19
BOARD OF RETIREMENT
FRESNO COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION
BOARD RETREAT – REGULAR MEETING
October 17 – 18, 2007
Trustees Present 10/17/07:
Alan Cade, Jr. Michael Cardenas
Nick Cornacchia Vicki Crow
Eulalio Gomez Steven J. Jolly
Stephanie Savrnoch Ronald S. Frye for John Souza
Trustees Absent 10/17/07:
Phil Larson John Souza
Others Present 10/17/07:
Michael Cunningham, Retired FCERA Member
Tom Iannucci, Cortex Applied Research
Carol Sheela, Retirement Benefits Manager
Thanaphat “Pat” Srisukwatana, Systems & Procedures Analyst
Robert Landen, Deputy County Counsel
Roberto L. Peña, Retirement Administrator
Becky Van Wyk, Assistant Retirement Administrator
Elizabeth Avalos, Administrative Secretary
1. Call to Order
Vice Chair Cardenas called the meeting to order at 9:09 AM and the Pledge of Allegiance was recited.
2. Public Presentations
None.
Consent Agenda/Opportunity for Public Comment
A motion was made by Trustee Crow, seconded by Trustee Frye, to Approve Consent Agenda Items 3 – 8. VOTE: Unanimous (Absent – Jolly, Larson, Souza)
*3. 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 September 2007
RECEIVED AND FILED; APPROVED
*4. Public Records Requests and/or Retirement Related Information Requests from Donna Marquez, Active FCERA Member; Mary Benson, Active FCERA Member; Susan Rutkowski, Active FCERA Member; Rachel Gomez, Active FCERA Member; Karen Heffron, Active FCERA Member; Paul A. Dictos, Paul A. Dictos Accountancy Corporation; Billy D. Reischling, Active FCERA Member; Linda Laine, Active FCERA Member; Ivonne Ripolle, Active FCERA Member; Cheryl Carlson, City of Fresno Fire Department
RECEIVED AND FILED
*5. Quarterly Trustee Travel Report and Anticipated Trustee Travel
RECEIVED AND FILED
*6. Budget Status for the period ending September 30, 2007
RECEIVED AND FILED
*7. Correspondence from Attorney Jeffrey Rieger, Reed Smith, to Nancy A. Jenner, North Central Fire Protection District Counsel, regarding a Public Records Act Request
RECEIVED AND FILED
*8. Certification of John P. Souza as Duly Nominated and Unopposed for Election as Retired Member Representative and Ronald S. Frye as Duly Nominated and Unopposed as Alternate Retired Member Representative. Approve request to place certification on the Board of Supervisors’ October 30, 2007 Agenda
RECEIVED AND FILED; APPROVED
9. Discussion and appropriate action on Strategic Planning presented by Tom Iannucci, Cortex Applied Research
Roberto L. Peña, Retirement Administrator, opened discussions by reminding the Board of its desire to implement a Strategic Planning process. Mr. Peña encouraged the Board’s participation in the discussion.
Tom Iannucci, Cortex Applied Research, began the presentation by noting the benefits of an effective planning process as follows:
· Offers clarity as to the general approach to the business
· Aligns how time is spent and resources are allocated
· Focuses the organization
· Improves efficiency
· Allows progress to be gauged
· Orients new board members and staff
Mr. Iannucci stated that the planning process consists of the Board clarifying its strategy and determining any threats, identifying strategic priorities, documenting a strategic direction, and implementing a business plan. The outcomes of the process should include a mission statement, Statement of Strategic Direction, and a Business Plan.
The Mission Statement will be a concise description of FCERA’s business with the Statement of Strategic Direction being a more detailed description of the kind of organization FCERA is and how FCERA will approach the business. The Business Plan is a detailed description of specific projects that the Board will undertake to achieve the Mission and Strategic direction over the coming 18 months.
It was noted that, for the public sector, identifying the business customers, needs, markets, and ownership structure are generally set in statute.
Mr. Iannucci stated that retirement systems should focus on continually ensuring clarity around other strategic issues such as:
· Role in influencing legislation
· Role in corporate governance
· Commitment to service quality
· Scope of member communications (narrow v. holistic)
· Approach to risk management
· Investment management v. investment oversight
· Independence vis-à-vis sponsor
Chair Jolly joined the Board at 9:29 AM.
Mr. Iannucci noted that through the planning process the Board will need to identify threats to the current business such as:
· Funding/Contribution levels
· Employer withdrawals
· Misinformed sponsors/stakeholders
· Competing pension arrangements
· Succession (Board, Staff, and Human Resource issues)
· Drains on the fund
· Internal governance/management
Mr. Iannucci described strategic programming as follows:
· Defining projects that will either:
o Move the organization in the desired direction
o Address threats to the business
· Defining project parameters:
o Deliverables
o Timing
o Responsible parties
o Reporting
It was noted that a mission statement should clearly and concisely describe what business an organization is in:
· What “needs” to meet
· What products/services to provide
· What customers we serve
· What market(s) we serve
FCERA’s mission statement, in essence, could read as follows:
“To administer the retirement benefits provided for by law to the members and beneficiaries of the Fresno County Employees’ Retirement Association in a prudent, accurate, and timely manner consistent with fiduciary duties.”
Discussions, questions, and comments followed regarding how the mission statement might differ between the trustees and FCERA staff in that their responsibilities differ.
Discussions ensued regarding to what extent, if any, FCERA requires greater autonomy [from the County] or authority to carry outs its mission in the following areas:
· Budget
· Human resources
· Legal services
· Management information services
Trustee Crow noted that with the exception of human resources FCERA has, for the most part, autonomy in the other areas.
Mr. Peña stated that he is comfortable with FCERA’s relationship with the County and the level of autonomy.
Trustee Savrnoch expressed her desire that FCERA become more autonomous in the area of legal services.
Discussions ensued regarding FCERA’s stakeholders and to what extent, if any, does FCERA need to be more stakeholder-focused as an organization and, if so, which groups will be emphasized and what types of efforts will be put forth. It was noted that the stakeholders include employers, active and retired members, and taxpayers.
Discussions, questions, and comments followed regarding FCERA’s current approach to stakeholder relations. Michael Cunningham, Retired FCERA Member, expressed his appreciation to the Board and Administration for their efforts in communicating with and educating the membership via the internet and the newsletter.
Discussions, questions, and comments followed regarding the differences between stakeholder relationships versus member/customer service relationships. Different approaches were discussed as to how and when to share information with the stakeholders, such as making the SACRS Economic Impact Study available to the Board of Supervisors (BOS) and having an occasional “after hours” Board meeting allowing the membership more opportunity for participation.
Trustee Savrnoch expressed her concern that information, such as scheduled Board meetings, are not being shared with the membership county-wide. Trustee Savrnoch suggested that the membership be notified of Board meetings via “All County” email distribution.
Mr. Peña noted that the Board meeting dates are available on the web-site and the Information Technology Services Department (ITSD) has guidelines as to the use of the “All County” email distribution and it may not be appropriate to notify the membership of the regularly scheduled Board meetings via “All County” email.
Mr. Iannucci noted that, through the Strategic Planning process, the differences between the “customer business” and “stakeholder business” should be well distinguished.
Discussions, questions, and comments followed regarding the importance of educating the stakeholders, mainly the Board of Supervisors, on the “business of retirement” so that sound business decisions can be made.
Discussions, questions, and comments followed regarding the different approaches/avenues to which information is shared with the BOS and County management.
Mr. Iannucci noted that he will summarize the Board’s concerns regarding the stakeholders and present an analysis at a future Board meeting.
Mr. Iannucci stated that because all retirement systems are committed to service quality, service quality must be well defined. Customer service has significant implications on the following areas:
· Organizational structure
· Staffing
· Training and development
· Technology
Mr. Iannucci stated that benchmarks are useful tools in identifying best practices and assessing customer service quality. It was noted that other 1937 Act retirement systems and custom internal benchmarks are good sources for indentifying best practices that FCERA may what to implement for measuring service quality.
Discussions, questions, and comments followed regarding the need for recording data so that custom internal benchmarks can be set before comparing FCERA with other 1937 Act Counties.
Mr. Iannucci suggested that the customer service criteria include the following:
· Customer service culture
· Performance evaluation tied to customer service
· Service quality measurement and reporting
· Customer service benchmarks
· Staff training
· Supporting technology
Chair Jolly expressed his concern that the Board may not be in a position to comment on the customer service criteria in that it is not familiar with the daily office operations. Mr. Peña encouraged the Trustees to spend time at the FCERA office in order to gain a better understanding of the daily operations and customer service issues.
Discussions ensued regarding the level in which Administration feels the customer service criteria are being satisfied. It was noted that, although improvement is needed in all areas, staff training, supporting technology, and customer service culture are satisfactory.
Trustee Gomez joined the Board at 12:25 PM.
Discussions ensued regarding the level in which the Board and Administration feel the FCERA investment program will look in the next 5 years. The discussions focused on the following topics:
· Internal investment resources
· Consulting resources
· Asset classes
· Risk management practices
· Board practices
In response to a question from Chair Jolly regarding the current and future growth of the Plan which is approaching $3 billion, Mr. Peña stated that the Plan’s assets and liabilities will continue to grow overtime.
Discussions, questions, and comments followed regarding the need for, costs of, and risk management issues related to using internal investment resources [investment analyst] as the Plan grows and becomes more complex.
Mr. Iannucci noted that performance management and risk management are the basic approaches to investment programs. Boards can allocate effort to both approaches.
The Performance Management approach includes:
· Manager interviews
· Manager selection
· Manager allocations
· Conducting due diligence
· Resolving member complaints
· Approving purchases and contracts
The Risk Management approach includes:
· Defining risks
· Asset allocation and diversification
· Policy (investment/operations)
· Due diligence process and oversight
· Business continuity and disaster recovery
· Internal controls and audit
· Investment compliance
· Monitoring service providers
· Organizational structure
Discussions, questions, and comments followed regarding the Board’s role in defining risk associated with the investment portfolio and the extent the Board is able to measure and control the amount of risk.
Discussions ensued regarding to the extent in which the Board needs to devote more resources to formally evaluating the performance of its advisors and service providers. It was noted that FCERA does not currently have a system in place for evaluating its advisors and service providers. Mr. Peña noted that Administration is developing a process to evaluate the investment consultant and would be presenting a suggested approach to the Board at a future meeting.
Discussions, questions, and comments followed regarding the importance of establishing an internal audit function. The Board expressed its desire to move forward in this area and requested additional education on the issue.
Discussions ensued regarding the Board’s passive/active role in retirement benefit policy. It was noted that Boards normally do not have authority over benefit design/levels, but may attempt to be influential in the design. Discussions, questions, and comments followed regarding the Board’s current role/position as “administering benefits only” with a desire to be more proactive in retirement legislation using the SACRS legislative platform and other avenues.
Mr. Iannucci stated that retirement systems are major shareholders in the U.S. and world economies and have a responsibility to exercise their duties as shareholders. There are a range of approaches retirement systems may take to exercise their duties such as low, medium, and high level activism. It was noted the Board currently takes a low level approach to Board Governance and a medium level approach to legislation. The Board expressed a desire to take a high level approach to class action lawsuits.
Discussions, questions, and comments followed regarding ways that FCERA should differentiate itself from other retirement systems of similar size. It was noted that emphasis should be placed on risk management, investments, and customer/member service.
Discussions, questions, and comments followed regarding a holistic approach to customer service by combining the different aspects of retirement such as deferred compensation, social security, and health benefits counseling.
Mr. Iannucci stated that developing specific skills such as a strong expertise in stakeholder relations, asset liability, and effective member counseling are strong advantages for successful Board positioning.
The Board addressed possible threats such as such as capital market returns, legislation, union influence, public opinion, and lack of autonomy that may impact its ability to administer retirement benefits.
The Board noted that it would like to address the following areas over the next 18 months:
· Customer service
· Stakeholder relations
· Risk management
· Fully implementing the investment strategy
· Establishing Board creditability
· Fresno Station Business Center
· Setting a policy regarding undistributed earnings
· Communicating directly with the membership
Discussions ensued regarding “County-wide” communication distribution. It was noted that after legal review and discussions with ITSD, the issue will be agendized for discussion at the November 7, 2007 Regular Board Meeting.
Mr. Iannucci stated that a summary of the discussions will be prepared and presented to the Board at a future date.
RECEIVED AND FILED
The Board recessed at 4:30 PM.
The Board reconvened October 18, 2007 and Chair Jolly called the meeting to order at 8:33 AM.