The TMRS Board met on Thursday, December 14th in Austin and this meeting was open to the public. I was able to attend in person. All TMRS Board Members were present at the meeting. The Board position previously occupied by Anali Alanis is currently vacant and her replacement is not known at this time. Anali now works as a full-time TMRS employee.
Agenda Item #1 – Consider and Act on Consent Agenda
- Motion was made to approve the Consent Agenda. Motion passed.
Agenda Item #2 – Receive Executive Director and Senior Staff Reports
- TMRS Executive Director David Wescoe was absent for the meeting but a report was given by TMRS staff in his absence which included a report on some internal happenings, retirements, staff updates, various presentations given by TMRS staff, etc.
- To date, (24) cities have adopted the new non-retroactive COLA option as a result of HB 2464 that was passed this last legislative session which allows cities to utilize the new COLA option.
- The TMRS City Training Conference was held on October 24th and (858) city staff registered to attend.
- An important 2023 Action Plan item, a first-ever MyTMRS online account refund tool for members, is complete and will be rolled out in January, 2024.
- In early November, TMRS was notified that they had once again received the Public Pension Coordinating Council’s (PPCC) 2023 Public Pension Standards Award. This is the 18th consecutive year TMRS has received the award.
- Former TMRS Board Member Anali Alanis started October 16th as TMRS’ first-ever Chief Quality Officer.
- TMRS Chief Investment Officer David Hunter announced his retirement effective January.
- Finally, TMRS Board Members received hard-copy quarterly reports from the Chief Legal Officer, the Chief Service Officer, the Chief Information Officer, and the Chief Quality Officer.
Agenda Item #3 – Report on Stakeholders Advisory Committee Meeting
- The newly established Stakeholder Advisory Committee, which replaced the previous Advisory Committee on Benefit Design – of which I represent GFOAT, met for the first time on November 16th. Unfortunately, due to a prior GFOA commitment, I was not able to attend this initial meeting.
- TMRS Chief Services Officer, Debbie Munoz, reported to the Board that the meeting was very successful and a lot of Committee member input was gathered on the following potential topics:
- Review of Cost of Living (COLA) Adjustment – possibly look at allowing some structure for cities to add 5% increases or decreases at a time instead of the current 30%-50%-70%. Incremental increases – or decreases – could be a valid option for cities.
- Making all City Plan Changes Effective January 1 – currently, some city plan changes can be implemented any month of the year. This has caused multiple tracking systems for city plans across the board. For tracking and monitoring purposes, it would be much easier to have all city plan changes effective January 1 of any given year.
- De-Coupling the Updated Service Credit (USC) and COLA Benefits – currently, a city must have adopted a USC before a COLA can be adopted. If the USC requirement was dropped, this would allow for (2) distinct plan features and thus, provide more flexibility for city plans. Or, one option could be to lower the USC requirement (currently 50%) to an option of 25%, as an example.
- Removing the Statutory Maximum Contribution Rate Limit – as the topic implies, allow for removal of the Statutory Contribution Rate limit. Since 2000, new cities to TMRS have no Statutory Contribution Rate limit.
- Adding a 2.5:1 Matching Ratio – as the topic implies, allow cities to adopt a 2.5:1 matching ratio. Currently the highest option is a 2:1 matching ratio.
Agenda Item #4 – Consider and Act on Topics for Stakeholder Advisory Committee
- TMRS Board Member Johnny Huizar asked what would be the benefits of de-coupling the USC and COLA. It was explained that COLA’s could more easily be given and could result in greater affordability for cities. On the flip side, a city that currently has both could potentially remove the USC if the de-coupling was allowed. The option could have both pro’s and con’s.
- TMRS Board Member and Stakeholder Committee Co-Chair Jesus Garza stressed the importance of allowing for greater flexibility for cities in their plan choices. We should approach any potential legislative plan changes from a “flexibility” standpoint.
- After much Board discussion, a motion was made to focus on the topics of: Review of COLA Adjustment, Make all City Plan Changes Effective January 1, De-Couple the USC and COLA Benefits, and Remove the Statutory Maximum Contribution Rate. The motion also included to not focus on Adding a 2.5:1 Matching Ratio at this time. Motion passed.
- GFOAT Board Members – it’s very important that you let me know if you have any comments or opinions on any of these potential TMRS Plan changes/modifications/additions. I represent all of you and all GFOAT member cities and I want to make sure I do my part in making our voices heard!!
Agenda Item #5 – Consider and Act on 2024 Board Meeting Dates
- The TMRS Act requires that the Board hold four (4) meetings annually.
- After much discussion, the Board decided to have five (5) regularly scheduled TMRS Board Meetings, plus a Retreat for 2024:
- March 28, May 23, June 27, September 19, and December 12 (Regular Board Meetings)
- October 24 (Retreat)
Agenda Item #6 – Consider and Act on Election of 2024 Board Officers
- Motion was made to elect Johnny Huizar for the 2024 Chair position and Bill Philibert as the 2024 Vice-Chair position. Motion passed.
Agenda Item #7 – Consider and Act on 2024 Board Committee Appointments
- Motion was made to appoint the following to the 2024 Board Committees:
- Budget and Compensation Committee: Chair – Bill Philibert, Vice-Chair – Johnny Huizar
- Audit Committee: Chair – David Landis, Vice-Chair – Jesus Garza
- Stakeholder Advisory Committee: Chair – Jesus Garza, Vice-Chair – Bob Scott
- Motion passed.
Agenda Item #8 – Report on Audit Committee Meeting
- TMRS Board Member and Audit Committee Chair David Landis gave an overview of the Audit Committee meeting which was held via Zoom on November 14, 2023.
- Items covered included:
- An update on the Quality Assurance and Improvement Program
- An update on the 2024 Risk Assessment and 2023-24 Audit Plan
- An update on the 2024 Internal Audit Budget
Agenda Item #9– Consider and Act on Proposed 2024 Operating and Capital Budgets
- TMRS Director of Finance, Candace Nolte, gave a brief presentation of the 2024 Draft Operating Budget back in September and she gave a follow-up to that presentation.
- Highlights of the 2024 Operating Budget:
- Overall 2% increase when compared to the 2023 Operating Budget.
- The 2024 Operating Budget totals $38.37 million and the Capital Budget totals $1.75 million for a total 2024 Budget of $40.1 million.
- Increases in the 2024 Operating Budget include: increase in personnel services of $535,000 reflecting a 4% anticipated mid-year pay adjustment to keep staff compensation competitive in the Austin metro area; and an increase in professional services of $237,000 for an Investment Practices and Performance Evaluation (IPPE) and also professional assistance in developing workflows and procedures that support quality initiatives.
- The 2024 Capital Budget of $1.75 million includes (3) projects: $1.0 million for rebuild of NexGen, $500K to update MyTMRS, and $250K to expand functionality for Online Retirement.
- Motion made to accept the 2024 TMRS Operating and Capital Budget. Motion passed.
Agenda Item #10 – Consider and Act on Resolution Transferring Monies from Interest Reserve Account to Expense Fund
- TMRS Finance Director, Candace Nolte, reported to the Board that in December, staff recommends that the Board authorize a transfer from the Trust Fund’s Interest Reserve Account to the Expense Fund to cover TMRS’ budgeted expenses for the following year. In addition, Board policy has been to allocate a 15% reserve of the next year’s budget to the Expense Fund.
- The transfer is a book-entry only as all funds remain invested in the Trust Fund until the actual expenditures are made.
- Motion made to transfer $38.3 million from the Interest Reserve Account to the Expense Fund to cover 2024 budgeted expenses. Motion passed.
Agenda Item #11 – Investment Reports
- TMRS Chief Investment Officer David Hunter reported that net investment returns for the Trust Fund were 10.15% and 5.51% for the one and five-years ended September 30, 2023 respectively. Net returns for all asset classes exceeded performance benchmarks for the 5 years ended September 30, 2023, excluding Global Equity. Actual asset allocation levels were within approved ranges.
- TMRS exceeded the Actual Allocation Benchmark, AAB, by 1.1% and 1.4% for the one and five-years ended September 30, 2023.
- TMRS ranks in the second quartile for all public pension plans in one-year returns in all public plans > $10 billion in assets.
Agenda Item #12 – Consider and Act on Amendments to the Investment Policy Statement (IPS)
- TMRS staff recommended the Board approve modest changes to the IPS to be effective January 1, 2024.
- Motion made to accept the proposed modest changes to the IPS to be effective January 1, 2024. Motion passed.
Agenda Item #13 – Receive 2024 Investment Pacing Plan
- TMRS Deputy Chief Investment Officer Tom Masthay gave an overview of the projected 2024 Private Market Pacing Plan that shows projected private market asset allocations as a percentage of the total Trust Fund.
- 2024 Modeled Commitments include: Private Equity ($900 million), Other Public & Private Markets ($200 million), Real Estate ($200 million), Private Debt ($1.25 billion), and Infrastructure ($500 million).
- Motion made to accept the 2024 Investment Pacing Plan. Motion passed.
Agenda Item #14 – General Investment Consultant Quarterly Report
- The Total Fund returned 10.15%, net of fees, for the one-year period ended September 30, 2023, exceeding the Asset Allocation Benchmark by 1.12%.
- Core and Non-Core Fixed Income, Real Estate, and Hedge Funds exceeded their respective benchmarks, while Global Equity, Other Public and Private Markets, and Private Equity trailed.
- Total Fund value at the end of the 3rd Quarter was $37,215,699,769. This time last year, the Total Fund value was $34,044,890,438.
Agenda Item #15 – Board Education: Fixed Income Asset Class
- TMRS Portfolio Director Darren Schlissel presented the annual Fixed Income review.
- Both Core and Non-Core Fixed Income yields remain near the highest sustained levels in the last 20 years. New investment activity is focusing on private debt due to high yields.
- The portfolio is well positioned relative to current and updated asset allocation targets.
Agenda Item #16 – Board Education: Private Equity Asset Class
- TMRS Portfolio Director Josh Garcia presented the annual Private Equity review.
- $984 million of capital commitments have been made so far in 2023.
- The portfolio is well positioned relative to current and updated asset allocation targets.
Agenda Item #17 – all for Future Agenda Items
- None
Hand-outs and Agenda for the TMRS Board Meeting are available on the following site: https://www.tmrs.com/governance_agendas_minutes.php
Please let me know if you have any questions or need clarification on any of the items on the agenda.
Next TMRS Board Meeting: March 28, 2024.
Casey Srader