FRESNO COUNTY BOARD OF RETIREMENT



BOARD OF RETIREMENT

FRESNO COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION

SPECIAL MEETING

June 22, 2011

Trustees Present:

Alan Cade, Jr. Michael Cardenas Nick Cornacchia

Vicki Crow Steven Jolly Phil Larson

John Souza

Trustees Absent:

Franz Criego Eulalio Gomez

Others Present:

Regina Wheeler, Alternate Trustee

Les Jorgensen, Retired Employees of Fresno County (REFCO)

Ron Madsen, FCERA Member

Jeff Rieger, Reed Smith via tele-conference

Laurie DuChateau, Reed Smith via tele-conference

Susan Coberly, Senior Deputy County Counsel

Roberto L. Peña, Retirement Administrator

Becky Van Wyk, Assistant Retirement Administrator

Elizabeth Avalos, Administrative Secretary

Elizabeth Cervantes, Office Assistant

1. Call to Order

Chair Cade called the meeting to order at 8:35 AM.

2. Pledge of Allegiance

Recited.

3. Public Presentations

None.

Consent Agenda/Opportunity for Public Comment

A motion was made by Trustee Larson, seconded by Trustee Souza, to Approve Consent Agenda Items 4 -14. VOTE: Unanimous (Absent – Criego, Gomez)

*4. Approve the June 1, 2011 Retirement Board Regular Meeting Minutes

RECEIVED AND FILED; APPROVED

*5. Summary of monthly statistics from the Retirement Association Office on service credit purchases, retirement benefit estimates, public service, age adjustments, final compensation calculations, and disability retirement applications for May 2011

RECEIVED AND FILED

*6. Public Records Requests and/or Retirement Related Correspondence from Daniel Mueller, TRIUM Corporate Finance; Ramona DeWitte, Santa Barbara County Employees’ Retirement Association; Teri Rothschild, FCERA Member; Catherine Walker, ACERA; Nancy Calkins, San Joaquin CERA; Teresa Panameno, Orange CERS; Barbara Holquin; Martina Navarrete, FCERA Member; Tangie Mathis, FCERA Member; Harsh Jadhav, Alameda CERA; and Kathleen Riley, Fresno City Retirement

RECEIVED AND FILED

*7. Update of Board of Retirement directives to FCERA Administration

RECEIVED AND FILED

*8. Educational Reading Materials

RECEIVED AND FILED

• May 4, 2011 Pensions & Investments article – Maryland state workers to put more into pension plans

• May 4, 2011 Pensions & Investments article – Public funds perform best in Wilshire TUCS

• May 16, 2011 Pensions & Investments article – State Street forex probed

• May 16, 2011 Pensions & Investments article – Emerging market investors looking beyond equities

• May 16, 2011 Pensions & Investments article – A need to address inflation risks in DB plans

• May 25, 2011 The Examiner article – Manhattan Moment: Pension debate postmortem

• May 26, 2011 PlanSponsor article – Global Custody/Master Trust: A Seamless World View

• May 26, 2011 PlanSponsor article – Pension Risk Transfer: A Means to an “End”?

• May 26, 2011 PlanSponsor article – Securities Lending: Keeping It Safe

• May 26, 2011 US News and World Report article – How Bad Is the Problem

• May 29, 2011 Everything Alabama article – Future shock for some Alabama pension plans, but may are on solid ground

• May 30, 2011 Pensions & Investments article – Managing risk vital for mature pension plans

• May 31, 2011 PlanSponsor article – Plan Sponsors Taking their Time with Transitions

• May 31, 2011 PlanSponsor article – Public Pension Funding and Valuation Methods Vary Globally

• June 1, 2011 Top 1000 Funds article – Investors Tell Hedge Funds to Lift Their Game

• June 1, 2011 Top 1000 Funds article – Choose your goal posts…and keep them there

• June 2, 2011 PlanSponsor article – London Bridges

• June 3, 2011 PlanSponsor article – CA City Allowed to Reduce Payment for Old Pension

• June 3, 2011 PlanSponsor article – CalSTRS Backs Bill Limiting Pension Spiking

• June 6, 2011 Asset International article – California Pension Sues Wilshire Associates

• June 6, 2011 PlanSponsor article – Living Longer Impacts Retirement Savings and the Workplace

• June 7, 2011 Asset International article – Survey: Institutional Investors Gain by Negotiating on Fees

• June 8, 2011 Top 1000 Funds article – Avoiding Misinterpretation in Calculating Performance-Based Fees

• June 10, 2011 PlanSponsor article – IRS Outlines Common Mistakes in VCP

• June 12, 2011 Asset International article – Questions Circulate Over Destruction of Evidence at CalPERS

• June 13, 2011 Asset International article – BNY Mellon Allegedly Cheated MassPRIM Out of $20 Million in Foreign Exchange Trading

• June 13, 2011 Asset International article – Alaska’s CIO Scott Leave to Join Wurts

• June 13, 2011 Asset International article – Alaska!

• June 13, 2011 GFOA Newsletter Public Policy Statement – Opposing Federal Intervention in Public Employee Retirement Systems

• June 15, 2011 Top 1000 Funds article – Jeff Scott takes on risky business as Wurts’ inaugural CIO

• May 2011 The Journal Newsletter

• June 2011 The Monitor Newsletter

*9. Correspondence regarding the Employee Contribution Rates for FY 2011-2012

RECEIVED AND FILED

*10. Binder of insurance confirmation for FCERA Fiduciary Liability Insurance

RECEIVED AND FILED

*11. NCPERS Public Fund Study June 2011

RECEIVED AND FILED

*12. Correspondence from Jeffrey MacLean, Wurts & Associates, announcing the appointments of Jeffrey Scott as Chief Investment Officer and Max Giolitti as Director of Risk Allocation

RECEIVED AND FILED

*13. Memorandum from Susan Coberly, Senior Deputy County Counsel, regarding Teleconferencing and the Brown Act

RECEIVED AND FILED

*14. Renewal of Property Liability Insurance for the FCERA Administration Building

RECEIVED AND FILED; APPROVED

15. Discussion and appropriate action on whether FCERA's historical practice of applying a $90 cap to the benefits paid to retirees and beneficiaries under Paragraph 9 of the 2000 Settlement Agreement should be changed prospectively and retroactively

Roberto L. Peña, Retirement Administrator, opened discussions by noting that questions were raised regarding the practice of applying a $90 ($3 per year of service up to 30 years) cap to the vested retiree health benefit. Mr. Peña stated that the reason for this practice is that the vested health benefit was viewed as being paid on top of the existing non-vested health benefit that is capped at 30 years of service and was therefore subject to the same 30-year cap.

The Board reviewed and discussed an analysis prepared by Attorney Jeffrey Rieger, Reed Smith, regarding whether it is appropriate for FCERA to apply a $90 cap on the vested health benefit paid to retirees and beneficiaries.

Attorney Rieger noted that FCERA has paid the $3 per year of service since January 1, 2001 pursuant to Paragraph 9 of the Settlement Agreement. However, he believes that the Settlement Agreement does not provide for a cap on the benefit. Rather, he believes that the Settlement Agreement entitles retired members and beneficiaries to receive the $3 per year of service for all years of service even if they have more than 30 years of service.

Based on his analysis, Attorney Rieger concludes that, under Paragraph 9 of the Settlement Agreement, FCERA retirees and beneficiaries have been and are entitled to receive $3 per year of service without a cap on many years of service apply to that equation. Thus, he recommended that the Board determine whether it will make a change prospectively and retroactively, pursuant to FCERA’s Policies and Procedures Regarding the Overpayments and Underpayments of Retirement Benefits. Detailed discussions ensued.

The Board heard questions and comments from Les Jorgensen, REFCO, and Ron Madsen, FCERA Member.

A motion was made by Trustee Jolly, seconded by Trustee Crow, to Adopt the recommendation to change the practice of applying the $90 cap prospectively and retroactively to the start of the practice. ROLL CALL VOTE: Yes – Crow, Jolly, Souza, Cade. No – Cardenas, Cornacchia, Larson. (Absent – Criego, Gomez)

RECEIVED AND FILED; APPROVED

16. Discussion and appropriate action on whether to eliminate FCERA’s practice of allowing pre-tax payroll installment deductions for service credit purchases

Becky Van Wyk, Assistant Retirement Administrator, opened discussions by reminding the Board that the current practice to purchase new service credit allows members to do so as a pre-tax payroll deduction. As a result of changes in interpreting the Internal Revenue Code some 1937 Act Systems have eliminated the pre-tax option from their service credit purchase installment contracts. FCERA, however, has not based on the advice of fiduciary counsel.

Attorney Laurie DuChateau, Reed Smith, advised that it would be prudent for FCERA to eliminate the pre-tax installment option from the available payment options on a service credit purchase in order to protect the tax qualification status of the system.

Ms. Van Wyk stated that should the Board elect to stop pre-tax installments, a transition period will be required to make the necessary changes to the payroll systems used by the various Plan Sponsors and to Pensions, including all letters and agreements. In addition, Ms. Van Wyk noted that adoption of an appropriate resolution or ordinance by the County and all appropriate participating districts is required prior implementing the change.

Ms. Van Wyk read the resolution for the record.

A motion was made by Trustee Cornacchia, seconded by Trustee Crow, to support the Resolution. VOTE: Unanimous (Absent – Criego, Gomez)

RECEIVED AND FILED; APPROVED

17. Discussion on Supplemental Cost of Living Adjustment Underpayment project

Roberto L. Peña, Retirement Administrator, opened discussions by reminding the Board that at the February 17, 2010 Regular Board Meeting Administration notified the Board that the COLA Bank percentages used to determine the Supp COLA of the member’s benefit were incorrect. Therefore, Administration would begin the process of making the necessary corrections.

Mr. Peña updated the Board on the progress of the project noting that staff has completed 314 (43.37%) of the calculations resulting in payments of benefits of $140,003.73, and another $47,203.97 of interest payments, for a total payment amount, to date, of $187,207.70.

Mr. Peña stated that one permanent employee and the equivalent of two and one-half extra-help employees are assigned to the project full time with the goal of completing it within the next twelve months.

RECEIVED AND FILED

Roberto L. Peña, Retirement Administrator, pulled Closed Session Items 18.A.1. - 18.A.3. as there was nothing to discuss.

18. Closed Session:

A. Conference with Legal Counsel – Actual Litigation - pursuant to G.C. §54956.9(a)

1. Geraldine Chisom, et al. v. Board of Retirement, etc., et al., Fresno County Superior Court Case No. 10 CECG 02372

2. Fresno County Employees’ Retirement Association v. Countrywide Financial Corporation, et al., United States District Court Central District of California Case No. CV11-0811-PA-SHX

3. Stephanie Mallen, Individually, and et al. v. Alphatec Holdings Inc., et al., United States District Court Southern District of California Case No. 3:10-CV-1673-BEN-JMA

4. David Moore v. Board of Retirement of the Fresno County Employees’ Retirement Association, et al.; Fresno County Superior Court Case No. 10 CE CG 03861

B. Disability Retirement Applications – Personnel Exception (G.C. §54957):

1. Teresa Arteaga-Alvarez

2. Rosalinda Gomez

19. Report from Closed Session

18.A.1. Pulled.

18.A.2. Pulled.

18.A.3. Pulled.

18.A.4. Nothing to report.

18.B.1. Teresa Arteaga-Alvarez – Decision – To grant Service-Connected Disability benefits based on the Findings of Fact and Decision with an effective date of April 2, 2010, the day following the last day compensated. M – Jolly. S – Souza. VOTE: Yes – Cade, Crow, Jolly, Larson, Souza. No – Cardenas. (Absent – Cornacchia, Criego, Gomez)

18.B.1. Rosalinda Gomez – Decision – To grant Service-Connected Disability benefits based on the Findings of Fact and Decision with an effective date of November 28, 2006, the date of the application. . M – Jolly. S – Souza. VOTE: Yes – Cade, Crow, Jolly, Larson, Souza. No – Cardenas. (Absent – Cornacchia, Criego, Gomez)

20. Report from FCERA Administration

Roberto L. Peña, Retirement Administrator, reported on the following:

1. The financial auditors visited the FCERA office the week of June 20th.

2. Six vendors responded to the RFP for Pension Administration System. Due Diligence visits will be scheduled the end of the month. Two firms will be selected to present to the Board at the July 20, 2011 Regular Meeting.

3. The July 6, 2011 Regular Meeting has been cancelled due to the Fourth of July holiday.

4. Mr. Peña will be absent from the August 3, 2011 Regular Meeting.

5. The July 20th Agenda will include discussion of budget questions raised by the Trustees at the June 1st Regular Meeting.

Becky Van Wyk, Assistant Retirement Administrator, reminded the Trustees to speak clearly into the microphones to ensure that their voices are heard over the internet.

21. Report from County Counsel

Susan Coberly, Senior Deputy County Counsel, had nothing to report.

22. Board Member Announcements or Reports

The Trustees had nothing to report.

There being no further business the meeting adjourned at 9:49 AM.

Roberto L. Peña

Secretary to the Board

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