Police Retirement Pension Board - Regular Meeting

No, but I just want to wait it out and see if something tanks.

Yeah, he confirmed, yes.

Or you can do it on your own. Because it's a pain to get in and out. There's a computer here. Is there a computer? No, no. Can you see my computer in the background? The silver computer?

You just want this.

In the background? No, not in the background. In the background. Can you show this? Is it heavy? No.

Hey, aren't you charging it here?

No, that was mine. No, that's not mine.

all right i call the meeting to order okay congratulations and it's and it's 12 0 3 p.m

Okay, so we're gonna we're gonna call order trustee coop president trustee Magoo's trustee Maura present trustee Reynolds trustee Vargas present Any public comments

Seeing none, hearing none, we'll move on. Item number three, approval of the minutes. Is everybody up to review the minutes? Any questions on the minutes? We got a motion to approve. Maude seconds. All in favor?

AYE.

AYE. ON NUMBER 4, RATIFYING THE WARRANTS, WE'RE GOING TO DO IT ALL AT ONCE UNLESS SOMEBODY OBJECTS. NOBODY OBJECTS.

MOVE TO APPROVE ALL OF THE WARRANTS A THROUGH D. JUST MAKE SURE YOU HIT THE MOVE TO APPROVE ALL OF THE WARRANTS A THROUGH D. I'LL SECOND.

ABOUT A SECOND. ALL IN FAVOR?

Aye. Aye.

All right, number five, Dave Europe.

Good afternoon, everyone. Two things on my agenda today. I wanted to run through professional transition that I'm going to be engaged in and obviously take you through some very good news. Numbers look great in the report. And so let's dive right into it. For those of you that were at the FPTA conference, it got leaked out accidentally by the CEO. Up on the big stage, she erroneously said that I was, correctly said that I was joining and accepting a position at the FPPTA as Director of Curriculum. So I'll be taking my 40 odd years of investment management slash consulting experience and assisting that awesome organization in that role. But she also said that I was doing that in my retirement. I'm not retiring, but I am going through entering into a professional transition. Nothing changes for us for a year But I am going to be transitioning off a lot of relationships to my esteemed colleagues in this case James Reno heavily credentialed CFA everything you need One of my good colleague consultants is gonna be attending every meeting. And while we appreciate your letting us do it on the teleconferencing, as long as we're here and since we are gonna be doing a transition, we think it's best to professionally handle this in person. So for at least the next year, we'll be attending all your meetings in person together. I want to do this carefully I want to make sure you're taken care of and not only does James need to know you know the technicals and ins and outs of everything we're doing here but he needs to get a feel for what's going on actuarially and he doesn't know what your secondary and tertiary objectives are here as a board and you know he needs to be able to get along and understand you know the unique vibe of this particular board so It's going to be a slow transition over. So that's my item. That's my big news. So after 40 years, I'm finally going to take the foot off the pedal here. So going into the report. Great period. Just a couple of things on attribution that impacted your system. If we look at all the Trump tariff activity, obviously Liberation Day resulted in a massive equity market decline of 20%. You know, the tech stocks, the AI stuff was down, I think it was some 35% or so, if I remember the number correctly. With the announcements, rescindments, announcements, rescindments, everything that's going on, creating enough confusion that I think the market became somewhat desensitized. and got the feeling and became a little more comfortable in the fact that, okay, these 50% or 120% tariffs aren't going to stick. They are going to be negotiated back. So where do we stand? As of Sunday, I believe, depending upon whether you're on Japanese time or American time, the latest round of negotiations puts a tariff on across the board tariff with Japan at 15 percent. And this brings actually the average country tariff right now. is at 15%. So there's still some other countries waiting for negotiations, but that's where it stands. And the practical implications here haven't been worked out yet. I'm not sure, I don't mean to be cynical, but if you've ever been to Tokyo, Japan, or even in Europe, I don't see a Ford F-150 making it down the streets. The streets are so narrow, you know, you can only get one big truck down the road at a time. But, you know, these things, we'll see how these things work out. And also Boeing seems to be a huge winner here. You know, I'm not sure how many hundreds of aircraft have been – ordered for Boeing. But, you know, there are beneficiaries of everything going on there. But there still remains a lot of uncertainty. So the market has rallied back. I think one of the biggest drivers of the most recent market recovery is, again, the market becoming a little bit desensitized. But also, everyone went out with these draconian forecasts Myself included, I was in that camp. I thought, oh, my God, tariffs were going into a recession. Everything's going to shut down. But what effectively happened is we all front loaded in advance of the tariffs. This provided a boost to the economy. So now we're at that critical section where we need to see if that gap gets filled. And it takes time for everything, you know, to actually be implemented. I think the first casualty maybe from a major corporation was GM, right? They announced earnings and took a big hit. They didn't change the prices of their vehicles, but with all their supply chains, auto parts coming from Canada, whatnot, Mexico, they took a big hit to the earnings because their distribution was, parts distribution system was always massively impacted so it's going to take time for companies to work things out figure out how they can you know rework their supply chains but I think bottom line and we talked about this last meeting you know no matter what we've been through far greater challenges as far as the U.S. economy goes. And, you know, we prevail. This capitalist system we operate in in the United States always maneuvers through, and we come through everything. So we'll see how it comes out. But I think the rubber will start to meet the road probably at the end of the summer. Early fall, we'll start to see some impact affecting things there. So let's take a look at the asset allocation. And the big drivers of return for the quarter were obviously equities and growth stocks were once again the big driver. And you guys remember we moved half and then we move all of our growth stock allocation out of the all spring active managed and we went into passive. 2020 hindsight, this proved to be a pretty good idea. Active managers are once again struggling a little bit as the equity markets have largely been driven by the resurgence in AI stocks, but we are in the growth index fund, so we're there, we got it. So that has brought our asset allocation up to just beyond the outer bands with that nice appreciation in the equities. So looking at page 15, you can see the green triangle went a little bit red. And we're set up here to rebalance with a discipline to kind of the 5% rule. And over time, looking back over years and cycles, usually if you get that far and you have that much of a deviation in performance in one asset class, especially equities, it's usually been a good time to, you know, rebalance and take profits. In this case, you know, it's a policy that's dictating that we have this conversation because we want to maintain the risk characteristics of this portfolio, right? So my recommendation today is to rebalance domestic equity. Let's get back in line. But I'm not going to recommend that we go all the way back to the policy target. I think it behooves us to maintain an overweight in equities over time. That's typically the best performing asset class. But we do want to manage the risk of the portfolio. And this is a great time. You're supposed to sell high, right, buy low. This is a great time to sell high and take some profits off the table. So my recommendation is to rebalance 2% of the total market value of the domestic equity. And I would recommend that we do that in a way that keeps our value side and our growth side equal, right? The growth side, we have the Fidelity Index Fund. And on the value side, we have Boston Company or now Newton. I would suggest that we keep those two allocations the same. And in this case value we have more value in the portfolio than we do growth. So that 2% equates to 1.6 million dollars. So I would recommend that we rebalance taking 1.3 million from the Newton value portfolio and just 300,000 from the growth index portfolio. So then the question is, what do we do with that? That leaves us with an overweight, right? But we are rebalancing. And what do we do with that cash? So I think we have two options. I would suggest that either one, we move $1 million of that into the international equity allocation, which is still underweight. or we move all of that or a part of that into the cash reserves rather than the fixed income. We are still earning, you know, 4 plus percent in the money market, and that is a credo that's helpful, you know, and we're not experiencing any of the market volatility in the money market fund. So my suggestion would be to, you know, allocate at least a portion of that portion of that into the money market. And, you know, I think up for discussion here is, you know, if the board's comfortable keeping the overall equity weight high, we move a million dollars into international in the balance into cash or we, you know, we move all of that rebalancing into cash. So let me just stop there for conversation and discussion. Bottom line, I do recommend we take some profits and take some money off domestic equity off the table here.

You know, the domestic equity is our best performing asset and has been since I've been here. That's for four years.

I just don't know why we're moving out of it at all.

So, if we are going to move out of it, then I would just go totally into international equity. Why do we need more money in cash?

It's more of a strategic call. Operationally, we have in and around enough to pay benefits. and pay bills. So this is more of a strategic call. If we move it into cash, we're actually making the same yield or close to the same yield that we would be making in the integrity portfolio. But we have no price volatility. And as you know, interest rates have been moving all over the place and bonds have been up, bonds have been down. And we can collect the same amount of annualized income in cash and money market than we would in the bond fund.

How much cash do we need? Don't we generate cash each year at this point rather than need cash?

Yeah, operationally, if you take a look at page 21. We produce cash, right? Well, we have fiscal year to date, if you look at the second table there, we've taken in contributions totaling $1.531 million. Right. And we've paid out $1.710 million.

So we're not quite. We are slightly cash negative.

Yeah, and looking at the most recent quarter, I don't know if there's an anomalous distribution there, but the contributions were $121,000, and we had $411,000 going out. I don't know if we have any drop payments or anything going out or redemptions. Yeah.

Okay, so we do need a little more cash, I guess, as a cushion. Yeah. All right. I understand that logic. But what did you say again? What was your recommendation? Is equity international and then cash? How much?

Yeah, so the recommendation would be to rebalance, but not all the way back. Just take some off the table. 2%, is what you said. Right, and that still leaves us overweight.

And how much is that, 2% of equities? Sorry.

And that 2% would be 1.6. 1.6 million, moving that.

And then moving how much into international?

And, you know, we can do two things. My top line recommendation would be to move it into cash, all of it into cash. I think a secondary consideration is, you know, if we wanted to maintain equity, we could add a million dollars to the international equity index fund. That's what I recommend.

I don't know why we would. I mean, it works, you know, year after year, being in equity works, as long as we have enough cushion to make sure we're not, we don't put in a spot where we have to liquidate when the market's, you know, upset. That's what I think.

How did the 1.6 million, how is 2%, how is 1.6 million 2% of 42 million?

So that would be a 2% of the total market value, yeah.

Right, so 2% of $42 million is $840,000.

It was a growth, and it's based off of the most recent market value. So what we did is we pulled your market value as a last market close of Friday, and that equity go on another run, right? So 2% of that new market value, and that's roughly 2%.

And our total value of the fund is over 40 million now, right? Yes. So that's where you get your 2%.

Oh, still, I still don't get it. Sorry. We would have to be at 80 million for 2% to be 1.6 million. Have we doubled since June?

That'd be great.

Yeah, if we did, I'm all for it. I understand the 2%, so we basically bring the allocation down from 55.3 to 53.3, is that correct? I see it.

Yeah, so that would, so actually that we would be doing a million.

If it is, how good is the mic, sir?

Feel free to come up to the mic if that way everyone can.

Yeah. So what is the current valuation of our fund, your last number, and how do you calculate 2% of that?

I just think with the last one, too, if it wasn't 2%, it's more like 1%.

So 1% is 1.6 million?

I'll give you the exact.

So 1.6.

So we pulled your market value. You're sitting at about $42.6 million now. Okay.

Because of last market close. Okay. Friday. 42.6. Yeah, so it's roughly 3.5%.

Yeah.

So are we doing 3.5%?

I'm saying are we doing 2%?

Or 2%. It would be 3.5%. My bad. Yeah.

So 3.5% would bring the allocation down from 55.3 to 51.8? Yeah, yeah. Is that what you're proposing? 42. That'd be 1.5 rounding.

Yeah, I'm sorry. The original calculation was to take us all the way back to center. Yeah, that's how we came up with the 1.3 and the 3, 1.6. So if I modify that original recommendation, which is what I'm trying to do live on the podium, so to your point, if we did the 2%, I'm sorry, if we did the, let's make it 3% given the appreciation. Okay. So that would be one, let's make that 1.3. So that would be $1 million from Boston and $300 from Fidelity Growth.

So we got $42,600,000 is the asset value. We are reallocating 3%. No, we want some to go to cash because we are a cash drain and we need a little more cushion Yeah, so look for clarity let me I apologize let me restate it so The three percent would be 1.3 million and

All out of domestic equity, $1 million out of Boston, and $300 out of Fidelity Growth. And then my top line recommendation is we just put that in cash and collect that money market yield and review it next quarter. Maybe we want to reinvest it somewhere else. A secondary recommendation, if the board is comfortable with everything that's going on in here, international equity is performing very strongly in here. You know, we could allocate a million of that to the international equity.

And then 300 to cash? Then 300 to cash?

And 300 to cash, right.

I'm happy with that.

Yeah, I think that's what you originally said. I think what was off was the percentage of the total fund. That's what was off and that's what's throwing everybody else off on the board. But that's what you said in the beginning as far as the allocation, the movement of the funds.

So would you repeat what the proposal is now, putting the most money, the bulk of it into international equity, just so we all understand what you're proposing?

Yes, yes. So the recommendation of the proposal is to rebalance domestic equities back into the policy range, but to only do a partial rebalancing. And that would be a total of $1.3 million. One million would come out of the Newton Value portfolio, and 300,000 would come out of the Fidelity Growth portfolio. And the top line recommendation was to allocate all of those monies into cash, The secondary recommendation, which I would be perfectly comfortable with, is to allocate $1 million of those proceeds into the international fund and the remaining $300 into cash.

Can I ask a question? The fixed income traveling returns, do they include the interest, or is it just the base?

What's the fixed income?

The fixed income here on page 20. Oh, it'd have to have the interest in it. It's fiscal year-to-date. It's 1.61%. Is that just the interest, or is it interest only? Is it interest and appreciation of the principal, or is it just the appreciation of the principal?

Oh, the fiscal year-to-date return for integrity?

Yeah, just in general.

Yeah, that is all in. So the annualized return, the one-year return was 6.7%. Is that the 6.66%? Yes. So, if we assume interest rates are going to be unchanged as of today and look at the current yield of the integrity portfolio, it's around five and a half-ish percent. So, if there's no change in interest rates, we should earn an annualized interest rate of that five and a half percent between now and year end. But in this case, interest rates came down, so you got a little bit of appreciation added on top of the income that was generated, and that's what got you over the top to the 6.6. Does that address the question? Yeah.

If we're trying to, like, increase cash flow, then why don't we just move it to higher than the cash?

Well, yes, you could, but you've also got volatility. Because if rates go up, the fixed income portfolio will crater. It won't crater 20%, which will certainly crater 5%. And the reason for the cash is we have a cash reserve to protect our negative cash flow for benefits. That's my thinking.

Yeah, money market has been a great strategic investment. I mean, you usually have it for, you know, operations, but throughout the year it's been, interest rates have been so volatile to your point, prices moving up and down, and we could just park it in that money market yield, dollar in, dollar out, and collect that annualized yield, check it next quarter. If rates came down, maybe then we want to put it somewhere else.

I mean, if Trump somehow fired the Fed chief, and the Treasury, the guy that Treasury goes in and does whatever Trump wants and drops rates, inflation goes through the roof, you'll see the fixed income portfolio just be decimated.

Yeah, under that scenario, you will have, let's call it, you will have negative total return.

Right. Yeah, likely. I mean, that's very unlikely, but...

So this is an insulator to get us through the volatility here and reassess next quarter.

Hey, Dave, as you know, I don't give investment advice, not qualified to do it. You've heard me say that a million times. But just for the minutes, just so we have a clear reasoning behind the recommendation of pros and cons, because that's what trustees weigh, but the advantages of doing it, and maybe you mentioned duration as part of that conversation.

So to address Adam's question, so duration is like a volume knob. It's a measure of price sensitivity to changes in the interest rates of your bond investment. So I think the duration or the volume knob for the integrity fixed income probably somewhere around, it's up on seven, right? It's not on 10. but it's around seven. So for every 1% change in the general interest rate environment, that's a 7% move in price that that portfolio would experience. So under the suggested scenario, if interest rates go up by just 1%, the total return for that fixed income portfolio is going to be a negative 7%. So that's where we were coming up with the volatility. But that's just one vector, right? You got three ways you can go. Interest rates go up, you lose. Interest rates go down, you win. Interest rates stay unchanged. You win, but you only win what the current yield is today.

So what would your duration on the money market fund be?

That's a zero duration. No sensitivity whatsoever to changes in interest rates. The only thing that would change is the yield, and if the Fed cuts rate, then the yield you're earning will come down likely when the Fed, if and when the Fed cuts rates. So you would just be working off your short-term investments there, and then when you go to reinvest that money in the money market, it would just be invested at a lower yield.

So your first recommendation was to move everything to cash?

So I can rearrange the order. So there seems to be an interest in maintaining overall equity. So we would be rebalancing and removing $1.3 million from the domestic equity and investing $1 million of those proceeds in the International Index Fund equity. and $300,000 into the money market.

And that makes up for the shortfall of possible cash shortfall? Yes. Yeah. And that's the secondary motivation.

It gives us enough cash.

I have a question.

I'm sorry. MR. WEST, IF WE PUT ONE MILLION INTO THE INTERNATIONAL EQUITY, HOW IS THAT GOING TO BALANCE OUT? IS THAT GOING TO PUT US BACK TOWARDS THE BALANCING?

YEAH, WE'LL BE WITHIN OUR TOTAL EQUITY RANGE.

BECAUSE THAT'S 20%.

AND THAT'LL BRING THE INTERNATIONAL EQUITY BACK UP OR MAYBE A LITTLE BIT OVER THE POLICY TARGET. AND THAT'LL GET THE RED TRIANGLE BACK INTO THE GREEN. OKAY. SO IT WOULD BE TOTALLY WITHIN OUR POLICY. keeping a very full allocation to overall equity.

It's going to be fairly close to target. Everything is going to be close to target because fixed income already is at 31.8, and the target is 33. International will be at 15, and the target is 15. Domestic will be at 52.4, you should say.

Yeah, that pretty much equalizes. Get us back to targets, yeah.

I'm sorry your motion I'll make a motion to follow.

Mister West advice to. The balance of portfolio and take a 3% or 1.6 million out of the 1.3 1.3.

Can you make sure your microphone on so we know it's not on.

So can make a motion.

I make a motion to follow Mr. West's advice and withdraw $1.3 million or rebalance $1.3 million from domestic equity, $1 million out of Boston, $300,000 out of Fidelity, and moving that money with an allocation of $1 million to international equity and $300,000 to cash.

Does that sum it up? Very well said. Thank you. Love it.

Do I have a second?

I'll second.

And her seconds all in favor.

All right with that out of the way. We'll get that done. Let's go to page 19. And very happy to report, if you follow with me on the top line there, the fund fiscal year to date is pretty close to the actual required rate of return bogey. We're at 6.69%. We're a little bit ahead of the policy benchmark. Interestingly, I think everybody here is aware that the FRS has their plan year end June. I'm a competitive guy. I like everybody on the podium. getting trophies um i highly think that we will have outperformed frs pretty significantly and as you guys know if you were happen to be in frs you make the payment that they come down and tell you and a lot of that has to do with how their investment portfolio did or not You don't have to worry about that here. You control everything here. And so you don't have to take the word from above. This is what the village owes. You guys can control that with your investment program. So I think we're going to look very, very strong when compared to FRS. So the one-year number, Just under 13%, 12.83%. Really nice. The other number that you're aware of is the one in parentheses there. And as I like to read this, you're in the top seventh percentile. But that means that 93% of the other trustees across the country and Florida and this database would rather be looking at your report than their report, right? You've outperformed everybody. Same for the three-year, same for the five-year. We had a conversation about inception numbers earlier, and I think this was way before our time, but I think earlier, in the early days of the fund, it was invested in bank CDs and other fixed-rate instruments, so that biases the data there for a number of years. Yeah, five-year number, looking very strong. And, you know, happily, we popped ahead of policy benchmarks, too. So that's adding incremental value to the portfolio. We were watching Newton, right, on the value side. They had a nice comeback here, fiscal year to date. They're up 6.93 versus the value index, value stocks squeaking out 3.9%. growth was the big driver of returns as i said uh the ai stocks driving everything once again the index fund right there you guys got 13.59 percent and um the mid cap index continues to be a laggard uh unfortunately mid cap stocks are just not uh getting the same bid But nevertheless, for the quarter, good strong numbers. But you're in the index fund, so you're getting what the market is delivering, 6.7. internationally, largely because the dollar depreciated. Remember last time we met, you could buy one euro for $1.05. Now it's going to cost you $1.17 to buy one euro. I hope everybody went over there over summer vacation, because now it's going to be more expensive for us to travel, right? But as investors overseas, that's good for us because we bought into a currency over there that was appreciating relative to our currency here. So that provided a nice boost for international, which fiscal year to date is up almost 11. The fixed income integrity doing a very good job, in my opinion. maneuvering through a very dicey fixed income market with rates just all over the place. The fiscal year to date, they're up 1.6. Yeah, that's a small number. But there's depreciation included in that because of negative interest rate moves. The most recent move in interest rates was slightly down. But remember, the long-term interest rates where the volume is on 10, like the 30-year treasury bond, that's got a duration or a volume of 10 in sensitivity, long-term interest rates went up. So, we experienced some price depreciation in that piece of the portfolio. So, that's why the returns for fixed income are very unexcitable there. Any questions on the percentage returns? So, let me wrap it up with the.

The expression, we're pumping on all cylinders. Yes, definitely.

Everything's working right now. Yeah, if we get a little more boost or stability out of the fixed income portfolio, yes. So on page 21, just looking at the cash flow, we'll just revisit that page again. Fiscal year to date would be the second table. So the total fund opened the fiscal year with $39.7 million. The contributions totaled $1.5 million, as we previously discussed, distributions going out $1.7. Investment management fees, these would be the fees invoiced and paid by the custodian only, $67,000. Other line item expenses, we pulled from the custodial statement, $111,000. So our total return on investment was a very nice appreciation and interest totaling $2,660,000. So as of June 30th, even though a little more money is going out than is coming in, we ended up with a higher market value. We're at $42,047,993. Do you have any questions on the cash flow? And let me just leave you one last page, as we always do, and we kind of talked about this last meeting, but if you go to page 50. Here's all the fees. As you guys know, we are proponents of 100% transparency. You've got to be able to look through everything. So here's all the investment management fees that you're being charged on page 50. For example, Newton Equity, that's a separately managed account. They're at a little over a half a percent or 55 basis points, as we like to say. But the total fund all in is at a quarter of a percent. or 0.23 and that's a percentage that's charged on the market value of the fund all in based on that allocation so i think we'd be hard-pressed to put together a more inexpensively constructed program that's generated the returns at the level that we've been able to uh to get out of this uh out of this portfolio that's that's my report unless anyone had any other questions

I have one question. I know that the general employees fund had you run some reports on how much more return would be generated by a higher allocation of equity. Right. If we went to, I mean, you may not know this number, but let me ask you. We're right now at 65% equity. If we went to 70% equity, how much over the long term, theoretically, would that generate in return?

Yeah, so two questions on the table. So yes, we completed a study, and they actually had us put a fictitious benchmark in the book here that was 85-15. I tried to negotiate that down. They wanted to go 100%. But the risk return is much better for an 85-15 portfolio were we to take that direction. I'm just giving you the genesis here.

Where were they going into this analysis? What allocation percentage?

So the conversation ended on it, and they decided to stay the course. for our previous discussions where we did all the study work. So that ended, but now most recently at today's meeting, they opted to change their investment policy statement and increase the target from 65 to 70. Okay. And from their perspective, they wanted to increase rather than rebalance the allocation to domestic equity. That's not my recommendation, but that's the direction the board wanted to take.

Theoretically, I mean, when you run your analysis, what was the, what, How much do they expect to gain over the long-term in percentage return? Do they think they're going to pick another 1%?

It would probably be, well, let me pull up, to answer that question, let's pull up the the fictitious benchmark. So, I'll just give you some, for conversation only, I'll give you some numbers here. So.

David M. And, Dave, do you happen to have any written copies of that? Because it might be useful to look at, or you don't have any written,

I'll just, I'll give you the numbers from the morning's report. So, the one year into June, the hypothetical 85-15 did 14-4, and the policy benchmark, as you know, did 12-5. five years it did twelve six versus nine three and the inception number which would include all that data bias I was talking about earlier the portfolio would have produced a seven point eight versus a six point eight but I was trying to emphasize with the committee this morning The objective here is not to maximize return, right? The objective is to meet the actuarial required rate of return, which is seven, and hopefully we can generate enough extra, and to be super sensitive to the interim periods that, create all the volatility. Because if we come short in the actuary smoothing valuations for us, that helps a lot. But if we go through a period where we get another market correction, which we will, it directly impacts the village contribution requirement. So we as fiduciaries, in my opinion as a consultant, I need to be super sensitive to disrupting your sponsor's budget We want to make the number, we want to exceed the number, but we've got to be sensitive to that. So that's why we've been running this the way we have. Now, from your perspective, there are systems out there that they want to maximize the return, they want to lower the rate of return assumption so that the investment differential is more, and then that puts you in a better position the program is better funded, then you're in a better position to go request benefit increases. So it depends what your motivation is on it. If it's just to make sure we exceed with a little extra, I'd encourage keeping the current allocation. But if you want to go for it and be less sensitive to intermediate changes in valuation and the effect on the sponsor. You know we can we can increase the allocation you guys are pretty high if you look at.

90% is the funded ratio.

Yeah, if you look at page 18. This is the universe of public plans, and this includes, you know, the, I don't know, 340-odd plans in Florida plus, you know, across the country. And I think most of them would be in there. And if you look at the left chart on page 18, this shows your equity allocation, domestic equity allocation relative to the universe of other pension systems. And you guys are actually at 52%, as of this print, you guys are actually in the top, almost in the top quintile. or quartile, I'm sorry, of allocation. So you have much more equity in your portfolio than most of the other systems. And from a global international equity, bam, at 15%, you're right on the long-term average. So, you know, we are pushing it, not that we care what other people are doing, but, you know, it's got to be what you guys want and what you're trying to achieve objective-wise. So, you know, I'm open. It's a conversation that needs to be ongoing. If you want to change the secondary objective to... over time, generating a little extra to put yourself in a better negotiating position, but there is no free lunch with that comes increased volatility during those down periods, which are inevitable.

That's my two cents. I don't want the mayor coming in here screaming at me. Let's hear that right now. That is not a good thing.

So, trustees, I'm going to reiterate again, I do not give investment advice. If I tried, you should run screaming through the door. So I'm just going to turn the clock back. This is probably 1998, a pension plan in Florida. I decided they wanted to go basically 100% equity. Well, I have fixed income because fixed income over the long term does less than equity.

And the interest rates were much higher then. You were making money.

So a plan circa 1990. And by the way, that was, remember, the Internet boom and equities were getting.

Is that Jacksonville?

So this was Miramar Fire, if I'm remembering correctly. Not my plan. So and you had double digit year back to back 25 percent. You know, you can give this the numbers. Long story short, what happens once they pull the trigger to go, you know, all in on equities?

Of course, it crashes. Right.

So, and by the way, I want to say that some of their consultants quit because of that. You know, they did not want to be involved with being so aggressive. And it's not for me to say there's no right answer. You have to be comfortable. There are always advantages and disadvantages. But I encourage trustees to have these conversations, not just with Dave and with James, but at conferences. You can't speak to each other if you're thinking about making a change. But talk to other cities. See what they're doing. You know, why are they more aggressive? Why are they less aggressive? So these are good conversations to have. There are no right answers. That's risk tolerance and goals. And, you know, keep having these conversations.

And what's the approximate market value funded 100% funded. 98% funded?

On a market value basis, yes. Do not tell the city manager that. But that's on a market value basis. They won't make any contributions. What?

That's on a market value basis. They contribute.

I know. I know that. But don't let him know. He'll be coming after our money. The ABA is 90?

The ABA is 90.8.

Well, that's just amazing.

So that's the smooth, the AVA. Yeah. So, I mean, you guys are in great shape. Yeah, there's no reason to go swinging out there on the vines. You don't need to take the extra risk unless you want to increase margins so you got, you know, put yourself in a better position. But that's not my call.

And maybe these are conversations to have with our actuary when she comes up. And again, I'm not giving investment advice, but the general conversation that you'll hear from actuaries and others is that as your funded ratio improves, you can take risk off the table.

I like to be part of a board that actually has done something well.

It's so rare. Any other questions for Mr. West? Thank you for everything. All right.

Thanks, guys. Appreciate your continued support. Thank you. Thank you, too.

Okay, great. Thank you. Nice meeting you.

James, right?

Yeah, James.

Nice to see you again. Just make sure you check the numbers because we're going to call you out on it, all right? Yeah, you're right. All right. Dino, you're up.

Oh, and then, by the way, for the next meeting, Dave?

Oh, that's a good question. Mr. West, do we need to sign an agreement? It talks about an agreement.

If it has not already been signed, yes, I would want to get it signed. The addendum.

The addendum. That's your addendum, right?

Yeah. I don't think so. Do you want to just real quickly explain and I can?

Yeah, so two second explanations. So basically, you know, with the Mariner name change and that provided the opportunity to add some additional items to the contract that were legally required. And so this one is just a revamping of the previous agreement, but just bringing everything up for Mariner continuity is our namesake. Can I leave anything out?

I think we're good, and there's a lot of legal technical things that have to be in there, and I'm not sure, did we bring a copy for execution today? Yeah. Yeah, if you want to just pass it around the table if anyone has any questions. And I'm going to mention for the next meeting, because you mentioned that James is a CFA, so it may make sense for James to describe what is a CFA, why is that a good thing, and also to explain his accent. I think it's a useful conversation to have. And then also you mentioned that you think that our board will stand higher on the podium than the FRS, if you could bring the proof statement for that. And I looked while you were speaking to see what their return was. And if everybody goes, I think it was page 20 or 18, which was the one-year return, and you guys were in 11-6, if I'm not mistaken, in that neighborhood. So the FRS number was a 10-5 as of June 30. But it might be useful to have that in writing so they can see the comparison. And that's what I'm saying that because it's useful for some of the city mothers and fathers to see that this portfolio is is doing what you want it to do. And maybe the question at the next meeting is, why has it been able to exceed FRS? And you know, what are we losing or gaining by investing with the way we are compared to FRS? So I welcome over time those conversations.

Yeah.

And again, that FRS number was 10.5. I think you're at 11.6. And that was the one year number.

Yeah, and if I may, Adam, also, it's not just investments, but it's being fiduciarily responsible with the actuarial inputs and assumptions that you're using here, and I believe you're in a better funded position. It should be better funded than FRS, right?

The name is you? I don't think I'm supposed to be on here. It's just me.

No, it's Justin. Yeah.

Yeah, so the minutes are reflecting that not only, and you'll bring it for the next meeting, not only did the fund outperform FRS on the one-year number, and I'm not sure about the other years, but also the funded ratio from Dena also is a better funded ratio than the FRS.

By the way, I misspoke.

I was saying 11-6. I'm now looking on page 19.

The one-year number that was reported to you was the 12-8.

So if IRS was 10-5, you'd much rather be the 12-8.

and that was the gross number. I'm not sure what that 10-5 number for FRS was, if that was gross or net.

The funded ratio for FRS as of July 1, 2024, is 80.7% on a smooth value basis.

Adam, are we paying you for investment, too?

I do not give investment. I'm just reading you from a newspaper article I pulled up.

Okay, all right, so the main item that I'm here to discuss with you today is the annual actuarial evaluation report. and you all have the bound copies in front of you. Before I get into the details, I just want to discuss one issue that I think is a minor issue and I don't think that it should prevent us from accepting the report today, but I do want to bring it to your attention before I start and that is that we're working with draft financial statements which is standard practice that we get a draft from the auditor and we use that those financial statements in the development of the actual evaluation report and the draft financial statements are in slightly more of a preliminary state this year than they have been in the last couple of years and we've gotten them a little bit closer to the deadline than what We got them on Tuesday. And then we discovered on Thursday that there is... going to be a revision to the financial statements to include some additional employee contributions. So I expect that to be approximately $50,000 in additional contributions that will be recorded as a receivable, which will result in a slight increase in the market value of assets as of the end of the year. So if we're talking about $50,000 on a $40 million market value that's less than 0.1% of the market value, it's not material for purposes of actual valuation, and it would ONLY REDUCE THE CONTRIBUTION REQUIREMENT BY A FEW THOUSAND DOLLARS IF WE WERE TO REFLECT IT. SO I'M COMFORTABLE PROCEEDING WITH FINANCIAL STATEMENTS THAT WE HAVE NOW, NOT REFLECTING THOSE ADDITIONAL RECEIVABLE CONTRIBUTIONS. ONCE WE GET A REVISED FINANCIAL STATEMENT INCLUDING THOSE, IF THERE ARE ANY OTHER CHANGES OR IF WE SEE, YOU KNOW, I NEED TO FOR THE REPORT TO BE REVISED, WE WILL BRING THAT TO YOUR ATTENTION AT THE NEXT MEETING. I suggest moving forward with the actual evaluation as it is now based on the market value, not including those $50,000 of employee contributions receivable. And we don't have the exact number, or I would have made adjustments on my end, but we don't know what the exact number is of the contributions that will be added.

I have a question for our administrators, and you may know or may not, and maybe Salem may or may not know. But the question is, was it just the auditor didn't see it, or was it that the contributions weren't made? And I would be more concerned if the contributions weren't made, but at least now they've caught it. So do we know the background?

Really? I'm not sure. I was copied on a preliminary spreadsheet of something that goes to the auditor and there was not an entry in a couple of months of employee contributions. I don't know if that means the contributions weren't made or they were made in different months or somebody just recorded it in a different line item than a contribution. But if this says that it's a receivable, a receivable means the money was not received during the fiscal year. So it would be received after the fiscal year and would be counted as part of the assets as of the year end because it's really for the fiscal year. It's due. It's money that's owed to the plan through 9-30-2024. So the fact that they're saying that it will become a receivable means that it was not contributed as of the year end.

They're telling you they're going to get it to you as a receivable?

Yes.

Got it.

Okay. And the impact on the overall valuation is less than 0.01%? Or it's 0.01%?

It would increase the market value of assets by 0.1%.

0.1%. 0.1%. I mean, it's immaterial, actually.

It's immaterial. It's immaterial.

Let's move on. I just... It's on the upside for us. I mean, it doesn't sound like anything negative at all whatsoever.

It would result in more... I mean, not reflecting this revision would reflect in more money coming into the plan by just a few thousand dollars. From the village, right. Well, thank you, Dina. Okay.

I appreciate it. Now we all know.

And I only, because I did have to ask the question, and from my perspective, if there's some unresolved issue, like we have to have that documented. So I wouldn't want to come into you with some kind of incomplete or inaccurate data that I know to be incomplete or inaccurate. But from my perspective, this is totally fine, and we can proceed. And if I get a revised financial statement that is not what I expected to see, then I will bring it to your attention at the next meeting. Okay, moving forward then, this is the annual actuarial evaluation report. Every year we prepare an actuarial evaluation as of a snapshot date of October 1 and it determines the village's contribution requirement for the fiscal year that begins one year after the valuation date. So this evaluation determines the village's contribution requirement for the fiscal year beginning October 1, 2025 and ending September 30, 2026. If you flip to page one, you will see a table that summarizes the contribution requirements developed in this actuarial evaluation as compared to those developed in the prior actuarial evaluation for fiscal year 2025. The leftmost column of numbers are the numbers from this evaluation that apply to fiscal year 2026. The middle column of numbers are from the prior year that apply to fiscal year 2025, and the rightmost column is the increase or decrease. As you can see, the contribution requirement remained quite level from last year to this year, which is a very slight decrease of $2,000 from last year to this year. So it's a very much not exciting year to do the valuation report.

I like it that way.

Same. The top line item is the gross contribution requirement that needs to come into the plan from both the state and the village. Now, the village can take as a credit against the requirement 50% of the amount of Chapter 185 premium tax money that comes from the state. That's estimated to be $77,000, as you can see here, based on that's the amount that was calculated for fiscal year ending 2023, actually, that we're expecting that will come in in fiscal year 2024. There is a chance that we will get two distributions in fiscal year ending 2024 because we are one year behind in state report expectances. I believe we're one year behind, or is that right? Two years behind? Yeah. But we'll probably... We'll get both of them this year. Okay. So if we get both of them this year, then the credit will be, you know, double this, essentially. We don't know exactly what the amount will be for fiscal year ending 2024, because they haven't published that yet. That comes out in August. But for the purposes of this evaluation, I'm just assuming we're going to get the one year. And if another year comes in, that can be set aside as a prepaid contribution. Or the village can reduce their contribution requirement by the difference. But essentially, the gross amount is $1.4 million. We're expecting $77,000 in premium tax money to come in, leaving the village with a $1,338,000 contribution that they should budget to include in the fiscal year 2026 budget. And the village also has a pre-paid contribution. Under the chart, there's a footnote that discusses the pre-paid contribution from the village. The second footnote talks about that there's a $55,000 pre-paid contribution as of October 1, 2024 that can be used to reduce the village's contribution requirement for fiscal year 2025 or fiscal year 2026 or future fiscal years. THE ACTUAL CONTRIBUTION THAT WENT INTO THE FUND DURING THE FISCAL YEAR WAS $1,175,000 FROM THE VILLAGE AND 71069, WHICH IS HALF OF THE CHAPTER 185 PREMIUM TAX REVENUE FROM THE STATE. IN ADDITION, $19,000 OF THE VILLAGE'S OWN, OF THE VILLAGE'S PRE-PAY CONTRIBUTION RESERVE WAS USED TO SATISFY THE REQUIRED CONTRIBUTION OF $1,265,000 FOR FISCAL YEAR 2024. SO THE REQUIRED CONTRIBUTION WAS SATISFIED FOR FISCAL YEAR 2024. LET'S SEE, WHAT ELSE SHOULD WE TALK ABOUT HERE? That's essentially the changes in contribution requirements and everything relating to that. There's no assumption changes or method changes since the prior evaluation. There was a change in benefits since the prior evaluation, which was just the extension to the drop that was adopted in January of 2025. The maximum drop participation period was extended from five years to eight years. that did not have an impact on the actual evaluation results because all job participants are valued the same way as retirees and valuation already assumes that 100% retirement rate at normal retirement eligibility.

Dina, I'm asking you about the drop on page 48 in the summary of plan provisions. You already captured that, that it's a 96-month drop. I don't know on the SPD, because we've been looking at the SPD for so long, if we've updated that on the SPD yet.

I believe so.

Yes. Yes, I read it last night.

Yes, because we just updated it in April, so that was that I cleared up. Okay. So what caused the no change in contribution requirement from prior to the current year? There was actually an experience gain during the year that was the result of a gain on the smooth value of assets. The return on the smooth value of assets was 8.9% versus the assumed return of 7%. The return on the market value of assets was actually 25%, but of course we don't recognize that all at once. The gain was partially offset by experienced losses from higher than expected interest credits on the drop in share accounts, which are tied to the actual return on the market value of assets. Higher than expected salary increases for continuing active members and lower than expected retiree mortality since nobody passed away during the year.

So not that many people are dying is what you're saying?

Not as many. I mean, we expect a certain proportion of each individual to die during the year. Right. And nobody died. So whenever nobody dies, there's a small experience loss. It's bad for the fun. And then there's a year where somebody does die, and then there's a gain. So you expect to have gains and losses every year. You're never going to meet the assumptions exactly every year. But on average, you'd expect to meet the actual assumptions if they're reasonable. So the net effect of the $180,000 actuarial experience gain was a reduction in the employer contribution of $17,000, a reduction of the required employer contribution of $17,000. There's also, if you look down below in the analysis of changes in the employer contribution, there's also a reduction in the contribution requirement of $17,000. $19,000 due to lower administrative expenses this year versus last year. That is probably just due to an increased activity in the previous year versus this year or timing of when invoices are sent or something like that.

We ordered all those actuarial reports last year. That really ran it up, I think.

Well, so this is through 930. The administrative expenses are an average of the prior two years. That's what it's used. So it's probably just the timing of when invoices are paid and when they're taken into account in this average. And then there was an increase as a dollar amount. For the normal cost, which is expected, you expect the normal cost to increase as a dollar amount year over year because it's calculated to be a level percentage of payroll, and payroll does increase year over year. So the normal cost should increase year over year. And there's a small increase on the amortization payment on the funded accrued liability separate from the amortization payment on the experience gain. And that's just due to the fact that we're using a one-year lag in the valuation dates. So the contribution that goes in during the year is determined by the valuation a couple of years ago. And there was a loss in the previous year. So the prior year's contribution is higher than the amount that goes in during the year. So there's a little bit of money in the pipes that causes the basis to increase. Anyway, this is all normal and expected, and the dollar amounts are really small, so we really don't need to talk about that level of detail. The point is, the contribution requirement is Very comparable this year to last year. There's some offsetting things that happened that brought us into balance with the prior year's contribution requirement. But everything is on track and there's nothing to worry about with regards to what happened during the year for the plan. The funded ratio, as we've previously discussed, is 90.8% this year on a smooth value basis. This compares to 89.3% for the previous valuation, so it was an increase from the prior year. On a market value basis, the funded ratio is 98% this year, which is really great, close to 100%. If we did use the market value basis to determine the village's contribution requirement, the amount the village would be required to contribute would be $1,071,000 instead of $1,338,000. And in the absence of offsetting investment losses, we should move in that direction over the next four years as deferred investment gains are smoothed into the smooth value of assets.

If we don't have a market curve.

If we don't have any additional investment loss, which of course.

Which we will.

This is why we use the smooth value because market values fluctuate a lot. Smooth values is a better predictor of long-term trend. And I feel like I've talked this a lot already.

Well, I can't ask for anything better than this.

I can definitely go into more detail and hit on more pages if you'd like. Let me know if you want to talk about anything in more detail.

I want to talk about page 30, and I don't know if you mentioned it, but I like to compare year to year. And I'm going to refer everybody to the employee contributions. And assuming everything is equal, if payroll is growing and pay raises are taking effect, then you would expect the employee contributions to increase, but they went down by around 40,000. So what would potentially explain that? Maybe people went into drop. So my suspicion is either we had vacancies or in retirements that weren't filled or we had more members going into drop when they don't make employee contributions. So if any of the trustees know or anybody else, go ahead.

Yeah, that's the missing employee contributions that weren't deposited that need to be recorded as receivable but aren't yet in these financial statements. That's also what I mentioned. That's the issue.

So they're going to be approximately the same then?

So yeah, it should be closer to $300,000 when we get the contributions included. Because actually the census data file that we received from YOLI had those employee contributions noted. in it, because it shows every person's employee contribution for the fiscal year as 9% of their salary. And if I just sum all those up, I get closer to $300,000, which is why I asked the question from the auditor, why is it only $250,000? So once the financial statements are revised, that number will go up.

I'm just pointing out it may make sense to have the administrator and the custodian verify that we are getting the pay. Is it every two weeks?

No, every week.

Every week. That it is coming in weekly because that apparently was the issue. It wasn't being deposited.

Yeah. Interesting.

Yeah.

We've had a change of administration in the finance department, right? Yes.

Yeah, and I think that's probably something to do with it.

Yeah, I think that could be a contribution to the contributing factor.

And I mean, it sounds like the village is trying to correct it, but yes. Ideally, we wouldn't get to this point of looking at this so many months later.

I have a question. Page 19. And it's just because I don't remember. So if we look at the valuation date, 10-1.2 and 10-1.23, the required contribution went up from 1.19 million to 1.34 million. That's almost 10%. Why did they go up so much?

Right. That's in the October 1, 2023 evaluation report. I think there were a couple of reasons, one of which I believe there was more employees, so the payroll increased. There was also investment losses being smoothed in. Let me pull that up.

Probably the 22 investment losses or 28.

Right, the 22 investment losses, because those are smoothed in over a period of five years, so there would be two years of losses smoothed in in that year by that point, or two phase-ins smoothed in at that point. I actually have the 2023 valuation report here. Let me pull that up. So if I look at... So one reason why the contribution requirement increased was that the payroll increased fairly significantly from 3 million to 3.3 million as of October 1, 2023. Right. And then there was also a net actuarial loss in the October 1, 2023 valuation report of $1.2 million, which was primarily due to lower than expected investment earnings under the asset smoothing method. The return on the asset smoothing method was 5% versus the assumed return of 7%. That makes sense. Are there any other questions or comments?

Yes, and I'm sure we'll cover it again when you go over the shared plan. Back to page 30. Okay. Yes, 30.

Page 30.

The state contributions. So the $142,139 for 2024. Uh-huh. And we received it in 2024, which is why you're reporting it there, but really it's from 2023.

It's from 2022?

Yeah, well, 2022, but we would have received it in 23.

I believe so. You would have received it in... It's... The 150 was calculated in fiscal year ending 24... Yes. So this was calculated in fiscal year 23, would have received it in 23 had the report been approved.

It was late. That's why we didn't have it. And we received it in 24. That's why you're reporting it in 24. So we're still behind one.

We're still behind one. So we need to get two state report approved this year in order to be back up to speed. We need the one from 2023 approved and the one from 2024 approved.

Okay, so we've already received the 142, 139. We've received that.

Yes, yes.

So we're still missing.

I mean, according to the financial statements.

So we're behind a year and we got to catch up for this year because this year ends August. We should be getting. Right, we got two, you're two behind essentially.

So we could get two distributions this year. The one that was calculated in August of 2024 and the one that, am I saying that right? I think I may be off.

So here is a conversation we can start thinking out loud about investments right because if we get those two checks and you can assume that it's the same amount hopefully it'll actually be higher yeah but what would our investment consultants want us to do if it comes in within the next month or two before the next meeting so that's a we can start thinking out loud about what to do with that ballpark what's the number if both of them are the same

So it'll be $300,000 if it's two, or $150,000 if it's one.

We should already know what last year's calculation is.

Yes, and that's what I'm using as the, so 77,290 is half of the actual amount that was calculated last year, 77,290 times two is 154,580. That's the actual amount that we expect to get, assuming the report is approved, that was calculated in fiscal year 2024. Got it. And then we'll have one more that's calculated in fiscal year 2025 that we could get that would be attributable to fiscal year 2024.

Got it. Okay. Any other questions regarding the report?

I would need a motion for you to accept the actual evaluation report and then we'll proceed with the actual disclosures and uploading the report to the state and also there's a dance we have to do once you vote on the approving the valuation okay do I have a motion to approve the evaluation report so moved all right do I have a second

All in favor?

Aye.

Now the dance.

It's going to lead in the dance that we have to do. Go ahead.

I'm not going to dance it. I'm not going to sing it, but I'll say it. Over the long term, the state requires that you approve based on your consultant's recommendation the actual required rate of return assumption. So from my part, I am suggesting that the current asset allocation will achieve the 7% ROR assumption over the long term, the intermediate term, and over any individual fiscal plan year. And I always do the sidestep on the individual plan year, because as you guys know, that's

And that has to be in writing and the board has to, we're memorializing to Tallahassee that we're talking about investment rates of return and because we're using 7% in the valuation, that's what you're hearing the consultants are recommending we tell the state. So Dina, do you want to add to that? And then a motion will be in order to direct that that letter be sent to Tallahassee.

And keeping the assumed rate of return at 7%? Yes. Got it, okay.

Okay, so I need a motion to approve the actual evaluation report and issue a letter that the board approves the 7% rate of return, that that return represents the long-term, mid-term, and short-term expectation for the return of the plan.

So moved.

Do I have a second? I'll second. I'm out of seconds. All in favor? Aye. Aye.

that's under the administrative report but if you wanted to go over it now but what you have in front of you is just the draft allocations of the THE MONEY THAT CAME IN DURING THE FISCAL YEAR BEING ALLOCATED TO THE $71,000 IN CHAPTER 185 PREMIUM TEXT REVENUE THAT CAME IN DURING THE YEAR. THIS IS THE CALCULATION THAT ALLOCATES IT TO EACH INDIVIDUAL PARTICIPANT AND IT ALSO CALCULATES EACH INDIVIDUAL SHARE PLAN PARTICIPANT'S BALANCE AS OF THE END OF THE YEAR REFLECTING AN INTEREST CREDIT FOR THE FISCAL YEAR.

It's a separate, yeah.

Actually, I do have it here. Okay.

So, Dina, if you could connect that to page six in the evaluation.

Right. Okay. So, it's actually on page 32, you'll see a reconciliation of the share plan accounts. SO THE SHARE PLAN ACCOUNTS ESSENTIALLY ARE AN ADDITIONAL LIABILITY FOR THE PLAN BECAUSE THOSE WHEN EMPLOYEES TERMINATE THEY RECEIVE A LUMSUM DISTRIBUTION OF THEIR SHARE PLAN ACCOUNT BALANCE WHICH IS ESSENTIALLY LIKE A DEFINED CONTRIBUTION TYPE ACCOUNT THAT'S CREDITED WITH A SHARE OF THE Chapter 185 premium tax money each year and it grows with interest credits each year at the same rate at which the total Assets of the plan Grow during the year so the total plan assets is grew at 25.08% for fiscal year 2024, which is amazing. So every share plan participant's balance received an interest credit at 25.08%. And then every participant's balance also received a proportionate share of the $71,000 that was allocated to the share plan. That's 50% of the total amount of Chapter 185 money that came in during the year. And then there's also a reallocation of a forfeiture for an employee who terminated, nonvested, whose balance gets reallocated amongst the remaining participants of the plan. And I mostly just bring this... This document to the board so that Officer Koop can review it because he is close to the employee data. And if one person's data is off, it could result in everybody's balance having to be corrected because it's a proportionate share. So if we are missing one employee or one extra employee terminates and we don't know about it, it can cause a mess. So I don't know that you necessarily have to approve this, but I just wanted you to have a chance to review it and discuss it.

then if there are no concerns and I can move forward with issuing individual statements for each share plan participant so I had a couple questions at the bottom of the share plan statement that you provided there's four individuals that have a ending balance account mm-hmm trying to figure out why they have an ending balance account have they not taken out their money or is this interest that they would have earned or money they would have received while they were employed

No, I think they just got a partial distribution of their full amount because the final balance wasn't available yet when they were taking their money. So they terminated employment, and I think the amounts that they got paid was paid based on the 2023 statement. Got it. So they just need to get a residual payment for the remainder of their money.

Okay, so these four individuals here, we need to reach out to to make sure they get their money.

You're talking about a refund?

I'm talking about the refund for Carrie Turner, Cliff Vickers, Heather Pickett, and Natasha McKay.

Yeah, these aren't refunds. These are the share plan distributions that we're talking about.

And I will follow up with them as well, make sure they're aware. All right? And then I guess when we're done here, you can send statements, and then we'll distribute.

Okay, yeah. So you don't see any issues? No, I didn't see any of the issues, no. Okay, perfect.

Yeah, that's because it's before she left.

And by the way keep in mind as everybody knows that once those statements reach the members they are immediately going to be out date because we're going to have two more incoming distributions hopefully in the next month or two.

Thank you very much.

Tedious but interesting.

Good afternoon. Everybody can hear me okay?

Yes.

I'm Karen Russo with Salem Trust. We're the custodian for the plant. And I like to come out once a year. If you need me to come out more often, I'm more than happy to do that. But I'd like to do a recap of your account at Salem and make sure that we're meeting your expectations. Also today, I wanted to talk about a, we want to get a form updated on your client contacts and about callbacks, so I'll go over that as well. So, at Salem Trust, we do have four accounts that are set up on the system for your plan. You have two that are separately managed, which is Integrity and Newton. You know, Dave was saying Boston. That was before we changed to Newton. We also have a receipt and disbursement account, and that is where we pay out the monthly benefit payments and also pay the invoices to your service providers, except for the two managers will pay their bills directly from their account. We also have a mutual fund account, which Dave went into detail. You have three funds that are held within that mutual fund account. As I mentioned, we do pay the monthly benefit payments. Of course, any lump sum distributions as well. The monthly benefit payments, there's about 31 approximately retirees that we pay on a monthly basis. And then any letters of directions that we receive, we might get direction like what you approved today to transfer money or make a purchase or a sale from a mutual fund, possibly even doing a wire outside of Salem. And when we receive those letters of directions we do compare it to the authorized signer form to make sure that we're getting the appropriate approval to to process the letter of direction. And that is, do we have the proper number of signers, as well as we compare the signature to the form that we have on file. Any discrepancies, we reach back out to the plan administrator. And we did process approximately, this is for the year ending June 30th, we processed 1,876 trades, of course, at the direction of your investment managers. The authorized signer form is up to date. We have, I guess the last one was March of 2025. We do like to get it updated every three years, so you're... you're good to go with that unless you have any changes. You can update the form at any time. So I'll just stop there and see if you have any questions on what I just discussed. Okay, so that leads us into at the end of April, we sent out a letter to all of our clients. We wanted to just remind that if you send any type of monetary requests to us that we want to receive it secure, which of course your plan administrator is very good at that we get everything secure. If we receive something that is not secure, What we've put in place now is we're going to do a call back to make sure that the letter of direction that we received is valid. We don't want to take any chances with everything going on today with fraud. And part of that email referenced a form which is updated contact form. And this is just to update who your service providers are and how to contact them. But at the bottom of the form, we do ask the question if we have to perform any type of a callback. And it could be because we received something not secure, as well as any time we do a first-time wire, we do a callback on that wire form. So we want to know who should we call in order to verify that. so if you were to for instance we have a plan administrator you could select or your consultant or other you could list you know say anybody on the authorized signer form but of course we would need phone numbers but for instance if we got an unsecure letter of direction from an investment manager we would you know call whoever you say If it's plan administrator, we would call Yoli or Doug and verify that what we received is valid So it just kind of gives you an idea an example. So you'll want to discuss that determine what you'd like and then They can add that to the bottom and we need the form signed and sent back to Salem Do you have any questions on on that piece? I

How are we getting that form to our members? Are we emailing and mailing it to them?

No, this is just for the plan administrator to complete on your behalf. She finishes it, got it. And then once it's signed, she'll send it back to us. Okay. But you just need to decide on who we're allowed to do a call back on if we receive something that's unsecure. Okay. But like I said, normally we get everything secure. Okay.

So trustees, I'm gonna say the same thing I said at the board meeting an hour ago, which is different boards do it differently, and I welcome the input from the consultant and our administrator, sorry, and our custodian as to what you recommend in terms of that process, that procedure.

Well, what I've seen is it's just really dependent on the board. But I've seen most of the time we do call back the plan administrator. But I also have seen where they've done plan administrator, the consultant, as well as saying other and anybody listed on the authorized signer. Because technically, you know, the trustees are on there as well as the plan administrator. but it's really up to the board. The main thing is that you want it to be efficient. If we get a lot of direction and we need to act on it, let's say a wire going out or whatever, and we have to do a callback on a wire, we want to make sure that we can get a hold of the person timely to do the callback. So you want to make sure that it's, you know, if it was just the trustees, are they accessible? Will they know the letter of direction that was sent? So you need to take that into consideration.

And typically you're the one sending it. Yeah, right.

I have a question that's just an aside. Has the advent of AI made fraud more difficult? Do you see a difference in the amount of fraud? And it seems to me it's just accelerating because, I mean, I just got a, you know, a text that says that UPS is trying to deliver something to my house and I need to call these people. And that kind of thing happens every single day. And I know I deal with fidelity, Simon. I mean, I can't really move things around infidelity easily anymore because they have so much such an issue with fraud. Are you experiencing a lot more fraud?

I think what does also take place is where people are hacking emails of city employees whatever it may be and somehow the person will get what the sign signatures look like or the signers look like and then they'll do a lod and they'll sign it and it gets sent to us and it looks real but it's not real and so we go through a lot when we get a lot of reaction you know who who is it going to does anything look you know incorrect, who it's coming from, the actual, it might have their name, but you don't just look at their name, you look at the email address it's coming from. Is there anything in there that's misspelled? We go through the whole process of does this look right? And again, that's why it's also important that we get everything secure. Because if we're not receiving things in a secure manner, or if there's oddities, we definitely push back. And we have we have caught some things and stopped it from happening for sure Any other questions Nope.

Thank you, Karen. Appreciate it. Do you have something else?

No, I was just going to thank you for your business. I mean, we've been your custodian for 24 years, and I've had the pleasure of working on your account. And this means I'm getting older, but it's been great, and I look forward to the continued relationship.

Thank you. Thank you. Mr. Attorney, you're up.

I'm going to ask a question for our investment consultants. And the question, and this is really letting the board know about a conversation at the general employee board meeting, because there is a trustee who wants the board to go through the process of doing RFPs. So there was a conversation about, you know, when was the last time we did RFPs in the other board and do we have to do RFPs? And the answer is it's been many years and you're not required to, but it's probably not a bad idea from time to time to think about it. But I want to flip to page 50 of the board's investment, the Mariner booklet, which tells you what the fees are on the various mutual funds, which, by the way, they can speak for themselves, you know, those fees. But I'm just pointing out to you that when you go to conferences, you know, feel free. You don't just listen to me as an attorney. Feel free to talk to other attorneys. Feel free to talk to other actuaries, other consultants, et cetera, and also with custodians because the other board is looking at, and they don't know because there may be a turnover at their next board meeting with new appointments on the board, so they're not going to do anything until they decide at the next meeting with the newly composed board. But I'm just letting you know that Again, it's entirely up to you, it's entirely up to them, but they may decide to do RFPs for everybody, they may decide not to do any RFPs at all. And since we only see Karen, you know, basically once a year when she comes to the meeting, and because the custodial bank's fee is not on page 50 of this report, nor is your fee, by the way, on page 50, if you just wanted to talk about real quick, how do we pay you? And I will point out that you are less expensive than one of the other big custodians in Florida, Fiduciary Trust. But since you're here, just any thoughts on, so everybody understands how the custodian gets paid and how ANCO gets paid.

The fees are calculated on a quarterly basis and then we'll send an invoice over for payment to the plan. I'm not sure, I was thinking, I think their fees are automatically taken. I can tell you that in a second.

So it's not an action item it's just sort of an FYI so that way you know over the next year or two if you ever decide to do an RFP you've got a better idea of how all the pieces fit together.

Yeah it's an advice so we're actually automatically debiting the account however the fee invoice is actually being sent to your plan administrator so they can make sure that the calculation is accurate. And how is that calculated? A basis point fee plus transactional fee.

basis point fee, so 0.01% times the amount, is that right? Is that how you do a basis point?

So it might be three basis points or four basis points?

No, it's 7.5 basis points on the market value, and then there's a $6 per buy and sell on the transaction.

Okay, so how much would that have been in the last quarter? On a quarterly basis or on an annual basis?

So the, I can, let me just pull the fee. I have the invoice here from 630. Again, it depends on your transaction volume. So if you're just looking at basis point fee on your market value, for looking at the market value as of 630, the annual basis point fee would be around 31,500. How much? $31,500. That's the annual based on your market value as of 6-30. Oh, okay. And then each quarter, depending on the transaction volume of the trades for your investment manager, it could change. So if they have a lower trading volume that quarter, it will be less. If it's higher, obviously higher. And this quarter, for the quarter ending 6-30, it was approximately $2,220 for the transactional fee for the two managers. There was one trade in the mutual fund account. And then there's a $125 fee on accounts exceeding three. So I should say quarterly it's $125. Annually it's $500 on any accounts over three. Okay. I understand. Thank you.

So continuing with you, you're standing up.

Yeah, and then you guys aggressively approved a fee increase for us recently. So we went through the fee review, but in summary, we're a hard dollar fee. We're one of the only service providers that doesn't charge a basis point fee. We don't get a raise as asset values go up, right? So we're a hard dollar fee, but doing the conversions, The $30,000 annual fee equates to an eight basis point charge if we did charge basis points. And as your assets grow, that percentage will decline. So the basis point fee would actually be going down because it is fixed. Does that make sense? You guys all go to the FPVTA. They're networking with all the vendors and providers.

Excellent. So continuing with the attorney's report, there are two memos that are coming from my office we'll talk about at the next meeting, just giving you the heads up when you see them. One deals with a US Supreme Court case dealing with disabilities. And whenever an item goes to the Supreme Court, this is coming from the city of Sanford, Florida, all the way up to the US Supreme Court dealing with age discrimination. And we'll talk about that at future board meetings. So that's a memo that's coming. There was also a memo dealing with investments. This is the Florida legislature. And it's not just Florida. A lot of other states have also made a issue out of Israel and investing in companies that are boycotting Israel. So again, this isn't something that the board has to take issues or deal with today. But at future board meetings, the investment consultant behind the scenes will be looking at this scrutinized companies list. So if any companies are targeting Israel because Israel is being boycotted, we cannot own that company, nor can we contract with a company that is boycotting Israel. So that's language that we'll be adding into future contracts. And again, this isn't me. This is the Florida legislature has spoken. So, you know, and over time, you'll see that reported in your reports. Any questions about those two pending memos? Another quick item is Form 1 disclosures. I want to make sure everybody has done their Form 1 disclosure. I see everybody is either smiling or nodding their head. If you haven't, I want you to do it yesterday because you're in the grace period. So make sure everyone does their Form 1 disclosures. The only other item is under new business, so I'll jump into that. So you remember at a prior board meeting, We decided as a board that we wanted to give one of our members who has a condition that does not have a cure the same treatment as everybody and without revisiting. So what our office is doing behind the scenes is they've gathered all the medical records and they sent a letter and I'm going to simplify it. The letter basically says so and so whose name is listed on item nine. You've diagnosed him with a certain condition. Is there any evidence in your file or for you to believe that this may be job related? So that letter is going out, if it hasn't already, to the doctors. Once we receive those responses from the treating doctors, then we'll bring it back to you. But that's in the process. And I just wanted to make sure from our administrators that I think our thinking was let's pay him the normal retirement benefit. And if it turns out that we could possibly consider it to be duty related, and I'm avoiding having that conversation. But, you know, if the providers come back to say, yeah, there is evidence it could be duty-related, then we would potentially consider reclassifying it. But I wanted to make sure, and I want the minutes to reflect, that we've put him into pay status, and does the administrator have anything to add on that? Yes.

Okay, so as for the last meeting, we did set him up to receive his monthly retirement benefit based on the estimate that the actuary did May 1. Since we've received the final normal retirement benefit, it was sent to Mr. Vieira He just sent us last week his benefit option. So it did increase from the estimate a little bit, and we're in the process of sending it to Salem Trust to adjust retroactive to May 1.

And we don't take a position on what options members select, but I just want to make sure he did not select, you don't have to tell us which option, but he did not select a life-only option.

He did not.

All right, I think we covered new business too, right? So we're under the administrative report.

So last month, we had a death. Mr. Robert Knowles passed away. His survivor wife, who is a beneficiary, he chose 100% survivor annuity. We received all the forms that she needed to complete. She has been set up. And so she's now receiving his retirement benefit effective July 1st. The final summary plan description was in the email that we sent you, so there's nothing further to discuss on that. The actuary added the investment managers as requested by the board. And then last but not least.

I'm sorry, did the board approve that at a prior board meeting? In other words, was it a draft or was the final?

It was approved contingent of adding the investment managers, so yeah, it was approved. And then we are, as the administrator and HR, we work together to put, develop a form so that all the active members would complete giving us the administrators, the administrator, all the information that we need on the members, demographic, beneficiary, et cetera. Last week we received a bunch. I think we still have some pending for the police, because I don't think we have all of them. I don't think we have yours. We received a lot, but I didn't see your name on there.

No, I did it.

You did it. Okay, so we're still working with them. They're sending it to us.

Yeah, I remember.

That's right, I do.

And we did have a change in personnel, so that might be sitting in a folder somewhere on our side.

Okay, but that's moving along nicely. And then the only last thing is between the actuary, Dina, and HR, Yami, and myself, We're working on revisiting the way the calculations are illustrated for the members. Yami requested the calculation be a little bit more detailed. Instead of telling a retiree, this is your monthly average, salary average, and this is what you're getting a month, she wanted the member to see where we got the payroll data, what the amounts were to ensure that they agree with that. So we're working with that. And one of the questions that was raised in the GE meeting was, Adam, that the form contains a trustee's signature. And they were asking if that is a requirement of the ordinance and whether that should be the case. You don't see all the data. So what are you signing? You're ratifying. So I guess...

Yeah, so I was late to the other board meeting for reasons I can tell you later, having to do with syncing my phone. But the point is that I defer to the administrator, to the actuary, and to HR, and ultimately the board, on what, they're your forms. So, you know, different boards do it differently, and if it isn't broke, then you don't need to fix it, but sometimes you want to see can it be improved. So there is no formal requirement on having the board approve the estimate because it's really coming from the actuary and as long as the actuary is standing behind it. So that's the quick answer that some boards

like to you know review it in advance and have the board approve the estimate but that can really slow things down especially if you're only meeting quarterly and some boards meet monthly and they like to make work for themselves so does that answer your question well we rather it would be a ratification because we do not hold the process but that was the sentiment at the last board what are they signing they're not looking at the actual data so what are they signing they're just confiding that HR gave the right information to the administrator, that the administrator sent the information to the actuary, and then of course the actuary looks at everything to make sure that everything is accurate before they issue the calculation.

So each board gets to make that decision on how they want to operate their forms. The argument to have it is that it shows that the board reviewed it. And maybe that's a good thing so that, you know, the board looked at it at a meeting. But then, you know, the minutes can reflect that the board. And so, again, there's no right answer. And I defer to everybody on how you want to operate your forms.

What are we doing now? Because I haven't signed anything.

You do not sign it. You know, personally, my only reservation is these forms contain date of birth.

Yeah, personal information.

Personal information. So I would have to bring those forms here. It would not be something that I would distribute via email. So I would have to bring the forms here and make sure that, you know,

So confirming, we don't do that now? No. Okay, so we'll just continue with the process.

I think that HR's issue is that they go to a folder and they have an employee election in the folder, and it's not signed by anybody other than the employee. So is that the most recent one? Did the employee put that in and then change it? So I think what HR was looking for was, is like the final, you know, good housekeeping seal that this is the final election form from the employee with more than just the employee signature. So we wouldn't have an objection to signing it to document this is the final But I think that's HR's problem is they have forms, an employee signed it, there's a place for a board member to sign it, nobody ever signed it, and is there a chance that this is an election?

I'm not signing it.

Yeah. So, but we would have protection for changing the form and signing it as the final, yeah, as the final, you know, with the date, you know.

So, wouldn't you just, when they make through their retirement, wouldn't you say, you have elected to do this, is this correct? Yeah, well, they sign a form.

Then they can change it if they want? Well, they are signing an election form. They have already done that.

They've signed the election form. How far back did they sign that?

Well, before they get a benefit, they sign it.

Right.

They didn't sign it like 20 years ago and put it in their file.

Well, I think this is the problem that because of all the turnover, maybe in HR, that they have kind of some files, some files they're missing, some files seem like they're complete, some are missing signatures, and so I think HR... just wants to dot the i's and cross the t's and have some sort of indication that what's in the folder is final. So again, we would not have a problem in signing that form with our date.

It's almost an acknowledgement.

Were you going to send out also a form that shows the data that was used to make the calculation?

That's a request from HR. I was just going to say they're making the selection when they retire what they want.

Instead of having, because it's their money, their business. We shouldn't have any part of it. Right. We shouldn't even look at it. Why don't we just do a notary? I don't get a notary instead of a trustee that signs a signing this because that's gonna have the date and everything else well then there we go several at the station yeah this is not really our business what they select what they don't like what their I agree with you I couldn't agree with you more

I was just going to expand on the changes that were being requested to the notification form and what the form currently contains. So currently we issue a notification form that has essentially all the same information as what is being requested from HR to include in the revised format. You know, YAMI comes from Surfside where GRS was also the actuary for that plan, and there's a different format of a form that was used historically for that plan. And it does have a little bit more detail when it comes to the pieces of the final average earnings, like that prior plan had a five-year average, and the form used to split out the salary by year for the five years. So it would show five annual salaries, how that's totaled, how that's averaged into a monthly average. so you know we can use that format it's no it's no problem like we already have the form we use it for another client we can just use it as well for your for your plan if that's fine if you have no issues with it this is what it looks like um i can give you i get i have a kind of a randomized Yeah, we're just we're just talking yeah, we're just talking about the summary statement The that everybody gets every year Okay, you're on the other time we're not about the one that we get every year this summer's okay Finance Department provides payroll data to Yoli. Yoli fills out a calculation request and sends the information to us. We prepare a calculation and issue a notification form that shows all of the benefit options that the person has and the data that we use to arrive at those amounts. We don't show the data in as much detail as HR would like to see, so we can add that additional detail The detail being the breakdown of the five years. In this case, it'll be three years of salary by year. And again, of course, we'll have to get that information in that format. We don't currently get it in that format, but we can request to get it in that format. And then just show the formula. It's monthly average salary times the benefit multiplier times the years of service. That's how you get to your benefit. So we could put that in the notification form. I think this just helps HR to explain what the numbers represent. Like if you look at line number 11 on this sample, they have $4,085 times one and two-thirds percent. That's the multiplier times years of credited service. That gets you to your benefit amount. So we could do the same thing and provide that level of detail on this notification form for this plan.

So we're just talking on the formula, one time at the time they go to retire, that's it?

Yes, so this is just like the form that they use to pick their option, essentially. If you don't mind...

I don't think anybody up here is going to mind. I think the more information the member has, the better. Absolutely. So I would totally support moving to this form here, which apparently you guys already have.

Yeah, we have it. And it's just really a legacy, like what was used by the plan historically. Perfect. And we don't typically change it unless the board directs us to, so...

I support it, and I'm sure everybody else up here would support it too. So if you would like to use that form, we support it for sure. Okay. Right? I'm not speaking for anybody.

Should it be a motion? Okay. It should be a motion.

We can make a motion. Do you want to make a motion?

I make a motion that we give supporting data to retirees showing how their retirement compensation is calculated by the actuary. in the form that has been presented to us. I'll second.

All right. All in favor? Aye. Thank you.

And would you like to add the notary section to the form for it to be notarized?

Sure.

It doesn't have it. It's not currently notary.

Right. So I think the options are to remove that second signature line for anybody that's not the participant or to change it to be something other than for the Board of Trustees if the Board does not want to sign personally.

So that would eliminate the notary process, correct?

Let's have a notary process so that everything is tied. Eliminate the board signature.

Yeah, eliminate the board signature, add the notary to that final selection form.

Okay. Do you happen to have a copy, an example I can look at? I can send that to you. Okay.

Are you going to make a motion?

Yes.

Sure, I'll make a motion that on the paper that we're discussing, the notification form, that we remove the trustee signature box, add a notary box to that form so that the members can have it notarized. Do I have a second?

I'll second.

Martin seconds all in favor. Anything else.

If I could as a personal privilege, the HR director is not here today and I will tell you in some cities the boards sort of resist a little bit sometimes when when city encroaches on their business because you know you're the trustees this is your staff, but I think in this case, you know HR has the right goals in mind that we play very comfortably around work well with them. So I appreciate, and I don't know why she's not here today. Maybe she's on vacation.

No, she was here for the previous meeting.

Okay, but I continue a constructive relationship with the city, with the village.

All right, anything else?

No, our next meeting is October 28, 2025. That would be a Tuesday.

I want to take a quick minute, though, and congratulate and thank Martin and Clark for remaining on the board and your appointment to the board. And I also want to congratulate Detective Maura and Sergeant Vargas here. For those of you that don't know, THEIR FAMILY IS GROWING AND THEY WILL BOTH HAVE NEW ADDITIONS TO THE FAMILY BY THE TIME WE MEET AGAIN. SO MEETING ADJOURNED.

IS THIS THE FIRST OR THEY SUGGEST ADDITIONS TO THE Wow. So October 28th, we're going to do 12 o'clock.

12 o'clock, October 28th, and that's a Tuesday. Yes. Sounds good. Thank you. Thank you.

It's June and July they didn't pay. You had 290 the previous year, and it seems like they make the employee contributions once a month. June and July is missing.

THIS IS THE THROWAWAY. SEPTEMBER 13. WE'LL FIND OUT.

Bye-bye. Congratulations. What number? What number, baby? Oh, my goodness. Whoa, you're going to be well taken care of.

They're going to take care of you. A hockey team.

Okay, this year? Oh, okay. Not a problem. For the drop? Oh, for the FPPTA. Okay, okay. No, no problem. Okay, okay. You're too young to retire. Okay. Bye, Josh. Bye-bye.

Bye, Martin. Good seeing you.

Hold on. I got to disconnect my computer.

OK. Bye. Nice to see you. You're Johnny.

Yeah, we made it. Well, I made it. Yeah, you made it. So did I. Bye, Karen.

Thank you.

I promise. Yes. Yes, I will make sure that that is documented.

Okay, not a problem. I promise I will do as they said because that's what they asked.

How's it going with your baby girl? How old is she now? Oh, my gosh. I still feel like you had her yesterday. Yeah? Oh, my gosh. So are you sleeping at night? At this time, yeah. At this time, yeah. The baby stage is the worst. Yeah, so you work from home constantly, full-time?

No, we have to be in the office two days a week, and sometimes I come in a little more because it's easy to come in the office sometimes. Yeah, yeah. She's in daycare, so it doesn't matter.

Oh, okay, okay, so that's good.

There's no way I could work and watch her.

Oh, my gosh, no, not with the work you do.

It requires my entire attention, yeah. No, not with the work.

Not with the work you do.

And if I could, she wouldn't let me because she was like...

Very clingy. She was mommy.

I can't even have a conversation when she's around. Like, I literally... She's like, Mommy, no, talk to me. Look at me.

Right. Really? My pants are the same way.

Oh. They just got it or they lost it? They got it or they lost it?

No, no, they have it.

Oh, they have it. They just went on vacation. Oh, I see. So you have the puppy?

I have the puppy for a week.

For a week. Oh, boy. Oh, okay. Doug, I have to hit the ladies room before. So I can go through there? Yeah. Yeah.

That money is June and July. They didn't send it.

So I can distribute the shared distributions only to the terminated members. Only the terminated.

And then the true ones. Is it through here? Yeah. All right.

Bye, Dina.