Minutes - 05/08/2006 - Firefighter's Pension Fund BoardMINUTES OF THE MAY 85 2006 SPECIAL MEETING
OF THE BOARD OF TRUSTEES OF THE OAK BROOK
FIREFIGHTERS' PENSION FUND APPROVED AS
WRITTEN ON JULY 265 2006.
It is noted for the record that the quarterly meeting of April 26, 2006 was
canceled due to lack of a proper meeting notice and rescheduled to a special
meeting on Monday, May 8, 2006.
1. SWEARING CEREMONY
Village Clerk Linda Gonnella gave the official oath of office to the newly
elected Trustees Michael Erickson, John Fagan and Scott Harris and to the
newly appointed members Darrell Langlois and Timothy Schlindwein of the
Oak Brook Firefighters' Pension Fund.
2. ELECTION OF OFFICERS
The Recording Secretary requested a motion from the floor to elect a President
for the Oak Brook Firefighters' Pension Fund Board of Trustees.
Motion by Trustee Harris, seconded by Trustee Fagan, to nominate Michael
Erickson as the President of the Oak Brook Firefighters' Pension Fund Board of
Trustees. No further nominations were made from the floor. VOICE VOTE:
Motion carried.
President Erickson requested a motion from the floor to elect a Secretary of the
Oak Brook Firefighters' Pension Fund Board of Trustees.
Motion by Trustee Langlois, seconded by Trustee Harris, to nominate John
Fagan as Secretary of the Oak Brook Firefighters' Pension Fund Board of
Trustees. No further nominations were made from the floor. VOICE VOTE:
Motion carried.
3. CALL TO ORDER
The Meeting of the Board of Trustees of the Oak Brook Firefighters' Pension
Fund was called to order by President Erickson at 8:50 a.m. in the Upper Level
Conference Room of the Butler Government Center, 1200 Oak Brook Road,
Oak Brook, Illinois.
4. ROLL CALL
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Recording Secretary Gonnella called the roll with the following persons
PRESENT: President Michael Erickson, Secretary John Fagan, Trustees Scott
Harris, Darrell J. Langlois and Timothy Schlindwen.
ABSENT: None.
IN ATTENDANCE: Fire Chief Jim Bodony; Deputy Fire Chief Tom McEllin;
Jim Brolin and Brian Speers, Merrill Lynch; Executive Vice President Tom
Sawyer and Vice President John Falduto, Oak Brook Bank.
5. DISCUSSION OF RULES OF BOARD OF TRUSTEES
Secretary Fagan noted that the Rules of the Oak Brook Firefighters' Pension
Fund Board of Trustees need to be amended due to the new legislation in which
five members serve on the Board rather than the previous nine member Board
of Trustees. He indicated that Section 1.01 Membership of the Board and
Section 1.06, Subsection B. Quorum would need to be amended due to reflect
the change in the law. Finance Director Langlois will prepare the changes to
the Rules for approval by the Board at their next meeting. He indicated that
Board Attorney Richard Reimer had given the previous Board proposed Rules.
Fire Chief Bodony remarked that the Rules maybe on diskette and Trustee
Langlois will research this further with the Information Services Department to
locate the files.
6. APPROVAL OF MINUTES
a. February 1, 2006
Motion by Trustee Langlois, seconded by Trustee Harris, to approve the
Minutes of the February 1, 2006 Regular Meeting as presented. VOICE
VOTE: Motion carried.
7. CONSENT AGENDA
All items on the Consent Agenda are considered to be routine in nature and will
be enacted in one motion.
Motion by Trustee Harris, seconded by Trustee Langlois, to approve the
Consent Agenda and authorize expenditures as presented. ROLL CALL
VOTE:
Ayes: 5 - President Erickson, Secretary Fagan, Trustees Harris, Langlois and
Schlindwein.
Nays: 0 - None.
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7. Absent: 0 - None. Motion carried.
a. Approval of December 1 -30, 2006 checks #3194 -3204 and #6378 -6398 in
the total amount of $93,165.14
b. Approval of January 1 -31, 2006 checks #2217, #3205 -3217 and #6399-
6419 in the total amount of $98,317.40
c. Approval of February 1 -28, 2006 checks #3218 -3230 and #6420 -6440 in
the total amount of $95,160.42
d. Approval of March 1 -31, 2006 checks #3231 -3243 and #6641 -6461 in the
total amount of $95,731.41
e. Approval of Illinois Public Pension Fund Association (IPPFA) dues in the
amount of $750.00
8. ITEMS REMOVED FROM THE CONSENT AGENDA — None presented.
9. UNFINISHED BUSINESS
a. Discussion and Possible Approval of Hiring a Pension Clerk
President Erickson explained that the prior Board of Trustees recommended
that Village Clerk Linda Gonnella be appointed as the Pension Clerk of the
Oak Brook Firefighters' Pension Fund at an hourly rate of $24.68 as that of
the Police Pension Clerk and the Village's Legal Secretary. He indicated
that if the Board of Trustees concurs with this recommendation then a
motion is in order.
Motion by Trustee Langlois, seconded by Trustee Harris, to approve the
hiring of Linda Gonnella as the Pension Clerk for the Oak Brook
Firefighters' Pension Fund at an hourly rate of $24.68. ROLL CALL
VOTE:
Ayes: 5 - President Erickson, Secretary Fagan, Trustees Harris, Langlois
and Schlindwein.
Nays: 0 - None.
Absent: 0 - None. Motion carried.
b. Discussion and Possible Action of Portfolio Re- Allocation of The Fund
Trustee Langlois explained that there are investment management reports
from Merrill Lynch and Oak Brook Bank. By State Statute the Board is
limited in how much funds may be invested in equity investments. Only
45% of the assets may be equity type investments. At the end of March,
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9. b.
2006 due to market appreciation, The Fund was $818,000 over the statutory
limit of how much may be invested. The Department of Insurance, that
oversees The Fund, requires that the portfolio be re- balanced at least once a
year. Typically, this has been done in July but due to the large amount
presently over, he recommended that $500,000 be transferred from the
equity funds that are being managed by Merrill Lynch at this point in time
and then re- evaluate in July if necessary. He suggested that this agenda
item be discussed later in the agenda so that Merrill Lynch may speak to this
issue.
c. Discussion of Public Act 94 -0079 Prohibition on Sudan Investments
Trustee Langlois explained that a law was passed last year that requires that
none of The Fund's equity investments could be related to the country of
Sudan. The law is being phased in over the next year and a half. At the
present time, no new investments may be made in relation to Sudan. When
fully implemented, there is potentially a problem with the way the accounts
are setup when there are capital gain distributions and dividends that are
automatically re- invested which may be in violation of this law. It is his
recommendation that The Fund stop this feature of re- investing capital gain
dividends in the mutual funds. There is a potential problem with The
Fund's large stock and foreign stock funds. The law requires that the fund
manager's must sign a certification to the Board of Trustees that we are in
compliance of this law. Merrill Lynch, not being a manager, they have not
and probably will not sign a certification. This will require the individual
mutual fund companies to sign a certification which is unlikely that they
will do this. It is not certain what will be done at that point. He noted that
there may be potential litigation against the State of Illinois.
Brian Speers, Merrill Lynch, explained that they hired outside counsel
regarding this legislation. He noted that they have no control over what
mutual funds may invest in and they are requesting these mutual funds to
sign the certification that they are not investing in these types of stocks.
They are working internally on products to screen the stocks for the Board.
They have not committed to this yet as it would be a shift in the investment
strategy that the Board uses today. This would basically change the
portfolio by having Merrill Lynch create individual stock portfolios for the
Board. They would draw the names against the list and guarantee there are
no Sudan investments. He has discussed this strategy with Finance Director
Langlois as this would be a major shift in the Board's investment strategy.
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9. C.
They believe until there is clarity in the legislation that they watch this
closely and as things develop then make a decision. Trustee Langlois
explained this discussion was informational to the Board at this time and for
them to be aware of this situation. Secretary Fagan asked if the Board's
investment managers have stopped re- investing the dividends. Trustee
Langlois remarked that the dividends are not being re- invested. The re-
investments are being placed in a money market account at this time and
when the funds are significant then it will be given to Oak Brook Bank for
investing.
Motion by Trustee Langlois, seconded by Trustee Schlindwein, to ratify the
stopping of the re- investing of capital gains of mutual funds with Merrill
Lynch. ROLL CALL VOTE:
Ayes: 4 - President Erickson, Trustees Harris, Langlois and Schlindwein.
Nays: 1 - Secretary Fagan.
Absent: 0 - None. Motion carried.
President Erickson noted that Trustee Langlois had previously requested that
Merrill Lynch speak to this issue at this point in time. Agenda Item 10. c.
Merrill Lynch Investment Management Presentation was presented.
10. NEW BUSINESS
c. Merrill Lynch Investment Management Presentation
Brian Speers, Merrill Lynch, explained to the Board their strategy of
investment management of The Fund. From January, 2006 through March,
2006 The Fund's rate of return was 5.96 %. They included in their
investment presentation a grid of what each fund has done against the index
that best fits what they are trying to accomplish. Due to the Sudan issue,
they recommended deferring any changes at this time since any change may
constitute a "new investment." He noted that Goldman Sachs small cap
value fund has been under performing its index and they have been watching
that fund and do not recommend changing. The Board had wanted to add a
foreign growth investment. On advice of their counsel and the Board
counsel, with the Sudan issue, that adding another fund to the portfolio may
be detrimental at this point in time. He hopes that in the near future that
there may be some clarity with the Sudan legislation.
He explained the target allocation and The Fund's actual allocation and
recommended to readjust The Fund to its appropriate allocation and
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10. c.
re- balance The Fund. He recommended selling off those funds that are over
$60,000 of the $500,000 that the Board wants to move out of mutual funds.
The remaining $440,000 would be taken pro -rata from the various funds.
They will move cautiously through this process.
d. Approve Investment Transactions
Mr. Speers noted that there were no investment transactions during the last
three months of the portfolio. Therefore, the Board does not have to approve
any investment transactions.
Motion by Trustee Langlois, seconded by Trustee Schlindwein, to reduce
The Fund's equity investments by $500,000 in three transactions over the
next thirty (3 0) days. ROLL CALL VOTE:
Ayes: 5 - President Erickson, Secretary Fagan, Trustees Harris, Langlois
and Schlindwein.
Nays: 0 - None.
Absent: 0 - None. Motion carried.
The Board returned to the printed agenda at this time.
a. Oak Brook Bank Investment Presentation
Tom Sawyer, Oak Brook Bank, gave the investment management
presentation. Value added from the investments for the quarter totaled
$- 39,366, the money market return was 1.05 %, fixed income was -0.41%
with a total account return of - 0.38 %. The long term portfolio performance
for 2005 showed an annual performance of 2.47 %.
The fixed income section allocations were U. S. Treasury Securities 26 %, US
Government Agency Notes /Bonds non - callable 26 %, US Government
Agency Notes/Bonds callable 38 %, Taxable Municipal Bonds 9% and US
Government Agency Mortgage backed securities 6 %. Mr. Sawyer indicated
that they would like to extend the duration of the portfolio but patience is
more important in this process. They recommend holding the duration of the
portfolio and extend it a little as the rates have moved up. He also
announced that Oak Brook Bank merged with MB Financial and will close in
the fourth quarter. It was a friendly merger and they will let the Board know
of any further developments.
Trustee Schlindwein asked how long Oak Brook Bank has been the
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10. a.
investment manager of The Fund. Mr. Falduto explained that the Board of
Trustees went through a search process for both equity and fixed income
investment managers about a year and half ago and they were chosen.
Trustee Langlois noted that Oak Brook Bank has been the investment
managers for the Oak Brook Police Pension Fund since 1997. The bank
helped restructure the duration of The Fund's investment policy strategy
during this time.
b. Approve Investment Transactions
Motion by Trustee Langlois, seconded by Secretary Fagan, to approve the
investment transactions from January 3, 2006 through March 31, 2006 as
indicated in Tab 5 of Oak Brook Bank's Investment Management
Presentation. ROLL CALL VOTE:
Ayes: 5 - President Erickson, Secretary Fagan, Trustees Harris, Langlois
and Schlindwein.
Nays: 0 - None.
Absent: 0 - None. Motion carried.
Trustee Langlois indicated that there were some items that needed to be
addressed with Oak Brook Bank. He explained that authorized signatures
on the pension fund checks were needed. By law Finance Director
Langlois, as the Village Treasurer, is required to be involved in any
transactions. He inquired what the Board requires for signatures for the
trust account. President Erickson and Secretary Fagan signatures were
required on the trust agreement with Village Treasurer Langlois.
e. Acceptance of Dan Myers Application for Membership to the Oak Brook
Firefighters' Pension Fund
President Erickson explained to the Board that Dan Meyers has applied for
membership to the Oak Brook Firefighters' Pension Fund and a motion was
in order to accept his application.
Motion by Trustee Langlois, seconded by Secretary Fagan, to accept Dan
Meyers Application for Membership to the Oak Brook Firefighters' Pension
Fund. ROLL CALL VOTE
Ayes: 5 - President Erickson, Secretary Fagan, Trustees Harris, Langlois
and Schlindwein.
Nays: 0 -None.
Absent: 0 - None. Motion carried.
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11. INFORMATION & UPDATES
Trustee Langlois explained to the new Board members that the current
Investment Policy needs to be amended and he distributed a copy to all of the
Board members. The wording on re- balancing should be amended and he
recommended that the Investment Policy be addressed at the next quarterly
meeting. He discussed the history of the investment managers noting that
Lake Forest Capital Management was the previous managers of The Fund.
The prior Board chose to search for a new manager of The Fund due to a
poor investment performance by Lake Forest. He explained that Oak Brook
Bank receives 25 basis points for their managing of The Fund. Merrill
Lynch is paid by the mutual fund companies where their fees are a little bit
higher. The actuarial study of The Fund was completed recently by Actuary
Timothy Sharpe. He distributed a copy to all of the Board members. The
cost is of the study is $2,500 which he stated was very reasonable and he wil
recommend at the October Board meeting to have the Actuary prepare the
actuarial study. The cost of the actuarial study is split between the Village of
Oak Brook and The Fund. He explained that this Board recommends the
assumptions and they are presented to the Village Board of Trustees for their
approval as the Village is ultimately responsible for funding. The Actuary
prepared a summary statement for all of the active members of The Fund.
The pension clerk will mail the summaries to all of the members.
He further explained that there are four vendors for the pension fund: the
investment managers, the actuary, the accounting firm and the Board
Attorney Richard Reimer. Trustee Schlindwein inquired of the unfunded
level of The Fund. Finance Director Langlois explained that State Statute
requires that by the year 2033 The Fund must be 100% funded. Five years
ago The Fund was 120% funded but now it is 77.1% funded. The present
allocation of equity investments is 45 -55 %. Beginning in 1999 legislation
was passed that the 10% investing in equities was raised to 45 %. Once that
happened over a year or two, the Board missed the run up in the market and
instead the market went down. On top of that, there have been two or three
actions by legislators in which they have increased benefit accrual rate and
allowed for no reduction for pensions of surviving spouse. He explained
further that there is a high rate of disabilities with The Fund as there are
fourteen disabilities and fourteen retirees. The funded status is above the top
half of the funds in the state.
Finance Director Langlois discussed the DROP Option that if it passes in the
State legislature could affect The Fund by $1,000,000 in accrued liability as
there are no offsets for these benefit changes. The Board has contracted with
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11. Lauterbach & Amen for accounting purposes at a cost of $675.00 a month.
The firm handles all of the accounting of The Fund, benefit payments and tax
reporting. Finance Director Langlois oversees the reports and accounting as
they prepare a monthly packet of their services they have provided.
Director Langlois requested that all of the new Board members sign an
account agreement with Merrill Lynch.
Trustee Harris discussed the Illinois Public Pension Fund Association's
(IPPFA) upcoming Certified Trustee Program and if any of the members
were interested in attending this program. Trustee Harris and Secretary
Fagan requested that they attend the programs scheduled for August 24th,
September 21st, October 26th and November 30th at a cost of $575.00 for
each Trustee. It was a consensus of the Board that Secretary Fagan and
Trustee Harris attend the seminars at a cost of $575.00 for each Trustee. The
approval of this cost will be ratified at the Board's July meeting.
Director Langlois asked what if someone would retire or a refund was
requested before the next Board meeting. He explained that it would be
handled administratively between himself and the Board President and it
would be ratified at the next Board meeting. Previously a special meeting
was called and a retirement was withheld until a meeting was held.
The Board discussed the next Board meeting date. Pension Clerk Gonnella
will notify the Village that economic interest forms need to be sent to all of
the new members of the Board of Trustees as required by the DuPage County
Clerk's Office. Trustee Schlindwein asked if the Board members could have
website access to both investment managers. Director Langlois will research
this as passwords will be given to each Board member. Trustee Harris also
noted that, as members of IPPFA, there is a password for members to visit
their site to receive information.
The Board discussed the next quarterly meeting for Wednesday, July 26th at
8:30 a.m. in the Upper Level Conference Room. The Pension Clerk will
verify the date with the Board members.
12. ADJOURNMENT
Motion by Trustee Langlois, seconded by Secretary Fagan, to adjourn the
regular meeting at 10:50 a.m. to the regular meeting. VOICE VOTE: Motion
carried.
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12.
ATTEST:
s /John Fagan
Secretary
s /Linda K. Gonnella
Recording Secretary
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