City of San Diego Retired Employees Association
January 9, 2024
Board Meeting Minutes
NOTES: All votes were unanimous unless otherwise noted
Call to Order: The meeting was called to order by President Mike Bresnahan at 9:30am.
Board Members Present: Jim Baross, Clay Bingham, Mike Bresnahan, Chris Brewster, Liza Crisafi, Shirley Hall, Joan Hernandez, Brad Jacobsen, Stacey LoMedico, Joan McNamara, Estella Montoya, and Dick Wilken.
Guests Present: None.
AGENDA: There were no additions to the agenda.
MINUTES: The minutes of the November 2023 Board meeting were approved.
TREASURER’S REPORT: Liza reported that there were no unusual activities in November and December, mostly income and expenses related to the Holiday Party.
M/S/C to approve the November Treasurer’s Report.
INVESTMENT COMMITTEE REPORT: Liza reported that despite a rocky year, the Fund gained $70K.
RETIREMENT BOARD REPRESENTATIVE’S REPORT: Chris informed the Board that Marcelle Voorhies-Rossmann is retiring from SDCERS on Friday; there will be a reorganization and her position is being cut. Chris’ full report is attached.
COMMUNICATIONS AND INFORMATION ITEMS:
1) Jonathan Hayes has requested the REA pay for the postal box.
2) The City has prepared a memo regarding Medicare Part A reimbursement. SDCERS has approved it, and Risk Management will send it out.
3) The transfer of health benefit processing from SDCERS to a City-hired consultant is still being negotiated due to the RFP not being complete is the scope of duties.
4) Joan McNamara brought up a concern about the City not reimbursing healthcare costs to provisional employees with Option C funds. She is now looking into this issue.
ACTION ITEMS:
1) Liza noted that because of our November Board elections, changes need to be made at CalCoast regarding credit card signatories.
M/S/C to remove Past President Dick Wilken and to add new President Mike Bresnahan and new Vice-President Clay Bingham as signatories on REA’s credit card account at CalCoast Credit Union.
2) Liza recommended investing $34K in an 8-month CD yielding 4%. We currently have over $19K in Savings and over $26K in Checking. We would keep $10K in Checking and invest the rest.
M/S/C to invest $34,000 in an 8-month CD yielding 4%
3) Stacey reported on the status of our support of Voice of San Diego including new rates for 2024. We can get 24 weeks at $4300.
M/S/C (11-1-0) to sponsor Voice of San Diego’s Morning Report for $4300.
Stacey is to go back to see if we can get a full year at $5000.
4) Stacey proposed that we support VOSD’s Parents’ Guide for $1500, including an REA ad. This would be for the 2025 Parents’ Guide.
M/S/C (10-1-1) to support VOSD’s Parents’ Guide for $1500.
5) Stacey proposed that REA continue supporting Learn to Swim programs for $5000. Locations of the pools would be determined later.
M/S/C to sponsor Learn to Swim programs for $5000.
6) Stacey introduced the Dave Twomey Scholarship Program which would sponsor swimming lessons for under-18 children of middle-income families who would not qualify for other financial support.
Chris mentioned that we should also look into sponsorship of the SD Junior Lifeguard program, a feeder to the City’s Lifeguards. The budget will probably be $5000. Stacey will report back in March.
7) Mike reported that the Bali Hai needs a $500 deposit for the 2024 Holiday Party.
M/S/C to approve the agreement with the Bali Hai for the Holiday Party.
8) Liza presented the 2024 budget developed at the Board Retreat.
M/S/C to approve the 2024 budget.
ADVOCACY COMMITTEE REPORT
Gary Katz will be invited to the February Board meeting to discuss his consultant service for the Learn to Swim Program.
OTHER COMMITTEE REPORTS
Membership: No report.
Newsletter: Deadline for the next issue is January 19 at 8:00am. Material should be sent directly to Connor Sorensen.
OTHER RETIREE/ACTIVE EMPLOYEE ASSOCIATION REPORTS
Retiree Issues Task Force (RITF): No report.
Retirement Security Roundtable: No report.
MEA: Jim reported that City employees are concerned about security at CAB and branch libraries.
Other Retired Public Employee Associations: No report.
PROGRAMS: Brad confirmed that the February program will be the Airport Authority. Both Clay (March) and Stacey (April) hit dead-ends in trying to book a speaker. It was suggested that the County Water Authority and/or the Clean Water Initiative be a program.
ADJOURNMENT
The meeting was adjourned at 10:55am.
Respectfully submitted,
Brad Jacobsen
Secretary
REA Board Briefing – Chris Brewster – January 9, 2024
City Request to Spread Out Payments: The next SDCERS Committee and Board meetings will take place on January 11th and January 12th respectively in the SDCERS Board Room at 401 A Street on the 3rd floor. This board meeting will address a City proposal to “smooth” contributions by the City to the SDCERS trust fund. Last year the actuary projected that the trust fund would return to being fully funded in the mid-2030s for the first time since the late 1990s, when the Board approved contribution holidays and the City enhanced various pension benefits, which resulted in significant underfunding (the City retirement fund was most recently reported by the actuary to be about 76% funded).
The actuary’s report to the SDCERS Board reveals a disappointing projection, regardless of the City’s request: Full funding of the trust fund even using the current strategy, is now projected to occur in 2040. The reasons for this five year delay is unclear at present, but appears to be related in large part to the large raises (reportedly 25%) recently approved.
The actuary is recommending a modification however, because of a shift from the funding approach taken after Proposition B passed, based on the fact that most employees would eventually be ineligible for a pension and the pension system would wind down, to a more normal pension funding model, with an open end fund and a “percentage of pay” approach. That pushes the estimated date of full funding out to 2041-42.
The City will be making a presentation on their current financial outlook, which includes some significant fiscal challenges. The City’s recently issued 2025-2029 Financial Outlook includes baseline shortfalls (in millions) of ($136.6), ($156.5), ($149.9), ($160.3), and ($141.3) respectively. (Obviously the City cannot run a deficit, so these will have to be made up somehow.)
The alternative financing proposals put forward to the Board at the City’s request would reduce short term annual obligations of the City by about $100 million and would, in the best scenario, achieve full funding in 2039, but these models ratchet up obligations to the City substantially in future years to an ever-increasing level ending at almost $700 million in the final year.
The Board has been advised confidentially by its fiduciary counsel about its statutory obligations and counsel will be at the meeting.
Two notable facts. First, the California Constitution states that, “The members of the retirement board of a public pension or retirement system shall discharge their duties with respect to the system solely in the interest of, and for the exclusive purposes of providing benefits to, participants and their beneficiaries, minimizing employer contributions thereto, and defraying reasonable expenses of administering the system. A retirement board’s duty to its participants and their beneficiaries shall take precedence over any other duty.”
Second, after the underfunding of the system in the 1990s and early 2000s, the City Charter was amended by a vote of the people as follows: “Funding obligations of the City shall be determined by the [Pension] Board on an annual basis and in no circumstances, except for court approved settlement agreements, shall the City and the Board enter into multi-year contracts or agreements delaying full funding of City obligations to the system.”
Pension Reserve: In the City’s recent five-year budget outlook, they included the following, “The Pension Reserve was established to mitigate potential increases in the annual pension payment, the Actuarially Determined Contribution (ADC). Per the City’s Reserve Policy, the City will fund and maintain a Pension Reserve up to 8.0 percent of the most recent three-year average of the ADC as reported in the most recent Actuarial Valuation Report. As a result of expected increases to the ADC due to the reversal of Proposition B, the FY 2023 Adopted Budget included the use of $7.9 million from the Pension Reserve. The reserve currently does not have a balance and contributions are planned to begin again once the General Fund Reserves reach the target of 16.7 percent by FY 2030.”
Medicare Part A Reimbursement: The retirees who will benefit are those who were hired prior to July 1, 2005, retired on or after April 1, 2012, qualified for and selected option A or B, and do not have adequate Medicare credits to qualify for free Medicare Part A. (The cost of Part A in 2024 is $505 per month if you paid Medicare taxes for less than 7½ years or $278 if you paid for 7½ years or more, but less than 10.) The City agreed to reimburse this out of the A or B funds, up to the ceiling of those funds, going forward.
For those who elected not to sign up for Medicare at 65, but wish to do so at a later time, there is a Medicare “General Enrollment Period” annually between January 1 and March 31. Medicare states, “Your coverage begins the month after you sign up.” As for penalties, Medicare states, “If you have to buy Part A, and you don’t buy it when you’re first eligible for Medicare, your monthly premium may go up 10%. You’ll have to pay the penalty for twice the number of years you didn’t sign up.” Similarly, “You’ll pay an extra 10% for each year you could have signed up for Part B, but didn’t.” Marcelle Voorhies Rossman of SDCERS advised that penalties cannot be reimbursed by law.
The City informed the RITF that it would inform affected retirees about the reimbursement process in December of last year. I do not know whether they have done so.
Marcelle Voorhies Rossman Retirement: Marcelle, who is the Deputy Chief Executive Officer of SDCERS, is retiring this month. The Board has decided not to fill this position. The CEO, Gregg Rademacher, has advised that he intends, with Board approval, to continue in his position for several more years, until his own retirement.
Sandra Claussen Promoted to Benefit Administration Director: Sandra has served as the Medical Review Officer, responsible for the disability application process, along with oversight of the Benefit Administration Division’s death process and retiree medical program. The appointment is effective January 12, upon the retirement of Marcelle.
City Retiree Healthcare Plan Administration: As of December 13th, the City was in contract negotiations.