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Even if it's my goal to continue working longer, what would I do for healthcare, for example, if for some reason I'm not able to continue working until I'm Medicare eligible? What is a safe withdrawal rate for me from my investment portfolio if I need to retire earlier than I expected to? Morningstar's Personal Finance Guru joins us for part two of our Building and Better retirement series on Consuelo Mack WEALTHTRACK. Announcer: Funding provided by ClearBridge Investments, First Eagle Investments, Royce Investment Partners, Baird, Matthews Asia, Strategas Asset Management and Women Investing in Security and Education. Mack: Hello and welcome to this edition of WEALTHTRACK.
I'm Consuelo Mack. There are few tasks more fraught with financial challenges and anxiety than planning for retirement and replacing a work paycheck with one from savings, ostensibly to last a lifetime. It's especially daunting against the backdrop of 2022's broad-based market decline and the new era of higher inflation, rising interest rates and the threat of recession. This week's guest describes herself as being passionate about simplifying retirement portfolio planning. Amen to that! She is Christine Benz, Morningstar's widely followed and admired Director of Personal Finance, a position she has held since 2008. She is here for the second of our two-part series on Building a Better Retirement. If you missed the first installment, you can see it on wealthtrack.com. Well, this week Benz is discussing retirement blind spots. She has identified six of them and she's going to help us fix them. The retirement blind spots are: retirement date risk, sequence-of-return risk, low-yield risk, inflation risk, health care / long-term care risk and longevity risk. She certainly ticked all of my boxes.
Now, how to mitigate those risks and what steps to take to solve them. I asked Benz to address them one by one, starting with retirement date risk. How big a problem is it? Benz: Well, this is simply that we tend to not be great judges of when we might retire. So there was a survey that Pew Research did several years ago where they asked pre-retirees approximately when they thought they might retire. And one trend that you see in the data is that people tended to think that they would be able to work longer than they were actually able to work. So many people identified kind of in the period from 70 to 75 as the period when they thought they might hang it up. Well, in reality, when they tracked those same folks about their actual retirement dates, they found that people were not able to delay retirement that long. So the short answer is that we tend to not be great judges of when we might retire. And there are a few reasons why this is the case.
One is the health situation, either our own health or our spouse's health or parental health may pull us out of the workforce. We know that ageism is a thing in our culture. We know that some folks who might have the intention of continuing to work may not be able to. They may have a job that's physically untenable to continue to do later in life. So there are a lot of things that can complicate someone's plans to work longer, which is one reason why I get very nervous when I talk to older adults who say, Well, my plan is to continue working until I'm 70 or 75 or whatever it is. As Morningstar contributor Mark Miller often says, that's a worthy aspiration. It's not a plan. Mack: So how do you resolve that? Clearly you can't anticipate it unless you're self-employed, in which case you're the one who's going to fire yourself. So that's right. There are some people – or keep your business going, whatever it is. Benz: Well, it's tricky, but the key thing is that you need to stay flexible.
And I think for older adults, it's really valuable to kind of have a contingency plan in mind. Even if it's my goal to continue working longer, what would I do for health care, for example, if for some reason I'm not able to continue working until I'm Medicare eligible? What is a safe withdrawal rate for me from my investment portfolio if I need to retire earlier than I expected to? What would I draw upon if I needed to pull from my portfolio? Do I have safe liquid reserves that I could draw upon if I were shoved out of the workforce in a year like 2022 when stocks and bonds went down at the same time? So I think you want to kind of build up, build in that contingency plan.
And then also top of mind is have a backup plan for some other form of work and maybe it's consulting in your field that you've built your career in. Maybe it's a completely different career path. But if you can find some sort of paid remuneration to tide you over in those early retirement years, that can go a long way toward helping your plan last and helping ensure that you're not having to invade your portfolio when it's at a low ebb. Mack: In part one of this series on building a better, more resilient retirement plan, and you've certainly talked about how to handle that from an investment point of view. So I just want our audience to know that, and they can see that on wealthtrack.com. The next blind spot that you mentioned is sequence-of-return risk. So explain that. And it certainly is, you know, uppermost in our minds after what happened with the markets in 2022.
Benz: Sequence-of-return risk is something that retirement researchers really worry about. And this is basically the odds that early on in your retirement, often when your portfolio is at its largest, you encounter a really bad market environment that either features dropping bond prices, falling stock prices, high inflation. Well of course, we had all of that come into play in 2022. And so what retirement researchers really worry about is that a period like that stretches on for a period of 2 or 3 years or even longer. And if the retiree is simultaneously pulling too much from that portfolio that's dwindling, that is a very bad thing. And that can leave less, leave fewer assets in place to recover and heal themselves when the market eventually does. Mack: One of WealthTrack guests, Mark Cortazzo, who I know you know, is a financial planner, has given us two matching portfolios, equal amounts of money, but showed what happens if you retire in a down market like 2022 versus a market where the stocks and bond prices do really well afterwards. And it can just be devastating in those first couple of years of what happens to you and how quickly you can run out of money.
Benz: Well, that's absolutely true. And that's where we got the 4% guideline for safe withdrawal rates from, where William Bengen looked back over market history and tried to identify, well, what would have been the worst period in market history to have retired into. And he identified the period of the late 1960s to early 70s as the worst starting period in modern market history, because you had a convergence of bad events where you had the '73 '74 bear market for equities, which some of your viewers may remember, you had high inflation after that, and then rising interest rates to help curtail inflation. And that, of course, clobbered bond prices during that period. So that's the period when researchers look back into history that they home in on as the type of environment when you want to be very, very careful. I think it's too soon to say whether we're sort of in a period like that. But coming into 2022, there were certainly a lot of storm clouds gathering for new retirees specifically that we had very low yields on fixed income and cash securities. So there just wasn't much of a buffer for bond investors.
When bond prices decline, they felt the full brunt of that price decline because there wasn't much of a yield there to cushion the losses. Mack: So, Christine, let's take that worst-case scenario that we are in a period where we could be going into like a lost decade or a period, as you just described in the 1970s, for instance, of high inflation, poor market results. What do we do? Benz: Well, I think two key things.
So if you are accumulating assets for retirement, if you're not yet retired, don't worry about it. That this sort of environment is your friend accumulating assets at lower prices. But if you are someone who is just on the cusp of retirement or you've just retired, I would say that a couple of key strategies can come into play. One is if you can find a way to reduce your withdrawals in those bad market years that redounds to the benefit of the sustainability of your plan. So if you can pull in your belt a little bit in those tough years, that's the first thing you can think about. And then the second thing you can think about is just make sure that you've built a portfolio that includes safe assets that you could spend from. If we go through a period where stocks go down and stay down and we have, say, another lost decade like we had in the early 2000s, the idea would be that you would build yourself kind of a runway of cash investments, perhaps short and intermediate term, high-quality bonds that you could effectively spend through rather than having to touch your depreciated equity assets.
So those are the two things: curtail withdrawals if you possibly can, and also build a portfolio that includes safer assets that you could pull your withdrawals from. Mack: You were talking about yields and one of the retirement blind spots that would have been operative a couple of years ago is the low-yield risk. Now that's changed. So how much of a risk are yields now? Benz: Well, it's gotten so much better.
We had this war on savers going on for the past couple of decades, really, where we saw this steady drip drop downward in terms of the interest rates that you're able to earn on safe investments. The good news story of the very bad market environment we had in 2022 is that yields are much, much higher today on all manner of cash and fixed-income investments. So you don't need to stretch to obtain a decent income stream from a cash or fixed-income portfolio. And I would say that this is the kind of thing that kind of ebbs and flows over time if perhaps we have a recessionary environment going forward.
I think it's a reasonable thing to kind of think about that yields could, in fact, drop from here and you'd want to be able to adjust if, in fact, that happens. So another thing to keep in mind, in a recessionary environment, if we see yields on safe investments drop, we will probably also see the prices of higher risk, fixed income securities see price declines as well, because we typically see them move in sympathy with equity markets during recessionary environments.
So for me, that's kind of a caution against overly gravitating toward higher yielding, lower quality fixed income securities because they do tend to be pretty equity-like and do tend to respond negatively in a recessionary environment. Mack: You know, as you mentioned, if interest rates do drop, which they do, if we do go into a recession, then the longer-term high-quality bonds like Treasuries will do extremely well because bond prices go up when interest rates drop. Benz: Definitely the high-quality fixed income is just a superb ballast for equity portfolios. We saw it in the great financial crisis. My guess is that in some other recessionary environment or economic shock, we would see a similar pattern where high-quality bonds would really earn their keep. Mack: Now, another retirement blind spot that you've mentioned, which is quite real now is inflation risk. How can we resolve how can we mitigate the inflation risk? Benz: It's a huge risk factor. It's a risk factor for all consumers, people of all ages. But I think of retirees in some ways as being especially vulnerable for a few key reasons.
Some of the categories that older adults spend more on, notably health care, have historically been inflating at a higher, even higher rate than the general inflation rate. So that's one risk factor. Another risk factor is that if you have safe investments in your portfolio and retirees inevitably do and should have safer assets in their portfolio like cash, like bonds, Well, on an inflation-adjusted basis, you're going to kind of get eaten alive. Your purchasing power will be gobbled up. So that's another reason that older adults tend to be more vulnerable. And then a key issue is that even though a portion of your income stream in retirement is going to receive an inflation adjustment, so specifically, your Social Security benefits will get a very nice bump up.
We saw Social Security working exactly as we would hope over the past year in this inflationary environment, The portion of your portfolio that you're withdrawing for your living expenses is not automatically insulated against inflation, which is why it's so valuable to think about adding that inflation insulation to the portfolio. Mack: And give us some ideas of adding inflation protection to your portfolio. What would you suggest that we look at? Benz: Well, a couple of key categories. One is within that fixed income position, the fixed income allocation, I would hold a complement of Treasury Inflation-Protected Securities and or I Bonds. And when we look at the allocations that my colleagues in Morningstar Investment Management would recommend, they would typically say 25 or 30% of a retiree's fixed income holdings should go in bonds that have those explicit inflation protections. Mack: That's a fairly sizable portion. That's a quarter or more of your fixed income.
Yeah. Benz: And probably more than many retirees have. I tend to like the short-term TIPS, short-term inflation-protected bonds because they provide more pure inflation protection without a lot of the interest rate volatility that come along with intermediate-term TIPS. But retirees should check out that within their fixed income holdings and then equities, we know over long time periods, even though they're by no means any sort of an inflation hedge, they do tend to outearn inflation over long periods of time. We typically see that equity return being higher than the inflation rate. I would expect that that pattern will likely persist into the future, which is one reason why I would say even conservative retirees should take steps to hold stocks in their portfolios simply because they need that growth potential that comes along with an equity portfolio.
Mack: And Christine, as far as the Treasury Inflation-Protected Securities, you can buy them directly, you know, at Treasury Direct.gov, but you're talking about funds. So what are some of the funds that Morningstar recommends to buy TIPS. Benz: So investors can go either route. I would keep it very plain vanilla here, and that's probably a recurrent theme with me. I tend to like the funds that give you a lot of diversification and very low costs. So most of the big firms do run good quality core and even short-term TIPS funds. One I recommend and to the extent that I put together model portfolios: Vanguard Short-Term Inflation-Protected Securities is a fund I really like because of its rock bottom costs and kind of a no-nonsense approach to portfolio construction. So that's a good strategy and I think one that can make sense in retiree portfolios.
Mack: And you mentioned another blind spot is health care and long-term care risk, especially. Describe how significant that is and also how we can mitigate it. Benz: Many people think, oh, I'm Medicare eligible, I'm home free. But Fidelity does these annual reports on how much a 65-year-old couple will expect to spend in health care outlays, out-of-pocket health care outlays over their retirement time horizon.
And the most recent run came around, came in around 315,000 for that 65-year-old couple. And importantly, that does not factor in long-term care expenses. So it's a big number. A couple of key messages is, one, you're not paying for it all at once that, you know, typically will be paying for it on an ongoing basis. And your health care costs can really vary a lot, certainly by your own health situation. But also geography is a big swing factor that in more expensive geographies, certainly in big urban centers, people tend to spend more on health care. They may receive higher quality health care, but they will pay for it. So kind of customizing your own situation, thinking about your own situation, certainly to the extent that people are still accumulating assets for retirement, to the extent that they can be mindful about setting aside a component of their retirement assets to help meet health care needs explicitly can make a lot of sense.
I'm a huge believer in health savings accounts for people who are covered by a high-deductible health care plan. If you can start on this when you're young, fund that HSA to the max and then that is like gold for you coming into retirement because the funds go in pre-tax, they accumulate and can be invested, accumulate interest on a tax-free basis and then their tax free withdrawals for health care expenses. So it's just a terrific account type to bring into retirement, but you need to be covered by a high deductible health care plan in order to be able to contribute to one.
Mack: No the HSAs are fabulous. But for retirees, for people who are on Medicare, I mean, they really need a good supplemental health insurance plan. Benz: Absolutely. And good prescription drug coverage as well. And it's also important to re-shop that drug plan every year because your own needs may have changed and what's covered within your plan may have changed. So even though it takes up a little bit of time, if you can do that, a little bit of hygiene every year with your coverage just to make sure you're getting the best possible deal given the drugs that you're taking, that can be time extremely well spent.
Mack: Longevity risk is the final retirement blind spot. And I don't know how you anticipate or plan for that. What's your advice as far as handling longevity risk? Benz: It's such an important consideration, Consuelo. One thing I would say to your viewers is that we see a very strong correlation with income and wealth and longevity.
So my guess is that many of your viewers will be higher income folks who have done well in their careers, have amassed substantial assets. That's great news on many levels, but it does tend to mean that you will live a longer life and will have a longer retirement. So for couples who are, say, in their mid-60s or individuals in their mid-60s who are in fairly good health today, I think it's reasonable to plan for quite a long retirement where you'd want your portfolio to last 30 years or even longer. And so that argues for being conservative in terms of your portfolio withdrawals, not taking too much early on especially. And it also argues for having a balanced portfolio that includes plenty of growth potential. So you'd want to have ample stock exposure, not 90% stock exposure, but probably some sort of a balanced asset allocation because you need the growth potential that comes along with stocks.
Mack: And Christine, we also have in our audience, you know, people who are not as well-to-do and or are aspiring to be. Since so many people don't have a defined benefit plan any longer, they don't have a pension plan. So what about annuities? Benz: And I'm so glad you mentioned that, Consuelo, because annuities, especially with higher interest rates that we have today, that really embellishes the case for annuities in a lot of ways because an annuity, a very simple annuity, which is the type of product that I would tend to favor, is just a contract with an insurance company where they pay you a stream of income that will last for your whole lifetime. So it can be a terrific product. You don't need to have a lot of assets to have an annuity.
And one strategy I really like is just look at your household's fixed costs, your very basic outlays for housing and food and insurance and taxes. Tally those up and try to see if you can match your certain sources of income, your Social Security, plus potentially an annuity, with those fixed outlays. And that I think will just give you a lot more peace of mind with that long-term portfolio. It can get buffeted around. We can encounter more years like 2022, but you'll know that you'll have those very basic income outlays set aside without having to worry about your portfolio. Very basic, immediate annuity or even a deferred annuity that will start paying you at some later date can be really effective ways to embellish your lifetime income in addition to Social Security. But job one is get the most you can out of Social Security because that's the best annuity-like product that any of us has.
Mack: Is there one investment for a long term diversified portfolio that would actually address these retirement blind spots? Benz: Well, one fund that I really like, and I'm not sure that it addresses each and every blind spot, but Baird Aggregate Bond is a fund I would call out. I know you've had Mary Ellen Stanek on your show many times. She is absolutely terrific, Co-Portfolio Manager of this fund, Co-Chief Investment Officer at Baird. And what I like is that this fund is very high quality. So we've talked about, you know, the types of investments you would want in your portfolio in some sort of a recessionary environment. And this is a fund that I would expect to perform very well because it's high quality and low-cost fixed income portfolios.
Mack: Christine Benz Such a treat to have you on WEALTHTRACK for your annual appearance once again, and thank you for giving us two interviews about building a better retirement plan. You've really helped us tremendously. Thanks, Christine. Benz: Thank you so much, Consuelo. Mack: At the close of every WEALTHTRACK we try to give you one suggestion to help you build and protect your wealth over the long term. This week's Action Point is identify your retirement blind spots and take steps to fix them. Are they retirement date risks? It turns out for many people that decision is out of their control. Sequence-of-return risk? Last year's miserable markets made us all more aware of how important timing can be to long-term financial security. Inflation risk? It's a heightened reality for all of us now. And of course, should we be so lucky? Longevity risk is a challenge for many of us.
Depending on where you are in the retirement cycle, a few or all of these blind spots can be key issues. This is as good a time as any to talk to your family and your financial advisor about them. Next week we'll have another in-depth interview to learn about strategies you need to build and protect your wealth over the long term. In this week's Extra feature, we asked Christine Benz to share which financial blind spots are especially meaningful to her and how she is handling them. Please follow us on Facebook, Twitter and our YouTube channel.
We appreciate the time you spend with us. Have a super weekend and make the week ahead a healthy, profitable and productive one. Announcer: Funding provided by ClearBridge Investments, First Eagle Investments, Royce Investment Partners, Baird, Matthews Asia, Strategas Asset Management and Women Investing in Security and Education. Mack: Hello, I'm Consuelo Mack. Every week on WEALTHTRACK we sit down with great investors and financial thought leaders to talk in depth about strategies you need to build and protect your wealth over the long term. Join us on Consuelo. Mack. Wealthtrack.
– Hi everyone, Bill Lethemon
here for MoneyEvolution.com. In today's video, I'm
gonna be talking about five things that you should do when you're five years
away from retirement. Okay, so right off the bat,
number one is get organized. So, if you're planning for
retirement you might have a lot of your financial information scattered into a whole
lot of different places. Maybe you've got some
401(k) plans at work, or maybe even an old
401(k), some IRA accounts, maybe your spouse has
some retirement plans or old pension benefits. So the first thing you wanna
do is really kinda bring all of that information in together.
We also wanna start to, in that process, start identifying how some
of those retirement resources are gonna be able to work for you to provide you with the retirement
lifestyle that you want. We call it your retirement gap. So fortunately, we've got
a couple of tools available to help you with this process. One of those, and we'll
put a link right below today's video, we just
recently launched our 7 Core Elements of Retirement Planning video series and action plan, so that's kind of a
do-it-yourself type of a plan where you can start to
get some of this financial information organized. And of course, we also do
financial planning as well. We call it our WealthVision
comprehensive financial plan where we do it for you. So we'll put links to both
of those below today's video, but number one is get organized.
Number two is we wanna
look at how we can kind of optimize some of those
retirement assets that you have. We call this shift money
to tax advantaged accounts. So as you approach retirement, for a lot of people, we
find that your cash flow tends to improve or get
a little bit better. Maybe your kids have
moved out of the house, you're done paying for college, they're kind of
self-sufficient on their own. Hopefully if your career
and your job is going well you're maybe making a
little bit more money. So you might have a little
bit more cash flow available to save money for retirement.
But we also wanna look at where some of those
monies are being saved. And what we find for a lot of people is if you have money in
non-retirement accounts, taxable accounts that you have to pay income taxes every year on, are there ways or opportunities for you to shift that over into
tax advantaged accounts. And we find for many people, there are. So take a look at, are you
maxing out your 401(k) plan? Some 401(k) plans allow you
to save an additional 10% in an after-tax savings vehicle. There's a recent tax
law that now allows you to move that money directly
to a Roth IRA account, even if you're over the income limits.
You can contribute money to IRA accounts or Roth IRA accounts, there's
lots of strategies there, but can we shift money from
one side of the balance sheet where you're not getting
that tax advantage over into a retirement
account, is number two. Number three is know
your healthcare options. This came up recently, and it was listed as one
of the number one concerns for retirees going into retirement is how much is my healthcare gonna cost? And understanding that is very important because it's some big,
big price tags on this. If you're working, and
your employer is offering healthcare insurance now, you
wanna visit the HR department. Find out, well, what do they do, do they do anything for you in retirement. Is there any options to
continue that healthcare, especially if you are gonna
be retiring prior to age 65 when you're eligible for Medicare. If you're married, check out
what your spouse offers too and compare those different plans, start putting together some ideas of how much that healthcare is gonna cost because you don't wanna
get blindsided by that.
In fact, there was actually a recent study that JP Morgan did a couple years ago, and they actually said
that if you had to go out into the exchanges, the
Affordable Care Act exchanges, for a 64-year-old it would
cost you about $8400 a year per person for just a Silver Plan, so that's not even the top-level plan. So understand what those options are, check with your employer,
that's number three.
Number four is you wanna think
about your plan for income. So, hopefully, if you've
done some financial planning, you've identified some of those gaps, you know where those gaps are. And what we find oftentimes is especially early on in retirement, where your income and expenses still may be a little bit more variable, you wanna understand what
some of those gaps are and how much money will you
potentially have to pull out of those retirement accounts. Are you eligible to take money out of those retirement accounts? Are you over 59 and a half if it's an IRA, are you over 55 if it's a 401(k)? You don't wanna get
hit with any penalties. Start planning out what that
income strategy's gonna be, and maybe having some of that money in a little bit more
conservative type of investments so you're not blindsided by,
oh my gosh, I'm retiring, I need to take $20,000 out
of a retirement account and guess what, the stock market's down. So think about that plan for income and where's the money gonna come from.
And then number five, I love this one, because I think it kind of fulfills two issues here with retirees, and it's consider a semi-retirement. So I think the idea for most of us, and in fact what I think
about my own retirement when that happens, the idea of
working 40, 50 hours a week, and then all of a sudden one
day just throwing in the towel and never working again
sounds a little bit abrupt. So we've been talking to a lot of clients about semi-retirement,
and easing your way into a retirement situation where maybe you go to a part-time status, maybe you do some
consulting for a few years, or maybe you just do a job that
you've always wanted to do. Maybe it doesn't pay a lot, but it's fun, and you enjoy doing it, and
it can also help to sustain some of that early
retirement spending needs that you're gonna have as well.
So again, and especially
if you wanna do strategies like maybe delay social security benefits, having some of that semi-retirement income can really help fill
some of those gaps there. So think about semi-retirement,
that's something that can be done during
the planning process where you can see how
that income might help your overall financial situation. That's it for this video, there you go,.
Well it's great to be with you all again it's
another video day for us – It is – So things that we wish we knew before we retired almost
sounds like a country music song there Tina – And I guess you must be feeling lucky
today Norm – Oh yeah got my lucky shirt on so because we're filming been to
Costco – Got the great deals haven't we – We have so one of the things that we wish we knew
before we retired was how free it is how stress free no longer having to get up and go through the
morning ritual of preparing yourself to go to work and being accountable to somebody else all
day long it's wonderful to be accountable to your own self and your partner that's it
you're your own person and it's such a freeing feeling and we saw that with Tina when she gave
up work the amount of stress we hadn't realized until a few years after retirement just how
different she was she'd lost all that stress of meeting quotas and all that good stuff – And I think
I'll just add Norm that when you're actually doing the job you actually don't think it is stressful
you don't think you are under all this stress until you stop it do something else and
you think wow this is a lot better we like this it's great so just being accountable to ourselves
we love it don't we – It is totally life changing – One thing that we do think is very important
before you retire is you do need to have a discussion with your partner as to what it is
that the ideas that you're both thinking you have when you're going to retire you do need to
have some goals about, do you want to travel do you want to garden or do hobbies do you want
to stay home you really do need to have that conversation to make sure you're both on the
same page – I think it is it is important and we hear a lot from some comments especially
married women who are saying that their husband their frightened the husband will get under their feet
because he'll be hanging around all the time in retirement but that really isn't the case – Not
for us is it – We've been secure as a couple for the longest time and retirement hasn't changed
how we feel about each other and about what our expectations of each other is it's not as if
we've all of a sudden being locked up together in retirement (no) so it is important to figure out
what you both want out of retirement and to have that discussion a few years before you actually
do retire (yeah) one thing to bear in mind is the first few years of your retirement you'll
be your most healthy so just use that health and strength that you do have in the early years
to achieve some of the goals that you want – Yeah and if you want to be traveling do it while
you've got that – Don't think about traveling if that's on your list just do it right away – Yeah
absolutely and that's what we've done isn't it when we retired we just traveled everywhere
didn't we it was great – About two years before we retired we had an inspector come to the house
for I don't even remember what it was but it was some form of home inspection that we had to and
so we got chatting with him because he was a few years older than us but not that much and he told
us that he had a house very similar to ours that he had sold and now he was living an apartment
and he went through the whole process of them and how they moved to the apartment and how
it was such an improvement on their life and it was something we'd never ever considered
– This was big news to us wasn't it we never even thought about renting an apartment – We had been
homeowners since we were 19 years old so to rent we had that preconceived idea that it was throwing
money away but the more that we looked into it so after he left the next couple of days we spent
many hours thinking about this we did a budget of how much it cost to keep our mortgage free
home – Yeah crunched all the numbers – And what the rent would be and if we had sold the house and it
made more and more sense to us to sell the house to downsize into an apartment bank the money
from the house live off that as an investment and that's what we did – And that's what we did didn't
we – But had that guy not come to our house we might never have come up with that idea – No because
originally we had thought that we would just buy a smaller house didn't we – That's right yeah
– So part of our decision when we had actually now decided that we were going to rent and we realized
that would take care of we wouldn't have all this maintenance and stuff like that to do we decided
after we started looking at apartments that if we moved to a cheaper area could we benefit by
getting the same as what we wanted in an apartment but would it cost us less money so the more
we looked into it we did have a family member who lived in a cheaper place so we looked
at the equivalent of renting an apartment in this new place and it was so much cheaper
wasn't it Norm – Because we initially thought we would just sell our house and stay in
the same area so we started shopping for apartments to find out how much they cost and the
availability and we were pretty surprised that at the expense of them but we were prepared
to pay that (yeah) and then we came to a what you would call it a small town that's cheaper
(yeah) we came to visit a family member here and so we started looking around at the apartments here
and they were substantially cheaper about $800 a month cheaper than where we were initially going
to – Yeah and not only that Norm there was a lot of extras with it wasn't that we got there was
underground parking and what else a swimming pool – And laundry facilities in the apartment – And that
was one thing the gentleman had told us he didn't have on-suite laundry he had it in a laundry room
so we wanted that – But coming to the cheaper town it wasn't just the rents that were
cheaper everything was cheaper the Tina's hairdresser as we've
said in the past was cheaper it just permeated everything so our budget became
so attainable (yeah) by moving – That gave us a lot more money to be able to travel didn't it because
we thought if we can save money on a daily basis and it worked perfect didn't it – It did it was
great, take a look at that if you do have family that live in an area that might be cheaper or
just consider going not knowing anybody – No it's like a new adventure isn't it a new chapter in
your life because we've made friends here and they don't have any family just here but they've
made it a new place for them haven't they – A lot of people have moved out of the big cities to a
small town because it's it's far more conducive to retirement (yes) and friendlier another
thing that you really need to consider is where your friends are going to come from
in retirement because once you leave work those friendships tend to wither away because
the only common bond you have was your job your workplace so we've never
really had lasting friendships from work colleagues they've always been outside
of there so it's it's critically important to continue looking for friendships in retirement
and being outgoing and prepared to speak to people Tina when we moved to this apartment building
they did have a social room and they did a coffee morning and so she would go down there and we
found out so much information about the town and businesses to use – It was great wasn't it – It was – It
was kind of my mission wasn't it to find out new information and to try and make new friends
which we did and we made some fabulous friendships – Well in particular there was one couple that Tina
made struck up a friendship with and they in turn have introduced us to another couple yeah and then
they in turn have introduced us to another couple so that's how it goes – Yeah so now we've got
a group of really close nice friends that we socialize with don't we – And the thing that we have
in common isn't an employer it's being retired – It is isn't it – It really is so don't be afraid
of striking out to a new city a new town because it's relatively easy to make friendships
– Yeah you just have to push yourself out there a little don't you and be confident to going to
things and it's very exciting isn't it so we hope that everybody is staying safe – And keeping
well – Until the next time bye bye, bye bye
FOR PEOPLE RIGHT NOW WHEN IT COMES TO SAVING . >> I THINK IT'S THE SAME THING THAT MAKES MOST SENSE FRANKLY ALL OF THE TIME, AND THAT IS TO CONSISTENTLY BUY AN S&P 500 LOW COST INDEX FUND. KEEP BUYING IT THROUGH THICK AND THIN, AND ESPECIALLY THROUGH THIN. BECAUSE THE TEMPTATIONS GET — WHEN YOU SEE BAD HEADLINES IN NEWSPAPERS, MAYBE TO SAY WELL MAYBE I SHOULD SKIP A YEAR OR SOMETHING. JUST KEEP BUYING. AMERICAN BUSINESS IS GOING TO DO FINE OVER TIME. SO YOU KNOW THE INVESTMENT UNIVERSE IS GOING TO DO VERY WELL. THE DOW JONES INDUSTRIAL AVERAGE WENT FROM 66 1,497 IN ONE CENTURY, AND SINCE THAT CENTURY HAS ENDED, IT'S MORE OR LESS DOUBLED AGAIN. AMERICAN BUSINESS IS G. THE TRICK IS NOT TO PICK THE RIGHT COMPANY, IT'S TO BE — BECAUSE MOST PEOPLE AREN'T EQUIPPED TO DO THAT. AND PLENTY OF TIMES I MAKE MISTAKES. THE TRICK IS TO ESSENTIALLY BUY ALL THE BIG COMPANIES THROUGH THE SFUND AND TO DO IT CONSISTENTLY, AND TO DO IT IN A VERY, VERY LOW COST WAY. BECAUSE COSTS REALLY MATTER. AND INVESTMENTS, IF RETURNS ARE GOING TO BE 7% OR 8% AND YOU ARE PAYING 1% THROUGH FEES, THAT MAKES AN ENORMOUS DIFFERENCE IN HOW MUCH MONEY YOU HAVE ON RETIREMENT.
>> AT THE ANNUAL MEETING FOR BERKSHIRE HATHAWAY THIS YEAR, YOU INTRODUCED A SPECIAL GUEST TO THE AUDIENCE OF 40,000 SHAREHOLDERS WHO WERE WATCHING. IT WAS JACK VOGEL. WHY DID YOU WANT TO RECOGNIZE JACK VOGEL? >> I THINK JACK VOGEL HAS DONE MORE FOR AMERICAN INVESTORS THAN ANY OTHER PERSON CONNECTED WITH WALL STREET OR T BECAUSE WITH A NUMBER OF OTHER PEOPLE WE CAME UP WITH THE IDEA, HE WASN'T THE SOLE THINKER BEHIND IT BUT HE WAS THE GUY WHO IMPLEMENTED IT AND CRUSADED FOR NOW TRILLIONS OF DOLLARS IN LOW COST INDEX FUNDS.
MOST PEOPLE ARE GOING TO HAVE BETTER LIVES, BETTER RETIREMENTS, THEIR KIDS ARE.Read More
ARE WHO UNTIL WE HAVE A QUORUM WE'RE GOING TO GO STRAIGHT IN SESSION FIRST. >> SO IT IS ORDERING A CLOSED SESSION FROM RECORDING IN PROGRESS AT AND NOW IT'S OFFICIAL. WE'RE CALLING THIS MEETING TO ORDER AND WE'RE GOING TO GO DIRECTLY TO CLOSE SESSION. >> FIRST OF ALL, WE HAVE TO COME TO OK BUT ON VACATION GOOD AROUND THE ROOM. >> FRANCO IS IS HERE DAVID COHEN HERE UH, SANTO'S ANDREW GARDNER SFR IS NOT HERE. DAVE WILSON HERE, HOWARD LEE PRESENT AND SUNEET, UH, SHE KNOWS SHE'S ON HER WAY. SHE IS. BUT ECHA BEGGED OFF RIGHT.
MEET IS HE NOT COMING TODAY? IT'S OH HE'S COMING TO EXXON. >> ALL RIGHT. WELL WE'LL DO ANOTHER ROLL CALL WHEN WE GET BACK FROM MY GUN SESSION NOW PLEASE. >> MOM, CAN WE GO IN CLOSED SESSION NOW? >> ARE WE GOING TO CAN WE UM YES. >> ALL RIGHT. SO WE'RE GOING OUT FOR ABOUT WHAT DID YOU FIGURE FORTY FIVE MINUTES AN HOUR MAYTAG I'M SORRY WHAT DO YOU FIGURE. FORTY FIVE MINUTES AN HOUR. SURE THERE'S YOU ITEMS FOR CLOSED SESSION. ONE OF THEM IS WHICH I'M RECUSED SO I'M NOT SURE HOW LONG OUR COMPANY COUNSEL UNRESTRICTIVE NEEDS IS ON THE LINE.
NO NO THERE WON'T BE SO I WELL IF YOU'RE IF YOU'RE RECUSED I'M SHOOTING ABOUT THIRTY SECONDS BECAUSE WE KNOW TOO WELL OK SO THERE'S NOT GOING TO BE ANY RECUSAL AND I WOULD ESTIMATE THE THE CONCESSION WOULD BE ABOUT FIFTEEN MINUTES. >> OK FOR THAT ITEM YOU MEAN . YEAH YEAH WE'LL TRY TO BE BACK BY NINE THIRTY FOLKS THANKS. UH OH UH OKAY UH UH UH UH OH OH OH UH UH UH UH UH UH UH UH OH UH UH UH UH UH UH OH UH UH UH WANT TO GO AHEAD AND PAY THE MONEY GO AND GET STARTED AGAIN. UH, WE'LL START JUST RIGHT FROM THE TOP EVEN THOUGH YOU DON'T HAVE TO SO MUNI'S CALLED TO ORDER. >> I THINK IT'D EASIER NEVERTHELESS TO STOP WE HOLD ON A SECOND. >> YEAH GO AHEAD. WE HAVE TO WAIT FOR THE MEETING UNTIL WE GET THE RECORDING BACK ON.
>> OH GOT GOT IT. SO WE'RE BACK FROM CLOSED SESSION. NO HOLD ON STILL. I THINK THEY'RE STILL WORKING ON RIGHT. >> I THOUGHT I HEARD IT WAS I STOPPED. OH SO THEY'RE GOING TO TRY TO PUT IT BACK ON. >> THANK YOU GOD NO WE CAN GO RECORDING PROGRESS. OH THERE WE GO . OK, HEY WE'RE BACK CLOSED SESSION NOTHING TO REPORT OUT. >> WE'RE GOING TO GO AHEAD AND START FROM BEFORE YOU GO ON SO THERE IS NOTHING TO REPORT OUT AND JUST FOR THE RECORD, UM, REED SMITH, HARVEY LIEDERMAN MAITSKI CHINA MERIBEL RECUSED HERSELF FROM CLOSED SESSION ITEM ONE B RIGHT. >> WE HAD THE LEGAL MATTER AND WE HAD NATURE MATTER AND ATTACKING HARVEY HELPED US REACH OUR MATTER AND THEN LEFT THE ROOM. >> THANKS. >> UM, LET'S GO AHEAD. NEW ROLL CALL ANYWAY I SAW DUCKED IN THE LADIES ROOM SHOULD BE UH UH FRANCO HERE DAVID KWAN HERE. YEAH. AS ANDREW HE'S HERE SOMEWHERE.
>> ESRAA YEAH. DAVE WOHLSEN HERE HOWARD LEE PRESENT AND SENJU JUST WALKED IN THE ROOM. >> UH YEAH UM LET'S SEE UM THEY GIVE ME A PIECE OF PAPER EVERY TIME SOMEONE'S GONNA READ FROM IT. UM ITEM ONE A JUST CAUSE UNDER A BIT TOO FAR FOR NINE FOR THE RECORD EVERY TRUSTIES HERE IN PERSON WE'RE NOT UTILIZING THAT AND FADEM ONE BE EMERGENCY CIRCUMSTANCE UNDER THAT SAME ASSEMBLY BILL FOR THE RECORD BEGINNING OF HIS HEARING NOBODY UTILIZING THAT. >> OKAY THEN WE'LL MOVE ON TO ORDERS OF THE DAY AND WE DO THAT. >> YEAH GO AHEAD. WE HAVE ONE ITEM FOR TWO WEEKS SUNSHINE ON I'M NOT SURE WE KNOW WELL THEY WANT ME DO ORDERS AND THEN DO WAIVE SO I'VE GOT IT SO SO SO FOR ORDERS OF THE DAY IF I COULD PLEASE ASK FOR ITEMS FOR DE AND FOR JAY TO BE HEARD TOGETHER. >> OH GREAT OK AND THAT DOVETAILS NICELY WITH THE FIRST ITEM ON DAUDZAI WHICH IS BILL. >> HI BILL I'M KIERAN'S ASKED FOR LIVES WE BILL YOU CAN DRIVE THE BUS ANY WAY YOU WANT TO OK IT SAYS THE ORDER BEFORE F FOLLOWED BY THREE NEXT TIME MAKE UP YOUR MIND BILL IS THAT AND BACK THERE DIANE GREAT.
>> RIGHT NOW WE'RE GOING TO WAIVE SUNSHINE . WE I'D LIKE A MOTION TO WE NEED A VOTE ON THE WORDS OF THE DAY. >> DO YEAH. >> OK NEED RUSSIAN TO BOUVARD THE DAY. I NEED A SECOND SECOND I HAVE A FIRST FROM SANTOS SECOND FROM VOLVO ALL IN FAVOR SAY AY AY AND HE OPPOSED NO. >> ALL RIGHT WE'RE GOING TO WAVE SUNSHINE ITEM ONE POINT FOR E THE LEFT DASHBOARD AND ITEM SEVEN POINT TO F WHICH IS A A SOUP OF INITIALISM A PDF A CFR BLAH BLAH BLAH. >> SO MOTION TO PROVE UH DO I HAVE A SECOND SECOND I HAVE A MOTION BY SANTOS ALL IN FAVOR AY AY AY AY GREAT. >> ANY POST UH FLOOR'S OPEN ANY CITIZENS WANT TO FAMING.
>> YEAH. WELCOME BACK. THANK YOU. I'M BACK I HAD SIX WEEKS IN SPAIN AND PORTUGAL. >> I'M TAN AND GORGEOUS AS YOU MIGHT EXPECT. >> UM I'M GOING TO PULL SOMETHING OFF THE CONSENT CALENDAR DECEMBER. I DON'T WANT TO PULL ANYTHING ELSE OFF GANSETT CALENDAR. >> I PUT SOMETHING ON THERE CALLED ENGINEERING ALFORD'S WORK. I DO WRITE FOR I LEFT IN AUGUST. I WANT TO GO THROUGH THE BOARD. I'LL TAKE A MOTION TO PROVE ALL THE CONSENT CALENDAR EXCEPT ITEM ONE POINT FOR G IN ALPHA JOB MOTION DIRIDON CONSENT CALENDAR OF MOTION ON SANTOSO. THE SECOND THING GARDNER I HAVE TO THANK MY GARDNER ON PAPER I I GREAT. >> UM CAN YOU GUYS PULL UP THAT ENGINEERING THING GO TO THE FIRST COLOR SLIDE UH THE ONE RIGHT BEFORE THAT GREAT. SO GOSH I'VE BEEN YOUR OWN I'VE BEEN HERE OVER 13 YEARS. I JOINED THE ARMY. YOU DID. >> SO I KEEP TELLING YOU GUYS THAT VINCE AND ZERI AT HIS MANSION IN FEBRUARY 2012 CAME UP WITH A PLAN THAT ACTUALLY WORKED OUT PRETTY WELL IN WITH JAY IN THE AUDIENCE.
>> JAY IS ONE OF THE GUYS WHO BENEFITS AREAS IN HIS BRAIN SO IT'S BEEN GOING ON NOW FOR FIVE YEARS. >> SO I FIRST CLOSE FIVE YEARS WE'VE BEEN DOING IT AND I WANT TO LET YOU KNOW GOD BLESS VINCENT ZERO WHEREVER HE IS, WE SHOULD GIVE HIM A MEDAL. >> HERE WE GO . SO THIS FIRST SLIDE SAYS IN GREEN THERE'S OUR DISCOUNT RATE IN OUR ACTUAL RETURN THOSE ARE KAFIRS THOSE ARE HARD NUMBERS. RIGHT. AND THERE'S A BENCHMARK RETURN .
THERE'S A BENCHMARK WE TRUST LAW WORK AND OUR FRIENDS HAVE TO GIVE THAT TO US. >> IF YOU LOOK AT THAT PRESENTATION I DOUBLE CHECKED THAT'S A PRETTY GOOD BENCHMARK . THEY KNOW WHAT THEY'RE DOING AND THERE'S THE ALPHA. WE GENERATE IT NOW FOR THOSE WHO WITH FINANCIAL KNOWLEDGE ALPHA JUST SAYS YOU BETTER THAN THE OTHER GUY. AND IN FACT IN THIS ENGINEERING ALPHA THERE'S A TECH SECTION SORT OF LIKE ALPHA FOR DUMMIES THAT THAT I WROTE. >> RIGHT. SO IF YOU'RE A FINANCIAL GUY, THERE'S ONLY ONE THING THAT STANDS OUT TO FROM THAT ALPHA COLUMN AND IT'S NOT THE NUMBERS BACK ALL POSITIVE. >> SO YOU KNOW, ALPHA CAN MEASURE LUCK OR SKILL AND YOU WANT TO GET OUT OF LUCK PART WELL I THINK YOU HIT FIVE MONTHS IN A ROW.
>> THAT'S NOT LIKE NEXT SLIDE NEXT SLIDE. >> NEXT SLIDE. OH YEAH. ALL RIGHT. >> SO YOU CAN MULTIPLY THE SIZE OF THE FUND BY THAT ALPHA AND YOU CAN SEE THAT OVER FIVE YEARS OUR TEAM IS GENERATED ABOUT ONE HUNDRED THIRTY MILLION DOLLARS WORTH ALPHA. SO IF BELIEVE WHAT I JUST SAID, LET ME PUT IT IN PLAIN ENGLISH ANY OTHER TEAM WOULD HAVE GENERATED ZERO AND THEY GENERATE ONE HUNDRED THIRTY MILLION. >> SO VINCE RIGHT NEXT SLIDE I'M GOING TO SHOW THREE SLIDES A WHOLE LONG THING NEXT SLIDE PLEASE. >> AND OH YEAH OK ALL RIGHT. >> SO TWELVE YEARS AGO I GOT THIS TEAM SO STUPID I'VE BEEN DOING THIS LONG WE GET TIRED OF GOING FOR CONFERENCES AND BEING TOLD WE I SWEAR TO CHRIST SOMETIMES YOU DO THE WEIRDEST THINGS IN LIFE BECAUSE PEOPLE TELL YOU YOU'RE UGLY.
AND VINCE SAID WE DON'T. YOU GUYS ALL KNOW THIS WE HAVE TO BE MORE CONSERVATIVE THAN OUR PEERS. >> AND VINCE SAID THERE IS A WAY FOR US TO BE MORE CONSERVATIVE THAN OUR PEERS BUT HAVE THE SAME RETURN AND THAT SKILL THAT'S ALPHA AND SO UNUSUALLY FOR A PENSION PLAN OUR SIZE WE HIRED A TEAM TO SEE IF THEY COULD GENERATE ALPHA I'VE JUST SHOWN YOU THEY DID SO WE CAN ASK BILL UNAN AND I DID IN JULY. >> SO THERE'S KIND OF LIKE FOUR SCENARIOS HERE AND YOU CAN SEE THE FIRST ONE IS HEY, WHAT IF WE WERE ANY OTHER PENSION PLAN AND WE NEVER HIRED OUR TEAM, WHAT WOULD WE DO? >> WELL, THAT'S A BASELINE CITY SAVINGS. >> THERE WOULDN'T BE ANY SAVINGS. WE'RE JUST PLUG IN AND COMPUTERS GENERALLY RETURN THEN WE CAN SAY WE'LL KEEP IT. WHAT ABOUT WHAT IS OUR TEAM DONE TO DATE RIGHT NOW? >> DON'T FORGET IF WE RETURN MORE TODAY WE HAVE TO CONTRIBUTE LESS TOMORROW BECAUSE THE PLAN IS 80 PERCENT FUNDED, KICKS IN A LOT MORE HEAVIER THAN PLANS.
EIGHTY FIVE PERCENT FUNDED AND SO IT CAN BE ARGUED THAT ALL OF THE TEAM IS GENERATED TO DATE. ONE HUNDRED AND THIRTY MILLION SAVINGS OVER THE NEXT QUARTER CENTURY IT WILL GENERATE ANOTHER ROUGHLY. >> NOW COMES THE IMPORTANT PART OF THIS PRESENTATION RIGHT. WE COULD ALSO SAY WELL THE TEAM FELL APART BUT WE DECIDED TO RAISE OUR DISCOUNT RATE TO OUR PEERS AND THAT WOULD SAVE THE CITY ALMOST A BILLION DOLLARS OVER THE NEXT QUARTER CENTURY. AND NOW FOR THE BIG DEAL IF WE KEEP OUR TEAM INTACT AND IF WE RAISE OUR DISCOUNT RATE WHICH IS THE WHOLE REASON WE DID THIS IN THE FIRST PLACE THIS I HOPE EVERYONE LISTENING. WE FORECAST THE CITY WILL SAVE OR BE GIVEN A BILLION DOLLARS OVER THE NEXT QUARTER CENTURY A BILLION DOLLARS NOT FOR OUR FUN GUYS TO BUILD LIBRARIES TO DO EVERYTHING ELSE.
>> ALL RIGHT. NOW I'M GOING TO READ SOMETHING IN THE MOST IMPORTANT THING I WILL EVER READ ON THIS BOARD. >> YOU AS SOON AS I READ THIS, YOU'RE ALL GOING TO GET A COPY OF IT. >> HERE WE GO . TO SHARE OF ONE SORT OR ANOTHER FOR MORE THAN HALF A CENTURY I FIRST BECAME ONE WHEN MY FATHER DIED A WEEK AFTER MY 16TH BIRTHDAY I BECAME A FIDUCIARY FROM BROTHER AND SISTER. >> I BECAME THEIR TRUSTEES. I'VE BEEN A FIDUCIARY NOW ALMOST A HUNDRED TIMES. >> THERE ARE TWO CORE FIDUCIARY DUTIES THOSE OF CARE AND LOYALTY TO DO WHAT A PRUDENT PERSON WOULD DO IN SERVICE TO THE PERSON ORGANIZATION ONE IS FIDUCIARY HERE AT SAN JOSE I HAVE FINAL YOU COME UP AGAINST A FIDUCIARY CHALLENGE THAT I CANNOT SURMOUNT SO THIS WILL BE MY LAST MEETING AND I'M READING TO YOU NOW IS MY RESIGNATION LETTER. >> I WILL LEAVE THIS BOARD AND THIS MEETING WHEN THIS BRIEF MEMO I'M READING IS DONE AND I WILL NOT RETURN.
>> I'M NOT LEAVING. BYE BY CHOICE AND I BEG YOU ALL DO TEND TO MY BRIEF FOLLOWING REMARKS THEY ARE THE MOST IMPORTANT THING I'LL EVER SAY. >> THEY'RE IMPORTANT ENOUGH TO FORCE ME OFF THE BOARD. I LOVE AND I'VE BEEN A PART OF FOR WELL OVER A DECADE. >> I HAVE LABORED ALONGSIDE ALL OF YOU ON THIS BOARD TO SOLVE OUR PLANS FINANCIAL STRAITS VINCENZO AARE SUGGESTS THE PATH TO DO SO MORE THAN A DECADE AGO AND GUESS WHAT FOLKS? HE TURNED OUT TO BE RIGHT FOR BONES WE HAVE JAY BACK THERE ARE THE INSTANTIATION OF VINCES VISION A VISION HE CAME UP WITH ELEVEN AND A HALF YEARS AGO, PUT BLUNTLY, VINCENT PRABHU GAVE BIRTH DELIBERATELY GAVE BIRTH TO GOOSE THAT LAYS GOLDEN EGGS GOLDEN CONSISTENTLY, PREDICTABLY AND SUSTAINABLY WE PULL THE RABBIT OUT OF THE HAT FOLKS WHERE PEOPLE SAY YOU CAN'T GENERATE ALPHA I'M A VENTURE CAPITALIST GUYS.
>> ALL I EVER DO IS GENERATE ALPHA. I'M A VERY WEALTHY MAN. I DO WELL I'VE JUST DETAILED OUR GOOSE'S PERFORMANCE AND I THINK WE'D ALL AGREE IT'S STUNNING IN ITS EXTENT GIVEN THAT OTHERS NATURALLY COVID OUR GOLDEN GOOSE. >> I'VE BEEN RINGING AN ALARM BELL SINCE LATE LAST YEAR THAT WE NEED TO PROTECT THIS GOOSE OF OURS OR GIVE UP EVER ENJOYING ITS GOLDEN EGGS AGAIN. >> IT'S BEEN POINTED OUT TO ME BY PEOPLE I TRUST AND RESPECT THAT I MUST STOP RINGING BELL ALARM BELL THEY'VE EXPLAINED TO ME WHY AND I CAN SEE THE RIGHT BUT MY INSTINCT TELLS ME THAT IF I STOP RINGING THE BELL TO GOOSE PARRISH OUR TEAM THAT'S THE FIDUCIARY CHALLENGE. >> I CANNOT GET BEYOND I'M BEING TOLD AND RIGHTLY JUST STAND AROUND AND WATCH AN IMPRUDENT DISSERVICE HAPPEN TO CITY WE ALL LOVE.
>> I'M BEING TOLD TO VIOLATE MY CORE FIDUCIARY DUTY RIGHT HAVE AND WE'RE UNCERTAIN FUTURE. YES WELL SORRY ABOUT THAT. UH UH HEY HEY. UH I'M UH I HAVE A SLIGHTLY A SLIGHTLY OLDER VERSION SO I'M SORRY NEIL DIRIDON SMACK PEOPLE AROUND THE UNIVERSE AND I'M PRETTY FRIENDLY. JUST STAND DOWN AND WATCH AN IMPRUDENT SERVANT. THIS SERVICE HAPPENED TO OUR CITY TO VIOLATE MY CORE FIDUCIARY DUTY BY CHOOSING INSTEAD TO DO MY OFFICIAL OR PRESCRIBED FIDUCIARY DUTY AND AFTER BEING A FIDUCIARY FOR SO MANY DECADES I JUST CAN'T LET GO OF THAT HIGHER FIDUCIARY CALLING.
>> SO I'M GOING TO RESIGN FROM THE BOARD TODAY IN WHAT WILL AMOUNT TO A VERY CLEAR BREACH OF MY PRESCRIBED DUTY BY CRYING OUT ONE FINAL LOUD TOLLING OF THIS ALARM BELL THAT I FEEL IS MY MORE IMPORTANT FIDUCIARY DUTY. >> SO PLEASE PLEASE LISTEN MY CALL OUT IN GORY DETAIL THIS ALARM THAT I FEEL IS SO DIRE I'M GOING TO FALL ON MY SWORD AND LEAVE THIS BOARD I LOVE THAT HAD BEEN ON FOR THIRTEEN AND A HALF YEARS AND I'M RESIGNING SPECIFICALLY IN HOPES MY RESIGNATION TODAY WILL CARRY ENOUGH IMPACT TO OPEN A PATH FORWARD PATH I WILL DETAIL LATER IN THIS MEMO.
>> SO HERE'S WHAT I BELIEVE SO STRONGLY AND IT'S JUST A BELIEF BUT I FELT COMPELLED TO SOUND THE ALARM FOR MANY MONTHS NOW. >> AND YOU DON'T AGREE WITH THIS RIGHT TO BELIEVE ITS PREDICTION FIRST IS THAT IF WE DON'T SOON COMPENSATE OUR INVESTMENT TEAM COMMENSURATE TO THEIR GOLDEN PERFORMANCE, YOU CANNOT ARGUE WITH THE NUMBERS. >> I JUST SHOWED THE ONLY PIECE YOU CAN QUESTION IS THE ONLY PIECE I QUESTION WHICH IS THE BENCHMARK. AND IF YOU READ WHAT I PUT IN THAT CALENDAR I GENERATED A COMPARABLE BENCHMARK USING PUBLIC SOURCES. >> THE BENCHMARK IS CORRECT. I BELIEVE THIS TEAM WILL START TO LEAVE ALMOS IN THE FIRST QUARTER TWENTY TWENTY FOUR AND I BELIEVE THAT NOW SINCE PROBABLY OCTOBER OF LAST YEAR A LITTLE OVER A YEAR AGO. >> THE SECOND THING I BELIEVE AND THIS IS THE MORE IMPORTANT ONE AND YOU REALLY NEED TO LISTEN THIS BECAUSE I'M AN EXPERT IN THIS AREA WE I BELIEVE IT'S AGAIN A BELIEVE FOR PREDICTION WE WON'T BE ABLE TO JUST SIMPLY REBUILD THIS TEAM ONCE IT DISSIPATES.
>> SOME TEAMS ARE UNIQUE. I'M A VENTURE CAPITALIST. >> MY JOB IS TO FIND UNIQUE TEAMS AND THOSE TEAMS CAN'T BE EASILY RECONSTITUTED WITH NEW FACES. >> A HALF OF ALL STARTUPS FAIL AND A HALF OF THOSE ONE EVERY FOUR STARTUPS FAILS BECAUSE A KEY PERSON OR SMALL TEAM LEAVES. SO I BELIEVE THIS ALL MY HEART AND SOUL SOME TEAMS UNIQUE THAT'S A FACT I BELIEVE THIS TEAM IS UNIQUE. >> NOT EVERYONE AGREES WITH THESE TWO PREDICTIONS NOR SHOULD YOU AND THEY ARE JUST THAT INFORMED BETS ABOUT A MYRIAD OF POSSIBLE FUTURES IF MY PREDICTION PROVES TRUE AND I HOPE IT DOESN'T THE UNFORTUNATE IMPACT TO OUR SYSTEM AND TO OUR CITY WILL BE ENORMOUS. >> I TRULY BELIEVE THAT IF WE LOSE THIS TEAM IT WILL DELETE I MEAN WHAT I DID THIS BUT EVEN I DON'T QUITE BELIEVE THIS IT WILL DELAY OUR GETTING TO FOLEY FUNDED BY MORE THAN A DECADE AND IT WILL COST OUR CITY A BILLION DOLLARS NOT OUR FUND OUR CITY OVER THE NEXT QUARTER CENTURY AND YEAH, YOU THAT BE BILLION RIGHT? >> FIFTY SIXTY MILLION DOLLARS A YEAR FOR THE CITY TO SPEND ON VITAL SERVICES AND THAT MY FRIENDS IS A FIDUCIARY DUTY .
>> I WILL NOT I I CANNOT SERVE NEXT PAGE. I UNDERSTAND AND APPRECIATE THE REALITIES OF OUR CITY COUNCIL IF YOU'RE HEARING THIS PAMS HERE COUNCIL MEMBERS THOSE NUMBERS ARE NOT A THREAT OR BOAST NOR AM I CHALLENGING YOUR FIDUCIARY COMPETENCE. >> I APPRECIATE THAT YOU ARE STAYING TRUE TO YOUR FIDUCIARY DUTIES. >> I'M STAYING TRUE TO MINE. SO PAM AND COUNCILMEMBER LET'S FIND COMMON GROUND IN THE BELIEF THAT HERE IN SILICON VALLEY ALL AROUND US WE SEE THE IMPOSSIBLE MAGNITUDE OF WHAT UNIQUE SMALL HIGH FUNCTION TEAMS CAN ACCOMPLISH. >> I MET STEVE JOBS AND WOZNIAK RIGHT BEFORE THEY STARTED APPLE JUST TWO KNUCKLEHEADS IN SEARCH OF A DREAM. LET'S TAKE THIS SHARED BELIEF IN HOW SPECIAL THIS TEAM IS AND LET'S WORK HAND IN HAND OVER THE NEXT MONTH OR TWO.
>> BRING HOME THAT ONE BILLION DOLLARS FOR OUR CITY AGAIN NOT OUR FUND A BILLION DOLLARS TO SPEND ON SERVICES. >> I BELIEVE THIS SMALL HIGH FUNCTION TEAM THAT OUR BOARD AND YOU TO CITY COUNCIL HELPED DESIGN AND ASSEMBLE CITY COUNCIL BUT GIVES MATAJI WHICH ALLOWED US TO ASSEMBLE THIS TEAM. I BELIEVE THIS UNIQUE TEAM ALONE CAN DELIVER THAT LEVEL OF PERFORMANCE IF YOU COUNSEL AND BOARDS BRISKLY GET AT THIS MATTER I BELIEVE THERE'S STILL TIME TO KEEP THIS GOOSE LAYING ITS GOLDEN EGGS FOR OUR RETIREMENT SYSTEM IN OUR CITY FOR MANY YEARS TO COME. >> NOW I'M GOING TO BREACH MY FIDUCIARY DUTY. >> CAN I PLEASE STOP YOU THERE YOU CAN'T REACH YOUR FIDUCIARY DUTIES AND I WANT TO COUNSEL YOU WHATEVER YOU'RE GOING.
WELL, I'M DOING THIS THIS IS A RESIGNATION LETTER SO I'VE ALREADY JUST RESIGNED MAY HAVE BEEN ALLOWED BY THE BOARD TO FINISH MY SEARCH SO LONG AS IT'S CLEAR ON THE RECORD THAT OH YEAH YEAH YEAH. >> PUBLIC MEMBERS YES. APPOINT YEAH YOU JUST JUMPED TO THE BOTTOM OF THE NEXT PARAGRAPH. >> SO HERE'S THE FAN STANDING IN LINE RIGHT. >> I'VE SAID THIS FOR OVER A YEAR THERE IS ONE POSSIBLE SOLUTION THOUGH NOT THE DESIRED ONE AND LET ME BE AS CLEAR AS I CAN BE I HAVE NEVER SUGGESTED WHAT I'M ABOUT TO SAY IS THE DESIRED SOLUTION A SOLUTION NOT ZERO WOULD BE JUST SPIN PRABHU AND HIS TEAM OUT INTO A SEPARATE COMPANY PLAN B IN CASE THE PREFERRED PLAN A A CITY SPONSORED INCENTIVE COMPENSATION SYSTEM FAILED A LESSON FROM A STARTUP WORLD IS ALWAYS ALWAYS ALWAYS MANY PEOPLE SEEN TELL US TO KEEP THE MAGIC INSIDE THE SYSTEM IF YOUR BOSS WILL LET YOU DO IT AT YOUR BIG COMPANY DON'T YOU BIG COMPANY AND THAT'S YOUR PLAN.
>> BUT THE LESSON LEARNED IS TO SIMULTANEOUSLY HAVE A PLAN B IN YOUR POCKET. JUST SPIN THE MAGIC OUT IN CASE THE SYSTEM REJECTS IT. >> THIS IS NOT ROCKET SCIENCE FOLKS. >> THE GOAL IS THE MAGIC NOT KEEPING SOME SYSTEM APPEASED ESRAA AND ON YOUR JOHN PEIRSOL SHEPHERD PLAN A A WELL THOUGHT OUT SILLY SPORT INCENTIVE SYSTEM AS COMPETENTLY AS ANY OF US HAVE.
>> I WAS THERE EVERY STEP OF THE WAY AND THEY DID EVERYTHING RIGHT A YEAR TO GO MAN MAYBE TEN MONTHS AGO I PUT THE ODDS OF THAT PLAN A SUCCEEDING AT NINETY PERCENT OR HIGHER. >> I NOW BELIEVE THAT IF THE FACTS ON THE GROUND DON'T MATERIALLY CHANGE BY MONTHS AND PLAN IS DEAD IN THE WATER MAY PROVE TO BE IT'S THAT WARNING ALARM TO GET READY NOT TO EXIT BUT TO GET READY. THE REASON WE HAVE A PLAN B IT'S THE YOU CAN DO THINGS IN PARALLEL RIGHT TO GET READY FOR PLAN B IN CASE WE NEEDED IT BECAUSE PLAN A FAIL AND THAT'S THE ALARM NOW BY SOUNDING AND MAYTAG MAYTAG'S BY SOUNDING ISLAM SO MANY TIMES AND NOW SO BLUNTLY AND FORCEFULLY AND RIGHT OUT IN THE OPEN COUNCIL AND SHE JUST DID ASSURES ME I'VE CROSSED A BRIGHT FIDUCIARY LINE SAID IN SIMPLE TERMS I'VE FELT COMPELLED TO BREACH MY FIDUCIARY DUTY IN ORDER TO DO MY FIDUCIARY DUTY.
>> LIKE I SAID IN THE BEGINNING, FOLKS, THIS IS A FIDUCIARY CHALLENGE. >> I CAN SEE NO WAY AROUND NOR CAN THE HALF DOZEN OR SO EXPERTS. I'VE PAID A LOT OF MONEY ON THIS ONE GUYS AND MENTORS I UNNERVE PEOPLE ARE ALMOST 90 WHOSE WISE COUNSEL I'VE SOUGHT SINCE MAY IN OVER FIFTY YEARS AND ACROSS NEARLY A HUNDRED FUTURE ASSIGNMENTS I'VE NEVER COME REMOTELY CLOSE TO BREACHING MY FIDUCIARY DUTIES BUT I JUST DID IN THE WORLD I INHABIT THAT LEAVES ME NO ETHICAL CHOICE BUT TO RESIGN.
YOU DON'T BREACH YOUR FIDUCIARY DUTY DUTIES RIGHTS A BIG HUGE NO NO AND I JUST DID BUT I FELT LIKE IT'S OK BECAUSE I DID IN ORDER TO DO MY FIDUCIARY DUTY I'M IF I DO AND IF I DON'T. MANY OF YOU KNOW THE STORY ABOUT ALEXANDER THE GREAT AND GORDIAN KNOT. >> I FOUND MY GORDIAN KNOT. ALL RIGHT, HERE'S THE PLAN. I SEE AND YOU'RE IN THE CAPITAL THIS MORNING. WALK OUT OF THE ROOM. I SINCERELY HOPE MY RESIDENT NATION FREES UP THE FOLLOWING PATH. >> I URGE THIS BOARD TO MEET IMMEDIATELY WITH ITS SISTER BOARD FEDERAL EMERGENCY JOINT CLOSED SESSION MEETING TO BE INFORMED BY HARVEY AND MAYTAG. I URGE THIS BOARD TO CONSIDER THE STEPS THEY WILL LAY OUT FOR YOU AND TO PURSUE THOSE STEPS WITH ALL DUE HASTE AND SPEED YOU WILL FIND IN SOME OF THOSE STEPS YOU NEED OTHER PEOPLE TO HELP YOU AND THEY WILL BE READY TO HELP YOU.
I'VE BEEN SITTING HERE IN STORAGE HELP CENTER IN THE BACKGROUND GETTING READY FOR PLAN B. >> THERE ARE SOME PIECES ALREADY IN PLACE I URGE THIS BOARD TO TAKE THE RESULTS OF THOSE STEPS IF THEY'RE FAVORABLE AGAIN YOU HAVE TO MAKE A DECISION TO THE CITY AND URGED THE CITY TO HELP WITH THE SUBSEQUENT STEPS POSSIBLE LAYOUT. I WANT TO GO AT THIS POINT AND SAY HEY, IF YOU HELP ME I'LL GIVE YOU A BILLION DOLLARS AND THEY SAY NO THAT UH IT'S IMPERATIVE THIS BOARD AND CITY COUNCIL MAINTAIN STEPS LIKE THANKSGIVING AND COMPLETE THEM BY CHRISTMAS. >> NOW ONE OF MY FORECASTS WAS THAT A TEAM WOULD LEAVE IN EARLY JANUARY.
>> I THINK IF THEY SEE YOU WORKING ON THIS THEY'LL STAY IN PLACE. >> SO MAYBE YOU HAVE A LITTLE MORE TIME THAT WILL BE KIND OF A SELF-FULFILLING PROPHECY BUT EXACTLY. >> WELL, IT'S VERY HEISENBERG WONDER IF THIS MEETING IS I DON'T KNOW OTHERS ARE NOT SPEAKING UP BUT NO, I AM NOT DONE YET. >> LET ME FINISH. YOU KNOW I AM INTENTIONALLY INTERRUPTING. IT'S VERY DISTURBING BECAUSE I FEEL LIKE WE MIGHT BE WE MIGHT BE DISTURBING THE SYSTEM ITSELF . >> OH, SO THAT'S THE REASON WHY IT'S EASY TO BREACH FIDUCIARY DUTY BECAUSE FOR US TO TALK ABOUT YEAH BUT I MEAN ARE WE REALLY HAVING A GUY SAY HEY I AM CHAIRMAN STILL YOU'RE NOT I AM NOT SURE I DON'T HAVE FOR YOU DOUG NEXT PARAGRAPH SO I UNDERSTAND THAT. SO LET ME JUST MAKE SOMETHING CLEAR FOR THE RECORD BECAUSE THERE IS CONFUSION COUNCILMEMBER FOLEY HAD JUST RAISED THAT THE BOARD NEEDS TO ACCEPT YOUR RESIGNATION UNDER THE BOARD POLICY JUST BE CLEAR FOR EVERYONE. AND ALSO ON THE RECORD, THE BOARD DOES NOT NEED TO ACCEPT BAROUSSE RESIGNATION.
SO AT THE TIME THAT HE HAD STATED HE IS RESIGNING AT THAT MOMENT FORWARD HE WAS NO LONGER CHAIR AND WAS COMMENTING AS A MEMBER OF THE PUBLIC. ANY MEMBER OF THE PUBLIC CAN MAKE THEIR OWN COMMENTS THERE IS NOTHING THAT WE CAN DO TO INTERRUPT THAT SORT OF FREE SPEECH AND SO I JUST WANT TO MAKE THAT CLEAR FOR THE RECORD FOR EVERYONE IN THE ROOM AS WELL AS FOR THE BOARD MEMBERS. I DID REVIEW THE POLICY FOR THE ELECTION OF BOARD MEMBERS AND THERE IS NOTHING IN THAT POLICY THAT REQUIRES SO MUCH CHAIRMAN ,I FINISH MY BRIEF REMARKS.
VICE CHAIR, THANK YOU. BEFORE I CONCLUDE, I WANT TO MAKE CLEAR THAT MY RESIGNATION HAS NOTHING TO DO WITH AND EVERYTHING TO DO WITH RECENT ALLEGATIONS MADE BY OUR INTERNAL AUDITOR WHISTLEBLOWERS . >> IT HAS NOTHING TO DO WITH THEM BECAUSE I'VE SEEN TODAY AND NOR HAVE ANY OF YOU ANY ALLEGATIONS OF ANY UNETHICAL OR CRIMINAL BEHAVIOR JUST TYPICAL INCONSEQUENCE SLOPPY PROCESSES WHICH PROBABLY I TAKE MOST OF THE BLAME NOT ROBERTO THAT WE HIRED AN INTERNAL AUDITOR TO UNCOVER IN THE FIRST PLACE. >> IT DOESN'T SURPRISE OR ALARM ME . IT'S A LONG DAY'S WORK FOR ME AS A TRUSTEE I CHAIRED TEN AUDIT COMMITTEE SO SOMETHING BUT IT HAS EVERYTHING TO DO WITH THIS BECAUSE EVERYONE IS WRINGING THEIR HANDS OVER THIS DIVERSION. OUR INVESTMENT STAFF, SOME OF WHICH ARE SITTING OUTSIDE WATCHING CLOSELY GETTING FED UP WITH THIS CLOWN SHOW REALLY CONCLUDING THE CITY COULDN'T CARE LESS ABOUT THE GOLDEN AGE OF BILLION DOLLARS THEY'VE BEEN WORKING THEIR TAILS OFF TO GENERATE AND IF THEY'RE AS SMART AS THEIR SELLING FOREIGN SAYS THEY ARE AND I THINK THIS MORE THEY'VE ALREADY GOT THEIR RESUMES OUT ON THE STREET AND ARE COUNTING THE DAYS UNTIL THEY JUMP TO A PLACE THAT WILL RECOGNIZE AND REWARD THEM FOR THEIR PROVEN TALENT IN GOLDEN EGGS.
>> AND THAT'S MY SECOND PREDICTION. >> YOU CANNOT AND I COULD BE WRONG, RIGHT? IT'S JUST ME . >> I DON'T THINK YOU CAN RECONSTITUTE THIS TEAM THESE ARE NOT FEEL REPLACEABLE PARTS AND IN MY DEFENSE, IF YOU BELIEVE ME , I AM IN THE BUSINESS AS IS HOWARD OF IDENTIFYING UNIQUE FUNCTION TEAMS AND HALF THE TIME YOU CANNOT RECONSTITUTE THEM OR REPLACE THEM. THAT'S WHY VENTURE CAPITAL EXISTS IN THE FIRST PLACE. THAT'S PRECISELY THE SORT OF CHAIN OF EVENTS THAT HAPPENED REPEATEDLY RINGING ALARM TO GET READY TO HASTILY EXECUTE A PLAN B IN CASE PLAN A BOTTOM DOWN WHICH APPEARS TO THE TAKE AWAY MESSAGE FROM MY RESIGNATION IS SIMPLE. >> WHILE NERO IS PLAYING HIS FIDDLE, ROME IS REDUCING ITSELF TO ASH SHAME ON EVERYONE INVOLVED IN THIS KERFUFFLE INCLUDING ME FOR TAKING THEIR EYES OFF THE BALL. >> THE GOLDEN GOOSE VINCENT BAROUSSE LABORED FOR MORE THAN A DECADE TO GIVE BIRTH TO I CHALLENGE ANYONE ANYONE AND MY DAUGHTERS GRUBBIER HEARING THIS MESSAGE TO DENY YOU HAVE THE PRESENTATION THAT THE BILLION DOLLARS SAN JOSE STANDS TO REAP IS NOT REAL OR DENY IT'S INCHES AWAY FROM OUR IN THE CITY'S GRASP MOLEN BAY FINAL POINT THE TRANSGRESSION THAT IS FORCING MY RESIGNATION COMES THE STEEP PRICE I'VE BEEN ADVISED BY BOTH INSIDE AND OUTSIDE PERSONAL COUNSEL.
>> I'VE SPENT A LOT OF MONEY ON THIS THAT I SHOULD NOT COMMUNICATE WITH THE BOARD MEMBERS AFTER THE SPEECH FRANK I'M OBVIOUSLY FOR FOR YOU TO CALL ON TO HELP WITH MATTERS NOT RELATED SPEECH NOR SHOULD I HELP PERUN TEAMS NOW WHICH I WILL NOT NOR SHOULD I BENEFIT IN ANY WAY FROM THE SPINOUT IF IT'S FORMED TRUST ME ON TEN BOARDS I GOT A LOT MORE THINGS TO DO THE PRICE OF MY SAYING THESE WORDS THAT CANNOT BE SPOKEN IS OF NECESSITY EXCOMMUNICATIO. >> IT'S BEEN AN ENJOYABLE HONOR TO WORK WITH ALL OF YOU AND I HOPE YOU ALL GOD I HOPE YOU ALL BELIEVE WHEN I SAY I SPENT MONTHS SINCE APRIL LABORING TO FIND A BETTER SOLUTION TO THIS INTRACTABLE FIDUCIARY DILEMMA AND A BETTER WAY TO SAVE OUR GOLDEN GOOSE THAN RESIGN IN SO DRAMATIC FASHION AVEOS SO WITH DREW'S RESIGNATION UNDER OUR BOARD POLICY LIKE I MENTIONED BEFORE THE BOARD'S POLICY DOES NOT REQUIRE THAT WE ACCEPT HIS RESIGNATION. HOWEVER, IN THE EVENT OF A MID-TERM VACANCY OF THE BOARD'S CHAIR POSITION, THE VICE CHAIR SHALL IMMEDIATELY ASSUME THE POSITION OF THE BOARD CHAIR FOR THE BALANCE THE TERM AND THE BOARD VICE CHAIR VACANCY WOULD THEN BE FILLED FOR THE BALANCE OF THE TERM IN ACCORDANCE WITH THE RULES OF THIS POLICY AND FOR THIS POLICY FOR THE VICE CHAIR POSITION IN THE EVENT OF A MID-TERM VACANCY OF THE BOARD VICE CHAIR POSITION NOMINATIONS FOR REPLACEMENT THE MEMBERS WILL BE TAKEN AT THE NEXT POSSIBLE REGULAR MEETING AND THE ELECTION WILL BE HELD AT THE NEXT POSSIBLE REGULAR MEETING IMMEDIATELY FOLLOWING IN ACCORDANCE WITH THE RULES OF OUR POLICY.
>> SO WITH THAT WE DO HAVE VICE CHAIR VOTTO TAKING TAKING THE POSITION NOW AS CHAIR AND WE ALSO HAVE LATER IN OUR AGENDA AGENDA ITEM I BELIEVE FOR NOMINATIONS. YES, YES. RIGHT. WE HAVE WE HAVE A FOUR I WHICH IS THE NOMINATION OF POSITION FOR BOARD AND VICE CHAIR. SO WE ARE WE HAVE TIME TO DO THAT LATER IN THE AGENDA. >> AND SO WITH THAT I TURN IT OVER TO CHAIR VOTTO. CONGRATULATIONS MAY I ASK A POINT OF PERSONAL PRIVILEGE? >> WOULD IT BE POSSIBLE FOR YOU TO MOVE TO THE HEAD OF THE TABLE SO WE CAN ALL SEE YOUR FACE? >> YEAH, I WAS JUST GOING TO SUGGEST WE TAKE A FIVE MINUTE BREAK.
>> THANK YOU. THANK YOU. AND BRING UH UH UH UH EDNA GRUBBERS SINCE THIS MEETING MY DAUGHTER IS A ONE TIME OH YES THAT'S TRUE. I GUESS THE CHIEF DON'T SEE OK ,START WITH YEAH YEAH WE RECORDING IN PROGRESS OK I KNOW THAT WAS UH YEAH LARDINOIS SOMEWHAT UNEXPECTED I DO HOWEVER WANT TO GIVE UM MEMBERS OF THE BOARD AN OPPORTUNITY TO ADDRESS THINGS THAT WERE SAID SO I WOULD LIKE TO START YEAH WE WANT TO ANYWAY BE ON THIS BOARD FOR TWENTY SIX YEARS SOMETHING LIKE THAT UH REAL SURPRISE I HAD NO IDEA BUT I COULD TELL YOU IT'S LIKE LOSING A BROTHER UH THE IMPACT IT HAD ON THIS RETIREMENT SYSTEM, THE CHANGES, THE POSITIVE THINGS AND THEN WHEN HE TALKS ABOUT VINCENT SIDBURY, UH, YOU CAN TALK ABOUT INVESTMENT BUT DREW IS THE KIND OF PERSON THAT APPEALED TO EVERYBODY WHETHER IT BE LABOR AWAY LOCAL TO THIRTY THE FIREFIGHTERS, POLICE OFFICERS, EVERYBODY HE WAS ALWAYS ABLE TO MEDIATE AND BRING PEOPLE TOGETHER.
HE WAS IT WAS LIKE JUST WORKING WITH ANOTHER FIREFIGHTER. I WOULD HAVE BEEN PROUD TO HAVE CONFIDENCE TO WALK WITH HIM INTO ANY MAJOR FIRE KNOWING THAT WE WOULD COME OUT TOGETHER. I WAS TOTALLY TAKEN ABACK BY SURPRISE. I DON'T KNOW ALL THE ISSUES PERSONALLY. IT'S KIND OF RAMBLA AND I'M KIND OF EMOTIONAL AT THE TIME SO IT'S PRETTY TOUGH BUT I LOVE THE MAN AND I APPRECIATE EVERYTHING HE DID FOR THE CITY ,FOR THE POLICE AND FIRE AND FOR THE RESIDENTS OF SAN JOSE. >> UM, LOVE THE DEATH. THANK YOU. YEAH. YEAH. >> NO, I WANT TO THANK DREW FOR EVERYTHING HE'S DONE FOR THE LAST I THINK HE SAID THIRTEEN YEARS THIS BOARD WAS AT A VERY DIFFERENT PLACE AROUND 2010 AND WHEN HE CAME ON CAME ON BOARD UM AND HE DID A LOT OF GOOD IN IN CHANGES OVER THE LAST 13 YEARS. SO AS A PLAN MEMBER UM KNOWING WHAT HE HAS DONE AND WHERE WE'VE BEEN AND WHERE WE ARE NOW, I WANT TO THANK YOU FOR YOUR SERVICE CHINITA LIKE SAY A COUPLE OF WORDS.
YEAH PLEASE GO AHEAD. YEAH THIS IS A SURPRISE TO ME THAT UM I CONTRIBUTED TO DREW UM FROM MY FORMER COLLEAGUE TOM AND UM I CAN TELL YOU BASED ON MY EXPERIENCE WORKING WITH MANY BOARDS UM AS A CONSULTANT OR AS AN EMPLOYEE I MEAN HARD PRESSED TO FIND ANY SINGLE BOARD MEMBER WHO'S MORE COMMITTED TO HIS CONSTITUENTS EXCUSE ME THAN YOUR SO THAT'S UH THAT'S A WASN'T AWARE OF THE NEWS BUT IT'S A SHOCK AND IT'S IT'S VERY UNFORTUNATE I THINK UM UM I GUESS I'M STRUGGLING TO SEPARATE THE UM TERRIFIC SERVICE ANDREW HAS PROVIDED THE BOARD UM FROM WHAT I JUST HEARD UH I I MEAN THE OTHERS HAVE SPOKEN UP ABOUT HIS SERVICE SO I DON'T NEED TO REGURGITATE THAT BUT I MUST EXPRESS THAT I WAS EXTREMELY DISTURBED THAT UM AS CHAIR UH THEN YOU KNOW SWITCHING TO PUBLIC MEMBER IT'S A FINE LINE.
IT'S EASY TO COUCH UNDER THE FACT THAT IT WAS A BREACH OF FIDUCIARY DUTY. BUT IF YOU'RE STILL SITTING THERE IT'S THE THE PERCEPTION AND REALITY ARE DIFFERENT AND UM I PERSONALLY WOULD RECOMMEND MY CO BOARD MEMBERS NOT GET UNDULY PRESSURED BY THE MESSAGE AND THE FACT THAT THE TEAM MIGHT LEAVE. I THINK THE FACT THAT WE EVEN SAID THAT I'VE NEVER HEARD IT BEFORE UM IS I'M CONCERNED THAT PUTS THE SYSTEM AT RISK AND I WOULD BE REMISS IF I DIDN'T SPEAK UP UH AS MY FIDUCIARY RESPONSIBILITY TO UH SORT OF ADDRESS THAT HEAD ON. AND I UNDERSTAND THIS WAS A SUBJECT THAT WAS COMPLICATED IN TERMS OF INCENTIVE COMPENSATION AND COMPENSATING PEOPLE FOR THEIR GOOD WORK.
BUT I DO UM I DO FEEL A BIT UH UH AS I SAID, DISTURBED THAT SOMEBODY WOULD USE THEIR PULPIT TO SERMONIZE US AND POTENTIALLY PUT UNDUE PRESSURE AND I DON'T KNOW HOW TO SAY THAT IN A BETTER OR IT BUT I DO RESPECT DREW IN MANY OTHER WAYS AND I'M NOT GOING TO TAKE THAT AWAY FROM THIS AND UH, HOPEFULLY I CAN PROCESS MORE AFTER THIS MEETING. THANKS FOR YOUR THANK YOU.
>> UM, SO FIRST OF ALL. YES, UH, I'VE WORKED WITH DREW BEING ON THE BOARD A LITTLE OVER FIVE YEARS UM AND I WORKED WITH HIM UM AND I APPRECIATE HIS SERVICE UM AND YOU HE'S GENERALLY BEEN SUPPORTIVE OF THE THINGS WHICH I'VE DONE. I TRIED TO COMMITTEES THE INVESTMENT COMMITTEE AND THE JOINT PERSONNEL COMMITTEE AND BOTH OF WHICH I THINK ARE KIND OF THE HEART OF THE ISSUE THAT HE TALKED ABOUT. UH AND ON THAT I COMPLETELY DISAGREE WITH HIM. UM, BECAUSE I THINK I THINK THIS BOARD HAS WORKED HARD IN TERMS OF IMPROVING GOVERNANCE UM IN TERMS OF TRYING TO RETAIN OUR INVESTMENT STAFF UM AND WE'VE ALSO WORKED UM YOU KNOW, TO TRY TO COMPENSATE THEM AND THEY CONTINUE TO WORK ON THAT AND I DON'T THINK THAT THAT BATTLE IS OVER. UM BUT I THINK THE COURSE THAT DREW SUGGESTED UM I DON'T THINK IS THE RIGHT PATH UM FOR THIS FUND. UM SO I DISAGREE ON TO SUGGESTION THERE AND NOT YES. >> UM I I DO WANT TO THANK DREW FOR HIS UH HIS SERVICE.
I THINK HE HAS UH A LOT OF UM ENERGY THOUGHTFULNESS AND KNOWLEDGE AND EXPERIENCE AND I THINK HE HE WAS AN ASSET TO THE BOARD OVERALL UM HIS HIS DEPARTURE TODAY WAS A SURPRISE TO ME AND UH IT WAS IT WAS DISAPPOINTING BECAUSE YOU KNOW, I FELT HE WAS AN ASSET. I THINK THE IDEAS THAT HE EXPRESSED AS A PUBLIC MEMBER WERE THINGS THAT I HAD NO AWARENESS OF AND I DON'T HAVE ANY WAY OF JUDGING WHETHER OR NOT IT'S IT'S VALID, REAL OR SOMETHING THAT WE COULD TAKE ACTION ON. SO I I CAN'T ENDORSE ANYTHING THAT WAS DISCUSSED IN TERMS OF HIS IDEAS BUT I DO I DO SAY THAT I UH I'M DISAPPOINTED THAT HE'S UH HE'S LEFT THE BOARD. YEAH NO I'LL JUST SAY QUICK THAT I CAN DRIVE THE PLAN MEMBER I'M GRATEFUL FOR THE THINGS THAT HE INSTITUTED AND HELPED GET THIS PLAN GOING AND I CAN'T SAY THAT I'VE ALWAYS AGREED WITH HIM OR HIS TACTICS BUT I WOULD LIKE TO THANK HIM, ROBERTO AND THANK YOU, MR.
CHAIR. >> SO I'LL LEAVE THE COMMENTS FROM, UH, FOR MY CHAIR. UH, LANCE, UH UM JUST WHY YOU JUST SAID I WANT TO ADDRESS THAT ISSUE AS BETWEEN HIM AND OF COURSE THE REST OF THE BOARD MEMBERS AND THE PUBLIC. BUT I DO WANT TO UH HE DID SPEND, UH, OVER TWELVE YEARS AS A TRUSTEE OF THIS BOARD. >> UH, UM I HAVE HAVE EXPERIENCES OVER THE LAST TWENTY SEVEN YEARS WORKING UM WITH DIFFERENT BOARDS ACROSS THE STATE AND UH I IT IS IMPORTANT THAT I RECOGNIZE UH THEY ENGAGE ME IN AND AND THE HARD WORK UH BY UH FORMER CHAIR AND TRUSTEE LANCE UH FOR THE POLICE ON FIREBAUGH. SO UH I DO WANT TO RECOGNIZE THAT AND I WANT TO UH ON BEHALF OF UH THE MEMBERS OF THE PLAN AND ON BEHALF OF THE STAFF OF THE OFFICE RETIREMENT SERVICES, UH, WE WANT TO TO THANK YOU FOR HIS WORK AND UH HE SUPPORTED THROUGHOUT HIS TENURE AS A TRUSTEE OF THE BOARD RETIREMENT UH PLAYBOY THING YOU ARE ATTENDING REMOTELY THE MEETING I THINK AND YOU WANTED TO ALSO I DON'T KNOW IF YOU I BELIEVE YOU WANTED TO SAY A FEW WORDS BUT IF YOU ARE LISTENING UH YES.
THANK YOU. WE'RE DONE HERE AS WELL AND LIKE ROBERTO, I'D LIKE TO THANK HIM FOR HIS FORGIVENESS SERVICE AND LIKE THE VERY GOOD FOR HIM THEY ARE BIG SHOES TO FILL. >> I THANK YOU. YES, GO AHEAD. YEAH. UH, FIRST UH YOU REITERATE THAT UM ONE THANK YOU TO YOU FOR HIS SERVICE BUT UM THE TOPICS AND THE ISSUES THAT YOU BROUGHT UP UH, DURING HIS RESIGNATION SPEECH WAS A SURPRISE TO ME AS WELL. >> I DON'T THINK WE EVER DISCUSSED IT IN ANY FORM OR COMMITTEE MEETINGS SO TOTAL SURPRISE ON MY PART. UH, LAST I WANT TO SAY THAT BEING ON THE BOARD FOR MAYBE COMING ON TWO YEARS UH I THINK THE BOARD REALLY APPRECIATES THE INVESTMENT TEAM AND HAVE BEEN VERY SUPPORTIVE OF THE TEAM.
I THINK WE TRY TO DO OUR BEST TO SHOW OUR APPRECIATION TO THE BEST WAY POSSIBLE. >> SO DEFINITELY I WANT TO THANK THE INVESTMENT TEAM FOR ALL THE HARD WORK AND CONTRIBUTIONS. IF I COULD JUST SAY ONE THING AS LEGAL COUNSEL TO THE PLAN UM YOU KNOW, I SHARE THE SAME SENTIMENT AS MANY OF THE BOARD MEMBERS. ANDREW WAS A VERY STRONG LEADER FOR OUR BOARD AND REALLY HELPED US THROUGH A NUMBER OF ISSUES AND I THINK AS WELL AS FOR HIS SERVICE, I JUST WANT TO MAKE IT CLEAR FOR THE RECORD THAT COUNCIL DOES NOT ENDORSE ANY OF THE POSITIONS THAT DREW HAS OUTLINED IN HIS RESIGNATION SPEECH AS A PUBLIC MEMBER OF THE THANK YOU NOTHING ELSE THAN MR.
CHEERIEST. I WOULD LIKE YOU TO CONSIDER MAKING SURE HE GETS A PLAQUE OR SOME KIND OF CERTIFICATE FROM THIS BOARD FOR ALL THE YEARS OF SERVICE WORK ON THAT. >> THANK YOU, MR. CHAIR. YOU ASK ME AND I THINK I GAVE YOU THE ANSWER BUT I WANT TO CONFIRM WITH COUNCIL THE CONSENT THERE WAS ALREADY APPROVED. THAT'S CORRECT. RIGHT. I JUST WANT TO MAKE SURE THAT I GIVE YOU THE INFORMATION. THANK YOU, COUNSEL. THEN THAT'S UP TO THE CEO FOR INVESTMENT. >> THANK YOU, MR. CHAIRMAN. THERE ARE NO AGENDA ITEMS THIS MONTH BUT I DO WANT TO LET THE BOARD KNOW THAT ON TUESDAY IN NOVEMBER 14TH I WILL BE PRESENTING TO THE CITY COUNCIL AN ANNUAL OR COMPREHENSIVE ANNUAL EXPENSE REPORT LIKE PREVIOUS YEARS. THIS IS TUESDAY, NOVEMBER 14TH AROUND ONE THIRTY OR TWO IN THE AFTERNOON.
SO PLEASE DO TUNE IN IF YOU ARE INTERESTED WITH THAT. I'M HAPPY TO TAKE QUESTIONS. HENRY HERRING NONE. >> I GUESS WE'LL MOVE ON TO NUMBER THREE OLD BUSINESS CONTINUED DIVERT ITEMS THAT THREE A DISCUSSION AN ACTION ON ECONOMIC ASSUMPTIONS TO BE USED IN THE PENSION FUND IN THIRTY TWENTY TWENTY THREE ACTUARIAL VALUATION TO BE PRESENTED BY REALLY QUICKLY ASK QUESTIONS CAN YOU TURN THE MICROPHONE ON. I THINK IT'S OK. LET ME QUICKLY ASK A QUESTION BECAUSE UH IN THE ORDER OF THE DAY DREW SAID WE COULD DO THINGS IN WHATEVER ORDER WE WANTED. UH, WE WOULD LIKE TO DO THREE A B AT THE END OF OUR PENSION ITEMS AND SO, UH, IF WE PROCEED NOW WE WOULD START WITH, UH, THE ITEMS THE NEW BUSINESS ITEMS OR WE HAD DIFFERENCES. >> THAT'S FINE. YOU'RE UP THERE SO LET'S HAVE YOU KEEP UP AND DOWN. >> OK, I WILL UH SHARE MY BILL .
>> I CANNOT TELL IF YOUR MICROPHONE IS ON OR NOT. >> CAN YOU HEAR ME ? WE CAN YOU KNOW. THANK YOU. YES. AND JUST FOR THE RECORD SO THAT WE HAVE IT CLEAR SO YOU ARE GOING TO BE COVERING UM WHICH ITEMS IN WHICH CATEGORY WHICH ORDER I'M SORRY UH THE UH PRELIMINARY PENSION VALUATION RESULTS. I'VE UH I'VE PUT THE AGENDA DOWN SO I DON'T HAVE THE NUMBER HERE FOR D FOR E THEN FOR F AND THEN THREE AND B AS A SINGLE ITEM.
THANK YOU SO I THINK WE HAVE THE PERFECT ANTIDOTE TO THE FIREWORKS THAT STARTED THE MEETING HERE. UH YOU HAVE TO TALKING ABOUT ISSUES FOR THE NEXT RECONNING SO I JUST WANTED TO START WITH A REMINDER OF WHERE WE ARE IN ACTUARIAL SCHEDULE. UH, SO TODAY WE'RE GOING TO START WITH THE PRESENTATION AND THE PRELIMINARY PENSION EVALUATION RESULTS. THEN WE ARE PRESENTING THE DEMOGRAPHIC EXPERIENCE STUDY AND TRYING TO UM ADOPTS CHANGES TO DEMOGRAPHIC ASSUMPTIONS AND THEN WE'RE BRINGING BACK THE THREE A AND B WHICH WERE THE ECONOMIC ASSUMPTIONS AND THE ASSET SMOOTHING METHOD ISSUE AND GETTING DECISIONS SO THAT WILL GIVE US ALL THE ASSUMPTIONS AND METHODS TO GET THE PENSION VALUATION GOING. IT'S ALSO OUR REGULARLY SCHEDULED TIME TO DO THE OP HAVE A ASSUMPTIONS AND SO IT IS A FULL PRESENTATION OF ASSUMPTIONS UH TODAY FROM US AND THEN WE'LL BE BACK IN DECEMBER WITH THE FINAL PENSION VALUATION AND PRELIMINARY OPSB AND FINISH THE OP ED AT THE FEBRUARY BOARD MEETING.
SO SO UH THE THE PRELIMINARY RESULTS ARE VERY CLOSE TO THE PROJECTIONS BUT UH, SLIGHT INCREASES. SO UH, THE FUNDED STATUS HAS INCREASED SLIGHTLY FROM SEVENTY NINE POINT SIX TO EIGHT POINT THREE AND A MARKET VALUE BASIS AND SEVENTY EIGHT TO SEVENTY NINE POINT NINE. UH, ON THE ACTUARIAL VALUE I HAVE THAT BACKWARDS. UH, SO NOT UH A HUGE CHANGE IN FUNDED STATUS THAT REFLECTS UH WELL WE'LL TALK ABOUT THE DIFFERENT PIECES BUT THAT REFLECTS THE INVESTMENT RETURNS AND THE CENSUS DATA CHANGES SINCE THE LAST VALUATION FOR UH CONTRIBUTIONS THE UH MEMBERS CONTRIBUTIONS WOULD TICK UP SLIGHTLY AS A PERCENT. THAT'S REALLY UH MOSTLY THE TRANSITION FROM CONTINUING TRANSITION FROM TIER ONE TO TIER TWO WHERE THE MEMBERS CONTRIBUTE MORE AND THE CITY CONTRIBUTION WOULD INCREASE, UH, SLIGHTLY AS A PERCENT OF PAY FROM SEVENTY SIX POINT FIVE TO SEVENTY SIX POINT NINE AND THEN A LITTLE BIT MORE AS A DOLLAR AMOUNT GOING FROM UH ABOUT TWO HUNDRED EIGHT MILLION TO TWO HUNDRED AND FIFTEEN MILLION. UH AND YOU'LL SEE THAT PART OF THAT IS WE'VE HAD AN INCREASE IN PAYROLL SO WE'RE GOING TO DO A LITTLE ACTUARIAL ONE ON ONE WITH THE ASSETS METHOD.
>> UM AND THIS UH GRAPH DESCRIBES HERE SHOW THE ACTUAL GAINS AND LOSSES OVER THE LAST FIVE YEARS AND YOUR SMOOTHING METHOD BASICALLY TAKES UM UH THE EXPECTED RETURN ON YOUR INVESTMENTS AND COMPARES THAT TO THE ACTUAL RETURN AND ANY DIFFERENCE BETWEEN THAT IS AN ACTUARIAL GAIN OR LOSS. SO ON THE LEFT HAND SIDE THAT CHART THE GREEN BARS SHOW THE ACTUAL RETURNS ON YOUR INVESTMENTS FOR THE LAST FIVE YEARS AND THEN THE BLUE BARS SHOW WHAT WAS EXPECTED.
>> SO THAT DIFFERENCE IS THE ACTUAL GAIN OR LOSS ON THE MARKET VALUE OF ASSETS. SO IF YOU GO BACK TO TWENTY NINETEEN THAT LOSS WAS ONE HUNDRED AND TWENTY SEVEN MILLION DOLLARS AND IT'S ALL OF THAT NOW IS COMPLETELY RECOGNIZED WITHIN THE ACTUAL VALUE OF THE TWO THOUSAND AND TWENTY THREE ACTUAL VALUE ASSETS. >> SO EACH YEAR WE'VE SHOWN WHAT THOSE GAINS AND LOSSES ARE UM AND THEN WHEN THE RIGHT HAND SIDE THE DARK GREEN BARS ARE THE VALUE OF THOSE GAINS AND LOSSES THAT HAVE ALREADY BEEN RECOGNIZED WITH THIS VALUATION THE TWENTY TWENTY THREE VALUATION SO YOU CAN SEE THE DRAMATIC CHANGE IN THE GAINS AND LOSSES BACK IN TWENTY TWENTY ONE WHERE WE HAD ALMOST EIGHT HUNDRED MILLION DOLLAR GAIN AND THEN THE VERY NEXT YEAR WE HAD A SIX HUNDRED MILLION DOLLAR LOSS.
>> UM AND SO FOR THIS CURRENT YEAR WE HAVE A SMALL GAIN OF ABOUT SIXTY THREE MILLION DOLLARS AND WE ARE ONLY RECOGNIZING TWENTY PERCENT OF THAT UH THAT GAIN IN THE TWO THOUSAND TWENTY THREE VALUATION SO EIGHTY PERCENT OF THAT VALUE IS BEING DEFERRED. SO QUICK QUESTION QUICKLY. SURE TO HIT ON THE SO THE METHODOLOGY HAS BEEN WE RECOGNIZE 80 PERCENT OF THE GAIN OR LOSS IN THE YEAR IT OCCURS AND THEN DEFERRED TWENTY PERCENT. >> RIGHT. SO YOU CAN SAY YEAH YOU'RE USING ONLY TWENTY PERCENT AND 80 PERCENT IS DEFERRED SO SEVEN NINETY THREE DIVIDED BY BOLIAN FORTY FOUR STEINHOF THAT GOOD AND MENTAL MATH THAT IS SEVENTY SIX PERCENT SO IT SEEMS LIKE WE RECOGNIZED A LOT IN TWENTY YEARS PERCENTAGE WISE RIGHT SO OVER A YEAR OR TWENTY PERCENT EVERY YEAR AFTER FOUR YEARS IT WILL BE CLOSER TO EIGHTY PERCENT TWENTY ONE TWENTY TWO TWENTY THREE WITH SIXTY PERCENT RIGHT YEAH.
>> LET'S LET'S LOOK AT THE TABLE ON THE NEXT TABLE IN THE NEXT SLIDE SHOWS THE ACTUAL NUMBERS AND IT'S EASIER TO TO TO SEE SO AT THE VERY TOP WE HAVE THE MARKET VALUE OF ASSETS UM AT FOUR POINT SEVEN BILLION DOLLARS SO THE CURRENT YEAR INVESTMENT GAIN OF SIXTY THREE MILLION DOLLARS UM WE ONLY ARE RECOGNIZED RISING TWENTY PERCENT OF THAT SO WE'RE DEFERRING 80 PERCENT OR DEFERRING FIFTY MILLION DOLLARS OF THAT GAIN. >> AND SIMILARLY WHEN YOU LOOK AT ALL THE PREVIOUS YEARS FOR INSTANCE IN TWENTY TWENTY TWO IT WAS A SIX HUNDRED AND FOURTEEN DOLLARS MILLION LOSS AND WE'RE WE'VE ALREADY RECOGNIZED A FORTY PERCENT OF THAT RIGHT.
>> SO WE'RE DEFERRING SIX PERCENT OF THAT. OK SO WHEN WE ADD UP ALL THE DIFFERENT DEFERRED MOUNTS FROM EACH YEAR OF THE LAST FIVE YEARS THAT TOTAL NET DEFERRED LOSS IS TWENTY THREE POINT TWO MILLION DOLLARS. >> SO NOT A LOT BUT THE FLUCTUATION FROM YEAR TO YEAR PRETTY DRAMATIC BECAUSE THERE WAS SUCH A SWING IN TWENTY TWENTY ONE ON TWENTY TWENTY TWO.
>> SO TO COME UP WITH THE ACTUAL VALUE OF ASSETS YOU TAKE THE MARKET VALUE AND SUBTRACT THE DEFERRED GAINS OR LOSSES. SO WHEN YOU'RE SUBTRACTING A NEGATIVE IT'S LIKE YOU'RE ADDING TO RIGHT SO THE ACTUAL VALUE OF ASSETS IS A LITTLE BIT HIGHER THAN THE MARKET VALUE BECAUSE THERE'S THOSE DEFERRED LOSSES THAT ARE GOING TO BE PHASED IN OVER THE NEXT FOUR YEARS.
SO IT'S IMPORTANT TO UNDERSTAND THIS. WE'RE SPENDING A LITTLE TIME ON THIS BECAUSE IT'S IMPORTANT TO UNDERSTAND THIS CALCULATION, TO UNDERSTAND OUR RECOMMENDATION WHEN WE GET TO THE LAST ITEM AND YOU CAN SEE RIGHT NOW IN TWENTY TWENTY THREE LIKE THE NUMBERS SHOW THAT WE DON'T NORMALLY HAVE IN A PERIOD WHERE THE ACTUAL VALUE IN THE MARKET VALUE ARE ALMOST THE SAME. RIGHT. THEY'RE VERY, VERY CLOSE. YOU TEND TO HAVE A LITTLE BIT OF FLUCTUATION BETWEEN THE TWO BUT WE'RE VERY CLOSE RIGHT NOW TO TO BEING THE SAME WITH THOSE TWO. UH, I UNDERSTAND THE CURRENT METHODOLOGY. THANK YOU. GREAT. SO THIS NEXT SLIDE IS JUST SHOWING MEMBERSHIP TRENDS THAT I THINK THE THING TO TAKE NOTE HERE IS THAT WE HAVE BEEN SEEING INCREASES IN THE ACTIVE MEMBERSHIP OVER THE LAST FEW YEARS BUT THIS YEAR THERE WAS ACTUALLY A DECREASE IN THE MEMBERSHIP OF ABOUT 50 MEMBERS. SO YOUR SUPPORT RATIO THE NUMBER OF ACTIVES TO ACTIVES HAS GONE UP A LITTLE BIT THIS YEAR BECAUSE OF THAT DECLINE THE ACTIVE POPULATION. SO THIS SLIDE IS SHOWING, UM, THE CHANGES IN THE UP FROM THE LAST VALUATION TO THIS VALUATION THERE WAS A SLIGHT INCREASE OF ABOUT ALMOST TEN MILLION DOLLARS DUE TO SOME OFFSETTING FACTORS HERE.
SO YOUR CONTRIBUTION THAT WE'RE COMING INTO THE PLAN LAST JUST FOR LAST YEAR DECREASED THE OIL BY SIXTY SIX DOLLARS MILLION AND THAT'S BECAUSE WITH THE BILL'S PREVIOUS SLIDE SHOWING HOW MUCH UH HOW MUCH OF THE CONTRIBUTION IS GOING TOWARDS PAYING OFF THAT UNFUNDED ACCRUED LIABILITY? IT'S ALMOST TWENTY PERCENT OF PAY AND THAT'S WHY YOU'RE SEEING A DECLINE IN THE OIL BECAUSE OF YOUR CONTRIBUTIONS PAYING OFF THAT PRINCIPAL ON THE UNFUNDED THERE WAS A LIABILITY EXPERIENCE OF ALMOST 70 MILLION DOLLAR LOSS AND THAT WAS ALMOST SOLELY DUE TO THE SALARIES BEING HIGHER THAN EXPECTED FOR THE YEAR. AND YOU CAN SEE IN THE GRAPH ON THE RIGHT SHOWS THE MAGNITUDE OF THE DIFFERENT GAINS AND LOSSES OR THE DIFFERENT SOURCES OF THE GAINS AND LOSSES, THE SALARY INCREASES OR THE GREEN BAROCIO MOST OF THAT 70 MILLION WAS DUE TO SALARY INCREASES.
>> NOW THERE WAS A SLIGHT INVESTMENT LOSS. I KNOW I HAD JUST SAID THERE WAS A GAIN FOR THE YEAR BUT THAT GAIN WAS ON THE MARKET VALUE OF ASSETS. RIGHT. SO THE GAIN THE LOSS HERE TAKES INTO ACCOUNT THAT THEY WERE ABOUT THIRTY OR NOT THIRTY ABOUT EIGHTY MILLION DOLLARS IN DEFERRED LOSSES FROM THE PREVIOUS VALUATION. SO WE'RE RECOGNIZING SOME OF THOSE LOSSES FOR PREVIOUS YEARS THERE. SO JUST A SLIGHT ACTUARIAL LOSS ON THE ACTUARIAL VALUE OF ASSETS OF ABOUT FIVE MILLION DOLLARS AND THEN THIS SLIDE TO SHOW THE HISTORICAL GAINS AND LOSSES BY SOURCE AND CHANGES IN THE UNFUNDED ACCRUED LIABILITY OVER THE LAST TEN YEARS. I THINK THE MOST IMPORTANT THING TO NOTE ON THIS IS THAT THE LIABILITY LOSSES HAVE OVERTAKEN IN MAGNITUDE THE IMPACT ON THE P&L OVER THE LAST TEN YEARS.
IT'S ABOUT TWO HUNDRED AND THIRTY TWO MILLION AND THEN YOUR RETURNS THE RETURNS ON THE ACTUAL VALUE OF ASSETS CONTRIBUTED TWO HUNDRED MILLION. >> SO THERE HAS BEEN MORE LIABILITY LOSSES THAN THE ASSET RETURN LOSSES AND AGAIN THOSE ARE MOSTLY DUE TO SALARY INCREASES AND EVERY PERIOD ON THIS CHART I GUESS A POSITIVE BEFORE WE GO TO THE NEXT ONE, IT IS VERY POSITIVE THAT THE CONTRIBUTIONS IN EXCESS OF THE TREAD WATER, THE AMOUNT OF CONTRIBUTIO THE SYSTEM IS RECEIVING HAS REDUCED THE UNFUNDED ACCRUED LIABILITY BY FOUR HUNDRED MILLION DOLLARS AND THAT'S MORE THAN ANY OF THE OTHER SOURCES HAVE INCREASED IT. UNFORTUNATELY THAT WAS THERE'S MORE SOURCES THAT HAVE INCREASED AND THE ONE SOURCE THAT'S DECREASING IT.
BUT HOPEFULLY GOING FORWARD WE'RE GOING TO SEE MORE GAINS ON THE INVESTMENT RETURNS AS WELL BECAUSE OVER THE PAST DECADE WE'VE DONE WELL IN REDUCING THAT ASSUMED RATE OF RETURN INCLUDING THE ALPHA WE'VE GENERATED COULDN'T RESIST . YEAH. SO UM, THIS IS JUST A DISCUSSION ITEM TO UPDATE YOU ON THE PRELIMINARY RESULTS BEFORE WE LOOK AT ANY ASSUMPTION CHANGES OR ANYTHING LIKE THAT. SO TAKE ANY QUESTIONS ON THIS. WE WILL UH IN THE NEXT ITEM GET INTO MUCH MORE DETAIL ON THE LIABILITY LOSSES UH, BECAUSE THAT'S REALLY THE FOCUS OF THE DEMOGRAPHIC EXPERIENCE. >> WHAT IS THE MEANING OF TREAD WATER? YEAH. YEAH. SO TREAD WATER WE'VE PRESENTED THIS IN THE PAST. WE DIDN'T LAY IT OUT HERE. WE PROBABLY SHOULD.
SO TREAD WATER IS THE AMOUNT OF CONTRIBUTIO YOU NEED TO CONTRIBUTE SO THAT IF ALL ASSUMPTIONS ARE MET THE DOLLAR AMOUNT OF THE UNFUNDED LIABILITY REMAINS THE SAME AND SO THAT'S KIND OF THE TREAD WATER LEVEL YOU ESSENTIALLY HAVE TO PAY THE COST OF THE BENEFITS ATTRIBUTED TO THE CURRENT YEAR SERVICE PLUS INTEREST ON THE UNFUNDED LIABILITY UH TO GET THERE I LIKE TO THINK OF IT AS A CREDIT CARD ANALOGY IS WHEN YOU GET YOUR CREDIT CARD STATEMENT IT'S IF YOUR PURCHASES YOU HAVE YOUR PURCHASES EVERY MONTH THEN YOUR INTEREST THAT ACCRUES IF YOU DON'T PAY YOUR CREDIT CARD OFF EVERY MONTH OR YOU HAVE THAT INTEREST AND SO WHEN YOU MAKE A PAYMENT IT'S THE AMOUNT OF PAYMENT THAT GOES TOWARDS, YOU KNOW, CHIPPING AWAY AT THE THE THE BALANCE ON YOUR CREDIT CARD.
THE PRINCIPAL THAT OK, UM NOW LET'S SEE IT JUST FOR BAIT FOR EXPLANATION PURPOSES YOU DO THESE EXPERIAN STUDY EVERY TWO YEARS THE DEMOGRAPHIC EXPERIENCE. YES WE DO EVERY FOUR YEARS. >> SO YOU'RE DOING IT FOR THE TWENTY TWENTY THREE EVALUATION NEXT TIME WILL BE THE TWENTY TWENTY FIVE. JUST WANTED TO MAKE SURE THAT WAS UNDERSTOOD. THERE ARE OTHER SYSTEMS THAT HAVE A LARGER EXPERIAN STUDY THAN TWO YEARS RIGHT. >> SO UM WE DO THIS EVERY TWO YEARS BECAUSE IT'S IN YOUR MUNICIPAL CODE TO DO IT EVERY TWO YEARS. UH WE WOULD UM NORMALLY RECOMMEND A LONGER PERIOD BETWEEN EXPERIENCE STATIC'S SOME REASON AFTER ALL RIGHT. >> SO UH YOU JUST SAW THIS CHART ON LIABILITY GAINS AND LOSSES BUT UH WE DO THE EXPERIENCE STUDY EVERY TWO YEARS IN TWENTY TWENTY ONE.
WE DID NOT CHANGE VERY MANY ASSUMPTIONS. THERE WERE JUST A COUPLE SMALL TWEAKS SO MOST OF THE ASSUMPTIONS HAVE BEEN THE SAME SINCE TWENTY NINETEEN AND SO THE CHART IS SHOWING THE GAINS AND LOSSES SINCE THE LAST UM REAL SIGNIFICANT ASSUMPTION CHANGES THE UM YOU CAN SEE HERE THE GREEN BARS ARE CLEARLY THE LARGE PIECE THAT'S CONTRIBUTED TO LOSSES OVER THE LAST FOUR YEARS AND IT'S REALLY JUST BEEN THE LAST THREE BUT I WANT TO POINT OUT THAT ALL OF THESE ARE RELATIVELY SMALL COMPARED TO YOUR LIABILITY, YOUR LIABILITIES LAST YEAR WAS FIVE POINT SEVEN BILLION. SO A FIFTY SEVEN MILLION DOLLAR LOSS WOULD BE A ONE PERCENT LOSS ON THE LIABILITIES. SO MOST OF THESE THINGS ARE WELL WITH IT IN THAT THIS LAST YEAR WE HAD, UH, A HIGHER LOSS THAN WE'VE HAD BUT PARTICULARLY JUST BECAUSE OF THE SALARY INCREASES. >> BUT YOU CAN ALSO SEE HERE SOME PATTERNS THAT BOTH UH, TERMINATIONS SHOWN IN RED AND RETIREMENT EXPERIENCE IN GOLD HAVE BEEN CONSISTENT SOURCES OF LOSSES.
THEY'RE NOT, UH, HUGE LOSSES BUT THEY ARE, UH, CONSISTENT. WE WOULD LIKE TO SEE, UM, SOME ALTERNATING GAINS AND LOSSES IF OUR ASSUMPTION IS RIGHT ON UH ON THE FLIP SIDE, THE DISABILITY THE DARK BLUE HAS BEEN A CONSISTENT SOURCE OF GAINS. UH, AND DURING THE PERIOD NOT TOO SURPRISINGLY THROUGH THE PANDEMIC, UH, MORTALITY HAS BEEN A SOURCE OF SO THAT KIND OF GIVES YOU A HINT OF WHERE WE'RE GOING TO BE GOING WITH OUR ASSUMPTION RECOMMENDATIONS HERE. YEAH, SURE. DO YOU MIND IF I ASK A QUICK QUESTION ON THE SALARY INCREASES? >> DOES THAT INCLUDE OVERTIME OR NO, I DON'T BELIEVE SO.
>> I THINK IT'S JUST PENSIONABLE PAY. >> OK, AND BUT IT DOES INCLUDE UM I MEAN A BIG PART OF IT WAS THE FUTURE INCREASES IS EMBEDDED IN THE MOST RECENT COLLECTIVE BARGAINING AGREEMENT RIGHT. >> WHICH WILL BE ON HEADING INTO NEGOTIATIONS SOON BUT OK. RIGHT. THANK YOU. AND I'LL JUST ONE LITTLE COMMENT ABOUT THAT THE SALARY OR OVERTIME SO OVERTIME PAY THOSE TYPE OF PAYS ARE UP PENETRABLE SO IT WOULDN'T IMPACT UM THE ACTUARIAL NUMBERS OR CONTRIBUTIONS BY CITY OR THE PLAN MEMBERS. >> THANK YOU FOR THAT CLARIFICATION. I APPRECIATE THAT.
JUST ONE OTHER QUESTION. SO SALARY INCREASES GOING FORWARD WOULDN'T IMPACT THE UNFUNDED LIABILITY BECAUSE WE I MEAN NOT FROM PREVIOUS LOSSES. HOW DO I THINK ABOUT THEM INTUITIONAL ON THAT BECAUSE IT'S GOING SO YEAH, THERE'S A LITTLE BIT OF BLENDE HERE UM BECAUSE IT'S AT ACTUAL SALARIES PAID UH THAT DIFFER FROM OUR ASSUMPTION GO INTO THIS. BUT WE ALSO ANTICIPATE ANY SALARIES THAT HAVE BEEN NEGOTIATED IN COLLECTIVE BARGAINING AND SO WE GET IN ADVANCE UH RECOGNITION OF SOME OF THOSE LOSSES WHEN THERE'S BARGAINING THAT HAS SALARY INCREASES GREATER THAN WE EXPECT BECAUSE THE CONTRIBUTIONS FOR THOSE INCREASES HAVEN'T COME IN YET RIGHT. WE'LL COME IN IN FUTURE YEARS. SO WHAT ARE YOU PLANNING TO RECOGNIZE? >> THIS IS JUST ON THE THE BENEFIT SIDE, NOT THE CONTRIBUTION SIDE. SO THIS IS SAYING THAT BECAUSE THOSE SALARIES ARE COMING ARE NOW ANTICIPATED WE WOULD ANTICIPATE PAYING LARGER BENEFITS LIKE BUT SO IAN AND I ARE GOING TO DO SOME BACK AND FORTH ON THIS.
BUT I JUST WANTED TO, UH, KIND HIT THE HIGHLIGHTS OF WHAT WE'RE GOING TO GO THROUGH HERE THAT UH WE ARE RECOMMENDING SOME CHANGES TO RETIREMENT ASSUMPTIONS, TERMINATION ASSUMPTIONS, MORTALITY, DISABILITY AND ADMINISTRATIVE EXPENSES. NOW A LOT OF THESE ARE JUST MINOR TWEAKS. UM, SO WE'LL GO THROUGH THEM FAIRLY QUICKLY. BUT PLEASE, UH, INTERRUPT AND ASK QUESTIONS AS WE GO THROUGH AND JUST FOR CLARITY FOR THE BOARD, WE JUST WENT THROUGH THE EXPERIENCE STUDY RESULTS AND NOW WE'RE TALKING ABOUT THE ASSUMPTIONS MOVING FORWARD BASED ON THAT EXPERIENCE STUDIES.
>> IS THAT RIGHT? UH, NO. >> WE'RE GOING TO PRESENT THE WE DID A HIGH LEVEL ANALYSIS OF GAINS AND LOSSES. OK, NOW WE'RE GOING TO PRESENT THE ACTUAL RESULTS FROM THE EXPERIENCE STUDY FOCUSING ON THE ASSUMPTIONS THAT WE'RE RECOMMENDING CHANGES TO OK, SO THE FIRST ASSUMPTION THAT WE'RE GOING TO THAT WE'RE SHOWING HERE IS THE MERIT SALARY SCALE. NOW THIS IS NOT THE WAGE INFLATION OR THE OVERALL INCREASES THAT ARE BARGAINED BY THE BARGAINING UNITS.
THIS IS A MERIT LIKE THE PROMOTIONAL STEPS OR LONGEVITY INCREASES AND SO THE EXPERIENCE DOES CLOSELY ALIGN WITH WHAT OUR CURRENT ASSUMPTION IS. THE CURRENT ASSUMPTION IS THE UH THE GREEN LINE WHICH IS ALSO BLUE IT'S COMBINE BECAUSE IT'S CURRENT AND PROPOSED. THERE'S CHANGES UM AND THERE ARE SOME VARIATIONS AND THE FIRST COUPLE OF YEARS OF THE ACTUAL EXPERIENCE IS A LITTLE LOWER BUT IT WAS HEAVILY IMPACTED BY ONE YEAR VERY LOW INCREASES AND WE'RE GOING TO CONTINUE TO MONITOR THIS GOING FORWARD IN THE FUTURE TO SEE IF THERE NEEDS TO BE ANY CHANGES. BUT THE PRETTY MUCH VARIATIONS ARE OFFSETTING FOR THE MOST PART. SO UH, WHEN WE GET INTO THINGS LIKE, UH, RETIREMENT RATES, TERMINATION RATES AND SO FORTH, UH, WE USE CONFIDENCE INTERVALS TO ASSESS THOSE ASSUMPTIONS AND SO I JUST WANTED TO GIVE YOU AN INTRODUCTION SO YOU KNOW HOW TO READ THE CHARTS AND WHY WE THINK IT'S IMPORTANT SO IN A HYPOTHETICAL CASE WE MAY OBSERVE A RATE OF 10 PERCENT BUT THAT COULD BE ONE OUT OF TEN PEOPLE WHO WERE ELIGIBLE FOR RETIREMENT, FOR EXAMPLE, OR IT COULD BE TEN OUT OF ONE HUNDRED OR ONE HUNDRED OUT OF A THOUSAND.
AND AS YOU MIGHT IMAGINE, IF IT'S ONE OUT OF TEN WE DON'T REALLY KNOW HOW MUCH TO RELY ON THAT ONE UH, BECAUSE TWO OUT OF TEN IS A QUITE DIFFERENT NUMBER THAN ONE OUT OF TEN AND SO WE CALCULATE THESE CONFIDENCE INTERVALS THAT TAKE INTO ACCOUNT THE WE CALL THEM EXPOSURES THAT IT'S IN THE CASE OF RETIREMENT. IT'S PEOPLE WHO WERE ELIGIBLE TO RETIRE AT THAT AGE SERVICE COMBINATION UH, AND SO THE GRAY BARS REPRESENT THE 90 PERCENT CONFIDENCE INTERVAL AND IF THERE'S ONLY TEN PEOPLE WHO ARE ELIGIBLE, THAT CONFIDENCE INTERVAL IS GOING TO BE LARGE BECAUSE INDICATING WE'RE UNCERTAIN ABOUT THAT 10 PERCENT ALL THE WAY DOWN TO IF YOU HAVE A THOUSAND WE'RE PRETTY CONFIDENT THAT THE ACTUAL RETIREMENT RATE IS IN THIS CASE SOMEWHERE BETWEEN EIGHT AND 12 PERCENT.
AND SO WHEN WE SEE THE ACTUAL ASSUMPTION OUTSIDE THE CONFIDENCE INTERVAL THAT CAUSES US TO CONSIDER A CHANGE, WE WON'T ALWAYS MAKE A CHANGE. UM, BECAUSE YOU'LL SEE THAT THE DATA IS KIND OF BUMPY AT TIMES BUT THAT'S REALLY WHAT'S DRIVING OUR RECOMMENDATIONS FOR A CHANGE IS IF WE SEE SOMETHING CONSISTENTLY OUTSIDE THE CONFIDENCE FOR MOST OF THIS WE'RE LOOKING AT TEN YEARS OF DATA. WE ARE AWARE THAT, UH, SEVERAL YEARS INCLUDED THE PANDEMIC WHICH MAY NOT UH, BE WHAT WE EXPECT IN THE FUTURE. SO WE HAVE LOOKED AT THAT IN SOME CASES, UH, MADE SOME ADJUSTMENTS OR JUST UH MADE SOME ADJUSTMENTS TO TAKE INTO ACCOUNT. >> WE ALSO ARE GOING TO REPORT TO OTHER STATISTICS THE ACTUAL TO EXPECTED RATIO SO IF WE EXPECT UH UH ONE HUNDRED RETIREMENTS AND THERE ARE ONE HUNDRED AND TWO THAT ACTUAL WILL BE ONE HUNDRED AND TWO PERCENT ACTUAL TO EXPECT IT OR IF THERE ARE ONLY NINETY EIGHT IT WILL BE NINETY EIGHT PERCENT . UH WE USE THAT BECAUSE WE WANT THE ASSUMPTION TO GET TO UH ONE HUNDRED PERCENT OR AROUND ONE HUNDRED PERCENT AND SO MOST OF OUR CHANGES WILL BE MOVING THAT IN THAT DIRECTION.
THE OTHER STATISTICAL REPORT IS CALLED R-SQUARED AND IT IT'S REALLY WHEN WE HAVE UH MULTIPLE ASSUMPTIONS FOR LIKE MULTIPLE AGES OR SERVICE BUCKETS IT'S MAKING SURE THAT OUR PATTERN FITS THE PATTERN OF THE DATA SO YOU COULD HAVE THE ASSUMPTION UPON AVERAGE CORRECT. BUT IF RETIREMENTS ARE GOING UP AT OLDER AGES, YOU NEED TO MAKE SURE YOU'RE MATCHING THAT PATTERN AS WELL. SO THAT'S WHAT THOSE TO GO TO.
WE DO WANT THE R-SQUARED TO GO TOWARDS UH ONE HUNDRED UM IT'S MUCH HARDER TO GET IT TO BE AT ONE HUNDRED SO WE WILL NOT BE UH RIGHT ON ONE HUNDRED. SO ANY QUESTIONS ON THAT THOSE YOU CAN RAISE THEM AS WE GO THROUGH UH AS WELL. SO LOOKING AT THE RETIREMENT RATES WE DID MAKE UM OVERALL SOME STRUCTURAL CHANGES TO TO HOW WE ARE SETTING THESE RETIREMENT RATES AND WE'RE LOOKING TODAY AT THE TIER ONE BECAUSE WE DON'T HAVE MUCH EXPERIENCE IF ANY THE TIER TWO MEMBERS YET. >> SO CURRENTLY THE ASSUMPTION IS AGE BASED AND THEN IT'S ALSO SERVICE BASED AND WE HAVE DIFFERENT ASSUMPTIONS FOR MEMBERS WHO ARE LESS WHO HAVE LESS THAN 30 YEARS OF SERVICE AND DIFFERENT ASSUMPTIONS FOR MEMBERS WHO WILL HAVE MORE THIRTY YEARS OF SERVICE. >> BUT NOW WE LOOKED AT SPLITTING THIS BUCKET OF BELOW THIRTY YEARS OF SERVICE INTO TWO PIECES BETWEEN TWENTY AND TWENTY FOUR AND TWENTY FIVE TO TWENTY NINE BECAUSE WE DID SEE HIGHER RATES OF RETIREMENT IF YOU HAVE TWENTY FIVE TO TWENTY NINE YEARS OF EXPERIENCE.
SO AND IT'S ALSO HOW THE ELIGIBILITY FOR RETIREMENT IS STRUCTURED FOR THE TIER ONE MEMBERS. >> UM SO GENERALLY WHAT WE DID FOR THE SERVICE PUCKETT'S TWENTY TO TWENTY FOUR WE DIDN'T CHANGE IT FOR THE FIRE WE ARE GOING TO RECOMMEND DECREASING SOME OF THE RATES FOR THE POLICE THAT THOSE SERVICE GROUPS BECAUSE THEY'RE ACTUAL TWO EXPECTED RATIO IS NINETY TWO WHICH MEANS NINETY TWO ACTUAL RETIREMENTS VERSUS ONE HUNDRED EXPECTED. SO WE'RE GOING TO PROPOSE REDUCING THOSE RATES A LITTLE BIT BUT FOR THE THE TWENTY FIVE TO TWENTY NINE BUCKET WE'RE GOING TO PROPOSE INCREASING THOSE RATES BECAUSE WE ARE SEEING HIGHER RATES THAN THE CURRENT ASSUMPTION AND THEN THOSE MEMBERS OF THIRTY OR MORE YEARS OF SERVICE RIGHT NOW WE ASSUME ONE HUNDRED PERCENT OF THOSE MEMBERS ARE GOING TO RETIRE BUT THERE IS THE DATA SUPPORTS THAT THAT'S NOT NECESSARILY TRUE AND WE ARE SEEING LESS ONE HUNDRED PERCENT RETIREMENT WHEN SOMEONE HAS THIRTY YEARS OF SERVICE AND HERE THE GRAPHS SHOWING CONFIDENCE INTERVALS ON THE LEFT IS THE FIRE WITH TWENTY TWENTY FOUR YEARS AND THE LINE REPRESENTS THE CURRENT AND PROPOSED ASSUMPTION BECAUSE WE'RE NOT CHANGING THEM.
>> AND THEN FOR THE POLICE YOU CAN SEE THE PROPOSED UH ASSUMPTIONS ARE THE GREEN LINE AND WE'RE RECOMMENDING JUST A SLIGHT UH UH SLIGHT DECREASE IN THE RATES FOR RETIREMENT BETWEEN AGES FIFTY EIGHT AND SIXTY ONE FOR THE POLICE TIER AND IT'S SIXTY TWO WE ASSUME ONE HUNDRED PERCENT SIXTY TWO FOR BOTH POLICE AND FIRE WE ASSUME ONE HUNDRED PERCENT RETIREMENT UM THE TWENTY FIVE TO TWENTY NINE YEARS WE'RE PROPOSING INCREASES FOR BOTH FIRE AND POLICE. YOU CAN SEE THE GREEN LINE IS UH ABOVE THE BLUE LINE WHEN THE BLUE LINE IS THE CURRENT ASSUMPTION AND IT FALLS MORE IN LINE WITH UH WITH THE EXPERIENCE AND WITHIN THOSE CONFIDENCE INTERVALS AS WELL. >> AND THEN HERE WE'RE SHOWING THIRTY OR MORE YEARS OF EXPERIENCE AND ON THE LEFT HAND SIDE WE'RE PROPOSING A FIFTY PERCENT RATE OF RETIREMENT WHEN SOMEONE HAS MORE THAN THIRTY YEARS OF THIRTY OR MORE YEARS OF SERVICE AND THEN ONE HUNDRED PERCENT ONCE THEY HIT AGE FIFTY FIVE AND YOU CAN SEE ON THE FIRE SIDE THE BLACK DOTS KIND OF BALANCE BETWEEN ZERO AND ONE HUNDRED BETWEEN AGES FIFTY SIX AND SIXTY ONE KIND OF GOES UP AND DOWN AND UP AND DOWN SO WE JUST WANTED TO BE CONSERVATIVE WHEN WE'RE SAYING UH PROPOSING ONE HUNDRED PERCENT ONCE THEY REACH AGE FIFTY FIVE AND THEN FOR THE POLICE IT'S A LITTLE BIT HIGHER RATE OF RETIREMENT ONCE YOU REMEMBER IT'S THIRTY YEARS OF SERVICE FOR THEM AND SO WE'RE GOING TO RECOMMEND A SLIGHTLY HIGHER RATE OF SIXTY PERCENT ACROSS THE BOARD UNTIL THEY HIT SIXTY TWO AND THEN IT'S ONE HUNDRED PERCENT AGAIN I THINK IN IN PRIOR YEARS WE REALLY DIDN'T HAVE MUCH DATA ABOVE THIRTY YEARS OF SERVICE AND SO WE ASSUMED EVERYONE RETIRED WHEN THEY GOT TO THIRTY YEARS WHICH MAKES SOME SENSE GIVEN THE BENEFIT FORMULAS AND STUFF BUT WE ARE NOW SEEING UH SOME PEOPLE WORK BEYOND THAT.
UH SO THE NEXT UH SET OF ASSUMPTIONS IS THE TERMINATION RATES. THESE ARE BASED ON YEARS OF SERVICE. UH JUST VERY QUICKLY THE FIRE UH TERMINATION RATES REALLY MATCH UP WITH THE CURRENT ASSUMPTION PRETTY WELL. THE POLICE THOUGH WE'VE HAD UM WE HAD A PERIOD THAT WERE UH WHERE THERE WERE REALLY HIGH TERMINATION RATES AND THE MORE RECENT EXPERIENCE IS MUCH LOWER .
AND SO WE ARE, UH, RECOGNIZING THAT SOME OF THAT IS FROM THE PANDEMIC YEARS. WE ARE STILL RECOMMENDING SOME REDUCTIONS IN THOSE TERMINATION RATES AND SO YOU CAN SEE HERE ON THE LEFT SIDE IS THE FIRE UH AND YOU CAN SEE THE PATTERN FITS UH, PRETTY WELL WITH THE CURRENT ASSUMPTION FOR THE POLICE PRIOR TO FIFTEEN OR FOURTEEN YEARS OF SERVICE, THE EXPERIENCE TENDS TO BE, UH, QUITE A BIT LOWER THAN THE CURRENT ASSUMPTION.
AND SO WE'RE RECOMMENDING REDUCING THAT. UH, YOU CAN SEE THAT IT'S VERY UNEVEN. SO UM IT DOES BOUNCE AROUND SOME UM BUT WE'RE TAKING UH YOU KNOW, A STEP IN REDUCING THOSE RATES IF THE CURRENT UH OR RECENT EXPERIENCE CONTINUES, WE MAY UH LOOK AT THIS AGAIN WITH THE NEXT STUDY IN TWO YEARS. UH, AND IF THAT RECENT EXPERIENCE CONTINUES, THERE MAY BE SOME ADDITIONAL REDUCTIONS TO THE OUR YOU'RE RUNNING IS IS IS ONE TOWARDS THE DEPENDENT VARIABLE. IT'S THE INDEPENDENT VARIABLE, THE R-SQUARED. >> SO THEY ARE SQUARED IT IS UM IN YOUR REGRESSION WHAT'S THE WHAT ARE THE VARIABLES? >> WHAT'S THE DEPENDENT AND WHAT'S THE INDEPENDENT? IT'S IT'S THE ACTUAL RATE VERSUS THE EXPECTED RATE AND UM IT REALLY DOES THAT PARTICULAR IN THAT PARTICULAR UM SO HERE ON THIS YOU'RE LOOKING AT IT AT EACH SERVICE POINT SO IT'S NOT UH THE R SQUARED OF THE TERMINATION RATE TO THE UNFUNDED LIABILITY.
>> NO NO OK IT'S JUST UH HEADCOUNT BASIS FOR UM WHO TERMINATES AT THOSE WE CHOSE THESE VARIABLES HAS THE BIGGEST DATA SO TO SPEAK UH IS THE TWENTY TO TWENTY FIVE YEARS RETIREMENT THE UM SO THE LARGEST THAT SO THE TERMINATION RATES DO NOT HAVE A HUGE IMPACT ON OUR LIABILITY. UM THEY HAVE SOME IMPACT THOUGH THE RETIREMENT RATES HAVE A MUCH MORE SIGNIFICANT IMPACT ON THE THE LIABILITY UH AND PARTICULARLY FOR MEMBERS WITH MORE YEARS OF SERVICE BECAUSE THEY OBVIOUSLY HAVE THE LARGER BENEFITS BUT THEY PROBABLY ARE THE SMALLEST POPULATION AS WELL.
RIGHT. THANKS. >> JUST MAKING SURE YOU KNOW I'M NOT SLEEPING SO YEAH. SHE DOES ASK QUESTIONS AND EVERYONE SHOULD KEEP ME ON MY TOES. >> UM CAN I BOTHER YOU TO ASK YOU TRY TO SPEAK CLOSER TO THE MICROPHONE BECAUSE PEOPLE THAT ARE EITHER FOR THE RECORDING OR IF THEY ARE LISTENING REMOTELY IS HARD FOR THEN SOMETIMES YOU'RE KIND OF BREAKING UP. >> THANK YOU. YEAH. AND YOU KNOW, IF THERE'S SOMETHING YOU DON'T WANT TO MISS IS ACTUARIAL DISCUSSION. >> SO, UM, SO NEXT WE'RE LOOKING AT THE MORTALITY EXPERIENCE OVER THE LAST TEN YEARS AND UM WE ARE RECOMMENDING ONLY CHANGING THE HEALTHY RETIREE MORTALITY THIS YEAR. >> UM, WE'VE USED THE SAME TABLE SINCE TWENTY NINETEEN AND THOSE EIGHTY RATIOS FOR THE MALE HEALTHY RETIREES HAS DECREASED EACH YEAR THAT WE'VE DONE THE EXPERIAN STUDY MEANING THERE ARE LESS MEMBERS DYING THAN WE'RE EXPECTING AND SO WE ARE NOT PROPOSING ANY CHANGES TO THE ACTUAL TABLE WE HAVE A LOAD TO THAT TABLE CURRENTLY OF ONE POINT ZERO ZERO TO WHICH MEANS WE INCREASE EACH OR EACH RATE OF DEATH BY THAT AMOUNT AND WE'RE SUGGESTING JUST NOW INSTEAD OF DOING A LOAD TO THE TO THE DEATH RATE WE'RE ACTUALLY GOING TO DECREASE THE DEATH RATE BY POINT NINE SEVEN TWO POINT NINE SEVEN TWO SO THAT WE'RE GOING TO ASSUME THAT MEMBERS THAT EACH AGE ARE GOING TO LIVE A LITTLE BIT LONGER.
>> UM, WE'RE GOING TO DO USE THE SAME FACTOR FOR MALES AND FEMALES. WE JUST DON'T HAVE AS MUCH EXP VARIANCE WITH THE FEMALE HEALTHY RETIREES. THERE'S ONLY THERE ARE ONLY THREE DEATHS IN THE PERIOD VERSUS ONE HUNDRED AND THIRTY THREE MALE DEATHS. >> UM, WE'RE NOT GOING TO CHANGE THE DISABLED RETIREES BECAUSE THEIR EXPERIENCE WAS IT WAS PRETTY CLOSE TO WHAT WE EXPECTED FOR THE MALES UH FOR BENEFICIARIES YOU CAN SEE THERE WAS EIGHTY RATIOS OR WELL ABOVE ONE HUNDRED PERCENT BUT WE'RE RECOMMENDING NO CHANGE FOR A COUPLE OF REASONS. WHEN YOU LOOK AT BENEFICIARIES THERE IS A WHAT'S CALLED THE WIDOWER EFFECT WHERE ONCE THE MEMBER OR THE THEIR SPOUSE HAS PASSED THAT THE RATE OF DEATH FOR THE SURVIVOR DOES GO UP. >> AND SO THAT'S WHAT WE'RE SEEING HERE. BUT WE ALSO USE THAT BENEFICIARY TABLE FOR MEMBERS WHO ARE CURRENTLY RECEIVING A BENEFIT AND THEY HAVE THEIR SURVIVOR BENEFIT. SO WE USE THAT MORTALITY FOR THAT AS WELL. SO WE'D PREFER TO BE A LITTLE CONSERVATIVE WITH THAT ASSUMPTION BECAUSE WE USE IT NOT JUST FOR THE COHORT OF THE CURRENT BENEFICIARIES BUT THE UH, MEMBERS ARE THE PEOPLE WHO MAY BECOME BENEFICIARIES IN THE FUTURE.
SO JUST TO BE CLEAR, OUR DATA HERE IS JUST BENEFICIARIES AFTER THE MEMBER HAS PASSED AND SO WE HAVE WE DON'T HAVE DATA ON THE BENEFICIAL BEFORE THE THE MEMBER PASSES AWAY AND SO IT ENDS UP BEING KIND OF A LITTLE BIT OF A SKEWED DATA JUST TO MAKE SURE I'M READING IT CORRECTLY. SO, UM SIDBURY FOR THE THE LAST TWO RIGHT. EIGHTY FIVE DIRIDON 90 PLUS IT'S ACTUALLY HIGHER THAN WHAT WE'VE BEEN USING AND WHAT WE PROPOSED TO USE.
>> UH YES. FOR THE FOR THE OLDER AGES AND SO THIS IS ACTUALLY SOMETHING THAT I'VE BEEN SEEING IN UH A VARIETY OF DIFFERENT CASES WHERE THE THE STANDARD TABLES ARE NOT AS STEEP IN TERMS OF INCREASING THE MORTALITY RATES. THE THE QUESTION IS HOW MUCH OF THAT IS DRIVEN BY COVID AND HOW MUCH IS UM YOU KNOW SOMETHING THAT SHOULD AFFECT THE UNDERLYING TABLES? UH, THE SOCIETY OF ACTUARIES IS IN THE MIDDLE OF CONDUCTING A NEW MASSIVE STUDY OF UH UH MORTALITY FOR ALL PUBLIC PLANS AND SO HOPEFULLY WE'LL GET SOME INSIGHT FROM THEM ON THAT.
BUT UH, THAT'S A VERY GOOD POINT. SO, UH, IT'S BEEN ALMOST A DECADE I THINK SINCE THERE WERE SOME DISABILITY REFORMS UH, PUT IN PLACE FOR THIS SYSTEM. I AND DISABILITY DATA IS UM, VERY THIN MEANING THERE'S NOT A LOT OF DISABILITIES EACH YEAR AND SO IT TAKES A WHILE FOR US TO BE ABLE TO REALLY CONFIDENTLY OBSERVE ANY CHANGE IN THE DATA. WE FEEL LIKE THIS YEAR WE HAVE ENOUGH TO TO DEFINITELY SAY THAT. AND YOU SAW THAT THE HISTORY OF GAINS ON DISABILITY THAT DISABILITY RATES HAVE REALLY COME DOWN PRIMARILY AT AGES 50 PLUS WE DON'T KNOW FOR SURE THAT IT'S THE DISABILITY REFORMS BUT IT SEEMS TO, UH, TRACK THE THE PATTERN OF THE DATA. >> THERE IS A LAG TIME BETWEEN WHEN SOMEONE BECOMES DISABLED AND WHEN THEY'RE GRANTED THE DISABILITY. SO UM, PART OF THE DELAY IS IS ADDRESSING THAT LAG TIME FOR THIS STUDY. >> WE REMOVED THE TWENTY TWENTY TWO TWENTY TWENTY THREE DATA BECAUSE IT SHOWS VERY VERY LOW LEVELS OF DISABILITY BUT WE BELIEVE THAT'S JUST BECAUSE THINGS ARE IN PROCESS AND HAVEN'T BEEN UH UH RECOGNIZED YET.
>> SO WE HAVE SIGNIFICANT REDUCTIONS TO DISABILITY RATES FOR BOTH FIRE AND POLICE. UH, THE MAIN REDUCTIONS ARE AFTER AGE FIFTY SO YOU CAN SEE THEM ON ON THIS SLIDE. >> UM, WE USED TO HAVE UH, DIFFERENT ASSUMPTIONS FOR FIRE AND POLICE BUT WE'RE SEEING, UM THE THE RATES ARE VERY SIMILAR SO WE HAVE COMBINED THEM. >> WE ARE I WE DON'T HAVE ENOUGH DATA TO CREATE OUR OWN DISABILITY TABLE SO WE ARE BORROWING CALIPERS DISABILITY TABLE FOR STATE POLICE OFFICERS AND FIREFIGHTERS AND MAKING A MINOR ADJUSTMENT TO IT. BUT YOU CAN SEE HERE THE BLUE LINE SHOWS WHAT OUR OLD ASSUMPTION WAS AND UH THERE'S A VERY SIGNIFICANT DIFFERENCE WHEN YOU GET TO AGE 50 IN HOW THOSE RATES ARE SHOWING NOW. >> YEAH, QUESTION ON THE DISABILITY. HOW DOES THE DISABILITY FACTOR INTO THE ACTUARIAL SCIENCE PART OF IT? BECAUSE MY UNDERSTANDING IS IT ONLY IMPACTS THE PLAN IF YOU GO ON DISABILITY PRIOR TO I GUESS YOUR ELIGIBILITY. >> RIGHT. DEPENDING ON YOUR YEARS OF SERVICE WHEN YOU'RE WHEN YOU SO IT'S OF AGE AND YEARS OF SERVICE WHEN YOU BECOME DISABLED.
>> AND SO A LOT OF THOSE DISABILITIES OVER AGE 50 WE'RE NOT HAVING A SIGNIFICANT FINANCIAL IMPACT TO THE PLAN BECAUSE THE BENEFITS WERE PAID BY THE PLAN WERE THE SAME WHETHER IT WAS A SERVICE RETIREMENT OR DISABLED RETIREMENT. >> SO I MEAN LOOK AT THAT GRAPH UP THERE. I MEAN THE DATA POINT OF JUST SAY 50 PLUS OR I MEAN REALLY THOSE ARE MUTED BECAUSE THEY'RE REALLY NOT DEBITING FROM THE PENSION SYSTEM IN A NEGATIVE WAY BECAUSE THEY WOULD BE COLLECTING ANYWAYS IF THEY JUST RETIRED. >> RIGHT. SO THE EFFECT OF THIS CHANGE IS ESSENTIALLY IN OUR UM VALUATION WE WILL BE ASSUMING FEWER DISABILITIES AND MORE RETIREMENTS BECAUSE THOSE PEOPLE WILL BE UM FALLING UNDER THE RETIREMENT UH, ASSUMPTION INSTEAD OF THE DISABILITY ASSUMPTION. >> OK, THANKS. AND WE DO VALUE THE DISABLED MEMBERS WITH A DISABLED MORTALITY VERSUS HEALTHY MORTALITY AS WELL. SO THERE IS THAT SMALL DIFFERENCE AS WELL. THANKS FOR THE SWEDISH.
>> SO MOVING ON TO THE ADMINISTRATIVE EXPENSES. UM, WE LOOKED AT THIS UH AND HAD SOME MORE DATA UM AND WHAT WE'RE GOING TO DO AND WHAT WE'RE RECOMMENDING IS CHANGING THE STRUCTURE OF THIS ASSUMPTION AS WELL TO BETTER ALIGN WITH HOW EXPENSES ARE ACTUALLY ALLOCATED TO EACH TIER AND THAT BASICALLY IS BEING DONE BASED ON THE PROPORTION OF ASSETS EACH TIER HAS WHERE THERE IS SPECIFIC INFORMATION TO DELEGATED OR ALLOCATED TO A SPECIFIC SOURCE OR GROUP THAT IS DONE BY THE STAFF.
BUT OVERALL THAT'S LARGELY DONE IN PROPORTION TO THE ASSETS AND PREVIOUSLY OUR CURRENT ASSUMPTION IS THAT WE WERE ALLOCATING ADMINISTRATIVE EXPENSES BASED ON HEADCOUNT FOR EACH OF THOSE GROUPS TIERS TEARS. AND SO WHAT THIS IS DOES IS UM THERE'S A BETTER ALLOCATION TO THE DIFFERENT GROUPS BECAUSE OF THIS AND THERE'S A LITTLE BIT OF A SHIFT TO FROM TIER TWO TO TIER ONE AND SO THE TIER TWO MEMBERS ARE GOING TO SEE A LITTLE BIT OF A DECREASE IN THEIR RATES BECAUSE OF THIS AND THAT MORE OF THAT IS GOING TO BE PUSHED TO THE CITY TIER ONE CONTRIBUTION RATES AND YOU CAN SEE HERE IN THE THE GRAPH ABOVE IT SHOWS OF THE CHART ABOVE SHOWS THAT AS A PERCENTAGE OF ASSETS THESE ADMINISTRATIVE EXPENSES ARE PRETTY CONSISTENT BETWEEN TIER ONE AND TIER TWO IN BETWEEN POLICE AND FIRE AS WELL.
>> YEAH. SO IN TIER TWO THE ADMINISTRATIVE EXPENSES ARE SPLIT 50/50 BETWEEN MEMBERS AND THE CITY IN TIER ONE THERE'S HISTORICAL RATE THAT THE MEMBERS PAY AND THE CITY PAYS THE BALANCE AND SO THIS EFFECTIVELY IS SHIFTING THE TOTAL AMOUNT OF ADMINISTRATIVE EXPENSES OF STAYING ABOUT THE SAME BUT IT'S SHIFTING MORE OF IT INTO THE TIER ONE BUCKET WHICH REFLECTS WHAT'S BEEN HAPPENING AND SO THAT WILL UM SHIFT MORE A BIT TO THE THE CITY WHICH IS EFFECTIVELY WHAT HAS HAPPENED ANYWAY BECAUSE IT SHOWS UP THEN AS A VERY TINY BUT A CONTRIBUTION TO THE UM WHICH THE CITY PAYS.
SO IN THE END, UM OVER THE LONG TERM IT WON'T HAVE A DRAMATIC IMPACT BUT YOU'LL SEE ON OUR UM PROJECTIONS THAT THERE IS THAT DYNAMIC AND WE'RE TALKING ABOUT YOU KNOW TWENTY FIVE BASIS POINTS. SO SOMETHING RELATIVELY NOT NOT SIGNIFICANT. >> DOES THIS INCLUDE INVESTMENT EXPENSIVE. NO NO. >> OUR ASSUMED RATE OF RETURN IS THAT OF INVESTMENT EXPENSES AND SO WE TAKE THAT OUT AND SO IT'S JUST THE ADMINISTRATIVE EXPENSE PIECE.
SO HERE'S OUR ESTIMATE OF THE IMPACTS. A LOT OF THE CHANGES WE'RE PROPOSING GO IN OPPOSITE DIRECTIONS AND SO A LOT OF IT ENDS UP KIND OF CANCELING OUT AND WE WE END UP WITH A VERY SLIGHT INCREASE IN THE ACTUARIAL LIABILITY AND CONSEQUENTLY THE WELL IT'S ABOUT UH YOU KNOW, POINT EIGHT MILLION THERE. IT DOESN'T REALLY CHANGE YOUR FUNDING STATUS BUT THEN YOU CAN SEE THE THE ALLOCATIONS HERE. THERE'S VERY LITTLE IMPACT TO THE TIER ONE MEMBER RATES THEY CAN GO DOWN JUST A HAIR THE TIER TWO MEMBER RATES GO DOWN ABOUT 70 BASIS POINTS.
THAT'S REALLY BEING DRIVEN BY THAT ADMINISTRATIVE EXPENSE UH, ASSUMPTION. >> AND THEN THE CITY'S RATE GOES UP SLIGHTLY BY POINT THREE PERCENT OF PAY. THAT'S UH, REALLY BOTH THE ADMINISTRATIVE EXPENSE AND THEN THE THE POINT EIGHT MILLION IN ADDITIONAL THAT THE CITY WOULD HAVE TO PAY FOR. SO THE THE CONTRIBUTE AND UH TOTALS FOR THE CITY GOES UP ABOUT JUST UNDER A MILLION.
SO UM THIS IS THE FIRST DECISION WE'D LIKE YOU TO MAKE. >> WE'RE ASKING YOU TO APPROVE THE PROPOSED ASSUMPTIONS. I WOULD ACTUALLY LIKE WE GO BACK TO SLIDE ELEVEN. I JUST WANT TO MAKE SURE I SAW ON EVERY SIDE THERE WAS A PROPOSED CHANGE AND I KNOW THAT YOU DOING A PROPOSED CHANGE FOR THE RETIREMENT RATE BUT I DON'T KNOW IF I SAW THAT ON THE SLIDE.
>> I THINK SLIDE 11 THE PROPOSED CHANGES HERE ARE SUMMARIZED ON THIS SLIDE. >> I THINK AND ON SLIDE 11 YOU CAN SEE THE DIFFERENCE BETWEEN THE THE GREEN AND THE BLUE LINE. >> THE BLUE LINE IS THAT ONE HUNDRED PERCENT ACROSS ATOP THE GREEN LINE IS THE PROPOSED ASSUMPTION. >> SO IT'S UH FIFTY PERCENT FOR AGES FIFTY TO FIFTY FOUR FOR FIRE AND THEN FOR POLICE AT SIXTY PERCENT FOR AGES FIFTY TO SIXTY ONE. >> OK THANK OK WE HAVE A MOTION OF A SECOND MOTION SINITTA SECOND BY SANTO'S ANY OTHER QUESTIONS. >> ALL THOSE IN FAVOR I POST. YEAH THE FIRST ONE. ALL RIGHT WE GET THE UH OK I SO NOW WE ARE DOING ITEMS THREE EIGHT AND THREE B UH FROM PRIOR MEETING AND UM SO JUST UH QUICK REVIEW UH WE WENT THROUGH THE ECONOMIC ASSUMPTIONS AT THE PRIOR MEETING AND UH INTRODUCED THE ASSET SMOOTHING QUESTION AND THE BOARD ASKED US TO COME BACK WITH UH IMPACTS A COUPLE OF DIFFERENT POSSIBILITIES. SO UH THERE'S NO CHANGE TO THE PRICE INFLATION OR THE AMORTIZATION PAYMENT INCREASES THE ISSUES WHERE WAGE INFLATION UH WE SUGGESTED THAT YOU CONSIDER INCREASING THE ULTIMATE ASSUMPTION FROM THREE TO THREE AND A QUARTER.
UM, THE BOARD HAS TO SEE BOTH OF THOSE RESULTS. >> THE DISCOUNT RATE WE PROPOSE NO CHANGE BUT THE BOARD BUT YOU'LL RECALL IN THE CAPITAL MARKET ASSUMPTIONS WERE WERE MUCH MORE OPTIMISTIC THIS YEAR AND BOARD ASKED TO SEE WHAT IT WOULD WHAT THE IMPACT OF GOING TO SIX POINT SEVENTY FIVE WOULD BE AND THEN ON THE ASSET SMOOTHING WE PROPOSED UH UH UH RESET OF ASSET SMOOTHING UH NOT TO MARKET BUT TO UM JUST SMOOTH OUT THE PATTERN OF RECOGNITION. AND SO THE BOARD WANTED TO SEE THE IMPACTS OF THAT WITH AND WITHOUT. >> SO THE WAGE INFLATION ASSUMPTION IS UM IS THE OVERALL WAGE INCREASES FOR THE ENTIRE GROUP.
IT'S WE TALKED ABOUT THE MERIT AND LONGEVITY INCREASES WHICH WERE THERE WAS NO CHANGE TO THAT AND THE DEMOGRAPHIC UM EXPERIENCED STUDY AND THE WAGE INFLATION IS MADE UP OF THE PRICE INFLATION PLUS THAT REAL WAGE GROWTH THAT'S AT YOUR CURRENT ASSUMPTION IS THREE PERCENT WHEN YOU COMPARE YOURSELF TO OTHER SYSTEMS IN CALIFORNIA ON THE RIGHT HAND SIDE OF THE SLIDE THERE ARE 20 OTHER SYSTEMS AT THREE PERCENT. SO IT IS THE MOST COMMON IN CALIFORNIA AND ALSO THE MEDIAN WAGE INFLATION. HOWEVER, SAN JOSE AS YOU KNOW, IS ONE OF THE HIGHER COST OF LIVING AREAS WHICH WOULD FOLLOW THAT THERE WOULD BE HIGHER TYPICALLY HIGHER WAGE INCREASES AND WE LOOKED AT THIS LAST YEAR WOULD THERE BE ANY THREE POINT TWO, FIVE OR YOU HAD ELEVEN UNDER THREE ONE TWO FIVE.
OH RIGHT RIGHT. IS THAT SOMETHING NEW THIS YEAR OR THAT THAT'S THE TWENTY TWENTY TWO SURVEY. YEAH AND WE DON'T HAVE TWENTY POINT THREE INFORMATION AT SO IN THE LEFT HAND SIDE THIS CHART SHOWS UM NATIONAL WAGE INFLATION DATA UM AND JUST FOCUSING ON THE WAGE INFLATION PIECE HERE AT THE BOTTOM UH THE LAST FIVE OR TEN YEARS THAT THAT FIGURE IS THREE POINT EIGHT FOR THE LAST TEN YEARS AND A FOUR POINT THREE PERCENT UM AGAIN HIGHER THAN THE THREE PERCENT UH ASSUMED WAGE INFLATION FOR YOUR SYSTEM. AND THEN LOOKING JUST AT YOUR RECENT WAGE INFLATION INCREASES FROM THE BARGAIN INCREASE AS YOU CAN SEE THAT THOSE AMOUNTS ARE ALSO HIGHER THAN THE THREE PERCENT WITH OUR ASSUMPTION AS BILL HAD MENTIONED IN PREVIOUS PRESENTATION IS THAT WE DO LOOK AT THE MOST BARGAIN UM MOST RECENTLY BARGAIN AMOUNTS. >> SO FOR TWENTY TWENTY THREE TWENTY TWENTY FOUR THAT'S FOUR PERCENT. SO WE INCORPORATE THAT INTO OUR VALUATION WITH THAT ASSUMPTION AT FOUR PERCENT AND THEN ANYTHING THAT WE DON'T HAVE ANYTHING BARGAIN WE DO USE THAT ULTIMATE THREE POINT UH THREE PERCENT WAGE INFLATION.
>> SO WE ARE CONSIDERING ASKING YOU TO INCREASE THAT TO THREE POINT TWO FIVE PERCENT. I'M NOT GOING TO GO THROUGH ALL THESE JUST TO SAY WHEN WE WENT THROUGH THIS THE CAPITAL MARKET ASSUMPTIONS INCREASED SIGNIFICANTLY. YOU CAN SEE THE THE CHANGE ON THIS SLIDE FROM TWENTY TWENTY TWO AND PRIOR YEARS TO WHAT WE SAW IN TWENTY TWENTY THREE UH THE MAIN THING IS UH WHETHER YOU THINK THOSE THAT CHANGED IN CAPITAL MARKET ASSUMPTIONS IS IS JUST A TEMPORARY CHANGE OR IF IT'S GOING TO LAST AND IT'S REALLY BEING DRIVEN BY THE THE CHANGES IN THE INTEREST RATES FROM THE FEDERAL RESERVE'S POLICY AND WE'RE JUST VERY CAUTIOUS ABOUT ANY INCREASE TO THE DISCOUNT RATE BECAUSE WE KNOW HOW HARD IT IS TO REDUCE THE DISCOUNT RATE AND THE PAIN THAT CAUSES SO WE'RE SUGGESTING THAT WE AT LEAST WAIT A YEAR, KEEP IT AT SIX POINT SIXTY FIVE THIS THIS TIME AROUND AND SEE IF THERE'S UH IF THOSE CAPITAL MARKET ASSUMPTIONS, UH, APPEAR TO BE MORE LONG TERM OR IF WE'RE GOING TO GET A REVERSAL.
I WE HAD HAD SOME DISCUSSION THAT I IF YOU THINK YOU MIGHT INCREASE THE DISCOUNT RATE EITHER THIS YEAR OR NEXT YEAR THAT YOU COULD COORDINATE THE WAGE INFLATION INCREASE WITH WHEN YOU DO THE DISCOUNT RATE AND YOU'LL SEE WHY WHEN WE LOOK AT THE THE COSTS HERE. >> SO BEFORE WE GET TO THE COST, THERE'S ONE A COUPLE SITES HERE ON THE ASSET SMOOTHING THE RESET OF THAT UM WE ARE PROPOSING JUST A ONE TIME RESET OF YOUR ASSET SMOOTHING TO SMOOTH OUT THE PATTERN OF THE RECOGNIZER NET GAINS AND LOSSES. UH, THE CURRENT NET UH, DEFERRED INVESTMENT LOSS IS TWENTY THREE MILLION DOLLARS WHICH ON ITS OWN IS NOT THAT MUCH.
BUT YOU CAN SEE THE PATTERN OF THOSE RECOGNITIONS ON THE RIGHT HAND SIDE OF THE SLIDE HERE AND EACH OF THOSE COLORED DIFFERENT COLOR BARS REPRESENTS TWENTY PERCENT OF THE ORIGINAL INVESTMENT GAIN OR LOSS. THE FROM THE FROM BACK TO TWENTY NINETEEN THROUGH TWENTY TWENTY THREE AND IN TWENTY TWENTY THREE THE TOTAL THERE REPRESENTS WHAT IS RECOGNIZED IN THE TWENTY TWENTY THREE VALUATION WHICH IS VERY CLOSE TO A NET ZERO BUT THEN IN TWENTY TWENTY FOUR YOU CAN SEE THAT WE'RE GOING TO RECOGNIZE UH ABOUT TWENTY FIVE MILLION IN GAINS TWENTY TWENTY FIVE FIFTY MILLION DOLLARS IN GAINS IN THE FOLLOWING YEAR FOLLOWING THE LINE THE PURPLE LINE WE RECOGNIZE ONE HUNDRED MILLION DOLLARS IN DEFERRED LOSSES SO THERE'S A SIGNIFICANT SWING YEAR TO YEAR BECAUSE OF THE INVESTMENT RETURNS BACK IN TWENTY TWENTY ONE AND TWENTY TWO AND HOW YOU KNOW THERE'S A HUGE GAIN AND THEN A LARGE LOSS YEAR OVER YEAR AND IT'S BEST TO SEE THAT THE RECOGNIZING THE TWENTY PERCENT EACH YEAR YOU LOOK AT THE TWENTY TWENTY THREE GAIN OF SIXTY THREE MILLION DOLLARS THAT DARK GREEN BAR THAT GAIN OF ABOUT TWELVE POINT FIVE MILLION IS RECOGNIZED EACH YEAR UNTIL TWENTY TWENTY SEVEN .
>> SO IF YOU WERE TO APPROVE THIS IT WOULD ONLY CHANGE THE ACTUAL RELIABLE OR THE ACTUARIAL VALUE OF ASSETS BY ABOUT FIVE MILLION DOLLARS AND HERE WE'RE SHOWING THE PROJECTION OF THE ACTUAL VALUE OF ASSETS IN THE LEFT AND YOU CAN SEE IT'S REALLY NOT THAT MUCH DIFFERENT BETWEEN EACH YEAR BUT THE PROJECTED CITY CONTRIBUTION RATES YOU KNOW, THEY START THEY START OUT ABOUT THE SAME IN TWENTY TWENTY FIVE AND THE SAME IN TWENTY THIRTY BUT IN THE MIDDLE YOU CAN SEE WHERE THE GOLD BARS REPRESENT THE RESET AND IT GRADUALLY COMES DOWN EACH YEAR WHEREAS THE CURRENT METHOD YOU'RE GOING TO SEE DECREASES IN THE NEXT TWO YEARS BUT THEN IT'S GOING TO INCREASE AGAIN IN TWENTY TWENTY EIGHT.
SO OUR RESET WOULD JUST BE SMOOTHING OUT THAT PATTERN OF THE NET DEFERRED GAINS AND LOSSES SO THAT IT'S IT'S RECOGNIZED EVENLY OVER THE COURSE OF THE FIVE YEARS IN A SENSE THEN WHAT WE'RE ASKING YOU TO DO IF YOU REMEMBER THE CHART FROM OUR FIRST UH FROM OUR FIRST PRESENTATION WHERE IT SHOWED EACH AND EVERY YEAR OF THE GAINS AND LOSSES BASICALLY WE WOULD BE TAKING THAT NET DEFERRED LOSS OF TWENTY THREE MILLION AND HAVING IT LIKE A FRESH START IN RECOGNIZING TWENTY PERCENT EACH YEAR FOR THE NEXT FIVE YEARS WITH NO OTHER YEARS OF DEFERRED GAINS AND LOSSES. WE'RE JUST COMBINING IT INTO ONE BASE IN A SENSE. SO LET'S PUT A PIN ON THAT ONE PIECE UM AND WE'LL GO AHEAD AND FINISH UP PRESENTATION BECAUSE I DO WANT TO LATER ON GO THROUGH THE POLICY THAT WE HAVE SAID THEY KNOW AND UNDERSTAND WHAT CHANGE THAT WHY YOU'RE RECOMMENDING CHANGED. >> YEAH.
AND I DO WANT TO BE CLEAR THIS IS THIS IS MORE OF AN OPTION. IT'S NOT GOING BE ACTUARIALLY SIGNIFICANT EITHER WAY. BUT OFTEN, UM YOU KNOW, WE DON'T NORMALLY LIKE A PATTERN WHERE WE REDUCE THE CONTRIBUTION KNOWING THAT IT'S GOING TO GO UP AGAIN AND SO WE'D RATHER HAVE A REGULAR PATTERN FOR THAT THAT CONTRIBUTION IN TERMS OF REALLY IN TERMS OF MANAGING BUDGETS AND THOSE SORTS OF THINGS. BUT FROM AN ACTUARIAL STANDPOINT, EITHER METHOD WORKS JUST FINE. >> I HAVE A FEW QUESTIONS. I UNDERSTAND THE REASON YOU'RE RECOMMENDING THIS TO ME . I GUESS ESSENTIALLY YOU START OFF WITH ACTUAL MARKET EQUAL THIS YEAR IF YOU DO THIS. >> NO, WE KEEP THE SAME DIFFERENCE OF TWENTY THREE MILLION UM, WELL IT'S A LITTLE BIT DIFFERENT.
WE CHANGE THE THE ACTUAL VALUE IT INCREASE BY ABOUT FIVE MILLION BUT UH IT WOULD NOT EQUAL THE MARKET. OH. UH BUT WE WOULD BE RECOGNIZING TWENTY THREE MILLION IN THAT INDIFFERENCES OVER THE NEXT FIVE YEARS INSTEAD OF UH FLUCTUATING INSTEAD OF THE FLUCTUATING THAT ADDS UP TO THE SAME TWENTY THREE MILLION THAT FOLLOWS A BETTER VERY DIFFERENT PATTERN. >> I HAVE A QUESTION SO YOUR DISCHARGE DOES IT ASSUME THAT YOU OR IS THERE AN ASSUMPTION THIS YEAR THAT THE REALIGNS RETURN FOR THE NEXT FIVE YEARS IS THE SAME AS THE DISCOUNT RATE? >> YES. SO THEN THAT NEVER HAPPENS, RIGHT. >> UM AND SO BY QUESTIONING OUR SMOOTHING SMOOTHING, ARE YOU ENDING UP HAVING AN UNINTENDED CONSEQUENCE OF NOT HAVING A FIRE IN CREATING FLUCTUATION SO ANY ANY GAIN OR LOSS THAT HAPPENS IN THE FUTURE WOULD FOLLOW THE SAME METHOD WE'VE USED CONSISTENTLY.
AND SO THE THOSE GAINS OR LOSSES WOULD MOVE THESE NUMBERS UP OR DOWN BUT IT DOES NOT CHANGE THIS PATTERN. >> SO IT REALLY MAYBE THE QUESTION IS EASIER ON THE PREVIOUS SLIDE. SO YOU'RE SHOWING THIS THIS BLUE LINE OR BLUISH GREEN LINE GOING UP IN TWENTY SIX. NOW LET'S SAY YOUR REALIZE THAT THIS IS A GAIN TWENTY SIX IS A GAIN. >> NO IT'S A LOSS.
OSSORIO IT'S THE OTHER AXIS IS OPPOSITE. >> YEAH YEAH. UM SO LET'S SAY WE PRABAL AND TEAM KNOCK KNOCK OUT OF THE BALLPARK AND WE HAVE ONE PERCENT OVER THIS COUNTRY THIS YEAR AND NEXT YEAR THAT LOSS AND WE DON'T MAKE A CHANGE WOULDN'T THAT BUMP LIKELY COME DOWN? >> NO. THE BOB WILL STILL BE THERE. THE OVERALL LEVEL WILL CHANGE SO YOU WOULD ADD FIVE MORE BARS STARTING IN TWENTY TWENTY FOUR THAT WOULD TAKE WHATEVER GAME THAT WAS UH AND RECOGNIZE TWENTY PERCENT OF IT EACH YEAR FOR THE NEXT FIVE YEARS AND SO THAT THAT BLUE LINE PATTERN WOULD REMAIN IT WOULD JUST MOVE UP OR DOWN BUT THAT'S NET OF ALL USE THE METRIC ADMISSION'S YOUR POINT TWENTY FOUR GAINS COULD OFFSET TWENTY PERCENT. THOSE WOULD OFFSET A TWENTY SIX LOSS OF TWENTY PERCENT DIVIDED EIGHTY PERCENT DIVIDED BY FIVE LET'S JUST SAY IT WAS ONE HUNDRED MILLION RIGHT SO TWENTY PERCENT THAT IS TWENTY MILLION EACH YEAR WHAT IT WOULD DO IS TAKE THAT AMOUNT IN TWENTY TWENTY FOUR AND MOVE IT DOWN BY TWENTY MILLION THE NET AMOUNT IN TWENTY TWENTY FIVE AND MOVE IT DOWN BY TWENTY MILLION THEN THAT AMOUNT IN TWENTY TWENTY SIX AND MOVE IT DOWN BY TWENTY MILLION SAME OVER TWENTY SEVEN SO YOU END UP WITH THAT WHOLE CHART MOVE DOWN BY TWENTY MILLION DOLLARS EACH YEAR BUT THE PATTERN OF THAT BLUE LINE STAYS THE THE SAME SO ESSENTIALLY IT'S ASKING FOR A UM RECAPITALIZATION OF THE TWENTY TWENTY THREE MILLION LOSSES THAT WE WOULD EXPERIENCE THIS YEAR TO BE SMOOTH OVER THE NEXT FIVE.
ONE THING I DO WANT TO JUST MAYBE PERHAPS IN THE INTEREST OF TIME IS TO BECAUSE THERE MAY BE FURTHER DISCUSSION ON THE SMOOTHING METHOD IS FOR ITS AGENDA IS IS TWO SEPARATE ITEMS IS TO FIRST TAKE EMOTION AND VOTE ON THE ECONOMIC ASSUMPTIONS AND HAVE A SEPARATE DISCUSSION ON THE UM THE AMORTIZATION METHOD. SO I THINK THAT IS ON SLIDE.
>> SO BY LET'S JUST CLOSE WITH THE SUMMARY OF THE IMPACTS. >> WE HAVE ALL THE DIFFERENT PIECES HERE SO THAT YOU COULD STUDY THE TABLE BUT THE FIRST SET OF COLUMNS ARE NO ASSUMPTIONS CHANGES. WE JUST ADOPTED THE DEMOGRAPHIC CHANGES AND YOU'RE IN THAT SECOND SET OF COLUMNS AND THEN I IF YOU ADD THE THREE AND A QUARTER PERCENT WAGE INFLATION, YOU'RE IN THAT THIRD COLUMN AND IF YOU ALSO DO THE DISCOUNT RATE YOU'RE IN THE FOURTH COLUMN AND AT THE YOU CAN SEE NONE OF THEM CHANGE THE FUNDED STATUS THAT MUCH UNTIL YOU GET TO THE DISCOUNT RATE THAT WOULD BUMP IT UP TO EIGHTY ONE. UM BUT LOOK AT THE THE MEMBER RATES CITY RATES AND THE THE CITY DOLLAR AMOUNT AND YOU CAN SEE THE THE DIFFERENT CHANGES UH SO INCREASE THE WAGE INFLATION UH BUMPS UH THE CONTRIBUTIONS UP UH AND THEN DOING THE DISCOUNT RATE WOULD BRING THEM DOWN AND THEN THERE'S ABOUT A A POINT FOUR MILLION DOLLAR DIFFERENCE BETWEEN UH RESETTING THE ASSETS OR NOT PERSONALLY I DON'T SEE A NEED TO CHANGE THE DISCOUNT.
WE WERE WE WERE SLOW IN BRINGING IT DOWN. THERE'S NO REASON TO BE FAST GOING UP AND UH OK. UH, MOVE TO ADOPT OUR CONSULTANTS RECOMMENDATION FOR ALL THESE UH YEAH. ADJUSTMENTS FOR PRICE INFLATION HOMOGENIZATION WAGE INFLATION, DISCOUNT RATE UH AMORTIZATION. >> WE ARE STILL DISCUSSING IT. NO, I'M SORRY THE ASSETS SMOOTHING IS THE ONE WE'RE GOING TO BE DISCUSSING. WE'RE NOT OH OK.
DOES NOT INCLUDE ASSETS SO I THINK YOU WOULD BE RECOMMENDING NO CHANGES TO THE ECONOMIC ASSUMPTIONS, CORRECT? >> YES. I WILL. SECOND THAT WE HAVE A MOTION FROM DUKAN IN A SECOND FROM DAVID WILSON FOR THE DISCUSSION JUST FOR CLARITY. SO WE'RE STAYING AT THREE PERCENT INFLATION AND THE WAGE INFLATION. I THINK THAT'S REASONABLE BECAUSE YOU'VE ALREADY MADE THE NEW AGREEMENT IN JUST TO BE CLEAR ON THIS TABLE THAT WILL MEAN THE LEFT HAND SIDE OF THE TABLE BASELINE NO ASSUMPTIONS CHANGES, NO DEMOGRAPHIC DEMOGRAPHIC, THE DEMOGRAPHIC TRENDS. OK THAT THE SECOND ONE YEAH OK 266 PAGE ELEVEN IS WHERE ALL THE SUMMARY IS I THINK OK YES OK WITHOUT THE LAST ONE ALL ALL THOSE IN FAVOR I POST UH OK I'M GOING TO FINISH OFF PRNS MOVIE.
YEAH. IF I MAY SO THE BOARD DOES HAVE A ACTUARIAL ASSUMPTIONS AND METHODS POLICY WHICH WAS ADOPTED IN UH TWO THOUSAND AND ELEVEN AND THE BOARD'S POLICY UH ADDRESSES WHAT TO DO IN SITUATIONS OF GAINS AND LOSSES AND SO WHAT OUR POLICY STATES IS THAT ACTUAL ACTUARIAL GAINS AND LOSSES IN PLANNED CHANGES ARE AMORTIZED OVER A FIFTEEN YEAR PERIOD BEGINNING WITH THE EVALUATION DATE FROM WHICH THEY FIRST RISE. >> AND SO WHAT CAMERON IS RECOMMENDING IS A ONE TIME DEPARTURE FROM OUR STATED POLICY RATHER THAN RECOGNIZING THE LOSSES IN TWO THOUSAND AND ONE IN TWENTY TWENTY TWENTY THREE OF THE TWENTY THREE MILLION LOSSES IS RATHER TO SMOOTH OUT THAT LOSS OVER THE NEXT FIVE YEARS.
>> THE ONLY THING THAT APPEARS TO ME FROM A FIDUCIARY STANDPOINT BOTH SEEM REASONABLE IN ITS BUT I WOULD ADVISE THAT IT MAY BE MORE PRUDENT TO STAY THE COURSE FOR THE REASONS THAT SUNITA HAD MENTIONED. WE DON'T KNOW WHAT OUR INVESTMENT GAINS WILL BE OR LOSSES WILL BE IN THE FUTURE AND IT'S BETTER TO RECOGNIZE WHATEVER OUR POLICY HAS TOLD US TO DO IN TERMS OF THE ACTUAL AS AS WE GO EXPERIENCED LOSS BASED ON HOW OUR POLICY IS WRITTEN IS THAT WE ARE TO AMORTIZE IT OVER A FIFTEEN OR PERIODS. >> THIS WOULD BE MAKING A SPECIAL EXCEPTION TO OUR POLICY FOR THE FIVE YEARS I DON'T THINK SO BECAUSE THIS IS THAT'S THE AMORTIZATION POLICY. WE ARE NOT CHANGING THE AMORTIZATION POLICY. WE WOULD ONLY BE CHANGING THE ASSET SMOOTHING POLICY SO IT WOULD AND THIS IS SOMETHING IS STATED ABOUT ASSET SMOOTHING.
NO, THERE'S ACTUALLY NOTHING WELL THERE IS SOMETHING STATED ABOUT THE SMOOTHING BUT IT'S ACTUALLY NOT LISTED IN THE IN THE APPENDIX B TO OUR ACTUARIAL UM VALUATION DOCUMENTS THAT WAS PROVIDED IT'S IN THE IT'S NOT IN ASSUMPTION SECTION IT'S IN THE CONTRIBUTION ALLOCATION PROCEDURE. >> SO YEAH I HAVE THAT I DON'T SEE IT THE ASSET SMOOTHING OF IT NO I SEE ACTUARIAL COST METHOD ASSET ASSET VALUATION METHOD AND THAT METHOD ASSET VALUATION METHOD SMOOTHING UM DIFFERENT BETWEEN WHAT UH THE AMORTIZATION AND ASSETS AS IT'S MOVING SO UM SO WE USE THE ACTUAL VALUE OF ASSETS TO DETERMINE WHAT THE P&L IS AND THEN THE AMORTIZATION POLICY TELLS US HOW TO PAY FOR THAT UL DOES THAT MAKE SENSE ACTUALLY LOOKING AT THAT SECOND SECTION THERE IS NO DEVIATION FROM THE POLICY. >> IT WOULD JUST REQUIRE THE THE BOARD TO DO A ONE TIME UH, AGREEMENT TO SMOOTH IT SMOOTH OUT FOR THE NEXT FIVE YEARS. >> THE ONLY IMPACT REALLY I BELIEVE IS ON THE VOLATILITY OF THE CITY AS FAR AS I UNDERSTAND FROM LOOKING AT THAT SLIDE IS THAT THE CITY WOULD PROVIDE MORE CASH FLOW UP FRONT FOR FOR IN RECOGNITION OF THAT LOSS.
BUT OTHERWISE, YOU KNOW, WITHIN THE NEXT FIVE YEARS WE WOULD GET THE SAME AMOUNT OF MONEY FROM THE ASSET SMOOTHING BASICALLY DETERMINES YOUR ACTUARIAL VALUE. AMORTIZATION IS THE THE RELATIONSHIP BETWEEN THAT AND FUND IT IS THAT IS THAT RIGHT? >> THE AMORTIZATION IS HOW WE PAY OFF. WHAT WE MEASURE IS THE UNFUNDED THE ASSET SMOOTHING AFFECTS WHAT WE MEASURE THE UNFUNDED TO BE. >> THANK YOU FOR GIVING SABIEN AND CAN I ASK IF YOU KNOW IF FUTURE GAINS OR LOSSES MOVES EVERYTHING UP RIGHT OR DOWN RIGHT.
WHAT IS CREATED THIS BUMP WHAT IT'S THE PATTERN OF THOSE LAST FIVE YEARS. IT'S REALLY THE TWENTY TWENTY ONE FOLLOWED BY TWENTY OR TWENTY TWO WHERE WE HAD A HUGE GAIN FOLLOWED BY A LOSS SO WE COULD GET THE SAME THING THE FUTURE YOU COULD GET THE SAME THING IN THE FUTURE IF YOU GET THAT PATTERN OF INVESTMENT RETURNS. >> OK, SO IF WE WERE TO EXPERIENCE MORE VOLATILITY IN RETURN FOR UH VERSUS THE DISCOUNT RATE IN THE FUTURE WE WOULD WE HAVE ANOTHER ONE OF THESE DISCUSSIONS AGAIN YOU COULD UM BUT FIXING THIS ONE DOES NOT. >> YEAH. IT'S KIND OF LIKE THE DYNAMICS OF THE FUTURE WHAT WE'RE TALKING ABOUT SMOOTHING THE ASSET RETURNS OVER A FIVE YEAR PERIOD. BUT WE'RE SAYING THIS THAT MAY NOT BE SMOOTH ENOUGH AND WE'RE INCORPORATING MORE AD PIECE INTO IT TO SMOOTH OUT A LITTLE BIT MORE.
>> YEAH, RIGHT. BUT IN PARTICULAR BECAUSE WE HAD AGAIN FOLLOWED BY YEAH. >> LOSS SO IT'S NOT I MEAN THAT PATTERN COULDN'T HAPPEN AGAIN. >> YEAH. AND IN THAT BOTH WERE SIGNIFICANT AND REALLY IN MY MIND THE MOST IMPACTFUL ASPECT OF THIS IS THE CONTRIBUTION MADE BY THE CITY THAT KIND OF SMOOTH THAT OUT AND THAT HAVING RIGHT VERY VOLATILE SWINGS IN THE CONTRIBUTION RATE WHICH MAY I DON'T MAY BE NOT ACCEPTABLE. >> SO YEAH THAT'S EXACTLY RIGHT . >> THAT'S THE FUNDAMENTAL QUESTION. AND IN YOU KNOW, AS I SAID ACTUARIALLY EITHER ONE WORKS OUT JUST FINE.
IT'S REALLY DO YOU WHAT ARE YOU OK WITH THE PATTERN WHERE THE CITY'S CONTRIBUTION GOES DOWN AND THEN BACK UP? UH, OR DO YOU WANT TO SMOOTH IT OUT? AND THAT'S REALLY WHAT I'M TRYING TO GUESS WHAT THE CITY PREFERS. >> I PREFER SPEAKING FROM THE PERSON WHO GETS EMPLOYED BY THE CITY AND RELIES ON THEIR BUDGET. >> I THINK THEY WOULD PREFER SOMETHING THAT WAS MUCH MORE MANAGEABLE. UM DROPPING DOWN TWO PERCENT AND GOING BACK UP TWO PERCENT AND DROP DOWN TWO PERCENT AGAIN IS SIGNIFICANT AND WOULD AFFECT BUDGET AND OPERATIONS. IT RAISES EVERYTHING IN THE CITY WHEREAS THEY IF YOU STEP IT DOWN INCREMENTALLY IT WOULD BE MUCH EASIER TO MANAGE JUST A LAYMAN'S POINT OF VIEW. >> HMM. I LIKE YOU MIGHT HAVE YOU KNOW, IF I WEIGH IN JUST A LITTLE BIT ,I UH THE ONE TIME SMOOTHING MAKES SENSE IN THAT THE NUMBERS ARE COMING DOWN INCREMENTALLY BUT UH AND KNOWING WHAT OUR BUDGET SITUATION IS COMING UP NEXT YEAR NOT IN THIS EFFECT BUT WE'RE ALSO NEGOTIATING WITH POLICE AND FIRE IN THE NEXT YEAR OR STARTING UH, POLICE I THINK OR FIRE SOON AND THEN POLICE WHICH COULD GENERATE HIGHER WAGES.
>> WELL, I HOPE SO. THANK YOU. WELL, I SHOULDN'T HAVE SAID THAT PUBLICLY. IT'S NEVER NEVER THOUGH IT'S ALWAYS POTENTIALLY SO I'M YOU KNOW, I'M I'M TORN BECAUSE THE REDUCING THE UNFUNDED QUICKER BUT THEN IT STEPS BACK UP. IS THAT A BIG BENEFIT TO THE CITY? >> I DON'T KNOW. I DON'T THINK FROM MY PERSPECTIVE AS A CITY COUNCIL MEMBER IT MATTERS MUCH. I WISH JIM SHANNON IS HERE OUR BUDGET GUY WHO COULD TELL ME WHICH HE THINKS IS A BETTER IDEA BUT I'M SURE THEY'RE ESTIMATING WORST CASE AS FAR AS EXPENSES FOR THE DETAIL. >> BUT AS YOU SAID, DAVE, ANY THE UNFUNDED LIABILITY AFFECTS OUR BUDGET AND AFFECTS OUR SERVICES THAT WE AND OUR HIRING CAPABILITY.
SO I DON'T I DON'T HAVE A STRONG PREFERENCE EITHER WAY. >> YOU KNOW, I'D PROBABLY DEFER TO YOUR CONSULTANT. I WOULD I WOULD PROBABLY SAY IS DOING THIS FOR A WHILE. >> THE CONSISTENCY FOR THE CITY'S BUDGET IS PROBABLY MORE FAVORABLE BECAUSE THEY HAVE A BETTER OPPORTUNITY TO PLAN. YEAH I I I DON'T WANT TO SPEAK FOR JIM. OF COURSE I NEED YOU YOU'RE LISTEN AND APOLOGIZE BUT I DO I HAVE HAVE DISCUSSIONS WITH HIM IN THE PAST AND FROM THE BUDGET STANDPOINT IT IS HELPFUL TO UNDERSTAND THAT PERCENTAGES ARE GOING TO BE CONSISTENT IN THE OVER TIME SO IT MAKES IT EASIER FOR THEM TO PLAN AHEAD UM AS OPPOSED TO HAVING A DROP OF THE NEXT COUPLE OF YEARS AND GOD KNOWS WHAT THE BUDGET IS GOING TO LOOK LIKE IN TWENTY SEVEN AND THEN HAVING TO PAY ALL OF A SUDDEN MORE SO FROM A BUDGET STANDPOINT I AM CONFIDENT WHEN I SAY THAT THEY WILL PREFER TO HAVE SOMETHING NUMBERS THAT ARE MORE CONSISTENT ESPECIALLY WHEN YOU SUGGEST ASSUMING EVERYTHING ELSE EQUAL RIGHT.
ALTHOUGH THE ASSUMPTIONS ARE MADE THAT AT LEAST PERCENTAGE WISE EXPECTED TO SLOW DOWN INCREMENTALLY OVER THE NEXT COUPLE OF YEARS. >> I THINK THAT THAT IS CORRECT. I DO WANT TO MENTION BECAUSE THERE WERE SOME QUESTIONS AND COMMENTS ESPECIALLY BY TRAUSTI CONNINGTON SO THE VOLATILITY UM THE WHOLE CONCEPT IF I MAY BE CORRECT ME BECAUSE YOU ARE THE ACTUALLY I'M NOT I'M JUST PLAYING ONE ON TV. >> UM, THE WHOLE CONCEPT OF THE UH THE SMOOTHING PROCESS IS TO ACTUALLY DEAL WITH THAT VOLATILITY AND MAKE IT MORE EVEN KEEL. IT'S JUST THAT WE DO HAVE IN THE SYSTEM AND WE HAVE A YEARS WHERE WE HAVE GAINS AND LOSSES .
HE JUST SAID THAT WE HAVE TWO YEARS UM NEXT TO EACH OTHER. >> THE LOSS WAS SIZABLE BUT I WOULD SAY IT'S STILL WITHIN HISTORICAL HISTORICAL RETURNS BUT THE GAME WAS ASTRONOMICAL SO THAT MAY PUT A HUGE GAP THAT WE DON'T USUALLY SEE IN THOSE YEARS. SO SURE WE CAN SEE SITUATIONS IN THE FUTURE WHERE THIS IS GOING TO CONTINUE HAPPENING BUT UM I WILL I WILL ASSUME UNLESS YOU PROMISE ME OTHERWISE WE WON'T BE SEEING 30 AND THIRTY FIVE PERCENT GAINS AND LOSSES IN THE NEXT FEW YEARS FOLLOWED BY A TEN PERCENT LOSS. SO I JUST WANTED TO MAKE THAT POINT. THANK YOU. YEAH. IN SOME SENSE UM MADE AN INITIAL ASSUMPTION ABOUT WHAT SMOOTHLY WE WANT TO TAKE PRIDE I DON'T KNOW WHEN FIVE YEARS I KNOW SOME PEOPLE MAY USE MORE OR LESS PAY MORE AND SO HAVING ANOTHER PROCESS TO MODIFY THAT TO SMOOTH OUT FURTHER I PERSONALLY DON'T HAVE AN ISSUE WITH IT.
I JUST WANT TO EXPRESS MY PERSONAL OPINION. I MEAN THIS IS UH OK, GO AHEAD HARVEY. >> OH MY GOD. THANK YOU BOTH QUESTION HAS ANYONE ASSESSED FROM THE PLANT PERSPECTIVE WHETHER EITHER OF THESE PATTERNS WILL HAVE AN IMPACT ON OUR LIQUIDITY AND CASH FLOW NEEDS IN THE YEARS THAT ARE EXPECTED? I LOOK AT I LOOK AT MORE I'M NOT SO INTERESTED IN THE COSMETICS OF MAKING IT LOOK SMOOTH. I'M MORE INTERESTED IN KNOWING WHETHER OR NOT IT HAS ANY IMPACT ON OUR CASH FLOW AND THE CONTRIBUTIONS THAT WILL BE COMING IN AND WHAT WE NEED TO PAY PAYROLL ON A MONTHLY BASIS. >> SO IT THE THE SMOOTH PATTERN SHOWS YOU WHAT THE IMPACT WOULD BE ON THE NET CASH FLOW BECAUSE YOU'D HAVE IN GOLD BARS YOU'D HAVE MORE CONTRIBUTIONS COMING IN FOR THOSE FIRST COUPLE OF YEARS AND SO THAT WOULD UH INCREASE THE NET CASH FLOW TO THE THE SYSTEM DURING THOSE YEARS. BUT I KNOW JAY KWAN GETS DATA FROM US EVERY YEAR TO LOOK AT THE LIQUIDITY NEEDS AND IN MANAGE THOSE THOSE CASH FLOWS THE TWO THREE PERCENT DIFFERENCE IN THE CONTRIBUTION RATE IS PROBABLY NOT A HUGELY SIGNIFICANT CHANGE IN YOUR NET CASH FLOW.
>> OK, THANK YOU. >> SHOULD BE PART OF OUR RECORD IN MAKING THIS DECISION. WE SHOULD WE BE CONSIDERING A DIFFERENT BUILDING POLICY AS DAVID SUGGESTED CONSIDER THIS IS BECAUSE WE HAVE TWO SHORT HORIZON. >> NO, NO, NO THE THIS IS JUST IT'S AN UNUSUAL SITUATION WHERE YOU HAD A SPECTACULAR YEAR FOLLOWED BY A SIGNIFICANT LOSS. IT WASN'T AS SIGNIFICANT AS YOUR YOUR GAIN BUT IT'S THE JUXTAPOSITION THOSE TWO INVESTMENT YEARS AND REGARDLESS OF WHAT POLICY WE HAD, WE'D HAVE SOME DYNAMIC FROM THAT THAT'S TYPICAL OF MARKETS TWO THOUSAND EIGHT NINE IS DISASTROUS AND THEN 2010 WAS A BIG RECOVERY.
SO I DON'T KNOW HOW WE AVOID THAT. >> UH, I WELL AND THERE'S NO YOU DON'T TRY AND AVOID THAT. YOU JUST START MANAGING THE THE IMPACTS ON CONTRIBUTIONS IN TWO THOUSAND EIGHT NINE IT CAME IN THE OPPOSITE ORDER AND SO IT HELPED US ACTUALLY BUILD THE RAMP UP OF CONTRIBUTIONS. >> YEAH. I MEAN I BELONG TO THE CAMP THAT A CONSISTENT METHODOLOGY OVER TIME IS SINCE WE HAD ANY WE'RE LOOKING AT LONG HORIZONS IS BETTER THAN I THINK THE UNINTENDED CONSEQUENCES OF TRYING TO TWEAK THESE THINGS WE ALREADY HAVE THEM POLICY WE HAD THE SMOOTHING POLICY TWO PERCENT DOESN'T MAKE A DIFFERENCE TO THE CITY ON US.
BUT I YOU KNOW, THAT'S SORT OF MY BIAS. BUT LIKE I SAID BOTH THAT BOTH APPROACHES ARE REASONABLE FROM A FIDUCIARY STANDPOINT. THE PROS AND CONS AS LAID OUT HERE IS A PRO IS THAT WHERE YOU GET ADDITIONAL LIQUIDITY COMING IN FOR THE FIRST FEW YEARS BECAUSE THE CONTRIBUTION RATES WOULD BE HIGHER, THE CON WOULD BE TO THE CITY WOULD BE MORE VOLATILE FOR THE NEXT FIVE YEARS IN TERMS OF THEIR CONTRIBUTION RATES OR THEIR PLANNING PURPOSES AND SO MY RECOMMENDAT WOULD BE TO SMOOTH FOR THE BOARD BY LOOKING AT IT.
I MEAN EITHER WAY BOTH ARE REASONABLE UM, BUT THAT WOULD BE MY POSITION. >> I'LL MAKE A MOTION TO ACCEPT AARON'S RECOMMENDATION TO RESET THE SMOOTHING FOR THE ONE TIME SO I SECOND THERE I HAD A MOTION FROM THE WILSON SECOND SANTOS ANY FURTHER DISCUSSION ALL IN FAVOR I OPPOSED I OPPOSE AND INTERPOSES. ALL RIGHT. UM, THE NEXT IS, UH, OUR UH OPAP ASSUMPTIONS. OH DEAR. JUST A MOMENT HERE. >> UM, JOINING ME IS GOING TO BE MIKE SHUTING WHO IS UH JOINING WE ASSUME HE'S OUR HEALTH CARE ACCURIDE AND I APOLOGIZE THEY APPARENTLY CLOSED AT THE MIKE. ARE YOU THERE? >> YES.
YES. OK, OK, UM SO JUST SINCE WE'RE SHIFTING FROM PENSION DOPEHEAD JUST A QUICK BRIEF BACKGROUND BUT THE OPAP PLAN THE RETIREE MEDICAL PLAN IT'S MOSTLY CLOSED SO THEY'RE ONLY TIER ONE MEMBERS WHO DID NOT ELECT TO GO TO THE VEBA ARE ARE GETTING FULL BENEFITS SO IT'S MOSTLY A DECLINING POPULATION. >> UH, PEOPLE WHO ARE NOT IN THAT GROUP I CAN QUALIFY FOR CATASTROPHIC DISABILITY BENEFITS BUT THAT IS A TINY PART OF THE LIABILITY MEMBER CONTRIBUTIONS ARE FIXED SO WHATEVER WE DO DOES NOT AFFECT, UH, MEMBER CONTRIBUTIONS. THEY'RE JUST EIGHT PERCENT OF PAY AND IT'S THE CITY THAT CITY CONTRIBUTIONS THAT WE SET THE CITY HAS THE OPTION TO CAP CONTRIBUTIONS AT ELEVEN PERCENT OF PAY. WE'VE EXCEEDED THAT ELEVEN PERCENT BY SMALL AMOUNTS AND THE CITY HAS NOT INVOKED THE CAP BUT THAT IS SOMETHING THAT THEY CAN DO.
UM AND LIKE WITH THE PENSION THIS VALUATION WOULD DEVELOP THE CONTRIBUTIONS FOR FISCAL YEAR IN TWENTY TWENTY FIVE. UM THE OTHER DIFFERENCE WITH THE OPM PLAN IS THAT THERE ARE REALLY TWO KINDS OF SUBSIDIES PROVIDED THERE'S THE EXPLICIT SUBSIDY WHERE THE PLAN PAYS THE PREMIUM FOR THE HEALTH COVERAGE SELECTED BY THE RETIREE UP TO ONE HUNDRED PERCENT OF THE PREMIUM FOR THE LOWEST COST PLAN OFFERED TO ACTIVE EMPLOYEES. >> THAT'S THE PORTION OF THE BENEFIT THAT IS PRE FUNDED AND THAT THIS BOARD ADDRESSES. >> THERE'S ALSO AN ADDITIONAL OBLIGATION FROM HAVING RETIREE MEDICAL PLAN THAT UH THAT WE HAVE TO DISCLOSE IN THE REPORT AND IN PARTICULAR IN THE GADSBY REPORT. THAT'S THE IMPLICIT SUBSIDY. SO THAT'S PAID ON A PAY AS YOU GO BASIS. >> IT'S NOT PART OF OUR PREFUNDING THAT IT'S WHEN YOU ARE PROVIDING HEALTH CARE BENEFITS TO PEOPLE AT THE COST OF THOSE BENEFITS VARIES BY AGE .
PEOPLE TEND TO HAVE HIGHER HEALTH CARE COSTS THAN YOUNGER PEOPLE. >> THE PREMIUMS ARE SET ESSENTIALLY AS AN AVERAGE FOR THE WHOLE GROUP. >> AND SO WHEN YOU'RE JUST LOOKING AT THE RETIREE GROUP PRE SIXTY FIVE THERE'S AN IMPLICIT SUBSIDY BECAUSE THE COST OF THEIR HEALTH CARE IS GENERALLY GREATER THAN THE PREMIUM THAT'S BEING CHARGED JUST BECAUSE THEY'RE AN OLDER POPULATION THAT GETS CAPTURED IN THIS IMPLICIT SUBSIDY. IT'S IN YOUR REPORT UM BUT WE'RE WE'RE NOT PREFUNDING IT SO UH IT'S AN IMPORTANT PIECE TO UNDERSTAND FOR THE TOTAL COSTS OF PROVIDING THIS BENEFIT. UH, BUT IT'S NOT PART OF THE PREFUNDING PACKAGE WE UPDATED THE PROJECTIONS WE PROVIDED IN THE VALUATION FOR THE INVESTMENT RETURNS AND SO I THINK THE QUICKEST WAY TO LOOK AT THIS IS ON THE RIGHT HAND CHART THE CONTRIBUTION THE BLUE LINE REPRESENTS WHAT WE PROJECTED FROM THE LAST VALUATION UPDATING THE ASSETS FOR THE ACTUAL INVESTMENT RETURNS.
YOU GET THE GOLD BARS, THEY LOOK PRETTY SIMILAR. UM, THAT'S THAT'S WHERE WE ARE . THE INVESTMENT RETURNS WERE CLOSE TO THE ASSUMPTION NOT NOT IDENTICAL. SO WITH THAT, UM OH LET ME DO ONE OR TWO MORE CHARTS AND THEN I'LL TURN IT TO MIKE. >> UH, MANY OF THE ASSUMPTIONS WE USE THE SAME AS THE PENSION PLAN SO WE DON'T HAVE TO ADDRESS THOSE. BUT UH, THE DEMOGRAPHIC ASSUMPTIONS YOU ADOPTED TODAY WILL ALSO BE USED IN THE VALUATION AND THE ECONOMIC ASSUMPTIONS THAT DIDN'T CHANGE . UM, BUT WE HAVE SOME SPECIFIC ASSUMPTIONS. UH, FOR OPAP THAT THAT ARE INDEPENDENT INCLUDING THE DISCOUNT RATE BECAUSE IT'S A DIFFERENT ASSET ALLOCATION. SO JUST HITTING THE HIGHLIGHTS HERE WE ARE RECOMMENDING A COUPLE OF CHANGES TO THE HEALTH CARE TREND RATES AND THE PLANNED ELECTIONS AND THEN THE ADMINISTRATIVE EXPENSES.
UH, NO CHANGES TO MANY OF THE OTHER ASSUMPTIONS. WE AREN'T GOING TO GO THROUGH THE ASSUMPTIONS THAT WE'RE NOT RECOMMENDING CHANGES FOR EXCEPT JUST TO TOUCH THE DISCOUNT RATE AGAIN. >> OK, MIKE. OK, SO THIS FIRST CHART SHOWS THE CHANGE IN THE EXPLICIT SUBSIDY. >> SO THIS IS WHAT THE CITY'S CONTRIBUTION IS ACTUALLY BASED ON AND FROM THE LAST EVALUATION WE ACTUALLY EXPECTED TO GO UP BY SEVEN POINT ONE SIX PERCENT. >> IT ACTUALLY WENT UP A LITTLE BIT OVER 10 PERCENT AND BASICALLY ALL THE PRE MEDICARE PLAN AS WE SEE THIS MEDICARE THIS MAXIMUM SUBSIDY BECAUSE IT'S BASED ON THE LOWEST COST PLAN. SO ANYBODY THAT TAKES ANYTHING ABOUT THAT LOWEST COST PLAN WHICH IS THE KAISER HIGH DEDUCTIBLE PLAN BASICALLY YOU'RE GOING TO PAY THE THAT'S ADDITIONAL INCREASE FOR THE MEDICARE ELIGIBLES. AGAIN, IT'S STILL BASED ON THAT ACTIVE PREMIUM.
THEY'RE ALL STILL THE PREMIUMS ARE LOWER THAN THAT MAXIMUM SUBSIDY. BUT THE AMOUNT THAT IS GOING TO HIT VIABILITY IS A LOT HIGHER BECAUSE AGAIN WE EXPECTED AN INCREASE OF FOUR POINT THREE PERCENT AND THE ACTUAL INCREASE FOR KAISER WAS SIXTEEN POINT THREE PERCENT AND THEN FOR THE ANTHEM PPO IT WAS THREE PERCENT. SO YOU AVERAGED THAT TOGETHER YOU'RE RIGHT AROUND NINE PERCENT. AND TO PUT THAT IN CONTEXT, THAT IS WHAT WE'VE BEEN SEEING . IF YOU LOOK AT WHAT PURCHASING CALCARS SAW AN INCREASE THEIR PRE MEDICARE PLANS OF ELEVEN PERCENT AND THE AVERAGE INCREASE FOR THEIR MEDICARE ELIGIBLE PLANS WERE NINE AND A HALF PERCENT. WE'VE BEEN SEEING THESE INCREASES OVERALL. IT'S JUST THE IMPACT OF INFLATION HITTING THE PLANS NOW THAT WE'RE PROBABLY GOING TO SEE HIGHER INCREASES FOR THE NEXT FEW YEARS. >> SO THE NEXT SLIDE GOES INTO THIS KIND OF GIVES YOU KIND OF A HISTORICAL COMPARISON OF WHERE TRENDS HAVE BEEN AND THIS IS JUST THROUGH TWENTY TWENTY TWO.
SO AGAIN WE DON'T HAVE ANY TWENTY TWENTY THREE OR TWENTY TWENTY FOR INFORMATION YET BECAUSE THAT HAS BEEN PUBLISHED . BUT YOU CAN SEE WE USED THE KAISER FAMILY FOUNDATION FOR THE PRE MEDICARE PIECE WHICH IS A SURVEY KAISER FOUNDATION HAS BEEN DOING FOR THE LAST PROBABLY THIRTY YEARS. SO IT'S A FAIRLY CONSISTENT GROUP OF EMPLOYERS OVER TIME AND YOU CAN SEE THAT THAT ACTUALLY HAS BEEN TRENDING FAIRLY WELL AT ABOUT FIVE POINT THREE PERCENT AND LAST YEAR IT WAS ACTUALLY REALLY POSITIVE BUT WE EXPECT IT TO START HITTING THE LEVELS THAT YOU ACTUALLY SAW BACK IN EARLY 2000S. ARE WE GOING TO START TO SEE DOUBLE DIGIT TRENDS FOR A FEW YEARS AND THEN YOU CAN REALLY START TO SEE THE INCREASE IN THE MEDICARE SIDE THAT HISTORICALLY WAS A THREE AND A HALF YEAR.
YOU LOOK AT THE LAST TWO YEARS IT'S BEEN ALMOST SIX PERCENT A YEAR. IT'S BEEN TRENDING THAT WAY FOR TWENTY THREE GOING INTO TWENTY FOUR. >> SO THE NEXT SLIDE IS KIND OF DEVELOPING OUR TREND RATES AND WE BASICALLY USE THE MODEL THAT'S BEEN DEVELOPED BY THE SOCIETY OF ACTUARIES WHERE WE SET THE INITIAL SHORT TERM TRENDS. SO AGAIN WE EXPECT THE NON MEDICARE ELIGIBLES TO STILL BE AROUND THE 10 PERCENT SHORT TERM IN THE MEDICARE ELIGIBLES AT SIX AND THEN ADJUST DOWNWARDS TO A LONGER TERM TREND OF JUST OVER FIVE PERCENT BY TWENTY TWENTY THIRD WHICH IS REALLY KIND OF A NOMINAL PER CAPITA GDP GROWTH PLUS ONE PERCENT MEDICAL ACCESS COST.
THE MEDICAL COSTS STILL ARE INCREASING AT RATES SLIGHTLY FASTER THAN WHAT THE GENERAL RATE OF OUR GROSS DOMESTIC INCREASING. BUT THEN IT GETS DOWN TO THE FACT THAT THAT CAN'T HAPPEN FOREVER. OTHERWISE HEALTH CARE TAKES UP ONE HUNDRED PERCENT OF OUR ECONOMY THAT DOES GREAT DOWN TO IT'S ESSENTIALLY JUST INCREASES WITH GDP GROWTH OVER TIME FOR IS THREE POINT NINE FOUR PERCENT RIGHT. >> TWENTY SEVENTY FIVE AND BASICALLY STILL KEEPING DOWN ALL THREE AND A HALF PERCENT FOR ALL YEARS IT'S BEEN FAIRLY FLAT AND ALWAYS HAS BEEN SO NEXT SLIDE THIS ONE SHOWS BAROCIO BETWEEN THE TWENTY TWENTY THREE AND TWENTY TWENTY TWO ASSUMPTIONS. THE CHART ON THE LEFT IS THE NON MEDICARE ELIGIBLE THREAD. YOU SEE THE BIG DIFFERENCE IS THE SHORT TERM TRENDS ARE HIGHER BUT THEN THE LONGER TERM TRENDS ARE A LITTLE BIT LOWER IN THE END ABOUT THE SAME POINT . >> SO KIND OF OVERALL THIS IS PROBABLY CAN HAVE A NOMINAL AGGREGATE EFFECT BUT IT DOES INCREASE THINGS A LOT BAROUSSE YEARS AND YOU BASICALLY GET SLIGHTLY LOWER TRENDS IN THE SUCCEEDING YEARS AND YOU SEE A VERY SIMILAR PATTERN WITH THE MEDICARE ELIGIBLE TRENDS WHERE IT'S GOING TO BE SOMEWHAT HIGHER IN THE EARLY YEARS BUT THAT ACTUALLY FALLS A LITTLE BIT LOWER AND THEN TRENDS DOWN TO THE FINAL SAME ULTIMATE RATE OVER THAT ESSENTIALLY FIFTY YEAR TIME FRAME.
SO THE NEXT SLIDE IS PLANNED ELECTIONS I'M SURE WE HAVE TO MAKE IS WHERE DO WE THINK FUTURE RETIREES WITH THE CURRENT ACTIVE RETIRE PLANS WILL THEY CHOOSE AND WE BASICALLY ALWAYS MONITOR THIS AND WE LOOK AT WHAT'S HAPPENED RECENTLY AND IN TWENTY TWENTY THREE THE ELECTIONS DID DIFFER SOMEWHAT AND THEY'RE KIND TRENDING IN MOTION THAT WE'RE ACTUALLY SEEING MORE PEOPLE TAKE THE KAISER DEDUCTIBLE HMO PLAN WHICH IS THE LOW COST PLAN BECAUSE THEY DON'T WANT TO PAY THAT ADDITIONAL AMOUNT IN PREMIUM AND WE ALSO THEN SAW SOME INCREASES IN THE SAME THING FOR ANTHEM. SO BASICALLY PEOPLE TAKING THE HIGH DEDUCTIBLE HEALTH PLAN ON THE UPSIDE OR THE DEDUCTIBLE HMO PLAN AGAIN FOR THE CHEAPER PLAN AND ON THE PEOPLE SIDE A LOT LESS PEOPLE TAKING THOSE HIGHER COST PPO PLANS. SO WE'RE RECOMMENDING CHANGES TO REALLY REFLECT THAT. >> THE OTHER CHANGE IS THERE'S JUST A REALLY SLIGHT CHANGE IN THE MEDICARE ELIGIBLE PLANS MAINLY BECAUSE THE ANTHEM MEDICARE HMO IS NO LONGER BEING OFFERED.
SO WE'RE ASSUMING ALL THOSE PEOPLE TRYING TO PPO PLAN BECAUSE AGAIN IF YOU'RE IN THE ANTHEM PLANS BECAUSE YOU DON'T WANT TO BE IN KAISER. SO THE ODDS OF THOSE PEOPLE WANTING TO MOVE TO KAISER IS PRETTY MINIMAL. SO WE'RE ASSUMING THEY'RE ALL GOING TO GO INTO THE ANTHEM MEDICARE PLAN AND AGAIN, NO CHANGE IN THE DENTAL PLANS THAT HAS BEEN CONSISTENT FOR YEARS THAT MOST PEOPLE WANT THE PEOPLE THEY DON'T WANT THE DENTAL HMO. SO WE HAVE A SEPARATE FRIDMAN OF EXPENSE ASSUMPTION FOR THIS PLAN WILL WE SET IT ON A PER CAPITA BASIS? THE CURRENT ASSUMPTION WOULD BE A LITTLE OVER FORTY THREE DOLLARS PER PERSON. WHAT WE'VE SEEN THOUGH IS SINCE WE'VE GOTTEN THROUGH THE IMPLEMENTATION OF THE VEBA AND ALL THE CHANGES THAT AFFECTED THIS PLAN, THE ADMINISTRATIVE COSTS HAVE GONE DOWN SO WE'RE RECOMMENDING A REDUCTION TO THE ADMINISTRATIVE COST ASSUMPTION UH DOWN TO THIRTY FIVE FOR FISCAL YEAR AND TWENTY TWENTY FIVE IT'D BE THIRTY FIVE DOLLARS PER MEMBER.
WE INCREASE IT WITH THE WAGE INFLATION ASSUMPTION EACH YEAR AFTER THAT FOR ANY PROJECTIONS AND THEN WE HAVE A SIMILAR DYNAMIC THAT WE SAW ON THE PENSION PLAN WITH THE CAPITAL MARKET ASSUMPTIONS BEING MUCH HIGHER AND SO PROVIDING SIMILAR DATA HERE BUT ALSO A SIMILAR RECOMMENDATION THAT WE HOLD THE ASSUMPTION THIS YEAR AT SIX PERCENT. >> SO I KNOW HAVE EXHAUSTED YOU WITH ACTUARIAL ASSUMPTIONS SO JUST WANT TO WRAP IT UP AND AND ASK FOR THE ADOPTION OF THESE OPAP ASSUMPTIONS AS DESCRIBED HERE.
DO YOU HAVE ANY QUESTIONS? NO EMOTION MOTION SANTO'S SECOND ANSWER SECOND GARDNER FOR THE DISCUSSION ALL THOSE IN FAVOR I PROPOSED. OK, THANK YOU VERY MUCH AND THANK YOU FOR YOUR PATIENCE. A VERY GOOD PRESENTATION. YEAH THANK YOU VERY MUCH. AND IN FILM I LIKE MOVING ON TO SIDBURY SEE DISCUSSION AND POSSIBLE ACTION. TWENTY TWENTY THREE POLICE AND FIRE BOARD SELF-ASSESSMENT EVALUATION WAS DOING. I HAVE TO APOLOGIZE HOW AGENDA REVIEW SO I'M NOT SURE THIS SHOULD WALTER FROM AUDITOR I JUST HAVE COMMUNICATION WITH WALTER REQUIRES DECIDING TO BE ADDED. I KNOW THERE WAS A DISCUSSION RIGHT SO IT WAS FEDERATED THAT THEY DID THE SEPARATION OF POLICE.
>> I KNOW WE HAD A LITTLE POLICE AND FIRE AND THEN WE HAD HIM TO COME BACK WITH SOME RECOMMENDATION OF HOW TO IMPLEMENT. >> SO WE DISCUSSED THIS AT A PRAYER MEETING. YES. THERE IS A MEMO I AM NOT AWARE THAT HE WAS UM PERHAPS WE CAN GO TO ANOTHER ITEM. >> WHAT I UM UH I'LL CHECK WITH BOTH AND SEE IF HE CAN STICK TO IT. OH, UH, APOLOGIZE WALTER. >> UM, YEAH NO I WAS NOT AWARE THIS WAS ON THE AGENDA. APOLOGIZE SO I DON'T I THINK THERE WAS A FOLLOW UP THERE WAS A REQUEST AND A DISCUSSION THAT STAFF COMPLETE THE SURVEY AND JUST TO CONFIRM THAT THEY WERE GOING TO DO THAT AND I CAN SEND THE SURVEY LINK TO THE THREE STAFF MEMBERS THAT WE TALKED ABOUT AND THEN FEEDBACK NEXT MEETING THE RESULTS IF THAT'S WHAT THE COMMITTEE WISHES.
SO THIS ITEM YEAH. OK, WE WILL DEFER THREE C NOW WE HAVE THREE D DISCUSSION AND ACTION ON MERIT INCREASE AND EXECUTIVE DAYS FOR THE CEO POSITION I THINK PER CONVERSATION I'LL TAKE A MOTION TO DEFER THAT SOME SPECIAL SECOND BY DAVE WILSON ANY FURTHER DISCUSSION ALL OF THEM FAVOR BY POST OK THAT'S UH OVER BRDO. THANK YOU MR. CHAIR. UM SO A COUPLE OF ITEMS UH I WANT TO LET YOU KNOW THAT WE KICK OFF THE MONTH IN NOVEMBER WHICH IS THE OPEN ENROLLMENT FOR HEALTH CARE FOR RETIREES. UH, THE ENROLLMENT PACKETS UH HAVE BEEN MAIL AND THEY SAID IN PERSON HEALTH FAIRS SCHEDULED FOR NEXT WEEK, NOVEMBER 8TH. THE LADY IN THE CENTER FROM 10 A.M.
TO TWO P.M. UH, IN ADDITION TO THAT THEY'RE GOING TO BE MULTIPLE OPPORTUNITIES FOR MEMBERS TO ATTEND UH, VITRA ONLINE WEBINARS AND ONE ON ONE CONSULTATION AND TIME WITH THE VENDORS. >> UM, IN ADDITION TO THAT, UH, THERE IS A TEAM OF STAFF FROM ALL AREAS THAT WILL BE UM FROM THE HEALTH FIELD THAT WILL BE UH PROVIDING THEIR PRESENTATION ON AN OPEN ENROLLMENT PROCESS ON NOVEMBER 9TH THROUGH THE ASSOCIATION OF RETIRED POLICE OFFICERS AND FIREFIGHTERS. >> UM, THE RETIREMENT CONNECTION NEWSLETTER FOR ADDITION WAS DISTRIBUTED EARLIER THIS MORNING. YOU SAID YOU HAD RECEIVED BY NOW UM PERABO UH ALLUDED TO THESE IN HIS REPORT. HE WILL BE IN FRONT OF THE CITY COUNCIL UH, TUESDAY, NOVEMBER 14 TO PRESENT THE ANNUAL INVESTMENTS PRETTY POOR. UH, THIS WILL BE FOR IN THE YEAR TWENTY TWENTY TWO UM UH ON TO LAST TUESDAY UH THERE WAS A DISCUSSION THE CITY AUDITOR PRESENTED THEIR INTERNAL AUDIT REPORT ON THE ALIGNMENT OF CONTROLS BETWEEN THE CITY AND THE OFFICE RETIREMENT SERVICES.
UH, AGAIN THAT PRESENTATION TOOK PLACE TO THE CITY COUNCIL. UM, I BARBARA ATTENDED IN PERSON AND SO DID YOUR UH, FUTURE COUNCIL. MAYTAG, UH, ATTENDED THE MEETING I ATTENDED REMOTELY AND UH, THERE WAS A REQUIREMENT OR REQUEST BY THE COUNCIL UM THAT WE BE BACK IN FRONT OF THE CITY COUNCIL UH WITHIN FORTY FIVE DAYS TO PROVIDE AN UPDATE ON THE WORK ASSOCIATED WITH THE PROJECT, UH FOR WHICH UH THE BOARD'S HIGHER CORTEX TO WORK WITH STAFF ON FILLING THOSE GAPS RELATED TO UM POLICIES AND PROCEDURES WITH THE CITY I DON'T KNOW MAITSKI IF YOU WANT TO ADD ANY OTHER COMMENTS. SURE. SO I DO HAVE AN AGENDA ITEM TO DISCUSS THAT VERY ISSUE. SO WE'LL I'LL DEFER THAT CONVERSATION TO THAT AGENDA ITEM VERY WELL. >> THANK YOU. AND LASTLY, UH, OUR OFFICE, UH WILL BE CLOSED A COUPLE OF UH FEW DAYS THIS MONTH FIRST ON NOVEMBER 10TH UH FOR VETERANS DAY AND AGAIN THE NUMBER TWENTY THIRD AND TWENTY FOUR FOR THE THANKSGIVING HOLIDAY.
THAT CONCLUDES MY COMMENTS. MR. UH OK THANK YOU. >> UM NEXT WE ARE ALL FROM COUNCILOR ON. IT'S BEEN A LONG MEETING. I APPRECIATE THAT AND I I JUST WANTED TO MAKE A COMMENT ABOUT THE AUDIT THAT WE HAD PERFORMED RECENTLY. THE AUDITOR JOEL ROYCE WAS RESPONDING TO A REQUEST BY MYSELF AND COUNCILMEMBER DAVIS WHO IS THE LIAISON TO THE FEDERATED BOARD AND THE MAYOR AS WELL TO DO AN AUDIT BASED ON THE CORTEX AUDIT. UH, WE WERE CONCERNED ABOUT SEVERAL ISSUES PROCUREMENT H.R. CYBERSECURITY, SEVERAL OTHER ISSUES AND I WOULD ENCOURAGE YOU IF YOU HAVEN'T READ THE REPORT THIS IS AN INTERIM REPORT. IT'S GOING TO BE ANOTHER REPORT COMING OUT. I DON'T KNOW WHEN BUT I WOULD ENCOURAGE YOU IF YOU HAVEN'T READ IT YET THAT YOU SHOULD READ IT. IT'S A PUBLIC DOCUMENT. >> IT'S VERY INFORMATIONAL AS IT RELATES TO THE ANALYSIS OF THE PLAN, BOTH THE RIGHTS AND RESPONSIBILITIES OF YOU AS TRUSTEES AND WE AS CITY COUNCIL. I JUST WANT TO SAY AND I HAVE SOME COMMENTS WHEN YOU GET TO THE LATER REPORT BRIEFLY BUT I JUST WANT TO ACKNOWLEDGE THAT I WEAR A DIFFERENT HAT THAT YOU WHEN I'M AT THESE MEETINGS I REPRESENT THE CITY OF SAN JOSE.
I REPRESENT A MILLION RESIDENTS . I AM ONE OF ELEVEN COLLEAGUES WHO VOTE ON ISSUES AND POLICIES THAT AFFECT THE CITY AND THE TAXPAYERS AND OUR BUDGET. >> SO I LOOK AT THESE THINGS SLIGHTLY DIFFERENTLY THAN YOU DO, WHICH IS MY RESPONSIBILITY . YOU HAVE YOUR RESPONSIBILITY AS TRUSTEE SO I LOOK FORWARD TO A LONGER DISCUSSION ABOUT THAT. BUT I JUST WANTED TO ACKNOWLEDGE THAT THE PURPOSE IS NOT TO SAY YOU'RE DOING THINGS RIGHT OR WRONG.
THE PURPOSE IS TO BUILD A TIGHTER ORGANIZATION TO HOLD ACCOUNTABLE FOR ALL THE MONIES THAT COME INTO YOUR INTO THE RETIREMENT SERVICES AND HOW THEY'RE THEN MANAGED BY YOU AND THEN THE CITY WHAT LIABILITY WE MAY HAVE OR DON'T HAVE. SO I'LL LEAVE IT WITH THAT. I DON'T HAVE ANYTHING ELSE TO SAY OTHER THAN IT'S BEEN UH, INTERESTING COUNCIL YEAR WITH SIX NEW PEOPLE IN THEIR POSITIONS AND ELECTIONS COMING IN AND BARGAINING FINISH WITH MOST OF OUR UNITS BUT STARTING UP WITH THE POLICE AND FIRE UNITS COMING UP SOON. >> WITH THAT I'LL TAKE ANY QUESTIONS IF YOU HAVE QUESTIONS TO MOVE ON DISCUSSION AND ACTION ON THE TWENTY TWENTY FOUR SCHEDULE BOARD AND STANDING COMMITTEE MEETINGS. >> SO I JUST WANTED TO MAKE ONE COMMENT ABOUT THAT. SO THE BACK OF MATERIALS PROVIDED WITH THE SCHEDULE DID MENTION THAT ALL THE MEETINGS WILL BE HELD BY MAYBE ONE MAYBE THREE SIXTY ONE WHICH IS NOT GOING TO BE THE CASE ANYMORE SINCE THAT HAD SINCE BEEN NOT REPEALED BUT THERE'S NO UH DECLARATION OF EMERGENCY FROM THE GOVERNOR.
SO WITH THAT CAVEAT WITH THE BACKUP MEMO I IT'S LEAVE IT FOR THE BOARD TO WHETHER OR NOT TO ADOPT AS STATED IN THE MEMO AND I DO WANT TO MENTION THIS IS UM A DOCUMENT THAT IS PREPARED EVERY YEAR BY STAFF. UH, I THINK THE KEY ISSUE HERE IS TO KNOW THAT, UH, THE THE BULK OF THE MEETINGS THAT AR% INDICATED HERE ARE DUE BOARD MEETINGS WHICH ARE SCHEDULED THE FIRST THURSDAY OF EVERY MONTH UH AND SET FOR THE MONTH OF JULY AND THEN OF COURSE THERE ARE UM SUGGEST THE COMMITTEE MEETING DATES FOR THE AUDIT RISK GOING IN AND DISABILITY THROUGHOUT THE YEAR. UM, THIS IS YOUR CHANCE TO ASK QUESTIONS UH SUGGEST CHANGES. UM, YOU'RE NOT ABLE TO CHANGE WHEN THE BOARD MEETINGS TAKE PLACE THE DAY UH BECAUSE THAT'S UH IN DOMINICO SO IT'S THE FIRST THURSDAY OF EVERY MONTH THAT DOESN'T CHANGE THAT A SPECIAL MEETING COULD ALWAYS BE CALLED IF NEEDED. BUT AGAIN THIS IS FOR YOU TO UH CINEQUEST PRNS AND THEN WE CAN ALWAYS COME BACK NEXT MONTH IF THERE ARE ANY SUGGESTED CHANGES UH FOR YOUR APPROVAL.
>> UH, I DON'T KNOW IF ANYONE ON STAFF BESIDES THE COMMENTS BY COUNCIL IF ANYONE HAS ANY OTHER COMMENTS. I JUST THINK UM UH I'D ALREADY IN MY EMAIL ROBERTO BUT ONE IS I THINK LAST UNIT ASKED IF THE BOARD MEETING COULD START AT NINE AND CERVETERI UH I THINK HE'S GOING TO CHECK ON THEM UNICODE COME BACK. I'M SORRY. YES, WE DID CHECK DOMINICO ONLY REQUIRES THAT THEY ARE THE FIRST THURSDAY DOESN'T REALLY ADDRESS THE START TIME. >> THAT'S CERTAINLY HAS BEEN EIGHT THIRTY SINCE I JOIN YOUR BOARD BUT I LEAVE IT I LEAVE THE BOARD FOR DISCUSSION.
I'M OKAY WITH THE OTHER THIRTY NINE DOESN'T MAKE A DIFFERENCE TO ME . >> NO EMOTION. WELL AND THEN I HAD ONE OTHER SUGGESTION UH I MEAN CURRENTLY I'M THE CHAIR OF THE COMMITTEE AT THE ISSUE LIKE YOU TO STAY ON IT'S A LOT OF WORK THAT'S GOING TO BE GOOD. I'M TRYING TO GET TO BUT UM BUT I THINK WHAT IS COMPLICATED ABOUT THAT IS IS IT'S BEEN SCHEDULED FOR AFTER THE UH FEDERATED BOARD MEETING AND THEN THE START TIME BECOMES VERY AMBIGUOUS AND SO I DON'T OFF THE ISLAND YOU FEEL STRONGLY BUT I JUST THOUGHT WE SHOULD HAVE FIXED START TIME. >> I DON'T KNOW. IT'D BE EASIER WITH FIXED START TIME I'D BE HONEST RIGHT UP THE STREET I'M PROBABLY NOT THE ONE TO MAKE THAT DECISION BECAUSE IT'S EASY IS THE REASON THAT THOSE ARE JOINT MEETINGS IS THAT RIGHT? THAT'S WHY WE HAVE THEM RIGHT AFTER.
>> YEAH, IT IS HARD TO HAVE A FIXED START TIME BECAUSE IT CAN UH AND WE SHOULD NOT START UNTIL THEY ARE TWELVE MORE IMMEDIATE. >> SO THAT'S WHY THERE'S A SUGGESTED TIME I THINK IT'S TWELVE THIRTY BUT WE FROM TIME TO TIME WE DON'T KNOW UH SOME MEETINGS MAY END AND ELEVEN SOMEWHERE IN TWO SO THAT'S WHY WE DON'T WE DO HAVE A FIXED DAY BUT NOT THEY START TIME YOU SAID THEY'RE MORE DIFFICULT SO IS THERE ANYTHING THAT SAYS THAT HAS TO FOLLOW FEDERATED MEETING? >> CAN IT BE ON AN OFF DAY? IT CAN BE IN AN OFF DAY. THAT'S WHAT WE HAVE HAVING THE DISCUSSION WHAT WE HAVE LEARNED IS THAT IT IS HARDER FOR MANY OF YOU TO DEDICATE DIFFERENT DAYS TO THE MEETINGS.
UH, THE ONLY MEETING THAT ACTUALLY HAS BEEN SCHEDULED ON A SEPARATE DAY THEN THE BOARD MEETINGS ARE INVESTMENT COMMITTEE MEETINGS BECAUSE TYPICALLY NOT AS MUCH OF THESE DAYS EVEN THOUGH I'M LOOKING AT J TYPICALLY THEY DON'T THEY LAST LONGER THAN THE OTHER COMMITTEE MEETINGS EXCEPT THEREFORE OF COURSE THIS YEAR THE AUDIT COMMITTEE SO THEREFORE THEY HAVE ALWAYS BEEN SCARED AFTER BOARD MEETINGS BECAUSE IT'S HARDER FOR A TRUSTEE TO BE AVAILABLE TWO OR THREE DAYS A WEEK THAN ONE CAN BE. UH, SCHEDULE THEM AFTER UM I GUESS YOU HAVE PUBLIC MEMBERS BOTH. BUT UH I THOUGHT MAYBE THE MORE EMPLOYEES ON THE THE AUDIT COMMITTEE BUT IF YOU SAID YOU SCHEDULE IT AFTER OUR BOARD MEETINGS, IS THAT A POSSIBILITY BECAUSE MANY OF THE EMPLOYEES THEY ARE A POSSIBILITY.
I SUSPECT I'M GOING TO GET THE SAME REQUEST BY THE OTHER SIDE AVENTADOR WHICH IS UH CAN YOU CAN WE ACTUALLY SCARED IN AFTER THE MEETING? >> UM, I DON'T I LEAVE IT UP TO YOU. YOU ARE MY BOSSES BUT WE TRY TO I DON'T WANT TO SPEAK FOR STAFF HERE BUT WE TRY TO UM OBVIOUSLY AS YOU SEE THEN OUR SCHEDULE AFTER NEW BOARD MEETING AND I DON'T MEAN YOUR AUDIT COMMITTEE. SO THE COMMITTEE MEETINGS ARE SCHEDULED AFTER POLICE HAVE FIRE SOME OTHER SARS-COV-2 AFTER FEDERATIVE I DON'T KNOW IF YOU WANT TO ADD ANYTHING TO IT. YOU DON'T HAVE ANY IF YOU DON'T WANT TO KNOW I'M JUST LISTENING AND OBVIOUSLY WE COULD GO BACK AND SEE IF WE COULD IDENTIFY, YOU KNOW, A DAY THAT'S NOT AFTER EITHER UM POLICE AND FIRE OR FED IF THE DESIRE IS TO HAVE A PARTICULAR START DATE I MEAN WE COULD EXPLORE THAT UM WE COULD UM UH NOT OPPOSED TO DOING THAT AGAIN. IT'S BEEN THE EXPERIENCE THAT ESPECIALLY FOR PUBLIC MEMBERS IS HARDER FOR THEM TO BE MORE AVAILABLE MORE THAN ONE TIME.
AND THEN OF COURSE YOU HAVE TO ALSO KEEP IN MIND THAT EVERY BOARD HAS A MEETING A MONTH. >> SO IF YOU GO ON A SCHEDULED MEETING, EAT IT PROBABLY SHOULDN'T BE THE SAME WEEK. I HAVE ONE OF THE BOARD MEETINGS SO YOU HAVE TO BE IN THE WEEK IN BETWEEN AND OF COURSE THAT ALSO IN FACT THEY'RE WORRIED THAT THE STAFF HAVE TO DO BECAUSE IN BETWEEN WHAT WE'RE DOING IS PUTTING TOGETHER THE BOARD MEETINGS AND THE AUDIT COMMITTEE QUARTERLY SO IT'S ONCE EVERY DAY AUDIT COMMITTEE SQUIRRELY. UH, THEY GOT THIS OF THESE UH ASSUME THAT THESE MEETINGS ARE QUARTERLY IS SET FOR UH DISABILITY FOR FAILURE WHICH ARE USUALLY MONTHLY AND BOARD MEETINGS AND JPC. WE KEEP IT ON KEEP IT THERE BUT WE UM DON'T WE BEFORE TWELVE THIRTY IF THE FEDERAL BOARD MEETING ENDS EARLY THEN THEY HAVE TO WAIT AND IF IT'S RUNNING LATE WE GET A MESSAGE AND WE CAN COME A LITTLE LATER.
>> I'M SORRY YOU SAID YOU SAID NOT TO MAKE IT BEFORE TWELVE THIRTY. YEAH SO IF THE MEETING ENDS EARLY THAT'S TOO BAD THEY JUST HAVE TO WAIT THAT THAT'S THAT WORKS FOR YOU BUT UH BUT NO I CERTAINLY UNDERSTAND WHERE YOU'RE COMING FROM. UH WHAT WE TRIED TO DO UH TRUSTING ANYBODY IS TO PUT LANGUAGE IN THE BOARD AGENDA THAT ALLOW US TO START A COMMITTEE MEETING UH SOMEWHAT IMMEDIATELY AFTER THE BOARD MEETING ENDS SO THAT IF WE SAY TWELVE THIRTY THE MEETING ANSWER ELEVEN YOU DON'T HAVE TRUSTIES IN THERE. NINETY MINUTES WAITING FOR THE COMMITTEE MEETING EVEN THOUGH IT WILL REQUIRE SOMEONE THAT IS NOT THERE TO TRY TO BE THERE EARLY. THAT'S WHY WE TRIED TO TEXT AND SO I COMPLETELY UNDERSTAND WHERE YOU ARE COMING FROM. BY THE SAME TOKEN IF THE MEETING LASTS LONGER THAN WELL THIRTY THEN UM OBVIOUSLY YOU WILL BE HERE EARLY BUT THEN AFTER THAT MEETING IS OVER FOR THE BOARD THEN THEY WILL HAVE THE JOINT COMMITTEE.
>> UM I'M NOT OPPOSED TO THAT APPROACH. >> UM THE CHALLENGE IS IS FOR ME TO ASK TRUSTEES IF A MEETING IS REALLY EARLY TO WEIGH 90 MINUTES BECAUSE THE SPECIFIC VIEW FROM THE PUBLIC DID YOU SITTING THERE DOING NOTHING. SO IT HAS BEEN MY EXPERIENCE AND I'M NO ONE TO SPEAK FOR YOU THAT IS EASIER FOR US TO KEEP TRACK HOW THE MEETING IS GOING SO WE CAN FIX THOSE TRUSTEES THAT ARE COMING LATER. >> HEY, THE MEETING IS RUNNING UH, SCHROETER YOU MAY WANT TO TRY TO BE HERE EARLIER THAN THE PARTICULAR TIME SO I JUST WANT TO JUMP IN SO THAT'S JUST KIND OF RELATED TO THE BROWN ACT. THE BROWN ACT REQUIRES US TO POST A TIME CERTAIN AND THE LOCATION CERTAIN OF WHERE THE MEETING WOULD TAKE PLACE.
BUT I HEAR YOU WE COULD MAKE IT THE AGENDA STATE THAT IT WOULD BE SCHEDULED I BELIEVE IN OUR PREVIOUS AUDIT COMMITTEE JOINT AUDIT COMMITTEE AGENDAS THAT SAID ELEVEN THIRTY OR TWELVE OR SOMETHING LIKE THAT OR SOON AFTER THE FEDERATED MEETING WE COULD CHANGE IT TO TWELVE THIRTY OR SHORTLY THEREAFTER FROM THE FEDERATED MEETINGS OF THE FEDERATED MEETING GOES LONGER THAN TWELVE THIRTY THEN THE NOTICE COULD TAKE THAT INTO ACCOUNT. IS THAT WHAT YOU'RE TRYING TO GET AT ? I'M JUST TRYING TO MAKE SURE I UNDERSTAND WHAT I'M JUST SAYING . >> THE MEETING'S RUNNING EARLY. CAN YOU COME EARLY? SHE'S ACTUALLY MORE CONCERNED ABOUT WHEN THE MEETING IS EARLY SO I THINK WE SHOULD SAY TWELVE THIRTY START TIME UNLESS THE FEDERAL MEETING RUNS LONGER IF THE MEETING LONGER THAN A COMMITTEE WILL WAIT FOR THAT. >> BUT YES, ACTUALLY THAT'S ALREADY STATE'S TWELVE THIRTY TO THIRTY UNLESS OTHERWISE NOTED SO IT ALREADY HAS THE TWELVE THIRTY ON THE MOVE BUT I THINK MY PRACTICE I'M GOING I UNDERSTAND BY PRACTICE YEAH YEAH OK WELL THIS IS A DISCUSSION AND ACTION I'LL MAKE THE MOTION TO ACCEPT A MEMO WITH THE STATED CHANGES OF REMOVING AB THREE SIXTY ONE MOVING THE START TIME TO NINE O'CLOCK AND THEN I THINK GOT AT REST OF THE WAY IT READS THIS ADDRESSES WHAT YOU WANT A SECOND OK A MOTION FROM DAVE WILL SAY THE SECOND FROM SUNITA ANY DISCUSSION OK ALL THOSE IN FAVOR I PROPOSED UM OK WE'RE NOT OK SO THIS IS AN ITEM THAT I HAVE HERE UM THAT TO BE HEARD THIS IS ITEM FOR D WHICH I AM REQUESTING TO ALSO BE HEARD ALONG WITH UM UH FOR J AND SO I'M GOING TO START OFF FIRST WITH THE ITEM FOR D SO AS YOU KNOW AND AS OUR COUNTY COUNCILWOMAN FOLEY HAS MENTIONED THE CITY AUDITOR ISSUED ITS INTERIM REPORT ON THE ALIGNMENT AND CONTROLS BETWEEN BETWEEN THE CITY AND ORESTE.
IT IS MY UNDERSTANDING THAT THIS REPORT WAS SENT TO ALL THE BOARD MEMBERS DIRECTLY. >> ALTHOUGH ORUS IS A CITY DEPARTMENT, IT IS UNIQUE IN THE FACT THAT IT EXISTS SOLELY TO ASSIST THIS INDEPENDENT BOARD AS FIDUCIARY IN THE PLAN ADMINISTRATION ON A DAY TO DAY BASIS. >> BUT THIS OFFICE IS STAFFED BY CITY EMPLOYEES AND USES A LOT OF THE CITY'S SYSTEMS FOR EXAMPLE, I.T. PAYROLL AND EMAIL. AND SO WITH THIS AGENDA ITEM I DO HAVE A MEMO THAT OUTLINES THE AUTHORITY'S OF THIS BOARD UNDER THE CALIFORNIA CONSTITUTION, THE CITY CHARTER, THE SAN JOSE AND THE SAN JOSE MUNICIPAL CODE . AND SO THE REASON WHY I PROVIDED THE THIS MEMO IS BECAUSE THERE'S A LOT OF DISCUSSION AND I THINK A LOT OF CONFUSION AROUND WHAT MEASURE G MEANS AND WHAT THE BOARD'S INDEPENDENCE REALLY IS UNDER THE CODE .
AND SO WHAT I WANTED TO DO IS PROVIDE THIS MEMO TO PROVIDE THE LEGAL LANDSCAPE OF WHERE OUR AUTHORITY LIES BOTH ON THE CALIFORNIA CONSTITUTION, THE CITY CHARTER AND THE SAN JOSE MUNICIPAL CODE NOW ITS FIDUCIARY COUNCIL I HAVE REVIEWED THE CITY AUDITOR'S REPORT AND I AGREE WITH MUCH OF THE REPORT THAT IT THAT STATES AND I HOPE THIS MEMO WILL ALSO HELP CLARIFY FOR THE BOARD TO UNDERSTAND WHAT OUR AUTHORITY IS VIS A VIS THE CITY SO THAT THE BOARD TO MAP OUT ITS AND UNDERSTAND AND EXERCISE INDEPENDENT UM AUTHORITY AND WHERE IT IS AND DECIDE WHERE IT'S PRUDENT TO FOLLOW THE CITY POLICIES FOR BOTH THE BOARD IN THE CITY TO HAVE CLARITY AND TO FIGURE OUT WHERE THOSE GRAY AREAS ARE NOW AS I MENTIONED EARLIER, THIS BOARD IS GOVERNED BY A MOSAIC OF LAW SO UNDER THE CALIFORNIA CONSTITUTION AND THE CITY CHARTER AND THE MUNICIPAL .
SO NOW LET'S START FIRST WITH THE CALIFORNIA CONSTITUTION UNDER THE CALIFORNIA CONSTITUTION, THIS BOARD IS GIVEN THE SOLE AND EXCLUSIVE AUTHORITY OVER ACTUARIAL ISSUES . WE ARE CHARGED WITH THE DUTY TO ENSURE THAT THE PLAN HAS COMPETENT ASSETS AND IS ACTUARIALLY SOUND. WE ALSO ARE CHARGED WITH THE EXCLUSIVE INDEPENDENT AUTHORITY TO ADMINISTER BENEFITS UNDER THE CONSTITUTION. NO ONE ELSE IS CHARGED WITH THAT FIDUCIARY DUTY TO PAY OUT THE TIMELY PAYMENT OF BENEFITS TO OUR RETIREES AND BENEFICIARIES OTHER THAN US.
>> ANOTHER AREA WHERE THE CONSTITUTION GRANTS US EXCLUSIVE AND SOLE AUTHORITY IS ON THE INVESTMENT OF OUR ASSETS. THAT MAKES SENSE BECAUSE WE ARE CHARGED WITH MAKING SURE THE FUND HAS ENOUGH MONEY TO PAY OUT THE BENEFITS NOW AND IN THE FUTURE. AND ONE OF THOSE FUNDING STREAMS IS OUR INVESTMENTS AND LASTLY THE PLAN ALSO THE CONSTITUTION ALSO PROVIDES THE YOU THE BOARD UM THE SOLE AND EXCLUSIVE DUTY FOR THE ADMINISTRATION OF THE PLAN IN LIGHT OF YOUR FIDUCIARY CONSIDERATIONS THAT ARE OUTLINED IN THE CALIFORNIA CONSTITUTION. >> NOW THESE DUTIES OF THIS BOARD ARE EXCLUSIVE TO THE BOARD AND REQUIRE THE BOARD TO MAINTAIN ITS INDEPENDENCE. SO I WANTED TO JUST PUT THAT OUT THERE. THIS IS SOMETHING AS A RETIREMENT BOARD I KNOW THE CONSTITUTION CANNOT BE TAKEN AWAY AND THINGS THAT WE WOULD NEED TO STAND STEADFAST ON IN TERMS OF EXERCISING OUR INDEPENDENCE. >> NOW THE CITY CHARTER DOES RECOGNIZE THE THE CALIFORNIA CONSTITUTIONAL INDEPENDENCE AND DUTIES. THE FEW THAT I HAVE JUST STATED BUT LARGELY ADDRESSES PERSONNEL BUDGET ISSUES AND THIS IS EXACTLY WHERE MEASURES DEFENSED MEASURE GEE WAS A UH, BALLOT INITIATIVE THAT AMENDED THE CITY CHARTER TO PROVIDE UM THIS BOARD A DIRECT LINE OF REPORTING TO THE CEO AND THE CEO AND THAT FROM THERE THE CEO THEN HAS ITS OWN AUTHORITY TO DECIDE WHAT THE PERSONAL ISSUES ARE NOW THROUGH THE CITY CHARTER.
IT DOES ALSO RESERVE A LOT OF AUTHORITY BACK TO THE CITY ESPECIALLY ON BUDGETING ISSUES . SO WHILE WE FOR EXAMPLE, IF WE WANTED TO ADDRESS WITH THE CITY AUDITOR'S REPORT TO HAVE A COMPLIANCE OFFICER POSITION CREATED , WE CAN CERTAINLY DO THAT. BUT WE WOULD HAVE TO LOOK TO THE CITY TO GET THE FUNDING TO FUND THAT THAT POSITION BEFORE WE CAN GO OUT TO THE MARKET AND DECIDE WHETHER OR NOT THAT WOULD BE A PRUDENT POSITION TO GET. >> SO JUST PUTTING THAT ALL IN CONTEXT WHOSE WHOSE AUTHORITY STANDS WHERE NOW THE SAN JOSE MUNICIPAL CODE THEN ALSO SUPPLEMENTS THE BOARD'S CONSTITUTIONAL AUTHORITIES, PARTICULARLY IN AREAS THAT I WANT TO CALL YOUR ATTENTION TO ONE OF THEM IS IN CONTRACTING.
>> SO ONE OF THE ISSUES UNDER THE THE SAN JOSE MUNICIPAL CODE IS THAT ANY CONTRACT ENTERED FOR THE ADMINISTRATION OF THIS PLAN HAS TO BE ENTERED IN THE NAME OF THE BOARD. IT CANNOT BE ENTERED IN THE NAME OF THE CITY. SO WE ARE RESPONSIBLE FOR ALL THE CONTRACTS THAT WE ENTER INCLUDING THE TIMELY PAYMENTS ON SERVICES RENDERED. ANOTHER IMPORTANT FEATURE FOR THE BOARD'S CONSIDERATION IS THE CUSTODY OF OUR FUND. >> SO IN IN IN OUR SITUATION WE HAVE TO CUSTODIANS WE HAVE ONE CUSTODIAN IS OUR B AND MY MEDDLING CUSTODIAN WHO CUSTODIES MOST OF OUR INVESTMENT FUNDS. WE ALSO HAVE THE CITY'S FINANCE DIRECTOR THAT IS COSTING THE REMAINDER OF OUR FUNDS AND THAT'S WHERE SO WE HAVE TO CUSTODIAN NOTHING IN THE MEANTIME REQUIRES US TO CUSTODY MONEY WITH THE CITY AND NOTHING REQUIRES US TO REQUEST YOUR MONEY WITH B NY MELLON OR ANY OTHER COMMERCIAL CUSTODIAN SERVICES.
SO THESE ARE A FEW DECISION POINTS I THINK I WOULD HIGHLIGHT IN THE IN THE SAN JOSE MUNICIPAL CODE . NOW THE MEMO THAT I PROVIDED IS MUCH MORE DETAILED AND I ENCOURAGE EVERYONE TO READ THROUGH IT. ONE OF THE ANOTHER AREA I WOULD LIKE TO HIGHLIGHT THAT WAS BOTH RECOGNIZED BY THE CITY AUDITOR AS WELL AS IN THE MUNICH AREA AND IN MY MEMO IS THAT THIS BOARD HAS RULEMAKING AUTHORITY. WE HAVE THE AUTHORITY TO MAKE REGULATIONS AND RULES FOR THE ADMINISTRATION OF OUR PLAN CONSISTENT WITH THE LAW. UM, ANOTHER THING I WANT TO MENTION HERE SO THIS IS SO THAT WAS TALKING ABOUT THE LEGAL MEMO AND NOW I'M GOING TO SWITCH OVER TO THE UM THE ONCE AGAIN THE RECOMMENDATION UNDER FOR GAO IF YOU CAN PLEASE PULL UP THAT UH THAT THE BACKUP MATERIAL FOR THAT ONE SO ACTUALLY YOU DO THAT AS SOME OF YOU KNOW AND ARE WHERE THE CITY AUDITOR PRESENTED ITS REPORT TO THE CITY COUNCIL AND THE MAYOR ISSUED A LETTER IN RESPONSE I APPEARED BEFORE CITY COUNCIL LAST WEEK AS FIDUCIARY COUNCIL FOR THIS PLAN AND COMMENTED ON THE MAYOR'S LETTER TO MAKE SURE THAT WE ARE ADDRESSING THE ISSUES RAISED IN THE AUDIT AND EXERCISING INDEPENDENT AUTHORITY TO DO SO.
THE MAYOR DIRECTED THE BOARD'S AS ROBERTA MENTIONED AND ALSO REPORT BACK WITHIN FORTY FIVE DAYS ON THE PROGRESS MADE IN TERMS OF DECIDING AND DEVELOPING OUR OWN POLICIES. >> THE MAYOR HAD ASKED THE BOARD TO ADOPT THE CITY'S POLICIES AS STATED IN THE LETTER AND BUT THE CITY AUDITORS FINDING ALSO INCLUDED THAT THE BOARD COULD EXERCISE ITS DISCRETION AND AUTHORITY TO ADOPT POLICIES OF ITS OWN. SO WITH THAT UM I'VE PROVIDED THIS BACKUP MATERIAL. SO WHAT I DID WAS THAT I WENT THROUGH ALL THE BODIES OF LAW AND I WENT THROUGH THE CITY'S POLICY AND IN MY JUDGMENT THESE ARE THE PROPOSALS I THINK FALL WITHIN THE LEGAL REALM FOR THE THE BOARD TO ADOPT BECAUSE THERE ARE SOME INSTANCES WHERE THE BOARD SHOULD ABSOLUTELY ADOPT IN AN EXERCISE THEIR INDEPENDENCE FROM THE PLAN SPONSOR WHICH IS THE CITY. BUT THERE ARE ALSO INSTANCES WHERE IT'S MORE PRUDENT TO FOLLOW THE CITY POLICIES GIVEN THAT THE CITY DEPARTMENT STAFF BY CITY EMPLOYEES AND SO AFTER CONSIDERATION OF THE LAW GOVERNING THE BOARD'S AUTHORITY PRACTICAL CONSIDERATIONS IN MY REVIEW OF THE CITY POLICIES I PRESENT TO THE BOARD MY ASSESSMENT OF WHERE I BELIEVE IT'S PRUDENT FOR THE BOARD TO ADOPT THE POLICY.
SO IF WE GO THROUGH THE BACK OF MATERIALS HERE YOU'LL SEE WITH CHAPTER ONE POINT ONE FAIR EMPLOYMENT I RECOMMEND THAT OR THE BOARD ADOPT ALL THOSE POLICIES FOR ORISSA'S OPERATIONS. IS THERE ANY QUESTIONS ON THAT? OK, UM CHAPTER ONE BOY ONE QUESTION. >> SURE. UM JUST OF THE ONES THAT YOU LIST IN THIS DOCUMENT DO YOU SEE ANY THAT WOULD BE UH CHALLENGE TO WORK THROUGH THAT ARE NOT YOU KNOW NOT WITH THIS NOT ADOPTING THE CITY? >> WELL, SO THERE MAY BE A FEW AND THOSE WILL BE SUBJECT TO THE GOVERNANCE COMMITTEE IN THE BOARD ADOPT ONE OF THEM WOULD MAYBE AROUND THE POLICIES UM FOR EXAMPLE, I THINK IT'S I HAVE TO LOOK CLOSER AT THE EXACT POLICIES AND FIND THE DETAILS ON BUT I BELIEVE SOME OF THE CURRENT POLICIES REQUIRE VACCINATIONS FOR EVERYONE FOR THEM TO CONTINUE WORKING.
UM, SO I THINK THAT'S ONE OF THEM WHERE WE MAY DISAGREE. BUT AGAIN WE ALSO NOT SAYING WE WILL DISAGREE. THAT'S THE THING. SO THESE ARE JUST AREAS WARRANTING FURTHER COMMUNICATION WITH THE CITY. FURTHER THOUGHT FROM OUR BOARDS, UM, THAT I'M RAISING WITHIN MY COMMENTS RIGHT NOW. I JUST WANT TO MAKE SURE THAT'S CLEAR FOR EVERYBODY. THESE ARE JUST THINGS THAT I'M RAISING FOR FURTHER CONSIDERATION. >> SO THAT BEING ONE ANOTHER AREA WOULD BE UH TO THE WOULD BE POLICY FOR EMPLOYEE TRAVEL. UM, WE MAY WANT TO PROVIDE A STRICTER POLICY ON EMPLOYEE TRAVEL. SO FOR EXAMPLE, IF THE CITY'S POLICY REQUIRES US TO SPEND MORE THAN IT WOULD OTHERWISE REQUIRE US TO SPEND TO SEND SOMEONE SOMEWHERE.
SO I BELIEVE IN I CAN CORRECT ME IF I'M INCORRECT IS THAT SOME OF THE CITY POLICY REQUIRES US TO FLY OUT OF SAN JOSE WHERE SOMETIMES THOSE FLIGHTS COULD BE EXPENSIVE DEPENDING ON WHERE THE DESTINATION IS MAYBE CHEAPER TO FLY FROM SFO AND SO BECAUSE THOSE FUNDS ARE GOING TO BE TAKEN OUT OF OUR OUR OUR ADMINISTRATIVE BUDGET, IT WOULD WE WOULD HAVE A MORE RESTRICTIVE PROVISION WHERE IT SAYS IF THERE'S A CHEAPER OPTION, PLEASE USE THE CHEAPER OPTION AGAIN NOT SET IN STONE. I'M JUST GIVING YOU AN EXAMPLE OF WHERE WHERE THAT MIGHT COME COME UP ANOTHER AREA A COUPLE OTHER AREAS HERE THAT REQUIRE FURTHER DILIGENCE.
CHAPTER TWO POINT ONE THREE POINT ONE THREE POINT TWO AND THIS ALL RELATES TO HIRING EMPLOYEE RELATIONS, LABOR UM EMPLOYMENT EMPLOYEE CLASSIFICATION WE JUST WANT TO CHECK FOR COMPATIBILITY WITH MEASURE G BECAUSE WE HAD A SPECIAL CHARTER PROVISIONS FOR FOR US AS A BOARD. SAME GOES WITH PERFORMANCE EVALUATION. SO THOSE ARE ALL THE ISSUES WE WOULD LOOK FOR COMPATIBILITY WITH MATAJI NOT TO SAY AFTER WE'VE DONE OUR ANALYSIS WE WOULDN'T ADOPT IT. I JUST DON'T KNOW OFF THE TOP OF MY HEAD, UH, IT REQUIRES FURTHER ATTENTION, TRAINING AND DEVELOPMENT. >> THIS MIGHT ALSO BE ANOTHER AREA WHERE WE WOULD ADOPT OUR OWN POLICIES BECAUSE WE DO HAVE THE DUTY OF PRUDENCE THAT REQUIRES US TO BE UP TO DATE AND GO TO MORE TRAININGS AND I THINK TYPICALLY A CITY EMPLOYEE WOULD HAVE TO GO TO SO THAT MIGHT BE SOMETHING WHERE WE WOULD EITHER INSTITUTE OUR OWN POLICY ON OR WE'LL LOOK FURTHER AT THE CITY'S POLICY TO SEE IF THERE'S JUST WAYS WE JUST MAKE MINOR TWEAKS.
UM AND THEN PURCHASING AND PROCUREMENT. UM, THERE ARE A FEW HERE THAT WE IT'S KIND OF THEY'VE GOT A LOT OF THEY'VE GOT UH POLICIES ONE THROUGH FIFTH TENE SO THERE'S FIFTEEN POLICIES FOR THE CITY WE WOULD WANT TO LOOK THROUGH MOST OF THEM TO MAKE SURE THAT THEY SUIT OUR NEEDS. UM THERE ARE A FEW THAT WE CAN AUTOMATICALLY ADOPT. SO IF YOU LOOK AT PAGE THREE OF THE CHART, UH, I RECOMMEND ADOPTING A POLICY POLICY NUMBERS FIVE POINT FIFTEEN FIVE POINT ELEVEN FIVE POINT ONE THIRTEEN FIVE POINT ONE FOURTEEN IN THE REST OF THEM I THINK WOULD REQUIRE FURTHER DILIGENCE TO TAKE A LOOK AT IT FOR FURTHER CONSIDERATION.
UM, YOU KNOW, THERE ARE JUST A FEW THAT I PUT OUT FOR CAUTION. I JUST INCLUDED BECAUSE I'M NOT SURE I DIDN'T HAVE A CHANCE TO FOLEY LOOK AT . SO AGAIN, TO YOUR POINT ENERGY FUND TRANSFERS AND DEPOSITS I'M NOT ENTIRELY SURE WHAT THAT POLICY IS. MAYBE UM SOMEONE HERE COULD TELL ME BUT OTHERWISE WE WOULD WANT TO TAKE A FURTHER LOOK AT THAT AND COME BACK TO DETERMINE WHETHER OR NOT THAT WOULD IMPACT US IN OUR OPERATIONS. >> UM, ANOTHER ONE WILL BE THE LOAN PROVISIONS UNDER CHAPTER FIVE POINT THREE AND WE HAVEN'T HAD THE OPPORTUNITY TO FOLEY LOOK AT THOSE AND SO WE RESERVE, UM, OUR RIGHT TO ADOPT THOSE OR DECIDE TO EDIT THOSE IN THE SAME WITH A TRANSFER SURPLUS PROPERTY. >> WE WOULD AGAIN JUST WANT TO TAKE LOOK AT THAT. >> BUT OTHER THAN THAT THE BALANCE AS YOU'LL SEE HERE, THE BALANCE OF THE CITY POLICIES I BELIEVE WOULD BE PRUDENT FOR US TO ADOPT WITH THOSE EXCEPTIONS FOR FURTHER CONSIDERATION.
>> AND PART OF THE REASON WHY I BRING THIS TO THE BOARD NOW IS THAT THE CITY MAYORS WRITE A LETTER REQUIRED TO COME BACK WITHIN FORTY FIVE DAYS AND OUR NEXT MEETING WOULD BE REALLY PUSHING UP AGAINST THAT DEADLINE WHICH I BELIEVE IS DECEMBER 8TH. AND SO I'M BRINGING THIS TO THE BOARD FOR CONSIDERATION TO ADOPT IN PART THE RECOMMENDED CITY POLICIES. WITH THAT I'LL LEAVE IT UP TO ANY QUESTIONS. THAT'S A GENERAL QUESTION ON WHAT OUR RESPONSIBILITIES ARE WHICH IS THE FACT THAT SOME OF THE FUNDING IS FROM THE CITY. RIGHT, RIGHT. SIDBURY KIND OF BRIDGE THAT RIGHT. >> SO TO MAINTAIN OUR TAX QUALIFIED STATUS WE DO NEED MAINTAIN OUR INDEPENDENCE FROM THE PLAN SPONSOR PARTICULARLY PLAN ADMINISTRATION. SO A LOT OF THE AREAS HERE FOR EXAMPLE FAIR EMPLOYMENT IT'S NOT REALLY A PLAN ADMINISTRATION FUNCTION IS AN H.R. FUNCTION AND SO THAT'S WHERE WE MAINTAIN OUR INDEPENDENCE.
SO CONTRACT PROCUREMENT ISSUES FOR EXAMPLE, WE'VE HAD SOME ISSUES WITH OUR CONTRACTS PARTICULARLY WITH OUR BENEFITS DIVISION FOR FOR EXAMPLE OUR PENSION ADMINISTRATION PLAN. WE HAVE A DEATH BENEFIT. SO NOW GETTING THE NITTY GRITTY SO WE HAVE A CONTRACT WITH A SERVICE WHEN MEMBERS DIE EACH MONTH THAT SERVICE COMES AND TELLS US THAT HERE'S THE LIST OF PEOPLE WHO HAVE PASSED AWAY BASED ON THE SOCIAL SECURITY RECORDS I THINK THE VENDORS PBI AND WE'VE BEEN HAVING ISSUES GETTING THAT VENDOR CONTRACT APPROVED AND PAID BUT IT'S CRITICAL FUNCTION OF OUR PLAN. SO THAT'S AN AREA FOR EXAMPLE, WE WANT TO MAKE SURE THAT WE ARE STAND GOOD ON THOSE CONTRACTS AND MAKE SURE THOSE CONTRACTS ARE WORKING ON A DAILY BASIS IN A ROUTINE WAY. SO THERE'S SO MANY GREAT JOB I MEAN FANTASTIC DETAIL WHEN WE COMPLEMENT HEADS OFF TO QUESTION ON FIVE POINT ONE THIS IS WHAT OVERLAPS WITH OUR MOST RECENT INTERNAL AUDIT REPORT. UM, IS THIS THIS IS WHAT COATEX CORTEXES DEVELOPING THE DEVELOPING BAULDERSTONE POLICY ? >> YES. SO THE CORTEX AS FAR AS I UNDERSTAND IT, BARBARA, MAYBE ABLE TO SPEAK ON IT MORE.
UM, THERE ARE CURRENTLY LOOKING AT THE CITIES PROCUREMENT POLICIES AND LOOKING AT OSAS IS UH PROCUREMENT POLICY AND CONTRACTING POLICY AND LOOKING AT THE NEEDS OF OUR DEPARTMENT TO DECIDE AND PRESENT A APROPO PROCUREMENT AND CONTRACTING CONTRACTING POLICY TO THE GOVERNANCE COMMITTEE WHICH I BELIEVE IS MEETING ON NOVEMBER TWENTY SEVEN. AND WHAT ABOUT THE REST OF THE REVIEWS HULET WHO'S GOING TO PERFORM THE REVIEWS WITH COMPATABILITY MEASURE JEAN IN THE OTHER AREAS AND SO THAT THAT WORK WOULD BE DELEGATED DOWN TO THE GOVERNANCE COMMITTEE IN THE GOVERNANCE COMMITTEE CAN TELL US WHICH ONES THEY WANT US TO PRIORITIZE AND REVIEW UM TO MAKE THAT DETERMINATION COUNCILL GOING TO BE PRESENTING TO GOVERNANCE COMMITTEES IS THAT GOING TO BE CORTEX OR MANAGEMENT OR. WELL WE CAN WE CAN MAKE THAT WE CAN WE CAN TALK ABOUT THAT IN A FURTHER MEETING.
WE DON'T HAVE THAT CURRENTLY AGENDA CURRENTLY AGENDA IS JUST THE ADOPTION OF THESE THESE POLICIES HERE. HOW WE GO ABOUT ADDRESSING THE OTHER AREAS IS STILL IN THE WORKS. >> I DON'T HAVE A RESPONSE TO THAT YET FROM OFFERED HERE BUT ON THE PROCUREMENT KABRA I ARE MEETING TOMORROW WE'VE GOT AN ADVANCED VERSION OF A DRAFT POLICY WHICH WE WILL SHARE WITH COUNSEL I THINK ON NOVEMBER 16TH I THINK WE HAD AGREED ON IT. >> YES, YES. BUT WHEN THE PROCUREMENT POLICY WE SAID FOR LEGAL REVIEW YEAH THAT'S ALL I HAD TO YEAH. I MEAN THAT'S CERTAINLY ON THE FRONT BURNER GIVEN BOTH INTERNAL AND CITY AUDITOR. BUT I'M JUST WONDERING, UM THE MAYOR'S LETTER THE FORTY FIVE DAY DEADLINE VERSUS THE YOUR RESPONSE TO THE CITY AUDIT OF JUNE OF NEXT YEAR HOW HOW ARE WE WHAT ARE WE LOOKING TO DO IN FORTY FIVE DAYS AND WHAT ARE WE LOOKING TO DO? SO WHEN I APPEARED BEFORE CITY COUNCIL AND CONGRESSMAN I WAS JUST ELEVATED AS A COUNCILMEMBER FOLEY WAS THERE AS WELL AS I INITIALLY I HAD THOUGHT THAT THEY WANTED THE DETERMINATION OF WHETHER OR WE WOULD ADOPT ALL POLICIES FROM THE CITY OR NOT.
THE MAYOR CLARIFIED THAT WHAT THEY'RE LOOKING FOR IS REALLY JUST A SYSTEMS UPDATE SO YOU REPORT BACK WITH THEIR STATUS OF WHAT WHERE WE ARE IN TERMS OF THE OPTIONS OF WHICH POLICIES AND WHAT DETERMINATIONS WE'VE MADE. SO WE STILL UNTIL NEXT YEAR ROUND IT OUT. YES, THANK YOU. >> AND JUST TO BE CLEAR, IT DOESN'T MEAN THAT WE WILL FINISH BY JUNE. OUR GOAL WILL BE TO BE COMPLETED EARLIER. BUT I DIDN'T WANT TO BE I DIDN'T WANT TO GIVE A DATE THAT WE WERE NOT POSSIBLY NOT ME . SO SINCE THEY AGREED TO DO WE ARE GOING TO USE THAT ONE. >> BUT IF WE CAN BE DONE BY MARCH AS SOON AS THAT BE GREAT. THANK YOU IS IF I MAY I JUST LIKE TO CLARIFICATION ON THIS WASN'T A LETTER FROM THE MAYOR.
THIS WAS A MEMORANDUM THE WAY THAT WENT ALONG WITH THE AUDIT REPORT THAT WAS ADOPTED UNANIMOUSLY BY CITY COUNCIL. SO THIS IS A POLICY THAT THE CITY COUNCIL ADOPTED THAT WE ENCOURAGE YOU TO TAKE A LOOK AT THE DIFFERENT AREAS LAID OUT IN THE AUDIT PROCUREMENT BEING ONE OF THEM. >> BUT AS I MENTIONED EARLIER, CYBERSECURITY IS A HUGE ISSUE AND VERY CONCERNING. I'M NOT GOING TO GO INTO DETAIL HERE BUT YOU SHOULD TAKE THAT VERY SERIOUSLY WHEN YOU'RE LOOKING AT PROVISIONS TO PROTECT YOUR SYSTEMS.
AND ON THAT POINT WE ARE RECOMMENDING ADOPTING CHAPTER ONE POINT SEVEN ON TECHNOLOGY. >> THANK YOU. I THINK THAT'S REALLY IMPORTANT. I ALSO WANT TO SAY THAT THE CITY HAS ITS POLICIES AND PROCEDURES AND THAT THEY HAVE BEEN WELL VETTED OVER THE YEARS. >> WE EACH RECENTLY HAD AN AUDIT ON OUR PROCUREMENT PROCESS AND AUDITOR MADE RECOMMENDATION ON OUR PROCUREMENT PROCESS AND SOME OF THE CHANGES WILL WE WILL BE WILL ACTUALLY BE IMPLEMENTING ALL OF THEM AS WELL.
MY RESPONSIBILITY AGAIN IS DIFFERENT THAN YOUR RESPONSIBILITY. MY RESPONSIBILITY IS TO LOOK OUT FOR THE TAXPAYERS FUNDS AND HOW THEY'RE BEING ALLOCATED AND IN MANY WAYS THEY'RE IT'S VERY DIFFICULT TO SEPARATE THE DUTIES THE THE ROLES OF THE CITY IN RELATION TO THE ROLE OF THE RETIREMENT SERVICES. >> NO ONE BECAUSE ALL OF YOUR EMPLOYEES ARE EMPLOYEES OF THE CITY OF SAN JOSE AND MANY OF THEM ARE PARTIES TO BARGAINING UNITS AND NEGOTIATIONS THROUGH THE CITY OF SAN JOSE AND NOT INDEPENDENT OF THE RETIREMENT SERVICES. >> THAT'S JUST ONE EXAMPLE. THE REASON I DO WANT TO HIGHLIGHT THE TRAVEL POLICY TO AND I THINK THERE IS SOME FLEXIBILITY ABOUT THE CHEAPEST TRAVEL WHERE THERE IS NOT FLEXIBILITY AND I STRONGLY ENCOURAGE YOU TO LOOK AT A TRAVEL POLICY THAT LIMITS THE TYPE OF TRAVEL WE PUSHED BACK, FOR EXAMPLE, ON A TRAVEL VOUCHER FOR FOR GOING FIRST CLASS ON A PLANE OR BUSINESS CLASS WHEN NORMALLY WE TRAVEL COACH.
SO WHETHER YOU FLY SAN FRANCISCO OR SAN JOSE, THAT'S NOT THE ISSUE. IT'S A CHEAPER EXPENSE. LIKEWISE IF YOU'RE GOING TO A CONVENTION YOU SHOULD BE STAYING IN A CONVENTION HOTEL AND NOT LOOKING AT A FIVE STAR HOTEL OR ONE THAT IS MORE EXPENSIVE DOWN THE STREET BECAUSE IT HAS NICER ACCOMMODATION. >> THAT'S NOT THE ROLE AND FUNCTION OF A FIDUCIARY AS I'M LOOKING AT A TAXPAYER DOLLARS I'M THINKING HOW CAN I JUSTIFY THAT IF I'M STAYING AT A FANCY HOTEL? HOW DO I JUSTIFY THAT TO MY RESIDENT? >> SO JUST UNDERSTAND YOU HAVE YOUR ROLE AND YOU WILL MAKE YOUR DECISIONS ON HOW YOU'RE GOING TO GO FORWARD THROUGH THESE THROUGH YOUR GOVERNANCE COMMITTEE AND SUCH.
>> THAT'S OUR THAT'S MY PERSPECTIVE AS A COUNCILMEMBER SUPPORTED THE MEMO THAT THE MAYOR BROUGHT FORTH. I ACTUALLY MADE THE MOTION TO SUPPORT THE MAYOR'S MEMO. THE FORTY FIVE DAYS IS TO FINE TO HEAR WHAT'S YOUR PLAN THAT YOU'RE TAKING A LOOK AT IT AND I'LL LEAVE IT AT THAT. YES, MR. CHAIRMAN, I MADE SOME COMMENTS ON THIS. THE BOARD WANTS TO SO A COUPLE OF THINGS SO I JUST WANT TO MAKE IT CLEAR BECAUSE I'VE BEEN IN MEETINGS UM TWO OR THREE OF THEM THAT I HAVE HEARD THE CYBERSECURITY ISSUE COME AND RESPECTFULLY I DON'T WANT THE PUBLIC TO BELIEVE THAT, UM, THE OFFICE RETIREMENT SERVICES DO NOT HAVE CYBERSECURITY CONTROLS SO DO NOT FOLLOW THEM BECAUSE IT'S THE THIRD TIME THAT I HAVE HEARD COMMENTS THAT TO THE NAKED EYE COULD JUST BE ASSUMED THAT'S THE CASE.
I JUST WANT TO MAKE IT REALLY CLEAR THAT OUR OFFICE FOLLOWED THE CYBERSECURITY MEASURES BY THE CITY. IN FACT, UM, EVERY MONTH WE GET THE REPORT FROM THE UH, I.T. DEPARTMENT, THE CITY ON THE STAFF TRAINING OR CYBERSECURITY AND I'M VERY PROUD TO SAY THAT OUR DEPARTMENT IS PRETTY MUCH MOST OF THE TIME ON THE TOP THREE OR FIVE FOR THE WHOLE CITY UH, SO CYBERSECURITY IS CLEARLY AN IMPORTANT ISSUE FOR US. UH, WE THINK VERY HIGHLY OF THE DEPARTMENT FOR THE CITY. >> UM, I HAD AN ISSUE LIKE OLDER EMPLOYEES AT THE CITY WHERE ONE TIME THERE WAS AN EMAIL THAT I RESPONDED TO, YOU KNOW THAT THEY WERE LOOKING TO TRY TO GET ACCESS TO THE CITY QUICKLY REACH OUT TO THE IT DEPARTMENT AND WORK WITH THE CYBERSECURITY DIRECTOR AND THAT MY ONLY REASON FOR SAYING THIS IS THAT AFTER THAT IN ONE OF OUR QUARTERLY MEETINGS WE ASKED THE CYBERSECURITY DIRECTOR TO PRESENT TO OUR STAFF TO REINFORCE THE IMPORTANCE CYBERSECURITY.
>> SO I YOU KNOW, I'M JUST CONCERNED THAT WHEN COMMENTS ARE MADE PUBLICLY LIKE THAT, YOU KNOW, PEOPLE MISS MAY THINK THAT WE WE DO NOT BELIEVE ON IT . WE DO NOT FOLLOW IT. AND THE TRUTH IS IT CANNOT BE FURTHER FROM THE TRUTH. WE DO WE STAND BY IT. WE BELIEVE AND WE DO HAVE CONTROLS AND WE FOLLOW THE STATED REQUIREMENTS ON THAT ISSUE ON THE TRAVEL UH, YOUR POINT IS WELL TAKEN COUNCILMEMBER COMPLETELY AGREE WITH YOU. BUT AGAIN I WANT TO MAKE IT CLEAR THAT I THINK THE FLEXIBILITY THAT WE ARE REFERRING TO IS NOT ABOUT SPENDING MORE MONEY BUT IT IS ABOUT UH FOR EXAMPLE, AS COUNSEL INDICATED SOMETIMES UH MAYBE EVEN TEN DOLLARS MORE TO LIVE FROM SFO THAN SOME WOULD SAY BUT FOR LOGISTICAL REASONS IT'S EASIER FOR THE STAFF TO LEAVE FROM SAN FRANCISCO TO SAN I'LL SAY IT AND IT SEEMS TO ME THAT TEN DOLLARS YOU NOW CALL WHETHER THE STAFF SHOULD BE LEAVING FROM ONE HOTEL I MEAN ONE AIRPORT ON THE OTHER ONE AND IN OF THE HOTELS IN FACT THERE WAS A TIME WHERE OUR CEO WAS GOING TO BE ATTENDING A CONFERENCE AND THERE WAS A HOTEL THAT WAS ACTUALLY CHEAPER THAN THE CONFERENCE HOTEL.
BUT I GUESS THE POLICY WOULDN'T ALLOW HIM TO STAY AT A LESS EXPENSIVE HOTEL. >> SO YOU WE WANT TO MAKE SURE THAT THERE'S THAT FLEXIBILITY THAT THAT WE WE AGREE WITH YOU COMPLETELY. WE WE VALUE, UH, THE PLANS. I WANT TO MAKE SURE THAT WE DON'T SPEND MORE MONEY THAN WE HAVE TO. WE JUST WANT TO MAKE SURE THAT FROM A LOGISTICAL STANDPOINT, UH, IT MAKES IT EASIER FOR US TO BE ABLE AND STAFF AND TRUSTEES TO TRAVEL AND ALSO TO REIMBURSE THOSE EXPENSES. SO I JUST WANTED TO MAKE THAT POINT CLEAR. UH, BECAUSE UH UM WE THINK UH, WHOLEHEARTEDLY THE SECURITY AND CONTROLS ARE CRITICAL TO ANY FUNCTION AND OBVIOUSLY THEY HAVE TO BE EFFICIENT AND EFFECTIVE AND THERE ARE GAPS AND SOME OF THE ISSUES UH THE CITY AUDITOR NEEDS AN AUDITOR FOUND UH WE STAND READY TO WORK ON THOSE GAPS BUT I JUST WANT TO PUBLICLY MAKE IT CLEAR THAT WE CONTROLS ARE IMPORTANT TO US AND WE INTEND TO MAKE SURE THAT WE RUN THE OFFICE AS AS EFFICIENT AND EFFECTIVE AS POSSIBLE.
>> THANK YOU. SO THIS IS FOR DISCUSSION AND ACTION. UM, WHAT I, UH REQUESTING FROM THE BOARD IS AN ADOPTION OF THE BACKUP MATERIAL THAT'S POSTED ITEM FOR JAY. I'LL MAKE THAT MOTION. UH, A MOTION FROM DAVE WILSON SECONDED BY SANTOS ANY FURTHER DISCUSSION WITH THE GOVERNANCE COMMITTEE? >> YOU KNOW, SO SO THE OTHER ISSUES ARE FOR EXAMPLE WHERE IT SAYS LOOK FURTHER INTO OR MAY CONSISTENT WITH METALLURGY OR HAVE ANY OTHER CAVEATS. YES, THOSE WILL BE ISSUES THAT WE WOULD BRING UP WITH THE GOVERNANCE COMMITTEE. BUT FOR THE FOR THE MAJORITY THE DOCUMENT IS JUST TO SHOW THAT WE ADOPT FOR EXAMPLE, UM WHEREVER INDICATES ADOPT. >> SO WE ARE VOTING ON YOUR RECOMMENDATION ON WHAT WE SHOULD ADOPT.
>> YES. AND IN ADDITION TO WHAT WE SHOULD BE LOOKING FURTHER INTO THE SIX ALL THOSE IN FAVOR I POST OK I CAN I JUST ASK FOR CHAPTER FIVE POINT ONE UM IT SAYS ADOPT CITY POLICY NUMBER FIVE ONE FIVE IS THAT IS THAT ACTUALLY FIVE ONE ONE FIVE OH I MISSED THE ONE THERE BUT YES YEAH OK OK WE'RE YEAH. UH DISCUSSION FOR H RIGHT DISCUSSION AND ACTION TO A POINT AD HOC EXECUTIVE SEARCH COMMITTEE SO OK I WANT TO HAVE A QUESTION FOR YOU AS OUR OUR S SORRY UM ISN'T THIS KIND OF A FUNCTION OF THE JPC? >> UM I THINK THAT'S ONE POSSIBILITY I GUESS WHAT I WAS TOLD BY HARVEY WAS THAT THE BOARD HAS TO MAKE THE DECISION EITHER THE JPC DOES IT OR YOU SEPARATE WHICH I THINK ANDREW MENTIONED THAT MAYBE YOU HAVE A DIFFERENT BOARD MEMBERS LOOK AT IT BUT I'M OPEN TO EITHER ONE.
>> JPC CAN HANDLE IT. SO SO HERE'S HERE'S HOW THIS PIECE GOT ON THE AGENDA. SO AT THE LAST FEDERATED BOARD MEETING OUR SISTER PLAN THEY DECIDED TO PUT UH AD FOR A FUTURE AGENDA. I PROPOSE AGENDA ITEM THE APPOINTMENT OF AN AD HOC COMMITTEE FOR A CEO SEARCH. >> SO BECAUSE OF THAT TIMING FOR THEIR AGENDA YOU'RE MEETING IN BETWEEN. I THOUGHT IT WOULD BE PRUDENT TO ADD THIS ONTO OUR AGENDA AS WELL SO THAT WE'RE ACTING IN PARALLEL. THE GPC CHARTER PROVIDES THAT THE AUTHORITY TO RETAIN A EXECUTIVE SEARCH FIRM AND WHAT THE IDEA IS FOR THIS AGENDA ITEM IS TO APPOINT A LIAISON FROM THIS PLAN TO WORK WITH AN APPOINTED LIAISON FROM THE OTHER PLAN AND WORK WITH THE EXECUTIVE SEARCH FIRM THAT'S RETAINED BY THE JPC AND THE REPORT BACK THEIR FINDINGS. >> OK, THAT'S DIFFERENT THAN THIS IS DIFFERENT THAN THE LIAISON THAT WE ALREADY HAVE ON THE SEPARATE. >> YES, BECAUSE I THINK THE INDIVIDUAL FROM FEDERATED THAT WANTS TO SERVE IN THAT FUNCTION IS NOT A MEMBER OF THE JPC.
SO THIS IS MY JUST MY SENSE HERE. >> UM, I THINK THIS IS EXACTLY WHAT THE JPC WAS CREATED FOR. >> UM, YOU HAVE BOOCH YEARS WHICH ARE KEY. YOU ALSO HAVE BOTH I SEE CHAIRS RIGHT NOW GRANTED THE SEARCH FOR THE CEO AND THE CIO BUT THEN IT'S EVEN MORE CRITICAL FOR THE CIO SEARCH AND THEN ONE OTHER TRUSTEE. >> UM SO THIS IS COMPLETELY UP TO YOUR BOARD TO DECIDE HOW YOU WANT TO PROCEED? I WOULD THINK THAT IF YOU'RE GOING TO HAVE AN EXECUTIVE UH AND UM I HAVE A COMMITTEE COMPRISED OF ABOUT SIX MEMBERS YOU MIGHT AS WELL AS YOU USE YOU UH JOINT ARTICLE I MEAN THE AUDIT COMMITTEE SUITE I'LL BE WORKING WITH YOU SO LONG.
THAT'S WHAT COMES TO MY MIND THE JPC. BUT IF YOU DO WANT TO DO UH COMMITTEE THAT IS COMPRISED OF A LARGER NUMBER WHICH I DON'T KNOW IF IF YOU'RE ABLE TO YOU CAN WRITE BECAUSE SO THE IDEA HERE WOULD BE AN AD HOC COMMITTEE WOULD PROVIDE THE MORE FLEXIBILITY BECAUSE AD HOC COMMITTEES ARE EXISTING FOR A LIMITED PERIOD OF TIME FOR A LIMITED PURPOSE AND SO THEY'RE NOT SUBJECT TO THE BROWN ACT THAT THAT IS THAT THAT'S THE FINAL ISSUE. IT DOES MAKES IT EASIER TO, UM, CALL FOR MEETINGS THEN UH OBVIOUSLY RULE BY BROWN ACT SO THEY'RE NOT PUBLIC MEETINGS PERALEZ SO FROM THAT STANDPOINT IT MAKES IT EASIER. >> THAT IS ABSOLUTELY TRUE. >> SO I'D LIKE TO ASK NASHWA THIS REALLY IS WHAT JPC WAS CREATED FOR IN YOUR CHAIR JPC.
>> WHAT WOULD WHAT WOULD BE YOUR PREFERENCE IN THIS? I THINK THE JPC CAN DO IT HANDLE IT RIGHT. THAT WAS MY INITIAL THINKING. UM BUT I WAS YOU KNOW, I WAS TOLD MAYBE THERE WAS OTHER IDEAS ABOUT IT SO I'M OPEN EITHER WAY BUT THE JPC CAN HAVE I JUST DON'T GET THE IDEA OF A LIAISON TO WORK WITH THE JPC. >> WELL NO THE LIAISON TO WORK WITH THE EXECUTIVE SEARCH FIRM SO THE EXECUTIVE SEARCH FIRM WILL REPORT BACK TO THE TWO LIAISON'S FROM THE BOTH BOARD'S .
>> SO I DON'T BELIEVE THIS WHAT THE JPC IS FOR LAST TIME WE DID A CEO AND A CIO SEARCH. WE DIDN'T HAVE A JPC AT THE TIME. WE HAD AN AD HOC BUT WE MADE A JPC FOR THESE TYPE OF PURPOSES THERE ARE ARE SAYING SO I THINK THIS SHOULD BE BONGANI JPC IF THE JPC REALLY WANTS TO HAVE A LEIA'S ON YOU KNOW, TO COMMUNICATE WITH THE SEARCH FIRM THEY COULD CREATE AN AD HOC INPUT ONE PERSON ON EACH SIDE ONTO IT.
BUT I DO BELIEVE THE JPC SHOULD BE TAKING A LEAD ON THIS AND FIND THAT. >> YEAH. AND ALSO TO WHOEVER YOU PICK FOR YOUR LIAISON FROM POLICE AND FIRE CAN BE ON THE JPC. I'M JUST TELLING YOU THIS ONE PIECE OF INFORMATION FEDERATED THE INDIVIDUAL FROM FEDERATED THAT THINKING ABOUT VOLUNTEERING IS NOT ON THE JPC. SO THAT'S WHY IT'S COMING ON AS THE AGENDA ITEM RATHER THAN THROUGH THE JPC AND AND WHO SITS ON THE JPC? I MEAN FEDERICA DO WHAT THEY WANT IF THEY WANT THIS PARTICULAR PERSON TO SIT ON THE JPC, THEY COULD MAKE THESE CHANGES DO THAT TOO. >> YEAH, THEY CAN CHANGE UP THE COMMITTEE SO I MEAN THIS BELONGS WHENEVER WE DO A SEARCH ANY TYPE OF SEARCH IN THE FUTURE SHOULD BE HANDLED IN THAT FORUM. >> YEAH, I WHOLEHEARTEDLY AGREE WITH THOSE STATEMENTS AS YOU HEARD WHAT I SAID, THE ONLY CAVEAT SETTING WHAT COUNSEL INDICATED THE FLEXIBILITY OF SCHEDULING MEETINGS THAT ARE NOT SUBJECT TO BRYANA REQUIREMENTS. >> UM, I'M ONLY SAYING THAT BECAUSE I DO AGREE WITH YOU.
I JUST YOU HEARD MY WORDS UH I KNOW AS WELL HAS BEEN ASKING FOR ABOUT 60 DAYS NOW TO REQUEST JPC MEETING. WE HAVE NOT BEEN ABLE TO SCHEDULE ONE BECAUSE WE HAD NOT BEEN ABLE TO FIND A QUORUM WHERE PEOPLE IS AVAILABLE TO ME OBVIOUSLY THAT COULDN'T BE THE CASE. THEY THEY'RE DOING THE SEARCH. >> I MEAN WE COULD APPEAL TO MEMBERS OF THE YEAH BUT AD HOC THE JPC. >> YES, THAT'S RIGHT. YES, I THINK YEAH. >> SO LIEDERMAN HAS TO GO AHEAD AMI UNNECESSARY. >> OH GOOD. OH OK. >> I CAN'T SEE WHY. SO DOES THIS NEED TO BE A MOTION. >> YES SO YOU DO NEED TO APPOINT SOMEONE TO SERVE FOR THAT AD FOR THIS AD HOC COMMITTEE LIAISON. >> I CAN'T IT CAN BE SOMEONE FROM THE JPC THAT'S CURRENTLY ON THE JPC. I THINK THE BOARD IS LEANING IN THE OPPOSITE DIRECTION.
>> I THINK THAT BOARD IS RECOMMENDATION IS THIS SHOULD BE HANDLED AT THE JPC LEVEL AND THEN AT THE JPC MEETING IF THEY WANT TO CREATE AN AD HOC THEY CAN AT THAT TIME. >> OK, THAT'S FINE TOO. I BELIEVE WE HAVE A MEETING IN NEXT TWO WEEKS AND WE COULD PUT IT ON THE AGENDA. >> YES. OK, IS THAT A MOTION? UH YES THAT'S MY MOTION. I HAVE MOTION FROM GARNIER SECOND ANY FURTHER DISCUSSION ALL THOSE IN FAVOR I POSED OK OK. >> I FEEL LIKE I'M TALKING A LOT TODAY NEXT YEAR NEXT WE HAVE THE NOMINATION IN THE POSITION OF THE BOARD CHAIR AND VICE CHAIR FOR THE CALENDAR YEAR. SO BEFORE I GO INTO THAT I DID WANT TO READ THROUGH THE BOARDS SOME KEY HIGHLIGHTS OF OUR ELECTION POLICY BECAUSE NOW THAT YOU'RE MOTTO IS ARE IS FROM THE PART OF THE SO SORRY I'M GETTING A LITTLE TONGUE TIED HERE.
>> THEY'RE TALKING SO MUCH. CHAIR BATO IS NOW A CHAIR FROM VICE CHAIR AND GENERALLY SPEAKING EACH YEAR WHEN WE HAVE A CHAIR WE FLIP FROM THE VARIOUS GROUPS AND SO BECAUSE HE'S OF THE SAFETY MEMBER GROUP ,THE MEMBERSHIP GROUP, THE CHAIR NOMINATION TECHNICALLY FROM OUR POLICY HAS TO BE FROM THE PUBLIC MEMBER GROUP FOR THE CALENDAR YEAR TO SERVE AS CHAIR. NOW THE POLICY DOES ALLOW FOR A AMENDMENTS TO THE POLICY OR AN EXCEPTION TO THE POLICY OF A SUPERMAJORITY VOTES OF THE SIX MEMBERS AND WE CAN CHANGE THE POLICY TO ALLOW CERRATO TO CONTINUE TO CHAIR FOR NEXT YEAR. BUT I DID WANT TO MAKE THAT INFORMATION KNOWN TO YOU WHILE YOU CONSIDER NOMINATIONS FOR NEXT FOR UH FOR THE CHAIR AND VICE CHAIR POSITIONS. >> NOW UM, IN TERMS OF POLICY, WE GENERALLY DO THE NOMINATIONS IN NOVEMBER AND WE CAN HAVE MULTIPLE NOMINATIONS FOR MORE MEMBERS OF MULTIPLE OR FOUR MULTIPLE POSITIONS AND THEN IN DECEMBER OUR POLICY REQUIRES US TO ELECT A CHAIR AND A VICE CHAIR BY A MAJORITY OF SIX VOTES. I I JUST WANT TO SAY THAT WHEN THE POLICY WAS CREATED MANY, MANY MONTHS AGO, UM THIS WAR WAS NOT AS COHESIVE AS IT IS TODAY NOT THAT IS NOT NEEDED ALSO I DO WANT TO SAY THAT I DON'T THINK THE WAR INVASION A SITUATION WHERE THE CHAIR WILL RESIGN IN THE MORNING AND THE VICE CHAIR BECOMES THE CHAIR RIGHT.
SO WITH THAT CAVEAT, I THINK THAT IT WOULD BE APPROPRIATE FOR YOUR BOARD AND I DON'T WANT TO SPEAK FOR COUNCIL OBVIOUSLY SHE HAS THE LEGAL BACKGROUND. I DO NOT IT WILL BE APPROPRIATE FOR YOU TO THIS IN THERE TO FORMULATE OTHERWISE THE CURRENT VICE CHAIR TO CONTINUE AS THE CHAIR ASSUMING UM YOU CAN TELL BY THE LOOK BUT ASSUMING THAT HE WANTS TO CONTINUE BEING THE CHAIR HIS AND I'M SURE HE IS THAT JUST THAT'S WHAT I WANTED TO SAY. >> THANK YOU. YEAH I THINK WE HAVE A LOT GOING ON RIGHT NOW UH WITH THE RETIREMENT BOARD AND FRANCOS HAD HIS HANDS IN MOST OF IT BECAUSE YOU KNOW DREW IS ON VACATION FOR THOSE TWO MONTHS.
>> I THINK IT WOULD BE PRUDENT TO KEEP HIM IN THAT POSITION SHOULD HE BE WILLING TO ACCEPT IT. >> I SECOND THAT IT'S A SHAME MOTION TO CHANGE A POLICY THAT YOU KNOW, THE POLICY IS NOT UP FOR UH IT'S NOT AGENDA. IT'S THAT WAY. BUT WE CAN TAKE MENTAL NOTE OF IT FOR THE FOLLOWING MEETING. UM, IN LIGHT OF THE NOMINATIONS AND COMMENTS. >> UH, AND I AND I HONESTLY DON'T COUNT WHAT HAPPENED TODAY SWITCHIN MEANING THAT OK, A PLAN MEMBER HAS BEEN IN THIS POSITION FOR THE FULL YEAR AND HE BASICALLY WILL BE TWO MONTHS THIS MONTH AND NEXT MONTH.
SO TO ME I DON'T THINK THE POLICY COMES INTO PLAY HERE BUT THAT'S ME . BUT I WOULD ALSO SECOND THE NOMINATION IF HE WANTS IT CONSIDERING THAT I DO HAVE MY HANDS AND SO MUCH RIGHT NOW PROBABLY MAKES THE MOST SENSE. SO I WILL ACCEPT QUESTION FOR THE VICE CHAIR AS VICE CHAIR I HAVE TO BE A PUBLIC MEMBER.
>> UM, DO THEY HAVE TO ALTER YOU KNOW, SENIOR OFFICER IT'S THE THAT'S WHAT I THOUGHT I CAN TELL YOU THE POLICY REQUIRES THAT THEY'RE OPPOSITES. SO IF THE CHAIR IS A MEMBER OF THE PLAN, THEY BUY SHARES TO BE. >> YES, THAT'S RIGHT. PUBLIC COUNCILMEMBER HOWEVER AGAIN I CAN'T EMPHASIZE THIS ENOUGH WHEN THAT PAULETT WHEN THAT POLICY WAS CREATED THIS BOARD FUNCTIONED DIFFERENTLY THAN IT'S FUNCTIONING TODAY SECON UM THAT SAME POLICY I BELIEVE REQUIRES THAT THE CHAIR IS NOMINATED JUST ONE YEAR IT COULD BE TWO ASSUMING THAT YOU HAVE I THINK EIGHT MEMBERS HAVE PROVEN IT AND JUST WANT TO REMIND YOU THAT THE CURRENT CHAIR WAS CHAIR FOR THREE YEARS. >> NO, JUST ONE NOT JUST TWO FOR THREE. MY ONLY POINT HERE IS THAT'S A POLICY CERTAINLY YOU WANT TO ADHERE TO YOUR POLICY AS MUCH AS POSSIBLE BUT IT DOESN'T MEAN THAT YOU DON'T HAVE SOME FLEXIBILITY.
>> SO IF, UH, CERRATO IS THE NOMINEE FOR CHAIR, THE VICE CHAIR NEEDS TO BE A PUBLIC MEMBER. >> I NOMINATE ISHWAR UH, SECOND ,SHOULD HE BE WILLING TO ACCEPT UH, I THINK I HAVE A LOT OF THINGS TO DO. SO I WOULD SAY IF SENATE HOWEVER DAVID YOU WANT TO IF YOU'RE UP TO IT UH, I DO WANT TO MENTION THE PAY IS THE SAME UH WELL IT SHOULD UH YEAH. THEY SHOULD GO TO THE PERSON WHO HAS THE MOST EXPERIENCE AND THE ONE WITH THE LEAST EXPERIENCE BECAUSE I'M THE LAST ONE TO JOIN THE BOARD SO IT DOESN'T MAKE SENSE TO GO IN MY DIRECTION. THE I WOULD PROBABLY NOMINATE SUNITA OR HOWEVER I'M VERY OPEN TO EITHER ONE OF YOU GUYS DONE A GOOD JOB. I APPRECIATE UH THE KIND WORDS I DON'T THINK I COULD COMMIT RIGHT NOW UH GIVEN MY MY SCHEDULE. BUT I THINK DAVID I THINK YOU HAVE A LOT OF EXPERIENCE IN GENERAL OUTSIDE OF THE BOARD AND YOU MIGHT UH YOU MAY ENJOY THE EXPERIENCE UH WATCHING FRANCO IN ACTION LUCKY YOU DIDN'T SHOW UP TO THE MEETING BECAUSE YOU KNOW HOW THAT WORKS.
I MEAN I DON'T WANT TO BE THE ONE THAT ACCEPTS THIS POSITION BY DEFAULT WHEN EVERYBODY ELSE I MEAN SUNITA I MEAN YOU'RE YOU HAVE MORE EXPERIENCE AND I HAVE MORE TIME ON THE BOARD. SO IF YOU WANT UH, VICE CHAIR POSITION, I AM VERY SUPPORTIVE . UH, I THINK THAT IF IF I TAKE THAT UP I PROBABLY WANT TO GET SOMEBODY ELSE IN THE AUTOGYRO SEAT.
>> I MEAN THE WAY THAT THOSE COMMITTEES HAVE BEEN GOING THAT'S PRETTY TOUGH. >> I AGREE WITH YOU AND I WANTED TO TALK TO YOU AFTER THE BOARD MEETING ANYWAY BUT UM SO MY ONLY POINT WITH THE POLICY WAS I'M NOT SUGGESTING YOU DO THIS BUT IF IF THERE ARE NO PUBLIC MEMBERS WHO DON'T APPEAR SUNITA IS REALLY WILLING TO SERVE AS A VICE CHAIR. I JUST I REALLY WILL. >> I KNOW IT'S A LOT OF WORK I AND I'M SUGGESTING YOU DON'T DO THAT BUT I REALLY WOULD HATE TO LOSE YOU'RE THE CHAIR OF THE COMMITTEE BECAUSE YOU HAVE BEEN SO INVOLVED ON THIS COVERING SITUATION AND WE STILL WORKING THROUGH IT, UH, THAT I WAS HOPING YOU CAN AT LEAST GIVE ME IN THE CHAIR FOR A COUPLE MORE MEETINGS AND THEN MAYBE CHAIR OF THE AUDIT COMMITTEE AND THEN MAYBE AFTER THAT.
BUT OBVIOUSLY I DON'T KNOW YOUR HOW MUCH WORK YOU HAVE OUTSIDE THE BOARD. SO, UH, YOU KNOW, I WON'T PUT YOU IN THAT POSITION BUT I APPRECIATE YOUR WILLINGNESS TO SERVE AS A VICE CHAIR. I DON'T KNOW HOW IT WOULD YOU STEP INTO DAVE WOULD YOU STEP INTO A CHAIR OF AUDIT OF UH I WITH YOUR BEING ASSEMBLED I MEAN IT'S NOT UH YEAH I HAVE THAT I WOULD HAVE THE CAPACITY FOR THAT UH LIKELY AND SO I COULD DO THAT IF IF DAVE WANTS TO SWIM UP EITHER WAY. >> YEAH I'M OPEN TO EITHER WAY UM I'LL SIT ON A FEW BOARDS MYSELF BUT UM YEAH I COULD PROBABLY TAKE THAT ON IF YOU HAVE MORE EXPERIENCE UH ON THE BOARD HERE THAN I DO I'M I'M SECOND JUNIOR TO DAVE TO THE LEFT SO I SEE HOW IT HAS MORE ISSUES THAN I DO BUT I A FEW MONTHS YEAH. >> SO I WOULD SAY IT SOUNDS LIKE SO I MEAN SO IT'S GOING ON SEATTLE MARCH.
>> YEAH AFTER THAT I COULD IN A TRANSITION WITH YOU. >> YES THE ANSWER WOULD BE YES. SO THE AUDIT COMMITTEE KNOWS THAT ANSWERS OUR VICE CHAIR QUESTION. >> NO NO NO THAT WAS FOR THE SHE WAS ASKING HOWEVER FOR THE AUDIT COMMITTEE SO SHE CAN BECOME THE ISSUE. >> IS THAT EXACTLY I COMMITTABLE. >> YEAH. AND I APPRECIATE THE WILLINGNESS. THANK YOU SO VERY MUCH, HOWARD AND I WANT TO TRADE AND THAT'S KIND OF MADE ME BACK TO THE AUDIT COMMITTEE. >> YEAH. I'M NOT EVEN FOLLOWING YOU A MORE OK SO THE NOMINATIONS WILL BE FOR YOUR TOMORROW TO CONTINUE TO BE CHAIR AND THEN FOR SUNITA TO BE VICE CHAIR I'M GOING TO PUT DOWN FOR FUTURE AGENDA ITEMS THE UM COMMITTEE ASSIGNMENTS. >> SO THANK YOU DO FOR THE NOMINATION AND I THINK THAT'S CORRECT. UH, OK. SOMEONE WOULD VOTE ON THIS NO. THERE'S NO VOTE NECESSARY FOR THE NOMINATION NOMINATION SO I CAN'T STAND NO NOT NOW. UH, DOWNHILL SLIDE. ALL RIGHT. RETIREMENT'S DO FINE. DO YOU REALLY WANT YES WE DO YES.
>> THINK WHAT GOES ON HERE BECAUSE IT'S EASIER TO READ OK, SERVICE RETIREMENTS KIM M BERNSTEN FIRE ENGINEER FIRED DEPARTMENT EFFECTIVE OCTOBER 13TH TWENTY TWENTY THREE TWENTY ONE POINT ZERO ONE YEARS OF SERVICE. BRETT MCDONNEL FIRE ENGINEER FIRE DEPARTMENT EFFECTIVE DECEMBER 7TH TWENTY TWENTY THREE TWENTY NINE YEARS OF SERVICE WAS PROSODY >> EDWARD RAMOS' POLICE OFFICER POLICE DEPARTMENT EFFECTIVE DECEMBER 8TH TWENTY TWENTY THREE TWENTY FIVE POINT ZERO NINE YEARS OF SERVICE JOHN D. CHAHINE POLICE OFFICER POLICE DEPARTMENT EFFECTIVE DECEMBER 9TH TWENTY TWENTY THREE TWENTY SEVEN POINT TWENTY SIX YEARS OF SERVICE DONALD TAURUS FIRE CAPTAIN FIRE DEPARTMENT VICTOR EFFECTIVE DECEMBER SEVEN TWENTY TWENTY THREE TWENTY SEVEN POINT EIGHT SIX YEARS OF SERVICE WITH RECIPROCITY AND THEN WE DO DESERVE IT FOR US AND SEPARATELY RIGHT CORRECT. YEAH OK OBTAIN A MOTION FOR THE MOTION SANTO'S SECOND CAR NEAR SECOND GUARD NEAR ALL THOSE IN FAVOR I OPPOSED OK OK DEFER VESTED UH DON MARCHETTI POLICE OFFICER POLICE DEPARTMENT EFFECTIVE NOVEMBER TWENTY THIRD TWENTY TWENTY THREE TWENTY POINT ONE SIX YEARS OF SERVICE WITH RECIPROCITY AND ALL THOSE ALL UP IF ANYONE WANTS TO SAY ANYTHING ANDREW.
>> YEAH I WANT TO THANK YOU THE GENTLEMAN THAT ARE RETIRING FROM THE FIRE DEPARTMENT. THANK YOU FOR YOUR SERVICE. I'VE WORKED WITH ALL OF THEM. THEY'RE ALL GREAT PEOPLE AND I HOPE YOU HAVE A LONG AND PROSPEROUS RETIREMENT. >> YEAH, I'LL SAY THE SAME FOR THE POLICE OFFICERS I KNOW BOTH PERSONALLY AS A MATTER OF FACT ,JOHN SHAHEEN WAS THE BEST MAN IN MY WEDDING. WE GOT HIRED TOGETHER. UM, HE'S LEAVING A YEAR BEFORE I AM SO I'M A LITTLE JEALOUS AND HE'S GOING TO HAVE TO BUY ME THE BEERS FROM HERE ON OUT SO OK, THANK YOU. >> DEATH AND SURVIVORSHIP NOTIFICATIONS NOTIFICATION OF THE DEATH OF EDWARD S. MORINI POLICE OFFICER RETIRED JANUARY 12TH, 2008 DIED SEPTEMBER SIX, 2003. >> SURVIVORSHIP BENEFITS TO NANCY MORENAE SPOUSE NOTIFICATION OF DEATH DEATH WARRANTS LAURENCE J ORDER POLICE OFFICER RETIRED MARCH 7TH NINETEEN EIGHTY FIVE DIED JULY TWENTY SEVEN TWENTY TWENTY THREE NO SURVIVORSHIP BENEFITS NOTIFICATION OF THE DEATH OF TERRENCE P.
RYAN FIRE CAPTAIN RETIRED MARCH SIX, 1997 DIED AUGUST 21ST TWENTY TWENTY THREE SURVIVORSHIP BENEFITS TO IRENE RYAN SPOUSE NOTIFICATION OF THE DEATH OF THE STAVO VEGA POLICE OFFICER RETIRED JULY TWENTY NINE 2013 DIED OCTOBER 10TH TWENTY TWENTY THREE NO SURVIVORSHIP BENEFITS AND THEN HAVE ANOTHER THING HERE WHICH IS JOB TITLE CORRECTION FOR DECEASED RETIREE ROY ILZE FROM FIRE CAPTAIN TO POLICE LIEUTENANT FROM THE OCTOBER 5TH TWENTY TWENTY THREE BOARD MEETING WITH CORRECTION AND ON THE MOMENT OF SILENCE WHEN YES THEY GO FIRST AND I'LL BE GLAD TO SAY SOMETHING. >> YEAH I KNOW I KNEW AT MORINI JUST BRIEFLY AND THE OTHER GENTLEMAN UH OBVIOUSLY HAD A VERY LONG UH CAREER AND UH STORIED CAREER AND UH JUST MY HEARTS AND PRAYERS AND THOUGHTS WITH THEIR FAMILY AND FRIENDS.
OH THAT'S SAD THAT THEY ALL HAVE PASSED AND THEY'RE ALL SPECIAL. BUT I WANT TO POINT OUT TERRY RYAN WAS MY FIRST FIRE CAPTAIN NINETY-SIX. HE WAS A KOREAN WAR VETERAN. HE DIED ABOUT NINETY YEARS OLD AND HE WAS A REAL SPECIAL PERSON AND DEFINITELY MISS HIM IN THE BEST OF HIS FAMILY. OK, THANK YOU. >> SO WE HAVE COMMUNITY MINUTE REPORTS AND RECOMMENDATIONS INVESTMENT COMMITTEE. >> UH, WE'VE HAD NO MEETINGS SINCE THE LAST BOARD MEETINGS. >> OK, SO NOTHING TO REPORT ARE AT RISK. >> YEAH. UM WE ACTUALLY WE'RE MEETING FAIRLY OFTEN UM WE HAD ANOTHER MEETING SINCE THE LAST BOARD MEETING AND UM WE UH WE DISCUSSED A COUPLE OF THE FINDINGS FROM THE AUDIT REPORT INTERNAL AUDIT REPORT FROM ME THE MANAGEMENT'S RESPONSE TO THAT THERE'S A LONG DISCUSSION AND I THINK WE CAME TO A GOOD CONCLUSION ON BOTH OF THOSE UM AND I BELIEVE IT'S THE MODIFIED, UH, RESPONSE AND THE I REMEMBER LOOKING AT IT SORRY UH IS NOT YET IN THIS OK, SO MAYBE THAT'LL BE THE NEXT OK SO UH I'LL JUST SAY THAT UH I THINK THE MEETING WENT WE HAD THREE BIG DISCUSSION ITEMS.
ONE WAS AS I SAID RE DISCUSSING TWO OF THE FINDINGS. THE SECOND WAS ON THE ANNUAL REPORT OF WHICH WE HAVE DEFERRED THE INVESTMENT SECTION OF THE ANNUAL REPORT UNTIL THE NEW AUDIT INVESTMENT FEZZES COMPLETED UH BUT ACCEPTED THE REST OF THE REPORT. I THINK IT'S WHEN DO THEY COME TO THE BOARD FOR THE FINANCIAL STATEMENTS THAT I THIS MEETING AND MEMBERS AND I KNOW YOU'RE TALKING ABOUT. YEAH, THEY CAME TO THE DID THEY COME THE BOARD AFTER THE AUDIT COMMITTEE? >> NO, THEY THEY DON'T COME TO THE BOARD. THEY JUST CONTINUE IT COMMITTED AND VERY COMMITTED TO COME INTO THE BOARD. >> SO I GUESS WE DO HAVE AN ACTION ITEM AROUND THAT. SO THAT WAS THE OTHER BIG DISCUSSION. I DON'T THINK I'VE MISSED ANYTHING ELSE. >> UH DID I AND NOTHING ELSE LIKE UH THE THE ONLY OTHER ONE WAS THE UM THE PROCUREMENT AND CONTRACTING POLICY WITH THE CORTEX. THE THE AUDIT COMMITTEE HAD DECIDED TO ASSIGN THAT TO THE GOVERNANCE COMMITTEE FOR AND FOR THE POLICY ALSO TO BE REVIEWED BY THE GOVERNANCE COMMITTEE BY THE END OF NOVEMBER. THAT'S RIGHT.
SO WE DECIDED THAT THANK YOU UH MEDIC WE DECIDED THAT IT WAS UM IT FIT IN BETTER WITH THE GOVERNANCE COMMITTEE'S RESPONSIBILITI TO TAKE IT ON FROM HERE. >> AND WE ALSO ACCELERATED THE TIMELINE FOR THAT REVIEW TO NOVEMBER UM UH NOT TO FINALIZE IT BUT TO HAVE A GOOD DRAFT IN FRONT OF THE GOVERNMENT'S FIRST READING. >> YEAH, UM AND THAT'S IT FOR ME . >> SO I THINK WE OUGHT TO RECEIVE AND FILE THE MINUTES. I DON'T KNOW FRANCO DOES THAT. >> YES. YEAH JUST RECEIVING PARLIAMENT'S AND I WOULD RECOMMEND DEFERRING ITEM SEVEN POINT TO SEE IN SEVEN POINT TWO D BECAUSE MANAGEMENT HAS NOT UH PROVIDED THEIR UPDATED AMENDED RESPONSE YET WE'LL DEFER THOSE ITEMS THEN THEY DO HAVE TO TAKE ACTION ON SEVEN E DISCUSSION AND ACTION REGARDING COMMUNICATION TO THE BOARD OF ADMINISTRAT OF THE CITY OF SAN JOSE POLICE FIRE RETIREMENT PLAN FROM THE C IS GENI AND WILL CONFIRM THE PLANS EXTERNAL AUDITOR.
YEAH SO THEY PRESENTED TO THE AUDIT COMMITTEE UH A CLEAN REPORT ON THE FINANCIALS. I BELIEVE THIS IS UH THAT'S WHAT IS UP IN FRONT OF THE BOARD. >> I TRAVELED ON JUST THIS WEEK UM THE THEY PRESENTED FINDINGS AND UH I THINK THE REQUEST HERE IS FOR YOUR BOARD TO UH TAKE ACTION UM THE COMMUNICATION TO THE BOARD ON THE AUDIT REPORT AND THEIR MANAGEMENT LETTER AND ALSO APPROVE THE POLICE AND FIRE RETIREMENT PLAN AND A COMPREHENSIVE FINANCE REPORT THERE WILL BE SEVEN THEY THEY HAVE A LONG PRESENTATION. THEY UH ACTUALLY ANSWERED QUESTIONS AND YOU A CLEAN OPINION. UH, THERE'S SOME DETAIL WORK THAT THEY'RE FINALIZING BUT UH IN ANY CASE THAT WILL BE AND I BELIEVE THE COMMITTEE IF I'M MISTAKEN IS A MATTER OF COURSE WE NEED TO CORRECT ME .
UH, THE COMMITTEE DID I SAID THEIR PRESENTATION AND AND IS IN A POSITION TO MAKE A RECOMMENDATION TO THE BOARD TO UH TO TAKE ACTION ON THOSE TWO AND THOSE TWO ITEMS. >> YEAH. MINUS THE INVESTMENT SECTION. CORRECT. I DON'T I CAN'T OPEN THE SEVEN TO F THAT THAT EXCLUDES THE INVESTMENT SECTION. IT'S KIND OF HANGING BACK FOR I THINK IF I RECALL FROM THE BOARD I MEAN WE HAD A SLIGHTLY REDUCED VERSION THAT WE WERE GOING TO PRESENT TO THE BOARD AFTER DISCUSSION ON THE UH I THINK IT WAS THE INVESTMENT RETURNS.
>> THAT'S RIGHT. YEAH. SO THE INVESTMENT SECTION IS STILL IN HERE THAT SHOULDN'T BE IN HERE. RIGHT. AND ALSO IT HAS THE BOARD CHAIR A LETTER I WAS THE OTHER BOARD LETTER WAS PULLED. >> RIGHT. SO SO THE THE ATTACHMENT THAT WAS PROVIDED FOR THE UH ITEM FOR F IS INCORRECT IS INCORRECT. >> UH SO I THINK WE WE DID DIRIDON TO CORRECT MAINLY DO YOU IN THE MEETING.
>> YES I'M IN THE MEETING THAT IS THE QUOTE I OFFER AND DREW DID WANT HIS BOARD CHAIR THAT ARE IN THERE EVEN BEFORE THE AUDIT I BELIEVE YOU WERE COPIED ON THE INAUDIBLE. >> YES. AND AS FAR AS THE INVESTMENT SECTION, IF WE ARE GOING TO PULL THAT AFTER UNTIL AFTER THE AUDIT THEN AND YOU WILL PROVIDE A REVISED OPINION LETTER THAT'S GOING TO EXCLUDE THAT SECTION. WHAT THANKS. >> BUT THE AUDIT COMMITTEE HAD VOTED FOR THE RECOMMENDATION TO THE BOARD TO REMOVE THE LETTER FROM DREW. >> SO OK, SO YOU WANT THAT REMOVED EVEN AFTER YOU WANTED IT IN THERE? THAT'S CORRECT. OK, SO WE WILL PULL THAT OUT OF THERE AND THEN WE'LL WE WON'T BE POSTING THE ACTOR UNTIL IT'S COMPLETE. WE ARE ALSO HOPING THAT THIS IS DONE BEFORE THE END OF THE YEAR BECAUSE THE GFA SUBMITTAL IS DUE AT THE END OF THE YEAR TO IN ORDER TO RECEIVE OUR ANNUAL CERTIFICATE OF ACHIEVEMENT. >> BUT WHEN YOU ATTEND THE LAST AUDIT COMMITTEE.
>> CORRECT. I DID WHAT I SAID WAS NOT VERY CLEAR WHICH ACTUALLY WAS GOING TO BE TAKEN TO MAKE SURE THAT WE ALL CLEAR MYSELF, YOU AND THE REST THE UM WHEN WHEN THE BOY IS REFERRING TO UM NOT INCLUDING THE INVESTMENT SECTION UM I I THINK THEY'RE REFERRING TO UM JUST LIKE THE ACT FOUR HAS AN ACTUARIAL SECTION THAT COMES WITH KYRA THIS ONE THAT COMES FROM MIKITA CARET. >> RIGHT. I UNDERSTAND WHY DIDN'T I NOT TO INCLUDE THAT BUT I THINK MRS. JENNY MENTIONED THEY CAN STILL OFFER A CLEAN OPINION JUST THAT THEY'RE ACTUAL LETTER WILL NOT THEN ACTUALLY ADDRESS THAT SECTION BECAUSE THAT WILL NOT BE INCLUDED AT LEAST IN THE MEANTIME IN THE ACT FOUR.
IS THAT WHAT THEY SAID? SO SO I JUST HAVE YES THAT IS CORRECT. BUT I DO HAVE A POINT OF CLARIFICATI THE BACKUP DOCUMENT THAT'S SUBJECT FOR THE BOARD'S APPROVAL TODAY IS THE SAME BACKUP DOCUMENT THAT WAS PRESENTED AT THE JOINT AUDIT COMMITTEE. MY UNDERSTANDING FROM UH, MGO IS THAT THEY WOULD PROVIDE AN UPDATED VERSION FOR THE BOARD TO ADOPT AT OUR NOVEMBER MEETING. HOWEVER, IT SOUNDS LIKE WE NEED TO GET THIS DONE BY THE END OF DECEMBER. IS THERE ROOM FOR US TO DEFER THIS ITEM? ROBERTA AND BENJI FOR US TO HAVE LIKE AN UPDATED VERSION TO ACTUALLY REVIEW AND APPROVE? I THINK SO. >> I JUST HAVE TO AS MANGI UH, NOT DIFFICULT. >> THEY CAN PROVIDE AN UPDATED VERSION UH, TAKING THAT SECTION . >> MM HMM. OKAY. OKAY. YES. I THINK WHAT I REMEMBER IN THE AUDIT COMMITTEE IS THAT ACTUAL WE WE WILL ON THE ACTUAL DECEMBER AFTER THE INVESTMENT SECTION THAT VESTING FEE AUDIT IS COMPLETE AND IS THE INVESTMENT SECTION IS CORRECTED WELL OR SOME DISCLOSURE I'M NOT SURE THAT I CANNOT TELL YOU FOR SURE THAT THE WORK BY MRS.
GENI ON THE INVESTMENT OF FEES AUDIT WILL BE COMPLETED IN TIME FOR THE INVESTMENT SECTION TO BE INCLUDED. DOES THAT MAKE SENSE? BENJY? >> YES. SO IDEALLY THAT WILL BE THE CASE. BUT WE NEED TO BE MINDFUL THAT IF THEY'RE NOT COMPLETED WITH THE WORK WE NEED TO MOVE AHEAD AND APPROVE THE STATEMENTS WITHOUT THE INVESTMENT SECTION . I THINK WHAT YOU'RE SAYING TO MAKE SURE I UNDERSTAND IF THEY FINISH THE AUDIT YOU WANT NO ONE TO REPORT ON THEIR FINDINGS AND NO TO YOU WANT THAT SECTION AS IT SHOULD BE BASIC THAT'S WHAT YOU'RE SAYING FOR THE DECEMBER MEETING? >> UM, NO, I THINK THAT HARVEY PROBABLY REMEMBERS IS THE BEST BUT I THINK TO HARVEY UH RAISE THIS OBJECTION AND OR THE DISCUSSION AND MY RECOLLECTION IS THAT IF THEY WILL BE AT LEAST SOME DISCLOSURE IF WE ARE NOT ABLE TO FINALIZE THE NUMBERS SAYING THAT THESE MIGHT BE REVISED RIGHT.
>> SO I THINK THE ISSUE HERE IS MGO MAY HAVE HAD AN UPDATED ACC AND WE DIDN'T RECEIVE IT IN TIME FOR A POSTING WITH THEIR AGENDA. SO MY RECOMMENDATION TO THE BOARD IS TO DEFER THIS ITEM UNTIL DECEMBER AND ACTUALLY GET THE DOCUMENTS SO WE CAN TAKE A LOOK AT IT BEFORE WE APPROVE. >> YEAH, I READ THE SIMILAR MEETING AT THE DECEMBER MEETING BEFORE THE DEADLINE, CORRECT? >> YES. THERE RESULTS OF IT BY MAY THERE WAS ALSO A DESIRE OR THE MANAGEMENT MANAGEMENT LETTER TO BE SIGNED BY THE CHAIRMAN IN THIS CASE THE CHAIR OF THE BOARD WILL BE FRANK OCADO SIGNING THAT MANAGER THE MANAGEMENT LETTER BUT THAT THE LANGUAGE OF THE CHANGE TO BE LESS PRECISE ABOUT REPRESENTING WHAT THE RETURNS THE ANNUAL RETURNS WERE AND BENCHMARK RETURNS IN THAT SORT THING SINCE THEY ARE AUDITED AND THEY MAY DIFFER SO THAT COVER LETTER NEEDS TO BE REVISED IN A WAY TO MAKE THE REPRESENTATION ACCURATE THAT IT'S AN ESTIMATE A A CERTIFIED NUMBER.
>> RIGHT. SO IT'S ESSENTIALLY WHAT WE NEED IS MGO AND STAFF TO GO BACK TO THE AUDIT COMMITTEE AND BRING FORTH THAT THE REVISED REPORT FOR ADOPTION AND DEFER THIS ITEM. >> I JUST WANT TO MAKE SURE YOU'RE CLEAR MANGIA YOU'RE CLEAR I'M NOT CLEAR WHAT MANAGEMENT LETTER HARVEY'S TALKING ABOUT. HE'S REFERENCING THE BOARD CHAIR. HE SAYS HE'S REFERRING TO THE BOARD CHAIR LETTER BOARD CHAIR LETTER.
WE NEED TO JUST TAKE ANOTHER LOOK AT THAT AND WE'RE A CERTAIN A CERTAIN RETURN NUMBER, FOR EXAMPLE, IS REPRESENTED TO SO MANY BASIS POINTS WE NEED AT LEAST TO SAY THAT THESE THESE ARE ESTIMATED NUMBERS ARE APPROXIMATE NUMBERS AND THEY ARE UNAUDITED. >> OK, ONE MORE THING WE DID WE JUST VOTE ON SEVEN POINT TO E SORRY. NO, WE VOTED WE DEFERRED SEVEN POINT F WE STILL NEED TO TAKE A VOTE ON SEPTEMBER SEVEN POINT TWO IS STILL SAYS DRAFT. I THOUGHT THE IDEA WAS AUDIT COMMITTEE WOULD APPROVE A DRAFT. UH PENDING THE FINALIZATION BEFORE THE BOARD MEETING. THAT WAS MY RECOLLECTION AS WELL. YEAH PEOPLE ARE LOOKING AT ME SO YOU WANT AN ANSWER YOU WANT ME TO? WELL YEAH EITHER EITHER BENJI WANTS TO GO TO THE CITY.
YES. THE WE HAD THE MEETING WITH THE CITY YESTERDAY AFTERNOON ON THE CITY FINANCIALS UM BENJI CAN YOU ADDRESS THE LAST QUESTION PLEASE? >> I THINK NGO WAS GOING TO PROVIDE A FINAL DRAFT WHEN WHEN THE OPINION WAS PROVIDED. WE'RE TRYING TO WRAP THAT UP TODAY. SO IF WE CAN FOR THIS NEXT MONTH AS WELL, THEN WE CAN HAVE A FINAL COPY THERE AS WELL. >> BUT HAS THIS GONE TO THE CITY, THE FINANCE THE AUDITED FINANCIALS? UM, WE HAVEN'T GIVEN THEM FINANCIALS. I MEAN WE'VE GIVEN THEM DRAFTS OF THAT SO THAT WAY THEY CAN EXTRACT THEIR PORTIONS FOR THEIR FUR BUT WE HAVE NOT GIVEN THEM A FINAL COPY, OK, BECAUSE I THOUGHT THERE WAS THIS TIMING MISMATCH THAT THE MONTH THE STATEMENTS NEED TO GO TO THE CITY HAD THIS DISCUSSION AGAIN. >> YES. SO UM, IF I MISS HERE PLEASE CORRECT ME .
UM, THERE IS A DIFFERENCE BETWEEN HAVING THE FINAL VERSION OF THE ACT FOR VERSUS MAKING SURE THAT THE SECTIONS THAT THE CITY NEEDS FOR THEIR STATEMENTS ARE COMPLETED. SO THE SECTIONS RELATED TO THE WORK BY THE CITY FOR THEIR STATEMENTS AS TO SAY PENSION LIABILITY, UH PENSION EXPENSE THAT'S ALL COMPLETED SO THAT WAS PROVIDED TO THE CITY THEY HAVE IT A DRAFT BECAUSE THE REPORT HASN'T BEEN FINALIZED AS YOU CAN TELL. BUT THOSE SECTIONS WERE PROVIDED AND NO NEED. THE UH BENJY'S UM GROUP HAD THE MEETING WITH THE COUNTERPART OF THE CITY BUT YESTERDAY WE MET WITH THE FINANCE DIRECTOR AND THEY ACTUALLY FINALIZED THE DISCUSSION ON THIS CD EXPERT.
SO AS FAR CONCERNING TURN CITY WORK, WE ARE COMPLETE PROVIDING THEM WHAT THEY NEED IS FOR THE FACT THAT ONCE THESE, UH, STATEMENTS ARE FINALIZED AND THEY HAVE FINE UH AFTER ALL THE CHANGES OR REQUIREMENTS ARE COMPLETED, THEN WILL MAKE SURE THAT WE PROVIDE THOSE DOCUMENTS TO THE CITY SO ONCE AGAIN, UM, IF WE DIFFER SEVEN POINT TO E DOES THAT CONFLICT WITH YOUR ABILITY TO PROVIDE THE AUDITED FINANCIALS? >> I UNDERSTAND NOT ASK FOR NO NO NO IT DOES NOT RIGHT BENJI? >> THAT'S CORRECT. WE ARE WORKING TO GET THE OPINION AND THE ORDERS FROM NGO TODAY. SO THAT WAY THE FINANCIAL STATEMENTS SECTION WILL BE FINAL TODAY AND SO IT WON'T AFFECT THE CITY'S ACT FOR OK SO THE FINANCIAL STATE AUDITED FINANCIAL STATEMENTS WILL GO TO THE CITY BUT IT'LL COME TO THE BOARD IN DECEMBER. >> YES SIR. COME TO THE BOARD AFTER IT GOES TO THE CITY. I JUST WANT TO MAKE SURE THAT EVERYBODY'S AWARE OF THAT OK BEFORE YEAH CORRECT ABOUT G SO G THERE'S A BACK UP TO THAT NEGATIVE BRIEFLY SPEAK TO THAT.
THAT'S OK. UH JUST YOU GANAPATI. YES PLEASE. SO UM WHAT WOULD ITEM G CORTEX THAT COME UP WITH A PROPOSED TIMELINE OF UH ADDRESSING OUR CONTRACTING PROCUREMENT ISSUES AND COMING UP WITH THE PROPOSED DRAFT FOR FIRST READING? UM THE THE COMMITTEE DECIDED TO TRUNCATE THAT AND THEY TOOK THE ORAL MOTION TO UH REFER THIS MATTER OVER TO THE GOVERNANCE COMMITTEE AND HAVE THE DRAFT UH PRESENTED TO THE GOVERNANCE COMMITTEE BY THE END OF NOVEMBER FOR A FIRST READING. AND SO THAT'S THE UH, ITEM FOR APPROVAL FOR THE BOARD MOTION TO SO MOVED MOTION BY SUNITA SECOND BY DAVE WILSON FURTHER DISCUSSION ALL THOSE IN FAVOR. >> UH, I OPPOSE OK, THAT'S FINALLY FOR GOVERNANCE. UH, NEXT ARE FOR AUDIT. NEXT IS GOVERNANCE. WE HAVE NOT HAD A MEETING SO THERE'S NOTHING TO REPORT AND THEN UH DISABILITY COMMITTEE MR.
YEAH. >> ANYWAY ON NOVEMBER SIX AT TEN O'CLOCK AT THE RETIREMENT OFFICE WILL BE OUR NEXT DISABILITY COMMITTEE AND WE'LL MISS DREW'S LEADERSHIP THE REST OF THE WORLD UPDATE IT AND I THINK DAVE, YOU'RE GOING TO I'LL BE DOWN OK. >> THANK OH FOR THE RECORD WELL WE'RE NOT HAVING A MEETING ON NOVEMBER SIXTEEN. THE AUDIT COMMITTEE IS CANCELED. THAT'S CORRECT.
YEAH. JOINT PERSONNEL COMMITTEE. ALL RIGHT. SO WE HAVEN'T MET IN A WHILE BUT WE HAVE A MEETING COMING UP AND A LOT OF THINGS TO DISCUSS . >> WE DO NEED ONE ADDITIONAL MEMBER SO YEAH. SO I THINK THE MAITSKI JUST MENTIONED AFTER THEIR LENGTHY DISCUSSION ON THE UH, AD HOC COMMITTEE THAT SHE TOOK NOTES AND ONE OF THE ISSUES THAT WE'RE GOING TO BRING BACK FOR A BROAD DISCUSSION AND THE NEXT MEETING IS THE COMMITTEE ASSIGNMENTS. THAT'S RIGHT. SO WE WILL MAKE SURE BUT UH, WE NEED IT FOR WEEK. >> IT'S BEEN HE IS SOMETHING WE HAVE TO BE THERE. YEAH. YEAH. THE CHAIR HAS TO BE PART OF THIS BUT HE HE'S THE CHAIR SO INNOCENT AS HE IS UM NOW DESIGNATED SIDBURY THE CHAIR ALREADY IT'S BY AUTOMATIC YEAH.
BECAUSE YEAH SO HE'S NOW THE PERSON UH TO ATTEND THE JOINT SELECT COMMITTEE. OK YOU'RE DOING GREAT. OK THAT'S IT. ALL RIGHT. >> PROPOSED AGENDA ITEMS ANY PUBLIC COMMENT HEARING NONE.Read More
what income does it take to be in the top one percent of all retirees you'd think that'd be a relatively simple project to research turns out it wasn't so stick around and benefit from the work that I did to uncover these hard to find numbers let's go for a walk and talk about it and you know the first thing I want to observe is that most of us probably would not recognize could not tell by the lifestyle folks that are in the top 10 percent of all retiree income when I get to the numbers I I think you'll you'll say okay I think I would be able to recognize people that are in the top one percent I'll give you a hint it's a it's a much bigger number than than I thought it was going to be okay and and so why is that you know why wouldn't we recognize uh the folks that are in the top 10 percent and it's because like a lot of things in life you know if you look at Millionaires and millionaires lifestyle you know 70 of millionaires in America are self-made made and and most of them most of us uh got there by being you know uh careful with our money and and and being good Savers is as much as uh being fortunate and and receiving a good salary along the way okay so I'm going to start off with what these numbers look like for all Americans and this is from a large data set they say it's the largest population data set uh in the world and the organization is called ipums and this is for all Americans not just retirees so to be in the top well first let's start off with median and and this is household this is household income the median household income uh in the United States for for everybody all ages is is seventy thousand dollars to be in the top 25 you've got to make about a hundred and thirty thousand dollars to be in the top 10 you're making a little over two hundred thousand dollars that the household income a little over two hundred thousand it's two hundred and twelve thousand and to be in the top one percent you're making over five hundred thousand dollars a year now um and the number is five hundred and seventy thousand what was interesting is each of those groups from um 2021 to 2022 so this is a data set uh that they released the results of at the end of 2022.
each of those groups got a raise between 2021 and 2022. unfortunately from the median and Below on an inflation adjusted basis folks that are at the median below uh are actually making less on an inflation-adjusted basis folks that are above the median are making more in 2022 and we've heard this play out in the press okay so so those are the income levels now let's talk about savings and there's a really interesting point I wanna I wanna share with you here okay to be in the um to be in the top one percent of Savers in the United States this is the top one percent if you're between 65 and 69 75 and 79 or over 80.
it's to be in the top one percent you've got to have 2.7 million dollars in what's called net worth and net worth is just take all of your assets all of your savings accounts the value if you own a house the value of your house and subtract from it the the the debt that you have on that essentially so you just take all of your assets and you subtract all your liabilities your car alone your your mortgage your credit card debt hopefully you don't have too many of the latter two uh and that's your net worth so uh if you have a net worth of 2.7 million dollars a household net worth uh in the United States you're in the top one percent what I want to point out is you know if you look at the income boy that income is really staggering right I mean the top one percent of income is 570 000 or higher and you know some people will say well you know that number seemed a little low I was expecting that top one percent income to be higher and I I agree but that's like the last person that made it into the top one percent so there's plenty of people in that category that are making a lot more money but think about this you know the the lowest income in the top one percent is almost six hundred thousand dollars right it's five hundred and seventy thousand dollars yet to be the top one percent in savings you just need two point seven million dollars or more um and what that tells me is you know as a society as a country it's no surprise we're not saving enough money and so um it's not enough to make a great salary you've got to be able to to save it but to me that was just staggering that you know essentially that top one percent you know if they were the Savers they essentially have saved um what five years worth of income uh and most of us could not retire if we had just saved five years worth of income right so that just shows just the the importance of living below your means and and saving as much as you can okay let's keep going now I'm going to break it out by decile and again this is household this is according to the Congressional research service so the the lower quintile so there's five groups the lower one-fifth the lower 20 percent of Americans are making under twenty two thousand dollars a year then the next group up from that are making you know between that twenty two thousand and forty thousand the next group up to that is is making between forty thousand and sixty five thousand um so you can see that you know eighty percent of Americans households are making less than sixty five thousand dollars a year now I haven't got to retirement that's coming up here really soon um let me get to the top quintile the top quintile households in America are a little over a hundred and ten thousand dollars let's call it a hundred and eleven thousand dollars okay so now let's get to what I finally was able to find out so I've shared a lot of info information here and I think many of you are listening to this this uh these numbers and saying you know what I'm doing okay you know it's hard to get that high high salary but if you're saving and if if you're uh spending less than you earn if you're saving that and then importantly if you're investing that remember it's not enough to just save you have to invest it you have to get compounding working for you so a lot of you I think are looking at the at least the savings number and saying yeah we're doing okay we're doing okay and I hope you are I hope you are okay so now getting on to the uh uh the the top income in retirement uh and before I get there if you're enjoying this video take a quick second and hit the like button it really does help the algorithm uh find other people that this this video uh and my videos can help okay so um I'm gonna break this out the top 10 percent the top five percent and the top one percent so people 65 to 69.
Now this is people that are working and not working top ten percent is two hundred thousand top five percent is two hundred and sixty thousand top one percent is essentially one million dollars okay so that's 65 to 69 and now for people 70 to 74 numbers come down a little bit top 10 percent is a hundred and seventy thousand dollars top five percent uh is 260. is that right yeah 265 000 and and the last number is a million dollars so retirees to be in the top one percent of all people 65 and older you need to be making a million dollars a year just to put that in perspective that rule of 25. if that's what the uh if that's what the income is then they had they'd have to have 25 million dollars in savings by the the rule of four percent I hope you found this video helpful if you did I know you're going to like this video up here that talks about average income for retirees in America in this video down here that talks about five reasons to retire as soon as you can thanks for watching bye byeRead More
In this video I'm going to show you three
things, what the average retirement savings is for a 60-year-old if you're comparing that
60-year-old against a population of savers, I'm going to show you that same number if
you add in the-non savers in this country, and I'm also going to show you what you
should have at 60 years old to retire in the same lifestyle that you're living
right now. Coming up next on Holy Schmidt. Holy Schmidt. So you're 60 years old, five to seven years
out from retirement, maybe a little bit more because of the pandemic that we're all in right
now and you want to know where you should be. Well, that's a very good question. And it's a
very complicated question because the pool of 60-year-olds spans the gamut from those that have
saved virtually every penny they've made up until this point in their life to those that have had
massive financial obligations, are deep in debt, and don't have a dime and everything in between.
So let's talk about each one of these categories. First, let's talk about the average retirement
savings for a 60-year-old when you're comparing that 60-year-old amongst a group of savers.
This number comes directly from the Fidelity 401(k) balances and it's quite accurate, it's
a good representation of where folks are.
Now, I want to point out two things. First, the
difference between average and median. Let's say you have five different 60-year-olds
and in their 401(k) one had $700,000, one had $100,000, the next one had $61,450, number
four had $45,000 and number five had $17,550. This totals $924,000 amongst those five 401(k)
participants. And that gives an average balance of $195,500. Now, even though I'm showing
you five balances here I could have easily have shown you 55,000 or 5 million and it
would have looked very similar to this. The average balance for a
60-year-old in their 401(k) is 195,500 and the median balance is 61,450. So
let's write these down. Average, 195.5K, median, 61,450. There are many, many problems with this
information. If you went to fidelity.com and you got this information, and that's where it
came from, most people watching this video would just call it a day. They'd say, "There's
no chance I'm going to live well in retirement." That's because retirement funds like Fidelity,
Vanguard, et cetera, have a very strong interest in you depositing more into your account, which
is of course good for you, but it's also good for them.
So let's take this information, I'm
just going to tell you what it actually means. The average balance of $195,500 is comprised of
a few, very, very large balances at the top. The flip side is this right here, 81% of Americans
have less than $5,000 in savings. The problem is this number right here, the $700,000, we'll call
those the trust fund and super saver 60-year olds. Some didn't have the same bills that you might've
had. Others lived very spartan and saved more than most. , Maybe they lived at home until they were
50, who knows? But they were able to sock away a lot of money but they don't represent the masses,
but they do skew the number of the average way up. This number, the median is the number that's more
important here because this is the more accurate representation of where you probably should
be if your average is $61,450 in your 401(k). Now, what happens if you overlay this population
right here? 81% of Americans have less than $5,000 in their 401(k), 81%. So that brings these
numbers way down, in fact, the actual numbers when you factor in the non-savers are
an average of $39,191 and a median of $15,725.
81% of the population has almost nothing.
When you add that in 39,191 is the average and the median is 15,725. The question is, what should
you have? Well, they'll tell you it's 8X, 8X your current salary. So if you make
$50,000 a year you should have $400,000. And before you shut the video off and pretend like
you didn't turn it on, let's talk about this. This assumes two things. One, it assumes that you
get a rate of return of six and half percent while you're working and 5% after, but more
importantly it assumes that you have the same exact expenses when you retire and therefore need
the same exact income that you're making today. The fact of the matter is when you retire you
won't have an endless mortgage that you need to pay off, you won't have college education
for your kids.
You may have already paid for your child's wedding. You might have already
taken the funds that you needed to set aside to care for an elderly parent or a relative in
need and put those aside and dealt with that. So at 65 years old a lot of your expenses that
you are paying for right now may or may not exist. Certainly by the time you get to 70, 75, 80,
those expenses are going to drop way down. So, while they say you should have 8X for your
savings in order to achieve the same income that you have now in retirement at six and a half
percent, I actually think for many people the numbers are about half that, as little
as 4X. So don't worry if you don't have 8X, you can't change the past. Don't even worry if
you don't have 4X, if you don't have 195 thousand, or even 15 thousand because there are
things you can do now and even in retirement to help your income go up or expenses go down.
We'll talk about those in an upcoming video.
If you like this video, please give it a thumbs
up so that other people can find it as well. Also don't forget to click subscribe and notifications
down below and that will alert you the next time I post a video, I try to post them twice a
week. This is Jeff Schmidt, thanks for watching..
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