TMRS Highlights from the March 24 Board Meeting

By Casey Srader, TMRS Advisory Board Representative

Gabriel, Roeder, Smith & Company (GRS) recommended crediting the Benefit Accumulation Fund (BAF) interest equal to approximately 15.42 percent, which will be credited based on the beginning of year market value BAF balance for each City. This will increase the initial Interest Reserve Account from 290 million to 310 million dollars to allow for unanticipated changes in the market values as all investments are finalized. As reported in February, the TMRS Total Fund performance ended at 14.71 percent, net of fees. Per TMRS Financial Policy, the goal performance is 6.75 percent. Annually, the difference between actual and expected credits at 6.75 percent is smoothed over ten years to determine the amount of excess/shortfall to recognize in a given valuation. The excess allocation above 6.75 percent first offsets the 1,701.5 million dollars in deferred shortfall as of December 31, 2018. Of the remaining excess, approximately 55.5 million dollars will be recognized in the 2019 valuation, and 500 million dollars will be deferred for future valuations (roughly 1.6 percent of Fund). As a result of the recognition of the 55.5 million dollars excess, this will produce a decrease in contribution rates of approximately 0.05 percent for 2021 from investment performance (will vary slightly by City).

The Board continued a discussion regarding the Board’s committee structure. Up until now, one of the committees in place was the Legislative Committee. Before the Legislative Committee was created, legislative involvement historically correlated with the Board Chair’s preferences. The Legislative Committee was created in May 2016, and a charter was first adopted in December 2016. The Advisory Committee role was altered in 2016 to be more Board-directed and analysis focused. At the March meeting, the Board voted to dissolve the Legislative Committee and assign its duties to the Board Chair and Vice-Chair, but allow for future ad-hoc legislative committees if necessary and to also allow the Advisory Committee to take a more meaningful role in the process.

The Board instructed staff to proceed with the process of developing a legislative agenda for the 87th Legislative session. This involves the Board possibly assigning study items to the Advisory Committee during the legislative interim period. The TMRS Board Chair and Vice-Chair are interested in holding a stand-alone Committee meeting on the morning of May 28, 2020, at TMRS headquarters in Austin. This meeting will provide Committee representatives with information about the system and the legislative agenda.

TMRS staff gave a progress report on the Pension Administration System Modernization program. TMRS embarked on a mission in 2012 to transform our paper-based, centralized administration of the retirement program to a modern user-driven, web-based system that enables members, retirees, and cities to perform interactive, self-service activities in a secure, efficient environment.

TMRS staff gave the Public Equity asset class annual review. Most current TMRS public equity portfolios are performing in accordance with expectations. TMRS Staff and RVK will continue to monitor the public equity portfolio for other potential portfolio improvements over time.