200 to 1500 for the Police only. Emphasis was also placed on Atty.
McHale’s statement that “he should be rehired on a temporary basis with a customary term of employment specified and an automatic termination of employment at the conclusion of the term. A similar agreement could be executed for each year that the Town and the retiree wish to continue the arrangement. The re-hire agreement should avoid language that implies that the retiree is rehired for an indefinite period or an indefinite number of successive terms.” The opinion goes on to suggest further measures that could be taken. It was determined that a written appointment letter might be best drafted by Atty. McHale and toward that end the Chief agreed to seek such a letter to be used for rehiring of Lt. McDonald.
A change in the Police Pension Plan to increase the requirement to be pension eligible from 1200 hours to 1500 will be further discussed by the Pension and Benefits Board at subsequent meetings.
A copy of Atty. McHale’s opinion letter should be attached to these minutes.
Actuarial Report
Results of the OPEB Study – Steve Lemanski distributed copies of the Town of Old Saybrook Other-Post-Employment Benefits Program as of July 1, 2012 and explained various details of the plan pointing out that the unfunded liability cannot include our Health Care Reserve fund of nearly a million as officially the auditors feel this money could ostensibly be used for other needs of the town,. At this point in time the only additional funding contributed by the town is to pay the actual health insurance premiums due each year so the future liability is not reduced but increasing. The plan is on a pay as you go basis. In reaching the final determination of funding various assumptions were calculated to arrive at the fact that the total accrued liability is actually $10,117,000.00. We do have on
hand nearly a million dollars in our state trust fund and annually fund about $540,000 of the Annual Required Contribution of $914,000.00 with the annual expense of the insurance premiums, which leaves a net budget impact of minus $374,000 as our Annual Required Contribution that we do not fund. It should be noted that in this case the town must also include the Board of Education teacher liability. This valuation is required every two years by the Government Accounting Standards Board.
Also discussed was the impact of further research into changes that would be made in the town’s pension plan. Further consideration and study of the cost impact of pension plan changes are required by state statute. Some brief discussion of various options were held and included a future defined contribution plan for new hires and maybe as an option for existing DB employees, a hybrid plan, modifications to the current DB plan, cost of maintaining both a DB plan and a DC or hybrid plan. Steve Lemanski was asked to prepare some cost proposals along some of these issues for consideration of the Board. He and Suzanne agreed to have further discussion of what areas to study.
Suzanne had some announcements;
- Brown & Brown has been invited to attend the September 26, 2013 meeting of the Board, to share information about the Town health insurance plans.
ICMA – Gary Lehrman gave a report concerning employee utilization of the 457 ICMA supplemental retirement investment program which showed that the total investment with ING is nearing the million dollar mark. The report is attached.
The next meeting will be September 26, 2013 at 7:00 p.m. in the town hall lower level conference room. A motion was made to adjourn by Carol Voigt and seconded by Gary Lehrman. The meeting adjourned at 3:40 p.m.
Respectfully Submitted,
Sharon E. Migliaccio
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