Board Meeting Minutes - Pension Plan for General Employees - February 22, 2013
Minutes - February 22, 2013
The Board met to 1) review and approve the minutes from the last meeting; 2) review and discuss 1st Q results; 3) review and discuss Fees/Revenue sharing; 4) review and discuss index funds; 5) review and discuss diversification report; 6) discuss Old Business and 7) discuss Other Business.
Present: Employee-elected board members Dan Feller and John Storb, Director of Finance Pat Soderberg, Director of Human Resources Suzanne Smith, and Council Member Todd Schumacher.
Others in attendance: Adam Varga and Darrell Quam from Wells Fargo. Vickie Mauri and Annette Rauschenberger from Human Resources.
Ms. Smith called the meeting to order at 12:03 pm.
Disposition of Minutes: Ms. Soderberg made a motion to approve the minutes which was seconded by Ms. Smith and approved unanimously by the board members.
New Business: Money Purchase Plan Fees – Mr. Quam stated that ERISA plans are required to provide fee disclosure information to participants. Broomfield’s plan is a non-ERISA plan but the committee had provided direction to Wells Fargo three years ago to provide more transparency in the explanation of fees and fee disclosure. The current direction is to streamline the fees in order to increase transparency. Mr. Quam explained how fees are currently calculated and presented a breakdown by fund. Reports can be accessed here (2012 May General Fee Summary and 2013 Feb General 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 had asked Mr. Quam to prepare a report for the committee members that moved the mutual funds to the lowest share class. There was also discussion about converting the current administrative fee to a per member fee. This will allow members to 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. Mr. Quam indicated that a per member fee would be approximately $150 per year. Members are paying an administrative fee based on 22 basis points and it does not appear on participants’ statements. The fees are included in any gains/losses incurred by each member. 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. Committee members directed Wells Fargo to determine if this fee can be included as a line item on each statement. Smith asked Mr. Quam to present a flat dollar amount fee to the board.
Mr. Feller made a motion to move all funds to a lower share class and to adopt a per member administrative fee. The fee will not be implemented until members are advised of the change. The motion was seconded by Ms. Smith and unanimously approved.
Target Date Funds – Mr. Varga explained the different philosophies and strategies for target date funds. Some funds use a date “To” retirement and some funds use a date “Through” retirement. It is important to review the prospectus for each fund to understand the fund manager’s philosophies and strategies relating to asset allocation. 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).
The committee members will work with Wells Fargo to prepare educational materials for employees.
Year-end Results for MPP – The year-end report can be accessed here (2013 12 31 GMPP Report.pdf)
Dodge and Cox continues as a “C” rating due to underperformance in the 3 and 5 year returns. It has outperformed the benchmark over the past year. Janus 20 has a “C” rating due to similar circumstances as Dodge and Cox. Morgan Stanley Mid-Cap has a “C” rating due to an overweighting in technology and underweighting in consumables. T. Rowe Price Emerging Markets continues as a “C” rating. Underperformance is occurring in the 5 year return (similar situation to Dodge and Cox).
Diversification Report – Mr. Quam will discuss this information at a meeting yet to be determined.
Other Business:There was no Other Business.
The meeting was adjourned at 1:32 p.m.
Minutes Prepared by Suzanne Smith
_______________________________________, Todd Schumacher, Chair