Book 1 Page 107 11-16-2023 10:00 a.m. MINUTES OF THE EMPLOYEE RETIREMENT ACCOUNT COMMITTEE REGULAR QUARTERLY MEETING OF NOVEMBER 16, 2023 Present: Chair Jeffrey Vredenburg, Treasurer Kelly Strickland, Secretary Shayla Griggs, and Member Lauren Sullivan (telephonic). Others: Pension Plans Administrator Debra Martin and Pension Specialist Peter Gottlieb. Absent: None 1. CALL THE MEETING TO ORDER: Presenter: Chair Vredenburg. Chair Vredenburg called the meeting to order at 10:00 a.m. 2. PLEDGE OF ALLEGIANCE: Presenter: Secretary Griggs. Secretary Griggs led the Board and meeting attendants in the Pledge of Allegiance. 3. PLEDGE OF CIVILITY: Chair Vredenburg 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.' 4. ROLL CALL: Presenter: Pension Plans Administrator Martin. Pension Plans Administrator Martin called roll. Chair Vredenburg, Treasurer Strickland, and Secretary Griggs appeared in person. Member Sullivan appeared telephonically. 5. PUBLIC INPUT: None. 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the Employee Retirement Account Committee Regular Quarterly Meeting of September 14, 2023. Presenter: Chair Vredenburg. Treasurer Strickland made a motion to accept the minutes of the September 14, 2023, meeting; Secretary Griggs seconded the motion. The motion passed unanimously (4-0). 7. QUARTERLY INVESTMENT REPORTS: 7.1. Presentation and Discussion Re: AIG Retirement Services, ERAC Report for Quarter Ending September 30, 2023. Presenter(s): David Allen, Divisional Vice President of Retirement Services VALIC Financial Advisors (Telephonic); Krista Hill Financial Advisor; Corebridge Financial (telephonic). Krista Hill of Corebridge Financial appeared before the Committee telephonically and introduced herself. After some confusion, Ms. Hill reviewed the presentation materials, noting the materials represent unique social engagements with individuals. 7.2. Presentation and Discussion Re: Quarterly Investment Analysis Review Ending September 30, 2023. Presenter: Howard Daher, Principal, Daher Capital Group. Mr. Daher appeared before the Board and introduced himself. Mr. Daher reviewed highlights from the Market Summary for Q3 2023, noting that the market gained in Q1 2023 and Q2 2023 what it lost in 2022; while the market cooled somewhat in Q3 2023, it remained healthy. Through the end of the day on November 15, 2023, the market has recovered its Q3 2023 losses. Some analysts are predicting the Federal Reserve (Fed) may lower interest rates before the end of the calendar year, although most analysts believe lower rates may be seen by the end of Q2 2024. Mr. Daher explained that lower interest rates will benefit equities as well as reduce borrowing costs for businesses, which will stimulate the economy and markets. The energy and communication sectors within large caps have driven the market; small- and mid-cap and international markets have not performed as well. Turning to the Executive Summary of the Investment Analysts Review, Mr. Daher noted that the Committee approved replacing the iShares S&P 500 Index fund with the Fidelity 500 Index which will reduce participants' costs and the MFS Growth fund is being replaced with the JPMorgan Growth Advantage; as of September 30, 2023, participants' monies remained in the outgoing funds, however the exchange may have taken place by now. The Ariel Fund Investor remains on watch; despite steep losses in Q3 2023, it remains, year-to-date, in the top 41st percentile, and outperformed both the benchmark and peer group which is not unsurprising for a high risk/high retum fund. The Ariel Fund remains on watch due to its risk measures: standard deviation, beta, and expected return. Year-to-date through November 15, 2023, it is up 2.07%, and in the top half of its category. Mr. Daher advised he would bring comparable funds to the February 15, 2024, meeting for the Committee to review. Mr. Daher noted that the Vanguard Wellington fund has approximately 21% of participants assets and is the Plan's largest concentration; it has performed respectably at a low cost over every timeframe. Also on the watch list is the Fidelity Select Health Care fund, which holds approximately 104 stocks and lost more than the benchmark and peer group; year-to-date, it is in the 50th percentile. It underperformed because its largest holdings declined 20% to 40%. Fidelity has a high conviction in its allocation and has not made any changes to its portfolio. Year-to-date, the fund is down 5.90% and the benchmark is down 8.47%. Approximately $1.6 million of participants funds are invested and it is amongst the top 5 largest funds in the Plan. Mr. Daher recommends keeping the fund on watch for the time being and he will bring comparable funds to the February 15, 2024, meeting for the Committee to review. The last fund on the watch list is the American Funds Inflation Linked Bond fund. Mr. Daher explained that while bonds have been underperforming recently, this fund has performed consistently over 3 and 5 years. While less than 5% of participants' funds are allocated to the American Funds Inflation Linked Bond fund, it is one of the largest funds available to the public; he discussed how changes in interest rates will impact the performance of this fund. Mr. Daher recommends keeping the fund on watch for the time being and he will bring comparable funds to the February 15, 2024, meeting for the Committee to review. Mr. Daher discussed the Asset Allocation by Fund, noting that, except for the health care fund, he is not concerned that approximately 66% of participants' monies are held within 51 funds as these funds represent the leading asset classes in the market. The target funds still represent less than 5% to 8% of participants' assets. Book 1 Page 108 11-16-2023 10:00 a.m. Book 1 Page 109 11-16-2023 10:00 a.m. Mr. Daher and Ms. Hill discussed the increased IRS contribution limits for 457(b) Deferred Compensation plans, which are outside the scope of the Committee. Ms. Hill advised that the fund exchanges were completed on November 8, 2023. The Committee, Pension Plans Administrator Martin, Mr. Daher, and Ms. Hill discussed how Corebridge's fees might change as the number of participants, and the amounts of participants' assets under management, decrease over time. The fee is a percentage of assets and stated in the Plan's contract, but that percentage would not automatically change; there may be a request for proposal, or an internal repricing process when the contract is renewed. Pension Plans Administrator Martin advised that the Plan has begun to use the forfeiture account held at VALIC to offset employer contributions; she estimates the monies in the forfeiture account to last approximately a year. The Committee thanked Mr. Daher for his presentation. 8. UNFINISHED BUSINESS: Chair Vredenburg noted that former Vice Chair Olsen is no longer on the Committee and thanked him for his service. As Chair Vredenburg will not be present for the February 15, 2024, meeting, Secretary Griggs advised she will be available to conduct the meeting in the absence of a Chair and Vice Chair; she suggested the Committee wait until the vacant seat is filled to elect a Vice Chair. The Committee discussed announcing the vacant Member seat on the City's SharePoint page. 9. NEW BUSINESS: None. 10. OTHER MATTERS: None. 11. ADJOURN. Chair Vredenburg adjourned the Employee Retirement Account Committee (ERAC) Regular Quarterly Meeting at 10:46 a.m. 0 Sha Chair JeffryVregénburg Secretary Shayla Griggs