Overland Pension Plan (Non-Uniform) Board of Trustees - Regular Meeting

Melissa, can you please call roll? Scott Pope here. Katie Sanders here. Mark Jeru here. Ken Crowder is absent. Mayor Little here. Steven Boyce is excused. Lieutenant Leiden here. Captain Morgan is excused. Chief Mackey here. Okay. We'll start with the approval of the minutes for the joint meeting on August 7th, 2025. I'll make a motion. Second. All those in favor? I. Any opposed? Motion carries. On to the staff report on fiduciary liability insurance.

Um traveler's renewal this year was $6,369. That's the joint renewal, the joint cost. It was an increase of $58 over the expiring premium. And the premium is based on the joint fund balance at the end of the year. Um the joint fund balance for the two plans together was $29.1 million. And when you break down the two um fund balances at the end of the plan year, the premium would be divided 47% to the non-uniform at 13.8 million and 15.3 million or 53% to the police plan. So the non-uniform uh premium would be $3,024 and the police premium would be $3,345. Um since you're two separate um trustees, boards of trustees, I'll need separate motions to approve um the approval of the fiduciary liability insurance.

Okay. You said the numbers are based on the values. Correct. The total value of the plan. All right. Let's start with the non-uniform plan. Uh all those uh that approve the liability insurance. I'll make motion. Second. All who approve? I I Any opposed? We're approved for non-uniform onto the uniform side. Make a motion. Second. All those in favor? I. Any opposed? That carries as well. That's it. Perfect. Thanks. That's it for now for staff report. I will have more after.

All right. Nice. And uh we have the bills here. Again, they're a little bit different from normal due to the date of our meeting here. Uh we'll start with the non-uniform uh approval of 14,2410 cents. I'll seek a motion to approve. I'll make a motion. I'll second. All those in favor? I. Any opposed? Motion carries. On to the uniform side. I'll make a motion. Second. All those in favor? I.

Any opposed? Bills are approved. On to the staff report. Just an update from the police plan. Um, since the last meeting, we've had no more police officers transfer um or withdraw from the police plan. I've had one more inquire um but uh they've never submitted the application to withdraw and transfer altogether. We've had seven police officers um withdraw from the plan, but their contributions remain in the plan until they're fully vest until they're vested at five years in loggers. And we are at 30 active participants in the police plan. For the non-uniform plan, we've had nobody withdraw. Um, and we are at 37. I told you 35. We're at 37 active participants. I forgot about we have two elected officials or three elected officials currently um contributing to the plan. Um, and then for the police plan, your final uh 2025 property tax rates for residential was one. I'm sorry, 1333. Commercial was 259 and the personal property rate stays at the voter approved.36. It does have an in a slight increase. Um revenue estimated revenues are increase slightly at $25,000 for the year. So that concludes just double checking everything. Oh, when we have um five new hires that were went for each side for police side and civilians that went direct into loggers for both sides and that concludes my report.

Perfect. Thanks. Thank you. Any questions for Melissa? All righty. Uh on to the actuary report. Mr. Sith,

thanks. So today we've got the what's called the Gazsby 6768 reports for each plan. Um when I was here last time we did the funding valuations and that's to determine the recommended contributions. This is for your uh auditors to use to to put disclosures in the city's audit related to the so lot a lot of the material is overlaps. So I'll just kind of go over the things that are unique to this report. Um again the assets some of that assumptions are the same as the valuation. So starting with the the uh police plan if you go to what's says page five the bottom right it's a table of contributions. So this is one of the required disclosures. Oh and Gazsby the way stands for governmental accounting standards board. They, you know, they're the ones that make the rules for what kind of disclosures you have to your pension. So that page five, that schedule of employer contributions, right? So what we know is, you know, the actual calculated on the far left, the actual contributions are next to the right and then there's a contribution deficiency, right? Taxes haven't kept up with determined contributions, right? So they call that efficiency and that will kind of be important in a minute distinction between two points but this this report or this this disclosure goes you know in the city's audit. Then looking at, you know, just one thing that that far right column, some of the things that are included in here are related to to payroll. That's, you know, those numbers are going because the plan is closed. Those numbers are probably going to become silly pretty quickly as membership drops and payroll goes down.

Everything is percentage of contributions. There's not much you can do. It's required disclosure. You know, I've got a plan that's basically down to zero. It's been closed for many years. Down to zero payroll pretty much. And so all the numbers do look really weird, but you're still required to disclose disclos. So the next few pages are repetitive with the valuation. If you go to page nine, um the rules also just require you disclose uh the rate of return for the current year, which is the 381 and the prior 10 years. That that'll go in the city's audit. And the bottom half is that the rules are very specific on exactly how you determine that. So it won't match won't match his returns, I'm sure. They tell you that, you know, Melissa provides us uh revenue and expenses by month. So we have you have to build those in one month by month and you find investment return that's close right. So I imagine it's probably similar to what you get investment 381 that's required to be disclosed. You have to calculate it this way. So there's no flex. The next page page 10 is just a table of of of you're supposed to show kind of the what you're invested in. various indices that kind of match up to that and you know we we have at Mill we have our own it's called capital market assumptions right so we have expected returns you know the long term these various asset so that that's a required disclosure and then the next page page 11 starts the process of this is why it's important that the contributions aren't aren't keeping up with the recommended and that is If if that's the case, you have to do this thing that Gazby calls a depletion date projection. What that

means is you have to look forward with reasonable assumptions and see if there is a point in the future given reason again reasonable assumptions where the money plan will actually work. So that I think I have to look back at one point you did fail this test a few years ago. You do pass it this So there's no and part of that does that's where one of one way that one way where the the the revenue source of the tax being disconnected from payroll helps because as payroll drops we can still assume that tax will be the same so funding stays the same so don't have future plan assets and the important thing there is um we can't only use our six and 3/4% assumption to calculate the liability If there is no completion date we have to use turns out to be lower that's because corporate bond you know which it's based on corporate bond rates and those are you know 6.75. So it's good to pass that because it means you can you know you can disclose lower. So the next few pages really is just Again, the rules required pretty complicated process. Project the contributions coming into the plan. That's on page 12. And then on page 13, we project the uh essentially the market value of assets going forward. Right? It's really a 99year table, but obviously this include the first 10 years show several pages of results, but you can see that at the end they're still increasing. That's a good sign. 99 years they'll be projected to have assets. Page 14 is just a kind of a that's where

we would calculate the blend if we had to. That column of all zeros means that you don't have to calculate you're in good shape. So, um that kind of confirms we can use the six and three4. Page 15 is kind of the the big kind of that's what all that all those calculations lead, right? Is what is the plan's liability? um it's 27.2 million versus the assets of 15.3 and then that's the net what they call the net pension liability. So that's the 11.9 million that's the essentially the liability that is disclosed for the plan million. So that's the liability of the plan that goes in the books. That's the number in the 56% funded. That's the number, you know, that compares to what you see in the news or whatever. Such and such data is 50% funded. That's this is the still not apples apples. I'll tell you why in a second. But that's kind of the comparison, right? Main thing that you see in the news or wherever else because every plant has to disclose this. So it's not apples apple still, right? Because we're using that six and three/4ers discount rate. you know, you might seven some half still or whatever. So, you still don't have quite apples to apples. You've got your own set of assumptions that makes your plan, you know, unique. But generally, you know, it's it's the best we have. Let's see the next page. I'll just show at the bottom the importance of that discount rate. Right at the very bottom of that page, you have the liability of the plan is 27.2 million. But if we could use a 1% higher interest rate, we could chop three million in liability off. Alternative alternatively, if we had to use a 1% lower discount rate, which would kind of be the case if you

had that depletion date problem, that might be might even be worse than that, right? You're going to increase the liability by the change that obviously change the liabilities significantly, but the assets don't change, right? the same amount of money in the bank. So, you know, your funded position um you know could change significantly. Again, that's why all plans not looking at if you're looking at statewide plan or whatever you hear% funded. Next thing you'd want to know is what's that discount, right? The same rate that's great, but they're using higher than six and three quarters. their numbers a little bit higher. And then the last thing I'll show is page 18. The rules also require us to calculate what's called an expense. It's really kind of a corporate pension uh idea, but it's it's the Gazsby way of kind of coming up with plan cost for the year. I've never I haven't really heard any feedback from any plans about any, you know, issues with this or any reason where it's ever become of importance. But I think the thing is that bond rating agencies, this is a number they might look at and say, "Oh, that's the that's a proxy of the cost for the year for the plan is this pension expense, right?" And as you can see, the other reason I'm pretty skeptical of it is that it's half it's less than half of what the actual real contribution is. So it's, you know, anyone looking at that would get the might get misinression that plan cost is actually lower. But again, it's these are mandated rules to calculate this. And so, um, again,

that's bonding agency might look at that and say, oh, the 50% funded, you're 56% funded, and you've got 484,000 in expense. And those are things that might take plans impact on the city in terms of questions on the police plan. Those couple of pages are really the key because it does get published. Okay. So then the non-uniform kind of same thing but on page on that same page was three no five. The non-uniform plan has always contributed back this year tiny bit over. um the recommended contribution. So it is exempt from that whole several p those several other pages aren't in here because you put in actual determine contribution every year you're exempt from having to do that complicated date test. That's you know I don't know it's obviously it's less work for us but it's also a little bit confusing or scary if you do get a position where you do have a completion date and don't want to have that then going forward to page page nine where the again return is almost identical calculated the same way 358 for the year see the 10 year history the ups and downs right of a couple of those years Um, same thing on page 10. It's pretty I think it's no I think slightly different asset allocation but more or less within the same categories. Um, page 11 that's where we where we certify that you know because you're contributing the actual term contribution. We don't have to do those other calculations. So we skip them. And then go to page 12 is

the the uh the same key disclosure, right? Plan 78% funded down from 80 and that's market value basis, right? Accounting accounting rules are primarily market based, right? So we're saying we don't get to use that smooth assets we use for the funding piece. We use the market value no matter what. So you're using market value assets and again that's down because our hurdle rate was 675 and we got 3.5% return loss 3% short of our 6.75 target and so that's why the fun% and same thing on the bottom of page 13 you know you can see the sensitivity not quite as extreme it's only$2 million difference roughly if we were to change the discount rate by 1% because the liabilities are smaller the change 1% the pension expense on 15 that same idea again that's another reason why I'm kind of skeptical of it you know went from 828,000 last year to 432,000 this year extremely volatile Please, if if those numbers ever come up, let me know because I've never really heard anyone say they matter, but presumably questions on that one. So again, I guess I don't know if the auditor, you know, the auditor for the city, I guess will, you know, all if they have any questions, obviously we'll answer them. If they I don't think normally we don't. So if we do obviously

it's done. Okay. Okay. Okay. Thank you. Thank you,

Mrs. Meta. I just have a couple reminders, announcements for this week. Um, first, the I believe my colleague Dan Schwarz talked to you guys about the new legislation in Missouri about investments in China or restricted entities as the language in the statute says. reminder that before December 1st, you are supposed to meet with your financial advisor and figure out if you have any investments in said restricted entities. And then by the end of the year, the 31st of December, you need to make a report to the general assembly saying whether you have investments in China. Um, please note there are exceptions in the statute for passively invested funds and active funds which I read and I think you're in agreement to mean any mutual funds or investments like that are excluded. So if you have some type of you know emerging markets or foreign markets mutual fund that happens to have Chinese companies in the mutual fund you don't need to divest of that it would just be direct investments like if your plan owned part of Tik Tok that could be an issue. So a direct investment with the Chinese company would be problematic. Mutual funds should not be. Regardless, by the end of the year, you need to make a report to the general assembly explaining that either you do or do not have any of the investments. And if you do have them, you need to divest by next August. But again, I expect that you're almost exclusively invested in the types of funds that would be accepted from this law. Um, and final announcement reminder, you should have received an email from my law firm that we are hosting our annual trustee training. It

will be Wednesday, November 12th from 6:00 to 8 at the Depair Lodge as always. Different room this year. So, you need your two hours of credits. Please come see us. It's free. There will be snacks. Thank you. Thank you. Thank you,

Mr. Flynn. Whenever you're ready. My understanding from last we answer any questions and make sure that any report to the general assembly or handled but since you invest internationally in mutual funds should be should be all right. And so that reports still due just to tell them that we're not investing in that stuff that comes from us. Okay.

We can provide templates or figure out how to communicate that. It should be a should be a simple thing just to say hey all of our investments any became an issue and they China returns and type performance, but we don't think that that that's necessary. So, um I passed out I know we've made the comments about how much paper I pass out each time. So, now hopefully we can uh you know, put that to work. I'll turn you to whichever book you're in, page five. Hopefully, I'll go quickly through the all the things that could be wrong with markets and I'll all the stuff that's good with the markets and with the portfolio and I'll try and fail as usual to be brief. Um, but page five again page that we put as much stuff as possible on there. I could list off all the concerns that we hear from various uh meetings and conversations with clients and money managers whatot. But big question earlier in the year was tariffs. do the economy down a lot seem all of the tariff rates down and so April 8 markets have really just straight up get into that there's concerns about Israel and what goes on there I would say if uh you don't invest in the market because there's turmoil in the Middle East you would never So really that's kind of thing China that's again ever back and forth trade battles and a lot of fiery

rhetoric there Russia that continues protests for various reasons continue to go on in the US so there's just a lot of turmoil but it seems business as usual there um the Fed a lot of big questions about that they recently cut rates in September by 25 basis points of 50 basis points are expected restmber should be a boost to uh your bond returns should be a boost to equities as well spending rather than businesses money because rates are a little bit higher going be a little and maybe they can buy a car because finances that these cuts will be stimulative and ward off any concerns which I'll get to that in just a second. On this page the bottom right I think what I didn't mention was the government shutdown uh that continues to go on and we have a succinct chart here that says that those shutdowns are usually a nonissue for equity markets the exact how long we've been going now, but we we show you usually they're wrapping up around now. I don't think that government shut down shows many signs of ending, but you see that really it's a non-issue equity markets most recent shutdowns that were significant here after the shutdown ends equity markets rally without exception. So nothing really to worry about and usually it's a good sign when it's over. Not really that bad of a sign. So you know this being for equity markets obviously there's impacts to the

economy and to individuals but from a lens of what this means this portfolio. I'll turn you to the next page talk about a couple of the key factors. I've shown this chart before but we four major economic data points. The upper left GDP, what's the US economy doing maybe a couple times ago when I was talking, we were coming off the first quarter decline. A lot of companies brought in, they sped up their imports to front of these tariffs. And so when you're bringing in a bunch of imports, it kind of fledges the numbers and made the economy really bad in the first quart. And the hope was that as those kind of normaliz get back to normal. Well, the economy picked it up in the second quarter was up almost 4% expectations for we're in the fourth quarter now, but a lot of this data to grow despite all of those concerns and questions. The upper right inflation uh this is just the last 12 months of inflation numbers have been pretty stable. So despite these tariffs, despite rising costs for producers, it hasn't generally reached the consumer year lately. It has been ticked up in recent months, but overall trend line is pretty flat. The bottom left also flat has been the unemployment rate. It has ticked up again, but the longer term the dotted line and these numbers remain pretty close to historic reason lately. And so um you get GDP growth

remains strong, inflation remains low threeish% but not quite as low as they want it to be and unemployment remains pretty good%. So that's pretty healthy, but there are concerns that tariffs could cause this to go the other way. And so uh the rates have started to come down. That's that bottom right. And see blue line is what has happened rates the last year plus. They come down a little bit. And that shows that as I said is good for for investors especially in the short term. And hopefully if there are any questions about inflation and unemployment a little bit lower rate. So finally um for the markets page seven talk about the good news. We talk about all the bad things that can happen year to date on the left column bonds that first line US% I wouldn't say to annualize that but that is more than full months moving down the S&P 500 large cap stocks % year to date. Really good return. That's in line with going all the way up 15%. Again, more of the same from there. What is different is you see a few numbers at the bottom that are higher than that. EA MSE that's international developed stocks UK, Japan, France, Germany that those are up 25% and then emerging China, India, those are 27. What this means is no matter what you've invested in, you're pretty happy. Your portfolios are a lot higher than they

were coming into the year. What's changed so far in 205 is that some of the leaders have changed. You're still not kicking yourself for investing in large cap equity. Uh you're maybe patting yourself on the back for remaining invested outside the US. Those trail in recent years, but overall having a little bit of bonds, having some US exposure, some non US exposure. No matter what you're doing, it's working. A lot of that outside the US, those are benefiting, but companies are doing well, but they're also a little bit weaker. US dollar weakening by about 10% means that you get about a 10% boo and then it weakens then you buy it back trade your money appreciates roughly those are the building blocks that lead to the the returns which I'm about to get to any questions about economy or markets answer those I'll turn behind tab two. Uh this will be page 18. And I'll talk first about the police portfolio. All my comments will be pretty similar. The manager lineups are are identical and just some slight changes to the allocations between the plans. Um but I will say this stands for both plans. Both were at all time high water marks at the end of September. So equity markets the S&P 500 also all high. that his portfolio would also be at an alltime high. So both are kind of in the same dollar range. This portfolio police 16.4 million remains in line with its targets. A little bit overweight to uh equity mostly most of that is non US equity because as you know those have run quite a bit this year. Fixed income is about 3% underweight which is fine.

performance equities and then there's a little bit of cash as of then turning on to the next couple pages open this up to 1920 I'll cover on both anywhere but year to date page 19 shows the dollar growth various time periods year to date the portfolion to 16.4 million so you've had $1.6 million return on investment in just nine months which is pretty significant. Going out longer term last decade you started with 11.8 million you had almost that exact amount of return on investment. It's almost double the net. Again a good reminder why we do this why you come and listen to us and why you put all the the effort into the plan into management because it is worth it. It is worthwhile effort to invest and remain invested in that. So finally page 20 we'll talk about the performance here. Um performance has been you know somewhat muted relative to some of the benchmarks we show on here but the last quarter was a very good quarter. So on the police plan we show a lot of colors. This is blue green and other bars. And for the police they ran 23 that is very short but in the far right. So that is good what we like to see kind of a bell there barbell really good over 10 years really good over three months with mixed performance especially over the last year. That is due to small cap managers which have been challenged a lot of what's working in small cap the

smaller US stocks is that everyone's buying and flooding into AI data centers electric companies that are powering data centers hardware software different kinds of things almost specul and we prefer that they like these companies that make money been around stable earnings, stable balance that aren't speculative and hoping that one day they can hit it big with power plant that has never been. So those are the companies that are being rewarded by the markets over the last few months. But in the long run, we think everything shot up really quickly and it was good if you were along for the ride, but was was felt on the downsides. These managers especially in small cap have trailed the benchmark but for good reason. So that those are my comments on that big picture performance for the police plan. I will quickly make similar comments for behind tab two the non-uniform retirement plan. The difference here is that uh and so this is on page 20 % to 70% group when I will draw attention equities down benefits you not look really good so in a period where equities have risen and continue to rise over the last decade performance so the last three months 35th percentile still very good longer term 10 years 76% manager line

that have 10% that explains those differences, but the portfolio's performed right in line over the last 10 years policy index right on top. So that's all net fees. policy index that's good and we like to see that trailing too much too much managers are doing what all right well good news markets are at all time highs your portfolios participating in those also at all time highs however we pretty comfortable with what's going on recommend any changes do have an eye on all of our managers particularly trying to small but hopefully it will be short.

Thank you for listening. Thank you. Thank you. Just a side note, I think I really think that um doing the benefit administration, outsourcing that to US Bank, we're drawing straight from the cash from the plans. I really think that has assisted in leaving the funds in the investments. I think that has probably added to because we were keeping a lot of cash in our checking account before where we're now leaving it in the investments until we absolutely need it now. So, I think that's made a difference as well. Right.

Okay. Nice. All right. Uh, next item. Set the date for the next meeting. These three months always go quick and we're a little early again for this meeting. So, we're going to look at uh early February. Um, if we're going to stick with Thursdays, we have the 5th or the 12th. 1:30. Any objection to either of those? Let's plan for the fifth. 1:30. Same room.

Correct. Other questions, comments on anything pension related? All right, with that I'll seek a motion to adjurnn. So moved. A second. All those in favor? Any opposed? We're journed. Thanks everybody.