Updates approved to benefits, investment plans

Bloomfield Township trustees approved amendment changes to the township retired employee health care benefits trust, investment policy defined contribution plans and defined benefit pension plan investment policy at its meeting on Monday, July 13. Township Treasurer Brian Kepes explained all of the proposed changes were presented to the township's financial sustainability committee as well as the board at a study session in January. Brian Green of AndCo, which invests the township's defined benefit pension plan and employee health care benefits trust, said there were two changes to the defined benefit pension plan investment policy. “One is minor, changing the date on the document to reflect the adoption this evening,” Green said. “But the (other) change we are making is within what is allowable in terms of minimums and maximums for the investment policy statement. We have targets for U.S. equities; we have targets for international equities. For cash, the purpose is to keep the portfolio as invested as possible at all times, but we do know at times we need to make quarterly payments to Prudential (Retirement) for the liability on the other side of the pension benefit at times, because of the contributions and because of the timing, knowing what is coming out. The cash balance can at times be 1.1, 1.2 percent. We're big believers if you have a policy, be in compliance with it. This allows just a little more flexibility, in terms of holding cash for the short term, knowing we have a payment due on a quarterly basis, to make sure we're in compliance with everything. The long-term targets still remains cash at zero – this isn't holding cash because we think something is going to happen. It's saying, 'I need to make a cash payment in three weeks, I'm going to raise the money now to know that expense is covered,' and in the sense that this ties into a month-end or quarterly report, I want to make sure for the auditors and stakeholders that we're maintaining full compliance. It doesn't mean anything different from an investment standpoint.” The maximum ceiling from cash, Green recommended, would go for one percent to two percent. Bloomfield Township has had a defined benefit pension plan with Prudential Retirement Insurance dating back to 1961, worth approximately $150 million in guaranteed deposits. In December 2014, trustees became aware the township's Prudential Retirement defined benefit pension plan was drastically underperforming, and had been since at least 2004-2005, forcing the township to contribute millions to the fund annually out of township operating funds to keep it fully funded and available to retirees. From 2010 until 2014, Bloomfield Township was budgeting $10.3 million each year to add to the Prudential plan; officials then took the opportunity to issue an $80 million pension obligation bond, which they invested in equities which provided a higher rate of return. The township had been paying Prudential from the equity account to maintain the defined benefit account at its necessary level. Trustees voted 6-1, with trustee Dave Buckley voting against, to approve the changes. For the retiree employee health care benefits trust amendment, Green said the proposed change was to keep the document consistent with best practices, and there were no changes to the document, but to have the date stamped brought up to date to show it has been reviewed on a regular basis. Trustees unanimously approved the change. For the change on the statement of investment policy defined contribution plans, which is held with Schwartz & Co., Kepes said, “This statement was reintroduced this year at the investment study session. This provides best practices for the defined contribution plans. Previously, this board had not had an investment policy as it relates to the defined contribution plan.” “Defined contribution plans by law are not required to have a statement of investment policy, but as Brian mentioned, on the defined benefits side, it surely is a best practice,” said Rob Higgins of Schwartz & Co. “The document is intentionally loosely drafted. It has some wiggle room. It provides a lens from which we can make decisions to the investment line up to monitor funds, move to replace funds, and you'll see language in there that refers the risk factors monitoring performances, the body of the funds, and how we view those factors and what leads to a recommendation.” Trustees unanimously approved the change.