County month in december well the market becomes 70 most old is the tide for the longest in hist makes it the performance has rebounded were slightly positive by a little bit more than one percent of the plan and the market is getting back to the same in the last two days the searchers with coming along it there is progress being made im sure youre aware of we hiefd eunice our senior portfolios manager for the fixed income and the 80 other two or progressing at apace that pays were trying to accelerate it is what it is and im going to turn it over to the board to ask if there are any questions. Questions. Seeing none ill open up for Public Comment on item 8 no one ill close Public Comment thank you for the report item 9 please. Item 9 discussion items for the Committee Report commissioner bridges. Thank you the Third Committee met on the third we were able to address several issues were seeking today for the phone bill restriction of the city and county for the Deferred Investment statement and further reporting and approval the russel uncommon update and review a board approval for the da replacing the funds offered when the funds were implemented the we utilized some fund they are over to replace it is cover that on the review funds and last thing well be covered for full review an update on gold maker for the phone bill i think other than that the last item was the meeting on the Mission Statement well go back to the committee for a fallout approval port authority. Questions of the chair. If not ill open up for Public Comment on item 9 seeing none ill close it thank you very much for your report. Item 10. The investments 2014 for the update. Good afternoon karen with the Workers Compensation russel was retained in 2010 to monitor the sf d custom toward date we last reviewed the glide path in 2013 and changes made in early 2014 im sorry the glide path has been updated since the 2013 we have john and russel to provide a brief presentation and answer your questions. Go ahead. Thank you for your time i think well start off with a quick comment. Were happy to announce on those december 3rd when the Stock Exchange completed the russel investment theres a exhibit no. 7 but the products youve purchased and received has not changed im going to turn it over to john to walk through the glide path any questions you want to address . Great well karen gave you a quick overall of the deferred contemplation plan on slide see 3 you ill not cover anything additional in 2011, we did our first review of the glide path in 2013 normally we wouldnt have an update but make a refresher but were prologis ccig Oakland Global an update to the glide path this year bus of a competitive review we wanted to bring forth the lastly recommend only the conclusion of that research were seeing a broad update normally we wouldnt have a frequent update to the process a quick refuse on slide 4 the objectives in modeling target date their at t Park Building the solution to income the financial and Human CapitalHuman Capital purposes into the plan we also have a reference around the objective of income rr79 and high probability of our glide path the secondary are the graphs and the contribution and the replacement ratios we also based assumptions around our model to discuss around the misdemeanor population with the plan but factoring the safety and test the safety for the glide path slide 5 is the detail i wont go 0 into a ton of detail but do give you a sense we collect the democrat graefbz on the safety population and conduct independent analysis of the populations we create custom income replacement ratios and have the approved list of classes weve worked with both los angeles and the board open for approval we include those in the modeling process and incorporate russel capital and test even though effectsness both for the populations and its primarily built around the miscellaneous population so any questions surrounding those. Questions no, go ahead. In terms of the 2014 analysis ive mentioned we had or we are proposing an update one year later when normally we wouldnt will have a implied change but to the implementation of the summary on slide 6 that talks about the main conclusion of the research one we handicap an extinct review from outside council 6 oufsh our interpretation of the requirements and upon this review from the xrirnl Council Meeting we incorporated the early on glide path that is supportive with our modeling and have a charter that shows the benefits where; right you have the pathway for additional risks so this is port of the recommendation where were urging the replacement starting point the 2012 a on study that incorporates replacement rates information about the National Averages we incorporate moved in our modeling we incorporated a in the income replacement target shifting to a target that includes the cost of living adjustment before we had annul assumptions someone that is retiring will have a target fixed on their 5 year salary now were incorporating a cost cost of living assumption as part of the impact of the statistics were incorporating we also rutdz the allowance with the research of the Employee Benefits were looking at the distribution of possible health care extension before we use a conservative but a 90 per actually now were reducing that to something that is practical in the 705 year per actually, thats incorporated into this research so all of that went into our recommendations and modeling for a new glide path for 2014 you see slide 7 shows the distribution or the participation assumptions both the 2013 analyzed and the 2014 analysis we did not collect new information on collected the demographics from the plan last year, we know the population has not changed that dromoso we will rereview that again in a couple of years time but for 80 this analysis we didnt many of the items are exactly the same the first 3 in particular the only few changes the model contribution rates has gone down we discussed the model and medium contribution rate they tend to be a low probability of success so we incorporated a rate for those planters would have remarkably high raise for success weve slightly louder them and at the bottom you see a defensive between Social Security and is pension fingers in terms of their contributions to the income replacement objective the numbers salute you numbers are not changing what is changing an adjustment to reflect the cost of the income targets so the values themselves has not changes the so any questions on what were obviously too the 2013 and up . Okay. If the look at slide 8 this is a detailed contribution of how we come up with the objectives i wont go through every portion and daily unless you have questions the net result if you looked at slides 8 and 9 were seeing agree slightly reduced hurdle for the replacement but the hurdle t is different it didnt include a cost of living adjustment thats one difference i will highlight between slides 8 and 9 slide 10 shows you the impact or the recommendation in terms of the aggregate level of risks taken in the path and the blue line is the current path and it is shown in gray it incorporates a higher capped assets at 93 percent but the ending allocation is relatively similar from where we were last year about 39 percent if you look at slide 11 it gives us a sense the income impact from the 93 percent that shifts out so we elbow that is supportive of taking on risk earlier on the the glide path so we have a captain forensic slide 12 is the distribution of outcomes with we see with we simulate the possible results using our meaning contribution rates and model contribution rates this is the district of columbia source income relative to the total in case the total income includes pension and Social Security if there is any and this is the target for the targeted funds the distribution results and the fact that the income replacement as i mentioned earlier the target of 16,000 on an annual basis is lower than what we see for the medium or lower than the target for the medium contribution rates thats one reason we model with the model contribution rates a low possibility of success with the low values transcribed but generally their higher like the pension and Social Security that we are incorporated into the process any questions on slide 12 yeah. A couple so to cut to the chase that in the year 2014 analysis 78 percent of the income would be replaced versus 81 for the previous year. Thats just the starting point so we use baseline from an independent report and make adjustments inform determine how much you would need from the dp plan if youre looking for youll need it in total. In total the income replacement is 18 plus Social Security and the denied at 32 those are the 3 that will add up to the total that is what the comparison is. Is that better or worse. Before or after its a relatively so in terms of the total income replacements it will come down because of the change in health care assumptions. Thats down a little bit. Thats from a on hewitt but our assumption on health care. Okay. So the other issue on page 11 ive never seen this as a access a square foot root of penciled what is the units of that metrics. It is our modeling process uses the question is what are the units. Their dollars values of the shortfall of the potential shortfall so they are when our incorporating the when your looking at the shortfall analysis when you simulate. I only want the units if its the square root shouldnt that be dollars. No, its the dollar amount but it is after youve square rooted the value that not the shortfall value. What are the unit for variance. So variance i mean this is the square root i mean the square of the the answer is you measure percentage and so the units are one hundred percent square i only want the unit 0 if this is in square root the answer is square rooftop of dollars. I believe see ill have to check. Ive never seen those units before if you could clarify that. The Research Papers weve published the update in september of this year and the original in 2007 we published use the exact same modeling process sowing soy weve been consistent with the 7 this isnt new but confusing to understand i appreciate our question ill get back to you with a precise response. Beautiful. Thank you. Any other questions . No back to you. So in addition to the review of or the miscellaneous purposes you can see i wont into go through the detail youll see the similar charts analysis for safety i can understand both from the model and the from a safety prospective and from a miscellaneous problematic second portion of the glide path analysis is the allocation thats like 17 if you so part of our research it on the target date model inside was an incorporation within our model to look at the impact changing the process over time and so we can understand the impact from an income replacement prospective of taking risks too the assets over 7 8, 9 so part of the analysis we gone through it looking at taking higher of those areas to ask the process that will provide higher he return such small Capital Markets the results of the modeling is you making a recommendation that we are increasing some of the risker sections in the glide path and incorporating more things to increasing the difference indication at the end of the glide path so for modeling its suggested you have a lot of capacity forensic early on in the career wear suggesting to have a time horizon to take the risks for the forecasts and expecting higher rates of return so relative to our former Asset Allocation and reduce those offer weighs relative to a capital basis down to the point of retirement the intent to accommodate capital early on and improve the defying indication so thats incorporated as part of the glide path in addition to fixed income were reducing the weighed to the fixed income recommendation thats relative to our forecast for Interest Rate that are were expecting higher Interest Rates over the next couple of years thats starts to could we consider its on target which we expect to be in the coming years in addition we have look at inflation to so the benefits in its current form is less necessary so our recommendations includes the shorter during yes within the fixed neckline. Slide 18 is is a sense for the forecast and returns for the capital preacher we have a dash blue line to give you a sense of lower expected return and oftentimes somewhat voluntary outlet within the glide path refresh were take a look risks or taking more risks early and blending in the prozacs especially during the medium tier growth assets so thats the intent to show the differentiation between the slide slide 19 is a sense of the allocation involves from the total portfolio throughout our career and slide 20 is the growth assets are involved so the reatlantic component are coming down were taking larger weighs of the Capital Markets and having as part of growth assets the real asset wealthy increases and add in market debt so youre seeing greater exception at the point of retirement than our career any questions on slide 19 or 20. Slide 21 gives us the specific percentages for the allocation this is part of our recommendation or this is what were actually requesting approval for in 2014 to be incorporating as you can see the Interest Rates from current to relate to proposed and then on slide 23 commissioner bridges already discussed that we are recommending a change to the global entity component weve worked with los angeles us to make a recommendation in terms of the global component that was recommended as 3 Fund Solution four both entities that was 75 percent and global was 22 and a half and 7 and a half mayor Eric Garcetti markets in was the combination of the 3 that was designed to have the endorse of entities and the world equate funds is coloring so our recommendation to switch to 9 new funds that is neutral in addition, we requested the use of d f a dedicated so we have the ability to incorporate that wealthy early on weve worked with the los angeles he is as you can see the impact on fees it is relatively fee neutral once you incorporate the beard adjustment as you can see the total fees have come down even with last year that concludes my remarks happy to take questions on the analysis or any portion. Questions . Thank you well, i support the changes there it makes sense early on to have a larger percentage of small overlay so for if you have tyson plus Year Alliance it is very good so i certainly favor that i want to comment your lowering the inflation sensitive in terms of the tips your lowering the commodity so could you examine on that. Certainly our expectation as i mentioned inflation is relatively new in this environment in addition it has an impact on the benefit enroll of the commodities and tips commodities in particular well have discussion on it is a difficult thing to forecast but we believe that the forecast for commodities it has been coming down just given the supply demand changes that weve seen in the marketplace over the last five or six years were seeing that play identity in the Fourth Quarter especially and i think our near term expectation for commodities is lower so its a combination of factors for a lower rate for commodities. One last question how often do you update. The aggregate level of risks were not being be coming back every year there may be a refresh on an annual basis but the aggregate we want to review every 236r years along with the demographics. Any questions. Commissioner driscoll. On page 18 that makes a reference russel is forecasting volatility numbers and your railing is doing this for a long time go the history of some accuracy could you provide when you make a forecast 20 years ago or 10 years ago how accurate and i dont have any evidence to support anything other than an anecdotal i would say our capital foovrts process is based on a long term equality and we know it varies over time we incorporate the evaluation adjustment of the entity within the modeling process but it is relatively constrained so we wont see large judgements to the entity strains so over periods where the entity stream our forecast would be inaccurate but over the last 10 years for example, the forecast for many of the especially entity clauses relatively consistent with our exceptions for 10 years ago but it will vary depending on how risk and i versus the market is versus the overall cap. I think so what youre trying to say dont worry the both return numbers and the risk numbers i want to see how well, youve director heinecke done it Going Forward you believe the market will give us plus your interpretation of the cost of living thats why the requirement was the number one objective so i want to go back not today but prepare to tell us. Commissioner well endeavor to get that you mentioned over a 20 or 10 year period. Whatever you have its still a long enough period to be significant. Thank you to our executive director. This is a again question and had been in the rfp if theyre giving assumptions and were relying on it thats the selection can we id rather get consultants. The rfp for consultants would be appropriate and they provided it so i remember very nice. Generally consult of the rfp. Thank you. Another questions or comments for commission seeing none ill open two to three up for. Welcome back claire thank you were trying to actually looking at slide 27 and the comments about new benefits formula for miscellaneous and safeties see below that the new hires to specifically inaudible to 55 is that possible to get a better explanation im trying to figure out if this is moving people