SDCERS Board Meeting –
December 21, 2007
Reported by Joe Flynn
The
SDCERS Board of Trustees ended the year on a high note: the IRS has issued a Compliance
Statement to SDCERS, which is the final resolution of SDCERS' Voluntary
Compliance Program. (VCP) This effort has been underway since July 12,
2005.
Highlights:
1. The VCP preserves SDCERS' qualified tax status. This protects members,
active and retired, and city taxpayers.
2.
There were 14 problems that needed remedies. These ranged from disallowing
the Presidential Leave program for Union Presidents; disallowing the use of
"Cash Equivalents", i.e., use of vacation pay to buy Purchase of
Service credits; disallowing the use of retirement fund money to pay health
benefits (discontinued in 2005); disallowing the Corbett payment to non service
eligible disability retirees (discontinued last year); and a number of items
that related to required updates of the Pension Plan (The Municipal
Code). Many of these required Municipal Code modifications were
prepared long ago by SDCERS and sent to the City Attorney for docketing and
adoption. Some, like an Ordinance complying with State Law regarding
domestic partners, have languished in the Attorney's office since 2004
+-. This lack of implementing Ordinances accounted for a number of
the 14 problems/failures. These are corrections that SDCERS
alone cannot make; they require action by the City Attorney and the City
Council.
The
IRS did not impose fines, sanctions, or penalties. And, for
disallowed payments such as the City's payment of Health Benefits using pension
funds, the IRS credited the City's excess payments to the Fund in the recent
years as compensation for past withdrawals. This is important since it
saves the City and the taxpayer a lot of money, and it gives credit to the City
for its efforts to make up for past under funding.
Let
me put this in perspective; THIS IS A BIG DEAL!
Two
SDCERS Board members with extensive experience in Pension Plans,
both public and private, have said that by seeking a voluntary
compliance program from the IRS, SDCERS is breaking new ground. These
Board members, Peter Preovolos, President/owner
of two Pension consulting firms, and William Scheffler,
Actuary, and President and owner of an Actuarial Consulting firm, deal
with both public and private pension plans and bring valuable expertise to
SDCERS. At the Board hearing today, Mr. Preovolos
said, "This document [VCP] is an extraordinary product in the
public sector." Mr. Sheffler, observed,
"This VCP puts SDCERS in a class by itself, since most plans would be
unwilling to submit to this kind of scrutiny by the IRS"
This
review of the Pension Plan, was an open book with the
IRS. SDCERS tax consultants, Ice Miller attorney Terry Mumford, and SDCERS Compliance Officer Roxanne
Story Parks, went through the Plan, i.e., the Municipal Code, with a fine tooth
comb and submitted their findings to the Board and to IRS. In addition,
IRS had the independent ability to add to the list of findings or expand the
scope of review.
The
VCP Compliance statement has been signed by the SDCERS Board President Thomas Hebrank, and the City of
Also
at the Board meeting today, Mike Aguirre, City Attorney submitted a final copy
of his "Report to the People of San Diego Regarding the San Diego City
Employees' Retirement System." You were emailed the earlier 18
page version of this report. This report is 24 pages. I don't have
an email version of this one yet; maybe our friends "of Counsel" will
find one for us. In the meantime you can access the City Attorneys'
website for the report.
The Board
meeting in January should have an in depth review of this document, along
with contending facts and figures. Board member George Murray had
requested that staff "field strip" this report and verify the
accuracy of the information. Yes, prior to his career in the upper
echelon of Prudential, George did serve in the Marines, why do you
ask?
There
were a number of other Board actions, but I wanted to get this to you ASAP.
Board
President Thomas Hebrank did add some year end
reflections. Top on his achievement list was the VCP, followed
by the progress on the Certified Annual Financial Report (CAFR)'s,
the move to a new office [saving a cool million the first year], achieving a
16+% return on the fund while avoiding the hedge fund scandal and the mortgage
meltdown. He thanked David Wescoe and
staff, and the elected and unpaid volunteer members of the Board for their
efforts in making this possible. He and previous Board President Preovolos agreed that the Board has two options; "They either pull together as a team, or get
sucked into the negativity which surrounds them."
Obviously,
he led the Board on the high road and it paid off.
And
in year end reflection, I would add my own. We can be thankful that we
have a Board and staff that has devoted their time,
energy and expertise to the well being of the Pension System and by extension,
the City of
Joe Flynn,
Retiree