San Mateo County Grand Jury
• 2012-2013
states that it has “already gone a long way in reducing retirement costs” by, among other things, reducing benefit
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⚠️ Este contenido ha sido traducido automáticamente. El texto original en inglés es la versión oficial. La traducción puede contener errores.
Findings and Recommendations 12 findings
F1
Board of Supervisors has failed adequately to address SamCERA’s unfunded liability because it has not (i) properly monitored the performance of SamCERA’s investment portfolio, (ii) made contributions sufficient to cause SamCERA’s funding to be sound or (iii) taken steps to reduce the County’s retirement costs significantly.
Related Recommendations (1)
R1
Adopt a policy to reduce SamCERA’s assumed rate of return by 0.25% per year until such time as it has achieved a funded ratio of 90%.
F2
SamCERA’s Board of retirement has not adequately addressed SamCERA’s unfunded liability in that it has adopted an assumed rate of return that does not sufficiently recognize the guaranteed status of its participants’ benefits.
Related Recommendations (1)
R2
Once a funded ratio of 90% has been achieved, establish SamCERA’s assumed rate of return each year by taking into consideration the guaranteed nature of its participants’ benefits and relevant macro-economic factors while disregarding (i) the effect, if any, the assumed rate of return will have on required contributions to SamCERA and (ii) the assumed rates of return of other public pension funds.
F3
SamCERA’s unfunded liability is materially greater than $962,282,000 as reported in the SamCERA CAFR for FY2012, and is probably closer to $2 billion.
Related Recommendations (1)
R3
Include in the SamCERA CAFR and SamCERA PAFR, the following information in tabular form: a. For each of the past one, three, five, and ten fiscal years: i. Its annual investment earnings (or losses) stated as a percentage and in dollars, both net of investment costs ii. Its actual rates of return as compared with its assumed rates of return iii. Its peer rankings iv. The peer rankings of each of its investment managers for which such rankings are available b. The unfunded liability amount for each of the past 10 years c. The amount contributed by the County to SamCERA attributable solely to its unfunded liability for each of the past 10 years d. The number of beneficiaries receiving annual benefits for each of the past five years in the following amounts: i. $100,000 - $149,999 ii. $150,000 - $199,999 iii. $200,000 and up e. The average and median annual benefit paid to SamCERA beneficiaries for the past five years 27
F4
SamCERA’s assumed rate of return of 7.5% is unrealistic given the actual rate of return of SamCERA’s investments over the past 10 years (5.54%) and the discount rate (4%) used by the 100 largest public companies in calculating their unfunded liabilities.
Related Recommendations (1)
R4
Replicate on SamCERA’s website, modified to apply to SamCERA, CalPERS “Facts at a Glance.”
F5
SamCERA’s investment performance over the past 10-year period has been poor.
Related Recommendations (1)
R5
Employ only investment managers for its alternative assets that rank in the top 10% of their peer group for at least the past five years. The Grand Jury recommends that the County’s Board of Supervisors do the following:
F6
SamCERA’s Board of Retirement can create liabilities that are required by law to be paid by the Board of Supervisors.
Related Recommendations (1)
R6
The Grand Jury recommends that the County’s Board of Supervisors do the following:
Implement GASB Statement 68 for FY2014.
F7
County taxpayers, not SamCERA’s beneficiaries, bear the economic burden of SamCERA’s investment performance because reduced County services, tax increases, or both, are required to pay SamCERA’s unfunded liability.
Related Recommendations (1)
R7
The Grand Jury recommends that the County’s Board of Supervisors do the following:
Appoint to the Board of Retirement only individuals who possess substantial experience in managing or overseeing investment portfolios, either by professional training, or by business or personal experience.
F8
There is no assurance that SamCERA’s change in investment strategy to include a significant allocation to alternative investments will produce better returns than the previous strategy or reduce the risk of its portfolio.
Related Recommendations (1)
R8
The Grand Jury recommends that the County’s Board of Supervisors do the following:
Formally review in open session on a quarterly basis the investment performance of SamCERA.
F9
The Board of Supervisors has not committed to using any portion of Measure A sales tax revenues to increase contributions to SamCERA to pay down SamCERA’s unfunded liability. 91 http://www.moneymanagementintelligence.com/Article/3137141/Community-Awards2/Small-Public-Plan-Of- The-Year-Nominees.html 92 http://www.gabrielroeder.com 93 Roeder Financial, California Pension Systems: Ranking their Funding Assumptions (March 15, 2013) 26
Related Recommendations (1)
R9
The Grand Jury recommends that the County’s Board of Supervisors do the following:
Give higher priority to funding SamCERA’s unfunded liability, an obligation that already exists, than to other new or expanded programs it may contemplate.
F10
The effects of the 2011 Changes and the adoption of PEPRA, both intended to reduce retirement costs, are minimal, apply principally to new hires, and will not yield significant savings when compared to the size of SamCERA’s unfunded liability.
Related Recommendations (1)
R10
The Grand Jury recommends that the County’s Board of Supervisors do the following:
Adopt the goal that SamCERA’s funded ratio should be 100% and that its minimum funded ratio is 90%.
F11
The longer the Board of Supervisors delays in eliminating SamCERA’s unfunded liability, the greater the cost will be to do so, and the more the burden of doing so will fall on the next generation.
Related Recommendations (1)
R11
The Grand Jury recommends that the County’s Board of Supervisors do the following:
At a minimum, set the County’s annual contribution to SamCERA attributable solely to the unfunded liability to the amount necessary to achieve a funded ratio of at least 90% on or before June 30, 2023.
F12
The financial reporting in the SamCERA PAFR can be improved.
Related Recommendations (1)
R12
The Grand Jury recommends that the County’s Board of Supervisors do the following:
Once the minimum funded ratio of 90% is achieved, at a minimum each year thereafter, set the County’s annual contribution attributable solely to the unfunded liability to the amount necessary to maintain a funded ratio of at least 90%.
Additional Recommendations 3
These recommendations are not explicitly linked to specific findings.
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R13The Grand Jury recommends that the County’s Board of Supervisors do the following: If they withstand judicial challenge, take all steps necessary to implement pension changes similar to those passed by San Jose’s voters. The Grand Jury recommends that SamCERA’s Board of Retirement and the County’s Board of Supervisors do the following:
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R14The Grand Jury recommends that the County’s Board of Supervisors do the following: Acknowledge that the reported unfunded liability of $962,282,000 is materially understated if either a risk free rate of return or SamCERA’s actual rate of return over the past 10 years is used in its calculation.
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R15The Grand Jury recommends that the County’s Board of Supervisors do the following: Annually compare SamCERA’s unfunded liability calculated in accordance with GASB Statement 68 with its unfunded liability calculated utilizing a risk free rate of return and SamCERA’s actual rate of return over the past 10 years.
No Responses Found 1
Government entities assigned to respond to this report. No response documents have been linked in our database.
San Mateo County Board of Supervisors
Elected County Office