TMRS Highlights from the May 27 Board Meeting

The TMRS Board met on Thursday, May 27, in Austin, and this meeting was open to the public at the TMRS building.  I was able to attend in person.  Some of the  members were present at the meeting while others participated via Zoom.

TMRS Executive Director David Wescoe gave a report on some internal happenings, retirements, staff updates, etc.  He also reported that the Board had a very successful and productive retreat last month (April) in Austin.  Finally, Mr. Wescoe mentioned the re-branded newsletter, which has a new design and incorporates the new TMRS logo.

The Board received a very favorable 2020 Actuarial Valuation Report from Gabriel, Roeder, Smith & Company (GRS).  Key findings of the Report:

  1. As of December 31, 2020, the overall funded ratio was 89.5 percent.  This figure is up from 88 percent and 87.1 percent in the two previous calendar years.  The funded ratio is expected to increase even more in 2021.  The funded ratio is the big driver which determines the City Contribution Rates for 2022.
  2. As of December 31, 2020, the unfunded actuarial accrued liability (UAAL) was $3.926 billion.  This figure is down from $4.271 billion in 2019 and $4.346 billion in 2018.  The UAAL is expected to decrease more in 2021.
  3. TMRS is the only plan in Texas and one of the very few plans in the country whose UAAL declined from 2009 through 2019.
  4. The total employer contribution rate (average for TMRS as a whole) is 13.32 percent.  The rate was 13.6 percent in the previous two years.
  5. Cities on average can expect about a .25 percent (25 basis points) decrease in contribution rates for 2022.
  6. Overall system-wide “health” is strong.  Funded ratios continue to improve.  Contribution rates have remained relatively stable.
  7. The expectation is for a slowly increasing funded ratio over the next few valuations and continued stability in the contribution rates system-wide.

TMRS staff gave a legislative update and overview of the 87th Legislative Session, which is about to wrap-up.  It was reported that the Senate confirmed all new TMRS Board appointments on May 5.  TMRS worked on one benefit design bill on return to work; it would codify the bona-fide termination, do away with the current eight-year gap for employees, and provide for a one-year bona-fide termination with the same city.  TMRS staff was pleased to report that this piece of legislation (S.B. 1105) was passed on May 14 and was sent to Governor Abbott on May 19 for approval.  This new legislation will have an effective date of September 1, 2021.  This is great news as this legislation was overwhelmingly supported by GFOAT!

The TMRS chief investment officer gave a report on the most recent private market investments.  In total, there were eight separate private market investments totaling up to $740 million.

TMRS staff gave a report on the selection of a new custodian bank.  The process to select a new custodian bank began on December 11, 2020, when RFPs were issued.  RFPs were sent to four different candidates:  BNY Mellon, JP Morgan, Northern Trust, and State Street.  Based on the average scores of the Evaluation Committee, the two highest scoring were:  State Street and BNY Mellon.  After due diligence and interviews with both companies, the Evaluation Committee recommended that the TMRS Board retain State Street as TMRS’ custodian bank for a five-year term.

Finally, RVK Consulting gave the quarterly investment report.  The total fund returned 2.79 percent net of fees in the first quarter of 2021 and 20.43 percent over the trailing 12 months.  As of March 31, the total fund market value was $34.5 billion, an increase of over $860 million from the end of 2020.  All asset classes, with the exception of private equity, were within their respective strategic target asset allocation ranges as of March 31.

The next TMRS Board meeting is set for June 24, 2021, at the TMRS headquarters in Austin.

Casey Srader
Representative, TMRS Advisory Board
Senior Budget Manager, City of Plano