June 26, 2001 – Board Agenda

6.1	Acceptance of Monthly Portfolio Performance Report
6.2	Acceptance of Gray & Company Quarterly Performance Report for periods ending March 31st
6.3	Annual Investment Consultant Review – Gray & Company
6.4	Approval of Topics for Investment Consultant Review – Strategic Investment Solutions

7.0

Board, Management and Actuarial Support Services & Audit Committee Report

7.1	Appointment of Ad Hoc Nominating Committee
7.2	Authorization for Actuarial Study of impact of Extra Help PARS Rollovers
7.3	Approval of Personal Services Contract with Lonni Hocker
7.4	Annual Review of SamCERA’s Violence Policy

8.0

Approval or Acceptance of Reports

8.1	Chief Executive Officer's Report
8.2	County Counsel's Report
8.3	Investment & Finance Reports

9.0

Adjournment

June 26, 2001 - Board Minutes, as amended

0106.1

Call to Order: Mr. Hoffman, Chair, called the Public Session of the Board of Retirement to order at 1:30 p.m., June 26, 2001 in SamCERA's Board Room, Suite 280, 702 Marshall, Redwood City.

0106.2

Roll Call: Mr. Bryan, Mr. Buffington (1:45), Mr. Carberry, Ms. Colson, Mr. Cottle, Mr. Hoffman, Mr. McMahon, Ms. Salas & Ms. Stuart (1:50). Staff: Mr. McCausland, Ms. Manning & Mr. Clifton. Counsel: Mr. Mares. Medical Adviser: Dr. Fracchia. Consultants: Mr. Gray & Mr. Anderson. Custodian: Mr. Gleason. Actives 1, County 1, Public 1.

0106.3

Approval of the Minutes: Mr. Cottle submitted the following corrections: 0105.5.1 ¶2 line 5 "Mr. McCausland ~~and~~ had noted"; 0105.6.6 ¶4 line 3 "He noted that INVESCO Realty Advisors has not"; 0105.6.6 ¶7 line 3-4 "Mr. Ridley noted that INVESCO’s other clients utilize a gross ~~net~~ –of fee performance objective." Motion by Cottle, second by Bryan, carried unanimously, to approve the Minutes of May 22, 2001 as corrected.

0106.4.1

Oral Communications from the Board: Mr. McMahon & Ms. Salas reported that the CALAPRS Trustee Roundtable had provided an excellent opportunity to learn how other California retirement systems handle various issues and included an in depth report on the litigation between William M. Mercer and the San Luis Obispo County Pension Trust.

Mr. Bryan reported that he had participated in the GFOA Annual Conference and strongly recommends that trustees and staff participate in future years.

Mr. Hoffman distributed copies of a presentation he had delivered to the Board of Supervisors that reviewed the Board of Retirement’s organizational and investment accomplishments of the past year as well as the impact of pension obligation bonds and COLA costs on SamCERA’s actuarial position relative to the other ’37 Act county retirement systems.

0106.4.2

Oral Communications from the Public: None.

0106.5

Benefit & Member Services

0106.5.1

Adoption of Consent Calendar: In response to a request from Mr. McMahon and without objection, Mr. Hoffman removed the applications of Sylvia Lewis and Anna Hazley from the Consent Calendar so they could be discussed by the Board.

Motion by Bryan, second by Colson, carried unanimously, to adopt the Consent Calendar, as amended, as follows:

The Board finds that Dale Ball is unable to perform her usual and customary duties as a Fiscal Office Specialist, finds that her disability is service-connected and grants her application for Service Connected Disability Retirement.

The Board finds that Don Rackham is unable to perform his usual and customary duties as a Radiological Technologist and grants his application for Non-Service Connected Disability Retirement.

The Board ratifies the following actions taken by staff pursuant to the Board’s Delegation of Authority and the Regulations of the Board of Retirement:

Service Retirements:

Ram, Shiri

May 26, 2001

General Services

Palma, Betty

June 6, 2001 (from deferred)

Probation Department

Castle, David

June 8, 2001

Sherriff’s Department

Renz, Adolf

June 9, 2001

Department of Public Works

Cohn Marie

June 15, 2001 (from deferred)

Chope Hospital

Walton-Horsley, Elaine

June 21, 2001(from deferred)

Board of Supervisors

Vitalie, Edward

June 27, 2001(from deferred)

Sherriff’s Department

O’Toole, Diane

June 22, 2001

Probation Department

Montes, Rosa

June 23, 2001

Mental Health

Parma, Rita

June 30, 2001

Recorder’s Office

Prescott, Kathleen

June 30, 2001

General Hospital

Beneficiaries & Survivors:

Groneck, Kathleen

Beneficiary of John

Merritt, Lester

Beneficiary of Bertha

Nelson, Josephine

Beneficiary of Leonard

Meyer, Irmadine

Beneficiary of Maurice

Tate, Betty

Beneficiary of James

Deferred Retirements:

Beretta, Marc

Cabaj, Robert

Reciprocity

Carter, Barry

Reciprocity

Jones-Dulin, Donna

3/G2

Reciprocity

Kim, Solomon

Reciprocity

Marlowe, Tia

Reciprocity

Newton, James

Arrivee, Dale

Babcock, Patricia

Galan de Martinez, Lisa

Johnson, Angela

Maguire, Elizabeth

Sibug, Gloria

Smith, Charlotte

Pace, Linda

Kirkendoll, Steve

Plan 3

Withdrawal Refunds:

Bluford, Hattie

G4 Non-vested

2,796.70

Celis, Deanna

G2 Vested

24,315.03

Clark, Janice

G2 Vested

12,327.55

Faletogo, Situa

G4 Non-vested

1,186.96

Freeman, Melanie

G4 Non-vested

119.22

Givens, Lorna

G2 Vested

16,499.78

Mattiassi, Victoria

G4 Non-vested

11.29

Pimentel, Melissa

G4 Non-vested

1,386.67

Rabago, Evangeline

G2 Vested

19,170.33

Riddell, Michele

G4 Non-vested

1,325.10

Roxas, Jerome

G4 Non-vested

57.17

Segovia, Diana

G4 Non-vested

2,317.67

Tillotson, Loretta

G4 Non-vested

548.01

Elisaia, Afiafi

G4 Non-vested

267.03

TOTAL FOR MAY:

$82,328.51

Withdrawal Rollover:

Abbott, Thomas

G2 Vested

16,834.12

Bell-Sanchez, Victoria

G2 Vested

7,3698.42

Bo, Heather

G4 Non-vested

1,075.57

Davis, Joyce

G4 Non-vested

7,165.29

Desilva, Leticia

G2 Vested

19,657.56

Estrella, Judith

G4 Non-vested

2,356.91

Ferrerra, Karen

G2 Vested

10,488.15

Mahoney, Edward

G4 Vested

9,031.32

O’Keefe, Brenna

G4 Vested

2,083.25

Rodacker, Shane

G4 Non-vested

1,281.18

Vazquez, Laura

G4 Non-vested

1,299.39

Ward, John

G4 Non-vested

2,754.77

TOTAL FOR MAY:

$81,395.93

The Board reviewed the application of Anna Hazley with Dr. Fracchia, who reported that the medical record as submitted contains conflicting information regarding the cause of Ms. Hazley’s disability to her elbow, but that each scenario is plausible and consistent with the examining physicians’ conclusion that the disability is related to her employment. Following extensive discussion: motion by McMahon, died for lack of a second, to deny the application; motion by Bryan, second by Salas, failed 3 ayes (Bryan, Salas & Carberry) to 5 noes (Buffington, Colson, Cottle, Hoffman & McMahon) to approve the application; motion by Colson, second by Bryan, carried unanimously, to invite Ms. Hazley to appear before the Board in an effort to determine the cause of the injury to her elbow.

The Board reviewed the application of Sylvia Lewis with Dr. Fracchia, who noted that year-old medical reports had indicated that Ms. Lewis could return to modified work, but that the physician who recently examined Ms. Lewis at SamCERA’s request concluded that she could not return to work. Following extensive discussion, motion by Bryan, second by Salas, carried unanimously, to find that Sylvia Lewis is unable to perform her usual and customary duties as a Benefits Analyst, to find that her disability is service-connected and to grant her application for Service Connected Disability Retirement.

0106.5.2

Acceptance of SACRS Comparison Survey: Mr. McCausland provided the Board with an analysis of a report that had been presented during the SACRS Spring Conference by Ira Summer of Public Pension Professionals. Mr. Summer’s report was based upon a survey he had conducted while building a database for his new firm. The report graphically compared the twenty ’37 Act County Retirement Systems on a variety of actuarial measures, but without identifying individual systems. Mr. McCausland’s analysis highlighted the fact that San Mateo County is one of four counties that did not sell pension obligation bonds, which accounted for most of the reason that SamCERA’s Funded Ratio ranked 15^th out of 20. He noted that two systems are collecting zero contributions and nine other systems are collecting less than the actuarial annual normal cost. In aggregate, these eleven systems waived approximately $194.8 million in contributions or 51.7% of their annual normal cost. He noted that this phenomenon reflected the retirement systems’ assistance to their counties with the debt service on the county pension obligation bonds.

Mr. McCausland noted that SamCERA’s actuarial annual Normal Cost ranked 15^th out of 20 as well. He attributed this to SamCERA’s COLA history, noting that Plan 1 with its 5% COLA and COLA Bank was the highest such benefit among ’37 Act Systems. He noted that while Plan 1 is closed to new members, it still requires a substantial annual contribution for Active Members in Plan 1. He noted that SamCERA’s new Plan 4, with its 2% COLA would eventually bring SamCERA’s Normal Cost in line with the SACRS median. He noted that since 1972 SamCERA’s COLA has been 100% funded by the County, whereas it is typical in other counties for the members to pay for a portion of the COLA benefit. Without objection, Mr. Hoffman accepted the report.

0106.6

Investment Management Services & Investment Committee Report: Mr. Cottle noted that the Investment Committee did not meet this month.

0106.6.1

Acceptance of Monthly Portfolio Performance Report: Mr. Clifton reported that as of May 31^st SamCERA’s return for May was 0.35% (benchmark 0.28%); fiscal-year-to-date: –3.84% (-5.17%); trailing 12-months: –1.02% (–2.07%); trailing 3-years: 4.33% (4.84%) and trailing 5-years: 9.08% (8.86%). During the month Deutsche Asset Management outperformed its benchmark by 25 basis points, while Bank of Ireland Asset Management trailed its benchmark by 15 basis points. Without objection, Mr. Hoffman accepted the report.

0106.6.2

Acceptance of Gray & Company Quarterly Performance Report for periods ending March 31^st:
[See 0106.6.3]

0106.6.3

Annual Investment Consultant Review – Gray & Company: Mr. Laurence Gray & Mr. Adrian Anderson were present for the review. Mr. Gray apologized for the fact that the quarterly performance reports continue to contain numerous errors. He noted that the rapid growth of his firm and the loss of his most experienced analyst during the past year resulted in the deterioration of quality control, which he avowed is limited to the SamCERA report process. He stated that he is currently interviewing for an analyst and support personnel for Mr. Anderson’s California office, because he recognizes the need to fully staff Mr. Anderson’s efforts to deliver on the firm’s commitment to the Board.

Mr. Anderson began to review the quarterly report with the Board, but the review was terminated when it was pointed out that the report still contained discrepancies. Mr. Anderson distributed examples of a risk analysis report that the firm is capable to generating for each of SamCERA’s managers.

Several trustees expressed their satisfaction with the adequacy of Mr. Anderson’s support for the Board in its deliberations over the past year, but the trustees also expressed grave concerns about the firm’s inability to generate quarterly performance reports upon which the Board can rely. Motion by McMahon, failed for lack of a second, to terminate the contract with Gray & Company.

Without objection, Mr. Hoffman instructed Mr. McCausland to include an item on the July Investment Committee agenda regarding potential changes to the structure of the Board’s investment consulting relationships.

0106.6.4

Approval of Topics for Investment Consultant Review – Strategic Investment Solutions: Following a general discussion, without objection, Mr. Hoffman approved the expanded list of topics and the self-rating process for the review of Strategic Investment Solutions.

0106.7

Board, Management and Actuarial Support Services & Audit Committee Report:

0106.7.1

Appointment of Ad Hoc Nominating Committee: In response to a question from Mr. Cottle, Mr. McCausland noted that the ’37 Act and the Board’s Regulations do not preclude a potential nominee from serving on the Nominating Committee. Mr. Hoffman asked for volunteers, all of whom he appointed. Per Regulation 2.5.1, Mr. Hoffman appointed Mr. Bryan, Ms. Colson, Ms. Stuart and Mr. Hoffman to the Ad Hoc Nominating Committee. He charged the Committee with the task of reporting a slate of officers for the consideration of the full Board at its meeting on July 24^th and he appointed himself Chair of the Committee.

0106.7.2

Authorization for Actuarial Study of impact of Extra Help PARS Rollovers: Mr. McCausland reminded the Board of his May 22^nd presentation regarding the County’s suggestion that an actuarial study be conducted to determine the impact of permitting SamCERA members with PARS accounts to rollover their PARS funds to purchase SamCERA service credit for their County Extra Help hours. [see 0105.8.2]

Mr. Hackleman and Mr. McCausland jointly reported that the recent changes to the tax laws will permit members to roll over their IRC 457, Deferred Compensation accounts, effective January 2002. Mr. Hackleman reported that the County’s Deferred Compensation Committee will be preparing an investment policy and taking other actions in anticipation of the changes that will be effective in January. Mr. Bryan noted that the new flexibility for the use of 457 assets will in no way increase the range or cost of service credit eligible for purchase, since the "new" military service credit & Plan 3 conversion programs both call for the employee to pay for 100% of the incremental cost of the benefit.

Mr. McCausland reported that there is no automated process available for evaluating all extra help time that might be eligible for conversion to SamCERA service credit. In the absence of full data, staff studied each of the 181 service retirements completed during the current fiscal year. He reported that 19% of those who retired were eligible to purchase extra help service credit and that 80% of those eligible did complete the purchase.

He reported that if 100% of the service credit which could have been purchased was actually purchased it would have increased the new retirees aggregate benefits by 1/10^th of 1%.

He noted that since member contributions are credited at the actuarial interest assumption rate, rather than the actual investment return, the longer the contributions are on deposit the less the benefit costs the County.

Therefore, he concluded that there would be no appreciable negative actuarial impact attributable to permitting the rollover of PARS balances to purchase service credit. Based upon the availability of data and his analysis, Mr. McCausland concluded that an actuarial study would be unlikely to identify an actuarial impact. Consequently, he recommended against authorizing a $5,000 special study. Without objection, Mr. Hoffman accepted the report.

0106.7.3

Approval of Personal Services Contract with Lonni Hocker: Mr. McCausland noted that Ms. Hocker is now a resident of Arizona, but that he still considers her a valuable component of SamCERA’s Risk Management and Business Continuity Plan. He noted that Ms. Hocker’s roles in the implementation of the County payroll system (PIPS), accounting system (IFAS), PensionGold and PensionGold’s health benefits system can not be replicated.

He requested permission to enter into a personal services contract with Ms. Hocker as a kind of insurance policy in the event that Mr. Hood finds the need for her expertise. He noted that the next few months are particularly critical in terms of year-end-closing, interest crediting, actuarial valuation, member statements, quarterly tax reports, implementation of the new VTO program, implementation of the new Plan 3 conversion program and retiree payroll.

He noted, in response to a question from Mr. Hoffman, that he had consulted with the County’s Information Services Department on appropriate compensation. Motion by Cottle, second by Arnott, withdrawn, to put the approval over for one month. Mr. McCausland noted that he needs the contract during these next two critical months, but that there are a number of projects where Mr. Hood might find Ms. Hocker’s expertise useful. Ms. Arnott and Mr. Bryan noted that by now staff should be able to manage PensionGold without needing to rely on Ms. Hocker. Mr. McMahon noted that the only time Ms. Hocker will get paid is if Mr. Hood needs her assistance.

Motion by Carberry, second by Colson, carried 7 ayes (Carberry, Colson, Cottle, Hoffman, McMahon, Salas & Stuart) to 2 noes (Arnott & Bryan), to authorize the Chief Executive Officer to enter into a personal services contract with Lonni Hocker for consultation regarding SamCERA’s Information Technology Systems at an hourly rate of $80 for a period from June 27 – August 27, 2001.

0106.7.4

Annual Review of SamCERA’s Violence Policy: Mr. McCausland reported that the Board of Supervisors adopted a zero-tolerance policy for violence in the workplace in March of 1995. In January 1996, the Board of Retirement adopted Resolution 95-96-13 extending the policy to SamCERA. This year, the Board of Supervisors has amended the County policy to require affirmative intervention in regards to domestic violence. Mr. McCausland recommended that the Board amend Resolution 95-96-13 to incorporate the new County policy regarding domestic violence.

Motion by Bryan, second by Stuart, carried unanimously, to amend Resolution 95-96-13, relating to violence in the work place, as follows:

Whereas, acts of violence jeopardize the fabric of our society and our tolerance for reasonable dissent; and

Whereas, the Board of Retirement is committed to ensuring a safe environment for its employees, members, trustees and all others participating in SamCERA activities. Therefore, be it

Resolved that acts of violence against the life, health, wellbeing, family or property of anyone affiliated with SamCERA will not be tolerated. Be it further

Resolved that each person who enters a SamCERA meeting or work environment is responsible for conducting herself or himself in a non-threatening manner. Be it further

Resolved that, in addition to physical acts, "acts of violence" include threats, whether made directly or indirectly, including, but not limited to words, gestures, correspondence, symbols or physical acts which threaten the safety or physical security of anyone participating in an activity relating to SamCERA, or which inhibit the conduct of SamCERA's business or the providing of SamCERA's services. Be it further

Resolved that this policy incorporates the County of San Mateo’s policy relating to domestic violence. Be it further

Resolved that it is the responsibility of each employee, member, trustee or other interested individual to inform the Chief Executive Officer ~~Retirement Administrator~~ immediately when she or he experiences or witnesses actual or threatened violence in SamCERA's meeting or work environment. The first line of defense will be the removal of individuals involved in potentially violent situations. When the danger for physical violence is imminent, the nearest law enforcement agency should be contacted immediately. Be it further

Resolved that the Chief Executive Officer ~~Retirement Administrator~~ is responsible for the faithful implementation of this policy. The Chief Executive Officer ~~Retirement Administrator~~ will take reasonable precautions to protect the safety of everyone in SamCERA's meeting and work environments. The Chief Executive Officer ~~Retirement Administrator~~ shall report all acts of violence to the District Attorney for possible criminal prosecution. In accordance with County policy, County employees engaging in acts of violence shall be subject to dismissal, regardless of whether or not the perpetrator intended to carry out the threat. Be it further

Resolved that the Board of Retirement is responsible for the annual review of this policy and for hearing appeals regarding the Chief Executive Officer ~~Retirement Administrator~~ 's implementation of this policy.

0106.8

Approval or Acceptance of Reports

0106.8.1

Chief Executive Officer's Report: Mr. McCausland noted that he had distributed a copy of a memorandum from Mr. Hackleman dated June 12^th that announces that the County’s Labor-Management-Retiree Committee is being reconvened to consider Blue Shield’s proposed premium increases.

Mr. McCausland distributed copies of correspondence between the County Manager and AFSCME, in which the County Manager agreed (1) to permit employees to convert Plan 3 service credit to Plan 2 or Plan 4 service credit, so long as the employee pays 100% of the actuarial cost of the benefit differential; and (2) to study the actuarial impact of restoring the Plan 3 service credit of unvested former employees who return to County employment more than two years after termination. Mr. McCausland noted that he will be working with Employee & Public Services, County Counsel and the actuary on the implementation of the County Manager’s decisions.

Mr. McCausland reported that the SACRS Legislative Committee has distributed the schedule for the submission of legislative proposals.

Mr. McCausland reported that the new federal tax law had integrated most of the features of other pension reform bills. His preliminary analysis is that the ’37 Act anticipated most of the changes and that the changes for SamCERA will be minimal.

0106.8.2

County Counsel's Report: Mr. Mares noted that he had appreciated the opportunity to serve in Ms. Carlson’s absence.

0106.8.3

Investment & Finance Reports: Mr. Clifton reported that he had been advised by County Counsel that the Board is not required to amend its contracts to comply with a new County Ordinance related to benefits for domestic partners.

Mr. Clifton distributed a letter from State Street and noted that in a subsequent conversation between Mr. Buffington and Ms. Jacobs it is reported that Mr. Buffington indicated that no further follow-up was required of State Street. [At the July meeting Mr. Buffington asked that the Minutes reflect that it had been his intent to indicate that there was no point in State Street communicating further with him.]

Mr. Clifton distributed a memorandum from Strategic Investment Solutions regarding additions to staff and noted that SIS had expected custodian banks to provide fuller performance reporting services than has turned out to be the case.

Mr. Clifton reported that INVESCO Realty Advisors is evaluating multiple offers for the Fremont property.

0106.9

Adjournment:

Mr. Hoffman thanked Mr. Carberry for his contributions to SamCERA, observing that the Board of Supervisors had noted that Mr. Carberry personifies the highest standards of fiduciary conduct and has guided the Board of Retirement in the development of prudent policies and procedures, which have been in the best interest of both SamCERA’s members and the County’s taxpayers; and that he has given richly of his love through his service with Samaritan House and the inmates of San Quentin. Mr. Hoffman presented Mr. Carberry with a gift expressive of the Board’s and Staff’s appreciation.

There being no further business, Mr. Hoffman adjourned the meeting at 4:25 p.m. in memory of the following recently Deceased Members:

LEWIS, FLORENCE

MARCH 21, 2001

BENEFICIARY OF WILLIAM

HANNERS, SAMUEL

MAY 3, 2001

SHERIFF'S DEPARTMENT

SWAN, GORDON

MAY 16, 2001

PROBATION DEPARTMENT

GRONECK, JOHN

MAY 8, 2001

PARK/RECREATION

MEYER, MAURICE

MAY 9, 2001

COMMUNICATIONS DEPARTMENT

NELSON, LEONARD

MAY 9, 2001

BUILDING AND GROUND MAINTENANCE

McGUIRE, JOHN

MAY 12, 2001

COUNTY COUNSEL

TATE, JAMES

MAY 17, 2001

PROBATION

MERRITT, BERTHA

MAY 19, 2001

RETIREMENT

MARTIN, MARY

MAY 22, 2001

BENEFICIARY OF CLYDE

RUXTON, ERIC

JUNE 5, 2001

SOCIAL SERVICES DEPARTMENT

ARON H. HOFFMAN, Chair

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