Minutes - 01/28/2015 - Police Pension Fund BoardVILLAGE OF OAK BROOK
BOARD OF TRUSTEES OF THE POLICE PENSION FUND - Minutes
JANUARY 28, 2015
UNOFFICIAL UNTIL APPROVED AS WRITTEN X
OR AS AMENDED BY BOARD OF TRUSTEES OF THE
POLICE PENSION FUND ON April 22, 2015
1. CALL TO ORDER:
The Regular Meeting of the Board of Trustees of the Oak Brook Police Pension Fund was called
to order by President Vel Torlo at 7:01 p.m. in the Upper Level Conference Room of the Samuel
E. Dean Board Room of the Butler Government Center, 1200 Oak Brook Road, Oak Brook,
Illinois.
2. ROLL CALL:
The roll was called with the following persons
PRESENT: President Vel Torlo, Vice President Alan Feldman, Secretary Edward Caspers,
Trustee Hitesh Patel (via teleconference), Trustee Ben Kadolph
ABSENT:
IN ATTENDANCE: Todd Schroeder and Jessica Fain of Lauterbach & Amen, Finance
Director/Treasurer Sharon Dangles, Courtney Cervantes, Jeff Kowalczyk and Bill Lowery of
Lowery Asset Consulting, LLC, Bob Thompson and Spencer Klein of MB Financial, Pension Clerk
Rose Kane
4. PRESIDENT’S COMMENT: None presented
5. APPROVAL OF MINUTES:
a. Approval of Board of Trustees Regular Board Meeting Minutes of October 22, 2014
Motion by Secretary Caspers, seconded by Trustee Kadolph, to approve the Minutes of the
October 22, 2014 Special Board Meeting as written. VOICE VOTE: Motion carried.
6 CONSENT AGENDA:
All items on the Consent Agenda are considered to be routine in nature and will be enacted in
one motion.
a. Approval of October 1-31, 2014 checks in the total amount of $187,881.81
b. Approval of November 1-30, 2014 checks in the total amount of $193,120.86
c. Approval of December 1-31, 2014 checks in the total amount of $186,510.56
d. Approval of Lauterbach & Amen, LLP’s invoices in the total amount of $8,2750.00, for
services rendered May through September, 2014, including preparation of Illinois Department
of Insurance and Actuarial reports for fiscal year ended December 31, 2013
e. Approval of Lowery Asset Consulting, LLC's invoice in the amount of $7,000.00, dated
October 21, 2014, for Third Quarter, 2014 services
f. Approval of Illinois Public Pension Fund Association’s 2015 membership dues’ invoice in the
amount of $775.00
g. Approval of The Mitchell Group’s invoice dated October 3, 2014, in the amount of $387.89
h. Approval of Pension Clerk Kane’s timesheet in the total amount of $368.75 for services
rendered September through November, 2014
i. Approval of refund check from Pension Clerk Kane in the amount of $281.10 in regard to
conference lodging which was reimbursed and then cancelled/credited
j. Approval of Reimbursements to Pension Clerk Kane for December. 2014 IPPFA seminar
registration and postage costs in the total amount of $49.05
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Motion by Secretary Caspers, seconded by Trustee Kadolph, to approve the Consent
Agenda.
ROLL CALL:
Ayes: 5 – Vice President Feldman, Secretary Caspers, Trustee Patel, Trustee Kadolph,
President Torlo
Nays: 0 – None
Absent: 0 – Motion carried.
7. ITEMS REMOVED FROM CONSENT AGENDA – None presented.
8. UNFINISHED BUSINESS – None presented.
9. NEW BUSINESS
a. Lowery Asset Consulting, LLC Report for Fourth Quarter, 2014
Mr. Lowery discussed the Economic Overview on page 2 of Lowery’s report, in particular the U.S.
Treasury Yields, 10-year bonds and the market in Germany. He referred to the US Equities
portion of the report on page 3 and then to a Senior Loan Officers Survey on page 7 regarding
how tightened the standards were. Per Section II. Executive Summary of the Report, page 9:
The Fund investment assets at MB Financial had a value of approximately $32,778,636 as of
December 31, 2014. The current allocation is 62% Equity and 38% Fixed Income and Cash
as defined by the Illinois State Statute. The current portfolio allocation:
40.3% Fixed Income (includes PIMCO Mutual Fund)
26.8% S&P500
6.6% Russell 2000
17.4% MSCI EAFE
2.2% S&P Nat Resources
5.0% Wilshire REIT
1.7% Cash
Mr. Lowery stated that on page 16 of the report, the Total Portfolio was up about 1.9%, for the
year it was up 3.54% and commented that it was not a good year for diversified funds. He then
discussed the performance of the equity on pages 16 and 17. Then Mr. Lowery discussed
Nuveen Real Estate on page 18. He remarked that by and large there was pretty good
performance in the managers from last year.
Mr. Kowalczyk discussed a survey of 16 different Illinois public funds regarding Fixed Income
performance and stated that the Oak Brook Police Pension Fund is right in the middle, and the
best ones are performing at 3%. Discussion ensued regarding the bond market.
b. MB Financial Investment Management Performance Report on Fourth Quarter, 2014
Mr. Klein discussed the blended index performance on page 11 of MB Financial’s report handed
out at the meeting and also the Projected Excess Return Over Benchmark graph after page 22.
He stated that he believes the rally in treasury bonds will be short-lived.
Mr. Klein then addressed that the MB Financial account which has all the income is also the
account that receives the payroll and tax levies and also pays out the pension benefits. He stated
that based upon how much cash is on hand and the anticipated income in maturities, things are
going to get pretty tight in that account in about three or four months. Mr. Klein explained that
either cash could be moved from other accounts or a bond could be sold. Mr. Lowery stated that
he does not see a lot of potential in fixed income. Lengthy discussion ensued regarding the risks
and performance of the managers of the portfolio, particularly the S&P 500 companies.
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
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In response to a Board inquiry regarding slowly shifting some of the equity assets into Energy,
Mr. Lowery suggested taking assets from the S&P 500. He stated that Mitchell is about 2.3% of
the portfolio and recommended increasing that by approximately $800,000, which would bring it
up to 5%, and suggested moving $200,000 per month for the next four months.
Discussion ensued regarding having Terese Krafcheck of MB Financial monitor the working
capital account and keeping the Finance Director/Treasurer Dangles informed and then moving
some of the equity for a cash infusion into the working capital account. Mr. Klein stated that there
is about $90,000 coming into the account and about $180,000 goes out of the account. Vice
President Feldman suggested selling $300,000 of S&P, with $100,000 going into the bank and
$200,000 into Energy each month.
Motion by Vice President Feldman, seconded by Trustee Kadolph, to liquidate $300,000 a
month from the Standard & Poor’s Vanguard, of which $100,000 will be put in the
operating account and reinvest the other $200,000 into The Mitchell Energy.
ROLL CALL:
Ayes: 5 –Trustee Patel, Trustee Kadolph, President Torlo, Vice President Feldman, Secretary
Caspers
Nays: 0 – None
Absent: 0 – Motion carried.
c. Approval of Investment Transactions for Fourth Quarter, 2014
Motion by Secretary Caspers, seconded by Trustee Kadolph, to approve the Investment
Transactions for the Fourth Quarter, 2014.
ROLL CALL:
Ayes: 5 –Trustee Kadolph, President Torlo, Vice President Feldman, Secretary Caspers,
Trustee Patel
Nays: 0 – None
Absent: 0 – Motion carried.
d. Ratification of 2015 Pension Increases
Motion by Secretary Caspers, seconded by Trustee Kadolph, to ratify the 2015 Pension
Increases.
ROLL CALL:
Ayes: 5 –President Torlo, Vice President Feldman, Secretary Caspers, Trustee Patel, Trustee
Kadolph
Nays: 0 – None
Absent: 0 – Motion carried.
Lowery Asset Consulting and MB Financial representatives all exited the meeting at
approximately 8:21 p.m.
e. Discussion of 2015 Actuarial Assumptions
Mr. Schroeder of Lauterbach & Amen reviewed the Final Actuarial Assumption Summary from
last year. Finance Director/Treasurer Dangles discussed the GASB 67 reporting requirements.
Mr. Schroeder explained “total” payroll increases and what can affect them. Finance
Director/Treasurer Dangles inquired about the payroll growth assumption and Mr. Schroeder
explained the reasoning for the 4% assumption. Discussion ensued regarding the unfunded
liability and level of payments. Mr. Schroeder stated that there are three main pieces to the
funding method that is outside the actuarial assumptions: 1. Entry Age Normal versus Projected
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Unit Credit; 2. Decision on how to pay down the unfunded liability, such as 90% or 100%,
increasing payment versus a level dollar payment, pay it off over 30 years versus 20 years; 3.
How the assets are valued for purposes of making the funding recommendations, such as going
with a straight market method, which is a little more volatile, could go with the five-year smooth
value over time. Finance Director/Treasurer Dangles stated that the Village’s actuary will be
switching to the Entry Age Normal method, but she stated that she is not sure which mortality
table the Village actuary will be using. Mr. Schroeder discussed the different mortality tables,
including the RP2014 table which has just come out. He added that this table did not include any
public sector employees in the study. There was some discussion regarding Tier II employees.
Mr. Schroeder discussed the gains and losses leading to blending regarding new employees and
death of a survivor spouse in figuring the assumptions.
f. Discussion regarding closing of Illinois Funds’ account
Finance Director/Treasurer Dangles explained that this account has $27,994 and is only earning
.01% and she is recommending that it be closed and the money moved. It was suggested to
move the money to the operating capital account.
Motion by Vice President Feldman, seconded by Trustee Patel, to move the money from
the Illinois Funds’ account into the primary operating account.
ROLL CALL:
Ayes: 5 – Trustee Kadolph, President Torlo, Vice President Feldman, Secretary Caspers,
Trustee Patel
Nays: 0 – None
Absent: 0 – Motion carried.
g. Approval of Application for Membership in the Oak Brook Police Pension Fund of Alyson
Mercer
Motion by Trustee Kadolph, seconded by Secretary Caspers, to approve the Application
for Membership in the Oak Brook Police Pension Fund of Alyson Mercer.
VOICE VOTE: Motion carried.
h. Approval of Application for Members Pension Benefits Retirement Pension of John C.
Verdera
Trustee Kadolph reported that Officer Verdera had concerns regarding a retroactive raise in the
union contract and it was suggested that this would occur as a matter of course.
Motion by Secretary Caspers, seconded by Trustee Kadolph, to approve the Application
for Members Benefits Retirement Pension of John Verdera. VOICE VOTE: Motion carried.
10. INFORMATION & UPDATES
Pension Clerk Kane reported on the status of the Illinois Department of Insurance audit and that a
visit is scheduled from the Illinois Department of Insurance next week to review the pension
members’ files. Mr. Schroeder stated that they will issue a report and perhaps list a few things
which can be handled by the Board’s attorney.
Pension Clerk Kane discussed some pension boxes which were stored offsite and then returned
to the Village. She stated that she would go through the boxes and shred any duplication and
enter a disposal order with the State on any other documents.
a. Scheduling of Second quarterly meeting in 2015:
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Consensus to have the Second quarterly meeting on April 29th. It was suggested to hold a
special actuarial meeting in March. Consensus to have the actuarial special meeting on March
11th.
11. ADJOURNMENT:
Motion by Secretary Caspers, seconded by Trustee Kadolph, to adjourn the Board of
Trustees of the Police Pension Fund meeting at 9:18 p.m. VOICE VOTE: Motion carried.
ATTEST:
Edward J. Caspers /s/
Edward J. Caspers, Secretary
Board of Trustees of the Police Pension Fund
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
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