Comment period. There will be a opportunity for general Public Comment at this meeting after we do not have closed session today and there will be a opportunity to comment on each discussion or action item on the agenda. Each comment is limited to two minutes. Public comment will be taken in person and remotely by callin. For each item the board will take Public Comment first for those in person, and then from people attending the meeting remotely. Comments are the opportunity to speak during Public Comment period are available by phone by calling 4156550001 access code 26608513617 then pound and pound again. When connected you will hear the meeting discussion but you will be muted and in listening mode only. When your item of interest comes up, press star 3. The best practice is call from a quite location, speak clearly and slowly and turn down your tv or radio. We thank you for joining us. Thank you. Madam secretary, call the next item. Item 3, general Public Comment. Reminder Public Comment is limited to two minutes. Do we have inperson Public Comment . Seeing none, reminder to any callers to press star 3 to be added to the speaker line. Moderator, do we have any callers on the line . Youre muted. Moderator, do we have any callers on the line . You are muted. Moderator, you are muted. President heldfond, while we are waiting would you like to mention the continuance . There will be a change to the agenda in item number 8. Moved forward in anotherin the next meeting. Thank you. Number 8. Thank you. Moderator, do we have any callers on the line . I see one raised hand. Caller, please state your name. Your two minute begin when you speak. My name is kevin [indiscernible] i was a Police Officer for 20 years and unfortunately i was disabled at work and couldnt return and i submitted an application 30 months ago for [indiscernible] have yet to have my hearing heard and i know you guys were concerned how your Job Performance was doing last month. You are the worst in the state. You are 4 to 5 times worse then the norm and twice as longat least twice as long as the numberas the second worst board or system in the state. I just want to let you know that. We retirees are waiting all most three years. Probably will be three years before i get my hearing heard. [indiscernible] i dont have juice so sitting in the queue like all the regular normal people and waiting forever to get my disability hearing and it is not fair. It is something that should not be done. Only did 4 this month. Do 7, 4, 6, you will never get to me. It will be over three years before my case is heard and thats not fair to me or any other people that are waiting on this list. However many people on there, no one will tell me. They wont tell me what number i am on the list and how many are the list the and think that should be made public for everyone to know. Thank you. Thank you for your call. Do we have other callers on the line . Madam secretary, no other callers on the line. Thank you. Public comment is now closed. Madam secretary, want to call item 4, please . Item 4 action item. Approval of the minutes of september 13, 2023 retirement board meeting. Move to approve the minutes. Second. Moved and seconded. You want to have Public Comment . Thank you. We have no inperson Public Comment on this item. Moderator, do we have callers on the line . Madam secretary, there are no callers on the line. Thank you. Hearing no calls, Public Comment is closed. Moved by commissioner thomas and seconded by commissioner driscoll. All in favor say aye. Aye. Opposed . Motion passes. Item 5, action item. Consent calendar. Anybody have any comments or want to get any item under the micro scope . [indiscernible] youre muted. Second. That was a motion, right . Yes. Okay, didnt hear it. Alright. Do we have any Public Comment . We have no inperson Public Comment. Any callers on the line . There are no callers on the line. Thank you, hearing no calls, Public Comment is closed. Been moved and seconded. All in favor say aye. Aye. Opposed . Motion passes. Next item, please. Item 6, discussion item. Response to grs report independent actuarially review. Good morning commissioners. Darlene will be bringing up the presentation and bill and ann are here. They are going to respond to the audit presented to the board in august and grs concluded july 1, 2022 is reasonable assessing Financial Condition of sfers and determining employer contribution rate. But of course grs had suggestions and ciron is here to respond and answer board questions. Thank you. Can we just go to the next slide . So, really the reason you do an audit is make sure you can rely on our results, and consider any recommendations from another independent perspective that we may not have brought to you. We were pleased that the audit confirmed our valuation was reasonable and can be relied on. They did make recommendations for us to consider when we do it next experience study, which is done after the 2024 valuation in 2025. We appreciate those recommendations and we will certainly address them when we conduct that experience study. The rest of this presentation has more detailed thoughts on their recommendations and how we would respond to it. I am happy to go through that, but thought maybe the best approach here wouldsince that would not happen until 2025, just ask the board if they have any questions on it details we provided. Good idea. Board members, anybody have any questions, comments . If notgo ahead. Alright. [indiscernible] you are on mute commissioner driscoll. The bullet point in front of us is based on their report . Part is directing to look at something. The bullet point where it says 7. 2 percent investment rate assumption is in g are grs opinion of the upper range. That is fine, it is observation. Did you address it in yours . I didnt notice it on the pages. That was a observation. Observation. The actual recommendation is we review and monitor it. The fact it was in a audit[indiscernible] ill stop then talking about and explain why we do what we do. To put to imply we should do Something Different is what bothers me. Ill stop. Thank you. The board does monitor the economic assumptions including discount rate annually and that will be the next item. We monitor and improve what we do. Thank you. Alright. I dont think we have anything else on this item. Any further questions, comments . I move to accept cirons response as submitted. The item on the agenda. Is this discussion item . So, this is discussion item only. We will have Public Comment. We have inperson Public Comment on this item. Reminder any callers to press star 3 to be added to the queue. Moderators, do we have callers on the line . There are no callers on the line. Public comment is closed. Call the next item, please. Item 7 is action item. Economic assumptions review for the july 1, 2023 actuarially funding valuation. Commissioners, this is the economic assumptions review that is performed annually by the board. Every board the deliberates and decides on the economic assumptions. If we can bring the presentation up for that. Thank you. Go ahead and move to the next slide. So, we are going to review the economic assumptions and i think this is a action item we like you to confirm the assumptions. Lets move to the next slide. Before we get into the assumptions, we just wanted to give you a preliminary update on where the plan is, the preliminary investment returns this year were about 4. 6 . That follows in 2022. We had negative returns, but 2021 we had significantly positive returns. We for calculating contributions, we smooth the returns over a 5 year period, so we are still recognizing part of that 2021 return, and so contribution rates are still trending downward because that is the overriding piece being recognized. The others are still close, even though they are actuarially losses, they were smaller. Lets move to the next slide. This is just a prileminary update using just the preliminary asset information, and comparing to our prior projections, so the left side is showing the gray bars are the projection of the liability and the green and teal lines are the assets and funded ratio on top. On the right hand side, we have the member contribution rates, estimated after costsharing and the gold is the employer contribution rate. You can see we are expecting the member contribution rates to go down by 50 basis points. The 4. 6 return does not trigger a supplemental cola, and in our projections we assume there is a 50 chance of the supplemental cola, so that not paying for a cola offset investment loss so the actual contribution rate we are projecting for next year is a little lower then what it was before. But you can see as it goes down, it is very close to what we had projected before. Pretty miner adjustment in those projections. Lets go to the next slide. Now, i do want to say, we still have to get new census data and look at gains and losses from all that, so this is all very much preliminary, and get final asset information. Okay. Now well move into the economic assumptions and are we can go to the next slide. As we have been stating, we review these every year. The demographic assumptions like mortality, retirement rates and so forth, we review every five years so thats what will be coming up in 2025. The assumptions you adopt today are for this year valuation but effect contributions fiscal year end 2025. There is a delay between the valuation date and contribution rates. Go to the next slide. Can you move your microphone more towards you . I can move myself. Thank you. So, this slide just shows the history of the economic assumptions, and we have been at 7. 2 for couple years now on the discount rate. Our Wage Inflation has been 3 and a quarter for about three yearss a has the Price Inflation. But over the 20 years here shown here, all of those numbers have come down quite a bit. Next slide. So, quick summary of what well show you. We are not recommending any changes. We think we should just stick with the current economic assumptions Going Forward. Ill turn it to ann to walk us through a couple of slides. Next two slides actually. Im going to walk through a lot of data and information that we use to develop and support our recommendations. First, well talk about Price Inflation. It is the Building Block of all the other economic assumptions, Wage Inflation and expected return assumption. It does not however, have direct impact on your valuation. Mostly because your cola, your basic cola is 2 . It is capped at 2 , based on cti, but capped at 2 and so the current inflation assumption of 2. 5 means that we every year we assume your retirees will receive their 2 cola. There is really no impact on your valuation for the Price Inflation. Next slide, please. So, jen ially when we set economic assumptions and development them we look at history, Industry Trends and also do a peer comparison for context, but the primarily source what we look at is future expectations of these economic assumptions. So, inflation as everyone knows, has been high. As of august 31, inflation is 3. 5 . Which is coming down, much lower then the 6 or 7 in the previous year. When we look future expectations, one of the explicit ways to look at that is market indicator, called the break even inflation rate and that is difference between yield on the treasury and tips, which is the treasury inflation protected securities. When we look at those, we can see that over the next five years the expectations in the market is driving is 2. 24 and then over the next 20 years it is 2. 6 . Your inflation rate now, the assumption of 2. 5 is still reasonable, but then the one last item that well look at is thenext slide, pleaseIndustry Trends and peer comparisons. On the left hand side of the chart firth urther left you see the economist expectation. Different economists and invest banks and universities in the country and you can see the very wide expectation of what inflation will be and this is over a 10 year period. In the first five year forecast, very very similar to the following five year forecast, between 1. 5 and 3 , so very wide range. But when you look at the next survey, which is comp yulation of 40 different investment, wilshire included you see a narrow range of the expectation of inflation are, and that is over a 20 year period. That is some reason it is little more narrow. A longer period of time. But then when we look at different databases for public pension plan assumptions, we can see on the public plan database with another wide range of assumptions there, and that is because it is national and over 200 different systems and so you have a range between 3sorry, 2 and over 3 and a half percent. We look at survey we put together every year of the California Public sector Pension Plans and that is again a narrower range and all of these have one thing in common is expectation for inflation are around 2. 4, 2. 5 so we believe the current assumption is reasonable and recommend no change to that. Forward two more slides and talk about Wage Inflation. The Wage Inflation assumption can be seen as a overall expectation of wage growth for your individual members of sfers. On top of that is the merit and longevity piece, when they promote or reach different steps in their career and that piece, that merit piece is studied when we do economicexcuse me, when we do the demographic study done every 5 years so we are just talking about that base Wage Inflation for your members. The chart on the right hand side of the slide shows that the California Survey of the most recent assumptions and youre at 3. 25 for your Wage Inflation with. 75 real wage growth and there are 12 systems in california that are at that same assumption. Most are at 3 level, about you are in a higher cost of living area here in San Francisco then other parts of california, so that makes sense. You said the 3is that california or nation wide . This isnow talking about california only. Okay. Yep. So, by regions within the state of california then, is it broken down by north, south or a wide sloth . This is just all of california. We do have in the appendix you can see the different systems and if you want to look specifically it is slide 29 to look at the different assumptions. Some of the lower Wage Inflation assumptions are the Transit Systems. We do have a handful of Transit Systems. That is what i okay. I know Transit Systems have a impact and they are huge. Particularly ones in San Francisco you go to la and larger Transit System it makes a difference. Next slide, please. This graph here Shows National local governments in what actually happened historically over the last 5, 10 and 20 years in terms of actual inflation, wage growth and then real wage growth. At the top green bars are the real wage growth and those are over the last 5 and 20 years, those havehistory of that has been ranged between 50 basis points and a little over 1 and your current real wage growth assumption is 0. 7 , so the current is 3. 25 and we still believe this is reasonable and we do use the current bargained agreements in our valuation when they are available, so we would incorporate those into the results of our projections for the valuation. Moving to discount rate. Slide 16, please. So, there are two sources of funding and paying for pension benefits. There is contributions and investment returns. So, if you have greater actual investment returns over time, actual investment returns you will have lower relative contribution and vice versa. If your investment returns are lower, then youre going to have higher contributions. So, we need to set an assumption for our actual valuation to estimate what we believe the assumed rate of return Going Forward and what your portfolio will earn so we can have someto provide contribution stability for your pension plan. So, the discount rate is the most powerful single assumption that we use, and relatively speaking the higher expected return you will have higher or lower expected contributions, but the higher assumption does increase the likelihood that future contributions will be higher then expected and vice versa. The lower assumption relatively speaking, redouches reduces lower contribution will be higher then expected. Currently the discount rate is 7. 2 . We have a graphic here that shows different discount rate spreads. The spread between the discount rate and Price Inflation and this spread as i said earlier, because inflation has little direct impact, your plan doesnt mean as much as Wage Inflation discount rate spread and the smaller that spread is, or lower that number is, means that you have a more conservative assumption, and then that last bar is showing the spread between your discount rate and the 10 year treasury yield. In the presentation it says 3. 75 , but currently that yield has increased all the way up to 4. 66 and so the spread there is called what we call a risk premium and the lower the spread, the less risk your plan would need to take to achieve the expected return assumption. That is because you need to have a lower allocation and the higher yielding Asset Classes, so this spread has been coming down in the last couple years. It is really what vice versa had driven discount rates down over the last decade be