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Minutes - 01/29/2013 - Firefighter's Pension Fund BoardMINUTES OF A REGULAR MEETING OF THE BOARD OF TRUSTEES OAK BROOK FIREFIGHTERS' PENSION FUND JANUARY 29, 2013 A regular meeting of the Board of Trustees of the Oak Brook Firefighters' Pension Fund was held on Tuesday, January 29, 2013 at 9:00 a.m., at the Butler Government Center, West Wing Training Room located at 1200 Oak Brook Road, Oak Brook, IL 60523, pursuant to notice, to conduct regular business. CALL TO ORDER BY PRESIDING OFFICER President Michael Erickson called the meeting to order at 9:06 a.m. ROLL CALL Upon roll call the following answered: Present: President Michael Erickson, Secretary John Fagan, Trustee Timothy Schlindwein, Trustee George Kouba Absent: Trustee Mark Fleishman Also Present: Treasurer Sharon Dangles, Jason Franken of Foster & Foster; David Russell of Investment Performance Services, LLC (IPS); Robert Thompson of MB Financial; Becky Davis of Lauterbach & Amen, LLP (L &A) PUBLIC COMMENT —No public was present and no comment was made. APPROVAL OF THE PRIOR MEETING MINUTES The Board reviewed the prior meeting minutes presented in the board meeting packet. A motion was made by Trustee Schlindwein and seconded by Trustee Kouba to approve the October 23, 2012 minutes as written. Motion carried unanimously by voice vote. The Board indicated that there are no closed session minutes to review PRESENTATION AND APPROVAL OF THE BILLS The Board reviewed the fourth quarter 2012 disbursements presented in the board meeting packet. A motion was made by Trustee Schlindwein and seconded by Trustee Fagan to approve the disbursements stating net payroll payouts and vendor payouts for October, November and December 2012 totaled $516,024.90. (See detail attached.) AYES: Trustees Erickson, Fagan, Schlindwein and Kouba NAYS: None ABSENT: Trustee Fleishman DISCUSS ACTUARIAL ASSUMPTIONS for the 12/31/2012 valuation — Foster and Foster Mr. Franken distributed Review of Actuarial Assumptions and reviewed it with the Board. After discussion and review, Mr. Franken recommended the following assumptions: 6.75% Investment Return; 4.25 Salary Increase; 3.25% Payroll Growth; RP2000 (combined, healthy) Mortality; and female spouses (three years younger) Marital Status. Ms. Dangles will contact Mr. Franken to confirm the Board's agreement on the assumptions. A special meeting will be held in March to review the actuarial report. Data will be sent to Mr. Franken as soon as the year- end report is completed. Mr. Franken was excused and left the meeting, and the Board took a short break at 10:21 a.m. The Board reconvened at 10:32 a.m. INVESTMENT PERFORMANCE SERVICES Mr. Russell distributed copies of the 12/31/2012 investment performance report and reviewed it with the Board. As of 12/31/2012, the Fund was up 1.7% for the quarter and up 9.0% year -to -date; the ending market value was $23,364,339. The portfolio outperformed the benchmark, which was up 0.9% for the quarter. Investment earnings were up $412,123 for the quarter and up $1,965,677 year -to -date. Asset allocations were: total domestic equity 35.7 %, total international equity 15.4 %, total fixed income 44.5 %, and total cash 4.3 %. Since the January 2010 inception the portfolio is up 10.7 %. Oak Brook Firefighters' Pension Fund Minutes of Meeting — January 29, 2013 Page 2 of 3 Mr. Russell commented on the good performance by all managers, and due to current market conditions, expects some to come back with better returns. Cash flow was discussed and Mr. Russell made a recommendation to the Board. A motion was made by Trustee Schlindwein and seconded by Trustee Kouba to reallocate $700,000 from the Cash account to the Blackrock GTAA fund. AYES: Trustees Erickson, Fagan, Schlindwein and Kouba NAYS: None ABSENT: Trustee Fleishman Mr. Russell reviewed the Risk/Return analysis and stated that the portfolio is positioned well and no changes were needed. The quarterly compliance report for the period confirmed that asset allocations, mutual funds and MB Financial are all in compliance. Mr. Russell led a discussion about the impact of rising interest rates on the fixed income portfolio. IPS presented a chart from JP Morgan, The Fed Funds Rate: History and Expectations showing the historical and the FOMC forecast for future rates. Also reviewed was the rate sensitivity analysis of fixed income indexes to various changes in interest rates discussed in the Quarterly Market Commentary portion of the performance report. Both IPS and MB Bank presented the view that since the Illinois Pension code mandates a minimum of 45% fixed income investments, reducing the fixed income portfolio's duration was the only way to control interest rate risk. ITS and MB Bank presented various alternative rate change scenarios, including the timing of the initial rate increase occurring in 2014, 2015, or triggered by the unemployment rate declining to 6.5% (per the FOMC minutes) and a "flight to quality" event that would increase bond prices and reduce rates further. Mr. Russell stated that the concern is that when interest rates do begin to rise, most probably sometime in 2014, keeping the current modified duration of 4.06 years could result in significant principal losses when rates rise. A motion was made by Trustee Schlindwein and seconded by Trustee Kouba to direct MB to move the duration of the portfolio to a target of 1.5 years with a maximum duration of 2.0 years and a minimum of 0 years, and to make this adjustment over the next three to six months. AYES: Trustees Erickson, Fagan, Schlindwein and Kouba NAYS: None ABSENT: Trustee Fleishman Mr. Russell offered some sample policy language to establish specific fixed income objectives to the Board. The Board amended the suggested language to provide for the specific duration objectives stated above and directed IPS to update Appendix A of the investment policy for review and approval at the next meeting. Due to a schedulingconflict, the next regular Board meeting was changed from April 23rd to April 25, 2013 to be held at the same time and location, if available. Also, the Board set the special meeting date for the actuarial discussion to be March 28, 2013 to be held at the same time and location, if available. Mr. Russell and Mr. Thompson left the meeting at 12:08 p.m. UNFINISHED BUSINESS The Board discussed the update regarding Sean Smyth's disability and his recent medical exam. A motion was made by Trustee Schlindwein and seconded by Trustee Erickson to direct the Board Attorney to draft a letter to Sean Smyth stating that in light of Dr. Arce's amended medical evaluation, a hearing would no longer be necessary, and that his disability pension benefits will continue. AYES: Trustees Erickson, Fagan, Schlindwein and Kouba NAYS: None ABSENT: Trustee Fleishman The Municipal Compliance Report (MCR) was distributed to the Board for their approval. A motion was made by Trustee Schlindwein and seconded by Trustee Kouba to approve the MCR stating the recommended municipal contribution of $978,767. Oak Brook Firefighters' Pension Fund Minutes of Meeting — January 29, 2013 Page 3 of 3 AYES: Trustees Erickson, Fagan, Schlindwein and Kouba NAYS: None ABSENT: Trustee Fleishman NEW BUSINESS The Board distributed and reviewed the 2013 annual pensioner increases. A motion was made by Trustee Kouba and seconded by Trustee Schlindwein to approve the 2013 annual pensioner increases as presented. AYES: Trustees Erickson, Fagan, Schlindwein and Kouba NAYS: None ABSENT: Trustee Fleishman The Board noted that the active member pension files are reviewed and kept up -to -date on an ongoing basis. No further action is needed. Renewal of the Fiduciary Liability Insurance was discussed by the Board. A motion was made by Trustee Kouba and seconded by Trustee Schlindwein to seek renewal for the 04/30/2013 Fiduciary Liability Insurance policy at the same rate or lower than last year's premium of $3,978. AYES: Trustees Erickson, Fagan, Schlindwein and Kouba NAYS: None ABSENT: Trustee Fleishman INFORMATION & UPDATES • Elections — there are currently no terms expiring this year and the Board determined there was no need to maintain past years' election records. • IRS mileage rate increase — 2013 mileage rate is now $0.565 (56 'h cents). • Statements of Economic Interest — the Board will look into who files the board members with the County, and will watch for and complete the statements prior to the due date. • 1099s — L &A is currently in the process of mailing these tax forms out to pensioners, due by the end of January. • Affidavits of Continued Eli ibility — 100% compliance from all pensioners. • Trustee training. summary — the Board noted that all Trustees are up -to -date or in process with required training. Mr. Kouba is enrolled in the February 2013 new trustee training program. The Board discussed their plans for 2013 training requirements. • Distributed to the Board: December 31, 2012 monthly financial report from L &A, revised and adopted Rules & Regulations, and the signed L &A engagement letter. • Illinois State Archives, Local Records Commission —on 12/21/2012 the Board submitted the proper form to the agency for approval to destroy the duplicate accounting work papers, bank and investment statements for 2001 through 2005 being held at L &A; no response has been received. CLOSED SESSION — The Board agreed there was no need to hold a closed session. ADJOURNMENT A motion was made by Trustee Fagan and seconded by Trustee Schlindwein to adjourn the meeting at 12:29 p.m. Motion carried unanimously by voice vote. Respectfully submitted, Michael Erickson, President John Fagan, Secretary Minutes prepared by Pension Services Administrator, Becky Davis OAK BROOK FIREFIGHTERS' PENSION FUND DISBURSEMENTS PRESENTED AT THE JANUARY 29, 2013 MEETING DESCRIPTION October 2012 Net Payroll Payouts October 2012 Vendor Payouts November 2012 Net Payroll Payouts November 2012 Vendor Payouts December 2012 Net Payroll Payouts December 2012 Vendor Payouts AMOUNT $ 138,608.18 $ 37,399.15 $ 138,608.18 $ 25,935.34 $ 138,582.06 $ 36,891.99 GRAND TOTAL OF DISBURSEMENTS: $ 516,024.90 A [I Checkbooks Oak Brook Firefighters' Pension Fund OAKBRKFIRE 10/01/12.12/31/12 Vendor Checks Report Page I Vendor Name_ Chk. No. Check Date Amount INVESTMENT PERFORMANCE SERVICES, 20067 10/12/12 8,194.01 JOHN FAGAN • 20068 10/12/12 19.80 LAUTERBACH & AMEN, LLP 20069 10/12/12 1,300.00 MIDWEST ENVIRONMENTAL MEDICINE 20070 10/12/12 425.00 RICHARD J. REIMER & ASSOCIATES LLC 20071 10/12112 225.00 VILLAGE OF OAK BROOK 3966 Subtotal 10,163.81 LAUTERBACH& AMEN, LLP 20072 10/17/12 1,300.00 OAK BROOK BANK/IRS -EFTPS 11544 10/31/12 15,732.22 VILLAGE OF OAK BROOK 3961 10/31/12 10,203.12 Subtotal 25,935.34 OAK BROOK BANK/IRS -EFTPS 11580 11/30/12 15,732.22 VILLAGE OF OAK BROOK 3966 11/30/12 10,203.12 Subtotal 25,935.34 IMCS GROUP 20073 12/06/12 1,750.00 LAUTERBACH & AMEN, LLP 20074 12/06/12 1,575.00 Subtotal 3,325.00 MB FINANCIAL BANK 50043 12/31/12 1,176.60 MB FINANCIAL BANK 50042 12/31/12 6,455.05 OAK BROOK BANK/IRS•EFTPS 11616 12/31/12 15,732.22 VILLAGE OF OAK BROOK 3971 12/31/12 10,203.12 Subtotal 33,566.99 TOTAL 100,226.48 12 -1