Pension Trustees - Regular Meeting

This time we'll call to order the 04/14/2025 meeting of the City of Clearwater Pension Trustees. This time we'll move to item 2.1 on the agenda.

Approve minutes of the 02/03/2025 meeting minutes. Move to approve the minutes.

Second.

All those in favor?

Aye.

Opposed? Unanimous. This time we move to item three on the agenda, citizens to be heard regarding items not on today's agenda. Is there anyone here to be heard? Seeing none, we'll move to item 4.1.

Annual review of the employee's pension plan investment performance for the calendar and plan year ended 12/31/2024.

Good afternoon, trustees. Jay Ravens, Finance Director. This is an annual calendar year review of investment performance for the pension plan, including performance of the total investment portfolio versus the plan's benchmark index, as well as each of the 22 separate money managers for the various asset classes. Got a chart to display. The first two columns on this chart provide the calendar 2024 performance versus the benchmark.

The middle two columns provide annualized three year performance and the last two columns provide similar five year performance results. For the plan in total, per the top line of the chart, it was a very good year on both an absolute basis with a gain of 10.27% versus the assumed rate of 6.5% and on a relative basis as we outperformed our benchmark index of 9.29%. Now at this point, at the risk of disappointing you, I don't intend to take you through each individual money manager on this chart. I am prepared to discuss the major asset categories if you wish or if you're comfortable with the information provided, I can stop at this point and open it up for any questions about categories or individual money managers. Your preference.

What's the desire of the trustees? Care more or to accept the report as we submitted?

It. I'll accept it.

Thank you.

Thank you.

Think we're here with what you presented. Thank you. Any questions from the trustees? None? Okay. It's time we'll move down to 4.2 on the agenda.

Approve recommended change in actuary valuation funding method from entry age normal to aggregate effective for the actuarial valuation dated 01/01/2025.

Good afternoon, trustees. Jay Ravens, Finance Director. At this time, I'd like to introduce the plan's actuary, Pete Strong with Gabriel Rotorsmith, who would like to discuss the recommendation of the change in funding method with you.

Good afternoon, trustees. My name is Pete Strong with Gabriel Rotorsmith. And I've been in talks with Jay for the last couple of years about the possibility of changing the funding method for the plan. The current funding method that's been in place for many years is the entry age normal funding method. And under this method, the there are two separate components.

There's a normal cost and there's a payment on the unfunded liability. When the plan is fully funded, as is the case now, there is no payment on the unfunded liability, but the full normal cost still has to be paid under state law. So there's no negative amortization credit for that full funding. Under the alternative aggregate funding method, there is no separate components. It's all in one component called the overall aggregate normal cost.

And with that normal cost, it takes into account the surplus because you take the total present value of all benefits versus the assets in the plan and you amortize that over future years. So you get to take credit basically for that surplus you have in the contribution environment. I do want to show a graph of a let me see if I can get out of Jay's. There we go. This graph here, if everyone can see it, shows a total of four projections.

Two of them are under aggregate and two are under intra age normal. I want to start with the first two, the blue and the red line. Under the blue line, that's your current intra age normal projection of contributions. And you can see it's higher than what it would be under aggregate, which is the red line. It's because you're under the red line, you're getting to take credit for the surplus that you have in the plan, being above 100 percent funded.

We also did a stress test. If the plan were to lose 15% on the market value of assets that would take the plan below 100% funded ratio to see what would happen under the two plans, you know, if the plan was not fully funded. Here, under the green line, under the current method, you have a contribution that goes still higher than what it would be under the aggregate method. The only downside of that is under aggregate, you don't get back to 100% funded as quickly. And that's demonstrated on this chart here.

With the stress test, the aggregate funding ratio would get back into the 90s, into the upper 90s, but not fully get back to 100% if it falls below 100% funding. But the huge benefit of using aggregate now is that with the current method under each age normal, you're going to continue to increase the fund ratio over time because you're not getting credit for the surplus. You're not getting a negative offset. The normal cost will keep being accretive to the funding ratio, increasing the fund ratio projected to over 115 after thirty years. Whereas under aggregate, you're slowly approaching back to 100 even, assuming all the assumptions are realized.

So with that, I'll leave it open to any questions you have and move forward with possibly our recommendation.

So we want hear from the public desire to speak to agenda item 4.2, specifically to the valuation.

I'm Mr. Haluba. I don't know, this could be an instance of Jadalajara statistics. But I'm not surprised that there's a negative offset. I predicted that the fund was gonna have to have some changes given the fact that we've got a double dipper, evil, unethical person in slaughter who's taken his retirement and his salary.

Not to mention changing the city charter or ignoring it, whichever happened, to allow Eric Gandhi to take his retirement and be rehired in the police department. Really poor move, miss Poirier.

Yeah. Would you speak to the valuation method? That's the agenda item.

The valuation is not a 100% in part because of those two issues. You can't just let everybody take their retirement and then be rehired so that they can double dip out of the retirement fund and still continue to earn their salary. It's completely unethical, but you allowed it to happen, I guess, because, you know, all of you, most of you that is, are under the direction of, you know, the the fiefdom that really runs things around here of gandy, slaughter, and even the assistant police chief.

Is anyone else here that desires to speak to agenda item 4.2? Seeing none, is there any trustee discussion? If there's not, is there a motion?

Move to approve agenda item 4.2.

Second. All those in favor? Aye. Opposed? None.

Thank you very much.

You. Geodime 4.3.

Discuss new procedures and processing applications for disability hearings disability pensions, sorry.

Thank you. I'll take this item. Trustees, so a little bit of background on this. The city pursuant to our ordinances, the state law provides for a process for disability pensions. Some of you are very, very familiar with that process because some members of the trustees have also served or do serve on the Pension Advisory Committee.

Historically, the Pension Advisory committee in Clearwater has been the body that is responsible for processing those disability applications with a lot of help from staff, but they process the applications and ultimately preside over the question of whether the employee or former employee is eligible for disability benefits. So they are essentially conducting mini trials and determining based on the facts and evidence whether the medical standards have been met for a disability pension under our retirement system. In recent years, however, that process has become much, much harder to manage through the pack. Part of it is because of the number of disability pensions that are now applied for. From what I understand, that number has climbed substantially in recent years, whereas the PAC in the past might have gotten them once a year.

Now we get them a lot. That's not unique to Clearwater. I see this trend in a lot of other communities as well. But part of it is the number of applications. That's particularly challenging for the pack because it is comprised of a mix of elected officials, union members, citizens.

It is not easy to coordinate seven people's schedules who all have come from totally different walks of life. At times, we have struggled even to get a quorum from the PAC, which has been to the detriment of employees who are applying for disability pensions as well as the pension fund that needs to make these determinations. That's really been the main issue. Then secondarily, the complexity of these cases has increased substantially in recent years. What used to be cases that were very cut and dry, for example, somebody who was shot in the line of duty or incurred very, very serious and obvious life changing injuries in the line of duty has now become far more complex.

Now we live in an era where there are mental health applications, multiple conditions, questions over whether a condition is cardiac in nature, which are complicated because those are evaluated under different standards under state law, etcetera. So both on a quantitative level as well as qualitative level, it's become increasingly challenging for the city to manage that process through the PAC and has not been beneficial for employees either. So as part of the latest round of collective bargaining both with the police union and the fire union, negotiated changes to the process. None of the benefits have changed, only the actual process for receiving and processing the applications themselves. The city has now approved an ordinance which codifies those changes and that ordinance was just approved last month, and I believe the ordinance for the record was 09/2005.

As part of that new ordinance, the trustees now have a decision to make, although the manager and I have recommendation on it. But the decision to make is fleshing out some of the details over that new process. What is codified in the new ordinance and what's codified in the union contracts states that when an application comes in for a disability pension going forward, there's old ones that are grandfathered into the old process, but when they come in under the new process, there's going to have to still be a physician or in some cases multiple physicians who evaluate the application. That's a requirement of state law, so that's not changing, because, again, that's a requirement of state law. Historically, that has been handled through the pension funds attorneys.

The pension funds attorneys, Stu Kaufman and his partners that are based in South Florida represent a lot of pension funds throughout the state. The reason they have handled that historically is because they have a lot of the relationships with the physicians who I don't know, staff doesn't know, etcetera. So that has been the process historically under the revised plan as approved in the ordinance and as approved by the new CBAs. Theoretically, the trustees could change that. If you guys wanted to on a case by case basis, you could decide who the trustee I'm sorry, who the physicians are going to be, and you would have the power to select them individually.

I don't think I would recommend that only because I don't know that any of the trustees are necessarily going to know the physicians. If I don't know them, chances are none of the trustees are going to as well. But that is an option. And so the discussion point for the trustees is to what extent do you want to be very hands on with that process, deciding on a case by case basis who those positions are going to be versus continuing to allow that process to reside with the pension funds attorneys who historically have determined what kind of independent medical evaluation is needed and who that's going to be. So for example, if somebody applies for disability pension, they might claim that there's both an orthopedic condition and a cardiac condition.

Historically, the pension fund's attorneys have said, okay, well we know this orthopedic, so we'll send them to this person and we know this cardiologist, so we'll send them to that person. Then you would get two different IMEs. You could either keep that process intact, or you could take it very hands on as trustees and say, you're going to decide case by case. So I don't know if the manager has anything to add to that, but that's kind of the gist of the issue.

Any discussion?

Yeah, I was gonna weigh in on this. I think that

it's good to keep it the way that it

is because it essentially keeps it completely third party. Know, I think that being able to take certain close to home issues and putting it to someone else to review and have that non bias outlook is extremely important, both for the applicant and for the city, right? So I think that keeping it as non biased as possible would probably be a greatest step going forward. So not changing what we're doing now is probably where I would on the side of caution just to for the protection of the city and for the protection of the applicant.

Agreed. I don't feel we need to be part of the selection process of any medical professional in these cases. So I agree.

Thank you. Anybody else? Okay. So our direction is unanimous. We keep it keep the way it is with the outside counsel recommending.

Yep. Sounds good. The only

question is the clerk, do you want them to do a motion?

I would prefer it to be a motion because since two did not say anything, so that'd be helpful.

I So would suggest,

Mayor, is that a motion be made then to designate the pension funds legal counsel to select and arrange the physicians on behalf of the trustees.

So moved. Second.

Okay. We'll get back to Councilmember Cotton since he's closest to the clerk for the second. Those in favor? Aye. Opposed? Amendments.

That's pretty much all I have unless there are other questions about the process.

Okay, thank you. No other questions? We will move to item five on the agenda, which is to adjourn the 04/14/2025 meeting of the city from our pension trustee.