April 2021 Board Meeting
The Public School and Education Employee Retirement Systems of Missouri (PSRS/PEERS) Board of Trustees convened on April 11 and April 12, 2021. In attendance were Board members Jason Hoffman, Jason Steliga, Kyle Collins, Sharon Kissinger, Beth Knes and Melinda Moss. Board member Scott Hunt was present via videoconference. 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; Chief Technology Officer, Lisa Scheulen; Director of Human Resources, Kim Harris; Director of Executive and Board Administration, Stacie Verslues; and various other PSRS/PEERS staff members.
Non-U.S. Equity Program Review
Mr. Frank Aten and Ms. Jessica Wilbers from the PSRS/PEERS investment staff reviewed the Systems' Non-U.S. Equity portfolio, including program objectives, guidelines and long-term results. The five-year annualized return for the Non-U.S. Equity composite for the period ended February 28, 2021 was 13.2%.
Real Estate Program Review
Ms. Susan Conrad and Ms. Chhayhea Sam from PSRS/PEERS reviewed the Systems' Real Estate portfolio, including program objectives, guidelines and long-term results. The five-year annualized return for the Real Estate composite for the period ended December 31, 2020 was 6.8%.
Budget and Audit Committee
The open session minutes from the December 7, 2020 Budget and Audit Committee meeting were approved by unanimous vote.
Preliminary 2021-2022 Budget Discussions
Mr. Bill Betts and Ms. Anita Brand from PSRS/PEERS led a compensation and budget discussion in preparation for the upcoming fiscal year. Mr. Betts reviewed the Board of Trustees' compensation strategy by highlighting the purpose, principles and overall approach of the strategy.
Mr. Betts also explained the difference between the cost of living and the cost of labor, since CBIZ, PSRS/PEERS' compensation consultant, recommends market data adjustments based on the cost of labor.
|Cost of Living||
|Cost of Labor||
Ms. Brand described the annual budgeting process, which begins in the second quarter of each calendar year. The budget includes two broad categories: investment expenses and administrative expense, inclusive of capital assets.
The annual budget is prepared with consideration of the necessary expenses to ensure the Systems continue to meet their goals and objectives in an efficient and effective manner.
Final detailed budget requests will be presented to the Budget and Audit Committee and the Board of Trustees during the June 2021 meeting.
Regular Board Meeting
The open session minutes from the February 28, 2021 and March 1, 2021 Board meetings were approved by unanimous vote.
Order of Business
Election of Chair and Vice Chair
Mr. Jason Steliga was elected to serve as chair of the Board and Ms. Beth Knes as vice chair of the Board for the period of July 1, 2021 through June 30, 2022. 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 the residual beneficiary. Ms. Brand presented information on current membership balances, as well as historical interest rates and payments. Staff recommended the interest rate credited to the accounts of active members remain at 1.0% for fiscal year 2021-2022. 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, 2022. The Board of Trustees approved staff's recommendation by unanimous vote.
Ongoing Investment Activity
Mr. Craig Husting from PSRS/PEERS and Ms. Margaret Jadallah (virtually) from Verus provided a market overview including detailed investment returns for several stock and bond indices for the calendar and fiscal years through March 31, 2021. Mr. Husting provided a broad overview of how the PSRS/PEERS' portfolio was structured including an estimated asset allocation for PSRS/PEERS as of March 31, 2021. Mr. Husting stated that the PSRS/PEERS preliminary (unaudited) investment return for the fiscal year (July 1, 2020 through March 31, 2021) was approximately 19.0%.
Report of the Actuary
Experience Study Review
Ms. Brand, along with Mr. Brandon Robertson and Ms. Cindy Fraterrigo from PricewaterhouseCoopers (PwC), presented on the results of the actuarial experience studies for the five-year period ended June 30, 2020. Ms. Fraterrigo explained the experience studies review the differences between the Systems' assumed and actual experience over multiple years (typically three to five), with the goal of examining the trends related to actual experience and recommending changes to the assumptions, if needed. The Systems perform an experience study at least every five years. The purpose of the studies are to confirm that the actuarial assumptions (economic and demographic) used in the annual valuations are: 1) reflective of the actual demographics and behaviors of the members, to the extent historical experience is measurable and expected to be an indicator of future experience, and 2) reflective of current economic conditions affecting members and their benefits.
Mr. Robertson reported that the overall results of the experience studies are excellent. The studies indicate the actual experience of the Systems over the past five years is very close to the assumptions that were utilized. There were no surprises in the results. The most significant discussion in the studies is inflation, which is the underlying component of all other economic assumptions. PwC has proposed recommendations to several of the Systems' actuarial assumptions, largely due to movements in inflation. PwC has also recommended revisions to the Systems' mortality tables and improvement scale which are consistent with prior experience and discussions. The Board is scheduled to take action on PwC's recommendations at the June Board Meeting.
Ms. Maria Walden from 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 March 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.
- HCS House Bill (HB) 101 and SCS Senate Bill (SB) 265 relate to workforce development in elementary and secondary education and adjust the Critical Shortage statute for PSRS/PEERS.
- HCS House Bill (HB) 439 allows school districts to issue school district teaching permits and requires the state Board of Education (SBE) to issue a certificate of license to teach for these members who hold a school district permit.
- 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.
- HCS House Bill (HB) 811 makes changes to the working after retirement statute for PSRS.
- Original HB 811: Allows for any teacher retired from the Public School Retirement System of Missouri (PSRS) to be employed in a non-certificated position covered under the Public Education Employee Retirement System (PEERS) without impacting their retirement benefit up to the Social Security earnings limit which has an automatic inflation factor and currently is $18,960.
- PwC estimates the impact to be an insignificant fiscal gain to PEERS
- HB 812: Amends Critical Shortage statutory time restriction from two years to four years.
- PwC estimates the impact to be an insignificant fiscal gain to PSRS and PEERS.
- HCS HB 828: Adds a 2.55% formula factor for new PSRS retirees with 32 years of service.
- PwC has estimated the annual savings of $16.8 million per year for the next 30 years due to the reduction of the Unfunded Actuarial Accrued Liability and the Normal Cost Rate of the plan as a result of the 2.55% provision being made a permanent part of the benefit structure.
- 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.
- HCS 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 $16.8 million per year savings for PSRS.
- House Bill (HB) 1130 specifies that public funds cannot go to certain businesses that censor free speech or discriminate against employees for their speech or political activity.
- House Bill (HB) 1282 changes the laws regarding marriage and replaces marriage licenses with contracts of domestic union.
- Senate Bill (SB) modifies provisions relating to income tax exemptions for certain retirement benefits.
- Senate Bill (SB) 448 modifies requirements for a visiting scholar's certificate of license to teach.
- Senate Bill (SB) 492 creates provisions relating to contracts between public entities and companies who discriminate against firearms manufacturers.
- Senate Bill (SB) 598 modifies eligibility of retirement benefits resulting from membership in multiple defined benefit plans established by a state or local retirement system.
- Senate Bill (SB) 608 provides a pop-up option for members in same sex relationships who retired prior to June 2015.
- House Bill (HB) 93 and Senate Bill (SB) 260 changes provisions governing school superintendent salaries and residency requirements.
- House Bill (HB) 608 provides a new four-year certification method for individuals who want to substitute teach.
- House Bill (HB) 961 raises the minimum teacher salary beginning in the 2022-2023 school year.
Mr. Betts provided a high-level recap of the construction timeline for the new building addition and building renovation. Renovation continues throughout the current building and remains on target to be complete in September 2021. Mr. Betts also shared with the Board that we will be reopening the building to visitors on June 1, 2021.
Mr. Dearld Snider from PSRS/PEERS 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 2.0237% through February 28, 2021.
Mr. Snider congratulated Mr. Omar Davis on his new career opportunity and thanked him for his service to PSRS/PEERS.
The Board went into closed session at 11:45 a.m.
The Board adjourned at 1 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.