Upload
others
View
3
Download
0
Embed Size (px)
Citation preview
San Joaquin County EmployeesRetirement Association
A G E N D AREGULAR MEETING
SAN JOAQUIN COUNTY EMPLOYEES RETIREMENT ASSOCIATIONBOARD OF RETIREMENT
FRIDAY, APRIL 8, 2016AT 9:00 AM
Location: SJCERA Board Room6 S. El Dorado Street, Suite 400, Stockton, California
1.0 ROLL CALL2.0 PLEDGE OF ALLEGIANCE3.0 APPROVAL OF MINUTES
3.01 Approval of the Minutes for the Regular Meeting of March 11, 2016 33.02 Approval of the Minutes for the Audit Committee Meeting of March 11, 2016 73.03 Board to approve minutes
4.0 CONSENT ITEMS4.01 Service Retirement (53) 104.02 Deferred Members (5) 174.03 Purchase of Service (13) 184.04 Domestic Relations Orders (0)4.05 Deceased Members Report 204.06 Death Benefits (1) 21
5.0 STAFF REPORTS5.01 SJCERA Statistics Report 225.02 Pending Retiree Accounts Receivable Report - First Quarter 2016 305.03 Trustee and Executive Staff Travel
01 Conferences and Events Summary for 2016 33a PIMCO California Public Plan Roundtable 34
02 Summary of Pending Trustee and Executive Staff Travel 3503 Summary of Completed Trustee and Executive Staff Travel 3604 Board to accept and file reports.
5.04 CEO Report01 CEO to provide updates to the Board
6.0 CORRESPONDENCE
6 South El Dorado Street, Suite 400 • Stockton, CA 95202(209) 468-2163 • (209) 468-0480 • www.sjcera.org
SJCERA Regular Meeting • 4/8/2016 • Page 1
6.01 Letters Received6.02 Letters Sent6.03 Reports6.04 Newsletters / Bulletins / Articles
01 NCPERS PERSist Spring 2016 3702 NCPERS The Monitor March 2016 51
7.0 COMMENTS7.01 Comments From the Board of Retirement7.02 Comments From the Public
8.0 CLOSED SESSION - PERSONNEL MATTERSCALIFORNIA GOVERNMENT CODE SECTION 54957EMPLOYEE DISABILITY RETIREMENT APPLICATIONS (4)
9.0 CALENDAR9.01 Financial Meeting, April 29, 2016 at 9:00 AM9.02 Regular Meeting, May 20, 2016 at 9:00 AM9.03 Financial Meeting, May 20, 2016, upon adjournment of the Regular Board Meeting
10.0 ADJOURNMENT
SJCERA Regular Meeting • 4/8/2016 • Page 2
M I N U T E SREGULAR MEETING
SAN JOAQUIN COUNTY EMPLOYEES RETIREMENT ASSOCIATIONBOARD OF RETIREMENTFRIDAY, MARCH 11, 2016
AT 9:00 AMLocation: SJCERA Board Room
6 S. El Dorado Street, Suite 400, Stockton, California
San Joaquin County EmployeesRetirement Association
1.0 ROLL CALL1.01 MEMBERS PRESENT: Shabbir Khan, J.C. Weydert, Cindy Garman, Michael
Restuccia, Katherine Miller, Dave Souza, Adrian Van Houten, and Raymond McCraypresiding.MEMBERS ABSENT: Michael Duffy and Margo PrausSTAFF PRESENT: Chief Executive Officer Annette St. Urbain, Financial Officer LilyCherng, Information Systems Manager Tallie Claypool, Management Analyst III GregFrank, Department Information Systems Specialist II Jordan Regevig and OfficeSecretary Andrea IrelandOTHERS PRESENT: Deputy County Counsel Andrew Eshoo, Graham Schmidt ofCheiron, David Sancewich of PCA, and Chanda Bassett of the San Joaquin CountySheriff’s Department
2.0 PLEDGE OF ALLEGIANCE2.01 Led by J.C. Weydert
3.0 APPROVAL OF MINUTES3.01 Approval of the Minutes for the Regular Meeting of February 12, 2016
01 Board unanimously approved the Minutes of the Regular Meeting ofFebruary 12, 2016.
4.0 CONSENT ITEMS4.01 Service Retirement (48)4.02 Deferred Members (2)4.03 Purchase of Service (22)4.04 Domestic Relations Orders (0)4.05 Deceased Members Report4.06 Board unanimously approved the Consent Items.
5.0 PENSION PLAN RISK DASHBOARD5.01 Demonstration by Graham Schmidt, Consulting Actuary of Cheiron, of this tool
developed by Cheiron to explore various risk measures of the plan5.02 Board accepted the staff recommendation to proceed with the implementation
of the Pension Risk Dashboard.
6 South El Dorado Street, Suite 400 • Stockton, CA 95202(209) 468-2163 • (209) 468-0480 • www.sjcera.org
SJCERA Regular Meeting • 3/11/2016 • Page 1
6.0 CRISIS RISK OFFSET (CRO) MANAGER STRUCTURE6.01 Alternative Risk Premia Manager Search Recommendation for CRO Class6.02 Board directed consultant to arrange for AQR and P/E Investments to make
presentations to the Board at the Financial Meeting in March regarding theirAlternative Risk Premia strategy.
7.0 STAFF REPORTS7.01 Trustee and Executive Staff Travel
01 Conferences and Events Summary for 2016a NCPERS Accredited Fiduciary Programb NCPERS Annual Conference & Exhibition
02 Summary of Pending Trustee and Executive Staff Travel03 Summary of Completed Trustee and Executive Staff Travel and Travel Report (1)
a 2016 VIP Conference04 Board accepted and filed reports.
7.02 CEO Report01 Courts Payroll System / Data to SJCERA - SJCERA received data from the
Courts for all prior pay periods and should have Court employees input intoSJCERA’s Active Member System in the near future.
02 New Third Party Administrator for CMCP on hold - San Joaquin CountyBenefits notified SJCERA that the County decided to start the RFP process overfor their selection of a new Third Party Administrator. This will likely delay thechange to October 1, 2016 or January 1, 2017.
03 Social Security Administration Inquiry - SJCERA received an inquiry from theSocial Security Administration in regards to finding a solution for GovernmentPension Offset. They would like to set up data exchanges with local entities,including SJCERA, to obtain timely data on pensions that are not covered bySocial Security so the Government Pension Offset can be applied correctly Fiveother CERAs received a similar inquiry.(SJCERA IT staff subsequently confirmed with SSA that this was a fraudulent e-mail and not a legitimaterequest from the SSA. CEO St. Urbain shared this information with her colleagues around the state.)
04 CALAPRS General Assembly - CEO St. Urbain stated she heard positivefeedback from fellow planning committee members on the success of theconference and hopes the SJCERA trustees who attended found it worthwhile.
05 NCPERS Programs - The National Conference in May will be held in San Diego.CEO St. Urbain noted that the new Accredited Fiduciary Program may beworthwhile for Trustees. The Room block is available until April 22nd.
06 RPESJC Appreciation Lunch - A reminder that the lunch will follow the FinancialMeeting on April 22nd.
07 Staffing Update - CEO St. Urbain informed the Board that Dana Duley accepteda promotion at the District Attorney’s Office and will be leaving SJCERA as earlyas March 18th; pending completion of her background review. Dana has been avaluable member of the SJCERA team and will be missed. We wish her everysuccess in her new position.
SJCERA Regular Meeting • 3/11/2016 • Page 2
8.0 CORRESPONDENCE8.01 Letters Received8.02 Letters Sent8.03 Reports8.04 Newsletters / Bulletins / Articles
01 NCPERS PERSist Winter 201602 NCPERS The Monitor February 2016
9.0 COMMENTS9.01 Comments From the Board of Retirement - None9.02 Comments From the Public - None
10.0 CLOSED SESSION - PERSONNEL MATTERSCALIFORNIA GOVERNMENT CODE SECTION 54957
10.01 EMPLOYEE DISABILITY RETIREMENT APPLICATIONS (3)
The Chair convened a Closed Session at 10:25 a.m. The Chair adjourned the ClosedSession and reconvened the Open Session at 12:05 p.m. Counsel reported that inClosed Session the Board took the following actions on personnel matters:01 Eligibilty Worker II
Nonservice-Connected Disability
The Board unanimously granted the applicant a Nonservice-ConnectedDisability Retirement.
02 Dialysis Patient Care TechnicianNonservice-Connected Disability
The Board unanimously dismissed the application for a nonservice-connected disability retirement for the applicant’s failure to diligentlypursue the application.
03 Child Support Officer IIService and Nonservice-Connected Disability
The Board unanimously dismissed the application for a service andnonservice-connected disability retirement for the applicant’s failure todiligently pursue the application.
10.02 PUBLIC EMPLOYEE DISCIPLINE/DISMISSAL/RELEASE01 Pursuant to Government Code Section 31522.3, the Board voted to release the
Assistant CEO for no cause at a date not later than August 31, 2016, such date tobe determined by mutual agreement between the Assistant CEO and the Board.The motion, made by Ms. Garman, seconded by Mr. Khan, carried with sixaffirmative votes with Mr. Duffy absent, Mr. Van Houten abstaining, and Mr.Weydert voting “no.”
11.0 CALENDAR11.01 Financial Meeting, March 25, 2016 at 9:00 AM11.02 Regular Meeting, April 8, 2016 at 9:00 AM
SJCERA Regular Meeting • 3/11/2016 • Page 3
12.0 ADJOURNMENT12.01 There being no further business the meeting was adjourned at 12:09 p.m.
Respectfully Submitted:
________________________Raymond McCray, Chair
Attest:
________________________Michael Restuccia, Secretary
SJCERA Regular Meeting • 3/11/2016 • Page 4
M I N U T E SAUDIT COMMITTEE MEETING
SAN JOAQUIN COUNTY EMPLOYEES RETIREMENT ASSOCIATIONBOARD OF RETIREMENTFRIDAY, MARCH 11, 2016
AT 12:13 PMLocation: SJCERA Conference Room
6 S. El Dorado Street, Suite 400, Stockton, California
San Joaquin County EmployeesRetirement Association
1.0 ROLL CALL1.01 MEMBERS PRESENT: Raymond McCray, Michael Restuccia, and Shabbir Khan
presidingMEMBERS ABSENT: Michael DuffySTAFF PRESENT: Chief Executive Officer Annette H. St. Urbain, RetirementFinancial Officer Lily Cherng, Management Analyst III Greg Frank, RetirementInvestment Accountant Felipa Maliwat, and Office Secretary Andrea IrelandOTHERS PRESENT: County Counsel Andrew Eshoo and Managing Partner ofBrown Armstrong Accountancy Corporation Andrew Paulden
2.0 2015 AUDIT ENTRANCE CONFERENCE2.01 Agenda from Mr. Andrew Paulden, CPA, Managing Partner of Brown Armstrong
Accountancy Corporation2.02 Critical Dates List2.03 Letter dated January 26, 2016 from Brown Armstrong for audit objectives and
procedures2.04 Mr. Paulden briefly reviewed the Audit Committee Entrance Meeting agenda
(attached), which summarizes the audit plan, significant areas the audit will focus on,and expected timeline/due dates and reports that will be issued. He expressed hisappreciation to SJCERA staff for having a pre-audit conference call in late 2015 toprepare for the audit. He indicated there were no findings or issues during the interimfieldwork conducted this week. He is happy to report that the implementation forGASB 67/68 in 2014 went smoothly.
2.05 The new GASB Statement 72, Fair Value Measurement and Application, will beimplemented by SJCERA for its 2016 financial statements. GASB’s goal is toenhance comparability of governmental financial statements by requiring fair valuemeasurement for certain assets and liabilities using a consistent definition andaccepted valuation techniques. This standard expands fair value disclosures toprovide comprehensive information for financial statement users about the impact offair value measurements on a governmental entity’s financial position.
2.06 Committee Member McCray indicated SJCERA is in the process of implementing thenew strategic asset allocation policy beginning January 2016. Mr. Paulden advisedthe new asset allocation policy and implementation should be disclosed as asubsequent event in the 2015 financial statements notes/disclosures.
6 South El Dorado Street, Suite 400 • Stockton, CA 95202(209) 468-2163 • (209) 468-0480 • www.sjcera.org
SJCERA Audit Committee Meeting • 3/11/2016 • Page 1
2.07 An Executive Session was held, which the listing had been inadvertently omitted fromthe published agenda. The Chair convened Executive Session at 12:25 p.m., whichconcluded at 12:37 p.m. There was nothing to report from Executive Session.
3.0 NEXT MEETING OF THE AUDIT COMMITTEE3.01 May 20, 2016 upon adjournment of the Board’s Financial Meeting that follows the
Board’s Regular Meeting.4.0 ADJOURNMENT
4.01 There being no further business, the meeting was adjourned at 12:46 p.m.
Respectfully Submitted:
______________________________Shabbir Khan, Audit Committee Chair
SJCERA Audit Committee Meeting • 3/11/2016 • Page 2
San Joaquin County Employees’ Retirement Association December 31, 2015 Audit Committee Entrance Meeting
March 11, 2016 10:00 AM
1. Overview
a. Summary of Audit Plan
i. The Audit Process
a.) Timeline coordination with SJCERA staff b.) Implementation of Risk Based Auditing Procedures c.) Understanding and evaluation of SJCERA internal controls
through inquiry and observation d.) Confirmation of cash and investments, legal, active and retired
participants, custodian, investment consultant and actuary e.) Final fieldwork f.) Report presentation
ii. Significant Audit Areas
a.) GASB 67 and 68 b.) Investments and related earnings c.) Participant data and actuary information d.) Employee and employer contributions e.) Benefit payments f.) SAS 99 – Fraud
iii. Audit Reports Expected to be Issued
a.) Independent auditors report on financial statements b.) Independent auditors report on compliance and on internal
control over financial reporting and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards; reportable conditions that are not material weaknesses
c.) Required communication to the audit committee in accordance with professional standards
d.) Agreed upon conditions designed to increase efficiency, internal controls and/or financial reporting.
b. Timing
i. Planning – now through completion of audit ii. See attached Critical Dates List
2. Questions and/or Comments? 3. Attachments
a. Critical Dates List
San Joaquin County Employees RetirementAssociation
April 2016
PUBLIC
4.01 Service Retirement ConsentRICHARD A ALDRED Sr Deputy Dir-SJGH Clinical
Hosp AdministrationMember Type: GeneralYears of Service: 17y 11m 00dRetirement Date: 4/1/2016
01
DARENDA D AUSTIN Senior Office AssistantMental Health - Clerical
Member Type: GeneralYears of Service: 29y 00m 24dRetirement Date: 3/21/2016
02
GLORIA P BARNETT Eligibility Worker IIHSA - Eligibility Staff
Member Type: GeneralYears of Service: 15y 10m 23dRetirement Date: 3/21/2016
03
LARRY K BEHNKE Deputy Sheriff IISheriff-Custody-Regular Staff
Member Type: SafetyYears of Service: 30y 07m 28dRetirement Date: 4/1/2016
04
CARMELITA BERMUNDO Clinical Social Worker IIHosp Social Services
Member Type: GeneralYears of Service: 27y 08m 05dRetirement Date: 4/1/2016
05
EUSEBIO T CASTANETO Operating Room Technician IIHosp Surgery - Recovery
Member Type: GeneralYears of Service: 29y 08m 14dRetirement Date: 4/1/2016
06
JILL A DEGRENDELE Staff Nurse IV - InpatientHosp Intensive Care Nursery
Member Type: GeneralYears of Service: 23y 10m 21dRetirement Date: 4/1/2016
07
BETTY J DENNISON Public Health Nurse IIPublic Health - TB CD
Member Type: GeneralYears of Service: 20y 09m 13dRetirement Date: 4/1/2016Comments: Incoming reciprocity and concurrent retirement with CalPERS.
08
4/1/2016 11:18:51 AM Page: 1
San Joaquin County Employees RetirementAssociation
April 2016
PUBLIC
TERRI G FARANO Development Services Sr TechCommunity Development Services
Member Type: GeneralYears of Service: 39y 09m 11dRetirement Date: 4/1/2016
09
BRIAN J FITZPATRICK Staff Nurse IV - InpatientMental Health-Childrens Srvc
Member Type: GeneralYears of Service: 05y 10m 11dRetirement Date: 2/16/2016
10
DORA FLOREZ Substance Abuse Counselor IISubstance Abuse Services
Member Type: GeneralYears of Service: 17y 11m 05dRetirement Date: 4/1/2016
11
JOSE A FRANCO Equipment Operator IINorth County Landfill
Member Type: GeneralYears of Service: 22y 04m 27dRetirement Date: 3/14/2016
12
PHILIP B GONZALES Lead Transportation WorkerHSA - Admin Support
Member Type: GeneralYears of Service: 42y 06m 18dRetirement Date: 4/1/2016
13
DAVID C GREEN Eligibility Worker IIIHSA - Eligibility Staff
Member Type: GeneralYears of Service: 24y 07m 09dRetirement Date: 3/7/2016
14
BERNARDINO A GUSMAN Solid Waste Recovery WorkerSW - North County Recycling
Member Type: GeneralYears of Service: 28y 07m 25dRetirement Date: 3/18/2016
15
SUSAN J HANSEN HSA Program Supervisor IIHSA - Admin Support
Member Type: GeneralYears of Service: 30y 01m 04dRetirement Date: 3/27/2016
16
DEBORAH L HAYES Deputy Sheriff IISheriff-Custody-Regular Staff
Member Type: SafetyYears of Service: 21y 02m 28dRetirement Date: 3/7/2016
17
4/1/2016 11:18:51 AM Page: 2
San Joaquin County Employees RetirementAssociation
April 2016
PUBLIC
CAROL J HOLBERT Child Support SupervisorChild Support Svs
Member Type: GeneralYears of Service: 19y 02m 29dRetirement Date: 4/1/2016
18
RICHARD D JIMENEZ Correctional OfficerSheriff-Custody-Regular Staff
Member Type: SafetyYears of Service: 26y 03m 02dRetirement Date: 3/21/2016
19
DEBORAH L KININMONTH Office Assistant SupervisorMental Health
Member Type: GeneralYears of Service: 16y 07m 04dRetirement Date: 4/1/2016Comments: Outgoing reciprocity and concurrent retirement with CalPERS.
20
JOHN G LAACK Non-memberN/A
Member Type: GeneralYears of Service: 11y 02m 22dRetirement Date: 3/1/2016Comments: General retirement after DRO split account.
21
ROSA S LEE Asst County AdministratorCounty Administrator
Member Type: GeneralYears of Service: 37y 00m 24dRetirement Date: 4/1/2016
22
TAMARA L LOWE Senior Office AssistantEnvironmental Health
Member Type: GeneralYears of Service: 23y 09m 29dRetirement Date: 4/1/2016
23
JOEL E MADARANG Custody Recreation SupervisorSheriff-Cust-Prisoner Welfare
Member Type: GeneralYears of Service: 14y 09m 13dRetirement Date: 4/1/2016
24
MARILYN J MARTIN Deputy Chief Probation OfficeProbation - Administration
Member Type: GeneralYears of Service: 01y 07m 02dRetirement Date: 4/1/2016
25
MARILYN J MARTIN Deputy Chief Probation OfficeProbation - Administration
Member Type: SafetyYears of Service: 25y 03m 19dRetirement Date: 4/1/2016
26
4/1/2016 11:18:51 AM Page: 3
San Joaquin County Employees RetirementAssociation
April 2016
PUBLIC
LUIS H MAYORGA Social Worker IIHSA - Services Staff
Member Type: GeneralYears of Service: 32y 10m 28dRetirement Date: 2/24/2016
27
GUADALUPE MENDOZA Outpatient Clinic AssistantHosp Childrens Health Services
Member Type: GeneralYears of Service: 22y 10m 13dRetirement Date: 4/1/2016
28
KEVIN E MING SergeantSheriff - Patrol
Member Type: SafetyYears of Service: 28y 03m 29dRetirement Date: 4/1/2016
29
MICHELE L MITCHELL Office Assistant SpecialistPublic Works - Administration
Member Type: GeneralYears of Service: 10y 05m 04dRetirement Date: 4/1/2016
30
AMY D NELSON Staff Nurse IV - InpatientHosp Intensive Care Nursery
Member Type: GeneralYears of Service: 11y 04m 16dRetirement Date: 2/2/2016
31
DIANNA L PAUL Child Support Officer IIChild Support Svs
Member Type: GeneralYears of Service: 17y 03m 08dRetirement Date: 4/1/2016
32
JANICE R PENCE Social Worker Supervisor IIHSA - Services Staff
Member Type: GeneralYears of Service: 24y 11m 12dRetirement Date: 4/1/2016
33
REMEDIOS D QUITORIANO Staff Nurse IV - InpatientHosp Labor-Del-Rcvry-Post Part
Member Type: GeneralYears of Service: 32y 01m 26dRetirement Date: 3/1/2016
34
MARVIS D RODDEWIG Senior Office AssistantHSA - Clerical Support
Member Type: GeneralYears of Service: 16y 01m 07dRetirement Date: 4/1/2016
35
4/1/2016 11:18:51 AM Page: 4
San Joaquin County Employees RetirementAssociation
April 2016
PUBLIC
MARCELA L RONQUILLO Supply Distribution TechniciaHosp Distribution Services
Member Type: GeneralYears of Service: 16y 09m 22dRetirement Date: 4/1/2016
36
PAUL E SCHULTZ Deputy Public Defender IVPublic Defender
Member Type: GeneralYears of Service: 29y 11m 26dRetirement Date: 3/21/2016
37
JULIE A SHANDS Courts-Legal ProcessClerk IIICourt-Court Oper-Family Law
Member Type: GeneralYears of Service: 17y 07m 01dRetirement Date: 4/1/2016
38
MARK M SHINMOTO PharmacistHosp Pharmacy
Member Type: GeneralYears of Service: 23y 11m 26dRetirement Date: 4/1/2016
39
JUDY L SHORT Eligibility Worker IIHSA - Eligibility Staff
Member Type: GeneralYears of Service: 28y 00m 20dRetirement Date: 4/1/2016
40
VIRGINIA Q SILVA Courts-Legal ProcessClerk IIICourt - Jury Service
Member Type: GeneralYears of Service: 15y 04m 26dRetirement Date: 4/1/2016
41
GLENDA SLAUGHTER Social Worker IVHSA - Services Staff
Member Type: GeneralYears of Service: 26y 01m 07dRetirement Date: 4/1/2016
42
MICHAEL P SMITH Crafts Worker IIIFacilities Management
Member Type: GeneralYears of Service: 25y 07m 29dRetirement Date: 3/28/2016
43
BERTHA S SOTELO Social Worker IIHSA - Services Staff
Member Type: GeneralYears of Service: 34y 06m 21dRetirement Date: 4/1/2016
44
4/1/2016 11:18:51 AM Page: 5
San Joaquin County Employees RetirementAssociation
April 2016
PUBLIC
KEITH E SPERRY Appraiser IIIAssessor
Member Type: GeneralYears of Service: 19y 07m 17dRetirement Date: 4/1/2016
45
KAREN THAMES Administrative Assistant IPublic Works - Fiscal
Member Type: GeneralYears of Service: 09y 11m 27dRetirement Date: 5/2/2016
46
THERESA TORRES Office SecretaryBehavioral Health Admin
Member Type: GeneralYears of Service: 29y 03m 12dRetirement Date: 4/1/2016
47
MICHAEL J VANGROUW LieutenantSheriff - Patrol
Member Type: SafetyYears of Service: 27y 07m 02dRetirement Date: 3/21/2016
48
EWA J WARREN Clinical Social Worker IIHosp Social Services
Member Type: GeneralYears of Service: 16y 07m 04dRetirement Date: 3/21/2016
49
ARLIN R WATSON Radiologic Technologist IIHospital Radiology
Member Type: GeneralYears of Service: 25y 00m 11dRetirement Date: 3/21/2016
50
CYNTHIA L WILLIAMS Nursing Department ManagerHosp Med-Surg Intensive Care
Member Type: GeneralYears of Service: 30y 01m 20dRetirement Date: 3/31/2016
51
JOHN D WILLIAMS Sheriff 's CaptainSheriff - CAL MMET
Member Type: SafetyYears of Service: 25y 09m 05dRetirement Date: 3/21/2016
52
TODD S WRIGHT LieutenantSheriff - Patrol
Member Type: SafetyYears of Service: 18y 08m 29dRetirement Date: 4/1/2016
53
4/1/2016 11:18:51 AM Page: 6
San Joaquin County Employees RetirementAssociation
April 2016
PUBLIC
4.02 Deferred Members ConsentKIMBERLY BARRIGA Staff Nurse IV - Inpatient
Hosp Progressive Care UnitMember Type: GeneralDeferredDeferral Date: 1/11/2016Years of Service: 9y 8m 18dComments: Established membership with StanCERA.
01
MELISSA C DEMETRAL Deputy District Attorney IDistrict Attorney
Member Type: GeneralDeferred - CalPERSDeferral Date: 1/25/2016Years of Service: 0y 11m 1d
02
VICTOR M GUERRERO Cashier ClerkLovelace Transfer District
Member Type: GeneralDeferred - CalPERSDeferral Date: 1/11/2016Years of Service: 2y 0m 18d
03
JENNIFER O'BYRNE Substance Abuse Counselor IIMental Health Services
Member Type: GeneralDeferred - CalPERSDeferral Date: 1/1/2016Years of Service: 1y 9m 11d
04
ANGELICA SANDOVAL MARIN Sr Reg Environmental Hlth SpeEnvironmental Health
Member Type: GeneralDeferred - CalPERSDeferral Date: 1/28/2016Years of Service: 5y 7m 8d
05
4/1/2016 11:18:51 AM Page: 7
San Joaquin County Employees RetirementAssociation
April 2016
PUBLIC
4.03 Purchase of Service ConsentDARENDA D AUSTIN Senior Office Assistant
Mental Health - ClericalMember Type: GeneralYears of Service: 00y 01m 11d Medical Leave of Absence
01
GLORIA P BARNETT Eligibility Worker IIHSA - Eligibility Staff
Member Type: GeneralYears of Service: 00y 00m 29d Medical Leave of Absence
02
TINA L BRUNS Staff Nurse V Clincl Nrs-InpatHosp Surgery - Recovery
Member Type: GeneralYears of Service: 00y 00m 11d Prior County Service
03
ZAINAB H CABABAT Staff Nurse IV - InpatientHosp Surgery - Recovery
Member Type: GeneralYears of Service: 04y 00m 19d Prior County Service
04
VIRGINIA L GLOVER Elections TechnicianRegistrar of Voters
Member Type: GeneralYears of Service: 00y 01m 16d Medical Leave of Absence
05
LUCIANO LOPEZ Mental Health Specialist IIMental HealthPHF-Inpatient Fac
Member Type: GeneralYears of Service: 01y 06m 00d Redeposit-Previously Withdrawn Contributions
06
KENNETH K MELGOZA Chief Dist Atty InvestigatorDistrict Attorney
Member Type: SafetyYears of Service: 00y 11m 25d Public Service
07
CANDY J MORGAN DeferredN/A
Member Type: GeneralYears of Service: 03y 06m 00d Prior County Service
08
REMEDIOS D QUITORIANO Staff Nurse IV - InpatientHosp Labor-Del-Rcvry-Post Part
Member Type: GeneralYears of Service: 00y 00m 27d Medical Leave of Absence
09
ROSIE A RANGEL Substance Abuse Counselor IISubstance Abuse Services
Member Type: GeneralYears of Service: 00y 04m 13d Medical Leave of Absence
10
GLENDA SLAUGHTER Social Worker IVHSA - Services Staff
Member Type: GeneralYears of Service: 00y 05m 01d Redeposit-Previously Withdrawn Contributions
11
KEITH E SPERRY Appraiser IIIAssessor
Member Type: GeneralYears of Service: 00y 00m 20d Medical Leave of Absence
12
4/1/2016 11:18:51 AM Page: 8
San Joaquin County Employees RetirementAssociation
April 2016
PUBLIC
MARGIE A VALDEZ Courts-Legal ProcessClerk IIICourt-Court Oper-Traffic Court
Member Type: GeneralYears of Service: 01y 00m 24d Medical Leave of Absence
13
4/1/2016 11:18:51 AM Page: 9
PUBLICSan Joaquin County Employees' Retirement Association
April 2016
01 DECEASED ACTIVE / DEFERRED MEMBERS
DATE OF DEATH DEPARTMENT
JENNIFER SIMS 03/16/2016 Mental Health-Adult Outpatient
02 DECEASED RETIRED MEMBERS
MOLLY BUSTOS 02/26/2016 SJGH
JOSEPH COLGAN 02/28/2016 Hospital Plant Operations
NELLIE HINOJOS 02/29/2016 Public Health
MALCOLM CURRY 03/01/2016 Probation
GWENDOLYN SNELL 03/02/2016 Public Health
FLOYD VERT 03/04/2016 SJGH
PAUL WERNER 03/06/2016 Mental Health
MARGIE LONG 03/07/2016 SJGH
EMILY CONCHITE 03/12/2016 Revenue and Recovery
IRYNA SHEVCHENKO 03/18/2016 Information Systems Division
03 DECEASED BENEFICIARIES
LEON TOLISON 02/29/2016
NORMA FUNK 03/05/2016
JAMES JACKSON 03/10/2016
EUNICE PREEO 03/19/2016
3/28/16 12:27 PM
4.05 Deceased Members Report Consent
PUBLIC San Joaquin County Employees RetirementAssociationApril 2016
4.06 Death Benefits ConsentCHERYL J ALLEN Senior Office Assistant
HSA - Clerical SupportMember Type: General
01
3/28/2016 11:28:55 AM Page: 11
Date of Death: 02/14/2016Benefits to Sherell Mandolph, DaughterOption: Death Benefit: Lump sum payment per Section 31781.
111111 STATISTICS REPORT
1st QUARTER 2016
2015* 2014 2013 2012 2011 2010
Active 5,8500000 5,7060000 5,55300000 5,2950000 5,2540000 5,4730000
Membership*Information
Deferred 1,4600000 1,4350000 1,41100000 1,4000000 1,4180000 1,4280000
Subtotal************Non5Retired 7,310**** 7,141**** 6,964***** 6,695**** 6,672**** 6,901****
Service0Retired 4,0500000 3,9090000 3,74300000 3,6270000 3,4310000 3,2680000
Disabled 6100000000 5980000000 58700000000 5820000000 5710000000 5710000000
Beneficiaries 7700000000 7420000000 71100000000 6880000000 6830000000 6500000000
Subtotal*Retired 5,430**** 5,249**** 5,041***** 4,897**** 4,685**** 4,489****
TOTALS 12,740* 12,390* 12,005** 11,592* 11,357* 11,390**"EstimatedSource:00Annual0Actuarial0Valuation0Report0as0of01/1/2015
0"
50"
100"
150"
200"
250"
300"
SVC"Ret" Deferred"SVC"Purch" DRO" Deaths" Disab"Ret"
Annual&Member&Benefit&Ac0vity&
2013"
2014"
2015"
2016"(YTD)"
Page 1 of 8
111111
STATISTICS REPORT
1st QUARTER 2016
2014 2013 2012 2011 2010General'Members&&&Average&Benefit $2,308 $2,194 $2,104 $2,001 $1,937&&&Number&of&Payees 4,358 4,172 4,041 3,871 3,697
Safety'Members&&&Average&Benefit $4,292 $4,176 $4,090 $3,900 $3,825&&&Number&of&Payees 891 869 856 814 792
General'&'Safety'Members&&&Average&Benefit $2,645 $2,536 $2,451 $2,331 $2,270&&&Number&of&Payees 5,249 5,041 4,897 4,685 4,489
Total'Benefit'Payments $166.6 $154.2 $143.7 $131.6 $121.2(Millions)
%'Increase 8.0% 7.3% 9.2% 8.6% 7.6%
Source:&&Annual&Actuarial&Valuation&Report&as&of&1/1/2015
Schedule'of'Average'Benefit'Payments
2016%%%%(YTD)* 2015* 2014 2013 2012 2011
Employee $8 17% $30 17% $27% 16% $23% 16% $20% 16% $14% 11%Employer 41 83% 150 83% 137 84% 120% 84% 108% 84% 113% 89%%%%Total% $49% 100% $180% 100% $164 100% $142% 100% $128% 100% $127% 100%
Annual%Active%%%%%%%%%%Member%Payroll: $409% $402% $396% $389% $366% $356%
*Estimated
Source: Annual Financial Report
Employer)&)Employee)Contributions)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))($)Millions)
Page 2 of 8
111111
STATISTICS REPORT
1st QUARTER 2016
Projections of Assets, Liabilities, and Contributions
Using actual (unaudited) -1.4% investment return for calendar year 2015, and 7.50% assumed return for each year thereafter. All other assumptions and methods are as contained in the annual actuarial valuation report as of 1/1/2015. To the extent that actual plan experience deviates from the underlying assumptions and methods, or there are any changes in plan assumptions or provisions, the actual results would vary accordingly.
TOTAL PLAN
Scales: Percentages across top show “Funding Ratio” for each year Dollar amounts top left are in $ millions Percentages bottom left show contribution rates as a Percentage of Covered Payroll Yellow bars: Employer Share (composite across all benefit tiers and cost-sharing arrangements) Green bars: Employee Share (composite across all benefit tiers and cost-sharing arrangements)
Page 3 of 8
222222
STATISTICS REPORT
1st QUARTER 2016
GENERAL PLAN
SAFETY PLAN
Scales: Percentages across top show “Funded Ratio” for each year Dollar amounts top left are in $ millions Percentages bottom left show contribution rates as a Percentage of Covered Payroll Yellow bars: Employer Share (composite across all benefit tiers and cost-sharing arrangements) Green bars: Employee Share (composite across all benefit tiers and cost-sharing arrangements)
Page 4 of 8
111111
STATISTICS REPORT
1st QUARTER 2016
Historical Market Value of Assets/Actuarial Accrued Liabilty/UAL
* Estimated
0.0#
0.5#
1.0#
1.5#
2.0#
2.5#
3.0#
3.5#
4.0#
2015*# 2014# 2013# 2012# 2011#
Actuarial#Accrued#Liability# MV#of#Assets# Unfunded#AAL#
UAL AVA%% MVA%%2012 $%918%M 70% 63%2013 $%1.228%M 63% 64%2014 $%1.277%M 64% 65%2015 $1.260%M 66% 66%
FUNDED%RATIOVal%DateJan%1st
Page 5 of 8
111111
STATISTICS REPORT
1st QUARTER 2016
Source: RMS data extracts
% of 2012 2011 2010Tier I Tier II Total Tier I Tier II
County of San Joaquin!!General!Members 4,864 918 5,140 507 5,379 5,308 5,476!!Safety!Members 861 59 881 12 901 920 945 Total 5,725 977 93.9% 6,021 519 6,280 6,228 6,421
Superior Court!!General!Members 263 38 269 20 289 326 357!!Safety!Members 0 0 0 0 0 0 0 Total 263 38 4.2% 269 20 289 326 357
Lathrop-Manteca Rural Fire Protection Dist!!General!Members 1 1 1 0 1 0 0!!Safety!Members 42 7 43 3 45 39 41 Total 43 8 0.7% 44 3 46 39 41
Waterloo-Morada Rural Fire Protection Dist!!General!Members 0 0 0 0 0 0 1!!Safety!Members 12 6 13 5 15 15 17 Total 12 6 0.3% 13 5 15 15 18
Other Special Districts (General Members)Local!Agency!Formation!Commission 0 0 0.0% 1 0 1 1 2Mountain!House!Community!Services!Dist 9 9 0.3% 13 5 16 14 14SJC!Historical!Society!&!Museum 2 0 0.0% 2 0 2 2 2SJC Law Library 1 0 0.0% 2 0 2 1 1SJC!Mosquito!&!Vector!Control!District 32 7 0.5% 38 2 38 38 37Tracy!Public!Cemetery!District 5 4 0.1% 6 3 6 8 7 Totals 49 20 1.0% 62 10 65 64 63
6,092 1,049 6,409 557
Grand Total 100.0% 6,695 6,672 6,900
This!table!will!be!updated!annuallySource: Annual Financial Report
20132014
Active'Membership'by'Participating'Employer
7,141 6,966
Active'Membership'by'Participating'Employer
12/1/15 12/1/14 DIFFERENCENUMBER0OF0PAYEES000Retiree 1,252 1,281 (29)000Beneficiary 314 305 9000000Total0Payees 1,566 1,586 (20)
000RETIREE0MONTHLY0GROSS0ALLOWANCE!!!!!AVERAGE!'!With!Subsidy $2,461 $2,437 24!!!!!AVERAGE!'!Without!Subsidy $2,294 $2,267 270000000000DIFFERENCE $167 $170 (3)
000BENEFICARY0MONTHLY0GROSS0ALLOWANCE!!!!!AVERAGE!'!With!Subsidy $2,077 $1,947 130!!!!!AVERAGE!'!Without!Subsidy $1,961 $1,833 1280000000000DIFFERENCE $116 $114 2
000COMBINED0MONTHLY0GROSS0ALLOWANCE!!!!!AVERAGE!'!With!Subsidy $2,384 $2,343 41!!!!!AVERAGE!'!Without!Subsidy $2,228 $2,183 450000000000DIFFERENCE $157 $160 (3)
Post019820Supplemental0Benefit0000000000000000000000000000000000000000000000000000000000000000000000000000000000
Page 6 of 8
111111
STATISTICS REPORT
1st QUARTER 2016
Source: Annual Actuarial Valuation Report as of 1/1/2015 2015 Return on Market Value was -1.4% per Financial Statements (unaudited)
Return'on'Market'Value
Return'on'Actuarial'Value
Increase'in'CPI
1995 25.3% 21.7% 2.5%1996 13.5% 12.2% 3.3%1997 17.3% 13.9% 1.7%1998 9.9% 13.3% 1.6%1999 13.7% 15.1% 2.7%2000 3.2% 11.5% 3.4%2001 A0.1% 8.8% 1.6%2002 A5.5% 4.7% 2.4%2003 25.5% 6.8% 1.9%2004 11.8% 6.6% 3.3%2005 6.9% 7.2% 3.4%2006 12.7% 9.6% 2.5%2007 6.9% 11.2% 4.1%2008 A30.1% A14.3% A0.5%2009 11.4% 11.6% 2.5%2010 12.4% 6.4% 1.5%2011 1.3% A1.8% 3.0%2012 11.7% A0.2% 1.7%2013 9.2% 8.5% 1.7%2014 4.7% 7.5% 0.8%
Compounded'''''''''15'Year'Average
4.7% 5.4% 2.2%
Compounded''''''''''''10'Year'Average
3.9% 4.3% 2.0%
Compounded'''''''''''5'Year'Average
7.8% 4.0% 1.7%
Investment(Rates(of(Return
2014 2011 2003 Prior7.50% 7.75% 8.00% 8.25%
Effective5JanuaryNominal(Rate(of(Return(Assumption
Page 7 of 8
111111
STATISTICS REPORT
1st QUARTER 2016
* Includes 3% public real estate securities ** Includes 7% private real estate equity investments
30.0%%
12.0%%
10.0%%14.0%%
14.0%%
20.0%%
Target'Investment'Alloca1on'''''''''''''''''''''''''''''
(Eff.'1/01/16)'
Global%Public%Equity*%
Private%Apprecia<on**%
Stable%Fixed%Income%
Credit%
Risk%Parity%
Crisis%Risk%Offset%
34.0%&
11.0%&12.0%&
15.0%&
13.0%&
11.0%&
4.0%&
2016%Actual%Alloca-on%%(3/31/16%MVA%Unaudited)%
Global&Public&Equity*&
Private&Apprecia=on**&
Stable&Fixed&Income&
Credit&
Risk&Parity&
Crisis&Risk&Offset&
Cash&
34%$
10%$24%$
10%$
7%$
15%$
Target'Investment'Alloca1on''''''''''''''''''''''''''
(Through'12/31/15)'
Public$Equity$
Real$Estate$
Fixed$Income$
Risk$Parity$
Real$Assets$
Global$OpportunisEc$
34%$
10%$25%$
9%$
7%$
15%$
Actual'Alloca)on'(As'of'12/31/15)'
Public$Equity$
Real$Estate$
Fixed$Income$
Risk$Parity$
Real$Assets$
Global$OpportunisFc$
Page 8 of 8
Board of Retirement Regular Meeting San Joaquin County Employees’ Retirement Association
Agenda Item 5.02 April 08, 2016 SUBJECT: Pending Retiree Accounts Receivable – 1st Quarter SUBMITTED FOR: ___ CONSENT ___ ACTION X INFORMATION RECOMMENDATION This report is submitted for the Board’s information. PURPOSE To report the quarterly summary of pending accounts receivables for SJCERA retirees as of March 31, 2016.
1st Quarter JANUARY to MARCH 2016
Employee Retirement Total Payments Current Monthly Payment Payments First Reportedor Mbr ID Date Receivable Began Balance Payment Description will End To Board
1 202326 02/01/04 $4,614.52 12/01/08 $1,321.20 $40.98 10% of May 2015 allow 12/1/2019 Dec-09
2 214605 07/15/09 11,475.48 05/01/11 $10,636.91 $14.99 10% of May 2015 allow 12/1/2082 Jul-11
3 215257 09/01/12 13,580.90 02/01/14 $12,721.51 $33.71 10% of May 2015 allow 4/1/2050 Apr-14
4 202011 05/19/02 35,537.23 11/01/15 $35,346.48 38.15* 10% of May 2015 allow 12/1/2027 Jan-16
5 203962 02/05/07 2,842.74 11/01/15 $2,342.74 $100.00 Fixed dollar amount 3/1/2018 Jan-16
6 226032 07/22/15 3,371.77 01/01/16 $2,414.08 $319.23 Fixed dollar amount 11/1/2016 Apr-16
* Payments will increase when member receives full SCDR allowance DISCUSSION The receivable listed above as Item 6 was initiated since the last report on January 8, 2016. Receivable #6 for Mbr ID: 226032 Retirement Date: July 22, 2015 Total Receivable: $ 3,371.77 Current Balance Due: $ 2,414.08 Current Monthly Payment: $ 319.23 Payments Began: January 1, 2016 Payments Estimated to End: November 1, 2016
On July 16, 2015, this member’s attorney-in-fact filed a retirement application on behalf of the ailing member. An Option 2 (100% joint and survivor benefit) naming the member’s daughter as the beneficiary was selected. On July 22, 2015, SJCERA was notified that the member
April 8, 2016 Page 2 of 3 Agenda Item 5.02
had passed away. Staff mailed information and required forms to the deceased member’s beneficiary. The beneficiary returned the forms to SJCERA on October 2, 2015, shortly after her 18th birthday on September 22, 2015. On November 1, 2015, the beneficiary received the first continuance check from SJCERA retroactive to July 22, 2015, as well as the $5,000 death benefit. On November 10, 2015, the final retirement allowance calculations were sent to SJCERA’s actuary, Cheiron, to verify, since the final updates to SJCERA’s Retirement Benefit Calculation (RBC) module to incorporate recent plan assumption changes had not been finalized, tested, and certified by Cheiron as yet. Cheiron informed staff that because the member’s non-spouse beneficiary is more than ten years younger than the member, Section 401(a)(9) of the Internal Revenue Code (IRC) required minimum distribution (RMD) rules limit the amount of the continuance payable to this beneficiary to less than 100% continuance. This beneficiary’s allowance should have been calculated as an Option 4 with a 55% continuance as limited by the RMD rules in the IRC. The original allowance calculated as an Option 2 resulted in a benefit of $4,943.68 per month to the member, and the same amount continuing to the beneficiary upon the member’s death. The corrected allowance calculated pursuant to the RMD rules results in a benefit of $5,804.26 per month to the member, and $3,192.34 per month to the beneficiary upon the member’s death. This beneficiary received the incorrect Option 2 benefit for a little over 3 months, resulting in total overpayment of $3,371.77. The beneficiary’s monthly benefit was corrected with the payment issued December 1, 2015. On November 10, 2015, SJCERA notified the beneficiary of the overpayment and provided options for repaying the amount due to SJCERA. The beneficiary did not respond by the deadline, thus SJCERA began withholding 10% of the corrected monthly benefit until the total overpayment is paid in full. Beginning with the retiree payroll issued January 4, 2016, $319.23 is deducted from the beneficiary’s monthly allowance. The overpayment will be recovered in full by November 2016. SJCERA’s Bylaws were amended effective January 1, 2015 to add “Part-II – Internal Revenue Code Compliance.” Section 25 of the Bylaws addresses RMD and specifies the method for adjusting the retirement allowance/continuance for a member who retires with a non-spouse beneficiary more than 10 years younger than the member. Section 25.4, D1 states:
“The survivor annuity percentage of an RMD Annuity that begins no later than the Required Beginning Date and is paid for the Member’s lifetime and the lifetime of a beneficiary other than the Member’s surviving Spouse must not at any time exceed the applicable percentage of the RMD Annuity payment during the Member’s lifetime, using the table set forth in Treasury regulation section 1.401(a)(9)-6, Q&A-2(c)(2), as determined in the manner described in Q&A-2(c)(1). This Treasury Regulation requires that the RMD Annuity payable to the Member’s beneficiary after the Member’s death not exceed the percentage of the RMD Annuity payable to the Member during
April 8, 2016 Page 3 of 3 Agenda Item 5.02
the Member’s life specified in the table if the adjusted age difference between the Member and the beneficiary is more than 10 years.”
The few cases that require the above calculation are referred to the plan actuary to calculate the adjusted benefit in accordance with the procedure described in the SJCERA Bylaws. This particular retirement calculation was performed before the RBC module had been programmed to state that “Option 2 is not available because the non-spouse beneficiary is more than 10 years younger than the member” when producing retirement benefit estimates. That programming has been completed, and the RMD limitations on continuances to non-spouse beneficiaries have been reviewed with all staff at regular staff meetings and in weekly team meetings. SJCERA management does not anticipate this this oversight will recur.
__________________________ __________________________ PATRICIA PABST GREG FRANK Asst. Chief Executive Officer Management Analyst III
Printed 3/28/16 1:53 PM
REG. WEBLINKBEGIN END FEE FOR MORE INFO
Apr 11 Apr 13 CRCEA Spring Conference CRCEA Bakersfield, CA $45 crcea.org
Apr 12 Apr 14 IREI Editorial Board Meeting IREI Ojai, CA N/A irei.com
Apr 19 Apr 21 Client Services Conference Deutsche Asset Management Dana Point, CA N/A deawm.com
Apr 27 Apr 29 2016 Public Funds Roundtable Institutional Investor Los Angeles, CA N/A institutionalinvestor.com
May 9 May 9 California Public Plan Roundtable PIMCO Newport Beach, CA N/A pimco.com
May 10 May 13 SACRS Spring Conference SACRS Costa Mesa, CA $120 sacrs.org
May 14 May 15 NCPERS Accredited Fiduciary Program NCPERS San Diego, CA $550 ncpers.org
May 15 May 19 NCPERS Annual Conference & Exhibition (TEDS ) NCPERS San Diego, CA $800
($400) ncpers.org
May 16 May 20 Investment Strategies & Portfolio Management Wharton School of Business Philadelphia, PA $10,250 wharton.upenn.edu
Jun 6 Jun 7 Annual Investor Meeting Walton Street Capital Chicago, IL N/A waltonst.com
Jun 16 Jun 16 Equilibrium's 5th Annual Forum Equilibrium San Francisco, CA N/A eq-grp.com
Aug 9 Aug 12 Principles of Pension Management for Trustees at Pepperdine CALAPRS Malibu, CA $3,100 calaprs.org
Sep 21 Sep 23 Administrators Institute CALAPRS Loews Coronado Island, CA $2,500 calaprs.org
Nov 8 Nov 10 Invesco Real Estate US Client Conference Invesco La Jolla, CA N/A invesco.com
Nov 8 Nov 11 SACRS Fall Conference SACRS Indian Wells, CA $120 sacrs.org
EVENT DATES 2016 EVENT TITLE EVENT SPONSOR LOCATION
2016 CONFERENCES AND EVENTS SCHEDULE 2016
Printed 4/1/16 11:01 AM
2016 Estimated BOR ApprovalEvent Dates Sponsor / Event Description Location Traveler(s) Cost DateApr 12 - 14 IREI Editorial Board Meeeting Ojai, CA Garman $1,750 February 26, 2016
Apr 19 - 21 Deutsche Asset Management Client Services Conference Dana Point, CA McCray $1,950 February 26, 2016
Apr 27 - 29 Public Funds Roundtable Los Angeles, CA Calkins $2,000 February 12, 2016
May 10-13 SACRS Spring Conference Costa Mesa, CA Garman, McCray, Eshoo, Calkins $8,735 Approved by Board Policy
May 22 - 25 GFOA Annual Conference Toronto, Ontario Cherng $2,500 February 12, 2016
SAN JOAQUIN COUNTY EMPLOYEES' RETIREMENT ASSOCIATION
SUMMARY OF PENDING TRUSTEE AND EXECUTIVE STAFF TRAVEL
Printed 3/28/16 1:59 PM
Event Estimated Actual Event ReportDates Sponsor / Event Description Location Traveler(s) Cost Cost Filed2016
Jan 18 - 21 New and existing manager due diligence meetings
Boston, MA; New York, NY
St. Urbain (Sancewich, PCA) $2,620 $1,840
2/26/2016 (PCA Reports on 3
DD Mtgs - Item 7.03)
Jan 27 - 29 2016 VIP Conference Carlsbad, CA St. Urbain, Calkins $5,500 $2,901 2/29/16
Mar 5 - 8 CALAPRS General Assembly Indian Wells, CA
Garman, Miller, Van Houten, Weydert,
Eshoo, Pabst, Calkins
$12,000 TBD N/A
Apr 5 - 6 Pension Bridge Annual Conferernce San Francisco, CA McCray, Calkins $2,000 TBD PendingApr 5 - 6 Miller Global Annual Investor Meeting San Antonio, TX Weydert, St. Urbain $3,800 TBD Pending
SAN JOAQUIN COUNTY EMPLOYEES' RETIREMENT ASSOCIATION
SUMMARY OF COMPLETED TRUSTEE AND EXECUTIVE STAFF TRAVEL
For the past four years, it hasbeen my distinct pleasure andhonor to lead our great organ-ization as president! As my
presidency draws to a close the naturaltendency is to look back on the pastaccomplishments. Over the past fouryears, NCPERS has been the leader inhelping states establish Secure Choiceretirement savings plans for the privatesector. The most significant develop-ment in this area is Department ofLabor’s proposed regulations to clarifyhow states can implement such retire-ment plans for the private sector with-out running afoul of ERISA. AnotherNCPERS achievement in 2015 was thelaunch of NCPERS Code of Conductfor Public Plan Service Providers toensure ethical behavior and minimizeconflict of interest between public pen-sions and their vendors. I’m veryproud these things have happened dur-ing my tenure.
However, I want to spend theremainder of this note on the AnnualConference & Exhibition (ACE).This year’s ACE program, held May
INSIDE THIS ISSUE (Click on Page Link)
2 Another Reason WHY Public Pensions Should Conduct PeriodicInternal Check-ups: ALTERNATIVEINVESTMENTS
3 Pension Rebalancing in a Time ofMarket Volatility
4 The Investment Case for Global ListedInfrastructure
5 Legal Report: Divestiture—When DoesDe Minimis Become “De Maximus?”
6 Why Digital Privacy Matters: A Look atthe FBI versus Apple Face-Off
14 Calendar of Events 2016
Spring 2016 • Volume 29 • Number 2
For information on how to sponsor an issue please contact Amanda Rok [email protected]
Mel AaronsonNCPERS President
15-19 at the Hilton San Diego, CA,will be the 75th ACE program!Sometimes I wonder if the foundersof our association could have imag-ined a time when our organizationwould be celebrating its 75Anniversary. For the past 75 years,NCPERS has been the premier con-ference for public pension educationand the best place to connect withpension trustees, administrators,staff members, union officials, andinvestment professionals. This year’sprogram is designed to inform atten-dees of issues facing public pensionplans, and most importantly provideyou with the tools to face theseissues. Addressing these issues ofpublic pension plans, with the fol-lowing tracks:
Monday, May 16
David A. Vaudt,Chairman,GovernmentalAccounting StandardsBoard (GASB)
In this session, the GASB Chair willpresent his views on Board activitiesdesigned to improve accounting andfinancial reporting for U.S. state andlocal governments, and highlight thekey issues and impacts NCPERSmembers should know about.Specifically, Vaudt will discuss issuesrelating to: OPEB standards finalizedin 2015, pensions, and fair value.
In these sessions, whether you arefully immersed in social media or stilltesting the waters, you will learn howto interact on various social mediaplatforms and how to get the most of
continued on page 8
Monday, May 16 andTuesday, May 17
Social Media Track, James Spellos, Meetings U
NCPERS PERSIST Spring 2016 • Return to front page2
In an effort to boost returns inrecent years, pension funds haveshifted away from traditionalfixed-income investments, such
as government and high-quality cor-porate bonds, and significantlyincreased their reliance on stocks andalternative investments, includingprivate equity, hedge funds, realestate, and commodities. This changein investment strategy and allocationhas affected the costs, fees, and com-plexity associated with pensioninvestments. Many pension boardsand beneficiaries have struggled tounderstand the structure and eco-nomic returns of alternative invest-ments, which are more complex andless transparent than stocks andbonds.
However, one consequence of the2008 financial crisis is that manypublic pension systems have takenaffirmative steps to review the costsof their investments, especially“alternative” investments, and ques-tion whether they are appropriate inlight of expected returns, risks, andupside potential. For example, inSeptember 2014, CalPERS ended itsinvestments in hedge funds owing tothe cost, complexity, and risk associ-ated with these investments.1 Manypensions have followed CalPERS’lead.2
Pension fiduciaries need to under-stand the benefits and risks of alter-native investments and assess the effi-cacy and true cost of employing out-side managers and advisers. Indeed,failure to understand and periodical-ly review pension investments may
Another Reason WHY Public PensionsShould Conduct Periodic Internal Check-ups:ALTERNATIVE INVESTMENTS
Chet B. Waldman is a graduate ofCornell University (A.B. 1982) andBoston University School of Law(J.D., 1985) (G. Joseph Tauro Scholarand Paul J. Liacos Scholar) and was amember of the American Journal ofLaw and Medicine. He was admittedto the bar for the State of New York in1986, to the US District Court for theSouthern/Eastern District of NewYork in 1988, and to the US Court ofAppeals (1st Circuit) in 2013. He pre-viously worked at Weil, Gotshal &Manges and now works at WolfPopper LLP (since 1988), where hebecame a partner as of January 1,1995, and a member of the ExecutiveCommittee as of January 1, 2015. Hehas extensive experience in litigatingcases on behalf of pension funds (pri-marily securities and merger andacquisition cases) and has been amember of the Securities LitigationCommittee and the Mergers &Acquisition Committee of the NewYork City Bar Association.
By Chet B. Waldman
come at a trustee’s peril. In a unani-mous 2015 decision in Tibble v.Edison International,3 the U.S.Supreme Court held that ERISAfiduciaries have a continuing duty tomonitor plan investments to ensurethey remain prudent, even if theywere prudent when originallyoffered.
The Tibble opinion also implicitlyapproved of a lower court’s decisionthere suggesting that where twoinvestments options are otherwisemirror images of each other (such asretail and institutional share classesof the same mutual fund), plan fidu-ciaries may be liable if they did notselect the investment option withlower expenses. If the availableinvestment options are not exactlythe same, however, courts appearreluctant to second-guess fiduciaries’investment strategy, notwithstandinga difference in cost. The lesson hereis that plan fiduciaries should have aprocedure in place to review the con-tinued prudence of their investmentsand associated costs, and be able todocument that procedure.
Pension trustees can shield them-selves from potential liability byproactively retaining their own foren-sic and legal professionals to investi-gate and review investments, invest-ment adviser performance, and relat-ed costs. Such periodic checkups alsodemonstrate to pension constituents,regulators, and the public that pen-sion trustees and management areattentive and vigilant in protectingpension assets and monitoring long-term pension sustainability.
Below is a checklist of some criticalissues that should be addressed anddocumented in an internal checkupaided by independent professionals:
m Review investment advisers witha focus on their independenceand performance.
m Review compliance with invest-ment guidelines, and considerwhether such guidelines needmodifications.
m Analyze the true costs of alterna-tive investments, including fee
continued on page 8
Return to front page • NCPERS PERSIST Spring 2016 3
1. Rebalancing policies: Doingsomething may be better thandoing nothing. Year-to-date cap-ital market moves have shiftedsome plans away from theirstrategic asset allocation targets.This development has led someplans to once again revisit theirpolicies as to when and how torebalance their portfolios. Wehave observed that having sometype of rebalancing policy, what-ever that may be, and followingit may be preferable to simplyletting asset allocation driftbased on market movements.Some plans may be concernedabout the transaction costsinvolved in rebalancing or thereality that these actions usuallyinvolve selling asset classes thathave done well and buying assetclasses that had been out offavor. Nonetheless, empiricalevidence suggests that a disci-plined policy of rebalancing canyield better Sharpe ratios for theportfolio.1
2. The question of timing: Periodicrebalancing and establishingmateriality thresholds at asset-class level is recommended.While doing something may bebetter than doing nothing, it stillleads to the question of when torebalance. There is no generalconsensus on an optimal rebal-ancing policy. Typically, rebal-ancing is effectuated either at aperiodic set time or when assetallocation drifts outside of a pre-determined threshold, or both.Frequent rebalancing, such as on
Pension Rebalancing in a Time of MarketVolatility
By Michael A. Moran
a daily basis or with a de min-imus threshold, can be subopti-mal, given cumulative transactioncosts. However, the differencesbetween rebalancing on a month-ly, quarterly, or annual basis orwhen established thresholds arebreached may be limited. Allthose strategies result in higherSharpe ratios for portfolios thandoes not rebalancing at all (withquarterly rebalancing subject to amaterial threshold having aslightly higher Sharpe ratio thanother options).
3. Differentiating rebalancing froma tactical shift: In the current envi-ronment of heightened volatility,more muted growth prospects insome economies, and increasedrecession fears in the UnitedStates, some plans are consideringshifting their risk exposures.Some clients have expressed adesire to become more defensive,including even contemplatingraising cash levels in their portfo-lio. Consequently, some plansmay seek to hold off on rebalanc-ing altogether since, given year-to-date moves, more defensive posi-tions like investing in USTreasuries have increased portfo-lios’ value while riskier assets likepublic equities make up a smallerpercentage of portfolios today.We would note that rebalancing istypically viewed as a risk manage-ment exercise, whereas a tacticalshift is typically an expression ofan investment view, and it is oftenimportant to distinguish betweenthe two concepts.
4. Integrating tactical allocationinto overall portfolio design:Plan sponsors that would like toact more tactically may want toconsider the potential advan-tages of embedding a tacticalallocation “bucket” into theportfolio. By establishing a spe-cific allocation to tactical strate-gies in the investment policystatement, the sponsor can,either directly or through the useof external managers, shift riskexposures based on their viewson various markets and sectors.By doing so, strategic allocationsto public equities and fixed-income investments are rebal-anced on schedule and the valueadded from a tactical view canbe exposed and quantified.Given that the governance struc-tures of many plans may not beconducive to effectuating suchtactical moves in a timely man-ner, for many plans, optimalimplementation may be achievedthrough the use of external tacti-cal managers.
1 Analysis and further disclosuresavailable upon request.
Michael A. Moran, CFA, Senior
Pension Strategist at Goldman Sachs
Asset Management, provides four
observations on pension rebalancing,
based on research and conversations
with clients.
continued on page 8
NCPERS PERSIST Spring 2016 • Return to front page4
Global GDP growth rates areslowing due to decliningpopulation growth rates,aging workforces, and
dwindling productivity gains. Mutedfuture growth expectations arereflected in low global bond yields.Historically, brisk GDP growthenabled companies to grow byincreasing output. In this lower-growth environment, other ways willneed to be found to stimulate earn-ings and generate real returns.
Global listed infrastructure is lessdependent on the broader economiccycle. Key assets include toll roads,airports, utilities, mobile towers, andenergy pipelines. Steady demand forinfrastructure’s essential services givesit a unique combination of character-istics: namely, predictable cash flows,strong pricing power, high barriers to
The Investment Case for Global ListedInfrastructureBy Peter Meany
Crown Castle (Adjusted Funds From Operations)
Source: Company, First State Investments
entry, and structural growth. Thesecharacteristics enable infrastructureto offer a number of valuable benefitsto an investment portfolio.
First, infrastructure earnings growthtends to be relatively insensitive toslowing GDP growth. For example,earnings growth at mobile toweroperator Crown Castle is under-pinned by growing demand formobile data, which is compelling tele-com companies to upgrade theirequipment.
Toll road operators, such asAustralian operator Transurban,derive earnings growth from stable orgrowing commuter volumes, pricingthat is linked to (or better than) infla-
Transurban (Sydney Orbital Network Proportionate EBITDA $m)
Source: Transurban, First State Investments
continued on page 9
Return to front page • NCPERS PERSIST Spring 2016 5
ly driven by the plansponsor, whereas the
Oregon decision wasdriven by Board ofHigher Educationpolicy.
What if survival ofthe entire system is
at stake? Are therules different? In
Withers v. Teachers’Retirement System, 447
F.Supp. 1248 (S.D.N.Y.1978), the Board of Trustees agreed
to buy $2.53 billion (approximately$10 billion in 2015) in New YorkCity bonds to prevent the City frombecoming insolvent. This commit-ment raised the amount of the port-folio in City securities to more than37 percent. Members of the plansued the trustees for breach of fiduci-ary duty. Ultimately, the court ruledthat trustees acted reasonably, as theinsolvency of the City would have ledto depletion of the retirement systemwithin less than 10 years. The courtrejected the claim of breach of fiduci-ary duty because the motivation ofthe decision was the long-term sol-vency of the system and not the long-term welfare of New York City. Thetrustees reasonably feared that inbankruptcy, the protection ofemployee benefits would be second-ary to claims of bondholders and thepreservation of essential public serv-ices.
Can environmental, social, and gov-ernance (ESG) issues be related to thelong-term survival of the plan spon-sor and the retirement plan? To theextent that ESG is integral to thelong-term success and prosperity of
In deciding whether to follow ordecline divestiture mandates, thecourts have looked to whetherthe effect on the portfolio is “de
minimus.” Black’s Law Dictionarydefines de minimis as “of the least” or“trifling; minimal” and a fact or thingthat is “so insignificant that a courtmay overlook it in deciding an issueor case.” In the context of an invest-ment decision, when is an effectde minimis? The term comes from aLatin legal standard, De minimis noncurat lex: “The law does not concernitself with trifles.”
At least one state, New York, rejectedthe above maxim in the context of afiduciary duty. In Sorin v. ShahmoonIndustries, 220 N.Y.S.2d 760 (Sup.Ct. N.Y. Cnty. 1961), challengeregarding waste of corporate assets,the court held that where a fiduciary’sduty to account is at issue, it is a ques-tion of “principle,” not principal.When a fiduciary is to account forfunds entrusted to his or her care, itmeans all funds, “not some, or evenmost.” This would seem to suggestthat there is no de minimis exception(at least in New York), highlightingthe confused and unsettled state of thelaw.
The leading (and really the only) casein this context remains Board ofTrustees v. Mayor and City Council,562 A.2d 720 (Md. 1989). Here thetrustees of the Baltimore city pensionfund sued to challenge ordinancesrequiring divestiture of holdings incompanies doing business with theApartheid government of SouthAfrica. In upholding the ordinances,the Court observed that given the“vast power that pension funds exertin American society, it would be
unwise to bar trusteesfrom considering thesocial consequencesof investment deci-sions,” where thecost was de min-imis. In this case,the trial courtfound that the ini-tial cost of divest-ment was 1/32 per-cent (3 basis points)and the ongoing costwas 1/20 percent (2 basispoints). To date, this remains theonly public pension case giving someconcrete definition to the term “deminimis” in the divestiture context.
A similar case concerned an actionby the Oregon Board of HigherEducation passing a divestiture reso-lution relating to investment ofendowment funds (AssociatedStudents v. Oregon InvestmentCouncil, 728 P.2d 30 [Or. App.1986]). The State InvestmentCouncil declined to adopt the resolu-tion, finding it contravened prudentinvestment standards. Various stu-dent groups whose members receivedendowment-funded scholarshipssued. An Oregon trial court held thatthe Board of Higher Education andnot the State Investment Councilcontrolled the endowment funds, butagreed that divestiture was a viola-tion of the prudent investor stan-dard. The decision was overturnedon appeal when the student plaintiffswere found to lack standing suffi-cient to challenge the investmentdecision. The trial court’s decision onprudent investment standards con-trasted with the result reached inMaryland. Significantly, theMaryland divestiture was legislative-
Divestiture—When Does De MinimisBecome “De Maximus?”By Robert D. Klausner, NCPERS General Counsel
continued on page 11
NCPERS PERSIST Spring 2016 • Return to front page6
Digital privacy, simply put,is our fundamental right ascitizens to control whereour Personally Identifiable
Information (PII) is exposed andshared. As our world becomesincreasingly digital and much of ourlives move to online systems, digitalprivacy has taken center stage. Wenow contend with all sorts of privacyconcerns: how much of my informa-tion is Google tracking? Are my textmessages encrypted? How is mysocial media usage affecting my riskof becoming a victim of identitytheft?
WHY DOES DIGITAL PRIVACY MATTER?
But why does digital privacy matter?Let’s be honest: most of us don’t havestate secrets on our cell phones orhome computers, but that doesn’tmean that we don’t have a right toprivacy or that the digital footprintswe leave behind aren’t valuable.
Many companies track consumerbehavior online and use it for adver-tising or sell the information to thirdparties. But that isn’t the only reasondigital privacy is important. Many ofus check work documents that con-tain private company informationfrom our cell phones. We also accesssensitive financial information onlineor store important personal docu-ments on our computers.
Digital privacy is important, andnothing illustrates this more than thecurrent battle between FBI andApple.
THE FBI VERSUS APPLE
In the months following the SanBernardino shootings, the FBI contin-ued to investigate the gunmeninvolved and recovered an iPhone5C. As a result of Apple’s strongencryption software, the FBI wasunable to recover all the informationon the phone, which they believe maycontain valuable leads in the case. Togain access to the information, a fed-eral judge ordered Apple to create acustom version of its iOS operatingsystem to bypass security measures.Apple contends that creating this“backdoor” would be dangerous andwould seriously endanger digital pri-vacy for all.
WHAT DOES THIS MEAN?
If Apple concedes to creating a back-door to their encryption system, itwould set a dangerous precedent inthe use of the All Writs Act of 1789and expand the FBI’s authority. AppleCEO, Tim Cook, warned that com-plying with such orders would givethe government the power to “cap-ture” anyone’s data. He also cau-tioned that the act could allow thegovernment to demand that compa-nies build surveillance software,undermining the privacy of allAmericans. Another concern is thatcreating the means to bypass thesecurity of one iPhone and allowbrute-force hacking would weaken
Why Digital Privacy Matters: A Look at theFBI versus Apple Face-Off
By Jerry Thompson
continued on page 12
Photo Illustration ©2016 Depositphoto.com
your online investments. In the digitalage, social media is more important tomembers now more than ever. Thesesessions (Social Media 101 & 201and It’s App-tastic) will give you fun-damental information you need to bepart of the social revolution.
NCPERS PERSIST Spring 2016 • Return to front page8
President’s Message continued from page 1
The complexities and challenges thatpublic plan investment professionalface are numerous and daunting.NCPERS first CIO & InvestmentStaf forum will be structured as aparticipant- driven session, provid-ing a comfortable and open settingfor CIOs and other investment personnel to discuss, learn, and network with peers. Topics willinclude timely strategies, pitfalls toavoid, governance issues, and com-
mon professional challenges.
As trustees, you can earn up to 16.5continuing education (CE) creditswith these sessions and more! Formore information on the AnnualConference & Exhibition, please visitwww.NCPERS.org/annconf.
I look forward to seeing you at the2016 NCPERS Annual Conference &Exhibition in May! �
arrangements and incentive com-pensation agreements with out-side managers, advisers, and con-sultants.
m Review portfolios for investmentsthat may become high risk understressed conditions (e.g., securitieslending).
m Carefully scrutinize and limitgifts from outside managers andconsultants; strive for transparen-cy and accountability.
m Establish rules regarding futureemployment for board membersand staff by outside advisers andmanagers.4 �
1Michael B. Marois, “Calpers to Exit Hedge Funds,Divest $4 Billion Stake,” Bloomberg Business,September 15, 2014, www.bloomberg.com/news/arti-cles/2014-09-15/calpers-to exit-hedge-funds-citing-expenses-complexity.2 For example, public pensions in Los Angeles, NewMexico, and Louisiana have eliminated or reducedtheir hedge fund investments. See ChristineWilliamson, “Hedge Fund Investing Strong in 2014,”Pensions & Investments, August 18, 2014,http://www.pionline.com/article/20140818/PRINT/308189978/hedge-fund-investing-strong-in-2014.3 __ U.S. __, 135 S. Ct. 1823 (2015).4 For example, see “CalPERS StrengthensAccountability, Transparency and Ethics” Fact Sheet,https://www.calpers.ca.gov/docs/ethics-fact-sheet.pdf.
THESE MATERIALS ARE PROVID-ED SOLELY ON THE BASIS THATTHEY WILL NOT CONSTITUTEINVESTMENT ADVICE AND WILLNOT FORM A PRIMARY BASISFOR ANY PERSON’S OR PLAN’SINVESTMENT DECISIONS, ANDGOLDMAN SACHS IS NOT AFIDUCIARY WITH RESPECT TOANY PERSON OR PLAN BY REA-SON OF PROVIDING THE MATE-RIAL OR CONTENT HEREIN.
Pension continued from page 3This information discusses generalmarket activity, industry or sectortrends, or other broad-based econom-ic, market or political conditions andshould not be construed as researchor investment advice. This material isnot financial research and was notprepared by Goldman Sachs GlobalInvestment Research (GIR).
Views and opinions expressed are forinformational purposes only and donot constitute a recommendation byGSAM.
CONFIDENTIALITY
No part of this material may, withoutGSAM’s prior written consent, be (i)copied, photocopied or duplicated inany form, by any means, or (ii) dis-tributed to any person that is not anemployee, officer, director, or author-ized agent of the recipient.
Copyright © 2016 Goldman Sachs.All rights reserved. �
Wednesday, May 18
NEW CIOs & Investment Staff Forum,Girard Miller, CIO of the Orange County(CA) Employees Retirement System
Check-ups continued from page 2
Return to front page • NCPERS PERSIST Spring 2016 9
tion, and the optionality of networkexpansions.
Second, infrastructure can protectinvestors from the impact of inflation.
Global continued from page 4 The chart below illustrates how listedinfrastructure has performed relativeto global equities during differentinflation environments.Outperformance has been greatestwhen inflation is highest.
This pattern of performance is basedon several factors, including regulat-ed real returns for utilities, allowedreturns explicitly linking tolls to infla-tion, and effective barriers to entrysupporting robust pricing outcomesfor sectors without explicit inflationlinks.
These factors have helped listed infra-structure produce higher returns thanglobal equities over the long termwith less risk.
Peter Meany is the Head of Listed
Infrastructure at First State
Investments.
Peter is responsible for managing
infrastructure securities on behalf of
institutional and wholesale clients in
North America, Europe, Middle East,
and Asia-Pacific. Since establishing
the strategy in 2007, he has built a
high-quality team of investment spe-
cialists who have delivered consistent
outperformance through challenging
market conditions.
Peter has more than 19 years of expe-
rience as a specialist infrastructure
portfolio manager and analyst. Prior
to his time at First State Investments,
Peter was responsible for research
coverage of the Infrastructure &
Utilities sectors at Credit Suisse
(Australia). He also gained experience
at Credit Suisse as an analyst in the
telecom and energy sectors.
Peter started his career as an analyst at
Macquarie Equities when the infra-
structure sector was in its infancy.
Infrastructure Performance During Periods of Inflation
Source: Bloomberg and First State Investments Quarterly time series from 2000-2015
Global Listed Infrastructure Relative Risk/Return
Source: Bloomberg and First State Investments
continued on page 10
NCPERS PERSIST Spring 2016 • Return to front page10
Market Cap $bn
Listed infrastructure has deliveredmore than 90 percent of the upside ofglobal equities in rising markets, butless than 60 percent of the downsidein falling ones, making it suitable forinvestors who are looking for a rela-tively defensive investment duringmarket volatility.
As a relatively new and still growingasset class, a number of clear inefficiencies exist in the listed infrastructure market, giving man-agers the scope to generate alpha by
Global continued from page 9 taking an active approach.
For example, the sector is under-researched with few broker-dealersproviding dedicated listed infrastruc-ture research coverage. Some infra-structure stocks have been listed onlyin the last decade, and investors arestill building knowledge about theassets and their management. In addi-tion, valuation differentials can ariseamong similar stocks in the same sec-tor that are listed in different coun-tries.
Specialist global listed infrastructure
teams are well positioned to identifyand capture the mispricing that aris-es as a result of carrying out on-the-ground research by conducting thor-ough due diligence and focusing onquality.
As with any asset class, there arerisks involved. The threat of politi-cal or regulatory intervention can bea key risk for infrastructureinvestors. These risks can be miti-gated by using an active managerwho is able to recognize and man-age these risks appropriately. �
Return to front page • NCPERS PERSIST Spring 2016 11
the plan sponsor and the employers’ability to make required employercontributions to sustain the system, itis comparable in sound fiduciarypractice to the New York City sys-tem’s decision to invest in the long-term economic survival of the primaryplan sponsor. Development of thatinformation as part of the ESG con-sideration is an appropriate means ofinsulating the decision making of thetrustees. But can a plan align its ESGpolicy, including divestiture, with themarketplace?
The Florida Attorney General opinedthat a decision by the State Board ofInvestment (which acts as the fiduci-ary for the Florida RetirementSystem) could not adopt, in theabsence of enabling legislation, anadministrative rule on divestiturebased on ethical considerations. Theopinion continued, however, thatinstability in a region (here, SouthAfrica) would be a legitimate consid-eration in making an investment deci-sion because of the potential effect oneconomic considerations.
More recently, the Attorney Generalof Maryland considered whether Iranand Sudan divestiture was inconsis-tent with the State Retirement Board’sfiduciary duty. The Attorney Generalconcluded that divestment was appro-priate only when fair market valuewas received for the divested interests;substitute investments had compara-ble returns and risks; the timing andmanner of divestment transactionswere prudent; and the effect was deminimis as compared with “total fundassets.”
A number of plans divested fromfirearms after the school deaths inSandy Hook, Connecticut, and manydivested from tobacco for socialhealth reasons. Such decisions clearlyhave an economic impact on the
retirement plan, as they take the fundout of a potentially profitable sectorof the investment environment. Inorder to be insulated as sound fiduci-ary decisions, these divestmentactions ultimately must be rooted inthe economics of the system.
Several states have recently consid-ered or have begun adopting laws thatrequire divestiture from companiesthat boycott Israel. The question afiduciary should ask is whether thedivestment is in the best interest of theretirement plan and its members.
Divestment has generally beenshunned by pension plans and largeendowments, with the notable excep-tion of church plans, as destructive ofthe mission of achieving the highestand best returns at a reasonable risk.Divestment has most recently beencriticized for causing loss of aninvestor voice in a critical industrythat directly impacts virtually everyeconomic sector in which pensionplans are invested. The goals of ESG,particularly in the area of sustainabil-ity, are directly compromised by lossof the presence at the corporate table,thereby making divestment of fossilfuels a “futile act,” according toProfessor Edward Zelinsky of theCardozo School of Law in New YorkCity.
Not all are in agreement. On June 4,2015, Georgetown Universityannounced it would make no furtherinvestments in thermal coal. (See dis-cussion in C. Hottinger, “In Supportof Fossil Fuel Divestiture,”Georgetown InternationalEnvironmental Law Review Online,June 13, 2015.) Also, in CaliforniaGovernment Code 7513.75, theLegislature made express findings thatdivestiture from thermal coal was oflong-term economic benefit toCalifornia, although not expressly inrelation to CalPERS and CalSTRS.
The general body of American trustlaw is collected in the Restatement ofthe Law of Trusts. The current versionrelating to institutional investmentdecision making is the Restatement(3d) of the Law of Trusts. Under theRestatement, investments are to beviewed on a case-by-case basis andmade based on the informationknown at the time the investmentdecision is made rather than in hind-sight.
Comment C in Section 227 of theRestatement concludes that while theduty of loyalty of a fiduciary does notpermit a trustee to ignore legal prohi-bitions, it also “...does not require thetrustee to disregard ethical principlesgenerally applicable to investmentmanagers.” In other words, theRestatement offers seemingly self-contradictory guidance.
Divestiture will continue to be a mat-ter of controversy and politicallyinfluenced legislation. Trustees areobligated to follow their governingstatutes but should remain sensitive tothe concept that divestment decisionsshould always be soundly rooted inthe economic benefit to the retirementplan and its participants. �
Legal Report continued from page 5
This article is a regular feature of
PERSIST. Robert D. Klausner, a well-
known lawyer specializing in public
pension law throughout the United
States, is General Counsel of NCPERS
as well as a lecturer and law professor.
While all efforts have been made to
insure the accuracy of this section, the
materials presented here are for the
education of NCPERS members and
are not intended as specific legal
advice. For more information go to
www.robertdklausner.com.
NCPERS PERSIST Spring 2016 • Return to front page12
Don’t Miss NCPERS’ Social Media
security overall and compromise thedata of any iPhone.
WHAT SHOULD WE DO MOVING
FORWARD?
We’ll have to monitor what becomesof this legal showdown, but in themeantime, follow these tips to safe-guard your privacy:
m Enable all the security measuresyour cell phone has to offer.
m Manage your privacy settings on
Digital Privacy continued from page 6 different devices, browsers,social networks, and apps.
m Regularly review and deleteyour browser’s cookies.
m Read privacy policies on web-sites, apps, and social networksand adjust your online behavioraccordingly.
No one should have to compromiseon digital privacy. Learn moreabout what you can do to manageyour digital privacy and help pro-tect your identity at www.identity-guard.com/NCPERS. �
Jerry Thompson is the SVP atIntersections, Inc.®, the parent com-pany of Identity Guard®. He joinedthe company after Intersectionsacquired White Sky, Inc., where Jerrywas the co-founder and Chief RevenueOfficer. As part of White Sky’s execu-tive team, he led the development andinnovation of mobile security andcommerce applications, providingnew ways for companies to interact,monetize, and retain their customersthrough solutions that consumers usedaily to protect their identities whilebanking, investing, shopping, socializ-ing, and browsing.
NCPERS PERSIST Spring 2016 • Return to front page14
National Conference on Public
Employee Retirement Systems444 North Capitol St., NW Suite 630Washington, D.C. 20001
…The Voice for Public Pensions
Trustee Educational Seminar (TEDS) May 14 – 15, 2016Hilton San Diego Bayfront | San Diego, CA
National Accredited Fiduciary (NAF)Program May 14 – 15, 2016Hilton San Diego Bayfront | San Diego, CA
Annual Conference & Exhibition May 15 – 19, 2016Hilton San Diego Bayfront | San Diego, CA
Public Pension Funding ForumAugust 21 – 23, 2016 | New Haven, CT
Public Safety Employees Pension &Benefits Conference October 23 – 26, 2016Planet Hollywood | Las Vegas, NV
Calendar of Events 2016 2015-2016OFFICERS
Mel AaronsonPresident
Daniel A. FortunaFirst Vice President
Kathy HarrellSecond Vice President
Tina FazendineSecretary
Richard WachsmanTreasurer
Pat McElligottImmediate Past President
Hank KimExecutive Director&Counsel
EXECUTIVE BOARDMEMBERS
State EmployeesClassificationStacy BirdwellKelly L. FoxBill Lundy
County EmployeesClassificationWill PryorDale Chase
Local EmployeesClassificationCarol G. StukesRobert McCarthy
Police ClassificationKenneth A. HauserAaron Hanson
Fire ClassificationDan GivensJohn Neimiec
EducationalClassificationPatricia ReillySharon Hendricks
Protective ClassificationPeter Carozza, Jr.Emmit Kane
Canadian ClassificationRick Miller
NCPERS OFFICE
444 North Capitol St., NWSuite 630Washington, D.C. 20001ph: 1-877-202-5706fax: [email protected]
Renew Your Membershipat http://ncpers.org/Members/
Renew YourMembership
Online Today!
DON’TDELAY!
N AT I O N A L C O N F E R E N C E O N P U B L I C E M P L O Y E E R E T I R E M E N T S Y S T E M S
2016 is shaping up to be aninteresting year for publicpension reform proposals. On a
positive note, Iowa has recentlyintroduced legislation calling for thecreation of a state-run private-sectorpension plan, which brings the issueof retirement security to the forefrontand reminds voters of the success ofpublic pension plans.
On a negative note, we areunfortunately still seeing reformlegislation aimed at closing publicdefined-benefit plans and convertingthem to defined-contribution plans.Details about specific statelegislation follow.
Florida
Rep. Matt Caldwell (R)has sponsored HouseBill (HB) 87, which
would reform the FloridaRetirement System; the bill iscurrently on the House floor. The billwould change the defined-benefitpension default to a defined-contribution plan and extend thetime for employees to make thedecision from six to nine months.The bill also establishes a survivorbenefit for members of the defined-contribution plan who are killed inthe line of duty (those in the defined-
State Update
�� � � � � � �
benefit plan already have thatbenefit) and makes the benefitretroactive to the beginning of thedefined-contribution plan in 2002. Asimilar death benefits bill (SenateBill [SB] 7012), sponsored by Sen.Jeremy Ring (D), was unanimouslypassed by the Senate in February andis en route to the House.
Georgia:
In Whitfield County,Commissioner HaroldBrooker made a motion
to close the defined-benefit pension system for new hiresand open a defined-contributionplan. Human resources directorJackie Carlo and finance directorAlicia Vaughn have been tasked withdeveloping the new plan by the endof February. No changes to thecurrent employee defined-benefitplan have been introduced.
Indiana
Rep. Robert Behning(R) has sponsored HB1004, which would
allow teachers tonegotiate extra pay and allow schooldistricts the option to offer a defined-contribution pension. The bill is areaction to a bill that was ruled
illegal in November by the courts.Some superintendents were givenflexibility to negotiate whereteachers were placed on the payscale; however, it was ruled thatdecisions about pay can only benegotiated with unions. The new billpassed the House on February 3,despite opposition from HouseDemocrats and the teachers unions,and is moving on to the Senate.
Iowa
Sen. Janet Peterson (D)and state treasurerMichael Fitzgerald (D)
have proposed a state-run plan for private employees inorder to address retirement securityin the state. The proposal asks for$1.5 million to set up RetirementSavings Iowa, which would focus onproviding a retirement savingsoption for small business that do notoffer retirement plans. Thelegislation will seek a mandate forIowa employers to offer the state-runoption. Contributions to the planwould come from automatic payrolldeductions, and employees would beable to opt out of the plan. Theproposal must be approved by thestate legislature and signed into lawby the governor.
continued on page 2
FEDERAL news
2 • N C P E R S , T h e Vo i c e f o r P u b l i c P e n s i o n s ! M a r c h 2 0 1 6
Kansas
Gov. Sam Brownback (R)could delay makingpension payments to the
Kansas Public EmployeesRetirement System (KPERS) under abill already approved by the SenateWays and Means Committee. HB 2365would allow Governor Brownback todelay payments to KPERS and thenpay with an 8 percent interest rate overtwo years. The House version of thebudget bill also allows the governor todelay contributions but does notinclude an interest rate and requires thedelayed payment to be paid the nextyear. The House and Senate are bothexpected to vote on their versions ofthe bill by the end of February.
Louisiana
On January 29, Rep.Barry Ivey (R)sponsored HB 65, a bill
that would shift theTeachers’ Retirement System ofLouisiana’s defined-benefit pension toa combination plan. The bill wouldalso raise the minimum retirement agefrom 62 to 65 for new hires as of July1, 2018, and make an automatic cost-of-living adjustment to the pensionevery other year.
Maryland
Gov. Larry Hogan (R) hasproposed a new budgetthat would provide $25
million more than requiredunder Maryland law for the state
employees’ pension fund, which hadits annual contributions cut under theprevious administration (Gov. MartinO’Malley [D]). This budget is lumpedin with many other bills. The budget iscurrently in the General Assembly.
South Dakota
At the end of January, alegislative panelapproved SB 13, which
offers a new benefitstructure for new hires joining theSouth Dakota Retirement Systemafter July 1, 2017. The bill includes atwo-year increase in the retirementage, to 67. The legislation is now infront of the House.
Virginia
House Speaker WilliamHowell (R) has filed HB665 to create the
Commission on EmployeeRetirement Security and PensionReform. The commission will studythe soundness of the defined-benefitretirement plans, the impact of andstrategies for addressing anticipatingstate employees’ retirements in thenext 10 years, and the benefitpackages of state employees. The billpassed the House and has beenreferred to the Senate Committee onRules. Separately, Sen. Chris Jones(R) has introduced HB 1072, whichwould modify the current hybridretirement plan for the VirginiaRetirement System. The legislationwould increase the employercontribution from 1 percent to 2percent, decrease the employer
maximum matching contribution from2.5 percent to 1.5 percent in thedefined-contribution component of theplan, increase the employeecontribution from 1 percent to 2percent, decrease the employeemaximum contribution from 4 percentto 3 percent, and decrease theemployee contribution to the defined-benefit component from 4 percent to 3percent. The bill has been referred tothe House Committee onAppropriations.
Washington
In Seattle, city councilmembers are voting on anew retirement plan for
the Seattle City Employees’Retirement System’s new hires. Thenew plan, called SCERS II, will givenew hires smaller pensions because ofan adjustment in how their benefits arecalculated, the retirement age will riseto 55, and employees will not beallowed to retire with full benefits untiltheir age and years of service add up to85, instead of the current 80.Employees will contribute 7 percent,instead of the current 10 percent, andthe city will contribute only 5 percent,versus the current 6 percent. The citycouncil is expected to vote on themeasure by the end of February.
Stay tuned and visitwww.NCPERS.org for moreinformation on upcoming statepension reform battles. As always, ifyour state is facing pension reformefforts and you would like NCPERS’help, please let us know.
State Update continued from page 1
N C P E R S , T h e Vo i c e f o r P u b l i c P e n s i o n s ! M a r c h 2 0 1 6 • 3
FEDERAL news
Members Urged to Join March 8Webinar Spotlighting LatestNCPERS Research
NCPERS is hosting a members’ webinarMarch 8 to share two recent additions tothe NCPERS Research Series. The newstudies provide a data-drivenperspective on important questions andtrends in retirement security.
“How Did the Shift from DefinedBenefit Pensions to DefinedContribution Plans in the Private SectorImpact Retirement Savings?” publishedin February 2016, examines the impacton retirement savings resulting from thehistoric shift from defined-benefit todefined-contribution plans.
The analysis of US Department ofLabor data concludes that retirementsavings, which totaled $6.9 trillion at
the end of 2012, would have beentwice that level, or $13.9 trillion, ifeveryone had remained in defined-benefit plans. The analysis coveredthe period 1977 to 2012.
Published in March 2016, “Are Stateand Local Pension Funds TakingMore Risk Now Than Before?”examines US Bureau of Census dataon assets and investable income tocounter the assumption that publicpension funds are taking on too muchrisk. The risk analysis draws on twodata sets, covering the periods 1967to 2007 and 1993 to 2014. The datashow that public pension plans aretaking on slightly more risk togenerate returns in recent decadesthan they did in the 1960s and 1970s.However, the risk level taken togenerate a unit of return has beenrelatively stable for 30 years.
“Arguments advanced by theopponents of public pensions arebased on ideology rather than facts,”wrote Michael Kahn, the author ofboth reports and director of researchfor NCPERS.
“The findings of these studies haveimportant implications for NCPERSmembers,” said Mel Aaronson,president of NCPERS. “At a timewhen public pensions are comingunder frequent attack as too riskyand costly, and 401(k) plans arebeing held out as the model of howto move forward, it is important toknow the real facts. NCPERSresearch seriously undermines thearguments of those who opposedefined-benefit pension plans.”
To join the webinar on March 8,please click here. !
Renew Your Membershipat http://ncpers.org/Members/
Renew YourMembership
Online Today!
DON’TDELAY!
Hank H. Kim, Esq.Executive Director
& CounselExecutive Director's Corner
At this early stage in thepresidential campaign,candidates and the
American public alike see the issuesin rough strokes. The economy,immigration, national defense, andsocietal change dominate the policyagenda, and Social Security andMedicare remain perennially hottopics. But the top concerns ofNCPERS members – ensuring thefuture of public pensions andpromoting retirement security for allAmericans – are just seeping into theconsciousness of candidates and theelectorate.
We can all play a role in sharpeningthe focus, because we know the timeis ripe for a national conversationabout ensuring a secure retirementfor all Americans. And publicpension funds, which have done thejob for decades, are a great model forthe future – a point that has beenunderscored by the US Departmentof Labor’s decision to amend theEmployee Retirement IncomeSecurity Act (ERISA) to facilitatestate-sponsored retirement plans forprivate-sector workers.
The good news is that public pensionfunds are not being used as apolitical football at the national level
the way they have been in somestates. The bad news is that none ofthe candidates are addressingretirement security with any depth,though several have staked outpositions on Social Security,focusing on privatization, payrollcaps, and the retirement age.
March through June is a keypresidential primary period and acritical time for members to helpelevate the dialogue aboutAmerica’s future. You don’t have tobe a political pro to help raise ourconcerns.
m Speak up if you are attendingevents for candidates for anyfederal, state, or local office.Ask questions about where theystand on public pensions and
fostering retirement security forall. Tell them unequivocallyhow pensions benefitcommunities.
m Stay abreast of the news inyour community and beprepared to defend publicpensions when they are attackedin newspaper articles and op-eds. Our members have beenvery successful in correctingmisconceptions about publicpensions and getting theirpositions published, and at thenational office we stand ready tohelp.
m Know our latest positions andresearch. Take part in eventssuch as our semiannuallegislative update (the next one
Election 2016 Is Right Time for NationalConversation on Retirement Security
continued on page 5
4 • N C P E R S , T h e Vo i c e f o r P u b l i c P e n s i o n s ! M a r c h 2 0 1 6
Hank H. Kim, Esq.Executive Director
& CounselExecutive Director's Corner
N C P E R S , T h e Vo i c e f o r P u b l i c P e n s i o n s ! M a r c h 2 0 1 6 • 5
is in July) or our forthcomingresearch update webinar to armyourself with facts you can useto stand up for public pensions.
m Keep in touch. Reach out toyour team at NCPERS to keepus apprised of the topics you areraising and how lawmakers andcandidates are responding.
Of course, you can count on us atNCPERS headquarters to continue toaddress public pension priorities withmembers of the Senate and House ofRepresentatives and with thepresidential candidates and their keyadvisers.
It is still very early in the presidentialcampaign cycle. March begins with atorrent of primaries; by the end of
March, we should have greaterclarity on who will receive thenomination when the Democratsand Republicans hold theirconventions in July. In themeantime, however, it is a long roadto November. We have a compellingstory to tell about the critical role ofpublic pensions in our communities,and over the next eight months weneed to keep telling it. "
continued from page 4
��� ������������� �����������
The States continued from page 1
T H E
M O N I T O R The Latest in Legislat ive NewsThe Monitor is published by the National Conference on Public Employee Retirement Systems. Website: www.NCPERS.org • E-mail: [email protected] North Capitol Street, NW, Suite 630 • Washington, DC 20001 • 1-877-202-5706 • (202) 624-1439 (fax)
444 North Capitol Street, NW, Suite 630Washington, DC 200011-877-202-5706(202) 624-1439 (fax)
FIRST CLASS MAIL
US POSTAGE PAID
WASHINGTON, DC