By Otto Fajen, MNEA Legislative Director
Trustees present: Jason Steliga (Chair), Chuck Bryant, Allie Gassman, Beth Knes (Vice-Chair), Dr. D. Eric Park, Katie Webb
BUDGET AND AUDIT AND ACTUARIAL
The Board met on August 25 to hear presentations on budget and audit and on actuarial valuations.
SYSTEM OPERATIONS
The Board reconvened on August 26, 2024. The Board approved the minutes from the June 10, 2024, meeting and established the order of business.
INVESTMENTS
Investment Performance Report – Craig Husting and Michael Hall from PSRS staff reviewed the Systems’ FY 24 investment performance. The Systems’ returns for the fiscal year were +10.6% net of all fees and expenses.
The Systems have shown 1.55 % of annualized alpha (the excess return over policy benchmarks) over the last five years, and this excess return has added $4.6 billion in value to the Systems. The Systems’ 5- and 10-year investment performance remains in the top quartile relative to other large public plans.
The report addressed the market and investment environment in FY 24. This year was a time of volatility. Markets have been repriced, the federal funds rate is higher, interest rates are higher, stock prices are significantly higher, real estate has been re-priced lower, private equity has shown a low (but positive) return, and private credit has shown a consistent return.
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.
Total System assets are $58.7 billion. The investment report provided a broad overview of how the PSRS/PEERS’ portfolio is structured, including estimated asset allocation for PSRS/PEERS as of June 30, 2024.
REPORT OF ACTUARY AUDIT
Milliman presented the results of the 2024 PSRS/PEERS Actuarial Audit results. Milliman reviewed the June 30, 2023, actuarial valuations for PSRS/PEERS Systems. Based on its review of the census data, experience study documents, liability replications, and actuarial valuation reports, Milliman believes the June 30, 2023, actuarial valuations for PSRS and PEERS are reasonable, based on reasonable assumptions and methods, and the reports comply with the Actuarial Standards of Practice. Milliman offered observations and recommendations that we believe would further enhance the communication and funding of PSRS and PEERS going forward.
OTHER
Board chair and Missouri NEA member Dr. Jason Steliga announced that he will be stepping down from Board service as of October 15, 2024, and will take a new position as the Executive Director for the Kansas City Public School Retirement System. The Association thanks Dr. Steliga for his years of service to Missouri students and his leadership and support as a member of the PSRS/PEERS Board of Trustees. The Board will establish an election schedule at the October meeting to elect a new Board member in early 2025 to replace Dr. Steliga for the remaining year of his term that ends on June 30, 2026.
MANAGEMENT REPORT
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 median for the peer group. This evaluation gives the Board outside confirmation that the Systems provide a broad range of outstanding member services efficiently.
PSRS/PEERS and its peer public pension plans have been improving member services in recent years. Greater digitalization is the key driver for higher service scores. Pension service organizations globally are experiencing significant changes. Pension plans are starting to use low-risk AI applications in their contact centers to support service agents.
Key accomplishments – Staff reviewed recent staff work in the key areas, including July retirement packet mailings, LEAD supervisor training program, GFOA Certificate of Achievement, the investment intern program.
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 is 77,966 and has declined slightly in the last two years, while the number of benefit recipients has increased to 71,204. PEERS active membership has increased to 53,526, while the number of benefit recipients has increased to 38,980. Retirements for 2023-24 totaled 2,826 for PSRS and 2,158 for PEERS.
Budget Adjustment – The Board approved a budget adjustment of $207,500 for the cost of the additional election costs that the Systems may incur in the 2025 year to elect a new Board to replace Dr. Jason Steliga.
CPI update/COLA review – The Board reviewed the COLA policy and COLA history for the current fiscal year. The final FY 24 CPI-U was up 2.9714 % through June 30, 2024. Under law and current policy, the Board is expected to approve a 2.0% COLA for eligible retirees beginning in January 2025.
Public Comment – None.
The public meeting adjourned, and the Board went into closed session.