Good morning, police and fire, retirement Assistance Committee number 3367 this island session, when I call tonight, please step into a present trustee, Kay here,
present at home, Trustee ballots, Trustee McGinnis, he
has to be excused.
Trustee Nazareth, present, Trustee Patel,
he has to be excused. Trustee me. Present, Trustee
Thomas, present president,
Miss Gabby, ours present, Oscar king,
he has to be excused. The time is now
Excellent. Thank you very much. I need a motion to approve the agenda. Motion. Matt second, Leo, any questions on the agenda? Anyone abstained or opposed? Carried unanimously. Retirement applications. We have one retirement application motion. Ron, second, second, Matt, any request, any questions on the retirement application for
senior corporal,
seeing none, anyone abstained or opposed, carried unanimously. I need someone to please acknowledge the receipts, acknowledge knowledge. I need a motion for disbursements. Motion. Ron, second, second. Leo, any questions on those? All right, seeing none. Anyone abstained or opposed, carried unanimously, refunds annuity withdraws motion. Mike, second second, Matt, any questions on the annuity withdraws? Seeing none anyone stand your clothes. Carried unanimously. I need a motion for the employee loans. Motion. Mike, second, second. Matt, I'm just making sure there are some Okay. Any questions on the employee loans? All right, seeing none. Anyone abstained or opposed. Carried unanimously. I administered distribution of November 21 2024 those are in your packet. I need minutes for approval of November 7, 2024 is there such a motion? Second? Motion. Leo, second, Greg, let me just make sure I wasn't at the 21st when I was there in the seventh. Okay. Any other questions on the minutes? Anyone abstained? So one abstention. George, okay, right. Copy
on the seventh. Oh, it's here. I couldn't vote. Couldn't talk.
All right, all right. Carrie Motion carries, okay. Assistant Executive Director support, Kelly Capra,
good morning. Board morning, hopefully short and sweet today, reminder that we cancel the December the 19th meeting. Our office will be closed for Christmas, between Christmas and New Year's, so the office will be closed, and then I also have those Voya balances that I've been reporting on. So the market value of the Voya account for drop is 106 million, give or take little over, and the book value is a little over 113 I am and that is all I have, unless you
guys have anything for me. Just Kelly, Marie Racine, wanted to drop an invitation
to invite everybody to
Christmas party on December 10, 17th, December
17, yes
at the atenium Hotel he
has opened.
Thank you. Yes, mentioning it before the meeting started. But you know, as everyone saw, city council approve the MOUs for the benefit of plan changes for all of the public safety unions. So the last step now is to get anchorage court approval. I've got, I just need a certified resolution from the clerk. I've ordered that chair Pegg knows we need HR to get the final signed demo used by everybody. So that's the last step. And I know you and David have been talking about them programming that is approval.
Yeah, we notified the staff on Monday that things were in motion. We have started to receive a few calls. We've been telling them that, you know, right now, things are still in motion. It's not all been signed up on when that it's going to be several months before we can get the programming done. And then we've just started looking at the numbers of how many people will have to look at it's gonna take a while. There's a lot of calculations. I mean, we're talking into the hundreds. No,
I think we all knew that. I just, I just wanted to hear about in front of the whole board so they
knew they Oh, definitely, thank you. Yes, that's
all. And then we start talking again. In 20 days, we start talking about improvements again, starting January 2025, so,
yes, right? Kelly,
any word or date? Nothing on the 13 checkers.
Yeah, sorry, nothing on that. That's a David project.
I was guided. Wasn't
sure, John, yeah, as soon as I opened my mouth, he started
changing. Yeah, I can give an update. So as I think the whole board knows, city council formed a thing called the retired Task Force. It's meeting tomorrow at 11 o'clock. That's one of their questions, too. And you guys, you know this board is really educated on it already, but I'll just say it out loud, because the combined plan document for GRS and PFRs prohibits 13th checks, we need to pursue a plan amendment, just like we did with these MOUs for the public safety union. So it'll be the same process. So right after the first of the year, I'll submit a resolution to city council to authorize the ten million payment, which they already appropriated. It's in the budget. And what that resolution does is, just like the MOUs, it's amending the plan to allow a 13th check, just like any plan amendment under statewide need an actuarial cost study. Gabriel Reuters already done that cost study that says that there's, of course, a de minimis effect on the system, because the 10 million will get transferred from the city to the retirement system, and then the retirement system will distribute it to the retirees. And the resolution that we're going to submit to city council, there'd be a number of ways to allocate the 10 million. But the resolution we're going to submit says we take 5 million for each system. So 5 million GRS, 5 million PFRs, and we'll instruct the retirement systems to PFRs, take the 5 million, divide it by the number of retirees and beneficiaries of the component two plan on the date of the distribution and give the same dollar amount to everybody. So if I I did that calculation based on the 630, 23, valuation, or the number of retirees and beneficiaries, we have our comp to plan, and it would be about $600 for every police and fire retiree or beneficiary. So that that'll be the steps. And now you see the drill. It's, you know, now we're, we're, after 10 years, pension changes are allowed again, but again, as we all know under state law, public pension plan can be changed, or the governing body adopts it. They've got to have an actuarial cost study. And then once you do that, you know you're good to go. So that's that's where we stand, and I'll be reporting that tomorrow too, so I don't know how long that'll take. After the first year, I'm sure Council will approve it pretty quickly, because we're the bankruptcy case is still open, we're going to take that to the court too and just make sure that they bless us doing it. So while we don't have an exact date. I've got the Russo drafted and the deeper rotor piece already done, so I think we're
at and then to add to our side, I'm thinking that the payment probably won't be until what, March 1, maybe February 1, really pushing,
hopefully by making. No,
I don't think I'll be that late, but
give them
a date because they want to make sure they're still around to get it.
Yeah, I definitely don't think it's going to be February. That's only giving us, like, 20 days in January to get it on payload, make sure there's no issues. And. Thank you.
I know also we have to, we got a copy of the Actuary report correct, so we have to also look at that the board we've done with the actuary report for the benefit changes,
oh, for the collective bargaining changes after the bankruptcy court, I guess we could potentially, I'll make sure they're on the January agenda. Okay? For the
stuff? Yep, okay. Thank you. All right. Thanks, John. Any other questions for Kelly or for our Assistant Executive Director Seeing none. We'll move on to the executive director report.
Just a couple things to piggyback on what Kelly said. So if your members come to you and ask about the benefit changes, just let them know. If they can come down and retire, they can come down and drop it to be under the old rules. If they qualify for the new stuff, we'll just pay them retro when it's all programmed in. But we would hope if they can't wait. Let them to wait. I don't like doing the retro stuff. It just makes it a lot more complicated. But I know some people have to go and on the player side, and some some other, some people just don't want to wait. But just let them know they're not to be surprised. When it comes down, it's not going to have the higher amount within the rules. So just get that word out in two. Kelly said, we're closed between the 23rd and the second, also on the 23rd we're going to be remote only, so the office is open, but not for physical people to come in. It's going to be by phone only on the 23rd
when does the when will people again? Has the notice went out that retires will not get their check until January 2.
It was on their check stub. This you read the check stuff and one out of so
I did mention that we canceled the January the December 19 meeting. But we also, because of the timing, we're not having the January two meeting either, because we That's the day we come back. There's just no way to have a meeting. So our next meeting after this one will be January the 16th. Sorry, thanks,
and excuse me on the fire side. You know we have people that have to leave at age 60 so. And the reason why I was talking to him about is because we do have someone coming down here on the 11th of December. It's forced retirement age 60. And you know, they do sign documents that state, this is my pension, and this is long as explained to them that okay, it could change, and it can only go up once these are instituted, just to let them know. So, but yeah, I know it's a lot. Yeah, it's a lot, so let's
get done. It just makes it
more complicated.
So right now we Gail is in charge of a couple of overtime projects that we've got starting off. We've just got some backlogs and some places that we need to clear. And so she's coordinating that, knowing that as well, these collective bargaining agreements are coming down the pike, so to clear some of the other backlog with the estimates and other things that need to be done, remember, we were doing an audit of people that retired and only picked up legacy but were entitled to hybrid that audit is in place still. People are working on that. In the overtime project, we had to clear the decks on some things for this collective bargaining and 13 stuff coming through.
How's the whole little world that Yvonne had in here?
Yeah, yeah, doing real
somebody hired in that department started Okay, in a payroll and she's working on a project when she has downtime as well. So it's working.
We have another new person coming to well, we're having a little back and forth with HR, because they wanted to send them down here on the 23rd Well, Robin for the next week days. So we filled them. No, don't send them till after New Year. So we're going back and forth with HR not to get them here before. Just start on the 23rd and then, okay, take a week and a half off. You know, it's like, oh, my
can't even start on the 23rd Yeah. Then
we're remote. We're we'll get it worked out, but we're getting another person there, so we're filling our spots. And
the issue of that caused the replacement that's still in your guys hands? Yes, okay, we
are still working on it. The forensic audit did kick off yesterday. There was some delays due to a death, but that perfect.
That's it. Yeah, okay, Mr. Chair, maybe
one more thing for David Kelly. So as you know, the city's committed to do quarterly payments of the legacy. Just talking about so that's on track for December 16 will be the same amount, really, like 20, money, 51,000,008, 50 will come in and just. For Lorenzo's knowledge, Ramsey knows payroll,
yeah,
so it would be really so it's early then, right? Because, yeah,
it's hard each quarter, but yeah, we we set it up just because the money's coming. Some of them comes now from Bank of New York, Mellon retired Production Fund. So we don't like to wait till last week, because something
goes wrong with the bank this city. Good job, John, nice job. We got people. We got people. We got people. Love it like we met about looking
ahead. Well, we
won't talk about the benefit negotiated. Let's see a year and a half to get the negotiations completed. So, but it got done. So anyway. All right, perfect timing. Anything else for David? All right, seeing that, we're gonna go to public comment. Do we have anybody for public comment? We'll again ask that you limit your time to three minutes. Anything for public comment? Good morning. How are you? Kathy Colin, I'm well, how about yourself? It's
a great okay. You have anything? Well, we'll be having the registration link soon. Kelly, so I might even go through today, because you have them already. That's where the mass upcoming conference is, which hopefully will be entered into the calendar. I know we'll have registration link, but I will remind again that the women's form is the first one comes up is between March 18 or 19th, and it will be in Boston. Posted by Wellington asset management. It is open to all, not just to to women, but I highly recommend it as a great form of education for trustees. So all are welcome. It'll be in on Boston, and I'll have Kelly The registration link very, very soon, just because they're releasing it. And also on the eighth, I'd like to invite everyone here as well. Locally, Detroit chapters hosting their annual holiday party December 18, and that will be, I have a flyer to use shortly, but that will be at the classic and historic floods bar and grill right over on Saint Antoine. Everyone knows floods. It's been there forever, and hopefully will remain. So we'll be there on December the 18th of the Wednesday, and we will kick off around six o'clock. And so all are welcome to please join us over there. Have just had a good time. We'll have a Christmas cheer, and there will be definitely, we'll have some visitors from out of town. They're all looking forward to seeing you all. So again, thank you all, and that's it. Thank you, Chairman, thank
you, Cathy, anybody else for public comment? No. Good, no. All right. Good. Moving on now to public relations advisor report. Bruce, good
morning, Mr. Chair and Board of Trustees. I really don't have much report, no meeting inquiries since our last meeting. One other item that pending legal report or the one issue is table, and I don't know whether that'll come up today or not, if so, I'd like to address that issue. Other than that, I have nothing else to
report. Thanks, Bruce. Any questions for our PR guy? All right, thank you. I lobbyist report. I know Dr King is not available. He is in Lansing. He reached out to be excused today, and I told him that again, we have those two House bills that are Lansing. The 21st I believe, is when lame duck session ends, and we're still looking for those two bills to be funded. It's on his radar screen. It's on the df of phase lobbyist radar screen, and we're hoping to get those two bills funded, 4866
collective bargaining. Yeah, so they wanted the state firefighters want to add language to public act 312 to make staffing a mandatory subject of bargaining. Right now it's not so. That's why some cities are able to ride with one or two firefighters on an engine or a truck or squad. We in Detroit, we do have it in our contract that we have minimal staffing. So that's but that's what you're trying to do in life for them, something to get that Social Security, yeah,
got the updates. Nothing really, other than it's still there. You're trying to there's, I don't know. They're a bunch of organizations and everything, are really pushing for it. So they didn't
put it on the schedule, not yet.
All you need to do is call our two senators and then please let them to get them to put it up. Yes,
I think each public safety union has a link which all it is typing in your address, and it automatically sends a letter to your legs, to your center in the PC. So there's
also a. Another one, another site that you can go on that's nationwide, for whoever was interested. Yeah, yeah.
I don't know if Bruce can help with that. I mean, I don't think the the general public knows this. I mean, just to say it out loud, I mean, I was surprised to hear there's this provision. So, as we all know, police officers and firefighters in Detroit and many other places don't participate in social security, so arguably, your pension benefit is higher than if you had a Social Security benefit that was coming. But then, as I understand this, which strikes me as just patently unfair, if you are a police officer or firefighter who has another job unrelated to public safety, and you contribute enough in Social Security or benefit that you don't get that benefit that That, to me, is 40% 40 Yeah, to me,
$62 right?
40% of what you would have gotten, oh, that
we don't know what the deal is in DC, to say that it's been on the agenda for the last least 25 years that I went on the job. So they've been trying to repeal it all these years. But, you know, they think that because of us getting it, it'll bankrupt the Social Security, which I don't see how it could. It
was like 6.8 billion over a 10 year period.
But, yeah, but you know that, like, down there enough, that's not a lot. But even, even if you were in a Social Security where some fire departments do pay into it, if you don't have 35 years of taxable earnings that meet the IRS limits, you still can get gouge so even, like even teachers, I think, right teachers that pay into it, if you get a pension in, from a public entity, and you pay the Social Security you don't have those 35 Yeah, you get gouged. I believe there's
government employees too. Yes, yes, a
lot of it's a bigger number. It's not just police and fire, government workers.
Yeah, terrible. And
quite honestly, yeah, I mean to say at the end of the day. And I've told people this, the general retirement system has a better retirement benefit paying into Social Security and a pension than we do, because all we get is our pension. It's all we get when you put Social Security together with the pension that they get on the general side, and they average even, even for a secretary, it's not that, because social security is going to give you at least two or $3,000 and you're going to get $1,000 a month, at least for your pension. So,
yeah, so I don't know. I mean, okay.
I mean, I think any hope to educate the press on this, I mean, to apply some pressure to Congress. I mean,
I don't know if we have any press with us today, but it'd be great if you get the word out, yeah, but hold on, Bruce, go ahead. Yeah, no, FDU
publications on your signature Hotel. Yeah,
sure. We'll do it every year. Just keep it handy, because if this doesn't happen, I know that in a recent, recent conference in the international talk to President Biden, and he will sign if it gets in front of
his lab anyway, so, all right, Bruce, let's do it as far as worst thing Reagan ever did, Right? All right, just not fair. It doesn't make sense. It doesn't again, if we didn't pay into it, that's fine, right? Like, if you don't get paid, you don't get paid, you don't pay and you don't pay out. I get that. But then the fact that we all have to get other jobs when we leave here, well, some people have to get jobs because, you know, no, we all have to get other jobs. Nobody's leaving here, and it's going to be able to, like, go retire, right? Because we don't need health care in retirement. So,
all right,
any other questions for our lobbyists or that topic? Okay,
I did work two jobs, right? And my Social Security is $285
that's ridiculous. Yep, you got, I think it's 30, over 30 years of substantial earnings right to not get penalized,
right? Terrible, all right, we're at pension investment officers report
substantial if morning. Everyone going over the financial markets for the previous month have a couple reports in a year that kind of gives everyone a good, you know, baseline understanding of what's what has transpired, and kind of what we can look forward to, kind of going forward. The first report shows the summary of the asset allocation. And I like to say we have four pillars of investments. We have our growth assets, our defensive. Assets, defensive assets and inflation sensitive assets. The month of November was a very strong month for pretty much all of the pillars, but primarily growth assets. It continued to do well within the equity markets, you know, kind of after the election, but kind of going forward, the US investment climate, you know, we know it faced a lot of risk, but also opportunities. There's going to be political uncertainty. Could be shifts in foreign policy, trade regulation, and that's going to create more market volatility going forward. But growth assets were up in November. Volatility actually went down after the election, and that's bond volatility and also equity market volatility. Real Assets were up during November. Commodities, our exposure and midstream energy was the most had it had the most positive gain, and that is due, you know, from our infrastructure exposure and you in that space, what we kind of could see going forward is kind of more bold moves that can be probably a little more unorthodox that's coming from the new administration coming in, But I think the market is kind of settled in to that what we are going to see is asking the asset allocation is not going to be a leading driver, kind of going forward for 2025 I think we really going to have to dig down and get closer and more involved in the underlying managers that we have in portfolio. And I've been working very quickly with our underlying managers to kind of, kind of get a feel of how they see the financial markets working with them on our views. And so, you know, the asset allocation report shows that 2.8 billion performance has been fine. Really. No asset class or investment manager has any issues for the month of November, looking at the next document is the investment environment dashboard, and I'll present this to you guys once a month to kind of let you know changes in the investment drivers that we have in the financial Markets, from political climate to sentiment, oil and gas and various asset classes. So and they're color coded, as you can see here, really the change, a couple of changes for the from October to the end of November, has been an improvement in economic sentiment, and that has been positive, and that's primarily due to getting the election behind, and also the strong movements that we've had in the financial markets for November, the other major change was in the strength of the US dollar that will continue to strengthen as we go forward with some of the issues regarding terrorists and situation with China. So overall, portfolio is in strong. You know, with shape, there has been very few movements in our economic drivers. But one thing, as I mentioned, if there's going to be some volatility along the way, and we're positioned very well from a diversification standpoint. But as I mentioned before, potential terrorists, trade wars and other type of unorthodox type of things going forward. Can cause some issues, and we really have to make a strong, crucial effort to focus on active management. And I think active management is going to kind of lead the way. I. As opposed to the asset allocation leading the way for the past few years. So that's kind of a quick summary of the overall markets. Anyone have any questions about the portfolio or anything about, you know, views in the market, kind of what we see or what we think going forward.
John, yeah, maybe Lorenzo, one question, just, you know, maybe listen to the Bloomberg Radio over the weekend. It's, there's just so much talk, as you know, you've had about The Magnificent Seven driving these outsized returns, right? And that doing what you do for a living, where you pick people that, on purpose, try to balance things out there. They're a real disadvantage when we compare them to the benchmark, because they're not just going with the most popular stocks. And I think the you know, kind of the gist of the Bloomberg discussion was you've got to have the discipline to say you're comfortable with your asset allocation, even though you're not matching up, because to match up, you put the assets at risk, because you'd be overloaded in these hot stocks, and there's no guarantee they'll stay there. But I just wondered if you know, again, I've heard you talk about this, but what your perspective is on sometimes people being disappointed that, well, we haven't done what the S P did, but then again, we, on purpose, don't invest in just the hot stocks, and they're outperforming, but that could go the other way. So
that's very true. What we have seen thus far is, if you go back the clock a year ago, when as long comfortable with the 25 26% return, and that's the p5 100 for year 2024 everyone said, Yeah, raise their hand so we're right now. It's strong, close to being overvalued. And i've showed some reports in previous board meetings showing price PE ratios are at 27% which are at the highest levels that they have been, and more than any other periods of two other periods of time, and after those periods of time, the financial markets dropped tremendously, but we have a very diversified portfolio, as I mentioned, the four pillars. And even you know, I've been here four months, and within those four months, three of those three of those four pillars, have taken leadership positions in our portfolio and performed well when there was volatility in the market. That shows it is very well diversified and able to withstand different head fakes that the market is going to provide in 2025 I guarantee you that we are going to have some interesting times in the financial market. It's not going to be like 2024 and so the diversification we have in the portfolio is, is, is very strong. And so we're not kind of focused on the S P. That's really not our diversified benchmark. But even if you were focused on the S P as you built that asset allocation, taking regards risk and return with what you were saying in regards to the movement that we've had in technology on the Magnificent Seven, your allocation is out of line. And so you actually need to take money from that and put it into other asset classes that had not performed to that level, to keep your risk return mix in balance. And so as public pension plans, that's kind of what we have to do. And it's a situation where, you know, I'm working with an ocean, you know, possibly move more away from large cap growth and move kind of more into small cap value, which has starting to take leadership position and probably take a nice leadership position In 2025 and so with the changes in the new administration, that's going to be more advantageous. And actually you're coming in at a better entry point in regards to valuations. And so large cap growth is so overvalued right now relative relative to small cap value. And so that mix would kind of actually help get us kind of back in line to the risk reward characteristics that you know, we initially put out there. It's always easy to kind of chase kind of what's going on and and go with momentum and. That's as an investor, getting in something is the easy trade, is knowing when to pull and take something off the table. That's the most difficult trade in investment, and that's where a lot of people kind of, kind of get involved. But our portfolio is diversified, and I keep the board informed kind of what we're doing going forward. And I said the dashboard kind of gives you a view of what we're thinking and how we're positioning portfolios, and how these economic drivers affect our portfolio, so you have a better understanding of, you know, what we're thinking and also how the portfolio is positioned. Thank you,
George. I'm sorry. I mean that point you have almost a billion dollars
of our $2.8 billion plan
and private equity, private credit and private real estate.
What have those three categories done this quarter.
Those categories have actually, they come with a lag and so, you know, I can talk about kind of third quarter ish, October, November. It's a little
kind of equity, because you're talking about withdrawing money from the part of the portfolio that
doing very well, and I'm hoping that heading down the road and putting more in it. Oh no, no,
no, no, no. We're we're at our allocation in regards to private equity. And so that mix would be still within us, equities. It would not be in private, okay? It will be in us. It will be publicly traded securities. And so that that mix would not change. That's kind of the sub category within US equities. When I say large growth does small cap value, that's just a shift within US equities as a whole has nothing to do with private equity. But private equities have been actually in a better position. There's actually more M and A activity, mergers and acquisition activity that is going on now, and actually that would kind of help with more movement of different properties and companies and those type of things like that. So that will actually cause more volume and more transactions, which for our position, do very well. We've had some very strong performance from a number of our managers and real estate and in and in private equity,
they have done
extremely well. I track with as a surrogate, a couple of ETF that kind of focus on private equity and private credit, they actually deal with underlying companies, not the underlying securities that's within those entities, but it's a good proxy group, and those proxies have done very well for October and November. There's continuing to be more money going into private credit, more on the actual High Net Worth side. So, yeah, you can say what you want about should I have worth people being in such illiquid assets, those type of things, but from our standpoint, from a public pension standpoint, the more interest and more money that's flowing into those categories will actually be beneficial to the pension plan by having more investors, more family offices, more ultra high net worth individuals focusing on an asset class because we're $45 million over in that category, yeah, but if I don't pay for the benefits monthly, Yeah, I mean, but we are positioned. Well, our liquidity situation is, is in a solid position, and so we are, you know, aware of that. You know our cash flow situation is matching up. And so we are, we have that balance so we're not overly involved in illiquid assets. And we are actually at the point where our capital contributions and distributions are matching off, and our distributions are actually starting, you know, we'll be picking up probably the second half of the year, so we'll be getting more cash return to us. Um. You know, kind of going forward, but we still come out to reinvest that to some degree, to keep everything kind of balanced out. But, you know, we are in a good mix in regards to returns versus the risk and volatility associated with the portfolio, and part of that risk is illiquidity risk.
Thank you. The only other thing I would add is on the black and blue, and when you put the total plan assets as of this month, can you just put the prior months or prior month of prior whatever, whatever, okay, okay. Just to show, just, just to give you, just to get, I just like to see, you know, how our funds moving
a change, yeah, yeah. I mean, for, for, I will do that going forward, what you know, just off the top, you know, probably a decent increase in US equities market value from the third quarter, and also midstream energy. Those probably were the two leaders. And so that's a growth asset pillar and inflation
sensitivity.
That was exciting. I'm the one who did that. Um, okay, thank you so much. All right, not that time yet. 15 minutes, we're going to go to our general legal counsel's report. Ron,
well, we're thinking because we might have to go to closed. So let's get the audit out of the way, dispensers on the phone, and then we can just go to closed, and then and then we can Just go
into closed.
This is the drugs
with the gonna
feel better. All right. You ready? Yes, I'm so ready. Good morning, everyone morning.
Do you want me to share? Sorry, give me access. I could share the presentation, sure.
Well, good morning. My name is Michelle waterworth, and my colleague, Spencer Tyler is on the line because he is currently working out of state, so this is the best way to be two places at one, but he will be co presenting with me today. You've got a number of materials from us. You've got a draft copy of the financial statements, you've got a draft copy of our letter package. And then you also have a PowerPoint presentation. I intend to go through the PowerPoint presentation, but if you have any comments or questions on the other two documents in detail, we could certainly go through those happy to answer any questions that you have. Do not should have all electronics of everything.
George, we usually don't get the papers till the draft word comes off of it. Yeah.
So as I said, they are in draft form. So if you see any changes that are necessary in the financial statement, wording changes, whatever, we can certainly still make those at this point in time. But I do not expect otherwise any significant change to those. There's a couple of minor open items that we're still working through to finalize the audit, which is why they're in draft form. So in terms of our agenda, we want to go through a couple things with you today, an overview of the financial statements, and then we'll go through our letter of communications, and then obviously answer any questions that you have. If you're following along in the PowerPoint presentation, you can turn to page four. So want to cut right to the chase and get to the most important part of the audit, which is, what is our audit opinion? That's what you hire us to do, is to express an opinion on the financial statements. We don't own the financial statements that are yours. The only piece of these financial statements that we are responsible for, that we own are those couple of pages at the front, which is our audit opinion. And this year, I am very pleased to say that once again, we have what is called an unmodified opinion on the financial statements. That's the opinion that you strive for. That's the opinion that you want. It's like a stamp of approval. You can think of it that way, which basically says that we think, based on our audit procedures, the financial statements are materially correct. So that's great news in terms of just some highlights on your financial statements and. You look at page five of the PowerPoint presentation, this gives you a snapshot of the balance sheet of your statement of fiduciary and that position. And as you might recall from last year, we report both on component two and component one in totality. So you have separate columns for component one, separate accounts for component two, including the income stabilization fund. And this shows your what we call your ending net position at the end of the year. And in total, your ending that position for police and fire is a little over $2.7 billion that's up from about about 3% from last year. And if you look at the next slide, this kind of shows how you got from where you were last year, which is about 2.6 billion, 2.6 5 billion, to the 2.7 billion at the end of this year. Now this graph, or this chart, will show not only 2024 but it will also give you a comparison in total to 2023 like Jeff, I always like to see the comparison, where were we last year compared to where were we this year and what's changed? So that's why we always include the 23 column along with the 24 column. And if you just look at the differences in total between the two years, you can see your investment income. You had a much better year in terms of investment performance this year compared to last year. So your investment income was up significantly. The other large change is in contributions. Right? If you look at the employer contributions line, you had total contributions last year, about 23 million. This year, 131 million. And that's because of the change to the plan. You now have the contributions coming into your legacy plan based on the actual determined contributions. They're no longer determined based on the plan of adjustment in terms of your deduction from the plan, fairly constant from last year, no significant changes there. You'll you will note that last year there were about $8 million $8.5 million between the two components. Again, that was a part of the provision with the plan of adjustment, and last year was the last last year that that transfer could happen. So you won't see those transfers on an ongoing basis. So in total, your combined plan, you added $72 million to the plan, and that got you to the $2.7 billion at the end of the year.
I'll stop there. So chair peg, as you know, part of the new pension benefits with your city council is a transfer from the rate stabilization fund and component one to component two. So while there's no new money coming in, I think there still will be in the next fiscal year, if the board approves it, which will need to write that transfer. But I think we all get what you're saying. Like for the first 10 years, the savings fund for employees was capped at five and a quarter, and when the fund does better, there was a transfer of that excess return, half of it to the rate Stabilization Fund, I believe. And what you're thinking, what you're saying is that's now over, because we're at the 10 years post bankruptcy, but we still will have one more transfer this coming year of that amount that's in the rate stabilization fund in component one to the component two. Right, correct. Yeah. So just since you said there won't be one, I just wanted to mention that
great clarification. So where does the excess go that went
through this exercise? There's not going to be it's going to stay in. We read the last time we talked about this, at least, I believe it stays in component too.
Yeah. So I think chair, what, what trustee is bringing up is so, so the first 10 years post bankruptcy, debt, excess, half of it went to the rate Stabilization Fund, and the other half went to the pension accumulation trustee Peggy, really swinging this stuff right? I think I got that right now. What happens is, because we're still capped at five and a quarter the excess earnings just stay in the pension accumulation fund as they're earned. There's no longer this transfer of 50% of it over to the component one we all remember the reason that was done by the people that designed the component one plan is there was this transition liability that had to be offset. So for the first 10 years it was okay. The way to fund the transition cost liability is trap 50% of that excess. Yes, but now that we're past 10 years, that no longer is done. So I think the answer to the trustees question Is it just stays in the pension accumulation fund, because the cap is still there. It's just where the excess goes that change. But
where would that be recorded?
It's in the
it'll just stay in the essence of component two.
Yeah right. It shows in the reserves. Yeah right, right.
Return access shall be transferred to the pension accumulation fund maintained under component to
accumulation policy,
which is, so that's a that's a reserve. It's not, you're not going to see it on the face of the financial statements, George, it'll stay within this column. But in your footnotes, you show the breakout of your different reserves, which is, let's see page 23 when we got 22 and 23 for component two, that is what will be impacted. So your reserves are how that overall net position of component two, which is the $2.3 billion how it's allocated between the pension accumulation fund, the annuity savings funds, all those different required components,
all right? And then we have a couple of charts for you, just to show you high level the trend for component two and component one, the first on that position. This goes all the way back to 2015 as we've been talking about. For component two, your net position has been declining every year, again, based on the contributions coming in, based on the plan of adjustment. This year, obviously your net position went up just a little bit, and then in component one, consistent with the trend we've seen since 2015 that deposition continues to grow, if you look at the next slide, which is the net pension liability. So this is the liability that if a rotor calculates, it's not recorded on your financial statements. It's just disclosed in your financial statements. It's actually a liability that the city has to record, that non pension liability. Again, the first chart is component two. The second chart is component one, that's been kind of up and down and really highly dependent on investment performance. Component one the reason that those numbers are looking is because you have an asset. You have a net pension asset on the component one side, which means that you've contributed more than the liability related to the plan. And that asset, again, goes up and down depending upon your investment, any investment performance for the year, Michelle,
before you leave that page, because I think it's an important one for trustees to see. What I'm happy to see is the component one plan 10 years ago. That was the idea was that the new pension plan would get to 100% funded and stay 100% funded. The best way for retirees to know their pension benefits not going to ever get impaired again, is to have enough assets there to pay benefits. So to me, what I love about this chart is it shows we've achieved our goal. In the component one, we're staying over 100% funded. And component two, legacy. We all know what we struggled through was 10 years of only the Grand Bargain money, pretty much coming into this plan, we've kind of held our own, which is a good news story. I know you're not in the forecasting business, but what should start to happen now, as long as investment performance keeps holding up, with contributions coming in from the city, we should start to chip away at that liability, like to me, if I'm a retiree of the component two, if I want to worry about something, I say, well, not all the money to pay my benefits is in the plan. The city still owes $800 million to this plan. And so what we all hope will happen is now the component two will climb up towards 100% funded. And then I guess the dream scenario for the board is if we, if we get above our restoration targets in the future, because we now start to make progress, that's when we start to then have restoration of the pensions that were impaired during bankruptcy. So to me, this is a really important chart to see. Think about what's going to look like, right?
And to your point, John, that is the whole point. Right, the amortization over the 30 years for component two, you would help hope that after that 30 year period, that's the goal, that 100% funding will be achieved. You
have here, I know you mentioned the 800 million. We have the net liability, the net. You AAL of the legacy planning here that
you know, the best way to look at that is on your financial statements. If you look at page 32 of the financial statements that shows the last 10 years of history related to that,
okay, page 32 of the
financial statements got it. Hold on,
I'm almost there, yep. 36
All right. 32 Yeah. Okay,
so this shows 10 years history, which is I love looking because you can see what happened, right? Trend, 2024 obviously, is that first column. And if you look almost all the way down that pension liability that John was talking about $756 million at the end of the year, okay, you can see, if you just look at that bottom line, the trend in that that's what this chart is showing. Is the trend in that liability has been, you know, up and down, obviously, depending on investment performance, but it really almost has been around that $800 million mark generally.
Well, I mean, if you look at 2020 it was over a billion,
because investment performance in 2020 right? Was very bad. That's why I'm saying it's highly dependent on your investment performance, exactly. But then look at 21 right? Like 21 was ridiculously good, right? So your your NPL, yeah, went from 1.2 to 800,000 that year, just in one year.
So what I think is interesting going to that chart where it shows the net liability in the net position is in the legacy is that it's the last two because of the pension investments that we were in the year before and the city's contributions from this year, those kind of stayed the Same. But what we should see is going down, but, but if it stays the same, if the trend starts to show that it's going to kind of stay the same, I think that's more interesting, if you ask me, because, you know, I still believe strongly, there's an there's an opportunity to combine the plans. I know the city doesn't like it, I know the bankers court may not like it. I don't know, but I think it's still strong possibility to combine the plans if we continue to perform the way we're performing so and that would be quite the benefit for those retirees that are the people that are still active, that the pensions, again, are small based on their so I don't I just think that's the history start for me right there. So yeah,
in the last point Mr. Chair, that I want to make is so if you know, again, if anyone thinks about this. So this pension liability, as Michelle mentioned, this is what gets picked up on the city's books as a liability. So when you pick up our audited financial statements, you will see that's on a one year lag basis, but we pick up that net pension liability. So again, as we all know, the city's the plan sponsor. The city is responsible to make contributions now over a 30 year closed period using this level, principal amortization. And all I'm saying is, if our investment returns hold up with now contributions coming into the city, we should see that liability go down right
now. Yeah, we love liabilities when they go down, right? John, right liabilities.
I agree. All right, great.
All right. Let's turn now to the letter package, and Spencer is going to talk a little bit about we have two sections, one that communicates what we call internal control matters, and then another is more required communication or informational so Spencer,
good morning. So, as Michelle mentioned, so I'm going to go over the audit letter. So this is a, you know, in addition to the opinion that we issue, we also issue this end of audit letter. It's a follow to our pre audit letter that we would have sent out earlier in the audit to kind of go through our plan and scope and timing of the audit. This is kind of like, Hey, this is the end. Here's here's our conclusion from from the audit, and so talking about the internal control related matters. So we had two material weaknesses or controls that we deem to be material weakness, and then one significant deficiency, or deficiency so material weaknesses we identified to the census data and it process. These are repeat findings, a little bit differences from prior years, so for the census data, so if you recall, so the total pension liability, or the net pension liability that we. Present on the on the previous screen, assets are as a 630 24 but the census demographic data, like an individual's pension payment, who's active, who's retiree, all of that, that's actually as a 630 23 so that's on a on a year lag. And so that data that we have to is actually coming still from the old system. So the old IT system that ran and it would produce, so a lot of the same census data issues that we had identified in the past came up again this year. One of them, you know that we've been in the latter intentional salaries and how the system was, you know, before giving to Gabri, rotor was taking information from the city, but then trying to annualize the pay for component one, instead of just saying, Okay, here's, here's what actual base pay for. You know, pensionable wages were for component one. So we've talked to, you know, Dave Ramsey and Dave, they've talked to the IT group of just like, hey, the new system, make sure we're not annualizing pay. We're just taking years actual pay. So we feel like that that will come off for next year. We noted other other items related, again, to like, you know, some being improperly included or excluded from the census data. And so we actually had, as we have in the past years, gave a rotor kind of go through and do a look back, sort of hey, here's the data we had on active and term vested individuals, different vested individuals. Here's how they had made assumptions on based on their data, what their liability was. And then now we know, hey, they've come in and retired. So we know here's their final payment. And so they've done a kind of a look back to see how off were they, and they determined that a, you know, it was materially correct. They didn't need to put what we call a load on any of the liabilities. So if they're seeing that, hey, everybody's potential wages is coming in 5% lower, we should raise 5% to in our assumptions. They've done that in the past. Years ago, they did not feel like they needed that to do that as it relates to information technology process. So again, this is, you know, kind of different as the system is, is implementing some of the new ERP software. So we do have an item, again, related to the IT system, on the old system for census data, but everything else really is on the new system, and teleplans related to benefit payments and whatnot. So we've, we've identified other things about like just user access, reviews, admin access, doing reviews of that. So we talked to the IT group we talked to Andy day Kelly, they're well aware of, and I know Kelly already had mentioned that she had already started talking to John, and it about some of the admin account access and whatnot, yeah, um, the last thing we had asked, yeah,
Spencer, one question that came out of that I had another conversation yesterday, was, what are other retirement plans doing? Because I know everybody else in the state is going to be smaller than us, and so if it doesn't have to be here, but at another point, you guys can give us some suggestions, because our size is what causes some of this issue, right? We don't have huge IT staff. There's not a need for one. So while I'm wrangling all of that, if you guys have suggestions of what other plans have done, I'd be happy to take those and incorporate them in my discussions to see you know if and how we can deal with
this. Yeah, that should we can absolutely think through that. Kelly, thank you for sure.
And then the last item, just a significant deficiency that we identified, this is, this is less than a material weakness. It related to voluntary contribution reporting for component one, so on a weekly or bi weekly basis, as individuals are being paid. Active members are being paid. The city is is remitting those payments to the retirement system. And with that payment that they're sending, they're also giving the system, Ramsay and his team, kind of a breakdown of thing, or any we're sending 600,000 and here's the breakdown between general employees and police and fire employees, and that's how Ramsey has recorded it for financial reporting. So it was noted this year that city had been kind of messing that up. They essentially included zero police and fire contributions this past year, and that's what was recorded in the financial records. Now I want to be very clear, though, that in the IT system and tele plan on a weekly basis, that system goes and pulls information from the city and then says, hey, you know this individual and police and fire? Here, you know, made a X amount of contribution. It hits their account and then teleplan system. So from that perspective, it's all been recorded properly on who's been making the payments and what plan they're in. It's just from a financial reporting perspective and where kind of the cash was going. And so Randy and his team kind of went back for past couple of years to identify, like, how much you know, does, essentially, the general plan owe police and fire related to this? And I think that the amount was about 3.7 million that the payment, I think, might have been already transferred during fiscal year 25 and this year just not reflected in the financial statements. And we have that on the on the past adjustment list, which we'll go over and monitor the other slides. All right, moving on. So last second part of the end of audit letters, it's required communications based on the auditing standards. So one of the things we have to do is, is identify and inform you of significant estimates in your financial statements. And these are two estimates here that haven't changed from previous years. It's the harder to value investments like there's discussions on the private equity, those are harder to value just because it's not public. There's not public pricing out there on those. You're just getting capital statements from a fund manager each quarter, maybe monthly. And then the other one is actuarial assumptions. So even though you're not recording the liability on your balance sheet, obviously in the footnotes. And then, of course, the city, as John mentioned, is recording that liability on their their financial statements. No difficulties with management and performing the audit. Everyone's super helpful. Answered all our questions as they happened in the past. So happy for that, and then unreported possible adjustments as we talked about our main one was the 3.7 million. So we kind of have a, you know, when the data sent to the actuary in early September, that's kind of the cut off, unless the material adjustment comes through, this came in after that fact. And so system side, not a maternal amount, will adjust the financial statement to reflect in a fiscal year 25 and then we'll include them on the past adjustment, what's in the in the bond letter, and then the third part, just all the recommendation informational items. These are not internal control deficiencies or anything were just kind of things that we saw that might help the retirement system. When we talked to everyone about this benefit payment classification, formalizing evidence of preparation, review of debt payments on certain documents, is doing a lot on others. There's a couple more to add. Income stabilization funds related to potentially being able to transfer some of that. That's something that I see to consider, and then, and then cybersecurity and IC controls do want to commend the retirement system. This is a obviously significant issue, not just for systems, given the number of data, but anybody. And so there was a cybersecurity assessment on that, and we know that the retirement system is doing what they can to ensure that systems are properly managed and protecting systems assets as well as the members data. With that, we're happy to answer any questions. You
might have any comments, any questions?
Okay, well, I think we need a motion to approve the audit and pending approval from the Investment Committee motion mass second. John, are there any questions?
George, is the on page 33
is that the correct numbers of 2024?
Page 33 you're looking at the money weighted rate of return. Correct, 11.86, correct. That comes from your investment advisor.
What page
are you
on? 33, 33
that's a good question,
right? Because, my understanding you get 9.4 correct. So I don't know why it would be. Maybe that's gross time weighted, yeah,
there's so many different ways they can do
it. That's, yeah, we do this money weighted annual Yeah, this
is, this is money weighted rate of return.
The 9.4 is what they gave us for the time weighted return. That might be a question that will never happen, because usually we don't see it that this is different. That might be a question.
George. Less than that, just if
you want to put a pin in that. On Monday, we're going through this exercise again with the PFIC, and we'll start over you sitting there so Oh, David will be sitting next to Michelle. We can put them on spot to find
out what they're talking about. Okay,
all right, any other questions we're on the motion? All right, seeing none anyone abstained or opposed, carried unanimously,
just for trustees that don't know. Sitting over here, I guess by the windows, is our head accountant and Bri Ramsey. Ramsey, yes, three our assistant did, but that's who gets these good audits come through every year. He's the one that's
still
that's throwing me off. I can remember his name because the sun
and they do deserve a lot of kudos. I don't know you know, very few of you probably have been through an audit in detail. John knows audits are not easy. We ask a ton of questions. Keep them on their toes quite a bit, so they've been working really hard in the last couple of months. So we appreciate it. Well, whatever
happened within the last, let's say, 20 years when we would be constantly struggling with getting the audit done on time, and we came to now where, the fact it's running like a well oiled machine, you get a done time. So,
right, yeah, there was a time where we weren't presenting to you during December, that's right.
Great news. Great.
Thank you so much. Thank you. Thanks sponsor.
Thank you. Do.
All right, what's next? Are we going to go Legal Report? Yeah,
good work. So,
good morning. Strong legal report. So kind of a nice segue. Item number one is the draft documents that will be presented to the Investment Committee on Monday, which are the semi annual certifications that the Investment Committee is required to make, to the to the state treasurer, the city and to the foundations of this all part and parcel of the package that trustee Nagle puts together At the end of the year for purposes of providing the report to the foundations. You know, we've done this as required yearly. The State Treasurer technically supposed to give us a response. It never has, but that's okay. We'll continue to do so. So anyway that that will be presented, in draft form right now. We'll, obviously, by Monday, we'll finalize have it in final form for execution by the IC chair. But I wanted to present that in the report, or in my legal report today. And then the other two items that we have, we do need to go into closed session. The one is with respect to the memorandum that we provided to the board regarding requests from the Office of the Inspector General, and then the subsequent response we received last week from the OIG. And the purpose of going to close to discuss this is two fold. One, it's a written memorandum from legal counsel on the provision of legal advice, and then also, there is a tendency to disability discussions, it may or may not implicate, you know, protected health information. So,
okay, motion second. Okay. So how do we how do we want to do this again? Do we want to conclude we're just going to close session, come back out and finish our meeting. Yeah, we'll just All right, good. Okay, so I got a motion in the second motion by Matt and second by Ron, and we have to roll call vote to go into closed session. Is
there a potential litigation on another topic that we're gonna Yeah, that's right. So
yes, I have a proposal from one of our securities firms that will I will also discuss
either one scheduled.
Okay, so this is the motion to go into closed session. Yes. Marcel is going to do a roll call. Yes
Okay, if you're on the call, you are going to get muted here. You're not going to hear anything. And then we will when we return, we will
listen back in.
Any questions on that, seeing none, any more abstained or opposed carrying damage, saying, I'm sorry. We only need that one. There's no other thing. No other action, board, okay, perfect, all right. Committee reports. You have a draft committee right after this
committee meeting right after this meeting, and we have an investment committee meeting on Monday at 10
in this board, yep, and I know one just you, has meeting this month in regards to the new actuarial study on what possible increases we can do to our view, but due to the state's contribution of the ten million that we were successful in getting. So don't, don't talk to me about that. So. One, right? So, so be hopefully, hopefully, we'll have that meeting this month on the 12th, I think, right around of December, and then we can get something out to the retirees and let them know what the increases are. So and yes, they're the firefighters are looking, are looking at increase, an increase after age 65 to 870 for the retirees. So that's, that's what that's we're looking at. Okay, anybody else on committee reports? No,
yeah, the CDP issue, yeah,
the
so you get that allocated every month to you. How long after you you hit
65 five do you have to spend?
I think you have a year to spend it down to year, right? Yes, to spend it down, you
can't spend the last month before you did it, right?
So it's a rotating year. You get it like that. One's got to be spent in a year. This one's a year from that date you're from. So it's a rotating gun, yeah, no, it's a year.
So you turn into 560, year to spend that debt, money down. Like, if you have excess dollars in there, you have a year to spend
it, right? So the 20, I gotta get a couple calls, a
couple guys had like, 20 grand in it. They never used it, right?
Well, they can go back. I think
I need to check you can go back a year
for expenses. So if you had a year's worth of expenses, you could submit all that at one time, right? So, but I don't know if they would have 20 grand
in there. Geez. If it goes away after year, how do
they accumulate
that much? Yeah, I don't
know about it get removed, right? If you never spent the 420 Well, 420 has only been around. Change that, because they're
gonna think they happen if they want to go back a year though 424 20, for
the firefighters, I think, has only been around for the last two years before that was only 200 some change, but they have a year to put it down, and we didn't have them call
it okay.
All right, having money there and being
able to do their three
different things. Any
other committee reports questions? No, we'll see none. Motion to adjourn, Matt and Ron. Anyone stand or opposed unanimously,
Merry Christmas.
Happy for the middle of January. Right?
You don't have to stay here, but you said, go home.