| Volume 7 Issue 4 |
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FSMSS
Board of Trustees Meets in Kosrae
 On
December 11 and 12, 2007, the FSMSS Board of Trustees met on the island
of Kosrae for its 3rd Regular Board Meeting of the year.
For the first time since February 2006, the board gathered with a full
quorum. Gathered for the meeting were Chairman and Pohnpei State Representative,
Lt. Gov. Jack E. Yakana; Vice Chairman and National Government Representative,
Nahoy G. Selifis; Representative of Yap, Charles L. Chieng; Representative
of Chuuk, Garrison Irons; and filling in vacant Kosrae Representative
Seat, was Yosiwo George. FSMSS Administrator Alexander R. Narruhn was
also present as ex-officio member.
The meeting took place in the conference room of the Kosrae Administration
Building. Chairman Yakana opened the meeting with the roll call after
which each member of the board took the time to cast their opening remarks.
George officially welcomed the board to the State of Kosrae as its new
representative and revealed that he was quite pleased to be representing
his state. Each of the members echoed each other in their pleasure for
finally attaining a full quorum. Irons, in particular, was pleased to
finally meet all the members including Chieng of Yap and George of Kosrae.
In his opening remarks, Chieng expressed similar sentiments and said
he hoped the board would finally move forward with all the challenges
the system currently faced in light of the fact that the board was finally
operating under a full quorum.
The first item on the agenda was a presentation by Daniel Roland of
Smith Barney’s Consulting Group, which replaced Merrill Lynch
in September of 2006 as the FSMSS Investment Portfolio’s consultant.
The FSMSSA’s portfolio is managed by three money managers: Atalanta
Sosnoff, Payden & Rygel, and Missouri Valley Partners. Roland showed
that the portfolio’s total value as of September 30, 2007, was
$44.479 million. 59.2% of that was invested in large cap core, 32.3%
was in fixed income, and the remaining 8.6% was invested in small cap.
The growth of the portfolio was largely attributed to the constant over
performance of Atalanta Sosnoff. It had constantly bested its benchmarks
and came with returns at times when the overall market did not induce
such returns.
After Roland’s presentation, the board paid a courtesy visit to
the Governor of the State of Kosrae, Robert J. Weilbacher. As it was
just a courtesy visit, the board offered its willingness to participate
in any state-arranged meeting or hearing in which the board would be
glad to hear the people’s concerns and questions. Chairman Yakana
revealed that the board had conducted open public forums in the past
and would be willing to schedule another for the State of Kosrae if
requested to do so. The Governor thanked the board for the visit and
assured them that if the need for a forum were to arise, he would inform
the board of it.
The board reconvened in the conference room for a presentation from
Donald H. Clark, vice president of Administrative Services Corporation.
In his presentation, Clark walked the board through the viability of
retirement plans.
Afterwards, Administrator Narruhn made his report to the board concerning
the FSMSSA’s current status. While benefit payments were constantly
increasing, collections seemed to have reached a stagnant point and
as a result, both 2005 and 2006 came in with deficits. Operations and
benefit payments were greater than collections by $817 thousand in 2005
and by $1.814 million in 2006. As of September 30, 2007, benefit payments
came in at a total of $10.217 million while contributions amounted to
$8.688 million. Narruhn revealed that Public Law 14-86 had been passed
in 2006, with the bulk of its amendments coming into effect on January
1, 2007. The intention of the law had been to decrease this gap between
benefit payments and collections. Going on further, the administration
had submitted a bill to the president which is currently with congress
and this bill aims to rectify this issue by introducing key changes
to help the system’s unfunded liability and to bring a balance
between collections and payments.
The administrator revealed that as of September 30, 2007, $4.082 million
was reported delinquent. Out of this, the FSMSSA had been able to collect
$1.704 million as of September 30, 2007, through audits and resulting
payment agreements.
Continuing, the administrator walked the board through the pending amendment
which if passed into law, would help the administration’s collections
and decrease the system’s unfunded liability by a total of $84.9
million and raise its funded status from the current 16% to 24%.
The board broke for the day at 4:00 p.m. and reconvened at 9:40 a.m.
the next day. After entertaining an appeal case, the board had the administrator
continue with his report. The administrator went on to present to the
board the 2008 Proposed Budget for the FSMSSA. The law mandates that
the budget for a year would be no more than 11% of the total collections
for the previous year. The proposed budget was at $1,104,132, which
was 9.2% of the total projected income of the year. The administrator
reminded the board that the FSMSSA had never exhausted the total budget
for any one year. The board approved the calendar year 2008 proposed
budget as it was well under the ceiling.
Along with this, the board approved a resolution to make two separate
drawdowns from the investment portfolio to cover benefit payments for
the upcoming year. $500 thousand would be the initial drawdown while
$900 thousand would be taken out sometime during the middle of the year.
At 1:07 p.m., the board paid a courtesy visit to the Speaker of the
Kosrae State Legislature, Lyndon Jackson.
After reconvening, the board went over a recommendation from its investment
consultant concerning one of its money managers, Missouri Valley Partners.
Due to its unsatisfactory performance since being hired in 2003, the
board decided to begin a manager search and have its consultant come
up with 3 potential managers for the board to review in its next meeting.
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