Firemen’s Pension Fund Board of Trustees

May 18, 2022 Peoria, Illinois PROCEEDINGS OF A SPECIAL MEETING OF THE BOARD OF TRUSTEES OF THE FIREMEN'S PENSION FUND OF PEORIA, ILLINOIS I A Special Meeting of the Board of Trustees of the Firemen 's Pension Fund of Peoria Illinois will be hel~ this date at City Hall, Room 40~. Peoria, Illinois at 9:30 A.M . with proper noti~e havi~g been given, for the purpose of conducting regular Firemen's Pension Fund business. ROLL CALL Roll Call showed the following Board members present: Higgins, Smith (electronically), Tarr, Tomblin , President Troglio - 5. Others present: City Treasurer Stephen Morris, Local 50 Union President Josh Martin, Chief Deputy City Clerk Trina Bonds, and other interested parties. INVOCATION A moment of silence was held in remembrance of those Firefighters who have served our community. MINUTES Recommendation to Approve the Minutes of the Regular Board Meeting held on March 28, 2022, and the Minutes of the Special Meeting held on April 7, 2022, as printed. Trustee Tomblin moved to approve the minutes of the Regular Board Meeting held on March 28, 2022 and the Special Meeting Minutes from April 7, 2022; seconded by Trustee Smith. Approved by viva voce vote. REGULAR BUSINESS ITEM NO. 1 DISCUSSION Regarding Alternative FIRE PENSION FUNDING with FOSTER AND FOSTER with request to RECEIVE and FILE or to Take Appropriate Action. Jason Franken of Foster and Foster provided a presentation regarding Alternative Fire Pension Funding. He noted he would be using a tool throughout the presentation showing a projection of the Fire Pension Fund based on the January 1, 2020 Actuarial Valuation . He said estimated contributions were based on the City of Peoria's approach of fund ing the statutory minimum amount that was looking to achieve a 90% funded ratio by the year 2040. He reported the current contribution was about $12 million and he noted the amount would increase to about $28 million by year 2040. He remarked on the estimated funded ratio, and he said the Plan was about 49% funded . He commented , based on the contribution schedule, the funded ratio would get to 90% by the end of 2040 or at the beginning of 2041 . He stated between now and 2060, the City had to make almost $500 million of contributions to the Fire Pension Fund. He said a problem had been created based upon the current situation of not amortizing the entire PROCEEDINGS - FIREMEN'S PENSION MEETING MAY 18, 2022 PAGE2 unfunded liability. He noted the unfunded liability would grow over time because the contributions were not large enough to cover the new benefits that were being accrued plus the interest on the unfunded liability of the plan. He reported in 2021 , they had almost $160 million of unfunded liability. He said the good news was they had several years of strong investment returns. He went on to say there was a lot of unrecognized investment gains that would help the plan in the next few years. Mr. Franken shared different estimated funding ratio scenarios of investment returns related to estimated City contributions . He said as a result of the consolidation and higher investment returns, they could expect there would be slightly higher returns that could help the City over time. In response to a question from Trustee Higgins, Mr. Franken clarified the intent of the consolidation was to provide additional investment opportunities. He said there were private equities now available that was not available in the past. Mr. Franken explained the biggest issue with the 90% approach was that it led to a significant increase in the City's contribution over time. He said a better approach would be to fund the entire unfunded liability. He said pensions were "pay now or pay later", but when you were paying more now, you would save a whole lot in contributions over time. He reported the Pension Code was using a level percentage of payroll approach, which led to what was called the pension ramp. He explained because of the level percentage of payroll contributions were designed to increase over time. He reported the assumption was currently 3.5%. He said if it was lowered to 2.5%, it would increase the current contribution , but he said it would lower the contribution down the road. He said the biggest issue with the Illinois Pension Code was that the contributions were way too low. He commented the only proposed solution out of Springfield was to defer the deadline for 10 years to 2050. He explained in that case they would be reducing their current contribution but making the pain much worse. During more comments, Mr. Franken suggested designing a funding policy to reflect a 15-year open amortization. He said IMRF was also phasing down to a 15-year period . He remarked that this alternative approach would cause the unfunded liability to be paid down . In discussion with President Troglio, Mr. Franken confirmed an open approach would create a model that would be more realistic and effective. In response to a question from City Treasurer Morris about if the 90% goal and the City's contribution remained the same, Mr. Franken confirmed that in 2040 the contribution number would be $28 million. President Troglio spoke in favor of an open amortization . He commented they had been educated and now had the ability to solve this problem. In summation, Mr. Franken gave a recap of his suggestions for the Board. He said his recommendation was to move towards an ongoing funding approach where they would not have target dates. He suggested a funding plan to match the payments that were going to be made to the Members. He said the effective way to do that would be to use a 15-year open amortization. PROCEEDINGS - FIREMEN'S PENSION MEETING MAY 18, 2022 PAGE3 Trustee Tomblin moved to receive and file the presentation by Foster & Foster regarding Alternative Fire Pension Funding ; seconded by President Troglio. Approved by viva voce vote. UNFINISHED BUSINESS There was no unfinished business presented for discussion . NEW BUSINESS It was determined there was no new business to come before the Board. EXECUTIVE SESSION It was determined that an Executive Session was not needed at this time CITIZENS' OPPORTUNITY TO ADDRESS THE BOARD OF TRUSTEES It was determined that there were no citizens to address the Board of Trustees . ADJOURNMENT Trustee Tomblin moved to adjourn the Special Firemen's Pension Board Meeting; seconded by President Troglio. Approved by roll call vote. Yeas: Higgins, Smith, Tarr, Tomblin , President Troglio - 5; Nays: None. The Special Firemen's Pension Board meeting adjourned at 9:58 A.M. Stefanie T , RMC , CMC, City Clerk Trustee and Board Secretary, Firemen's Pension Fund of Peoria, Illinois /tb