Below is the HillCo client report from the August 28 Pension Review Board meeting.
The board met to consider and take action on their agenda.
Minimum Educational Training Program
- Since last meeting draft rules were published in TX Register for public comment
- 3 commenters made submissions regarding typographical corrections, clarifications and a few substantive changes
- See Board Meeting Packet for all comment submissions
- Rules adopted unanimously
Curriculum Guide
- Draft was presented at last board meeting and to working group members; no changes were suggested
- Intended as a supplemental policy document
- Curriculum guide approved unanimously
Minimum Education Training Forms
- Forms approved unanimously
Compliance Rules
- Deals with minimum reporting requirements and requirements for reporting changes in system trustees and administrators
- Executive Director Chris Hanson noted most of these rules were developed with consideration for what would be easiest for system staff
- Rules approved for publication unanimously
Compliance Database
- Working closely with database administrator to develop a program that will be easy for information to be uploaded by system staff
- Hanson noted staff hopes the online database will be available by early 2015; because of funding, the program will be very simplistic but should allow systems to designate an administrator to log in and update training information; should be very simple for systems to do
- Working to determine what technology will be used to provide online training; should have all needs met to complete development
- Expect to have courses rolled out by the end of January
- A board member asked about TLFFRA moving to organize training at their coming conference
- Part of Sunset process required training to be developed; working to sync everything up; trustees and administrators can use training received at conference to count toward CLE credits
Actuarial Committee Report
- At June 17 meeting, committee covered many topics including using guidelines as the standard for the financial health study as well as including some report data that would be applicable to the study
- There was discussion about recommendations the committee was looking at as well as other models in other states
- Preliminary findings were discussed
- At the August 14 meeting, information was provided by TMRS and TCDRS in regard to how their unique characteristics are portrayed in the report
- Staff provided more background on findings and recommendations
Preliminary Report on the Study of the Financial Health of Public Retirement Systems
- Executive summary outlines some key findings and key recommendations
- This is followed by a short introduction and then discussion of the basic formula for pension funding
- Includes background on total system funds and background on systems themselves
- Background on the actuarial soundness test
- Discussion of funded ratio and how it should be looked at concurrently with amortization period
- There are charts incorporating all systems in the state as well as broken down by amortization periods
- Board recommends a range of 15-25 years for amortization periods but 40 years is the minimum standard for actuarial soundness
- Board member Robert May noted when looking at each plan, there are 12 with infinite amortization periods and more with over 40 years; it is important to note that every county and city has their own plan within TMRS and TCDRS and those should be looked at accordingly
- Key findings show a large number of systems are above the 40 year period and tries to show factors that led to those high periods and some historical information
- It is noted in the report that building up cash flow is important to put less stress on contribution requirements; also notes some systems are working to come out of negative cash flow
- Benefit enhancements were also noted in the study
- May noted that funding governance is an important factor for funding systems
- Demographics were discussed; there has been a reduction in the ratio for active members to retired members; decline was steepest in systems with infinite periods
- Investment performance was included and shows that strong investment performance will not offset the lack of adequate contributions over time
- There are a variety of appendices showing reports for all systems, actuarial information, contribution and benefit decision making information, TMRS and TCDRS information, historical information charts, correlation analysis, projected additional contributions necessary to achieve various amortization periods, general fund expenditures for plan sponsors of each system, actuarial assumptions and methods used, and language from HB 13 (83R)
- Systems included in report are allowed a period to comment on the report as well after the preliminary report is adopted
- Final report is due December 2014
- Included recommendations in the report:
- Funding policy to establish an adequate contribution rate; recommended that systems and sponsors should work together to establish a funding policy for adequate contributions; there are three versions of this recommendation that will have to be decided upon
- Should include language the requires the plan sponsor to be notified if the contribution cannot be met
- Requiring a corrective action plan should be included in the recommendation for systems with three consecutive reports not meeting guidelines
- Would like to put both changes in the recommendation because there will be a comment period and it is easier to take stuff out rather than adding it in later
- Would like to change the term “corrective action plan” because it implies that something was done within the system’s control to the detriment of the system
- Recommendations that focus on disclosure and reporting; may want to include language regarding DROP balances and accrued liability
- Recommendations regarding benefit decisions; those are best made by local sponsors; adequately funding benefits is necessary for long term health
- Recommendations on actuarial assumptions; systems should conduct actuarial experience studies
- Additional recommendations that may be included:
- Recommend that systems look at actuarial stress tests and solvency analyses to determine what could happen to funding of the system in hypothetical situations
- Would like to add this recommendation
- Recommendations on pooled or group trust funds
- Would like to include this one and maybe merge with the TMRS /TCDRS recommendation
- Recommending that all eligible systems join TMRS and TCDRS
- Development of a reserve or rainy day funds to help offset potential investment costs
- Would like to add this one
- Recommend that systems look at actuarial stress tests and solvency analyses to determine what could happen to funding of the system in hypothetical situations
- Funding policy to establish an adequate contribution rate; recommended that systems and sponsors should work together to establish a funding policy for adequate contributions; there are three versions of this recommendation that will have to be decided upon
- Preliminary report with discussed changes was approved unanimously
- Comments from systems will be taken at which point the report will be amended as necessary; there will be another board meeting for members to approve the final report; comments will be included in a new appendix; comment period will end October 15
Legislative Committee Report
- House Pensions committee heard charges regarding new GASB statements and implementation of HB 13 (83R)
- Budget hearings have begun; working with LBB to update the baseline request; nothing significant has changed with exceptional item requests
Executive Director Report
- Approved FY 2015 operational budget
- Currently reviewing internal staff structure; there may be some changes coming; there are two vacancies in the staff and interviews will begin next week
- 2014 TLFFRA conference will begin in Lufkin September 7; will be presenting an update of board activities
- Next meeting will be December 17
Public Comment
Jim Smith, San Antonio Fire and Police Pension Fund
- May want to add suggestive language regarding the rainy day funds
- Currently for San Antonio Fire and Police Pension Fund when investments come in above estimates, the assumed rate of returns are ratcheted down to reduce risk
Max Patterson, TEXPERS
- Commended staff on their work concerning the educational training requirements
- Commended staff on their report from the study of system health
- There is no reason why a supporting jurisdiction shouldn’t know everything that is going on with their pension plans