Retirement Board Update - February 17, 2006 - By Joe Flynn

Retirees: The Feb. 17 meeting was low key; updating the Board on investment performance, modifying Board Rules, and working on a revised committee structure and schedule.  A few spectators in the morning, dwindling in the afternoon to one; the ever faithful Patricia Karnes of CSDREA.  Patricia is a former librarian so she is used to staying until everybody leaves, and she takes very good notes.

    Each Board Agenda includes the numbers on retirees and active employees.  You see these numbers floating around in newspaper articles and the numbers vary widely so I thought you might like to see SDCERS figures.  Here are the numbers as of Jan. 31, 2006.

Retirees: 5,381 plus 2 in the 1981 Pension Plan.

Active: 10,391

Deferred/Inactive: 2,111

    These numbers change monthly, but at least it's a point of reference.

    One item coming from the Disability Committee was a report on procedures to be used to review disability retirements.  Existing San Diego Municipal Code Sec. 24.0501 calls for periodic review of previously awarded disability retirement cases to confirm the recipients' continued eligibility.  This review would be limited to disability recipients who have not yet reached the age for a service retirement; 50 for safety retirees or 55 for general retirees..  There are approximately 288 disability recipients currently in this category.

    This review is required to prevent abuse of disability retirement.  Initially information would be required of disability recipients to verify their continued disability.  This information would be returned to SDCERS for evaluation.  In some cases, recipients could be required to undergo a re-examination to verify continued disability.  The first group would involve 11 disability recipients about whom SDCERS has information which casts doubt on the accuracy of previously submitted information or current activities inconsistent with the disability claimed.  Where further action by SDCERS is necessary, these matters would be referred to the Board for consideration.  This review process will proceed with continued review and refinement by the Board.

    You may have read or heard recent news articles regarding the Port Authority and the Airport Authority seeking to better identify and separate their funds in the retirement system.  Currently, SDCERS administers pension plans for both of these agencies.  Currently the funds of these agencies are accounted for carefully but are invested as part of the Trust.  SDCERS Board requested an opinion from our tax consultant on the request for separation.  They advised that since SDCERS is currently in the process of an Internal Revenue Service review of the Retirement Plan, it would be inappropriate to try to make changes at this point.  The proposal will be reviewed following completion of the IRS compliance program. 

    The General member election to fill the Board seat vacated by John Torres had four candidates but non received the required majority.  The runoff of the two top vote-getters, Dennis Boisvert and Franklin Lambeth is now underway and we expect to have the new member on board for the March 17 meeting.  Then we will be up to 10 members.  The remaining seats are two public appointees of the Mayor and Council and one designated representative of the Mayor.  No word on those at this time. 

New Committee lineups will be considered by the Navigant Committee on March 8.  When the current Retirement Board was formed in April of 2005, the previous committee structure was put on hold to devote attention to fighting fires. Not that all those fires are not out now, but we have grown accustomed to the heat.  The proposed list includes eight committees, some of which will only meet as needed.  The Committees are: Executive, Rules and Governance, Investment, Audit, Business and Procedures, Disability. Navigant Report, and Health Care Advisory.   After review, a schedule of dates and times for committee meetings will be published.

    On the Finance and Investment side, I presented a report on the selection process for the Custodial Bank which holds all of SDCERS stocks and bonds, handles buy and sell transactions, and monitors SDCERS portfolio managers.  The current contract in nearing its end so requests for proposals were sent out, and three custodial banks were selected for interviews.  I chaired this committee with members Mark Sullivan, and Richard Kipperman.  Peter Preovolos also sat in in the interview.  A selection was not made at the initial meeting, but we have requested a presentation on computer software technology by all three banks to compare and evaluate these systems.  The meeting is to be scheduled soon so that a final recommendation for custodial bank selection can be made to the Board at the March 17 meeting.

    Doug McCalla, Chief Investment Officer, Dawne Clark Assistant Investment Officer, and Callan Consultant presented an update on investment returns.  The fund continues to operate in the one percent or 20 percent of public funds, depending on which time frame you select.  The main message is that the funds are being well invested and with above average returns.

On that bright note, I will sign off.

Joe Flynn, Retiree Rep. to the Board.