Legislative Updates For May 2016
Firefighter Cancer Registry Act of 2016 & Public Retirement Systems: Funds: Disclosures
The Board of Fire and Police Pension Commissioners recently reviewed and discussed two pieces of proposed legislation. The Board adopted a position on the two bills and requested that the City take an official position as well. Any official position of the City of Los Angeles with respect to legislation, rules, regulations or policies proposed to or pending before a local, state or federal governmental body or agency must have first been adopted in the form of a Resolution by the City Council with the concurrence of the Mayor. The two bills are summarized below.
H.R. 4625 would require the Secretary of Health and Human Services to develop a voluntary patient registry to collect data on cancer incidences among firefighters. Since the 1990s, studies have indicated a strong link between firefighting and an increased risk of developing several major cancers. Past studies on cancer incidences among firefighters have been limited by the availability and the standardization of important epidemiological data.
Currently, many states nationwide maintain registries that collect information regarding cancer diagnoses. These registries help further research related to assessing cancer incidence among firefighters. The Firefighter Cancer Registry Act of 2016 would create a special purpose national cancer registry to provide researchers and public health agencies with more direct and comprehensive access to the specific set of information they need to conduct more robust, focused, and epidemiologically rigorous research on cancer incidence among firefighters. Additionally, a national cancer registry would better inform firefighters of future precautions to take and develop more sophisticated safety protocols to lower cancer risks.
H.R. 4625 is a bi-partisan bill supported by the International Association of Fire Fighters (IAFF) and the International Association of Fire Chiefs, among other state associations in support of firefighters. In April 2016, Mayor Garcetti spoke at the IAFF 2016 Legislative Conference in Washington, DC in support of the Firefighter Cancer Registry Act of 2016.
AB 2833, as amended, would require alternative investment vehicles within LAFPP’s portfolio to make specific disclosures regarding fees, expenses, the gross and net rate of return associated with these vehicles and the underlying investments, as well as other specified information on a form prescribed by the system (for contracts entered on or after January 1, 2017). Public pension or retirement systems would have to disclose the following information received related to alternative investment vehicles at least annually at a public meeting.
- The fees and expenses that the retirement system pays directly to the alternative investment vehicle, fund manager or related parties.
- The fees and expenses that are paid from the alternative investment vehicle, including carried interest to the fund manager or related parties.
- The fees and expenses paid by the portfolio companies held within the alternative investment vehicle to the fund manager or related parties.
- The gross and net rate of return of each alternative investment vehicle since inception.
- Other information described in Government Code Section 6254.26 (b).
This bill would impose a state-mandated local program in which any fees incurred would not be reimbursed by the State.
Argument in favor of AB 2833: It will increase the transparency of fees paid to alternative investment vehicles, including carried interest fees within a portfolio. Additionally, the bill would provide transparency concerning compensation paid to private equity managers with the ability to assess whether the amount of compensation is appropriate.
Argument against AB 2833: It would require disclosure of sensitive information regarding the underlying position(s) of private equity funds. These positions are considered proprietary information. Under existing State law, there are several private equity funds that have made the decision to exclude public pension plan investors within the State of California from investing in their respective funds due to disclosure requirements. Passage of this law will most likely increase the number of private equity funds with such restrictions. Additionally, the bill as currently drafted will require disclosure for all existing funds if there are any amendments to the limited partnership agreements.
LAFPP has over three hundred private equity funds and does not have the staff resources to prepare an annual report of this magnitude that includes all of the information as required in this bill. LAFPP currently adheres to existing laws that apply to disclosing payments to placement agents and through its own Contractor Disclosure Policy, which predates state law. The Board opposes AB 2833 as currently drafted since it has the potential to limit future private equity investment opportunities and would require additional staffing and/or contractor resources.
The Board of Fire and Police Pension Commissioners, management and staff will continue to monitor these proposed bills and other legislation that may impact Plan members.