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The Texas Pension Review Board met on February 24 to cover a number of items. The meeting included discussion of board administrative matters, rulemaking, and various report updates. A recording of the meeting can be found here.

 

This report is intended to give you an overview and highlight of the discussions on the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

 

Meeting Called to Order and Administrative Matters Taken Up

  • Quorum and meeting minutes approved
  • Keith Brainard as Vice Chair re-nominated to continue in service
  • Staff has begun process of receiving applications for executive director, all applicants are expected to be considered in the coming months

 

Actuarial Committee Discussion

  • Actuarial Valuation Report; market value assets have increased substantially, and unfunded liability decreased by about $2 million
  • Went from 99 to 100 plans, but have historically had 100
  • Board member question on discount rates, one plan that has one greater than 8%; are there any discussions to lower that?
    • No not at this time and not aware of discussions of why they left it at that rate
  • Board members discuss the quality of numbers; liability or normal costs are understated and payroll growth numbers; amortization period is understated
  • Board Member- Need to focus on plans with poor funding ratios; those four plans include Dallas Pension & Fire; the board should keep an eye on them
  • Vice Chair notes there are other good news portions in the report
  • Board Member – Wichita Falls has not had an intensive review and it is on this list, so we need to keep an eye on it
  • Board Member – Dallas Police & Fire and Midland Systems have a total normal cost in excess of 25% where plan is poorly funded
  • Board Member – 0% of employer cost causes a concern on equitable provision of benefits, it could be there was an undercharge in the past but new members are paying excess
    • Includes Longview, Orange, Odessa Paris, and Texas City
    • Board member – Is there a next level we should be concerned about? Like 5%?

 

Funded Soundness Restoration Plan Reviewed

  • Per committee direction they have contact the groups on the list
  • Those triggering FSRP need to develop plans on page one and the following page covers systems at risk
  • Need to develop plans to fully fund benefits by September 1, 2055 in order to have a third-year amortization period
  • Plans also above new threshold are highlighted; zero strikes but if above 30 they would trigger an upcoming FSRP
    • Encourage plans to be fully funded by 2055
  • Legacy FSRP plans spotlighted; were previously submitted schedules
  • Overviews previously completed schedules

 

Rulemaking

  • Vice Chair – Will try to keep discussions at a high level
  • Analysist for PRB focused on projected timeline and feedback
  • Slide four shows outlines of timeline: concept document has been released for feedback, amendment concepts being presented today and after meeting the updated concept document will be sent out again
  • May 2023 rulemaking language will be in front of committee with completed language in July in front of board
  • Once rulemaking is published there will be 30 days comment period and staff will present that feedback to the board
  • Anticipated final rules to take effect October 2022
  • Section on changes will be skipped, discussed in committee before
  • Transition period is addressed in rulemaking and not changed since committee, new FSRP should be in consideration according to feedback
  • Recommendation focuses on establishing how a system qualifies for revised FSRP section; could be voluntary application submission and staff will look further into this
  • FSRP notification to members will be applied
  • Vice Chair – Concerns raised if board is getting enforcement authority? Nothing would empower board to make a change on contributions or benefit levels?
    • There is a rule to determine how a system completed FSRP but not able to exceed statutory authority, seeking advice from counsel
    • Not aware of any empowerment to change contributions or benefit levels
    • Board Member – We are enacting statute
  • Item was information only; will be going out to public and anticipates final ruling in October
  • Clarification that draft rules will be in May actuarial meeting and full board will see rules in July for adoption in October
  • Board members note FSRP triggered plans have a bit longer because of transition period that is provided as they move through statutory requirements
  • Vice Chair refers board members to material on the back of tab four

 

Public Retirement System Reporting and Compliance Discussion

  • 22 noncompliant plans out of 99; in contact with them to ensure they are adhering to requirements for audit report
  • Plans on 60-day noncompliant list; Plainview Relief and Fire came off list yesterday
    • University Park Relief and Fire retirement fund; noncompliant for 2019 and 2020 fiscal years
    • Nacogdoches County District Retirement System is working on 2021 audit; their 2020 report was due last January

 

Update on Intensive Actuarial Review of Midland Firemen’s Relief and Retirement Fund

  • Among ten systems they have conducted reviews of, three systems have lowered actuarial assumptions in the last 3 years
  • Beaumont Fire passed a new benefit tier that reduces period to under 30 years based on studies
  • Longview Fire and Irving Fire both considering pension obligation bonds
    • Longview City council approved putting issue on May 2022 ballot; plan has three guidelines to eliminate funding issue
    • Irving looking to do pension obligation bonds this year, but amount of issuance is under discussion as they are reviewing options to balance the right amount
  • Vice Chair requests copy of Longview’s memorandum of understanding to take a look in future meeting
  • Board Member – Commends Longview on getting ahead of things to ensure they do not repeat or worsen the problem
  • Board Member – Requests modification to see funding changes past/current to see improvement
  • Board Member – Longview will have an election to vote their pension obligation bonds; will Irving also have an election?
    • Not entirely sure, we can verify with them
    • That will impact the timing that the bonds can be issued
  • City and the fund of Midland are working together to review bids on additional services for both the forensic and the governance audit
  • They are meeting tomorrow to review the bids and will continue to provide updates
  • Board Member – Forensics will provide confidence in the reported numbers; Midland must do more
  • Board Member – Has there been any discussion of work that the board together with the city are doing on benefits?
    • Both the city and the fund have a good relationship right now and are working towards their FSRP
    • Those conversations are starting to happen now and we will hear more in the coming months

 

System Intensive Reviews

  • Will report the plan in October board meeting
  • Selected plan is Wichita Falls Fire, a Legacy FSRP plan
  • Only two plans in the state with a higher assumed rate of return and only one with a higher payroll growth rate
  • Putting those assumptions together along with other assumptions including mortality it is possible that Wichita Falls is most aggressive
  • Board member comment about bringing this to the full board meeting in October in order to have both the actuarial and investment sides

 

Update on Texas Public Pension Data Center

  • Data center is up and running since updating database and fixing staffing issues

 

Public Comment

David Stacy, Representative from Midland Fire Department

  • PRB from November 2, 2021, approved various recommendations that had been in the works
  • There is concern that theses recommendations will be viable long term
  • There is an even greater concern in regard to how these recommendations are being used

 

Tyler Grossman, Executive Director & Chief Investment Officer for El Paso Police and Fire Pension Fund

  • Thanked PRB for its efforts to improve the pension system of Texas and to continue in those efforts

 

Ashley Rendone, Director of Policy and Communications for PRB

  • Provided update on core education offering the board provides to the public
    • The PRB has been working to update the courses it offers, with the actuary courses most recently updated
    • The courses that have been updated do far have already received positive feedback from the public
    • The goal is to have three more courses updated before the end of the calendar year

 

Mira Miller, PRB Research Specialist

  • Provided an update on the progress of the PRB website modernization
    • New and improved website will be up by March 11th, 2022

 

Amy Cardona, Executive Director of PRB

  • Gave an update on IT projects going on internally within PRB
  • Included the modernization of the PRB database and report portal
  • Strategic plan for the board was updated to get rid of administrative errors, with the plan as a whole being published in May or June of this year
  • Next meeting of the board will occur on July 14, 2022