ABOUT LACERA

OPERATIONS & OVERSIGHT COMMITTEE MINUTES 8-13-09

PRESENT

• Yves Chery, Chair
• Ed C. Morris, Vice Chair
• Edward L. Blecksmith
• James P. Harris
• Sadonya Antebi, Alternate

BOARD MEMBERS AT LARGE

• Les Robbins
• Simon S. Russin

STAFF, ADVISORS, PARTICIPANTS

• Robert Hill
• James Pu
• Walter Howey
• Robert Whitten
• Justin Stewart

The meeting was called to order by Chairman Chery at 11:20 a.m.

1. APPOINTMENT OF VOTING MEMBER(S) IN THE EVENT ONE OR MORE REGULAR COMMITTEE MEMBERS ARE ABSENT

   All regular members of the Committee were present.

2. APPROVAL OF THE MINUTES OF THE REGULAR MEETING OF JULY 9, 2009

   A motion was made by Mr. Morris seconded by Mr. Harris, to approve the minutes of the regular meeting of July 9, 2009.

   The motion passed unanimously.

3. ACTION ITEMS
   1. Microfiche Media Conversion

      In October, 2008 the Operations Oversight Committee authorized the release of a Request for Quotations (RFQ) from vendors qualified to convert member data in microfiche format to electronic images. Proposals were submitted by six capable vendors with a genuine interest in the project, and staff has selected one from the resulting short list for recommendation to the Committee.

      The proposals were evaluated in two phases. Phase I consisted of weighted ratings against our criteria, which explicitly called for detailed descriptions of a wide range of vendor capabilities, experience, and physical plant characteristics. We also gave the vendors the option of including a second proposal with an alternate approach. Once cost was applied to the technical proposals, the top three ranking proposals were selected for further evaluation.

      Phase II included researching company profiles, reference checks, and site visits. Each vendor was invited to LACERA’s offices to look at actual samples of our fiche and to ask any questions relevant to the project. All three vendors received written answers to all questions, and were given an opportunity to submit a “best and final” price quote. The three finalists were ranked as follows:

      1. National Business Systems, Inc. (NBS)
      2. FNTI
      3. ImageScan

      NBS was the most forthcoming in their technical proposal, and have all of the required controls in place as regards staffing and physical plant. Their best and final quote was also the lowest.

      When we have large projects under consideration, but have not yet determined the complete scope, duration, or approximate cost, we request funding out of contingency. Therefore, our recommendation includes a request for funding out of contingency in an amount not to exceed $775,000, approximately 3% of the $26 million balance remaining in the 2009-2010 budget for contingency funding.

      Recommendation: (1) Recommend the Board of Retirement instruct the Chief Executive Officer to execute an agreement with National Business Systems, Inc. (“NBS”) for conversion of member data in microfiche format to electronic images, at a cost not to exceed $775,000, subject to approval by LACERA Counsel; and (2) Recommend the Board of Retirement approve funding from Contingency.

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

      The motion passed unanimously.

4. FOR INFORMATION
   1. Interest Crediting and the Impact on Member Accounts (oral presentation) Robert Hill

      Board policy is to credit annual interest equal to the actuarial assumed earnings rate. Accordingly, 3.875% interest is credited to member and employer reserves on December 31 and June 30 of each year, provided there is sufficient realized investment income. Historically, LACERA has always had realized earnings, and have therefore always posted an interest credit.

      Interest crediting does not affect members’ retirement allowances, as these are based on final comp, years of service, and age. However, it does impact withdrawals, which are based on accumulated contributions plus interest, the lump-sum cost of certain contracts, and certain death benefits. Financing a purchase can also be impacted. If a member elects to make installment payments, which include interest at the assumed rate, that rate will be the contract rate and will not change based on interest credited. If the assumed rate changes, new contracts would use the newly adopted assumed rate.

   2. Disaster Recovery Exercise Report and Flooding on the 7th Floor in May, 2009 James Pu

      LACERA conducted its annual Disaster Recovery Test in May. Last year the mainframe was restored remotely using a secure network connection across the Internet for the first time, giving us the ability to activate and operate the mainframe without sending staff to a dedicated recovery center. Following that success, new objectives were tested this year:

      • Determine whether IBM staff were capable of restoring our mainframe to full operation with no assistance from LACERA staff
      • Determine whether IBM staff could successfully troubleshoot our DB2 database and resolve problems with no assistance from LACERA staff
      • Establish and test a purely wireless temporary Call Center using wireless computers and cellular phones
      • Access the mainframe using a cellular-based wireless computer

      Overall, the exercise was a big success. The wireless and remote capabilities offer great operational flexibility, while IBM’s ability to restore our mainframe provides a new layer of assurance should our technical staff become unavailable during a disaster.

      On May 20, 2009, while a technician was performing routine cleaning of the air conditioning units cooling LACERA’s technology centers, a high pressure water leak occurred. Water filled the fan room and migrated toward the Data Center housing LACERA’s mainframe. Some flooding also occurred in the employee lunchroom, 7th floor hallways, and the freight elevator. The water also reached the motor control for the 7th floor air conditioning, damaging the control unit, before building staff could shut off the main water supply.

      LACERA and building management staff rallied to prevent water from damaging vital equipment, using fans and other measures to maintain cooling to computer systems in order to delay a potential shutdown from thermal overload. Due to their efforts, a shutdown was unnecessary. Administrative Services, Systems, and building personnel’s quick response to this crisis prevented any loss of service or data.

5. MISCELLANEOUS
6. PUBLIC COMMENT
7. GOOD OF THE ORDER

   (For discussion purposes only)

8. ADJOURNMENT

The Board of Retirement has adopted a policy permitting any member of the Board to attend a standing committee meeting open to the public. In the event five or more members of the Board of Retirement (including members appointed to the Committee) are in attendance, the meeting shall constitute a joint meeting of the Committee and the Board of Retirement. Members of the Board of Retirement who are not members of the Committee may attend and participate in a meeting of a Board Committee but may not vote on any matter discussed at the meeting. The only action the Committee may take at the meeting is approval of a recommendation to take further action at a subsequent meeting of the Board.

Documents distributed to members of the Committee less than 72 hours prior to the meeting will be available for public inspection at LACERA at the time they are distributed to a majority of the Committee, provided the documents are subject to public disclosure and relate to an open session of the Committee. Such documents may be viewed Monday through Friday during normal 9:00 a.m. to 5:00 p.m. business hours. LACERA is located at 300 N. Lake Avenue, Suite 820, Pasadena, California.

Persons requiring an alternative format of this agenda pursuant to Section 202 of the Americans with Disabilities Act of 1990 may request one by calling Cynthia Guider at (626)-564-6000, 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. Assistive Listening Devices are available upon request. American Sign Language (ASL) Interpreters are available with at least three (3) business days notice before the meeting date.

9/10/09