agenda - los angeles fire and police pensions · trend rate of 6.75% for the fiscal year (fy...

An opportunity for the public to address the Board or Committee about any item on today’s agenda for which there has been no previous opportunity for public comment will be provided before or during consideration of the item. Members of the public who wish to speak on any item on today’s agenda are requested to complete a speaker card for each item they wish to address, and present the completed card(s) to the commission executive assistant. Speaker cards are available at the commission executive assistant’s desk. In compliance with Government Code Section 54957.5, non-exempt writings that are distributed to a majority or all of the Board or applicable Committee of the Board in advance of their meetings may be viewed at the office of the Los Angeles Fire and Police Pension System (LAFPP), located at 360 East 2nd Street, 4th Floor, Los Angeles, California 90012, or by clicking on LAFPP’s website at www.lafpp.com, or at the scheduled meeting. Non-exempt writings that are distributed to the Board or Committee at a scheduled meeting may be viewed at that meeting. In addition, if you would like a copy of any record related to an item on the agenda, please contact the commission executive assistant, at (213) 978-4555 or by e-mail at [email protected]. Sign language interpreters, communication access real-time transcription, assistive listening devices, or other auxiliary aids and/or services may be provided upon request. To ensure availability, you are advised to make your request at least 72 hours prior to the meeting you wish to attend. Due to difficulties in securing sign language interpreters, five or more business days notice is strongly recommended. For additional information, please contact the Department of Fire and Police Pensions, (213) 978-4545 voice or (213) 978-4455 TDD. A. ITEMS FOR BOARD ACTION

1. CONSIDERATION OF ASSUMPTIONS FOR THE JUNE 30, 2015 RETIREE HEALTH ACTUARIAL VALUATION AND POSSIBLE BOARD ACTION

2. GOVERNMENTAL ACCOUNTING STANDARDS (GAS) 68 ACTUARIAL VALUATION

AS OF JUNE 30, 2015; GOVERNMENTAL ACCOUNTING STANDARDS BOARD (GASB) STATEMENT NO. 68 REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2014; AND POSSIBLE BOARD ACTION

3. APPROVAL OF PROPOSED BOARD RULE 5.9 – FORFEITURE OF UNCLAIMED

FUNDS TO THE PLAN AND POSSIBLE BOARD ACTION 4. TRANSFER OF FUNDS FOR PURCHASE OF NEW MICROFICHE/MICROFILM

MACHINE AND POSSIBLE BOARD ACTION

AGENDA

BOARD OF FIRE AND POLICE PENSION

COMMISSIONERS

September 3, 2015 8:30 a.m.

Los Angeles Times Building

202 W. First Street, Suite 500 Los Angeles, CA 90012

Commissioner Diannitto will participate telephonically from

4612 El Reposo Drive, Los Angeles, CA 90065

http://www.lafpp.com/

mailto:[email protected]

September 3, 2015 2

5. CONSIDERATION OF MARTHA WETZEL’S REQUEST TO TRANSFER FROM TIER 3 TO TIER 5 AND POSSIBLE BOARD ACTION

6. CONSIDERATION OF CEDRICK CLEVELAND’S APPEAL TO TRANSFER FROM

TIER 3 TO TIER 5 AND POSSIBLE BOARD ACTION

B. REPORTS TO THE BOARD

1. CONTRACTOR DISCLOSURE POLICY – QUARTERLY REPORT

2. Has any Board Member made any expenditure to influence State legislative or administrative action?

3. Miscellaneous correspondence from money managers, consultants, etc. – Received

and Filed. 4. General Manager’s Report

a. Benefits Actions approved by General Manager on August 20, 2015 b. Other business relating to Department operations

C. COMMITTEE CALENDAR

1. Audit Committee – Last met: 07/16/15; next meeting: 10/15/15 2. Benefits Committee – Last met: 04/02/15; next meeting: 09/16/15 3. Governance Committee – Last met: 08/06/15; next meeting: 10/01/15

D. CONSENT ITEMS

1. Approval of Minutes of the Regular Board meeting of May 7, 2015 2. Findings of Fact – Michael J. Almasy – Tier 5

E. CONSIDERATION OF FUTURE AGENDA ITEMS F. GENERAL PUBLIC COMMENT ON MATTERS WITHIN THE BOARD’S JURISDICTION G. DISABILITY CASES

Alternative 2 Police Officer II Tracy L. Andres. Officer Andres will be represented by Thomas J. Wicke, Esq. of Lewis, Marenstein, Wicke, Sherwin and Lee.

September 3, 2015 3

This is a Closed Session in accordance with Government Code Section 54957. Police Officer II Lee Jensen. Officer Jensen will be represented by Michael Treger of Straussner and Sherman.

H. CLOSED SESSION ITEMS FOR POSSIBLE BOARD ACTION

1. CLOSED SESSION PURSUANT TO GOVERNMENT CODE SECTION 54956.81 TO CONSIDER THE PURCHASE OF ONE (1) PARTICULAR, SPECIFIC INVESTMENT AND THE REDEMPTION/SALE OF (1) PARTICULAR, SPECIFIC INVESTMENT AND POSSIBLE BOARD ACTION

2. CLOSED SESSION PURSUANT TO GOVERNMENT CODE SECTION 54956.81 TO

CONSIDER THE SALE OF TWO (2) PARTICULAR, SPECIFIC INVESTMENTS AND POSSIBLE BOARD ACTION

3. CLOSED SESSION PURSUANT TO GOVERNMENT CODE SECTION 54957(b)(1):

BOARD REVIEW OF THE CITY ATTORNEY ANNUAL PERFORMANCE EVALUATION AND POSSIBLE BOARD ACTION

DEPARTMENT OF FIRE AND POLICE PENSIONS

360 East Second Street, Suite 400 Los Angeles, CA 90012

(213) 978-4545

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS DATE: SEPTEMBER 3, 2015 ITEM: A.1 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: CONSIDERATION OF ASSUMPTIONS FOR THE JUNE 30, 2015 RETIREE

HEALTH ACTUARIAL VALUATION AND POSSIBLE BOARD ACTION

RECOMMENDATION That the Board adopt the retiree health assumptions for the June 30, 2015 Retiree Health Valuation as recommended by The Segal Company (Segal). DISCUSSION Beginning with the June 30, 2007 valuation, Segal has recommended that the health care trend assumptions used in the health valuation be reviewed annually. Every year Segal publishes a set of health care trend assumptions based on the latest research and information available. Segal has submitted their recommendations for LAFPP’s health care related actuarial assumptions in the attached letter.

For the June 30, 2015 valuation, Segal continues to separate the medical trend rate assumption for Medicare and non-Medicare plans, and the trend rates for the two types of plans are the same again this year. However, in future years, Segal’s analysis may result in separate trend rates for the two plan types (e.g., due to the fact that Medicare rates are determined by the Federal Government, whereas non-Medicare rates are determined by private insurance companies). Segal’s recommended health care cost trend rate for the June 30, 2015 valuation has a first year trend rate of 6.75% for the fiscal year (FY 2015-16), 6.50% for FY 2016-17, then grading down by 0.25% each year until an ultimate rate of 5.00% is reached after six years (FY 2022 and later).

Fiscal Year

6/30/14 Valuation

Trend: Non-Medicare

6/30/14 Valuation

Trend: Medicare

6/30/15 Valuation

Trend: Non-Medicare

6/30/15 Valuation

Trend: Medicare

2014-2015 7.00% 7.00% 2015-2016 6.75% 6.75% 6.75% 6.75% 2016-2017 6.50% 6.50% 6.50% 6.50% 2017-2018 6.25% 6.25% 6.25% 6.25% 2018-2019 6.00% 6.00% 6.00% 6.00% 2019-2020 5.75% 5.75% 5.75% 5.75% 2020-2021 5.50% 5.50% 5.50% 5.50% 2021-2022 5.25% 5.25% 5.25% 5.25% 2022 and later 5.00% 5.00% 5.00% 5.00%

Board Report Page 2 September 3, 2015

The per capita costs assumption, which has been adjusted to reflect current medical and dental plan premiums paid by LAFPP pensioners, has been reviewed by staff and found to be accurate. Beginning with the June 30, 2015 valuation, in accordance with changes to Actuarial Standards of Practice (ASOP) No. 6, Segal will begin to utilize age-adjusted per-capita costs based on the demographics of the group being valued and the group’s total expected claims or premiums. (NOTE: This new requirement is not expected to have a significant impact on the plan’s liabilities.) Additionally, Segal recommends that the Medicare Part B Premium and Dental Premium trend rates remain unchanged at 5% for all years. On July 15, 2011, the City Council adopted an ordinance to permanently freeze the health subsidies and reimbursements of LAFPP members retiring or entering DROP on or after July 15, 2011 and for those employees who did not opt to make an additional 2% contribution to vest future subsidy increases. On September 5, 2014, the Los Angeles County Superior Court issued an official Writ directing LAFPP to disregard the subsidy freeze when administering subsidy benefits. However, on November 12, 2014, in response to the appeal and writ filed by the City of Los Angeles, the Court of Appeal granted a stay on the Writ issued by the trial court on September 5th. As a result of the stay, beginning with the November 30, 2014 pension payments and until otherwise ordered by the court, LAFPP once again provided a frozen subsidy to those pensioners and to any future retirees who did not elect to contribute the additional 2% of their salary. Based on staff’s direction, Segal will continue to reflect the subsidy freeze for impacted members when valuing the liabilities in the June 30, 2015 valuation. In addition, neither the Court Order nor the stay addressed the legality of the collection of the 2% contributions from members who had previously agreed to pay the additional amount so that they would not be subject to the subsidy freeze. Segal will therefore follow staff’s direction to assume that those contributions will continue to be made by those members who opted-in. All other assumptions and methods will be consistent with those recommended in the June 30, 2010 to June 30, 2013 triennial experience study, which was adopted by the Board on July 17, 2014, including the economic and demographic assumptions. Segal has again noted the potential tax liability related to health care reform that possibly may need to be reported in future valuations. (The Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act (HCERA) contain a provision that would impose a 40% excise tax on high-cost employer plans beginning in 2018.) Segal notes that the recently adopted Statements No. 74 and 75 by the Governmental Accounting Standards Board (GASB) for financial reporting purposes is expected to require the inclusion of the excise tax in the liability. For illustration purposes, in 2012 Segal provided staff with the estimated additional liability for the excise tax calculated as of June 30, 2011, which was less than 0.7%. Statement No. 74 is effective for fiscal years beginning after June 15, 2016 for plan reporting and Statement No. 75 is effective for fiscal years beginning after June 15, 2017 for employer reporting. Based on Brown Armstrong’s (LAFPP’s external auditor) continued advice, no adjustment to the net OPEB obligation will be made in the 2015 valuation. However, a contingency footnote will be included in the financial statements without disclosing any potential quantitative estimates or range of estimates. Mr. Andy Yeung of The Segal Company will be present at today’s Board meeting.


BUDGET If adopted, the recommended assumptions will be used in the June 30, 2015 valuation, which will determine the City’s contribution rate for the 2016-17 Fiscal Year. POLICY There are no policy changes as a result of this report. This report was prepared by: Robyn L. Wilder, Chief Benefits Analyst Pensions Division RPC:JS:RLW Attachment: Segal Letter – Assumptions and Methods Recommended for the June 30, 2015

Retiree Health Actuarial Valuation

100 Montgomery Street Suite 500 San Francisco, CA 94104-4308 T 415.263.8200 www.segalco.com

Benefits, Compensation and HR Consulting. Member of The Segal Group. Offices throughout the United States and Canada

VIA E-MAIL & USPS

August 27, 2015 Mr. Raymond P. Ciranna General Manager Los Angeles Fire and Police Pension Plan 360 East Second Street, 6th Floor Los Angeles, CA 90012 Re: Los Angeles Fire and Police Pension Plan

Assumptions and Methods Recommended for the June 30, 2015 Retiree Health Actuarial Valuation

Dear Ray: We have provided in this letter the health care related actuarial assumptions we recommend to the Board for the June 30, 2015 retiree health valuation. The health care trend assumptions used in the health valuation are reviewed annually. Every year Segal Consulting publishes a set of health care trend assumptions based on the latest research and information available to our health actuaries. The health care trend assumptions take into account factors such as: recent and expected premium increases affecting our clients, changes in utilization of health care and cost shifting from Medicare. Other assumptions such as the proportion of members expected to be covered by each health benefit provider (e.g. Kaiser, etc.) can sometimes be volatile due to the dynamic nature of the health care market place. That projection is typically based on the enrollment experience among the current retirees at the most recent annual open enrollment. Following are our recommended assumptions for the June 30, 2015 health plan valuation:

1. Health care trend assumptions – The detailed health care trend assumptions we are recommending are outlined in Item 1 of the Attachment.

Similar to the 2014 valuation, the recommended trend rates for Medicare and non-Medicare medical plans happen to be the same. In future years, if our analysis suggests, we may use separate trend rates for the two types of medical plans. Medicare rate changes are determined by the budgeting process in the Federal Government, whereas Non-Medicare rate changes are determined by private insurance carriers. Due to the different funding sources and dynamics involved, it is anticipated that rate changes in the future may differ between Medicare and Non-Medicare plans.

ATTACHMENT

Mr. Raymond P. Ciranna August 27, 2015 Page 2

5385920v1/07916.003

For this valuation, we are recommending the first year trend rate be set at 6.75% (this is unchanged from the second year trend rate of 6.75% assumed in the June 30, 2014 valuation), then grading down by 0.25% each year until an ultimate rate of 5.00% is reached after seven years.

2. In developing the ultimate health care trend assumption of 5.00%, we have continued to rely on Segal’s research and analysis on long-term costs in the health care market as a whole.

3. Per capita health care costs – These per capita costs are used to project the premiums for

current active members when they retire. Based on the percentage of retired members, spouses and beneficiaries electing health coverage and the proportion of members enrolled in each available medical plan, we have developed the per capita health premium costs for a member who is covered in fiscal year 2015-2016.

Based on the June 30, 2015 membership data, we have provided in Items 2(a) and 2(b) of the Attachment the observed election rates among the different medical plans. The medical coverage election assumption is shown in item 3(j) of the Attachment. We have shown in Item 2(c) of the Attachment the per capita costs for members subject to the retiree medical freeze as those members have not agreed to make an additional 2% member contribution. We do understand that LAFPP has received a Court Order to no longer freeze the medical subsidies for these members but the City is currently appealing the Court Order. Based on LAFPP’s direction, we will not reflect that Court Order when we value the liabilities in our June 30, 2015 valuation until such legal action is completed. The per capita costs and election rates for the dental plan for the June 30, 2015 valuation are also provided in Items 2(d) and 3(k) of the Attachment, respectively.

In calculating the per capita health care costs, we have been following all the relevant and current Actuarial Standards of Practice (ASOP). As we pointed out in our 2014 assumptions letter dated September 24, 2014 ASOP No. 6, Measuring Retiree Group Benefits Obligations and Determining Retiree Group Benefits Program Periodic Costs or Actuarially Determined Contributions, has been modified and the new requirements are effective with the June 30, 2015 valuation for LAFPP. In particular, Section 3.7.7. includes a requirement that:

“…the actuary should use age-specific costs in the development of the initial per capita costs and in the projection of future benefit plan costs. In general, the development of the age-specific costs should be based on the demographics of the group being valued and the group’s total expected claims or premiums. Any age ranges used should not be overly broad.”

ATTACHMENT

ATTACHMENT

ATTACHMENT Comparison of Current and Recommended Actuarial Assumptions

For the June 30, 2015 Health Valuation

5385920v1/07916.003 1 SEG AL CONSULTING

1. Health Care Trend Rates

MEDICAL TRENDS USED IN JUNE 30, 2014 VALUATION Trends to be applied in following fiscal years, to all health plans. Trend is to be applied to premium for shown fiscal year to calculate next fiscal year's projected premium. First Fiscal Year (July 1, 2014 through June 30, 2015) The fiscal year trend rates are the following:

Trend (applied to calculate following year premium)

Fiscal Year Non-Medicare Medicare

2014-2015 7.00% 7.00% 2015-2016 6.75% 6.75% 2016-2017 6.50% 6.50% 2017-2018 6.25% 6.25% 2018-2019 6.00% 6.00% 2019-2020 5.75% 5.75% 2020-2021 5.50% 5.50% 2021-2022 5.25% 5.25%

2022 and later 5.00% 5.00% Dental Premium Trend 5.00% for all years Medicare Part B Premium Trend 5.00% for all years

ATTACHMENT


1. Health Care Trend Rates (continued)

MEDICAL TRENDS PROPOSED FOR JUNE 30, 2015 VALUATION Trends to be applied in following fiscal years, to all health plans. Trend is to be applied to premium for shown fiscal year to calculate next fiscal year's projected premium. First Fiscal Year (July 1, 2015 through June 30, 2016) The fiscal year trend rates are the following:

Trend (applied to calculate following year premium)

Fiscal Year Non-Medicare Medicare

2015-2016 6.75% 6.75% 2016-2017 6.50% 6.50% 2017-2018 6.25% 6.25% 2018-2019 6.00% 6.00% 2019-2020 5.75% 5.75% 2020-2021 5.50% 5.50% 2021-2022 5.25% 5.25%

2022 and later 5.00% 5.00% Dental Premium Trend 5.00% for all years Medicare Part B Premium Trend 5.00% for all years

ATTACHMENT


2. (a) Per Capita Costs and Election Rates – Future retirees under age 65 are assumed, upon retirement, to elect carriers in the percents and corresponding premiums and subsidies as noted in the table below. Current retirees and current eligible survivors under age 65 are assumed to continue to cover themselves (and their spouse or domestic partner) – but all children are assumed to age out at the valuation date.

2014 – 2015 Fiscal Year Single Party Married/With Domestic Partner Eligible Survivor

Carrier Election Percent Monthly Premium

Maximum Subsidy Subsidy

Monthly Premium


Monthly Premium

Maximum Subsidy Subsidy Observed Recommended

Fire Fire Medical 77.9 75 $1,083.93 $1,344.38 $1,083.93 $1,406.66 $1,344.38 $1,344.38 $547.22 $729.83 $547.22 Fire Kaiser 13.0 15 $585.25 $1,344.38 $585.25 $1,160.48 $1,344.38 $1,160.48 $585.25 $729.83 $585.25 Fire Blue Cross 5.3 5 $1,256.43 $1,344.38 $1,256.43 $1,558.35 $1,344.38 $1,344.38 $1,059.54 $729.83 $729.83 Fire California Care 3.8 5 $1,256.43 $1,344.38 $1,256.43 $1,256.43 $1,344.38 $1,256.43 $759.34 $729.83 $729.83 Police Blue Cross PPO 61.5 65 $906.71 $1,344.38 $906.71 $1,610.63 $1,344.38 $1,344.38 $906.71 $729.83 $729.83 Blue Cross HMO 18.2 15 $642.53 $1,344.38 $642.53 $1,221.11 $1,344.38 $1,221.11 $642.53 $729.83 $642.53 Police Kaiser 20.3 20 $580.36 $1,344.38 $580.36 $1,149.96 $1,344.38 $1,149.96 $580.36 $729.83 $580.36 2015 – 2016 Fiscal Year Single Party Married/With Domestic Partner Eligible Survivor



Monthly Premium


Monthly Premium


Fire Fire Medical 78.1 75 $1,059.81 $1,435.13 $1,059.81 $1,518.17 $1,435.13 $1,435.13 $485.53 $787.87 $485.53 Fire Kaiser 13.2 15 $648.30 $1,435.13 $648.30 $1,286.58 $1,435.13 $1,286.58 $648.30 $787.87 $648.30 Fire Blue Cross 4.8 5 $1,372.98 $1,435.13 $1,372.98 $1,703.42 $1,435.13 $1,435.13 $1,157.51 $787.87 $787.87 Fire California Care 3.9 5 $1,344.38 $1,435.13 $1,344.38 $1,372.98 $1,435.13 $1,372.98 $828.97 $787.87 $787.87 Police Blue Cross PPO 59.8 65 $917.07 $1,435.13 $917.07 $1,737.78 $1,435.13 $1,435.13 $917.07 $787.87 $787.87 Blue Cross HMO 18.3 15 $702.79 $1,435.13 $702.79 $1,336.26 $1,435.13 $1,336.26 $702.79 $787.87 $702.79 Police Kaiser 21.9 20 $580.36 $1,435.13 $580.36 $1,149.96 $1,435.13 $1,149.96 $580.36 $787.87 $580.36

ATTACHMENT


2. (b) Per Capita Costs and Election Rates – Future retirees and current retirees under age 65 are assumed, upon reaching age 65, to elect carriers in the percents and corresponding premiums and subsidies as noted in the table below. Current retirees and current eligible survivors over age 65 are assumed to continue to cover themselves (and their spouse or domestic partner) – but all children are assumed to age out at the valuation date.

2014 – 2015 Fiscal Year Single Party Married/With Domestic Partner Eligible Survivor



Monthly Premium


Monthly Premium


Fire Fire Medical 85.3 90 $540.80 $493.74 $493.74 $834.90 $787.84 $787.84 $468.37 $493.74 $468.37 Fire Kaiser 11.0 10 $390.88 $493.74 $390.88 $771.76 $771.76 $771.76 $390.88 $493.74 $390.88 Fire Blue Cross 2.6 0 $729.00 $493.74 $493.74 $1,518.62 $1,283.36 $1,283.36 $729.00 $493.74 $493.74 Fire California Care 1.1 0 $493.74 $493.74 $493.74 $1,256.43 $1,256.43 $1,256.43 $493.74 $493.74 $493.74 Police Blue Cross PPO 73.1 75 $533.71 $493.74 $493.74 $927.18 $887.21 $887.21 $533.71 $493.74 $493.74 Blue Cross HMO 10.0 10 $437.53 $493.74 $437.53 $909.06 $909.06 $909.06 $437.53 $493.74 $437.53 Police Kaiser 16.9 15 $235.84 $493.74 $235.84 $466.66 $466.66 $466.66 $235.84 $493.74 $235.84 2015 – 2016 Fiscal Year Single Party Married/With Domestic Partner Eligible Survivor



Monthly Premium


Monthly Premium


Fire Fire Medical 84.6 85 $578.65 $523.25 $523.25 $893.33 $837.93 $837.93 $501.15 $523.25 $501.15 Fire Kaiser 11.9 15 $384.28 $523.25 $384.28 $758.56 $758.56 $758.56 $384.28 $523.25 $384.28 Fire Blue Cross 2.3 0 $795.84 $523.25 $523.25 $1,659.95 $1,387.36 $1,387.36 $795.84 $523.25 $523.25 Fire California Care 1.2 0 $493.74 $523.25 $493.74 $1,399.09 $1,399.09 $1,399.09 $493.74 $523.25 $493.74 Police Blue Cross PPO 73.2 75 $544.07 $523.25 $523.25 $1,007.97 $987.15 $987.15 $544.07 $523.25 $523.25 Blue Cross HMO 9.3 10 $478.79 $523.25 $478.79 $995.29 $995.29 $995.29 $478.79 $523.25 $478.79 Police Kaiser 17.5 15 $256.70 $523.25 $256.70 $508.38 $508.38 $508.38 $256.70 $523.25 $256.70

ATTACHMENT


2. (c) Per Capita Costs – For Members Previously Subject to Retiree Medical Subsidy Freeze

Single Party Married/With

Domestic Partner Eligible

Survivor Under 65 – All Plans $1,097.41 $1,097.41 $595.60 Over 65 Fire Medical $480.41 $795.09 $480.41 Fire Kaiser $384.28* $758.56 $384.28* Fire Blue Cross $480.41 $1,084.08 $480.41 Fire California Care $480.41 $1,084.08 $480.41 Police Blue Cross PPO $480.41 $848.75 $480.41 Police Blue Cross HMO $478.79* $972.41 $478.79* Police Kaiser $256.70* $508.38 $256.70* *Future single-party subsidy levels limited to $480.41.

2. (d) Proposed Per Capita Costs used in June 30, 2015 Valuation – Dental Plan

Maximum Dental Subsidy Because almost all current retirees enrolled (see Item 3(k) for election assumption) in a dental plan are paying a premium in excess of the maximum subsidy, we will assume that 100% of future retirees with dental coverage will receive the maximum subsidy.

Monthly Subsidy for

2015-2016 Fiscal Year

$43.24

2. (e) Adjustment of Per Capita Medical Costs for Age, Gender and Spouse Status

Applied to Per Capita Costs in Table 2(a) for 2015-2016 Retiree Spouse

Age Male Female Male Female 55 0.8761 0.9045 0.6895 0.7809 60 1.0404 0.9749 0.9230 0.9057 64 1.1936 1.0342 1.1652 1.0194

Applied to Per Capita Costs in Table 2(b) for 2015-2016 Retiree Spouse

Age Male Female Male Female 65 0.9396 0.7987 0.9396 0.7987 70 1.0890 0.8607 1.0890 0.8607 75 1.1736 0.9264 1.1736 0.9264

80+ 1.2638 0.9988 1.2638 0.9988

ATTACHMENT


3. Other Assumptions and Methods In the June 30, 2015, valuation, we will also apply the following assumptions and methodologies:

a. Discount rate: 7.50% per annum, as recommended in our most recent economic assumptions study.

b. Demographic assumptions: These include the incidence of service retirement, disability retirement, withdrawal, deferred vested retirement and death. We will apply the same assumptions that we recommended in the July 1, 2010 - June 30, 2013 experience study and adopted by the Board on July 17, 2014.

c. Funding methodologies: The Entry Age cost method, level percent of pay method will continue to be used in this valuation.

d. Expected annual rate of increase in the Board’s health subsidy amount: We will assume that the Board’s health subsidy amount will:

For all non-Medicare retirees, increase at lesser of 7% or medical trend as shown on page 2,

For Medicare retirees with single party premium, increase with medical trend as shown on page 2,

For Medicare retirees with 2-Party premium less than or equal to the maximum subsidy as of July 1, 2015 (e.g. Fire Kaiser), increase with medical trend as shown on page 2,

For Medicare retirees with 2-Party premium greater than the maximum subsidy as of July 1, 2015 (e.g. Police Blue Cross PPO), increase with lesser of 7% or medical trend as shown on page 2.

e. Percentage of retirees over age 65 covered by Medicare Parts A and B: Because all active employees hired after 1986 must elect Medicare A and B coverage, we will assume 100% of future retirees will be covered by Medicare Parts A and B.

f. Assets: We will use the seven-year smoothed actuarial value of asset method (with 60% to 140% Market Value Corridor) in our valuation.

g. Implicit Subsidy: Unless directed otherwise by LAFPP, for valuation purposes, we will

continue to proceed as if the insurance rates were underwritten separately for actives and retirees – that no implicit subsidy need be valued. We are aware that a small (less than 3%) proportion of retirees under age 65 (enrolled in Fire Blue Cross and Fire California Care) may be receiving an implicit subsidy. However, because we consider the potential liability to be insignificant, we recommend that for the June 30, 2015 valuation, all premiums be treated as retiree-only.

ATTACHMENT


h. Spouse Age Difference in Years for Retirees with Medical Coverage:

Member Gender

Average Observed Age Difference for

Spouse Current

Assumption Recommended

Assumption Male -3 -3 -3

Female +3 +3 +3

The table below summarizes the data used to derive our results:

New Male and Female Retirees Added in Last 3 Years

Total Number with LAFPP Health Subsidy and Spouse or Domestic Partner Coverage 511

Average Retiree Age 58.5

Average Spouse Age 55.5

Average Age Difference, Rounded Down to Nearest Integer -3

__________________________________________________________________________________

i. Spousal or Domestic Partner Coverage:

Member Gender Observed Percentage Coverage for Spouse

Current Assumption

Recommended Assumption

Male and Female 78% 80% 80%

The table below summarizes the data used to derive our results:

Three Year Total

Plan Year Ended June 30, 2015



New Retirees with LAFPP Health Subsidy

658 244 199 215

New Retirees with LAFPP Health Subsidy with Spouse or Domestic Partner Coverage

511 189 150 172

Spouse or Domestic Partner Coverage Percentage

78%

ATTACHMENT


j. Retiree Medical Coverage Election:

The table below summarizes the figures for retirees eligible for LAFPP retiree medical coverage.

Service Range Observed for Current

Retirees

Current Assumption for Future Retirees

Recommended Assumption for Future Retirees

Under 65 10-14* 38.2% 45% 45%

15-19 59.0 60 60

20-24 75.3 70 75

25 and over 95.7 95 95

Over 65 10-14* 64.6% 80% 80%

15-19 85.2 85 85

20-24 82.6 90 90

25 and over 96.7 95 95 * Since retirees with 10-14 years of service account for less than 5% of the retiree population and their

observed enrollment percentages fluctuate from year to year, we have decided to leave the assumption unchanged.

__________________________________________________________________________________

k. Retiree Dental Coverage Election:

The table below summarizes the figures for retirees eligible for LAFPP retiree dental coverage.

Observed for Current Retirees

Current Assumption for Future Retirees

Recommended Assumption for Future Retirees

All Retirees 79.1% 80% 80%

l. In the June 30, 2014 valuation, our retirement assumption for members enrolled in the DROP as of the valuation date matched the Pension Plan actuarial valuation. We will continue to assume in the June 30, 2015 valuation members will remain in the DROP for five years and then retire.

m. Eligibility requirement changes since the prior valuation: Unless directed otherwise by LAFPP, we will assume that no changes in eligibility for benefits have occurred since the prior valuation.

ATTACHMENT


n. Amortization period: Closed. On September 6, 2012, the Board adopted the following amortization policy:

Type of Base Amortization Period (Closed) Actuarial Gains or Losses* 20 Assumption or Method Changes 25 Plan Amendments 15 ERIPs 5 Actuarial Surplus 30 * Retiree health assumption changes in this annual letter are treated as gains and losses and amortized over

20 years.

ATTACHMENT



(213) 978-4545

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

DATE: SEPTEMBER 3, 2015 ITEM: A.2 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: GOVERNMENTAL ACCOUNTING STANDARDS (GAS) 68 ACTUARIAL

VALUATION AS OF JUNE 30, 2015; GOVERNMENTAL ACCOUNTING STANDARDS BOARD (GASB) STATEMENT NO. 68 REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2014; AND POSSIBLE BOARD ACTION

RECOMMENDATION It is recommended that the Board:

1. Review and approve the Governmental Accounting Standards (GAS) 68 Actuarial Valuation as of June 30, 2015; and,

2. Review and approve the Governmental Accounting Standards Board (GASB) 68 Statement No. 68 Report for the Fiscal Year Ended June 30, 2014.

BACKGROUND In June 2012, the Government Accounting Standards Board (GASB) issued Statement No. 68, Accounting and Financial Reporting for Pensions – an Amendment of GASB Statement No. 27, effective for plan years beginning after June 15, 2014. The primary objective of GAS 68 is to improve accounting and financial reporting of state and local government pension information. Requirements are intended to enhance “decision-usefulness” of this information. Plan sponsors will be implementing GAS 68 in their 2015 financial statements. GASB 68 requires employers to record their proportionate share of the total pension liability less the plan’s fiduciary net position (i.e., net pension liability) on the face of their financial statements. A proportionate share of the total pension expense and collective deferred inflows of resources and deferred outflows of resources of the pension fund will also be reflected. Implementation of GAS 68 is included in LAFPP’s 2015-16 Business Plan. Since 2014, staff has worked with our actuary (Segal Consulting), our external financial statement auditors (Brown Armstrong Accountancy Corporation), the City, and the City’s external financial statements auditor to ensure successful implementation. DISCUSSION LAFPP’s plan year beginning July 1, 2014 through June 30, 2015 is the first year for which GAS 68 applies. Segal Consulting prepared the GAS 68 Actuarial Valuation (Report). Brown


Armstrong Accountancy Corporation audited Segal’s’ Report as reflected in the GASB 68 Statement No. 68 Report that includes the Independent Auditor’s Report and Schedule of Employer Allocations for Fiscal Years ended June 30, 2014 and 2013. Once approved by the Board, these reports will be provided to the City with the following disclaimer: To complete their financial statements, each “Employer” (the City, and the Harbor Department) will need to record its own proportionate share of collective pension amounts for all benefits provided through LAFPP”s pension plan. LAFPP has provided a schedule of pension amounts by Employer, prepared by the independent actuary Segal Consulting in accordance with the methodology set forth in GASB 68, based on data maintained and provided by LAFPP. This schedule has been audited by independent auditor Brown Armstrong Accountancy Corporation. Please note that LAFPP is not responsible for Employers’ compliance with the requirements of GASB 68. Employers are solely responsible for accurately presenting their financial statements within the requirements of GASB 68. CONCLUSION The GAS 68 Actuarial Valuation as of June 30, 2015 contains information and schedules that will assist the City and the Harbor Department in implementing the new reporting requirements for 2015. The new GASB rules redefine pension liability and expense for financial reporting, and do not apply to contribution amounts for pension funding purposes. For example, the new GASB rules impact financial reporting with respect to pension liability, total pension liability, and the treatment of the Deferred Retirement Option Plan (DROP), and do not impact contribution amounts or funding policies and practices.

BUDGET Costs up to $25,000 are budgeted.

POLICY There is no policy impact associated with this report. This report was prepared by: Erin J. Kenney, Departmental Audit Manager Internal Audit Section RPC/EJK Attachment 1. Governmental Accounting Standards (GAS) 68 Actuarial Valuation as of June 30,

2015 Attachment 2. Governmental Accounting Standards Board (GASB) 68 Statement No. 68 Report

for the Fiscal Year Ended June 30, 2014

City of Los Angeles Fire and Police Pension Plan Governmental Accounting Standards (GAS) 68 Actuarial Valuation as of June 30, 2015

This report has been prepared at the request of the Board of Commissioners to assist the sponsors of the Fund in preparing their financial report for the pension plan. This valuation report may not otherwise be copied or reproduced in any form without the consent of the Board of Commissioners and may only be provided to other parties in its entirety. The measurements shown in this actuarial valuation may not be applicable for other purposes.

Copyright © 2015 by The Segal Group, Inc. All rights reserved.

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100 Montgomery Street Suite 500 San Francisco, CA 94104-4308 T 415.263.8200 www.segalco.com August 19, 2015 Board of Fire and Police Pension Commissioners City of Los Angeles Fire and Police Pension Plan 360 East Second Street, Suite 400 Los Angeles, CA 90012 Dear Board Members: We are pleased to submit this Governmental Accounting Standard (GAS) 68 Actuarial Valuation as of June 30, 2015. It contains various information that will need to be disclosed in order to comply with GAS 68. This report was prepared in accordance with generally accepted actuarial principles and practices at the request of the Board to assist the sponsors in preparing their financial report for the pension plan. The census and financial information on which our calculations were based was provided by LAFPP. That assistance is gratefully acknowledged. The measurements shown in this actuarial valuation may not be applicable for other purposes. Future actuarial measurements may differ significantly from the current measurements presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; and changes in plan provisions or applicable law. The actuarial calculations were completed under the supervision of Andy Yeung, ASA, MAAA, FCA, Enrolled Actuary. We are members of the American Academy of Actuaries and we meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion herein. To the best of our knowledge, the information supplied in the actuarial valuation is complete and accurate. Further, in our opinion, the assumptions as approved by the Board are reasonably related to the experience of and expectations for LAFPP. We look forward to reviewing this report with you and to answering any questions.

Sincerely, Segal Consulting, a Member of The Segal Group, Inc. By:

Paul Angelo, FSA, MAAA, FCA, EA Andy Yeung, ASA, MAAA, FCA, EA Senior Vice President and Actuary Vice President and Associate Actuary

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5378766v2/07916.120

SECTION 1 SECTION 2 SECTION 2 (CONTINUED) SECTION 3

VALUATION SUMMARY GAS 68 INFORMATION ACTUARIAL ASSUMPTIONS AND METHODS AND APPENDICES

Purpose .......................................... i Significant Issues in Valuation

Year.......................................... i Summary of Key Valuation

Results .................................... iv

Important Information about Actuarial Valuations .............. v

EXHIBIT 1 General Information – “Financial Statements”, Note Disclosures and Required Supplementary Information for a Single-Employer Pension Plan ............... 1

EXHIBIT 2 Net Pension Liability .................. 4

EXHIBIT 3 Target Asset Allocation .............. 5

EXHIBIT 4 Discount Rate Sensitivity ........... 7

EXHIBIT 5 Schedule of Changes in Net Pension Liability – Last Two Fiscal Years ................................ 8

EXHIBIT 6 Schedule of Employer Contributions – Last Ten Fiscal Years ........................................... 9

EXHIBIT 7 Determination of Proportionate Share ......................................... 11

EXHIBIT 8 Pension Expense ....................... 12

EXHIBIT 9 Deferred Outflows of Resources and Deferred Inflows of Resources .................................. 15

EXHIBIT 10 Schedule of Proportionate Share of the Net Pension Liability ...... 19

EXHIBIT 11 Schedule of Reconciliation of Net Pension Liability ....................... 22

EXHIBIT 12 Schedule of Recognition of Changes in Total Net Pension Liability .................................... 25

EXHIBIT 13 Allocation of Changes in Total Net Pension Liability ................ 27

Actuarial Assumptions and Methods ................................ 28

Appendix A Calculation of Discount Rate as of June 30, 2014 ............... 38

Appendix B Glossary of Terms ................. 40

SECTION 1: Valuation Summary for the City of Los Angeles Fire and Police Pension Plan

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Purpose

This report has been prepared by Segal Consulting to present certain disclosure information required by Governmental Accounting Standard (GAS) 68 as of June 30, 2015. The results used in preparing this GAS 68 report are comparable to those used in preparing the Governmental Accounting Standard (GAS) 67 report for the plan based on a reporting date and a measurement date as of June 30, 2014. This valuation is based on:

The benefit provisions of the Pension Plan, as administered by the Board of Commissioners;

The characteristics of covered active members, terminated vested members, and retired members and beneficiaries as of June 30, 2013, provided by LAFPP;

The assets of the Plan as of June 30, 2014, provided by LAFPP;

Economic assumptions regarding future salary increases and investment earnings; and

Other actuarial assumptions, regarding employee terminations, retirement, death, etc.

Significant Issues in Valuation Year

The following key findings were the result of this actuarial valuation:

The Governmental Accounting Standards Board (GASB) approved two new Statements affecting the reporting of pension liabilities for accounting purposes. Statement 67 replaces Statement 25 and is for plan reporting. Statement 68 replaces Statement 27 and is for employer reporting. Statement 67 is effective with the fiscal year ending June 30, 2014 for Plan reporting and Statement 68 is effective with the fiscal year ending June 30, 2015 for employer reporting. The information contained in this valuation is intended to be used (along with other information) in order to comply with Statement 68.

It is important to note that the new GASB rules only redefine pension liability and expense for financial reporting purposes, and do not apply to contribution amounts for pension funding purposes. Employers and plans can still develop and adopt funding policies under current practices.

When measuring pension liability GASB uses the same actuarial cost method (Entry Age method) and the same type of discount rate (expected return on assets) as LAFPP uses for funding. Note that, with regard to the actuarial cost method, the new GASB rules use a version of the Entry Age method where the Total Pension Liability (TPL) must be fully accrued by the time a member either enters the DROP or is expected to elect the DROP. This is in contrast to the version of the Entry Age method used for funding, where the Actuarial Accrued Liability (AAL) is not fully accrued


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until members retire from employment after participation in the DROP. Under the GASB method, actives who are expected to enroll in the DROP in the future would report an annual Service Cost that is higher than the Normal Cost used for funding, while members already in the DROP would report no Service Cost even though their Normal Cost continues to accrue for funding.

As the service retirement rates we use in the funding valuation have been developed based on the later date of exit from the DROP, we have adjusted those rates in this valuation so that they are based on the earlier date of first participation in the DROP. Those rates are provided in Section 3.

The Net Pension Liability (NPL) is equal to the difference between the TPL and the Plan’s Fiduciary Net Position. The Plan’s Fiduciary Net Position is equal to the market value of assets and therefore, the NPL measure is very similar to an Unfunded Actuarial Accrued Liability (UAAL) calculated on a market value basis. The NPL decreased from $3.584 billion as of June 30, 2013 to $1.872 billion as of June 30, 2014, primarily as a result of favorable investment results during 2013/2014 and the change in actuarial assumptions as of June 30, 2014. Changes in these values during the last two fiscal years ending June 30, 2013 and June 30, 2014 can be found in Exhibit 5.

For this report, the reporting dates for the employer are June 30, 2015 and June 30, 2014. The NPLs measured as of June 30, 2014 and 2013 have been determined by rolling forward the TPL from actuarial valuations as of June 30, 2013 and 2012, respectively. The Plan’s Fiduciary Net Position (plan assets) was valued as of the measurement dates. Consistent with the provisions of GAS 68, the assets and liabilities measured as of June 30, 2014 and June 30, 2013 are not adjusted or rolled forward to the respective June 30, 2015 and June 30, 2014 reporting dates.

The discount rates used to determine the TPL and NPL as of June 30, 2014 and 2013 were 7.75% and 7.75%, respectively, following the same assumptions used by LAFPP in the funding valuations as of June 30, 2013 and June 30, 2012. However, as the Board of Commissioners has approved a new discount rate of 7.50% (together with other new actuarial assumptions) for use in the next pension funding valuation as of June 30, 2014, we have estimated the impact of this assumption change by (1) revaluing the actuarial valuation TPL as of June 30, 2013 (before the roll forward) and (2) using this revalued TPL in rolling forward the results from June 30, 2013 to June 30, 2014.

The detailed calculations used in the derivation of the discount rate can be found in Appendix A of Section 3. Various other information that is required to be disclosed can be found throughout Exhibits 1 through 13 in Section 2.


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It should be noted that there are two member categories in LAFPP: (1) the Harbor Port Police (an enterprise fund) and (2) the other members associated with the City’s Fire and Police Departments. We have been directed by LAFPP to provide the pension expense and NPL for each of the two member categories. Both the pension expense and the NPL for each member category have been obtained from internal valuation results which have been developed separately for each of the members associated with the Fire and Police Departments and the Harbor Port Police. The Plan Fiduciary Net Position for each membership category was estimated by adjusting the valuation value of assets for each membership category by the ratio of the total LAFPP Plan Fiduciary Net Position to total LAFPP valuation value of assets.

Results shown in this report exclude any employer contributions made after the measurement date of June 30, 2014. Employers should consult with their auditors to determine the deferred outflow that should be created for these contributions.


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Summary of Key Valuation Results

Reporting Date for Employer under GAS 68 6/30/2015(1) 6/30/2014(2) Measurement Date for Employer under GAS 68 6/30/2014 6/30/2013 Disclosure elements for fiscal year ending June 30:

1. Service cost(3) $368,017,648 $361,192,260 2. Total Pension Liability 18,861,992,028 18,264,528,081 3. Plan’s Fiduciary Net Position 16,989,704,585 14,680,373,040 4. Net Pension Liability 1,872,287,443 3,584,155,041 5. Pension expense $148,766,618 N/A

Schedule of contributions for fiscal year ending June 30: 6. Actuarially determined contributions $440,698,260 $375,448,092 7. Actual Contributions 440,698,260 375,448,092 8. Contribution deficiency (excess) (6) – (7) 0 0

Demographic data for plan year ending June 30: 9. Number of retired members and beneficiaries 12,502 12,432 10. Number of vested terminated members(4) 131 133 11. Number of DROP members 1,277 1,191 12. Number of active members 11,820 12,033

Key assumptions as of June 30: 13. Investment rate of return 7.50% 7.75% 14. Inflation rate 3.25% 3.50% 15. Projected salary increases(5) Ranges from 4.75% to 11.50%

based on years of service Ranges from 5.25% to 12.25%

based on years of service (1) The reporting date and measurement date for the plan are June 30, 2014. (2) The reporting date and measurement date for the plan are June 30, 2013. (3) Please note that service cost is always based on the previous year’s assumptions, meaning both values are based on the assumptions shown as of

June 30, 2013. (4) Includes terminated members due only a refund of member contributions. (5) Includes inflation at 3.25% (3.50% for the June 30, 2013 valuation) plus a real across-the-board salary increase of 0.75% plus merit and promotional

increases that vary by service.


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Important Information about Actuarial Valuations

In order to prepare an actuarial valuation, Segal Consulting (“Segal”) relies on a number of input items. These include:

Plan of benefits Plan provisions define the rules that will be used to determine benefit payments, and those rules, or the interpretation of them, may change over time. It is important to keep Segal informed with respect to plan provisions and administrative procedures, and to review the plan description in this report (as well as the plan summary included in our funding valuation report) to confirm that Segal has correctly interpreted the plan of benefits.

Participant data An actuarial valuation for a plan is based on data provided to the actuary by LAFPP. Segal does not audit such data for completeness or accuracy, other than reviewing it for obvious inconsistencies compared to prior data and other information that appears unreasonable. It is important for Segal to receive the best possible data and to be informed about any known incomplete or inaccurate data.

Assets This valuation is based on the market value of assets as of the valuation date, as provided by LAFPP.

Actuarial assumptions In preparing an actuarial valuation, Segal projects the benefits to be paid to existing plan participants for the rest of their lives and the lives of their beneficiaries. This projection requires actuarial assumptions as to the probability of death, disability, withdrawal, and retirement of each participant for each year. In addition, the benefits projected to be paid for each of those events in each future year reflect actuarial assumptions as to salary increases and cost-of-living adjustments. The projected benefits are then discounted to a present value, based on the assumed rate of return that is expected to be achieved on the plan’s assets. There is a reasonable range for each assumption used in the projection and the results may vary materially based on which assumptions are selected. It is important for any user of an actuarial valuation to understand this concept. Actuarial assumptions are periodically reviewed to ensure that future valuations reflect emerging plan experience. While future changes in actuarial assumptions may have a significant impact on the reported results, that does not mean that the previous assumptions were unreasonable.

The user of Segal’s actuarial valuation (or other actuarial calculations) should keep the following in mind:

The valuation is prepared at the request of the Board to assist the sponsors of the Fund in preparing items related to the pension plan in their financial reports. Segal is not responsible for the use or misuse of its report, particularly by any other party.

An actuarial valuation is a measurement of the plan’s assets and liabilities at a specific date. Accordingly, except where otherwise noted, Segal did not perform an analysis of the potential range of future financial measures. The actual long-term cost of the plan will be determined by the actual benefits and expenses paid and the actual investment experience of the plan.


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If LAFPP is aware of any event or trend that was not considered in this valuation that may materially change the results of the valuation, Segal should be advised, so that we can evaluate it.

Segal does not provide investment, legal, accounting, or tax advice. Segal’s valuation is based on our understanding of applicable guidance in these areas and of the plan’s provisions, but they may be subject to alternative interpretations. The Board should look to their other advisors for expertise in these areas.

As Segal Consulting has no discretionary authority with respect to the management or assets of LAFPP, it is not a fiduciary in its capacity as actuaries and consultants with respect to LAFPP.

SECTION 2: GAS 68 Information for the City of Los Angeles Fire and Police Pension Plan

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EXHIBIT 1 General Information – “Financial Statements”, Note Disclosures and Required Supplementary Information for a Single-Employer Pension Plan

Plan Description

Plan administration. The City of Los Angeles Fire and Police Plan (LAFPP) was established by the City of Los Angeles in 1899. LAFPP is a single employer public employee retirement system whose main function is to provide retirement benefits to the safety members employed by the City of Los Angeles. It should be noted that there are two member categories in LAFPP: (1) the Harbor Port Police (an enterprise fund) and (2) the other members associated with the City’s Fire and Police Departments.

The Fire and Police Pension Plan is administered by a Board of Commissioners composed of five commissioners who are appointed by the Mayor, two commissioners elected by Police Members of the Plan and two commissioners elected by Fire Members of the Plan. Under provisions of the City Charter, the City Administrative Code and the State Constitution, the Board has the responsibility to administer the Plan.

Plan membership. At June 30, 2014, pension plan membership consisted of the following:

Retired members or beneficiaries currently receiving benefits 12,502

Vested terminated members entitled to but not yet receiving benefits(1) 131

DROP members 1,277

Active members 11,820

Total 25,730 (1) Includes terminated members due only a refund of member contributions.

Benefits provided. LAFPP provides service retirement, disability, death and survivor benefits to eligible sworn members of the Los Angeles Fire, Police and Harbor Departments. Sworn employees become members upon graduation from the Police Academy or Fire Drill Tower.

There are currently six tiers applicable to members of the LAFPP. Tier 1 includes members hired on or before January 28, 1967. Tier 2 includes members hired from January 29, 1967 through December 7, 1980, and those Tier 1 members who transferred to Tier 2 during the enrollment period of January 29, 1967 to January 29, 1968. Tier 3 includes members hired from December 8, 1980 through June 30, 1997 and those Tier 4 members hired during the period of July 1, 1997 through December 31, 1997 who elected to transfer to Tier 3 by the enrollment deadline of June 30, 1998. Tier 4 includes members


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hired from July 1, 1997 through December 31, 2001 and those Tier 3 members who elected to transfer to Tier 4 by the enrollment deadline of June 30, 1998. Tier 5 includes members hired from January 1, 2002 through June 30, 2011 and those active members of Tiers 2, 3, or 4 who elected to transfer to Tier 5 during the enrollment period of January 2, 2002 through December 31, 2002. Tier 6 was established for all firefighters and police officers hired on or after July 1, 2011.

Tier 1, Tier 2, and Tier 4 members are eligible to retire once they attain 20 years of service. Tier 3 members are eligible to retire once they reach age 50 and have attained 10 or more years of service. Tier 5 and Tier 6 members are eligible to retire once they reach age 50 and have attained 20 or more years of service.

The Service Retirement benefit the member will receive is based upon age at retirement, final average compensation, years of retirement service credit and tier.

The Tier 1 Service Retirement benefit is calculated pursuant to the provisions of Section 1304 of the Los Angeles Charter. The monthly allowance for a member with between 20 to 25 years of service who retires from active status is equal to 40% of the average monthly rate of salary assigned to the ranks or positions held by the member during the three years immediately preceding the date of his/her retirement plus 2% of the average rate of salary for each year of service in excess of 20 years. The monthly allowance for a member with between 25 to 34 years of service who retires from active status is equal to 50% of the average monthly rate of salary assigned to the ranks or positions held by the member during the three years immediately preceding the date of his/her retirement plus 1 2/3% of the average rate of salary for each year of service in excess of 25 years. The monthly allowance for a member with 35 or more years of service who retires from active status is equal to 66 2/3% of the average monthly rate of salary assigned to the ranks or positions held by the member during the three years immediately preceding the date of his/her retirement.

The Tier 2 Service Retirement benefit is calculated pursuant to the provisions of Section 1408 of the Los Angeles Charter. The monthly allowance for a member with less than 25 years of service who retires from active status is equal to 2% of Normal Pension Base per year of service. The monthly allowance for a member with 25 or more years of service who retires from active status is equal to 55% of Normal Pension Base plus 3% per year over 25 of Normal Pension Base, with a maximum of 70% of Normal Pension Base.

The Tier 3 Service Retirement benefit is calculated pursuant to the provisions of Section 1504 of the Los Angeles Charter. The monthly allowance for a member with less than 20 years of service who retires from active status is equal to 2% of Final Average Salary per year of service. The monthly allowance for a member with 20 or more years of service who retires from active status is equal to 40% of Final Average Salary plus 3% per year over 20 of Final Average Salary, with a maximum of 70% of Final Average Salary.

The Tier 4 Service Retirement benefit is calculated pursuant to the provisions of Section 1604 of the Los Angeles Charter. The monthly allowance for a member who retires from active status is equal to 40% of Final Average Salary plus 3% per year of service over 20, with a maximum of 70% of Final Average Salary.


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The Tier 5 Service Retirement benefit is calculated pursuant to the provisions of Section 4.2004 of the Los Angeles Administrative Code. The monthly allowance for a member who retires from active status is equal to 50% of Final Average Salary plus 3% per year of service over 20, except for the 30th year, where 4% is provided, with a maximum of 90% of Final Average Salary.

The Tier 6 Service Retirement benefit is calculated pursuant to the provisions of Section 1704 of the Los Angeles Charter. The monthly allowance for a member who retires from active status is equal to 40% of Final Average Salary, plus 3% of Final Average Salary per year of service from 21 through 25, 4% of Final Average Salary per year of service from 26 through 30, and 5% of Final Average Salary per year of service over 30, with a maximum of 90% of Final Average Salary.

Under Tier 1, pension benefits are calculated based on the average monthly rate of salary assigned to the ranks or positions held by the member during the three years immediately preceding the date of his/her retirement. Under Tier 2, pension benefits are calculated based on the Normal Pension Base, the final monthly salary rate. Under Tiers 3 – 6, pension benefits are calculated based on the Final Average Salary. Under Tiers 3 – 5, the Final Average Salary is the highest monthly average salary actually received during any 12 consecutive months of service. Under Tier 6 the Final Average Salary is the highest monthly average salary actually received during any 24 consecutive months of service.

LAFPP provides annual cost-of-living adjustments (COLAs) to retirees. The cost-of-living adjustments are made each July 1 and vary by Tier. Under Tier 1 and Tier 2, the COLA is based on the percentage change in the average of the Consumer Price Index for the Los Angeles-Riverside-Orange County Area--All Items For All Urban Consumers. Under Tier 3 and Tier 4, the COLA is the same as under Tier 1 and Tier 2 but is capped at 3%, with a prorated COLA in the first year of retirement. Under Tier 5 and Tier 6, the COLA is the same as under Tier 3 and Tier 4, with the excess of the COLA over 3% banked for future use when the COLA is under 3%.

The City of Los Angeles contributes to the retirement plan based upon actuarially determined contribution rates adopted by the Board of Commissioners based upon recommendations received from LAFPP’s actuary after the completion of the annual actuarial valuation. The average employer contribution rate for fiscal year 2013 – 2014 (based on the June 30, 2012 valuation) was 33.69% of compensation if paid on July 15, 2013.

All members are required to make contributions to LAFPP regardless of tier in which they are included. However, members are exempt from making contributions when their continuous service exceeds 30 years for Tiers 1 through 4, and 33 years for Tier 5 and Tier 6. The average member contribution rate for fiscal year 2013 – 2014 (based on the June 30, 2012 valuation) was 9.51% of compensation paid biweekly.


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EXHIBIT 2 Net Pension Liability

Reporting Date for Employer under GAS 68 June 30, 2015 June 30, 2014 Measurement Date for Employer under GAS 68 June 30, 2014 June 30, 2013 The components of the Net Pension Liability are as follows:

Total Pension Liability $18,861,992,028 $18,264,528,081 Plan’s Fiduciary Net Position 16,989,704,585 14,680,373,040 Net Pension Liability $1,872,287,443 $3,584,155,041 Plan’s Fiduciary Net Position as a percentage of the Total Pension Liability 90.07% 80.38%

The Net Pension Liability (NPL) was measured as of June 30, 2014 and 2013. The Plan’s Fiduciary Net Position (plan assets) was valued as of the measurement date while the Total Pension Liability (TPL) was determined based upon rolling forward the TPL from actuarial valuations as of June 30, 2013 and 2012, respectively.

Plan provisions. The plan provisions used in the measurement of the NPL are the same as those used in the LAFPP actuarial valuation as of June 30, 2013.

Actuarial assumptions and methods. The total pension liability as of June 30, 2014 was remeasured as of June 30, 2014 to reflect the following actuarial assumptions that the Board of Commissioners has approved for use in the pension funding valuation as of June 30, 2014:

Inflation 3.25% Salary increases Ranges from 4.75% to 11.50% based on years of service, including

inflation Investment rate of return 7.50%, including inflation but net of Pension Plan investment

expense Other assumptions See analysis of actuarial experience during the period July 1, 2010

through June 30, 2013 and Section 3 for the service retirement rates after they have been adjusted to be based on the assumed date of first participation in the DROP.


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EXHIBIT 3 Target Asset Allocation

The long-term expected rate of return on pension plan investments was determined in 2014 using a building-block method in which expected future real rates of return (expected returns, net of inflation) are developed for each major asset class. These returns are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage, adding expected inflation and subtracting expected investment expenses and a risk margin. The target allocation and projected arithmetic real rates of return for each major asset class, after deducting inflation but before investment expenses, used in the derivation of the long-term expected investment rate of return assumption are summarized in the following table:

Asset Class Target

Allocation

Long-Term Expected Real Rate of Return

Large Cap U.S. Equity 23.00% 6.03% Small Cap U.S. Equity 6.00% 6.71% Developed International Equity 16.00% 6.71% Emerging Markets Equity 5.00% 8.02% U.S. Core Fixed Income 14.00% 0.52% High Yield Bonds 3.00% 2.81% Real Estate 10.00% 4.73% TIPS 5.00% 0.43% Commodities 5.00% 4.67% Cash 1.00% -0.19% Unconstrained Fixed Income 2.00% 2.50% Private Equity 10.00% 9.25% Total Portfolio 100.00% 5.12%

Discount rate: The discount rate used to measure the Total Pension Liability (TPL) was 7.50% and 7.75% as of June 30, 2014 and June 30, 2013, respectively. The projection of cash flows used to determine the discount rate assumed plan member contributions will be made at the current contribution rates for each tier and that employer contributions will be made at rates equal to the actuarially determined contribution rates for each tier. For this purpose, only employer contributions that are intended to fund benefits for current plan members and their beneficiaries are included. Projected employer contributions that are intended to fund the service costs for future plan members and their beneficiaries, as well


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as projected contributions from future plan members, are not included. Based on those assumptions, the Pension Plan's Fiduciary Net Position was projected to be available to make all projected future benefit payments for current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the TPL as of both June 30, 2014 and June 30, 2013.


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EXHIBIT 4 Discount Rate Sensitivity

Sensitivity of the Net Pension Liability to changes in the discount rate. The following presents the Net Pension Liability (NPL) of LAFPP as of June 30, 2014, calculated using the discount rate of 7.50%, as well as what LAFPP’s NPL would be if it were calculated using a discount rate that is 1-percentage-point lower (6.50%) or 1-percentage-point higher (8.50%) than the current rate:

Net Pension Liability 1% Decrease

(6.50%) Current Discount Rate

(7.50%) 1% Increase

(8.50%) Fire and Police $4,366,137,036 $1,861,824,464 $(196,339,518) Harbor Port Police 19,891,987 10,462,979 3,527,366 Total for the City $4,386,029,023 $1,872,287,443 ($192,812,153)


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EXHIBIT 5 Schedule of Changes in Net Pension Liability – Last Two Fiscal Years

Reporting Date for Employer under GAS 68 June 30, 2015 June 30, 2014 Measurement Date for Employer under GAS 68 June 30, 2014 June 30, 2013

Total Pension Liability

1. Service cost $368,017,648 $361,192,260 2. Interest 1,392,552,174 1,344,600,162 3. Change of benefit terms 0 0 4. Differences between expected and actual experience -234,637,547 -431,388,856 5. Changes of assumptions -69,482,273 0 6. Benefit payments, including refunds of member contributions -858,986,055 -859,503,176 7. Net change in Total Pension Liability $597,463,947 $414,900,390

8. Total Pension Liability – beginning 18,264,528,081 17,849,627,691 9. Total Pension Liability – ending $18,861,992,028 $18,264,528,081 Plan’s Fiduciary Net Position 10. Contributions – employer $440,698,260 $375,448,092 11. Contributions – employee 124,394,889 121,777,654 12. Net investment income 2,617,089,650 1,707,776,453 13. Benefit payments, including refunds of member contributions -858,986,055 -859,503,176 14. Administrative expense -13,865,199 -12,200,359 15. Other 0 0 16. Net change in Plan’s Fiduciary Net Position $2,309,331,545 $1,333,298,664

17. Plan’s Fiduciary Net Position – beginning 14,680,373,040 13,347,074,376 18. Plan’s Fiduciary Net Position – ending $16,989,704,585 $14,680,373,040 19. Net Pension Liability – ending (9) – (18) $1,872,287,443 $3,584,155,041 20. Plan’s Fiduciary Net Position as a percentage of the Total Pension Liability 90.07% 80.38% 21. Covered employee payroll(1) $1,308,148,504 $1,277,031,317 22. Plan’s Net Pension Liability as percentage of covered employee payroll 143.12% 280.66%

(1) Covered employee payroll represents the collective total of the LAFPP eligible wages of all LAFPP member categories.


9

EXHIBIT 6 Schedule of Employer Contributions – Last Ten Fiscal Years

Year Ended June 30

Actuarially Determined

Contributions(1)

Contributions in Relation to the

Actuarially Determined

Contributions Contribution

Deficiency (Excess) Covered-Employee

Payroll(2)

Contributions as a Percentage of

Covered Employee Payroll(3)

2005 $135,853,688 $135,853,688 $0 N/A(4) N/A(4)

2006 143,945,802 143,945,802 0 N/A(4) N/A(4)

2007 224,946,082 224,946,082 0 $1,130,296,904 19.90% 2008(5) 261,635,491 261,635,491 0 1,188,972,417 22.01% 2009 238,697,929 238,697,929 0 1,253,658,885 19.04% 2010 250,516,858 250,516,858 0 1,266,311,709 19.78% 2011 277,092,251 277,092,251 0 1,289,856,708 21.48% 2012 321,593,433 321,593,433 0 1,213,395,874 26.50% 2013 375,448,092 375,448,092 0 1,277,031,317 29.40% 2014 440,698,260 440,698,260 0 1,308,148,504 33.69%

See accompanying notes to this schedule on next page. (1) All “Actuarially Determined Contributions” through June 30, 2014 were determined as the “Annual Required Contribution” under GAS 25 and 27. (2) Covered employee payroll represents the collective total of the LAFPP eligible wages of all LAFPP member categories. (3) Contribution rate as a percentage of payroll reflects discount applied when the employer prepays its contributions. This rate has been “backed” into

by dividing the actual contributions by the budgeted covered-employee payroll. (4) Not available. (5) Figures include amounts transferred and contributed during the fiscal year that were related to the transfer of certain Harbor Port Police members

from the Los Angeles City Employees’ Retirement System into LAFPP.


10

Notes to Exhibit 6

Methods and assumptions used to establish “actuarially determined contribution” rates:

Valuation date Actuarially determined contribution rates are calculated as of June 30, two years prior to the end of the fiscal year in which contributions are reported

Actuarial cost method Entry Age Actuarial Cost Method Amortization method For Tier 1, level dollar amortization is used with last period ending on June 30, 2037. For

Tiers 2, 3 and 4, level percent of payroll amortization with multiple layers is used as a percent of total valuation payroll from the respective employer (i.e., City or Harbor Port Police). For Tiers 5 and 6, level percent of payroll with multiple layers is used as a percent of combined payroll for these tiers from the respective employer (i.e., City or Harbor Port Police).

Remaining amortization period Actuarial gains/losses are amortized over 20 years. Assumption changes are amortized over 25 years. Plan changes are amortized over 15 years.

Asset valuation method Market value of assets less unrecognized returns in each of the last seven years. Unrecognized return is equal to the difference between the actual market return and the expected return on the market value, and is recognized over a seven-year period. Deferred gains and losses as of June 30, 2013 have been combined and will be recognized over a period of six years from July 1, 2013. The actuarial value of assets is further adjusted, if necessary, to be within 40% of the market value of assets.

Before Reflection of Assumptions Approved for Pension Funding Valuation

as of June 30, 2014

After Reflection of Assumptions Approved for Pension Funding Valuation

as of June 30, 2014 Actuarial assumptions:

Investment rate of return 7.75%, net of administrative expenses 7.50%, gross of administrative expenses

Inflation rate 3.50% 3.25% Real across-the-board salary increase 0.75% 0.75% Projected salary increases(1) Ranges from 5.25% to 12.25% based on

years of service Ranges from 4.75% to 11.50% based on years of service

Cost of living adjustments 3.50% of Tiers 1 and 2 retirement income and 3.00% of Tiers 3, 4, 5, and 6 retirement income.

3.25% of Tiers 1 and 2 retirement income and 3.00% of Tiers 3, 4, 5, and 6 retirement income.

Other assumptions Same as those used in the June 30, 2013 funding actuarial valuation

See analysis of actuarial experience during the period July 1, 2010 through June 30, 2013

(1) Includes inflation at 3.25% (3.50% for the June 30, 2013 valuation) plus real across-the-board salary increase of 0.75% plus merit and promotional increases that vary by service.


11

EXHIBIT 7 Determination of Proportionate Share

Allocation of June 30, 2014 Net Pension Liability

Member Category Total NPL

Fire and Police $1,861,824,464

Harbor Port Police 10,462,979

Total for the City $1,872,287,443

Notes:

The Net Pension Liability (NPL) for each member category is the Total Pension Liability (TPL) minus the Plan Fiduciary Net Position (plan assets). The Total Pension Liability for each member category is obtained from internal valuation results and is calculated separately for each of the members associated with the Fire and Police Departments and the Harbor Port Police. The Plan Fiduciary Net Position for each membership category was estimated by adjusting the valuation value of assets for each membership category by the ratio of the total LAFPP Plan’s Fiduciary Net Position to total LAFPP valuation value of assets.

The following items are allocated based on the internal valuation results maintained and calculated separately for each of the members associated with the Fire and Police Departments and the Harbor Port Police. 1) Net Pension Liability 2) Service cost 3) Interest on the Total Pension Liability 4) Expensed portion of current-period benefit changes 5) Expensed portion of current-period difference between expected and actual experience in the Total Pension Liability 6) Member contributions 7) Projected earnings on plan investments 8) Expensed portion of current-period differences between actual and projected earnings on plan investments 9) Administrative expense 10) Recognition of beginning of year deferred outflows of resources as pension expense 11) Recognition of beginning of year deferred inflows of resources as pension expense


12

EXHIBIT 8 Pension Expense – Total for all Employers

Reporting Date for Employer under GAS 68 June 30, 2015 Measurement Date for Employer under GAS 68 June 30, 2014 Components of Pension Expense 1. Service cost $368,017,648 2. Interest on the Total Pension Liability 1,392,552,174 3. Expensed portion of current-period changes in proportion and differences between employer's

contributions and proportionate share of contributions 0 4. Expensed portion of current-period benefit changes 0 5. Expensed portion of current-period difference between expected and actual experience in the

Total Pension Liability (41,020,550) 6. Expensed portion of current-period changes of assumptions or other inputs (12,147,251) 7. Member contributions (124,394,889) 8. Projected earnings on plan investments (1,155,859,729) 9. Expensed portion of current-period differences between actual and projected earnings on

plan investments (292,245,984) 10. Administrative expense 13,865,199 11. Other 0 12. Recognition of beginning of year deferred outflows of resources as pension expense 0 13. Recognition of beginning of year deferred inflows of resources as pension expense 0 14. Net amortization of deferred amounts from changes in proportion and differences between

employer’s contributions and proportionate share of contributions 0

Pension Expense $148,766,618


13

EXHIBIT 8 (continued) Pension Expense – Fire and Police

Reporting Date for Employer under GAS 68 June 30, 2015 Measurement Date for Employer under GAS 68 June 30, 2014 Components of Pension Expense 1. Service cost $364,618,784 2. Interest on the Total Pension Liability 1,388,872,981 3. Expensed portion of current-period changes in proportion and differences between employer's


Total Pension Liability (40,983,473) 6. Expensed portion of current-period changes of assumptions or other inputs (12,063,325) 7. Member contributions (123,456,579) 8. Projected earnings on plan investments (1,153,225,966) 9. Expensed portion of current-period differences between actual and projected earnings on

plan investments (291,560,899) 10. Administrative expense 13,833,601 11. Other 0 12. Recognition of beginning of year deferred outflows of resources as pension expense 0 13. Recognition of beginning of year deferred inflows of resources as pension expense 0 14. Net amortization of deferred amounts from changes in proportion and differences between




14

EXHIBIT 8 (continued) Pension Expense – Harbor Port Police

Reporting Date for Employer under GAS 68 June 30, 2015 Measurement Date for Employer under GAS 68 June 30, 2014 Components of Pension Expense 1. Service cost $3,398,864 2. Interest on the Total Pension Liability 3,679,193 3. Expensed portion of current-period changes in proportion and differences between employer's


Total Pension Liability (37,077) 6. Expensed portion of current-period changes of assumptions or other inputs (83,926) 7. Member contributions (938,310) 8. Projected earnings on plan investments (2,633,763) 9. Expensed portion of current-period differences between actual and projected earnings on

plan investments (685,085) 10. Administrative expense 31,598 11. Other 0 12. Recognition of beginning of year deferred outflows of resources as pension expense 0 13. Recognition of beginning of year deferred inflows of resources as pension expense 0 14. Net amortization of deferred amounts from changes in proportion and differences between




15

EXHIBIT 9 Deferred Outflows of Resources and Deferred Inflows of Resources – Total for all Employers

Reporting Date for Employer under GAS 68 June 30, 2015 Measurement Date for Employer under GAS 68 June 30, 2014 Deferred Outflows of Resources 1. Changes in proportion and differences between employer's contributions and proportionate

share of contributions(1) $0 2. Changes of assumptions or other inputs 0 3. Net difference between projected and actual earnings on pension plan investments 0 4. Difference between expected and actual experience in the Total Pension Liability 0 5. Total Deferred Outflows of Resources $0 Deferred Inflows of Resources 6. Changes in proportion and differences between employer's contributions and proportionate

share of contributions(1) $0 7. Changes of assumptions or other inputs 57,335,022 8. Net difference between projected and actual earnings on pension plan investments 1,168,983,937

9. Difference between expected and actual experience in the Total Pension Liability 193,616,997 10. Total Deferred Inflows of Resources $1,419,935,956

Deferred outflows of resources and deferred inflows of resources related to pension will be recognized as follows:

Reporting Date for Employer under GAS

68 Year Ended June 30: 2016 $(345,413,785) 2017 (345,413,785) 2018 (345,413,785) 2019 (345,413,786) 2020 (38,280,815) Thereafter 0

(1) Calculated in accordance with Paragraphs 54 and 55 of GAS 68.


16

EXHIBIT 9 (continued) Deferred Outflows of Resources and Deferred Inflows of Resources – Fire and Police



share of contributions(1) $0 7. Changes of assumptions or other inputs 56,938,891 8. Net difference between projected and actual earnings on pension plan investments 1,166,243,596

9. Difference between expected and actual experience in the Total Pension Liability 193,441,991 10. Total Deferred Inflows of Resources $1,416,624,478



68 Year Ended June 30: 2016 $(344,607,697) 2017 (344,607,697) 2018 (344,607,697) 2019 (344,607,697) 2020 (38,193,690) Thereafter 0



17

EXHIBIT 9 (continued) Deferred Outflows of Resources and Deferred Inflows of Resources – Harbor Port Police



share of contributions(1) $0 7. Changes of assumptions or other inputs 396,131 8. Net difference between projected and actual earnings on pension plan investments 2,740,341

9. Difference between expected and actual experience in the Total Pension Liability 175,006 10. Total Deferred Inflows of Resources $3,311,478



68 Year Ended June 30: 2016 $(806,088) 2017 (806,088) 2018 (806,088) 2019 (806,089) 2020 (87,125) Thereafter 0



18

EXHIBIT 9 (continued) Deferred Outflows of Resources and Deferred Inflows of Resources

Notes:

Amounts shown in this exhibit were allocated by Fire and Police and Harbor Port Police member categories based on the internal calculations as described in Exhibit 7.

In determining the pension expense:

- Any differences between projected and actual investment earnings on pension plan investments are recognized over a period of five years beginning with the year in which they occur.

- Differences between expected and actual experience and changes of assumptions are recognized over the average of the expected remaining service lives of all employees that are provided with pensions through LAFPP determined as of June 30, 2013 (the beginning of the measurement period ending June 30, 2014) and is 5.72 years.

The average of the expected remaining service lives of all employees was determined by:

- Calculating each active employee’s expected remaining service life as the present value of $1 per year of future service at zero percent interest.

- Setting the remaining service life to zero for each nonactive or retired members.

- Dividing the sum of the above amounts by the total number of active employee, nonactive and retired members.

There is no change in the pension expense brought about by “Changes in Proportion and Differences Between Employer Contributions and Proportionate Share of Contributions”. This is because calculations are done separately to track TPL and Plan Fiduciary Net Position for each of the Fire and Police Departments and Harbor Port Police.

We did not attempt to determine the beginning balances for deferred inflows or resources and deferred outflows of resources as of the beginning of the period for the 2014 plan year. Per paragraph 137 of GAS 68, these balances are assumed to be zero.


19

EXHIBIT 10 Schedule of Proportionate Share of the Net Pension Liability – Total for all Employers

Reporting Date for Employer under GAS 68

as of June 30

Proportion of the Net Pension

Liability

Proportionate share of Net

Pension Liability

Covered-employee payroll(1)

Proportionate share of the Net Pension Liability as a percentage of its covered-

employee payroll

Plan’s Fiduciary Net Position as a percentage of the Total Pension Liability

2014 100.000% $3,584,155,041 $1,277,031,317 280.66% 80.38% 2015 100.000% 1,872,287,443 1,308,148,504 143.12% 90.07%



20

EXHIBIT 10 (continued) Schedule of Proportionate Share of the Net Pension Liability – Fire and Police


as of June 30


Liability


Pension Liability



employee payroll


2014 99.600% $3,569,834,904 $1,266,729,332 281.82% 80.41% 2015 99.441% 1,861,824,464 1,296,529,122 143.60% 90.10%



21

EXHIBIT 10 (continued) Schedule of Proportionate Share of the Net Pension Liability – Harbor Port Police


as of June 30


Liability


Pension Liability



employee payroll


2014 0.400% $14,320,137 $10,301,985 139.00% 68.00% 2015 0.559% 10,462,979 11,619,382 90.05% 79.16%



22

EXHIBIT 11 Schedule of Reconciliation of Net Pension Liability – Total for all Employers

Reporting Date for Employer under GAS 68 June 30, 2015 Measurement Date for Employer under GAS 68 June 30, 2014 Reconciliation of Net Pension Liability 1. Beginning Net Pension Liability $3,584,155,041 2. Pension Expense 148,766,618 3. Employer Contributions (440,698,260) 4. New Net Deferred Inflows/Outflows (1,419,935,956) 5. New Net Deferred Flows Due to Change in Proportion 0 6. Recognition of Prior Deferred Inflows/Outflows 0 7. Ending Net Pension Liability $1,872,287,443


23

EXHIBIT 11 (continued) Schedule of Reconciliation of Net Pension Liability – Fire and Police

Reporting Date for Employer under GAS 68 June 30, 2015 Measurement Date for Employer under GAS 68 June 30, 2014 Reconciliation of Net Pension Liability 1. Beginning Net Pension Liability $3,569,834,904 2. Pension Expense 146,035,124 3. Employer Contributions (437,421,086) 4. New Net Deferred Inflows/Outflows (1,416,624,478) 5. New Net Deferred Flows Due to Change in Proportion 0 6. Recognition of Prior Deferred Inflows/Outflows 0 7. Ending Net Pension Liability $1,861,824,464


24

EXHIBIT 11 (continued) Schedule of Reconciliation of Net Pension Liability – Harbor Port Police

Reporting Date for Employer under GAS 68 June 30, 2015 Measurement Date for Employer under GAS 68 June 30, 2014 Reconciliation of Net Pension Liability 1. Beginning Net Pension Liability $14,320,137 2. Pension Expense 2,731,494 3. Employer Contributions (3,277,174) 4. New Net Deferred Inflows/Outflows (3,311,478) 5. New Net Deferred Flows Due to Change in Proportion 0 6. Recognition of Prior Deferred Inflows/Outflows 0 7. Ending Net Pension Liability $10,462,979


25

EXHIBIT 12 Schedule of Recognition of Changes in Total Net Pension Liability

Increase (Decrease) in Pension Expense Arising from the Recognition of the Effects of Differences between Expected and Actual Experience on Total Pension Liability

Reporting Date for

Employer under

GAS 68 Year

Ended June 30

Differences between Expected

and Actual Experience

Recognition Period (Years)

Reporting Date for Employer under GAS 68 Year Ended June 30:

2015 2016 2017 2018 2019 2020 Thereafter

2015 $(234,637,547) 5.72 $(41,020,550) $(41,020,550) $(41,020,550) $(41,020,550) $(41,020,550) $(29,534,797) -

Net increase (decrease) in pension expense $(41,020,550) $(41,020,550) $(41,020,550) $(41,020,550) $(41,020,550) $(29,534,797) -

Increase (Decrease) in Pension Expense Arising from the Recognition

of the Effects of Assumption Changes Reporting Date for

Employer under

GAS 68 Year

Ended June 30

Effect of Assumption

Changes



2015 2016 2017 2018 2019 2020 Thereafter

2015 $(69,482,273) 5.72 $(12,147,251) $(12,147,251) $(12,147,251) $(12,147,251) $(12,147,251) $ (8,746,018) -

Net increase (decrease) in pension expense $(12,147,251) $(12,147,251) $(12,147,251) $(12,147,251) $(12,147,251) $ (8,746,018) -

As described in Exhibit 9, the average of the expected remaining service lives of all employees that are provided with pensions through LAFPP (active and inactive employees) determined as of June 30, 2013 (the beginning of the measurement period ending June 30, 2014) is 5.72 years.


26

EXHIBIT 12 (continued) Schedule of Recognition of Changes in Total Net Pension Liability

Increase (Decrease) in Pension Expense Arising from the Recognition of

Differences between Projected and Actual Earnings on Pension Plan Investments Reporting Date for

Employer under

GAS 68 Year

Ended June 30

Differences between

Projected and Actual

Earnings



2015 2016 2017 2018 2019 2020 Thereafter

2015 $(1,461,229,921) 5.00 $(292,245,984) $(292,245,984) $(292,245,984) $(292,245,984) $(292,245,985) - -

Net increase (decrease) in pension expense $(292,245,984) $(292,245,984) $(292,245,984) $(292,245,984) $(292,245,985) - -

Total Increase (Decrease) in Pension Expense Reporting Date for

Employer under

GAS 68 Year

Ended June 30

Total Differences


2015 2016 2017 2018 2019 2020 Thereafter

2015 $(1,765,349,741) $(345,413,785) $(345,413,785) $(345,413,785) $(345,413,785) $(345,413,786) $(38,280,815) -

Net increase (decrease) in pension expense

$(345,413,785) $(345,413,785) $(345,413,785) $(345,413,785) $(345,413,786) $(38,280,815) -


27

EXHIBIT 13 Allocation of Changes in Total Net Pension Liability

There is no change in the pension expense brought about by “Changes in Proportion and Differences Between Employer Contributions and Proportionate Share of Contributions”. This is because calculations are done separately to track TPL and Plan’s Fiduciary Net Position for each of the Fire and Police Departments and Harbor Port Police.

SECTION 3: Actuarial Assumptions and Methods and Appendices for the City of Los Angeles Fire and Police Pension Plan

28

Actuarial Assumptions and Methods

The following assumptions were adopted by the Board based on the Actuarial Experience Study as of June 30, 2013 and the Economics Assumptions Study as of June 30, 2014.

Mortality Rates

Healthy: RP-2000 Combined Healthy Mortality Table (separate for males and females), projected to 2022 with scale BB set back one year for members.

RP-2000 Combined Healthy Mortality Table (separate for males and females), projected to 2022 with scale BB set forward one year for beneficiaries.

Disabled: RP-2000 Combined Healthy Mortality Table (separate for males and females), projected to 2022 with scale BB set forward one year.

The tables shown above were determined to contain sufficient provision appropriate to reasonably reflect future mortality, based on a review of mortality experience as of the measurement date.


29

Termination Rates Before Retirement:

Pre-Retirement Mortality:

Rate (%) Mortality

Age Male Female

20 0.03 0.02 25 0.04 0.02 30 0.04 0.02 35 0.07 0.04 40 0.10 0.06 45 0.13 0.10 50 0.19 0.15 55 0.30 0.22 60 0.52 0.36

All pre-retirement deaths are assumed to be service connected.


30

Termination Rates Before Retirement (continued):

Rate (%) Disability*

Age Fire Police

20 0.02 0.02 25 0.02 0.03 30 0.03 0.05 35 0.06 0.08 40 0.15 0.22 45 0.23 0.36 50 0.28 0.46 55 1.02 0.80 60 3.00 1.18

* 90% of disabilities are assumed to be service connected. Disability rates are not applied to members eligible to enter the DROP.


31

Termination Rates Before Retirement (continued):

Rate (%) Termination (< 5 Years of Service)

Years of Service Fire Police

0 - 1 8.00 8.00 1 - 2 2.50 3.00 2 – 3 1.50 2.50 3 – 4 0.75 2.50 4 – 5 0.50 1.75

Rate (%)

Termination (5+ Years of Service) * Age Fire Police

20 1.00 2.00 25 1.00 2.00 30 0.85 1.70 35 0.54 1.20 40 0.37 0.85 45 0.17 0.66 50 0.02 0.24 55 0.00 0.00 60 0.00 0.00

* No termination is assumed after a member is eligible for retirement. This includes all active members currently in Tier 2. Members in Tiers 3, 5 and 6 who are not eligible to receive a deferred vested retirement benefit are assumed to receive refund of contributions.


32

Retirement Rates for Funding Valuation: Rate(%) Fire Police

Age Tiers 2&4 Tiers 3&5 Tier 6 Tiers 2&4 Tiers 3&5 Tier 6 41 1.00 0.00 0.00 10.00 0.00 0.00 42 1.00 0.00 0.00 10.00 0.00 0.00 43 1.00 0.00 0.00 10.00 0.00 0.00 44 1.00 0.00 0.00 10.00 0.00 0.00 45 1.00 0.00 0.00 10.00 0.00 0.00 46 1.00 0.00 0.00 7.00 0.00 0.00 47 1.00 0.00 0.00 7.00 0.00 0.00 48 2.00 0.00 0.00 7.00 0.00 0.00 49 2.00 0.00 0.00 7.00 0.00 0.00 50 3.00 3.00 3.00 12.00 7.00 8.00 51 4.00 3.00 3.00 12.00 6.00 10.00 52 5.00 3.00 4.00 12.00 6.00 10.00 53 10.00 3.00 5.00 15.00 6.00 15.00 54 15.00 7.00 5.00 20.00 10.00 15.00 55 20.00 12.00 10.00 20.00 18.00 18.00 56 20.00 14.00 12.00 25.00 18.00 18.00 57 20.00 16.00 15.00 25.00 20.00 20.00 58 20.00 20.00 18.00 25.00 22.00 22.00 59 20.00 25.00 20.00 25.00 25.00 25.00 60 20.00 25.00 25.00 25.00 25.00 25.00 61 20.00 30.00 30.00 25.00 25.00 25.00 62 25.00 35.00 30.00 25.00 25.00 25.00 63 25.00 40.00 35.00 30.00 25.00 25.00 64 30.00 40.00 40.00 40.00 30.00 30.00 65 100.00 100.00 100.00 100.00 100.00 100.00

DROP Program: DROP participants are considered active members until they leave the DROP and begin receiving retirement benefits. Members are assumed to remain in the DROP for 5 years. Of all members expected to retire with a service retirement benefit, we project a 95% probability that members have elected the DROP before retirement if they will have also satisfied the requirements for participating in the DROP for 5 years.


33

Retirement Rates After Adjustment for DROP Participation: As the service retirement rates we use in the funding valuation have been

developed based on the later date of exit from the DROP, we have adjusted those rates in this GASB valuation so that they are based on the earlier date of first participation in the DROP. Retirement rates used in our June 30, 2014 funding valuation are shown again on the next page. Please note that those rates are applicable in the GASB valuation for actives not eligible to enter the DROP. A sample of those rates used in the GASB valuation for an active eligible to enter the DROP at age 55 are as follows:


34

Retirement Rates for funding valuation

(Also applicable to actives not eligible to enter the DROP in GASB valuation)

Sample Retirement Rates for GASB valuation (For actives eligible to enter the DROP at 55)

Fire Police Fire Police

Age Tiers 2&4

Tiers 3&5 Tier 6

Tiers 2&4

Tiers 3&5 Tier 6 Age

Tiers 2&4

Tiers 3&5 Tier 6

Tiers 2&4

Tiers 3&5 Tier 6

41 1.00% 0.00% 0.00% 10.00% 0.00% 0.00% 41 1.00% 0.00% 0.00% 10.00% 0.00% 0.00% 42 1.00 0.00 0.00 10.00 0.00 0.00 42 1.00 0.00 0.00 10.00 0.00 0.00 43 1.00 0.00 0.00 10.00 0.00 0.00 43 1.00 0.00 0.00 10.00 0.00 0.00 44 1.00 0.00 0.00 10.00 0.00 0.00 44 1.00 0.00 0.00 10.00 0.00 0.00 45 1.00 0.00 0.00 10.00 0.00 0.00 45 1.00 0.00 0.00 10.00 0.00 0.00 46 1.00 0.00 0.00 7.00 0.00 0.00 46 1.00 0.00 0.00 7.00 0.00 0.00 47 1.00 0.00 0.00 7.00 0.00 0.00 47 1.00 0.00 0.00 7.00 0.00 0.00 48 2.00 0.00 0.00 7.00 0.00 0.00 48 2.00 0.00 0.00 7.00 0.00 0.00 49 2.00 0.00 0.00 7.00 0.00 0.00 49 2.00 0.00 0.00 7.00 0.00 0.00 50 3.00 3.00 3.00 12.00 7.00 8.00 50 3.00 3.00 3.00 12.00 7.00 8.00 51 4.00 3.00 3.00 12.00 6.00 10.00 51 4.00 3.00 3.00 12.00 6.00 10.00 52 5.00 3.00 4.00 12.00 6.00 10.00 52 5.00 3.00 4.00 12.00 6.00 10.00 53 10.00 3.00 5.00 15.00 6.00 15.00 53 10.00 3.00 5.00 15.00 6.00 15.00 54 15.00 7.00 5.00 20.00 10.00 15.00 54 15.00 7.00 5.00 20.00 10.00 15.00 55 20.00 12.00 10.00 20.00 18.00 18.00 55 26.23 21.06 20.49 26.01 25.47 25.47 56 20.00 14.00 12.00 25.00 18.00 18.00 56 27.70 26.20 25.81 32.42 27.00 27.00 57 20.00 16.00 15.00 25.00 20.00 20.00 57 31.92 32.30 30.46 34.77 30.84 30.84 58 20.00 20.00 18.00 25.00 22.00 22.00 58 34.71 41.79 38.90 40.44 35.38 35.38 59 20.00 25.00 20.00 25.00 25.00 25.00 59 41.79 51.69 48.62 52.03 45.33 45.33 60 20.00 25.00 25.00 25.00 25.00 25.00 60 90.43 88.44 88.89 89.56 90.23 90.23 61 20.00 30.00 30.00 25.00 25.00 25.00 61 1.00 1.50 1.50 1.25 1.25 1.25 62 25.00 35.00 30.00 25.00 25.00 25.00 62 1.25 1.75 1.50 1.25 1.25 1.25 63 25.00 40.00 35.00 30.00 25.00 25.00 63 1.25 2.00 1.75 1.50 1.25 1.25 64 30.00 40.00 40.00 40.00 30.00 30.00 64 1.50 2.00 2.00 2.00 1.50 1.50 65 100.00 100.00 100.00 100.00 100.00 100.00 65 100.00 100.00 100.00 100.00 100.00 100.00


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Retirement Age and Benefit for Inactive Vested Participants: For deferred vested members, retirement assumption is age 50.

Unknown Data for Members: Same as those exhibited by members with similar known characteristics. If not specified, members are assumed to be male.

Exclusion of Inactive Vesteds: All inactive participants are included in the valuation.

Definition of Active Members: First day of biweekly payroll following employment for new department employees or immediately following transfer from other city department.

Percent Married/Domestic Partner: 80% of male members, 60% of female members

Age of Spouse: Wives are 3 years younger than their husbands.

Future Benefit Accruals: 1.0 year of service per year.

Consumer Price Index: Increase of 3.25% per year; benefit increases due to CPI subject to a 3.0% maximum for Tiers 3 through 6.

Member Contribution and Matching Account Crediting Rate: 5.00%

Net Investment Return: 7.50%, net of investment expenses

Administrative Expenses: Out of the total 1.00% of payroll in administrative expense, 0.94% of payroll payable bi-weekly is allocated to the Retirement Plan. This is equal to 0.91% of payroll payable at beginning of the year.


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Salary Increases:

Annual Rate of Compensation Increase

Inflation: 3.25% per year; plus 0.75% “across the board” salary increases; plus the following Merit and Longevity increases based on years of service.

Years of Service Additional Salary Increase 0 7.50% 1 6.50 2 5.00 3 4.75 4 3.75 5 3.00 6 2.25 7 2.00 8 1.75 9 1.75

10 1.25 11 or more 0.75

Service Connected Disability Benefits: Years of Service Benefit

Less than 20 55% of Final Average Salary 20 – 30 65% of Final Average Salary

More than 30 75% of Final Average Salary

Nonservice Connected Disability Benefits: 40% of Final Average Salary


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Actuarial Value of Assets: The market value of assets less unrecognized returns. Unrecognized return is equal to the difference between the actual and expected returns on a market value basis, and is recognized over a seven-year period. Deferred gains and losses as of June 30, 2013 have been combined and will be recognized in equal amounts over a period of six years from that date. The actuarial value of assets is further adjusted, if necessary, to be within 40% of the market value of assets.

Actuarial Cost Method: Entry Age Normal Actuarial Cost Method. Entry Age is the current age minus Service Credit. Actuarial Accrued Liability is calculated on an individual basis and is based on costs allocated as a level percentage of compensation.

Funding Policy: The City of Los Angeles Fire & Police Pension Plan makes contributions equal to the Normal Cost adjusted by amount to amortize any Surplus or Unfunded Actuarial Accrued Liability. Both the Normal Cost and the Actuarial Accrued Liability are determined under the Entry Age Normal cost method. Any changes in Surplus or Unfunded Actuarial Accrued Liability due to actuarial gains or losses are amortized over separate twenty year periods as a level percentage of payroll. Any changes in Surplus or Unfunded Actuarial Accrued Liability from plan amendments are amortized over separate fifteen year periods as a level percentage of payroll. Any changes in Surplus or Unfunded Actuarial Accrued Liability from plan assumption changes are amortized over separate twenty-five year periods as a level percentage of payroll. Normal Cost and Actuarial Accrued Liability are calculated on an individual basis and are allocated by service. For Tier 1, the Unfunded Actuarial Accrued Liability is amortized using level dollar amortization ending on June 30, 2037. For Tiers 2, 3 and 4, the Unfunded Actuarial Accrued Liability is amortized using level percent of payroll as a percent of total valuation payroll from the respective employer (i.e., the City or Harbor Port Police). For Tiers 5 and 6, the Unfunded Actuarial Accrued Liability is amortized using level percent of payroll as a percent of combined payroll for these tiers from the respective employer (i.e., City or Harbor Port Police).


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APPENDIX A Calculation of Discount Rate as of June 30, 2014 Projection of Pension Plan’s Fiduciary Net Position ($ in millions)

* Less than $1 million, when rounded.

** $7,743 million when discounted with interest at the rate of 7.50% per annum has a value of $5 million as of June 30, 2013.

Projected Beginning Projected Projected Projected Projected Projected EndingYear Plan Fiduciary Total Benefit Administrative Investment Plan Fiduciary

Beginning Net Position Contributions Payments Expenses Earnings Net PositionJuly 1 (a) (b) (c) (d) (e) (f) = (a) + (b) - (c) - (d) + (e)2013 $14,680 $565 $859 $14 $2,617 $16,9902014 16,990 628 899 15 1,284 17,9872015 17,987 628 1,007 16 1,355 18,9482016 18,948 619 1,154 17 1,420 19,8162017 19,816 586 1,096 17 1,485 20,7742018 20,774 588 1,191 18 1,553 21,7062019 21,706 564 1,169 19 1,622 22,7052020 22,705 514 1,240 20 1,690 23,6492021 23,649 504 1,312 21 1,757 24,5772022 24,577 503 1,379 21 1,824 25,505

2038 32,646 191 2,601 28 2,356 32,5632039 32,563 210 2,682 28 2,348 32,4102040 32,410 173 2,746 28 2,331 32,1402041 32,140 109 2,793 28 2,304 31,7322042 31,732 93 2,828 28 2,271 31,239

2087 1,204 1 80 1 87 1,2112088 1,211 1 61 1 88 1,2392089 1,239 1 46 1 91 1,2832090 1,283 1 35 1 95 1,3442091 1,344 1 26 1 100 1,418

2115 7,203 6 0 * 6 540 7,7432116 7,7432116 Discounted Value: 5 **


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APPENDIX A (continued) Calculation of Discount Rate as of June 30, 2014 Projection of Pension Plan’s Fiduciary Net Position ($ in millions)

Notes:

(1) Amounts may not total exactly due to rounding.

(2) Amounts shown in the year beginning July 1, 2013 row are actual amounts, based on the information provided by LAFPP.

(3) Years 2023-2037, 2043-2086, and 2092-2114 have been omitted from this table.

(4) Column (a): Except for the "discounted value" shown for 2116, none of the projected beginning plan fiduciary net position amounts shown have been adjusted for the time value of money.

(5) Column (b): Projected total contributions include employee and employer normal cost rates applied to closed group projected payroll (based on covered active members as of June 30, 2013), plus employer contributions to the unfunded actuarial accrued liability. Contributions are assumed to occur beginning of the year.

(6) Column (c): Projected benefit payments have been determined in accordance with paragraph 39 of GAS 67, and are based on the closed group of active, inactive vested, retired members, and beneficiaries as of June 30, 2013. The projected benefit payments reflect the cost of living increase assumptions to be used in the June 30, 2014 valuation report. The projected benefit payments are assumed to occur beginning of the month, on average.

(7) Column (d): Projected administrative expenses are calculated as approximately 0.09% of the projected beginning plan fiduciary net position amount. The 0.09% portion was based on the average of the actual administrative expenses from 2008 to 2013. Administrative expenses are assumed to occur halfway through the year, on average.

(8) Column (e): Projected investment earnings are based on the assumed investment rate of return of 7.50% per annum except for 2013/2014.

(9) As illustrated in this Exhibit, the Plan's fiduciary net position was projected to be available to make all projected future benefit payments for current Plan members. In other words, there is no projected "cross-over date" when projected benefits are not covered by projected assets. Therefore, the long-term expected rate of return on Plan investments of 7.50% per annum was applied to all periods of projected benefit payments to determine the total pension liability as of June 30, 2014 shown earlier in this report, pursuant to paragraph 44 of GAS No. 67.


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APPENDIX B GLOSSARY OF TERMS Definitions of certain terms as they are used in Statement 68; the terms may have different meanings in other contexts. Active employees Individuals employed at the end of the reporting or measurement period, as applicable. Actual contributions Cash contributions recognized as additions to a pension Plan’s Fiduciary Net Position. Actuarial present value of projected benefit payments Projected benefit payments discounted to reflect the expected effects of the time value (present value) of money and the probabilities of payment. Actuarial valuation The determination, as of a point in time (the actuarial valuation date), of the service cost, Total Pension Liability, and related actuarial present value of projected benefit payments for pensions performed in conformity with Actuarial Standards of Practice unless otherwise specified by the GASB. Actuarial valuation date The date as of which an actuarial valuation is performed. Actuarially determined contribution A target or recommended contribution to a defined benefit pension plan for the reporting period, determined in conformity with Actuarial Standards of Practice based on the most recent measurement available when the contribution for the reporting period was adopted. Ad hoc cost-of-living adjustments (ad hoc COLAs) Cost-of-living adjustments that require a decision to grant by the authority responsible for making such decisions.


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APPENDIX B (continued) GLOSSARY OF TERMS Ad hoc postemployment benefit changes Postemployment benefit changes that require a decision to grant by the authority responsible for making such decisions. Agent employer An employer whose employees are provided with pensions through an agent multiple-employer defined benefit pension plan. Agent multiple-employer defined benefit pension plan (agent pension plan) A multiple-employer defined benefit pension plan in which pension plan assets are pooled for investment purposes but separate accounts are maintained for each individual employer so that each employer’s share of the pooled assets is legally available to pay the benefits of only its employees. Allocated insurance contract A contract with an insurance company under which related payments to the insurance company are currently used to purchase immediate or deferred annuities for individual employees. Also may be referred to as an annuity contract. Automatic cost-of-living adjustments (automatic COLAs) Cost-of-living adjustments that occur without a requirement for a decision to grant by a responsible authority, including those for which the amounts are determined by reference to a specified experience factor (such as the earnings experience of the pension plan) or to another variable (such as an increase in the consumer price index). Automatic postemployment benefit changes Postemployment benefit changes that occur without a requirement for a decision to grant by a responsible authority, including those for which the amounts are determined by reference to a specified experience factor (such as the earnings experience of the pension plan) or to another variable (such as an increase in the consumer price index). Closed period A specific number of years that is counted from one date and declines to zero with the passage of time. For example, if the recognition period initially is five years on a closed basis, four years remain after the first year, three years after the second year, and so forth.


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APPENDIX B (continued) GLOSSARY OF TERMS Collective deferred outflows of resources and deferred inflows of resources related to pensions Deferred outflows of resources and deferred inflows of resources related to pensions arising from certain changes in the collective Net Pension Liability. Collective Net Pension Liability The Net Pension Liability for benefits provided through (1) a cost-sharing pension plan or (2) a single-employer or agent pension plan in circumstances in which there is a special funding situation. Collective pension expense Pension expense arising from certain changes in the collective Net Pension Liability. Contributions Additions to a pension Plan’s Fiduciary Net Position for amounts from employers, nonemployer contributing entities (for example, state government contributions to a local government pension plan), or employees. Contributions can result from cash receipts by the pension plan or from recognition by the pension plan of a receivable from one of these sources. Cost-of-living adjustments Postemployment benefit changes intended to adjust benefit payments for the effects of inflation. Cost-sharing employer An employer whose employees are provided with pensions through a cost-sharing multiple-employer defined benefit pension plan. Cost-sharing multiple-employer defined benefit pension plan (cost-sharing pension plan) A multiple-employer defined benefit pension plan in which the pension obligations to the employees of more than one employer are pooled and pension plan assets can be used to pay the benefits of the employees of any employer that provides pensions through the pension plan. Covered-employee payroll The payroll of employees that are provided with pensions through the pension plan.


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APPENDIX B (continued) GLOSSARY OF TERMS Deferred retirement option program (DROP) A program that permits an employee to elect a calculation of benefit payments based on service credits and salary, as applicable, as of the DROP entry date. The employee continues to provide service to the employer and is paid for that service by the employer after the DROP entry date; however, the pensions that would have been paid to the employee (if the employee had retired and not entered the DROP) are credited to an individual employee account within the defined benefit pension plan until the end of the DROP period. Defined benefit pension plans Pension plans that are used to provide defined benefit pensions. Defined benefit pensions Pensions for which the income or other benefits that the employee will receive at or after separation from employment are defined by the benefit terms. The pensions may be stated as a specified dollar amount or as an amount that is calculated based on one or more factors such as age, years of service, and compensation. (A pension that does not meet the criteria of a defined contribution pension is classified as a defined benefit pension for purposes of Statement 68.) Defined contribution pension plans Pension plans that are used to provide defined contribution pensions. Defined contribution pensions Pensions having terms that (1) provide an individual account for each employee; (2) define the contributions that an employer is required to make (or the credits that it is required to provide) to an active employee’s account for periods in which that employee renders service; and (3) provide that the pensions an employee will receive will depend only on the contributions (or credits) to the employee’s account, actual earnings on investments of those contributions (or credits), and the effects of forfeitures of contributions (or credits) made for other employees, as well as pension plan administrative costs, that are allocated to the employee’s account.


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APPENDIX B (continued) GLOSSARY OF TERMS Discount rate The single rate of return that, when applied to all projected benefit payments, results in an actuarial present value of projected benefit payments equal to the total of the following:

1. The actuarial present value of benefit payments projected to be made in future periods in which (a) the amount of the pension Plan’s Fiduciary Net Position is projected (under the requirements of Statement 68) to be greater than the benefit payments that are projected to be made in that period and (b) pension plan assets up to that point are expected to be invested using a strategy to achieve the long-term expected rate of return, calculated using the long-term expected rate of return on pension plan investments.

2. The actuarial present value of projected benefit payments not included in (1), calculated using the municipal bond rate. Entry age actuarial cost method A method under which the actuarial present value of the projected benefits of each individual included in an actuarial valuation is allocated on a level basis over the earnings or service of the individual between entry age and assumed exit age(s). The portion of this actuarial present value allocated to a valuation year is called the normal cost. The portion of this actuarial present value not provided for at a valuation date by the actuarial present value of future normal costs is called the actuarial accrued liability. Inactive employees Terminated individuals that have accumulated benefits but are not yet receiving them, and retirees or their beneficiaries currently receiving benefits. Measurement period The period between the prior and the current measurement dates. Multiple-employer defined benefit pension plan A defined benefit pension plan that is used to provide pensions to the employees of more than one employer.


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APPENDIX B (continued) GLOSSARY Net Pension Liability The liability of employers and nonemployer contributing entities to employees for benefits provided through a defined benefit pension plan. Nonemployer contributing entities Entities that make contributions to a pension plan that is used to provide pensions to the employees of other entities. For purposes of Statement 68, employees are not considered nonemployer contributing entities. Other postemployment benefits All postemployment benefits other than retirement income (such as death benefits, life insurance, disability, and long-term care) that are provided separately from a pension plan, as well as postemployment healthcare benefits, regardless of the manner in which they are provided. Other postemployment benefits do not include termination benefits. Pension plans Arrangements through which pensions are determined, assets dedicated for pensions are accumulated and managed, and benefits are paid as they come due. Pensions Retirement income and, if provided through a pension plan, postemployment benefits other than retirement income (such as death benefits, life insurance, and disability benefits). Pensions do not include postemployment healthcare benefits and termination benefits. Plan members Individuals that are covered under the terms of a pension plan. Plan members generally include (1) employees in active service (active plan members) and (2) terminated employees who have accumulated benefits but are not yet receiving them and retirees or their beneficiaries currently receiving benefits (inactive plan members). Postemployment The period after employment.


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APPENDIX B (continued) GLOSSARY OF TERMS Postemployment benefit changes Adjustments to the pension of an inactive employee. Postemployment healthcare benefits Medical, dental, vision, and other health-related benefits paid subsequent to the termination of employment. Projected benefit payments All benefits estimated to be payable through the pension plan to current active and inactive employees as a result of their past service and their expected future service. Public employee retirement system A special-purpose government that administers one or more pension plans; also may administer other types of employee benefit plans, including postemployment healthcare plans and deferred compensation plans. Real rate of return The rate of return on an investment after adjustment to eliminate inflation. Service costs The portions of the actuarial present value of projected benefit payments that are attributed to valuation years. Single employer An employer whose employees are provided with pensions through a single-employer defined benefit pension plan. Single-employer defined benefit pension plan (single-employer pension plan) A defined benefit pension plan that is used to provide pensions to employees of only one employer.


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APPENDIX B (continued) GLOSSARY OF TERMS Special funding situations Circumstances in which a nonemployer entity is legally responsible for making contributions directly to a pension plan that is used to provide pensions to the employees of another entity or entities and either of the following conditions exists:

1. The amount of contributions for which the nonemployer entity legally is responsible is not dependent upon one or more events or circumstances unrelated to the pensions.

2. The nonemployer entity is the only entity with a legal obligation to make contributions directly to a pension plan. Termination benefits Inducements offered by employers to active employees to hasten the termination of services, or payments made in consequence of the early termination of services. Termination benefits include early-retirement incentives, severance benefits, and other termination-related benefits. Total Pension Liability The portion of the actuarial present value of projected benefit payments that is attributed to past periods of employee service in conformity with the requirements of Statement 68. 5378766v2/07916.120

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Attachment 2



(213) 978-4545


DATE: SEPTEMBER 3, 2015 ITEM: A.3 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: APPROVAL OF PROPOSED BOARD RULE 5.9 – FORFEITURE OF UNCLAIMED

FUNDS TO THE PLAN AND POSSIBLE BOARD ACTION

RECOMMENDATION That the Board approve the proposed Board Policy Section 5.9 – Forfeiture of Unclaimed Funds to the Plan (Attachment). DISCUSSION Charter Section 1246 was added as part of Charter Amendment G, approved by voters on March 8, 2011. Charter Section 1246 gives the Board the “authority to declare a forfeiture of all monies, including but not limited to contributions, interest thereon and benefits, that become payable or distributable from the Plan to any owner who either cannot be found or refuses to accept the payment or distribution of such monies within ten years of the date such monies become payable or otherwise distributable from the Plan.” Additionally, Charter Section 1246 allows for the Board, or General Manager if delegated the authority by Board rule, to relieve a person of any such forfeiture. Charter Section 1246 was necessary to ensure that such funds remain with the Plan. Similar language was inadvertently removed from the Charter when the new Charter was approved by voters in 1999. Under California law, any such monies would escheat to the state after three years if the owner had not accepted the distribution. However, California law allows for monies to remain with a retirement system if the plan document contains a provision similar to Charter Section 1246. Per the authority provided by Charter Section 1246, staff recommends that the Board delegate its authority to declare a forfeiture of money or relieve a person from forfeiture of money to the General Manager. BUDGET There is no budget impact associated with this proposed Board Policy. POLICY The City Attorney’s Office has reviewed and approved Board Policy Section 5.9, as proposed.


This report was prepared by: Greg Mack, Manager Communications & Active Member Services Section RPC:JS:GFM Attachment: Proposed Board Policy Section 5.9

ATTACHMENT

Los Angeles Fire & Police Pension System

5.0 - MEMBER ACCOUNTS CREDITING OF INTEREST 5.1 The General Manager shall determine the approximate earned investment income of all

funds for each (6) six-month period ending December 31 and June 30, excluding profits and losses from the sale of securities, as follows: Earned Investment Income for the six-month period divided by (1/2 of the beginning asset balance + each of the following five months asset balance + 1/2 of ending asset balance) divided by six months. A recommendation shall be presented to the Board, based upon this calculation. The Board shall adopt an official interest rate that shall be credited to individual member contribution accounts.

REFUNDS OF CONTRIBUTIONS 5.2 Upon the written request of terminated System members, the General Manager shall

process refunds of contributions, plus interest credited as of the last day of each June and December, and additional interest for any period of service between the next preceding last day of June and December and the end of the pay period preceding the date of termination, at the rate at which regular interest was last credited to plan member's individual accounts.

Refunds for Public Service Purchases (PSP), as described in Section 5.5 below, are subject to the provisions of Administrative Code Section 4.2212. A member may elect that a refund, due to overpayment of PSP as determined by an actuarial “true-up”, be processed via trustee-to-trustee transfer to the City’s Deferred Compensation 457(b) Plan if the 457(b) plan was a source of the original PSP payment. (Amended 4/5/12)

5.2.1 Upon application by a former member of LAFPP who currently is employed by the City as a member of LACERS, the General Manager is authorized to transfer all contributions (including interest) of the former member directly to LACERS for the purpose of enabling the former member to purchase service credit and other benefits as authorized under the provisions of LACERS. In connection with this transfer, the former member shall be required to sign a written waiver of all rights to benefits from LAFPP.

The purpose of this Board rule is to restore the rights that former members previously had (prior to December 21, 1996) to transfer their contributions to LACERS in order to purchase service credit and other benefits with LACERS in a manner that is consistent with the provisions of LACERS and current tax law. This rule shall not establish a reciprocity program between LACERS and LAFPP. (Section added 07/05/2012)

CONTRIBUTIONS OWED TO THE SYSTEM

1

ATTACHMENT

5.3 The General Manager is authorized to collect mandatory regular pension contributions owed to the System that were not collected and voluntary additional pension contributions as defined in Administrative Code Section 4.1167. For amounts less than or equal to a member’s biweekly contribution, no notification is required to the member. For amounts greater than a member’s biweekly contribution, the member shall be notified of the amount due and provided an opportunity to pay the total amount in a lump sum. If the member does not pay such amount within 30 days of such notification, the General Manager is authorized to initiate deductions from the member's salary in the amount of 2% until the amount due has been collected. This 2% deduction may be reduced upon the member’s election to pay interest equivalent to the Board approved assumed actuarial rate in effect when the agreement is made. The payment period, not to exceed ten years, shall be determined in advance by the member, except however, the General Manager may prescribe a minimum payment amount. The entire balance may be paid at any time. If the member applies for a pension prior to completing the agreement, the entire balance of the purchase agreement, including interest accrued to date, becomes due. (Amended 12/06/12)

CONTRIBUTIONS COLLECTED IN ERROR 5.4 The General Manager is authorized to refund mandatory and non-mandatory

contributions collected in error. PURCHASE OF SERVICE CREDIT 5.5 Upon the written request of a member of Tier 3, Tier 4, Tier 5 or Tier 6, application may

be made for purchase of Years of Service Credit. Plan membership is defined by City Charter §1502(c), §1602(c), §1702(d) and Administrative Code §4.2002(c). Only active, non-DROP members of the Police, Fire, and Harbor departments are allowed to purchase service credit as defined in applicable Charter and Administrative Code provisions. (Amended 05/16/13)

(i) Recruit Training Time – City Charter §1500(a), §1600(a), §1700(b) and

Administrative Code §4.2000(a) A member may purchase their entire recruit training time or they may purchase a

prorated amount. (Amended 05/16/13) (ii) Prior Service Time – City Charter §1500(b), §1502(m)(4), §1514(d), §1600(f),

§1602(m)(4), §1700(d), §1702(p)(4)&(6), §1714(e), Administrative Code §4.2002(m)(4) and §4.2014(d)

A member may purchase the entire period of prior service as a former member of Tiers

1, 2, 3, 5, or 6 by re-depositing the entire amount of refunded contributions and interest, or may purchase a portion of such service by depositing a prorated amount of the refunded contributions and interest in accordance with paragraph B. (Amended 05/16/13)

(iii) Temporary Disability paid at State rate – City Charter §1502(m)(4), §1514(e), §1602(m)(4), §1614(e), §1702(p)(4) and §1714(g), Administrative Code §4.2002(m)(4) and §4.2014(e)

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ATTACHMENT

A member may purchase their entire temporary disability paid at State rate, or they may purchase a prorated amount. (Amended 05/16/13)

(iv) Non-service connected disability pension – City Charter §1502(m)(2), §1602(m)(2), §1702(p)(2), Administrative Code §4.2002(m)(2)

Members who elect to have service credit restored for time spent on a non-service connected disability pension may purchase the entire time or a prorated amount. (Amended 05/16/13) (v) Paramedic/Civilian Ambulance Service while a member of the City Employees’ Retirement System for current members of Tier 3 or Tier 4; former members of Tier 3 or Tier 4 who transferred to Tier 5; and former members of Tier 2 who transferred to Tier 5 – City Charter §1500(d), §1600(g), Administrative Code §4.2000(d) and §4.2000(c)(4)

Members who received a refund of contributions and interest from the City Employees’

Retirement System for a service as a paramedic/civilian ambulance employee can purchase this prior service, or a partial period of this service, by re-depositing the amount refunded plus interest that would have been earned had the member not received the refund. (Amended 07/21/2005)

(vi) Public Service Purchase (PSP) – Administrative Code §4.2212

A member may increase the monthly retirement allowance or survivorship benefits based upon the increased retirement allowance with the purchase of public service credit, not to exceed 4 years, that includes full-time service with a public entity, including a branch of the military service. Verification through a Certification of Service or presentation of original proof of military service time (DD214) will serve to establish eligibility of service time sought for purchase. (vii) Office of Public Safety (OPS) Service Purchase Program – Administrative Code

§4.2214

Members who were transferred to the Police Department from the Department of General Services’ OPS and gained status in Class Code 2214, 2217, 2223, 2227, 2232, or 2244, and who become members of Tier 6 may purchase service. Only sworn service in Class Codes 3183, 3185, 3188, and 3198 is eligible for purchase. Former OPS officers are eligible to purchase either the minimum or the maximum eligible OPS service credit as determined by the Plan’s actuary. Members shall not be allowed to purchase a different number of years of service for Tier 6 health benefit purposes than for purposes of other Tier 6 benefits. Eligible members must enter into a written purchase agreement on or before June 30, 2015. (Added 10/16/14)

The following rules apply to the purchases above unless otherwise stated: A. Service credit may be purchased by a single cash payment or on an installment

basis through payroll deduction, or both. However, if the member is purchasing nonqualified permissive service credit as defined by Internal Revenue Code Section 415(n), the member may not make the purchase with after-tax contributions unless the member has five or more service credit years. In accordance with Los Angeles Administrative Code Section 4.1906(q) if a member

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ATTACHMENT

making a purchase of nonqualified service has less than five service credit years, a trustee-to-trustee transfer from the City of Los Angeles Deferred Compensation Plan or a rollover from an eligible retirement plan is the only payment option available. Members who elect to purchase prior service, recruit training time or temporary disability through payroll deduction contract shall be limited to two such contracts for any one type of purchased service. Members who elect to make a public service purchase through payroll deduction contract shall be limited to one such contract for each period of service purchased. Each such purchase service contract may be initiated or ended by a lump sum payment.

For OPS service purchases made through payroll deduction the member may

terminate the payroll deduction contract and cease further payments. The member shall not be allowed to complete this purchase at a later date or enter into another agreement to purchase this service. The member will receive prorated years of service based on the payments already made.

A member may make any cash payment or lump sum payment authorized above

by using a trustee-to-trustee transfer from the City of Los Angeles Deferred Compensation Plan. Should a trustee-to-trustee transfer not be large enough to cover the entire cost of the purchase, any balance owing may then be paid by the member either as a lump sum payment or on an installment basis through payroll deduction. If the member is purchasing nonqualified permissive service, the member must have five or more service credit years. A member who is purchasing nonqualified permissive service and who has fewer than five service credit years and opted for trustee-to-trustee transfer or rollover will only be allowed to do so, if the purchase amount will be fully covered by the transfer or rollover. A trustee-to-trustee transfer may also be used by Tier 2 members to purchase Lost Service Time.

A member purchasing OPS service may make a lump sum payment by waiving his or her right to all benefits (based on all his or her non-OPS service) with LACERS and authorizing a transfer of all his or her remaining LACERS member contributions and accrued interest from LACERS to LAFPP, provided that the total amount of the member’s remaining LACERS contributions and interest does not exceed the remaining amount that the member owes to LAFPP for the purchase. (Amended 10/16/14)

B. When payment is made through payroll deduction, the member may elect a

payment period not to exceed ten years for all purchases except public service and OPS service purchases. For public service and OPS service purchases, the member may elect a payment period that is not to exceed thirty years, does not extend past the date on which the member would attain the maximum years of service permitted by his/her tier when the public service or OPS service purchase is included, and establishes payment three months prior to the member’s intended retirement/DROP entry date for all contracts.

The General Manager may prescribe a minimum payment amount for all contracts.

The member’s payroll deduction for a contract will be the greater of the minimum amount prescribed by the General Manager or the amount necessary to complete the contract within the allowable time as defined in the previous paragraph. The schedule, which shall be determined by the member in advance, cannot be

4

ATTACHMENT

changed except the member may pay off the balance at any time. The member shall be charged an amount equivalent to the Board determined

assumed actuarial interest rate in effect when the contract is signed. However, OPS service purchases will pay an interest rate of 7.75%. For the purchase of prior service, an additional amount equivalent to the interest that would have been earned in accordance with Section 5.1 (i.e., the amount credited to member accounts) shall also be charged.

For all purchases described in Section 5.5, except for purchase of prior service,

public service, or OPS service purchases, no additional amount will be charged if the purchase agreement begins within one year of the member’s eligibility to make the purchase. If the purchase is made after the one year eligibility date, an additional amount equivalent to the interest that would have been earned in accordance with Section 5.1 shall also be charged from one year following the eligibility date until the beginning date of the purchase agreement. Such payments may be made on either a pre-tax or post-tax basis, except that payroll deductions for public service and OPS service purchase contracts may be made only on a post-tax basis, with pre-tax contributions subject to all requirements of the Internal Revenue Code.

Purchases of service credit time for Tier 5 and Tier 6 Plan members are to be

calculated based on the pension rate in effect during the period of service time to be purchased. If a contribution rate change falls within a pay period, a pro-rated rate shall be applied. (Amended 10/16/14)

C. A qualified surviving spouse/domestic partner may complete the purchase of years

of service agreed to by a member, and subject to a true up for public service purchases, by remitting a lump sum payment prior to benefits being granted. (Amended 10/16/14)

WORKERS’ COMPENSATION AWARD RECAPTURE 5.6 Disability pension payments must be reduced by the total amount of compensation

awarded or paid pursuant to Workers’ Compensation in accordance with Los Angeles City Charter Article XI, Part 3, Section 1212 (Effect of Receipts of Workers’ Compensation). As to Workers’ Compensation payments being received concurrently with a disability pension, the General Manager is directed to reduce the monthly pension by the monthly equivalent of the Workers’ Compensation payments. As to Workers’ Compensation awards or payments received prior to the granting of the disability pension, the General Manager is directed to deduct from monthly pension payments on an installment basis until the total amount of prior Workers’ Compensation has been offset. Each deduction made on an installment basis shall be in an amount of no less than twenty-five (25) percent of the monthly gross pension amount. The member, at his or her discretion, may elect to repay the full amount of prior Workers’ Compensation at any time. The member and General Manager may agree on deduction amounts greater than twenty-five (25) percent. If a member, upon being granted a disability pension, is eligible to receive a pension payment retroactive to a date earlier than the Board action date, the deduction provisions stated above shall be applied to the retroactive pension payment. (Amended 03/07/13)

5

ATTACHMENT

WORKERS’ COMPENSATION RECAPTURE SUSPENSION 5.7 Members receiving disability pension payments that are reduced by the Workers’

Compensation recapture amount may apply for a six-month recapture suspension. The recapture suspension will only apply to the amount determined as no less than twenty-five (25) percent of the monthly gross pension amount. The suspension request with justification must be made in writing addressed to the General Manager. The General Manager or the Board will review and may approve the recapture suspension request. However, Workers’ Compensation payments being received continuously on a bi-weekly basis are not subject to suspension and will continue to reduce the pensioner’s monthly pension payment. In the event that the member would need an additional recapture suspension, a request addressed to the General Manager should be submitted. The request will be presented to the Board for consideration. The Board may request additional documentation prior to the approval of the Worker’s Compensation recapture suspension. Upon the Board’s approval, the succeeding six monthly pension payments will be issued without the deduction of the monthly worker’s compensation recapture subject to suspension. Requests received during the first ten days of the current month will be presented to the Board on the second meeting of the current month. Requests received after the first ten days of the current month will be presented to the Board on the first meeting of the following month. (Amended 03/07/13)

ACCEPTANCE OF ELECTRONIC SIGNATURES

5.8 The Board authorizes the acceptance of an electronic signature on a document that requires a signature. Such document shall be given the same force as a signed, valid original document, if the document and electronic signature are submitted using technology that the Board deems sufficient to ensure its integrity, security and authenticity. The system deemed sufficient shall embody all of the following attributes:

a) User ID and password are unique to each member, and b) The User ID and password are capable of verification. (Section added 05/02/13)

FORFEITURE OF UNCLAIMED FUNDS TO THE PLAN 5.9 The Board authorizes the General Manager to declare a forfeiture of money or relieve a

person from forfeiture of money. The General Manager is authorized to declare a forfeiture of all monies, including but not limited to contributions, interest, and benefits, that become payable or distributable from LAFPP to any owner who either cannot be found or refuses to accept payment or distribution within ten years of the date such monies become payable or distributable from LAFPP. (Section added 09/03/15)

HISTORY 5.910 Adopted: Circa June 13, 1996; Amended 07/21/05, 04/05/12, 07/05/12, 12/06/12,

03/07/13, 05/02/13, 05/16/13, 02/20/14 and, 10/16/14 and 09/03/15. (Also listed after amended sections).

REVIEW

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ATTACHMENT

5.1011 This policy shall be reviewed by the Board as needed and may be amended by the Board at any time.

7



(213) 978-4545


DATE: SEPTEMBER 3, 2015 ITEM: A.4 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: TRANSFER OF FUNDS FOR PURCHASE OF NEW MICROFICHE/MICROFILM MACHINE AND POSSIBLE BOARD ACTION

RECOMMENDATION That the Board authorize a transfer of $10,000 from Account 3040 - Contractual Services to Account 7300 - Furniture, Office, and Technical Equipment to purchase a microfiche/microfilm machine. DISCUSSION As indicated in various Fiscal Year 2014-15 Business Plan updates to the Board for the Document Imaging System Project, staff have identified issues with the scanned microfiche/microfilm records returned to LAFPP from an outside vendor. These records consist mostly of historical member-related payroll data that need to be retained by the Department. Staff determined that the most cost effective approach regarding the microfiche/microfilm documents would be to correct the documents onsite by procuring a new state of the art microfiche/microfilm machine to be used as to view and edit records. The two microfiche/microfilm machines currently used by the department are out-of-date and have limited editing features. The Department of General Services (GSD) will initiate the competitive bidding process to purchase a new microfiche/microfilm machine based on LAFPP’s needs and specifications. The new machine must be purchased as a line item using the Furniture, Office, and Technical Equipment Account 7300, as it is anticipated that the equipment purchase will exceed $5,000 based on recent quotes. Because there are no existing funds to cover this purchase in the Fiscal Year 2015-16 Budgetary Account 7300, a transfer between accounts is necessary. BUDGET The Fiscal Year 2015-16 Budgetary Account 3040 - Contractual Services has funds to cover the expense of the new machine. There would be no impact to the overall LAFPP budget after the transfer is completed. POLICY There is no policy change associated with this request.


This report was prepared by: Erick S. Kurimoto, Senior Clerk Typist Administrative Services Section RPC:WSR:SHC:ESK:JP



(213) 978-4545

REPORT TO THE BOARD OF FIRE AND POLICE PENSION COMMISSIONERS DATE: SEPTEMBER 3, 2015 ITEM: B.1 FROM: RAYMOND P. CIRANNA, GENERAL MANAGER SUBJECT: CONTRACTOR DISCLOSURE POLICY – QUARTERLY REPORT

THIS REPORT IS PROVIDED TO THE BOARD FOR INFORMATIONAL PURPOSES. The Board adopted the Contractor Disclosure Policy to provide transparency in LAFPP’s contracting process and to help ensure that investment and procurement decisions are made solely on the merits of the goods or services proposed to be provided by Contractors to LAFPP.

Section 1.18.G.2.f of the Policy reads as follows:

“LAFPP internal audit staff will compile a quarterly Board report containing the names and amount of compensation agreed to be provided to each Intermediary by each Contractor; the campaign contributions and gifts of each Contractor as reported in the Contractor Disclosures; the List of Contacts; and the List of Exclusions.”

In accordance with the above section, Staff is providing its quarterly report to the Board. Ninety disclosure reports were received by the Internal Audit Section (IAS) for the period ending June 30, 2015. The following table is a breakdown of the reports received by IAS and the reports outstanding at the time this report was prepared.

Description No. Outstanding

No. Received

Quarterly Disclosures (69 Required) Completed Quarterly Reports 68 Outstanding Quarterly Reports 1 Annual Disclosures (0 Required) Completed Annual Reports Outstanding Annual Reports Additional Disclosures (22 Required) Private Equity Funds (New Fund or Increased Commitment) 5 RFP Respondent 17

Total 1 90

Attachment 1 lists outstanding disclosure reports, exclusions, disclosed contributions, contacts, gifts, and intermediary information. Attachment 2 is a summary of the gift information disclosed by the private equity consultant, Portfolio Advisors.


Prior Quarterly Report Update There were no outstanding disclosure reports in the prior quarter. BUDGET No impact. This report was prepared by: Caroline Dinu Senior Management Analyst II Internal Audit Section RPC:EJK:CD Attachment 1. Contractor Disclosure Summary Attachment 2. Private Equity Disclosure Information

DEPARTMENT OF FIRE AND POLICE PENSIONS CONTRACTSAs of September 3, 2015

Attachment 1

Page 1

Start Date Exp. Date574PEN Keenan & Associates 3/1/2013 2/29/2016 Unresponsive

Start Date Exp. DateNone



Vendor / Contract NameNone

Vendor / Contract Name570PEN and

584PEN Portfolio Advisors

Vendor / Contract Name Notes

PE Fund New Water Capital PE fund approved at 6-4-15 board meeting.

Medical and Dental BenefitsNEW EXCLUSIONS

Contract Term

Contract Term Campaign Contribution Information

CAMPAIGN CONTRIBUTIONS

Contact Information

Contract Number

Contract Number

OTHER CONTRIBUTIONS

Vendor / Contract Name

CONTRACTOR DISCLOSURE POLICY

Contract Number Vendor / Contract Name Contract Term

OUTSTANDING DISCLOSURES

Responsible Section Reason for non-disclosure

Gift Information

DISCLOSED GIFTS

Contribution InformationContract Term

Contact DateDISCLOSED CONTACTS

Vendor / Contract Name

Capstone Partners GP, LLC 2.0% of capital commitments. 5/29/2015

Contract Number Vendor / Contract Name Exclusion Information

See attached summary.

Compensation Disclosure DateIntermediary

INTERMEDIARY INFORMATION

Gift Date

PRIVATE EQUITY DISCLOSURE INFORMATION

In response to the Contractor Disclosure Policy as modified in June 2015, LAFPP’s private equity consultant, Portfolio Advisors, submitted its contractor disclosure for the quarter ending June 30, 2015.

Portfolio Advisors employees attend annual and advisory board meetings of the underlying portfolio funds as part of its due diligence and in order to fulfill its responsibilities to its clients. IAS summarized disclosure information in consideration of due diligence protections in certain limited partnership agreements.

The table below is a summary of gifts of meals, lodging, and transportation, as defined in LAFPP’s Contractor Disclosure Policy and as reported by Portfolio Advisors for the second quarter of 2015.

Number of Annual and/ or Advisory Board Meetings

Number of PA Staff Attending as Advisory Board Members

Total Number of PA Staff in Attendance

Number of Attendees w/ Travel and Lodging Provided by GP

Number of Attendees w/ Lodging Only Provided by GP

35 24 51* 7 2 Note: It is understood that meals are provided by the General Partner (GP) of the private equity fund. *This number includes one PA Staff attending via conference call or web ex on-line meeting.

In addition, Portfolio Advisors has in place a Gifts and Entertainment Policy. IAS has reviewed the Portfolio Advisors’ Gifts and Entertainment Policy and notes that it is robust, comprehensive, and demonstrates commitment to ensuring employees’ actions are free from conflicts of interest, the appearance of conflicts of interest, and potential violations of law. Key provisions of the policy include restrictions on gifts and entertainment, quarterly reporting (in addition to those required by LAFPP), references to Portfolio Advisors’ Code of Ethics, and consideration of applicable laws and ERISA.

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Attachment 2

M I N U T E S

OF THE

BOARD OF FIRE AND POLICE PENSION COMMISSIONERS

BOARD MEETING OF MAY 7, 2015 The Board of Fire and Police Pension Commissioners of the City of Los Angeles met at the LACERS Board Room, located at the Los Angeles Times Building, 202 W. First Street, Suite 500, Los Angeles 90012 on Thursday, May 7, 2015. COMMISSIONERS PRESENT: Belinda Vega, President

Robert von Voigt, Vice President George Aliano Cielo Castro Sam Diannitto (participated telephonically) Ruben Navarro Corinne Tapia

COMMISSIONER ABSENT: Pedram Salimpour DEPARTMENT OF FIRE AND POLICE PENSIONS: Raymond P. Ciranna

William Raggio, Executive Officer Tom Lopez, Chief Investment Officer

Joseph Salazar, Assistant General Manager Barbara Nobregas, Commission Executive Assistant

CITY ATTORNEY’S OFFICE: Alan Manning, Assistant City Attorney President Vega called the meeting to order at 8:35 a.m. All of the above-listed Commissioners were present at the start of the meeting with the exception of Commissioners Castro and Tapia, who arrived at 8:42 a.m. and 8:50 a.m. respectively. A. COMMITTEE REPORTS

1. CONTRACT AMENDMENT WITH BROWN ARMSTRONG ACCOUNTANCY CORPORATION FOR FINANCIAL AUDIT SERVICES AND POSSIBLE BOARD ACTION

Ms. Erin Kenney, Departmental Audit Manager, presented the request to amend the Brown Armstrong contract. She indicated that staff is satisfied with their work. Additionally, LAFPP is in the process of completing full implementation of the new Governmental Accounting Standards Board (GASB) 67 and 68 Statements. Staff is working with the actuary, the City, and City’s

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ITEM: D.1

Minutes of the Board of Fire and Police Pension Commissioners Meeting of May 7, 2015 Page 2

financial statements auditor to complete the full implementation. She noted a correction on page two of the board report, which should read $79,568.00.

RESOLUTION 15110

Commissioner Navarro moved that the Board execute a contract amendment with Brown Armstrong Certified Public Accountants (Brown Armstrong) to extend the contract for an additional one-year period, and at an amount not to exceed $79,568.00 to provide financial statements auditing services consistent with the current contract, which was seconded by Commissioner von Voigt and approved by the following vote: ayes, Commissioners Aliano, Diannitto, Navarro, von Voigt, and President Vega – 5; nays, none.

Item A.3, B.1, and B.2 were taken out of order.

3. SUBSIDY PROGRAM AUDIT – HEALTH PLANS ADMINISTERED BY THE LOS ANGELES POLICE PROTECTIVE LEAGUE; AND POSSIBLE BOARD ACTION

Ms. Erin Kenney provided a brief overview of the subsidy program audit. Mr. James Yeung, Internal Auditor IV, stated the objectives of the audit were to evaluate whether the program is effective, and if it provides expected results. The specific objectives were to determine if LAFPP actually paid dental subsidies to the Los Angeles Police Protective League (LAPPL) and whether the LAPPL provided dental insurance coverage. Mr. Yeung provided details of the audit and the results in which both objectives were determined without exception.

RESOLUTION 15111

Commissioner von Voigt moved that the Board review, receive, and file the Subsidy Program Audit – Health Plans Administered by the Los Angeles Police Protective League, which was seconded by Commissioner Navarro and approved by the following vote: ayes, Commissioners Aliano, Diannitto, Navarro, von Voigt, and President Vega – 5; nays, none.

B. ITEMS FOR BOARD ACTION

1. PROPOSED RENEWAL OF FRONTIER CAPITAL MANAGEMENT CO., LLC DOMESTIC SMALL CAP GROWTH EQUITY CONTRACT AND POSSIBLE BOARD ACTION

Commissioner Navarro motioned to approve the staff recommendation, seconded by Commissioner Aliano. Ms. Erin Kenney stated that she received the disclosure information and there was no information to report. Messrs. Paul Palmer, Investment Officer II and Daren Perlstein, Investment Officer I provided an overview of Frontier Capital Management Co. (Frontier) discussing their performance, history, personnel and ranking. The firm represents about 10% of System’s domestic portfolio. Frontier


has netted the System over $700M. Mr. Palmer briefly discussed the other two firms, Attucks and Daruma that are in the same class as Frontier and their performance. Mr. Palmer addressed the Board’s question stating that it is not unusual for small cap managers to have performance based fees.

RESOLUTION 15112

Commissioner Navarro moved that the Board: 1. Approve a three-year contract with Frontier Capital Management Co. LLC; 2. Authorize the General Manager to negotiate and approve the terms and conditions of a

contract with Frontier Capital Management Co., LLC for services, including the incorporation of the Board’s Contractor Disclosure Policy for the period July 1, 2015 through June 30, 2018; and,

3. Authorize the President of the Board, on behalf of the Board, to execute the contract with

Frontier Capital Management Co., LLC for domestic small cap securities management services, subject to the approval of the City Attorney as to form, which was seconded by Commissioner Aliano and approved by the following vote: ayes, Commissioners Aliano, Castro, Diannitto, Navarro, von Voigt, and President Vega – 6; nays, none.

2. MAXIMUM RETIRED SWORN NON-MEDICARE HEALTH SUBSIDY FOR FISCAL YEAR

2015-2016 AND POSSIBLE BOARD ACTION

Mr. Anthony Torres, Senior Management Analyst II, from the Medical and Dental Benefits Section stated that the recommendation is to increase the health subsidy by 6.75% to $1,435.13, which is the maximum increase the Board may grant. For most of the members, the health plan premiums rose about 6.75% or more and members are going to shoulder more of their health plan premiums on average. Currently, members are paying an average of 6.04% of their premium, and it will increase to an average of 7.24%. The overall health subsidy budget will increase by 4.94%. He explained the overall premium increase of roughly 6.5%, and the differentials of the various plans and some of the savings. Ms. Elsa Moy gave public comment.

RESOLUTION 15113

Commissioner Navarro moved that the Board increase the maximum retired sworn non-Medicare health subsidy by 6.75%, to $1,435.13 per month, effective July 1, 2015 as follows:

WHEREAS, retired members of the Fire and Police Pension Plan, Tiers 1, 2, 3, 4, 5 and 6, have had paid, on their behalf, a health insurance premium subsidy, or have received a


reimbursement, in accordance with the provisions of Article 10, Division 4, Chapters 11.5 and 20 of the Administrative Code; and

WHEREAS, the Board of Fire and Police Pension Commissioners has been granted the authority under Section 4.1154(e) of the Administrative Code to increase or decrease the maximum monthly amount of the health insurance subsidy in accordance with the authority conferred in subsections (e) of Sections 1330, 1428, 1518, 1618 and 1718 of the Charter and subsection (e) of 4.2018 of the Administrative Code; and WHEREAS, the pre-65 actuarial assumed medical trend rate for the 2015-2016 fiscal year as adopted by the Board in the plan’s most recent actuarial valuation is 6.75%; and WHEREAS, the pre-65 actuarial assumed medical trend rate for the 2015-2016 fiscal year as adopted by the Board in the plan’s most recent actuarial valuation is less than 7%; RESOLVED, that the maximum monthly health insurance premium subsidy as described in Section 4.1154 (e) of the Administrative Code shall be $1,435.13, payable on behalf of the members and their eligible dependents (as such term is defined in the Board approved health insurance plans) or received as a reimbursement; and RESOLVED, that retired members of age 60 and above with 10 or more years of service who retired with an effective date prior to July 1, 1998, and retired members of age 55 and above with 10 or more years of service who retired with an effective date of July 1, 1998 or after, who do not qualify for Part A of Medicare, shall have paid to their respective approved health insurance carriers a monthly health insurance subsidy, or paid directly to the member as a reimbursement, an amount not to exceed $57.4052 for each whole year of service; said subsidy to apply first to that portion of the premium applicable to the retired member with any remainder to be applied to the dependent(s) of said member; and

RESOLVED, that retired members who do qualify for federally funded Part A of Medicare

shall have paid to their respective approved health insurance carriers, on their behalf, a subsidy as provided in Section 4.1154(c) and in addition shall have paid to said insurance carriers, on behalf of their eligible dependents, a subsidy equal to the amount payable on behalf of the dependents of a retired member in the same plan with the same years of service who does not qualify for Parts A or B of Medicare or qualifies for Part B but not Part A and has their Medicare Part B and D benefits included in their Board-approved health plan, whichever subsidy amount is greater, providing such subsidy, both member and dependent portions combined, does not exceed the highest subsidy for a retired member of Tiers 1, 2, 3, 4, 5 and 6 with a like number of years of service and who does not qualify for federally funded Part A of Medicare; and

RESOLVED, that subsidies paid on behalf of retired members, the dependents of retired members, and qualified surviving spouses/domestic partners who are eligible to enroll in Medicare Parts A and B or Medicare Part B but not Part A shall be subject to the limits described in Board Operating Policy 8.2, and


RESOLVED, the health insurance premium subsidy provided herein shall be applied against

the June 30, 2015 and subsequent monthly health insurance premiums or at the earliest month thereafter which is administratively feasible, and shall remain in effect until modified or cancelled by subsequent action of the Board; and

RESOLVED, that the General Manager of the Department of Fire and Police Pensions be

authorized to cause demands to be drawn upon the funds of the Fire and Police Tiers 1, 2, 3, 4, 5 and 6 General Pension Funds to be paid to the service organizations through which health insurance is provided for subsidy payments applying the health insurance premiums to said eligible members in advance of or after the effective date of enrollment or change in coverage, or directly to the member in the case of a reimbursement; providing such subsidy payments have been verified against records kept by the Department of Fire and Police Pensions and found to be correct and proper and that individual subsidy amounts are within the limits set forth in the Los Angeles City Administrative Code, which was seconded by Commissioner Castro and approved by the following vote: ayes, Commissioners Aliano, Castro, Diannitto, Navarro, Tapia, von Voigt, and President Vega – 7; nays, none.

A2. SUBSIDY PROGRAM AUDIT – HEALTH PLANS ADMINISTERED BY THE UNITED

FIREFIGHTERS OF LOS ANGELES CITY; AND POSSIBLE BOARD ACTION

Mr. Erin Kenney and Mr. James Yeung presented the objective, scope and procedures of the United Firefighters of Los Angeles City (UFLAC) health subsidy audit. The audit was similar to the LAPPL audit in that the objective was to determine whether LAFPP accurately paid health subsidies to ULFAC and whether UFLAC provided health coverage to its members who receive subsidies. Staff did not find exceptions reviewing the data. However, nine members did not have the proper documentation for dependents covered under the members’ plans. It appeared that these were older enrollees. Currently, UFLAC is in the process of collecting the documentation. Overall, UFLAC has a comprehensive process for verifying dependent eligibility. UFLAC agreed with the suggestion to formalize specific practices and implement them.

Mr. Frank Lima, President of UFLAC stated that he appreciated LAFPP’s professionalism in conducting the audit. Moving forward, UFLAC intends to be in compliance and specifically in regards to the nine members. He thanked LAFPP for doing good things. Mr. Ken Buzzell, Director, Los Angeles Retired Fire and Police Association requested that LAFPP include in future retired newsletters information regarding the audit, dependent coverage verification and findings.

President Vega agreed with Mr. Buzzell to provide communication to the members.

RESOLUTION 15114

Commissioner Navarro moved that the Board review, receive, and file the Subsidy Program Audit – Health Plans Administered by the United Firefighters of Los Angeles City, which was


seconded by Commissioner von Voigt and approved by the following vote: ayes, Commissioners Aliano, Castro, Diannitto, Navarro, Tapia, von Voigt, and President Vega – 7; nays, none.

B. ITEMS FOR BOARD ACTION (continued)

3. CITY MANAGEMENT AUDIT RECOMMENDATIONS ASSIGNED TO THE BOARD; AND

POSSIBLE BOARD ACTION

Ms. Erin Kenney presented an overview of the City Management Audit as known as Hewitt EnnisKnupp (HEK) Audit. Thirty-four out of the 55 recommendations were assigned to the Board. She provided a status update of the remaining 18 recommendations. She thanked Mr. Tom Lopez and the Investment staff for their assistance. Ms. Elsa Moy gave a public comment.

RESOLUTION 15115

Commissioner Castro moved that the Board review and approve the proposed status of the remaining 18 recommendations assigned to the Board and as recommended in the City Management Audit, as “Completed,” which was seconded by Commissioner Tapia and approved by the following vote: ayes, Commissioners Aliano, Castro, Diannitto, Navarro, Tapia, von Voigt, and President Vega – 7; nays, none.

4. DISCUSSION ON THE ANNUAL BOARD EDUCATIONAL OFF-SITE MEETING AND

POSSIBLE BOARD ACTION

Mr. William Raggio, Executive Officer, Administrative Operations Division provided a summary of the February 19, 2015 Off-site meeting held at the California Endowment. The recommendation is to have next year’s meeting at the same location with the same meeting format as this year. Attendance increased from last year and General Manager Ciranna is expanding the guest list. Staff is working to be more efficient on the process, for example to implement electronic registration. General Manager Ciranna requested if Board Members have any suggestions on topics to inform him. President Vega stated that she agrees with the date although it is a year in the future.

RESOLUTION 15116

Commissioner Navarro moved that the Board approve March 3, 2016 as the date for the 2016 Board Educational Off-Site Meeting and confirm The California Endowment as the venue, which was seconded by Commissioner Tapia and approved by the following vote: ayes, Commissioners Aliano, Castro, Diannitto, Navarro, Tapia, von Voigt, and President Vega – 7; nays, none.


C. REPORTS TO THE BOARD

1. CITY ATTORNEY ADVICE REGARDING APPLICABILITY OF CHARTER SECTION 1120(c)

TO REAL ESTATE INVESTMENT TRUSTS Mr. Alan Manning, Assistant City Attorney stated that if the Board wishes to discuss the issue in public then it must waive the attorney-client privilege, which requires a motion from the Board.

RESOLUTION 15117

Commissioner Navarro moved that the Board waive its attorney-client privilege of the City Attorney's memorandum dated April 23, 2015 regarding Applicability of Charter Section 1120(c) to Real Estate Investment Trusts, to facilitate a discussion in open session and to allow copies of the memorandum to be available to the public, which was seconded by Commissioner Aliano and approved by the following vote: ayes, Commissioners Aliano, Castro, Diannitto, Navarro, Tapia, von Voigt, and President Vega – 7; nays, none.

Mr. Manning stated that the question was to determine if a section of the Los Angeles City Charter (Charter) that provides that any purchase of real estate by the Board requires an affirmative majority vote from not only the Board, but also specifically from one of the elected active employee members of the Board. The Board directed the City Attorney to provide a brief review of the task, summary, and conclusion for the public. Ms. Anya Freedman, Deputy City Attorney stated that Commissioner Diannitto asked the City Attorney’s Office to advise the Board whether a specific voting procedure contained in Section 1120(c) of the Charter applied to real estate investment trusts (REITS). She stated that the City Attorney concluded that it does not. She provided details supporting the conclusion. The City Attorney memorandum was made available to the public.

Item C.2 was heard in the latter portion of the meeting.

4. THE TOWNSEND GROUP'S REAL ESTATE "VIEW OF THE WORLD”

Ms. Jennifer Young, Principal and Mr. Nick Rittenhouse, Consultant from The Townsend Group provided details of the report and answered the Board’s questions.

3. REAL ESTATE PERFORMANCE REVIEW BY THE TOWNSEND GROUP

Ms. Jennifer Young and Mr. Nick Rittenhouse from The Townsend Group presented the performance of the Real Estate portfolio and answered the Board’s questions.


5. REVIEW OF 2015 PRIVATE EQUITY AND COMMODITIES INVESTMENT ACTIVITY BY PORTFOLIO ADVISORS, LLC Mr. Todd A. Hughes, Managing Director for Portfolio Advisors provided an update of the private equity portfolio. He will present two investment opportunities in closed session today. In June 2015, he will have two specialized managers returning to the Board to use the remaining monies allocated to that particular space. With respect to commodities, there is one existing manager and two to three managers investing in mining firms that he will bring to the Board for future consideration. The board report was received and filed.

6. MINORITY, WOMEN AND DISABLED VETERAN OWNED BROKER USAGE REPORT Ms. Miki Shaler, Management Assistant, Investment Division stated that currently, there are 27 Minority, Women, or Disabled Veteran Owned Business Enterprise (MBE/WBE/DVBE) brokers who have certifications on file with LAFPP. Semi-annually staff updates the certification list. Staff follows up with managers to track their usage of MBE/WBE/DVBE brokers and reports it to the Board semi-annually. President Vega asked if the Board has previously set targets, goals, or held a discussion on the issue of using minority or women owned businesses. If the Board wishes to move forward, she believed that targets should be established.

General Manager Ciranna stated that he does not believe that any targets were previously set, and previously information was provided to the Board. LAFPP highly encourages managers to use minority and women-owned type firms. Staff included disabled veterans about six months ago. Mr. Tom Lopez stated that the issue of using women and minority owned firms was discussed in the past. The situation is that that most of these brokers are minority or women owned; staff cannot set a specific number to hire because it will violate California law. President Vega discussed the possibility of setting MBE/WBE/DVBE manager goals. Mr. Lopez suggested that the Board may wish to consider a balanced approach in reaching goals for MBE/WBE/DVBE brokers. Staff has found that hiring approximately 5-15% of MBE/WBE/DVBE brokers is possible for the Fund’s managers. That is what the program has generated dating back about twenty years of the program’s existence. General Manager Ciranna stated that the Board will continue to receive the report every six months.


7. FLUCTUATING PENSIONS BASED ON ACTIVE POLICE MEMBER SALARIES

Ms. Myo Thedar, Senior Management Analyst II, Retirement Services Section, Pensions Division stated that the fluctuating pensioners are a group of nine Tier 1 members whose benefits are defined by the Los Angeles City Charter, and that fluctuate with salaries negotiated for the active members. The recent ratification of MOU #24 for active Police personnel impacts some of the fluctuating pensions, effective July 2016. Staff will budget for these increases in their respective fiscal year budget. The board report was received and filed.

The Board recessed for break at 10:01 a.m. and reconvened at 10:18 a.m. 2. STATUS OF THE DIRECT HIRE EMERGING MANAGER SEARCHES

Messrs. Rick Rogers, Investment Officer III; Jim Voytko, Chief Operating Officer and Ryan Sullivan, Associate Consultant from RVK were before the Board. Mr. Rogers stated that the qualitative screening for the fixed income manager search has been performed. Staff and RVK are in the review process of preparing a final list of managers to present to the Board at the next meeting. Once the Board approves the finalist list, then interviews will be scheduled. Staff and RVK are moving into the final screening process for the small cap and micro cap manager search. Staff anticipates bringing a list of finalist to the Board in June 2015. In regards to the large cap manager search, the initial screening process has reduced the number of products to 33. Mr. Voytko and Mr. Sullivan were present to discuss the large cap search. The Board raised the issues of how many managers to hire and much money to allocate to each of the three categories. General Manager Ciranna proposed that the Board may wish to consider hiring two managers for each search, and allocating $20-25 million to each category. If the Board wishes to hire more managers and increase the original allocation, monies may be shifted to support an increase. The Board continued its discussion on how many managers to interview, when to interview, and hire. Board members gave their respective opinions. General Manager Ciranna proposed scheduling interviews on June 18, June 25 for a special meeting, and July 2, 2015. Today’s report provides an update on the searches. Staff will prepare another report asking for direction at the next meeting.

Messrs. Sullivan and Voytko provided a detailed summary of the large cap emerging manager search and answered the Board’s questions.


President Vega stated that it is important to notify the managers who were not selected. She encouraged staff work diligently to decrease the number of managers to interview.

8. President Vega asked if any Board Member made any expenditure to influence State legislative or administrative action to which their reply was negative.

9. Miscellaneous correspondence from money managers, consultants, etc. – Received and Filed.

10. General Manager’s Report

a. Benefits Actions approved by General Manager on April 16, 2015

Pursuant to Resolution 04008, adopted by the Board of Fire & Police Pension Commissioners on August 7, 2003, the following benefit actions have been approved by the General Manager.

DISCONTINUED PENSIONS – TIER 1 – 2 James E. Barr Fire Disability Retired: 08-08-73 Died: 03-09-15 Lawrence L. Harris Fire Disability Retired: 06-01-50 Died: 03-17-15

DISCONTINUED PENSIONS – TIER 2 – 12 Robert J. Patterson Fire Service Retired: 02-01-71 Died: 03-07-15 Marion J. Helenkamp Police Service Retired: 02-15-87 Died: 03-14-15 Philip A. Leiker Police Service Retired: 11-03-91 Died: 03-12-15 Barry L. Morrison Police Service Retired: 09-12-99 Died: 03-11-15 Gary J. Redel Police Service Retired: 11-18-90 Died: 03-02-15 J. L. Trojanowski Police Service Retired: 01-07-73 Died: 03-06-15 Billy R. Wedgeworth Police Service Retired: 04-22-90 Died: 02-27-15 Dennis E. Murphy Police Disability Retired: 09-27-72 Died: 02-21-15 Irene E. Haskin Fire Widow Retired: 06-07-09 Died: 01-21-15 Mildred C. Brown Police Widow Retired: 11-19-06 Died: 03-03-15 Lucille A. Hess Police Widow Retired: 03-06-99 Died: 03-13-15 Coralee Milburn Police Widow Retired: 04-04-05 Died: 02-16-15

DISCONTINUED PENSIONS – TIER 3 – 1 Gregory C. Telian Fire Disability Retired: 09-25-98 Died: 07-24-14

DISCONTINUED PENSIONS – TIER 5 – 1 Erin N. Jackson Police Dependent Child Retired: 09-30-09 Died: 03-15-15

DISCONTINUED PENSIONS FORMER SPOUSE – TIER 2 – 4


Virginia M. Hawkes Fire Service Retired: 07-01-95 Died: 02-01-15 Marsha K. Brychta Police Service Retired: 11-03-91 Member Died: 03-12-15 Cheryll S. Redel Police Service Retired: 06-01-97 Member Died: 03-02-15 Betty L. Woodson Fire Disability Retired: 09-01-87 Died: 03-08-15

DISCONTINUED PENSIONS FORMER SPOUSE – TIER 3 – 1 Margaret J. Medrano Fire Disability Retired: 09-25-98 Member Died: 07-24-14

ELIGIBLE SURVIVING SPOUSE’S PENSION – TIER 1 – 1 Name Deceased Member Member’s Class Effective Date Linda C. Barr James E. Barr Fire Disability 03-10-15

ELIGIBLE SURVIVING SPOUSE’S PENSION – TIER 2 – 4 Name Deceased Member Member’s Class Effective Date Sandra M. Morrison Barry L. Morrison Police Service 03-12-15 Margaret P. Trojanowski J. L. Trojanowski Police Service 03-07-15 Edith F. Wedgeworth Billy R. Wedgeworth Police Service 02-28-15 Linda F. Murphy Dennis E. Murphy Police Disability 02-22-15

SURVIVOR BENEFIT PURCHASE PROGRAM VESTED MEMBERS – TIER 5 – 1 Name Member’s Class Effective Date Vested Date Survivor Benefit % Robert E. Percy Police Service 02-01-14 02-01-15 30%

PARTIAL PAYMENT OF PENSION – TIER 2 – 2 In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the pension payable to David H. Combs, Police Service Pensioner, is to be paid to his former spouse, Jean I. Combs, effective April 1, 2015. Ms. Combs will receive cost of living adjustments. In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the pension payable to Robert F. Navarro, Police Service Pensioner, is to be paid to his former spouse, Maria T. Navarro, effective April 1, 2015. Ms. Navarro will receive cost of living adjustments.

PARTIAL PAYMENT OF PENSION – TIER 5 – 1 In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the pension payable to Marc H. Segal, Fire Service Pensioner, is to be paid to his former spouse, Patricia Segal, effective February 27, 2015. Ms. Segal will receive cost of living adjustments.

DESIGNATED PARTIAL PAYMENT OF PENSION – TIER 2 – 1


In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the pension payable to Kenneth H. Gunderman, Fire Disability Pensioner, which was paid to his deceased former spouse, Lorraine M. Gardner, has been designated to her beneficiary, Gary Gardner, effective July 19, 2014. Mr. Gardner will receive cost of living adjustments.

CONSERVATORSHIP/GUARDIANSHIP - TIER - 2 - 1 A certified copy of the Letters of Guardianship and Conservatorship for Edward T. Chilson, issued in the District Court of the State of Kansas, Cowley County, Case Number 15 PR 8W, appointing Alixis Chilson, Guardian and Conservator for Edward T. Chilson, retired Fire Service Pensioner, effective February 19, 2015, has been filed with this office. Pension payments will be paid to Alixis Chilson for the benefit of Edward T. Chilson, effective April 1, 2015.

DEFERRED SERVICE PENSION – TIER 3 – 1 Police Marc M. Tessier Police Officer II Eff: 03-18-15 16 Years 326 Days

SERVICE PENSION – TIER 3 – 1 Police William S. Travis Detective I Eff: 03-22-15 20 Years 126 Days SERVICE PENSION – TIER 5 – 2 Police Ronald N. La Grassa Police Officer II Eff: 03-22-15 21 Years 37 Days Karen A. Zuniga Detective III Eff: 03-12-15 27 Years 95 Days

SERVICE PENSION/DROP – TIER 3 – 1 Police Robert Grant III Sergeant I Eff: 01-15-15 25 Years 166 Days

SERVICE PENSION/DROP – TIER 4 – 1 Police Cole D. Burdette Police Officer III +5 Eff: 02-01-15 26 Years 33 Days

SERVICE PENSION/DROP – TIER 5 – 21 Fire Gary W. Alexander Captain I Eff: 02-03-15 28 Years 145 Days Donald Batiste Engineer Eff: 02-02-15 27 Years 186 Days Andre B. Raya Captain II Eff: 12-30-14 31 Years 3 Days Thomas P. Garifo Inspector I Eff: 12-01-14 27 Years 219 Days Dale W. Grottke Firefighter III Eff: 01-31-15 28 Years 44 Days


Roy A. Harvey Battalion Chief Eff: 01-29-15 36 Years 358 Days William E. Holland Engineer Eff: 01-30-15 28 Years 39 Days Police Felipe J. Arreola Police Officer II Eff: 02-01-15 25 Years 0 Days Silva L. Atwater Lieutenant II Eff: 02-21-15 25 Years 233 Days Rhonda N. Baychue Police Officer II Eff: 02-02-15 27 Years 96 Days William M. Bennyworth Police Officer III +1 Eff: 12-01-14 26 Years 344 Days Duncan D. Burns Police Officer II +2 Eff: 02-01-15 26 Years 267 Days Natalie D. Gipson Lieutenant II Eff: 12-01-14 26 Years 15 Days David E. Hernandez Police Officer III Eff: 01-01-15 25 Years 265 Days Eleanor G. Hill Police Officer III Eff: 12-01-14 25 Years 185 Days James L. Hill Detective I Eff: 01-02-15 30 Years 111 Days Debora A. Orpin Sergeant II Eff: 03-02-15 25 Years 0 Days Sylvia T. Ruize Detective III Eff: 01-02-15 26 Years 11 Days Rocky E. Sherwood Detective I Eff: 01-02-15 28 Years 134 Days Gregg A. Smith Detective III Eff: 02-02-15 26 Years 23 Days Timothy J. Torsney Lieutenant II Eff: 12-01-14 27 Years 185 Days

DISCONTINUE DROP – TIER 2 – 2 Fire Randall J. Beach Retired: 05-01-10 Exit Close of: 04-30-15

Police Wayne Okamoto Retired: 05-03-10 Exit Close of: 04-30-15 DISCONTINUE DROP – TIER 3 – 1 Police Larry L. Johnson Retired: 11-01-13 Exit Close of: 04-30-15

DISCONTINUE DROP – TIER 4 – 2 Police David A. Harrison Retired: 04-26-10 Exit Close of: 04-25-15 Jeffrey A. Sandefur Retired: 04-30-10 Exit Close of: 04-29-15 DISCONTINUE DROP – TIER 5 – 27 Fire James V. Bizzini Retired: 05-01-10 Exit Close of: 04-30-15 Edward M. Bushman Retired: 04-21-10 Exit Close of: 04-20-15 Jose L. S-Cronenbold Retired: 04-30-10 Exit Close of: 04-29-15 Walter S. Duffy Retired: 04-30-10 Exit Close of: 04-29-15 Richard W. Elder Retired: 04-30-10 Exit Close of: 04-29-15


Daniel L. Grahek Retired: 05-01-10 Exit Close of: 04-30-15 Pierre T. Houbein Retired: 05-01-10 Exit Close of: 04-30-15 Ronald H. Klamecki Retired: 04-30-10 Exit Close of: 04-29-15 Albert Luna Retired: 05-01-10 Exit Close of: 04-30-15 Ronnie S. Matsuo Retired: 04-30-10 Exit Close of: 04-29-15 Ricardo A. Ramirez Retired: 04-30-10 Exit Close of: 04-29-15 Gregory J. Resendez Retired: 04-26-10 Exit Close of: 04-25-15 Charles H. Smith Retired: 05-02-10 Exit Close of: 04-30-15 Police Manuel Andujo Retired: 05-01-10 Exit Close of: 04-30-15 John M. Balderas Retired: 06-05-13 Exit Close of: 04-30-15 Raymond P. Conboy Retired: 05-01-10 Exit Close of: 04-30-15 Donald R. Christensen Retired: 01-04-11 Exit Close of: 03-31-15 Lionel M. Garcia, Jr. Retired: 05-01-10 Exit Close of: 04-30-15 Hector M. Ibarra Retired: 03-01-11 Exit Close of: 03-31-15 Annette Lopez Retired: 05-03-10 Exit Close of: 04-30-15 Daryl L. Maxwell, Sr. Retired: 04-30-10 Exit Close of: 04-29-15 Evangelyn Nathan Retired: 05-03-10 Exit Close of: 04-30-15 Isaias F. Ornelas Retired: 05-01-10 Exit Close of: 04-30-15 Rodney O. Rodriguez Retired: 05-03-10 Exit Close of: 04-30-15 Steve G. Savala Retired: 05-01-10 Exit Close of: 04-30-15 John C. Shafia Retired: 05-03-10 Exit Close of: 03-31-15 John H. Washington, Jr. Retired: 05-01-10 Exit Close of: 04-30-15

PARTIAL PAYMENT OF DROP FUNDS – TIER 5 – 1 In accordance with the City Attorney’s advice, a designated proportion of the community property interest of the DROP funds payable to Daryl L. Maxwell, Sr., Police Service Pensioner, is to be withheld for his former spouse, Victoria A. Maxwell, effective April 29, 2015.

ELIGIBLE SURVIVING SPOUSE APPLICATION – TIER 5 – 1 Name Member’s Rank Type % Rate Effective Date Violeta J. De La Cruz (Erwin B. De La Cruz)

Police Officer II NSC w/o prejudice 30% + 2 minor children

03-08-15

SERVICE CONNECTED DISABILITY PENSION – TIER 5 – 1 Name Member’s Rank Percentage Effective Date Board Date Christina M. Higuera Police Officer II 45% 04-02-15 04-02-15

b. Other business relating to Department operations

General Manager Ciranna gave the following updates:


1. He congratulated Commissioner von Voigt on his election to the Board although the

results are unofficial. President Vega stated that Board Members are honored to serve with Commissioner

von Voigt and congratulated him. 2. The newly appointed Commissioner Adam Nathanson is tentatively scheduled to be

confirmed by the Los Angeles City Council on May 13, 2015. If he is confirmed by City Council, he may be at the May 21, 2015 Board meeting.

3. Staff was before the Los Angeles City Council, Budget and Finance Committee (Committee) discussing the LAFPP budget. Staff did not receive questions from the Committee that require any follow-up. One issue that was frequently talked about was the rate of return. Committee members have their concerns that the Board is too conservative. The Committee reflected on the 20-year averages with a rate of return at 8-1/2%. General Manager Ciranna stated that it is important for education within the department and at offsite meetings. He is expanding his outreach to get stakeholders engaged.

4. He continues to work on the parking issue for the new headquarters facility.

D. COMMITTEE CALENDAR

1. Audit Committee – Last met: 04/16/15; next meeting: 07/16/15 2. Benefits Committee – Last met: 04/02/15; next meeting: 05/21/15 3. Governance Committee – Last met: 04/02/15; next meeting: 06/18/15 4. Ad Hoc Emerging Investment Managers – Last met: 11/06/14; next meeting: TBD

President Vega noted that Committee meetings are scheduled, with the exception of the Ad Hoc.

E. CONSENT ITEMS 1. Approval of Minutes

a. Minutes of the Regular Board meeting of August 7, 2008 and January 15, 2015 b. Minutes of the Special Board Meeting of January 15, 2015

MOTION

Commissioner Navarro moved that the Board approve the consent items, seconded by Commissioners von Voigt and approved by the following vote: ayes, Commissioners Aliano, Castro, Diannitto, Navarro, Tapia, von Voigt, and President Vega – 7; nays none.

F. CONSIDERATION OF FUTURE AGENDA ITEMS


Commissioner Navarro requested that the Board evaluate the General Consultant RVK because he believed that Ms. Rebecca Gratsinger, CEO and Senior Consultant, from RVK is not present at most meetings. Mr. Tom Lopez stated the issue of evaluating the General Consultant was in the policy at one point.

G. GENERAL PUBLIC COMMENT ON MATTERS WITHIN THE BOARD’S JURISDICTION

Mr. C. Cleveland, LAFD employee requested to transfer from Tier 3 to Tier 5 and stated that his situation was unique. General Manager Ciranna stated the staff will report back on this issue at a future meeting.

H. CLOSED SESSION ITEMS FOR POSSIBLE BOARD ACTION

1. CLOSED SESSION PURSUANT TO GOVERNMENT CODE SECTION 54956.81 TO CONSIDER THE PURCHASE OF TWO (2) PARTICULAR, SPECIFIC INVESTMENTS AND POSSIBLE BOARD ACTION The Board met in closed session.

Upon reconvening in open session, President Vega stated that there was no public report.

The meeting adjourned at 10:03 a.m.

President Secretary

FINDINGS OF FACT A duly noticed hearing of the Board of Fire and Police Pension Commissioners was

held on July 16, 2015, in the matter of the disability pension application of Tier 5 member

Michael J. Almasy, a police officer II + 2 (“the Applicant”).

The Applicant was not present but was represented by Thomas J. Wicke, Esq. from

the law offices of Lewis, Marenstein, Wicke, Sherwin and Lee.

The administrative record, including all medical reports, was received into evidence

without objection.

The Applicant’s claim of disability is based upon injuries to “back, left shoulder,

and right knee” sustained through involvement in multiple traffic accidents while

performing duties as an LAPD motorcycle officer. Staff recommended that the Applicant

be granted a service-connected disability pension of 60% for the back, left shoulder, and

right knee with no foreseeable purpose served in requiring periodic medical examinations.

The applicant agreed with this recommendation.

The Board considered the evidence, deliberated and rendered its decision that the

Applicant is entitled to a service-connected disability pension of 60% for the back, left

shoulder, and right knee, having first found the following:

1. The Applicant was examined by three licensed, practicing physicians in

the medical specialties of Orthopedic (2) and Neurologic medicine.

2. The Applicant is impaired in duty performance because of his claimed

orthopedic impairments to his back, left shoulder, and right knee.

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Typewritten Text

ITEM: D.2

Michael J. Almasy Page 2

3. The applicant showed by clear and convincing evidence that the discharge

of the member’s duties was the predominant cause of his impairments to the

back, left shoulder, and right knee, pursuant to L.A.C.C. Section 1506 (a).

4. The Applicant has a service-connected disability of 60% and is within the

Serious Limitations strata of the Disability Rating Worksheet.

5. The Applicant has been continuously disabled and no foreseeable purpose

would be served in requiring periodic medical examinations.

Based upon all of the foregoing the Board determined that the Applicant is entitled to a

service-connected disability pension in an amount of 60% for back, left shoulder, and right

knee with no scheduled review.

I hereby certify that the foregoing is a true and correct copy of the Findings of Fact adopted

by the Board of Fire and Police Pension Commissioners at its regular meeting held

__________________.

Date_____________ ______________________________

Manager - Secretary

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