October 2010 Newsletter

HOUSTON
POLICE
OFFICERS’
PENSION
SYSTEM
VOL. 20
ISSUE 1
OCTOBER 2010
INSIDE
Money Math:
Lessons for Life
In Remembrance
Investment Summary
OUR M I SSI O N
TO RESPONSIBLY
MANAGE THE SYSTEM IN
THE BEST
INTERESTS OF THE
MEMBERS AND
BENEFICIARIES
SO THAT THEY
MAY HAVE PEACE
OF MIND KNOWING
THEIR PENSION
BENEFITS ARE SECURE.
HPOPS Launches
New Member Website
During the last
few years HPOPS
has been very busy
developing and upgrading much of the
technology used to
manage and administer the plan. Now
that all of the behind
By J. Larry Doss, Chairman
the scenes upgrades
have been made we are
proud to launch the new HPOPS websites.
These sites utilize and integrate much of
the technology used by HPOPS staff on a
daily basis. HPOPS now has two separate
websites. The new websites have been
completely redesigned in order to provide
for additional functionality. The new public
site is www.hpops.org and the new Member
site is members.hpops.org. The sites were
separated to allow for additional security
on the Member site. The public site does
not require nor need the additional security
measures. We have redesigned and added
many new features to the new Member site.
This new site already has over 1,000 Members and Survivors registered to use the site.
We encourage each Member and Survivor to
register as soon as possible.
Security
Security was and will continue to be a
priority for the new websites. While we
need to authenticate your credentials during
the registration process you are no longer
required to enter your full Social Security
Number during registration, just the last
4 digits. As previously provided the entire Member site is encrypted using TLS
(Transport Layer Security) so that any and
all information transmitted between your
computer and HPOPS’ servers is shielded
from anyone attempting to steal data during
transmission. This is the same technology
used by other sites to protect your information when doing online banking. (You will
notice the padlock in your web browser that
shows the site is using TLS.) While HPOPS
does a number of things to safeguard your
personal information, you perform the most
important role as a registered user of the site.
We authenticate you to login to the site using
your email address and password and assume
that anyone who enters your email address
and password is you. The point is, you should
never provide anyone with your password to
the HPOPS website. Doing so can provide that
person with the ability to make changes to
your benefits!
Site Features
We have been working for some months
to build new features into the website that
would provide you more information about
your benefits. Some features are brand new
and some that have been improved.
Improvements
»» Recently Retired - This section is now
updated as retirements are processed
in HPOPS’ systems. There is no more
waiting for the manual update following
the monthly Board meeting. The list now
also includes the retiring member’s rank
and academy class number.
continued on page 2
HPOPS’ NEWSLETTER
to you. For HPOPS to mail out a onepage letter to all 8,000 members, the cost
is about $5,000 in just paper resources
and postage.
continued from cover page
»» Account updates and Synchronization –
Member contributions, DROP and PROP
accounts will now be updated nightly.
When you register, your email address
will be updated in HPOPS’ internal systems. Updates to your mailing address or
phone number will be available to HPOPS
immediately. Any changes or updates
made in HPOPS’ internal systems will be
available to you the next day.
Houston Police Officers’
Pension System
602 Sawyer, Suite 300
Houston, Texas 77007
(713) 869-8734
1 (800) 874-0454
fax (713) 869-7657
www.hpops.org
[email protected]
Board of Trustees
J. Larry Doss
CHAIRMAN
Ralph D. Marsh
VICE CHAIRMAN
James E. Montero
SECRETARY
Terry A. Bratton
TRUSTEE
Joe Glezman
TRUSTEE
Craig T. Mason
CITY TREASURER
Position Vacant
MAYOR’S REPRESENTATIVE
Executive Director
John E. Lawson
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HPOPS’ NEWSLETTER
»» Obituaries – Want to know when members have passed away? We will continue
to post the same information on the
website but now we will send out email
notifications to those who choose this
subscription option.
New Site Features
Some of the site’s new features are listed below.
Other new features are described throughout
this Newsletter.
»» Contact Information – Now you can update your mailing address, phone numbers
and email address online.
»» My Beneficiaries – Not sure who your
HPOPS’ beneficiaries are? Now you will
have real-time access to view the list of
your current HPOPS’ beneficiaries. For security reasons HPOPS still requires you to
submit a written and signed Designation
of Beneficiary Form. After all, we don’t
want someone to log on to the website as
a member who has just died and change
his or her beneficiaries.
»» Member Inbox – HPOPS’ documents
will be delivered directly to your website
account as PDF documents. You can print,
save or email PDF documents. No more
waiting on the mailman! Whether you’re
someone that considers yourself green or
not, please help HPOPS save some green
by reducing the always increasing costs of
printing and mailing information we send
»» Information Requests – Whether getting a loan, applying for Social Security
benefits or going through a divorce, members routinely need detailed information
about their benefits provided to them on
HPOPS letterhead. You can now request
this information online. Submit your request and HPOPS staff will process your
request and deliver the document to your
new Member Inbox with an email notification. After some practice, we should be
able to provide much quicker turnaround
times on these types of requests.
»» Updating monthly benefit payment
information –Members and Survivors receiving monthly benefits can now update
their Direct Deposit and Federal Income
Tax Withholding online.
While the new site does provide more information than the previous site, we still have
more ideas and enhancements planned for the
future.
»»
Submitting PROP distribution requests
»»
Managing PROP Credits online
»»
Viewing payment history for retirees and
survivors
»»
Information about Active/Retiree gun
Licenses/Permits
»»
Integrating pictures of Members throughout the site
We trust that you will find the new site a
helpful tool in exploring your HPOPS benefits.
Please provide us your feedback on the new
site by emailing [email protected]. If you experience any technical problems when registering
or using the website, please email the address
above or call the office at 713-869-8734.
Need to sell a car? Want everyone to know about your business or service offering?
Use the new Classifieds section of the HPOPS website. Just submit a Classified ad. Members
subscribed to receive “Classifieds” updates will receive an email notification. Once posted you
still have the ability to update your ad or remove it completely. Any content changes will require
re-approval by HPOPS staff.
How do I view my DROP or PROP Balance on the new website?
1.
2.
3.
4.
Select Benefits from the main menu
Choose “My Benefits”
Click the “Details” button of your DROP or PROP account
This loads the first page of data; choose “Print View” to see the entire account history.
I just changed my insurance with the City of Houston, did HPOPS get the change?
While HPOPS is not responsible for administering or changing your health insurance premiums we do deduct them from
your monthly check. We receive notifications of changes from the insurance providers (City of Houston, Texas Police Trust
& HPPU) on a monthly basis. Now you can view the current deductions HPOPS has and when they were last updated by the
insurance provider.
1.
2.
3.
4.
Select Benefits from the main menu
Choose “My Benefits”
Click the “Details” button of your retirement/disability/survivors benefit
Review the active deductions and last updated date of each.
Who from your Academy Class is still working for HPD?
or Who from your Academy class is still living?
Search the new HPOPS Member Directory on the website to see what everyone is up to from your Academy class.
To lookup old friends:
1.
2.
3.
4.
Log in (if not registered on the new site you must register before you can log in)
Go to Member Info, Member Directory
Type in your class number (To see deceased members you must click the “Show deceased” check box)
Click someone’s name to see details on how you can contact them.*
*HPOPS respects the privacy of all HPOPS Members. Only the contact information of those members who have chosen to share their information
will be displayed. You can also change your Member Directory settings by going to Profile, My Directory Listing.
HPOPS
2011
Retiree
Seminar
HPOPS’ NEWSLETTER
3
Money
Math:
Lessons for Life
The U.S. Treasury Department
has a website called
TreasuryDirect.com. This site
is a convenient place to buy
and sell savings bonds and
other securities issued by the
Treasury. Believe it or not, when
compared to other guaranteed
investments, savings bonds have
By Richard Gable, CFP
a history of offering competitive
yields. Unfortunately, during the past couple
of years their rates have followed the rest of the
market downward. Frustrated by those low rates,
I eventually sold the savings bonds I owned, and
used the proceeds to pay off a car loan.
The TreasuryDirect website is a good place to go
when you want to check the current yield on supersafe investments such as Treasury bonds, TIPS,
and savings bonds. After receiving several emails
recently about how pathetically low rates are these
days, I revisited the TreasuryDirect site. A listing of
current yields is provided at the end of this article.
During my most recent visit to their site, I
discovered some interesting educational material
originally designed for teenagers. The title of the
program is “Money Math: Lessons for Life.” In my
opinion, the topics they are addressing are ones
that people of all ages could benefit from. I think
it’s a good idea to get back to the basics from time
to time. The following is a small sampling of the
issues discussed in the Money Math material:
http://www.treasurydirect.gov/indiv/tools/tools_moneymath.htm
Wealth
How would most people define wealth these days?
It would be interesting to ask 20 people to describe
what it means to have wealth. Their responses
would probably include the following:
• I have wealth when I live in a big new house.
• I have wealth when I have a luxury vehicle in
my driveway.
• I’m wealthy when I own property in the
country.
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HPOPS’ NEWSLETTER
• I’m wealthy when I have $500,000 in savings.
The “Money Math” material reminds us that:
“…wealth is the total value of what a person
owns, minus what he or she owes.”
This is a fundamental point they’re making. Any
discussion of wealth must include debt as part of the
equation. It’s good for all of us to be reminded of
that. Otherwise we may be tempted to ignore our
liabilities.
If I have $20,000 in savings, and I owe the bank
$40,000 in college loans (no other debt), my net
worth (or wealth) is a negative $20,000 ($20,000 asset
- $40,000 liability = - $20,000). I have no wealth at
this point.
So how can I build real wealth? The traditional
solution is to increase the balance in my savings
account (build assets). Let’s assume I stopped at a
Shell station and bought a scratch-off ticket for $5. I
deployed my lucky quarter to scrape the ticket, and
who would have believed it? I was a winner! Within
days I received a check for $30,000. Now I had a total
of $50,000 in savings.
When I take the $50,000 and subtract what I owe
($40,000) I get a positive number ($50,000 - $40,000
= $10,000). I now have $10,000 in wealth.
What if I use the $30,000 lottery winnings to pay
down the college loan instead? I can reduce the loan
balance to $10,000. But how will that effect my wealth
calculation? This didn’t increase my assets at all.
I still have $20,000 in savings, but now I only owe
$10,000. Assets minus liabilities again equal $10,000.
By reducing my debt rather than building my assets,
the results are the same. Dollar for dollar, reducing
the debt was just as productive as increasing the
savings, in term of building wealth.
This may be a fundamental concept, but far too many
people have been taught that it’s okay to leave debt
out of the equation.
Inflation
The “Money Math” material also addresses the issue
of inflation:
“Inflation reduces the purchasing power of
accumulated savings. If people’s savings are
going to have the same purchasing power in
the future, then the interest rate/earnings on
the savings must be equal to or greater than the
inflation rate.”
At this point in time, staying ahead of inflation is
much easier said than done. The Bureau of Labor
Statistics publishes the Consumer Price Index (CPI)
as a measurement of inflation. During 2010 the
CPI has hovered around 2.0%. Looking back over
the past few years the CPI has been in the 2.6%
range. Therefore, in order to maintain purchasing
power, our cash savings and investments need to
earn 2.6% or better. People instinctively know this,
which is why the frustration level is so high right
now. Earning 2.6% in a safe investment is almost
impossible unless you are willing to accept a very
long maturity. So why is this worth pointing out?
During times of uncertainty many of us feel the urge
to accumulate cash reserves (we hoard cash). I don’t
know how many pension members I have talked to
recently who have significant balances stashed away
in CD’s. The CD’s are paying them around 1.5% or
less. With an inflation rate of 2.6%, those dollars are
steadily losing their purchasing power, since their
rate of return is less than inflation. I would suggest a
couple of alternatives:
1) Rather than collect 1.5% from a CD, why not use
that cash to pay off a liability that’s charging you
a much higher rate?
2) If debt is not an issue, consider diverting dollars
to accounts that offer more attractive rates. For
active duty officers, your deferred comp plans
have “stable value” funds which are worth
looking at. For example, Great West features
their “Houston Fixed Fund,” currently paying
4.1%. Retirees may be able to divert a portion of
their monthly retirement benefit into PROP, which
is also paying a competitive rate. In other words,
consider diverting a few dollars each month into
deferred comp or PROP, and offset the loss of
income by drawing down your low yielding cash
savings.
Have you shopped around for a decent rate of return recently?
Take a look at a sampling of rates being offered out there:
Houston Police Federal Credit Union (HPFCU)
Regular Share account (over $2,500) 2.00% interest rate
Fixed Dividend Rate Term Share Certificate (CD’s)
12 month CD ($1,000 min balance)
1.48% interest rate
24 month CD ($1,000 min balance)
1.77% interest rate
U.S. Savings Bonds – Series I
1.74% interest rate
http://www.savingsbonds.gov/
U.S. Treasury Bonds – 3 year maturity
0.76% interest rate
U.S. Treasury Bonds – 5 year maturity
1.43%
http://www.ustreas.gov/offices/domestic-finance/
debt-management/interest-rate/yield.shtml
Treasury Inflation-Protected Securities (TIPS)
TIPS – 5 year maturity
0.50% interest rate
What about the stock and bond markets?
PIMCO Total Return (bond mutual fund)
Vanguard Total Stock Market Index
7.39% 10 yr annualized return
0.06% 10 yr annualized return
I look forward to your feedback.
HPOPS In-House Financial Trainer • [email protected]
HPOPS’ NEWSLETTER
5
a
In Remembrance
b
We wish to remember the following who have passed away.
Franklin Y. Paul
9/27/2009
Retiree Daniel B. Doetterl
4/6/2010
Retiree
Donald D. Williams
10/27/2009
Retiree James W. Brown
4/6/2010
Retiree
Buford W. Rushing
11/1/2009
Retiree Howard M. McNutt
4/23/2010
Retiree
Francisco J. Lopez
11/7/2009
Active Edward L. Jordan
5/7/2010
Retiree
Samuel W. Orlando
11/13/2009
Retiree Eydelmen Mani
5/19/2010
Active
Doris M. Crowder
11/15/2009
Survivor Harold E. Stephens
5/23/2010
Retiree
G. J. Frankovich Jr.
12/17/2009
Retiree Dorotha Skearton
5/23/2010
Survivor
Margaret V. Buckner
12/28/2009
Survivor Dennis N. Richards
5/31/2010
Retiree
Paul B. Santerre
1/2/2010
Retiree Orville A. Williams
6/9/2010
Retiree
Hardy E. Massey
1/4/2010
Retiree Ernestine M. Sanford
6/9/2010
Survivor
Drayton M. Fults
1/11/2010
Retiree Marlene M. Rose
6/10/2010
Survivor
Edmund J. Brossman
1/13/2010
Retiree Bobby E. Goodson
6/18/2010
Retiree
Bennie M. Jordy
1/14/2010
Retiree Joe Y. McNutt
6/19/2010
Retiree
Donald E. Comer
1/19/2010
Active Leroy Tuttle
6/23/2010
Retiree
James M. Smith
1/20/2010
Retiree John B. Walzel
7/10/2010
Retiree
Joel Garza
1/27/2010
Active Eva J. Rollins
7/23/2010
Survivor
Wanda R. Petersen
2/1/2010
Survivor Ruth E. Cones
7/28/2010
Survivor
Clara Lambert
2/11/2010
Survivor Marie L. Shackelford
7/31/2010
Survivor
Marlene R. Foster
2/14/2010
Survivor Charles W. Brown
8/1/2010
Retiree
Danny J. McBee
2/16/2010
Retiree Lanell Poehl
8/4/2010
Survivor
Rita L. Ewton
3/7/2010
Survivor James O. Brannon
8/11/2010
Retiree
Anna M. Luter
3/7/2010
Survivor Hansford G. Whitaker
8/16/2010
Retiree
Joseph F. Lanza
3/25/2010
Retiree Harold E. Sharp
8/18/2010
Retiree
Mary A. Acton
3/27/2010
Survivor Royce R. Sillavan
9/2/2010
Retiree
Jimmie R. Watson
4/1/2010
Survivor Mark E. Meaney
9/6/2010
Retiree
6
HPOPS’ NEWSLETTER
S
HP O PS
Investment
ummary
HPOPS has recently completed its fiscal
year ending in June 2010 and while the
auditors are still busy finalizing their work
the preliminary investment rate of return
estimate for the fiscal year is 13.7 percent.
The fiscal year is really a tale of two halves
wherein the first six months of the year
returned over 12.5 percent as government monetary stimulus “stimulated” the
financial markets and a second six months
wherein the stimulus effects faded and the
System returned just about 1 percent.
The 2010 fiscal year was a relatively volatile year as evidenced by the fact that the
System’s investment rate of return for the
fiscal year was up over 19 percent through
April only to give a significant portion of
those returns back in May and June as the
financial markets reversed themselves.
There is no one explanation for this volatility that has continued into the new 2010 fiscal year but “uncertainty” probably could
best define things. This uncertainty comes
from a list of issues including recession,
unemployment, deleveraging, inflation,
deflation, too much government intervention, not enough government intervention,
and everything else that you can think of.
Our approach to address this environment
is to have a well diversified portfolio that
can participate in a growing economy but
that also can produce meaningful positive
returns in periods of slow growth or high
inflation.
If we drill down a little deeper we can
see that our public equity portfolio
moderately out-performed its benchmark with a 15 percent return in US
markets and an 11 percent return in
non-US markets. We had a comparable level of moderate out-performance versus our benchmark in our
fixed income portfolio which returned
just over 11 percent. As always, we
break out the performance of our high
yield debt strategies into a separately
reported component of fixed income
and this year these strategies produced generally disappointing returns.
Our high yield managers structured
relatively conservative portfolios
which under-performed in the government stimulus-inflated markets with a
return of 18 percent which significantly lagged the high yield benchmark
return of over 25 percent.
HPOPS differs from many of its public
employee pension plan peers in that
its allocation to public equity markets
is significantly less than that of these
peers. These funds have instead been
allocated to “alternative” investments
including, private equity, hedge funds,
and risk parity strategies. HPOPS also
has a five percent allocation to real
estate but since this is a relatively new
strategy to the portfolio only something less than one percent of assets
is currently actually invested. This
portfolio of “alternatives” returned almost 15% during the fiscal year which is
comparable to the return of the public
equity markets as noted above.
While we do not expect an annual return of 15 percent from these alternative strategies we do expect a longterm return that is comparable to the
return of public equities. And what we
like about this is that these alternative
strategies are generally uncorrelated
with public equity. This means that
when public equity “zigs” these alternative strategies quite often “zag” and the
result of all this is that while our investment return highs may not be quite as
high as that of our “public equity heavy”
peers, our return lows will quite likely be
significantly better that the lows of our
peers, thus smoothing out our investment return stream and adding some
stability to the financial status of the
System.
The drill down into this bucket of alternative strategies shows that our private
equity portfolio returned 14 percent
on the year, the hedge fund portfolio
returned 13 percent, and our risk parity
strategies ended the period with a return of 20 percent. As we noted above,
our real estate portfolio is too new to
meaningfully affect our total investment
rate of return.
By the time you read this the new 2011
fiscal year will be well under way and we
can report an estimated return for the
System through mid-September of approximately 7 percent as the months of
July and September have seen sharply
increasing equity markets. This continues the volatile trends of the previous year as indicated by the US equity
markets which have been up 7 percent
in July, down 5 percent in August, and
through this writing, up 7 percent in
September. We see this as additional
support for our view that a reduced
reliance on public equity markets is in
the best interests of plan participants.
Please review our web site for monthly
updates of our performance and how
these issues play out. Monthly return
results are generally posted to the web
site around the fifteenth of the following month.
2010 Pension Trustee Elections
Pursuant to Article 6243g-4, the Houston Police Officers’ Pension System must hold a Trustee election each year. Beginning Wednesday, October 13, 2010 at 8:00 a.m. and ending with the close of business on Friday, October 22, 2010 at 5:00 p.m., HPOPS will be accepting applications from those members interested in filing for candidacy in the 2010 Pension Trustee election. Members interested
in filing must be eligible to run for election in accordance with the provisions of Article 6243g-4. The position currently held by Terry A.
Bratton (Active Member position) will be on this year’s ballot. The three-year term of office for this position will extend from January
2011 through December 2013.
Any interested party may file as a candidate by completing an application at the HPOPS office, located at 602 Sawyer, Suite 300, Houston, TX, 77007, during normal business hours within the above stated filing period. The applicant should be prepared to complete the
application form at the Pension System Office. Questions concerning the election should be directed to the Pension System Office at
713-869-8734.
HPOPS’ NEWSLETTER
7
PRESORTED
FIRST CLASS MAIL
US POSTAGE
PAID
Houston Police Officers’ Pension System
602 Sawyer, Suite 300
Houston, Texas 77007
PERMIT NO. 144
HOUSTON, TEXAS
VOL. 20 - ISSUE 1 - OCTOBER 2010
New HPOPS Website
How to register for the new Member Website
1.
2.
3.
4.
5.
6.
Go to www.hpops.org
Click on “GO TO MEMBER SITE” in top right corner
Click the link “CLICK HERE TO REGISTER”
Enter your registration information
a. SSN last four, zip code and birth date must match HPOPS system data
b. Enter your email
c. Enter a password, must be at least 8 characters
Check your email inbox for an email from [email protected]. Click the link in the email that says
“Activate my HPOPS Account.”
Login to HPOPS Member site using email address and password you setup during registration
HPOPS’ NEWSLETTER