By Otto Fajen, MNEA legislative director
Jason Steliga, Chair
Beth Knes, Vice-Chair
Dr. D. Eric Park
The Board meeting started at 9:00 a.m. The Board approved the minutes from the June 12-13, 2023 meeting and the Operations Symposium meeting. Dr. Eric Park was appointed to replace former Board member Kyle Collins as a member of the Budget and Audit Committee.
The Board welcomed the staff in attendance from the new St. Louis satellite office and acknowledged staff member Jessica Wilbers for being recognized as a 2023 Institutional Investors Rising Star. The Board also had a moment of silence to acknowledge the passing of former Missouri House Speaker and former MRTA Exec. Director Jim Kreider. The Board also established the order of business.
Investment Performance Report – Craig Husting and Michael Hall from PSRS staff reviewed the Systems’ FY 23 investment performance. The Systems’ returns for the fiscal year were +6.2% net of all fees and expenses. The Systems’ Alpha (excess return over policy benchmark based on actual allocation and investment) was below target after 2 years with Alpha significantly above expectations. The Systems’ 5- and 10-year investment performance remains in the top quartile relative to other large public plans.
The markets have behaved differently in the last two fiscal years. Increases in public equities drove FY 23 returns, while alternative asset classes were the primary factor in FY 22 returns. A narrow market list of large, tech-focused companies drives the increases in U.S. equities.
The markets have shown volatility and the Federal funds rate has increased significantly from 1.5% to 5.0%. 10-year Treasury rates have increased to 3.81%. Higher interest rates lead the Staff to expect better overall investment conditions in the future.
The Systems’ investment policy seeks to provide important downside protection. This means the Systems’ experience less of a loss in declining markets. Correspondingly, the policy means the Systems’ investments are slower to increase during rising markets.
Member Services Benchmarking – The system hires CEM Benchmarking to review PSRS/PEERS member services and compare them both to the entire plan universe of CEM clients and to comparable public pension plans. Franco Wang from CEM reported that PSRS/PEERS again has the second highest-rated services in our public plan peer group. Meanwhile, PSRS/PEERS member service costs are slightly below the median for the peer group. This evaluation gives the Board outside confirmation that the Systems provide a broad range of outstanding member services efficiently.
Investment systems are generally experiencing challenges in employee recruitment and retention. Pension systems also need to focus on information technology and cybersecurity to meet member expectations to do more interactions online. PSRS has increased its use of member experience surveys. Opportunities for improvement include more member surveys regarding website experiences and reducing undesired outcomes on incoming calls.
Member Services Update – Member Services staff shared updated information about membership, retirements, member inquiries, service purchases, working after retirement, website services, member education meetings, and other member services issues. PSRS active membership has remained relatively flat, while the number of retirees has increased. PEERS has also increased turnover. Actual retirement from PSRS for 2022-23 was 2,977.
Board Charter Revisions – The Board approved several charter revisions drafted and presented by Staff. Many of the changes were recommended in the report the Board previously received from Funston. The Board retained Funston to review the Systems’ governance policies and practices and suggest improvements based on best practices. Many of the revisions were of a technical nature to improve clarity, wording, and grammar. The revisions also specify that the Internal Audit report will be presented to the Board for formal approval. The Board also approved minor revisions to the Budget and Audit Committee Charter and the Executive Director Charter.
GFOA Award Presentation – The Systems once again received the GFOA Certificate of Achievement award for the annual comprehensive financial report (ACFR). The Systems have achieved this recognition every year since 1994.
Key Accomplishments: Sarah Swoboda gave updates on recent accomplishments: processing 2,281 PSRS and 1097 PEERS retirements in July 2023, creating a Working After Retirement dashboard for employers to provide information and help implement the many WAR options for staff, work on modernizing the Systems’ internal pension administration system known as OASIS, and starting the new group of LEAD supervisor training participants.
Appointment of NCTR delegates - The National Council on Teacher Retirement conference will be held in October this year. Dearld Snider, Jason Steliga, and Allie Gassman were selected to serve as delegates at the conference and Jennifer Martin will attend and serve as an alternate.
CPI update/COLA review – The Board reviewed the COLA policy. The final CPI-U for 2023-2023 was 2.9692% through June 30, 2023. Since the final CPI exceeds 2% for the year, the Staff expect the actuary to recommend in a 2.0% COLA for eligible retirees next year at the October meeting. The CPI-U for 2023-24 was 0.1908% through July 31, 2023.
Public Comment – None.
The public meeting adjourned at 12:40, and the Board went into a closed session.