November 3, 2008
University of Illinois
SUR.09.01 Report on the SURSMAC Meeting, October 14, 2008.*
SURSMAC met at the SURS headquarters in Champaign from 10:30 a.m. to 2 p.m. The agenda included presentations by SURS staff, meetings of the SURSMAC subcommittees, and a business meeting. SURSMAC chair, Jim Carlson of ISU, welcomed the members and asked for approval of the minutes for the April 8, 2008 SURSMAC meeting.
Dan Slack, Executive Director of SURS, covered a number of issues. The first was a legislative update in which he noted that Public Act 95-0950 had passed which would assign all proceeds from unclaimed property to the deficit in pension funds, such proceeds being in addition to and not in lieu of regular state funding. The second was a summary of recent SURS Board actions which included the review and revision of the Boards Bylaws and its Code of Conduct. The third was the vote on whether or not to hold a Constitutional Convention which is on the November 4, 2008 ballot. The Board has not taken a position but is aware that current pension guarantees in the constitution (the impairment clause) could be removed if such a convention were held. The final topic was the funding of the system by the State of Illinois. An important goal will be to ensure that the state stays on course in this the final year of the program to ramp up the contributions to meet the legislated goal of reaching 90% of full funding. In July, 2008, the funding ratio stood at 57.4%. By September, the ratio had fallen to 51.7%. He suggested that a massive increase in funding from the State will be needed to meet the “ramp up” required for fiscal year 2010.
The second report was by Dan Allen, the Chief Investment Officer. The first part of his report was a summary of the performance during the fiscal year ending June 30, 2008. For perspective, he noted that the FY 2008 (return of - 4.5%) was the fifth worst in SURS history and that June 2008 (return of - 5.5%) was the sixth worst month in SURS history. Nevertheless, the return has been better than that for the indices used as a benchmark and on par with the funds felt to be SURS’ peers. Regarding the financial crisis which has occurred since June 30, he noted that “we will get through this” but was hoping as a first step that there would be a decline in the current volatility of the markets.
He also made a report on the final results of the asset liability review discussed at the April SURSMAC meeting and presented a table showing the new asset allocation structure which has been adopted. Some major changes will be a decrease in the proportion of the portfolio in U.S. equities and in fixed income and an increase in the share in global equities and real estate. The staff also has completed searches for managers in a number of these investment areas.
Kelly Jenkins, General Counsel, made a brief report on new SURS Rules and Rules Amendments. This was followed by a presentation by Judy Parker, Associate Executive Director, who noted that the SURS staff is continuing to study whether the traditional plan should remain the default option for those not choosing an alternative. In the ten years since the self managed plans were introduced, 15% chose the traditional plan, 34% chose the self managed or portable plans, and 51% did not choose and were therefore in the traditional plan.
She then introduced Becky Grove and Angie Lieb who reported on developments in member services. They discussed how new staff are trained and the changes which have been made in the order in which retirement documents are processed. They continue to work on improving the web site. One goal is to enable individuals to follow the status of their retirement papers on the site. The program of campus visits at regular intervals continues and additional visits are possible upon request.
During the break for lunch, the Benefits and Legislative Committees met. The first report was from Jake Baggott, Chair of the Benefits Committee. There was an extensive discussion of the changes in the health care plans given that the Benefit Choice 2 enrollment period would commence October 27. They also discussed the current availability of tuition rebates and what changes might be considered in the future. They recommended that at a future SURSMAC meeting, the SURS staff again make a presentation on the retirement “cycle.”
The second report was by Ken Andersen, Chair of the Legislative Committee. The committee had an extensive discussion of whether or not to approve a resolution on the vote on whether or not to hold a Constitutional Convention which is on the November 4, 2008 ballot. This resolution would appear on the SURSMAC portion of the SURS web site. The Resolution first noted that (1) the vote would take place, (2) information was available on the merits from a number of sites including the Secretary of State’s web site, and (3) the current constitutional protection of pension and retirement benefits under Article III, Section 5 could be altered for future retirees if the Convention were held. It was resolved that (1) we urge all citizens to become knowledgeable about the issue and to vote on it and (2) SURSMAC recommends a negative vote on calling a Constitutional Convention. The resolution was passed.
After a motion to accept the reports from both Committees, Jake Baggott was elected as the new Chair and Janet Davis was elected as the Vice Chair of SURSMAC. The next SURSMAC meeting is April 14, 2009.
H.F. (Bill) Williamson
UIUC Senate Representatives
* SURSMAC is the State University Retirement System Members Advisory Committee to the SURS Board of Trustees. Its members are faculty and staff representing the various institutions and agencies affected by SURS such as public universities, state surveys and retiree organizations. The group meets twice a year in October and April at the SURS headquarters at 1901 Fox Drive, Champaign, IL.