TRUSTEE COMMENTS The Chairman asked Trustees if they had any comments, Trustees, Lucas, Maurice and Stevens all said they had none.

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1 City of Deerfield Beach Municipal Firefighters Pension Fund Meetings located at: Fire Station #102, 1441 FAU Research Park Blvd, Deerfield Beach, Florida Minutes of the Meeting held June 12, 2015 Trustees Robert Weech, Chairman Mike Harper, Trustee John Lucas, Trustee Joan Maurice, Trustee James Stevens, Trustee Also in Attendance: Burgess Chambers, Burgess Chambers & Associates Ronald Cohen, Rice Pugatch Robinson & Schiller, P.A., Fund Counsel Richelle Levy, Rice Pugatch Robinson & Schiller, P.A., Fund Counsel Chad Little Freiman Little Actuaries, LLC Doug Falcon FHA-TPA Benefit Administrators, Inc. Yolanda Shea FHA-TPA Benefit Administrators, Inc. Meeting called to order by the Chairman at 8:41 a.m. After the pledge of allegiance the Chairman asked all in attendance to take a minute of silence to recognize those firefighters who have lost their life in the line of duty. TRUSTEE COMMENTS The Chairman asked Trustees if they had any comments, Trustees, Lucas, Maurice and Stevens all said they had none. Ms. Levy asked to take this opportunity to congratulate the Chairman who had been promoted to Assistant Chief. CUSTODIAN PRESENTATIONS Mr. Chambers distributed a copy of the Burgess Chambers & Associates Request for Quotation (RFQ) Deerfield Beach Municipal Firefighters Pension Trust Fund Custodial Services February 24, Mr. Chambers briefly discussed the items requested from the respective custodian entities and advised the Trustees that the last two pages of the presentation entitled Service Matrix and Fee Matrix highlight some of the key information for each custodian. The Service Matrix illustrated the following information: Custodian Name #of Fl accts/total accts Relationship Team/Location Termination Technology Direct Feed Page 1 of 10

2 Purchase ETF s & MF Platform Fiduciary Florida Law Disaster Recovery Plan Stmt Delivery Online Access Trade Date Statements Shadow Acct. The Fee Matrix illustrated the following information: Custodian Name Fee Type Asset Based Fee Schedule Ancillary Fees Estimated Annual Fee Market Value Fee Special Asset Fee Trading Fee Account Fee Minimum Fee Fee Rank Fee Guarantee Mr. Chambers said he works with these custodians and they all do a good job. Trustee Stevens asked if the fees are negotiable. Mr. Chambers responded he believes the fee guarantee could be negotiable in terms of going from 3 to 5 years. Trustee Harper asked if these custodians would be able to administer the DROP options that are in place which include an option for a guaranteed income fund. Mr. Chambers said these custodians would be able to administer those options just as Salem is doing today. Trustee Harper asked if the Money Market rate amount will remain the same should they change custodian, and if not, is there a better rate out there. Mr. Chambers replied that the fund rate would not change if the custodian changed, only if the fund itself was changed. However, Mr. Chambers offered that with short maturities he would not expect better returns are available in alternate products. Mr. Cohen advised the Trustees that just from a legal stand point the choice of a custodian is the Board s decision; we asked Mr. Chambers to do an RFQ and today he scheduled three presenters and not the others. I would like Mr. Chambers to tell us why he thinks these three custodians are appropriate. You as a Board need to understand that if any of you would like to bring someone else, you can do so. Mr. Cohen pointed out that from a legal standpoint the Trustees cannot rubber stamp Mr. Chambers choices. Mr. Chambers replied that in performing his evaluation he looked at fees, technology employed by the respondent, and their overall reputation. If all are equal, then what he is attracted to is the lower cost. The options presented are less expensive than what you are paying now. Trustee Stevens asked if the number of accounts in the state should be given consideration, and how much weight it should be given. Mr. Chambers said he would not be overly concerned about it. Page 2 of 10

3 Mr. Cohen pointed out that these companies all have experience and positive reputations. Trustee Harper asked Mr. Chambers should they decide to stay with Salem could they go back to Salem and ask for a fee reduction. Trustee Lucas said that one of the things he is concerned about with Salem is that the holding company has had its own missteps. The Chairman asked if there is an advantage that Salem maintains a local office. Mr. Chambers replied that the accuracy and timing of the Plan reporting was more important, and that the location of the servicing office was not a significant factor. Trustee Harper asked what these other custodians are doing better than Salem. Mr. Chambers said that the initial displeasure with Salem stemmed from difficulties encountered with a software conversion that did not go as planned for Salem. That has created extra work for the Plan service companies, and has led to both direct and indirect costs for the Plan. Additionally, besides the problems with Salem s own internal audit, and its software there are issues in some of the other companies that are part of the holding company. The Trustees discussed the fees offered by the different vendors, and the process if a change is to be contemplated. Fifth Third Bank Jay Young & Kimberly Kutlenios Mr. Young reported he is based out of Tampa and does business development for the bank. When an RFP comes he matches the resources of the bank to what the fund is looking for with respect to custodial needs. Ms. Kutlenios is the client consultant for the team. He discussed the bank s system and in response to Trustees questions offered that a decision had been made in the past to continue a legacy program (Amtrust) and support it internally. The system is now proprietary there are no third parties using it. The Chairman asked if they were going to change it, Ms. Kutlenios said no. Trustee Lucas about the banks disaster recovery Plan and Ms. Kutlenios described the Bank s plan. Mr. Chambers asked the representatives to describe statement corrections. Ms. Kutlenios said they can update a document until the next statement drops. They can reissue a statement with corrections. Mr. Chambers asked if they have ever been asked to lower the asset base fee for tracking mutual funds. Mr. Young replied they could consider it. Mr. Chambers asked about the transfer of the Federated mutual funds, and was assured it was identical. Ms. Kutlenios said they use three federated funds, prime cash, US Treasure fund and Government Agency fund, although they default to Prime Cash, they could use any of the funds for that purpose. The Chairman asked if their fee rate is the same rate to everybody, Mr. Young said it does vary, what drives that rate is the assets and the Plan. Larger Plans like Deerfield Beach allows them to be a little more aggressive in pricing. Trustee Lucas observed they are a third faster in terms of turnaround time for statement delivery vs other custodians. Ms. Kutlenios responded that because they control everything in house, it results in quicker turn around time. They get their pricing source (IBS) for example the night before, the next morning they are able to generate the statements and make them available on line before they print them and mail them out. Mr. Chambers asked if they gave Karla Engard a dollar quotation on the fee Mr. Young responded that they did a basis point. Page 3 of 10

4 Mr. Cohen said regarding the contract for online access, he would not recommend to this Board they accept the standard indemnification agreement proposed. The Fifth Third representatives offered that it was negotiable. The Chairman asked if they always had clean audits, Ms. Kutlenios responded affirmatively and said they will provide a copy to the Board. Mr. Chambers asked if they have the ability to purchase client directed ETF s and is there a broker out there that will help them do that? Also how do they ensure that is best execution and best commission rate out there? Ms. Kutlenios said they can do it in one or two ways, and would propose options based on the specific needs. Trustee Lucas asked if they do security lending, Ms. Kutlenios responded affirmatively. Trustee Lucas pointed out that this quote assumes no security lending and if they were going to do security lending they would notify the plan. Mr. Falcon asked on behalf of the participants, what safeguards are in place to protect the identity of the members. If she can him the information he would distribute to the Board. Ms. Kutlenios said they have never had any instances of that occurring. Mr. Chambers asked if someone wanted to go back with a records request how long can they get it, Ms. Kutlenios said on line 12 months, further they would have to request it from her at no cost. Ms. Levy asked what their liability policies are. Mr. Young said he will provide a copy of the bank s liabilities coverage. Mr. Little asked if they can receive password protected direction Ms. Kutlenios responded affirmatively. He further asked can they take direction now for future benefits changes. Ms. Kutlenios said they can handle future changes. There is one type of direction that is on a share account, we do a listing which entails a one-time payment to Mr. Little asked do you accept a spread sheet with all the participants and the amounts. Ms. Kutlenios responded affirmatively. Mr. Little asked if they were able to establish individual accounts under whatever money market fund that is payable so one of the DROP options is to put your money with the custodian thru a money market account so each member gets and account number and gets a statement, Ms. Kutlenios said they can handle this function Ms. Levy asked they have a process in place to track down a deceased. Ms. Kutlenios responded they perform the search on a weekly basis. Mr. Chambers asked when the last audit was done; Ms. Kutlenios said the last one was December Mr. Young asked where to send the liability coverage and Mr. Chambers asked them any information to be sent to Doug Falcon. Comerica Bank Felecia Ryans Ms. Ryans briefly introduced herself and was asked by Trustee Lucas that they were the only respondent to the RFP with an account fee and asked if it can be eliminated. Mr. Little asked if they are able to take passcode protected direction Ms. Ryans responded yes. Mr. Little asked can they take direction now for future changes, she said yes. There is another type of payment direction like an entire set of retirees that is the same for all but instead of doing one by one can they do a listing. Ms. Ryans said yes they have the capability of taking excel spread sheets and downloading the information in to each pensioners account. Mr. Little said that under the DROP account members are allowed to elect self directed through a money market established thru you and each member would have their own account and statements can you establish individual accounts, Ms. Ryans said yes. Trustee Stevens asked regarding her fees how is the fee derived. Ms. Ryans said they look at the entire 58 million at 3 basis point adding the Page 4 of 10

5 account fee which they were asked to eliminate, and for special assets they charge $1,000 each for mutual funds, comingle funds, special assets so the $7,500 for account fee, the $17,400 for market value the $10,000 for asset bring the total to $34,900. Ms. Ryans pointed out that they do not charge a market value fee they charge $1,000 annual for the administration of the asset. Waiving the account fee their fee is now $27,400. Trustee Lucas asked what their disaster plan is; Ms. Ryans described their plan and noted they also have manual paper files in fire proof cabinets. Mr. Chambers asked Ms. Ryans if an error for the previous month is caught in the future are they able to fix the statement prior to issuing the next statement, Ms. Ryans said yes but cautioned that it could affect accrual accounting. Mr. Chambers asked how far back they can obtain statement information. Ms. Ryans said they keep records as far back as the 90 s. They have a system called File Net where the manual statements are kept that allows the retrieval of that information. Mr. Little asked regarding the self-directed DROP that goes through the current custodian through the Federated fund if they had access, Ms. Ryans responded that they do work with the Federated fund and are able to handle the individual self-directed accounts for each pensioner. Mr. Cohen asked what their E&O limits were, Ms. Ryans responded 40 million on the policy, and it provides liability, auto and personal coverage for the bank. When they are assigned the relationship they can name Deerfield as an additional insured. This policy is effective June 1. Mr. Cohen asked in terms of the cash that will be invested are there a number of different investment vehicles available Ms. Ryans said Yes. Trustee Lucas asked a three year rate guarantee and asked if is negotiable. Ms. Ryans responded affirmatively. Mr. Chambers asked if the Board wants to purchase an ETF or Mutual Fund do they have a way work this through. Ms. Ryans said yes they work with Comerica Securities as well as their investment company World Asset Management located on the same floor. Mr. Chambers asked Ms. Ryans if the fund asks for best execution what does that mean to them, Ms. Ryans responded they will buy the best price they can to execute the ETF for the customer. Trustee Lucas asked who they purchased from, Ms. Ryans said they facilitate through them but they do the purchase for the fund. Trustee Lucas asked Comerica has people who buy and sell shares, there is a possibility we could be buying the share from Comerica, Ms. Ryans responded affirmatively. Ms. Levy asked how they handle death audits and how often, Ms. Ryans responded they do a major death audit annually but the death audit is actually done monthly. They communicate with the plan sponsor to confirm when we have identified a death. Trustee Lucas asked with respect to Securities lending if their price quote based on securities lending activities Ms. Ryans said no. The Chairman asked if they have ever had a breach of identity or a bad audit. Ms. Ryans responded no breaches of identity and all audits have been clean. The Chairman asked why they do not have a large Florida presence here; she said they do have accounts in Florida and mentioned a few such as City of Pompano, Villages of Palm Springs, and Miramar Firefighters. They have had City of Pompano since 1996 and maintain a service office in Boca Raton. Mr. Chambers asked Ms. Ryans if they were able to administer the DROP account that is in a money market federated fund individually directed, Ms. Ryans responded that they are familiar with this type of account so yes they are able to do so. Mr. Cohen asked with respect to class action settlement how do they handle, Ms. Ryans Page 5 of 10

6 said when you are participating in a class action the customer sends us the information, we maintain the information in our system and we file on behalf of the client. We have a quarterly report that provides pending, settled and recovered. Trustee Stevens asked regarding the activity fees listed on page 22 of her presentation, Ms. Ryans described the fees charged for various services. The Chairman asked Ms. Ryans if there was anything omitted from her presentation. Ms. Ryans said not that she knows of. Ms. Ryans said she would be the main contact but has a back up analyst and the analyst also has a back up. The fund would get a personalized service. The Trustees thanked Ms. Ryans for her presentation. US Bank Steven Richter & Eric Knoll Mr. Richter introduced himself. The Chairman told him they would ask questions on specific items of interest to the Board. Mr. Chambers asked about their fee schedule and ask to confirm if their fees are 3 ½ basis points, Mr. Richter responded affirmatively. Mr. Chambers asked if they charge the same for shadow accounting, Mr. Richter responded affirmatively, and Mr. Chambers asked if they ever had a client to charge a different rate for shadow posting. Mr. Richter replied they have been asked to do that in the past but from a custody stand point these postings require much manual work and represents no cost saving. With respect to the statements for example if there is an error in a previous statement and is caught in the future, are you able to make a correction and how far back can you look at and make correction, Mr. Knoll responded that they are able to correct the statement and go back several months. Mr. Chambers asked what they charge for pension checks, they charge $2 per check and it includes the postage. Mr. Chambers asked how they handle Security Lending, Mr. Richter responded that would be a separate service they would enter with the plan, they would be the Security Lending Agent and essentially split the revenues generated by the security lending. Mr. Little asked if they are able to take passcode protected direction Mr. Richter responded yes. Mr. Little asked can they take direction now for future changes, Mr. Richter replied they have a tickler file and are able to take present day instructions for future benefit modifications. Mr. Little asked about a listing of instructions. Mr. Knoll said yes. Mr. Little said that under the DROP account members are allowed to elect self-directed thru a money market account established thru you and each member would have their own account and statements can you establish individual accounts. Mr. Knoll said yes that would be set up as a sub account. Trustee Lucas asked if they had Federated funds, Mr. Richter said they do have most money market mutual funds. Trustee Lucas asked they explain disaster recovery plan, Mr. Knoll responded they have multiple redundancies built in to both centers in St. Paul Minnesota and Wisconsin. Additionally, data is backed up continuously, they have seven different back up locations, and each location is backed by six separate locations. Trustee Lucas asked if the fee guarantee for three years is negotiable, Mr. Richter responded affirmatively. Ms. Levy asked what type of insurance they carry and limits, Mr. Richter said they are fully covered and with the E&O $25 million per instance. Mr. Cohen asked if there was a cap on the instances, Mr. Richter said not that he is aware of. Mr. Chambers asked if they are in a position to assist the plan with ETF s and Mutual Funds. Mr. Richter said yes for them best rate execution is getting it done as soon as directed. Trustee Harper asked given their size why do they have only two clients in Florida, Mr. Richter said they are fairly new in the public pension business in Florida but well established elsewhere. Mr. Chambers asked if the fees could be restructured, and Mr. Richter replied that was a possibility. Ms. Levy asked what their process is for death audits, Mr. Richter responded Page 6 of 10

7 they are handled monthly. The Chairman asked if they have had cyber breach and audit results, Mr. Richter said he is not aware of any cyber breach and audits have all been clean. A copy of the audit can be forward to them for their review. Mr. Richter discussed the internal administrative flow chart and advised the Board they would have an inside representative assigned to the client to ensure a fast response time. Mr. Richter advised the Board that in the last two years the bank has spent over two million dollars on the online system to allow their customers online access and reporting capabilities. Mr. Cohen asked if they had indemnity language in their agreement Mr. Richter responded they have a standard template agreement and would be open for discussion. This concluded the custodian RFQ presentations. The Trustees discussed their observations, and agreed to re-open this agenda item at the end of the Salem presentation for further discussion. Salem Trust Karen Russo and Mark Rhein The Chairman advised Ms. Russo and Mr. Rhein that they have entertained a change in the custodianship and stated they were here because they asked to present to the Board. Ms. Russo said they wanted to update the Board about the SSAE 16. Mr. Rhein said the SSAE 16 is a report that tests internal controls. For example, a control function as far as securities, are trades that are considered settled also recorded. Documentation is produced to support those trades. This is an example of what is the SSAE 16 is designed to do. It is designed to supplement the activity of an auditor. The Chairman asked who performs these procedures Mr. Rhein responded these procedures are substantially performed by the operations unit in house. Mr. Rhein added it gets a little more complicated because we use or have used other processors who support us. Some of that changed when the software was converted last year. The whole notion of that conversion was to give a better customer service to Salem s clients. Mr. Chambers asked when the transition to the new system occurred Mr. Rhein responded the actual conversion was June 1, 2013 the process of converting was begun much sooner. Mr. Chambers asked which period the adverse opinion affected Mr. Rhein responded it was the period For fifteen years prior they have had a clean audit result. The first week we converted over we had about 3,000 failed trades reported to us, most of them related to brokers or their associates not following instructions. The reconciliation of those trades then had to be handled manually. That is why statements were delayed. The Chairman asked how many brokers could they have reached out to the brokers to avoid this, Mr. Rhein said there are hundreds of brokers. Not all brokers will make a trade. Ms. Russo said the investment managers choose their brokers, we notify the investment managers and they notify the brokers. We reach out to the investment manager so the broker is aware of the issue. The Chairman asked if any of their trades were jeopardized. Ms. Russo said all the trades went through but this issue delayed the statements. Mr. Chambers asked if they Page 7 of 10

8 would do this all over again, how you would have done it differently. Mr. Rhein offered that he would rethink the conversion entirely, and if a decision to go ahead was still made he would have spent additional time in bringing the investment managers on board regarding the trade instructions. Mr. Chambers asked how many clients were affected. Mr. Rhein responded about 250 clients in the municipal plan like this one. We have other clients that we provide services for. The consequences of the conversion affected the municipal clients the most. We recognized we needed support. We brought in a third party consultant in August to help us (Oakbrook Solutions). The Chairman asked where they are now. Mr. Rhein said from a practical stand point, the impact of the SSES16 audit has not impacted many of the clients. The impact on our reputation should be abated when this years report is issued. We have instructed our auditors to begin as soon as possible. Management of Salem reports the deficiencies noted in the prior year are corrected so this next review period is expected to produce a clean opinion. The SSES16 covers the period from July 1, 2014 through June 30, 2015 and we hope to have new report available mid September or sooner. Mr. Chambers asked for an update regarding the parent company and the circumstances for the subsidiary company regarding its purchase of some fraudulent loans. Mr. Rhein first noted we have three operating units that are independent and that report to a holding company. One of those entities (Pennant) following USDA guidelines established a business relationship with an approved entity of the USDA. As part of its due diligence during the course of that relationship Pennant alerted the USDA district office in Atlanta that a loan presented to them did not appear to have required signatures and approvals. Ultimately a book of those loans was discovered to have been improper. Pennant is now clawing back assets, and Mr. Rhein believes that most of the losses will be recovered. He pointed out that Salem is a totally separate entity in any case. Trustee Harper asked if they were to stay with Salem would they consider reducing their fee to the lowest bid. Mr. Rhein responded absolutely not. The Chairman said he would have preferred Salem to be more proactive in their communications early on, and thanked both Ms. Russo and Mr. Rhein for their time today. Ms. Russo said she has been working with Deerfield since from her local office, and the Plan has grown in complexity. The Trustees agreed that the service had been good besides the conversion problems. This concluded Salem s presentation, and they were excused from the meeting. The Trustees discussed their options and decided to have Ms. Levy and Mr. Cohen review the agreements for Fifth Third as their first choice and US Bank as their second should things not work out with Fifth Third. Trustees agreed that the change would take place the beginning of the new fiscal year to have a complete year with the incumbent custodian. Ms. Levy said by the August meeting she should be able to update the Board on their efforts in establishing an agreement. Page 8 of 10

9 A motion was made to authorize the legal counsel Ms. Levy and Mr. Cohen to begin the negotiation agreement process with Fifth Third, and US Bank if needed the motion was second and unanimously passed. INVESTMENT Trustee Stevens expressed his concern that if something were to happen to negatively impact the financial markets would Mr. Chambers be in a position to act promptly. Mr. Chambers advised Trustee Stevens that in cases where action needs to be taken the process has been that he would contact the Chairman and if an emergency meeting is necessary the meeting would be called. However, the investments cannot be moved around without Board direction. Mr. Chambers discussed whether having some insurance against a severe downturn could be considered. Trustee Lucas asked Mr. Chambers to do some research on managed options in response to those comments. Mr. Chambers discussed Deerfield Beach Municipal Firefighters Pension Trust Fund Investment Performance through March 31, There were no recommendations at this time. MINUTES The Chairman asked if anyone had any questions regarding the minutes of the meetings held February 13, 2015 and March 13, 2015, there being no questions, A motion was made to approve the minutes of the meetings held February 13, 2015 and March 13, 2015, the motion was seconded and unanimously passed. ACTUARY Mr. Little discussed that he has tried contacting Jesus Barrera as he is due a refund however the mail was returned undeliverable and is asking the administrator to see if they are able to obtain a current address. Mr. Barrera works with the City of Boca Raton. Mr. Falcon said he would work on this request. Mr. Little advised the Trustees that now the form for retirees to choose which premium insurance products they wish be deducted from the monthly pension benefit now includes vision as an option. The Chairman thanked Mr. Little for that provision. ATTORNEY Ms. Levy discussed House Bill 1279 not passing. The Bill that went in to effect is Senate Bill 172 and that bill has some impact on this fund even though you have implemented most of the requirements. However, the Bill also requires you prepare an administrative expense budget. That must be done before the next fiscal year. For the October 1, 2016 valuation you will be required to use a standard mortality table as specified in the Bill. Ms. Levy discussed the issue of divorce and how it is handled. Most private plans commonly use Qualified Domestic Orders ( QDROs ) to handle the separation of marital assets. Your Plan does not recognize those orders, and Ms. Levy has to spend some time with the attorneys handling the divorces. Your Plan will only recognize income deduction orders (mostly used for child support) and IRS levies. The Florida Retirement System does agree to take QDROs because they believe that is easier to handle administratively. Page 9 of 10

10 They have been contacted by a firm looking to present their approach on class action litigation, and the Chairman agreed a 15 minute presentation could be made at the next meeting. NEW BUSINESS None ADMINISTRATOR Mr. Falcon presented Silvant s request for a different equity tracking service; however they agreed to postpone that request if a decision to leave Salem was made. Mr. Falcon discussed the City of Deerfield Beach Firefighters Pension Trust Fund Statement of Assets & Fund Balance as of March 31, 2015 and Statement of Revenues and Expenses for the three and six months ended March 31, Mr. Falcon pointed out that the City has funded more than half of the contribution. Mr. Falcon asked the Trustees to look at their expenses. Also your auditor always wants you to look at your fair market value that is in your financials. Mr. Falcon advised the Trustees that their Dropbox contains a copy of the City of Deerfield Beach Municipal Firefighters Pension Fund Disbursements/Ratifications for the period January 15, 2015 through June 9, 2015 as well as a copy of all the back-up documentation of each invoice. A motion was made to approve the City of Deerfield Beach Municipal Firefighters Pension Fund Disbursements/Ratifications for the period January 15, 2015 through June 9, 2015 the motion was seconded and unanimously passed. Trustee Harper asked Mr. Falcon for a status of the web page, Mr. Falcon said he moved it to a Linux based server so that mobile devices work properly. There have been items added including the SPD, the Plan Audit, GASB 67 supplement, and a link to the State Comparison of Plans. There are a few items to clean up, and then he will market it aggressively to the plan participants. The Chairman said he will address it at the next meeting. Meeting adjourned at 1:11 p.m. Page 10 of 10