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Cheryl Alston, Executive Director Employees’ Retirement Fund City of Dallas

Cheryl Alston, Executive Director Employees’ Retirement Fund City of Dallas. National Society of Institutional Investment Professionals Public Plans – Plan Design and Funding Issues. Overview of Dallas ERF.

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Cheryl Alston, Executive Director Employees’ Retirement Fund City of Dallas

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  1. Cheryl Alston, Executive Director Employees’ Retirement Fund City of Dallas National Society of Institutional Investment ProfessionalsPublic Plans – Plan Design and Funding Issues

  2. Overview of Dallas ERF • Started in 1944 as a single employer defined benefit plan that provides retirement, disability and death benefits for the civilian employees of the City of Dallas • Governed by Chapter 40A and a seven member Board of Trustees consisting of three members appointed by the City Council who may be Council members; three employee members of the Plan elected by the membership, and the City Auditor • $2.5 billion in Assets Under Management as of 09/30/09 • Key member statistics - 7500+ active members, 5,500+ retirees • City of Dallas does not participate in Social Security • Both the employer and employee make contributions to the Fund • COLAs – Based on change in CPI, applied to base pension • Funding Ratio – 96.17% as of December 31, 2008

  3. No changes to plan design since 2004 • City Council formed Employees’ Retirement Fund Study Committee in December 2003 • Study Group Conclusions • Current contribution rates will not support future benefit payments – contributions need to be increased • The current defined benefit plan and pension benefit levels are appropriate based on market data • The current contribution ratio (63% City and 37% employee) should be maintained • The investment program is sound • Actuarial assumptions are conservative • Study Group Plan put in place • Pension Obligation Bonds should be issued to lessen the cost of reestablishing sound actuarial status • Future City and employee contribution adjustments should be automatic • Change select Actuarial Assumptions • November 2004 – Plan approved by ERF Board, City Council and City of Dallas Voters. Citizen vote on Plan amendments passed (71%)

  4. Asset Allocation Process focus on 30 year horizon • Board reviews Asset Allocation annually and rebalances quarterly • Process now includes liquidity component in the asset allocation process as well as return and risk • As of Nov 30, 2009, the market has rebounded hopefully in line with other recessions • Wilshire 5000 + 24.94% • MSCI ACWI (US dollars) + 38.53%, MSCI EM + 71.72%, • Barclays US Aggregate + 7.61%, Barclays Corp High Yield + 53.18% Source: Navallier & Associates

  5. Investment Manager Selection and Monitoring • ERF Investment Manager Selection and Monitoring Policy requires: • RFP process • Due Diligence Visits to be made prior to recommending a list of finalists to the Board • In addition to standard topics (Inv Philosophy, portfolio construction, trading, etc.); compliance is separate topic and often compliance officer is interviewed alone • Complete contract negotiations before finals • Board interviews finalists and selects firm • Monitoring • Staff has quarterly conference calls with all investment managers individually • Staff visits investment manager every 12-18 months • Investment Managers present to Board every 12 -18 months

  6. DB Through the eyes of our Oldest Retiree • Born in 1899 and retired in 1969 (70 years old) • Worked part time until he was 95 years old • His first car was a Model T and his last car was a Buick • He just turned 110 years old • Total years in retirement – 40 years and still going… • His retirement spans the last six recessions • Median annual income in 1969 was $8,389 according to US Department of Commerce Bureau of Census. A Ford Car cost $2,200 vs. $33,000 and a movie ticket cost $1.00 vs. $9.00 today • If he receives $500 a month, $6,000 a year, how much would he have to save in 1969 when he retired in a Defined Contribution Plan?

  7. Questions and Answers

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