 Good morning. You are with the Vermont House Government Operations Committee. We are meeting now for the second half of the morning to take a look at an initial proposal of some pension design changes. These are, we're putting on the table here in committee for consideration in order to contribute to a path towards sustainability for our pension system. We have a tremendous opportunity right now with the speaker really committing to pulling together as much one-time money as we can as a state to help put our pensions and OPEB on a sustainable, pre-funded path. This 150 million is a tremendous opportunity and it is a one-time opportunity to really make some investments as well as some potential plan changes. And so what you're going to see here is a number of slides, some of which talk about the background just because I think it's important for us to recognize the magnitude of the challenge that we have in front of us. And also, you know, some proposals around plan changes and a little information about what, how we think that can help contribute to us on a path towards sustainability. I will reiterate before I go to Chris Roup to run through the proposal that we're putting on the table that this is, this is just the first proposal and we will hear in committee reactions from members of the public, from members of the employee groups, from folks who'd like to testify about this, and all of the decisions that are made will be made by this committee with the input of Vermonters who want to share their thoughts with us. And so I don't want to, you know, I just want to reemphasize that this is not the middle of the conversation. This is not the end of the conversation. This is really the beginning and the hard work of figuring out what the legislation looks like is going to fall on the shoulders of this committee. Thank you all for your commitment to doing that with me and for your good questions and scrutiny on what John and I are putting on the table here. With that, Chris Roup has the PowerPoint in front of him and, and he'll walk us through this and we can ask him for clarifying changes and you can ask John and me for, or ask John and me if you have questions around the substance or why we went in a particular direction. Thanks, Chris. Thank you, Madam Chair. Hello everyone, my name is Chris Roup and I'm a fiscal analyst with the Joint Fiscal Office. Today I will walk you through an overview of the initial pension proposal put forth by the chair and vice chair for the committee's consideration, just to be clear to those who may be watching this hearing online. The Joint Fiscal Office proposal my role here today is to help interpret and explain the proposal. And for folks who may be watching online you can access this slide deck on the House Government Operations Committee's website. So, moving on to slide two. I want to see a hand raised, Madam Chair. Madam Chair, since this proposal is a lot more dense than the first one maybe instead of a trot we might do a fast walk. It's going to be a lot of information here I think. Thank you. There is a lot of information here and I guess what I would say is I welcome folks to to jump in with questions as we go slide by slide. Let's ask the questions, clarifying questions as we go along. So if you know if you have thoughts on, you know, maybe restating something that you think you heard that will also give us an opportunity to to slow down and make sure we understand this as we go. Mark, did you have your hand up as well. I do I just, you know, I finally found it but it's under Chris's name it's not right on our day page so if people are looking for it's under, it's under Chris's name. Yeah, it it's under documents for Wednesday March 24. And there you'll see two documents there that Chris has presented both of them are our proposals that John Gannon and I are putting on the table here and committee. Any other questions before we get started. All right. Thank you, Chris. Thank you, Madam chair. So I'm on slide to now. This proposal is designed to address the structural challenges facing Vermont State employee and teacher retirement systems by taking steps to reduce future liabilities, increase the pension system assets and relieve budgetary pressures to improve the state's long term fiscal health. And the draft proposal that the committee will receive feedback and testimony on in the days and weeks at this is not a final product by any means. Importantly, this proposal would not apply to existing retirees, active employees who are within five years of current normal retirement eligibility, or inactive vested members. So members who are in those categories we would see no changes under this proposal. This proposal focuses just on the state and teacher plans and not on the municipal plan because the municipal plan has a lot of fundamental differences from the other two. The proposal also includes all visas and teacher retirement groups that are open to new entrance, and includes risk sharing components, but also components to share gains with employees once the systems improve their fiscal health. And that's on that slide. I'm going to just pause in between, in between slides, questions, comments, clarifications Bob Hooper. Madam chair, this I haven't looked far enough to know but do we have the ability to pinpoint projected savings during the course of the discussion or is that I haven't looked forward enough to know if that's there. Yeah, yes. Yes. Cool. Rob Leclerc. Thank you madam chair and just the active members who are within five years of current normal retirement eligibility I'm guessing that will inspire a significant amount of conversation. Is there a reason for the five years. Is there any sort of financial reason other than the obvious. So I don't think there's really any magic to that and in fact, at the one of the VSE a meetings that I attended last night there was a recommendation that we that we get much more specific about what we mean by that but my intention with that is really to say, you know, to those folks who are, you know, in two, three, four years from retirement, you know, like they're making their plans for, you know, where they're going to live and what they're going to have to live on and, and I don't think that it makes sense to, to make changes on people who are, are largely, you know, already planning to leave and go into retirement. There's no magic there we can decide. Okay, like, that's fine. That that's an area that I received significant feedback on as far as the, the formula, and those that are currently in the system. How much time would they have to readjust their retirement plans. Thank you. Absolutely, Sam LaFave. Thank you Madam Chair, can I be given an example of who an inactive vested member would be. Madam chair if I may, an inactive vested member would be somebody who earn five plus years of service working for state government or as a teacher, and then left service, and did not take their, their, they did not withdraw their retirement, and so they're not currently working, but they are vested in entitled to a retirement benefit when they reach eligibility that help Bob Hooper. Madam chair if you grant me a little liberty may I respond to the senior member from various question. Um, is it. Yeah, relevant to understanding what we're talking about on slide number one. Well, I don't know about that it's relevant to his question. It's, it's 15 words. Five years of retirement is significant because at the veterans home where we hire nurses and other people like that. 26% of the staff are eligible to leave if they decide to buy five years and walk out the door tomorrow. Sorry, Madam chair, can I just ask a question around that. You can. Okay, so, so as I'm sorry, I'm sorry. Well, it's just is so is there currently a provision where people can buy up to five years of their retirement now. Yes, if you have 25 years of service in the system. Okay, so there really is a, not that it wasn't relevant before but there really is a reason for that five year number that, or could be. All right, slide number two. Again, my apologies. No worries, we're going to take the time that it takes to get this done. So I have finished with slide two and I am on to slide three, making progress. So this slide provides you with some background into the issue at hand and why these proposals are being brought forth. Both of these retirement systems are facing significant and growing unfunded liabilities and declining funding ratios, despite the employer fully funding it's required ADAC payments. Right now the service has an unfunded liability of $1.04 billion and the teacher system has an unfunded liability of $1.93 billion for total unfunded liability of more than $3 billion across both systems. These liabilities have increased significantly over the prior year, due to a combination of factors that include historic underfunding prior to the great recession, lower than anticipated investment returns, changes to demographic assumptions based on plan experience and revised economic assumptions, including a lower assumed rate of return. In just the last year these factors have led to the visas unfunded liability growing by $225 million and leading to an ADAC payment that is $36 million more than an FY 21. And on the teacher side, these factors led to the unfunded liability increasing by $379 million, leading to an increase in the ADAC of $60.6 million. The treasurer details some of the factors that drove these increases in her report from January 15. Moving on to slide four. So these are obviously pretty significant increases and costs and liabilities, and there's no. I'm going to need to pause you right there because I have a hand up. Chris, I'm always trying to get my mind around the actual unfunded liability and, you know, I see this figure here, but I've heard in the past, even as much as the $5.6 billion unfunded liability. Can you explain to me the difference? Is that including OPEB and other things as well? That's correct. So that higher number refers to all of the, all four buckets of retirement obligations. Thank you. And I think it's important that we start with this background information fresh in our minds because, you know, we've heard folks sort of push back against the idea of putting plan design changes on the table. You know, in the context of promises made, and I think from the standpoint of the general assembly whose job it is to pay the bill for the ADEC each year, you know, I would say that we didn't realize that we would have to pay, you know, an ADEC that increases by 36 or $60 million in a year. So, you know, nobody likes the situation that we're in, but we are looking to try to find the right combination of changes that will make this more sustainable for the general fund as well as for the retirees and beneficiaries. So, any other questions on that slide before we go back to the next one. All right, go ahead. On slide four now. So these are obviously pretty significant increases in costs and liabilities. And there's no single option that will make these go away or drop back to FY 21 levels. And charting any proposed path forward will likely require multiple options and some painful and difficult tradeoffs for both members and the state. But when thinking about charting a path forward, it's often helpful to think about where you want to end up and how you want to get there in order to maintain focus as proposals evolve. So the development of this specific proposal was guided by a set of principles or goals. It was also guided by the principle that providing retirement security to Vermont's public sector workers and their families must be maintained in order to ensure that the state can attract and retain a talented and effective workforce that provides so many critically important services to the state. It was also guided by the principle that any changes to the system should exempt existing retirees and those close to retirement who are already planning for their future. It was also guided by a principle that pre-funding retirement and OPEB benefits is a prudent long-term strategy for funding long-term obligations. And this strategy should be pursued to the greatest extent possible. Consistently fully funding these obligations in accordance with the funding schedule is key to making progress toward paying off these long-term obligations and shoring up the fiscal health of the state. Any changes to retiree benefit systems should consider what impact those changes may have on the behavior of the existing workforce, especially those who are near retirement age already. This proposal was also guided by the principle that the long-term preservation and strengthening of the retirement system will require participation from all participants and that these costs are going to keep increasing in the future and putting more and more pressure on the budget unless necessary changes are made. So the time to make those changes and put the state on a stronger path forward is now. Moving on to slide five. In totality, this proposal reduces long-term pension obligations by proposing the following modifications to the pension benefit structure. The proposal modifies the cost of living adjustment structure, increases the number of years considered when calculating an employee's average final compensation, increases the vesting period to be eligible for a retirement benefit, and changes the eligibility criteria for normal retirement, while also making related adjustments to the maximum benefit formula to account for additional years of service that the workforce may accrue. The proposal also increases assets into the pension system by increasing based employee contribution rates across all employee groups and implementing a supplemental progressive risk sharing employee contribution that would be triggered by the overall performance of the pension fund. The proposal also allows for a shared risk, shared gain provision for the COLA structure based on pension fund health, and notably the proposal calls for a significant investment of state revenue above and beyond the ADAC amounts to pay down the state's long-term retirement liabilities. So that's the high level. Let's now look at the specific details. Moving on to slide six. Let's start off by looking at the cost of living adjustment formula. Currently, retired members receive an annual COLA that is tied to the consumer price index, and the full amount of their pension benefit is adjusted. This helps pension benefits keep pace with inflation over time. For most members, there is a 1% minimum and 5% maximum on the COLA, and the COLA's start applying once a retiree reaches normal retirement eligibility. In other words, if you retire early at a reduced benefit level, the COLA typically does not apply until you reach the normal retirement age. Under the proposal, the COLA stays, but it would only apply to the first $24,000 of retirement benefits. This $24,000 threshold is slightly higher than the average retirement benefit being paid out in either system. The proposal would also standardize the COLA formula across all plans by tying it to 100% of the CPI and keeping the 5% annual maximum in place, but it would eliminate the 1% minimum increase from all plans. Lastly, the proposal calls for implementing a COLA once a retiree reaches 67 years old with the exception of Visors Group C, which would be pegged at age 60 because Group C has an earlier normal retirement eligibility age than other groups. And to add some clarity to all this jargon, I've added a box here at the bottom of the slide that gives you a high level description of who is in which of these pension groups. Visors Group C is the law enforcement and public safety group. Visors Group D are the judges. Old Group F is the state employees hired before January of 2008 and new Group F is state employees hired after January 2008. Visors Group side Group C1 are members who were at least 57 years old or had at least 25 years of service on June 30, 2010, and Group C2 are the members who had less than 50 who are less than 57 years old and had fewer than 25 years of service as of June 30, 2010. Bob Hooper has a question. Thank you Madam Chair. Is this removing the 1% does that indicate that it's possible for the COLA to go negative? I don't believe there's any element in the proposal that changes the existing language and statute about COLA's going negative. The only element to this proposal is if the CPI is at some positive number that is less than 1%, that positive number less than 1% would be what applies and not 1%. Thank you. This would seem to indicate that somebody who started very early in their career could, let's say 20. They could put in 47 years before they were eligible for a COLA and they probably would have retired a long time before that. Is there, is there's a fluctuation in maximum benefit they can receive or is it going to be limited in future slides. We'll cover that topic in future slides. Okay, and we're we're not we're not stepping into the age discrimination area here right. I believe we're treating everybody equally here. Okay. Thank you. Rob Leclerc. I hope this is a quick answer do we know how many people were talking that are in the old Group F currently. Wasn't there like 80 something or. We could get that information for you. Okay. Thank you. I can say that the vast majority of the visaers workforce is in group F either older new that that's the overwhelming majority of the members. Yeah, I seem to remember we took that testimony last week perhaps from the treasurer's office. Director of retirement. I'll see if I can find that thank you you're right. I have written down somewhere but I'm trying to focus on the meeting at hand otherwise I'd go rifle through my papers. Peter Anthony. Thank you madam chair remind me group C, which is distinguished by the earlier retirement age. That's is it all public safety classified or only the uniformed officers. Sort of line officers as it were. That's a great question I'd have to go back in the statute and find the specific definitions of who is included in that. I think Bob knows but go ahead Bob if you know. I think it's certified law enforcement officers and the unit that you're in I mean there are some in supervisory unit some and some inspecting funeral homes some inspecting utero beauty parlors it's it's a pretty broad range but it's all certified law enforcement officers. Okay, thanks. Tonya Behovsky. Two questions one might actually be for Bob. Where do game wardens fall in this list I know that we have talked previously just about their work being very remote and sometimes actually potentially more dangerous than some of our more. They have full police powers they are certified. Okay, so they fall into that same group. Thank you. My other question is how the 24,000 number was arrived at. The, the principle that we're trying to follow there is is not to not to have an outweighed impact on people that are on the lower end of that retirement income spectrum so I think Chris said that the average is 22,000. Yeah, it's 21,060 dollars for visas and 21,964 the teachers. That's based on the most recent valuation study. Yeah, thank you I just 24,000 is still a pretty low number so I was just wondering how that's where we let how we landed there. All right, any other questions on the cola threshold slide before we move on. Please. I just said because I heard last night at the chapter meeting that it was indexed, but it's indexed to tied to the inflation rate. Whatever the CPIS. Okay. I believe it's that the CPI you if you want to get very specific but that's, that's for the urbanized markets in the markets. All right, Tonya Behovsky. Was there any looking into the impact that this might have on our retirees accessing other state services if we're going to pull a cola away from someone who's bringing home $24,000 are they then going to be eligible to access Medicaid or be needing other parks so that we're just displacing this money. That's certainly a good question that we, that we should ask in committee. And Madam chair if I may add to that I just want to clarify that if you earn over the $24,000 threshold that doesn't mean you would receive no cola under this proposal, it would mean that only your first $24,000 of benefit would be to the COLA. And most, if not all, Vermont employees also participate in social security. Awesome. Thank you. No, I'm actually more concerned about the people who are earning just that 24 percent and the removal of the 1 percent minimum. All right. Next slide. All right. We're on slide seven. So the proposal also calls for increasing the number of years considered when calculating a member's average final compensation for the purposes of determining what their retirement benefit will be. Right now, AFC is calculated by averaging the three highest consecutive years of salary with a few exceptions. For Visors Group C, it's the second highest consecutive years, and for Visors Group D, it's based on the final salary at retirement. Under the proposal, all groups would have their AFC determined by averaging their seven highest consecutive years of salary. And for Visors Group C, the annual payoff for unused leave would be excluded from the AFC calculation to mirror the terms already in place for other employee groups. So can you just give an example of the kind of scenario under which somebody in Group C might see a change? Sure. So a longer salary history would be considered when determining what the with the AFC would be. So in many cases, and this doesn't apply across the board, but in many cases, an employee's final years of employment are often when their highest income is. By averaging a broader range of years, considering this, it has the effect of resulting in a number that is more representative of an employee's overall salary history and mitigate some of the impacts that may occur from unusual spikes in final years of employment. So that would be the most significant impact that members would see as a result of this change. Robert. So would collective bargaining agreements weigh in on this, for instance, which to say hypothetically that you had an employee that had accumulated a lot of paid time off and was able to roll it over year to year to year, could they selectively and strategically take some of that time and have that counted into their annual salary? That's a good question. I'm not as well versed in all the ins and outs of the collective bargaining agreements, but I think there's any number of hypothetical scenarios that any employee, regardless of these changes, can leverage their personal time or their leave payouts in their overall compensation, not just for purposes of determining AFC, but just in general. Okay. So it is subject to collective bargaining agreements? I'm just not sure if this is stipulated in the contract or not. Okay. Thank you. We want to stick a pin in that question. That is definitely something that we will need to explore in the context of this proposal. So thank you for bringing it up. And I'm not sure that we have a real firm understanding at this moment which of these might present a collective bargaining issue and which might not. So we'll keep coming back to that. Other questions before we move on? All right. Take it away, Chris. We are now on slide eight. The proposal calls for a modification to the vesting period, which is the number of years a service member must accrue in order to qualify for a normal retirement benefit. Currently, the vesting period is five years for all groups. The proposal would increase the vesting period to 10 years. Bob Hooper. Madam Chair, if you just may enlighten me as to why on this one, it's every time we've looked at it before, it's been cost-neutral. Is there another issue that brings this forward? Nope. Just putting an idea on the table. I mean, I understand that there isn't necessarily a great deal of change that it makes in terms of our long-term liabilities. It has a tendency, I think, to be an unintended consequence in times we've looked at it before of once somebody gets five years in there, less likely to leave. That threshold is now going to be a third of their career or more. So it may very well have a personnel impact that we should hear from the commissioner on, because we're going to have enough trouble hiring people to begin with there. Yep. All part of the conversation. Any other questions on the vesting slide before we move to the next one? All right. Go ahead, Chris. On slide nine now, the proposal also calls for changes to eligibility for normal retirement. Right now, most employees must reach either an age or a combination of age plus years of service in order to retire with an unreduced benefit. A notable exception is V-Series Group C. Those members may retire early without penalty at age 50 with 20 years of service and may have mandatory retirement at age 55. But since members can retire earlier than age 55 without penalty, as long as they have 20 years of service, many do so. Under the proposal, the pension systems move to an age-based eligibility where the employee must reach the full social security retirement age to qualify for normal retirement. Currently that age is 66 or 67 depending on the year in which someone is born. The rule of 87 and rule of 90, which currently allow employees with more than 30 years of service to retire with full benefits at ages younger than 60, would be eliminated. For V-Series Group C, the existing mandatory retirement at age 55 would be maintained, but the ability to retire earlier without penalty would be eliminated. Any questions on the normal retirement eligibility slide? Yes, ma'am. Since I know I'll get a question, what is, is it a normal, actuarially determined reduction for the plan C earlier than 55? House, what are we looking at? If I may, Madam Chair, I think that's a topic of open conversation for the committee to consider, whether it's to maintain it in an actuarial reduction form with early retirement or to do away with the ability entirely. I think it's very much an open question. Thank you. As you will recognize as we go through these slides, we are opening up a thousand points of decision-making for this committee to embark on, and that's why it made sense to put a proposal on the table as a starting point, as opposed to trying to build this from scratch, because that sounds like shopping for furniture at Ikea where you come with a thousand pieces, and you hope you can figure out how to put it all together. Peter Anthony. Bed and a box. There you go. Thank you, Madam Chair. I wanted to sort of expand on your observation. I think I've sensed that the idea of the actuarially determined adjustments in the context Chris just mentioned and Bob commented on, but also in the context of buying years of service is problematic. If we have failed to anticipate actuarially correctly in the most recent past, I'm willing to bet that the calculation of how much you buy your years has also been unfortunately missed the mark as well. So I guess I would double put a pin in that subject because it's not clear that we're or our actuaries are terrifically good at putting a number on buying years actuarially. Thank you. Good point. Any other questions before we move on? Chris, go right ahead. Looking at slide 10 now. So in recognition of the fact that these changes to normal retirement eligibility would likely result in many members accruing more years of credited service, the proposal also calls for adjusting the maximum benefit payable cap. Right now, the various pension groups cap their maximum benefits at different percentages of average final compensation. For example, Visa Group C at the top of this chart accrues pension benefits based on a 2.5% multiplier per year and they are subject to a maximum benefit of 50% of AFC. That means that an employee hits their AFC cap once they work for 20 years because 20 years times 2.5% equals 50%. The proposal does not call for any changes to the benefit multipliers already in place for any members. But to address the fact that the proposed changes to normal retirement eligibility may increase the longevity of many employees, the proposal calls for increasing the maximum benefit cap by 1% for every year that a member works beyond the year at which their benefit multiplier times their years of service hits that cap. The proposal also calls for reducing the maximum benefit that Visa Group D can earn from the current 100% of final salary to 60% of AFC plus 1% escalator for each year work beyond 18 years. This would make Group D comparable to the other groups under the proposal. Does that make sense to folks? Understanding that if we are on the one slide going to ask folks to work longer that we ought to also make it possible for them to continue to get some benefit out of that. Peter Anthony. I was going to say my additional highlight of that is there are enough incentives for people to retire. It would be nice for people to have an incentive to work right up until they feel they're no longer capable or their spirit is not in it. Thanks. Yeah. All right. Next slide. We're on slide 11. So those are the key elements of the proposal that addresses the liability side of the equation. The proposal also contains items that help improve the pension plan's funding status. The proposal calls for increasing employee-based contribution rates across all groups. Currently employees pay fixed percentages of gross salary and that percentage varies based on plan. The proposal calls for increasing the contribution rate for most Visa Groups by 1.1% to 7.75% of gross salary with a lower rate of increase for Group C to bring them to 8.75% in recognition of the fact that their rate is already higher than everybody else's. The proposal also calls for increasing teacher contribution rates from the 5 or 6% currently in place to 7.25% of gross salary. And again, like with other elements of the proposal, active employees within five years of current normal retirement eligibility would not be impacted by the changes proposed to contribution rates. Questions. We'll just take a momentary pause there for any clarifying questions. Go ahead, Peter. Thanks. I just, because it was mentioned as recently as late last week, just to distinguish between changes which will change the unfunded liability as opposed to changes which will encourage accumulation through cash flow of the size, the corpus of the fund, investment fund, this falls on the side of increasing the growth, if you will, of the asset fund. And I guess I just want to be sure that those rates that you have ticked off or suggested for discussion, people may throw darts at me, but is it high enough on the sense that I also know my sense that we have been incurring expenses in a way that was not adequately covered by the, in quotes, normal contribution levels. And I just want to be sure as Roger Dumas, among other people said, the worst thing you could do is start essentially eating your capital. And I just want to be sure, surprisingly, me to ask that this is enough to make sure that those costs don't outstrip this within the next decade. Thanks. And Madam Chair, if I could dig a stab at addressing that, I think just to be clear, the additional employee contribution rates, the primary effect that would have would be paying for a greater share of the normal cost. Right now, the remainder of the normal cost that is not fully covered by employee contributions, which is roughly half of it, falls on the employee ear to pay through the ADAC payment. So increased employee contributions would have the impact of, you know, would have the practical effect of providing a little bit more of the coverage on the normal cost and relieving the employee ear of paying that burden. And just to clarify the unfunded liability right now falls squarely on the employer. Right. Thanks, Chris Bob Hooper. Thank you for your tolerance, Madam Chair. I'd like to put a pin in the previous slide because the old group F and the new group F look strange to me in terms of the new proposal versus the old proposal. And on this particular slide we're on now, none of which have a number on Chris. So I seriously hope we get cost and the other numbers that we've asked for from the Treasurer's Office because I still see a glaring difference in benefit versus cost here from an equity proposal. And Representative Hooper, if I may, thank you for looking at the last slide. I did find one typo which under new group F in the proposed that should be 1.67% multiplier with a maximum 60% of AFC, not 30% of AFC. That's exactly. Yeah. Okay. Thank you. Mark Higley. Thank you. Thank you, Chris. You had just talked about now the employee contribution being such a smaller percentage of the employee contribution. Is there any provision or could there be a provision regarding, you know, looking at it when that percentage reaches a certain point? I mean, I, you know, again, we were, I thought we were hopefully considering going forward with this without you know, running into this problem again. And I just, I just wonder if there's a percentage break that the employee contribution should be considered again. But I think that's a really open question for this committee to discuss. You know, I think for some context, you know, the normal cost for both groups exceeds 10% total, including what the employee and employer pays. So, you know, I think determining what share of that normal cost should be paid by whom is an open question for this committee to consider. Thank you. Rob Leclerc. Well, without jumping ahead here, but without jumping ahead here, doesn't the next screen, the employee risk sharing contribution kind of address that issue somewhat? Yes and no. It would bring in additional revenue. But I'm not sure it addresses the full question. I think there's several questions. Ready to move on, folks? All right. Okay. We're now on slide 12. So, in addition to increases in the base employee contribution rates, the proposal includes a new risk sharing contribution that would be assessed in addition to the base contribution rates when the health of the pension fund triggers it. The proposal calls for a tiered contribution rate where the more an employee earns, the more they pay. And it would work similarly to income taxes, where income within certain brackets is taxed at different rates. The proposal calls for these risk sharing contributions to kick in if the investment performance of the specific pension fund falls below a target defined as the assumed rate of return plus half a percent. So, in real life, this target would be 7.5% based on the current assumed rate of return. Here's how it would work. Every year, the investment performance of the two most recently completed fiscal years calculated based on the actuarial value of assets would be averaged together. If the average is above 7.5%, no risk sharing contribution would apply for the upcoming fiscal year. If the average is below 7.5%, the risk sharing contribution would apply for the upcoming fiscal year. So, if this were put in place today, the investment performance of the fund during FY19 and FY20 would be averaged to determine whether the risk sharing contribution would apply for FY22. And the process would repeat annually. Under the proposed income and rate structure shown here, the vast majority of the workforce would be subject to a risk sharing contribution of less than half a percent. Okay, so this gets us into the concept of risk sharing. And so I want to make sure that people understand, you know, at first blush what this is trying to accomplish. Bob Hooper. So, I assume even though it says proposal for the two systems and all groups that we're still keeping the unfunded liability and earnings and everything else discrete to each group and the assessment would be made out of each group independent, we're not looking at an overall state liability and making an escalation to every retiree that's covered by these two plans. Correct? That is the decision point that we will have to make if we want to get more, are you suggesting that being more refined in how this is applied across? Well, I'm not talking about within the state plans because they are unfortunately homogeneous. And I still believe that there's more unfunded liability generated by one than the other. And I'd like to look deeper into that, but I'm wanting to make sure that because it says a proposal that includes both the state employees and the teachers that we're keeping those two systems discrete. And if the teachers round up a lot of unfunded liabilities, they're not going to be bleeding over into the overall state obligation and everybody gets a boost in their contribution. Right. Okay. Yes. Other questions, comments, anybody want to jump in with a clarifying point? Rob Leclerc. Thank you, Madam Chair. I found most of my questions, so we are going to finally be looking backwards to try to have some anticipation while we're looking at going forward. In the example here, if the actuarial determined amount, let's say using the 7.5%, let's say that that isn't realized for say the two years, is there anywhere in this that that number would be addressed? I think I need you to say that again in a different way. I mean, these are all decision points that we have before us here as a committee. The mechanism for how we're basing the risk sharing is a first proposal. Yep. No, that's a very fair question, Madam Chair. Part of the reason why we're here today is that the actuarial numbers have not proven out as far as the investment earnings, correct? So using this 7.5% as an example about the cost sharing, looking back the two years, we're going to say that the plan did not realize the 7.5% return, correct? Right. So that's when the cost sharing will kick in, but is there anywhere that we would go back and address the assumptions going forward to say that, well, the 7.5% hasn't been right, maybe we should lower that number? And does that change anything going forward? Yeah, I think I understand your question, Madam Chair, if I may. I don't think there's any element of this proposal that changes the way the assumed rate of return is currently evaluated. The language that's proposed here would, the trigger is defined as whatever the assumed rate is at the time that this analysis is happening, plus 0.5%. So it may not be 7.5% all the time. It may fluctuate if the assumed rate of return fluctuates. I do think there's a great deal of risk to the plan if the decision of what the appropriate assumed rate of return is is influenced by whether or not the risk sharing contribution would be applied. I do think a different level of evaluation needs to occur on what the appropriate assumed rate of return is that's separate from the consideration of what impact that will have on contributions. And this has been a challenge that other states have had to wrestle with, but it goes back to this concept of the fiduciary duties of the governance structure. Peter and Anthony. Thank you, Madam Chair. Yeah, I was going to say, as Chris just did, that part of my good friend from the town's question really goes back to how you share or not share or vest the imposition or the adoption of a actuarially determined rate of return. Again, to cross back and forth between governance and not, but where I was going before I had to say what I just said is back to Bob Hooper's question when you have noticeably unequal contribution, shall we say, to the unfunded liability between the mega groups, that is to say, V-STRS and V-SERS, it occurs to me just as a starting proposition that it wouldn't be very, it would not be very difficult, relatively easy to essentially divide the burden of the risk proportionately to who is showing the least conformance with the expected actuarially determined pathway to reduce the unfunded liability. In other words, some will perform, I'm sure, more successfully than others as between the two, and I don't see why you couldn't, as a starting proposition say, by the way, the risk and or the trigger, if you will, to change contributions would be proportional to whoever is not performing in that proportion, if you will, between the two mega groups. Other questions, statements, clarifications that folks would like. All right, next slide. Okay, we're on slide 13 now. On a similar theme to the risk sharing contribution that we just discussed on the previous slide, the proposal also includes a shared risk shared gain provision involving the COLA threshold. Remember from earlier in the presentation that the proposal calls for setting a threshold for applying the COLA on the first $24,000 of benefits. The proposal calls for allowing the threshold to increase above $24,000 based on the CPI once the pension fund reaches 85% funding. If the funded ratio declines below 85%, the threshold would be frozen at the level in place at the time until it gets back above 85%. In practice, this would work by looking at the funded ratio and CPI during the most recently completed fiscal year. That would determine what the COLA threshold would be for the upcoming calendar year. So if this were in place today, you'd look at the funded ratio and CPI for FY20 for determining what the COLA threshold would be for calendar 2021. This provision aims to share some of the gains back to the members who would be asked to shoulder some of the sacrifice for improving the health of the pension fund. Questions? What would that raise quote unquote? If that were applied today, what would the impact be on the employees' contributions? For the shared risk shared gain model, I don't think it would have any impact on employee contributions. This would just allow the COLA threshold to increase above $24,000. So again, I didn't... So this provision on slide 13, I don't believe that would have a direct impact on employee contributions. This would trigger the increasing or maintaining the $24,000 COLA threshold. Oh, okay. I'm unfortunately still back to slide. Rob LeClair. Sure, there's a good answer to this, but why would we not want the plan to be 100% funded? Why 85? I think that's an open question for the committee to consider. I think there's a wide range of opinions on is 100% the ideal number or is there another number that might be slightly lower, but makes the liabilities easy to manage on a budgetary situation. So I do think it's a fair question to ask. I think this can be set any way that the committee would... Any direction the committee would like to take, but if the fund is reaching 85%, and I'm painting with a real broad brush here, but generally your unfunded liability is not going to be so great that it's completely unmanageable to pay off over an amortization schedule. And just for folks who are following along at home, can you remind us of what percent funded each of the two systems are that we're looking to hear? Sure. The V-SER system is 66% funded right now. The teacher system is 51% funded now, and those ratios have continuously declined over the last decade. So this would be an aspirational target to to substantively improve the health of both of those funds. Follow-up question, Rob? Well, I'm certainly not trying to be the least a little bit difficult here, but I'm thinking that wouldn't the aspirational target look to be 100% funding because just hypothetically, if I had a plan that had a billion dollars in it, even at 85% funding, I'm still $150 million dollars arguably unfunded, aren't I? You are. And I think going back to, I think it's an open question for the community to consider, and the length of time it may take to reach 85% funded, to what extent will inflationary pressures transpire between now and then, I think is another consideration as well. Okay. Yep. Thank you. Peter Anthony. Thank you, Madam Chair. Just to go back a couple of weeks, I think I was a bit worried in the context of Mr. Pelletier's first presentation about risk sharing of being overly sensitive in reacting to performances and overshooting and undershooting, and I think the answer to my good friend from the town is, if you were at 100%, what would you say if you cross that threshold and you all of a sudden were at 110% percent? That is to say, more than cover the liability, what do you do? Write refund checks? You know, I think having a cushion but being close is much, much, much preferred, so that there's room to maneuver, so to say, but you don't over collect. Thanks. Other questions, comments, clarifications? John Gannon, I thought maybe you had your hand up earlier, but perhaps someone else already made your point. No, I was just going to note the funded lot ratios that we have and that the 85% target was something that I think is achievable whereas 100% might not be achievable in the near future. So I think that's just some of the thought is that this is something we could maybe hit versus whereas 100% might be some time way in the future, but you know, this is something that could change in time if we do achieve 85% funding is to move that number up to still encourage us getting to a full funded state. John just walked into what my comment was going to be. Fundamentally, I believe there's no such thing as a fully funded retirement system. You might hit 100%, but because you're going to turn around and make adjustments to the soup over the course of the next year, that 100% as it has done in the past could turn into something very different very quickly. So we got into this bind because former treasurer, former chair of the Appropriations Committee and a couple of governors said, oh, we're at 100%, we didn't need to worry about paying this bill. And that's contributed mightily to where we are today. So 100% is no magic number in my book. Questions, comments or clarifications? All right. Okay. So on to slide 14, in recognition of the importance of addressing the state's long-term liabilities and in combination with the other elements of this proposal, the proposal also calls for the state dedicating a total of $150 million above the ADAC payment to pay down the state's four major retirement liabilities. By investing these significant one-time revenues, those funds can grow with interest during the remainder of the amortization period. And as those funds grow, they help to close the unfunded liability while relieving some of the future budgetary pressures caused by ADAC payments. And over time, the funding ratio of the plans will improve as those funds grow with interest. Slide 15, here is a summary of the preliminary fiscal. Hold on, I've got a hand up, Hooper, go ahead. No, today you've got a pain someplace because you mentioned the four major retirement liabilities and I always want to take exception to the retirement system versus paying for retirement benefits because we seem to be talking about the retirement system here. And when we start to talk about this ADAC and OPEB eating into this $150 million, the significance of what we're going to do here is potentially reduced a lot. I mean, as we took testimony on, OPEB is an obligation or OPEB is a discretionary thing. Our retirement system is an obligation to pay. And I think Wall Street looks differently on that. Stepping off my soapbox. Appreciate it. Come back with the rest of us. Go ahead, Rob. I swear there was no coordinated effort to make this the Bob and Rob show. The $150 million that we're talking about injecting into this is that over and above the escalating ADAC amounts that are on that actuarial for the 2038? Yes. So that's over and above the amounts that are going to be escalating going forward as well. That's over. The proposal calls for that funding to be over and above the ADAC. And by dedicating additional one-time funds, the amortization schedule of the unfunded liability between now and 2038 will likely change as well. That was going to be my next question. And would it be reasonable to expect some return on that investment to affect the ADAC payments going forward? I believe that would be a reasonable expectation. Great. Thank you. All right. Other questions, comments, observations, right? Cruising right along. All right. Slide 15. Here's a summary of the preliminary fiscal impacts from the proposed revenue increases. As I just mentioned, the proposal calls for $150 million that can be used to address the four major retirement obligations, the pensions and the OPEB for state employees and teachers. For some context, though, for every $50 million you invest today, that could grow to $153 million by the 2038 amortization date if it consistently grew at 7% every year. And each one-time increase of $50 million above the ADAC would by itself immediately increase the funded ratios of each pension plan by more than 1%. But the impact of this investment will grow over time as the money grows with investment gains. The proposal also calls for increased base employee contribution rates, a 1.1% increase for most visa's employees, and a 1.25 to 2.25% increase for most teacher members. Although the teacher proposed increase slightly higher than that of the state employees, the proposed rates would bring the teacher contributions closer in parity than they currently are. And the teacher system is significantly worse off financially than the state employee system is. For some context, every 1.5% increase in employee contributions generates approximately $2.8 million for visa's and about $3.3 million for the teacher plan. These numbers will grow over time as payroll grows. If you extrapolate out from these estimates, the proposed increase for visa's would generate approximately $5.8 million in additional revenue to the visa's pension system, and the proposed increases on the teacher side regenerate roughly $12 million. And these are preliminary estimates based on the size of the overall payroll. They're in the ballpark, but they've not yet been adjusted for the exclusion of active members who are within five years of normal retirement eligibility. It's a little trickier to model what the future revenue would be from the risk-sharing contribution structure because salaries change every year, and we don't have a crystal ball to know which years the fund's performance would trigger the contributions to take effect. But the proposed structure would result in an effective risk-sharing contribution rate of less than half a percent for the vast majority of the workforce. Questions on that? A lot of words, a lot of numbers on that slide, but just want folks to have an understanding of roughly how we calculate the impacts of these changes. And obviously when we come down to a more final decision about how we want to move forward with us, we will cost it out again if we've made significant changes. Oh, look, it's the Bob and Rob show. Bob Hooper, you got your hand up first. Jim has us running a little game on the side here, so we didn't get into March Madness. We're getting into this. So Treasurer has repeatedly, first let me say I have no objection to pre-funding OPEP at all. I think it's a wise fiscal decision for us. I just don't know that this section of federal fund mix-up should be used for. Treasurer has said a lot, and I believe it to be true, that raising contribution rates doesn't have that much of an immediate impact on unfunded viability. That's correct. Is there a threshold where that tips and it actually starts to have a more dynamic impact than the smaller amounts that we're talking about? That's a great question. I think that threshold is probably higher than any of the rates under consideration right now, because the employee contributions fund the normal cost, and not the unfunded liability. So these additions would pay for a slightly larger share of the normal cost, and it would relieve some ADEC pressure on the employer, because part of that ADEC payment is, in addition to the installment payment on the unfunded liability, it covers the remainder of the normal cost that employee contributions are not sufficient to cover. You just tipped on the iceberg that I want to get to. Traditionally in this, when we talk about differences in the actuarial evaluation at the end of a fiscal year, the interplay between parties that are paying, as one goes up, the other has a tendency to go down. Because it's basically a cost shift, not necessarily a cost share. So if we're looking in the future to have the unfunded liability decrease as quickly as possible, why are we not throwing something in here that seems to establish that as contributions from employees go up, it's matched by contributions from the state so that we're both kind of reaching our goal, and all this burden is not falling on the people that we're actually paying to work an extra 20 hours of overtime so the unemployment checks can go out. That makes sense? I think that long story short, the remainder of the bill gets put on our desk, and we have to figure out how to pay it, whether you call it our share of our equivalent pain with the increase in the employee contribution, or whether you the rate simply remains. The point I'm trying to probably and articulately make is that we have a tendency to stay level when we talk about the contribution interplays. It would be nice if we raised one side of the seesaw, that the other side of the seesaw went up also. A lot of times when one group's contribution increases, it offsets the burden on the taxpayer, which isn't a bad thing, but it doesn't move us towards fixing the problem as quickly as we could. Rob Leclerc? I'm going to have to reformulate my questions here, Madam Chair, so I'll raise my hand again going forward, sorry. No worries. Peter, Anthony. Yeah. In the back of my mind is what's the way to manage the pressure on the general fund as we accomplish what we hope to accomplish. I'm thinking along Bob's lines of whether, for instance, in pre-funding OPEP, the Treasurer had a plan which included what I'll call balloon payments in the near years, I think it was three years, to put in some excess 10%, I think over what normally we would. And I'm just wondering whether or not we can't digest that balloon payment in part of our overall approach so that we go to the 3% glide path sooner rather than later. I say that because it leaves more room in the general fund to make extra ADAC payments say in year two or year three without doubling up, so to say, on top of the 10% that the Treasurer had in mind hitched to her ODAC submission. OPEP, excuse me, Submission. I'm trying always to think of ways to have room to maneuver so that when we get a successful year, we really can bank a lot of it if we choose to. But if we don't have a good year, obviously, we don't have the choice. So I'm just saying let's leave as much latitude in year two, three, four from when we adopt whatever we adopt so that we can essentially, as Bob says, when the contributions go up, we can also bump down, so to say, the unfunded liability by an extra contribution. Thanks. Thanks, Peter. Rob LeClaire. There, Madam Chair, I think I have my questions formulated. One, this $150 million, is that all inclusive? In other words, is it including the 20 million initially that we were talking about for OPEP or is this geared primarily towards the pensions? Because I see that there is a line here that says funds could also support funding of OPEP. So are we talking 150? Are we talking 170 million, potentially? So, Chris, why don't you break that down a little? Yeah, I would have to clarify with my colleagues in JFO, whether it's 150 or 170. I can tell you that the 150 is included in the big bill language that was just introduced yesterday. And the language that that framed it did not designate it for any of, you know, any dollar amounts for the specific buckets. You know, I think that the funds were reserved that could be used for some or all of the for retirement liabilities that were discussed. I would be interested in answering that question if we're talking 150 or 170 million. I realize it's only 20 million, but it might be good, right? And the other question I have, and I think it's a little bit along the lines of my friend from the city, in doing what's being proposed here, I guess on page 15, where we increase the initial payment by 150 million, there is an increase on the employees for lack of a better expression side of things. Where in the, I guess, the 2038 amortization schedule, do we start seeing an impact on the ADAC payment as far as how much of it's got to come totally out of the general fund versus how much of it could be offset by income from investment? Does that make sense? Do we know that? Because has that been done? Do you know, Chris? I'm trying to understand your question. I'm not sure that specific analysis has been run. I can tell you that the unfunded liability is recalculated every year, and investment performance goes into that calculation from the prior year. Statutorily, the unfunded liability needs to be paid off by 2038, and the statute stipulates that the payments increased by 3% a year. So I think the intent behind that was to try to make sure that they remain somewhat level as a percentage of payroll, and they grow as the overall growth of the budget from year to year. But when you look at the valuation studies every year, the actuaries will take a snapshot in time and look at what money do you have right now, what was your investment performance, and how big is the gap? And they reprogram that amortization schedule every year. So that's part of the ADAC payment. The part that's a little harder to project out into the future in a great distance is the normal cost. So you'll typically see in the valuation studies, they know what the unfunded liability is and how many years there are left to spread it out over, but they will only provide an estimate for the normal cost for a much smaller window. Right. But that 3% increase in the ADAC payment, that didn't anticipate 150 million plus one-time infusion of capital either, did it? It did not. And that's why these numbers are recalculated every year. Okay. All right. Thank you. Ready to move to the next slide? All right. So slide 16. Bob Hooper has his hand up. Well, following up on my friend, the questioner's question, if we put in this 150 million dollars, we're going to see a reduction next year when the actuator comes back to us and says what your overall normal and unfunded liability cost will be. Right? It would likely show up in the unfunded liability more so than the normal cost. And I think there's a lot of variables that I wouldn't say it will necessarily go down because nothing's guaranteed in life as we well know, but the investment performance and the experience factors will all go into that calculation. Sure. But those things being equal, the bill that appropriations is going to get next year should indeed be significantly lower than the one they got this year. I think it depends on how you define significant and the timing of when the funds are invested. I think the impact of it will grow over time as the money grows over time. But yeah, I agree with you that I think I would hesitate to say it's guaranteed to go down by X. I think we would want to see what the actuaries put forth in the next and evaluation study that includes the impact of those funds. Thank you. Peter Anthony. I, Chris just concluded, I was going to say because we've decided to go to three years intervals instead of five, we're going to see a new one relatively soon. And depending on what we do with the proposal before us today, never mind the government aside, but the benefits side, that will figure into the revaluation in the next year, year and a half. And even if we did not do anything but the benefits, that should show up in the re-figuring of the actuarial projection of the unfunded liability. Never mind the ADAC payments. Thanks. All right. Ready to move to the next slide. All right. We're almost finished. Slide 16. These charts show you some preliminary actuarial modeling around the fiscal impacts from the proposed changes to retirement plan design. The cumulative impact of the changes is on the far right side. And you can also see the impact of each specific proposal for lowering the ADAC payment and accrued liability. These models are preliminary. Although they include the impacts of excluding all actives who are within five years of normal retirement eligibility, there are a few elements of this proposal that were not incorporated into this model. Proposed changes to visors group D are not included in here. And those changes would generate some additional savings beyond what's reflected here. The proposed increase of the maximum benefit cap of 1% for each year of service worked beyond the current maximums is also not factored in. That will likely result in a slightly lower savings than what's reflected here in the age-based normal retirement estimates. And these models do not factor in the impact of the additional employee contributions that are proposed, which would generate approximately, you know, $5.5 million for visors and $12 million for the teachers and would further reduce the ADAC beyond what is shown here. So I think these are, this is my disclaimer of saying that these are preliminary numbers that, you know, I think further modeling based on where the committee wants to go will tighten these up. But these are pretty solid estimates about dollar impacts cumulatively of some of the major elements of this proposal. Moment to digest that and give you a chance to raise your hand. Robert there. Okay. So I believe I understand this. So this is strictly around the cost savings that you would realize based on the prior recommendations. It has nothing to do with the anticipated revenue increase from the investment side. Correct. Good. Very good. Thank you. Other questions? Just to keep up, Madam Chair. Yes. I was digesting numbers and I didn't hear if you said why Group D is eliminated from the top chart other than complexity. I'm sorry, Madam Chair. Group D can be added to the model. It just in order to eliminate, in order to limit the number of scenarios and the complexity of the work, they weren't included in the first round. They can certainly be factored into subsequent work and Group D is a relatively small universe compared to the overall system. I think it's, you know, don't quote me on the number, but I believe it's less than 60 members. So the impact will be there for equity purposes, but the impact for financial purposes will be tiny. Correct. That is a good way to summarize that. Yes. Other questions? Go ahead, Rob. Sorry, I should ask this the first time. Were you have the cumulative impact of the changes? Let's say if we go to V-SIRS, the ADEC, the minus 34.7, that's an annual number. That number is based on savings based on what the FY22 ADEC is currently projected to be. And then the savings under the cumulative for the liability of the 200 and looks like 10 million. Is that based on the 2038 amortization schedule? Everything's based on the existing amortization schedule and these numbers all show the differences from the FY22 values. So just for some context, recall on a previous slide that for FY22, the ADEC for V-SIRS was projected to increase by $36 million over FY21. This is essentially saying that out of that $36 million increase, $34.7 million of it would be reduced. Give or take based on these preliminary numbers and same type of equation for the liability increases. Very good. Thank you. All right. Next slide. So slide 17. Let's wrap things up. Preliminary modeling shows that the full range of proposed changes to V-SIRS would lower the ADEC by roughly $34.7 million and the V-SIRS accrued liability would be lowered by roughly $210.5 million. And again, these are all preliminary estimates. For the teacher system, the full range of proposed changes would lower the ADEC by roughly $45.7 million and the accrued liability by $308.6 million. And these are solid but preliminary estimates subject to the caveat side as mentioned. But overall, when you factor in these changes to the benefit structure and contribution rates, the increases to the ADEC from FY21 to 22 for both systems due to assumption changes would be largely eliminated. And the unfunded liabilities would be significantly reduced by more than $500 million in total across both plans. So that's the end of my overview and the walkthrough of the proposal. And if any members have specific questions that you haven't already asked, I'm happy to answer them. And with that, I'll turn it back over to the chair. Thank you so much, Chris, for helping to present this proposal. Let's do a few questions and then I'd like to make sure that we have a little committee discussion here about how we move forward with the next steps of hearing from folks. So, Bob Hooper, go ahead. Thank you, Madam Chair. And I apologize for taking up so much time. But I'll take up a little more. In the context of what we're doing here, we're basically doing a corrective action. If I have an infection, I take an antibiotic for a while and then when the infection goes away, I stop. These are pretty drastic changes. I think they will impact our ability to be competitive in the ability to gain workforce members, nurses, specialized computer programming people in the future. And when I talk about the future, I'm talking decades after we're gone. I think we should talk about building a sunset of some sort into this because this is a corrective action. And it's dealing with a particular problem that we had, which is an unfunded liability that is excessive. And there might be a point, hopefully in the future, where the unfunded liability goes away. And I'd like to at least consider this not being a remedial thing that continues to drag us down. Thank you. Peter Anthony. Thank you. I'm kind of going a little bit aware Bob went, although not quite as immortal as I think he is, in the sense that Do you say immortal? Immortal as in demographics, you recall. Anyway, it occurs to me. I know the Madam Chair and Vice Chair want the proposals in the two buckets that is to say governance and the revision in both the contribution side and the benefit side to sort of follow the same legislative path. I'm what I'm, I guess I'm given the conditional language of Chris, I'm saying to myself, you know, if we did do what you're suggesting, and we did have the revised government structure, and we did have a commission that essentially had plenary authority, I really would hope we would constrain that in some way so that we have a little time to see how we're doing on the side that we just finished the 17 slides on. Because I would hate since we made a drastic move from 7.9 to 7 in the expected rate of return, I would hate for the new governance structure to all of a sudden adjust that without having seen whether or not in the coming say three or four years, assuming we are adopt a robust version of what's on the table now to sort of see how that sugars out before we try to, you know, two adjustments chasing each other so to say would be unwieldy and unwelcome and in some way in some sense mystifying. That is to say not helping transparency and public faith support and confidence. So I hope we put the brakes on the revision of the actuarially determined rate of return for a bit since we just drastically changed that and see whether Chris's the most rosy picture or less rosy picture follows from what we do on the benefit slash contribution side for a few years. Till we get some settling out so to say thanks. Tonya Bihowski. Thank you, Madam Chair. I am sort of looking at this and it feels like we are changing everything all at once and the scientist in me wants to sort of pause that. I mean we're asking if we won't know what made a real impact. We won't know what impact it's going to have because we're asking people to work longer, pay more, get less. We're going to pay more. It just feels like a lot really quickly and sort of on what Peter is saying we're already making some changes and it seems like it makes sense to go slower and see what impact those changes have before we put forth such a deeply impactful plan that impacts our capacity to attract workers and for our workers to it just impacts every aspect of this program for them. It just feels like a lot. Other questions, comments? Mike Marwicky. Yeah, I hear that piece about going slow but I think what I've been hearing through all this is this situation is not going to get better on its own and waiting is not going to help the unfunded amount get smaller and is Chris still here? So I'm going to admit my own lack of expertise in this matter but that was pretty much a general statement. Is this going to get better on its own if we wait? I do not believe it's going to get better on its own though, sir. Can I just follow up really quickly? I'm not suggesting we do nothing. I'm suggesting we maybe don't do everything that we use sort of a more measured approach to choose something that has an impact and see what impact that has before we throw everything at it. I think I blipped out there for a moment. Last I heard you're in and out. Can you hear me now? Yes. All right. I think Mike McCarthy was next. Yeah, I hope my connection is going okay, Madam Chair, because I froze for a second too. Thanks. So yeah, I really appreciate all the work that went into laying something on the table. I'm looking forward to taking the time to look at each one of these policy levers and to hear feedback on it. My reaction to the idea that it's sort of a lot is that it seems like instead of trying to find one silver bullet solution, there's a lot of levers being pulled a bit in order to have a cumulative impact that's actually makes a difference on the huge problem that we have. So I'm hoping we are able to make that difference and that it does pay off for the kind of impact that we want in terms of predictability and reliability and for people to be able to count on these systems working in the future. I also had a thought when we were talking about governance that I really want to make sure that we can count on the assumptions like the rate of return, for example, being made based on what we think the assets are going to earn rather than putting the choice in the context of a bunch of other political decisions that are being made about plans, etc. It's like if we're empowering a group to say what do we think this rate of return is going to be and they're factoring in a whole bunch of other things in that thinking, then I don't know that we should trust that rate of return. So I appreciate the combining of both the governance and some of these plan changes as we move forward. I'm Gannon. Thank you. Just to follow up on Mike's comment, I do think we need to look at both sides, governance as well as benefit changes. On the governance side, if we don't start meeting our assumed rate of return and our other actual real assumptions on a consistent basis, some of this work will be for naught because they will still have increasing unfunded liability. To address Tony's question, and the Treasurer has talked about this, in order to pre-fund OPEP, we need to achieve a certain level of savings in the pension system. If our goal, and we can decide as a committee that our goal is not to pre-fund OPEP, we do need to achieve a certain amount of savings in the pension system in order to do that. That is something we all need to think about, is what ultimately do we want to achieve here? For some people say, well, there's no contract for retirement healthcare, but some people may view that as a very important component of their retirement. I think that is a decision this committee is going to have to make. We could take it very slow and only achieve a small amount of savings in the pension system, but then you have to look at what we're going to do with respect to OPEP. Thank you. All right. Questions, comments, clarification? Bob Hooper. Chris, when we look at the preliminary physical estimates slide, that excludes contribution increases. Correct. That's correct. The contribution increases are not reflected in there. The impact of those would move those numbers higher. That's because the contribution increases, it's a little bit more of a straight mathematical exercise to figure out how much money that's going to generate. You'd see that show up in the ADAC savings. You would not see that show up on the liability line. Okay. I somewhat agree with John. We really, it is a really responsible thing to do to address the OPEP stuff. I just think it's confusing the whole process here to have them both thrown into sort of the same barrel. We could throw a new bridge in for that matter. I think it would sort of be the same thing, but pre-funding new bridges is a good thing too. Hal Colston. Thank you, Madam Chair. I think this is a very complex exercise, as we can all attest, and I think it could be interesting if we were to have some scenarios of how this could play out. All of a sudden, like a dashboard presentation so that we can see if Plan A or Plan B or Plan C or D, how they compare and have a better sense of the impact of what these changes would look like. So I'm just wondering how that could be accomplished, but that would really help me kind of get my head wrapped around it in a better way to see how we actuate these different levers and how it really plays out. So if I'm understanding your desire for information as you want to know, is this a little lever? Is this a big lever? Is this a medium-sized lever in terms of its ability to do work on the ultimate problem? Exactly. Okay. I can see value in understanding that, and we can work with Chris to try to figure out how to put some relative scale on the levers. Right, Chris? And if it's helpful, it may be helpful to review this proposal next to the Treasurer's Report from January 15th to refresh your memory on sort of the scale of impacts. Recall that Chi put forth several scenarios with really the goal of trying to reduce that FY22 ADAC and liability increase back down to FY21 levels, and you could see a range of options that she asked the actuary to cost out and what that translates to in the dollar terms. So that may be a helpful exercise for putting some context around what this proposal looks like in relation to some of the other levers that have been explored. Thanks, Chris. Sam LaFave. Thank you, Madam Chair. As a hands-on learner, that would be very helpful for me, even though I know it's not going to be hands-on, but just seeing like if you do this, this is what you see. And I understand reading and comparing side-by-side is helpful, but again, for someone that likes to see the things in front of me, that would be very helpful. I know the other day the member from Barrie Town asked to see like basically, you know, what Rep Holston just asked for. Like, can we see it not in real time, but in a very good estimate if we do this versus this, what's that going to project out to? And I think that would be very appropriate for us to be able to obtain, because I appreciate the proposal coming forward, but I feel that if we want to tweak something that we need to be able to also have the resources to see what it's going to happen, like maybe some of the proposal had to get here. Thank you. So, Chris, maybe we can work on that comparison document for some point, a few meetings from now. And I don't put a time on that because I have no idea how much committee time we're going to get relative to the backlog on the floor. And we do want to hear reactions from the impacted folks around the governance proposal before we come back to this. And I think it would be helpful to hear another round of reaction to the plan changes before we come back to really understand. So, in other words, you have a day or two, Chris, before we're going to need to see that. John Gannon. Thank you. So, yeah, it would be nice to have a side by side with some of the treasurer's proposals just so we can see what those look like. But slide 16 does show the impact of various levers that we're pulling and what their impact on ADAC is and liability. So, you can at least take a look there to see what the various impacts are. Now, some of them, when they're in combination, have a different impact than if they're by themselves. So, that's something we have to keep in mind. So, if you pull one thing out, it can actually impact other levers as well. Peter Anthony. I guess I'm all for trying to create a sort of matrices of if you do this, this is the savings that you accrue. But I must say, I'm speaking consistently for the voice that said, you know, if you see an inequity, now's the time to fix it, which with all due respect to my colleague from Essex, you know, if you don't do that, you'll say, gee, I wish I had done that in the process of. And so, it looks like we're doing a lot of things. But frankly, some of them are done for fairness reasons, not because they're going to bring us a lot of money. And I'd hate to throw out a fairness one just because it's not going to buy us but a million and a half in ADAC savings. I just think this is one of those once in a lifetime chances. And as you can see, the inequities have sort of crept in over 30 years of building pension funds history. And that's two, that's, you know, it's just the way the history works. And once in a while, you have to have a sort of reboot as it were and say, does this really make sense? And I think we're at one of those moments. So I still want to protect the equity element in our work. I suppose that's my point. Thanks. I think it's fair to say we suspected that that equity was important to folks and the decision of whether we stick with this or make changes to this aspect of it, certainly is one of the decision points on the table here. Sam Lefebvre. Thank you, Madam Chair. I just wanted to respond back to Vice Chair's comment. Mine was more towards what the end of you, which you were saying was if something is removed or example of just the vesting, you know, the proposals from five years to 10 years, but what if we said just seven? What would that look like? Just things of in real time changing? Not what we already have out. I appreciate that slide and I have looked at it, but it was more of if one thing changes, how is that going to trickle out to the rest? So I appreciate it and thank you very much. All right. So any last questions? Mike Marwicky. Thank you, Madam Chair. I'm not sure whether the group is ready to wrap up or not, but I have a commitment to meet with the school group now. So I'm going to take off for now and I will see you later. We do have a number of folks who have noontime meetings and I want to respect that we also have a caucus of the whole going on to help folks familiarize themselves with the capital budget and the big bill. So Steve Howard, thank you for jumping into this meeting. It was a little difficult to predict how we would pace ourselves getting through these two different proposals this morning. And so since you're here, I want to just reiterate what I have said to the committee previously about our plan going forward. We would like to hear from BSEA as well as the teachers union and the troopers union and the judiciary on the governance structure changes. We will get to that this afternoon if we are off the floor by four o'clock, but if we are on the floor later than that, which I understand there's a fair chance we will be, then we're not going to come back to committee at dinner time, for instance. So we are a little unsure of what time we'll get back to committee and what time we'll get to each of these steps, but we would like to hear from the employee groups on the governance proposals first, then we'll hear from a couple other perspectives on governance. And then whenever we can, we'd like to get back to hearing a reaction from each of the groups on the plan design proposal. Does that make sense, Steve, in terms of how you all will fit in in the next steps? I think so. So what I think I heard you say is that you are going to hear from us this afternoon. Are you still planning to hear from us this afternoon? If we're off the floor by four o'clock, yes, but if we're not off until after four, then I don't think that gives us enough time to really hear a first blush reaction from everyone. A little discombobulated because I've got, I just popped out of a meeting because they said they wanted, you wanted to hear from me, but I wasn't sure what you wanted to hear from me about. So we would like to hear from folks on governance first, and we'll go through the first round of hearing from folks on the governance proposal, and then we'll come back to the pension plan design proposal, which, you know, at the rate we're going may not be till Friday. All right. So a number of people are texting me that they have new meetings and need to go. So thank you all for your long attention to this and your hard work, and hopefully I'll see you in committee this afternoon. I committee just for your information. We may try to start tomorrow morning at eight 30 in order to buy ourselves a little more time since we since we have judicial retention. So keep an eye out. And I'll ask Andrea to email everyone a revised agenda if we make that change.