Reccsf bulletin 2 2011


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Reccsf bulletin 2 2011

  1. 1. Retirement Committee ReportBy Jean S. Thomas, • SFERS did not write off assets —or sell themHerb Meiberger, CFA, and Stephen Herold —in a panic when market values declined, so that many of those assets are improving withSupplemental Earnings Based COLA-Our the market upturn. Gary did not claim that the2/28/2011 Checks City has no problems or challenges—specifically, Recall: On 12/14/2010, the SFERS Board ap- those discussed in SFERS’ actuarial consultants,proved a 3.5% supplemental earnings-based “COLA” Cheiron’s, “7/1/2010 Actuarial Valuation,” pre-to all retirees in FY 2010/111 (7/1/2010-6/30/2011), sented to the SFERS Board on 1/12/2011 (seeto be paid in our 2/28/2011 benefit checks. The next)—, only that these are not cause for fear.basic calculation is 3.5% of the 6/30/2010 monthly SFERS’ monies will not run out!gross benefit less any COLAs already paid. Allretirees will receive a full 3.5% of the 6/30/2010 Actuarial Consultant (Cheiron’s) 7/1/2010monthly gross benefit for 2/2011 and, for the seven Actuarial Valuation – Key Resultsmonths 7/1/2010-1/30/2011, a retroactive benefit The Employer Contribution Rate—the rate thatequal to the difference between 3.5% and whatever the City must pay to SFERS to adequately fund theother COLAs were already paid. The following ex- system—will increase in FY 2011/12 to 18.09% ofample is for Miscellaneous, and new Safety (Police covered payroll, from FY 2010/11’s rate of 13.56%.and Fire hired on or after 11/2/1976), who received (Not good news, but lessened somewhat because thea 2% cost of living COLA effective 7/1/2010.** For rate will apply to a smaller payroll in FY2011/12simplicity’s sake, we assume a 6/30/2010 monthly than in prior years.) The major cause of the in-gross benefit payment of $1,000 (which, we ac- crease: the big FY2008/09 investment losses that,knowledge, is ridiculously low): under actuarial “smoothing” standards, continueCurrent month (2/2011) benefit: to be recognized over a five-year period. Under ac- 6/30/2010 monthly benefit payment $1,000 tuarial “smoothing,” significant losses (and gains) Add Supplemental COLA ($1,000 x 3.5%) 35 are recognized over an extended period—such as Total current month (2/2011) benefit $1,035 five years—rather than in the year incurred, so Monthly retroactive adjustment: that rates will be predictable over time, and large, $1,000 x 1.5% = 15 abrupt annual payment changes will be avoided. Multiply by number of months (Our comment: Arguably, the employer contribu- (7/2010-1/2011) x 7 $105 tion rate increase, and estimates of future year increases—which we will discuss in the Bulletin Gross benefit amount in the 2/28/2011 check March issue—will have significant political reper- $1,140 cussions. Stay tuned!) **“Old” Safety’s (Police and Fire hired before The Actuarial Funding Ratio is a percentage of11/2/1976) supplemental earnings-based COLA the actuarial value of assets (reflecting “smooth-distribution calculations are more complicated ing,” discussed above) to the actuarial liability. Inthan the above, and, regretfully, space does not FY 2010/11, it was 97%; for FY 2011/12, it will bepermit a similar illustration for them. 91.1%. The actuarial funding ratio is the standard Please contact SFERS if you have any ques- by which public plans are measured. Although thetions on your 2/28/2011 checks. Member Services modest ratio decline is not good news, 91.1% is nev-has people ready to help! ertheless a sound funding ratio. (A worrisome level is around 80%, considerably lower than 91.1%!)Gary Amelio’s Comments If you had an opportunity to hear SFERS Ex- Other Matters of Interest:ecutive Director Gary Amelio’s presentation at the • Preliminary SFERS performance figures as of1/12/2011 General Membership meeting, you were 12/31/2010 are: Plan market value, $14.9B; fis-fortunate, indeed. Gary’s overall message was that cal year-to-date (FYTD) 2010/11 earnings forSFERS is sound, and that hysterical news articles the six months ended 12/31/2010, 15.58%! Also,about how public plans (SFERS included, at least investment opportunities are improving; moreby inference) are “going down the tubes” do not next month!apply to SFERS. Gary explained that some of the • Employee-elected Retirement Board Com-reasons for SFERS’ success are: missioner Joe Driscoll ran unopposed for• Experienced SFERS Board Members make sound another five-year term, which will commence on decisions; 2/20/2011. Congratulations, Joe!• Investment staff is top-notch;• The City has made required contributions to the Comments? Questions? Contact: Herb at herb. fund (some state and local governments simply; Jean at, or have not done so); (415) 665-4149; Stephen at,• Most members are paying 7-1/2% of gross sala- or (415) 664-1201. ries into the fund; and Page 3