Fresno County Board of Retirement s4

BOARD OF RETIREMENT FRESNO COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION

December 2, 2009

Trustees Present:

Alan Cade, Jr. Michael Cardenas Nick Cornacchia Eulalio Gomez James Hackett Steven Jolly Phil Larson John Souza

Trustees Absent:

Vicki Crow

Others Present:

Ronald S. Frye, Alternate Trustee Michael Cunningham, FCERA Member Jeffrey MacLean, Wurts & Associates Attorney Jeffrey Rieger, Reed Smith ~ via tele-conference Rick Ballantyne, Local Agency Formation Commission Steve Sanchez, Fresno Madera Area Agency on Aging Rob Rossetti, Attorney for Fresno Madera Area Agency on Aging Susan Coberly, Senior Deputy County Counsel Roberto L. Peña, Retirement Administrator Becky Van Wyk, Assistant Retirement Administrator Elizabeth Avalos, Administrative Secretary

1. Call to Order

Chair Cade called the meeting to order at 8:39 AM.

2. Pledge of Allegiance

Recited.

3. Public Presentations

Consent Agenda/Opportunity for Public Comment

Trustee Cornacchia pulled Consent Agenda Item 9 for discussion.

Roberto L. Peña pulled Consent Agenda Item 15.

A motion was made by Trustee Souza, seconded by Vice Chair Gomez, to Approve Consent Agenda Items 4-8, 10-14 and 16 and 17. VOTE: Unanimous (Absent – Crow, Jolly, Larson) 12/02/09 Regular Meeting Minutes 2

*4. Approve the November 4, 2009 Retirement Board Regular Meeting Minutes

RECEIVED AND FILED; APPROVED

*5. Retirements

Joel S. Acosta Sheriff 1.96 Larry R. Allred Public Works & Plan, Deferred 0.48 Pamela M. Couto Public Works & Plan, Deferred 13.39 Isabel Good Community Health 31.43 Peter L. Kemp Behavioral Health 15.10 Patrick C. Kertzman Children & Family Services 29.06 Roger McCoy ACTTC, Deferred 10.03 Thomas C. Nyberg Agriculture 32.94 Dennis A. Peterson District Attorney 25.44 Linda P. Reed Superior Court 34.64 Alfred Robinson VMC, Deferred 9.85 Ovonder Tatum Community Health 30.17

*6. Disability Retirements

Lorraine Luna Superior Court 10.58 Roscoe A. Sharpe, Jr. Sheriff 16.46

*7. Deferred Retirements

Katherine Boyden Probation 6.64 Bianca F. Contreras ACTTC 9.99 Barbara Edmonston Children & Family Services 23.26 Sharon A. Glover Children & Family Services 7.77 Jacqueline Heffron Superior Court 11.54 Joanne Madril Coroner Public Admn/Guardian 14.52

*8. Summary of monthly statistics from the Retirement Association Office on buybacks, retirement benefit estimates, public service, age adjustments, final compensation calculations, and disability retirement applications for October 2009

RECEIVED AND FILED

Trustee Jolly joined the Board at 8:43 AM. 12/02/09 Regular Meeting Minutes 3

*9. Public Records Requests and/or Retirement Related Correspondence from Roger Greening, FCERA Member; Joshua Fredlund, Thomson Reuters; Paul Dictos, Paul Dictos Accountancy Corporation; Andrew Zaytsev, CFA; Ruben Coronado, Deputy Real Estate Commissioner; Dale Wong-Nguyen, LACERS; and Tanya Cam, County of Madera

Roberto L. Peña, Retirement Administrator, responded to a question from Trustee Cornacchia regarding the request from Paul Dictos as to whether FCERA has complied with the tax laws.

A motion was made by Trustee Souza, seconded by Vice Chair Gomez, to Receive and File Consent Agenda Item 9 as presented. VOTE: Unanimous (Absent – Crow, Larson)

RECEIVED AND FILED

*10. Update of Board of Retirement directives to FCERA Administration

RECEIVED AND FILED

*11. Most recent investment returns, performance summaries and general investment information from investment managers

RECEIVED AND FILED

*12. Board Communications

RECEIVED AND FILED

*13. Reports from Trustee Cardenas and Cornacchia on the Pension & Investment Defined Contribution Conference

RECEIVED AND FILED

*14. Report from Roberto L. Peña, Retirement Administrator, on attendance at the SACRS Fall Conference 2009

RECEIVED AND FILED

*15. Approve FCERA temporary office closure on Friday, December 18, 2009 from 3:00 PM to 5:00 PM for staff holiday function

Roberto L. Peña, Retirement Administrator, pulled Consent Agenda Item 15 noting that the item need not be considered by the Board because the FCERA office will not be closing on December 18, 2009.

NO ACTION TAKEN

*16. Approve recommended Board of Retirement Regular Meeting Schedule for Calendar Year 2010

RECEIVED AND FILED; APPROVED 12/02/09 Regular Meeting Minutes 4

*17. Approve Third Amended and Restated Employment Agreement with Retirement Administrator

18. Discussion and appropriate action on Brandywine transition to State Street Global Advisors Russell 2000 Value Index Fund presented by Jeffrey MacLean, Wurts & Associates

Jeffrey MacLean, Wurts & Associates, began the discussion with an update on the timeline and costs of the Brandywine transition to the State Street Global Advisors (SSGA) Russell 2000 Value Fund Index noting that the cost of the transition was approximately $546,000 (54 basis points).

Mr. MacLean, reviewed in detail, the total costs of the transition which included commissions, bid ask spread, market impact, and opportunity costs.

Trustee Larson joined the Board at 8:55 AM.

A motion was made by Trustee Jolly, seconded by Vice Chair Gomez, to Accept Agenda Item 18 as presented. VOTE: Unanimous (Abstain – Larson) (Absent – Crow)

19. Discussion and appropriate action on recommendation to place INTECH Investment Management on “watch” status presented by Jeffrey MacLean, Wurts & Associates

Roberto L. Peña, Retirement Administrator, opened discussions by clarifying that Administration and Jeffrey MacLean, Wurts & Associates (Wurts), initially proposed a recommendation to place INTECH Investment Management (INTECH) on watch. However, after further consideration it was determined that a recommendation to terminate INTECH is appropriate at this time.

Mr. MacLean stated that Wurts has become increasingly concerned regarding several issues at INTECH. The concerns include numerous senior level departures and continued performance issues in their Enhanced Plus and Broad Large Cap Growth strategies. In light of factors impacting quantitative strategies as well as issues specific to INTECH, Mr. MacLean recommended termination of all strategies (under INTECH) and move the assets into the Russell 1000 Growth Index Fund until an active manager can be identified to replace them.

In response to a question from Trustee Larson regarding the cost, if any, to transition the assets, Mr. MacLean noted that the cost will be approximately 20-25 basis points.

Trustee Jolly noted that underperformance from quantitative strategies is expected due to the current market conditions and, in order to save the costs of transition fees, suggested placing INTECH on watch until a search for new active management can be finalized.

12/02/09 Regular Meeting Minutes 5 In response to a question from Trustee Larson regarding the cost, if any, to transition the assets, Mr. MacLean noted that the costs are approximately 20-25 basis points.

Mr. MacLean responded to general comments regarding INTECH’s underperformance and noted that the recommendation to terminate is based not only on performance but personnel departures as well. Discussions ensued.

A motion was made by Trustee Jolly, seconded by Trustee Hackett, to place INTECH on watch status and to direct Wurts to begin a search for a replacement. VOTE: Unanimous (Absent – Crow)

20. Presentation of the September 30, 2009 Investment Performance Review presented by Jeffrey MacLean, Wurts & Associates

Jeffrey MacLean, Wurts & Associates, reviewed the current economic environment noting that there is tremendous political attention being paid to reinvigorating the economy, not to mention trillions in stimulus in one form or another. Therefore, a resumption of economic growth does not really seem to be in question. However, the questions of the pace of growth and resulting inflation are of primary concern.

Wurts believes tremendous value can be added through rational and disciplined asset allocation decisions. As such, Wurts continuously monitors key macroeconomic factors and valuations in equity and credit markets to identify strategic asset allocation opportunities. Mr. MacLean reminded the Board that markets are proven to be random and inefficient over the short term, but are efficient over the long term. Furthermore, markets tend to be short sighted in nature, which only works to the advantage of long term focused investors.

Mr. MacLean reviewed the quarterly investment performance as of September 30, 2009 noting that the total fund returned 11.7% in the third quarter, ranking in the 36th percentile.

Trustee Jolly departed at 10:35 AM.

Mr. MacLean reviewed the various investment manager asset classes noting any significant earnings or losses. It was noted that the Plan’s market value as of the end of September 2009 is $2.5 billion.

A motion was made by Trustee Souza, seconded by Vice Chair Gomez to Accept Agenda Item 20 as presented. VOTE: Unanimous (Absent – Crow, Jolly)

21. Presentation of the September 30, 2009 Guideline Compliance Report presented by Jeffrey MacLean, Wurts & Associates

Jeffrey MacLean, Wurts & Associates, had no violations to report.

A motion was made by Trustee Larson, seconded by Vice Chair Gomez, to Accept Agenda Item 21 as presented. VOTE: Unanimous (Absent – Crow, Jolly) 12/02/09 Regular Meeting Minutes 6

22. Discussion and appropriate action on the costs to administer the retirement plan for the Special Districts

Roberto L. Peña, Retirement Administrator, opened discussions by reminding the Board of its request that Administration calculate the costs to administer the special districts. Administration identified one task where processing differs between the special districts and the County of Fresno. Retirement contributions for the special districts are manually reviewed, balanced, posted to the Pension Administration System and deposited with the County; while the County’s contributions are balanced and posted via an interface between their payroll system and FCERA’s Pension Administration System. Thus, once the programming and rates are reviewed and approved for the County, the flow of information requires little staff time.

An analysis of the time required to review, balance and post member contributions to the Pensions Administration System and deposit the checks into the County Treasury disclosed that it costs between $723 and $2,917 annually, depending on the number of employees and annual pay cycles (e.g., 12 monthly, 24 semi-monthly, or 26 bi-weekly) involved. Discussions ensued.

RECEIVED AND FILED

23. Discussion and appropriate action on Local Agency Formation Commission’s (LAFCO) request to join the FCERA as a separate participating employer presented by Roberto L. Peña, Retirement Administrator

Roberto L. Peña, Retirement Administrator, opened discussions by reminding the Board of its request that Administration work with Counsel on drafting an agreement with the Local Agency Formation Commission (LAFCO) for its participation in FCERA.

Attorney Jeffrey Rieger, Reed Smith, via tele-conference, gave a brief overview of LAFCO’s request and the process of drafting the participation agreement. Mr. Rieger requested the Board’s input and comments. General discussions ensued.

In response to a question from Trustee Cornacchia regarding assuming any liabilities, Attorney Rieger noted that the Plan will have the liabilities associated with the benefits for the members while LAFCO will assume funding the liabilities.

Rick Ballantyne, LAFCO Executive Officer, reviewed the timeline for completing the agreement and transition process should the Board of Retirement approve LAFCO’s participation in FCERA. Mr. Ballantyne reported that the Board of Supervisors continued the discussion to a later date, but the agreement does include language regarding a later implementation date.

Attorney Rieger assured the Board that no action is required by the Board today. The purpose of this presentation is to provide the Board with information and a chance to comment.

12/02/09 Regular Meeting Minutes 7 Mr. Peña noted that he expects the final agreement to be presented for the Board’s consideration at the December 16, 2009 Regular Board Meeting.

In response to a question from Vice Chair Gomez regarding the possible termination of LAFCO at a later date, Attorney Rieger noted that the terms of the agreement articulate what is allowable under the law and stated that FCERA will enforce the law. Termination is discussed in paragraphs 6 and 7 of the agreement.

RECEIVED AND FILED

24. Discussion and appropriate action on which of the earn codes used by the Fresno Madera Area Agency on Aging (FMAAA) should be included in the “final compensation” of FMAAA’s employees

Becky Van Wyk, Assistant Retirement Administrator, opened discussions by reminding the Board that Government Code §31461 places the responsibility for determining the composition of compensation earnable with the Board of Retirement (BOR). Compensation earnable is the basis for determining the amount of retirement contributions due from both the employee and employer and is the basis of determining the final compensation that is used to calculate retirement benefits. The Board has adopted pensionable earn code resolutions for the County of Fresno and North Central Fire Protection District.

Recently, the governing board of the Fresno Madera Area Agency on Aging (FMAAA) adopted a new pay code. Thus, Administration felt it would be a good time to present all pay codes used by FMAAA to the Board for approval. As required by GC §31461 the Board of Retirement is responsible for determining the components of compensation earnable and the Board must approve the inclusion of the pay codes.

Attorney Jeffrey Rieger, Reed Smith, has reviewed the pay codes and prepared the resolution for the Board’s consideration, which ratifies the classification of all pay codes in existence since FMAAA joined FCERA on April 1, 1998.

Since the pay codes are used in a similar fashion to those used by the County of Fresno in their calculation of compensation earnable, Ms. Van Wyk recommended that the Board approve the resolution to include the pay codes defined as compensation earnable with an effective date April 1, 1998 for pay codes numbered 01 through 04 and 06 through 21 and an effective date of September 18, 2009 for pay code 05 – vacation payoff.

In response to a question from Trustee Souza regarding pay code 05 (vacation payoff), Ms. Van Wyk clarified that an FMAAA employee is allowed to cash out 200 hours of vacation pay once every 5 years. Attorney Jeffrey Rieger, Reed Smith, stated that the law requires that the vacation payoff included in final compensation is limited to the amount of vacation “earned” and paid out during the final compensation period. Trustee Souza expressed concern at the disparity between FMAAA and County employees who may have no opportunity to cash out vacation or are limited to 80 hours.

12/02/09 Regular Meeting Minutes 8

Detailed discussions ensued regarding vacation payoff limits to prevent potential “spiking” and increased liabilities for the Plan. Ms. Van Wyk asked counsel for clarification of the Board’s ability to limit the number of hours of vacation payoff included in final compensation. Attorney Rieger noted that the Board’s responsibility is to determine whether the pay code meets the requirements of the law for inclusion in compensation earnable and that the employer has the authority to establish its own compensation policies. Attorney Rieger noted that Board does have the authority to determine if an employer’s compensation policies create additional cost to the system and charge that employer more in order to prevent one employer from spreading its cost to the other employers.

Attorney Rieger clarified that including a vacation payoff is not unlawful and should not be considered “spiking”.

In response to a question from Trustee Souza regarding FMAAA funding, Steve Sanchez, Deputy Director FMAAA, stated that FMAAA receives Title 3 monies, federal and state grants, as well as funding from Fresno and Madera counties. Mr. Sanchez is unclear which monies fund the salaries.

For the record, Trustee Souza clarified that this Board is not allowing the cash out of one year of vacation; it is the responsibility of the employer to determine whether employees are allowed to “cash-out” vacation pay. Trustee Gomez asked for clarification of the District’s vacation usage policy. Hours in excess of the maximum accumulation are recorded as sick leave.

Trustee Souza recommended that the County of Fresno look into this issue as it will cause ill feelings with County of Fresno employees.

Ms. Van Wyk recommended that the Board accept the FMAAA draft resolution and pay codes as presented and noted that the final resolution and pay codes would be include on the agenda for December 16, 2009.

Roberto L. Peña, Retirement Administrator, suggested that Administration draft special district policies for the Board’s consideration next year. The Board agreed. Chair Cade requested that staff review the impact on employer contributions based on the additional costs that can be attributed to the vacation buyoff of this district. Mr. Peña clarified that staff is unable to do this, but could bring back draft policies that will address these types of issues.

Trustee Souza asked for clarification that contributions are taken from the vacation payoff.

A motion was made by Trustee Cade, seconded by Trustee Hackett, to Approve the draft resolution and earn [pay] codes proposed by FMAAA as presented. VOTE: Yes – Cade, Gomez, Hackett, Larson. No – Cardenas, Cornacchia, Souza. (Absent – Jolly, Crow)

12/02/09 Regular Meeting Minutes 9 Board directed staff to draft policies on the administration of the special districts with emphasis on the special district’s responsibility to bear the cost of any incremental costs associated with their compensation policies.

Roberto L. Peña, Retirement Administrator, pulled Closed Session Agenda Items 25.B. and 25.C.1 as there was nothing to discuss.

25. Closed Session:

A. Conference with Legal Counsel – Actual Litigation - pursuant to G.C. §54956.9(a)

1. Fresno County Employees’ Retirement Association v. Public Pension Professionals 2. Marsha Stillman v. Fresno County Employees’ Retirement Association

B. Conference with Legal Counsel – Initiation of Litigation – pursuant to G.C. §54956.9(c) - one matter

C. Conference with Real Property Negotiators – pursuant to G.C. §54956.8

1. Property: 1713 Tulare Street, Fresno, CA 93721 Agency Negotiators: Brian Decker of Colliers Tingey

D. Disability Retirement Applications – Personnel Exception (G.C. §54957):

1. Earl Richardson 2. David Hamman

26. Report from Closed Session

25.A.1. Nothing to Report 25.A.2. Nothing to Report 25.B. Pulled 25.C.1. Pulled 25.D.1. Earl Richardson – Decision – to grant Earl Richardson service connected disability benefits based on the Findings of Fact and Decision. M – Souza. S – Gomez. VOTE: Unanimous. (Absent – Crow, Jolly) 25.D.2. David Hamman – Decision – to not require the member to undergo an examination by an independent medical examiner. M – Larson. S – Souza. VOTE: Unanimous (Absent – Crow, Jolly)

27. Report from FCERA Administration

Roberto L. Peña, Retirement Administrator, reported on the following:

12/02/09 Regular Meeting Minutes 10 1. The annual audit and actuarial valuation presentations are scheduled to be presented at the December 16, 2009 Regular Meeting. 2. Franz Criego was elected to the Board of Retirement to represent the General members and will begin his term in January 2009.

28. Report from County Counsel

Susan Coberly, Senior Deputy County Counsel, had nothing to report.

29. Board Member Announcements or Reports

Chair Cade expressed concerns over the campaigning practices during the recent General member election and requested that Counsel research the rules of campaigning on County properties.

Roberto L. Peña, Retirement Administrator, noted that it is his understanding that campaign issues are the responsibility of the County. However, Administration will follow up on his request.

There being no further business, the meeting adjourned at 12:04 PM.

Roberto L. Peña Secretary to the Board

12/02/09 Regular Meeting Minutes