10
BOARD OF RETIREMENT
FRESNO COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION
March 21, 2007
Trustees Present:
Alan Cade, Jr. Michael Cardenas
Vicki Crow Steven Jolly
Phil Larson A. Papaleo
Stephanie Savrnoch John Souza
William Storey
Others Present:
Ronald S. Frye, Alternate Trustee
Tom Iannucci, Cortex Applied Research
Bob Solis, Retired FCERA Member
Michael Cunningham, Retired FCERA Member
Henry Lopez, Active FCERA Member
Les Jorgensen, Fresno County Retired Employees’ Association
Barbara Booth Grunwald, Deputy County Counsel
Roberto L. Peña, Retirement Administrator
Becky Van Wyk, Assistant Retirement Administrator
Elizabeth Avalos, Administrative Secretary
Sign in Sheet Attached.
1. Call to Order
Chair Jolly called the meeting to order at 8:41 AM.
Trustees Crow and Larson arrived at 8:42 PM.
2. Public Presentations
Bob Solis, Retired FCERA Member, addressed the Board as to the status of the Fresno Station Business Center “Lot Split”, selection of a Real Property Professional, and current appraisal of the property.
Roberto L. Peña, Retirement Administrator, stated that Administration is working on issuing a Request for Proposal (RFP) for Real Property Services, but due to more urgent retirement matters the issue has not progressed as he would like. Mr. Peña noted the issue would be brought to the Board for further discussion as information is gathered.
Chair Jolly called a brief recess at 8:46 AM, the meeting resumed at 8:48 AM.
Michael Cunningham, Retired FCERA Member, suggested that the Board consider reciting the Pledge of Allegiance at the beginning of each Board Meeting. The Board agreed.
Chair Jolly briefly commented on his role as “Chair” of the Board of Retirement.
Henry Lopez, Active FCERA Member, addressed the Board regarding the importance of providing correct/accurate information to the current actuarial firm.
Consent Agenda/Opportunity for Public Comment
Trustee Savrnoch pulled Consent Agenda Item 5 for discussion.
A motion was made by Trustee Larson, seconded by Trustee Souza, to Approve Consent Agenda Items 3-4 and 5-8. VOTE: Unanimous
*3. Approve the March 7, 2007 Board of Retirement Regular Meeting Minutes
RECEIVED AND FILED; APPROVED
*4. Approve revised July 19, 2006 Board of Retirement Regular Meeting Minutes
RECEIVED AND FILED; APPROVED
*5. Summary of monthly statistics from the Retirement Association Office on buybacks, retirement benefit estimates, public service, age adjustments, final compensation calculations and disability retirement applications for February 2007
In response to a question from Trustee Savrnoch regarding the timeline in which County and Public Service buybacks are processed, Roberto L. Peña, Retirement Administrator, stated that County buybacks are typically processed within 3 to 6 months and Public Service buybacks within 1 year, barring any unforeseen issues.
At the request of Trustee Savrnoch; Mr. Peña and Becky Van Wyk, Assistant Retirement Administrator, commented on the status of the Final Compensation project and noted that the Final Compensation team is fully staffed and the project is expected to be completed calendar year 2007.
A motion was made by Trustee Savrnoch, seconded by Chair Jolly, to Approve Consent Agenda Item 5. VOTE: Unanimous
RECEIVED AND FILED
*6. Public Records Requests and/or Retirement Related Information Requests from Bob Solis, Retired FCERA Member; Kevin Walter, Active FCERA Member; Lucky Begum, Private Equity Intelligence Ltd.; Gregory Koster, Deferred FCERA Member; Kevin Briggs, Active FCERA Member; Karen Heffron, Active FCERA Member; Randolfo Hernandez, Active FCERA Member; and various members regarding the COLA UAAL
RECEIVED AND FILED
*7. Correspondence to be included with the April 1, 2007 Retirement Benefit checks regarding the Cost of Living Increase
RECEIVED AND FILED
*8. Lease Agreement with the County of Fresno for Records Storage Space at the Wells Fargo Building
RECEIVED AND FILED; APPROVED
9. Discussion and appropriate action on Governance Policy Project presentation by Tom Iannucci, Cortex Applied Research
Roberto L. Peña, Retirement Administrator, opened discussions by noting that Tom Iannucci of Cortex Applied Research was present to continue with the development of the Governance Policy project. Mr. Peña strongly encouraged the Board’s participation and input in drafting the policies.
Mr. Iannucci briefly reviewed his findings obtained through a survey and interviews with the Board as follows:
· Perceived lack of clarity regarding the roles of the Board and Staff
· Dissatisfaction with meetings
· Mixed views on effectiveness of Committees
· Mixed views on implementing education
· Stronger orientation is needed
· More focus on investments and ethics training
· Need to review Board policies periodically - numerous policy gaps
· Frustration with disability process
Mr. Iannucci noted the key objectives in drafting the Governance Policies as follows:
· Shift more towards a policy-focused Board
· Improve efficiency of the Board
· Enhance risk management
· Support exercise of fiduciary duties
Mr. Iannucci summarized the proposed Governance Policy Manual as follows:
Charters Policies
Board Board Operations Policy
Chair & Vice Chair Policy Development Process
Retirement Administrator Strategic Planning Policy
Audit Committee Code of Conduct
Budget Committee Trustee Education Policy
Disability Committee Due Diligence Policy
Personnel Committee
The Board of Retirement Charter was reviewed and it was noted that the Charter describes the roles and responsibilities of the Board and reflects much of the provisions under the County Employees Retirement Law of 1937 (the “Act”).
Discussions, questions, and comments followed regarding developing a policy to evaluate the Board’s own performance and that of the Retirement Administrator. At the request of Trustee Cardenas, the Board discussed several methods of evaluating their own performance such as using a survey and monitoring service quality.
The Chair and Vice Chair Charters were reviewed and the key roles and responsibilities were discussed.
The Retirement Administrator Charter was reviewed and the key duties and responsibilities were discussed.
Discussions, questions, and comments followed regarding the responsibilities and limitations of the Retirement Administrator when contracting with non-primary service providers. The Board requested that Mr. Iannucci expand the language in Item 14.k. of the Board of Retirement Charter to include “goods and services”.
At the request of Chair Jolly, the Board discussed and directed Mr. Iannucci to expand the Retirement Administrator Charter to include, as part of policy, a key responsibility that the Retirement Administrator will identify and communicate to the Board any issues related to the key service providers.
The Audit, Budget, Disability, and Personnel Charters were reviewed and discussed by the Board. Mr. Iannucci suggested that, due to the important nature and complexity of actuarial issues, the Actuarial Committee be eliminated to allow for full Board participation. The Board agreed.
At the request of Chair Jolly, the Board discussed using the Strategic Planning Process as a vehicle to implement a policy that will aid the Board in establishing priorities and defining the benchmarks for measuring/monitoring client satisfaction.
In response to a comment from Trustee Savrnoch regarding the Disability Committee Charter as it relates to the practicality of the Disability Committee members reviewing and assessing the disability applications prior to a full Board discussion, the Board agreed to eliminate Item 3.a of the Charter and continue to have disability applications heard before the full Board.
At the request of Mr. Peña, the Board discussed the Disability Retirement Charter as it relates to the Disability Committee authorizing searches for investigators, independent medical examiners, and hearing officers and it was noted that the Committee will review and recommend to the full Board the processes in which the Administrator will search for service providers pertaining to disability issues.
Mr. Iannucci reviewed the Board Operations Policy and noted that much of the information within the policy was incorporated from the FCERA Bylaws. Mr. Iannucci noted that in the event that the Board Operations Policy is adopted, the FCERA Bylaws will need to be updated in order to eliminate duplicate information and thereby creating two distinct documents.
In response to a comment from Mr. Peña regarding Item 28 of the Board Operations Policy as it relates to posting agendas 5 days in advance of all meetings including standing and ad hoc committee meetings, Barbara Booth Grunwald, Deputy County Counsel briefly reviewed the Brown Act requirements for posting agendas and suggested that changes be made to reflect that only a 24 hour notice is required for committee and special meetings and that because an ad hoc committee consists of less than a quorum, notice is not required.
The Policy Development Process was reviewed and discussed by the Board. Mr. Iannucci briefly commented on the roles and responsibilities of the Board and Retirement Administrator as they relate to policy development processes and the principles that will guide the Board’s decision making process.
Mr. Peña reminded the Board that the Policy Development Process is intended to generate effective Board meetings and not to control interactions or limit discussions with the public and/or stakeholders.
At the request of Trustee Savrnoch, the Board discussed and requested that a policy be established that would require Administration to track prior Board directives and to agendize the status of those directives prospectively. Mr. Peña agreed.
The Strategic Planning Policy was reviewed and discussed by the Board. Mr. Iannucci noted it is designed to set out the general process by which the Board and management will discuss and agree upon the strategic direction of FCERA and the specific strategic planning projects to be undertaken each year.
The Code of Conduct was reviewed and discussed by the Board. Trustee Savrnoch suggested that the Code of Conduct be expanded to include the following:
· Trustees will not accept any dinners independent of a conference with companies that are not currently FCERA service providers, but it may reasonably be anticipated will seek to do business with FCERA in the future
· Trustees will not accept gifts of any value from any service provider including tickets to events, holiday gifts, etc. excluding dinners that are held at conferences that are open to all who attend the conference
Discussions, questions, and comments followed regarding the reporting requirements of the Trustees. The majority of the Board disagreed with the language noting that there is an ethical responsibility to follow the existing laws that govern the gift giving practices. No changes will be incorporated.
Discussions, questions, and comments followed regarding the roles and responsibilities of the Trustees as they relate to suggesting/recommending a particular firm or company to a service provider. Mr. Peña briefly described the selection process in which the investment consultant selects a firm or company.
Mr. Iannucci briefly explained the enforcement provisions of the Code of Conduct and the Board discussed how, if at all, issues would be brought to the attention of the full Board.
At the request of Trustee Savrnoch and after some discussion, the Board directed Mr. Iannucci to draft a policy in which the roles and responsibilities of the Chair are defined as to the enforcement provisions of the Code of Conduct. It was noted that Mr. Peña would consult with Counsel regarding any possible legal issues.
The FCERA Trustee Education and Due Diligence Policies were reviewed and the key issues were discussed by the Board. Mr. Iannucci noted that the policies are updated versions of FCERA’s existing policies.
Mr. Iannucci recommended that the Board redefine their view on due diligence visits and to consider them as an educational opportunity and a responsibility to observe and ensure that effective due diligence processes are in place with respect to existing and prospective service providers.
Trustees Savrnoch and Larson expressed their opinions opposing any educational due diligence visits, noting that education can come from other sources such as in-house visits.
Discussions, questions, and comments followed regarding the fiduciary responsibility of each Trustee to oversee and perform due diligence visits while being mindful on the costs that are incurred.
Mr. Peña noted that, because past due diligence was performed only when hiring a new service provider or manager, the current investment approach would need to be updated in order to incorporate existing service providers.
Discussions, questions, and comments followed regarding certain educational programs that are known to provide important training such as the State Association of County Retirement Systems (SACRS), California Association of Public Retirement Systems (CALAPRS), and the National Conference of Public Employee Retirement Systems (NCPERS). Trustee Savrnoch noted that she opposes the inclusion of NCPERS as one of the “pre-authorized” conferences in which Trustees can attend and suggested that it be eliminated from the policy. After further discussion, the Board agreed.
At the request of Mr. Iannucci, the Board discussed reasonable expectations regarding the roles and responsibilities of the Trustees while performing due diligence visits.
Discussions, questions, and comments followed regarding the pro and cons of performing due diligence and the potential risks of relying on a consultant for information. It was noted that Trustees Larson and Savrnoch oppose due diligence visits when the attending Trustee may lack investment knowledge and/or qualifications.
Mr. Iannucci clarified that prudent administration requires that the Board ensure that effective due diligence processes are in place with respect to existing and prospectrive service providers. Mr. Ianncci stated that upon accepting the policy, the Board accepts the role for “overseeing” that the due diligence processes are followed by the consultant.
The majority of the Board requested the following changes to the proposed Education Policy:
· Paragraph 12 - Eliminate NCPERS as one of the pre-authorized conferences in which Trustees are able to attend.
· Paragraph 14 - Change language to reflect “up to two (2) due diligence trips during each term they serve on the Board”
· Paragraph 15 - Change language to reflect “Retirement Administrator will be responsible for co-coordinating up to two (2) educational sessions for the Board each year”
Mr. Iannucci commented on concerns raised by the Board and their desire to implement a policy for evaluating the Retirement Administrator and noted that, in the event the Board agrees that a policy is needed, the Board should consider the following issues:
· Should evaluation criteria be established in advance?
· How should the evaluation be weighted - Subjective vs. Objective?
· How should the criteria be linked to the operations?
· Is there a need for staff input?