August 2021 Board of Trustees Meeting Summary

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The Public School and Education Employee Retirement Systems of Missouri (PSRS/PEERS) Board of Trustees convened on August 29 and 30, 2021. In attendance were Board members Jason Steliga, Beth Knes, Kyle Collins, Sharon Kissinger, Eric Park 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, Stacie Verslues; Director of Legislation and Policy, Maria Walden; Director of Communications, Susan Wood; Chief Technology Officer, Lisa Schuelen; Human Resources/Benefit Plan Administrator, Kim Harris; Director of Executive and Board Administration, Jennifer Martin; and various other PSRS/PEERS staff members. Assistant Executive Director, Operations, Bill Betts presented virtually.


Investments-Sunday, August 29, 2021

U.S. Equity Program Review

Mr. Frank Aten and Mr. Dan Lane from the PSRS/PEERS investment staff reviewed the Systems’ U.S. Equity portfolio including program objectives, guidelines and long-term results. The five-year annualized return for the U.S. Equity composite for the period ended June 30, 2021 was 16.7%.

Investment Manager Selection Process 

Mr. Husting provided an educational session on the decision-making process related to external investment service providers. The presentation included the following: (1) the PSRS/PEERS investment governance procedures, (2) the manager selection process, (3) on-going manager due diligence, and (4) the investment manager evaluation and termination practice.

403 (b) Discussion

Mr. Husting and Mr. Snider presented an educational session on 403(b) plans.  The discussion included an explanation of the plans, the structure of such plans and both national and statewide (Missouri) issues related to the administration of 403(b) plans.  The presentation also included estimated fees and expenses in traditional 403(b) plans and case studies from other states and entities that utilize 403(b) plans.

Investment General Consultant Review

Mr. Husting presented historical information on the general consultant relationships at PSRS/PEERS since 1995.  Mr. Husting also discussed the traditional role of a general investment consultant at a public pension plan and the specific needs of a general consultant for PSRS/PEERS.  The presentation included a review of the process utilized by staff in 2017 to select the current general investment consultant (Verus).  

Mr. Husting recommended conducting a targeted search process to review the market for a general consultant. 

REGULAR BOARD MEETING-Monday, August 30, 2021

SYSTEM OPERATIONS  

Minutes 

The open session minutes from the June 7, 2021 (Board education day) and June 8, 2021 meeting, as amended, were approved by unanimous vote. 

Order of Business 

Executive Director, Dearld Snider, presented plaques to Jason Hoffman and Scott Hunt for their dedication and service as PSRS/PEERS Trustees. Mr. Snider also presented a plaque to former Exectuve Director, M. Steve Yoakum recognizing his dedication, service and retirement from PSRS/PEERS. 

Appointment of Budget and Audit Committee Members

Board Chair Mr. Jason Steliga noted that because Jason Hoffman and Scott Hunt are no longer on the Board, there are two vacancies on the Budget and Audit Committee. Mr. Steliga offered to serve on the committee and recommended Ms. Knes and Dr. Moss serve as well. The two were nominated for the positions and those nominations were approved by unanimous vote.

INVESTMENT REPORT

Fiscal Year 2021 Performance and Attribution

Mr. Husting from PSRS/PEERS and Ms. Margaret Jadallah from Verus (the Systems’ Investment Consultant) provided a detailed presentation on the PSRS/PEERS fiscal year 2021 investment performance.  The presentation included the following: (1) a review of the Systems’ investment principles, philosophy and asset allocation, (2) a summary of fiscal year 2021 performance, (3) a review of the private markets activity, (4) PSRS/PEERS’ performance relative to expectations and relative to a peer group, (5) attribution for fiscal year 2021 performance, (6) a review of fiscal year 2021 objectives and a description of fiscal year 2022 objectives, and (7) an  update on fiscal year 2022.

Mr. Husting reported that the fiscal year 2021 (July 1, 2020 thru June 30, 2021) investment return for PSRS/PEERS was 28.7%, or, 28.5% net of all fees and expenses.  The Systems outperformed the passive benchmark which returned 22.9% for the year.  

Mr. Husting reported that the 5-year annualized return for the Systems for the period ending June 30, 2021 was 11.9%, or, 11.7% net of all fees and expenses.  The Systems outperformed the passive benchmark which returned 10.6% for the 5-year period. The 5-year PSRS and PEERS investment return exceeded 70% of the peer group as defined by the Wilshire TUCS universe of public pension plans with assets in excess of $1 billion.  The Systems generated the investment return while taking less risk than approximately two-thirds of comparable public funds. The PSRS/PEERS internal investment staff and external investment managers added value above the policy benchmark of over $3.0 billion, net of all fees and expenses, for the last 5 years.  The outperformance was due to portfolio construction and tactical asset allocation decisions by internal investment staff (overweighting and underweighting asset classes around targets) as well as active management on the part of external managers.

MANAGEMENT REPORT

Appointment of NCTR Delegates

Mr. Dearld Snider, Mr. Bill Betts and Mrs. Jennifer Martin were approved by a unanimous vote to serve as delegates at the annual National Council on Teacher Retirement (NCTR) Conference being held virtually October 11-14, 2021.

CEM Benchmarking

PSRS/PEERS participated in the CEM benchmarking study based on fiscal year 2020 performance. Mr. Betts from PSRS/PEERS and Ms. Kam Mangat (virtual attendance) with CEM Benchmarking Inc. presented a summary of the final report. CEM benchmarked PSRS/PEERS' service and costs compared to 72 leading global pension systems, including 11 in our peer group that are similar in size.

For the fourth straight year, the results were very positive, with an overall service score of 89 out of 100. This high level of service was provided in a cost-efficient manner with total administration costs below the average cost of the CEM universe.

Ms. Mangat explained to the Board how CEM measures both costs and service by analyzing over 120 key performance metrics. Mr. Betts expressed his appreciation to CEM, but more importantly, to the staff of PSRS/PEERS for continuing to provide a high level of service in a cost-efficient manner.

Member Services Report

Ms. Hamler from PSRS/PEERS shared with the Board a video highlighting the positive survey results on our customer service from our members. Ms. Hamler commended her team for continuing to provide a high level of customer service. She reviewed statistics for the 2020-2021 fiscal year regarding the number of inquiries handled by the information center, records, retirements, deaths and refunds processed, and total member education meetings held throughout the state. Ms. Hamler also presented to the Board information regarding total membership statistics, active service information, benefits, working after retirement and Web Member Services usage. 

Facility Renovation 

Mr. Betts provided a high-level recap of the construction timeline for the new addition and renovation. Renovation is in full swing throughout the current building and presently set to be complete in October 2021.

CPI-U Update

Mr. Snider reviewed the COLA policy that was set by the Board 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:

PSRS/PEERS Board Approved Funding Policy
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 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 5.31915% through June 30, 2021. 

The CPI-U calculation for Fiscal Year 2021-2022 is:

Raw CPI-U Index Values
  Index Values
June 2021 271.696 Month To-Date
July 2021 273.003 0.0082 0.4811%

The beginning CPI-U for 2021-2022 is at 0.4811% through July 31, 2021. The August CPI-U update will not be released until September 11, 2021. 

Public Comment

PSRS Retiree, Carol Weatherford, publicly thanked the Systems for their financial support. She is a member and is also receiving survivor benefits due to the death of her husband. 

Other

DESE extends waivers through December 31, 2021.

Executive Order 21-09 invokes the Governor's emergency powers pursuant to Section 44.100 and activates the Missouri National Guard for continued mission support in recovery operations, if needed. The order also keeps in place certain prior waivers under the prior emergency order, including the waiver of certain working after retirement (WAR) limits for PSRS/PEERS retirees.

Certificate of Achievement for Excellence in Financial Reporting (GFOA)

Mr. Snider shared with the Board that the Systems were awarded the Government Finance Officers Association (GFOA) Certificate of Achievement for Excellence in Financial Reporting for the Systems’ fiscal year 2020 Comprehensive Annual Financial Report. The Certificate of Achievement is the highest form of recognition in the area of governmental accounting and financial reporting. The Systems have received the GFOA Certificate of Achievement each year since 1994. Mr. Snider explained to the Board that the Comprehensive Annual Financial Report is a collaborative effort among departments and also reminded the Board of the importance of the report, as it is an accumulation of all activity conducted by the Systems during the fiscal year.

CLOSED SESSION

The Board voted to go into closed session at 11:15  a.m.

Legislative Review and Planning Meeting

The Board voted to go back into open session at 12:10 p.m. Following a lunch break, they started the Legislative Review and Planning Meeting at 1:30 p.m. Mr. Snider went over the quick facts of the Systems. 

Ms. Brand from PSRS/PEERS presented the results of the actuarial experience studies for the five-year period ended June 30, 2020. 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. Ms. Brand 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.

Ms. Walden from PSRS/PEERS presented on the 2021 Retirement-Related Legislative Session. She discussed 2021 legislation that did not pass, but impacted the Retirement Systems and might be introduced again in 2022. There are over 17,000 PSRS members who are currently eligible to retire. It is important that legislation isn’t introduced that would cause those members to retire earlier than they intend to retire. The actuary reviews several factors in order to determine the cost of legislative change regarding working after retirement:

  • Does it change the behavior of the active members and cause them to retire early?
  • Does it allow covered employers to hire one or two retiree(s) to replace one current, active member?
  • Are contributions collected on the amount of earnings?

Ms. Walden talked about the governor’s waiver of the working after retirement statute relating to the 550-hour/50% of salary limits on working after retirement. The waiver suspends the 550-hour and 50% of salary limits in RSMo 169.560.1 (as well as corresponding language regarding how to calculate the 50% salary limit) for retired PSRS members who return to work in certificated positions. It also suspends the 60% of minimum teacher salary limit in RSMo 169.560.2 for retired PSRS members who return to work in non-certificated positions and subjects such retired members to the (non-suspended) requirements in RSMo 169.560.1. It also suspends the 550-hour limit in RSMo 169.660.2 on working after retirement for retired PEERS members.

The waiver of working after retirement limits is in effect for as long as a current Executive Order declared by the governor due to the COVIDÔÇÉ19 pandemic is in effect. On August 27, 2021, Governor Mike Parson’s office confirmed that the extension is in effect until December 31, 2021.

Ms. Walden spoke about the research that has been conducted by staff regarding potential future changes to working after retirement. The educational associations discussed issues of importance for their members with regard to retirement and the upcoming 2022 legislative session. There was also time for other public comment.  

ADJOURNMENT 

The Board adjourned at 3:45 p.m. following the Legislative Review and Planning Meeting.

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.