TMRS Highlights from the February 13-14 Board Meeting

Article by Casey Srader, TMRS Advisory Board Representative

The TMRS board has two  new members in 2020 – Anali Alanis, assistant city manager of Pharr, and Juan Diego “Johnny” Huizar, city manager of Pleasanton. Anali replaces Jim Jeffers of Nacogdoches, who retired in January 2020. Johnny replaces Jim Parrish of Plano, who retired in 2019. All TMRS board members are Governor-appointed; both of these positions were appointed on February 4.

In addition to adding these new members, the TMRS board made new board committee appointments, reappointments, and modifications. One of the modifications was combining the budget committee and the compensation committee, due to overlap. There will now only be a budget committee chaired by TMRS board member Julie Oakley. TMRS board chair Bill Philibert will serve as vice-chair. The internal audit committee, the legislative committee, and the advisory committee on benefit design will all remain as is with new chair and vice-chair appointments. Finally, after a comprehensive application process of the advisory committee on benefit design, two new appointees were made to fill vacant positions representing the individual class: Paul Parker, retired city manager, replaces George Kauffman representing retirees; and Barry Sullivan, city manager of Gainesville, replaces Bryan Langley representing active members.

Various investment manager recommendations were made by TMRS investment staff and approved by the TMRS board in the non-core fixed income ($300 million), private equity ($250 million), and real estate ($325 million) areas. The board continued discussions from the August, September, and December 2019 meetings regarding investment manager approvals and terminations. Currently, the board approves all investment managers and their terminations. Going forward, the board has authorized TMRS staff to make investment manager decisions  without board approval, with specific thresholds put in place. Anything above the thresholds in place will require TMRS board approval. This new process will be incorporated in the TMRS Investment Policy Statement (IPS).

RVK Consulting gave their quarterly report to the board. The fourth quarter of 2019 was strong – especially when compared to the same quarter in 2018. For the calendar year 2019, the TMRS total fund performance ended at 14.71 percent, net of fees. Inception-to-date (01/01/1989), the TMRS total fund performance is 8.46 percent. The goal is 6.75 percent.

The TMRS board was given a benchmarking summary report by CEM Benchmarking comparing TMRS administrative and service costs against 11 other similar pension plans (based on plan size) across the United States  on topics such as total pension administration cost, pension administration cost per active member, cost per organization FTE, IT, and major project costs, etc. Overall, the general consensus was that TMRS faired very well in comparison to the other benchmark pension plans. In addition, CEM gave a separate benchmarking summary report on Investment Cost-Effectiveness Analysis comparing cost and return performance to 288 other pension funds (164 United States funds, 77 Canadian funds, 38 European funds, 6 Asia-Pacific funds, and 3 Gulf Region funds). Again, the general consensus was that TMRS faired very well in comparison to other pension plans.

TMRS staff gave an annual risk assessment report to the board. TMRS has a well-defined risk management process: 1) across all asset classes; 2) that is well-positioned to evolve with growth in scope and complexity; and 3) that strives to continuously improve the probability of meeting TMRS objectives.

Per the board’s request, Amy McDuffee, with Mosaic Governance Advisors, led a discussion with the TMRS board and staff regarding the creation of a new teleconferencing policy. It was agreed that a new policy is indeed wanted by the TMRS board. McDuffee got TMRS board input on items such as: 1) does the board prefer that the Trustee attend meetings in person, rather than remotely; 2) can the board chair participate remotely; 3) should roll call votes on agenda items be required when any board members are participating remotely; 4) should the number of meetings that a board member be allowed to teleconference be limited; and 5) various other questions. McDuffee will summarize all comments and bring a draft policy for review at a future meeting date.

TMRS Director of Actuarial Services, Leslee Hardy, gave the board an overview and report for the 2019 calendar year. Of the 877 TMRS participating cities, 17 cities have a contribution rate with a phase-in rate less than the full rate, while 860 cities have a full contribution rate. One new city joined TMRS in 2019. The overall funded ratio came in at 87.1 percent.

Finally, a representative from Hudepohl & Associates (search firm) updated the board on the current executive director search. The search is progressing well. Thirteen candidates have been identified as “high interest.” Near the end of February, Hudepohl & Associates will provide their recommended candidate(s) to the TMRS board for consideration.

The next TMRS board meeting is set for March 24-25, 2020 at the TMRS headquarters in Austin.