February 2021 Board Meeting
The Public School and Education Employee Retirement Systems of Missouri (PSRS/PEERS) Board of Trustees convened on February 28 and March 1, 2021. In attendance were Board members Jason Hoffman, Jason Steliga, Kyle Collins, Scott Hunt, Sharon Kissinger and Melinda Moss. Also present were Executive Director, Dearld Snider; Chief Investment Officer, Craig Husting; Assistant Executive Director, Bill Betts; 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 Human Resources, Kim Harris; Director of Executive and Board Administration, Stacie Verslues; and various other PSRS/PEERS staff members.
Safe Assets Program Review
Mr. Frank Aten and Mrs. Jessica Wilbers of PSRS/PEERS reviewed the Systems' Safe Assets portfolio including program objectives, guidelines and long-term results. The five-year annualized return for the Safe Assets composite for the period ended December 31, 2020 was 3.5%.
Private Equity and Private Credit Program Review
Mr. John Tuck, Mr. Dan Case and Mr. Ben Frede of PSRS/PEERS reviewed the Systems' Private Equity and Private Credit portfolios including program objectives, guidelines and long-term results. The five-year annualized return for the Private Equity composite for the period ended December 31, 2020 was 17.8%, and the five-year annualized return for the Private Credit composite for the same period was 8.8%. Staff also discussed the Private Equity co-investment program and the Private Credit Direct Investment program.
Regular Board Meeting
The open session minutes from the December 7, 2020 meeting were approved by unanimous vote.
Order of Business
Investment Performance Report
Mr. Craig Husting of PSRS/PEERS and Ms. Margaret Jadallah (virtually) of Verus, reviewed the investment performance for the period ended December 31, 2020. The one-year PSRS/PEERS investment return was reported as 13.0%, while the fiscal year return (July 1, 2020 through December 31, 2020) was reported as 14.6%.
Ongoing Investment Activity
Mr. Husting and Ms. Jadallah reviewed ongoing investment activities, which included estimated investment performance through February 28, 2021. Mr. Husting discussed the current asset allocation of the PSRS/PEERS portfolio, and reviewed the long-term strategy, portfolio themes and the broad portfolio expectations.
Anti-Terrorism Policy Review
Mr. Husting reviewed the Systems' Anti-Terrorism and Economic Sanction Investment Policy. The Policy was adopted by the Board in 2005 and last reviewed with the Board in February 2020. The Policy requires PSRS/PEERS staff to provide a report to the Board on an annual basis that identifies any investment actions taken due to links to terrorist or sanction-related activities.
Mr. Husting stated that the Systems have several safeguards in place to ensure compliance with the Policy, including:
- On an annual basis, staff sends letters to selected federal officials requesting any information they can provide on companies that, in their opinion, have terrorist links.
- Based on guidance from the U.S. Department of Commerce and other sources, staff monitors several websites, including the Specially Designated Nationals List. The lists are compared to the PSRS/PEERS active holdings on a monthly basis.
- The Systems' custodian bank (J.P. Morgan) is required by federal law to monitor all individual security holdings in the Systems' investment accounts.
- The Systems have amended contracts with traditional external investment managers to require annual confirmation that each manager maintains appropriate policies, procedures and controls to comply with all U.S. and applicable non-U.S. economic sanction programs.
At the end of the report, Mr. Husting stated that both staff and general counsel recommended that no investment action be taken this year with regard to the Anti-Terrorism and Economic Sanctions Investment Policy.
Affirmative Action Policy Review
Mr. Husting reviewed the Systems' Affirmative Action Policy and Procurement Action Plan. The Policy was last revised in October 2014 and last reviewed with the Board in February 2020. The Policy requires PSRS/PEERS staff to provide a report to the Board on an annual basis regarding the Systems' efforts to assure equal opportunities for minorities and women as money managers, brokers and investment counselors. Mr. Husting stated that the Systems were in compliance with the policy.
Sections 104.621, 105.702, and 169.573, RSMo require the Systems to make an annual report to the Governor's Minority Advocacy Commission and the Joint Committee on Public Employee Retirement regarding the progress made in the area of utilization of minority and women money managers, brokers and investment counselors. Staff submitted the required report on February 1, 2021.
At the end of the review, Mr. Husting stated that both staff and general counsel recommended no investment action be taken this year with regard to the Affirmative Action Policy and Procurement Action Plan.
Ms. Susan Wood of PSRS/PEERS provided the Board with a review of the recent updates being made to the public website. This included a background review of previous website updates, statistics for the site and the process for making any updates.
Member Services Report – Member Education
Ms. Nicole Hamler and Ms. Amanda Wooten of PSRS/PEERS presented an update on member education, a section within the member services department. Ms. Hamler shared with the Board that over the last year the member education goals have remained the same: to provide exceptional service to members as the face of PSRS/PEERS, reach as many members as possible, offering many different educational platforms and to evolve with technology, finding new ways to meet members' needs. In the spring of 2020, Ms. Wooten reviewed how the member education group had to reassess how to best serve the membership due the onset of COVID-19. The member education team worked quickly to convert all remaining seminars into webinars and prepared and mailed personalized benefit estimates to all registered members. The team then developed a menu of online educational opportunities including: RealTalk webinars, Featured Topic webinars and Pre-Retirement Planning Webinars, which allowed them to virtually serve over 4,600 members. The member education group is also excited to rollout a new program entitled, RetireSmart, which includes Beginner Basics, Education Essentials and Retirement Ready products to cater to members at each stage of their careers.
Ms. Anita Brand of PSRS/PEERS reviewed a memo regarding a banking resolution. The resolution provides continuing authority to Dearld Snider and Craig Husting to make necessary changes to our banking relationship with Central Bank. The banking resolution adds the same authority for Bill Betts as the new assistant executive director, operations and removes Sarah Swoboda, general counsel. The banking resolution authorizes appropriate individuals to execute documents with the bank without additional approval by the Board of Trustees. The authorization will automatically expire June 30, 2021 unless replaced with a new resolution. The Board voted unanimously to approve the resolution.
Ms. Maria Walden, Ms. Sarah Swoboda, Mr. Omar Davis and Ms. Becky West, all of PSRS/PEERS, provided the Board with an overview of charter schools in Missouri. Ms. Walden gave the Board a brief history of charter schools. There are currently 20 charter schools in Kansas City, 16 in the City of St. Louis and no charter schools outside of the Kansas City and St. Louis public school districts. Ms. Swoboda reminded the Board that charter schools are covered by Missouri retirement systems like other public schools. The Leadership School, which will operate within the boundaries of the Normandy Schools Collaborative, was approved for charter in December 2020. Mr. Davis and Ms. West shared how the employer services staff is working to prepare for the 2021-2022 opening of the Leadership School, as this is the first charter school to be a part of PSRS/PEERS.
PSRS/PEERS Board Chair Mr. Jason Hoffman, announced his planned departure and retirement from the Jefferson City School District on July 1, 2021. Upon his retirement, Mr. Hoffman must vacate his Board seat. Ms. Swoboda explained that since the resulting vacancy is less than 12 months prior to when the Board position would have expired, pursuant to PSRS/PEERS statutes and regulations, no Board election is required until the regularly scheduled time – the spring of 2022. The new Board member's term will begin on July 1, 2022.
Ms. Maria Walden of PSRS/PEERS and Mr. Jim Moody, legislative consultant, updated the Board on the current Missouri legislative session. Mr. Moody reported briefly on state revenue and gave an update on January 2021 revenue to the Board. Bills currently being tracked by PSRS/PEERS include the following:
- House Bill (HB) 29 adds all public employee retirement systems and quasi-governmental entity employees' salaries to the government accountability portal.
- House Bill (HB) 101 relates to workforce development in elementary and secondary education and adjusts the Critical Shortage statute for PSRS/PEERS.
- House Bill (HB) 439 allows school districts to issue school district teaching permits for persons without a certificate of license to teach granted by the State Board of Education (SBE).
- The Board discussed utilizing our Benefit Resolution to address the cost and potential Social Security impact of this bill on the Systems.
- House Bill (HB) 558 authorizes an income tax deduction for certain public school retirement system participants.
- House Bill (HB) 590 requires all public officials to maintain a direct phone number and email address for the purposes of constituent contact.
- House Bill (HB) 608 establishes qualifications for substitute teachers. This bill provides a new four-year certification method for individuals who want to substitute teach.
- House Bill (HB) 811 makes changes to the working after retirement statute for PSRS.
- Currently, any teacher retired from PSRS can be employed in a position covered under PEERS without stopping their retirement benefit.
- Such teacher may earn up to 60% of the minimum teacher's salary as set forth in Section 163.172,RSMo, and will not contribute to the Retirement System or earn service.
- This bill will allow such teacher to earn up to the annual earnings limit applicable to a Social Security recipient before the calendar year of attainment of full retirement age under 20 CFR 404.430.
- PricewaterhouseCoopers (PwC) is currently working on an actuarial statement.
- The Board unanimously voted to go on record in support of this bill.
- House Bill (HB) 812 makes changes to the Critical Shortage statute for PSRS/PEERS.
- This bill extends the time a retired teacher or retired non-certificated employee who is receiving a retirement benefit from PSRS/PEERS is allowed to work full time from two years to four years.
- PricewaterhouseCoopers (PwC) estimates the impact of the proposed Critical Shortage modification to be an insignificant gain to both PSRS and PEERS.
- The Board unanimously voted to go on record in support of this bill.
- House Bill (HB) 828 modifies provisions relating to school teacher and employee retirement allowances.
- This bill repeals the July 1, 2014 termination date of a provision allowing members of PSRS who have 31 or more years of service to have their retirement allowance calculated using a multiplier of 2.55%.
- PricewaterhouseCoopers (PwC) estimates a small gain to PSRS.
- The Board unanimously voted to go on record in support of this bill as presented, as well as if it were to increase to 32 or 33 years.
- Pop-up Option for Same Sex Relationship prior to June 2015:
- Representative Kip Kendrick approached the Systems about providing language to address individuals who retired prior to June 2015, couldn't marry their same sex partner, and chose a Joint-and-Survivor benefit plan.
- He requested language that would provide these individuals with a similar pop-up option as enacted for married couples.
- The Board unanimously voted to go on record in support of the language provided by PSRS/PEERS to Representative Kip Kendrick.
Working After Retirement
Mr. Dearld Snider of PSRS/PEERS presented the Board with potential modifications to the current working after retirement provisions. During the 2020 annual legislative meeting, the Missouri State Teachers Association (MSTA) discussed the possibility of removing the hours-based limitations and establishing only a pay-based limitation for those retirees working after retirement. Mr. Snider explained that the provisions must be cost neutral and preferred not to require contributions from the employers. After looking at different pay-based scenarios, the PSRS/PEERS staff feels a pay-based limitation of 25% of the retiree's final average salary (FAS) is an option that would benefit over 90% of those working after retirement. In addition, employers would be able to expand their utilization of retired educators to address the ongoing need for substitute teachers. Mr. Snider explained that we do not anticipate making changes to the working after retirement provisions this legislative session, but will continue the discussion through the summer and into the 2021 legislative meeting.
Mr. Bill Betts of PSRS/PEERS provided a high-level recap of the construction timeline for the new building addition and building renovation. Renovation is in full swing throughout the current building and remains on target to be complete in September 2021.
Mr. Snider presented the Board Governance Report recently completed by Cortex Applied Research, Inc (Cortex). Cortex conducts a general review of the extent to which the Board is operating in accordance with its governance policies and charters. The process involves reviewing Board and committee meeting minutes and related documentation, as well as follow-up discussions with senior management. Mr. Snider explained that the primary goal of the annual review is to ensure that the Board's governance policies and charters are living documents that truly guide how the Board functions, while also evolving to meet the changing needs of the Board and the Systems over time.
In preparing the annual Board Governance Report, Cortex found the policies and charters to be appropriate and identified only minor issues and improvement opportunities. Cortex recommended updating the Board Operations Policy to reflect a change to 16 CSR 10-1.010 General Organization, allowing the chair to reschedule a previously scheduled regular meeting for a month or location other than originally scheduled. Cortex also recommends revising the Board education policy to clearly differentiate between the statutory requirement and the higher standard the Board has imposed. The Board voted unanimously to approve the report with suggested changes.
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 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. Snider explained that the Consumer Price Index for Urban Consumers (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' regulation requires 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 1.4682% through January 31, 2021.
The February reading for the CPI-U will not be released until March 10, 2021.
The Board went into closed session at 12:45 p.m.
The Board adjourned at 1:15 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