April 24                                                                                                         2001

 

 

REPORT OF THE PROCEEDINGS

 

OF THE

 

Board of Trustees

 

OF THE

 

Public School Teachers’ Pension and

Retirement Fund of Chicago

 

_________

 

 

Regular Meeting - Official Report

Tuesday, April 24, 2001

 

A regular meeting of the Board of Trustees of the Public School Teachers’ Pension and Retirement Fund of Chicago was held Tuesday, April 24, 2001.

 

The President, Ms. Mary Sharon Reilly, called the meeting to order at 9:25 a.m.

 

 

PUBLIC PARTICIPATION

 

Mr. James A. Westerberg, a disability applicant, briefed the Trustees on his disability situation.  President Reilly informed Mr. Westerberg that disability applications will be reviewed later in the meeting.

 

 

ROLL CALL

 

Members present:  Ms. Anderson, Ms. Knazze, Mr. Mayo, Ms. Nolan, Mr. O’Brill, Mr. O’Farrell, Dr. Pilditch, Ms. Reilly, Ms. Rodriguez, Mr. Saffold, Mr. Silver, Mr. Ward--12.

 

Members absent:  None.

 

Also in attendance were Mr. Michael J. Nehf (Executive Director), Mr. Kevin Huber (Chief Financial Officer), Mr. Joseph Burns and Ms. Gwendolyn Reeves of Jacobs, Burns, Orlove, Stanton and Hernandez (Legal Counsel), Ms. Stephanie Grieser and Ms. Kristin E. Conrad of Mercer Investment Consulting Inc. (Investment Consultant), Mr. Terry Ahern and Ms. Michele M. Dinn of the Townsend Group (Real Estate Consultant), Mr. Sandor Goldstein of Goldstein and Associates (Consulting Actuary), Mr. Mitch Bramstaedt and Mr. Andrew Sherman of the Segal Company (Insurance Consultant), Ms. Kathy Stevenson of the Northern Trust Company (Custodian), and various observers and staff members

 

 

REPORT OF THE REAL ESTATE

INVESTMENT CONSULTANT

 

Mr. Terry Ahern and Ms. Michele Dinn of the Townsend Group outlined the agenda for the day.  They briefed the Trustees on specific areas of discussion expected to rebalance and reconstitute the portfolio of core open-end commingled funds, and presented their recommendations.

 

 

Presentations of Core Open-End Commingled Fund

 

Presentations were made by representatives of the Prudential Real Estate Investors PRISA and PRISA II representing core open-end commingled fund managers.  Each presentation was followed by questions from the Trustees.

 

After the presentations were concluded, a motion was made by Mr. Silver, seconded by Mr. O’Brill, to move Townsend’s recommendation to retain PRISA I Fund at approximately $80 million, to adjust the portfolios of UBS RESA, TimeSquare Charter Fund, J. P. Morgan Strategic Property Fund so that each would be funded at approximately $80 million, and to redeem the SSR Tower Fund effective as soon as it can be implemented.  The motion passed by the following roll call vote:

 

Ayes:  Ms. Anderson, Ms. Knazze, Ms. Nolan, Mr. O’Brill, Mr. O’Farrell, Ms. Reilly, Ms. Rodriguez, Mr. Silver--8.

 

Nays:  Mr. Ward--1.

 

(Messrs. Mayo, Saffold, Dr. Pilditch were not present at the time the vote was taken.)

 

 

A motion was made by Mr. Silver, seconded by Mr. O’Farrell, to transfer $20 million from J. P. Morgan Special Situation Property Fund and to allocate the $20 million to PRISA II.  The motion passed by the following roll call vote:

 

Ayes:  Ms. Anderson, Ms. Knazze, Ms. Nolan, Mr. O’Brill, Mr. O’Farrell, Ms. Reilly, Ms. Rodriguez, Mr. Silver--8.

 

Nays:  None.

 

(Messrs. Mayo, Saffold, Ward, Dr. Pilditch were not present at the time the vote was taken.)

 

For the record, Mr. Silver requested the Townsend Group inform the full board of meeting agendas. 

 

 

Due Diligence Presentations of Real Estate Public REIT Managers

 

Presentations were made by representatives of LaSalle Investment Management and Morgan Stanley Dean Wittter Investment Management.

 

 

Introduction of Capri/Capital Advisors and

Due Diligence Presentation of Private Real Estate Manager

 

A presentation was made by representatives of the newly merged Capri/Capital Advisors.  The presentation was followed by questions from Trustees. 

 

 

REPORT OF THE INVESTMENT CONSULTANT

 

Lazard Asset Management Proposed Guideline Change

 

Ms. Stephanie Grieser of Mercer Investment Consulting, Inc. informed the Trustees on the Lazard Asset Management proposed guideline change.  Ms. Grieser addressed questions raised by the members of the Board of Trustees.

 

After further discussion, a motion was made by Mr. Silver, seconded by Mr. O’Brill, and unanimously passed, to allow Lazard the latitude to increase its maximum allocation to the international small fund to 15% for the following reasons:

 

·         Currently, Lazard has a maximum $1 billion market cap for inclusion within the international small cap fund.  They plan to increase this maximum to $5 billion.

·         The EAFE Index (Lazard’s index benchmark) has approximately 8% exposure to small cap investments less than $5 billion.

·         MSCI has announced that EAFE will be broadened to include about 85% of the investable universe of international equity stocks, and will move to a free float framework.  Given these changes, which are to occur over the next 12-18 months, Lazard estimates that the percentage invested in small cap stocks will increase to 15% (subject to market changes).

 

 

Commission Recapture Program

Chicago Based Brokerage Summary

 

Ms. Grieser met with Berean Capital Inc. and Melvin Securities Corp. to discuss the Fund’s commission recapture program, the overall directed brokerage program, and international brokerage.  In addition, Mercer met with Loop Capital to discuss their organizational structure and growth, execution capabilities, and experience within commission recapture and international brokerage programs. 

 

 

Commission Recapture Loop Capital Matter

 

Following discussion, a motion was made by Ms. Knazze, seconded by Mr. Silver, and unanimously passed, to invite Loop Capital to participate in the commission recapture program, pending negotiations and legal issues. 

 

 

REPORT OF THE LEGISLATIVE CONSULTANT

 

Legislative Update

 

Mr. Henry P. Anselmo of Henry R. Anselmo and Associates and Senator Robert Molaro telephoned from Springfield and updated the Trustees on the status of H.B. 2662.  They reported the major provisions of H.B. 2662 which already passed the House.

 

·         Increases from 100 days per year to 150 days per year the number of days a teacher may return to work as a teacher after retirement before his or her pension is cancelled or suspended. 

·         Provides that a person who retires on or after July 1, 1998 with at least 30 years of service at retirement may have that service converted to the augmented rate without paying any additional contribution. 

·         Grants additional benefits to persons who began receiving early retirement benefits in 1993 and provides for recalculation of current annuities. 

·         Allows a person who began receiving early retirement benefits in 1994 to purchase additional service credit for up to 3 weeks in 1968 during which time the person was prevented from working due to civil unrest.

·         Provides that a surviving spouse of a member or annuitant under the Chicago Teacher Article who is also a dependent beneficiary under the provisions of the Downstate Teacher Article is eligible for a reciprocal survivor’s pension provided that any refund of survivor’s pension contributions is repaid to the Fund and application is made within 30 days.

 

 

 

REPORT OF THE ACTUARY

 

Mr. Sandor Goldstein of Goldstein and Associates presented a summary on the potential impact of the recent stock market volatility on the Pension Fund.

 

He indicated that from the perspective of the participants of the Fund, recent stock market changes will not have any impact on the benefits provided.  This is because under a defined benefit plan such as the Public School Teachers’ Pension and Retirement Fund of Chicago, changes in investment return do not have any impact on the benefits provided.

 

The actuary also indicated that from the perspective of the employer, recent investment results will not have any immediate impact on the required employer contribution to the Fund.  Based on the funding plan that is currently in effect, no Board of Education contributions are required if the Fund’s funded ratio is at least 90%.  As of June 30, 2000, the funded ratio was 96.7%.  Since changes in market value are smoothed over a 4-year period, the impact of any current year market value fluctuation on the results of the valuation should not be substantial.

 

 

REPORT OF THE HEALTH INSURANCE CONSULTANT

 

Domestic Partner Medical Coverage Materials

To Retirees and Fund Office Staff Members

 

Mr. Andrew Sherman of The Segal Company presented and reviewed with the Trustees the first draft of the domestic partner medical coverage materials to retirees and fund office staff members.  The intended target date of implementation of this program is January 1, 2002.  Segal addressed questions raised by Trustees during their presentation. 

 

A second draft of the domestic partner medical coverage for retirees will be presented to the Board and attorney for their comments at a future meeting.

 

 

The Feasibility Study of Providing Dental Benefits to Retirees

 

Mr. Mitch Bramstaedt of The Segal Company presented and reviewed with the Trustees the first draft of the feasibility study of providing dental benefits to retirees.  Following review, Mr. Bramstaedt addressed questions raised by Trustees.  Segal will revisit this issue again in another six months to a year.

 

 

APPROVAL OF MINUTES

 

On a motion by Ms. Anderson, seconded by Ms. Knazze, and by unanimous vote, the minutes of the meetings on February 20, February 21, and March 15, 2001 were approved and ordered printed.

 

 

COMMUNICATIONS

 

In accordance with the Illinois Freedom of Information Act, a list of the Fund’s equity holdings per manager, total commissions report by each broker with average commission per share for each manager for the year ending December 31, 2000, and an invoice for the time involved in compiling this information was mailed to FDC, LLC on March 14, 2001.

 

 

 

 

REPORT OF COMMITTEE ON FINANCE

 

Reimbursement of the Contingent Account

 

The Committee on Finance reported that all bills, cancelled checks, bank statements and other supporting documents covering net expenditures of $29,675.04 for the period from February 1 through March 31, 2001, inclusive, were audited.

 

The Committee found that expenditures had been made properly.

 

The Committee further reported that as of March 31, 2001, the contingent account at the American National Bank has been closed.  Subsequent expenditures will be drawn on the cash account held with the City Treasurer and duly reported with the bills at each regular Trustee meeting.

 

 

Bills

 

The following bills were presented with the recommendation that they be approved.

 

 

Replacement Warrants

 

The Committee on Finance reported that the following persons requested replacement warrants in lieu of the following described warrants which were lost or destroyed.  Affidavits certifying these losses and in each case indemnifying the Fund against any liability, damage or expense which may result by reason of issuing such replacement warrants were duly filed.  Therefore, the Committee recommended that warrants issued to the persons named below in the amounts indicated be duly recorded in the minutes of this meeting.

  

Ms. Reilly moved the Report of the Committee on Finance to the omnibus.

 

 

REPORT OF COMMITTEE ON CLAIMS AND SERVICE CREDITS

 

Pensions

 

The Committee on Claims and Service Credits reported that applications for pensions were presented for persons, hereinafter listed, with the recommendation that they be approved and granted in the amounts and under the conditions set forth herewith.

 

 

In the case of each applicant for service and disability pensions, the employment of the teacher has terminated, the legally prescribed minimum years of teaching service were completed and requirements with respect to age, the Illinois Retirement Systems Reciprocal Act (if applicable), and the Illinois Pension Code were fulfilled.

 

In accordance with the provisions of the Illinois Pension Code, each applicant for disability retirement pension was declared by two physicians appointed by the Board to be suffering from a disability which wholly and presumably permanently incapacitates him/her for teaching.

 

Each applicant for a survivor’s or reversionary pension furnished proper evidence of his/her right to receive such benefits.

 

Cancellation of Pensions

 

The Committee on Claims and Service Credits reported that pursuant to the law, the pensions of the following persons were cancelled upon the date of attainment of legal age or under age 50.  The Committee recommended that the cancellations shown below be confirmed and reported in the proceedings of this meeting.

 

 

Revision in Rate of Pensions

 

The Committee on Claims and Service Credits reported that changes in salary credits after pensions were granted necessitate the following revisions. 

 

The Committee recommended that (1) these revisions be approved, (2) the records of the Fund be changed accordingly, and (3) adjustments be authorized for pension payment made prior to this date, as applicable.

 

 

Death Benefits

 

The Committee on Claims and Service Credits reported that documents pertaining to claims for death benefits were examined and verified, and recommended approval thereof.

 

In support of these claims, the Committee reported that death benefits are for persons whose dates of death were certified and whose heirs, beneficiaries, administrators or executors furnished proper evidence to receive such payments.

Refunds

 

The Committee on Claims and Service Credits reported that documents pertaining to claims for refunds, listed herewith, were examined and verified, and recommended approval thereof.

 

In support of these claims, the Committee reported that (1) the refunds of separation from service were for persons no longer employed as members of the teaching force... (2) refunds of contributions for survivor’s pensions were for members with no eligible survivors at the time of retirement... (3) refunds of excess contributions are for deductions outside of the statutory requirements and/or overpayments towards the 2.2 upgrade option and... (4) refunds of creditable service withdrawn are for previously validated optional service.

 

Outside Time

 

The Committee on Claims and Service Credits reported that affidavits, or other evidence attesting to or certifying service in the public schools of the several states or in schools operated by or under the auspices of the United States outside of the City of Chicago were presented for the persons hereinafter listed.

 

The Committee recommended that the service described be approved for pension credit provided that the last five years of the member’s service shall have been rendered in a position covered by this Fund, the State Universities Retirement System or the Teachers’ Retirement System of the State of Illinois; a maximum credit of ten years shall be reduced by credit for such service validated by the State of Illinois and three-fifths of the term of service for which an annuity is granted shall be in the public schools of the City.

 

Dr. Pilditch moved the Report of the Committee on Claims & Service Credits to the omnibus.

 

 

REPORT OF COMMITTEE ON INVESTMENTS

 

The Committee on Investments included the following reports subject to review and approval by the Board of Trustees with the recommendation that they be recorded in the proceedings of this meeting.

  

 Ms. Anderson moved the Report of the Committee on Investments to the omnibus.

 

 

REPORT OF FINANCIAL SECRETARY

 

Financial Statement

 

The Financial Secretary presented herewith a report on the Fund’s net assets, changes in net assets, and supporting reports for the eight-months ending February 28, 2001, with the recommendation that it be approved and printed in the proceedings of this meeting.

 

Ms. Reilly moved the Report of the Financial Secretary to the omnibus.

 

 

REPORT OF THE PRESIDENT

 

Matter of Information

 

President Reilly disclosed to the Trustees that she and Ms. Anderson attended the Institutional Investor Institute’s Public Funds Workshop and Roundtable in California.  She informed the Trustees that they are sponsoring a conference in Chicago in October.  She stated if the Trustees attended the Chicago conference it would not be counted as one of their trips.  She also informed the Trustees of other upcoming local conferences.

 

REPORT OF THE EXECUTIVE DIRECTOR

 

Fiduciary Liability Coverage/Indemnification

 

The Trustees deferred the Fiduciary Liability Coverage/Indemnification Report to a later date to be determined.

 

 

Retiree Health Insurance Fund

 

After some discussion, a motion was made by Ms. Anderson, seconded by Ms. Knazze, and unanimously passed, to set the health insurance rebate percentage at 85% for the fiscal year July 1, 2001 through June 30, 2002.

 

 

Removal of Trustee From Recording Minutes

 

After some discussion, a motion was made by Mr. O’Farrell, seconded by Mr. O’Brill, and unanimously passed, to amend the by-laws and rules to remove the obligation from the recording secretary from recording the minutes of the Pension Fund meetings.

 

 

Travel Expense Reimbursement Policy

 

After some discussion, a motion was made by Mr. Ward, seconded by Dr. Pilditch, to provide a reimbursement of $75 per day for the number of days the individual will be traveling on Fund business to amend the travel expense reimbursement policy effective July 1, 2001.  Mr. Ward withdrew his motion. 

 

The Trustees instructed Mr. Nehf to amend the travel expense reimbursement policy and make the recommended changes and present the policy to the Trustees at the next meeting for their approval.

 

After further discussion, a motion was made by Mr. Ward, seconded by Dr. Pilditch, and unanimously passed, to accept the entire report as amended including,  1) $10 per day for tips and miscellaneous, 2) an advance of the per diem when requested by an individual only if the individual has filed all previous expense reports and there are no outstanding amounts owed by the individual to the Fund, and 3) reimburse parking expenses up to the amount of a round trip of a limousine service.

 

 

REPORT OF THE ATTORNEY

 

Administrative Hearing in the Matter of Duty Disability Pension

of Karen Ochwat

 

The special disability committee has yet to meet with the Board of Trustees on the administrative hearing of Karen Ochwat because of additional required information.

 

 

Matter of Information

 

After numerous attempts at holding disability committee meetings for the benefit of teachers, and after numerous cancellations by teachers, and/or their attorneys, the Board agreed to allow these committee meetings (or meetings of the full board) on the afternoons of the scheduled special meetings (May 17, July 19, August 23, and October 18).

 

 

Disability Pension of James Westerberg Approved

 

The Trustees reviewed the disability application for James Westerberg.  Following discussion, a motion was made by Ms. Anderson, seconded by Ms. Rodriguez, to grant Mr. Westerberg’s request for a disability pension.   The motion passed by the following vote:

 

Ayes:  Ms. Anderson, Ms. Knazze, Mr. Mayo, Ms. Nolan, Mr. O’Brill, Mr. O’Farrell, Ms. Reilly, Ms. Rodriguez, Mr. Ward--9.

 

Nays:  Pilditch--1.

 

(Messrs. Saffold and Silver were not present at the time the vote was taken.)

 

 

Disability Pension of Ellen Strauss Deferred

 

 

The Trustees reviewed the disability application for Ellen Strauss.  Following discussion, a motion was made by Dr. Pilditch, seconded by Mr. Mayo, and unanimously passed, to instruct staff to further investigate and conduct due diligence.

 

(Messrs. Saffold and Silver were not present at the time the vote was taken.)

 

 

EXECUTIVE SESSION

 

A motion was made by Ms. Anderson, seconded by, Ms. Knazze, and unanimously passed, to enter in an executive session for the consideration of litigation matters.  The executive session lasted from 4:45 p.m. to 4:50 p.m.

 

Following executive session, a motion was made by Mr. O’Brill, seconded by Ms. Nolan, and unanimously passed, to resume the regular order of business.

 

(Messrs. Saffold and Silver were not present at the time the vote was taken.)

 

 

  OMNIBUS VOTE

 

On a motion by Mr. Ward, seconded by Ms. Nolan, the foregoing committee reports which were moved to the omnibus were approved.

 

ADJOURNMENT

 

On a motion by Ms. Rodriguez, seconded by Ms. Nolan, and passed unanimously, the meeting adjourned at 4:50 p.m.

                                                                                    Respectfully submitted,

 

                                                                                    Maria  J. Rodriguez

                                                                                    Recording Secretary

 

April 24                                                                                                          2001  

 

REPORT OF THE PROCEEDINGS

 

OF THE

 

Board of Trustees

 

OF THE

 

Public School Teachers’ Pension and

Retirement Fund of Chicago

 

____

 

Executive Session - Official Report

 

Tuesday, April 24, 2001

 

____

 

 

An executive session of the Board of Trustees of the Public School Teachers’ Pension and Retirement Fund of Chicago was held Tuesday, April 24, 2001.

 

The President, Ms. Mary Sharon Reilly, called the meeting to order at 4:45 p.m. with the following members present:  Ms. Anderson, Ms. Knazze, Mr. Mayo, Ms. Nolan, Mr. O’Brill, Mr. O’Farrell, Dr. Pilditch, Ms. Reilly, Ms. Rodriguez, Mr. Ward--10.

 

(Messrs. Saffold and Silver were not present at the time roll call was taken.)

 

Also in attendance were Mr. Michael J. Nehf (Executive Director), Mr. Kevin Huber (Chief Financial Officer), Mr. Joseph Burns and Ms. Gwendolyn Reeves of Jacobs, Burns, Orlove, Stanton, and Hernandez (Legal Counsel).

 

Discussion ensued regarding litigation matters.  No further action was taken.

 

There being no further business, the executive session was adjourned at 4:50 p.m.

 

                                                                                   Respectfully submitted

 

                                                                                   Maria J. Rodriguez

                                                                                   Recording Secretary