The Elected Officials Retirement System Annual Popular Report for fiscal year ending June 30, Minding your P s and QDRO s

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1 SUMMER 2017 A Newsletter for Active and Retired Members of the City of Baltimore Elected Officials Retirement System The Elected Officials Retirement System Annual Popular Report for fiscal year ending June 30, 2016 Minding your P s and QDRO s Deferred Compensation Plan (457) Mission Statement: The System is committed to protecting and prudently investing member assets and providing accurate and timely retirement benefits with quality service to members and beneficiaries.

2 Dear Active Members, Retirees, and Beneficiaries, Happy Summer! I am delighted to inform you that the EOS has $23 million in assets and is fully funded with an actuarial value of 169%. Very few pension plans can claim such a high valuation of assets. As a result of this overfunded status, no contribution is required from the City for 2017 and This means more cost savings for the City. EOS excellent performance is attributed to a broadly diversified asset allocation and keen management by the staff and Board of Trustees. Information about the financial highlights of the Plan for fiscal year 2016 is provided in the Annual Popular Report, starting on page 2. Also in this issue, is an article on Minding your P s and QDRO s on page 5. It is an excellent article on Qualified Domestic Relations Order, a legal process under which your retirement benefits can be paid to others. This is also a good time to remind you that your 2016 Annual Retirement Benefits Statement is available for downloading from the ERS website. To get a copy, or to do an estimate of your EOS retirement benefits, go online to the EOS Member Self-Service (MSS) web portal at On behalf of the Board of Trustees, I would like to thank you for the enduring confidence that you have placed in us. We welcome the opportunity to discuss your retirement benefits and any of the articles enclosed in this volume of the Outlook. Sincerely, Roselyn Spencer, Executive Director TABLE OF CONTENTS Annual Popular Report for Fiscal Year Ending Minding your Ps and QDROs...5 Setting your power of attorney...5 Deferred Compensation Plan...6 Food for thought...6 Update your beneficiaries...7 CHANGES TO SURVIVING SPOUSE BENEFITS: Widowhood certification Thinking about remarrying? Previously under prior City pension law a surviving spouse would be eligible for a death benefit payable for life, provided that he/she did not remarry. An annual, notarized certification was required to confirm nonmarriage status. Recently, an amendment was made to the law pertaining to surviving spouse death benefits that would allow a surviving spouse to remarry after age 70 and keep their benefit. To remain eligible for the benefit, surviving spouses cannot remarry before age 70 and must notify ERS immediately if they do. ERS is required to monitor the status of surviving spouses through the Widowhood Certification letter. Annually, surviving spouses are required to complete and return the widowhood certification letter. After age 70, the annual proof of status is no longer required. Please feel free to contact ERS with any questions or for further information.

3 ANNUAL POPULAR REPORT FOR FISCAL YEAR ENDING JUNE 30, 2016 ABOUT THE PLAN The Elected Officials Retirement System of the City of Baltimore (EOS) is a single employer defined benefit local government retirement plan (the Plan). Established December 5, 1983, the Plan covers the Baltimore City Mayor, the Comptroller, and the President and members of the City Council. There are a total of 40 EOS members covered by the System; 17 active, 21 retired, and 2 vested inactive members. Elected Officials become active members immediately upon taking the oath of office. INVESTMENT RETURNS In fiscal year 2016, performance, as exhibited by the chart below, saw a return of 0.4%. This return placed the Plan in the median of the Public Fund Universe ranking 61st percentile. Decline from last year s investment rate of return was due to investment underperformance in the domestic and international equity sectors. The Systems exposure to US and international small-cap equities contributed positively, but not enough to meet the Plan s long-term actuarial assumption rate of 7.00%. FUNDING RATIO EOS funded ratio, based on actuarial value of assets, was at 169%, up 1.8% over the previous year. The funded ratio is the ratio of actuarial assets to actuarial liability, and determines the required employer contribution. FIDUCIARY NET POSITION Fiduciary net position represents the total funds available to meet ongoing obligations to participants and their beneficiaries. EOS is financially strong with an overfunded ratio of 163%. Such a strong net position signifies that sufficient funds are available to cover every dollar of benefits due today and for the long term. The Plan overfunded status also provides a cost savings for the City, in that it relieves the City from making required contributions to the Plan in 2017 and in Total revenue for the year was $107, comprising of member contributions of $62, and a net investment gain of $45, There was no employer contribution from the City as previously stated. Total net asset for the fiscal year was $22,749, Net assets provide a snapshot of the financial position of the Plan as compared to the previous fiscal year. The Plan assets are broadly diversified in all major assets classes, to provide favorable rate of return at measured risks, as indicated in the graph below. City of Baltimore EOS Returns 8.0% 7.0% 6.6% 6.5% 6.8% 6.5% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 0.4% 0.9% 1 YR 3 YR 5 YR EOS Median Public Pension Plan 2

4 ANNUAL POPULAR REPORT FOR FIDUCIARY NET POSITION CONTINUED... During the year, the Board reviewed the asset allocation structure and implemented strategies to increase diversification in fixed income, equity and real estate over the coming year. Fund assets allocated among the different asset classes are designed in an uncorrelated manner to minimize most major types of risks, and positively affect the net investment income. It should be noted that the adopted EOS asset allocation plan is highly conservative because of the Plan s funding status. CHANGES IN FIDUCIARY NET POSITION The plan s funding objective is to preserve the capital value of the Plan assets and to meet long-term benefit obligations through contributions and investment income. In fiscal year 2016, employer contributions decreased by $84,986 to zero because it was determined that no employer contributions were necessary. This combined with the low investment income contributed to a slight decline in the fiduciary net position. Geo-political events such as BREXIT (the British election to withdraw from the European Union), and anxiety over US election outcomes, caused heightened investor s sensitivity, and financial markets to fall close to the end of the fiscal year, with no time to recover. Both factors significantly affected annual performances all around. A broad diversification of the Plan s assets facilitated some portfolio risk mitigation while contributing to performance returns. FIDUCIARY NET POSITION Fiscal Year Fiscal Year Increase/ Percent (Decrease) Change Investment at fair value $ 20,427,069 $ 23,342,004 ($ 2,914,935) (12.5)% Other assets 2,328, ,393 2,217,958 2,009.1% Total assets 22,755,420 23,452,397 (696,977) (2.9)% Total liabilities 6,138 12,436 (6,298) (50.6)% Total net assets $ 22,749,282 $ 23,439,961 ($ 690,679) (2.9)% CHANGES IN FIDUCIARY NET POSITION Additions Employer Contributions Member Contributions Net Investment Income Total Additions Deductions Retirement Allowances Administrative Expenses Refund of Members Contribution Total Deductions Net Increases (Decreases) $18 Fiscal Year Fiscal Year Increase/ (Decrease) $ - $ 84,986 ($ 84,986) 62,485 60,667 1,818 45, ,349 (583,919) 107, ,002 (667,087) $ 763,018 $ 744,046 $ 18,972-20,232 (20,232) 35,576 33,366 2, , , ($ 690,679) ($ 22,642) ($ 668,037) FIDUCIARY NET POSITION $20 $ MILLION $24 FY 2012 FY 2013 FY 2014 FY 2015 $23 $23 FY

5 FISCAL YEAR ENDING JUNE 30, 2016 CITY OF BALTIMORE EOS RETURNS AS OF JUNE 30, % 6.8% 0.4% 1 YR 3 YR 5 YR 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile EOS 1st Quartile 2nd Quartile Median 3rd Quartile 4th Quartile EOS # of Portfolios 1 Year 3 Year 5 Year 3.2% 1.8% 0.9% -0.3% -2.3% 8.0% 7.2% 6.5% 5.7% 4.1% 8.0% 7.2% 6.5% 5.8% 4.4% 0.4% % % 246 AWARDS ACTUAL ASSET ALLOCATION US Fixed Income 24% US Small Equity 9% US Mid Equity 11% US Large Equity 25% Real Estate 10% International Small Equity 12% International Large Equity 9% EOS is proud to be 169% funded on an actuarial basis For the 30th consecutive year, the Government Finance Officers Association of the United States and Canada has awarded the Certificate of Achievement to EOS for Excellence in Financial Reporting for its Comprehensive Annual Financial Report for the fiscal year ending June 30, This certificate is valid for a period of one year and is awarded to governmental units who meet or exceed the strict standards and criteria of the association. FOR MORE INFORMATION... This newsletter provides an overview of the EOS finances. All information provided here is intended to be accurate in all material aspects and is intended to fairly present the financial position and results of EOS operations. If you would like the full and complete details, a copy of the 2016 EOS Comprehensive Annual Financial Report is available at 4

6 Minding your P s and QDRO s Generally, benefits from the EOS can only be paid to a retired member or to the member s beneficiary. Under certain circumstances, however, EOS benefits can be paid to others. One of those exceptions is in the case of a qualified domestic relations order, or QDRO, following a member s divorce. A QDRO is a court order that requires EOS to pay a portion of a member s benefit to the member s ex-spouse. The member and the member s ex-spouse will negotiate the exact portion that will be paid to the ex-spouse. Typically, the amount is 50% times a fraction, the numerator of which is the member s EOS service while married and the denominator of which is the member s total EOS service. For example, if the member had 10 years of EOS service while married and 16 total years of EOS service, the ex-spouse would receive 31.25% (50% x 10/16) of each payment made to the member. the member s beneficiary for as long as the beneficiary is eligible to receive benefits. COLA increases The QDRO typically provides that the ex-spouse will receive a portion of cost-of-living increases payable to the retired member following the member s retirement. If you are divorced and enter into a QDRO with your exspouse, please submit a copy of the order to the ERS Office so that it can be reviewed for legal sufficiency by the ERS General Counsel. The ERS Office will be happy to answer any questions you may have about QDRO s. 5 Under EOS law, payments to the ex-spouse under a QDRO cannot begin until the member starts receiving benefits. QDRO after member s death EOS provides certain death benefits to members who die before retirement. The QDRO can provide that the ex-spouse will receive a portion of the member s pre-retirement death benefit that would otherwise be paid to the member s beneficiary. In that case, the death benefit would be split between the ex-spouse and the beneficiary for as long as the beneficiary is eligible to receive benefits. Payments under a QDRO are made to the ex-spouse from the date of the member s retirement to the date of the member s death. The QDRO can provide that the ex-spouse will continue to receive survivorship benefits after the member s death if the member has elected a form of payment that provides a survivorship benefit and the member dies before the ex-spouse. Again, in this situation, the survivorship benefits would be split between the ex-spouse and Setting your power of attorney Financial decisions can be tough to make for yourself as it is, but what happens if you are not physically or mentally able to make these important judgment calls? Situations such as temporarily being out of the country, to being incapacitated due to a medical procedure, et. cetera, can cause financial matters to become time consuming, expensive, and troublesome. If you have not set a power of attorney to act on your behalf, a court may need to appoint someone for you, and you may not have any say in it. The decision of whom you will designate as your power of attorney is very important, as you must trust them with making the right decisions with your property, including your ERS benefits....continued on p. 6

7 Setting your power of attorney, continued... To establish your power of attorney, select the Power of Attorney Designation form on our website, at: You are also able to limit the powers your designated authority will be able to have by submitting a Maryland Statutory Form Limited Power of Attorney, which can be found at: get/ pdf Once you have completed your power of attorney form, you must submit it to the ERS, where it will be reviewed for legal sufficiency. Enroll Now! Deferred Compensation Plan (457 Plan) Saving for retirement is a theme often discussed but less often fully executed. In today s economy, it has become apparent that relying on your pension and social security alone will not be enough to sustain you during your retirement years. Your personal savings and/or an additional retirement account will be the bridge to close the income gap and achieve optimal retirement outcomes. The City s Deferred Compensation Plan, also referred to as the 457 Plan, is just the vehicle to help you do that in a safe and convenient way. City Elected Officials are already contributing to both the EOS and to Social Security. Question is, are you contributing enough to savings? The City of Baltimore s Deferred Compensation Plan is available to facilitate your savings requirement. To help you reach your retirement goals, enroll today in the City of Baltimore s Deferred Compensation Plan and start saving through payroll deductions on a pretax or Roth basis. During our working years, the food that we chose to eat may have been out of convenience. From running from place to place to keeping up with the kids, grabbing a quick and easy meal may have been more important than focusing on what effect our choices may have had on us. But now as retirees, we may find ourselves with more time to think about what we eat. As we age, it is more important to make healthy decisions. Food can have a big impact on our bodies, even on our brains! Did you know that with the right foods, you can help improve your memory and possibly ward off Alzheimer s? Older adults should make sure to include leafy green vegetables in their diet and avoid saturated and trans fats. Foods including fish, vegetables, nuts, whole grains, beans, and even dark chocolate have all been found to promote brain health. Take a look at these types of foods and how they can promote a healthier brain. Next time you are putting together your grocery list, make sure you are including some or all of these items: Leafy greens Helps control inflammation Beets, tomatoes, avocados Help to increase blood flow to the brain, promoting learning and memory retention Nuts and pomegranates Help minimize plaque in the brain Fish, blueberries, grapes, and dark chocolate Help support and trigger the growth of neurons Enrolling is easy! One way is to go online to retirewithbaltimore.com, select About Your Plan. Choose Deferred Compensation Plan, and then Enroll Now. You may also call Brittney Keys at the ERS office at (443) , or a Retirement Plan Counselor at (877) or

8 OUTLOOK NEWS 7 East Redwood Street, 13th Floor Baltimore, MD PRSRT STD U.S POSTAGE PAID Baltimore, md permit no Office hours: Monday through Friday 8:30 a.m. to 4:30 p.m. Phone: Outside of Baltimore Fax: Website: horizon@bcers.org Administration Roselyn H. Spencer Executive Director ERS Board of Trustees Deborah F. Moore-Carter Chair of the Board City of Baltimore Labor Commissioner Elected by Active Members Joan M. Pratt, CPA Vice Chair Ex-officio Member City of Baltimore Comptroller Henry Raymond Trustee Ex-officio Member City of Baltimore Finance Director Jerome L. Sanders Chair Investment Committee LVI Power, LLC. Appointed by the Mayor Doris Y. Brightful Retired Vice Chair Investment Committee Appointed by the Mayor Dorothy L. Bryant Phlebotomist City of Baltimore Health Department Elected by Active Members Gary Gilkey Chief of Labor & Employment City of Baltimore Department of Law Elected by Active Members Rosemary H. Atkinson Retired City of Baltimore HOPE VI Community Builder Elected by Retired Members Reminder: TO FILE A NAME BENEFICIARY WITH THE ERS As an Elected Official, it is important that you complete two beneficiary forms to get City benefits that you are entitled to in the event of an unfortunate circumstance. First, complete a beneficiary form with the ERS. Second, complete a beneficiary form with the Department of Human Resources (DHR) Call ERS at (410) and DHR at (410) for more information or to obtain the beneficiary designation forms. Every effort has been made to make sure this information is correct; however, in case of any discrepancy, the provisions of the legal documents, policies, and law (Article 22 of the Baltimore City Code) embodying the Elected Officials System of the City of Baltimore will govern.