SAN DIEGO CITY EMPLOYEES` RETIREMENT SYSTEM

SAN DIEGO CITY EMPLOYEES’ RETIREMENT SYSTEM
POPULAR ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
A DEFINED BENEFIT PENSION PLAN TRUST FOR EMPLOYEES OF
THE CITY OF SAN DIEGO, THE SAN DIEGO UNIFIED PORT DISTRICT
AND THE SAN DIEGO COUNTY REGIONAL AIRPORT AUTHORITY.
A FIDUCIARY COMPONENT UNIT OF THE CITY OF SAN DIEGO
I NTR O D U CTI O N
SDCERS is pleased to present the fiscal year
Contributions in FY 2015, continuing their strong
2015 Popular Annual Financial Report (PAFR)
commitment to adequately funding plan benefits.
to members from our three plan sponsors –
Proposition B, approved by the City of San Diego
the City of San Diego, the San Diego Unified
voters in 2012, closed the defined benefit retirement
Port District and the San Diego County
plan to City employees hired after the effective date,
Regional Airport Authority.
other than for sworn police officers. On December
The information provided in this PAFR is a
29, 2015, the California Public Employment Relations
snapshot of the detailed information contained
Board issued a ruling finding the City failed to meet
in the Comprehensive Annual Financial Report
and confer with the unions before the Prop B ballot
(CAFR). The PAFR provides a concise summary
measure went to the voters. At the time of this
of SDCERS financial health, investment
publication, Proposition B is still the law pending any
performance and key accomplishments
further appeals by the City or its labor unions before
throughout the fiscal year. For more in-depth
the court. SDCERS will continue to monitor
information, we encourage you to read the
developments on the issue and work with the City on
CAFR by visiting www.sdcers.org and clicking
the outcome of any court proceedings.
on the Publications tab.
I would like to express my thanks to the Board of
SDCERS reported a 3.3% investment return (net of
Administration, Audit Committee and SDCERS staff
fees) for FY 2015, which met our policy benchmark
who work steadfastly in the best interest of our plan
for the year but fell short of the system’s actuarially
sponsors and members. This year’s accomplishments
assumed 7.25% return. Longer-term results remain
would not be possible without their commitment and
strong; annualized returns were 11.0% over the past
leadership. Their dedication ensures our plan sponsors,
three years, 11.4% over the past five years, and 7.0%
members and the citizens of San Diego are well-
over the past 10 years, which is in the top 12% for
served.
public pension plans. The long-term focus is key, as
SDCERS looks forward to continuing its mission to
our goal is to ensure we continue to have sufficient
deliver accurate and timely retirement benefits to its
assets to pay benefits not only for our current retirees,
members based on a disciplined investment strategy
but for our active members when they retire, too.
in the coming year.
SDCERS engages an independent actuary to conduct
Sincerely,
annual actuarial valuations. The June 30, 2014
actuarial valuations, the most recent available, show
that the City’s plan is 74.2% funded, the Unified Port
District’s plan is 76.9% funded and the Airport
Mark A. Hovey
Authority’s plan is 95.9% funded. All three plan
Chief Executive Officer
sponsors paid 100% of their Actuarially Determined
1
ACTUAL ASSET ALLOCATION
GROWTH OF INVESTMENTS, AT FAIR VALUE
As of June 30, 2015
For Ten Years Ended June 30, 2015
Domestic Equity
26.5%
International Equity
16.2
Global Equity
4.8
Emerging Market Equity
0.9
Domestic Fixed Income
22.8
Emerging Market Debt
4.3
$7,000
$6,000
$5,000
$4,000
Real Estate
10.0
$3,000
Private Equity and Infrastructure
10.6
$2,000
Opportunity Fund
2.6
$1,000
Cash
1.3
Total
100.0%
2014
HISTORICAL INVESTMENT PERFORMANCE Periods Ending June 30th
24.2%
25.00%
16.8%
16.5%
15.00%
13.6%
13.4%
12.8%
3.3%
5.00%
0.9%
-5.00%
-4.7%
-15.00%
-19.1%
-25.00%
2006
2007
2008
SDCERS’ Current Assumption Rate is 7.25%
2009
2010
2011
2012
Total Fund*
2013
2014
2015
* Total
Fund returns
are shown net
of investment
management fees
beginning FY 2011.
Returns prior to
FY 2011 are gross
of investment
management fees.
I NVE STM E NTS
SDCERS’ investment team, working
with BlackRock, reviewed SDCERS’
Rebalancing Model. The Rebalancing
Model is a tool that is used to ensure
compliance with SDCERS’ target
allocation. The Model triggers sales of
assets that have risen in price and buys
of assets that have fallen in price. It was
determined that the current Model is not
only cost-effective but also efficient and
that no changes were necessary.
The investment team completed a search
for general investment consulting
services. Staff participated in the review
of responses to the Request for Proposal
and in-house presentations. Aon Hewitt,
the incumbent, was unanimously rehired
by the Board of Trustees based upon the
strong relationship and the good work
that they had already accomplished.
2
The investment team, with Aon Hewitt,
continued to evaluate potential new ideas
for the Opportunity Fund. The goal of the
Opportunity Fund is to invest in strategies
that may generate potential strong returns
and/or provide additional diversification.
Staff and Consultant continue to look at
strategies that may be a good fit for
SDCERS’ portfolio.
FI NAN C IALS
STATEMENT OF PLAN NET POSITION
As of June 30 (Dollars in Thousands)
2015
City of San Diego Unified Port District
$108,844
$13,986
143,416
8,491
6,434,940
364,598
192,680
11,192
6,406
382
$6,886,286
$398,649
316,612
17,648
192,961
11,207
$509,573
$28,855
Cash & Cash Equivalents
Receivables
Investments, at Fair Value
Securities Lending Cash Collateral
Capital Assets and Prepaid Expenses
TOTAL ASSETS
Current Liabilities
DROP Liabilities
Securities Lending Obligations
TOTAL LIABILITIES
PLAN NET POSITION
$6,376,713
$369,794
2014
2013
Airport Authority
$17,922
2,945
123,813
4,073
139
$148,892
6,299
4,077
$10,376
Total
$140,752
154,852
6,923,351
207,945
6,927
$7,433,827
340,559
208,245
$548,804
Total
$240,528
63,615
6,680,200
198,398
6,954
$7,189,695
218,915
198,688
$417,603
Total
$237,090
214,194
5,780,277
190,851
5,030
$6,427,442
422,766
490,931
191,363
$1,105,060
$138,516
$6,885,023
$6,772,092
$5,322,382
This table depicts a summary presentation of the assets and liabilities of SDCERS and reflects the resources available to pay benefits to members and beneficiaries at the end
of the fiscal year. The Statement of Plan Net Position is presented with a more detailed analysis in SDCERS' Comprehensive Annual Financial Report (CAFR).
STATEMENT OF CHANGES IN PLAN NET POSITION
For the years ended June 30 (Dollars in Thousands)
2015
Plan Sponsor Contributions
Member Contributions and Other Contributions
DROP - Contributions
Net Investment Earnings
TOTAL ADDITIONS
Benefit Payments
Refunds of Member Contributions
Administrative Expenses
DROP Interest Expense
TOTAL DEDUCTIONS
CHANGES IN PLAN NET POSITION
NET POSITION AT JULY 1*
City of San Diego Unified Port District
$265,660
$14,321
56,643
3,624
4,800
251
207,653
12,064
$534,756
$30,260
402,242
21,191
4,489
114
8,693
691
22,507
471
$437,931
$22,467
96,825
7,793
6,279,888
362,001
NET POSITION AT JUNE 30
$6,376,713
2014
2013
Airport Authority
$3,823
2,836
79
4,390
$11,128
2,322
122
332
39
$2,815
8,313
130,203
Total
$283,804
63,103
5,130
224,107
$576,144
425,755
4,725
9,716
23,017
$463,213
112,931
6,772,092
Total
$294,888
69,998
5,066
1,007,011
$1,376,963
381,468
2,742
11,528
22,446
$418,184
958,779
5,813,313
Total
$246,943
74,600
0
715,478
$1,037,021
382,060
4,064
12,979
26,044
$425,147
611,874
4,710,508
$138,516
$6,885,023
$6,772,092
$5,322,382
$369,794
This table reflects the financial activity of SDCERS for the fiscal year and presents information to illustrate how SDCERS' fiduciary net position changes as a result of this activity.
Contributions from both Sponsors and Members, and Net Investment Earnings are the main additions to the pension system. The payment of retirement benefits accounts for the
majority of deductions from the trust funds. This is a summarized version of the data presented and analyzed in SDCERS' CAFR.
*Beginning Net Position for the City, Port and Airport at July 1, 2013 was restated due to the implementation of GASB Statement No. 67.
FUNDED RATIO AND UNFUNDED ACTUARIAL LIABILITY (UAL)
As of June 30
Plan Sponsor
2014
2013
2012
2011
2010
City of San Diego
Funded Ratio
UAL (billions)
74.2%
$2.0
70.4%
$2.2
68.6%
$2.3
68.5%
$2.2
67.1%
$2.2
Unified Port District
Funded Ratio
UAL (millions)
76.9%
$100.0
73.7%
$107.7
72.7%
$104.2
73.1%
$95.5
75.3%
$76.7
Airport Authority
Funded Ratio
UAL (millions)
95.9%
$5.3
93.4%
$7.6
98.5%
$1.4
102.7%
$(2.3)
96.0%
$3.0
The chart summarizes key information from the most current independent actuarial valuation performed for SDCERS. The Funded Ratio is the relative percentage of actuarial assets to actuarial
liabilities. The UAL (Unfunded Actuarial Liability) is the difference in dollars between actuarial assets and actuarial liabilities. Data for FY 2014 is the most recent available from SDCERS’ actuary.
Agency funds that do not represent the assets of SDCERS are excluded from the financial summary.
3
S E LECTE D AC C O M PLI S H M E NTS
INVESTMENT ACHIEVEMENTS AND RECOGNITION
In April 2015, SDCERS won the
Investor Intelligence Award for
excellence in private equity. The
Investor Intelligence Awards
recognize the most outstanding and
innovative public pension plans in
North America. SDCERS’ award
was voted on by approximately 800
peers and institutional investment
firms and is a great honor for the
system. Again in June 2015,
SDCERS was recognized by
PitchBook (a private markets
database aggregator), who reported
that StepStone’s Atlantic Fund and
Grosvenor’s Pacific Fund (SDCERS’
two private equity funds) were the
two top funds with a vintage year
of 2009, when SDCERS’ private
equity program began.
SEMINARS, OUTREACH AND
IMPROVED COMMUNICATION
SDCERS is always looking to
improve communications to
members. Member Services
scheduled and presented at least
two seminars per month beginning
January 2015. Seminars were
geared toward an overview of the
retirement process. Staff developed
a tool with the new pension
operating system to automate
tracking of seminar attendance,
which averages full capacity.
SDCERS has also improved
accessibility to Board meetings.
Members can view videos of Board
meetings on the SDCERS YouTube
Channel, which can be viewed from
any web browser.
IMPROVEMENTS TO WEBSITE AND MEMBER PORTAL
To gauge the success of the newly
designed website introduced in the
summer of 2014, a member survey
was conducted and initial results
were analyzed by SDCERS staff in
January 2015. The website
experience includes a Member Portal
where members can access their
personal information. Generally, the
survey revealed members were
pleased with the website redesign
and with the ability to navigate
through the website to find the
information sought. Member
suggestions to improve the Portal
login process were addressed.
Member Services continues to
monitor website survey results
to identify areas of improvement.
BY THE NUMBERS
SDCERS’ Call Center answered
more than 37,000 calls, and the
average member waited less than
35 seconds to speak to a helpful
representative. 25% of all calls to
SDCERS are answered by the
informative introductory message,
which is also repeated through web
and social media communications.
Since the inception of the new
Member Portal a year ago, 47% of
SDCERS members have registered
to access their account information
online. 55% of routine member
transactions for address updates, tax
withholding changes, and beneficiary
updates are handled on the site, a
more efficient and faster process
than submitting paper forms.
SDCERS’ counselors conducted
1,747 individual counseling
sessions covering topics such as
the Deferred Retirement Option
Plan (DROP), service retirement,
purchase of service credit,
termination and disability. In
addition to counseling sessions,
28 educational seminars were
offered to expand SDCERS’
outreach and ensure members
are properly informed.
4
SDCERS MEMBERSHIP
AS OF JUNE 30, 2015
CI T Y OF S AN DI EGO
Active & Inactive Members:
9,948
Retired Members & DROP Participants:
9,103
U N I F I E D P ORT D I STR ICT
Active & Inactive Members:
660
Retired Members & DROP Participants:
537
AI R P ORT AU T H O R IT Y
Active & Inactive Members:
Retired Members & DROP Participants:
468
76
TOTAL SDCERS MEMBERSHIP 20,792
401 West A Street, Suite 400
San Diego, CA 92101
This Popular Annual Financial Report (PAFR) is a summary
depiction of SDCERS’ audited financial statements and other
information contained in SDCERS’ Comprehensive Annual
Financial Report (CAFR). The complete audited financial
statements and pertinent notes to the financial statements can
be found in SDCERS’ 2015 CAFR. SDCERS’ PAFR provides
summary financial information and does not conform to Generally
Accepted Accounting Principles (GAAP); the SDCERS’ CAFR
conforms to GAAP and provides a comprehensive overview of
the System’s financial and operating results.
SDCERS’ CAFR is available for review at www.sdcers.org
within the “Publications” section or at the SDCERS office.
facebook.com/SanDiegoCityEmployeesRetirementSystem
linkedin.com/company/sdcers
@SDCERS