A. Governance, Financial Planning, and Efficient/Effective Administration 1) Determine whether the pension system department is organized in a manner that facilitates effective and efficient operations, including an assessment on whether the department’s span of control is adequate for the complexity of its operations. 2) Evaluate whether the department is staffed with and managed by individuals possessing appropriate skill sets to effectively manage the plan. Assess whether Board composition is consistent with other pension systems in terms of subject matter expertise. 3) Determine whether plan fiduciaries (i.e., Board members and key management staff with discretion over the assets) are properly fulfilling their responsibilities as related to the Retirement Plan. Assess whether there are adequate ethics and conflict-of-interest provisions in place for plan fiduciaries. 4) Review the Plan’s operational practices for efficiency and adherence to established policy or leading practices. Determine whether investment activities comply with established objectives and policies adopted by the Plan. 5) Assess whether WPERP has adequate procedures for long-term financial planning to ensure that appropriate/timely financial strategies and decisions can be made by the pension system management and its plan sponsor. B. Actuarial Assumptions, Asset Allocation, and Investment Performance 1) Assess the adequacy of actuarial methods in order to assure the validity of actuarial assumptions. 2) Evaluate the adequacy and reasonableness of the manner in which Retirement Plan’s assets are allocated. Determine whether system investments are adequately diversified in order to minimize the risk of loss and maximize the return. 3) Assess how investment managers’ performance is evaluated and determine whether there are tools in place to hold managers accountable for underperformance. 4) Analyze and opine on past performance and trajectory of WPERP investments, actuarial predictions, contributions, and unfunded liabilities and provide comparative benchmarking analysis against a comparable peer group (e.g., City’s other pension systems and public/private sector utility pension systems) and identify best practices and key success factors. C. Minimizing DWP Contributions 1) Evaluate, for reasonableness, the broad categories of expenses incurred for administering the pension/retirement system and explore opportunities to minimize administrative and management expenses through cost sharing with the City, the City’s other pension systems, or through other means. 2) Evaluate whether the Plan has adequate processes to account for lower than anticipated market returns and ensure that the Plan Sponsor’s contributions are sustainable. 3) Ensure that expenses of administering the Plan have been defrayed properly, including expenses related to Board travel activities. Determine whether the Plan should pursue opportunities to minimize administrative expenses by cost-sharing with the City/DWP or the City’s other pension systems. 4) Evaluate the Plan’s approach with using active and passive management of investments to determine whether it is consistent with leading industry practices. Assess the adequacy of the Plan’s evaluation of the ongoing cost-benefits associated with participation in actively managed funds as compared to passively managed funds. 5) Determine whether the Retirement Plan adequately evaluates investment performance with costs to ensure costs are minimized. This includes determining where investment consultants and asset custodial services can be consolidated with Los Angeles Fire and Police Pensions (LAFPPS) and Los Angeles City Employees’ Retirement System (LACERS) to achieve savings. 6) Determine amounts paid in investment management fees both directly/indirectly and evaluate whether those amounts are consistent with peer systems.
