* This transcript was created by voice-to-text technology. The transcript has not been edited for errors or omissions, it is for reference only and is not the official minutes of the meeting. THIS COMMITTEE. [Joint Meeting of the Government Performance and Financial Management Committee and Ad Hoc Committee on Pensions on November 7, 2024.] [00:00:03] OKAY. WELCOME EVERYONE. UM, I'M GOING TO, AT THIS TIME CALL THE GOVERNMENT PERFORMANCE AND FINANCIAL MANAGEMENT COMMITTEE TO ORDER, AS WE HAVE DETERMINED A QUORUM IS PRESENT. IT IS 1:36 PM THIS IS, UH, CHAIRMAN ACKMAN OF THE AD HOC COMMITTEE OF THE PENSION TO ORDER TO DETERMINE THAT A QUORUM IS PRESENT. CHAIR ZENES. THANK YOU. I MOVE THAT CHAIR WEST ACT AS CHAIR OF THIS JOINT COMMITTEE. SECOND? SECOND. SECOND. THANK YOU. ALL THOSE IN FAVOR SAY AYE. AYE. AYE. ANY OPPOSED? MOTION CARRIES. ALL RIGHT. SO THE PURPOSE OF THIS MEETING, I'M ACTUALLY GONNA TEE THIS OVER TO MY, UH, FELLOW CHAIR HERE, UH, CHAIR ADKINS, TO TALK ABOUT THE, UH, WHY WE'RE, WHY WE'RE DOING THIS TAKEN AWAY. OKAY. THANK YOU VERY MUCH. CHAIRMAN. CHAIRMAN WEST, UH, WE ARE HERE AND THANK EVERYONE WHO SERVED ON THE PENSION COMMITTEE. WE ARE HERE TO, FOR DELOITTE TO TALK ABOUT THE CITY OF DALLAS, SECTION 8 0 2 DASH 0.102, UM, OF THE PENSION EMPLOYEE RETIREMENT FUND, AND ALSO THE EMPLOYEE RETIREMENT FUND. ALSO, AND THIS IS SOMETHING WE ARE NOT TALKING ABOUT ASSET. WE'RE NOT TALKING ABOUT AN INVESTMENT PERIOD. IT'S STRICTLY, UH, A REVIEW ABOUT THE GOVERNING CODE ON 8 0 2. SO WITH THAT, I'M TRYING TO MAKE SURE WE'RE NOT GETTING AN ASSET. NUMBER ONE, JUST THE BASIC, AND WE HAVE SOMETHING FOR DELOITTE. IT'S GOING TO WALK US THROUGH THIS PROCESS. AND SO IF WE MAY, MAYOR PRO TIM, I'LL START AND THEN GIVE IT TO DELOITTE. UH, AS, UH, WE'VE DONE IN THE PAST, THERE'S A REQUIREMENT UNDER SECTION 8 0 2 OF THE GOVERNMENT CODE THAT A FIVE YEAR INDEPENDENT AUDIT BE CONDUCTED OF OUR TWO PENSION FUNDS, THE DALLAS POLICE AND FIRE PENSION SYSTEM, AND THE EMPLOYEE RETIREMENT FUND. WE HAVE ENGAGED WITH DELOITTE CONSULTING TO DO THAT WORK ON, UH, FOR THE CITY. AND SO WE HAVE REPRESENTATIVES FROM DELOITTE CONSULTING WITH US TODAY. SO I'M GONNA TURN IT TO THEM FOR THEM TO GO THROUGH THE REPORT, UH, THAT THEY PREPARED AND BE AVAILABLE FOR QUESTIONS THAT Y'ALL MAY HAVE REGARDING THE, THE AUDIT REPORT. THANK YOU VERY MUCH. UM, IF YOU COULD MOVE TO THE NEXT SLIDE. SO THE PURPOSE OF, WILL YOU STATE YOUR NAME SO EVERYBODY KNOW WHO YOU ARE, PLEASE? OH, SORRY ABOUT THAT. MY NAME IS JEANNIE CHEN. I AM WITH DELOITTE CONSULTING. AND, AND, UH, I'M JOE KNICKY, ALSO WITH DELOITTE CONSULTING. SO, AS MENTIONED, THE PURPOSE OF THIS, UM, PRESENTATION IS FOR US TO GO OVER OUR REVIEW AS REQUIRED BY THE TEXAS GOVERNMENT CODE SECTION 8 0 2 0.1012. AS PREVIOUSLY MENTIONED, UM, THIS REVIEW IS REQUIRED EVERY FIVE YEARS BY GOVERNMENT CODE, AND IT APPLIES TO PUBLIC SYSTEMS WITH ASSETS OVER A HUNDRED MILLION DOLLARS. SO EVERY FIVE YEARS, AN INDEPENDENT ACTUARY IS REQUIRED TO REVIEW THE VALUATIONS AND EXPERIENCE STUDIES AND REPORTS PRODUCED BY PUBLIC RETIREMENT SYSTEM. IN THIS CASE, DPFP, AS WELL AS ERF, UM, FOR, FOR COMPLIANCE AND WITH ACTUARIAL STANDARDS OF PRACTICE. UM, THE TEXAS GOVERNMENT CODE LAYS OUT SPECIFIC TIMELINES AND ITEMS THAT WE NEED TO FOLLOW. SO IN, YOU KNOW, IN THIS, IN THIS SLIDE, YOU CAN SEE KIND OF THE REQUIREMENTS LAID OUT BY THE CODE. SO BEFORE STARTING OUT THE AUDIT, UM, WE NEED TO AGREE TO CONFIDENTIALLY AGREEMENT, UM, AND ALSO MEET WITH THE MANAGERS OF THE FUNDS. WE'VE DONE THAT. UM, AND THEN THE NEXT ITEM THAT'S REQUIRED BY THE CODE IS THAT NO LATER THAN 30 DAYS AFTER COMPLETION OF THE DRAFT REPORT, THAT WE PRESENT THE FINDINGS OF THE DRAFT REPORT TO THE PENSION FUNDS BOARDS, UM, DELIVER THE DRAFT REPORT TO THE BOARD, AS WELL AS REQUESTING FORMALLY IN WRITING FOR RESPONSES TO ANY OF OUR FINDINGS, UM, IN OUR REVIEW. SO WE'RE HERE RIGHT NOW IN THIS 30TH, FIRST TO 60TH DAY AFTER THE DELIVERY OF OUR DRAFT REPORT. SO WE'RE HERE TO PRESENT THE FINAL AUDIT REPORT TO THE CITY, AND THEN AS WELL AS PRESENTING THE RESULTS OF THE, THE FINDINGS, AS WELL AS, UM, RESPONSES THAT WAS PROVIDED TO US BY DPFP AND ERFS ACTUARIES. AND THEN FINALLY, THE CITY WILL BE RESPONSIBLE FOR SUBMITTING OUR FULL REPORT TO THIS TEXAS STATE PENSION REVIEW BOARD, AS WELL AS MAINTAINING A COPY, UM, OF THE REPORT ON THE NEXT SLIDE. AS, SO, THE PURPOSE AND INTENT OF THIS AUDIT IS TO REVIEW THE DPFP AND RFS VALUATION REPORTS AND EXPERIENCE STUDIES THAT WERE MOST RECENTLY PREPARED BY THE RETAIN ACTUARY. SO SEGAL AND GRS WERE THE ONES THAT PREPARED THE REPORTS FOR DPFP AND ERF RESPECTIVELY. UM, THE REVIEW IS TO REVIEW, TO ENSURE THAT THE REPORT WAS DONE IN COMPLIANCE WITH ACTUARIAL STANDARDS OF PRACTICE, AND PROVIDE ANY FINDINGS OR RECOMMENDATIONS THAT COULD IMPROVE THE UNDERSTANDING OF THE REPORT AS [00:05:01] WELL AS THE SUPPORT TO THE ASSUMPTIONS. SO THE INFORMATION THAT WE REVIEWED WERE THE EVALUATION REPORT AS WELL AS THE EXPERIENCE STUDY. AND AS MENTIONED PREVIOUSLY, WE, THIS REVIEW DOES NOT INCLUDE INVESTMENT PRACTICES REVIEWING UNDERLYING ASSETS, NOR DOES IT REVIEW ANY SORT OF PLAN CHANGES OR ASSUMPTION CHANGES AFTER, AFTER THE REVIEW OF, YOU KNOW, THE VALUATION REPORTS THAT WE LOOKED AT. AND WITH THAT, WE'LL GO OVER IN MORE DETAIL THE PROCESS AND OUR RESULTS. JULIE? THANK YOU. WE CAN GO TO THE NEXT SLIDE. SO THIS OUTLINES THE PROCESS THAT WE UNDERTOOK FOR OUR REVIEW. WE SOUGHT TO ASSESS THE APPROPRIATENESS OF THE ASSUMPTIONS AND METHODS REVIEW THE ACTUARY DETERMIN CONTRIBUTIONS AND PROJECTION OF FULL FUNDING YEAR FROM THE EVALUATION REPORT MEETS THE REQUIREMENTS OF THE ASOP OR THE ACTUARIAL STANDARDS OF PRACTICE, AND ASSESS THE COMPLETENESS AND CONSISTENCY OF THE VALUATION REPORTS, AND ALSO REVIEW TEST CASES THE LIABILITIES PROVIDED IN TEST CASES BY THE RETAINED ACTUARIES TO CONFIRM THAT THE UNDERLYING CALCULATIONS WERE CONSISTENT WITH THE PLAN DOCUMENT ASSUMPTIONS AND METHODS. TO DO THIS, WE RECEIVED NUMEROUS ITEMS FROM, UH, EACH PLAN. WE RECEIVED THE RAW SYSTEM DATA FROM DPFP AND ERF, AS WELL AS THE FINAL VALUATION DATA USED BY THE ACTUARIES, AND WE REVIEWED BOTH SETS OF DATA FOR CONSISTENCY, UM, BETWEEN THOSE TWO SETS, WE ALSO RECEIVED OR REVIEWED THE EVALUATION REPORTS AS WELL AS THE EXPERIENCE STUDY, AND AS MENTIONED ABOVE, THE TE THE TEST CASES FROM THE RETAINED ACTUARY, WHICH WE, WE TESTED, UM, WITH THE UNDERLYING CALCULATIONS AND, AND ASSUMPTIONS CAN MOVE TO THE NEXT SLIDE. SO TO SUMMARIZE OUR FINDINGS, WE BELIEVE THAT THE MOST RECENTLY PREPARED REPORTS AND EXPERIENCED STUDIES FOR, FOR DPFP, WHICH WAS 1 1 20 23 REPORTS, 12 31 20 19 EXPERIENCE STUDY, AND FOR ERF, THE 12 31 22 REPORT AND 12 31 20 19 EXPERIENCE STUDY, WE BELIEVE BOTH OF THEM WERE PERFORMED IN COMPLIANCE WITH THE APPLICABLE, UH, STANDARDS OF PRACTICE ISSUED BY THE ACTUARIAL STANDARDS BOARD FOR DPFP. THE THE 2023 VALUATION USED THE ASSUMPTIONS THAT WERE RECOMMENDED IN THE 2019 EXPERIENCE STUDY. THERE WERE SEVERAL ASSUMPTIONS THAT HAD BEEN UPDATED SINCE THEN, UM, TO REFLECT PERTINENT CHANGES SUCH AS THE SALARY SCALE, WHICH WAS UPDATED, UM, FOR THE RECENT MEET AND CONFER AGREEMENT FOR ERF. ALL THE ASSUMPTIONS USED IN THE 2022 REPORT ARE CONSISTENT WITH WHAT WAS RECOMMENDED BY THE ACTUARY IN THE 2019 EXPERIENCE STUDY. AND THROUGH OUR REVIEW OF THE SAMPLE LIVES, WE DETERMINED THAT ALL PLAN PROVISIONS, METHODS AND ASSUMPTIONS DISCLOSED IN THE REPORTS WERE APPROPRIATELY VALUED IN THE UNDERLYING LIABILITY CALCULATIONS. WE DID NOTE A HANDFUL OF FINDINGS TO IMPROVE THE CLARITY AND COMMUNICATIONS IN THE REPORTS, AS WELL AS FOR, UM, SOME CONSIDERATIONS FOR THE DEVELOPMENTS OF THE ASSUMPTIONS. THOSE ARE LISTED IN THE, ON THE NEXT PAGE. AND WE'LL, WE'LL GO THROUGH ALL OF THOSE. AND AS JEANIE MENTIONED, THE UM, CPFD AND ERF AND THEIR ACTUARIES REVIEWED OUR DRAFT REPORTS AND OUR FINDINGS, UH, ISSUED RESPONSE LETTERS, WHICH WERE INCLUDED IN THESE MATERIALS. AND, UM, WELL PROVIDE COMMENTARY ON WHAT THEY HAD TO SAY AS WELL. SO I THINK WE CAN JUMP TO THE, UH, NEXT PAGE AND ONE MORE PAGE AFTER THAT. THIS GOES THROUGH ALL OF THE FINDINGS THAT WE LISTED, AND THEY'RE REALLY BROKEN OUT INTO TWO MAIN CATEGORIES. ONE DEALS WITH THE VALUATION REPORTS, SO THE COMMUNICATIONS AND, AND CONTENTS OF THE REPORTS. UM, SO WE'LL START WITH OUR FINDINGS HERE FOR GPFP, FOR THE PLAN PROVISIONS WE RECOMMENDED, INCLUDING ADDITIONAL DESCRIPTION ABOUT A A 10 YEAR MAX ON, ON, UH, DRAW PARTICIPATION AND THEN SEVERAL ASSUMPTIONS FOR REPORT CONTENT, THINGS THAT THEY COULD ADD TO INCREASE THE, UM, THE COMMUNICATION AND WHAT THE DATA THAT'S BEEN PROVIDED, SUCH AS A HISTORY OF THE FULL FUND OF YEAR PROJECTION. A DESCRIPTION OF THE, UH, CURRENT, ACTUAL AND TARGET ASSET ALLOCATIONS ALIGNED TO THE TARGETS. FACTORING THE EXPERIENCE STUDY, UH, DISCLOSED 10 TO 20 YEARS OF UNDISCOUNTED CASH FLOWS AND ADD A FEW THINGS TO THE TABLE OF DEMOGRAPHIC EXHIBITS, INCLUDING A ALIGNED FOR AVERAGE MONTHLY DROP ANNUITY. AND A FOOTNOTE TO CLARIFY THE AVERAGE BENEFICIARY AGE. AGAIN, THESE THINGS ARE JUST TO PROVIDE A LITTLE MORE DETAIL TO ENHANCE UNDERSTANDING OF THE DATA OR THE, THE, THE NUMBERS IN THE REPORT AND SIEGEL'S RESPONSES. UM, GENERALLY THEY AGREE, THEY, THEY WILL CONSIDER INCLUDING THESE IN THE REPORT. UM, I THINK FOR ONE OR TWO OF THEM, THEY THOUGHT THAT IT MAY, THEY WEREN'T NECESSARY TO INCLUDE IN THE REPORT. I THINK THE FULL FUNDING YEAR AND THE [00:10:01] 10 TO 20 YEARS BOND DISCOUNTED CASH FLOWS, THEY PREFERRED TO, UM, KEEP THOSE OUT OF THE REPORT JUST FOR SIMPLICITY. BUT THE OTHER ONES, THEY, THEY AGREED TO, UM, CONSIDER INCLUDING MOVING ON TO THE EXPERIENCE STUDY. SO THESE ARE RELATE TO THE EXPERIENCE STUDY AND THE DEVELOPMENT OF THE ASSUMPTIONS. THERE'S REALLY TWO MAIN CATEGORIES OF THESE. ONE IS JUST, AGAIN, ADDITIONAL DISCLOSURE AND THE EXPERIENCE STUDY, UH, SUPPORTING DETAIL, UH, AND THEN TWO KIND OF CONSIDERATIONS FOR WHEN THEY'RE SETTING THE ASSUMPTIONS AGAIN FOR THE NEXT EXPERIENCE STUDY. JUST DIFFERENT THINGS THAT THAT WE WOULD THINK ABOUT. SO FOR PAYROLL GROWTH AND INVESTMENT RETURN, OUR FINDINGS WERE JUST TO REVIEW THE ASSUMPTIONS AGAIN IN LIGHT OF CURRENT, UM, NATIONAL DATA, CAPITAL MARKET ASSUMPTIONS. THE EXPERIENCE STUDY IS FIVE YEARS OLD NOW, SO CERTAINLY INFLATION, SALARY, SCALE, CAPITAL, MARKET ASSUMPTIONS, ALL THOSE HAVE HAVE CHANGED SINCE THEN. AND THEIR, THEIR NEXT EXPERIENCE STUDY SHOULD TAKE THOSE INTO CONSIDERATION WHEN SETTING THESE, THESE ASSUMPTIONS. THE INVESTMENT RETURN WE RECOMMENDED INCLUDING A BIT MORE DETAIL IN THE EXPERIENCE STUDY, INCLUDING THE TARGET ASSET ALLOCATION AND DIFFERENT, UM, BREAKDOWNS BY ASSET CLASS, THE SALARY INCREASE ASSUMPTION. AGAIN, MORE, MORE DETAIL IN THE STUDY ABOUT, UM, SIEGEL'S BEST ESTIMATE FOR, FOR YEARS AFTER THE MEET AND CONFER AGREEMENT, THE COST OF LIVING. UM, ADDITIONAL DETAIL ON THEIR RATIONALE FOR SELECTING THE CO ASSUMPTION AND A CONSIDERATION TO POTENTIALLY EXPLORE SARCASTIC ANALYSIS ON THAT ASSUMPTION DUE TO THE 0% FLOOR AND 4% CAP ON THE, ON THE MORTALITY. UH, ADDITIONAL DETAIL, ADDITIONAL FOR THEIR RATIONALE FOR THE, THE SETBACK AND SET FORWARD, UM, ADJUSTMENT TO THE MORTALITY TABLES. WE CAN GO TO THE NEXT PAGE, WHICH TAKES A FEW MORE ON THE EXPERIENCE STUDY RETIREMENTS INCLUDE ADDITIONAL DETAILS SUCH AS NUMBER OF EXPOSURES AND ANY ADJUSTMENTS MADE TO THE DATA TO SUPPORT THE, THE, UM, COMMUNICATIONS AND THE EXPERIENCE STUDY AND SOME CONSIDERATIONS FOR THE NON DROP RETIREMENT ASSUMPTION, INCLUDING, UH, UNIQUE PROVISIONS SUCH AS THE 20 OUT PROVISION AND WHETHER THOSE COULD BE INCORPORATED INTO THE ASSUMPTION MORE DIRECTLY AND FOR WITHDRAWAL. SIMILAR, A BIT MORE DETAIL ON THE NUMBER OF EXPOSURES AND DATA ADJUSTMENTS AND A CONSIDERATION ON WHETHER, UH, HOST 2011 HIRES COULD HAVE A SEPARATE WITHDRAWAL ASSUMPTION. AND FINALLY, DISABILITY, UM, A BIT MORE ANALYSIS ON SERVICE VERSUS NON-SERVICE DISABILITIES. SO AGAIN, TWO BROAD CATEGORIES, ONE AND JUST MORE MORE DISCLOSURES IN THE EXPERIENCE STUDY. AND THEN TWO, JUST THINGS TO THINK ABOUT AS THEY'RE SETTING THE, THE ASSUMPTIONS AGAIN. AND IN THEIR NEXT EXPERIENCE STUDY AND THEIR RESPONSES. IN GENERAL, THEY AGREED TO CONSIDER MOST OF THESE THINGS. I THINK ONE OR TWO OF THEM THEY DIDN'T THINK WERE NECESSARY. UM, I THINK THE SARCASTIC ANALYSIS ON COLA THEY THOUGHT WASN'T NECESSARY BECAUSE COLA IS NOT PROJECTED TO BE PAID UNTIL VERY FAR IN THE FUTURE. UM, BUT OVERALL MOST OF THESE WILL BE CONSIDERED MOVING ON TO ERF, UH, SIMILAR STRUCTURE HERE IN THE VALUATION REPORTS, UH, FINDINGS TO IMPROVE THE COMMUNICATION AND, UM, UNDERSTANDING OF THE REPORT. ADDING A DESCRIPTION OF PLAN PROVISIONS ABOUT THE NON VESTED TERMINATION. UM, THREE YEAR FORFEITURE OF MEMBER CONTRIBUTIONS AFTER THREE YEARS. WE DID NOTICE ON CENSUS DATA, WE DID NOTICE A SMALL, UM, ERROR IN THE CENSUS DATA AND HOW THE 4 0 1 A 17 LIMITS WERE APPLIED. THE X-RAY DID CONFIRM THAT THAT HAS ALREADY BEEN FIXED. UM, SO THAT'S GOOD TO HEAR. AND THEN SEVERAL OTHER ITEMS ON THE REPORT FUNDING METHOD CONSIDER, UM, THE AMORTIZATION METHOD USING A FINITE OR CLOSED PERIOD AND REPORT CONTENT, ADDING HISTORY OR FULL FUNDING YEAR AND THE 20 YEARS OF UNDISCOUNTED CASH FLOWS IN THE REPORT. AND AGAIN, THE ACTUAL AND TARGET ASSET ALLOCATIONS NOW VERSUS WHAT THEY WERE IN THE EXPERIENCE STUDY TO WHAT IN ALL THESE GENERALLY. SO INCREASE THE, THE COMMUNICATION AND UNDERSTANDING OF THE REPORT. UH, GRS, UM, IN THEIR LETTER AGREE THAT THEY WILL IMPLEMENT OR CONSIDER IMPLEMENTING ALL OF THESE. AND THEY MENTIONED THE CENSUS DATA HAS ALREADY ALREADY BEEN FIXED. FINALLY, LAST PAGE, THE ERF EXPERIENCE STUDY FINDINGS, PAYROLL GROWTH CONSIDER A CONSISTENT [00:15:01] PAYROLL GROWTH FOR THEIR OPEN GROUP PROJECTION, WHICH IS THEIR LONG TERM PROJECTIONS. UM, AND THE ONE YEAR, UM, PROJECTION, THOSE WERE DIFFERENT BY 50 BASIS POINTS. WE RECOMMEND RECOMMEND EXPLORING, UM, STANDARDIZING THOSE, THE ADMINISTRATIVE EXPENSE ASSUMPTION. UM, THE FIRST TWO ARE GENERALLY MORE DISCLOSURE IN THE REPORT ABOUT HOW THE ADMINISTRATIVE EXPENSES ARE MADE UP AND WHETHER THEY ARE ASSUMING INFLATION, UH, APPLIES TO THE ASSUMPTION OR APPLIES TO THE EXPENSE. AND THEN CONSIDERING A DIFFERENT APPROACH TO SETTING THE ASSUMPTION IN THE FIRST PLACE TO REDUCE THE YEAR OVER YEAR VOLATILITY IN THAT ASSUMPTION ON RETIREMENTS. UM, ADDING SOME RATIONALE TO THE EXPERIENCE STUDY ON THEIR, UH, HOW THEY DETERMINE THE TIER B ASSUMPTION. AND, UM, CONSIDERING A, SOME CHANGES TO THE TIER B ASSUMPTION, UH, FOR FIRST YEAR IN WHICH SOMEONE BECOMES ELIGIBLE AND POTENTIALLY STUDYING THE RETIREMENT ASSUMPTION FOR DEFERRED VESTED PARTICIPANTS WITHDRAWAL STUDYING THE ASSUMPTION FOR TIER B EMPLOYEES. UM, NOW THAT THERE'S A GOOD AMOUNT OF DATA SINCE 2017 ON THOSE, AND ADDITIONAL JUSTIFICATION ON THE, ON THE SPOUSE STAGE ASSUMPTION, UM, FOR ALL OF THESE GRS SAID THAT THEY WILL CONSIDER THEM FOR THEIR NEXT EXPERIENCE STUDY. SO OUR FULL REPORTS ARE INCLUDED IN THE, UM, PACKET WITH THIS, BUT THESE HIGHLIGHTED ALL OF OUR ASSUMPTIONS. AND WITH THAT, WE'RE HAPPY TO TAKE ANY QUESTIONS. THANK YOU VERY MUCH. UH, WITH THAT I'M GONNA BE GREAT, UH, THANKFUL THE REPORT. AND WE ARE GONNA HEAR THIS AGAIN ON DECEMBER THE FOURTH. IS THAT RIGHT, JACK? YES, SIR, THAT IS CORRECT. WE ARE SCHEDULING IT FOR THE FULL COUNSEL AS WELL ON DECEMBER 4TH. RIGHT, WHICH WAS THE NEXT AVAILABLE BRIEFING DATE. THANKS SIR. WE'LL BE SCHEDULED FOR THE NEXT FULL BRIEFING ON DECEMBER, DECEMBER 4TH. UM, I, I'M NOT GONNA GO THROUGH, IF YOU LOOK AT THE EVALUATION EXPERIE STUDY, UH, ON THE EMPLOYEES IN THE UNIFORM, AND YOU HAVE QUITE A BIT OF FINDINGS. SO IF YOU HAD TO TAKE THREE OF, OF THE, THE UNIFORM ON THE EMPLOYEES, UH, WHAT WOULD BE THE FINDING THAT YOU FEEL LIKE THAT THEY SHOULD BE, UH, HERE TO YOUR RECOMMENDATION? I KNOW IT'S JUST FINDING, BUT IT'S SO MANY, YOU KNOW, SO HAVE YOU CATEGORIZED THOUGH WHICH ONE IS MORE IMPORTANT THAN THE OTHER? BUT I KNOW THEY, UM, IS IN COMPLIANCE WITH ALL OF THEM. YEAH, I MEAN THE, OUR OVERALL FINDING IS THAT ALL ASSUMPTIONS AND THE REPORTS ARE REASONABLE SO THAT, YOU KNOW, FIRST AND FOREMOST THAT, AND I THINK THE FINDINGS, I DON'T KNOW IF ANY STAND ABOVE THE OTHER, I MEAN, GENERALLY THEY'RE, UM, ALL JUST TO IMPROVE THE COMMUNICATIONS IN THE REPORT OR THEIR DEVELOPMENT. YOU KNOW, SOME ASSUMPTIONS ARE CERTAINLY MORE IMPACTFUL THAN OTHERS, JUST THEIR IMPACT ON NON LIABILITY, UM, INVESTMENT RATE OF RETURNS, PROBABLY THE MOST IMPACTFUL ASSUMPTIONS. SO, UM, YOU KNOW, CERTAINLY THAT ONE WOULD IS THE MOST IMPACTFUL. SO THAT, THAT, THAT WE HAD TO HAVE ONE STAND OUT. OKAY. SO KYLIE'S IN A PORTION OF THIS GROUP, STEWART, I, JACK, I WOULD JUST LIKE YOU TO EX JUST, UM, REVIEW FOR US HOW WE, UH, CALL THIS AN INDEPENDENT, UM, ACTUARIAL STUDY. I KNOW THE, THE CITY PAYS FOR IT, BUT WHAT ARE THE PRINCIPLES THAT ARE PUT IN PLACE TO ENSURE THAT THIS IS NOT, UM, SKEWED IN ANY WAY OR THERE'S NOT ANY, UM, SOMEBODY CAN HAVE AN ISSUE OR, OR, OR TRY TO MANIPULATE THE INFORMATION ANYWAY THAT IT'S, THAT WE CAN RELY ON IT. HOW, HOW DO WE KNOW WE CAN RELY ON THIS INTERESTING, UH, PROCESS HERE? BECAUSE, UH, DALLAS POLICE AND FIRE PENSION SYSTEM HAS AN ACTUARY AND THEY USE SIEGEL, I BELIEVE IS THEIR ACTUARY. AND ERF ALSO HAS AN ACTUARY, WHICH IS GRS. AND SO WHAT WE HAVE DONE AS THE CITY, AS REQUIRED BY SECTION 8 0 2, IS FOR US TO ENGAGE US AS THE CITY SPONSOR TO ENGAGE WITH AN ACTUARY TO REVIEW, IF YOU WILL, THE WORK OF THE OTHER TWO ACTUARIES. AND SO WE AS THE SPONSOR OF THE FUNDS, HAVE THE RESPONSIBILITY OF SELECTING, UH, AND CONTRACTING WITH ENGAGING A FIRM, AND WE HAVE WITH DELOITTE TO DO THAT WORK ON OUR BEHALF. UM, THERE'S PROBABLY AN OPPORTUNITY FOR US TO CONSIDER GOING FORWARD SHOULD WE CONSIDER HAVING SEPARATE ACTUARIES ENGAGED BY THE CITY TO DO THIS TYPE OF WORK VERSUS THE AD HOC WORK THAT WE'VE ALSO HAD DELOITTE DO TO FURTHER SEPARATE THAT IN CASE THERE WAS ANY [00:20:01] KIND OF, UH, PERCEIVED CONFLICT. BUT, UH, AS FAR AS ALREADY HAVING DELOITTE UNDER CONTRACT AND SCHEDULED TO DO THIS WORK, UM, THAT THAT'S AN OPPORTUNITY POTENTIALLY IN THE FUTURE THAT WE MAY BE ABLE TO LOOK AT, UH, THAT MIGHT TAKE AWAY ANY PERCEIVED, UH, LACK OF INDEPENDENCE. AND I WILL ALLOW JENNY IF SHE WOULD LIKE TO, UH, AS THE LEAD ON THIS TO PROVIDE ADDITIONAL THOUGHTS. YEP. I THINK, YOU KNOW, WE'RE AWARE THAT, YOU KNOW, DELOITTE HAS DONE AD HOC TYPE OF ACTUARIAL CONSULTING, BUT FOR PURPOSES OF THIS REVIEW, YOU KNOW, WE ARE REVIEWING THE WORK OF SEGAL AND GRS, WHAT THEY PROVIDED IN THEIR REPORTS. WE COLLECTED DATA FROM THE FUNDS AND USED PUBLIC, UM, PUBLICLY AVAILABLE CAPITAL MARKET ASSUMPTIONS, FOR EXAMPLE, TO BE REVIEWING THE, THE RESULTS OF THE REPORT AND THE CONTENT OF THE REPORT. UM, WE BELIEVE THAT WE HAVE DONE THE WORK IN ACCORDANCE TO OUR CODE OF PROFESSIONAL CONDUCT AND THAT THE ACTUARIAL STANDARDS OF PRACTICE, UM, REQUIRES INTERDEPENDENCE RELATED TO THIS REVIEW. SO WHILE DELOITTE HAS DONE OTHER TYPE OF SERVICES, ACTUARIAL AND OTHERS THAT ARE NOT, UM, WE DON'T BELIEVE THAT THOSE SERVICES ARE IN CONFLICT IN WHAT WE HAVE DONE FOR PURPOSES OF THIS REVIEW. AND IT REALLY DIDN'T IMPACT, UM, THE RESULTS IN OUR FINDINGS. OKAY. THAT'S HELPFUL. THANK YOU VERY MUCH. ANYONE ELSE? CHAIRMAN MILLI. THANK YOU. UM, SO THERE'S QUITE A FEW FINDINGS HERE FOR, UM, THIS KIND OF REPORT. I THINK, SO THE OVERALL QUESTION THAT I HAD WHEN I READ THIS FOR BOTH, UM, THE POLICE FIRE PENSION AS WELL AS ERF WAS HOW, 'CAUSE BECAUSE YOU MENTIONED IT SEVERAL TIMES, HOW DOES OUR STAFFING ASSUMPTION AND OUR PAYROLL GROWTH ASSUMPTION ACTUALLY PLAY OUT BASED ON EXPERIENCE? YOU MEAN HOW THE ACTUAL SALARY AND HEADCOUNT ALIGNS TO WHAT WAS ASSUMED? I THINK IT, I MEAN, IT'S REVIEWED YEAR OVER YEAR BY THE ACTUARIES IN THEIR, YOU KNOW, THEY UPDATED THE SALARY ASSUMPTION IN 2023 BASED ON THE MEET AND CONFER. THEY'RE, YOU KNOW, THEY TRACK TOWARDS THE HOUSE BILL 31 58, UM, PAYROLL PLAN. SO THEY'RE REVIEWING IT EVERY YEAR AND, AND BASED ON OUR ASSESSMENT, IT'S YOU, THERE'S ALWAYS GONNA BE GAIN OR LOSS EVERY YEAR FROM ALL ASSUMPTIONS. BUT, UM, IN OUR ASSESSMENT, THE ASSUMPTIONS ARE, ARE REASONABLE. AND DO YOU THINK THAT, WELL, I I'M GOING TO GET TO THIS I GUESS WITH, I MEAN, DO YOU WANT TO DO ERF NOW OR SEPARATE? DO BOTH 'EM TOGETHER? GO AHEAD. SO ERF HAS TOLD US THEY HAVE A CONSTANT, UM, PERCENTAGE AND A CONSTANT GROWTH ON HEADCOUNT AND THAT HAS NOT MATCHED WHAT HAS ACTUALLY HAPPENED. AND SO ARE YOU FINDING ANY KIND OF CONFLICT WITH KEEPING A VERY STATIC, UM, MODEL OF WHAT THAT GROWTH WILL BE WHEN IT ISN'T MATCHING OUR EXPERIENCE? SO IN THE VALUATIONS REPORT, THE WAY THE LIABILITIES ARE DEVELOPED IS BASED ON A CLOSED POPULATION. SO ESSENTIALLY THE CENSUS DATA IS AS OF 12 31 22, THEIR PAYROLL FOR THE UPCOMING YEAR. THE NUMBER OF PARTICIPANTS IN THE PLAN AS OF THAT DATE IS WHAT'S THE BASIS FOR DEVELOPING THE LIABILITY AS OF THAT DATE. SO IN TERMS OF, YOU KNOW, PROJECTIONS OF STAFFING, THAT REALLY DOESN'T COME INTO PLAY YET INTO THE LIABILITY. AND AS SALARY, UH, UPDATES ARE MADE, THE CENSUS DATA DOES REFLECT THAT IN THE EVALUATIONS. OKAY. SO, UM, MY NEXT QUESTION FOR YOU IS FOR THE WITHDRAWALS. UM, YOU'RE ALSO TALKING ABOUT SOME CONCERNS WITH ASSUMPTIONS. SO WILL YOU, ON PAGE SEVEN, WILL YOU TALK ABOUT THE FIRST AND SECOND FINDING THAT YOU HAVE ON THOSE, ON THAT PAGE? WHY, WHY WOULD YOU NEED A SEPARATE, UM, WITHDRAWAL ASSUMPTION FOR PEOPLE WHO ARE HIRED AFTER 20 20 11? THE, THE IDEA IS PEOPLE HIRED AFTER 2011 HAVE DIFFERENT, UH, PLAN FORMULAS OR, AND FOR ERF AFTER 2017, SO WITH DIFFERENT, CERTAINLY THAT IMPACTS RETIREMENT BECAUSE IT, IT'S A RETIREMENT BENEFIT, BUT EVEN WITHDRAWAL AS SOMEONE IS NOT RETIREMENT ELIGIBLE, BUT WORKING THROUGH THEIR CAREER, IF RETIREMENT IS A, UM, A FACTOR IN THEIR DECISION TO STAY OR LEAVE, IT COULD BE DIFFERENT, UM, PRE OR POST 2011 OR 2017 FOR ERF. SO OUR RECOMMENDATION IS THAT THE ACTUARY LOOK AT IT, IT MAY BE CLOSE ENOUGH WHERE THIS, IT DOESN'T MAKE SENSE TO SEPARATE OUT THE ASSUMPTION INTO TWO, BUT IF THEY CAN BETTER [00:25:01] CAPTURE THE EXPERIENCE BY BREAKING IT OUT, THEN THEY SHOULD CONSIDER DOING SO. OKAY. SO ON PAGE 14, WHEN YOU'RE TALKING ABOUT, UM, IN YOUR, IN YOUR VERY LAST PARAGRAPH, BASED ON THE NATIONAL DATA ABOVE AS WELL AS THE 3% ULTIMATE SALARY INCREASE FROM MAJORITY OF THE POSITIONS IN THE 2023 MEET AND CONFER AGREEMENT, THE DALLAS POLICE FIRE PENSION PENSION SHOULD REVISIT THE 2.5 PAYROLL GROWTH ASSUMPTION AND IMPLIED ZERO REAL WAGE GROWTH ASSUMPTION. CAN YOU ELABORATE A LITTLE BIT ON THAT? YES, I BELIEVE THAT'S IN THE SALARY SCALE OR PAYROLL GROWTH SECTION. YES. SO THAT, THAT HAS TO DO WITH THE, YOU KNOW, THE MEET AND CONFER HAS, UM, SET, UH, RATES AND THE MEET CONFER ALSO CONSIDERS OTHER PEER CITIES IN THE, UM, THE SALARY. SO, UH, ACTUARIES SHOULD CONSIDER FUTURE MEET AND CONFERS OR FUTURE, YOU KNOW, 10 PLUS 10, 20 YEARS DOWN THE ROAD, WHAT THAT COULD LOOK LIKE AND WHETHER, UM, THE 2.5 ULTIMATE GROWTH IS APPROPRIATE OR SOMETHING HIGHER IS APPROPRIATE. AND IT'S JUST SOMETHING THAT FOR THE EXPERT TO LOOK AT. SO IT SEEMS LIKE POLICING IS EXPERIENCING, UM, A VERY LARGE CHANGE IN SALARIES AND HAS KIND OF MOVED FROM ONE KIND OF CLASS TO ANOTHER. MEANING I THINK WE WOULD GENERALLY TALK ABOUT TEACHERS AND POLICE OFFICERS AND NURSES TOGETHER, BUT WE'RE PAYING POLICE OFFICERS A LOT MORE THAN THOSE PEER PROFESSIONS. NOW THEY'RE IN A DIFFERENT CLASS, SO MAYBE WE NEED TO PUT THEM IN WITH ENGINEERS AND PROGRAMMERS AND I'M NOT SURE THAT WE'RE ACTUALLY ACCOUNTING FOR THAT IN THE PENSION. AND IN THOSE ASSUMPTIONS, I MEAN, I THINK WE'RE SEEING A FUNDAMENTAL SHIFT ON WHAT IT COSTS TO HIRE A POLICE OFFICER AND IF THEY'RE ONLY CONSIDER, SO THE PAYROLL GROWTH ASSUMPTIONS 2.5%, I MEAN, I'M NOT EVEN SURE THREE PERCENT'S APPROPRIATE ANYMORE. ARE ARE YOU PROVIDING GUIDANCE ON THAT OR, I THINK THAT'S CONSISTENT WITH OUR, OUR FINDING CONSIDER YEARS AFTER THE MEETING AND CONFER. I KNOW THAT 2023 OR 2024 I THINK WAS 7% OR 6%, UM, BASED ON THE MEETING AND CONFER AND THEN YEARS AFTER IF, IF THE DPFP AND AND SAL THINK THAT THE LONG-TERM GROWTH IS HIGHER THAN THAT'S SOMETHING THEY SHOULD INCLUDE IN THEIR EXPERIENCE STUDY AND THAT THAT WAS WHAT OUR FINDING WAS. YES. OKAY. AND THEN CHAIR, YOU WANT US TO ALSO DO ERA OH, YOU WERE DOING BOTH AT THE SAME TIME? WELL, I CAN, YEAH. UM, JUST BE KIND OF PRECISE BECAUSE I KNOW RE WEST, THANK YOU CHAIRMAN WEST FOR DOING THIS JUMP, BUT WE ALSO GONNA DO THIS ON DECEMBER THE FOURTH. SO IF YOU, YOU RUN OUT LITTLE TIME, SO I'M TRYING TO MAKE SURE I DON'T GET A, A LINK FROM SHARON WEST SO HE GOT A, A FULL AGENDA. SO IT'S THAT COUPLE THE TIME. WELL, I APPRECIATE THAT. UM, OF COURSE IT MIGHT HELP THEM BE BETTER PREPARED FOR THE ANSWERS AROUND THE HORSESHOE IF THEY HEAR IT. NOW THE FIRST THING OF THE FINDING IS, I THINK ACTUALLY THE MOST ALARMING THING IN THIS WHOLE DOCUMENT, WHICH IS CONSIDER ADDING, ADDING A DESCRIPTION THAT NON VESTED TERMINATE EMPLOYEES WHO DO NOT REQUEST A REFUND OF THE MEMBER'S CONTRIBUTION WITHIN THREE YEARS, FORFEIT THAT REFUND. ARE YOU SAYING IT, THEIR CONTRIBUTION, THEIR PAYROLL DEDUCTION IS GONNA GO BACK TO THE PLAN MONEY THAT WAS, THAT THEY EARNED, THAT WAS TAKEN OUTTA THEIR PAYCHECK IS GONNA GO BACK TO THEIR PLAN. THAT'S WHAT WE SAW WHEN WE REVIEWED THE, THE PLAN DOCUMENT. UM, AND YOU KNOW, WE'RE NOT, WE'RE NOT REVIEWING WHAT THE PLAN DOCUMENT SHOULD OR SHOULDN'T HAVE. THAT'S NOT IN OUR SCOPE, BUT JUST WHAT THE ACTUARY IS SUMMARIZING. UM, YEAH, SO JACK, I'D ACTUALLY LOVE TO ASK YOU AT WHAT POINT IS THAT IN THE SCOPE, LIKE IF THAT IS APPROPRIATE NOW MY UNDERSTANDING IS THAT THE CITY'S CONTRIBUTION TO THAT WOULD OF COURSE RETURN TO THE PLAN, BUT TO TAKE SOMEBODY'S WAGES, I MEAN, I WOULD WANNA KNOW THAT WE VERY, UM, SPECIFICALLY HAVE SENT THEM A LETTER MAYBE WITH THEIR COVER DOCUMENTS, MAYBE, UM, EVERY PHONE NUMBER MAILING ADDRESS THAT WE, YOU KNOW, SENT THAT LETTER EMAIL AND DOCUMENTED IT. I MEAN THIS, I MEAN IT FEELS LIKE A TAKING TO TAKE SOMEBODY'S WAGES. AND I'M GLAD WE'RE ASKING THIS QUESTION HERE. THIS WILL GIMME A CHANCE TO RESEARCH THAT BEFORE. OKAY. THAT'S, WE GET TO THE FOURTH. IS THAT WHAT I'M GONNA NEED TO CHECK ON? UH, COUNCIL MEMBER MENDELSON. OKAY. SO, AND THEN THIS IS, I I THINK THIS IS MY SECOND TO LAST QUESTION. UM, UNDER FUNDING METHOD, YOU HAVE CONSIDER MODIFYING THE AMORTIZATION PERIOD TO CONFORM [00:30:01] WITH PRB GUIDELINES, WHICH RECOMMEND USING A FINITE OR CLOSED FUNDING PERIOD OVER AS BRIEF A PERIOD POSSIBLE. AND SO CAN YOU, CAN YOU ELABORATE ON THAT ITEM? SO THE, THE PRB GUIDELINES, UM, RECOMMENDS A CLOSED, UH, EXTRA DETERMIN CONTRIBUTION OVER AS, AS QUICK A PERIOD AS POSSIBLE. 15, 20 YEARS IS, IS PREFERRED. AND YOU KNOW, AS THE REPORTS WE REVIEWED FOR ERF, YOU KNOW, THEY HAVE THE 36% OF PAYROLL, THAT'S WHAT THEY'RE CONTRIBUTING. BUT THE REPORT ALSO INCLUDES A QUOTE UNQUOTE RECOMMENDED CONTRIBUTION OR AN ACTUARY DETERMINED CONTRIBUTION. AND THE GRS REPORT HAD A 30 YEAR OPEN, UM, PERIOD, WHICH ACCORDING TO PRB IS NOT PREFERRED. SO IF FOR THAT, UM, ITEM, THE RECOMMENDED CONTRIBUTION OR THE A DC, WE SHOULD CONSIDER A A CLOSE PERIOD, WHICH WOULD BE HIGHER THAN AN OPEN PERIOD. AND SO JACK, THIS WAS ALREADY TAKEN CARE OF WITH OUR PLAN. RIGHT. OKAY. AND THEN, UM, THE LAST ONE IS, I THINK IT'S THE LAST ONE. LEMME SAY THAT, UM, WHEN IT SAYS CLARIFY, THE ESTIMATED ADMINISTRATIVE EXPENSES ARE EXPECTED TO INCREASE WITH INFLATION FOR PURPOSES OF ADEC. ARE YOU SAYING THAT THEY'RE USING JUST A CONSTANT NUMBER FOR ADMINISTRATIVE, THEY ARE USING INFLATION? WE CONFIRM THAT WITH THEM BY EMAIL. SO WE JUST RECOMMENDED THAT IT BE INCLUDED IN THE REPORT FOR ADDED CLARITY FOR THE, FOR THE 17, UM, I'M SORRY, FOR THE SEVEN PARTICIPANTS THAT HAD INCORRECTLY APPROPRIATED NUMBERS, UM, DO YOU THINK THAT'S NORMAL? IS THAT SOMETHING TYPICAL YOU'LL FIND WHEN YOU'RE, WHEN YOU'RE GOING THROUGH DATA OR YEAH, I, WE WOULD CATEGORIZE THAT AS VERY MINOR. UM, THINGS LIKE THAT DO HAPPEN FROM TIME TO TIME DATA CORRECTIONS AND THE, THE IMPACT ON THE LIABILITY WOULD'VE BEEN VERY, VERY SMALL. AND IT WAS, IT WAS FIXED IN THE 12 31 23 EVALUATION ALREADY. UM, SO NOT, NOT CONCERNING TO US. OKAY. BUT SO PEOPLE'S LIMIT, THEY DIDN'T HAVE THE APPROPRIATE LIMIT? RIGHT. I THINK THE LIMIT WAS OFF BY A YEAR. OKAY. AND THEN, UM, THAT'S THE SAME THING AS THE OPEN. OKAY. THAT'S ALL MY QUESTIONS. THANK YOU. ANYONE ELSE ON THE COMMITTEE WHO HAD ANY QUESTIONS? OKAY, SO YOU'RE GONNA WAIT? YES, WE'RE DONE. OKAY. UM, I ADJOURN THE GOVERNMENT PERFORMANCE AND FINANCIAL MANAGEMENT COMMITTEE AT 2:09 PM UH, I, I ADJOURNED. THE AD HOC COMMITTED PENSION AT 2:09 PM IS ADJOURNED WITHIN ONE MINUTE WHEN OUR UH, GPFN MEETING WAS SET FOR. GREAT JOB, EVERYBODY. * This transcript was created by voice-to-text technology. The transcript has not been edited for errors or omissions, it is for reference only and is not the official minutes of the meeting.