The most pressing topic of the meeting was the proposal to introduce a lump-sum payment option for retirees. This proposal would enable retirees to take a portion of their benefits as a one-time cash payment, with options ranging from 5% to 20%, while the remainder would continue as regular monthly payments. The board debated the implications of this change, with assurances that the plan’s overall actuarial integrity would remain unaffected. A motion was made to draft an ordinance to formalize this option, with careful consideration given to ensuring sufficient liquidity for the plan.

Simultaneously, the board examined the potential shift to a fixed multiplier for calculating retiree benefits. Currently, the multiplier fluctuates, leading to varying monthly payments for retirees. By moving to a fixed rate, the board aims to provide stability and predictability for retirees. The proposed fixed multiplier of 3.13% could stabilize costs over the long term, although it might necessitate negotiations with the police union, given that benefit changes typically require collective bargaining.

The pension fund’s strong performance over the past year was a focal point. With an investment return of 22.65%, the fund outperformed its expected return of 7.5%. This resulted in an actual gain of $2.572 million above expectations, which will benefit the fund over a five-year smoothing period. Despite this success, the board reported an actuarial loss of $106,000 due to the prior year’s poor performance. Furthermore, the fund ranked in the top 18% nationally among governmental pension systems, reflecting its competitive edge.

The meeting delved into financial market trends, including a discussion on the “magnificent seven” high-performing technology stocks and their impact on the S&P 500. Although these stocks had been outperforming the broader market, the trend reportedly ended in January. The board reviewed how market fluctuations and economic factors such as inflation and interest rates could influence the pension fund’s future returns. The Federal Reserve’s past and current policies were highlighted, with specific attention to how they have impacted inflation rates, which peaked at 9.9% in 2022 before dropping to 2.9% by the end of 2024.

Economic conditions, particularly in the real estate sector, were addressed. The meeting noted a recent uptick in private real estate prices following two years of decline, attributed to economic recovery trends. However, concerns were raised about infrastructure capacity, specifically in energy generation and distribution, pointing to potential challenges in meeting future electric demand.

The board also considered the pension plan’s funding status. An increase in funding requirements was noted, with city and state contributions rising from 24.9% to 26.7% of payroll. This was partly due to an improved multiplier for police officers and an influx of new employees spreading fixed costs over a larger payroll base. Despite a favorable year, the board applied smoothing techniques for valuation, resulting in an actuarial return slightly below the assumed rate.

A point of discussion was the failure to implement a reduction in retiree benefits expected to take effect on October 1, 2023. This oversight resulted in retirees receiving unchanged benefits longer than anticipated. A proposal was put forth to disregard the missed reduction and apply the new rate starting June 1, 2025.

The meeting concluded with a general review of investment strategies, including the balance between active management and index-based investments. The board acknowledged the difficulty of outperforming the S&P 500 index and noted the improvements in the bond portfolio’s value despite past downturns. The transition to a new small-cap index was also mentioned, emphasizing the need for ongoing evaluations of investment quality.