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BOARD OF RETIREMENT
FRESNO COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION
“Our mission is to administer the retirement benefits for the members and beneficiaries in a prudent, accurate, timely and cost-effective manner, while administering fund assets in a manner that achieves investment and funding objectives within prudent levels of risk”
January 15, 2014
REGULAR MEETING AGENDA MINUTES
Trustees Present:
Marion Austin Laura P. Basua Alan Cade, Jr.
Dr. Rod Coburn, III Vicki Crow Robert Dowell
Eulalio Gomez Judith G. Case McNairy
Trustees Absent:
Steven Jolly
Others Present:
Andy Yeung, Segal Company
Robert Skowronski, FCERA Member
Ron Madsen, FCERA Member
Art Wille, Deputy County Counsel
Phillip Kapler, Retirement Administrator
Becky Van Wyk, Assistant Retirement Administrator
Kelly Prinz, Retirement Benefits Manager
Elizabeth Avalos, Administrative Secretary
1. Call to Order
Chair Coburn called the meeting to order at 8:34 AM.
2. Pledge of Allegiance
Recited.
3. Public Presentations
Robert Skowronski, FCERA Member, addressed the Board regarding the Fund’s unfunded status.
4. Election of Chair and Vice Chair for the Calendar Year 2014.
A motion was made by Trustee Gomez, seconded by Trustee Austin, to appoint Dr. Rod Coburn as Chair of the Board of Retirement and Alan Cade, Jr. as Vice Chair of the Board of Retirement for the calendar year 2014. VOTE: Unanimous (Absent – Jolly)
5. Discussion and appropriate action on appointments to the Retirement Board Standing Committees: Audit, Budget, Disability, Personnel and Consultant Evaluation
Chair Coburn recommended appointments to the Standing Committees as follows:
(changes noted in bold)
Audit Committee Budget Committee
Alan Cade, Jr. – Chair Alan Cade, Jr. – Chair
Vicki Crow Vicki Crow
Steven J. Jolly Steven J. Jolly
Judith G. Case McNairy Judith G. Case McNairy
Personnel Committee Disability Committee
Marion Austin – Chair Eulalio Gomez - Chair
Laura P. Basua Dr. Rod Coburn, III
Dr. Rod Coburn, III Steven J. Jolly
Robert Dowell Judith G. Case McNairy
Consultants Evaluation Committee
Robert Dowell – Chair
Marion Austin
Alan Cade, Jr.
Eulalio Gomez
A motion was made by Trustee Gomez, seconded by Trustee Crow, to appoint the Standing Committee members as recommended. VOTE: Unanimous (Absent – Jolly)
RECEIVED AND FILED; APPROVED
Consent Agenda/Opportunity for Public Comment
Trustee Gomez pulled Consent Item 19 for discussion.
A motion was made by Trustee Crow, seconded by Trustee Dowell, to approve Consent Items 6-18 and 20-26 as presented. VOTE: Unanimous (Absent – Jolly)
*6. Approve the December 13, 2013 Board of Retirement Disability Committee Meeting Minutes
RECEIVED AND FILED; APPROVED
*7. Approve the December 18, 2013 Retirement Board Regular Meeting Minutes
RECEIVED AND FILED; APPROVED
*8. Approve the December 18, 2013 Board of Retirement Audit Committee Meeting Minutes
RECEIVED AND FILED; APPROVED
*9. Disability Retirements
RECEIVED AND FILED; APPROVED
Richard Gallegos / Sheriff / 13.58Rex Garcia / Sheriff / 12.46
*10. Retirements
RECEIVED AND FILED; APPROVED
Glynis Alvardo / Behavioral Health, Deferred / 13.24Janie Barbosa / Dept of Social Services / 13.05
Arlene C. Boyajian / Public Health / 16.46
Anne L. Bridgers / Assessor Recorder, Deferred / 16.76
Cle Mitchell Canizalez / Dept of Social Services / 34.08
Minnie Chavarria / Sheriff / 24.00
Julie A. Condon / Public Work & Planning / 17.98
Marion Ann Contreras / Assessor Recorder, Deferred / 8.11
Henry Facio / Sheriff / 33.35
Phillip Fuentez / Probation / 22.61
Consuelo Gonzalez / Behavioral Health / 23.86
Wanda Hemmitt-Patton / Dept of Social Services / 11.78
Theresa A. Henry / Dept of Social Services, Deferred / 5.07
Julia M. Holmes / Behavioral Health / 22.68
Edward Lipski / Dept of Social Services, Deferred / 6.53
Jerome A. Marquez / Internal Services / 22.84
Consuelo Martin / Library / 11.96
Donna M. Moran / Library / 12.30
Steven K. Nitta / Library / 25.24
Connie H. Pagulayan / Library, Deferred / 11.43
Vickie L. Pound / Dept of Social Services / 12.92
Willis E. Robinson / Public Works & Plan, Deferred / 9.08
Cheryl Rutledge / Dept of Social Services / 12.01
Treasa Schuler / ACTTC, Deferred / 9.15
Fred Starks / Sheriff, Deferred / 14.53
Brian D. Tamblin / Internal Services / 14.99
Kenneth K. Taniguchi / Public Defender / 30.73
Jon K. Thoren / VMC, Deferred / 16.99
Andrea M. Zavala / District Attorney / 14.40
*11. Summary of monthly statistics from the Retirement Association Office on service credit purchases, retirement benefit estimates, public service, age adjustments, final compensation calculations, and disability retirement applications for December 2013
RECEIVED AND FILED
*12. Public Records Requests and/or Retirement Related Correspondence from Maria Almario, IPREO
RECEIVED AND FILED
*13. Educational Reading Materials
· January 7, 2014 San Francisco article – California pension reformer disputes write-up on initiative
RECEIVED AND FILED
*14. 2014 Pension Payroll Payment Schedule
RECEIVED AND FILED
*15. Board of Retirement Annual Attendance Report for the calendar year 2013
RECEIVED AND FILED
*16. Budget Status for the Quarter ended December 31, 2013
RECEIVED AND FILED
*17. Most recent investment returns, performance summaries and general investment information from investment managers
RECEIVED AND FILED
*18. FCERA Cash Flow position as of November 2013
RECEIVED AND FILED
*19. Quarterly Trustee Travel Report and Anticipated Trustee Travel
Trustee Gomez suggested prominently displaying the Travel Report on the FCERA website and Trustee Case McNairy recommended adding a section to the report that will identify whether a Trustee has submitted a written seminar report for Board reference. The Board agreed.
In addition, Trustee Case McNairy noted that a cost $121.00 for meals was noted in error on her expenses at the Pacific States Institutional Investors forum and requested that it be corrected. Administration agreed.
A motion was made by Trustee Gomez, seconded by Case McNairy, to accept the Quarterly Travel Report with the noted revisions. VOTE: Unanimous (Absent – Jolly)
RECEIVED AND FILED
*20. FCERA’s Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2013
RECEIVED AND FILED
*21. Travel request from Trustee Case to attend the 24th Annual Southern CA Public Retirement Seminar on February 27, 2014 in Lakewood, CA
RECEIVED AND FILED; APPROVED
*22. Travel request from Trustee Jolly to attend the Pension Bridge Annual on April 22-23, 2014 in San Francisco, CA
RECEIVED AND FILED; APPROVED
*23. Travel requests from Chair Coburn and Trustee Jolly to attend the International Investing and Emerging Markets Wharton Course on July 28-30, 2014 in San Francisco, CA
RECEIVED AND FILED; APPROVED
*24. Travel request from the Disability Committee to conduct a Fact Finding visit to Santa Barbara Employees’ Retirement System and Orange County Employees’ Retirement System to gain an understanding their disability processes
RECEIVED AND FILED; APPROVED
*25. Recommendation to adopt PEPRA Pension Compensation Limit (Code Section 7522.10)
RECEIVED AND FILED; APPROVED
*26. Adopt FCERA 2010 IRS Code Compliance Policy
RECEIVED AND FILED; APPROVED
27. Discussion and appropriate action on draft Actuarial Valuation report as of June 30, 2013 presented by Andy Yeung, The Segal Company
Andy Yeung, The Segal Company, opened discussions by noting that the valuation was performed to determine whether the assets and contributions are sufficient to provide the prescribed benefits and reviewed the actuarial valuation key findings as follows:
· The results of the valuation reflect changes to the economic and non-economic assumptions adopted by the Board for the June 30, 2013 valuation. These assumption changes resulted in an increase in the average employer rate of 7.78% of payroll and an increase in the average member rate of 1.04% of payroll.
· On June 30, 2013, after crediting interest to the various reserve accounts at the assumed earnings rate, the balance of the Contra Tracking Account increased from $516.3 million as of June 30, 2012 to $588.3 million as of June 30, 2013.
· In this June 30, 2013 valuation, the UAAL has increased from $1,040.4 million to $1,175.8 million when determined on a valuation (smoothed) value of assets. On a market value basis, the UAAL decreased from $1,225.7 million to $1,215.7 million.
· The funded ratio on valuation value of assets decreased from 76.1% to 75.0%, while on a market value basis, the funded ratio increased from 71.8% to 74.1%.
· The aggregate employer rate calculated in the valuation increased from 47.37% of payroll to 53.52% of payroll. The reasons for this change are: (i) lower than expected return on investments (based on valuation value of assets after smoothing), (ii) one year delay in implementing employer and employee contribution rates calculated in the June 30, 2012 valuation, (iii) increase in UAAL rate due to less than expected increase in total payroll, and (iv) changes is actuarial assumptions, offset to some degree by (v) salary increases less than expected, (vi) lower than expected COLA increases, (vii) fewer than expected retirements, and (viii) other actuarial gains.
· The aggregate member rate calculated in this valuation has increased from 8.55% of payroll to 9.56% of payroll. The change in the aggregate member rate is due to changes in actuarial assumptions and changes in membership demographics for the June 30, 2013 valuation.
Mr. Yeung noted that based on discussions with the Board, Segal used the discretion made recently available by AB1380 to no longer round the member’s contributions to the nearest ¼% as previously required by CalPEPRA.
· The employer and member rates developed in this valuation have been determined only with respect to the Regular and the Settlement benefits. Assets and liabilities associated the non-vested supplemental benefits (i.e., discretionary purchasing power and additional non-vested retiree health benefits) have been excluded from the development of the employer and member rates.
· The net total unrecognized investment losses as of June 30, 2013 are $39.9 million compared to the net total unrecognized investment losses of $185.3 million as of June 30, 2012. These investment losses will be recognized in the determination of the actuarial value of assets for funding purposes in the next few years, and will offset any investment gains that may occur after June 30, 2013. This means, if the Association earns the assumed net rate of investment return of 7.25% per year on a market value basis, it will result in investment losses on the actuarial value of assets in the next few years. So, if the actual market return is equal to the assumed 7.25% rate and all other actuarial assumptions are met, the contribution requirements would increase in the next few years.
· The unrecognized investment losses represent about 1% of the market value of assets. Unless offset by future investment gains or other favorable experience, the recognition of the $39.9 million in past market losses is expected to an impact on the Association’s future funded ratio and the aggregate employer contributions. This potential impact may be illustrated as follows:
· If the deferred losses were recognized immediately in the actuarial value of assets, the funded percentage would decrease from 75.0% to 74.1%.
· If the deferred losses were recognized immediately in the actuarial value of assets, the aggregate employer contribution rate would increase from 53.5% of payroll to 54.5% of payroll.
· In preparing the breakdown of the total costs of the General Tier I plan into the cost to provide the “Regular” and the “Settlement” benefits, Segal followed the Association’s practice of allocating the cost to provide a benefit under section 31676.12 as the cost for the “Regular” benefit and allocating the difference between this “Regular” benefit cost and the cost to provide a benefit under Section 31676.14 plus Section 31627 as the “Settlement” benefit. In particular, this means that the difference between benefits under Sections 31676.12 and 31676.14 is considered “Settlement” and so under the Settlement Agreement could be funded out of future undistributed earnings.
Mr. Yeung reviewed, in detail, the changes in the recommended employer contribution rate from the prior valuation to the current year’s valuation and the average member contribution rates noting the rates vary based on data such as tier level, age, and salary.
Detailed discussions, questions, and comments ensued regarding the demographic and financial data provided in the valuation.
A motion was made by Vice Chair Cade, seconded by Trustee Crow, to adopt the Actuarial Valuation as of June 30, 2013 and to recommend the employer and employee contribution rates to the Board of Supervisors. VOTE: Unanimous (Absent – Jolly)
RECEIVED AND FILED; APPROVED
28. Discussion and appropriate action on Project Tracking
Phillip Kapler, Retirement Administrator, opened discussions with a brief update on the status of each Administrative project noting which projects have been completed and which were on-going. The Board considered whether to purge projects that are no longer an on-going concern or that have been substantially resolved.
Chair Coburn suggested combining the matter of adding an internal auditor and in-house investment position to the FCERA complement and delegating the issue to the Board Consultants Evaluation Committee for further consideration. The Board agreed.
NO ACTION TAKEN - RECEIVED AND FILED
29. Verbal report from Trustee Alan Cade on the December 18, 2013 Audit Committee Meeting
Trustee Cade gave a verbal report of the December 18, 2013 Audit Committee meeting stating that the Plan earned unqualified (“clean”) opinion. It was noted that the opinion is the highest opinion that an independent audit firm can issue.
Trustee Cade informed the Board that one recommendation was made to help FCERA make improvements and achieve operational efficiencies. It was noted that findings and recommendations are intended to improve the internal control structure or result in other efficiencies.
In addition, Trustee Cade noted that the prior year conditions (six) have been addressed and implemented according to Brown Armstrong’s recommendations.
Trustee Cade noted Brown Armstrong will work with Administration in the upcoming year in setting up a task force consisting of members of the Board of Retirement and the Board of Supervisors to address the implementation of GASB 67.
A motion was made by Trustee Gomez, seconded by Trustee Crow, to accept the Audit Report as recommend by the Audit Committee. VOTE: Unanimous (Absent – Jolly)
RECEIVED AND FILED; APPROVED
30. Discussion and appropriate action of first consideration of the revised FCERA Trustee Travel, Education, and Due Diligence policies