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Education and Travel Policy Update

Education is a necessary component for the ability of LACERA's Boards to fulfill their fiduciary duty to effectively administer and invest the over $56 billion global fund for the benefit of our more than 165,000 members. Trustees are legally required to educate themselves on topics relevant to today's complex public pension environment, including benefits, healthcare, investments, governance, and plan administration. Trustees also travel to connect with state and federal legislators and regulators to advocate on behalf of member interests and to serve in leadership positions in state-wide and national pension organizations. LACERA has a formal Board-approved Education and Travel Policy that sets program guidelines.

As part of the organization's dedication to continued improvement, LACERA has longstanding processes in place to regularly review the education policy and to audit the cost and terms of the policy and the education program. This year, the policy is being updated and, as part of a normal review which began in October 2018, the costs and operations of the program have been audited.

At its July 26, 2019 meeting, the Boards' Joint Organizational Governance Committee (JOGC) voted unanimously to recommend policy revisions to the full Boards for approval at their August meetings. The JOGC recommended targeted changes intended to enhance the program's administrative efficiency and cost-effectiveness, without compromising the trustees' ability to receive their needed education.

The JOGC will meet again on August 14, 2019 to consider additional policy updates.

Updated Information on the LACERA CEO Transition

Dear Members:

Effective June 7, 2019, LACERA’s governing Board of Retirement and Board of lnvestments terminated Lou Lazatin as Chief Executive Officer. While this is a confidential personnel matter about which the organization cannot comment in detail, LACERA’s Boards and staff understand that members care deeply about LACERA and would like additional information. In this spirit, we provide the following background.

The Board of Retirement and Board of Investments each have nine members: four members appointed by the County Board of Supervisors; four members elected by general, safety, and retired County employees; and the County Treasurer and Tax Collector sitting ex officio. The Boards bring a diversity of backgrounds, experiences, and perspectives to all of their decisions, including their action as to Ms. Lazatin.

The Boards and a joint board committee conducted a performance evaluation of Ms. Lazatin in closed session over the course of several meetings spanning four months from February to May 2019, as permitted under California law. Each closed session was duly posted on a public agenda. While LACERA legally cannot comment on the closed session discussions, the Boards decided through the performance evaluation process and lengthy deliberations to dismiss Ms. Lazatin from her position. Ms. Lazatin was an at-will employee under a public written contract. The Boards’ final decision was publicly reported, including the vote of each member. The vote was nearly unanimous, showing a strong consensus among the different groups represented on the Boards. On the Board of Retirement, the vote was 8-1, with all members being present, and on the Board of Investments, the vote was 6-0, with three members absent. The Boards acted properly within the exercise of their fiduciary duty to manage the fund in the best interest of active employees and retirees.

LACERA is a well-run and well-funded pension fund of over $56 billion that pays over $3 billion in benefits each year. The organization is healthy and strong. The fund is managed to ensure its ability to honor benefit commitments into the future and provide outstanding service to its more than 165,000 members. LACERA’s 80.6% funded ratio far exceeds that of most state and local pension funds.

LACERA can assure all LACERA members that the state of LACERA and its over $56 billion fund is sound and that members’ benefits are secure. Our Mission is to produce, protect, and provide the promised pension and retiree healthcare benefits to the many thousands of active and retired employees of the County and participating agencies. LACERA’s Boards and our 430 dedicated employees live the Mission every day and, in doing so, we honor the public service of those who take care of the people of Los Angeles County by making sure we can provide them with a secure and dignified retirement.

LACERA’s Mission is a long-term proposition to provide benefits for generations of County employees, past, present, and future. LACERA’s sound funding and the organization’s passion for member service mean that our members, our plan sponsors, and the public can be secure that the pension promise will continue to be met, just as it has for the past 80 years of our existence.

LACERA will conduct a national recruitment for a new CEO. Details about that process will be available in the near future. In the meantime, the Boards directed that Steven P. Rice, LACERA’s Chief Counsel, assume the duties and responsibilities of Chief Executive Officer. Mr. Rice has many years of California public pension experience and will provide steady leadership for the organization during the search.

Update on the CEO Recruitment, July 9, 2019: The Boards have now started the recruitment process for a new CEO to lead LACERA. The new CEO will be selected by a vote of all members of the Board of Retirement and the Board of Investments. To assist in the selection process, the Board Chairs appointed an ad hoc search committee, following the approach also used in past years. The committee members represent a diverse cross section of the Boards: Alan Bernstein, Gina Zapanta-Murphy, and Les Robbins from the Board of Retirement, and Shawn Kehoe, Wayne Moore, and David Muir from the Board of Investments. Once the committee narrows the field of qualified candidates, all members of the Boards will participate in a thorough interview and evaluation process with all finalists for the position before voting on their final selection.

Watch this space for additional updates as the process moves forward.

Congresswoman Judy Chu Visits LACERA

On Wednesday, July 3, U.S. Representative Judy Chu visited LACERA during a special joint Board meeting. A longtime supporter of many of our issues, Chu represents the 27th District, a highly diverse stretch of San Gabriel Valley communities that is home to LACERA’s headquarters and many of its members and staff.

After thanking LACERA for its advocacy in Washington, D.C., Chu detailed her efforts on retirement and benefits legislation as a member of Congress and the House Ways and Means Committee, which has jurisdiction over Social Security and Medicare, among other federal government programs.

Chu gave an update on HR 141, the current version of the Social Security Fairness Act, which would repeal the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). The WEP and GPO penalize those who have worked in public service by reducing their Social Security benefits. The legislation was reintroduced in the House this year, and is currently with the Subcommittee on Social Security. With Democrats controlling the House agenda and ongoing bipartisan support for the bill, Chu expressed optimism that this time it may be passed.

Chu and the Board members discussed the Affordable Care Act excise tax, which would invoke a 40 percent tax on insurance plans on the amount above a specific threshold. With bipartisan support, the excise tax is currently on hold and will hopefully be eliminated, Chu said.

Another strongly bipartisan bill, the Setting Every Community Up for Retirement Enhancement (SECURE) Act, easily passed the House in May, Chu reported. Expressing her concern that 55 million Americans working in the private sector have no retirement savings at all, the act would incentivize businesses to set up 401(k) programs, among other provisions. Chu said she is hopeful that the bill will be passed soon and signed into law.

Regarding healthcare, Chu is a supporter of early Medicare buy-in for first responders and overall Medicare expansion through lowering the age for eligibility and bringing back the public option. She stated that prescription drug prices need to drop down to the levels seen in other countries, and advised that another bipartisan bill to increase transparency in drug pricing had also recently passed out of the Ways and Means Committee.

She and the Board members discussed numerous other issues, including Chu’s visit to migrant detention facilities on the nation’s border on July 1 as part of a 15-member Democratic delegation. Chu described the conditions as alarming, unsanitary, and crowded, stating that minimum standards should be required for such facilities and reporting that there would be a hearing with the head of Homeland Security the following week. She also addressed the upcoming census and potential loss of $2,000 in federal funding for every person not counted in California; gerrymandering and voting rights; and the problem of college costs and student debt, which is tied into greater societal costs.

At the end of the meeting, Chu thanked the Boards for their wide-ranging questions. “It shows that you are concerned with all Americans: immigrants, workers, and students, and what we all need to succeed and have hope for the future,” she said.

Board of Retirement Schedule Changes

On Wednesday, July 3, the Board of Retirement approved beginning in August, 2019, permanent changes to its meeting schedule. The BOR will now convene its Administrative meeting and Operations and Oversight Committee on the first Wednesday of the month. This first date for these meetings will occur on Wednesday, August 7, 2019. In addition, the Disability meeting and Disability Procedures and Services Committee will now convene on the Thursday following the second Wednesday of the month. The first date for these meeting will be Thursday, August 15, 2019. The Insurance, Benefits and Legislative Committee will meet following the Disability meetings. The Board of Retirement Meeting Schedule has been updated to reflect these changes.

Social Security Eligible Members: Help Repeal the WEP and GPO

If you receive a retirement allowance from LACERA and are also eligible for Social Security benefits, you may be subject to Social Security’s Windfall Elimination Provision (WEP) and Government Pension Offset (GPO), enacted by Congress in 1983 and 1977, respectively.

Take Action

To get in touch with your member of Congress regarding repeal of the WEP/GPO, visit the following links:

Communications toolkits with talking points, information sheets, sample letters, and more are available from organizations with members affected by the WEP and GPO:

The WEP reduces the Social Security benefit for workers who receive a government pension from employment that is not covered by Social Security, while the GPO applies to Social Security dependent benefits that you may receive as a spouse, widow, or widower while you are also receiving a government pension.

On April 11, 2019, the Board of Retirement adopted a “Support” position on the Social Security Fairness Act, with House and Senate versions of the legislation introduced to repeal the WEP and GPO: H.R. 141 by Representative Rodney Davis (Ill.) and S. 521 by Senator Sherrod Brown (Ohio).

To urge your congressional representatives to support these bills, see the Take Action box to access contact information for your representative as well as communications toolkits to help you make your case.

Protecting You From Fraud: We Take It Seriously

Fraud. It’s a small word that represents a big headache for millions of people annually, and it has serious implications for your financial security. Already rampant, fraud is a growing problem: In 2018, reported fraud losses to the Federal Trade Commission increased by $406 million to total $1.48 billion. (Note the word reported in that statistic. Actual losses are likely much higher, as many cases go unreported.) Meanwhile, every advance in technology provides a new way for enterprising thieves to scam unwitting victims.

As part of our mission of protecting your benefits, LACERA is intent on safeguarding your personal information and accounts through comprehensive security measures. Here’s how we do it.

Ongoing Alerts and Fraud Prevention Resources

First, LACERA helps you be on your guard against current, ongoing scams by posting alerts on our website and in our newsletters. Check out our Fraud Alerts page for public service announcements and tips from L.A. County District Attorney’s Office, or look in issues of PostScript and Spotlight.

In addition, there are plentiful local, state, and federal resources to help protect consumers. Check out the following agencies to sign up for alerts, file a complaint, get links to free credit reports, report identity theft, and more.

Internal and External Controls

Behind the scenes, LACERA is also vigilant about keeping your information secure. To protect member information, LACERA’s system security is constantly monitored and engineered with facilities to detect and prevent unauthorized intrusions. My LACERA has enhanced security features to protect members’ identity.

Internal security starts with preventing unauthorized access to LACERA’s offices and computers. Additionally, employees are trained to follow our policies and procedures on handling sensitive and confidential information. These internal and external controls dovetail with regular audits to flag any areas for improvement.

Specialized Teams

Investigative and response teams are also at the ready if problems arise.

LACERA has an internal team dedicated to detecting fraud, anomalies, and irregular activity on member accounts using a variety of factors.

In keeping with industry best practices, LACERA also has a standing team of executive officers and top-level managers that mobilizes to quickly and decisively deal with threats to business operations, which could range from a disaster to a security incident. After any incident, the group institutes lessons learned and appropriate steps to be taken to prevent or minimize impacts from any similar events in the future.

CIO Jonathan Grabel Receives Industry Innovation Award

On December 13, LACERA Chief Investment Officer Jonathan Grabel was honored at the 9th Annual Chief Investment Officer Industry Innovation Awards gala in New York City as the winner of the 2018 Industry Innovation Award in the category Public Defined Benefit Plan Between $15 Billion and $100 Billion. He was selected from a group of distinguished finalists from pension plans across the U.S.

The annual awards ceremony is hosted by the publication and communications firm Chief Investment Officer to “highlight the truly innovative approaches to asset management and asset owning, separating the merely different from the meaningful,” with the goal of changing the way people think about the investment business. Winners are chosen by the CIO editorial team in conjunction with CIOs from some of the country’s most influential companies and organizations.

Grabel’s strategic approach to investing for LACERA over the long-term is featured in this article on the CIO website.

Congratulations and well done, Jon!