April 2020 Board Meeting
The April 6, 2020 meeting of the Public School and Education Employee Retirement Systems of Missouri (PSRS/PEERS) Board of Trustees convened via video-conference at 9 a.m. In attendance were Board members Aaron Zalis, Jason Hoffman, Yvonne Heath, Scott Hunt, Sharon Kissinger, Beth Knes, and Jason Steliga. Also present were Executive Director, M. Steve Yoakum; Assistant Executive Director, Investments, Craig Husting; Assistant Executive Director, Operations, Dearld Snider; General Counsel, Sarah Swoboda; Chief Financial Officer, Anita Brand; Director of Member Services, Nicole Hamler; Director of Employer Services, Omar Davis; Director of Internal Audit, Jeff Hyman; Director of Legislation and Policy, Maria Walden; Director of Communications, Susan Wood; Chief Technology Officer, Bill Betts; Human Resources/Benefit Plan Administrator, Kim Harris; Director of Administrative Planning and Design, Stacie Verslues; and various other PSRS/PEERS staff members.
Regular Board Meeting
Board Meeting by Videoconference
The decision to hold the April 6, 2020 Board Meeting by videoconference was approved by unanimous vote.
The open session minutes from the February 10, 2020 Board meeting and March 20, 2020 Special Meeting were approved by unanimous vote.
Order of Business
Election of Chair and Vice Chair
Mr. Jason Hoffman was elected to serve as chair of the Board and Mr. Jason Steliga as vice chair of the Board for the period of July 1, 2020 through June 30, 2021. Both were elected by unanimous vote.
Interest Credit Rate
Each June 30, interest is credited to the memberships of active members at the rate set by the Board of Trustees. If a member requests a refund of his or her contributions, any accumulated interest is paid as part of this refund. If a member retires from the Systems, the amount of interest credited to the membership will not affect the retirement benefit calculation. In the event that there is an unused balance in the membership at the death of the member and any Joint-and-Survivor benefit plan beneficiary, the remainder is paid in a lump sum to a beneficiary named for that purpose. Ms. Anita Brand of PSRS/PEERS presented information on current membership balances as well as historical interest rates and payments. Staff recommended decreasing the interest rate credited to the accounts of active members to 1.0% effective July 1, 2020. This rate will be utilized throughout the fiscal year to facilitate necessary member account corrections and will be utilized to credit active member accounts on June 30, 2021. Staff's recommendation was based on recent decreases in the Federal Funds Rate. The Board of Trustees approved staff's recommendation by unanimous vote.
Purchase Interest Rate
Ms. Anita Brand presented information to the Board of Trustees on the purchase interest rate. According to Board Regulation (16 CSR 10-4.012 (4)), prior to July 1 each year, the Board of Trustees shall establish a "purchase rate" of interest based on the actuarially assumed rate of return on invested funds of the Retirement Systems. The purchase interest rate shall apply to any amount due for reinstatement of service or for the purchase of service, except as otherwise specified by law. Staff recommended the purchase interest rate be set at the current assumed rate of return of 7.5%. The Board of Trustees approved staff's recommendation by unanimous vote.
Ongoing Investment Activity
Mr. Craig Husting of PSRS/PEERS provided an overview of the coronavirus pandemic and the related impact on the economy and investment markets. He detailed investment returns for several stock and bond indices for the month of March, calendar year, fiscal year and one-year time periods. Mr. Husting provided a broad overview of how the PSRS/PEERS' portfolio was structured prior to the crisis and how the portfolio responded during the market decline. An estimated asset allocation for PSRS/PEERS as of March 31, 2020 was also presented. Mr. Husting stated that the PSRS/PEERS preliminary (unaudited) investment return for the fiscal year (July 1, 2019 through March 31, 2020) was approximately -4.4%.
Asset Liability Study
Mr. Husting recapped the Asset Liability Study that staff and Verus presented at the February 10, 2020 Board meeting. He then introduced two more asset allocation options requested by the Board. Mr. Husting provided 10-year expected risk and return estimates for several (separate) asset allocation options. Mr. Husting also discussed the implementation plan if the Board selected the asset allocation option that included a 35% allocation to Private Assets.
Mr. Husting recommended a new asset allocation of 45% Public Risk Assets, 20% Safe Assets and 35% Private Risk Assets. The Board voted on and approved the recommendation.
Mr. Dearld Snider of PSRS/PEERS presented a timeline of actions that have been taken since the onset of COVID-19. As of March 24, the PSRS/PEERS office building has been closed with all employees working from home with the minor exception of mail services and member correspondence. Due to our disaster recovery/business continuity plans, our staff has been able to telecommute and function rather seamlessly. He shared with the Board the website articles, email blasts and social media posts produced for our members, as well as guidance for our employers through OASIS. Mr. Snider also took the opportunity to show how the office has been supporting the PSRS/PEERS staff. Bill Betts, Chief Technology Officer, shared some background into the organization's Business Continuity and Disaster Recovery plans, which included moving file storage to the Cloud, upgrading to a Cloud-based phone system, and most recently in August 2019, beginning the process of telecommuting. All of this gave the Systems the ability to move quickly and efficiently when COVID-19 impacts began. PSRS/PEERS Member Services Director Ms. Nicole Hamler agreed, sharing that members of her team began telecommuting in October 2019, which allowed for a seamless transition to telecommuting by the full member services staff. Ms. Hamler reported that her staff continues to handle calls/emails, process workflows, hold telephone and web meetings, as well as provide seminars online. Director of Employer Services Omar Davis also reported things have been business as usual, as most school district representatives are reporting on a consistent basis. The Employer Services group will be holding webinars in the upcoming weeks as an additional form of communication. Chief Financial Officer Anita Brand stated that while the accounting staff is also telecommuting, all controls and processes remain the same. The payment of benefits remains a top priority.
Mr. Jim Moody, legislative consultant, updated the Board on the current legislative session. Mr. Moody reported briefly on state revenue and gave an update on the March 2020 state revenue to the Board.
Ms. Maria Walden of PSRS/PEERS gave an update on this legislative session including the changes in the House and Senate schedules due to COVID-19. She also reviewed the upcoming important legislative dates, the legislative statistics and new legislation filed. Several bills have been filed that have a direct impact on the Systems:
- House Bill (HB) 1298 allows active members who have more than 31 years of service to retire with a benefit factor of 2.55% instead of the current benefit factor of 2.5%.
- This bill repeals the July 1, 2014 termination date of a provision allowing PSRS members who have 31 or more years of service to have their retirement allowance calculated using a multiplier of 2.55%.
- House Bill (HB) 1934 and Senate Bill (SB) 755 state information pertaining to the salaries and benefits of the executive director and employees of the Board of PSRS shall not be considered confidential individually identifiable information.
- House Bill (HB) 2174 and Senate Bill (SB) 830 modify provisions to workforce development in elementary and secondary education and include changes to the PSRS/PEERS critical shortage statute.
- House Bill (HB) 2291 increases the duration of time that a retired teacher may teach without losing their benefit under the critical shortage statute from two years to four years.
- House Bill (HB) 2460 creates a Missouri Emergency Substitute Teacher Pool (ESTP). The pool allows any retired member of PSRS or PEERS to be employed as a temporary or long-term substitute under the provisions of ESTP and still receive his or her monthly benefit.
- House Bill (HB) 2476 requires all public employee retirement systems and quasi-governmental entities to report such system's or entity's employees' salaries and any incentive pay to the Missouri government accountability portal in the same manner as all state departments and agencies report.
- House Bill (HB) 2683 requires only defined benefit plans for public employee retirement systems boards in Missouri to comply with educational requirements.
- Senate Bill (SB) 1000 provides that no investment asset or contract of a retirement system of this state, any political subdivision, or instrumentality of the state shall be purchased or executed unless all documents relating to such investment are public records. This bill also states that all investment assets and contracts shall be presented to the governing board of a plan for approval prior to the investment of any funds.
Ms. Walden also discussed other legislation the Systems are monitoring, but which does not have a direct impact on the Systems.
Ms. Sarah Swoboda of PSRS/PEERS presented proposed amendments to PSRS/PEERS regulations. The proposed amendments to 16 CSR 10-5.020 (PSRS) and 16 CSR 10-6.070 (PEERS) address the policy and regulation changes to the disability retirement program that were presented at the February 2020 Board meeting.
Mr. Steve Yoakum reviewed the COLA policy that was set by the Board of Trustees at their November 3, 2017 meeting. According to the policy, COLAs may be granted based on the Consumer Price Index for Urban Consumers (CPI-U) as follows:
|CPI-U||COLA per Board-Approved Funding Policy|
|Less than 0.0%||0.0%|
|0.0%-2.0%||0.0% when CPI-U is cumulatively below 2.0%|
|0.0%-2.0%||2.0% when CPI-U cumulatively reaches 2.0% or more*|
|2.0%-5.0%||2.0% when the CPI-U is at least 2.0%, but less than 5.0%|
|5.0% or more||5.0%|
|*resets cumulative calculation after a COLA is provided|
Mr. Yoakum explained that the CPI-U is calculated by the Bureau of Labor Statistics (BLS). The CPI-U is the measure of the change in prices of goods and services purchased by urban consumers between any two time periods. PSRS/PEERS' regulations require that the time period for the CPI-U calculation used in the determination of a COLA be from June to June. Based on the values provided by the BLS, the CPI-U is up 0.9897% through February 29, 2020.
The total cumulative is 2.6382% through February 29, 2020.
The March reading for the CPI-U will not be released until April 10, 2020.
The Board went into closed session at 11:45 a.m.
The Board adjourned at 12:15 p.m.
This summary is not official minutes of the PSRS/PEERS Board of Trustees Meeting. The official minutes will be approved at the next PSRS/PEERS Board of Trustees meeting and will be posted to our website at that time.