Retirement Division September 16, 2010 MINUTES of the Meeting of the Retirement Commission

MINUTES OF MEETING
STATE EMPLOYEES RETIREMENT COMMISSION
OFFICE OF THE STATE COMPTROLLER
55 ELM STREET
HARTFORD, CONNECTICUT 06106

September 16, 2010

TRUSTEES PRESENT
Peter R. Blum, Chair
Robert Baus, by phone
Charles Casella
Richard Cosgrove
Claude Poulin
Linda Yelmini
Fae Brown-Brewton
Sal Luciano
Bob Coffey
Ronald McLellan
James Dzurenda
Thomas Culley

TRUSTEES ABSENT

Paul Fortier

MUNICIPAL LIASONS

Thomas Landry Present
Dominic Absent

OTHERS PRESENT
Mark Ojakian, Deputy Comptroller and Director, Retirement Services
Craig Henrici, Counsel to the State Comptroller
Colin Newman, Assistant Director, Retirement Services
Peggy Gray, Executive Assistant, Retirement Services

GUESTS

George Spurlock, CEIU

CALL TO ORDER

The Chairman called the meeting to order at 9:06 AM.

CHAIRMAN'S REPORT

The Chairman's luncheon will be held following the Retirement Commission meeting on October 21, 2010. Please let Peggy know if you are planning to attend.

DIVISION DIRECTOR'S ADMINISTRATIVE AND SUBCOMMITTEE REPORTS

On the disability side we have 88 pending applications that we received that are new, 289 applications are waiting for documentation. 99 applications are scheduled for upcoming meetings and 200 applications were denied. This gives us a total of 676 pending applications. For the month of August, 2010 we received 27 applications 28 were placed on the agenda and 17 applications were approved. The next available meeting of the MEB for scheduling is February 2011.

Following the close of the September 2010 retirement payroll the current backlog of unfinalized retirement records is approximately 10, 807. The Division processed 107 new retirees to payroll ( 85 normal, 22 disabilities). Finalizations for the month were 77.

We are attempting to ease the backlog by bringing back some employees who retired from the Audit unit. So far only one employee has returned.

We have one audit recommendation from the State Auditors that pertains to the Retirement Division. The Division lacks updated manuals and operation procedures. We will be addressing this with the Auditors.

We have received the reappointment letter for the Chairman from the Governor's office. We will swear the Chairman in at the October meeting.

NEW MATTERS

1. REQUEST COMMISSION APPROVAL OF THE AUGUST, 26, 2010 MINUTES
Motion made by Mr. Luciano, seconded by Mr. Poulin to approve the minutes of August 26, 2010 with the following corrections:

  1. Mr. Coffey had to leave the meeting early. Was not here to vote on Item # 16, Item # 18, 19 and tabled Agenda items # 16 and 18. His name needs to be removed from the voting record for those items.
  2. Mr. Casella on page 2 under disability figures believes they were wrong, or reported differently. The numbers are in fact correct and reported in the usual manner.
  3. Mr. Casella noted that there was no report from the Investment Subcommittee.
  4. On Item # 14 Mrs. Ashton's name needs to be spelled correctly
  5. Item # 17 Laterzia , the minutes should read she met all financial hardship.
    All voted for the minutes with the above corrections.

Unanimous Decision

2. REQUEST COMMISSION APPROVAL OF THE STATE EMPLOYEES RETIREMENT COMMISSION CHAIRMAN'S PER DIEM EXPENSES REIMBURSEMENTS. Mr. Luciano moved, seconded by Mr. Casella to approve the State Employees Retirement Commission Chairman's Per Diem Expenses and Reimbursements. All voted in favor.

Unanimous Decision

3. REQUEST COMMISSION APPROVAL OF THE STATE EMPLOYEES RETIREMENT SYSTEM SERVICE RETIREMENTS FOR THE MONTH OF AUGUST 2010. Mr. Luciano moved, seconded by Mr. Casella to approve the State Employees Retirement System Retirements for the month of August, 2010. All voted in favor.

Unanimous Decision

4. REQUEST COMMISSION APPROVAL OF THE STATE EMPLOYEES RETIRMENT SYSTEMS VOLUNTARY PENDING DISABILITY RETIREMENTS FOR THE MONTH OF AUGUST, 2010. Mr. Luciano moved, seconded by Mr. Casella to approve the State Employees Retirement Systems Voluntary Pending Disability Retirments for the month of August, 2010. All voted in favor.

Unanimous Decision

5. REQUEST COMMISSION APPROVAL OF THE STATE EMPLOYEES RETIREMENT SYSTEM DISABIILITY RETIREMENTS FOR THE MONTH OF AUGUST, 2010 AS APPROVED BY THE MEDICAL EXAMINING BOARD AS OF JULY 31, 2010. Mr. Luciano moved, seconded by Mr. Casella to approve the State Employees Retirement System Disability Retirements for the month of August, 2010 as approved by the Medical Examining Board as of July 31, 2010. All voted in favor.

Unanimous Decision

6. REQUEST COMMISSION APPROVAL OF THE STATE EMPLOYEES RETIREMENT SYSTEMS RETROACTIVE RETIREMENTS FOR THE MONTH OF JULY 2010. Mr. Luciano moved, seconded by Mr. Casella to approve the State Employees Retirement Systems Retroactive Retirements for the month of July 2010. All voted in favor.

Unanimous Decision

7. REQUEST COMMISSION ACCEPTANCE OF THE MEDICAL EXAMINING BOARD FROM ITS MEETING ON AUGUST 26, 2010 RELATIVE TO APPLICATIONS FOR DISABILITY RETIREMENT RECEIVED FROM THE MUNICAL EMPLOYEES RETIREMENT SYSTEM.

For informational purposes only

8. REQUEST COMMISSION APPROVAL OF THE CONNECTICUT PROBATE JUDGES AND EMPLOYEES RETIREMENTS FUND PERSONAL EXPENSES FOR THE MONTH OF AUGUST 2010. Mr. Luciano moved, seconded by Mr. Poulin to approve the Connecticut Probate Judges and Employees Retirement Fund Personal Expenses for the month of August 2010. All voted in favor.

Unanimous Decision

9. REQUEST COMMISSION APPROVAL OF THE MUNICIPAL RETIREMENT SYSTEM RETIREMENTS. Mr. Luciano moved, seconded by Mr. Poulin to approve the Municipal Retirement System Retirements. All voted in favor.

Unanimous Decision

10. REQUEST COMMISSION APPROVAL OF THE CONNECTICUT PROBATE JUDGES AND EMPLOYEES RETIREMENT SYSTEM RETIREMENTS. Mr. Luciano moved, seconded by Mr. Poulin to approve the Connecticut Probate Judges and Employees Retirement System Retirements. All voted in favor.

Unanimous Decision

11. REQUEST COMMISSION APPROVAL OF THE STATE EMPLOYEES RETIREMENT COMMISSION MANAGEMENT TRUSTEES PER DIEM AND TRAVEL EXPENSES REIMBURSEMENTS. Mr. Luciano moved, seconded by Mr. Cosgrove to approve the State Employees Retirement Commission Management Trustee's Per Diem and Travel Expenses Reimbursements.Mr. Baus and Mr. Casella abstained.

Majority Decision

12. REQUEST COMMISSION APPROVAL OF THE STATE EMPLOYEES RETIREMENT UNION TRUSTEES PER DIEM AND TRAVEL EXPENSES REIMBURSEMENTS. Mr. Luciano moved, seconded by Mr. Greatorex to approve the State Employees Retirement Union Trustee's Per Diem and Travel Expenses. Mr. Poulin abstained

Majority Decision

DISCUSSION ITEM- INTERDEPARTMENTAL MEMORANDUMS FROM THE AUDITORS OF PUBLIC ACCOUNTS. Mr. Luciano moved, seconded by Mr. Greatorex to submit the draft from the Chairman as written. All voted in favor.

Unanimous Decision

INFORMATIONAL ITEM FROM MR. POULIN:

New GASB Preliminary Views

The Governmental Accounting Standards Board (GASB) is in the middle of a multi-year project to make changes to the way in which government sponsors of defined benefit (DB) pension plans account for and report their pension assets and liabilities in their annual financial reports, including the balance sheet.

Under current GASB rules, a government employer's unfunded actuarial accrued liability (UAAL) for its pension plan is not included on the balance sheet. Rather, it is disclosed in the notes to the employer's financial statements or in other supplementary information. Instead, the amount now shown on the balance sheet, and referred to as the employer's "Net Pension Obligation," is tied to the actual funding of the pension plan. It reflects the cumulative
difference between the employer's actuarially determined Annual Required Contribution (ARC) necessary to fund plan liabilities over time and the actual contributions made by the employer. In June, GASB has indicated in its "Preliminary Views" (PV) that significant changes lie ahead.

First, rather than reporting the cumulative difference between the employer's ARC and its actual contributions as its pension liability on its balance sheet, the employer would instead be required to show a new number, referred to as the "Net Pension Liability," or NPL. The NPL will essentially reflect, as of the employer's fiscal year-end date, the difference between its UAAL and the fair market value of its pension assets. These assets would not be "smoothed," (i.e., averaged over some time period) as currently allowed for funding purposes.

Also, the discount rate for valuing the UAAL would in some cases have to be a blended rate that incorporates a municipal bond yield instead of just using the pension plan's long-term expected rate of return, as is now permitted by GASB.

GASB chose the Entry Age Normal cost method as the actuarial cost method that must be selected to assign a portion of the total pension liability to past periods. SERS actuaries have been using the Projected Unit Credit Unit cost method for that purpose.

For Connecticut State Retirement Systems, this new "Net Pension Liability" will be dramatically larger than the number currently disclosed on the state's balance sheet. There will also be additional costs resulting from the change in the actuarial cost method.

There are fears in some circles that the GASB PV's current direction would inflate employers' perceived costs, increase the perception of volatility in their pension liabilities and raise public confusion over the adequacy of plan sponsors' funding efforts.

___________________________
Peter R. Blum, Chairman

_______________________________
Mark Ojakian, Deputy Comptroller and Division Director, Retirement Services

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