MINUTES OF THE CITY OF SARASOTA GENERAL EMPLOYEES' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF MAY 22, 2025 Present: Chair Ryan Chapdelain, Vice Chair Mark Nicholas, Treasurer Kelly Strickland, Secretary Shayla Griggs, Trustee Robert Reardon, Trustee Barry Keeler, and Jan Thornburg. Others: Attorney Stuart Kaufman (telephonic), Pension Plans Administrator Debra Martin, and Pension Specialist Peter Gottlieb. Absent: None. 1. CALL MEETING TO ORDER: Chair Chapdelain called the City of Sarasota (City), General Employees' Pension Plan (Plan) Board of Trustees Regular meeting to order at 10:30 a.m. 2. PLEDGE OF ALLEGIANCE: Presenter(s): Secretary Griggs. The Board and meeting attendees stated the Pledge of Allegiance. 3. PLEDGE OF CIMILITY: Presenter(s): Chair Chapdelain. Chair Chapdelain stated for the record, "We may disagree, but we will always be respectful to one another. We will direct all comments to issues, and we will not engage in personal attacks." 4. ROLL CALL: Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin called roll. Treasurer Strickland and Trustee Thomnburg were not present. 5. PUBLIC INPUT: None. 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the General Employees' Pension Plan Board of Trustees Regular Meeting of April 24, 2025. Presenter(s): Chair Chapdelain. Trustee Keeler made a motion to approve the minutes of the April 24, 2025, Regular meeting; Vice Chair Nicholas seconded the motion. The motion passed unanimously (5-0). 7. APPROVAL OF RETIREMENT REQUESTIS): 7.1. Presentation and Discussion: The Vested, Deferred Retirement Request ofvary Tucker. Presenter: Debra Martin, Pension Plans Administrator. Book 1 Page 492 05-22-2025 10:30 a.m. Book 1 Page 493 05-22-2025 10:30 a.m. Pension Plans Administrator Martin advised that Ms. Tucker separated from employment with the City in October 2015 and now requests the lifetime option with 10 years of service. Vice Chair Nicholas made a motion to approve the vested deferred retirement request of Mary Tucker; Trustee Keeler seconded the motion. The motion passed unanimously (5-0). 8. INVESTMENT PERFORMANCE REVIEW: 8.1. Presentation and Discussion Re: Hudson Edge Capital, Performance Review as of March 31, 2025. Presenter(s): Matthew Witschel, CFP, Director, National Accounts, Hudson Edge. Mathew Witschel of Hudson Edge Capital (Hudson) appeared before the Board and introduced himself. Mr. Witschel provided a firm overview, a history of Hudson's name change, and discuse. d its Organizational Chart; David Hauck left the firm and was replaced by former intern Joe DeMaro. Mr. Witschel reviewed the Statement of Changes, Q1 2025 page of the materials. In 2024, the portfolio's performance was boosted by classic value sectors like real estate, utilities, industrials, and financials; the health care, materials, consumer discretionary, and technology sectors hurt performance. Many of the trailing sectors in 2024 were leaders in 2025. In Q1 2025, value stocks held up better than growth, which rewarded the portfolio with a 3.89% return as earnings growth and market breath expanded beyond the magnificent 7, mega-cap, tech stocks. The portfolio's holdings in IBM, Intel, Pfizer, Dollar General, and the utilities sector all outperformed. Mr. Witschel characterized utilities as being almost a subsector of technology because of the energy needs of the artificial intelligence (AI) industry. He briefly reviewed some of the portfolio's biggest detractors. To Chair Chapdelain's and Trustee Reardon's questions, Mr. Witschel explained that CVS's outperformance may be attributable to finally realizing the benefits of its acquisition of Aetna, as well as getting a new chief executive officer. While he couldn't comment on how much direct impact Walgreens had on CVS's performance, Mr. Witschel noted that space has a limited number of large companies which all compete for market share as a "1-stop shop.' n He offered to obtain more information from Hudson's research team. Mr. Witschel discussed the Long Term Performance page, highlighting Matt Kosara's role as Chief Risk Officer since 2016 which ensures the portfolio management team isn't making unintended sector bets or exhibiting behavioral bias; he noted the portfolio has outperformed relatively over the 3-, 5-, 7-, and 10-year timeframes. Year-to-date in 2025, the portfolio is up 1.5%. Trustee Thornburg joined the meeting at 10:45 a.m. Mr. Witschel reviewed the Attribution Report page of the materials; the portfolio tracks closely to its benchmark and is concentrated in 45 to 50 stocks with high active share, which results in performance being attributable more to stock selection than relative positioning in any specific stock or sector. He reviewed the Top 5 Stocks, Bottom 5 Stocks, and Portfolio Changes pages of the materials. The Portfolio Characteristics are typical for Hudson with a price-to-earnings ratio lower than the benchmark and return on equity higher than the benchmark; while Hudson doesn't have a dividend in its name, the portfolio's dividend yield is at least 2.5% and is a sizable component of its total return. While it has over- and under-weighted positions relative to the index, Hudson isn't investing in any specific sectors; instead, it is finding stocks which meet its investment criteria which happen to be grouped in certain sectors. He briefly reviewed the Top Ten Holdings. Mr. Witschel provided a market outlook. The President's imposition of tariffs and their economic impacts, as well as labor cuts by the Department of Government Efficiency at federal agencies, has caused significant uncertainty and muted consumer confidence, despite reassuring economic data, such as employment numbers and Gross Domestic Product. Although Hudson anticipates tariffs to be less than what analysts fear, Hudson attempts to exclude political speculation and consider only individual company information when making investment decisions. Hudson expects the market to continue to broaden away from the magnificent 7, which have limited space to grow earnings expectations, and move into utilities, materials, and financials. Mr. Witschel explained that page 23 of the materials has a graphic representation of Hudson's philosophy of being overweight to less expensive, high-quality companies with margins of safety, like low debt and profitability, and being underweight to expensive, low-quality companies. Trustee Reardon asked Mr. Witschel to comment on the portfolio's pharmaceutical holdings which would be negatively impacted by the "most favored nation" provision of a recent Presidential Executive Order which directs the US Department of Health and Human Services to set target prices for drug manufacturers. Mr. Witschel advised that Bristol Myers Squibb is the only pharmaceutical company in the portfolio, and that he will discuss the question with Hudson's research team and provide a response to the Board through Pension Administration. The Board thanked Mr. Witschel for his presentation. UNFINISHED BUSINESS: None. 9. NEW BUSINESS: None. 10. ATTORNEY MATTERS: 10.1. Presentation and Discussion Re: In-Service Distributions and City-Employment after the DROP. Presenter(s): Stuart Kaufman, Klausner, Kaufman, Jensen & Levinson. Attorney Kaufman appeared before the Board telephonically and explained that the internal Revenue Service (IRS) changed its regulations to allow "in-service distributions; meaning that an employee who is eligible for a normal retirement benefit, or is age 59%, may begin receiving retirement benefits while remaining employed. This now conflicts with City Ordinance Sec. 24-116, Reemployment after retirement, which allows a rehired retiree to continue receiving retirement benefits only if that employee reached age 59%; Section 24-116 requires the Plan to discontinue benefit payments to rehired retirees who are younger than age 59%. To allow participants who are less than age 59%, but otherwise eligible for normal retirement to being drawing pension benefits, City Ordinances need to be amended. Additionally, the IRS in-service distribution regulation does not require normal retirement-eligible participants to separate from employment to begin receiving distributions. The Plan's DROP provisions require those participants to separate from service when their DROP period ends; the IRS in-service distribution regulation allows DROP participants who are over age 59% to remain employed and receive benefits when their DROP period ends. He noted that the IRS regulation was changed during the COVID-19 pandemic; prior to the IRS regulation change, a qualified retirement plan which allowed in-service distributions could be disqualified. To Chair Chapdelain's question, Attorney Kaufman clarified under the current City Ordinance, a participant must separate from service to receive a distribution, even if the participant has reached age 59%. Further, Ordinances allow a retiree who returns to City employment, meaning a break in service occurred, to continue receiving their retirement benefit while re-employed only if that participant had reached age 59%. To comport with IRS regulations, the controlling City Ordinance must be updated to allow Plan distributions without a break in service to participants who have reached age 59% or normal retirement eligibility, meaning 30 years of service at any age, or age 65 with 10 years of service. Under such an ordinance, participants could declare their retirement, cease to be members of the Plan, begin drawing their benefits, and remain in employed status at their current salary. Treasurer Strickland joined the meeting at 11:04 a.m. A discussion amongst the Board and Attorney ensued. To the Board's questions, Attorney Kaufman stated that: Bogk 1 Page 494 05-22-2025 10:30 a.m. * Book 1 Page 495 05-22-2025 10:30 a.m. A proposed ordinance addressing in-service distributions must be accompanied by an actuarial impact statement; considering the beneficiaries of such a change would already be eligible for normal retirement, the financial impact to the Plan seems minimal. The Board could ask the Plan's actuary to prepare a cost estimate before proposing an ordinance to the City Commission. Approximately 25 of Attorney Kaufman's clients now allow in-service distributions, and the provision is gradually gaining popularity. There are approximately 25 Plan members who could take in-service distributions, however there is no specific timeframe by which City Ordinances must be amended. The Plan's provisions do not specifically define, "break in service. " IRS's guidelines suggest there can be no preplanned agreement for an employee to return to service after separation, and that the employee is not separating for the purpose of avoiding in-service distribution issues. Tax attorneys consider a 6-month break in service to be appropriate. The proposed ordinance would allow the Plan to make in-service distributions to. participants who are eligible for a normal retirement at any age, or eligible for a retirement benefit and are at least age 59%. Currently, the Plan requires a break in service for any distribution. To Chair Chapdelain's question, only the City Code would need to be amended, although the Plan should also update the Summary Plan Description and adopt an administrative rule to clarify sny ambiguities. While Attorney Kaufman suggested the Board may wish to determine the City Commission's interest in the matter before incurring any costs, Secretary Griggs advised the Board should determ' 3 the potential cost to the Plan before discussing the matter with the City Commission; the Board agreed with Secretary Griggs. Attorney Kaufman advised he will contact Gabriel, Roeder, Smith and Co., the Plan's actuary, and request the actuarial impact of allowing in-service distributions as described. The Board and Attorney Kaufman discussed a timeline of events. By consensus, the Board directed Attorney Kaufman to present the actuarial cost of a proposed ordinance at the Board's June 26, 2025, meeting. If the Board approves, Attorney Kaufman wil present a proposed ordinance to the Board at its September 25, 2025, meeting; if the Board approves, the proposed ordinance could have first and second readings before the City Commission in October and November 2025. 11. OTHER MATTERS: 11.1. Presentation and Discussion Re: Administrative Budget Analysis as of December 31, 2024. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Administrative Expense Budget as of December 31, 2024, and added to the presented materials the Administrative Expense Budget as of March 31, 2025. The Board had no questions. 11.2. Presentation and Discussion Re: Check Register as of December 31, 2024. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Check Register as of December 31, 2024, and added to the presented materials the Check Register as of March 31, 2025. The Board had no questions. 11.3. Presentation and Discussion Re: Asset Allocation as of May 14, 2025. 1S. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the Asset Allocation as of May 14, 2025, for the Board's information. The Board had no questions. 12. ADJOURN. Chair Chapdelain adjourned the General Employees' Pension Plan Board of Trustees meeting at 11:15 a.m. Chair Ryan Chapdelain Secretary Shayla Griggs - Book 1 Page 496 05-22-2025 10:30 a.m.