June Board of Trustees Meeting Summary

The June 10, 2025, meeting of the Budget and Audit Committee of the Public School and Education Employee Retirement Systems of Missouri (PSRS/PEERS) Board of Trustees convened at 8 a.m. at 520 Maryville Centre Dr., St. Louis, Missouri, 520 Maryville Conference Room. The Regular Board Meeting convened at 9:30 a.m. at the same location. In attendance were Board members Beth Knes, Dr. Eric Park, Allie Gassmann, Katie Webb, Chuck Bryant, and Amanda Perschall. Also present were Executive Director Dearld Snider; Chief Operating Officer Sarah Swoboda; Chief Investment Officer Craig Husting; Chief Counsel Mike Moorefield; Chief Financial Officer Brandon Robertson; Executive Advisor, Finance and Strategy Anita Brand; Director of Human Resources Michelle Varcho; Director of Member Services Nicole Hamler; Director of Employer Services Stacie Verslues; Director of Internal Audit Jeff Hyman; Director of Communications Susan Wood; Chief Technology Officer Lisa Scheulen; 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 Budget and Audit Committee meeting minutes from the April 6, 2025, meeting were approved by unanimous vote.

Operating Bank Review and Contract

Ms. Anita Brand and Mr. Brandon Robertson, both from PSRS/PEERS, discussed the Systems' operating bank services. The Systems issued a Request for Proposals (RFP) for banking, treasury, and cash management services on February 21, 2025.

PSRS/PEERS does not frequently change the vendor providing these services because the Systems' needs are complex and a vendor change can disrupt members, staff, and business partners. However, it is important the Systems continuously assess all vendor relationships to ensure it retains the best overall service, pricing, security, and technologic advances.

Ms. Brand summarized the unique needs and requirements of the Systems that were reflected in the RFP. An internal evaluation committee reviewed all responses and conducted finalist presentations.

Staff recommended retaining the Systems' current vendor, Central Bank Trust. Staff's recommendation was based on Central Bank Trust's proposal submission, presentation, unique expertise with large public funds to adequately manage statutory collateral requirements, and the beneficial relationship the Systems have shared with Central Bank Trust. The Budget and Audit Committee voted unanimously to bring the recommendation to the full Board for final approval.

Annual Banking Resolution

Ms. Brand and Mr. Robertson reviewed a memo regarding a banking resolution. The resolution provides continuing authority to Mr. Dearld Snider, Ms. Sarah Swoboda, and Mr. Craig Husting to make necessary changes, when needed, related to the Systems' banking relationship with Central Trust Bank. The banking resolution authorizes appropriate individuals to execute documents with the bank without additional approval by the Board of Trustees. The resolution automatically expires each June 30 or when a new resolution is received by Central Trust Bank. The Budget and Audit Committee voted unanimously to bring the resolution to the full Board for final approval.

Discussion and Approval of the Fiscal Year 2025-2026 Budget

Ms. Brand and Mr. Robertson reviewed the fiscal year 2025-2026 proposed budget request. They provided information regarding the processes used to develop the budget. Leaders compiled the budget based on the Systems' mission of providing retirement security to Missouri's educators and public-school employees in the most efficient and cost-effective manner possible. Ms. Brand provided the following budget highlights and provided detailed discussion on significant changes from the prior year.

As part of the annual budgeting process, Management prepares annual key initiatives. Each department develops and reviews key initiatives annually under the leadership of the department director. Management then reviews the key initiatives to ensure alignment with the Systems' mission, goals, focus areas, and strategic objectives. Annually, Management reviews each key initiative to determine whether it was completed and what measurable effect (if measurable) each action had on the Systems' strategic objectives. Key initiatives vary in scope and duration for completion. The Systems currently have several multi-year key initiatives in progress. Ms. Brand reviewed the multi-year key initiatives, fiscal year 2025-2026 key initiatives, and key initiatives completed during the 2024-2025 fiscal year.

The total budget request has increased by 4.8% from the fiscal year 2024-2025 budget. An expected 4.8% increase in benefit payments to members is driving the increase, which includes a projected January 1, 2026, cost-of-living adjustment (COLA), the 2% COLA granted on January 1, 2025, and the addition of benefits for new retirees. The Systems' actuary will present the recommended January 1, 2026, COLA at the October 2025 Board of Trustees meeting.

The investment expenses are comprised of investment fees and investment administrative expenses. Budgeted investment fees increased compared to the prior year. The increase is directly related to the assets under management and current contracts with investment managers. Investment fees are paid and budgeted in accordance with current legal contracts. The Systems account for and budget all investment fees including performance and incentive fees. Actual expenses will directly depend on the market environment.

The budget request also includes an increase of approximately $1,100,000 (or 7.4%) in investment administrative expenses. Investment administrative expenses consist primarily of internal investment staff (salary, benefits) and related costs (office expenses, technology) and have increased as the Systems continue to invest in the internal investment team and infrastructure. The increase is attributed to the addition of one investment position, two investment operations positions, and the completion of a comprehensive compensation study in accordance with the Board of Trustees' Compensation Strategy. Investment returns are reported net of investment fees and investment administrative expenses. The investment administrative expense budget reflects an increase in due diligence-related travel expenses by investment staff, given the nature of the investment allocations. Budgeted increases and decreases for other non-personnel related investment administrative expenses were generally minor and/or inflationary.

The total administrative budget is made up of the administrative expense budget and the capital asset budget (items over $10,000 that are capitalized). Administrative expenses have increased by approximately $2,000,000 (or 7.4%) from the previous year. The increase is attributed to the addition of four full-time positions and the completion of a comprehensive compensation study in accordance with the Board of Trustees' Compensation Strategy. The increase in administrative expenses is largely offset by a $570,000 (or 53.9%) decrease in capital assets. Capital assets have decreased from the previous year due to the completion of one-time projects.

The budget for non-personnel administrative expenses reflects an increase in professional services due to an experience study to be performed by the Systems' retained actuary, which occurs every five years, and an increase in software and infrastructure-related technology costs for the continued investment in information technology and security initiatives that are critical to providing exceptional service to the Systems' members and employers, to retaining staff, and for appropriate protection of sensitive data. Budgeted increases and decreases for other non-personnel related administrative expenses were generally minor and/or inflationary.

Throughout the proposed budget request, the Systems have decreased the budget where appropriate. However, the overall proposed budget request has increased to meet the Systems' long-term goals and strategic objectives. The Systems' administrative expenses are funded through investment earnings.

The Budget and Audit Committee voted unanimously to bring the proposed budget to the full Board for final approval.

Public Comment

None

Regular Board Meeting

System Operations

Approval of Minutes

The open session minutes from the April 6-7, 2025, Board meetings were approved by unanimous vote.

Order of Business

The order of business was approved with no changes.

Other

None.

Investment Report

Performance Report for March 31, 2025

Mr. Craig Husting from PSRS/PEERS and Mr. Michael Hall from Russell reviewed the investment performance for the period ended March 31, 2025. The one-year PSRS/PEERS investment return was reported as 6.8%, while the fiscal year return (July 1, 2024, through March 31, 2025) was reported as 4.8%.

Ongoing Investment Activity

Mr. Husting and Mr. Hall reviewed ongoing investment activities, which included estimated investment performance through May 31, 2025. The estimated fiscal year investment return (July 1, 2024, through May 31, 2025) was reported as approximately 8.0%. Mr. Husting discussed the investment markets and the current PSRS/PEERS asset allocation.

Custodial Review and Contract

JP Morgan was hired as the custodian for PSRS/PEERS in September 2010 after a formal RFP process. Consultant RVK was hired in 2015 and 2020 to conduct a Custodial and Related Services Review. The result of the RVK reviews was an extension of the JP Morgan custody contract (under a new compensation structure) through September 2020 and then through September 2025.

Mr. Husting and Ms. Brand reported that PSRS/PEERS again retained RVK in February 2025 to conduct a third Custodial and Related Services Review. As part of the review, RVK evaluated specifics of the PSRS/PEERS relationship with JP Morgan, including cost drivers, levels of complexity, and changes over time. Following discussion, the Board voted unanimously to allow staff, with assistance from RVK, to negotiate new contract terms with JP Morgan (through September 2030) based on the results of the Custodial Review.

Real Estate Portfolio 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 10-year annualized return for the Real Estate composite for the period ended March 31, 2025, was 7.1%.

Management Report

Board Meeting Dates for Calendar Year 2026

The 2026 calendar year Board of Trustees meeting dates were reviewed and approved by unanimous vote. The following dates were set for calendar year 2026 meetings: February 2, 2026; April 20, 2026; June 8, 2026; August 31, 2026; October 26, 2026; and December 14, 2026.

Operating Bank Review and Contract

Ms. Brand and Mr. Robertson reviewed a memo regarding the Systems' operating bank services and the Request for Proposals (RFP) issued by the Systems for banking, treasury, and cash management services on February 21, 2025. Earlier in the day, the Budget and Audit Committee approved Staff's recommendation to retain Central Trust Bank. The Board approved retaining the current vendor, Central Trust Bank, by unanimous vote.

Annual Banking Resolution

Ms. Brand and Mr. Robertson reviewed a memo regarding a banking resolution, which was unanimously approved earlier in the day by the Budget and Audit Committee. The resolution provides continuing authority to Mr. Dearld Snider, Ms. Sarah Swoboda, and Mr. Craig Husting to make necessary changes related to our banking relationship with Central Trust Bank. The Board approved the resolution by unanimous vote.

Fiscal Year 2025-2026 Budget Approval

The proposed fiscal year 2025-2026 budget, as presented to and unanimously approved earlier in the day by the Budget and Audit Committee, was approved by the Board by unanimous vote.

Implementation of Regulations

Mr. Mike Moorefield from PSRS/PEERS presented several proposed amendments to Title 16, Division 10 of the Missouri State Code of Regulations, amending Chapters 3, 4, 5, and 6, which govern PSRS and PEERS. These amendments are all member friendly and are being put in place to clarify current language and processes. The Board voted unanimously to approve the proposed amendments.

Legislative Update

Mr. Moorefield also presented the June end-of-legislative-session update.

Mr. Moorefield reported that the 2025 legislative session resulted in few bills passing. PSRS/PEERS tracked 70 bills, filed 128 fiscal note requests on legislation that could impact the Systems, and had 32 bills on its Priority Legislation Track.

The General Assembly Truly Agreed To and Finally Passed 16 appropriations bills and 51 non-appropriations bills and joint resolutions during the 2025 session. Of the 51 non-appropriations bills, four bills contained components of the PSRS/PEERS Priority Track legislative package. These bills contained three provisions that address investment mandates/system governance and the extension of the substitute working after retirement (WAR) waiver.

No bills passed this session negatively impact PSRS/PEERS.

Governor Kehoe has until July 14 to act upon legislation. If those bills become law, the provisions are effective August 28, 2025.

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. A 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 2.11% through April 30, 2025.

Public Comment

None

Other

None

Closed Session

The Board went into closed session at 12:08 p.m.

Adjournment

The Board adjourned at 12:55 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.