Board of County Commissioners Business Meeting - workshop

So good afternoon everyone. Thank you for your patience. We were celebrating. We had a whole big party in the next room and unfortunately we did not invite you. Next time. Next time. No, I'm kidding. But no, we were celebrating the retirement of our coroner and so since she has been here such a long time, we were not going to rush it. So thank you so very, very much for being here today. We're going to go around the room with some introductions, please.

Jeff Baker, Commissioner.

Kendra Davis, Commissioner's Office. Leslie Somme, Commissioner. Jessica Campbell, Commissioner, District 2.

Michael Westberg, Treasurer. Ben Calusi, Retirement Plan Administrator.

Down there.

Kevin Crescita, Cap Trust. Andy Beagle, Cap Trust.

Cindy Burley, Davis-Graham.

I'm the Plan Attorney.

Mike Sutherland, Retirement Board. Lauren Kohler, Retirement Board.

Marcia Stevens, Retirement Plan Assistant. Julie Lanier, Human Resources Manager. Julie Durand, Retirement Plan Coordinator.

Wonderful. Commissioner Rhonda Fields is on her way back to the room. She is here and Commissioner Kerry Warren-Gully is absent and excused. Well, I'm looking way down the table at Mr. Calusi. What do you have for us today, sir?

Thank you, Commissioner. Well, thank you for the opportunity to review the annual update for the retirement plan. We are here today to discuss the January 1st, 2026 actuarial valuation and overall financial condition of the plan. Before we begin, I want to highlight a little bit of a new approach we took this year. I worked with Patrick Hernandez and invited our actuaries to an E-Team meeting in May to review the same PowerPoint slide deck that we're going to cover here today. The goal there, obviously, is to create earlier discussion, increase transparency, and strengthen collaboration between county leadership and the Retirement Board. As a reminder, you know we in this room all feel very strongly about this retirement plan So much so that I would submit that it's probably on the route Mount Rushmore of the county's total compensation package It's one of only a handful of counties that provide a locally administered defined benefit plan so in that there's a unique opportunity there to recruit and retain top talent and for the county, which benefits all of us. We've already done a roll call, you know, so we have representatives here. Our primary, the retirement board's primary consultants are here as well to help in the discussion or respond to any questions that you have. So again, we have, you know, GRS, Dana Wolfrey, and Christy Kiesel. With Cap Trust, our investment consultants, we have Annie Fagel and Kevin Yoshida. And then our legal consultant, Sandy Burley, is here as well. Members of the Retirement Board are also present and available. With that, I'm going to turn it over to Dana and Christy to go over the presentation.

Is rare when they're in the room and they don't. We just weren't sure how to type it right.

But thank you for having us today and allowing us to present on the retirement plans funding position on behalf of the Retirement Board. My name is Dana Wolfrey and I'm an actuary with Gabriel Roeder Smith and Company here in the Tech Center. I've been doing this for 21 years. I am joined with my colleague Christy Kiesel who has been doing this for over a decade. And so today we're going to present the annual actuarial evaluation results, and that's where we take updated asset and census data and get a current assessment of the plan's funding position, basically how do assets compare to liabilities. And how do current contributions fund the plan over time? Do they look adequate? This year, these results represent not just new assets and new census data, but also an experience study that was done this past year, and that's where we do a longer-term review. of how plan assumptions are matching up against actual plan experience. And so the board did adopt some new assumptions, the retirement board, back in the fall, and we used those for this January 1, 2026 valuation, updated the valuation model for that. And so on slide two, before we get into the numbers, we're gonna get our bearings a little bit. So the plan we're talking about today is your defined benefit pension plan. And what that means, defined benefit, is that there's a formula based on salary at retirement. So a member gets 1.85% of their final average salary times their years of service. And so then that amount gets established at retirement and then paid monthly for that participant's lifetime. And then depending on the optional form they choose, potentially their spouse's lifetime as well. And so the important part of that is that there's a very long promise associated with these benefits. So first over their career, and then their lifetime of retirement thereafter. And unfortunately, this plan, like many others, in the same timeframe, got a little carried away with itself in the late 90s, following some very good investment returns. They increased the benefit promise, they improved the benefits out of this plan, and then this plan got itself into trouble when that was immediately followed by the bursting of the tech bubble, 2000 to 2002, the market correction in 2008. And also, just looking at our expectations, our expectations of how much investment return can be gotten for a certain level of risk or volatility is much less than it used to be. In addition, our expectations for how long participants will live and receive benefits has increased significantly over time as well. And so there's been a lot of adversity for these defined benefit plans. And so on slide three, the result of that is a large unfunded liability. The plan's obligations exceed the plan's assets by $269 million. So the Retirement Board has been very active in working to counteract this adversity and set the plan back on a path to sustainability. So first of all, they reduced benefits for new hires in both 2006 and 2010, each time pushing back the time at which they were eligible to receive benefits and reducing that benefit formula each time. In 2014, the plan had a five-year legal window that allowed them to change future benefit accruals for all current actors. So what it said was, you know, what you've accrued to date, that's protected. But going forward, that can be changed. And that's different because usually the retirement board can only change things for new hires. Alongside those benefit reductions, the retirement board has been pretty consistently seeking contribution increases from the VOCC. And while the BOCC has not dramatically increased the contributions overnight, we certainly appreciate the increases in the contribution rate over time as we work to turn this plan around. And so while the plan is not in a great funded position, we're still trying to play catch up, the plan outlook these last couple of years, because of the effects of some payroll growth, and some additional actives into the plan, as well as those contribution increases from the VOCC, it's still really the best it has been in about a decade. Basically, between the size of the payroll and the corresponding contribution increases, we do expect to be able to make some progress on the unfunded liability and the plan's funding levels. All right, so on slide four, This in a nutshell is what pension actuaries do. They help retirement boards maintain the balance of this equation over the long term. Because over the long term, for a plan to be sustainable, we know that contributions plus investment earnings on those contributions have to be sufficient to pay benefit payments and expenses. And so we need to make sure we have good assumptions in setting these expectations and maintaining this balance. Because on slide five, the thing about that last slide is that the balance of that equation, assumptions only set the expectations of that balance. They don't impact actual costs. The plan's ultimate sustainability, it depends on actual benefit payments. It depends on actual investment earnings and actual contributions. The assumptions just help us manage expectations of what each of these pieces will contribute to the equation. And we have to update our assumptions to reflect a changing reality. If things aren't meeting our expectations, then we change our expectations. You can look at the forecast, say it isn't supposed to rain today, and now it's the afternoon and it's raining. And committing to the not raining isn't gonna make you any less wet, right? It is what it is. So on slide six, we're gonna get into the actuarial funding valuation results soon. This is an annual report. We collect new census data, new asset information, and we assess where we are this year. We look at the funded status, so how do assets compare to obligations, and then going forward, how do we expect that to change over time? Are the contributions going to be able to keep the plan on track? And then lastly, how did experience during this last year deviate from our assumptions? Basically, we hold ourselves accountable to these assumptions and we explain any differences between what we expected and what we saw. All right, so in slide seven, the valuation is the annual checkup. An experience study is a broader look that we do every five years. We assess trends in what we're seeing. We look at your historical plan experience for your demographic assumptions. We look at current investment forecasts and assess the current economic assumptions. We basically do a reset of our balance equation based on new information. And so we came to the retirement board with a new recommended assumption set last fall. That was approved and that was first used in this 2026 valuation. All right, so on slide eight, all of the assumption changes that were made as a result of that study were demographic. We left the investment return assumption alone. The primary assumption change was to the way that we apply the termination probabilities. And so when we talk about termination rates in terms of a retirement plan, you know, we're not talking about people getting fired. We're talking about people leaving for any reason other than retirement, disability, or death. And basically, in the Arapahoe County plan, the probability that people terminate out of the plan tends to be very dependent on how close they are to meeting rule of retirement eligibility. And we found that our model was not adequately reflecting that. And so we changed the model to better reflect that. And when we did that, it increased the expected costs of the plan. We had a couple other changes as well. None of them as big as the termination change, but they were all kind of small changes that all added up and went the wrong way. They all increased costs. But again, what we're doing is not actually increasing costs. We are adjusting expectations to the fact that the plan is, in fact, costing more. And ultimately, even with the strengthening of the assumptions, the plan outlook is about as good as it's been for at least a decade. Christy's going to take over now and take you through your last year of plan experience.

Can you go into a little bit more about that termination rate? Can you just unpack that a little bit more?

Sure. So we did have an age-based termination rate, right? So it basically said if you're age 30, you have a certain probability of terminating that year. If you're 31, you have a different rate, 32. And it was a slowly trending down rate, right? But we still had some fairly substantial rates in the 45, early 50 age groups. But the thing is, somebody who's 45 with eight years of experience or service and somebody who's 45 with 25 years of service are going to have very different probabilities of termination, right? And so on average, we had our termination rate about right for that age 45-year-old. But those two things in terms of the plan's cost don't average out, right? Because if that 45-year-old with 20 or 25 years of service terminates from the plan before they're retirement eligible, they miss out on a ton of benefits because, you know, they could have taken an unreduced retirement benefit when they were age 52. whereas the person that has eight years of service they're not gonna be able to take that benefit until they're 65 and that was a much more modest benefit and so the two things were not averaging out so even though on accounts basis we had it about right the model still wasn't working as desired for the plan because of that nuance.

Let me restate that so I think I understand. So based on people's just raw ages, we were right about ages and all of that, but based on how long they had been with the county, that impacts their decision of whether to stay or go and then how that would impact the plan. So we have, I think, more people starting younger and being a longer term with the county or more people who are 40 or 45 who have been with the county a shorter amount of time?

Well, so it's not necessarily about like how many that we have. It's more like what their decision process will be, right? So basically now we are taking those two 45-year-olds and And the one who has 20 or 25 years of service is going to have a very low probability of termination because we're going to say they're going to find a way to stick around and get that age 52.

Their eggs are in this basket.

Yes. And we're saying the 45-year-old with the eight years of service, they were probably making up the majority of that termination rate that we were seeing, right? So they're going to have a higher termination rate in this model. Okay.

Okay. Okay. Okay. Okay.

I have a question, Madam Chair, just to follow up on that question in line with thinking as it relates to years of service and age. How does gender fit into that?

I don't think we have gender-based decay. We do look at it. Some plans do have different termination rate assumptions based on gender. We've probably looked at it and not found it to be meaningfully different or not... Sometimes we don't have enough data to feel confident about setting two different rates. It's like if we have the whole group, we feel more confident about the assumption. I don't think that you have a gender-based assumption.

Mortality is the only gender-based assumption we have on the NASA standard table. Treasurer Westbrook?

Feel free to correct me if I'm wrong, which happens once or twice. but I also do want to just note It's very tempting whenever we saw the equations and things and the projections we're doing, it is very tempting to compare to the current population we have, and that's not necessarily what we're doing. So be careful not necessarily to do that, right? Because we're looking 20 years out, right, and what that's going to be, which is not what our population currently is going to be of employees. So just be careful with what you're comparing it to there. Thank you.

Yeah, there are more experienced study questions. I am going to jump into some of our more just basic, the regular stuff we bring to you every year. So if we hop to slide nine, focusing on Some of the experience over the year, not experience study related, not assumption related. We first bring the really great news that 2025 was a good year.

Before we go, because to stay on the experience studies, you said that the termination rate assumption and understanding that that was a little off was the biggest, had the biggest impact to the plan needing to cost more. But you said there were other... changes in assumption that impacted the cost as well. Can you just kind of, what are they?

Can we let Christy keep going and I will refresh my memory really quick? Can do.

All right. Well, get back. Yes. No, I think these are great questions. So sorry to come back to it. But just kind of quickly go through some of the other experience during the year, we did have really good investment returns at a 12% return compared to our seven and a quarter assumption. So that was a really great year for the plan. Another significant item this has been a couple of years now and it is something we looked at in the experience study so that was another change we made but yet again salary increases were a bit more than we'd expected so we are going to see an immediate impact to the liabilities due to that but on the other side we do contribute as a percentage of pay so when the salary increases and there's more payroll that means more contributions to the plan which really brings us to the next slide talking about those contributions. We again are really grateful for the commitment that the BOCC has made to those incremental increases to the contributions. So yet again, we've had an increase from 9.75% to a 10% of payroll contribution to the plan from the county, while the employee contribution has remained level at that 9% rate. So moving on to some of the actual results that come out of our annual valuation. So we really want to look at some comparison on our asset value versus our actuarial accrued liabilities. And so those actuarial accrued liabilities are going to be the benefit obligations that have been accrued for all of your members to date. We may look at this as kind of a target asset value. In the ideal world, the current assets on hand would be able to cover all of those benefit obligations that have been accrued to date. So we're going to make that comparison in value. On this slide, you'll see the comparison for assets that we're making is an actuarial value of assets, which you might also hear referred to as a smoothed value of assets. We want to use this measure because as we all know the markets can be Quite volatile and we also look at these numbers as a single point in time So this is this would be our value as of the valuation date So January 1 2026 and we don't want to make our funding decisions Based on really good years. So for example, if we had a really really strong year and these results were looking fantastic, maybe people might think it's time to make some benefit enhancements. Or if we are in a really bad market year, everyone might panic and think the world is crumbling. So we really want to avoid that. And so we are going to use this actuarial value of assets, which smooths those results over a five year period. So the actual comparison on that from this valuation period, the liabilities are about 719 million, while the actuarial value of assets is falling short of that by about 450 million, which results in our unfunded accrued liability. So that's the amount of our current liability that is not being covered by the assets at 269 million. The next figure that we're going to look at as a comparison point is going to tell us approximately how close to that 100% funded ratio we are. So that 100% would mean that all of our assets are able to cover all of the currently accrued to date liabilities. So with our 450 million compared to our 719 million, we are currently sitting at a funded ratio of 63% approximately. Again, this is a one point in time estimate. So as we move on to the next slide, it's really important that we look at the plan in the context of where it's been. And then also later on, we are going to take a closer look at where we believe the plan is going. in terms of all of this. So from year to year, from last year's valuation to this year's valuation, the funded ratio did remain approximately stable on an actuarial value of assets basis at that 63%. you will see on that market value basis, with that 12% return being greater than our assumed seven and a quarter, we saw a little bit more improvement there from 62% to 64%. But before we really look at this as a setback, as we have been coming to you year over year saying, look at this trend, we're continuing with this positive trajectory, that funded ratio line is going up, it's increasing, and this year we're bringing it to you as flat. But as Dana has already said, we still see the plan in a better position than it has been in for the last decade. And so we do want to bring your attention to the gray dot on this graph, which is what the funded ratio would have been if we had measured last year's valuation on the same assumptions. So those would be the assumptions from after the experience study from last year. And you'll see it was just under 62% on that value, so we're still seeing from our newly just adjusted perspective to account for the actual plan experience. We just have to adjust our perspective and our starting point a little bit, but you'll still see that the plan did actually make improvements year over year when we're looking at that same basis. But we just have a minor, minor setback this year just to account for that adjustment in our perspective. And just again to reiterate why we still see this as a really positive trajectory for the plan, if we go back to that starting point 2006, we can see when times were a bit good. And then as Dana walked us through Earlier on, we see where times were bad. And as those times got bad, the funded ratio was in a consistent decline for almost two decades. It was a pretty significant period where the plan was continuing to decline. And in recent years, with our payroll growth, with active population growth, with those incremental increases to contribution, we've started to work our way back towards a positive slope on this funded ratio line. And we still see this as really, really positive progress for the plan that we would like to continue on that trajectory moving forward. So to move on to our unfunded liabilities, we will see that we had some growth in the unfunded liabilities from 246 million to 269 million year over year. We do expect to continue to see some growth in this unfunded liability. You will see that the assumption changes were the primary source of that increase in the unfunded liability year over year. So that really was kind of the big story this year But again, it was really important for us to make those changes and adjust those expectations As Dana mentioned we can't just ignore the actual experience of the plan just to make ourselves feel better so to speak so that that really was our primary takeaway on our the unfunded liability year over year.

And one of the main objectives of an experience study is to really minimize these numbers going forward, the differences from expected. So you're always trying to get these numbers as close to zero as possible going forward.

So hopefully that's what we'll bring you next year. We do expect some balancing year over year. We are unfortunately not oracles and we can't see the future exactly, but our goal is on average to give you the result that's best going to mimic your plan moving forward.

And maybe it would make sense to jump in here with the assumption changes. So Jessica, you asked about the assumption changes. So again, termination was by far the biggest. We made modest changes to the retirement rates. modest changes to the salary increase assumption. So when we project benefits at retirement, we basically model an individual participant's salary increases from today until their retirement. And so we brought that assumption up a little bit. And then partial lump sum utilization, the member can take up to three years of benefits as a lump sum at retirement. And the actual conversion factors that are used in that are subsidized. That's something that the retirement board took out a few years ago, so new hires do not get that anymore. But we did see increased utilization of that option. And so those were the three main things besides termination, and all three of those things were less than termination change.

Why would, what would cause somebody to do a partial lump sum in utilization? I'm just curious, is that a response to the market, to cost of living, that is causing our retirees to choose that option?

Yes.

Okay, cool. Sometimes I just don't wanna, I don't, you know, no assumptions.

It's a pretty big carrot. to communicate with employees that are retiring. They look at that number and they see, okay, I can take how much up front, and it only impacts my monthly benefit by a few dollars. So it is, for some, lucrative, but it's not always the right decision. And so not everyone does it, but it tends to be a common question that the retirement office gets.

Commissioner Baker?

Yeah, and 12% interest that we got. It's good. That's good. But there are other options that I think people want to avail themselves if they did have that payout that they think and hope that they will make a lot more than maybe that 12% if they are taught, say. And he knows how things work. I mean, I'm just using you because you're the most fiscally knowledgeable person I have to refer to. But, you know, there's investments that you can make that may be better than leaving it in the plan.

I'll tell you in two years. Just to echo that sentiment, Commissioner, you're right. The individual could invest that money and make a lot more, but they also take on a lot more risk. And so there's an opportunity there for gain, but there's also an opportunity for loss. Some do roll it over into another retirement account for that reason.

Thank you. Just pause for a moment. Were there any more questions on the experience study, changes in assumptions? Okay, then we're gonna move on to Some of the other big results that we're going to take from our annual evaluation. And so it's important that we consider how are we covering those costs? And that's going to bring us to the first recurring cost to the plan. And that's going to be our normal cost or our service cost. So this is really that cost of accruing one additional year of service in the plan for the members. So on an annual basis, you want to make sure that we are funding the plan in order to pay for those additional costs that are accruing. Beyond that, we want to look at funding that unfunded liability. We don't want to just continue to see it growing over time. And so in our actuarial determined contribution, we first want to pay for that normal cost. And then the other portion of that is going to be the amortization of the unfunded accrued liability over a reasonable time period. So for this plan, that is going to be a 20 year period is what we're looking at for paying down that unfunded liability. So really you can look at the actual determined contribution overall, very similar to your house payments where that normal cost is going to be your property taxes, your insurance, the maintenance costs that you have to keep paying every single year. Sorry. while the unfunded liability is like your mortgage paying to the bank over a 20 year period with a seven and a quarter percent interest rate on that mortgage. So pretty significant. Sorry. So we're going to express these as a percentage. I'm so sorry. I was going to help you. What happened?

Oh, my goodness.

It was like everyone had the same threshold. Everyone had the same. She's got it. Oh, no. Then everybody should have it. Oh, my goodness. Thank you so much.

I apologize.

I left my water in the car. I have to. All right, after that brief break, moving on to our actuarial determined contribution rate. We then want to compare this rate. Why it's really going to be important is to compare it to our fixed contribution rate. So that's that rate from a few slides ago that I mentioned where we'll have 10% coming from the county and 9% coming from the employee. So we want to compare this actuarial determined contribution rate to that 19% total contribution that is coming into the plan to see how well we are meeting our funding goal of trying to fund the plan fully in that 20 year period. So if we look at the next slide, we can see that, sorry. The contribution needed to fund that plan over 20 years, that actual determined contribution rate was 19.91%. We can see on this graph that that's made up of our normal cost rate, that's almost 11%. I didn't mention it previously, but another one of those annual maintenance costs are going to be that administrative cost to make sure the plan continues running. And then finally, we have that bit on top, which is going to be the amortization payment on that unfunded liability of 8.76% this year. When we compare that to that fixed rate contribution of 19%, we have a shortfall of just under 1%. So when we consider that unfunded liability, trying to get paid down, that interest at 7.25%, as we all know, When you're in those early years of paying down a mortgage, you're primarily paying for those interest payments. That's what most of that contribution is going towards for that unfunded liability for that debt to the plan. So while we have a shortfall, we're really just scraping away and paying down that interest and not really making any progress on that principal payment for the plan. so however this shortfall is a bit higher than our shortfall last year if we look at the next slide we will say last year we came to you with that just over half a percent shortfall and we came with a lot of positive Outlook saying that we were very, very close to getting to the point where we're going to start to paying down that principle. We did see that slight setback this year due to those assumption changes. However, we really wanted to zoom out on this comparison of where we were historically in that shortfall. And if we look back at 2018 and we had over a four and a half percent shortfall on this contribution and that's where we saw in that funded ratio graph where that fund ratio keeps getting depleted it keeps decreasing we continue to expect that unfunded liability to increase as we weren't making any progress towards that principal payment towards paying that off but you can see over time with All of those positive steps for the plan, such as the population growth, our payroll growth, and then of course those incremental increases that we can see as we go through time on those contribution rates, we really have made significant progress on shortening that shortfall gap for the plan. which we again just are seeing really positive progress. We see this as a very, very strong indicator that the plan is in a significantly better position than it has been in for about a decade. And we just see that as another reason to continue with this plan we have set out. This is not the time to take our foot off the gas. We do see that slight setback. We again can see that faded blue line that we provided here shows you that 20.37% actual determined contribution rate would have been the rate we would have calculated last year based on those new assumptions. So we still are seeing a shortening in that gap year over year on that same basis. So just to bring slight attention to that, just as a reminder that it's not a long-term setback, but it's just resetting our expectations for the plan. which really brings us to our recommendation once more on the next slide which is the same thing we've been coming to you with for a few years now and that's again that we believe this continued progress these incremental increases of a quarter percent increase to that county contribution is going to continue to help the plan stay on the right course. So we have been coming to the last couple of years saying that if we reach that 10-7-5 rate in 2029, that would be the point at which the plan is expected to be fully funded in 15 years or less. With our small setback due to our assumption changes, that is still a viable option for the plan. However, we do see a slight lengthening in that time to fully funded. So here we are saying perhaps an 11% maximum at 2030 with will get us to 100% funding in 2046. But what we really want to emphasize here is that the entire goal, the entire goal that we're trying to lead to is just to get to a point where stable contributions, both from county and employee, are at a point where they consistently are exceeding the actuarial determined contribution requirement that we are bringing to you. Once we have that point, that's when we're really going to start making meaningful progress on that unfunded liability. And really, all we're asking today, all we're recommending today is to make that additional 25 basis point increase to 10.25% in 2027 and continue on this path for the plan. This is a long-term progress and today we really want to focus on that one ask. The end point doesn't necessarily have to be determined or in stone today, but again, we would encourage to stay the course. If we move on to the next slide, I think this is a really good representation of why staying the course is a good plan and why we're making these recommendations. So in the past few slides, we've looked at that historical information for the plan. Up here, we wanted to really bring your attention to the forward-looking trajectory and projections for the plan and what we also wanted to emphasize on why we still believe the plan is in a significantly better place than it has been in years. If you bring your attention to that blue line, that is the projection just on your baseline results that we brought to you in 2019. We did not expect the funded ratio to increase at that time. All of our assumptions being met would lead to the plan continuing to be in a slow decline in all of our expectations. the yellow line which is again our 2019 results and that was an increase in the contributions from a 17% to an 18% that included increases from both the county and the employees and we'll see that it does turn the line around a bit and we were at least expecting an increase in the funded ratio but we were not expecting the plan to reach 100% funding in a reasonable amount of time. Heck, we weren't even expecting the plan to get into 70% range in a significant period of time, versus if we look at that red line and green line today, The red line is going to be our baseline results. So that is if all of our assumptions are met, including that seven and a quarter return on our investments and the current contributions remaining stable where they're at with that 10% county contribution, 9% employee contribution. And we expect the plan to reach 100% funding in 2040. I forget the exact number. I had it written down. Lost it. But, you know, in the 2040s, within a reasonable time, it's within, I would say, our lifetimes, which is a significant improvement to what we were coming to you with in 2019. And it really is just bolstering the fact that the plan is working. And both the board and the county commissioners have all done a lot to turn this plan around.

Get the plan on a good forward-looking trajectory and we don't We really just don't see this setback as a setback to that trajectory for the plan Yes Thank You madam chair the difference between the green line and the red line is can you tell me how many years is and what I'm trying to determine if we do the 0.25% contribution in 2026 like we have been doing, what difference does that make in the number of years? Is it three to four? It's four to five. Four to five?

Yes.

Four-ish to five-ish. Is that all part, I guess? Yeah.

Somewhere between three and six.

So, five years, four to five years is nothing to sneeze at. Yeah. I was just trying to think the other day what that 0.25 means for reaching 100% funding as far as the number of years, but that, so four to five years earlier. And granted the, sorry, my turn.

Yes, Treasurer wants to approve.

Granted our payroll will increase, right, in its percentage, so that will also increase, but if Correct me if I'm wrong, right now a quarter percent is about $500,000, right? Yeah. So that's $500,000 over 15 years. It's a big deal.

And then what I'll get to on the next slide, but we don't have to change it right now, is really going to be what that also means for the plan's resilience to any negative experience and having those additional contributions coming in, how much that helps to bolster the plan in any way you know downturns to the markets or other potential which are inevitable negative plan experience so it is yeah i want to say it's about a four or five year difference and i had it written down and lost it so i apologize but the the um green line is actually hitting in 2046 so i believe that might be about 2050 to 2051 just when the red line is hitting which is confusing i think we have it in the quick

fact sheet, too.

Oh, we do have it in the fact sheet. But that brings us to the next slide. So here's where we really want to look at the fact that, as we've discussed, we cannot see into the future and we don't know exactly what's going to happen. So on that last slide, that was to give us the idea of what is our expectation if all of our assumptions are met, including the primary item that we're looking at here is going to be that investment return. So again, the green line here is the same as the green line on the last slide. So that's going to be all assumptions are met, including our seven and a quarter return, also including some contribution increases up to that 11% maximum is what we showed on this slide. and what we also wanted to look at then is okay what does it look like if the plan were to experience a set of returns that is not our assumed seven and a quarter so of course on the positive side we have the blue and purple line above our green line and that is going to be if the plan returns over are assumed 7.25%, so of course we're going to get to where we're heading faster if that is the case. Important to note that this is, if they return this investment return in one year, in one single year, so this would be if 2026 returns were at 14%, Then our forward looking every year after that, we did meet our seven and a quarter assumption. That would be what our expectation is on this projection. So if we shift our look to that yellow, orange, red line, these are all of the scenarios. in which the plan does not meet our seven and a quarter assumption in 2026. And on top of that, there is no recovery to the plan after that. So oftentimes if we even went back, looked at 2022, where we saw another little dip on our funded ratio due to, I think it was negative 10% thereabouts return on the market. In that year, then in the following year, we had a recovery where the returns were above our expectation, whereas in this scenario, we were looking at if there was also no recovery, and we can see that the plan is significantly more resilient today than it has been in the past. So if we think back to that 2019 line, we weren't even looking at there were to be a negative return on the plan what would have happened and we saw the plan in decline whereas with this expectation we can see with a negative 14% return in 2026 although we expect some decrease in the near future we see plan recovery following only after five years of recognizing those negative returns.

So I just want to, I want to synthesize the resilience on this. It's so interesting because like she said, on the prior slide, with no adverse experience, we were, the phrase I used over and over with the BOCC talking about these results for so many years was treading water. The plan was expected to stay 60% funded basically indefinitely if we were lucky. Sometimes the line trended down. Sometimes we were asking for the contribution increase to tread water. And so now, to be able to withstand a minus 14% return, which is a 21% deviation from the assumption With no recovery. That is an extremely adverse event because, you know, normally we would model some volatility and we'd say, yeah, minus 14% one year. But then we'd model some recovery right after, right? We don't normally see a minus 14% return and then not have some recovery. So this is an extremely adverse event. And the fact that we can still recover from it is just such a change in the plan's outlook. And so that is a great thing that the plan actually has some resilience now. All right. I lost some power here.

Think of that chart as how well does Andy do his job in 2026? All right.

So if we scoot on to slide 20, almost done here. So the plan outlook is good. We do expect the plan funding to improve given the contributions that we have coming in. But, of course, the sooner the better. We would like to leave those 60-some percent funded ratios behind. The harder we work now, the sooner we can gain some momentum on paying off that unfunded liability and improving the funded ratio. Making this plan a funded priority also increases benefit security for your members. It increases plan resiliency in adverse times, and it will ultimately cost you less in nominal dollars the sooner you get those dollars into the plan. So we will keep encouraging the BOCC to increase those contributions. As Christine mentioned, we encourage you to continue to make those quarter percent increases for at least the near term. On slide 21, even though the funded ratio was pretty stable this year and the plan is 63% funded right now, the plan is much better off than it was a couple years ago and dramatically better off than it was six or seven years ago. The outlook is good and even better if you continue to make those contribution increases. The additional funding commitments and the retirement board will keep a close watch on these funding levels and do everything they can to improve them, working to invest as efficiently as possible and being transparent with you about the plan's needs. And so again, we encourage you to increase that county rate to 10.25% in 2027. And we thank you for your time and consideration.

Thank you. Do you have any questions? That was the question. Are there questions? Comments? Commissioner Fields?

Thank you, Madam Chair. I didn't see you. Look over here. You just saw my hand. The question on the last bullet there, your recommendation for the 10.25 contribution from the county, I'm wondering how you factor into that decision Any inflation and societal factors like war and those kinds of things, does that play into your long scheme of things? No. Inflation and tariffs and war?

I mean, obviously, we are cognizant of those factors and concerns in the investment market. But it is a very long promise, and so it's all It's partially sort of doing the snapshot as of, you know, 2026 and saying, what are things today? But then our decision making is a very long term view, right? We're trying to fund the plan over 20 years. And so, you know, that 10 and a quarter, it mostly reflects just through today and not sort of anticipating what if there's like a major market downturn type of thing. We would react to that as it came. And, you know, we have smoothing mechanisms in place so that if there were a major market downturn, we would not react to that immediately and say, you know, increase the rate to 14% kind of thing. So I know it's kind of all over the place, but for the most part, it's sort of where are things as of 2026 and how do we react to that over the next 20 years?

You're saying it's over time, so you're just not looking at one snapshot in time. You're looking at a longer landscape. Yes.

Great. We have an update. Thank you very, very much. Thank you.

How do y'all feel? I feel like it's good news, and I'm always glad to bring good news. Yay.

Great. Thank you. It is 2.32. We did it. We caught up. I love it.

Excellent.

And did it. So thank you very much, everybody. We appreciate the information, and we will be circling back with your strong recommendation after we take a look and see what we're going to do. Until next year, if not sooner.

Yes, until next year, if not sooner.