news - San Joaquin County Employees` Retirement Association

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San Joaquin County Employees
Retirement Association
AGENDA
REGULAR MEETING
SAN JOAQUIN COUNTY EMPLOYEES RETIREMENT ASSOCIATION
BOARD OF RETIREMENT
FRIDAY, AUGUST 14, 2015
AT 9:00 AM
Location: SJCERA Board Room, 6 S. El Dorado Street, Suite 400, Stockton, California.
1.0 ROLL CALL
2.0 PLEDGE OF ALLEGIANCE
3.0 APPROVAL OF MINUTES
3.01 Approval of the Minutes for the Regular Meeting of July 10, 2015
3
01 Board to approve minutes
4.0 CONSENT ITEMS
4.01 Service Retirement (19)
7
4.02 Deferred Members (6)
10
4.03 Purchase of Service (37)
11
4.04 Domestic Relations Orders (0)
4.05 Deceased Member Report
14
4.06 Death of Active Member (1)
15
4.07 General (1)
01 Proposed Revisions to SJCERA Funding Policy
16
a Funding Policy August 2015 - Mark-Up
18
b Funding Policy August 2015 - Clean
24
c Proposed Resolution 2015-08-01
30
5.0 STAFF REPORTS
5.01 Trustee and Executive Staff Travel
01 Conferences and Events Summary for 2015
32
a 2015 Global CFO Forum
33
b 2015 Public Funds Forum
39
c 2015 Invesco Real Estate US Client Conference
41
02 Summary of Pending Trustee and Executive Staff Travel
45
a Travel Requiring Approval (2)
6 South El Dorado Street, Suite 400 • Stockton, CA 95202
(209) 468-2163 • (209) 468-0480 • www.sjcera.org
SJCERA Regular Meeting • 8/14/2015 • Page 1
03 Summary of Completed Trustee and Executive Staff Travel and Travel Reports
(1)
46
04 Board to accept and file reports and approve 2 pending travel requests as
required.
5.02 Annual Trustee Education
01 Individual Trustee Education Reports 2014-2015
50
5.03 CEO Report
01 CEO to provide updates to the Board
6.0 CORRESPONDENCE
6.01 Letters Received
6.02 Letters Sent
6.03 Reports
6.04 Newsletters / Bulletins / Articles
01 NCPERS
PERSist
Summer 2015
62
02 NCPERS
The Monitor
July 2015
74
7.0 COMMENTS
7.01 Comments From the Board of Retirement
7.02 Comments From the Public
8.0 CLOSED SESSION - PERSONNEL MATTERS
CALIFORNIA GOVERNMENT CODE SECTION 54957
EMPLOYEE DISABILITY RETIREMENT APPLICATION(S)
9.0 CALENDAR
9.01 Financial Meeting, August 19 at 10:00 a.m.
9.02 Regular Meeting, September 11 at 9:00 a.m.
10.0 ADJOURNMENT
San Joaquin County Employees
MINUTES
REGULAR MEETING
SAN JOAQUIN COUNTY EMPLOYEES RETIREMENT ASSOCIATION
BOARD OF RETIREMENT
FRIDAY, JULY 10, 2015
AT 9:00 AM
Location: SJCERA Board Room, 6 S. El Dorado Street, Suite 400, Stockton, California.
1.0 ROLL CALL
1.01 MEMBERS PRESENT: Cindy Garman, Michael Duffy(arrived at 9:17), Michael
Restuccia, David Souza, Adrian Van Houten, and Shabbir Khan presiding
MEMBERS ABSENT: J.C. Weydert, Steve Bestolarides and Raymond McCray
STAFF PRESENT: Chief Executive Officer Annette St. Urbain, Assistant Chief
Executive Officer Patricia Pabst, Retirement Financial Officer Lily Cherng,
Management Analyst III Greg Frank, Department Information Systems Specialist II
Jordan Regevig, Retirement Services Technician Beatriz Garcia, Retirement Payroll
Technician Marissa Smith, Senior Office Assistant Dana Duley and Office Assistant
Andrea Ireland.
OTHERS PRESENT: Deputy County Counsel Andrew Eshoo, and via telephone
Sean Byrne of Morrison & Foerster
2.0 PLEDGE OF ALLEGIANCE
2.01 Led by Shabbir Khan
3.0 APPROVAL OF MINUTES
3.01 Approval of the Minutes for the Regular Meeting of June 12, 2015
01 Board unanimously approved the Minutes of the Financial Meeting of June
12, 2015.
4.0 CONSENT ITEMS
4.01 Service Retirement (18)
4.02 Deferred Members (3)
4.03 Purchase of Service (30)
4.04 Domestic Relations Orders (0)
4.05 Deceased Members Report
4.06 Board unanimously approved the Consent Items.
5.0 STAFF REPORTS
5.01 Mid-Year Administrative Budget Update
01 Review of 2015 Actual and Budgeted Expenses
5.02 SJCERA Statistics Report - Second Quarter 2015
5.03 Pending Retiree Accounts Receivable - Second Quarter 2015
(209) 468-2163 • (209) 468-0480 • www.sjcera.org
5.04 Strategic Plan Scorecard - Second Quarter 2015
5.05 Trustee and Executive Staff Travel
01 Conferences and Events Summary for 2015
a 2015 Public Pension Funding Forum
b CALAPRS Administrators’ Institute
02 Summary of Pending Trustee and Executive Staff Travel
03 Summary of Completed Trustee and Executive Staff Travel
04 Board accepted and filed reports
5.06 CEO Report
01 State Legislation
SACRS-sponsored AB 992 (A PER&SS) was enacted as Ch. 40, Statutes of
2015,
Ventura County-sponsored AB 663 (Irwin) providing for an alternate appointed
member was enacted as Ch. 38, Statutes of 2015.
02 SACRS Update
Legislative Committee - CEO St. Urbain was encouraged to receive some very
nice feedback from members of the SACRS Legislative Committee upon news of
her resignation from the Committee.
SACRS Board - Has engaged a strategic consultant to work with the directors on
board governance/operations, help clarify and refocus on SACRS’ mission, etc.
This consultant will also be reaching out to the administrators of member systems
for input.
03 Alternate Retired Member - SJCERA received a letter from RPESJC
recommending that the Board appoint Margo Praus as the Alternate Retired
Member. The Board of Retirement will take action at the July 24th Financial
Meeting. CEO St. Urbain encouraged Ms. Praus to attend that meeting as it will
be significant in terms of asset allocation decision work with PCA and Cheiron.
04 Fresno City Retirement Systems - Fresno City Retirement Board is currently
recruiting to fill the vacancy that will be open upon Retirement Administrator Stan
McDivitt’s retirement this November. Alliance Resource Consulting has been
retained to manage the recruitment.
05 Staffing Update - Senior Office Assistant Mercy Tayabas’ last day with SJCERA
will be July 24th. She accepted a promotion with Community Development, her
previous department. Mercy has been a great member of the SJCERA team, will
be missed very much and wished continued success in her career.
06 Next Financial Meeting - As a reminder, SJCERA will be having the asset liability
modeling at the July 24th Financial Meeting, which is estimated to last about an
hour and a half. Additionally, Cheiron will present the preliminary valuation results,
so the meeting could take two and a half to three hours in total. Staff respectfully
requests that Board members plan accordingly.
6.0 CORRESPONDENCE
6.01 Letters Received
01 6/24/15
California Strategies, LLC
Proposals
2016 SACRS-Sponsored Legislative
6.02 Letters Sent
6.03 Reports
6.04 Newsletters / Bulletins / Articles
7.0 COMMENTS
7.01 Comments From the Board of Retirement - Trustee Restuccia expressed that Ms. St.
Urbain’s resignation from the SACRS Legislative Committee after ten years of service
is a great loss for SACRS.
7.02 Comments From the Public - None
8.0 CLOSED SESSION
THE CHAIR CONVENED A CLOSED SESSION AT 9:19 A.M. THE CHAIR
ADJOURNED THE CLOSED SESSION AND RECONVENED THE OPEN SESSION AT
9:28 A.M.
8.01 PERSONNEL MATTERS
CALIFORNIA GOVERNMENT CODE SECTION 54957
EMPLOYEE DISABILITY RETIREMENT APPLICATION(S)
Counsel reported that in Closed Session the Board took the following actions on
personnel matters:
8.02 Disability Retirement (3)
01 FD 112 HREmplRate 1 SM NFICA
WAterloo - Morada Rural Fire
The Board unanimously dismissed the application for a service-connected
disability retirement for failure to diligently pursue the application.
02 Substance Abuse Counselor II
Substance Abuse Services
The Board unanimously dismissed the application for a nonserviceconnected disability retirement for failure to diligently pursue the
application.
03 Mental Health Specialist II
Mental HealthPHF-Inpatient FAC
The Board unanimously dismissed the application for a nonserviceconnected disability retirement for lack of medical evidence to establish a
prima facie case for permanent disability.
8.03 CONSIDERATION OF INVESTMENT TRANSACTIONS, PURCHASES, SALES;
GOVERNMENT CODE SECTION 54956.81 (1)
01 Counsel noted there was nothing to report from closed session regarding this
subject.
9.0 CALENDAR
9.01 Financial Meeting, July 24, 2015, at 9:00 a.m.
9.02 Regular Meeting, August 14, 2015, at 9:00 a.m.
10.0 ELECTION OF OFFICERS
10.01 The Chair called for nominations for each officers of the Board of Retirement for 2015
-2016.
01 Motion by Restuccia, second by Souza, nominating Ray McCray as
Chairperson and Cindy Garman as Vice Chairperson passed unanimously.
02 Motion by Duffy, second by Garman, nominating Michael Restuccia as
Secretary passed unanimously.
11.0 ADJOURNMENT
11.01 There being no further business the meeting was adjourned at 9:31 a.m.
Respectfully Submitted:
________________________
Raymond McCray, Chair
Attest:
________________________
Michael Restuccia, Secretary
San Joaquin County Employees Retirement
Association
PUBLIC
August 2015
4.01 Service Retirement
01
Consent
BILL J ARAGON
Social Worker Supervisor II
HSA - Services Staff
Member Type: General
Years of Service: 10y 04m 29d
Retirement Date: 8/3/2015
02
SHARON K BROOKS
Non-Member
N/A
Member Type: Safety
Comments: Safety retirement after DRO split.
03
SCOTT A CADY
Deputy Sheriff II
Sheriff - Patrol
Member Type: Safety
04
THEA G CHOY
Deferred Member
N/A
Comments: Outgoing reciprocity and concurrent retirement with CalPERS.
05
GEORGIA H DALE
Department Payroll Specialist
Hosp General Accounting
06
JACQUELINE S ESCALANTE
Courts-Legal Process Clerk II
Court-Oper-Criminal-Stkn
07
MARYCORINNE T GILES
Public Health Nurse II
California Childrens Services
08
GLORIA GONZALES
Substance Abuse Counselor II
8/3/2015
3:38:58 PM
Page: 1
Association
PUBLIC
August 2015
09
MARCELLE GOREE
Child Support Officer II
Child Support Svs
10
MAUREEN E HAMMOND
Senior Public Health Nurse
11
DIANNE HUNZIKER
Non-Member
N/A
Member Type: Safety
Comments: Safety retirement after DRO split account
12
MOHAMMAD IMRAN
Highway Maintenance Worker
Public Works-Road Main Central
13
DELIA MUNOZ
Eligibility Worker II
HSA - Eligibility Staff
14
STEPHEN W OLMSTED
Social Worker IV
15
ARACELI C PINEDA
Senior Office Assistant
Mental Health - Clerical
16
CLAUDE E PURKIS
Sergeant
Sheriff-Lathrop Police Contrac
Member Type: Safety
17
ESTANISLAO RUBIANES
Information Systems Analyst IV
Information Systems Division
8/3/2015
3:38:58 PM
Page: 2
Association
PUBLIC
August 2015
18
LAURI L TRIBBEY
Deferred Member
N/A
Comments: Deferred from SJCERA since 7/6/02.
19
EMOGENE WILLIAMS
Legal Technician II
County Counsel
8/3/2015
3:38:58 PM
Page: 3
Association
PUBLIC
August 2015
4.02 Deferred Members
01
Consent
ANNETTE K AINA
Junior Administrative Asst
Cooperative Extension
Deferred
Deferral Date: 6/1/2015
Comments: Established membership with Sacramento CERA
02
MARIA I CASTRO
Physician
Hosp Physician Compensation
Deferred
03
REBEKAH M GRAHAM
Probation Unit Supervisor
Probation - Juvenile
Member Type: Safety
Deferred
04
HERMAN L MARQUEZ
Solid Waste Recovery Worker
Lovelace Transfer District
Deferred
05
TAM T NGUYEN
Physician Manager
Deferred
06
ROCHELLE Y VELOSO
Sr Reg Environmental Hlth Spe
Environmental Health
Deferred
Comments: Established membership with Sacramento CERA
8/3/2015
3:38:58 PM
Page: 4
Association
PUBLIC
August 2015
4.03 Purchase of Service
01
STACEY M BALAGEY
02
Temporary/Contract Time
Utility Dist Maint Worker II
Utility Districts
Medical LOA
Physician
Legal Technician II
D A - Public Assist Fraud Pros
Medical LOA
Child Support Officer II
Child Support Svs
Redeposit Prior County Service
Central Plant Engineer
Hosp Plant Operations
Medical LOA
EARL W GRAVES
12
Physician
EARL W GRAVES
11
Medical LOA
MARCELLE GOREE
10
Physician
DIANA FIERRO
09
Medical LOA
SORAYA G ESTEVA
08
Mental Health Clinician II
Mental Health-Adult Outpatient
JOHN W COOK
07
MARIA I CASTRO
06
Office Technician/Coordinator
Auditor - Controller
MARIA I CASTRO
05
Medical LOA
JOANNA I BOGACS
04
Appraiser III
Assessor
DANIELLE C BARNEY
03
Consent
Central Plant Engineer
Hosp Plant Operations
MICHAEL T GRIGGS
Member Type: Safety
Correctional Officer
Sheriff - Cust. Realignment
Military/Merchant Marine Time
8/3/2015
3:38:58 PM
Page: 5
Association
PUBLIC
August 2015
13
EUGENIA E HUDSON
14
Sheriff-Custody-Regular Staff
Medical LOA
Medical LOA
Information Systems Analyst IV
Information Systems Division
Medical LOA
Communications Dispatcher III
Sheriff - Communications
Medical LOA
Physician Manager
THANH V NGUYEN
25
Deputy District Attorney I
DA-Consumer Fraud-Prop 64
TAM T NGUYEN
24
DAVID C MORROW
23
Social Worker IV
LEENA MITTAL
22
Medical LOA
LEANN J MCKELROY
Member Type: Safety
21
Social Worker IV
LEANN J MCKELROY
Member Type: Safety
20
KELLY R MCDANIEL
19
Mental Health - Clerical
ANNA M MAGUIRE
18
Medical LOA
ANNA M MAGUIRE
17
Courts-Legal Process Spvr
Court - Oper-Criminal-Manteca
MARIA C LOPEZ
16
CYNTHIA L LEVESEY
15
Public Health Nurse II
RecordsManagementTechnician I
Purchasing - Support Services
NATHAN P PALOMARES
Weatherization Specialist
Aging - Community Services
8/3/2015
3:38:58 PM
Page: 6
Association
PUBLIC
August 2015
26
CLAUDE E PURKIS
Member Type: Safety
27
Management Analyst II
Medical LOA
DA Investigative Assistant II
Medical LOA
DA Investigative Assistant II
Emergency Medical Srvs Speclst
Emergency Medical Services
Medical LOA
County Counsel
ESPERANZA S VALENZUELA
37
Medical LOA
ESPERANZA S VALENZUELA
36
Social Worker II
CHRISTINE E TUALLA
35
Medical LOA
TIFFANY N TIRAPELLE
34
Court Interpreter
Court - Interpreters
TIFFANY N TIRAPELLE
33
Medical LOA
ANGELA R STEELE
32
BERTHA S SOTELO
31
Medical LOA
ROSA E SANCHEZ
30
Senior Administrative Spvr
HSA - Admin Support
MARI D ROBINSON
29
Military/Merchant Marine Time
RONANN M ROBELLO
28
Sergeant
Sheriff-Lathrop Police Contrac
County Counsel
Public Service Time
CYNTHIA L WILLIAMS
Nursing Department Manager
Hosp Med-Surg Intensive Care
Medical LOA
8/3/2015
3:38:58 PM
Page: 7
CONFIDENTIAL
San Joaquin County Employees' Retirement
Association
August 2015
Consent
4.05 Deceased Member Report
01
DATE OF DEATH
DEPARTMENT
07/22/2015
Public Defender
JOHN MAGGI
06/06/2015
Public Works
DOUGLAS BROWN
06/22/2015
SJGH Communications
RONNIE CARPENTER
07/07/2015
Flood Channel Maint.
ELEONORE LITVINCHUK
07/20/2015
Auditor/Controller
LOIS FOGT
07/23/2015
Superior Court
SCOTT DIETRICH
07/28/2015
Public Works
HERBERT LOZIER
08/01/2015
Sheriff’s Office
DECEASED ACTIVE / DEFERRED MEMBERS
GEORGIA MC ELROY
02
03
DECEASED RETIRED MEMBERS
DECEASED BENEFICIARIES
WILMA FREDERICKSEN
6/27/2015
8/4/15 11:02 AM
Association
PUBLIC
August 2015
Consent
4.06 Death of Active Member
01
KATHIE U BUTLER
Deputy Sheriff II
Sheriff-Stockton Unified Court
Member Type: Safety
Date of Death: 5/11/2015
Benefits to George Butler, brother; Detrick Herron, nephew; Bertram Herron, nephew
Option: Lump Sum Death Benefit
8/3/2015
3:38:58 PM
Page: 8
Board of Retirement Regular Meeting
San Joaquin County Employees’ Retirement Association
Agenda Item 4.07-01
August 14, 2015
SUBJECT: Statement of Funding Policy
SUBMITTED FOR:
_X_ CONSENT
l___l ACTION
___ INFORMATION
RECOMMENDATION
Staff recommends the Board adopt Resolution 2015-08-01 titled “Statement of Funding
Policy” to approve the proposed revisions as recommended by the plan actuary, which will be
included in actuarial studies conducted as of January 1, 2015 and later.
PURPOSE
To revise SJCERA’s Statement of Funding Policy to incorporate layered amortization as
encouraged by the California Actuarial Advisory Panel and Conference of Consulting
Actuaries and establish closed amortization periods to coordinate with new GASB disclosure
rules.
DISCUSSION
At the Board’s Financial Meeting held July 24, 2015, consulting actuaries Robert McCrory
and Graham Schmidt of Cheiron reviewed and discussed the preliminary results of
SJCERA’s valuation as of January 1, 2015, and obtained direction from the Board on
proposed revisions to SJCERA’s Statement of Funding Policy. The actuaries recommended
the Board revise SJCERA’s funding policy to use closed period layered amortization for
future changes in unfunded actuarial accrued liability (UAAL). The Board approved the
recommendations as follows:
•
Beginning January 1, 2015, any future UAAL that occurs due to investment gains or
losses, assumption changes, or a cause not related to benefits will be amortized as a
level percentage of payroll over a closed 15 year period.
•
Beginning January 1, 2015, any future UAAL that occurs due to a change in plan
benefits will be amortized as a level percentage of payroll over a closed period, the
length to be determined by the Board.
•
Any UAAL layers already established prior to January 1, 2015 will not be affected by
these changes.
August 14, 2015
Page 2 of 2
Agenda Item 4.07-01
Additional proposed revisions memorialize the Board’s direction on July 11, 2014, that the
actuaries use a closed, rather than open or “rolling,” amortization period for the plan valuation
as of January 1, 2014 and later, and add provisions reflecting current practice that the
employer contribution rates established by the Board will comply with the employer contribution
requirements of the California Public Employees’ Pension Reform Act of 2013 (PEPRA).
The attached mark-up and clean versions of the Statement of Funding Policy reflect the
proposed revisions.
ATTACHMENTS
Statement of Funding Policy – August 2015 (mark-up)
Statement of Funding Policy – August 2015 (clean)
Proposed Resolution 2015-08-01
__________________________
ANNETTE ST. URBAIN
Chief Executive Officer
________________________
GREG FRANK
Management Analyst III
San Joaquin County Employees'
Statement of Funding Policy
October 2011 August 2015
A. Introduction
The purpose of this Statement of Funding Policy is to record the funding objectives
and strategy set by the Board of Retirement (Board) for the San Joaquin County
Employees' Retirement Association (SJCERA). The Board re-establishes this
Statement of Funding Policy to ensure future benefit payments for members of
SJCERA. In addition, this document records certain guidelines established by the
Board to assist in administering SJCERA in a consistent and efficient manner. It is a
working document and may be modified as the Board deems necessary. (Last
modification October 2009 2011)
B. Funding Objectives
The Board's primary funding objectives, in order of importance, are to:
1. Provide sufficient assets to permit the payment of all benefits under SJCERA.
2. Maintain equity among generations of taxpayers by:
a. Achieving and maintaining a Funded Ratio, as defined in Section E, between
90% and 110%;
b. Amortizing the Unfunded Actuarial Accrued Liability, as defined in Section E,
over a period approximately equal to the expected average future working
lifetime of the active SJCERA membership; and
c. Setting Funding Policy so that the Inactive Funded Ratio, as defined in
Section E, is expected to remain above 100%.
3. Minimize the volatility of the employers’ annual contribution rate as a percentage
of covered pay by:
a. Maintaining 3% of total assets as a reserve against contingencies; and
b. Coordinating Funding and Investment Policies to reduce portfolio risk as the
Funded Ratio improves, with the ultimate goal of matching fixed income
investments to benefit payments for inactive SJCERA members.
4. Encourage participating employers to refrain from making discretionary benefit
improvements in any year in which the Funded Ratio is below 110% on an
actuarial value of assets basis.
C. Funding Guidelines
This statement reflects the current policy of the Board and establishes guidelines for
setting the employer contribution rates.
1. Regular Contribution Rate
Through coordinated Funding and Investment Policy we will attempt to minimize
the volatility of the employers’ contribution rate from year to year as a percentage
of covered pay. The employer contribution is the sum of the employers’ Normal
Cost and a payment to amortize the Unfunded Actuarial Accrued Liability as of
the date of valuation:
a. The Normal Cost and Actuarial Accrued Liability used for this purpose will be
calculated using the Entry Age actuarial funding method.
b. The Actuarial Value of Assets used for this purpose will be a smoothed value
that recognizes realized and unrealized investment gains over a five-year
period, but in no event shall be more than 120% of market value or less than
80% of market value.
c. The Board has declared 50% of the actuarial loss from Fund investments
during 2008 to be an Extraordinary Actuarial Loss, as defined in Section E.
This Loss will be amortized as a percentage of expected payroll over a closed
30-year period beginning January 1, 2009 and ending January 1, 2038.
In the event that the Board declares an Extraordinary Actuarial Gain during
the amortization period of the 2008 Loss, the Gain will first be used to reduce
the remaining unamortized balance of the 2008 Loss, and any amount of the
Gain remaining will be amortized as a percentage of expected payroll over a
closed 30-year period beginning on the date of the Gain.
d. Any Unfunded Actuarial Accrued Liability other than Extraordinary Actuarial
Gains or Losses will be amortized as a percentage of expected payroll over a
20-year period beginning with the 2009 Valuation Year.
This amortization period will remain at 20 years through the 2013 Valuation
Year. After 2013, the amortization period for the remaining UAAL will
decrease by one year each Valuation Year until it reaches 12 years, at which
point no further decreases will occur.
SJCERA / 2011 2015 Statement of Funding Policy / Page 2 of 6
e. Beginning with the January 1, 2015 valuation, any future UAAL that occurs
due to an investment gain or loss, assumption change, or other cause not
related to plan benefits will be amortized as a level percentage of payroll over
a closed 15 year period, commencing with the valuation which first recognizes
the change in UAAL. Any UAAL layers already established prior to the
January 1, 2015 actuarial valuation will not be affected by this change.
f. Beginning with the January 1, 2015 valuation, any future UAAL that occurs
due to a change in plan benefits will be amortized as a level percentage of
payroll over a closed period, the length of which will be established by the
Board, commencing with the valuation which first recognizes the change in
UAAL. In selecting the amortization period, the Board will balance the
objective of cost stability with the goal of generational equity in funding the
liabilities associated with the benefit change. Any UAAL layers already
established prior to the January 1, 2015 actuarial valuation will not be affected
by this change.
g. The Board will review the ultimate above amortization period policy from time
to time, based on the Funding Objectives in B. above.
2. Minimum Contribution Rate
In the interest of maintaining the funded position of SJCERA and to ensure that
assets are sufficient at all times to provide for the prompt delivery of benefits and
related services to plan participants, the Board will, under certain circumstances
increase the employers’ contribution rate above the Regular Contribution Rate,
as detailed below:
a. If the Market Value of Assets is less than expected to be needed to pay
benefits and expenses during the year, the employer contributions shall be
increased to a level sufficient to provide for such payments.
b. If the Inactive Funded Ratio is less than 100%, on both an actuarial value and
market value basis for more than two consecutive years, in the third
consecutive year, the employer contributions may be increased to a level that
would restore the Inactive Funded Ratio to 100% over a five-year period using
a level percentage of expected payroll amortization.
c. If the Funded Ratio has increased to over 100% and any Unfunded Actuarial
Accrued Liability has been fully amortized, the employer will continue to
contribute at least the Normal Cost until such time as the Board decides
otherwise.
d. If the employer experiences a significant change in active membership, and
the Board determines that the amortization of the Unfunded Actuarial Accrued
Liability will be extended as a result, the Board may revise the employer’s
contribution rate to maintain funding progress.
e. After January 1, 2013, the employer contribution rates established by the
Board will comply with the employer contribution requirements of the
California Public Employees’ Pension Reform Act of 2013 (PEPRA).
D. Assumption Guidelines
The actuarial assumptions directly affect only the timing of contributions; the ultimate
contribution level is determined by the benefits and expenses actually paid and by
actual investment returns. To the extent that actual experience deviates from the
assumptions, experience gains and losses will occur. These gains (or losses) then
serve to reduce (or increase) future contribution levels.
Assumptions are generally grouped into two major categories:
•
Demographic assumptions -- which include withdrawal, retirement, disability,
marriage and mortality rates
•
Economic assumptions -- which include inflation, valuation interest rate, and
salary increase
The assumptions represent the Board's best estimate of anticipated experience
under SJCERA and are intended to be long term in nature. Therefore, in developing
the assumptions, the Board considers not only past experience, but also trends,
external forces and future expectations. Irrespective of the care with which actuarial
assumptions are chosen, actual experience over the short term is not expected to
match these assumptions.
In order to reduce the expenses and administrative difficulties involved in changing
the actuarial assumptions used to compute optional settlements under Article 11 of
the CERL, the Board may elect to use separate sets of actuarial assumptions for
funding purposes – computing Plan liabilities and employer and employee
contributions – and for administrative purposes – computing optional settlements.
E. Glossary of Terms
Actuarial Allocation Percentage: The portion of total earnings expected to be
allocated to pension reserves over the long term.
Actuarial Funding Method: The technique used to allocate costs to various time
periods.
Actuarial Accrued Liability (AAL): The portion of the Present Value of Projected
Benefits that is attributed to past years of service by the Actuarial Funding
Method. This represents the target level of assets each year under the Actuarial
Funding Method.
Actuarial Value of Assets: The value of assets used by the actuary in the actuarial
valuation. Although the value of assets for this purpose can be the Market Value
of Assets, a smoothed value is often used in order to reduce the impact of market
fluctuations on the employers’ contribution rate, while capturing the long-term
intrinsic value of those plan assets that will be used to pay for promised benefits.
For SJCERA, the Actuarial Value of Assets shall be no more than 120% of
market value and no less than 80% of market value.
Entry Age Actuarial Funding Method: An Actuarial Funding Method that determines
the plan's Normal Cost as a level percentage of pay over the working lifetime of
plan members.
Experience Gains and Losses: The difference between the experience anticipated
by the actuarial assumptions and the plan's actual experience during the period
between valuations. If actual experience is financially more favorable to the plan,
it is a Gain, (e.g., more deaths than expected or higher investment return than
expected). If actual experience is financially less favorable to the plan, it is a
Loss, (e.g., higher salaries than expected or lower investment return than
expected).
Extraordinary Actuarial Gain (Loss): An Experience Gain (Loss) determined by the
Board to be of such magnitude and rarity to warrant creation of a special
amortization policy.
Funded Ratio: The ratio of the Actuarial Value of Assets to the Actuarial Accrued
Liability of the plan.
Inactive Funded Ratio: The ratio of the Actuarial Value of Assets to the Actuarial
Accrued Liability of the plan for members who are not active, including retired
members and their beneficiaries, disabled members, and members terminated
with a vested benefit.
Market Value of Assets: The total fair value of fund assets as reported in SJCERA’s
financial statements.
Normal Cost: The portion of the Present Value of Projected Benefits that is
attributed to the current year by the Actuarial Funding Method.
Unfunded Actuarial Accrued Liability (UAAL): The portion of the Actuarial Accrued
Liability not currently covered by plan assets. It is calculated by subtracting the
Actuarial Value of Assets from the Actuarial Accrued Liability.
Statement of Funding Policy
August 2015
A. Introduction
The purpose of this Statement of Funding Policy is to record the funding objectives
and strategy set by the Board of Retirement (Board) for the San Joaquin County
Employees' Retirement Association (SJCERA). The Board re-establishes this
Statement of Funding Policy to ensure future benefit payments for members of
SJCERA. In addition, this document records certain guidelines established by the
Board to assist in administering SJCERA in a consistent and efficient manner. It is a
working document and may be modified as the Board deems necessary. (Last
modification October 2011)
B. Funding Objectives
The Board's primary funding objectives, in order of importance, are to:
1. Provide sufficient assets to permit the payment of all benefits under SJCERA.
2. Maintain equity among generations of taxpayers by:
a. Achieving and maintaining a Funded Ratio, as defined in Section E, between
90% and 110%;
b. Amortizing the Unfunded Actuarial Accrued Liability, as defined in Section E,
over a period approximately equal to the expected average future working
lifetime of the active SJCERA membership; and
c. Setting Funding Policy so that the Inactive Funded Ratio, as defined in
Section E, is expected to remain above 100%.
3. Minimize the volatility of the employers’ annual contribution rate as a percentage
of covered pay by:
a. Maintaining 3% of total assets as a reserve against contingencies; and
b. Coordinating Funding and Investment Policies to reduce portfolio risk as the
Funded Ratio improves, with the ultimate goal of matching fixed income
investments to benefit payments for inactive SJCERA members.
4. Encourage participating employers to refrain from making discretionary benefit
improvements in any year in which the Funded Ratio is below 110% on an
actuarial value of assets basis.
C. Funding Guidelines
This statement reflects the current policy of the Board and establishes guidelines for
setting the employer contribution rates.
1. Regular Contribution Rate
Through coordinated Funding and Investment Policy we will attempt to minimize
the volatility of the employers’ contribution rate from year to year as a percentage
of covered pay. The employer contribution is the sum of the employers’ Normal
Cost and a payment to amortize the Unfunded Actuarial Accrued Liability as of
the date of valuation:
a. The Normal Cost and Actuarial Accrued Liability used for this purpose will be
calculated using the Entry Age actuarial funding method.
b. The Actuarial Value of Assets used for this purpose will be a smoothed value
that recognizes realized and unrealized investment gains over a five-year
period, but in no event shall be more than 120% of market value or less than
80% of market value.
c. The Board has declared 50% of the actuarial loss from Fund investments
during 2008 to be an Extraordinary Actuarial Loss, as defined in Section E.
This Loss will be amortized as a percentage of expected payroll over a closed
30-year period beginning January 1, 2009 and ending January 1, 2038.
In the event that the Board declares an Extraordinary Actuarial Gain during
the amortization period of the 2008 Loss, the Gain will first be used to reduce
the remaining unamortized balance of the 2008 Loss, and any amount of the
Gain remaining will be amortized as a percentage of expected payroll over a
closed 30-year period beginning on the date of the Gain.
d. Any Unfunded Actuarial Accrued Liability other than Extraordinary Actuarial
Gains or Losses will be amortized as a percentage of expected payroll over a
20-year period beginning with the 2009 Valuation Year.
This amortization period will remain at 20 years through the 2013 Valuation
Year. After 2013, the amortization period for the remaining UAAL will
decrease by one year each Valuation Year.
SJCERA / 2015 Statement of Funding Policy / Page 2 of 6
e. Beginning with the January 1, 2015 valuation, any future UAAL that occurs
due to an investment gain or loss, assumption change, or other cause not
related to plan benefits will be amortized as a level percentage of payroll over
a closed 15 year period, commencing with the valuation which first recognizes
the change in UAAL. Any UAAL layers already established prior to the
January 1, 2015 actuarial valuation will not be affected by this change.
f. Beginning with the January 1, 2015 valuation, any future UAAL that occurs
due to a change in plan benefits will be amortized as a level percentage of
payroll over a closed period, the length of which will be established by the
Board, commencing with the valuation which first recognizes the change in
UAAL. In selecting the amortization period, the Board will balance the
objective of cost stability with the goal of generational equity in funding the
liabilities associated with the benefit change. Any UAAL layers already
established prior to the January 1, 2015 actuarial valuation will not be affected
by this change.
g. The Board will review the above amortization policy from time to time, based
on the Funding Objectives in B. above.
2. Minimum Contribution Rate
In the interest of maintaining the funded position of SJCERA and to ensure that
assets are sufficient at all times to provide for the prompt delivery of benefits and
related services to plan participants, the Board will, under certain circumstances
increase the employers’ contribution rate above the Regular Contribution Rate,
as detailed below:
a. If the Market Value of Assets is less than expected to be needed to pay
benefits and expenses during the year, the employer contributions shall be
increased to a level sufficient to provide for such payments.
b. If the Inactive Funded Ratio is less than 100%, on both an actuarial value and
market value basis for more than two consecutive years, in the third
consecutive year, the employer contributions may be increased to a level that
would restore the Inactive Funded Ratio to 100% over a five-year period using
a level percentage of expected payroll amortization.
c. If the Funded Ratio has increased to over 100% and any Unfunded Actuarial
Accrued Liability has been fully amortized, the employer will continue to
contribute at least the Normal Cost until such time as the Board decides
otherwise.
d. If the employer experiences a significant change in active membership, and
the Board determines that the amortization of the Unfunded Actuarial Accrued
Liability will be extended as a result, the Board may revise the employer’s
contribution rate to maintain funding progress.
e. After January 1, 2013, the employer contribution rates established by the
Board will comply with the employer contribution requirements of the
California Public Employees’ Pension Reform Act of 2013 (PEPRA).
D. Assumption Guidelines
The actuarial assumptions directly affect only the timing of contributions; the ultimate
contribution level is determined by the benefits and expenses actually paid and by
actual investment returns. To the extent that actual experience deviates from the
assumptions, experience gains and losses will occur. These gains (or losses) then
serve to reduce (or increase) future contribution levels.
Assumptions are generally grouped into two major categories:
•
Demographic assumptions -- which include withdrawal, retirement, disability,
marriage and mortality rates
•
Economic assumptions -- which include inflation, valuation interest rate, and
salary increase
The assumptions represent the Board's best estimate of anticipated experience
under SJCERA and are intended to be long term in nature. Therefore, in developing
the assumptions, the Board considers not only past experience, but also trends,
external forces and future expectations. Irrespective of the care with which actuarial
assumptions are chosen, actual experience over the short term is not expected to
match these assumptions.
In order to reduce the expenses and administrative difficulties involved in changing
the actuarial assumptions used to compute optional settlements under Article 11 of
the CERL, the Board may elect to use separate sets of actuarial assumptions for
funding purposes – computing Plan liabilities and employer and employee
contributions – and for administrative purposes – computing optional settlements.
E. Glossary of Terms
Actuarial Allocation Percentage: The portion of total earnings expected to be
allocated to pension reserves over the long term.
Actuarial Funding Method: The technique used to allocate costs to various time
periods.
Actuarial Accrued Liability (AAL): The portion of the Present Value of Projected
Benefits that is attributed to past years of service by the Actuarial Funding
Method. This represents the target level of assets each year under the Actuarial
Funding Method.
Actuarial Value of Assets: The value of assets used by the actuary in the actuarial
valuation. Although the value of assets for this purpose can be the Market Value
of Assets, a smoothed value is often used in order to reduce the impact of market
fluctuations on the employers’ contribution rate, while capturing the long-term
intrinsic value of those plan assets that will be used to pay for promised benefits.
For SJCERA, the Actuarial Value of Assets shall be no more than 120% of
market value and no less than 80% of market value.
Entry Age Actuarial Funding Method: An Actuarial Funding Method that determines
the plan's Normal Cost as a level percentage of pay over the working lifetime of
plan members.
Experience Gains and Losses: The difference between the experience anticipated
by the actuarial assumptions and the plan's actual experience during the period
between valuations. If actual experience is financially more favorable to the plan,
it is a Gain, (e.g., more deaths than expected or higher investment return than
expected). If actual experience is financially less favorable to the plan, it is a
Loss, (e.g., higher salaries than expected or lower investment return than
expected).
Extraordinary Actuarial Gain (Loss): An Experience Gain (Loss) determined by the
Board to be of such magnitude and rarity to warrant creation of a special
amortization policy.
Funded Ratio: The ratio of the Actuarial Value of Assets to the Actuarial Accrued
Liability of the plan.
Inactive Funded Ratio: The ratio of the Actuarial Value of Assets to the Actuarial
Accrued Liability of the plan for members who are not active, including retired
members and their beneficiaries, disabled members, and members terminated
with a vested benefit.
Market Value of Assets: The total fair value of fund assets as reported in SJCERA’s
financial statements.
Normal Cost: The portion of the Present Value of Projected Benefits that is
attributed to the current year by the Actuarial Funding Method.
Unfunded Actuarial Accrued Liability (UAAL): The portion of the Actuarial Accrued
Liability not currently covered by plan assets. It is calculated by subtracting the
Actuarial Value of Assets from the Actuarial Accrued Liability.
Board of Retirement
Resolution
RESOLUTION TITLE:
STATEMENT OF FUNDING POLICY
RESOLUTION NO.:
2015-08-01
WHEREAS, the Board of Retirement of the San Joaquin County Employees’
Retirement Association has established a Statement of Funding Policy to give
direction to its actuaries on funding objectives; and
WHEREAS, from time to time the Board reviews its Funding Policy, which policy
was last revised in October 2011; and
WHEREAS, Cheiron, Inc., the Board’s retained actuary, has reviewed and made
recommendations for changes to the Board’s Statement of Funding Policy that
specify:
•
Beginning January 1, 2015, any future unfunded actuarial accrued liability
(UAAL) that occurs due to investment gains or losses, assumption changes,
or a cause not related to benefits will be amortized as a level percentage of
payroll over a closed 15 year period;
•
Beginning January 1, 2015, any future UAAL that occurs due to a change in
plan benefits will be amortized as a level percentage of payroll over a closed
period, the length to be determined by the Board;
•
Any UAAL layers already established prior to January 1, 2015 will not be
affected by these changes;
•
Clarify that amortization periods specified in the policy are closed, rather than
open or rolling, periods;
•
Add provisions reflecting current practice that since January 1, 2013, the
employer contribution rates established by the Board comply with the
employer contribution requirements of the California Public Employees’
Pension Reform Act of 2013 (PEPRA).
NOW, THEREFORE, BE IT RESOLVED that the Board adopts the proposed
revisions to its Statement of Funding Policy and directs that a copy be forwarded to its
retained actuary to be included in actuarial studies conducted as of January 1, 2015
and later.
SJCERA Board of Retirement
Resolution No. 2015-08-01
PASSED AND APPROVED by the Board of Retirement of the San Joaquin
County Employees' Retirement Association on the 14th day of August, 2015.
AYES:
NOES:
ABSENT:
ABSTAIN:
_______________________________
RAYMOND McCRAY, Chair
Attest:
_______________________________
MICHAEL RESTUCCIA, Secretary
2015
EVENT DATES 2015
BEGIN
END
CONFERENCES AND EVENTS SCHEDULE
EVENT TITLE
Aug 23
Aug 25 Public Pension Funding Forum
Aug 25
Aug 28
Aug 31
Sep 1
Sep 8
Sep 10 Public Funds Forum
Sep 10
Sep 11
Sep 24
Sep 25 Public Pensions & Investment Forum
EVENT SPONSOR
2015
LOCATION
REG.
FEE
NCPERS & IPPS
Berkeley, CA
Principles of Pension Management for
Trustees at Pepperdine
CALAPRS
Malibu, CA
Global CFO Forum
CalPERS
Sacramento, CA
$400
www.calpers.ca.gov
Public Funds Forum
Laguna Beach, CA
$775
publicfundsforum.com
FIS Group
San Francisco, CA
N/A
fisgroup.com
Nossaman
San Francisco, CA
$250
nossaman.com
FIS Group's 4th Annual Investment
Symposium
$400
WEBLINK
FOR MORE INFO
ncpers.org
$2,500 calaprs.org
Sep 30
Oct 2
CALAPRS Adminstrators' Institute
CALAPRS
Carmel, CA
$1,000 calaprs.org
Oct 1
Oct 1
Public Retirement Seminar
Public Retirement Journal
Sacramento, CA
Oct 26
Oct 30
Investment Strategies & Portfolio
Management
Wharton School of Business Philadelphia, PA
Oct 1
Oct 5
Oct 2
Oct 8
PIMCO Client Education Seminars
PIMCO
Newport Beach, CA
N/A
pimco.com
Nov 3
Nov 5
Invesco Real Estate US Client Conf
Invesco
La Jolla, CA
N/A
invesco.com
Nov 17
Nov 20 SACRS Fall Conference
SACRS
San Diego, CA
$120
sacrs.org
$200
publicretirementjournal.org
$10,000 wharton.upenn.edu
Printed 8/6/15 3:04 PM
2015 Global CFO Forum
Sessions and Speaker Descriptions
a | 2015 Global CFO Forum
Sessions in Detail – Monday, August 31
8:30 – 8:45 a.m. – Welcome/Opening Remarks
Speakers:
Anne Stausboll, Chief Executive Officer – California Public Employees’ Retirement System (CalPERS) Cheryl Eason, Chief Financial Officer – CalPERS
8:45 – 10:15 a.m. – General Session Keynote
Cybersecurity Threats – Major Business Disruptors
Almost three-quarters of CFOs say that cybersecurity is a high priority for their organization, but how much do they really
know about today’s cybersecurity threats? We read about a major data breach almost daily that results in millions of dollars
in expenses, regulatory entanglement, and the inevitable litigation. However, there are other cyber threats that are even more
dangerous that don’t always get the same level of attention.
This roundtable panel will examine some of the most dangerous cyber threats and how they disrupt the financial stability of
both businesses and marketplaces. It will also discuss how forward-thinking organizations are both responding to these cyber
threats and partnering with law enforcement to better protect their financial interests.
Panelists: Liana Bailey-Crimmins, Chief Information Officer – CalPERS
Scott Springer, Supervisory Special Agent – Federal Bureau of Investigation
Aravind Swaminathan, Partner – ORRICK
10:30 a.m. – 12:15 p.m. – Breakout Sessions
CFO Roundtable
This is an interactive session designed for chief financial officers to discuss dynamic trends, issues, and priorities that CFOs
face today.
Facilitator:
Cheryl Eason, Chief Financial Officer – CalPERS
Internal Audits – What to Expect and How to Address the Risks
Expectations of internal audit functions are high, and the challenges are unique: fiscal restraint, increased pressure for
transparency, the influence of the media, and challenges in measuring risks and outcomes, among others. This session
explores three topics: The evaluation of governance over subsidiaries (as structuring entities and investments), vendor
management risks and controls, and cyber risk assessments.
Facilitator: Barry Rowland, Managing Director, Head of Internal Audit – Canada Pension Plan Investment Board
1 | 2015 Global CFO Forum
Sessions in Detail – Monday, August 31
1:00 – 3:00 p.m. – Breakout Sessions
Asian Pacific Geographical Roundtable
This roundtable will provide attendees from the Asian Pacific region with an interactive forum to discuss issues and
challenges facing their plans.
Facilitator: Claire Blake, Executive Director, Finance and Chief Financial Officer – OIC
Canadian Geographical Roundtable
This session is an interactive discussion on issues facing Canadian pension plans. It is an opportunity for you to share
information about areas of significance that your organization is focusing on and to hear from your colleagues in other
pension plans.
Facilitator: Aaron Walker-Duncan, Vice President, Board Services – BC Pension Corporation
U.S. Geographical Roundtable
The first half of this roundtable will provide a technical update from the Governmental Accounting Standards Board (GASB)
on projects they are working on, and updates for the most recently issued statements. The second half of the presentation
will be a facilitated discussion on hot topics and issues facing U.S. funds.
Facilitator:
Speaker: Julie Underwood, Chief of Fiscal Services – San Bernardino County Employees’ Retirement Association
Michelle Czerkawski, Project Manager – GASB
3:15 – 3:30 p.m. – End of Day Remarks
Speaker:
Cheryl Eason, Chief Financial Officer, CalPERS
Sessions in Detail – Tuesday, September 1
8:30 – 9:45 a.m. – Opening Session Keynote
Speaker:
Ted Eliopoulos, Chief Investment Officer – CalPERS
10:00 – 11:15 a.m. – Breakout Sessions
Exploring Enterprise Risk and Operational Risk Management
The session explores:
• What are ERM and ORM?
• The differences between ERM and ORM and how they are structured in an organization
• How organizations design, develop, and implement an ERM and ORM program
• The mandates of an ERM and ORM program
• Differences in the ERM / ORM program between the U.S. and Canada
Facilitators: Corinne Ho, Senior Director – Healthcare of Ontario Pension Plan
Valuations – From Corporate Governance to Risk
Your valuation program is a critical strategic function for your organization. In the public sector environment, accountability to
taxpayers and other stakeholders brings an additional dimension to consider.
This session will cover the topic of valuations from the perspective of governance and risk. The discussion will include specific
steps to consider including: oversight of the valuation processes, models – strengths and pitfalls, techniques of valuation
advantages and disadvantages, and dealing with valuation differences and management reporting.
Facilitator: Speaker:
Barry Rowland, Managing Director, Head of Internal Audit – Canada Pension Plan Investment Board
Susan H. Glass, National Leader of Valuation and Litigation Services (Canada) – KPMG
Investment Management Reporting of Performance and Risk
The session will discuss the processes and controls in place to support Investment Management Reporting, the desire and
ability to audit the information, the technology supporting reporting, and the role that the end-user plays in accessing and
consuming the information.
Facilitator: Robert Fijalkowski, Senior Director of Valuation, Risk and Compliance –
Healthcare of Ontario Pension Plan
Sessions in Detail – Tuesday, September 1
12:15 – 1:30 p.m. – Breakout Sessions
Evaluating Pension Plan Custodians
A representative from Thomas Murray IDS will provide a summary of trends in the custody industry and will provide tips to
evaluate custodians and the services they provide. A facilitated discussion with session attendees will solicit views on the
strengths and weaknesses of various custodians, and issues currently being faced.
Facilitator:
Janet Wynn, Senior VP, Business Development – Thomas Murray IDS
Measuring Your Organization’s Performance – Which Measures Matter Most for You?
Your organization probably has hundreds, if not thousands, of measures theoretically in place to help its performance. An
overabundance of measures though can dilute their effect and lead you and your board to working at a too detailed of a level.
This session will share two organizations’ experiences as they tried to overcome the noise to determine what’s most useful
for them and their boards. A facilitated discussion will solicit views from session attendees and provide a wide range of
perspectives on corporate performance measurement.
Facilitator: Trevor Fedyna, Vice President, Corporate Services and Chief Financial Officer – BC Pension Corporation
Roles and Methods for Pension Plan Stress Testing
This session will look at stress testing as a primary tool for understanding and managing plan funding policy and asset
allocation. The discussion will cover what criteria is used to design stress testing, the tradeoffs in design and implementation,
the role of stress testing in liquidity and counterparty risk management, transitioning from a traditional rules-based approach
to a principles-based approach, and the stress-based risk framework.
Facilitator: Robert Fijalkowski, Senior Director of Valuation, Risk and Compliance –
Healthcare of Ontario Pension Plan
1:45 – 3:00 p.m. – General Session Keynote
Improving Performance and Pension Governance in Your Fund
Most pension governance matters are regulated and most plans comply with legislation. However, there are areas where
decisions are at the discretion of the plan. Non-legislated areas are more likely to represent a significant risk exposure for
directors. This presentation will cover questions board members can consider when making a decision to ensure good
pension governance.
Speaker: Claude N. Marchessault, Counsel – Dentons
Optional Tour – Wednesday, September 2
8:30 – 11:00 a.m. – CalPERS Tour
CalPERS Tour, CalPERS Headquarters
At CalPERS, our commitment to the environment is reflected in our investment decisions and global leadership. Our tour will
guide you through our building complex, including the LEED-Certified Lincoln Plaza East and West buildings. After the tour,
CalPERS executives and senior leaders will be available to answer any questions you may have about our agency.
8:30 a.m. Shuttle pick-up from Sheraton Grand Hotel
9:00 – 11:00 a.m. CalPERS Tour/Group Meetings with CalPERS Senior Leadership
11:00 a.m. Shuttle Departs back to Sheraton Grand Hotel
Monday, November 2, 2015
6:30 p.m.
Casual Dinner (Optional)
Tuesday, November 3, 2015
7:30 a.m. – 9:00 a.m.
Breakfast (Optional)
8:30 a.m. – 10:00 a.m.
Invesco Core Real Estate – U.S.A. Fund Advisory Committee Meeting
10:00 a.m. – 12:00 p.m.
Invesco Asia Core Fund Update
10:15 a.m. – 11:30 a.m.
Invesco Mortgage Recovery Fund II Annual Meeting
12:00 a.m. – 1:00 p.m.
Lunch
1:00 p.m. – 1:15 p.m.
Welcome and Invesco Real Estate Update
Scott Dennis
Invesco Real Estate
Managing Director – Chief Executive Officer
1:15 p.m. – 2:15 p.m.
John Greenwood
Chief Economist, Invesco
2:15 p.m. – 3:15 p.m.
Listed Real Assets
Joe Rodriguez
Invesco Real Estate
Managing Director – Head of Global Real Estate Securities
Darin Turner
Invesco Real Estate
Managing Director – Portfolio Manager
3:15 p.m. – 3:45 p.m.
Break
3:45 p.m. – 4:45 p.m.
Jack Uldrich
Global Futurist and Best Selling Author
Jack Uldrich is a renowned global futurist, independent scholar and
best-selling author. He is noted for his ability to deliver stimulating,
new perspectives on competitive advantage, organizational change,
and transformational leadership, while helping businesses to adapt.
Mr. Uldrich is highly regarded for his unique ability to present
multifaceted information in an entertaining and understandable manner
that stays with his audience long afterwards.
6:00 p.m.
Cocktail Reception
7:00 p.m.
Welcome Dinner
9:00 p.m. – 12:00 a.m.
Hospitality Suite (Optional)
Wednesday, November 4, 2015
7:30 a.m. – 8:30 a.m.
Buffet Breakfast/Meetings with Portfolio Managers
7:30 a.m. – 8:30 a.m.
Income from Alternative Debt Strategies Discussion/Breakfast
With Bert Crouch
8:30 a.m. – 9:30 a.m.
Jeff Speck
Speck & Associates, LLC – Principle
Jeff Speck is a city planner and urban designer who advocates
internationally for more walkable cities. Mr. Speck spent ten years as
Director of Town Planning at DPZ & Co., the principal firm behind the
New Urbanism movement. Since 2007, he has led Speck & Associates,
a boutique planning firm that specializes in making American downtowns thrive.
9:30 a.m. – 10:30 a.m.
Sector Focus – Multi Family
A Discussion with Market Participants
10:30 a.m. – 10:45 a.m.
Break
10:45 a.m. – 11:45 a.m.
Invesco Real Estate House View – International
Tim Bellman
Invesco Real Estate
Managing Director – Head of Global Research
Andy Rofe
Invesco Real Estate
Managing Director – Europe
Soon Lau
Invesco Real Estate
Managing Director – Asia Pacific
11:45 a.m. – 12:30 p.m.
Lunch
12:30 p.m. – 1:30 p.m.
Invesco Real Estate House View – U.S.
Paul Michaels
Invesco Real Estate
Managing Director – Director of North American Direct Real Estate
Greg Kraus
Invesco Real Estate
Managing Director – Head of Acquisitions – North America
Mike Sobolik, CFA®, CRE
Invesco Real Estate
Senior Director, Regional Director of Research – North America
Wednesday, November 4, 2015
1:30 p.m. – 2:45 p.m.
Shark Tank – Overview of Regional Real Estate Strategies
Tim Bellman
Invesco Real Estate
Managing Director – Head of Global Research
Max Swango
Invesco Real Estate
Managing Director – Director of Client Portfolio Management
Simon Redman
Invesco Real Estate
Managing Director – Europe
Client Portfolio Manager
Rita Ling
Invesco Real Estate
Managing Director – Asia
Claiborne Johnston
Invesco Real Estate
Managing Director – North America
3:00 p.m. – 5:00 p.m.
Group Networking Activity – Bike Building on the Lawn
6:30 p.m.
Cocktail Reception - Broadstone Little Italy
7:30 p.m.
Dinner – Kettner Exchange
9:00 p.m. – 12:00 a.m.
Thursday, November 5, 2015
7:00 a.m. – 9:00 a.m.
Buffet Breakfast/Meetings with Portfolio Managers
7:00 a.m. – 8:00 a.m.
Global Core Discussion/Breakfast with Tim Bellman
8:00 a.m. – 9:00 a.m.
Invesco U.S. Income Fund Annual Meeting
9:00 a.m. – 10:15 a.m.
Breakout Sessions
•
Invesco Core Real Estate – U.S.A. Annual Meeting
•
Invesco Real Estate Europe Market Update
•
Invesco Real Estate Asia Market Update
10:15 a.m. – 10:30 a.m.
Break
10:30 a.m. – 11:45 a.m.
Breakout Sessions
•
Invesco Real Estate Value-Added Funds Annual Meeting
•
Invesco Real Estate Europe Market Update
•
Invesco Real Estate Asia Market Update
10:40 a.m. – 11:40 a.m.
Invesco San Jacinto Core Fund
11:45 a.m.
Lunch
Afternoon
Golf, Spa, Kayaking and Group Hiking Excursion (Optional)*
5:00 p.m.
Cocktail Reception (Optional)
7:00 p.m.
Casual Dinner (Optional)
9:00 p.m. – 12:00 a.m.
Friday, November 6, 2015
7:00 a.m. – 9:00 a.m.
Buffet Breakfast Available
*Note that due to regulatory requirements, these activities may not be available to certain clients including Sovereign Wealth Funds and FINRA Registered
participants. Invesco payment of fees related to golf and spa activities is subject to Invesco compliance and approval.
Please Note: Agenda is subject to change. Final version will be distributed closer to event date.
For Invesco Real Estate Client Use. This is not an offer to buy or sell any financial instruments
SAN JOAQUIN COUNTY EMPLOYEES' RETIREMENT ASSOCIATION
SUMMARY OF PENDING TRUSTEE AND EXECUTIVE STAFF TRAVEL
2015
Event Dates
Aug 25 - 28
Sponsor / Event Description
Principles of Pension Management for
Trustees at Pepperdine
Location
Malibu, CA
Estimated
Cost
BOR Approval
Date
$4,500
Approved by Board Policy
St. Urbain, Cherng
$1,000
(no lodging expense for CEO;
Staff in-state travel approved
by CEO)
Eshoo
$1,000
June 12, 2015
Traveler(s)
Van Houten,
St. Urbain
(as Program Faculty)
Pending for CEO
Aug 31-Sep 1 Global CFO Forum
Sacramento, CA
Sep 24 - 25
San Francisco, CA
Public Pensions & Investment Forum
Sep 30 - Oct 2 CALAPRS Adminstrator's Institute
Carmel, CA
St. Urbain
$2,000
Approved by Board Policy
Nov 17 - 20
La Jolla, CA
Garman
$2,500
Pending
Invesco Real Estate Conference
Printed 8/6/15 3:05 PM
SUMMARY OF COMPLETED TRUSTEE AND EXECUTIVE STAFF TRAVEL
Event
Dates
2015
Jan 13
Jan 15
Jan 28-30
Sponsor / Event Description
Location
Due Diligence visit
Due Diligence visit
2015 Visions, Insights & Perspectives
(VIP)
Portland, OR
Santa Monica, CA
Dana Point, CA
Traveler(s)
St. Urbain, Calkins
St. Urbain, Calkins
Restuccia, Garman,
Calkins
St. Urbain
(Audit course as
CALAPRS Board
Member)
Garman, McCray,
Souza, Weydert,
Duffy, St. Urbain,
Pabst, Calkins,
Calkins
McCray, Calkins
St. Urbain
Estimated
Cost
Actual
Cost
Event Report
Filed
$1,320
$1,100
$1,334
$979
N/A
N/A
$4,265
$1,977
2/20/15
$300
$942
N/A
$5,000
$7,392
Approved by
Board Policy
$1,950
$2,370
$2,000
$1,130
$1,495
$1,387
$1,250
$385
Jan 28-30
Advanced Principles of Pension
Management for Trustee at UCLA
Los Angeles, CA
Mar 7-10
CALAPRS General Assembly
Monterey, CA
Mar 17-19
Apr 7-8
Apr 8-9
2015 Real Asset Conference
Pension Bridge
Miller Global Annual Investor Meeting
Dana Point, CA
San Francisco, CA
San Antonio, TX
Apr 20-21
CALAPRS Management Academy
Pasedena, CA
Apr 21-23
IREI Editorial Board Meeting
San Diego, CA
Garman
$1,750
$371
N/A
Apr 28-29
Mesa West Annual Investors Meeting
Santa Monica, CA
Calkins
$1,500
$632
6/26/15
Garman, Khan,
Mills, Eshoo, St.
Urbain, Pabst,
Calkins,
$12,000
$8,443
Approved by
Board Policy
St. Urbain
(as Program Faculty)
4/10/15
6/26/15
4/24/15
Approved by
Board Policy
May 12-15
SACRS Spring Conference
Anaheim, CA
May 17-20
World Investment Forum
Newport Coast, CA
Calkins
$1,250
$1,024
6/26/15
GFOA Annual Conference
Philadelphia, PA
Cherng
$2,500
$2,305
8/6/15
SACRS Public Pension Investment
Management Program
Berkeley, CA
Van Houten
$2,851
TBD
N/A
May 31 - Jun 3
Jul 26 - 29
Printed 8/7/15 11:55 AM
MEMORANDUM
TO:
ANNETTE ST. URBAIN
Chief Executive Officer
FROM:
LILY CHERNG
Retirement Financial Officer
DATE: AUGUST 6, 2015
SUBJECT: GFOA ANNUAL CONFERENCE - MAY 30-JUNE 2, 2015
Philadelphia, Pennsylvania
The GFOA’s 109th Annual Conference’s theme is “Innovation and Resilience”.
Thousands of public finance professionals gathered for the three-day conference to
share ideas, develop technical and managerial skills, view new products and network
with peers. The conference attracts attendees who strive to improve current practices
and who see innovation as the key to high performance government. This event
provided a great opportunity to share ideas and experiences and learn best ideas from
finance officer peers. The conference’s topics include Accounting and Financial
Reporting, Budgeting and Financial Planning, Economic Development, Debt
Management, Financial Management, Pension and Benefit Administration, Technology
and Treasury Management.
Pension Reform – Misperception that DC Plans “Save Money”
As many organizations continue to address pension issues from a finance, human
resource, and political perspective, many will be faced with the task of converting to an
entirely different system. Topics discussed included overall project governance,
maintaining employee morale, plan design, decision making, achieving savings, and
overall sustainability.
Key reasons that DB plans save money compared to DC plans remain valid. DB plans
pool the longevity risks of large numbers of individuals and provide lifetime financial
security without the risk of outliving savings. In addition, DB plans perpetually maintain
optimally balanced investment portfolios rather than downshifting over time to a lower
risk/return asset allocation. Finally DB plans achieve higher investment returns as
compared to individual investors because of professional asset management and lower
fees.
DB plans can be funded to last the average life expectancy for each participant;
however, an individual in a DC plan to avoid running out of money must plan to get
income beyond average life expectancy. Pooled investments in DB plans can lower
(209) 468-2163 • Fax (209) 468-0480 • www.sjcera.org
expenses by large group pricing negotiation and avoid expenses of individual record
keeping, investment education and investment transactions. In summary, the benefit a
DB plan delivers would cost nearly twice as much to provide with a DC plan.
DB recruitment and retention effects increased productivity with lower employee
turnover and high morale. Changing from a DB plan to a DC plan did not help an
existing underfunding problem and, on the contrary, increased pension plan costs.
The best way to address DB plan underfunding is to implement a responsible funding
policy of making the full annual required contribution each year, and to evaluate and
adjust assumptions and funding over time as appropriate.
The Implementation of the GASB’s New Guidance on Fair Value – GASB
Statement No. 72
The Governmental Accounting Standards Board (GASB) has recently issued final
guidance on fair value reporting and its application to specific assets and liabilities. The
GASB Statement No. 72 is effective for periods beginning after June 15, 2015. The
Statement addresses accounting and financial reporting issues related to fair value
measurements, provides guidance for determining a fair value measurement for
financial reporting, and also for applying fair value to certain investments and
disclosures related to all fair value measurements.
The Statement primarily clarifies and expands on GASB Statements No. 31 and 53. It
revises the definition of fair value, and determines the applicability of fair value guidance
to investments and other items currently reported at fair value as well as potential
disclosures about fair value measurements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. Fair
value is an exit price at the measurement date from the perspective of a market
participant that controls the asset or is obligated for the liability. In a fair value
measurement, the sale of an asset or the transfer of a liability would be expected to take
place in the principal market for the asset or liability. In the absence of a principal
market, the government may use the most advantageous market.
It is preferable to use observable inputs such as quoted prices in active markets, rather
than less reliable, non-objective, internally-generated information (unobservable). There
are three valuation approaches such as market approach, cost approach and income
approach.
Financial reporting disclosures for fair value include description of valuation techniques,
nature of any material changes in valuation techniques, nonrecurring fair value
measurements, the reason and required disclosures for those investments reported at
net asset value. For SJCERA, GASB Statement No. 72 will be implemented for the
fiscal year ended 12/31/2016.
The GFOA Annual Conference offered an ideal venue for meeting and networking with
colleagues and experts from across the country. I appreciate the Board allowing me to
attend the annual meeting to obtain reliable, timely and practical guidance in the areas
of public finance.
This year’s conference provided me the additional benefit of discussing directly with Mr.
Stephen Gauthier, GFOA Director of Technical Services, the GFOA award review notes
for the Statistical Section of SJCERA’s CAFR. Mr. Gauthier and Mr. James Falconer of
his staff followed up with me directly after the conference to clarify the review notes and
provide advice for the Summary of Statistical Data applicable to pension plans, which
we incorporated into production of SJCERA’s CAFR for 2014.
SUMMARY OF COMPLETED TRUSTEE EDUCATION HOURS JULY 2014 - JUNE 2015
Trustee: STEVE BESTOLARIDES
Event
Dates
2/27/15
8/21/14
Current Term of Office: 1/6/2012-12/31/2016
Board Member Since: JANUARY 2009
Topic / Event Description
Presenter / Sponsor
Location
Board eduction on Direct Rate Smoothing Concept
Board Meeting
Robert McCrory and Graham Schmidt, Vice Presidents of Cheiron
All Asset Roundtable Discussion
Special Meeting
Event Report
Filed
N/A
Actual
Hours
1.00
N/A
3.75
Board Meeting
N/A
1.00
Monterey, CA
N/A
15.25
Board Meeting
N/A
2.00
Strategic Investment Consultants (SIS) - Investment Consultant
Courtland Partners - Real Estate Consultant
19 of SJCERA's Investment Managers
10/24/14
Board education on venture & growth equity
Jim Feuille and Joel Hausman, Partners of Crosslink Capital;
John Coelho, Partner and Brey Jones, Director of StepStone
Group
11/11-14/14 SACRS Fall Conference
Various presenters on investment, funding, benefit, legal,
administrative, and related topics
3/27/2015 &
Board eduction on Asset Liability Study
4/24/15
Pension Consulting Alliance (PCA) - Investment Consultant
TOTAL EDUCATION HOURS COMPLETED FOR 2014-2015
23.00
Printed 8/7/15 9:58 AM
Trustee: RICHARD CALLISTRO
Event
Dates
Presenter / Sponsor
7/11/2014 &
2/27/15
Board Member Since: SEPTEMBER 2010
Event Report
Filed
Actual
Hours
Board Meeting
N/A
2.00
Special Meeting
N/A
3.75
Board Meeting
N/A
1.00
Monterey, CA
N/A
15.25
Board Meeting
N/A
2.00
Location
8/21/14
10/24/14
Group
3/27/2015 &
4/24/15
24.00
Printed 8/7/15 9:59 AM
Trustee: MICHAEL DUFFY
Event
Dates
2/27/15
Presenter / Sponsor
Board Member Since: JULY 2012
Event Report
Filed
N/A
Actual
Hours
1.00
Special Meeting
N/A
3.75
Board Meeting
N/A
1.00
Monterey, CA
N/A
10.00
Board Meeting
N/A
1.00
Location
Board Meeting
8/21/14
10/24/14
Group
3/7-10/15
3/27/15
Annual General Assembly - California Association of Public
Retirement Systems (CALAPRS)
16.75
Printed 8/7/15 10:00 AM
Trustee: CINDY GARMAN
Event
Dates
Presenter / Sponsor
7/11/2014 &
2/27/15
Event Report
Filed
Actual
Hours
Board Meeting
N/A
2.00
Special Meeting
N/A
3.75
Board Meeting
N/A
1.00
Monterey, CA
N/A
15.25
2/20/15
12.25
Monterey, CA
N/A
10.00
Board Meeting
N/A
2.00
La Jolla, CA
N/A
10.50
Location
8/21/14
10/24/14
Group
1/28-30/15
3/7-10/15
2015 Visions, Insights & Perspectives (VIP) Americas
Institutional Real Estate Inc. (IREI)
3/27/2015 &
4/24/15
Dana Point, CA
4/21-23/15
Institutional Real Estate Inc. (IREI) Editorial Advisory Board Meeting
Printed 8/7/15 10:00 AM
Trustee: CINDY GARMAN
Event
Dates
5/12-15/15
Presenter / Sponsor
Semi-Annual Conference - Statewide Association of County
Retirement Systems (SACRS)
Event Report
Filed
Actual
Hours
Anaheim, CA
N/A
16.00
Special Meeting
N/A
3.50
Location
Various presenters on investment, funding, benefit, legislative,
and related topics
6/4/15
Real Estate Roundtable Discussion
13 of SJCERA's Real Estate Investment Managers
76.25
Printed 8/7/15 10:00 AM
Trustee: SHABBIR KHAN
Board Member Since: JANUARY 2001
Event
Dates
Presenter / Sponsor
Location
7/11/2014 &
Board Meeting
2/27/15
8/21/14
Event Report
Filed
Actual
Hours
N/A
2.00
Special Meeting
N/A
3.75
Board Meeting
N/A
1.00
Board Meeting
N/A
2.00
Anaheim, CA
N/A
16.00
10/24/14
Group
3/27/2015 &
4/24/15
5/12-15/15
and related topics
24.75
Printed 8/7/15 10:00 AM
Trustee: RAYMOND MCCRAY
Event
Dates
Presenter / Sponsor
7/11/2014 &
2/27/15
Event Report
Filed
Actual
Hours
Board Meeting
N/A
2.00
Special Meeting
N/A
3.75
10/1/14
13.75
Board Meeting
N/A
1.00
Monterey, CA
N/A
15.25
Monterey, CA
N/A
10.00
Board Meeting
N/A
2.00
6/26/15
14.00
Location
8/21/14
9/7-10/14
Investment Funds Summit
Santa Barbara, CA
Opal Financial Group
10/24/14
Group
3/7-10/15
3/27/2015 &
4/24/15
4/7-8/15
The Pension Bridge Annual Conference
San Francisco, CA
The Pension Bridge, Inc
Printed 8/7/15 10:01 AM
Trustee: RAYMOND MCCRAY
Event
Dates
Presenter / Sponsor
Location
6/4/15
Special Meeting
Event Report
Filed
Actual
Hours
N/A
3.50
65.25
Printed 8/7/15 10:01 AM
Trustee: LAWRENCE MILLS
Event
Dates
2/27/15
Presenter / Sponsor
Event Report
Filed
N/A
Actual
Hours
1.00
Special Meeting
N/A
3.75
Board Meeting
N/A
1.00
Monterey, CA
N/A
15.25
Board Meeting
N/A
2.00
Anaheim, CA
N/A
16.00
Special Meeting
N/A
3.50
Location
Board Meeting
8/21/14
10/24/14
Group
3/27/2015 &
4/24/15
5/12-15/15
6/4/15
and related topics
42.50
Printed 8/7/15 10:02 AM
Trustee: MICHAEL RESTUCCIA
Event
Dates
Presenter / Sponsor
7/11/2014 &
2/27/15
Event Report
Filed
Actual
Hours
Board Meeting
N/A
2.00
Board Meeting
N/A
1.00
Monterey, CA
N/A
15.25
1/28-30/15
Dana Point, CA
2/20/15
12.25
Board Meeting
N/A
2.00
Special Meeting
N/A
3.50
Location
10/24/14
Group
2015 Visions, Insights & Perspectives (VIP) Americas
3/27/2015 &
4/24/15
6/4/15
36.00
Printed 8/7/15 10:02 AM
Trustee: DAVE SOUZA
Event
Dates
Presenter / Sponsor
Location
7/11/2014 &
Board Meeting
2/27/15
8/21/14
Event Report
Filed
Actual
Hours
N/A
2.00
Special Meeting
N/A
3.75
Board Meeting
N/A
1.00
Monterey, CA
N/A
15.25
Monterey, CA
N/A
10.00
Board Meeting
N/A
2.00
10/24/14
Group
3/7-10/15
3/27/2015 &
4/24/15
34.00
Printed 8/7/15 10:02 AM
Trustee: J.C. WEYDERT
Event
Dates
Presenter / Sponsor
7/11/2014 &
2/27/15
Event Report
Actual
Filed
Hours
Board Meeting
N/A
2.00
Special Meeting
N/A
3.75
Board Meeting
N/A
1.00
Monterey, CA
N/A
15.25
Monterey, CA
N/A
10.00
Board Meeting
N/A
2.00
Special Meeting
N/A
3.50
Location
8/21/14
10/24/14
Group
3/7-10/15
3/27/2015 &
4/24/15
6/4/15
37.50
Printed 8/7/1510:03 AM
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s one of the most respected
providers of education and
training to public pension
professionals, NCPERS is
happy to announce two additional educational opportunities in August. The
State Initiatives on Retirement Security
(SIRS) Symposium is an educational
program held in conjunction with the
National
Conference
on
State
Legislatures’ (NCSL) 2015 Legislative
Summit. The SIRS Symposium will be
held on August 6, 2015 in Seattle,
Washington. The second program is the
2015 Public Pension Funding Forum
held on August 23-25 in Berkley,
California.
The SIRS Symposium will educate state
and local officials, policy advisers, and
advocates on recent trends, current
issues, and what may be the next evolution of state based public- private partnerships on retirement security for
the private sector. As advocates for
retirement security, the presenters at this
symposium will provide actionable
information and knowledge so you can
begin to identify an approach that will
work for your state. The SIRS
Symposium is now even more relevant
after President Obama ordered ERISA
(The Employment Retirement Security
Act of 1974) revisions to facilitate
state- sponsored retirement plans for
private- sector workers. To read
NCPERS press release on this, please
click here. The symposium is complimentary for all NCPERS members and
NCSL attendees.
The Public Pension Funding Forum will
examine the issues surrounding the pension funding gap: the obstacles that
stand in the way of closing the public
pension funding gap, new solutions to
overcome these obstacles, and new
thinking that might resolve the funding
challenges without dismantling public
pensions. Trustees and administrators of
state and local pension funds are
encouraged to attend the forum.
These conferences are your opportunity
to become current on these important
issues confronting public pension funds.
I encourage you to attend them and
enable your pension plan to benefit from
this education. If you have any questions
about either of these events, please contact NCPERS at 202-624-1456. ❖
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n June 25, 2015, Delaware
governor Jack Markell
approved legislation that
bars any stock corporation
from adopting any provision in its certificate of incorporation or bylaws that
would impose liability on stockholders
for the litigation expenses of the corporation. The law goes into effect on August
1, 2015. This successful outcome was the
result of immense work by the investor
community, NCPERS, and its members,
following a judicial decision that threatened to undermine the ability of stockholders to protect their legal rights
In ATP Tour, Inc. v. Deutscher Tennis
Bund, 91 A.3d 554 (Del. 2014), the
Delaware Supreme Court held that directors of a nonstock corporation could
adopt a bylaw requiring any member
who commences litigation against the
company or its directors or officers to be
personally liable for the legal expenses
of the company if the member did not
prevail on all asserted claims. Although
decided in the context of a nonstock corporation, the court’s opinion made reference to the provisions of Delaware law
directly applicable to stock corporations,
suggesting that the decision would apply
with equal force to publicly traded corporations.
Public reaction to the ATP Tour decision
was immediate. While investors saw the
decision as threatening to eliminate an
essential means of protecting shareholders’ interests, some corporations saw the
decision as providing a means for corporate boards to act with impunity, free of
any enforceable fiduciary obligations at
all. By June 2015, at least 64 publicly
Ó
traded Delaware corporations had adopted some kind of “fee
shifting” bylaw, and
several others had
started mergers with
plans to adopt such
provisions in the surviving entity.
The new legislation
sides decidedly with
investors. It limits
ATP Tour to nonstock corporations
by prohibiting the
certificate of incorporation or the bylaws of any stock corporation from containing “any provision
that would impose liability on a stockholder for the attorneys’ fees or expenses
of the corporation or any other party in
connection with an internal corporate
claim.” Also, in response to a 2013 decision by the Delaware Court of Chancery
that validated “forum selection” bylaws,
the legislation permits such bylaws provided that they do not preclude litigation
in Delaware.
Investor support was instrumental to
achieving this legislative success.
Similar legislation introduced in 2014
stalled in the face of intense lobbying
from the U.S. Chamber of Commerce.
This time, however, the voices of
investors drove the debate. Throughout
the 2015 legislative session, institutional
investors representing well over $1 trillion in assets, including NCPERS and
several of its members individually, sent
letters to the Delaware legislature urging
action to stem the adoption of fee-shift-
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ing bylaws and
rejecting
the
Chamber’s efforts to
portray such legislation as contrary to
shareholders’ interests. The Council of
Institutional
Investors also provided essential leadership in communicating with the
Delaware legislature.
The successful passage of the legislation this year, therefore, demonstrates
the importance of investor advocacy and
the effectiveness of a coordinated communication strategy. ❖
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-
mart-beta strategies have proliferated in the past few years.
However, the explosive growth in
the number of these rules-based
strategies doesn’t mean that investors
really have a clear understanding of the
expected returns and inherent risks (i.e.,
exposure risk, relative and absolute risk,
and implementation risk) associated with
smart beta.
The term smart beta is used to define a
systematic portfolio-construction methodology designed to provide exposure to
market factors – including size, low
volatility, value, momentum, or dividend
yield – different from traditional capitalization-weighted indices. Smart-beta portfolios are usually intended to mitigate
undesirable risk factors within the overall
equity allocation, or to gain a potential
benefit by increasing exposure to desirable risk factors resulting from a tactical or
strategic view of the market.
However, most plan sponsors, seeking to
meet their long-term funding obligations,
are looking for more than beta. They want
(and need) alpha. The need for alpha may
not seem as great in sharply rising markets, such as we experienced the past few
years, but excess returns are essential in
moderately up and down markets.
Smart alpha – an integrated framework
that targets a more optimal trade-off
between return, risk, and transaction
costs – takes traditional smart beta one
step further.
By systematically and periodically rebalancing portfolios, a smart-alpha approach
seeks to capture stock-price volatility in
the form of a rebalancing premium. It
pursues this potential source of outperformance more directly and efficiently than a
single-factor strategy, while attempting to
create a more diversified portfolio across
various industries and factors.
… most plan sponsors, seeking to meet their long-term funding
obligations, are looking for more than beta.
They want (and need) alpha
Many investors still do not understand
whether the source of excess return from
smart beta is the risk premium of the targeted factor, the result of removing the
biases of a cap-weighted index, or the
result of systematic rebalancing.
Research shows that systematic rebalancing contributes to long-term returns by
advantageously exploiting natural stockprice volatility by locking in gains that
otherwise might be lost. Because smartbeta strategies are not buy-and-hold portfolios, to varying degrees they inadvertently benefit from the regular rebalancing they require to maintain their respective factor exposures.
Smart alpha provides investors with the
ability to customize their portfolios to
meet their specific risk budgets and return
targets; enables a deep understanding of
when and why reweighting a cap-weighted portfolio improves efficiency; and then
uses this understanding, together with
portfolio risk controls, to further increase
portfolio efficiency and minimize transaction costs.
Smart alpha pursues excess returns from
rebalancing more directly and efficiently
than a single-factor strategy. Smart alpha
creates a more diversified portfolio across
various industries and factors to effective-
ly manage exposure risk and improve
consistency of performance. Moreover,
smart alpha manages liquidity risk, avoids
predatory trading, and controls transaction costs through effective and agile trading that adapts to market conditions. In
the end, smart alpha provides a targeted
return framework and better risk controls
that potentially lead to higher returns at
comparable or reduced risk compared to
smart-beta strategies. ❖
This material is for general informational purposes only and is not intended as investment
advice; as an offer or solicitation of an offer to
sell or buy; or as an endorsement, recommendation, or sponsorship of any company, security, advisory service, or product. This information should not be used as the sole basis for
investment decisions. Past performance does
not guarantee future results. Investing involves
risk, including the loss of principal and fluctuation of value.
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9
ou probably don’t spend
much time thinking about the
GASB – the Governmental
Accounting Standards Board
– but allow me to explain briefly who we
are and what we do.
The GASB is an independent private-sector organization, based in Norwalk,
Connecticut, that sets accounting and
financial reporting standards for U.S.
state and local governments that follow
Generally
Accepted
Accounting
Principles (GAAP). The board’s seven
members are appointed by the trustees of
the Financial Accounting Foundation,
which oversees the GASB. Board members are required to have knowledge of
governmental accounting and finance and
a concern for the public interest in matters
of accounting and financial reporting.
Standards set by the GASB – which are
like rules – are recognized by state and
local governments, state Boards of
Accountancy, and the American Institute
of Certified Public Accountants.
Financial reports prepared following
these standards – including the reports
issued by public employee retirement
systems – allow taxpayers, elected officials, bond analysts, and others to stay
informed about their government’s or
retirement system’s finances and financial performance. Another way to say it
is that preparing financial reports using
È
GASB standards lets you demonstrate
accountability and allows people who
read your reports to judge how accountable you’ve been.
But there is a bigger question: why do we
need to set standards in the first place?
Why we set standards
GASB standards help you communicate
about your finances in a comparable and
consistent manner. We listen to all stakeholders (preparers, auditors, and users) –
and based on that input, we develop standards that address the issues stakeholders say need to be addressed. Standards
must evolve because there are new transactions, or because things change over
time and the guidance that is in place no
longer fits the situation on the ground.
Whatever the specifics, we take a look to
see if there is a way to address the issues
stakeholders bring to our attention.
For example, the board recently tackled
how to account for and report on government employees’ promised pension and
retiree healthcare benefits in ways that
show a much more complete picture of
what exactly has been promised and how
much that will actually cost.
If there is something you don’t understand about how our standards work –
such as an area of implementing the
GASB pension standards – you can go to
our website, www.gasb.org, where you
will find a variety of resources to help
you not only understand the requirements but also implement them. The
pension team has developed implementation guides for pension plans and for
governments that include specific,
searchable Q&As on many implementation areas. Beyond these implementation
guides, the GASB has also posted toolkits that include articles, videos, and the
full text of the statements themselves.
We also offer a technical inquiry system
that allows you to submit a question – on
any GASB topic – that a staff member
will respond to, usually within 48 hours.
Let your voice be heard!
Let me leave you with a closing thought
on the importance of getting involved in
our standard-setting process: we listen to
stakeholders to identify areas we should
address, and then respond with guidance
and related resources so you are
equipped with the information and tools
you need. We are particularly interested
in learning your views and any specific
suggestions you might have. Needless to
say, sharing your thinking with the board
is one of the most important ways you
can make sure that your voice is heard
and your thoughts and ideas are reflected
in our process. Your input truly can help
shape the standards we set. ❖
For more information, visit www.gasb.org.
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n June 9, 2015, the New
Jersey Supreme Court, by a
5–2 vote, refused to enforce
the funding provisions of a
2011 law (Chapter 78) hailed as a solution to New Jersey’s long-standing pension funding crisis. The majority decision by Justice LaVecchia held that
notwithstanding Chapter 78’s “historic
compromise” and the legislature’s and
governor’s clear intent to create an
enforceable contractual right to pension
funding, “Chapter 78 cannot constitutionally create a legally binding, enforceable obligation on the State to annually
appropriate funds as Chapter 78 purports
to require.”
The court agreed with the plaintiffs, a
group of labor unions, that a “promise
was made by the legislative and executive branches when enacting Chapter
78.” The court conceded that morally,
the plaintiffs’ argument is “unassailable.” Yet, the debt limitation and appropriations-related clauses in the New
Jersey Constitution interdict the creation
“of a legally binding enforceable contract compelling multi-year financial
payments in the sizable amounts called
for by Chapter 78.”
Interestingly, the majority decision does
not strike down or invalidate Chapter 78.
Rather, the court explained that “we are
not declaring Chapter 78 unconstitutional…Chapter 78 remains in effect, as
interpreted, unless the Legislature chooses to modify it.” Significantly, the court
did not hold that the promise to pay the
obligation within seven years according
to a prescribed formula was in and of
itself unconstitutional. Only the promise
to actually fund that
obligation through an
appropriation each
year was held
unconstitutional.
As
repeatedly
emphasized by the
court, appropriations
should be determined
annually by the elected
branches of government that
are accountable to the voters.
According to the court:
The responsibility for the
budget process remains squarely where the Framers placed it:
on the Legislature and
Executive, accountable to the
voters through the electoral
process. Ultimately, it is the
people’s responsibility to hold
the elective branches of government responsible for their
judgment and for their exercise
of constitutional powers. This
is not an occasion for us to act
on the other branches’ behalf.
The majority decision did affirm that
the underlying right by members and
beneficiaries to payment of retirement
benefits remains intact:
We reiterate that there is no
question that individual members of the public pension systems are entitled to this
delayed part of their compensation upon retirement, but, as
stated at the outset, that is not
in question in the instant mat-
ter before this
Court. That said,
the State repeatedly asserted at
oral argument
that it is not
walking away
from its obligations to the pension systems and to
pay benefits due to
retirees.
Additionally, the court acknowledged
that the legislature’s and governor’s
well-intentioned efforts intended to create a contractual arrangement addressing pension funding “to promote the fiscal health” of the retirement systems.
Likewise, the court understood “the
importance of maintaining the soundness of the pension funds” and
bemoaned that “the loss of public trust
due to the broken promises made
through Chapter 78’s enactment is staggering.” But after narrowly focusing on
the legal question presented, the court
determined that the contractual pensionappropriation provisions in Chapter 78
were not enforceable. In so holding, the
court agreed that the case presented a
“matter of great public importance to
members of the public pension systems
and citizens throughout the State.”
The vigorous dissent by Justice Albin
and Chief Justice Rabner included the
observation that the majority decision
unfairly requires public workers to
uphold their end of the bargain while
allowing the State to shirk “its binding
commitment” to fund the retirement
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oday’s climate of financial
repression has lowered return
expectations across asset
classes, which presents a difficult challenge to many institutional
investors: How can they meet their
return objectives without exposing themselves to substantial drawdown risk?
To reach their goals, investors may need
to increase their allocations to returngenerating growth assets such as equities, but this also increases risk. Allianz
Global Investors has analyzed the
risk/return profiles of many plans and
discovered that the implied capital losses
for many fund allocations significantly
exceed the plans’ risk budgets, which
could put their risk/return objectives in
jeopardy.
dynamic asset allocation (DAA) is
becoming an increasingly popular technique for achieving plan-level investment goals within the specified risk
budget – an approach we call “dynamic
risk mitigation.”
Dynamic risk-mitigation strategies are
similar to tactical asset allocation (TAA)
in that they rely on a rules-based
approach to continuously shift a portfolio’s asset allocation. The key difference
is that, unlike TAA, dynamic risk-mitigation strategies are not focused on alpha
generation; they are designed to manage
risk.
At the same time, this situation could be
an opportunity for plans to revisit their
approaches by looking at their investment goals and their risk constraints and
then exploring new ways to meet their
return objectives while prudently balancing risk.
Dynamic risk mitigation does not provide the guaranteed protection that
option-based tail-risk hedging provides.
However, the benefit of successful
dynamic risk-mitigation strategies is that
they can provide similar loss profiles
with high confidence at a much lower
cost than tail-risk-hedging strategies.
The table below provides a brief comparison of tail-risk hedging and dynamic
risk mitigation.
How Dynamic Risk Mitigation Can
Help
Many of the risk management approaches that plans commonly employ, including diversification and tail-risk hedging,
have major drawbacks. As a result,
Dynamic risk-mitigation strategies do
not interfere with a plan’s existing portfolio structure or managers, as they are
generally implemented with an overlay.
They also tend to be very cost-effective,
because futures can be used to achieve
the desired exposures.
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Many institutional investors pursue their
investment goals by holding large allocations of return-generating growth assets.
This can result in higher expected longterm returns, but it also exposes plans to a
higher level of risk that can result in material losses at any point in time – a risk that
cannot be fully alleviated by further diversification. We believe that by employing a
dynamic risk-mitigation strategy, it is possible for investors to proceed on a
smoother path toward achieving their longterm objectives in a cost-effective manner.
About Allianz Global Investors
Allianz Global Investors is a diversified
active investment manager with a strong
parent company and a culture of risk
management. With 24 offices in 18 countries, Allianz provides global investment
and research capabilities with consultative local delivery. ❖
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rustees and employees of public, municipal, and governmental pension plans face
increased exposure in their
roles as fiduciaries. Allegations of
breaches of fiduciary duty are costly to
defend and may result in personal liability for trustees.
Fiduciary duties established by state pension codes tend to mirror the standards
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the pension codes
Pension codes typically allow participants, beneficiaries, fiduciaries, and/or
the attorney general to bring suits to
enforce a fiduciary’s duties and other
pension code provisions. In general, pension codes do not offer absolute limitations on liability and often indicate that
litigation against fiduciaries is allowed.
A fiduciary who breaches his or her duty
may be held personally liable to remunerate a pension fund for losses resulting
from such breaches of duty.
Boards and pension funds are often
authorized (and in some cases required)
by pension codes to purchase insurance
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from liabilities that may arise from
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To assist our members in procuring this
important insurance coverage, NCPERS
has worked with independent insurance
consultants to develop a fiduciary liability insurance program. This program is
the most comprehensive and competitive
program that the market will provide and
is offered through Ullico Casualty Group
Inc.
In the near future, one of our trusted brokers may contact you to provide you with
an actual insurance proposal that outlines
the coverage, exclusions, and annual
pricing for a potential fiduciary liability
policy. This summary will be provided by
an NCPERS-endorsed fiduciary liability
insurance brokerage firm that specializes
in this coverage for public pension funds
and their trustees. These proposals can be
easily generated based on publicly available information posted online (annual
reports, actuarial studies, meeting agendas, and minutes). ❖

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systems. The dissent worried that public
workers continue to pay into a system
“on its way to insolvency.” The dissent
also chastised the majority’s “cheery
assurance” that there was “no question”
but that each person’s pension would
have to be paid in full, because under the
majority’s ruling “the political branches...can let the pension fund run dry and
leave public service workers pauperized
in their retirement.”
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As a result of this decision, the New
Jersey funding crisis remains unsolved
and the state retirement systems continue
to edge toward insolvency. This problem
was made even worse when, on June 30,
the governor vetoed the 2016 appropriation designed to reignite the Chapter 78
payment plan. The retirement systems
have brought a separate suit to reduce the
unfunded liability to a judgment that can
be enforced under existing state law.
That suit continues. ❖
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What’s Going on in the States?
S
o far, 2015 has seen many
pension reform proposals.
Some of those proposals have
come and gone – most notably, in
Arkansas. We have also seen longstanding pension reform proposals
resolved, such as in Jacksonville,
Florida. Details about specific state
legislation follows:
Arkansas
As previously reported,
Rep. David Whitaker (D)
proposed House Bill
(H.B.) 1216, which would
have granted the Fayetteville
Firemen’s Pension & Relief Fund the
authority to reduce benefits. The bill
died in the House and the Senate in
April. Separately, H.B. 1215, which
would have required Arkansas
retirement systems to publish the value
of the system based on a calculation of
unfunded accrued liability using the
expected rate of return as 4 percent,
also died in the House in April.
Florida
the city of Jacksonville
has been going through
long pension reform talks.
In the beginning of June, the
Jacksonville Police and Fire Pension
Fund’s board of trustees voted 4–1 to
accept the city’s latest reform
agreement. Mayor Alvin Brown (D)
immediately signed the reform into
law. The bill will increase employee
contributions and raise the retirement
age for future hires. It also commits the
city to paying an additional $350
million toward the city’s $1.62 billion
pension debt over the next 13 years.
The city has yet to find a funding
source. However, it is likely that the
reform will be challenged in the courts.
Illinois
Senate Bill (S.B.) 437,
sponsored by Senator
John Cullerton (D), did
not pass in the Illinois
House in the middle of the June. The
bill would have given the Chicago
Public Schools until August 10 to make
a $634 million payment to its pension
fund. The bill will be called for another
Illinois House vote on June 30.
Indiana
S.B. 492, which will
automatically place new
hires into a 401(k)-style
plan, was adopted by the House
Committee on Employment, Labor
and Pensions after being referred to
the House by the Senate. The bill is
currently in the House.
Kansas
On May 29, Governor
Sam
Brownback
signed H.B. 2095, a
bill rewriting rules for
public workers who return to work
after retiring. The bill sets
compensation limits for retired state
employees and schoolteachers
while accepting Kansas Public
Employee Retirement System
benefits. Previously, public workers
could return to work after
retirement and earn up to $20,000 a
year while drawing their pension
benefits. Now, retirees will be able
to earn $25,000 annually from a
public employer while drawing
pension benefits from the Kansas
Public Employee Retirement
System. The law also creates a
deferred-retirement option for the
Kansas Highway Patrol.
Louisiana
H.B. 42, sponsored by
Rep. Sam Jones (D), is
a
cost-of-living
adjustment
(COLA)
increase in the pension checks of
130,000 retired state employees,
teachers, school workers, and State
Police troopers. The bill would
grant a 1.5 percent permanent
continued on page 2
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
FEDERAL news
The States continued from page 1
benefit adjustment to the retirees,
effective July 1. The bill has had a
bumpy road; it was passed in the
House at the end of May, with a vote
of 80–20. After the House forced its
Retirement Committee to release the
bill for action, the Senate Finance
Committee moved the COLA date to
July 1, 2016. Governor Bobby Jindal
(R) vetoed the bill in June; however,
Democrats are calling for a special
session to override his veto.
Nevada
Assemblyman
Randy
Kirner’s (R) Assembly
Bill 190, which would
convert the Nevada Public
Employees Retirement System into a
combination system, died in the
legislative session. Assembly Bill 190
continued the current defined-benefit
plan for existing employees but would
have moved new hires into a
combination plan consisting of both
defined-benefit
and
definedcontribution elements. Instead, the bill
will be turned into a sustainability
study of the existing retirement system
and alternatives that might improve it.
The results of the study are expected
for the 2017 legislative session.
Separately, S.B. 406, sponsored by
Senate Majority Leader Michael
Roberson (R), was approved by
Governor Brian Sandoval (R) on June
9. The bill will slightly reduce benefits
to new recipients and prevents public
workers from collecting benefits after
felony convictions. The bill is
expected to save the retirement system
$1 billion every decade.
2
•
New York
New York City Mayor
Bill de Blasio proposed
a bill that calls for
increases in disability
benefits of “uniformed” public
employees hired after 2009 by
changing the payment formula,
boosting COLAs and ending the
policy of subtracting the workers’
Social Security earnings from their
pension checks. In early June, the
City Council voted 31–17 in favor of
the proposal.
Oregon
See Executive Director’s
Corner.
Pennsylvania
H.B. 316, sponsored by
Reps. Keith Greiner (R)
and Seth Grove (R),
would place municipal
new hires in a defined-contribution
plan and freeze the defined-benefit
plans for current employees. Each
municipality would maintain two
plans until there are no more
beneficiaries in the defined-benefit
plan. The legislation would also
remove pension benefits from the
collective bargaining process. In early
June, when the State Government
Committee voted, House Democrats
voted against the pension reform
legislation; however, it passed with a
Republican majority and is now
headed to the House floor. Separately,
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 ◆ J u l y 2 0 1 5
S.B. 1 is another pension reform
legislation in front of the
Pennsylvania Legislature. This bill,
which passed the Senate in May,
would create a cash balance plans for
newly hired state workers and
teachers. Current employees would
be given the option to either increase
their contributions or accept a
reduced benefit. The bill is currently
in front of the House State
Government Committee, where
NCPERS executive director, Hank
Kim, provided written testimony
expressing concerns with the
proposal. The bill has not yet been
voted on in front of the full House,
and it does not have the support of
Governor Tom Wolf (D).
Texas
On June 9, Governor
Greg Abbott (R) signed
into law H.B. 9,
sponsored by Rep. Dan
Flynn (R) in the House and Rep. Joan
Huffman (R) in the Senate. The bill
will add $440 million to the Texas
Employees Retirement System
pension fund, which is currently $7
billion short. The bill targets the
shortfall by raising state employee
contributions to 9.5 percent from 7.5
percent.
Stay
tuned
and
visit
www.NCPERS.org to learn more
about upcoming state pension battles.
If your state is facing an upcoming
pension reform battle and you would
like NCPERS’ help, please let us
know.
FEDERAL news
NJ Supreme Court Pension
Ruling Underscores
“Staggering” Impact from Loss
of Public Trust
budgets and not on the merits of the
governor’s budget plans. Still, the
decision emphasized, “That the state
must get its financial house in order is
plain.”
Skipping Payments to Pension Fund
Ruled Legal but Comes at a Cost
Writing for the majority, Justice
Jaynee LaVecchia concluded that the
portion of the 2011 pension law
known as Chapter 78 did not create a
legally enforceable contract. The
state’s constitution requires voter
approval for such long-term financial
arrangements, the court ruled. In
doing so, it struck down a February
lower court ruling that ordered the
state to make the slated contributions
to the pension and benefit system.
The New Jersey Supreme Court on
June 9 delivered a stinging rebuke of
the state’s handling of its 2011
pension reform law even as it upheld
Governor Chris Christie’s decision to
renege on $3.1 billion in scheduled
public pension payments during the
fiscal year ending June 30, 2015.
“Because of the importance of
maintaining the soundness of the
pension funds, the loss of public trust
due to the broken promises” in the
law “is staggering,” the majority
wrote in a 5–2 opinion. Over and
over in the 114-page decision, the
majority emphasized that its purview
was confined to the strict
constitutional question of whether the
governor and legislature could
impose binding obligations on future
The 2011 law required the state to
make regular payments to cover
unfunded pension liabilities, which
reached $83 billion in December
2014, according to a report from
Moody’s Investor Services. Ruling in
the case Burgos vs. the State of New
Jersey, Justice LaVecchia wrote that
the “plaintiffs correctly assert that a
promise was made by the legislative
and executive branches when
enacting Chapter 78, and morally
their argument is unassailable.”
However, the majority concluded that
the 2011 law “could not create the
type of legally enforceable contract
that plaintiffs argue, and the trial court
found, is entitled to protection under
the Contracts Clauses of either the
State or Federal Constitutions.”
In practical terms, the ruling means
that New Jersey can continue its
pattern of skipping one pension
payment after another while its
public-sector employees remain
obligated to contribute their full
share. A dissenting opining written by
Justice Barry T. Albin and joined by
Chief Justice Stuart Rabner addressed
this issue squarely.
“Having relieved the governor and
Legislature of the obligations they
assumed by passing Chapter 78, the
majority keeps in place the increased
payments mandated of public workers
under the law,” Justice Albin wrote.
“The Legislature could not have
contemplated that the compromise
continued on page 5
•
3
Executive Director's Corner
Hank H. Kim, Esq.
Executive Director
& Counsel
Oregon Is Latest State to Adopt Legislation
Creating State-run Retirement Plan for
Private-sector Employees
S
core another
win for state
initiatives on
retirement security!
Oregon’s legislature
on June 16 passed the
Retirement Security Bill, which
would create a state-sponsored,
payroll-deduction retirement plan for
private-sector employees in Oregon
by July 2017. The measure is
expected to be signed into law by
Oregon Governor Kate Brown.
Similar legislation was adopted by
Illinois and Washington in December
2014 and May 2015, respectively,
and New York City is the latest to
conduct
exploratory
hearings.
Massachusetts,
California,
Minnesota, Connecticut, Vermont,
Utah, and Virginia are among the
other hot spots for the Secure Choice
Pension or a variation on it.
We are gratified to see states taking
the lead on addressing the retirement
crisis in the private sector by
considering innovative solutions like
the Secure Choice Pension – which
was developed by NCPERS in 2011.
We believe states are drawn to the
fact that it is a flexible approach, and
we are seeing that the structure of
each plan differs in some details. We
can all take pride in the fact that our
leadership in the development of this
new solution to the growing
retirement crisis was recently
4
•
spotlighted by a Institutional
Investor magazine article that also
gives a brief history of Secure
Choice.
As pension professionals, we know
that a pooled, professionally
managed investment vehicle for
workers is a time-tested method of
delivering a steady future income
stream. What better way is there to
secure a living retirement income for
millions of Americans who no
longer have access to employersponsored defined-benefit pensions?
We are happy to export our
knowledge of traditional pensions in
this new and creative way.
The data from Oregon tell a
compelling story of why the time
was ripe for the Retirement Security
Bill. “Currently, nearly half of all
Oregonians do not have a retirement
plan at work,” Senator Lee Beyer, a
co-sponsor of the measure, told the
Wall Street Journal on June 19. “As
a result, many are at risk of living in
poverty when they retire – unable to
cover basic living and medical
expenses.” NCPERS has, of course,
documented the economic ripple
effects of the decline in definedbenefit pensions in its recent study,
“Income
Inequality:
Hidden
Economic Cost of Prevailing
Approaches to Pension Reforms.”
We at NCPERS are also gratified to
be a resource to state and local
policymakers as they consider
creating their own version of the
Secure Choice Pension. One way we
help is by providing expert
testimony to lawmakers as they take
up legislation or simply gather
information
on
innovative
approaches to retirement savings. I
had the honor on June 23 to testify
before the New York City Council
Committee on Civil Service and
Labor about the city’s nascent efforts
to create a Retirement Security
Review Board. The board’s mission
is to review options and make
recommendations for establishing a
fund and program to help privatesector
workers
accumulate
retirement savings. New York City is
taking an important step toward
addressing the retirement crisis our
nation faces by examining its
options in this way.
Another way we share our expertise
and knowledge is through special
events we organize. On August 6 in
Seattle, we will host the State
Initiatives on Retirement Security
Symposium, a free half-day
educational
program
focused
exclusively on these issues. We
anticipate a strong turnout from
lawmakers
and
policymakers
involved in retirement security, and
we hope members will also consider
joining us for this important
dialogue. ■
FEDERAL news
NJ Supreme Court continued from page 3
reached by passage of Chapter 78
would result in only public workers
holding the bag.”
The Supreme Court ruling could yet
prove to be a hollow victory for
Governor Christie. Democratic
leaders of the New Jersey Senate and
Assembly have vowed to make good
on the state’s portion of pension
funding. And the Communications
Workers of America, New Jersey’s
largest labor union, has put forth its
own funding plan. It offered a slate of
changes that includes increased taxes
on income over $350,000, a business
tax surcharge, freezing Christie’s
small business tax cuts, and closing
corporate tax loopholes that allow
some multistate businesses to shuttle
profits across state lines to avoid New
Jersey’s corporation business taxes.
Meanwhile, fallout from the
repudiation of pension obligations is
likely to continue to prove costly for
the state. Each of the three major
credit rating agencies – Moody’s,
Standard & Poor’s, and Fitch – has
cut the Garden State’s debt rating
three times since Governor Christie
took office in January 2010, citing the
pension shortfall. Lower ratings
generally translate into higher
borrowing costs.
•
5
FEDERAL news
Further Action on Public Safety
Tax Legislation
Congress has been busy this year on
legislation related to the federal tax
treatment of our nation’s public safety
employees. One important piece of
federal legislation has been signed into
law, and a second bill is working its
way through the legislative process.
NCPERS strongly supports both
pieces of legislation.
On May 22, President Obama signed
H.R. 606, the Don’t Tax Our Fallen
Public Safety Heroes Act, into law. The
measure, which is now Public Law 11414, clarifies that federal and state-based
survivor benefits on behalf of a public
safety officer who has died as the direct
and proximate result of a personal injury
sustained in the line of duty are exempt
from federal tax. The legislation was
approved on a 413–0 vote in the House
and by voice vote in the Senate. It was
sponsored by Reps. Erik Paulsen (RMN) and Bill Pascrell (D-NJ).
In addition, on June 18, the House for a
second time passed H.R. 2146, the
6
•
Defending Public Safety Employees’
Retirement Act. This version of the bill
also contains controversial international
trade legislation, which may complicate
passage in the Senate. The underlying
bill, H.R. 2146, would modify the
exemption in Internal Revenue Code
section 72(t)(10) for public safety
employees from the early withdrawal
penalty. The bill would make three
changes to the existing exemption: (1)
add federal public safety employees to
the exemption, (2) include distributions
from defined contribution plans, and (3)
allow retirees to modify a stream of
substantially equal periodic payments
without incurring a recapture tax
penalty. The bill is effective for
distributions after December 31, 2015.
As always, NCPERS will keep you
apprised of any further developments.
Tony Roda is a partner at the Washington,
D.C., law and lobbying firm Williams &
Jensen, where he specializes in legislative
and regulatory issues affecting state and
local pension plans. He represents
NCPERS and individual pension plans in
California, Ohio, Tennessee, and Texas.
ASB Blurb
The Actuarial Standards Board
requested comments on its actuarial
standards of practice and public
pension issues. NCPERS joined the
National Association on State
Retirement Administrators and the
National Council on Teacher
Retirement in a letter of response.
The letter states that the current
Actuarial Standards of Practice
pertaining to pensions are working
well in providing guidance for
actuaries to assist their clients in
establishing pension funding policies
and that Actuarial Standards of
Practice should not be developed or
modified to specifically address
public pensions and other publicsector issues. The letter also requests
that any additional disclosures that
the Actuarial Standards Board might
require should provide clarity
regarding the funded status and
funding requirements of a plan in
accordance with the funding policy
and not apply measures that confuse
the users of actuarial information.
You can read the full letter on page 7:
FEDERAL news
•
7
FEDERAL news
Developments in Lifetime
Income Disclosure
At the request of U.S. Senator Bernie
Sanders (D-VT), the ranking member
of the Subcommittee on Primary
Health and Retirement Security of
the Committee on Health, Education,
Labor and Pensions, the Government
Accountability Office recently
released a report on retirement
security.1 The report specifically
examines the resources that are
available to workers approaching
retirement age. It draws some
discouraging conclusions.
Among households age 55 and older,
about 29 percent have neither
retirement savings nor definedbenefit plans. Among those with
some retirement savings, the median
amount of the those savings is about
$104,000 for households age 55 to 64
and $148,000 for households age 65
to 74, equivalent to an inflationprotected annuity of $310 and $649
per month, respectively. Social
Security provides most of the income
for about half of households age 65
and older.
Couple the lack of retirement savings
with the fact that the age 65-andolder population in 2030 is projected
to be about 74 million – more than 50
percent larger than in 2015 – and the
problem transcends from an
individual economic shortfall to a
national economic crisis. If retirees
are not able to finance their
retirement years, then they will
become a financial drain on local,
state, and federal governments.
8
•
Recognizing that the lack of adequate
retirement savings, even among those
who have been saving, is a major
problem for the country, both the
Obama Administration and Congress
are examining ways to drive home the
need for greater savings. The effort is
being referred to as lifetime income
disclosure.
Efforts are under way to require
pension benefit statements for
Employee
Retirement
Income
Security Act (ERISA)–regulated,
defined-contribution (DC) plans to
contain lifetime income disclosure
information, that is, the dollar amount
of a monthly distribution at retirement
age that one’s account balance would
yield. This would be an important step
toward educating our nation’s citizens
by providing some basic financial
information that they need to make
decisions about savings.
Lifetime income disclosure would be
sound retirement policy. Plan
participants would have a snapshot of
what their current DC plan account
balance would translate into in the
way of monthly income at retirement
age. They could then make informed
decisions on the level of savings they
need for a secure retirement. The
disclosures would also underscore the
weaknesses of the growing singular
reliance on the DC model for
retirement savings by highlighting the
importance of the three-legged stool
concept of retirement savings – a
traditional pension (defined-benefit
plan model), Social Security, and
supplemental savings through DC
plans.
The Department of Labor (DOL)
Initiative
In 2010, the DOL and Department of
Treasury issued a request for
information. As stated in the request
for information, the departments were
examining how they could enhance
the retirement security of participants
in employer-sponsored retirement
plans and individual retirement
arrangements. This was done in
recognition of the fact that workers
today face greater responsibility for
managing their assets and finances for
retirement but that they may not
understand what savings, asset
allocations, and drawdown decisions
are necessary to achieve these goals.
The departments received more than
700 comments.
In May 2013, the DOL’s Employee
Benefits Security Administration
issued an advance notice of proposed
rulemaking, which announced that the
department intends to issue a
proposed rule that would require
ERISA-regulated DC plans to include
in their benefit statements the
following: (1) the estimated monthly
payments to the participant based on
the participant’s current account
balance calculated as if the participant
had reached normal retirement age
and (2) the estimated monthly
payments based on a projection of the
account balance at the participant’s
normal retirement age, using specific
assumptions.2
DOL is expected to release a proposed
rule sometime this summer.
continued on page 9
FEDERAL news
Income Disclosure continued from page 8
Congressional Effort
A parallel effort is under way in
Congress. Legislation has been
introduced in the House and Senate
to require lifetime income disclosures
in benefit statements of ERISAregulated plans – S. 1317, by
Senators Johnny Isakson (R-GA) and
Chris Murphy (D-CT), and H.R.
2317, by Reps. Luke Messer (R-IN)
and Mark Pocan (D-WI).
Unlike the DOL proposal contained
in the 2013 advance notice of
proposed rulemaking, the IsaksonMesser bills would require that the
disclosures be made only once during
each 12-month period. The lifetime
income streams would be a qualified
joint and survivor annuity, which
would include the assumption that the
participant or beneficiary has a
spouse of equal age and a single life
annuity. The secretary of labor would
establish the other assumptions that
would be used in making the
calculations and would issue a model
lifetime income disclosure statement
within 12 months of enactment.
Tony Roda is a partner at the Washington,
D.C., law and lobbying firm Williams &
Jensen, where he specializes in legislative
and regulatory issues affecting state and
local pension plans. He represents
NCPERS and individual pension plans in
California, Ohio, Tennessee, and Texas.
decisions related to retirement
savings. Lifetime income disclosure
is one such tool. !
1
U.S. Government Accountability Office,
Retirement Security, GAO-15-419 (May 2015).
2 The assumptions are (1) contributions continue to
Please be assured that NCPERS will
continue to promote efforts to provide
our citizens with the information they
need to make sound financial
normal retirement age at the current annual dollar
amount and increase at a rate of 3 percent per year,
(2) investment returns are 7 percent per year, and (3)
there is a discount rate of 3 percent per year (for
establishing the value of the projected account
balance in current dollars).
•
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M O N I T O R The Latest in Legislative News
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