December Board of Trustees Meeting Summary

The Budget and Audit Committee of the Board of Trustees convened Monday, December 16 at 8:30 a.m. with the regular session of the Board of Trustees meeting following at 9:30 a.m. In attendance were Board members Beth Knes, Dr. Eric Park, Allie Gassmann, Katie Webb, Chuck Bryant and Dr. Nate Moore. 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, Deputy Chief Financial Officer Tory Brondel, Director of Human Resources Michelle Varcho, Director of Member Services Nicole Hamler, Director of Employer Services Stacie Verslues, Chief Technology Officer Lisa Scheulen, Director of Communications Susan Wood, Chief Information Security Officer Jake Woratzeck, Director of Executive and Board Administration Jennifer Martin and various other PSRS/PEERS staff members.

Budget and Audit Committee

Approval of Minutes

The open session minutes from the August 25, 2024, Budget and Audit Committee meeting were approved by unanimous vote.

Review of the Fiscal Year 2024 Annual Comprehensive Financial Report (ACFR)

Ms. Anita Brand from PSRS/PEERS reviewed the purpose of the ACFR. The ACFR is an accumulation of all activity conducted by the Systems during the fiscal year and becomes a historical document for current and future users.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 ACFR is prepared in compliance with accounting requirements established by the Governmental Accounting Standards Board (GASB). The Government Finance Officers Association (GFOA) also provides guidance on the content of the ACFR. The Systems strive for excellence in reporting and transparency, therefore the ACFR 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 full version is found on the PSRS/PEERS website at https://www.psrs-peers.org/About-Us

Ms. Brand also briefly discussed GASB Statement No. 68 audit. She reviewed the roles of PSRS/PEERS' staff and Williams-Keepers, LLC during this process and the joint effort made with participating employers.

Independent Auditors' Report

Mr. Nick Mestres, Ms. Kristen Brown and Mr. Zachary Brown from Williams-Keepers, LLC discussed the recent June 30, 2024, audit of the Systems. Mr. Mestres provided an overview of Williams-Keepers, LLC and the overall audit engagement with the Systems. Ms. Brown provided details on the audit process and indicated that Williams-Keepers, LLC had issued an unqualified audit opinion on the June 30, 2024, financial statements. She 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 U.S. Generally Accepted Accounting Principles: and the financial statements can be relied upon. She also briefly reviewed the audit process, financial statements and footnotes. The Audit Communications Letter to the Board of Trustees was reviewed and indicated the auditors found no significant deficiencies or material weaknesses in internal controls.

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

Public Comment

None

Regular Board Meeting

System Operations

Approval of Minutes

The open session minutes from the October 28, 2024, meeting were approved by unanimous vote.

Order of Business

The order of business was approved with no changes.

Best Places to Work Announcement

Chairwoman Knes announced that for the second year in a row, PSRS/PEERS has been named one of Pension & Investments (P&I) Best Places to Work in Money Management. Winners of this year's award were recognized in the December 9 issue of Pensions & Investments magazine. The Systems were ranked #3 in the Large Employer Category. This category covers companies with 100 to 499 U.S. employees.

The survey and recognition program on which this award is based are dedicated to identifying and recognizing the best employers in the money management industry.
PSRS/PEERS was evaluated in two parts when being considered for the award:

• Part 1 evaluated workplace policies, practices, philosophy, systems and demographics.
• Part 2 anonymously surveyed all PSRS/PEERS employees to measure employee experience. There were questions regarding our benefits package, the hiring process, employee recognition and activities. Employees were asked to describe what makes PSRS/PEERS a great place to work.

In the press release for the award, P&I's Editor-in-Chief Julie Tatge stated, "As their employees attest, the companies named to this year's Best Places to Work list demonstrate a commitment to building and maintaining a strong workplace culture. In doing so, they're helping their employees, clients and their business succeed."

Other

PSRS/PEERS Executive Director Dearld Snider and Chief Investment Officer Craig Husting presented a plaque to Frank Aten for his dedication, service and retirement from PSRS/PEERS. Mr. Aten will retire effective January 1, 2025.

Mr. Snider and Director of Communications Ms. Susan Wood also presented a plaque to Renette Reiske for her dedication, service and retirement from PSRS/PEERS. Ms. Reiske will retire effective January 1, 2025.

Investments

Investment Performance Report (9/30/24)

Mr. Husting and Mr. Michael Hall from Russell reviewed the investment performance for the period ended September 30, 2024. The one-year PSRS/PEERS investment return was reported as   16.8%, while the fiscal year return (July 1, 2024 through September 30, 2024) was reported as 3.9%.

Ongoing Investment Activity

Mr. Husting and Mr. Hall reviewed ongoing investment activities, which included estimated investment performance through November 30, 2024. Mr. Husting discussed the current asset allocation of the PSRS/PEERS portfolio, in which he reviewed the long-term strategy and broad portfolio expectations.

Global Investment Performance Standards (GIPS®)

Mr. Husting reported on the Global Investment Performance Standards (GIPS) which are ethical standards for calculating and presenting investment performance based on principles of fair representation and full disclosure. PSRS/PEERS provides the GIPS Asset Owner Report for the Total Plan fiscal year performance to the Board of Trustees on an annual basis. An independent third-party verification is also conducted and reported with the GIPS Asset Owner Report to the Board of Trustees.

Investment and Governance 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 December 2023.

Mr. Husting discussed proposed changes to the General Policy, the Personal Trading Policy, the Yield Enhancement Policy and Implementation Manuals for Public Risk, Safe Assets, Private Credit and Private Equity. He also discussed a change to the Board Communication Policy.

The recommended changes were categorized as: 1. clarification and enhancements, 2. technical/investment related and 3. governance related. Changes to the Public Risk, Private Credit and Private Equity Implementation Manuals included specificity to allow a portion of direct lending and co-investments to be implemented without the use of a consultant.

Following discussion, the proposed investment and governance policy changes were approved by unanimous vote.

Real Estate Annual Review

Mr. Seth Marcus and Ms. Kathryn Finneran from Townsend (the Systems' real estate consultant), presented several items to the Board, including a real estate market overview and details of the PSRS/PEERS real estate portfolio. Townsend reported that the PSRS/PEERS' real estate portfolio had produced an annualized return of 7.8% (net of all fees) for the 10-year period ended June 30, 2024.

Accounting

Independent Auditors' Report

Ms. Anita Brand briefly reviewed the purpose of the Annual Comprehensive Financial Report (ACFR) which was previously shared with the Budget and Audit Committee.

Ms. Anita Brand and Mr. Nick Mestres from Williams-Keepers, LLC briefly reviewed the recent June 30, 2024 audit of the 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.

Management Report

Approve Audit Committee to certify petitions for election

The Board voted unanimously to delegate to PSRS/PEERS staff (executive director) the task of organizing the audit committee composition, time to meet, etc. The audit committee will be comprised of representatives from various education associations.

LEAD Group Recognition

Ms. Sarah Swoboda from PSRS/PEERS recognized the Leadership Exploration and Development (LEAD) class of 2025. Ms. Swoboda first outlined the mission statement, curriculum and selection process for the program. She then introduced the members of this class, including Ashley Meyerpeter, Erin Fouch, Chad Kemna, Joren Trimble, Lexi Bonnot, Samantha Lindsay, Laurie Cantrell, Samantha Kelly, James Scurlock and Rebecca Stockman.

Legislative Update

Mr. Doug Nelson, external government relations consultant, and Mr. Mike Moorefield from PSRS/PEERS presented the December legislative update.

Mr. Moorefield and Mr. Nelson provided an update on the upcoming 2025 legislative session and potential themes and priority legislation the General Assembly will consider. Mr. Moorefield and Mr. Nelson also discussed how the 2024 elections could impact legislative activity.

Finally, Mr. Moorefield discussed bills of interest to PSRS/PEERS, highlighting legislation that could impact the Systems' investment activity and working after retirement provisions.

Key Accomplishments

Ms. Sarah Swoboda and Ms. Anita Brand reviewed key accomplishments since the October Board Meeting.

Ms. Swoboda informed the Board that the member services department has taken another step to encourage members to file for retirement online. Instead of mailing paper service retirement applications with benefit estimates calculated for a retirement date within one year, members will now receive a single-page information sheet which explains how to file for retirement online and also contains a QR code directing them to the PSRS/PEERS Retirement Planning Guide. In addition to encouraging members to file for retirement online, this initiative is estimated to reduce the number of pages mailed by approximately 800,000 each year, saving time and money for the Systems.

Ms. Swoboda also discussed the 2025 LEAD participants. The LEAD program is a 12-month program provided by the Missouri Training Institute and PSRS/PEERS management team. The areas of focus are communication skills in a leadership role, how to become an effective leader, how to navigate stress and burnout as a leader and the art of positive attitude.

Ms. Swoboda next mentioned the Systems' transfer of the PSRS/PEERS staff 457(b)/401(a) plans from Nationwide to a partnership between Voya Financial and Sundvold Financial. This transition meets all System goals including increased customer service, more employee-centric interfaces, diverse and competitive investment choices.

Ms. Swoboda also highlighted PSRS/PEERS being named one of Pensions & Investments Best Places to Work in Money Management as previously discussed under "Other." This is the second year in a row the Systems have received this award.

Ms. Anita Brand also noted that the Systems were again recognized for meeting and exceeding the Public Pension Coordinating Council's (PPCC) standards for both funding and administration. PSRS has received the award every year since 2004 and PEERS has received the award every year since 2005.

Lastly, Ms. Brand reported to the Board that phase 1 of the expansion of the Systems' internal investment platform, Horizon, is now live for the investment team. This phase of the Horizon project includes the full life cycle of the Systems' U.S. Equity and Non-U.S. Equity investments. This is a newly created platform for the investment department that modernizes workflows and data storage, creating significant efficiencies for the team.

CPI-U Update

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:

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 decreased slightly in November. The CPI-U change for the five months ended November 30, 2024, is 0.42%. 

Public Comment

None

Other

None

Closed Session

The Board went into closed session at 12:18 p.m.

Adjournment

The Board adjourned at 1:55 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.