[Speaker 1] (2:16 - 4:57)
Hello everyone, on behalf of the Swampscott Contributory Retirement Board, my name is Tom Driscoll. I'm the chairperson, member of this retirement board for 30 years. Tonight we're having a retirement system information session.

The reason for this is many fold, but one of the main reasons is just to really to educate people in the community, town meeting members, employees. This meeting will be, this information session will be recorded and will be saved forever and will be available on the website, town website. As most of you may or may not know, the Swamp, the Contributory Retirement Budget line item is, is the contribution rather, line item is the second biggest in the town budget.

And oftentimes at town meeting, we don't really have any discussion about it. And I think a lot of town meeting members and people around the town just kind of wonder where that number comes from. And so we hope that tonight we'll have a chance to tell you how we operate, how, what we operate under in terms of our legal requirements and how we get to that number that's presented in town.

As far as the budget of the retirement system, the actual operating budget comes out of the fund, so that isn't a line item that's paid out of the budget. What? I haven't done it yet.

Oh, I know, okay. You're already giving me instructions. So this will be an informational system session.

And it's really going to be that, going through everything that we know about the retirement system that we can tell you so you can have a better understanding of how the process works. There'll be questions at the end of the presentation. For you at home who are watching, I would suggest the easiest way to do this is we'll be going through slides.

Each slide will be numbered. If you have a question, mark it down somewhere that you want to talk about. Slide number 12 on your question would be the easiest ways to do it.

Although we're not going to be making any decisions tonight or taking any votes, compliance with the open meeting law in Massachusetts, we posted this as a regular retirement board meeting for 7 o'clock this evening. So I, at this point, will call to order the meeting. All being present.

Roger, roger, roger. Roger, roger, roger. Being present, Bob Powell.

Johnny Bean. Johnny Bean. Amy Sorrow.

[Speaker 9] (4:57 - 4:57)
Sorrow, aye.

[Speaker 1] (5:01 - 14:17)
When we, during this time to ask a question, we ask you to simply e-mail Nancy Lord, our administrator, who is here with us today, at her government website, NancyNLord.SwarmscottMass.gov, our rate through the Teams application, which you're watching, and submit that through the chat. Tracy Spear, our assistant administrator, is here running the high-tech things for us. On tonight's agenda, we'll be having a contributory time overview, a PARAC overview, which is the Public Employment Time Administration Commission.

We'll have our actual overview, and that will be presented by Joanne Barrack, our actual PARAC, also with us will be Bill Keefe, the Executive Director of PARAC. Our investors will consult with me on my investment consultancy, and we'll be here to talk about our investment strategy and how to go about that. And finally, we'll have our Chief Consultant, Mike Rosado, who will join us and give the brief presentation.

Swarmscott Contributory Retirement System is made up, we're under General Laws Chapter 32. Anybody that's gone to law school or looked at it, there's only one law in Massachusetts that takes an entire volume, if you go into a law library, and that's Chapter 32. So under the General Laws Chapter 32, the Swarmscott Town, Swarmscott has a retirement system based on the fast passing of the law due to the size of the town at the time.

The town accountant is a board member ex-officio, which is Amy, which we're very lucky to have. The second member of the board is appointed by the Select Board, and that's me for 30 years. And the third and fourth members are elected by members of the system, either active or retired members of the system.

Kevin Breed, the Fire Chief, Johnny B., the Police Lieutenant, and they serve, they are elected by the attorneys and the attorneys have, and they serve three terms. The fifth board member, Bob Powell, is chosen by the other four boards, and he cannot be retired or an official, so it's basically a volunteer from the community who comes in and brings a great deal of investment, which is really why he's the person we're looking at. Second term?

What most people know about, and often across the state, weren't independent of Powell, despite being appointed by myself. We're employees of a completely separate town government. We interact with the town government.

The budget obligation of the town is how we're budgeting. But in terms of our actions, we hold fiduciary duty to fund employees to retirees, to manage the effects of the weather for the employees and the retirees, although we do interact with the town government to answer questions about what the funds on these are. So that law was established in 1937, and there's 104 public employees at the time, and sometimes in Massachusetts.

We operate under an administrative, and we operate under an administrative ministry that provisions any contributory to a fine, public government, and that is established by General Oshkoff in 1937. Now, going to our own part of fiduciary duty, we act solely on the belief, on behalf of the roughly earned secured benefits of the members, beneficiaries, and future beneficiaries of the Sloan's Belt Contributory Economic System, using the highest degree of skill, intelligence, and integrity to improve and strengthen our marching orders. Currently in Sloan's Belt, we have 235 retirees, 240 active members, and there's also 214 inactive members, which means they have funds of their own system, but not currently contributing to their employment in Sloan's Belt.

When we run a typical meeting, people probably want to know when we meet, where we meet. For the better part of 30 years, John, we meet at 8 a.m. in the town hall on the third Tuesday of the month. We're there every day.

It's open to the public, obviously. We usually meet in the conference room on the first floor when you come off the town hall, and typically what we do is we review minutes in the previous meeting like any other board. We also have to accept, we have to vote on new members.

When they become employed by the town, they have to be accepted into our system by our board. When people want to retire, we have to accept their application for retirement to make sure all the paperwork is in order, that all the numbers match up, and they are cleared for retirement, so we vote on that. We take transfers out of the system.

When someone goes to, say, works here for five years and goes to work for the city of Linn, we then transfer funds out as requested. They'll go transfer it to the Linn system. Conversely, transfer it in or people come to work here from other systems.

Clearly, the monthly receipts and expenditures include the monthly retirement payroll, so the entire payroll from all the retirees. I'll keep looking up. We've got several retirees here tonight with us.

Then we do our monthly cash books and bank reconciliations, and then determine when there's a report in terms of deaths on the report, and we'll instruct our administrator to act as required to process the wintertime and some of the benefits. Am I continuing on the meeting? Do you want me to continue?

So in a typical meeting, to continue, each year we give a cost of living. We are eligible to give a cost of living benefit. That's correct.

I know. So that's actually tomorrow. And the cost of living for our SWAM Scott is, if we voted, typically it's up to 3%, and that's of the first $14,000 of a retiree's pension.

It's allowed to go up to $18,000. The range is $18,000. And we've voted a town meeting twice now to raise it from $12,000, $13,000, $14,000.

That is not a town meeting twice. Town meetings are usually raised, but increased by $1,000. We do receive quarterly performance reviews and investments on reviews and investments by an investment consultant, which is Wayne Wright, investment consultants.

And basically they sit with us to strategize, to discuss our investment companies that we're dealing with, to establish what they see and advise us the best path forward to make the best investment return that we can. We often, every meeting, will have retirees and employees and surviving spouses or surviving interests in the retirement come to us with various issues and questions. We receive administrative updates on just about everything.

Annual affidavits that we have to send out. People have to report to us whether they're alive, which sounds pretty interesting, but we have to know that people haven't expired out there, and so we have to keep a constant, vigilant account of that. And we review, time-consuming, but all of these vendors that we deal with on any aspect of the retirement system, we have to do full RFP searches for them, we have to monitor their performance, and then interview.

So there's a lot of things that go to the investment side, which you have a consultant, but we personally sit there overseeing a fund of $84 million. So there's a little bit of personal pride, personal pressure, but we do feel obligated, and it can be a little bit stressful. And, of course, one other thing we do is we bring to the town meeting warrant documents as needed.

Much of General Law is Chapter 32. When changes are made in it by the legislature, it usually passes through to the town, and we have to bring those measures to the town meeting for a vote as the legislative body. I'll get back into it, but I think that's a fairly good recap.

Who's up next?

[Speaker 7] (14:18 - 19:46)
I guess it goes to me. So the numbers that I'm going to be going, so in front of you right now we have a slide. These numbers are up to 2022.

So you'll notice a little bit of variance from the numbers that we read off earlier as far as total participants, but these are provided by our actuarial consultant, Siegel Associates, who we contracted to do our actuarial. And this slide in front of you here shows the change in active participants from 2020 to 2022, and as of 2022, we have 243 active participants. So active participants are police, fire, public works, town hall employees, library employees, housing authority employees, and everyone in the school department that isn't a teacher.

So custodians, administrative assistants, and so on and so forth. So that's how you arrive at the total active participants. The average age of our active participants is 45.4, according to our actuarial studies, and the average years of service is 10.5. Their average projected compensation all in would be $60,816 on average. On the retired participant side, again, this is as of 2022, we have 209 retired participants, 31 beneficiaries who are survivors of a retiree who opted to take option C to cover their survivors afterwards after their death. And the average age of our retirees currently is 75.2. Fortunately, I beat that average. And the average monthly amount of their pension is $2,602.

How the system is—and all I wanted to—if I can back up on—what's interesting is when you look at this, you can go back one slide, the bar graph at the bottom shows the distribution of where these averages are, which is kind of interesting to look at. I mean, we have like 17 retirees or retired board survivors that are 90 or over. So that's kind of an interesting number.

So the next slide, slide 12, is how the system is funded. In the wisdom of the legislature over the years, with people living longer and in keeping the system up to date and properly funded, the legislature over the years has put more and more emphasis on the employees paying into the system. So if you were fortunate enough to be in the system prior to 1945, it was a non-contributory system.

So the employees didn't pay anything into the system. There are no more of those employees left. From 1945 to 74, employees contributed 5%.

After 75 to 78, they contributed 7%. And then starting in 1979 and going up through July of 1996, the legislature voted to increase the contribution from the employees from 7 to 8 to 9 and also added a 2% premium above $30,000 salary. So depending on when an employee is hired depends on how much their individual contribution into the system is.

So employees hired after July of 1996. So all of our current employees are paying 11%, essentially, for the most part, of their salary into the system. The employer contributions through the annual appropriations based on the actuarial projections, which you'll hear in a few minutes.

So this is from the town budget. It is paid into the system and funded liability, which will be touched as well.

[Speaker 6] (19:48 - 20:44)
I think the pension system's goal is to have enough assets to pay all future liabilities, all future pensions. With increased longevity of that. So we've, over the past, determined what amount of money the town needs to fund in terms of the unfunded liability.

And it also determines what our funded date will be. At the moment, the commitment of the town is to maintain its share of the pension obligation instead of allocating tax dollars to perhaps other services. But even after the fund is fully funded in 2031, there will still be a cost to the town for its employer or normal contribution, as Kevin said.

And by the way, that number will be about $1.2 million. So right now, our current funding schedule.

[Speaker 12] (20:46 - 20:50)
Sorry, we're having difficulty.

[Speaker 6] (20:50 - 23:53)
Is everything messed up? So our current funding schedule is the employer normal cost, which will be the town's obligation, ranges from $1 million to $1.3 million in 2032. The amortization of the unfunded liability, that is the amount that's needed in order to reach 100% of funding.

Fundedness ranges from $5 million to $7 million. And then in the final year, 2031, it will be $2.8 million. And when you add up all these numbers, you'll see that each and every year, the unfunded liability declines over time.

So presently, our unfunded liability is $36 million. But over time, it will go down to zero in the year 2032. The percent increase in terms of the amount that the town has to fund, it's unfunded liability and the employer normal cost.

It increases 5% per year, which works out to, if these numbers work out to roughly about 8% of the town's budget. And we're required by law, I believe we have to increase it at least a minimum of 3% per year. So in order to hit the 2031 schedule to be fully funded, we need to increase the amount by 5% per year.

Then in terms of our income and expenses, what you'll see here is a two year comparison. In 2021, we had a market value of $74 million. And in 2022, a market value of 87 million.

If you look at the rows below that, contributions and other income. Employer contributions of 5.9 million in 2022. The employees contributed 1.4, and that became a total of contributions of $7.4 million. The fund then has investment income, less investment fees that we pay for the management of the fund. And then our net investment income would be 8.5, negative 8.5. So the total income available for benefits was negative $1.1 million. And then we also then subtract benefit payments, administrative expenses, and pensions.

And then what we get is a net asset value of $78 million at the end of 2022. I should note that when the actuary takes a look at our assets, they look at market value. But what they actually do is look at what's called a sort of a smooth number.

So the number that you see here is different from what the actuaries actually report in our numbers. So they'll look at our actual value as being currently in 2023 would be $83 million. And they do that to smooth for market returns for the ups and downs of the market.

And presently our market value is $84 million.

[Speaker 1] (23:56 - 24:13)
Bob, I just want people to, this screen could cause panic. But the show, we're all familiar with the stock market. And that's indicative of it going from 87 to 78.

But now to see where we've come back to 84.

[Speaker 6] (24:14 - 25:15)
Yeah, and I think it's important, you know, these are just two-year numbers. For us, it's important to look at the one, three, five, and ten-year numbers. And in that respect, our long-term performance of the fund is better than average compared to other systems.

And the other thing I'll mention is when I think about the fiduciary responsibility of this retirement board, ultimately it's to make sure that there's money there to fulfill the obligations, to make sure that the pensions are paid. And that is sort of job one. And we take that job seriously.

And so when markets decline, some things are out of our control, right? You all experienced this perhaps with your own investment accounts a couple years ago during COVID. You watched things decline.

The same thing happens to a public pension plan or a private pension plan. We are well diversified. And so we probably don't fall as much as the S&P 500.

But then again, we may not always rise as much as the S&P 500 because we're so well diversified. If that takes me.

[Speaker 13] (25:28 - 25:30)
I don't think it will.

[Speaker 10] (25:30 - 25:32)
The deck will be available.

[Speaker 6] (25:32 - 25:32)
Yeah.

[Speaker 9] (25:44 - 25:59)
Anyone that is interested, this slide deck is available on the retirement site. And we can also put it on the town website if that would be helpful. And for my family members, I will circulate it to you.

[Speaker 14] (26:05 - 26:10)
Ready, Bob?

[Speaker 6] (26:14 - 26:15)
Bear with us.

[Speaker 7] (26:15 - 26:43)
Bear with us a moment. We're doing some tech work. Again, the purpose here is to provide information.

And as we just said, all of these slides will be up on the town website and on the retirement board website so that you can go back through them.

[Speaker 2] (26:53 - 27:03)
I'm sure that we can do that. While we're waiting for that to come up, I'd like to just keep the conversation going a little bit. Tom, if you remember.

Okay, I'm off.

[Speaker 14] (27:04 - 27:04)
You're off.

[Speaker 2] (27:06 - 27:07)
That was planned.

[Speaker 6] (27:09 - 28:19)
So I'm just going to make one comment about this slide, which is one of the things that we have to do as a board is to set what's called the discount rate or the investment return expectations. And we do that in order to sort of manage what the fund needs to achieve in order to fulfill our obligations. And we generally look at not just other systems in Massachusetts, but we look at what's going on in other public pensions around the country, including CalPERS, the largest public pension plan in the country.

And in our last cycle, we lowered our expected investment return from 7.18% to 7%. I mention that because one of the things that happens when you lower the discount rate is that you also actually increase the amount of money that needs to be committed to pay off the fund earlier. But if, on the other hand, the fund exceeds the 7% in the next cycle of our actuary assumptions, we could lower the amount that the town might have to owe.

So it's a bit of a moving target. But at 7%, we feel like we're in line with other public pension plan systems in terms of our expected annual return.

[Speaker 1] (28:23 - 28:25)
We're going to hold all questions until the end of the meeting.

[Speaker 9] (28:35 - 31:34)
So as Kevin and Bob mentioned, how it fits in the town budget is the normal cost, the unfunded liability, the trend for the funding schedule, and the cost and fees. I do also want to say that the 5% number that you see on that funding schedule is actually split through four different funding mechanisms. So the housing authority pays for their portion.

The water and sewer enterprise funds pay for their portion. And then the general fund pays for their portion. So just in case you look at that funding schedule and it does not tie to the town budget, that is why.

Next slide. So we have two different benchmarks for eligibility for retirement. It's members who became members prior to April 2, 2012.

That is broken out into four different groups. And you would have had to have been a credible member for 10 years and 55 years of age. And you would receive 3% of your average highest three consecutive earning years.

Next slide. After the sunset in April of 2012, it is now 10 years of credible service for 60 years of age. And you would receive the average of your five highest consecutive earning years.

Different criteria for police and fire, they don't have minimum years. Next slide. This just shows the calculation formula for those prior to the 2012 sunset.

So it's your benefit rate based off which group you're in and the age at which you retire. For those of you who have already looked at it, it's just a giant grid. You want to look at X and Y axis and trace your box that way.

And that calculation is based off your highest three average earning years times the years of credible service. Is your annual allowance divided by 12 to get your monthly allotment. Next slide.

Shows you the same thing just with a five-year average. So we can go to the next slide. This just shows an example of someone prior to 2012 who was group one, age 55 when they retired, with a compensation of $42,000 for their average.

Just shows how the calculation works out. I'm not actually going to read this whole slide, but it's more to give you an overview that if this person had retired, they would be getting a monthly benefit of $813.75. Next slide. It's going to show someone who was after the sunset.

Similar calculation, just more years of service and a higher retirement age. Their monthly benefit would be $973.92 in this example. And then I will turn it over to John.

[Speaker 2] (31:35 - 37:28)
Okay. I'm last. And I do that for a reason, because I don't want me talking too, too long.

So we'll leave it at that. I have the book right here. It's chapter 32.

I've been reading this book for almost 40 years. I don't know all the answers and everything else. It's hard to put this into a slide show for you, but we try to lay a foundation.

What we wanted to tell you is what we can do and can't do. We have one of the highest contribution rates around, and Kevin went over that. It's almost 9 plus 2, and then along with that, there's been a huge shift towards the employee picking up a lot of these things, which Amy just talked about, which is 55, and now you have to work to 60.

Instead of a three-year average, now it's a five-year average. All these things come into play. And on Kevin's slide, one of the things is, in 1973, there's a little notation in there, the SJC said, you entered into a contract with these people, and you need to fulfill that.

So always remember that it's a relationship. You come in, you do your job, and we'll do our job to make sure that the money is there, and we'll do our best to our ability. I'm going to jump into a couple of things.

Before I even start, I just wanted to talk a little bit about superannuation. There's a service in age. Like Amy said, there's a sunrise, sunset, 2012, depending on where you come in.

So what you want to do is you want to find out if you're a sunrise or sunset. The other thing is that you can get injured on this job, and a lot of people know that. So this green book right here, it has about 40 pages.

PARAC puts it out, and it gives you all your benefits on this. And this is the brown book. This is when you pass away, and this takes care of your family.

So you come in, you do your job, and the time will take care of you. We have a great benefit package. I'm just going to give you a quick overview.

When you do retire, when you put the years in service and everything else, you're going to have a couple options up there, and you're going to see option A, B, and C. So option A, if you put in $200,000 and you took the highest benefit and you died a month afterwards, the $200,000 stays in the system. That's it.

There's no benefit. B, if you take that and use the same thing, it's going to be approximately 1% to 5% less than A. Everything's calculated off of A.

And so if you were to die, again, hypothetically, say one year afterwards, $200,000, whatever was in that annuity, that $200,000 that was left, let's just say there was like $195,000, that would go to whoever your beneficiary was. Option C is where you have like a spouse, and that's approximately 7% to 12% less than A. With that being said, let's just do some easy math.

I always like to give an example. So if you took option C and you wanted to provide for your spouse and your benefit was $30,000 and you passed away, your wife or whoever you had as that beneficiary would get $20,000. And if they died the year after, that would be it.

So out of the A, B, and C, it's very important because you can't change that. The minute you commit, that's it. There's also a pop-up C, and that's if your wife pre-deceases you, you go right up to A.

The last one I'm going to talk about is option D. Most people don't know about it. We've had a couple situations.

I see some in the audience. A lot of people remember Joe. He had a heart attack in the police station and just recently, Tommy, he didn't get a chance to make his retirement date.

And so, therefore, option D will take care of you and take care of your family. And he'll have option C and will be able to provide for his family. Okay, next slide.

I'm done with that slide. Okay, situations that we encounter. What I'm going to do is there's a lot of information here.

I'm just going to give you a quick overview, and what it is is WEP. WEP is the Windfall Elimination Provision, and what it does is it reduces your Social Security benefit. So that's all I really want to get out of this slide, and this was signed by Ronald Reagan.

I like to remember things by presidents and so forth because it kind of gives you a little bit of history of when did this come about. So just remember, when you see that WEP, you're not really going to get the number from Social Security that you think you are because when you come in and you work for the government, you're not paying into Social Security. And we all know that prior to coming on to this job that you actually build up some quarters maybe before and maybe after.

But since then, it's been reduced. Can I have the next slide, please? Okay, so what I thought would be important here to let you know, you know, glass half full, half empty.

The legislative in the middle there has been trying to deal with that, but on the very top, the supporters will argue this, the opponents will argue this. You can read that later on. I just want to let you know that the dust hasn't settled with it, but it's been a long time, and hopefully they'll be able to come to some type of a conclusion.

[Speaker 1] (37:31 - 37:36)
And, John, it's important to know that Massachusetts is one of several states.

[Speaker 2] (37:36 - 40:28)
Yeah, that's right. Good point, Tom. We're not the only one in this.

There's six or seven other states that are trying to solve it on a national level. But like I said, it's been going on for a long, long time, and hopefully they'll be able to correct it. Next slide.

Oh, I'm sorry. Is this the last? Yeah, 28 is the last slide.

So what I always like to do is do examples, and I apologize for that because it's hot out here, and you're looking at the screen, and I'm trying to look at my notes. Every year you get a statement from Social Security, and what you need to know is that you're not going to get that number. There's a penalty almost 60% of that number.

So I gave a little example there. So if you were to get your 10 quarters to 10 years in, your 40 quarters, and your number was $606, and that's what you thought you were going to get a month, it would be reduced under the WEP, and your real number would be $242.40. And then we all know you go on Medicare, and they take the Medicare premium out of that, and right now it's about $175. So when you think you're getting $606, that's really not your number.

There's a calculator on the Social Security website. You can go in there. You can put in your 35 years of your earnings and so forth, and you can get a rough idea of what your number is going to be.

Okay, next slide, please. The GPO. The GPO is the Government Pension Offset.

And what we're trying to do today is we're trying to tell you some of these things that you might have been in the 1930s when they first started Social Security. There's been a lot of changes since then. And basically what the GPO is going to do is it's going to reduce your Social Security spousal benefits.

This is about probably 1% of the population in the Social Security system that would fall into this category. Next slide. Again, I did the same thing.

I tried to do the opponents. I tried to do what the defenders argue, and I did the effects. You can kind of read that later.

But what I wanted to show you is the last one. I always like to throw an example in there. So if your pension was $9,000 and you were eligible for a $6,000 spousal benefit, two-thirds of your pension, $6,000, would unfortunately reduce your Social Security benefit to zero.

So someone like myself might have a wife that's paid into the Social Security system, and if she was to pass away, I would most likely lose, or I definitely would lose my Social Security spousal benefit.

[Speaker 1] (40:29 - 40:31)
She's out there and looks a lot better than me.

[Speaker 2] (40:32 - 41:37)
A couple quick things. I also wanted to say Tommy and myself have been doing this for a long time. We've been volunteering our time.

I've been doing it for 28 years. Tommy's been doing it for 30, so he's senior to me. When we first started this journey, we only had, I think, $32 million.

I think we were 42% funded, and here we are today. We're almost $84 million, and we're 70% funded. So we know what it's like.

I think what I want to end up with, which is I think most taxpayers understand that there's a cost, but there has to be value there, and that's what we try to do. We try to provide value, value for the cost for the 710 people, because I know all those folders. I know all those people, and it's a tremendous burden because, like I said, some people don't finish their tour of duty.

So I'll turn it back over to Tom. How did I do? I didn't talk too long, all right?

[Speaker 1] (41:41 - 41:57)
28 years together. And I've already told my wife that on my gravestone, hopefully it will say fully funded. We made it.

Who's going to be up next on the types of disabilities? Parag. Parag.

Parag. Okay. So who are we going to tune in here?

[Speaker 8] (42:00 - 47:19)
So it should be John. John Barr. I'm the new executive director of Parag.

And Bill, are you there as well? I just wanted to step in. It was a little hard to hear sometimes, but I thought I heard mentioned that the $18,000 was the upper limit of the COLA base, and it had been for quite some time.

I did want to point out that there's now one system that's up to $20,000. There's another that's at $19,000, increasing $1,000 per year up to fiscal 26 when it hits the $21,000. And this one system has actually gone as far up as $30,000 in the COLA base.

So those are the three exceptions. Outside of that, the upper limit is $18,000. But there is no set limit, whatever the system decides.

So Parag's role, we're to provide regulatory oversight and guidance for the effective, equitable, and ethical operation of the state's 104 public retirement systems. Chapter 7, Section 50 states broadly that Parag shall have general responsibility for the efficient administration of the public retirement system. We have a seven-member commission that governs Parag and set policy.

Governor Mara Healy, her designee, which is Jennifer Sullivan, undersecretary of administration and finance. A representative of a public safety union appointed by the governor, who is currently Jay Guido, lieutenant in the Chelsea Police Department. A person experienced in investment of funds.

That person is Kathy Fallon. This person is also appointed by the governor. Then state auditor, Diana Gazzaglio, her designee, which is currently our general counsel, Michael Leontat.

The president of the AFL-CIO, his designee, which is currently Rich McKinnon, the president of the Professional Firefighters of Massachusetts. And there's a representative of the Massachusetts Municipal Association, that's currently Kate Fitzpatrick, the town manager of Needham. And both the AFL-CIO and the MMA selections are made by the state auditor.

Those six people select the seventh member. That person is Bill Brown. He's an attorney, and he also serves as the chair of our commission.

So, in addition to what you see on your screen for some of our responsibilities, we also schedule medical panels for retirees who are seeking accidental disability. We approve all disability retirements. And we review monthly financials.

You can go to the next slide. We talk here about overseeing investment in financial operations of the retirement systems. And, really, in the investment space, what we do is show that Chapter 32, Section 23B is followed, that there's an open and fair process.

That's the spirit of 23B. Education is a big part of CARAC. We're statutorily dictated to provide board member training.

We issue a quarterly memo with multiple opportunities, both live and recorded. It talks about our collection of analyzing data from retirement systems. Each year, we always publish an annual report.

In addition to that, publish investment fees and returns from the different retirement systems, so there's some comparison. We issue memos with guidance. We interpret statutes.

We fill in the blanks on retirement law. We offer guidance on implementing administrative law decisions and share best practices. We've had a number of cyber incidents where we've offered cybersecurity training.

We've offered best practices. We've seen fraud attempts or successful fraud at different places, and we've been tied to people pulling form off the website and trying to act as a retiree to change their bank account information. So we instructed boards to pull that off of their website and take different steps for retirees to make that change, to add security.

We oversee compliance with Section 91A. That's disability retirees post-retirement work. They have to submit tax returns and other paid documentations to make sure that they are within the earnings limits.

We issue specific legal opinions when boards ask for interpretation. We file and monitor legislation and serve as a resource to the legislature. So we have a fairly broad mandate, and we try to work collaboratively with boards and with the practitioners, and we're here to help in any way that we can.

So with that, I think I'll turn it to John Borak, who's going to cover our actuarial piece.

[Speaker 1] (47:28 - 47:33)
John, you can't use it. It's muted, I think. It's muted.

[Speaker 13] (47:34 - 47:35)
No, he's not muted. He's just on the symbol.

[Speaker 8] (47:36 - 47:36)
What?

[Speaker 13] (47:37 - 47:38)
He doesn't have the symbol, so he's not muted.

[Speaker 8] (47:38 - 47:39)
John, you might be muted.

[Speaker 14] (47:53 - 48:02)
Boom. Can you hear me now? There we go.

[Speaker 1] (48:04 - 48:05)
Welcome.

[Speaker 3] (48:07 - 53:26)
Okay, so as someone had mentioned earlier, I am Segal Consulting. I am an actuary, however, at Segal Performance for the retirement system. So next slide, slide 43.

So an actuary is essentially a professional who does math and statistics and they deal with the measurement and management of risk and uncertainty in pension plans. On the next slide. So an actuary evaluation is performed every year by statute.

A system could have evaluation performed every year if they chose. Evaluation is a snapshot of the plan's position on a given date, which is the valuation date. As part of the evaluation, we compare the abilities to the assets.

The liabilities are essentially, in actuary terms, the portion of the present value of future benefits attributed to past service. And the assets are the money on hand invested in the project. The normal cost, as someone had mentioned earlier, is the cost of benefits that accrue in any given year for the active members.

Again, the actual accrued liability is the liability for the employee's past service or it's the accumulation of all normal costs for past members. At the bottom of the last bullet point, there is a little typo. The normal cost plus should be removed.

So it should say that the actual liability is greater than the assets. Then there is an unfunded liability. We don't show it on the slide, but the two primary purposes of evaluation is to determine the contribution amount necessary to ensure benefits are paid to all plan members at some point in the future.

And that's done through the funding schedule. And the second one is to determine the funded status of the plan on any given date. And the funded status should be represented by the unfunded liability or funded ratio.

So the funding schedule, as was talked about earlier, is a series of payments due from the municipalities and the other governmental units within the retirement system. The payments reflect normal costs and this amortization of the remaining unfunded liability, which we also call a past service cost. So whenever a valuation is performed, there is a new funding schedule created based on those results.

And the new funding schedule gets approved and adopted by the new retirement board and it gets sent to PERAC for me to review and approve those funding schedules as well. So when performing a valuation, we make several assumptions as to what we think is going to happen in the future. There are two types of assumptions.

There are economic assumptions and demographic assumptions. The economic assumptions are things like the investment return assumption of the discount rate, the salary increase projection, COLA percentage, inflation. The demographic assumptions are retirement, disability, death, and turnover, which is leaving the retirement system by any means other than disability or retirement.

So as has been mentioned several times, the Swanscot payment system is 71% funded. And coincidentally, this is about the 70th ranked system. So there are 70 systems who have a slightly funded ratio than Swanscot.

As they mentioned, the board is on track to be fully funded after 2031. And that's a little bit better than half. There's like 40% of the systems who are scheduled to be funded sooner than 2031.

As mentioned, the current pension obligation is your current liabilities and your past liabilities. When a system is fully funded, the payment required is the employer portion of the normal cost. So it's the total cost of benefits accruing to the members of the plan, less the employee contributions that the active members make to the plan.

With that, that's all the information on the consulting piece. Just keep in mind that the actuarial slides were intended to be a very basic summary of the services provided by the actuary and not an all-encompassing reflection of the work that the actuary does. Now, I couldn't hear if we're going to take questions at this point in time or if we're going to take questions at the end.

[Speaker 1] (53:27 - 53:38)
If you could hold on to the end, we're going to try to power through this. Do you guys mind waiting for a couple of minutes? Is that all right?

Hello?

[Speaker 3] (53:38 - 53:41)
Yeah, I have no problem waiting if that's what the board would like.

[Speaker 1] (53:41 - 53:42)
Thank you.

[Speaker 7] (53:42 - 53:42)
That would be great.

[Speaker 14] (53:44 - 53:45)
Wayne Wright's next.

[Speaker 1] (53:45 - 53:58)
Wayne Wright's next, okay. We have our investment advisers, Wayne Wright, with Mike Dwyer and Jeffrey Fabrizio are up. Are you on there?

[Speaker 14] (54:00 - 54:01)
I'm here.

[Speaker 1] (54:01 - 54:02)
Hi, Mike. How are you?

[Speaker 10] (54:03 - 54:04)
Okay.

[Speaker 1] (54:04 - 54:07)
So tell the good people of Swampscote all the magic you work.

[Speaker 10] (54:09 - 57:20)
Good evening, everyone. My name is Michael Dwyer, Senior Vice President and Senior Consultant for Wayne Wright Investment Council, and today I have with me Jeffrey Fabrizio, who is the Director of Research for Wayne Wright Investment Council, and we're delighted to be here and speak about what the role of a consultant is. The consultant works very closely with the board, and typically when we start working with the board, the first thing we want to do is what we call a power position analysis, because we have a sequential process, investment process, that we want to go through with the board, and once we find out exactly where we are, we kind of hand-in-hand develop an investment policy statement and the proper asset allocation for what the board believes fits the constituents of that particular pension fund. So what is asset allocation? It's basically diversification of your assets to increase returns and or reduce risk.

And asset allocation can vary widely depending on investors, based on their risk tolerance, time horizon, income needs, and liquidity preferences. So there are two approaches. One is practical, and that doesn't really fit a long-term pension fund, especially one that has several board members and only meets periodically.

The other is strategic allocation, and that's what we work for, is to work with the board to come up with a long-term strategic allocation that will stay with the testing time. And that requires holding a constant proportion of different assets, different bids, using target rates, rebalancing periodically, and we don't use market timing at all. So when it comes to how do we invest the assets in the portfolio, when we determine exactly what the asset allocation should be, that would be manager services, which we have to do an RFP for that, and I will attempt to talk more about that.

But over the long term, and one of the things that's important about our pension fund is that the pension fund is going to be here long after we're all gone. So it's a very long-term portfolio, and that has implications. And studies have proven that over time, as much as 91.5% of a portfolio's performance can be explained by the asset allocation choice. So with that, I'll turn it over to Chuck, and he can talk about how we choose which managers will manage each asset class in the portfolio.

[Speaker 5] (57:22 - 1:02:54)
Thank you. So as Mike had alluded to, the first step that we do is take a look to see what exposures are in the retirement portfolio as it stands today. And as it stands today, it's only allocated towards the print fund, but we look beyond just the print fund and do a look-through to see exactly what the print fund is comprised of.

And if it is decided that we do a search, let me back up. Once we do what Mike says is a composition analysis, we understand what the exposures are right now in response by the portfolio, we ask ourselves the question, okay, is there a portfolio that we can have a better return, and or the same return but less risk? And that is a discussion that we have in an educated way and collaborative way with the board.

And whether we decide to issue searches or not is a function of the board's tolerance. For example, some boards do not like hedge funds or private equity, for example, which are very illiquid, long-term, limited partnership arrangements that are very illiquid. Other boards do not mind having exposure to those types of investments and are willing to take the illiquidity risk.

So depending on the presence of the board, we may or may not issue manager searches. Most of the time we do, and when we do that, we typically issue them for approximately 30 days. It can take a little bit, but usually about 30 days.

And when we get them back, we rate them in accordance with the PARAC regulations, which means we look at a proposal and assign them a rating of either highly advantageous, advantageous, or non-advantageous. And when we do that, we consider a couple of things with respect to each manager to come up with those ratings, such as, obviously, performance. Has this manager outperformed their index?

And if not, why? Some managers don't outperform, rather, given their investment strategy is not geared or not as volatile as the index, and therefore should outperform to a reasonable degree. But again, very highly dependent on the manager.

We take a look at fees. We take a look at portfolio exposure, such as the sector ratings, how much does this manager have in the health care area, for example, or how much do they have invested in financials or technology, for example, relative to the index. How big are the exposures?

Are the exposures here or overseas, for example? And if they're overseas, do they develop markets or emerge markets? That type of thing.

So we can understand the style of that manager and how it will complement the managers that are already, or exposures, I should say, that are already in the portfolio. Remember, we have a portfolio now, and we are happy for subtracting managers to that existing portfolio. So the big thing that Mike and I are trying to understand is how well a new manager will complement the existing manager.

There's no point in having too much of the same manager, because then you will not have the degree of diversification that you might like to have. So typically when we bring this analysis to the board, it's very much a first task. What we are trying to do is say, okay, we've got, let's pick a number.

Let's say 30 managers, and we're trying to decide, okay, these 10 look good on paper. These 10 here don't look good on paper for whatever reason. And the remaining 10 are good but not great and don't stand out.

Those are usually ones that are rated advantageous. Nothing stand out in a good or bad way, whereas advantageous or highly advantageous, rather. We do see something on paper that looks good.

And then, of course, those that are rated not advantageous. There's something that stands out that's not. Perhaps it's these, or they've underperformed, or maybe their risk-reward profile is not attractive relative to the index or whatever the case may be.

But it's very much a first step, and as Mike said, a sequential process. And from there, we do due diligence on each of the managers that the board, in Wayne-Wright, selects to be potentially good candidates for the portfolio. We learn more about them.

That's our second step, so to speak, of the investment manager process. And then come back to the board with our recommendations on who we would recommend to make a final presentation to the board. The board can have a chance to meet these managers, ask questions with regards to their strategy or people or organization or whatever the case may be.

And from there, we put our heads together and figure out which managers we think will be a good candidate for the portfolio. And that's pretty much the overview of our research process.

[Speaker 1] (1:02:56 - 1:03:05)
Jeff, if you could just discuss the PRIC fund, and so people out there don't understand completely what that is. You can explain it probably better than me. I mean, I can do it.

[Speaker 5] (1:03:06 - 1:06:14)
Sure. So the PRIC fund is administered by the Pension Reserve Investment Management, and it is a portfolio that is highly diversified. They are investing in U.S. equities, in U.S. fixed income, in foreign fixed income or international fixed income, and within a broad bucket of alternatives. When I say broad bucket of alternatives, they invest in private equity, in real estate, in hedge funds, in Timberland, and what they call a portfolio completion strategy, which is an idiosyncratic category of investments that are complementary to the rest of the PRIC fund, but might not fit in the neat buckets of private equity, real estate, or hedge funds. Within U.S. equities, they are diversified by style, so they have growth value. They're diversified by size, stock size, so you might get stocks like General Electric and Boeing, which are large-cap blue-chip stocks that everyone knows, but they'll also have exposure to less-known companies that we might call micro-cap, small-cap, very unknown companies that everyone believes could have the potential over the long run to grow up into a household name, for example.

That approach is also applied to foreign markets, holdings like Sony, for example, which would be a company that's almost hired overseas, but I think we can all agree that's become a pretty good household name. There is also exposure to emerging markets in companies such as India, for example, where the average person might not know, but a firm does do a good job in getting some exposure there as well. That same diverse exposure is also mirrored in the fixed-income world, where you have U.S. treasuries, investment-grade credit securities, below-investment-grade securities that are also known as high-yield securities, as well as other investments such as bank loans and other treasury-type exposures. A very sophisticated approach to doing this. What we tell our clients is the print fund is a very good solution to a lot of problems, and it may be a solution to you. It's a one-size-fits-all.

The problem is sometimes the boards are not, for whatever reason, given their asset liability structure, might be better off to do something a little bit different. Again, that's a discussion we have with the board, but the print fund is very diversified.

[Speaker 1] (1:06:14 - 1:07:28)
Jeff, we have, excluding the sleeves, we're about 53% of the general print fund currently, I believe, right? Correct. So I think just to help describe that, I know I'm jumping off here, is that that print fund, it's all retirement systems around the state.

104 can invest in it. It gives you some buying power. In terms of the town of Swampscott on our own, there's things available within the print fund that we can be invested in because we invest with a print fund that we couldn't really do most likely on our own.

It gives us a greater buying value. So we keep, you know, over the years, we've gone from, you know, up to probably 70% in the print fund. We've always been very successful keeping money out of the print fund as well.

Our goal is to always beat the print fund, and we kind of have it in our mindset. And we've done very well keeping upwards of 30% to 40% out of the print fund and investing it on our own with the guidance of Wainwright and other advisors, other funds that we invest in. All right, we're going to do the last one.

We have the legal talk now?

[Speaker 14] (1:07:29 - 1:07:29)
Mm-hmm.

[Speaker 1] (1:07:30 - 1:07:57)
Lawyer to lawyer, Mike. Mike's been our lawyer for many, many, many years. Mike Sacco is our attorney.

Good guy. Hello? Michael?

[Speaker 7] (1:08:00 - 1:08:01)
There he is.

[Speaker 1] (1:08:01 - 1:08:06)
Are you there now? I love technology.

[Speaker 9] (1:08:06 - 1:08:07)
I'm like, I see his mouth moving.

[Speaker 1] (1:08:07 - 1:08:09)
You'd think after COVID we'd have this all figured out.

[Speaker 6] (1:08:11 - 1:08:13)
I don't think his mic is connected to the right thing.

[Speaker 1] (1:08:13 - 1:08:24)
Are you texting him? Michael, we can't hear you. Can you imagine that, a lawyer who can't talk?

[Speaker 6] (1:08:29 - 1:08:30)
These aren't billable hours, then.

[Speaker 1] (1:08:30 - 1:08:39)
Yeah, these aren't billable, Mike, if you can't speak. Does he realize we cannot hear him?

[Speaker 9] (1:08:40 - 1:08:40)
Yes, he's aware.

[Speaker 1] (1:08:41 - 1:08:41)
Okay.

[Speaker 2] (1:08:42 - 1:09:11)
All right, so as he tries to work that out, just to let you know, we're going to be going to questions and answers after this if we can end this last little segment of the legal part of it. And that was just to kind of lay a foundation. So hang in there.

We'll get through this. And then we can start taking in some questions. But it's important because a lot of times, you know, people say, well, why aren't you doing this and why aren't you doing this?

And Mike hopefully can expand a little bit on that.

[Speaker 9] (1:09:11 - 1:09:12)
As the attorney said, no.

[Speaker 1] (1:09:12 - 1:10:39)
Are you with us, Mike? Can we hear you yet? No.

No. And just a background, Wainwright is actually our ‑‑ they're our investment advisors. However, although not new to us who have been in the industry, we know who they were, they're new to us.

We changed investment advisors how many months ago? Four? Five?

I would say at least four. It was a process, and I think that people always have to know that's one of the things being on the retirement board and overseeing our investments. You develop professional relationships.

We were with someone else for quite a while. There's some things that we felt we should maybe be looking to do things a little bit differently. It was not necessarily anything bad that the former advisor did.

It just was a comfort level and some ideas that we had, and we decided to open up a search. And so Wainwright gave a good overview, but it's a very interesting time for us and our relationship with them because we're now just, you know, developing the new strategy with them. So they gave a pretty good discussion about the general concepts, but in general we have not been working that long together, although we work closely together.

Do you want to open up the questions now and let Mike hop in?

[Speaker 2] (1:10:39 - 1:11:00)
You know, I want to give just maybe a little bit, but then we're going to have to, like you said, we're pivoted before when it comes to investments and so forth, and that's really what we did. We just thought that we needed to pivot. I don't know, maybe we should.

We're going to lose some of the audience. I'm worried about people not being able to come in.

[Speaker 1] (1:11:00 - 1:11:02)
Have we got any questions come in, Nance?

[Speaker 13] (1:11:02 - 1:11:09)
Is he right there?

[Speaker 1] (1:11:11 - 1:11:16)
Who's the other Eric? Up top? Chime in.

Is he on? Can you unmute him?

[Speaker 9] (1:11:24 - 1:11:24)
Hi.

[Speaker 1] (1:11:24 - 1:11:28)
Hi, Eric. How are you? I'm good.

How are you? Good.

[Speaker 12] (1:11:30 - 1:13:15)
Yes, Eric Schneider. I'm a member of FinConf, and so I have two questions. But first, thank you for this presentation.

This was very helpful and educational, and I feel like I've learned a lot more about this system. And, you know, obviously I do believe that any member of this system, you know, they are entitled to benefits that they have earned and earned, you know, hard and done stuff with talent. I sort of have two questions, one looking back and one looking forward.

And I guess looking back, you know, currently we have an unfunded liability, and, you know, that is a burden for the current taxpayers. And I think just for our discussions, it would be helpful to understand maybe how did that happen and how can we prevent that from happening again and what are sort of steps, you know, what mistakes were made in the past maybe and what are we doing now to sort of not end up in the same situation. And then looking forward, once we're fully funded, and I guess related, if the value of the plan's assets fluctuates and decreases dramatically for some market-driven reason, does that result in an unfunded liability again that then the town would have to make up, or how would that work with this investment risk basically in the future for a fully funded plan?

[Speaker 1] (1:13:16 - 1:13:20)
John, do you want to – that last part of the question, John, might be good for you to answer?

[Speaker 3] (1:13:23 - 1:16:30)
I'll take the last part if you want. In regards to the forward-looking question, fully funded status is not a static state, it's dynamic. So as we mentioned, once you're fully funded and you have actuarial losses, like investment losses especially, that occur, you will be in a situation again where your assets exceed your – I'm sorry, where your liabilities exceed your assets and you will have an unfunded liability again.

So some of the ways you can try to mitigate that is to, once you become fully funded, is to adopt a more conservative asset allocation so you're not taking on as much risk. As someone had mentioned earlier, though, if that's what the plan of the retirement board is, you have to look at reducing your investment return assumptions. So if you're – if you have a portfolio that has a current level of risk and you're willing to move to something that's – you have to reduce your investment return assumption.

And by doing that, your liabilities will necessarily increase as well. So there's a balancing act there as well. But that's typically what will happen as plans approach fully funded status.

With regard to what's happened in the past, this is going to be a very simplistic answer, but for many, many, many years, the retirement systems were all a pay-as-you-go retirement system. So you only paid retirement benefits as they became due. You weren't pre-funding any kind of these benefits.

The pre-funding of the benefits started sometime in the late 80s, maybe early 90s. So you're really playing this catch-up game as far as funding for your plan. And the way to avoid a situation like that again is now funding is set in the statute.

So there's a requirement that all plans fund. And then it's just keeping up to date with the funding we plan to set up in the funding schedules. Hopefully, when the system becomes fully funded, you have a couple of really good investment years to build up some kind of surplus.

I'm staying right at the 100% funded level. You've built up that surplus, then you have some reserves on hand should you have a couple of bad investment years. That's how it is in this situation, and that's really what the board can try to do to prevent something like that from happening again.

[Speaker 8] (1:16:31 - 1:17:03)
Just to piggyback on what John said, it's true of all systems. It's not just Swanscape. As it was pay-as-you-go, we're paying for the sins of the past now to catch up for those earlier sins.

Then the sins then change to the retirement plan for those into the system post-2012 where the benefits are a little less liberal and people have to work longer, retire at a later age. So those things control plan costs also.

[Speaker 1] (1:17:07 - 1:17:09)
Eric, did you want to have a follow-up or not?

[Speaker 12] (1:17:12 - 1:17:34)
No, I guess the only other question for John would have been in the past year, it seems like our goal has always been to make it to fully funded, but it seems like it would be a recommendation to exceed the fully funded and actually have a surplus, or is that not... I mean, I know it's not statutorily required, but is that...

[Speaker 3] (1:17:35 - 1:20:04)
a good practice? Okay, so this is a debate that Mike and I have had in the past with one of his other boards. Chirag has recommendations on what retirement boards can do once they achieve fully funded status, but as you had mentioned, and as Mike would recommend to the board, none of these recommendations have said statute.

So there's no statutory requirement that we... So one of my recommendations when a board reaches fully funded status is to continue to fund to a level greater than 100%. What that level is really depends upon the appetite of the retirement board, how you consider reducing the appropriation.

Part of the reason I make that recommendation is if you were to reduce your funding schedule immediately upon reaching fully funded status, I don't have the numbers in front of me. A significant decrease in the level of appropriation from 2030 to 2032. 2031 is a final year where the rest of the other funded liabilities are expected to be paid off.

So there's a fairly significant drop in the level of appropriation, and I think everyone is well aware that once that money is no longer needed in the pension system, it's going to have to be spent somewhere else, whether it's to build a new fire station, a new police station, a new library, to build a school, to do something somewhere else. And as we had mentioned just a few minutes ago, yeah, you have asset losses when you're fully funded. You are now going to have an unfunded liability then.

You're going to be amortized again in addition to your normal costs. So you're going to have to get money back into that pension budget, which is going to be very, very difficult once that money has been spent somewhere else. So that's why I currently make the recommendation to retirement boards to fund to a level greater than 100%.

Again, that's just a recommendation. As Mike would correctly point out, there's no statutory requirement to do that. So it doesn't have to be that.

That's just a recommendation.

[Speaker 1] (1:20:05 - 1:21:56)
And I would like to throw out one other idea is that the Finance Committee, and I think that Eric Oppmann has heard me say this, is that over the years, you know, we've extended out to try to work to help defray some of the costs and the impact of the town. We've had early retirements that affected the fund. We haven't really been, you know, in the world, and I think actually we probably, John would support this, we may not have been requiring the town to contribute the more aggressive end of it.

We tend to have our actuarial be a little more to give us a little bit of some room to try to help the town out. I think most communities that really have been very aggressive have stuck to the hardest number they can, the highest number year in and year out of contribution. And from what I've talked to many people on boards, when there is the ability to have some free cash available, it's not a bad thing to every, you know, so often to maybe throw $500,000 extra into the retirement system.

So I think that it's not the sins of the past. I do think that if we could have been more aggressive over the years, we are where we are now. I'm not saying that anything's going to, you know, stop breathing fire and say we got to do this.

But I do think when you say sins of the past, with us, I think we probably as a town hasn't been, we haven't been as aggressive as I think some communities have been. Mike, are you there? He just, I'll tell you, if I get a bill for this one, Mike, we're going to, I can't hear you.

[Speaker 2] (1:21:57 - 1:21:58)
He must hear us because he's laughing.

[Speaker 1] (1:21:59 - 1:22:41)
Do you want to go on speakerphone? You want to call us? I know.

Is he going to call us? Call me. Any other questions out there?

In Internet land? Anybody here have a question? Mike.

Can you hear me? Yeah.

[Speaker 15] (1:22:43 - 1:22:51)
Sorry about that. I had no idea. This is, you know, I went to law school for legal things, not technological things.

So sorry about that.

[Speaker 1] (1:22:52 - 1:22:56)
Okay. Go ahead. Give you a little talk.

[Speaker 15] (1:22:57 - 1:23:01)
Okay. Well, let's move on to the other slide. Next slide, please.

[Speaker 6] (1:23:01 - 1:23:02)
Can everyone hear him?

[Speaker 1] (1:23:02 - 1:23:05)
Can everyone, can someone give me a nod out there if they can hear him?

[Speaker 6] (1:23:05 - 1:23:08)
The microphone, Tom. What? Hold the speaker to the microphone.

[Speaker 1] (1:23:09 - 1:23:09)
The butt of the phone.

[Speaker 6] (1:23:09 - 1:23:10)
At the bottom.

[Speaker 1] (1:23:11 - 1:23:16)
Sorry. Sorry. I'm not a teenager.

I'm sorry. Go ahead, Mike.

[Speaker 4] (1:23:17 - 1:32:30)
Okay. So thank you, everybody. Sorry about that.

So what my role is, as Tom said, I've been the board's counsel for actually 30 years. When I started out in private practice in 94, Swamp Squad Retirement Board was a client of the firm that I joined, and I've had the pleasure of serving as their counsel for the last 30 years and went out on my own in 2006. My role primarily is to provide day-to-day assistance as needed to Nancy and Tracy on any sort of benefit issues that arise in the course of their communication with the members and retirees.

Chapter 32 is one of 282 of the general laws, and if you pick up a volume of the general laws, usually there'll be multiple chapters in that particular volume. With Chapter 32, it actually takes up two volumes of the general laws. It is, as the SJC has said, it's one of the more complex statutes in the Commonwealth.

So on a day-to-day basis, I assist for those questions. I also give advice to the board on cases that are decided, on PERAC regulations that are issued, any changes in the state law, whether that be a retirement law or the open meeting law, the public records law. We deal with domestic relations orders when members or retirees get divorced.

The pension is a marital asset, so that gets divided, and I would review those forms and provide some advice to the board in terms of the implementation, and I review investment contracts and other vendor contracts to make sure that they're in compliance with the state law. Next slide, please. So I do represent the board in litigation when needed.

When would that come up? Most often, it would be in a case where someone has applied for a benefit, usually a disability benefit, sometimes a death benefit, and for whatever reason, that person does not qualify for the benefit. That doesn't mean it's a fraudulent claim.

It just simply means that one of the elements of the statute was not satisfied based on the law or based on the case law, and what happens in those cases is I will represent the board on the appeals, and we're going to get to the appeal process in another slide, but that's the sort of litigation with which I've been involved with the board in representing them. Policies and procedures, the board has the discretion to determine what is a full year of creditable service, how do we prorate part-time service, what's considered regular compensation, policies and procedures for conducting disability hearings, all of those things I've been asked to do for the board from time to time, and I provide the expertise for that. As the next bullet says, interpreting the complex pension laws.

As you heard earlier, the law was changed significantly back in 2012 to essentially create a two-tier retirement system, people who were in the system before April 2nd of 2012 and those who came in after 2012. As far as court decisions, Chapter 32 is one of the more highly litigated sections of the law in Massachusetts. There have been hundreds of appellate and SJC decisions based on Chapter 32 cases.

We had one in Swamp Squad a few years ago, which went to the SJC, in which the board was successful in defending its position in a case. I also, when asked, although John and Tom have been on the board a long time and the other board members are also very experienced, but from time to time I do provide some training and guidance to the board members as needed. Next slide, please.

So ensuring the board follows all the rules and regulations, I really don't have to worry too much about that with your board, regardless of the composition. You've always had people on that board who have been dedicated to serving the members and the retirees. Unfortunately, sometimes we have to make the hard decision and say no to a particular claim.

What I try to do is to bring to that discussion my years of experience, the case law, the statute, and oftentimes there isn't any case law or the statute is not as clear as we would like it to be, and that's where I need to provide guidance to the board to help them make the most informed decision. Next slide. In terms of the value that we bring, I think as noted in the slide, we've been doing this for a long time.

My firm does nothing other than represent public pension funds. We represent 53 of the 104 systems. The attorneys in my office, including myself, have over 100,000 hours of experience with the retirement law, so we certainly bring that to the table with the board to try and help them make the best decision that they can.

Quite frankly, that decision is pretty simple. It's that everyone who's entitled to a benefit should receive it, and everyone who is not entitled to a benefit should not. That requires some difficult decisions and difficult cases, but this board has always been interested in doing the right thing, making the best decision possible.

Next slide, please. The appeal process, this goes back to the litigation piece. If the board denies a disability claim or a death claim or a creditable service claim or someone believes that some compensation that they received should be included in the calculation of their retirement allowance or a variety of other things that the board can take action on, if there is an appeal, it goes to the Division of Administrative Law Appeals.

That's the first level of appeal, and you go before an administrative magistrate, and you have a sort of mini-trial where the board is called upon to defend its decision, and the member or retiree who is aggrieved has the opportunity either to represent themselves or be represented by counsel and defend their position and argue their case. DALA will make a decision, and then from there, any party that's aggrieved, either the board or the member or retiree, can take that decision to the next level, which is the Contributory Retirement Appeal Board, or CRAB. CRAB is a three-member board.

You don't have a hearing in front of CRAB. They look at the DALA decision, the exhibits that were filed in that litigation. Both parties submit legal briefs to CRAB, and CRAB reviews the DALA decision to see if they agree or disagree, and they can either affirm the DALA decision or reverse it.

Sometimes they remand it back down if they feel that there's additional facts that need to be determined or legal questions that weren't decided that need to be decided. But more often than not, it's an affirmation or a reversal of that decision. Then from CRAB, anyone who is aggrieved by that decision can take it into Superior Court.

And similar to CRAB, in Superior Court, the court looks at the CRAB decision to determine whether or not it was supported by substantial evidence or erroneous as a matter of law. More often than not, because of that narrow scope of review, CRAB decisions are affirmed by our appellate courts, but not always. There certainly have been plenty of cases, some of which I've been involved with, where the CRAB decisions were overturned at either the Superior Court, or once the Superior Court has rendered a decision, the member or the board can then take that decision to the Appeals Court as a matter of right.

And then beyond the Appeals Court, you can seek further review with the Supreme Judicial Court, but that is a discretionary review on the part of the Supreme Judicial Court. And the SJC has decided many, many cases in the retirement law simply because of going back to the complexities in the retirement law. And oftentimes, they want to put their stamp on what the law is.

So, you know, we haven't had a lot of litigation in SWAMP Squad, but we've had a couple of prominent cases over the years, and I've been happy to represent the board in those. I think that's it on the last slide.

[Speaker 1] (1:32:31 - 1:32:41)
Anyone? Thanks, Michael. 30 years, huh?

I guess you've been my lawyer for the board since I've been on it. I didn't realize that. All righty.

Thank you.

[Speaker 4] (1:32:42 - 1:32:43)
All right, thank you.

[Speaker 1] (1:32:44 - 1:32:50)
All righty. So I hope at this point, anyone online looking, any questions here?

[Speaker 6] (1:32:51 - 1:34:45)
I'd like to thank... I just want to make one comment. A few years ago, we had our meeting.

We had applied to increase the COLA base from 13,000 to 14,000, which we did in FY21, I believe. And as we think about the future, and John mentioned that we can go up to 18 and beyond as our COLA base, one of the things that we outlined in that meeting way back when was that there would be three criteria that we would need to meet in order to come back before town meeting and ask for an increase in the COLA base. And those three criteria were what was the rate of inflation, how did we stand relative to other towns and communities with respect to our funded ratio, and how do we stand relative to our COLA base to the other communities?

And if we were below, for instance, if our COLA base was below the average for the 104 communities, that would be a trigger. If inflation was higher and that rate of inflation was such that people were losing their standard of living because of inflation, that would be another trigger. And then lastly, how were we improving our funded ratio and how did that stack up relative to other communities?

At some point, we may come back before town meeting and ask for another increase in the COLA base, which would increase the unfunded liability of the system and may do a couple things. It could force us to extend the funding schedule or force us to increase the amount of money that the town would have to pay to meet the unfunded liability. Those are some of the balancing acts that we have to face because I think, as I mentioned, we are mindful of the burden of the cost on the community.

On the other hand, we're mindful of the need to have retirees have a COLA base that is consistent with other communities in the Commonwealth.

[Speaker 1] (1:34:46 - 1:34:50)
And Nancy, what's our average retirement benefit? It's a long story.

[Speaker 14] (1:34:52 - 1:34:53)
What, for the year?

[Speaker 1] (1:34:53 - 1:34:56)
For a person. So per retiree, what's the average?

[Speaker 2] (1:34:57 - 1:34:58)
I can answer that.

[Speaker 1] (1:34:58 - 1:34:59)
$26,000.

[Speaker 2] (1:35:00 - 1:35:03)
It was $26,000, but I think it's gone up.

[Speaker 1] (1:35:03 - 1:35:05)
$2,602. Yeah, I think it's gone up a little.

[Speaker 2] (1:35:05 - 1:35:06)
Yeah, 2022.

[Speaker 7] (1:35:07 - 1:35:09)
So a little higher now.

[Speaker 1] (1:35:09 - 1:35:54)
So hopefully now, everyone knows, this is going to be online. This will be up on our website and the town's website, which is our website. Right?

So we'll have it posted there. We can maybe edit down some of the dead air that we had. We really appreciate it.

We hope that this will provide guidance and education for people. I really hope if you're a town meeting member out there especially, really beneficial for, you know, and I hope that the moderator would consider getting this out to all town meeting members, that it's worth watching this so that when you go in and vote on something the size of the retirement obligation, that they understand where it comes from. I'd like to thank everyone out there, my guests.

You were awesome.

[Speaker 11] (1:35:55 - 1:35:55)
I have a question.

[Speaker 1] (1:35:56 - 1:35:56)
Yeah?

[Speaker 11] (1:35:56 - 1:35:58)
Yes. May I ask a question? Yeah.

Sure.

[Speaker 7] (1:36:00 - 1:36:07)
If you could go to the microphone over here. I'll give you this. Thanks.

[Speaker 11] (1:36:10 - 1:38:16)
My name is Jerry Caron. I'm a group one retiree. My wife, Sandra, and I live in Lynn on Ocean Street.

We appreciate you having the meeting tonight. Very helpful. I have a very narrow interest in my old age.

It's like, what are my benefits as a retiree? And I wonder what suggestion the board may have to have to, that the representatives, that the retirees as a group are represented vis-a-vis the town and the retirement board. Because I think I saw the agreement that was written in 2015, and I got that idea from this agreement, that it was a negotiation between the retirees as a group and the town.

And lately, I don't think the spirit of that agreement is being honored. And I wanted to call that to the board's attention. And any suggestions you might have, I can think of different things you could do.

For example, you could give the retirees space on the voucher that you send out every month to every retiree who has a direct deposit. I don't know about checks, but the use of that space to communicate as a group, that might be helpful. Because I don't know who my fellow retirees are.

I don't know who they are. I don't know what their contact info is or anything. Otherwise, I might try to communicate with them all, but through your board, that could be done.

[Speaker 1] (1:38:16 - 1:38:27)
I think the only problem with that is the information, contact information is confidential. Correct.

[Speaker 11] (1:38:29 - 1:38:37)
But if we had a mailing and you guys sent it out, I wouldn't have to know. Like when you have an election, for example.

[Speaker 1] (1:38:38 - 1:38:47)
We send out a newsletter. But in terms of getting, so you could start, that's probably something for social media.

[Speaker 9] (1:38:48 - 1:38:58)
I was going to say, we do have the Retirement Board Facebook page, so you could make a post on there asking for fellow retirees to get together and share contact information.

[Speaker 11] (1:38:59 - 1:39:00)
Yeah, that's helpful.

[Speaker 6] (1:39:00 - 1:39:05)
And we have talked about doing a fair for employees and retirees.

[Speaker 1] (1:39:05 - 1:39:06)
Yeah, exactly.

[Speaker 11] (1:39:07 - 1:39:24)
All right, so... Can I say one more question? Since the town accountant's here, she might know what I'm talking about.

I wonder if I could get a recapitulation for a year for the expense warrant that the board signs every month.

[Speaker 9] (1:39:25 - 1:39:26)
The Retirement Board?

[Speaker 11] (1:39:27 - 1:39:28)
The Retirement Board.

[Speaker 9] (1:39:28 - 1:39:33)
You would get that through Nancy. I don't keep those. They're kept with the Retirement Board.

[Speaker 11] (1:39:35 - 1:39:36)
Thank you.

[Speaker 1] (1:39:37 - 1:40:00)
So thank you, John. Bill, thank you very much. Bill, we haven't met before, but hopefully we'll get to meet each other somewhere.

Mike, you still there? Take care. Thank you.

Thank you very much for joining us. And, again, thank you for taking time out of your night to spend with us. Bye-bye.

Motion to adjourn?

[Speaker 13] (1:40:00 - 1:40:00)
Second.

[Speaker 1] (1:40:01 - 1:40:06)
Made by Powell, seconded by Saro. All those in favor? Aye.