City of San Diego Retired Employees Association

March 14, 2023 

Board Meeting Minutes

NOTES: All votes were unanimous unless otherwise noted

Call to Order: The meeting was called to order by Vice-President for Advocacy Mike Bresnahan at 9:30am.

Board Members Present: Mike Bresnahan, Chris Brewster, Liza Crisafi, Joan Hernandez, Charlie Hogquist, Brad Jacobsen, Stacey LoMedico, Joan McNamara, Mary Ann Stepnowsky, John Tsiknas, and Dave Twomey

Guests Present: Joe Flynn

AGENDA: There were no additions to the agenda.

MINUTES: The minutes of the January and February 2023 Board meeting were approved with one abstention.

TREASURER’S REPORT: Liza noted that a check to the City Treasurer for $1013 for the Tierrasanta swim program was finally cashed..

M/S/C to approve the February 2023 Treasurer’s Reports

INVESTMENT COMMITTEE REPORT: John reported that the appreciation for the Russell 3000 is 32.22%, just slightly down from January. The appreciation for the Money Market is 4.80%. The value for the legal fund is $332,684.

RETIREMENT BOARD REPRESENTATIVE’S REPORT: Charlie reported that newly-elected SDCERS Board member Chris Brewster attended the most recent SDCERS meeting as an observer, and turned the reporting over to him. 

In January the SDCERS Board meeting, the Board adopted methods to fund the Plan for missed normal cost payments and expected shortfall due to the unwinding of Proposition B. The SDCERS actuaries were unable in FY 2022 to provide advice to SDCERS and the City about their required contributions for the Prop B employees added into the system in July 2021. These contributions were therefore in arrears. So, the Board adopted a payment for FY 2022 missed normal cost for those new members, payable July 2023 – $2.7 million. The Board also adopted a payment for the FY 2023 and FY 2024 normal costs for those new members payable July 2023 – $35.7 million and $36.8 million, respectively. Third, the Board had to decide how to bill the City for the 9+ years of Prop B during which employees who were hired received defined contribution plans (401(k) type plans) — $118 million total. The Board elected to allow that debt to be amortized over 20 years beginning with the FY 2024 ADC. With interest, this is expected to be $10.8 million per year for 20 years. The total ADC will be about $448 million. Meanwhile, discussions are ongoing between the unions and the City to decide how to treat the 1,586 people hired during the Prop B years who left City employment during those years.

Chris Charlie made note that some of the nasty anti-pension articles in the U-T stopped due in large part to Charlie’s SDCERS renaming use of of the term infamous “13th Check.”  Annual Supplemental Benefit, in lieu of the former term which was so poorly received. 

The REA Board expressed its deep appreciation for Charlie and his service on the SDCERS Board.

COMMUNICATIONS AND INFORMATION ITEMS: 

1) Dave reminded the Board that the Read Across America event will begin around 9:30 on March 23; this will conflict with the Advocacy Committee meeting, which will be rescheduled so that REA Board members can attend. It was noted that this has become such a big event that next year’s should be coordinated by a professional, perhaps Gary Katz.

2) Mike reported that the meeting he and Mary Ann had with District 6 Council Member Kent Lee went well; Lee expressed interest in an REA-sponsored swim program in his district. 

3) Dave and Stacey reported that finalizing our Special Use Permit (SUP) with the City for our use of the War Memorial Building is proceeding, but that if we want an exclusive lock for one of our lockers for storage of AV equipment it will have to be installed by a City locksmith and will take time.

ACTION ITEMS:

1) Mike reported that SDCERS staff is running out of REA membership application forms.

M/S/C to approve an expenditure of approximately $125 to print 500 membership application forms

2) The City has engaged Buck Consulting to look into the feasibility of issuing a Request for Proposals (RFP) for a private contractor to administer retiree health benefits, relieving SDCERS of this responsibility. SDCERS administration is in favor of this proposal, as administration of retiree health care benefits is not a core activity of theirs and is underfunded. Mike said that he would reach out to the City and determine our role in this process – including sitting on the selection panel – as it directly affects us. A Zoom meeting between City staff and REA Board members will be scheduled if time is of the essence. 

3) Chris noted that since his election to the SDCERS Board, he now holds two seats on the REA Board. He will resign his seat as a Director on the REA Board effective March 31 and will assume the SDCERS Board representative seat on April 1. This will create a vacancy on the REA Board.

ADVOCACY COMMITTEE REPORT

Advocacy Committee members and other REA Board members are invited to attend the Read Across America event on March 23, the scheduled date of the Committee. It was later decided to reschedule the  Advocacy Committee to Friday March 24, at 1:00pm via Zoom.

OTHER COMMITTEE REPORTS

Membership: No report.

Newsletter: Deadline for the next issue is March 20 at 8:00am.

OTHER RETIREE/ACTIVE EMPLOYEE ASSOCIATION REPORTS

Retiree Issues Task Force (RITF): No report.

Retirement Security Roundtable: No report..

MEA: No report.

Other Retired Public Employee Associations: No report.

PROGRAMS: We need a speaker for the May meeting.

ADJOURNMENT

The meeting was adjourned at 10:50am.

Respectfully submitted,

Brad Jacobsen

Secretary

REA Board Briefing

In January the SDCERS Board meeting, the Board adopted methods to fund the Plan for missed normal cost payments and expected shortfall due to the unwinding of Proposition B.

In March the Board received, at its request, a briefing from the Port, Airport Authority, and the City on their five-year financial plans. Notable that the Airport Authority has a policy to always keep their pension funded to 95% or above and has followed that.

The SDCERS actuaries were unable in FY 2022 to provide advice to SDCERS and the City about their required contributions for the Prop B employees added into the system in July 2021. 

These contributions were therefore in arrears.

So, the Board adopted a payment for FY 2022 missed normal cost for those new members, payable July 2023 – $2.7 million.

Next, the Board adopted a payment for the FY 2023 and FY 2024 normal costs for those new members payable July 2023 – $35.7 million and $36.8 million, respectively. 

The City decided to prepay the amounts for FY 2022 and FY 2023 after the January meeting.

Third, the Board had to decide how to bill the City for the 9+ years of Prop B during which employees who were hired received defined contribution plans (401(k) type plans). Placing those employees in the retirement system obligates the City to pay the City contribution costs for all of those employees over that period of time. The actuary determined that cost to be $118 million. 

The Board elected to allow that debt to be amortized over 20 years beginning with the FY 2024 ADC. With interest, this is expected to be $10.8 million per year for 20 years. 

On July 1 the City will owe $47.6 million — $36.8 million for FY 2024 normal cost for news Proposition B Members and $10.8 million for FY 2024 payment of the amortized shortfall.

The total ADC will be about $448 million.

The addition of the Prop B era members increased active membership by over 9%.

As of June 30, 2022, the system’s funding ratio had risen to 76%. This will likely decline due to market issues and the currently unfunded costs of the $118 million shortfall.

Meanwhile, discussions are ongoing between the unions and the City to decide how to treat the 1,586 people hired during the Prop B years who left City employment during those years.