MINUTES State Universities Retirement System Members Advisory Committee June 18, 2015

Transcription

1 MINUTES State Universities Retirement System Members Advisory Committee June 18, 2015 On March 23, 2015, the members of the State Universities Retirement System Members Advisory Committee (SURSMAC) were notified that the next meeting would convene on April 21, 2015, at SURS, 1901 Fox Drive, Champaign, Illinois, in the Training Center, beginning at 10:30 a.m. The meeting was changed to begin at 10:00 a.m. on June 18, 2015, at the location set forth in the notice of the meeting. The following SURSMAC members were present for the meeting: David Bardack, U of I Chicago; Linda Brookhart, SUAA; Susan Comad, U ofl; Laura Czys, U ofl; Jean Ann Dargatz, ISU; Jayne Defend, SIUE; Mary Griesinger, Northeastern Illinois University; Barry Hancock, ICCCA; Donna Haynes, U of I Springfield; Mia Igyarto, College of DuPage; John Kindt, U of I Urbana; Hongbok Lee, WIU ; James Lockard, Northern Illinois University; Glenn Martin, U of I Chicago; Marchant Martinelli, Civil Service; Brad McCormick, John A Logan College; Anna Moyer, Kaskaskia College; Mary Nippe, SIU; Henry Owen, Northeastern Illinois University; Jay Rich, Illinois State University; Bill Rupert, WIU; John Shuler, University of Illinois, Chicago; Stephanie Spann, IL Comm. College Trustees Association; Roger Spayer, William Rainey Harper College; Cheryl Twenhafel, Kaskaskia College; Steven Verhulst, Southern Illinois Carbondale; and Bill Williamson, U of I Urbana. The following SURS staff members were present for the meeting: Mr. Dan Allen, Chief Investment Officer; Mr. Larry Curtis, Employer Representative; Ms. Karen Goodmann, Executive Assistant; Ms. Kristen Houch, Legislative Liaison; Ms. Jessica Karnmin, Pay Benefits Team Leader; Mr. Albert Lee, Interim General Counsel; Mr. Bryan Lewis, Executive Director; Ms. Angela Lieb, Director of Member Services; Mr. Andrew Matthews, Chief Operating Officer; Ms. Suzanne Mayer, Director of Outreach; Mr. Eric Stickels, Employer Representative; and Ms. Phyllis Walker, Director of Finance. WELCOME AND INTRODUCTIONS Mr. Matthews called the meeting to order. Introductions of committee members and staff were made. APPROVAL OF MINUTES Upon a motion and a second, the minutes from November 18, 2014, were approved. UPDATE FROM EXECUTIVE DIRECTOR Mr. Lewis gave an update from the Executive Director. Mr. Lewis and Mr. Matthews joined SURS on the same date in April Mr. Lewis noted that SURS wants to continue to hear concerns from SURSMAC, continue to be transparent and open in communications, and to ensure that each employer is represented on SURSMAC. SURS encourages members and 1

2 employers to utilize its website, and SURS is using technology as much as possible to make sure that member needs are met. Mr. Lewis also noted that when it comes to retirement income and quality of life, there is nothing more important than financial stability, and SURS as an organization is trying to obtain consistent funding sources. INVESTMENT UPDATE Mr. Matthews introduced Mr. Allen who distributed and discussed the March 2015 Investment Update. A copy of these materials is incorporated as a part of these minutes on page 10 through 35. Mr. Allen also noted that there is a hedge fund search and commodities search ongoing by the Board of Trustees. The Board will have new members coming on in July The committee had a few questions concerning hedge funds and Mr. Allen encouraged SURSMAC members to forward article on hedge funds to Mr. Lewis or Mr. Allen as there continues to be media interest in hedge funds. Mr. Matthews noted that he is very proud of the work that Mr. Allen and the investment team at SURS does for the investment portfolio and updated SURSMAC on the Self-Managed Plan provider search that is ongoing. The last search was done approximately 15 years ago and the SURS Board of Trustees felt it was time to conduct a new search. Currently, there are two SMP providers, but SURS can have more than that. Mr. Matthews welcomed feedback from SURSMAC members over the next two weeks while staff are preparing for the September Board meeting where the SURS Board will receive recommendations from staff on the provider search. LEGAL/LEGISLATIVE UPDATE Ms. Houch presented the following legislative update: Bills Passed Both Chambers House Bill Actuarial Experience Study Every Three Years Sponsors - Representative Thomas Morrison and Senator Michael Connelly HB 422 requires an actuarial experience study to occur at least once every three years (instead of at least once every five years) for the General Assembly Retirement System, State Employees Retirement System, State Universities Retirement System, Teachers Retirement System, and Judges Retirement System. HB 422 takes effect immediately upon becoming law. Status: Passed Both Houses on 5/19/15 (House Vote: ; Senate Vote: ). Senate Bill Aspirational Diversity Goals for State Contracts Sponsors - Senator James F. Clayborne, Jr. and Representative Arthur Turner 2

3 SB 1334 establishes that, beginning January 1, 2016, it is the aspirational goal for a retirement system, pension fund, or investment board under the Illinois Pension Code to use emergmg investment managers for not less than 20% of total funds under management. Additionally, SB 1334 establishes that it is the aspirational goal that not less than 20% of investment advisors be minorities, females, and persons with disabilities. Finally, SB 1334 establishes that it is the aspirational goal to utilize businesses owned by minorities, females, and persons with disabilities for not less than 20% of contracts awarded for internet technology services, accounting services, insurance brokers, architectural and engineering services, and legal services. SB 1334 takes effect immediately upon becoming law. Status: Passed Both Houses on 5/31/15 (Senate Vote: ; House Vote: ). Senate Bill No Investments in Companies that Boycott Israel Sponsors - Senator Ira I. Silverstein and Representative Sara Feigenholtz SB 1761 prohibits investments in companies that boycott Israel and streamlines the current divestiture policies for Iran and Sudan. SB 1761 defines boycotting Israel as "engaging in actions that are politically motivated and are intended to penalize, inflict economic harm on, or otherwise limit commercial relations with the State of Israel or companies based in the State of Israel or in territories controlled by the State of Israel." Additionally, SB 1761 creates the Illinois Investment Policy Board, consisting of 4 members appointed by the Governor and 3 members appointed by each of the Boards of the State Universities Retirement System, Teachers Retirement System, and Illinois State Board of Investments, respectively. The Illinois Investment Policy Board will identify all Iran-restricted companies, Sudan-restricted companies, and companies that boycott Israel and develop a list of restricted companies for the retirement systems. The Illinois Investment Policy Board will also send a written notice to a company informing it of its status on the list of restricted companies and that it may become subject to divestiture by the retirement systems and will collect information from each retirement system regarding investments sold, redeemed, divested, or withdrawn from the list of restricted companies in accordance with the Act. SB 1761 takes effect immediately upon becoming law. Status: Passed Both Houses on 5/18/15 (Senate Vote: ; House Vote: ). 3

4 Resolutions Adopted House Resolution Urge Federal Repeal of the Government Pension Offset and Windfall Elimination Provision Sponsor - Representative Mary E. Flowers HR 146 urges the United States Congress to introduce and pass legislation repealing the Government Pension Off set and the Windfall Elimination Provision. These federal laws reduce the Social Security benefits of certain public sector retirees and their survivors. Status: Resolution Adopted in the House on 4/17/15. House Resolution Fee Reductions for Reductions in State Aid to Municipalities Sponsor - Representative Emanuel Chris Welch HR 531 urges ~embers of the General Assembly not to implement any cuts to State aid to municipalities unless those cuts are matched by equally proportionate reductions in fees for financial services paid by State agencies, including fees for all financial services, including cash management, investment management, and debt management. Additionally, HR 531 urges that, if the General Assembly cuts State aid to municipalities, all State agencies request that the firms that provide financial services to them reduce fees by an equally proportionate amount. Lastly, HR 531 urges State agencies not to make any payments to firms that refuse to reduce fees for financial services by the set amount until they have first met all of their other financial obligations, including fully funding public services and State aid to municipalities, paying workers, making pension fund contributions, and paying other legitimate bills. Status: Resolution Adopted in the House on 5/30/15. Senate Resolution Tier 2 Pension Impact Study Sponsor - Senator Daniel Biss SR 317 urges the Teachers Retirement System ("TRS") and State Universities Retirement System ("SURS") to pursue an Internal Revenue Service ruling on the compliance of Tier 2 with safe harbor provisions under the Internal Revenue Code. SR 317 also resolves that TRS and SURS provide a detailed analysis of the financial impact that the Governor's proposal would have on people currently in Tier 1 and resolves that the report be completed prior to consideration of the Governor's proposal to move Tier 1 participants into Tier 2. 4

5 SR 317, as amended, is identical to House Resolution 358. Status: Resolution Adopted as Amended in the Senate on 5/31/15 (Vote: ). Appropriations Bills (Pending) Senate Bill Fiscal Year 2016 Budget Implementation Sponsors - Senator John J. Cullerton and Representative Barbara Flynn Currie SB 842 contains budget implementation language authorizing the appropriation of $190,000,000 from the State Pensions Fund to the State Universities Retirement System as part of the annual required State contribution for Fiscal Year SB 842 also makes other changes and contains an effective date of July 1, Status: A motion to reconsider the vote was filed by Senator John J. Cullerton on (Senate Vote: ; House Vote: ). Senate Bill Fiscal Year 2016 Required State Contribution Sponsors - Senator John J. Cullerton and Representative Michael J. Madigan SB 2030 appropriates the annual required State contribution to the State Universities Retirement System ("SURS"), as certified by the Board of Trustees ($1,601,480,000). Specifically, SB 2030 appropriates $1,411,480,000 from the General Revenue Fund and $190,000,000 from the State Pensions Fund to SURS for the Fiscal Year 2016 State contribution. SB 2030 also appropriates $4,624,625 from the Education Assistance Fund to SURS for deposit into the Community College Health Insurance Security Fund for the Fiscal Year 2016 State contribution to the College Insurance Program ("CIP"). SB 2030 contains an effective date of July 1, Status: A motion to reconsider the vote was filed by Representative Barbara Flynn Currie on (Senate Vote: ; House Vote: ). Other Legislation (Pending) Senate Amendment #1 to House Bill State Retirement Systems Administrative Technical Changes Sponsors -Representative Elaine Nekritz and Senator Daniel Biss SA #1 to HB 3484 makes the following technical changes to strengthen the oversight and administration of the State Universities Retirement System ("SURS"): 5

6 Clarifies that the final rate of earnings formula for a person with more than 36 months of prior service applies to individuals with service credit before September 1, 1941; Codifies a definition of "plan year," which is referenced in statute but never defined; Clarifies that interest calculated on a refund to reestablish service credit begins on the date the refund was issued by SURS (instead of the date received by the member); and Clarifies that both active and inactive participants may purchase optional service credit, but only active participants can purchase optional service credit through pre-tax paycheck deductions. SA # 1 to HB 3484 also clarifies language allowing SURS to require information from any "benefit recipient" (instead of "beneficiary") and from any employer of a "current or former participant" (instead of "participant") that is necessary for the proper administration of the System. SA #1 to HB 3484 makes technical changes for three of the other State-funded retirement systems (General Assembly Retirement System, State Employees Retirement System, and Teachers Retirement System) and takes effect immediately upon becoming law. Status: Re-Referred to House Rules Committee on ; Previously Senate Amendment #I Placed on Calendar Order of Concurrence in the House (Senate Vote: ). Senate Bill Emerging Investment Manager Competitive Bidding Exemption Sponsors - Senator Iris Y. Martinez and Representative Christian L. Mitchell SB 437 exempts contracts with an emerging investment manager that has invested assets of the pension fund, retirement system, or investment board within a manager of managers services agreement from the competitive bidding process for investment services, at the discretion of the pension fund, retirement system, or investment board. Status: Re-Referred to House Rules Committee on ; Previously on Postponed Consideration in the House (Senate Vote: ; House Vote: ). House Resolution Tier 2 Pension Impact Study Sponsor- Representative Elaine Nekritz HR 358 urges the Teachers Retirement System ("TRS") and State Universities Retirement System ("SURS") to pursue an Internal Revenue Service ruling on the compliance of Tier 2 with safe harbor provisions under the Internal Revenue Code. 6

7 HR 358 also resolves that TRS and SURS provide a detailed analysis of the financial impact that the Governor's proposal would have on people currently in Tier 1 and resolves that the report be completed prior to consideration of the Governor's proposal to move Tier 1 participants into Tier 2. HR 358 is identical to Senate Resolution 317, as amended. Status: House Assigned to Personnel and Pensions Committee on 4/21/15. Mr. Lee reported on the following legal issues: 1. Briefly reviewed the holding of the Illinois Supreme Court in the In re Pension Reform Litigation case. 2. Briefly discussed the Jones v. Municipal Employees Annuity and Benefit Fund of Chicago, Charmichael v. Laborers & Ret. Bd. Employees' Annuity & Benefit Fund of Chicago, and Burgos v. State of New Jersey cases. 3. Discussed the proposed rulemakings that were recently approved by the SURS Board at the June meeting concerning affected annuitants and employer appeals. MEMBER SERVICES UPDATE Ms. Lieb introduced Ms. Karnmin, who is the new team leader for the Pay Benefits and Insurance Team. Ms. Lieb reported the following from the insurance refunds recently distributed and noted that Ms. Karnmin and staff did a great job organizing and processing the insurance refunds: $23,481, (amount sent to SURS to refund) 911,004 (# of adjustment transactions entered by staff); 32,384 (# of annuitants who received refund prior to 6/15 deadline); 2,042 (#of deceased annuitants due a refund-surs has until 9/15 to pay to their estate); 134 (#of SURS annuitants that opted out of the class); and 44 (#of SURS staff involved in the refund process). Ms. Lieb also discussed the roles of CMS and SURS concerning insurance: CMS Administer Plan Establish plan rules and provisions Determine who is eligible to participate Act as a liaison between participants and carriers in the settlement of claims disputes and benefit coverage issues Design and support the various Group Insurance Division Computer Systems SURS Collect premiums and forward to CMS Enroll eligible members and dependents Provide plan information and materials supplied by CMS Update member information on Group Insurance Computer Systems 7

8 Mr. Shuler commented on the current legal/legislative/budgetary issues affecting the pension fund and investments, gave a progress report on specific points raised with the legislature in order to make the necessary changes following the Supreme Court decision, and discussed the impact of collective bargaining agreements now up for renegotiation. OTHER BUSINESS Questions were asked by SURSMAC to SURS staff concerning several topics: 1. The formulas used when annuitants retire. Ms. Lieb noted that currently approximately 60-65% of annuitants retire under the money purchase formula. 2. New SURS member retirement elections. Ms. Mayer noted that currently 20-25% of new members elect the self-managed plan (SMP) and there are arguments to be made as to all three plans (Traditional, Portable and SMP) being a good default plan. Ms. Mayer noted that SURS conducts monthly new hire webinars on the election process and SURS encourages new members to log on to these webinars. SURSMAC BYLAWS DISCUSSION Mr. Matthews noted that suggested changes to the SURSMAC Bylaws by SURS outside legal counsel will be distributed to SURSMAC in the next few weeks and will be on the SURSMAC agenda in the fall for approval. There are fiduciary and open meeting act concerns that are addressed in the SURSMAC Bylaws that will be up for approval. SURSMAC reports to the Executive Director of SURS. Being an advisor to the Executive Director changes the fiduciary requirements. Mr. Matthews noted that as a former SURS Board Member there are legal and practical concerns that need addressed and the changes to the Bylaws are not being suggested to change the relationship with SURSMAC. SURS wants to continue and improve this relationship. SURS is working with all SURS-covered agencies to gain additional SURSMAC committee members to make sure all agencies are represented at SURSMAC. NEXT MEETING DATE The next meeting of SURSMAC is October 13, 2015, beginning at 10:00 a.m. ELECTION OF CHAIR AND VICE CHAIR Mr. Shuler noted that was willing to serve again as Chair of SURSMAC. A suggestion was made that the election be delayed to give all committee members (some of who may not be present at this meeting) the opportunity to state they are willing to serve as Chair. The Chair position comes up for election in October Mr: Shuler moved forward with the election for chair. A motion was made by Mr. Lockard to elect Mr. Shuler as Chair of SURSMAC. This motion was seconded and approved by SURSMAC. 8

9 Ms. Defend noted that she was willing to serve as Vice Chair, but wanted to speak with her supervisor to confirm that would be acceptable. Mr. Shuler noted that the vice chair election would be done in October. The vice chair position is currently vacant. Ms. Conrad, Ms. Haynes and Ms. Brookhart noted that they are willing to become more active in SURSMAC. There being no further business to come before the committee, the meeting adjourned. Respectfully submitted, ASM:kg Andrew S. Matthews Chief Operating Officer 9