MINUTES OF THE CITY OF SARASOTA GENERAL EMPLOYEES PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF DECEMBER 19, 2022 Present: Chair Ryan Chapdelain, Secretary Shayla Griggs, Trustee Robert Reardon, Trustee Barry Keeler, and Trustee Jan Thomburg. Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, and Pension Specialist Peter Gottlieb. Absent: Vice Chair Mark Nicholas and Treasurer Kelly Strickland. 1. CALL MEETING TO ORDER: Chair Chapdelain called the General Employees' Pension Plan (Plan) Board of Trustees Regular meeting to order at 8:31 a.m. 2. PLEDGE OF ALLEGIANCE: Presenter(s): Secretary Griggs. Chair Chapdelain led the Board and meeting attendees in the Pledge of Allegiance. 3. PLEDGE OF CIVILITY: Chair Chapdelain stated for the record, "We may disagree, but we will be respectful to one another. We will direct all comments to issues, and we will avoid personal attacks." 4. ROLL CALL: Pension Plans Administrator Martin called roll. Vice Chair Mark Nicholas and Treasurer Kelly Strickland were absent. 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 19, 2022. Presenter(s): Chair Chapdelain. Chair Chapdelain asked if Graystone Consulting had provided any feedback or information regarding Geneva's proposed fees; Pension Plans Administrator Martin stated that it has not provided any further information. Trustee Keeler made a motion to accept the minutes of the Regular Meeting of October 19, 2022; Trustee Thornburg seconded the motion. The motion carried nanimously (5-0). 7. APPROVAL OF RETIREMENT REQUEST/S): 7.1. Approval Re: Early Retirement Request of Jeorge Bestard. Presenter(s): Debra Martin, Pension Plans Administrator. Book 1 Page 356 12-19-2022 8:30 a.m. Book 1 Page 357 12-19-2022 8:30 a.m. Pension Plans Administrator Martin stated that Mr. Bestard requests an early retirement after 20.11 years of service, noting the reduced multipliers in his benefit computation; he selected the lifetime option benefit. Trustee Keeler made a motion to accept Mr. Bestard's request for retirement; Trustee Thomburg seconded the motion. The motion carried unanimously (5-0). 7.2. Approval Re: Normal Retirement Request of Jerry Dawson. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated that Mr. Dawson requests a normal retirement at age 65 after 22.69 years of service; he selected the pop-up option to joint annuitant. Trustee Thornburg made a motion to accept Mr. Dawson's request for retirement; Trustee Keeler seconded the motion. The motion carried unanimously (5-0). 7.3. Approval Re: DROP Retirement Request of Alvin Hurskin. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated that Mr. Hurskin requests to enter the DROP as of October 1, 2022, after 22.17 years of service; he selected the pop-up option with 50% to joint annuitant. Trustee Keeler made a motion to accept Mr. Hurskin's request for retirement; Trustee Thornburg seconded the motion. The motion carried unanimously (5-0). 8. UNFINISHED BUSINESS: 9. NEW BUSINESS: 9.1. Presentation and Discussion Re: Change in Actuarial Assumption for September 30, 2022 Valuation. Presenter(s): Peter Strong, FSA, EA, MAAA, FCA, Gabriel Roeder Smith & Company. Peter Strong of Gabriel, Roeder, Smith, & Company (GRS) appeared before the Board telephonically and introduced himself. Mr. Strong explained he would like the Board to consider temporarily changing a component of the salary assumption in the actuarial valuation of the Plan to minimize the effect of the City of Sarasota's (City's) one-time, 9% salary increase to employees, issued in October 2022 which was not reflected in the census data for the Fiscal Year that ended September 30, 2022. Mr. Strong explained that the salary assumption has two components: inflation, which is approximately 2.3%, and promotions, productivity, and seniority, which is 2.4% to 4%, for a total salary assumption range from 4.7% to 6.3%. Mr. Strong suggests the Board may want to increase the inflation component of the salary assumption from 2.3% to 9% of the valuation for one year only, with the salary assumption returning to 4.7% and 6.3% the following year. Without having the required employer contribution amount as of September 30, 2022, Mr. Strong estimated the salary assumption increase would increase the City's employer contribution rate by approximately $350,000. Mr. Strong noted that if the Board were to refrain from changing the salary assumption, the experienced salaries in the coming year could exceed the assumed salary rate, which would then be recognized as a loss to the Plan in the current fiscal year. Alternately, the Board may consider increasing the salary assumption by an amount lesser than 9% and allow salaries in excess of the assumption be recognized as an experience gain or loss. The Board noted the poor audio quality of Mr. Strong's connection, and the lack of materials to review. Chair Chapdelain and Mr. Strong discussed delaying a decision on the matter until its January 27, 2023, meeting when the Board may review prepared materials which explain the impacts to the Plan using various changes to the salary assumption. Mr. Strong stated that he could bring a draft copy of the valuation to the January 27, 2023 meeting, or the Board could delay accepting the valuation until its February 13, 2023 meeting. To Pension Plans Administrator Martin's question, Mr. Strong asserted the Board's delay in accepting the valuation could delay the independent auditor's presentation of the financial statements. Mr. Strong reiterated that increasing the salary assumption from 2.7% to 9% would increase the City's employer contribution by approximately $350,000. Secretary Griggs noted the Board's hesitation in taking action due to the audio connection quality, however, deferring a decision to a later meeting date could delay the City's financial audit process. Chair Chapdelain and Mr. Strong discussed the components of the salary assumption; Mr. Strong explained the salary assumption and its components were based on an experience study which separated the merit and seniority salary increases from inflation-caused changes in salaries. Mr. Strong also explained that he estimated the experienced return on the actuarial value of assets for fiscal year ending September 30, 2022 was between 3.5% and 4% as a result of smoothing gains and losses and will add approximately $300,000 to the City's required contributions; he added that, if the Plan were to recognize the full market losses from Fiscal Year 2022 without smoothing, the City's contributions would increase by several million dollars. Mr. Strong further noted that the actual returns from 2022 are less than the estimated rate of investment return, which will also add approximately $300,000 to the City's required contributions for Fiscal Year Ending September 30, 2024. Mr. Strong added that, if the Board were to increase the inflation component of the salary assumption by 6% and the actual salaries were either greater or less than the assumed amount, the experienced gains or losses would be factored into the following year's valuation. To Chair Chapdelain's and Trustee Thornburg's questions, Mr. Strong discussed the projected rate of inflation; while economists anticipate inflation to remain elevated for the next one to two years, they currently forecast inflation to average approximately to 2.5% over the next 10 to 20 years. In that regard, Mr. Strong only recommends a 1-year increase to the salary assumption at this time. If any experiences are significantly different than the assumptions, the Board may consider changing any of the assumptions for the following valuation. Chair Chapdelain expressed support for temporarily increasing the inflation component of the salary assumption by 2.7% as there may not be as many promotional or seniority raises this year after the general wage increase of 9%. Mr. Strong explained how increasing the assumption by an amount which exceeds the experienced amount will cause an experience gain at the expense of the City's required contributions. Trustee Reardon and Secretary Griggs also expressed support. Trustee Keeler made a motion, as clarified by Mr. Strong, to increase the inflation component of the salary assumption for 2022 only from 2.3% to 6%; Secretary Griggs seconded the motion. The motion carried unanimously (5-0). The Board thanked Mr. Strong for his presentation. 10. ATTORNEY MATTERS: Attorney Christiansen noted that the contract with Segal Bryant has been finalized and the Board may move forward with investments. Pension Plans Administrator Martin advised the account is in process of being set up with the Custodial Bank. Book 1 Page 358 12-19-2022 8:30 a.m. Book 1 Page 359 12-19-2022 8:30 a.m. Chair Chapdelain asked Pension Plans Administrator Martin to follow up with Scott Owens of Graystone Consulting regarding Geneva and Invesco's fee structures. 11. OTHER MATTERS: 11.1. Presentation and Discussion Re: Administrative Budget Expense Report, July 1, 2022 through September 30, 2022. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin advised this is the final administrative budget expense report for Fiscal Year ending September 30, 2022. She noted that when the Board approved the administrative budget for Fiscal Year ending September 30, 2023 Pension Administration had not been informed the City would issue a 9% general wage increase; Pension Administration will request a budget adjustment for salaries at a future meeting. 11.2. Presentation and Discussion Re: Check Register, July 1, 2022 through September 30, 2022. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin presented the check register as most payments are issued by ACH. She noted the payments to Trustee Keeler were reissuances of reimbursement of Plan-covered travel expenses. The smaller payment to Traveler's Insurance was crime coverage; the larger payment was for liability coverage. She also noted that two thirds of payments to Staples would be reimbursed by the City's other two defined benefit pension plans. 11.3. Presentation and Discussion Re: Asset Allocation as of December 9, 2022. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin explained this is presented to the Board for its information only. Pension Plans Administrator Martin clarified that the financial statements referenced by Mr. Strong are provided to GRS by Mauldin & Jenkins, the Plan's external auditor, towards the end of December each year. Pension Plans Administrator Martin noted Chair Chapdelain had a schedule conflict with the February 13, 2023 meeting, and that Mr. Christiansen would be available on Friday, February 24, 2023 following the Police Officers' Pension Plan Board meeting. Trustee Thornburg noted she would be unable to attend a February 24, 2023 meeting due to an existing engagement. Secretary Griggs, Trustee Reardon, and Trustee Keeler stated they would be able to attend. Pension Plans Administrator Martin noted the 2023 schedule will be amended. 12. ADJOURN. Chair Chapdelain adjourned the meeting at 9:04 a.m. Chair Ryan Chapdelain Secretaly Shaylé Griggs