►
Description
San José Federated City Employees' Retirement Board Retreat
View Agenda at https://sjrs.legistar.com/View.ashx?M=A&ID=712755&GUID=9954909B-84C2-4C8A-BD63-740D27F5FB35
A
I
like
to
call
to
order
please
our
September
meeting,
which
is
a
study
session
in
lieu
of
our
federated
Retirement
Board
in
the
healthcare
trust
meeting.
So
we'll
just
kick
it
off.
We
have
under
orders
of
the
day,
we're
just
gonna
follow
the
order.
That's
in
the
agenda
we've
lots
of
presentations
lots
of
discussions,
so
the
point
here
is
our
intent,
really
is
to
have
a
great
discussion.
A
So
if
you
just
raise
your
hand,
come
on
up
and
announce
yourself
into
the
microphone
who
you
are
and
what
your
question
or
comment
is
and
we'll
get
going
from
there.
So
first
up
discussion
on
the
roadmap.
Strategic
planning
for
tier
1
tier
2,
including
the
development
of
asset
management
options,
mr.
hallmark,
is
that
you
I.
B
Think
that
is
good
morning.
Everyone
I'm
bill,
hallmark
and
with
me,
are
Jacquie
King
and
Stephen
Hastings,
and
so
we're
gonna
work
through
this
PowerPoint
to
go
through
a
variety
of
topics.
I
would
encourage
you
to
stop
us
at
any
point
and
engage
in
a
discussion
as
we
move
through.
If,
if
we
have
a
slide
that
deals
with
your
question,
I
may
ask
to
hold
the
question
until
we
get
there
but
feel
free
to
ask
questions
as
we
go
along.
So
let's
go
ahead.
A
Everybody
again
about
is
make
sure
you're
speaking
into
the
microphone
if
you're.
If
you
want
to
be
heard,
speaking
of
the
microphone,
you
don't
speak
of
mine
from
playing
not
to
be
heard
so
nice
and
loud.
So
everybody
can
hear
you
and
that
way
the
people
in
the
back
who
are
listening,
that
people
are
watching.
So
thanks.
B
Okay,
so
the
the
main
focus
of
our
presentation
is
talking
about
the
differences
between
tears,
one
and
two
and
how
they
should
be
managed
going
forward.
They're
currently
managed
very
similarly
if
they
have
the
same
investments
same
discount
rate.
We
have
some
different
assumptions
and
different
amortization
periods,
but
for
the
most
part,
they're
managed
the
same
way.
The
dynamics
of
the
two
tiers
are
very
different,
I
tier
one.
B
The
key
factor
is
it's
a
very
large
unfunded
liability
and
paying,
for
that
is
a
strain
on
the
city's
resources,
and
it's
probably
it's
predominantly
borne
by
the
city.
The
members
pay
a
portion
of
the
normal
cost,
but
any
of
the
gains
and
losses
get
paid
by
the
city
tier
two.
However,
the
members
pay
half
of
any
unfunded
liability
that
develops
as
well
as
half
of
the
cost
of
their
ongoing
benefits.
B
So
if
a
large
unfunded
liability
develops
that
it's
going
to
put
burden
on
the
member
contributions,
as
well
as
on
the
city
contributions,
so
the
really
the
question
is:
should
these
two
tiers
with
those
different
sources
to
pay
for
any
gains
and
losses,
be
managed
differently,
either
starting
right
now
or
starting
at
some
point
in
the
future?
Should
there
be
different
investment
strategy?
Should
we
work
through
different
contribution
methodologies
and
we've
done
some
on
the
contribution
side
with
the
different
amortization
periods,
but
it
really
wanted
to
go
a
little
deeper
on
some
of
those
issues.
B
B
To
get
there,
we're
gonna
start
by
giving
you
some
background
on
where
we
are
both
for
the
federated
system
and
the
police
and
fire
system
and
how
we
got
here
and
what
we've
learned
about
how
and
why
we
got
here
and
how
that
might
influence.
How
we
manage
things
going
forward,
then
we're
going
to
get
into
more
details
about
the
different
tiers
and
the
comparisons
and
really
tier
one
has
been
our
immediate
concern,
because
we
need
large
contributions
to
restore
funded
levels,
and
that
has
a
significant
impact
on
the
city's
budget.
B
The
Tier
two
dynamics
suggest
that
we
might
want
to
get
more
conservative,
at
least
when
the
plan
matures
and
there's
some
volatility
in
those
contribution
rates.
That
would
affect
member
contributions,
but
that's
not
going
to
happen
for
a
while
and
so
we'll
go
through
those
dynamics.
I
think
the
the
general
options
we're
going
to
present-
and
this
is
we're
not
asking
for
decisions
today,
but
kind
of
a
sense
of
the
board
of
which
general
approach
we
should
be
pursuing
on
with
respect
to
tier
two.
B
B
C
As
bill
mentioned,
we're
gonna
do
a
bit
of
a
comparison
between
the
police
and
fire
and
the
federated
plan.
So
this
slide
shows,
if
you
look
at
it,
it's
kind
of,
if
you
think,
of
the
the
systems
as
a
as
a
tank
and
at
the
top,
you
have
your
contributions
and
your
investment
returns
coming
into
the
plan
and
at
the
bottom
you
have
your
administrative
expenses
and
your
benefits
coming
out
and
then
the
actual
tank
themselves.
C
The
full
rectangle
would
be
the
liability
of
each
plan,
and
then
you
split
it
out
by
how
much
is
covered
by
your
ass,
your
current
assets
and
how
much
is
unfunded,
which
is
unfunded,
accrued
liability,
which
is
the
top
grade
section
of
it.
So
as
a
comparison
you
can
see,
and
in
their
proportional
to
each
other,
in
that
the
police
and
fire
of
a
higher
liability
than
federated
with
those
have
much
higher
assets
and
a
lower
proportion
is
unfunded
compared
to
the
federated.
C
This
is
from
our
last
valuation
and
it's
a
comparison
of
the
total
contributions
for
the
current
fiscal
year.
That's
going
on,
you
can
see
also
it's
proportional
in
that
the
total
bar
is
proportional
to
the
total
contributions
being
paid,
but
it
split
out
by
the
different
portions
of
the
contributions.
The
bottom
is
contributions
being
made
by
the
members
themselves.
C
Then
the
next
one
is
the
normal
cost,
and
you
can
see
that
please
a
fire
of
a
higher
normal
cost,
but
then
the
next
one
is
much
lower
for
them.
Federated
has
much
higher
interest
on
the
UL
that
you're
paying
that's,
because
you
have
that
higher
UAL
and
at
the
very
top
is
of
the
UAL
principle
that
you're
paying
down.
So
once
again,
that's
that's
small
of
a
federated
compared
to
police
and
fire.
C
This
chart
shows
the
funded
status
of
the
plans,
so
one
again,
the
bars
are
proportional
in
that
the
total
height
of
the
bar
is
the
total
liabilities
of
the
plan
and
the
green
dot
in
the
middle.
That
represents
your
market
value
of
assets.
So
you
can
see
here,
police
and
fire.
They
are
74%
funded
as
of
the
last
valuation
date
and
federated
was
50%
funded.
C
One
thing
to
note
here
is
that
the
liability
is
broken
out
by
the
different
portions
for
your
actives,
your
deferred.
They
said
you'll
pay
status
and
your
tier
two,
although
it
looks
like
there's
only
Tier
one
here.
If
you
look
at
the
very
top
there's
a
very
light
pink
bar,
and
that's
your
tier
two,
so
it
is
there
it's
just.
This
graph
is
just
showing
how
proportionally
it's
a
much
smaller
proportion
of
the
liabilities.
At
this
point,
I.
B
Think
I'd
also
note
that
both
plans
have
a
significant
portion
of
the
liability
is
for
people
who
are
currently
receiving
benefits.
So
I,
don't
remember
the
percentages,
but
it's
somewhere
around.
Two-Thirds
of
the
liability
is
for
people
already
receiving
benefits,
and
so
that
presents
a
bit
of
a
challenge,
because
that
means
that
the
assets
and
the
liabilities
are
very
large
compared
to
the
size
of
the
active
population
and
their
payroll
and
our
contributions
to
fund
a
plan
are
driven
by
their
payroll.
C
And
I
think
most
of
you
have
you
seen
before.
We
do
use
it
in
our
valuation,
but
it
shows
the
historical
changes
in
the
unfunded
accrued
liability
and
what
it's
showing
is
that
it's
actually
oh-
and
this
is
just
what
federated
sorry
this
isn't.
This
isn't
showing
for
police
and
firing.
I
was
switching
to
some
historical
folk,
just
federated.
So
since
2001
you
can
see
that
the
UAL
has
increased
from
about
12
million
for
nine
billion,
and
if
you
look
at
the
each
color
represents
a
different
reason
for
that
particular
gain
or
loss.
C
You
can
see
the
biggest
reasons
of
a
time
the
the
orange
bar
with
the
yellow
bar
is
your
gains
and
losses
on
your
investment
returns
and
at
the
top
you're
gonna
have
a
lost
bottom.
It's
again,
so
you
can
see.
You've
had
significant
losses
with
investment
returns
and
that's
added
to
the
the
unfunded
liability
and
then
another
big
portion
is
the
Assumption
changes
which
are
mostly
due
to
the
board
lowering
the
discount
rate
over
time
and
periodically.
B
So
I'd
also
notice,
there's
more
than
just
the
discount
rate
that
changed
and
in
particular
we
had
some
consistent
liability
losses
from
2001
through
2009,
and
then
we
made
some
significant
changes
in
assumptions
both
reflecting
mortality
refund
rates
and
some
other
assumptions
that
were
relatively
aggressive
before
that.
After
that,
on
the
liability
side,
it's
been
much
closer
to
to
the
actual
we've
had
some
gains
when
there
were
lower
salary
increases
and
then
losses
when
those
were
made
up.
B
But
on
balance
we've
been
much
closer,
so
that's
part
of
those
assumption
changes
is,
is
correcting
that
past
dynamic.
The
other
thing
I'd
note
is
those
small
red
slices
for
contributions.
Those
are
contributions
that
are
less
than
the
tread
water
rate
and
and
so,
if
you
don't
contribute
the
tread
water,
the
normal
cost,
plus
the
interest
on
the
unfunded
liability,
you're
expected
to
build
more
UAL
and
historically,
this
plan
had
used
an
amortization
method
that
never
paid
normal
cost
plus
interest.
B
So
there
was
always
a
piece
going
in
the
only
exception
being
when
payroll
grew
so
much
that
it,
it
accidentally
contributed
more,
and
so
we've
been
working
really
the
last
ten
years
to
whittle
that
down
and
have
just
crossed
that
line
to
where
we're
paying
more
than
the
normal
cost
plus
interest.
So
I
think
those
are
key
pieces
that
we
can
control.
C
This
slide
is
showing
is
the
difference
really
between
the
current
expected
return,
your
discount
rate
and
an
interest
rate,
which
is
usually
the
ten-year
Treasury
rate,
and
what
you
can
see
is
the
difference
between
them
is
the
the
risk
premium
that
the
plan
is
taking
on
and,
as
you
can
see,
since
1985,
the
implied
risk
premium
was
negative
versus.
As
of
now
it's
grown
to
about
four
point:
six:
nine
percent.
So
it's
really
just
the
extra
risk
you're
taking
on
the
assumed
return,
you're
just
gonna
grade
compared
to
the
risk-free
rate.
That's
out
there.
A
Before
you
skip
to
the
next
slide,
I'd
like
you
to
dig
into
this
just
a
little
bit
more.
We
have
mostly
because
we
have
a
lot
more
people
paying
attention
today
than
in
typical
slides
and
so
that
this
is
something
that
tends
to
be
pretty
confusing
and
it
is
hard
for
people
to
soak
in,
and
so,
if
you
can
even
take
another
whack
at
describing
it
to
be
great
yeah.
B
So
so
this
is
actually
a
critical
piece
that
has
affected
all
pension
plans
across
the
country
and
we're
showing
that.
But
what's
happened
with
this
plan,
but
when,
when
the
yield
on
the
10-year
Treasury
is
6.2
percent
like
in
1995,
you
can
assume
an
eight
and
a
quarter.
Percent
return
and
you'll
only
have
to
beat
the
yield
on
the
10-year
Treasury
by
two
percent
and
that's
much
easier
than
today.
B
B
Nobody
has
that
kind
of
fixed
income
allocation
anymore
because
you
can't
get
any
yield
out
of
it.
And
so,
if
you
follow
the
trend,
you
see
a
drop
in
the
fixed
income
allocations
and
growth
in
in
equity
markets
and
then
you'll
see
a
shift
to
other
alternative
classes
as
well,
and
so
every
plans
done
it
a
little
bit
differently.
But
the
broad
outline
is
that,
with
the
lower
interest-rate
environment,
we've
had
to
take
on
more
risk
to
try
and
achieve
a
return.
C
C
So
the
contribution
rate
has
been
increasing
over
the
last
few
years,
but
going
forward
it's
expected
to
be
more
stable
and
then,
hopefully,
eventually
we
can
get
it
to
decreasing
as
a
plan
becomes
more
funded,
but
on
the
dollar
amount.
Obviously,
the
contribution
carries
on
increasing
and
that's
just
as
payroll
increases
and
the
plan
grows
in
size.
D
Can
you
explain
what
you
mean
by
threat
water
I
know
bill
made
a
quick
statement
as
to
what
he
was
referring
to,
but
I'm
not
clearly
I'm,
not
sure
that
to
the
average
person
they
would
understand
what
treading
water
means,
and
so,
if
you
can
elaborate
any
more
on
there,
so
that
it's
understood
that
we
I
think
that'd
be
helpful.
Yeah.
C
Going
back
to
this
slide,
you
can
see
that
your
actual
contribution
is
broken
down
into
a
few
different
pieces.
So
the
bottom
of
your
main
contribution,
the
top
three
combined
is
your
city
contribution
and
the
different
portions
of
it
is
you?
Have
your
the
portion
of
the
contribution?
Is
a
portion
that's
attributable
to
the
normal
cost,
which
is
the
benefits
that
are
gaining
a
clue.
C
So
the
normal
cost
is
a
contribution.
That's
going
to
pay
down
for
the
benefits
that
are
accruing
right
now
and
then
the
rest
of
the
portion
is
related
to
your
unfunded
accrued
liability.
So
you
have
a
portion
where
you
paint
on
the
principle
there
and
find
a
liability,
but
then
you're
also
paying
the
interest
on
the
unfunded
liability.
C
D
Appreciate
just
to
be
clear
and
I
think
we'll
mention
this
before.
Prior
to
this
year,
the
city
contributions
included
the
normal
cost
and
some
interest
on
the
year.
Well,
but
not
the
full
amount
correct
to
actually
decrease
the
UAL,
assuming
everything
else
stayed
the
same,
meaning
that
all
the
assumptions
were
made.
That's
what
you
meant
before
interest
was
paid,
but
in
this
example
the
total
interest
payment
is
137
point
a
but
in
the
past
maybe
they
instead
of
paying
one
thirty
two
point:
seven,
they
were
paying
less
than
that.
D
B
Exactly
so,
the
term
tread
water
is
meant
to
imply
that
that's
the
amount
you
have
to
contribute
so
that
the
UAL
is
expected
to
stay
at
the
same
level.
The
same
dollar
amount.
Okay,
if
you
contribute
less
than
that,
the
UL
is
expected
to
get
larger
and,
and
you
don't
start
reducing
the
UL
until
you
contribute
more
than
that,
and
so
that's
been.
The
process
for
this
plan
is,
is
to
get
above
that
level
so
that
we
are
actually
paying
down
the
UL
doing.
A
More
than
try
to
like
to
provide
a
little
bit
of
clarity,
that's
not
because
the
way
your
wording
it
can
be
confusing.
We
see
the
contribution
rates
at
a
place
that
did
not
have
additional
principal
being
paid.
It's
not
that
the
city
wasn't
paying
it.
It's
we
crach
that
contribution
rates
in
a
way
that
would
get
to
that
point
where
were,
and
so
we
had
to
work
our
way
into
it
overtime
as
opposed
to
in,
and
that's
where
a
lot
of
these
changes
have
been,
as
you
see
year
by
year,
making
these
incremental
changes.
D
B
B
The
idea
behind
that
strategy
originally
was
that
it
gives
you
very
level
contributions,
there's
not
much
volatility
in
your
contributions
and
if
your
gains
and
losses
end
up
offsetting
each
other,
even
though
you're
not
paying
the
interest,
you
have
gains
that
offset
the
losses
and
they
they
balance
out.
That
was
kind
of
the
general
idea
of
that
approach.
A
Something
massive
spike
in
the
2009.
There
was
a
couple
things
that
we
moved
in
2009
and
that
was
one
of
the
largest
chunks
to
go
from
a
rolling
to
a
closed
amortization.
Then
we
started
pulling
in
the
amortization,
shorter
and
then
decreasing
the
discount
rate.
All
these
things
are
what's
making
all
that
purple
happen.
Mr.
Lederman.
F
Excuse
me,
I
was
simply
gonna
say
that
some
people
may
be
more
familiar
with
the
phrase:
negative
amortization,
which
is
essentially
the
same
concept
and
as
a
shorthand.
If
you
all
of
the
things
being
equal.
If
you
amortize
that
debt
over
more
than
16
or
17
years,
you
end
up
in
negative
amortization
and
so
you're,
not
paying
the
full
interest
and
so
you're
adding
interest
to
the
principal
the
debt
each
year
over
16
or
17
year.
Amortization.
So.
B
F
C
D
Just
to
close
the
loop,
as
the
chair
indicated
in
2009,
they
went
to
a
30-year
close.
So
then,
from
that
point
forward,
when
thay
nine
twenty-eight
twenty-nine
twenty-eight.
So
now
this
most
recent
valuation
went
down
to
21
years
and
is
the
one
time
where
we
cross
over
to
pay
a
little
bit
more
than
the
actual
total
in
terms
of
us.
Do
next
will
be
2019
or
so
that
a
MA
will
continue
increasing
everything
else
equal
which
we
know.
Usually
it
doesn't
happen.
C
Slide
focuses
on
the
historical
assets
and
your
liability
and
that's
a
top
chart,
so
the
bars
are
your
liabilities,
the
line
of
your
assets
and
the
percentage
above
that
is
your
funding
ratio,
and
what
you
can
see
is
that,
yes,
your
funding
ratio
decrease
a
little
bit
over
time,
but
now
projected
in
the
future.
Now
that
you
reach
the
trade
water
rate
you're,
it's
expected
you'll
find
the
ratio
expected
to
increase
slowly
over
time
as
you
pay
down
that
you
al
the
bottom,
I've
kind
of
just
corresponds
to
that.
It's
it's
showing
the
bars!
C
C
C
So
what
your
actual
value
of
assets
is
is
just
a
smooth
value
of
your
assets.
So,
as
you
have
investment
gains
and
losses,
you
can
smooth
them
so
a
particular
year
you
smooth
it
over
five
years
and
that
way
it
just
allows
less
volatility
in
the
value
that
you're
using
now
the
funded
ratio
is
using
electorial
value
of
assets
and
for
this
plan
you
have
a
five-year
smoothing,
so
it
smoothes
the
gains
and
losses
over
five
years.
We're.
G
C
B
So
in
general
that
is
a
significant
piece
and
that's
something
you
know.
If
you
look,
the
differences
between
police
and
fire
and
federated
Police
and
Fire
did
contribute
for
the
most
part
more
than
the
tread
water
amount,
and
that's
one
of
the
reasons
that
they're
in
a
better
funded
position
than
federated.
B
We
talked
about
the
declining
interest
rates
on
that
chart
with
the
implied
risk
premium,
and
that
is
a
very
difficult
economic
environment
for
plans
to
navigate,
because
we
we
think
when
interest
rates
go
down,
you
get
good
investment
returns.
You
do,
but
then
the
market
conditions
change
and
it
forces
you
to
change
your
expected
return
going
forward
and
the
additional
investment
returns
you
get
are
not
nearly
as
powerful
as
having
to
change
the
discount
rate
to
stay
at
the
same
level
of
risk.
B
So
that's
a
very
difficult
environment
for
all
pension
plans
to
deal
with,
and
now
that
well
now
that
the
feds
reducing
interest
rates
again,
we're
not
talking
about
potential
increases
as
much,
but
when
there
was
a
discussion
of
potential
increases
in
interest
rates,
that's
actually
something
that
would
kind
of
reverse
that
process,
and
you
would
see
reductions
in
your
assets.
But
then
you
could
either
look
at
reducing
the
risks
in
your
investment
portfolios
or
potentially
getting
higher
returns
going
forward.
So
that
is
something
to
keep
in
mind
and
watch.
B
B
B
If
all
of
our
assumptions
are
met
now,
if
things
turn
out
better
than
we
expect,
then
we
can
get
there
faster,
but
but
it
takes
a
long
time
to
get
these
things
back
after
significant
losses.
I
think
other
plans
also
realize
that
a
hundred
percent
funded
should
not
be
viewed
as
a
ceiling
a
lot
of
times
when
plans
got
above
a
hundred
percent.
B
H
Hello,
everyone
so
we're
on
slide
13.
Now
the
slide
shows
again
the
breakdown
of
contributions
for
fiscal
year
and
2020,
but
we're
looking
at
it
by
tier
now,
so
so
for
next
few
slides.
We
want
to
compare
the
the
tiers
and
you
can
see
on
the
left
side
of
the
Left
chart
that
there's
this
large
sort
of
light,
yellow
piece
which
is
the
city's
portion
of
the
UIL
in
Tier
one,
and
you
know
that
pretty
much
Dwarfs
everything
so
that
that
is
the
based
on
the
based
on
the
amortization
methods.
H
That's
that's
the
amount
of
UAL
being
paid
by
the
city.
Now,
there's
there's
a
piece
underneath
that
is
the
city's
normal
cost
in
the
in
the
darker
yellow
and
then
the
member
normal
cost
in
in
purple,
and
then
we
have
0.1
showing
there
on
the
side
and
that
that's
a
very,
very
small
piece.
That's
about
some
member
UAL!
H
Now
compare
that
to
tier
two.
Where
that
there's
they're
sharing
rough,
you
know
roughly
50/50.
Well,
it
is
50/50
of
the
city,
normal
cost
and
the
member
normal
cost,
and
then
the
the
UAL
is,
you
know
very,
very
small,
0.4
and
again,
there's
there's
a
tiny
member
piece,
but
but
I
guess.
What
we
want
to
show
here
is
that
you
know
that
City
portion
of
the
UIL
is
is
dwarfing
everything
and
on
the
right
side
we
show
the
funded
status
similar
to
some
of
the
charts
from
earlier,
but
but
we're
showing
it
by
tier.
H
So
you
know
on
the
left.
You
have
Tier
one,
and
you
know
we
intentionally
left
left
the
scale
here.
To
show
that
you
know
tier
two
is
just
just
a
tiny,
tiny
portion
there
and
yes,
it's
85
percent
funded,
but
it's
a
very
tiny
portion,
whereas
tier
one
is
percent
funded
and
it
is
the
lion's
share
of
the
liabilities.
C
B
B
H
H
C
J
B
H
So,
on
slide
14,
we
again
look
at
some
projections
by
tear
now
that
on
the
top
slide
or
the
top
chart,
we're
showing
a
projected
payroll
by
tier,
and
you
can
see
that
tier
two
is
well
so
historically,
all
tier
1
tier
two
comes
in
so
now
we're
approaching
50%
of
payroll
under
tier
two.
You
know
that
that
will
be
crossed
in
the
next
couple
of
years,
where
over
half
of
the
the
payroll
will
be
tier
two,
and
you
know
projecting
that
forward.
H
You
can
see
that
the
tier
1
payroll
drops
off
pretty
significantly
fairly
quickly
as
new
hires
come
in
and
people
retire.
But
if
you
look
at
the
bottom
chart
we're
showing
the
projected
actuarial
liability
by
tier,
and
that
shows
that
you
know
that's
a
very
different
picture.
So
it's
it's
almost
entirely
tier
one
and
you
just
start
to
see
tier
two.
You
know
there's
some
emerging
liability
there
and
you
know
even
out
at
twenty
thirty
nine.
You
still
have
you
know
what
more
than
two-thirds
of
the
liability
is
for
tier
one.
A
G
I
A
H
B
B
H
They
correct
a
stable
active
population
and
as
as
Tier
one
employees
retire,
they
are
replaced
by
tier
two
employees
so
on
slide,
15
we're
showing
the
projected
net
cash
flow
by
tier
and
so
net
cash
flow
would
be.
You
know
the
your
contributions
coming
in
versus
your
benefit
payments
and
expenses
going
out
as
one
of
the
early
slides
Jacqui
showed
and
when,
when,
when
those
are
negative,
you
know
it
can
it
can
cause
some
challenges.
H
So
if
we
look
at
the
look
at
this
bite
well
in
first,
let's
look
at
in
total
so
that
the
green,
the
green
line
shows
in
total
that
the
cash
flows
are
negative
and
that's
because
the
Tier
one
tier
one
portion
of
the
plan
is
very
mature.
There
are
a
lot
of
benefits
being
paid
out
and
fewer
active
members.
H
You
know
paying
in
to
support
that,
but
if
we
break
it
into
tier,
they
would
break
it
out
by
tier.
The
tier
two
portion
is
actually
a
positive
cash
flow
because
there
aren't
many
members
that
are
retired
yet
in
under
that
tier
now,
if
we
look
down
below
at
the
benefit
payment,
so
these
these
are
the
payments
being
made
to
retirees
and
I
guess
also
some
returns
a
contribution,
that's
or
thing
you
know
those
have
grown
or
those
were
projected
to
grow.
But
you
don't
see
much
there
under
tier
two.
H
B
H
A
B
So
negative
cash
flow
presents
some
challenges,
but
but
it
is
the
objective
of
a
pension
plan.
We
want
to
put
money
away
now
so
that
we
can
draw
it
out
of
the
pension
plan
later
to
pay
benefits,
and
so
when,
when
you're,
fully
funded,
you'll
have
more
negative
cash
flow
than
when
you're
poorly
funded,
because
when
you're
poorly
funded,
we're
going
to
increase
contributions
to
get
you
better
funded,
and
so
what
you're?
Seeing
there
is
we're
hitting
a
point
in
our
our
payment
plan
that
reduces
the
contribution
so.
A
I
think
you've
made
a
couple
of
comments
bill
that
being
a
negative
cash
flow
scenario,
is
a
challenge
or
an
opportunity
for
challenges,
but
it's
also
the
natural
state
of
a
closed
Tier
one
plan
that
it
would
be
a
negative
cash
flow
I.
Don't
think
you
discuss
what
those
challenges
how
how
they
present
us
I,
don't
think
it's
clearly
gonna
cross.
So.
B
The
well
and
I'm
sure
we'll
get
into
this
on
the
investment
side,
because
the
the
first
challenge
of
negative
cash
flows
is,
you
have
to
have
liquidity
in
your
fund
to
pay
the
cash
flow.
So
when
you
get
when
you
have
a
positive
cash
flow,
your
contributions
are
coming
in
and
use
those
contributions
to
pay
the
benefits.
And
then
you
invest
the
leftover
contributions
here.
It's
the
reverse.
B
A
Kkona
I'm,
a
really
simple
person
simple-minded,
that
is,
that
we
have
our
contributions
that
are
coming
in
from
the
city
are
massive,
but
we
also
have
massive
payments
as
well,
paying
out
our
checks
to
our
retirees.
That's
going
to
be
the
case
in
the
investment
cycle.
If
we
have,
if
it's
hard
to
get
returns
as
less
likely
to
have
this
extra
cash
from
the
returns,
that
would
be
able
to
pay
payments.
That's
the
challenge
right.
So
we're
not
yeah.
A
I
So
it's
the
the
negative
cash
flows
will
become
an
issue
at
some
point
in
the
future.
Right
now
we
do
get
city
contributions
and
we
make
payments
and
it's
about
1%
of
the
plan
and
which
is
why,
in
our
asset
allocation,
we
have
a
name
nice
cash
flow
pocket
that
actually
takes
care
of
five
years
of
projected
cash
flows,
especially
police
and
fire,
and
less
so
it
federated
in
the
next
ten
years,
or
so
there
will
be
significant
outflows
and
that.
J
J
I
D
For
the
average
person
that
means
that
funds
that
are
in
liquid
investments
earn
the
least
return.
Does
the
asset
allocation,
as
as
the
amount
of
funds
needed
to
be
liquid
increases,
then
we
have
less
in
the
bucket
to
seek
investment
in
some
potential
higher
return
investment,
so
I
just
wanted
to
make
that
point.
I'm
presenting
I'm
always
worried
about
when
we
make
explanations
what
the
average
person
is
thinking.
But
of
course,
if
the
market
is
in
a
downturn,
then
obviously
having
the
liquid
may
be
helpful.
C
But
it's
mine
is
because
the
aggregate
plan
and
the
mostly
tier
one,
has
a
such
a
high
negative
cash
flow.
So
the
amassment
asset
allocation
has
to
be
a
certain
amount,
liquidity
into
the
investment
plan
and
then,
if
we
take
tier
two
assets
out
of
this
discussion,
tier
two
doesn't
have
any
negative
cash
flow
to
two
people
as
it,
albeit
small
and
fifty
million
we
may
need
another.
We
may
see
net
growth
for
the
next
twenty
ten
twenty
four
thirty
years.
Do
we
need
to
partake?
C
C
H
All
right
so
moving
on
to
slide
16
again,
we
are
showing
a
break
out
by
tear,
but
here
we're
showing
the
range
of
contribution
amounts
projected
out
into
the
future
and
again
with
the
scale.
You
can
see
that
to
tier
one
has
the
potential
for
very
well
significant
contributions
and
there's
also
some
potential
for
some
significant
upside
and
what
we're
showing
here,
the
different
percentiles
of
returns
right.
So
so
you
know
the
baseline
and
then
the
different
bars
around
that
or
you
know
better
and
lower
or
higher
and
lower
returns.
B
So,
just
to
kind
of
put
a
point
on
that.
If
you
go
all
the
way
out
to
2033
we're
expecting
the
Tier
one
contribution
to
be
a
little
over
two
hundred
million
okay,
that's
the
black
line
on
the
2033,
but
with
the
variation
potential
variation,
just
an
investment
returns,
they
could
be
down
almost
to
zero
or
up
above
300
million.
So
there's
a
huge
range
that
could
come
just
from
investment
returns
on
tier
two,
the
range
from
investment
returns.
It
is
very
small,
it's
less
than
you
know.
B
Less
than
20
million
dollar
variants
due
to
investment
returns
now
tear
to
can
have
more
variability
in
the
contributions,
but
it's
going
to
come
from
having
changes
in
payroll
changes
in
the
number
of
tier
2
members
and
those
sorts
of
things.
But
the
investment
returns
are
not
going
to
drive
a
significant
change
in
tier
2
contribution
amounts
for
the
next.
You
know:
15
20,
30
years
as
tier
2,
is
growing.
H
So
on
on
slide
17,
we
gonna
switch
gears
a
little
bit
and
talk
about
some
of
the
characteristics
of
the
district,
different
tiers
and
we're
starting
with
tier
1.
So
you
know
that
it's.
The
the
first
bullet
point
is
that
it's
50%
funded
and
you
know,
there's
a
declining
active
population.
It
is,
it
is
closed
to
new
members
and
there
are
large
liabilities
and
large
contributions
compared
to
the
city's
budget.
So
you
know
it's
it's
basically
summarizing
what
we've?
What
we've
been
seeing
here?
H
H
Third
bullet
point
avoid
unaffordable
investment
losses.
You
know
as
we
as
we
showed
a
couple
of
slides
back
investments
can
have
it.
You
know
a
very
large
impact
down
the
road
and
then,
as
we
discuss,
maintain
liquidity
to
manage
the
negative
cash
flow
and
then
also
when
the
stunt
funded
status
improves,
consider
reducing
the
risk.
B
So
I
think
these
are
largely
things
we've
talked
about
and
the
board
has
kind
of
followed.
These
general
philosophies
the
last
several
years.
It
at
least
we
would
love
to
get
the
fund
get
a
better
funded
status
faster.
The
question
is
just
how
much
contribution
can
can
the
city
really
afford
to
make
and
what
are
the
implications
of
raising
it
faster
than
but
we've
been
kind
of
moving
along
this
path?
I
think
the.
A
Best
headers
of
the
proposed
objectives-
these
are
objectives
that
we've
been
employing
for
a
number
of
years
and
getting
to
basically
check
the
boxes
on
all
these
we've
certainly
presented
to
the
city
that
concept
in
the
joint
meeting
with
the
Retirement
boards
and
the
City
Council
on
what
the
advantages
of
additional
contributions
I
mean.
The
council
member
Davis
brought
that
up
that
it
could
be
done.
It
have
the
capacity
and
their
budget
as
things
are
coming
along
as
a
concept
of
paying
making
additional
contributions
as
a
way
to
pay
down
that
principal,
more
timely.
So.
J
A
Think
all
that
well
looking
I
would
change
this
there's
a
header.
That's
proposed,
implying
that
they're
not
being
done
now,
but
they're,
certainly
all
being
I
said
all
the
ones
below
it
are
being
done
and
I
think
the
top
bullet
is
something
that's
certainly
being
contemplated
at
the
City
Council
level
and
their
discussions.
Mr.
D
Chair
can
I
ask
a
quick
question.
Can
you
comment
beyond
the
last
bullet
point?
Let
me
tell
you
why
I'm
asking
you
to
do
that.
We
have
maintained
this
message
that
we
are
reducing
risk
with
the
asset
allocation
and
we
have
been
taking
that
approach
for
some
time
now.
But
your
statement
says
here
when
funded
status
improved.
B
So
we've
done
a
lot
of
work
on
what
the
variability
is
of
contributions
do
do
investment
risk
with
where
we
are
currently
there
there's
a
lot
more
volatility
on
that
front
in
the
police
and
fire
plan
in
this
plan,
but
this
plans
50%
funded,
that
involve
volatility
of
contribution
rate
due
to
investment
returns.
If
we
were
a
hundred
percent
funded
it'd
be
twice
the
volatility
right.
So
what
this
is
getting
at
is
whatever
level
you're
at
now
that
you're
comfortable
with
recognize
that
you're
going
to
have
twice
that
volatility.
B
If
you
get
to
a
hundred
percent
funded,
and
so
as
those
come
missions
come
down
you
may
you
could
consider
spending
some
of
those
reductions
and
contributions
by
reducing
risk,
as
opposed
to
just
fully
taking
that
reduction
in
contribution.
But
it's
something
to
look
at
when
we
get
there
more
than
right
now.
You
know
I
think
we've
done
the
analysis.
Now
I'm
kind
of
the
levels
of
risk
there
there's
kind
of
a
I
guess,
that's
an
ongoing
analysis,
but
it's
just
recognizing
that
as
our
funded
status
improves.
H
In
a
dollar
amount,
they
are
increasing
over
time
the
employer
contributions
are
represented
by
the
the
yellow
bar,
which
is
you
know,
most
of
most
of
the
bar.
The
member
contributions
are
the
amounts
at
the
bottom
in
the
purple
color.
So
we've
talked
about
the
tread
water
rate.
That
is
the
dark
blue
line
up
at
the
top
and,
and
you
can
see
that
it
for
2019
the
the
contribution
amount.
Is
you
know
right
at
the
tread
water,
and
so
it
so
so
the
plan
is
starting.
H
You
know
we're
just
looking
at
Tier
one
here,
so
that
sort
of
drops
away
as
the
close
group,
the
afters
retire
and
I
guess
another
another
item
to
notice.
There's
a
little
bit
of
noise
out
there.
You
know
20
years
out
and
that
again
that's
that's
one
of
the
that's
the
large
amortization
being
paid
off
so
that
there's
a
drop
there
in
contributions.
H
But
I
guess
the
overall
takeaway
is
that
the
contributions
are
right
near
the
the
tread
water
amount.
So
so
there's
not
a
lot
of
room
to
start
reducing
those
contributions,
short
term,
and
then
you
know
the
fact
that
these
are
so
large.
You
know
that's
the
balancing
act
right
that
there's
also
not
a
lot
of
ability,
probably
for
the
city,
to
absorb
higher
contributions,
and
given
that
that
the
city's
contribution
is
nearly
sixty
percent
of
payroll.
H
B
Want
to
emphasize
one
of
the
things
Stephen
pointed
out
who's:
that
black
line
is
the
normal
cost,
which
means
that
all
of
the
gold
bar
above
that
black
line
is
going
to
pay
the
UAL,
whether
it's
the
interest
or
the
principle.
Everything
above
that
black
line
is
going
to
pay
the
you
al.
So
you
can
see
how
dominant
that
is
in
the
projection,
so
well.
The
level
of
contributions
that
are
going
towards
that.
H
H
So
you
can
see,
there's
there's
a
drop
there
and
that
and
that
that
that's
what
leads
to
the
discontinuity
and
a
few
of
the
other
charts
we've
seen
and
so
well,
so
we
have
it
in
the
bullet
point
there.
The
UAL
is
fixed
at
30
years
once
upon
a
time.
Well,
so
that
that
2009
piece
is
still
going.
The
the
Assumption
changes
are
amortized
currently
over
25
years,
and
the
gains
and
losses
and
benefit
changes
are
amortized
over
20
years.
H
B
Yes,
so
I
think
police
and
fire
is
much
further
along
in
there.
It
in
the
amur
say
ssin
on
this
and
so
they're
looking
at
some
of
those
bumps
that
are
happening
at
the
end
and
we're
starting
to
look
at
smoothing
that
out
that
piece
out
for
them.
We
would
do
that
same
thing
when
we
get
closer
to
that.
But
since
those
bumps
don't
happen
for
fifteen
or
twenty
years,
we'll
wait
till
we
get
a
little
closer
and
I.
A
Think
the
prior
discussions
we've
had
on
dealing
with
this
amortization
is
so.
This
is
a
large
chunk
in
2009
that
we
started.
We
decided
to
lump
off
and
say
alright,
we're
gonna
pay
this
off
over
30
years.
Hence
this
trailing
and
essentially
hitting
one
class
of
taxpayers,
essentially
at
one
time
to
pay
this
whole
thing
down
something
that
accrued
over
a
period
of
probably
multiple
generations
of,
and
so
this
is
where
we've
talked
about.
A
You
know
lots
of
different
alternatives
for
things
that
could
have
been
a
resource
challenged,
and
so
that's
that
was
the
discussion
last
time.
I
still
don't
know
whether
there
were
early
days
in
that,
if
there's
any
further
conversation
about
dealing
with
the
amortization
of
that
clump
and
really
I
mean
to
the
point
I
think
we
left
it
last
time.
It's.
You
know
it's
probably
a
good,
fruitful
discussion
with
City
Council
about
how
we
deal
with
this.
Essentially,
you
love
Korres,
be
paying
greater
interest
the
longer
you
pay
it
off
there.
A
You
have
more
interest
payments
and
so
the
the
bucket
gets
bigger,
but
then
how
we
spread
that
to
the
different
tax
payers
to
the
current
payroll
is
something
that
again
just
being
made
with
an
open
mind
that
there's
you
know
when
questions.
Are
there
any
other
alternatives
to
how
we're
paying
these
and
the
answer
is,
there
are
but
there's
costs
every
alternative
as
well.
A
B
And
I
think
our
issue
has
been
trying
to
get
us
up
to
that
tread
water
level
first,
but
going
forward
as
we're
exceeding
that
tread
water
level
that
that
issue
of
the
generational
equity,
of
how
much
each
class
of
taxpayers
class
of
workers,
because
it
certainly
affects
employees
as
well
in
in
terms
of
the
number
of
employees.
It
affects
the
number
of
service,
the
services
that
can
be
provided
and
pay
levels.
Certainly
so
it's
well.
A
That's
really
the
nut
of
it
because
we're
a
service
delivery
organization,
we
don't
make
widgets,
we
provide
services
and
so
the
more
employees
we
have
the
better
paid.
We
are
very
better
employees
to
provide
services,
and
so
that's
the
balance
that
the
organization,
the
bargaining
units
in
the
city
are
gonna,
have
to
kind
of
weigh
out.
Because
again
it's
that's.
That's
the
trade-off
right.
B
So
so
I
do
think
that
that
becomes
a
bigger
question,
as
we
move
forward
here
and
I'm,
not
sure
that
anyone
really
wants
to
go
off
the
cliff
like
that
and
just
in
one
year,
all
of
a
sudden
reduced
the
contribution
by
one
hundred
and
thirty
million
dollars.
That's
probably
not
the
best
way
to
budget
that
that
out,
so
we
may
revisit
that.
But
maybe
it
you
know,
maybe
it
is
how
how
people
want
to
do
it,
but
in
in
other
cases
we
found
when
we
get
close
to
that.
B
All
right
so
wanted
so
tier
one
is,
is
all
about
paying
off
that
you
Al,
and
how
do
we
get
there?
Tier
twos
completely
different,
and
so
we
wanted
to
talk
a
little
bit
about
tier
two
and
how
we
might
approach
handling
it.
If
it
was
the
only
thing.
So
it's
it's
well
funded.
You
know
eighty
five
percent,
but
there's
just
some
real,
quick
variations
that
are
going
on
that
switched
it
to
eighty
five
percent,
it's
less
than
eight
million
dollars
in
unfunded
liability.
So
it's
really
a
pretty
well
funded
tier.
B
J
A
And
so
we
sorta
had
to
pick
a
guesstimate
because
we
had
no
population
to
model
it
on,
and
so
you
made
a
guesstimate
based
on
our
existing
population
with
some
factors,
and
so
we
might
have
been
a
little
wrong
on
that.
But
we
had
no
information
to
make
a
decision
on
number
one
and
number
two.
Wasn't
there
a
slight
modification
and
the
benefit
with
measure
F
yeah.
A
C
B
D
I
just
like
to
us
a
quick
question
and
maybe
miss
Parkman
from
all
urine
can
address
the
issue.
Unless
you
know
the
answer,
the
one
two
three,
four,
the
fifth
bullet
point:
CDI
members
both
share
the
risk
paying
for
any
you
a
you
know.
So,
first,
a
question
to
you.
That
is
not
a
typical
arrangement
in
public
pension
plans.
I,
don't
know
lately
with
all
the
changes,
whether
they're
other
plans
that
have
typical
arrangement
like
that.
But
it's
not
it
because
so
that
you
know
he
has
an
impact.
Is
that
is
that
a
fair
statement.
D
Yes,
so
I
guess
my
question
is:
how
do
you
handle
that
Delta
that
gap
if
we
have,
for
example,
a
sustained
three
to
five
years
of
bad
returns,
where
that
gap
continue
increasing
because
their
gap
between
the
plan
sponsor
and
employee,
because
there
is
a
ceiling,
how
much
we
can
increase
the
employees
on
the
annual
basis?
That's
the
question
that
I
have
yes.
B
So
correct
me:
if
I
have
this
wrong
off
the
top
of
my
head,
but
my
recollection
is:
there's
a
cap
to
the
one-year
change
in
the
UAL
rate
for
members.
So
if
we
change
the
discount
rate
down
to
four
percent,
that
would
have
a
huge
impact
on
the
normal
cost
and
all
of
that
would
flow
through
immediately,
but
just
on
the
UAL
rate.
There's
a
cap
that
it
can't
change
by
more
than
I.
B
Believe
it's
a
third
of
a
percent
in
one
year,
and
so
then
the
city
picks
up
any
difference
in
that
year
for
what
we
need
for
the
full
UAL
contribution.
But
if
you
build
up
that
gap,
the
member
contribution,
UAL
contribution
rate
is
going
to
go
up
a
third
of
a
percent
per
year
until
it
gets
back
to
the
50/50
range.
D
D
D
B
D
All
right
so
in
dollars
figures!
If,
if
it's
a
one
dollar
each
one
year,
the
next
year,
it
goes
up,
it'd
be
a
dollar
thirty,
three
cents
versus
the
dollar,
thirty,
three
plus
the
rest,
is
a
dollar
sixty
seven
by
the
see.
This
is
why
I
wanted
the
dollar
figures,
a
dollar
67
by
day
by
the
employer.
So
right
there
is
dollar
$33,
67,
so
the
next
year.
In
your
example,
what
will
be
the
number.
B
B
D
D
D
B
D
B
B
So
our
thought
is
that
the
objective
is:
we
need
to
maintain
a
funded
status
near
a
hundred
percent
so
that
we
don't
get
a
large
UAL
that
members
have
to
pay
a
portion
of,
because
that
could
be
very
difficult.
So,
while
tier
2
is
young
and
growing,
we
put
10
year
amortization
in
for
tier
two
as
opposed
to
the
20
years
for
Tier
one.
So
we're
trying
to
keep
that
amortization
period
short
so
that
we
stay
closer
to
a
hundred
percent
and
even
with
that
10
year
amortization.
B
It's
still
difficult
to
make
big
swings
in
the
in
the
tier
2
contribution
rate
over
time.
That's
going
to
change,
and
then,
in
theory
at
least
for
Tier
two.
You
could
pursue
a
relatively
aggressive
investment
strategy,
and
so
that's
kind
of
the
question
here
about
whether
that's
worth
pursuing
at
this
point,
the,
where
tier
one
has
all
that
volatility
and
the
negative
cash
flow,
and
it
has
some
concerns
about
that
there.
B
A
B
Years
before
you
see
much,
we,
you
know
the
slide.
Steven
showed
went
out
just
15
years,
showing
the
volatility
is
virtually
nothing
and
so
we're
gonna
have
to
get
out
probably
25,
30
years
before
there's
significant
volatility
and
it's
going
to
gradually
change
over
time.
It's
something
to
that.
We
want
to
monitor
it
watch
as
as
we
go
along,
but
it's
going
to
be
a
long
time
before
it's
a
significant
effect
bill.
B
So
if
we
were
just
dealing
with
tier
two,
one
thought
here
is
that
we
should
really
use
to
discount
rates
to
help
manage
this
transition,
while
while
it
matures
we'd
use
a
post
retirement
discount
rate,
which
essentially
tells
us
how
much
assets
do
we
need
to
accumulate
by.
Sometimes
someone
retires
to
pay
their
benefits
in
retirement
and
then
we'd
use
a
separate
pre-retirement
discount
rate
that
we're
using
to
see
how
fast
contributions
accumulate
to
accumulate
to
that
asset
targeted
by
retirement.
B
And
so
we
could
use
a
lower
discount
rate
for
the
post
retirement
to
anticipate
a
more
conservative
investment
strategy
in
retirement
which
and
then
a
more
aggressive
or
a
higher
discount
rate
pre-retirement.
And
so
the
basic
idea
of
this
approach
is
it
puts
you
on
a
path
to
try
and
accumulate
more
assets
by
the
time.
Someone
retires,
so
that
at
that
point,
then
you
could
invest
those
assets
more
conservatively
to
pay
out
so
that
there
wasn't.
The
volatility
in
UAL
does.
A
G
B
B
It's
not
common
today
it
used
to
be
something
that
was
done
a
long
time
ago,
but
I
I
think
things
moved
to
simplifying
to
a
single
discount
rate,
particularly
you
know,
I
think
back
in
the
80s
and
90s.
When
you
know
the
more
conservative
rate
wasn't
really
that
much
different
than
the
more
aggressive
rate.
So
it's
a
theoretical
structure
that
I
think
makes
a
lot
of
sense,
but
it
is
not
something
that's
commonly
in
practice.
B
E
B
Just
this
is
just
here
we're
just
talking
tier
2,
and
this
is
this-
is
intended
to
kind
of
facilitate
a
transition
as
tier
2,
matures
to
automatically
move
to
a
more
conservative
structure
as
it
matures,
because
you
start
with
everyone
active
and
you
have
a
an
effective
higher
discount
rate,
but
as
people
retire,
the
effective
plan
wide
discount
rate
would
automatically
go
down
and
become
more
conservative
and
the
idea
would
be
they.
You
would
mirror
that
in
some
way
in
your
investment
policy.
Well,
we'll
talk
about
some
of
that
right.
Now.
B
But
this
would
be
conceptually
at
least
when
someone
retires
their
portfolio
would
be
invested
in
a
matching
bond
portfolio
that
would
match
the
expected
benefit
payments
for
them.
Now
that
that's
the
pure
theoretical
in
practice,
I
think
you
you
deviate
from
that.
You
could
just
match
the
duration
of
the
bond
portfolio
so
that
you're
not
too
focused
on
it.
You
can
vary
the
credit
quality
so
that
you
could
get
a
higher
return
and
you
can
include
non
matching
investments.
You
could
have
some
equities.
B
We
don't
have
any
retiree
benefits,
so
that's
not
a
big
deal,
but
if
we
got
to
the
point
where
we
have
a
huge
retiree
benefit
population
and
we're
still
invested
pretty
aggressively,
that's
going
to
have
a
huge
leveraging
effect
on
the
active
members,
and
so
the
idea
here
would
be
they.
You
would
decide
how
much
of
risk
that
you
could
afford
on
the
retirees
and
then
build
that
into
your
plan
so
that
it
gradually
changes
over
time
and
I've
got
an
example
here
to
run
through
and
show
you,
but
before
I
do
that
pre-retirement.
B
B
B
So
then,
let's
start
in
the
first
column,
we
have
our
current
structure
where
we
use
6.75%,
both
post
and
pre
retirement
middle
column.
We're
saying
this
is
the
two
discount
rate
approach.
What
if
we
use
the
post
retirement
discount
rate
of
four
and
a
half
and
a
pre
retirement
of
seven
and
a
half
or
in
the
last
column,
is
closer
to
a
financial
actor
on
economists
would
have
been
suggesting
is
that
we
should
use
something
more
like
four
and
a
half
for
everything.
B
So
what
that
means
is,
for
the
$5,000
per
month
benefit
payable
at
age
65.
If
we
have
a
post
retirement
discount
rate
of
six
point,
seven
five
percent,
we
would
need
seven
hundred
and
fifty-five
thousand
dollars
in
the
bank
at
age
65
to
pay
that
benefit
at
four
and
a
half.
We
need
nine
hundred
and
forty-one
thousand,
and
so
both
of
the
two
right
columns
are
targeting
nine
hundred
and
forty-one
thousand
by
age.
65.
B
B
The
entire
time
the
we
just
ran
these
on
the
2018
valuation
to
see
what
the
impact
on
the
normal
cost
rate
would
be,
and
so
the
current
normal
cost
rate
is
sixteen
point,
one
percent
which
is
split
evenly
between
members
and
city.
If
you
did
four
and
a
half
and
seven
and
a
half,
it
would
increase
to
nineteen
point
six,
and
if
you
did
the
straight
four
and
a
half,
it
would
increase
to
twenty
seven
point
one.
B
So
we're
not
saying
here
that
four
and
a
half
and
seven
and
a
half
are
the
right
numbers
for
the
assumptions.
But-
and
you
could
certainly
phase
into
this
type
of
adjustment
and
not
do
it
all
at
once,
but
conceptually
it
helps
set
the
plan
up
for
a
transition
to
where
it
needs
to
be
over
time,
but
it
does
require
more
contribution.
Now.
J
B
If
we
continue
on
the
single
discount
rate
approach,
it
really
requires
us
to
be
vigilant
and
make
the
manual
adjustments
as
the
plan
matures
when
they
need
to
be
made
and
each
time
we
make
an
adjustment.
It's
going
to
affect
contributions
at
that
time,
because
and
if
we
wait
until
it's
mature,
when
you
make
the
adjustment,
you
will
not
only
adjust
the
normal
cost
rate,
you'll
create
a
UAL
payment
that
has
to
be
paid
as
well,
and
if
we
don't
make
those
adjustments,
we
could
get
into
the
situation
where
we
have
very
volatile
employee
contributions.
B
B
So
going
back
to
our
general
approaches,
we
could
just
continue
with
the
the
single
discount
rate
approach
for
now.
Keeping
this
in
mind
and
thinking
about
the
adjustments
that
need
to
be
made.
We
could
switch
now
to
a
two
discount
rate
approach.
Perhaps
phasing
in
so
we
didn't
jump
all
the
way
to
something
like
four
and
a
half.
We
could
kind
of
gradually
move
to
a
more
conservative,
post-retirement
discount
rate.
B
We
would
need
to
do
some
analysis
about
what
that
post-retirement
discount
rate
should
be
how
we
wanted
to
track
it,
how
it
should
change
when
interest
rates,
change
or
not
change
so
there'd,
be
we're
still
dealing
with
it
at
a
fairly
theoretical
level.
Now,
there'd
be
a
lot
more
work
to
be
done
to
nail
down
specifics.
If
that's
what
the
board
is
interested
in,
we
could
also
just
decide
okay.
B
Well,
this
is
something
we
want
to
look
at
as
the
tier
1
UAL
is
paid
off,
and
part
of
that
argument
goes
back
to
the
the
chairs
point
about
the
generational
equity
and
the
impact
on
the
current
generation,
which
includes
both
tier
1
and
tier
two
members
of
paying
off
the
tier
1
UAL,
and
that
that
in
and
of
itself
is
imposing
a
burden
on
everyone.
And
so
maybe
we
should
plan
to
wait
for
that
burden
to
lighten
before
we
switch
to
a
to
discount
rate
type
of
approach.
That.
G
Thank
you.
So
if
I
understand
things
correctly,
and
that
is
certainly
not
a
foregone
conclusion,
we
have
two
issues.
Main
issues
facing
us,
whether
to
separate
the
pool
of
assets
into
two
separate
pools
of
assets
for
tier
1
and
for
tier
2
and
then
separately,
whether
to
adopt
a
to
discount
rate
approach
in
the
pool
of
assets
for
tier
2.
Is
that
fundamentally
correct?.
B
So
I
I
think
the
the
mechanics
of
two
different
pools
of
assets.
We
haven't
really
gone
through
the
analysis
of
that
here.
We
are
saying
that
you
know
there
could
be
a
structure
where
tier
2
has
different
investments,
but
if
you
follow
the
two
discount
rate
approach,
it's
not
clear
that
there's
a
significant
change
right
now
in
the
investment
strategy.
B
Once
you
get
a
bunch
of
retirees
there
would
be,
and
whether
that
requires
you
to
actually
physically
separate
the
assets
or
not
is
a
whole
different
question
that
that
we
would
want
to
go
through
versus
right.
Now,
all
the
assets
are
pooled
together,
but
we
account
for
them
separately
and
track
them
separately,
so
that
we
have
different
values
for
tier
1
and
tier
2.
B
Don't
invest
separately,
you
know,
I.
Think
you'd
have
to
look
at
the
advantages
of
two
separate
pools
versus
something
that
I
would
think
of
as
akin
to
a
master
trust
type
of
arrangement
where
you
have
one
pool,
but
you
assign
shares
to
different
investment
strategies
for
the
different
tiers,
but
that
gets
to
a
whole
nother
level
of
detail
before
we
before
there
are
higher
level
decisions
before
we
need
to
get
into
figuring
out
what
would
be
the
best
approach
there.
E
B
E
E
B
A
The
audience
has
been
provocatively
quiet,
I
know
your
hoover
eager
to
dive
into
the
actuarial
science
fund
that
we
get
to
deal
with
other
questions
or
comments
or
thoughts
on
any
of
the
things
that
have
been
talked
about
here,
I'm
eager
to
hear
your
thoughts
on
it.
I
also
understand
that
sometimes
this
gets
pretty
median.
Don't
really
know
how
to
have
word
our
questions,
and
so,
if
there's
thoughts
or
questions
that
I'd
welcome
them
and
I
know,
the
board
wants
to
hear
from
you.
E
B
So
we
could,
we
could
do
triggers
based
on
funded
status
or
contribution
levels,
for
example,
so
that
the
idea
would
be
that
as
the
city's
burden
on
tier
one
eases
that
we
would
use
some
of
that
savings
to
transition
to
tier
two
to
this
other
approach
and
so
I
guess
the
easiest
thing
would
be
to
tie
it
to
either
contribute
in
levels
for
Tier
one
or
funded
status
for
Tier.
One
and.
E
J
J
A
E
B
Look
at
this
slide
is
the
projection
of
tier
one
contributions,
so
this
assumes
all
assumptions
are
met
and,
if
we're
doing
that,
we
probably
wouldn't
be
triggering
well
those
numbers,
while
they're
going
up
we'd,
become
a
smaller
and
smaller
portion
of
the
city's
budget.
Hopefully
we
didn't
have
the
do.
We
have
actually
go
to
the
model.
We
can
show
this
same
thing.
E
G
That,
today,
the
presentation
is
not
about
the
mechanics
or
what
the
legal
or
actual
actual
mechanics
would
be
to
separate
the
plans
or
the
benefits
or
costs
of
this,
but
to
sort
of
do
an
analysis
of
the
two
plans
separately
to
understand
sort
of
the
the
potential
investments
moving
forward
and
also
look
at
this
second
having
two
rates
associated
with
tier
two
potentially
in
the
future.
Yes,.
B
So
it
it's
really
looking
at
a
high
level
at
the
ways
that
we
might
manage
the
costs
going
forward
and
and
really
the
only
significant
change
we're
looking
at
potentially
is.
Do
we
want
to
do
something
different
on
tier
two
to
prevent
it
in
the
long
run
from
becoming
too
volatile,
and
do
we
want
to
incur
the
costs
of
that
change
now
or
do
we
want
to
keep
that
as
something
to
look
at
down
the
road?
Okay,
thank.
D
D
D
B
The
longer
you
wait,
the
bigger
the
adjustment
on
the
tier
2
contribution,
you're,
potentially
looking
at
making
and
there's.
No.
So
there's
no
like
point
in
time
when
you
should
pull
the
trigger,
but
that's
why
we
raise
the
question
about
tying
it
to
the
how
tier
1
is
paid
off,
because
there
are
offsetting
effects,
even
though
they're
not
necessarily
directly
because
remember
tier
2
members
are
going
to
make
an
actual
contribution.
A
Ii
think
if
you
just
look
at
your
chart
and
peg
it
like
2027,
you
see
areas
where
there's
a
potential
for
even
immunize
things
even
out
and
keeping
that
flat
as
a
percent
to
overtime
that
gradually
again,
it's
fairly
tangential
and
not
really
meaningful
on
the
firt
next
8
years
or
so.
But
after
that,
maybe
that's
when
it
increases.
A
But
even
if
you
know,
one
of
the
things
we
did
in
2009
was
to
realize
that
this
lump,
when
we
were
dealing
with
this
rolling
amortization
stuff
that
was
sort
of
maddening
like
how
are
we
gonna
pay
for
this?
Initially,
they
wanted
to
lump
that
thing
down
to
20
years
and
and
in
that
nut
was
sort
of
insane
as
to
what
the
costs
would
be
for
something
that
had
been
rolling
around
no
pun
intended
for
quite
a
while,
and
so
we
we
spread
that
to
30
years.
A
But
potentially
this
is
something
if
we
decided
it
was
a
1%
increase
in
contribution
it.
We
could
do
this
in
five
percent
increments,
not
5
percent
overall,
but
5
percent
of
that
one,
so
that
over
ten
years
you
would
get
there
20
years.
You
would
get
to
a
place
where
you'd
absorb
it
all
and
get
to
a
place
over
time.
We're
in
a
place,
then
we,
you
know
so,
there's
not
a
surge
of
impact.
These
are
the
employer,
the
employee,
that
you
could
gradually
work
your
way
into
it.
A
So
because,
right
now,
there's
been
some
impacts
right
in
the
last
few
years
with
the
modification
and
benefit
or
some
of
the
other
slight
change
that
we've
made
in
the
discount
rate.
I
think
we
have
to
be
thoughtful
in
that
and
spread
that
out
over
10
to
15
to
20
years,
so
that
it's
more
absorbable
and
also
then
provides
that
security
on
both
ends
and
not
that
that's
necessarily
a
bargainable
discussion
that
we
should
kick
to
the
very
but
I
think
we
shouldn't
certainly
engage
that.
A
This
is
our
intention
of
what
why
we're
doing
this
I
think
once
you
do
that
and
have
that
conversation
I
think
they'd
appreciate
both
the
intentionality
of
where
you're
going,
but
also
the
the
pace
in
which
you're
making
those
decisions,
because
then,
certainly
you
could
pull
back.
If
something
drastic
happens,
the
markets
are
in
the
employment
schemes
going
on
or
you
know
you
could
accelerate
it
if
need
be,
but
that
way
you'd
have
some
kind
of.
Since
it's
not
an
urgent.
We
got
to
do
this
in
the
next
five
years.
A
We
don't
have
to
pound
on
it,
but
it
certainly
could
be
putting
ourselves
in
a
trajectory.
That's
more
absorbable
across
both
sides,
but
doing
a
big
open
discussion.
So
people
can
have
understand
the
impact
and
why
we're
doing
it
and
see
if
any,
because
really
it's
it's
they're,
the
ones
paying
for
it.
Does
it
what
makes
best
sense
to
them.
J
Yeah
I
agree,
I
think
it's
that's
a
really
prudent
approach
not
to
put
off
the
discussion
for
10
years,
but
to
have
the
discussion
now
and
talk
about.
How
can
we
get
there
and
I
really
like
the
idea
of
phasing
it
in
I?
Think
that's
good
for
the
members
and,
as
we
can
see,
good
for
the
it'll
be
good
for
the
city
as
well,
and
just
knowing
in
advance.
J
A
Gradual
it's
good
for
everybody,
especially
if
we
can
figure
out
a
plan
forward
again.
Then
we
make
these
decisions
as
to
how
we
deal
with
the
assets
over
time
as
well.
Because
again,
then,
when
we
get
into
our
next
discussion
about
what
asset
conversation
and
investment
plan
we
need
around
these,
how
do
we
then
isolate
and
is
it
best
to
have
it
in
two
wholly
separate
buckets?
Mr.
polanyi's,
pretty
smart
I'm
sure
we
can
find
ways
to
what
are
the
most
prudent
ways
to
deal
with
the
the
assets
themselves
and
I?
A
C
C
C
C
A
Why
we
peg
on
tier
1
I,
don't
I
didn't
heard
from
bill
that
we
have
to?
He
says
as
an
idea.
We
could
so
that
the
city's
contribution
isn't
so.
Essentially
the
city's
contribution
is
is
stable
and
and
as
the
city's
contribution
will
will
dwindle
down
as
a
percent
of
overall
payroll.
Perhaps
that's
how
you
use
there's
a
capacity
in
city
payroll
that
could
be
used
to
then
put
towards
additional
tier
two
contributions.
So
usually
it's
an
idea.
That's.
B
B
C
Trying
to
try
to
figure
out
what's
the
relationship,
because
I
know
the
city
has
a
huge
burden
on
the
on
the
tier
one.
My
ability,
I
figure,
I
thought
it
is
some
maybe
is
starting
from
last
fiscal
year.
The
city
changed,
the
presentation
on
the
Alpha
I
have
a
payment,
and
then
it's
not
died
all
due
to
each
active
employee
right.
It's
just
a
the
Alpha
on
the
liability
contribution
by
the
city
is
a
that's
a
300
million
street
city.
Just
a
pays
for
a
three
hundred
million.
A
B
It's
not
it's
not
well
I,
don't
know
how
the
city
ties
it
to
individual
employees
and
I.
Don't
think
we're
going
there
we're
just
saying
you
could
take
the
viewpoint
that
if
the
city
didn't
have
to
make
that
137
million
dollar
payment,
that
it
would
affect
other
things
in
the
city's
budget,
including
being
able
to
provide
more
services
and
presumably
pay
people
more
as
well.
A
What
is
this
again
just
a
more
detailed
discussion
on
what
it
might
look
like,
and
then
we
could
see
if
there's
actions
that
need
to
get
taken
again.
This
is
very
squishy
and
I'm.
Much
more
show
me
what
actually
means
in
numbers
and
you're,
using
some
hypothetical
things.
Let's
look
at
some
actual
numbers
to
see
what
those
costs
are
and
what
it
would
look
like
in
a
potential
couple.
A
Phasing
opportunities
and
potential
couple
triggers
that
might
be
interesting
to
take
advantage
of
again
getting
more
assets,
aligned
to
those
tier
two
members
when
they're
ready
to
retire
and
then
securing
them
so
that
they
have
a
greater
chance
of
less
volatility.
I
think
it's
interesting,
but
that's
I'd
like
to
explore
it
a
little
bit
more
and
I'd
like
you
to
do
more,
studying
on
it
and
come
back
with
some
more
detailed
ideas
and
like
say
December,
so
you
have
a
couple
months
before
we
get
into
all
the
actuarial
stuff
fun
for
the
next
will.
G
B
No,
no
I
think
it
is
a
fair
way
to
think
about
it,
and
you
know
so.
There
is
a
generational
equity
aspect
to
it.
If,
if
you're,
just
looking
at
tier
2-
and
the
idea
is
when
the
plan
gets
mature,
you
would
want
the
retiree
portion
of
the
portfolio
invested
more
conservatively.
The
generational
equity
argument
is
well.
G
H
H
A
F
Been
tough
to
stay
quiet
this
long,
but
I
do
it,
since
we
are
in
a
retreat.
I
want
to
make
a
point
about
generational
equity.
Nice
concept
has
absolutely
nothing
to
do
with
your
fiduciary
responsibilities
and
stewarding
a
pension
fund.
There
is
no
fiduciary
responsibility
that
includes
generational
equity.
It's
a
nice
idea,
it's
a
good
theory,
all
other
things
being
equal.
It
would
be
nice
to
have
each
generation
of
members
carry
their
own
burden
in
the
city
for
the
period
that
services
are
rendered
by
the
to
have
that
fully
paid
for
both.
F
We
gambled
with
Tier
one
I,
don't
mean
that
in
any
pejorative
sense
we
we
gambled
with
the
funding
of
Tier
one
and
lost
the
gamble
so
far,
we're
50
percent
funded
on
tier
one.
Essentially,
when
I
say
gambled,
we
made
projections
of
mortality.
We
made
projections
about
what
the
markets
would
return
and
we
came
up
short
to
me.
F
The
goal
here
for
the
board
to
consider
are
mechanisms
by
which
we
don't
repeat
that
for
Tier
two,
we
have
the
opportunity
for
tier
two
to
do
something
about
the
funding
today,
so
that
we
never
have
to
go
through
what
we've
had
to
go
through
with
Tier
one
and
the
underfunding.
Our
obligation
as
a
board
is
to
pay
the
benefits
when
they
come.
Do
we
take
into
account
the
city's
ability
to
pay?
We
take
into
account
the
members,
but
for
the
first
time
the
members
are
going
to
be
sharing
in
that
unfunded
liability.
F
That's
never
happened
before
so.
The
real
question
for
me,
as
your
fiduciary
counsel,
that
I'd
like
to
see
the
board
address.
Not
only
this
idea
of
you
know
changing
the
amortization,
but
the
whole
idea
of
continuing
to
make
funding
decisions
based
on
future
projections,
when
history
has
shown
us
that
if
the
projections
have
never
over
stated
performance,
they've,
always
understated,
and
so
we're
left
with
a
tier-one
burden
on
the
city
that
impacts
it
in
ways
that
we
would
like
to
avoid.
I
think
for
tier
2
and.
C
F
Repeat
the
the
process
that
we
used
in
the
past,
whether
it's
an
actuarial
process
or
investment
projecting
the
capital
markets
process,
we've
come
up
extremely
short
on
tier
one
and
that's
what
we're
dealing
with
today.
We
need
to
find
mechanisms
to
not
repeat
that
again
for
tier
two.
If
we
can-
and
maybe
we
can't
it's
still
a
defined
benefit
plan
and
I
would
say
mr.
chairman,
in
terms
of
going
forward,
these
ideas
are
worth
exploring.
F
A
A
J
Good
morning,
our
goal
is
not
to
go
through
necessarily
every
single
slide,
but
to
hit
the
high
points
and
hopefully
allow
for
more
discussion
and
questions.
So
the
point
of
this
presentation
is
to
talk
about
what
the
most
appropriate
asset
allocation
is.
A
secondary
concern.
Is
you
know,
do
you
want
to
have
two
separate
asset
allocations?
If
you
break
out
the
Tier
one
and
tier
two,
that
would
largely
come
from
an
actuarial
decision.
J
So
we
wanted
to
review
the
history
of
the
asset
allocation
asset
allocation
is
the
primary
determinant
of
your
investment
return,
the
managers
that
staff
and
that
Makita
has
assisted
in
selecting.
If
you
look
at
your
reports
have
actually
done
quite
well
within
their
asset
classes
within
their
peer
groups,
the
majority
of
the
asset
managers
and
your
in
your
investments
have
outperformed
their
peer
groups
since
you
hired
them,
so
the
individual
strategies
doing
quite
well
the
fact
that
there
are
asset
classes
that
have
been
more
out
of
favor.
Like
say,
hedge
funds.
J
There
was
a
large
commodities
allocation
for
a
long
time
have
not
performed
anywhere
near
us.
Equity
returns
has
been
the
primary
determinant
of
the
pure
relative
returns
in
the
federated
plan.
So
I
think
this
slide
is
really
interesting
because
it
looks
at
the
pretty
large
ships
that
have
taken
place
and
asset
allocation.
J
Since
Makita
began
working
with
the
federated
plan
back
in
2009,
so
you
can
see
on
the
left
and
when
we
came
on
board,
we
worked
with
the
staff
at
the
time
to
develop
an
asset
ocation,
and
you
can
see
in
this
first
column
it
was
about
half
global
equity,
20%,
fixed
income
and
31
percent
and
alternatives.
Then
a
sort
of
two
CIOs
ago.
J
There
was
a
major
shift-
and
you
see
this
in
the
second
column,
to
20
percent
in
real
assets,
primarily
commodities
and
25
percent,
an
absolute
return,
which
is
hedge
funds,
similar
to
a
shift
where
you
say,
increased,
fixed
income,
and
you
can
sort
of
push
a
button
and
trade
tomorrow
and
get
into
a
fixed
income
index
fund
going
up
to
25
percent
and
hedge
funds
takes
a
long
time.
A
separate
consultant
was
hired.
These
are
funds
that
aren't
very
liquid.
Typically,
it
takes
you
know
six
months
to
get
out.
J
There
might
still
be
a
sub
piece
after
that,
and
it
also
took
a
long
time
to
research
what
funds
were
going
to
be
hired
and
how
that
was
all
going
to
work,
I'm
so
commensurate
with
that
other
asset
classes
that
have
returned
well.
Since
then,
like
say,
private
markets
were
sort
of
put
on
the
back
burner
for
a
while,
and
there
wasn't
really
investment
made
and
say
private,
real
estate
and
private
equity
during
the
years
that
this
hedge
fund
allocation
was
being
built
up.
J
Another
thing
I
wanted
to
mention
is
that
Makita
investment
groups,
expectations
for
returns
for
these
real
assets
and
hedge
funds
were
never
above
the
6.75%
level.
At
the
time,
the
staff
did
their
own
study
where
they
came
up
with
their
own
capital
market
assumptions
that
assumed
a
higher
rate
of
return
for
hedge
funds
because
they
assumed
a
lot
of
manager
alpha
so
I
think
you
know,
there's
there's
been
some
discussion
around.
You
know
we
haven't
hit
our
projections
for
investment
return.
A
lot
of
that
has
been
implementation
related
rather
than
the
board.
J
Let's
see
so
then
we
moved
in
August
2014
under
the
next
last
CIO
moderated
that
hedge
fund
exposure
a
little
bit
on,
moderated
the
real
assets
a
bit
and
and
diversified
it
from
just
commodities
and
then
in
October
2017.
We
moderated
it
even
more
so
now
we
don't
have
the
column
for
the
current
which
we'll
talk
about
later,
but
where
we've
moved
back
sort
of
to
what
we
had
in
2010
and
with
a
little
bit
more
equity.
G
So,
shifting
over
to
what
peers
have
been
doing
in
the
space
that
starts
on
page
four
and
trying
to
get
a
better
understanding
of
what
US
based
public
pension
plans
were
doing
asset
allocation,
wise
meketa
investment
group
partnered
with
Nasra
at
the
end
of
last
year,
to
conduct
a
survey
in
which
thirty
nine
plans
responded.
Various
sizes--
you'll
see
they're
depicted
in
the
graph
representing
assets
from
one
and
a
half
billion
dollars
all
the
way
up
to
three
hundred
and
fifty
two
billion
dollars.
G
So
the
results
of
that
peer
review
were
quite
interesting.
I
noted
on
page
five
you'll
see
that
43%
of
us-based
plans
in
that
survey
noted
that
they
review
asset
allocation
every
four
to
five
years.
Thirty
percent
of
those
plans
note
that
they
review
every
year
and
then
should
think
to
page
six,
we'll
note
that
it's
one
thing
to
talk
about
asset
allocation.
It's
another
thing
to
implement
new
asset
allocation.
G
That
brings
us
to
where
we
are
kind
of
in
the
marketplace
today.
On
page
seven
Nasra
also
surveyed
127
public
plans
and
will
note
that
the
median
investment
return
assumption
is
seven
and
a
quarter
percent.
Well
note
there
has
been
a
downward
trend.
Investment
return
assumptions
over
the
past
20
years,
which
represents
much
of
what
Chiron
had
touched
base
with
on
their
implied
risk
premium
slide
and
interest
rates
have
decreased
substantially
and
the
ability
to
hit
high
assumed
rates
of
return
have
decreased
with
certainty.
J
Sort
of
designed
to
show
that
you
know,
asset
allocation
has
shifted
more
than
I.
Think
peers
have
shifted
their
asset
allocations
during
that
time,
and
this
plan
has
been
on
the
front
lines
of
reducing
the
discount
rate.
That
said,
one
of
the
reasons
that
you
have
the
low
funded
status
is
because
you're
assuming
returns
lower.
That
doesn't
mean
that's,
that's
a
bad
thing
to
have
moved
down,
but
just
so
that
everyone's
you
know
aware
of
that
dynamic.
J
If
you
did
have
a
seven
and
a
quarter
percent
expected
return
like
pure
plans,
then
your
funded
status
would
improve,
so
we
then
get
into
some
analysis
on
the
current
portfolio.
You
know,
as
everyone
knows,
we
cannot
predict
investment
returns.
We
don't
know
what
the
markets
gonna
do.
We
can
look
at
the
historical
market
environment
and
look
at
different
things
that
are
happening
in
the
current
market
environment
to
to
try
to
develop
an
expected
return
for
each
asset
class.
J
J
We
also
look
at
stress
testing,
a
different
historical
scenario,
analysis
and
different
proprietary
analysis
to
try
to
look
at
differences
between
portfolios,
and
so
we
get
into
portfolios
your
current
portfolio
and
some
other
potential
portfolios
that
you
could
consider,
all
of
which
take
a
bit
more
risk
and
have
a
bit
higher
expected
return.
This
is
something
we
talked
about
with
your
investment
committee
already
and
that
you
know
we
we
don't
expect
anyone
to
take
action
on.
We
know
there's
no
action
items
today.
The
wanted
to
talk
about.
J
You
know
how
the
portfolio
might
look
in
different
market
environments
or
with
a
I
expect
a
return.
If
you
were
to
shift
your
assets
a
bit.
So
in
the
left
two
columns
on
the
slide,
you
can
see
the
the
current
allocation,
so
the
current
allocation
has
25%
in
cash
equivalents.
You
can
see
that
halfway
down
the
page
under
low
beta,
one
of
the
things
that
we
believe
is
already
within
the
current
adopted
asset
allocation,
but
we
wanted
to
talk
about
with
the
board,
is
to
potentially
move
20%
of.
J
What's
in
cash
now
to
a
short
term,
investment
grade
bonds,
which
would
modestly
improve
the
expected
return,
would
also
leave
the
standard.
Deviation.
The
same
you'll
see
at
the
bottom
here
we're
showing
our
expected
return.
These
are
average
annual
expected
returns
for
20
years
in
the
top
line
for
10
years
in
the
second
line,
and
then
our
risk
level.
So,
ideally
you
want
to
try
to
get
the
highest
return.
J
You
can
for
a
lower
level
of
risk
but,
of
course,
the
sort
of
correlation
between
risk
and
returns
that
the
more
return
you
want,
the
more
risk
you
have
to
take
to
get
there,
and
we
also
showed
the
Buras
standard
deviation.
So
varis
is
your
risk
consultant
and
the
policy
in
the
investment
policy
statement
right
now
uses
varus's
standard
deviation
numbers,
so
every
consulting
firm
develops
their
own
expectations
for
expected,
return
and
standard
deviation.
None
of
our
numbers
are
going
to
be
exactly
right.
They
all
use
different
sources.
J
The
main
thing
to
look
at
here
with
the
standard
deviation
numbers
is
just
relative
differences,
so
it
doesn't
matter
too
much
if
it's
nine
point
two
and
eleven
point
six.
What
matters
more
is:
do
you
adopt
an
asset
allocation?
How
that
goes
up
over
time,
because
one
thing
that
we've
experienced
recently
is
nobody
is
hitting.
The
standard
deviation
expectation
is
that
we
put
in
place.
J
Markets
have
been,
despite
perhaps
what
you
see
in
the
financial
news,
remarkably
not
volatile
over
the
past
several
years,
so
most
folks
are
having
experiencing
a
standard
deviation
that
is
below
what
anyone
is
projecting.
Then,
in
the
last
line
we
show
the
probability
of
achieving
achieving
your
discount
rate
of
six
point.
Seven
five
percent
in
terms
of
you
know
something
we
talked
about
with
boards-
is:
what's
the
relationship
between
the
discount
rate
that
you
set
with
the
actuary
and
what
you
target
on
the
investment
side,
every
board
looks
at
that
differently.
J
There's
no
sort
of
requirement.
That's
you
must
adopt
a
portfolio
that
gets
you
your
discount
rate,
or
you
must
adopt
one
that's
higher
in
general,
when
we
work
with
boards.
Folks
generally
want
at
least
a
50%
probability
of
hitting
the
discount
rate
that
the
actuary
has
come
up
with
and
that
you've
adopted
in
in
some
cases
in
the
past,
when
we've
done
work
with
prior
staffs
and
and
the
prior
board
here
and
the
staff
decided,
you
know,
we
would
recommend
an
asset
allocation
that
actually
has
a
lower
than
expected
return.
J
A
lower
expect
to
return
that
your
discount
rate,
because
either
we
expect
that
we'll
be
moving
the
discount
rate
down
in
the
future.
Or
you
know
we
work
with
plans
that
have
an
eight
and
a
half
percent
discount
rate,
and
they
say
you
know,
that's
not
really
reasonable,
so
we're
only
going
to
accept
adopt
an
asset
allocation,
that's
expected
to
get
8%
or
whatnot.
So
there's
that
relationship
between
the
discount
rate
and
what
asset
allocation.
What
expected
return
you
adopt
is
not
set
in
stone.
J
Every
board
looks
at
it
differently,
but
generally
you
want
to
have
a
higher
probability
of
hitting
that
discount
rate
than
lower
one
thing
that
Chiron
talked
about
and
it
was
discussed
before-
is
the
immunized
cash
flows.
So
we
had
talked
about
needing
more
liquidity
to
pay
benefit
payments,
as
your
plan
changes
in
composition.
So
that's
under
cash
equivalents.
You
can
see
the
cash
equivalents
number
never
drops
below
five,
because
five
is
what's
expected
to
pay
the
next
five
years
of
benefits
and
that
number
would
be
expected
likely
to
grow
over
time.
J
As
that
those
benefit
payments
increase.
You
know
we
talked
about
liquidity,
you
know
where
you
get
income
and
how
you
might
need
more
liquid
assets
as
the
plan
composition
changes
over
time.
Different
folks
have
have
approached
that
differently.
Many
people
have
said
we
need
more
liquidity.
Let's
do
more
in
bonds,
let's
do
more.
In
cash,
some
people,
like
one
of
the
San
Francisco
plans,
have
said
we
have
a
really
highly
didn't
mature
private
markets,
portfolio
that
distributes
cash
every
year,
because
these
are
ten
year,
typically
partnerships
and
private
markets
and
private
equity.
J
And
so
we
expect
that
the
distributions
from
those
funds
will
actually
provide
us
more
liquidity
over
time.
So
there
are
different
as
to
how
you
shift
your
plan
to
being
more
liquid.
You'll
also
see
most
of
these
alternative
allocations,
reduce
hedge
funds,
increase
equity
and
also
typically
leave
this
sort
of
other
allocations
to
a
core
private,
real
estate
and
private
markets,
and
that
sort
of
thing
the
same
one
thing
I
wanted
to
talk
about
around
the
discussion
of
tier
1
versus
tier
2
and
breaking
those
assets
out.
J
We
have
a
little
bit
of
a
case
study
in
the
health
care
plan
that
you
already
run,
which
has
about
150
million
in
assets
in
terms
of
how
would
you
structure
a
plan
that
has
a
lower
asset
base?
Some
of
the
challenges
from
an
investment
perspective
with
having
a
lower
asset
base?
Is
you
typically
pay
higher
fees,
and
you
also
can't
really
go
into
a
lot
of
the
illiquid
partnerships?
J
You
know
you,
you
couldn't
be
doing
a
lot
of
the
the
private
equity,
the
private
debt
things
like
that,
because
a
low
asset
base
doesn't
allow
you
to
get
appropriate
diversification.
But
if
we
looked
at
the
health
care
plan,
it
has
invested
a
lot
like
the
pension
plan,
but
used
more
say,
passive
index
funds
and
more
sort
of
a
straight
exposure
to
the
market,
which
has
been
a
little
bit
more
volatile.
J
It
has
returned
a
little
bit
better
in
different
market
environments
like
when
equities
are,
are
running
up,
so
it's
very
reasonable
for
us
to
structure
two
different
plans.
We've
already
done
that
you
know
we
consult
the
police
and
fire
as
well,
so
we're
looking
at
four
different
plans
for
different
asset
allocations
already
having
one
that's
broken
out
with
the
tier
two
and
structuring
either
our
more
aggressive
or
more
public
equity
reliant
portfolio
for
those
tier
two
assets
is
very
is
something
we
can
certainly
do.
J
We
also
wanted
to
take
a
look
at
peer
information,
so
this
peer
group
has
about
a
hundred
funds
in
it
different.
This
is
all
self-reported
information,
so
you'll
see
that
the
sort
of
universe
of
funds
that
reported
their
separate
emerging
market
equity
allocation
is
only
eight,
so
take
some
of
this
with
a
grain
of
salt,
because
everyone
classifies
their
asset
differently.
J
But
that
said,
I
think
the
major
takeaways
are
that
the
federated
plan
has
a
lower
allocation
to
us
and
total
equity
assets,
a
higher
allocation
to
alternatives,
and
you
can
see
that
hedge
funds
and
private
equity
or
two
of
the
higher
alternative
areas,
real
assets
and
real
estate,
are
sort
of
middle-of-the-road
or
lower
quartile.
So
you
know
that's
historically
and
the
time
that
we've
worked
with
the
federated
plan
been
the
preference
because
of
the
experience
with
the
global
financial
crisis
is
to
be
less
risky
than
peers
and
and
that's
manifested
itself
through
less
equity.
J
And
that
said,
that
is
the
direction
that
pure
plans
are
moving.
So
from
that
same
organization,
the
National
Association
of
State
Retirement
administrators,
they
have
over
a
hundred
plans
as
part
of
their
peer
group.
Having
more
assets
and
alternatives
has
definitely
been
the
way
that
peers
are
moving.
A
lot
of
that
is
because
of
what
we've
talked
about
with
declining
expectations
for
returns
in
public
markets,
assets,
I.
J
Mentioned
that
the
potentially
varying
goals
between
tier
1
and
tier
2,
that's
mainly
a
function
of
what
decisions
you
make
on
the
actuarial
side.
We
are
confident
that
we
could
structure
the
portfolio
for
whatever
discount
rate
and
liquidity
profile
you'd
be
interested
in.
If
you
do
decide
to
separate
out
the
assets,
we
then
go
through
a
variety
of
other
types
of
risk:
analysis
for
these
different
asset
allocations
and
historical
scenario,
analysis
and
stress,
testing,
they'll.
We
do
this
type
of
analysis
to
see
you
know.
J
Does
it
tell
us
what
we
would
expect
and
in
this
case
it
does,
which
is
that
the
higher
return
that
you
target,
the
better
we'd,
expect
the
plan
to
do
in
upmarket
environments
when
equities
are
going
up.
The
worst
we'd
expect
it
to
do
in
a
downturn,
and
these
projections
are
not
for
your
specific
managers,
because
we
can't
say
how
artuz
and
global
growth
or
value
is
going
to
do.
In
one
of
these
environments,
we
can
say
how
global
equity
as
a
whole.
We
would
expect
to
do
in
different
market
environments.
J
So
at
first
we
have
mean-variance
optimization
based
risk
analysis.
That
shows
what
we
would
expect.
The
worst-case
scenario
returns
to
be
in
any
given
year,
also
the
probability
of
experiencing
negative
returns,
and
you
can
see
that
you
know.
Typically,
when
you
have
a
bad
market
environment,
it
washes
out
over
time.
We
wouldn't
expect
any
of
these
scenarios
to
have
a
20-year
negative
return,
because
we
have
always
recovered
from
downturns
historically
and
then
also
the
probability
of
achieving
your
assumed
rate
of
return,
which
goes
up
with
the
riskier
the
portfolio.
J
Looking
at
scenario,
analysis,
we've
looked
at,
you
know
ten
different
market
environments
here
and
they're
all
a
little
bit
different.
I
know
a
lot
of
folks
currently
are
concerned
about
stagflation,
an
environment
where
we
have
low
growth
and
high
inflation.
Those
are
those
two
scenarios
on
the
bottom
and
what
you
would
expect
the
negative
returns
to
be
in
those
scenarios,
and
then
we
also
show
a
smaller
number
of
positive
scenarios,
because
we're
always
very
focused
on
the
downside,
and
you
can
see
here.
J
For
example,
we
had
the
global
financial
crisis
where
your
current
allocation,
we
would
expect
to
be
down
23%.
However,
when
that
recovery
happened,
assuming
that
you
stayed
the
course
with
your
asset
allocation
and
didn't
you
know,
get
spooked
and
make
it
less
risky
would
expect
a
recovery
of
twenty
seven
point,
five
percent
so
historically,
when
we
do
have
a
downturn,
assuming
that
you
stay
the
course
with
your
investments.
Typically,
we
do
recover.
We
then
look
at
stress
testing,
and
these
are
expectations
for
potential
forward-looking
returns.
J
J
And
I,
am
you
know
one
of
the
reasons
I'm
not
spending
too
much
time
on
these
slides
is
I.
Don't
want
anyone
to
put
too
much
stock
in
these
specific
numbers,
because
we
cannot
the
actuarial
side.
You
have
a
lot
more
hard
data.
You
know
how
many
people
are
in
your
plan.
You
know
what
you
promise
to
pay
them,
there's
a
lot
more
modeling
that
you
can
do
these
numbers
I
really
want
to
highlight.
We
want.
We
want
to
look
at
relative
differences,
not
the
actual
number,
so
in
general.
The
outcome
of
these.
J
This
analysis
is
that
if
you
move
to
a
riskier
plan,
you
will
have
a
higher
probability
of
meeting
your
your
assumed
rate
of
return.
You
would
have
very
strong
returns
and
upmarket
environments
like
we've
had
recently.
However,
there
is
the
risk
that
we
have
these
other
negative
market
environments
that
we've
experienced
in
the
past,
or
some
that
we
haven't
experienced
yet
and
then
you'd
see
more
of
a
downturn.
J
With
that
you
know,
I
think
23
is
this,
live
that
makes
sense
to
look
at
one
of
the
things
we've
talked
about
with
your
staff
and
we've
read
your
grand
jury
report
for
the
plan.
One
of
the
considerations
in
there
was
that
sort
of
take
away
that
was
stated
is
that
there
were
too
many
managers
in
the
plans,
and
so
we
wanted
to
do
an
analysis,
because
our
feeling
is
that
you
actually
have
a
pretty
concentrated
high
conviction
portfolio
relative
to
peers.
So
we
wanted
to
look
at
the
actual
numbers.
J
So
on
page
23
you
can
see
that
the
Federated
plan
has
20
27
public
markets
managers
that
does
include
passive
index
funds
and
also
hedge
funds.
So
some
people
wouldn't
consider
an
index
fund
to
be
a
manager,
but
for
the
purposes
of
you
know
full
disclosure
and
full
counting.
We
wanted
to
include
passive
funds
as
well,
and
then
the
number
of
private
markets
managers
are
40,
so
that
includes
every
underlying
investment.
You
have
moved
to
a
direct
private
markets
program
from
a
fund
of
fund,
so
each
of
those
funds
is
its
individual
line
item
now.
J
So
that
brings
the
total
plans
to
67
managers
right
now.
So
there
were
a
few
plans
that
were
mentioned
quite
a
bit
in
the
grand
jury
report
as
peers.
Those
were
LA
fire
and
police
pensions,
lasers
and
lacera.
We
at
Makita
work
with
lacera.
The
other
two
plans
use
other
consultants
just
for
purposes
of
looking
at
peers.
So
you
can
see
that
each
of
these
plans
has
at
least
ten
more
public
markets
managers.
J
The
bottom
bullet
point
on
this
page
talks
about
direct
private
markets
relative
to
fund
of
funds.
So
if
you
hire
a
fund
of
funds,
manager
and
private
equity,
you're
just
hiring
one
manager
and
say
it's
some
abidor
pathway,
there's
a
there's.
A
lot
of
different
fund
of
funds
managers
out
there
and
so
they're
gonna
hire
a
bunch
of
underlying
funds,
so
you're
paying
them
and
then
you're
also
paying
all
those
underlying
funds.
J
E
J
Or
or
they
might
just
not
I
mean
something
you
could
do
and
your
reporting
is
just
have
a
line
item
that
says
private
equity
portfolio.
You
know
and
that's
what
a
lot
of
your
peers
do.
So
they
did.
You
know
if
somebody
doesn't
pull
up
the
report
and
say:
oh
my
gosh,
there's
hundreds
of
managers
in
here
and
that's
that's
something.
That's
you
know
reasonable
as
well.
G
Page
number
three
showing
the
history
of
where
we've
been
it
sounded
like
you
were,
associating
the
different
asset
allocations
through
the
various
columns
with
changes
of
CIO
at
the
pension
plan.
So
I
guess,
my
initial
question
is
who's.
Driving
changes
in
asset
allocation
is
that
driven
by
the
board
or
by
the
individual
CIOs.
J
Sure
so
asset
allocation
is
the
responsibility
of
the
board.
That
said,
the
board
you
know
is
involved
in
the
hiring
of
the
CIO
and
difference.
You
know
in
different
CIOs
have
different,
you
know,
initiatives
and
there
there
were
periods
of
time
where
there
was
not
as
many
staff
members
as
everyone
would
have
liked,
and
a
lot
of
turnover.
So
there
I
would
say
that
you
know
it's
a
collaborative
effort
when
asset
allocation
has
changed
it's
by
a
vote
of
the
board,
but
it's
heavily
driven
by
staff.
E
J
Can
talk
about
definitely
how
it
is
now
I
can
tell
you
that
in
some
periods
in
the
past
it's
been
very
different.
There's
there
you
know
for
many
of
our
clients,
there's
there's
not
a
staff
where
there's
a
smaller
staff
and
it's
very
collaborative
I
would
say
we're
very
collaborative
right
now,
with
a
couple
of
CIOs
ago,
there
was
a
different
sort
of
operational
culture,
I
guess
and-
and
there
was
a
lot
that
was
driven
by
staff
and
sort
of.
J
I
I
may
add,
so
we
did
a
governance
project
with
Corp
X
last
year
and
those
recommendations
were
accepted
by
both
boards
at
the
end
of
last
year
and
so
for
the
first
time,
we've
actually
hopefully
we'll
see
how
this
works
in
practice
made
it
very
clear
that
the
responsibilities
of
asset
allocation
rests
with
the
board
and
but
practically
speaking,
as
Laura
mentioned,
the
investment
consultant
and
staff
worked
together.
We
come
up
with
a
number
of
options
and
you
saw
four
options.
Today,
a
b
c
and
d.
I
We
actually
presented
eight
options
to
the
IC
and
then
the
IC
design
recommended
that
we
take
four
options
in
front
of
the
full
board.
So
at
the
October
board
meeting
you
will
get
those
four
options,
including
the
current
where
we
stand
currently
and
the
board
will
then
get
to
discuss
and
vote
on
one
of
those
options.
And
then
it
is
our
responsibility
as
the
investment
team
to
implement
the
option
selected
by
the
poor
and
to
pick
the
underlying
managers.
E
I
J
Manager
selection
to
the
staff,
which,
in
our
opinion,
is
good
governance.
You
know
different.
This
has
always
been
a
great
board
to
work
with,
but
at
different
points
in
time
you
know
staff,
a
Makita
would
bring
it
stuff.
A
Makita
or
chef
or
Makita
would
bring
suggestions,
and
there
were
you
know
certain
board,
members
that
you
know
said
you
know
what
I've
heard
bad
things
about
this
asset
class
right
now
or
in
my
personal
work,
I'm
I'm
not
recommending
this
asset
class,
and
so,
let's
not
do
it.
J
So
that
leads
to
a
lot
of
sort
of
disconnect
between
the
strategy
that
we're
all
trying
to
carry
out
so
I
think
you
know
adopting
an
asset
allocation
that
makes
sense
which
drives
the
majority
of
returns,
is
number
one
most
important.
Implementing
that
and
leaving
a
lot
of
that
to
the
folks
who
are
day-to-day
meeting
with
investment
managers
and
paying
attention
to
markets
makes
a
lot
of
sense
from
a
governance
perspective,
and
that's
where
you
are
now.
F
A
G
I
We
are
actually
at
the
asset
allocation
currently,
and
so
there
is
a
mechanism,
that's
built
into
the
IPS,
where,
if
we
deviate
more
than
a
certain
percentage
from
the
strategic
asset
allocation
for
each
asset
class,
we
will
immediately
rebalance
to
the
asset
allocation.
So
you
will
not
see
any
significant
deviations
from
the
strategic
asset
allocation
policy.
A
G
That
that
I
infer
from
that
that
we
have
the
ability,
then
to
quickly
respond
to
rapid
changes
in
asset
class
valuations
he
if
the
market
were
to
go
down
sharply,
we
would
respond
quickly
to
bring
our
asset
allocation
back
up
to
the
preferred
level,
thereby
capturing
the
potential
gains
when
stocks
are
on
sale.
Yes,.
I
However,
there
could
be
in
a
situation
where
there's
sell-off
in
equities,
but
similarly
there
could
be
a
similar
move
in
bonds
and
therefore
it
doesn't
necessarily
distort
the
entire
asset
allocation,
and
in
that
case
we
would
have
to
come
back.
The
consultant
and
staff
would
have
to
come
back
to
the
IC
and
such
as
changes
and
the
IC
does
not
have
the
authority.
I
So
what
we
can
do
is
we
can
discuss
this
with
the
investment
committee
in
the
investment
committee
can
then
say
we
should
take
this
to
the
full
board
to
make
changes
and
part
of
this
was
done
deliberately
as
part
of
the
governance
project.
There
was
a
feeling
that
staff
was
not
adhering
to
the
strategic
asset
allocation,
so
we
wanted
to
make
it
very
clear
that
the
board
sets
our
strategic
asset
allocation
and
in
staffs
job
to
actually
stick
to
that
strategic
asset
allocation.
I
Any
change
that
staff
wants
to
make
will
have
to
be
approved
by
the
full
board.
So
there
could
be
some
timing
issues
as
in
you
know,
when
does
the
next
IC
meeting
take
place
takes
place
or
when
does
the
next
board
meeting
take
place
and
there
might
be-
and
maybe
Harvey
can
comment
on
that
and,
if
need
be,
if
you.
G
I
I
G
Again,
I'm
not
suggesting
that
would
necessarily
be
a
good
idea,
but
when
the
asset
allocation
will
change
rapidly,
if
there's
a
rapid
evaluation
reevaluation
in
different
asset
classes
and
our
ability
to
respond
to
that
quickly,
I
believe
will
do
much
to
increase
our
returns
over
time.
You
are
right,
it
has
the
potential.
G
A
E
A
Definition
of
rapid
you
know,
is
it
a
rapid
with
balance?
Is
it
what
is
the
right
time?
I
mean
that's
where
you
get
into
how
quickly
can
staff
make
moves
to
capture
or
to
rebalance
rebalance
to
capture
it's
not
written
that
route
yeah?
How
quickly
can
they
do
that,
and
that's
probably
the
right
question:
how.
F
Staff
does
have
some
tactical
capability,
because,
basically
our
asset
allocation
is
set
with
a
target,
but
would
but
within
ranges,
higher
low
and
so
within
those
ranges.
Staff
can
make
some
limited
tactical
determinations.
Also,
the
liquidity
of
the
portfolio
gives
us
the
opportunity
to
fund
those
kind
of
situations
and,
of
course
the
the
judgment
call
always
is
going
to
be.
Are
you
trying
to
catch
a
slippery
knife,
or
is
it
really
a
buying
opportunity?
F
J
I
think
markets
have
been
expensive
for
a
long
time.
I
think
I
think
a
lot
of
people
could
point
to
look
at
where
the
p/e
ratio
is
for
US
equity
relative.
You
know-
and
you
could
point
to
it
five
years
ago-
and
you
can
point
to
it
seven
years
ago
and
you
could
say
we're
really
worried
about
a
coming
downturn
and
so
therefore
we're
going
to
overweight,
fixed
income
in
cash
and
so
I
think
everyone's
heart
was
in
the
right
place.
But
that
said
the
asset
allocation,
it's
not
so
much.
J
A
G
Turning
attention
to
page
11,
it
seems
to
me
this
is
this:
is
the
critical
page
and
I
think
a
lot
of
our
decision-making
is
being
led
by
the
data
presented
here,
especially
with
respect
to
expected,
returns
and
standard
deviations
and
I?
Think
if
we
look
at
your
appendix
in
some
asset
categories,
we
have
probably
some
very
good
data
about
potential
returns
and
historical
returns,
and
and
because
there
was
a
mark
to
market,
but
in
a
lot
of
alternative
classes.
These
are
not
marked
to
market,
and
so
the
expected
returns
is
well
somewhat.
G
J
Of
that
is
the
relationship
between
risk
and
return.
It
also
has
a
lower
expected
return,
so
we'd
expected
to
have
a
lower
risk.
Part
of
that
is
also
the
way
that
we
develop
our
assumptions
so
for
private
markets.
Assets
they're
only
valued
to
your
point,
usually
every
quarter,
if
that,
and
so
it's
gonna
look
like
private
equity
and
private
debt
and
private
real
estate
have
really
low
volatility.
J
Really
that's
just
an
accounting
issue
why
it
looks
low,
and
so
we
sort
of
artificially
inflate
the
standard
deviation
for
private
markets
asset
classes
so
that
our
optimizer
software
just
doesn't
steer
everything
toward
them,
because
it
appears
that
they
have
such
low
volatility.
So
so
the
expected
standard
deviation
for
allocations
that
include
private
markets
is
gonna,
be
higher
than
what
we
think
you'll
actually
experience
when
you,
you
know,
take
an
Excel
spreadsheet
and
do
standard
deviation,
but
we
think
it's
more
useful
for
decision-making.
I.
G
A
A
F
I'm,
a
large
just
a
question
just
looking
at
your
median
expected
returns,
10
years
and
20
years.
So
what
is
it
that
causes
Makita
to
believe
that
in
the
out
10
years
that
the
performance
will
be
significantly
better
and
when
I
say
the
out
10
to
go
from
7
point?
Let's
just
take
the
current
cash,
the
first
column,
if
over
10
years
of
expected
return
is
7.2
and
over
20
years
at
7.7.
That
means
in
the
out
10
years,
you're
actually
saying
it's
going
to
be
8.3
or
something
like
that
and
that's
across
the
board.
J
J
G
Think
you're
thinking
about
that
correctly
I
think
you
might
have
worded
it
absolutely
and
talking
about
which
line.
But
yes
in
2009
we
would
have
expected
much
higher
asset
class
returns
coming
off
of
recession
and
then
in
the
following
10
years
we
would
have
expected
lower
asset
class
returns,
but.
J
C
Asked
the
question
about
asset
management
in
the
Cominco
stage:
I
thought
it
might
be
less.
It
will
be
more
confusing
to
have
the
assets
in
tier
1
tier
2
commingled.
If
we
started
down
the
track
of
us
using
different
kind
of
required
rate
of
return
structures
for
the
tier
and
then
you
said,
that
would
be
a
question
true
to
discuss
at
this
time.
Question.
A
C
So
if
we
decide
to
choose
a
different
path
for
tier
2,
let's
say
we
have
two
different
project:
priority
return,
3
and
3
employment
and
post
employment.
We
decided
to
have
all
the
assets
commingled
with
tier
1.
Is
this
feasible
for
you
to
still
come
up
with
the
asset
allocation
for
the
aggregated
plan,
or
is
it
easier
for
you
to
separate
plan
need
to
do
two
different
polls
separated
into
two
different
polls.
J
So
if,
if
you
were
gonna,
have
different
expectations
for
return
that
you
were
trying
to
hit,
it
would
be
simpler
as
a
you
know,
for
everyone
to
monitor
and
and
set
an
asset
allocation
if
you
did
not
have
the
assets
commingle.
Currently
we're
looking.
You
know
we're
accustomed
to
looking
at
different
plans
for
you
and
for
other
clients
where
it
is
coming
boldness.
J
C
J
J
D
D
D
They're
designed
there
are
different
colors,
but
we
went
by
month
as
to
a
specific
board
agenda,
Islands
that
come
before
you
board
for
discussion,
issues
related
to
the
retirement
office
operations
and
then
events
or
timelines
that
we
have
to
follow
us
on
office
when
we
are
dealing
with
the
issues
that
are
related
to
the
City
Council
and
the
budget
office.
So
you
can
see
that
I
won't
go
into
the
specifics.
D
Although
I'm
happy
to
answer
any
questions
but
I
think
the
easiest
want
to
deal
with
this
the
budget
process
and
because
the
budget
is
actually
approve
or
presented
to
the
City
Council
in
May
actually
fully
approve
in
June.
We
were
back
backwards
from
that
and
we
make
sure
that
we
come
before
boring
Marge
and
before
that
as
part
of
the
process,
our
office
work
within
the
city
structure
is
considered
an
appointee
office.
So
we
work
with
the
mayor's
office.
D
That
means
that
then
I
start
discussion
with
the
mayor's
office,
either
in
December
in
January
as
to
what
are
our
potential
needs
for
the
following
year,
so
that
was
just
an
example.
The
second
I'm,
sorry,
the
second
attachment
it
just
kind
of
split
a
discussion
or
a
particularly
vein
or
item
on
whether
they
may
have
a
potential
impact
on
the
budget
or
not,
because
it
makes
a
difference
if
it's
a
work
plan
or
an
issue
that
wants
to
be
implemented.
D
That
does
not
have
any
budgetary
impact,
then
we
have
more
flexibility
as
to
when
we
want
to
have
those
discussions,
because
it
doesn't
have
to
be
part
of
the
budget
process.
But
if
it's,
if
it
does
require
to
make
sure
that
we
request
budget
dollars
for
that
particular
initiative,
then
we
want
to
make
sure
that
we
work
through
the
budget
timeline
process
so
that
by
the
time
it
is
discussed
at
the
board
level
with
staff.
D
It
can
be
part
of
the
process
that
we
use
to
present
the
budget
to
your
boss
in
March
and
eventually
approve
at
the
City
Council
level
in
May.
So
again,
what
we
were
trying
to
do
here
is
sort
of
provide
you
with
the
timeline
that
we
use
at
the
office
so
that
then
the
board
can
use
that
approach.
And
again
this
is
a
kick
of
discussion.
D
So
that
a
future
meetings,
if
if
there
are
particular
initiatives
that
you
would
like
us
to
include
as
part
of
the
work
plan
for
the
following
year,
that
those
discussions
take
place
timely
at
the
board
level,
so
that
that
information
can
be
then
input
into
our
process
to
the
borough
that
develop
the
work
plan
for
the
following
year
now,
I
know
before
the
you
know.
If
you
have
any
questions
comments,
I'm
happy
to
address,
then
I
I
did
discuss
this
issue
socially
I
met
with
rusty,
saw
and
castiana
will
be
developed
agenda.
D
I
also
know
trustee
after
general
has
some
further
comments.
This
particular
approach
was
to
help
you
board
getting
to
a
process
for
develop
a
work
plan
for
the
following
fiscal
year.
I
know
a
trustee,
caster
Jana
was
also
interesting,
interested
on
kicking
off
a
discussion
on
how
we
contain
these
kind
of
process
and
then
use
that
as
a
basis
to
develop
a
more
strategic
planning
process
for
the
full-bore
that,
of
course
taking
to
account
for
than
just
one
year.
E
My
my
input
was
that
the
as
far
as
I
know,
we
don't
have
a
the
board,
doesn't
have
a
strategic
plan
as
in
mission
vision,
that
kind
of
thing
and
I
am
and
and
I
think
the
value
of
that
is.
If
is
that?
It's
and
it's
really
not
necessarily
outcome
the
output
that
we
would
get
from
that,
but
rather
the
discussion,
the
conversation
amongst
ourselves,
I'm
not
sure,
for
example,
that
all
the
board
members.
E
If
we,
if
you
were
to
ask
us
individually,
what's
the
mission
of
this
board
I'm,
not
sure
we
would
all
have
the
same
answer.
What's
the
vision
for
the
future
for
this
board
I'm,
not
sure
we
individually
all
have
the
same
answer,
and
so
there's
a
vet
but
and
I
think
there
was
a
value
and
having
a
conversation
so
that
we
all
are
thinking
about
what
the
where
we
should
be
going,
and
the
other
added
element
to
that
I
think
is
the
is
where
we
at
with
regard
to
the
mission
and
vision.
E
Are
we
doing
well?
Are
we
already
there
because
the
that
that
Delta
would
dictate
where
we
want
to
put
our
board
giant
board
agenda
priorities,
so
I
don't
have
I,
don't
have
a
thought
right
now
about
where
those
priorities
should
be
I,
think
there's
really
a
conversation
to
be
had
beforehand
again,
mission
vision
and
in
current
state.
E
So
my
my
interest
on
this
agenda
was
to
have
a
conversation
about
process.
What
can
we
build
in
to
what
the
board
does
on
an
annual
basis
and
we-
and
it
definitely
makes
sense
to
work
around
other
processes
like
the
budget
process,
so
that,
to
the
extent
that
we
do
have
a,
we
do
have
a
priority
that
requires
some
kind
of
funding
or
some
other
kind
of
alignment
that
we
can.
E
We
can
build
into
that
into
the
budget
process,
for
example,
but
it's
really
about
having
a
process,
whether
it's
an
annual
or
biannual
process
of
looking
at
looking
where
we're
at
and
what
we
need
to
do
to
close
the
gap.
I
mean
I
think
that
probably
each
one
of
us,
if
we
envision
successful
organizations
of
which
we've
been
apart,
there
is
some
there
is
a
plan.
A
Should
just
Willie
there's
gold
month
by
month
and
figure
this
thing
out?
So
yes,
planning's
is
a
great
idea.
I,
don't
think.
I
should
weigh
in
a
whole
lot
on
that,
because
of
I
could
tell
you
that
the
last
10
years
has
been
pretty
interesting,
because
the
problem
sets
we've
had
to
deal
with
have
come
out
of
left
field
almost
every
year
and
having
to
implement
so
many
different
things
and
kind
of
right.
A
The
ship
on
so
many
different
things
going
on
it's
been
it
I
would
say:
it'd
be
pretty
damn
impossible
to
come
up
with
a
plan
that
we
could
have
implemented
and
stuck
to
it
for
three
years.
I.
Think
if
you
just
looked
at
the
last
presentation
of
what
we
had
to
deal
with
with
staffing
around
CIO
implementations
and
asset
allocations,
we
could
talk
over
that
and,
if
I
project
my
breasts,
drew
lanza
overall
many
many
beers
and
have
many
interesting
discussions
about
how
these
things
actually
came
to
fruition.
A
G
A
The
only
thing
I
would
recommend
only
because
of
having
didn't
have
scheduled,
so
many
of
these
things
I
would
recommend
knowing
the
Federated
Board
that
we
should
do
them,
and
you
know
a
lot
time
during
board
meetings
to
do
something
like
that.
If
we
wanted
to
have
a
separate
retreat
at
strategic
planning
retreat,
that's
it
sounds
like
a
great
idea,
also
but
I,
because
of
how
hard
it
is
to
get
people's
schedules.
A
If
we
all
know
that
every
third
Thursday
we
have
to
be
around
each
other
and
most
people
then
block
off
their
eleven
of
those
days
through
the
eleven
times
a
year
that
schedule
around
times
or
push
it
to
a
lighter
agenda.
And
you
say
you
can
move
some
things
on
the
identity.
We
have
a
good
hour
and
a
half
to
our
time
to
kind
of
work
on
that
and
then
iterate
throughout
the
year.
D
Did
that
at
a
prior
board
meeting
we
may
bring
it
back
because
we
have
to
change
your
day
for
the
January
meeting.
We
had
changing
from
the
16th
to
the
23rd,
but
now
we
want
to
make
it
back
to
16,
I
hope,
I,
don't
go
back
to
the
23rd,
but
right
now
is
at
16
to
the
16
to
the
23rd
yeah.
So
so
we
can
bring
it
back,
but
that
already
yeah
we
did
that
I
think
it
was
accuracy.
E
To
answer
trustee
Horowitz,
this
initial
question
I
think
I'm
envisioning
in
in
board
meeting
work
I
for
the
same
reason
that
cherish
mentioned
the
time
outside
of
the
meetings
is
difficult,
especially
when
board
members
already
have
committee
member
assignments.
That's
plenty
of
meetings
every
month
for
for
the
group.
I
do
think
that
to
accept
we
haven't
done
this
before
you
make
any
sense.
We,
if
that's
true,
then.
A
There's
work
plans
that
are
established
by
both
the
operational
investment
side
and,
more
broadly
so
there
there
are
work
plans
that
I
think
could
then
be
massaged
into
something.
Longer-Term
yeah
I
mean
we've
been
doing
this
whole
pension
administration
system
revamp
for
four
years
we've
been
doing,
we
break
out
a
new
CIO
would
go
through
a
hole
or
and
and
things
on,
not
just
that,
but
also
the
governance
around
that.
So
there's
been
many
of
these
longer-term
initiatives
that
have
been
in
play.
A
Have
we
documented
it
in
something
called
a
strategic
plan
and
I
there's
work
plans
every
year
that
could
you
could
take
those
and
shove
those
as
a
first
go
as
how
would
you
do
this,
so
not
that
no
planning
is
being
done.
It
mister
mr.
Payne,
who
comes
in
every
year
with
these
work
plans
for
the
different
work
groups
underneath
and
those
things
are
there.
You
can
take
that
as
a
first
cut
and
they
have
sort
of
been
aligned
year
to
year,
but
it
hasn't
been
beyond
here.
You.
D
D
Think
that
you
know,
if
I
hear
you
correctly,
you
may
want
to
kick
up
with
that.
First,
it
seems
to
me
that
what
you're
saying
is
you
want
everyone
to
be
on
the
same
page,
we
need
to
know
what
I
mentioned
and
our
vision
is
and
then,
as
we
move
along
and
work
on
developing
the
process,
we
want
to
from
time
to
time
check
in
where
we
are
compared
to
what
that
goal
is
I.
E
D
D
Aside
from
all
the
issues
and
again
I'm
sure
you
can
see
the
actuary
he's
not
smiling,
but
he
is
so
excited
because
for
the
next
four
months
is
gonna,
be
before
you
every
month,
between
October
and
January.
Either
talking
about
valuation
for
the
pension
plan
of
the
open,
other
post-employment
benefits
and
we're
gonna
eat,
throw
in
the
new
tier
1
and
tier
2
options
in
the.
A
D
I'm
sorry
tier
2
options
which
chair
Lodge
promised
me
he
will
be
watching
in
December
in
any
case,
so
I
think
we
first
step
is,
let's
think
about
when
it's
a
good
time
to
do
that.
Of
course,
we
can
do
in
the
next
few
months,
but
I
mean.
Is
we
gonna
be
so
so
BC,
the
next
three
or
four
meetings?
I
think
we
want
to
kind
of
set
a
time
where
that
would
be
the
main
discussion.
A
newborn
meeting,
which
really
to
me,
seems
like
sometime
in
the
early
2020.
Hopefully
you
know
to
build
from.
A
I
A
The
wrong
reason:
it's
really
because
then
you'll
have
the
full
full
assets
of
all
seven
trustees
and
all
the
new
trustees
will
be
in
place.
You
know
so
we'll
be
talking
about
the
seventh
person
next
meeting,
hopefully
they'll
be
in
place
by
November.
The
person
to
replace
me
hopefully
will
go
through
an
employee
election
and
be
placed
for
the
December
meeting.
So
you'd
have
the
full
confluence
of
people
that
will
be
with
you
for
2020
and
at
least
have
initial
discussion.
A
You
might
finalize
it
in
January,
February,
but
I
think
certainly
to
get
folks
around
having
some
discussions.
It's
probably
hard
to
get
done
in
one
meeting,
and
certainly
people
want
to
ruminate
on
these
kind
of
things
and
think
and
kind
of
noodle
on
stuff.
My
recommendation
to
kick
off
some
of
that
discussion
as
early
as
you
can,
and
so
it
doesn't
sit
and
fester,
but.
A
E
A
D
E
A
A
Long
did
so
when
PMF
put
together
their
mission
statement.
How
long
did
that
take
they've
got
their
mission
stay.
There
worked
on
that
for
a
bit
sure
that
was
drew
was
a
great
wordsmith
on
that
and
there's
stuff
that
I
mean
so
PMF
spend
a
good
amount
of
time
on
it
and
they
they
were
very
contemplative
about
their
approach,
and
so
potentially
it's
I
mean
you
could
also
start
from
something.
That's
already
known.
E
A
D
A
Not
hearing
that
I'm
hearing
the
plan
earlier
so
that
the
work
is
going
on
then
around
it
so
that
the
board
has
capacity
of
time
to
work
on.
Is
that
so
it's
not?
It's
not
come
with
the
book
and
present
the
plan
for
the
time
in
2020.
It's
be
ready
to
be
working
in
2020
on
that
plan.
So
present
the
plan
earlier,
like
I,
think
if
you
can
come
back
in
November
with
this
is
what
we
think
will
be
working
on
on
this
part.
D
D
Well,
I
mean
that
yeah,
so
so
so
the
my
goal
will
be
to
first
get
all
of
the
board
members
together
and
understand.
What
is
what
are
we
here
for?
What
is
the
mission?
What
because
I
think
that's
going
to
drive
everything
else,
I
supposed
to
start
working
on
some
of
the
kind
of
process
and
to
start
thinking
about
what
our
mission
is
and
so
I?
That's,
that's
that's
what
I
was
coming
from
and
and
then
establish
to
have
an
actual
discussion
and
a
board
level
to
to
come
to
and
understand.
D
You
know
what
is
that
we're
thinking
and
supposed
to
come
forward
with
it
to
you
to
you
boy
with
some
suggested
process,
which
maybe
some
board
members
will
ask
some
questions.
Well,
we're
not
really
sure
what
why
are
we
doing
this
for
us
in
this
our
mission
or
isn't
this
we
want
to
do
so.
I
just
want
a
clear
direction
on
that.
So.
E
E
D
Last
question
not
to
be
difficult,
I
think
when
chair
lodge
was
talking
saying:
2020
I
think
he
may
be
referring
to
cattleman
year,
since
we
put
a
work
plan
for
the
fiscal
year.
Do
you
want
the
data
initiative
for
the
calendar
year
2020,
or
do
you
wanna?
Kick
it
off
for
the
fiscal
year
2020
just
to
be
in
line
with
our
work
plan
that
we
work
every
year.
I
mean
that
to
me
that
may
be
easier,
because
otherwise
you
may
have
some
incentive
now
in
2020
that
we
didn't
even
think
about
before.
D
E
2020
calendar
year,
I
think
that's
you
know,
we'll
have
capacity
will
have
the
capability
at
that
point
and
then
we
can.
You
know
we
can
see
how
the
process
that
you
lay
out
in
November.
We
can
see
how
it
lines
up
with
the
budget
process.
I
know
the
budget
process.
You've
gotta
have
proposals
in
place
and
by
the
March
timeframe
on
we
got
some
things
like
that.
So
if
I'm
envisioning
we're
gonna
hit
pieces
of
the
process
during
our
regular
meeting
time,
I'm
not
I'm,
not
envisioning,.
B
E
B
A
Recommend
not
deviating
from
the
fiscal
year
plan,
but
that's
yours
to
decide
not
mine,
so
I
fiscal
year
makes
it
easy,
because
that
way
they
have
things
that
they
have
budget
for.
But
you
know
you
open
for
your
interpretation,
not
mine.
My
recommendation
would
be
stay
on
fiscal
year
because
that
makes
easier
for
staff
to
actually
be
able
to
implement
if
budgets
needed,
but
again
you're
gonna
have
six
months
worth
of
remaining
budget.
But
really
you
only
have
you
need
budget
for
the
following
fiscal
year?
A
E
No
I
do
understand
I'm
very
mindful
about
the
budget
process
too
and
I'm
just
saying
we
there
will
be
the
opportunity
in
early
2020
to
get
started
on
the
work
and
if
the
work
takes
nine
months,
for
example,
and
then
just
making
that
up
if
it
takes
nine
months
and
and
there
is
a
budget
aspect
to
the
implementation,
then
we'll
just
have
to
wait
for
that
next
cycle.
Alright,.