General Employees Retirement Board - Regular Meeting

Thank you.

Good evening. We are going to go ahead and get started, recognizing that there are a few people that may be a few minutes late, given the activity that has taken place over the past hour and a half or so. So with that, roll call.

Roll call. Mayor Fremark. Here. Vice Mayor Salver. Here. Councilman Levy's not here yet. Councilman Sklar. Here. Councilman Wolf.

Here.

Lourdes Rodriguez. Here. Brian Cochran.

Here.

We have quorum.

All right. Thank you very much. Please rise for the pledge.

I pledge allegiance.

United States of America, and to the Republic for which it stands, one nation, under God, indivisible, with liberty and justice for all. Thank you. First item on the agenda, item 3.1, is the approval of the July 15th Retirement Board Minutes. I move approval. We have a motion. Do we have a second?

I'll second.

We have a motion and a second. All in favor? Aye. Any opposed? Motion carries. Next item is the quarterly investment report. And given market conditions, it should be a very positive report.

The punchline is we're trying to get, what, five reports. We did 11.14, doubling what we should get. So it's been a great market.

You're leading with the highlights, so that's okay. You don't want to snatch the feet from the gentleman.

It is creating volatility in the market, but with that, if we're in our books and we go to page two, even with the uncertainties still on the tariffs, and we do have at least some And if you look over the last 12 months, up 17.6%.

If you go back to the first quarter, the markets were down 5%.

And even after that, when Trump was on TV with his two big billboards, Liberation Day, markets fell another 15% from there. And now we look, year to date, And it's really right at the bottom of that page. Technology, communication services, magnificent center. It's better than the S&P 500, which is only 14%. So international's done well. Why? We've seen the dollar depreciate. That's been a tailwind. We break this page down to two halves. The right-hand side of this page is in local currency. Left-hand side of this page is in US dollar terms. And if we look year to date, I'm hand side up 25. So we've seen the dollar depreciate by about 10%. A lot of that was early in the year when there was a lot of uncertainty in policy. A lot of rebalancing. International investors were taking their money back overseas and was the a lot of time talking to those on page three, four. Fixed income markets. We saw Fed Chair Powell, Trump on TV wearing hard hats, bickering with husband and wife over the last several quarters. And I think Trump is getting his way now. We're starting to see interest rates come down. Last month, they came down by a quarter percent. The Fed is meeting today, making a decision tomorrow, most likely in another quarter point cut. So why are we seeing interest rates come down? Apollo's been pounding the tables If a consumer now can get a car loan for a percent cheaper, that's money in our pocket. 70% of our GDP is based on us spending money. If we have more money in our pocket, it continues to stimulate the economy. And secondarily is interest on the loans that we had as a nation. We've seen the 10-year come down from 4.6 in the beginning. remember about a year, two years ago, long-term rates were lower than short-term rates. So we're starting to see that reversion back to a normal yield curve. And we do have one recommendation we'll show here in a second with that thought in mind. But before I go to the portfolio, any questions on the economy?

We'll keep speeding along. Keep going.

number. Peter from GRS will be here next month. He's going to be thrilled. 11.18% for the fiscal year above our benchmark.

If we look over the last five years, up 8%, and since inception, going back to 2002, 6.5%. Strong performance. If we look at the middle section of that page, when we look at the fiscal year, we started with $24.7 million. 25, gain now $2.3 million for the income, and gain together $2.8 million in gains for the year, ending the fiscal year at $28,459,000.

T.J., when you mentioned current quarter, is that quarter ending September 30th, or is that just quarter to date as of now? That's quarter ending September 30th. September 30th, okay.

And we've been adding probably more.

Yeah, because the last week or two it's been...

12% since the end of this quarter.

And that goes into the next, we'll skip page six, seven, eight, and go to page nine and talk about allocation. alternative investments a little bit below. Our one recommendation would be on the next page, page 10. This is double clicking on that asset allocation and looking at the details. And you'd imagine if technology is doing well, the growth side of the equation may be overweighted. And we look at the second manager down on the left-hand Now, our recommendation is, with markets being at all-time highs, let's lock in some of those gains. Rebalance the portfolio to target, so take anything that's overweight in the equity side of the equation and put it into the fixed income part of our portfolio. We're trying to get five and three quarters. Our fixed income part of the portfolio is earning 4%, 4.4% yield to maturity. I would make the recommendation

So you're not recommending any changes to the targets, the allocations that we have in the policy?

Not yet. Now, being an open plan and having contributions come in and we're going to Cohen and Steer's global infrastructure. They focus on toll roads and airports and utilities. We do an asset allocation update on an annual basis with updated projected forward-looking returns. We will bring an asset allocation study, say, based on our investment policy, here's our expected returns. If we add another 5% to fixed income, that's what would change to our expected returns. So I think to demonstrate that, we would bring that to the next meeting and then make a decision, do we want to add more? But at this point, I think adding minimal amounts

So my reaction to that would be to be supportive of that. We hired you guys to manage this portfolio for us, and we've been pleased. But I'll open it up to discussion on the part of anybody else on the committee.

Can I ask a question? I just want to make sure. Because I'm looking at your – you're moving that asset to the Vanguard total bond or the short-term bond? The total bond. Because that's the one that – I mean, the other one's doing better, it looks like.

now added to bond, the total bond market, which is now yielding about almost a percent higher than that short. So now it's reversed from, George, where we started, now that we have the normalized yield curve where that middle part of the interest rates are paying more than the short side of interest rates. So that's going to be probably our recommendation going forward as we have rebalances, adding it to that total bond market part of the bond portfolio.

Okay, you can continue.

Our cone and skiers global infrastructure is paying 2.6% dividend, it's up So strong returns, my recommendation is to make a motion to rebalance the equity part of the portfolio to that Vanguard total bond market.

All right, so you have support from the committee on that. Any questions or comments?

Lois, anything? No?

All right. We need a motion to accept the report. Okay. I'll make the motion. Do we have a second?

I'll second it.

We have a motion and a second. All in favor? Aye. Aye. Any opposed? Motion carries.

Great.

Appreciate everybody's time. Thank you very much. We look forward to continuing positive results, for which we'll give you full credit.

Thank you. Okay.

All right. Next item on the agenda, item 5.1. Mr. Manager.

We have the budget. Mr. Mayor, yes. This is the budget for the year. The pension board operates on a fiscal year just like the village does. The proposed budget is pretty straightforward. There are a couple of increased fees. One associated with the management fee, the more money you have invested, the more you're paying in fees. And the other is some additional accounting and bookkeeping that's required to make sure that we report on all the things that we need to report. But otherwise, the budget, when you look at where actual to propose, it's within a reasonable rate.

Any questions or comments on the part of the committee? I'll make the motion. Do we have a second?

I'll second it.

We have a motion and a second. All in favor? Aye. Any opposed? Motion carries. Item 6.1, Mr. Manager.

Mr. Mayor, we've had actually two items back-to-back here that are employees who've left the village or retired. First one is John Oldenburg. He, as you know, retired some months ago and has started to draw his pension, but the requirement is that at the next pension board hearing, you need to accept the calculation and the award for his retirement benefits.

All right, so is there any action at this point? Yeah, we need you to move it and move forward with it. Okay. Any comments on this? I'll make the motion. Do we have a second?

I'll second it.

We have a motion and a second. All in favor?

Aye.

Aye. Any opposed? Motion carries. Item 7.1.

Mr. Mayor, 7.1 is another employee who left the village. He didn't have the same length of tenure, so he has requested his lump sum contributions to be paid back, right? Rick, is that it? Correct. Consistent with our plan, you can do that and get the interest earnings on his component of it. And so this is basically dollars that are his.

Okay, I'll make the motion. Second it. We have a motion and a second. All in favor? Aye. Aye. Any opposed? Motion carries. Item 8.1, an interesting item. Mr. Manager?

Mr. Mayor, thank you. This is, you know, I congratulate the creativity. One of our members of the plan, some time ago as they were doing their estate planning, asked could the beneficiary, the survivor benefit, be provided through a trust. And after researching it with our pension attorneys who are here to explain it, the answer was yes, you can. However, you still have to designate, it has to be tied to a survivor. And then when that's done, there's an actuarial calculation that it takes place to make sure that the pension is not, there's no windfall associated with it. But it could be your spouse or it could be anybody actually. A pension is pretty broad as to who you can name as your survivor. And so this would allow the survivor benefits to work through a trust, although attached to an individual. So it's not like it'll be a trust in perpetuity and it's actuarial and neutral. And what our attorneys have suggested that is it should not be an interpretation, that it should be a policy decision of the pension board to make sure that that can be done in the future. And so, you know, the person who asked or anybody is now entitled to that benefit if they so choose. Anything you need to add to that? Go ahead. Our attorney's here, so let her. She drove from Boca, so let's...

Thank you. Louis Longman-Walker. We specialize in local pension work, and they called us. We've done some work with the Village of Bell Harbor plan before through my colleague, Jim Lynn, who's since retired, and this question has come up quite a bit. I do have a very short presentation, but I'm sensitive to your time, so I think your village manager laid it out okay. Essentially, when the question came to us, yes, you can take The way that the plan defines beneficiary, it's a person or legal representative who is designated as the person who is going to receive your survivor benefits, that is your benefits after you die. IRS considers the term person to include a trust. And per IRS rules, you can use a trust if it meets certain requirements. It has to be valid under state law. It has to be irrevocable behind the member's death. It has to be, and it has to name the beneficiaries. The challenge as, and it would be easier if I just do my little quick presentation because I think it's kind of a complicated thing. So if you just want to pull it up, it's just easier for me to kind of talk about all these terms at one time. All right. All right. So, as I said, the plan definition is a person or a legal representative who receives payment upon the death.

I think we can potentially preempt this. So, is there discussion on the part of anybody on the committee?

I'm the one that actually brought it up, so...

You want to see the presentation?

No, no, but I'm in favor.

Okay, so I think there's going to be support, but I just wanted...

I have a question based on the policy adjustment.

You can ask the questions, of course.

On the mic.

Go to the mic, Brian.

So if the pension plan were to allow a trust to be the beneficiary, how would this affect the annual affidavit to confirm that these individuals are still alive, and would it be prudent to build in some sort of defined control?

Just to clarify, the trust itself is not the beneficiary. The plan will still have a designated beneficiary, and the benefits are paid through a trust. So instead of depositing it into a bank account, you deposit it into the trust. So for the plan purposes, the application form still has the name of the beneficiary, the designated plan beneficiary, And just a statement that it's paid through a trust. So it really doesn't have any bearing on the death reporting that you do. So you'd know immediately you have one person that you're dealing with. And that's the important thing to know about adopting this policy is you will still be designating a person. But that person will just be paid through a trust. And what happens when the benefits go into the trust? It has nothing to do with the plan. The trust then can distribute the assets to as many people as they want. But for plan purposes, only one person can be designated. You cannot name a trust as the beneficiary. You have the designated beneficiary who's paid through a trust.

And the actuarial calculations are predicated on that individual for determination of the funds flow.

That is correct.

And that has to be done at the time of retirement.

That is correct.

You can't keep changing it. It's like a one-time decision.

Right.

Did that answer your question?

We recommend, though, it's just for post-retirement benefits. The plan does have death benefits, and what that would require is when a person onboards, you have a new employee and they sign up for the plan, they would have to designate that beneficiary in the event that they die while being employed. We've just found that it adds another layer of complexity of people onboarding. We recommend that you use a trust only for post-retirement survivor benefits only.

All right. So the board needs to take action on this. Is this a voice vote or a roll call? Voice. Voice vote? Okay. Any other questions? I'll make the motion. We have a motion and a second. All in favor? Aye. Any opposed? Motion carries. Thank you very much. Thank you very much. All right. Any public comments? All right. So with that, the meeting is adjourned.