Owosso Employee's Retirement System Minutes

December 16, 2004 - 8:00am
City Council Chambers

PRESENT:       CHAIRPERSON LINDA ROBERTSON, TRUSTEES WILLIAM BLANCHETT, WILFRED A. FARRELL, FRANCES KUKULIS, MARK MITCHELL, AND JAMES TREADWAY.

ABSENT:         TRUSTEE JOHN C.M. DAVIS.

ALSO PRESENT:  Marie Vanerian, Merrill-Lynch; Brian Lee, Fifth Third Bank; City Attorney William C. Brown, City Treasurer Ronald Tobey, Richard Williams, Rhonda Pritchett, Patricia Skutt, and Jacqueline Williams.

CALL TO ORDER

Chairperson Robertson called the meeting to order at 8:07 a.m.

APPROVE AMENDED AGENDA

Motion by Trustee Kukulis to approve the amended agenda as presented.

Motion supported by Trustee Blanchett and concurred in by unanimous vote.

APPROVE MINUTES OF SEPTEMBER 16, 2004 REGULAR MEETING

Motion by Trustee Kukulis to approve the minutes of the September 16, 2004 Employees Retirement System Board meeting as presented.

Trustee Farrell questioned why Fifth Third Bank has 50% of the funds and the other two money managers have 25% each.

Motion supported by Trustee Mitchell and concurred in by unanimous vote.

APPROVE MINUTES OF OCTOBER 14, 2004 ORGANIZATIONAL MEETING

Motion by Trustee Treadway to approve the minutes of the October 14, 2004 Employees Retirement System Board organizational meeting as presented.

Motion supported by Trustee Farrell and concurred in by unanimous vote.

APPROVE PENSION CHECK REPORTS

Motion by Trustee Kukulis to approve the following Pension Check Reports: 

·        September, 2004                             $88,278.68

·        October, 2004                                 $88,278.68

·        November, 2004                              $88,278.68

Motion supported by Trustee Treadway and concurred in by unanimous vote.

APPROVE STATEMENTS

Motion by Trustee Blanchett to approve the following statements:

·        Chemical Bank and Trust Company

September-November, 2004

·        Fifth Third Bank

September-November, 2004

·        Tom Johnson Investment Management, Inc.

Period ending October 30, 2004

·        City of Owosso Employees Retirement Fund

September-November, 2004

Motion supported by Trustee Farrell and concurred in by unanimous vote.

PAYMENT AUTHORIZATIONS

Motion by Trustee Kukulis to authorize the following payments:

• Chemical Bank and Trust Company

            Administrative Fees

            For Period 09/01/04 through 11/30/04                             $7,880.88

• Fifth Third Bank

            Administrative Fees

            For Period 07/01/04 through 09/30/04                             $6,575.73

• Tom Johnson Investment Management, Inc.

Management Fee

For Period 07/01/04 through 09/30/04                             $8,952.96

• Gabriel, Roeder, Smith & Company

            Review of City ordinance in light of recent

            changes to Section 401(a)(9) of the Internal

            Revenue Code                                                               $1,000.00

• MAPERS

2005 Annual Dues                                                         $    50.00

Motion supported by Trustee Treadway and concurred in by unanimous vote.

COMMUNICATIONS

The following communications were received for file:

• Ronald J. Tobey, City Treasurer – Report of Checks Written
• Gail L. Schultz, City Clerk – Certified copy of ordinance amendment to Sections 2-403 and 2-404 of Chapter 2 as it relates to the Board of Trustees and terms of office.
• Brian T. Lee, Fifth Third Bank – Copies of 09/27/04 and 11/15/04 letters to City Treasurer regarding discussions with Marie Vanerian, Merrill Lynch.
• Gabriel, Roeder, Smith & Company – Client Satisfaction Survey
• Gabriel, Roeder, Smith & Company- August, October, November 2004 News Scan
• Fifth Third Bank Investment Advisors – summary of qualifications

The following publications and conference announcements are on file with the City Clerk – if you would like to read them, please contact her:

• Rodwan Consulting Company – Maximum Benefit and Contribution Limits for 2005.
• Miscellaneous Conference Announcements

OLD BUSINESS

Status Report – Report on meeting with Brian Lee, Fifth Third Bank representative

Ronald Tobey, City Treasurer, reported on the recent meeting with City Manager Gregg Guetschow, Finance Director Richard Williams, and Brian Lee, Fifth Third Bank representative.  He addressed the four issues that they discussed: 1) to facilitate cooperation and coordination between the Fifth Third Bank, the City and Merrill Lynch with Karen Blum being appointed as the administrative officer/contact person at Fifth Third Bank; 2) missing cost basis information; 3) trading commission rates and done away fees; and 4) the amount and style of trades being done.

He reported that Fifth Third Bank will trade exclusively with Merrill Lynch, which will eliminate done away fees.  He also indicated that Fifth Third Bank will discuss a different style of trading later in the meeting.

Trustee Kukulis questioned “have the done away fees been waived from June”.  It was reported that on November 19^th the account was credited with done away fees of $4,325 (through March) by Merrill Lynch and that since that time the done away fees have not been credited.  City Treasurer Tobey said that he is not sure of the current balance of done away fees.

There was further discussion regarding the status of done away fees.  Trustee Kukulis commented that at the June meeting, City Attorney Brown requested that Merrill Lynch waive the trade done away fees already submitted and going forward and Ms. Vanerian agreed to this.  Trustee Kukulis commented that she felt that the done away fees should be waived and that the Board should be made aware of the fact that heavy trading was done. She commented further that she felt the done away fees should be waived.

Ms. Vanerian is to prepare a list of done away fees charged to the system and present to the Board at the February meeting.  Brian Lee reported that Fifth Third Bank would use Merrill Lynch exclusively at five (5) cents a share.

There was further discussion regarding commission rates still ten (10) cents a share, done away fees, trades being accepted, and monitoring of the trading at Merrill Lynch.  City Attorney Brown commented that there should not be any confusion regarding the amount of the commission rate.  Brian Lee recalled that trading would be done at five (5) cents unless a better rate can be obtained elsewhere.  He said that it was their error if trades were being done at ten (10) cents.  He said that he takes responsibility and will change this immediately. 

The Board felt that the same direction should be given to all managers for all to trade at five (5) cents.  The City Attorney and the City Clerk will send a letter to all three money managers directing that equity trades be done at five (5) cents through Merrill Lynch unless a better commission rate can be obtained elsewhere.

Ms. Vanerian will provide a full disclosure of fees and difference between soft and hard dollars at the February meeting.

Brian Lee commented regarding “excessive trading”.  He commented that he will be talking about a different strategy and that they don’t do this because of any benefit to Fifth Third Bank.

Status Report – Trading Commissions with Merrill Lynch

The Board felt that City Treasurer Tobey provided this information in the foregoing report.

NEW BUSINESS

Request for Transfer of Funds to MERS – Rusty LaMay

Motion by Trustee Treadway to authorize the transfer of Rusty LaMay’s funds in the amount of $13,635.06 to MERS.

Motion supported by Trustee Kukulis and concurred in by unanimous vote.

Nomination of Section 16.24(a) Beneficiary and Election of Option B – Chester F. Borton, Jr.

Motion by Trustee Kukulis to approve the Nomination of Section 16.24(a) Beneficiary and Election of Option B by Chester F. Borton, Jr. for his beneficiary, Mary Joan Borton.

Motion supported by Trustee Treadway and concurred in by unanimous vote.

System Compliance with IRS Regulations

The Board received a response from Gabriel, Roeder, Smith & Company regarding the IRS Section 401(a)(9) compliance study.

City Attorney Brown reported that he is communicating with Miller, Canfield to prepare proposed amendments for presentation to the City Council in February.

Resolution of Authorization

Motion by Trustee Kukulis to adopt the following resolution authorizing the City Treasurer to make certain payments without prior board approval and further to make this resolution as Attachment B of the Board’s Rules of Procedure with a yearly review:

Whereas, pursuant to Chapter 2, Administration, Article VII, Municipal Employees’ Pension, Section 2-408, Retirement system officers, Subsection (3), that the City of Owosso Employee Retirement System Board of Trustees hereby resolves that:

1)               The treasurer is hereby given authorization to pay the following items without prior board action:

a.      Monthly pension payments to retirees along with associated Federal and State withholding taxes.  Such payments may be for previously adopted retirees or new retirees that meet qualifications, but have not yet been approved by the board.

b.      Blue Cross Blue Shield insurance premiums for retired members through payroll deduction, direct payment or city reimbursable premiums per employee agreement.

c.      Contractual money manager fees.

d.      Refund or rollover of member contributions with credited interest for persons withdrawing from the retirement system.

e.      Office supplies such as check stock, postage or mailing fees required to carry out the administration of the system.

2)               Items paid under this resolution shall be submitted to the board at the next regularly scheduled meeting for review and approval.

3)         The treasurer and board shall annually review this resolution at the organizational meeting for appropriate authorizations to be added or deleted.

Motion supported by Trustee Farrell and concurred in by unanimous vote.

Fifth Third Bank-Trust/Institutional Investment Management Services Agreement, Fifth Third Bank-Certificate of Plan Administrator, Fifth Third Bank- Retirement Plan Services Mutual Fund Consent Form, and Resolution-City of Owosso Retirement Fund Trust

City Attorney William Brown commented regarding the documents and suggested designating three individual with two required to sign the documents contingent upon their reviewing the prospectus when received.

Motion by Trustee Farrell to designate City Clerk Gail L. Schultz, City Treasurer Ronald J. Tobey and Chairperson Linda L. Robertson as the three signatories with two (2) of the three being required to execute documents related to Fifth Third Bank.

Trustee Kukulis inquired about the fee schedule. Brian Lee, Fifth Third Bank representative, responded to her questions.

Motion by Trustee Kukulis to adopt the following resolution contingent upon the review of the prospectus by the designated signatories:

Resolved, that the investment management agreement between the Entity as principal and Fifth Third Bank as agent presented to this meeting is approved;

Further resolved, that any two (2) of the three following are authorized to sign the agreement on behalf of the Entity, to execute stock and bond powers and assignments necessary to transfer the assets listed on a schedule of the agreement, and to give instructions to the agent on behalf of the Entity under the terms of the agreement:  Gail L. Schultz, City Clerk; Ronald J. Tobey, City Treasurer; and Linda L. Robertson, Board Chairperson.

Motion supported by Trustee Farrell and concurred in by unanimous vote.

INVESTMENT MANAGERS REPORT

Merrill-Lynch:  Third Quarter 2004 Executive Summary Report

Marie Vanerian, Merrill-Lynch representative, gave the third quarter report.  She commented that the economy is growing and doing a good job.  She commented further about 1) third year of recovery; 2) national debt; 3) oil prices; and 4) election (mute point).

She reported the following:

Total Portfolio Performance Summary for Period Ending 09/30/2004

There was general board discussion regarding who monitors policy against manager’s investment strategy, reviewing the investment strategy and considering amendments, and clarification of investment policy.

City Attorney Brown asked who monitors the investment policy against the manager’s investment strategy.  Ms. Vanerian said that she monitors the “whole” portfolio once a month.

The Board requested a year-end composite report that will show holdings by individual money managers.

Ms. Vanerian asked for authority to suggest making recommendations to change policy to clarify for managers.  She commented that it was time for a review of the investment policy.  This would be done at no additional cost.

Trustee Kukulis requested that the Board agenda and minutes be posted on the City web site.  She also requested that the money managers be notified of the meeting schedule changes.

SPECIAL PRESENTATION

Trustee Orientation - “Fiduciary Responsibility” – Your Role as a Trustee.

Michael VanOverbeke – Principal, VanOverbeke, Michaud & Timomony, PC, Attorneys and Counselors.

Mr. VanOverbeke spoke about the relationship between the board, the investment management consultant, and the money managers.  He commented that there should be an investment consultant agreement that clearly describes fees and that commission rates should be in the agreement.

He also commented that a letter should be sent to all managers regarding the commission rate of 5 cents with Merrill Lynch and if all things are equal to trade with Merrill-lynch.

There was board discussion regarding ways to educate employees, interpretation of the plan, requests for retirement, actuarial reports conducted once a year, benefit changes required to have a prior actuarial valuation seven days prior to making decisions as a result of a change in law, and annual money manager reports.

Brian Lee, Fifth Third Bank-Customized Investment Management

Brian Lee, Fifth Third Bank representative, addressed the Board regarding changing the portfolio to a more individually invested strategy – 35-45 stocks by stocks rated B+ or higher by S&P.

There was Board discussion regarding the proposal.

SET NEXT BOARD MEETING

The next regular board meeting is Thursday, February 17, 2005 at 8 a.m.

ADJOURNMENT

Motion by Trustee Farrell to adjourn the meeting at 11:02 a.m.  Motion supported by Trustee Kukulis and concurred in by unanimous vote.                                                                  _____________________________________
Gail L. Schultz, Owosso City Clerk