December 2019 Board Meeting Summary
The Budget and Audit Committee of the Board of Trustees convened at 9 a.m. on Monday, December 9 in the Retirement System offices in Jefferson City, MO, with the regular session of the Board of Trustees meeting following at 9:30 a.m. In attendance were Board members Aaron Zalis, Jason Hoffman, Yvonne Heath, Beth Knes and Jason Steliga. Also present were Executive Director, M. Steve Yoakum; Assistant Executive Director, Investments, Craig Husting; Assistant Executive Director, Operations, Dearld Snider; 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; Director of Administrative Planning and Design, Stacie Verslues; and various other PSRS/PEERS staff members.
Budget and Audit Committee
The open session minutes from the October 27-28, 2019 Budget and Audit Committee meeting were approved by unanimous vote.
Review of June 30, 2019 Audit Report
Ms. Heidi Chick, Mr. Nick Mestres and Ms. Kristen Brown of Williams Keepers discussed the recent June 30, 2019 audit of the Retirement Systems. Mr. Mestres indicated that Williams Keepers had issued an unqualified audit opinion on the June 30, 2019 financial statements. Mr. Mestres 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 the U.S. Generally Accepted Accounting Principles, and the financial statements can be relied upon. Mr. Mestres briefly reviewed the audit process, financial statements, new accounting pronouncements and all the footnotes. Ms. Chick reviewed the audit communications letter to the Board of Trustees. She indicated they found no significant deficiencies or material weaknesses in internal controls. Ms. Brown also briefly discussed the Governmental Accounting Standards Board Statement No. 68 audit. She reviewed the roles of PSRS/PEERS’ staff and Williams Keepers during this process and the joint effort made with the school districts.
The audit report was approved and recommended for acceptance by unanimous vote by the Budget and Audit Committee.
Regular Board Meeting
The open session minutes from the October 27-28, 2019 meeting were approved by unanimous vote.
Order of Business
PSRS/PEERS Board Chairman Dr. Aaron Zalis presented a plaque to Chuck Bryant recognizing his dedication and service as a PSRS/PEERS Trustee.
PSRS/PEERS Executive Director Mr. Steve Yoakum presented a plaque to Susan Cassmeyer recognizing her recent retirement from PSRS/PEERS.
Investment Performance Report (9/30/19)
Mr. Craig Husting from PSRS/PEERS and Ms. Margaret Jadallah from Verus reviewed the investment performance for the period ended September 30, 2019. The one-year PSRS/PEERS investment return was reported as 5.3%, while the fiscal year return (July 1, 2019 through September 30, 2019) was reported as 0.8%.
Ongoing Investment Activity
Mr. Husting and Ms. Jadallah reviewed ongoing investment activities, which included estimated investment performance through November 30, 2019. Mr. Husting discussed the current asset allocation of the PSRS/PEERS portfolio, in which he reviewed the long-term strategy, portfolio themes and the broad portfolio expectations.
Safe Assets Program Review
Mr. Frank Aten and Ms. Jessica Wilbers from the PSRS/PEERS investment staff reviewed the Systems’ Safe Assets portfolio including program objectives, guidelines and long-term results. The five-year annualized return for the Safe Assets composite for the period ended September 30, 2019 was 2.4%.
Hedged Assets Program Review
Mr. John Tuck and Mr. Travis Allen from the PSRS/PEERS investment staff reviewed the Systems’ Hedged Assets portfolio including program objectives, guidelines and long-term results. The five-year annualized return for the Hedged Asset composite for the period ended June 30, 2019 was 4.5%.
Review of Fiscal Year 2019 Comprehensive Annual Financial Report (CAFR)
Ms. Anita Brand reviewed the purpose of the CAFR. The CAFR 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 CAFR is prepared in compliance with the accounting requirements established by the Governmental Accounting Standards Board (GASB). The Government Finance Officers Association (GFOA) also provides guidance on the content of the CAFR. The Systems’ strive for excellence in reporting and transparency, therefore the CAFR 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 Trustees each received a copy of the CAFR with the Board Meeting information. The full version is also found on the PSRS/PEERS website https://www.psrs-peers.org/About-Us/Resources/Annual-Report
Report of External Auditor: Review of the June 30, 2019 Audit Report
Mr. Nick Mestres of Williams Keepers reviewed the recent June 30, 2019 audit of the Retirement Systems. Mr. Mestres indicated that Williams Keepers had issued an unqualified audit opinion on the June 30, 2019 financial statements. Mr. Mestres 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 the U.S. Generally Accepted Accounting Principles, and the financial statements can be relied upon. Mr. Mestres briefly reviewed the audit process, financial statements, new accounting pronouncements and all the footnotes. Ms. Chick reviewed the audit communications letter to the Board of Trustees. She indicated they found no significant deficiencies or material weaknesses in internal controls. Ms. Brown briefly discussed the Governmental Accounting Standards Board Statement No. 68 audit.
The audit report was approved as recommended by the Budget and Audit Committee by unanimous vote.
Ms. Maria Walden from PSRS/PEERS updated the Board on the 2020 pre-filed legislation. The Missouri General Assembly allows elected officials to pre-file legislation starting on December 1 for the upcoming legislative session. Mr. Jim Moody, legislative consultant, reported briefly on state revenue and gave an update to the Board.
Ms. Sarah Swoboda from PSRS/PEERS presented a proposed amendment to PSRS/PEERS regulations. The proposed amendment to 16 CSR 10-3.010 (PSRS) and 16 CSR 10-6.020 (PEERS) is regarding the payment of funds to the Systems.
The proposed amendment more fully sets forth the Systems’ existing policy regarding the employer-paid payments to employees’ Heath Savings Accounts (HSAs).
Mr. Dearld Snider from PSRS/PEERS presented to the Board a new leadership program at PSRS/PEERS entitled Leadership Exploration and Development (LEAD) that is set to kick-off in 2020. This program is being led by the Missouri Training Institute with the purpose of identifying, developing and retaining internal talent for leadership positions to sustain our culture and support the ongoing growth of the organization. Mr. Snider also introduced the 12 individuals who were selected to participate in the class of 2020.
Mr. Snider shared with the Board an update on the facility renovation and new addition. Bid Package 1 (geothermal bore fields, pipe installation, demolition of the maintenance facility, three-lane south exit and new west parking lot) was completed November 1, 2019. Mr. Snider was pleased to report that work on Bid Package 2 (new addition and renovation) has begun and the budget remains on track.
Mr. Steve Yoakum 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 Consumer Price Index for Urban Consumers (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. Yoakum 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 0.4697% through October 31, 2019.
The total cumulative is 2.1181% through October 31, 2019.
The November reading for the CPI-U will not be released until December 11, 2019.
The Board went into closed session at 12:30 p.m.
The Board adjourned at 2:30 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 posted to our website at that time