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EMPLOYEES' RETIREMENT SYSTEM OF THE COUNTY OF MILWA UKEE MINUTES OF THE MARCH 27, 2019 PENSION BOARD MEETING

1. Call to Order

The Chairman called the meeting to order at 8:33 a.m. at the Marcus Center for the Performing Arts, 929 North Water Street, Milwaukee, WI 53202.

2. Roll Call

Members Present

Fernando Aniban Linda Bedford Laurie Braun (Vice Chair) Dr. George Cashman Michael Harper (Chairman) William Holton LaValle Morgan Ronald Nelson David Zepecki

Members Excused

Elena LaMendola

Others Present

Tim Coyne, Director—Retirement Plan Services Tina Lausier, Fiscal Officer - Retirement Plan Services Anne Berleman Kearney, Deputy Corporation Counsel Jessica Culotti, Reinhart Boerner Van Deuren s.c. Christopher Caparelli, Marquette Associates, Inc. Jay Butterfield, American Realty Michael Harmon, former County employee Sharon Harmon, Mr. Harmon's spouse George Mark, Mr. Harmon's friend June Simeth

3. Chairman's Report

The Chair began the meeting by thanking everyone for attending and noting his hope that the meeting would be less eventful than the prior month's meeting. The Chair also stated that his comments would be brief.

The Chair continued by stating that as the Pension Board is aware, the County Board of Supervisors reviewed and adopted the Ordinance amendments related to ERS. While the Chair stated that ERS will be implementing and rolling out those changes, he explained that what struck him is that in the last decade, ERS has paid out a billion or more dollars in benefits. He noted that Ms. Lausier could likely

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provide a more exact number, but the Chair stated that over the same decade, ERS's liabilities have doubled. The Chair explained that without additional action, these liabilities could potentially double again. He stated that the Pension Board needs to determine how to reduce some of these liabilities, taking into account the suggestions and recommendations made by the Retirement Sustainability Task Force and some of the other service providers ERS has retained. The Chair noted that this was why he has consistently pushed to have an asset liability model study performed. The Chair stated that this study can better inform the Board how it is allocating its investments and noted that consistent investment underperformance has been a detriment to ERS.

The Chair further explained that while ERS is in the business of paying benefits to its members, the Pension Board also needs to be figuring out with ERS how to manage its expenses. The Chair noted that currently ERS is in negatively amortizing situation, which is not good. The Chair explained that this means that every year the liability gets larger instead of being reduced. The Chair further explained that this needs to be a part of the Board's strategic focus, both at the Board level and the Committee level. The Chair ended his comments by stating that the Committee charters will be part of this process and may become important in terms of moving forward and starting to look at the structural challenges ERS faces.

4. Minutes

(a) February 27, 2019 Meeting

The Chair stated that he would entertain comments or questions regarding the draft minutes from the February 27, 2019 meeting, and if none, he would entertain a motion to accept the minutes as presented.

The Pension Board voted unanimously to approve the minutes of the February 27, 2019 Pension Board meeting. Motion by Mr. Zepecki, seconded by Mr. Holton.

5. Investments

(a) Investment Manager – American Realty

Jay Butterfield from American Realty Advisors ("American Realty") distributed a booklet containing information on the investment services provided by American Realty for ERS.

Mr. Butterfield thanked the Pension Board for the opportunity to present today and speak about American Realty. Mr. Butterfield noted that he is going to talk

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about what American Realty is doing to contribute to the stability of the ERS portfolio and to help to maintain and produce some positive returns to address the issue that the Chair raised. Mr. Butterfield also noted that the issue of underfunding is endemic across many pension funds. He further noted that this difficulty is increased when moving from a period of strong returns, lots of capital and lots of success to a period of time of slower growth and lower returns overall. Mr. Butterfield stated that it is American Realty's job to focus on how to create sustainable income, sustainable returns and preserve capital.

Mr. Butterfield then continued by providing an overview of American Realty. He stated that American Realty is a privately held firm that has been in business for 30 years. American Realty serves over 500 retirement systems and other employee benefit plans throughout the country and all of the capital managed is third-party capital. Mr. Butterfield explained this means that American Realty does not manage any money on its own. American Realty's growth has been continuous, even during times of economic downturn and they have added clients each year.

Mr. Butterfield then explained American Realty's three products. He stated that the primary fund is the American Core Realty Fund ("Core Fund"), which is what ERS is invested in. The Core Fund is an income-orientated and broadly diversified core real estate investment fund. Mr. Butterfield also stated that American Realty has two other investment products that are higher up on the risk-spectrum for some clients who are interested in a higher return profile.

Mr. Butterfield then reviewed American Realty's risk management techniques. Mr. Butterfield stated that real estate provides two significant components of the portfolio, one is stability of returns and the second is realizable income. Mr. Butterfield explained that many pension funds are turning to real estate as a predictable source of that realized income because the income results from long-term leases, which are more predictable. Mr. Butterfield also explained that American Realty has a robust process focused on risk control and an integrated investment process that takes into account research, top-down market analysis and a bottom-up asset focus. Mr. Butterfield commented that real estate is all American Realty does, it is 100% of their business and they do it well.

Mr. Butterfield continued by discussing the current market environment. He noted that 2018 was a very good year for economic growth, due primarily to tax cuts, a fiscal stimulus and continuing low interest rates. Mr. Butterfield explained that this cannot continue forever, and they are seeing projections for 2019 that suggests economic growth will be lower. Therefore, Mr. Butterfield further explained that this provides an opportunity for a fundamental shift in the real estate market. Mr. Butterfield stated that the last few years have resulted in raised

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asset prices and created a "cap rate compression." They are moving away from that now.

Ms. Bedford asked about when in the cycle of ownership American Realty becomes involved, and Mr. Butterfield stated that for the most part, the assets that American Realty purchases are completed. He gave examples of well-leased, high-quality, multi-tenant office spaces and multi-family and retail assets. Mr. Butterfield further stated that a small amount, approximately 4-5% of the portfolio, may have what they call "build core." Mr. Butterfield explained that if they are looking for an asset in a particular market that has aggressive pricing, it may make more sense to find a good location and create a core asset with a well-vetted partner. Mr. Butterfield further explained that if American Realty does this, they generally have substantial preleasing, build the asset and then hold it long-term.

Mr. Butterfield continued by presenting an overview of the Core Fund. He explained that the Core Fund has 73 investments and grows overtime. He stated that the Core Fund has 15.2 million total square feet and 522 commercial tenants. Mr. Butterfield also stated that the largest tenant in the portfolio represents less than 3% of revenue, so there is not any one exposure to a particular industry or tenant. Mr. Butterfield further stated that the portfolio is 95% leased, which is essentially fully leased, and the cash flow has been very positive.

Mr. Butterfield then reviewed the Core Fund's past year target and results. He stated that the Core Fund's acquisitions and dispositions were on target with what was predicted. He explained the Core Fund acquired about $1,047 million in assets and disposed approximately $326 million. Mr. Butterfield further explained that the Core Fund's net operating income, which is the actual cash flow after expenses, was predicted to be 3.4% and was exceeded significantly to 5.1%. Mr. Butterfield then explained that with the weighted average lease expiration, which was 6.6 years in 2018, the Core Fund is anticipating the slowdown in the economy and stretching out leases longer with contractual rent increases. He noted that while this strategy gives up a little bit of flexibility, it locks in longer lease terms, which provides some more comfort for the Core Fund and ERS where the stability is predictable.

In response to a question from Mr. Nelson, Mr. Butterfield stated that the Core Fund financed the acquisitions through capital flows from new investors and portfolio-level financing, which is private placement financing. Mr. Butterfield explained that the Core Fund does this instead of taking out a mortgage because it provides greater flexibility.

The Vice Chair then asked Mr. Butterfield to describe the process that American Realty uses to ensure the asset valuations are correct. Mr. Butterfield explained

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that they employ an independent valuation manager, which does valuations quarterly.

In response to a question from Mr. Aniban, Mr. Butterfield stated that cap rates, which are a metric used to evaluate how relatively expensive an asset is, differ from property type to property type. He further stated that retail and industrial properties tend to be higher.

Mr. Butterfield then reviewed ERS's experience with American Realty. He stated that the net asset value of ERS's investment as of December 31, 2018 is approximately $42 million, and this includes the $14 million in distributions over the last eight years that the Core Fund has paid back to ERS. Mr. Butterfield stated that over the last three years, the Core Fund sold 34 properties at an average size of $50 million and an average disposition of 21 years. He further stated that the Core Fund purchased 26 assets with an average size of $116 million and an average age of disposition of 2.3 years. Mr. Butterfield explained that this means that more of the income goes toward creating value for future valuations rather than going toward capital expenditures and repairing older, less strategically positioned assets. This strategy resulted in an outperformance in 2017 and 2018, and the Core Fund should be positioned for an outperformance in 2019. Mr. Butterfield further explained that the Core Fund over the last three years has moved the portfolio from primarily suburban exposure toward more urban exposure.

In response to a question from Dr. Cashman, Mr. Butterfield explained the Core Fund anticipates, given the age and quality of most of the major assets, that there will be minimal cap expenses going forward. In response to a follow-up question from Dr. Cashman, Mr. Butterfield explained that the focus of the Core Fund is income, which comes from focusing on target markets such as innovation hubs, growth centers and major population centers.

In response to a question from Ms. Lausier related to retail market, Mr. Butterfield explained that there is a bifurcation in retail. On one side are the full-price discretionary retailers that one finds in large regional malls. These places are struggling. The other side, and the area in which the Core Fund has investments, are the neighborhood and community shopping centers dominated or anchored by a large grocer. These are necessity-based shopping places so that feeds traffic into an area. Mr. Butterfield stated that Amazon and e-commerce will of course have an impact, but because of the rise of these companies, there has been a shift from inventory storage to distributional logistics. This has created a significant demand for industrial real estate. Mr. Butterfield stated the Core Fund has purchased and continues to purchase industrial space.

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Mr. Butterfield then discussed the Core Fund's diversity of tenants. He reviewed the Expiring Commercial Portfolio and mentioned that there is nothing significant expiring in the portfolio over the next 10 years, and the highest is 12% in 2021. Mr. Butterfield stated that the Core Fund's largest tenants are also diversified in sectors, including technology, energy, healthcare and consumer services.

In response to a question from Mr. Nelson, Mr. Butterfield stated that the Expiring Commercial Portfolio shows lease expiration.

Mr. Butterfield continued by briefly reviewing the types of properties the Core Fund is currently acquiring. He stated that the most recent acquisition was an office building in Boston. He also stated that the Core Fund has acquired some multi-family buildings in popular areas. Mr. Butterfield explained that going forward, real estate should have stable returns, absent a major financial disruption, which will provide stability for the portfolio.

Mr. Butterfield then asked for any additional questions. Seeing none, he stated that American Realty has been happy to have been of service to ERS over the past 8 years, and he is confident in the portfolio and will be happy to continue to keep the Pension Board updated on what the Core Fund is doing.

(b) Marquette Associates Report

(i) Monthly report

The Chair invited Christopher Caparelli from Marquette Associates to present his report to the Board.

Mr. Caparelli stated that his presentation would be relatively brief, but he would discuss the markets and ERS's portfolio.

Mr. Caparelli continued by first discussing the markets. He stated that the returns have been pretty good, and 2019 is off to a positive start. Mr. Caparelli explained that the U.S. equity returns have been positive. He stated that the S&P 500 was up 3.2% in February, which gives a year-to-date return of 11.5% for the first two months of the year. Mr. Caparelli then explained that non-U.S. equities have been positive as well. He stated that the emerging markets were at 9% year-to-date, and the ACWI, which is developed and emerging is at 9.7%. Mr. Caparelli also stated that the aggregate index was up 1% for the first two months of 2019. Mr. Caparelli further stated that while there is not a shrinking economy yet, the numbers are starting to slow down. He explained that there are some macro risks on the horizon. Mr. Caparelli stated that the Brexit situation continues to be a challenge. However, there has been a positive bounce-back on the equity markets.

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In response to a question from Mr. Aniban, Mr. Caparelli stated that the U.S. trade policy and Brexit are binary events. He explained that if there are positive resolutions to either one, the markets would be off to the races. He also explained that if there are negative developments, it could have the opposite effect.

In response to a question from the Chair about the ERS portfolio if the economy is entering into a period of moderate growth, Mr. Caparelli stated that a 9-12 month period is always tricky for returns because it is such a short-term period. Mr. Caparelli pointed to the end of 2018 to illustrate how unpredictable the short-term markets can be. Mr. Caparelli stated that he believes ERS is in a good position for 2019, and overall the portfolio is where they want it. Mr. Caparelli explained that because of the make-up of the portfolio, ERS will be able to support cash flow and rebalance in the event of a market downturn. He further explained that the portfolio is as well tuned as it can be for whatever environment comes forward.

Mr. Caparelli continued by reviewing the ERS portfolio returns. He stated that the market value for the total portfolio as of the end of February was a little above $1.67 billion. Mr. Caparelli also stated that they are still working to shift the overall portfolio to match with Portfolio D that was adopted by the Board last year. Mr. Caparelli clarified that the most immediate piece is getting the new emerging market debt manager in place, which should be doable in the next month or two, with the funding of the portfolio likely toward the end of the second quarter.

In response to a question from the Chair, Mr. Caparelli clarified that private equity is now a larger percentage of the overall portfolio. He further clarified that the portfolio is underweight in private equity, but the managers have called capital and done well so they have become a larger piece of the portfolio.

Mr. Caparelli then reviewed the cash flow summary. He stated that February was a good month. ERS had a starting market value of $1.664 billion dollars with a net cash outflow of $14 million and a net investment change in the positive direction of about $20 million. Mr. Caparelli explained that ERS has experienced a net cash flow of about $720 million offset partially by a net investment change of approximately $547 million over the past five years.

Mr. Caparelli continued by reviewing the annualized returns. He stated that the return over the 5-year period is 6.2%, and the 7-year and 10-year numbers are completely removed from the financial crisis. Accordingly, ERS has earned 9.8% per year on average. Mr. Caparelli also stated that ERS is up year-to-date by 5.2%. He explained that fixed income is up 1.5%, U.S. equities are up 12.7%, international is up 9.7% and hedged equity is up 5.5%. Mr. Caparelli further explained that the last three pieces, real estate, infrastructure and private equity,

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are somewhat illiquid assets with not as regular valuation, so ERS does not have returns yet for the first two months. Mr. Caparelli clarified that the expected returns of those asset classes are positive.

In response to a question from Mr. Nelson, Mr. Caparelli clarified that because those asset classes are missing, he anticipates the overall return increasing, likely to the 5.4-5.5% range. Mr. Caparelli also clarified in response to a question from Mr. Aniban that these are net of fees.

Mr. Caparelli then reviewed some of the managers in the portfolio. He stated that Galliard is doing a nice job, beating the benchmark at 3.5% versus the 3.2% benchmark. Mr. Caparelli also stated that U.S. equities were a bit ahead of the benchmark, 12.7% versus 12.4% benchmark. Mr. Caparelli then noted that international equity seems to be underperforming to the U.S., but still it had a nice return at 9.7%. After reviewing some of the individual managers in international equity, Mr. Caparelli stated that ABS, the traditional hedge fund, had strong returns, and Parametric also had nice returns. Mr. Caparelli explained that they are right next to each other at 5.4% and 5.5% year-to-date.

In response to a question from the Vice Chair, Mr. Caparelli stated that it is likely time to take ABS off alert because there has not been an issue with performance and the management is still in place.

In response to a question from the Chair about the appropriate benchmark for hedged equity, Mr. Caparelli stated that the primary benchmark is the HFRX Equity Hedge Index, but benchmarking is a bit tricky in this space because the HFRX is not an investable benchmark. Mr. Caparelli explained that for a benchmark to be well-defined, it has to be somewhat investable. Accordingly, Marquette included a couple of other benchmarks, including the Russell 3000 and the MSCI ACWI, but neither of those is a great fit. Mr. Caparelli distinguished this situation from the U.S. equities where someone can buy 500 stocks in the S&P 500 and there is a solid benchmark.

In response to a question from Mr. Nelson, Mr. Caparelli explained that most times, a benchmark is a good comparison to see how you are doing versus a passive implementation.

Mr. Caparelli then proceeded to review the calendar year snap shots. The Chair stated that for him this is a challenge because it is a rolling number, so it provides little instructive value in terms of forecasting. The Chair also stated that he would like to see in the reports going forward the aggregate portfolio standard deviation. Mr. Caparelli explained that Marquette did add that to the report at the end. Mr. Caparelli stated that it shows the 5-year and 10-year trailing standard deviation for the portfolio against the return. Mr. Caparelli explained that these numbers are as

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of December 31, so they do not necessarily match with the end of February returns. Mr. Caparelli addressed some questions related to the charts and confirmed that an asset allocation study would be forward looking. Dr. Cashman and Mr. Nelson asked Mr. Caparelli for a few changes to the charts and Mr. Caparelli stated those could be made.

The Chair then took the Pension Board's agenda out of order to next discuss the appeals in open session.

6. Appeals

(a) Michael Harmon.

The Chair thanked Mr. Harmon for attending the meeting and for his service. The Chair explained that this is an open meeting, but if there are certain items that Mr. Harmon would prefer were not on the record, the Board could enter into closed session to hear that information. The Chair further explained that the Board received a package of materials prior to the meeting, so the Board is apprised of the issues involved in Mr. Harmon's appeal. However, the Chair noted that the Board wanted to provide Mr. Harmon with an opportunity to present his case and make any comments he would like to make.

The Chair then explained to Mr. Harmon that the Board would discuss his appeal later in closed session and make its decision. The Chair stated that Deputy Corporation Counsel Kearney would inform Mr. Harmon of the Pension Board's decision after the meeting and then there would be a written decision provided in a letter. The Chair proceeded to invite Mr. Harmon to provide his thoughts and comments.

Mr. Harmon expressed his gratitude to the Board for allowing him to present his case. In response to a question from Mr. Harmon, the Chair stated that this is more informal, no judge and no jury, so Mr. Harmon can just explain to the Board what is going on.

Mr. Harmon first stated that approximately two years ago, he applied for his pension benefit from Milwaukee County. He stated that first he was told he was eligible for a benefit, but then he received a call saying that he did not have sufficient hours. Mr. Harmon then inquired if his military service counted as hours of service. He stated that ERS said yes, but they would need paperwork to substantiate it. Mr. Harmon explained he gathered the necessary paperwork and sent it to ERS, which responded that they would get back to him in two weeks. Mr. Harmon stated that they never got back to him, so Mr. Harmon contacted ERS. Mr. Harmon further stated that when he spoke to ERS, he was told that he needed other paperwork.

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Mr. Harmon stated he then provided an Airforce form, which lists all of the hours and days he was in active service. Mr. Harmon explained that after he did not hear anything again, he went down to the ERS office. There, an ERS staff member told him that what he had submitted was not sufficient and not an official form. Mr. Harmon stated that he was told he needed a DD Form 214. Mr. Harmon stated that he provided that form and was told he needed four months, which is what the DD Form 214 said he had earned with the military. Mr. Harmon explained that he waited two weeks and when he did not hear from ERS again, he called ERS. Mr. Harmon further explained that ERS told him that it was still not good enough.

Mr. Harmon then received a letter from Mr. Coyne that explained that his form was not sufficient because he did not report back to work. Mr. Harmon stated that he did report back to work after his active duty ended. He explained that he made a deal with the House of Corrections where the County was supposed to find him a job. However, the County did not. Mr. Harmon explained that he did report back to work because up until the day he signed the agreement papers, he worked for Milwaukee County. Mr. Harmon further explained that the agreement states that the County was supposed to find him a job. Mr. Harmon stated that he received a list of jobs they had available, but he had seen another list with 13 jobs he was qualified for. Mr. Harmon noted that the County did send him on one job interview, but he stated that he does not think that the County made the deal in good faith. Mr. Harmon also noted that he was part of the decree in the Johnnie Jones case so that could be why the County did not make the deal in good faith.

Mr. Harmon then explained to the Pension Board that the agreement he made with Milwaukee County says that he would receive pay for vacation, personal, holiday and compensatory time in 1999. Mr. Harmon stated that compensatory time is military time. He further stated that the agreement also provides for vacation, personal days and holidays for 2000. Mr. Harmon stated he understood that he could not double-dip, so he was provided compensatory time, which is military time.

Mr. Harmon then explained that he wanted to leave the House of Corrections because they wanted to get rid of him as a result of the harassment he was experiencing. He stated that he was under a doctor's care for anxiety and other issues. He also stated that the County said it would find him another job and they reneged on that. Accordingly, Mr. Harmon said the only thing he wanted was his pension. Mr. Harmon stated that he is sick now and cannot get around by himself. Mr. Harmon stated that ERS kept postponing him for two years. He questioned whether someone thought he was going to pass away because his wife came in a couple of times and dropped off paperwork.

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Mr. Harmon continued by explaining that he came today because it is important to him, his wife, his children and grandchildren. Mr. Harmon summarized by stating that he provided ERS with everything that they asked for, but every time he provided the information, ERS moved the goal posts. He noted that he never missed anything and provided everything. He also stated that even today, he was provided an address of 825, but the address is 829. He figured it out because he was not going to miss the meeting, but he walked across the street.

Mr. Harmon then asked if the Board had questions. Mr. Harmon then also mentioned that he thought he had hours from the four years he worked as a park attendant for the County. He said he asked for credit for that and believed it was CETA service. Mr. Harmon noted that the service is part of the buy-back cases. Mr. Harmon also noted that the letter he received from ERS did not mention his park employment but just his military time.

The Chair asked the Board for questions and stated he wanted to clarify a couple of items for Mr. Harmon. The Chair stated that during Mr. Harmon's employment in 1970s, those periods of service were considered seasonal employment, which did not grant service credit unless the member elected into ERS. Additionally, the Chair explained that while some members purchased service credit for those time periods, the ability to purchase service credit has long since sunset. Accordingly, the Chair stated that the option to purchase service credit is no longer available. The Chair noted that the issue of how Mr. Harmon's service is recognized is something that the Board will deliberate on further, and the Board will have some discussions with Mr. Coyne to obtain additional insight.

The Chair then stated that it was brought to his attention that the definition of compensatory wages or earnings does not necessarily for the purposes of ERS mean military service. The Chair stated that Ordinance section 201.24(2.10) specifically states what military service is eligible for service credit. The Chair explained that this is something else the Board will have further discussions about. The Chair then thanked Mr. Harmon for taking the time to come and speak to the Board. The Chair also apologized for any error in the communication about the address because it is 929.

The Chair then asked the Pension Board if there were questions for Mr. Coyne about Mr. Harmon's appeal while the Board was in open session.

In response to a question from Mr. Nelson, Mr. Coyne stated that a member's service credit is based on the number of hours that the member works in eligible County employment. Mr. Coyne further stated that at the time Mr. Harmon entered ERS, the total number of service credits required to earn a pension benefit was 10. Mr. Coyne stated that the letter in the Pension Board's packet breaks

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down Mr. Harmon's hours of service for each year that he was employed with the County.

In response to a question from Mr. Aniban, Mr. Coyne stated that Mr. Harmon earned 9.617 credits based on ERS's calculations, and Mr. Harmon would have needed to earn another .39 service credits to vest in his pension benefit. Mr. Coyne explained that if Mr. Harmon would have returned to County employment for two additional months, he would have likely earned sufficient credit to vest.

In response to a question from Mr. Morgan, Mr. Coyne stated that if a member was working full-time for six-month, they would typically earn .5 years of service credit.

Mr. Coyne then stated that while Mr. Harmon is present, he wanted to apologize because it appears that prior to Mr. Coyne assuming his role as director, that the communication Mr. Harmon received from ERS was challenging. Mr. Coyne stated that it is unfortunate that Mr. Harmon was subjected to that treatment. Mr. Coyne clarified that typically in all retirement systems an individual only needs to submit the DD-214 in order to receive military service credit. Accordingly, Mr. Coyne stated that while he cannot speak to what was in the individual's mind who asked for all of the additional documentation, he is unaware of any system in the country that requires additional documents beyond the DD-214. Mr. Coyne clarified that military service is almost always contingent on the DD-214, and then the system, depending on its rules, most of which are set by USERRA, will credit the service. Mr. Coyne explained that Mr. Harmon is a very kind, very empathetic individual, and this is a difficult situation.

The Pension Board made a motion on the matter later in the meeting in open session.

(b) June Simeth.

The Chair then welcomed Ms. Simeth and noted that she may have heard during Mr. Harmon's portion of the meeting how the appeals proceed. The Chair stated that if there were items that she deemed more personal, private or confidential, the Pension Board can enter into closed session to discuss these items with Ms. Simeth. If not, the Chair explained that the Board has received information about Ms. Simeth's appeal and the Board would like to allow Ms. Simeth the opportunity to present her case.

Ms. Simeth began by summarizing her situation. She explained that she was hired by the County in July 1985 as a law clerk, full-time, 40 hours a week to draft decisions for judges. She stated she worked in the civil division for 9 years.

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Ms. Simeth got her current job in 1994, at which time she purchased some service credit in ERS.

Ms. Simeth continued by stating that in 1988, there was an audit performed by the County, and they discovered that they were incorrectly treating the law clerks as independent contractors. Ms. Simeth explained that they had to pay self-employment tax, but once the County figured out that they should have been treating the law clerks as employees, the County agreed to make them employees. As a result, Ms. Simeth stated that the County went back to the three years that she worked as an independent contractor and paid her $7,000 for the self-employment tax she paid. She explained that when the County determined her ERS start date, they forgot about her three years. Accordingly, Ms. Simeth said that is why she is here today because she is requesting ERS service credit for those three years from July 1985 until October of 1988.

Ms. Simeth explained that nothing changed as far as her job, but it was simply that the County figured out that they were supposed to be treating the law clerks as employees and they were not. The County determined that they should have been employees in 1988, so that is when she became eligible for ERS service. Ms. Simeth stated she believes that this determination is unfair. Ms. Simeth also stated that she did not understand why her buy back did not go back to 1985 and noted it appears arbitrary.

In response to a question from Mr. Nelson, Ms. Simeth stated that she is bringing this to the Pension Board now because she is preparing to retire.

The Chair then asked Ms. Simeth about her understanding at her point of hire in terms of her status. Ms. Simeth responded that she understood and felt like she was a full-time employee. Ms. Simeth stated that she had no choice in whether she was an independent contractor or an employee because the County told her how she was classified.

The Chair then explained that the Pension Board would enter closed session and discuss her appeal further, after which the Pension Board will make a decision. The Chair and Ms. Simeth then asked for any additional questions and seeing none, Ms. Simeth thanked the Board for its time. The Chair wished Ms. Simeth much enjoyment in her upcoming retirement.


(c) Marshall Dixon.

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Mr. Dixon was not present at the meeting, but the Chair asked the Pension Board if anyone had questions for Mr. Coyne regarding Mr. Dixon's appeal while in open session.

In response to a question from Mr. Aniban, Mr. Coyne confirmed that there was a tracking system in place for retirement materials at the time of Mr. Dixon's retirement. However, Mr. Coyne stated that it appears the process fell apart when there was not a good succession plan for the employee who left ERS. Mr. Coyne explained that ERS has since addressed the issue of how ERS communicates between staff members so that this does not happen again and things do not fall through the cracks when someone leaves.

Mr. Coyne further stated that there was previously poor communication between County departments. Mr. Coyne explained that currently ERS is part of the Human Resources ("HR") suite, so ERS relies upon HR reception and operations. ERS has been working with HR operations to ensure that when members come in or submit documents, ERS is informed immediately. However, Mr. Coye stated that there was previously very poor communication between the HR reception team and ERS. Mr. Coyne stated that they have been working to change that and have met multiple times with the team, the manager and the director to improve communication.

Mr. Aniban then questioned whether technology was able to help in this process to avoid papers getting lost. Mr. Coyne confirmed that ERS has added a customer relations management tool. Mr. Coyne explained that previously, if a member came in to meet with ERS, ERS itself had no record of that meeting or communication with the member because every analyst was maintaining their own Excel spreadsheet and sharing those. Mr. Coyne stated that one of the first things he implemented was this customer relations tool within V3. Now every member communication is logged into the system, so when someone comes in, ERS has a log of the member's previous contact and communications with ERS. Mr. Coyne explained that this is what was missing before.

In response to a question from Mr. Nelson, Mr. Coyne explained that he does not have an exact answer with regard to what happened to Mr. Dixon other then there was a communication with an ERS staff member right before that staff member left. Mr. Coyne also explained that he does not know what was communicated to Mr. Dixon and ERS does not have any notes. Mr. Coyne clarified that this was during his transition to director. Mr. Coyne also noted that this is one of those situations where if the Ordinances and Rules provided ERS more discretion, ERS could have made the decision instead of this being an appeal to the Board. Mr. Coyne stated in his view the "tie goes to the runner," and in this case Mr. Coyne has no reason to believe Mr. Dixon did not provide his materials when he said he did and there is communication to confirm this. Mr. Coyne stated that ERS just

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did not at the time have a way to track interactions with members and did not have a process in place for when ERS staff members left their jobs.

In response to a question from the Vice Chair, Mr. Coyne confirmed that the open records request was completed.

Dr. Cashman asked Mr. Coyne to confirm that the new customer relations management tool will prevent this from occurring again. Mr. Coyne confirmed that ERS will now have a record of every contact they have had with a member, including calls, emails, letters or personal conversations. Before none of this was being logged.

In response to a question from the Chair, Mr. Coyne clarified that a member's communication with ERS is now logged electronically and lives in the V3 system. Mr. Coyne gave an example where a member comes in and provides his paperwork. The analyst or a member of the service center who meets with him logs it in V3, so it lives digitally, and there is a permanent record of what occurred, including questions and responses. Mr. Coyne stated that with the paperwork itself, it should be scanned, imaged and indexed to V3 and be attached to that member's file.

In response to a question, Mr. Coyne stated that ERS would likely have restored Mr. Dixon to the retirement date that he was requesting and document the circumstances as part of his file.

Mr. Coyne then also confirmed that Mr. Dixon's employment has been fairly straightforward, and he did not have a large backDROP or anything complicated like that.


Ms. Braun then moved that the Pension Board adjourn into closed session under the provisions of Wisconsin Statutes section 19.85(1)(g) with regard to agenda items 6 and 7 for the purpose of the Board receiving oral or written advice from legal counsel concerning strategy to be adopted with respect to pending or possible litigation. At the conclusion of the closed session, the Board may reconvene in open session to take whatever actions it may deem necessary concerning these matters.

The Pension Board agreed by roll call vote 9-0 to enter into closed session to discuss agenda items 6 and 7. Motion by Ms. Braun, seconded by Mr. Holton.

7. Pending Litigation

(a) Milwaukee District Council 48 v. Milwaukee County

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The Pension Board discussed this item in closed session.

Later in the meeting, upon returning to open session, Mr. Coyne provided the Pension Board with an update regarding ERS's efforts to implement the Supreme Court's ruling in this case. Mr. Coyne stated that ERS has provided a news bulletin on the website and the County's intranet.

Mr. Coyne then reviewed ERS's project plan to move forward to comply with the ruling. In terms of time frame, Mr. Coyne stated that currently ERS is working on a list of questions and clarifications that they will submit to the Office of Corporation Counsel by the end of the week. Mr. Coyne also stated that ERS is hoping that the Office of Corporation Counsel can turn around the questions in two weeks so that ERS can then begin systems implementation for the covered population. Mr. Coyne noted that the hope is to identify the covered population by the end of April.

In response to a question from the Vice Chair, Mr. Coyne stated that the population was not clearly identified from the lawsuit. Mr. Coyne explained that while there were some estimates, ERS does not have a lot of confidence in those estimates and are going to start from scratch. Mr. Coyne stated that once ERS has a population, Segal will provide an actuarial analysis. Mr. Coyne noted that there were some numbers in the media, including $800,000 over eight years, but Mr. Coyne stated that it is unclear where those numbers came from, so ERS is going to do a new analysis with the current actuary.

Mr. Coyne continued by explaining that once ERS has identified the population, and Segal has provided the actuarial information, ERS will prepare a draft communication to send to every covered member informing them of what this means for their retirement eligibility. Mr. Coyne stated that the goal is to make the system changes by June 30, so ERS can implement compliance with the ruling by July 1, 2019. Mr. Coyne stated it was a three-month time frame.

Mr. Coyne then stated that there is a list of actions that ERS has already done. Mr. Coyne explained that the County Board of Supervisors has asked ERS to provide some information on the impact of the ruling. Mr. Coyne further explained that ERS is going to take its time and do this right with follow ups to the Pension Board and the County Board until July 1 and after July 1 if they would like. Mr. Coyne noted that ERS is working closely with the Office of Labor Relations and the HR business partners to make sure they understand that this could mean anywhere from 100 to 600 retirements. ERS will be holding full-day retirement counseling appointments at certain employee locations.

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In response to a question from the Vice Chair, Mr. Coyne stated that the RPS Pulse is a monthly newsletter for active members that will be in email in-boxes as of April 1.

In response to a second question from the Vice Chair, Mr. Coyne stated that ERS has had some members come into the office to ask questions about the ruling. Mr. Coyne stated that ERS has conveyed to them that at this point, ERS does not have any information on whether individual members are eligible to retire per the ruling because ERS needs to clarify some items. Mr. Coyne explained that ERS wants to take its time and do this correctly to avoid overpayments or incorrect information. Mr. Coyne stated that the members have been receptive to this. Mr. Coyne also stated that the retroactive effect of the ruling is an item that will be reviewed by the Office of Corporation Counsel.

In response to a question from Mr. Holton, Mr. Coyne stated that if people want to retire sooner than July 1, ERS will make every effort to accommodate them, but what ERS is communicating to members is that in the past ERS has rushed to implement things and done a poor job of it. Instead, Mr. Coyne stated that ERS wants to get the information correct and make sure that anyone who believes they are covered by the DC 48 ruling is actually covered.

(b) Kubicek v. Milwaukee County

The Pension Board took no action on this item.

(c) Tietjen v. Milwaukee County and Employees' Retirement System


(d) Dennis Dietscher v. Pension Board of the Employees' Retirement System


(e) Jennifer Aleman v. Employees' Retirement System of the County of Milwaukee, Jennifer Aleman v. Employees' Retirement System of the County of Milwaukee, et al.


(f) Willie Watkins v. Pension Board


(g) Kevin Walker, et al. v. Milwaukee County, et al.

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(h) Carol Couturier v. Pension Board of the Employees' Retirement System of the County of Milwaukee


(i) Michael Hoffmann v. Milwaukee County (State)


(j) Michael Hoffmann v. Milwaukee County (Federal)


(k) Candace Hauck v. Milwaukee County and the Employees' Retirement System of the County of Milwaukee


The Pension Board agreed by roll call vote 9-0 to return to open session. Motion by Ms. Bedford, seconded by Mr. Holton. After returning to open session, the Pension Board made the following motions.

(a) Appeals - Marshall Dixon

The Pension Board voted unanimously to approve Mr. Dixon's appeal. Motion by Mr. Nelson, seconded by Mr. Morgan.

(b) Appeals - Michael Harmon

The Pension Board denied the appeal by Michael Harmon consistent with the discretion assigned to it by Ordinance section 201.24(8.17) to interpret the Ordinances and Rules of the Employees' Retirement System of the County of Milwaukee ("ERS"), and makes the following findings of fact:

Factual Background.

1. Michael Harmon commenced County employment as a seasonal employee in the Parks Department and was not enrolled in ERS. Mr. Harmon worked in that capacity in 1974, 1975, 1976 and 1977 and was not enrolled in ERS during any of those years.

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2. Mr. Harmon returned to County employment on March 5, 1990 as a Food Service Worker. He was enrolled in ERS at this time.

3. In May 1999, the County suspended Mr. Harmon, pending a review by the Personnel Review Board ("PRB"). Accordingly, Mr. Harmon worked 867 hours in 1999 and received .45156 years of ERS service credit that year.

4. Mr. Harmon was active duty in the military from November 9, 1999 until March 8, 2000.

5. On February 22, 2000, the PRB held a meeting to hear Mr. Harmon's challenge related to his suspension. Mr. Harmon did not attend the meeting because he was deployed, but a letter from the Executive Secretary of the PRB stated that Mr. Harmon's attorney and then Deputy Corporation Counsel explained the terms of a proposed settlement agreement to the PRB ("Settlement Agreement"). The PRB accepted the Settlement Agreement, subject to Mr. Harmon's execution of the agreement.

(a) The Settlement Agreement provided:

(i) Mr. Harmon would resign from his position with Milwaukee County;

(ii) Mr. Harmon would receive certain pay for 1999 and 2000; and

(iii) Mr. Harmon could be placed on the County's reinstatement list for three years and a day.

6. On May 15, 2000, Mr. Harmon "resigned in absentia" from the County, having earned a total of 9.61786 years of pension service credit in ERS.

7. In 2018, Mr. Harmon inquired about his eligibility for a pension benefit from ERS. During 2018, Mr. Harmon and ERS had multiple correspondence about his military service so that ERS could determine whether Mr. Harmon was eligible for additional service credit.

8. In a letter dated January 9, 2019, ERS explained its decision that Mr. Harmon was not eligible for a pension benefit from ERS. ERS determined that Mr. Harmon did not have the 10 years of service credit necessary to receive a deferred vested pension benefit from ERS. ERS also determined that Mr. Harmon was ineligible to receive additional military service credit in ERS for the time he was deployed. ERS further determined that Mr. Harmon was not eligible to receive ERS service for his period of employment in the Parks Department in the 1970s.

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(a) According to ERS, Mr. Harmon received ERS service credit from January 2000 through his resignation date of May 15, 2000 due to the PRB Settlement Agreement. Accordingly, the only military service for which Mr. Harmon is requesting service credit that he has not already received is for his time between November 1999 and January 2000.

9. Mr. Harmon appealed ERS's decision. In a letter dated February 27, 2019, Mr. Harmon claims that he should receive ERS service credit for his military service because he did report back to Milwaukee County after his deployment. Mr. Harmon further claims that he was to "retain employment status for three years and one day" and that the Human Resources department was to use every effort to find him employment. Mr. Harmon states that the County had nine job openings for which he was qualified, but the County only sent him on one interview. Mr. Harmon also states that at the very least he should have been restored to his previous position with the House of Corrections or received preference for job openings as they arose.

10. With regard to his position with the Parks Department, Mr. Harmon stated that the issue with regard to seasonal work has been challenged by numerous employees and overturned.

11. In a letter dated March 18, 2019, Mr. Harmon provided a number of documents for the Pension Board's review, which were provided to the Pension Board prior to the March 27, 2019 meeting.

Pension Board Findings.

ERS Service Credit for Parks Department Employment

12. Mr. Harmon was employed by the Parks Department as a seasonal employee in 1974, 1975, 1976 and 1977. ERS has been unable to verify Mr. Harmon's exact ERS classification during this time period, but it appears Mr. Harmon was an optional employee under Rule 202 because he was a seasonal employee. The alternative is that Mr. Harmon was ineligible for ERS at the time.1

13. For purposes of this decision, the Pension Board will assume Mr. Harmon was an optional employee. In order to be eligible for service credit for this time period, Mr. Harmon would have needed to elect into ERS as stated in Rule 202 prior to its repeal. ERS has no record of Mr. Harmon electing into ERS during this period, and Mr. Harmon has not suggested that he did. Accordingly, Mr. Harmon

1 Seasonal employees have not historically been mandatory members of ERS, so Mr. Harmon could not have been automatically enrolled in ERS during this time period.

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was not enrolled in ERS during his Parks Department employment and did not receive ERS service credit for this period of time.

14. Optional employees who did not elect into ERS were previously provided the option to purchase service credit in ERS for the time period that they were optional employees. This option was included as Rule 207. However, Rule 207 was sunset on January 1, 2007 and no other applications for purchases of service credit were allowed after that date. Additionally, Rule 207 was repealed by the Pension Board in May 2015.

(a) Mr. Harmon did not request to purchase service credit prior to January 1, 2007, and purchases of service credit are no longer allowable under the Ordinances and Rules.

15. Because Mr. Harmon did not opt into ERS when he was a seasonal employee and did not request to purchase that service credit prior to January 1, 2007, the Pension Board finds that Mr. Harmon is not eligible to receive ERS service credit for his employment in the Parks Department.

16. Mr. Harmon argues that issues with regard to seasonal workers have been challenged and overturned. Mr. Harmon also included a number of cases with his documents for the Pension Board. However, the Pension Board must administer ERS based on the Ordinances and Rules, and a member cannot purchase prior optional employee service credit after January 1, 2007. The case law provided does not change this analysis.

17. Mr. Harmon also suggested that he was potentially a CETA employee during the period of time he worked for the Parks Department. However, ERS did not find and Mr. Harmon did not offer any evidence to the Pension Board that Mr. Harmon was a CETA employee. Accordingly, the Pension Board finds it cannot grant service credit to Mr. Harmon that a CETA employee could be eligible to receive without some evidence that he was a CETA employee.

ERS Service Credit for Military Service

18. Ordinance section 201.24(2.10) provides that a member may receive ERS service credit for military service if the member returns to County employment within three months after termination of military service.

19. According to his military records, Mr. Harmon was absent from County employment to serve in active duty from November 9, 1999 through March 8, 2000. Mr. Harmon resigned from County employment as required by the PRB Settlement Agreement on May 15, 2000.

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20. ERS was unable to find any documentation in County records that showed Mr. Harmon was part of the reinstatement list. However, Mr. Harmon's February 2019 letter suggests that he did contact the County to be part of the reinstatement list and that he did go on one job interview. Mr. Harmon also told the Pension Board at the March meeting that he reported back to work after his military service. He stated he was on the reinstatement list and that the County sent him on one job interview.

21. Based on Mr. Harmon's statements in his letter and at the March meeting, the Pension Board finds that Mr. Harmon returned to County employment within the required period after termination of his military service on March 8, 2000. The Pension Board further finds that Mr. Harmon is eligible to receive ERS service credit for the time period he was in military service but for which he has not otherwise been credited with ERS service.

22. As noted above, ERS already credited Mr. Harmon with ERS service credit for the time period he was employed in 2000 (January through May). Accordingly, the only military service that Mr. Harmon would be eligible to receive is the service credit from November 9 through December 31 of 1999, which results in a little under .16666 additional years of service credit.

23. Mr. Harmon argued that the County did not do an adequate job of placing him into other positions when he was on the reinstatement list. Unfortunately, that is a County issue and not one for which the Pension Board can provide an adequate remedy.

Eligibility for Deferred Vested Benefit.

24. Ordinance section 201.24(4.5) provides for a deferred vested pension benefit for those members who terminate County employment prior to retirement. However, to be eligible for a deferred vested benefit, the Ordinance requires a member whose continuous ERS membership started after January 1, 1982 to have earned 10 years of service prior to the member's termination.

25. Mr. Harmon's ERS membership commenced in 1990. Accordingly, he needs 10 years of service credit in ERS to be eligible to receive a deferred vested pension benefit.

26. ERS is a tax-qualified plan under the Internal Revenue Code ("Code") and must comply with Code requirements applicable to governmental plans, including being administered in accordance with the Ordinances and Rules. Therefore, the Pension Board must administer ERS in accordance with the Ordinances and cannot provide benefits or service credit outside of the Ordinances and Rules.

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27. With his additional military service discussed above from November 9, 1999 through December 31, 1999, Mr. Harmon has earned only 9.78452 years of service. Accordingly, the Pension Board must find that Mr. Harmon is not eligible for a deferred vested pension benefit.

The Pension Board's vote to deny the appeal was unanimous, motion by Dr. Cashman, seconded by Mr. Holton.

(c) Appeals - June Simeth

The Pension Board denied the appeal by June Simeth consistent with the discretion assigned to it by Ordinance section 201.24(8.17) to interpret the Ordinances and Rules of the Employees' Retirement System of the County of Milwaukee ("ERS"), and makes the following findings of fact:

Factual Background.

1. According to ERS records, June Simeth has performed work for Milwaukee County from July 29, 1985 to the present.

2. From July 29, 1985 to October 2, 1988, Ms. Simeth was an independent contractor and was not enrolled in ERS.

3. From October 3, 1988 to August 7, 1994, Ms. Simeth was a County employee but did not participate in ERS.

4. In February of 1995, Ms. Simeth purchased ERS service through the buy in program for the period of October 3, 1988 to August 8, 1994. She did not have the option to purchase service credit for the period of July 29, 1985 to October 2, 1988.

5. Ms. Simeth became a mandatory ERS employee and was enrolled in ERS on August 8, 1994.

6. For federal tax purposes, workers may be classified as employees, leased employees, or independent contractors. Workers are classified based on criteria issued by the IRS. A worker’s classification determines the rate at which they are taxed under the Federal Insurance Contributions Act (“FICA”).

(a) Prior to 1989, many departments of Milwaukee County contracted with individuals to perform services. The County designated these individuals as independent contractors for ERS purposes and for federal tax purposes. However, the IRS eventually determined that these individuals should have been classified as employees of Milwaukee County for federal tax purposes.

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(b) In response, Milwaukee County ceased this use of independent contractors and reclassified some individuals as employees in 1988. Milwaukee County also issued tax refunds to individuals who overpaid FICA taxes because they were improperly classified as independent contractors for tax purposes.

(c) Ms. Simeth received one of these tax refunds. Because she was improperly classified as an independent contractor rather than an employee for tax purposes, Ms. Simeth overpaid FICA taxes. The refund from the County equaled the amount of taxes she overpaid.

7. In 2018, Ms. Simeth contacted ERS to request the right to purchase service credit for the period of time between July 29, 1985 and October 2, 1988. Ms. Simeth asserts that she should have been eligible to participate in ERS during this time.

8. ERS denied Ms. Simeth's request for service credit in a letter dated December 4, 2018, and Ms. Simeth appealed to the Pension Board.

9. Ms. Simeth appeared at the Pension Board meeting on March 27, 2019. Ms. Simeth made a number of arguments to the Pension Board regarding her appeal. Those arguments are detailed below.

Pension Board Findings.

Eligibility for Service Credit in ERS.

10. To participate in ERS, an individual must meet the definition of "employee" provided in Ordinance Section 201.24(2.4), which requires a person to be "regularly employed by the county at an annual wage or salary."

11. From July 29, 1985 to October 2, 1988, Milwaukee County did not classify Ms. Simeth as an employee. Instead, she was classified as an independent contractor. As an independent contractor, the Pension Board finds that Ms. Simeth did not fit the definition of employee in the Ordinances because she was not regularly employed by the County at an annual wage or salary.

(a) In her appeal letter, Ms. Simeth admits that she did not meet the definition of employee provided in Ordinance Section 201.24(2.4) during this period. While Ms. Simeth stated that she felt like a regular employee during this period, she does not argue that she expected to receive pension benefits for these years.

12. ERS is a tax-qualified plan under the Internal Revenue Code ("Code") and must comply with Code requirements applicable to governmental plans, including being administered in accordance with the Ordinances and Rules. Therefore, the

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Pension Board must administer ERS in accordance with the Ordinances and cannot provide benefits or service credit outside of the Ordinances and Rules.

13. Ms. Simeth asserts that she should have been classified as an employee for ERS purposes because she was classified as an employee for federal tax purposes and her job did not change throughout these years. Further, she argues that the tax refund she received from Milwaukee County proves that the County knew she should have been classified as an employee for ERS purposes.

14. However, an individual’s employment classification for federal tax purposes is not dispositive of his or her classification for ERS purposes.

(a) To be considered an employee for purposes of ERS, an individual must fit the definition provided in Ordinance Section 201.24(2.4).

(b) By contrast, to be considered an employee for federal tax purposes, an individual must meet criteria provided by the IRS.

(c) Because the IRS and the Ordinances use separate definitions of “employee,” an individual may be an employee for federal tax purposes, but not for ERS purposes.

15. The fact that Milwaukee County initially misclassified Ms. Simeth as an independent contractor for federal tax purposes does not mean that she was improperly classified as an employee for ERS purposes.

16. As noted above, Ms. Simeth needed to classify as an employee under the Ordinances to receive service credit, and as an independent contractor, she did not. Accordingly, the Pension Board finds that Ms. Simeth is not entitled to ERS service credit for the period of time between July 29, 1985 and October 2, 1988.

Purchase of Service Credit.

17. As stated above, in 1995, Ms. Simeth purchased service credit for the period between October 3, 1988 and August 7, 1994. She did not have the option to purchase service credit for the period between July 29, 1985 and October 2, 1988.

18. Ms. Simeth argues that because she was in the same position (law clerk) from July 29, 1985 until August 7, 1994, there is no reason she should have been allowed to purchase service credit for some of that period, but not for the rest. She contends that the decision to allow her to purchase service credit only back to October 1988 was arbitrary. Therefore, Ms. Simeth now requests the right to purchase service credit for the period between July 29, 1985 and October 2, 1988.

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19. Purchases of optional service credit were authorized for individuals who were classified as optional employees through Rule 207 and commonly referred to as buy ins. However, buys in were sunset as of January 1, 2007. Additionally, Rule 207 was repealed in May 2015. Accordingly, buy ins are no longer available in ERS, and the Pension Board finds that Ms. Simeth cannot now purchase service credit for the period between July 29, 1985 and October 2, 1988.

20. Ultimately, whether or not Ms. Simeth was eligible to purchase service credit for the period between July 29, 1985 and October 2, 1988 is contingent on whether she met the definition of employee provided in Ordinance Section 201.24(2.4) during that time period. An individual must be an employee under the Ordinance before the individual can be an optional member for purposes of a buy in.

(a) As stated above, effective December 31, 1988, Milwaukee County terminated all existing contracts for workers classified as independent contractors. As a result, some individuals formerly classified as independent contractors, including Ms. Simeth, became County employees. As a result of her becoming a County employee, the County re-classified her position to one that was eligible for ERS membership, if elected.

(i) Under the buy in program allowed by Rule 207 at the time, Ms. Simeth was eligible to, and did, purchase service credit for the period of time she was an employee (as defined by Ordinance section 201.24(2.4)) and an optional member but did not elect into ERS between October 1988 and August 1994.

(b) However, as determined above, Ms. Simeth did not meet the definition of "employee" during the time period between 1985 and 1988 because she was an independent contractor. Accordingly, the Pension Board finds that Ms. Simeth was not eligible to purchase service credit at the time of her prior buy in (in 1995) for the period of time between July 1985 and October 1988 because she was not a County employee and therefore could not be an optional member.

The Pension Board's vote to deny the appeal was unanimous, motion by Mr. Holton, seconded by Ms. Bedford.

8. Audit Committee Meeting – March 14, 2019 – M. Harper

The Chair stated that the minutes reflect the discussions of the Audit Committee at the March meeting. The Chair noted that most of the discussions were informational in nature.

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9. Disability Retirement Applications

There were no disability retirement applications for review.

10. Governance Implementation

Mr. Coyne stated that this was a verbal update. He explained that at the request of the Audit Committee and the Chair, ERS prepared a proposal to develop an Audit Committee Charter over the course of the next few months. Mr. Coyne also stated that the proposal further proposed to move to a schedule where the Audit Committee met 7 times a year instead of 12. Mr. Coyne explained that each meeting would have a standing agenda attached to it. Mr. Coyne stated that the next steps are to produce a draft of an actual charter that reflects the proposal. Mr. Coyne stated that the hope is to have that ready for the April Audit Committee meeting, but that may not be possible.

Mr. Coyne proceeded to explain that a similar process would be taken with the Investment Committee, where ERS would develop a charter, create some structure around the topic of each of those meetings and reduce the number of overall meetings.

Mr. Coyne then stated that in terms of the other governance piece, he does not yet have confirmation. Mr. Coyne explained that he submitted the file to the County Board of Supervisors for the County to approve payment of half of the contract with Funston Advisory Services, and the Board's Finance and Audit Committee meeting is on April 18. Mr. Coyne further explained that his expectation is that one of the items on the agenda will be that they approve the payment of half of the contract.

11. RPS Reports

(a) Strategic Plan

Mr. Coyne stated that he wanted to discuss briefly two items related to the Strategic Plan. First, Mr. Coyne stated that ERS is launching, in accordance with the Strategic Plan, the first round of member education and outreach sessions, which is aimed at improving the member experience. Mr. Coyne explained that the RSVPs for the three Sheriff sessions in April will go live today. Mr. Coyne further explained that these are the small group sessions that ERS is doing in collaboration with the deferred retirement staff. Mr. Coyne stated that these sessions will be about 90 minutes, and to accommodate schedules, ERS will hold two sessions after normal hours at 5 p.m. and a third session on Saturday morning at 10 a.m.

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Mr. Coyne proceeded to explain the second item, which is that ERS will be publishing the Strategic Plan to the website. Mr. Coyne stated that ERS is also working on the quarterly report that will provide updates on the progress. Mr. Coyne then stated that was all he had with regard to the Strategic Plan.

(b) Pension Ordinance Amendment Package

Mr. Coyne stated that the Ordinance amendment package was passed by the County Board of Supervisors on Thursday. Mr. Coyne stated that unlike the DC 48 ruling, ERS had more advanced notice so it has had a longer time to implement the changes.

Mr. Coyne proceeded by explaining the two primary changes brought by the Ordinance amendments. The first is the whole month benefit calculations. Mr. Coyne explained this will likely have the longest-reaching impact and will mitigate the likelihood of calculation errors in the future. Mr. Coyne stated that it will also put ERS in line with leading practices for pension plans across the country. Mr. Coyne stated the second change is the recovery of overpayments.

Mr. Coyne then stated that ERS's plan is to have a July 1 effective date for many of the provisions in the Ordinance amendments. He stated this includes being ready to provide full-month calculations as of July 1, 2019 and to have member communication and member materials available. Mr. Coyne explained a similar time line will be in place for the overpayment recovery changes. ERS will be able to implement those recovery plans for people depending on which option they choose as of July 1, 2019. Mr. Coyne stated that he will report at the Audit Committee meeting on the efforts to implement these changes, but if the Board members have questions or would like more information, Mr. Coyne can provide that.

In response to a question from Mr. Aniban regarding adequate staffing, Mr. Coyne stated that fortunately ERS has a couple of new staff members who have really stepped up and assisted with the efforts of Ms. Lausier, Ms. Bronikowski and Ms. Moreno.

In response to a question from the Vice Chair, Mr. Coyne stated that ERS was using temp services at the moment because they cannot get approval from budget to reclassify two positions, the Project Coordinator and the Communications Specialist. Mr. Coyne stated that he sends this to budget every month, but it continues to be rejected.

(c) Fiscal

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Ms. Lausier proceeded to provide the Fiscal Report. Ms. Lausier first noted that the Retirements Granted report was provided to the Board. She stated that in the month of February, ERS had 14 new retirements, including 3 normal retirements, 10 deferred retirements and 1 disability retirement. Ms. Lausier noted that two of the retirees chose a backDROP, and the total backDROP amount was a little over $433,000.

Ms. Lausier then reviewed ERS's financial status. Ms. Lausier stated that ERS is up a little bit, to $1.67 billion. Ms. Lausier then stated that ERS needed to raise $15 million, which was raised from the Northern Trust International Index Fund. Ms. Lausier also stated that she needed to transfer $19 million for March, which brings ERS down to $6 million in surplus. Ms. Lausier further stated she is asking for $54 million to be made available for the second quarter. Ms. Lausier explained that last year in the second quarter, ERS required $57 million, and because of some of the changes, including DC 48, she wants to be certain ERS has the funds it needs available. Ms. Lausier noted that ERS will only use what is needed. Ms. Lausier further explained that the $54 million she is asking for, coupled with the $6 million currently in surplus, will give ERS availability of $60 million for the second quarter.

In response to a question from Mr. Nelson, Ms. Lausier stated that she anticipates an increase in activity related to DC 48 in the third quarter. However, Ms. Lausier explained that the second quarter is typically one of ERS's highest quarters, so she wants to make certain that they have enough availability for what may be coming in the second quarter.

In response to second question from Mr. Nelson, Ms. Lausier stated that generally payments are somewhere around $15 million each month, and then ERS adds the backDROPs. She further stated that the end of a quarter is when a lot of the investment manager fees are paid.

The Pension Board unanimously approved the liquidation of assets to fund cash flow of $54 million for 2019 second quarter funding. The amounts should be withdrawn from investments designated by Marquette. Motion by Mr. Zepecki, seconded by Mr. Holton.

Ms. Lausier then reviewed the disbursements during the month of February. She stated that distributions were a little over $1 million dollars, including $569,000 from Siguler Guff and $510,000 from Adams Street. Additionally, Ms. Lausier explained that ERS had two capital calls. One from Siguler Guff Fund III for $1.6 million and Fund II for $40,000. Ms. Lausier noted that $40,000 seems like a really small amount, but it came as a reduction to the distribution.

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Ms. Lausier then reviewed the chart she provided regarding the reimbursements of County paid expenses for 2018. She stated the chart shows the amount of expenses that were cross-charged to ERS. Ms. Lausier explained that the County's accounting period closes at the end of the second week in April, so the numbers may change slightly by approximately $10,000. Ms. Lausier stated that she can either ask for the Board's approval today or wait until the April meeting when she will have final numbers. The Chair stated that he would prefer to wait until April when the Board can have the final numbers.

The Chair then ask about the cross charges from Corporation Counsel's Office. The Chair stated that he was aware there were some litigation-related costs, but he thought insurance was also covering a lot of those costs. The Chair requested an explanation of these cross charges, and noted that ERS could characterize this as a Board request. The Vice Chair agreed that she would also like an explanation of the cross charges. Mr. Coyne stated that he will discuss this with Corporation Counsel's Office and noted that cross charges have been a source of frustration for ERS. Mr. Coyne explained that this is one reason why the 2019 Strategic Plan includes ERS and the Pension Board entering into Memorandum of Understandings with the County on all cross charges.

Mr. Coyne stated that it has been very difficult to determine how the County is calculating these cross charges. Mr. Coyne explained that generally there is a formula that provides for the calculation of overhead expenses. However, he stated that ERS has not been provided any of this information. Mr. Coyne further stated that this conflict has underlined the need for additional governance where ERS is a stand-alone entity reporting to the Pension Board. The Chair stated that Mr. Coyne should note to the applicable parties that the Pension Board has requested this information, and the Chair is prepared to escalate the matter if necessary to obtain the information. The Vice Chair also noted that two of the positions that were added to assist the Pension Board, an attorney and a paralegal, have both left the County, so the cross charges are very unclear. Mr. Coyne stated his understanding and agreement.

Ms. Lausier then reviewed the Expenses Compared to Budget for the year ending December 31, 2018. She noted that Corporation Counsel's charges are the biggest variance followed by a variance for office equipment. Ms. Lausier explained that some specific changes needed to be made to the V3 system and software maintenance was in the budget. However, Ms. Lausier noted that in order for her to capitalize the expenses, they need to be in equipment. Accordingly, Ms. Lausier explained that ERS is under budget on software maintenance but over budget on equipment. In response to a question from the Vice Chair, Ms. Lausier agreed that she would aim to provide this information to the Pension Board prior to the meeting.

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Ms. Lausier then discussed Northern Trust. Ms. Lausier stated that it was a challenge to get back to where they needed to be after the transition to Northern Trust, but they did close February last night. Ms. Lausier noted she hopes to be back on track next month. She stated that they resolved all of their processes with Northern Trust. Ms. Lausier met with Northern Trust to ensure that everything is being accounted for using the same procedures ERS has used in the past. Ms. Lausier explained that there were a few little things that had to be adjusted, but they are all resolved. Ms. Lausier then stated that they will be going back down to Chicago in April to discuss reporting with Northern Trust, so they should be able to produce their own reports and be able to make those readable. Ms. Lausier noted that she is excited to be able to move to the next step where they can provide the Board with information in a timelier manner and thanked the Board for their patience through this transition.

In response to a question from the Vice Chair about the education budget, Ms. Lausier explained that in the end of the year a lot of costs came in, including the training provided by the IFEBP. In response to additional questions, Mr. Coyne explained that the training was mentioned at a Pension Board meeting, but it was an introductory course. Mr. Coyne also noted that the use of monthly expenses is not really good data because it just takes an annual budget and divides it by 12. Accordingly, this is not a reflection of truly what is projected to be spent in a given month. Ms. Lausier stated that ERS is still $18,000 under budget for education for the year, but it all happened at the end of the year.

12. Administrative Matters

(a) Annual Pension Board Meeting, Wednesday, April 24, 2019

Mr. Coyne stated that the annual meeting is scheduled for April 24 at the Wilson Park Senior Center. Mr. Coyne stated that invitations to speak have been sent to the County Executive, Chairman Lipscomb and the Comptroller. Mr. Coyne further stated that invitations to speak were also provided to Supervisor Schmitt and Supervisor Johnson Jr. because of their involvement with pension issues. Mr. Coyne noted that ERS has not received confirmation from any of the speakers yet.

Mr. Coyne then provided an overview of the Wilson Park Senior Center. He stated it is free to use, there is ample parking and members may be familiar with the area because the park offers a lot of senior activities. Mr. Coyne stated that in order to track attendance, ERS will be including an RSVP option on the external ERS website, which will allow ERS to have a better feel for how many individuals will be attending. Mr. Coyne also stated that the March issue of the Communicator included two pieces on the annual meeting.

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Ms. Lausier stated that the Pension Board's business meeting will be from 8 to 9. She explained that the Senior Center does not open until 9, but they will open it for Pension Board members before 8. Ms. Lausier stated that it is then open to the public at 9 with the annual meeting starting at 9:30.

In response to a question from the Vice Chair, Ms. Lausier stated that it has been clearly communicated to the retirees that the doors will not be open until 9.

13. Adjournment

The meeting adjourned at 12:33 p.m.

Submitted by Steven D. Huff, Secretary of the Pension Board

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