ABOUT

BOARD OF RETIREMENT MINUTES 6-11-09

PRESENT

• Simon S. Russin, Vice Chair
• Yves Chery, Secretary
• Sadonya Antebi
• Edward L. Blecksmith
• James P. Harris (Alternate Member)
• Ed C. Morris (Alternate Retired)
• Mark J. Saladino

ABSENT

• William de la Garza, Chair
• William R. Pryor
• Les Robbins

STAFF ADVISORS AND PARTICIPANTS

• Gregg Rademacher, Chief Executive Officer
• Robert Hill, Assistant Executive Officer
• Janice Golden, Assistant Executive Officer
• David L. Muir, Chief Counsel
• Christine Roseland, Staff Counsel
• Cynthia Lau, Legislative Affairs Officer
• Robert Proctor, Director, Human Resources
• John Nogales, Senior Human Resources Analyst
• Sharon Norton, Senior Human Resources Analyst

1. CALL TO ORDER

   Vice Chair Russin, presiding in the absence of Chair de la Garza, called the meeting to order at 9:00 a.m., in the Board Room of Gateway Plaza.

2. PLEDGE OF ALLEGIANCE

   Mr. Saladino led the Board Members and staff in reciting the Pledge of Allegiance.

3. BOARD MEMBER ANNOUNCEMENTS (For Information Only)

   Acting Chair Russin announced that Messrs. de la Garza, Pryor and Robbins would not be present at today’s meeting.

4. APPROVAL OF THE MINUTES OF THE SPECIAL MEETING OF MAY 7, 2009

   A motion was made by Mr. Morris, seconded by Mr. Chery, to approve the minutes of the regular meeting of May 7, 2009. The motion passed unanimously.

5. OTHER COMMUNICATIONS

   1. For Information
      1. May 2009 All Stars

         Mr. Hill announced the eight winners for the month of May, (Debbie Juul, Marcos Grajeda, Mary Ortiz, Koreana Wong, Vanessa Rodriguez, Renee Copeland, Jennifer Maxwell, and Elda Villarroel) of the Employee Recognition Program. Karla Sarni was the winner of LACERA’s Web Watcher Award. Katy Tieu, Shari Altmark, Clarence Malone, and Michael Umeda were the winners of LACERA’s RideShare Program.

      2. Service Award

         Mr. Rademacher presented a 30 year service award to Sharon Carter.

      3. Chief Executive Officer’s Report (Memo dated June 3, 2009)

         Mr. Rademacher reported on flooding that occurred during the routine maintenance of LACERA’s data center’s air conditioning system. The vendor performing the service will take responsibility for damages and repair.

         The new State and Federal tax table changes have been implemented with the Federal changes taking effect with the March 31, 2009, retiree payroll. The new state tax withholding tables were implemented in time for the May 29, 2009, retiree payroll.

         Mr. Rademacher reported that a new California Ballot initiative is being circulated for signatures on pension income taxation which would create a surcharge on private and government pension incomes in California.

         Mr. Rademacher announced that Mr. Robert Van Der Volgen has accepted the position of LACERA’s Chief Counsel. Mr. Van Der Volgen will be joining LACERA on August 3, 2009. Mr. Muir will be helping with Mr. Van Der Volgen’s orientation and transition.

6. NON-CONSENT AGENDA
   1. Recommendation as submitted by Gregg Rademacher, Chief Executive Officer: Approve attendance of Board Members, and staff, as designated by the Chief Executive Officer, at the 19th Annual Public Retirement Northern California Seminar; and approve reimbursement of all travel costs incurred in accordance with LACERA’s Education and Travel Policy. (Memo dated June 4, 2009.)

      A motion was made by Mr. Morris, seconded by Mr. Saladino, to approve the recommendation. The motion passed unanimously.

   2. Recommendation as submitted by Gregg Rademacher, Chief Executive Officer: Approve attendance of Board Members, and staff as designated by the Chief Executive Officer, at IFEBP’s Trustees and Administrators Institutes Conference; and approve reimbursement of all travel costs incurred in accordance with LACERA’s Education and Travel Policy. Placed on the agenda at the request of Mr. Chery. (Memo dated June 4, 2009.)

      A motion was made by Mr. Morris, seconded by Mr. Harris, to approve the recommendation.

      The motion passed unanimously.

   3. Adoption of the LACERA Fiscal Year 2009-2010 Administrative and Retiree Health Care Benefits Budgets.(Memo dated May 26, 2009)

      Mr. Rademacher thanked the Board for attending the April 30 and May 6, 2009 budget hearings. Minutes of both budget hearing dates were distributed to the Board Members. Mr. Rademacher thanked Shamila Alam, Kaelyn Ung, and Judith Chadderdon, LACERA’s budget team, for their hard work and dedication in putting together the Budgets. Additionally, Mr. Rademacher recognized and thanked LACERA’s Communications and Management Team for all their help and input. Mr. Rademacher presented an executive summary of the presentations made during the budget hearings. There were no changes made to the spending plan as a result of the budget hearings. A brief discussion followed with the following motion being made:

      A motion was made by Mr. Chery, seconded by Mr. Morris, to approve the adoption of the LACERA Fiscal Year 2009-2010 Administrative and Retiree Health Care Benefits Budgets.

      The motion passed unanimously.

   4. Recommendation as submitted by Christine Roseland, Staff Counsel regarding: Amendment to Bylaws, Attendance at Committee Meetings by Non-Committee Members. (Memo dated June 2, 2009.)

      Mr. Muir addressed the Board noting that Ms. Roseland is the attorney in the Legal Office assigned responsibility for the Retiree Health Care Program. Ms. Roseland is also responsible for Ralph M. Brown Act compliance in general. In order to provide clarity and to assure continued compliance with the Ralph M. Brown Act, the Legal Office is recommending that provisions in the Board’s By-Laws related to committee meetings be amended.

      Retirement Board committee meetings are agendized as joint meetings of the Committee and the Board. This allows members of the Board who are not appointed to the committee to attend and to participate in deliberations. Only those individuals who are appointed to the committee are permitted to vote on action items. The Legal Office is recommending that the Board’s By-Laws be amended to assure that the public understands LACERA’s process and has the opportunity to comment on all items that come before the committees and the Board. The Legal Office is recommending that committee agendas include a notice that any action taken at the joint meeting will be taken solely by the committee, that Board Members in attendance who are not voting members of the committee will not be entitled to vote (although they will be allowed to participate in deliberations), and that any action taken by the committee shall be in the form of a recommendation to the full Board. The Legal Office is also recommending that the Board’s By-Laws be amended to document these procedures. The proposed By-Law amendments are set forth in Attachment No. 1 to the Legal Office memorandum. After a brief discussion the following motion was made:

      A motion was made by Mr. Chery, seconded by Mr. Morris, to approve the recommendation.

      The motion passed unanimously.

   5. Recommendation as submitted by William de la Garza, Chair, Insurance, Benefits and Legislative Committee: That the Board adopt a “watch” position on AB 1355, which would cross-reference an alternative method of calculating survivor’s allowances. (Memo dated May 21, 2009.)

      AB 1355

      The bill, sponsored by SACRS, would make technical corrections to Government Code sections 31855.5, 31855.6, 31855.7, and 31855.9 to appropriately cross-reference an alternative method of calculating survivor's allowances.

      These amended sections are not applicable to LACERA.

      A motion was made by Mr. Morris, seconded by Mr. Chery, to adopt a “watch” position on AB 1355.

      The motion passed unanimously.

   6. Recommendation as submitted by William de la Garza, Chair, Insurance, Benefits and Legislative Committee: That the Board adopt a “watch” position on SB 711, regarding labor negotiations and the Brown Act. (Memo dated May 21, 2009.)

      SB 711

      The Ralph M. Brown Act requires the meetings of local governments’ legislative bodies to be “open and public”, with specified exceptions. Some exceptions include discussions with legal counsel on pending litigation, threats to public buildings or access to public services, public employee personnel issues, and conferences with the body’s representatives on labor negotiations.

      Senate Bill 711 is sponsored by the California Newspaper Publishers Association and addresses the Act with respect to labor negotiations.

      Closed Sessions Regarding Labor Negotiations

      The bill would require a local legislative body, in an open session before the closed session, to:

      1. Identify, orally or as part of the meeting agenda, the agency’s designated representatives, the employee or class of employees that are the subject of the negotiations, and the representatives of the employees.

      2. Provide an oral report by the agency’s designated representative on the current status of the negotiations.

      The bill also prohibits a closed session from including any final action, regardless of whether it relates to represented or unrepresented employees. Additionally, final action cannot take place on any proposal until a reasonable time has elapsed after disclosure of the proposal to enable the public to become informed and until the public has the opportunity to express itself regarding the proposal at a meeting of the legislative body.

      Agenda Requirements

      The Legislature established a model format for closed session agenda item descriptions. Use of the model format is voluntary, however, compliance with the model format assures the legislative body that it will not be found in violation of the Brown Act’s closed session agenda requirements.

      SB 711 amends the model agenda format to further include the employee or class of employees that are the subject of the negotiations, the representative of the employees, and the oral report by the agency’s designated representative on the current status of the negotiations. Conclusion Supporters of the bill are seeking more transparency in labor negotiations and point out that under the Rodda Act, which governs school districts’ labor negotiations, the public has the opportunity to scrutinize and comment on labor agreements before school officials give any agreement their final approval. On the other hand, the California State Association of Counties (CSAC) states that “successful negotiations depend upon meaningful discussions at the bargaining table. Under no circumstances should closed sessions of the Board of Supervisors and its designated management representatives be required to be open to the public.”

      A motion was made by Mr. Harris, seconded by Mr. Morris, to adopt a “watch” position on SB 711.

      The motion passed unanimously.

   7. Recommendation as submitted by William de la Garza, Chair, Insurance, Benefits and Legislative Committee: That the Board adopt a “watch” position on SB 414, relating to the process of filling of vacancies on boards. (Memo dated May 21, 2009.)

      SB 414

      The bill is sponsored by the California Retired County Employees Association (CRCEA) and addresses the process for filling vacancies on boards of retirement and boards of investments in counties operating retirement systems under CERL.

      This bill is similar to AB 2526 from the 2007-2008 legislative session. The bill passed the Assembly, but failed to get out of the Senate Committee on Public Employees and Retirement. Senator Ashburn objected to the provisions in AB 2526 mandating prompt action by a board of supervisors. These provisions have not been included in SB 414.

      Specifically, SB 414 does the following:

      1. Renames the “alternate member” to “alternate seventh member” on the Board of Retirement.

      2. Deletes dates no longer pertinent related to the Board of Investments.

      3. Deletes the authority of a Board of Retirement to prohibit by resolution or regulation an alternate retired member’s ability to participate in the deliberations of the board or its committees. This does not affect LACERA since its Bylaws provide for the participation of the alternate retired member in deliberations of the Board and eligibility to serve as a member of Board committees to the same extent as other Board members.

      4. Provides in event of a vacancy for elected members, an election shall be held and if the vacancy is for six months or less on the date of the election, concurrent elections may be held to fill the vacancy for the remainder of the current term and to fill the position for the succeeding term, with the exception of the seventh member or alternate seventh member of the Board of Retirement.

      With respect to a vacancy of the seventh member or alternate seventh member, the successful candidate shall serve only for the duration of the current term.

      Provides that if there is a vacancy of the eighth member of the Board of Retirement, the alternate retired member shall fill the vacancy for the remainder of the eighth member’s term of office. Previously, the alternate retired member would fill the vacancy until a successor qualifies.

      Provides that if there is a vacancy with respect to the alternate retired member, the Board of Retirement shall appoint a replacement alternate member who shall serve until the expiration of the current term of the current eighth member.

      The bill is not in final form. CRCEA planned to provide amendments to the current version, but reported that the bill is on hold for now. It is recommended that your Board adopt a “Watch” position, pending further amendments.

      A motion was made by Mr. Chery, seconded by Mr. Morris, to adopt a “watch” position on SB 414.

      The motion passed with Ms. Antebi voting no.

   8. Recommendation as submitted by William de la Garza, Chair, Insurance, Benefits and Legislative Committee: That the Board adopt a “watch” position on AB 850, regarding prosecution for conspiracy in use of public funds. (Memo dated May 21, 2009.)

      AB 850

      Under current law, members of the Legislature and State, county, district and city officers or employees are prohibited from being financially interested in any contract made by them in their official capacity, or by any body or board by which they are members.

      Assembly Bill 850 amends Government Code Section 1090 to additionally prohibit a person from knowingly inducing another to, or participating in the commission of, a violation of the existing prohibition, or conspiring in a violation of the existing prohibition.

      The author references a case in which, in exchange for bribes, Michael Klistoff Jr. and his waste hauling company, All City Services, received millions of dollars in city contracts from former South Gate Treasurer Albert Robles. Mr. Robles received a 10-year prison term, however, Klistoff only received a 6-month sentence for mail fraud and imparting bribes. The court cited the current statute’s failure to provide the state with a remedy for third party violations of Government Code Section 1090 as a reason for their inability to impose a penalty for such actions.

      The author further states that this bill protects the expenditure of public money by “eliminating temptation, avoiding the appearance of impropriety, and assuring the public entity of the official’s undivided and uncompromised allegiance by holding all parties accountable for corrupt actions.”

      Current Status of Bill

      The Assembly Appropriations Committee placed AB 850 in the Suspense File on May 20, 2009. This is typically done when a bill meets a threshold cost of $150 K or more. Appropriations staff estimated AB 850 would cost the state $160 K annually, assuming four additional persons were incarcerated in state prison due to the change in the law.

      A motion was made by Mr. Morris, seconded by Mr. Harris, to adopt a “watch” position on AB 850.

      The motion passed unanimously.

   9. Recommendation as submitted by Cynthia Lau, Legislative Affairs Officer: That the Board adopt a “watch” position on AB 1406, relating to additional “at will” employees of San Bernardino CERA. (Memo dated May 26, 2009.)

      AB 1406

      The Insurance, Benefits and Legislative Committee recommended a “Watch” position on Assembly Bill 1406 which would extend the authority of retirement boards of San Bernardino and Orange counties to include additional personnel outside the civil service system.

      The bill was subsequently amended on May 7, 2009, to enact similar provisions applicable only to the board of retirement in San Bernardino County, upon adoption by resolution.

      A motion was made by Mr. Saladino, seconded by Ms. Antebi, to adopt a “watch” position on AB 1406.

      The motion passed with Mr. Chery abstaining and Acting Chair Russin voting no.

   10. Report from David L. Muir, Chief Counsel on Pensionable Treatment of Flexible Benefit and Megaflex Contributions. (Memo dated June 2, 2009.)

       Mr. Muir provided a history of pensionable treatment of flexible benefit and megaflex contributions. The original flexible benefit program allowed a participant to receive the entire County contribution as taxable cash in lieu of using the funds to purchase benefits. The County Counsel advised that because of this feature, the entire County contribution should be treated as pensionable income.

       A lawsuit by the Howard Jarvis Taxpayers Association and the Los Angeles Taxpayers Association that sought to exclude the flex contribution from pensionable income failed. However, political pressure over the issue caused the Board of Supervisors to cap the amount of taxable cash to the amount of the County contribution as of December, 1994. Future pay increases still increased the amount of the contribution, however, the increase had to be spent on benefits or forfeited. As a result, future increases in the flexible benefit contribution resulting from salary increases were not pensionable. New employees on and after January 1, 1995, were limited to $244 taxable cash. Existing employees remained capped at the December, 1994 level.

       Effective January 1, 1996, new employees had to enroll in the nonpensionable Mega Flex Program.

       In 1993, the Los Angeles County Board of Supervisors sponsored legislation allowing flex contributions and certain other allowances to be nonpensionable. The reason was to allow employees to take the flex contributions as taxable cash without increasing pension benefits.

       In 1994 Los Angeles County sponsored legislation to add subdivision (d) to allow the Board of Supervisors to implement section 31461.1 “with respect to any member not represented by a certified employee organization who makes an irrevocable election” to exclude flexible benefit contributions from pensionable income. Approximately 1,700 employees made this irrevocable election.

       In 1999, the County sponsored AB 288 to provide that any increase in flexible benefit plan contributions made after January 1, 1995 for a non-represented employee would be non-pensionable if the employee waived the right to have it pensionable before receiving any cash payment. There was no provision allowing those who previously made the “irrevocable election” to rescind that election. As to the approximately 1,700 employees who waived the right to have contributions treated as pensionable, Mr. Muir concluded that LACERA’s procedures for collecting contributions and calculating final compensation are correct.

7. PUBLIC COMMENT

   Board Members individually congratulated Mr. Muir on his upcoming retirement and thanked him for all his years of service to LACERA.

8. GOOD OF THE ORDER (For discussion purposes only.)
9. EXECUTIVE SESSION
   1. CONFERENCE WITH LABOR NEGOTIATORS (Government Code Section 54957.6)
      • Agency designated representatives:
        • Gregg Rademacher, Chief Executive Officer
        • Janice Golden, Assistant Executive Officer
        • Robert Hill, Assistant Executive Officer
        • Robert Proctor, Director of Human Resources
        • David Muir, Chief Counsel
        • Sharon Norton, Senior Human Resources Analyst
        • John Nogales, Senior Human Resources Analyst
      • Employee organization:
        • Service Employees International Union (SEIU), Local 721

      The Board met in Executive Session pursuant to Government Code Section 54957.6 to discuss labor negotiations with Service Employees International Union (SEIU), Local 721.

      The Board reconvened in open session, at which time Mr. Rademacher said there were no matters to report out.

   
   Green Folder Information

   (Information distributed in each Board Member’s Green Folder at the beginning of the meeting.)

   1. LACERA Legislative Report –Bills Amending CERL. (Dated June 10, 2009)

   2. LACERA Legislative Report – Other.(Dated June 10, 2009)

   3. LACERA Legislative Report – PERS/STRS Bills.(Dated June 10, 2009)

   4. Memo from Gregg Rademacher, Chief Executive Officer regarding:Successful Search For Chief Counsel. (Memo dated June 8, 2009)

   5. 2009/2010 Health Care Coverage Welcome Brochure (6/2009)

   
   Informational Items

   Distributed Along With the Board Agenda.

   1. Memo dated June 3, 2009, from Richard Bendall, Chief Internal Auditor, and Ted Granger, Senior Internal Auditor regarding: Fiduciary Review by Ennis Knupp & Associates – 2009 “Supplemental” Report.

10. ADJOURNMENT

Documents subject to public disclosure that relate to an agenda item for an open session of the Board of Investments that are distributed to members of the Board of Investments less than 72 hours prior to the meeting will be available for public inspection at the time they are distributed to a majority of the Board of Investments Members at LACERA’s offices at 300 N. Lake Avenue, Suite 820, Pasadena, CA 91101, during normal business hours of 9:00 a.m. to 5:00 p.m. Monday through Friday.

Listening Devices are available at days notice before the meeting date. Persons requiring an alternative format of this public notice pursuant to Section 202 of the Americans with Disabilities Act of 1990 may request one by contacting Cynthia Guider at (626) 564-6000, x3327 from 8:30 a.m. to 5:00 p.m. Monday through Friday, but no later than 48 hours prior to the time the meeting is to commence.

7/13/09