Written By: Casey Srader, TMRS Advisory Board Representative
The TMRS Board met on Thursday, June 23, in Austin, and this meeting was open to the public at the TMRS building. I was not able to attend in person but instead was able to listen via Zoon. All TMRS Board Members were present at the meeting in Austin.
TMRS Executive Director David Wescoe gave a report on some internal happenings, retirements, staff updates, various presentations given by TMRS staff, etc. He also reported that all 2023 City Contribution Letters had been sent out to all participating cities. Mr. Wesco was happy to report that 2020 was the 34th consecutive year that TMRS received the Government Finance Officers Association’s Certificate of Achievement for Excellence in Financial Reporting Award. Finally, Mr. Wescoe reported that the sale of the old IH-35 TMRS building continues to go well and that the closing of the sale could take place within 30 days.
A TMRS Board discussion was held regarding the City of Grand Prairie using proceeds from the sale of Pension Obligation Bonds to pay down their Unfunded Actuarial Accrued Liability. This requested action is very similar to what a few other cities have done in the past, whereby a lump sum is paid upfront, with the remaining amount to be placed in an escrow account to be used to make payment to fund the “prior service portion” of the City’s monthly required employer contributions to TMRS. According to TMRS legal staff, Chapter 107 of the Texas Local Government Code does allow for POBs to be used for these purposes. TMRS staff had no administrative issues for this to occur. A motion was made and passed to allow the City of Grand Prairie to proceed.
External auditors, Clifton Larson Allen, gave a report on the 2021 Financial Statement Audit results to the TMRS Board. CLA reported on the 2021 TMRS Financial Statements, which received an unmodified “clean” opinion that the financial statements are presented fairly and in conformity with GAAP. Limited procedures were performed, and an unmodified “in relation to” opinion was rendered on the other supplemental schedules. Also reported, the 2021 TMRS Schedule of Changes in Fiduciary Net Position by Participating City received an unmodified “clean” opinion that the financial statements are presented fairly and in conformity with GAAP. Finally, an unmodified “in relation to” opinion was issued on the individual city information presented in the Schedule.
Clifton Larson Allen also gave a report on the System and Organization Controls results to the TMRS Board. The 2021 TMRS SOC Report received an unmodified “clean” opinion that the controls implemented by TMRS were fairly presented, adequately designed, and operating effectively to meet the stated control objectives for the period May 1, 2021, thru April 30, 2022. In addition, no exceptions were noted for the ten control objectives tested. Also, CLA gave a report on the required auditor communications to the Board of Trustees, and the required governance communications are in compliance.
TMRS staff gave an overview of the 2021 TMRS comprehensive annual financial report. Notable takeaways: 6 new cities joined TMRS – 901 total participating cities – 212,727 total members; $1.6 billion in retirement benefits paid; average annual benefit was $19,561; $1.1 billion in City and $492 million in member contributions; one-year gross time-weighted rate of return – 12.86%; TMRS as a whole is 90.5% funded as of 12/31/21 (up from 89.5% in 2020); Pension Trust Fund increased by $4.3 billion or12.6%; retirement benefit payments increased by $101.3 million or 6.6% primarily due to number of retirees increasing from 64,121 in 2020 to 67,016 in 2021; Independent Auditors’ Report gave an unqualified clean opinion; Supplemental Death Benefits Fund decreased by $6.8 million or 54.0% as death benefit increased from $11.1 million in 2020 to $17.8 million in 2021; electronic format pdf of the comprehensive annual financial report is available on the TMRS website; and Distribution of Schedule of Changes in Fiduciary Net Position – by Employer GASB 68 is available as a package in electronic format pdf on the TMRS website.
TMRS Chief Investment Officer David Hunter reported that TMRS’ 2021 net investment return was 12.86%, exceeding both the asset allocation benchmark 12.23% and the actuarial return assumption 6.75%. Investments in Private Equity have been the best performing over a trailing five-year time period vs. the benchmark. $2.1 billion has been committed in Private Market commitments for the first five months of 2022. In addition, RVK Consulting reported that the Total Fund is down 1.73% net of fees in the 1st quarter of 2022. Relative to the market, TMRS did pretty well overall. The current asset allocation paid off during the down market. Total Fund value at the end of the 1st quarter was $37,042,143,161.
TMRS Legal and Investment Compliance staff reported to the Board regarding the annual testing of TMRS investment staff’s 2021 compliance with TMRS’ Personal Trading Policy. The investment staff was in compliance with the Policy.
Finally, TMRS Board Chair Jesus Garza and TMRS Executive Director David Wescoe led a Board discussion about the recently completed Board’s 2018 – 2022 Strategic Plan and the next iteration of the Board’s strategic planning process to follow. In particular, what discussions need to happen at the upcoming Board Retreat, which is scheduled for October 2022. During the Board discussion, (6) topics for Retreat discussion were outlined:
1. Customer Service & Communications
2. Organizational Structure & Culture
3. Governance
4. Finances
5. Investments
6. Legislation
Various TMRS Board Members voiced their desired areas of focus for the upcoming Retreat, including TMRS staff involvement as it relates to Organizational Structure & Culture, communication to its members, the future and what’s best for TMRS going forward, what it means to be “excellent,” and finally, focusing on communications via the TMRS website and app.
The next TMRS Board Meeting is set for September 22, 2022, at the TMRS headquarters in Austin.