12
BOARD OF RETIREMENT
FRESNO COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION
December 5, 2007
Trustees Present:
Alan Cade, Jr. Michael Cardenas
Nick Cornacchia Vicki Crow
Eulalio Gomez Steve Jolly
Phil Larson Stephanie Savrnoch
John Souza
Others Present:
Ronald S. Frye, Alternate Trustee
Andy Yeung, The Segal Company
Attorney Harvey Leiderman, Reed Smith – via tele-conference
Pam Carrozza, Fresno County Retired Employees Association
Jeffrey Stover, Fresno County Retired Employees Association
John Pinheiro, Personnel Services Manager
1. Call to Order
Chair Jolly called the meeting to order at 8:36 AM.
2. Pledge of Allegiance
Recited.
3. Public Presentations
None.
Consent Agenda/Opportunity for Public Comment
Roberto L. Peña, Retirement Administrator, pulled Consent Agenda Item 11.
Mr. Peña noted that John P. Souza and Ronald S. Frye’s terms will expire December 31, 2010, not 2008 as noted in Consent Agenda Item 11.
A motion was made by Chair Jolly, seconded by Trustee Cade, to Approve Consent Agenda Items Consent Agenda Items 4-16 with noted changes. VOTE: Unanimous (Absent – Crow) (Abstain – Souza)
Due to his absence at the October 17, 2007 Board Retreat Meeting, Trustee Souza abstained from the vote to approve the minutes of October 17, 2007 (Consent Agenda Item 4).
*4. Approve the October 17-18, 2007 Retirement Board Retreat Meeting Minutes
RECEIVED AND FILED; APPROVED
*5. Retirements
RECEIVED AND FILED; APPROVED
Mariam M. Alvarez / E&TA / 18.06Roberta Cope / Public Works & Planning / 12.04
James Michael Farris / Personnel Services / 8.82
Eleanor Ginther / E&TA / 12.26
Pamela A. Hanemoto / Behavioral Health / 30.17
Kenneth W. Hart / Behavioral Health / 31.06
David Randy Kevorkian / Probation / 10.42
Frances Alene King / Children & Family Services / 18.03
Juan Mangibin / ITSD / 16.84
Barbara A. McDowell / District Attorney / 23.11
Michael McSpadden / VMC, Deferred / 16.45
Vaughn K. Moss / Community Health / 34.17
Anthony Rabago / E&TA / 10.84
Maria Salinas / Community Health / 7.94
Marie R. Singh / Community Health / 15.06
Delores Jean Wilson / Superior Court / 30.02
*6. Disability Retirements
RECEIVED AND FILED; APPROVED
Edwin F. Barkman, Jr. / General Services / 17.94Ruben R. Perea / General Services / 25.03
*7. Deferred Retirements
RECEIVED AND FILED; APPROVED
Stephanie Alaniz / Probation / 5.51Enriqueta Alvarado / Sheriff / 3.62
Brian Borchardt / Public Works & Planning / 4.03
Brian Charlesworth / Behavioral Health / 15.73
Stephen B. Conner / Public Works & Planning / 11.18
Adrian L. Della Porta / Behavioral Health / 9.19
Petros Ghermay / Behavioral Health / 9.97
Mary E. Graham / Community Health / 8.90
Victor Koua Her / Sheriff / 5.17
Greg A. Jones / Sheriff / 0.08
Aaron Kelley / NCFPD / 0.75
Paul J. Lyon / Public Defender / 12.71
Brad E. Mallory / NCFPD / 22.31
Dottie K. Mazurek / Behavioral Health / 5.25
Ometha M. Moore / Probation / 6.02
Irma Y. Perez / Public Works & Planning / 2.10
Marcia L. Price / Public Defender / 6.48
Joshua S. Richards / Sheriff / 5.23
Joshua Sellers / NCFPD / 0.75
Sandra L. Sullivan / Community Health / 1.15
Ter Vang / Superior Court / 5.59
Lisa S. Weaver / Sheriff / 5.80
*8. Most recent investment returns, performance summaries and general investment information from investment managers
RECEIVED AND FILED
*9. Summary of monthly statistics from the Retirement Association Office on buybacks, retirement benefits estimates, public service, age adjustments, final compensation calculations and disability retirement applications for October 2007
RECEIVED AND FILED
*10. Public Records Requests and/or Retirement Related Information Requests from Jason Fullenkamp, Active FCERA Member; Sandra Brock, Active FCERA Member; Mary Benson, Active FCERA Member; Paul A. Dictos, Paul A. Dictos Accountancy Corporation; Sandra Carr, Active FCERA Member; Doug Hogel, Cooperative Research Services; Rita Deubner, Active FCERA Member; and Michael Jarvis, Mastagni, Holstedt, Amick, Miller, Johnsen, & Uhrhammer
RECEIVED AND FILED
*11. Board of Supervisor’s unanimous decision to appoint John P. Souza as Retired Member Representative and Ronald S. Frye as Alternate Retired Member Representative on the Board of Retirement for a Term expiring December 31, 2010
RECEIVED AND FILED
*12. Update of Board of Retirement directives to FCERA Administration
RECEIVED AND FILED
*13. Board of Retirement General Member Election November 15, 2007 Election Summary Report
RECEIVED AND FILED
*14. Report from Roberto L. Peña, Retirement Administrator, on attendance at the SACRS Fall Conference 2007
RECEIVED AND FILED
*15. Memorandum from Jeffrey MacLean, Wurts & Associates, regarding State Street Global Advisors Organizational Changes
RECEIVED AND FILED
*16. Approval of the FCERA temporary office closure on December 7, 2007 from 3:30 PM to 5:00 PM for holiday function
RECEIVED AND FILED; APPROVED
17. Discussion and appropriate action on Actuarial Valuation of Impact on Future Annual Costs of County Tier III Retirement Benefits, pursuant to G.C. §31515.5 presented by Andy Yeung, The Segal Company
Roberto L. Peña, Retirement Administrator, opened discussions by reminding the Board of the County’s decision to adopt a Tier III retirement benefit negotiated with Service Employees International Union (SEIU). Mr. Peña noted that The Segal Company conducted an actuarial study to determine the impact on employer and employee contributions. It was noted that Attorney Harvey Leiderman was avalialbe for comment via tele-confernce.
Andy Yeung, The Segal Company (Segal), presented the results of the General Tier III valuation study noting the key points as follows:
Background
At the request of the Board, Segal has determined the impact on County and member contributions of a “General Tier III” under Government Code Section 31676.15. Under this Section of the Code, the benefit ranges from 2% at 55 to 3.13% at age 65. Benefits will be calculated using a three year average final compensation.
It was noted that the benefit improvement is scheduled to be effective on December 17, 2007 and employees will receive the higher benefit level only for service after entry into General Tier III membership status. Benefits applicable to the prior service of current Tier II employees would continue to be based on their current Tier II member formula.
It was noted that members will be required to pay a basic contribution rate calculated under Section 31621.6, and that the County has agreed to reduce the rate by one-half as permitted by Section 31630. Therefore, Segal has calculated the basic member rates so that they will provide an annuity at age 55 that equals 1/200th of three year average final compensation.
Segal has continued to assume that the normal cost to provide the cost-of-living benefit will be shared equally between the employer and the employee.
Based on the data provided by FCERA as of June 30, 2006 for the regular actuarial valuation, there were 140 employees enrolled in the General Tier II plan. Out of those employees, about 75% were covered by SEIU and will be eligible for the new Tier III.
Actuarial Assumptions
The actuarial assumptions used to determine the cost of General Tier III benefits in this study were identical to those used for valuing benefits of General Tier II members in the June 30, 2006 regular valuation, with the exception of modified retirement age assumptions. The retirement age assumptions used in this study for General Tier III were based on a combination of the retirement age assumptions currently used for General Tier I and General Tier II members as the benefits for General Tier III are somewhere in between the benefits for General Tiers I and II.
It was noted that the actuarial assumptions are based on the 2003 Experience Study.
Discussion of Funding Methodologies
Based on discussions with FCERA, Segal will continue to use the demographics of all members in the current General Tier II plan in developing the employer and member contribution rates for the new Tier III plan. This has the same impact as assuming that all General Tier II members will be transferred to Tier III, despite the fact that in practice only those covered by SEIU (about 75% of all General Tier II members) are eligible for the new benefit.
This methodology is based on the following considerations:
A. Based on the June 30, 2006 valuation, for the 2007/2008 plan year the Board has adopted contribution rates for members covered by General Tier II which pooled the demographics of SEIU and non-SEIU members. The demographic profile of the Tier II members after the transfer of the SEIU members to Tier III (i.e., non-SEIU Tier II members) will be different from the pooled demographics reflected in the 2006 valuation report. This will result in a different contribution rate for the non-SEIU members, which will first be recognized in the next valuation as of June 30, 2007.
B. As of June 30, 2006, there were only 140 active members in General Tier II before the transfer, and of those about 35 were not in SEIU. Segal will determine how the employer and member normal cost rates for those 35 members will be impacted by the transfer of SEIU as part of our June 30, 2007 valuation.
The funding methodology used to establish the County contribution rates was chosen for its ability to maintain relatively stable normal cost rates over time. This requires the General benefit normal cost rates to be determined as if they were to be charged from employees’ original date of hire. Doing so assures that the rates charged for employees hired after December 17, 2007 are consistent with those for employees hired earlier, and that COLA costs are appropriately allocated between members and the County.
A consequence of this methodology is the creation of an unfunded actuarial accrued liability (UAAL) for existing employees on the effective date of the improvement, even though the benefit increase is only for future service. The amount of this new UAAL is $713,000. This new UAAL represents the portion of the cost that remains after future “original entry age” normal costs are collected for these employees.
In the June 30, 2006 regular valuation, Segal had determined a pooled General employer contribution rate to pay off the UAAL for all of Tier I and Tier II. If it is desirable to maintain the pooled UAAL rate for all General employees, then the employer UAAL contribution for the General Tier employees has to be increased slightly (0.01% of payroll when calculated using all General member salaries) as a result of the adoption of General Tier III.
Alternatively, it may be desirable to maintain the employer UAAL contribution rate for Tier I so that all changes in the UAAL rate will be charged to Tier III.
It was noted that Board’s practice has been to amortize the cost of the plan amendment over 30 years. Segal has followed that practice in determining the contribution rates in this study.
The increase in the member’s rate is higher than the increase in the employer’s rate. This is because there is an increase in the basic member rate as required by the Government Code.
Instead of providing an annuity at age 60 that equals 1/240th of final one year average salary, as discussed above the basic member rates have been increased so that they will provide an annuity at age 55 that equals 1/200th of three year average final compensation.
The Board discussed, in detail, the results of the study. Questions and comments were heard from Mr. Peña, Trustees Cade, Crow, Savrnoch, Souza and Chair Jolly.
At the request of the Board, Attorney Leiderman briefly commented on the County’s decision to not have an actuarial study completed prior to adopting the General Tier III retirement plan. It was noted that it is the County’s responsibility to request the study and not that of the Retirement Board.
A motion was made by Trustee Souza, seconded by Trustee Crow, to Approve the General Tier III contribution rates “in concept” pending a decision from the County on whether to pool the UAAL rate for General Members. VOTE: Yes – Cade, Cardenas, Cornacchia, Crow, Gomez, Larson, Savrnoch, Souza. No – Jolly. MOTION PASSED
RECEIVED AND FILED; APPROVED
18. Discussion and appropriate action on Request by Clyde Francone to implement an optional provision of the Pension Protection Act 2006
At the request of Attorney Harvey Leiderman, Reed Smith, and the Counsel of Claire Dias and Clyde Francone, the item was tabled until the December 19, 2007 Regular Board Meeting.
TABLED
19. Discussion and appropriate action resolution recognizing Fresno County Retired Employees Association as the “official” retirees organization by FCERA’s Board of Retirement
Roberto L. Peña, Retirement Administrator, opened discussions by reminding the Board of the request made by the Fresno County Retired Employees Association (FCREA) that FCERA officially recognize the organization. Mr. Peña noted that, at the recommendation of FCERA’s Counsel, language addressing the Ralph M. Brown Act (Brown Act) as it relates to “reasonable advance notice” and “reasonable opportunity to comment” was incorporated into the resolution.
Jeffrey Stover, FCREA, addressed the Board and requested that any reference to the Brown Act be stricken from the resolution as it is redundant and unnecessary and unfairly restricts FCREA’s ability to advocate on behalf of its members.
Attorney Leiderman opined that the language, as it relates to the Brown Act, is only a baseline requirement for notification and does not restrict the Board from allowing for more advance notice.
Pam Carozza, President – FCREA, requested that the Board adopt the resolution without reference to the Brown Act as originally presented to the Board on November 7, 2007.
A motion was made by Trustee Souza, seconded by Trustee Gomez, to Adopt the resolution presented omitting the following language:
“Whereas, FCREA has agreed that any “advance notice” and “opportunity to comment” required to be provided to it by FCERA pursuant to the County Employees Retirement Law of 1937 shall be deemed “reasonable” if provided by FCERA to the President of FCREA, in writing, in compliance with all applicable provisions of the Ralph M. Brown Act and the Board packet” decision made by FCERA on or about February 16, 2005.”
A motion was made by Trustee Crow, seconded by Chair Jolly, to Adopt the resolution presented maintaining the following language: