Okay, good morning everybody. Today is January 14th, 2026. The time is 9.03 and we will call the Lexington-Fayette-Urban County Government Police and Fire Retirement Fund Board meeting to order. First item on our agenda is CAVMAC, who is here to present their actuarial report. Mr. Green. Good morning. So this building is really convenient. I've stayed at the hotel right across the street. So I'm here to present the results of the July 1, 2025 actuarial evaluation. I can't believe it's been every year. I can't believe it's another year. So as usual, for those of you who are used to seeing me, I always start off with some educational pieces just to kind of get everybody warmed up and to understand what an actuary is and why I'm here today. And then after that I will get into the actual results of the evaluation. So the first question here is why does my plan need an actuary? And I would just have you focus on these two bullets right there. So as an actuary, we need to determine your actuarial contribution rates to fund the plan. So you have a pension plan. A pension plan pays benefits. That's your outflow. The inflow are contributions that accumulate in earned investment income and over time are the source of that benefit payment outflow. If you think of Social Security, there is no real investment income side. It's just outflow side and whatever contributions coming in have to support that every year. So this is a pre-funded pension system. You've been having actuarial evaluations done for at least as long as I can remember. And the idea of that is to measure the assets and liabilities on an annual basis in order to determine a proper required contribution rate. In addition to that, since we, you know, our expertise in this area, we also help develop funding policies as well. So, because there's different ways to actually come up with that required contribution. So unfortunately, outside of the assumptions and methods we use, the rest of yours is determined in the statute. The actuarial process, so basically the cash flow or future cash flow can't be, you know, we don't know today what the future cash flow is because for retirees, they have to continue to live to receive the benefit because it is paid for the lifetime of the member. And then for actives, we have to wait until they retire, until they start the benefit. So they're still working. We don't know when they're going to retire exactly. And we also have to kind of estimate what that future benefit payment is going to be for that active member as well. So we collect data on everybody. We throw them through our actuarial software. And then what comes out is basically the future cash flow of the system. And we have different sources of future benefit payments. So we have retirements. We have death benefits. So when a retiree dies, there's a death benefit that continues to the spouse. And then we have disability benefits as well. And so in order to come up with that, we have to make a lot of assumptions. So I call these demographic assumptions because they basically are, you know, how are people going to behave? So the first one is turnover. So that is leaving employment prior to becoming eligible for retirement. So if somebody leaves before they're vested, so it's 10 years, they only do their contributions. They're not due a benefit. Once they hit 10 years, they become vested. Now they're due a benefit when they hit retirement. And so there's, so the idea is, like, when are people going to leave prior to becoming eligible for retirement? And then once you become eligible for retirement, when are you going to retire? Are you going to retire immediately? Are you going to continue to earn future service accruals? You know, retirement's a very personal thing. Do you have money in the bank? Do you have health insurance? All kinds of things. Even though you have a pension, contribute to that decision, do I retire? Some people retire immediately on becoming eligible to retire. Some people enjoy working and continue to work. So, and then finally of mortality. So mortality is how long people are going to live. And that's very important because in terms of cost, it's probably the biggest cost driver of your system. Or in terms of these types of assumptions. The one thing I'd like to point out here for mortality is that we do, we are using what's called generational mortality, which means that we are building in improvement in mortality every time we do evaluation. So, and what that means is a 65 year old 20 years from now is going to have better life expectancy than a 65 year old today. And actuaries call that generational mortality improvement scales. And that's pretty much become the standard in the actual practice, essentially. In the old days, what we would do is we'd do an experience study, select a table, and then we'd have to come back in five years later, do another experience study, and put in another table. And generally that would create additional cost every five years. And so what we've done now is basically we're capturing that cost of incremental mortality improvement as we do the evaluation. So in terms of the experience studies where we review assumptions, that's no longer a big shock in terms of the cost. Here we have what I call our economic assumptions. So economic assumptions, salary increases, so this is a pay-based plan. It's a formula based on years of service times their final average salary at retirement. And so we have to estimate salaries at retirement for active members. The second one here, and this is the biggest one, is the discount rate. And the discount rate is what we use to measure the liabilities, and it's based on what we expect your assets to earn over the lifetime of the fund. And so right now that's 7 percent, the way that you have invested your assets. If you were to change your asset allocation due to a change in philosophy on your investment style, investment strategy, we would have to review that asset allocation policy and determine can the current discount rate still support that. And then we would have to make a recommendation in that situation if it didn't. So something to keep in mind, we don't just come in here and say 7 percent. There is some analysis that goes behind it, and a lot of it is driven by the risk profile of the people making the decisions essentially. Last thing I'll say about that is in the private sector it's different because they have to measure the liabilities based on the current bond market every year. And so for years bonds were paying near 0 percent. So private sector pension plans were way over, you know, way overvaluing their liabilities, and employers had to fund those liabilities over 7 years basically. And then since we've come back to what I would consider like a more inflationary environment where bond returns are up closer to, you know, 5, 6 percent, those liabilities of private sector pension plans have come way down. So there's a reason why private sector pension plans have been closing. It's because they can't manage their costs. So if every year you come in, you're, well, what's our contribution? Well, the bond market went down, and so that means your costs went up. Well, I mean, that's, you know, how is that? That's really no way to actually manage your costs from year to year. Whereas what we feel like this methodology is more appropriate for just the long-term perspective of the plan. Finally, I'd like to show this slide. We call this the basic retirement funding equation. And the left-hand side way, the contributions and investment income. And the right-hand side way, the benefit payments and expenses. And we show it to you as a scale because, you know, the scale is in balance over the lifetime of the fund. In order to have money to pay it, you know, you have to have money on the left side of that equation to pay out something on the right-hand side of that equation. But the reason why I like this one is because you'll see that I there, that's your investment income. You know, roughly 60 to 70 percent that gets paid out actually comes from investment income. So you are reducing by pre-funding the plan, having an actuary come in and tell you what your future cost is and planning for that and setting aside contributions. You're actually reducing the ultimate cost of the plan by 60 to 70 percent depending on how your assets are doing. So it's a real critical difference. If you're instead of, you know, if you compare this to a social security type plan or what we call pay-as-you-go, there is no I. It's just contributions. There's very little I in those plans, but it doesn't really, it's not enough to really offset the long-term cost of the plan at all. So that's an important aspect of your plan and it's very important to recognize. So that was our education piece. Now we'll just get into the results of the plan. So just some comments on the valuation. So this is the July 1, 25 valuation. This determines the contribution rate for the 26-27 fiscal year. And the reason for that lag is because it just gives the county or the government, the city, time to understand what that cost is in the future so they can help with the budgeting process. That's the only reason we do that. The unfunded liability as of 2025 is being amortized over a closed 18-year period on a level dollar basis. So I had mentioned funding policies before and how actuaries, you know, we help plans or help our clients develop funding policies. In this case, this is in your statute. So this is a legal requirement right now. So there's no flexibility in that 18-year thing. The return on the market value of assets for the plan year was 10.87%, so that did exceed our assumed rate of 7, which is fantastic. And the return on the actuarial value, the difference between actuarial value of assets and market value of assets is that actuarial, we smooth our gains and losses over a 5-year period. And the reason we do that is just to reduce volatility in the contribution rates. If you're on a market value basis, you can get significant swings. And when we get into the more information, I'll kind of elaborate on that. But the whole reason is to smooth things. If you were to earn 7% year after year, there would be nothing to smooth and everything would be the same on the market or actuarial value. Finally, because we are smoothing, there's about $12 million of investment gains that we're not recognizing in the valuation. So we have $12 million in the bank right now that we're going to be using to offset potential lower returns. If not, if we just earned the 7%, we're going to be recognizing this gain. Next year is going to be a loss. And you'll recall back in 2022, we had that big negative return of over 13.5%. That's the final year that we're recognizing that loss. But then following that, we have three gain years. We have a 27, there'll be a gain of $16.3 million. Follow that, a gain of $12.4 million and then another gain of $7 million. So if the assets continue to do well, that loss, that $24.2 million loss will not feel as bad. So that's something to keep in mind. And I have a slide that'll demonstrate that to you as well. Finally, the next thing, I'd just like to talk about the funding policy. So again, this is set in statute. You have a closed 30-year funding policy that began July 1, 2013. We're now at 18 years. So that means that unfunded liability every year, no matter what it is, it's amortized. This year, last year it was 19 years. This year it's 18 years. And this potentially can lead to a ton of volatility in the employer contribution rate significantly up or down. And so, I mean, up is bad, but we're actually more concerned about down because when the costs go down significantly due to unnecessary volatility, the employer basically allocates those resources somewhere else. And then when it goes back up, they're gone. And now you're fighting with the city or the government to come up with that money again. So as actuaries, we really like to limit volatility on the good side, to be honest, although there's a benefit to limiting it on the upside or the bad side as well. I've said this to you before. I do recommend just basically adopting the amortization policies that are used by the Kentucky retirement systems. And just to let you know that that would not change that current 18-year, the current path that we're on with the current big outstanding balance of unfunded liability. That would still get paid off over the closed 18 years. It's just that every time we do evaluation, there's always a gain or a loss. And this year the loss was small. It was only $4 million. That new $4 million would get amortized over 20 instead of 18. And at 18, you don't really feel that pain, but when you get down to 7 and 6 and 5 years, if you have a minus 13 percent return with only 5 years left to amortize that's going to be a significant hit to your contribution rate. And so that's why we would just not a lot of heavy lifting here. All you would have to do is just copy the statute and say this is what we want to do. It's what we call layered amortization. And it's pretty standard within the actual communities these days. So it should not create any controversies or anything like that. Because we're still on track. Because the unfunded that's being paid off over 18 years today, most likely once that's paid off, you're going to be very close to 100 percent funded. It's just really just to reduce that. All the new ones over time should kind of offset each other. But you could have years minus 13 percent in one year. And if you only have 5 years left, that's going to be a huge hit to the city's contribution. And we have demonstrated that before. So now we get into the census data. So in order to perform the evaluation, we have to collect census data on everybody in the plan. So you can see as of 2025, we had 1,165 active members and 1,531 retirees. So as part of the evaluation process, we do anticipate these retirees. Because we're anticipating that there's going to be a portion of these active members that will eventually become retired. So that's really not a surprise. The only thing with the active members is we don't assume new active members. So every year there's new actives that come in. You know, those are typically have no liability because they should have zero years of service. So it's like they don't really have a liability yet. And so every year they work, their liability grows as they get closer to retirement. That's kind of how that works. Here's the active payroll. So active payroll went from $97 million to just over $100 million based on as of this evaluation. And we do anticipate growth in salaries, which kind of works hand in hand with these things. Retiree benefit payments, or retired, disabled, and beneficiary benefit payments on the rolls on the evaluation date was $84 million. So again, this is part of the actuarial process. Based on the active membership, we anticipate these future retiree benefit payments, or future inactive people in pay status. We anticipate that. So those last two slides are the basis for determining the liability. And now, you know, once we have that liability, we want to compare that to the assets. So here you can see the returns on your market value of assets going back to 2010, up to 2025. And you can see that, you know, overall, you know, we don't have 2008 or 2009 in there, which were pretty bad. Those are finally in the past. But, you know, overall, we've been doing pretty good. It's just important, though, even though you have, you know, like in 21, we have almost 30% return that year, that minus 13%, anytime you have not hit the assumed rate, and you can see the assumed rates there at the bottom. So for instance, you know, we only, you know, we're at 5.5 there. That's a loss. That's a 2% loss. So we're anticipating that every year you hit that 7%. So that's why when you were at that minus 13%, that's really a minus 20% loss, because we're saying that you're starting with 7. So even though that in general, you look good, nice double digit returns there, those negative returns are very powerful. So keep that in mind. And that the assumed rate of return is really based on what we expect the future of the plan, not, you know, we're explicitly told by Actuarial Standards of Practice, you cannot look backwards. And so we look at investment consultants, capital market assumptions, and we, which kind of tell us what we think is going to happen in the future, and then we apply that to the investment, the investment strategy or the asset allocation, and that's how we came up with the 7%. So, and the reason why things have been coming down since 2010 is that, you know, back in the 90s, you could buy a 10-year treasury that was paying 10%, right? So as interest rates came down, you know, especially due to this kind of artificially low inflation, that put a lot of pressure on bond returns, and that's a decent part of your portfolio, and that's why over the years, we've been coming down from 8% to 7%, essentially. So, but we're still not at double digit, you know, fixed income returns, so, but still, you know, that's really the reason that the 8% has come down. So plans that are, you know, have a higher assumed rate of return typically are a lot of interesting, you know, investments, like alternatives, essentially, that you kind of generate a little bit higher return, and that's how they get there. Here's our asset values, so we're just over a billion dollars as of this valuation, and you can see that difference of 12 million that I mentioned earlier, that our market value exceeds our actuarial, that's the gain, that's an unrecognized gain that we have not, that we haven't used yet. So if we can, if we earn that 7%, next year, there's going to be a loss, followed by three years of gains, so, and then if we continue to earn 7%, market and actuarial will be identical, so there'll be nothing to spend. Here we have the net cash flow, so net cash flow from us, in our viewpoint, is just contributions minus benefit payments, it has nothing to do with investment income, and you can see that your negative net cash flow has been, you know, this year is minus 2%, that's very good, and so the idea here is that we're trying to accumulate assets to pay future benefit payments. If you're spending your money too fast, it makes it harder to get there, so we used to be the actuary for the Kentucky retirement system years ago, and they were like minus 12% negative cash flow, so that means that you're already down 12% before the year even starts, so in terms of, you're just, your market values. So the idea here is, you know, typical rule of thumb is, you know, you're looking at, if you're exceeding 4%, you know, we need to look at that and say, you know, is this, are you okay, because ultimately, if you're spending your money too fast, it does put constraints on how you can invest, and then it creates volatility, because if you have a bad year, and then you're spending, you know, you're selling assets to pay benefit payments, then those assets aren't there to recover, so, you know, it creates this whole big dynamic that is not good, but from this standpoint, I would say your plan is in great shape at these levels, and you can see that they've been, you know, it's actually been improving, and it's mainly because, you know, we were phasing in the changes due to the last experience study, so we're phasing in those increase in contribution rates over a four-year period, and then also too, your asset pool has grown significantly, so all, you know, so two good things here. So here's the present value of the future benefits, so if we take all the estimated benefit payments of the system that we have calculated for you, the total liability would be $1.7 billion. If you had $1.7 billion in the bank, you would need no more contributions, so we only have $1 billion, and we know most people, you know, most plans aren't funded this way, where, oh, I have all this, you know, let's just dump it in, that's not usually how it works, and that's where the actuary comes in to help you get to the $1.7 billion, essentially, and so here are the different pieces of it, so we have our age and service benefits, so these are just our normal retirement benefits, and, you know, this is a retirement plan, so it makes sense that our retirement benefits make up a bulk of the liability, and then the second biggest piece is disability, so these are active members who became disabled and are receiving a disability benefit, and historically, that's always been the case, those two buckets are the biggest pieces, so here we have the liability split by member type, and so the only thing that's, I think, important to recognize here is 60% of your liability is with people in pay status, so that means that, you know, the actives today aren't, you know, it's really the people who are in pay status, that's where all your liability is, so, and that's not uncommon, I mean, all plans are pretty much like that these days, so here's how we look at this from an actuarial perspective, so, you know, the actuary comes in, and we have to come up with contributions, so in order to do that, the first step is to split the liability, so we split it up into what we call past service, which is accrued liability, and future service, so the future service is what we call the employer normal cost and the future employee cost, so those are future member contributions and future employer normal costs rates will cover the $300 million. If you add up the unfunded liability of $386 million plus the actuarial value of assets, you get about $1.4 billion, that's or accrued liability for people who are currently retired and for active members who have already, you know, they basically, on average, active members have kind of worked half of their career, basically, so they've accrued half of their liability and their benefits, and so that's about $1.4 billion, so those are the, how we look at that from kind of like the 1,000-foot view, and so how do we translate that into annual contributions, so you add your, there's two future normal cost components, the total normal rate is 27.73% of pay, so that's the value of the benefit that active members are accruing on average, so the members are paying 12% of that, so what's left with the employer is 15.73% of pay. We add on to that piece the amount for administrative expenses, so that's 0.55%, so what's important here is if the plan was 100% funded, it would only cost the 15.73% plus the 0.55%. We do have an unfunded liability, and it is being paid off over that statutory requirement, and so that 18-year amortization cost is 34.96% of pay, and so we get a total required employer contribution of 51.24% contribution. Like I said, most of that is just trying to get that unfunded liability paid off, so the unfunded liability actually went down by $2 million, and the funded ratio went up from 71.3 to 72.5%, so the one thing to point out here, because we're at this 18 years now, if you think about your mortgage, right, if you have a 30-year mortgage, that doesn't, you know, those first payments really don't, it's just paying interest, we're now getting into the meat of, like, where these, where the contributions themselves are actually going to start paying off the unfunded liability instead of covering just the interest on the unfunded liability, so we're kind of in a good time period here in terms of, you know, we're going to see your funded ratio improve pretty rapidly, actually, over the next several years, and again, you know, I've recommended that layered amortization, you know, whenever that would go into effect, the current unfunded liability, when that would go into effect, would stay on this schedule, it would just be any new unfunded liabilities would get paid off over 20 years, so, and really, this is the bulk, most likely, once this is paid off, you're going to be very close, if not 100% funded, so, and so, a slight increase in the employer costs, from 50.06% to 51.24%, and this is for the fiscal year 27, so, here's the gains and losses, so, as, you know, I already went over the fact that as actuaries, we make a lot of assumptions, so, mortality, when people are going to retire, so, as part of the valuation, we have to do a kind of a review of where we started and where we ended up and what happened different compared to what we expected, and that creates a gain or a loss, so, the big one, you had a $9 million gain because your assets on an actuarial basis exceeded the 7%, from a liability standpoint, we had a slight mortality loss of $4 million, we had a demographic loss of $8 million, so, those are the two big demographics are, you know, retirement, termination, those types of things, and then we had salaries, which were pretty close, a $1 million loss on salaries, so, in total, we had a, we only added $2 million of liability, or $4 million of liability, if you add up all these things, so, if we were on layered amortization at $4 million, we would be paying that off separately over 20 years, okay, if we were following that process, so, and I'd just like to point out, since the last experience study, your assumptions are so much more in line, you know, to what is actually really happening, so, and from, you know, when you compare these to the plan's total accrued liability of $1.4 billion, it's very small, so, we feel like the assumptions are good, so, our accurate prediction of what we expect to happen, so, it's never going to be right on the money, because it's impossible, but it should be in the neighborhood, and you definitely are. Here's your funded percentage, so, you can see, historically, it has come down, but a lot of that has been driven, has been driven by asset losses and changes in assumptions, so, the biggest one is, you know, we've been changing, that assumed rate of return went down from eight to seven, and that's what's kind of kept you kind of in that 70% range over these years. So, finally, just to finish off, so, just to finish off, so, the valuation is really just a snapshot, that's what's happening on July 1, 25. The next two slides are projections, so, what a projection does is, we don't want, you know, we want to see what the plan's going to look like 30 years from now, and so, what we're doing is, we have active members who are going to retire, they become retirees, we replace that active member with a hypothetical new entrant, whose demographic characteristics are kind of representative of the current plan, essentially, current active members, and then, so, we have new retirees, and then we have current retirees who will be passing away, and, you know, beneficiaries will be passing away, that, you know, that will be replaced, so, we kind of project the data, or the active people and the retired people forward, and then every year, we perform a valuation on those groups, and then we want to see, well, what is the projected funded ratio, what is the projected funded contribution rates, and so, and we do this for you every year, and so, here's the projected funded ratio, so, as you can see, and what we've done is, we've kind of compared the one we did in 24 to, based on what, and then we've updated to what we thought, you know, based off the 25 valuation, and what's important here is that, you know, what really happened between last year and this year, well, your assets really have performed, outperformed, right, so, whenever your assets do well, it kind of elevates everything up, so, and you can see, when we did this for you in 24, that loss that we're expecting to come in in 26, you can see that it, you can see it's almost leveled out, based on the 25 valuation, so, the better your assets perform, it's going to offset any kind of prior losses that we were, you know, expecting to see, and that's kind of how you'd look at it, and I mentioned because you're, because we are now at that 18-year amortization payment, and how a lot of that payment is actually going to pay off the unfunded liability, not just, not just the interest service cost on the unfunded liability, you can see now, you can see how quickly, you know, you're going to get to 100% funded, but more importantly, you know, how quickly you're going to get to 90% funded and, you know, 80% funded, it's really going to happen fast, and that's mainly due to the fact that we only have 18 years left on that unfunded liability, so, and again, we would still see, if we were using layered and implemented it the way that I recommend, you would still see this pattern, because we are still going to have the bulk of that unfunded liability is going to be paid off over that closed period, it's just the new pieces, and again, those new pieces tend to offset over time, so, and then finally, the funded ratio, I know it's important to the board to see a positive funded ratio, and this is the projected employer contribution rate, and this number is probably more important to the city, because, you know, they have to fund it, so, again, you can see that we have the comparison from 24 to 25 valuation, and again, because our asset performance and our, the asset performance and the fact that we did not have significant actuarial losses, you can see that the required contribution based on the prior evaluation, we're below that now, so, you can see, so the outlook in terms of the city's cost is actually less than what we anticipated one year ago today, and that's represented by the orange line there, so we got the blue line, and the orange line is the current valuation, so, again, it's very, you know, these are very positive results, and hopefully, you know, things keep, you know, moving along in that manner, so, and then, just to finish up, please refer to the actual report for the, you know, the report details all the calculations and summarizes all the data and everything, and that, you know, I am a member of the Academy of Actuaries, and I'm qualified to make these opinions, again, this is a requirement by the Society of Actuaries, so, you know, we, it's an organization that polices itself, so that's why we have actuarial standards of practice that we have to follow, and, you know, so, again, I meet those qualification standards, so, which is good for you guys. Thank you very much, Mr. Green. I'd like to open it up at this point and see if we have any questions. No questions? Well, I have several, but I'll ask anybody else wants to answer. Mine's easy. This smoothing, and you've explained it several times, but I want to make sure I grasp this. We're still on the 2043 to wipe out the current unfunded liability, but any additional liabilities that happen between now and then would be put on a new 20-year loan that would, since we only have 18 years left, be paid off in 45. Well, you would have, so, no, you would have, each year would be a new 20, so, ultimately, you would have one at 20, one at 19, one at 18, 17, 16, so, at the end of 20 years, you'll have, you know, one at one that's going to be paid off in one year, then two, three, all the way out to 20, so it's kind of like you're going to have 20 different mortgage payments, but the bulk of your unfunded liability is really this current unfunded liability of 386 million, so once that gets paid off, typically what you see is that those future gains and losses will offset, so some years you'll have gains, some years you'll have losses, and typically they make up a very small portion of the overall unfunded liability. All right. Commissioner Hensley. Can we go back to page 21, if you don't mind? Sure. Yes. So, I'm looking at 2021, that looks like we were almost 80% funded, and then back to 2015, so 10 years ago when we were, again, closer to 80% funded, and I'm just trying to wrap my head around your explanation of the mortgage payment and how we're now paying down the principal and it should go faster and that balance should shift, and what happened in the 10 years? So, basically after the 2021 valuation, we reviewed all the assumptions, and so that's when we recommended going down to 7% on your discount rate, so really, and then we also had to implement that generational mortality, which had a pretty big hit to your unfunded liability as well, so those are the two. So that was 21? Yes. Do we remember what happened from 2015? Did we have a big change then, too? We did an experience study back then, but it didn't have as significant of an impact, mainly because back then we were just doing, every time you reviewed your mortality table, it was like, okay, now the current one's out of date now, so now we have to use a new one, and you had to build in some cushion to anticipate that it's going to improve over the next five-year period, and that always had this impact of reducing your unfunded liability, so what we do now is we've taken that away, because we're anticipating future improvement in mortality every year. So really, the biggest, reviewing your assumptions, I mean, the biggest impact going forward, if we did that, would be the discount rate of 7%, and, you know, like, you know, unused sick leave at retirement that the members can use, things like that, so those are probably the biggest kind of levers at this point. Retirement rates, if everybody started retiring, like, immediately they first become eligible, that could be a big thing, but it typically doesn't happen. So, you know, we wouldn't, I mean, you did the hard work five years ago, so. So, and you all had recommended that we move to 7%. Yes. Is that a rate that you're comfortable with still? Yes, I would say today, yes. Okay. But it's not, I don't think we're ever going to get back to a point where we'd be at 8 again, if that makes sense, and there was a short time period where capital market assumptions were coming out, and we're actually pretty, I mean, I don't want to say aggressive, but pretty optimistic, and I mean, but that was about a year, and now we're kind of back down, you know, so basically I look at it as, like, if you're just a 60-40 vanilla fund, I mean, to me, like, just, I mean, I start off at 6.75 right there, you know. In order to get higher, then you have to start looking at, like, you know, are you investing in alternatives and things like that to kind of get some extra return? Usually when you do that, you're, you know, the whole idea is to get extra return and lower risk at the same time so you can pay to do that, but, you know, typically a 60-40 just vanilla type investment strategy, I mean, to me, I mean, I just start off in my head thinking, well, that's probably 6.75, you know, and we use a survey of capital market assumptions that, you know, kind of backs that up, because trust me, I look at it because I want to tell good news sometimes, you know, so. Well, it's been a topic of much conversation, because we've had so many fund managers over the last six months that we've been looking at, and do we want to be more conservative, less risk, more aggressive? You know, as we're making these decisions, it's a conversation. So we went to seven upon your all's advisement and consultation, and it's good to know that you're still feeling good about that, so I appreciate that. My last question, I think, is what do you typically see as far as other plans and their funded ratio? Like what is typical? I know ours is set by statute, so that really doesn't matter, but what is typical out in the environment? Yeah, so that's kind of a tricky question, because you kind of have to, you know, what plan would I want to be in this 90% funded plan or this 45% funded plan, right? The 90% funded plan could have, they could have just implemented benefit enhancements without funding them, and so that 90% eventually is going to become 45%. And I would put you guys in this position, because for years, all you were paying was interest on the unfunded liability. And so back in 13 is when you said we can't do this anymore, and even though your funded ratio was actually not bad back then, it was probably going to get worse because of that. And so, you know, there's not one plan, you know, that's like, oh, everybody's averaging 80%, and so that's like some kind of standard. I wouldn't look at it that way. I would look at it this way. For you, I would say that, you know, your funded ratio is actually okay. It came down because we updated assumptions, so I wouldn't look at that as a bad thing. Because ultimately, you're going to pay it no matter what. So you could assume it and pay it ahead of time and actually be cheaper for you, or you could not assume it and pay it later, and it's going to cost more. And because of your funding policy, I mean, you're paying it regardless. So in my opinion, you're better off getting in front of it, because in the long run, it'll be cheaper. So your funded ratio to me is fine, considering the fact that your funding policy is really solid. And then the other thing I would look at is this slide right here. You know, how fast are you spending your money? You're not spending your money fast at all. So that's very manageable. So that means that you're free to actually explore different investment allegation strategies, whereas if you're spending your money too fast, you wouldn't be free. And then that kind of creates this cycle. Well, now, you know, we work for the Kentucky Retirement System. It was like every year we were lowering the discount rate because they had to keep adjusting it to pay, because they needed enough money coming in so that they could pay benefits without having to sell assets, right? Because when you get it, you get into trouble doing that. Not that that's not a good strategy. I mean, you know, mathematically you can do a lot of different things, and that's kind of out of our professional expertise, but we do review it to come up with the 7%. So, yeah, I think your plan's in excellent shape. And also, too, you know, this as well is, you know, we started to rely on projections a lot more to kind of really dictate, you know, is this plan healthy? And based on this right here, and if you continue to fund it in the way that you're required to, you're going to be fine. All right, other questions? Sir. Good morning. Hey. One of the kind of hot topics, or at least around the police department side, is this issue of staffing. We're relatively somewhere in the neighborhood of 15% to 20% understaffed, and so I was looking at your scale illustration and then at the staffing levels going back. I was just kind of curious, how much, if anything, does that actually impact the fund itself? Because it seems like fewer people is fewer contributions, but also is fewer benefits down the road. I'm just kind of curious, does that impact the fund a lot? Obviously not as much as the investment side, but I guess some feel of how does that impact the fund as a whole? So it doesn't. Because we're, like, funding actuarial determined contributions, it's not a significant impact on the fund, because if you were to work on plans that basically are what we would call a statutory plan. So say you were only getting your only source of revenue, and I'm just going to pull a number, for explanation purposes, but say you're only getting 20% of pay of active members, and you're only 70% funded and that number starts to decline because you're not staffing those positions, that can put the plan in a terrible position, because the money is only coming in. The shovel is really that percent of active payroll. You're not in that situation. We're developing a contribution rate independent of all that. We're measuring the liabilities, and then we're telling you what that costs. So you could have zero people working, and we couldn't illustrate the cost as a percent of pay. We'd have to do it in dollars that way. But from that standpoint, it really doesn't have an impact. I mean, you are getting 12% of member contributions when a new person has no liability yet. So that does help with the cash flow. I mean, there could be some help on that end in terms of that negative cash flow number. It could improve that because now you're getting 27% of pay in total from the actives in the city for those people in the plan. So it probably would improve your negative cash flow, but overall it's not a huge detriment because, again, we're determining this contribution totally absent of the active workforce. We're saying here's your costs, and, you know, we just allocate it. That top part, that normal cost, is what it costs just for the actives to earn a year of service. So that's the first piece, and then the rest of it is the unfunded liability piece. So, yeah. I want to expand on that. So I'm of the opinion that that's not exactly. I mean, I get it, and you're the professional. You've got that. But if we don't have people here and we're not getting the 27% of their money, then that creates a higher unfunded liability or puts the burden directly on the city, which instead of employee versus employer contributions. I mean, I don't know. So that's, I mean, that's not totally true because when a member comes in, so a member has zero liability, a new member. It costs, the city has to, we have to contribute 27.73% of pay to reflect that year of service they're going to earn. The member is going to pay 12% of it. The city is going to pay the 15.73% of it, okay? That active member has no unfunded liability associated with them. So that's all it costs. So the unfunded liability is a separate calculation, and that's really attributed to, you know, the prior practice of not paying off, you know, not having, you know, paying interest only on the unfunded liability. It would be worth mentioning that if we had $3 million worth of payroll that wasn't there, like we didn't by either not having the people in the seats or whatever the reason is, then at $3 million, 27%, it's $810,000. Having that money, you know, close to a million dollars front-loaded, as we've talked about in the case of the mortgage, right, kind of goes to the principal. I see that it would make things even better over time. Yeah, so it could improve this slide right here, this net cash flow. And so it could improve that, which means you wouldn't be spending your money. You'd be spending your money slower, which is, you know, a good thing. So it could improve that. But in terms of just the overall, you know, unfunded, it's not going to affect the overall unfunded liability or funding ratio. All right. Any other questions for Mr. Green? All right. Thank you very much. Appreciate the presentation. Okay. Thank you. And thanks for not being snowing and icing out there. The board does need to make a motion to set the city's contribution rate, please. Chief, motion to accept the actuarial report and set the rate for the next year at 34. I'm sorry, 51.24%. Approved. Approved. 34. 51.24%. Second. Thank you, sir. Are there any questions? All those in favor of the motion? Anyone opposed? Motion passes. Thank you. All right. Thank you all. Next on our agenda is the treasurer's report. I believe we have Chad here. Welcome. Good morning. You should have in your packet the various financial reports comparing fiduciary net assets, as well as the bank statement and the fund reconciliation. The value of the plan as of yesterday morning was $1,081,547,888.54, which compares to last month of $1,042,088,372.06, which that's a pretty good jump in a month. So that helps our cash flow. Thank you for the good news. Do we have a motion? Motion to accept the report and approve the transfer letter. I'll second. All right. We have a motion and a second. Any discussion? All those in favor of the motion? Aye. Anyone opposed? Thank you very much, Chad. All right. Next on the agenda is new business. It's a rather lengthy new business report, and we'll turn that over to Ms. Combs. Thank you. Item number one is widow's annuity for Barbara Glass and Loretta Nave. I need a motion to approve. So moved. Second. All right. Any discussion on the motion? All right. All those in favor? Aye. Anyone opposed? Motion passes. Thank you. Item number two, child's annuity for Joseph Hood. I need a motion to approve. So moved. All right. We have a motion and a second. Any discussion? All those in favor? Aye. Any opposed? Thank you. Item number three, disbursements for January. They're listed on your agenda. I need a motion to approve. Second. All right. Any discussion on the motion? All those in favor? Aye. Any opposed? Thank you. Next is retirements, and we're going to do police first. So I'm going to read all the police, so we'll have one motion for those. December 13, 2025, Officer Bill Reeker retired on a service retirement. Lieutenant Thomasina Greider retired on January 2, 2026. Officer Patrick Murray, Jr. retired on a service retirement January 3, 2026. Officer John McBride retired on a service retirement effective January 4, 2026. We have Commander Brian Peterson, Officer Seth Frazier, Officer Brandon Carter, Officer Martin Scheer, and Officer Michael Painter, all retired on a service retirement effective January 10, 2026. I need a motion to approve. All right. Any discussion on the motion? All those in favor? Aye. Any opposed? Motion passes. Thank you. Next are service retirements for the Division of Fire. Lieutenant Josh Dollings retired on a service retirement January 8, 2026. Battalion Chief Adam Sorrell, Captain Billy McIntosh, retired on a service retirement effective January 9, 2026. Assistant Chief Joseph Witt, Battalion Chief Trevor Cox, District Chief Paul Welch, Lieutenant John McMinna, Firefighter Charles Anders, and Firefighter Jeff Reed, all retired on a service retirement effective January 10, 2026. District Chief Scott Marshall, Captain Shannon Isen, Captain Brian Mosko, Lieutenant Mark Rogers, Lieutenant Ashley Womack, Firefighter Brian Harris, and Firefighter James Endelde, retired on a service retirement effective January 11, 2026. Captain James Moore, Captain Robert Powell, and Firefighter Darrell Walton, retired on a service retirement effective January 12, 2026. I need a motion to approve. So moved. Second. All right. Any discussion on the motion? All those in favor? Aye. Any opposed? All right. Motion passes. Now we go to disabilities. We have Antonio Munoz, Division of Police, application for total and permanent occupational disability. I need a motion to send to appropriate doctors. So moved. Second. Any discussion on the motion? All those in favor? Any opposed? Thank you. Jacob Seed, Division of Fire, application to convert an existing service retirement to total and permanent occupational disability. I need a motion to send to appropriate doctors. Any discussion? All those in favor? Any opposed? Thank you. Thomas Eanes, Division of Fire, medical reports completed and distributed. I need a motion, please. Motion to approve and send at the appropriate rate. Any discussion on the motion? All those in favor? Any opposed? Next is Anthony Bottoms, Division of Police, medical reports completed and distributed. I need a motion, please. Motion to approve and send at the appropriate rate. Mm-mm. Uh-uh. He needs to go to a third doctor. One doctor said it was not work-related. I'm sorry. Do you want to withdraw? Do you want to withdraw your motion? I wish to withdraw my motion. Very well. Do we have another motion? Motion to send to a third doctor. Second. All right. Do we have any discussion on the second motion? All those in favor? Any opposed? All right. Motion carries. Thank you. Thank you. Tributes. We have quite a few. Carol Mitchell, widow of John Mitchell, Division of Police, passed away on November 10, 2025. John Nave, Division of Fire, passed away on November 28, 2025. Starlyn Gwen Gray, Division of Fire, passed away on December 6, 2025. Linda Gum, widow of Lionel Gum, Division of Fire, passed away on December 10, 2025. Alec Hood, Division of Police, passed away on December 11, 2025. Sandra Thompson, widow of David Stewart, Division of Fire, passed away on December 19, 2025. Raymond Glass, Division of Fire, passed away on December 20, 2025. Thank you. And if it's OK, we'll pause there. I think we probably have a fair amount to talk about here. So I'd like to ask if we have anybody who would like to comment, particularly on the tributes or the retirements. Thank you, Chief. First, to everybody that retired, we appreciate your service. Welcome to the dark side. And checks are on the 15th. I knew John Mitchell at the Division of Police. Our condolences to that family. John Nave, Division of Fire, worked with. Good guy. Sorry. Condolences to his family. Gwen Gray at Fire. Barely knew him, but condolences to the family. Did know Lionel Gum. Did not know his wife Linda, but condolences. Sondra Thompson, widow of Dave Stewart. I knew Dave. Condolences again. And worked with Ray Glass. Again, condolences to that family. Thank you very much. Anyone else like to speak? Commissioner Armstrong. Yes, sir. Since Chief Weathers is not here today, obviously I want to thank everyone in the Fire Department for their service and their retirements. But I just wanted to mention specifically the Police Department again since Chief Weathers is not here. I look at that list of individuals, and ironically, I know every last one of them, which is unusual these days. But I just want to thank all of them for their service, for what they provided to Fayette County over the last, some of them, 20 plus years. So thank you very much for your service. Thank you to the firefighters as well. And our condolences go along to the families of those that we lost. That's a lot in a month's, give or take, time. So I just want to thank them and thank their families for being a part of our family. That's all I have. Thank you. Other comments? I would like to add a few things. First, regarding those that we've lost, on behalf of the Division of Fire, we want to extend our condolences to the family of all of those who have passed away over the last month. John Nave, unfortunately, was only here for a fairly short time in the early 80s and had to leave on an occupational disability, but certainly was a proud member of the organization, and we extend our condolences. Mr. Gray served from 1973 until 1995, and I think his last assignment was 3rd Platoon, Engine 18. And so certainly he will be missed. And Ray Glass, who served from February of 1969 until October of 1998, was a character, somebody who was well-known on the 1st Platoon, and I think his claim to fame is if you played him in ping pong, he could beat you with just about anything, a scrub brush, anything as a paddle, and he would still beat you. So lots of great stories there, and they will certainly be missed. As far as the retirements go, certainly thank you to all of the retirees from the Division of Police and Division of Fire. Just on the fire side, the service that we lost this month accounts to 431 years combined. That's a tremendous amount of service and experience that we're losing, and we are so very thankful for their time and their dedication. I know in the audience we have Tommy Edens, who is leaving us. Tommy, this is not the way that you envisioned it, but thank you. Thank you very much. It's always tough, but your service is greatly appreciated, and your time here. So thank you all very much. So next, I believe we have... We have subcommittee updates. Subcommittee, yeah. Yes, and Tommy is not here, so there will be no update on the continuation of benefits nor the legislative subcommittee. Organizational Attorney, do you have any updates? No, ma'am, nothing to pass along. All right, very good. I guess that brings us... Do we have anything else for the good of the whole? Any other comments from the membership? Brock. Thank you, Chief. As usual, I start off with telling you how wonderful the CPI was, and it came out yesterday, and it was down to 2.7%. So, you know, it's better. However, when you look at our retirees, 201 of them get 2% cost of living. So every single one of those lost 0.7. 880 get 1.5% cost of living. They lost 1.2. 249 get a 1% cost of living. They lost 1.7. For those of you who were around here in 2012, when these 2013 changes came about, the pension was going broke. One of the things we did was for new hires, they have to work longer. I think for current employees, things remained the same, but retirees went from the promised 2% to 5% cost of living as determined by the board down to the numbers I just gave you. Now, if you go to page 21 of CAVMAX report and you look at 2013, we're almost exactly the same. Now, Mr. Green can tell you in fancy mathematical language exactly how this happened, and we reduce our expectation. It makes a huge change. However, we really make some drastic changes, and our retirees are still paying the price for it. I made two motions the past two years in the legislative subcommittee to do something about this. Both went nowhere. To my knowledge, there has nothing been proposed for the current legislative session to change this. Our retirees are losing money every single month, and I hope that we can find some way in the future to help them. Thank you. Any other comments from the board? All right, do we have a motion to adjourn? Second. All right, we are adjourned. Thank you all.