Dan MacDonald's report on the STRS Board meeting of September 15. 2022

From Dan MacDonald

September 18, 2022 

Dan MacDonald and Rob Walters attended the September 15, 2022 STRS Board meeting which featured three new Board members - Steven Foreman, Elizabeth Jones, and Julie Sellers. All were active throughout the meeting.

After greeting the new members and approval of August minutes, the Investment Department reported a negative 2.46% return for August. The preliminary FY23 total fund return was estimated at positive 1.33%. Total investments ended August at $88.1 billion.

There was a brief but lively discussion of having an investment consultant search and how it should be handled. Callan and Cliffwater contracts could be extended or terminated. The last consultant search was in 2009. These firms have had their contracts extended for 13 years. An RFP will be issued before December and It was determined that the investment committee, not the whole Board, will make recommendations of firms to the Board.

Investment then presented the annual review of the securities lending program. It was explained why FY22 earnings decreased approximately 37% over the year with overall loans increasing. Callan then presented 9 draft “high level” investment beliefs which the Board first discussed in March. The beliefs are meant to be a communication tool to stakeholders that are reflective of STRS’s view of global investment markets.

After the 9 were presented, feedback and other considerations opened lively discussion by most Board members especially around ESG considerations - Environmental, Social and Governance. Jones and Sellers are to present next month on ESG from a seminar they attended. Again, there were concerns about the forming of beliefs in committee or the whole and the Sunshine Law. More fire was added to the pot by Steen’s definition of success – a restored COLA.

The Executive Director’s Report reported that Defined Benefit Plan and Combined Plan members will receive their Annual Statement of Account mid-September. Members who are eligible for retirement have a July 1, 2022 benefit estimate on their statement. Active members with at least five years of service credit receive four projections on their statement offering comparison for reduced and unreduced benefits. Benefit projections reflect the elimination of the minimum age 60 requirement.

Neville also pointed out that FY22 budget was $3.3 million less than approved. He also presented some interesting actuarial info – As of June 30, 2022 STRS has 209 benefit recipients who are age 100 or older – of which 179 are female and 30 are male. Most of these centenarians are service retirees while 61 are beneficiaries of retirees or survivors of active member who died and three are disability recipients. The oldest recipient age is 110. This member retired in 1980 at age 68 after 25 years of service. Her final salary average was $21,000; her original benefit was $873 and has increased to $2,197. She began teaching for an annual contract of $5,300. The retiree who has been receiving benefits the longest is a disability recipient who began receiving a benefit in 1957 at the age of 27. The monthly benefit has increased from $162 to $1,078. STRS has been paying this recipient for 65 years. Active members also have longevity in the classroom with 16 members having 50 or more years of service and 247 members exceeding 40 years.

Neville shared 3 more areas and had the STRS auditor share demographic information on the 500,000 people STRS represents. He covered payroll growth by year, the number of active participants by year, age range of new hires, salary increases based on service years, mortality, number of new retirees by year, benefit graph by amount.

Public Participation consisted of 10 individuals. A POP 5 – Protect Our Pensions individual introduced herself. Two OEA-R speakers addressed the Board in defense of Carol Correthers, Board Chair, and the misinformation found on the internet and concerns about the new board. Another speaker defended previous Boards.

Dean Dennis, Cincinnati retiree and President Elect of ORTA, challenged anyone to present to him inaccurate or misinformation on the STRS Watchdogs or STRS Members Only sites. The rest of us addressed concerns over healthcare, COLA, incentives.

After lunch the Member Benefits Department had CEM of Toronto, Canada report on the costs and services of the department compared to its peers. STRS admin cost were $101, peers $108 and $19 below the universe average. STRS service score was 92, peers median 82. This was followed by a Defined Contribution Program review which looked at the Defined Contribution and Combined plans with member demographics investment choices and fees and info on retirees in these plans.

Executive Director Neville then updated on the Fiduciary Performance Audit again stating there were no red flags but 172 recommendations. There was a suggestion to create a governance committee. November’s Educational and Planning meeting will begin to address the recommendations.

Routine Matters then Old/New Business. New Business then took up 90 minutes of time. First Neville requested that consultant actuarial firm Cheiron have their contract extended 3 years through 2026. Lots of discussion with October’s meeting determined to take a vote. Then new board member Elizabeth Jones moved to start video/audio of meetings at the October meeting with a 5-year archive. Postpone by 6-5 vote. Other new board members plus Steen made motions.

Motion to have materials on-line for membership 7 days before meeting, settled at 48 hours posted to website. Move to have Board members receive material 10 days before meeting…lost, vote 5 to 5 with Herrington not voting.

Move to have color copies available to audience in attendance at Board meetings … Neville said he would do it.

Motion to have October and February Board meetings on a Saturday so actives can attend … voted down. Motion to call an Emergency Meeting if 4 Board members request … voted down 6-5. Motion to remove glass barrier wall between audience and Board … Neville to do research with reason it was there to begin, cost and timeline report in October.

Next meeting: Thursday, October 20, 2022

SERS Votes 2.5% COLA for its members. At the SERS Board meeting on September 15, 2022, its Board voted a 2.5% COLA.