ILLINOIS MUNICIPAL RETIREMENT FUND

MEETING NO. 01-01

REGULAR MEETING

OF THE

BOARD OF TRUSTEES


The Regular Meeting of the Board of Trustees was held at 4:00 P.M., January 24, 2001, in the Fund Office at 2211 York Road, Suite 400, Oak Brook, Illinois 60523.

 

(01-01-01) (Board of Trustees) The Executive Director reported that Julie A. Newell, W. Thomas Ross, and Sharon U. Thompson had subscribed to the constitutional oath of office which were filed in the Fund’s records.

 

(01-01-02) (Board Officers) Mr. Setchell noted that it was in order to elect a President, Vice President, and Secretary of the Board of Trustees for 2001.

Mr. Shoop nominated R. Steven Sonnemaker for the Office of President of the Board, John L. Novak for the Office of Vice President of the Board, and Max F. Bochmann for the Office of Secretary of the Board, and the nominations were seconded by Mr. Ross.

It was moved by Mr. Shoop, seconded by Mrs. Newell, that the nominations be closed and that a unanimous ballot be cast for R. Steven Sonnemaker, John L. Novak, and Max F. Bochmann.

Vote:

Aye: Bochmann, Newell, Ross, Setchell, Shoop, Sonnemaker

Nay: None

Absent: Novak

Mr. Sonnemaker assumed the chair and called the meeting to order.

Ms. Enright called the roll:

Present: Bochmann, Newell, Ross, Setchell, Shoop, Sonnemaker

Absent: Novak, Thompson

Mrs. Bea Koza representing the Illinois League of Municipal Employees (ILME), Mrs. Miotti form the Village of Matteson, Messrs. Suppan and Clementi representing the City of Joliet, Mr. McKee, Jr. representing the Village of Winnetka, Ms. Voller and Ms. Stodola From the Illinois Education Association (IEA) and Mr. Rietz, a retiree, were also present.

 

(01-01-03) (Appointment of Committees) The President of the Board of Trustees proposed the following Committees for 2001:

 

Benefit Review Committee

Marvin R. Shoop, Jr., Chair

Max F. Bochmann

Julie A. Newell

W. Thomas Ross

 

Investment Committee

John L. Novak, Chair

Thomas Setchell

Max F. Bochmann

Sharon U. Thompson

 

Legislative Committee

Sharon U. Thompson, Chair

John L. Novak

Thomas Setchell

 

Personnel/Budget/Insurance Committee

W. Thomas Ross, Chair

Marvin R. Shoop, Jr.

Julie A. Newell

 

The Board unanimously agreed to adopt the above committees.

 

(01-01-04) (Consent Agenda) The Chairman presented an agenda consisting of a Consent Agenda. The following items remained on the Consent Agenda since no Board member asked for their removal.

Schedules - Dated January 24 & 25, 2001

Schedule A - Benefit Awards listing official applications for retirement, disability and death benefits, and for refund of employee contributions processed during the preceding calendar month be computed and allowed as provided under Article 7 of the Illinois Pension Code.

Schedule B - Adjustment of Benefit Awards showing adjustments required in benefit awards and the reasons therefore.

Schedule C - Benefit Cancellations.

Schedule D - Expiration of Temporary Disability Benefits terminated under the provisions of Section 7-147 of the Illinois Pension Code.

Schedule E - Total and Permanent Disability Benefit Awards showing proposed total and permanent disability awards as recommended by the Fund's medical consultant as provided by Section 7-152 of the Illinois Pension Code.

Schedule F - Benefits Terminated.

Schedule G - Administrative Benefit Denials.

Schedule P - Administrative Denial of Applications for Past Service Credit

Schedule R - Prior Service — New Governmental Units

Schedule S - Prior Service Adjustment

 

Administration - Master Trustee Report

The Master Trustee Report for the month of November, 2000 was prepared by The Northern Trust Company.

 

Participation of New Units of Government

Tri-Township Park District
Madison County
2001 Rate: 9.13%

Village of Elkville
Jackson County
2001 Rate: 10.67%

Village of Winnebago
Winnebago County
2001 Rate: 9.65%

 

Bids

Disability Benefits Booklets (revised bid)
Low Bidder: Centurion, Inc.
Low Bid: $16,192.00

Two Apple PowerMac G4 Computers w/21" Viewsonic Monitors Low Bidder: Dartek
Low Bid: $5,769.42

Two Fujitsu M4097D Scanners
Low Bidder: CEO Image
Low Bid: $10,746.00

Microcomputer Equipment
Low Bidder: Computer Discount Warehouse
Low Bid: $24,381.51

It was moved by Mr. Shoop, seconded by Mr. Bochmann, that the items on the Consent Agenda be approved.

Vote:

Aye: Bochmann, Newell, Ross, Setchell, Shoop, Sonnemaker

Nay: None

Absent: Novak

 

(01-01-05) (Schedule T - Report of Expenditures) The Chairman presented Schedule T, the Report of Expenditures from December 1, 2000 — December 31, 2000 to the Board of Trustees.

It was moved by Mr. Shoop, seconded by Mrs. Newell, that Schedule T, the Report of Expenditures from December 1, 2001 — December 31, 2001 be approved.

Vote:

Aye: Bochmann, Newell, Ross, Setchell, Shoop, Sonnemaker

Nay: None

Absent: Novak

 

(01-01-06) (2001 Legislation Staff Recommendations) The Board of Trustees reviewed recommendations for 2001 Legislation presented by the Legislative Liaison.

The Board reviewed legislative proposals which IMRF supported in the last session of the General Assembly which did not pass. Those proposals were as follows:

  • Disability Benefits
    Eliminate the pre-existing condition for temporary disability applicants. To be eligible for total and permanent disability benefits, members would remain subject to the current pre-existing condition provisions.

    Allow an employer to increase the amount of disability benefit to 60% of an employee’s average wage. Employers have stated a desire to increase disability benefits in order to attract and retain employees.

  • Retirement Benefits
    Remove the one-year limitation on a retroactive commencement of a pension benefit.
    Change the current eight-year vesting period to five years.

  • (Separation) Refunds
     Pay interest on separation refunds. The rate of interest would be determined by the Board on an annual basis.

  • Death Benefits
    Provide a 3% increase in a surviving spouse annuity the first of January if the retiree dies in the month of December. Currently, the 3% increase is not paid to a surviving spouse of a member who dies in December until the second January following the death of the member.

    Increase the retiree lump sum death benefit from $3,000 to $5,000.

  • Miscellaneous
    Require an employee to participate in IMRF if he or she returns to service in a position requiring between 600 and 1,000 hours per year after retiring, even though the new employer has 1,000-hour standard. Currently, certain individuals are penalized because their pension is stopped but they cannot participate in IMRF. If a retired member earned the pension under the 600 standard on or after 1/1/82, retirees and later returns to work for a 1,000-hour employer, the pension is stopped but the employee does not participate in IMRF.

    Remove the requirement that an application for an IMRF Benefit Protection Leave of Absence be filed within two years of the leave period.

After discussion, it was moved by Mr. Setchell, seconded by Mr. Ross, to re-introduce the proposals for last session, and to introduce the following proposals to the 92nd General Assembly.

  • Allow vested members over the age of 55 to receive a refund on their contributions to purchase an annuity elsewhere. Currently, these members must take a retirement annuity. This legislation would reduce employer contribution rates.

  • Change the statutory reference of age 65 as the reference for eligibility for Social Security benefits. Since the full Social Security age is increasing, flexibility must be built into the statute in order to comply with the Federal standard. This is considered a "no cost" item.

  • Make technical changes to the IMRF Article of the Pension Code to reflect the amortization period of unfunded liabilities. This is considered a "no cost" item.

  • Permit the accumulation of sick leave service credit from multiple employers. Currently, sick leave service credit is forfeited if a member changes employment between units of local government. This is considered a cost item, with the cost spread proportionately among all employers.

Vote:

Aye: Bochmann, Newell, Ross, Setchell, Shoop,, Sonnemaker

Nay: None

Absent: Novak

(01-01-07) (2001 ILME Proposals) The Legislative Liaison next presented the Board with the following proposals from the Illinois League of Municipal Employees (ILME).

  • Increase surviving spouse benefit to 66.67%.

  • Increase Regular plan formula to a flat 2.0% of salary.

  • Increase Regular plan formula to 2.0% for first 15 years and 2.25% thereafter.

  • Increase death benefit from $3,000 to $5,000.

  • Avoid the early retirement reduction of 1/4% for each month between 55 and 60 if a participant has 30 years of service (currently 35 years). Cost of this proposal is 1.03%.

The Legislative Liaison noted that ILME supports an increase in employee contributions to assist in the payment for a benefit enhancement.

Mrs. Koza from the Illinois League of Municipal Employees (ILME) and Board Members discussed the above proposals in more detail.

The Board took no action regarding the ILME proposals.

 

(01-01-08) (Outside Entities) Mrs. Miotti from the Village of Matteson, Messrs. Suppan and Clementi from the City of Joliet, and Mr. McKee, Jr. from the Village of Winnetka were present to voice their disapproval of IMRF’s support of legislation providing a health insurance program for retired members.

They requested that the Board focus its efforts on increasing the basic pension benefit structure to attract and retain employees, versus adding retiree health insurance.

Ms. Voller and Ms. Stodola from the Illinois Education Association (IEA), stated the importance for the IMRF Board of Trustees to concentrate it’s efforts on obtaining a health insurance program for retired members.

Mr. Rietz, an annuitant, suggested several changes in the statute regarding the election process for the Annuitant Trustee.

 

The Board recessed at 5:55 P.M., to reconvene at 9:00 A.M. on Thursday, January 25, 2001, in the Fund office, 2211 York Road, fourth floor, Oak Brook, Illinois.

Mr. Sonnemaker assumed the chair and called the meeting to order.

Ms. Enright called the roll:

Present: Bochmann, Newell, Ross, Setchell, Shoop, Sonnemaker

Absent: Novak, Thompson

Mr. Moss from D’Ancona & Pflaum, Ms. Grieser and Mr. Birch from Mercer Investment Consulting were also present.

 

(01-01-09) (Investment Manager Activities — Mercer Investment Consulting) Ms. Grieser and Mr. Birch of Mercer Investment Consulting, gave the following report to the Board on the activities of IMRF’s large cap growth equity managers (NewBridge Partners, Oak Associates, Lincoln, Holland, and Jacobs Levy); large cap value equity managers (DFA Large Cap Value, Harris, and Iridian); small cap growth equity managers (DFA 9-10, Fidelity, Frontier, and Wall Street); small cap value equity managers (Investment Counselors of Maryland, DFA 6-10); international equity managers (Bank of Ireland, Brandes, and Schroder); global equity manager (Brandes);international small cap equity managers (Capital Guardian, and Schroder); emerging markets equity managers (Capital Guardian); global fixed income (Julius Baer) and U.S. fixed income managers (Abacus, BlackRock, Wellington, Fidelity High Yield, Payden & Rygel and MacKay Shields).

 

(01-01-10) (Investment Guideline Change Request — Lincoln Capital Management) The Director of Investments reported to the Board that Lincoln Capital Management is requesting a change to their investment guidelines.

He stated that currently, Lincoln Capital Management is limited to investing no more than 7% of their portfolio’s market value in any one stock at the time that the stock is purchased.

The Director of Investments reported that Lincoln Capital Management would like their guidelines to be revised to allow them to purchase the greater of 7% of the market value of the portfolio, or 1.5 times the weighting of the stock in their benchmark index.

He further stated that both staff and consultant recommend to the Board that this change be approved.

After discussion by Board Members, staff and consultant, it was moved by Mr. Setchell, seconded by Mr. Shoop, to grant Lincoln Capital Management’s request for a guideline change.

Vote:

Aye: Bochmann, Newell, Ross, Setchell, Shoop, Sonnemaker

Nay: None

Absent: Novak

 

(01-01-11) (Report of the Benefit Review Committee) The Chairman of the Benefit Review Committee gave a report to the Board on the meeting that was held on January 18, 2001.

(Disability Claim Review Hearing — Roger Hamby — Peoria County Highway Department

MOTION

Mr. Bochmann moved to recommend to continue the denial of total and permanent disability benefits for Roger Hamby effective May 1, 2000. Seconded by Mr. Setchell.

 

(Disability Claim Hearing — Phillip Carlson — Kane County

The Committee approves Phillip Carlson’s claim for temporary disability benefits.

 

(Disability Claim Hearing — Robert Bier — Village of Lombard)

The Committee defers making a recommendation concerning eligibility for total and permanent for Robert Bier until after they review the additional information and the report of the IMRF Medical Consultant.

 

(Disability Claim Review — Judith Pampuch — Joliet SD 204)

The Committee approves Judith Pampuch’s claim for temporary disability benefits for the period from October 16, 2000 through January 7, 2001.

 

(Disability Claim Review — Brenda Beach — Hillsboro Community SD)

The Committee denies Brenda Beach’s claim for temporary disability benefits.

 

(Disability Claim Review — Sharon Seals — Quincy Public Library)

The Committee denies Sharon Seals’ claim for temporary disability benefits.

 

(Disability Claim Review — Virginia Needham — Madison County)

The Committee terminates Virginia Needham’s total and permanent disability benefits, effective January 31, 2001.

 

It was moved by Mr. Shoop, seconded by Mr. Bochmann, to approve the above recommendations of the Benefit Review Committee.

Vote:

Aye: Bochmann, Newell, Ross, Setchell, Shoop,

Nay: None

Absent: Novak

Abstain: Sonnemaker

 

(01-01-12) (Skokie Park District Litigation — Settlement Offer) The General Counsel reported that the Skokie Park District has offered to settle its lawsuit.

The litigation arose when the Skokie Park District requested that its retirement contribution be suspended until its overfunding was reduced from 118% to 105%. Having decided not to allow the Skokie Park District to suspend its retirement rate, they brought suit against IMRF.

He reported the District proposed to dismiss its litigation if IMRF grants a credit of one-half of the retirement contributions they paid in 1999, which is a credit for $60,116.

The General Counsel stated that staff recommends the Board accept the Skokie Park District’s settlement offer.

After discussion, it was moved by Mr. Setchell, seconded by Mrs. Newell, to accept the Skokie Park District’s settlement offer.

Vote:

Aye: Bochmann, Newell, Ross, Setchell, Shoop, Sonnemaker

Nay: None

Absent: Novak

 

(01-01-13) (Revisions To Freedom of Information Act Requests Policy) The General Counsel reported to the Board that the Illinois Freedom of Information Act (FOIA) requires IMRF to have procedures in place to facilitate inspection of IMRF’s records by anyone interested.

He further noted that the last time IMRF’s FOIA procedures were reviewed, was in 1984 when the statute was enacted in its current form, and the Board of Trustees adopted a resolution that stated the rules for inspection and copying of IMRF’s records.

It was moved by Mrs. Newell, seconded by Mr. Ross, to adopt the following resolution:

WHEREAS, the Illinois Freedom of Information Act requires establishment of procedures for access by the public to records of the Illinois Municipal Retirement Fund; and

WHEREAS, the Board of Trustees as fiduciaries of a governmental pension fund believe that the Fund’s records should be available, at reasonable times, for public inspection, for public purposes to the extent that disclosure does not violate individual privacy;

THEREFORE, it is hereby RESOLVED that the Board of Trustees adopt the following rules and regulations to implement the Illinois Freedom of Information Act and to govern disclosure of the records of the Illinois Municipal Retirement Fund:
  1. Records Subject to Public Inspection
    • All IMRF records shall be subject to public inspection except:
      • Individual member files
      • Personnel files of staff employees
      • Correspondence and memorandum and other items relating to personal matters of any trustee
      • Personnel applications
      • Any other record exempted from disclosure under Section 7 of the Freedom of Information Act


  2. Persons Entitled to Inspect Records
    • All persons shall be entitled to inspect IMRF records.

  3. Hours of Inspection
    • Records shall be available for inspection at the Fund’s offices between 8:30 A.M. and 4:30 P.M. on days when the Fund is open for business.

  4. Employee to Whom Requests Should be Directed
    Title and Address

    Human Resources Manager
    2211 York Road
    Oak Brook, Illinois

  5. Inspection and Disclosure Procedures
    • Persons appearing at the IMRF offices will be afforded the right to inspect original records upon oral or written request. The records will be furnished as soon as reasonably possible unless the requested records require substantial file research or a significant number of records are requested. In this event, the person will be informed when the records will be available for inspection or when copies can be mailed.
    • Records will be furnished within 7 business days (or 14 days if time extended by writing within 7 days).
    • If the person so requests in writing, copies of the records will be furnished upon payment of the published fees.
    • A person may be required to deposit the required fee before the copies are made.
    • Copies will be made by staff personnel and the person inspecting records shall not be entitled to make the copies.
    • Mailed requests for copies of records will also be accepted and the same procedures will be followed.

  6. Fees for copies
    • 25 cents per page hard copy
    • $5 per computer disk

  7. Denial Procedures
    • If the request for inspection is denied, notice shall be given to the person or persons requesting inspection as provided by Section 9 of the Freedom of Information Act in writing within 7 business days or (if extended by written notice) within 14 business days.

  8. Appeal Procedures
    • If the person who is denied inspection wishes to appeal, the appeal shall be made within 14 business days to the Executive Director.
    • The Executive Director shall act upon the request within 7 business days and in writing notify the person requesting the records.
    • If the Executive Director grants the appeal, the records shall be furnished as provided in Paragraph 5 and the date the appeal is granted shall be considered as the date of the request.
    • If the Executive Director denies the appeal, written notice shall be given to the person requesting inspection as provided in Section 9 of the Freedom of Information Act.
    • In the absence of the Executive Director the appeal shall be acted upon by a Director.

Vote:

Aye: Bochmann, Newell, Ross, Setchell, Shoop, Sonnemaker

Nay: None

Absent: Novak

 

(01-01-14) (Litigation Update) The General Counsel reported to the Board on currently pending litigation.

The following is an update of the currently pending litigation.

WILLIAM ARBEITER vs. IMRF (Jackson County)

An IMRF member filed for an administrative review of the Board’s decision that he is not eligible for temporary disability benefits. The Board determined that Mr. Arbeiter did not have 12 months of service credit before his date of disability.

We filed our answer and the administrative record on January 25.

CENDANT (U.S. District Court, New Jersey)

This is the class action lawsuit brought by various parties against Cendant Corporation based on securities fraud. Cendant has agreed to settle this matter for $2.8 billion.

The settlement fund is now ready for distribution to the class members. Northern Trust has filed for our share of the settlement. The attorneys who represented the class will receive 8.275% of the settlement fund.

 

FORD COUNTY vs. IMRF (Ford County)

Ford County has asked the circuit court to review the Board’s decision regarding the County’s attempt to rescind its ECO resolution for newly elected county officials. The Board determined that the ECO resolution originally passed by Ford County was irrevocable.

The sheriff of Ford County, who is the only official impacted by the County’s original attempt to rescind ECO, was recently convicted of a felony related to his previous IMRF employment with Gibson City. We don’t know yet how this will affect our litigation.

 

DARLA HALL vs. IMRF (Will County)

An IMRF member filed suit against IMRF for payment of a disability claim which the Board denied. Because she didn’t file as an administrative review claim, we had the claim dismissed. She then amended her claim to conform with administrative review.

It was the opinion of the medical consultant that Ms. Hall’s condition should not keep her from performing her duties as a medical secretary for the Will County Health Department.

We have filed our response and a brief. The claim was argued on February 19, 1999 and the judge has not yet made his decision.

 

 

MARK MORRIS vs. HELEN TOLAN, et al. (Sangamon County)

A member filed suit against Sangamon County, the Sangamon County Superintendent of Schools and IMRF seeking omitted service credit. There is a dispute as to whether his employer during the period at issue was the Superintendent (whose employees participated in IMRF through Sangamon County) or an educational consortium which did not participate in IMRF at the time.

We filed our answer on October 27, 2000.

 

OXFORD HEALTH PLANS (U.S. District Court, So. District of N.Y.)

This is a class action brought by stockholders against Oxford Health Plans, Inc. based on securities fraud. The lead plaintiffs are Colorado Public Employees Retirement Association and PBHG Funds.

We are a member of the class and will be monitoring the litigation as it proceeds.

 

WILLIE RUSH vs. IMRF (St. Clair County)

An IMRF member filed for an administrative review of the Board’s decision that he is not eligible for total and permanent disability benefits. The medical consultant could find no reason his condition should keep him from holding some sort of gainful employment.

Mr. Rush asked the court to order a new administrative hearing because his testimony was not recorded at the original hearing. After several motions regarding the issue of no transcript of Mr. Rush’s testimony, we returned this matter to the Benefit Review Committee for a new hearing, which was held on July 13, 2000. The Committee postponed its decision pending an independent medical evaluation and the continuation of the hearing is tentatively scheduled for February.

 

 

SKOKIE PARK DISTRICT vs. IMRF (Cook County)

Skokie Park District has filed an administrative review claim asking the court to order the IMRF Board of Trustees to grant the Park District a moratorium on retirement contributions until the overfunding in its IMRF account is reduced. We filed our response to this claim on April 30, 1999.

Skokie has now filed an amended complaint. They are asking the judge to declare that Skokie’s rate was too high and to order IMRF to refund contributions. Our answer to the amended complaint was filed on September 22, 1999.

The Park District has now proposed a settlement to the litigation. Please see the related memo.

 

 

EDWARD STYDEN, et al., vs. LAKE COUNTY SHERIFF'S OFFICE MERIT COMMISSION, et al. (Lake County)

A group of Lake County sheriff's deputies filed suit against Lake County, the Lake County Sheriff, the Lake County Merit Commission and IMRF because they have not been promoted past the bottom rank of deputy sheriff. They allege that the sheriff, the county and the commission have violated the Sheriff's Merit System Law.

Motions for summary judgment have been filed in this case. Arguments have not yet been scheduled.

 

STEVEN L. WHETSTONE vs. IMRF (Sangamon County)

An IMRF member filed a claim for administrative review which asks the court to reverse the Board’s decision that he is not eligible for retroactive service credit.

Mr. Whetstone was the assessor for a township which passed a resolution finding that the position of assessor qualified for IMRF participation, but shortly thereafter rescinded that resolution. Mr. Whetstone argues that his position actually did qualify and an improper concern for cost made the township board rescind the resolution.

We filed the answer and administrative record on May 13, 1999.

 

(01-01-15) (Report of Executive Director) The Executive Director reported as follows:

Assets Net assets as of November 30, 2000 at market were $ 15.6 billion.

Benefits During December, the Fund processed 1,553 claims. On January 1, 2001, benefit claims in process totaled 1,103.

Investments The market value of the Fund’s investment portfolio, including short term investments, totaled $15.6 billion on November 30, 2000, which was $890.2 million over cost.

Fixed income investments of $1,026.1 million were made in November. The market value of fixed income investments totaled $4,791.6 million, which was $55.2 million under cost.

Domestic equity investments of $173.0 million were made in November. The market value of domestic equity investments totaled $6,898.2 million, which was $556.2 million over cost.

International equity investments of $151.6 million were made in November. The market value of international equity investments totaled $2,753.6 million, which was $236.1 million over cost.

The market value of real estate investments totaled $460.5 million, which was $15.5 million over cost.

The market value of alternative investments totaled $516.0 million, which was $137.6 million over cost.

 

 

(01-01-16) (Trustee Comments) The Chairman reported that the following Trustees requested authorization from the Board to attend the following conferences and seminars.

Julie A. Newell International Foundation

Trustees Institute

February 18-21, 2001

 

W. Thomas Ross International Foundation

Trustees Institute

February 18-21, 2001

It was moved by Mr. Shoop, seconded by Mr. Bochmann, to approve the above Trustee requests.

Vote:

Aye: Bochmann, Newell, Ross, Setchell, Shoop, Sonnemaker

Nay: None

Absent: Novak

 

(01-01-17) (Adjournment) It was the consensus of the Board that the meeting be adjourned to reconvene in the Fund offices, 2211 York Road, Suite 400, Oak Brook, Illinois, on February 23, 2001.