October 25, 2005 – Board Agenda

  Closed Session – The board may meet in Closed Session prior to adjournment

C1

Consideration of items removed from the Consent Agenda

Public Session – The Board will meet in Public Session at 8:30 a.m.

1.

Call to Order

2.

Roll Call

3.

Approval of the Minutes

4.

Oral Communications

4.1

Oral Communications From the Board

4.2

Oral Communications From the Public

Matters Set for a Time Certain

Times listed under this section are approximate. The Board will make every effort to adhere to the times listed, but in some cases, items may not be heard precisely at the time scheduled. In no case will any item be heard before the time it is scheduled.

8:45 a.m.

Manager Interview: BlackRock, Inc. (Item 6.2)

9:45 a.m.

Manager Interview: Fidelity Management Trust Company (Item 6.3)

10:45 p.m.

Manager Interview: Lehman Brothers Asset Management (Item 6.4)

1:00 p.m.

Adoption of Consent Agenda (Item 5.4)

5.

Benefit & Actuarial Services

5.1

Adoption of Consent Agenda (Special Order at  1:00 p.m.)

5.2

Consideration of Items Removed from Consent Agenda

5.3

Discussion of June 30, 2005, Actuarial Valuation Study  (Special Order at 1:15 p.m.)

5.4

Acceptance of 2006-2007 Fiscal Year Employer & Employee Contribution Rates

5.5

Annual Actuarial Review and Action (Public Pension Professionals)

5.6

Approval of Resolution to Share Certain Member Information with San Mateo CountyEmployee and Public Services Department

6.

Investment Services (The Investment Committee will meet on September 26 at 8:30 a.m.)

6.1

Monthly Portfolio Performance Report

6.2

Selection of Finalist for SamCERA’s Fixed Income Enhanced Index Mandate

6.3

Manager Interview: BlackRock, Inc.                                       (Special Order at  8:45 a.m.)

6.4

Manager Interview: Fidelity Management Trust Company     (Special Order at   9:45 a.m.)

6.5

Manager Interview: Lehman Brothers Asset Management      (Special Order at 10:45 a.m.)

6.6

Approval of Investment Management Agreement with Aberdeen Asset Management, Inc

7.

Board & Management Support Services

7.1

Monthly Financial Reports

7.2

Quarterly Budget Report

7.3

Annual Review of  SamCERA’s Attorneys – County Counsel

7.4

Approval of SamCERA Strategic Plan

7.5

Approval of Revisions to Resolution 98-99-06

7.6

SACRS Voting Proxy Approval

7.7

Request for Retirement Investment Analyst I Position  

8.

Management Reports

8.1

Chief Executive Officer's Report

8.2

Investment & Finance Manager’s Report

8.3

County Counsel's Report

9.

Adjournment

October 25, 2005 – Board Minutes

0510.1

Call to Order:  Mr. Lewis, chair, called the Public Session of the Board of Retirement to order at 8:35 a.m., October 25, 2005, in SamCERA’s Board Room, Suite 125, 100 Marine Parkway, Redwood Shores.

0510.2

Roll Call:  Mr. Bryan, Ms. Colson (arr. 8:52 a.m.), Mr. Hackleman, Mr. Hooley, Mr. Lewis, Ms. Salas, Ms. Stuart & Ms. Tashman.  Board Alternate: None.  Excused:  Mr. Buffington.  Staff:  Mr. Bailey, Mr. Clifton, Ms. Palu & Ms. Dames.  Consultants:  Ms. Jadallah, Mr. Thomas, Mr. Summer & Ms. Carlson.  Retirees: 1, County: 1.

0510.3

Approval of the Minutes:  Motion by Salas, second by Hooley, carried unanimously to approve the board meeting minutes of September 27, 2005, as submitted.

0510.4.1

Oral Communications From the Board:  None.

0510.4.2

Oral Communications From the Public:  John Murphy, representing SCORPA, commended the board and the investment committee for its prudent investment policy this past year which has lead to an increase in SamCERA’s net assets to $1.723 billion at cost of $4.167 million dollars in professional fees.  Mr. Murphy brought to the attention of the board the current favorable returns versus last year’s increased retirement costs due to a decrease in market returns, an enhanced retirement benefit formula, as well as an actuarial longer life expectancy.  Mr. Murphy encouraged the board to put forth an increased effort to boost SamCERA’s funding ratio to 80%.  He reminded the Board of its agreement with the Board of Supervisors regarding the Medicare Part-B Reimbursement Program and its contingent 80% funding ratio minimum.  He then distributed copies of correspondence between the Hon. Richard Gordon, Supervisor, and himself regarding the program. 

0510.5

Benefit & Actuarial Services

0510.5.1

Adoption of Consent Calendar:  Motion by Bryan, second by Salas, carried unanimously to adopt the Consent Calendar, as submitted, as follows:

Routine Actions taken by staff pursuant to the board's Delegation of Authority and the Regulations of the Board of Retirement:

Service Retirements:

Estanislao, Marissa

September 10, 2005

District Attorney’s Office

Massaglia, Margarita

September 10, 2005

Human Services Agency

Phelps, Patricia

September 30, 3005

Department of Mental Health

Visconti, Judy

October 1, 2005

Department of Child Support Services

McNeely, Rosalind

October 4, 2005

Department of Mental Health

Hernandez-Askin, Sandra

October 15, 2005

Department of Public Health

Penman, Maria

October 22, 2005

San Mateo Medical Center

Ogata, George

October 29, 2005

Human Services Agency

Continuance of Benefits:

McIntosh, Bobby

Beneficiary of Sally Brother

Gantt, Roy

Beneficiary of Johnetta

Quey, Betty

Beneficiary of Peter

Deferred Retirements:

Alinea, Edmund K.

G4 vested

Cardosa, Sandra M.

G2 vested

Gacula, Jesusa M.

G2 vested

Hawkins, Ursula D.

G4 vested

Hsia, Vera

G4 vested

Netherland, Lisa G.

G4 vested

Parent,  Darlene A.

G4 vested

Trajano, Jeannette C.

G2 vested

Extended Purchase:

None

Refunds For September 2005:

Barbara, Natalie

G4 non-vested

Colcleasure, Sandra

G4 non-vested

Diaz-Chama, Doralinda

G4 non-vested

Hurtado, Adan

G4 non-vested

Macababbad, Cheryl

G4 non-vested

Merrill, Peter

G4 non-vested

Morrow, Dana

G4 non-vested

Navarro, Jovic

G4 non-vested

Nunez, Soledad

G4 non-vested

Wendt, Eric

G4 non-vested

Rollovers for September 2005:

Carrillo, John

G4 non-vested

Gomes, Gina

G4 non-vested

Langworthy, Malia

G4 non-vested

Luczkowiak, Jennifer

G4 non-vested

Michelsen, Renu

G4 non-vested

Symonette, Celeste

G4 non-vested

Viloria, Holly

G4 non-vested

Vu, Vinh

G4 non-vested

Williams, Keta

G4 non-vested

Mr. Lewis then took up agenda item 6.3.

0510.5.2

Consideration of Items Removed from Consent Agenda:  None.

0510.5.3

Discussion of June 30, 2005, Actuarial Valuation Study:  Ira Summer of Public Pension Professionals was present to review the actuarial valuation.  He discussed the reasons for significant differences between this year’s and last year’s actuarial valuation results.  Mr. Summer also reported on the changes in actuarial assumptions from those approved by the board at the August board meeting. 

Following his presentation, Mr. Summer respectfully resigned as SamCERA’s actuary primarily due to workload and deadline issues.  He stated that he will remain SamCERA’s actuary until a new actuary is hired.

Mr. Bailey discussed the Request for Proposal (RFP) process with the board in a search for a new actuary.  RFP’s will be sent out to potential actuarial candidates as soon as possible and a special board meeting will be held in December for interviews.

Mr. Lewis then took up agenda item 7.1.

0510.5.4

Acceptance of 2006-2007 Fiscal Year Employer & Employee Contribution Rates:  This agenda item was removed.

0510.5.5

Annual Actuarial Review and Action (Public Pension Professionals):  This agenda item was removed.

0510.5.6

Approval of Resolution to Share Certain Member Information with San Mateo County Employee and Public Services Department:  Mr. Bailey stated that the county of San Mateo Employee and Public Services Department sometimes requests retiree member information from SamCERA in order to inform retirees about non-SamCERA benefits available to them through the county such as the availability of flu shots.  The county also needs information regarding retirees’ ages, dates of retirement, spouse’s ages, etc. now that the Government Accounting Standards Board requires that an actuarial value be placed on retiree health insurance benefits.  Mr. Bailey and Ms. Carlson noted that it is appropriate to provide certain statistical data as well as ways to contact retirees to the county in cases where it serves the best interest for SamCERA’s retirees.

Motion by Bryan, second by Hackleman, carried unanimously to adopt Resolution 05-06-03, permitting SamCERA to share certain member information with San Mateo County Employee and Public Services Department, as submitted, as follows:

“Whereas, Article XVI, §17 of the Constitution of the State of California as amended in 1992 states, in pertinent part, as follows:

“Notwithstanding any other provisions of law or this Constitution to the contrary, the retirement board of a public pension or retirement system shall have plenary authority and fiduciary responsibility for investment of moneys and administration of the system, subject to all of the following:

            (a)  …The retirement board shall also have sole and exclusive responsibility to administer the system in a manner that will assure prompt delivery of benefits and related services to the participants and their beneficiaries…”;  and

“Whereas, Government Code §31532 provides that member records are to be kept confidential and may be used to administer benefits under the 1937 Act; and

“Whereas,from time to time the county of San Mateo Employee and Public Services Department has a need to communicate directly with retirees of the county regarding the administration of benefits provided, administered or communicated through the county;  and

“Whereas, the county of San Mateo can be relied upon to utilize the information provided in a confidential manner that is of benefit to SamCERA retirees; now,

“Therefore be it

“Resolved that the Chief Executive Officer of SamCERA is hereby authorized to provide information regarding SamCERA retirees to the county of San Mateo Employee and Public Services Department when such information in the judgment of the CEO is necessary for the administration of county benefits for SamCERA retirees.”

Mr. Lewis then took up agenda item 6.4.

0510.6

Investment Services

0510.6.1

Monthly Portfolio Performance Report:  Mr. Clifton presented the Preliminary Monthly Performance Report for the period ending September 30, 2005.  He stated that SamCERA’s Total Fund Return of 1.07% for the month slightly underperformed the Total Plan Policy Benchmark return of 1.20%.  

Asset Class

Market Value

1-Month

1-year TTWRR

5-year TTWRR

$884,301,791

0.73%

16.37%

0.55%

International Equity

     289,504,290

4.53%

29.30%

2.96%

Total Equity

1,173,806,081

1.64%

19.29%

1.08%

Fixed Income

479,005,467

-1.01%

3.65%

7.13%

Real Estate Aggregate

63,754,965

7.27%

23.02%

13.01%

Cash Equivalents

6,458,747

0.25%

3.30%

3.18%

Total Fund

$1,723,025,261

1.07%

14.47%

4.28%

Benchmark

1.20%

13.86%

3.81%

Mr. Lewis then took up agenda item 6.6.

0510.6.2

Selection of Finalist for SamCERA’s Fixed Income Enhanced Index Mandate:  Following presentations by three investment management firms and extensive discussion, motion by Hackleman, second by Salas, carried unanimously to select Fidelity Management Trust Company as the Association’s Fixed Income Enhanced Index Manager.

Mr. Lewis then recessed the meeting at 11:50 p.m. The board meeting resumed at 1:13 p.m.  Mr. Lewis then took up agenda item 5.3.

0510.6.3

Manager Interview: BlackRock, Inc.:  The board conducted the first interview of the three finalists for SamCERA’s Fixed Income Enhanced Index mandate.  Mr. Clifton introduced Andy Phillips, Managing Director, Senior Member of Portfolio Management Group and Anthony Freitas, Director, representing BlackRock, Inc.  Mr. Phillips and Mr. Freitas provided a 20-minute overview of their proposal and then responded to 15 minutes of questions.

Mr. Lewis then took up agenda item 5.6.

0510.6.4

Manager Interview: Fidelity Management Trust Company:  The board conducted the second interview of the three finalists for SamCERA’s Fixed Income Enhanced Index mandate.  Mr. Clifton introduced Dan Tremblay, Fixed Income Investment Director, and Art Greenwood, Relationship Manager, representing Fidelity Management Trust Company.  Mr. Tremblay and Mr. Greenwood provided a 20-minute overview of their proposal and then responded to 15 minutes of questions.       

Mr. Lewis then took up agenda item 6.1.

0510.6.5

Manager Interview: Lehman Brothers Asset Management:  The board conducted the final interview of the three finalists for SamCERA’s Fixed Income Enhanced Index mandate.  Mr. Clifton introduced Andy Johnson, Manager Director, Portfolio Manager, and Alexander Knowles, Senior Vice President, Product Specialist, representing Lehman Brothers Asset Management.  Mr. Johnson and Mr. Knowles provided a 20-minute overview of their proposal and then responded to 15 minutes of questions.

Mr. Lewis then took up agenda item 6.2.

0510.6.6

Approval of Investment Management Agreement with Aberdeen Asset Management, Inc:  Mr. Clifton reminded the board that Aberdeen Asset Management agreed to purchase Deutsche Asset Management Investment Services Limited (DeAM), one of SamCERA’s fixed income managers.  The purchase transaction is slated to occur on November 30, 2005.  Mr. Clifton sent Aberdeen Asset Management an Investment Management Agreement similar to DeAM’s, adding a Most Favored Nation clause.  The addition of the language resulted in a new fee structure saving SamCERA approximately $30,000 per year.

Motion by Colson, seconded by Bryan, carried unanimously to authorize the chair to execute the Investment Management Agreement between SamCERA and Aberdeen Asset Management Inc.

Mr. Lewis then took up agenda item 6.5.

0510.7

Board & Management Support Services:

0510.7.1

Monthly Financial Reports:  Mr. Clifton submitted the preliminary monthly financial report for the period ending September 30, 2005.  SamCERA’s Net Assets Held in Trust for Pension Benefits totaled $1,721,478,930.

0510.7.2

Quarterly Budget Report:  Mr. Clifton submitted the preliminary First Quarter Budget Report.  In the first quarter of fiscal year 2005-2006 SamCERA expended 19.3% of administrative appropriations.  All major categories are under budget.

SamCERA’s Administrative Budget

In regards to professional fees, with the exception of actuarial services, those expenditures are on target in accordance with the budget appropriations.  The aggregate professional services fee is approximately 31.6 basis points.

0510.7.3

Annual Review of  SamCERA’s Attorneys – County Counsel:  Ms. Carlson was present for County Counsel’s annual attorney review.  Comments indicated that staff and trustees are generally pleased with the quality of advice provided by counsel.  Mr. Clifton stated SamCERA may explore outside counsel when issues regarding securities review or tax laws arise.  Ms. Carlson stated that the County has an independent contract with a tax advisor, Bob Blum of Hanson Bridgett.  Ms. Carlson responded to trustee questions regarding the attorney relationship.

0510.7.4

Approval of SamCERA Strategic Plan:  Mr. Bailey stated that staff had developed a Strategic Plan with various administrative goals and objectives through a series of meetings.  He then performed an overview of SamCERA’s Strategic Plan for the board. 

Motion by Salas, second by Stuart, carried unanimously to approve the SamCERA Strategic Plan.

0510.7.5

Approval of Revisions to Resolution 98-99-06:  Mr. Bailey reviewed Resolution 98-99-06 regarding the collection of amounts due from active and retired members.  He incorporated board comments and suggestions from the September board meeting.

Motion by Stuart, second by Hooley, carried unanimously to approve the changes to Resolution 98-99-06, as follows:

“Whereas, errors may occur from time to time in the collection or calculation of contributions, refunds and benefits that may result in under-payments or over-payments by members as well as by SamCERA; &

“Whereas,the Board is guided by the Constitution, as it relates to the prohibition against gifts of public funds, and State law governing statutes of limitations, as it relates to recovery of over-payments.  Therefore be it

“Resolved that the Board affirms that it is the Policy of the Board of Retirement

•     To preserve and protect the assets of the Retirement Fund,

•     To collect contributions in accordance with the provisions of the law,

•     To issue all disbursements in accordance with the provisions of the law,

•     To pay earned benefits on a timely basis,

•     To correct errors as soon as possible once identified and verified,

•     To rectify under-payments as soon as possible upon verification by the Chief Executive Officer,

•     To recover over-payments whenever it is reasonable to do so in the opinion of the Board,

•     To harmonize the Constitutional prohibition against gifts of public funds with the Board’s paramount duty to its participants and their beneficiaries,

•     To honor State law governing statutes of limitations when determining the period for which recovery is to be calculated.  Be it further

“Resolved that the Board hereby approves the following procedure for resolving errors which result in amounts owed from or to SamCERA members and benefit recipients:

1)      The Chief Executive Officer shall verify the under-payment or over-payment.

2)      The Chief Executive Officer shall correct under-payments with the next available payroll and report the correction in the next Consent Agenda for ratification by the Board.

3)      If a monthly benefit is no longer being paid, the Chief Executive Officer shall make a reasonable attempt to pay the amount of the under-payment to the beneficiary, survivor, or estate of the deceased recipient and shall report such action in the next Consent Agenda for ratification by the Board.

4)      It shall be the responsibility of the Chief Executive Officer to assure that at the beginning of each calendar quarter, SamCERA will take action to reconcile the amounts due, if any, from benefit recipients (including retirees, beneficiaries of retirees, and or their estates as well as members who have withdrawn contributions) and commence collection of past due amounts in accordance with the following procedure.

a)      For amounts of $50 or less, the Chief Executive Officer shall write off the amounts.

b)      For amounts between $50 and $500, the Chief Executive Officer may write off the amount due after a collection effort has been completed. Litigation to recover the amount due need not be commenced.

c)      For amounts between $500 and $5,000, the Chief Executive Officer may, after the completion of collection efforts, either commence litigation or write off the amount due after considering the estimated cost of litigation versus the amount due.

d)      For amounts over $5,000, the Chief Executive Officer shall, after the collection efforts have been completed, commence litigation or seek Board approval to write off the amount due.

e)      All actions taken in a) through d) above shall be reported to the Board.

f)       Notwithstanding the above, any benefit recipient who receives a lump sum benefit shall have the amount of any member contributions owed deducted from their lump sum payment.  In the event that the member has already received the payment, or the amount owed is greater than the lump sum due, SamCERA will commence a collection effort following the steps in this procedure for collection of amounts due from benefit recipients.

g)      Collection efforts for all amounts due from benefit recipients, shall be undertaken in the following manner: each collection effort shall include a notice setting forth the amount owed, thealternatives for repayment, the right to appeal, an explanation of the cause of and calculation of the amount owed, an explanation of the recovery process and any applicable deadlines. The notice shall include a form for the benefit recipient to sign and return indicating acceptance of the demand for repayment, selection of payment method and/or the intent to appeal.

5)      It shall be the responsibility of the Chief Executive Officer to assure that at the beginning of each calendar quarter, SamCERA will take action to reconcile the contribution amounts due from active members of the retirement system and commence collection of past due amounts, if any, in accordance with the following procedure.

(a)    For a past due contribution amount of 5% or less of the member’s bi-weekly gross pay, the Chief Executive Officer shall initiate actions to add the amount to the member’s regularly scheduled payroll deducted contributions to the retirement fund for a period of time until the amount owed has been paid.  Members shall receive notice of any amounts deducted which exceed $5.00.

b)      For a past due contribution total greater than 5% of a member’s bi-weekly gross pay, the Chief Executive Officer will commence a collection effort that shall include a notice to the member setting forth (1) the total amount of contributions owed, (2) the amount of additional deductions to be added to the member’s regularly scheduled payroll deducted contributions, (3) the number of pay periods which will include a deduction for additional contributions, and (4) and the member’s rights to appeal the collection method.  Any past due amount that exceeds the above-noted percentage of the member’s current bi-weekly pay will be collected through additions to the member’s regularly scheduled payroll deducted contributions to the retirement fund during multiple pay periods in increments not to exceed that percentage of the member’s bi-weekly gross pay. An exception to the 5% limit will be made in the event a member has a retirement application pending with SamCERA.  In such case the full amount of the required contributions must be paid to SamCERA prior to establishment of a retirement benefit.”

0510.7.6

SACRS Voting Proxy Approval:  Mr. Bailey distributed copies of resolutions from SACRS that will be considered and voted upon at the fall conference.  One resolution would increase SamCERA’s fees from $1,500 per year to $4,000 per year.  Trustees indicated that a discussion regarding the steep fee increase be brought up at the SACRS conference. 

Motion by Hackleman, second by Salas, carried unanimously to approve the recommended members and alternates and to empower the SamCERA voting delegate to use his/her best judgment in voting based on information gained at the meeting. 

0510.7.7

Request for Retirement Investment Analyst I Position:  SamCERA’s finance department has experienced an increase in workload over the past two years.  Mr. Bailey discussed the two main factors contributing to the increase: (1) additional responsibilities pertaining to IRS rules and the support of the rest of the agency, and (2) increased accounting and auditing functions resulting from the transition from passive to active management. 

Motion by Hackleman, second by Salas, carried unanimously to authorize the Chief Executive Officer to work with the Employee and Public Services Department to establish a new position titled Retirement Investment Analyst I.

0510.8

Management Reports

0510.8.1

Chief Executive Officer's Report:  Mr. Bailey distributed graphical information regarding the trends in service retirements and disability retirements over the past ten years. 

0510.8.2

Investment & Finance Manager’s Report:  Mr. Clifton reported that there was a high probability that SamCERA’s $40 million would be called by INVESCO on January 1, 2006. 

0510.8.3

County Counsel's Report:  None.

0510.9

Adjournment in Memory of the following Deceased Members:  There being no further business, Mr. Lewis adjourned the meeting at 4:10 p.m., in memory of the following deceased members:

Brother, Sally

September 1, 2005

Department Of Public Health

O’hare, Dorothy

September 2, 2005

Department Of Mental Health

Perri, Jr., Louis

September 8, 2005

Department Of Public Works

Goheen, William

September 18, 2005

General Services Administration

Haley, Matilde

September 23, 2005

Beneficiary Of Vincent

Newton, Walter

September 24, 2005

Department Of Public Health

Diltz, Deborah

September 25, 2005

District Attorney’s Office

Wong, Stephen

September 25, 2005

Probation Department

Goldstrom, Paula

September 26, 2005

District Attorney’s Office

Dergan, Bernice

October 2, 2005

Assessor’s Office

Ferreira, Barbara

October 2, 2005

County Clerk Recorder’s Office

Justimbaste,  Cesar

October 8, 2005

Controller’s Office

Cedor, Sue

October 11, 2005

San Mateo Medical Center

Noyer, Elizabeth

October 11, 2005

Library

Hensley, Charles

October 16, 2005

Beneficiary Of Betty

E-Mail:samcera@co.sanmateo.ca.us - Tel:(650)599-1234 - Fax:(650)591-1488 - Hours:M-TH 7am-6pm
Address: 100 Marine Parkway, Suite 125, Redwood Shores, CA 94065-5208 - InterOffice Pony: RET141