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(PLEASE FIND THE AGENDA/TABLE OF CONTENTS ON PAGE 5.)

REGULAR MEETING OF THE BOARD OF DIRECTORS November 5, 2013 9:30 AM NMRHCA Board Room 2nd Floor Suite 207 4308 Carlisle Blvd. NE Albuquerque, New Mexico


2012 S 1 8 15 22 29

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2013

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2014

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JANUARY T W 1 6 7 8 13 14 15 20 21 22 27 28 29

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T W T SEPTEMBER T W T 2 3 4 9 10 11 16 17 18 23 24 25 30 31

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New Mexico Retiree Health Care Authority Regular Meeting BOARD OF DIRECTORS

ROLL CALL November 5, 2013

Member in Attendance Mr. Sullivan, President Mr. Monta単o, Vice President Mr. Baca Mr. Crandall Ms. Goodwin Mr. Johnson Mr. Linton Ms. Padilla-Jackson Ms. Sucher Ms. Hill

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NMRHCA BOARD OF DIRECTORS November 2013 Mr. Julian Baca Designee of PERA Executive Director 33 Plaza La Prensa Santa Fe, NM 87507 PO Box 2123 Santa Fe, NM 87504-2123 julian.baca@state.nm.us

Ms. Olivia Padilla-Jackson NM Municipal League Director, Financial Services City of Rio Rancho opadilla-jackson@ci.rio-rancho.nm.us W: 505-896-8761

Ms. Jan Goodwin, Executive Director Educational Retirement Board PO Box 26129 Santa Fe, NM 87502-0129 jan.goodwin@state.nm.us; (W) 505-827-8030 (F) 505-827-1855

Mr. Wayne Propst Executive Director Public Employees Retirement Association 33 Plaza La Prensa Santa Fe, NM 87507 PO Box 2123 Santa Fe, NM 87504-2123 Wayne.Propst@state.nm.us; W: (505) 476-9301

The Honorable Mr. Wayne Johnson NM Association of Counties Bernalillo County Commissioner One Civic Plaza, NW Albuquerque, NM 87102 Ms. Karen Brown Deputy County Commissioner Bernalillo County, District 5 kbrown@bernco.gov; 505-468-7212 (office) 505-462-9821 (fax) The Honorable Mr. James B Lewis NM State Treasurer 2055 South Pacheco Street Suite 100 & 200 Santa Fe, NM 87505-5135 jamesb.lewis@state.nm.us (W) 505-955-1120 (Fax) 505-955-1195 Mr. Terry Linton Governor’s Appointee 1204 Central Ave. SW Albuquerque, NM 87102 terry@lintonandassociates.com; 505-247-1530 Mr. Joe Montaño, Vice President NM Assoc. of Educational Retirees 5304 Hattiesburg NW Albuquerque, NM 87120 Jmountainman1939@msn.com (H) 897-9518

Ms. Marilyn Hill Deputy State Treasurer Designee of NM State Treasurer Marilyn.Hill@state.nm.us 505-955-1123 Ms. Karen Sucher NEA-NM, Classroom Teachers Assoc., & NM Federation of Educational Employees PO BOX 1983 Tijeras, NM 87059 smithsucher3@aol.com Phone: 505-286-8702 Mr. Tom Sullivan, President Superintendents’ Association of NM 800 Kiva Dr. SE Albuquerque, NM 87123 tlsullivan48@gmail.com; 505-330-2600 Mr. Doug Crandall Retired Public Employees of New Mexico PO Box 20607 Albuquerque, NM 87154-0607

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Regular Meeting of the NEW MEXICO RETIREE HEALTH CARE AUTHORITY BOARD OF DIRECTORS November 5, 2013 9:30 AM NMRHCA Board Room 2nd Floor, Suite 207 4308 Carlisle Blvd. NE Albuquerque, NM 87107

AGENDA Call to Order

Mr. Sullivan, Vice Chair

Roll Call to Ascertain Quorum

Ms. Beatty, Recorder

Pledge of Allegiance

Mr. Sullivan, Vice Chair

Approval of Agenda

Mr. Sullivan, Vice Chair

Approval of Regular Meeting Minutes September 3, 2013

Mr. Sullivan, Vice Chair

Public Forum and Introductions

Mr. Sullivan, Vice Chair

Consent Agenda (Action Item)

Mr. Sullivan, Vice Chair

Board Election/Committee Assignments (Action Item) Mr. Sullivan, Vice Chair Executive Director’s Update 1. 2. 3. 4.

Mr. Tyndall, Executive Director

2013 NEPC Asset Allocation Update State Investment Council Update Investment and Pensions Oversight Committee Switch Enrollment Update

Medicare Advantage Contracts (Action Item)

Mr. Tyndall, Executive Director

First Quarter Budget Status Report

Mr. Archuleta, Deputy Director

Date & Location of the next Regular Board Meeting

Mr. Sullivan, Vice Chair

December 3, 2013, 9:30 AM, NMRHCA Board Room, 2nd Floor Suite 207, 4308 Carlisle Blvd. NE, Albuquerque, New Mexico. Other Business

Mr. Sullivan, Vice Chair

Adjourn Executive Session

Mr. Sullivan, Vice Chair

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MINUTES OF THE NM RETIREE HEALTH CARE AUTHORITY BOARD OF DIRECTORS REGULAR MEETING: SEPTEMBER 3, 2013 CALL TO ORDER A Regular Meeting of the Board of Directors of the New Mexico Retiree Health Care Authority was called to order on this date at 9:30 a.m. in the NMRHCA Board Room, 4308 Carlisle Boulevard, N.E., Albuquerque, New Mexico. ROLL CALL TO ASCERTAIN QUORUM A quorum was present: Members Present: Mr. Alfredo Santistevan, President [designee of the Honorable James B. Lewis, NM State Treasurer] Mr. Tom Sullivan, Vice President Mr. Joe Montaño, Secretary Mr. Doug Crandall Ms. Jan Goodwin Mr. Wayne Johnson Mr. Terry Linton Ms. Olivia Padilla–Jackson Mr. Wayne Propst Ms. Karen Sucher Members Excused: None. Staff Present: Mr. Mr. Ms. Mr. Ms. Mr.

Mark Tyndall, Executive Director David Archuleta, Deputy Director Debbie Vering, Chief Financial Officer Tomas Rodriguez, IT Director Kimberly Scott, Customer Service Manager Rudy Bantista, Communications & Board Recording Secretary

Others Present: [See sign–in sheet.] Present but not signed in: Ms. Judith S. Beatty, Recorder Ms. Claudia Armijo, LCS Analyst for IBAC PLEDGE OF ALLEGIANCE Mr. Archuleta led the pledge.

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PUBLIC FORUM AND INTRODUCTIONS None. APPROVAL OF AGENDA Mr. Crandall moved for approval of the agenda, as published. Mr. Johnson seconded the motion, which passed unanimously by voice vote. APPROVAL OF ANNUAL MEETING MINUTES: JULY 9 & 10, 2013 Mr. Johnson moved for approval of the Board of Directors’ Annual Meeting Minutes of July 9—10, 2013. Mr. Crandall seconded the motion, which passed unanimously by voice vote. APPROVAL OF MEDICARE ADVANTAGE SELECTION Mr. Tyndall referred the Board Members to page 20 of the September 3, 2013, Board of Directors Regular Meeting Book that is incorporated herein in its entirety by reference. Mr. Crandall moved to accept the recommendations and move forward with negotiations. Mr. Johnson seconded the motion, which passed unanimously by voice vote. Mr. Tyndall thanked Ms. Kimberly Scott, who did an excellent job as acting procurement manager. APPROVAL OF FY 2015 BUDGET APPROPRIATION REQUEST [PAGES 48—63 AS ABOVE] Mr. Archuleta reviewed the proposed budget appropriation request, with the following highlights: Program Support — The FY15 appropriation request is a 12 percent increase above FY14 operating levels approved for Program Support. In response to Mr. Montaño, Mr. Archuleta reported membership growth has been 35–40% since FY10. In 2012, customer services staff answered more than 40,000 phone calls and assisted 10,000 walk–in customers, and for some time, two approved CSR positions were unfilled. Mr. Montaño recollected that he had phone calls and complaints in years past but in the last three or four years, those have dropped off because of the vastly improved level of service the Agency provides to the membership. Health Benefit Fund In response to Mr. Santistevan, Mr. Archuleta said employee growth is projected at 1%, and the Agency is expecting to collect approximately $120 million in FY14 from Employee/Employer (EE/ER) contributions, but these monies will be used to balance revenues and expenditures as part of the appropriation request. Ms. Goodwin and Mr. Propst both reported increased numbers of workers entering retirement. Mr. Archuleta informed Ms. Padilla-Jackson that under DFA rules monies may not be budgeted until they

6


are spent. Mr. Tyndall has discussed this with DFA. Ms. Padilla-Jackson requested additional information from the Agency about DFA. Mr. Crandall moved for approval of the FY15 budget request, as submitted. Ms. Goodwin seconded the motion, which passed unanimously by voice vote. [Not present during the vote: Ms. Padilla–Jackson.] Mr. Santistevan asked about the IT plan summary, and Mr. Rodriguez reported that the Retiree Benefit Intake System (REBIS) upgrade and enhancement project (on pg. 57& 61) is currently in the design phase and on schedule, with $256,000 expended to date. Responding to Mr. Montaño, Mr. Rodriguez stated that, once the new system (see example screens pg. 63) is in place, it would take at least two years for IT and CSR FTE requested to acquire expertise. For now, it is necessary to continue the maintenance agreement, but one project goal is to reduce and/or eliminate a maintenance agreement altogether. Mr. Tyndall commented that Mr. Rodriguez’s talent and expertise have saved the Agency many millions of dollars over the past 5 or 6 years as entities that out-source all his talents typically spend greater than $1.5 million annually. EXECUTIVE DIRECTOR’S UPDATE Mr. Tyndall reported interviews are completed for the 2 vacant CSR positions and both will be filled in time for the switch enrollment period. Mr. Tyndall referred to page 93 of the Board Book and said 16 Switch Enrollment meetings would be held across the state, from October 11th through November 1st. He said two new venues, Raton and Española, have been added this year. For the fourth year in a row, attendees will be offered free flu shots and other age–appropriate immunizations as well as free biometric screenings. Mr. Tyndall reported that the NMRHCA met with the Investments and Pensions Oversight Committee on June 6th and August 9th. While June 6th was a general discussion of the state of the Agency, on August 9th (pg. 25—30) the Agency discussed the five–year plan adopted by the Board as well as the request for additional employee/employer contributions. He said meetings are being scheduled with stakeholders (mostly the union groups) to talk about the specifics of how that might look in terms of increased contributions and what the contribution mix should be. DATE AND LOCATION FOR THE NEXT REGULAR BOARD MEETING: November 5, 2013, 9:30 AM, NMRHCA Board Room, 2nd floor, Suite 207, 4308 Carlisle Blvd., NE., Albuquerque, NM. OTHER BUSINESS None. ADJOURNMENT Its business completed, the NMRHCA Board adjourned the meeting at 10:40 a.m.

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Tom Sullivan, Chair

Joe Monta単o, Vice Chair

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NMRHCA Staff Request for Board Approval of Albuquerque Housing Authority as Participating  Employer    Background  The City of Albuquerque passed a resolution in 2010 that created the Albuquerque Housing  Authority (AHA) as Public Body Corporate effective July 1, 2011.  The employees who are  currently City of Albuquerque employees will transition to becoming Albuquerque Housing  Authority employees effective July 1, 2014.  AHA held a public meeting on September 18, 2013, at which time the governing body of AHA  passed a resolution to irrevocably include the Albuquerque Housing Authority in coverage by  the Retiree Health Care Act.  AHA has since requested continue coverage for its employees  upon their transition from the City of Albuquerque to AHA.  Recommendation  Participation of the Albuquerque Housing Authority in the New Mexico Retiree Health Care  Authority program does not create an additional liability for the program, it simply transfers the  existing liabilities incurred under the organizational umbrella of the City of Albuquerque to  newly created public body.   NMRHCA respectfully requests Board approval of inclusion of the Albuquerque Housing  Authority as a participating employer with the New Mexico Retiree Health Care Program  effective July 1, 2014.  Approval of this request will allow AHA employees to seamlessly  transition their benefits to their newly created employer and avoid any delay in their eligibility  for benefits.    

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As of October 31, 2013, committee assignments are as follows:  Executive Committee  Tom Sullivan, Chair  Joe Montano, Vice Chair  Vacant, Secretary  Audit Committee  Jan Goodwin, Chair  Joe Montano  Board Policies & Procedures Committee (Ad Hoc)  Investment Committee  Doug Crandall  Joe Montano  Olivia Padilla‐Jackson  Jan Goodwin  Tom Sullivan   Legislative Committee  Tom Sullivan, Chair  Joe Montano, Vice Chair   

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New Mexico Retiree Health Care Authority 2013 Asset Allocation Update

September 18, 2013

Allan Martin, Partner Dan LeBeau, Consultant

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New Mexico Retiree Health Care Authority

Summary •

The New Mexico Retiree Health Care Trust Authority is partially funded to meet future post-retirement benefit commitments. – –

This analysis seeks to balance competing objectives using existing asset classes under overseen by the State Investment Council – – –

Extend the expected insolvency date with increased return (and risk) Protect the Fund from the risk of earlier insolvency with decreased risk (and return) Measure allocation relative to other public post-retirement medical funds

NEPC has reviewed the asset allocation targets using the asset classes currently available through the State Investment Council as well as adding Global Asset Allocation as a potential addition – –

Similar to most post-retirement medical programs Transitioning from a pay-as-you-go system to a funded system

Seeking marginal improvement with higher return and/or lower risk Significant opportunity to improve diversification if State Investment Council allows access to additional asset classes and strategies

The current asset allocation targets produce an optimal risk-adjusted return using the asset classes currently available through the State Investment Council. –

Any reduction in the Fund’s allocation to fixed income, which is a decision we would support, would increase the Fund’s allocation to equities •

Result is a portfolio with a higher expected return with higher risk, resulting in a risk-adjusted return that is not meaningfully different than that of the current asset allocation targets

Though we would generally support a reduction in equities, NEPC’s current outlook for fixed income does not support an increase to fixed income exposure •

An increase to fixed income would reduce the expected risk of the Fund, but would also lower the expected return of the Fund, resulting in a risk-adjusted return that is not meaningfully different than that of the current asset allocation targets

2

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New Mexico Retiree Health Care Authority

Purpose and Methodology

• To assist the Trustees in developing a long-term asset allocation strategy – Which asset classes should be represented in the portfolio – Long-term target percentages to be allocated to each asset class

• Recommend revisions, if any, to change current asset mix targets – Additionally, suggest alternative asset classes/strategies that would help diversify the portfolio

• Assess appropriateness of current and prospective asset mixes

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New Mexico Retiree Health Care Authority

Actual Asset Allocation and Risk Allocation as of June 30, 2013

Sm/Mid Cap 11.4%

Lg Cap 28.5%

Core Bonds 34.6%

Asset Allocation

34.6%

Int'l 14.8%

Emerg 10.8%

65.4%

MBS 1.4%

Asset Risk

Emerg 17.7%

Int'l 21.0%

Sm/Mid Cap 17.0%

Lg Cap 38.8%

Credit 3.2% Treas 1.0%

5.6% 0%

94.4% 10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

• The Fund’s current asset allocation has 65% in equities, which contributes 94% of the Fund’s total risk • Greater diversification could spread risk across different sources and lower overall portfolio volatility, but would decrease return as well – Assuming use of investments offered by State Investment Council 4

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New Mexico Retiree Health Care Authority

Impact of 2013 NEPC Capital Market Assumptions on Long-Term Policy Targets

5-7 Year

30 Year

Current Long-Term Policy Target

Current Long-Term Policy Target

Large Cap Equity

25%

25%

Small/Mid Cap Equity

10%

10%

Int’l Developed Markets Equity

15%

15%

Emerging Markets Equity

15%

15%

Core Fixed Income

35%

35%

Expected Return Expected Volatility Sharpe Ratio

2011

2013

2011

2013

6.6%

6.4%

8.4%

7.5%

12.9%

12.7%

12.9%

12.7%

0.32

0.44

0.30

0.35

Note: NEPC last reviewed asset allocation with the NMRHCA in 2011.

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New Mexico Retiree Health Care Authority

Potential Asset Allocation Targets

Current Actual

Current Target

Increase Fixed Income

Diversify Fixed Income

Decrease Fixed Income, Decrease Int'l Equity, Add GAA

0% 28% 11% 15% 11% 65% 35% 0% 35% 0% 0%

0% 25% 10% 15% 15% 65% 35% 0% 35% 0% 0%

0% 25% 10% 13% 13% 60% 40% 0% 40% 0% 0%

0% 25% 10% 15% 15% 65% 10% 25% 35% 0% 0%

0% 25% 5% 13% 13% 55% 20% 0% 20% 25% 25%

Expected Return (5-7 Yr) Standard Dev of Asset Return Sharpe Ratio

6.2% 12.6% 0.43

6.4% 12.7% 0.44

6.0% 11.8% 0.44

6.7% 13.8% 0.43

6.3% 12.3% 0.45

Probability of 1-Year Return < 0% Probability of 5-Year Return < 0% Sortino Ratio (MAR = 0%)

31.1% 13.5% 0.60

30.8% 13.1% 0.61

30.6% 12.8% 0.61

31.4% 13.9% 0.57

30.5% 12.7% 0.62

Expected Return (30 Yr) Standard Dev of Asset Return Sharpe Ratio

7.4% 12.6% 0.35

7.5% 12.7% 0.35

7.2% 11.8% 0.35

7.6% 13.8% 0.34

7.3% 12.3% 0.35

Cash Large Cap Equities Small/Mid Cap Equities Int'l Equities (Unhedged) Emerging Int'l Equities Total Equity Core Bonds Diversified Fixed Income Total Fixed Income Global Asset Allocation Total Other

• •

Given the limited asset class options available, the current asset allocation targets produce the optimal risk-adjusted return Three additional mixes have been provided for discussion purposes – – –

Increase fixed income by 5%, reduce equities by 5% - can be done using current asset class options Maintain current target allocation, but add diversified fixed income strategies to diversify exposure and increase expected return and risk Reduce equities and fixed income and add allocation to global asset allocation strategies, resulting in a portfolio with increased diversification with a similar expected return at lower risk 6

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New Mexico Retiree Health Care Authority

Risk Allocations Standard Deviation Current

Current

MBS 0.2 Credit Actual 0.4 Treas 0.1 MBS 0.2 Credit Target 0.4 Treas 0.1

MBS 0.2 Increase Fixed Credit 0.5 Income Treas 0.2 MBS 0.1 Diversify Fixed Credit EMD 0.6 0.4 Income Treas HY 0.0 0.6 MBS Decrease Fixed 0.1 Income, Decrease Credit EMD 0.2 Int'l Equity, Add 0.5 GAA Treas HY 0.1

0.0

Lg Cap 4.2

Sm/Mid Cap 1.2

Lg Cap 4.4

Int'l 2.6

11.8%

13.8%

Emerg 3.3

Int'l 2.7

Sm/Mid Cap 1.9

12.7%

Emerg 2.6

Int'l 2.2

Sm/Mid Cap 1.9

Lg Cap 4.2

Emerg 3.2

Int'l 2.7

Sm/Mid Cap 1.9

Lg Cap 4.2

12.6%

Emerg 2.2

Int'l 2.6

Sm/Mid Cap 2.1

Lg Cap 4.9

Emerg 2.9

HF Low Vol 0.1

12.3%

Commod 0.1

0.2

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

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New Mexico Retiree Health Care Authority

Scenario Analysis • NEPC Scenario Analysis allows plan sponsors to test the viability of alternative asset mixes under multiple economic scenarios – Allows better understanding of risk exposures under contrasting inflation and economic growth regimes – Can understand the effect on both assets and liabilities (funded status)

Growth

Expansion Recession

Base Case

Overextension Inflation

Stagflation

Delev-flation

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New Mexico Retiree Health Care Authority

Scenario Analysis â&#x20AC;&#x201C; Value Add vs. Actual Asset Allocation as of June 30, 2013 Base Case

Expansion $20.0

$10.0

$15.0

$8.0

$10.0

$6.0

Millions

Millions

$12.0

$4.0 $2.0 $0.0

$5.0 $0.0 -$5.0

-$10.0

-$2.0

-$15.0

-$4.0 -$6.0 1/1/13

1/1/14

1/1/15

1/1/16

1/1/17

-$20.0

1/1/18

1/1/13

Current Target Increase Fixed Income Diversify Fixed Income Decrease Fixed Income, Decrease Int'l Equity, Add GAA

1/1/15

1/1/16

1/1/17

1/1/18

Overextension

$8.0

$15.0

$6.0

$10.0 $5.0

$4.0

Millions

Millions

Stagflation

$2.0 $0.0

$0.0 -$5.0

-$10.0

-$2.0

-$15.0

1/1/13

1/1/14

1/1/15

1/1/16

1/1/17

1/1/18

1/1/13

Current Target Increase Fixed Income Diversify Fixed Income Decrease Fixed Income, Decrease Int'l Equity, Add GAA

1/1/14

1/1/15

1/1/16

1/1/17

1/1/18

Current Target Increase Fixed Income Diversify Fixed Income Decrease Fixed Income, Decrease Int'l Equity, Add GAA

Recession

Delev-flation

$8.0

$10.0

$6.0

$8.0 $6.0

Millions

$4.0

Millions

1/1/14

Current Target Increase Fixed Income Diversify Fixed Income Decrease Fixed Income, Decrease Int'l Equity, Add GAA

$2.0 $0.0 -$2.0 -$4.0

$4.0 $2.0 $0.0 -$2.0 -$4.0

-$6.0

-$6.0 1/1/13

1/1/14

1/1/15

1/1/16

1/1/17

1/1/18

1/1/13

Current Target Increase Fixed Income Diversify Fixed Income Decrease Fixed Income, Decrease Int'l Equity, Add GAA

1/1/14

1/1/15

1/1/16

1/1/17

1/1/18

Current Target Increase Fixed Income Diversify Fixed Income Decrease Fixed Income, Decrease Int'l Equity, Add GAA

9

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New Mexico Retiree Health Care Authority

Post-Retirement Medical Fund Asset Allocation Comparison

NMRHCA

ASRS

SJP&F

SBCERA

City of Boston

City of Charlotte

Newcastle County

0% 25% 10% 15% 15% 0% 65% 35% 0% 0% 0% 0% 35% 0% 0% 0% 0% 0%

0% 34% 6% 17% 6% 0% 63% 13% 0% 8% 0% 4% 25% 8% 8% 0% 4% 4%

0% 0% 0% 0% 0% 43% 43% 35% 0% 0% 0% 0% 35% 10% 10% 0% 12% 12%

0% 15% 5% 10% 10% 0% 40% 0% 5% 5% 0% 5% 15% 5% 5% 30% 10% 40%

0% 33% 0% 12% 0% 0% 45% 35% 0% 0% 0% 0% 35% 0% 0% 20% 0% 20%

0% 30% 20% 18% 0% 0% 68% 12% 0% 0% 20% 0% 32% 0% 0% 0% 0% 0%

0% 40% 0% 15% 0% 0% 55% 30% 0% 0% 0% 0% 30% 0% 0% 15% 0% 15%

Expected Return (5-7 Year) Standard Dev of Asset Return Sharpe Ratio

6.4% 12.7% 0.44

6.8% 13.1% 0.46

6.0% 9.6% 0.54

6.5% 11.6% 0.50

5.6% 11.1% 0.44

5.7% 13.0% 0.38

5.9% 12.1% 0.42

Probability of 1-Year Return < 0% Probability of 5-Year Return < 0% Sortino Ratio (MAR = 0%)

30.8% 13.1% 0.61

30.2% 12.4% 0.63

26.8% 8.4% 0.78

28.8% 10.5% 0.70

30.7% 13.0% 0.61

33.0% 16.3% 0.53

31.4% 13.9% 0.58

Expected Return (30-Year) Standard Dev of Asset Return Sharpe Ratio

7.5% 12.7% 0.35

7.7% 13.1% 0.36

7.0% 9.6% 0.41

7.3% 11.6% 0.37

6.8% 11.1% 0.34

7.0% 13.0% 0.31

7.0% 12.1% 0.33

Cash Large Cap Equities Small/Mid Cap Equities Int'l Equities (Unhedged) Emerging Int'l Equities Global Equity Total Equity Core Bonds IG Corp Credit High-Yield Bonds Global Bonds (Unhedged) EMD (Local Currency) Total Fixed Income Real Estate (Core) Total Alternatives Global Asset Allocation Commodities Total Other

10

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New Mexico Retiree Health Care Authority

Post-Retirement Medical Fund Risk Allocation Comparison Standard Deviation NMRHCA

12.7%

ASRS

13.1%

SJP&F

9.6%

SBCERA

11.6%

City of Boston

11.1%

City of Charlotte

13.0%

Newcastle County

12.1% 0.0

2.0

4.0

6.0

8.0

10.0

12.0

Cash

Treas

Credit

MBS

HY

Glob Bonds

EMD

Lg Cap

Sm/Mid Cap

Int'l

Emerg

RE

HF Low Vol

Commod

14.0

11

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New Mexico Retiree Health Care Authority

Wrap Up • Given current asset class options available through the State Investment Council, there are limited options available from an asset allocation standpoint – Three additional mixed modeled for discussion purposes

• Current asset allocation targets are very close to the optimal portfolio – Changes using asset class options offered by the State Investment Council do not meaningfully change the expected risk-adjusted performance of the Fund

• Opportunities exist to diversify the portfolio through the use of institutional mutual funds – Expanding the opportunity set beyond the options offered by the State Investment Council provides an opportunity to increase the expected return of the portfolio with only slightly higher levels of volatility – Use of Global Asset Allocation mandates offers the Fund an opportunity to invest in asset classes that are not currently offered by the State Investment Council, including emerging market debt and commodities

12

32


2013 Asset Class Assumptions

33


New Mexico Retiree Health Care Authority

What We Said Last Year*

Recognize that current global deleveraging is a multi-year event

If appropriate, increase portfolio risk – and expected return

Continue to increase emerging markets exposure

Use active strategies to enhance returns

“Buy Low” in segments of illiquid and less liquid assets

*Major bullets from NEPC 2012 General Actions for Clients

14

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New Mexico Retiree Health Care Authority

2012 Asset Class Performance

Source: Bloomberg as of 12/31/2012, *Hedge Funds as of 11/30/2012

15

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New Mexico Retiree Health Care Authority

U.S. Treasury Yield Curves

3.5%

U.S. Treasury Yield Curve

3.0%

2.5%

2.0% 12/30/2011

1.5%

6/29/2012 12/31/2012

1.0%

0.5%

0.0% 0

5

10

15

20

25

30

Years to Maturity  Source: U.S. Treasury

16

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New Mexico Retiree Health Care Authority

Assumption Setting in 2013 – Background • After broad rally in 2012, opportunistic trades are less compelling – Most markets have recovered from pull back in 2011 – Lack of good value across markets presents opportunity to revisit investment objectives and confirm long-term strategic allocations

• Forward-looking expectations are lower after 2012 market rally – Performance in credit and U.S. equity markets lowers 5-7 year expectations across these asset categories – Yields remain low as do sovereign bond return expectations – Non-U.S. equities have high risk but also higher return expectations

• 30-year returns also lower for credit markets – Broad based credit spread compression and low sovereign yields reduce long-term expectations for credit – Equity asset classes less affected by rally and supported by higher inflation expectation over 30 years

• Macroeconomic themes continue to weigh on markets

17

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New Mexico Retiree Health Care Authority

NEPC 2013 Capital Market Observations • Strong 2012 market returns lead to subdued expectations – Without a fundamental shift in underlying economic drivers, favorable recent performance “robs from the future” and lowers 5-7 year outlook across markets – Markets have rallied based on policy announcements more than economic results – Policy accommodation could provide further tailwind to markets in near-term •

Valuation expansion is unlikely to be a large driver on its own as few markets look cheap

• Potential for macro shock is elevated in the near term – Stimulative monetary policy in developed world creates a deceptively calm backdrop – U.S. fiscal cliff, European misstep, China slow down, or Middle East conflict could send shocks across markets

• Global growth outlook remains constrained as developed world lacks political will to truly address debt burden – Pressure for fiscal tightening (European austerity, U.S. fiscal cliff) could neutralize benefits of monetary stimulus – Structural debt issues plus ancillary effects of money printing will extend deleveraging

• Seeds of inflation planted but not yet watered – Money printing has led to asset price inflation instead of inflation in the real economy – Monetary easing creates long-term inflation threat, but muted credit growth limits near-term inflation pressure

18

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New Mexico Retiree Health Care Authority

NEPC 2013 General Actions for Clients • Position for a continuation of macro-driven themes – Examine existing managers’ capabilities •

Add to global asset allocation and top-down active strategies

– Use flexible active managers to implement allocations to policy-driven markets • •

Non-U.S. equities have attractive valuations, but return premium reflects downside risk Credit markets have recovered but liquidity has fallen, making market dynamics less stable

• Use Risk Parity as a stable foundation of a diversified program – Reconsider what constitutes a “core” investment in this environment •

No longer just stocks and bonds

– Risk Parity can be used as a liquid placeholder while tactical opportunities are limited

• Continue building allocations in emerging markets and real assets – Developing countries consistently demonstrate superior fundamentals to G7 markets – Most investors remain vulnerable to higher inflation, with limited real assets exposure

• Allocate to less liquid strategies with patience – Distressed assets thesis is compelling but current opportunities are limited – Strategies providing capital to markets that have traditionally relied on banks are appealing with high income and relatively shorter time horizons – Significant system stress remains in real estate market but conditions have improved

19

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New Mexico Retiree Health Care Authority

Looking Forward –Focused Actions for Public Fund Clients

• Risk Management – Portfolio structure considerations •

Continue building broad diversification, focusing on incremental benefits of adding to or taking away from asset class exposures –

Avoid stretching for higher returns through increased, unrewarded risk

Be willing to change –

What has worked in the past may not be the answer for the future

– Prepare for ongoing impact of macro events • • •

Revisit existing manager guidelines for flexibility Add/Increase global asset allocation exposure to allow for added tactical component Be prepared to act if opportunities do present themselves

• Plan Structure and Return Objectives – Maximize returns with appropriate allocations to riskier assets – Decreased return expectations for domestic equities point to non-U.S. and emerging markets • •

Non-U.S. equity valuations are attractive relative to history but return premium reflects downside risks Emerging markets remain a critical strategic exposure across equity and debt investments

– Review fixed income positioning • • •

Interest rate risk at all time highs after 30 year rate decline Explore dynamic fixed income structures with significantly reduced manager constraints, different benchmarks, and ability to address duration risk Credit is less attractive coming out of 2012, but still plays a strategic role in long-term asset allocation 20

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New Mexico Retiree Health Care Authority

Looking Forward –Focused Actions for Public Fund Clients

• Plan Structure and Return Objectives (continued) – Build inflation hedging exposure before it is needed •

Risk of inflation is still a concern – –

Investors have generally been underweight the few asset classes that can perform well in high inflation environments Less liquid inflation-sensitive exposures can provide inflation protection with more attractive return expectations

– Selectively build out illiquid investments • • •

Illiquid (private) investments still offer the best return opportunities Liquidity analysis can help determine prudent allocation to illiquid investments Diversify –

Primary, Secondary, Strategy Type, Vintage Year

Where private equity is well established or already committed, consider private debt

• Plan to proactively communicate with non-trustee stakeholders on the potential impact of a subdued return environment – Beneficiaries – Policy Makers – Media

21

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New Mexico Retiree Health Care Authority

Development of Asset Class Assumptions • Relies on a combination of historical data and forward looking analysis – Expected returns based on current market pricing and forward looking estimates – Volatility based on history, while recognizing current uncertainty – Correlations based on a mix of history and current trend

• Historical data is used to frame current market environment as well as to compare to similar historical periods – Historical index returns, volatility, correlations, valuations, and yields

• Forward-looking analysis is based on current market pricing and a building blocks approach – Return equals yield + changes in price (valuation, defaults, etc.) – Use of key economic observations (inflation, real growth, dividends, etc.) – Structural themes (supply and demand imbalances, capital flows, etc.)

• Assumptions prepared by Asset Allocation Committee – Asset Allocation team plus members of various consulting practice groups meet throughout Q4 to develop themes and assumptions – Specialists from public markets, hedge funds and private markets provide insight on market themes

• Assumptions and Actions reviewed and approved by Partners Research Committee

22

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New Mexico Retiree Health Care Authority

Themes for 2013 Asset Class Assumptions • 5-7 year return expectations are broadly lower relative to prior year – Sustained low yields keep bond market expectations historically low – Rally in credit markets leads to meaningfully reduction in expectations for credit asset classes – Risky asset fundamentals are similar, but strong 2012 performance limits further growth potential •

US equity outperformance leads to lower expectations, non-US markets remain unchanged

– Liquid inflation sensitive asset classes have modest improvements in return and Sharpe ratio but forecasts are still low – Hedge fund assumptions reduced based on lower expected cash returns and challenging alpha environment

• Volatility expectations reduced modestly in bond markets and certain equity markets – Aligning volatility forecasts with evolution of market conditions • •

EM volatility falling modestly as growth continues MBS markets reflecting government support

• 30-year returns have similar themes to 5-7 year forecasts – Reflecting pressure for higher long-term inflation through 25 basis point increase in long-term inflation forecast (3% for 5-7 years and 3.25% for 30 years) – Broad based credit spread compression and low sovereign yields reduce long-term expectations for credit – Limited changes to equity forecasts – Remain higher than 5-7 year expectations

23

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New Mexico Retiree Health Care Authority

Inflation • Inflation is an important component of our asset allocation assumptions – An essential building block for projecting returns in stocks, bonds, and commodities

• There are several measures of inflation used to inform our view (all of which have issues) – Consumer Price Index – Producer Price Index – TIPS break-even inflation

• We are projecting 3% inflation over the next 5-7 years – This assumption represents the geometric mean of a time series – Inflation could take several different paths over 5-7 years to arrive at a 3% mean – Given the wide-ranging potential inflation paths (US 1970s or Japan 1990s), we continue to use an elevated estimate of inflation volatility

• While muted credit growth leaves inflation expectations unchanged in the near term, pressures for higher long-term inflation continue to build – Monetary stimulation continued in 2012, several planned for ongoing implementation without an end date (US QE3, ECB bond purchasing)

• Given increasing long-term inflation pressures, a modestly higher inflation assumption (3.25%) is utilized for determining 30 year return expectations

24

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New Mexico Retiree Health Care Authority

Inflation (cont.) • For asset class assumptions, we use a broader but less measurable concept of inflation – Thought of as the inflation that flows through to ending corporate earnings for equities, required market yields on fixed income, or spot price returns on commodities

• NEPC thinks of inflation on a global basis – Considered from an investment perspective •

That which passes through to the end investor across global investments

• The inflation measure represents an average of inflation experience across all assets and all countries, including a meaningful weight to emerging markets • Institutional investment pools will experience asset inflation globally, encompassing both developed and emerging countries. – Can be different from inflation experienced on local/home country liabilities or spending needs

25

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New Mexico Retiree Health Care Authority

Inflation Has Stayed Low

Inflation and Capacity Utilization

90

14

88

12

86

Most recent measure: 2.2%

10

84

8

82

6

80

4

78

2

76

0

74

‐2

CPI

Capacity Utilization

12‐mo % Change (CPI)

16

72

Cap‐U

‐4

70 1970 1972 1974 1977 1979 1981 1984 1986 1988 1991 1993 1995 1998 2000 2002 2005 2007 2009 2012

Source: St. Louis Fed as of 11/30

26

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New Mexico Retiree Health Care Authority

Many Economic Factors Driving Inflation Remain Subdued

Source: Bureau of Economic Analysis as of 9/30

Source: St. Louis Fed as of 9/30

Source: Bloomberg as of 11/30

Source: Bloomberg as of 11/30

27

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New Mexico Retiree Health Care Authority

Long-Term Inflation Pressures Continue to Build as Central Banks Stimulate

Source: Bloomberg

• Major central bank balance sheets have grown by a 4.8x factor since February 2002 (when PBoC data begins) – While not an apples to apples comparison, US Consumer prices have increased by 1.3x factor over this same time

• Much of the increases come from the end of 2007 to the present, with very muted inflation – Cumulative CPI increases are 1.1x in this period

28

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New Mexico Retiree Health Care Authority

2013 5-to-7 Year Return Forecasts

Geometric Expected Return Asset Class Cash Treasuries IG Corp Credit MBS Core Bonds* TIPS High-Yield Bonds Bank Loans Global Bonds (Unhedged) Global Bonds (Hedged) EMD External EMD Local Currency Large Cap Equities Small/Mid Cap Equities Int'l Equities (Unhedged) Int'l Equities (Hedged) Emerging Int'l Equities Private Equity Private Debt Private Real Assets Real Estate Commodities Hedge Funds Low Vol Hedge Funds Mod Vol

2012 1.25% 1.50% 4.50% 3.25% 2.88% 1.75% 7.00% 5.00% 1.25% 1.49% 5.75% 6.75% 7.25% 7.50% 7.75% 8.00% 9.75% 9.75% 9.50% N/A 6.00% 4.75% 5.50% 7.25%

2013 0.75% 1.00% 3.00% 2.50% 2.04% 1.50% 5.00% 5.00% 0.75% 0.93% 4.00% 5.00% 6.75% 7.00% 7.75% 8.00% 9.75% 9.00% 8.50% 8.00% 6.00% 5.00% 4.75% 6.50%

2013-2012 -0.50% -0.50% -1.50% -0.75% -0.84% -0.25% -2.00% -0.50% -0.56% -1.75% -1.75% -0.50% -0.50%

-0.75% -1.00%

0.25% -0.75% -0.75%

* Core Bonds assumption based on market weighted blend of components of Aggregate Index (Treasuries, IG Corp Credit, and MBS). 29

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New Mexico Retiree Health Care Authority

2013 5-to-7 Year Volatility Forecasts

Volatility Asset Class Cash Treasuries IG Corp Credit MBS Core Bonds* TIPS High-Yield Bonds Bank Loans Global Bonds (Unhedged) Global Bonds (Hedged) EMD External EMD Local Currency Large Cap Equities Small/Mid Cap Equities Int'l Equities (Unhedged) Int'l Equities (Hedged) Emerging Int'l Equities Private Equity Private Debt Private Real Assets Real Estate Commodities Hedge Funds Low Vol Hedge Funds Mod Vol

2012 1.50% 6.00% 7.00% 9.00% 7.00% 7.50% 13.00% 6.50% 10.00% 5.50% 13.00% 15.00% 18.00% 22.00% 21.00% 19.00% 27.00% 28.00% 19.00% N/A 15.00% 18.00% 7.00% 12.00%

2013 1.00% 6.00% 7.50% 7.00% 6.31% 7.50% 13.00% 6.50% 9.00% 5.00% 12.00% 14.00% 18.00% 21.00% 21.00% 19.00% 26.00% 27.00% 19.00% 24.00% 17.00% 18.00% 7.00% 12.00%

2013-2012 -0.50% 0.50% -2.00% -0.69%

-1.00% -0.50% -1.00% -1.00% -1.00%

-1.00% -1.00%

2.00%

* Core Bonds assumption based on market weighted blend of components of Aggregate Index (Treasuries, IG Corp Credit, and MBS). 30

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New Mexico Retiree Health Care Authority

2013 5-to-7 Correlation Forecasts Correlations Asset Class Cash

Cash

Treas

Credit

MBS

TIPS

HY

Glob (U)

Glob (H)

EMD (Ext)

1.00

EMD (Loc)

Lg Cap

Smid Cap

1.00

Int'l Eq Int'l Eq Emerg (U) (H) Eq Priv Eq

Priv Debt

Pr Rl Real Assets Estate

Comm

HF Low HF Mod Vol Vol

1.00

Treas

0.20

1.00

IG Credit MBS

0.10 0.25

0.75 0.90

1.00 0.80

1.00

TIPS High-Yield

0.00 -0.05

0.75 0.15

0.60 0.60

0.70 0.30

1.00 0.20

1.00

Glob Bonds (U)

0.10

0.55

0.50

0.45

0.40

0.10

1.00

Glob Bonds (H) EMD (Ext)

0.10 0.05

0.90 0.15

0.65 0.65

0.70 0.25

0.65 0.30

0.10 0.65

0.60 0.15

1.00 0.10

EMD (Loc)

0.05

0.15

0.65

0.25

0.25

0.70

0.25

0.05

0.80

1.00

Lg Cap Eq Sm/Mid Cap Eq

0.05 -0.05

0.05 -0.05

0.55 0.35

0.15 0.05

0.10 0.05

0.70 0.70

0.10 0.00

0.05 -0.05

0.60 0.55

0.65 0.60

1.00 0.90

Int'l Eq (U)

-0.10

0.00

0.30

0.05

0.05

0.50

0.40

0.25

0.60

0.65

0.75

0.65

1.00

Int'l Eq (H) Emerg Eq

-0.10 -0.10

0.00 -0.10

0.30 0.25

0.05 -0.10

0.05 0.05

0.50 0.55

0.30 0.05

0.40 0.05

0.60 0.75

0.65 0.80

0.75 0.65

0.65 0.70

0.90 0.70

1.00 0.70

1.00

Private Eq

-0.10

-0.05

0.25

0.05

0.00

0.60

-0.10

-0.10

0.35

0.40

0.75

0.80

0.60

0.60

0.40

1.00

Private Debt Private Real Assets

0.00 0.15

-0.35 -0.20

0.15 0.05

-0.10 -0.10

0.05 0.20

0.65 0.40

-0.10 -0.05

-0.10 -0.05

0.55 0.40

0.60 0.40

0.55 0.50

0.65 0.55

0.55 0.50

0.55 0.50

0.60 0.50

0.50 0.65

1.00 0.55

1.00

Real Estate

0.40

-0.05

-0.05

-0.05

0.00

-0.10

-0.05

-0.05

-0.10

-0.10

0.15

0.05

0.10

0.10

-0.05

0.15

0.00

0.35

1.00

Commodities Hedge Funds Low Vol Hedge Funds Mod Vol

0.10 0.35 0.05

-0.10 -0.05 0.00

0.00 0.25 0.35

-0.10 0.00 0.10

0.30 0.35 0.20

0.10 0.60 0.65

0.10 0.00 0.00

0.10 -0.10 -0.10

0.25 0.50 0.50

0.35 0.50 0.50

0.20 0.55 0.70

0.20 0.55 0.75

0.25 0.60 0.65

0.25 0.60 0.65

0.30 0.60 0.65

0.15 0.40 0.50

0.20 0.50 0.70

0.35 0.45 0.50

0.10 0.10 0.05

1.00 0.30 0.35

1.00 0.90

* Core Bonds assumption based on market weighted blend of components of Aggregate Index (Treasuries, IG Corp Credit, and MBS). 31

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New Mexico Retiree Health Care Authority

Relative Asset Class Attractiveness

32

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New Mexico Retiree Health Care Authority

Starting Yields Signal Bond Returns

Starting yield is the key building block for future performance –

Yields have had a 30-year secular decline –

Correlation to forward return of 0.88

This has been a tailwind to performance

Low current yields will challenge forward looking returns –

10 year Treasury Yield as of January 22, 2013 was 1.86%

Source: St. Louis Fed, Ibbotson, Research Affiliates 33

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New Mexico Retiree Health Care Authority

Forecasting Bond Returns

Source: Putnam 34

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New Mexico Retiree Health Care Authority

Major Asset Class Review (Geometric)

Asset Class Cash 2 Core Bonds Large Cap 3 International

Historical Long Term Geometric 1 Average 3.5% 8.2% 9.8% 9.0%

US Equity Prem ium Ov er Core Bonds

5-to-7 Year NEPC Assumptions

2006 3.75% 5.00% 8.50% 9.00% 3.50%

2007 4.00% 5.00% 8.50% 8.75% 3.50%

2008 4.00% 5.00% 8.50% 9.00% 3.50%

2009 3.00% 5.50% 9.25% 9.75% 3.75%

2010 2.00% 3.75% 7.75% 8.00% 4.00%

2011 2.00% 3.00% 7.00% 7.00% 4.00%

2012 1.25% 2.88% 7.25% 7.75% 4.37%

2013 0.75% 2.03% 6.75% 7.75% 4.72%

Historical Equity Premium Over Core Bonds

5%

4%

3%

2%

1%

0% 2006

1. 2. 3.

2007

2008

2009

2010

2011

2012

2013

Reflects average since inception (1926 except as noted below) of the respective index through 11/30/2012 LB/BC Aggregate reflects average compound annual return since 1976 International reflects average annual return since 1970 35

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New Mexico Retiree Health Care Authority

Comparison of International Equity and U.S. Large Cap Equity Expectations

Expectations for Developed International Equities are relatively high compared to recent history

Non-U.S. markets have lagged the S&P 500 for several years and continued to lag in 2012 –

5 year trailing performance as of December 31, 2012 • • •

S&P 500: 1.7% MSCI EAFE: -3.7% MSCI EM: -0.9%

Valuations are fairly attractive and dividends are high

Meaningful downside risks remain despite attractive valuations given exposure to any disappoint in Europe or long-term growth challenges in Japan

While we expect investors to be compensated over 5-7 years with a higher relative return for holding non-U.S. equities, it is appropriate to use active management to attempt to minimize exposure to downside risks 36

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New Mexico Retiree Health Care Authority

2013 30-Year Return Forecasts

Geometric Expected Return Asset Class Cash Treasuries Credit MBS Core Bonds* TIPS High-Yield Bonds Bank Loans Global Bonds (Unhedged) Global Bonds (Hedged) EMD External EMD Local Currency Large Cap Equities Small/Mid Cap Equities Int'l Equities (Unhedged) Int'l Equities (Hedged) Emerging Int'l Equities Private Equity Private Debt Real Estate Commodities Hedge Funds Low Vol Hedge Funds Mod Vol

2012 3.25% 3.50% 5.00% 5.25% 4.50% 3.75% 6.25% 6.00% 3.25% 3.48% 6.25% 7.00% 8.00% 8.50% 8.25% 8.50% 9.50% 10.00% 8.00% 6.00% 5.25% 6.25% 8.00%

2013 3.00% 3.00% 4.25% 4.50% 3.84% 3.25% 5.25% 5.50% 2.50% 2.67% 6.00% 6.25% 8.00% 8.25% 8.25% 8.50% 9.50% 10.00% 8.00% 6.00% 5.50% 5.75% 7.50%

2013-2012 -0.25% -0.50% -0.75% -0.75% -0.66% -0.50% -1.00% -0.50% -0.75% -0.81% -0.25% -0.75% -0.25%

0.25% -0.50% -0.50%

* Core Bonds assumption based on market weighted blend of components of Aggregate Index (Treasuries, IG Corp Credit, and MBS). 37

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New Mexico Retiree Health Care Authority

Wrap Up • Strong rallies across markets should not be confused with structural debt problems being solved – Major global economic risks exist in the near-term – Many years of restructuring and deleveraging remain ahead – Likely to lead to continued low growth across developed countries

• Without change to underlying fundamentals, high recent returns “rob from the future” • With elevated uncertainty and limited high return opportunities, a balanced, risk-aware approach to asset allocation remains paramount • Continue building allocations in emerging markets and real assets – Developing countries consistently demonstrate superior fundamentals to G7 markets – Most investors remain vulnerable to higher inflation, with limited real assets exposure

• Allocate to less liquid strategies with patience – Distressed assets thesis is compelling but current opportunities are limited – Strategies providing capital to markets that have traditionally relied on banks are appealing with high income and relatively shorter time horizons – Significant system stress remains in real estate market but conditions have improved

• Be prepared to act should attractive opportunities arise from market volatility

38

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New Mexico Retiree Health Care Authority

Information Disclaimer • Past performance is no guarantee of future results. • Information on market indices was provided by sources external to NEPC. While NEPC has exercised reasonable professional care in preparing this report, we cannot guarantee the accuracy of all source information contained within. • The goal of this report is to provide a basis for substantiating asset allocation recommendations. • All investments carry some level of risk. Diversification and other asset allocation techniques do not ensure profit or protect against losses. • This report is provided as a management aid for the client’s internal use only. This report may contain confidential or proprietary information and may not be copied or redistributed.

39 39

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New Mexico State Investment Council Investment Performance Analysis

Quarter Ended June 30, 2013

1211 SW 5th Ave, Suite 900 Portland, OR 97204 503.221.4200 www.rvkuhns.com

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Retiree Health Care Authority

61 Page 1


New Mexico State Investment Council Retiree Health Care Authority As of June 30, 2013

Asset Allocation vs. Target Allocation Market Value ($) 77,669,451 31,061,070 40,215,988 29,344,975 94,270,760 272,562,244

Large Cap US Equity Small/Mid Cap US Equity Non-US Developed Markets Non-US Emerging Markets US Core Bonds Total Fund

Allocation (%) 28.50 11.40 14.75 10.77 34.59 100.00

Target (%) 25.00 10.00 15.00 15.00 35.00 100.00

Comparative Performance

QTD Retiree Health Care Authority Total Fund Total Fund Benchmark (Retiree Health Care Authority)

-0.83 -1.29

Comparative Performance 1 3 CYTD Year Years 3.78 11.86 9.81 3.09 10.54 10.62

5 Years 3.99 4.44

10 Years 7.40 7.25

2012

2011

2010

13.66 13.02

-3.74 -0.89

13.56 12.43

Allocations shown may not sum up to 100% exactly due to rounding. Performance shown is gross of fees.

62 Page 2


New Mexico State Investment Council Asset Allocation & Performance - Composites & Managers As of June 30, 2013 Allocation Market Value ($)

%

QTD

CYTD FYTD

1 Year

3 Years

Performance (%) 5 10 2012 Years Years

2011

2010

Since Incep.

Inception Date

US Equity NMSIC US Equity Composite R 3000 Index

6,310,355,992

36.92

3.08 2.69

13.99 14.06

21.89 21.47

21.89 21.47

16.81 18.63

6.44 7.25

8.43 7.81

16.02 16.42

-4.34 1.03

19.00 16.93

4.32 3.90

05/01/1999

NMSIC US Large Cap Equity Composite R 1000 Index IM U.S. Large Cap Equity (SA+CF) Median

4,749,090,966

27.78

2.71 2.65 2.86

13.14 13.91 13.84

20.02 21.24 21.06

20.02 21.24 21.06

16.27 18.63 18.30

6.70 7.12 7.23

8.17 7.67 8.14

16.14 16.43 15.92

-4.63 1.50 1.14

17.00 16.10 15.12

3.59 3.63 4.95

05/01/1999

NMSIC US Large Cap Active Pool R 1000 Index IM U.S. Large Cap Equity (SA+CF) Median Wellington Management Company R 1000 Value Index IM U.S. Large Cap Value Equity (SA+CF) Median Brown Brothers Harriman R 1000 Index IM U.S. Large Cap Core Equity (SA+CF) Median SIC Managed Large Cap Active Large Cap Custom Index IM U.S. Large Cap Core Equity (SA+CF) Median J.P. Morgan Asset Management T. Rowe Price R 1000 Growth Index IM U.S. Large Cap Growth Equity (SA+CF) Median

2,065,888,669

12.09

3.83

528,804,780

3.09

127

0.00

619,597,747 264,261,974

3.62 1.55

12.42 13.91 13.84 14.05 15.90 15.76 14.30 13.91 13.72 8.17 13.91 13.72 9.09 13.64 11.80 11.54

18.87 21.24 21.06 21.62 25.32 24.86 24.20 21.24 20.88 12.62 21.24 20.88 11.77 20.37 17.06 17.64

18.87 21.24 21.06 21.62 25.32 24.86 24.20 21.24 20.88 12.62 21.24 20.88 11.77 20.37 17.06 17.64

14.96 18.63 18.30 N/A 18.51 18.28 N/A 18.63 18.38 15.77 18.66 18.38 N/A N/A 18.68 17.70

5.94 7.12 7.23 N/A 6.67 7.45 N/A 7.12 7.15 6.03 7.13 7.15 N/A N/A 7.47 6.65

7.79 7.67 8.14 N/A 7.79 8.82 N/A 7.67 8.19 7.79 7.35 8.19 N/A N/A 7.40 7.85

15.45 16.43 15.92 N/A 17.50 15.75 N/A 16.43 15.72 13.76 16.54 15.72 N/A N/A 15.26 15.31

-6.46 1.50 1.14 N/A 0.39 0.47 N/A 1.50 1.87 -0.02 2.11 1.87 N/A N/A 2.64 -0.06

16.12 16.10 15.12 N/A 15.51 14.46 N/A 16.10 14.85 16.15 15.06 14.85 N/A N/A 16.71 16.20

3.11 3.63 4.95 24.85 28.79 27.41 24.20 21.24 20.88 9.96 9.77 10.28 12.53 21.83 18.55 19.16

05/01/1999

655,274,412

2.74 2.65 2.86 2.87 3.20 3.83 2.65 2.65 2.75 0.00 2.65 2.75 2.30 4.68 2.06 2.07

NMSIC US Large Cap Index Pool NT Russell 1000 Index Fund R 1000 Index IM U.S. Large Cap Core Equity (SA+CF) Median

2,683,202,297 2,682,844,376

15.70 15.69

2.68 2.68 2.65 2.75

13.92 13.92 13.91 13.72

21.22 21.21 21.24 20.88

21.22 21.21 21.24 20.88

18.33 N/A 18.63 18.38

7.88 N/A 7.12 7.15

8.51 N/A 7.67 8.19

16.09 16.31 16.43 15.72

1.18 N/A 1.50 1.87

17.30 N/A 16.10 14.85

4.24 14.18 14.37 14.13

05/01/1999 08/01/2011

NMSIC US Large Cap Enhanced Index Pool PanAgora Asset Management R 1000 Index IM U.S. Large Cap Core Equity (SA+CF) Median

499,326,549 499,326,549

2.92 2.92

1.54 1.54 2.65 2.75

13.42 13.42 13.91 13.72

22.46 23.00 21.24 20.88

22.46 23.00 21.24 20.88

N/A N/A 18.63 18.38

N/A N/A 7.12 7.15

N/A N/A 7.67 8.19

N/A N/A 16.43 15.72

N/A N/A 1.50 1.87

N/A N/A 16.10 14.85

23.52 24.02 23.68 23.27

06/01/2012 06/01/2012

Performance shown is gross of fees, except for Credit & Structured Finance, Absolute Return, Real Estate, Real Asset, and Private Equity investments, which are shown net of fees. Performance is annualized for periods greater than one year. RVK endorses GIPS and calculates performance for composites and investment managers using different methodologies. For additional information, please see the Glossary. Fiscal year ends June 30.

Page 3

06/01/2012

07/01/2012

07/01/1988

06/01/2012 06/01/2012

63


New Mexico State Investment Council Asset Allocation & Performance - Composites & Managers As of June 30, 2013 Allocation Market Value ($) NMSIC US Small/Mid Cap Pool R 2500 Index IM U.S. SMID Cap Equity (SA+CF) Median Seizert Capital Partners R Mid Cap Index IM U.S. Mid Cap Equity (SA+CF) Median Donald Smith & Company R 2000 Value Index IM U.S. Small Cap Value Equity (SA+CF) Median Cortina Asset Management R 2000 Growth Index IM U.S. Small Cap Growth Equity (SA+CF) Median NMSIC US Small/Mid Cap Index Pool NT Extended Equity Market Index Fund DJ US Cmpl TSM Index IM U.S. SMID Cap Equity (SA+CF) Median NMSIC US Small/Mid Cap Enhanced Index Pool BlackRock Alpha Tilts R 2000 Index IM U.S. SMID Cap Equity (SA+CF) Median

3 Years

Performance (%) 5 10 2012 Years Years

%

QTD

CYTD FYTD

1 Year

2011

2010

Since Incep.

Inception Date

730,336,913

4.27

227,532,895

1.33

218,088,439

1.28

285,951,448

1.67

6.71 2.27 2.42 7.96 2.21 2.26 1.44 2.47 3.21 10.01 3.74 4.60

19.36 15.42 15.50 22.61 15.45 14.67 10.49 14.39 16.18 24.58 17.44 18.32

31.08 25.61 25.89 45.75 25.41 22.77 29.45 24.77 27.46 24.85 23.67 25.51

31.08 25.61 25.89 45.75 25.41 22.77 29.45 24.77 27.46 24.85 23.67 25.51

19.12 19.57 19.49 N/A 19.53 19.16 N/A 17.33 19.48 N/A 19.96 21.28

6.24 9.21 9.64 N/A 8.28 8.11 N/A 8.59 10.96 N/A 8.89 9.90

9.93 10.34 11.22 N/A 10.65 10.74 N/A 9.30 11.69 N/A 9.62 10.80

13.70 17.88 16.23 22.61 17.28 16.18 19.90 18.05 17.59 7.72 14.59 14.63

-2.65 -2.51 -1.54 N/A -1.55 -1.50 N/A -5.50 -3.26 N/A -2.91 -1.82

25.04 26.71 26.36 N/A 25.47 24.66 N/A 24.50 27.77 N/A 29.09 29.12

8.09 9.43 11.23 31.23 22.39 20.46 20.63 22.17 23.40 21.67 21.89 22.92

11/01/1998

60,060,015 60,060,015

0.35 0.35

2.33 2.33 2.25 2.42

15.69 15.69 15.61 15.50

N/A N/A 25.04 25.89

N/A N/A 25.04 25.89

N/A N/A 19.43 19.49

N/A N/A 8.94 9.64

N/A N/A 10.57 11.22

N/A N/A 17.89 16.23

N/A N/A -3.76 -1.54

N/A N/A 28.62 26.36

15.69 15.69 15.61 15.50

01/01/2013 01/01/2013

271,541,550 271,509,636

1.59 1.59

2.72 2.72 3.08 2.42

15.84 15.86 15.86 15.50

N/A 27.65 24.20 25.89

N/A 27.65 24.20 25.89

N/A N/A 18.67 19.49

N/A N/A 8.77 9.64

N/A N/A 9.53 11.22

N/A N/A 16.34 16.23

N/A N/A -4.18 -1.54

N/A N/A 26.86 26.36

19.70 20.70 17.65 18.17

12/01/2012 02/01/2012

Performance shown is gross of fees, except for Credit & Structured Finance, Absolute Return, Real Estate, Real Asset, and Private Equity investments, which are shown net of fees. Performance is annualized for periods greater than one year. RVK endorses GIPS and calculates performance for composites and investment managers using different methodologies. For additional information, please see the Glossary. Fiscal year ends June 30.

Page 4

01/01/2012

01/01/2012

01/01/2012

64


New Mexico State Investment Council Asset Allocation & Performance - Composites & Managers As of June 30, 2013 Allocation Market Value ($)

%

QTD

CYTD FYTD

1 Year

3 Years

Performance (%) 5 10 2012 Years Years

2011

2010

Since Incep.

Inception Date

Non-US Equity NMSIC Non-US Equity Composite MSCI ACW Ex US Index (Net) Non-US Equity Custom Index

2,365,653,545

13.84

-3.82 -3.11 -3.79

-1.48 -0.04 -1.53

11.27 13.63 12.10

11.27 13.63 12.10

7.40 7.99 7.76

-0.82 -0.80 -0.13

9.34 8.62 10.01

16.27 16.83 17.82

-14.99 -13.71 -14.54

12.13 11.15 13.84

5.55 N/A N/A

05/01/1999

NMSIC Non-US Developed Markets Equity Pool Alliance Bernstein MSCI EAFE Int'l Index MSCI EAFE Index (Net) IM Int'l Large Cap Core Equity (SA+CF)

1,472,986,841 1,472,590,805

8.62 8.61

-0.89 -0.90 -0.98 -0.17

4.24 4.24 4.10 4.71

18.84 18.70 18.62 19.05

18.84 18.70 18.62 19.05

10.83 10.57 10.04 11.71

-0.28 -0.36 -0.63 0.50

6.99 6.96 7.67 9.17

17.61 17.53 17.32 19.08

-11.38 -11.44 -12.14 -11.97

9.74 8.42 7.75 11.12

3.74 5.38 3.66 5.79

05/01/1999 06/01/1998

NMSIC Non-US Emerging Markets Equity Pool Alliance Bernstein Emerging Markets Index MSCI Emg Mkts Index (Net) IM Emerging Markets Equity (SA+CF) Median

892,666,704 892,981,778

5.22 5.22

-8.29 -8.29 -8.08 -7.60

-9.65 -9.65 -9.57 -7.25

0.74 N/A 2.87 5.78

0.74 N/A 2.87 5.78

1.15 N/A 3.38 5.07

-2.63 N/A -0.43 0.24

14.56 N/A 13.66 14.53

14.10 N/A 18.23 20.06

-21.95 N/A -18.42 -18.46

15.17 N/A 18.88 21.47

9.68 -3.96 -3.94 -1.08

05/01/1999 11/01/2012

NMSIC Fixed Income Composite Fixed Income Custom Index

3,890,692,722

22.76

-1.96 -1.84

-0.62 -1.81

5.84 0.03

5.84 0.03

8.12 2.88

6.57 3.52

4.08 1.49

12.78 0.69

6.65 6.25

17.12 10.89

5.43 3.36

05/01/1999

NMSIC US Core Bonds Pool Barclays US Agg Bond Index PIMCO Barclays US Universal Prudential Barclays US Universal Loomis Sayles Barclays US Universal Barclays US Unv Bond Index IM U.S. Broad Market Core + FI (SA+CF)

3,196,397,599

18.70 9.34 4.71 4.66

-2.32 -2.44 -2.06 -2.11 -3.05 -2.29 -2.09

2.95 -0.69 3.09 3.38 1.95 0.24 1.66

2.95 -0.69 3.09 3.38 1.95 0.24 1.66

5.50 3.51 N/A N/A N/A 4.09 5.34

5.70 5.19 N/A N/A N/A 5.53 6.87

4.86 4.52 N/A N/A N/A 4.84 5.53

11.29 4.21 11.44 11.23 10.77 5.53 7.94

4.92 7.84 N/A N/A N/A 7.40 7.49

11.07 6.54 N/A N/A N/A 7.16 8.95

5.88 5.53 4.95 6.72 6.04 4.33 5.19

05/01/1999

1,595,906,569 805,231,934 796,036,329

-3.06 -2.32 -2.99 -2.90 -3.36 -2.37 -2.49

NMSIC Credit & Structured Finance Pool Credit & Structured Finance Benchmark

694,295,123

4.06

3.54 0.58

8.18 1.38

20.76 3.63

20.76 3.63

20.82 -0.04

10.73 -5.51

N/A N/A

19.67 -12.07

16.03 -2.18

46.02 31.02

1.49 N/A

04/01/2006

NMSIC Cash Equivalent Composite BofA ML 3 Mo US T-Bill Index

133,928,498

0.78

0.34 0.02

1.05 0.04

1.05 0.11

1.05 0.11

1.20 0.11

1.02 0.29

2.48 1.72

0.00 0.11

2.52 0.10

0.20 0.13

4.20 3.81

07/01/1988

Fixed Income

Performance shown is gross of fees, except for Credit & Structured Finance, Absolute Return, Real Estate, Real Asset, and Private Equity investments, which are shown net of fees. Performance is annualized for periods greater than one year. RVK endorses GIPS and calculates performance for composites and investment managers using different methodologies. For additional information, please see the Glossary. Fiscal year ends June 30.

Page 5

04/01/2011 04/01/2011 04/01/2011

65


New Mexico State Investment Council Asset Allocation & Performance - Composites & Managers As of June 30, 2013 Allocation Market Value ($) Absolute Return NMSIC Absolute Return Composite Mariner Matador, LLC AAM High Desert Fund Crestline Enchantment Fund Class A Crestline Enchantment Fund Class B Crestline Offshore Recovery Austin Capital Safe Harbor QP Fund ARS Pool (Cash Account) CT Preferred Investors Management LLC Altair Stars LTD Class ZII US HFRI FOF Comp Index

1 Year

3 Years

Performance (%) 5 10 2012 Years Years

2011

2010

Since Incep.

Inception Date

6.48 6.01 10.31 3.84 3.54 5.35 -2.27 0.00 3.08 0.00 4.79

-3.93 -5.34 -3.98 -1.52 0.71 -3.07 -16.86 0.00 0.21 -33.13 -5.72

4.65 3.99 N/A 6.03 9.10 17.82 -5.06 -0.30 3.76 -9.92 5.70

2.13 3.30 4.35 2.88 0.69 17.96 -1.40 1.91 -0.91 -7.24 2.13

09/01/2005 10/01/2005 12/01/2010 10/01/2005 06/01/2006 02/01/2009 10/01/2005 09/01/2005 11/01/2005 10/01/2005

10.20 N/A 14.00 13.43

14.86 16.22 14.12 14.79

10.03 N/A 15.20 12.13

11.02 N/A 16.36 15.88

3.33 8.75 11.33 11.38

06/01/2001 07/01/2011

-5.58 -1.75 -3.59

N/A N/A N/A

9.19 10.47 10.39

10.49 17.18 17.31

-6.53 6.01 3.09

1.48 5.28 6.02

10/01/2004

N/A 0.13

N/A 5.52

N/A 4.90

N/A 2.77

N/A 7.53

8.35 0.39

06/01/2012

%

QTD

1,166,989,066 394,038,827 383,558,377 310,270,163 40,734,785 12,454,905 10,742,910 9,831,505 5,156,500 201,095

6.83 2.31 2.24 1.82 0.24 0.07 0.06 0.06 0.03 0.00

1.38 2.45 0.90 1.19 1.52 -3.76 0.05 0.00 0.00 0.00 0.12

4.95 7.70 5.48 3.11 1.80 -1.79 0.44 1.11 0.00 0.00 3.44

8.19 11.34 11.02 4.63 2.41 -1.42 -1.87 1.11 1.07 0.00 7.35

8.19 11.34 11.02 4.63 2.41 -1.42 -1.87 1.11 1.07 0.00 7.35

3.74 4.02 N/A 3.21 4.36 2.70 -7.95 0.35 2.59 -12.44 3.02

0.26 3.31 N/A 0.16 -0.56 N/A -7.57 0.37 -4.29 -13.36 -0.60

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 3.45

1,525,569,959 1,522,830,595

8.92 8.91

3.17 3.17 4.10 4.93

5.43 5.44 7.22 8.62

10.30 10.33 11.23 12.84

10.30 10.33 11.23 12.84

11.57 N/A 14.47 14.01

5.01 N/A 6.87 7.05

887,822,704

5.19

2.27 2.43 2.16

3.87 4.56 4.78

7.24 9.66 9.84

7.24 9.66 9.84

7.83 14.02 13.87

444,900,073

2.60

2.03 -4.48

5.18 -4.15

9.85 -0.89

9.85 -0.89

N/A 3.66

CYTD FYTD

Private Equity NMSIC Private Equity Composite (Ex. State) Private Equity Pooled Funds 80/20 Cambridge PE Index (Lagged 1 Qtr) Venture Econ All Prvt Eq Index (Lagged 1 Qtr)

Real Estate Townsend Reported Real Estate NCREIF ODCE Index (Net) (Lagged 1 Qtr) NCREIF/Townsend Wtd Bnchmk (Lagged 1 Qtr)

Real Return NMSIC Real Return Pool Real Return Custom Index

Performance shown is gross of fees, except for Credit & Structured Finance, Absolute Return, Real Estate, Real Asset, and Private Equity investments, which are shown net of fees. Performance is annualized for periods greater than one year. RVK endorses GIPS and calculates performance for composites and investment managers using different methodologies. For additional information, please see the Glossary. Fiscal year ends June 30.

Page 6

66


New Mexico State Investment Council Asset Allocation & Performance - Composites & Managers As of June 30, 2013 Allocation Market Value ($)

%

QTD

CYTD FYTD

1 Year

3 Years

Performance (%) 5 10 2012 Years Years

2011

2010

Since Incep.

Inception Date

ETI NMSIC Economically Targeted Investments BofA ML 3 Mo US T-Bill Index

53,917,735

0.32

-0.20 0.02

-0.04 0.04

-0.77 0.11

-0.77 0.11

-0.73 0.11

-3.06 0.29

-0.78 1.72

-0.32 0.11

-2.12 0.10

-4.87 0.13

-1.75 2.50

07/01/1998

Severance Tax State PE Program Cambridge VC Index (Lagged 1 Qtr) Venture Econ All Prvt Eq Index (Lagged 1 Qtr)

201,870,716

1.18

-1.24 2.52 4.93

-2.22 3.70 8.62

2.28 4.91 12.84

2.28 4.91 12.84

7.98 11.98 14.01

-0.93 4.43 7.05

-3.18 7.34 13.43

13.11 7.54 14.79

11.39 20.66 12.13

2.37 8.66 15.88

-6.26 -0.75 8.37

08/01/2001

17,094,085,920 100.00

0.92

5.89

13.11

13.11

11.72

4.29

6.80

14.26

-0.93

14.55

4.40

01/01/2000

NMSIC Total Fund Composite

The Global Equity Custom Index consists of 70% R 3000 Index, 18% MSCI EAFE Index (Net), 12% MSCI Emg Mkts Index (Net). The Large Cap Custom Index consists of the S&P 500 Index (Cap Wtd) through 6/30/2012 and the R 1000 Index thereafter. The Non-US Equity Blended Index is calculated monthly using beginning of month asset class weights applied to each corresponding primary benchmark return. The Fixed Income Custom Index consists of the Barclays US Agg Bond Index prior to March 2007 and is calculated using beginning of month weights applied to each corresponding primary benchmark return thereafter. Credit & Structured Finance Benchmark consists of 45% ABX.HE.BBB-06-1, 45% S&P/LTSA 1100 Names Index & 10% CDX 15 lagged by 1 month. Absolute Return market values are lagged 1 month and provided by J.P. Morgan. Performance for Absolute Return is preliminary and shown as of the most current month end. Historical performance for Crestline Enchantment Fund Class A shares prior to January 2011 consists of Crestline Partners LP. Class B shares before this date consists of Vintage Classic LLC. Performance for Mariner Matador, LLC prior to August 2008 consists of Mariner Select LP. 80/20 Cambridge Private Equity Index is lagged 1 quarter and is a blend of 80% Cambridge Private Equity Index and 20% Cambridge Venture Capital Index. Venture Economics All Private Equity Index is lagged 1 quarter. NCREIF/Townsend Weighted Benchmark is calculated by Townsend, is lagged 1 quarter, and is a weighted benchmark based on the target allocation to each real estate sector using the investable universe. Real Estate and Private Equity investments are lagged 1 quarter and assume a 0.00% return during interim months. Real Return Custom Index consists of 35% Barclays US Treasury: US TIPS Index, 25% Dow Jones-UBS Commodity Index, 20% NCREIF Timberland Index, and 20% Consumer Price Index + 3%. Indices show N/A for since inception returns when the fund contains more history than the corresponding benchmark. Since Inception dates reflect first month of reliable and verifiable data and may not reflect the actual full month following initial funding. As a result, composites and/or managers may have more history than the Total Fund. Since Inception performance shown for the HFRI FOF Comp Index is as of October 1, 2005. R.V. Kuhns & Associates began calculating performance in May 2011 using data provided by J.P. Morgan. Historical performance prior to this date was provided by NEPC.

Performance shown is gross of fees, except for Credit & Structured Finance, Absolute Return, Real Estate, Real Asset, and Private Equity investments, which are shown net of fees. Performance is annualized for periods greater than one year. RVK endorses GIPS and calculates performance for composites and investment managers using different methodologies. For additional information, please see the Glossary. Fiscal year ends June 30.

Page 7

67


Investment and Pensions Oversight Committee  Background  Laws 2009, Chapters 287 and 288 provided the New Mexico Retiree Health Care (NMRHCA) program  with a graduated employee/employer contribution increase (1.95 percent to 3 percent of payroll)  beginning in FY11 and concluding in FY13.  In addition, Chapter 288 includes the following section:  “...At  the first session of the legislature following July 1, 2013, the legislature shall review and adjust the  distributions pursuant to Section 7‐1‐6.1 NMSA 1978 and the employer and employee contributions to  the authority in order to ensure the actuarial soundness of the benefits provided under the Retiree  Health Care Act” (10‐7C‐15‐G).   The Investment and Pensions Oversight Committee is scheduled to meet on November 7, 2013, at 9:00  a.m. in State Capitol Room 309.  This meeting will include a presentation from New Mexico Retiree  Health Care Authority (NMRHCA) staff outlining the details of proposed legislation to be introduced  during the 2014 Legislative Session in accordance with the requirements mentioned above.     Proposed Legislation  Similar to Senate Bill 71, as introduced during the 2013 Legislative Session, NMRHCA staff will seek  support to amend the Retiree Health Care Act by increasing the employer and employee contribution  rates paid to the Retiree Health Care Fund.  The employee increase will begin in FY15 from its current  level of 1 percent to 1.75 percent over a 3 year period (FY15 – FY17). The employer increase will begin in  FY18 from its current level of 2 percent to 3.5 percent over a 3 year period (FY18 – FY20).   

A B C Fiscal Year Employee Increase FY14 1.00% NA FY15 1.25% 0.25% FY16 1.50% 0.25% FY17 1.75% 0.25% FY18 1.75% 0.00% FY19 1.75% 0.00% FY20 1.75% 0.00%

D Employer 2.000% 2.250% 2.500% 2.750% 3.000% 3.250% 3.500%

E Increase NA 0.250% 0.250% 0.250% 0.250% 0.250% 0.250%

F GF Impact NA $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000 $5,000,000

G H Total RHCA Revenue NA NA 3.500% $20,000,000 4.000% $40,000,000 4.500% $60,000,000 4.750% $70,000,000 5.000% $80,000,000 5.250% $90,000,000  

Fiscal Implications  Upon full implementation in FY19 an additional $90 million per year [$56.3 million (employer) / $33.7  million (employee)] will be directed toward the Retiree Health Care Fund as compared to FY14. Total  recurring General Fund impact will be approximately $30 million with the remaining balance of  employer contributions coming from federal, other state funds and internal services funds.    Currently an employee earning an annual salary of $40,000 pays $15.39 per pay period and the  employer pays $30.77 for a total of $46.16 per pay period.  Under the proposal, the same employee will 

68


pay $26.93 and the employer will pay $53.85 for a total of $80.78 per pay period.  Overall, net take  home pay will be reduced by $3.84 each pay period for the first year, $7.69 the second year and $11.54  in the third and final year.   Other Substantive Issues  The proposed legislation is a major component of the NMRHCA Five Year Strategic Plan adopted by its  board of directors in October 2012, to extend the solvency of the program through 2043.  Other major  components of the plan include:  Phase out “family coverage” subsidies for retirees with multiple dependent children  Increase cost sharing on prescription coverage (stabilize plan/member share percentage)  Increase cost‐sharing of pre‐Medicare Plans   

Implem+.ent graduated minimum age requirement (to receive subsidies) 

 

Increase years of service required to receive maximum subsidy (currently 20 years)  Reduce pre‐Medicare retiree subsidies  Reduce pre‐Medicare spousal subsidies  Implement enhanced wellness programs 

All elements of the strategic plan combined will extend the solvency of the NMRHCA program from 2029  through 2043 and more closely align benefits and with contributions over the life of the program.        

69


10/21/13

BILL

1 2

51ST LEGISLATURE - STATE OF NEW MEXICO - SECOND SESSION, 2014

3

INTRODUCED BY

4 5 6

DISCUSSION DRAFT

7 8

ENDORSED BY THE INVESTMENTS AND PENSIONS OVERSIGHT COMMITTEE

9 AN ACT

10 11

RELATING TO HEALTH CARE; AMENDING THE RETIREE HEALTH CARE ACT

12

BY INCREASING THE EMPLOYER AND EMPLOYEE CONTRIBUTION RATES PAID

13

TO THE RETIREE HEALTH CARE FUND; RECONCILING MULTIPLE

14

AMENDMENTS TO THE SAME SECTION OF LAW BY REPEALING LAWS 2009,

15

CHAPTER 287, SECTION 2.

underscored material = new [bracketed material] = delete

16 17 18

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO: SECTION 1.

Section 10-7C-15 NMSA 1978 (being Laws 1990,

19

Chapter 6, Section 15, as amended by Laws 2009, Chapter 287,

20

Section 2 and by Laws 2009, Chapter 288, Section 3) is amended

21

to read:

22 23

"10-7C-15. A.

RETIREE HEALTH CARE FUND CONTRIBUTIONS.--

Following completion of the preliminary

24

contribution period, each participating employer shall make

25

contributions to the fund pursuant to the following provisions: .194926.1SA

70


(1)

1 2

members of an enhanced retirement plan, the employer's

3

contribution shall equal:

4

(a)

one and three-tenths percent of each

5

participating employee's salary for the period from July 1,

6

2002 through June 30, 2010; (b)

7

one and six hundred sixty-six

8

thousandths percent of each participating employee's salary for

9

the period from July 1, 2010 through June 30, 2011; (c)

10

one and eight hundred thirty-four

11

thousandths percent of each participating employee's salary for

12

the period from July 1, 2011 through June 30, 2012; [and] (d)

13

two percent of each participating

14

employee's salary [beginning] from July 1, 2012 through June

15

30, 2014; (e)

16 underscored material = new [bracketed material] = delete

for participating employees who are not

two and twenty-five hundredths

17

percent of each participating employee's salary from July 1,

18

2014 through June 30, 2015; (f)

19

two and one-half percent of each

20

participating employee's salary from July 1, 2015 through June

21

30, 2016; (g)

22

two and seventy-five hundredths

23

percent of each participating employee's salary from July 1,

24

2016 through June 30, 2017; (h)

25

three percent of each participating

.194926.1SA - 2 -

71


1

employee's salary from July 1, 2017 through June 30, 2018; (i)

2 3

percent of each participating employee's salary from July 1,

4

2018 through June 30, 2019; and (j)

5 6

three and one-half percent of each

participating employee's salary on and after July 1, 2019; (2)

7

for participating employees who are

8

members of an enhanced retirement plan, the employer's

9

contribution shall equal:

10

(a)

one and three-tenths percent of each

11

participating employee's salary for the period from July 1,

12

2002 through June 30, 2010; (b)

13

two and eighty-four thousandths

14

percent of each participating employee's salary for the period

15

from July 1, 2010 through June 30, 2011; (c)

16 underscored material = new [bracketed material] = delete

three and twenty-five hundredths

two and two hundred ninety-two

17

thousandths percent of each participating employee's salary for

18

the period from July 1, 2011 through June 30, 2012; [and] (d)

19

two and one-half percent of each

20

participating employee's salary [beginning July 1, 2012; and]

21

from July 1, 2012 through June 30, 2014; (e)

22

two and eighty-one hundredths

23

percent of each participating employee's salary from July 1,

24

2014 through June 30, 2015; (f)

25

three and thirteen-hundredths

.194926.1SA - 3 -

72


1

percent of each participating employee's salary from July 1,

2

2015 through June 30, 2016; (g)

3 4

percent of each participating employee's salary from July 1,

5

2016 through June 30, 2017; (h)

6

three and seventy-five hundredths

7

percent of each participating employee's salary from July 1,

8

2017 through June 30, 2018; (i)

9

four and six-hundredths percent of

10

each participating employee's salary from July 1, 2018 through

11

June 30, 2019; and (j)

12

four and thirty-eight hundredths

13

percent of each participating employee's salary on and after

14

July 1, 2019; and (3)

15

underscored material = new [bracketed material] = delete

three and forty-four hundredths

each employer that chooses to become a

16

participating employer after January 1, 1998 shall make

17

contributions to the fund in the amount determined to be

18

appropriate by the board.

19

B.

Following completion of the preliminary

20

contribution period, each participating employee, as a

21

condition of employment, shall contribute to the fund pursuant

22

to the following provisions: (1)

23

for a participating employee who is not a

24

member of an enhanced retirement plan, the employee's

25

contribution shall equal: .194926.1SA - 4 -

73


(a)

1 2

of the employee's salary for the period from July 1, 2002

3

through June 30, 2010; (b)

4

eight hundred thirty-three

5

thousandths of one percent of the employee's salary for the

6

period from July 1, 2010 through June 30, 2011;

7

(c)

nine hundred seventeen thousandths

8

of one percent of the employee's salary for the period from

9

July 1, 2011 through June 30, 2012; [and] (d)

10 11

13

(e)

(f)

one and one-half percent of the

employee's salary from July 1, 2016 through June 30, 2017; and (g)

16 17

one and one-fourth percent of the

employee's salary from July 1, 2015 through June 30, 2016;

14 15

one percent of the employee's salary

[beginning] from July 1, 2012 through June 30, 2015;

12

underscored material = new [bracketed material] = delete

sixty-five hundredths of one percent

one and three-fourths percent of the

employee's salary on and after July 1, 2017; (2)

18

for a participating employee who is a

19

member of an enhanced retirement plan, the employee's

20

contribution shall equal:

21

(a)

sixty-five hundredths of one percent

22

of the employee's salary for the period from July 1, 2002

23

through June 30, 2010; (b)

24 25

one and forty-two thousandths

percent of the employee's salary for the period from July 1, .194926.1SA - 5 -

74


1

2010 through June 30, 2011; (c)

2 3

thousandths percent of the employee's salary from July 1, 2011

4

through June 30, 2012; [and] (d)

5

one and one-fourth percent of the

6

employee's salary [beginning July 1, 2012; and] from July 1,

7

2012 through June 30, 2015; (e)

8 9 10

one and fifty-six hundredths percent

of the employee's salary from July 1, 2015 through June 30, 2016; (f)

11

one and eighty-eight hundredths

12

percent of the employee's salary from July 1, 2016 through June

13

30, 2017; and (g)

14 15

two and nineteen-hundredths percent

of the employee's salary on and after July 1, 2017; and (3)

16 underscored material = new [bracketed material] = delete

one and one hundred forty-six

as a condition of employment, each

17

participating employee of an employer that chooses to become a

18

participating employer after January 1, 1998 shall contribute

19

to the fund an amount that is determined to be appropriate by

20

the board.

21

the contribution from the participating employee's salary and

22

shall remit it to the board as provided by any procedures that

23

the board may require.

24 25

Each month, participating employers shall deduct

C.

On or after July 1, 2009, no person who has

obtained service credit pursuant to Subsection B of Section .194926.1SA - 6 -

75


1

10-11-6 NMSA 1978, Section 10-11-7 NMSA 1978 or Paragraph (3)

2

or (4) of Subsection A of Section 22-11-34 NMSA 1978 may enroll

3

with the authority unless the person makes a contribution to

4

the fund equal to the full actuarial present value of the

5

amount of the increase in the person's health care benefit, as

6

determined by the authority.

underscored material = new [bracketed material] = delete

7

D.

Except for contributions made pursuant to

8

Subsection C of this section, a participating employer that

9

fails to remit before the tenth day after the last day of the

10

month all employer and employee deposits required by the

11

Retiree Health Care Act to be remitted by the employer for the

12

month shall pay to the fund, in addition to the deposits,

13

interest on the unpaid amounts at the rate of six percent per

14

year compounded monthly.

15

E.

Except for contributions made pursuant to

16

Subsection C of this section, the employer and employee

17

contributions shall be paid in monthly installments based on

18

the percent of payroll certified by the employer.

19

F.

Except in the case of erroneously made

20

contributions or as may be otherwise provided in Subsection D

21

of Section 10-7C-9 NMSA 1978, contributions from participating

22

employers and participating employees shall become the property

23

of the fund on receipt by the board and shall not be refunded

24

under any circumstances, including termination of employment or

25

termination of the participating employer's operation or .194926.1SA - 7 -

76


1

participation in the Retiree Health Care Act. G.

2

Notwithstanding any other provision in the

3

Retiree Health Care Act and at the first session of the

4

legislature following July 1, 2013, the legislature shall

5

review and adjust the distributions pursuant to Section 7-1-6.1

6

NMSA 1978 and the employer and employee contributions to the

7

authority in order to ensure the actuarial soundness of the

8

benefits provided under the Retiree Health Care Act. H.

9 10

As used in this section, "member of an enhanced

retirement plan" means: (1)

11 12

retirement association who, pursuant to the Public Employees

13

Retirement Act, is included in: (a)

14 15

17

21

coverage plan 1; or

22

(2)

24 25

municipal police member coverage

(c)

municipal fire member coverage plan

(d)

municipal detention officer member

3, 4 or 5; or

20

23

(b) plan 3, 4 or 5;

18 19

state police member and adult

correctional officer member coverage plan 1;

16 underscored material = new [bracketed material] = delete

a member of the public employees

a member pursuant to the provisions of the

Judicial Retirement Act." SECTION 2.

REPEAL.--Laws 2009, Chapter 287, Section 2 is

repealed. .194926.1SA - 8 -

77


1 2

SECTION 3.

EFFECTIVE DATE.--The effective date of the

provisions of this act is July 1, 2014.

3

- 9 -

4 5 6 7 8 9 10 11 12 13 14 15

underscored material = new [bracketed material] = delete

16 17 18 19 20 21 22 23 24 25 .194926.1SA

78


NMRHCA Staff Request for Board Approval of Medicare Advantage Contracts    Background  NMRHCA’s last procurement of Medical plan services (including Medicare Advantage) became  effective July 1, 2012.   While the procurement process generally allows for a four‐year cycle,  market conditions warranted a reexamination of the Medicare Advantage offerings.  Provider  network changes as well as a larger array of market options were contributing.  Board approval  for a procurement specific to Medicare Advantage products was granted in December 2012 for  a January 1, 2014 effective date.  NMRHCA collaborated with the General Services Department’s State Purchasing Division to  ensure the process was in accordance with the state’s Procurement Code and would yield the  most advantageous results to the agency.   The Request for Proposal was released in May 2013  with responses received in June 2013.   The proposals were reviewed by an evaluation  committee with representation from the Board of Directors, agency management, customer  service as well as an external adviser from the IBAC purchasing collaborative.  A consensus  scoring methodology was employed and there was unanimous agreement of the resulting  recommendation.  At the September 3, 2014 regular Board meeting, NMRHCA staff received Board permission to  pursue contract negotiations with the Lovelace Health Plan (Statewide HMO), Presbyterian  Health Plan (Statewide PPO), and United Health Care (Nationwide PPO) based upon the RFP  evaluation committee recommendation.    Recommendation  NMRHCA staff respectfully requests Board approval to execute a new contract with United  Health Care effective January 1, 2014.   The proposed compensation assumes participation will  reach 1,000 members by June 30, 2014.  If participation exceeds or falls short of this  assumption, the contract will be amending accordingly.  In addition, NMRHCA staff respectfully requests Board approval to amend the existing  agreements between NMRHCA and Presbyterian and Lovelace Health Plans to reflect  participation totals resulting from the Switch Enrollment period ending November 12, 2013.       

79


Contract ID# 14-343-0381-0001

STATE OF NEW MEXICO NEW MEXICO RETIREE HEALTH CARE AUTHORITY PROFESSIONAL SERVICES CONTRACT # 14-343-0381-0001 THIS AGREEMENT is made and entered into by and between the State of New Mexico, NEW MEXICO RETIREE HEALTH CARE AUTHORITY, hereinafter referred to as the “Agency” or “Group” and UNITED HEALTHCARE INSURANCE COMPANY, hereinafter referred to as the “Contractor” or “UnitedHealthcare” and is effective as of the date set forth below upon which it is executed by the Department of Finance and Administration (DFA). IT IS AGREED BETWEEN THE PARTIES: 1.

Scope of Work. A. Definitions: 1) Agreement is this Medicare Advantage with Prescription Drug Benefit Plan Group Agreement., including, but not limited to any attachments or exhibits and any amendments thereto, and by reference, the Evidence of Coverage and Summary of Benefits, and any amendments thereto. 2) Alternative Disclosure Standards Waiver is the waiver of certain Medicare disclosure requirements at 42 CFR 422.111 and 42 CFR 423.128 for Group Plan beneficiaries when the Group, as the Group Plan sponsor, is subject to the disclosure requirements. Additional requirements to the Alternative Disclosure Standards Waiver apply pursuant to Chapter 9 of the Medicare Managed Care Manual and Chapter 12 of the Medicare Prescription Drug Benefit Manual. 3) Centers for Medicare & Medicaid Services (“CMS”) is a Federal agency within the United States Department of Health and Human Services and is responsible for administering various Medicare programs. 4) Coinsurance is the portion of medical expenses for a service the Member must pay out-of-pocket, usually a fixed percentage. Coinsurance is usually applied after a deductible or Copayment requirement is met. Coinsurance does not include any amounts payable by the Member that are not Covered Services or Covered Part D Drugs under this Agreement. Coinsurance is in addition to the MA-PD Plan Beneficiary Premium. 5) Copayment(s) is a fixed dollar amount payable to a health care provider or pharmacy by the Member when the Member receives a health care service or product that is a Covered Service or a Covered Part D Drug. Copayments are in addition to the MAPD Plan Beneficiary Premium paid by Group.

1

80


Contract ID# 14-343-0381-0001

6) Covered Part D Drugs are the Part D eligible prescription drugs and drug products covered pursuant to the current terms of the MA-PD Plan, in compliance with Medicare Laws and Regulations. 7) Covered Services are the health care services and products covered pursuant to the current terms of the MA-PD Plan. 8) Eligible Dependent(s) is any person defined as a qualified dependent by Group, who in all cases meets all the eligibility requirements of Group and the MA-PD Plan in his or her own right, and who is eligible, in his or her own right, to enroll in a Medicare Advantage with prescription drug benefit plan under the Medicare Laws and Regulations. The Eligible Dependent must permanently reside within the Service Area. 9) Eligible Retiree(s) is a former Group employee who has met the minimum required retiree participation conditions as determined by Group, who is eligible to enroll in a Medicare Advantage with prescription drug benefit plan under the Medicare Laws and Regulations, who meets the eligibility and enrollment requirements of the MA-PD Plan, and who permanently resides in the Service Area. 10) Enrollment is the enrollment of Group’s Eligible Retirees and Eligible Dependents into the MA-PD Plan by Group pursuant to and in accordance with Medicare Laws and Regulations. Enrollment is conditioned upon acceptance of the Eligible Retiree or Eligible Dependent by UnitedHealthcare and by CMS, the execution of this Agreement by UnitedHealthcare and by Group, and the receipt of MA-PD Plan Beneficiary Premium by UnitedHealthcare. 11) Evidence of Coverage (“EOC”) is the document supplied by UnitedHealthcare and issued to Members disclosing and setting forth the health care and prescription drug benefits and terms and conditions of coverage to which Members of the MA-PD Plan are entitled. The EOC is incorporated fully into this Agreement by reference. 12)

Group Plan is the employee welfare benefit plan sponsored by Group.

13) Group Contribution is the amount of the MA-PD Plan Beneficiary Premium applicable to each Member which is paid by Group. 14) Low Income Subsidy (“LIS”) is a low-income subsidy provided to a LIS-eligible Member for the cost of the Member’s premium or drug cost-sharing coverage under a Medicare Advantage with prescription drug benefit plan, as described in Medicare Laws and Regulations. 15) MA-PD Plan is the Medicare Advantage with prescription drug benefit plan described in this Agreement, subject to modification, amendment or termination pursuant to the terms of this Agreement and the Group Plan.

2

81


Contract ID# 14-343-0381-0001

16) MA-PD Plan Beneficiary Premium is an amount established by UnitedHealthcare and approved by CMS to be paid to UnitedHealthcare by or on behalf of each Member enrolled in the MA-PD Plan for coverage under the MA-PD Plan. The amount, method of payment, and Group Contribution to the MA-PD Plan Beneficiary Premium, if any, is set forth in the applicable document. The MA-PD Plan Beneficiary Premium may include late enrollment penalties as assessed by CMS for those Members who did not have creditable prescription drug coverage for a period that exceeds sixty-three (63) calendar days from or after eligibility for Medicare Part D Plan. The MA-PD Plan Beneficiary Premium will not include Income Related Monthly Adjustment Amounts (IRMAA), if any, as assessed by the Social Security Administration to certain individuals with higher incomes. 17) Medicare Laws and Regulations are, collectively, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “MMA”), the Medicare Improvements for Patients and Providers Act of 2008, the Patient Protection and Affordable Care Act, the regulations implementing the Medicare Advantage provisions at 42 CFR Part 422, together with guidance, instruction and other directives from CMS relating to Medicare Advantage Plans, and the regulations implementing the Medicare Part D Plan provisions of the MMA at 42 CFR Part 423, together with guidance, instruction and other directives from CMS relating to the Medicare Part D Plan. 18)

Medicare Part D Plan is a Medicare Part D prescription drug benefit plan.

19) “Members” means any eligible retirees or other beneficiaries covered under the Plan. 20) Open Enrollment Period is the annual period established by Group, or if no Open Enrollment Period is declared by Group, another period required by CMS, during which all eligible and prospective Group Eligible Retirees and Eligible Dependents may enroll in the MA-PD Plan. 21) Service Area is a geographic area approved by CMS within which an MA-PD Plan Member must permanently reside in order to enroll in the MA-PD Plan. 22) UnitedHealthcare Affiliates are all companies controlling, controlled by or under common control with UnitedHealthcare Insurance Company. 23) UnitedHealthcare Enrollment Packet is the packet of information supplied by UnitedHealthcare to prospective and current Members which discloses plan policy and procedure, and provides information about MA-PD Plan medical and prescription drug benefits and exclusions. 24) “Plan” or “Benefit Booklet” means the Employer Group Waiver Plan (“EGWP”) benefit plans purchased by Agency, which, among other things, defines the health benefits available to Members under this Agreement, an example of which is attached as Exhibit A.

3

82


Contract ID# 14-343-0381-0001

B. The Contractor agrees as follows: 1) Licensing. Contractor will continuously maintain in good standing all licenses and permits necessary to enable it to perform its obligations under this Agreement in the State of New Mexico and in accordance with applicable federal law. 2) EGWP Program. Contractor, a Medicare Advantage Organization (“MAO) operating pursuant to a contract with the United States Department of Health and Human Services, Centers for Medicare and Medicaid Services (“CMS”), agrees to provide health care benefits to Agency’s Members through an EGWP program. Contractor will conduct the EGWP program in accordance with its contract with CMS and all applicable federal laws. 3) Identification Card. Contractor will issue Member identification cards for use in connection with the Plan. 4) Eligibility Data. Contractor will maintain current eligibility data for all Members enrolled in the Plan. In the event there is an immediate need to provide health care benefits for a new Member, Contractor shall contact Agency for eligibility verification. Agency will enter the Member into Agency’s eligibility system as soon as possible. 5) Member Benefit Booklets. The Contractor will distribute the Member Benefit Booklets to current Agency group Members and new enrollees. Contractor will make all provider directories available via the Internet through Contractor’s website, and when requested, through the Agency website either through hot links or through updated provider directories provided directly to Agency. Contractor will make paper copy provider directories available on request at the initial and all future enrollment meetings. Contractor will produce and distribute paper copy provider directories directly to work sites as may be requested from time to time by Agency. 6) Orientation Meetings. Contractor will conduct Member orientation meetings in locations identified by Agency to familiarize Members with the offered benefits. Agency will hold Member enrollment meetings prior to the beginning of the Plan year throughout the state in order to provide Members with the information regarding all benefits offered by Agency, any changes to the Plan, etc. In addition, Contractor will attend enrollment meetings as requested by Agency. 7) Training Sessions. Contractor will participate in group training sessions, as determined by Agency, and in locations designated by Agency, but not to exceed six times each year. 8) Attendance at Agency Meetings and Events. From time to time and as requested by

4

83


Contract ID# 14-343-0381-0001

Agency, Contractor will attend Board, Committee and/or Legislative meetings as well as informational meetings that pertain to Agency benefit matters. Contractor also agrees to attend: 1) Agency Board meetings, including quarterly performance appraisal meetings, and 2) Agency Health Fairs Contractor will be required to provide slide or video presentations and financially share in the reasonable cost of creating comparison of benefits sheets and enrollment forms. No Contractor representative may market any other Contractor products through such meetings without permission of Agency. 9) Quarterly Performance Survey. Contractor shall cooperate with the quarterly performance appraisal survey conducted by Agency. 10) Performance Measures. Performance Measures. Contractor shall comply with the terms and conditions of the Performance Guarantees attached as Exhibit B. C. ELIGIBILITY AND ENROLLMENT 1)

Eligibility. The MA-PD Plan specifies the coverage for which Eligible Retirees and Eligible Dependents are eligible, in consideration of their continued entitlement to Medicare Part A and/or enrollment in Part B, and in consideration of UnitedHealthcare’s receipt of any specified MA-PD Plan Beneficiary Premium. Only persons with Medicare Parts A and/or B are allowed to be enrolled in the MAPD Plan. The Member is responsible for paying the appropriate premiums for Medicare Part A and/or Part B.

2)

Submission of Eligibility List and Enrollment Election Forms. Group shall submit a list of Eligible Retirees and Eligible Dependents (the “Group Eligibility List”). Agency will provide contractor with Agency eligibility data on a weekly basis through electronic full replacement files. Contractor will verify the eligibility status of Members via the Agency eligibility website, as needed. Agency will send a monthly eligibility listing to Contractor’s self-bill unit for reconciliation purposes.

3)

If Group seeks to automatically enroll all Eligible Retirees and Eligible Dependents, Group will make available to such Eligible Retiree and Eligible Dependent the ability to opt out of the automatic enrollment in a manner that allows such Eligible Retiree and Eligible Dependent to enroll in another plan of their choice on a timely basis and in accordance with Medicare Laws and Regulations. 3.01 Enrollment/Election. A properly completed Enrollment form must be submitted to UnitedHealthcare by Group for each Eligible Retiree and Eligible Dependent to be enrolled in the MA-PD Plan. In its discretion, UnitedHealthcare may accept a uniform group Enrollment (without individual

5

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Contract ID# 14-343-0381-0001

enrollment election forms and usually in an electronic file format) if such group Enrollment is conducted pursuant to Medicare Laws and Regulations. Required elements for an Enrollment include, but are not limited to the following: the MA-PD Plan name; Member name; Member birth date; Member gender; Member permanent residence address; Member Medicare number; Member’s response to the end-stage renal disease question; contact information if signed by an authorized representative; Group name and Group number. For a paper Enrollment form, an additional required element is Member’s signature or Member’s authorized representative’s signature. 3.02 Time of Enrollment. All Enrollment forms shall be completed and submitted by Group to UnitedHealthcare during the Open Enrollment Period. The EOC applicable to the MA-PD Plan includes information regarding Initial Enrollment Period and Special Enrollment Period, as defined by CMS, during which Eligible Retiree and Eligible Dependent may enroll in the MA-PD Plan outside of the Open Enrollment Period. Group shall provide notice to existing and/or prospective Members of the applicable Open Enrollment Period. Group shall also provide prior notice of such Open Enrollment Period to UnitedHealthcare so that the appropriate UnitedHealthcare Enrollment Packet can be sent to Member in advance of the desired MA-PD Plan effective date. Group shall forward all completed or amended Enrollment forms for each Member for receipt by UnitedHealthcare by the tenth (10th) calendar day of each month. Group acknowledges that any Enrollment form not received by UnitedHealthcare by the tenth (10th) calendar day of each month may be rejected by UnitedHealthcare or may result in a later effective date of coverage. 3.03 Enrollment Notice to Eligible Retiree and Eligible Dependent. Group shall provide a written notice, prepared by UnitedHealthcare, to Eligible Retirees and Eligible Dependents at the commencement of the Open Enrollment Period and throughout the year to persons who become eligible at times other than during the Open Enrollment Period. The written notice shall provide notice of the availability of coverage under the MA-PD Plan. 3.04 Enrollment Record Retention. Group’s record of Member’s enrollment election must exist in a format that can be easily, accurately and quickly reproduced for later reference by each individual Member, UnitedHealthcare and/or CMS, as necessary, and be maintained by Group for the term of this Agreement and for ten (10) years thereafter. 4)

Commencement of Coverage. The commencement date of coverage under the MAPD Plan shall be effective in accordance with the terms of this Agreement and Medicare Laws and Regulations (or, if applicable, in accordance with the eligibility date CMS communicates to UnitedHealthcare). UnitedHealthcare's acceptance of 6

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each Member's Enrollment is contingent upon receipt of the applicable MA-PD Plan Beneficiary Premium payment and CMS’ confirmation of enrollment. 5)

Involuntary Disenrollment. In the event a Member no longer meets Group’s eligibility requirements for participation in the MA-PD Plan, Group and/or Member shall provide written notice to UnitedHealthcare of such Member’s disenrollment from the MA-PD Plan or Group shall provide notice via the monthly Group Eligibility List submission, if applicable. Such notice, regardless of medium, shall include the reason for disenrollment. Group shall notify UnitedHealthcare thirty (30) calendar days prior to the proposed effective date of disenrollment. Disenrollment generally cannot be effective prior to the date Group submits the disenrollment notice. In the case of a Member who no longer meets Group’s eligibility requirements for participation in the MA-PD Plan or in the case of termination of this Agreement in accordance with Section 4, Group will issue prospective notice to Member of the termination a minimum of twenty-one (21) calendar days prior to the effective date of said termination. Such notice must advise Member of other insurance options that may be available through Group. Group will also advise such Member that the disenrollment action means the Member will not have Medicare prescription drug coverage. Notice must include information about the potential for late-enrollment penalties that may apply in the future. The effective date of disenrollment always falls on the last calendar day of a month. In the case of a Member no longer meeting Group’s eligibility requirements, Group will send UnitedHealthcare notice of a Member’s termination from the MA-PD Plan by the first calendar day of the month for an effective date of the last calendar day of that month. All notifications received after the first calendar day of the month will result in a termination effective date of the last calendar day of the following month.

6)

Voluntary Disenrollment. In the event a Member elects to discontinue being covered by the MA-PD Plan, such Member must submit a signed, written notice to UnitedHealthcare that complies with Medicare Laws and Regulations by the tenth (10th) calendar day of the month. Group cannot request a voluntary disenrollment of a Member. Group shall notify UnitedHealthcare prior to the proposed effective date of disenrollment. The effective date of disenrollment always falls on the last calendar day of a month. Disenrollment generally cannot be effective prior to the date Group submits the Member’s signed, written disenrollment notice. All notifications received after the tenth (10th) calendar day of the month can result in a termination effective date of the last calendar day of the following month.

7)

Disenrollment Record Retention. Group’s record of Member’s election to disenroll must exist in a format that can be easily, accurately and quickly reproduced for later reference by each individual Member, UnitedHealthcare and/or CMS, as necessary, and be maintained by Group for at least ten (10) years following the effective date

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of the Member’s disenrollment from the MA-PD Plan. D. Agency Obligations

1)

Compliance with Law. Notwithstanding anything to the contrary herein, Agency agrees to comply with all applicable state and federal laws relating to its provision of an EGWP retiree benefit plan, including the regulations and sub-regulatory guidance of CMS. Agency agrees to comply with Contractor’s reasonable requests for information and assistance in meeting Contractor’s regulatory obligations as a Medicare Advantage Organization (“MAO”) and its operation of the EGWP program.

2)

Notices to UnitedHealthcare. Group shall forward all notices of disenrollment to UnitedHealthcare within the timeframes specified in Sections 1(C)(5) and 1(C)(6) above in the event a Member loses eligibility or elects to terminate membership under this Agreement. Group agrees to pay any applicable MA-PD Plan Beneficiary Premium through the last calendar day of the month in which the Member is enrolled.

3)

Notices to Member. If Group or UnitedHealthcare terminates this Agreement pursuant to Section 4 below, Group shall promptly notify all Members enrolled through Group of the termination of their coverage in the MA-PD Plan. Such notification will include any other plan options that may be available through Group. Group shall provide such notice by delivering to each Member a true, legible copy of the notice of termination sent from UnitedHealthcare to Group, or from Group to UnitedHealthcare, at the Member's then current address. Group shall promptly provide UnitedHealthcare with a copy of the notice of termination delivered to each Member, along with evidence of the date the notice was provided. In the event that UnitedHealthcare terminates Member’s enrollment in the MA-PD Plan for non-payment of MA-PD Plan Beneficiary Premium or UnitedHealthcare’s non-renewal of this Agreement, Members will receive notice of termination from UnitedHealthcare. If, pursuant to Sections 1(D)(7.01) and 1(D)(7.02) below, UnitedHealthcare or Group increases MA-PD Plan Beneficiary Premium payable by the Member, or if UnitedHealthcare increases Copayments or Coinsurance or reduces Covered Services and Covered Part D Drugs provided under this Agreement, UnitedHealthcare or Group, as applicable (whichever party promulgates the change), shall promptly notify all Members enrolled through Group of the increase or reduction. In addition, UnitedHealthcare or Group, as applicable (whichever party promulgates the change), shall promptly notify Members enrolled through Group of any other changes in the terms or conditions of this Agreement affecting Members’ benefits or obligations under the MA-PD Plan. Unless the change is to be communicated by UnitedHealthcare through the Annual Notice of Change (ANOC) process, Group shall provide such notice by delivering to each Member a

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true, legible copy of the notice of the MA-PD Plan Beneficiary Premium or Copayment or Coinsurance increase or reduction in Covered Services and Covered Part D Drugs sent from UnitedHealthcare to Group at the Member's then current address. When required by CMS, Group shall promptly provide UnitedHealthcare with a copy of the notice of MA-PD Plan Beneficiary Premium or Copayment or Coinsurance increase or reduction in Covered Services and Covered Part D Drugs delivered to each Member, along with evidence of the date the notice was provided. UnitedHealthcare shall have no responsibility to Members in the event Group fails to provide the notices required by this Section. 4)

MA-PD Plan Beneficiary Premium. MA-PD Plan Beneficiary Premium is set forth in the applicable document and will be paid to UnitedHealthcare by the Due Date in accordance with Section 1(D)(6) below. Group shall pay or ensure payment of any portion of MA-PD Plan Beneficiary Premium for Members for which Group is responsible, as set forth in the applicable document. Each Member is responsible for paying to UnitedHealthcare or Group, as applicable, any portion of MA-PD Plan Beneficiary Premium for which he or she is responsible, as set forth in the applicable document. When agreed by UnitedHealthcare and Group, UnitedHealthcare will bill each Member for Member’s amount of the MA-PD Plan Beneficiary Premium. UnitedHealthcare shall arrange for Covered Services and Covered Part D Drugs under the MA-PD Plan only for those Members for whom the applicable MA-PD Plan Beneficiary Premium has been paid.

5)

Late Enrollment Penalty. MA-PD Plan Beneficiary Premium may include any late enrollment penalties as determined applicable by CMS. The late enrollment penalty (“LEP”) is based on the combination of a percentage of the national average Part D bid amount set by CMS and the number of months a beneficiary has not enrolled in a Medicare Part D plan, when eligible or a Member does not have creditable coverage (coverage containing a prescription drug benefit that is equivalent to Medicare Part D). The LEP is communicated to UnitedHealthcare by CMS upon confirmation of Member enrollment by CMS. In the event Member is assessed a LEP by CMS, UnitedHealthcare will bill the LEP directly to Group. Otherwise, upon Group’s written authorization, UnitedHealthcare will bill the LEP directly to Member. In the case where UnitedHealthcare bills Member directly for MA-PD Plan Beneficiary Premium, UnitedHealthcare will bill the LEP directly to the applicable Member.

6)

Due Date. MA-PD Plan Beneficiary Premium is due in full on a monthly basis by check or electronic transfer and must be paid directly by Group and/or by Member, as applicable, to UnitedHealthcare on or before the first business day of the month prior to the month for which the premium applies (“Due Date”). Failure to pay the MA-PD Plan Beneficiary Premium on or before the Due Date may result in termination of the Member from the MA-PD Plan in accordance with eligibility requirements as determined by the Group, the procedures set forth in the EOC and Medicare Laws and Regulations. For payments due from Group, UnitedHealthcare reserves the right to assess Group an administrative fee of five percent (5%) of the

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monthly premium prorated on a thirty (30)-day month for each day it is delinquent thereafter. This fee will be assessed solely at UnitedHealthcare's discretion. In the event that deposit of payments not made in a timely manner are received by UnitedHealthcare after termination of Group, the depositing or applying of such funds does not constitute acceptance, and such funds shall be refunded by UnitedHealthcare within twenty (20) business days of receipt, if UnitedHealthcare, in its sole discretion, does not reinstate Group. 7)

Modification of MA-PD Plan Beneficiary Premium and Benefits. 7.01 Modification of MA-PD Plan Beneficiary Premium. MA-PD Plan Beneficiary Premium, as set forth in the applicable document, may be modified by UnitedHealthcare in its sole discretion upon thirty (30) calendar days written notice to Group. Any such modification shall take effect commencing the first full month following the expiration of the thirty (30)day notice period. 7.02 Modification of Benefits or Terms. Covered Services and Covered Part D Drugs, as set forth in the EOC, as well as other terms of coverage under the MA-PD Plan may be modified by UnitedHealthcare in its sole discretion upon thirty (30) calendar days written notice to Group. Any such modification shall take effect commencing the first full month following the expiration of the thirty (30) day notice period or on a later date specified in the notice.

8)

Effect of Payment. Except as otherwise provided in this Agreement, only Members for whom the MA-PD Plan Beneficiary Premium is received by UnitedHealthcare are entitled to benefits under the MA-PD Plan, and then only for the period for which such payment is received.

9)

Adjustments to Payments. No retroactive adjustments may be made beyond ninety (90) calendar days for any additions to or terminations of Eligible Retiree, Eligible Dependent or Member or changes in coverage classification not reflected in UnitedHealthcareâ&#x20AC;&#x2122;s records at the time UnitedHealthcare calculates and bills for MA-PD Plan Beneficiary Premium. Any imposition of or increase in any premium tax, guarantee or uninsured fund assessments, or other governmental charges relating to or calculated in regard to the MA-PD Plan Beneficiary Premium shall be automatically added to the MA-PD Plan Beneficiary Premium as of their legislative effective dates, as permitted by law. In addition, any change in law or regulation that significantly affects UnitedHealthcareâ&#x20AC;&#x2122;s cost of operation can result in an increase in the MA-PD Plan Beneficiary Premium, in an amount to be determined by UnitedHealthcare, as of the next available date of MA-PD Plan Beneficiary Premium adjustment, as permitted by law.

10) Member/Marketing Materials. Group shall provide UnitedHealthcare with copies

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of any and all materials relating to the coverage available through the MA-PD Plan that Group intends to disseminate to Eligible Retiree, Eligible Dependent or Member. All materials relating to the MA-PD Plan and/or UnitedHealthcare shall be subject to review and written approval by UnitedHealthcare prior to its distribution by Group. Group understands that the MA-PD Plan is subject to federal and state regulatory oversight, and that Eligible Retiree, Eligible Dependent or Member materials and marketing materials (including, but not limited to, cover letters accompanying direct mail kits, announcement mailings, etc.) may be required to be filed with, reviewed and approved by, CMS or state regulators prior to use. Group agrees not to distribute such material prior to receipt of written approval of the material by UnitedHealthcare. Group shall assume all liabilities and damages arising from Groupâ&#x20AC;&#x2122;s unauthorized dissemination of Eligible Retiree, Eligible Dependent or Member materials and/or marketing materials. Group also agrees to comply with all relevant federal and state regulatory requirements regarding the distribution and fulfillment of Eligible Retiree, Eligible Dependent or Member materials and/or marketing materials and applicable timeframes. If Group is subject to the Alternative Disclosure Standards Waiver, Group must ensure compliance with any such alternative disclosure requirements, notify UnitedHealthcare of the reason for following alternative disclosure requirements, and timely provide UnitedHealthcare with copies of alternative disclosure materials for review and approval pursuant to the Alternative Disclosure Standards Waiver and UnitedHealthcare policies. 11) Employer/Union-Only Group Part D Prescription Drug Plan Obligations. Pursuant to Medicare Laws and Regulations, Group acknowledges and agrees to comply with the following obligations with respect to the MA-PD Plan: 11.01. Uniform Premium Requirements: Group may determine how much of a Memberâ&#x20AC;&#x2122;s MA-PD Plan Beneficiary Premium Group will subsidize, subject to the following conditions shall be met in determining the MA-PD Plan Beneficiary Premium subsidy: a. Group can subsidize different amounts for different classes of Members in the MA-PD Plan provided such classes are reasonable and based on objective business criteria, such as years of service, date of retirement, business location, job category, and nature of compensation (e.g., salaried v. hourly). Different classes cannot be based on eligibility for Low Income Subsidy individuals; b. Group cannot vary the MA-PD Plan Beneficiary Premium subsidy for individuals within a given class of Members, other than as is required for the CMS-assessed late enrollment penalty; and c. Group cannot charge a Member for prescription drug coverage provided under the MA-PD Plan for more than the sum of his or her monthly MA-PD Plan Beneficiary Premium attributable to basic

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prescription drug coverage and 100% of the monthly MA-PD Plan Beneficiary Premium attributable to his or her supplemental prescription drug coverage (if any). 11.02. Low Income Subsidy: For all MA-PD Plan Low Income Subsidy eligible individuals: a. UnitedHealthcare will administer Low Income Premium Subsidy (LIPS) credits. Pursuant to federal regulations, the LIPS amount must first be used to reduce the portion of the monthly MA-PD Plan Beneficiary Premium attributable to basic prescription drug coverage paid by Member, with any remaining portion of the LIPS amount then applied toward the portion of the monthly MA-PD Plan Beneficiary Premium attributable to basic prescription drug coverage paid by Group. If, however, UnitedHealthcare does not or cannot directly bill Group’s Members, CMS will waive this up-front reduction requirement and permit UnitedHealthcare to directly refund the amount of the LIPS to the Member. b. If the sum of Member’s and Group’s monthly MA-PD Plan Beneficiary Premium is less than the amount of the LIPS credit, any amount of the LIPS credit above the total MA-PD Plan Beneficiary Premium must be returned to CMS; and c. If the LIPS credit for which a Member is eligible is less than the portion of the monthly MA-PD Plan Beneficiary Premium paid by Member, Group shall communicate to Member the financial consequences for Member of enrolling in the Group MA-PD Plan as compared to enrolling in another Medicare Part D Plan with a monthly beneficiary premium equal to or below the LIPS amount. d. Any LIPS credit due to Member and/or Group must be applied within forty-five (45) calendar days of receipt. e. To enable UnitedHealthcare to appropriately administer LIPS disbursements, Group shall complete and return an annual attestation issued by UnitedHealthcare. i. The attestation validates the Group’s current billing procedures and is used to determine the recipient of LIPS disbursements. ii. The lack of an up-to-date attestation will default the disbursement of LIPS to Member regardless of prior year attestation information.

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iii. UnitedHealthcare will not refund Group for LIPS disbursements made to Member during periods prior to an adequate attestation being completed and returned. iv. In order to collect and redistribute misappropriated LIPS disbursements made to Group, UnitedHealthcare reserves the right to bill Group who has received LIPS disbursements on behalf of Member due to incorrect attestation information. f. UnitedHealthcare shall provide reporting to Group for Members currently receiving LIPS disbursements. These reports will identify Member by name and display their respective monthly disbursements. These reports are intended to allow Group to recoup, if applicable, any remaining portion of the LIPS credit (payment that remains after the LIPS credit is used to exhaust the monthly MA-PD Plan Beneficiary Premium attributable to basic prescription drug coverage paid by the Member). If the reported amount exceeds $30, the amount distributed would likely cover multiple months. The employer would only be allowed to recoup the difference between the monthly MA-PD Plan Beneficiary Premium and the monthly LIPS credit amount. In these cases, a request for a more detailed report from UnitedHealthcare should be sought before attempting to recoup LIPS disbursements. 12) Compliance with the Health Insurance Portability and Accountability Act of 1996; Creditable Coverage. UnitedHealthcare is not responsible for issuing any and all notices of creditable coverage required by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) to eligible Members. D. BENEFITS AND CONDITIONS FOR COVERAGE The applicable EOC and any attachments are an integral part of this Agreement and are fully incorporated by reference into this Agreement. These documents include a complete description of the Covered Services and Covered Part D Drugs under the MA-PD Plan. UnitedHealthcare agrees to apprise Group concerning the type, scope and duration of Covered Services and Covered Part D Drugs to which Member is entitled under the MA-PD Plan. E. PARTIES AFFECTED BY THIS AGREEMENT; RELATIONSHIPS BETWEEN PARTIES 1)

Relationship of Parties. UnitedHealthcare is not the agent or representative of Group and shall not be liable for any acts or omissions of Group, its agents or employees, or any other person or organization with which Group has made, or hereafter shall make, arrangements for the performance of services under this MAPD Plan. Group is not the agent or representative of UnitedHealthcare and shall not

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be liable for any acts or omissions of UnitedHealthcare, its agents, employees or providers, pharmacies, or any other person or organization with which UnitedHealthcare has made, or hereafter shall make, arrangements for the performance of services under this MA-PD Plan.

2.

2)

Roles. UnitedHealthcare shall not be deemed or construed as an employer or as an employee for any purpose with respect to the administration or provision of benefits under Group’s benefit plan. UnitedHealthcare shall not be responsible for fulfilling any duties or obligations of an employer or an employee with respect to Group’s benefit plan. This Agreement is a business transaction between two unrelated parties.

3)

LEP/LIS. Agency agrees to collect and remit any Late Enrollment Penalties (“LEPs”) that CMS indicates are due with regard to any of Agency’s Members, where CMS indicates that such Members are eligible for a Limited Income Subsidy. Contractor will furnish reports to Agency, based on CMS information, to allow Agency to perform the foregoing function.

Compensation.

A. The Agency shall pay to the Contractor the rates detailed in Exhibit C. The total amount payable to the Contractor under this Agreement, including gross receipts tax and expenses, shall not exceed $1,500,000.00 (ONE MILLION, FIVE HUNDRED THOUSAND DOLLARS and ZERO CENTS), for the period of January 1, 2014 through June 30, 2014. This amount is a maximum and not a guarantee that the work assigned to be performed by Contractor under this Agreement shall equal the amount stated herein. The parties do not intend for the Contractor to continue to provide services without compensation when the total compensation amount is reached. Contractor is responsible for notifying the Agency when the services provided under this Agreement reach the total compensation amount. In no event will the Contractor be paid for services provided in excess of the total compensation amount without this Agreement being amended in writing prior to those services in excess of the total compensation amount being provided. B. Payment is subject to availability of funds pursuant to the Appropriations Paragraph set forth below and to any negotiations between the parties from year to year pursuant to Paragraph 1, Scope of Work, and to approval by the DFA. All invoices MUST BE received by the Agency no later than fifteen (15) days after the termination of the Fiscal Year in which the services were delivered. C. Contractor must submit a detailed statement accounting for all services performed and expenses incurred. If the Agency finds that the services are not acceptable, within thirty days after the date of receipt of written notice from the Contractor that payment is requested, it shall provide the Contractor a letter of exception explaining the defect or objection to the services, and outlining steps the Contractor may take to provide remedial action. Upon certification by the Agency that the services have been received and accepted, payment shall be tendered to the

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Contractor within thirty days after the date of acceptance. If payment is made by mail, the payment shall be deemed tendered on the date it is postmarked. However, the agency shall not incur late charges, interest, or penalties for failure to make payment within the time specified herein. 3.

Term.

THIS AGREEMENT SHALL NOT BECOME EFFECTIVE UNTIL APPROVED BY DFA. This Agreement shall terminate on JUNE 30, 2014 unless terminated pursuant to paragraph 4 (Termination), or paragraph 5 (Appropriations). In accordance with NMSA 1978, § 13-1-150, no contract term for a professional services contract, including extensions and renewals, shall exceed four years, except as set forth in NMSA 1978, § 13-1-150. 4.

Termination.

A. Grounds. The Agency may terminate this Agreement for convenience or cause. The Contractor may only terminate this Agreement based upon the Agency’s uncured, material breach of this Agreement. B.

Notice; Agency Opportunity to Cure.

1. Except as otherwise provided in Paragraph (4)(B)(3), the Agency shall give Contractor written notice of termination at least sixty (60) days prior to the intended date of termination to allow processing time for UnitedHealthcare to notify Members within twenty-one (21) calendar days advance notice of termination. Group termination shall always be effective on the first day of the month. Group shall continue to be liable for MA-PD Plan Beneficiary Premium for all Members enrolled in this MA-PD Plant through Group until the date of termination or, if later, the termination date indicated by CMS. 2. Contractor shall give Agency written notice of termination at least thirty (30) days prior to the intended date of termination, which notice shall (i) identify all the Agency’s material breaches of this Agreement upon which the termination is based and (ii) state what the Agency must do to cure such material breaches. Contractor’s notice of termination shall only be effective (i) if the Agency does not cure all material breaches within the thirty (30) day notice period or (ii) in the case of material breaches that cannot be cured within thirty (30) days, the Agency does not, within the thirty (30) day notice period, notify the Contractor of its intent to cure and begin with due diligence to cure the material breach. 3. Notwithstanding the foregoing, this Agreement may be terminated immediately upon written notice to the Contractor (i) if the Contractor becomes unable to perform the services contracted for, as determined by the Agency; (ii) if, during the term of this Agreement, the Contractor is suspended or debarred by the State Purchasing Agent; or (iii) the Agreement is terminated pursuant to Paragraph 5, “Appropriations”, of this Agreement. C.

Termination by UnitedHealthcare.

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1)

Termination in the Event of Non-Renewal or Termination of CMS Contract. This Agreement shall automatically terminate in the event of a termination or non-renewal of UnitedHealthcareâ&#x20AC;&#x2122;s contract with CMS (including termination or non-renewal with respect to a Service Area or a portion of a Service Area in which Member resides, as applicable). If the contract between UnitedHealthcare and CMS is not renewed, Memberâ&#x20AC;&#x2122;s MA-PD Plan coverage will be terminated unless Member decides to enroll in another Medicare Advantage with prescription drug benefit plan. If either UnitedHealthcare or CMS decides not to renew the contract at the end of the year, UnitedHealthcare will send Member a letter at least ninety (90) calendar days before the end of the contract. If CMS ends the contract in the middle of the year, Member will receive a letter at least thirty (30) calendar days before the end of the contract. In the event UnitedHealthcare exits a portion of the Service Area, Member will be notified prior to the Service Area exit, pursuant to CMS requirements.

2)

Termination for Nonpayment of MA-PD Plan Beneficiary Premium. UnitedHealthcare may terminate this Agreement in the event Group or its designee, or Member fails to remit MA-PD Plan Beneficiary Premium, including LEP, in full by the Due Date to UnitedHealthcare by giving written notice of termination of this Agreement to Group. Nonpayment of MA-PD Plan Beneficiary Premium includes, but is not limited to, payments returned due to non-sufficient funds (NSF) and post-dated checks. Such notice shall specify that payment of all unpaid MA-PD Plan Beneficiary Premium must be received by UnitedHealthcare within fifteen (15) calendar days of the date of issuance of the notice, and that if payment is not received within the fifteen (15) day period, no further notice shall be given, and coverage for all Members enrolled in this MAPD Plan shall automatically be terminated effective at the end of the month for which MA-PD Plan Beneficiary Premium has been actually received by UnitedHealthcare, subject to compliance with notice requirements.

3)

Termination for Breach of Material Term. UnitedHealthcare may terminate this Agreement if Group breaches any material term, covenant or condition of this Agreement and fails to cure such breach within thirty (30) calendar days after UnitedHealthcare sends written notice of such breach to Group. UnitedHealthcare's written notice of breach shall make specific reference to Group's action causing such breach. If Group fails to cure its breach subject to UnitedHealthcare's satisfaction within thirty (30) calendar days after UnitedHealthcare sends notice of the breach to Group, UnitedHealthcare may terminate this Agreement at the end of the thirty (30)-day notice period.

4)

Termination for Providing Misleading or Fraudulent Information. UnitedHealthcare may terminate this Agreement thirty (30) calendar days

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after UnitedHealthcare sends written notice to Group if Group provides materially misleading or fraudulent information to UnitedHealthcare in any Group questionnaire or is aware that materially misleading or fraudulent information has been provided on Eligible Retiree, Eligible Dependent or Member Enrollment forms. 5)

Termination for Ceasing to Meet Group Eligibility Criteria. UnitedHealthcare may terminate this Agreement upon thirty (30) calendar days written notice to Group if Group fails to abide by and enforce the conditions of Enrollment set forth in this Agreement.

6)

Termination for Withdrawal of Product from Market. UnitedHealthcare may terminate this Agreement upon at least ninety (90) calendar days prior written notice to Group if UnitedHealthcare no longer issues this particular MA-PD Plan within the applicable market, as permitted by law.

7)

Termination for Withdrawal from Market. UnitedHealthcare may terminate this Agreement upon at least one hundred eighty (180) calendar days prior written notice to the applicable state regulatory authority and to Group if UnitedHealthcare no longer issues group health benefit plans within the applicable market.

8)

Minimum Requirements. UnitedHealthcare may terminate this Agreement upon sixty (60) calendar days prior written notice to Group if Group no longer meets UnitedHealthcare’s minimum contribution or participation requirements.

9)

For Loss of Group’s Office Location within Service Area. Group acknowledges that in the event of such change of Group’s office location, a modification to MA-PD Plan Beneficiary Premium may be necessary. In the event of a change of Group’s office location, UnitedHealthcare and Group shall negotiate any changes requested by either UnitedHealthcare or Group to the MA-PD Plan Beneficiary Premium. In the event that the parties are unable to reach agreement regarding modified MA-PD Plan Beneficiary Premium, UnitedHealthcare may terminate Group upon thirty (30) calendar days written notice prior to such termination.

D. Return of Prepayment Premium Fees Following Termination. In the event of termination by either UnitedHealthcare (except in the case of fraud or deception in the use of UnitedHealthcare services or facilities, or knowingly permitting such fraud or deception by another) or Group, UnitedHealthcare will, within thirty (30) calendar days, return to Group the pro-rata portion of money paid to UnitedHealthcare which corresponds to any unexpired period for which payment has been received, together with amounts due on claims, if any, less any amounts due to UnitedHealthcare. UnitedHealthcare’s exercise of its termination rights under Section 4(C) does not waive UnitedHealthcare’s right to payment by Group for all coverage provided, including late fees as provided in this Agreement.

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E. Liability. Except as otherwise expressly allowed or provided under this Agreement, the Agency’s sole liability upon termination shall be to pay for acceptable work performed prior to the Contractor’s receipt or issuance of a notice of termination; provided, however, that a notice of termination shall not nullify or otherwise affect either party’s liability for pre-termination defaults under or breaches of this Agreement. The Contractor shall submit an invoice for such work within thirty (30) days of receiving or sending the notice of termination. THIS PROVISION IS NOT EXCLUSIVE AND DOES NOT WAIVE THE AGENCY’S OTHER LEGAL RIGHTS AND REMEDIES CAUSED BY THE CONTRACTOR'S DEFAULT/BREACH OF THIS AGREEMENT. F. Termination Management. Immediately upon receipt by either the Agency or the Contractor of notice of termination of this Agreement, the Contractor shall: 1) not incur any further obligations for salaries, services or any other expenditure of funds under this Agreement without written approval of the Agency; 2) comply with all directives issued by the Agency in the notice of termination as to the performance of work under this Agreement; and 3) take such action as the Agency shall direct for the protection, preservation, retention or transfer of all property titled to the Agency and records generated under this Agreement. Any non-expendable personal property or equipment provided to or purchased by the Contractor with contract funds shall become property of the Agency upon termination and shall be submitted to the agency as soon as practicable. 5.

Appropriations.

The terms of this Agreement are contingent upon sufficient appropriations and authorization being made by the Legislature of New Mexico for the performance of this Agreement. If sufficient appropriations and authorization are not made by the Legislature, this Agreement shall terminate immediately upon written notice being given by the Agency to the Contractor. The Agency's decision as to whether sufficient appropriations are available shall be accepted by the Contractor and shall be final. If the Agency proposes an amendment to the Agreement to unilaterally reduce funding, the Contractor shall have the option to terminate the Agreement or to agree to the reduced funding, within thirty (30) days of receipt of the proposed amendment. 6.

Status of Contractor.

The Contractor and its agents and employees are independent contractors performing professional services for the Agency and are not employees of the State of New Mexico. The Contractor and its agents and employees shall not accrue leave, retirement, insurance, bonding, use of state vehicles, or any other benefits afforded to employees of the State of New Mexico as a result of this Agreement. The Contractor acknowledges that all sums received hereunder are reportable by the Contractor for tax purposes, including without limitation, self-employment and business income tax. The Contractor agrees not to purport to bind the State of New Mexico unless the Contractor has express written authority to do so, and then only within the strict limits of that authority.

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7.

Assignment.

The Contractor shall not assign or transfer any interest in this Agreement or assign any claims for money due or to become due under this Agreement without the prior written approval of the Agency. 8.

Subcontracting.

The Contractor shall not subcontract any portion of the services to be performed under this Agreement without the prior written approval of the Agency. No such subcontract shall relieve the primary Contractor from its obligations and liabilities under this Agreement, nor shall any subcontract obligate direct payment from the Procuring Agency. 9.

Release.

Final payment of the amounts due under this Agreement shall operate as a release of the Agency, its officers and employees, and the State of New Mexico from all liabilities, claims and obligations whatsoever arising from or under this Agreement. 10.

Confidentiality.

Any confidential information provided to or developed by the Contractor in the performance of this Agreement shall be kept confidential and shall not be made available to any individual or organization by the Contractor without the prior written approval of the Agency. 11.

Product of Service -- Copyright.

All materials developed or acquired by the Contractor under this Agreement shall become the property of the State of New Mexico and shall be delivered to the Agency no later than the termination date of this Agreement. Nothing developed or produced, in whole or in part, by the Contractor under this Agreement shall be the subject of an application for copyright or other claim of ownership by or on behalf of the Contractor. 12.

Conflict of Interest; Governmental Conduct Act.

A. The Contractor represents and warrants that it presently has no interest and, during the term of this Agreement, shall not acquire any interest, direct or indirect, which would conflict in any manner or degree with the performance or services required under the Agreement. B. The Contractor further represents and warrants that it has complied with, and, during the term of this Agreement, will continue to comply with, and that this Agreement complies with all applicable provisions of the Governmental Conduct Act, Chapter 10, Article 16 NMSA 1978. Without in anyway limiting the generality of the foregoing, the Contractor specifically represents and warrants that:

19

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Contract ID# 14-343-0381-0001

1) in accordance with NMSA 1978, § 10-16-4.3, the Contractor does not employ, has not employed, and will not employ during the term of this Agreement any Agency employee while such employee was or is employed by the Agency and participating directly or indirectly in the Agency’s contracting process; 2) this Agreement complies with NMSA 1978, § 10-16-7(A) because (i) the Contractor is not a public officer or employee of the State; (ii) the Contractor is not a member of the family of a public officer or employee of the State; (iii) the Contractor is not a business in which a public officer or employee or the family of a public officer or employee has a substantial interest; or (iv) if the Contractor is a public officer or employee of the State, a member of the family of a public officer or employee of the State, or a business in which a public officer or employee of the State or the family of a public officer or employee of the State has a substantial interest, public notice was given as required by NMSA 1978, § 10-16-7(A) and this Agreement was awarded pursuant to a competitive process; 3) in accordance with NMSA 1978, § 10-16-8(A), (i) the Contractor is not, and has not been represented by, a person who has been a public officer or employee of the State within the preceding year and whose official act directly resulted in this Agreement and (ii) the Contractor is not, and has not been assisted in any way regarding this transaction by, a former public officer or employee of the State whose official act, while in State employment, directly resulted in the Agency's making this Agreement; 4) this Agreement complies with NMSA 1978, § 10-16-9(A)because (i) the Contractor is not a legislator; (ii) the Contractor is not a member of a legislator's family; (iii) the Contractor is not a business in which a legislator or a legislator's family has a substantial interest; or (iv) if the Contractor is a legislator, a member of a legislator’s family, or a business in which a legislator or a legislator's family has a substantial interest, disclosure has been made as required by NMSA 1978, § 10-16-7(A), this Agreement is not a sole source or small purchase contract, and this Agreement was awarded in accordance with the provisions of the Procurement Code; 5) in accordance with NMSA 1978, § 10-16-13, the Contractor has not directly participated in the preparation of specifications, qualifications or evaluation criteria for this Agreement or any procurement related to this Agreement; and 6) in accordance with NMSA 1978, § 10-16-3 and § 10-16-13.3, the Contractor has not contributed, and during the term of this Agreement shall not contribute, anything of value to a public officer or employee of the Agency. C. Contractor’s representations and warranties in Paragraphs A and B of this Article 12 are material representations of fact upon which the Agency relied when this Agreement was entered into by the parties. Contractor shall provide immediate written notice to the Agency if, at any time during the term of this Agreement, Contractor learns that Contractor’s representations and warranties in Paragraphs A and B of this Article 12 were erroneous on the effective date of this Agreement or have become erroneous by reason of new or changed circumstances. If it is

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Contract ID# 14-343-0381-0001

later determined that Contractorâ&#x20AC;&#x2122;s representations and warranties in Paragraphs A and B of this Article 12 were erroneous on the effective date of this Agreement or have become erroneous by reason of new or changed circumstances, in addition to other remedies available to the Agency and notwithstanding anything in the Agreement to the contrary, the Agency may immediately terminate the Agreement. D. All terms defined in the Governmental Conduct Act have the same meaning in this Article 12(B). 13.

Amendment.

A. This Agreement shall not be altered, changed or amended except by instrument in writing executed by the parties hereto and all other required signatories. B. If the Agency proposes an amendment to the Agreement to unilaterally reduce funding due to budget or other considerations, the Contractor shall, within thirty (30) days of receipt of the proposed Amendment, have the option to terminate the Agreement, pursuant to the termination provisions as set forth in Article 4 herein, or to agree to the reduced funding. 14.

Merger.

This Agreement incorporates all the Agreements, covenants and understandings between the parties hereto concerning the subject matter hereof, and all such covenants, Agreements and understandings have been merged into this written Agreement. No prior Agreement or understanding, oral or otherwise, of the parties or their agents shall be valid or enforceable unless embodied in this Agreement. 15.

Penalties for violation of law.

The Procurement Code, NMSA 1978 §§ 13-1-28 through 13-1-199, imposes civil and criminal penalties for its violation. In addition, the New Mexico criminal statutes impose felony penalties for illegal bribes, gratuities and kickbacks. 16.

Equal Opportunity Compliance.

The Contractor agrees to abide by all federal and state laws and rules and regulations, and executive orders of the Governor of the State of New Mexico, pertaining to equal employment opportunity. In accordance with all such laws of the State of New Mexico, the Contractor assures that no person in the United States shall, on the grounds of race, religion, color, national origin, ancestry, sex, age, physical or mental handicap, or serious medical condition, spousal affiliation, sexual orientation or gender identity, be excluded from employment with or participation in, be denied the benefits of, or be otherwise subjected to discrimination under any program or activity performed under this Agreement. If Contractor is found not to be in compliance with these requirements during the life of this Agreement, Contractor agrees to take appropriate steps to correct these deficiencies.

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Contract ID# 14-343-0381-0001

17.

Applicable Law.

The laws of the State of New Mexico shall govern this Agreement, without giving effect to its choice of law provisions. Venue shall be proper only in a New Mexico court of competent jurisdiction in accordance with NMSA 1978, § 38-3-1 (G). By execution of this Agreement, Contractor acknowledges and agrees to the jurisdiction of the courts of the State of New Mexico over any and all lawsuits arising under or out of any term of this Agreement. 18.

Workers Compensation.

The Contractor agrees to comply with state laws and rules applicable to workers compensation benefits for its employees. If the Contractor fails to comply with the Workers Compensation Act and applicable rules when required to do so, this Agreement may be terminated by the Agency. 19.

Records and Financial Audit.

The Contractor shall maintain detailed time and expenditure records that indicate the date; time, nature and cost of services rendered during the Agreement’s term and effect and retain them for a period of three (3) years from the date of final payment under this Agreement. The records shall be subject to inspection by the Agency, the Department of Finance and Administration and the State Auditor. The Agency shall have the right to audit billings both before and after payment. Payment under this Agreement shall not foreclose the right of the Agency to recover excessive or illegal payments 20.

Indemnification.

The Contractor shall defend, indemnify and hold harmless the Agency and the State of New Mexico from all actions, proceeding, claims, demands, costs, damages, attorneys’ fees and all other liabilities and expenses of any kind from any source which may arise out of the performance of this Agreement, caused by the negligent act or failure to act of the Contractor, its officers, employees, servants, subcontractors or agents, or if caused by the actions of any client of the Contractor resulting in injury or damage to persons or property during the time when the Contractor or any officer, agent, employee, servant or subcontractor thereof has or is performing services pursuant to this Agreement. In the event that any action, suit or proceeding related to the services performed by the Contractor or any officer, agent, employee, servant or subcontractor under this Agreement is brought against the Contractor, the Contractor shall, as soon as practicable but no later than two (2) days after it receives notice thereof, notify the legal counsel of the Agency and the Risk Management Division of the New Mexico General Services Department by certified mail. 21.

New Mexico Employees Health Coverage.

A. If Contractor has, or grows to, six (6) or more employees who work, or who are expected to work, an average of at least 20 hours per week over a six (6) month period during the term of the contract, Contractor certifies, by signing this agreement, to have in place, and agree

22

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Contract ID# 14-343-0381-0001

to maintain for the term of the contract, health insurance for those employees and offer that health insurance to those employees if the expected annual value in the aggregate of any and all contracts between Contractor and the State exceed $250,000 dollars. B. Contractor agrees to maintain a record of the number of employees who have (a) accepted health insurance; (b) declined health insurance due to other health insurance coverage already in place; or (c) declined health insurance for other reasons. These records are subject to review and audit by a representative of the state. C. Contractor agrees to advise all employees of the availability of State publicly financed health care coverage programs by providing each employee with, as a minimum, the following web site link to additional information: http://insurenewmexico.state.nm.us/. 22.

Employee Pay Equity Reporting.

Contractor agrees if it has ten (10) or more New Mexico employees OR eight (8) or more employees in the same job classification, at any time during the term of this contract, to complete and submit the PE10-249 form on the annual anniversary of the initial report submittal for contracts up to one (1) year in duration. If contractor has (250) or more employees, contractor must complete and submit the PE250 form on the annual anniversary of the initial report submittal for contracts up to one (1) year in duration. For contracts that extend beyond one (1) calendar year, or are extended beyond one (1) calendar year, contractor also agrees to complete and submit the PE10-249 or PE250 form, whichever is applicable, within thirty (30) days of the annual contract anniversary date of the initial submittal date or, if more than 180 days has elapsed since submittal of the last report, at the completion of the contract, whichever comes first. Should contractor not meet the size requirement for reporting at contract award but subsequently grows such that they meet or exceed the size requirement for reporting, contractor agrees to provide the required report within ninety (90 days) of meeting or exceeding the size requirement. That submittal date shall serve as the basis for submittals required thereafter. Contractor also agrees to levy this requirement on any subcontractor(s) performing more than 10% of the dollar value of this contract if said subcontractor(s) meets, or grows to meet, the stated employee size thresholds during the term of the contract. Contractor further agrees that, should one or more subcontractor not meet the size requirement for reporting at contract award but subsequently grows such that they meet or exceed the size requirement for reporting, contractor will submit the required report, for each such subcontractor, within ninety (90 days) of that subcontractor meeting or exceeding the size requirement. Subsequent report submittals, on behalf of each such subcontractor, shall be due on the annual anniversary of the initial report submittal. Contractor shall submit the required form(s) to the State Purchasing Division of the General Services Department, and other departments as may be determined, on behalf of the applicable subcontractor(s) in accordance with the schedule contained in this paragraph. Contractor acknowledges that this subcontractor requirement applies even though contractor itself may not meet the size requirement for reporting and be required to report itself. Notwithstanding the foregoing, if this Contract was procured pursuant to a solicitation, and if Contractor has already submitted the required report accompanying their response to such solicitation, the report does not need to be re-submitted with this Agreement.

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Contract ID# 14-343-0381-0001

23.

Invalid Term or Condition.

If any term or condition of this Agreement shall be held invalid or unenforceable, the remainder of this Agreement shall not be affected and shall be valid and enforceable. 24.

Enforcement of Agreement.

A party's failure to require strict performance of any provision of this Agreement shall not waive or diminish that party's right thereafter to demand strict compliance with that or any other provision. No waiver by a party of any of its rights under this Agreement shall be effective unless express and in writing, and no effective waiver by a party of any of its rights shall be effective to waive any other rights. 25.

Notices.

Any notice required to be given to either party by this Agreement shall be in writing and shall be delivered in person, by courier service or by U.S. mail, either first class or certified, return receipt requested, postage prepaid, as follows: To the Agency: Mark Tyndall Executive Director New Mexico Retiree Health Care Authority 4308 Carlisle Blvd., NE, Suite 104 Albuquerque, NM 87107 mark.tyndall@state.nm.us

To the Contractor: Gayle Q. Adams President, Sales & Client Management United Retiree Solutions Public Sector and Labor Markets 9800 Healthcare Lane Minnetonka, MN 55343 gadams@uhc.com 26.

Authority.

If Contractor is other than a natural person, the individual(s) signing this Agreement on behalf of Contractor represents and warrants that he or she has the power and authority to bind Contractor, and that no further action, resolution, or approval from Contractor is necessary to enter into a binding contract.

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Contract ID# 14-343-0381-0001

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date of signature by the DFA Contracts Review Bureau below. New Mexico Retiree Health Care Authority

By:

Date:_____________ Mark Tyndall, Executive Director

By:

____________________________ Debbie Vering, Chief Financial Officer

Date:_____________

Agency General Legal Counsel, Certifying legal sufficiency: Rodey, Dickason, Sloan, Akin & Robb, P.A.

By:

______________________________

Date:______________

United Healthcare Insurance Company

By: Its:

Date:_____________

The records of the Taxation and Revenue Department reflect that the Contractor is registered with the Taxation and Revenue Department of the State of New Mexico to pay gross receipts and compensating taxes. ID Number: 36-2739571

By:

____________________________________________ Taxation and Revenue Department

Date:_____________

This Agreement has been approved by the DFA Contracts Review Bureau:

By:

____________________________________________ DFA Contracts Review Bureau

Date:_____________

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104


New Mexico Retiree Health Care Authority Fiscal Year 2014 First Quarter Review Health Care Benefit Fund As of September 30, 2013, expenditures are $61,032,400 and revenues are $69,140,400 creating a surplus of $8,108,000. At this time, Management projects revenues in excess of expenditures of $31.9 million in FY14 based on a similar utilization pattern for hospitals and physicians, growth in membership, migration between health plans and estimated revenues. Claim expenditures through the first quarter of FY14 as compared to the same time frame in FY13 have increased by approximately 8.6 percent. Upward pressures include: 1. NMRHCA has grown by 2,522 members or 4.6 percent compared to the same time frame in FY13 2. Claim costs have increased by $4.8 million or 4 percent 3. Participants have begun to meet their deductibles and annual out-of-pocket limits Downward pressures include: 1. Continued migration toward lower premium/higher out-of-pocket costing plans 2. Increased cost sharing on the prescription drug plan 3. Limited growth in dependent participation (38 members) Current projections indicate sufficient budget authority exists to cover claim costs through the remainder of FY14. NMRHCA staff will continue to monitor and report revenues and expenditures in order to identify significant changes from projected amounts. Revenues through the first quarter of FY14 have grown by $3.6 million, or 5 percent compared to the same time period in FY13. This increase is supported by a $2.7 million, or 10 percent increase in retiree premiums, $489 thousand increase in employer/employee contributions and $373 thousand growth in transfers from the Taxation and Revenue Suspense Fund.

105


Below is a summary of the cash contributions made to the SIC for FY 2014:

Transfer Effective August 1, 2013 October 1, 2013 Total

Amount Transferred $              20,000,000 $                 3,500,000 $              23,500,000

The $20 million transfer made on August 1, 2013, is entirely comprised of revenues earned and received in FY13. However, total operating transfers between NMRHCA and the State Investment Council totaled $15,315,000 in FY13 as the timing associated with each transfer has to be exactly the first day of each month. Program Support Fund The Agency budget for FY14 is $2,665,300. As of September, 2013, expenditures are $698,300 with supporting transfers made from Health Care Benefit Fund. Current projections indicate the need to submit a budget adjustment request (BAR) increasing the personal services and employee benefits and other categories of Program Support. Factors contributing to the shortfall include: a zero percent vacancy rate (all positions are currently filled) combined with increases employee health benefits and retirement contributions. In addition, the other category is projecting a shortfall related to charges from the Department of Information Technology for telecommunication services, copying and mailing costs, and rent of equipment. NMRHCA staff will seek Board approval of a budget adjustment request increasing the personal services and employee benefits and other category at the December 3rd meeting. The includes an increase of $83 thousand between the two categories as authorized in Laws 2013, Chapter 227, Section 10, Subsection D, which allows agencies to increase their budget in an amount equal to 5 percent of their appropriation provided in Section 4 of the General Appropriation Act.

106


New Mexico Retiree Health Care Authority First Quarter Budget Review Comparison of Projected vs. Actual Fiscal Year 2014 (in thousands) Healthcare Benefit Fund 1st Quarter (FY14-FY13 Comparison) FY14 Approved Budget Sources: Employer/Employee Contributions

FY14 Actual

FY13 Actual

% Change

Budget Actuals

$ 26,114.9

$29,737.1

$

29,247.8

1.7%

$3,622.2

Retiree Contributions

$ 28,031.6

$29,954.4

$

27,231.4

10.0%

$1,922.8

Taxation & Revenue Fund

$

5,982.8

$5,796.0

$

5,422.2

6.9%

-$186.8

Other Miscellaneous Revenue

$

4,443.7

$3,647.4

$

3,638.0

0.3%

-$796.3

Interest Income

$

6.7

$5.5

$

6.6

-16.7%

-$1.2

Total Sources

$ 64,579.7

$69,140.4

$

65,546.0

5.5%

$4,560.7

$ 63,913.4

$60,334.1

$

55,581.7

8.6%

-$3,579.3

Uses: Medical Contractual Services Other Financing Uses

$

666.3

$776.9

$

671.0

15.8%

$110.6

Total Uses

$ 64,579.7

$61,111.0

$

56,252.7

8.6%

-$3,468.7

8,029.4

$

9,293.3

Sources Over Uses

$

-

FY14 Approved Budget Sources: Employer/Employee Contributions

$

Revenues & Expenditures/Projections % Remaining Collected/ FY14 Actual Balance Expended

Estimated FY14 Total

$ 104,459.7

$29,737.1

$

74,722.6

28.5%

$122,783.0

Retiree Contributions

$ 112,126.5

$29,954.4

$

82,172.1

26.7%

$121,614.9

Taxation & Revenue Fund

$ 23,931.3

$5,796.0

$

18,135.3

24.2%

$23,931.3

Other Miscellaneous Revenue

$ 17,774.7

$3,647.4

$

14,127.3

20.5%

$17,589.6

Interest Income

$

26.7

$5.5

$

21.2

20.6%

$22.0

Total Sources

$ 258,318.9

$69,140.4

$

189,178.5

26.8%

$285,940.7

$ 255,653.6

$60,334.1

$

195,319.5

23.6%

$251,291.5

Uses: Medical Contractual Services Other Financing Uses/Refunds

$

2,665.3

$776.9

$

1,888.4

29.1%

$2,695.7

Total Uses

$ 258,318.9

$61,111.0

$

197,207.9

23.7%

$253,987.2

Sources Over Uses

$

8,029.4

$31,953.5

107


New Mexico Retiree Health Care Authority First Quarter Health Care Benefit Fund Detail Fiscal Year 2014 (in thousands) FY14 Actual July 2013 - September 2013 REVENUE: Employer/Employee Contributions

29,737.1

Retiree Contributions

29,954.4

Taxation and Revenue Suspense Fund

5,796.0

Other Miscellaneous Revenue

3,647.4

Interest Income TOTAL REVENUE:

5.5 69,140.4

EXPENDITURES: Prescriptions MEDCO Total Prescriptions

19,962.2 19,962.2

Non-Medicare Blue Cross Blue Shield BCBS Administrative Costs Presbyterian Presbyterian Administrative Costs Total Non-Medicare

14,980.4 583.3 6,721.9 463.4 22,749.0

Medicare Blue Cross Blue Shield

8,274.2

BCBS Administrative Costs

1,234.9

Presbyterian

894.4

Lovelace

559.7

Total Medicare

10,963.2

Other Benefits Davis Vision

440.2

Delta Dental

1,392.7

Standard Life Insurance

2,481.4

United Concordia Dental

2,345.4

Total Other Benefits

6,659.7

Other Expenses Program Support Refunds Total Other Expenses TOTAL EXPENDITURES: Total Revenue over Total Expenditures

698.3 78.6 776.9 61,111.0 8,029.4

108


New Mexico Retiree Health Care Authority First Quarter Budget Review Comparison of Budget vs. Actual Fiscal Year 2014 (in thousands) Program Support 1st Quarter Projections (FY14-FY13 Comparison) FY14 Approved Budget

FY14 Actual

FY13 Actual

Sources: Other Transfers

$

666.3

$

698.3

$

719.5

$

(21.2)

-2.9%

Total Sources

$

666.3

$

698.3

$

719.5

$

(21.2)

-4.8%

$

428.0

$

417.5

$

443.6

$

(26.1)

-5.9%

Contractual Services

$

111.3

$

51.9

$

85.0

$

(33.1)

-38.9%

Other Costs

$

127.0

$

228.9

$

190.9

$

38.0

19.9%

Total Uses

$

666.3

$

698.3

$

719.5

$

(21.2)

-2.9%

Uses: Personal Services and Benefits

$ Change

% Change

Revenue and Expenditure Projections Approved Operating Budget

FY14 Actuals

Sources: Other Transfers

$ 2,665.3

$

698.3

$

Total Sources

$ 2,665.3

$

698.3

$ 1,712.0

$

Contractual Services

$

445.2

Other Costs

$

Total Uses

Uses: Personal Services and Benefits

% Collected/ Expended

FY14 Estimated Total

Surplus/ Deficiency

1,967.0

26%

$ 2,695.7

$

(30.4)

$

1,967.0

26%

$ 2,695.7

$

(30.4)

417.5

$

1,294.5

24%

$ 1,746.1

$

(39.1)

$

51.9

$

393.3

12%

$

397.6

$

47.6

508.1

$

228.9

$

279.2

45%

$

552.0

$

(43.9)

$ 2,665.3

$

698.3

$

1,967.0

26%

$ 2,695.7

$

(30.4)

Remaining Balance

109


Expenditure Detail (in thousands) Personal Services / Employee Benefits Acct #

Account Description

Approved Budget

Expended Budget

Remaining Balance

Estimated Expenditures

Projected Balance

520100

Exempt Positions

263.3

34.9

228.4

131.1

520300

Classified Perm. Positions

916.4

207.4

709.0

825.0

(116.0)

97.3

520800

Annual & Comp Paid

0.0

0.0

0.0

521100

Group Insurance Premium

150.6

30.3

120.3

121.7

(1.4)

521200

Retirement Contributions

185.6

39.8

145.8

158.6

(12.8)

521300

FICA

90.2

17.7

72.5

73.1

(0.6)

521400

Worker Comp

0.3

0.5

(0.2)

0.0

(0.2) 0.0

(5.0)

521410

GSD Work Comp Ins

3.0

3.0

0.0

0.0

521500

Unemployment Comp

12.1

12.1

0.0

0.0

0.0

521600

Employee Liability Insur

66.9

66.9

0.0

0.0

0.0

521700

Retiree Health Care

23.6

4.9

18.7

19.1

521900

Other Employee Benefits

0.0

0.0

0.0

0.0

1,712.0

417.5

1,294.5

1,328.6

Approved Budget

Expended Budget

Remaining Balance

Estimated Expenditures

TOTAL

(0.4) 0.0 (39.1)

Contractual Services Acct #

Account Description

Projected Balance

535200

Professional Services

250.0

37.8

212.2

202.0

535300

Other Services

22.5

3.0

19.5

11.5

8.0

535400

Audit Services

44.0

7.3

36.7

31.0

5.7

535500

Attorney Services

75.0

3.8

71.2

51.2

20.0

535600

Information Technology Services

53.7

0.0

53.7

50.0

3.7

445.2

51.9

393.3

345.7

47.6

Approved Budget

Expended Budget

Remaining Balance

Estimated Expenditures

TOTAL

10.2

Other Costs Acct #

Account Description

Budget Balance

542100

Employee In-State Mileage & Fares

5.0

1.1

3.9

2.9

542200

Employee In-State Meals & Lodging

4.5

1.4

3.1

0.6

2.5

542300

Board & Commission - In-State

33.0

8.9

24.1

24.1

0.0

542500

Transportation-Fuel & Oil

2.0

0.1

1.9

1.0

0.9

542600

Transportation

0.1

0.0

0.1

0.1

0.0

542700

Transportation - Insurance

0.3

0.0

0.3

0.0

0.3

542800

State Transportation Pool Charges

7.0

0.7

6.3

3.6

2.7

543100

Maintenance - Grounds & Roadways

0.0

0.1

(0.1)

0.0

(0.1)

543200

Maintenance - Furniture, Fixtures & Equipment

13.0

2.3

10.7

4.3

6.4

543300

Maintenance - Building & Structure

7.0

0.0

7.0

0.5

6.5

543400

Maintenance - Property Insurance

3.0

1.9

1.1

0.8

0.3

543500

Maintenance - Services

0.0

0.0

0.0

0.0

0.0

543700

Maintenance Services

0.8

0.0

0.8

0.0

0.8

543820

Maintenance IT

2.0

0.0

2.0

2.0

0.0

544000

Supply Inventory IT

20.0

2.0

18.0

3.0

15.0

544100

Supplies - Office Supplies

10.0

2.6

7.4

4.4

544900

Supplies - Inventory Exempt

6.0

21.6

545700

DoIT - ISD Services

2.8

0.4

2.4

2.4

0.0

545701

DoIT - HCM Fees

7.0

8.6

(1.6)

0.0

(1.6)

545900

Printing & Photo. Services

47.0

21.4

25.6

28.6

(3.0)

546100

Postage & Mail Services

58.8

70.7

(11.9)

14.3

(26.2)

546400

Rent of Land & Buildings

145.0

49.7

95.3

99.2

(3.9)

546500

Rent of Equipment

38.0

16.3

21.7

41.2

(19.5)

546600

Telecomm

20.0

4.8

15.2

18.2

(3.0)

546610

DOIT - Communications

57.3

10.5

46.8

64.5

(17.7)

546700

Subscriptions & Dues

2.0

1.4

0.6

0.6

0.0

546800

Employee Training & Edu.

6.5

1.0

5.5

1.5

4.0

546801

Board Member Training

1.0

0.0

1.0

1.0

0.0

546900

Advertising

2.0

0.0

2.0

1.0

1.0

547900

Miscellaneous Expense

2.0

0.2

1.8

1.3

0.5

547999

Request to Pay Prior Year

0.0

0.0

0.0

0.0

0.0

548300

Information Technology Equipment

0.0

0.0

0.0

0.0

0.0

549600

Employee Out-Of-State Mileage & Fares

0.0

0.0

0.0

0.0

0.0

549700

Employee Out-Of-State Meals & Lodging

1.0

0.0

1.0

0.0

1.0

549800

B&C-Out-Of-State Mileage & Fares

2.0

0.1

1.9

1.0

549900

B&C- Out-Of-State Meals & Lodging TOTAL

2.0 508.1

1.1 228.9

0.9 279.2

1.0 323.1

(15.6)

1.0

3.0

0.0

(15.6)

0.9 (0.1) (43.9)

110


NEW MEXICO RETIREE HEALTH CARE AUTHORITY CHANGE IN NET ASSET VALUE FOR THE MONTH ENDED SEPTEMBER 30, 2013 Large Cap Active Market Value

August 31, 2013

Core Bonds

$42,733,857.44

Large Cap Index

$101,001,981.82

Non U.S. Developed

$41,873,885.40

$44,718,418.39

Non U.S. Emerging

Mid/Small Cap

Total

$31,980,526.67

$34,239,829.30

$296,548,499.01

Prior Month Adjustment

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Contributions

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Distributions/Withdrawals

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Fees

0.00

0.00

0.00

0.00

0.00

0.00

0.00

57,166.66

326,489.32

14.60

262,218.32

83,938.78

36,576.87

766,404.55

1,812,473.89

1,107,743.72

1,455,475.71

2,992,112.19

2,042,232.23

1,729,547.25

11,139,584.98

$44,603,497.98

$102,436,214.86

$43,329,375.71

$47,972,748.90

$34,106,697.67

$36,005,953.43

$308,454,488.55

Income Earned Capital Appreciation/Depreciation

August 31, 2013

New Mexico Retiree Health Care Authority Market Value of Investment Fiscal Year 2014 $250,000,000 $225,000,000 $200,000,000 $175,000,000 $150,000,000 $125,000,000 $100,000,000 $75,000,000 $50,000,000 $25,000,000

Core Bonds

Large Cap Index

Non US Develope d

Eme rging Markets

30-Jun-14

31-May-14

30-Apr-14

31-Mar-14

28-Feb-14

31-Jan-14

31-Dec-13

30-Nov-13

31-Oct-13

30-Sep-13

31-Aug-13

$0 31-Jul-13

Market Value

Mid/Small Cap

111


NEW MEXICO RETIREE HEALTH CARE AUTHORITY PORTFOLIO ALLOCATION FOR THE MONTH ENDED SEPTEMBER 30, 2013

Investment Equity Domestic Large Cap Active Large Cap Index Mid/Small Cap

Market Value

% of Total

Long-term Target

$ 44,603,497.98 43,329,375.71 36,005,953.43

14% 14% 12% 40%

12.5% 12.5% 10% 35%

20-30%

17% 10% 27%

15% 15% 30%

10-20% 10-20%

33% 33%

35% 35%

30-40%

100%

100%

International Non US Developed 47,972,748.90 Emerging Markets 34,106,697.67 Asset Allocation 11% Emerging Markets

Fixed Income Core Bonds 16% Non US Developed

Total

10% Mid/Small Cap

14% Large Cap Active

102,436,214.86

37% Core Bonds

12% Large Cap Index############

Policy Range

5-15%

112


November 2013 Board Book