MINUTES OF THE REGULAR MEETING OF THE POLICE OFFICERS' PENSION BOARD, MAY 25, 2012 Present: Chair Ron Baty, Secretary/Treasurer Pamela Nadalini, Trustees Darrell Nixon and Kevin Stiff Absent: Vice Chair Jody Hudgins Others Present: Mr. Larry Cole, Burgess Chambers, Mr. Chris Lyons, City Finance Director, Pension Plans Administrator Benita Saldutti, Pension Analyst Gail Loeffler and Staff Member Janice Docking CALL THE MEETING TO ORDER Chair Baty called the meeting to order at 8:17 a.m. APPROVAL OF THE MINUTES OF MARCH 23, 2012, AND MAY 4, 2012 On a motion of Trustee Stiff and a second of Secretary/Treasurer Nadalini, it was moved to approve the minutes of March 23, 2012, and May 4, 2012. Motion carried unanimously. DROP RETIREMENT REQUESTS OF JANINE HEBELER SMITH Pension Analyst Loeffler stated that Janine Hebeler Smith, 48 years of age with 25.08 years of service is requesting DROP retirement effective August 1, 2012, with the option of 75% to joint annuitant. On a motion of Trustee Stiff and a second of Trustee Nixon, it was moved to approve the DROP retirement request of Janine Hebeler Smith. Motion passed unanimously. INVESTMENT REVIEW - BURGESS CHAMBERS Mr. Cole reported that the portfolio is up $12.6 million for the quarter ending March 31, 2012, with a net return of 8.5%for the quarter and 16.1% for the fiscal year to date. He continued that the market has lost approximately 3% to 4% since the end of the quarter. Trustee Stiff asked Mr. Cole if the current assumed rate of return of 7.75% is a reasonable assumption over a long period of time. Mr. Cole responded that maybe not each year, but over the long term, yes. DISCUSSION RE: ASSUMED RATE OF RETURN Mr. Lyons stated that some Commissioners have concerns over the assumed rate of return of 7.75% because the actual rate of return is 4.59% over an eleven year time May 25, 2012 1 period. Mr. Lyons stating he has discussed this issue with the other two Pension Boards and suggested an educational workshop be held with the Commission and the professionals who advise the Boards. Trustee Stiff asked why Mr. Lyons used a span of eleven years instead of using 20 - 25 years, the average career of a police officer. Mr. Lyons stated that the rate of return would have been 7.9% over a 20 year period, but that time frame included the tech bubble which drove returns up and that scenario will never happen again. Mr. Cole stated that the past eleven years have been more of an aberration than the norm. He continued that the cost associated with lowering the assumed rate of return is very high and asked if it is more reasonable to look at eleven years or twenty in the life of a Pension Plan. Mr. Lyons stated that some of the Commissioners are taking a very conservative stand and would rather be overfunded than under. Chair Baty stated that the Board is required to address the assumed rate of return every year, and the City has shown no interest until last year. Secretary/Treasurer Nadalini stated that if there was a concern by the City that this should have been addressed much sooner. Mr. Lyons stated that is why a workshop with the consultants and the Commission has been suggested. Secretary/reasurer Nadalini reported that the Commission plans to schedule a workshop with the consultants of the Pension Plans after labor negotiations are completed with the Police. Attorney Dehner stated that fiduciaries are bound by the "prudent expert" standard, that is why the Trustees hire professionals to advise them. He continued that the Trustees must make decision in the best interest of the plan. The Board thanked Mr. Lyons for meeting with them. STATUS RE: DISABILITY REQUEST OF RICHARD CONWAY, JANINE CROUGH AND TIMOTHY VAN SCHULTZ The Initial Hearing for Janine Crough and Richard Conway will be June 22. The Hearing for Mr. Van Schultz has not yet been scheduled. Trustee Stiff informed the Board that he will be absent from the meeting due to training classes. OTHER MATTERS Attorney Dehner stated that a settlement for a total of $8.5 million has been proposed in the class action suit against Merrill Lynch, that the Police Officers' Pension Fund should receive approximately $248,000. Next Meeting May 25, 2012 2 The next meeting will be the Initial Disability Hearing for Richard Conway and Janine Crough at 8:15 a.m. on Friday, June 22, 2012, in the City Commission Chambers. Trustee Stiff announced is he would not be in attendance at this meeting. ADJOURN The meeting was adjourned at 10:14 a.m. Benki Heela N Nooy Chair Baty Secretary/Treasurer Nadalini May 25, 2012 3