Retirement Board Update: August 25, 2006
Reported by Joe Flynn Kroll Report
The overdue, overpriced 266 page Kroll Report was presented to Council on Aug.8, followed by a flurry of media articles. The only satisfaction the report produced was a sigh of relief that it is finished. This investigation into the City, the Retirement System, and the sewer rate structure, was necessary to allow the city’s auditor, KPMG, to finish it’s audit and allow San Diego to get back into the municipal bond market. In addition to detailing the actions of elected officials, key city staff; former SDCERS Board members, former general counsel and former administrator, the report sets forth a 121 step remediation plan. Mayor Sanders, in recent press conferences and interviews has embraced the entire plan. One item of interest for retirees is the proposed change in the Retirement Board. Kroll proposes a nine-member board made up of five mayor/council appointees, two members elected from the active employees, and two members elected by retirees. Retirees have long felt under represented with only one board member for 6,000 retirees and four board members for 9,500 active employees. While retirees were looking for an increase in representation, it was not intended that it come at the expense of active employees. Changes to the structure of the Retirement Board, along with a number of other proposals, require changes to the City Charter, which requires a vote by the citizens of San Diego. Time estimates for such action; show June of 2007 as the earliest likely possibility.
SDCERS CEO David Wescoe gave the Board an update at today's meeting with a review of those items of remediation which pertain to SDCERS. On this issue, SDCERS is ahead of the curve; we have already implemented many of the changes suggested in the Kroll report. This was not an accident, and we do not have a crystal ball, but we did have the Navigant Report. This was the report, you will recall, prepared by Navigant, after we hired them to do a full investigation of SDCERS. We formed the Navigant Report Committee chaired by Mark Sullivan, with Jim Clem of RFPA and Virginia Silverman of CSDREA as stakeholders who took part in the committee deliberations. We started implementing their suggestions for improvements right away, so many of the changes are already in place.
Now, Kroll drew heavily on the Navigant Report so most of their remediation suggestions for SDCERS had already been implemented, or were in the process of being put in place. A major change recommended by Kroll, was the change in the structure of the SDCERS Board outlined above. So that effort has paid off and we are ahead of the curve on this one. And after what we have been through, that's a good feeling. But not to worry, we plan to keep moving and hold our early lead. Board President and David Wescoe will be meeting with Mayor and Council to assist in the remediation efforts and explain the changes already in place.
IRS
The Board received an in person report today from our tax consultants, Ice Miller. I know, that name sounds like a private detective out of an old radio show, but they are one of the top tax law firms in the country. They are handling our Voluntary Compliance Program with the IRS. They reported that they had "an excellent meeting that covered all issues" with IRS in Washington, DC. SDCERS Actuary, Gene Kalwarski was also in the meeting. Representing IRS was the Director of Rulings, the Director of Voluntary Compliance Programs, two other senior agents and an IRS actuary. This program was initiated by the Board last year to correct some known deficiencies and do a thorough review of the plan for compliance with the IRS. This effort keeps the corrections in a "compliance mode" versus having IRS come in an Audit mode. The main effort is to preserve and protect the tax qualified status of the pension fund, and the effort is paying off.
Bill Sheffler, Board member and our resident actuary, said, "Very few public plans are willing to take action for voluntary compliance. According to Board Pres. Peter Preovolos, it was a "significant step for a public agency." In their professional practice, both deal with many retirement systems, public and private, nation wide, so they provide an important perspective to the Board.
Disability Committee
Disability cases continue to take up an important segment of the Board's time, and some would say that is because Mark Sullivan and I have a number of questions on procedure as well as the specific cases. One of these procedural questions revolves around DROP, and when DROP participants may make application for disability retirement. Some believe that a retirement date dictated by the end of a DROP contract precludes a member from applying for disability retirement. I am still looking for clarity and equity on that question.
The other point of contention relates to the questionnaires being mailed to non service eligible disability retirees to verify their continued eligibility status. Some in this category have raised questions about full medical disclosure. They question the need to provide information on marriage counseling, for example, when their disability is a knee injury. SDCERS staff contends that it is not possible to delineate the medical history needed, and further, that other medical problems can shed light on the validity of a continued physical disability. The questionnaires used, they say, are standard forms used by public and private agencies. They also point out the privacy safeguards of this information. The Disability Committee will attempt to shed further light on these issues and remove this penumbra of doubt.
Public Comment Counts
Just a reminder that a lot of that public comment opportunity at the beginning of each Board meeting is going to waste. You should take advantage of this opportunity. Three minutes may not sound like much, but if you write it down what you want to say, you can cover a lot of ground and get your point across. And yes the Board does listen. Patricia Karnes, CSDREA secretary, who has better attendance at board meetings than some members, makes her points in her own unique way. In urging the Board to follow Prop G and it's 15 year amortization period, she suggested, "Don't worry about it. Just think of it as someone suggesting that you wear purple. Who knows, you might look good in purple and you would get a lot of compliments." The Investment Committee got a good laugh out of it, but she made her point. And, at the meeting today, two of the members of the Investment Committee made it a point to wear purple shirts. So, in the future, when Prop G comes up for discussion, I'll bet you will see some Board members in purple shirts.
But don't expect to see me in a purple shirt. When I retired I only saved a few white shirts........ for weddings and funerals ...............and Board meetings.
Joe Flynn, Retiree Rep. to the Board
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