Book 1 Page 283 12-10-2021 11:00 a.m. MINUTES OF THE CITY OF SARASOTA GENERAL EMPLOYEES PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF DECEMBER 10, 2021 Present: Chair Ryan Chapdelain, Vice Chair Mark Nicholas, Treasurer Kelly Strickland, Secretary Shayla Griggs, and Trustee Robert Reardon. Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, Senior Pension Analyst Anthony Ferrer, and Pension Specialist Peter Gottlieb. Absent: None. 1. CALL MEETING TO ORDER: Chair Chapdelain called the General Employees' Pension Plan (Plan) Board of Trustees regular meeting to order at 11:00 a.m. 2. PLEDGE OF ALLEGIANCE: Presenter(s): Secretary Griggs. 3. PLEDGE OF CIVILITY: 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: Pension Plans Administrator Debra Martin called roll. All trustees were present. Secretary Griggs advised she will need to leave the meeting by noon due to other obligations. Chair Chapdelain requested an excused absence for the October 22, 2021 meeting; Treasurer Strickland advised she would not request an excused absence because she had another meeting which coincided with the October 22, 2021 meeting. By consensus, the Board approved Chair Chapdelain's absence. 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 October 22, 2021. Presenter(s): Chair Chapdelain. Vice Chair Nicholas made a motion to approve the minutes of the Regular meeting of October 22, 2021; Trustee Reardon seconded the motion. The motion carried unanimously (5-0). 7. BOARD ELECTIONS: 7.1. Presentation and Discussion Re: Nomination to General Employees' Pension Plan Board of Trustees Seat GP1. Presenter(s): Secretary Griggs. Senior Pension Analyst Ferrer appeared before the Board and, with Attorney Christiansen, unsealed the ballots from the election of Seat GP1. Secretary Griggs read the ballots for the record; Pension Plans Administrator Martin and Pension Specialist Gottlieb recorded the ballots. Secretary Griggs noted 2 ballots were ineligible because they each voted for 2 candidates. Pension Plans Administrator Martin announced she and Pension Specialist Gottlieb concurred in their vote counts. April Bryan received 71 votes, Barry Keeler received 68 votes, Stacey Monroe received 11 votes, and Jan Thomburg received 12 votes. Attorney Christiansen explained that the election provisions of the operating rules require a winning candidate to receive the majority vote to be elected; if one candidate does not receive a majority, meaning more than 50% of the votes received, a runoff election must be held between the top 2 candidates. Pension Plans Administrator Martin stated that to win, a candidate would have needed 81 votes to receive the majority vote. Chair Chapdelain asked if a new election could be held before the next Board meeting; Pension Plans Administrator Martin advised it could, and that Pension Administration will also be sending out self-nomination forms to active members regarding seat GP3, vacated by former Trustee Kari McVaugh. 8. APPROVAL OF RETIREMENT REQUESTIS): 8.1. Presentation and Discussion: Early Retirement Request of Scott Lyons. Presenter: Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated Mr. Lyon requests to retire early effective October 1, 2021 with almost 20 years of service time; he selected the lifetime option. Mr. Lyon worked for Utilities. Vice Chair Nicholas made a motion to approve Mr. Lyon's request for retirement; Treasurer Strickland seconded the motion. The motion carried unanimously (5-0). 8.2. Presentation and Discussion: DROP Retirement Request of William Mallett. Presenter: Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated Mr. Mallet requests to enter the DROP effective October 1, 2021 after just over 15 years of service; he selected the lifetime only option. She explained that Pension Administration did not receive Mr. Mallet's signed election until November 12, 2021. Vice Chair Nicholas made a motion to approve Mr. Mallet's request to enter thel DROP; Trustee Reardon seconded the motion. The motion carried unanimously (5-0). 9. INVESTMENT PERFORMANCE REVIEW: None. 10. NEW BUSINESS: Book 1 Page 284 12-10-2021 11:00 a.m. Book 1 Page 285 12-10-2021 11:00 a.m. 10.1. Presentation and Discussion Re: Assumed Rate of Investment Return. Presenter(s): Pete Strong, Consultant and Senior Actuary, Gabriel Roeder Smith. Pete Strong of Gabriel Roeder Smith appeared before the Board telephonically and introduced himself. Mr. Strong explained the Board has been reducing its assumed rate of investment return when the opportunity presents itself, such as when the Florida Retirement System recently issued new mortality tables, with a long- term goal of 6%. The current assumed return rate is 6.55%, which was consistent with capital market forecasts at the time the Board approved that rate, however the capital market forecasts have since come down. Based on current capital market outlooks, the expectation is in the 6% to 6.25% range over the next 10 to 20 years. Mr. Strong recommends lowering the assumed rate of investment return by at least 15 basis points effective with the September 30, 2021 Plan valuation and offset any associated costs of that reduction with the experienced investment returns from 2021. By his preliminary estimations based on the actual returns from fiscal year 2021 and considering he has not received the audited financial statements yet, the increased investment income will reduce contributions by $400,000 to $500,000 even after smoothing for the year, and offset the impact of reducing the investment return assumption 15 to 20 basis points. He recommends lowering the retum assumption from 6.55% to 6.40% and making annual reductions until it reaches 6%. Chair Chapdelain asked if a reduction of 20 basis points would still be cost neutral. Mr. Strong explained that because of smoothing, the valuation only recognizes 20% of the actual gains from the fiscal year 2021. The smoothed gains from fiscal year 2021 should reduce the contribution amount by approximately $425,000 to $450,000 and reducing the investment assumption by 15 basis points would increase the contribution by $350,000 to $400,000, resulting in a net decrease in the contribution amount. Reducing the investment assumption by 20 basis points would slightly increase the contribution amount by $500,000 to $600,000, resulting in a net increase in the contribution amount. At Treasurer Strickland's request, Mr. Strong explained that when combined with the actual investment returns, a 15-basis point reduction in the assumed rate of return should result in an approximate $50,000 to $100,000 decrease in required contributions, and a 20-basis point reduction should result in a net increase of $100,000 to $150,000. He clarified this only accounts for the investment experience and the assumed rate of retum, and no other factors. Mr. Strong stated that the capital markets forecasts assumptions are in the 5% to 5.5% range over the next 10 years. He also noted that for the valuations for the next 4 years will each realize 20% of the gains from fiscal year 2021. Chair Chapdelain expressed support for reducing the assumption rate as much as possible without incurring additional costs and asked Mr. Strong to comment on the possibility of a 17.5 basis point reduction to the assumption rate. Mr. Strong explained that his estimates do not factor in other experiences, such as demographics or liabilities. If those result in a gain, then a 20-basis point reduction could be cost-neutral. However, if those resulted in a loss, then a 15-basis point reduction may be the cost-neutral option. Mr. Strong stated that if the Board wished to make a cost-neutral reduction, it could wait until the valuation is presented at the January 2022 meeting and he would bring valuations with 15- and 20-basis point reductions in the assumed rate of return. Attorney Christiansen asked what would happen if the cost-neutral reduction was between 15 and 20 basis points. Mr. Strong stated one of two scenarios could occur. In one, the question could be between a $75,000 cost decrease or a $125,000 cost increase, in which case he would recommend the assumed rate which produced a $75,000 decrease as being the closest option to cost neutral. In the second, a valuation could show a $75,000 cost increase, or a $125,000 cost decrease; he would again reçommend the assumed rate of return which produced a $75,000 increase as it is closest to cost neutral. Chair Chapdelain stated his preference for not increasing any costs to the Plan or City. Mr. Strong stated that if the Board preferred, GRS could calculate the amount to reduce the assumption rate in single-point increments rather than 5-point increments. The Board generally concurred. Treasurer Strickland made a motion to direct the Plan actuary to determine the amount of reduction to the assumed rate of investment return in the Plan's valuation which will result in no change in the dollar amount of required City contributions during the next fiscal year compared to the current year. Chair Chapdelain noted that last year's employer contribution was $6,978,000. Trustee Nicholas seconded the motion. The motion carried unanimously (5-0). Mr. Strong thanked the Board for its direction and stated he intends to be present in person at the January 2022 meeting. Secretary Griggs exited the meeting at 11:43 a.m. 10.2. Presentation and Discussion Re: Addendum to the Operating Rules and Procedures. Presenter(s): Chair Chapdelain. Chair Chapdelain explained the Board had amended its operating rules applicable to when a member or retiree nominates themself for a seat on the Board which can be held by an employee or retiree. The Board decided to waive the requirement for the nominee to obtain 10 witness signatures from active members because of the burden it presents to retirees to obtain witness signatures. He asked if there should be a requirement for active members to obtain 3 or 5 witnesses from other active members to ensure their sincerity for a seat on the Board. He asked Attorney Christiansen if other plans he counsels require witness signatures. Attorney Christiansen stated no other plan he advises has requirements for witness signatures and noted elections with 4 candidates, as was the case in the election for seat GP1, is a rare occurrence. The Board took no action. 11. ATTORNEY MATTERS: Attorney Christiansen reminded Pension Administration that former Trustee McVaugh must complete form 1F for exiting trustees, and any new trustee must also complete Form 1. Chair Chapdelain, Pension Plan Administrator Martin, and Pension Specialist Gottlieb discussed the feasibility of conducting a nomination, and if necessary, an election for seat GP3 prior to the January 2022 meeting. 12. OTHER MATTERS: 12.1. Presentation and Discussion Re: Administrative Expense Budget Report, July 1, 2021, Through September 30, 2021. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated this is the final Administrative Expense Budget Report for the fiscal year. The Board had no questions. Book 1 Page 286 12-10-2021 11:00 a.m. Book 1 Page 287 12-10-2021 11:00 a.m. 12.2. Presentation and Discussion Re: Check Register July 1, 2021, Through September 30, 2021. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated this is presented because payments are made through ACH. The Board had no questions. 12.3. Presentation and Discussion Re: Investment Allocation as of November 30, 2021. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin advised this is a new document which shows the Plan's investment allocation value at the time it determines its monthly payroll needs. Itwill be presented to the Board each quarter and is for informational purposes. Treasurer Strickland stated she appreciated the information. Pension Plans Administrator Martin noted the FPPTA winter trustee school will be in January 2022. 13. ADJOURN. Chair Chapdelain adjourned the General Employees' Pension Plan Board of Trustees regular meeting at 11:51 a.m. & Gnp2 Chair Ryan Ghapdelain Sècrétary, Shayla Griggs