INTER-AMERICAN DEVELOPMENT BANK ASSOCIATION OF RETIREES MEMORANDUM                                                                                                                                                                                                                                                                

DATE: 31 July 2009              

TO:  Members of the Association of Retirees
                       
FROM: Saúl Hanono President

SUBJECT: Report on the Board’s activities during the past three months.

Background The Board of the Association are carrying out their mandate within a not very encouraging environment.  On the one hand many members have demands and expectations, particularly with regards to pension adjustments, which are usually not in accord with the statutes of the Bank’s Staff Retirement Plans (SRP and LRP).  On the other hand the influence the Association has to effect significant changes of the retirement plans in order to improve pensions tends to be overestimated.

In this regard, in the midst of a global economic and financial crisis, as well of the Bank’s replenishment negotiations, the main objective of the Association’s tasks are centered in preserving, both in the short-and long-term, two key benefits; namely, adjustable pensions and  high quality health insurance.  A capital replenishment is obviously crucial for the Bank, because it would provide added assurance in order to safeguard retirement benefits.

It is worth recalling that the Association barely has a single vote in each of the Staff Retirement Plan’s committees and none at all in the Post-Retirement Benefits Plans (which fund, inter alia, the medical insurance and the pension tax reimbursements).

In broader terms the Association does have great moral authority, as well as professional authority stemming from their members’ many years of dedicated service both at Headquarters and in Country Offices.  Active participation by the Association, with prudent and well-developed recommendations, can contribute to decision-taking processes, particularly with regards to matters which affect retirees’ interests and benefits.

The current Board took office barely three months ago.  They immediately completed their composition by selecting five members according to procedures which were in strict agreement with the Association’s By-Laws.  They then appointed their representatives to the three committees of the International, Complementary and Local Retirement Plans.

In order to apply right away the transparency policy which now guides the Board, procedures for approval of the minutes of their meetings were modified (they are now approved by short procedure), so that a copy can be instantly sent to the Presidents of the Chapters and then be posted on the Association’s website.  The Board also endeavours to communicate all ad hoc matters which they consider may be of interest to members.  The Newsletter will continue to be an additional and effective channel of communications.  The monthly lunches will also continue to be another information channel.  Finally, the Board is making a special effort to boost communications with Chapters, which is already beginning to bear fruit.

Specific Matters

• Actuarial valuations.  As of 31 December 2008 the Retirement Plans were under-funded as a result of the poor performance of the investment portfolios caused by the global financial crisis.  The Board suggested that the Bank had to raise their contributions by more than Management has proposed.  Unfortunately the Board’s suggestion was ignored and it is anticipated that next year’s contributions have to be increased significantly.

• Review of criteria to determine the basis for the calculation of pensions of participants in Local  Plans.  It was agreed that the relevant document submitted to the Administrative Committee by the Executive Secretariat of the Staff Retirement Plans should be reviewed in order to take into account comments made by the Board’s representatives on the Committee.

• The Board’s representatives on the Staff Retirement Plans’ Investment Committee have played an active role in a course of action that will probably result in a review of investment policies reflecting the conclusions of the study on Asset/Liability Management being carried out by a consulting firm hired by the Committee.

• Option for local currency payment of pensions: focus groups.  In order to assist with discussion and analysis processes with Association Chapters, the Board asked the Executive Secretariat of the Staff Retirement Plans to call a meeting of the Administrative Committee so that they can select three or four of the most viable options from the 13 options included in the document prepared by the Actuaries in October, 2008.  These three or four options would serve as the basis for discussion of focus groups organized by the Association and sponsored by the Bank, in accordance with a decision taken by the Administrative Committee.  The Board has already decided to establish the focus groups in close coordination with Chapters and to prepare the questionnaires, which will serve as guidelines for the focus groups.

•    The Association actively intervened to reverse CIGNA’s hasty decision to suspend their agreement with Medstar Health, which was of immense concern to members because of the possibility of no longer having access to Georgetown University Medical Centre, or Washington Hospital Centre.  Fortunately, CIGNA and Medstar Health reached a new agreement and services for members at both institutions is secure.

• Medical insurance premiums.  Management have informed the Association that there is no budgetary assignment in the 2009 budget to increase the Bank’s participation in funding premiums from the current 66% to 75%.  Moreover, the process to unify active and retired staff premiums has been halted.  These modifications were prematurely announced two years ago and raised expectations amongst our members, which so far remain unfulfilled.  The Board will continue to address this issue, even though they have not received any favourable encouragement from Management.

Looking Ahead

• Strengthen contacts with Senior Management, as well as with the Secretariat of the  Retirement Plans, in order to find some kind of solutions to the problems outlined above, particularly with regards to pension cost-of-living adjustments and to the difficulties caused by persistent exchange-rate fluctuations between the U.S. dollar and local currencies.

• Make a continuous follow-up of the financial position of the retirement funds.

• Conduct an internal evaluation of the current mechanism used to determine pension tax reimbursement, in order to make it more transparent, comprehensible and fair, to the extent possible.  This evaluation, if necessary, would be shared with Bank Management.

• Follow-up on the proposal to charge administrative expenses of the Executive Secretariat of the Staff Retirement Plans to the retirement plans, which is a violation of SRP statutes.

• Organize information and discussion meetings with members who live in the greater Washington, D.C. area, beginning in September, 2009.

• Continue strengthening contacts and dialogue with Chapters, responding to the concerns raised in their communications.  Organize video conferences with Chapters.  Promote the re-incorporation of the Colombia Chapter.

• Encourage membership of retirees who have not yet joined the Association, in order to increase the level of participation.

• Obtain e-mail addresses from those members who have not yet provided them, in order to improve communications with all members and to make them more agile.

• Promote communications with representatives of the retirees on the Life and Medical Insurance Review Committee.

• Strengthen links with the IDB Staff Association and with the IDB Families Association, as well as with the retirees associations of other multilateral institutions.

• Begin preparing for the next election of Association officers (President, Secretary, Deputy Secretary, Treasurer and five Directors).

Conclusion

The Board requests member’s cooperation and understanding so as to achieve their objectives in these difficult times, which are to ensure that benefits to which all members are entitled are in no way jeopardized.  The Association’s means are limited and they cannot pretend to find a solution to all pending issues in barely three months.  Cooperation from members will be vital, regardless of where they live, so that the Board can continue with their tasks and revitalize the Association to a level consistent with the professionalism and prestige of their members, which reflect their many years of dedicated service to the IDB.