HomeMy WebLinkAboutPension & Audit Committee May 21, 2019
PENSION & AUDIT COMMISSION CHAMBER
COMMITTEE May 21, 2019
PRESENT: Hons. Hardie Davis, Jr., Mayor; Sean Frantom, Mayor Pro Tem; Bill Fennoy,
Finance Committee Chairman; Ben Hasan, Commissioner; Jarvis Sims, Interim Administrator;
Donna Williams, Finance Director; Tim Schroer, Asst. Finance Director; Geri Sams, Procurement
Director; Kenneth Perry, Human Resources Dept.; Lena Bonner, Clerk of Commission.
1. Presentation of First Quarter ending March 31, 2019 investment reports for 1945 and
1949 Pension Plans. (Heather J. Seigler, Morgan Stanley)
Ms. Seigler made a presentation regarding the investment reports for the above pension
funds.
Mr. Frantom: I move that we receive this item as information.
Ms. Williams: Second.
Motion carries 5-0.
3. Receive information related to efforts to contact former employees who were non-
vested in the 2008 GMEBS Plan in order to return their contributions as required
by plan document. (Tony McDonald, Deputy Administrator and Kenneth Perry,
Compensation and Benefits Manager)
Ms. Williams: -- and to get a designation as to what they want done with their funds. So
that’s kind of where we are right now. So this is bringing you the information that we are going
through this process attempting to contact those individuals and working with GMA to return their
money to them.
Mr. Mayor: Okay, is it also not true that you have a schedule of meetings that you will
continue to try to engage them?
Ms. Williams: We had the one meeting. I’m not sure right now how many more are
scheduled.
Mr. Perry: We’re in the phase of doing the emails now. So once we do that then we have
to look at how we’re going to do the rest remaining because GMA is basically telling us saying
that we have to make a good faith effort for six consecutive months in order for us to be able to
move through the process.
Mr. Fennoy: Is it possible when new people are hired on that they could have a person
designated at that time to let them know that if you don’t get vested at what, five years, in case you
don’t stay the five years you would get a return and where do want it sent?
1
Mr. Perry: Well, we do discuss that in orientation with them that if they’re not vested you
know what happens. When the person leaves, there is a process we have to fill out an application
for them and essentially requesting to get the money back. And of course once we have that
completed then we have to send it to Ms. Bonner for signature and then it’s sent off because it’s
associated with the termination date.
Mr. Hasan: Ms. Williams or Mr. Kenneth, how far does these 400 go back?
Mr. Perry: I’ve had some with 2003 dates on them.
Mr. Hasan: I’m sorry.
Mr. Perry: I’ve had some with termination dates of 2003 on them.
Mr. Hasan: 2003. So back to Commissioner Fennoy’s letter, most people doesn’t sign a
beneficiary when they come on board for their insurance and things of that nature?
Mr. Perry: Well, they do sign the beneficiary but it’s for as the return of contributions.
That is a separate form because it’s essentially requesting to get those monies back.
Mr. Hasan: So my point is if I was here and I was not vested as an employee, I didn’t fill
out a form so is the government able to consider if I had a beneficiary on my insurance policy,
could that become my beneficiary? Because if I would have known I had not been vested
obviously I look at us not doing our job if we’re down to 2003 that we can receive that benefactor
from an insurance perspective to be a benefactor of the funds here. Is that cross contamination or
something?
Mr. Mayor: I’ll recognize Donna to speak to that but as a matter of practice when we’re
designating beneficiaries whether that’s public or private sector you’re typically designating a
beneficiary for a series of things and that’s a different thing. Donna.
Ms. Williams: We have been in contact and we have been working with GMA to try to
uncomplicate this process. Our attorney has been involved in those conversations. We’re trying
to do everything that we can within the pension. The laws that govern the pension and the tax
consequences that are associated with them because these are pre-tax dollars that go into your
pension plan so we’re very limited on what we can assume. It requires an active signature of the
person that owns those contributions. We’re working on it but we’re extremely hampered in this
process.
Mr. Sias: Here’s what I don’t understand. If you are dealing with a bank and you are a
member of these agencies and you overpay, they automatically send you your money back. So
my question is if an employee is leaving and we know they’re not vested, why is that applicant,
that employee not said okay, you need to get your money back, fill out this form and we’re going
to send your money back. I don’t think too many folks are going to refuse to do that. So my
question is we’re letting them walk out the door and we know what we need to do for them and
we’re not doing it. That’s my view. I could be wrong but the thing is we’re talking about we’re
2
trying to contact them long after they’re gone. On the day they’re walking out the door we should
do that paperwork. It should be mandatory because we know, number one, we’ve got a problem
dealing with the money. Number two, we’ve got a problem dealing with GMA and number three,
we’re fixing to put some money in a hole somewhere that we don’t know wherever it might end
up at. So for me why not give that person their money back the day they’re walking out the door.
And I mean the paperwork, the whole nine yards, get your money, you didn’t stay long enough,
sorry, nada, bye. We don’t have to worry about that five years from now. I don’t understand that.
That is what it should be. Do we need a policy to say that?
Mr. Mayor: Well, let’s just suspend on that for a second.
Mr. Sias: You always want to suspend when we get down to brass tacks.
Mr. Mayor: Well, it’s a germane conversation but again, you’re here to receive information
right now not to, and I want to be proper when I say this, we’ll come back to that but this is not
the administrative policies and procedures sub-committee. Just hold on a minute, okay? I’m going
to come back to you. What is your immediate path forward, Mr. Perry, beyond what you’re sharing
th
with us? There are 440 people who are non-vested. Everything the commissioner from the 4 just
said certainly has merit and there needs to be an approach to how you’re handling that as a matter
or record and ya’ll need to be prepared to address that. What we’re not going to do is try to solve
it today in the Pension Committee meeting. But you need to be prepared. What’s your immediate
next step forward in terms of –
Mr. Perry: Our immediate path forward now is to use the email as the immediate way of
contacting them and then from there to provide 30 days and then we’ll see whether we have to take
some other measures.
Mr. Mayor: Do you have last known address?
Mr. Perry: Yes, but that’s what we sent out initially and some of them came back.
Mr. Mayor: As a matter or record, you couldn’t just unilaterally just send checks out either,
is that correct?
Mr. Perry: We did address that with GMA. I’m not sure whether they actually responded
back to us, just sending out the checks, but it was my understanding that they actually had to have
the signature on the application requesting the funds because we do have an exit interview with
the employees. We schedule those on the day that we get paid and some that are scheduled just
don’t show up so I think what we need to do going forward is actually those that don’t show up
rather than wait until GMA sends us a list, take that separation list and actually start contacting
those people right away.
Mr. Mayor: Yeah, I think all of those things have merit. All right, I’ll give you another
th
opportunity to speak to this, Commissioner from the 4, but –
Mr. Sias: I’m going to ask a question about number two.
3
Mr. Mayor: We haven’t gotten to that one yet. We’re coming back to that.
Mr. Sias: You’re coming back to that one?
Mr. Mayor: We are.
Mr. Sias: But I would just say this. I will concur with you that this wasn’t the thing to do
this but I’m also going to concur with me this is the place to bring up the issue so we don’t get
back to this place. So I would like to see going forward when we come up with a plan and a policy
that we do that from the day that they’re leaving. We keep creating holes so, but I want to thank
you for the effort that ya’ll are putting into this but sooner or later we’re going to have to meet the
deadline on what happens with those folks’ monies and sooner or later somebody is going to come
back later on or three years later and want to sue for their money. So we need a good, clear path
of how you all went through the process to dispose of this. It needs to be legally sound that it can
stand up in court because we get enough lawsuits as it is. So whatever that consecutive number
that GMA requires because when the money is forfeited, exactly what happens to the funds then?
Does it go into Augusta Richmond County’s pot or does it go into GMA’s pot or what happens
with it?
Mr. Perry: That I can’t answer but I can definitely get an answer for you but not today.
Mr. Sias: I’m good. Thank you.
Mr. Mayor: Receive this as information. That was the intent. We’ll receive this as
information.
Mr. Hasan: Based on what Mr. Kenneth said as well, I think he said about six months’
succession, I heard you just say emails and I’m just asking for us is that aggressive enough knowing
that in that six months and persons may lose their resources so do we want to be a little bit more
aggressive so that we’ll feel well about what we’ve done in trying to make absolute contact with
them. Is that sufficient enough? That’s my real question.
Mr. Mayor: He stepped us through it and began first and foremost with communicating
the last known address. 440 plus letters that were sent out. They received a hundred back. Of
that hundred back 30 people decided to show up and attend the meetings that they prescribed.
They have touched out of that 440 what I heard with my bad hearing is that you’ve touched about
65 people at this point.
Mr. Perry: In addition to the 60 based on the email, that’s a little over a hundred.
Mr. Mayor: That’s right. Which gets you to your hundred people.
Mr. Hasan: And what are you in, Mr. Mayor? What month are you in at this point?
Out of the six months?
4
th
Mr. Perry: Well, we had the meeting on the 8 of this month.
Mr. Hasan: Is this your very first meeting?
Mr. Perry: Yes, sir.
Mr. Hasan: Okay. So can we also consider if we can do a newspaper ad or something with
those persons name in it? Is that too much?
Mr. Mayor: Well, anything is possible. You’ve got a target audience that you’ve already
reached and clearly there was a level of success with that. So you’ve really got two things going
on here. You’re trying to touch those people in a constructive way. The piece that the
th
commissioner from the 4 is talking about is what is our process in terms of the off boarding of
employees. At the point in time that I leave this organization you can hand me a check or tell me
that a check is going to show up at my house in 45 days and there’s a piece of paperwork that
processes that or allows that to happen. Right now it doesn’t sound like there is a standard
operating procedure for that.
4. Discuss the 1998 Money Purchase Plan and schedule information session for
participants.
Mr. Perry: It was brought to my attention that there have been some discussions with the
1998 members who had some questions and things of that nature. When it got to me it was at the
point of scheduling those sessions. So we reached out to GMA who is the administrator of our
1998 plan and they have agreed to come down on July 10 and 11 here in the Commission Chambers
and allow the members that are still in that plan to ask questions and get clarification and things
of that nature. I think it’s a good idea because if we tell them you know you don’t get this or this
is attached to the pension plan for the 1998 members, but I think just a different voice being able
to explain how the plan is administered will probably be beneficial.
Mr. Mayor: So we’re having a conversation but nobody knows why you’re having that
conversation. So whether it’s you or Donna, tell us why we’re having this conversation.
Ms. Williams: There were initially when the 2008 defined benefit plan came into existence
it replaced this 1998 defined contribution plan, which is a 401A plan. The employee puts in 4%
of their gross earnings and the employer Augusta matches it with 2%. It works very similar to
your 457 deferred compensation plan except that your contribution is fixed. It does not preclude
you from putting other tax-sheltered assets into any other type plan but this 401 is the one that was
sponsored by Augusta. There were a group of employees that made an active election –
Mr. Mayor: How many?
Ms. Williams: Originally 240 approximately in 1998 that made an active election to stay
on the 1998 defined contribution plan. There were information sessions, there were meetings,
there was also a very vocal group of employees advocating for other employees not to move to the
2008 defined benefit plan. As a result for one reason or another those 240 plus individuals opted
5
to stay in this plan. That is a one-time irrevocable decision according to IRS and pension
regulations. That cannot be changed later for whatever reason. So fast forward not quite so much
to 2019 there are 90 folks still on that plan. We’ve had various discussions before with, regarding
this plan that some of those participants that remained on that plan are, were not necessarily happy
with their decision as the market conditions changed as they realize that they were getting closer
to retirement and may not have as much money in that plan as might should take them through
their retirement years. So back and forth several different times there seems to be constant
conversations one way or the other with various members of the plan concerning the level of
assistance, what can be done, the status of the plan, etc. So this an attempt to provide more
information to this group of people, more assistance from the administrator of the plan which is
GMA once again that they will come on site. We have these four meetings set up on two separate
days. Employees can come. They can listen to the presentations from GMA, they can schedule
individual sessions for consultations later and just get some additional assistance. We’re just trying
to provide some additional assistance to these people that remained on this defined contribution
plan.
Mr. Sias: A couple of questions here. In the 2000 and the new GMEBS I think it’s 2008,
when was the effective date of this changeover? Was it 2008 or 2009?
Ms. Williams: 2008.
Mr. Sias: 2008 which makes it about 11 years ago. So here’s my question. Can an
employee drop, and they didn’t change over, and my question is can an employee say I’m done
with the ’98 plan. I want to stop it and I want to join a new one. Not a rollover, just a stop and
start.
Ms. Williams: If they are terminated from the government, they can withdraw their money
from the ’98, they can join the 2008 plan but their date of participation would be the date of their
rehire unless they purchase prior years credit in the 2008 plan which is cost prohibitive to most
individuals.
Mr. Sias: Understood. Just say for example, I took a bold step. I was an employee for
about 15 years, I’m five before and I’ve been with the ’98 for the last 11 years. And I decided that
I want to get terminated and I get terminated. I pull out my money and I come back to work again.
When you say terminated, does that mean quit or do I have to be fired?
Ms. Williams: Either way.
Mr. Sias: Okay. So if I quit and I came back and I joined the GMEBS eight and I’m just
asking the question and I brought all that money, whatever the money I took back and (inaudible)
the years, could I jump on GMEBS 08 and buy some years back with whatever the money I drew
back in ’98? Am I in?
Ms. Williams: Theoretically, yes, sir. (inaudible) available to you.
6
Ms. Sias: Because I’ve heard a lot of 1998 complaintees. And I understand the irrevocable
piece. I simply am looking for is there any path forward for them if they’re really that I don’t want
to use the term desperate, if they’re that really inclined to try to get in on GMEBS eight. I’m just
asking, are there ways to get it done and you described one. All right. And hopefully they’ll get
some answers on this meeting. I certainly want to be in the back of the room listening. Thank you
very much.
Mr. Mayor: Are there any additional questions?
The Clerk: Receive as information?
Mr. Mayor: Yes, ma’am. Receive as information.
2. A motion to award RFP 19-003 Investment Management and Trustee Administration
Services of the 1945 and 1949 Pension Plans to Morgan Stanley as recommended by the
selection committee.
Mr. Schroer: This RFP is to provide investment management services for the 1945 and
1949 pension plans. A quick overview. The 1945 and 1949 plans are closed. The ’45 plan was
for Richmond County employees and the ’49 plan was for City of Augusta employees. As Heather
mentioned before some of the actuarial assumptions that we made when we look at these plans are
the actuarial (inaudible) when they look at the plans. We have an inflation rate of 2%, salary
increases of 3% and then a rate of return that we look for is a 7.25%. One of things that we did
find interesting is the number of active retirees. You can see on the green line the 45 plans, there
is less and less of them while on the ’49 plan, there are more retirees which coincides with our
increased contributions. A question we came up with that was asked at one point was what’s the
break in? What would we have to make for the government not to make a contribution based on
the actuarial studies? To do that we would have to get for the ’45 plan a 12.6% rate of return and
for the ’49 plan it would be 9.59% rate of return. As we said before there are no active employees
in the ’45 plan and as of January 1 of ’18 there are 23 and I think it was 18 as of January 1 of this
year. Plan Performance. We always want to make sure that our plans are performing well. We
looked at our actuarial assumptions over the last ten years. The ’45 plan had a rate of return of
7.83%. The ’49 plan had a rate of return of 8.3%. The GMEBS plan had a 9.95% rate of return
and we’re very happy to say that we beat both the Georgia plan and the Alabama plan. Heather
also mentioned the market does create a lot of havoc on us and last December if everybody
remembers the market tanked on us and as you can see back to April we’re almost back to where
we were in September. This is the actual returns for each plan. A couple of years we didn’t make
it but most of that was driven by the market not by the investment choices. Performance Summary.
The plans all fared well against the benchmark. All three plans outperformed the Georgia State
plan and the Alabama plan and they’ve all outperformed the U. S. Treasury market. Going forward
with the RFP results, the evaluation team, there were two members of the team from the Finance
Department, one member from the Administrator’s Office and one member from the Utilities
Finance Department. Three bids were received that we deemed acceptable. We scored those and
the two highest bidders came in for presentations. After the presentations there were discussions
and at that point the evaluation team scored Morgan Stanley the higher of the two. It is the
evaluation team’s recommendation that the bid be awarded to Morgan Stanley.
7
Mr. Frantom: I’ve got a few questions here. Number one, if we can go back to slides five
and seven, I just want to understand. You’re saying that 9.59% is the break even for the 1949 plan
and we only did 8.3, is that correct, over a ten year span?
Mr. Schroer: No, sir. That’s the rate of return we would have to get from government not
to make the contribution.
Mr. Frantom: That’s right, that’s what I’m asking. 9.59 would be the break even to where
we wouldn’t have put money in as a government versus we ended up at 8.3.
Mr. Schroer: Yes, sir.
Mr. Frantom: Is there anything the current provider could have done to where we didn’t
put the amount of money that we put in as a government over those ten years?
Mr. Schroer: I don’t think so. I mean we have to look at the actuarial studies and based
upon what we need to make the plan whole, I think our rate of return has been well. Our benchmark
is to beat the actuarial assumption and we did that. This is just kind of if. If we got really lucky
and on the long term, and bear in mind this would have to be a ten-year rate of return of 9.49%.
Mr. Frantom: Right but over those ten years this government put in $19.5 million dollars
out of the General Fund because of this plan, the 1949 and the 1945 plan. So that leads me to my
next question is was the past history taken into account when the RFP from a performance
standpoint is that taken into account when the group was deciding who the firm was?
Mr. Schroer: We looked at that. We looked at the rates of return based on the information
provided in the RFP, yes.
Mr. Frantom: My next question is for Ms. Sams or Tim. It’s concerning to me that when
this plan came before the Pension Committee that we did not know the fee that both of these
companies had, and there’s a significant difference in that fee, which means significant dollars
based on a $70 million dollar asset, and my question to Ms. Sams is number one, why, because we
can’t change the price anyway, we shouldn’t be able to have all the information as a commissioner
to make that decision and number two, can this government change that process moving forward
that we know what the cost is of the plans?
Ms. Sams: Mr. Commissioner, the information that I sent you on yesterday explains why
the Commissioners were not given fee proposals. One is because those fee proposals are still in
committee and accordingly to the Georgia Open Record Act, and I quoted that to you, you’re not
supposed to release any information at the state in which you are requesting the information.
Mr. Frantom: Okay, explain to me why they’re still in committee if they’re coming before
the Commission to vote on something like this?
8
Ms. Sams: Well, a recommendation has been made and if you look at Georgia State Statute
Open Record Act, it becomes public, all of it becomes public after it has been finalized and as of
today, it has not been finalized and you haven’t taken a vote on it.
Mr. Frantom: I’m hearing you. It just doesn’t make sense to me that we would vote on
something, seven-year deal, something so significant to this government and we’ve paid this firm
$5.4 million over the last 15 years and we can’t know what the cost is of the plan before we vote
on it. That’s difficult for me. I don’t know that I can move forward today.
Ms. Sams: Mr. Commissioner, may I give the Clerk a copy of the state statute of the Open
Records Request as it relates to what type of information is not to be released until the end of this
process? I have it in hand.
The Clerk: Ms. Sams, do you recall what section that was?
Ms. Sams: I will give it to you.
Mr. Frantom: My final comment is that I just feel like the cost to the taxpayers and the
performance really should be graded at a higher scale than the current scoring system and I guess
my question is again does Procurement change this grading scale or does this government change
the grading scale of how Procurement does things?
Ms. Sams: Procurement did not change anything.
Mr. Frantom: I didn’t say you did. I said if we were wanting to change the scoring system,
is it your department that changes it or is it this government that changes it?
Ms. Sams: Mr. Commissioner, the compliancy of the computer, of the Procurement
Department are actually addresses state statutes and your local government codes so if you were
to try to change it, you would also have to change your code and your statute.
Mr. Mayor: So, Ms. Sams, a couple of things that are happening right now. In Title 50
you refer to the Open Records Act –
Ms. Sams: Yes, sir, I did.
Mr. Mayor: You did and I want to caution you on using that with regards to what
information is admissible and what is not, particularly in light of what the Mayor Pro Tem has
asked.
Ms. Sams: Yes, sir.
Mr. Mayor: I’m going to take a few more questions for Ms. Sams. I just wanted to caution
you on that.
Ms. Sams: On the Georgia Open Records Act?
9
Mr. Mayor: Yeah.
Ms. Sams: Okay.
Mr. Mayor: You can’t use it as a tool to deny the Commissioner the information that he’s
asked for. It’s inconsistent with State law. And this is not the first time I’ve heard it but I just
want to again, that information.
Mr. Sias: We can do a workshop on that.
Mr. Mayor: We can do that, I’d be happy to do that, in fact, I’ll even bring the Attorney
General down to do it.
Mr. Sias: I’m going to go back to your earlier statement.
Mr. Mayor: Which is why I want to move on. While I go to the commissioner from the
th
6, I want to, to the voting members of this pension committee, I think there’s more discussion
beyond this timeframe we have and I’m not aware of an urgency that requires us to take action on
this today and so I want to strongly give this body, the voting members of this committee, an
opportunity to have some more discussion beyond today and so I’m telegraphing about taking this
issue up at our next full Commission meeting.
Mr. Hasan: Ms. Sams, Mr. Tim, I hear my colleague Commissioner Frantom asking about
the fees. So am I to understand that the fees is that what the vendor charges to service the account?
Is that what they were talking about?
Mr. Schroer: Yes, sir. And there is a difference between the management philosophy.
Morgan Stanley has an active portfolio management philosophy and the other vendor, Janey, has
a passive management philosophy. So Janey’s fees were lower.
Mr. Hasan: Okay, so if you, obviously you have kind of prepared for that so when you’re
talking about dollar and cents, what is the difference in terms of the amount of money that it costs
for us to pay the service, what does that look like?
Mr. Schroer: It depends and I don’t take that answer very lightly.
Mr. Hasan: Is it substantial?
Mr. Schroer: It could be. What you want to do is look at your fees as kind of a base. I
need to make “x” amount of dollars. With an active plan because they’re actively looking at the
plans, actively looking at your investments, the object of that is to beat the benchmark of the funds
and make a higher rate of return. So your net cost or net return on investments with an active plan
should be higher. That’s the goal. With a passive plan you go with your funds. The cost is lower
but I think you lose some opportunity cost and the committee felt that in today’s environment, an
active manager would be the best recommendation for Augusta.
10
Mr. Hasan: But it will cost us more for that particular –
Mr. Schroer: You will pay more but if everything works out according to plans and we all
made our benchmarks, you’re going to earn more money too. So if your passive plan fee is $50,000
–
Mr. Hasan: So if we put out an RFP for this did we say we was looking for an active
manager versus one that’s passive in terms of how they manage our portfolio?
Mr. Schroer: No, sir, we did not. We just asked for management and whichever philosophy
that they propose.
Mr. Hasan: All right, thank you.
Mr. Fennoy: Ms. Sams, what are the two plans? One is the active –
Mr. Schroer: That’s the management philosophy, the portfolio management. This will
govern investments for the 1945 plan and the 1949 plan.
Mr. Fennoy: That’s what we call the active plan.
Mr. Schroer: No, sir, that’s just how they manage the portfolio.
Mr. Fennoy: Okay, now how does the company manage the portfolio?
Mr. Schroer: Yes, sir, Morgan Stanley took an active approach. Janey took a passive
approach.
Mr. Fennoy: Okay, but both Janey and Morgan Stanley had the option of whatever
approach –
Mr. Schroer: Yes, sir, that’s their firm philosophy.
Mr. Fennoy: Okay.
Mr. Frantom: I’d like to make a motion to move this agenda item to the first full
Commission June 4.
Mr. Mayor: Second.
Ms. Williams abstains.
Motion carries 4-1.
Mr. Mayor: Ms. Bonner, is there any other additional business for the pension meeting?
11
The Clerk: No, sir.
ADJOURNMENT: There being no further business, the meeting was adjourned.
Lena J. Bonner
Clerk of Commission
12