Minutes - 04/29/2020 - Police Pension Fund BoardBOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 1 of 9 April 29, 2020
VILLAGE OF OAK BROOK
BOARD OF TRUSTEES OF THE POLICE PENSION FUND - Minutes
April 29, 2020
UNOFFICIAL UNTIL APPROVED AS WRITTEN √
OR AS AMENDED BY BOARD OF TRUSTEES OF THE
POLICE PENSION FUND ON July 21, 2020
NOTE: This meeting was conducted via teleconference due to the Covid -19 Pandemic. The public
was provided the opportunity to participate in the audio meeting and/or submit questions
beforehand.
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 7:00 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 Ed Caspers, Trustee Hitesh
Patel, Trustee Ben Kadolph
ABSENT: None
IN ATTENDANCE: Phil Kosmala and Zach Pearsall of Taiber Kosmala and Associates, Bob
Thompson and Alex Garber of Fifth Third Bank, Bob Rietz of Lauterbach & Amen, Village Finance
Director/Treasurer Jason Paprocki, Pension Clerk Rose Kane
3. PUBLIC COMMENTS
a. 2020 Election Results
Vice President Feldman read the Notice of Election Results for the Pension Board Trustee Election
on April 20, 2020, and the results were as follows:
Velia Torlo was re-elected as an Active Member, Reid Fotyniewicz was elected for the first time as
an Active Member, and Edward J. Caspers was re-elected as the Retired Member.
4. APPROVAL OF MINUTES
a. Approval of Regular Meeting Minutes of January 21, 2020
Motion by Secretary Caspers, seconded by Vice President Feldman, to approve the Meeting
Minutes of the January 21, 2020 Regular Board Meeting as presented.
VOICE VOTE: Motion carried.
5. 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 January 1-31, 2020 expenditures in the total amount of $266,549.73
b. Approval of February 1-29, 2020 expenditures in the total amount of $254,968.37
c. Approval of March 1-31, 2020 expenditures in the total amount of $257,807.29
d. Approval of Taiber Kosmala 4Q19 invoice in the amount of $7,000.00
e. Approval of Lauterbach & Amen, LLP invoices in the total amount of $5,000.00, for FYE18 MCR,
September 2019, FYE19 1099s, January 2020, and February 2020 invoices
f. Approval of Pension Clerk Kane’s timesheet in the total amount of $225.00 for administrative
services rendered between July and December 2019
g. Approval of reimbursement to Pension Clerk for election envelopes in the amount of $39.14
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 2 of 9 April 29, 2020
Motion by Trustee Kadolph, seconded by Trustee Patel, 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 – None
Motion carried.
6. ITEMS REMOVED FROM CONSENT AGENDA – None presented.
7. UNFINISHED BUSINESS
a. Discussion/Action regarding Actuarial Assumptions
Mr. Rietz stated that no changes had been made since the draft report was discussed at the January
meeting. He discussed page 2 of the tax levy report prepared for this meeting per the table below.
CONTRIBUTION RECOMMENDATION & FUNDED PERCENTAGE
Last Year Current Year
Recommended Contribution $2,026,000 $2,411,000
Normal Cost $923,000 $1,041,000
Market Value of Assets $35,165,000 $41,183,000
Actuarial Value of Assets $38,228,000 $39,827,000
Actuarial Accrued Liability $61,407,000 $65,925,000
Unfunded Actuarial Accrued Liability $23,179,000 $26,098,000
Percent Funded
Actuarial Value of Assets 62.25% 60.41%
Market Value of Assets 57.27% 62.47%
He talked about preserving the market gains to offset future losses. He then referred to the table on
page 3 of the report.
CHANGE IN CONTRIBUTION
Actuarial
Liability
Recommended
Contribution
Prior Year $61,407,000 $2,026,000
Expected Changes $2,115,000 $76,000
Salary Increases Greater than Expected ($273,000) ($28,000)
Demographic Changes $1,049,000 $91,000
Assumption Changes $1,490,000 $175,000
Plan Changes $138,000 $49,000
Asset Return (Greater)/Less than Expected $0 $23,000
Contributions (Greater)/Less than Expected $0 ($1,000)
Net (Decrease)/Increase $4,519,000 $385,000
Current Year Recommended Contribution $65,926,000 $2,411,000
Discussion ensued regarding new retirements reflected an increase in liability. Mr. Rietz explained that
10% of the time members will retire at age 50, and that they determine a 15 -year period between age
50 and 65 to calculate a present value. He stated that when members retire earlier, the Fund will
typically experience a loss in that regard, because it expected 90% of the time retirements will be
deferred to the future. He explained that bringing in new members may also result in a shortfall due to
the increase in contributions and liability. Mr. Rietz discussed other probabilities that would affect the
liability such as, a disability, which would reflect a loss to the Fund, which would be demographic
change, what the actual experience compared to what was assumed previously. He referred to page
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 3 of 9 April 29, 2020
37 of the full actuarial report and stated the average age of retirement over the past 5 years is 53.7. In
reply to a question, Mr. Rietz stated that based on all the assumptions, all the retirements, it is expected
that on average everyone would retire at age 55.8, so the Fund’s population is a little bit ahead of that,
historically, based on 6 retirements in the last 4 years. He exp lained that this is why a large scale study
is done, gathering data from all the police and fire funds because there is more credibility based on a
larger set of data, than just using the occurrence seen within the Fund itself. Regarding anticipating
retirements, he remarked that if the Fund has 10 eligible to retire in a year, it would be expected that 1
to 2 of them would retire.
DEMOGRAPHIC CHANGES:
7 members hired during the year, 1 of whom terminated employment within the current
year
2 members retired during the year
4 non-vested members terminated service during the year, 1 of whom was hired with
the current year, 3 members took a refund of contributions
Salary increases were less than expected. Most active members received an increase
of 2.75% or less
CHANGE IN MARKET VALUE OF ASSETS
Current Year
Beginning Market Value of Assets $35,165,000
Employer Contributions $2,057,000
Member Contributions $379,000
Return on Investments* $6,529,000
Benefits and Refunds ($2,905,000)
Other Expenses ($41,000)
Ending Market Value of Assets $41,184,000
Change in Market Value of Assets $6,019,000
*The Rate of Return on Investments on a Market Value of Assets Basis was
approximately 18.57% net of administrative expense.
EXPECTED BENEFIT PAYMENTS
Current Year
Active Member Count 40
Inactive Member Count 42
Current Benefit Payments $2,890,000
Expected Benefit Payments in 5 Years $3,795,000
Expected Benefit Payments in 10 Years $4,910,000
Mr. Rietz stated that it is expected that there will be an increase of $900,000 in 5 years and another
$1.2 million in 10 years, taking into account of members who will be close to retirement.
RISK MANAGEMENT:
Benefit Payment Risk exists when the annual retirement benefits paid to members exceeds the cash
inflows due to contributions and investment returns.
The current ratio of benefit payments to the Market Value of Assets is 7.02%,
compared to an Expected Rate of Return on Investments of 6.50%.
Contribution Risk is the potential for actual future contributions to deviate from
expected future contributions.
Cash Flow Risk is the potential that net cash flows do not exceed the growth in plan
liabilities.
Typically, when cash flows are insufficient to cover the growth in liabilities, the Funded
Percentage will decline, while future Recommended Contributions will increase.
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 4 of 9 April 29, 2020
Mr. Rietz stated that no action is necessary at this time because this is a draft document and a final
document will not available until after the audit is completed. He stated that there would have to be
substantial change from the audit to make a difference in the recommended contribution amount of
$2.4 million. Mr. Paprocki concurred that he did not anticipate any major changes.
Motion by Vice President Feldman, seconded by Trustee Patel, to approve the actuarial report
as it stands pending any other changes that might come in from the Illinois Department of
Insurance.
ROLL CALL:
Ayes: 5 – Vice President Feldman, Secretary Caspers, Trustee Patel, Trustee Kadolph,
President Torlo
Nays: 0 – None
Absent: 0 – None
Motion carried.
8. NEW BUSINESS
a. Taiber Kosmala and Associates, LLC Report on First Quarter, 2020
Mr. Kosmala and Mr. Pearsall summarized the First Quarter, 2020 as follows:
Oak Brook Pension Performance
On page 6 of the Taiber Kosmala Report, the portfolio activity was listed as follows:
On the back of three Fed rates cuts, low inflation, a strong labor market, robust housing fundamentals,
a competed Brexit deal, and a long-awaited U.S.-Sino trade deal – market conditions were very
encouraging in January. The S&P 500 closed at a record high on February 19th, but equity prices lost
momentum when CoVid-19 set in motion travel bans, school closures, and event cancellations; the
U.S. economy contracted as social distancing measures quickly became widespread. March achieved
the dubious distinction of the most volatile month in U.S. stock market history and ended a historic 11 -
year bull market.
Key takeaways for the quarter:
Inflation expectations declined meaningfully by quarter end. The 10-year “break-even”
inflation rate fell below 1.0% in March, a level not seen since 2008. The dramatic
decline in oil prices and spike in unemployment suggest that inflationary pressures are
unlikely to appear in the near-term.
Policy responses to the Coronavirus pandemic pushed global balance sheets to record
levels. By the end of April, the U.S. Fed balance sheet expanded to a record $6.7
trillion, well above the previous peak of $4.5 trillion and slashed Fed Funds rate to 0%-
0.25%. The Fed has affirmed its “whatever-it-takes” commitment to soften the blow of
the coronavirus with Wall Street anticipating its balance sheet could easily reach $9 to
$11 trillion (50% of GDP) in coming months, dwarfing the $3.7 trillion increase during
and after the ’08-’09 financial crisis.
On March 25th Congress passed the $2.2 trillion CARES Act authorizing payments to
more than 150 million American households. The CARES Act enhanced
unemployment insurance programs, and established a $500 billion loan program for
businesses, cities, and states, including a $349 billion employee retention fund for
Summary of Cash Flows
First Quarter
Beginning Market Value $41,072,623
Net Cash Flow -$295,965
Net Investment Change -$5,904,392
Ending Market Value on 3/31/18 $34,872,265
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 5 of 9 April 29, 2020
small businesses. After the initial bill, an additional $484 billion package was provided
to replenish the CARES Act for small business loans, provide capital to hospitals and
testing programs.
The S&P 500 reached a near-term low on March 23rd, having dropped 34% from its February 19th high
water mark. The pull-back was excessive, U.S. equity prices dropped 32% in 22 trading days, 6.5x
worse than the average initial 22 days of all post-war bear markets. Looked at another way, at this
point in 2008 the stock market had only declined by about 10%. By quarter -end, large-cap stocks
finished almost exactly 20% lower than year -end levels. Cyclical sectors, such as Industrials (-27%),
Materials (-26%), Energy (-51%) and Financials (-32%) all lagged the broader market. Small-cap and
mid-cap stocks fell even more, ending the quarter approximately 30% lower than their 2019 year -end
levels.
International and emerging market stocks declined by 23% during the first quarter. Among developed
markets, Japan and the U.S. were somewhat resilient, whereas Europe generally lagged. Value-
oriented stocks around the world fell dramatically more than Growth stocks.
The U.S. Treasury yield curve made a dramatic shift downward an d became steeper over the course
of the quarter. Every point on the curve declined by a minimum of 104 bps. During the quarter, 10 -
year yields declined 122bps from 1.92% to 0.70% and 2-year yields fell 135 bps from 1.58% to 0.23%.
Liquidity-driven dislocations occurred in almost every segment of fixed-income markets. Credit spreads
widened tremendously but stabilized after the Fed indicated it would purchase both investment grade
and high yield corporate bonds as part their liquidity programs.
The pension underperformed in the first quarter mostly due to an overweight allocation to risk assets.
The portfolio declined 14.4% in the first quarter, relative to a 12.2% decline for the policy benchmark.
Performance for active managers was mixed; growth-oriented managers such as WCM and MFS
outperformed their benchmarks and their respective peer groups. Virtus Ceredex & Polaris both
underperformed on the value side. The portfolio under performed in fixed income, the satellite position
in PIMCO Income declined 7.7% during the trailing three-months as credit spreads in both corporate
and securitized bonds blew out over concerns of an economic collapse. The core fixed income holding
also underperformed broader fixed income due to a shorter duration posture a nd higher exposure to
credit relative to treasuries.
Discussion ensued regarding the economic effects of Covid-19 and its resulting shutdown of
businesses for months.
b. Fifth Third Report on Fourth Quarter, 2020
Mr. Thompson referred to page 6 of the Fifth Third report and the lagging Real Estate Investment
Trusts (REITs), especially the hotels and regional malls.
REAL ESTATE AND ALTERNATIVE INVESTMENTS OVERVIEW
Index 1-Month 3-Months YTD 1-Year 3-Years* 5-Years*
S&P US REIT -21.53 -26.90 -26.90 -21.42 -3.17 -0.61
HFRX Global Hedge Fund -5.88 -6.85 -6.85 -1.39 -0.54 -0.65
S&P Global Infrastructure -22.96 -29.17 -29.17 -21.19 -3.27 -0.40
S&P GSCI Gold Total Return 1.91 4.83 4.83 22.96 8.46 6.17
Thompson Reuters/Core Community -23.58 -34.25 -34.25 -32.50 -11.62 -9.44
*Annualized Return
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 6 of 9 April 29, 2020
Mr. Garber discussed page 5 of the Fifth Third report.
FIXED INCOME MARKET OVERVIEW
Index 1-Month 3-Months YTD 1-Year 3-Years* 5-Years*
BC U.S Intm Gov/Credit -0.44 2.40 2.40 6.88 3.79 2.76
BC Global Agg excl. USD -3.22 -2.68 -2.68 0.74 2.57 2.03
BC U.S. TIPS -1.76 1.69 1.69 6.85 3.46 2.67
BC U.S. Municipal Bonds -3.63 -0.63 -0.63 3.85 3.95 3.19
BC U.S. High Yield Bonds -11.46 -12.68 -12.68 -6.94 0.76 2.77
*Annualized Return
Page 8 of the Fifth Third report shows the marketable holdings:
ALLOCATION SUMMARY: ASSET CATEGORY
%
Holdings Market Value Estimated
Annual Income
Current
Yield
Marketable Holdings
Traditional Asset Classes 100.00% $11,847,366.90 $419,291.51 3.54%
Cash and Equivalents 5.33% $ 631,566.14 $ 5,178.84 0.82%
Fixed Income 94.67% $11,215,800.76 $414.112.67 3.69%
Total Marketable Holdings 100.00% $11,847,366.90 $419,291.51 3.54%
Total Holdings $11,847,366.90 $419,291.51 3.54%
Mr. Thompson then referred to page 9 of the Fifth Third report and stated that in regard to total earnings,
the portfolio is up. Mr. Garber stated that current month fixed income has done particularly well.
RECONCILLIATION SUMMARY
Total Holdings on 01/01/2020 $12,068,647.97
Beginning Marketable Holdings on 01/01/2020 $11,974,007.69
Beginning Accrued Income $ 94,640.28
Beginning Value $12,068,647.97
Contributions
Cash Contributions $477,141.46
Asset Receipts $ 0.00
Other Contributions $ 0.00
Total Contributions $477,141.46
Withdrawals
Cash Withdrawals ($765,855.13)
Asset Delivery $0.00
Fees ($5,274.78)
Total Withdrawals ($771,129.91)
Income Earned
Interest Collected $ 88,368.82
Dividends Collected $0.00
Other Income $0.00
Net Accrued Income $ 19,214.68
Total Income Earned $107,583.50
Net Change $ 78,978.84
Ending Marketable Holdings on 03/31/2020 $11,847.366.90
Ending Accrued Income $ 113,854.96
Ending Value $11,961,221.86
Total Holdings on 03/31/2020 $11,961,221.86
Total Earnings $186,562.34
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 7 of 9 April 29, 2020
Mr. Thompson stated that as of April 28, 2020, $12,041,698 is the valuation for the bond portfolio, definitely
rebounding. Mr. Garber discussed the Performance Summary: Asset Category on page 10.
Mr. Thompson discussed the page 11 of the Fifth Third report.
FIXED INCOME: INDIVIDUAL HOLDINGS
Category
% Total
Fixed
Income
Market Value
Estimated
Annual
Income
Current
Yield
Domestic Fixed Income
Government Bonds 46.68% $5,235,132.05 $215,677.54 4.12%
Domestic Fixed Income
Corporate Bonds 41.11% $4,610,328.70 $157,477.98 3.42%
Intl Developed Mkt Bonds 5.75% $644,834.50 $24,375.00 3.78%
Domestic Fixed Income
Savings Instruments 5.60% $628,420.00 $14,062.50 2.24%
Domestic Fixed Income
Mortgage Backed 0.00% $153.26 $11.45 7.47%
Total Indiv Fixed Income
Holdings
Total Pooled Fixed
Income Holdings
99.14%
0.86%
$11,118,868.51
$96,932.25
$411,604.47
$2,508.19
3.70%
2.59%
Total Fixed Income
Holdings
100% $11,215,800.76 $414,112.66 3.69%
Trustee Kadolph remarked that some Oakbrook Center stores will be offering curbside service.
c. Approval of Investment Transactions for First Quarter, 2020
Motion by Trustee Kadolph, seconded by Secretary Caspers, to approve the Investment
Transactions for First Quarter 2020.
ROLL CALL:
Ayes: 5 – Secretary Caspers, Trustee Patel, Trustee Kadolph, President Torlo, Vice
President Feldman
Nays: 0 – None
Absent: 0 – None
Motion carried.
Mr. Thompson, Mr. Garber, Mr. Kosmala, and Mr. Pearsall all exited the teleconference at approximately
8:12 p.m.
d. Approval of Application for Membership in the Oak Brook Police Pension Fund of Christian A.
Bartnicki (hired 2/24/2020)
e. Approval of Application for Membership in the Oak Brook Police Pension Fund of Tanayry
Campos-Perez (hired 2/24/2020)
Motion by Secretary Caspers, seconded by Trustee Kadolph, to approve the Applications for
Membership in the Oak Brook Police Pension Fund of Christian A. Bartnicki and Tanayry
Campos-Perez, hired February 24, 2020.
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 8 of 9 April 29, 2020
ROLL CALL:
Ayes: 5 –Trustee Patel, Trustee Kadolph, President Torlo, Vice President Feldman,
Trustee Caspers
Nays: 0 – None
Absent: 0 – None
Motion carried.
f. Approval of Adjusted Transfer of Creditable Service for Thomas Russell from the Oakbrook
Terrace Police Pension Fund to the Oak Brook Police Pension Fund
Pension Clerk Kane explained that this item reflected a correction in the last date of Mr. Russell’s
Oakbrook Terrace creditable service.
Motion by Trustee Kadolph, seconded by Trustee Patel to approve the Adjusted Transfer of
Creditable Service for Thomas Russell. VOICE VOTE: Motion carried.
g. Approval of Transfer of Creditable Service for Justin Pearce from the Posen Police Pension Fund
to the Oak Brook Police Pension Fund
Motion by Trustee Kadolph, seconded by Secretary Caspers, to approve the Transfer of
Creditable Service for Justin Pearce. VOICE VOTE: Motion carried.
h. Approval of Service Retirement Pension Benefit Request and Calculation Worksheet for Robin J.
Froehlich
Motion by Trustee Kadolph, seconded by Secretary Caspers, to approve the Service Retirement
Pension Benefit Request and Calculation Worksheet for Robin J. Froehlich.
VOICE VOTE: Motion carried.
i. Ratification of Pension Calculation Worksheet for Donald Jacobs
Motion by Trustee Kadolph, seconded by Secretary Caspers, to ratify the Pension Calculation
Worksheet for Donald Jacobs. VOICE VOTE: Motion carried.
9. PENDING BUSINESS
a. Discussion/action regarding consolidation of pension funds
Mr. Rietz stated that in light of the pandemic, the schedule has not changed, it is still the 30 -month
time frame, a temporary board is in place, and the next thing is to determine how to do the voting for
the actual boards in addition to hiring on executive directors, etc. He said there has been some
discussion about extending the amortization period for the statutory municipal contributions from 2040
to 2050. He discussed other things which have been done to put this in place.
Mr. Rietz exited the teleconference at approximately 8:23 p.m.
b. Discussion/action regarding disability matter
Discussion ensued regarding the next steps, if any, and that Covid-19 has forced a delay in any other
medical reports. It was suggested that the Bylaws be amended for future disability matters.
9. INFORMATION & UPDATES
a. Scheduling of third quarterly meeting 2020
Consensus to meet for the third quarterly meeting on July 21, 2020 at 7:00 p.m.
BOARD OF TRUSTEES OF THE POLICE PENSION FUND
Minutes Page 9 of 9 April 29, 2020
10. ADJOURNMENT
Motion by Trustee Kadolph, seconded by Vice President Feldman, to adjourn the Board of
Trustees of the Police Pension Fund meeting at 8:29 p.m. VOICE VOTE: Motion carried.
ATTEST:
Edward J. Caspers /s/
Edward J. Caspers, Secretary
Board of Trustees of the Police Pension Fund