Month: July 2014

Belinda Vega Elected New Board President On July 17, 2014, Belinda Vega was elected as the new President of the Board of Fire and Police Pension Commissioners. Ms. Vega was originally appointed to the Board on December 5, 2012 and succeeds Ruben Navarro, who served as Board President since July 2013. As President of the Board, Ms. Vega will preside over the Board’s primary responsibility to oversee the administration of the pension system; its assets, investments, actuarial services, rules and regulations. Additionally, the Board President provides leadership in furthering the mission of LAFPP “to advance the health and retirement security of those who dedicate their careers to serve and protect the people of Los Angeles” and the delivery of professional and prompt service to over 25,000 active and retired members.

As President, Ms. Vega will exercise the following duties:

• Appoint members to committees;
• Approve the Board agenda; Preside at all Board meetings, ensuring that such meetings are conducted in an efficient manner and in accordance with the City Charter and Administrative Code, applicable public meeting laws, and relevant Board policies, including utilizing Robert’s Rules of Order as a guideline in conducting meetings;
• Determine who shall act as spokesperson for the System should the need arise; and,
• Approve the travel expenses incurred by the General Manager and the Board, as appropriate.

In addition, Robert von Voigt was elected Vice President of the Board. The Vice President assumes the duties of the President when the President is absent or if the President delegates to the Vice President to act. The Vice President also assumes the duties of the President if the President becomes unable to carry out his or her duties due to death, resignation, removal from office, or permanent disability. Mr. von Voigt was appointed to the Board on December 1, 2008 and succeeds Ms. Vega, who served as the Board’s Vice President since December 2013.

The Board consists of nine members, of which Ms. Vega is one of the five members appointed by the Mayor. Mr. von Voigt is one of the four members elected by active and retired plan members.

On July 17, 2014, the Board of Fire and Police Pension Commissioners approved the Plan actuary’s recommendation to lower the investment return assumption from 7.75% to 7.50%.  This action will help ensure the long-term viability of the Plan to properly fund the benefits for the Plan’s members.
The Segal Company, the Plan’s actuary, presented its findings from its review of the economic assumptions to the Board and recommended that the investment return assumption be reduced to 7.50%, primarily due to a continued decline in inflation over the past two decades.  (The assumption was previously lowered in 2010 from 8.00% to 7.75%.)
The investment return assumption is the expected long term rate of return on the Plan’s investments, after expenses.  One component of this assumption is the inflation assumption, which was lowered from 3.50% to 3.25% due to the low inflationary economic environment.  The “across-the-board” salary increase assumption was also reduced from 4.25% to 4.00% to be consistent with the recommended inflation assumption.
In addition to the economic assumptions, the Board reviewed and adopted the findings and recommendations detailed in The Segal Company’s triennial Actuarial Experience Study covering July 1, 2010 through June 30, 2013.  This study compares the Plan’s actual experience to the non-economic (or demographic) assumptions previously adopted by the Board.  Based on the Plan’s experience, the Board adopted the actuary’s recommendations to adjust various assumptions such as retirement rates, mortality rates and disability incidence rates. 
Adoption of the economic and non-economic assumptions is expected to have less than a 1.0% impact on the City’s contribution to the Plan. Other recent experience may also help mitigate the impact to the City’s contribution rate from lowering the assumed rate of return. 
It is important to note that the actuarial assumptions do not determine the “actual cost” of the plan.  The actual cost is determined by the benefits and administrative expenses paid, offset by contributions and investment income received.  The use of realistic actuarial assumptions is critical in maintaining adequate plan funding, while fulfilling benefit commitments to LAFPP members already retired and to those nearing retirement.  Accurate actuarial assumptions aid in achieving equity across generations of taxpayers.  The goal is to fund employees’ benefits while they are rendering service and taxpayers are receiving services from those employees.