AGENDA BOARD OF FIRE AND POLICE PENSION COMMISSIONERS. January 4, :30 a.m.

Transcription

1 AGENDA BOARD OF FIRE AND POLICE PENSION COMMISSIONERS January 4, :30 a.m. Sam Diannitto Boardroom Los Angeles Fire and Police Pensions Building 701 East 3rd Street, Suite 400 Los Angeles, CA 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 , 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 3 rd Street, 2 nd Floor, Los Angeles, California 90013, or by clicking on LAFPP s website at 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) or by at rhonda.ketay@lafpp.com. 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) voice or (213) TDD. A. ITEMS FOR BOARD ACTION 1. REVIEW OF BAILLIE GIFFORD OVERSEAS LIMITED S CONTRACT FOR INTERNATIONAL EQUITY MANAGEMENT AND POSSIBLE BOARD ACTION 2. REVIEW OF ALLIANCEBERNSTEIN, L.P. S CONTRACT FOR GLOBAL REAL ESTATE INVESTMENT TRUST INDEX AND POSSIBLE BOARD ACTION 3. DISCUSSION OF THE FINALIST CANDIDATES FOR THE INTERNATIONAL SMALL CAP EQUITY SEARCH AND POSSIBLE BOARD ACTION 4. APPROVAL TO ISSUE A REQUEST FOR PROPOSAL FOR ACTUARIAL CONSULTING SERVICES AND POSSIBLE BOARD ACTION

2 5. STATUS REPORT TO 2017 ANNUAL AUDIT PLAN AND FORECAST AND PROPOSED 2018 ANNUAL AUDIT PLAN AND FORECAST AND POSSIBLE BOARD ACTION 6. APPROVAL TO ISSUE A REQUEST FOR PROPOSAL FOR HEALTH CONSULTING SERVICES AND POSSIBLE BOARD ACTION 7. AIRPORT DEPARTMENT CONTRIBUTION RATE FOR JANUARY 8, 2018 AND POSSIBLE BOARD ACTION B. REPORTS TO THE BOARD 1. QUARTERLY PORTFOLIO PERFORMANCE REPORT BY RVK 2. UPDATE ON IMPLEMENTATION OF CALIFORNIA GOVERNMENT CODE SECTION ALTERNATIVE INVESTMENT FEES 3. Has any Board Member made any expenditure to influence State legislative or administrative action? 4 Miscellaneous correspondence from money managers, consultants, etc. Received and Filed. 5. General Manager s Report a. Benefits Actions approved by General Manager on December 19, 2017 b. Other business relating to Department operations C. CONSIDERATION OF FUTURE AGENDA ITEMS D. GENERAL PUBLIC COMMENT ON MATTERS WITHIN THE BOARD S JURISDICTION E. DISABILITY CASES Alternative 2 Police Officer III Christopher A. Bouse. Officer Bouse will be represented by Thomas J. Wicke, Esq. of Lewis, Marenstein, Wicke, Sherwin and Lee. F. CLOSED SESSION ITEM FOR POSSIBLE BOARD ACTION 1. CLOSED SESSION PURSUANT TO GOVERNMENT CODE SECTION TO CONSIDER THE PURCHASE OF ONE (1) PARTICULAR, SPECIFIC INVESTMENT AND POSSIBLE BOARD ACTION January 4,

3 DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA (213) REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS DATE: JANUARY 4, 2018 ITEM: A.4 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: APPROVAL TO ISSUE A REQUEST FOR PROPOSAL FOR ACTUARIAL CONSULTING SERVICES AND POSSIBLE BOARD ACTION RECOMMENDATION That the Board: 1) Authorize the General Manager to issue a Request for Proposal (RFP) for actuarial consulting services, including a provision for a secondary consultant to conduct an actuarial audit, if necessary; and, 2) Direct staff to either: a. Report back to the Board with a recommendation(s) for contract award(s) upon completion of the competitive proposal and evaluation process; or b. Report back to the Board with a list of responding firms so the Board may evaluate the responses and decide which firms, if any, to interview. DISCUSSION Segal Consulting (Segal) has served as LAFPP s actuary continuously since July 1, Most recently, the Board renewed Segal s contract in 2015 without engaging in a competitive bidding process, in accordance with Article XVI, Section 17 of the California Constitution which states that the Board has the sole and exclusive power to provide for actuarial services in order to assure the competency of the assets of the public pension or retirement system. Segal s current threeyear contract expires June 30, Staff recommends that a competitive bid process be initiated at this time to execute a new contract for actuarial consulting services. To continue to avoid any perceived conflicts of interest, LAFPP s consulting actuary will be prohibited from entering into a contract with the Plan Sponsor while under contract with LAFPP. Having this separation is considered a best practice, as discussed with fiduciary counsel in the past. Segal s current and past contracts have restricted them from contracting with the Plan Sponsor for actuarial services. It is noted that this contracting restriction does not preclude the LAFPP actuary from sharing data with the Plan Sponsor s actuary, which is common practice in the actuarial profession. Section 3.15(D) of the Board s Governance Policies provides that the Board will ensure that an actuarial audit or equivalent is conducted at least every 5-7 years, unless the System has recently appointed, or is about to appoint, a new actuary at or about the time an actuarial audit is

4 scheduled to be performed. The last actuarial audit was conducted by Cheiron, Inc. in 2013 and was presented to the Board on December 5, Therefore, the RFP will also provide for an option to contract with a second firm to perform an actuarial audit in the event that Segal is selected to be the System s actuary. Both contracts will be for the period of July 1, 2018 to June 30, Upon approval, staff will publish the RFP on the LAFPP website, the City s Business Assistance Virtual Network, and notify actuarial services companies. If the Board chooses to approve recommendation 2.a., the evaluation of responses, cost information and a contract award recommendation will be presented to the Board by April If the Board chooses to approve recommendation 2.b., the evaluation of responses will be reviewed at the Board meeting of March 15, 2018, and finalist interviews will be scheduled at a subsequent Board meeting. BUDGET No impact at this time. POLICY No changes recommended at this time. This report was prepared by: Gregory Mack, Chief Benefits Analyst Pensions Division RPC:JS:GFM Board Report Page 2 January 4, 2018

5 DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA (213) REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS DATE: JANUARY 4, 2018 ITEM: A.5 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: 2017 ANNUAL AUDIT PLAN AND FORECAST STATUS REPORT AND PROPOSED 2018 ANNUAL AUDIT PLAN AND FORECAST; AND POSSIBLE BOARD ACTION RECOMMENDATIONS That the Board: 1. Review the status report to the 2017 Annual Audit Plan and Forecast; and, 2. Review and approve the proposed 2018 Annual Audit Plan and Forecast. BACKGROUND Each year, Internal Audit Section (IAS) develops the Annual Audit Plan and Forecast (AAPF) to determine and plan the priorities of the internal audit activities in support of LAFPP s mission and goals. The AAPF is developed from a formal risk assessment that complies with the International Standards for the Professional Practice of Internal Auditing (ISPPIA) that requires a risk-based, flexible annual audit plan. DISCUSSION 2017 AAPF Status Report On January 5, 2017, the Board approved the 2017 AAPF (Attachment 1) in which fourteen projects were scheduled. Ten projects were scheduled for 2017 as follows: eight projects were scheduled for completion, and two were ongoing for The remaining four projects, the Subsidy Program Audits, were forecast for completion in IAS completed seven of the eight projects scheduled for completion in For the remaining project, management is working to address one outstanding recommendation from the City Management Audit. The two ongoing projects for 2017 are still ongoing. The status of each of the 2017 projects is detailed in Attachment 2 and summarized in the table below.

6 TABLE STATUS OF ANNUAL AUDIT PLAN AND FORECAST PROJECTS SCHEDULED FOR 2017 Project Type 2017 S T A T U S Projects Completed Ongoing Pending Total Audit Monitoring project Follow up project Special project TOTAL Projects that are not completed each year are reassessed for inclusion in the following year s AAPF Risk Assessment and AAPF The 2018 risk assessment was based on IAS review and assessment of operations and risks based on an application of LAFPP s Strategic Plan Goals. The risk assessment incorporated IAS knowledge of operations based on prior work and included reviews of section operations and controls, trends in the public pension fund industry, and surveys. IAS surveyed Board members and executive and senior management to solicit input on threats to LAFPP s mission and strategic plan goals. IAS evaluation included assessments of prevailing business risks, LAFPP s controls, prior risk assessment results, and audit findings from external and internal audits. Based on this risk assessment, thirteen projects are proposed for the 2018 AAPF (Attachment 3) consisting of five audits, six monitoring projects, one follow up project, and one special project. An audit of LAFPP s cybersecurity program is scheduled to evaluate LAFPP s controls that address cybersecurity threats. The second round of Subsidy Program Audits remains on the 2018 plan, and IAS proposes awaiting the results of outcomes and potential Board actions regarding the Ad Hoc Committee and stakeholder meetings prior to finalizing objectives and determining a target date. IAS proposes treating the 2017 Data Analytics Development project as an ongoing monitoring project. The AAPF is flexible to enable adjustments in scheduled projects and target dates necessary to respond to changes in business, risk, operations, programs, systems, and controls in accordance with the ISPPIA. IAS will continue to conduct annual risk assessments as the basis for future calendar year audit plans. BUDGET There is no additional impact to the budget. The fiscal year budget includes contingencies for potential co-sourcing or outsourcing projects. Board Report Page 2 January 4, 2018

7 This report was prepared by: Erin J. Kenney, Departmental Audit Manager Internal Audit Section RPC:EJK Attachments: Annual Audit Plan and Forecast Annual Audit Plan and Forecast Status Report 3. Proposed 2018 Annual Audit Plan and Forecast Board Report Page 3 January 4, 2018

8 A N N U A L A U D I T P L A N A N D F O R E C A S T Los Angeles Fire & Police Pensions prepared by Internal Audit Section AUDIT PROJECTS No. AUDIT TITLE TYPE PRIORITY ASSESSMENT TARGET DATE 1 Business Continuity and Disaster Recovery Plan Audit Standard Moderate: based on moderate controls, materiality of potential losses, and high impact on customer service and productivity October 2017 Objective: Determine whether LAFPP business continuity and disaster recovery plans are effective to minimize business disruptions. 2-5 Subsidy Program Audits - 2nd round: LAFRA, LAPPL, LAPRA, UFLAC Public Pension Fund Audit Moderate: based on moderate controls, changes to control environment, and implementation of new policies and procedures. Objective: Determine whether LAFPP's Subsidy Program is effective, efficient, and operates as intended MONITORING PROJECTS No. MONITORING PROJECT TITLE TYPE RESPONSIBILITY / AUTHORITY TARGET DATE M1-M4 Contractor Disclosure Policy: Quarterly reporting Ethics Board policy Quarterly M5 Information Systems Security Monitoring System Security Risk assessment On-going FOLLOW UP AND SPECIAL PROJECTS FOLLOW UP / SPECIAL PROJECT TITLE TYPE RESPONSIBILITY / AUTHORITY TARGET No. DATE F1 Follow Up to City Management Audit/HEK Standard Management request recommendations June 2017 SP1 Data Analytics Development Project Standard Risk Assessment On-going SP2 Peer Review Project Administrative Auditing standards SP3 Sensitive Information Physical Security Review Standard Management request TBD June 2017 Projects scheduled for calendar year 2017 are based on budgeted 3 full time equivalents. Page 1 of 1

9 A N N U A L A U D I T P L A N A N D F O R E C A S T S T A T U S R E P O R T 2017 Project Report Los Angeles Fire & Police Pensions prepared by Internal Audit Section No. PROJECT TYPE 1 Business Continuity and Disaster Recovery Plan Audit 1 Audit M1-M4 Contractor Disclosure Policy: Quarterly Monitoring 4 reporting M5 Information Systems Security Monitoring Monitoring 1 STATUS Completed Ongoing Pending Comment F1 Follow Up to City Management Audit/HEK Follow Up 1 recommendations SP1 Data Analytics Development Project Special Project 1 Propose treating as a Monitoring Project in 2018 SP2 Peer Review Project Administrative 1 SP3 Sensitive Information Physical Security Review Special Project 1 T O T A L 7 2 1

10 P R O P O S E D A N N U A L A U D I T P L A N A N D F O R E C A S T Los Angeles Fire & Police Pensions prepared by Internal Audit Section AUDIT PROJECTS No. 1 Objective: AUDIT TITLE Audit of Cybersecurity Program and Basic Controls Evaluate LAFPP's overall cybersecurity control framework and controls. TYPE PRIORITY ASSESSMENT TARGET DATE Standard Moderate: based on moderate to strong controls, changes to external environment, and high impact on customer service and productivity. July Subsidy Program Audits - 2nd round: LAFRA, LAPPL, LAPRA, and UFLAC Public Pension Fund Audit Moderate: based on moderate controls, changes to external and control environments, and implementation of new procedures. Objective: Determine whether LAFPP's Subsidy Program is effective, efficient, and operates as intended/tbd. 2018/TBD MONITORING PROJECTS No. M1-M4 MONITORING PROJECT TITLE Contractor Disclosure Policy: Quarterly Reporting TYPE RESPONSIBILITY / AUTHORITY TARGET DATE Ethics Board policy Quarterly M5 Information Systems Security Monitoring System Security Risk assessment On-going M6 Data Analytics Development Project Standard Risk Assessment On-going FOLLOW UP AND SPECIAL PROJECTS FOLLOW UP / SPECIAL PROJECT TITLE TYPE RESPONSIBILITY / AUTHORITY TARGET No. DATE F1 Follow Up to City Management Audit/HEK recommendations Standard Management request July 2018 SP1 Sensitive Information Physical Security Review Standard Management request TBD 2018 Projects scheduled for calendar year 2018 are based on budgeted 2.75 full time equivalents. Page 1 of 1

11 DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA (213) REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS DATE: JANUARY 4, 2018 ITEM: A.6 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: APPROVAL TO ISSUE A REQUEST FOR PROPOSAL FOR HEALTH CONSULTING SERVICES AND POSSIBLE BOARD ACTION RECOMMENDATION That the Board authorize the General Manager to issue a Request for Proposal (RFP) for health consulting services. DISCUSSION The Medical and Dental Benefits (MDB) Section facilitates the retiree health plan and subsidy program. While MDB s primary focus is the administration of the Department s subsidy and reimbursement programs, it is also tasked with responding to information requests and other health insurance/benefit-related inquiries for the Board and the Ad Hoc Committee on Retiree Health Plans (Committee). Given the high-priority nature of the activities surrounding the retiree health plan program, staff foresees a need to establish a panel of health plan consultants to ensure continuity and efficiency. Review of the retiree health plan and subsidy programs has been ongoing since During this time LAFPP contracted with Keenan & Associates for health plan consulting services. Keenan has since completed several deliverables associated with consulting and advisory services and the health plan bid process. The current stage of this project is focused on evaluation of the subsidy calculation for Medicare premiums that include dependent coverage. As the Committee may be considering recommendations formulated by the stakeholders and their respective health plan consultants, any viable proposals will require review for impact and feasibility. The Board has expressed some dissatisfaction with the current consultant s ability to clearly communicate specific requirements to fully execute the 2017 medical, dental, and vision plan RFP process. Since the formation of the Ad Hoc Committee on Retiree Health Plans in June 2017 and the closeout of the RFP in October 2017, the current contract with Keenan has not been utilized given the Board s disposition and Keenan s ability to act on behalf of the Department. It is proposed that an additional health plan consultant is contracted to constitute a panel from which the Department can assign specific projects. The scope of work and terms of the agreement for the additional health plan consultant would be similar to the contract with Keenan. However, due to the timing, the terms of the new health consultant contract would extend beyond the contract with Keenan, ensuring continuity in services (NOTE: Keenan s current three-year contract expires on January 25, 2020).

12 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 health consulting services. The evaluation of responses, cost information and a contract award recommendation will be presented to the Board no later than April BUDGET Approval to issue a Request for Proposals for health plan consultants will not incur any cost to the Plan outside of necessary staff time to administer the bid process. The total contract amount for Keenan is $200,000 over three years. Any additional health plan consultant agreements would have similar terms. Services rendered from all consultants will not exceed MDB s annual budgeted amount for outside services. There is $44,000 remaining in the fiscal year budget for health consulting services. POLICY No policy changes as recommended. This report was prepared by: Eunice Zordilla, Manager Medical & Dental Benefits RPC:JS:GM:EZ Board Report Page 2 January 4, 2018

13 DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA (213) REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS DATE: JANUARY 4, 2018 ITEM: A.7 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: AIRPORT DEPARTMENT CONTRIBUTION RATE FOR JANUARY 8, 2018 AND POSSIBLE BOARD ACTION RECOMMENDATION That the Board adopt the contribution rate for the Airport Department s employer contribution due on January 8, BACKGROUND On November 8, 2016, voters approved a Charter amendment which will: 1) Enroll new Airport Peace Officers (APOs) into Tier 6; 2) Allow current APOs 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. DISCUSSION Pursuant to the November 2016 Charter amendment, all new APOs hired on or after January 7, 2018 will become LAFPP Tier 6 members rather than LACERS members. Additionally, all APOs hired prior to January 7, 2018 were provided with an opportunity to elect to either remain LACERS members or transfer to LAFPP Tier 6, effective January 7, Over the past 9 months, Staff counseled over 500 APOs and 43 elected to transfer to LAFPP. In letters dated June 16 and July 7, 2016, Segal provided an estimate of the employer Normal Cost rates required to enroll new and existing APOs in Tier 6 based on the demographic profile and assumptions in effect for the June 30, 2015 LACERS and LAFPP actuarial valuations. Segal has now recalculated the stand-alone employer normal cost rates based on the demographic data of the 43 APO transfers and assumed new hires. These contribution rates are for benefits accrued during the period from January 7, 2018 through June 30, These contribution rates do not include any past LACERS service for those APOs electing to transfer from LACERS to Tier 6, as these members are required to pay the full actuarial cost for their past service. The Airport Department contribution rate, for a payment made on January 8, 2018, is 23.65% of the expected $2,195,770 payroll for the period from January 7, 2018 to June 30, Airport Department contribution rate consists of 15.51% for the Retirement plan and 8.14% for the Health plan.

14 Segal notified staff that it expects there will be an increase in the Unfunded Actuarial Accrued Liabilities for the Airport Department in the June 30, 2018 retirement plan valuation, due to higher than expected salaries for members with less than 5 years of service. Based on a review of salaries of the 43 members who elected to transfer to LAFPP, Segal determined the salary increases for members, with less than 5 years of service, was approximately 30% not the anticipated 10% increase. BUDGET If adopted, the contribution rates detailed in this report will be used to establish the Airport Department s pension and health benefit contributions due to the System on January 8, 2018 (for the period of January 7, 2018 through June 30, 2018). In the coming months, Segal will prepare a separate report reflecting the Airport Department s required employer contribution for the fiscal year. POLICY There are no policy changes as a result of this report. This report was prepared by: Greg Mack, Chief Benefits Analyst Pensions Division RPC:JS:GM Attachments: 1. Segal Letter RE: Normal Cost Rates for APOs, Simplified Method, dated June 16, Segal Letter RE: Employer Contribution Rate for APO Transfers and New Hires, dated December 29, 2017 Board Report Page 2 January 4, 2018

15 ATTACHMENT Montgomery Street Suite 500 San Francisco, CA T ` VIA AND USPS June 16, 2016 Mr. Ray Ciranna General Manager Los Angeles Fire and Police Pensions 701 E. 3 rd Street, Suite 200 Los Angeles, CA Re: LAFPP Increases in Normal Cost Rates for Airport Police Officers to Enter Tier 6 Dear Ray: As requested by LAFPP, we have estimated the increases in the normal cost rates for the City if existing and new Airport Police Officers who are currently (or would otherwise be) enrolled in the LACERS plans are permitted to enter LAFPP Tier 6. As discussed in the attached letter dated June 13, 2016, this initial analysis has been prepared using the Simplified Method outlined in that letter in order to meet the City s deadline required for this analysis. As further discussed in that letter, we will be following up with a final analysis before the end of June using the actual census data based calculation under the Detailed Method also outlined in our June 13 letter. The results provided herein reflect a June 30, 2015 valuation date. SUMMARY OF RESULTS The estimated increases in the normal cost rates for the City, expressed as a percent of payroll, to allow existing and new Airport Police Officers to enter LAFPP Tier 6 are as follows: Summary of Results: Estimated Increases in the City s Normal Cost Rates (1) Retirement Plan Health Plan Both Plans Combined Existing Airport Police Officers (2) 10.17% 3.79% 13.96% New Airport Police Officers 13.68% 4.07% 17.75% (1) All City contribution rates provided in this letter are assumed to be payable at the beginning of the year. (2) The projected annual payroll for the 516 existing Airport Police Officers included in this study is $49.0 million as of June 30, Benefits, Compensation and HR Consulting. Member of The Segal Group. Offices throughout the United States and Canada

16 Mr. Ray Ciranna June 16, 2016 Page 2 ATTACHMENT 1 Although employer normal cost rates would increase due to the inclusion of Airport Police Officers in LAFPP Tier 6 1, there would be no adverse impact on the LAFPP plans funded ratios. The reason for this is that the City would be obligated to make these employer normal cost contributions, and members would be responsible for paying the entire cost of converting any of their past LACERS service to LAFPP Tier 6 service (in addition to their obligation to pay the ongoing employee normal cost rate), as discussed below. It should be noted that the normal cost increases provided in the table above are with respect to the funding required by the City. We have assumed that the Airport Police Officers would continue to pay an employee normal cost rate of 11% of pay per pay period (which is unchanged from the rate they are currently paying into LACERS). 2 The assumed 11% employee normal cost rate is before the cost for the employees to purchase any prior LACERS service as LAFPP Tier 6 service. We have not included the amount required to purchase prior service, as the purchase cost is dependent on the specific procedures that would be used to determine the purchase. Those procedures would not be developed until after the ballot measure to approve Tier 6 membership is approved by the voters. The absence of such purchase cost should not affect the results provided herein for the City because it is anticipated that any such cost to purchase prior service would be borne entirely by the individual Airport Police Officers and not by the City. BACKGROUND The City is preparing a ballot measure that would allow existing Airport Police Officers appointed to the Airport prior to January 7, 2018 to elect a change in their membership from LACERS to LAFPP. This ballot measure would also mandate LAFPP membership for all new Airport Police Officers appointed on or after January 7, 2018 (with some exceptions as outlined in the measure). All of the existing Officers who elect to join LAFPP and the new Officers who are mandated to join LAFPP would join the Tier 6 plan. Airport Police Officers who have accrued service at LACERS prior to January 7, 2018, and who elect LAFPP membership, would be required to convert all of their prior LACERS service to LAFPP service. There would be increases in the City s ongoing normal cost rates associated with enrolling existing and new Officers in LAFPP instead of LACERS, and those increases in normal cost rates are provided in this letter. However, we reiterate that it is beyond the scope of this study to 1 These increases represent the changes in the employer normal cost rates payable during fiscal year 2016/2017 for the Airport Police Officers as members in LACERS. 2 Under the LAFPP Tier 6 plan, the member normal contribution rate for current members is 9%, plus 2% additional contributions to support funding of retiree health benefits. The additional 2% contributions are not required for members with more than 25 years of service, and the 9% contributions are not required for members with more than 33 years of service. Based on our review of the documents related to the transfer, we understand that for tax qualification purposes all members who transfer from LACERS to LAFPP Tier 6 would have to pay a level contribution throughout their entire membership at LAFPP, similar to what they would be required to pay had they not transferred their membership from LACERS. As details are still being developed on what would comply with the relevant tax laws, we assume that the full 11% of employee contributions would continue to be paid even after members attain 25 or 33 years of service v5/

17 Mr. Ray Ciranna June 16, 2016 Page 3 ATTACHMENT 1 determine the cost for the individual members to purchase their prior LACERS service as LAFPP service. METHODOLOGY The increases in the City s normal cost rates have been calculated in the following steps: Step One: Normal Cost Rates under LACERS Previously, as part of completing the LACERS public safety tier feasibility study for the Airport Police Officers, we calculated the normal costs associated with (a) providing the 516 existing Airport Police Officers reported as of June 30, 2015 (who were represented by Bargaining Units 30, 39 and 40) a benefit under the LACERS Tier 1 plan, and (b) providing any new Airport Police Officers who would join in the future a benefit under the LACERS Tier 3 plan. Since no Airport Police Officers had yet entered Tier 3 as of June 30, , the demographic profile of new Airport Police Officers was estimated by using the demographics of the then active LACERS Tier 2 Airport Police Officers who were hired during the two-year period July 1, 2013 through June 30, Under the ballot measure, certain existing non-represented Airport Police Officers will also be allowed to elect LAFPP membership. Note that when we previously calculated the normal cost rates in our aforementioned public safety tier study, we were not requested by the City to include three (3) non-represented Assistant Airport Police Chiefs in our calculations. Accordingly, our calculations were based only on the 516 Airport Police Officers, rather than all 519 existing Officers and Assistant Police Chiefs. Under the Simplified Method used herein, we have not refined the normal costs described in item (a) above to include the 3 non-represented Assistant Airport Police Chiefs. Even though the 3 Assistant Police Chiefs have a higher age at entry into LACERS which would normally lead to a higher normal cost rate under the funding method used by LACERS and LAFPP, that difference should not be material as they are a relatively small group compared to the other 516 Officers we included in our earlier study. The normal cost rates for the City, expressed as a percent of payroll, for the 516 existing Officers assuming all of them are enrolled in the LACERS Tier 1 retirement and health plans, determined using their demographic and the actuarial assumptions used in the June 30, 2015 valuations, are as follows: Employer Normal Cost Rates as if All 516 Existing Airport Police Officers are Enrolled in LACERS Tier 1 Existing Airport Police Officers Retirement Plan Health Plan Both Plans Combined 5.45% 2.88% 8.33% 3 Tier 3 became effective on February 21, v5/

18 Mr. Ray Ciranna June 16, 2016 Page 4 ATTACHMENT 1 In determining the normal cost rates above, we took the 42 members reported by LACERS as Tier 2 members in the 2015 valuations and treated them as Tier 1 members to reflect the rescinding of the Tier 2 plan after the 2015 valuations. We combined those 42 members with the 474 members reported by LACERS as Tier 1 members in the 2015 valuations and we recalculated the employer normal cost rates for all 516 existing Officers under LACERS Tier 1 plan provisions and using Tier 1 actuarial assumptions. It should be noted that the normal cost rates for the City provided in the table above are less than the Tier 1 normal cost rates of 6.75% and 3.31% 4 for the City determined in the June 30, 2015 retirement and health valuations, respectively, based on the demographic profile of all LACERS Tier 1 members covered in all City Departments. (The employer normal cost rate for both plans combined is therefore 10.06% for all LACERS Tier 1 members.) This is because the average entry age of about 28.8 for the 516 Officers is lower than the average entry age of about 33.7 for all of the 21,915 Tier 1 active members included in the 2015 valuations. Even though 10.06% is the combined employer normal cost rate calculated for all Tier 1 members (including most of the 516 Officers who were reported as Tier 1 members in the 2015 valuations), we believe it would be more appropriate when determining the increase in the cost to provide benefits under LAFPP to start with the 8.33% normal cost rate shown in the table above, which was calculated using only the 516 Officers included in study. In the absence of the ballot measure, any new Airport Police Officers who join on or after January 7, 2018 would enter the new LACERS Tier 3. The Tier 3 normal cost rates for the City, expressed as a percent of payroll, for the new Airport Police Officers (again, estimated by using the demographics of the then active LACERS Tier 2 Airport Police Officers who were hired during the two-year period July 1, 2013 through June 30, 2015) are as follows: New Airport Police Officers Employer Normal Cost Rates if New Airport Police Officers are Enrolled in LACERS Tier 3 Step Two: Normal Cost Rates under LAFPP Retirement Plan Health Plan Both Plans Combined 1.94% 2.60% 4.54% In this step, we estimate the normal cost rates associated with enrolling the 516 existing and the new Airport Police Officers as described in Step One in LAFPP. Under the Simplified Method, we have not actually calculated the normal costs associated with enrolling the existing and the 4 The 3.31% Tier 1 employer normal cost rate was developed for our June 30, 2015 health plan valuation report dated October 30, 2015 and was cited in our LACERS public safety tier feasibility study for the Airport Police Officers. Subsequently, we are asked by LACERS to recalculate this rate for our Tier 3 study report (dated March 14, 2016) to reflect a change in eligibility requirements for a retiree health benefit for certain part-time employees, and that recalculated rate was 3.40%. We note, however, that the change in the Tier 1 employer normal cost rate (i.e., from 3.31% to 3.40%) to reflect the change in eligibility requirements would not affect the employer normal cost rate increases shown in this letter v5/

19 Mr. Ray Ciranna June 16, 2016 Page 5 ATTACHMENT 1 new Airport Police Officers in the LAFPP. Instead, we have estimated the normal costs for these Officers based on the following observations and analysis. As part of this analysis, we need to first estimate normal cost rates if all the existing 516 Officers would elect LAFPP membership. When we compared the demographic profile of the existing Airport Police Officers at LACERS against the demographic profile of the Tier 6 members included in our June 30, 2015 valuation for LAFPP (excluding Harbor Port Police members), we observed that the average entry age of the LAFPP Tier 6 members included in the valuation was about 27.1, whereas the average entry age of the existing Airport Police Officers was about 28.8, as we noted earlier. Entry age is an important factor in the calculation of costs under the actuarial cost method used by LACERS and LAFPP, and this difference in average entry ages of less than two years could result in some changes to the normal cost rates presented herein. However, as discussed in our June 13 letter, this relatively small difference in entry ages is not reflected under the Simplified Method used for this letter. However, the entry age difference will be reflected in our final analysis using the actual census data based calculation under the Detailed Method that will be performed before the end of June. One major difference in demographics that we observed is that the average salary of the existing Airport Police Officers in LACERS (i.e., about $95,000) is much higher than the average salary of the Tier 6 members in LAFPP (i.e., about $72,000). For a pay related retirement benefit, the normal cost rate for the retirement plan is somewhat self-adjusting. Therefore, despite the difference in the current level of salary, we believe it is still reasonable to approximate the retirement plan normal cost rate for enrolling the existing Airport Police Officers in LAFPP Tier 6 by using the normal cost rate for the Tier 6 members in LAFPP. However, for a retiree health benefit that is not pay related, the above relationship for the normal cost for the retiree health plan would not hold true and we would need to consider making an adjustment to account for that difference in pay. In consideration of making such an adjustment, we note that while the average salary as of June 30, 2015 for Tier 6 members is lower than for Airport Police Officers, the difference is accounted for by the earlier career point of the Tier 6 group. That is, the average attained age of the Tier 6 group is 28.2 compared to 42.9 for the Airport Police Officers. If Tier 6 member salaries increase according to the salary scale assumption adopted for the June 30, 2015 LAFPP valuation, their projected salary would be greater than for Airport Police Officers at the equivalent points in their careers (i.e., in about 13 years, based on average service for the two groups). The lower salary for Airport Police at an equivalent career point (i.e., after about 14 years of service) would increase any normal cost rate adjustment we would consider. In addition, we observed that the average attained age of the Airport Police Officers was much higher than the average age of the current LAFPP Tier 6 members. Accordingly, Airport Police Officers would commence retiree health benefits sooner on average than current Tier 6 members. Since health care costs are assumed to increase with medical trend, the dollar amount of normal cost for Officers who would be retiring sooner (and thus subject to lower medical cost increases on average) would be lower than for current Tier 6 members. On average, Airport Police Officers would receive retiree health benefits about 15 years earlier and the dollar cost difference v5/

20 Mr. Ray Ciranna June 16, 2016 Page 6 ATTACHMENT 1 would reflect the 15 fewer years of projected health cost increases, which would decrease any normal cost rate adjustment we would consider. As the adjustments for the salary and the attained age differences described above would offset each other, we believe it is appropriate not to make an adjustment to the Tier 6 health plan employer normal cost rate of 6.67% from the June 30, 2015 valuation to be used for the Airport Police Officers, as discussed next. The normal cost rates for the City, expressed as a percent of payroll, based on the demographics for the current 1,203 active LAFPP Tier 6 members, and on the actuarial assumptions used in the June 30, 2015 valuations, are as follows: Current LAFPP Tier 6 Members Employer Normal Cost Rates for Current LAFPP Tier 6 Members Retirement Plan Health Plan Both Plans Combined 15.62% 6.67% 22.29% Based on the earlier discussion regarding a possible adjustment to account for the difference in pay between the Officers and the Tier 6 members, we have determined that the same employer normal cost rates shown above for current LAFPP Tier 6 members can be used for the existing and new Airport Police Officers. Now that we have estimated the normal cost rates for the 516 existing and the new Officers under Tier 6, we need to estimate the normal cost rates for only the existing Officers who may actually elect Tier 6 membership. We agree with the City s expectation that not all of the 516 existing Airport Police Officers would join LAFPP Tier 6 because of the cost to upgrade their past service, and that the shorter service employees (such as those with less than 5 years of service) might be most likely to join LAFPP. However, under the Simplified Method, we have made a simplifying assumption that the changes in the normal cost associated with enrolling only those with less than 5 years of past LACERS service would be the same as those for the 516 members. Based on all of the information presented above, the normal cost rates for the 516 existing and the new Officers under LAFPP Tier 6 are as follows: Employer Normal Cost Rates for Existing and New LACERS Officers to Join LAFPP Tier 6 Members Existing Officers to Join LAFPP Tier 6 New Officers to Join LAFPP Tier 6 Retirement Plan Health Plan Both Plans Combined 15.62% 6.67% 22.29% 15.62% 6.67% 22.29% v5/

21 Mr. Ray Ciranna June 16, 2016 Page 7 ATTACHMENT 1 Step Three: Increase in Normal Cost Rates The increases in the normal cost rates for the City for the existing and the new Airport Police Officers to join LAFPP can be calculated by taking the difference between the normal cost rates for LAFPP estimated in Step Two and the normal cost rates for LACERS estimated in Step One. These increases, expressed as a percent of payroll, are as follows: Estimated Increases in Employer Normal Cost Rates Retirement Plan Health Plan Both Plans Combined Existing Airport Police Officers (1) 10.17% 3.79% 13.96% New Airport Police Officers 13.68% 4.07% 17.75% (1) The projected annual payroll for the 516 existing Airport Police Officers included in this study is $49.0 million as of June 30, Although employer normal cost rates would increase due to the inclusion of Airport Police Officers in LAFPP Tier 6 5, there would be no adverse impact on the LAFPP plans funded ratios. The reason for this is that the City would be obligated to make these employer normal cost contributions, and members would be responsible for paying the entire cost of converting any of their past LACERS service to LAFPP Tier 6 service (in addition to their obligation to pay the ongoing employee normal cost rate), as discussed below. It should be noted that the normal cost increases provided in the table above are with respect to the funding required by the City. We have assumed that the Airport Police Officers would continue to pay an employee normal cost rate of 11% of pay per pay period (which is unchanged the rate they are currently paying into LACERS). 6 The 11% assumed employee normal cost rate is before the cost for the employees to purchase any prior LACERS service at LAFPP Tier 6 service. We have not included the amount required to purchase prior service, as the purchase cost is dependent on the specific procedures that would be used to determine the purchase. Those procedures would not be developed until after the ballot measure to approve Tier 6 membership is approved by the voters. The absence of such 5 These increases represent the changes in the employer normal cost rates payable during fiscal year 2016/2017 for the Airport Police Officers as members in LACERS. 6 As noted earlier, under the LAFPP Tier 6 plan, the member normal contribution rate for current members is 9%, plus 2% additional contributions to support funding of retiree health benefits. The additional 2% contributions are not required for members with more than 25 years of service, and the 9% contributions are not required for members with more than 33 years of service. Based on our review of the documents related to the transfer, we understand that for tax qualification purposes all members who transfer from LACERS to LAFPP Tier 6 would have to pay a level contribution throughout their entire membership at LAFPP, similar to what they would be required to pay had they not transferred their membership from LACERS. As details are still being developed on what would comply with the relevant tax laws, we assume that the full 11% of employee contributions would continue to be paid even after members attain 25 or 33 years of service v5/

22 Mr. Ray Ciranna June 16, 2016 Page 8 ATTACHMENT 1 purchase cost should not affect the results provided herein for the City because it is anticipated that any such cost to purchase prior service would be borne entirely by the individual Airport Police Officers and not by the City. Even though we have utilized the assumptions discussed throughout this report under the Simplified Method in lieu of the actual census data based calculations under the Detailed Method, we believe these assumptions are reasonable for this type of study. The following are members of the American Academy of Actuaries. We are qualified to render the actuarial opinion contained herein. Please let us know if you have any questions. Sincerely, Paul Angelo, FSA, EA, MAAA, FCA Senior Vice President and Actuary Andy Yeung, ASA, EA, MAAA, FCA Vice President and Actuary Thomas Bergman, ASA, EA, MAAA Associate Actuary DNA/bbf Enclosure ( ) cc: Joe Salazar Li Hsi Lita Payne Maritta Aspen Anya Freedman v5/

23 ATTACHMENT 1 ìf S"gal Consulting 100 Montgomery Street Suite 500 San Francisco, CA I v*vw.segalco.com AndyYeung, ASA, MAAA, FCA, EA Vice President & Actuary ayeung@segalco.com VIA AND USPS June 13,2016 Mr. Ray Ciranna General Manager Los Angeles Fire and Police Pensions 701 E. 3'd Street, Suite 200 Los Angeles, CA Re: LAFPP - Methodologies to Calculate Increase in Normal Costs for Airport Police Officers to Enter Tier 6 Dear Ray, When we proposed to provide the results of our cost analysis for Airport police officers to enter Tier 6 before the end of June 2016, we were planning on performing our study using the same detailed method we would usually use for such a study, as outlined in Section A below. Since the City is in need of the results on or before June 17, we would suggest the completion of our study using a Simplified Method as outlined in Section B below. While the use of the Simplified Method would allow us to meet the City's deadline, we would need to include some disclaimers in our written report to disclose the assumptions associated with using that Simplified Method. However, we would also state that we believe the assumptions used are reasonable for the purposes of this study. The major assumptions that we would disclose are described in Section B so that the City is aware of those limitations as we complete our analysis using that method. As we funher discussed, even though we would use the Simplified Method when we deliver our initial report, we would follow up with a final report before the end of June 2016 prepared using the Detailed Method. Benefits, Gompensation and HR Consulting. Member of The Segal Group. Offices throughout the United States and Canada

24 Ray Ciranna June 1 3,2016 Page 2 ATTACHMENT 1 Section A - Detailed Method Under this Method, our analysis would be prepared in the following steps: 1) Previously, as part of completing the LACERS public safety tier study, we calculated the normal costs associated with (a) providing the 516 existing Airport police officers (reported as of June 30, 2015) a benefit under the LACERS Tier I plan and (b) providing any new Airport police officers who would join in the future a benefit under the LACERS Tier 3 plan. Since no Airport police offrcers have entered Tier 3 as of June 30, 2015, the dernographic profile of the new Airport police officers was estimated by looking at those Airport police officers who joined the LACERS Tier 2 plan during the period July 1, 2013 through June 30, Since we were not requested by the City to include the 3 non-represented assistant Airport police chiefs in our earlier study, under the Detailed Method we would refine those normal costs calculation to include those 3 members, which would bring the number of Airport police officers to 519 as of June 30, ) We would then calculate for the first time the normal costs associated with enrolling the Airport police officers in the LAFPP Tier 6 plan. We agree with the City's expectation that not all of the 519 existing Airport police officers would join LAFPP Tier 6 (because of the cost to upgrade their past service) and that the shorter service employees (such as those with less than 5 years of service) might be most likely to join LAFPP. For that reason, we would value the changes in the normal cost associated with enrolling only those with less than 5 years of past LACERS service as well as the normal cost associated with enrolling the full 519 members in the LAFPP Tier 6 plan. 3) We would calculate for each of the retirement and the retiree health plans the changes in the normal cost rate for the existing Airport police officers as described in 2) as well as for any new Airport police officers who would join LAFPP Tier 6 instead of LACERS Tier 3. Again, the demographic profile of the new Airport police officers would be estimated by looking at those Airport police officers who joined the LACERS Tier 2 plan during the period July 1, 2013 through June 30,20T5. Section B - Simptifïed Method W'e would not be able to complete the actual census data based calculation under the Detailed Method in time for the City's June 17 deadline. Under the Simplified Method, in order to meet the City's deadline, we would estimate the changes in the normal cost rate in the following steps l) We would not refine the normal costs described in A(1) to include the 3 non-represented assistant Airport police chiefs. Even though the 3 assistant police chiefs have a higher age at entry into LACERS which would normally lead to a higher normal cost rate under the funding method used by LACERS and LAFPP, that difference should not be material as they

25 Ray Ciranna June 13,2016 Page 3 ATTACHMENT 1 are a relatively small group compared to the other 516 offrcers we have included in our earlier study. 2) We would not calculate the normal costs associated with enrolling the Airport police officers in the LAFPP Tier 6 plan. Instead, we would estimate the normal costs for the 516 existing officers based on the following observations. When we compare the demographic profile of the existing Airport police officers against the demographic profile of the other Tier 6 members included in our June 30, 2015 valuation for LAFPP (again, the age at entry into City service is one of the important factors), the major difference we observe is that the average salary of the existing Airport police officers (of about $95,000) is much higher than the average salary of the other Tier 6 members in LAFPP (of about $72,000). For a pay related retirement benefit, the normal cost rate for the retirement plan is somewhat self-adjusting so in spite of the difference in the current level of salary we believe it is still reasonable to approximate the normal cost rate for enrolling the existing Airport police officers in LAFPP Tier 6 by using the normal cost rate for the other Tier 6 members in LAFPP. However, for a retiree health benefit that is not pay related, the above relationship for the normal cost for the retiree health plan would not hold true so we would need to make a relatively straightforward adjustment to account for that difference in pay. Once the normal cost rates to enroll the existing 516 members in LAFPP Tier 6 have been estimated, we would make another simplifying assumption that there would not be a material difference between the normal cost rates of the 516 members and the normal cost rates for members with less than 5 years of past service (who might most likely join LAFPP). 3) We would calculate for each of the retirement and the retiree health plan plans the changes in the normal cost rate for the existing officers as described in 2). However, for the new Airport police officers we would have to further assume that their normal cost rates in LAFPP Tier 6 would be the same as those 516 mernbers calculated in 2). As noted above, we believe these are reasonable assumptions for this type of study and would state that in our report. We would also note that for the study under either the Simplified Method (to be used in our initial report) or the Detailed Method (to be used in our final report), we would not be including the cost to purchase prior LACERS service for the individual members. This is because the analysis to determine such purchase cost is dependent on the specific procedures used to determine the purchase cost which would not be drawn up until after the ballot measure to approve Tier 6 membership is approved by the voters. This would not affect the results in our reports because it is anticipated that any such cost to purchase prior service would be borne entirely by the individual Airport police officers.

26 Ray Ciranna June 13, 2016 Page 4 ATTACHMENT 1 Please let us know if you have any questions. Sincerely, ðn,-,u ut Andy Yeung AYY/j1 cc: Joe Salazar Li Hsi Lita Payne Maritta Aspen Anya Freedman V1/

27 ATTACHMENT Montgomery Street Suite 500 San Francisco, CA T December 29, 2017 Mr. Ray Ciranna General Manager Los Angeles Department of Fire and Police Pensions 701 East 3rd Street, 2nd Floor Los Angeles, CA Re: LAFPP Normal Cost Contributions for Airport Police Officers for the Period from January 7, 2018 through June 30, 2018 Dear Ray: Pursuant to Ordinance No ( the Ordinance ), which was adopted by the City Council on March 28, 2017, Airport Police Officers (APO) at Los Angeles City Employees Retirement System (LACERS) can elect to remain in LACERS or transfer to Los Angeles Fire and Police Pensions (LAFPP) Tier 6 prior to January 7, All new APO hired after that date would be enrolled in LAFPP Tier 6, rather than in LACERS. Under the Ordinance, APO members who elect to transfer to LAFPP are required to convert all of their prior LACERS service to LAFPP service. As requested, we have calculated the employer normal cost contribution rate to be applied to the total payroll for the 43 Airport Police Officers who have elected to transfer to LAFPP Tier 6 as well as the budgeted payroll forwarded to us by your office for new Airport Police Officers who may be hired between January 7, 2018 and June 30, This analysis has been prepared using the results from our July 7, 2016 letter, which outlined the normal cost rates to allow existing and new Airport Police Officers to enter LAFPP Tier 6. A copy of that letter is attached. DATA LAFPP provided us with the list of 43 Airport Police Officers who have elected to transfer to LAFPP Tier 6, their salary rates as of December 9, 2017 and their years of service with LACERS that are being transferred to LAFPP. LAFPP also provided us with the estimated total pensionable salary of $1,624,570 for these transferees for the period from January 7, 2018 through June 30, 2018, as well as the budgeted payroll of $571,200 for new employees who may Benefits, Compensation and HR Consulting. Member of The Segal Group. Offices throughout the United States and Canada

28 Mr. Ray Ciranna December 29, 2017 Page 2 ATTACHMENT 2 be hired over the same period. The total expected payroll is $2,195,770 for the two groups combined. RESULTS In the table below, we have provided the employer contribution rate to be applied to the total Airport expected payroll of $2,195,770 for the period from January 7, 2018 to June 30, The contribution rates are shown on three timing bases, assuming payment on January 7, 2018, assuming payment on January 8, 2018 (the first business day after the transfer date), and assuming biweekly payments. Retirement Plan Health Plan Both Plans Combined Payment on January 7, % 8.14% 23.65% Payment on January 8, % 8.14% 23.65% Biweekly Payments from January 2018 June % 8.28% 24.06% METHODOLOGY The weighted average employer contribution rate for the two groups of Airport Police Officers has been calculated in the following steps: Step 1: Contribution Rates for Transferees and New Hires Previously, as part of providing the increase in normal cost rates to allow existing and new Airport Police Officers to enter LAFPP Tier 6 in our July 7, 2016 letter, we calculated the normal costs associated with (a) enrolling all existing Airport Police Officers in LAFPP Tier 6, (b) enrolling only existing Airport Police Officers who had 5 or less years of service in LAFPP Tier 6, and (c) providing any new Airport Police Officers who would join in the future a benefit under the LAFPP Tier 6 plan. We calculated a separate normal cost for those existing Airport Police Officers with less than 5 years of service (see item (b)) because we anticipated that those Officers would be more likely to elect to transfer to LAFPP as their cost to upgrade their prior LACERS service would be lower. Among the 43 transferees, 35 Airport Police Officers have 5 or less years of service and 8 have over 5 years of service. Since the majority of these transferees have 5 or less years of service we recommend using the normal cost contribution rates for Airport Police Officers with 5 or less years of service, as shown on page 6 of that July 7, 2016 letter (i.e., 23.38% for the retirement and health plans combined) as the weighted contribution rate for the 43 transferees. The contribution rates shown in that letter were calculated as of the beginning of the period, which in this instance represents a payment of employer contributions as of January 7, V3/

29 Mr. Ray Ciranna December 29, 2017 Page 3 ATTACHMENT 2 The contribution rates to be weighted in for new Airport Police Officers hired on or after January 7, 2018 is 24.43% for the retirement and health plans combined as shown on page 6 of the July 7, 2016 letter. Step 2: Calculate Payroll Weights for Transferees vs. New Hires We used the payroll information provided by LAFPP to determine the weights for Transferees vs. New Hires. In particular, LAFPP provided us with the estimated total pensionable salary over the period of January 7, 2018 through June 30, 2018 for the Airport Police Officers who have elected to transfer to LAFPP. They also provided us with the total budgeted payroll for January 7, 2018 through June 30, 2018 for the new Airport Police hires. Using these two payroll figures, we have calculated that the employees who have elected to transfer to LAFPP represents approximately 74% of the total $2,195,770 Airport Police Officers payroll (payroll for transferring members and budgeted payroll from new members) for the period from January 7, 2018 through June 30, Conversely, the budgeted payroll for future new hires represents approximately 26% of the total Airport Police Officers payroll. Step 3: Calculate Weighted Average Employer Contribution Rate Applying the weights calculated in Step 2, to the employer contribution rates calculated in Step 1, we have calculated the following weighted average employer contribution rates as of January 7, 2018: Both Plans Retirement Plan Health Plan Combined Payment on January 7, % 8.14% 23.65% As requested by LAFPP, we have also calculated the employer contribution rates assuming a lump sum payment is made on January 8, 2018 (the first business day following the effective date of transfer). The following employer contribution rates reflect interest charge for this 1 day delay in payment: Both Plans Retirement Plan Health Plan Combined Payment on January 8, %* 8.14%* 23.65%* * These rates are the same as the employer contribution rates assuming payment on January 7, 2018 due to the rounding of the rates to 2 decimals. Lastly, for comparison purposes, we have calculated the employer contribution rates assuming they are paid on a biweekly basis: Biweekly Payments from January 2018 June 2018 Retirement Plan Health Plan Both Plans Combined 15.78% 8.28% 24.06% V3/

30 Mr. Ray Ciranna December 29, 2017 Page 4 ATTACHMENT 2 We are members of the American Academy of Actuaries and we are qualified to render the actuarial opinion contained herein. Please let us know if you have any questions. Sincerely, Paul Angelo, FSA, EA, MAAA, FCA Senior Vice President and Actuary Andy Yeung, ASA, EA, MAAA, FCA Vice President and Actuary EK/bbf Enclosure ( ) cc: Gregory Mack Joseph Salazar V3/

31 ATTACHMENT Montgomery Street Suite 500 San Francisco, CA T VIA and USPS July 7, 2016 Mr. Ray Ciranna General Manager Los Angeles Fire and Police Pensions 701 E. 3 rd Street, Suite 200 Los Angeles, CA Re: LAFPP Increases in Normal Cost Rates for Airport Police to Enter Tier 6 Supplement to Letter Dated June 16, 2016, which had Results Prepared under Simplified Method Dear Ray: As requested by LAFPP, we have calculated the increases in the normal cost rates for the City if existing and new Airport Police who are currently (or would otherwise be) enrolled in the LACERS plans are permitted to enter LAFPP Tier 6. As discussed in the attached methodologies letter dated June 13, 2016, this analysis has been prepared using the actual data-driven Detailed Method outlined in that letter. As the results prepared using the Detailed Method are comparable to the estimates prepared using the Simplified Method, this letter may be viewed as a supplement to our letter dated June 16, 2016 which provided the results under the Simplified Method (note that the Simplified Method was also outlined in our June 13 methodologies letter). The results provided herein reflect a June 30, 2015 valuation date. SUMMARY OF RESULTS The increases in the normal cost rates for the City, expressed as a percent of payroll, to allow existing and new Airport Police to enter LAFPP Tier 6 are shown on the following page. Benefits, Compensation and HR Consulting. Member of The Segal Group. Offices throughout the United States and Canada

32 ATTACHMENT 2 Mr. Ray Ciranna July 7, 2016 Page 2 Increases in the City s Normal Cost Rates (1) Retirement Plan Health Plan Both Plans Combined If all Airport Police elect Tier 6 (2) 10.21% 3.37% 13.58% If only Airport Police with 5 or less years of 9.44% 3.90% 13.34% service elect Tier 6 (3) New Airport Police mandated to join Tier 6 (if hired on or after January 7, 2018) 13.73% 4.78% 18.51% (1) All City contribution rates provided in this letter are assumed to be payable at the beginning of the year. (2) The projected annual payroll for the 519 existing Airport Police Officers and Airport Police Chiefs ( Airport Police ) included in this study is $49.5 million as of June 30, (3) The projected annual payroll for the 60 existing Airport Police with five (5) or less years of service included in this study is $3.8 million as of June 30, Although the City s normal cost rates would increase due to the inclusion of Airport Police in LAFPP Tier 6 1, there would be no adverse impact on the LAFPP plan funded ratios. The reason for this is that the City would be obligated to make these normal cost contributions, and members would be responsible for paying the entire cost of converting any of their past LACERS service to LAFPP Tier 6 service (in addition to their obligation to pay the ongoing employee normal cost rate), as discussed below. It should be noted that the normal cost increases provided in the table above are with respect to the funding required by the City. We have assumed that the Airport Police would continue to pay an employee normal cost rate of 11% of pay per pay period (which is unchanged from the rate they are currently paying into LACERS). 2 The assumed 11% employee normal cost rate is before the cost for the employees to purchase any prior LACERS service as LAFPP Tier 6 service. We have not included the amount required to purchase prior service, as the purchase cost is dependent on the specific procedures 1 2 These increases represent the changes in the City s normal cost rates payable during fiscal year 2016/2017 for the Airport Police as members in LACERS. Under the LAFPP Tier 6 plan, the member normal contribution rate for current members is 9%, plus 2% additional contributions to support funding of retiree health benefits. The additional 2% contributions are not required for members with more than 25 years of service, and the 9% contributions are not required for members with more than 33 years of service. Based on our review of the documents related to the transfer, we understand that for tax qualification purposes all members who transfer from LACERS to LAFPP Tier 6 would have to pay a level contribution throughout their entire membership at LAFPP, similar to what they would be required to pay had they not transferred their membership from LACERS. As details are still being developed on what would comply with the relevant tax laws, we assume that the full 11% of employee contributions would continue to be paid even after members attain 25 or 33 years of service v5/

33 ATTACHMENT 2 Mr. Ray Ciranna July 7, 2016 Page 3 that would be used to determine the purchase. Those procedures would not be developed until after the ballot measure to approve Tier 6 membership is approved by the voters. The absence of such purchase cost should not affect the results provided herein for the City because it is anticipated that any such cost to purchase prior service would be borne entirely by the individual Airport Police and not by the City. BACKGROUND The City is preparing a ballot measure that would allow existing Airport Police appointed to the Airport prior to January 7, 2018 to elect a change in their membership from LACERS to LAFPP. This ballot measure would also mandate LAFPP membership for all new Airport Police appointed on or after January 7, 2018 (with some exceptions as outlined in the measure). All of the existing Airport Police who elect to join LAFPP and the new Airport Police who are mandated to join LAFPP would join the Tier 6 plan. Airport Police who have accrued service at LACERS prior to January 7, 2018, and who elect LAFPP membership, would be required to convert all of their prior LACERS service to LAFPP service. There would be increases in the City s ongoing normal cost rates associated with enrolling existing and new Airport Police in LAFPP instead of LACERS, and those increases in normal cost rates are provided in this letter. However, we reiterate that it is beyond the scope of this study to determine the cost for the individual members to purchase their prior LACERS service as LAFPP service. METHODOLOGY The increases in the City s normal cost rates have been calculated in the following steps: Step One: Normal Cost Rates under LACERS Previously, as part of completing the LACERS public safety tier feasibility study for the Airport Police Officers, we calculated the normal costs associated with (a) providing the 516 existing Airport Police Officers reported as of June 30, 2015 (who were represented by Bargaining Units 30, 39 and 40) a benefit under the LACERS Tier 1 plan, and (b) providing any new Airport Police Officers who would join in the future a benefit under the LACERS Tier 3 plan. Since no Airport Police Officers had yet entered Tier 3 as of June 30, , the demographic profile of new Airport Police Officers was estimated by using the demographics of the 41 4 then active LACERS Tier 2 Airport Police Officers who were hired during the twoyear period July 1, 2013 through June 30, Tier 3 became effective on February 21, One (1) of the 42 LACERS Tier 2 Airport Police Officers included in the feasibility study was hired before July 1, v5/

34 ATTACHMENT 2 Mr. Ray Ciranna July 7, 2016 Page 4 Under the ballot measure, certain existing non-represented Airport Police Chiefs will also be allowed to elect LAFPP membership. Note that when we previously calculated the normal cost rates in our aforementioned public safety tier study, we were not requested by the City to include three (3) non-represented Airport Police Chiefs in our calculations. Our calculations were based only on the 516 Airport Police Officers, rather than all 519 existing Officers and Chiefs. In this study, we have refined the normal costs described in item (a) above to include the 3 non-represented Airport Police Chiefs. All Existing Airport Police The normal cost rates for the City, expressed as a percent of payroll, for the 519 existing Officers and Chiefs assuming all of them are enrolled in the LACERS Tier 1 retirement and health plans, determined using their demographics and the actuarial assumptions used in the June 30, 2015 valuations, are as follows: All 519 Existing Airport Police The City s Normal Cost Rates as if All 519 Existing Airport Police are Enrolled in LACERS Tier 1 Retirement Plan Health Plan Both Plans Combined 5.47% 2.86% 8.33% In determining the normal cost rates above, we took the 42 members reported by LACERS as Tier 2 members in the 2015 valuations and treated them as Tier 1 members to reflect the rescinding of the Tier 2 plan after the 2015 valuations. We combined those 42 members with the 477 members reported by LACERS as Tier 1 members in the 2015 valuations and we recalculated the City s normal cost rates for all 519 existing Officers and Chiefs under LACERS Tier 1 plan provisions and using Tier 1 actuarial assumptions. Even though 10.06% is the City s combined (i.e., Retirement and Health Plans) normal cost rate calculated for all Tier 1 members (including most of the 519 Airport Police who were reported as Tier 1 members in the 2015 valuations), we believe it would be more appropriate when determining the increase in the cost to provide benefits under LAFPP to start with the 8.33% normal cost rate shown in the table above, which was calculated using only the 519 Airport Police included in study v5/

35 ATTACHMENT 2 Mr. Ray Ciranna July 7, 2016 Page 5 Existing Airport Police with 5 or Less Years of Service We agree with the City s expectation that not all of the 519 existing Airport Police would join LAFPP Tier 6 because of the cost to upgrade their past service, and that the shorter service employees (such as those with 5 or less years of service) might be most likely to join LAFPP. Accordingly, we have also calculated the normal cost rates for the City, expressed as a percent of payroll, for only the 60 (out of the 519) existing Airport Police with five (5) or less years of service to be as follows: Airport Police with 5 or less years of service New Airport Police The City s Normal Cost Rates for Only Existing Airport Police with 5 or Less Years of Service Retirement Plan Health Plan Both Plans Combined 6.02% 4.02% 10.04% In the absence of the ballot measure, any new Airport Police who join on or after January 7, 2018 would enter the new LACERS Tier 3. The Tier 3 normal cost rates for the City, expressed as a percent of payroll, for the new Airport Police (again, estimated by using the demographics of the 41 then active LACERS Tier 2 Airport Police Officers who were hired during the two-year period July 1, 2013 through June 30, 2015) are as follows: New Airport Police mandated to join Tier 6 (if hired on or after January 7, 2018) The City s Normal Cost Rates if New Airport Police are Enrolled in LACERS Tier 3 Retirement Plan Health Plan Both Plans Combined 1.92% 4.00% (1) 5.92% (1) We have refined the cost associated with providing Tier 3 health benefits for new Airport Police. Previously that cost was estimated at 2.60% determined using the Tier 2 health benefit provisions. Our Detailed Method has updated the calculation to apply Tier 3 health provisions. Step Two: Normal Cost Rates under LAFPP In this step, we calculate the normal cost rates associated with enrolling the 519 existing and the new Airport Police as described in Step One in LAFPP Tier 6. We have updated the normal costs estimated in our June 16 letter by calculating the normal costs using the demographic profile associated with the existing and the new Airport Police. We have also calculated the normal cost rates for only the existing Airport Police who are most likely to actually elect Tier 6 membership (i.e., those with 5 or less years of service, for purposes of this study) v5/

36 ATTACHMENT 2 Mr. Ray Ciranna July 7, 2016 Page 6 Based on all of the information presented above, the normal cost rates under LAFPP Tier 6 for the 519 existing Airport Police, for the 60 existing Airport Police with 5 or less years of service, and for the 41 members included as new Airport Police, are as follows: If all Airport Police elect Tier 6 If only Airport Police with 5 or less years of service elect Tier 6 The City s Normal Cost Rates for Existing and New LACERS Airport Police to Join LAFPP Tier 6 Retirement Plan Health Plan Both Plans Combined 15.68% 6.23% 21.91% 15.46% 7.92% (1) 23.38% New Airport Police mandated to join Tier 6 (if hired on or after January 7, 2018) 15.65% 8.78% (1) 24.43% (1) The normal cost rates for these Airport Police are higher than the Tier 6 retiree health rate of 6.67%. The difference is because, while on a dollar basis the retiree health normal costs are similar, the lower compensation for Airport Police (for example, $72,000 annual average for Tier 6 LAFPP members vs. $64,000 for Airport Police with 5 or less years of service) increases the cost as a percentage of pay. Step Three: Increase in Normal Cost Rates The increases in the normal cost rates for the City for the existing and the new Airport Police to join LAFPP can be calculated by taking the difference between the normal cost rates for LAFPP calculated in Step Two and the normal cost rates for LACERS calculated in Step One. These increases, expressed as a percent of payroll, are as follows: If all Airport Police elect Tier 6 If only Airport Police with 5 or less years of service elect Tier 6 New Airport Police mandated to join Tier 6 (if hired on or after January 7, 2018) Increases in the City s Normal Cost Rates Retirement Plan Health Plan Both Plans Combined 10.21% 3.37% 13.58% 9.44% 3.90% 13.34% 13.73% 4.78% 18.51% v5/

37 ATTACHMENT 2 Mr. Ray Ciranna July 7, 2016 Page 7 NOTE ON EFFECT ON FUNDED RATIOS Although the City s normal cost rates would increase due to the inclusion of Airport Police in LAFPP Tier 6 5, there would be no adverse impact on the LAFPP plans funded ratios. The reason for this is that the City would be obligated to make these normal cost contributions, and members would be responsible for paying the entire cost of converting any of their past LACERS service to LAFPP Tier 6 service (in addition to their obligation to pay the ongoing employee normal cost rate), as discussed below. It should be noted that the normal cost increases provided in the table above are with respect to the funding required by the City. We have assumed that the Airport Police would continue to pay an employee normal cost rate of 11% of pay per pay period (which is unchanged from the rate they are currently paying into LACERS). 6 The assumed 11% employee normal cost rate is before the cost for the employees to purchase any prior LACERS service at LAFPP Tier 6 service. We have not included the amount required to purchase prior service, as the purchase cost is dependent on the specific procedures that would be used to determine the purchase. Those procedures would not be developed until after the ballot measure to approve Tier 6 membership is approved by the voters. The absence of such purchase cost should not affect the results provided herein for the City because it is anticipated that any such cost to purchase prior service would be borne entirely by the individual Airport Police and not by the City. NOTE ON ASSUMED MEDICAL PLAN SELECTION We understand that Airport Police who elect to join LAFPP Tier 6 will, upon reaching eligibility to retire, have a choice of LACERS retiree medical plans, but will be subject to the LAFPP maximum medical subsidy limit. Due to limited, readily available data on Airport Police enrollment in LACERS medical plans 7, we will need to make new assumptions (potentially different from those in the LACERS or LAFPP valuations) for medical plan 5 These increases represent the changes in the City s normal cost rates payable during fiscal year 2016/2017 for the Airport Police as members in LACERS. 6 As noted earlier, under the LAFPP Tier 6 plan, the member normal contribution rate for current members is 9%, plus 2% additional contributions to support funding of retiree health benefits. The additional 2% contributions are not required for members with more than 25 years of service, and the 9% contributions are not required for members with more than 33 years of service. Based on our review of the documents related to the transfer, we understand that for tax qualification purposes all members who transfer from LACERS to LAFPP Tier 6 would have to pay a level contribution throughout their entire membership at LAFPP, similar to what they would be required to pay had they not transferred their membership from LACERS. As details are still being developed on what would comply with the relevant tax laws, we assume that the full 11% of employee contributions would continue to be paid even after members attain 25 or 33 years of service. 7 As part of the LACERS valuation, we do not analyze retiree health elections by department (e.g. Airport Police) as the Bargaining Unit information is not provided for current retirees v5/

38 ATTACHMENT 2 Mr. Ray Ciranna July 7, 2016 Page 8 election among Airport Police at retirement. As experience emerges over time, we can refine our medical plan election assumptions for this group. For this study, we have assumed that Airport Police will select similar plans roughly in proportion as assumed for future LAFPP Police retirees, shown on pages 43 and 44 in our June 30, 2015 OPEB valuation report. For pre-65 retirees, we have assumed that 65% will enroll in the Anthem Blue Cross PPO and 35% will enroll in the Kaiser Permanente HMO. For retirees over age 65, we have assumed that 85% will enroll in the Anthem Blue Cross PPO and 15% will enroll in the Kaiser Permanente Senior Advantage HMO. The following are members of the American Academy of Actuaries. We are qualified to render the actuarial opinion contained herein. Please let us know if you have any questions. Sincerely, Paul Angelo, FSA, EA, MAAA, FCA Senior Vice President and Actuary Andy Yeung, ASA, EA, MAAA, FCA Vice President and Actuary Thomas Bergman, ASA, EA, MAAA Associate Actuary /bqb Enclosure ( ) cc: Maritta Aspen Anya Freedman Li Hsi Lita Payne Joe Salazar v5/

39 ATTACHMENT 2 ìf S"gal Consulting 100 Montgomery Street Suite 500 San Francisco, CA I v*vw.segalco.com AndyYeung, ASA, MAAA, FCA, EA Vice President & Actuary ayeung@segalco.com VIA AND USPS June 13,2016 Mr. Ray Ciranna General Manager Los Angeles Fire and Police Pensions 701 E. 3'd Street, Suite 200 Los Angeles, CA Re: LAFPP - Methodologies to Calculate Increase in Normal Costs for Airport Police Officers to Enter Tier 6 Dear Ray, When we proposed to provide the results of our cost analysis for Airport police officers to enter Tier 6 before the end of June 2016, we were planning on performing our study using the same detailed method we would usually use for such a study, as outlined in Section A below. Since the City is in need of the results on or before June 17, we would suggest the completion of our study using a Simplified Method as outlined in Section B below. While the use of the Simplified Method would allow us to meet the City's deadline, we would need to include some disclaimers in our written report to disclose the assumptions associated with using that Simplified Method. However, we would also state that we believe the assumptions used are reasonable for the purposes of this study. The major assumptions that we would disclose are described in Section B so that the City is aware of those limitations as we complete our analysis using that method. As we funher discussed, even though we would use the Simplified Method when we deliver our initial report, we would follow up with a final report before the end of June 2016 prepared using the Detailed Method. Benefits, Gompensation and HR Consulting. Member of The Segal Group. Offices throughout the United States and Canada

40 Ray Ciranna June 1 3,2016 Page 2 ATTACHMENT 2 Section A - Detailed Method Under this Method, our analysis would be prepared in the following steps: 1) Previously, as part of completing the LACERS public safety tier study, we calculated the normal costs associated with (a) providing the 516 existing Airport police officers (reported as of June 30, 2015) a benefit under the LACERS Tier I plan and (b) providing any new Airport police officers who would join in the future a benefit under the LACERS Tier 3 plan. Since no Airport police offrcers have entered Tier 3 as of June 30, 2015, the dernographic profile of the new Airport police officers was estimated by looking at those Airport police officers who joined the LACERS Tier 2 plan during the period July 1, 2013 through June 30, Since we were not requested by the City to include the 3 non-represented assistant Airport police chiefs in our earlier study, under the Detailed Method we would refine those normal costs calculation to include those 3 members, which would bring the number of Airport police officers to 519 as of June 30, ) We would then calculate for the first time the normal costs associated with enrolling the Airport police officers in the LAFPP Tier 6 plan. We agree with the City's expectation that not all of the 519 existing Airport police officers would join LAFPP Tier 6 (because of the cost to upgrade their past service) and that the shorter service employees (such as those with less than 5 years of service) might be most likely to join LAFPP. For that reason, we would value the changes in the normal cost associated with enrolling only those with less than 5 years of past LACERS service as well as the normal cost associated with enrolling the full 519 members in the LAFPP Tier 6 plan. 3) We would calculate for each of the retirement and the retiree health plans the changes in the normal cost rate for the existing Airport police officers as described in 2) as well as for any new Airport police officers who would join LAFPP Tier 6 instead of LACERS Tier 3. Again, the demographic profile of the new Airport police officers would be estimated by looking at those Airport police officers who joined the LACERS Tier 2 plan during the period July 1, 2013 through June 30,20T5. Section B - Simptifïed Method W'e would not be able to complete the actual census data based calculation under the Detailed Method in time for the City's June 17 deadline. Under the Simplified Method, in order to meet the City's deadline, we would estimate the changes in the normal cost rate in the following steps l) We would not refine the normal costs described in A(1) to include the 3 non-represented assistant Airport police chiefs. Even though the 3 assistant police chiefs have a higher age at entry into LACERS which would normally lead to a higher normal cost rate under the funding method used by LACERS and LAFPP, that difference should not be material as they

41 Ray Ciranna June 13,2016 Page 3 ATTACHMENT 2 are a relatively small group compared to the other 516 offrcers we have included in our earlier study. 2) We would not calculate the normal costs associated with enrolling the Airport police officers in the LAFPP Tier 6 plan. Instead, we would estimate the normal costs for the 516 existing officers based on the following observations. When we compare the demographic profile of the existing Airport police officers against the demographic profile of the other Tier 6 members included in our June 30, 2015 valuation for LAFPP (again, the age at entry into City service is one of the important factors), the major difference we observe is that the average salary of the existing Airport police officers (of about $95,000) is much higher than the average salary of the other Tier 6 members in LAFPP (of about $72,000). For a pay related retirement benefit, the normal cost rate for the retirement plan is somewhat self-adjusting so in spite of the difference in the current level of salary we believe it is still reasonable to approximate the normal cost rate for enrolling the existing Airport police officers in LAFPP Tier 6 by using the normal cost rate for the other Tier 6 members in LAFPP. However, for a retiree health benefit that is not pay related, the above relationship for the normal cost for the retiree health plan would not hold true so we would need to make a relatively straightforward adjustment to account for that difference in pay. Once the normal cost rates to enroll the existing 516 members in LAFPP Tier 6 have been estimated, we would make another simplifying assumption that there would not be a material difference between the normal cost rates of the 516 members and the normal cost rates for members with less than 5 years of past service (who might most likely join LAFPP). 3) We would calculate for each of the retirement and the retiree health plan plans the changes in the normal cost rate for the existing officers as described in 2). However, for the new Airport police officers we would have to further assume that their normal cost rates in LAFPP Tier 6 would be the same as those 516 mernbers calculated in 2). As noted above, we believe these are reasonable assumptions for this type of study and would state that in our report. We would also note that for the study under either the Simplified Method (to be used in our initial report) or the Detailed Method (to be used in our final report), we would not be including the cost to purchase prior LACERS service for the individual members. This is because the analysis to determine such purchase cost is dependent on the specific procedures used to determine the purchase cost which would not be drawn up until after the ballot measure to approve Tier 6 membership is approved by the voters. This would not affect the results in our reports because it is anticipated that any such cost to purchase prior service would be borne entirely by the individual Airport police officers.

42 Ray Ciranna June 13, 2016 Page 4 ATTACHMENT 2 Please let us know if you have any questions. Sincerely, ðn,-,u ut Andy Yeung AYY/j1 cc: Joe Salazar Li Hsi Lita Payne Maritta Aspen Anya Freedman V1/

43 DEPARTMENT OF FIRE AND POLICE PENSIONS 701 E. 3rd Street, Suite 200 Los Angeles, CA (213) REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS DATE: JANUARY 4, 2018 ITEM: B.2 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: UPDATE ON IMPLEMENTATION OF CALIFORNIA GOVERNMENT CODE SECTION ALTERNATIVE INVESTMENT FEES FOR INFORMATIONAL PURPOSES ONLY BACKGROUND In September 2016, California Assembly Bill 2833 (AB2833) was enacted and became effective January 1, 2017 as California Government Code Section (the Code). The new legislation imposes additional requirements for California Public Pension Plans (Plans) to obtain and publically disclose on an annual basis specified fee and expense data (primarily) for their alternative investments (funds). Previously Plans were only required to disclose the information, upon request, detailed under the California Public Records Act, Government Code Section (b). The purpose of the Code is to create greater transparency into the fees and expenses that Plans pay into their funds. It applies to new contracts entered into after January 1, 2017 and to existing contracts where a new capital commitment is made after January 1, Additionally, for any existing contract made prior to January 1, 2017, California plans are to use reasonable efforts to obtain the required information. DISCUSSION The disclosure requirements in the Code are mandatory for contracts effective after January 1, A report will be presented to the Board in late 2018 providing the disclosure requirements for the 23 funds that were approved in These funds have only recently started investing money and have charged minimal fees and expenses through the end of In the interim, the attached report is provided on a voluntary basis for the Board. It includes some of the information as required by the Code but does not include all the information. The report also only includes those funds that allow us to make some disclosure in line with the older California Public Records Act. The Board s private equity program began in September 1996 and many of the older funds do not have disclosure allowances. BUDGET There is no budget impact associated with this report. POLICY