March 16, 2017 Agenda

AGENDA

BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

March 16, 2017 8:30 a.m.

Sam Diannitto Boardroom Los Angeles Fire and Police Pensions Building 701 East 3rd Street, Suite 400 Los Angeles, CA 90013

Commissioner Diannitto will participate telephonically from 4612 El Reposo Drive, Los Angeles, CA 90065

An opportunity for the public to address the Board or Committee about any item on today’s agenda for which there has been no previous opportunity for public comment will be provided before or during consideration of the item. Members of the public who wish to speak on any item on today’s agenda are requested to complete a speaker card for each item they wish to address, and present the completed card(s) to the commission executive assistant. Speaker cards are available at the commission executive assistant’s desk.

In compliance with Government Code Section 54957.5, non-exempt writings that are distributed to a majority or all of the Board or applicable Committee of the Board in advance of their meetings may be viewed at the office of the Los Angeles Fire and Police Pension System (LAFPP), located at 701 East 3rd Street, 2nd Floor, Los Angeles, California 90013, or by clicking on LAFPP’s website at www.lafpp.com, or at the scheduled meeting. Non-exempt writings that are distributed to the Board or Committee at a scheduled meeting may be viewed at that meeting. In addition, if you would like a copy of any record related to an item on the agenda, please contact the commission executive assistant, at (213) 279-3038 or by e-mail at [email protected].

Sign language interpreters, communication access real-time transcription, assistive listening devices, or other auxiliary aids and/or services may be provided upon request. To ensure availability, you are advised to make your request at least 72 hours prior to the meeting you wish to attend. Due to difficulties in securing sign language interpreters, five or more business days notice is strongly recommended. For additional information, please contact the Department of Fire and Police Pensions, (213) 279-3000 voice or (213) 628-7713 TDD.

A. ITEMS FOR BOARD ACTION

1. APPROVAL OF AMENDMENTS TO BOARD POLICY SECTION 5.0 MEMBER ACCOUNTS AND POSSIBLE BOARD ACTION

2. REVISIONS TO BOARD POLICY SECTION 10.0: ACTUARIAL FUNDING POLICY AND POSSIBLE BOARD ACTION

3. 2017-18 PROPOSED ANNUAL BUSINESS PLAN AND POSSIBLE BOARD ACTION

4. 2017-18 PROPOSED BUDGET AND POSSIBLE BOARD ACTION

5. RECOMMENDATION OF CONTRACT AWARD FOR FINANCIAL PLANNING EDUCATION SEMINAR PROGRAM CATERING SERVICES AND POSSIBLE BOARD ACTION

6. CHIEF INVESTMENT OFFICER’S QUARTERLY REPORT OF ASSET ALLOCATION STATUS AND POSSIBLE BOARD ACTION

7. APPROVAL TO ISSUE A REQUEST FOR PROPOSALS FOR INDEPENDENT REVIEW OF HEALTH SUBSIDY AND BENEFITS COSTS AND POSSIBLE BOARD ACTION

B. REPORTS TO THE BOARD

1. RETIREE HEALTH BENEFITS PROGRAM OVERVIEW

2. QUARTERLY PORTFOLIO PERFORMANCE REPORT BY RVK

3. CONTRACTOR DISCLOSURE POLICY QUARTERLY REPORT

4. REVIEW OF 2017 PRIVATE EQUITY AND COMMODITIES INVESTMENT ACTIVITY BY PORTFOLIO ADVISORS

5. Miscellaneous correspondence from money managers, consultants, etc. – Received and Filed.

6. General Manager’s Report

a. Monthly Report

b. Marketing Cessation Information

c. Benefits Actions approved by General Manager on March 2, 2017

d. Other business relating to Department operations

C. CONSENT ITEMS

1. APPROVAL OF TRAVEL AUTHORITY (VON VOIGT) – LAPPL, 2017 DELEGATES CONFERENCE

2. APPROVAL OF TRAVEL AUTHORITY (BABCOCK AND VEGA) – IFEBP, THE WHARTON SCHOOL - PORTFOLIO CONCEPTS AND MANAGEMENT

3. APPROVAL OF TRAVEL AUTHORITY (NAVARRO) – IFEBP, HEALTH CARE MANAGEMENT CONFERENCE

D. CONSIDERATION OF FUTURE AGENDA ITEMS

March 16, 2017 2

E. GENERAL PUBLIC COMMENT ON MATTERS WITHIN THE BOARD’S JURISDICTION

F. CLOSED SESSION

1. CLOSED SESSION PURSUANT TO GOVERNMENT CODE SECTION 54956.81 TO CONSIDER THE PURCHASE OF TWO (2) PARTICULAR, SPECIFIC INVESTMENTS AND POSSIBLE BOARD ACTION

2. CLOSED SESSION PURSUANT TO SUBDIVISIONS (a) AND (d)(1) OF GOVERNMENT CODE SECTION 54956.9 TO CONFER WITH LEGAL COUNSEL REGARDING PENDING LITIGATION IN THE FOLLOWING CASE:

ESTATE OF DENNIS SAL MASSA, DECEDENT (CASE NO. BP 161 463, LOS ANGELES SUPERIOR COURT)

March 16, 2017 3

DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA 90013 (213) 279-3000

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

DATE: MARCH 16, 2017 ITEM: A.1

FROM: RAYMOND P. CIRANNA, GENERAL MANAGER

SUBJECT: APPROVAL OF AMENDMENTS TO BOARD POLICY SECTION 5.0 MEMBER ACCOUNTS AND POSSIBLE BOARD ACTION

RECOMMENDATION

That the Board approve the proposed amendments to Board Policy Section 5.0 – Member Accounts.

BACKGROUND

Currently, sworn personnel of the Airport Department (“Airport Peace Officers”) are members of the Los Angeles City Employees’ Retirement System (LACERS). On November 8, 2016, voters approved Measure SSS, a Charter amendment that would: 1) enroll new Airport Peace Officers into Tier 6 effective January 7, 2018; 2) allow current Airport Peace Officers to transfer into Tier 6 from LACERS at their own expense; and 3) permit new Airport Police Chiefs to transfer into LACERS rather than participate in Tier 6. On January 31, 2017, the City Council instructed the City Attorney to prepare and present all ordinances necessary to implement the measure, including the requirements and methodology for transferring Airport Peace Officers to purchase all of their LACERS service at LAFPP. The first reading of that implementing ordinance was approved by the City Council on February 22, 2017. The second reading and proposed final adoption of the ordinance is scheduled for March 24, 2017. The Mayor would then have ten days to approve or veto the ordinance.

DISCUSSION

Once the ordinance becomes law, Section 4.2215 “Airport Peace Officer Service Purchase Program” will be added to the Los Angeles Administrative Code. This new section provides for the voluntary transfer of current Airport Peace Officers (hired prior to January 7, 2018) to Tier 6 and requires them to purchase all of their prior LACERS service in order to do so. Staff has been informed that there are approximately 536 Airport Peace Officers who have the option to transfer to Tier 6. For the majority of these Airport Peace Officers, the transfer will become effective on January 7, 2018.

A subgroup of Airport Peace Officers, Airport Safety Officers (ASOs), currently perform firefighting duties at Ontario Airport. These ASOs will have the opportunity to graduate from the LAFD drill tower and become LAFD firefighters. This group of Airport Safety Officers will have the right to transfer to Tier 6 upon graduation from the drill tower. As of November 2016, six out of thirteen ASOs were scheduled to begin training in the drill tower. These ASOs are expected to graduate on April 13, 2017. The remaining seven ASOs will enter the drill tower in May and August 2017. Upon

graduation, they can elect to enter Tier 6 membership in lieu of membership in LACERS. LAFPP and LACERS staff are scheduled to begin counseling the ASOs on March 29, 2017.

Per the draft ordinance, for each member who elects to transfer and make a purchase under the Airport Peace Officer Service Purchase Program, LACERS will transfer to LAFPP sufficient funds to cover all funded accrued liability for pension and retiree health benefits for all periods of membership with LACERS, to include employee contributions, City contributions and earnings. As these purchases must be cost neutral, the transferring members are required to pay any remaining balance for the service to be purchased.

Staff proposes modifying Board Policy 5.0 to implement Measure SSS and the ordinance by: 1) including references to the Airport Department and Airport Police members, as well as references to the November 2016 Charter language amendments; 2) documenting the special member contribution requirements for transferring Airport Peace Officers and former Airport Safety Officers, to the extent required by the Internal Revenue Code; 3) including language detailing the rules for and authorizing the purchase of all Airport Peace and Safety Officers’ service credit; and 4) establishing timeframes in which qualified survivors must elect to complete payments for service purchases agreed to by a member. Although the ordinance is not yet law, staff recommends that the Board adopt the amendments now to ensure that these policy changes are in place before the first ASOs graduate from the LAFD drill tower and (if they so choose) enter Tier 6. The policy amendments are subject to the Mayor’s final approval of the ordinance which is expected in early April, following Council’s final adoption of the ordinance on March 24.

Miscellaneous Amendments In addition to establishing the policies for the new Airport Peace Officer Service Purchase Program, staff is also recommending an amendment to Section 5.5 B of the policy based upon new advice from outside tax counsel. The current policy states that if a member who is purchasing nonqualified permissive service (as defined by Internal Revenue Code Section 415(n)) and who has fewer than five service credit years and opted for trustee-to-trustee transfer or rollover will only be allowed to do so, if the purchase amount will be fully covered by the transfer or rollover. In practice, this can make it difficult for new members to purchase their academy or drill tower training time as members at this early career stage may not have sufficient funds in another plan, such as the City’s Deferred Compensation Plan, to cover the full purchase amount. In reviewing the draft Airport Peace Officer Service Purchase Program ordinance, tax counsel noted that nonqualified service credit does not include service as an employee of a state or political subdivision, or an agency or instrumentality of a state or political subdivision (with some exceptions), provided the service credit would not cause a participant to receive a retirement benefit for the same service under more than one plan (see IRC § 415(n)(3)(C)). In the case of LAFPP members, as long as they do not receive benefits under more than one plan for the same time period (in this case, members are paying into the City’s Pension Savings Plan for part-time, seasonal and temporary employees while they participate in the academy or drill tower), this training time should not be viewed as nonqualified permissive service and there is no need to incorporate the five-year service requirement. Accordingly, staff recommends that the policy for training time purchases be amended to allow members who transfer all of their Pension Savings Plan funds to the City’s Deferred Compensation Plan to pay any remaining balance using post-tax payroll deductions (i.e., if the amount of the trustee-to-trustee transfer is insufficient).

Lastly, staff recommends a minor amendment to Policy Section 5.5 B, to clarify historical practice that purchases of training time made after the one year eligibility date will be charged interest (at

Board Report Page 2 March 16, 2017 the rate applicable to member accounts) from the eligibility date until the beginning date of the purchase agreement.

BUDGET

There is no budget impact associated with this revised Board Policy as the service purchases made under the Airport Peace Officer Service Purchase Program must be cost neutral.

POLICY

The City Attorney’s Office has reviewed and approved Board Policy Section 5.0 as amended.

This report was prepared by:

May Simmons, Manager Active Member Services Section

RPC:JS:MS

Attachment: Proposed Amendments to Board Policy 5.0

Board Report Page 3 March 16, 2017 ATTACHMENT

Los Angeles Fire & Police Pension System

5.0 - MEMBER ACCOUNTS

CREDITING OF INTEREST

5.1 The General Manager shall determine the approximate earned investment income of all funds for each (6) six-month period ending December 31 and June 30, excluding profits and losses from the sale of securities, as follows:

Earned Investment Income for the six-month period divided by (1/2 of the beginning asset balance + each of the following five months asset balance + 1/2 of ending asset balance) divided by six months.

A recommendation shall be presented to the Board, based upon this calculation. The Board shall adopt an official interest rate that shall be credited to individual member contribution accounts.

REFUNDS OF CONTRIBUTIONS

5.2 Upon the written request of terminated System members, the General Manager shall process refunds of contributions, plus interest credited as of the last day of each June and December, and additional interest for any period of service between the next preceding last day of June and December and the end of the pay period preceding the date of termination, at the rate at which regular interest was last credited to plan member's individual accounts.

Refunds for Public Service Purchases (PSP), as described in Section 5.5 below, are subject to the provisions of Administrative Code Section 4.2212. A member may elect that a refund, due to overpayment of PSP as determined by an actuarial “true-up”, be processed via trustee-to-trustee transfer to the City’s Deferred Compensation 457(b) Plan upon termination of employment if the 457(b) plan was a source of the original PSP payment. As a limited exception to the provisions under Administrative Code Section 4.2212, an overpayment correction of a PSP purchase, not due to a true-up, may be made, including to the City’s Deferred Compensation 457(b) Plan, as described in Section 5.5(D) below without the requirement for a termination of employment. (Amended 03/17/16)

5.2.1 Upon application by a former member of LAFPP who currently is employed by the City as a member of LACERS, the General Manager is authorized to transfer all contributions (including interest) of the former member directly to LACERS for the purpose of enabling the former member to purchase service credit and other benefits as authorized under the provisions of LACERS. In connection with this transfer, the former member shall be required to sign a written waiver of all rights to benefits from LAFPP.

The purpose of this Board rule is to restore the rights that former members previously had (prior to December 21, 1996) to transfer their contributions to LACERS in order to purchase service credit and other benefits with LACERS in a manner that is consistent with the provisions of LACERS and current tax law. This rule shall not establish a reciprocity program between LACERS and LAFPP. (Section added 07/05/2012) ATTACHMENT

CONTRIBUTIONS OWED TO THE SYSTEM

5.3 The General Manager is authorized to collect mandatory regular pension contributions owed to the System that were not collected and voluntary additional pension contributions as defined in Administrative Code Section 4.1167. For amounts less than or equal to a member’s biweekly contribution, no notification is required to the member. For amounts greater than a member’s biweekly contribution, the member shall be notified of the amount due and provided an opportunity to pay the total amount in a lump sum. If the member does not pay such amount within 30 days of such notification, the General Manager is authorized to initiate deductions from the member's salary in the amount of 2% until the amount due has been collected. This 2% deduction may be reduced upon the member’s election to pay interest equivalent to the Board approved assumed actuarial rate in effect when the agreement is made. The payment period, not to exceed ten years, shall be determined in advance by the member, except however, the General Manager may prescribe a minimum payment amount. The entire balance may be paid at any time. If the member applies for a pension prior to completing the agreement, the entire balance of the purchase agreement, including interest accrued to date, becomes due. (Amended 12/06/12)

5.3.1 Members of the Airport Department who transferred from LACERS to Tier 6 shall continue to make member contributions at the rate applicable to his or her LACERS membership to the extent required by the Internal Revenue Code and as further described in Charter §1714(a)(3). A LACERS Tier 1 member who elected to transfer to Tier 6 will make member contributions at the following rates:

1) Before the LACERS ERIP obligation expires (June 30, 2026): 11% of compensation on a pre-tax basis. 2) After the ERIP obligation expires but before the member has 25 years of service: 11% of compensation of which 10% will be made on a pre-tax basis and 1% will be made on an after-tax basis; and 3) After the ERIP obligation expires, and after the member has 25 years of service up to retirement: 10% of compensation on a pre-tax basis. (Added 03/16/17)

CONTRIBUTIONS COLLECTED IN ERROR

5.4 The General Manager is authorized to refund mandatory and non-mandatory contributions collected in error.

PURCHASE OF SERVICE CREDIT

5.5 Upon the written request of a member of Tier 3, Tier 4, Tier 5 or Tier 6, application may be made for purchase of Years of Service Credit. Plan membership is defined by City Charter §1502(c), §1602(c), §1702(ed) and Administrative Code §4.2002(c). Only active, non-DROP members of the Police, Fire, and Harbor, and Airport departments are allowed to purchase service credit as defined in applicable Charter and Administrative Code provisions. (Amended 05/16/1303/16/17)

(i) Recruit Training Time – City Charter §1500(a), §1600(a), §1700(b), §1700(f) and Administrative Code §4.2000(a)

ATTACHMENT

A member may purchase their entire recruit training time or they may purchase a prorated amount. (Amended 05/16/1303/16/17)

(ii) Prior Service Time – City Charter §1500(b), §1502(m)(4), §1514(d), §1600(f), §1602(m)(4), §1700(d), §1702(qp)(4)&(6), §1714(e), Administrative Code §4.2002(m)(4) and §4.2014(d)

A member may purchase the entire period of prior service as a former member of Tiers 1, 2, 3, 5, or 6 by re-depositing the entire amount of refunded contributions and interest, or may purchase a portion of such service by depositing a prorated amount of the refunded contributions and interest in accordance with paragraph B. (Amended 05/16/1303/16/17)

(iii) Temporary Disability paid at State rate – City Charter §1502(m)(4), §1514(e), §1602(m)(4), §1614(e), §1702(qp)(4) and §1714(g), Administrative Code §4.2002(m)(4) and §4.2014(e)

A member may purchase their entire temporary disability paid at State rate, or they may purchase a prorated amount. (Amended 05/16/1303/16/17)

(iv) Non-service connected disability pension – City Charter §1502(m)(2), §1602(m)(2), §1702(qp)(2), Administrative Code §4.2002(m)(2)

Members who elect to have service credit restored for time spent on a non-service connected disability pension may purchase the entire time or a prorated amount. (Amended 05/16/1303/16/17)

(v) Paramedic/Civilian Ambulance Service while a member of the City Employees’ Retirement System for current members of Tier 3 or Tier 4; former members of Tier 3 or Tier 4 who transferred to Tier 5; and former members of Tier 2 who transferred to Tier 5 – City Charter §1500(d), §1600(g), Administrative Code §4.2000(d) and §4.2000(c)(4)

Members who received a refund of contributions and interest from the City Employees’ Retirement System for a service as a paramedic/civilian ambulance employee can purchase this prior service, or a partial period of this service, by re-depositing the amount refunded plus interest that would have been earned had the member not received the refund. (Amended 07/21/2005)

(vi) Public Service Purchase (PSP) – Administrative Code §4.2212

A member may increase the monthly retirement allowance or survivorship benefits based upon the increased retirement allowance with the purchase of public service credit, not to exceed 4 years, that includes full-time service with a public entity, including a branch of the military service. Verification through a Certification of Service or presentation of original proof of military service time (DD214) will serve to establish eligibility of service time sought for purchase.

(vii) Office of Public Safety (OPS) Service Purchase Program – Administrative Code §4.2214

Members who were transferred to the Police Department from the Department of General Services’ OPS and gained status in Class Code 2214, 2217, 2223, 2227, 2232, or 2244, ATTACHMENT

and who become members of Tier 6 may purchase service. Only sworn service in Class Codes 3183, 3185, 3188, and 3198 is eligible for purchase. Former OPS officers are eligible to purchase either the minimum or the maximum eligible OPS service credit as determined by the Plan’s actuary. Members shall not be allowed to purchase a different number of years of service for Tier 6 health benefit purposes than for purposes of other Tier 6 benefits. Eligible members must enter into a written purchase agreement on or before June 30, 2015. (Added 10/16/14)

(viii) Airport Peace Officer Service Purchase Program – Administrative Code §4.2215

Members of the Airport Department in class codes 3225-1, 3225-2, 3225-3, 3202-0, 3202- 1, 3202-2, 3236, 3226-0, 3226-1, 3226-2, 3227, 3203, 3203-9, 3228-0, 3228-1, 3228-2, 3205, 3234 or 3232, who were appointed prior to January 7, 2018, or who, on that date or the date immediately preceding the date of such person’s appointment as a firefighter and employment by the Fire Department, had served as a sworn Airport Department employee in these class codes, and made an irrevocable election in writing to become a member of Tier 6 in lieu of membership in LACERS, must purchase all of their prior LACERS service. Eligible members must enter into a written purchase agreement prior to graduation from the Fire Department drill tower or prior to January 7, 2018, whichever is earlier. (Added 03/16/17)

The following rules apply to the purchases above unless otherwise stated:

A. Service credit may be purchased by a single cash payment or on an installment basis through payroll deduction, or both. However, if the member is purchasing nonqualified permissive service credit as defined by Internal Revenue Code Section 415(n), the member may not make the purchase with after-tax contributions unless the member has five or more service credit years. In accordance with Los Angeles Administrative Code Section 4.1906(q) if a member making a purchase of nonqualified service has less than five service credit years, a trustee-to-trustee transfer from the City of Los Angeles Deferred Compensation Plan or a rollover from an eligible retirement plan is the only payment option available. The only exception to this rule is, if a member transfers all of his or her funds from the City’s Pension Savings Plan (for Part-Time, Seasonal and Temporary Employees) into his or her Deferred Compensation Plan account to make this purchase via a trustee-to-trustee transfer, then the balance of the purchase, if any, may be paid on an installment basis with after-tax payroll deductions or a lump sum payment. Members who elect to purchase prior service, recruit training time or temporary disability through payroll deduction contract shall be limited to two such contracts for any one type of purchased service. Members who elect to make a public service purchase through payroll deduction contract shall be limited to one such contract for each period of service purchased. Each such purchase service contract may be initiated or ended by a lump sum payment.

For OPS service purchases made through payroll deduction the member may terminate the payroll deduction contract and cease further payments. The member shall not be allowed to complete this purchase at a later date or enter into another agreement to purchase this service. The member will receive prorated years of service based on the payments already made.

A member may make any cash payment or lump sum payment authorized above by ATTACHMENT

using a trustee-to-trustee transfer from the City of Los Angeles Deferred Compensation Plan. Should a trustee-to-trustee transfer not be large enough to cover the entire cost of the purchase, any balance owing may then be paid by the member either as a lump sum payment or on an installment basis through payroll deduction. If the member is purchasing nonqualified permissive service, the member must have five or more service credit years unless the exception noted above applies. A member who is purchasing nonqualified permissive service and who has fewer than five service credit years and opted for trustee-to-trustee transfer or rollover will only be allowed to do so, if the purchase amount will be fully covered by the transfer or rollover. A trustee-to-trustee transfer may also be used by Tier 2 members to purchase Lost Service Time.

A member purchasing OPS service may make a lump sum payment by waiving his or her right to all benefits (based on all his or her non-OPS service) with LACERS and authorizing a transfer of all his or her remaining LACERS member contributions and accrued interest from LACERS to LAFPP, provided that the total amount of the member’s remaining LACERS contributions and interest does not exceed the remaining amount that the member owes to LAFPP for the purchase. (Amended 10/16/1403/16/17)

B. When payment is made through payroll deduction, the member may elect a payment period not to exceed ten years for all purchases except public service, and OPS service purchases, and Airport Peace Officer service purchases. For public service and OPS service purchases, the member may elect a payment period that is not to exceed thirty years, does not extend past the date on which the member would attain the maximum years of service permitted by his/her tier when the public service or OPS service purchase is included, and establishes payment three months prior to the member’s intended retirement/DROP entry date for all contracts. For Airport Peace Officer service purchases, the member may elect a payment period that is not to exceed thirty years and establishes payment three months prior to the member’s intended retirement/DROP entry date for all contracts.

The General Manager may prescribe a minimum payment amount for all contracts. The member’s payroll deduction for a contract will be the greater of the minimum amount prescribed by the General Manager or the amount necessary to complete the contract within the allowable time as defined in the previous paragraph. The schedule, which shall be determined by the member in advance, cannot be changed except the member may pay off the balance at any time.

The member shall be charged an amount equivalent to the Board determined assumed actuarial interest rate in effect when the contract is signed. However, OPS service purchases will pay an interest rate of 7.75%, and. Airport Peace Officer service purchases will pay an interest rate of 7.5%. For the purchase of prior service, an additional amount equivalent to the interest that would have been earned in accordance with Section 5.1 (i.e., the amount credited to member accounts) shall also be charged.

For all purchases described in Section 5.5, except for purchase of prior service, public service, or OPS service purchases or Airport Peace Officer service purchases, no additional amount will be charged if the purchase agreement begins within one year of the member’s eligibility to make the purchase. If the purchase is made after ATTACHMENT

the one year eligibility date, an additional amount equivalent to the interest that would have been earned in accordance with Section 5.1 shall also be charged from one year following the eligibility date until the beginning date of the purchase agreement. Such payments may be made on either a pre-tax or post-tax basis, except that payroll deductions for public service and , OPS service purchase, and Airport Peace Officer service purchase contracts may be made only on a post-tax basis, with pre- tax contributions subject to all requirements of the Internal Revenue Code.

Purchases of service credit time for Tier 5 and Tier 6 Plan members are to be calculated based on the pension rate in effect during the period of service time to be purchased. If a contribution rate change falls within a pay period, a pro-rated rate shall be applied. (Amended 10/16/1403/16/17)

C. A qualified surviving spouse/domestic partner may complete the purchase of years of service agreed to by a member, and subject to a true up for public service purchases, by remitting a lump sum payment prior to benefits being granted. (Amended 10/16/14)

A qualified surviving spouse/domestic partner who elects to complete an Airport Peace Officer service purchase agreed to by a member, rather than to have the member’s years of service pro-rated based upon the payments made prior to the member’s death, shall have 90 days following the member’s death to make his or her election. Payment must be received within 180 days following the member’s death. (Added 03/16/17)

D. The Board shall establish the amount of interest and the manner in which this interest is credited on PSP payments for refund purposes as provided by Los Angeles Administrative Code Section 4.2212. The amount of interest established by the Board for refunds of PSP purchases shall be the rate applied to individual member contribution accounts in accordance with Section 5.1. This contribution rate shall apply on a daily basis.

With the exclusion of any correction necessary to adjust an overpayment of a PSP purchase (i.e., the transferor plan transferred an incorrect amount for the PSP purchase, or the Plan determined that there was an error in the calculation of the amount necessary for the purchase), a member shall not be paid a PSP refund until the member terminates employment. (Added 03/17/16)

WORKERS’ COMPENSATION AWARD RECAPTURE

5.6 Disability pension payments must be reduced by the total amount of compensation awarded or paid pursuant to Workers’ Compensation in accordance with Los Angeles City Charter Article XI, Part 3, Section 1212 (Effect of Receipts of Workers’ Compensation). As to Workers’ Compensation payments being received concurrently with a disability pension, the General Manager is directed to reduce the monthly pension by the monthly equivalent of the Workers’ Compensation payments. As to Workers’ Compensation awards or payments received prior to the granting of the disability pension, the General Manager is directed to deduct from monthly pension payments on an installment basis until the total amount of prior Workers’ Compensation has been offset. Each deduction made on an installment basis shall be in an amount of no less than twenty-five (25) percent of the monthly gross pension amount. The member, at his or her discretion, may elect to ATTACHMENT

repay the full amount of prior Workers’ Compensation at any time. The member and General Manager may agree on deduction amounts greater than twenty-five (25) percent. If a member, upon being granted a disability pension, is eligible to receive a pension payment retroactive to a date earlier than the Board action date, the deduction provisions stated above shall be applied to the retroactive pension payment. (Amended 03/07/13)

WORKERS’ COMPENSATION RECAPTURE SUSPENSION

5.7 Members receiving disability pension payments that are reduced by the Workers’ Compensation recapture amount may apply for a six-month recapture suspension. The recapture suspension will only apply to the amount determined as no less than twenty-five (25) percent of the monthly gross pension amount. The suspension request with justification must be made in writing addressed to the General Manager. The General Manager or the Board will review and may approve the recapture suspension request. However, Workers’ Compensation payments being received continuously on a bi-weekly basis are not subject to suspension and will continue to reduce the pensioner’s monthly pension payment.

In the event that the member would need an additional recapture suspension, a request addressed to the General Manager should be submitted. The request will be presented to the Board for consideration. The Board may request additional documentation prior to the approval of the Worker’s Compensation recapture suspension. Upon the Board’s approval, the succeeding six monthly pension payments will be issued without the deduction of the monthly worker’s compensation recapture subject to suspension. Requests received during the first ten days of the current month will be presented to the Board on the second meeting of the current month. Requests received after the first ten days of the current month will be presented to the Board on the first meeting of the following month. (Amended 03/07/13)

ACCEPTANCE OF ELECTRONIC SIGNATURES

5.8 The Board authorizes the acceptance of an electronic signature on a document that requires a signature. Such document shall be given the same force as a signed, valid original document, if the document and electronic signature are submitted using technology that the Board deems sufficient to ensure its integrity, security and authenticity. The system deemed sufficient shall embody all of the following attributes: a) User ID and password are unique to each member, and b) The User ID and password are capable of verification. (Added 05/02/13)

FORFEITURE OF UNCLAIMED FUNDS TO THE PLAN

5.9 The Board authorizes the General Manager to declare a forfeiture of money or relieve a person from forfeiture of money. The General Manager is authorized to declare a forfeiture of all monies, including but not limited to contributions, interest, and benefits, that become payable or distributable from LAFPP to any owner who either cannot be found or refuses to accept payment or distribution within ten years of the date such monies become payable or distributable from LAFPP. (Added 09/03/15)

HISTORY

ATTACHMENT

5.10 Adopted: Circa June 13, 1996; Amended 07/21/05, 04/05/12, 07/05/12, 12/06/12, 03/07/13, 05/02/13, 05/16/13, 02/20/14, 10/16/14, 09/03/15, and 03/17/16 and 03/16/17. (Also listed after amended sections).

REVIEW

5.11 This policy shall be reviewed by the Board as needed and may be amended by the Board at any time.

DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA 90013 (213) 279-3000

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

DATE: MARCH 16, 2017 ITEM: A.2

FROM: RAYMOND P. CIRANNA, GENERAL MANAGER

SUBJECT: REVISIONS TO BOARD POLICY SECTION 10.0: ACTUARIAL FUNDING POLICY AND POSSIBLE BOARD ACTION

RECOMMENDATION

That the Board approve a revision to Board Policy Section 10.0: Actuarial Funding Policy to decrease from 25 years to 20 years the amortization period for future assumption and cost method changes (Attachment I).

BACKGROUND

A pension plan funding policy is designed to determine the total contribution required each year by the employer and active members to provide for the secure funding of benefits in a systematic fashion. A comprehensive funding policy is made up of three components: the actuarial cost method, the asset smoothing method, and the amortization policy.

The Board adopted a comprehensive Actuarial Funding Policy in September 2012. The policy had one minor amendment in October 2014 to provide for ad hoc adjustments to the asset-smoothing component of the policy under certain conditions. The Board’s funding policy had not undergone a complete review since it was adopted in 2012. The Actuarial Trend Education project (Project #3) of the 2016-17 Business Plan calls for a review of the Board’s actuarial funding policy and for Staff to recommend any changes to the policy by March 31, 2017.

On January 19, 2017, Mr. Paul Angelo of The Segal Company (Segal) and Staff engaged in a discussion with the Board regarding the goals and objectives of a funding policy, a review of the Board’s current policy, and discussed possible changes to the policy.

DISCUSSION

Based upon the Board’s discussion in January, Staff worked with Segal to draft changes to the funding policy. Segal is recommending that the Board decrease the amortization period for future assumption and cost method changes from 25 years to 20 years (Attachment II). Reducing the amortization period will help control negative amortization that occurs in the current 25-year amortization period. Negative amortization occurs in the first six years for each new unfunded actuarial accrued liability (UAAL) layer under the 25-year amortization period. Under the recommended 20-year amortization period there is only negative amortization in the first year.

In their letter, Segal provides the Board with an example that illustrates the potential cost impact that this recommendation may have by demonstrating how much the employer’s UAAL contribution rate would increase if the investment return assumption were reduced from 7.5% to 7.25% in the June 30, 2016 valuation. As shown in Segal’s letter, the recommended reduction in the amortization period would have resulted in a net increase in the City’s contribution rate of 0.4% of payroll (increase of 2.6% would further increase to 3.0%). However, over the entire 20-year amortization period there would be savings to the City from less interest accruing as compared to the 25-year amortization period (i.e., savings of approximately $250 million based on the above scenario).

Segal is also recommending that the funding policy clarify the two variations of the entry age actuarial cost method related to participation in the Deferred Retirement Option Plan (DROP). Government Accounting Standards require that plans with a DROP use a version of the Entry Age for financial purposes that differs from the Entry age version used for funding purposes.

Lastly, based on feedback from the Board regarding options for reducing the amount of time to bring the retiree health benefits to full funding, Segal’s letter also discusses an option to combine and re- amortize the current UAAL for the retiree health benefits over a 15-year period in the June 30, 2017 valuation. Doing so would have the impact of shortening the period it would take the health benefits to achieve 100% funding by about 5 years, which would increase the City’s contribution rate by about 1.7% of payroll. Staff is not recommending that the Board include this change in its policy at this time; however, Staff suggests the Board consider this option in the future depending on the future funding status of retiree health benefits.

As requested by the Board, Segal provided an illustration of the run out of the current June 30, 2016 UAAL outstanding balances for the retirement plan. Segal also included a projection of the amortization payments for the current June 30, 2016 UAAL for the retirement plan.

Mr. Paul Angelo from Segal will be present at today’s Board meeting to discuss the proposed policy changes.

BUDGET

As the recommended reduction in the amortization period is with respect to future changes in actuarial assumptions and cost methods, the exact contribution rate impact is not known at this time but will be reflected beginning with the 2017 valuations.

POLICY

The recommended amendment to Board Policy Section 10.0 has been approved by the City Attorney as to form.

This report was prepared by:

Greg Mack, Chief Benefits Analyst Pensions Division

RPC:JS:GM

Attachments: I. Board Policy Section 10.0: Actuarial Funding Policy II. Proposed Changes to Actuarial Funding Policy prepared by The Segal Company

Board Report Page 2 March 16, 2017 ATTACHMENT I

Los Angeles Fire & Police Pension System

10.0 – ACTUARIAL FUNDING POLICY

This Actuarial Funding Policy supersedes any previous Actuarial Funding Policies. It is a working document and may be modified as the Board deems necessary.

FUNDING POLICY GOALS

10.1 To achieve long-term full funding of the cost of benefits provided by the Los Angeles Fire and Police Pension System (LAFPP);

10.2 To seek reasonable and equitable allocation of the cost of benefits over time;

10.3 To minimize volatility of the plan sponsors’ contribution to the extent reasonably possible, while consistent with other policy goals; and,

10.4 To support the general public policy goals of accountability and transparency by being clear as to both intent and effect, allowing for an assessment of how and when the plan sponsors will meet the funding requirements of the plan.

FUNDING REQUIREMENT

10.5 LAFPP’s annual funding requirement is comprised of a payment of the cost attributed to the current year of service (Normal Cost) and a payment on the Unfunded Actuarial Accrued Liability (UAAL). The Normal Cost and the amount of the payment on UAAL are determined by the following three components of this funding policy:

A) Actuarial Cost Method: The techniques to allocate the total present value of future benefits to each year (Normal Cost), including all past years (Actuarial Accrued Liability).

B) Asset Smoothing Method: The techniques that spread the recognition of investment gains or losses over a period of time for the purposes of determining the Actuarial Value of Assets used in the actuarial valuation process.

C) Amortization Policy: The decisions on how, in terms of duration and pattern, to reduce the difference between the Actuarial Accrued Liability and the Actuarial Value of Assets in a systematic manner.

ACTUARIAL COST METHOD

10.6 The actuarial cost method is the Entry Age Normal (EAN) method, with the Normal Cost determined as a level percentage of payroll for each individual employee.

A) For funding purposes, Normal Cost continues to accrue while members are in the DROP. Accordingly, salaries for members currently or anticipated in the future to elect the DROP are included in determining the Normal Cost.

ATTACHMENT I

B) For financial reporting purposes, Normal Cost accrues only until members enter the DROP. Accordingly, salaries for members currently or anticipated in the future to elect the DROP are excluded in determining the Normal Cost. (Section amended 03/16/17)

ASSET SMOOTHING METHOD

10.7 A) For investment gains/losses prior to July 1, 2008:

The investment gains or losses of each valuation period, as a result of comparing the Market Value of assets at the end of the period with what the Market Value would have been if the assumed rate of return on assets was realized during the period, shall be recognized in a level amount over five (5) years in calculating the Actuarial Value of Assets; and

B) For investment gains/losses after June 30, 2008:

The investment gains or losses of each valuation period, as a result of comparing the Market Value of assets at the end of the period with what the Market Value would have been if the assumed rate of return on assets was realized during the period, shall be recognized in a level amount over seven (7) years in calculating the Actuarial Value of Assets; and

10.8 The Actuarial Value of Assets as determined above shall be limited to within a corridor of 60%-140% of the Market Value of Assets.

10.8.1 This policy anticipates that future circumstances may warrant adjustments to change the pattern of the recognition of the net deferred investment gains or losses after a period of significant market change followed by a period of market correction. Such adjustments would be considered by the Board upon receiving an appropriate analysis from LAFPP’s actuary. Such adjustments would be appropriate for consideration when the net deferred investment gains or losses are relatively small (i.e., the actuarial and market values are very close together), but the recognition of that net deferred amount is markedly non-level. Any such adjustment would be made subject to the following conditions:

A) The net deferred investment gains or losses are unchanged as of the date of the adjustment; and,

B) The period over which the net deferred investment gains and losses are fully recognized is unchanged as of the date of the adjustment. (Section added 10/02/14)

AMORTIZATION POLICY

10.9 The Unfunded Actuarial Accrued Liability (UAAL), the difference between the Actuarial Accrued Liability and the Actuarial Value of Assets, shall be amortized over various periods of time, depending on how the unfunded liability arose.

10.10 For UAAL identified before the June 30, 2012 actuarial valuation:

A) The original UAAL bases for the Pension Plan: ATTACHMENT I

Tier 1 (including all UAAL identified in subsequent valuations through June 30, 2011): 70 years in 1967 with 26 years remaining in the June 30, 2011 valuation, and;

Tier 2 (including all UAAL identified in subsequent valuations through June 30, 2008): 70 years in 1967 with 26 years remaining in the June 30, 2011 valuation, and;

Tier 5: 30 years in 2002 with 21 years remaining in the June 30, 2011 valuation.

B) The original UAAL bases for the Health plan (including all UAAL identified in subsequent valuations through June 30, 2011 for the Health Plan):

All Tiers (except for Harbor Department): 30 years in 2006 with 25 years remaining in the June 30, 2011 valuation; and;

Tier 5 (Harbor Department): 29 years in 2007 with 25 years remaining in the June 30, 2011 valuation.

C) Actuarial gains or losses (for the Pension Plan) shall be amortized over 15 years;

D) Changes in actuarial assumptions and cost methods (for the Pension Plan) shall be amortized over 30 years;

E) Plan amendments, other than Early Retirement Incentives, (for the Pension Plan) shall be amortized over 30 years;

F) Early Retirement Incentives (for the Pension Plan) shall be amortized over 30 years;

G) Actuarial funding surplus (an excess of Actuarial Value of Assets over Actuarial Accrued Liability) (for the Pension Plan) shall be amortized over 15 years;

10.11 For UAAL indentified beginning from the June 30, 2012 valuation:

A) The original UAAL bases for the Pension Plan:

Tier 1 (including all UAAL identified in subsequent valuations through June 30, 2011): 70 years in 1967 with 25 years remaining in the June 30, 2012 valuation, and;

Tier 2 (including all UAAL identified in subsequent valuations through June 30, 2008): 70 years in 1967 with 25 years remaining in the June 30, 2012 valuation, and;

Tier 5: 30 years in 2002 with 20 years remaining in the June 30, 2012 valuation.

B) The original UAAL bases for the Health Plan (including all UAAL identified in subsequent valuations through June 30, 2011 for the Health Plan):

All Tiers (except for Harbor Department): 30 years in 2006 with 24 years in the June 30, 2012 valuation; and;

Tier 5 (Harbor Department): 29 years in 2007 with 24 years remaining in the June 30, 2012 valuation. ATTACHMENT I

C) Actuarial gains or losses shall be amortized over 20 years;

D) Beginning from the June 30, 2012 valuation, Cchanges in actuarial assumptions and cost methods shall be amortized over 25 years. Beginning from the June 30, 2017 valuation, changes in actuarial assumptions and cost methods shall be amortized over 20 years; (Section amended 03/16/17)

E) Plan amendments, other than Early Retirement Incentives, shall be amortized over 15 years;

F) Early Retirement Incentives shall be amortized over 5 years;

G) Actuarial funding surplus (an excess of Actuarial Value of Assets over Actuarial Accrued Liability) shall be amortized over 30 years;

10.12 For all Tiers except for Tier 1, UAAL shall be amortized as a level percentage of payroll so that the amortization amount in each year during the amortization period shall be expected to be a level percentage of covered payroll, taking into consideration the current assumptions for general payroll increase (Tier 1 UAAL shall be amortized as a level dollar amount);

10.13 The UAAL amortization payment rate shall be calculated for Tiers 2, 3 and 4 by dividing the amount required to amortize the UAAL for each of these Tiers by the total City sworn covered payroll (excluding the Harbor Department sworn covered payroll);

10.14 The UAAL amortization payment rate shall be calculated for Tiers 5 and 6 by dividing the amount required to amortize the UAAL for each of these Tiers by the total City sworn covered payroll for these Tiers (excluding the Harbor Department sworn covered payroll);

10.15 The UAAL amortization payment rate shall be calculated for Harbor Department Members of Tiers 5 & 6 by dividing the amount required to amortize the UAAL for each of these Tiers by the total Harbor sworn covered payroll for these Tiers (excluding the City sworn covered payroll);

10.16 UAAL shall be amortized over multiple fixed layers for pension benefits;

10.17 UAAL shall be amortized over multiple fixed layers for health benefits, with any annual changes in assumptions and plan elements (such as medical trend rate and annual premium rates) considered similar to actuarial gains/losses and amortized accordingly.

10.18 Layers generated by various sources of UAAL shall be combined and/or restarted when:

A) The net result of amortization of all layers combined is an amortization credit which would offset the Normal Cost; or

B) Other conditions arise such that the Board, upon the advice of its consulting actuary considers that is appropriate to do so.

HISTORY

ATTACHMENT I

Adopted: 09/06/12; Amended 10/02/14; 03/16/17. (Listed after amended section.)

ATTACHMENT II

100 Montgomery Street Suite 500 San Francisco, CA 94104-4308 T 415.263.8283 www.segalco.com

VIA E-MAIL and USPS

March 7, 2017

Mr. Raymond P. Ciranna General Manager City of Los Angeles Fire and Police Pensions 701 East 3rd Street, Suite 200 Los Angeles, CA 90013

Re: City of Los Angeles Fire and Police Pension Plan (LAFPP) Proposed Changes to Actuarial Funding Policy

Dear Ray:

As requested, we have prepared this letter to provide our recommendations regarding changes to LAFPP’s current Actuarial Funding Policy, along with examples that illustrate the potential cost impact these changes may have on the Retirement and Health Plans. In addition, as requested by the Board at its January 19, 2017 meeting, we have included in this letter an illustration of the run out of the amortization layers for the current June 30, 2016 Unfunded Actuarial Accrued Liability (UAAL), which includes both the future amortization payments as well as the future outstanding balances for the Retirement Plan.

RECOMMENDATIONS REGARDING CHANGES TO ACTUARIAL FUNDING POLICY

1. Decrease the Amortization Period for Future Assumption and Cost Method Changes From 25 Years to 20 Years

Under Section 10.11 (D) of the Actuarial Funding Policy, any changes in actuarial assumptions and cost methods identified beginning from the June 30, 2012 valuation have been amortized over 25 years. Based on the discussion of the funding policy at the January 19 meeting, we understand there is Board interest in reducing the amortization period and accordingly we are recommending a 20-year period be used for assumption and cost method changes identified beginning from the June 30, 2017 valuation.

Reducing the amortization period helps control negative amortization inherent in the current 25-year amortization period. Negative amortization occurs when amortization

Benefits, Compensation and HR Consulting. Member of The Segal Group. Offices throughout the United States and Canada

ATTACHMENT II Mr. Raymond P. Ciranna March 7, 2017 Page 2

payments are not large enough to cover the interest that has accrued over the year on the outstanding balance. This leads to an increased outstanding balance in the following year. Under the 25-year amortization period, negative amortization will occur in the first six years for each new UAAL layer. In contrast, under a 20-year amortization period there is negative amortization only in the first year.

As our recommended reduction in the amortization period is with respect to future changes in actuarial assumptions and cost methods, the exact contribution rate impact is not known at this time. However, by way of illustration, we can demonstrate how much the employer’s UAAL contribution rate would increase from shortening the amortization period from 25 to 20 years if the investment return assumption were to be reduced from 7.50% to 7.25% in the June 30, 2016 valuation.

Decreasing the investment return assumption for 2016 by 0.25% would have increased the UAAL by roughly $600 million for the Retirement Plan1. For simplicity, if we assume that this increase was amortized over a level percent of payroll (i.e., we are not reflecting the level dollar amortization under the funding policy for Tier 1), the aggregate Employer Rate would have increased by 2.6% of payroll under the current 25-year amortization period. In comparison, the aggregate Employer Rate would have increased by 3.0% of payroll under the proposed 20-year amortization period for a net increase of 0.4%2 of payroll.

As noted above, a 20-year amortization period limits negative amortization to only one year. Furthermore, for this hypothetical increase in the UAAL of $600 million there would also be savings over the entire amortization period of approximately $250 million from less interest accruing under the proposed 20-year period as compared to the 25-year period. Attachment 1 compares the amortization of this hypothetical UAAL under the current policy and the proposed revision.

2. Consider Combining and Reamortizing the Current Unfunded Actuarial Accrued Liability for the Health Plan Over a 15-Year Period in the June 30, 2017 Valuation (or Future Valuation)

For historical and other reasons, as of June 30, 2016, the 48.1% funded ratio for the Health Plan is only about one-half the 93.9% funded ratio for the Retirement Plan. Based on the discussion of the funding policy at the January 19 Board meeting, we understand there is also interest in considering shortening the amortization period used in the Health Plan, which would reduce the time it would take to bring the funded ratio of that Plan to 100%.

1 There would have been a corresponding increase of $100 million for the Health Plan. 2 Note that in practice, a change in the investment return assumption would also impact the Normal Cost contribution rate as well as the UAAL contribution rate associated with reamortizing the existing amortization layers over the new investment return assumption. These components would not be impacted by the proposed change (from 25 to 20 years) and therefore have not been included in this letter.

5475912v5/07916.005 ATTACHMENT II Mr. Raymond P. Ciranna March 7, 2017 Page 3

In order to achieve that objective, the Board could consider combining and reamortizing the outstanding balance of all of the UAAL layers carried over into the June 30, 2017 Health Plan valuation (or future valuation) over a period of 15 years. Since the equivalent single amortization period for all the outstanding balance of the existing UAAL is slightly under 20 years in the June 30, 2017 Health Plan valuation, shortening the amortization period to 15 years would have the impact of shortening the period it would take the Health Plan to achieve 100% funded ratio by about 5 years. The contribution rate would increase by about 1.7% of payroll.

3. Clarify the Two Variations of the Entry Age Actuarial Cost Method Related to Participation in the Deferred Retirement Option Plan (DROP)

There are two variations of the Entry Age actuarial cost method that are used for LAFPP. For funding purposes, Normal Cost continues to accrue for members enrolled in the DROP, so that the liability for those members continues to accrue until they retire from employment after their participation in the DROP. However, for financial reporting purposes, Normal Cost accrues only until members are enrolled in the DROP, so that the liability for those members is fully accrued when they enter DROP. This version of the Entry Age method is required under the Government Accounting Standards for plans with a DROP.

Also, note we recommend changing the name of the cost method from “Entry Age Normal” to “Entry Age” consistent with both the GASB statements and current actuarial practice.

We would propose Section 10.6 of the Actuarial Funding Policy be amended and expanded to read as follows:

10.6 The actuarial cost method is the Entry Age method, with the Normal Cost determined as a level percentage of payroll for each individual employee.

OTHER INFORMATION

Illustration of Run Out of Current Amortization Bases

As requested by the Board at its January 19 meeting, we have included a graph in Attachment 2 that shows the run out of the current June 30, 2016 UAAL outstanding balances for the Retirement Plan. The black line represents the net outstanding balance,

5475912v5/07916.005 ATTACHMENT II Mr. Raymond P. Ciranna March 7, 2017 Page 4

which is equal to the UAAL in a given year. Additionally, we have included Attachment 3 that shows the projection of amortization payments for the current June 30, 2016 UAAL for the Retirement Plan. The black line represents the net amortization payment for a given year.

It should be noted that a net negative amortization payment (or contribution credit) would be projected for some plan years beginning July 1, 2026 that could cause some instability in the annual UAAL payments. That instability illustrates the need for some active management of the amortization layers in the later years of this projection, assuming no future layers are added. We would bring this topic back to the Board for further discussion well in advance of the actual onset of any net negative amortization payments.

If you have any questions, please let us know.

Sincerely,

Paul Angelo, FSA, MAAA, EA, FCA Andy Yeung, ASA, MAAA, EA, FCA Senior Vice President and Actuary Vice President and Actuary

EK/bqb Enclosures (5476584) cc: Gregory Mack Joseph Salazar

5475912v5/07916.005 Attachment 1 ATTACHMENT II Comparison of Annual Payments from an Initial $600 Million in UAAL over a 20-Year and 25-Year Amortization Period 100

90 $ in Millions in $

Annual Payment Annual 40

- 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 Plan Year Beginning July 1,

25 Year Amortization 20 Year Amortization

Comparison of Outstanding Balance from an Initial $600 Million in UAAL over a 20-Year and 25-Year Amortization Period 700

$ in Millions in $ 600

500

400

300 OutstandingBalance

200

100

- 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 Plan Year Beginning July 1,

25 Year Amortization 20 Year Amortization Attachment 2 ATTACHMENT II

Amortization Schedule of $1,153 Million in Net UAAL as of June 30, 2016 (Retirement Plan Only) 5,000

4,000 $ in Millions

3,000

2,000

1,000

(1,000)

(2,000)

(3,000)

(4,000) 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 GAINS & ASSUMPTION / OTHER NET UAAL LOSSES PLAN CHANGES CHANGES BALANCE Attachment 3 ATTACHMENT II

Annual Payments Required to Amortize $1,153 Million in Net UAAL as of June 30, 2016 (Retirement Plan Only) 500

400 $ in Millions

300

200

100

(100)

(200)

(300)

(400) 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 GAINS & ASSUMPTION / OTHER NET UAAL LOSSES PLAN CHANGES CHANGES PAYMENT

DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA 90013 (213) 279-3000

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

DATE: MARCH 16, 2017 ITEM: A.3

FROM: RAYMOND P. CIRANNA, GENERAL MANAGER

SUBJECT: 2017-18 PROPOSED BUSINESS PLAN AND POSSIBLE BOARD ACTION

RECOMMENDATION

That the Board approve the attached 2017-18 Proposed Business Plan.

DISCUSSION

The 2015-18 Three-Year Strategic Plan (Attachment I) approved by the Board in February 2015 includes the Vision, Mission, Values and Strategic Goals for Los Angeles Fire and Police Pensions (LAFPP). This document serves as a blueprint to guide LAFPP in the development of the Proposed 2017-18 Business Plan. As indicated on the Project Summary Matrix included in the Proposed Business Plan (Attachment II – Pages 3-4), the Plan consists of ten projects, including five projects continuing from the 2016-17 Business Plan and five new projects. The 2017-18 Proposed Business Plan was developed in conjunction with the 2017-18 Proposed Budget to ensure that all resources required to complete the Business Plan projects are adequately funded.

The Business Plan is organized pursuant to the following LAFPP Strategic Goals to ensure that projects are prioritized relative to operational needs:

1) Ensure a Financially Sound Retirement System 2) Manage Risk Throughout the Organization 3) Enhance Customer Service to our Members 4) Pursue Operational Efficiencies 5) Enhance Communication Efforts and Outreach

The five multi-year projects continuing from the 2016-17 Business Plan include:

1) Implement Health Care Options for Members (No. 4) (formerly Health Care Education and Research/Implement Options for Members): Establish alternative health care options for those who currently receive their coverage through LAFPP’s agreement with the Los Angeles City Employees’ Retirement System (LACERS) or their health subsidy through the LAFPP Health Insurance Premium Reimbursement Program (HIPR). Enrollment in these health care plans would also be available to any new or existing pensioner or surviving spouse; 2) PARIS (Pension and Retirement Information System) Implementation (No. 5): Design and implement a new Pension Administration System that will result in improved overall efficiency in the department’s business operations and continued superior service to our membership;

3) Employee Development and Training (No. 7): Enhance employee development, recruitment and training to help retain and further develop our talented workforce; 4) Administrative Manual Updates (No. 8): Update Department-wide procedures, including the Administrative Manual and the Document Imaging Governance Manual; and, 5) Increase the Number of Members Reached (No. 10) (formerly Increase the Number of Outreach Events and Seminars): Provide members with thorough and timely information regarding our Plan, utilizing a range of communication methods.

The five new 2017-18 proposed Business Plan projects include:

6) Portfolio Risk Analysis (No. 1): Conduct a thorough risk analysis of the Fund’s investment portfolio; 7) Private Equity Investment Fee Disclosure (No. 2): Provide the Board with specified information relating to the fees and returns of specified alternative investments in compliance with AB 2833; 8) Alive and Well Audit (No. 3): Verify the status of all age 95+ pensioners and confirm that benefits are received by the intended recipients; 9) Airport Police Transfer (No. 6): Implement the provisions of the Charter amendment (Measure SSS), enrolling all new Airport Police in Tier 6 and allowing existing Airport Police the option to transfer from LACERS to Tier 6; and 10) LAFPP Intranet Website Redesign (No. 9): Redesign the Department’s intranet and leverage it as a resource to disseminate information within LAFPP.

The Project Summary Matrix (Attachment II, Pages 3-4) lists all the projects and includes workload level indicators, which is intended to give the Board a sense of the staff and participant workload requirements for the upcoming fiscal year.

Staff will continue to track the progress of all projects in the Business Plan Quarterly Update reports to the Board, and through these reports will recommend any necessary changes in scheduling or budget. This process allows the Board to measure progress and adjust periodically to reflect any changes that may occur.

As this is the last of the annual Business Plans associated with the 2015-18 Three-Year Strategic Plan, staff will be working with the Board and management on developing a new Three Year 2018- 21 Strategic Plan next fiscal year that will help guide a new cycle of Business Plans starting in 2018- 19.

BUDGET

Funding for the proposed projects has been included in the 2017-18 Proposed Budget.

POLICY

There are no policy changes proposed in this report.

This report was prepared by:

Diana Pointer, Senior Management Analyst II Administrative Services Section

RPC:WSR:SHC:DP

Board Report Page 2 March 16, 2017 Attachments: I. Three-Year 2015-18 Strategic Plan II. 2017-18 Proposed Business Plan

Board Report Page 3 March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS 360 East Second Street, Suite 400 Los Angeles, CA 90012 (213) 978-4545

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

DATE: FEBRUARY 5, 2015 ITEM: B.4

FROM: RAYMOND P. CIRANNA, GENERAL MANAGER

SUBJECT: CONSIDERATION OF THE 2015-18 THREE YEAR STRATEGIC PLAN AND POSSIBLE BOARD ACTION

RECOMMENDATION

That the Board:

1. Consider and approve the 2015-18 Three Year Strategic Plan, which includes the following elements: Vision, Mission, Values, Goals, Objectives and Strategic Initiatives (Attachment);

2. Direct Staff to return to the Board with a 2015-16 Business Plan on March 19, 2015 that includes Business Plan Projects that will help to achieve LAFPP Goals, Objectives and Strategic Initiatives.

DISCUSSION

On December 4, 2014, the Board and LAFPP managers engaged in a second strategic planning session facilitated by an outside consultant (Alta Mesa Group). This session provided an opportunity for the Board and managers to work together to review and revise our Mission Statement, Values, Goals, Objectives and Strategic Initiatives. At that meeting, staff were directed to return to the Board with a completed Strategic Plan for approval that would include all of these elements.

Mission Statement

During the session, the Board remarked that the current LAFPP Mission is very similar to the Los Angeles Police Department motto “To Protect and to Serve”. Therefore, the Mission Statement language was revised to be more inclusive of our entire membership.

Current: To advance the health and retirement security of those who dedicate their careers to serve and protect the people of Los Angeles.

Proposed: To advance the health and retirement security of those who dedicate their careers and risk their lives to protect the people of Los Angeles. Values

Values are defined as LAFPP guiding principles, beliefs and a Code of Behavior that form an important part of the foundation on which LAFPP staff and the Board operate. Staff had previously proposed six Values: Accountability, Collaboration, Compassion, Dedication, Ethics and Transparency. At the December 4th meeting, the Board and managers approved these Values in concept and asked that each of the Values be defined. The Board also asked that ‘Efficiency’ be added as a Value to reflect our commitment to operational efficiencies.

Based on recent staff meetings to define these Values, staff now recommends adding ‘Respect’ as a Value in-lieu of ‘Compassion’ and ‘Dedication.’ Staff believes ‘Respect’ best encompasses how we treat each other, our members and stakeholders.

Current Values: Not applicable; Values have not been codified previously.

Proposed Values and Definitions:

1) Accountability – We recognize our responsibility to our members to deliver promised pension benefits. We ensure appropriate oversight to achieve excellence in service, operational and investment decision making.

2) Collaboration – We value teamwork to achieve success and encourage staff at all levels to share ideas and offer suggestions for improving operations. We are enriched by our engagement with the Board, our members and our stakeholders.

3) Efficiency – We continually search for ways to deliver quality services and reduce administrative expenses. We promote innovation throughout the organization and use performance measurement to drive decisions.

4) Ethics – We preserve the public trust by adhering to the ethical standards established by the State, the City, and our Board Policies.

5) Respect – We treat each other and our members with kindness and dignity. We promote a fair environment and support each other by sharing information and knowledge to ensure we deliver quality services.

6) Transparency – We strive to always provide clear, accurate and complete information and transact business decisions in an open manner so that our members, the City, and the public can trust that our decisions are fair, honest and ethical.

Goals, Objectives and Strategic Initiatives

At the December 4th session, the General Manager proposed an expansion of the primary goals from three to five to more fully capture the breadth of the longer-term “theme” and objectives of the Board. The General Manager also presented Objectives and Strategic Initiatives designed to help LAFPP meet its Goals. During this session, the Board and managers broke into groups to discuss these Goals, Objectives and Strategic Initiatives in greater detail and the results were presented to the full group. Based on these discussions, the Board and managers agreed to the five goals listed below with some minimal language revisions.

Board Report Page 2 February 5, 2015 Current LAFPP Goals: 1) Customer Service 2) Risk Management 3) Communications and Stakeholder Relations

Proposed LAFPP Goals: 1) Ensure a financially sound retirement system 2) Manage risk throughout the organization 3) Enhance customer service to our members 4) Pursue operational efficiencies 5) Enhance communication efforts and outreach

Subsequent to the December 4th session, Executive staff met over several days and revised the Goal Objectives and Strategic Initiatives to incorporate comments from the break-out sessions, and consolidate and refine the language.

Also, Executive staff determined that some of the items initially labeled as Strategic Initiatives should be removed from the Strategic Plan as they reflected specific projects that were better suited for future Business Plans. Strategic Initiatives generally reflect high-level, aspirational statements that will guide the organization over the next several years. Conversely, the annual Business Plans will include specific, measurable projects to help us achieve our Strategic Goals, Objectives and Initiatives (Attachment).

BUDGET

LAFPP has incurred $10,500 to date utilizing the Alta Mesa Group, inclusive of travel expenses. Budgetary impact of the 2015-16 Business Plan will be included in 2015-16 Budget to be presented to the Board on March 19, 2015.

POLICY

No policy changes are being recommended.

This report was prepared by:

Stephanie Clements, Chief Management Analyst Administrative Operations Division

RPC:WSR:SHC

Attachment

Board Report Page 3 February 5, 2015 Attachment

LOS ANGELES FIRE & POLICE PENSIONS 2015-18 THREE-YEAR STRATEGIC PLAN

Vision To be a leader and innovator in the public pension industry through an uncompromising dedication to excellence, customer service, transparency and education

Mission To advance the health and retirement security of those who dedicate their careers and risk their lives to protect the people of Los Angeles

Goals

1. Ensure a financially sound retirement system 2. Manage risk throughout the organization 3. Enhance customer service to our members 4. Pursue operational efficiencies 5. Enhance communication efforts and outreach

Attachment

Values

I) Accountability – We recognize our responsibility to our members to deliver promised pension benefits. We ensure appropriate oversight to achieve excellence in service, operational and investment decision making.

II) Collaboration – We value teamwork to achieve success and encourage staff at all levels to share ideas and offer suggestions for improving operations. We are enriched by our engagement with the Board, our members and our stakeholders.

III) Efficiency - We continually search for ways to deliver quality services and reduce administrative expenses. We promote innovation throughout the organization and use performance measurement to drive decisions.

IV) Ethics – We preserve the public trust by adhering to the ethical standards established by the State, the City, and our Board Policies.

V) Respect - We treat each other and our members with kindness and dignity. We promote a fair environment and support each other by sharing information and knowledge to ensure we deliver quality services.

VI) Transparency – We strive to always provide clear, accurate and complete information and transact business decisions in an open manner so that our members, the City, and the public can trust that our decisions are fair, honest and ethical.

Attachment Goals, Objectives and Strategic Initiatives

Goal 1: Ensure a Financially Sound Retirement System

Objective x Achieve our long-term investment performance targets.

Strategic Initiatives a) Employ prudent risk-adjusted asset allocation strategies, measure portfolio performance against the appropriate benchmark(s) and take action when investment objectives are not met.

Objective x Pursue funding policies and strategies that fund our member benefits.

Strategic Initiatives a) Adopt sound actuarial policies and assumptions that balance the goals of: 1) keeping contributions relatively stable; 2) equitably allocating the cost of benefits over the member’s period of actual service; and 3) achieving long-term full funding of the cost of benefits over time; and b) Explore local and sustainable investment opportunities that complement our portfolio objectives and comply with our investment goals concerning risk, return and diversification.

Goal 2: Manage Risk Throughout the Organization

Objective x Maintain & promote a culture of risk awareness with an enterprise-wide view.

Strategic Initiative a) Develop a top-down risk-intelligent culture that proactively identifies and acts to manage risk exposure, through enhanced governance, Board and staff training, and collaboration with stakeholders.

______

Objective x Actively monitor systems and processes to reduce or minimize risk.

Strategic Initiative a) Assess and test our systems and processes through periodic audits, risk assessments and technology to help mitigate and minimize risk in our organization.

Attachment

Goal 3: Enhance Customer Service to our Members

Objective x Deliver superior customer service that is adaptive to our member needs.

Strategic Initiatives a) Research and implement technology solutions to upgrade our business processes to better serve our members; b) Expand educational opportunities to our members regarding their benefits and our services so that they can make informed decisions about retirement security and health care; and c) Enhance member access to information regarding the cost of health care options and alternative methods of service delivery.

______

Goal 4: Pursue Operational Efficiencies

Objective x Implement industry best practices for continuous improvement.

Strategic Initiative a) Research, identify and pursue best practice opportunities throughout the organization.

______

Objective x Foster a “team approach” or culture of collaboration within and outside the Department to facilitate innovation.

Strategic Initiative a) Increase team engagement and encourage ideas and suggestions from the Board, employees and stakeholders to improve knowledge and communications.

______

Objective x Ensure staff is provided the necessary support and tools for success.

Strategic Initiative a) Develop and implement a comprehensive strategy that includes employee development, recruitment, retention, and succession planning.

______

Attachment

Goal 5: Enhance Communication Efforts and Outreach

Objective x Enhance our communication to members, the City, and the public regarding our Plan.

Strategic Initiative a) Provide members, the City, and the public with thorough and timely information utilizing a range of communication methods to help promote our system and build good relations with our stakeholders; and b) Strengthen relationships and enhance interactions with the Police, Harbor and Fire Departments, along with other City agencies, employee unions and retiree associations.

______

Objective x Promote LAFPP's Emerging Manager Program as a leader in the pension industry

Strategic Initiatives a) Continue building and elevating the profile of our LAFPP Emerging Manager Program. ______

ATTACHMENT II

LAFPP LOS ANGELES FIRE AND POLICE PENSIONS

PROPOSED 2017-18 BUSINESS PLAN

AS SUBMITTED TO THE BOARD: MARCH 16, 2017

2017-18 PROPOSED BUSINESS PLAN INTRODUCTION

The 2015-18 Strategic Plan serves as a blueprint to guide LAFPP in the development of the annual 2017-18 Business Plan and includes the Vision, Mission, Values and Strategic Goals for LAFPP. The Strategic Plan was approved by the Board on February 5, 2015, including the new LAFPP Vision Statement:

To be a leader and innovator in the public pension industry through an uncompromising dedication to excellence, customer service, transparency, and education

The 2017-18 Proposed Business Plan methodically allocates resources to the most critical areas of our operations to successfully accomplish our Mission: To advance the health and retirement security of those who dedicate their careers and risk their lives to protect the people of Los Angeles. Our Business Plan includes ten projects, including five new projects and five carried over from last year. We believe these ten projects are the most critical to ensure we continue to meet the Department’s five primary Goals:

Over the last several years, the Department has been engaged in the Pension Administration System Project, otherwise known as PARIS (Pension and Retirement Information System). This significant Project, which commenced in 2015-16, involves a complete transition of all member data and payment processing to a new system and h a s required a sustained, Department-wide effort to design and build the new system . For 2017-18, the Project will continue to require a considerable amount of L A F P P resources to continue building and testing the system, with implementation anticipated by September 2018.

Another significant project in the 2017-18 Business Plan is the Implement Health Care Options for Members Project to establish alternative health care plans for those who currently receive their coverage through the Los Angeles City Employees’ Retirement System (LACERS) or their health subsidy through the LAFPP Health Insurance Premium Reimbursement Program (HIPR). Enrollment in these health care plans would also be available to all LAFPP pensioners. The Business Plan also includes the Airport Police Transfer Project to ensure that the recently approved Charter amendment to enroll all new Airport Police into the LAFPP Plan is successfully implemented.

Once again, I want to extend my deep appreciation to the Board and staff for its continued support for the Strategic and Business Plans over the years.

Sincerely,

Raymond P. Ciranna, General Manager

2 2017-18 PROPOSED BUSINESS PLAN PROJECT MATRIX SUMMARY

GOAL I – Ensure a Financially Sound Retirement System Project Title Workload Duration Project Objective Level

(1) Lead: 2017-18 To conduct a thorough risk analysis of (NEW) Moderate the Fund’s investment portfolio. Portfolio Risk Analysis Participants: High

GOAL II – Manage Risk Throughout the Organization Project Title Project Objective Workload Duration Level

(2) Lead: 2017-18 To annually provide the Board with (NEW) Moderate specified information relating to the Private Equity fees and returns of specified alternative Investment Fee Participants: investments in compliance with AB Disclosure Moderate 2833. (3) Lead: 2017-18 To verify the status of all age 95+ (NEW) Moderate pensioners and confirm that benefits Alive and Well Audit are received by the intended Participants: recipients. Low

GOAL III – Enhance Customer Service to our Members Project Title Workload Duration Project Objective Level

(4) Lead: 2016-17 To establish health care plans for Implement Health Care High 2017-18 pensioners who currently receive their Options for Members coverage through LAFPP’s agreement Participants: with the Los Angeles City Employees’ High Retirement System (LACERS) or their health subsidy through LAFPP’s Health Insurance Premium Reimbursement Program (HIPR). These health plans would also be available to all LAFPP pensioners.

3 2017-18 PROJECT MATRIX SUMMARY

GOAL III – Enhance Customer Service to our Members

(5) Lead: 2015-16 To design and implement a new Pension PARIS High 2016-17 Administration System that will result in (Pension and 2017-18 improved overall efficiency in the Retirement Information Participants: 2018-19 department’s business operations and System) High continued superior service to our Implementation membership. (6) Lead: 2017-18 To implement the provisions of the (NEW) High Charter amendment (Measure SSS), Airport Police Transfer enrolling all new Airport Police in Tier Participants: 6 and allowing existing Airport Police Moderate the option to transfer from LACERS to Tier 6.

Goal IV – Pursue Operational Efficiencies

Project Title Workload Duration Project Objective Level

(7) Lead: 2015-16 To enhance employee development, Employee Development M o derate 2016-17 recruitment and training to help retain and Training 2017-18 and further develop our talented Participants: LAFPP workforce. Moderate (8) Lead: 2016-17 To provide staff with LAFPP’s manual Administrative Manual Medium 2017-18 updates on Department-wide Updates procedures reflecting administrative Participants: operations and policies. Moderate (9) Lead: 2017-18 To fully leverage the (NEW) High Department’s intranet as a LAFPP Intranet resource to disseminate information Website Redesign Participants: within LAFPP. Moderate

Goal V – Enhance Communication Efforts and Outreach Project Title Workload Duration Project Objective Level

(10) Lead: 2016-17 To provide members with thorough and Increase the Number High 2017-18 timely information regarding our Plan, of Members Reached utilizing a range of communication Participants: methods. Moderate

4 GOAL I – Ensure a Financially Sound Retirement System Project 1: NEW – Portfolio Risk Analysis

Duration: 2017-18 Project Lead: Tom Lopez, Chief Investment Officer, Investments Division Project Participants: General Consultant, Investments Staff Stakeholders: Board Members, Investments Staff, LAFPP Members, and the City

PROJECT To conduct a thorough risk analysis of the Fund’s investment portfolio. OBJECTIVE PROJECT Some commentators believe that the prolonged period of low interest HISTORY rates has caused many investors, in their efforts to achieve their desired rates of investment returns, to assume too much risk in their portfolios.

The purpose of this project is to explore and analyze risk in the pension fund portfolio, over time and in relation to its peers. The objective is to better understand the nature and causes of investment risk and how that risk may have changed over the years.

2017-18 R.V. Kuhns and Staff will produce a report for the Board detailing the DELIVERABLES nature and extent of investment portfolio risk. 2017-18 BY DECEMBER 31, 2017: MILESTONES Staff to produce a risk analysis report and present the information to the Board.

2017-18 Staff will utilize existing resources and will not require additional RESOURCES funding or authorized positions.

5 GOAL II – Manage Risk Throughout the Organization

Project 2: NEW – Private Equity Investment Fee Disclosure

Duration: 2017-18 Project Lead: Tom Lopez, Chief Investment Officer, Investments Division Project Participants: Investments Staff, Private Equity Advisors and Private Equity Funds Stakeholders: Board Members, LAFPP Members, and the City

PROJECT To annually provide the Board with specified information relating to the OBJECTIVE fees and returns of specified alternative investments. PROJECT Assembly Bill No. 2833 was signed into law in 2016 and added Section HISTORY 7514.7 to the Government Code, requiring that effective January 1, 2017 public pension plans annually disclose at a public meeting information relating to the fees, expenses and returns of alternative investments entered into on or after the effective date, as well as existing alternative investments to which additional commitments are made after the effective date, and to make reasonable efforts to obtain such information from such investments existing prior to January 1, 2017. The purpose of this project is to comply with the new law. 2017-18 An annual Private Equity Fee Report covering the preceding calendar DELIVERABLES year will be presented to the Board before the end of each calendar year.

2017-18 BY DECEMBER 31, 2017: MILESTONES Staff will prepare and present to the Board a Private Equity Fee Disclosure Report for the 2016 calendar year.

Subsequent reports will be presented before the end of each calendar year, and will cover the preceding calendar year.

2017-18 Staff does not anticipate requiring additional funding or authorized RESOURCES positions.

GOAL II – Manage Risk Throughout the Organization

Project 3: NEW – Alive and Well Audit

Duration: 2017-18 Project Lead: Myo Thedar, Manager, Retirement Services Section Project Participants: Retirement Services Section Stakeholders: LAFPP Members

PROJECT To verify the status of all age 95+ pensioners and confirm that OBJECTIVE benefits are received by the intended recipients. PROJECT The City Controller’s Office conducted an audit in 1986 which contained HISTORY a recommendation that the Department verify the status of age 90+ pensioners. To achieve this objective, the Department utilized a contractor to conduct “alive and well” interviews with these pensioners in-person. The last in-person alive and well audit was completed in 2012. It consisted of 540 pensioners, 77% of whom resided in California. The audit took 10 months to complete and the total cost was $95,000.

In February 2014, after reviewing the intent of these audits, required resources and associated costs, and having surveyed several other systems, staff recommended that audits be performed in-house using online electronic audit services without the assistance of an investigative services consultant. These electronic audits are conducted monthly by staff and have proven successful in identifying pensioners who have passed away.

However, in light of recent news articles on pension fraud in New York, Japan, and Florida, some in-person interactions with our Age 95+ population is warranted to ensure that intended recipients are receiving pension payments. The in-person audit is intended to complement the use of existing online audit services. 2017-18 Updated contact information for members; in-person visit with Age 95+ DELIVERABLES members; investigative reports to confirm intended recipient of pension benefits; investigator contact with Social Services if warranted; staff contact with Department of Aging and LARFPA if warranted; and improved welfare for members. 2017-18 BY SEPTEMBER 30, 2017: MILESTONES Board report to authorize RFP for investigative services and approve selection of consultant(s).

BY DECEMBER 31, 2017: Pensioner notification of audit; pensioner response to such notification; pensioner notification of auditor information; in-person visits commence.

BY JUNE 30, 2018: In-person visits completed and audit reports received/reviewed by staff.

2017-18 The 2017-18 Proposed Budget includes a total of $40,000 for an RESOURCES investigative services consultant.

GOAL III – Enhance Customer Service to our Members

Project 4: Implement Health Care Options for Members

Duration: 2016-17, 2017-18 Project Lead: Mark Granado, Manager, Medical & Dental Benefits Section Project Participants: Medical & Dental Benefits Section Staff, LACERS, LAFPP Health Consultant, and the City Attorney’s Office Stakeholders: LAFPP Management, LAFPP Retired Members, and Board-approved Medical and Dental Insurance Plan Providers (aka, “Associations”)

PROJECT To implement alternative medical, dental and vision insurance coverage OBJECTIVE options for those who currently receive their coverage through LAFPP’s agreement with the Los Angeles City Employees’ Retirement System (LACERS) or their health subsidy through the LAFPP Health Insurance Premium Reimbursement Program (HIPR). Enrollment in these Plans would also be available to all LAFPP pensioners. PROJECT A small group of LAFPP pensioners has received medical/dental HISTORY insurance coverage through LACERS health plans since LACERS took over civilian retiree health plan administration from the Personnel Department in 1999. Through an agreement with LACERS, LAFPP has offered coverage through LACERS health plans to Port Police who retired under the Fire and Police Pension Plan, as well as retired firefighters who were not eligible to participate in plans offered by the United Firefighters of Los Angeles City or the Los Angeles Firemen’s Relief Association. LACERS has agreed to cover these LAFPP members through the end of December 2017, at which time only those pensioners who were enrolled prior to January 1, 2000, will be allowed to remain in their plans.

At the November 17, 2016 meeting, the Board authorized the release of Requests for Proposals (RFPs) for group medical, dental and vision insurance plans. The purpose of the RFPs is to find suitable medical, dental and vision insurance plans for the group of LAFPP pensioners losing access to their current LACERS plans, as well as for future Port Police and Airport Police Officers as they retire. However, these plans would be open to all retired members and surviving spouses.

2017-18 a) Work with LAFPP’s health consultant to review carrier responses to the DELIVERABLES Requests for Proposals (RFP) for group medical, dental and vision plans. Implementation to include negotiation and contracting with health carriers. Present recommended plans to the Board for approval.

b) Conduct Open Enrollment in Fall 2017.

c) Successfully enroll pensioners and qualifying spouses into new plans with coverage effective January 1, 2018.

Project 4: Implement Health Care Options for Member (Continued)

2017-18 BY SEPTEMBER 30, 2017: MILESTONES Present recommended plans and rates to the Board for approval by July 2017.

Work with LAFPP’s health consultant to complete Open Enrollment packets and prepare for distribution.

BY DECEMBER 31, 2017: Complete enrollment of all LACERS subgroup members who lost LACERS plan coverage, as well as other pensioners or qualifying spouses who choose to enroll. 2017-18 The 2 0 1 7 - 1 8 P r o p o s e d Budget includes a total of $75,000 for RESOURCES health consulting services, to account for the estimated costs for implementing the RFP’s (negotiating and contracting with health carriers) and completing the Open Enrollment for Calendar Year 2018. The 2017-18 Proposed Budget also includes funding for additional staff to administer the new medical, dental and vision insurance coverage options.

GOAL III – Enhance Customer Service to our Members

Project 5: PARIS (Pension and Retirement Information System) Implementation (formerly Pension Administration System Replacement)

Duration: 2015-16, 2016-17, 2017-18, and 2018-19 Project Lead: Alfred Domagat, Sr. Systems Analyst II, Systems Section Project Participants: LAFPP Staff, Consultants, Northern Trust, the Information Technology Agency (ITA), and Office of the Controller Stakeholders: LAFPP Staff and Management, and LAFPP Members and Beneficiaries

PROJECT To design and implement a new Pension Administration System that will OBJECTIVE result in improved overall efficiency in the department’s business operations and continued superior service to our membership. PROJECT The Request for Proposal (RFP) to replace the current Pension HISTORY Administration System was released in July 2014 with several bids received in October 2014. The Evaluation Team reviewed the bids and selected Xerox State and Local Systems, Inc (Xerox) as the top-ranking vendor with the lowest cost. The Board awarded the contract to Xerox on May 21, 2015 and implementation of the project began in July 2015. The new system that is being developed was later named PARIS (Pension and Retirement Information System).

For the last couple of years, staff has worked with the Xerox team to setup the hosting environment, confirm and document the various specifications for PARIS, and deliver in phases, newly developed system functionality for testing and validation by LAFPP staff. The major system functionalities delivered include Core Calculations for Service Retirement, DROP, Disability, and Terminations as well as Secondary Calculations involving Service Purchases, Enrollment, Deaths, and QDROs. All discrepancies and defects were logged and addressed for resolution and re-testing. 2017-18 will serve as the third year of project implementation.

2017-18 a) Identify for correction all system functionality that have issues/defects DELIVERABLES in prior rollout/testing.

b) Configure and deliver for testing all system functionality for User Acceptance Testing which includes defect repair of major issues identified to move forward with the “Go Live” production rollout.

c) Ongoing data cleansing and data conversion.

Project 5: PARIS (Pension and Retirement Information System) Implementation (formerly Pension Administration System Replacement) (Continued)

2017-18 BY December 31, 2017: MILESTONES Delivery for testing of corrected system functionality that had issues/defects in prior rollout testing.

BY JUNE 30, 2018: Delivery and testing of all system functionality for User Acceptance Testing which includes defect repair of major issues identified to move forward with the “Go Live” production rollout (by April 30, 2018).

2017-18 On May 21, 2015, the Board approved an amount not to exceed $9.02 RESOURCES million to implement a new Pension Administration System (PAS) (3 years) and provide post-implementation services (5 years) by Xerox State and Local Systems, Inc. The Board also approved LRWL, Inc. to provide oversight project management and quality assurance services for an amount not to exceed $1.16 million.

Approximately $2.293 million for the PARIS Project is included in the 2017-18 Proposed Budget, consisting of $1,903,000 for Xerox State and Local Systems, Inc. and $390,000 for LRWL, Inc.

GOAL III – Enhance Customer Service to our Members

Project 6: NEW – Airport Police Transfer

Duration: 2017-18 Project Lead: Joseph Salazar, Assistant General Manager, Pensions Division Project Participants: LAFPP, ITA, Department of Airports (LAWA), LACERS, and the City Attorney’s Office Stakeholders: Airport Police and the City

PROJECT To implement the provisions of the Charter amendment (Measure SSS), OBJECTIVE enrolling all new Airport Police in Tier 6 and allowing existing Airport Police the option to transfer from LACERS to Tier 6. PROJECT During labor negotiations with the Airport Police bargaining units, the City HISTORY agreed to place on the State General Election ballot a Charter amendment that proposes certain retirement benefit enhancements for this group.

On November 8, 2016, a majority of voters approved the Charter amendment (Measure SSS) which includes the following provisions:

1) Enrolls all new Airport Police hired on or after January 7, 2018 into Tier 6;

2) Allows current Airport Police (hired prior to January 7, 2018) to transfer into Tier 6 from LACERS at their own expense; and

3) Permits new Airport Police Chiefs to join LACERS rather than participate in Tier 6. 2017-18 Adapt all internal/external systems, forms and publications to include DELIVERABLES Airport Police; work with LACERS to provide benefit counseling and service purchase estimates to all current Airport Police so they may make an informed transfer election. 2017-18 BY SEPTEMBER 30, 2017: MILESTONES a) Continue counseling sessions for Airport Police eligible to transfer from LACERS.

BY DECEMBER 31, 2017: a) Complete counseling of all Airport Police eligible to transfer from LACERS.

b) Finalize testing and implementation of City payroll system and pension administration system changes necessary to integrate Airport Police into Tier 6.

c) Develop outreach plan for new Airport Police hires.

BY MARCH 31, 2018: Complete integration of Airport Police into all LAFPP materials and publications. 2017-18 Funding for related IT enhancements is included in the 2017-18 Proposed RESOURCES Budget. The Department of Airports will reimburse LAFPP for costs associated with this project, including staff salaries, legal, and actuarial consulting fees.

12 Goal IV – Pursue Operational Efficiencies

Project 7: Employee Development and Training

Duration: 2015-16, 2016-17, 2017-18 Project Lead: Lindi Willhite, Sr. Personnel Analyst I, Administrative Services Section - Human Resources Project Participants: All Sections Stakeholders: LAFPP Staff and Management

PROJECT To enhance the LAFPP employee development, recruitment and OBJECTIVE training program to help retain and further develop our talented workforce, to encourage employee professional growth creating a culture of excellence required for the long-term success of LAFPP.

PROJECT With approximately 37% of the current LAFPP workforce eligible to retire HISTORY in the next few years, it is vital that LAFPP continue to support efforts to train, develop and recruit staff. LAFPP’s training program is supported strongly by Executive Management and the Department has significantly increased the amount of training completed by staff over the last few years.

Starting in 2015-16 as part of the Business Plan, all staff were required to take at least two training courses every fiscal year. Our compliance rate that year was 80%. For 2016-17, we are on track to meet our goal of all staff taking at least two training courses and as of March, 2017, 41% have already met this requirement which is a significant improvement from 2015- 16. In 2016-17, brown bag seminars on Workplace Violence, Creating Work- Life Balance, and the LAFPP budget process have been conducted.

2017-18 Ensure all LAFPP staff take at least two (2) non-mandated training sessions DELIVERABLES of their choice and schedule two (2) Brown Bag Lunch sessions in 2017-18.

2017-18 BY JUNE 30, 2018: MILESTONES Ensure all staff attend two training sessions of their choice and schedule two (2) Brown Bag Lunch sessions. 2017-18 Funding totaling $20,300 is estimated for Annual Training programs and RESOURCES this amount is included in the 2017-18 Proposed Budget. There is also additional training, travel, and tuition reimbursement funding for professional development opportunities.

13 Goal IV – Pursue Operational Efficiencies

Project 8: Administrative Manual Updates

Duration: 2016-17, 2017-18 Project Lead: Diana Pointer, Sr. Management Analyst II, Administrative Services Section Project Participants: Administrative Services Stakeholders: LAFPP Staff and Management

PROJECT To provide staff with LAFPP’s manual updates on Department-wide OBJECTIVE procedures reflecting administrative operations and policies. PROJECT Administrative Operations manuals are designed for standard tasks that HISTORY encompass general office policies & procedures, EEO, employment policies & procedures, building operations, document imaging, safety, emergency planning, budget programs, and related projects. LAFPP manuals exist but some need to be reviewed and updated.

For 2016-17, staff will complete new headquarters-related procedures and manuals including building operations and emergency procedures. Staff are also in the process of updating other manuals relating to Department- wide Administrative Policies and Procedures, Contracts and Board Elections.

2017-18 In 2017-18, staff will continue to update these manuals and will complete DELIVERABLES them by June 30, 2018. Staff will also complete a Document Imaging Governance manual to provide policy and guidelines to staff. The document imaging manual will ensure the Department’s operations align with the Los Angeles Administrative Code and document imaging industry standards. Staff will ensure the timely completion of this manual and will distribute it to LAFPP through the DocuShare system.

2017-18 BY JUNE 30, 2018: MILESTONES Complete the following manuals: Administrative Policies and Procedures, Contracts, Board Elections and Document Imaging Governance.

2017-18 Existing staff will be utilized to update manuals and procedures. RESOURCES

14 Goal IV – Pursue Operational Efficiencies

Project 9: NEW – LAFPP Intranet Website Redesign

Duration: 2017-18 Project Lead: Bob Yan, Director of Systems, Systems Section Project Participants: All Sections Stakeholders: LAFPP Staff and Management

PROJECT To fully leverage the Department’s intranet as a resource to OBJECTIVE disseminate information within LAFPP. PROJECT The current LAFPP intranet website was developed more than ten years HISTORY ago with tools available at that time. Since then, technology has advanced and many more tools have been developed that have enhanced features in navigation and user functionality. The redesign of the intranet website will provide easier access to information within a single portal and more flexibility in managing content. 2017-18 Redesign and develop a new intranet website with additional information DELIVERABLES for sharing and establish processes in updating the content.

2017-18 BY DECEMBER 31, 2017: MILESTONES a) Review existing content and gather new requirements from all sections and management;

b) Research and evaluate available open source software tools to design and develop websites; and

c) Complete training and implement the website tools.

BY JUNE 30, 2018: a) Design, develop, test, and deploy new intranet website; and

b) Implement processes and procedures in website maintenance and content update.

2017-18 Existing staff will be utilized to redesign the website. No additional RESOURCES funding is required.

15 GOAL V – Enhance Communication Efforts and Outreach

Project 10: Increase the Number of Members Reached

Duration: 2016-17, 2017-18 Project Lead: Carol Tavares, Manager, Communications & Education Section Project Participants: Pensions Division Staff Stakeholders: Board Members, LAFPP Staff, LAFPP Members, and the City

PROJECT To provide members with thorough and timely information regarding our OBJECTIVE Plan, utilizing a range of communication methods. PROJECT This project expands from the last fiscal year where the number of HISTORY seminars was increased and additional formats and locations were added to accommodate the growing interest in attending Financial Planning Education Seminars.

Staff participates in various other outreach events hosted by the Unions and Associations, and benefit presentations are also offered to members at their work locations. The number of members reached increased approximately 10% from 2015-16 to 2016-17.

A large percentage of the members reached were from LAPD because of the high number of events hosted by the Police Protective League. Outreach should be extended to the Port Police and Fire members.

Beginning in January 2018, all new Airport Police hires will become members of LAFPP Tier 6 upon completion of basic training. These new members will need to be incorporated into our outreach efforts going forward.

2017-18 Increase outreach efforts to include Port Police, Firefighters, and Airport DELIVERABLES Police. Increase the total number of members reached by 5%.

2017-18 BY SEPTEMBER 30, 2017: MILESTONES Develop a campaign strategy to reach more Port Police and Fire members.

BY DECEMBER 31, 2017: Develop a plan for outreach to new Airport Police members.

BY JUNE 30, 2018: Implement the outreach strategies and meet the 5% target goal. 2017-18 No additional funds are anticipated. RESOURCES

DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA 90013 (213) 279-3000

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

DATE: MARCH 16, 2017 ITEM: A.4

FROM: RAYMOND P. CIRANNA, GENERAL MANAGER

SUBJECT: 2017-18 PROPOSED BUDGET AND POSSIBLE BOARD ACTION

RECOMMENDATION

That the Board approve the 2017-18 Proposed Budget (Attachment) and instruct staff to submit it to the City Administrative Officer (CAO) and the Mayor’s Office for inclusion in the Mayor’s 2017-18 Proposed Budget.

DISCUSSION

Los Angeles Fire and Police Pensions (LAFPP) is tasked with administering the defined benefit retirement plan for all sworn employees of the City of Los Angeles in an efficient manner. Consequently, we have sustained a disciplined approach to stay within our current year budget and we are confident that the 2017-18 Proposed Budget will help us continue providing excellent customer service to our members, maintain our fiduciary responsibilities, and implement best practices.

The LAFPP 2017-18 Proposed Budget includes the estimated City’s (employer) annual required contributions to prefund LAFPP retirement and healthcare benefits, and also member (employee) contributions, investment earnings, pension benefit payments, investment management fees, and the estimated departmental administrative expenses. A final 2017-18 Budget will be submitted for Board approval on June 15, 2017 to include the City’s Adopted Budget contribution receipts from the City and estimated member contributions.

To help develop the 2017-18 Budget, staff utilized the following key items:

1. The Three-Year 2015-18 Strategic Plan – a plan that effectively guides our Department and includes our Vision, Mission, Strategic Goals and Values; 2. The Annual Business Plan – a plan that includes specific projects in support of our Strategic Plan; 3. Performance Metrics – a tool that helps us measure our services and provides a basis for prioritizing business improvements; and 4. Mayor’s Priority Outcomes - goals aimed to drive greater efficiency and effectiveness in the operations and services provided by the City.

In addition, staff were instructed that all new budget requests should relate to the following LAFPP budget priorities:

• Continue Funding Existing Business Plan Projects • Fund new Business Plan Projects that meet our Strategic Goals • Pursue Innovative Technology Solutions • Risk Assessment • Customer Service • Employee Development and Training • Performance Metrics • Succession Planning

This year’s Proposed LAFPP Budget totals approximately $1.3 billion, a $66.0 million increase from 2016-17 levels. This increase is mostly due to $60.8 million in anticipated increases in health and pension retirement payments. Investment expenses are projected to increase slightly by approximately $3.4 million because of projected growth in asset size in 2017-18.

The proposed LAFPP Administrative Expense Budget totals approximately $23.7 million, a net increase of about $396,000 from 2016-17. The increase is due to additional administrative expenses associated with:

• The increased workload from the transfer of Police Airport Officers from the Los Angeles City Employees’ Retirement System (LACERS) to LAFPP. (Note: LAFPP will be reimbursed by Los Angeles World Airports for all costs associated with this Airport Police transfer); • The creation and management of medical, dental, and vision plans for members transitioning from LACERS health plans, and new enrollees from Port Police, Airport Police, and any other member transferring from a health plan offered through an association; and, • The next phase of the Pension Administration System Replacement Project.

Provided below are additional details of the anticipated receipts and expenditures.

RECEIPTS

LAFPP receives revenue primarily from three sources; the City’s (employer) contribution, member (employee) contributions, and investment earnings. Collectively for 2017-18, these sources are estimated at $1.2 billion.

1) City’s Contribution (Schedules 1 & 2)

The City’s total contribution is based on the application of the actuarial calculated rates for each Tier to the budgeted sworn payroll amounts. Each year, the LAFPP Board of Fire and Police Pension Commissioners (Board) adopts a contribution rate that is applied to the sworn payroll to fund the retirement and retiree health care benefits promised by the City to its sworn LAFPP members. On December 1, 2016, the Board adopted the pension and health valuation reports for the period ending June 30, 2016 that established the City’s combined contribution rate of 44.26% for sworn members of the Los Angeles Fire Department and the Los Angeles Police Department, and 32.91% for the Harbor Port Police. These figures mark decreases of (-0.28%) and (-0.67%) from 2016-17 respectively, due to lower than expected Cost of Living Adjustment (COLA) in 2015-16, lower than expected salary increases for active sworn members, as well as slightly higher than expected return on the valuation value of assets.

Board Report Page 2 March 16, 2017 Because the 2017-18 sworn payroll amounts have not yet been finalized, LAFPP uses the 2016-17 sworn payroll amounts with the Board-adopted contribution rates to determine the City’s estimated 2017-18 contribution for purposes of the Proposed Budget. Based on these amounts, the 2017-18 total City contribution to LAFPP, which is comprised of the City’s General Fund, Special Fund (Harbor Department), and the City’s Excess Benefit Plan payment, is estimated to be $616.9 million, a decrease of $3.9 million (-0.6%) from the 2016-17 Budget (Schedule 2).

The City’s actual 2017-18 contribution amount will be adjusted after the 2017-18 Adopted Budget for sworn payroll accounts is approved by the City Council and the Harbor Commission. The revised amount will be included in the 2017-18 Final Budget to be presented to the Board on June 15, 2017.

2) Member Contributions (Schedules 1 & 3)

Using 2016-17 sworn payroll amounts, total member contributions are estimated at $143.9 million, an increase of $1.7 million (1.2%) from the 2016-17 Budget (Schedule 3). The proposed member contribution amount will also be adjusted after the City’s 2017-18 Budget is adopted. Member contributions are calculated based on the member’s obligation or contribution rate for each Tier. These rates range from 7% to 9% for members in Tiers 2 through 5 while members in Tier 6 contribute 11% of salary. In addition, members of Tiers 2 through 5, who elected to unfreeze their future retiree medical subsidy, make additional 2% “opt-in” contributions.

3) Investment Earnings (Schedule 1)

The third major source of revenue for the System is derived from investment earnings, which consists of “Earnings on Investments” and “Gain (Loss) on Sale of Investments.”

• Earnings on Investments - includes interest and dividends, real estate income, securities lending income and miscellaneous income. Earnings on Investments for 2017-18 are estimated at $392.6 million, an increase of $67.6 million (20.8%) from 2016-17. The increase is due to a projected higher earnings trend based on actual earnings received for the past two years.

• Gain (Loss) on Sale of Investments - includes capital gains/losses as investments are sold. These estimated receipts are not included in the Proposed Budget because it is difficult to determine in advance which investments will be sold within the year. Additionally, the gains and losses will fluctuate significantly from year to year depending upon market conditions. As such, gains/losses on sale of investments are recorded in our financial statements and future budget cycles after the amount is audited.

2017-18 Budget - Receipts 34.1% 53.4% City (Employer) Contribution

Member Contributions

12.5% Investment Earnings*

*Investment Earnings do not include Gain (Loss) on Sale of Investments

Board Report Page 3 March 16, 2017 Five-Year Receipts History

In Millions $2,500

$2,000

$1,500

$1,000

$500

2013-14 2014-15 2015-16 * 2016-17 *2017-18 Actual Actual Actual Budget Budget

Investment Earnings* Member Contributions City (Employer) Contribution *Investment Earnings do not include Gain (Loss) on Sale of Investments

EXPENDITURES

1) Pension Benefits Expenses (Schedule 1)

2017-18 pension benefits expenses represent 90.5% of total 2017-18 estimated expenditures and are projected at $1.1 billion, a net increase of $60.8 million (5.7%) from the 2016-17 Budget. Expenses include service pensions, DROP distributions, disability and survivorship pensions, refunds of contributions, and health/dental subsidies and Medicare reimbursements. The benefit expense increases and decreases are grouped by Pension Expenses and Health Benefit Expenses:

• Pension Benefit Expenses ($990.5 million) – $48.5 million net increase (5.1%) based on the following: o Service Pensions ($630.0 million) - $40.0 million increase (6.8%) based on a three-year average of rate changes in actual expenditures; o DROP Distributions ($115.0 million) - $10.0 million increase (9.5%) based on projected payments for 200 mandatory exits expected in 2017-18; o Disability Pensions ($115.0 million) - $5.0 million decrease (-4.2%) based on an average trend of Disability Pension claims received. Claim requests went from 40 in 2014, 46 in 2015, to only 33 in 2016. The decrease in pension claim requests was also checked against current year disability pension expenses; o Surviving Spouse Pensions ($124.0 million) - $3.0 million increase (2.5%) based on a three- year average of rate changes in actual expenditures; and o Minor/Dependent Pensions – ($3.0 million) - $500,000 increase (20.0%) based on a three-year average of rate changes in actual expenditures.

Board Report Page 4 March 16, 2017

• Health Benefit Expenses ($142.2 million) - $12.3 million increase (9.5%) based on the following: o Health Insurance Subsidy ($123.0 million) – $10.0 million increase (8.8%) based on additional retirees receiving a health insurance subsidy and the maximum available rate increase of 7% effective July 2017 for non-Medicare members (This item will be considered at a subsequent Board meeting and staff will adjust the amount for the Adopted Budget in June, per Board action) and a 7% projected rate of increase effective December 2017 for Medicare members. Pursuant to Los Angeles Administrative Code Section 4.1154(c), the Medicare subsidy is linked to the highest Medicare plan premium for LACERS members; o Dental Insurance Subsidy ($4.5 million) – $400,000 increase (9.8%) based on an increase in the number of retirees receiving a dental insurance subsidy and a 5% increase in the dental insurance subsidy. This subsidy is linked to the LACERS dental subsidy; o Medicare Reimbursement ($12.5 million) –$1.0 million increase (8.7%) based on an increase in the number of retirees receiving a Medicare reimbursement and an anticipated 5% increase to the Medicare reimbursement rate effective January 2018; and o Health Insurance Premium Reimbursement (HIPR) ($2.2 million) – $900,000 increase (69.2%) based on an expansion of the HIPR Program and contingency planning by LAFPP for those pensioners transferring from LACERS health plans who could enroll in HIPR, upon loss of their LACERS plan coverage.

2) Investment Management Expense (Schedule 4)

Investment management expenses for the 2017-18 Proposed Budget represent 7.6% of total 2017- 18 estimated expenditures and are projected at $94.5 million, an increase of about $3.4 million (3.7%) from the 2016-17 Budget and are derived as follows (amounts have been rounded):

Type/Asset Class 2017-18 Investment Expense Percentage of 2017-18 Total Budget Investment Expense Budget Consultants & Bank $796,000 0.8% Services Public Equity $24.52 million 26.0% Fixed Income $8.81 million 9.3% Private Equity $33.96 million 35.9% Commodities $3.57 million 3.8% Real Estate $22.86 million 24.2% TOTAL $94.52 million 100%

Actual payments to investment managers depend on the dollar amount of assets under management, the portfolio performance, the period in which the fee is calculated, and the terms and conditions of the individual contracts as approved by the Board. These investment management expenses are reasonable and in line with the growth in the portfolio.

The changes by asset class are primarily attributed to the following (amounts have been rounded):

• Public Equity – $395,000 net increase to overall Public Equities as a result of a $491,000 decrease in public equity fees due to the reallocation of assets to lower cost managers and an increase of $886,000 in emerging market public equity fees due to an increase in asset values; • Fixed Income – $559,000 increase mainly due to increases in asset values;

Board Report Page 5 March 16, 2017 • Private Equity – $2.8 million increase due to an increase in private equity commitments because of asset allocation changes approved by the Board; • Commodities - $1.1 million increase due to increased commitments to commodities; and • Real Estate – $1.5 million decrease mostly due to the sale of a property and increased commitments to core commingled funds.

3) Administrative Expense (Schedules 5 & 6) The proposed LAFPP Administrative Expense Budget totals approximately $23.7 million, a net increase of about $396,000 (1.7%) from 2016-17. Administrative expenses include staff salaries and benefits, operating costs, and funding for contingencies. The proposed budget aims to maintain critical programs that are prioritized as mandatory and essential to the Department’s business operations. Details of the significant proposed changes are listed below (amounts have been rounded).

• Salaries, General – $220,000 net increase to add four new positions for the following services: o (1) Management Analyst for the Investments Division due to, increased compliance regulations, reporting and growth of the Fund; and o (1) Benefits Specialist, (1) Senior Administrative Clerk, and (1) Management Analyst for the Medical & Dental Benefits Section to assist with an increased workload resulting from the creation and management of medical, dental, and vision plans for members transitioning from LACERS medical and dental plans, and new enrollees from Port Police, Airport Police and any other member transferring from a plan offered through an association; • Salaries, As-Needed – $26,000 decrease due to the completion of current year projects, such as the DocuShare document migration being completed in 2016-17; • Overtime - $12,285 increase due to Airport Police outreach and testing of the new pension administration system; • Employee Benefits – $109,000 net increase to more accurately reflect estimated 2017-18 expenditures as a result of additional staff added and an increase in employee salaries; • Printing and Binding – $21,000 increase due to the estimated printing and mailing of Open Enrollment packages to all plan members for new LAFPP administered medical, dental, and vision plans; • Contractual Expense – increase of $447,000 based on the following: o $96,000 net decrease in City Attorney-related expenses including a $45,700 decrease in costs associated with the City Attorney’s Office and a net decrease of $50,000 for outside legal counsel expenses to accurately reflect estimated expenditures; o $100,000 increase in Actuarial Services as a result of additional work required due to the transfer of Airport Police from LACERS to LAFPP. (Note: Los Angeles World Airports will reimburse LAFPP for actuarial costs associated with this increase); o $40,000 increase due to the investigative services needed for the new Business Plan Project, Age 95+ Alive and Well Audit, for the Retirement Services Section; and o $547,000 increase due to contractual obligations associated with the Pension Administration System Replacement Project; and o $144,000 net decrease in various contractual services as a result of the elimination of one- time expenses and other costs savings identified by staff. • Election Expenses – $25,000 decrease due to no scheduled elections planned for Active or Retired Board Members in 2017-18;

Board Report Page 6 March 16, 2017 • Office and Administrative Expense – $67,000 decrease due to the elimination of one-time expenditures related to the purchase of new laptops and other replacements of department-wide PC, printers and hardware being completed in 2016-17; • Furniture, Office and Technical Equipment – $40,000 decrease due to the elimination of one-time funding for the Intrusion Prevention System and the Backup Network upgrade in 2016-17; and • Unappropriated Balance (UB) –$253,000 decrease to $0. LAFPP is not recommending any funding for contingencies in 2017-18.

2017-18 Budget - Expenditures Administrative Expense 1.9% 7.6% Investment Management Expense 11.4%

Medical and Dental Subsidy 0.3%

Refund of Contributions 50.4% 10.2%

Surviving Spouse and Minors/Dependents Pensions Disability Pensions

Service Pensions - DROP payout 9.2%

Service Pensions 9.2%

Five-Year Expenditure History In Millions Administrative Expense $1,400

Investment Management Expense $1,200

Medical and Dental Subsidy $1,000

Refund of Contributions $800

Surviving Spouse and $600 Minor/Dependent Pensions Disability Pensions $400

Service Pensions - DROP payout $200 2013-14 2014-15 2015-16 2016-17 2017-18 Actual Actual Actual Budget Proposed Service Pensions Budget

Board Report Page 7 March 16, 2017 Personnel Resolution & Personnel Changes (Schedules 7 & 8)

The Personnel Resolution provides employment authorization for all Department employees, whereas the Detail of Personnel Changes illustrates the proposed changes to the Civil Service classifications for 2017-18. Along with the four new positions being requested, the Personnel Resolution includes consolidation of several classifications and pay grades into one classification per the new Memorandum of Understandings with the unions. These pay grade consolidations include Management Analyst, Systems Analyst and Accountant as noted in in the Detail of Personnel Changes.

This report was prepared by:

Mark Granado, Senior Management Analyst I Administrative Services Section

RPC:WSR:SHC:DP:MG

Attachment: 2017-18 Proposed Budget Schedules

Board Report Page 8 March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-18 Proposed Budget

TABLE OF CONTENTS

Schedule Page

2017-18 BUDGET SCHEDULE 1 2

DETAIL OF CITY AND HARBOR CONTRIBUTION REQUIREMENTS SCHEDULE 2 3

DETAIL OF ESTIMATED PAYROLLS AND MEMBER CONTRIBUTIONS SCHEDULE 3 5

DETAIL OF INVESTMENT MANAGEMENT EXPENSE SCHEDULE 4 6

ADMINISTRATIVE EXPENSE SCHEDULE 5 8

DETAIL OF ADMINISTRATIVE EXPENSE SCHEDULE 6 9

PERSONNEL RESOLUTION SCHEDULE 7 12

DETAIL OF PERSONNEL CHANGES SCHEDULE 8 14

ORGANIZATION CHART SCHEDULE 9 16

TRAVEL RESOLUTION SCHEDULE 10 20

1 2017-18 Proposed Budget - March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-18 Proposed Budget Schedule 1

Adopted Estimated Change from % Change Receipts Budget Receipts Budget Budget from Budget 2015-16 2016-17 2016-17 2017-18 2016-17 2016-17 RECEIPTS

624,463,729 616,234,998 616,234,998 Total General Fund 1 612,408,133 (3,826,865) (-0.6%) (563,500) (1,303,600) (1,303,600) less: Excess Benefit Plan (EBP)1 (1,250,000) 53,600 (-4.1%) 623,900,229 614,931,398 614,931,398 General Fund to LAFPP 611,158,133 (3,773,265) (-0.6%) 4,237,083 4,547,876 4,547,876 Special Fund (Harbor) 4,456,881 (90,995) (-2.0%) 628,137,312 619,479,274 619,479,274 City Contribution (to LAFPP) 615,615,014 (3,864,260) (-0.6%)

129,733,559 142,160,559 137,506,908 Member Contributions 143,880,677 1,720,118 1.2% 484,868,483 325,000,000 351,232,461 Earnings on Investments 392,616,090 67,616,090 20.8% 439,703,707 - - Gain (Loss) on Sale of Investments 2 - - 3,356,964 2,000,000 3,043,935 Miscellaneous 2,500,000 500,000 25.0%

1,685,800,025 1,088,639,833 1,111,262,578 Total Receipts 1,154,611,781 65,971,948 6.1%

Adopted Estimated Change from % Change Expenditures Budget Expenditures Budget Budget from Budget 2015-16 2016-17 2016-17 2017-18 2016-17 2016-17 EXPENDITURES

573,741,855 590,000,000 610,194,042 Service Pensions 630,000,000 40,000,000 6.8% 181,495,545 105,000,000 110,376,001 Service Pensions - DROP payout 115,000,000 10,000,000 9.5% 112,097,385 120,000,000 111,679,236 Disability Pensions 115,000,000 (5,000,000) (-4.2%) 117,553,409 121,000,000 121,599,813 Surviving Spouse Pensions 124,000,000 3,000,000 2.5% 2,407,917 2,500,000 2,467,740 Minor/Dependent Pensions 3,000,000 500,000 20.0% 3,067,069 3,500,000 2,668,628 Refund of Contributions 3,500,000 - 0.0% 990,363,180 942,000,000 958,985,460 Subtotal Pension Benefits 990,500,000 48,500,000 5.1% 102,171,944 113,000,000 107,922,258 Health Insurance Subsidy 123,000,000 10,000,000 8.8% 3,861,676 4,100,000 4,071,046 Dental Insurance Subsidy 4,500,000 400,000 9.8% 9,614,045 11,500,000 10,119,553 Medicare Reimbursement 12,500,000 1,000,000 8.7% 1,030,778 1,300,000 1,271,883 Health Insurance Premium Reimb 2,200,000 900,000 69.2% 116,678,443 129,900,000 123,384,740 Subtotal Health Benefits 142,200,000 12,300,000 9.5% 1,107,041,623 1,071,900,000 1,082,370,200 Total Benefits Expenses (90.5%) 1,132,700,000 60,800,000 5.7%

77,289,035 91,152,419 87,179,078 Investment Management Expense (7.6%) 94,518,234 3,365,815 3.7% 20,897,310 23,270,652 22,552,053 Administrative Expense (1.9%) 23,667,000 396,348 1.7% 1,205,227,968 1,186,323,071 1,192,101,330 Total Expenditures (100.0%) 1,250,885,234 64,562,163 5.4%

Increase (Decrease) 480,572,057 (97,683,238) (80,838,752) in Fund Balance (96,273,453) 1,409,786 (-1.4%)

Total Expenditures and Increase 1,685,800,025 1,088,639,833 1,111,262,578 (Decrease) in Fund Balance 1,154,611,781 65,971,948 6.1%

1 On May 6, 2010, the Board authorized a credit to be applied towards the City's Annual Required Contribution equal to the amount budgeted for the Excess Benefit Plan (EBP), as calculated by the actuary. As such, beginning in 2010-11, the total General Fund Contribution in a given fiscal year is the sum of the General Fund and EBP line items. However, since EBP revenue is not transferred to LAFPP, it is excluded from the Department's total revenue.

2 Gain (Loss) on Sale of Investments is recorded in LAFPP financial statements after the amount is audited and therefore an amount is not included in the budget.

2 2017-18 Proposed Budget - March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-18 Proposed Budget Schedule 2 Detail of City and Harbor Contribution Requirements (Assuming Contributions Made on July 15, 2017) % Projected Contribution 1 of Payroll Payroll = Required TIER 1 requirements: 1. Unfunded supplemental present value annual amount N/A N/A 14,845,840 2. Health subsidy unfunded actuarial accrued liability annual amount N/A N/A 1,701,267 Subtotal 16,547,107 TIER 2 requirements: 1. Entry age cost 24.35% 1,383,704 336,932 2. Unfunded supplemental present value annual amount* 0.41% 1,383,703,751 5,673,185 3. Pension Admin Expenses 0.91% 1,383,704 12,592 4. Health subsidy entry age cost 3.48% 1,383,704 48,153 5. Health subsidy unfunded actuarial accrued liability annual amount* 4.16% 1,383,703,751 57,562,076 6. Health Admin Expenses 0.06% 1,383,704 830 Subtotal 63,633,768 * Unfunded Actuarial Accrued Liability (UAAL) expressed as a percent of payroll for all active members. TIER 3 requirements: 1. Entry age cost 16.57% 89,940,744 14,903,181 2. Unfunded supplemental present value annual amount* 2.82% 1,383,703,751 39,020,446 3. Pension Admin Expenses 0.91% 89,940,744 818,461 4. Health subsidy entry age cost 4.65% 89,940,744 4,182,245 5. Health subsidy unfunded actuarial accrued liability annual amount* 0.37% 1,383,703,751 5,119,704 6. Health Admin Expenses 0.06% 89,940,744 53,964 Subtotal 64,098,001 * Unfunded Actuarial Accrued Liability (UAAL) expressed as a percent of payroll for all active members. TIER 4 requirements: 1. Entry age cost 17.24% 34,592,594 5,963,763 2. Unfunded supplemental present value annual amount* 1.31% 1,383,703,751 18,126,519 3. Pension Admin Expenses 0.91% 34,592,594 314,793 4. Health subsidy entry age cost 4.43% 34,592,594 1,532,452 5. Health subsidy unfunded actuarial accrued liability annual amount* 0.22% 1,383,703,751 3,044,148 6. Health Admin Expenses 0.06% 34,592,594 20,756 Subtotal 29,002,431 * Unfunded Actuarial Accrued Liability (UAAL) expressed as a percent of payroll for all active members. TIER 5 requirements: 1. Entry age cost 18.99% 1,126,334,853 213,890,989 2. Unfunded supplemental present value annual amount 7.60% 1,126,334,853 85,601,449 3. Pension Admin Expenses 0.91% 1,126,334,853 10,249,647 4. Health subsidy entry age cost 4.41% 1,126,334,853 49,671,367 5. Health subsidy unfunded actuarial accrued liability annual amount 3.02% 1,126,334,853 34,015,313 6. Health Admin Expenses 0.06% 1,126,334,853 675,801 Subtotal 394,104,566

3 2017-18 Proposed Budget - March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-18 Proposed Budget Schedule 2 Detail of City and Harbor Contribution Requirements (Assuming Contributions Made on July 15, 2017) % Projected Contribution 1 of Payroll Payroll = Required TIER 6 requirements: 1. Entry age cost 15.64% 131,451,856 20,559,070 2. Unfunded supplemental present value annual amount 7.60% 131,451,856 9,990,341 3. Pension Admin Expenses 0.91% 131,451,856 1,196,212 4. Health subsidy entry age cost 7.02% 131,451,856 9,227,920 5. Health subsidy unfunded actuarial accrued liability annual amount 3.02% 131,451,856 3,969,846 6. Health Admin Expenses 0.06% 131,451,856 78,871 Subtotal 45,022,260

NET CITY (GENERAL FUND) ACTUARIAL CONTRIBUTION REQUIREMENT 612,408,133 Early Payment Savings (relative to payment at the end of each pay period) 20,738,858

TIER 5 Harbor requirements: 1. Entry age cost 19.58% 11,952,973 2,340,392 2. Unfunded supplemental present value annual amount 5.76% 11,952,973 688,491 3. Pension Admin Expenses 0.91% 11,952,973 108,772 4. Health subsidy entry age cost 5.94% 11,952,973 710,007 5. Health subsidy unfunded actuarial accrued liability annual amount 1.21% 11,952,973 144,631 6. Health Admin Expenses 0.06% 11,952,973 7,172 Subtotal 3,999,465 TIER 6 Harbor requirements: 1. Entry age cost 15.14% 1,588,250 240,461 2. Unfunded supplemental present value annual amount 5.76% 1,588,250 91,483 3. Pension Admin Expenses 0.91% 1,588,250 14,453 4. Health subsidy entry age cost 5.72% 1,588,250 90,848 5. Health subsidy unfunded actuarial accrued liability annual amount 1.21% 1,588,250 19,218 6. Health Admin Expenses 0.06% 1,588,250 953 Subtotal 457,416

NET HARBOR (SPECIAL FUND) ACTUARIAL CONTRIBUTION REQUIREMENT 4,456,881 Early Payment Savings (relative to payment at the end of each pay period) 150,474

GENERAL FUND TO LAFPP 611,158,133 EXCESS BENEFIT PLAN 1,250,000

TOTAL GENERAL FUND CONTRIBUTION 612,408,133

TOTAL SPECIAL FUND (HARBOR) CONTRIBUTION TO LAFPP 4,456,881

TOTAL CITY CONTRIBUTION 616,865,014

1 Figures may be rounded.

4 2017-18 Proposed Budget - March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-18 Proposed Budget Schedule 3 Detail of Estimated Payrolls and Member Contributions

Tier 2 Tier 3 Tier 4 Tier 5 Tier 6 TOTAL 4 SWORN PAYROLL

PENSIONABLE PAY Fire 363,554 23,630,988 9,088,842 295,932,686 34,537,598 363,553,668 Police 1,020,150 66,309,755 25,503,752 830,402,168 96,914,258 1,020,150,083 Harbor - - - 11,952,973 1,588,250 13,541,223

TOTAL 1,383,704 89,940,744 34,592,594 1,138,287,826 133,040,106 1,397,244,974 TOTAL General Fund 1,383,704 89,940,744 34,592,594 1,126,334,853 131,451,856 1,383,703,751 TOTAL Special Fund - - - 11,952,973 1,588,250 13,541,223

BASE PAY (2% OPT-IN)1 Fire 120,765 1,382,413 3,795,919 212,472,531 - 217,771,628 Police 658,960 59,577,439 19,701,324 534,914,632 - 614,852,355 Harbor - - - 9,260,763 - 9,260,763

TOTAL 779,725 60,959,852 23,497,243 756,647,926 - 841,884,746 TOTAL General Fund 779,725 60,959,852 23,497,243 747,387,163 - 832,623,983 TOTAL Special Fund - - - 9,260,763 - 9,260,763

MEMBER CONTRIBUTIONS

PENSIONABLE PAY Seven Percent2 Eight Percent Eight Percent Nine Percent3 Eleven Percent TOTAL Fire - 1,890,479 727,107 26,633,942 3,799,136 33,050,664 Police - 5,304,780 2,040,300 74,736,195 10,660,568 92,741,843 Harbor - - - 1,075,768 174,708 1,250,476 TOTAL - 7,195,259 2,767,407 102,445,905 14,634,412 127,042,983

BASE PAY (2% OPT-IN) Two Percent Two Percent Two Percent Two Percent n/a TOTAL Fire 2,415 27,648 75,918 4,249,451 - 4,355,432 Police 13,179 1,191,549 394,026 10,698,293 - 12,297,047 Harbor - - - 185,215 - 185,215 TOTAL 15,594 1,219,197 469,944 15,132,959 - 16,837,694

TOTAL 15,594 8,414,456 3,237,351 117,578,864 14,634,412 143,880,677 TOTAL General Fund 15,594 8,414,456 3,237,351 116,317,881 14,459,704 142,444,986 TOTAL Special Fund - - - 1,260,983 174,708 1,435,691

1 This figure reflects estimated base pay amounts for those members who elected to unfreeze their future retiree medical subsidy by making additional 2% opt-in contributions. The 2% is calculated based on base pay, not pensionable pay.

2 Pursuant to Charter Section 1420, pension benefit-related deductions shall not be made from the salaries of Tier 2 System members who have completed 30 years of service. Accordingly, as of December 8, 2010, all Tier 2 members have completed at least 30 years of service and therefore no longer make pension contributions.

3 For Tier 5 only, City pays 1% of the 9% if the Plan is at least 100% actuarially funded for pension benefits.

4 Figures may be rounded.

5 2017-18 Proposed Budget - March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-18 Proposed Budget Schedule 4 Detail of Investment Management Expense Adopted Estimated Change from Budget Expenditures Budget 2016-17 2016-17 2016-17 2017-18 Budget 3 CONSULTANTS & BANK SERVICES Custodian Bank Services (STIF) 275,338 292,589 292,589 17,251 General Consultant - RV Kuhns 503,750 375,000 503,750 - CONSULTANTS & BANK SERVICES TOTAL 779,088 667,589 796,339 17,251

ADVISORY PUBLIC EQUITY - LARGE CAP AllianceBernstein (Systemic Value) - - 396,704 396,704 Alliance Capital (S&P 500 Index) 174,908 177,178 142,757 (32,151) Alliance Capital (Russell 1000 Growth Index) 213,594 199,513 232,320 18,725 Alliance Capital (Russell 1000 Value Index) 27,654 26,985 - (27,654) Chicago Equity (Enhanced Index-Core) 530,939 419,711 - (530,939) LA Capital (Enhanced Index-Growth) 600,495 560,075 796,959 196,464 OakBrook Investments (Large Cap-Core) 148,969 282,977 166,824 17,855 PIMCO (Enhanced Index-Value) 954,762 229,017 - (954,762) Redwood Investments (Large Cap-Core) 122,031 119,837 135,472 13,441 Robeco (Value) 798,386 746,402 489,069 (309,317) S&P 500 (Equal Weighted Index) - - 313,759 313,759 STOXX USA (900 Minimum Variance) - - 235,543 235,543 Subtotal 3,571,738 2,761,695 2,909,407 (662,331)

PUBLIC EQUITY - SMALL CAP Channing Capital Mgmt. (Small Cap) 421,264 436,308 543,589 122,325 Daruma (Value) 2,357,838 2,250,495 1,897,147 (460,691) Frontier Capital Mgmt. (Growth) 3,472,935 945,394 724,629 (2,748,306) Future Active Small Cap Manager - - 3,081,051 3,081,051 Granite Investment Partners (Micro Cap) 308,407 296,971 - (308,407) Phocas Financial (Small Cap) 459,673 449,749 571,113 111,440 Subtotal 7,020,117 4,378,917 6,817,529 (202,588)

PUBLIC EQUITY - INTERNATIONAL Baille Gifford (Growth) 2,267,805 2,162,696 2,383,053 115,248 Blackrock (Core Passive) 283,252 252,539 280,096 (3,156) Boston Common (ESG - Sustainability) 171,582 154,851 169,462 (2,120) Brandes (Value) 3,735,275 3,412,263 3,914,166 178,891 FIS International (Mgr of Emerging Mgrs) 666,085 616,636 680,588 14,503 Fisher (Core) 1,955,960 1,807,707 2,026,170 70,210 Northern Trust (Small Cap Index) 261,543 236,920 262,119 576 Subtotal 9,341,502 8,643,612 9,715,654 374,152

PUBLIC EQUITY - EMERGING MARKETS Dimensional Fund Advisors 1,689,060 2,060,701 2,263,168 574,108 Harding Loevner 2,500,645 2,949,554 2,812,014 311,369 Subtotal 4,189,705 5,010,255 5,075,182 885,477

PUBLIC EQUITY TOTAL 24,123,061 20,794,479 24,517,772 394,711

FIXED INCOME - INVESTMENT GRADE Bridgewater (Pure Alpha) 1,488,293 1,376,608 1,617,132 128,839 Bridgewater (TIPS) 1,438,994 1,359,391 1,516,146 77,152 CA Community Mortgage Fund - 13,357 13,357 13,357 GIA Partners (Opportunistic) 83,085 78,889 87,114 4,029 LM Capital (Opportunistic) 360,827 328,014 333,138 (27,689) Loomis Sayles (Long Duration) 599,773 596,490 737,532 137,759 Northern Trust (Fixed Income Index) 207,276 183,079 204,402 (2,874) Payden & Rygel (Unconstrained) 686,260 618,940 692,038 5,778

6 2017-18 Proposed Budget - March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-18 Proposed Budget Schedule 4 Detail of Investment Management Expense Adopted Estimated Change from Budget Expenditures Budget 2016-17 2016-17 2016-17 2017-18 Budget 3 FIXED INCOME - INVESTMENT GRADE (Continued) Reams Asset Mgmt. (Opportunistic) 755,474 702,759 768,353 12,879 Reams Asset Mgmt. (Passive TIPS) 111,485 96,084 104,456 (7,029) Reams Asset Mgmt. (Unconstrained) 386,510 359,159 401,424 14,914 Semper Capital Mgmt. 83,392 80,507 89,887 6,495 Subtotal 6,201,368 5,793,277 6,564,979 363,611 FIXED INCOME - HIGH YIELD MacKay Shields 2,053,188 1,960,301 2,248,221 195,033 Subtotal 2,053,188 1,960,301 2,248,221 195,033

FIXED INCOME TOTAL 8,254,556 7,753,578 8,813,200 558,644

PRIVATE EQUITY Fairview Capital Partners (Specialized Mandate) - 160,000 240,000 240,000 Portfolio Advisors 1,225,000 1,057,533 1,300,000 75,000 Portfolio Advisors (Specialized Mandate) 45,000 45,000 45,000 - Private Equity Partnership Fees 1 29,871,455 29,871,455 32,375,519 2,504,064

PRIVATE EQUITY TOTAL 31,141,455 31,133,988 33,960,519 2,819,064

COMMODITIES Alliance (Public Equity) 255,272 271,268 313,825 58,553 Gresham Invest. Mgmt. (Active) 529,436 522,876 584,267 54,831 Goldman Sachs (Enhanced Index) 124,412 182,109 135,407 10,995 Kleinwort Benson (Public Equity) 481,341 456,907 510,661 29,320 Mellon Capital (Public Equity) 190,439 231,921 264,421 73,982 Private Equity Partnership Fees 1 894,812 1,753,091 1,759,606 864,794

COMMODITIES TOTAL 2,475,712 3,418,172 3,568,187 1,092,475

REAL ESTATE Alliance Capital (Global REIT) 64,367 78,511 65,071 704 Total Pooled Funds2 17,698,790 16,326,140 16,326,140 (1,372,650) Principal (Global REIT) 851,729 772,769 834,293 (17,436) Principal (U.S. REIT) 1,642,506 1,539,932 1,681,270 38,764 Heitman (Asset Mgmt. Fees) 1,191,321 1,421,108 1,056,647 (134,674) Sentinel (Asset Mgmt. Fees) 1,342,634 1,826,511 1,498,091 155,457 Sentinel - Neptune (Headquarters) 530,000 492,000 371,205 (158,795) Separate Accounts (Heitman/Sentinel) 757,000 729,300 729,300 (27,700) Townsend (Consultant) 300,200 225,000 300,200 - Subtotal 24,378,547 23,411,272 22,862,217 (1,516,330)

REAL ESTATE TOTAL 24,378,547 23,411,272 22,862,217 (1,516,330)

ADVISORY TOTAL 90,373,331 86,511,489 93,721,895 3,348,564

TOTAL INVESTMENT MANAGEMENT EXPENSE 91,152,419 87,179,078 94,518,234 3,365,815

¹ Partnership fees do not include performance fees. Generally performance fees take 20% of the profit. In some cases, they can go as high as 30%. 2 Pooled Fund fees do not include performance fees. Generally performance fees take 20% of the profit. In some cases, they can go as high as 30%.

3 Figures may be rounded.

7 2017-18 Proposed Budget - March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-18 Proposed Budget Schedule 5 Administrative Expense

Actual Adopted Estimated % Change Acct Exp Budget Exp Budget from Budget No. 2015-16 2016-17 2016-17 Account Titles 2017-18 2016-17

641010 10,533,199 11,800,000 11,701,000 Salaries - General 12,020,000 1.9% 641070 119,374 107,000 107,000 Salaries - As-Needed 81,000 (-24.3%) 641090 85,602 69,715 48,000 Overtime 82,000 17.6% 10,738,175 11,976,715 11,856,000 Sub-total Salaries 12,183,000 1.7%

642120 21,787 36,654 36,654 Printing and Binding 58,000 58.2% 642130 77,540 159,443 130,000 Travel Expense 157,000 (-1.5%) 643040 4,954,795 4,932,150 4,600,000 Contractual Expense 5,379,000 9.1% 643310 6,250 6,000 6,000 Transportation 6,000 0.0% 644230 218,265 330,000 330,000 Medical Services 330,000 0.0% 645180 1,061,794 1,300,000 1,259,000 Health Insurance 1,355,000 4.2% 645190 45,814 55,000 54,000 Dental Insurance 60,000 9.1% 645200 40,000 40,000 40,000 Other Employee Benefits 40,000 0.0% 645360 3,040,354 3,175,000 3,172,189 Retirement Contribution1 3,220,000 1.4% 645370 134,511 173,000 173,000 Medicare Contribution 177,000 2.3% 645417 3,802 25,000 25,000 Election Expense - 0.0% 646010 393,368 728,690 600,000 Office and Administrative Expense 662,000 (-9.2%) 649570 12,349 20,000 15,000 Tuition Reimbursement 20,000 0.0% 647300 148,506 60,000 105,210 Total Furniture, Office, & Tech Equip.2 20,000 0.0% 10,010,629 10,980,937 10,440,843 Sub-total Expense 11,484,000 4.6%

649500 - 253,000 150,000 Unappropriated Balance - (-100.0%) 20,897,310 23,270,652 22,552,053 TOTAL ADMINISTRATIVE EXPENSE 23,667,000 1.7%

1 Beginning 2014-15, LAFPP has made payments to LACERS for LAFPP employee retirement contributions pursuant to the released audit of the City Contribution to LACERS and LAFPP (Account 645360). 2 The following adjustments were made to the following accounts as authorized by the Board after the 2016-17 Adopted Budget was approved: a) On January 9, 2017, funds totaling $40,000 were transferred to Furniture, Office & Tech. to purchase a department vehicle. The transfer was processed based on the January 5, 2017 Board authority to move funds from Unappropriated Balance (Account 649500) to Furniture, Office & Tech. Equip. (Account 647300) for this purchase. b) On September 15, 2016, funds totaling $5,210 were transferred from Contractual Services (Account 643040) to Furniture, Office & Tech. Equip. (Account 647300) for Headquarters-related costs. The transfer was processed based on the July 16, 2015 Board authority to move funds between line items as needed for the Headquarters Project.

8 2017-18 Proposed Budget - March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-18 Proposed Budget Schedule 6 Detail of Administrative Expense Adopted Acct Budget Budget Change from No. Account Titles 2016-17 2017-18 2016-17

641010 Salaries - General 11,800,000 12,020,000 220,000 641070 Salaries - As-Needed 107,000 81,000 (26,000) 641090 Overtime 69,715 82,000 12,285 Total Salaries 11,976,715 12,183,000 206,285

642120 Printing and Binding 36,654 58,000 21,346 642130 Travel Expense 159,443 157,000 (2,443) 643040 Contractual Expense City Attorney City Attorney Expense Paid to LACERS 35,700 30,000 (5,700) City Attorney Staff 740,000 700,000 (40,000) Legal Services: Fiduciary Counsel 150,000 100,000 (50,000) Legal Services: Legal Representation 100,000 50,000 (50,000) Legal Services: Real Estate and Investment Counsel 235,000 300,000 65,000 Legal Services: Securities Litigation Counsel 50,000 35,000 (15,000) Legal Services: Tax Counsel 100,000 100,000 - Subtotal 1,410,700 1,315,000 (95,700) Communications and Education Financial Planning Education - Venue 15,000 15,000 - Financial Planning Education Consultant 70,000 53,500 (16,500) Graphic Design Services 26,000 18,000 (8,000) Pre-Retirement Seminar Caterer 35,000 40,000 5,000 Survey Consulting Services 14,000 - (14,000) Web Site Support Services 30,000 30,000 - Subtotal 190,000 156,500 (33,500) Department-wide Contracted LAFPP Training 5,000 5,000 - Headquarters Contingency 75,000 50,000 (25,000) Photocopiers 20,000 30,000 10,000 Records Retention 5,000 5,000 - Secure Shredding Services 4,500 4,500 - Vehicle Maintenance 5,000 5,000 - Workers Compensation 60,000 54,000 (6,000) Subtotal 174,500 153,500 (21,000) Disability Pension Hearing Reporter 20,000 20,000 - Investigative Services 100,000 100,000 - Subtotal 120,000 120,000 0 Executive Actuarial Services 325,000 425,000 100,000 Annual Retreat Services 8,000 10,000 2,000 Fiduciary Liability Insurance 50,000 40,000 (10,000) Governance Consultant 20,000 20,000 - Subtotal 403,000 495,000 92,000

9 2017-18 Proposed Budget - March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-18 Proposed Budget Schedule 6 Detail of Administrative Expense Adopted Acct Budget Budget Change from No. Account Titles 2016-17 2017-18 2016-17

Internal Audit ALGA Peer Review 8,950 - (8,950) Financial Audit 90,000 82,000 (8,000) Subtotal 98,950 82,000 (16,950) Investments Proxy Service 40,000 40,000 - Subtotal 40,000 40,000 0 Medical and Dental Benefits Health Consultant 90,000 75,000 (15,000) Subtotal 90,000 75,000 (15,000) Retirement Services Investigative Services - Age 95+ Alive and Well Audit - 40,000 40,000 Subtotal 0 40,000 40,000 Systems Disaster Recovery - Verizon Terremark 73,000 43,000 (30,000) EMC/AT&T 24,000 24,000 - IT Network Security Penetration Test 20,000 - (20,000) IT Systems Security 30,000 30,000 - Offsite Media Storage 12,000 12,000 - OnPoint Enhancements 25,000 25,000 - OnPoint License & Maintenance 175,000 175,000 - Pension Administration System Consultant (LRWL) 390,000 390,000 - Pension Administration System (Xerox State & Local Solutions) 1,356,000 1,903,000 547,000 Retiree Benefit Payment Services 300,000 300,000 - Subtotal 2,405,000 2,902,000 497,000 Total Contractual Expense 4,932,150 5,379,000 446,850

643310 Transportation 6,000 6,000 - 644230 Medical Services (Disability Cases) 330,000 330,000 - 645180 Health Insurance 1,300,000 1,355,000 55,000 645190 Dental Insurance 55,000 60,000 5,000 645200 Other Employee Benefits 40,000 40,000 - 645360 Retirement Contribution1 3,175,000 3,220,000 45,000 645370 Medicare Contribution 173,000 177,000 4,000 645417 Election Expense 25,000 - (25,000)

646010 Office and Administrative Expense 646010-01 Office & Administrative Expense 306,349 307,000 651 646010-02 Office Supplies 76,747 77,000 253 646010-03 Telephone, Internet, and Tablet Devices 142,300 125,000 (17,300) 646010-05 Training Expense 79,450 77,000 (2,450) 646010-06 Dues & Subscriptions 29,844 30,000 156 646010-530 Computer & Peripheral 94,000 46,000 (48,000) Total Office & Administrative Expense 728,690 662,000 (66,690)

649570 Tuition Reimbursement 20,000 20,000 -

10 2017-18 Proposed Budget - March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-18 Proposed Budget Schedule 6 Detail of Administrative Expense Adopted Acct Budget Budget Change from No. Account Titles 2016-17 2017-18 2016-17

647300 Total Furniture, Office, & Technical Equip > $5,0002 60,000 20,000 (40,000) Total Expense 10,980,937 11,484,000 503,063

649500 Unappropriated Balance (UB) Financial Planning Counseling Program 123,000 - (123,000) Internal Audit Consultant 90,000 - (90,000) Vehicle 40,000 - (40,000) Total Unappropriated Balance 253,000 - (253,000)

TOTAL ADMINISTRATIVE EXPENSE 23,270,652 23,667,000 396,348

1 Beginning 2014-15, LAFPP has made payments to LACERS for LAFPP employee retirement contributions pursuant to the released audit of the City Contribution to LACERS and LAFPP (Account 645360).

2 The following adjustments were made to the following accounts as authorized by the Board after the 2016-17 Adopted Budget was approved: a) On January 9, 2017, funds totaling $40,000 were transferred to Furniture, Office & Tech. Equip. to purchase a department vehicle. The transfer was processed based on the January 5, 2017 Board authority to move funds from Unappropriated Balance (Account 649500) to Furniture, Office & Tech. (Account 647300) for this purchase. b) On September 15, 2016, funds totaling $5,210 were transferred from Contractual Services (Account 643040) to Furniture, Office & Tech. Equip. (Account 647300) for Headquarters-related costs. The transfer was processed based on the July 16, 2015 Board authority to move funds between line items as needed for the Headquarters Project.

11 2017-18 Proposed Budget - March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-18 Proposed Budget Schedule 7 Personnel Resolution

A resolution authorizing the employment of personnel in the Department of Fire and Police Pensions of the City of Los Angeles

BE IT RESOLVED, that:

Section 1. Effective July 1, 2017, the number and classification of positions listed below are authorized within the Los Angeles Fire and Police Pension System:

FIRE AND POLICE PENSIONS

(a) Regular Positions:

2016-17 2017-18 Change Code Title Salary Range

2 2 0 1116 Secretary ( 50,425 - 73,686 ) 2 2 0 1117-2 Executive Administrative Assistant II ( 60,656 - 88,698 ) 1 1 0 1117-3 Executive Administrative Assistant III ( 65,020 - 95,067 ) 1 1 0 1170-1 Payroll Supervisor I ( 62,202 - 90,912 ) 1 1 0 1201 Principal Clerk ( 54,121 - 79,156 ) 19 20 1 1203 Benefits Specialist ( 54,121 - 79,156 ) 5 4 -1 1358 Administrative Clerk ( 37,584 - 54,935 ) 14 17 3 1368 Senior Administrative Clerk ( 46,374 - 67,818 ) 1 0 -1 1431-3 Programmer Analyst III ( 75,815 - 110,852 ) 0 1 1 1455-1 Systems Programmer I ( 102,959 - 124,507 ) 1 1 0 1455-2 Systems Programmer II ( 91,580 - 133,924 ) 1 1 0 1455-3 Systems Programmer III ( 99,264 - 145,116 ) 0 7 7 1513 Accountant ( 53,808 - 78,697 ) 7 0 -7 1513-2 Accountant II ( 53,808 - 78,697 ) 1 1 0 1523-2 Senior Accountant II ( 67,672 - 98,950 ) 1 1 0 1525-1 Principal Accountant I ( 77,841 - 113,817 ) 1 1 0 1525-2 Principal Accountant II ( 82,121 - 120,039 ) 1 0 -1 1539 Management Assistant ( 48,797 - 71,326 ) 1 1 0 1555-1 Fiscal Systems Specialist I ( 85,984 - 125,698 ) 1 1 0 1593-3 Departmental Chief Accountant III ( 113,984 - 166,664 ) 0 6 6 1596 Systems Analyst ( 68,612 - 100,308 ) 6 0 -6 1596-2 Systems Analyst II ( 68,612 - 100,308 ) 3 3 0 1597-1 Senior Systems Analyst I ( 81,161 - 118,661 ) 2 2 0 1597-2 Senior Systems Analyst II ( 100,391 - 146,766 ) 1 1 0 1610 Departmental Audit Manager ( 123,067 - 179,944 ) 1 1 0 1625-4 Internal Auditor IV ( 100,370 - 146,745 ) 3 3 0 9146-1 Investment Officer I ( 93,354 - 136,472 ) 3 3 0 9146-2 Investment Officer II ( 116,302 - 170,026 ) 1 1 0 9146-3 Investment Officer III ( 146,285 - 213,853 ) 1 1 0 9147 Chief Investment Officer ( 179,109 - 261,814 ) 2 2 0 9151 Chief Benefits Analyst ( 123,067 - 179,944 ) 1 1 0 9167-1 Senior Personnel Analyst I ( 84,418 - 123,401 ) 5 5 0 9171-1 Senior Management Analyst I ( 81,035 - 118,473 ) 7 7 0 9171-2 Senior Management Analyst II ( 100,370 - 146,745 ) 1 1 0 9182 Chief Management Analyst ( 123,067 - 179,944 ) 0 21 21 9184 Management Analyst ( 68,612 - 100,308 ) 2 0 -2 9184-1 Management Analyst I ( 54,810 - 80,137 ) 17 0 -17 9184-2 Management Analyst II ( 68,612 - 100,308 ) 1 1 0 9267 General Manager ( 164,910 - 292,299 ) 2 2 0 9269 Assistant General Manager ( 138,330 - 202,265 ) 1 1 0 9375 Director of Systems ( 123,067 - 179,944 ) 1 1 0 9734-2 Commission Executive Assistant II ( 68,612 - 100,308 )

122 126 4

12 2017-18 Proposed Budget - March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-18 Proposed Budget Schedule 7 Personnel Resolution

(b) Resolution Authority Positions:

2016-17 2017-18 Change Code Title Salary Range

1 1 0 1539 Management Assistant ( 48,797 - 71,326 ) 0 1 1 9184 Management Analyst ( 68,612 - 100,308 ) 1 0 -1 9184-2 Management Analyst II ( 68,612 - 100,308 )

220

0820 Administrative Trainee 1133 Relief Retirement Worker 1501 Student Worker 1502 Student Professional Worker 1535-1 Administrative Intern I 1535-2 Administrative Intern II

(d) Commissioner Positions:

9 0101-2 Commissioner 9

Section 2. One Assistant General Manager (Class Code 9269), when designated by the General Manager to assume the additional administrative and supervisory duties of Executive Officer, shall be compensated at the fourth premium level rate above the appropriate step rate or premium level rate of the incumbent. Upon approval of the General Manager, one additional Assistant General Manager (Class Code 9269) may receive salary up to the fourth premium level rate above the appropriate step rate of the prescribed salary range.

Section 3. Whenever the General Manager is authorized pursuant to Charter Section 1164(b) to employ a person who is retired from City service, the employee may be employed at any step within the salary range prescribed for the class that is determined by the General Manager to be commensurate with, and based upon, the extent, responsibility, and importance of the work to be assigned and the experience, skill and ability of the employee.

Section 4. Upon approval of the General Manager, substitute and resolution authority positions may be activated and filled using any class of position specified in Schedule "A" of Los Angeles Administrative Code Section 4.61 or approved Memorandum of Understanding. This approval shall specify the period during which the position shall be filled. The General Manager shall maintain a record of the substitute and resolution authority positions approved for filling.

Section 5. The General Manager may employ persons and assign duties appropriate to the employee’s classification and pay grade in any class of position specified in Schedule "A" of Los Angeles Administrative Code Section 4.61 in lieu of vacant positions in a related occupational series which vacant positions have a salary or salary range equal to or higher than the salary or salary range for the class of position in which the persons are to be employed; provided, however, that at no time shall the total number of persons employed in the department exceed the total number of positions authorized.

Section 6. The personnel authority contained in this resolution shall be limited by the amount of money available on the records of the Departmental Chief Accountant for the payment of salaries and wages in the appropriate departmental account.

13 2017-18 Proposed Budget - March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-18 Proposed Budget Schedule 8 Detail of Personnel Changes

CHANGE No. REASON FOR CHANGE ADD/DELETE POSITION

Administrative Operations Division Management Analyst 1 Alignment of duties and requirements of position with proper classification with progressively challenging assignments and increasing Management Assistant -1 responsibilities.

Accounting Accountant 7 Elimination of paygrade per Memorandum of Understanding 01. Accountant II -7

Active Member Services Senior Management Analyst I 1 The requested Senior Management Analyst downgrade is due to decreased workload since the position no longer oversees the Senior Management Analyst II -1 Communications & Education Section.

Management Analyst 2 Elimination of paygrade per Memorandum of Understanding 01. Management Analyst II -2

Administrative Services Management Analyst 3 Elimination of paygrade per Memorandum of Understanding 01. Management Analyst II -3

Communication & Education Management Analyst 2 Elimination of paygrade per Memorandum of Understanding 01. Management Analyst II -2

Disability Management Analyst 4 Elimination of paygrade per Memorandum of Understanding 01. Management Analyst II -4

DROP/SP Senior Administrative Clerk 1 The requested change in position to Senior Administrative Clerk is to accommodate the change of workload and realignment of duties to those Administrative Clerk -1 more suited to work at the level of Senior Administrative Clerk.

Senior Administrative Clerk 1 The requested change in position to Senior Administrative Clerk is to accommodate the change of workload and realignment of duties to those Management Analyst I -1 more suited to work at the level of Senior Administrative Clerk.

Management Analyst 2 Elimination of paygrade per Memorandum of Understanding 01. Management Analyst I -1 Management Analyst II -1

Investments Management Analyst (NEW) 1 The requested Management Analyst position will assist with increased compliance regulations and reporting.

Management Analyst 1 Elimination of paygrade per Memorandum of Understanding 01. Management Analyst II -1

14 2017-18 Proposed Budget - March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-18 Proposed Budget Schedule 8 Detail of Personnel Changes

CHANGE No. REASON FOR CHANGE ADD/DELETE POSITION

Medical Dental Benefits Benefits Specialist (NEW) 1 The requested Benefits Specialist, Management Analyst, and Senior Administrative Clerk positions will assist with increased workload Management Analyst (NEW) 1 resulting from the creation and management of medical and dental plans for all members, including those transitioning from LACERS medical and Senior Administrative Clerk (NEW) 1 dental plans.

Senior Management Analyst II 1 The requested Senior Management Analyst upgrade is due to increased workload resulting from increased staffing and the management of new Senior Management Analyst I -1 medical and dental plans.

Management Analyst 2 Elimination of paygrade per Memorandum of Understanding 01. Management Analyst II -2

Retirement Services Management Analyst 2 Elimination of paygrade per Memorandum of Understanding 01. Management Analyst II -2

Systems Systems Programmer I 1 The requested change of classification is due to the need for specialized technical skillsets for safeguarding the Department's critical information Programmer Analyst III assets and to manage the rapid changes in cybersecurity. -1

Systems Analyst 6 Elimination of paygrade per Memorandum of Understanding 01. Systems Analyst II -6

NET NUMBER OF POSITIONS 4

15 2017-18 Proposed Budget - March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-2018 Proposed Budget Schedule 9 Organization Chart Members

LAFPP – TOTAL POSITIONS Authorized Filled 126 110 *Sub-Authorities Filled 4 4 Board of Fire and Police Pension *Resolution -Authorities Filled Commissioners 2 2 **As Needed Filled Pedram Salimpour, MD – President 5 1 Ruben Navarro – Vice President George V. Aliano City Attorney Sam Diannitto 1 Assistant City Attorney Adam Nathanson Alan M. Manning Brian Pendleton Internal Audit 2 Deputy City Attorney IV Corinne T. Babcock John C. Blair Belinda M. Vega 1 Departmental Audit Manager #075 James H. Napier Robert von Voigt Erin Kenney 2 Deputy City Attorney III 1 Internal Auditor IV #119 Anya J. Freedman James Yeung Joshua M. Geller 1 Senior Management Analyst II #104 1 Legal Secretary II Caroline Dinu Julie Cruz General Manager - #041 Raymond P. Ciranna

1 Executive Administrative Assistant III #009 Martha Martinez 1 Secretary #086 Joni Chavez

Adminstrative Operations Division Investments Division Pensions Division Executive Officer - #077 Chief Investment Officer - #083 Assistant General Manager - #042 William S. Raggio Thomas Lopez Joseph Salazar

Effective July 1, 2017 (as of March 16, 2017) 16 2017-18 Proposed Budget – March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-2018 Proposed Budget ADMINISTRATIVE OPERATIONS DIVISION Schedule 9 Organization Chart Executive Officer #077 William S. Raggio

Systems 17 1 Commission Executive Assistant II #069 1 Chief Management Analyst #057 Rhonda Ketay 1 Director of Systems #064 Stephanie Clements Bob Yan (Info Systems Manager II in-lieu) 1 Executive Administrative Assistant II #011 1 Senior Systems Analyst I #102 Evange Masud (Secretary in-lieu) Vacant 1 Management Analyst #128 Human Resources 3 1 Sr. Administrative Clerk #109 Jennifer Shimatsu 1 Senior Personnel Analyst I #118 Rita Harper Lindi Willhite ConSEPP 1 Management Analyst #051 Jennifer Barnych (Mgmt. Asst. in-lieu) 1 Senior Systems Analyst II #073 1 Sr. Administrative Clerk Alfredo Domagat Accounting 13 Latesha Hamm #106 1 Senior Systems Analyst I #074 1 Department Chief Accountant IV* SA52 Teresa Guerrero Yolanda Huang 1 Fiscal Systems Specialist I #079 1 Department Chief Accountant III #037 Administrative Services 10 Pat Kho Vacant – Held for Sub-Authority 1 Systems Analyst #092 Administrative Unit 1 Administrative Clerk #091 Sharon Chan Laura Navarro 1 Senior Management Analyst II #061 Server and Help Desk Payroll/Investment Accounting Diana Pointer 1 Senior Management Analyst I #105 1 Senior Systems Analyst II #114 1 Principal Accountant II #036 David Liu Cecilia De Los Angeles Vacant 1 Systems Programmer II #094 1 Payroll Supervisor I #018 2 Management Analyst Tarralyn Rose Annett Anderson Wendy Kamayatsu #085 Carissa Takahashi (Mgmt. Asst. in-lieu) #056 1 Senior Systems Analyst I #044 3 Accountant Kien Trieu Felicitas De La Cruz #034 #062 Administrative Support Unit 4 Systems Analyst Maria Nina De Leon-Tabangin John Strand #033 1 Principal Clerk #012 Amorfina Stubblefield #046 Erick Kurimoto Robin Woo #095 1 Relief Retirement Worker** RRW6 Niela Chavez 1 Sr. Administrative Clerk #088 Sylvia Whelan #103 James Pineda Jack Huang #110 General Accounting/Pension Roll 1 Administrative Clerk #015 1 Systems Analyst * SA49 Vacant 1 Principal Accountant I #093 Elaine Good Ramirez Vacant 1 Sr. Administrative Clerk #016 Network and Security 1 Senior Accountant II #035 Chris Dimaano Narciso Magno Jr. 2 Administrative Clerk 1 Systems Programmer III #115 #017 Jimmy LIndsey 4 Accountant Vacant 1 Systems Programmer I #116 Lingying Hwang #014 Vacant #101 Vacant Ally Tang #032 2 Relief Retirement Worker** James Kawashima #100 1 Systems Analyst #049 Vacant RRW1 Apollo Victoria Jazmin Erenas #117 Vacant RRW5

Effective July 1, 2017 (as of March 16, 2017) 17 2017-18 Proposed Budget – March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-2018 Proposed Budget Schedule 9 Organization Chart

INVESTMENTS DIVISION Chief Investment Officer #083 Thomas Lopez Support 1 Secretary #008 Marie Prieto 1 Sr. Administrative Clerk #019 Catherine Taylor-Gomez

Asset Class Management

1 Investment Officer III #039 Richard Rogers

Public Equity & Real Estate Private Equity & Performance Mgmt. Commodities, Cash & Fixed Income

1 Investment Officer II #108 1 Investment Officer II #040 1 Investment Officer II #107 Paul Palmer Susan Liem Derek Niu 2 Investment Officer I 1 Investment Officer I #038 2 Management Analyst Annie Chao #120 Vacant (Hold for Sub-Authority) Adam Perez (Mgmt. Asst. in-lieu) #052 Daren Perlstein #084 1 Sr. Management Analyst I SA58 Vacant New FY 17-18 #TBD Miki Shaler

Effective July 1, 2017 (as of March 16, 2017) 18 2017-18 Proposed Budget – March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS PENSIONS DIVISION Attachment 2017-2018 Proposed Budget Assistant General Manager - #042 Schedule 9 Organization Chart Joseph Salazar 1 Chief Benefits Analyst - #043 1 Executive Administrative Assistant II #010 Robyn WIlder Lee Tsubaki Active Member Services 9 1 Chief Benefits Analyst - #131 1 Senior Management Analyst I #096 Gregory Mack May Simmons Disability Pension 9 PAS Coordination 2 Management Analyst 1 #078 1 Senior Management Analyst II #060 1 Senior Management Analyst II Jackie Pallas Tina Zipper #070 Vacant #124 Kyle Susswain SA64 Anthony Torres 1 Benefits Specialist #112 2 Senior Management Analyst I 1 Management Analyst * RA1 Diane Barragan Loanne Truong #065 Erika Robinson 1 Sr. Administrative Clerk #082 Vacant #058 Management Assistant* 1 RA2 Elizabeth Lopez 4 Management Analyst Jennifer Chan Service Purchase Devon Zatorski (Mgmt. Asst. in-lieu) #047 3 Benefits Specialist Lady Smith #048 Carin Batista #029 Usha Papa #055 Sandy Davis #063 Timothy Morita (Mgmt. Asst. in-lieu) #129 Rhodora Silverman #031 1 Benefits Specialist Refund of Contributions Carleen Guzman #028 1 Benefits Specialist #025 1 Sr. Administrative Clerk #027 Travis King Anthony Samaniego (Admin. Clerk in-lieu) Communications & Education 6 Retirement Services 11 Medical and Dental Benefits 9 1 Senior Management Analyst I #050 Carol Tavares 1 Senior Management Analyst II #080 1 Senior Management Analyst II #059 2 Management Analyst Myo Thedar Mark Granado (Sr. MA I in lieu) Barbara Nobregas #054 Pensioner Benefits Administration 3 Management Analyst Conroy Gibson #125 1 Management Analyst #045 Joe McGlinchey #081 2 Benefits Specialist Naomi Sukimoto Laura Morales #090 Bernice Ortiz #127 3 Benefits Specialist Vacant New FY 17-18 #TBD #021 Stephen Bayutas #130 Deborah Campos Laura Gonzalez Ellis #026 3 Benefits Specialist 1 Sr. Administrative Clerk #111 Jorge Saenz #030 Samantha Villasenor (Admin. Clerk in-lieu) Lea Villero #122 1 Sr. Administrative Clerk #066 Edwina Valencia #087 DROP/Service Pensions 11 Pam Dacoff Vacant New FY 17-18 #TBD 1 Senior Management Analyst II #053 Pensioner Information & Support Services Diana Anderson 2 Sr. Administrative Clerk 1 Management Analyst #013 Luis Pelayo #076 2 Management Analyst Ahna (Vivian) Chang (Mgmt. Asst. in-lieu) Kimberly McCullough Vacant New FY 17-18 #TBD #099 4 Sr. Administrative Clerk Lorraine Chan (Mgmt. Asst. in-lieu) #022 Paul Guevara (Admin. Clerk in-lieu) 2 Relief Retirement Worker** 1 Sr. Administrative Clerk #097 #020 Sue Wells #024 Vacant #TBD Vacant Ramiro Lopez #072 Vacant #TBD 1 Sr. Administrative Clerk #023 Vacant #123 Vacant Counseling and Application Processing 3 Benefits Specialist (Entries) Lourdes (Lis) Burog #126 Jesse Hernandez #098 Roel Villanueva #071 3 Benefits Specialist (Exits) Kimberly Boyd #121 Leneva Cobb #113 Angela Espino #089

Effective July 1, 2017 (as of March 16, 2017) 19 2017-18 Proposed Budget – March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS Attachment 2017-18 Proposed Budget Schedule 10 Travel Resolution

BE IT RESOLVED, that the Board of Fire and Police Pension Commissioners and staff are authorized to travel and incur required expenses to the functions and for the reasons listed below, adopted effective July 1, 2017. Travel under the following categories (A, B and C) is automatically approved to a maximum of four Commissioners (Board Operating Policies and Procedures, Section 2.6).

A. Business Trips

1. To meetings with investment advisors, a master custodian bank and various consultants under contract in connection with the management of fund assets. 2. To the offices of investment advisors and consultants who are under consideration to be hired. 3. To the site of proposed real estate property investments. B. Conferences, business meetings and educational programs held or sponsored by the following organizations as necessary to conduct the business of LAFPP: Association for Information and Image Management (AIIM) Association of Asian American Investment Managers (AAAIM) Association of Local Government Auditors (ALGA) Association of Public Pension Fund Auditors (APPFA) Association of Records Managers and Administrators (ARMA) California Association of Public Retirement Systems (CALAPRS) California Public Employees' Retirement System (CalPERS) California State Teachers' Retirement System (CalSTRS) Callan Investment Institute Chartered Financial Analyst Institute (CFA Institute) Client conferences of current contractors EMC Corporation Government Finance Officers Association (GFOA) Institute for Fiduciary Education Institute of Internal Auditors (IIA) Institutional Investor Institute Institutional Limited Partners Association (ILPA) International Foundation of Employee Benefit Plans (IFEBP) MIS Training Institute (MISTI) National Association of Investment Companies (NAIC) National Association of Public Pension Attorneys (NAPPA) National Association of Securities Professionals (NASP) National Conference on Public Employee Retirement Systems (NCPERS) National Employment Law Institute (NELI) New America Alliance (NAA) Opal Financial Group Conferences Pension Real Estate Association (PREA) Public Safety Employees Pension and Benefits Conference Stanford Law School - Fiduciary College State Association of County Retirement Systems (SACRS) Sworn active employee or retired member associations Xerox State and Local Solutions, Inc. (Pension Administration System) Wharton School (Partnership w/ IFEBP)

C. Pension industry organization meetings of officers and directors, when a Commissioner or staff member is an officer in that organization and expenses are not reimbursable by the organization.

D. Other educational or continuing education training and seminars (not listed in B above), approved by the General Manager up to $4,500 per staff member per trip.

AUTHORIZATIONS FOR TRAVEL Travel expenses incurred by any Commissioner or General Manager shall require the approval of the Board President.

20 2017-18 Proposed Budget - March 16, 2017

DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA 90013 (213) 279-3000

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

DATE: MARCH 16, 2017 ITEM: A.5

FROM: RAYMOND P. CIRANNA, GENERAL MANAGER

SUBJECT: RECOMMENDATION OF CONTRACT AWARD FOR FINANCIAL PLANNING EDUCATION SEMINAR PROGRAM CATERING SERVICES AND POSSIBLE BOARD ACTION

RECOMMENDATION

That the Board:

1) Approve the selection of Something Special, to provide financial planning education seminar program catering services for a total amount not to exceed $120,000; and 2) Authorize the General Manager to negotiate and execute the terms and conditions of the three- year contract; and 3) Authorize the President of the Board, on behalf of the Board, to execute the contract subject to the approval of the City Attorney as to form.

BACKGROUND

Catering for the LAFPP Financial Planning Education Seminars is necessary, as the primary event facility is located in a semi-secluded location and attendees would not be able to return from lunch within a reasonable time. Since there are no restaurants in the immediate area, a continental breakfast and lunch are served to members and their spouses/domestic partners during the six- hour educational session. Something Special currently holds a one-year contract to provide catering services which will expire on July 31, 2017.

The number of seminars planned for the current year as well as next fiscal year have been increased due to a number of factors, including a growing interest in the education seminars, new locations being utilized throughout the City, and new seminar formats designed to reach the mid-career and retiree audience. To accommodate these changes, staff requested that the term for a new contract be increased from a one-year term to a three-year term, with additional funding.

DISCUSSION

On December 15, 2016, the Board authorized staff to issue a Request for Proposal (RFP) for catering services for a three-year term. The RFP was posted to the Department’s website and the City’s Business Assistance Virtual Network (BAVN) website. Additional bids were solicited via email from other prospective caterers. Accordingly, responding firms were required to submit a response that included a listing of past clients, potential menus and food items, and corresponding fees. A

total of four proposals were received by the February 1, 2017 deadline. All four firms were deemed responsive, having met the minimum proposal requirements.

Staff is recommending to award the proposed new three-year contract to Something Special, for a total amount not to exceed $120,000. Something Special is competitively priced and offers more goods and services for the cost:

• No service charge imposed • Food is prepared both on and offsite • Food servers remain onsite to replenish the breakfast menus, coffee, water, etc. • Sufficient side dishes to accommodate alternative diets.

Consideration was given to Something Special’s versatility to offer both hot lunch entrées and boxed lunches at a comparable cost, which was not offered by the other bidders. Their extensive menu and the services offered are favorable when accommodating up to 100 attendees for a six-hour session. Something Special has consistently received very good reviews from our members and complies with the policies imposed by the seminar facility.

The attached valuation provides a summary of the proposals received. The price of a boxed lunch was used to calculate the average total cost per seminar attendee as it was the item that was similarly listed by all proposers.

BUDGET

Sufficient funding is included in the FY 2016-17 budget and additional funding to account for the increased number of seminars will be included in future budgets.

POLICY

No policy changes are recommended.

This report was prepared by:

Carol Tavares, Manager Communications and Education Section

RPC:JS:CT:CG

Attachment: Summary of Financial Planning Education Seminar Caterer Proposals

Board Report Page 2 March 16, 2017

DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA 90013 (213) 279-3000

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

DATE: MARCH 16, 2017 ITEM: A.6

FROM: RAYMOND P. CIRANNA, GENERAL MANAGER

SUBJECT: CHIEF INVESTMENT OFFICER’S QUARTERLY REPORT OF ASSET ALLOCATION STATUS AND POSSIBLE BOARD ACTION

RECOMMENDATION

That the Board approve the actual asset allocation of the Fund and Staff’s plans for bringing asset classes currently outside of their target allocation ranges back within their allocation ranges.

BACKGROUND

The Rebalancing Policy (Board Policies Sec 1.7) specifies that the Board will review and affirmatively approve any allocations of Fund assets outside of their target ranges. It states:

Staff will monitor the portfolio’s asset allocation relative to the target allocations. If the actual allocations fall within the defined ranges, no rebalancing will be required. If actual allocations fall outside the predetermined range, Staff will implement a rebalancing back to within the range of the target allocation.

Staff will report all rebalancing activities to the Board on a quarterly basis at a minimum. In circumstances where it is impractical to rebalance the portfolio for any market or portfolio-specific reason, Staff shall assess the rebalancing options, notify the Board of the out of balance situation, and report its recommendations to the Board. Staff shall seek approval from the Board to implement rebalancing according to Staff’s recommended rebalancing plan in situations that involve leaving the portfolio, or some portion of the portfolio out of balance for an extended period of time.

On June 16, 2016, the Board approved the current asset allocation:

Target Upper Lower Asset Class Allocation Range Range Dom. Large Cap Equity 23.0% 25.8% 20.2% Dom. Small Cap Equity 6.0% 7.3% 4.7% Int'l Equity 16.0% 18.4% 13.6% Int'l Emerging Markets 5.0% 6.4% 3.6% Core Bond 12.0% 12.7% 11.3%

(cont’d from previous page) Target Upper Lower Asset Class Allocation Range Range TIPS 5.0% 5.3% 4.7% High Yield Bond 3.0% 3.4% 2.6% Unconstrained Fixed Income 2.0% 2.2% 1.8% Real Estate 7.0% 8.0% 6.0% REITS 3.0% 3.5% 2.5% Commodities-Energy 5.0% 6.2% 3.8% Private Equity 12.0% 15.0% 9.0% Cash Equivalent 1.0% 4.0% 1.0%

Together with the General Consultant RVK and Staff, rebalancing range limits were established.

DISCUSSION

Portfolio Status

As of February 28, 2017, all asset classes were within their target ranges except Domestic Equity and Private Equity (Attachment I). During the last three months, the global equity markets including both US and international markets continued to improve resulting from encouraging economic trends and positive earnings. In addition, the growth sentiment in the US grew stronger due to the expectations of fiscal spending, tax policy and pro-business regulations from the new administration. The strong return experienced by Domestic Large Cap Equity continued to drive its allocation above its upper limit. Due to the denomination effect, Private Equity dipped slightly below its lower target range.

Attachment II illustrates the portfolio and allocation status of each asset class as of February 28, 2017.

Rebalancing

With the approval by the Board on November 3, 2016 to restructure the Domestic Large Cap Equity asset class, Staff began rebalancing this asset class by 1) moving approximately $428 million in securities and cash out of the Alliance S&P 500 and Alliance Russell 1000 Value accounts into a new Alliance Smart Beta account (implemented in January 2017); 2) transferring in cash and securities approximately $1.2 billion from three active domestic equity managers (two of the three managers were terminated) and $235 million from the Alliance S&P 500 account to one active domestic manager account, two new Smart Beta accounts and approximately $196 million to the cash account (implemented in February 2017).

Board Report Page 2 March 16, 2017 CASH FLOW

The actual and estimated cash flows (in millions) for 1Q2017 and 2Q2017 are summarized as below.

Jan 1 - Mar 31, 2017 Apr 1 - Jun 30, 2017 Actual/Projected Projected City Contributions (Net)1 $ - $ - Member Contributions $ 31.5 $ 32.4 Securities Lending $ 2.1 $ 2.3 Investment Income $ 82.6 $ 86.9 Earnings on Cash/Misc. $ 0.8 $ 1.3 Real Estate $ 24.6 $ 15.0 Private Equity $ 24.6 $ 12.0 DROP $ (37.1) $ (16.6) Benefits & Administrative Expense $ (259.2) $ (277.7) Net Cash Flow (est.) $ (130.1) $ ( 1 44.4)

1The Net City Contribution = (the Total General Fund Contribution – the retirement contribution payment from LAFPP to LACERS for LAFPP staff) + the Special Fund (Harbor) contribution.

CURRENT EVENTS

Asset Allocation/Asset Structural Review

On December 1, 2016, the Board approved a search to add an additional active US REIT manager. On December 15, 2016, the Board also approved the restructure of the Small Cap asset class in which one or more additional small cap managers will be hired in 2017. Similarly, on March 2, 2017, the Board authorized Staff to conduct a search for Real Estate separate account managers.

In addition to the Domestic Large Cap Equity, Small Cap Equity, US REIT, and Real Estate structural changes, a series of other asset allocation structure studies which include International Equity (including Emerging Markets) and Fixed Income will be conducted by RVK in April 2017.

This report was prepared by:

Tom Lopez Chief Investment Officer

RPC:TL:DN:AP

Attachments: I. Portfolio Allocation Chart as of February 28, 2017 II. Total Portfolio as of February 28, 2017

Board Report Page 3 March 16, 2017 Attachment I

Portfolio as of January 29, 2016 Total Fund Portfolio Allocation

35.00% % 30.00% 25.92

25.8 25.00%

20.2 %

20.00% % 18.4 18.0 16.44 15.52 16.0 15.00% 15.0

13.6 % 9.84 11.5 % % 10.00% 8.5 8.76 9.0 6.91 %

7.3 % 6.4 % % 3.98 % 4.11

5.00% 4.7 6.2 3.99 3.4 4.0 3.6 2.65 3.8 2.6 2.2 1.89 1.8 1.0 0.00% Core Equity (23%) Small Cap. Equity (6%) Int'l Equity (16%) Int'l Emerg. Mkts (5.0%) Core Bonds Iincluding High Yield Bonds (3%) Unconstrained Fixed Cash (1.0%) Total RE (Including REITS) Private Equity (12.0%) Commodities Energy TIPS) (17.0%) Income (2.0%) (10.0%) (5.0%) Actual Allocation, Target Allocation in parenthesis Over-allocated (Blue), Under-allocated (Red) *Board approved ranges on 6/16/16 Attachment II

A Portfolio as of February 28, 2017

EQUITIES STOCKS BONDS CASH TOTAL ALLOC. PRIVATE EQUITY STOCKS / EQUITY / RE BONDS CASH TOTAL ALLOC. Alliance Capital (S&P 500 Index) 1,724.5 - 3.6 1,728.2 Abbott Capital 45.6 - - 45.6 Alliance Capital (Russell 1000 Value Index) 0.0 - 0.2 0.2 Hamilton Lane 9.1 - - 9.1 AllianceBernstein Systematic Value 441.2 - 0.9 442.1 PCA 36.7 - - 36.7 Alliance Capital (Russell 1000 Growth Index) 1,077.3 - 5.1 1,082.3 Fairview Capital 1.2 - - 1.2 Chicago Equity (Enh. Index-Core) 0.4 - 0.0 0.4 Portfolio Advisors 1,293.4 - - 1,293.4 LA Capital (Enh. Index-Growth) 324.8 - 1.0 325.8 Aldus Equity 232.9 - - 232.9 NTI S&P 500 Equal Weight 753.1 0.3 753.4 Stepstone Group 135.7 - - 135.7 NTI Stoxx USA 900 451.5 0.3 451.8 TOTAL PRIVATE EQUITY MGRS (12%) 1,754.6 - - 1,754.6 8.76% PIMCO (Enh. Index-Value) 2.8 - 0.0 2.8 Target Differential (3.24)% (648.9) Robeco (Value) 321.3 - 6.4 327.7 OakBrook Investments (Large Cap-Core) 30.7 - 0.4 31.1 REAL ESTATE Redwood Investments (Large Cap-Core) 28.0 - 1.3 29.3 Alliance Capital Global REIT 111.3 - 0.4 111.7 Terminated Domestic Equity Managers 15.2 - 0.1 15.3 Principal Global REIT 170.6 - 1.1 171.7 Core Equity Managers (23%) 5,170.8 - 19.7 5,190.6 25.92% Principal U.S. REIT 340.0 - 3.7 343.7 Target Differential 2.92% 584.0 Terminated REIT Managers 0.0 - - 0.0 REIT Managers (3.0%) 622.0 - 5.2 627.2 3.13% Frontier Capital Mgt (Growth) 624.8 - 17.7 642.5 Target Differential 0.13% 26.3 Daruma (Value) 553.8 - 30.9 584.7 REAL ESTATE COMMINGLED FUNDS SUMMARY Channing Capital Mgt. (Small Cap.) 64.3 - 1.7 66.0 Total Pooled Funds 819.0 - - 819.0 4.09% Phocas Financial (Small Cap.) 61.3 - 2.5 63.7 REAL ESTATE SEPARATE ACCT. SUMMARY BY MANAGER Granite Investment Partners (Micro Cap) 26.5 - 0.4 26.9 Heitman 218.5 - - 218.5 Attucks (Mgr of Emerging Mgrs) / New Accts. - - - - Sentinel 305.8 - - 305.8 Small Cap. Equity Mgrs (6%) 1,330.7 - 53.2 1,383.9 6.91% Real Estate Equity Mgrs 524.4 - - 524.4 2.62% Target Differential 0.91% 182.2 TOTAL REAL ESTATE (10%) 1,965.3 - 5.2 1,970.5 9.84% Target Differential (0.16)% (32.3) Brandes (Value) 881.4 - 69.8 951.2 COMMODITIES Fisher (Core) 437.6 - 6.2 443.7 Alliance (Commodities, Public Equity) 324.6 - 0.4 325.1 Blackrock (Core Passive) 685.5 - 1.1 686.6 Gresham Invest. Mgmt. (Commodities, Active) 87.8 - 7.3 95.2 Baille Gifford (Growth) 554.8 - 7.5 562.4 Goldman Sachs (Commodities, Enhanced Index) 100.6 - - 100.6 Boston Common (ESG) 27.4 - 0.5 27.9 Kleinwort Benson (Commodities, Public Equity) 93.4 - 2.8 96.1 Northern Trust (Int'l Small Cap Index) 351.7 - 2.5 354.1 Mellon Capital (Commodities, Public Equity) 88.7 - 0.8 89.5 FIS (Mgr of Emerging Mgrs) International 81.0 - 2.2 83.2 PA (Commodities, Private Equity) 91.7 - - 91.7 Terminated Int'l Equity Managers 0.0 - 0.0 0.0 TOTAL COMMODITIES (5.0%) 786.9 - 11.3 798.2 3.99% Int'l Equity Mgrs (16%) 3,019.4 - 89.8 3,109.2 15.52% Target Differential (1.01)% (214.6) Target Differential (0.48)% (95.4) Harding Loevner 357.2 - 7.9 365.1 CASH Dimensional Fund Advisors 455.3 - 1.7 457.1 HOUSE ACCOUNTS Terminated Int'l Emerg. Mkts. Mgrs. 0.0 - 0.0 0.0 Tier 1 (Article 17) - - 2.3 2.3 Int'l Emerg. Mkts Mgrs (5.0%) 812.5 - 9.7 822.2 4.11% Tier 2 (Article 18) - - 577.4 577.4 Target Differential (0.89)% (179.3) Tier 3 (Article 35) - - 28.8 28.8 TOTAL EQUITIES MGRS (50.0%) 10,333.5 - 172.4 10,505.9 52.45% Tier 4 (New) - - 12.9 12.9 Int'l Tax Reclaims - - 0.3 0.3 Tier 5 (New) - - 163.7 163.7 FIXED INCOME Tier 6 (New) - - 12.4 12.4 Northern Trust (Fixed Income Index) - 667.8 0.9 668.7 CASH SUMMARY Reams Asset Mgmt. (Opportunistic) - 689.7 - 689.7 Unallocated Cash Reserve (1%) - - 797.5 797.5 3.98% LM Capital (Opportunistic) - 323.1 9.9 333.0 Target Differential 2.98% 597.2 GIA Partners (Opportunistic) - 26.2 0.5 26.7 Transition - - 0.0 0.0 SemperCapital Mgt. - 26.4 0.6 27.0 TOTAL FUND Loomis Sayles (Long Duration) - 624.0 23.5 647.6 PRIVATE REAL CA Comm. Mort. Fund - 0.7 - 0.7 COMMODITIES EQUITY STOCKS BONDS ESTATE CASH TOTAL Bridgewater (TIPS) - 353.7 - 353.7 ACTUAL ASSET MIX Reams Asset Mgmt. (Passive TIPS) - 473.4 0.4 473.9 Current Month 786.9 1,754.6 10,335.2 4,144.3 1,965.3 1,042.4 20,028.6 Bridgewater Pure Alpha - 71.3 - 71.3 3.93% 8.76% 51.60% 20.69% 9.81% 5.20% 100.00% Core Bond Mgrs (17.0%) - 3,256.4 35.9 3,292.3 16.44% Last Month 792.7 1,756.8 10,234.8 4,126.1 1,936.8 883.6 19,730.8 Target Differential (0.56)% (112.6) % Change -0.74% -0.13% 0.98% 0.44% 1.47% 17.98% 1.51% MacKay Shields 1.7 509.3 19.7 530.7 High Yield Bond Mgrs (3.0%) 1.7 509.3 19.7 530.7 2.65% Target Differential (0.35)% (70.2) Reams Asset Mgmt. (Unconstrained) - 189.9 - 189.9 Payden & Rygel (Unconstrained) 188.7 - 188.7 Unconstrained Fixed Income (2.0%) 378.6 - 378.6 1.89% Target Differential (0.11)% (22.0)

TOTAL FIXED INCOME MGRS (22.0%) 1.7 4,144.3 55.6 4,201.6 20.98%

Subtotals & totals may not sum up exactly due to rounding. Note: City Pension Contribution received on 7/15/16 Note: Data is unaudited Dollars expressed in Millions.

DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA 90013 (213) 279-3000

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

DATE: MARCH 16, 2017 ITEM: A.7

FROM: RAYMOND P. CIRANNA, GENERAL MANAGER

SUBJECT: APPROVAL TO ISSUE A REQUEST FOR PROPOSALS FOR INDEPENDENT REVIEW OF HEALTH SUBSIDY AND BENEFITS COSTS AND POSSIBLE BOARD ACTION

RECOMMENDATION

That the Board authorize the General Manager to issue a Request for Proposals (RFP) for an independent review and measurement of (1) LAFPP health insurance subsidy expenditures and benefits costs, and (2) the efficiency of Board-approved health insurance plan premium negotiations.

DISCUSSION

On March 2, 2017, the Board reviewed data that summarized LAFPP health insurance subsidy expenditures since FY 2006-07. The data revealed a considerable growth of health insurance subsidy expenditures over the last 10 years. The General Manager noted that other factors have contributed to the overall expenditure increases (i.e., increase in surviving spouses and the subsidy plan population), and not just the increases in the maximum health insurance subsidy over the past ten years. Subsequently, the Board adopted a motion to release a RFP for an independent review of the health subsidy program and costs and an evaluation of LAFPP health consultant, Keenan & Associates (Keenan), health plan bids and proposed plan designs.

As instructed, Staff is reporting back to the Board on a proposed scope of work for the independent review, which may include, but is not limited to, the following:

A. Proposed scope of work related to current health plans structure: • Consult with LAFPP regarding the effectiveness of the System’s Medical and Dental insurance program and highlight any proposed changes. • Provide an evaluation of the current LAFPP health benefits program available to LAFPP retirees and surviving spouses. • Conduct a cost benefit analysis of the current LAFPP health benefits program. • Analyze the current plan design effectiveness and the cost to pensioners and LAFPP. • Provide cost saving recommendations for the current health benefits program. • Conduct a comparison of the current health benefits program to other retired public safety employee health benefits programs. • Analyze the most recent plan renewals by current plan providers.

B. Proposed scope of work related to new health plans structure: • Consult with LAFPP regarding new coverages in anticipation of the next year’s insurance program, including but not limited to, the evaluation of alternative program proposals. • Evaluate the LAFPP Health Plan Bids and Proposed Plan Design. • Review and analysis of Keenan’s recommended plan designs. • Review and analysis of proposed health plan rates. • Provide extensive review of RFP bids and make recommendations to the Board as to the most advantageous insurance program providing the highest level of coverage at the best possible price to meet the System’s needs and objectives. • Recommend cost saving changes to proposed plan designs. • Analyze proposals received from various insurance carriers and verify the reasonableness of the price for the coverage provided. • Conduct a cost benefit analysis of LAFPP administering the entire health benefits program. It should be noted that in 2006, the Board contracted with The Segal Company (Segal) to conduct audits of the Los Angeles Police Relief Association, Los Angeles Firemen’s Relief Association, Los Angeles Police Protective League and the United Firefighters of Los Angeles City (Associations). The audits took over two and a half years to complete and the principal areas covered by the audits were review of eligibility records, financial operations of the plans, and benefits sufficiency and comparability to other providers of retiree benefits. The audits did not uncover any material deficiencies and the plans were all deemed to be competitive within the benchmark universe and well run with respect to effective plan designs and economies of administration. The audits determined that the cost to LAFPP of the benefits being offered to retirees is more than competitive than what other employers are charged for the same benefits and meet or exceed market benchmarks for monthly premiums. Subsequent audits of the Associations were conducted by the Internal Audit Section and were more limited in their scope as they related only to subsidy payments.

Upon approval, the RFP will be published on the LAFPP Web site, on the City's Web site (Los Angeles Business Assistance Virtual Network - LABAVN), and forwarded directly to firms providing related consulting services. The evaluation of responses, cost information and a contract award recommendation will be presented to the Board at the earliest possible date.

BUDGET

There is sufficient funding in the FY 2016-17 Budget to cover the estimated costs for issuing the RFP. However, savings within the administrative budget would need to be identified to cover the cost of the independent review. Staff expects that there would be an increase in fees payable to Keenan due to their having to perform additional collaborative work with the newly hired consultant. It is anticipated that the cost of the independent review will range from $100,000 to $150,000.

Board Report Page 2 March 16, 2017 POLICY

No policy changes as recommended.

This report was prepared by:

Greg Mack, Chief Benefits Analyst Pensions Division

RPC:JS:GM:MG:JM

Attachment: Health Fund Audit by Segal dated April 23, 2009

Board Report Page 3 March 16, 2017

DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA 90013 (213) 279-3000

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

DATE: MARCH 16, 2017 ITEM: B.1

FROM: RAYMOND P. CIRANNA, GENERAL MANAGER

SUBJECT: RETIREE HEALTH BENEFITS PROGRAM OVERVIEW

THIS REPORT IS PROVIDED TO THE BOARD FOR INFORMATIONAL PURPOSES.

DISCUSSION

On March 2, 2017, the Board discussed the attached data chart that summarized all LAFPP health benefits program expenditures since FY 2006-07, which include: • Health insurance premium subsidies for retired members; • Health insurance premium subsidies for qualified surviving spouses/domestic partners; • Dental insurance premium subsidies for retired members; and • Medicare Part B premium reimbursements for retired members and qualified survivors

The Board then directed staff to prepare a report to seek authorization to issue an RFP for an independent review of the health subsidy program cost efficiency and an evaluation of upcoming LAFPP health plan bids and proposed plan designs. The Board’s instruction to issue this RFP will be considered as a separate item on today’s agenda.

In light of the Board’s discussion concerning health benefits program expenditures, Staff believes it would be beneficial to review the history of the program, including benefit modifications made by the City over the years. Staff will present an overview of the program during today’s meeting to include the following:

• Evolution of the LAFPP health benefits program • What portion of the retiree health benefit program does the LAFPP Board have control over? • Breakdown of health benefit program expenditure chart

BUDGET

No impact as recommended.

POLICY

No policy changes as recommended.

This report was prepared by:

Joe Salazar, Assistant General Manager Pensions Division

RPC:JS

Attachment: 10-Year History of Total Annual Benefits Paid

Board Report Page 2 March 16, 2017 ATTACHMENT

TOTAL ANNUAL BENEFITS PAID

$987,269 $1,000,000 $915,163 $900,000 $856,237 $856,036 $831,191 $786,861 $800,000 $754,312 $762,205 $768,114 $733,810 $700,000

$600,000

$500,000

$400,000

$300,000

$200,000 $104,371 $110,411 $116,678 $82,911 $89,271 $93,536 $98,306 $100,000 $62,216 $70,879 $77,502

$0 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 PENSION HEALTH SUBSIDY

LAFPPTO SERVE THOSE WHO PROTECT

DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA 90013 (213) 279-3000

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

DATE: MARCH 16, 2017 ITEM: B.3

FROM: RAYMOND P. CIRANNA, GENERAL MANAGER

SUBJECT: CONTRACTOR DISCLOSURE POLICY – QUARTERLY REPORT

THIS REPORT IS PROVIDED TO THE BOARD FOR INFORMATIONAL PURPOSES.

The Board adopted the Contractor Disclosure Policy to provide transparency in LAFPP’s contracting process and to help ensure that investment and procurement decisions are made solely on the merits of the goods or services proposed to be provided by Contractors to LAFPP.

Section 1.18.G.2.f of the Policy reads as follows:

“LAFPP internal audit staff will compile a quarterly Board report containing the names and amount of compensation agreed to be provided to each Intermediary by each Contractor; the campaign contributions and gifts of each Contractor as reported in the Contractor Disclosures; the List of Contacts; and the List of Exclusions.”

In accordance with the above section, Staff is providing its quarterly report to the Board. Two- hundred and thirty disclosure reports were received by the Internal Audit Section (IAS) for the period ending December 31, 2016. The following table is a breakdown of the reports received by IAS and the reports outstanding at the time this report was prepared.

Description No. No. Outstanding Received Quarterly Disclosures (83 Required) Completed Quarterly Reports 83 Outstanding Quarterly Reports Annual Disclosures (138 Required) Completed Annual Reports 135 Outstanding Annual Reports 3 Additional Disclosures (12 Required) 12 Total 3 230

Attachment 1 lists outstanding disclosure reports, exclusions, disclosed contributions, contacts, gifts, and intermediary information. Attachment 2 contains summaries of the gift information disclosed by private equity consultant, Portfolio Advisors. Fairview Capital’s disclosure report is included in the above numbers. Information disclosed by Fairview will be provided in future quarterly reports.

Prior Quarterly Report Update

There were no outstanding reports for the prior quarter.

BUDGET

No impact.

This report was prepared by:

Caroline Dinu Senior Management Analyst II Internal Audit Section

RPC:EJK:CD

Attachments: 1. Contractor Disclosure Summary 2. Private Equity Disclosure Information

Board Report Page 2 March 16, 2017 DEPARTMENT OF FIRE AND POLICE PENSIONS CONTRACTS Attachment 1 As of March 9, 2017

CONTRACTOR DISCLOSURE POLICY OUTSTANDING DISCLOSURES Contract Responsible Vendor / Contract Name Contract Term Reason for non-disclosure Number Start Date Exp. Date Section PE Fund Black Diamond Opportunity Fund III Investments Unresponsive PE Fund Black Diamond Opportunity Fund IV Investments Unresponsive PE Fund Lone Star X Investments Unresponsive NEW EXCLUSIONS Vendor / Contract Name Exclusion Date Exclusion Information None CAMPAIGN CONTRIBUTIONS Contract Contract Term Vendor / Contract Name Campaign Contribution Information Number Start Date Exp. Date None OTHER CONTRIBUTIONS Contract Contract Term Vendor / Contract Name Contribution Information Number Start Date Exp. Date None DISCLOSED CONTACTS Vendor / Contract Name Contact Date Contact Information Argland reports its intermediary firm, MVision, contacted Tom Lopez, Chief Investment Officer, in 2015 and 2016, through one email PE Fund Argland Partners Fund I Various Dates and three telephone calls. CityView reports the company President, Sean Burton, had contact with Mayor Eric Garcetti, Councilmember Joe Buscaino, and Councilmember Curren Price through text messages, calls, events, and occasions as summarized below. The reported nature of all contacts listed was personal or related to Los Angeles World Airports (LAWA) and CityView business was not discussed. RE Commingled Fund CityView So. Calif. Fund II Various Dates Month(s) Calls Events Text Messages 7/13/2016 - CityView reports Mr. Burton had 232 text messages with Mayor Garcetti, 5 text messages 0 0 1/2/2017 with Councilmember Buscaino, and 4 text messages with Councilmember Price. Greycroft reports two partners of the firm, Dana Settle and Mark Terbeek, serve on the LA Mayor's technology council in unpaid PE Fund Greycroft Growth II Various Dates positions. Incline Equity reports its intermediary firm, Sixpoint Partners, had contact with Tom Lopez, Chief Investment Officer, and Susan Liem, PE Fund Incline Equity Partners IV (updated information) 9/3/2015 Investment Officer II. 649PEN R.V. Kuhn & Associates, Inc. 5/4/2016 R.V. Kuhns reports Becky Gratsinger, CEO, had social contact with Commissioner Von Voigt and no LAFPP business was discussed. DISCLOSED GIFTS Vendor / Contract Name Gift Date Gift Information Lightyear Capital reports providing dinner at Marea, valued at approximately $300.79, to Ms. Amanda Peacock, Senior Associate with PE Funds Lightyear Capital Funds III and IV 5/2/2016 Portfolio Advisors. Portfolio Advisors confirmed Ms. Peacock received the gift and the firm made a donation. Los Angeles Capital Management reports gifts, valued at approximately $85.73 each, were provided to Susan Liem, Investment Officer, Miki Shaler, Cash Management Officer, and Adam Perez, Cash Management Officer, at the Los Angeles Investment 599PEN Los Angeles Capital Management 12/6/2016 Professionals Holiday Party/Charity Benefit. Mss. Liem and Shaler and Mr. Perez confirmed receipt of the gifts. 650PEN and 662PEN Portfolio Advisors Various Dates See attached summary. INTERMEDIARY INFORMATION Vendor / Contract Name Intermediary Compensation Disclosure Date Notes MVision Private Equity 0.25% to 1.25% of aggregate PE Fund Argland Partners Fund I Advisors USA LLC commitments. 12/29/2016 PE fund approved at 1-5-17 meeting. PE fund approved at 9-15-16 meeting. Subsequently Nossaman, LAFPP legal counsel, reports there is an intermediary, and the PE firm reports PE Fund Incline Equity Partners IV (updated information) Sixpoint Partners 1.2% of capital commitments. 12/16/2016 compensation.

Page 1 Attachment 2

PRIVATE EQUITY DISCLOSURE INFORMATION Portfolio Advisors In response to the Contractor Disclosure Policy as modified in June 2015, LAFPP’s private equity consultant, Portfolio Advisors, submitted its contractor disclosure for the quarter ending December 31, 2016.

Portfolio Advisors employees attend annual and advisory board meetings of the underlying portfolio funds as part of its due diligence and in order to fulfill its responsibilities to its clients. IAS summarized disclosure information in consideration of due diligence protections in certain limited partnership agreements.

The table below is a summary of gifts of meals, lodging, and transportation, as defined in LAFPP’s Contractor Disclosure Policy and as reported by Portfolio Advisors for the fourth quarter of 2016.

Number of Annual Number of PA Staff Total Number of Number of Attendees Number of and/or Advisory Attending as PA Staff in w/ Travel and Attendees w/ Board Meetings Advisory Board Attendance Lodging Provided by Lodging Only Members GP Provided by GP 30 13 33* 1 4 Note: It is understood that meals are provided by the General Partner (GP) of the private equity fund. *This number includes one PA Staff attending via teleconference.

In addition, Portfolio Advisors has in place a Gifts and Entertainment Policy. IAS has reviewed the Portfolio Advisors’ Gifts and Entertainment Policy and notes that it is robust, comprehensive, and demonstrates commitment to ensuring employees’ actions are free from conflicts of interest, the appearance of conflicts of interest, and potential violations of law. Key provisions of the policy include restrictions on gifts and entertainment, quarterly reporting (in addition to those required by LAFPP), references to Portfolio Advisors’ Code of Ethics, and consideration of applicable laws and ERISA.

Prior Quarter Information from Portfolio Advisors

There is no information outstanding from the prior quarter; however, based on reconciliation of annual information received from private equity funds, IAS would like to revise information previously reported for the second quarter of 2016, as indicated on the following table.

Information for the second quarter of 2016 is revised as follows:

Number of Annual Number of PA Staff Total Number of Number of Attendees Number of and/or Advisory Attending as PA Staff in w/ Travel and Attendees w/ Board Meetings Advisory Board Attendance Lodging Provided by Lodging Only Members GP Provided by GP 36 37 10 53 55 0 7 Note: It is understood that meals are provided by the General Partner (GP) of the private equity fund.

Los Angeles

Fire & Police Pensions March 2017

Review of 2017 Private Equity & Commodities Investment Activity by Portfolio Advisors, LLC March 16, 2017 Los Angeles Fire & Police Pensions Contents  Review of 2017 Private Equity Investment Activity ̶ Private Equity Commitment Pace Page 4 ̶ Private Equity Investment Strategy Page 5 ̶ 2017 Approved/Closed Private Equity Commitments Pages 6-7 ̶ Specialized Manager Criteria and Investment Strategy Page 8 ̶ Specialized Manager Commitments Pages 9-10  Review of 2017 Commodities Investment Activity ̶ Commodities Criteria and Investment Strategy Page 12 ̶ Commodities Commitments Page 13

Page 2 Los Angeles Fire & Police Pensions

Review of 2017 Private Equity Investment Activity

Page 3 Los Angeles Fire & Police Pensions Private Equity Commitment Pace  Portfolio Advisors recommended commitments averaging $263 million per annum from 2010 to 2013. During this time frame, the exposure target was 9%  LAFPP approved an increase in the exposure target to 10% in late 2013 which led to an increase in the commitment pace during 2014 and 2015  In 2016, LAFPP approved another increase in the exposure target to 12%. As a result, PA will be targeting commitments of $425 to $475 million per annum ̶ If the $45.0 million of private equity commitments up for discussion are approved by the Board, commitments totaling $157.5 million will have been approved/closed for 2017 $500.0 Vintage Year Approved/Closed1 $433.8 $400.0 MM

$360.0 MM $336.1 $300.0 MM $280.0 $264.9 $261.2 MM MM $246.0 $200.0 MM MM

$100.0 $112.5 MM $0.0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

1) Commitments made by prior investment advisors are attributed to their respective fund vintage years. Each commitment recommended by Portfolio Advisors beginning in April 2010 is attributed to the year in which the commitment was approved/closed. In 2010, Portfolio Advisors recommended $264.9MM with the balance of $85.0MM committed by prior investment advisors. In 2011, Portfolio Advisors recommended $261.2MM with the balance of $20.0MM committed by a prior investment advisor Page 4 Los Angeles Fire & Police Pensions Private Equity Investment Strategy  Focus on the following objectives: ̶ Achieve and maintain a target allocation of approximately 12% of total Plan assets (increased from 10% on 6/16/2016) • As of December 31, 2016, the private equity program is approximately 9.0% of total Plan assets ̶ Commit approximately $425 million to $475 million to private equity per year (increased from $300 million to $350 million) • From 2010 to 2014, $1,412.1 million was closed across 81 funds** • In 2015, $336.1 million was closed across 21 funds • In 2016, $433.8 million was approved/closed to 24 funds • YTD 2017, $112.5 million has been approved/closed to 5 funds ̶ Achieve long-term sector weightings approximating 50% Buyout (range 40% to 60%), 30% Special Situations (range 15% to 40%) and 20% Venture Capital & Growth Equity (range 15% to 35%) ̶ Seek geographic weightings approximating 65% to 85% US and 15% to 35% International, as well as increase weighting of Asia within International ̶ Emphasize diversification and investment manager selection • Since Portfolio Advisors was hired in April 2010, LAFPP has approved/closed 131 commitments to 71 investment managers that total $2,294.6 million • Several commitments were made with the goal of increasing the Portfolio’s exposure to: Asia ($100.0 million to five funds), Diversified Emerging Markets ($15.0 million to one fund), Europe ($131.0 million to five funds) and Specialized Managers ($254.0 million to 31 funds) • During this time period, LAFPP has re-invested with 25 existing investment managers and invested with 46 new investment managers

** Please note that Palladium Equity Partners IV is double counted due to the original commitment in 2010 and the subsequent re-up in 2013 Page 5 Los Angeles Fire & Police Pensions 2017 Approved/Closed PE Commitments  PA expects several of LAFPP’s existing managers to launch new funds in 2017  Depending on Board approval and allocations to funds, LAFPP may close on approximately $450.0 million of commitments for the year ̶ Commitment sizes will likely range from $7.5 to $40.0 million

Long-Term YTD 2017 Long-Term YTD 2017 $s in MM Sector Targets Commitments Sector Targets Commitments Under / (Over) Investment Strategy

Buyout 50% 42% $225.0 $47.5 $177.5

Special Situations 30% 36% $135.0 $40.0 $95.0

Venture Capital 20% 22% $90.0 $25.0 $65.0 & Growth Equity

Cumulative 100% 100% $450.0 $112.5 $337.5

Please note long-term sector targets are based on an annual commitment pace of $450.0MM to private equity, the midpoint of Portfolio Advisors' target range of $425.0MM to $475.0MM. 2017 statistics are based on YTD approved/closed commitments of 112.5 MM Page 6 Los Angeles Fire & Police Pensions 2017 Approved/Closed PE Commitments (Continued) Manager Specialized or Core Investment $s in MM Status Manager Strategy Commitments Buyout P4G Capital Partners New Specialized Middle Market $7.5 Silver Lake Partners V Existing Core Large Cap $40.0 YTD 2017 $47.5 Long-Term Sector Target $225.0 2017 Remaining $177.5 Fund Manager 11 Existing Core Middle Market $25.0 Special Situations

EnCap Energy Capital XI Existing Core Multi-Strategy & Other $40.0 YTD 2017 $40.0 Long-Term Sector Target $135.0 2017 Remaining $95.0 Venture Capital & Growth Equity

SG Growth Partners IV Existing Core Growth $15.0 Oak HC/FT II Existing Specialized Growth $10.0 YTD 2017 $25.0 Long-Term Sector Target $90.0 2017 Remaining $65.0 Fund Manager 21 Existing Core Multi Stage $20.0 Cumulative

YTD 2017 $112.5 Target Commitments for 2017 $450.0 2017 Remaining $337.5

Page 7 1) The $45.0MM in commitments to two funds that are pending Board approval are not factored into any of the 2017 statistics above

Los Angeles Fire & Police Pensions Specialized Manager Criteria and Investment Strategy  The LAFPP Specialized Manager program focuses on private equity commitments to funds with a preference for the following: ̶ First -, second- or third-time institutional funds for a given manager; ̶ Funds with a stated target size of less than or equal to $500 million; ̶ Managers of funds that are owned at the General Partner level by one or more minorities, women, disabled veterans or members of the LGBT community; ̶ Funds that target companies which offer demographically-focused products and services to minorities and women; and ̶ Funds that have a specialized strategy such as investing in companies located in California or Los Angeles  In August 2016, LAFPP’s Board approved $100 million for Portfolio Advisors to commit to Managers that fit one or more of the above criteria ̶ Commitment sizes will range from $7.5 to $15 million  Specialized Manager investment activity is listed below: $s in MM YTD Remaining Pending Year Allocation Commitments Allocation Commitments 2014 $60.0 $25.0 $35.0 $0.0 2015 $35.0 $30.0 $5.0 $0.0 2016* $105.0 $22.5 $82.5 $0.0 2017 $82.5 $17.5 $65.0 $0.0 *LAFPP Specialized Manager program was put on hold in early 2016 as a result of a request from the Commissioners to conduct an RFP process. LAFPP’s Board of Commissioners recently approved a $100 million pool of capital for investment in Specialized Managers, and the program has resumed. Page 8 Los Angeles Fire & Police Pensions Specialized Manager Commitments Minority/Woman/Disabled First, Second or Third Target Fund Size Veteran/LGBT* California Specialized Cumulative $s in MM Institutional Fund ≤ $500.0 Ownership** Office Investments Commitments Commitments 2010 Bertram Growth Capital II, LP    $25.0 Total $25.0 $25.0 2011 Gridiron Capital Fund II, LP   $5.0 Incline Equity Partners III, LP   $5.0 Longitude Venture Partners II, LP   4   $10.0 Palladium Equity Partners IV, LP 5 1   $10.0 Pelion Ventures V, LP 6  $10.0 Vivo Ventures Fund VII, LP  2   $10.0 Total $50.0 $75.0 2012 Alta Growth Capital Mexico Fund II, LP    $5.0 Carrick Capital Partners, LP   3  $4.0 Clearlake Capital Partners III, LP 1,2  $5.0 GenNx360 Capital Partners II, LP  3 $5.0 ICV Partners III, LP   3  $10.0 Mainsail Partners III, LP    $5.0 SG Growth Partners II, LP   $10.0 Siris Partners II, LP  1,3 $5.0 StepStone Secondary Opportunities II, LP   1  $5.0 Total $54.0 $129.0 2013 Palladium Equity Partners IV, LP*** 1   $15.0 Vista Foundation Fund II, LP   3  $15.0 Total $30.0 $159.0 *LGBT and Disabled Veteran criteria added in 2016 ** Minority Ownership Legend: 1) U.S. Hispanic 2) Asian American 3) African American 4) Woman 5) LGBT *** Represents an additional commitment made to Palladium Equity Partners IV, which was originally approved in 2011. Total commitment to the fund is now $25 million. 5) Palladium Changed its strategy in fund III to focus on investments targeting the Hispanic community 6) Pelion is a merger of two venture funds. Pelion IV was the first fund under this new management structure Page 9 Los Angeles Fire & Police Pensions

Specialized Manager Commitments (Continued) Minority/Woman/Disabled First, Second or Third Target Fund Size Veteran/LGBT* California Specialized Cumulative $s in MM Institutional Fund ≤ $500.0 Ownership** Office Investments Commitments Commitments 2014 Blue Sea Capital Fund I, LP    $5.0 NMS Fund II, LP   1 $5.0 Oak HC / FT Partners, LP   4 $5.0 Stripes Growth III, LP   $10.0 Total Total $25.0 $184.0

2015 Carrick Capital Partners II, LP   3  $10.0 New Water Capital Partners, LP   $5.0 1315 Capital, LP   4 $5.0 CenterGate Capital Partners I, LP   4 $5.0 Angeles Equity Partners I, LP    $5.0 Total Total $30.0 $214.0

2016*** Astra Partners I, LP   3,4 $7.5 Bain Double Impact, LP   3  $7.5 DEFY Partners I, LP   4  $7.5 Total Total $22.5 $236.5 2017 P4G Capital Partners, LP   3,4,5  $7.5 Oak HC/FT II, LP   4 $10.0 Total Total $17.5 $254.0 Cumulative Grand Total: $254.0 $254.0 *LGBT and Disabled Veteran criteria added in 2016 ** Minority Ownership Legend: 1) U.S. Hispanic 2) Asian American 3) African American 4) Woman 5) LGBT ***LAFPP Specialized Manager Program was put on hold in early 2016 as a result of a request from the Commissioners to conduct an RFP process. LAFPP’s Board of Commissioners recently approved for PA to manage $100 million pool of capital for investment in specialized managers, and the program has resumed.

Page 10 Los Angeles Fire & Police Pensions

Review of 2017 Commodities Investment Activity

Page 11 Los Angeles Fire & Police Pensions Commodities Criteria and Investment Strategy  LAFPP approved an allocation to private equity funds focused on commodity investments in March 2012  Investment strategy is focused on the following objectives: ̶ Source, review and close on commitments to groups that invest in agriculture, metals & mining, oil & gas and timber. Emphasize diversification and investment manager selection, with two to three commitments per year ̶ Target net asset value of approximately $160.0 million over a 4-6 year period • As of December 31, 2016, the Commodity Portfolio has $92.1 million of net asset value ̶ Commit approximately $50.0 million per year • In 2012, $43.8 million was closed across three funds • In 2013, $25.0 million was closed to one fund • In 2014, $50.0 million was closed to two funds • In 2015, $55.0 million was closed to two funds • In 2016, $45.0 million was closed to two funds  Commodities investment activity is listed below: $s in MM Annual YTD Remaining Pending Year Commitment Pace Commitments Commitments Commitments 2012 ~$50.0 $43.8 $0.0 $0.0 2013 ~$50.0 $25.0 $0.0 $0.0 2014 ~$50.0 $50.0 $0.0 $0.0 2015 ~$50.0 $55.0 $0.0 $0.0 2016 ~$50.0 $45.0 $5.0 $0.0 2017 ~$50.0 $0.0 $50.0 $0.0

Page 12 Los Angeles Fire & Police Pensions Commodities Commitments Manager Investment $s in MM Status Strategy Commitments 2012 Apollo Natural Resource Partners, LP Existing Commodity Multi-strategy $15.0 EnCap Energy IX, LP New Oil and Gas $18.8 NGP Natural Resources X, LP Existing Oil and Gas $10.0 2012 Total: $43.8 2013 NGP Agribusiness Follow-on Fund, LP Existing Agribusiness and Food Processing $25.0 2013 Total: $25.0 2014 Molpus Woodlands Fund IV, LP New Timber $25.0 NGP Natural Resources XI, LP Existing Oil and Gas $25.0 2014 Total: $50.0 2015 EnCap Energy X, LP Existing Oil and Gas $30.0 Apollo Natural Resource Partners II, LP Existing Commodity Multi-strategy $25.0 2015 Total: $55.0 2016 Tillridge Global Agribusiness Partners II, LP New Agribusiness and Food Processing $20.0 Resource Capital Fund VII, LP New Metals & Mining $25.0 2016 Total: $45.0 2017 2017 Total: $0.0 Cumulative Grand Total: $218.8

Page 13 Los Angeles Fire & Police Pensions

Thank you!

Todd A. Hughes, CFA Geoffrey Kelleman (203) 662-3461 (203) 662-3021 [email protected] [email protected]

Page 14

DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA 90013 (213) 279-3000

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

DATE: MARCH 16, 2017 ITEM: B.6.a

FROM: RAYMOND P. CIRANNA, GENERAL MANAGER

SUBJECT: FEBRUARY 2017 MONTHLY REPORT AND UPDATE

THIS REPORT IS PROVIDED FOR INFORMATIONAL PURPOSES

DISCUSSION

The February 2017 Monthly Report includes the following notable items:

1) Airport Police Transfer to Tier 6 and Technical Amendments to Administrative Code – In anticipation that the Airport Safety Officers may transfer to our Plan as early as April, staff met with the Controller’s Office and the Information Technology Agency staff on February 16, 2017 to discuss the requirements needed in the City’s payroll system (PaySR). On February 22, 2017, the ordinance was approved by the City Council at its first reading and the second reading is scheduled for March 24, 2017. LACERS and LAFPP staff are preparing for a counseling session scheduled for March 29, 2017 for the Airport Safety Officers. There is currently one Airport Safety Officer participating in the Fire Department’s Drill Tower.

2) Proposed Financial Counseling Program – On April 6, 2017, staff will present to the Board the additional information that was requested on Four Square Financial Literacy Partners.

3) Pension Administration System Replacement – The issues and discrepancies found during the prior build testing are being corrected. Staff will continue to test and validate these fixes. The issue concerning the method of calculating service credit in a leap year has been resolved. However, the initial “Go Live” date of the project has been pushed back from January 2018 to April 2018. To prevent similar issues from negatively impacting the project, Xerox and LAFPP staff will closely monitor the project requirements.

4) 2017 Fire Department Employee Member Board Election – The Notice of Intent packets have been mailed by the Office of the City Clerk to eligible active Fire Department employee members to qualify as candidates for the ballot. The deadline for candidates to submit the Notice of Intent packets is March 17, 2017. Thereafter, the Office of the City Clerk will begin preparations to mail ballots to eligible voters.

5) Private Equity - The following private equity investments have closed since the last meeting announcement:

On October 20, 2016, the Board, in closed session pursuant to Government Code Section 54956.81, approved a commitment of up to $25 million in the following alternative investment: Resource Capital Fund VII, L.P. and the investment closed on February 10, 2017. Board vote: Ayes 7, Nays 0

The following searches and firms are within the Marketing Cessation Period Policy*: Contract Contract Market Cessation Vendor / Contract Start Date Expiration Date Start Date Domestic Equity (New search) TBD TBD 12/15/16 Real Estate Investment Trust Manager (Active) (New search) TBD TBD 12/01/16 FIS Group, Inc. (International Manager of Emerging Managers) 07/01/14 06/30/17 04/01/17 MacKay Shields, LLC (Fixed Income – High Yield Bond) 07/01/14 06/30/17 04/01/17

*Marketing Cessation: In accordance with Section 9.0 of the Investment Policy, from the time the search begins with the Board’s approval of the minimum criteria for the search until the search ends with the selection of the firm(s) to receive contract(s), all direct marketing contact with firms that meet the search criteria will be limited to meetings with the Consultant, information sent to the Consultant or Department, questions about the search directed to the Staff or Consultant, one meeting at the Department’s office with Staff and any site visits. The Board members, Department Staff or Consultant will accept no entertainment or gifts of any kind from any firm qualifying for the search. This policy does not prohibit contact with potential interview candidates at group social events, educational seminars, conferences, or charitable events so long as there is no direct marketing.

During the three months prior to the renewal of a contract with a firm currently under contract, the Board Members, Department Staff and Consultant will accept no entertainment or gifts from that firm until the contract has been renewed or terminated by the Board. Firms who currently have contracts with LAFPP are allowed to continue contact related to the existing contract with Staff and the Consultant.

Attachment

Board Report Page 2 March 16, 2017 Item: B.6.a

MONTHLY REPORT

FEBRUARY 2017 STATUS REPORT OF BOARD ASSIGNMENTS TO STAFF

03/16/17

DATE DUE MEETING STAFF ASSIGNMENT TO THE STATUS DATE PERSON BOARD FORMERLY GOVERNANCE The Board approved the COMMITTEE status of the two recommendations on October 2, 2014, leaving one in Progress.

The one remaining active recommendation marked “In Progress” concerns the process that will be invoked when a potential HEK Audit recommendations: 2 conflict of interest arises William

04/03/14 recommendations assigned to the Raggio (1) TBD with the City Attorney. Governance Committee. This is being discussed by the Ad Hoc Committee – City Attorney on Engagement of Outside Counsel.

The date this is expected to be completed and presented to the Board is contingent upon the work of the Ad Hoc Committee on Outside Counsel.

I:Executive/Board Assignments/Board Assign to Staff 03/16/17 A Portfolio as of February 28, 2017

TOTAL FIXED INCOME MGRS (22.0%) 1.7 4,144.3 55.6 4,201.6 20.98%

Subtotals & totals may not sum up exactly due to rounding. Note: City Pension Contribution received on 7/15/16 Note: Data is unaudited Dollars expressed in Millions. Portfolio as of January 29, 2016 Private Equity Commitment Summary

Venture Capital Buy-out Special Situations Percentage

Total $848,202,000 23% $1,787,218,000 49% $987,536,000 27% 100.00%

Commitment Total $3,622,956,000

Private Equity Funding Summary

Total Commitment Contributions Remaining Commitment Percent Funded

Abbott $282,351,000 $272,553,000 $9,798,000 96.53% Hamilton Lane $200,852,000 $193,398,000 $7,454,000 96.29% Portfolio Advisors Legacy $265,205,000 $254,458,000 $10,747,000 95.95% Portfolio Advisors Current $1,999,276,000 $997,681,000 $1,001,595,000 49.90% PCA $193,197,000 $180,919,000 $12,278,000 93.64% Stepstone Group $197,451,000 $178,051,000 $19,400,000 90.17% Aldus Equity $484,625,000 $438,657,000 $45,968,000 90.51% Total $3,622,957,000 $2,515,717,000 $1,107,240,000 69.44%

Unfunded Commitment $1,107,240,000

Source: BOARD OF FIRE AND POLICE PENSION COMMISSIONERS Data as of June 30, 2016 Data is based only on current/active funds whaich are funds that have remailing commitment or residual value. Total Fund Portfolio Allocation

35.00% % 30.00% 25.92

25.8 25.00%

20.2 %

20.00% % 18.4 18.0 16.44 15.52 16.0 15.0

15.00% 13.6 % 9.84 11.5 % % 10.00% 8.5 8.76 9.0 6.91 % %

7.3 % 6.4 % 3.98 % 4.11

5.00% 6.2 3.99 4.7 4.0 3.6 3.4 2.65 3.8 2.6 2.2 1.89 1.8 1.0 0.00% Core Equity (23%) Small Cap. Equity (6%) Int'l Equity (16%) Int'l Emerg. Mkts (5.0%) Core Bonds Iincluding High Yield Bonds (3%) Unconstrained Fixed Cash (1.0%) Total RE (Including REITS) Private Equity (12.0%) Commodities Energy TIPS) (17.0%) Income (2.0%) (10.0%) (5.0%) Actual Allocation, Target Allocation in parenthesis Over-allocated (Blue), Under-allocated (Red) *Board approved ranges on 6/16/16 Portfolio as of January 29, 2016

Real Estate Summary

COMMINGLED FUNDS EQUITY POOLED CASH TOTAL ALLOC. ABR Chesapeake Fund III NA 9.4 - 9.4 AEW Partners V NA 0.2 - 0.2 AEW Value Investors II NA 1.4 - 1.4 Almanac Securities Realty VII NA 20.9 - 20.9 Asana Partners NA 4.3 - 4.3 Berkshire Multifamily Income Realty Fund NA 35.2 - 35.2 Buchanan Fund IV NA 11.6 - 11.6 Calif Smart Growth IV NA 12.6 - 12.6 Capri Urban Investors NA 13.9 - 13.9 CIM Real Estate Fund III NA 27.0 - 27.0 CIM Urban REIT, LLC NA 32.1 - 32.1 CityView LA Urban Land Fund NA 3.2 - 3.2 Clarion Lion NA 94.1 - 94.1 Colony VIII NA 3.0 - 3.0 CPI Capital Europe (A NA 1.4 - 1.4 Forum Asian Realty II NA 1.1 - 1.1 Gerrity Retail Fund NA 23.2 - 23.2 Genesis Workforce Fund II NA 0.1 - 0.1 Hampshire Partners VI NA 0.4 - 0.4 Heitman Value Partners II NA 1.1 - 1.1 Heitman American Realty Trust (HART) NA 75.1 - 75.1 Jamestown Premier NA 85.6 - 85.6 LaSalle Asia Opp. II NA 0.1 - 0.1 Legg Mason Chesapeake RE NA 0.1 - 0.1 Legg Mason II NA 5.5 - 5.5 Metlife Core Property NA 88.5 - 88.5 Noble Hospitality NA 5.6 - 5.6 Oaktree Capital RE Opp. III NA 0.8 - 0.8 Praedium Fund VII NA 0.3 - 0.3 Principal Green I NA 0.3 - 0.3 Prudential PRISA NA 83.1 - 83.1 Prudential RE Fund II NA 0.1 - 0.1 Rothschild Five Arrows Realty V (Almanac) NA 5.9 - 5.9 Savanna Real Estate Fund III NA 41.6 - 41.6 Starwood Distressed Opp IX NA 21.6 - 21.6 Standard Life Investments NA 18.9 - 18.9 Standard Life Investments Euro RE Club II NA 33.4 - 33.4 Stockbridge RE Fund II NA 8.3 - 8.3 Unico Partners I NA 39.9 - 39.9 Urdang Value-Added Fund II (CenterSquare) NA 3.9 - 3.9 Value Enhancement IV (Ares) NA 0.0 - 0.0 Value Enhancement V (Ares) NA 4.3 - 4.3 Total 819.0 - 819.0 4.09%

SEPARATE ACCOUNT PROPERTIES EQUITY POOLED CASH TOTAL ALLOC. Heitman - Galleria Palms Apts. 39.3 NA - 39.3 Heitman - 121 W. Chestnut 69.8 NA - 69.8 Heitman - Palm Valley 0.0 NA - 0.0 Heitman - Woodland Plaza 35.8 NA - 35.8 Heitman - Twin Creeks Village 32.5 NA - 32.5 Heitman - Sea Isle, Inc. 41.1 NA - 41.1 Sentinel - Corridor Park Pointe 6.8 NA - 6.8 Sentinel - Riverplace 28.3 NA - 28.3 Sentinel - Walmart Building at Water Ridge 17.4 NA - 17.4 Sentinel - Windward Place Apts. 23.4 NA - 23.4 Sentinel - Jefferson Town Center Apts 44.7 NA - 44.7 Sentinel - Shoppes @ Broad Street 0.0 NA - 0.0 Sentinel - St. Louis Industrial 45.9 NA - 45.9 Sentinel - NorthPointe Exec. Park 37.3 NA - 37.3 Sentinel - Aerial Center Exec. Park 29.6 NA - 29.6 Sentinel (Urdang) - Shadeland Station 48.5 NA - 48.5 Sentinel (Urdang) - Exelon Building 23.9 NA - 23.9 Neptune Building 0.0 NA 0.0 Real Estate Managers Total Committed Heitman 218.5 Sentinel 233.4 Sentinel (Urdang) 72.4 Total 524.4 2.62% Preliminary Return Information as of February 28, 2017

Manager 1-month 3-month 1-year 3-years 5-years FYTD Total Fund 1.87 % 4.81 % 16.09 % 6.24 % 8.67 % 8.20 % S & P 500 Index 3.97 % 8.04 % 24.98 % 10.63 % 14.01 % 14.23 %

Total Equity 2.88 % 7.37 % 23.60 % 6.15 % 10.38 % 14.24 % S & P 500 Index 3.97 % 8.04 % 24.98 % 10.63 % 14.01 % 14.23 %

Total Domestic Equity 3.63 % 6.99 % 25.30 % 8.77 % 13.47 % 15.45 % Russell 3000 Index 3.72 % 7.73 % 26.29 % 9.92 % 13.85 % 14.96 %

Total Large Cap Equity 3.90 % 7.64 % 24.34 % 10.13 % 13.97 % 14.28 % S & P 500 Index 3.97 % 8.04 % 24.98 % 10.63 % 14.01 % 14.23 %

Total Small Cap 2.69 % 4.72 % 29.56 % 3.59 % 11.64 % 20.59 % Russell 2000 Index 1.93 % 5.20 % 36.11 % 6.93 % 12.89 % 21.45 %

Total International Equity 1.63 % 8.04 % 20.80 % 1.88 % 5.25 % 12.24 % MSCI ACWI ex-US 1.61 % 7.95 % 19.88 % 0.27 % 4.02 % 11.24 %

Total International Developed Markets 1.17 % 7.53 % 18.41 % 1.48 % 6.24 % 12.07 % MSCI ACWI ex-US 1.61 % 7.95 % 19.88 % 0.27 % 4.02 % 11.24 %

Total International Emerging Markets 3.27 % 9.95 % 30.91 % 3.43 % 1.35 % 13.32 % MSCI Emerging Markets Index 3.07 % 9.03 % 29.94 % 1.73 % -0.02 % 13.82 %

Total Fixed Income 0.88 % 1.90 % 6.42 % 3.75 % 3.48 % 0.75 % Barclays Universal 0.77 % 1.43 % 3.20 % 2.97 % 2.74 % -0.57 %

Total Core Fixed Income 1.00 % 1.67 % 4.33 % 3.77 % 3.54 % -1.32 % Barclays Aggregate 0.67 % 1.01 % 1.42 % 2.64 % 2.24 % -1.68 %

Total High Yield 1.15 % 4.23 % 21.56 % 6.30 % 7.54 % 10.46 % LAFPP HY Benchmark1 1.56 % 4.95 % 22.30 % 4.79 % 6.87 % 10.61 %

Total REITs 3.90 % 7.97 % 14.34 % 9.57 % 10.17 % -0.70 % LAFPP REIT Benchmark2 3.34 % 7.19 % 14.18 % 9.04 % 9.23 % -0.80 %

Total Commodities 0.04 % 4.03 % 24.83 % -1.98 % N/A 7.34 % Bloomberg Commodities Index TR 0.21 % 2.15 % 15.95 % -13.02 % N/A -0.97 %

Footnote: 1 LAFPP HY Benchmark: CS HY Index thru 12/31/11 & BofA ML US HY Master II Cnst Index thereafter.

2 LAFPP REIT Benchmark: Dow Jones US Select RE Securities Index thru 12/31/13, 50% FTSE EPRA/NAREIT Global RE Index & 50% Dow Jones US Select RE Securities Index thereafter. PENSIONS DIVISION

(Data through February 28, 2017)

DISABILITY PENSIONS Total Claims Filed* 10 9 8 7 6 5 4 3 2 1 0 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec YTD 2015 8 3 5 4 3 3 6 2 3 3 5 1 46 2016 0 1 5 4 1 3 3 4 1 7 2 2 33

2017 1 5 6

*Claims filed include the following: Disability, Active Member Death, Dependent Child/Parent.

Withdrawn Claims 7

0 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 2015 3 2 0 1 0 1 1 2 0 2 4 6 2016 1 0 4 2 2 2 1 1 0 4 0 0 2017 2 0

PENSIONS DIVISION

Total Claims Pending - All 95 90 85 80 75 70 65 60 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 2015 79 78 81 82 85 86 90 89 87 85 85 79 2016 75 72 73 69 68 66 65 67 67 69 69 71 2017 69 74

Total Claims Pending - Disability Pensions New Applications and Review

87 82 77 72 67 62 57 52 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 2015 72 71 73 73 75 76 79 77 75 74 74 68 2016 62 59 60 60 59 57 55 56 56 54 54 56 2017 56 57

Total Claims Pending - Active Member Deaths* 19 17 15 13 11 9 7 5 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 2015 7 7 8 9 10 10 11 12 12 11 11 11 2016 13 13 13 9 9 9 10 11 11 15 15 15 2017 13 17

*Claims include Surviving Spouse/Domestic Partner, Minor Child, Dependent Child/Parent. PENSIONS DIVISION

Total Claims Presented to the Board* 9 8 7 6 5 4 3 2 1 0 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec YTD 2015 4 2 2 3 0 2 1 3 6 3 5 4 35 2016 3 4 1 8 0 4 3 3 3 1 3 0 33 2017 1 1 2

*Claims include the following: Disability, Active Member Death, Dependent Child/Parent.

Avg. Processing Time for Claims Presented to the Board* 40 35 30 25 20 15 10 5 0 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 2015 6 9.4 12 11.5 0 12.6 13 8.8 17.3 12.9 14.5 19.9 2016 26.1 16 1.4 8.8 0 17.4 13 7 6 17.9 15.6 0 2017 38.3 0

*Claims include the following: Disability, Active Member Death, Dependent Child/Parent. Months with zero (0) indicate no claims presented to the Board that month. PENSIONS DIVISION

DROP ENTRIES/EXITS DROP Entries

90 80 70 60 50 40 30 20 10 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2015 16 43 46 55 37 34 48 12 19 18 7 9 344 2016 19 69 23 24 30 23 26 16 19 12 6 5 272 2017 3 85 88

DROP Exits 100 80 60 40 20 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2015 42 53 31 29 31 24 18 24 16 8 2 17 295 2016 46 41 27 39 46 98 65 3 13 6 2 2 388 2017 40 30 70 Projected 7 15 10 1 16 9 2017

DROP PARTICIPATION DROP Participants

1,450 1,400 1,350 1,300 1,250 1,200 1,150 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 1,285 1,275 1,292 1,322 1,332 1,342 1,378 1,369 1,375 1,398 1,404 1,397 2016 1,370 1,403 1,399 1,384 1,370 1,294 1,255 1,268 1,278 1,284 1,287 1,289 2017 1,252 1,307

PENSIONS DIVISION

SERVICE PENSIONS Current Fiscal Year 12 Month Month To Date Moving Avg. Service Pensions by Effective Date 7 33 4

SURVIVORSHIP PENSIONS Current Fiscal Year 12 Month Month To Date Moving Avg. Surviving Spouse/Domestic Partner Pension Applications Processed 17 117 15 Survivor Benefit Purchase Program 1 3 1 Total Surviving Spouse/DP Applications Processed and Survivor Benefit Purchase Program Granted 18 120

ACTIVE MEMBER SERVICES Refund of Contributions Current Fiscal Year 12 Month (Number Leaving Without Vesting) Month To Date Moving Avg. Fire 0 3 1 Police 2 42 6 Harbor 0 0 0 Completed Basic Training Purchases Fire 15 51 7 Police 46 229 32 Harbor 0 0 0 Public Service Purchases (PSP) Completed Purchases 0 2 1 Avg. Years of Service (YOS) Purchased N/A 2.25 2 Avg. Cost per YOS Purchased N/A $47,157 $50,430

MEDICAL & DENTAL TRANSACTIONS February 2017 (PPE February 28, 2017)

Current Month* Fiscal YTD* Last 12 Mos* Total Subsidies Paid $9,625,579 $75,401,753 $111,223,149 Total Medicare Part B Reimbursements Paid $904,108 $6,506,648 $9,702,852 *Includes Quarterly HIPR Payment(s) PENSIONS DIVISION

OUTREACH ACTIVITIES Number of Date Type of Outreach Tier Participants Financial Planning Education Seminar: February 8, 2017 51 5 Late Career – Grace Simons Lodge Information Table: LAPPL Outreach – February 9, 2017 24 Multiple Newton Division Recruit Talk: LAPD Graduates – February 10, 2017 33 6 Westchester ARTC Information Table: LAPPL Outreach – February 23, 2017 64 Multiple Metro Division Recruit Talk: LAFD Graduates – Drill February 24, 2017 44 6 Tower 81 Upcoming Events Financial Planning Education Seminar: March 1, 2017 TBD Multiple DROP Exit – Grace Simons Lodge Financial Planning Education Seminar: March 8, 2017 TBD 5 Late Career – Grace Simons Lodge Information Table: LAPPL Outreach – March 9, 2017 TBD Multiple 77th St. Division March 13, 2017 Benefits Presentation: Fire Station 88 TBD Multiple March 15, 2017 Information Table: Fire Station 5 TBD Multiple Deferred Compensation / DROP March 16, 2017 TBD Multiple Meeting Financial Planning Education Seminar: March 22, 2017 TBD Multiple DROP Exit – Grace Simons Lodge Information Table: LAPPL Outreach – March 30, 2017 TBD Multiple Valley Traffic Division Outreach Activity Totals Current Month Fiscal Year to Date Members Reached 216 1,637 -# of Recruit Talks 2 11 -# of Financial Planning Education Seminars 1 10 -# of Other Outreach Events 2 21 Note: The number of participants for “Information Table” events is an estimate. Staff is available to answer questions, check personal information and collect forms at these events.

NEW PROJECTS

PENSION PERSPECTIVES – RETIRED/DROP MEMBERS

Staff has begun drafting the spring issue of the newsletter. All LAFPP staff have been asked to submit proposed topics and draft articles. The target distribution date is June 2017.

PENSIONS DIVISION

UPDATED PROJECTS

TECHNICAL AMENDMENTS TO ADMINISTRATIVE CODE In conjunction with the draft ordinance that will establish the dates and procedures for the transfer of Airport Police employees from LACERS to LAFPP, staff and the City Attorney have also worked together to prepare some technical amendments to the Administrative Code to clarify plan language/provisions and provide greater flexibility for members. The amendments will pertain to the following: • Ensure that the inclusion of Airport Police in Tier 6 will not trigger the elimination of the 1% payment by the City of Tier 5 employee contributions as provided in Charter Section 1222. • Late Tier 5 transfer election forms shall not be accepted. • Inclusion of Airport Police in the DROP plan provisions. • Clarify that the Board may contract with third-party administrators that provide or contract for suitable health plans, including health care exchanges. • Remove references to special MOU health subsidies (this language is no longer relevant as any impacted members are now eligible for a regular subsidy). • Clarify that retired members are eligible to be reimbursed for the basic/standard Medicare Part B premium only (in accordance with current LAFPP practices). • Provide additional flexibility for pensioners who participate in the Health Insurance Premium Reimbursement Program (i.e., retired members can be either the primary subscriber or a dependent on the plan for which they seek reimbursement; removed the requirement that members must live outside an HMO service area to provide more options for members who do not have access to an affordable PPO plan or those currently enrolled in LACERS’ plans).

It is also noted that LACERS has requested an amendment to their health plan provisions to state that effective December 31, 2017, any former employee retired from LAFPP shall be ineligible for enrollment in any LACERS health plans unless such former employee was enrolled in a plan administered by the Personnel Department on December 31, 1999.

[UPDATE: The City Council approved the ordinance at its first reading on February 22. The second reading of the ordinance is scheduled for March 24.]

PENSION PERSPECTIVES – ACTIVE/DROP MEMBERS Staff has begun drafting the spring issue of the newsletter. All LAFPP staff have been asked to submit proposed topics and draft articles.

The target distribution date is late March 2017. The proposed topics include: • Pension benefit information in MyLAFPP • Requests for Contribution Letters or Divorce Calculation Letters • Pension contributions while at the Fire Drill Tower or Police Academy • DROP Program - Entering and Exiting • LAFPP’s funding status and other 2016 valuation results

[UPDATE: Section Managers and Executive staff have reviewed the newsletter. The newsletter is currently being reviewed by the General Manager. Thereafter, the newsletter will be forwarded to the graphics designer. The target distribution is scheduled in mid-March.] PENSIONS DIVISION

AIRPORT POLICE TRANSFER TO TIER 6 Currently, sworn personnel of the Airport Department (“Airport Police”) are members of the Los Angeles City Employees’ Retirement System (LACERS). During labor negotiations with the Airport Police bargaining units, the City agreed to place on the November 8, 2016 State General Election ballot a Charter amendment that proposes certain retirement benefit enhancements for this group.

Staff has worked with the City Attorney’s Office, outside tax counsel, CAO, and LACERS in reviewing the draft Charter amendment which would: 1) Enroll new Airport Police into Tier 6; 2) Allow current Airport Police to transfer into Tier 6 from LACERS at their own expense; and 3) Permit new Airport Police Chiefs to transfer into LACERS rather than participate in Tier 6. Additionally, staff worked with the Plan actuary to commission a study demonstrating the impact of allowing Airport Police to participate in Tier 6.

On June 16, 2016, the Plan actuary completed the cost study showing the increases in normal cost rates for Airport Police Officers to enter Tier 6, utilizing a simplified method to estimate the cost differences. A follow-up study using a detailed methodology was completed on July 7. The proposed ballot measure was approved by City Council on July 1.

On October 4, 2016, Staff met with representatives from the CAO’s office, Airports, LACERS, and City Attorney’s office to discuss the possible need to move up the transfer counseling for Airport Safety Officers currently assigned to Ontario International Airport. This group of approximately 30 employees is expected to attend the Fire Drill Tower in groups of 10 and their transfer counseling would need to occur in March 2017. The remaining 500 Airport Police would be counseled in groups later in 2017.

The November 2016 ballot measure was approved by voters. On December 2, 2016, the County certified the election results and on December 13, 2016, the City Council adopted the results.

On January 12 and 31, 2017, LAFPP Staff met to discuss the payroll and pension administration system changes needed for Airport Police transferring to our plan. On January 31, 2017, the City Council instructed the City Attorney to prepare and present all ordinances necessary to implement the measure.

[UPDATE: LAFPP staff met with the Controller’s Office and Information Technology Agency (ITA) staff on February 16, 2017 and discussed the requirements needed in PaySR (the City’s payroll system) in anticipation of Airport Safety Officers that may transfer to our Plan as early as April. The City Council approved the first reading of the ordinance on February 22, 2017 and the second reading is scheduled for March 24, 2017. LACERS and LAFPP staff are preparing for the Airport Safety Officers counseling session currently scheduled for March 29, 2017.]

PENSIONS DIVISION

RFP FOR FINANCIAL PLANNING EDUCATION SEMINAR CATERING SERVICES At the December 15, 2016 Board meeting, staff requested authority to release a Request for Proposal (RFP) for catering services for the Financial Planning Education Seminars. The proposed contract would be for a three-year term. If approved, the RFP is scheduled to be released in mid-December, and the proposed deadline for responses from potential contractors would be early February 2017.

On December 16, 2016, the RFP was posted on the LAFPP website and the City's contracting opportunities website (Business Assistance Virtual Network - BAVN). Emails were also sent to notify companies who had previously provided bids or services for the prior one-year contract. Responses to the RFP were due on February 1, 2017. Staff anticipates the evaluation of responses, cost information and a contract award recommendation will be presented to the Board in March 2017.

[UPDATE: Staff received a total of 4 proposals and is evaluating the services and fees of each. Staff will present a recommendation to the Board at the March 16, 2017 meeting.]

PROPOSED FINANCIAL COUNSELING PROGRAM Staff is conducting research to determine the scope and feasibility of offering individual financial counseling sessions to members. Members who attend one of the Financial Planning Education (FPE) seminars (for education only) would be given the opportunity to schedule a follow-up session with a financial planner for a personalized review of their financial situation. This would allow members to apply the education provided in the FPE seminar to take the next step and develop a comprehensive financial plan.

Staff previously met with representatives of United Firefighters of Los Angeles City, Los Angeles Police Protective League, Los Angeles Firemen’s Relief Association, Los Angeles Police Relief Association, and Los Angeles Retired Fire and Police Association, to request their input on the individual financial counseling services. The representatives were supportive of the proposed services.

The individual counseling sessions would be conducted through our current financial education consultant. The FPE seminar contract was awarded as a result of an RFP released in July 2015. At that time, staff requested to make a recommendation to award a financial counseling contract at a later date. The financial education and planning consultants would not be allowed to provide, sell or derive any income from the sale of any investment products to members. In addition, any advice to the member for certain investment choices should not affect or provide compensation to the advisor.

Staff met with the City Attorney on May 27, 2016, to discuss the parameters of the proposed financial counseling program. Staff proceeded with the plan for a pilot study of the financial counseling program and to conduct focus group sessions with members to gather feedback that will assist staff and the contractor in the development of the program.

PENSIONS DIVISION

On September 6, 2016, eleven members participated in a focus group session and provided valuable feedback. The purpose of the focus group was to determine if the proposed program would be beneficial to members by addressing the questions and decisions they face as they transition into retirement. Information was presented on how the program would work and each participant was provided a personalized report similar to what will be provided as part of the final program. After reviewing their personal reports and providing suggestions, the participants agreed that the proposed program will be of great value to LAFPP members, even with the members picking up the full cost of the individual counseling session.

On December 15, 2016, the Board awarded a contract for financial counseling services to Four Square Financial Literacy Partners. Staff is working with the City Attorney to draft a contract and liability waiver to proceed with the Financial Counseling Program.

[UPDATE: At the February 22, 2017 meeting, the Board requested further information on Four Square Financial Literacy Partners. Staff will present the information to the Board on April 6, 2017.]

UNCHANGED PROJECTS

MULTIMEDIA EFFORTS As part of the prior fiscal year Business Plan (FY 2015-16), staff began developing a library of informational videos that are now posted on the LAFPP website. These videos cover topics regarding pension benefits and other plan information. In April 2016, a new "Multimedia" page was developed on our website to present these videos along with future multimedia postings.

The 2016-17 Business Plan includes a project to expand our multimedia efforts and the range of communications methods used to reach members and other stakeholders (Project #12). As part of this effort, staff is working with our website consultant to update the user’s experience by adding a filter to the Multimedia page. This filter, which will be applied to the video library in October 2016, will sort videos as they apply to Active, Retired, and General membership topics.

Staff is working to livestream Board meetings internally to Department employees. Thereafter, staff will work with the Board to determine whether we post audio or video to the website, and whether it will be livestreamed or archived. ADMINISTRATIVE OPERATIONS DIVISION

UPDATED PROJECTS

PENSION ADMINISTRATION SYSTEM REPLACEMENT The monthly requirements gathering sessions with Xerox and staff Subject Matter Experts from impacted business units continue in order to develop the specifications for the configuration and customization of the CPAS system.

Weekly meetings with the project management team (LAFPP, Xerox, and LRWL consultant) are also being conducted to review and check on the progress of various deliverables, including planning documents, data mapping and conversion, hosting services, as well as the implementation of the new imaging solution to replace Documentum.

[UPDATE: The Defect-Repair build/rollout to fix the issues and discrepancies found during prior build testing was completed as scheduled. Staff will be testing and validating the fixes made as well as verifying the refreshed data in the system resulted from a recent data conversion.

The issue regarding the method of calculating service credit in a leap year has been addressed. Xerox and LAFPP has agreed to share the cost of fixing the calculation methodology and closely monitor project requirements to prevent similar issues from negatively impacting the project. This issue has pushed back the initial “Go Live” date of the project from January 2018 to April 2018, which will result in additional costs to the Department due to the dedicated LAFPP staff assigned to the project.]

2017 FIRE DEPARTMENT EMPLOYEE MEMBER BOARD ELECTION LAFPP provides for the election of employee and retired Board members in accordance with the City Charter, Los Angeles Administrative Code (LAAC), Division 23, Chapter 5, Articles 5 and 5.5, and Board rules. On September 1, 2016, the Board approved changes to the LAAC election procedures, which then required City Council to adopt an ordinance reflecting the changes. The City Attorney’s Office prepared the ordinance and on December 9, 2016, the City Council approved the ordinance with Mayoral concurrence. Some of the key changes include no longer requiring signatures for the nominating petition and making the employee member election process more consistent with the retired member election process. On December 15, 2016, the Board authorized staff to administer the 2017 Fire Department Employee Member Board Election. Below are some key dates for the election:

February 24, 2017 Latest date the Office of the City Clerk shall notify by mail all employee members of the Fire Department of the impending Board seat vacancy and that candidates are being sought to run for election.

March 9, 2017 First day for candidates to file the Notice of Intent (to run for office) packet at the Office of the City Clerk – Election Division.

ADMINISTRATIVE OPERATIONS DIVISION

March 17, 2017 Last day for candidates to submit the Notice of Intent packet to the Office of the City Clerk – Election Division, by 5:00 p.m., to qualify for the ballot.

April 21, 2017 Deadline for candidates to submit an Observers List to the Office of the City Clerk – Elections Division, by 5:00 p.m.

April 25, 2017 Election Day, 8:00 a.m. to 5:00 p.m. All ballots must be received by the Office of the City Clerk – Elections Division by 5:00 p.m. to be counted.

May 18, 2017 Board Meeting – Elections Results

July 1, 2017 New five-year term begins for the Fire Department Employee Member of the Board.

[UPDATE: The Office of the City Clerk has mailed the Notice of Intent packets to eligible active Fire Department employee members to qualify as candidates for the ballot. After the March 17, 2017 deadline for candidates to submit the Notice of Intent packets to qualify for the ballot, the Office of the City Clerk will begin preparations to mail ballots to eligible voters.]

UNCHANGED PROJECTS

PERFORMANCE METRICS As part of the Mayor’s “Back to Basics” philosophy, the Mayor has directed departments to submit performance metrics that will measure the effectiveness of the departments in key areas. Monthly, staff submits performance metrics and business plan project updates to Mayoral staff including data in following areas: payment of pension payments; disability applications; customer satisfaction; contractor disclosure; and investment benchmarks.

In addition, the General Manager has expanded the use of performance metrics to internally measure and track performance and assist management decision making, taking into consideration resource requirements needed to compile and analyze the data. These internal metrics are reviewed by management on a regular basis.

As part of the 2017-18 budget process, management has been asked to review all metrics to determine if they need to be changed or refined in any way for the Fiscal Year 2017- 18.

‘SIDE A’ DIRECTOR’S AND OFFICER’S (D&O) LIABILITY INSURANCE \ While the City is statutorily required to indemnify Board members and staff acting in a fiduciary capacity, there are instances where the City can choose to not indemnify thereby obliging Board members or staff to defend themselves at their own expense. The City is not required to provide a legal defense to Board members or staff if:

ADMINISTRATIVE OPERATIONS DIVISION

• The defense would create a conflict of interest with the City; or • The act or omission involved is not within their scope of duties; or • The Board member or staff acted or failed to act because of actual fraud, corruption, or malice; or • Criminal actions have been brought against the Board member of staff. (Note: The City has the discretion to indemnify criminal actions, thereby potentially obliging Board members or staff to defend themselves at their own expense.

The California Government Code allows for pension boards to purchase liability insurance to bridge the risk exposure gap in cases where the City does not indemnify. In 2015, the Board authorized the General Manager to purchase an annual ‘Side A’ Director’s and Officer’s (D&O) liability insurance policy to cover only Board members and key executive staff. The LAFPP Side A D&O insurance policy is liability insurance payable to the Board members and key staff to cover defense costs and losses up to $10 million, in circumstances when the City chooses to not indemnify. The current policy covers the term 12/23/15 to 12/22/16 and was purchased for $33,500, a significant savings compared to a traditional fiduciary insurance policy which normally covers Board members, all staff, and Plan assets.

Staff are currently working to secure quotes for a new policy with a new term starting 12/23/16. In the 2016-17 LAFPP Budget, the Board authorized up to $50,000 for this insurance policy and staff expects the policy cost to remain fairly flat. Staff will report to the Board when the policy has been executed and what the final cost was.

As part of this insurance policy, a Waiver of Recourse endorsement is required that protects the insured against recourse by the insurer. Without this endorsement, those insured are not protected from personal liability. Staff expect the required endorsement fee to total $25 per insured, which would have to be paid by the insured individuals and not by System assets. Staff will collect this fee from the insured once the policy invoice has been delivered to LAFPP.

A new policy effective 12/23/16 is now in place. Staff is working with the Board of Commissioners to collect fees associated with the Waiver of Recourse as addressed above.

DEPARTMENT OF FIRE AND POLICE PENSIONS BUDGET TO ACTUAL - RECEIPTS AND EXPENSES As of February 28, 2017 (67% of year)

VARIANCE ACTUAL PROJECTED % YEAR YEAR END SURPLUS/ (UNDER)/OVER BUDGET TO DATE PROJECTIONS DEFICIT PROJECTED AB CC-A RECEIPTS General Fund (1) $ 616,234,998 $ 616,234,998 $ 616,234,998 $ - 0% Less: Excess Benefit Plan (1) (1,303,600) (1,303,600) (1,303,600) - 0% Special Fund (Harbor) 4,547,876 4,547,876 4,547,876 - 0% Member Contributions (2) 142,160,559 91,718,442 137,506,908 (4,653,651) -3% Earnings on Investments 325,000,000 234,154,974 351,232,461 26,232,461 8% Miscellaneous (3) 2,000,000 2,029,290 3,043,935 1,043,935 52% Total Receipts $ 1,088,639,833 $ 947,381,980 $ 1,111,262,577 $ 22,622,745 2%

EXPENSES Service Pensions $ 590,000,000 $ 406,470,350 $ 610,194,042 $ 20,194,042 3% Service Pensions - DROP payout 105,000,000 65,376,001 110,376,001 5,376,001 5% Disability Pensions 120,000,000 74,659,632 111,679,236 (8,320,764) -7% Surviving Spouse Pensions 121,000,000 80,929,349 121,599,813 599,813 0% Minor/Dependent Pensions 2,500,000 1,712,060 2,467,740 (32,260) -1% Refund of Contributions 3,500,000 1,779,085 2,668,628 (831,373) -24% Health Insurance Subsidy 113,000,000 71,852,902 107,922,258 (5,077,742) -4% Dental Insurance Subsidy 4,100,000 2,699,986 4,071,046 (28,954) -1% Medicare Reimbursement 11,500,000 6,505,677 10,119,553 (1,380,447) -12% Health Insurance Reimbursement 1,300,000 763,130 1,271,883 (28,117) -2% Investment Management Expenses 91,152,419 23,868,082 87,179,078 (3,973,341) -4% Administrative Expenses (4) 23,270,652 16,153,641 22,552,053 (718,599) -3%

Total Expenses $ 1,186,323,071 $ 752,769,895 $ 1,192,101,330 $ 5,778,259 0%

RECEIPTS OVER EXPENSES (5) $ (97,683,238) $ 194,612,085 $ (80,838,753) $ (16,844,485)

YTD CURRENT MOVING MONTH AVERAGE

PENSION PAYROLL $ 92,079,740 $ 88,949,942

(1) Represents the City of Los Angeles General Fund Annual Required Contribution, including the amount earmarked to pay excess benefits and associated administrative costs in compliance with IRC Section 415. The 2016-17 Excess Benefit Plan (EBP) estimated cost is $1,506,055. The EBP is funded by a City contribution of $1,303,600 and $202,455 in available funds from prior years. On December 9, 2016, the prior years' funds totaling $202,455 were re-appropriated to the current year EBP fund. Since the EBP revenue is not transferred to LAFPP, it is excluded from the department's total revenue. (2) Includes 2015-16 Pay Period 26 and up to 2016-17 Pay Period 17. (3) Represents receipts from prior years' pension buybacks/overpayments. (4) Actual Year-to-Date reflects Year-to-Date commitments (encumbrances) and expenditures. (5) Figures may be rounded. DEPARTMENT OF FIRE AND POLICE PENSIONS BUDGET TO ACTUAL - ADMINISTRATIVE AND INVESTMENT MANAGEMENT EXPENSES As of February 28, 2017 (67% of year)

ADMINISTRATIVE EXPENSE (A) (B) (C) (D) (E) (F) (G) (H) DIFFERENCE ADOPTED BUDGET ADJUSTED YEAR TO DATE REMAINING YR END (UNDER)/OVER VARIANCE ACCOUNT TITLE BUDGET CHANGES2 BUDGET TOTAL BALANCE PROJECTED PROJECTED %1 (A + B = C) COMMITTED (C - D = E) EXPENSES (F - C = G) (G / C = H)

Salaries-General3 11,800,000 - 11,800,000 6,993,696 4,806,304 11,701,000 (99,000) -1%

Salaries-As-Needed3 107,000 - 107,000 71,973 35,027 107,000 - 0%

Overtime3 69,715 - 69,715 17,217 52,498 48,000 (21,715) -31%

Printing & Binding 36,654 - 36,654 36,654 - 36,654 - 0%

Travel 159,443 - 159,443 63,261 96,182 130,000 (29,443) -18%

Transportation3 6,000 - 6,000 4,000 2,000 6,000 - 0%

Contractual Services 4,932,150 (5,210) 4,926,940 4,293,162 633,778 4,600,000 (326,940) -7%

Medical Services 330,000 - 330,000 330,000 - 330,000 - 0%

Health Insurance 1,300,000 - 1,300,000 559,324 740,676 1,259,000 (41,000) -3%

Dental Insurance 55,000 - 55,000 23,880 31,120 54,000 (1,000) -2%

Other Employee Benefits 40,000 - 40,000 19,781 20,219 40,000 - 0%

Retirement Contribution 3,175,000 - 3,175,000 3,172,189 2,811 3,172,189 (2,811) 0%

Medicare Contribution 173,000 - 173,000 70,459 102,541 173,000 - 0%

Office & Administrative 728,690 - 728,690 427,297 301,393 600,000 (128,690) -18%

Tuition Reimbursement 20,000 - 20,000 8,631 11,369 15,000 (5,000) -25%

Election 25,000 - 25,000 - 25,000 25,000 - 0%

Furniture, Office & Tech. 60,000 45,210 105,210 62,117 43,093 105,210 - 0%

Unappropriated Balance 253,000 (40,000) 213,000 - 213,000 150,000 (63,000) -30%

TOTAL ADMINISTRATIVE EXPENSES $ 23,270,652 $ - $ 23,270,652 $ 16,153,641 $ 7,117,011 $ 22,552,053 $ (718,599) -3%

TOTAL INVESTMENT MANAGEMENT EXPENSES $ 91,152,419 $ - $ 91,152,419 $ 23,868,082 $67,284,337$ 87,179,078 $ (3,973,341) -4%

1 Percentage difference between projected expenses and the adjusted budget. 2 A couple adjustments were made to the following accounts as authorized by the Board after the 2016-17 Adopted Budget was approved: a) On January 9, 2017, funds totaling $40,000 were transferred to Furniture, Office & Tech. to purchase a department vehicle. The transfer was processed based on the January 5, 2017 Board authority to move funds from Unappropriated Balance (Account 649500) to Furniture, Office & Tech. (Account 647300) for this purchase. b) On September 15, 2016, funds totaling $5,210 were transferred to Furniture, Office & Tech. to offset HQ related costs. The transfer was processed based on the July 16, 2015 Board authority to move funds between line items as needed for the HQ Project. Also on July 21, 2016, the Board approved a contract extension for Haworth to December 31, 2017 and authority to expend funds on furniture or services with identifiable savings within existing budgetary accounts. 3 Year-to-Date Committed based on Pay Period 17 ending February 18, 2017. DEPARTMENT OF FIRE AND POLICE PENSIONS Active, Expired, and Upcoming Contracts February 28, 2017

Contract Term Board Authorization Date Market Contract Cessation New Vendor/ Contract Vendor / Services Expiration 1 Award / Comments Start Date Start Date Search Candidate Date Renewal Date Finalist Date Date

INVESTMENTS SEARCH Domestic Equity tbd tbd 12/15/16 12/15/16 The Board approved a new search.

SEARCH Real Estate Investment Trust Manager (Active) tbd tbd 12/01/16 12/01/16 The Board approved a new search.

595PEN FIS Group, Inc. (International Manager of Emerging 07/01/14 06/30/17 04/01/17 Managers) 596PEN MacKay Shields, LLC (Fixed Income - High Yield 07/01/14 06/30/17 04/01/17 Bond) 598PEN Chicago Equity Partners LLC (Domestic Equity) 08/01/14 07/31/17

599PEN Los Angeles Capital Management and Equity 08/01/14 07/31/17 Research, Inc. (Domestic Equity) 602PEN Payden & Rygel (Unconstrained Fixed Income 08/01/14 07/31/17 Manager) 600PEN PIMCO (Pacific Investment Management Company 08/01/14 07/31/17 The Board approved the Consent to Assignment of Research Affiliates LLC) (Domestic Equity) LLC to PIMCO on 01/21/16. 601PEN Scout Investments, Inc. - Reams Asset Management 08/01/14 07/31/17 Division (Unconstrained Fixed Income Manager) 604PEN Kleinwort Benson Investors (Commodities Active 10/01/14 09/30/17 Equity Manager) 605PEN Mellon Capital (Commodities Active Equity Manager) 10/01/14 09/30/17

613PEN Dimensional Fund Advisors LP (International 01/01/15 12/31/17 Emerging Markets) 614PEN BlackRock Institutional Trust Company (International 02/01/16 01/31/18 Equity) 615PEN Baillie Gifford Overseas Limited (International Equity) 03/01/15 02/28/18

618PEN AllianceBernstein, L.P. (Global REIT) 03/02/15 02/28/18

624PEN Frontier Capital Management Company, LLC 07/01/15 06/30/18 (Domestic Equity) 621PEN Gresham Investment Management (Active 07/28/15 06/30/18 Constrained Commodity Manager) 622PEN Goldman Sachs Asset Management (Enhanced Index 07/16/15 07/15/18 Commodity Manager) 629PEN LM Capital Group, LLC (Fixed Income) 09/01/15 08/31/18

638PEN Boston Common Asset Management, LLC 10/01/15 09/30/18 (International Equity Emerging Manager) 639PEN Loomis, Sayles & Co. LP (Fixed Income) 10/01/15 09/30/18

633PEN Channing Capital Management, LLC (Domestic 10/01/15 09/30/18 Equity) 636PEN GIA Partners, LLC (Domestic Fixed Income) 10/01/15 09/30/18

635PEN Granite Investment Partners (Domestic Equity) 10/01/15 09/30/18

631PEN OakBrook Investments, Inc. (Domestic Equity) 10/01/15 09/30/18

634PEN PHOCAS Financial Corporation (Domestic Equity) 10/01/15 09/30/18

632PEN Redwood Investments, LLC (Domestic Equity) 10/01/15 09/30/18

637PEN Semper Capital Management, L.P. (Fixed Income) 10/01/15 09/30/18

643PEN Northern Trust Investments, Inc. (Fixed Income) 12/01/15 11/30/18

642PEN Scout Investments, Inc. - Reams Asset Management 12/01/15 11/30/18 Division (Fixed Income) 647PEN Glass, Lewis, & Co., LLC (Proxy Voting Services) 01/01/16 12/31/18

646PEN Northern Trust Investments, Inc. (International 01/01/16 12/31/18 Equity) 644PEN Heitman Capital Management, LLC (Real Estate 01/01/16 12/31/18 Separate Account) 645PEN Sentinel Trust Company (Real Estate Separate 01/01/16 12/31/18 Account) 649PEN R.V. Kuhns & Associates, Inc. (General Consultant) 03/01/16 02/28/19

650PEN Portfolio Advisors, LLC (Private Equity) 04/01/16 03/31/19

655PEN Brandes Investment Partners, LP (International 08/01/16 07/31/19 Equity) 659PEN Daruma Asset Management, Inc. (Domestic Equity) 08/01/16 07/31/19

656PEN Fisher Asset Management, LLC (International Equity) 08/01/16 07/31/19

657PEN Scout Investments, Inc. - Reams Asset Management 09/01/16 08/31/19 Division (Fixed Income - TIPS)

Page 1 DEPARTMENT OF FIRE AND POLICE PENSIONS Active, Expired, and Upcoming Contracts February 28, 2017

658PEN AllianceBernstein, LP (Commodities) 10/01/16 09/30/19 INVESTMENTS

651PEN Northern Trust Company (Custodian Bank) 10/01/16 09/30/19

662PEN Portfolio Advisors, LLC (Private Equity - Specialized 10/20/16 09/30/19 Manager) 663PEN Fairview Capital Partners (Private Equity - Specialized 11/01/16 09/30/19 Manager) 664PEN Robeco Investment Management, Inc. (Boston 11/01/16 10/31/19 Partners) (Domestic Equity) 666PEN Principal Real Estate Investors, LLC (Global REIT 12/01/16 11/30/19 Manager) 665PEN Principal Real Estate Investors, LLC (U.S. REIT 12/01/16 11/30/19 Manager) 667PEN AllianceBernstein, LP (Domestic Equity) 01/01/17 12/31/19

669PEN Harding Loevner (International Emerging Markets) 02/01/17 01/31/20

671PEN Northern Trust Investments, Inc. (Domestic Equity) 02/01/17 01/31/20

670PEN The Townsend Group (Real Estate Consultant) 02/01/17 01/31/20

ADMINISTRATIVE OPERATIONS 653PEN InnerVision Technology Relocation Company 03/01/16 02/28/17 (Technology Relocation Services) 641PEN Haworth, Inc. (HQ Furniture) 08/01/15 12/31/17

ADMINISTRATIVE SERVICES 608PEN Iron Mountain Secure Shredding, Inc. (Secure 07/01/16 06/30/17 Document Shredding) COMMUNICATIONS & EDUCATION RFP Financial Counseling Services tbd tbd 12/15/16 The Board awarded the contract to Four Square Financial Literacy Partners, Inc. The contract is pending negotiation and execution. RFP Financial Planning Education Seminar Program tbd tbd 12/15/16 Staff evaluations of reponses and recommendations to the Board is Catering Services scheduled for 03/16/17. 661PEN Something Special (Catering) 08/01/16 07/31/17

607PEN The Cherry Hill Company (Website Design and 10/01/14 09/30/17 Support) 648PEN Four Square Financial Literacy Partners, Inc. 12/03/15 12/02/18 (Financial Planning Education) 652PEN Firedrill (Graphic Design Services) 05/19/16 05/18/19

DISABILITY PENSION 654PEN U.S. Legal Support (Court Reporting) 07/01/16 06/30/17

627PEN Alpha-One Investigations, Inc. (Investigative 09/15/15 09/14/18 Services Contractor) 628PEN CoventBridge (USA) Inc. (Investigative Services 09/15/15 09/14/18 The contract was formerly awarded to "Examination Management Contractor) Services, Inc. dba ICS Merrill". The name change to CoventBridge (USA) was effective 07/07/16. INTERNAL AUDIT 660PEN Simpson & Simpson Certified Public Accountants 07/19/16 07/18/19 (Annual Financial Statements Audits) LEGAL SERVICES C-113244 Berstein Liebhard & Lefshitz (Securities 03/15/08 03/14/11 Litigation/Monitoring Services) C-113252 Kaplan Fox & Kilsheimer, LLP (Securities 03/15/08 03/14/11 Litigation/Monitoring Services) - Kessler Topaz Meltzer & Check (Securities 03/15/08 03/14/11 Litigation/Monitoring Services) - Robbins Geller Rudman & Dowd (Securities 03/15/08 03/14/11 Litigation/Monitoring Services) RFP Fiduciary Counsel tbd tbd 03/17/16 09/15/16 The Board awarded three contracts, but Nossaman LLP's contract is pending negotiation and execution. The other two contracts for K & L Gates, LLP and Olson Hagel & Fishburn, LLP have been executed.

RFP Jackson Walker (Outside Real Estate and Investment tbd tbd 03/17/16 07/07/16 On 09/15/16, the Board approved the annual contract limits for Counsel) Jackson Walker LLP. The contract for Jackson Walker LLP is pending negotiation and execution. C-125199 Nossaman, LLP (Fiduciary Services) 11/10/14 11/09/17

C-126341 Ice Miller, LLP (Tax Services) 06/16/15 06/15/18

C-126452 Steptoe & Johnson LLP (Tax Services) 09/21/15 09/20/18

C-128417 Nossaman, LLP (Outside Real Estate and Investment 09/17/16 09/16/19 Counsel) C-128402 Kutak Rock LLP (Outside Real Estate and Investment 10/17/16 10/16/19 Counsel) C-128928 K&L Gates, LLP (Fiduciary Counsel) 11/17/16 11/16/19

Page 2 DEPARTMENT OF FIRE AND POLICE PENSIONS Active, Expired, and Upcoming Contracts February 28, 2017

C-128926 Olson Hagel & Fishburn, LLP (Fiduciary Counsel) 12/15/16 12/14/19 INVESTMENTS

C-123569 Nossaman, LLP (Legal Representation) 09/15/13 until completion C-121678 Reed Smith, LLP (Legal Representation) 08/02/12 until On 09/15/16, the Board approved an increase in hourly rates. completion C-126107 Morgan Lewis & Bockius LLP (Bingham) 03/01/12 until (Tribune Shareholders Legal Representation) completion MEDICAL AND DENTAL BENEFITS Los Angeles City Employee Retirement System 08/22/11 07/31/14 The contract is currently under negotiation. (Health and Dental Plan Subgroups) Los Angeles Firemen's Relief Association 07/01/14 06/30/17 (Medical Insurance Administration) Los Angeles Police Relief Association 07/01/14 06/30/17 N/A (Medical and Dental Insurance Administration) Los Angeles Police Protective League 08/01/14 07/31/17 (Dental Insurance Administration) United Firefighters of Los Angeles City 09/01/14 08/31/17 (Medical and Dental Insurance Administration) RFP Group Medical, Dental and Vision Plans tbd tbd 11/17/16

574PEN Keenan & Associates (Health Consulting Services) 03/01/13 02/28/17

668PEN Keenan & Associates (Health Consulting Services) 01/25/17 01/24/20

PENSIONS DIVISION (EXECUTIVE) 625PEN The Segal Company (Western States), Inc. (Actuarial 07/01/15 06/30/18 Consulting Services) SYSTEMS 603PEN Center for Internet Security, Inc. (Network Security 03/01/14 02/28/17 An amendment for a one-year contract extension is pending Monitoring) execution. 610PEN EMC Corporation (Documentum) 10/01/14 09/30/17

611PEN Verizon Terremark (Disaster Recovery Services) 12/04/14 12/03/17

552PEN Buck Consultants, LLC (OnPoint Software) 05/01/15 04/30/18

616PEN AT&T (CALNET3 Phone) 11/15/13 06/30/18

617PEN AT&T (CALNET3 Data) 11/15/13 06/30/18

619PEN Verizon (CALNET3 Phone) 11/15/13 06/30/18

620PEN Verizon (CALNET3 Data) 03/26/14 06/30/18

575PEN LRWL, Inc. (Pension Administration System 06/01/13 12/31/18 Replacement Project Consulting Services) 521PEN Northern Trust Company (Benefit Payment System) 05/20/13 05/19/19

626PEN Xerox State and Local Solutions, Inc. (Pension 07/02/15 07/01/23 Administration System Replacement Project) HEDGE FUND OF FUNDS PARTNERSHIP AGREEMENTS2 Subscription Bridgewater Associates, Inc. (TIPS and Pure Alpha) 07/31/08 n/a on-going Staff recommendation to the Board is scheduled for 03/02/17. Agreements

1Marketing Cessation: The purpose of this policy is to prevent, and avoid the appearance of, undue influence on the Board or any of its members in the award of all contracts. In accordance with Section 9.0 of the Investment Policy, from the time the search begins with the Board’s approval of the minimum criteria for the search until the search ends with the selection of the firm(s) to receive the contract(s), all direct marketing contact with firms that meet the search criteria will be limited to meetings with the Consultant, information sent to the Consultant or Department, questions about the search directed to the Staff or Consultant, one meeting at the Department’s office with Staff and any site visits. The Board members, Department Staff or Consultant will accept no entertainment or gifts of any kind from any firm qualifying for the search. This policy does not prohibit contact with potential interview candidates at group social events, educational seminars, conferences, or charitable events so long as there is no direct marketing.

During the three months prior to the renewal of a contract with a firm currently under contract, the Board Members, Department Staff and Consultant will accept no entertainment or gifts from that firm until the contract has been renewed or terminated by the Board. Firms who currently have contracts with the Los Angeles Fire and Police Pension System are allowed to continue contact related to the existing contract with Staff and Consultant.

2Hedge Fund of Funds do not have contracts like our other managers. They have limited partnership agreements that do not have a fixed expiration date. They are on this list to include them in our regular three-year manager review process.

*Expired contracts are listed in red. Expired investments contracts will remain on the list if the market cessation period is active and until a new contract is awarded.

Page 3

DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA 90013 (213) 279-3000

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

DATE: MARCH 16, 2017 ITEM: C.1

FROM: RAYMOND P. CIRANNA, GENERAL MANAGER

SUBJECT: APPROVAL OF TRAVEL AUTHORITY (VON VOIGT) – LAPPL, 2017 DELEGATES CONFERENCE

RECOMMENDATION

That the Board approve Commissioner Robert von Voigt’s request to attend the Los Angeles Police Protective League (LAPPL), 2017 Delegates Conference on April 26 – 30, 2017 in San Diego, CA (April 26th is a travel day).

DISCUSSION

Commissioner von Voigt expressed interest in participating in the following conference:

Conference: 2017 Delegates Conference Sponsor: Los Angeles Police Protective League Dates: April 27 – 30, 2017 Location: San Diego, CA Mode of transportation: Personal Vehicle

BUDGET

Sufficient funds are available in the Fiscal Year 2016-17 Travel Account. Listed below is an estimated cost to travel for Commissioner von Voigt.

Registration * $ 0.00 Hotel 821.00 Per Diem 256.00 Incidentals (mileage, parking) 299.00 TOTAL $1,376.00

POLICY

If approved by the Board, the proposed expenditures would be within the Board’s Travel and Education Policy.

There is currently no agenda but attached is the 2012 agenda as reference. * There is no registration cost due to Commissioner von Voigt’s participation as a speaker.

This report was prepared by:

Evangelina Masud, Executive Administrative Assistant Administrative Operations Division

RPC:WSR:EM

Attachment: Conference information

Board Report Page 2 March 16, 2017 THURSDAY, MARCH 22,2012

1600 Registration and Check-In Hospitality Room opens(The Tapestry Room)

FRIDAY, MARCH 23, 2012 0700 Breakfast Buffet - Poolside

0800 Welcome,Introductions and summary, Housekeeping Pledge ofAllegiance Kristi Sandoval, Conference Committee Chair,P1' PPL

0815 President's Message A Tyler Izen, President, LAPPL

0830 Managed Health Network hr • -'• Joy Anni3ellomo, Senfor',Agbunt Manager MHN,a Health Net CompAny

0900 Department Resources Dan PutziEMployee6ssistance Unit, LAPD -Ito*" Chaplain Corps „Ben Warren,Sergeant, LAPD

4 "•:: '..' . .4,4,-itr , • We I ine .::ttQf.ordiiiior '4,i, Mary E. Kteocrgeahkwr,..,..,... roT&..t. i.:*. eta ...,..,„.., . d 0946t:)...Break ",....:-..., •, •-.... ,: 1000 Charliepeck, ChisPiqfPolice, LAPD ..,iffi70 ., a ''Vit!!.q.f ill.,.,1' 1100 Behaviorat:040ice services ,,..... Dr. Michael Craw,Police Psychologist,855

1200 Lunch

1245 Sane& Jo MacArthur, Assistant Chief, LAPD

1345 Financial Wellness: Panel and Speakers Manny Padilla Jr., Vice President Marketing, Los Angeles Police Federal Credit Union Steve Getzoff,EAU Financial Counseling Team, LAPD Professional Specialist 1415 Break

1430 Financial Wellness Panel Continues: • Deferred Compensation Gary Robison, Regional Director, Great-West Retirement Services • Long-Term Disability Terry U5l ofSouthern California

1500 Pensions Bob Von Voight, Sergeant, LAPD Carol Tavares and Robyn Wilder, Communications and Special Projects, Los Angeles Fire and Police Pqp,efone

1530 Hot Topic - Paycheck Deception Lou Paulson, President, California ProfessloalBrea/Sera

1630 End of Pay One 7 It A SATURDAY, MARCH 24,20

0700 Breakfast . !!

0800 - 500: LEGAL WELLNESS

0800 Keynote"Spa,[5:4 * r. =, GordonOraham, 'Attorney at Lak 4..;.--: Expertise4n California.Law Enforcement ...„ ,''*. "Top 10 ThipysThings, That Get.ThatCops In e Trouble". ir.,.. 1000 break . IC1-4"tfi 40 10: n 1015 basics of Governmeatcode and Representation Gary Ingemunson, Independent Counsel, LAPPL 1145 Lunch and Awards:Presentation d 1345 Employee:k Gary IngemuhiOn, Independent Counsel, LAPPL Sgt. Anthony Otero, Delegate Sgt. Kathleen Mathews, Delegate a 1445 Hot Topic - Pension Fights

1530 End of Pay Two

SUNDAY, MARCH 25,2012

1 100 Check-Out Time Have a safe trip home. We will see you Tuesday, April 3,2012, at our next Delegates Meeting! (Updated: 3/2/1 2)

DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA 90013 (213) 279-3000

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

DATE: MARCH 16, 2017 ITEM: C.2

FROM: RAYMOND P. CIRANNA, GENERAL MANAGER

SUBJECT: APPROVAL OF TRAVEL AUTHORITY (BABCOCK AND VEGA) – IFEBP, THE WHARTON SCHOOL-PORTFOLIO CONCEPTS AND MANGEMENT

RECOMMENDATION

That the Board approve Commissioners Corinne Babcock and Belinda Vega to attend the International Foundation of Employee Benefit Plans (IFEBP), The Wharton School-Portfolio Concepts and Management on April 30 – May 4, 2017 at Philadelphia, PA (April 30th is a travel day).

DISCUSSION

Commissioners Babcock and Vega expressed interest in participating in the following conference:

Conference: The Wharton School-Portfolio Concepts and Management Sponsor: International Foundation of Employee Benefit Plans Dates: May 1 – 4, 2017 Location: Philadelphia, PA Mode of transportation: Commercial Airline

BUDGET

Sufficient funds are available in the Fiscal Year 2016-17 Travel Account. Listed below is an estimated cost to travel:

Estimate cost for Commissioner Babcock:

Registration $5,095.00 Airfare 512.00 Hotel 827.00 Per Diem 240.00 Incidentals (mileage, parking, ground transportation & baggage fees) 227.00 TOTAL $6,901.00

Estimated cost for Commissioner Vega:

Registration $5,095.00 Airfare 512.00 Hotel 827.00 Per Diem 240.00 Incidentals (mileage, parking, ground transportation & baggage fees) 220.00 TOTAL $6,894.00

By attending this training, Commissioners Babcock and Commissioner Vega will become reacquainted with investment portfolio concepts from an academic perspective.

POLICY

If approved by the Board, the proposed expenditures would be within the Board’s Travel and Education Policy.

All information regarding the conference is contained in the attached agenda.

This report was prepared by:

Evangelina Masud, Executive Administrative Assistant Administrative Operations Division

RPC:WSR:EM

Attachment: Conference agenda

Board Report Page 2 March 16, 2017 Portfolio Concepts and Management Monday, May 1-Thursday, May 4, 2017 The Wharton School | University of Pennsylvania | Philadelphia, Pennsylvania

Portfolio Concepts and Management is a 3½-day program that offers lecture/discussion sessions, problem-solving exercises and an interactive case study. Portfolio Concepts and Management is offered every year at the Wharton School on the University of Philadelphia campus.

Objective This program lays the groundwork for the core principles of portfolio theory and investment performance measurement, offering the practical tools and experiences needed to make sound investment management decisions. It is intended for those who have had exposure to investment concepts, with limited experience with academic coursework—or those looking to refresh their past experience.

Outline MONDAY, MAY 1 MONDAY, MAY 1 (Cont.) 7:30-8:30 a.m. 1:00-4:15 p.m. Registration and Breakfast Fundamentals of Portfolio Theory Steinberg Conference Center • Time-weighted and value-weighted rates of return 8:30 a.m.-12:00 noon • Principles of diversification Introduction and Overview • The concept of efficiency of Financial Assets • How to construct well-diversified • The difference between a bond and portfolios a stock • How to build portfolios for a targeted • How bonds and stocks are evaluated risk level • Discounted value of coupons • What happens to bonds when interest TUESDAY, MAY 2 rates change? 7:30-8:30 a.m. • Call features Breakfast • Rating services • Different types of indexes Provided at the conference center • Different definitions of earnings 12:00 noon-1:00 p.m. I would highly recommend the Lunch Portfolio Concepts and Management Provided at the conference center course to trustees, so they are able to effectively understand their “portfolios and communicate risks to their constituents. Wilkin Ly Investment Officer Los Angeles City Employees” Retirement System 4 2017 Wharton Programs Portfolio Concepts and Management

TUESDAY, MAY 2 (Cont.) WEDNESDAY, MAY 3 (Cont.) 8:30 a.m.-12:00 noon 8:30 a.m.-12:00 noon Performance Evaluation Macroeconomic Issues and Financial • Elements of manager monitoring Markets • Risk-adjusted measures • Basics of price and return • Factors behind the numbers • Monetary and fiscal policy structures • Role of investment style and current stances • What do the numbers in a performance • Exchange rates and international factors evaluation report mean? 12:00 noon-1:00 p.m. • Using your performance measurement tools (practical framework) Lunch • Impact of investment policy Provided at the conference center

12:00 noon-1:00 p.m. 1:00-4:15 p.m. Lunch Fundamentals of Valuation Provided at the conference center • How does an analyst determine the price of stock? 1:00-2:30 p.m. • What determines the volatility of a bond? The Current Markets • Mechanics of compounding and • Recent trends discounting • Determining the discount rate • Valuation of annuities • Historical risk and return patterns • Present and future value • The capital asset pricing model 4:15-5:30 p.m. • Price distortions Case Study Group Work 2:45-4:15 p.m. (Dinner on your own) Matching Assets and Liabilities in Public Pension Plans THURSDAY, MAY 4 • The economist approach to discounting 7:30-8:30 a.m. • Motivation • The numbers Breakfast • Bonds vs. stocks Provided at the conference center

4:15-5:00 p.m. 8:30-11:00 a.m. Introduction to Case Study Asset Allocation and Impacts of Risk on Return WEDNESDAY, MAY 3 • Trends in pension management 7:30-8:30 a.m. • Investment policy • Overall asset allocation and allocation Breakfast within asset class Provided at the conference center • Rebalancing vs. reinforcing asset allocation 11:00 a.m.-12:00 noon Case Study Attendance required to earn a certificate.

(888) 334-3327, option 2 | www.ifebp.org/wharton 5

DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA 90013 (213) 279-3000

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

DATE: MARCH 16, 2017 ITEM: C.3

FROM: RAYMOND P. CIRANNA, GENERAL MANAGER

SUBJECT: APPROVAL OF TRAVEL AUTHORITY (NAVARRO) – IFEBP, HEALTH CARE MANAGEMENT CONFERENCE

RECOMMENDATION

That the Board:

1) Approve Commissioner Navarro’s request to attend the International Foundation of Employee Benefit Plans (IFEBP), Health Care Management Conference on April 30 – May 3, 2017 in New Orleans, LA (April 30th is a travel day).; and,

2) Determine that the $50 cancellation fee incurred when Commissioner Navarro could not attend the IFEBP Certificate Series - Health Care Cost Management from March 3 – 4, 2017 in Orlando, FL was a reasonable expenditure in administering the System, due to unavoidable conflicts in his schedule, and authorize the System to pay the cancellation fee.

DISCUSSION

Commissioner Navarro expressed interest in participating in the following training:

Conference: Health Care Management Conference Sponsor: International Foundation of Employee Benefit Plans Dates: May 1 – 3, 2017 Location: New Orleans, LA Mode of transportation: Commercial Airline

Additionally, Commissioner Navarro could not attend the IFEBP Certificate Series training from March 3 – 4, 2017. While the registration fee was refunded by the IFEBP, a $50 cancellation fee was incurred. As such, the Board must determine this was a reasonable expense in administering the System, due to unavoidable conflicts in his schedule, and authorize the System to pay the cancellation fee.

BUDGET

Sufficient funds are available in the Fiscal Year 2016-17 Travel Account. Listed below is an estimated cost to travel for Commissioner Navarro.

Registration $1,445.00 Airfare 386.00 Hotel 901.00 Per Diem 192.00 Incidentals (mileage and parking) 275.00 TOTAL $3,199.00

POLICY

If approved by the Board, the proposed expenditures would be within the Board’s Travel and Education Policy.

Summary information regarding the conference is contained in the agenda.

This report was prepared by:

Evangelina Masud, Executive Administrative Assistant Administrative Operations Division

RPC:WSR:EM

Attachment: Conference agenda

Board Report Page 2 March 16, 2017 Program Schedule

Sunday, April 30 4:00-6:00 p.m. Registration/Information Monday, May 1 7:00 a.m.-4:15 p.m. Registration/Information

7:00-8:00 a.m. Continental Breakfast

8:00-9:15 a.m. The Impact of Politics on the Future of Health Care Recent changes in the political climate have plan sponsors wondering what’s next for health care legislation and how it will impact the future of their plans. Join this session for a viewpoint on the current and future outlook of the health care industry. Diann Howland, Vice President, Legislative Affairs, American Benefits Council, Washington, D.C.

9:30-10:45 a.m. Using Data to Make Decisions for Your Fund • Sources of data —Prescription drug trends and adherence —Medical claims —Health risk assessment • Benchmarking your data • Determining what is actionable data

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Monday, May 1 (Continued) 11:00 a.m.-12:15 p.m. Preventive Care Protocols and Practices • U.S. Preventive Services Task Force protocols and statistics • Best practices for health risk assessments (HRA) —Biometric screenings —Family history information—What you can and cannot collect —Should screenings complement or replace a physician visit? —How do patients use HRA results? • Screenings outside of recommended protocols—How and when should they be used? Examples: —Whole body screenings —3-D mammography —Mail-in laboratory tests

12:15-1:30 p.m. Luncheon

1:30-2:45 p.m. Identifying and Preventing Health Care Fraud Fraud in health care plans comes in many forms: provider billing, members enrolling nonqualified dependents and medical identify theft, to name a few. This session will discuss ways to identify and address past fraudulent activities as well as ways to prevent future issues. Discuss the pros/cons and best practices for internal and third-party audits.

3:00-4:15 p.m. Securing Your Members’ Data There is more “data movement” in the health care industry now than ever before, which results in a need for greater controls over the information being sent and received. This session will discuss ways in which your fund can plan for the unexpected and protect your members’ personal data. Topics will include: • The argument for centralizing security and privacy efforts • How to respond to data breaches • Practices and policies for device management • Responding to threats.

(888) 334-3327, option 2 | www.ifebp.org 5 Program Schedule

Tuesday, May 2 7:00 a.m.-4:15 p.m. Registration/Information

7:00-8:00 a.m. Continental Breakfast

8:00-9:15 a.m. Concurrent Sessions Sustainability and Future Role of Health Care Coalitions Join a discussion of the future outlook for coalitions in light of recent trends in the health care industry. Topics will include: recent activities, potential new opportunities and of the value proposition offered by coalitions. The Journey From Wellness to Well-Being Is well-being just the latest buzzword or a new strategy to improve member productivity and health? • The differences between wellness and well-being • The link between well-being and performance • Opportunities offered by a well-being model Attendees will gain a comprehensive understanding of the concept of well-being and the metrics used to measure outcomes.

9:30-10:45 a.m. Concurrent Sessions Direct Contracting With Health Care Providers Direct contracting with providers is one way funds are looking to save costs and increase access to care for their members. This session will discuss the variety of options available and why some plans choose to go this route. Topics will include on-site and near-site clinics, centers of excellence and provider contracting— including performance guarantees. Engaging Your Members With Effective Communication Effective communication is key to engaging members and influencing the outcomes you hope to achieve. Discussion in this session will include the following topics: • Do your member communications send the right message? • What messages should be segmented, and which should be sent to everyone? • Which communication channels are most appropriate? • Ways to measure effectiveness.

6 Health Care Management Conference Program Schedule

Tuesday, May 2 (Continued) 11:00 a.m.-12:15 p.m. How New Drugs Come to Market There are many steps involved in determining the safety and effectiveness of new drugs being developed. Join this session to hear the roles the manufacturer and the U.S. Food & Drug Administration (FDA) play in the testing and review of new pharmaceuticals, from development to final market launch. Discuss why this information is relevant to health care plans and the health care industry as a whole.

12:15-1:30 p.m. Luncheon

1:30-2:45 p.m. Specialty Drug Management While often achieving advancements in patient care, new therapies raise affordability concerns for health plans and members. Do you have a clear picture of how these costs impact your plan, and do you understand best practices for cost control? This session will discuss: • Top conditions that use high-cost drugs • Site where care is received—pharmacy vs. physician’s office • How physicians can be held responsible for treatment choices.

3:00-4:15 p.m. Top 10 Things to Expect From Your Pharmacy Benefits Manager (PBM) Active vendor management is essential to maximizing the value of the partnership you have with your PBM. Do you know all you should be expecting and what key areas you may have influence over? Join this session for a discussion on topics such as: • Contracting: Transparency and accountability • Evidence-based formulary lists • New innovations • The PBM’s role in member engagement and outcomes.

(888) 334-3327, option 2 | www.ifebp.org 7 Program Schedule

Wednesday, May 3 7:00 a.m.-12:00 noon Registration/Information

7:00-8:00 a.m. Continental Breakfast

8:00-9:15 a.m. Use of Technology in Personal Health Decisions An increase in technology in health care delivery can offer patients more convenience, support and access to data. How will future innovations shape the patient decision-making process? This session will discuss topics such as: • Wearables • Wellness apps and platforms • Connected health devices • Impact of clinical decision support systems on physician treatment patterns.

9:30-10:45 a.m. Trends in Mental Health Management As a matter of public health, many believe it is crucial to remove the stigma surrounding mental health conditions in order to effectively address issues at rd the appropriate time and in the right way. Are patients receiving the appropriate screenings at their annual physicals or through telehealth appointments? Join a 63AnnualOctober 22-25, 2017 | Las Vegas, Nevada | Preconference: October 21-23 discussion of what your plan can do, including the following topics: • Do your members have access to appropriate screenings and care? Employee Benefits Conference • How to remove barriers to care where they exist • Identifying and preventing the costliest conditions www.ifebp.org/usannual • Identifying and preventing comorbidities that go hand in hand with mental illness.

11:00 a.m.-12:00 noon Trends in Retiree Health Coverage • Engaging the caregiver and decision maker in retiree health care decisions • The role of stakeholders in patient advocacy • Employer Group Waiver Plans (EGWP) —Costs —Guidelines—Are they aggressive enough? —Should there be a relationship between the EGWP and other plans offered?

8 Health Care Management Conference