December 2020 Board Meeting

The Budget and Audit Committee of the Board of Trustees convened at 8:30 a.m. Monday, December 7 via teleconference, with the regular session of the Board of Trustees meeting following at 9:45 a.m. In attendance were Board members Jason Hoffman, Jason Steliga, Kyle Collins, Scott Hunt, Sharon Kissinger, Beth Knes and Melinda Moss. Also present were Executive Director, Dearld Snider; Assistant Executive Director, Investments, Craig Husting; General Counsel, Sarah Swoboda; Chief Financial Officer, Anita Brand; Director of Member Services, Nicole Hamler; Director of Employer Services, Omar Davis; Director of Legislation and Policy, Maria Walden; Director of Communications, Susan Wood; Director of Administrative Planning and Design, Stacie Verslues; and various other PSRS/PEERS staff members.

Budget and Audit Committee Meeting

Minutes

The open session minutes from the June 9, 2020 Budget and Audit Committee meeting were approved by unanimous vote.

Review of Fiscal Year 2020 Comprehensive Annual Financial Report (CAFR)

Ms. Anita Brand from PSRS/PEERS reviewed the purpose of the CAFR. The CAFR is an accumulation of all activity conducted by the Systems during the fiscal year and becomes a historical document for current and future users. The CAFR is prepared in compliance with the accounting requirements established by the Governmental Accounting Standards Board (GASB). The Government Finance Officers Association (GFOA) also provides guidance on the content of the CAFR. The Systems' strive for excellence in reporting and transparency, therefore the CAFR exceeds the GFOA requirements. Ms. Brand focused on the report's five distinct sections: 1. Introductory, 2. Financial, 3. Investment, 4. Actuarial and 5. Statistical. The Trustees each received a copy of the CAFR with the Board Meeting information. The full version is also found on the PSRS/PEERS website https://www.psrs-peers.org/About-Us/Resources/Annual-Report.

Review of June 30, 2020 Independent Auditors' Report

Mr. Nick Mestres and Ms. Kristen Brown from Williams Keepers discussed the recent June 30, 2020 audit of the Systems. Mr. Mestres indicated that Williams Keepers had issued an unqualified audit opinion on the June 30, 2020 financial statements. Mr. Mestres indicated an unqualified audit opinion represents the following: the "highest opinion" available, that the financial statements are fairly presented in all material respects in accordance with the U.S. Generally Accepted Accounting Principles, and the financial statements can be relied upon. Mr. Mestres briefly reviewed the audit process, financial statements, and footnotes. Ms. Brown reviewed the audit communications letter to the Board of Trustees. She indicated they found no significant deficiencies or material weaknesses in internal controls. Ms. Brown also briefly discussed the Governmental Accounting Standards Board Statement No. 68 audit. She reviewed the roles of PSRS/PEERS' staff and Williams Keepers during this process and the joint effort made with participating employers.

The audit report was approved and recommended for acceptance by unanimous vote by the Budget and Audit Committee.

Budget Adjustment

Ms. Brand reviewed a memo regarding a budget amendment request. The budget amendment included costs related to the Board-approved executive director national search firm contract and investment succession plan, as well as for the multi-year building expansion and renovation project. As previously discussed with the Board, additional testing of existing windows during the current renovation project indicated a need to repair and replace all existing windows. The budget amendment included this change, as well as an evaluation of direct owner costs. The budget adjustment was approved and recommended for acceptance by unanimous vote by the Budget and Audit Committee.

Banking Resolution

Ms. Brand reviewed a memo regarding a banking resolution. The resolution provides authority to Mr. Dearld Snider and Mr. Craig Husting to make necessary changes related to our banking relationship with Central Bank, and formally removes Steve Yoakum. Steve Yoakum's authority to act on behalf of the Systems ended on November 30, 2020; this resolution finalizes those procedures. The banking resolution authorizes appropriate individuals to execute documents with the bank without additional approval by the Board of Trustees. The resolution automatically expires each June 30 or when a new resolution is received by Central Bank. The Budget and Audit Committee requested the inclusion of General Counsel, Sarah Swoboda on the resolution, and then approved and recommended it for acceptance by unanimous vote by the Budget and Audit Committee.

Regular Board Meeting

System Operations

Board Meeting by Videoconference

The decision to hold the December 7, 2020 Board Meeting by videoconference was approved by unanimous vote.

Minutes

The open session minutes were approved by unanimous vote.

Order of Business

None

Investment Report

Investment Performance Report (9/30/20)

Mr. Craig Husting from PSRS/PEERS and Ms. Margaret Jadallah from Verus reviewed the investment performance for the period ended September 30, 2020. The one-year PSRS/PEERS investment return was reported as 8.5%, while the fiscal year return (July 1, 2020 through September 30, 2020) was reported as 5.3%.

Ongoing Investment Activity

Mr. Husting and Ms. Jadallah reviewed ongoing investment activities, which included estimated investment performance through November 30, 2020. Mr. Husting discussed the current asset allocation of the PSRS/PEERS portfolio, in which he reviewed the long-term strategy, portfolio themes and the broad portfolio expectations. 

Investment Policy Changes

The Investment Policy was originally adopted in 1995. The investment staff periodically conducts a full review of the Investment Policy and recommends changes to the Board. The last full review was conducted in June 2020. 

Mr. Husting discussed proposed Investment Policy changes to the Private Equity and Private Credit Implementation Manuals. The recommended changes were primarily to permit the acquisition of minority equity stakes in and/or provide financing to established investment management firms that have an existing relationship with PSRS/PEERS. Following discussion, the proposed investment policy changes were amended by the Board and approved by unanimous vote.

Accounting

Review of Fiscal Year 2020 Comprehensive Annual Financial Report (CAFR)

Ms. Anita Brand briefly reviewed the purpose of the CAFR which was previously shared with the Budget and Audit Committee.

Report of External Auditor: Review of the June 30, 2020 Audit Report

Ms. Anita Brand and Mr. Nick Mestres and Ms. Kristen Brown from Williams Keepers briefly reviewed the recent June 30, 2020 audit of the Retirement Systems as previously shared with the Budget and Audit Committee.

The audit report was approved as recommended by the Budget and Audit Committee by unanimous vote.

Budget Adjustment

Ms. Brand reviewed a memo regarding a budget amendment request. The budget amendment included costs related to the Board-approved executive director national search firm contract and investment succession plan, as well as for the multi-year building expansion and renovation project. As previously discussed with the Board, additional testing of existing windows during the current renovation project indicated a need to repair and replace all existing windows. The budget amendment included this change, as well as an evaluation of direct owner costs. The budget adjustment was approved as recommended by the Budget and Audit Committee by unanimous vote.

Banking Resolution

Ms. Anita Brand reviewed a memo regarding a banking resolution. The resolution provides authority to Mr. Dearld Snider and Mr. Craig Husting to make necessary changes related to our banking relationship with Central Bank, and formally removes Steve Yoakum. Steve Yoakum's authority to act on behalf of the Systems ended on November 30, 2020; this resolution finalizes those procedures. The banking resolution authorizes appropriate individuals to execute documents with the bank without additional approval by the Board of Trustees. The resolution automatically expires each June 30 or when a new resolution is received by Central Bank. The resolution with the inclusion of General Counsel, Sarah Swoboda was approved as recommended by the Budget and Audit Committee by unanimous vote.

Management Report

Legislative Update

Ms. Maria Walden from PSRS/PEERS and Mr. Jim Moody, legislative consultant, updated the Board on the current legislative session. Mr. Moody reported briefly on state revenue and gave an update to the Board. Ms. Walden updated the Board on the 2021 pre-filed legislation. The Missouri General Assembly allows elected officials to pre-file legislation starting on December 1 for the upcoming legislative session.

The Board discussed certain potential changes to the critical shortage statute, as previously provided during last year's legislative session. The Board went on record unanimously in support of these potential changes.

Member Services Disability Program

Ms. Nicole Hamler from PSRS/PEERS presented on the disability retirement program. Ms. Hamler provided the Board with an overview of the program review and discussed the history and objectives of the review. She reminded the Board that we do not want to enrich the program to entice members to retire under disability, but we want to ensure the programs provide a sufficient level of protection and financial assistance. Ms. Hamler then went through the various program enhancements including the policy, regulation and possible statutory enhancements. The policy enhancements previously approved by management staff are currently being implemented. These enhancements consist of adding additional medical advisors and the implementation of an annual income verification process. The regulation enhancements were previously approved by the Board in Spring of 2020. The regulation changes set allowable earned income into regulation for disability retirees under the age of 60 and also remove the automatic approval for PEERS disability based on Social Security disability approval. Ms. Hamler briefly reviewed the possible statutory enhancements, which include modifying the working after retirement restrictions for disability retirees. Currently disability retirees cannot work for covered employers at all until age 60. At age 60, retirees are moved to service retirement work limits. The statutory enhancement would allow disability retirees to go back to work for covered employers within set limits. Ms. Hamler feels it prudent to wait on the statutory enhancements, but expressed the desire to pursue the proposed working after retirement enhancements should the opportunity arise this legislative session.

Facility Renovation

Mr. Dearld Snider from PSRS/PEERS provided a high-level recap of the construction timeline for the new addition and renovation. Construction of the new addition is in its final stages and substantially completed in November 2020. Renovation is in full swing throughout the current building and presently set to be complete in September 2021.

CPI-U Update

Mr. Snider 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:

Mr. Snider 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 01.0051% through October 31, 2020.

The November reading for the CPI-U will not be released until December 10, 2020.

Public Comment

None

Closed Session

The Board went into closed session at 11:45 a.m.

Adjournment

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 posted to our website at that time