30 October 2006
University of Illinois
SURSMAC Chair Joyce Changnon (ISWS) called the meeting to order at 10:20 a.m. There was a general discussion with both the Legislative Issues and Benefits Issues committees. There seemed to be not much happening at this time in the Legislature, with the election about a month away, and no one was aware of any pending legislation, so the Legislative Committee had nothing to report. It was noted that pension issues were not on the agenda during the gubernatorial debate held the night before. Jake Baggott (SIU-C), Chair of Benefits Issues, was concerned about health benefits and noted that SURS is not at the table in negotiations with CMS, but rather CMS negotiates with AFSCME. [Note: Until recently, AFSCME was the largest union in the state, but that distinction now belongs to the Service Employees International Union (SEIU).] Lunch at 11:30 a.m. followed the discussion.
Chair Joyce Changnon called the business meeting to order at 12 noon. New and continuing members of SURSMAC and of the SURS staff introduced themselves. Minutes of the 4 April 2006 meeting were approved as distributed.
SURS Update: Dan Slack, SURS Executive Director, gave the SURS Update. He noted a continuing attack on public-sector, defined-benefit pensions, often perceived as overly generous, and on the future existence of pension systems themselves. The cause of the problem, he said, was not the pensions themselves, but that they were being under funded. He said that SURS benefits were not overly generous, but rather were “middle of the road.” He continued with a recent history of SURS funding, and added that he was very concerned about the State’s long-term ability to fund pensions. He noted an 11.7% rate of return through the end of fiscal year (30 June 2006). Through August 2006, the fund had assets of $14.46 billion and estimated liabilities of $21.89 billion, with a funding ratio at 66.1% of estimated liabilities.
Slack explained that every five years SURS does an actuarial “experience study,” which is now in progress, to examine current actuarial assumptions, including assumptions on each member’s compensation, age at retirement, and life expectancy; and on members’ choice of plan (assumed to be 33% for Self-Managed plan, but actually only about 10% ) and mortality rate. Results of that study will go to the SURS Board of Trustees at its December meeting for approval of changes, if any, in assumptions. Those assumptions will affect the “effective rate of interest” (ERI) set by the SURS Board. The State Comptroller sets the ERI only for the Money Purchase (MP) plan and reports it by 31 January 2007. Currently, the SURS Board set the ERI at 8.5% and the Comptroller set the ERI for MP at 8.0%.
Financial Returns Update: Doug Wesley, Deputy Chief Investment Officer, updated SURSMAC on the financial returns. SURS outperformed about two-thirds of public funds for the year, and it ranks consistently in the top half of its peers among large public plans. Through the end of the fiscal year (30 June 2006), SURS had an 11.7% rate of return, which was better than public pension funds (10.7%), in general, and better than an average of Illinois funds (9.9%), in particular. Nevertheless, for FY2007 he estimated a $750 million cash shortfall, the difference between SURS payment of benefits and the State’s contribution. [See www.surs.org. for investment updates.]
SURS Rules Update: Albert Lee, Assistant General Counsel, updated SURSMAC pending rules and on the current implementation of the 6% rule.
SURS Web Site Update: Doug Steele, Application Development Manager, updated SURSMAC on improvements in the SURS website.
Committee Reports: Neither the Legislative Issues Committee nor the Benefits Issues Committee had anything else to report. Don Naylor (SUAA), however, distributed a draft of “Legislative Goals and Implementation Strategy” and reported on planned activities of SUAA for 2006-07. They are working on six goals, including to maintain and improve existing benefits for pre-1980 retirees and survivors (adjustment for inflation); to increase SURS death benefit to $5,000 from $1,000, which it has been since 1959; and to restore the two-year sick leave credit option provided to earlier community college retirees. Jake Baggott (SIU-C) moved that SURSMAC continue its support of the pre-1980 one-time adjustment for retirees, the SURS death benefit increase to $5,000, and the restoration of the two-year sick leave credit option provided to community college retirees. Motion was seconded, and approved by SURSMAC.
Election of Officers: SURSMAC elected Jim Carlson (ISU) to be Chair and Jake Baggott (SIU-C) to be Vice Chair for the coming year. Ken Andersen (UIUC) continues to serve as Chair of the Legislative Issues Committee.
Next Meeting Date: The next meeting is 10 October 2007.
Adjournment: Meeting adjourned at 2:30 p.m.
UIUC Senate Representative
Explanatory Note: State University Retirement System Members Advisory Committee (SURSMAC) is advisory to the SURS Board of Trustees. Members represent its various constituents, including participating institutions and agencies, such as public universities, community colleges, and state surveys; annuitants (through SUAA); and survivors and recipients of disability and disability retirement allowance, and includes both faculty and academic staff. (This Senate elects two faculty representatives.) The group meets twice a year at the SURS office in Champaign — typically Tuesdays in October and April.