City of San Diego Retired Employees Association
August 13, 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: Clay Bingham, Mike Bresnahan, Liza Crisafi, Shirley Hall, Brad Jacobsen, Stacey LoMedico, Joan McNamara, Estella Montoya, Dick Wilken, and Greg Woods.
Guests Present: Joe Flynn
AGENDA: There were no additions to the agenda.
MINUTES: The minutes of the July 2024 Board meeting were approved.
TREASURER’S REPORT: Liza reported that our catering expenses were under-budgeted, in part because of the rise in food prices and wages, and delivery costs. This can be rectified when we prepare the 2025 budget at the Board retreat.
M/S/C to approve the July Treasurer’s Report.
INVESTMENT COMMITTEE REPORT: Liza reported that our rates of return continue to be very good.
RETIREMENT BOARD REPRESENTATIVE’S REPORT: See attached report.
COMMUNICATIONS AND INFORMATION ITEMS:
1) Mike informed the Board that the Retiree Health Fair will be on Wednesday October 30, from 10:00 to 2:00 at the Balboa Park Club. Board members are encouraged to attend.
2) Mike reported that he has contacted the office of CD4 Councilmember Henry Foster for our usual meet-and-greet with new councilmembers. He has not heard back yet, but Council is in recess for the summer.
3) Mike asked Board members to form a Nominating Committee for this year’s Board elections; Clay and Joan McNamara volunteered. Mike will ask for a General Member to fill out the committee.
4) After checking of calendars, the Board Retreat is tentatively scheduled for 9:30 Friday, November 1 at Mission Trails Park.
IMAGE ENHANCEMENT UPDATES:
1) Estella reported that the Voice of San Diego banners will be focusing on our learn to swim programs
2) Stacey said that she will have all the swim scholarship info at the September Board meeting; the invoice will need to be paid by December 31. The final draft of the VOSD school brochure will be ready by the end of the year.
3) Clay reported that the process for supporting youth swim lessons will need to start earlier next year with REA taking a stronger coordinating role.
ACTION ITEMS: None
OTHER COMMITTEE REPORTS
Membership: No report.
Newsletter: Deadline for the next issue is August 20 at 8:00am. Material should be sent directly to Connor Sorensen and Mary Ann Stepnowsky.
OTHER RETIREE/ACTIVE EMPLOYEE ASSOCIATION REPORTS
Retiree Issues Task Force (RITF): Members of the RITF met via Zoom with staff from Benefits Outsourcing Solutions (BOS) about the company’s management of open enrollment. BOS staff is ready to take over SDCERS’ responsibilities this year. BOS may be able to include REA’s usual informational inserts in their communications with retirees.
The next meeting will be September 26.
Retirement Security Roundtable: No report.
MEA: There was discussion about Mike Zucchet’s request that REA support a Council-proposed ballot initiative to raise the City sales tax by 1% with the additional money earmarked specifically for the General Fund. After the discussion, a special Advocacy Committee meeting was scheduled for August 22 with a report back to the REA Board at the September meeting.
PROGRAMS: Clay reported that this year’s speaker schedule is full and, thanks to suggestions he has received, next year’s schedule has great possibilities.
ADJOURNMENT
The meeting was adjourned at 10:45am.
Respectfully submitted,
Brad Jacobsen
Secretary
REA Board Briefing – Chris Brewster – August 12, 2024
Natasha Collura is now on board as the new Member Services Director.
Additional Contributions: As I reported earlier, in reviewing the San Diego Municipal Code after I was elected last year, I came upon two identical sections (one for safety and one for general) that state that,
a member (in this case an active employee) may elect to make post-tax “Additional Contributions” at rates in excess of the member’s “Normal Contributions,” for the purpose of providing additional benefits upon their retirement. (This is separate and distinct from buying “air time.”)
Per the SDMC, upon application, the SDCERS Board must furnish to the member information concerning the nature and amount of additional benefits to be obtained by the additional contributions.
When I inquired of SDCERS staff how this works, I was told, last year, that there is an SDCERS policy that bars this benefit due to an IRS rule. When the policy came up for review in May 2024, I asked if this IRS rule continues to prohibit such a system. It turns out it doesn’t and it’s unclear to me if it ever actually did.
Apparently SDCERS used to allow pre-tax additional contributions, which are not allowed by the IRS, at least presently, so that practice was ended; but due to a misunderstanding by SDCERS staff, it seems that post tax contributions were also disallowed, even though the SDMC expressly allows them.
As a result of my inquiry, at the July SDCERS meeting the General Counsel proposed and the Board agreed to remove the language from the SDCERS policy that disallowed these contributions. However, at the moment, SDCERS staff has chosen to consult with the City to see if they still want this benefit offered. Since this is referenced in the City Charter (based on a vote of the people), it would seem difficult to continue to deny this benefit. We shall see.
In any case, this could be an attractive benefit for active employees who would like to make additional contributions for an additional guaranteed benefit upon retirement. From what I’m hearing, the only IRS limit on post tax contributions is the lesser of $69,000 (annually I believe) or the employee’s compensation.
Disability Retirement Issues: As you know, I’ve been pursuing an effort to eliminate circumstances in which members are denied employment due to a job-related disability and denied a disability retirement due to conflicting rules being applied by SDCERS.
In May 2024, when I made my presentation, the Disability Committee agreed that it would recommend to the SDCERS Board that they send a letter to the Mayor and City Council recommending legislative remedies. Since then, SDCERS staff researched the matter and determined that around 2000 and again in 2012, the SDCERS Board recommended the Mayor and City Council amend the Municipal Code to remedy the matter. In both instances, the City did not take any action as a result of SDCERS’ efforts.
SDCERS staff therefore recommended that this time they initially work with the Risk Management Director and other key personnel to see if the Worker’s Compensation and/or SDCERS’ disability retirement processes can be adjusted to address the matter. Staff hopes to gain the support of City management before approaching the City Council. The following letter to the Risk Management Director was approved by the SDCERS Board in July:
Recently, the SDCERS Board of Administration examined instances where the City of San Diego (City) has determined an injured employee is no longer able to perform their job duties (and cannot be accommodated) but SDCERS determines the employee is not entitled to a disability retirement benefit based on the San Diego Municipal Code requirements. SDCERS is concerned that these employees—especially those that are not eligible to service retire—are left without a job or a retirement benefit.
Per San Diego Municipal Code section 24.0100, the purpose of the City’s defined benefit plan “is to recognize a public obligation to City employees for their long service in public employment by making provision for retirement compensation and death benefits as additional elements of compensation for future services and to provide a means by which City employees who become disabled may be replaced without inflicting hardship on the employees removed.” (italics added.) The current disability retirement statutes have this potential gap, which could create a hardship on the employee.
On behalf of the SDCERS’ Board, I would like to meet with you and other City Officials to discuss how the City’s or SDCERS’ processes or disability retirement statutes can be amended to address this matter. I want to help ensure that disabled employees are provided the best possible outcome after separating from City service. Thank you for your consideration of this matter and I look forward to working with you.
Hopefully we will see progress on this and resolve the issue.
Annual Affidavits: It was discussed at a prior RFPA board meeting that at one point a police officer with an obvious life-long disability was required to complete an annual affidavit testifying to his continuing disability to preserve his benefits. I was also advised that in this person’s case, the issue was resolved. However, the SDCERS policy on this remains and there are no exceptions listed in the policy.
I have approached SDCERS staff to request a modification to the policy whereby a person with a disability from which recovery is impossible, such as an amputated limb, is not required to complete such a form. I’ve been promised this will be taken up when the policy is scheduled for review in early 2025.
Private Equity Investments: Recently a front-page investigative story appeared in the Los Angeles times regarding private equity and investment therein by pension systems, notably SDCERS. You can find it here: https://netorgft2999493-my.sharepoint.com/:b:/g/personal/brewster_lifesaver1_com/EeippxKumE9IrjixghQUYhABGORW1nUDHMboK3ivOoCGfQ?e=EIugML
Private equity consortiums typically buy companies, impose “efficiencies,” and later aim to sell the companies at a profit. There have been many stories written about PE, such as cases where private equity investment groups have bought companies and fired many workers and/or slimmed them down radically, resulting in negative outcomes. Some have bought nursing homes, immediately sold the underlying property, and then rented the land back to the same nursing homes, generating a profit and reducing operation margins, which often results in significantly reduced care to seniors. Some have bought medical providers, with similar outcomes.
One troubling strategy is buying apartment buildings, evicting tenants, making marginal improvements, and then re-renting at significantly higher rates. One result is homelessness. A recent study referenced in Voice of San Diego was entitled: HELTER SHELTER: How Blackstone Contributes To and Profits From California’s Broken Housing System.
That article can be found here: https://netorgft2999493-my.sharepoint.com/:b:/g/personal/brewster_lifesaver1_com/ETTVTXs5qDlJo1nRMMPDJaABl8ShYbgQ2G3xMKfKxJT6wQ?e=OYgE26
Pension systems have been major investors in private equity in hopes of improving return on investment. However, long-term return on investment in private equity is mixed and a recent study found that pension systems which invest in private equity have done no better, and in some cases worse, than in traditional investments.
A separate issue with PE is that the value of an investment is completely unknown until the underlying business or businesses are sold and often this doesn’t take place for many years. Exiting a PE investment early is difficult and costly. Compare this to investing in stocks and bonds, which have an immediate, current value and can typically be traded in seconds.
The question then becomes, should pension systems invest in PE considering potential adverse social outcomes with no clear income advantage and challenges to exiting bad investments?
SDCERS has an investment strategy of investing 5% of it’s approximately $11 billion trust fund in private equity.