April Board of Trustees Meeting Summary
The Public School and Education Employee Retirement Systems of Missouri (PSRS/PEERS) Board of Trustees convened on April 16 and 17, 2023. In attendance were Board members Jason Steliga, Beth Knes, Dr. Kyle Collins, Dr. Eric Park, Allie Gassmann and Katie Webb. Also present were Executive Director Dearld Snider; Chief Operating Officer Sarah Swoboda; Chief Investment Officer Craig Husting; Chief Counsel Mike Moorefield; Chief Financial Officer Anita Brand; Chief Technology Officer Lisa Scheulen; Director of Human Resources Kim Harris; Director of Member Services Nicole Hamler; Director of Employer Services Stacie Verslues; Director of Communications Susan Wood; Director of Internal Audit, Jeff Hyman; Director of Executive and Board Administration Jennifer Martin; and various other PSRS/PEERS staff members.
Budget and Audit Committee, Sunday, April 16, 2023
The open session minutes from the December 5, 2022, Budget and Audit Committee meeting were approved by unanimous vote.
Preliminary 2023-2024 Budget Discussion
Ms. Anita Brand and Ms. Sarah Swoboda from PSRS/PEERS and Mr. Joe Rice from CBIZ led a compensation and budget discussion in preparation for the upcoming fiscal year. Ms. Swoboda reviewed the Board of Trustees' compensation strategy by highlighting the purpose, principles and overall approach of the strategy. Mr. Rice provided information on labor market trends and guidance on compensation adjustments.
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 expenses, 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 2023 meeting.
Private Equity and Private Credit
Mr. John Tuck, Mr. Dan Case, Mr. Ben Frede and Ms. Shradha Birchmier from 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, 2022 was 20.0% and the five-year annualized return for the Private Credit composite for the same period was 9.8%. Staff also discussed the Private Equity co-investment program and the Private Credit direct investment program.
Regular Board Meeting, Monday, April 17, 2023
The open session minutes from the February 5 and 6, 2023, Board meetings were approved by unanimous vote.
Order of Business
PSRS/PEERS Executive Director Dearld Snider presented a plaque to Dr. Kyle Collins for his dedication and service as a PSRS/PEERS Trustee. Dr. Collins will retire effective July 1, 2023.
Mr. Jason Steliga announced that Sharon Kissinger resigned from the Board due to personal health reasons. He stated that her 40-plus years of financial experience helped to take the most complex investment situations and explain them in simpler terms. She will be missed by all.
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, 2023 through June 30, 2024. Both were elected by unanimous vote.
Interest Credit Rate
Each June 30, interest is credited to the accounts 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 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. Anita Brand presented information on current member account balances, as well as historical interest rates and payments. Staff recommended the interest rate credited to the accounts of active members be 4.0% for fiscal year 2023-2024. 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, 2024. 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 7.3%. The Board of Trustees approved staff's recommendation by unanimous vote.
Mr. Jason Steliga thanked Dr. Kyle Collins again for his service on the Board. He stated that during his three years as a Trustee, Dr. Collins' vast experience and knowledge made a valuable contribution to the Board and to the Systems. He then congratulated him again on his retirement.
Ongoing Investment Activity
Mr. Craig Husting from PSRS/PEERS and Mr. Michael Hall from Russell provided a market overview including detailed investment returns for several stock and bond indices for the calendar and fiscal years through March 31, 2023. Mr. Husting provided a broad overview of the PSRS/PEERS' portfolio structure, including an estimated asset allocation for PSRS/PEERS as of March 31, 2023. Mr. Husting stated that the PSRS/PEERS preliminary (unaudited) investment return for the fiscal year (July 1, 2022 through March 31, 2023) was approximately 3.3%.
Member Services-Information Center Update
Ms. Nicole Hamler and Ms. Stacey Shahangian from PSRS/PEERS provided the Board a Member Services - Information Center update. Ms. Hamler provided the Board with the goals and primary responsibilities of the Information Center. She discussed the approximately 36% increase in total member interactions, phone calls, emails and chats over the past decade along with the change in staff within the section due to promotions and retirements. Ms. Hamler discussed the impact of both factors on the department as a whole and on long-term customer service expectations. Ms. Shahangian reviewed the positive effect the recently approved additional information center positions have had over the past year on Member Services. She also provided the Board current staffing information and fiscal year-to-date numbers. Ms. Hamler recapped the overall increase in customer service, innovation and morale within the department and how the additional information center positions have positively impacted long-term planning for the department.
Mr. Rick Funston, Mr. Randall Miller and Mr. Keith Johnson from Funston Advisory Services provided a brief introduction of themselves and their firm. They described their recent engagement to provide certain governance consulting services to the Board.
Mr. Funston, Mr. Miller, Mr. Johnson and Ms. Sarah Swoboda from PSRS/PEERS discussed the results from the Governance Policy and Charter Review and the Summary of the InGov Peer Benchmarking Survey. They explained the PSRS/PEERS governance policy documents were found to be comprehensive, appropriate and consistent with peer practices. Funston outlined a few recommendations on governance policies for future Board consideration. Overall, PSRS/PEERS is efficiently operated with costs and staffing relative to peer funds and could be considered a high-performing organization with effective policies and practices.
Ms. Swoboda reviewed the new Board Governance Timeline with the Board, which was suggested by Funston. This will be a tool for Board use outlining the main topics for each of the months the Board meets (February, April, June, August, October and December) each year and linking to relevant documents.
Mr. Mike Moorefield from PSRS/PEERS and government relations consultants Mr. Jim Moody and Mr. Doug Nelson presented the February legislative update.
Mr. Moody described the current budget climate in Missouri state government, touching on the previous fiscal years' revenue numbers and the historical general revenue base. Mr. Moody also provided the Board with information on the potential future impact of various tax cuts passed into law over the past several years to the state budget. Mr. Nelson and Mr. Moorefield then provided the Board with an update on the status of Systems' Priority Tracked Legislation going into the last four weeks of the 2023 legislative session. The Systems are tracking over 250 bills and have provided more than 50 fiscal note responses to the legislature concerning the potential impact on PSRS/PEERS. Mr. Moorefield and Mr. Nelson gave an update on the 24 bills in the Systems' Priority Tracked List, discussing with the Board the potential for a number of statutory provisions to pass in the General Assembly that would have either a positive impact or no negative impact on Systems' fiscal position and operations.
Ms. Sarah Swoboda and Mr. Dearld Snider from PSRS/PEERS reviewed some key accomplishments since the February Board Meeting.
Ms. Swoboda explained to the Board that our website now has a Chatbot available to members and this will help answer some of the more general questions people have, freeing up our information center specialists for more difficult questions. She also showed them an online Critical Shortage Enrollment Form that is now available for Employers to use to provide information more efficiently and consistently to PSRS/PEERS regarding Critical Shortage Employment requests.
Mr. Snider explained to the Board that we shredded nearly 3,000 boxes of records that were previously being stored in a secure offsite location. These documents have already been scanned and saved electronically. Continuing to store the documents was no longer necessary and destroying them is a cost savings to the system. Moving forward, as we get new documents, they will immediately be scanned, stored for six months, and then shredded.
Ms. Swoboda covered two additional key accomplishments. The first is an Employee Compensation Calculator, which is a tool that HR can utilize with potential new hires to help explain the benefits PSRS/PEERS offers to employees. Lastly, Ms. Swoboda discussed the Board Governance Timeline. This will be a tool for Board use and outlines the main topics covered each of the months the Board meets (February, April, June, August, October, and December) each year with links to relevant documents.
Mr. Dearld 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 1.8646% through March 31, 2023.
The Board went into closed session at 11:48 a.m.
The Board adjourned at 1:59 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.