City of San Diego Retired Employees Association
September 12, 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 9:35am.
Board Members Present: Mike Bresnahan, Liza Crisafi, Shirley Hall, Joan Hernandez, Brad Jacobsen, Stacey LoMedico, Joan McNamara, Mary Ann Stepnowsky, John Tsiknas, and Dick Wilken
Guests Present: Clay Bingham, Joe Flynn
AGENDA: There were no additions to the agenda.
MINUTES: The minutes of the August 2023 Board meeting were approved.
TREASURER’S REPORT: Liza reported a payment of $2500 to Voice of San Diego, which is half of our $5000 annual commitment.
M/S/C to approve the September Treasurer’s Report
INVESTMENT COMMITTEE REPORT: John reported that the appreciation for the Russell 3000 is 46.54% and for the Money Market it is 7.10%. The value of the Legal Defense fund is $368,581.
RETIREMENT BOARD REPRESENTATIVE’S REPORT: See Chris’ report [attached]
COMMUNICATIONS AND INFORMATION ITEMS:
1) Mike reported that bids for the RFP to transfer administration of retiree healthcare from SDCERS to the City have been received and that the first negotiation meeting will be September 20. Rumor has it that there was only one bidder.
ACTION ITEMS:
1) Liza reported that by selling our Russell 3000 ishares and buying Russell 3000 ETF, we would reduce fees from 0.20% to 0.10%.
M/S/C to approve the sale of our Russell 3000 ishares and to buy Russell 3000 ETF
2) The Nominating Committee is working with Jim Baross to develop a slate of candidates.
3) The Board discussed how to continue Dave’s workload and projects:
- a) Programs for October (SDCERS/PEBA) and November (Carl Luna) are set, although someone needs to contact Luna and inform him of Dave’s passing. Lunch options will probably be Phil’s BBQ and Aladdin.
- b) The Bali Hai has been notified of Dave’s passing. We will have the same menu as last year. The RSVP deadline is December 5 for the December 12 event. It was decided not to have “mixer” games.
- c) Joan Hernandez has worked with the San Diego Food Bank previously and will contact them about the November virtual food drive.
- d) Our support for Voice of San Diego is $5000/year. This will be discussed at the Board Retreat.
- e) The Board agreed that for the most part, the Learn to Swim Program and Read Across America were worthy projects but that extremely labor-intensive. What our future support would look like and whether to outsource will be discussed at the Advocacy Committee and subsequently at the Board Retreat.
4) Earlier in the year, the Board agreed that Dave would be the recipient of our annual service award. It was decided that at the Holiday Party, Dave would be recognized in memoriam but with an upbeat tone. His daughters (who may live out of town) will be invited to attend.
5) The date for the Board Retreat was set for November 17 at Mission Trails Park.
6) The SDPEBA Health Fair will be November 1 from 10:00 to 2:00 at the Balboa Park Club; there will be no virtual event. Liza and Stacey volunteered to staff our table. Mike will contact SDPEBA about food at the event.
It was noted that at last year’s event, the SDCERS informational packets had not yet been received by members and participation was low. Mike will ask SDCERS to send out the material as early as possible to assure greater attendance.
7) Joan Hernandez will find out the status of our REA Board Member badges.
ADVOCACY COMMITTEE REPORT
No report. The next Advocacy Committee meeting will be Thursday September 28 at 9:30am via Zoom.
OTHER COMMITTEE REPORTS
Membership: John reported that we have lost 21 members since February; we are now at 1733, down from 1754.
Newsletter: Deadline for the next issue is September 20 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. The next meeting is September 26.
MEA: No report.
Other Retired Public Employee Associations: No report.
PROGRAMS: All is good for the rest of 2023.
ADJOURNMENT
The meeting was adjourned at 10:45am.
Respectfully submitted,
Brad Jacobsen, Secretary
REA Board Briefing – Chris Brewster September 12, 2023
SDCERS Return on Investment: The SDCERS Board was informed at our September meeting that, for the Fiscal Year 2023, SDCERS’ Total Fund earned a return of 5.2%, an underperformance of 2.3% compared to the 7.6% AVERAGE ANNUAL RETURN policy benchmark. The main detractors from performance over the fiscal year were the private equity and opportunity fund portfolios. Private equity underperformed by 2.9% and the opportunity fund underperformed by 13.9%. SDCERS’s funds are widely diversified, so strong performance in other areas offset these areas.
Triennial Actuarial Update: SDCERS’ actuary conducts an experience study every three years, which was delivered to the Board in September. This takes into account economic assumptions, discount rate, price inflation, wage inflation, cost-of-living increases, demographic assumptions, mortality, retirement rates, termination rates, disability rates, salary merit increase norms, and other issues. This study covered the period from July 1, 2015 through June 30, 2022.
The actuary recommended (and the Board approved): No change to the discount rate: 6.50%; an increase in annual wage inflation to 3.25%; and an assumption that the COLA will average 2% per year for the foreseeable future due to recent inflation, increasing from an assumption of 1.9%.
The bottom line for all this is an approximate $20 million per year increase in actuarially determined costs to be borne by the City and active employees. It should be noted that last year’s annual cost to the City was inflated due to various one-time expenses related to unwinding Proposition B, so it is possible the City’s expense next year will be lower than last. Specifics will be determined in November or January.
City Request to Spread Out Payments: Following SDCERS’ July 14th Board meeting, the City’s Chief Financial Officer requested a meeting with SDCERS staff to discuss SDCERS’ funding policy. In summary, the City requested the SDCERS actuary study a “fresh-start” re-amortization of the City’s $2.8 billion Unfunded Actuarial Liability (UAL) so that all the amortization layers are compressed into one layer with that layer being amortized over a new period of time. The City further requested that the study results be brought before the SDCERS Board so the Board can consider implementing a fresh-start re-amortization for the City’s plan. (The City will pay for the actuary’s work.)
The key to this request is the “new period of time.” Presently, SDCERS expects to return to a 100% funded level (now around 72%) in 2035 or thereabouts. (It was last 100% funded in the late 1990s.) The new period of time would presumably move this date much further down the road, with the City’s short-term annual payments declining substantially, but with the City essentially paying interest on the delayed payments. In this scenario, the achievement of 100% funding might be delayed to 2045, 2050, or later. The specific options and outcomes will be part of the results of the study and any proposal.
I would note that 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”
Lifeguard Nominations to SDCERS Board: The SDCERS Board has long included four active employee reps who have been nominated from Police, Fire, and General (2). Under this system, active lifeguards have not been able to nominate for any of the active employee positions. At my request, this was evaluated by the City Attorney and the SDCERS Board approved a modification which allows lifeguard members of the pension system to nominate for the Fire position.