b'LOS ANGELES FIRE AND POLICE PENSION SYSTEM NOTES TO FINANCIAL STATEMENTS JUNE 30, 2025 AND 2024NOTE 15COMMITMENTS AND CONTINGENCIES (Continued)prior to the 2011 Freeze Ordinance.Under the pre-Freeze Ordinance process, the LAFPP Board may exercise its discretion in setting the annual subsidy rate and can set it up to the maximum amount of 7% or the medical trend rate, whichever is lower.In the LAPPL I Action, on April 15, 2016, the plaintiffs agreed to dismiss LAFPP from the action in exchange for LAFPPs agreement to be bound by the final judgment rendered in the case. Until a court of competent jurisdiction renders a final judgement on the interpretation of the LOA, LAFPP has a fiduciary duty to follow LAAC4.1154(e) as written and its Board must continue to exercise its discretion in setting the retiree medical subsidy as it did before the 2011 Freeze Ordinance. The LAPPL Action I proceeded to trial, and on November 1, 2016, the trial court ruled in favor of the plaintiffs,findingthatthelanguageoftheLOAwasunambiguouswithoutweighingtheconflicting evidence regarding the interpretation of the LOA and the parties intent. The City appealed, and on October 30, 2018, the Second District Court of Appeal reversed and remanded the case for further proceedings consistent with the Court of Appeals decision. In its decision, the Court of Appeal found that the provisions at issue in the LOA were ambiguous, which required the trial court to consider and weigh the evidence of the parties intent in its interpretation of the provisions, which the trial court did not do. Retiree Health Subsidy Litigation (Continued)While the LAPPL Action I was pending on appeal, on August 10, 2017, the union filed LAPPL Action II. The LAPPL Action II raises the same issues as the LAPPL Action I regarding the 2% contribution and the interpretation of the LOA, but also asserts new breach of fiduciary duty claims against LAFPP, which preserves the unions rights to challenge LAFPPs 2017 discretionary action to set the subsidy should the union lose the issues in the pending LAPPL Action I. On July 3, 2018, the LAPPL filed a First Amended Complaint, asserting the same claims based on LAFPPs 2018 discretionary action in setting the subsidy.The union filed a Second Amended Complaint to add LAFPPs 2019 and 2020 discretionary actions in setting the subsidy.The union later sought to file a Third Amended Complaint to add LAFPPs 2021 discretionary actions in setting the subsidy, and on or around August 11, 2021, the parties stipulated to permit the union to file its Third Amended Complaint. The union has not filed any further amended pleadings for LAFPPs 2022, 2023, 2024 and 2025 discretionary actions.On February 15, 2019, the LAPPL I Action was remanded back to the Superior Court and reassigned to Judge Holly Fujie for further trial proceedings The City filed a motion to consolidate the two actions (LAPPL I and LAPPL II) before Judge Fujie, which the Court granted. On September 30, 2019, Judge Fujie ordered that the case be heard in phases. In Phase One, the LOA interpretation issues common to LAPPL I and LAPPL II are to be heard in a bench trial.Upon resolution of Phase One, the Court will then address the residual fiduciary duty claims against LAFPP unique to LAPPL II in Phase Two, which is currently stayed.On September 20 and 21, and October 28, 2021, Judge Fujie held a bench trial in Phase One of the consolidated action. On May 2, 2022, Judge Fujie issued the trial courts Final Statement of Decision for Phase One in favor of the City on the LOA interpretation issues. On June 23, 2022, the union plaintiff appealed the trial courts Final Statement of Decision for Phase One. As of October 3, 2025, Phase One of the consolidated action is pending on appeal and briefing has commenced with the Appellants Opening Brief (i.e., the unions) due on December 8, 2025. Phase Two of the consolidated action will continue to be stayed pending the final resolution of Phase One.55 70 LAFPP ANNUAL REPORT 2025'