Retirement Plan Sub-Committee Minutes of Special Meeting - October 3, 2013

Retirement Sub-Committee

Minutes of Special Meeting

Thursday, October 3, 2013 at 7:30 a.m.

Board of Education Conference Room

Simsbury Town Hall – 933 Hopmeadow Street

I.             Call to Order

The following Sub-Committee Members were in attendance:  Paul Henault and Nick Mason from the Board of Finance; Lisa Heavner (who joined the meeting at 7:50 a.m.) and Moira Wertheimer (who left the meeting at 7:55 a.m.) from the Board of Selectmen; Michael Goman from the Board of Education; Phil Schulz and Paul McAlenney, members-at-large.

Also in attendance were: Thomas Cooke, Administrative Chair and Director of Administrative Services (who joined the meeting at 7:50 a.m.); Burke LaClair, Business Manager, Board of Education; Mary Ann Harris, Director of Finance/Treasurer; Mary Glassman, First Selectman (who joined the meeting at 7:50 a.m.); Christopher Kachmar and Tyler Polk from Fiduciary Investment Advisors, LLC

Mr. Henault called the meeting to order at 7:44 a.m.

I.             Presentation by Fiduciary Investment Advisors, LLC (“FIA”)

Pension Plans 2Q Executive Summary Report, Pension Plans August Flash Report and September Results

FIA presented the members of the sub-committee with a report entitled “Town of Simsbury – Retirement Plan Sub-Committee Meeting – October 3, 2013.”

Mr. Kachmar addressed Section 2 of the report which included a second quarter summary report on the performance of the Town and Board of Education Pension plans.  In his review of the report, Mr. Kachmar noted that concern over the Federal Reserve’s handling of the stimulus program had resulted in erratic market behavior and implications that the stimulus program would be soon cease caused interest rates to spike.  Domestic equities have done well, but other markets (fixed income, International equities, emerging markets and real estate) have had a difficult time.  Mr. Kachmar noted that fundamental indicators remained strong and that “event risk” (the future of the stimulus program and concerns about the federal government’s handling of the debt ceiling) was dampening enthusiasm on the market.

Mr. Kachmar then turned to Section 1 of the report which included information on the performance of the pension plans in August and to a one-page summary of performance in September.  While the markets performed poorly in August, Mr. Kachmar noted that September results were stronger and that with the September results, plan performance year-to-date was likely to be up around 11% to 12% for the three plans.

Mr. Kachmar noted that the transition to the new open architecture structure was now complete with the investment of funds in the real-estate based Cornerstone Patriot Fund.

Finally, Mr. Kachmar stated that at the sub-committee’s meeting in November he would revisit the fund with respect to allocations to domestic equities and inflation protection.  Mr. Mason stated that historically the Board had rarely revisited its allocation strategy and Mr. McAlenney concurred.  Mr. Kachmar agreed that changes in strategy were and should be infrequent.

Mr. Kachmar and the sub-committee discussed the likely view of rating agencies such as Moody’s with respect to the performance of the funds, noting that critical steps (the experience study and a reduction in interest rate assumptions) had been taken to demonstrate responsible management of the pension funds.

Mr. Kachmar concluded with a review of the OPEB funds’ performance.

II.            Update on Defined Contribution Plans

Mr. Cooke introduced Tyler Polk of FIA.  Mr. Polk worked closely with the Town, the Board of Education and MassMutual in establishing the new defined contribution plans, reviewing employee investment options in the 457 plan and aligning the investment options between the new 401(a) plans and the 457 plan.  Mr. Cooke added that the roll-out of the revisions to the 457 plan and the creation of the 401(a) plans went very smoothly and with good assistance from FIA and MassMutual.

Mr. Polk reviewed Section 3 of the FIA presentation, entitled “Update on Defined Contribution Plans.”  He provided additional detail on the creation of the new plans and the roll-out process and proceeded to a discussion of the selection of investment options for the 457 and 401(a) plans.  He explained the goal of eliminating duplicative investment options, filling gaps in investment option opportunities and selecting appropriate funds for target retirement, index and actively managed funds.  Mr. Polk also stated that part of FIA’s role was to evaluate the fees paid for the different investment options and to ensure that fees were appropriate and in line with market rates.

Mr. Polk then moved to discussion of the Fiduciary Governance Calendar (p. 32 of the report) which outlines the annual strategy for ensuring appropriate oversight of the funds.  Mr. Polk and Mr. Cooke described the steps that had been taken to roll out the new plans and to explain the changes in the 457 plan to existing plan participants.  Mr. Cooke also noted that MassMutual had been on-site a number of times to meet with participants to answer questions about the 457 plan.  Finally, Mr. Cooke and Mr. LaClair noted that the Board of Education already had employees participating in the defined contribution plan.

The sub-committee discussed a timeline for reviewing the performance of MassMutual and the advisability of conducting an RFP process to ensure that the Town, the Board of Education and their respective employees are getting the best value.  Mr. Polk noted that plan participants had faced a large number of changes in 2013 and recommended that the possibility of issuing an RFP might be revisited in a year.  He noted that the RFP process would likely take three to four months.

Mr. Cooke distributed a copy of the draft “Town of Simsbury Defined Contribution Plans Investment Policy Statement, October 2013” prepared by FIA and including notes prepared by Mr. McAlenney.  Mr. Cooke recommended that the sub-committee postpone discussion and action on the policy until the November meeting which would give members the time to review Mr. McAlenney’s comments.  No other action was taken on the proposed policy statement.

III. Acceptance of Minutes

a.    March 27, 2013

Mr. Mason moved the approval of the minutes of the March 27, 2013 meeting.  Mr. Henault seconded the motion.  There were no changes and the motion passed unanimously.

b.    May 9, 2013

Mr. Henault moved the approval of the minutes of the May 9, 2013 meeting.  Ms. Heavner seconded the motion.  There were no changes and the motion passed unanimously.

IV.          Adjourn

Ms. Heavner made a motion to adjourn the meeting at 8:55 a.m.  Mr. Schulz seconded the motion and it passed unanimously.

Respectfully submitted,

Thomas F. Cooke II

Director of Administrative Services