CalPERS CEO Marcie Frost names Ben Meng new Chief ...

Page 2 10 questions for your retirement

financial advisor

Page 5 American Heart Month

Page 11 Medicare costs and income taxes

Page 12 & 13 Welcome new members!

87

Vol. XXXIII No. 2

A PUBLICATION REPRESENTING CALIFORNIA STATE RETIREES

FEBRUARY 2019

CalPERS CEO Marcie Frost names Ben Meng new Chief Investment Officer

In September 2018, Ben Meng was selected as CalPERS new chief investment officer (CIO) by CEO Marcie Frost. Meng is returning to CalPERS to assume the CIO role and will report to CalPERS chief executive officer Marcie Frost. "We are so pleased to welcome Ben back to CalPERS," Frost said. "Ben's strong investment background makes him wellsuited to lead our investment strategy. He understands the need to drive investment returns to help us achieve a fully funded system." Meng, a United States citizen born in China, will oversee an Investment Office of nearly 400 employees and be responsible for investment policies, risk management, corporate governance standards, and environmental, social, and governance strategies. He will implement the asset allocation set by the CalPERS board and manage a $360 billion investment portfolio comprising public and private

investments. Meng, 48, is returning to

CalPERS after serving as the Deputy CIO at the State Administration of Foreign Exchange (SAFE) for the past three years. Prior to SAFE, Meng was at CalPERS for seven years with his last role as the investment director of Asset Allocation. He also was a portfolio manager in fixed income. Before joining CalPERS in 2008, Meng worked at Barclays Global Investors as a senior portfolio manager, Lehman Brothers as a risk officer, and Morgan Stanley as a fixed income trader. He holds a master's degree in financial engineering from the Haas School of Business at the University of California, Berkeley, and a doctorate in civil engineering from the University of California, Davis. He also serves as an

associate editor for the Journal of Investment Management. In 2014, he was the recipient of the Cheit Award for Excellence in Teaching at the Haas School of Business.

CSR staff was present at the CalPERS January offsite meeting where Meng revealed his 180 day plan. His approach was broken down in three steps: 1: Get to know the Board's strategic

priorities. 2. Get to know the CEO and executive team including reviewing the past CIO's efforts. 3. Get to know the Investment Office.

His five-year plan includes focusing on total fund performance and basing incentives for the investment staff on total fund performance rather than individual asset classes. He also wants to create a strategy for CalPERS' Investment Office to use the data it receives to generate returns.

"Success for CalPERS is really defined by achieving a high rate of return," Meng told the CalPERS board. He listed some of the reasons achieving high returns in the future may be more difficult than in the past. Meng said there are likely to be growing pains, criticism and setbacks as changes are made. He asked the board to "empower the CEO to enable the CIO" to stay focused on investments and to help persuade stakeholders to stay the course. "One of you asked me in the CIO selection process how much time I would need to effect all these changes and my answer was five years, and it's still five years," Meng said. Outcomes are not guaranteed, Meng said, but he believes CalPERS can increase its chance of success.

Meng will replace Ted Eliopoulos who announced his departure in May 2018 to relocate to New York.

CalPERS Board Elects Henry Jones as President and Theresa Taylor as Vice President

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news

Top 10 questions you should ask your retirement financial advisor

There are several financial transitions throughout life. One of the most significant financial transitions is retirement. The shift from pre-retirement when you are earning, saving, and growing assets to retirement when you are withdrawing assets is monumental. A successful retirement transition can make or break retirement. It's important your retirement financial advisor is able to make this journey with you. If you've never worked with a financial advisor or if you already have a financial advisor but are not sure if they can help you make the retirement financial transition, the following ten questions will help you better understand their capabilities, experience, and philosophy when it comes to helping their clients create a successful retirement. 1. Are you a True Fiduciary? It doesn't make sense to pay for advice when the advice doesn't have to be in your best interest. Period. A True Fiduciary is someone who is legally obligated to give you advice that is in your best interest. Yes, this means there are advisors (the majority of them, actually) who get paid by their clients and who do not have to put their client's interests ahead of their own. Ridiculous. Ludicrous. Preposterous. Why in the world would you pay someone for advice when what the advisor is recommending may actually be in their best interest? I just don't understand this. Imagine going to a marriage therapist and paying her

to help you improve your marriage but knowing that she is also a divorce lawyer who can help you get divorced if your marriage doesn't go well. Why in the world would you pay for her marital "advice"? I'm hopeful that one day all financial advisors will be fiduciaries who are required to put their clients' interests first, but until then, this should be your first question to any potential financial advisor. 2. Why do you do what you do? This is a question that doesn't get asked often enough. At the end of the day, you don't just want an advisor to legally put your interests ahead of their own (see #1). In fact, you don't even want an advisor that has a moral obligation to put your interests ahead of theirs. You want a financial advisor that is honored to always put your interests ahead of his/her own ? an unbiased and independent steward of your money. Talk to the advisor. Find out what makes him tick. Why does she do what she does? Ask why they do what they do so you can learn why they want to work with you. 3. How do you make money? There is nothing wrong with getting paid to provide expertise and a service. At the same time, you need to know who you are working with and how they get paid. It's important that you are getting value and expertise that exceeds what you are paying. If you work with a good retirement financial advisor, this shouldn't be too difficult. There are many ways to reduce your taxes, plan your estate,

build an appropriate retirement asset allocation, and help you create lifetime income to live on in retirement. Good retirement advice should more than make up for the fee. 4. How long have you been working as a retirement financial advisor? I've written about the 10,000 hour rule before. This rule was coined as a result of the work by psychologist Anders Ericsson on exceptional performers. His research shows that great performers practice a lot. The 10,000 hour rule is a rule-of-thumb for how much practice is required to develop an expertise in a field of study. What this means is that it often takes at least 10 years of focused effort and experience in order to gain mastery in an area. Keep this in mind when you interview retirement financial advisors. 5. Do you have any regulatory/legal issues? You're counting on your financial advisor to help you navigate retirement. Let's think about this. You've worked hard for 30 or 40 years and now you want to make sure your assets are safe and managed judiciously so you can travel and enjoy your retirement. If you are relying on your retirement financial advisor to help you throughout this process, it makes a lot of sense to verify your advisor has not had any legal, regulatory, or license issues. A quick way to do this is to use the FINRA BrokerCheck website as a starting point. If the retirement financial advisor has any licenses or

designations (e.g., CFP), check these organizations' websites to see if anything has been reported there as well. 6. Does your firm hold my money and investments? What you want to hear is no. There is a subtle, but significant, difference between a firm that manages your investments and one that manages and holds your investments. It is hard to overemphasize the importance between these two types of retirement planning firms. Why is this question important and something I've written and talked about for years? It has to do with investment fraud. If the firm managing your money also holds your money, there is a greater opportunity for embezzlement. The goal is to protect yourself and your finances as much as possible. This is why I feel so strongly about having a custodian -- an unaffiliated and large firm ? hold your investments (such as Charles Schwab, TD Ameritrade, Fidelity, etc.) and a separate RIA retirement advisory firm to manage the assets. 7. Do you manage retirement portfolios the same or differently from non-retirement portfolios? What you are trying to understand is their philosophy to retirement investing. I'd argue that it makes sense to at least think of pre-retirement and retirement investing differently. This doesn't mean your portfolio needs a complete shift the day after you retire, but there should be a re-evaluation of the portfolio, the

allocation, and an income strategy as you approach and throughout retirement. Someone who is 35 and is focused on saving and growing their money requires a different strategy than someone who is 68 and is living off their investments. 8. Can you help me create an income strategy for retirement? In retirement, this is one of the most critical and overlooked areas. Retirement is all about income. Once you stop working, the only sources of income for most retirees is Social Security, maybe a retirement pension if they are lucky, and their investment portfolio. A good retirement plan is one that provides the necessary income to live on and one that lasts a lifetime. This requires special planning and an investment approach that may look different from the accumulation phase during the working years. Your retirement financial advisor needs to be well-versed in creating retirement portfolios that provide for lifetime income and be able to communicate their approach to you in a way that makes sense. 9. Do you provide comprehensive financial planning? Comprehensive financial planning is just as important at age 35, 55, 65, or 75. Although the type of advice may look different at each phase of life, each stage offers its own challenges and opportunities. In fact, I could argue that having a comprehensive financial advisor is even more

continued to page 9

PAGE 2

CALIFORNIA STATE RETIREE

FEBRUARY 2019

updates

CALIFORNIA STATE RETIREES STATEWIDE OFFICERS

Tim Behrens President TEL: 559.920.0371 EMAIL: TBehrens@

Stephanie Hueg Executive Vice President TEL: 831.588.5061 EMAIL: SHueg@

J.W. "Jay" Jimenez Vice President TEL: 714.926.6409 EMAIL: jayj46@

Gerald "Jerry" Fountain CFO/Secretary TEL: 559.935.2238 FAX: 559.935.5884 EMAIL: JFountain@

CSR DISTRICT BOARD DIRECTORS

Sharon Stoltzman TEL: 424.228.2820 EMAIL: SStoltzman@ District A: Ch. 4, Ch. 9, Ch. 20

Susanne Paradis TEL: 916.919.4091 EMAIL: SParadis@ District B: Ch. 10, Ch. 26, Ch. 31, Ch. 36

Mary McDonnell TEL: 415.509.1914 EMAIL: MMcDonnell@ District C: Ch. 1, Ch. 3, Ch. 21, Ch. 23

S.E. Riazi TEL: 530.519.2174 EMAIL: SERiazi@ District D: Ch. 8, Ch. 13, Ch. 14, Ch. 19

Keith Umemoto TEL: 916.429.2768 EMAIL: kumemoto@ District E: Ch. 2, Ch. 15, Ch. 165

R. Connie Lira TEL: 209.601.5754 EMAIL: CLira@ District F: Ch. 5, Ch. 11, Ch. 16, Ch. 35

Gaspar Luna Oliveira TEL: 619.548.4793 EMAIL: gasparlunaoliveira@ District G: Ch. 6, Ch. 12, Ch. 17, Ch. 34

Contact us!

CALIFORNIA STATE RETIREES

Headquarters 1108 O St., Suite 300 Sacramento, CA 95814

TEL: 916.326.4292 FAX: 916.326.4201 TOLL-FREE: 888.808.7197 EMAIL: csrinfo@ WEB:

Please note the schedule for February 2019 Board of Directors meeting

Tuesday, Feb. 26, 2019 Board Members and Chapter Presidents (closed meeting)

Wednesday, Feb. 27, 2019 Finance Committee

Membership Committee Lunch

Health Benefits Committee (HBC) Bylaws & Governing Rules Committee (BGR)

Thursday, Feb. 28, 2019 Board of Directors Meeting

ATTENTION: CHAPTER 165

Members of Chapter 165 are eligible to have their children, grand children or great grandchildren apply.

To receive an electronic application package, simply send an email to: Geanie.Hixon@

Completed application packages with required documentation must be received via mail by May 15, 2019.

UPCOMING EVENTS 2019

February 18 Presidents Day HQ closed

February 20 & 21 CalPERS Board of Administration Lincoln Plaza North 400 P St. Sacramento, CA 95814

March 19 & 20 CalPERS Board of Administration Lincoln Plaza North 400 P St. Sacramento, CA 95814

March 29 Cesar Chavez Day HQ closed

February 26-28 CSR Board of Directors meeting Sacramento, CA

April 1 & 2 CSR Lobby Day Sacramento, CA 95814

FEBRUARY 2019

CALIFORNIA STATE RETIREE

PAGE 3

LEGISLATIVE WATCH withTedToppin

CSR state budget report Governor: Responsible budgeting, one-time investments

On Thursday, January 10, Governor Gavin Newsom released his proposed fiscal year 2019-20 State Budget. The budget totals just over $209 billion ? about $8 billion over the 2018-19 budget ? with $144.2 billion in general fund, $59.5 billion in special funds, and $5.4 billion in state bond spending.

In November, the LAO had predicted $15 billion in surplus. According to the governor, there is likely to be $21 billion in surplus revenue, in addition to the $16 billion held in the state's rainy day fund and other reserve accounts. The Newsom proposed budget will sock an additional $1.8 billion into the rainy day fund alone.

The Governor preached responsible budgeting while also touting his many well-publicized new budget initiatives. On the fiscal responsibility front he sounded much like Jerry Brown in recent years. He said his Administration is preparing for the inevitable next recession, plans to build the largest state budget reserve in American history, and noted that his new budget initiatives are largely one-time funding proposals.

Governor Newsom spent the rest of his time outlining "bold investments in California's future," including plans to increase access to affordable health care and

prescription drugs, address the housing and homelessness crisis, and provide universal preschool for four-year-olds, among other expansions in education funding.

Here is the quick rundown on items that will interest CSR members: Long-Term Obligations

The Governor's budget summary acknowledges that progress has been made in ensuring that retirement security -- in the form of a defined benefit pension -- will continue to be available to public employees and retirees.

Here's what the summary says: "Over the past several years, the state has made progress in addressing its long-term pension liabilities to curb the growing costs of state retirement programs and help ensure its continuing ability to provide retirement benefits over the long term. The California Public Employees' Pension Reform Act of 2013 (PEPRA) was enacted to save billions of taxpayer dollars by capping benefits, increasing the retirement age for new employees, and requiring them to pay at least half of their normal costs (or the amount of money that must be set aside today to pay for the future pension benefits that accrued that year)."

"Both CalPERS and CalSTRS have adopted more realistic assumptions related to future

investment earnings, more realistic life expectancy assumptions, and more responsible amortization schedule ... While the state's employee pension costs continue to grow, these efforts have placed the state in a better fiscal position to address them." Here are some of the details: State CalPERS Contribution -Supplemental $3 Billion

The Governor's proposal dedicates a large part of the surplus revenue to making $13.6 billion in one-time payments to pay down retirement liabilities and loans taken during the Great Recession. This includes $4 billion to eliminate debts and reverse deferrals, $4.8 billion to build reserves, and an additional $4.8 billion to pay down unfunded retirement liabilities. Of most importance, the proposed budget includes a $3 billion supplemental payment, in addition to the statutorily required $6.8 billion contribution, to CalPERS. The additional $3 billion will save the state $7.2 billion over the next 30 years in required pension costs. The proposed budget also makes a supplemental $1.8 billion payment to CalSTRS. State Health Care/Retiree Health Care -- Fully Funded

Funding for state retiree health care is included in the 2019-20 proposed budget at $2.3 billion.

Ted Toppin

In total, the state is projected to spend approximately $5.8 billion on health, dental, and vision care benefits in 2018-19 for more than 850,000 state employees, retirees, and their family members. Of that, $3.5 billion covers the costs for active employees. As you know, and the summary reminds, the Administration has negotiated contracts with each of the state's employee bargaining units, which included joint prefunding for retiree health benefits. The 201920 proposed budget contributes $577 million to cover the state's prefunding obligation next year. If all goes as expected, the CalPERS trust that is managing prefunding health care contributions is expected to take over retiree health care payments from the general fund in 2045.

State Employee Compensation

continued on page 15

Website: calpers. Phone: 888.CalPERS or 888.225.7377

TTY: 877.249.7442 Fax: 800.959.6545 Hours: Monday - Friday 8 a.m. to 5 p.m.

HAVE YOU MOVED? Don't miss an issue of

the California State Retiree!

To update your information, please call us at 916.326.4292 | 888.808.7197 or email csrinfo@

PAGE 4

CALIFORNIA STATE RETIREE

FEBRUARY 2019

news

February is American Heart Month

Heart disease is the leading cause of death for men and women in the United States. Every year, 1 in 4 deaths are caused by heart disease.The good news? Heart disease can often be prevented when people make healthy choices and manage their health conditions. By taking these steps you can improve heart health:

Quit smoking and stay away from secondhand smoke.

Control your cholesterol and blood pressure.

If you choose to drink alcohol, limit your drinking to no more than 1 drink a day for women and no more than 2 drinks a day for men.

Get active. Aim for 2 hours and 30 minutes of moderate aerobic activity every week.

Stay at a healthy weight. If you are overweight or obese, losing just 10 pounds can lower your risk of heart disease.

Eat healthy. Get plenty of fruits, vegetables, whole grains, and fat-free or low-fat dairy products. Limit saturated and trans fats, added sugars, and sodium (salt).

To lower the amount of sodium in your diet, follow these tips when you go food shopping: Choose fresh instead of processed foods when you can, use the Nutrition Facts label to check the amount of sodium, compare labels to find products with less sodium and look for foods labeled "low sodium" or "no salt added." Take the list below with you the next time you go food shopping to help you choose foods that are lower is sodium:

Vegetables and Fruits

Buy plenty of vegetables and fruits Any fresh fruits, like apples, oranges, or bananas Any fresh vegetables, like spinach, carrots, or broccoli Frozen vegetables without added butter or sauce Canned vegetables that are low in sodium or have no salt added (rinse canned vegetables to remove some of the sodium) Low-sodium vegetable juice Frozen, canned, or dried fruit with no added sugars

Breads, Cereals, and Other Grains

Compare labels to find products with less sodium. Look for foods with 5% Daily Value (DV) or less for sodium. A DV of 20% or more is high. When you cook grains, don't add salt. Whole grains such as brown or wild rice, quinoa, or barley Whole-wheat or whole-grain pasta and couscous Whole-grain hot or cold breakfast cereals with no added sugars, like oatmeal or shredded wheat Unsalted popcorn or low-sodium chips and pretzels Whole-grain bread, bagels, English muffins, tortillas, and crackers ? many types are high sodium, so be sure to check the label Tip: If your food comes with a seasoning packet, use only part of the packet. This will lower the amount of sodium in the food.

Seasonings

Try these seasonings instead of salt to flavor your food. Herbs, spices, or salt-free seasoning blends Chopped vegetables, like garlic, onions, and peppers Lemon and lime juice Ginger

Protein Foods

Choose fresh or frozen seafood, poultry, and meats instead of processed options. Some meat, poultry, and seafood has added sodium. If the package has a Nutrition Facts label, look for 5% DV or less. Fresh or frozen fish or shellfish Chicken or turkey breast without skin or marinade Lean cuts of beef or pork Unsalted nuts and seeds Dried beans and peas ? like kidney beans, pinto beans, black beans, lima beans, black-eyed peas, garbanzo beans (chickpeas), split peas, and lentils. Canned beans labeled "no salt added" or "low sodium" Eggs

Dairy

Be sure to check the label on cheese, which can be high in sodium. Choose fat-free or low-fat dairy products. Fat-free or low-fat (1%) milk Fat-free or low-fat plain yogurt Low-sodium or reduced-sodium cheese (like natural Swiss cheese) Soymilk with added calcium, vitamin A, and vitamin D

Dressings, Oils, and Condiments

Unsalted margarine and spreads (soft, tub, or liquid) with no trans fats and less saturated fats Vegetable oils (canola, corn, olive, peanut, safflower, soybean, or sunflower) Low-sodium salad dressing ? or oil and vinegar Low-sodium or "no salt added" ketchup Low-sodium salsa or picante sauce

For more information, please visit:

FEBRUARY 2019

CALIFORNIA STATE RETIREE

PAGE 5

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