the-compact
Board Of Trustees Thursday, February 5, 2026 · 117 min

Board of Trustees Study Session, FSC Quarterly Meeting, REHBT Quarterly Meeting February 5, 2026

Summary

The city council discussed financial investments, liquidity options, and pension plan trust, aiming to maintain liquidity and generate a market rate of return.

  • The city council reviewed the township's operating reserves and financial investments.
  • The investment portfolio has generated a 9.04% annualized return over 11 years, outperforming expectations.
  • The city council discussed investment portfolio performance and strategies, including reallocation of funds from real estate to private equity and fixed income.
  • The city council discussed pension funding and cash flow, considering alternative distribution methods and regular check-ins.
  • The city council discussed pension buyout options and their impact on actuarially determined contributions.

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Transcript

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  1. Good morning everyone and welcome to the Bloomfield Township Board of Trustees study session along with the Financial Stability Committee. If we'll all stand for the Pledge of Allegiance. I pledge allegiance to the flag of the United States of America and to the republic for which it stands, one nation, under God, indivisible, with liberty and justice for all. Alright, good morning everyone. Is the clerk here to take attendance? So noted. Everybody looks like they're a tenant and at this point I'd like to appoint our meeting chair as our treasurer, Michael Shostak. The motion? I moved. Support? Support. All in favor say aye. Aye. Aye. Congratulations. Thank you. Want me to stick the thing up? I'm sure I won't need the gavel, but thank you. Good morning everybody. This is the annual investment review for the Board of Trustees and the quarterly meeting for the Financial Sustainability Committee and the Retiree, Retired Employees Healthcare Benefits Trust. As you know, as the fiduciaries for our investments for our pension fund and our retiree health care fund, the Board of Trustees has the obligation to monitor and advise on the matters of the investments. And so this is our annual study session that we go through it. Okay, thank you. Okay, so we'll begin with public comment. Since this is an open meeting under the Open Meetings Act, at this time, if there's anyone from the public who would like to address the Joint Committee, now would be the time. Okay, seeing none, we'll close public comment. We'll move on to approving the minutes of the November 5th, 2025 Financial Sustainability Committee meeting. So members of the FSC, is there a motion to approve the minutes? So moved. Motion by Barnett. Support. Support by Olson. All those in favor say aye. Aye. Aye. Okay, hearing no objections, those minutes are approved. Next is the approval of the minutes of the November 5th, 2025 Retired Employees Healthcare Benefits Trust Meeting. So for members of that committee, can I get a motion to approve the minutes? So moved. Moved by Kalinske. Second. Second by Tice. All those in favor say aye. Aye. Opposed? Okay, those pass. Okay, now

  2. As you know, as the fiduciaries for our investments for our pension fund and our retiree health care fund, the Board of Trustees has the obligation to monitor and advise on the matters of the investments. And so this is our annual study session that we go through it. Okay, thank you. Okay, so we'll begin with public comment. Since this is an open meeting under the Open Meetings Act, at this time, if there's anyone from the public who would like to address the Joint Committee, now would be the time. Okay, seeing none, we'll close public comment. We'll move on to approving the minutes of the November 5th, 2025 Financial Sustainability Committee meeting. So members of the FSC, is there a motion to approve the minutes? So moved. Motion by Barnett. Support. Support by Olson. All those in favor say aye. Aye. Aye. Okay, hearing no objections, those minutes are approved. Next is the approval of the minutes of the November 5th, 2025 Retired Employees Healthcare Benefits Trust Meeting. So for members of that committee, can I get a motion to approve the minutes? So moved. Moved by Kalinske. Second. Second by Tice. All those in favor say aye. Aye. Opposed? Okay, those pass. Okay, now we begin our annual portfolio review. And we begin with the operating reserves, which are the township funds. And I apologize here. Give me one second. I should have the packet up. There is it here. There is it here. I don't. Okay. Pull it up. So these are the township funds. Belongs to the township. And I manage a portfolio with the goal of maintaining liquidity. And so that we have the funds that we need when we need it. And also generating a market rate of return or as best a return as we can. So you'll see in your packet for December 31st, 2025, we ended the year with a little over $3 million in our checking accounts, $7 million in money market funds, which are

  3. Second. Second by Tice. All those in favor say aye. Aye. Opposed? Okay, those pass. Okay, now we begin our annual portfolio review. And we begin with the operating reserves, which are the township funds. And I apologize here. Give me one second. I should have the packet up. There is it here. There is it here. I don't. Okay. Pull it up. So these are the township funds. Belongs to the township. And I manage a portfolio with the goal of maintaining liquidity. And so that we have the funds that we need when we need it. And also generating a market rate of return or as best a return as we can. So you'll see in your packet for December 31st, 2025, we ended the year with a little over $3 million in our checking accounts, $7 million in money market funds, which are readily available. We had $7.5 million in two bank certificates of deposit. Those CDs will be maturing one in March and one in April. And based on where I see rates going, I'm not sure that we're going to renew all $7.5 million of it. We may move those funds. Then we have $56 million in the what I call local government investment pools. We're in two local government investment pools. One is the Oakland County treasurer runs a investment pool for the local communities in Oakland County. So we have some money there. And then the other one. Michigan class which is a privately managed pool for local governments across Michigan that includes not just municipalities but also school districts and authorities and they have a very competitive return one of the highest I've seen and so there are good 20 to 25 basis points higher than anything we get through our money market funds so I try to keep as much of the money in there as possible so we have about 57 million dollars and that is the the

  4. a little over $3 million in our checking accounts, $7 million in money market funds, which are readily available. We had $7.5 million in two bank certificates of deposit. Those CDs will be maturing one in March and one in April. And based on where I see rates going, I'm not sure that we're going to renew all $7.5 million of it. We may move those funds. Then we have $56 million in the what I call local government investment pools. We're in two local government investment pools. One is the Oakland County treasurer runs a investment pool for the local communities in Oakland County. So we have some money there. And then the other one. Michigan class which is a privately managed pool for local governments across Michigan that includes not just municipalities but also school districts and authorities and they have a very competitive return one of the highest I've seen and so there are good 20 to 25 basis points higher than anything we get through our money market funds so I try to keep as much of the money in there as possible so we have about 57 million dollars and that is the the Michigan class is same day available so if we put in a request for money before 3 p.m. we'll have the cash in our checking account that same day Oakland County is a next day liquidity and then lastly we have a portfolio of fixed income securities of about 40.5 million dollars this consists of bonds mostly treasuries and agencies so agencies are like the federal farm federal Farm Bureau and federal Home Loan Corporation etc those are basically government backed agencies so there they have the same security as treasuries do they're backed by the US government we have about 40.5 million there the weighted average coupon rate on those bonds is four point one two percent and most money markets right now are in the 3.5 range so the money markets are three point five but they're same day liquid the bonds which are next day liquid we don't we have to sell security then pull the money out if we needed it but we're of course not doing that that we're earning 4.12% so significantly higher

  5. there as possible so we have about 57 million dollars and that is the the Michigan class is same day available so if we put in a request for money before 3 p.m. we'll have the cash in our checking account that same day Oakland County is a next day liquidity and then lastly we have a portfolio of fixed income securities of about 40.5 million dollars this consists of bonds mostly treasuries and agencies so agencies are like the federal farm federal Farm Bureau and federal Home Loan Corporation etc those are basically government backed agencies so there they have the same security as treasuries do they're backed by the US government we have about 40.5 million there the weighted average coupon rate on those bonds is four point one two percent and most money markets right now are in the 3.5 range so the money markets are three point five but they're same day liquid the bonds which are next day liquid we don't we have to sell security then pull the money out if we needed it but we're of course not doing that that we're earning 4.12% so significantly higher and that's that's locked in for a while so that's the good thing about the bonds okay that is the some summary of the operating portfolio last quarter we generated over eight hundred thousand dollars in interest and we because of the timing of the bonds it's every other quarter because we get those interests semi-annually that the September quarter and the March quarter are when we get most of the interest from the bonds so you saw in the September quarter we did 1.1 million in interest versus the 800 in the December quarter so those are the operating reserves and at this time I'll move on to the pension plan trust so the pension plan trust is as you know separated into two portfolios one is a portfolio that is controlled by Empower which is the record keeper for our pension plan they also take care of paying the benefits and as part of the contract that came from Prudential which was then bought by Empower

  6. of course not doing that that we're earning 4.12% so significantly higher and that's that's locked in for a while so that's the good thing about the bonds okay that is the some summary of the operating portfolio last quarter we generated over eight hundred thousand dollars in interest and we because of the timing of the bonds it's every other quarter because we get those interests semi-annually that the September quarter and the March quarter are when we get most of the interest from the bonds so you saw in the September quarter we did 1.1 million in interest versus the 800 in the December quarter so those are the operating reserves and at this time I'll move on to the pension plan trust so the pension plan trust is as you know separated into two portfolios one is a portfolio that is controlled by Empower which is the record keeper for our pension plan they also take care of paying the benefits and as part of the contract that came from Prudential which was then bought by Empower We're locked into a stable value investment called the Guaranteed Deposit Account, GDA, that is managed by Empower. And it's basically a fixed income vehicle, but it's a stable value fund, which means that it can't really go below zero. So we give up some of the upside on that investment, but it can't go down. And so we're earning basically about 3% on that money, and that's being held by Empower. And then they use that money to pay the benefits for the pension plan. And we're locked into that. You know, my predecessor, Brian Keeps, and I, we've looked at every which way to try to get out of that contract because of the low yield that we're getting on that money. As you see, it's $109 million, so it's a lot of money. But unfortunately, that contract just seems to be unbreakable. So we are, we are stuck in that for now. But the good news is that in 2016, the township closed its pension, closed the guaranteed portion of the pension plan. So the, the number of retirees that are going to be funded by the GDA are locked and closed. And over time, that will come down as, as those pensioners no longer collect pensions.

  7. We're locked into a stable value investment called the Guaranteed Deposit Account, GDA, that is managed by Empower. And it's basically a fixed income vehicle, but it's a stable value fund, which means that it can't really go below zero. So we give up some of the upside on that investment, but it can't go down. And so we're earning basically about 3% on that money, and that's being held by Empower. And then they use that money to pay the benefits for the pension plan. And we're locked into that. You know, my predecessor, Brian Keeps, and I, we've looked at every which way to try to get out of that contract because of the low yield that we're getting on that money. As you see, it's $109 million, so it's a lot of money. But unfortunately, that contract just seems to be unbreakable. So we are, we are stuck in that for now. But the good news is that in 2016, the township closed its pension, closed the guaranteed portion of the pension plan. So the, the number of retirees that are going to be funded by the GDA are locked and closed. And over time, that will come down as, as those pensioners no longer collect pensions. So the second portfolio is the portfolio that we manage with our advisor. that's going to be done. Okay. Okay. Thank you. Okay. Thank you. earner and Brian Green, and he'll talk about that here. So this is totally within our discretion, how we invest it. Back in 2014, the township sold pension bonds to fully fund the pension plan. Since then, there's been a little bit of a slide backwards. We're not fully funded, but we're about 90% funded. And we use that money to invest and generate a higher rate of return. So I will let Brian talk about that. That's about $130 million. And so Brian, I'll turn it over to you to talk about the pension portfolio. Thank you, Michael. Good morning, all. So I'll roll in, you know, the book that we have on screen and in front of you is a combination of an update on the pension plan. And then the second half, the front half of it's for the pension, the back half of it's for the retiree health care. So obviously a little different from an asset allocation standpoint,

  8. And over time, that will come down as, as those pensioners no longer collect pensions. So the second portfolio is the portfolio that we manage with our advisor. that's going to be done. Okay. Okay. Thank you. Okay. Thank you. earner and Brian Green, and he'll talk about that here. So this is totally within our discretion, how we invest it. Back in 2014, the township sold pension bonds to fully fund the pension plan. Since then, there's been a little bit of a slide backwards. We're not fully funded, but we're about 90% funded. And we use that money to invest and generate a higher rate of return. So I will let Brian talk about that. That's about $130 million. And so Brian, I'll turn it over to you to talk about the pension portfolio. Thank you, Michael. Good morning, all. So I'll roll in, you know, the book that we have on screen and in front of you is a combination of an update on the pension plan. And then the second half, the front half of it's for the pension, the back half of it's for the retiree health care. So obviously a little different from an asset allocation standpoint, but a number of the names are similar. So I've had the pleasure of being in front of this committee a number of times before. And you know, I always try to come up with like some theme. And I try to come up with the new one from one quarter to the next, but I don't have a new one this time. So the theme this quarter, similar to last quarter is the news is good, not great. And what's the distinction between good and great? Well, great is positive and outperforming. Good is positive, but underperformed. forming. The story of 2025 was really, if you made the decision on January 1 to invest in the equity market, whether it was U.S. or international, that was the single best decision you could have made. But if you, however, then made the distinction of saying, well, I'm going to buy stocks, but I want two components of everything that I own. Number one, you have to sell things. So you have to have revenue. And number two, you have to have profits. So the audacity of saying, I want to buy companies that generate revenue and generate revenue that then results in a profit to shareholders, those were the two worst decisions you could have made. Those two decisions are the distinction or the driving factor between good news versus great news. And I'll give you a couple of examples. So you always talk about kind of broad equity returns. And I know we are nine months into

  9. for the retiree health care. So obviously a little different from an asset allocation standpoint, but a number of the names are similar. So I've had the pleasure of being in front of this committee a number of times before. And you know, I always try to come up with like some theme. And I try to come up with the new one from one quarter to the next, but I don't have a new one this time. So the theme this quarter, similar to last quarter is the news is good, not great. And what's the distinction between good and great? Well, great is positive and outperforming. Good is positive, but underperformed. forming. The story of 2025 was really, if you made the decision on January 1 to invest in the equity market, whether it was U.S. or international, that was the single best decision you could have made. But if you, however, then made the distinction of saying, well, I'm going to buy stocks, but I want two components of everything that I own. Number one, you have to sell things. So you have to have revenue. And number two, you have to have profits. So the audacity of saying, I want to buy companies that generate revenue and generate revenue that then results in a profit to shareholders, those were the two worst decisions you could have made. Those two decisions are the distinction or the driving factor between good news versus great news. And I'll give you a couple of examples. So you always talk about kind of broad equity returns. And I know we are nine months into the fiscal year for the township. But 2020, you know, December 31st is kind of putting a bow on things from a personal standpoint. So, you know, looking at last year, the S&P was up 17, almost 18%. Great news. Small cap stocks here in the U.S. measured by the Russell 2000 were up 12%, almost 13. The story was really international markets. The MSCI IFA, which would be Europe, Australia, Far East, was up north of 31%. And emerging market stocks were up north of 33. So for the first time in a long time, we saw significant outperformance from international stocks versus U.S. stocks. Now, What gets a little bit more interesting, and to kind of lay the groundwork for the driving force between good, not great, is if you start to split hairs a little bit. So I just mentioned the S&P 500 and the Russell 2000. So S&P and Russell are two different market data, market index providers. Why do we use one versus the other? Unfortunately, my answer is the bad one. That's just the way it's always been, right? You hear the S&P 500 in the news every single night. You hear the Dow, you hear the NASDAQ, but they're built a little differently.

  10. of examples. So you always talk about kind of broad equity returns. And I know we are nine months into the fiscal year for the township. But 2020, you know, December 31st is kind of putting a bow on things from a personal standpoint. So, you know, looking at last year, the S&P was up 17, almost 18%. Great news. Small cap stocks here in the U.S. measured by the Russell 2000 were up 12%, almost 13. The story was really international markets. The MSCI IFA, which would be Europe, Australia, Far East, was up north of 31%. And emerging market stocks were up north of 33. So for the first time in a long time, we saw significant outperformance from international stocks versus U.S. stocks. Now, What gets a little bit more interesting, and to kind of lay the groundwork for the driving force between good, not great, is if you start to split hairs a little bit. So I just mentioned the S&P 500 and the Russell 2000. So S&P and Russell are two different market data, market index providers. Why do we use one versus the other? Unfortunately, my answer is the bad one. That's just the way it's always been, right? You hear the S&P 500 in the news every single night. You hear the Dow, you hear the NASDAQ, but they're built a little differently. And the best example that I can give you is if you look at the Russell 2000, which would be a proxy for small cap stocks here in the U.S., the only restriction is you have to fit a certain market cap range, and it's about $500 million to $10 billion in value, which doesn't, I say, isn't that large when you talk about, like, Walmart just graduated into the trillion-dollar club. So $500 million to $10 billion in market cap and $2,000 names. The only requirement is that you fit that range of value of market capitalization and be a publicly traded stock in the U.S. So that was up 12.9% last year. If you instead said, let me look at the S&P 600, which has 600 stocks, that has the exact same market capitalization range, so $500 million to $10 billion. The median market cap is the same, the average market cap is the same, so the pool... that it's selecting from is identical to the Russell 2000. But there's one distinction. To be included in the S&P indices, you have to have four straight quarters of profitability. That is the reason why Tesla wasn't in the S&P 500, despite when it finally met those standards, it was now

  11. You hear the Dow, you hear the NASDAQ, but they're built a little differently. And the best example that I can give you is if you look at the Russell 2000, which would be a proxy for small cap stocks here in the U.S., the only restriction is you have to fit a certain market cap range, and it's about $500 million to $10 billion in value, which doesn't, I say, isn't that large when you talk about, like, Walmart just graduated into the trillion-dollar club. So $500 million to $10 billion in market cap and $2,000 names. The only requirement is that you fit that range of value of market capitalization and be a publicly traded stock in the U.S. So that was up 12.9% last year. If you instead said, let me look at the S&P 600, which has 600 stocks, that has the exact same market capitalization range, so $500 million to $10 billion. The median market cap is the same, the average market cap is the same, so the pool... that it's selecting from is identical to the Russell 2000. But there's one distinction. To be included in the S&P indices, you have to have four straight quarters of profitability. That is the reason why Tesla wasn't in the S&P 500, despite when it finally met those standards, it was now a top 10 name. Last year, the S&P 600 was up 6%. So index fund buying the same range of companies in value. But the one distinction is four straight quarters of generating a profit. It was up six, not up 13. So I mentioned that from the standpoint of, it's really easy to come in and deliver positive news. It's even easier to come in and deliver positive news that are ahead of benchmarks. But that underlying current of profitable companies weren't rewarded as well in 2025 as unprofitable. And it really comes down to the prospects of what AI is going to do to your business. And if the prospect or the perception was that this is going to be a positive disruption, your stock did well. If it was a negative disruption, your stock got hammered. And if it was no disruption, or we really can't figure out what it's going to mean, the stock languished. And one of those examples, Rob and I were talking before, like I have a seven year old, a 10 year old, a 12 year old at home. So there's a lot of snacks that come through my house. My seven year old loves extra cheesy Cheez-Its. That's Calanova, right?

  12. reason why Tesla wasn't in the S&P 500, despite when it finally met those standards, it was now a top 10 name. Last year, the S&P 600 was up 6%. So index fund buying the same range of companies in value. But the one distinction is four straight quarters of generating a profit. It was up six, not up 13. So I mentioned that from the standpoint of, it's really easy to come in and deliver positive news. It's even easier to come in and deliver positive news that are ahead of benchmarks. But that underlying current of profitable companies weren't rewarded as well in 2025 as unprofitable. And it really comes down to the prospects of what AI is going to do to your business. And if the prospect or the perception was that this is going to be a positive disruption, your stock did well. If it was a negative disruption, your stock got hammered. And if it was no disruption, or we really can't figure out what it's going to mean, the stock languished. And one of those examples, Rob and I were talking before, like I have a seven year old, a 10 year old, a 12 year old at home. So there's a lot of snacks that come through my house. My seven year old loves extra cheesy Cheez-Its. That's Calanova, right? On Auto Catalog, they generated 10% more cash on their balance sheet from Jan 1 to December 31st. So the company, right, the balance sheet, the bank account had 10% more cash because they sold snacks at a profit all year long. Stock was down 20% last year. Why? Because AI wasn't going to have any disruption to their business. That seems to be the only explanation. So I provide that as a bit of backdrop into, as we get into the numbers of, you know, we've seen underperformance from a number of active managers, and it's simply because they had the audacity to say, I want to own stocks that sell things and sell them at a profit. My favorite chart, when you go into page four, you know, dating back to 2014, bond issuance, right, the county traded, sorry, the township traded, you know, a certain liability for an uncertain liability in funding the pension plan, moved into an arbitrage, right? We have to pay interest on this debt, and as long as we can invest these dollars in the equity markets, in real estate, in fixed income, in private equity, and generate a return higher

  13. On Auto Catalog, they generated 10% more cash on their balance sheet from Jan 1 to December 31st. So the company, right, the balance sheet, the bank account had 10% more cash because they sold snacks at a profit all year long. Stock was down 20% last year. Why? Because AI wasn't going to have any disruption to their business. That seems to be the only explanation. So I provide that as a bit of backdrop into, as we get into the numbers of, you know, we've seen underperformance from a number of active managers, and it's simply because they had the audacity to say, I want to own stocks that sell things and sell them at a profit. My favorite chart, when you go into page four, you know, dating back to 2014, bond issuance, right, the county traded, sorry, the township traded, you know, a certain liability for an uncertain liability in funding the pension plan, moved into an arbitrage, right? We have to pay interest on this debt, and as long as we can invest these dollars in the equity markets, in real estate, in fixed income, in private equity, and generate a return higher than what our interest cost is on the debt, we're in a good position. Well, we started 12 years ago, 11 years ago, with $84 million. We have had net negative cash flow, so this is... distributions from the equity portfolio into the GDA with now Empower of $32 million. It's generated a 9.04% return annualized over that 11-year time period, where in dollar terms, the stock portfolio, the little bit of fixed income, the real estate, the private equity has added $82.6 million in value. That $84 million today without any market growth would be worth the $51 million that you see in the bottom right-hand corner, and I will make a concerted effort to make that font size bigger for everyone's advantage going forward. So to the question of was this prudent and wise, the answer still is an unequivocal yes. Excuse me, at the time that we did that, our hope and expectation was that our return would be about 6% or 7%, so we've certainly outperformed what the expectations were back

  14. in real estate, in fixed income, in private equity, and generate a return higher than what our interest cost is on the debt, we're in a good position. Well, we started 12 years ago, 11 years ago, with $84 million. We have had net negative cash flow, so this is... distributions from the equity portfolio into the GDA with now Empower of $32 million. It's generated a 9.04% return annualized over that 11-year time period, where in dollar terms, the stock portfolio, the little bit of fixed income, the real estate, the private equity has added $82.6 million in value. That $84 million today without any market growth would be worth the $51 million that you see in the bottom right-hand corner, and I will make a concerted effort to make that font size bigger for everyone's advantage going forward. So to the question of was this prudent and wise, the answer still is an unequivocal yes. Excuse me, at the time that we did that, our hope and expectation was that our return would be about 6% or 7%, so we've certainly outperformed what the expectations were back in 2014. Thank you for that, Neil. Right, and I would add that the bonds that we sold are now, we're paying interest on it between 2% and 3%, so that money that we're paying 2% or 3% on, we're earning 9%. So where do we sit? As I mentioned, good, not great. You know, for the quarter, up 2% and change on a fiscal year-to-date basis. Remember, this is about half of the portfolio, so we're trying to get to a 6% or 7% return, and... the equity half of the portfolio so far in this fiscal year has generated better than 17%. So if Q1 of 2026 is flat, this is always that point in the fiscal year where I say, let's not get greedy, just hold the line from this point forward. The investment portfolio will be pushed up the funded ratio, right? Because we will have done better than the actual expected. So I'm going to focus on that one year column because I spent some time on the front end talking about what went on, right? And what it all comes down to is if you had the audacity of buying profitable names, you underperformed. So Ancora for the year was up just shy of 9% versus their benchmark up 15.9. I found this interesting and I know I'm tossing a lot of numbers, but like, again,

  15. would be about 6% or 7%, so we've certainly outperformed what the expectations were back in 2014. Thank you for that, Neil. Right, and I would add that the bonds that we sold are now, we're paying interest on it between 2% and 3%, so that money that we're paying 2% or 3% on, we're earning 9%. So where do we sit? As I mentioned, good, not great. You know, for the quarter, up 2% and change on a fiscal year-to-date basis. Remember, this is about half of the portfolio, so we're trying to get to a 6% or 7% return, and... the equity half of the portfolio so far in this fiscal year has generated better than 17%. So if Q1 of 2026 is flat, this is always that point in the fiscal year where I say, let's not get greedy, just hold the line from this point forward. The investment portfolio will be pushed up the funded ratio, right? Because we will have done better than the actual expected. So I'm going to focus on that one year column because I spent some time on the front end talking about what went on, right? And what it all comes down to is if you had the audacity of buying profitable names, you underperformed. So Ancora for the year was up just shy of 9% versus their benchmark up 15.9. I found this interesting and I know I'm tossing a lot of numbers, but like, again, we talked about Russell versus S&P 500. So the Russell 1000 value, which would be a proxy for large cap value stocks, was up 15.9 last year. The S&P 500 value was up 13. So saying, give me large cap value names, but give them to me that actually generate a profit, and you gave up 3% in return. So about half of Ancora's underperformance was just market driven. The other is a little bit more on the AI side is they've had a lot of exposure to Microsoft and Broadcom and a few investment banking names like Houlihan, Lukey, that despite generating better than estimate profitability, stock price is still traded off. However, we have a balance of active managers and passive managers. One of the largest positions is the S&P 500 Index Fund, and it was up 17.8, and the index was up 17.8. So there's the balance back and forth. Siegel, Bryant, and Hamill, new addition to the portfolio. This replaced the Clarkston portfolio that was removed for underperformance. Slight outperformance in the first two months that it was in the portfolio. Outperforming again here in Q1. And I did the thing you're not supposed to do when I was getting ready last night,

  16. I found this interesting and I know I'm tossing a lot of numbers, but like, again, we talked about Russell versus S&P 500. So the Russell 1000 value, which would be a proxy for large cap value stocks, was up 15.9 last year. The S&P 500 value was up 13. So saying, give me large cap value names, but give them to me that actually generate a profit, and you gave up 3% in return. So about half of Ancora's underperformance was just market driven. The other is a little bit more on the AI side is they've had a lot of exposure to Microsoft and Broadcom and a few investment banking names like Houlihan, Lukey, that despite generating better than estimate profitability, stock price is still traded off. However, we have a balance of active managers and passive managers. One of the largest positions is the S&P 500 Index Fund, and it was up 17.8, and the index was up 17.8. So there's the balance back and forth. Siegel, Bryant, and Hamill, new addition to the portfolio. This replaced the Clarkston portfolio that was removed for underperformance. Slight outperformance in the first two months that it was in the portfolio. Outperforming again here in Q1. And I did the thing you're not supposed to do when I was getting ready last night, which is go back and look at an investment manager that you terminated. I went back and looked, and Clarkston has continued to underperform, and Edgewood has continued to underperform. So those changes that were made in 2025 with several of those underperforming strategies have been additive to the portfolio. Reinhardt, as I mentioned, again, that distinction of the S&P 600 is up 6%. The Russell 2000 is up 12%. What's the difference? Profitability. So this isn't we picked the wrong name, or we didn't have enough information technology. This is just simply last year the market did not reward high-quality, profitable companies. They are up 7%. Benchmark was up 12%. Long-term numbers for them continue to be in line. This was added back in beginning of 2024 to diversify some of the Clarkston exposure. If we look back, and we don't have it here because this is just our exposure, but like their three-year number. ahead they're five-year numbers ahead so everything from a longer term standpoint continues to be very very strong still an index component in the small mid cap side up 11 and change for the year with the fidelity extended market index fund flip you head to page six international equity was the single

  17. And I did the thing you're not supposed to do when I was getting ready last night, which is go back and look at an investment manager that you terminated. I went back and looked, and Clarkston has continued to underperform, and Edgewood has continued to underperform. So those changes that were made in 2025 with several of those underperforming strategies have been additive to the portfolio. Reinhardt, as I mentioned, again, that distinction of the S&P 600 is up 6%. The Russell 2000 is up 12%. What's the difference? Profitability. So this isn't we picked the wrong name, or we didn't have enough information technology. This is just simply last year the market did not reward high-quality, profitable companies. They are up 7%. Benchmark was up 12%. Long-term numbers for them continue to be in line. This was added back in beginning of 2024 to diversify some of the Clarkston exposure. If we look back, and we don't have it here because this is just our exposure, but like their three-year number. ahead they're five-year numbers ahead so everything from a longer term standpoint continues to be very very strong still an index component in the small mid cap side up 11 and change for the year with the fidelity extended market index fund flip you head to page six international equity was the single greatest contributor we own an index fund here so just choosing to own everything AI was obviously the driver of things from a US standpoint European defense was the driver of things from an international standpoint as big push from a NATO standpoint for more spending within Europe ABS from an emerging market standpoint great start that was added back in March of 2025 recall that one is a little different and how it's it's built it is built of 26 different country-based emerging market equity portfolios so if we own equity in South Korea it is a manager based in South Korea that is building that portfolio or in South Africa or in Brazil rather than a team sitting at a trading desk in New York and deciding these are the names we're going to buy so they are equal weight some of the largest names like Alibaba Tencent and Samsung but overweight a lot of smaller names in those emerging markets so a lot of I'll say domestic exposure in that they're buying stocks in India that are benefiting from Indian consumers or they're buying stocks in South Africa

  18. market index fund flip you head to page six international equity was the single greatest contributor we own an index fund here so just choosing to own everything AI was obviously the driver of things from a US standpoint European defense was the driver of things from an international standpoint as big push from a NATO standpoint for more spending within Europe ABS from an emerging market standpoint great start that was added back in March of 2025 recall that one is a little different and how it's it's built it is built of 26 different country-based emerging market equity portfolios so if we own equity in South Korea it is a manager based in South Korea that is building that portfolio or in South Africa or in Brazil rather than a team sitting at a trading desk in New York and deciding these are the names we're going to buy so they are equal weight some of the largest names like Alibaba Tencent and Samsung but overweight a lot of smaller names in those emerging markets so a lot of I'll say domestic exposure in that they're buying stocks in India that are benefiting from Indian consumers or they're buying stocks in South Africa that are benefiting from South African consumers. Not global trade, but domestic trade in each of these countries. Negative spot in the portfolio. So about 1% of the underperformance that we saw for the last year is because of write downs that we saw this year in the TerraCAP portfolio. This is reflective of them making some painful decisions within the portfolio of several properties that because of appraisals and because of debt coming due, were sold. So they have a number of properties that were being sold in the fourth quarter and first quarter that were appraised in the third quarter. They knew what those exits were gonna be and they just wrote the entire, all of those to what they thought the exit price would be. I'm not gonna use the word optimism. This is a negative spot in the portfolio. If this were a U.S. equity portfolio, this would be a stock that we got wrong and would have been sold. But because this is an illiquid portfolio that will be worked out over the coming years, it's something that will continue to be there. It is a small part of the overall allocation and was intended to be that way. And what it comes down to is 2021 is gonna be one of the worst vintage years for investing in real estate because 22 happened with significant rate increases, which meant commercial real estate prices declined.

  19. that are benefiting from South African consumers. Not global trade, but domestic trade in each of these countries. Negative spot in the portfolio. So about 1% of the underperformance that we saw for the last year is because of write downs that we saw this year in the TerraCAP portfolio. This is reflective of them making some painful decisions within the portfolio of several properties that because of appraisals and because of debt coming due, were sold. So they have a number of properties that were being sold in the fourth quarter and first quarter that were appraised in the third quarter. They knew what those exits were gonna be and they just wrote the entire, all of those to what they thought the exit price would be. I'm not gonna use the word optimism. This is a negative spot in the portfolio. If this were a U.S. equity portfolio, this would be a stock that we got wrong and would have been sold. But because this is an illiquid portfolio that will be worked out over the coming years, it's something that will continue to be there. It is a small part of the overall allocation and was intended to be that way. And what it comes down to is 2021 is gonna be one of the worst vintage years for investing in real estate because 22 happened with significant rate increases, which meant commercial real estate prices declined. That's offset by some good news and we'll see the numbers out of the two Bloomfield, but the Bloomfield Capital Fund. This is real estate lending, you see up 8%. the year for one of the tranches and four percent in the principal enhanced property fund which is u.s commercial high quality real estate diversified by property type diversified by geography seeing positive news there in that portfolio up seven percent for the year the offset that i'll give you to the terra caps negative 42 is capital dynamics which is the private equity portfolio that was added back in 2024 was up 42 last year that is really reflective of that is a secondary portfolio so they are going out and buying existing interests from private equity investors typically at a discount right that is an institution that decides they don't want to own private equity anymore a group of individuals decide that they don't want to own a private equity fund anymore and capital dynamics specializes in purchasing those interests i expect that number to come down you know it's done 27 percent since it was added to the portfolio back in october the expectation over the life of the fund is kind of 15 to 20 percent

  20. which meant commercial real estate prices declined. That's offset by some good news and we'll see the numbers out of the two Bloomfield, but the Bloomfield Capital Fund. This is real estate lending, you see up 8%. the year for one of the tranches and four percent in the principal enhanced property fund which is u.s commercial high quality real estate diversified by property type diversified by geography seeing positive news there in that portfolio up seven percent for the year the offset that i'll give you to the terra caps negative 42 is capital dynamics which is the private equity portfolio that was added back in 2024 was up 42 last year that is really reflective of that is a secondary portfolio so they are going out and buying existing interests from private equity investors typically at a discount right that is an institution that decides they don't want to own private equity anymore a group of individuals decide that they don't want to own a private equity fund anymore and capital dynamics specializes in purchasing those interests i expect that number to come down you know it's done 27 percent since it was added to the portfolio back in october the expectation over the life of the fund is kind of 15 to 20 percent but nice to see a private investment right out of the gate do phenomenally well and then finally the new addition of the portfolio and this was just a conversation that the treasurer and i were having around we have some cash that needs that you know will ultimately be deployed we have some upcoming needs to make transfers to the gda for pension payments and mid-full obligations but with short-term rates decreasing what can we find you that is conservative safe liquid but attractive from a yield standpoint and that was where at the end of the year the Baird ultra short bond fund was added and it's yielding something just north of 4% versus three and a half out of money market and liquid on a daily basis so as long as we enter a trade by 4 p.m. we have the money ready for us the next day so go back to the beginning story is good not great what it comes down to is and we've seen it here in January and February is the market turns quickly and it's now rewarding the audacity of selling things in a profit so pleased with you know the numbers that we've seen just in terms of of how strong they are disappointed in the

  21. in october the expectation over the life of the fund is kind of 15 to 20 percent but nice to see a private investment right out of the gate do phenomenally well and then finally the new addition of the portfolio and this was just a conversation that the treasurer and i were having around we have some cash that needs that you know will ultimately be deployed we have some upcoming needs to make transfers to the gda for pension payments and mid-full obligations but with short-term rates decreasing what can we find you that is conservative safe liquid but attractive from a yield standpoint and that was where at the end of the year the Baird ultra short bond fund was added and it's yielding something just north of 4% versus three and a half out of money market and liquid on a daily basis so as long as we enter a trade by 4 p.m. we have the money ready for us the next day so go back to the beginning story is good not great what it comes down to is and we've seen it here in January and February is the market turns quickly and it's now rewarding the audacity of selling things in a profit so pleased with you know the numbers that we've seen just in terms of of how strong they are disappointed in the underperformance we've seen from several strategies but understand what's driving that under performance and recommend continued patience questions yeah Ryan I got a couple questions you were talking about commercial real estate I've been talking to some developers and their office space general open office space was down their vacancy rate was it and I'm speaking of one in particular company I know of they were during COVID at 55% now it's really picked up they're at 75 percent occupancy the industrial properties are 100 percent full and then we have other developers in the area I can point out to you that are buying real real estate like office space and turning it into apartment building or condos is that reflective and when you were talking about commercial uh real estate and the investment or is this like something we need to start paying attention to so i would say that that positive news and that optimism is what's being portrayed for example in principal's numbers um tarot caps numbers because principal is an evergreen vehicle um so they're on on a regular basis purchasing properties selling properties and kind of refreshing the portfolio tarot caps

  22. we've seen just in terms of of how strong they are disappointed in the underperformance we've seen from several strategies but understand what's driving that under performance and recommend continued patience questions yeah Ryan I got a couple questions you were talking about commercial real estate I've been talking to some developers and their office space general open office space was down their vacancy rate was it and I'm speaking of one in particular company I know of they were during COVID at 55% now it's really picked up they're at 75 percent occupancy the industrial properties are 100 percent full and then we have other developers in the area I can point out to you that are buying real real estate like office space and turning it into apartment building or condos is that reflective and when you were talking about commercial uh real estate and the investment or is this like something we need to start paying attention to so i would say that that positive news and that optimism is what's being portrayed for example in principal's numbers um tarot caps numbers because principal is an evergreen vehicle um so they're on on a regular basis purchasing properties selling properties and kind of refreshing the portfolio tarot caps issue is everything that's in that portfolio was purchased in 2021 from a peak and really at a peak valuation standpoint so it's reflective of the interest rate increases that we saw in 22 which then trickled over into the real estate the commercial real estate market in 23 and 24. what they face is um interestingly what's probably creating the opportunity for a lot of the examples that you just gave is the developer working that property right now is purchasing it from someone that bought it in 2020 or 2021 with a five-year mortgage that's now coming due and because prices have come down the choice is um do i put more equity into this because the bank won't just right it was worth 10 and i borrowed five and now it's worth seven and i owe five but the bank's saying you owe me five but if i'm going to renew the mortgage it's only going to be it you you maybe three and a half million dollars. So that's where developers have to make that, or building owners have to make that decision of, do I just give it back and redeploy my capital elsewhere? In TerraCap situation, I think it was three office buildings where loans were maturing and it's,

  23. basis purchasing properties selling properties and kind of refreshing the portfolio tarot caps issue is everything that's in that portfolio was purchased in 2021 from a peak and really at a peak valuation standpoint so it's reflective of the interest rate increases that we saw in 22 which then trickled over into the real estate the commercial real estate market in 23 and 24. what they face is um interestingly what's probably creating the opportunity for a lot of the examples that you just gave is the developer working that property right now is purchasing it from someone that bought it in 2020 or 2021 with a five-year mortgage that's now coming due and because prices have come down the choice is um do i put more equity into this because the bank won't just right it was worth 10 and i borrowed five and now it's worth seven and i owe five but the bank's saying you owe me five but if i'm going to renew the mortgage it's only going to be it you you maybe three and a half million dollars. So that's where developers have to make that, or building owners have to make that decision of, do I just give it back and redeploy my capital elsewhere? In TerraCap situation, I think it was three office buildings where loans were maturing and it's, we can throw more money at this or take the loss on these three to be able to protect the rest of the portfolio. That is, you know, 95% occupied apartment buildings in Austin or Orlando or Atlanta and have a better chance of recovery on those properties versus these that are probably going to languish for a little while. In other areas where population is shrinking? Mm-hmm. How much money do we currently have in TerraCap? Is it on the sheet? Yeah, 1.3 million. It's on page eight. Well, that's, that's the current value. Current value. Was 1.3. Um, we probably had... 2.5? 2 to 3 in it. Yeah, it was $3 million was the commitment. Okay. We did see an initial distribution right out of the gate on that one. I remember, yeah. Um, they had an apartment building in Sarasota or Bradenton, Naples adjacent, um, that they bought and owned it for about six months and somebody came in and made them up.

  24. where loans were maturing and it's, we can throw more money at this or take the loss on these three to be able to protect the rest of the portfolio. That is, you know, 95% occupied apartment buildings in Austin or Orlando or Atlanta and have a better chance of recovery on those properties versus these that are probably going to languish for a little while. In other areas where population is shrinking? Mm-hmm. How much money do we currently have in TerraCap? Is it on the sheet? Yeah, 1.3 million. It's on page eight. Well, that's, that's the current value. Current value. Was 1.3. Um, we probably had... 2.5? 2 to 3 in it. Yeah, it was $3 million was the commitment. Okay. We did see an initial distribution right out of the gate on that one. I remember, yeah. Um, they had an apartment building in Sarasota or Bradenton, Naples adjacent, um, that they bought and owned it for about six months and somebody came in and made them up. sweetheart deal it was right after one of the hurricanes right that they were affected so they it was one as i recall um because that's the view of if you live in florida you you don't own on the coast you own inland um you visit the beach but you own inland because of the hurricane risk and they said they had i think it was three screen doors they had to replace that just for whatever reason um the way the wind you know everything came through that building was unscathed okay so we're currently at a 19.65 um value mark on that investment that doesn't mean we've lost all that money it means that's what the value of the investment is today correct so it is possible that if the market turns or a little you know over time i mean this this was intended to be a seven to ten-year investment right and it's only been five years five so over the next two to five years we could see a reversal in that and and we could end up getting more of our money back but if we were to liquidate today um we would take a 19.6 loss right um and i think there's two important components of

  25. sweetheart deal it was right after one of the hurricanes right that they were affected so they it was one as i recall um because that's the view of if you live in florida you you don't own on the coast you own inland um you visit the beach but you own inland because of the hurricane risk and they said they had i think it was three screen doors they had to replace that just for whatever reason um the way the wind you know everything came through that building was unscathed okay so we're currently at a 19.65 um value mark on that investment that doesn't mean we've lost all that money it means that's what the value of the investment is today correct so it is possible that if the market turns or a little you know over time i mean this this was intended to be a seven to ten-year investment right and it's only been five years five so over the next two to five years we could see a reversal in that and and we could end up getting more of our money back but if we were to liquidate today um we would take a 19.6 loss right um and i think there's two important components of that that value is reflective of tear caps choice to appraise every property every quarter so take the good take the bad and recent appraisers have always have been taking the bad. If we see any decline in long term interest rates, which is a big push from an executive branch standpoint, you know, if you see the 10 year come down, you're going to see a significant recovery in the value of that. So they're operating the way that they should be. If we get a different interest rate environment, that will be a tremendous beneficiary to to that portfolio. Right. Because that's, that's, that's a defined set of investments that that fund has that we are invested in. So I could give you the list of buildings with addresses that we are invested in through that fund. Right. Right. And that's not going to change as compared to the principal fund, which is Brian said, is an evergreen fund. So they're constantly turning over the portfolio, buying and selling, buying and selling. And we're only showing a 1.3%, 1.4% increase on that over the life of our investment. But we've also we're also getting cash every quarter, they're sending us a dividend distribution

  26. liquidate today um we would take a 19.6 loss right um and i think there's two important components of that that value is reflective of tear caps choice to appraise every property every quarter so take the good take the bad and recent appraisers have always have been taking the bad. If we see any decline in long term interest rates, which is a big push from an executive branch standpoint, you know, if you see the 10 year come down, you're going to see a significant recovery in the value of that. So they're operating the way that they should be. If we get a different interest rate environment, that will be a tremendous beneficiary to to that portfolio. Right. Because that's, that's, that's a defined set of investments that that fund has that we are invested in. So I could give you the list of buildings with addresses that we are invested in through that fund. Right. Right. And that's not going to change as compared to the principal fund, which is Brian said, is an evergreen fund. So they're constantly turning over the portfolio, buying and selling, buying and selling. And we're only showing a 1.3%, 1.4% increase on that over the life of our investment. But we've also we're also getting cash every quarter, they're sending us a dividend distribution every quarter for that for that property that we are not reinvesting with them that we are taking that cash. And it sits at our cash account until we make other investments. So we are putting to work the dividend that we're getting from them. Likewise, with Bloomfield Capital, which is a private credit or, you know, real estate credit fund, we are getting a quarterly distribution distribution of cash that we are buying. putting to work in other investments. And if you look at their mark to market on those two funds, they're showing about a 9.5% to 10% IRR, or 9.5% to 10% annualized return on our investment since we've made it. And so, but we're seeing that cash come every quarter. Now that's also, it's not exactly Evergreen, but they have in their plan document, their fund documents, that we will continue to roll over our investment into new funds, into new series of funds. So right now we're in fund five series C and D. They're starting to raise capital for fund six.

  27. also we're also getting cash every quarter, they're sending us a dividend distribution every quarter for that for that property that we are not reinvesting with them that we are taking that cash. And it sits at our cash account until we make other investments. So we are putting to work the dividend that we're getting from them. Likewise, with Bloomfield Capital, which is a private credit or, you know, real estate credit fund, we are getting a quarterly distribution distribution of cash that we are buying. putting to work in other investments. And if you look at their mark to market on those two funds, they're showing about a 9.5% to 10% IRR, or 9.5% to 10% annualized return on our investment since we've made it. And so, but we're seeing that cash come every quarter. Now that's also, it's not exactly Evergreen, but they have in their plan document, their fund documents, that we will continue to roll over our investment into new funds, into new series of funds. So right now we're in fund five series C and D. They're starting to raise capital for fund six. And we are at present signed up to roll over our investment into fund six. We can stop that. I think we have until April to say, no, we'd like our money back rather than rolling it over. So that's a decision we're going to have to make going forward. But so far I've been very pleased with that investment. The reporting is excellent. They're giving us our quarterly dividend, you know, you know, like clockwork. Um, and we're continuing to see value in the way that they do it. They, they make short term loans. So they do basically bridge financing on real estate. So if an investor wants to buy a property, they will give them a two year loan or a one year loan on that property. It's gotta be paid back right away. I like that buy two. Let's pay. So you need one. all first lien debt so you know we're at the top of the capital stack so it's it's very secure and that's been generating good returns so for now I think that we should just keep rolling with that investment going forward principle we can get out also that the liquidity there is probably a six month time frame if we put in a request for our money back it'll take about six months for them to get us our money back but as we talk about how we want to

  28. They're starting to raise capital for fund six. And we are at present signed up to roll over our investment into fund six. We can stop that. I think we have until April to say, no, we'd like our money back rather than rolling it over. So that's a decision we're going to have to make going forward. But so far I've been very pleased with that investment. The reporting is excellent. They're giving us our quarterly dividend, you know, you know, like clockwork. Um, and we're continuing to see value in the way that they do it. They, they make short term loans. So they do basically bridge financing on real estate. So if an investor wants to buy a property, they will give them a two year loan or a one year loan on that property. It's gotta be paid back right away. I like that buy two. Let's pay. So you need one. all first lien debt so you know we're at the top of the capital stack so it's it's very secure and that's been generating good returns so for now I think that we should just keep rolling with that investment going forward principle we can get out also that the liquidity there is probably a six month time frame if we put in a request for our money back it'll take about six months for them to get us our money back but as we talk about how we want to allocate the portfolio and Brian's going to go into that I think on the next page we have those levers between Bloomfield and principal that we could pull money out of real estate and redeploy it if that's something we wanted to do so Brian why don't you talk us through our allocation strategy yeah so we are at page 7 since you're on that topic I've got a couple quick questions sure what's how much cash is being generated to meet the pension obligations by those accounts you're talking about through the real estate yes so we get a seven point five percent distribution on our Bloomfield investment every quarter okay an annualized seven point five percent and I haven't calculated I can calculate what the principal is I think it's closer to what one percent maybe two percent a quarter it's it then we're getting covers in portion of what we owe yeah so but I was going to get to that a little bit later in terms of how we're funding the pension obligations okay but right now it's it's we have enough cash with empower to fund our investments but going forward we're gonna have to come up with a new funding strategy so if we

  29. months for them to get us our money back but as we talk about how we want to allocate the portfolio and Brian's going to go into that I think on the next page we have those levers between Bloomfield and principal that we could pull money out of real estate and redeploy it if that's something we wanted to do so Brian why don't you talk us through our allocation strategy yeah so we are at page 7 since you're on that topic I've got a couple quick questions sure what's how much cash is being generated to meet the pension obligations by those accounts you're talking about through the real estate yes so we get a seven point five percent distribution on our Bloomfield investment every quarter okay an annualized seven point five percent and I haven't calculated I can calculate what the principal is I think it's closer to what one percent maybe two percent a quarter it's it then we're getting covers in portion of what we owe yeah so but I was going to get to that a little bit later in terms of how we're funding the pension obligations okay but right now it's it's we have enough cash with empower to fund our investments but going forward we're gonna have to come up with a new funding strategy so if we could come back to that at the end okay thank you yep and he's actually gonna address some of that as we talk about our allocation strategy here we're gonna talk about reallocating to allow for more cash flow to be able to meet our pension obligations yeah so this is kind of the we've reached the point of maturity with the pension plan that we're kind of at a tipping point where we have more cash flow needs so this is where we start to spend down what we start to slowly spend down what we've saved for all of these years so much the same as for any of us as an individual we reach that point in our career where we're no longer getting a paycheck no longer have to wake up other than a day like today and put on pants that need a belt and right so the tipping point of being in retirement now spending down the nest egg that you've put together so we're at an inflection point with the pension system such that we're now starting to have cash flow needs so this is where you're starting to see things like fixed income being added in not at a 30 or 40 percent allocation that you might see with others but at a 5 to 10 percent the idea being

  30. going forward we're gonna have to come up with a new funding strategy so if we could come back to that at the end okay thank you yep and he's actually gonna address some of that as we talk about our allocation strategy here we're gonna talk about reallocating to allow for more cash flow to be able to meet our pension obligations yeah so this is kind of the we've reached the point of maturity with the pension plan that we're kind of at a tipping point where we have more cash flow needs so this is where we start to spend down what we start to slowly spend down what we've saved for all of these years so much the same as for any of us as an individual we reach that point in our career where we're no longer getting a paycheck no longer have to wake up other than a day like today and put on pants that need a belt and right so the tipping point of being in retirement now spending down the nest egg that you've put together so we're at an inflection point with the pension system such that we're now starting to have cash flow needs so this is where you're starting to see things like fixed income being added in not at a 30 or 40 percent allocation that you might see with others but at a 5 to 10 percent the idea being and this is where Michael and Jason and I are in ongoing conversations around what do we need for the next three months, next six months, next 12 months and using that on a continual basis to make sure that if we have a pullback in the equity markets that we have the next six months of cash flow covered so that we don't have to sell something at a loss to cover a known cash flow need. So that's where if you compare this to others, you see things added in here like we now have a fixed income allocation. When we talk about the investment policy statement later, you're going to see a target to fixed income because we now need to have some because we have cash flow needs. The overweights you see here, for example, to U.S. equity, particularly large cap and international, are driven by two pieces. Number one, the success of both of those, they keep growing. And number two, because we are underweight alternatives. And simply put, rather than just having the money sitting in cash and earning three and a half percent waiting for it to go to work with Capital Dynamics or a new private equity fund, that money is invested in the rest of the portfolio and earned 17 and 30 percent last year in the S&P 500 and in international equities. So the other piece you see here is an underweight to real estate. That is intentional, right? As the portfolio

  31. and this is where Michael and Jason and I are in ongoing conversations around what do we need for the next three months, next six months, next 12 months and using that on a continual basis to make sure that if we have a pullback in the equity markets that we have the next six months of cash flow covered so that we don't have to sell something at a loss to cover a known cash flow need. So that's where if you compare this to others, you see things added in here like we now have a fixed income allocation. When we talk about the investment policy statement later, you're going to see a target to fixed income because we now need to have some because we have cash flow needs. The overweights you see here, for example, to U.S. equity, particularly large cap and international, are driven by two pieces. Number one, the success of both of those, they keep growing. And number two, because we are underweight alternatives. And simply put, rather than just having the money sitting in cash and earning three and a half percent waiting for it to go to work with Capital Dynamics or a new private equity fund, that money is invested in the rest of the portfolio and earned 17 and 30 percent last year in the S&P 500 and in international equities. So the other piece you see here is an underweight to real estate. That is intentional, right? As the portfolio has grown, we should be adding more to real, we could add more to real estate, but we have made an active choice not to. One of the pieces that you will see later on is reducing the target to real estate such that we're not deploying new money. into that asset class it's allow the existing stuff to continue to work but deploy those funds that were expected to go into real estate into other parts of the portfolio okay so the goal here and we can talk about it when we get to the investment policy but basically what we're looking to do is trim some of our equity exposure um and increase uh and have a fixed income component now brian mentioned that other systems other pension funds have like 30 allocated to fixed income whereas right now we're only talking about uh eight percent here in this portfolio and the reason for that is because we have the gda um generating cash and that is a a fixed income investment so our if you look at our pension

  32. underweight to real estate. That is intentional, right? As the portfolio has grown, we should be adding more to real, we could add more to real estate, but we have made an active choice not to. One of the pieces that you will see later on is reducing the target to real estate such that we're not deploying new money. into that asset class it's allow the existing stuff to continue to work but deploy those funds that were expected to go into real estate into other parts of the portfolio okay so the goal here and we can talk about it when we get to the investment policy but basically what we're looking to do is trim some of our equity exposure um and increase uh and have a fixed income component now brian mentioned that other systems other pension funds have like 30 allocated to fixed income whereas right now we're only talking about uh eight percent here in this portfolio and the reason for that is because we have the gda um generating cash and that is a a fixed income investment so our if you look at our pension trust as a whole we're closer to 45 fixed income and we're only talking about eight percent uh eight percent here and the reason for that is because uh if you think of our our pension obligations we have two categories one is the guaranteed pensions that are guaranteed by empower that is is backed by the gda and then the non-guaranteed pensions so anybody who started collecting their pension after 2016 is a non-guaranteed. Now it's still guaranteed by us, but it is not guaranteed by Empower. And so that's what we have to fund going forward are these non-guaranteed pensions. So if you look in your packet, I put a slide in about what our holdings are both in Empower and what our non-guaranteed pension payments are per month. So it's this slide. It was in the packet. I didn't print it out for you guys, but it was in the packet. But basically we had a year ago, so in December of 2024, we had about $117 million in our GDA. That's the guaranteed deposit account. Our minimum fund liability or MIFL, as you've heard it referred to, was only about $112 million. So

  33. um generating cash and that is a a fixed income investment so our if you look at our pension trust as a whole we're closer to 45 fixed income and we're only talking about eight percent uh eight percent here and the reason for that is because uh if you think of our our pension obligations we have two categories one is the guaranteed pensions that are guaranteed by empower that is is backed by the gda and then the non-guaranteed pensions so anybody who started collecting their pension after 2016 is a non-guaranteed. Now it's still guaranteed by us, but it is not guaranteed by Empower. And so that's what we have to fund going forward are these non-guaranteed pensions. So if you look in your packet, I put a slide in about what our holdings are both in Empower and what our non-guaranteed pension payments are per month. So it's this slide. It was in the packet. I didn't print it out for you guys, but it was in the packet. But basically we had a year ago, so in December of 2024, we had about $117 million in our GDA. That's the guaranteed deposit account. Our minimum fund liability or MIFL, as you've heard it referred to, was only about $112 million. So that means our liabilities for pension payments was $112. We had $117 in cash. So we were well funded there for the pensions. That has come down over the course of 2025 so that at the end of, call it November, before we put money in, in November, our minimum fund liability was $106 million and we only had about $107 million in cash. So again, we've drawn down that money. We replenished that money at the end of December. We put about $2.5 million in to empower into the GDA. So again, we're well covered there. But the other chart that I i put on that sheet was our non-guaranteed pension payments per month so in december of 2024 so a year ago we had to pay 593 000 every month in nine guaranteed pensions by the end of december of 2025 that number was almost 700 000 a month so we saw a little a little over a hundred thousand dollars a month extra get added to our obligation and then if you look at what i printed out for you

  34. minimum fund liability or MIFL, as you've heard it referred to, was only about $112 million. So that means our liabilities for pension payments was $112. We had $117 in cash. So we were well funded there for the pensions. That has come down over the course of 2025 so that at the end of, call it November, before we put money in, in November, our minimum fund liability was $106 million and we only had about $107 million in cash. So again, we've drawn down that money. We replenished that money at the end of December. We put about $2.5 million in to empower into the GDA. So again, we're well covered there. But the other chart that I i put on that sheet was our non-guaranteed pension payments per month so in december of 2024 so a year ago we had to pay 593 000 every month in nine guaranteed pensions by the end of december of 2025 that number was almost 700 000 a month so we saw a little a little over a hundred thousand dollars a month extra get added to our obligation and then if you look at what i printed out for you um this this chart okay so this is our forecasted monthly non-guaranteed so you see here at the end of 2024 our monthly obligation was 593 000 at the end of 2025 it was 698 000 and we're projecting that by the end of 2026 it's going to be 810 000 a month and you see the increase every year as more and more people retire and that is the other sheet of paper i gave you which is our expected retirements over the next five years or six years rather we're going to see 58 retirements pension retirements uh which is about 24 of our overall workforce um and so that large number of of retirees over the next five to six years is what's going to drive this need for cash flow so we now need to start thinking forward how are we going to meet these monthly obligations uh to these to these new pensioners um and so that's what's leading into the discussion of our asset allocation um and so we decided not to put more money into real estate we didn't think that that was the

  35. dollars a month extra get added to our obligation and then if you look at what i printed out for you um this this chart okay so this is our forecasted monthly non-guaranteed so you see here at the end of 2024 our monthly obligation was 593 000 at the end of 2025 it was 698 000 and we're projecting that by the end of 2026 it's going to be 810 000 a month and you see the increase every year as more and more people retire and that is the other sheet of paper i gave you which is our expected retirements over the next five years or six years rather we're going to see 58 retirements pension retirements uh which is about 24 of our overall workforce um and so that large number of of retirees over the next five to six years is what's going to drive this need for cash flow so we now need to start thinking forward how are we going to meet these monthly obligations uh to these to these new pensioners um and so that's what's leading into the discussion of our asset allocation um and so we decided not to put more money into real estate we didn't think that that was the the best investment we are underweight alternatives we're currently a target allocation of five percent we're only at two percent so we are looking at one more uh private equity fund uh to add to the portfolio so we're going to stay right around that five percent about five million to six million dollars allocated to private equity uh real estate we're going to kind of just keep where it's at um and so it's currently about six percent of the portfolio um we do have the ability to pull money out of principle if we needed to trim that back a little bit as i said that's going to take six months to get money out from them um and we have about um if you look on page eight we have um 2.3 2.4 million uh invested in principle we could we could pull that back and make that request um tarot cap we can't pull money out that's totally illiquid until the um until they start making distribution um so going forward brian what was what was your recommendation to how to

  36. um and so we decided not to put more money into real estate we didn't think that that was the the best investment we are underweight alternatives we're currently a target allocation of five percent we're only at two percent so we are looking at one more uh private equity fund uh to add to the portfolio so we're going to stay right around that five percent about five million to six million dollars allocated to private equity uh real estate we're going to kind of just keep where it's at um and so it's currently about six percent of the portfolio um we do have the ability to pull money out of principle if we needed to trim that back a little bit as i said that's going to take six months to get money out from them um and we have about um if you look on page eight we have um 2.3 2.4 million uh invested in principle we could we could pull that back and make that request um tarot cap we can't pull money out that's totally illiquid until the um until they start making distribution um so going forward brian what was what was your recommendation to how to reallocate the portfolio it was trimming four percent out of real estate which is effectively taking it from a 10 target down to its existing exposure at six percent right um and then uh the other four percent comes just from trimming u.s equities and international equities right so we're going to take we're going to move the target back for domestic equity to uh currently the the target allocation is 35 we're going to move that to 33 or 34 33 and then we're going to move international also by two percent right correct so we're going to take that from 25 to 23 and then fixed income which we currently have a zero target on we're going to make that target eight percent right correct and the math on that eight percent is because it's what we expect to spend it's the the net cash flow need on an annual basis right so um and that's going to be um a combination of a intermediate term uh bond fund and a short-term bond fund right so the we've been using the baird funds so right now we've got uh 2.8 million dollars in ultra short bond fund and we're

  37. reallocate the portfolio it was trimming four percent out of real estate which is effectively taking it from a 10 target down to its existing exposure at six percent right um and then uh the other four percent comes just from trimming u.s equities and international equities right so we're going to take we're going to move the target back for domestic equity to uh currently the the target allocation is 35 we're going to move that to 33 or 34 33 and then we're going to move international also by two percent right correct so we're going to take that from 25 to 23 and then fixed income which we currently have a zero target on we're going to make that target eight percent right correct and the math on that eight percent is because it's what we expect to spend it's the the net cash flow need on an annual basis right so um and that's going to be um a combination of a intermediate term uh bond fund and a short-term bond fund right so the we've been using the baird funds so right now we've got uh 2.8 million dollars in ultra short bond fund and we're going to allocate um about six million to the um intermediate bond fund and we'll keep that replenished so that we're going to have to make monthly orderly it's out of this portfolio over to empower so that they can pay the pensions okay so um i'm trying to get it to be quarterly so we don't have to make monthly payments but i'm working that out with that so it'll either be monthly um at about um 700 000 a month 800 000 a month or it'll be 2.1 to 2.4 a quarter and so we'll constantly be replenishing um out of the into the fixed income um to make sure that we're not going to run into any market timing issues um to be able to meet that obligation right a couple comments around that one we just talked about how this worked perfectly and it's nine percent and that's what the purpose of this was so you know now we're moving this target to be a little bit more conservative so i would adjust our seven percent expectation over time right wherever it was it's going to be less because we're adding the bonds two we just talked about how

  38. using the baird funds so right now we've got uh 2.8 million dollars in ultra short bond fund and we're going to allocate um about six million to the um intermediate bond fund and we'll keep that replenished so that we're going to have to make monthly orderly it's out of this portfolio over to empower so that they can pay the pensions okay so um i'm trying to get it to be quarterly so we don't have to make monthly payments but i'm working that out with that so it'll either be monthly um at about um 700 000 a month 800 000 a month or it'll be 2.1 to 2.4 a quarter and so we'll constantly be replenishing um out of the into the fixed income um to make sure that we're not going to run into any market timing issues um to be able to meet that obligation right a couple comments around that one we just talked about how this worked perfectly and it's nine percent and that's what the purpose of this was so you know now we're moving this target to be a little bit more conservative so i would adjust our seven percent expectation over time right wherever it was it's going to be less because we're adding the bonds two we just talked about how real estate's opportunistic and we're going to reduce it not a fan of that right so this is the time to be purchasing because the asset class is rotating back into having an opportunity to potentially do better if rates are coming down we don't know what the future is going to be and this is probably a no but why so the key of not wanting to be a fourth seller ever right but we have all this cash can we use cash that we have sitting in money market until the market is right to sell and replenish it so if we're sitting on all this money at the township and we needed some money and the market happened to be off so leave it fully invested and then sell six months later or even a year later when it's back to a right number from a timing and forced selling yeah so that's a fair question um it's really two separate and distinct entities the pension trust versus the township funds so if we put township funds into the pension trust which we we do every year through our um adc our our required annual contribution um once it goes into the trust it can't come out okay um so we we can't um um loan township money or use township money because that's all you know it's dedicated to various township requirements you know water and sewer and public

  39. right wherever it was it's going to be less because we're adding the bonds two we just talked about how real estate's opportunistic and we're going to reduce it not a fan of that right so this is the time to be purchasing because the asset class is rotating back into having an opportunity to potentially do better if rates are coming down we don't know what the future is going to be and this is probably a no but why so the key of not wanting to be a fourth seller ever right but we have all this cash can we use cash that we have sitting in money market until the market is right to sell and replenish it so if we're sitting on all this money at the township and we needed some money and the market happened to be off so leave it fully invested and then sell six months later or even a year later when it's back to a right number from a timing and forced selling yeah so that's a fair question um it's really two separate and distinct entities the pension trust versus the township funds so if we put township funds into the pension trust which we we do every year through our um adc our our required annual contribution um once it goes into the trust it can't come out okay um so we we can't um um loan township money or use township money because that's all you know it's dedicated to various township requirements you know water and sewer and public safety and roads and you know all those things that are for townships so that's really two distinct and separate entities can't cross the line can't cross the line yeah so but i mean kind of forced into this yeah so your point is well taken about the real estate we could certainly address that i'm not suggesting that we pull money back we're we're just lowering the target from 10 to 6 which is where it's currently at uh principal um and bloomfield capital are continuing to invest um it's just terra cap that were locked into those properties that were bought in 2021 um so we could we could keep those um and i like the fact that they do generate cash yeah i'm not i'm not even critiquing terror Yeah. That happens from time to time. Timing is the issue. At least we don't own a coffee bean farm, right? Exactly. Or not own a coffee bean farm anymore. Right. So I get it. Okay. I just wanted to make sure that we adjusted our expectations as well as we shift to a cash flow out a little bit more often. Yeah. I have a follow-up question to yours. Since we do have an actuarially determined contribution, do we time, can we time that to offset various cash needs?

  40. all you know it's dedicated to various township requirements you know water and sewer and public safety and roads and you know all those things that are for townships so that's really two distinct and separate entities can't cross the line can't cross the line yeah so but i mean kind of forced into this yeah so your point is well taken about the real estate we could certainly address that i'm not suggesting that we pull money back we're we're just lowering the target from 10 to 6 which is where it's currently at uh principal um and bloomfield capital are continuing to invest um it's just terra cap that were locked into those properties that were bought in 2021 um so we could we could keep those um and i like the fact that they do generate cash yeah i'm not i'm not even critiquing terror Yeah. That happens from time to time. Timing is the issue. At least we don't own a coffee bean farm, right? Exactly. Or not own a coffee bean farm anymore. Right. So I get it. Okay. I just wanted to make sure that we adjusted our expectations as well as we shift to a cash flow out a little bit more often. Yeah. I have a follow-up question to yours. Since we do have an actuarially determined contribution, do we time, can we time that to offset various cash needs? And is that something we can consider? Because we have to put the money in anyways. No, you're right. I mean, we could certainly make a monthly contribution versus right now we just make it all in December. But, I mean, that's certainly, Jason, I don't know if you've. But that contribution is not enough to offset what we have to draw. No, no. Not all of it, but like you said, timing of events. Yeah. It's over $6 million. Yeah. So that's a lot of money, especially if there's an opportunity to improve the end result. Yeah. I don't know, do you see your thoughts on that? In a way, we've been doing that each November, December. We have a conversation of, you know, there's five, five and a half million dollars we have to pay out to the, for the ADC. And we assess where should that go and which bucket. And if you. And if you. have a miffle requirement we haven't had that in a while but the years where we did since you're infusing five and a half million dollars of new cash into the trust that then when you do that actually counts as your miffle requirement as well so in a way to both your comments we've been doing that the

  41. Since we do have an actuarially determined contribution, do we time, can we time that to offset various cash needs? And is that something we can consider? Because we have to put the money in anyways. No, you're right. I mean, we could certainly make a monthly contribution versus right now we just make it all in December. But, I mean, that's certainly, Jason, I don't know if you've. But that contribution is not enough to offset what we have to draw. No, no. Not all of it, but like you said, timing of events. Yeah. It's over $6 million. Yeah. So that's a lot of money, especially if there's an opportunity to improve the end result. Yeah. I don't know, do you see your thoughts on that? In a way, we've been doing that each November, December. We have a conversation of, you know, there's five, five and a half million dollars we have to pay out to the, for the ADC. And we assess where should that go and which bucket. And if you. And if you. have a miffle requirement we haven't had that in a while but the years where we did since you're infusing five and a half million dollars of new cash into the trust that then when you do that actually counts as your miffle requirement as well so in a way to both your comments we've been doing that the only new thing you could assess is instead of doing one contribution throughout the year you could try and time it and do a multiple but in the end you're still going to need to get to that five million dollar number and you can evaluate what time you want to do it and and which portfolio and assets do you want to put it into but for the pension that usually goes in then January correct pension is typically end of November early December because it's on account the plan year is a calendar so it just has to be done this is 1231 don't typically after 401 so it's it because it has to be in our new budget year and then by 1231 to make it into the plan year right so conceivably once we get some April we start our new fiscal year we could take our 5.67 whatever million dollar ADC and start making it monthly over the course of the fiscal year just do it it has to be done before December the full plan the full payment right so

  42. requirement as well so in a way to both your comments we've been doing that the only new thing you could assess is instead of doing one contribution throughout the year you could try and time it and do a multiple but in the end you're still going to need to get to that five million dollar number and you can evaluate what time you want to do it and and which portfolio and assets do you want to put it into but for the pension that usually goes in then January correct pension is typically end of November early December because it's on account the plan year is a calendar so it just has to be done this is 1231 don't typically after 401 so it's it because it has to be in our new budget year and then by 1231 to make it into the plan year right so conceivably once we get some April we start our new fiscal year we could take our 5.67 whatever million dollar ADC and start making it monthly over the course of the fiscal year just do it it has to be done before December the full plan the full payment right so So I guess we wouldn't divide it by 12. We could divide it by nine. Theoretically, we could do that. So what I'm hearing is we just need to be more intentional about how this is before we just kind of let it ride. Yeah, we have to run instead of accumulation, run harder distribution or decumulation of some sort. And then we need to be more intentional. And I will tell you, that's where our conversations have shifted from periodic throughout the quarter to on a much more regular basis. Just checking in, where are we on cash flow? Has Empower, you know, given you the update? And I would say also understand that this plan is fluid and changing because of this, right? So the 8% we have today could be 10% like constantly looking at cash flow to understand because they're a must pay, not want to pay, right? Unlike a foundation where if the equity markets are down, well, I'm sorry, we're just going to give fewer grants this year. This is a benefit guarantee. This is a benefit promise guaranteed to be paid each month. And if I'm supposed to make a deposit of $4,000, you know, into your bank account and I make a deposit of $3,999 and 99 cents,

  43. So I guess we wouldn't divide it by 12. We could divide it by nine. Theoretically, we could do that. So what I'm hearing is we just need to be more intentional about how this is before we just kind of let it ride. Yeah, we have to run instead of accumulation, run harder distribution or decumulation of some sort. And then we need to be more intentional. And I will tell you, that's where our conversations have shifted from periodic throughout the quarter to on a much more regular basis. Just checking in, where are we on cash flow? Has Empower, you know, given you the update? And I would say also understand that this plan is fluid and changing because of this, right? So the 8% we have today could be 10% like constantly looking at cash flow to understand because they're a must pay, not want to pay, right? Unlike a foundation where if the equity markets are down, well, I'm sorry, we're just going to give fewer grants this year. This is a benefit guarantee. This is a benefit promise guaranteed to be paid each month. And if I'm supposed to make a deposit of $4,000, you know, into your bank account and I make a deposit of $3,999 and 99 cents, a township phone lines blowing up, right? So it's constantly monitoring and making sure that we're aware of future cash flow needs because we don't want to be surprised. I have one other question regarding the cash outflows. Does this include Empower as well? No, this is just the non-guaranteed pensions. The Empower, the guaranteed pensions are funded out of the GDA. And what if, you'd mentioned earlier on occasion we have to put more money into the GDA? Yeah, so the reason the GDA has been declining is because we've been using the GDA to fund this. And now we've reached a point in the number of non-guaranteed pensions that it's too much for the GDA to cover, basically. So we need to start covering this portion. But, I mean, the way the GDA works is when it makes a benefit payment to a guaranteed pension, it reduces the MIFL, you know, at the same. So, I mean, it stays funded. But we've been using the GDA to fund these, which don't lower the MIFL. And so we need to start, we need to start funding these because the number of non-guaranteed pensions has increased.

  44. into your bank account and I make a deposit of $3,999 and 99 cents, a township phone lines blowing up, right? So it's constantly monitoring and making sure that we're aware of future cash flow needs because we don't want to be surprised. I have one other question regarding the cash outflows. Does this include Empower as well? No, this is just the non-guaranteed pensions. The Empower, the guaranteed pensions are funded out of the GDA. And what if, you'd mentioned earlier on occasion we have to put more money into the GDA? Yeah, so the reason the GDA has been declining is because we've been using the GDA to fund this. And now we've reached a point in the number of non-guaranteed pensions that it's too much for the GDA to cover, basically. So we need to start covering this portion. But, I mean, the way the GDA works is when it makes a benefit payment to a guaranteed pension, it reduces the MIFL, you know, at the same. So, I mean, it stays funded. But we've been using the GDA to fund these, which don't lower the MIFL. And so we need to start, we need to start funding these because the number of non-guaranteed pensions has increased. So, yeah, it's going to continue. And then what's... And it's going to continue, right, over the next five, six years, yeah. So we, based on that, we won't have to be putting any more additional funds into the GDA? Correct. So, I mean, the only way we'd have to put more money into the GDA is if interest rates fall below 1% again. Okay. Because the GDA is designed to match. liability, the MIFL. But if the GDA isn't earning enough to cover the increases in the MIFL, then we have to put money in. So when interest rates were below 1% for several years, we had to keep putting money in for the GDA to keep up with the increase in the liability. Lately, the interest rates have been high, so the GDA has been earning between 3% and 4%, so it's earning more than enough money to cover the guaranteed pensions. And will we continue to pull money out, a portion of that out of the GDA moving forward, or no? Well, the GDA will always fund the guaranteed pensions. If there's additional funds in the GDA because of higher interest

  45. And so we need to start, we need to start funding these because the number of non-guaranteed pensions has increased. So, yeah, it's going to continue. And then what's... And it's going to continue, right, over the next five, six years, yeah. So we, based on that, we won't have to be putting any more additional funds into the GDA? Correct. So, I mean, the only way we'd have to put more money into the GDA is if interest rates fall below 1% again. Okay. Because the GDA is designed to match. liability, the MIFL. But if the GDA isn't earning enough to cover the increases in the MIFL, then we have to put money in. So when interest rates were below 1% for several years, we had to keep putting money in for the GDA to keep up with the increase in the liability. Lately, the interest rates have been high, so the GDA has been earning between 3% and 4%, so it's earning more than enough money to cover the guaranteed pensions. And will we continue to pull money out, a portion of that out of the GDA moving forward, or no? Well, the GDA will always fund the guaranteed pensions. If there's additional funds in the GDA because of higher interest rates, will we be pulling those out? We, I mean, we could, it could, if it's generating a higher interest rate, we could lower our contribution and use some of that money to cover these monthly payments. But, you know, right now, I mean, right now it's earning 3%, so there is a little bit of extra money there. But it's not worth it to make the move at this time. Right, right. So we wouldn't, so like right now, our monthly pension payments are $700,000, right? So maybe we only need to put 500,000 in out of the equity portfolio because we can take 200,000 out of the GDA, right? If the, as interest rates fall, we're not going to have enough money in the gda we're gonna have to start funding these full payments and and because of the expected cash flows uh from the uh non-guaranteed pensions um it's probably more beneficial to keep a little extra funds in the gda so we don't have to come up with well empower requires us to have six months deposited with them of these payments okay so i'm trying to get them to lower that if we make monthly payments but there's no guarantee they're going to agree to that but right now we have to

  46. the guaranteed pensions. If there's additional funds in the GDA because of higher interest rates, will we be pulling those out? We, I mean, we could, it could, if it's generating a higher interest rate, we could lower our contribution and use some of that money to cover these monthly payments. But, you know, right now, I mean, right now it's earning 3%, so there is a little bit of extra money there. But it's not worth it to make the move at this time. Right, right. So we wouldn't, so like right now, our monthly pension payments are $700,000, right? So maybe we only need to put 500,000 in out of the equity portfolio because we can take 200,000 out of the GDA, right? If the, as interest rates fall, we're not going to have enough money in the gda we're gonna have to start funding these full payments and and because of the expected cash flows uh from the uh non-guaranteed pensions um it's probably more beneficial to keep a little extra funds in the gda so we don't have to come up with well empower requires us to have six months deposited with them of these payments okay so i'm trying to get them to lower that if we make monthly payments but there's no guarantee they're going to agree to that but right now we have to have six months on deposit with them so right now it's seven hundred thousand dollars so we have to have six months of that on deposit in the gda for them to make these payments and then we just have to fund it each month to keep that six months intact again i'm trying to get them to lower that if we start to make monthly payments i haven't gotten an answer from them yet but um instead of six months i i have to take it out of three months if we're making monthly payments but if it helps so the choice a year ago right empower is always happy like hey you need to fund another seven hundred thousand dollars you can take it out of our portfolio which we really don't want you to do because we earn a fee on that or you could pay it from your equity portfolio and we made the choice of spending down about a seven million dollar surplus over the last year that was earning three and it was we can take this seven million that's earning three and a half percent here agree or keep it here and made 16 percent it's a no-brainer yeah yeah and yeah understood yeah okay and then is our goal to sell down total equities and then domestic equity to fund the total fixed income as well as our increase for private equity that the current plan right now that would be yes we would

  47. monthly payments but there's no guarantee they're going to agree to that but right now we have to have six months on deposit with them so right now it's seven hundred thousand dollars so we have to have six months of that on deposit in the gda for them to make these payments and then we just have to fund it each month to keep that six months intact again i'm trying to get them to lower that if we start to make monthly payments i haven't gotten an answer from them yet but um instead of six months i i have to take it out of three months if we're making monthly payments but if it helps so the choice a year ago right empower is always happy like hey you need to fund another seven hundred thousand dollars you can take it out of our portfolio which we really don't want you to do because we earn a fee on that or you could pay it from your equity portfolio and we made the choice of spending down about a seven million dollar surplus over the last year that was earning three and it was we can take this seven million that's earning three and a half percent here agree or keep it here and made 16 percent it's a no-brainer yeah yeah and yeah understood yeah okay and then is our goal to sell down total equities and then domestic equity to fund the total fixed income as well as our increase for private equity that the current plan right now that would be yes we would trim back domestic and international equity and use that to fund a fixed income application I have one other question regarding the payments and that's the pension bond pension bond payments are 5 million those are retired in May of 2033 so really the concern is right now the bulk of this concern is up to 2033 because we'll have that additional cash flow in 2034 right so the pension bonds are general obligation bonds of the township so when we pay that totally separate from anything we have to pay to the pension trust correct we borrowed the money to fund this so that we could have this portfolio return 9% when we borrow the money two to three percent correct so when those pension bonds are up that frees up cash flow for general township purposes it doesn't affect this in any way but this is a general township purpose so that can be used to fund sure fear I mean theoretically we could take that money and put it in here and leave the money in the equities I mean we can always over fund the pension

  48. private equity that the current plan right now that would be yes we would trim back domestic and international equity and use that to fund a fixed income application I have one other question regarding the payments and that's the pension bond pension bond payments are 5 million those are retired in May of 2033 so really the concern is right now the bulk of this concern is up to 2033 because we'll have that additional cash flow in 2034 right so the pension bonds are general obligation bonds of the township so when we pay that totally separate from anything we have to pay to the pension trust correct we borrowed the money to fund this so that we could have this portfolio return 9% when we borrow the money two to three percent correct so when those pension bonds are up that frees up cash flow for general township purposes it doesn't affect this in any way but this is a general township purpose so that can be used to fund sure fear I mean theoretically we could take that money and put it in here and leave the money in the equities I mean we can always over fund the pension Well, eventually, according to the Milliman Actuary, you just have to start drawing it down. So having too much money in there when the expected drawdown is coming wouldn't make sense. Right. No. Agreed. Agreed. Okay. Are there any other questions on that? The other topic I just want to address, and it's actually lower under new business, but since we're talking about it now, we're talking about cash flow, is this concept of pension buyouts. So I was able to negotiate language into all of the collective bargaining agreements that allow us to offer pension buyouts to retirees when they retire. We cannot offer it to somebody who's an active employee. It can only be at retirement. And as of now, the legal answer I'm getting is that we can't offer it to existing retirees because there's an IRS issue there. So basically, this option to take a buyout would have to be at retirement,

  49. Well, eventually, according to the Milliman Actuary, you just have to start drawing it down. So having too much money in there when the expected drawdown is coming wouldn't make sense. Right. No. Agreed. Agreed. Okay. Are there any other questions on that? The other topic I just want to address, and it's actually lower under new business, but since we're talking about it now, we're talking about cash flow, is this concept of pension buyouts. So I was able to negotiate language into all of the collective bargaining agreements that allow us to offer pension buyouts to retirees when they retire. We cannot offer it to somebody who's an active employee. It can only be at retirement. And as of now, the legal answer I'm getting is that we can't offer it to existing retirees because there's an IRS issue there. So basically, this option to take a buyout would have to be at retirement, before they start collecting, but when they've terminated their employment. And so I just want to address cash flow because these pension buyouts are going to be roughly So we're going to be, you know, to two million dollars each i have received some interest from a few employees about it and we're just fine fine tuning how we're going to actually calculate it but i guess what i'm asking for from this committee is how aggressively do we want to be pursuing these because we're going to have to pay for that out of the trust that's going to come out of these funds out of the equities funds um to pay to pay that buyout um i see it as um a benefit i would i will only do it if it's accretive to the plan um we're not in any way going to take a loss but we're going to reduce the liability and reduce cash and reduce our long-term costs and right the liability of long-term cost and it basically de-risks the plan because we don't know where lifespan is going i just saw you know a headline a couple weeks ago about you know they're raising life expectancy rates and so people are living longer like you know we have a dozen people on our pension that are over the age

  50. So basically, this option to take a buyout would have to be at retirement, before they start collecting, but when they've terminated their employment. And so I just want to address cash flow because these pension buyouts are going to be roughly So we're going to be, you know, to two million dollars each i have received some interest from a few employees about it and we're just fine fine tuning how we're going to actually calculate it but i guess what i'm asking for from this committee is how aggressively do we want to be pursuing these because we're going to have to pay for that out of the trust that's going to come out of these funds out of the equities funds um to pay to pay that buyout um i see it as um a benefit i would i will only do it if it's accretive to the plan um we're not in any way going to take a loss but we're going to reduce the liability and reduce cash and reduce our long-term costs and right the liability of long-term cost and it basically de-risks the plan because we don't know where lifespan is going i just saw you know a headline a couple weeks ago about you know they're raising life expectancy rates and so people are living longer like you know we have a dozen people on our pension that are over the age of 95. um and when they retired 40 years ago there was no calculation that said they're going to still be collecting a pension in 40 years um so it wasn't properly funded which is no fault of the people at that time but it's just you know life is you know medical has changed right so by buying out these pensions today we eliminate the long-term risk that they're going to outlive what we're allocating for that so michael when you say a be more aggressive kind of give us a definition of that so we could I could be more aggressive in terms of marketing to these people that are going to be retiring over the next five to six years and try to convince them to take a buyout versus just throwing it out there and say anyone who's interested in a buyout come see me and you know it'll be a trickle two three four whatever versus hey do I want to be out there trying to sell this that's that's what I mean by I can also mention that they get lifetime health care that we're paying to correct which is yes they which is another they would have lifetime health care which is separate from from this right which is only going up as well but would if you offer or we are offering the pension buyout is there a limited number like I know with my husband's company you know they could only offer

  51. people are living longer like you know we have a dozen people on our pension that are over the age of 95. um and when they retired 40 years ago there was no calculation that said they're going to still be collecting a pension in 40 years um so it wasn't properly funded which is no fault of the people at that time but it's just you know life is you know medical has changed right so by buying out these pensions today we eliminate the long-term risk that they're going to outlive what we're allocating for that so michael when you say a be more aggressive kind of give us a definition of that so we could I could be more aggressive in terms of marketing to these people that are going to be retiring over the next five to six years and try to convince them to take a buyout versus just throwing it out there and say anyone who's interested in a buyout come see me and you know it'll be a trickle two three four whatever versus hey do I want to be out there trying to sell this that's that's what I mean by I can also mention that they get lifetime health care that we're paying to correct which is yes they which is another they would have lifetime health care which is separate from from this right which is only going up as well but would if you offer or we are offering the pension buyout is there a limited number like I know with my husband's company you know they could only offer a certain percent buyout because they didn't have the money you know would we cap that would we limit it well we have the money um and we would have to buy it out right around what the actuarial value of their pension is so we would look at you know so let's say you you know you take a police officer who comes in they're earning 95 000 they cap out at 80 percent of their pay is they're going to be their pension right so they're three best years right so the three best years so let's say you know um 80 percent would take them down to 71 72 thousand dollars is their month is to be their pension plus the one percent every year we would run a calculation that says okay we think you're going to live 20 years and this is how much we're going to pay and so we'll give you that payment today basically and the benefit of doing that is if they live longer than we project and they're still collecting a pension we have to pay that pension you know and and versus if we buy it out today they could live you know god bless live as long as you can but we're off the hook is the buyout considered uh part could it be considered part of the actuarially determined

  52. is there a limited number like I know with my husband's company you know they could only offer a certain percent buyout because they didn't have the money you know would we cap that would we limit it well we have the money um and we would have to buy it out right around what the actuarial value of their pension is so we would look at you know so let's say you you know you take a police officer who comes in they're earning 95 000 they cap out at 80 percent of their pay is they're going to be their pension right so they're three best years right so the three best years so let's say you know um 80 percent would take them down to 71 72 thousand dollars is their month is to be their pension plus the one percent every year we would run a calculation that says okay we think you're going to live 20 years and this is how much we're going to pay and so we'll give you that payment today basically and the benefit of doing that is if they live longer than we project and they're still collecting a pension we have to pay that pension you know and and versus if we buy it out today they could live you know god bless live as long as you can but we're off the hook is the buyout considered uh part could it be considered part of the actuarially determined contribution i don't know that's a great question it's going lower it it's going the other way yeah yeah i mean by by reducing the liability it would reduce our adc but is it but i think mark's question is can we count the two million that we're paying as a buyout towards our adc um no i'd say no but but it's going to adjust the formula right so it could they run the actuary of the adc every annually so you know those let's say two people took a buyout they would come out of the pool of people but the cash flow is moving out of the plan right but it doesn't count toward your adc it or it does not count it's not considered a contribution correct so it just comes out of the it just comes out of the formulas that they well okay but i think what mark is saying is if we have to put five million into the plan and then the plan immediately has to pay two million out to a retiree that we're buying out i mean essentially we could take two million of that five million and just give it to the retiree and that would count as part of our so i think yes it would count as part of our abc payment but it wouldn't change it wouldn't change

  53. the hook is the buyout considered uh part could it be considered part of the actuarially determined contribution i don't know that's a great question it's going lower it it's going the other way yeah yeah i mean by by reducing the liability it would reduce our adc but is it but i think mark's question is can we count the two million that we're paying as a buyout towards our adc um no i'd say no but but it's going to adjust the formula right so it could they run the actuary of the adc every annually so you know those let's say two people took a buyout they would come out of the pool of people but the cash flow is moving out of the plan right but it doesn't count toward your adc it or it does not count it's not considered a contribution correct so it just comes out of the it just comes out of the formulas that they well okay but i think what mark is saying is if we have to put five million into the plan and then the plan immediately has to pay two million out to a retiree that we're buying out i mean essentially we could take two million of that five million and just give it to the retiree and that would count as part of our so i think yes it would count as part of our abc payment but it wouldn't change it wouldn't change it would be the change to the adc would be very minimal because we're only removing one person from the calculation so our liability is you know going to be shifted down a little bit but i'm i'm more looking at on an annual basis if you're going to put a restriction on how many people you're going to buy out that might be a way to do it if we can come yeah i mean that's certainly an option um but i mean i i'm open you know to hear other people's thoughts on this you know to take money out of whether we take it out of the adc either way it's money that's coming out of the equities trust but we'll be reducing our long-term costs it will be reduced and you can run some numbers on that well that's what the actuary does they'll tell us that you know and you've interviewed a couple people inquired about the about doing this i mean i haven't really interviewed them they've come to me and said hey we saw the language in the contract that you're doing buyouts we're interested can you tell us more about it and i said well i don't have all the information yet i had to figure out you know where the money goes when we pay it to them we can open it basically we'd open a 401a account for them and then transfer it it's like a rollover okay and then they could draw from that and they pay taxes as they draw money

  54. so i think yes it would count as part of our abc payment but it wouldn't change it wouldn't change it would be the change to the adc would be very minimal because we're only removing one person from the calculation so our liability is you know going to be shifted down a little bit but i'm i'm more looking at on an annual basis if you're going to put a restriction on how many people you're going to buy out that might be a way to do it if we can come yeah i mean that's certainly an option um but i mean i i'm open you know to hear other people's thoughts on this you know to take money out of whether we take it out of the adc either way it's money that's coming out of the equities trust but we'll be reducing our long-term costs it will be reduced and you can run some numbers on that well that's what the actuary does they'll tell us that you know and you've interviewed a couple people inquired about the about doing this i mean i haven't really interviewed them they've come to me and said hey we saw the language in the contract that you're doing buyouts we're interested can you tell us more about it and i said well i don't have all the information yet i had to figure out you know where the money goes when we pay it to them we can open it basically we'd open a 401a account for them and then transfer it it's like a rollover okay and then they could draw from that and they pay taxes as they draw money out um so that was one question and then the other question and of course this is going to be their biggest question is how much am i going to get and i'm still working that out with the actuaries uh at milliband to figure out how we're going to calculate that what what you know what are the what are the assumptions that are going to go into the calculation uh etc but i would only do it if it lowers our liability by more than we're paying out in cash right as long as it continues with that assumption that it's going to lower liability that i'm certainly in favor of it you know as i was when you first presented it to us i had the same question as mike what do you mean by aggressive and i think you've explained that but i would you know i would recommend that once you have more information um you provide it to the employees and say rather than say if you're interested come and see me uh here's the information that we currently have here are the assumptions um and why don't you come see me if you're interested but at least give them as much information as you have at the time yeah are our pensions single life or joint life joint meeting with like like can they pick yeah yes they so they really kind of this could go on for

  55. out um so that was one question and then the other question and of course this is going to be their biggest question is how much am i going to get and i'm still working that out with the actuaries uh at milliband to figure out how we're going to calculate that what what you know what are the what are the assumptions that are going to go into the calculation uh etc but i would only do it if it lowers our liability by more than we're paying out in cash right as long as it continues with that assumption that it's going to lower liability that i'm certainly in favor of it you know as i was when you first presented it to us i had the same question as mike what do you mean by aggressive and i think you've explained that but i would you know i would recommend that once you have more information um you provide it to the employees and say rather than say if you're interested come and see me uh here's the information that we currently have here are the assumptions um and why don't you come see me if you're interested but at least give them as much information as you have at the time yeah are our pensions single life or joint life joint meeting with like like can they pick yeah yes they so they really kind of this could go on for a long time so yes when they when they retire they have the option of choosing a survivor of their spouse um to continue their pension after they pass it's at a lower amount well know you could buy it you can get a hundred percent you can get two-thirds or you can get 50 percent right yeah and then so obviously if you do that it lowers your payment it lowers your it lowers your pension amount but yes we continue long after the yeah I think it makes sense to look at that because the quicker you can get this done that's one less administrative obligation as well mm-hmm so one thing that I've seen other communities do is as you get closer to retirement you will meet with HR or meet with the people to understand the numbers so here is your packet this officer you're gonna get a $71,000 a year pension option B is we will buy you out at 1.2 million here are your assumptions here is I would go hand them both pieces of paper then not only are we educating our members every single one of these people that are retiring we're giving them the option so I wouldn't call it aggressive I am informing our maybe place it was the wrong word I just meant like how much do I want to push it versus just wait like do we want to only do a couple of these for the people

  56. joint meeting with like like can they pick yeah yes they so they really kind of this could go on for a long time so yes when they when they retire they have the option of choosing a survivor of their spouse um to continue their pension after they pass it's at a lower amount well know you could buy it you can get a hundred percent you can get two-thirds or you can get 50 percent right yeah and then so obviously if you do that it lowers your payment it lowers your it lowers your pension amount but yes we continue long after the yeah I think it makes sense to look at that because the quicker you can get this done that's one less administrative obligation as well mm-hmm so one thing that I've seen other communities do is as you get closer to retirement you will meet with HR or meet with the people to understand the numbers so here is your packet this officer you're gonna get a $71,000 a year pension option B is we will buy you out at 1.2 million here are your assumptions here is I would go hand them both pieces of paper then not only are we educating our members every single one of these people that are retiring we're giving them the option so I wouldn't call it aggressive I am informing our maybe place it was the wrong word I just meant like how much do I want to push it versus just wait like do we want to only do a couple of these for the people that actually seek it out or do I want to like you said give a piece of paper to every retiree that comes in and to try to say hey look this this could be good for you if it's contractually if it's contractual what's contract with the contract just says that we are allowed to allow to it's not okay there's no shell like they are not required to we we are not required to do any buyouts we could say hey we're not gonna do it but it's the language in the contract allows us to do it so I think it is a major benefit not only to the township for reducing our life especially if we know that it can reduce our cash obligations but from an employee perspective I can control my own destiny right so a pension is not inherible wealth so if I am able to provide them with a 1.2 1.5 million dollars that is wealth they can pass on to different generations versus a pension stops upon the less beneficiary getting it so I just think by providing them both in it both piece of paper not only are we informing our members we are also helping the pension plan so that's how I would like to see it and again in other communities that's what they do okay they provide both okay I think that makes a lot of sense any other thoughts Michael I would just I guess the area only area I would be concerned or cautious about and you've probably thought about it is is the cash flow we talked about the the drawdowns and so

  57. versus just wait like do we want to only do a couple of these for the people that actually seek it out or do I want to like you said give a piece of paper to every retiree that comes in and to try to say hey look this this could be good for you if it's contractually if it's contractual what's contract with the contract just says that we are allowed to allow to it's not okay there's no shell like they are not required to we we are not required to do any buyouts we could say hey we're not gonna do it but it's the language in the contract allows us to do it so I think it is a major benefit not only to the township for reducing our life especially if we know that it can reduce our cash obligations but from an employee perspective I can control my own destiny right so a pension is not inherible wealth so if I am able to provide them with a 1.2 1.5 million dollars that is wealth they can pass on to different generations versus a pension stops upon the less beneficiary getting it so I just think by providing them both in it both piece of paper not only are we informing our members we are also helping the pension plan so that's how I would like to see it and again in other communities that's what they do okay they provide both okay I think that makes a lot of sense any other thoughts Michael I would just I guess the area only area I would be concerned or cautious about and you've probably thought about it is is the cash flow we talked about the the drawdowns and so with each buyout you reduce liability but you also reduce the assets in the plan because you're paying it out of the asset so if you just compare it to making a monthly payment over 40 years to a pensioner it much smaller versus now you've taken 1.2 million out of the invested assets that I'm going earning it over their lifetime and earnings on it while you're paying it versus a big lot lump sum if you have multiple in a year yeah I mean that's absolutely right so you know we're earning call it nine percent let's say we add the fixed income that it goes down to seven percent a year versus you you you you you you know a huge chunk that we're paying out today and because of the gda and the empower contract we're locked into that right i mean and those guaranteed pensions are going to be there until the last one is collected you know gets collected which is probably 25 years from now um and so you know whereas these will go a lot longer right because these are younger people that are starting their retirements now you know they're retiring at 52 we just had a guy in the pension that just died at 105 so and that was a firefighter which you know they always say that their life expectancy

  58. thought about it is is the cash flow we talked about the the drawdowns and so with each buyout you reduce liability but you also reduce the assets in the plan because you're paying it out of the asset so if you just compare it to making a monthly payment over 40 years to a pensioner it much smaller versus now you've taken 1.2 million out of the invested assets that I'm going earning it over their lifetime and earnings on it while you're paying it versus a big lot lump sum if you have multiple in a year yeah I mean that's absolutely right so you know we're earning call it nine percent let's say we add the fixed income that it goes down to seven percent a year versus you you you you you you know a huge chunk that we're paying out today and because of the gda and the empower contract we're locked into that right i mean and those guaranteed pensions are going to be there until the last one is collected you know gets collected which is probably 25 years from now um and so you know whereas these will go a lot longer right because these are younger people that are starting their retirements now you know they're retiring at 52 we just had a guy in the pension that just died at 105 so and that was a firefighter which you know they always say that their life expectancy is shorter but that guy lived to 105 so good for him um but we're 10 underfunded so you could fund the other 10 we could try a little bit of this if we had to fund yeah i mean the the adc that we have to make includes an amortization of that 10 so that i believe jason correct me if i'm wrong that it's by 2038 we will our adcs should get us to be fully funded um but we could certainly you know if the township's cash flow allowed it we could certainly move that up and try a couple of these yeah see how it works yeah we could certainly without disrupting this yes yes we could certainly do that and again if every single person took it that was eligible or likely to retire in the next five years that's 58 people again i don't think all them are gonna so even if you got 10 of them we're talking about six people over the next five years right right michael are you thinking it would be all or nothing or um for example when my husband did it they offered 10 cash max it was an option but it was either 100 pension or 90 pension 10 cash out this would be 100 cash out okay no

  59. died at 105 so and that was a firefighter which you know they always say that their life expectancy is shorter but that guy lived to 105 so good for him um but we're 10 underfunded so you could fund the other 10 we could try a little bit of this if we had to fund yeah i mean the the adc that we have to make includes an amortization of that 10 so that i believe jason correct me if i'm wrong that it's by 2038 we will our adcs should get us to be fully funded um but we could certainly you know if the township's cash flow allowed it we could certainly move that up and try a couple of these yeah see how it works yeah we could certainly without disrupting this yes yes we could certainly do that and again if every single person took it that was eligible or likely to retire in the next five years that's 58 people again i don't think all them are gonna so even if you got 10 of them we're talking about six people over the next five years right right michael are you thinking it would be all or nothing or um for example when my husband did it they offered 10 cash max it was an option but it was either 100 pension or 90 pension 10 cash out this would be 100 cash out okay no that's another way to make it go further yeah but that's much more complicated from an actuarial standpoint um and doesn't really get rid of it yeah correct so yeah okay um i think we good subject discuss that let's move on to the retired employees health care benefits trust um brian will walk us through the portfolio there and that begins on page nine so completely different cash flow situation for retiree health care trusts you know any forecast that we have um says we have no expected needs for the next 15 to 20 years and we limited it to 15 to 20 years is because we don't look out 25 years um so with the retiree health care trust and its underfunded status and the long-term plan is allow it to grow allow it to grow allow it to grow um it's really in a position of being as aggressive as we are legally permitted to do so max we can have in equities is 70 percent we have 70 percent in equities the maximum we can have in

  60. but it was either 100 pension or 90 pension 10 cash out this would be 100 cash out okay no that's another way to make it go further yeah but that's much more complicated from an actuarial standpoint um and doesn't really get rid of it yeah correct so yeah okay um i think we good subject discuss that let's move on to the retired employees health care benefits trust um brian will walk us through the portfolio there and that begins on page nine so completely different cash flow situation for retiree health care trusts you know any forecast that we have um says we have no expected needs for the next 15 to 20 years and we limited it to 15 to 20 years is because we don't look out 25 years um so with the retiree health care trust and its underfunded status and the long-term plan is allow it to grow allow it to grow allow it to grow um it's really in a position of being as aggressive as we are legally permitted to do so max we can have in equities is 70 percent we have 70 percent in equities the maximum we can have in equity is 15%. We're pushing towards 15%. The idea being is with no cash flow obligations expected out of this portfolio for the next two decades, allow it to be in the parts of the market that over the long run will deliver the absolute best returns. So that's where you see there is a little bit of fixed income in here just because as you check each box from a maximum exposure under Public Act 314, which is the state law that governs what we can do on the pension and retire your healthcare side from an investment standpoint, as we heat each hit each of those maximums for equities or private equity or real estate. As you add those up, you can't get to 100. So you have to have a small portion in fixed income, but we keep that as as as minimal as possible. And then that's used as a funding mechanism for when we have capital calls for private equity managers. But you know, as an example last year, or so far this fiscal year, you know, retiree healthcare trust is up 14, almost 15%. That number will be north of 15% today versus a 7% assumed growth rate. So just continued good news. Managers are the same. It's just the asset allocation is a little different. That's the

  61. equity is 15%. We're pushing towards 15%. The idea being is with no cash flow obligations expected out of this portfolio for the next two decades, allow it to be in the parts of the market that over the long run will deliver the absolute best returns. So that's where you see there is a little bit of fixed income in here just because as you check each box from a maximum exposure under Public Act 314, which is the state law that governs what we can do on the pension and retire your healthcare side from an investment standpoint, as we heat each hit each of those maximums for equities or private equity or real estate. As you add those up, you can't get to 100. So you have to have a small portion in fixed income, but we keep that as as as minimal as possible. And then that's used as a funding mechanism for when we have capital calls for private equity managers. But you know, as an example last year, or so far this fiscal year, you know, retiree healthcare trust is up 14, almost 15%. That number will be north of 15% today versus a 7% assumed growth rate. So just continued good news. Managers are the same. It's just the asset allocation is a little different. That's the extent of prepared comments and retiree healthcare, but I'm happy to answer questions. Why don't you, any, if we don't have any questions on that, why don't you talk about the asset allocation? Yep. So bad news, So I don't know. This is page 10, and you see things really reflective. So in line from a domestic equity and international equity standpoint, because our max exposure each of those is 70%. We have the good problem of continually having to trim those back a little bit, because they keep going above the 70% limitation. You'll see we are a little bit overweight in domestic fixed income, just because we are underweight in real estate here, and we are underweight in alternative investments, but are actively working on either there's money being deployed, for example, in capital dynamics or in Bloomfield Capital for the real estate portion, and then actually looking at new investment opportunities to add to the portfolio as it grows and can scale to bring down that domestic fixed income. So please understand that is not a market call of being overweight fixed income. That is the reality of we've made commitments to capital dynamics that have yet to be deployed. And because we cannot have more than 70% in stocks,

  62. good news. Managers are the same. It's just the asset allocation is a little different. That's the extent of prepared comments and retiree healthcare, but I'm happy to answer questions. Why don't you, any, if we don't have any questions on that, why don't you talk about the asset allocation? Yep. So bad news, So I don't know. This is page 10, and you see things really reflective. So in line from a domestic equity and international equity standpoint, because our max exposure each of those is 70%. We have the good problem of continually having to trim those back a little bit, because they keep going above the 70% limitation. You'll see we are a little bit overweight in domestic fixed income, just because we are underweight in real estate here, and we are underweight in alternative investments, but are actively working on either there's money being deployed, for example, in capital dynamics or in Bloomfield Capital for the real estate portion, and then actually looking at new investment opportunities to add to the portfolio as it grows and can scale to bring down that domestic fixed income. So please understand that is not a market call of being overweight fixed income. That is the reality of we've made commitments to capital dynamics that have yet to be deployed. And because we cannot have more than 70% in stocks, that money has to be somewhere else from an investment standpoint. I have a question about the asset allocation. Our business inspection fund is generated from fees. And I think it's about 170% to 200% fully funded. So why would we place that cash and that subac... into an equity fund when it can be self-sufficient so you're conflating two issues so the building inspection fund is a governmental fund part of the township so that's addressed earlier with the operating funds all in fixed income we can't we can only be in fixed income this is strictly retiree health care this has nothing to do with building inspection so this is separate from OPEP this is open the retirement health care yes so in OPEP for the the OPEP liabilities oh I understand what your business inspection are 170 to 200 percent it's a

  63. And because we cannot have more than 70% in stocks, that money has to be somewhere else from an investment standpoint. I have a question about the asset allocation. Our business inspection fund is generated from fees. And I think it's about 170% to 200% fully funded. So why would we place that cash and that subac... into an equity fund when it can be self-sufficient so you're conflating two issues so the building inspection fund is a governmental fund part of the township so that's addressed earlier with the operating funds all in fixed income we can't we can only be in fixed income this is strictly retiree health care this has nothing to do with building inspection so this is separate from OPEP this is open the retirement health care yes so in OPEP for the the OPEP liabilities oh I understand what your business inspection are 170 to 200 percent it's a sub-account we don't look at the sub-accounts during the meeting right we discussed asset allocation right and if you're generating three to four percent on fixed income and you're 170 to 200 percent funded why would you put that cash into equities when it's already self-sufficient you have enough assets right so the funded status of the trust as a whole or any of the individual sub-accounts can move around and based on what's going on in the market and what the life are, et cetera. So the strategy for the retiree health care OPEB trust has always been fund as much as we can into the trust and put it to work as aggressively as possible so it can grow over time so that in the future we can take that money to pay the benefits. Right now we're paying the benefits out of our operating budget. Cash flow. Our operating cash flow is how we're making the current payments to the retirees. You're looking at the fund as a whole. I'm looking at a sub account

  64. I understand what your business inspection are 170 to 200 percent it's a sub-account we don't look at the sub-accounts during the meeting right we discussed asset allocation right and if you're generating three to four percent on fixed income and you're 170 to 200 percent funded why would you put that cash into equities when it's already self-sufficient you have enough assets right so the funded status of the trust as a whole or any of the individual sub-accounts can move around and based on what's going on in the market and what the life are, et cetera. So the strategy for the retiree health care OPEB trust has always been fund as much as we can into the trust and put it to work as aggressively as possible so it can grow over time so that in the future we can take that money to pay the benefits. Right now we're paying the benefits out of our operating budget. Cash flow. Our operating cash flow is how we're making the current payments to the retirees. You're looking at the fund as a whole. I'm looking at a sub account and we have a sub account that's fully funded. We charge fees to residents to inspect buildings and properties. It's not tax-based. It's an enterprise fund. It says it on the reports and it doesn't make sense to me when we can generate eight percent or three to four percent on a fixed income for that section of the portfolio and have it be fully funded and help lower rates for inspection fees because it would drop that requirement. I mean we shouldn't be building inspection, shouldn't be putting money in if it's fully funded. And that's what I'm trying to understand. Right. I guess my response would be that that would be a better topic of conversation at our budget meeting when we address how we allocate. the revenues and expenses as it relates to that fund. What we're looking at today is simply how we're investing the portfolio for the OPEB trust. And so I think it'd be better if we address that

  65. current payments to the retirees. You're looking at the fund as a whole. I'm looking at a sub account and we have a sub account that's fully funded. We charge fees to residents to inspect buildings and properties. It's not tax-based. It's an enterprise fund. It says it on the reports and it doesn't make sense to me when we can generate eight percent or three to four percent on a fixed income for that section of the portfolio and have it be fully funded and help lower rates for inspection fees because it would drop that requirement. I mean we shouldn't be building inspection, shouldn't be putting money in if it's fully funded. And that's what I'm trying to understand. Right. I guess my response would be that that would be a better topic of conversation at our budget meeting when we address how we allocate. the revenues and expenses as it relates to that fund. What we're looking at today is simply how we're investing the portfolio for the OPEB trust. And so I think it'd be better if we address that in two weeks. But that's the whole crux, is if you're 200% funded. I understand. But the trust as a whole is only 29% funded. And so we're not putting, we're not taking any money out of that trust because we want it to grow as aggressively as we can so that in the future it can make those benefit payments. But right now the benefit payments are paid out of the operating budget. And so what we're looking at today is the portfolio as a whole with our investment advisor. Again, I would suggest that the topic of reallocating for the individual sub accounts or funds is a topic that should be addressed at the budget meeting. Right. And we are out of state oversight now for our OPEB. So Brian, the funding policy and strategy, if you could just clarify, is for the whole trust as a whole, you don't look at or allocate based on the sub accounts that is being referenced? Correct? Correct. Correct. The investment strategy is for the retention.

  66. we're investing the portfolio for the OPEB trust. And so I think it'd be better if we address that in two weeks. But that's the whole crux, is if you're 200% funded. I understand. But the trust as a whole is only 29% funded. And so we're not putting, we're not taking any money out of that trust because we want it to grow as aggressively as we can so that in the future it can make those benefit payments. But right now the benefit payments are paid out of the operating budget. And so what we're looking at today is the portfolio as a whole with our investment advisor. Again, I would suggest that the topic of reallocating for the individual sub accounts or funds is a topic that should be addressed at the budget meeting. Right. And we are out of state oversight now for our OPEB. So Brian, the funding policy and strategy, if you could just clarify, is for the whole trust as a whole, you don't look at or allocate based on the sub accounts that is being referenced? Correct? Correct. Correct. The investment strategy is for the retention. healthcare OPEB trust in its entirety not on an individual sub account basis and recall from an investment standpoint those assets were consolidated in April of last year after we were done with fiscal year-end because it allowed for greater efficiency lower costs access to investment opportunities that we wouldn't have if I was trying for trying to parse out on an individual sub trust by trust basis but an important distinction it was combined for investment purposes but it is tracked and allocated for accounting purposes separately so that we can identify each of the sub accounts whether it's police fire water cable building inspection each of those are tracked individually and you know for example are laid out in the actual evaluation each year would your recommendation on the investment portfolio make up change if a fund was twenty nine percent funded versus two hundred percent funded yes yeah so that's the crux of it because we decided to put more cash in from water and sewer cable studio and building inspection those are all fully funded the places that aren't

  67. healthcare OPEB trust in its entirety not on an individual sub account basis and recall from an investment standpoint those assets were consolidated in April of last year after we were done with fiscal year-end because it allowed for greater efficiency lower costs access to investment opportunities that we wouldn't have if I was trying for trying to parse out on an individual sub trust by trust basis but an important distinction it was combined for investment purposes but it is tracked and allocated for accounting purposes separately so that we can identify each of the sub accounts whether it's police fire water cable building inspection each of those are tracked individually and you know for example are laid out in the actual evaluation each year would your recommendation on the investment portfolio make up change if a fund was twenty nine percent funded versus two hundred percent funded yes yeah so that's the crux of it because we decided to put more cash in from water and sewer cable studio and building inspection those are all fully funded the places that aren't fully funded is something else and that's one of my concerns is are we creating taxes by how we're funding this and that would be an additional liability to the township. My caveat would be, at the end of the day, I need to earn a long-term rate of return. And if it's 200% funded and it's – if I'm assuming I'm going to earn 6% or 7%, that 200% funded status is assuming I earn 6% or 7% over the life of all of the participants that are in it or are going to come in it. And that 30% funded status is assuming a 6% or 7% growth rate over the life of all of those participants. So the asset allocation solves a math problem of what's my mix of assets to get to a 7% return because I could make that 200% funded at 7% return 100% funded if I then said we're going to make it a 3% return. Like, the actuary can move whatever lever they want, but I'm solving for 7% from a – like, my math problem that I'm solving for is what mix of assets gets me to 7%?

  68. studio and building inspection those are all fully funded the places that aren't fully funded is something else and that's one of my concerns is are we creating taxes by how we're funding this and that would be an additional liability to the township. My caveat would be, at the end of the day, I need to earn a long-term rate of return. And if it's 200% funded and it's – if I'm assuming I'm going to earn 6% or 7%, that 200% funded status is assuming I earn 6% or 7% over the life of all of the participants that are in it or are going to come in it. And that 30% funded status is assuming a 6% or 7% growth rate over the life of all of those participants. So the asset allocation solves a math problem of what's my mix of assets to get to a 7% return because I could make that 200% funded at 7% return 100% funded if I then said we're going to make it a 3% return. Like, the actuary can move whatever lever they want, but I'm solving for 7% from a – like, my math problem that I'm solving for is what mix of assets gets me to 7%? Because whether I'm 30% funded, 100% funded, or 200% funded, that's what the actuary is assuming over the next 20, 30, 40 years we're going to earn. We have well-funded plans. Look, I've got an OPEB plan that I'm going to see tomorrow morning that's 150% funded. That's got to earn 7.25%. The difference is, is they have more exposure to managers that typically do better and negative. markets because we're trying to protect but they still have to earn and still have to take risk in the in the in the stock market um to pay out those benefits over the next 40 50 plus years and my concern is we charge fees for water and sewer using those fees to meet obligations of the general fund would be inappropriate same with business building inspection we charge fees it's not tax-based cable studio is now collecting fees to help cover their budget so again i don't want the township to be in a position where it could be shown that these fees are actually being used to meet tax obligation requirement that's doesn't have to do with what you're doing but it does

  69. like, my math problem that I'm solving for is what mix of assets gets me to 7%? Because whether I'm 30% funded, 100% funded, or 200% funded, that's what the actuary is assuming over the next 20, 30, 40 years we're going to earn. We have well-funded plans. Look, I've got an OPEB plan that I'm going to see tomorrow morning that's 150% funded. That's got to earn 7.25%. The difference is, is they have more exposure to managers that typically do better and negative. markets because we're trying to protect but they still have to earn and still have to take risk in the in the in the stock market um to pay out those benefits over the next 40 50 plus years and my concern is we charge fees for water and sewer using those fees to meet obligations of the general fund would be inappropriate same with business building inspection we charge fees it's not tax-based cable studio is now collecting fees to help cover their budget so again i don't want the township to be in a position where it could be shown that these fees are actually being used to meet tax obligation requirement that's doesn't have to do with what you're doing but it does it is something that the township board has to consider and i'm not disagreeing with you mark but let's deal with it at the budget meeting so just to also be clear that the there is no money from those funds being used in the general fund there is the water sewer fund and the cable there are separate funds um and those are not being diverted for any general fund purpose at all period you have a concern hypothetical concern we would all agree that money shouldn't be used from the water and sewer fund to fund general expenses absolutely period you're right but the answer is they're not actually there's a form jason fills out that we sent to the department of treasury And it includes the actuarially determined calculation of all five separate funds. The fund contributions required from cable studio, building inspection, and water and sewer are all negative. That results in a drop in the actuarial determined contribution for the fund as a whole, reducing the obligations for the general fund and public safety. So mathematically, it still works out separately.

  70. meet tax obligation requirement that's doesn't have to do with what you're doing but it does it is something that the township board has to consider and i'm not disagreeing with you mark but let's deal with it at the budget meeting so just to also be clear that the there is no money from those funds being used in the general fund there is the water sewer fund and the cable there are separate funds um and those are not being diverted for any general fund purpose at all period you have a concern hypothetical concern we would all agree that money shouldn't be used from the water and sewer fund to fund general expenses absolutely period you're right but the answer is they're not actually there's a form jason fills out that we sent to the department of treasury And it includes the actuarially determined calculation of all five separate funds. The fund contributions required from cable studio, building inspection, and water and sewer are all negative. That results in a drop in the actuarial determined contribution for the fund as a whole, reducing the obligations for the general fund and public safety. So mathematically, it still works out separately. And we're not going back and saying the fully funded portions don't have to put anything in. We're putting in more money. Even last year, we put in $50,000 above the benefit payouts from water and sewer, yet the board never approved that transfer during a board meeting. So I think it is a serious thing, and I think it puts... Every transfer has been approved. So moving on from that. The other important point I want to make is that making the contributions, I think, are important, even though it may be, as an individual fund, overfunded. Over my life, I've seen in giving advice to employers, they can be overfunded one day and completely underfunded the next day. I don't know what the market's going to do. And so a wise employer doesn't just run around at 100%. They make sure they're continually making investments because the actuarial numbers will change a lot depending on the investments and the markets go. And someone who... things are doing really great because they're 100% today and could be, you know, at 50% tomorrow and then they're in deep doo-doo. So it's a conservative way to continue to fund these obligations. It would be risky in my mind to lower our returns or to stop making contributions because

  71. So mathematically, it still works out separately. And we're not going back and saying the fully funded portions don't have to put anything in. We're putting in more money. Even last year, we put in $50,000 above the benefit payouts from water and sewer, yet the board never approved that transfer during a board meeting. So I think it is a serious thing, and I think it puts... Every transfer has been approved. So moving on from that. The other important point I want to make is that making the contributions, I think, are important, even though it may be, as an individual fund, overfunded. Over my life, I've seen in giving advice to employers, they can be overfunded one day and completely underfunded the next day. I don't know what the market's going to do. And so a wise employer doesn't just run around at 100%. They make sure they're continually making investments because the actuarial numbers will change a lot depending on the investments and the markets go. And someone who... things are doing really great because they're 100% today and could be, you know, at 50% tomorrow and then they're in deep doo-doo. So it's a conservative way to continue to fund these obligations. It would be risky in my mind to lower our returns or to stop making contributions because the actuarial number looks good at any given day. And employers that did that over my career and watched them do it suffered later, measurably so, because they had greatly increased the contributions to catch up. That's where I think why we should do it. I want to be mindful of everybody's time here. We can certainly address these topics at the budget meeting. But as it relates to this portfolio, the asset allocation, Brian, do you want to address the changes that we're recommending for this portfolio? So on the retiree health care side, it's really, I want to see. Trimming the fixed income allocation from 15% down to 7.5%. Increase.

  72. It would be risky in my mind to lower our returns or to stop making contributions because the actuarial number looks good at any given day. And employers that did that over my career and watched them do it suffered later, measurably so, because they had greatly increased the contributions to catch up. That's where I think why we should do it. I want to be mindful of everybody's time here. We can certainly address these topics at the budget meeting. But as it relates to this portfolio, the asset allocation, Brian, do you want to address the changes that we're recommending for this portfolio? So on the retiree health care side, it's really, I want to see. Trimming the fixed income allocation from 15% down to 7.5%. Increase. the alternative investments from um 10 up to 15 um revising real estate from 10 down to seven and a half which is really reflective of our current exposure um yeah and without any changes to the equities correct because we're at our we're at our ceiling our target is our ceiling so that's a continual monitoring to make sure that we um stay in compliance right and again it's reflective of the projected cash flow needs or lack of cash flow needs for the retiree healthcare trust so let's put it into maximum growth mode to close the gap from a funding standpoint okay so those changes uh will be reflected in um a revised investment policy that will come to the board on monday um and same thing with the recommended changes to the um pension trust uh equities allocation um so i wanted to discuss that today so that the board would be aware of it um when we address it on monday uh okay at that at this point um that concludes the

  73. the alternative investments from um 10 up to 15 um revising real estate from 10 down to seven and a half which is really reflective of our current exposure um yeah and without any changes to the equities correct because we're at our we're at our ceiling our target is our ceiling so that's a continual monitoring to make sure that we um stay in compliance right and again it's reflective of the projected cash flow needs or lack of cash flow needs for the retiree healthcare trust so let's put it into maximum growth mode to close the gap from a funding standpoint okay so those changes uh will be reflected in um a revised investment policy that will come to the board on monday um and same thing with the recommended changes to the um pension trust uh equities allocation um so i wanted to discuss that today so that the board would be aware of it um when we address it on monday uh okay at that at this point um that concludes the um retiree health care uh review um and now i'd like to move on to the defined contribution plans um um um um and as the the board knows we don't invest this money I call it participant directed investment accounts we have the 401 a retirement plan that the township puts money in for active employees and a deferred compensation 457 B plan and the retirement health savings plan all told it's about 73 million dollars of participant money they direct how that fund gets invest how those funds get invested and we have Rob Higgins and from Schwartz and Company who is our investment advisor on these funds and as Rob will tell you he also meets directly individually with the employees to help them choose which funds they want to invest in so I'll let you Rob we only have 78 pages to get through so strap it up I'm gonna pick select slides of course under your time I appreciate being able

  74. aware of it um when we address it on monday uh okay at that at this point um that concludes the um retiree health care uh review um and now i'd like to move on to the defined contribution plans um um um um and as the the board knows we don't invest this money I call it participant directed investment accounts we have the 401 a retirement plan that the township puts money in for active employees and a deferred compensation 457 B plan and the retirement health savings plan all told it's about 73 million dollars of participant money they direct how that fund gets invest how those funds get invested and we have Rob Higgins and from Schwartz and Company who is our investment advisor on these funds and as Rob will tell you he also meets directly individually with the employees to help them choose which funds they want to invest in so I'll let you Rob we only have 78 pages to get through so strap it up I'm gonna pick select slides of course under your time I appreciate being able to present to you today though I'm gonna dive right into inside of tab 2 on page 10 these are some select slides pulled from plant health update that empower provides with to us I'm happy to follow up with the complete reports for both the 401 a 457 this particular slide pertains to the the 457 plan of course 401 a heavily funded by the the township 457 is the optional component and that's probably a more meaningful metric in terms of impact we're making as advisors in terms of encouraging people to contribute to their own retirement so there's some stats and figures again I'm not going to spend time on every number you see here I did want to show on page 11 I highlighted the average balance in this plan healthy and

  75. up I'm gonna pick select slides of course under your time I appreciate being able to present to you today though I'm gonna dive right into inside of tab 2 on page 10 these are some select slides pulled from plant health update that empower provides with to us I'm happy to follow up with the complete reports for both the 401 a 457 this particular slide pertains to the the 457 plan of course 401 a heavily funded by the the township 457 is the optional component and that's probably a more meaningful metric in terms of impact we're making as advisors in terms of encouraging people to contribute to their own retirement so there's some stats and figures again I'm not going to spend time on every number you see here I did want to show on page 11 I highlighted the average balance in this plan healthy and it's a it's a growing trend we'd like to see that on page 12 I wanted to call out somewhat of a statistical anomaly if you will follow me to the far right column under 12 31 2025 data third row down reflects the average contribution rate you'll see 5.6 percent everyone see that and if you compare that to prior year 11.6 like geez what happened and I had that reaction myself and I spoke with my contact at empower and it comes down to a quality of data issues so for instance in 2020 24, Empower had 13% of salary information on file, so they were making their average deferral percentage based on 13% of actual data they had for people's salary. This year, Elizabeth's been hard at work, so that payroll data is better, more higher quality, 70% of actual data or actual salaries are on file now, so we can make a more statistically

  76. want to show on page 11 I highlighted the average balance in this plan healthy and it's a it's a growing trend we'd like to see that on page 12 I wanted to call out somewhat of a statistical anomaly if you will follow me to the far right column under 12 31 2025 data third row down reflects the average contribution rate you'll see 5.6 percent everyone see that and if you compare that to prior year 11.6 like geez what happened and I had that reaction myself and I spoke with my contact at empower and it comes down to a quality of data issues so for instance in 2020 24, Empower had 13% of salary information on file, so they were making their average deferral percentage based on 13% of actual data they had for people's salary. This year, Elizabeth's been hard at work, so that payroll data is better, more higher quality, 70% of actual data or actual salaries are on file now, so we can make a more statistically accurate projection there. So we'll continue to shore that up. I'm going to make, that's a follow-up item I have, an initiative, maybe have to lean a little bit more on Elizabeth just to get those, that file uploaded, but at any rate, I wanted to explain that away if that caught your eye. I will leave the rest of those slides for your review. I do want to show you on page 19 and 20, you know, Empower spent a lot of resources plow back internally to add more depth to their education program. And it's very dynamic, I would say. There's a number of touch points they have throughout the year. And so this is, I think what they're doing is it serves as a great complement to the work of the Schwartzen company. Four of them. A six. Five. is doing on an individual basis and sometimes people need to hear messaging a few different ways and empower does that in a variety of ways at milestone moments throughout the year and they do so in a more customized way based on the individual so it's not just stamped out

  77. quality, 70% of actual data or actual salaries are on file now, so we can make a more statistically accurate projection there. So we'll continue to shore that up. I'm going to make, that's a follow-up item I have, an initiative, maybe have to lean a little bit more on Elizabeth just to get those, that file uploaded, but at any rate, I wanted to explain that away if that caught your eye. I will leave the rest of those slides for your review. I do want to show you on page 19 and 20, you know, Empower spent a lot of resources plow back internally to add more depth to their education program. And it's very dynamic, I would say. There's a number of touch points they have throughout the year. And so this is, I think what they're doing is it serves as a great complement to the work of the Schwartzen company. Four of them. A six. Five. is doing on an individual basis and sometimes people need to hear messaging a few different ways and empower does that in a variety of ways at milestone moments throughout the year and they do so in a more customized way based on the individual so it's not just stamped out so i wanted to point that out um and of course that pertains to both plans 401-8457 on page 21 i did provide you with a uh recap of specific education that took place from schwartz and company and um this is something uh obviously i pay close attention to so i was happy to report we had 79 qualified investment consultations um that's a sticky number those are um meetings primarily held with me individually um and whether that's over the phone zoom at schwartz and co or here on on site i enjoy that that's probably my favorite part of the job is meeting with people and we'll continue to offer that and make sure that's available on a going forward basis um in addition to those individual consultations those opportunities we also did two different uh on-site education group education you you you you

  78. and they do so in a more customized way based on the individual so it's not just stamped out so i wanted to point that out um and of course that pertains to both plans 401-8457 on page 21 i did provide you with a uh recap of specific education that took place from schwartz and company and um this is something uh obviously i pay close attention to so i was happy to report we had 79 qualified investment consultations um that's a sticky number those are um meetings primarily held with me individually um and whether that's over the phone zoom at schwartz and co or here on on site i enjoy that that's probably my favorite part of the job is meeting with people and we'll continue to offer that and make sure that's available on a going forward basis um in addition to those individual consultations those opportunities we also did two different uh on-site education group education you you you you meetings April and then in October so we had a lot of face time with individuals last year and that's always a good thing to keep turning that wheel what's not reflected here are two on-camera Q&A sessions I did with Michael at the cable on cable that was probably my favorite price should have highlighted that but that that was all in an effort when we we did a lot of work behind the scenes last year in implementing a new target date series which the important feature there was these target date funds happen to include an income for life component so they're relatively new concept industry-wide hands down Bloomfield township is leading the charge in terms of being out in front of that not many plans have have have adopted that feature but it is something being talked about because as Brian mentioned everyone's used to getting a paycheck and then when retirement hits they're no longer using getting a paycheck and so how do you take

  79. meetings April and then in October so we had a lot of face time with individuals last year and that's always a good thing to keep turning that wheel what's not reflected here are two on-camera Q&A sessions I did with Michael at the cable on cable that was probably my favorite price should have highlighted that but that that was all in an effort when we we did a lot of work behind the scenes last year in implementing a new target date series which the important feature there was these target date funds happen to include an income for life component so they're relatively new concept industry-wide hands down Bloomfield township is leading the charge in terms of being out in front of that not many plans have have have adopted that feature but it is something being talked about because as Brian mentioned everyone's used to getting a paycheck and then when retirement hits they're no longer using getting a paycheck and so how do you take your big basket of savings and understand how that's going to cover 30 years of your life going forward so income for life is becoming more and more important for people to continue getting quote-unquote a paycheck into retirement And so Jason, Michael did a fantastic job kind of leading those discussions, and we worked a lot to identify a solution there and provide people with an option, meaningful option. So in that effort, you know, again, Michael, Jason did a fantastic job of making sure that there are plenty of opportunities for people to make informed choices and really understand what was being added to the plan. So kudos to you guys for taking the time in that regard, and it did allow me to be on camera with Michael, so I appreciate that. More to come, right? Yeah. I think you're going to look for a series. Okay. Skipping ahead to page 25, I wanted to show you a roll-up of the 457-401A plans, combined asset update. I highlighted in the lower right $64 million in those two plans.

  80. retirement hits they're no longer using getting a paycheck and so how do you take your big basket of savings and understand how that's going to cover 30 years of your life going forward so income for life is becoming more and more important for people to continue getting quote-unquote a paycheck into retirement And so Jason, Michael did a fantastic job kind of leading those discussions, and we worked a lot to identify a solution there and provide people with an option, meaningful option. So in that effort, you know, again, Michael, Jason did a fantastic job of making sure that there are plenty of opportunities for people to make informed choices and really understand what was being added to the plan. So kudos to you guys for taking the time in that regard, and it did allow me to be on camera with Michael, so I appreciate that. More to come, right? Yeah. I think you're going to look for a series. Okay. Skipping ahead to page 25, I wanted to show you a roll-up of the 457-401A plans, combined asset update. I highlighted in the lower right $64 million in those two plans. I also highlighted in the middle there the largest, most highly concentrated position in the JPMorgan large cap. 22% of plant assets. That fund continues to do well performance-wise, so no issues. Always worth noting where the highest concentration is within a fund lineup. Behind those plans, that page... I have the individual 457-401-A assets split for you. Let me draw your attention to page 28. A couple notes here. First and foremost, the effort here is just to provide you with a weighted average. Hey, what's the all-in cost on average for a participant in the Bloomfield Township 401-A-457? So left to right, we've got the funds, assets, and then expense ratio of each funds, and then on a weighted average basis, plan costs. And down at the lower corner there, there's three cost components. It's the weighted average investment cost, advisor fee, and then the record-keeping fee.

  81. I highlighted in the lower right $64 million in those two plans. I also highlighted in the middle there the largest, most highly concentrated position in the JPMorgan large cap. 22% of plant assets. That fund continues to do well performance-wise, so no issues. Always worth noting where the highest concentration is within a fund lineup. Behind those plans, that page... I have the individual 457-401-A assets split for you. Let me draw your attention to page 28. A couple notes here. First and foremost, the effort here is just to provide you with a weighted average. Hey, what's the all-in cost on average for a participant in the Bloomfield Township 401-A-457? So left to right, we've got the funds, assets, and then expense ratio of each funds, and then on a weighted average basis, plan costs. And down at the lower corner there, there's three cost components. It's the weighted average investment cost, advisor fee, and then the record-keeping fee. And the sum of those parts, 57 basis points, 0.57%. And then we, of course, benchmarked that on the following pages. But before I get there, I also highlighted on page 28, the Fidelity 500 Index, which has an expense ratio of, it's rounded here. It's actually 1.5 basis points. Extremely thin margin, right? And one of the investment recommendations or the changes that I'm recommending, Empower has come to market last year with a zero-cost S&P 500 Index Fund. So they're first to market with a zero-cost. Interesting. Thank you. Thank you. fund of that nature and so that's eligible for this plan and so that's a formal change that I'm recommending and I'm of course can send some follow-up information to you if you're how are they managing that are they where where is that cost coming back to us and it's not they're eating any administrative costs behind that offering and it's I kind of picture it as a loss leader for them you know they use it obviously to get their foot in the door with other plans and they've never really managed a plan or created a plan before

  82. And the sum of those parts, 57 basis points, 0.57%. And then we, of course, benchmarked that on the following pages. But before I get there, I also highlighted on page 28, the Fidelity 500 Index, which has an expense ratio of, it's rounded here. It's actually 1.5 basis points. Extremely thin margin, right? And one of the investment recommendations or the changes that I'm recommending, Empower has come to market last year with a zero-cost S&P 500 Index Fund. So they're first to market with a zero-cost. Interesting. Thank you. Thank you. fund of that nature and so that's eligible for this plan and so that's a formal change that I'm recommending and I'm of course can send some follow-up information to you if you're how are they managing that are they where where is that cost coming back to us and it's not they're eating any administrative costs behind that offering and it's I kind of picture it as a loss leader for them you know they use it obviously to get their foot in the door with other plans and they've never really managed a plan or created a plan before themselves have they the power is a record keeper another their record keeper per se a new venture for them yeah the you know they're at truth be told it's actually blackrock that's that's managing S&P and and again power is kind of swallowing the administrative cost behind that so they're leveraging blackrock on the actual but when you're tracking an index the S&P index is the S&P it's the 500 SOC so there's not a lot of decision making there you're just tracking an index so you know costs are it's funny Vanguard had theirs in at four basis points and fidelity came in undercut them at one and a half and now you got in power coming to market with a zero cost so at any rate that is one of the rest investment recommendations that I have for the for your consideration and that'll color smooth the needle little bit in overall plan costs on page 29 and 30 i i am essentially benchmarking for you on a plan level and then an individual cost component level where the township plan sits

  83. plans and they've never really managed a plan or created a plan before themselves have they the power is a record keeper another their record keeper per se a new venture for them yeah the you know they're at truth be told it's actually blackrock that's that's managing S&P and and again power is kind of swallowing the administrative cost behind that so they're leveraging blackrock on the actual but when you're tracking an index the S&P index is the S&P it's the 500 SOC so there's not a lot of decision making there you're just tracking an index so you know costs are it's funny Vanguard had theirs in at four basis points and fidelity came in undercut them at one and a half and now you got in power coming to market with a zero cost so at any rate that is one of the rest investment recommendations that I have for the for your consideration and that'll color smooth the needle little bit in overall plan costs on page 29 and 30 i i am essentially benchmarking for you on a plan level and then an individual cost component level where the township plan sits relative to two universes benchmark unit say that this plan continues to benchmark favorably we pay a lot of attention to these planned costs and certainly we want to make sure that this is a cost-efficient feature for people cost is one thing but it's the value of what they're getting to and hopefully we're adding value as the investment consultant in addition to being in a high performance plan behind those pages i have included similar exhibits for the retirement health savings plan um and again in the interest of time i'll i'll just leave those for your review the fund lineups are roughly the same the the caveat there is that um those new target date funds with the income component income for life component are only eligible under the defined contribution plans the 401a 457 the retirement health savings plan still owns the vanguard target date series as its target date option you you

  84. on a plan level and then an individual cost component level where the township plan sits relative to two universes benchmark unit say that this plan continues to benchmark favorably we pay a lot of attention to these planned costs and certainly we want to make sure that this is a cost-efficient feature for people cost is one thing but it's the value of what they're getting to and hopefully we're adding value as the investment consultant in addition to being in a high performance plan behind those pages i have included similar exhibits for the retirement health savings plan um and again in the interest of time i'll i'll just leave those for your review the fund lineups are roughly the same the the caveat there is that um those new target date funds with the income component income for life component are only eligible under the defined contribution plans the 401a 457 the retirement health savings plan still owns the vanguard target date series as its target date option you you um in the section four first exhibit and you've seen this before pages 37 through 40 what you're seeing here is the entire fund lineup and each row represents the investment option stacked on top of its morning star category and if a fund beat or at least met relative to its its peer group category i awarded it a shaded cell so visually you can just see hey if this is a scorecard i like to see a lot of a lot of color here and um a couple of the a few the funds the ones that i highlighted are actually a little more anemic and uh we've got some recommendations to to refresh the lineup in those areas so there's there's really four fund changes that i'm recommending i've got those summarized in the recommendations in the back of the presentation so four outright fund changes and then i um that s p 500 i'm not calling that a replacement more of a shift to a lower cost option so to summarize this exhibit on page 40

  85. um in the section four first exhibit and you've seen this before pages 37 through 40 what you're seeing here is the entire fund lineup and each row represents the investment option stacked on top of its morning star category and if a fund beat or at least met relative to its its peer group category i awarded it a shaded cell so visually you can just see hey if this is a scorecard i like to see a lot of a lot of color here and um a couple of the a few the funds the ones that i highlighted are actually a little more anemic and uh we've got some recommendations to to refresh the lineup in those areas so there's there's really four fund changes that i'm recommending i've got those summarized in the recommendations in the back of the presentation so four outright fund changes and then i um that s p 500 i'm not calling that a replacement more of a shift to a lower cost option so to summarize this exhibit on page 40 um i i highlighted for you at the bottom hey all right bottom line how many of these funds outperformed their category on a 10, 5, 3, 1-year basis and, you know, decent score, 79, 81, 79, 76, so when you've got three-quarters of the fund line up doing its job, you know that that's delivering good net returns to participants at the participant level. Again, this is just one way to assess performance of the plan, raw performance, not risk-adjusted. Okay, that passes the litmus test. Second, let me draw your attention to 41 and 42, and this is an effort by our firm, by me, to just track on a plan level, you know, Michael made the mention of an IRR pertaining to the pension plans. IRR is probably more meaningful, more applicable to pension plans, but I'm also tracking an IRR for these two plans. I've done so since 2014, sorry, 2011, I've done so since 2011, dating back to the time when I was inserted as kind of the lead point on these plans, and so I have conducted an IRR calculation for both the 401A, 457, that's what

  86. a replacement more of a shift to a lower cost option so to summarize this exhibit on page 40 um i i highlighted for you at the bottom hey all right bottom line how many of these funds outperformed their category on a 10, 5, 3, 1-year basis and, you know, decent score, 79, 81, 79, 76, so when you've got three-quarters of the fund line up doing its job, you know that that's delivering good net returns to participants at the participant level. Again, this is just one way to assess performance of the plan, raw performance, not risk-adjusted. Okay, that passes the litmus test. Second, let me draw your attention to 41 and 42, and this is an effort by our firm, by me, to just track on a plan level, you know, Michael made the mention of an IRR pertaining to the pension plans. IRR is probably more meaningful, more applicable to pension plans, but I'm also tracking an IRR for these two plans. I've done so since 2014, sorry, 2011, I've done so since 2011, dating back to the time when I was inserted as kind of the lead point on these plans, and so I have conducted an IRR calculation for both the 401A, 457, that's what you see on 41 and 42, and I did so over a 14-year period, or from 2011 to 2024, and 2011 to 2025. I wanted to split those two time frames up because we get benchmark data provided to us from Fidelity. I wanted to shoot through this as well as I was in 2021. I wanted to put that down. in vanguard for their universe of funds that they record keep and they get that data to us between february and april may of each year so i don't have that data for 2025 yet i did for 2024 so that's what you're seeing so just as an example on page 41 the ir of the 457 plan from 2011 and 2014 9.38 percent versus ir of 8.8 8.2 percent fidelity and vanguard respectively it's good to beat those benchmarks go ahead quick question on the bottom of this is annual net return from 2011 through 2014. so we'll say 24. thank you for that

  87. point on these plans, and so I have conducted an IRR calculation for both the 401A, 457, that's what you see on 41 and 42, and I did so over a 14-year period, or from 2011 to 2024, and 2011 to 2025. I wanted to split those two time frames up because we get benchmark data provided to us from Fidelity. I wanted to shoot through this as well as I was in 2021. I wanted to put that down. in vanguard for their universe of funds that they record keep and they get that data to us between february and april may of each year so i don't have that data for 2025 yet i did for 2024 so that's what you're seeing so just as an example on page 41 the ir of the 457 plan from 2011 and 2014 9.38 percent versus ir of 8.8 8.2 percent fidelity and vanguard respectively it's good to beat those benchmarks go ahead quick question on the bottom of this is annual net return from 2011 through 2014. so we'll say 24. thank you for that edit yeah okay revise that apologize that makes more sense yeah i was going to say i was having a hard time following that yeah i didn't see any 24s took a blind look at that yeah that should obviously read 2024 2025 i'll send a revised thank you for calling that i'll appreciate that um so same calculation for 2011 to 2025 9.64 percent that's on the 457 um interestingly on 42 page 42 again same error really i appreciate you calling that out in front of everybody that's really good no um the rr from 2011 to 2024 10.7 percent and and 11. three percent to 2025 i mean that's a very meaningful number just because that's pertaining to that 401a and i know what those initial calculations were based on you know hey can we get eight percent and again this isn't this is plan level so it's not specific but i know behind that this means that participants are really getting good returns for a long period of time now through a full market cycle plus and and that's going to drive a really great outcome for them so i'm paying close attention to that number and i'm happy to be able to report that um again

  88. the bottom of this is annual net return from 2011 through 2014. so we'll say 24. thank you for that edit yeah okay revise that apologize that makes more sense yeah i was going to say i was having a hard time following that yeah i didn't see any 24s took a blind look at that yeah that should obviously read 2024 2025 i'll send a revised thank you for calling that i'll appreciate that um so same calculation for 2011 to 2025 9.64 percent that's on the 457 um interestingly on 42 page 42 again same error really i appreciate you calling that out in front of everybody that's really good no um the rr from 2011 to 2024 10.7 percent and and 11. three percent to 2025 i mean that's a very meaningful number just because that's pertaining to that 401a and i know what those initial calculations were based on you know hey can we get eight percent and again this isn't this is plan level so it's not specific but i know behind that this means that participants are really getting good returns for a long period of time now through a full market cycle plus and and that's going to drive a really great outcome for them so i'm paying close attention to that number and i'm happy to be able to report that um again i'll i'll provide the uh accurate time frame on a follow-up slide um okay let me um let me skip to i want you to see this page 70 inside of tab 5 page 77 um and then you can tell me how you want to use any remainder of our time but um i wanted just for you to see that hey majority of the fund line up from our view you know we do the work hey we look at raw performance but we're looking at each fund in a granular manner what's the body work of a fund risk measures portfolio change manager changes etc majority of funds doing what they're supposed to do i am calling out uh four funds because of i would call it sustained underperformance and in each of those four cases i'm recommending funds that at least historically have better net returns and from a cost perspective they're

  89. them so i'm paying close attention to that number and i'm happy to be able to report that um again i'll i'll provide the uh accurate time frame on a follow-up slide um okay let me um let me skip to i want you to see this page 70 inside of tab 5 page 77 um and then you can tell me how you want to use any remainder of our time but um i wanted just for you to see that hey majority of the fund line up from our view you know we do the work hey we look at raw performance but we're looking at each fund in a granular manner what's the body work of a fund risk measures portfolio change manager changes etc majority of funds doing what they're supposed to do i am calling out uh four funds because of i would call it sustained underperformance and in each of those four cases i'm recommending funds that at least historically have better net returns and from a cost perspective they're they're lower costs um so hopefully a win-win there and um and then of course the s p 500 fund change based on a move to lower cost just for the expense ratio alone so that's my summary i'm happy to dive into anything um any other questions you may have about the fun lineup again sorry for that error that doesn't make me look good so you can strike that from the record everything else is good though yeah let's skip forward yeah i was looking at that thinking what am i not following this is testing uh all right so if the committee has any feedback on the uh recommendation to replace these funds uh be glad to hear it otherwise um i'm inclined to go forward with the recommendation i agree i agree agreed well yeah i uh i really appreciate working with uh everyone here it's an honor and um again michael and jason you guys had a heavy workload this year um did a lot behind the scenes i hope that's acknowledged and um just from my my viewpoint talking to empower they work with other municipalities and they're always saying how the level of the level of engagement is here is different from other places that they you

  90. funds that at least historically have better net returns and from a cost perspective they're they're lower costs um so hopefully a win-win there and um and then of course the s p 500 fund change based on a move to lower cost just for the expense ratio alone so that's my summary i'm happy to dive into anything um any other questions you may have about the fun lineup again sorry for that error that doesn't make me look good so you can strike that from the record everything else is good though yeah let's skip forward yeah i was looking at that thinking what am i not following this is testing uh all right so if the committee has any feedback on the uh recommendation to replace these funds uh be glad to hear it otherwise um i'm inclined to go forward with the recommendation i agree i agree agreed well yeah i uh i really appreciate working with uh everyone here it's an honor and um again michael and jason you guys had a heavy workload this year um did a lot behind the scenes i hope that's acknowledged and um just from my my viewpoint talking to empower they work with other municipalities and they're always saying how the level of the level of engagement is here is different from other places that they you are involved with and that's that's that's a tell so that's that's pretty cool to be able to say say that yeah okay any other questions for rob thanks rob thank you very much all right all right thanks rob thanks for sticking around yeah on the first part okay uh so returning to our agenda um at this point it'd be number eight annual policy review um in your packet were our four investment policies uh the first is the general investment policy this pertains to the uh investing of township operating funds i am recommending no changes to that so basically uh by us reviewing it today we can market we can complete our obligation of having reviewed that annually but i'm not recommending any changes so unless anybody does have any changes then i'd recommend that we just move forward with that um on the pension plan uh trust investment policy as brian talked about um the only recommendation that we're that i'm going to bring to the board on monday is that we uh change the allocations um to trim uh just a little bit from the equities

  91. are involved with and that's that's that's a tell so that's that's pretty cool to be able to say say that yeah okay any other questions for rob thanks rob thank you very much all right all right thanks rob thanks for sticking around yeah on the first part okay uh so returning to our agenda um at this point it'd be number eight annual policy review um in your packet were our four investment policies uh the first is the general investment policy this pertains to the uh investing of township operating funds i am recommending no changes to that so basically uh by us reviewing it today we can market we can complete our obligation of having reviewed that annually but i'm not recommending any changes so unless anybody does have any changes then i'd recommend that we just move forward with that um on the pension plan uh trust investment policy as brian talked about um the only recommendation that we're that i'm going to bring to the board on monday is that we uh change the allocations um to trim uh just a little bit from the equities um and bring down the uh target on real estate more in line with where it's at and adding a allocation for fixed income of eight percent so that we have that cash there um in a in a secure way to be able to meet our obligations uh for having to start to pay those uh pension benefits um so that that was in your packet today it'll also be in the packet for monday and then on the retiree uh health care benefits trust um as brian uh mentioned the recommendation is to adjust the targets uh from real estate from 10 to 7.5 um from fixed income 10 to 7.5 and then alternatives from 10 to 15. so we stayed 100 there so again uh giving more opportunity for aggressive growth with the alternatives um and that is the only other recommended change to the investment policy for that so are there any questions or we can i'll also be happy to take questions on monday after you have a chance to read it again okay uh then moving forward to the uh participant directed plans investment policy that's the dc plans uh i'm not recommending any

  92. is that we uh change the allocations um to trim uh just a little bit from the equities um and bring down the uh target on real estate more in line with where it's at and adding a allocation for fixed income of eight percent so that we have that cash there um in a in a secure way to be able to meet our obligations uh for having to start to pay those uh pension benefits um so that that was in your packet today it'll also be in the packet for monday and then on the retiree uh health care benefits trust um as brian uh mentioned the recommendation is to adjust the targets uh from real estate from 10 to 7.5 um from fixed income 10 to 7.5 and then alternatives from 10 to 15. so we stayed 100 there so again uh giving more opportunity for aggressive growth with the alternatives um and that is the only other recommended change to the investment policy for that so are there any questions or we can i'll also be happy to take questions on monday after you have a chance to read it again okay uh then moving forward to the uh participant directed plans investment policy that's the dc plans uh i'm not recommending any changes uh to that it's been pretty pretty stable um on that point so again we have an annual obligation to review it so i will consider it reviewed unless anybody has any questions on that okay so that completes the policy review moving on to new business we already talked about the buyouts and the liquidity strategy for the pension plan uh so that was moved up earlier uh you Last item of new business is I'm recommending that we add two new resident members to the FSC. Currently, the FSC consists of Supervisor McCready, myself, Trustee Barnett, Finance Director Jason Tice, and then three residents, Raina, the last remaining here of the three. Thank you, Raina. And David Olson and David Petoskey. So I'm recommending that we add two to get some additional points of view moving forward. So does anybody have any thoughts on that? Any questions? I think it makes sense, especially as we're combining with the Retired Healthcare Trust into this committee, as well as just getting more engagement. Again, just like David Petoskey brought up today in terms of looking at real estate investment

  93. uh participant directed plans investment policy that's the dc plans uh i'm not recommending any changes uh to that it's been pretty pretty stable um on that point so again we have an annual obligation to review it so i will consider it reviewed unless anybody has any questions on that okay so that completes the policy review moving on to new business we already talked about the buyouts and the liquidity strategy for the pension plan uh so that was moved up earlier uh you Last item of new business is I'm recommending that we add two new resident members to the FSC. Currently, the FSC consists of Supervisor McCready, myself, Trustee Barnett, Finance Director Jason Tice, and then three residents, Raina, the last remaining here of the three. Thank you, Raina. And David Olson and David Petoskey. So I'm recommending that we add two to get some additional points of view moving forward. So does anybody have any thoughts on that? Any questions? I think it makes sense, especially as we're combining with the Retired Healthcare Trust into this committee, as well as just getting more engagement. Again, just like David Petoskey brought up today in terms of looking at real estate investment and thinking about it as an opportunity, as well as what Ms. Emmons talked about on how some of the structure regarding the ADCs and those things, they bring a lot of information and resources to us. So being able to get that engagement in our pocket. Great. Agreed. Okay. Good idea to get more viewpoints. Okay. Great. So we'll move forward with that. At that point, the other thing that Chris just mentioned is that we will be combining the Retired Employee Healthcare Benefits Trust meeting that used to be at 730 before the FSC. We're going to combine it with the FSC. Chris is going to step off that committee. Thank you. so uh we can we will only have three board members present for the meeting um and um that will be going forward so the next meeting of the fsc and the rehbt uh thursday may 7th 2026 at 8 a.m at this point i'd look for a motion to adjourn so moved support support all those in favor aye any opposed all right we're adjourned