Book 1 Page 207 01-22-2021 8:15 a.m. MINUTES OF THE CITY OF SARASOTA POLICE OFFICERS' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF JANUARY 22, 2021 Present: Chair Demetri Konstantopoulos, Vice Chair Johnathan Todd, Secretary/reasurer Shayla Griggs, Trustee Ronnie K. Baty, and Trustee Jody Hudgins. Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, Senior Pension Analyst Anthony Ferrer, and Pension Specialist Peter Gottlieb. 1. CALL MEETING TO ORDER: Presenter(s): Chair Konstantopoulos. Chair Konstantopoulos called the meeting to order at 8.15am. 2. PLEDGE OF CIVILITY: Presenter(s): Chair Konstantopoulos. Chair Konstantopoulos stated for the record, "We may disagree, but we will be respectful of one another. We will direct all comments to issues. We will not engage in personal attacks." 3. ROLL CALL: Presenter: Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin called roll. Chair Konstantopoulos, Secretary/Treasurer Griggs, and Trustee Baty appeared in person. Vice Chair Todd and Trustee Hudgins appeared elephonically. Also in attendance in person were Attorney Christiansen and Pension Specialist Gottlieb. Pension Plans Administrator Martin and Senior Pension Analyst Ferrer appeared telephonically. Attorney Christiansen noted for the record that three trustees were attending the meeting in person which satisfied the physical quorum requirement, and two trustees were appearing telephonically due to extraordinary circumstances. Chair Konstantopoulos stated that another advisory board meeting was scheduled to begin at 10.00am, and advised presenters to anticipate this meeting would conclude by 9.40 am. 4. NEW BUSINESS: 4.1. Presentation and Discussion Re: Actuarial Valuation Report for Fiscal Year Ended September 30, 2020. Presenter(s): Peter Strong, FSA, EA, MAAA, FCA, Senior Consultant and Actuary, Gabriel, Roeder, Smith & Company. Nicolas Lahaye, FSA, MAAA, FCA of Gabriel, Roeder, Smith & Company appeared before the Board telephonically; he advised Mr. Strong was unable to attend the meeting and in Mr. Strong's absence, that he would present items 4.1., 4.2., and 4.3. Mr. Lahaye presented the Actuarial Valuation and stated that the City of Sarasota's contribution requirement for the fiscal year beginning October 1, 2021 is 44.14% of covered payroll, which in dollar terms, is expected to be approximately $6.34 million. Mr. Lahaye noted that the City's contribution requirement for the fiscal year that began on October 1, 2020 is 48.03% of payroll with an expected contribution of $6.58 million. In response to Trustee Hudgins' question regarding the Plan's funded ratio compared to other pension plans, Mr. Lahaye stated he has not completed many valuations as of October 1, 2020, but for valuations as of October 1, 2019, the average funded ratio was approximately 87% compared to the Plan's 86%. Mr. Lahaye expected the Plan's current funded ratio of 89% to be comparable to the average as well. Mr. Lahaye discussed the Actuarial Valuation Process; he commented on the Observed Experiences noting experience gains, assumption rate changes, asset performance, demographic experience, and payroll increases. He discussed how the decreased costs associated with the changes in the Florida Retirement System mortality tables were greater than the increased costs incurred when the Plan lowered its investment retumn assumption for a net decrease in costs to the Plan. Mr. Lahaye discussed Actuarial Assumptions and Methods, Changes in Plan Provisions, Relationship to Market Value, and the variability of Future Contribution Rates. Mr. Lahaye reviewed the Contributions to Finance Benefits of the Pension Fund and noted the goal was to reduce the Unfunded Actuarial Accrued Liability to 0%, Funding Progress Indicators which is a history of the Plan's funded ratio and currently shows a trend towards becoming fully funded while making the investment retum assumption more conservative, the Unfunded Actuarial Accrued Liability, and the Accounting Information Submitted for Valuation. While discussing the Reconciliation of Plan Assets, Mr. Lahaye stated that the investment expenses stated on C.2.d. were approximately 44 basis points while comparable sized plans range from 50 to 70 basis points. Regarding the Development of Actuarial Value of Assets, Mr. Lahaye noted the valuation only recognizes 20% of the difference between the assumed and actual rates of returns. He concluded by discussing the History of Investment Return Rates. Trustee Baty made a motion to accept the Actuarial Valuation Report for Fiscal Year Ended September 30, 2020; Trustee Hudgins seconded the motion. The motion carried unanimously (5-0). 4.2. Presentation and Discussion Re: GASB No. 67 Plan Reporting and Accounting Schedules for Fiscal Year Ended September 30, 2020. Presenter(s): Peter Strong, FSA, EA, MAAA, FCA, Senior Consultant and Actuary, Gabriel, Roeder, Smith & Company. Mr. Lahaye reviewed the Schedule of Changes in the Employer's Net Pension Liability and Related Ratios. Trustee Hudgins made a motion to accept the GASB No. 67 Plan Reporting and Accounting Schedules for Fiscal Year Ended September 30, 2020. Trustee Baty seconded the motion. The motion carried unanimously (5-0). 4.3. Presentation and Discussion Re: Proposal for Updating Actuarial Factors for Service Purchases and for Optional Forms of Benefit Payments. Book 1 Page 208 01-22-2021 8:15 a.m. Book 1 Page 209 12-11-2020 8:15 a.m. Presenter(s): Peter Strong, FSA, EA, MAAA, FCA, Senior Consultant and Actuary, Gabriel, Roeder, Smith & Company. Mr. Lahaye stated that Mr. Strong had discussed the topic of actuarial factors for optional payments with Pension Plans Administrator Martin. Secretary/Treasurer: Griggs clarified no backup material had been provided for the item. Attorney Christiansen offered to clarify the issue and explained that the definition of"actuarial equivalency" in ordinances specifies the Plan must use specific actuarial tables to calculate optional forms of benefit payments and the cost of service buybacks. The Plan states it must use the RP2000 Combined Healthy Participant Mortality Table, and a 7% assumed rate of return, however the Plan is not using those in the valuation because the Plan must use the mortality table specified by the State of Florida, and the Plan has now reduced its assumed rate of return to 6.75%. In other plans, rather than state a specific numeric assumed rate of return, they refer to the factors stated in the most recent actuarial valuation which has been approved by its board. Attorey Christiansen stated this relieves the burden of updating the Plan's controlling provisions when the State updates mortality tables and the Board changes the assumed rate of return. Mr. Lahaye stated that many plans include specific rates of returns in their valuations because frequent changes in assumed rates of returns creates dramatic fluctuations in valuations. Trustee Hudgins stated the Board does not have a history of frequently changing the assumed rate of return, and has always adopted the FRS actuarial mortality tables. Trustee Hudgins made a motion to adopt the stated approved actuarial return, and the actuarial mortality tables will be the most recent published or approved tables from FRS as provided for in the valuation. Attorney Christiansen stated that all of his plans have general language referencing the assumptions in the valuations and that he would need to draft an ordinance change to be presented at the next meeting. Pension Plans Administrator Martin stated that Mr. Strong recommended updating the actuarial factor table used in calculations. Attorney Christiansen stated this was different than his understanding of the item, but that the issue he described was still appropriate for consideration. Trustee Hudgins suggested tabling the discussion until backup materials could be provided. Attorney Christiansen clarified that Pension Administration uses a table showing a person's age and number of years of service that could be used to estimate the cost to buy back amounts of service; which is separate from the issue he raised. Attorney Christiansen stated that the two issues should be addressed separately. He suggested the Board take up the issue he initially presented, and the actuary could then take up the issue Pension Plans Administrator Martin described if necessary. At the request of Chair Konstantopoulos, Trustee Hudgins restated his motion as: for the purpose of equivalency computation, the Plan use the most recent approved actuarial return assumption and most recent published and approved actuarial mortality tables as provided by FRS, to be accomplished by an ordinance. Trustee Baty seconded the motion. The motion carried unanimously (5-0). Chair Konstantopoulos asked if the second issue would be tabled or discussed. Attorney Christiansen stated that the chart prepared by the actuary would be based on the mortality table and assumed rate of return, and therefore when the change in the ordinance addressing the factors used in actuarial equivalency was accomplished, the Board would be in a position to recompute the chart used for buybacks. Mr. Lahaye clarified his understanding of the item was related to the actuarial factor table used internally by Pension Administration to compute service time cost estimates versus final service time cost computations performed by the actuary using the updated assumptions, and therefore no change would be needed for the factor table being used internally for estimates. Pension Plans Administrator Martin confirmed this was her understanding of the issue. She stated that in the past 5 years, Pension Administrations has received approximately 50 requests for estimates of the costs to buy service time, but only 12 requests have become actual service time purchases. Ms. Martin stated Mr. Strong had advised her it would cost approximately $450 per calculation by GRS, and the proposed cost to update the tables would be $9,000, which would require 20 calculations to justify the cost to update the tables used for estimates. A discussion ensued between Attorney Christiansen and Mr. Lahaye regarding the Plan's controlling provisions and procedures used to compute estimates and final calculations in which they agreed the service buyback provisions require that transaction to incur no cost to the Plan which allows the actuary to use the current actuarial assumptions and mortality tables instead of those specified in the definition of "actuarial equivalency" in ordinances; Chair Konstantopoulos and Attorney Christiansen agreed the change to the definition in ordinance should be updated as approved. Pension Plans Administrator Martin stated Mr. Strong had recommended updating the actuarial equivalency tables used in retirement calculations for optional benefit options but leave the tables used for estimates of service purchases. Ifa participant would like to pursue buying service time, it would be less costly to the Plan to have GRS perform final computations on a case-Dy-case basis rather than update the factor table being used by Pensions for estimates. Further, Pension Plans Administrator Martin stated Mr. Strong advised the cost to update the factor table for optional benefit computations would be no more than $4,000. Mr. Lahaye stated the updated optional benefit computation factor table would include the current investment return assumption and mortality tables. Trustee Baty made a motion, as stated by Chair Konstantopoulos, to update the equivalency factor tables used by Pension Administration in computing retirement benefit payment options to reflect a 6.75% assumed rate of return and the approved FRS mortality rate. Vice Chair Todd seconded the motion. The motion carried 4-1 with Trustee Hudgins dissenting. Chair Konstantopoulos thanked Mr. Lahaye for his presentation. 5. PUBLIC INPUT: None. 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the Police Officers' Pension Plan Board of Trustees Regular Meeting of Book 1 Page 210 01-22-2021 8:15 a.m. Book 1 Page 211 12-11-2020 8:15 a.m. December 11, 2020. Presenter(s): Chair Konstantopoulos. Trustee Baty made a motion to accept the minutes of the December 11, 2020 meeting. Vice Chair Todd seconded the motion. The motion carried unanimously (5-0) 7. RETIREMENT REQUESTS: 7.1. Approval Re: DROP Retirement Request of Daniel Riley. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated that Mr. Riley is 55 years old, and after 22.08 years of service, he requests to enter the DROP program effective January 1, 2021, and selected the lifetime only benefit. Vice Chair Todd made a motion to accept Mr. Riley's request for retirement. Trustee Baty seconded the motion. The motion carried unanimously (5-0). 8. UNFINISHED BUSINESS: 9. NEW BUSINESS: 10. ATTORNEY MATTERS: Attorney Christiansen stated that counsel in the ConAgra securities monitoring case is moving forward with an appeal of the decision. In the' Van Gostein matter, Mr. Van Gostein has filed a motion for rehearing which asserts the court errored in its application of the law; Attorney Christiansen has filed an opposing motion, and the judge's decision is pending. Should the judge find for the Plan, Mr. Van Gostein would have the right to appeal to the district court of appeals. 10.1. Presentation and Discussion Re: New Mandatory Florida Law - F.S.5448.095 Registration and Use of the "E-Verify" System, Christiansen & Dehner. Presenter(s): Scott Christiansen, Christiansen & Dehner, P.A. Attorney Christiansen stated that the State of Florida has enacted a legislative change which requires public employers and those institutions which contract with public employers to use E-Verify to confirm new employees' residency status. Therefore, not only would the Plan, as well as City, need to use E-Verify, but contracted firms such as its actuary, attorney, and investment consultant are now also required to use E- Verify. This would apply to new employees and is not retroactive. Attorney Christiansen included a proposed letter to include to prospective contractors and will include an addendum in any contracts drafted after January 1, 2021. Attorney Christiansen stated the next meeting should have an agenda item to declare an expected rate of return to accompany the actuarial valuation. 11. OTHER MATTERS: Pension Plans Administrator Martin stated that, for those trustees working on their CPPT certification, there will be an online event April 6-9, 2021, and she would forward more details when available. Pension Plans Administrator Martin advised there are two additional police officers who are in the process of entering the DROP effective January 1, 2021 but were unable to complete and submit their required paperwork due to circumstances beyond their control; those will be presented in the February meeting. 12. ADJOURN. Chair Konstantopoulos adjourned the meeting at 9:14am. 6 Chair Demetri Konstantopoulos Vicé Chair Johnathan Todd Book 1 Page 212 01-22-2021 8:15 a.m.