# Police & Fire Pension Board Meeting - January 8, 2025 > Auto-transcribed civic record · Board · January 8, 2025 - **Permalink**: https://meetings.lexingtonky.news/meeting/6301 - **Source video**: https://lfucg.granicus.com/player/clip/6301?view_id=14&redirect=true - **Date**: 2025-01-08 - **Body**: Board - **Last revised**: March 28, 2026 - **Length**: 10,434 words - **Speakers**: Mayor > ⚠️ **Auto-generated content.** Audio from the official Granicus video was auto-transcribed by OpenAI Whisper-1, with speaker labels folded in from Granicus closed-captioning. Structured facts were extracted with GPT-4o; the narrative summary was written by Anthropic Claude Sonnet. Speaker labels and verbatim wording may contain errors. See [methodology](https://meetings.lexingtonky.news/about/methodology) or [report a correction](mailto:editor@lexingtonky.news). --- ## Meeting Overview The City Council met on January 8, 2025, with the Mayor presiding over the session. The meeting covered two agenda items, both of which were informational in nature: a Treasurer's Report and Authorization Letter, and a CAVMAC Report. Across the course of the meeting, a total of 10 motions and votes were taken. No public comments were heard during the session. ## Attendance The following individuals were present at the January 8, 2025 Board meeting: - Mayor - Chad Hancock - Susan - Chief Weathers - Commissioner Hensley - Trey Abel - Todd Green **Absent:** Tommy Puckett No members were recorded as arriving late. ## Votes and Decisions The Board took the following actions at the January 8, 2025 meeting, all by voice vote: - **Agenda Amendment:** The Board voted to amend the agenda to move the class map presentation to the end of the meeting. The motion passed. [timestamp: 0:04] - **Treasurer's Report:** The Board voted to accept the treasurer's report for the manager's mix. The motion passed. [timestamp: 0:06] - **December Meeting Minutes:** The Board voted to approve the minutes from the December meeting. The motion passed. [timestamp: 0:07] - **Widow's Annuity:** The Board voted to approve widow's annuity benefits for Deborah Giles and June Verney. The motion passed. [timestamp: 0:07] - **January Disbursements:** The Board voted to approve disbursements for January. The motion passed. [timestamp: 0:08] - **Service Retirements – Division of Fire:** The Board voted to approve service retirements for members of the Division of Fire. The motion passed. [timestamp: 0:09] - **Service Retirements – Division of Police:** The Board voted to approve service retirements for members of the Division of Police. The motion passed. [timestamp: 0:10] - **Disability – Otis Sevekian (Division of Fire):** The Board voted to approve a disability benefit for Otis Sevekian of the Division of Fire. The motion passed. [timestamp: 0:11] - **Disability – Dustin Spillman (Division of Fire):** The Board voted to approve a disability benefit for Dustin Spillman of the Division of Fire. The motion was seconded by Chief Weathers and passed, with 2 nays recorded. [timestamp: 0:11] - **Fiscal Year 2026 Rate:** The Board voted to set the contribution rate for fiscal year 2026 at **50.06%**. The motion was seconded by a Commissioner and passed. [timestamp: 1:09] All motions passed by voice vote. The disability application for Dustin Spillman was the only item that drew recorded opposition, with 2 nays. No roll call votes were taken, so individual member votes for or against are not available in the record. ## Contested Items - **Disability Approval for Dustin Spillman:** A motion to approve a disability determination for Dustin Spillman was brought before the Board and resulted in a split vote. The motion ultimately passed, though it drew opposition from two Board members who voted against it. The structured data available does not detail the specific grounds for the dissenting votes or the arguments made on either side. The outcome was approval of the disability, despite the two nay votes indicating that the decision was not unanimous. ## Treasurer's Report and Authorization Letter [timestamp: 05:01] Chad Hancock presented the Treasurer's Report during the January 8, 2025 Board meeting. Hancock noted that no transfer authorization letter was included with the report, attributing the absence to the timing of the meeting. Hancock discussed the current financial status of the organization as well as anticipated future transfers. No further details regarding specific figures, account balances, or transfer amounts are reflected in the available record of this discussion. This item was informational in nature, and no vote or formal action was taken as a result of the presentation. ## CAVMAC Report [timestamp: 16:33] Todd Green presented the CAVMAC Report, providing the Board with an actuarial evaluation of the retirement system. The presentation covered the core methodologies used to fund benefits, measure assets and liabilities, and assess the impact of various actuarial assumptions on the system. Green's presentation was informational in nature, walking the Board through the technical framework underlying the retirement system's financial evaluation. Key topics included the approaches used to determine funding requirements for member benefits, how assets and liabilities are measured and reported, and how different assumptions factor into the overall actuarial analysis. No vote or formal action was taken on this item. The report served as an informational briefing for the Board. --- ## Decisions - **Motion** — passed (0-0): Amend the agenda to move the class map presentation to the end - **Motion** — passed (0-0): Accept the treasurer's report for the manager's mix - **Motion** — passed (0-0): Approve minutes for the December meeting - **Motion** — passed (0-0): Approve widow's annuity for Deborah Giles and June Verney - **Motion** — passed (0-0): Approve disbursements for January - **Motion** — passed (0-0): Approve service retirements for Division of Fire - **Motion** — passed (0-0): Approve service retirements for Division of Police - **Motion** — passed (0-0): Approve disability for Otis Sevekian, Division of Fire - **Motion** — passed (0-2): Approve disability for Dustin Spillman, Division of Fire - **Motion** — passed (0-0): Set the rate for fiscal year 2026 at 50.06% --- ## Full transcript ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ We do have a quorum. Yes? Actually, Mayor, we need to make a motion. Oh. To hear. To amend the agenda. Okay. The class map presentation to the end of the agenda. To the very end? Yes, ma'am. After everything? Yes, ma'am. Okay. Is there a second? Second. And is this because we don't have all the people yet? Or we just want to give extra time? We're actually expecting our bond rating information, and so we've got to get our treasurer's team out of here so that we can. Oh, okay. That would be Chad. All right. All right. Everyone in favor, please say aye. Aye. Is anyone opposed? All right. Okay. So apologies to CavMac, who's got to sit through the whole meeting. And I'll welcome Chad Hancock for our treasurer's report and the authorization letter. Good morning. Good morning. We do not have a transfer authorization letter due to the closure of the city and the timing of this meeting. Like we've done in the past, we'll have two transfers in February for December and January. So we'll be showing that next month when we do have December numbers and January numbers. I will say that this month of January there's three payrolls, so we will have, obviously, a lesser amount to transfer for the January payroll. So this is actually not a bad time for this to happen. So we will not have a large amount to transfer in February. You should have all the other reports that was handed out to you that we were able to get to you today, as well as the manager's mix, which shows the value of the plan as of this morning at $974,795,388.36, which compares to last month of $1,004,753,498.90. The last five days of December were not particularly good in the markets, and that's why we're kind of seeing the dip that we had between December and January. All right. Thank you. Could I have a motion to accept the report for the manager's mix? Motion to accept the report. And it appears our fund balance is dropping like the temperature. Thank you. Is there a second? Thank you. Any questions for Chad? All right. All those in favor, say aye. Aye. Is anyone opposed? And we'll look forward to that letter of transfer next month. Thank you very much. Go get that good bond rating. Okay. We do have minutes for the December meeting, and I'll ask for a motion and a second. Motion to approve. Thank you. Second. Thank you. Are there any questions, corrections, additions? I know some of you may not have had much time to look these over. Anything at all? No? All right. All those in favor of approval, say aye. Aye. Anyone opposed? All right. That motion passes. And I'll ask Susan to run us through new business, et cetera. Yes, mayor. New business, item number one is widow's annuity for Deborah Giles and June Verney. I need a motion to approve. Is there a motion? I move. Second. Thank you. Thank you. There's a second. Are there any questions? All those in favor, say aye. Aye. Is anyone opposed? All right. That motion passes. That motion passes. Item number two on the new business is disbursements for January. They're listed on your agenda. I need a motion to approve. Do I hear a motion? So moved. Second. Thank you, chief. Thank you, commissioner. Any questions? All those in favor, please say aye. Aye. Is anyone opposed? All right. That motion passes. Thank you. Next on the agenda are service retirements. I will do fire first and we'll just lump them all together. So division of fire. December 28th, 2024 was firefighter Robert Perkins. January 4th, 2025 was district chief Brian Dawson. January 7th, 2025 is firefighter Travis McQueen. January 8th, 2025 is firefighter James Brooks. January 10th, 2025 is captain Josh Thiel. January 11th, 2025 is battalion chief Jason Walton. Battalion chief Chris Ward. District chief Gerald Evans. District chief Harold Miracle. Captain James Cropper. Captain Greg Lingle. Lieutenant Robert May. Firefighter Homer Day. January 12th, 2025 is captain Jason Neal. Captain Jason Picklesimer. Lieutenant David Sullivan. January 13th, 2025 is district chief Jamie Tinsley. Firefighter David Baker. And firefighter William Turner. I need a motion to approve. Thank you. Are there questions? That's a lot of years, chief. 378. Any questions? All those in favor, please say aye. Aye. Is anyone opposed? All right, that motion passes. Next will be division of police. January 4th, 2025 is officer Jeremy Day. January 10th, 2025 is officer Jerome Beam. Officer Shannon Gayhafer. January 11th, 2025 is assistant chief Eric Lowe. Lieutenant Daniel Truex. And officer Stuart Fowler. I need a motion to approve. Do I hear a motion and a second? Chief motions. Second. All right, thank you. Are there any questions? All those in favor, please say aye. Aye. Is anyone opposed? All right, that motion passes. Next on the agenda are disabilities. We have Otis Sevekian, division of fire. Medical reports are completed and distributed. I need a motion, please. Do I hear a motion? Motion to approve at the appropriate rate. Set at appropriate rate. Okay. Very good. Thank you. Any questions? All those in favor, please say aye. Aye. Is anyone opposed? All right, that motion passes. Next on the agenda is Dustin Spillman, division of fire. Third medical report is completed and distributed. I need a motion, please. Do I hear a motion? Motion to approve at the appropriate rate. I'll second it. Okay, and Chief Weathers seconds it. Any questions? All right, all those in favor, please say aye. Aye. Let's do that again. All those in favor, please say aye. Aye. Is anyone opposed? No. Okay, we have two nay votes. Is that correct? All right. That motion passes. All right. Next on the agenda are tributes. Robert Giles, division of police, passed away on December 19, 2024. Dora Cook, wife of Donald Cook, division of fire, passed away on December 14, 2024. Thank you very much, Susan. Before we go to subcommittee, we have a lot of retirements as well as those going out on disability. Are there any comments? Or Chief Wells? Thank you, Mayor. On behalf of the division of fire, we want to extend our condolences to the Giles family and to Firefighter Don Cook on the loss of his wife. And I also want to extend our congratulations and thanks to the many retirees, specifically within the division of fire that does represent 378 years of combined service. A whole lot of dedication and hard work over the years, and sad to see a lot of these folks go. Many of them came on after I did, which is probably telling me something, but grateful for everyone's service. Thank you. Thank you very much. Anyone else? Chief Weathers? I want to extend my condolences to the Giles family and the Cook family as well. There are a lot of retirements on the firefighter side, quite a few of them. I had the pleasure of knowing, and life's about changes, but they will be missed. On the police side, especially Assistant Chief Eric Lowe, a good friend and a good leader, he will be missed. But I need to say something about Officer Day and Officer Fowler and Officer Bean and Gay Hafer and Lieutenant Truex. All of them truly set the standard for us. I wish them well and enjoy working with them and hope we can continue to see them at least around in some part in the community helping out. So, thank you. Thank you. Any other comments? I will add my voice to the condolences to the Cook and Giles families, as well as my thanks to all of those who are retiring and all the years of service that represents. It's pretty amazing how many years of dedication this represents to our community. And I really appreciate that. I appreciate their family's dedication and what they've done to support these officers, both fire and police, and thank them very much. So, with that, we move on to subcommittee updates. And I notice Tommy Puckett isn't here. He is in warmer weather. I thought maybe he is in warm weather. Does anyone from either of those committees have any report, either benefits or legislative? I do know we have no complaints, so- No complaints. I'll just mirror what he says. There you go. All right. Trey Abel, do you have organizational update? No updates at this time, ma'am. All right. Very good. That brings us back. We didn't ask Todd to wait very long, just a few minutes. Todd Green is here. Welcome to give the CAVMAC report. And you all received, I think, a bunch of information. So, I'm not sure, Todd, how many people have had a chance to look at the entire thing yet. But welcome. Okay. Well, I'm glad to be here. We're getting this weather on Friday, I think, in Atlanta. This gives you a little preview. A little preview. Yeah. We get sloppy winter in Atlanta, just what it looks like out there when it happens. So, anyways, I'm here to present the July 1, 2024 Actual Evaluation of the Retirement System. So, I'd like to start off my presentations with just a little bit of a background on actuaries, our role here. Because most people don't even know what actuaries are. So, first off, why does the plan need an actuary? So, in general, actuaries, they work in many industries. But this is the defined benefit industry. You're in a defined benefit plan. So, in general, actuaries help determine the methodologies in order to fund the benefits that are promised in the plan, essentially. In order to do that, we have to measure the assets and the liabilities of the plan. So, the assets are the assets in your account in the trust. And then the liabilities are the future benefit payments. So, not only are we measuring future benefit payments for people who are in retirement, but we're also measuring future benefit payments for people who are not in retirement yet. So, even the brand new hire that has come on, we are projecting out when they're going to retire. And then once they do retire, what their benefit is going to be. And then the question after that is how long are they going to live to receive that benefit. As part of the valuation process, we determine the annual contribution rate because this plan is funded annually by employer and employee contributions. And then as part of our reports, we analyze experience because we make a lot of assumptions. So, when things differ from reality, there's either a gain or a loss to the plan. So, we do that analysis and show you that. And then finally, we also report on trends, any upcoming trends or any trends we're seeing in your populations. We do report on risks. And in addition to that, we also do all the accounting and financial disclosures for the government as well regarding the plan. So, here's kind of a snapshot of the actuarial process. So, this is a defined benefit plan. So, the ultimate cash flows, we don't know them with certainty. Like I said before, not only are we predicting the future benefit payments for people who are retired. And for a retired person, we don't know how long they're going to live. So, we have to estimate that. And then for an active person, we have to determine or come up with an educated guess on when we think they're going to retire. What their benefit will be at retirement. And then, again, the question is how long will they live to receive that. So, we take the data from the plan or from everybody who's in the plan on the evaluation date. And then we do this actuarial process. And, you know, basically, the assumptions that we use are the likelihood of disability, retirement, and death prior to retirement. And then after retirement, it's only mortality after that. So, here are the three what I call demographic assumptions. So, turnover is leaving employment prior to being eligible to retire. So, when people leave prior to retirement, if they're not vested, then they just get their money back that they've contributed. And if they're vested, they get a benefit payable in the future. Or payable at retirement age. Once somebody becomes eligible for retirement, the question is do they retire immediately? Do they wait a couple years after they're first eligible? And then, finally, mortality. And the mortality tables we use are standard mortality tables for public safety people that are published by the Society of Actuaries. And it's based on public plan mortality. So, public plan, public safety mortality. Here we have what I call economic assumptions. So, salary increases. So, these are defined benefit plans. So, we have to anticipate what someone's benefit is going to be at retirement. And in order to do that, we have to know their service at retirement and their pay at retirement. And then we use the formula in the plan to calculate the benefit. And then, let me just go back one here. In terms of cost, the biggest one here is mortality. So, if all of a sudden we had a change in medical advancements where everybody in the country was going to live one year longer, then that would add cost to the plan. Because now we have to pay a retirement benefit for one extra year. So, in terms of cost, mortality on this page is probably the biggest cost factor, essentially. On this page, we have the salary increases. And then we have the discount rate. The discount rate is based on the asset allocation of your portfolio and what we expect that portfolio to earn. Right now, we're using 7%. In terms of cost, the discount rate is the biggest cost driver. So, lowering that discount rate increases cost dramatically. And increasing the discount rate reduces cost dramatically. And we've been, you know, I started doing this in the 90s. Average assumed rates of return were around 8%. And now we're at 7%, basically. And 7 is pretty much the average across the country right now. Even though there are some plans who are even going lower than 7%. And that's based on the expectation of what you think your asset, your investment pool, your assets are going to earn. So, you have money set aside in equities, some in bonds, and various different investments. And each one of those produces a different expected rate of return. We put that all together, and that's where we land at the 7%. And then, finally, I like to have this slide because this, on the left-hand side, we have the contributions and investment income. And on the right-hand side, you have the benefits, payments, and expenses payable from the plan. For a pre-funded defined benefit plan, this equation is always in balance, or is in balance over the lifetime of the fund. If you think of a Social Security retirement system, which is PAYGO, in any given year, if this equation is not in balance, meaning the contributions and what little investment income Social Security has cannot meet the benefit payments that are required in that given year, there has to be an immediate adjustment so that you can make the benefits. And we're actually coming up on that in Social Security, where there's a mandated, I think it's a 30% reduction, if Congress doesn't come to a solution on that. The other thing I like to point out here is that 60% to 70% on that right-hand side actually comes from investment income. So this is what I like to say is actuaries, we're professional savers, basically. We're telling you how much you put aside for people while they're working. That money gets invested, accumulates with investment income, and ultimately meets that benefit obligation on that right-hand side. And 60% to 70% comes from investment income. So you're actually, it's cheaper to save early and invest that money and pay it in the long term than it would be to be on a PAYGO system like Social Security. So with that, I'm going to get into the results of the valuation. So just a major comment on the valuation. So July 1, 24 valuation determines the required contribution for the 25-26 fiscal year. And the reason we do it this way is basically just to allow the city or the government to have time to be able to budget the number in advance. We are still phasing in, a three-year phase in, in the change in assumptions in regard to the employer contribution. So the next valuation will be the completion of that phase in. So even though we're measuring the liabilities at the assumptions set in the plan, we're still phasing in from the change in the discount rate from 7.5% to 7%. And we did that over a three-year period, so that means there's four changes to get there. So next year we'll complete that process. The return on the market value is 9.94% for the plan year. And there's a difference between market and actuarial. So actuaries like to use complicated things. So actuarial value assets are smoothed assets. So that's where we smooth the gains or losses over a five-year period. So for this instance, there's a 9.94% gain. We expected the plan to earn 7%. That difference, instead of recognizing it immediately, we're going to phase that in over four years. So that also goes for losses as well. So if you remember back in 22, the plan was a negative 13%. So we're also phasing in that loss still. And if we get to the bottom there, you'll see how the smoothing process works. So next year we're going to have a small gain of $2.9 million. And then in 26, we're going to have that loss, and that's from 2022. So that's the final year we'll be recognizing that loss. But in the 2026 valuation, there could be upward pressure on the required contribution if there's not gains to offset that. In 2027, we'll be recognizing a gain of $9 million. And then in 2028, we'll have a gain of $5.1 million. So, you know, just from an asset point of view, we would expect the contribution rate to go up in 26, but then to come back down in 27 and 28, reflecting those gains that we have now. So the first part of any valuation is to collect census data on everybody in the plan. So here's the people in the plan as of, you know, going back to 2010. But it's been pretty consistent, you know, just over 1,000. You know, we're up to 1,113 as of 2024, a reduction by one from last year. The number of retirees in the plan went up from 1,456 to 1,484. As part of the valuation process, we anticipate that growth in retirees. So the fact that that number of retirees is going up, that's not a surprise to us because every time we do those snapshots, we're projecting out future retirements in the plan. So we're anticipating that growth in the number of retirees. And the number of actives has stayed pretty steady. Here's the active payroll. So active payroll went from, and this is just payroll on the valuation date, went from $94 million to $97 million. And, again, this is important because this is a pay-based plan, so we have to know what people's payroll is. Here's the retiree benefits that are on the rolls. So we have the 77, we went from $77 million to $80 million. And, again, this is what we're anticipating or projecting out every valuation is these future benefit payments. So from an actuarial perspective, that's built into our valuation process. But you can see it's gone up from 2010 to 2024. And, you know, that's, you know, baby boomer generation has a lot to do with that. Here's the asset returns. So those two slides are used to determine the liability or the B of that equation that I mentioned earlier. And then here you can see the market returns and, you know, going back to 2009. You can see the volatility is the market value, that jagged blue line there, that dotted blue line. And then you can see the actuarial value is that smooth orange line. So that's why we use the smoothing process is to smooth out those gains or losses. If the assets were to earn the assumed rate of return for the next four years in a row, there would be nothing to smooth. So it would just be together. The other thing I like to point out about smoothing process is that, you know, the average person or, you know, somebody might look at this and say, why are you doing smoothing? You're trying to limit our contributions to the plan. But the reality is from an actuarial perspective and working in public plans across the country is that we use smoothing and it's more important for when contribution rates go down. Because what happens is when the amount of money that needs to be put into the plan decreases, so if you look back at, and I like to use 21 and 22 as an example, if you were on a market value basis in 21, the contribution rate would have dropped considerably. The employer would essentially budget that money away to another resource within the government. And then we come back to 22 and you see that now the contribution rate would have to go back up. And that creates havoc in the budget process. And so we prefer or we use smoothing to actually prevent contribution rates from going down too quickly, essentially. And then you can see, and I've already mentioned this, but in 24 the assets earned 9.94% on an actuarial basis was just under the assumed rate of 6.73%. And you can see the assumed rate underneath there. Here's in terms of dollar values. So, again, the actuarial value is that orange line and the market value is the dotted blue line. So you'll see that difference there is that $14 million. That's the amount that we're recognizing over that next four years. So that previous slide we had that small gain, then we had the loss, and then the two gains. You add those up, that's the $14 million. And since the actuarial value is higher than the market value, that means that we're recognizing a loss, essentially. And we're going to recognize all that loss in the 2026 evaluation. And, again, if we earn 7% going forward, after the next four years and always earn 7%, there would be no smoothing. They would be identical. So here's the present value of the benefits of the plan. So this is the B side of the equation. And the total liability of the plan is $1.6 billion. So if you had $1.6 billion in assets, this plan would require no further contributions if all the assumptions were met. And then you can see the breakup in the different categories. So we have age and service retirement. So age and service retirements make up a bulk of it, and that makes sense because this is a retirement plan. And then the other significant piece is the disability component. And then we have the small death and separation amounts. And separation is for people who leave prior to retirement. And then death is survivor benefits. And disability is retiring on a disability. Here we have the present value of the benefits by type of person. So for the active people, the liability is $630 million. The service retirements is almost the same, $630 million as well. And then we have disability at 291, and survivor benefits are the smallest component. So this is how we look at this, how the actuary looks at this. So obviously, it would be pretty tough for you to come up with $600 million to fund this plan overnight to get to the $1.6 billion. And so instead, we do this annually with the expected contributions. So what you see there with the future employee and employer normal contributions, those represent, the future employee contributions represents the 12% a year that the members are going to, they have to contribute while they're working. Right, so every year, they're going to put 12% of their compensation goes to the plan. And so that covers that piece. The employer's normal contribution is 15.64% of pay. And that's just the cost of the active member's benefit accruals during the year. From the time, say somebody has got ten years on and they're going to work for 20 years. That future service only costs 15% a year, basically. And then finally, we have the unfunded liability payments. So the plan does have an unfunded liability of $388 million. And that's being amortized over a closed 19 year period. It's like a mortgage payment to pay that off. So when you add those three pieces and you add that to the assets, you get to the total $1.6 billion. The one thing I'd like to point out about the unfunded liability payment is that methodology is set in statute. And so right now, it's over a closed 19 year period. Last year's valuation was over a closed 20 year period. So the 23 valuation just takes the unfunded liability on the valuation date, and now we're going to amortize that at 19. And then the 25 valuation, that's going to be over 18 years. So one of the situations that could happen, and it could put a lot of pressure on the contribution rate from the employer side, is that once that amortization period gets low, say under ten years, and there's a significant market correction or something like that, that is going to be amortized over such a short time period that it could make the employer's contribution go way up. And so I talked about this last time, but one of the, the state amortizes the unfunded liability for their pension plans using this layered amortization method. And I think it's something that as a board, as administrators of the plan, that you should investigate because right now it's not a big deal, but ten years down the road it could be a big deal. And I know it would require a statutory change in order to do that. And I am working, I do have a plan that was on this methodology, and they were a closed system, meaning no more active members. And so the number of active members is declining and will eventually be to zero, and it will be all retirees. And we are using this closed system. And we were down to four years, and then the 22, that returns in 22 were bad, and then the city's contribution is like tripling. And so we've had to work with them to kind of help them through that process. And so I think from the employer side, I think this is something that you, you know, you would want to definitely, I think, work with them in order to, you know, mitigate that, something like that. Because it could be quite significant. So those slides were kind of the thousand foot view. Like I said before, if you had $600 million, you could put it in a plan and you'd be done funding it. We would just come in here to make sure that the assets were enough, you know, if you needed to make any adjustments. But instead, we come here and we're telling you how to fund this plan on an annual basis. So the total normal cost of the plan is 27.1%. So that's the cost of the benefit accrual. So every time a year an active person works a year of service, the value of that additional benefit accrual is 27% of pay. The members put in 12% towards that. So the employer cost is 15%, 15.1%. On top of that, we add an administrative expense load. And then we have a rate, an amortization rate in order to pay off that unfunded liability. So we add up the 15.1, the 0.54, and the 34.42. We get to just over 50% of pay. And you can see the unfunded liability went from 384.5 to 388.7. So stayed pretty steady. And the funded ratio increased from just over 70.7% or just 70.7% to 71.3. And then that amortization period again is at 19 years. So we're taking that entire 388 and we're amortizing that over 19. So to get back to my previous discussion regarding, you know, this methodology, say next year there was a correction in the market and that unfunded went to, and this is an extreme example, this would not happen, but say it went to 500 million. Now that whole 500 million is getting amortized over 18 years. And that's going to, so the layered amortization kind of smooths out those gains and losses basically. And I'd be glad to come back here and give you, do an educational session on that if you would like. So, wait, let me go back. So again, the city's contribution went up from 47.3 to 50 points, just over 50%. And really, that's just due to the phasing in of that contribution rate from the experience study. That's the only reason it went up. Funded ratio increased. That's great news. And the other good news, too, is right now that you're really getting into the meat of your amortization payments, being a lot of principal versus interest in principal. So we're going to start to see some really good progress on this funded ratio going forward. This is the gains and losses. So we make assumptions, you know, when we do the valuations, and if something, reality is different than an assumption, it creates a gain or a loss. So you can see we had a small mortality loss of $1.168 million. That's .09% of the accrued liability. And then we had a small demographic loss of $500,000. So that's retirements, disabilities, death in service, those types of things. We had a gain on the salaries. So we expected salaries to go up by a certain amount, but they actually, they did not. So that created a small gain. And then we had the asset loss due to the fact that we didn't earn 7% on that smooth rate, it was 6.7% or 6.69 or whatever. So all in all, these are very tight numbers. You can see from the demographic and the mortality, we always put that, the way to look at that is really in the percent of the liability, and you can see they're, you know, way less than 1% of the liability. So from an actuarial perspective, we feel like we're hitting the assumption, the assumption is hitting reality pretty close. And then if you add the demographic and the salary gain, those pretty much net out. So really it's the, you know, the investment side is the one that creates a lot of the volatility one way or another. Here's the funded percentage going back historically. So from 2010, we're at 69.4%, and today we're at 71.3. Just like to point out, you see that drop from 20, 21 to 22 was due to the experience study, and the biggest component of that was going down from 7.5 to 7% on the assumed rate return on the assets. And same thing happened in 16 to 17, and that's, that was mainly due to I think a change in the mortality table at that time. So the good news is, you know, we keep an eye on these assumptions from year to year, and the assumptions right now are tracking with reality, and that's a good thing. So here's a projection of the funded ratio going forward from 2024 to 2044. So you can see in 25, we're expecting that contribution rate to go up, and that's because of that, you know, we're phasing, first of all, we're doing that final phasing, and then, you know, we're recognizing the asset loss. And then once we get to 2026, I'm sorry, 2026 is where we recognize that asset loss, because you can see it ticks down. And then it starts to progress upward towards 100%. So very good position to be in. Here's the projected employer contribution rates. So right now we're projecting the employer contribution rate to get up to 56% after 2026, but then you can see it starts to decline once the asset loss is, that loss in 2026 is fully recognized, and that the phase in of the transition is done as well in 25. So that's a, you know, in terms of a dollar amount, it's pretty consistent. It's just that pay continues to grow, and so as pay goes up, that dollar amount staying the same is why that, why it's, the percentage is going down over time. And then finally, just to, this is a caveat, but, you know, please refer to the actual report itself for, you know, and if you have any questions, I'll be glad to answer them, obviously. And that I am, you know, qualified to render these opinions as well, so, which is a good thing. We are happy about that. Taking a lot of tests. Well, Todd, thank you so much. Let's open it up for any questions. Does anyone have questions? I guess I'll start it off. In your experience, you know, years ago, I know when we were, we had that task force for pension reform, and I served on that, and there was so much discussion at that time about what percentage of funding was appropriate. In your experience, how many pension funds go for 100%? Have a plan for 100%? Well, so, not all, I have a few plans that are approaching 100% actually, but it's, it's not important that you get, that you are 100%, but it's important that you are funding to try to get to 100%, if that makes sense. I mean, in a way, is this a correct statement, that we would never need 100% unless all of our police and fire retired at once? Is that? Maybe not so. Yeah, I mean, in theory, yes. In theory. In theory, yes. If you retired all at once, and you had no more new police and fire coming on, then that might force changes in your asset allocation, because right now, you're pretty much like 70-30, you know, equities versus, and so, if your investment consultant said, oh, we're all retirees now, we need to shift away from this 70-30 portfolio down to, say, 50-50, you know, equity versus income, then that number would go up, because now those assets would be expected to earn less in that scenario. But in theory, 100%, but in theory, to answer your question, 100%, you know, the only time you would need 100%, let me take that back, I would say in no time would you actually need 100% of your money. As long as you're willing to make, still continue to make contributions. If you're not willing to make contributions, then yes, you would need 100%. But you know, that, if we go back to that formula, C plus I equals B plus E, that equation is in balance over the lifetime of the fund, right? So it's not on any particular day. But having a goal of getting to 100% is good, because it keeps your cash flow characteristics of your assets in good place, because you don't want to, in theory, you don't need an actuary. You could kind of come up, you know, you could do this, you know, you could say, well, here's my future benefit obligation, or future benefit obligation, if you were to get that number, you could come up with any strategy to have assets to meet that, right? So you could put all the money in today, or you could put all the money, you know, you could put in less today and more down the road type of thing. But getting to 100%, or having a goal of getting to 100% basically means your contributions coming in are sufficient to where you're not spending your current asset pool fast, too fast, essentially. And it also provides security to the members as well. You know, but, so security is on pay as you go, right? So they don't pre-fund anything. So I mean, there's many ways to do it. You know, you could do, you know, all the plans that were on pay as you go, when they were set up, they were very cheap, and now they're becoming very expensive, because it's all retirees, you know? So back when they set them up, there were no retirees, there was nothing to pay. So oh, we have this plan, and it's so cheap, it's not costing us anything. So, but your plan was set up to actually set aside money while people are, you know, in the beginning. So you're accumulating those assets. And also that task force, as well, improved the way the plan was funded, as well. Because prior to that, you were really not making progress towards 100%, unless your assets outperformed. Your contributions were just the interest on the unfunded liability only. So the only way you would get to 100% in that scenario is if the assets outperformed. Because your contribution wasn't paying off any unfunded liabilities, so. Well, I appreciate that. Mine was simply a curiosity question. Yeah, yeah, yeah. I mean, the reality is, you only need enough money to make the benefits when they come due. So this way, the pre-funded way, is the ideal way, the actuarial perspective way. But the reality is, there's a million ways to do it. So no. Thank you. Yeah. Thank you. Any other questions? Yes. Just a few things. And they're kind of questions, maybe more statements, and then some clarifications. We'll get to layering in a second. That's been a discussion. We've been on the phone with you before, Mr. Green, from our organizational subcommittee. At times, we're all scratching our head, looking at numbers that I'm certain the equations are miles long. But I think one trend that I see, and I'm asking, is there seems to be more of an inversion of active and retirees. And then with that, we start to see kind of a loss in our percentage funded. Now, I know that some of that came from our experience study and the assumptions that we changed there. But what does that look like? I mean, as far as in terms of the active versus the retirees, does that create a problem when we have that inversion where we're starting to see more retirees than we have active people? How does that affect it, I guess, is the question. So that would affect you if you were a, what we call, like a fixed rate contribution plan, meaning that, say that the city, you know, it's in statute that the city only puts in 30% of pay, and the employees put in 12% of pay. And if that's all you were ever going to get, if you're active, you know, the number of actives staying steady or even declining, and total payroll staying steady or declining, that could put a significant, that could be a significant issue down the road. But in this case, you know, we're coming in and giving you actual determined contributions. So in your case, it's not as big a deal. It's not as big a deal. That would make sense in how I would see it, too, as well as payroll. Because as we know, or at least on our end, the user end, we hope that there are raises involved over time as contracts develop and things like that, that probably couldn't have been assumed in 2012-13 when we started to make these changes. And that would still go toward the city's, or the administration's, unfunded liability of the plan. Does that sound pretty accurate? Well, so we're setting the contributions separate than what payroll actually is. So payroll is important because that goes into determining the future benefit payments. But we're coming up with a dollar amount, essentially, and converting it to a percent of pay, essentially. So it's not, so having more people doesn't, I mean, it could advance fund the plan because there's the delay, the lag. So right now, we told you the percent of pay is 50% of, let me go backwards here, is 50% of, here we go, $97 million. So the reality is that in 2025-26, when that contribution is made, if payroll is, say, $110 million, then that would be advanced funding the plan. But only because of that lag from the time the contribution rate is determined and when it's actually paid. So there is a small benefit, but not like, not the windfall, I think, that you would, you know, suggest. But, yeah. And that makes sense to a degree. And now we're just over 10 years into this, since we've made these changes, and what we'll refer to as Tier 2. It does seem, and I'm probably speaking on behalf of some folks that I don't need to speak for, that maybe the unfunded liability's been paid and it seems more like we're renting than we're having principal paid down on a house that we own, you know, to make it in a metaphor. But you're suggesting now that we're going to start to see more of that principal is being paid off from this point forward. Is that kind of the way you see it? If you don't change the methodology, like, and if we keep doing what's going on today with the closed amortization methodology, then, yes, it's going to, you know, and I think you can see it here in this slide here with the funded ratio going up. You know, we're going to be at 80% funded in 2031, in six years, so a lot of that is driven by the fact that the contribution now is more, you know, it's going to be principal heavy versus interest. Can we have a discussion about this layering process and explain that to other folks, maybe? I need a refresher myself, but what that would look like if we wanted to change the way we do this versus the... So the layering would still get you there on this, you know, on this trajectory. The only thing that, so what layering would do is going forward, so what we would do is set up, so right now we had an unfunded liability base, the entire unfunded is $388 million, that's getting amortized over 19 years. So next year, we would, if we started layering next year, doing 20-year layered amortization, so we would still have, next year, we'd still have that $388 million, and that would be down to 18 years, but we would have a new base, a small base, that would be the change in the unfunded liability on the valuation date next year and the outstanding balance on the $388 million, and that amount, that small amount would get amortized over 20 years. And so the plan would still, because the bulk of the unfunded liability is going to be in that transition base, and in theory, going forward, those future little gains and losses should kind of offset, you know, over time. But what it does is, and what it protects you against, is that, say there's a, you know, I mean, we, you know, historically, we know that the markets do correct, and that allows that correction to be funded over 20 years instead of being funded over, you know, say nine or, you know, some extremely short period because you're on this closed methodology. So it just smooths out, you know, significant increases or decreases in that, you know, unfunded liability. So that initial base, that initial $388 million would still be on the same schedule that we're on today. So you'd still be roughly in this same trajectory, you know. So if we had another, you know, that minus 20 percent, you know, that we had back in, you know, 2009, that, you know, it would be very helpful if, you know, you run into a situation like that, essentially. But even that minus 13 percent, you know, it's pretty, it's a pretty big number. So that's where layering helps. And I'm generally an optimist, I'll tell you that. However, I'm also not naive enough to think in the next 19 years, we don't see another one of those dips again, I mean. So yeah, I think it's, I feel like we'll probably be giving you a call from the organizational subcommittee again to listen to some more of your math problems, sir. Yeah, I appreciate it. Yeah, that would be great. All right, thank you. Are there any other questions? Yes, Commissioner Hensley, I knew you'd be in there. Well, since Trey opened the door. Thank you. I do have several, and I'll start there, since that's kind of where I'm not sure legally what is available to this board as far as layering. So I'm just going to start with that. The statute dictates the closed period. So what our options are as far as layering and not layering and whatnot, I'm not sure what is within our purview and what is not. But presuming that it is, for just a moment, if we were to have looked at that in 2020, our unfunded liability was $263 million versus $388 million. Now I understand that we have changed our rate of return assumption to 7% from 7.5%, and we've made all those changes, and that dramatically changes the landscape of what we're looking at. So I just want to make sure that I'm understanding that what that effectively does is kind of put a pin in a base and then take the change and move that out a little bit from when you decide that you're going to change your approach from the close to the layering, and then you move out those incremental changes over a longer period of time. Is that correct? That's correct. Okay. Okay. At least we understand the concept. That's great. And then how many plans are on like a closed period that you see? Are there a lot of those, or is it more common that you see this layered approach? So layering has become much more common. Since 2008, you know, that 2008 and 2009, it's becoming more, it's becoming adopted by a lot of plans across the country. But prior to that, it used to be what you're doing now. Is it because it became not feasible for folks to be able to meet it, and they had to find another solution? Is there other alternative reasons? Is it because we keep seeing new layers? Yeah. So layered amortization was a private sector thing. And so when I first started doing this, because I did some private sector work back in the day, and you would, I was kind of like, man, this is a lot easier. But also plans back then were severely overfunded, right? So plans would have, you know, zero contributions, and they would try to push out that surplus, you know, as far as possible, so that it wouldn't, you know, make employers get, I mean you can't take the money back out of the trust, but essentially plans were so overfunded that they had zero contributions. And so there was really no much, there wasn't a lot of thought put into it. And then 2001 came, and you know, that was significant, but plans were actually starting to recover once 2008 and 2009 hit. That was like the real impetus, because that required significant rethinking of like, how are we funding these plans? And so that's when, you know, they started converting to that. But in some states, like in Florida, like their local plans, you're required to do layered amortization. They've always been doing it. So it just, you know, the basis there, the only limit is it can't go past 30 years. You know, but most actuaries today are telling their clients where there's no restrictions, like if you had to pick the best methodology, 20-year layered amortization is, you know, is good. You know, going beyond 20, like I mentioned earlier, you know, the idea that the contributions being enough to pay off your unfunded liability, so if you're at, if you're putting, constantly putting in 30-year bases, those first 10 or 12 years, you're hardly paying anything towards it. And then you're potentially adding, you know, you're adding more to it year after year. And it just, you know, so I think actuaries are kind of landing on 20 years being kind of the best, you know, methodology, you know, the longest time period that you would like to use. And, you know, here in your state, the KPPA or whatever, the Kentucky Retirement System uses layered amortization, and to be honest, I would recommend just follow that same methodology because, I mean, it's fine. So you could just, in terms of a legislative change, you would just take, you could just lift that language out of the thing and just use it, you know, so. I think it might be a little more complicated for us, but I do think, you know, in the recent past, I mean, I think we'll only talk, I'm only going to talk to the recent past, in the period of time that I've been here, you know, the change from the seven and a half to seven was intentional, noting that we had a time period that we were trying to hit. And that was at a significant cost to our budget. You know, we were at $41 million in benefits, retirement benefits, last year versus 30, not quite 34 the year before. So that is not insignificant. And knowing that we're going to just over 50% next year on our way to 53 is a commitment. And our unfunded liability continues to increase. And so, you know, the potential that we have the market correction or that we, you know, have those things that are on a closed period and we hit 56, 57, 60% will limit our abilities to do other things. And that is something that I think everybody at this horseshoe today is well aware of. And I think that, you know, it is to Trey's point, something that we need to have the conversation about. So I think I have one more question. Sorry. You mentioned the mortality tables were the other biggest factor. Are we seeing any changes in those post COVID? Is it too soon to see anything falling out from that? Yeah. So the way that the way mortality tables are developed, you have to like experience it first. So the Society of Actuaries, they put out these projection scales. So the MP21 was the last one they put out. And they're not even going to put out a new projection scale until like 25 or 26. So they've just held off looking at it because they don't even know yet. But I don't anticipate the mortality changing that much going forward now that we do have these projection scales built in. And, you know, I showed you earlier, you know, the mortality, the mortality gain and loss was, you know, I mean, it's right on the money. So I don't anticipate I mean, I think going forward, your costs are going to be as steady as you've seen them. And a lot of that's due to the assumptions that we're using now. So, you know, back when you were at 8%, I mean, just assets don't perform like they used to, you know. So it's fixed income was coming way down, you know. So if you were expecting your fixed income to earn 6% or whatever, you know, you had to now you had to get into like, you know, 70%, you know, equities and alternatives to get there. Because your bonds or your income type stuff wasn't producing. But now we're kind of seeing where that's coming back. It's probably not going to come back to where it was, you know, in 1999, like a 10-year treasury was like over 10% or, you know, something really high. So you know, now that's more like five or six. So I mean, it's better, it's better for you. And to me, I think that 7% is probably the sweet spot, assuming we don't revert back to where we were in the 2000s, where interest rates just kept coming down and down and down. So. My last question. Thank you, Mayor. All right. You're welcome. Anything else? Yes, Rock. It appears that from the questions here, this layering thing is something that we're going to have to move forward and move forward quickly. In my experience, government doesn't move quickly. But this looks like we better, I can't imagine we can get anything in this legislative session, but we better get on board for the next one. I guess I would tag onto that for Dave Barbary. Can you, Commissioner Hensley mentioned she wasn't exactly sure what the KRS says. Do you know off the top of your head, or could you get that? I don't have it off the top of my head, but I'm happy to send that to you all so you can see what it says. Okay. I think that would be a helpful place to start. We would probably advocate making the language for us, and I know there are some back and forth with the different interests involved in something like this, but we would probably try to get something that would give us multiple options that are up to the board so that you don't have to, after you do this, possibly do it again. We may want to look at several different options, make them all available for us to use, and then leave it to the discretion of the board as to how they want to choose to operate under those. That should give some protection to people that think you might be doing something you shouldn't do, and it would avoid us having to do this more than once, probably. Or creating a lot of attention. Right. Anything else? Okay. Well, Mr. Green, you have helped us think about a lot of things, and I appreciate you. Stay warm as you go south, and hit our weather on Friday or whatever. Well, I appreciate it. Thank you very much. And also, I forgot to mention this at the very beginning, but I don't know if you noticed, our color scheme has changed, and yeah, and we're, you know, so we're still Cavanaugh McDonald Consulting, LLC, but now we're doing business now as CavMac. The reason is only, is really because that's what people in our industry have been calling us for years, as our little acronym for us, so we've kind of leaned into it 100%, so anyways. But we're still the same people, still dedication to our clients and service and stuff, but just have a new look, so. Well, it's easier to say. Yeah, absolutely. Practical. Thank you so much. Safe travels. Thank you very much. I appreciate it. Yes. Do we need a motion to set the rate? We do need a motion to set the rate for fiscal year 2026 so they can start budgeting. Okay. That would be a good thing. Okay. May I make a motion to set the rate at 50.06%? Second. All right. The motion is to set the rate at 50.06%. Are there any questions? And Commissioner seconded. Are there any questions? All right. All those in favor say aye. Aye. Is anyone opposed? Thank you. That passes. Thank you for reminding me. Is there anything else for the good of the whole ROC? Last meeting I mentioned the Social Security Fairness Bill that got signed by the President the other day. That bill, some of the media about it made it sound like people that would be drawing this do not deserve it. All of these people paid in at 100% but were receiving approximately 40% depending on how many years of substantial income they have. Kind of back of the envelope kind of thing says most of the police and fire retirees I talk to get between $100 and $200 a month. This will raise that approximately 60% for those people. But even better, the wipeout of the government pension offset would significantly help. The worst example of that was presented by one senator. There was a lady up in Ohio that drove a school bus for 40 years. And her husband died. And she was able to draw on his Social Security $2,000 a month until she retired and the government pension offset came into effect and that $2,000 turned into $400. That is not the way that bill was designed. And that's one of the punitive things. Personally I'm going to, I think, make $1,000 a month and get a year's worth of back pay. I worked a little longer before, during, and after in jobs where I did pay Social Security. But I was only getting 40% of what Social Security thought I was going to get due to windfall elimination. So the retirees are pretty happy about getting a raise. And I'd also like for this board to remember that their cost of livings are not keeping up with the cost of living. Thank you. Thank you. Anything else for the good of the board? Yes, Commissioner. Somewhat following up with that, I know we've discussed this in the past about minimum distributions on some of the individuals, whether they be retirees or widows or, you know, survivors. And I guess, I don't know, Susan, if we can get that information from you or does it need to come through the committee on what that level is right now and how many people are on it and how long it's been at that level. I know we addressed it, what, a year or two ago? We did increase it a couple years ago to 1,500. Okay. All right. Can we just find out how many people are receiving that? Yeah. So, okay. One other thing, ma'am, it's not necessarily related to the board and I'm sure, I don't mean to steal any of your thunder because I'm sure you were going to say this, but obviously everyone knows about the bad weather we've experienced in the last couple of days. I just, as the Commissioner of Public Safety, want to thank Police and Fire, our active members for their hard work during this time and their dedication coming to work when other people couldn't or wouldn't in some cases. So I just want to thank them very much for that, risking their own well-being. And people forget that whenever they're out there doing their jobs, their families are at home without electricity like some of us are and they have to overcome that. Now as a caveat to that, I would also like to take a moment and thank everyone else in LFUCG that helped us during this time too, whether it was Streets and Roads, Parks and Rec, Traffic Engineering, the Office of Homelessness, all those different people, Rob Allen and his crew, Nancy Albright and her group and everything, there are a lot of people that come together. We've got another one coming in on Friday, so everyone be careful of that. But just remember, you know, those folks are putting themselves in danger just like our police and fire. So please pass along your appreciation to those. And that sounds a little funny at this time, but I also want to thank the citizens for actually heeding the call, especially on Monday. Whenever I came in on Monday, it was very treacherous and the only thing that saved me from having an accident at least twice is no one else was on the road. That's the only reason that that didn't happen. So I commend them for doing that too, and our partners at KU and Blue Grass Energy for, you know, really stepping up and getting, I'm not sure how many people don't have electricity right now, but I think it's just in the double digits. And I do appreciate that and just want to pass that along from all of Public Safety to those individuals for their help. It's been a great all-hands-on-deck effort. I have actually heard from two constitutional officers thanking the government for the response to the storm, and I thought that was pretty important because we don't always get that necessarily and they were very appreciative of all the efforts. So thank you all very much. All right. With that, I'll ask for a motion to adjourn. All those in favor say aye. Aye. We are adjourned. Thank you very much to all of you. Stay safe. Well, can't you see? Need you much more than yesterday. Love me tomorrow. Love me tomorrow like today. Love me tomorrow. Need you much more than yesterday. Love me tomorrow. Love me tomorrow like today. Love me tomorrow. Love me two time baby. Love me twice today. Love me two time girl. I'm going away. Love me two time girl. One for tomorrow. One just for today. Love me two time. I'm going away. Love me one time.