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From YouTube: Public Pension Oversight Board (2-27-23)
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A
D
I'd
like
to
welcome
everyone
today
to
the
second
meeting
of
the
year
of
the
ppob.
It's
one
o'clock
so
I'd
like
to
get
started
on
time.
If
we
could
I
would
recommend
everyone
as
they
walk
in
if
as
you're
sitting,
if
you
would
silence
or
mute
your
cell
phones
and
at
this
time,
Madam
clerk,
you
called
the
road.
Please.
D
D
D
And
as
they
come
forward,
I
just
remember
just
a
quick
reminder
that
the
reason
that
we're
having
this
report
today
is
it's
basically
a
second
set
of
eyes
on
our
Actuarial
procedures,
and
this
is
created
per
the
statute
of
the
ppob
that
that
the
PPO
would
be
retains
responsibility
to
perform.
The
audit
which
we
began
discussing
in
2021
for
those
that
were
here
and
it's
been
progressing
up
until
today
through
2022.
D
gentlemen.
The
floor
is
yours.
G
And
we're
actuaries
with
Millman
here
today
to
discuss
our
findings
of
the
actual
audits
of
the
Kentucky
Statewide
Retirement
Systems.
In
addition
to
Dan
and
myself,
Nick
Collier
and
Aaron
Shapiro
were
also
principal
actuaries,
who
assisted
us
on
the
audit
and,
along
with
a
team
of
actuaries
and
analysts
from
that
assistant,
assisted
us
before
we
get
started.
G
I
would
like
to
thank
the
staffs
of
each
of
the
systems
and
the
Actuarial
firms,
along
with
Jennifer
and
Brad,
as
you
can
imagine,
completing
an
actual
audit
requires
many
pieces
of
information
and
especially
for
systems
as
complex
as
these
numerous
questions
are
needed
to
ensure
our
understanding
of
the
various
Provisions
assumptions
and
statute.
So
we
sincerely
appreciate
their
assistance.
We're
happy
to
take
questions
along
the
way
on
our
presentation
today.
G
G
So
what
is
the
purpose
of
an
actual
audit,
so
we
performed
an
independent
full-scope
audit,
meaning
that
we
completed
a
full
replication
or
parallel
valuation
of
the
liabilities
and
contributions
for
each
of
the
systems
for
the
retirement
and
insurance
benefits.
We
also
reviewed
the
experience
studies
which
reset,
which
represents
a
complete
analysis
by
each
of
the
system,
actuaries
on
the
experience
of
the
systems
and
form
the
basis
for
their
recommended
actual
assumptions,
in
essence,
we're
providing
opinion
on
the
reasonableness
and
accuracy
of
the
application
of
the
Actuarial
assumptions,
cost
methods,
valuation
results
and
contribution
rates.
G
We
also
reviewed
the
teachers,
retirement
system
and
Dan
was
the
lead
actuary
for
that,
and
so
his
comments
will
be
focused
more
on
the
teachers
retirement
system
today
and
then,
in
addition,
we,
we
reviewed
the
judicial
form
retirement
system,
which
includes
both
the
judicial
retirement
plan
and
the
legislators
retirement
plan
so
as
we're
performing
an
actual
audit
of
all
the
systems.
At
the
same
time,
we
feel
this
gave
us
what
I
would
say
is
a
rather
unique
perspective
in
seeing
differences
in
assumptions,
methods
and
in
approach
across
each
of
the
systems
and
their
actuaries.
G
I
Great
I
will
talk
about
the
audit
scope
during
the
audit.
We
covered
many
different
aspects
of
Actuarial
work
when
you
do
an
actual
evaluation.
There
are
many
inputs
that
go
into
the
model.
First
of
the
inputs
is
the
census
data
used.
We
took
the
same
raw
demographic
data
provided
by
each
system
to
each
of
the
differing
Actuarial
firms
and
did
some
analysis
and
some
calculations
to
turn
that
data
that
was
received
from
the
systems
into
the
data
that
was
used
for
the
actual
evaluation.
I
We
compared
our
calculations
to
the
data
summaries
provided
by
the
actuaries
and
had
good
matches,
as
was
shown
in
our
audit
report.
One
additional
step
that
we
did
was
a
comparison
of
recent
benefit
calculations
with
the
data
provided
to
the
actuary
by
each
system.
In
our
experience,
this
is
not
actually
a
common
step
when
it
comes
to
an
actual
audit,
but
it
can
reveal
more
information
and
we
will
talk
about
what
we
did
learn
and
what
we
did
in
a
couple
of
slides.
I
We
also
as
Scott
referenced.
We
did
a
complete
replication
of
all
the
actual
liabilities
and
the
normal
costs.
The
normal
costs
are
the
costs
allocated
to
a
specific
year
based
on
the
actual
cost
method,
and
we
did
this
by
taking
all
the
same
inputs,
all
the
same
data
on
the
same
Actuarial
assumptions,
all
the
same
actual
methods
as
well
as
the
plan
provisions,
and
we
verified
the
plan.
Provisions
stated
in
the
actual
evaluation
reports
with
the
statute
and
with
the
member
handbooks,
and
then
we
made
sure
that
those
Provisions
were
Incorporated
in
the
calculations.
I
After
feeling,
good
about
the
liabilities
we
move
on
to
the
out
to
the
asset
side
of
things,
and
we
use
the
income
statement,
balance
sheet
and
the
asset
valuation
method
to
determine
a
smooth,
Actuarial
value
of
assets
used
in
the
funding
calculations.
There's
a
five-year
smoothing,
that's
used,
and
that's
done
because
there's
so
much
volatility.
If
you
took
the
market
value
of
assets
on
a
specific
date
for
your
funding
calculations,
it
would
be
more
volatility
in
the
contribution
rates.
I
We
then
also
looked
and
did
a
peer
review
of
The
Experience
studies,
establishing
the
recommendations
for
the
actual
assumptions
on
the
economic
side,
those
include
inflation,
investment
rate
of
return,
interest,
credit
and
salary
growth,
and
then
we
also
looked
at
the
other
type
of
broad
type
of
actual
assumptions.
That's
the
demographic
assumptions.
That's
reflects
when
members
terminate
employment
when
they
retire
when
they
become
disabled
and
how
long
they're
anticipated
to
live.
G
Okay,
so
moving
on
to
the
next
slide
anytime,
you
complete
an
audit.
You
tend
to
really
focus
on
those
aspects
where
we
believe
some
modification
and
current
procedures
would
be
desirable
and
we're
going
to
have
a
handful
of
items
that
we're
going
to
discuss
today.
But
we
do
want
to
make
sure
that
it's
clear
that
our
findings
are
such
that
this
is
a
favorable
review,
that
we
found
that
the
actual
procedures
and
practices
to
be
of
a
high
quality
and
in
compliance
with
all
major
aspects
of
the
applicable
actual
standards
for
all
of
the
systems.
G
First,
as
we've
mentioned
a
couple
times
that
we
perform
the
full
replication
or
a
parallel
valuation,
and
that
indicated
no
significant
deviation
from
the
amounts
calculated
in
the
valuation.
In
fact,
the
couple
of
relatively
small
items
that
we
found
that
we
noticed
they
were
actually
corrected
in
the
2022
valuations.
G
Now,
since
we
were
performing
an
audit
of
all
the
systems
at
once,
we
noticed
differences
in
certain
assumptions
or
methods
used
by
each
of
the
actuaries,
and
our
suggestion
is
attempt
to
promote
a
consistency
in
that
framework
used
all
the
while
reflecting
each
system's
unique
demographics
and
funding
situations.
And
so
we'll
discuss
these
in
our
presentation
today.
G
Other
specific
items
that
we
believe
require
additional
study
or
modification
include
an
increase
in
the
assumed
interest.
Crediting
rate
for
the
hybrid
plan
benefits
a
reduction
in
the
inflation
and
investment
return,
assumption
for
jfrs,
and
then
a
review
of
how
the
final
average
compensation
should
be
accounted
for
in
the
actual
evaluation,
specifically
for
certain
members
of
sprs
for
state
police.
G
And
so
this
impacted
kers
and
cers,
and
also
there
was
we
found
that
a
mortality
table
was
misapplied
within
the
actual
programs
and
for
both
the
JRP
and
lrp
valuations.
And
both
of
these
items
have
been
where
our
understanding
has
been
subsequently
corrected
in
the
2022
valuations.
G
G
In
addition,
we
review
that
the
retiree
data
with
the
data-
that's
supplied
subsequently
to
the
actuary
in
the
following
year,
to
ensure
that
all
aspects
are
being
transmitted
to
the
actuary,
such
as
their
benefit
amounts
and
how
that
benefit
amount
may
change
in
the
future.
Upon
the
death
of
the
retiree
or
the
death
of
the
beneficiary,
in
all,
we
reviewed
86
individual
benefit
calculations
56
across
the
systems
in
kppa
15
for
TRS
and
15
for
jfrs.
G
Now,
one
item
we
specifically
found
was
a
development
of
final
average
compensation
for
Tier
1
sprs
members
for
Tier
1,
State,
Police
members
and
the
the
final
average
calculation
appears
to
result
in
an
amount
that
could
be
higher
than
the
members
typical
monthly
salary,
and
thus
it's
higher
than
that's
being
estimated
in
the
by
the
actuary
in
the
actual
program.
So
we
recommend
the
review
to
determine
if
a
load
should
be
incorporated
into
the
actual
evaluation.
For
this
particular
feature.
G
In
addition,
there's
no
allocation
of
the
liability
when
the
member
is
an
active
employee
mean
the
entire
liability
is
either
considered
hazardous
or
non-hazardous
up
until
that
point
of
retirement.
So
when
the
member,
when
the
member
actually
does
retire,
a
loss
is
occurring
on
one
of
the
plans
where
the
full
allocation
we're
now
the
allocation
applies
when
there
was
no
allocation
before
and
a
gain
occurs
on
the
plan
where
the
full
liability
had
previously
resided.
G
So
regarding
the
actual
evaluation
methods
and
procedures,
we
found
them
to
be
in
compliance
with
actual
standards
of
practice
and
the
funding
policy
to
be
in
line
with
actual
guidance.
Specifically
in
our
report,
we
referenced
a
white
paper
that
was
published
by
the
conference
of
Consulting
actuaries
several
years
ago.
G
A
few
considerations
we
do
offer
is
four
kpas
for
the
kppa
systems.
The
unfunded
liability
is
amortized
over
a
30-year
close
period
as
of
July,
1,
2019
and
so
28
years
were
remaining.
As
of
the
July
1
2021
valuation.
Subsequent
changes
are
being
amortized.
Subsequent
changes
to
the
unfunded
liability
are
amortized
over
20
years
from
the
date
that's
calculated,
and
this
methodology
is
consistent
with
actual
guidance.
G
The
issue
becomes
that
if
actual
gains
have
occurred,
since
that
initial
Fresh
Start
base
was
established
from
July
1
2019,
that
those
gains
are
amortized
quicker
than
that
initial
base,
and
then
this
can
result
in
what
we
call
an
effective
amortization
period
being
greater
than
that
remaining
amortization
period.
The
remaining
Fresh
Start
amortization
period
of
28
years,
and
basically,
what
this
means
is
that
the
the
calculated
amortization
amount
is
less
than
if
you
would
calculate
a
28-year
amortization
of
the
unfunded
liability,
and
so
our
suggestion
is
to
Overlay
a
minimum
amortization
payment.
G
That's
based
on
amortizing
the
unfunded
liability
over
this
remaining
Fresh
Start
amortization
period,
so
28
years
and
21.
2021
27
years
in
2022.
Up
until
the
point
you
get
to
that
20-year
period
methodology,
we
also
reviewed
the
allocations
for
kppa
the
house
bill
8
allocations,
as
we've
referred
to
them
by
individual
employer.
G
I
Thanks
Scott
for
TRS,
we
suggest
that
more
clarity
be
provided
regarding
any
special
Appropriations
and
on
the
overall
calculations
of
the
contribution
requirements
for
the
special
appropriation,
we
did
receive
clarification
that
the
intent
was
to
reduce
the
employer
contributions
rather
than
accelerate
a
payment
of
the
unfunded
liability
on
the
next
slide.
I
will
provide.
We
do
provide
more
details
regarding
the
calculation,
the
TRS
contributions.
I
When
we
reviewed
the
report,
we
had
some
confusion
on
our
end
about
how
the
contribution
rates
were
developed
through
our
analysis
and
information
received
from
the
system
and
from
the
actuaries
or
from
the
actuary.
We
were
able
to
put
together
these
charts
on
this
slide
that
we
feel
are
instructive
in
understanding
how
the
contribution
rates
were
developed.
The
first
chart
in
the
upper
left
hand
corner
shows
the
statutory
contribution
rates
made
by
members
and
employers,
which
vary
by
University
and
non-university,
and
those
hired
before
or
after
July
2008.
I
And
if
you
look
at
all
those
rates
and
you
take
a
weighted
average
looking
at
the
pay
for
each
of
those
categories,
you
end
up
with
a
21.68
percent
contribution
rate
and
now
I'll
move
over
to
the
chart
on
the
right
hand,
side
where
the
21.68
will
appear
later,
but
taking
in
one
step
at
a
time.
The
gross
normal
cost
is
16.20
percent,
and
that
was
again
taking
a
weighted
average
of
the
reported
rates
for
University
and
non-university
members.
I
Then
there's
the
unfunded
liability
contribution
and
we
calculated
that
to
be
a
30.92
percent.
The
30.92
percent
isn't
in
the
actual
evaluation,
but
the
1.17
billion
number
that
is,
there,
was
developed
in
the
actual
evaluation
and
we
were
able
to
match
that
calculation
using
the
assets
using
the
liabilities
using
the
amortization
policy.
I
But
when
it
comes
to
the
47.12,
you
can
subtract,
the
21.68
percent
I
talked
about
being
developed
on
the
upper
left,
hand,
side
and
subtract
a
special
State
appropriation
of
2.38
and
that's
how
the
actuary
determine
the
23.05
percent.
That
is
in
the
actual
evaluation
report,
and
so
you
can
feel
good
that
we
were
able
to
match
the
23.05
by
going
through
this
process,
and
you
can
be
assured
that
the
actuary
did
the
same
process
now.
I
I
will
say
that
in
the
actual
evaluation
report,
the
emphasis
is
on
the
16.18
percent,
which
is
a
phased
in
contribution
rate.
Basically,
had
there
not
been
the
experience
study
had
the
old
assumptions
been
used,
there
would
have
been
a
14.48
percent
rate
having
gone
through
all
the
same
steps
on
the
right
hand.
I
Side
of
this
of
this
slide
and
the
16.18
is
just
20
percent
of
the
14.48
to
23.05
percent,
and
our
suggestion
is
that
more
clarity
be
added
to
the
reports
to
denote
the
total
contribution
requirement,
for
instance
the
47.12
percent,
and
also
the
portion
that's
phased
in
and
the
remaining
rate
that
is
deficient
and
what
is
the
impact
on
future
contribution
rates?
And
one
last
thing
to
note
is
that
the
actual
standard
of
practice
number
four
has
been
revised
and
some
more
disclosure
will
be
required
by
that
Aesop
actual
standard
of
practice.
G
Okay,
so
on
slide,
eight,
so
over
the
next
couple,
slides
we're
going
to
detail
a
review
and
suggestions
regarding
the
actual
assumptions.
Before
we
begin,
we
do
want
to
note
that
the
current
assumptions
are
reasonable
and
in
compliance
with
actual
standards
of
practice
and
as
we
noted
earlier,
performing
the
audit
for
all
the
systems
at
once.
Provided
us
that
unique
perspective
to
compare
and
contrast
how
each
of
the
systems
and
actuaries
develop
the
assumptions.
G
So
on
slide
nine
we're
discussing
the
inflation
and
the
investment
return
assumptions
and
we
independently
reviewed
the
inflation
and
investment
return
assumptions
using
millman's
Capital
Market
assumptions.
As
of
June
30th,
2021
and
June
30th
2022.,
the
chart
shows
the
inflation
assumption,
the
assumed
real
return
and
then
the
resulting
investment
return
assumption
currently
used
by
each
of
the
systems.
Now
recently,
we've
all
heard
stories
inflation's
been
at
a
much
higher
level,
but
long-term
inflation.
G
The
projected
inflation
over
a
30-year
20
30-year
period
has
really
only
ticked
up
a
few
percentage
points
and,
as
seen
here
on
this
chart,
the
jfrs
inflation
assumption
is
about
50
basis
points
higher
than
TRS
and
that
70
basis
points
higher
than
kppa.
And
as
such
we
do
recommend
the
reduction
in
the
inflation
Assumption
of
50
basis
points
and
a
corresponding
reduction
to
the
investment
return
assumption
for
jfrs.
G
G
So
as
such,
the
current
assumptions
are
currently
below
millman's,
50th
percentile,
meaning
that
half
the
time
we're
projecting
out
returns
above
it
or
half
the
time.
We're
projecting
out
returns
below
that
particular
level
as
of
June
30th
2022
for
the
kppa
systems
and
TRS,
and
therefore
we're
not
recommending
any
changes
to
those
assumptions
at
this
time
now
on
slide
10
we're
discussing
the
specific
hybrid.
G
The
cash
balance
accounts
are
credited
with
interest
equal
to
75
percent
of
the
average
of
the
compounded
Return
of
the
past
five
years,
that's
in
excess
of
four
percent
plus
four
percent.
So,
therefore,
when
that
average
return
is
less
than
four
percent,
the
four
percent
is
still
credited.
So
we
perform
two
analyzes
to
review
the
specific
assumption
that
the
actuaries
are
using.
G
One
was
a
historical
analysis
and
we
looked
at
what
the
current
investment
portfolios
are
and
estimated
what
their
actual
returns
were
in
the
past
30
years
and
apply
the
formula
to
those
to
those
Returns.
The
second
one
we
did
was
a
forward-looking
analysis
that
reflects
the
distribution
of
anticipated
Returns
on
the
portfolios.
G
Now
we
know
that
the
investment
return
assumption
is
not
to
be
is
not
meant
to
be.
The
return
that's
expected
to
occur
each
year
in
the
future,
but
rather
it
represents
an
average
of
potential
returns,
accounting
for
the
portfolio's
asset
allocations
and
risk
components,
and,
based
on
these
two
analyzes,
we
determined
that
the
average
excess
return
is
greater
than
that,
what's
currently
being
used
in
the
actual
evaluation.
G
So
when
you
look
at
the
the
chart
there,
the
top
part
of
this
chart
shows
what
the
assumed
access
return
currently
is.
So
for
kers,
non-hazardous
and
State
Police.
The
actuary
is
assuming
an
additional
0.9375
percent,
so
a
little
under
one
percent
for
jfrs,
it's
as
high
as
1.875
percent
and
then
based
on
our
historical
analysis
and
our
forward-looking
analysis
for
kers
non-hazardous.
G
Our
assumptions
range
between
1.5
percent
and
2.4
percent.
For
that
one
specifically
and
then
the
bottom
half
of
the
grid,
we
add
in
the
four
percent
assumption,
and
so
you
can
see
that
you
know
for
kers
and
non-hazardous.
The
assumed
return
on
the
hybrid
plan
accounts
those
the
cash
balance
accounts
is
that
4.9375
percent,
and
then
our
calculations
are
estimating
it
to
be
somewhere
between
the
five
and
a
half
and
six
point
four
percent,
and
we
show
what
they
are
for
each
of
the
different
systems
there.
G
So
our
recommendation
is
that
each
Actuarial
firm
perform
similar
analysis
to
determine
if
an
increase
in
the
Assumption
should
occur,
and
so,
while
the
hybrid
plan
is
a
relatively
small
impact
on
liabilities.
Currently
we
believe
this
change
will
have
an
impact
on
the
projected
long-term
cost
of
the
system.
Foreign
we'll
move
on
to
slide
11.
I
Great
thank
you
and
we'll
talk
about
mortality.
That
is
the
most
significant
of
the
demographic
assumptions.
We
believe
that
the
assumptions
used
by
each
of
the
actuaries
are
reasonable.
Mortality
assumptions
are
typically
split
into
two
components.
One
is
the
current
base
rates
and
these
reflect
how
long
people
are
living.
Now
it
looks
at
the
age
sex
characteristics
of
each
individual
and
looks
at
How
likely.
I
The
person
is
to
live
another
year
and
how
long
that
person
is
to
live
and
those
are
set
based
on
an
experienced
study
that
looks
at
what
is
happening
currently
now,
in
addition
to
what's
happening
currently,
there's
a
second
component
and
that's
how
the
base
rates
are
going
to
be
expected
to
change
over
time.
We
call
this
mortality
Improvement
and
each
of
the
actuaries
uses
different
versions
of
mortality,
Improvement
scales
produced
by
the
Society
of
actuaries.
I
While
it
does
certainly
make
sense
to
look
at
by
System
the
base
rates
to
look
at
the
the
current
assumptions
for
the
base
rates,
it's
not
as
clear
that
there
should
be
changes
in
what
the
Improvement
of
mortality
should
be,
for
instance,
with
what's
being
used
here.
The
teacher's
mortality
is
expected
to
improve
less
than
the
other
systems,
and
currently
Society
of
actuary's
guidance
does
not
really
vary
the
rate
of
improvement
by
employee
type.
I
I
One
is
the
application
and
the
contingent
survivor's
mortality
table.
The
Society
of
actuaries
show
research
shows
that
surviving
spouses
have
significantly
higher
mortality
at
some
of
the
60s
and
70s
type
ages,
then,
would
happen
for
the
beneficiaries
prior
to
the
member's
death
and
the
Society
of
actuaries
specifically
cautions
against
the
use
of
the
same
table
prior
to
and
after
the
member
dies,
and
we
recommend
that
the
actuaries
consider
that
same
approach
here,
the
other
technical
issue
refers
to
the
use
of
one
mortality
table
for
both
the
Hazardous
and
the
non-hazardous
in
the
kppa
systems.
I
This
seems
to
be
the
one
and
only
Assumption
of
consequence
that
doesn't
vary
between
the
Hazardous
and
non-hazardous
and
since
separate
valuations
are
conducted
for
hazardous
and
non-hazardous.
We
would
suggest
a
review
to
determine
if
the
experience
of
each
group
is
statistically
different
and
it
very
much
might
be
because
the
Society
of
actuaries
does
produce
Separate
Tables
for
safety
versus
General
employees.
I
Other
assumptions
on
the
insurance
valuations,
we
suggest
consistency
be
considered
for
two
of
the
assumptions
regarding
health
care,
Trend
and
aging
factors.
Again.
Each
of
the
assumptions
used
by
the
actuaries
are
reasonable,
but
they
do
differ,
even
though,
in
this
case,
the
underlying
benefits
are
provided
by
the
Kentucky
employee
health
plan
for
all
members
prior
to
Medicare
eligibility.
G
And
then
the
other
couple
things
that
we
noted
there
on
the
slide
for
jfrs,
the
actuary
USI
for
jfrs
used
a
dual
salary
increase
assumption
effectively.
One
percent
assumed
salary
increases
for
a
three
year
period
of
time
and
then
three
and
a
half
percent
year
thereafter
in
the
application
of
the
salary
scale,
they
apply
the
one
percent
Assumption
of
what
we
call
backwards
so
back
to
the
person's
actual
date
of
hire.
G
This
has
a
a
technical
issue
in
terms
of
how
you
allocate
the
liability
to
the
the
members
actual
to
service
accrued
as
of
the
valuation
date
and
by
using
the
one
percent
assumption
versus
the
three
and
a
half
percent
assumption.
A
higher
accrued
liability
is
developed.
We
weren't
sure
if
that
was
the
intention
or
not,
so
we
just
kind
of
note
it
in
our
report.
The
second
thing
that
we
note
is
regarding
a
sizable.
G
What
we
call
is
a
sizable
load
to
account
for
members
who
retire
or
who
do
not
retire,
I
should
say
after
termination
with
lrp,
but
whose
benefits
could
increase
substantially,
based
on
non-legislative
salaries
earned
subsequently,
and
so,
with
such
a
significant
load,
effectively
we're
suggesting
if
additional
data
could
be
provided
to
to
the
actuary
to
jfrs,
so
that
it
can
be
more
strategic
in
the
application
of
any
sizable
load.
40
is
a
pretty
large
load
to
apply
to
to
the
liability.
G
G
We
independently
programmed
our
valuation
system
with
the
data
plan,
provisions
and
actual
assumptions
to
perform
a
match,
and
our
replications
indicate
no
significant
deviations
from
those
that
were
calculated.
Although
we
list
the
three
specific
items
here
now,
the
first
and
the
third
item
we
had
noted
earlier
and
they've
actually
been
corrected
in
the
subsequent
2022
valuations
that
have
now
been
released.
G
D
You,
gentlemen,
for
that
very
timely
and
also
accurate
report
for
us.
We
appreciate
the
summary:
are
there
any
questions
from
the
members
and
I
will
start
off
with
chairman.
Higgin
has
a
question
and
if
anyone
else
has
one
please
let
me
know.
J
The
talk
about
a
a
con
consistent
framework
for
setting
assumptions,
and
they
also
could
you
give
us
some
examples
of
of
what
other
states
do
and
and
I
guess
kind
of
to
better
explain
exactly
what
you're
talking
about
on
that
sure
didn't.
G
I
Sure,
well
it
certainly
there
is
a
lot
of
variation
out
there.
I
can
speak
to
the
Florida
retirement
system.
Now
there
there's
a
an
assumption
conference
that
takes
place
every
year
and
the
assumptions
for
the
entire
system.
It's
very
different.
It's
all
one
system
with
different
membership
classes,
but
there
is
one
set
of
assumptions:
there's
one
inflation
assumption,
there's
one
investment
rate
of
return
assumption.
There
are
differences
that
cause
that
to
be
the
case,
but
you
know
there
is
something
to
be
said
for
inflation,
for
teachers
being
the
same
as
inflation
for
other
systems.
I
I
will
also
say
I
work
on
with
the
Washington
State
Retirement
Systems,
and
there
again
it's
looked
holistically,
although
they
do
have
one
separate
board
for
one
of
their
plans,
and
so
in
that
regard
there
are
some
similarities
to
what's
done
here,
but
the
majority
of
the
people,
the
majority
of
the
systems,
are,
do
use
one
set
of
assumptions,
particularly
for
those
you
know,
assumptions
that
could
be
universally
applied
and
I
think
one
one
other
thing
I
just
want
to
make
make
clear
is
that
we
don't
want
to
say
okay
you're,
going
to
use
the
same
mortality
assumption
for
for
each
of
the
systems,
for
instance
in
Florida,
there's
a
separate
assumption
for
teachers
and
there's
a
separate
assumption
for
safety,
there's
a
separate
assumption
for
General,
and
that
is
corresponding
to
the
fact
that
the
Society
of
actuaries
has
done
studies
that
has
shown
statistically
significant
differences
between
those
systems,
and
we
certainly
would
anticipate
that
that
would
be
incorporated
and
of
course
they
are
Incorporated.
I
But
when
it
comes
to
things
like
mortality
Improvement
in
Florida,
there's
only
there's
only
one
assumption
for
how
much
the
current
mortality
is
going
to
improve.
In
the
future
years,
so
it
was
kind
of
a
long-winded
answer,
but
I
hope
it
got
to
your
question.
J
Thank
you,
and
did
you
I
do
in
your
Mr
Chairman's,
okay,
but
one
of
the
one
of
the
things
you
mentioned
in
your
assumptions
for
the
payroll
assumptions
and
you
had
that
in
there
it
looked
like
the
systems
are
using
2.3
to
2.5
as
their
assumption
for
payroll
increase,
and
you
said
that
that
was
somewhat
appropriate
and
that's.
G
Correct
okay,
correct
from
an
inflation
assumption
perspective.
Yes,
yes,
that
and
that's
consistent
with
millman's
current
capital,
Market
assumptions
and
probably
has
been
I,
think
I.
Think
our
Capital
Market
assumptions
have
had
inflation
about
2.3
percent.
It's
it's
been
for
quite
a
while
now
short
term
over
the
next
five
years,
or
so
our
inflation
assumptions
are
higher.
But
then
it's
anticipated
to
you
know
over
a
longer
period
of
time,
still
be
in
that
2.3
2.35
range
at
this
point
in
time,.
J
Mr
chairman
one
more
and
I
noticed
you.
You
spoke
several
times
through
the
when
I
read
this
reciprocity
issues
between
kppa
and
TRS.
Could
you
elaborate
a
little
more
on
that.
I
G
Sure
so
you
know
when,
when
members
change
systems,
they
have
options
and
I'm
trying
to
remember
the
details
specifically,
but
on
TRS
they
have
options
of
incorporating
their
kppa
service
and
compensation
in
developing
that
benefit
amount
and
in
TRS
that
accrual
rate
varies
based
on
their
years
of
service.
So
by
including
sort
of
Prior
periods
of
service
it
it
has
an
effect
of
an
impact
of
increasing
their
benefit.
G
You
know
greatly,
so
it's
really
trying
and
we've
seen
I'll,
say
systems
struggle
of
making
sure
that
the
data
can
be
supplied
to
the
actuaries
to
account
for
members
who
might
have
this
prior
service.
Ohio
is
one
kind
of
system
that
comes
to
mind
where
they
have
a
reciprocity
agreement
across
their
systems
and
what's
the
impact
on
when
the
person
finally
retires,
you
know
the
whole
point
of
the
Actuarial
function
is
trying
to
produce
benefits
that
are
going
to
be
consistent
with
what
the
member
actually
receives,
and
so
you
know
quote.
G
Hidden
reciprocity
service
is
something
that
doesn't
actually
get
reflected
in
that
in
that
program,
part
of
it
always
comes
down
to
the
extent
of
you
know.
What's
what's
the
impact
of
that
reciprocity
service
and
how
prevalent
is
it
so
I
think
our
recommendation
at
this
point
is
you
know,
estimate
what
the
prevalence
is
estimate,
what
the
potential
impact
is
and
then
can
the
actuary
incorporate
a
specific
load
in
their
valuation
to
to
reflect
it.
Thank.
K
Thank
you,
Mr
chairman,
thank
you
for
the
lens
that
you're
bringing
to
this.
You
know
it's
really
interesting
to
hear
you
know
the
cross.
The
systems
there
and
I
want
to
just
make
a
note.
I
appreciate
the
comment
about
clarification
on
special
Appropriations,
and
your
comment
about
that.
That's
that's
that
should
be
well
regarded,
got
a
question
on
the
mortality
Improvement
scale
that
you
mentioned.
I
K
Believe
in
the
last
experience
study
for
the
teachers
retirement
system,
that
was
one
of
the
key
changes
that
they've
made
was
the
method
by
which
they
were
calculating
the
mortality
rate
of
mostly
teaching
and
School
District
type
of
employees.
So
is
the
statement
in
slide
11
that
they
use
the
2020
scale?
Is
that
accurate
with
what
they
changed
recently
with
experience
study,
and
you
all
are
recommending
that
kpba
look
at
something
similar.
I
Well,
I
think
when
it
comes
to
the
Improvement
scale,
the
yeah
you're
right
that
the
most
recent
experience
studies
did
incorporate
updates
to
the
Improvement
scale
and
they
both
well.
Both
the
you
know
the
jfrs
and
the
TRS
went
to
the
latest
SOA
Society
of
actuaries
mortality
Improvement
scale.
However,
on
the
teacher's
side,
there
was
a
belief
that
Improvement
would
be
slower
than
the
Improvement
implied
by
the
standard,
most
recent
table
by
the
Society
of
actuaries,
and
that
was
not
what
was
done
on
the
jfrs
side.
K
I
Kpba,
well,
there
are
a
couple
things
that
are
different
about
the
yes.
Thank
you.
Thank
you.
There
are
a
couple
things
that
are
different
about
the
kpba.
For
one
thing,
the
just
simply
the
the
timing,
The
Experience
study
was
different,
so
they
didn't
have
the
very
latest
one,
but
also
there
was
a
use
of
what
they
call
the
ultimate
table.
On
the
kpba
side,
the.
K
I
Of
actuaries
has
gotten
very
complicated
with
having
a
select
and
ultimate
table
where,
for
a
few
years,
there
are
different
rates
that
vary
by
age
and
by
gender
as
to
how
much
mortality
is
going
to
improve,
not
just
what
the
current
rates
are,
but
how
much
it's
going
to
improve
and
what
kppa
has
done
and
Gabriel
rotors
to
Smith
is
recommended
and
kbpa
is
done,
is
to
not
look
at
the
early
fluctuations,
but
to
look
at
okay.
Where
is
it
going
to
be
eventually
and
let's
assume
that's
what
should
be
used
now.
K
K
K
G
Yeah
and
just
to
just
to
add
on
you
know,
one
of
the
differences
between
kpba
and
T
and
TRS.
That
Dan
mentioned
was
the
timing
of
the
experience
study
and
so
getting
back
to
the
other
question
of
how
do
you
kind
of
produce
consistent
framework
aligning
the
timings
of
the
experience
studies?
G
So
if
all
the
investment
return
assumptions
are
being
based
on
Capital
Market
assumptions
as
of
2023
as
of
2024,
then
you're
going
to
get
a
little
more
consistent
assumption,
as
you
can
imagine,
if
we
were
sitting
in
2020
versus
2023
you're,
going
to
come
up
with
a
different
assumption
based
on
what
you're
you
know,
based
on
that
timing,
so
aligning
the
the
timing
of
the
experience
study,
which
would
kind
of
help
with
that
when
GRS
recommended
the
the
using
of
the
the
select
table,
the
Society
of
actuaries,
the
Improvement
scales
were
relatively
new.
G
At
that
point,
we're
now
about
I
think
seven
tables
in
seven
years
worth
in
they
were
producing
mortality,
Improvement
scales
every
single
year
and
every
single
year
that
they
had
produced
them.
They
lowered
what
they
were,
projecting
the
Improvement
was
going
to
be
and
I
think
personally,
and
they
may
have
a
similar
experience.
But
you
know
when
they
first
came
out
with
the
tables.
A
lot
of
actuaries
thought
that
they
were
somewhat
being
too
conservative
that
the
projection
was
was
too
long
and
together.
G
I
People
are
going
to
live
longer
and.
G
That's
a
good
thing
right,
but
it's
how
you
reflect
it
in
the
actual
evaluation
process
and
as
time
marched
on
and
the
tables
came
down,
the
rates
of
improvement
came
down.
We
became
especially
in
2020
when
they
came
out
with
that
table
personally
felt
much
more
comfortable
with
the
use
of
those
Improvement
scales
and
I.
Think
that's
why
you
kind
of
see
with
the
the
actual
firms,
TRS
and
Jr
for
jfrs
that
they
had
used
that
2020
scale.
Of
course
it's
important
to
note.
G
None
of
that
data
reflects
any
impact
of
covid,
and
it's
really,
you
know
over
the
next
couple
years.
Us
as
actuaries
are
all
trying
to
figure
out.
How
should
we
reflect
the
impact
of
covet
if
we
should
reflect
it
at
all,
because
when
we
do
the
valuations
in
2023,
it's
for
the
individuals.
Who've
survived
right,
it's,
so
how
is
their
mortality
going
to
be
any
different
than
what
we
were
assuming
prior
to
2019.
A
Thank
you,
Mr
chairman
Mr,
Porter,
Wade
I,
appreciate
you
all
being
here
today
in
presentation,
I'd
like
to
go
back
to
page
seven
of
your
summary
and
page
10
of
the
full
audits
where
it
talks
about
that.
But
in
regard
to
the
TRS
and
the
way
they
do
their
valuation
method,
I
just
want
to
clarify
one
thing:
I
think
I'm
right
in
this:
the
weighted
average
statutory
rate
of
21.68.
I
A
So
we
have
a
follow-up
Mr
chair
also
on
this
chart.
You
you
list
the
on
the
right
hand,
side
you
list
the
gross
normal
costs,
the
unfunded
liability
contribution,
and
you
total
that
so
am
I
correct
that
the
actual
determined
contribution
of
1.783.2
billion
dollars
is
the
actual
cost
needed
to
fund
the
teacher's
retirement
system
per
year,
based.
A
A
They're
they
smooth
it
in
over
five
years
right
then,
the
next
year
we
had
big
losses
during
covet,
I
think
around
20
percent.
So
when
you
do
this
moving
in,
aren't
you
really
offset
in
a
sense,
offsetting
those
huge
losses
and
gains,
and
is
this?
Is
this
something
is
this
practice
moving
in
something
that
other
states
do
other
pension
systems
do,
and
could
you
elaborate
a
little
bit
on
the
benefits,
pros
and
cons
of
doing
this
moving
in
sure.
I
Yeah
well
I
I,
just
first
of
all,
Most
states
do
in
most
public
Retirement
Systems,
do
some
kind
of
smoothing
and
I
believe
that
the
five-year
smoothing
is
the
most
common.
There
are
a
lot
of
different
flavors
that
get
done,
but
the
five
years,
as
is
done
in
Kentucky,
is
the
most
common
and
as
far
as
the
pros
and
cons,
it's
really
about
contribution
rate
stability,
because
the
market
value
fluctuates
a
great
deal
and
and
I
mean
that's.
I
Basically,
the
the
pro
the
I
mean
the
the
con
I've
heard
the
saying
that
you
can't
pay
benefits
with
smooth
assets.
But
realistically,
if
we're
talking
about
a
long-term
funding
policy,
we
feel
it
makes
sense
to
have
an
assets
moving
to
mitigate
the
somewhat
artificial,
day-to-day
Market
volatility.
I
A
Chair
one
more
brief
question
and
then
I'll
pass
it's
not
in
your
summary,
but
in
page
17
of
the
full
report.
You
talk
about
the
jfrs
system
and
you're,
referring
to
the
non-legislative
salary
load
for
lrp
and
you're,
using
basically
the
the
load
is
that
can
be
increased
by
40
percent
and
for
those
that
don't
understand,
we
have
legislative
members
who
go
on
to
other
employment
and
state
government,
sometimes
at
much
higher
salary,
so
that
increases
their
their
pension
benefits
in
the
lrp
system.
A
G
And,
and
in
essence,
that
was
our
concern
I,
if
I
remember,
numbers
right,
you
know,
I
think
the
the
liability
for
the
active
members
was
10
million
dollars,
I
want
to
say
and
and
and
then
effectively
it
turns
into
14
million
because
of
the
load
and
that
load
is
applied.
G
You
know
to
the
entire
Act
of
liability
as
well
as
there's
a
handful
of
what
we
call
terminated
vested
members
and
really
this
provision
applies
to
members
who
terminate
to
the
legislators,
who
retired
directly
from
service
commence
their
benefit
at
that
time,
their
benefits
is
is
known.
Based
on
the
information
the
issue
becomes.
G
Is
that
when
a
legislator
moves
on
to
other
employment
within
the
state
government,
as
you
know,
a
much
higher
salary
in
terms
of
what
you
know,
what
they're
earning
than
that
higher
salary
can
increase
their
their
retirement
benefit
and
it
can
actually
have
you
know,
really
significant
increase
and
that
that's
really
what
it
came
down
to,
as,
as
quote
an
outsider
I
mean
as
actuaries.
G
We
probably
use
loads,
two
percent
three
percent,
maybe
five
percent,
it's
rare
that
I
would
ever
use
a
load,
that's
as
even
as
high
as
ten
percent.
You
got
to
really
get
in
this,
so
for
a
load
to
be
as
high
as
40.
G
Now
we
looked
at
the
analysis
that
USI
performed
the
actuary
for
jfrs
and
they
kind
of
showed
here's
what
we
did
and
and
here's
the
low
here's
the
extra
additional
benefits
that
these
members
have
accrued
based
on
these
non-legislative
salaries,
and
then
they
compared
it
to
all
those
members.
Even
those
who
didn't
get
any
and
came
up
with
this
40
load,
they
ensured
they
had
done
it
a
couple
different
times
and
they
were
pretty
similar.
G
J
We
talk
about
risk
prostate
and
you
just
talked
about
it
with
with
the
legislators
and
and
that's
something
I
I
don't
agree
with
I'm
on
the
few
that
voted
against
it
when
it
came
up
for
a
vote
anyway.
One
of
the
few
remaining
should
say
that,
but
we
have
reciprocity
all
across
the
the
systems.
You
could
have
a
a
magistrate
that
served
for
20
24
years
in
Ranford,
County
judge
and
and
hold
that
County
judge
at
a
much
higher
rate
of
pay.
J
Those
respiratory
issues
are
not
mentioned
in
other
systems.
Should
they
be.
G
You
know
effectively,
so
what
I
would
say
is
you
know
we
kind
of
talked
about.
We
did
a
review
of
individual
benefit
calculations
and
based
on
that
review
is
really
what
came
out.
The
members
we
chose
were
completely
random
in
many
ways,
so
we
just
looked
at
people
who
had
retired
during
the
past
year.
It's
certainly
possible.
If
you
had
looked
at
every
single
calculation,
you
might
come
up
with
you
know
more
members,
I'm
always
surprised
with
what
we
do
find
with
the
amount
of
members
that
we
have.
G
If,
if
there
are
I'll,
say
additional
situations
that
are
prevalent
enough,
that
you
feel
that
you
should
be
Corp
incorporating
it
to
some
degree,
I
mean
the
systems
are
going
to
know
best
because
they're
going
to
know
their
membership
best
that
so
it
didn't.
Nothing
else
came
up
in
our
review,
based
on
the
the
calculations
that
we.
J
Could
see
I
just
point
that
out
because
you
brought
it
up
about
the
legislative
retirement?
We
understand
that,
but
that's
reciprocities
across
all
systems
items-
and
you
also
mentioned
you-
talked
about
the
reciprocity
between
like
Tia
TRS
somebody
working
TRS
for
10
years
and
work
goes
over
to
cers
for
17
and
retires.
J
G
Yeah
I
think
it
was
the
the
additional
service
so
really
from
our
standpoint.
It
comes
down
to
is:
does
the
actuary
know
about
that
prior
service?
So,
when
they're
determining
the
liability
in
the
actual
evaluation,
are
they
determining
an
accurate
estimate
of
the
liability
for
as
many
individuals
as
possible,
and
so
it's
really
the
question
is:
is
that
service
being
supplied
does
this?
Does
the
system
know
and
is
the
search
that
service
being
supplied
to
the
actuary,
so
they
can
include
it
in
their
functions?
To
me,
that's
really.
J
Also,
you
mentioned,
and
and
I'm
not
sure
what
page
it
was
on.
I
should
have
marked
my
pages,
but
the
digital
contribution.
The
general
assembly
made
to
pay
off
the
green
box
dollars
and
I
think
you
kind
of
were
curious.
How
that
was
applied
and
I.
Don't
know
that
you
got
a
good
answer
or
the
good
answer
was
and
then
the
in
the
report
I
think
you
said
it
was
2.338
percent
of
payroll,
correct.
G
Correct
I
think
yeah
I
think
in
our
review
of
of
TRS
there
was
a
special
appropriation
that
was
in
addition
to
the
statutory
we
weren't
sure
if
it
was
something
that
was
supposed
to
be
in
addition
to
it,
it
became
it
was
in
addition
to
the
statutory
rates,
basically
as
we
understood
it,
but
then,
which
resulted
in
a
reduction
in
that
quote
additional
contribution
to
comply
with
that
board
policy.
G
So
once
when
we
understood
exactly
what
it
was,
and
that
was
why
we
kind
of
I
put
the
page
up
that
we
tried
to
put
charts
in
our
report.
So
we
understood
it
better
and
then
you
know
our
recommendation
is
for
the
actuaries
to
to
disclose
that
information
directly
into
their
reports.
J
One
last
question:
Mr
chairman
I,
want
to
make
sure
their
flight
to
Kentucky
was
we
get
asked
all
the
questions
we
can?
Yes,.
J
You
mentioned
in
house
bill
that
in
House
Bill
8,
it
increased
non,
has
liability
by
1.8
percent
because
of
the
way
they
were
reporting
that
are.
G
It
was,
it
was
yeah,
it
was
1.8
percent
and
then
let
me
see
if
I
can
get
to
a
page
Okay.
So,
let's
see
so
for
k-e-r-s.
L
G
J
I
Well,
the
negative
amortization
basically
means
that
the
unfunded
liability
amount
is
expected
to
grow
as
a
dollar
amount
grow
fairly
slowly
at
this
point
now
that
it's
a
23-year
amortization,
but
that
meant
means
that
the
contribution
is
not
enough
to
pay
the
interest
on
the
unfunded
liability
and
the
normal
cost.
The
combination
of
the
normal
cost
and
the
interest
on
the
unfunded
liability.
It's
just
a
little
short
of
that
Benchmark,
and
we
call
that
negative
amortization.
J
I
guess
in
in
your
rate,
what
we've
contracted
for
we
we,
you
will
take
our
phone
calls
for
follow-up
of.
J
E
D
Thank
you
for
your
work
on
behalf
of
the
board
and
if
you
would
pass
on
to
your
entire
team,
our
thanks
as
well.
Thank.
I
D
Up
next,
we
wanted
to
give
the
system
some
rep,
the
representatives
of
the
systems
that
we
just
heard
about
a
chance
to
respond.
Should
you
desire
to
have
a
response?
Please
come
forward
now,
foreign.
K
N
Boat
Craycraft
executive
director
of
the
judicial
Forum
Retirement
Systems
good,
to
be
here
today
and
no
comments
are
pretty
limited.
You
know.
First
off
just
you
know,
board
has
not
been
able
to
meet
since
we
received
the
final
draft
of
the
report.
I
had
received
a
draft
copy
and
it's
pretty
unchanged
from
the
final
report,
so
we
did
get
an
opportunity
to
talk
so
I'm,
just
reflecting
from
our
meeting
in
January.
First
off
we're
happy
to
hear
that
you
know.
N
Overall,
the
assessment
was
positive
and
the
when
you
look
at
the
large
larger
scale
process
of
Actuarial
evaluations,
the
report
was
was
good
and
positive,
so
we're
thankful
for
that.
We're
also
thankful
for
opportunities
to
improve,
and
so,
as
Mr
Porter
mentioned,
you
know,
one
of
the
mortality
tables
was
not
applied
correctly.
That
was
something
that
our
actuary
was
made
aware
of
and
something
we
were
able
to
implement
in
2022,
and
so
you
know
it's
always
good
to
have
someone
take
a
look
and
we
felt
like
you
know.
N
We
got
both
positive
in
the
sense
that
we're
doing
a
good
job.
Our
actuaries
are
doing
a
good
job,
but
also
there
was
spots
to
improve
with
regards
to
the
inflation
assumption
and
the
return
assumption
you
know.
House
Bill
76
was
passed
during
last
year's
session
and
so
we're
slated
to
do
one
of
our
biennial
reviews
of
our
economic
assumptions
in
July,
as
we
lead
into
our
2023
evaluation.
So
that's
going
to
be
on
the
top
of
the
list.
N
I
did
do
some
research
and
when
our
board
adjusted
their
return
assumption
from
seven
to
six
and
a
half
which
was
quite
a
bit
earlier
than
most
plans
at
that
time
they
chose
to
reduce
the
real
return
assumption
and
you
know
they
utilized
a
building
block
approach.
There's
two
building
blocks
inflation
and
real
return.
In
that
particular
case,
they
probably
could
have
spread
that
reduction
across
both
building
blocks,
but
they
chose
one
and
so
I
think
as
a
result.
N
Now
you
know
our
inflation
assumption
is
a
little
bit
higher
just
because
we
haven't
made
a
recent
change
and
then
the
last
thing
I
would
speak
to
with
regards
to
the
legislative
load
and
the
40
percent.
Our
actuary
would
tell
you
that
that
is
not
normal
right,
they're,
not
doing
that
with
a
lot
of
clients.
When
we
did
an
experience
study
in
October,
the
actual
results
of
the
load
were
36
percent,
so
it's
it
is
abnormal,
but
it's
not
unrealistic.
N
I
think
there's
a
couple
factors
that
go
into
play
here:
one:
it's
a
limited
population
sample
size
right,
there's,
not
a
ton
of
folks
that
are
eligible,
and
so
there's
not
you
know.
Thousands
like
there
could
be
at
kppa
with
reciprocity.
It's
a
smaller
group.
However,
the
resulting
change
in
benefit
is
usually
fairly
significant
and
dramatic.
So
when
you
have
a
small
number
and
a
significant
change,
it
has
a
very
large
impact
on
the
ultimate
liability,
and
so
you
know
I
think
the
actuary
has
contemplated
multiple
ways
of
doing
this.
N
You
know
they
just
implemented
this
about
a
decade
ago
and
the
result,
the
actual
results,
are
not
abnormal
to
that
40
percent
load.
So
we're
definitely
going
to
consider
the
recommendations,
but
while
it
it
is
an
abnormal
number,
it's
not
unrealistic.
So
I
just
want
to
make
sure
we
were
clear
there.
D
M
Like
Bo
I
want
to
say
thank
you
to
milliman,
they
were
really
professional.
They
gave
us
great
deadlines,
they
were
very
patient.
We
especially
worked
with
Scott
Porter
and
Aaron
Shapiro,
and,
and
we
really
appreciated
them.
We
certainly
appreciate
the
opportunity,
for
an
audit
audits
are
always
good.
We
are
when
we
got
the
first
draft
and
I
agree
with
Beau.
It
didn't
change
significantly.
When
the
final
came
out.
We
shared
it.
M
Of
course
it
was
embargoed,
so
we
shared
it
just
with
the
leadership,
so
the
cers
CEO
Ed
Owens,
who
is
here
the
KRS
CEO
John
Chilton,
who
is
here
my
boss,
the
kpb
executive
director
David
eager
our
board
chair,
Jerry
Powell
of
the
kppa
board,
chair
Jerry
Powell,
and
we
Danny
White
and
Janie
Powell
Janie
Shaw,
who
were
instrumental
answering
questions
for
Scott
and
Aaron,
were
also
a
part
of
we
looked
at
it
together.
M
We
provided
in
writing
a
response
about
January
26,
which
we'll
be
happy
to
provide
to
you
guys
to
see
our
response.
It
was
only
a
couple
pages
long
in
general,
we
are
thrilled
with
this
report.
It's
terrific.
We
think
it
provides
a
great
level
of
assurance
to
our
members
and
to
you
guys
and
oversight
that
our
valuations
are
accurate
and
appropriate
for
our
plans
in
the
executive
summary
that
you
guys
are
looking
at.
There
are
seven
primary
conclusions.
The
first
one
says
this
is
quoting
from
the
the
report.
M
Audit
provides
a
high
level
of
assurance
that
the
results
of
the
valuation
reasonably
reflect
the
aggregate
liabilities
of
each
system.
We're
very
happy
with
that.
If
you
keep
reading
through
the
reports,
you'll
also
see
see,
quotes
like
overall,
we
believe
that
the
June
30
2021
actual
evaluation
reports
are
reasonable
and
appropriate
for
the
intended
uses
of
these
reports.
M
That's
on
page
four,
on
page
28,
speaking
of
the
benefit
calculations
for
retirees,
this
degree
of
matching
indicates
a
very
high
quality.
Retiree
data
is
being
provided
to
the
actuary
by
each
system.
That's
something
that
always
keeps
me
up
at
night.
When
we're
talking
about
providing
money
data
to
the
actuaries.
Is
it
right?
Is
it
accurate,
Pages
100
through
113?
You
will
find
six
places
because
three
for
pension
and
three
for
insurance.
That
say,
we
view
the
results
as
a
successful
replication
of
milliman
of
grs's
results.
M
So
I
think
we
have
a
clean
bill
of
health
here
and
I'm.
We're
very
excited
about
all
of
that.
I
think
that
speaks
well
to
our
processes
and
our
data
and
the
abilities
of
GRS
to
understand
our
systems
and
provide
us
good
stats.
M
The
recommendation
from
milliman
is
this:
this
consistent
framework
and
the
consideration
of
picking
some
of
the
assumptions
to
be
a
little
more
uniform
across
all
systems.
Our
response
is
on
page
four.
In
there
it
is
the
funded
statuses
risk
tolerances
liquidity
needs,
member
and
retiree
demographics
and
the
asset
allocations
vary
by
System.
Therefore,
the
assumptions
need
to
be
unique
to
each
of
these
systems,
since
setting
assumptions
is
unique
and
specific
to
each
of
these
plans.
M
That
was
one
of
the
primary
reasons
that
that
we
now
have
the
government
structure
that
we
had
that
began
in
2021.
This
appears
to
be
a
little
bit
of
a
reversal
of
that
thought
process.
So
while
we
have
not
shared
this
with
us
with
the
board
yet
because
of
course
it
was
embargoed
until
you
all
see
it,
our
boards
will
see
it
and
they'll
they'll.
Look
at
that
closely.
M
The
remaining
issues
that
have
something
to
do
with
kbba,
3,
5
and
6,
and
then
the
rest
of
the
report
has
sprinkled
throughout
it
a
plethora
of
more
minor
recommendations
that
just
didn't
hit
the
executive
summary.
We
certainly
are
committed
to
looking
at
all
of
it
and
seriously
considering
that
GRS
is
already
plowing
through
some
of
that.
The
boards
will
look
at
all
of
that
and
consider
each
recommendation.
L
Good
afternoon
Beau
Barnes
service,
Deputy,
executive
secretary
and
as
general
counsel
for
the
teachers
retirement
system.
Thank
you
for
the
opportunity
to
make
a
brief
comment
to
back
that
about
the
Actuarial
audit
and
I
will
try
to
be
as
brief
as
I
can,
because
I
know
we
have
a
lot
of
other
things
on
the
agenda.
L
We
certainly
appreciate
the
professionalism
of
working
of
Millman
and
working
with
them.
It
was
a
good
relationship
working
with
them,
and
we
want
to
thank
them
for
the
very
thorough
work
that
they
can
did
in
conducting
a
level
one
full
scope.
Audit.
We
certainly
are
very
pleased
that
they
found
that
the
TRS
actuary
are
is
projecting
the
liabilities
of
the
retirement
system
correctly,
that
the
TRS
independent
actuary
is
using
reasonable
and
appropriate
Actuarial
assumptions
that
are
consistent
with
the
Actuarial
standards
of
practice.
L
We
did
Note
One
exception,
one
sole
exception
to
the
audit
report
and
that
sole
exception
is
noted
by
milliman
in
the
report
that
they
submitted
to
this
board,
and
that
sole
exception
is
a
suggestion
that
the
Retirement
Systems
use
a
cons,
similar
framework
for
developing
Actuarial
assumptions,
and
it
was
noted
by
kppa.
We
are
very,
very
different,
Retirement
Systems
in
many
many
ways:
demographics
just
one
example
of
demographics.
Our
system
is
70.
Female
women
on
average
live
longer
than.
F
L
There
are
also
differences
in
funding
levels,
risk
tolerance,
asset
allocation
and
approach
to
Investments.
You
know
all
of
those
things
we're
a
system
whose
membership
is
95
percent
of
which
do
not
participate
in
Social
Security.
So,
in
regard
to
our
membership,
we
are
largely
a
social
security
replacement
plan
for
our
teachers
and
in
addition
to
those
differences,
we
have
the
findings
that
concluded
that
the
assumptions
developed
by
the
actuaries
are
reasonable
and
appropriate.
L
So
we
would
be
moving
from
something
that
is
working
now
to
something
new
that
is
noted
in
the
audit
report
would
require
complexity
and
even
moving
to
one
of
the
concerns
we
have
here
is,
furthermore,
that
and
moving
to
a
new
system
like
that,
particularly
if
the
assumptions
were
to
be
set
by
one
entity
that
we
are
opening
up
the
possibility
that
we
are
going
to
have
a
system,
that's
going
to
move
and
drive
towards
very
similar
and
I
even
identical
assumptions,
and
that
would
seem
that
we
would
be
actually
consolidating
risk
for
the
Commonwealth
with
similar
and
identical
assumptions,
in
other
words
putting
all
of
our
Actuarial
eggs
in
one
basket.
L
And,
of
course,
those
eggs
represent
tens
of
billions
of
dollars,
so
that
is
a
concern
that
we
have
and
we
feel
like.
We
need
to
note
that
if
we
were
to
use
very
similar
or
identical
assumptions
set
by
one
entity,
particularly
that
we
do
consolidate,
not
spread
risk
for
the
Commonwealth
and
very
respectfully,
we
made
that
one
so
exception
to
the
audit
report.
Otherwise
we
were
extremely
happy
with
it.
It
was
a
very
clean
report
and
very
reassuring
for
our
members
that
we
have
such
a
clean
audit
report.
D
Thank
you,
bro
I
would
just
say
no
true
exception.
I
would
I
would
add
to
that
that
it
seems
to
me
that
that
recommendation
on
their
part
is
simply
food
for
thought
and
I
think
we
need
to
revisit
it
down
the
road
a
little
bit.
We
can
talk
offline,
a
little
bit
more
about
it
and
get
get
more
of
a
consensus,
but
it's
something
we
can
talk
about
down
the
road.
Any
questions
from
the
board.
D
All
right,
the
next
item's
on
the
agenda,
changing
directions.
A
bit
is
a
discussion
of
the
the
bills
coming
up
in
this
General
Assembly
that
impact
pensions
or
could
impact
pensions.
We
have
several
bills,
we're
going
to
move
them
as
quickly
as
we
can.
The
first
one
up
is
representative
sharp.
If
you
would
come
forward
and
while
he's
coming
forward,
I
would
just
mention
that
the
purpose
of
us
hearing
these
bills
today
is
for
vetting
with
respect
to
pension
applicability
or
impact
we're
not
here
to
discuss
pluses
or
minuses
of
the
bill.
D
That's
the
purpose
of
the
standing
committees.
Today,
we
simply
want
to
look
from
the
perspective
of
Pensions
as
to
how
these
bills
might
or
might
not
impact.
With
that
being
the
case,
I
will
open
it
to
representative
sharp
I
will
say
treasure
ball.
It's
very
good
to
see
you
again,
and
we
look
forward
to
hearing
from
you,
representative,
sharp
forgers.
Thank.
O
O
One
of
the
things
that
this
bill
is
addressing
is
some
issues
that
have
come
up
recently
in
by
Major
investment
firms
to
where
they're
starting
to
invest
more
on
a
political
and
biological
level.
So
what
we
wanted
to
do
is
kind
of
look
out
for
the
employees
and
our
pension
plans
to
make
sure
that
they're
getting
the
maximum
returns
possible.
So
what
this
bill
does
is
it?
O
It
basically
says
that
if
you're
going
to
invest
our
pension
plans,
you
must
invest
it
based
on
a
fiduciary
return
and
not
a
political
or
an
ideological
basis.
You
know
the
traditional
you
know
and
that's
the
traditional
returns
that
we
have
done
and
that's
the
way
it's
been
done
for
years
and
again
this
is
a
recent
development
so,
with
that
I'm
going
to
turn
it
over
to
the
treasurer
here,
just.
B
By
way
of
background,
when
I
first
became
Treasurer,
this
was
talked
about
a
lot
at
state,
treasurer's
meetings
and
I
know.
Auditor
Harmon
has
also
been
a
part
of
conversations
where
this
has
come
up
quite
a
bit
and
I
thought
it
was.
It
was
novelty.
B
It
was
academic,
it
was
something
that
was
not
really
going
to
be
actually
available
to
State
Pension
systems,
but
in
the
last
couple
of
years
this
has
become
a
major
issue
and,
like
representative
sharp
has
just
said,
Once
Upon
a
Time
Investments
were
about
in
getting
good
returns
and
that's
what
you
think
of
when
you
think
of
Pensions.
You
think
it's
about
making
sure
you
have
money
when
you
retire,
but
the
problem
with
ESG
is
that
it
looks
at
different
purposes.
Besides
just
getting
good
returns,
it's
environmental,
social
and
governments.
B
That's
what
ESG
stands
for,
and
it's
really
been
a
way
to
push
certain
ideological
perspectives.
Trying
to
get
some
ideological
out
comes
and
it's
using
dollars
to
to
push
Industries
the
way
that
certain
people
want
them
to
go
and
I.
Think
that
it's
contrary
to
what
we
need
to
do
as
as
kentuckians,
we
need
to
make
sure
we're
protecting
our
pensions,
we're
getting
good
returns.
B
We
don't
need
to
play
around
with
ideologies,
so
I'm
very
encouraged
to
see
this
I
think
that
you
know
it's
already
progressing
on
its
way
in
other
areas,
but
but
I'm
glad
that
I
have
an
opportunity
to
discuss
it
with
all
of
you.
So
you
have
some
information
about
what
this
is
and
what
it
would
do.
A
B
B
Yes,
that
is
correct.
It's
just
saying
that
these
these
Returns,
what
you're
getting
out
of
this,
has
to
be
Financial
you're,
not
pushing
an
ideological
agenda.
P
Thank
you,
Mr,
chairman,
okay,
so
here's
the
question
that
I'm
having
trouble
with
and
I
want
somebody
to
assure
me
that
we
are
keeping
everything
in
mind
when
we
make
these
decisions
as
a
state
when
we
invest
state
held
money
and
the
goal
is
to
make
as
much
profit
as
possible
in
the
short
term.
P
How
are
we
accounting
for
the
long
term
costs
to
the
state
that
are
the
results
of
these
decision,
making
processes
and
offset
those
costs
against
the
short-term
gain
of
an
additional
two
percent
return?
Nobody
has
been
able
to
explain
to
me.
How
do
we
look
at
what
it's
going
to
cost
us
as
a
state
to
fix
some
of
the
commercial
ravagant
that
has
been
happening
in
this
state
that,
ultimately,
we
are
responsible
for
fixing,
even
though
we're
supporting
businesses
that
have
created
this
Finance
for
us?
B
If
I
understand
the
question,
I
think
the
question
is
you're
asking:
if
we're
getting
good
returns,
are
we
not
looking
at
the
way
we
want
Society
to
go
and
I
would
argue?
I
would
argue
that
Society
is,
is
policy
related,
which
is
what
this
body
or
or
the
members
of
this
body
are
involved
with
policy
returns?
B
But
you
want
your
Investments
to
be
out,
be
about
good
Investments,
getting
good
returns,
so
you
look
at
it
in
a
long-term
perspective,
of
course,
and
you
look
at
it
in
a
short-term
perspective,
but
it's
about
the
pecuni
area
making
sure
that
you're
having
good
returns
that
people
can
retire
when
they
want
to
retire
anything
else.
Anything
else
is
introducing
problematic
areas
into
Investments,
because
you're
you're,
saying
I
want
to
see
Society
go
to
a
certain
way.
I
want
to
see
companies
operate
a
certain
way
and
that
those
are
policy
issues.
J
Thank
you,
Mr
chairman
treasure
ball.
There
was
a
little
I
guess,
misunderstanding
about
a
report
that
cers
and
kers
are
supposed
to
get
back
to
you
on
I.
Just
want
to
tell
you.
I
was
in
a
meeting,
I,
think
Friday
with
Brittany
and
she's
a
remarkable
her
knowledge
of
of
the
retirement
system
and
and
what
we're
supposed
to
be
doing
and
I
just
want
to
commend
her
for
her
great
work
and
helping
us
understand
exactly
what
it
was
that
we
needed
to
do
so.
Thank
you,
Brittany.
Thank
you.
C
You
Mr
chairman
treasure,
ball,
representative
sharp.
We
appreciate
you
all
coming
forward.
Just
quick
question
on
this
particular
Bill
I
know.
Currently
it's
already
required
Kentucky
law
to
for
our
investments
to
make
a
fiduciary
responsibility.
Does
this
particular
law
or
Bill?
What's
the
goal
of
this
bill?
Is
it
to
tighten
up
even
the
proxy
voting,
because
I
know
that's
been
a
concern
of
yours
and
mine
both
when
it
comes
to
proxy
voting?
Is
that
primarily
what
this
does
or
does
it
do
something
else
as
well.
B
It's
a
good
question
it.
It
offers
some
clarification
when
it
comes
to
ESG
and
the
fiduciary
duties,
it
does
expand
fiduciary
duties
to
asset
managers.
They
are
already
under
fiduciary
laws,
but
it
just
clarifies
that
you
cannot
use
Kentucky's
dollars.
Kentucky's
taxpayer
dollars
Kentucky's
pension
dollars
to
push
certain
ideologies,
so
it
has
a
fiduciary
aspect
to
it.
Some
of
it
is
clarification,
and
then
there
is
a
proxy
element
to
it
as
well.
Very.
Q
How
do
you
determine
whether
or
not
it's
controversial
in
terms
of
the
politics
versus
what's
what's
best,
to
invest
in
some
areas?
Right
I
mean
I.
Don't
want
this
to
come
into
a
political
thing
and
it
sounds
like
some
of
this
is
I.
B
B
It
is
just
about
getting
good
returns,
so
the
language
in
the
statute
actually
tries
to
spell
it
out
in
a
way
that
will
give
some
guardrails
to
it,
and
it
says,
but
urinary
factor
means
a
consideration
having
a
direct
and
material
connection
to
the
Financial,
Risk
or
financial
return
of
an
investment,
so
so
I
think
that
provides
the
guard
rails
and
the
clarity
so
that
you're
saying
you're
not
going
to
go
into
whatever
kind
of
political
issue.
You
want,
whether
it's
the
right
or
the
left
or
anything.
B
That
is
correct
and
and
if,
if
it's
within
investment
judgment
that
this
is
a
good
return
using
traditional
ways
of
evaluating
something,
then.
Q
B
So
some
of
this
is
informed
about
the
way
Investments
are
operating
right
now.
So
this
is
a
world
that
that
I
live
in
and
we're
hearing
a
lot
of
commentary
about,
invest
this
way,
don't
invest
this
way,
use
this
asset
manager,
not
this
one,
because
they
are
trying
to,
for
example,
put
out
the
coal
industry
or
or
eliminate
the
fossil
fuel
industry
in
general.
So
a
lot
of
that
is
informed
by
language
that
we're
actually
hearing
from
people
in
the
investment
world
if
it
is
a
traditional
pecuniary.
B
This
is
a
good
investment
because
I'm
getting
a
good
return.
It
will
look
like
that.
It's
much
more,
it's
much
more.
What
you're
used
to
seeing,
but
we
are
seeing
a
lot
of
language
from
people
saying
hey
we're
actually
doing
this
for
these
ideological
reasons,
most
of
the
time,
they're,
actually
labeled,
ESG
many
times,
they're,
actually
labeled,
ESG
funds
and
I'll.
B
Tell
you
one
thing
to
be
aware
of:
when
it
comes
to
ESG
funds,
is
they
have
very
high
fees,
I
think
it's
43
percent
higher
on
average
than
and
traditional
fees
that
you
get
when
it
comes
to
asset
managers?
So
so
there
has
been
an
incentive,
because
some
people
feel
like
some
of
this
is
trying
to
just
earn
some
money
that
that
it's
kind
of
a
a
way
to
get
people
to
pay
more
because
they
get
more
fees.
So
so
just
to
help
you
understand
this.
B
R
Q
I
just
think
we
better
be
very
careful
on
how
we
pursue
this.
Obviously,
we
want
the
best
best
return,
as
we
possibly
can,
with
the
politics
being
out
of
it
or
just
because
you
don't
agree
with
it,
but
it's
showing
that
it
is
doing
well.
I
just
want
to
make
sure
that
we
will
proceed
with
doing
what's
right
by
getting
the
best
return
possible.
We.
D
D
I
want
to
thank
all
of
you
for
coming
in
and
taking
your
time
to
present
this
to
us
another
video,
probably
a
very
robust
conversation
as
we
move
forward
with
your
bill,
but
I
appreciate
you
letting
us
know
this
board
know
what
the
bill
is
about.
Thank
you
very
much.
Thank.
O
You
Mr
chairman,
thank
you
oversight,
board.
D
Identify
yourself
for
the
record:
please
proceed
representative
DJ,
Johnson,
13th,
District,
state
representative
and
I'm
here
today
to
present
House
Bill
328,
which
is
a
measure
brought
to
me
by
a
small
number
of
police
officers,
and
it
relates
to
their
participation
date
in
the
kppa
systems,
which
in
turn
impacts
the
benefits
they're
eligible
to
receive
upon
retirement.
D
The
officer
is
in
question:
sign
an
agreement
with
a
local
city
to
undergo
training
with
the
Department
of
Criminal
Justice
training
through
an
owed
Federal
program
known
as
the
police
Corps
program.
The
benefit
to
the
city
was
that
cost
of
the
training
would
be
paid
for
paid
for
these
new
recruits.
Who
would
then
go
on
to
serve
as
a
local
police
officer
in
their
Department?
In
other
words,
they
receive
the
training
under
federal
funds,
but
then
worked
with
local
police
departments
once
they
finished
the
training.
D
At
this
time
the
individuals
were
promised
that
they
would
be
enrolled
in
the
retirement
system
at
the
beginning
of
their
training.
Much
like
any
other
police
recruit,
unfortunately,
for
whatever
reason
they
were
not,
and
their
participation.
Data
in
the
kppa
system
is
after
July,
1
2003,
which
impacts
their
retirement
benefits.
D
House
Bill
328,
the
measure
before
you
corrects
This
Wrong
by
making
their
participation
date
the
date
they
enter,
training
at
docjt.
As
far
as
the
impact
on
the
systems
there
are
14
police
recruits.
This
impacts
and
kppa
has
stated
that
there
is
no
discernible
cost
to
the
system.
In
fact,
we
just
received
a
report
written
report
stating
the
same
that
effectively.
There
is
no
statistical
impact
to
the
systems.
D
H
Mr
chairman,
you
asked
me
to
keep
this
brief
and
I
will
House
Bill
587
adds
the
internal
auditor
as
someone
who
may
be
appointed
or
contracted
from
the
Kentucky
public
pension,
Authority
It
also
says.
The
internal
auditor
shall
report
directly
to
the
trustees
of
the
Kentucky
public
pensions
authority
to
reform
internal
audit
functions
as
directed
by
the
authority.
D
So
I'll
just
ask
one
very
briefly:
do
you
see
any
impact
on
the
current
Retirement
Systems
fiscally
or
in
any
way
from
that
that
perspective.
D
A
D
D
Brianna
chairman
Weber
appreciate
your
time.
Thank
you
very
much.
D
This
time,
I
will
turn
it
over
to
I,
won't
turn
it
over
to
but
introduce
chairman
Higdon.
He
has
two
two
actions
for
us
to
consider
today.
J
You
Jimmy
Higdon
state
senator
co-chair
ppob
Mr
chairman
have
two
two
bills:
fairly
simple
bills,
one
of
them
the
Senate
Bill
128.
As
an
act
relating
to
sickly
reporting
for
Teachers
Retirement
Systems.
It
would
require
each
School
District
to
report
for
the
financial
year,
ending
June,
30
2023
and
each
physical
year
thereafter
the
sick
leave
balances
for
each
TRS
member
and
District
employees,
including
the
amount
of
sick
leave
accrued
at
the
beginning
of
the
year
in
the
amount
used
during
the
year.
J
J
J
Primarily
the
reason
for
this
we,
you
know
in
a
question
of
the
actuary.
You
know
what
are
the:
what
is
the
liability
for
sick
days?
They
could
only
give
us
an
estimate
because
the
actuaries
said
they
they
don't
know
what
the
amount
is
until
the
employee
retires.
So
the
teacher
retires
so
I
think
it's
beneficial
to
us
as
an
oversight
committee
and
for
the
system
to
know
exactly
what
the
liability
is.
J
Second,
one
is
a
senate
joint
resolution
83
and
it
directs
the
establishment
of
a
public
pension,
Administration
advisory
committee
of
the
ppob
to
to
evaluate
options
for
coordinating,
consolidating,
Actuarial
and
Investments,
or
the
general
administrative
service
among
the
state
administered,
Retirement
Systems,
and
examining
additional
legislative
or
administrative
actions
that
may
be
necessary
to
clearly
Define
the
roles
of
kers
and
cers
in
their
Board
of
Trustees
and
the
shared
administrative
and
the
shared
administrative
entity
of
the
two
boards
known
as
kppa
and
the
report.
Their
findings
back
to
ppob
on
December,
the
1st
and
Mr
chairman.
J
J
D
K
K
J
Well,
just
a
thought:
I
like
the
idea,
though
true
true
and
but
I
wanted
to
get
on
and
I
guess
on
paper
and
in
guidance
on
what
what
it
is
exactly
that
we're
that
we're
looking
at.
So
when
we
do
the
subcommittee
we're
not
chasing
after
down
different
rabbit
holes
because
there's
a
lot
of
them.
We
can
go
down
and
appreciate
the
question.
D
I
was
I'm
going
to
presume
that
anyone
any
of
the
board
members
who
come
up
with
a
question
for
any
of
the
presenters
today
certainly
feel
free
to
ask
those
questions
and
I'm
sure
they'll
get
back
to
us.
One
final
item:
that's
not
technical!
That's
not
actually
on
the
agenda
but
as
we
wrap
up
I
just
want
to
let
you
know
that
there
is
a
one-page
handout
that
the
staff
has
it's
referencing
House
Bill
506,
sponsored
by
chairman
Walker
Thomas.
D
This
particular
information
is
referencing,
a
bill
that
has
already
previously
been
heard
before
the
board,
but
he's
made
some
significant
modifications
to
it.
So
we
wanted
to
share
that
information
with
you
and
again.
Should
you
have
any
concerns
or
questions?
Please
feel
free
to
ask
the
bill
sponsor.