A regular meeting of the Board of Trustees of the Public School Teachers' Pension and Retirement Fund of Chicago was held Tuesday, September 11, 2001.

Members present: Ms. Anderson, Ms. Knazze, Mr. O'Brill, Mr. O’Farrell, Dr. Pilditch, Ms. Reilly, Mr. Silver, Mr. Ward--8.

Also in attendance were Mr. Michael J. Nehf (Executive Director), Mr. Kevin Huber (Chief Financial Officer), Ms. Marisel Hernandez of Jacobs, Burns, Orlove, Stanton and Hernandez (Legal Counsel), Mr. Brad Blalock of Mercer Investment Consulting, Inc. (Investment Consultant), Ms. Michele Dinn of The Townsend Group (Real Estate Consultant) Mr. Sandor Goldstein of Goldstein and Associates (Consulting Actuary), Mr. Eugene Barnes of E. M. Barnes and Associates (Legislative Consultant), Ms. Kathy Stevenson of the Northern Trust Company (Custodian), and various observers and staff members.

APPROVAL OF MINUTES

On a motion by Ms. Anderson, seconded by Mr. O’Farrell, and by unanimous vote, the minutes of the meetings on June 11, June 25, July 19, and August 23, 2001, were approved and ordered printed.

COMMUNICATIONS

Mr. Nehf reported receipt of a request under the Illinois Freedom of Information Act. He indicated that the Fund has complied with the request of the Chicago Sun-Times, Inc. relating to Pension Fund assets, investments, and membership.

REPORT OF THE LEGISLATIVE LOBBYIST

Mr. Eugene M. Barnes of E.M. Barnes and Associates updated the Trustees on House Bill 2157 which was recently signed by Governor George H. Ryan and is now Public Act 92-0416. Mr. Barnes addressed questions raised by Trustees.

ADJOURNMENT

Following the report of the legislative lobbyist, the 55 W. Wacker Building was evacuated due to the terrorist attacks against the United States. The meeting was immediately adjourned.

September 21 2001

REPORT OF THE PROCEEDINGS

OF THE

Board of Trustees

OF THE

Public School Teachers' Pension and

Retirement Fund of Chicago

__________

Continued Regular Meeting - Official Report

Friday, September 21, 2001

__________

The regular meeting of September 11, 2001 of the Board of Trustees of the Public School Teachers' Pension and Retirement Fund of Chicago was continued on Friday, September 21, 2001.

The President, Ms. Mary Sharon Reilly, called the meeting to order at 9:15 a.m.

ROLL CALL

Members present: Ms. Anderson, Ms. Knazze, Ms. Nolan, Mr. O'Brill, Mr. O’Farrell, Dr. Pilditch, Ms. Reilly, Ms. Rodriguez, Mr. Saffold, Mr. Silver, Mr. Ward--11.

Members absent: Mr. Mayo--1.

Also in attendance were Mr. Michael J. Nehf (Executive Director), Mr. Kevin Huber (Chief Financial Officer), Mr. Joseph Burns of Jacobs, Burns, Orlove, Stanton and Hernandez (Legal Counsel), Mr. Brad Blalock of Mercer Investment Consulting, Inc. (Investment Consultant), Mr. Sandor Goldstein of Goldstein and Associates (Consulting Actuary), Mr. Mitch Bramstaedt of The Segal Company (Insurance Consultant), Ms. Kathy Stevenson of the Northern Trust Company (Custodian), and various observers and staff members.

REPORT OF THE INVESTMENT CONSULTANT

Motion Requesting Disclosures from Investment Consultant Approved

A motion was made by Ms. Rodriguez, seconded by Ms. Anderson, and unanimously passed, that Mercer Investment Consulting, Inc., reveal in writing within five business days, all Fund money managers ever attending a Mercer Global Forum. Further, that Mercer also reveal all finalists in all future searches, whether or not they have participated in any Mercer Global forum. (Ms. Knazze and Mr. Saffold were not present at the time the vote was taken.)

Update on Mercer Investment Consulting, Inc. New York Personnel

Mr. Brad Blalock of Mercer Investment Consulting, Inc. updated the Trustees on the status of Mercer’s New York personnel in the wake of the terrorist attacks on September 11, 2001.

Investment Performance Evaluation

Mr. Blalock reviewed the investment performance evaluation for the period ended June 30, 2001. He addressed questions raised by Trustees.

Review of Communication from Trustee

Mr. Silver distributed a memorandum addressed to Trustees regarding Mercer Investment Consulting, Inc. During review of his memorandum, Mr. Silver proposed several motions which failed, due to a lack of a second.

REPORT OF THE ACTUARY

Mr. Sandor Goldstein of Goldstein and Associates indicated that House Bill 2157, which was signed into law on August 17, 2001 as Public Act 92-0416 made a number of changes in the benefit provisions of the Fund. He provided cost estimates for those benefit changes that have a significant financial impact on the Fund.

Mr. Goldstein also stated that the recently enacted tax bill (Economic Growth and Tax Relief Reconciliation Act of 2001) contains a number of pension changes applicable to governmental retirement plans. He provided a summary of the pension changes that may be of interest to the Fund.

REPORT OF COMMITTEE ON FINANCE

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.

Mr. Silver 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. 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 payments 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 were 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 on separation from service are for persons no longer employed as members of the teaching force...(2) refunds of contributions for survivor’s pensions are 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. These reports shall be recorded in the proceedings of this meeting.

The Committee on Pension Law and Rules reported that the General Assembly enacted legislative measures affecting the Fund.

The committee recommended that the following report on the 2001 Pension Legislation be approved and printed in the proceedings of this meeting:

House Bill 3440 (Public Act 92-008)--appropriates $65,044,700 for the Public School Teachers’ Pension and Retirement Fund of Chicago for the 2002 fiscal year.

House Bill 3440 (Public Act 92-008)--appropriates $50,000 for the Retired Teachers’ Supplementary Payment for the 2002 fiscal year.

House Bill 2157 (Public Act 92-0416)--was signed by the Governor on August 17, 2001, thus providing for the following:

· Provides additional benefits to teacher pensioners who began receiving 1993 5+5 early retirement benefits and provides for retroactive calculation of their annuities payable in a lump sum and in an increased annuity.

· Increases from 100 days per year to 150 days per year the number of days a teacher pensioner may return to work as a substitute teacher (earning the equivalent of substitute teacher pay) before his or her pension is cancelled or suspended.

· Provides that a teacher member who retires on or after the effective date of this law with at least 30 years of creditable service at retirement may have such converted to the 2.2 augmented rate without paying additional employee contributions to the Pension Fund. A teacher member who has previously paid or is currently paying for the 2.2 upgrade will be paid a refund of such contributions along with interest at the time of his or her retirement.

· Provides that a pensioner member who retired on or after July 1, 1998 with at least 30 years of creditable service and who chose not to upgrade to the 2.2% augmented rate shall be paid an increased annuity as well as a lump sum equal to the amount he or she would have received under the 2.2% augmented rate minus the amount he or she actually received under the step rate formula retroactive to the later of July 1, 1998 or his or her date of retirement.

· Provides that a pensioner member who retired on or after July 1, 1998 with at least 30 years of creditable service and who paid contributions in order to upgrade to the 2.2 augmented rate will be paid a lump sum refund of such contributions.

· Provides that a teacher pensioner who began receiving 1994 5+5 retirement benefits may purchase additional service credit of up to 3 weeks during the month of January 1968, during which the member was prevented from working due to civil unrest or a wildcat strike. A pensioner wishing to establish this credit must apply in writing to the pension office within 30 days after the effective date of this law and pay to the pension fund additional employee contributions. After such time that such additional service credit is established with the pension fund, the fund shall recalculate the pension originally granted in order to reflect the additional service credit and pay to the pensioner an increased annuity as well as in a lump sum the difference in such pension amounts retroactive to the original date of retirement.

· Provides that a surviving spouse of a teacher or pensioner who is also a dependent beneficiary under the provisions of the Teacher Retirement System of Illinois is eligible for a reciprocal survivor’s pension, provided that any refund of survivor’s pension contributions is repaid to the pension fund and application is made within 30 days after the effective date of this law.

Fiscal Year 2002 Legislative Proposals Adopted

The Trustees reviewed the Pension Fund’s 2000-01 legislative program prior to composing the 2001-02 legislative proposals.

Following review, a motion was made by Mr. Ward, seconded by Dr. Pilditch, and unanimously passed, to add to the legislative agenda a provision to remove post retirement teaching restrictions, subject to appropriate wording and actuarial analysis of supplemental pension benefits for returning retirees. (Ms. Knazze was not present at the time the vote was taken.)

A motion was then made by Mr. O’Brill, seconded by Ms. Rodriguez, and unanimously passed, to adopt the following fiscal year 2002 legislative proposals as amended. (Ms. Knazze was not present at the time the vote was taken.)

Mr. O’Brill moved the Report of the Committee on Pension Law & Rules to the omnibus.

The Financial Secretary presented herewith a report on the Fund’s net assets, changes in net assets, and supporting reports for the year ended June 30, 2001, with the recommendation that it be approved and printed in the proceedings of this meeting.

REPORT OF THE PRESIDENT

Retention of the Investment Consultant

President Reilly presented the Fund’s current investment consultant service agreement for review. The agreement detailed the scope of advisory services provided by Mercer Investment Consulting, Inc.

A motion was made by Ms. Anderson, seconded by Ms. Rodriguez, to extend the current investment consultant service agreement with Mercer Investment Consulting Inc. for a term of two years, beginning January 1, 2002. The motion passed by the following roll call vote:

Ayes: Ms. Anderson, Ms. Nolan, Mr. O’Brill, Mr. O’Farrell, Dr. Pilditch, Ms. Reilly, Ms. Rodriguez—7.

REPORT OF THE EXECUTIVE DIRECTOR

Teacher-Trustee Election Location and Stipend Approved

Mr. Nehf proposed an alternate drop-off location for returning ballot boxes and conducting the teacher-trustee election due to the Wacker Drive construction. He indicated that the ballots would later be delivered to the Pension Office and tallied. He also recommended an increase in the stipend for returning each ballot box to $15.00.

A motion was made by Ms. Anderson, seconded by Ms. Rodriguez, and unanimously passed, to increase the ballot box return stipend from $10.00 to $15.00, and to use Plumbers Hall as an alternate ballot drop off location for the purpose of conducting the teacher-trustee election.

Mr. Mitch Bramstaedt of The Segal Company presented and reviewed with the Trustees a long-term care discussion guide. Following review and discussion, Mr. Bramstaedt addressed questions raised by Trustees. The Trustees invited Ms. Karen Paul of The Segal Company to a future Board meeting for further discussion on long-term care programs.

Mr. Bramstaedt presented and reviewed with the Trustees the proposal for comprehensive claims auditing services. Following review, Mr. Bramstaedt addressed questions raised by Trustees.

A motion was made by Mr. Ward, seconded by Mr. O’Brill, and unanimously passed, to accept Segal’s recommendation to audit sample groups (non-Medicare and Medicare) for the BCBS PPO and HMO plans at a cost not to exceed $49,500. The motion passed by the following roll call vote:

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

A motion was made by Dr. Pilditch, seconded by Mr. O’Brill, and unanimously passed, to enter into executive session for the consideration of personnel and litigation issues. The executive session lasted from 1:20 p.m. to 2:10 p.m.

Following executive session, a motion was made by Mr. Ward, seconded by Ms. Rodriguez, and unanimously passed, to resume the regular order of business.

Mr. Joseph Burns of Jacobs, Burns, Orlove, Stanton and Hernandez, discussed with the Trustees various legal issues. After discussion, a motion was made by Dr. Pilditch, seconded by Mr. O’Farrell, and unanimously passed, to approve the legal settlements for deceased annuitants, Dorothy Fredericks, Mary Hearne, LaSalle Bank in the Margaret D. Gaethke matter, and to reject the proposed settlement offered by Lenice Vierra in the Gaethke matter.

CONTINUATION OF THE REPORT OF THE EXECUTIVE DIRECTOR

A motion was made by Mr. O’Brill, seconded by Ms. Nolan, to approve terms of the sublease of the 12^th floor, 55 West Wacker Drive, subject to final negotiations and legal review by fund legal counsel. The motion passed by the following roll call vote:

Ayes: Ms. Anderson, Ms. Nolan, Mr. O’Brill, Mr. O’Farrell, Dr. Pilditch, Ms. Reilly, Ms. Rodriguez, Mr. Silver—8.

A motion was made by Dr. Pilditch, seconded by Mr. O’Farrell, to approve items 1-5 of the scheduled salary increases effective October 1, 2001 as adjusted for the 10% increase for the part time subs.

Ayes: Ms. Anderson, Ms. Nolan, Mr. O’Brill, Mr. O’Farrell, Dr. Pilditch, Ms. Reilly, Ms. Rodriguez, Mr. Silver—8.

Mr. Nehf updated the Trustees on the 1993 5+5 project. Mr. Nehf advised the Trustees of the future mailing being sent to 2,600 teacher pensioners receiving 1993 5+5 early retirement benefits in the form of a lump sum payment (recalculation of the benefit retroactive to the date of retirement) as well as a higher monthly pension. He also discussed special tax notice regarding plan payments.

On a motion by Mr. Silver, seconded by Ms. Knazze, and unanimously passed, the foregoing committee reports which were moved to the omnibus were approved.

On a motion by Mr. Silver, seconded by Dr. Pilditch, and passed unanimously, the meeting adjourned at 2:30 p.m.

An executive session of the Board of Trustees of the Public School Teachers’ Pension and Retirement Fund of Chicago was held Friday, September 21, 2001.

The President, Ms. Mary Sharon Reilly, called the meeting to order at 1:20 p.m. with the following members present: Ms. Anderson, Ms. Knazze, Ms. Nolan, Mr. O’Brill, Mr. O’Farrell, Dr. Pilditch, Ms. Reilly, Ms. Rodriguez, Mr. Silver, Mr. Ward--10.

Also in attendance were Mr. Michael J. Nehf (Executive Director), Mr. Joseph Burns of Jacobs, Burns, Orlove, Stanton, and Hernandez (Legal Counsel).

Discussion ensued regarding personnel and litigation issues. No further action was taken.

There being no further business, the executive session was adjourned at 2:10 p.m.