City of San Diego Retired Employees Association
September 11, 2018
General Meeting Minutes
The August 2018 Treasurer’s Reports were approved.
Joan McNamara announced the October 10 tour to the Balboa Art Conservation Center.
Mike Bresnahan announced the next two speakers. Jack McGrory will speak in October about SDSU’s option for the stadium. Carl Luna will speak in November about the midterm elections and the political scene. Mike also talked about the Advocacy Committee and our agenda to meet with council members to introduce them to REA.
Margaret K. won the free lunch raffle.
The program included several reports from SDCERS.
Cynthia Queen introduced the speakers from SDCERS. Cynthia mentioned she has been the Member Services Director for 10 years now. She is looking forward to her own retirement and will do everything in her power to protect our pensions. The Pension Fund was started in 1927. She pointed out that SDCERS is respectful of the past and hopeful for the future.
Liza Crisafi, Chief Investment Officer, reported on the performance of the Trust Fund and the state of the U.S. economy.
The Trust Fund had an 8.9% return net of fees for the fiscal year ending June 30, 2018. The return exceeded the benchmark of 7.6%. The fund topped 8 billion dollars. Investments in U.S. stocks gained 16.3% against a benchmark of 14.8%. All SDCERS fund managers outperformed their benchmarks. Small Cap stocks were up 17.6%. Tech stocks were up 24%. Also strong were investments in Private Equity, up 16.5%, and Real Estate, up 11.8%.
This has been the longest Bull Market in U.S. history. Not likely to last forever. The interest rate has been raised seven times in the last two years and the trade situation is volatile. The current tariffs are expected to impact our GDP with a loss of .1 to .3 percent. If an all out trade war happened, there could be a 1 to 3 percent loss.
Right now the U.S. economy is strong. Corporate earnings are up 25%. The Corporate tax rate is down from 35% to 21%. Corporations are seeing strong sales growth. However, she is concerned about interest rates. They could slow the economy. If short term interest rates get higher than long term rates, then there is the potential for a down turn in the overall economy. She is positive for the short term. As to the long term, a correction in the market will come sometime.
She was asked about SDCERS’ real estate holdings. She said they had 19 properties, primarily apartment buildings, office buildings and commercial sites. They are selling off the properties and plan to invest in property funds.
Marcelle Rossman, Deputy CEO, spoke about SDCERS board membership and the challenge with introducing the new health care options.
Two SDCERS board members are termed out in March, including Charles Hoquist. In February, we will get a solicitation for nominations. All will be done online now, but a phone option will be provided. There will be 20 days to nominate and an election in February.
As to retiree health, this was a challenging year. It was the first time in 10 years that there was a change in providers. Many retirees used CareCounsel for advice. They received 1,000 calls last quarter with a greater than 85% satisfaction rate. They provide great service. Their phone number is 888-227- 3334. The phone lines are staffed by nurses and health practitioners.
Gregg Rademacher, CEO, spoke about Prop B.
Gregg gave an overview of Prop B. In general, Prop B ended pensions or defined benefit plans (DBP) for all new city hires, except sworn police officers. New hires now are given a defined
contribution plan (DCP). With a DBP, the risk is on the employer. For a DCP, the risk lies with the employee. Since 2012, most new City employees are on a DCP. There has been a national movement to
move employees to a DCP. In 2000, nearly all state plans were DBP. As of late 2017, 26 state plans are DBP. Only half! In California, SB 1149 proposed that new state employees be given an option of choosing a DBP or DCP. The bill died in committee. The California University system has offered a choice since 2016 (2/3 in DBP, 1/3 in DCP).
He then talked about the California Savers Program for non-governmental employees. Once implemented, businesses will be required to offer employees a retirement savings plan or facilitate access to a state plan. The program is expected to start in 2020 for companies with 100+ employees, 2021 for companies with less than 100 employees and 2022 for small businesses.
He then gave an overview of the Prop B litigation. The latest update being the City’s motion for a rehearing with the California Supreme Court. With all the litigation, there may not be a resolution for many years. SDCERS will keep watching and stay informed as to the Prop B challenge.
He was asked about the 13th check for this year. The final numbers aren’t in yet. The 13th check will be determined at SDCERS’ November 8 board meeting.
He was asked what SDCERS is doing to prepare for Prop B remedies. They have done some scenario testing to see what SDCERS may need to do to comply with possible remedies. They believe they have the resources to respond appropriately. They are reminding the stakeholders that SDCERS is a resource to help them address any Prop B remedies. One problem with doing the Prop B remedy analysis is that the City does not provide information to SDCERS regarding employees not in the pension plan. They don’t know who they are or anything about their salaries.
Marcelle answered the following questions. There was a question about better coordination with the City regarding the introduction of the new health care plans. The City does a RFP for health care every five years. The City keeps SDCERS up to date on the steps being taken, but can’t share everything with SDCERS. As soon as the City was able to disclose the change in providers, they let SDCERS know. 500+ retirees came to the May 30 health care kickoff. On June 22, over 500+ came for questions and answers. There was a concern about information not getting out in a timely manner. SDCERS will look into ways to improve that in the future. There was a question regarding the new provider not matching the old exactly, specifically Part D for retirees. SDCERS indicated that all the plans offered by the City include Part D for drugs. There was no real answer about any disconnect between the old and new plans.
There was a question about what percentage of public pension systems are fully funded in the United States. Marcelle only knew about California. She said only two plans are considered fully funded because the administrations floated pension obligation bonds to make the payments. SDCERS has a goal to be fully funded, but it’s not necessary to maintain a healthy pension system.
The member meeting was adjourned at noon.