ORANGE COUNTY EMPLOYEES RETIREMENT SYSTEM BOARD OF RETIREMENT 2223 E. WELLINGTON AVENUE, SUITE 100 SANTA ANA, CALIFORNIA

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1 ORANGE COUNTY EMPLOYEES RETIREMENT SYSTEM BOARD OF RETIREMENT 2223 E. WELLINGTON AVENUE, SUITE 100 SANTA ANA, CALIFORNIA REGULAR MEETING 1:30 p.m. MINUTES NOTICE OF TELECONFERENCE MEETING A MEMBER OF THE BOARD OF RETIREMENT FOR THE ORANGE COUNTY EMPLOYEES RETIREMENT SYSTEM MAY PARTICIPATE IN THE REGULAR BOARD MEETING, SCHEDULED FOR AUGUST 27, 2014, VIA TELECONFERENCE AT THE LOCATION LISTED BELOW, WHICH IS OPEN TO THE PUBLIC. TELECONFERENCE LOCATION: INN AT SARATOGA 231 BROADWAY, NEWBURGER ROOM SARATOGA SPRINGS, NEW YORK The Chair called the meeting to order at 1:30 p.m. and read the opening statement into the record. Attendance was as follows: Present: Frank E. Eley, Chair; Chuck Packard, Vice Chair; Chris Prevatt; Ray Geagan; Roger Hilton; Shari L. Freidenrich; Tom Beckett; Wayne S. Lindholm Thomas E. Flanigan participated by telephone from a teleconference location at The Inn at Saratoga, 231 Broadway, Newburger Room, Saratoga Springs, New York. Absent: Also present: David Ball Steve Delaney, Chief Executive Officer; Suzanne Jenike, Assistant CEO, External Operations; Girard Miller, Chief Investment Officer; Brenda Shott, Assistant CEO, Finance and Internal Operations; Robert Valer, Chief Legal Counsel; Tracy Bowman, Director of Finance; Cynthia Hockless, Director of Administrative Services; David James, Director of Internal Audit; David Lantzer, Staff Attorney; Jenny Sadoski, Director of Information Technology; Robert Kinsler, Communications Manager; Anthony Beltran, Visual Technician; Megan Cortez; Disability Coordinator; and Michelle Brinker, Recording Secretary Paul Angelo, FSA, Senior Vice President and Actuary, Segal Consulting Harvey Leiderman, Esquire, ReedSmith, LLP opened the meeting at 1:30 p.m.

2 Regular Board Meeting Minutes Page 2 DISABILITY APPLICATIONS/MEMBER APPEALS AGENDA 1:30 P.M. NOTE: WHEN CONSIDERING DISABILITY RETIREMENT APPLICATIONS, THE BOARD MAY FIND IT NECESSARY TO DISCUSS MATTERS RELATING TO THE EVALUATION OF THE WORK PERFORMANCE OF AN EMPLOYEE WHO HAS APPLIED FOR DISABILITY RETIREMENT, OR DISCUSS COMPLAINTS OR CHARGES MADE AGAINST SUCH EMPLOYEE. IF THIS OCCURS, THE BOARD MAY ADJOURN TO A CLOSED SESSION TO DISCUSS SUCH MATTERS PURSUANT TO GOVERNMENT CODE SECTION 54957, UNLESS THE EMPLOYEE REQUESTS THAT THE DISCUSSION BE IN PUBLIC. **************** Megan Cortez, Disability Coordinator, presented item D-1 to the Board along with the staff D-1: Jean Fairley Senior Citizens Representative II, Orange County Community Resources Date of employee filed application for non-service connected disability retirement: 03/20/2014 STAFF RECOMMENDATION IS TO GRANT NON-SERVICE CONNECTED DISABILITY RETIREMENT WITH AN EFFECTIVE DATE OF MARCH 20, (GENERAL MEMBER) (D-1) Following discussion, a motion was made by, seconded by to grant nonservice connected disability retirement with an effective date of March 20, The motion carried 7-0 with voting as follows: Megan Cortez, Disability Coordinator, presented item D-2 to the Board along with the staff D-2: Ernie Lopez Deputy Juvenile Correction Officer II, Orange County Probation Department Date of employee filed application for service and non-service connected disability retirement: 09/09/2011 Date of employer filed application for service and non-service connected disability retirement: 07/20/2011 STAFF RECOMMENDATION IS TO GRANT SERVICE CONNECTED DISABILITY RETIREMENT FOR CONDITION #1 WITH AN EFFECTIVE DATE OF JULY 20, 2011 AND TO DENY SERVICE AND NON-

3 Regular Board Meeting Minutes Page 3 SERVICE CONNECTED DISABILITY RETIREMENT FOR CONDITIONS #2 AND #3 DUE TO INSUFFICIENT EVIDENCE OF PERMANENT INCAPACITY. (SAFETY MEMBER) (D-2) Following discussion, a motion was made by, seconded by to grant service connected disability retirement for condition #1 with an effective date of July 20, 2011 and to deny service and non-service connected disability retirement for conditions #2 and #3 due to insufficient evidence of permanent incapacity. The motion carried 7-0 with voting as follows: Megan Cortez, Disability Coordinator, presented item D-3 to the Board along with the staff D-3: Kenneth Sedei Sergeant, Orange County Sheriff s Department Date of employee filed application for service and non-service connected disability retirement: 07/25/2013 STAFF RECOMMENDATION IS TO GRANT SERVICE CONNECTED DISABILITY RETIREMENT WITH AN EFFECTIVE DATE OF MARCH 22, (SAFETY MEMBER) (D-3) Following discussion, a motion was made by, seconded by to grant service connected disability retirement with an effective date of March 22, The motion carried 7-0 with voting as follows: Megan Cortez, Disability Coordinator, presented item D-4 to the Board along with the staff D-4: Mireya Serrano Information Processing Technician, Orange County Social Services Agency

4 Regular Board Meeting Minutes Page 4 Date of employee filed application for service and non-service connected disability retirement: 08/02/2013 STAFF RECOMMENDATION IS TO GRANT SERVICE CONNECTED DISABILITY RETIREMENT FOR CONDITION #1 WITH AN EFFECTIVE DATE OF OCTOBER 12, 2013 AND TO DENY SERVICE AND NON-SERVICE CONNECTED DISABILITY RETIREMENT FOR CONDITION #2 DUE TO INSUFFICIENT EVIDENCE OF PERMANENT INCAPACITY. (GENERAL MEMBER) (D-4) Following discussion, a motion was made by, seconded by to grant service connected disability retirement for condition #1 with an effective date of October 12, 2013 and to deny service and non-service connected disability retirement for condition #2 due to insufficient evidence of permanent incapacity. The motion carried 7-0 with voting as follows: Megan Cortez, Disability Coordinator, presented item D-5 to the Board along with the staff D-5: Maryhelen Young Eligibility Technician, Orange County Social Services Agency Date of employee filed application for non-service connected disability retirement: 11/04/2013 STAFF RECOMMENDATION IS TO GRANT NON-SERVICE CONNECTED DISABILITY RETIREMENT WITH AN EFFECTIVE DATE OF NOVEMBER 4, (GENERAL MEMBER) (D-5) Following discussion, a motion was made by, seconded by to grant nonservice connected disability retirement with an effective date of November 4, The motion carried 7-0 with voting as follows: Megan Cortez, Disability Coordinator, told the Board that D-6 was pulled.

5 Regular Board Meeting Minutes Page 5 D-6: PULLED Megan Cortez, Disability Coordinator, presented item D-7 to the Board along with the staff D-7: Mark Kelley Deputy Sheriff II, Orange County Sheriff s Department Date of employer filed application for service and non-service connected disability retirement: 12/21/2011 Date of employee filed application for service connected disability retirement: 01/06/2012 STAFF RECOMMENDATION IS TO DENY SERVICE AND NON-SERVICE CONNECTED DISABILITY RETIREMENT DUE TO INSUFFICIENT EVIDENCE OF PERMANENT INCAPACITY. (SAFETY MEMBER) (D-7) Following discussion, a substitute motion was made by, seconded by to refer the matter back to staff for a second opinion from an OCERS panel physician and further staff development, without sending Dr. Ross opinion to the new panel physician. The motion carried 5-2 with voting as follows: A motion was made by, seconded by to deny service and non-service connected disability retirement due to insufficient evidence of permanent incapacity. The motion failed due to receiving the substitute motion. Megan Cortez, Disability Coordinator, presented item D-8 to the Board along with the staff D-8: Mark Stevens Firefighter/Paramedic, Orange County Fire Authority Date of employee filed application for service connected disability retirement: 12/04/2012 STAFF RECOMMENDATION IS TO DENY SERVICE CONNECTED DISABILITY RETIREMENT DUE TO INSUFFICIENT EVIDENCE OF PERMANENT INCAPACITY AND JOB CAUSATION. (SAFETY MEMBER) (D-8) Following discussion, a substitute motion was made by Mr. Geagan, seconded by to grant service connected disability retirement with a retirement date determined by staff. The motion carried 4-3 with voting as follows:

6 Regular Board Meeting Minutes Page 6 Mr. Geagan A motion was made by, seconded by to deny service connected disability retirement due to insufficient evidence of permanent incapacity and job causation. The motion failed due to receiving the substitute motion. Megan Cortez, Disability Coordinator, presented item D-9 to the Board along with the staff D-9: Daniel Colgan Fire Captain, Orange County Fire Authority Date of employee filed application for service connected disability retirement: 06/24/2013 STAFF RECOMMENDATION IS TO DENY THE APPLICANT S REQUEST FOR AN EARLIER EFFECTIVE DATE AS HIS APPLICATION WAS NOT DELAYED BY AN ADMINISTRATIVE OVERSIGHT OR HIS INABILITY TO ASCERTAIN THE PERMANENCY OF HIS INCAPACITY. (SAFETY MEMBER) (D-9) Following discussion, a motion was made by Mr. Geagan, seconded by to grant the applicant s request for an earlier effective date. The motion carried 6-1 with voting as follows: Mr. Geagan Megan Cortez, Disability Coordinator, presented item D-10 to the Board along with the staff D-10: James Morabito Retired Deputy Sheriff I, Orange County Sheriff s Department STAFF RECOMMENDS THAT THE BOARD OF RETIREMENT REQUIRE JAMES MORABITO TO UNDERGO A MEDICAL REEXAMINATION PURSUANT TO GOVERNMENT CODE SECTION AND (SAFETY MEMBER) (D-10) Following discussion, a motion was made by, seconded by to require James Morabito to undergo a medical reexamination pursuant to government code section and The motion carried 7-0 with voting as follows:

7 Regular Board Meeting Minutes Page 7 Megan Cortez, Disability Coordinator, presented item D-11 to the Board along with the staff D-11: Phil Duncan (DECEASED) Building Inspector IV, Orange County Public Works Date of employee filed application for service and non-service connected disability retirement: 09/14/2007 DISMISS WITHOUT PREJUDICE THE SURVIVING SPOUSE OF THE DECEASED APPLICANT S REQUEST FOR A HEARING DUE TO FAILURE TO COMPLY WITH THE HEARING RULES. (GENERAL MEMBER) (D- 11) Following discussion, a motion was made by, seconded by to dismiss without prejudice the surviving spouse of the deceased applicant s request for a hearing due to failure to comply with the hearing rules. The motion carried 7-0 with voting as follows: * * * * * * * * END OF DISABILITY APPLICATIONS/MEMBER APPEALS AGENDA * * * * * * * CONSENT AGENDA connected to the meeting via teleconference at 2:44p.m., appearing via teleconference, confirmed his location at the Inn at Saratoga, 231 Broadway, Newburger Room, Saratoga Springs, New York. He also confirmed that the Board Meeting Agenda was publicly posted at least 72 hours prior to the meeting, he was on a speaker phone so that any member of the public could both hear the meeting and address the Board if necessary, and that the room was accessible to any member of the public with a disability. All matters on the Consent Agenda are to be approved by one action unless a Board Member or a member of the public requests separate action on a specific item.

8 Regular Board Meeting Minutes Page 8 pulled item C-4. Mr. Eley pulled item C-5. Mr. Delaney clarified that listed within item C-2 the Board Meeting Minutes for July 21, 2014 would not been included as part of this motion as they were completed late. A motion was made by, seconded by to approve the remainder of the Consent Agenda. The motion carried 8-0, with voting as follows: C-1 MATERIAL DISTRIBUTED Application Notices - Death Notices - C-2 BOARD MEETINGS AND COMMITTEE MEETINGS Approval of Meetings and Minutes Regular Board Meeting - June 16, 2014 Regular Board Meeting - July 21, 2014 Audit Committee Meeting - July 22, 2014 Recommendation: Authorize all meetings and approve all minutes. C-3 CEO FUTURE AGENDAS C-4 LEGISLATIVE UPDATE C-5 V3 PROJECT UPDATE C-6 SECOND QUARTER UNAUDITED FINANCIAL STATEMENT

9 Regular Board Meeting Minutes Page 9 C-7 SECOND QUARTER BUDGET REPORT C-8 OCERS BY THE NUMBERS C-9 EMPLOYER AND EMPLOYEE PENSION COST COMPARISON C-10 BOARD COMMUNICATIONS * * * * * * END OF CONSENT AGENDA * * * * * * * INDIVIDUAL ITEMS AGENDA I-1 INDIVIDUAL ACTION ON ANY ITEM TRAILED FROM THE CONSENT AGENDA C-4 LEGISLATIVE UPDATE asked if there would be a change to the county procedure, which states that currently Orange County veterans cannot buy back four years of active military service as part of their retirement benefit. Mr. Lantzer said no, that will not be changing for OCERS members. After discussion, a motion was made by, seconded by to receive and file C-4. The motion carried 8-0, with voting as follows:

10 Regular Board Meeting Minutes Page 10 C-5 V3 PROJECT UPDATE Mr. Eley stated that, Mr. Delaney, OCERS Executive Staff and he met with representatives from Vitech, Chris Lodge and Jamie Vitiello. During the meeting the attitudes of the Vitech representatives were very good. The Board is going to wait for OCERS staff to report on what has happened at the Quarterly Update Meeting, and we are looking forward to release 4.0 on September 12 th. stated that we were hoping that the project would be finished now, not next year. OCERS needs to better understand what we can or cannot legitimately say in a reference for Vitech once the project is completed. He encouraged Legal Staff to say the right thing. In addition, said that the next time we have a major project such as V3, we need to go above and beyond the call of verifying and validating references. Mr. Delaney thanked and Vice Chair Packard you for their time at the meeting with Vitech. He said V3 is on track for December We have a written report, and we are available to answer questions. After discussion, a motion was made by, seconded by to receive and file C-5. The motion carried 8-0, with voting as follows: I-2 TRIENNIAL STUDY OF ACTUARIAL ASSUMPTIONS (CONTINUATION) Presentation by Paul Angelo, FSA, Senior Vice President and Actuary, Segal Consulting Mr. Angelo discussed possible modifications to current actuarial assumptions based on the past three years experience. Mr. Angelo reviewed economic assumptions, including the payroll growth assumption used in UAAL Amortization. He proposed what could be appropriate payroll growth assumptions. The Board recessed for break at 4:50 p.m. The Board reconvened at 5:02 p.m.

11 Regular Board Meeting Minutes Page 11 did not return after the break. Because not all Board members were in attendance, the Board could not elect one of the proposals on this day. Consequently, the Board selected a date to hold a Special Board Meeting to vote. The date chosen was Tuesday, September 23, After discussion, a motion was made by, seconded by to receive and file Triennial Study of Actuarial Assumptions. The motion carried 7-0, with voting as follows: left the meeting at 5:55 p.m. I-3 ADOPTION OF REGULATIONS FOR IRS VOLUNTARY CORRECTION PROGRAM Presentation by David Lantzer, Staff Attorney Recommendation: Adopt regulations approved by the IRS and request ratification of the regulations by the Orange County Board of Supervisors in order to comply with the IRS Voluntary Correction Program. Mr. Lantzer explained that according to the IRS, OCERS is required to adopt seven tax regulations. The IRS and OCERS worked closely together to come up with the language. The IRS approved the new language, and OCERS now needs to put them in place to be in compliance with the Voluntary Correction Program. After discussion, a motion was made by, seconded by to adopt the regulations approved by the IRS and request that the Board of Supervisors ratify the regulations in order to comply with the IRS Voluntary Correction Program. The motion carried 6-0, with voting as follows:

12 Regular Board Meeting Minutes Page 12 I-4 MID-YEAR 2014 BUSINESS PLAN REVIEW Presentation by Steve Delaney, Chief Executive Officer Due to time limitations, this item was removed from the agenda. Mr. Delaney will instead send the Board a written summary of the Mid-Year 2014 Business Plan Review. * * * * * * * END OF INDIVIDUAL ITEMS AGENDA * * * * * * PUBLIC COMMENTS: At this time members of the public may address the Board of Retirement regarding any items within the subject matter jurisdiction of the Board, provided that no action may be taken on nonagendized items unless authorized by law. BOARD MEMBER COMMENTS None. CHIEF EXECUTIVE OFFICER/STAFF COMMENTS None. COUNSEL COMMENTS None. ADJOURNMENT: (IN MEMORY OF THE ACTIVE MEMBERS, RETIRED MEMBERS, AND SURVIVING SPOUSES WHO PASSED AWAY THIS PAST MONTH) Active Members Cocke-Reynolds, Joyce Dameron, Gina West, Sandra Members Bennett, Sharon Boyd, Frank Cotner, Donald Elliott, Ronald Francisco, James Fullenwider, Ed Surviving Spouses Arevalos, Rose Bates, Bonnie Bybee, Samuel Giacchetti, Louis Guzzetta, Thomas Harding, Francis Javier, Aurelio Jones, James Martinez, Estela Erthal, Edna Milton, Margaret Sanders, Madge Propst, Zena Stills, Kenneth Tiller, Adelle Van Meter, Virginia Wilson, Marilyn Yung, Olga Uram, Donna

13 Regular Board Meeting Minutes Page 13 ADJOURNMENT: There being no further business to bring before the Board, the meeting adjourned at 6:07 p.m. Submitted by: Approved by: Steve Delaney Secretary to the Board Frank Eley, Chair

14 ORANGE COUNTY EMPLOYEES RETIREMENT SYSTEM BOARD OF RETIREMENT 2223 WELLINGTON AVENUE, SUITE 100 SANTA ANA, CA AUDIT COMMITTEE MEETING October 3, :00 a.m. MINUTES The Chair called the meeting to order at 9:04 a.m. and read the opening statement into the record. Attendance was as follows: Present: Also present: Ray Geagan, Chair; Charles Packard, Vice-Chair; Shari Freidenrich and Wayne Lindholm Steve Delaney, Chief Executive Officer; Brenda Shott, Assistant Chief Executive Officer, Finance and Internal Operations; David James, CPA, Director of Internal Audit; Mark Adviento, Internal Auditor; Suzanne Jenike, Assistant CEO, External Operations; Catherine Fairley, Member Services Director; Anthony Beltran, Audio/Visual Technician and Michelle Brinker, Recording Secretary arrived at 9:05 a.m. A. APPROVAL OF REQUEST FOR PROPOSAL FOR DATA ANALYSIS USING ACL ANALYTICS EXCHANGE Recommendation: Review and approve. Mr. James spoke about a request for approval for Internal Audit to proceed with an RFP to provide data analysis using ACL Analytics Exchange software for an audit of data converted from PensionGold to V3, and various data analysis with key projects such as risk analysis and audits of data integrity in the pension administration system. He asked for approval of a budget of $488,800, subject to change based on the accepted bid. He said the budgeted amount had been arrived at by applying the hourly rate of consultants used by OCERS IT for a one year period. asked about historical cost overruns in technology projects and expressed concern as to whether this budgeted amount is a realistic number, and if the project can be completed on time and on budget. Mr. James said that the audit project would be defined and planned as completely as possible, allowing the vendor and Internal Audit to successfully complete the project within budget. asked if this audit project would overlap with V3 s original contract and whether the cost could be applied to the V3 project. Ms. Shott explained this project is to audit data converted to V3 and compared it to a second set of eyes not directly involved in the project. She said the cost of the audit would need to be expensed, not capitalized. said this was new information and is being put in late in the project. would like to see a more clearly defined RFP that focuses on the data conversion audit. F:\Board\Scanned Board-Committee Packets\October\2014\Regular Board, Special Board, etc\boardvantage Material\C Audit Committee Meeting Minutes.docx

15 October 3, 2014 Audit Committee Meeting Minutes 2 Ms. Sadoski responded that the data conversion will need an independent audit and the expertise from an experienced ACL programmer to setup scripts in the software. Mr. James said this data conversion audit has been on the approved Audit Plan for two years, and that there has been a delay in the audit due to the delay of the V3 project, but commencing the data conversion audit at this time is timely. Mr. Geagan asked if there would be a delay in timing with V3 testing. Ms. Sadoski explained that the audit will fall in line with the timing originally planned. said that according to the agenda an approval of a budget is not included. Mr. James said that he had consulted with OCERS Legal staff on this point, and they said that the subject of the agenda item could include the budgeted amount. Ms. Shott said that this item was intended for the Committee to authorize the RFP project to get it going and that the budget will be presented to the full Board for approval with the 2015 budget. A budget amendment could be added at the time that the Audit Committee approves a vendor to work on the audit project. Following discussion, a motion was made by, seconded by to approve issuance of an RFP limited to data analysis using ACL Analytics, but did not approve a budget amount at this time. The motion carried unanimously. B. OCERS INTERNAL AUDIT ANALYSIS FOR PENSION SPIKING Mr. James explained the purpose of the presentation was to inform the Audit Committee about Internal Audit s procedures to detect and audit pension spiking. Mr. James summarized the changes in PEPRA to prevent pension spiking and defined pension spiking. Mr. James described how pension spiking could occur, such as pay items not being reviewed or manual overrides of final average salary in PensionGold. Member Services has procedures to prevent pension spiking and run tests as well as preparing reviews of calculated final average salary for correctness. Internal Audit did a benefit payment audit in 2013 and plans to continue doing these types of audits periodically. Since the implementation of PEPRA, Internal Audit began including test work for pension spiking to supplement regular audits of plan sponsors payroll data transmissions. Internal Audit performs audits of plan sponsors at least twice a year. In its recent audit of the County, results identified and tested a sample of employees who received annual pay increases of 10% or more. The audit did not find any instances of pension spiking. Increases in in salary were from promotions, multi-step increases, and additional premium pay items. Other Internal Audit initiatives include a project using ACL Analytics Exchange software to test member data for possible pension spiking. Also, the OCERS Ethics, Compliance, and Fraud Hotline can be used for anonymous reporting of suspected instances of pension spiking. Following discussion, the Committee suggested that audit results should be presented to see where the 10% salary increases occurred in the recent audit. After discussion, a motion was made by Mr. Geagan, seconded by to receive and file the OCERS Internal Audit Analysis for Pension Spiking. The motion carried unanimously. F:\Board\Scanned Board-Committee Packets\October\2014\Regular Board, Special Board, etc\boardvantage Material\C Audit Committee Meeting Minutes.docx

16 October 3, 2014 Audit Committee Meeting Minutes 3 C. UPDATED 2014 AUDIT PLAN Mr. James gave an update on the 2014 Audit Plan. Internal Audit has completed the fieldwork on a County payroll transmittal audit. There was one finding given to County staff and Internal Audit is waiting for a written response to the finding. The same type of audit is being done with the Sanitation District. Auditors have completed the entrance meetings and walkthroughs of procedures. Upcoming is a Due Diligence audit. The OCERS Plan Sponsor Review report will be presented at the Regular Board meeting on November 17. Following discussion, a motion was made by, seconded by, to receive and file the Updated 2014 Audit Plan. The motion carried unanimously. * * * * * * * END OF AGENDA ITEMS * * * * * * PUBLIC COMMENTS: None COMMITTEE MEMBERS COMMENTS: None CHIEF EXECUTIVE OFFICER/STAFF COMMENTS: None ADJOURNMENT: The meeting adjourned at 10:30 a.m. Submitted by: Approved by: Steve Delaney Secretary to the Committee Ray Geagan Committee Chair F:\Board\Scanned Board-Committee Packets\October\2014\Regular Board, Special Board, etc\boardvantage Material\C Audit Committee Meeting Minutes.docx