Board Meeting Minutes
MONEY PURCHASE PENSION PLAN FOR PEACE OFFICERS
February 5, 2013
The Board met to 1) elect a chairperson, 2) review/approve the minutes from the last meeting; 3) review/discuss New Business; 4) review/discuss Old Business; and 5) discuss any Other Business.
Present: Present were Employee Board Members Micheal Deedon, Justin Petersen and Bryan Lingo, and Director of Finance Pat Soderberg and Director of Human Resources Suzanne Smith.
Others in attendance: Adam Varga and Darrell Quam from Wells Fargo. Annette Rauschenberger from Human Resources. Jim Becklenberg from the City and County Manager’s Office.
The meeting was called to order at 9:00 am.
Elect Chairperson – Mr. Deedon made a motion to nominate Mr. Lingo to chairperson. The motion was seconded by Mr. Peterson and unanimously approved by the board.
Disposition of Minutes – The minutes of the September 13, 2012 meeting were approved.
Discussion of Fees – Proposal to Separate Fees to show charge for administrative expenses and charge per mutual fund: Mr. Quam explained how fees are currently calculated and presented a breakdown by fund. That reports can be accessed here (2012 May Police Fee Summary and 2013 Feb Police Fee Summary). Wells Fargo’s current administrative fee is 22 basis points. Any revenue sharing above the 22 basis points is returned on a pro-rata basis (based on individual account balances) to members except for members enrolled in Advice Track. There is no revenue sharing on Advice Track. Ms. Smith advised the group that the goal was to move the mutual funds to the lowest class share and convert the current administrative fee to a per member fee. This will allow for greater transparency – members can evaluate if the fee for administration is worth the cost and can also evaluate if the fund manager’s fees are worth the fund performance.
Mr. Quam indicated that the plan could adopt the lowest share class for each mutual fund and Wells Fargo would reduce the administrative fee to 20 basis points. Ms. Smith requested that Mr. Quam prepare “before and after” examples so members can see the difference.
Ms. Smith asked Mr. Quam to present a flat dollar amount fee to the board. Using a basis point fee schedule would mean that members would be paying variable fee amounts depending on the individual account balance. Members are receiving the same level of service from Wells Fargo so it doesn’t make sense to charge variable fees.
Mr. Lingo asked about transparency with regard to Advice Track. Members enrolled in Advice Track pay the administrative fee, an Advice Track management fee plus the fees associated with the mutual funds. Revenue sharing is not available on Advice Track. The Advice Track presentation on the webpage is not up-to-date; Mr. Quam and Mr. Lingo will work on updating the presentation.
Review of Plan’s target Date Fund Performance/Glide Path/Strategy and Comparison to Other TD Funds:
Target Date funds use different glide paths (Wells Fargo Target Date Glidepath Design.pdf). Wells Fargo manages the portfolio to the Dow Jones target. This means that Wells Fargo manages to retirement (age 65) so its asset allocation is more conservative (heavier weighting in bonds/cash; lighter weighting in equities) at age 65. T. Rowe Price uses a “through” retirement philosophy extending the path out 30 years from retirement (age 65) so its asset allocation is more aggressive at retirement and gradually moves to a more conservative path over the course of 30 years following retirement. The more conservative approach was selected (to retirement) since many members will be withdrawing those funds and may not be able to wait out down turns in the market. When compared to the peer group ratings (TD Fund Comparison) for “to retirement” plans, Wells Fargo is a top performer (See more information at Target Date Funds Comparison Admin 12.31.12).
Year-end Results and Funds on Watch List: Year-end results are available here (2012 12 31 PMPP Report.pdf).
Oakmark Equity has a “C” rating. This fund is performing better against the benchmark for the last quarter. The manager retired in mid-2012. Mr. Varga recommends keeping this fund.
Janus 20 has a “C” rating. There has been some improvement in this fund. Performance is good for the last year; there was underperformance in previous years.
Wells Fargo Small Cap has a “C” rating. The manager placed a larger percentage of the portfolio in cash thereby reducing performance compared to peer groups.
Janus Overseas has a “D” rating. This is a volatile fund with 40% in emerging markets. Performance has been better over the last quarter and the fund has outperformed its benchmark. The board will continue to monitor this fund.
T Rowe Price has a “C” rating but is getting close to a “B” rating.
Consultation Services: Mr. Lingo would like the board to consider contracting with an outside firm to the current offerings and the fees. Ms. Smith indicated that the board will need to determine the source of revenue to pay for the services. Possible sources include a per member fee or use of funds in the forfeiture account. The procurement process will need to be followed for this potential project. The board will discuss this further with the general employees’ pension board.
Old Business/Other Business
Provision to Allow Tax-free Withdrawals for Medical Expenses (Pension Protection Act): Second reading and public hearing for the ordinance is February 26, 2013.
Pension Plan Alternatives Update: Mr. Deedon reported that FPPA is conducting a feasibility study.
Discussion of High Yield Bond Funds and Comparison to Other Bond Funds including Inflation Protected Funds: Mr. Varga and Mr. Quam will present information on inflation protected funds at the next meeting.
Diversification Report: Mr. Quam will provide an update at the next meeting.
The meeting was adjourned at 11:29 a.m.
Minutes Prepared by Suzanne Smith
Approved by _______________, Chair