Medamerica Retirement & Benefits

Total Page:16

File Type:pdf, Size:1020Kb

Medamerica Retirement & Benefits

MEDAMERICA RETIREMENT & BENEFITS COMMITTEE MEETING MINUTES October 30, 2009

Members Present: Myron Wacholder, MD, Chairman, Joel Stettner, MD, Gregg Shubert, MD, Bob Buscho, MD, Ivan Miller, MD, Jim Antinori, MD, Rodney Smith, M.D. & Chris Renner, Sol Nevins, MD

Others: Jeff Skubic (Charles Schwab), Katrina Tange, Robert Parker (EPIC)

TOPIC DISCUSSIONS / DECISIONS

REVIEW OF MINUTES Minutes were reviewed from the meeting held on May 21, 2009. Two changes were cited:

1) Under “Retirement Plan Update”, the original statement read as follows: Dr. Miller mentioned that Chris could always refer employees to Guided Choice or Executive Services through Schwab for investing advice. p.3

Dr. Miller felt that the statement did not accurately reflect the meaning of his statement. The revised statement should read, “Dr. Miller mentioned that Chris should remind employees of the advice options available from Guided Choice or Executive Services through Schwab for investing advice.”

2) Brian Steineman was incorrectly referred to as Ben Steineman under the “Executive Services” section.

M/S/P Motion to approve minutes of May 21, 2009 with two changes. (U)

RETIREMENT PLAN C. Renner briefly reported on the Retirement Plans. As of 09/30/2009, UPDATE total assets from all plans amounted to approximately $500 million, which equates to a 31% YTD asset gain. $51.7 million of the total is invested in Defined Benefit Plans. Approximately 2/3rds of this increase was due to investment earnings while the other third was from contributions. Since April 1, 2009, assets have increased approximately 45%. Within the 401(k) plans, more participants are invested in the Europacific International Fund than any other fund. Stable Value Fund participation has increased by 38% in the past year. Dr. Wacholder asked that, in the future, the statistics for each plan should itemize the gains (losses) for the most recent period and year to date.

1 FUNDWATCH Using a plan analysis vehicle called “FundWatch”, the Retirement and Benefits Committee evaluates each investment option in terms of its performance compared to relevant market indices and peer groups over trailing one, three, and five year periods. The FundWatch list often acts as a catalyst for the Committee discussions about the pooled funds for both the 401(k) and Defined Benefit plans. The Retirement and Benefits Committee considers the following minimum standards in monitoring the Plan’s investment options:

 Manager Tenure: 5 years minimum on all actively managed funds  3 year Performance within style category: Top 40%  5 year Performance within style category: Top 35%  1 year Performance within style category: Top 60%  Overall Expense Ratio: under 1% (except small cap, which is under 1.50%)  Minimum Fund Performance History: 5 years on all actively managed funds  Deviations from published style as evidenced by Morningstar’s grid of 9 styles.

After the third quarter review, there were now six funds on the FundWatch list- the Schwab Total Stock Market Index, Schwab Large Cap Value Fund, the SEI Small Cap Value Fund, the Vanguard Explorer Fund, the Growth Fund of America and the Calamos Aggressive Growth Fund. This was an increase from four funds at our last quarterly meeting but that may be a bit misleading. All of the funds improved their performance immensely over the past year (and especially, the past six months) so as the recent returns mature, the fund’s three and five year performance numbers will also improve. Calamos, Vanguard Explorer, and the Schwab Large Cap Value Fund have been on FundWatch for more than four quarters.

In discussing each of these three funds, the committee decided to continue monitoring these funds for the following reasons:

Schwab Large Cap Value Fund – Has improved its one year performance rank from 91st to 30th, valued for its longstanding success within the plans since 1988.

Vanguard Explorer Fund – Improved its one year rank from 49th to 35th and its three and five year rank is just a few points below the investment policy guidelines.

Calamos Aggressive Growth Fund – Improved its one year rank from 93rd to 22nd. Committee understands the volatile nature of Aggressive Growth funds and realizes that potential replacements are also very volatile. Calamos also has a lower expense ratio than those of other aggressive growth funds.

2 Discussion ensued on the merits of FundWatch. Various members of the committee voiced concerns such as: Is there enough information from the current format of FundWatch to really make fund replacement decisions? Should we rely more on advisory data from Morningstar or do our current parameters meet our needs? What other vehicles can we utilize to help us? Does Fund Watch still give the committee latitude to make decisions? Is the Notice of Concern a timely help to participants or does it in fact make people “sell low”? The Committee decided that a due diligence review of FundWatch is warranted.

The Committee appointed a sub-committee of Sol Nevins, Gregg Shubert, Chris Renner, and Jeff Skubic to explore possible revisions / additions to the current FundWatch process and present their findings for discussion at the next meeting.

DEFINED BENEFIT Mr. Renner updated the Committee on the status of the Defined Benefit PLAN UPDATE Plan.

The recovery in the stock market has helped the earnings of the Defined Benefit Plan (to the tune of about 13%) and these earnings will help reduce the amount of losses incurred in 2008. It will not however, provide enough recovery to offset the entire amount of losses. Therefore, each participant will still be assigned a loss allocation that could be reduced to an estimated 40% of 2008’s loss allocation. Mr. Renner then notified the Committee of a potential tax law change that would tie the Defined Benefit Plan’s required rate of return to a more market based return such as a Balanced Index or even an index of funds that a plan sponsor could actually select. While the regulations won’t be finalized for another two months, they would provide Defined Benefit Plans across the nation with an alternative that is better tied to a market rate of return than the current T-Note rate which is required by law.

Members questioned the need for such a regulation and Mr. Renner replied that it may provide relief for thousands of underfunded plans across the nation.

Mr. Renner suggested that once the regulations are published, he would have our actuaries present alternatives to the Committee for future discussion.

TARGET BENEFIT Jeff Skubic discussed the pros and cons of Target Benefit Plans as well PLANS as Schwab’s new technologies that enable more customization of target plans.

Mr. Skubic began by briefly discussing target benefit plans and why more and more retirement plans are adopting them. Target Benefit Plans are diversified security funds that utilize several different asset classes (growth stocks, value stocks, international stocks, short and long term

3 bonds, real estate, and money market funds) into a fund which is periodically adjusted to reflect a targeted “maturity” or retirement date. For example, a 2015 target date fund will be invested more conservatively (i.e. more fixed income) than a 2025 target date fund. Depending on the maturity date, a corresponding “glide path” is designed to gradually change investments from a more aggressive allocation to a more conservative allocation over time. Target Benefit Funds have appeal among investors who don’t follow the market and really don’t want to understand its underlying principles. Mr. Skubic explained to the group that if there is a desire to add target benefit funds, there are two directions to pursue. The Committee could add an existing fund or design a custom fund from our existing funds. Vanguard, Fidelity, Schwab, Barclays, and several other investment firms each offer target benefit funds. All are typically structured in a fund of funds format, whereby the sponsor utilizes different individual funds (i.e. growth stock, value stock, fixed income) and allocates each based on a pre-designed glide path. Target benefit funds can differ based on their aggressiveness and their glide path so diligence in selecting a fund is advisable. Very few of these target benefit funds have a track record of over three years so the investment policy requirement of a 5 year track record could not be met. The other option for the Committee is actually designing a custom target benefit fund using the underlying plan sponsored funds. For example, the Committee could design a 2020 target benefit fund that would utilize the Calamos Growth Fund, the PIMCO Total Return Fund, the Vanguard Total Stock Market Index and all the remaining funds in an allocated structure that is part of a pre-designed glide path. This method has the advantage of knowing the management style and experience of the underlying funds. However, the design of the glide path is ultimately the responsibility of the Committee. Schwab provides custom designed target benefit funds in two different ways; first as a unitized fund that carries a Net Asset Value that is determined daily and second as a system based portfolio where the individual is simply invested in each fund as determined by the glide path. The unitized portfolio is more costly but provides the advantage of custom fact sheets, and target fund portfolio tracking. The system based portfolio does exactly the same thing but portfolio tracking is more difficult. The Committee deliberated about the details of the different options, the need for plans to add target benefit funds, the Board approval process, and the potential administrative considerations. While an informal vote indicated a desire to further investigate target benefit funds, there was not a overwhelming need to complete our diligence quickly. Because of the lack of long term track records, the idea of potentially designing a glide path, and other considerations, the Committee feels that a slow and deliberate process is warranted in the possible selection of target benefit funds.

4 PLAN Some terminated individuals have tried to rollover their defined benefit AMENDMENTS assets into the 401(k) plan but because rollovers are not permitted for terminated individuals, the transfers could not take place. This amendment allows terminated or retired individuals to transfer their defined benefit balances into the 401(k) plan.

M/S/P Motion to amend Section 3.1 to allow terminated individuals to rollover their defined benefit plan balances into the 401(k) plan. (U)

Due to an oversight in the resubmission of the retirement plans, a former provision was accidentally removed. The provision provided for retired individuals to distribute their plan assets after the age of 55. This amendment will reinstate that provision in the existing 401(k) plans.

M/S/P Motion to amend Section 6.5 to reinstitute a retirement distribution provision as early as age 55. (U)

Amendments designated individuals and their 2009 defined benefit contributions were approved:

M/S/P Motion to approve the 2009 Additional Schedule Amendments for all Defined Benefit Plans. (U)

WEBSITE UPDATE Chris Renner notified the Committee that he has posted the investment policy and copies of the meeting minutes under the Newsletter website. This site is attached to each companies own website.

SECURITIES In response to an article regarding the Securities Lending policies of LENDING Calamos, the Committee was concerned that profits from this practice were not being shared with the owners of the securities (i.e. the 401(k) Plan). Responses from both Calamos and PIMCO have allayed our fears and shown that the practice of securities lending does indeed provide a small return to the owners and that both firms pass through all profits directly to the owners.

2010 CHANGES The Internal Revenue Service announced the retirement plan limitations for 2010 and all contribution limits will remain static from the 2009 levels. As such, employees and PA’s will be permitted to contribute $16,500, physicians will be permitted to contribute $49,000 and catch up provisions remain at $5,500. Health Savings Account limitations were increased to $3,050 (single) and $6,150 (couples or families).

FUTURE MEETINGS February 5, 2010 is scheduled for Emeryville, CA May 21, 2010 is scheduled for Emeryville, CA October 22, 2010 is scheduled for New York, NY End of January 2011 – Emeryville, CA

ADJOURNMENT The meeting was adjourned at 2:10 p.m. MDT.

5

Recommended publications