San Diego County Employees Retirement Board
Regular Administrative Meeting
Thursday, March 7, 2002 -- 8:30 A.M.
SDCERA Boardroom, 401 West A Street, Suite 1400

ACTIVE MEMBERS:

Regular 15,146
Safety 3,449
Total Active 18,595

RETIRED/DEFERRED MEMBERS:

Retired 8,881
Deferred 3,402
Total Retired/Deferred 12,284

TOTAL MEMBERS 30,879

There being a quorum present, Chairman Murphy called to order the Regular Meeting of the Board of Retirement at 9:35 a.m., First National Bank Building, 401 West A Street, Suite 1400. Mr. Rossi led the Board in the Pledge of Allegiance to the flag. Proper notice of the meeting had been posted at least 72 hours in advance of the meeting.

The Board went into closed session at 8:30 a.m.

1. Closed Session

CONFERENCE WITH LEGAL COUNSEL – EXISTING LITIGATION
Subdivision (a) of Government Code Section 54956.9
Retirement Cases-Judicial Council Coordinated Proceeding No. 4048

A. Stapel, et al v. San Diego County Employees Retirement Association, et al – SDSC No. 722450

B. Scheidel, et al v. San Diego County Employees Retirement Association, et al – SDSC No. 725666

C. Deputy Sheriffs Association, et al v. San Diego County Employees Retirement Association, et al – SDSC No. 725984


2. Public Communication

A. Opportunity for members of the public to speak to the Board on any subject within the Board's jurisdiction but not an item on today's agenda.

Arne Hansen, Senior Deputy County Counsel, was presented with an award for his services to the Retirement Association and Retirement Board. Mr. Hansen recently retired from County Service.

Mr. Russell asked that staff prepare a letter for the Retirement Board’s signature commending Mr. Hansen for his service to the Retirement Association.

Chairman Murphy next introduced Ralph “Skip” Coomber, III, who assumes the sixth seat on the Retirement Board, replacing Michael Branch, whose term ended.

The Board then heard from Linda Stirpe, Counselor, Health and Human Services, who addressed the Board regarding her concerns about the way retirement funds are invested.


3. Approval of Minutes

ACTION: There was a motion by Mr. Russell and a second by Mr. Gonzalez to approve the Minutes of the Regular Retirement Board Meeting held February 7, 2002.

The motion was carried. (Mr. Coomber and Mr. Rossi abstained.)

Consent Calendar

4-7. Application of member for a Non-Service Connected Disability Retirement. Adopt Administrative Recommendation that the application is granted.

It is recommended that the Board of Retirement find that:

1. The applicant is permanently incapacitated mentally for the performance of duties.

2. The applicant is capable of performing other duties.

3. The applicant has accrued at least five years retirement service credit.

4. The permanent incapacity of member is not a result of injury or disease arising out of and in the course of her employment.

5. The application of member for a Non-Service Connected Disability Retirement is granted to be effective as of December 15, 2000, which represents the date of application. This effective date is subject to adjustment necessitated by sick leave computation.


8-10. Application of member for a Service Connected Disability Retirement. Adopt Administrative Recommendation that the application is granted.

It is recommended that the Board of Retirement find that:

1. The applicant is permanently incapacitated physically for the full performance of her duties as an Eligibility Technician, but is capable of performing other duties.

2. The permanent incapacity is a result of injury or disease arising out of and in the course of employment, and the employment is a substantial cause of the incapacity.

3. The application of member for a Service Connected Disability Retirement is granted to be effective as of January 17, 2001, the date she filed her application.

4. The Department of Human Resources is informed and requested to immediately initiate a suitable rehabilitation program for member in accordance with Section 139.5 of the Labor Code.


11. Application of member for a Safety Member Service Connected Disability Retirement. Adopt Administrative Recommendation that the application is granted.

Member requests the Retirement Association put his application on hold because of the benefit enhancements under consideration.

12. Application of member for a Safety Member Service Connected Disability Retirement. Adopt Administrative Recommendation that the application is granted.

It is recommended that the Board of Retirement find that:

1. The applicant is permanently incapacitated physically for the performance of her duties as a Supervising Probation Officer, but is capable of performing other duties.

2. The permanent incapacity is a result of injury or disease arising out of and in the course of member’s employment, and the employment is a substantial cause of the incapacity.

3. The application of member for a Safety Member Service Connected Disability Retirement is granted to be effective as of February 19, 2001, which represents the day following the last day for which she received regular compensation. This effective date is subject to adjustment necessitated by sick leave computation.

4. The Department of Human Resources is informed and requested to immediately initiate a suitable rehabilitation program for Millie J. Wilkes in accordance with Section 139.5 of the Labor Code.

Request to amend/withdraw application

13. Office of the District Attorney’s request to withdraw, without Prejudice, the application for Non-Service Connected Disability Retirement filed July 9, 2001 on behalf of Sandra J. Trombly.


14. Information Items regarding members to be filed with the Minutes of the Board

(A) Death Benefits, Active Members (attached)

(B) Death Benefits, Retired Members & beneficiaries (attached)

(C) Service Retirement (attached)

End of Consent Calendar

ACTION: There was a motion by Mr. Feeley and a second by Mr. DeVol to approve the Consent Calendar, Items 4-14 (A-C), except for Item 11, which was pulled and put on hold because of benefit enhancements under consideration.

The motion was carried.


15. Hearing on the application of member for a Non-Service Connected Disability Retirement.

This application was withdrawn at the request of the applicant.


16. Application of member for a Service Connected Disability Retirement (Proposed Findings of Fact and Decision and Summary of Evidence). Whether to adopt Hearing Officer’s Findings of Fact and Decision that the application is denied.

It is recommended that the Board of Retirement find that:

1. The applicant member is not permanently incapacitated physically for the performance of her duties as a Recordable Documents Specialist I.

2. The application of member for a Service Connected Disability Retirement is denied.


ACTION: There was a motion by Mr. Feeley and a second by Mr. Gonzalez to adopt the Hearing Officer’s findings and recommendation that member’s application for a Service Connected Disability Retirement is denied.

The motion was carried. (Member Coomber abstained.)


17. Application of member for a Service Connected Disability Retirement (Proposed Findings of Fact and Decision and Summary of Evidence). Whether to adopt Hearing Officer’s Findings of Fact and Decision that the application is denied.

It is recommended that the Board of Retirement find that:

1. The applicant is permanently incapacitated mentally for the performance of her duties as a Supervising Clerk.

2. The incapacity is not a result of injury or disease arising out of and in the course of her employment.

3. The applicant has accrued at least five years retirement service credit.

4. The applicant is capable of performing other duties.

5. The application of member for a Service Connected Disability Retirement is denied; however, the Non-Service Connected Disability Retirement granted at your Board meeting of November 2, 2000, will remain in effect.

ACTION: There was a motion by Mr. Gonzalez and a second by Mr. Russell to adopt the Hearing Officer’s findings and recommendation that member’s application for a Service Connected Disability Retirement is denied, however, the Non-Service Connected Disability Retirement granted November 2, 2000 will remain in effect.

The motion was carried. (Member Coomber abstained.)



18. Bank of New York Performance Report (Bernie Schoenfeld)

Mr. Schoenfeld reported that returns for the fourth quarter, gross of fees, were 8.85%, -5.34% on a one-year basis and -4.13% for two years.

Addressing some of the concerns raised by Ms. Stirpe in her address to the Board, Mr. Schoenfeld, explained that there are different considerations for institutional investing compared to those in individual investing. He said the Fund has to take a very long-term view. Its purpose is not to decide whether there is a “bull or bear market” but to try to define an asset allocation that can persevere through various cycles in the market.

Mr. Schoenfeld reported there was a very intense decline in performance in the 3rd quarter, reflecting the events of September 11. In the 4th quarter, the market came back, with an increase in the S&P of 10.69%. He said that much of this increase came in the month of November.

Next, Mr. Schoenfeld reported that the Fund’s performance has been credible, with a five-year return of 8.75%. The actuarial assumption is 8.25%, so on a five-year basis, the returns were above the actuarial rate of return. He briefly reviewed the performance of the individual managers in the Fund and indicated some concerns about Jennison’s performance.

Mr. Woodham said staff is currently looking for a replacement for Jennison. They will make a recommendation to the Equity Committee when their search is complete.

Concluding his report, Mr. Schoenfeld said that although there have been rough times for the stock market and economy, there are indications the worst is over and things are improving.

19. Actuarial Valuation

Rick Roeder, Actuary, reviewed the results of the Annual Actuarial Valuation as of June 30, 2001. He reported there was an overall increase in the County’s overall contribution rate, and reasons for this increased were:

1) Some of the previous year’s amortization credit had been used up in applying it against the normal cost rate for which there was no contribution.

2) There was a net increase in assets that were allocated to benefits not included in this valuation, which were excluded from the valuation assets.

3) There was an experience loss of $13 million.

Mr. Roeder said the results of the next valuation could be critical because of consideration of the pension obligation. He made a commitment to complete the valuation early. He said this would mean that he would need data from the Retirement System early to accomplish this.

Mr. White reported that the Retired Members Reserve is $1,454,765,000 as of June 30, 2001. Since the liability for current restraints and beneficiaries is $1,549,360,885, he recommended that the Board adopt the actuary’s recommendation to transfer the $94,595,885 difference into this reserve.

ACTION: There was a motion by Mr. Russell and a second by Mr. Feeley to increase the Retired Members’ Reserve to $1,549,360,885.

The motion was carried.


20. Contribution Rates for FY 2003

Mr. White reported that the actuary recommended a negative 1.03% for General Members and 6.87% for Safety Members with a combined rate of 0.81%.

ACTION: There was a motion by Mr. Russell and a second by Mr. Gonzalez to approve the contribution rates recommended by the actuary effective July 1, 2002.

The motion was carried.

Staff will notify the County of these changes.

21. Cost-of-Living Adjustments (COLA)

ACTION: There was a motion by Mr. DeVol and a second by Mr. Feeley to increase the retirement allowance for all retired members and their beneficiaries by 3% effective April 1, 2002.

The motion was carried.


22. STAR COLA

ACTION: There was a motion by Mr. Feeley and a second by Mr. DeVol to increase the STAR COLA formula to 80% and increase the reserve to $60.0 million June 30, 2002.

The motion was carried.


23. Alternate Retiree Election (duties/election method)

The Retirement Board took action at their last meeting to implement Section 31520.5 to add an Alternate Retired Board Member. At issue was the amount of participation required by an alternate, procedures for electing an alternate and selection of an alternate until election procedures are in place.

County Counsel’s opinion is that the Retirement Board has full discretion in deciding the role of the Alternate Retired Member. Section 31520.5 states that “the alternate retired member shall be elected separately by the retired members of the Association in the same manner and at the same time the Eighth Member is elected.

The appointment process is at the Retirement Board’s discretion until an alternate is elected.

Staff recommended the following:

* The Alternate Retired Member will receive a complete Board package with the exception of confidential material (such as the disability material and closed session material). If the Elected Retired Board Member provides notice to staff of his/her absence from a Board meeting, then the confidential material will be provided to the alternate member.

* The Alternate Retired Member is excluded from participation in Board discussions and deliberations and voting on issues, unless the Retired Member is absent.

* The Alternate Retired Member is excluded from acting as a Board representative on any Board committees.

* The Alternate Member is allowed and encouraged to attend SACRS meetings.

Following their review and discussion, the Board took the following action.

Participation of Alternate Retired Member

ACTION: There was a motion by Mr. DeVol and a second by Mr. Gonzalez to adopt recommendations regarding the Alternate Retired Member’s participation as a Board member as presented by staff, except for the recommendation to exclude confidential disability and closed session material from the alternate’s Board package.

The motion was carried by the following vote:

Ayes: DeVol, Feeley, Gartrell, Gonzalez, Rossi
Noes: Coomber, Murphy, Russell, Wiczynski
Abstain: None
Absent: None

Election Process

The Board discussed issues involving candidates running for both the Regular Retired position and the Alternate Retired position and winning in both elections.

ACTION: There was a motion by Mr. Feeley and a second by Mr. Gonzalez to adopt the Resolution for procedures for the election of the Alternate Retired Member as presented by staff.

The motion failed by the following vote:

Ayes: DeVol, Feeley, Gonzalez
Noes: Coomber, Gartrell, Rossi, Murphy, Russell and Wiczynski
Abstain: None
Absent: None
The Board decided to table discussion on this item and take care of the other items on the agenda.

ACTION: There was a motion by Mr. Coomber and a second by Mr. Russell to table discussion of the resolution relative to the election process, until the issues that were brought up can be addressed in a new resolution.

The motion was carried. (Member Feeley voted “No.”)

The Board resumed their discussion regarding the election process. Mr. Murphy suggested that a paragraph be added to the resolution after bullet #3 on page 1 stating, “Should the candidate also be on the ballot for the 8th seat and prevail in that election, the next highest candidate from the alternate retired member election will be elected to the alternate position.”

ACTION: There was a motion by Mr. Russell and a second by Mr. Gonzalez to reconsider the resolution regarding the Alternate Retired Member.

The motion was carried.

ACTION: There was a motion by Mr. Russell and a second by Mr. DeVol to amend the resolution to include the new paragraph recommended by Mr. Murphy as follows:

“Should the candidate also be on the ballot for the 8th seat and prevail in that election, the next highest candidate from the Alternate Retired Member election will be elected to the alternate position.”

The motion to adopt the resolution as amended was carried.

Appointment of Alternate Retired Member pending election

The Retired Employees of San Diego County, Inc. submitted the following list of candidates for the Alternate Retired Member position:

* Charles Curtis
* Joe McGuire
* George Shoemaker.


ACTION: There was a motion by Mr. Gonzalez and a second by Mr. Russell to appointment Joe McGuire as the Alternate Retired Member.

Discussion followed regarding some Board members’ concern that a conflict of interest existed regarding Mr. McGuire and Mr. Shoemaker, as they are both active in the Retired Employees Association as either an executive officer and/or committee member.

The motion was withdrawn

Mr. Gonzalez with concurrence from Mr. Russell withdrew the motion, so that Board members could settle issues regarding the appointment process.

ACTION: There was a motion by Ms. Wiczynski and a second by Mr. Rossi to appoint Charles Curtis as the Alternate Retired Member pending an election.

The motion was carried by the following vote:

Ayes: Coomber, DeVol, Rossi, Murphy, Wiczynski
Noes: Feeley, Gartrell, Gonzalez, Russell
Abstain: None
Absent: None


24. Retirement Classifications

Mr. White brought the Board up-to-date on his efforts to meet with Walt Ekard, Chief Administrative Officer for the County, to discuss classifications for Retirement employees. He is scheduled to meet with Mr. Ekard March 26th and will give the Board an update at the next Board meeting.


25. Benefit Enhancements/Implementation Plans

Mr. White reviewed the benefit enhancement implementation process, the PARIS Project and reported that the Board of Supervisors had approved the new Benefit Enhancements last week. To date, 600 applications for retirement have been received with approximately 100 of those being employees in deferred status.


Mr. White recognized Arlene Thichava and her staff for their efforts to keep the members up-to-date regarding the new enhancements through the SDCERA Website, brochures, seminars and departmental meetings. He also commended the SDCERA staff as a whole for the efforts put forth to make the process for implementing the enhancements a success.

The Board then heard from John Carrasco, who currently works in the Sheriff’s Department. Mr. Carrasco, who previously worked in DIS (Department of Information Services), retired in December 1999 after his department was outsourced. He returned to County employment in February 2000 with the Sheriff’s Department. He is requesting that he be returned to Tier I status, because of the short turnaround time between his retirement and reemployment with the County. Staff will research his request and bring the information back to the Board.


26. Section 415 of the IRC

Mr. White reviewed Section 415 of the Internal Revenue Code. Sarah Griffin, Jones, Day, Reavis & Pogue was also available at the meeting to answer questions from Board Members.

Section 415 provides that the maximum annual benefit that can be paid from a defined benefit plan is $160,000. This limit is adjusted for retirements that occur before and after the age of 62. Section 415 also provides an exemption for those employed as a fulltime employee of any police or fire department.

The County has adopted a 415 (m) restoration plan, which will pay the difference between the maximum amount payable under the 415 regulations and the amount of pension benefit determined by the pension plan formula. Six members, who have applied for a March retirement, are affected by the 415 limitation.

The County has requested that the Retirement Association administer the 415 (m) plan for the County.

Staff recommended that the Board of Retirement allow the Retirement Association to administer the 415 (m) plan for the County and direct the CEO to negotiate an agreement with the County which will reimburse the Retirement Association for any costs connected to that administration.


ACTION: There was a motion by Mr. DeVol and a second by Mr. Feeley to allow the Retirement Association to administer the 415 (m) plan for the County and negotiate an agreement with the County to reimburse the Retirement Association for any costs connected to that administration as recommended by staff.

The motion was carried. (Member Russell was absent.)


27. Chief Executive Officer’s Report

The Chief Executive Officer’s Report included information that Bill Kelly, Chief Financial Officer for the County of San Diego, will address the Board at their April meeting regarding funding issues for the enhancements. Other items in the Chief Executive Officer’s Reports were:

* A request from SACRS to poll Board Members regarding their preference for annual or semi-annual SACRS Conferences.

* Inclusion of a Pensions Project Update from Watson Wyatt and

* Financial Statements for the period ending January 31, 2002.


28. Resolution to accept conference expenses as a gift to the Retirement Association.

ACTION: There was a motion by Mr. DeVol and a second by Mr. Gonzalez to approve the Resolution to accept conferences expenses as a gift to the Retirement Association from Institutional Real Estate, Inc. for their Editorial Advisor Board Meeting February 21-22, 2002, Phoenix, Arizona.

The motion was carried. (Member Russell was absent.)

29. Seminars and Conferences

ACTION: There was a motion by Mr. Feeley and a second by Mr. Gonzalez to approve the attendance of Mr. Coomber, Mr. Russell and Mr. White at the CALAPRS, “Principles of Pension Management,” March 26-29, 2002 Stanford University, Palo Alto, California.

The motion was carried. (Member Russell was absent.)


ACTION: There was a motion by Mr. DeVol and a second by Mr. Feeley to approve the attendance of Mr. Coomber at Stanford Law School Executive Education, “Fiduciary College,” April 28-30, 2002, Palo Alto, California.

The motion was carried. (Member Russell was absent.)


ACTION: There was a motion by Mr. Feeley and a second by Mr. Gonzalez to approve the attendance of Bill Betts at the APPFA (Association of Public Pension Fund Auditors) Conference, May 5-8, 2002, Williamsburg, Virginia.

The motion was carried. (Member Russell was absent.)


30. Information Items

Various items of interest were included in Board Book material for informational purposes.


31. Last Item of Business

A. Future Agenda Items/Matters to be referred to staff.

There were none.


The meeting adjourned at 2:27 p.m.

This meeting was conducted with the use of teleconference pursuant to Government Code Section 54953. The conference locations are:

SDCERA 
401 West A Street 
Fourteenth Floor 
San Diego, CA 92101 

Fenwick & West 
Two Palo Alto Square, Room 5L
Floor Palo Alto, CA 94306