TRS Board of Trustees Meeting Documents/board_book... · 2019-07-18 · July 18, 2019 – 8:00 a.m....

JULY 2019

TRS Board of Trustees

Meeting

Teacher Retirement System of Texas

1000 Red River Street

Austin, Texas

78701-2698

TEACHER RETIREMENT SYSTEM OF TEXAS MEETING BOARD OF TRUSTEES

AGENDA

July 18, 2019 – 8:00 a.m. July 19, 2019 – 8:00 a.m.

TRS East Building, 5th Floor, Boardroom.

All or part of the July 18-19, 2019 meeting of the TRS Board of Trustees may be held by telephone or video conference call as authorized under Sections 551.130 and 551.127 of the Texas Government Code. The Board intends to have the presiding officer and a quorum physically present at the following location, which will be open to the public during the open portions of the meeting: 1000 Red River, Austin, Texas 78701 in the TRS East Building, 5th Floor, Boardroom. NOTE: The Board may take up any item posted on the agenda during its meeting on Thursday, July 18, 2019, or during the meeting on the following day, July 19, 2019, beginning at the time and place specified on this agenda. The open portions of the July 18-19, 2019, Board meeting are being broadcast over the Internet. Access to the Internet broadcast of the Board meeting is provided at www.trs.texas.gov. 1. Call roll of Board members.

2. Receive an update on the 86th Legislative Session – Brian Guthrie.

3. Consider personnel matters, including the appointment, employment, evaluation,

compensation, performance, duties, discipline, or dismissal of the Executive Director, Chief Audit Executive, and Chief Investment Officer – Janet Bray and Keith Robinson, Focus Consulting.

4. Receive an update regarding Executive Succession Planning including the Executive Director, Chief Investment Officer, Chief Audit Executive and the Executive Council – Janet Bray.

NOTE: The Board meeting likely will recess after the last item above and resume Friday morning to take up items listed below.

5. Call roll of Board members.

6. Provide an opportunity for public comment – Jarvis V. Hollingsworth.

7. Consider the following administrative matters – Jarvis V. Hollingsworth:

A. Approval of the April 2019 proposed meeting minutes

B. Excusing Board member absences from the April 2019 meeting.

C. Recognize the past service of TRS Fiduciary Counsel Steve Huff.

8. Receive the report of the Strategic Planning Committee on its July 18, 2019 meeting – Committee Chair.

9. Receive the report of the Benefit Committee on its July 18, 2019 meeting and consider adoption or acceptance of the following: A. Accept the Medical Board Meeting Minutes for November 2018, March

2019 and May 2019;

B. Consider the appointment of Chair and member of the Medical Board including considering a finding that to deliberate or confer in open meeting would have a detrimental effect on the position of the retirement system in negotiations with a third person;

C. Consider approval of the Benefit Payments for March 2019 – May 2019; and

D. Consider adoption of a resolution directing staff to prepare for and issue the

supplemental payment consistent with the provisions of Senate Bill 12 as passed by the 86th Texas Legislature.

10. Receive the report of the Budget Committee on its July 18, 2019 meeting and consider adoption of the following – Committee Chair: A. Consider the adoption of the proposed fiscal year 2020 pension trust fund

administrative operations budget, general provisions, and resolution authorizing transfer of pension trust funds to the TRS expense account to cover the expenses approved under the fiscal year 2020 budget.

B. Consider the adoption of the proposed fiscal year 2020 administrative operations budgets and general provisions for the TRS health benefits funds (retired and active plans), including the optional long-term care insurance program.

C. Consider adoption of Historically Underutilized Businesses program (HUB) goals for fiscal year 2020.

D. Consider the statutory certification of estimated state contributions to the State Comptroller of Public Accounts to be received by the retired school employees group health benefit fund for the fiscal year ending August 31, 2020.

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11. Receive the report of the Policy Committee on its July 18, 2019 meeting and consider adoption of proposed amendments to the following TRS Rules in Chapters 25, 29, 41, and 47 of Title 34, Part 3 of the Texas Administrative Code – Committee Chair: A. Amended § 25.162, relating to State Personal or Sick Leave Credit; B. Amended § 25.302, relating to Calculation of Actuarial Costs of Service

Credit; C. Amended § 25.303, relating to Calculation of Actuarial Cost for Purchase

of Compensation Credit; D. Amended § 29.11, relating to Actuarial Tables; E. Amended § 29.21, relating to Beneficiary Tables; F. Amended § 29.71, relating to Tables; G. Amended § 41.1, relating to Initial Enrollment Periods for the Health

Benefit Program under the Texas Public School Retired Employees Group Benefits Act (TRS-Care);

H. Amended § 41.2, relating to Additional Enrollment Opportunities; I. Amended § 41.3, relating to Retirees Advisory Committee; J. Amended § 41.4, relating to Employer Health Benefit Surcharge; K. Amended § 41.7, relating to Effective Date of Coverage; L. Amended § 41.8, relating to Eligible Bidders; M. Amended § 41.9, relating to Bid Procedure; N. Amended § 41.11, relating to Years of Service Credit Used to Determine

Premiums O. Amended § 41.15, relating to Requirements to Bid on Insurance for School

District Employees and Retirees Under Chapter 1576 of the Insurance Code;

P. Amended § 41.31, relating to Eligible Bidders; Q. Amended § 41.32, relating to Bid Procedure; R. Amended § 41.34, relating to Eligibility for Coverage under the Texas

School Employees Uniform Group Health Coverage Program; S. Amended § 41.39, relating to Coverage for Individuals Changing

Employers; T. Amended § 41.41, relating to Premium Payments; U. Amended § 41.50, relating to Appeals Relating to Claims or Other Benefits; V. Amended § 47.17, relating to Calculation for Alternate Payee Benefits

Before a Member's Benefit Begins.

12. Receive the report of the Investment Management Committee on its July 18, 2019 meeting and consider adoption of the Strategic Asset Allocation Proposal – Committee Chair.

13. Receive the report of the Audit, Compliance and Ethics Committee on its July 18, 2019 meeting - Committee Chair.

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14. Consider possible lease for TRICOT including considering a finding that to deliberate or confer in open meeting would have a detrimental effect on the position of the retirement system in negotiations with a third person– Jerry Albright.

15. Consider the engagement of a provider of fiduciary counsel and related services including considering a finding that to deliberate or confer in open meeting would have a detrimental effect on the position of the retirement system in negotiations with a third person – Carolina de Onis.

16. Discuss development of a funding policy for the TRS pension fund – Rebecca Merrill and Joe Newton, GRS.

17. Receive an update on the TEAM Program – Brian Guthrie and Chet Henry.

18. Receive a presentation from the TEAM Program Independent Program Assessment (IPA) Vendor – Michael Johnson, Bridgepoint Consulting.

19. Review and discuss the Executive Director's report on the following matters – Brian Guthrie:

A. Review administrative operational matters, including updates on legislative, financial, audit, legal, staff services, special projects, long-term space planning, investment matters, strategic planning and personnel matters.

B. Sunset Review Update.

C. Board operational matters, including a review of draft agendas for upcoming meetings.

D. Event notices or reminders; holiday and other schedules of interest; board member, employee or other individual recognitions; and expressions of thanks, congratulations, or condolences.

20. Receive an update from the COAO including discussion on shared services, long term facilities planning, Diversity Equity and Inclusion Director and Classification and Compensation Review– Andrew Roth.

21. Review the report of the General Counsel on pending and contemplated litigation, including updates on litigation involving benefit-program contributions, retirement benefits, health-benefit programs, and open records – Carolina de Onis.

The Board may convene in Executive Session under the following but not limited to: A. Texas Government Code, Section 551.071: Consultation with Attorney; B. Texas Government Code, Section 551.072: Deliberation Regarding Real

Property;

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C. Texas Government Code, Section 551.074: Personnel Matters Relating to Appointment, Employment, Evaluation, Assignment, Duties, Discipline, or Dismissal of Officers or Employees including but not limited to the Executive Director, Chief Auditor Executive, Chief Investment Officer.

D. Texas Government Code, Section 551.076: Deliberation Regarding Security Devices or Security Audits;

E. Texas Government Code, Section 551.089: Deliberation Regarding Security Devices or Security Audits;

F. Texas Government Code, Section 825.115: Applicability of Certain Laws; or

G. Texas Government Code, Section 825.3011: Certain Consultations Concerning Investments.

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Brian Guthrie

July 18, 2019

86th Legislative Session Update

• A total of 7,541 bills and joint resolutions were filed in both the House and Senate during the 86th Legislature. Of those, 1,439 passed the Legislature and were sent to the Governor.

• The Governor has three options: sign the bill into law, allow the bill to become law without his signature, or veto the bill.

• The Governor vetoed 56 bills.• Approximately 18% of all bills and joint resolutions filed became law.

86th Legislative Session

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HB 1: the General Appropriations Act.

HB 1 also includes all of the additional FTE’s and FTE authority requested for Benefits, IMD, TEAM and related support functions. Allows for full implementation of TRS initiatives to align and improve customer service and reduce investment fees.

HB 1

Teacher Retirement SystemSTRATEGY:

FY 20/21$ Million

A.1.1. Public Education Retirement $3,747.1

A.1.2. Higher Education Retirement $368.5

A.1.3. Administrative Operations $272.5

A.2.1. Retiree Health -Statutory Funds $879.4

A.3.1. Retiree Health -Supplemental Funds $230.8 Does not include additional appropriation in SB 500

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• Operating budget rider authorizes TRS to employ additional FTEs and contract workers under a Fiduciary Finding of the TRS Board of Trustees.

The Board must approve a statement of justifications and objectives for adopting the additional staff to the Legislative Budget Board (LBB) and the Governor.

No later than October 31 following a fiscal year for which the TRS Board has adopted a Fiduciary Finding, TRS must provide a report to the LBB and the Governor on actual number of additional FTEs and contract workers hired, total expenditures, and a report on performance metrics.

HB 1 New Riders

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• Contingency rider for SB 12 to increase the state pension contribution rate to 7.50% in fiscal years 2020 and 2021.

• TRS-Care rider providing $231 million in supplemental funds to maintain plan year 2019 premiums and benefit levels in the 2020-21 biennium.

• “Right to Shop” rider directs TRS to incentivize members of TRS-Care and TRS-ActiveCare to shop for lower cost care within the health plans in order to achieve shared savings.

• “UB Rider” authorizes any unexpended balances of remaining 2019 TEAM & CAPPs Capital Appropriation to be used in fiscal years 2020 and 2021 for the same purpose.

HB 1 New Riders

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SB 12: TRS Pension Reform bill provides for gradual contribution increases from the state, public education employers, and active employees to make the pension fund actuarially sound. • As a result, eligible members who retired on or before 12/31/2018 will receive a

one-time supplemental payment in either the amount of their monthly annuity payment or $2,000, whichever is less.

SB 12 and SB 500

Current FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025STATE 6.80% 7.50% 7.50% 7.75% 8.00% 8.25% 8.25%

MEMBERS 7.70% 7.70% 7.70% 8.00% 8.00% 8.25% 8.25%

PUBLIC ED EMPLOYER

1.50%* 1.50% 1.60% 1.70% 1.80% 1.90% 2.00%

*Prior to SB 12, only public education entities that did not contribute to Social Security were required to pay the 1.50% contribution. Beginning 9/1/2019 all public education employers will contribution the 1.50%. 6

SB 500: Supplemental Appropriations Bill• Provides $524 million to fund the increases for the state’s contribution to the

pension fund from 6.80% to 7.50% in fiscal years 2020 and 2021.• Provides $589 million to fund the supplemental annuity check for 405,538

annuitants or alternate payees. Of those 193,279 will receive $2,000.• In total, the State is contributing an additional $1.113 billion for the biennium

to TRS for contributions to the pension plan and supplemental payments to retirees.

SB 12 and SB 500

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HB 1612: Relating to the authority of the Teacher Retirement System of Texas to invest in certain hedge funds.• Eliminated a sunset date on TRS’s ability to invest up to 10% of pension trust

assets in hedge funds. Absent the repeal of the sunset date, the hedge fund limit would have reverted to 5% as of September 1, 2019.

HB 2820: Relating to the registration and certification of certain investment products made available to public school employees.• TRS will no longer certify 403(b) companies nor will TRS maintain a list of

registered 403(b) investment products. Products will continue to be regulated by the Texas Department of Insurance, the Texas State Securities Board and applicable federal agencies.

TRS Specific Bills

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SB 1682: Relating to the administration of and benefits payable under the Texas public school retired employees group insurance program and the Texas school employees uniform group health coverage program.• Requires TRS to establish a contingency reserve fund equal to sixty days of

average projected claims and administrative costs for TRS-Care.

HB 2629: Relating to the deadline to appeal administrative decisions of the Teacher Retirement System of Texas.• Requires the TRS Board of Trustees, in adopting rules governing the appeal of

a final administrative decision of TRS, to ensure that rules establishing deadlines for the filing of an appeal afford a member or retiree at least the same amount of time to file an appeal as TRS has to issue a TRS decision. The bill applies to appeals made on or after January 1, 2020.

TRS Specific Bills

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SB 619: Relating to the sunset review process and certain governmental entities subject to that process.• Subjects TRS to Sunset review in 2019/2020 rather than 2023/2024.

SB 65: Relating to state contracting and procurement.• Provides for additional oversight and requirements in state agency contracting and

procurement.

SB 1264: Relating to consumer protections against billing and limitations on information reported by consumer reporting agencies.• Prevents out-of-network emergency care, facility-based provider, out-of-network

laboratory service, or an out-of-network diagnostic imaging service from balance billing patients in TRS-ActiveCare and TRS-Care.

• The bill instead requires mediation for participants in TRS health care programs on a disputed out-of-network facility claims. For out-of-network physicians’ charges, TRS and the physician will either settle claims in an informal teleconference or in arbitration.

Bills Impacting TRS and other agencies

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SB 2224: Relating to requiring a public retirement system to adopt a written funding policy.• Requires retirement systems to adopt a funding policy. The policy would include a plan

to achieve a 100% or more funded ratio.

SB 322: Relating to the evaluation and reporting of investment practices and performance of certain public retirement systems.• Requires certain public retirement systems to select an independent firm to evaluate

investment practices and performance and make recommendations for improving the retirement systems’ investment policies procedures, and practices.

• Public retirement systems are required to include in their annual financial report a listing, by asset class, of all direct and indirect commissions and fees paid by the retirement system for the sale, purchase, or management of its assets and to provide the names of the investment managers engaged by the retirement system.

Bills Relating to Texas Pension Systems

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Board Overview

C-Suite Evaluations

July 2019

Presented by:

Keith Robinson

Managing Partner

DRAFT

TRS Leadership Assessment: Process Steps & Timeline

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Online Competency Rating

COMPLETE

TRS Board Interviews

COMPLETE

Report Generation & Candidate Review

COMPLETE

Report Review and Feedback – TRS Board

May 9 – May 24

May 23 – June 3

June 5 – June 28

July 19

Minutes of the Board of Trustees

April 26, 2019

The Board of Trustees of the Teacher Retirement System of Texas met on April 26, 2019, in the boardroom located on the fifth floor of the TRS East Building offices at 1000 Red River, Austin, Texas. The following Board members were present:

Jarvis Hollingsworth, Chair Joe Colonnetta John Elliott Greg Gibson Christopher Moss Nanette Sissney James D. Nance

Others present:

Brian Guthrie, TRS Michael Bentrott, Aetna Andrew Roth, TRS Nick Arnold, Humana Don Green, TRS Cheryl Anderson, TAFT Retiree Plus Carolina de Onís, TRS Joyce Knapik Katrina Daniel, TRS Jeff Adair, Prospecta Janet Bray, TRS Troy Coleman, Coleman and Associates Jerry Albright, TRS Liz Severyns, Focus Consulting Group Jase Auby, TRS Jim Ware, Focus Consulting Group Barbie Pearson, TRS Todd Brown, Access Sciences Amanda Jenami, TRS Tom Krapu, Access Sciences Rebecca Merrill, TRS Heather Traeger, TRS Katherine Farrell, TRS Chet Henry, TRS Keith Johnson, Reinhart Boerner Van Deuren Steve Voss, Aon Hewitt Mike McCormick, Aon Hewitt Michael Johnson, Bridgepoint Mr. Hollingsworth called the meeting to order at 8:05 a.m. 1. Call roll of Board members.

Ms. Farrell called the roll. A quorum was present, Mr. Corpus and Ms. Ramirez were absent.

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Mr. Hollingsworth took a personal point of privilege to congratulate Mr. Nance on his successful testimony before the 86th Legislature’s Senate Committee on Nominations.

2. Consider the following administrative matters including approval of the February 2019 proposed meeting minutes – Jarvis V. Hollingsworth:

On a motion by Mr. Elliott, seconded by Mr. Colonnetta, the Board voted to approve the proposed minutes of the February 2019 Board meeting.

Mr. Hollingsworth announced, with no objections made, to take up Agenda Item 15.

15. Receive an update regarding TRS Facilities – Brian Guthrie, Don Green, Richard Scheel, Sylvia Bell, Eric Lang and Grant Walker.

Mr. Brian Guthrie provided background regarding the overall agency footprint and TRS’ continue growth. He noted plans to renovate the Red River facilities was under way but due to the increase construction and renovation costs put into question the best value proposition for long-term space planning. He said a consultant was engaged to identify not only needs but potential options and solutions. At 8:11 a.m., Mr. Hollingsworth announced the Board would recess into executive session on agenda item 15, under Sections 551.072 and 551.071 of the Government Code, to discuss real property matters and consult with legal counsel as needed.

At 9:59 a.m., Mr. Hollingsworth reconvened the meeting in open session.

Mr. Hollingsworth announced, with no objections made, to take up Agenda Item 3.

3. Provide opportunity for public comment – Jarvis V. Hollingsworth.

Ms. Joyce Knapik expressed concerns over retired teachers not receiving a raise and the changes in health insurance.

4. Receive an update on the TEAM Program – Brian Guthrie and Chet Henry. Mr. Guthrie provided an overview of the program and the schedule. He reported an issue with the latest test evaluation summary. He said Phase 2 TRUST benefits is scheduled to go live early second quarter of 2020, more specifically in April or May of next year. Mr. Chet Henry reported there are a series of test evaluations and the first evaluation took two months before the quality met requirements. He said they altered the evaluation process to a more iterative approach in an effort to avoid such delay again. Mr. Guthrie reviewed the budget status of the overall project. He said a contract addressing additional scope of work was reached in principal for another $2.6 million. Mr. Adair added the contract also addressed a list of team members to work on the project. Mr. Guthrie stated the primary focus on the project is quality.

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5. Receive a presentation from the TEAM Program Independent Program Assessment (IPA) Vendor – Michael Johnson, Bridgepoint Consulting.

Mr. Michael Johnson provided an overview of Bridegpoint’s assessment of the TEAM program’s progress. He said since his last report, quality has improved and an agreement with Perspecta on moving forward with a new date was reached. He noted in July the focus will be on the finalization of the Perspecta contract and monitoring the delivery and quality of the TES package. 6. Review and discuss the Executive Director’s report on the following matters – Brian

Guthrie: a. Administrative operational matters, including updates on financial, audit, legal, staff

services, special projects, strategic planning, security assessment related to information resources technology, legislative, and personnel matters.

b. Board operational matters, including a review of draft agendas for upcoming meetings.

c. Event notices or reminders; holiday and other schedules of interest; board member, employee or other individual recognitions; and expressions of thanks, congratulations or condolences.

Mr. Guthrie provided a legislative update. He reported the ballots for the board election were mailed and the election closes on May 6th. Mr. Guthrie discussed past conferences and meetings and referenced upcoming ones. Mr. Guthrie gave an update on mid-year actuarial valuation as required during the legislative session. He said the Trust’s performance since August was relatively flat increasing the unfunded liability slightly from 87 to 99 years. He then reviewed the upcoming Sunset review process for the agency. He noted the total compensation review timeline and how this review may change the use of the state classification system. Mr. Guthrie concluded by reviewing the upcoming board agendas. 7. Chief Operations and Administration Officer (COAO) Update – Andrew Roth. Mr. Andrew Roth discussed shared services and next steps towards opportunities for improvement. He noted shared services have been outstripped by the overall swift growth of the agency. He provided an update on the diversity and inclusion program and the director’s position. Mr. Roth concluded with recognition and awards employees had received. 8. Receive the Report of the Strategic Planning Committee on its April 25, 2019 meeting –

Committee Chair. Mr. Elliott, Committee Chair, provided the following report of the Strategic Planning Committee:

The Strategic Planning Committee met on April 25, 2019. The committee approved the

proposed minutes of the Strategic Planning Committee for the December 2018 meeting.

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The first presentation to the Committee was provided by Brian Guthrie and Rebecca

Merrill who reviewed the Executive Director’s Areas of Focus and results forum for the

2019-2023 TRS Strategic Plan Objectives. Chris Cutler also participated in this

presentation and addressed TRS’ objectives of enhancing its IT systems and services and

information security program.

Concluding the Strategic Planning Committee, Ms. Carolyn Perez provided an update on

TRS Strategic Communications.

9. Receive the report of the Benefits Committee on its April 25, 2019 meeting and consider

adoption or acceptance of the following – Committee Chair: a. Medical Board Meeting Minutes for January 2019; b. Benefit Payment for December 2018 – February 2019; c. TRS-ActiveCare FY 2020 PPO Rates and Benefits Changes; and d. TRS-ActiveCare FY 2020 HMO Rates and Benefits Changes.

Ms. Sissney, Committee Chair, provided the following report of the Benefits Committee:

The Benefits Committee met Thursday, April 25th. The first item of business was approval of the minutes of the December 2018 Benefits Committee meeting.

Ms. Barbie Pearson presented the Medical Board minutes from the January 8, 2019 meeting. The committee recommends to the Board the acceptance of the Medical Board minutes for January 8, 2019.

Ms. Pearson also presented for the Committee’s consideration to recommend to the Board the approval of Benefit Payments for December 2018 through February 2019. The committee recommends to the Board approval of the presented Benefit Payments.

The Committee received an update on Benefit Services Operations from Ms. Pearson on the second quarter of Fiscal Year 2019.

Next, the committee received an update from Ms. Katrina Daniel on TRS-ActiveCare as well as overall program and plan performance.

Ms. Daniel then recommended benefit and premium changes for the FY2020 plan year for the self-funded plans, including the HMO plans. Ms. Daniel recommended an overall average 3.9 percent premium increase to the self-funded ActiveCare plans, applying a 3 percent increase to the ActiveCare 1 HD, and the ActiveCare Select plan, and an 8.9 percent increase to the ActiveCare 2. Ms. Daniel further recommended benefit changes to the plans that included increases to the maximum out-of-pocket limits and increases in brand drug cost sharing to encourage more generic drug use. Finally, Ms. Daniel

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recommended premium increases to the HMO plans that resulted in a less than 5 percent overall increase and modest benefit changes.

The committee approved the recommendations and recommends changes to TRS-ActiveCare plans as recommended by staff.

On a motion by Ms. Sissney, on behalf of the Benefits Committee, the Board accepted the Medical Board minutes from the January 8, 2019 meeting. On a motion by Ms. Sissney, on behalf of the Benefits Committee, the Board approved the benefit payments for December 2019 through February 2019. On a motion by Ms. Sissney, on behalf of the Benefits Committee, the Board adopted the following resolution to adopt the TRS ActiveCare FY 2020 PPO rates and benefit changes.

RESOLUTION APPROVING BENEFITS, PREMIUM RATES AND SERVICE AREAS

FOR HMOs ASSOCIATED WITH THE TRS-ACTIVECARE PROGRAM

April 25–26, 2019

Whereas, Chapter 1579, Insurance Code, establishes the Texas School Employees Uniform Group Health Coverage Program (“TRS-ActiveCare”), a uniform group health benefits program;

Whereas, under Chapter 1579, Insurance Code, the Teacher Retirement System of Texas (“TRS”), as trustee, is authorized to implement and administer TRS-ActiveCare;

Whereas, TRS currently has contracts with three health maintenance organizations, Blue Cross and Blue Shield of Texas, a Division of Health Care Service Corporation, a Mutual Legal Reserve Company (“BCBSTX”), SHA, L.L.C. d/b/a FirstCare Health Plans, and Scott and White Health Plan, which contracts allow these entities to offer benefits to participants in TRS-ActiveCare who reside or work in the respective service areas of each health maintenance organization (“HMO”) that have previously been approved by the TRS Board of Trustees (the “Board”);

Whereas, TRS staff and TRS health benefits consultant, Gabriel, Roeder, Smith & Company Health and Welfare Consulting, LLC (“GRS”) have recommended that during Fiscal Year 2020, BCBSTX, SHA, L.L.C. d/b/a FirstCare Health Plans, and Scott and White Health Plan be allowed to provide health care services to TRS-ActiveCare participants in their respective service areas, as approved by the Board, under the same respective plan design that each HMO offered in fiscal year 2019, with only those changes in benefits noted hereafter, along with any minor benefit changes that may be reflected in the applicable TRS and HMO plan documents;

Whereas, Staff and GRS have recommended that for fiscal year 2020, the Board approves the gross premium rates noted herein, which premium rates include a monthly administration fee of

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$10 per employee enrolled in an HMO, to cover fees and other administrative expenses incurred by the TRS-ActiveCare program; and

Whereas, The Board desires to approve the recommendations, including the respective, proposed plan design being offered in fiscal year 2020 by each of the three HMOs, with the respective changes in benefits (including changes as noted hereafter) proposed by BCBSTX, SHA, L.L.C. d/b/a FirstCare Health Plans, and Scott and White Health Plan, and to approve the gross premium rates offered for fiscal year 2020 by each of the three HMOs as recommended by Staff and GRS; now, therefore, be it

Resolved, the Board hereby approves the proposal for BCBSTX to offer to TRS-ActiveCare participants during fiscal year 2020 the same plan design it offered in fiscal year 2019, with no major benefit changes, along with any minor benefit changes that may be reflected in the applicable TRS and HMO plan documents, and approves and adopts the following gross monthly premium rates for enrollment in this HMO during fiscal year 2020 according to coverage tier:

BCBSTX Gross Premium Changes

Coverage Tier FY 2019 Premiums FY 2020 Premiums Percent Change

Employee Only $ 474.02 $ 486.56 + 2.6%

Employee & Spouse $ 1,146.83 $ 1,177.52 + 2.7%

Employee & Child(ren) $ 742.19 $ 761.96 + 2.7%

Employee & Family $ 1,216.42 $ 1,249.00 + 2.7%

Resolved, that the Board hereby approves the proposal for SHA, L.L.C. d/b/a FirstCare Health Plans to offer to TRS-ActiveCare participants during fiscal year 2020 the same plan design it offered in fiscal year 2019, with the following proposed major benefit changes, along with any minor benefit changes that may be reflected in the applicable TRS and HMO plan documents, and approves and adopts the following gross monthly premium rates for enrollment in this HMO during fiscal year 2020 according to coverage tier:

SHA, L.L.C. d/b/a FirstCare Health Plans Major Benefit Change Highlights

Benefit FY 2019 Plan Year FY 2020 Plan Year

Medical Deductible Individual -- $ 750.00

Family -- $ 2,250.00

Individual -- $ 950.00

Family -- $ 2,850.00

Pharmacy Deductible Individual -- $ 100.00

Family -- $ 300.00

$150 per member

(Excl. Preferred Generics)

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Maximum Out of Pocket Individual -- $ 7,350.00

Family -- $ 14,700.00

Individual -- $ 7,450.00

Family -- $ 14,900.00

Specialist Office Visit Copay $60 $70

Urgent Care Copay $75

(deductible waived)

$50

(deductible waived)

Preferred Generic Prescription Drugs

Retail Copay

(up to 30-day supply)

Retail Maintenance Copay

(after 1st fill; up to 30-day supply)

Mail Order Copay/Coinsurance

(up to 90-day Supply)

$15

$15

$45

(drug deductible waived)

$5

$12.50

$12.50


Preferred Brand Drugs

Retail Copay/Coinsurance


Retail Maintenance Copay/Coinsurance



(60 to 90-day Supply)

$40 after drug deductible



30% after drug deductible



Non-preferred Brand Drugs

50% after drug deductible 7













Specialty Medications


Tier 1 and 2 - 15% after drug deductible

Tier 3 - 25% after drug deductible

SHA, L.L.C. d/b/a FirstCare Health Plans Gross Premium Changes


Employee Only $ 534.04 $ 560.50 + 5.0%

Employee & Spouse $ 1,348.92 $ 1,416.52 + 5.0%


Employee & Family $ 1,385.36 $ 1,454.80 + 5.0%

Resolved, that the Board hereby approves the proposal for Scott and White Health Plan to offer to TRS-ActiveCare participants during fiscal year 2020 the same plan design it offered in fiscal year 2019, with the following proposed major benefit changes, along with any minor benefit changes that may be reflected in the applicable TRS and HMO plan documents, and approves and adopts the following gross monthly premium rates for enrollment in this HMO during fiscal year 2020, according to coverage tier:

Scott and White Health Plan Major Benefit Change Highlights


Medical Deductible Individual -- $ 1,000.00

Family -- $ 3,000.00


Family -- $2,850.00

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Out-of-Pocket Maximum


Family -- $14,000.00


Family -- $14,900.00

Primary Care Provider Copay

$15, 1st office visit copay waived for

illness

$20, 1st office visit copay waived for illness,

$0 copay for primary visit for dependents age 19 and under

Emergency Room Copay

$250 + 20% coinsurance after deductible $500 after deductible

Scott and White Health Plan Gross Premium Changes


Employee Only $ 578.36 $ 558.54 - 3.4%

Employee & Spouse $ 1,353.40 $ 1,306.58 - 3.5%

Employee & Child(ren) $ 908.06 $ 876.76 - 3.4%

Employee & Family $ 1,509.56 $ 1,457.28 - 3.5%

Resolved, that the approved plans of coverage offered by each HMO to participants in TRS-ActiveCare who reside or work in the respective service areas of each HMO, each of which commences on Sept. 1, 2019, shall remain unchanged until further action by the Board.

Resolved, that the approved service area of each HMO shall remain unchanged until further action by the Board;

Resolved, that with prior written approval from the Executive Director or his designee, each HMO may offer to participants in TRS-ActiveCare who reside or work in the respective service areas of each HMO, lower premiums than those herein approved, each of which commences on Sept. 1, 2019.

Resolved, that the Board authorizes the Executive Director or his designees to take any actions, including the expenditure of funds and the execution of all documents, deemed by him or such designee to be necessary or advisable to implement this resolution and to administer the TRS-ActiveCare contracts with the HMOs in the best interests of the TRS-ActiveCare program.

On a motion by Ms. Sissney, on behalf of the Benefits Committee, the Board adopted the following resolution to adopt the TRS ActiveCare FY 2020 HMO rates and benefit changes.

RESOLUTION APPROVING BENEFITS, PREMIUM RATES AND SERVICE AREAS

FOR HMOs ASSOCIATED WITH THE TRS-ACTIVECARE PROGRAM

9

April 25–26, 2019

Whereas, Chapter 1579, Insurance Code, establishes the Texas School Employees Uniform Group Health Coverage Program (“TRS-ActiveCare”), a uniform group health benefits program;

Whereas, under Chapter 1579, Insurance Code, the Teacher Retirement System of Texas (“TRS”), as trustee, is authorized to implement and administer TRS-ActiveCare;

Whereas, TRS currently has contracts with three health maintenance organizations, Blue Cross and Blue Shield of Texas, a Division of Health Care Service Corporation, a Mutual Legal Reserve Company (“BCBSTX”), SHA, L.L.C. d/b/a FirstCare Health Plans, and Scott and White Health Plan, which contracts allow these entities to offer benefits to participants in TRS-ActiveCare who reside or work in the respective service areas of each health maintenance organization (“HMO”) that have previously been approved by the TRS Board of Trustees (the “Board”);

Whereas, TRS staff and TRS health benefits consultant, Gabriel, Roeder, Smith & Company Health and Welfare Consulting, LLC (“GRS”) have recommended that during Fiscal Year 2020, BCBSTX, SHA, L.L.C. d/b/a FirstCare Health Plans, and Scott and White Health Plan be allowed to provide health care services to TRS-ActiveCare participants in their respective service areas, as approved by the Board, under the same respective plan design that each HMO offered in fiscal year 2019, with only those changes in benefits noted hereafter, along with any minor benefit changes that may be reflected in the applicable TRS and HMO plan documents;

Whereas, Staff and GRS have recommended that for fiscal year 2020, the Board approves the gross premium rates noted herein, which premium rates include a monthly administration fee of $10 per employee enrolled in an HMO, to cover fees and other administrative expenses incurred by the TRS-ActiveCare program; and

Whereas, The Board desires to approve the recommendations, including the respective, proposed plan design being offered in fiscal year 2020 by each of the three HMOs, with the respective changes in benefits (including changes as noted hereafter) proposed by BCBSTX, SHA, L.L.C. d/b/a FirstCare Health Plans, and Scott and White Health Plan, and to approve the gross premium rates offered for fiscal year 2020 by each of the three HMOs as recommended by Staff and GRS; now, therefore, be it

Resolved, the Board hereby approves the proposal for BCBSTX to offer to TRS-ActiveCare participants during fiscal year 2020 the same plan design it offered in fiscal year 2019, with no major benefit changes, along with any minor benefit changes that may be reflected in the applicable TRS and HMO plan documents, and approves and adopts the following gross monthly premium rates for enrollment in this HMO during fiscal year 2020 according to coverage tier:

BCBSTX Gross Premium Changes

10


Employee Only $ 474.02 $ 486.56 + 2.6%

Employee & Spouse $ 1,146.83 $ 1,177.52 + 2.7%


Employee & Family $ 1,216.42 $ 1,249.00 + 2.7%

Resolved, that the Board hereby approves the proposal for SHA, L.L.C. d/b/a FirstCare Health Plans to offer to TRS-ActiveCare participants during fiscal year 2020 the same plan design it offered in fiscal year 2019, with the following proposed major benefit changes, along with any minor benefit changes that may be reflected in the applicable TRS and HMO plan documents, and approves and adopts the following gross monthly premium rates for enrollment in this HMO during fiscal year 2020 according to coverage tier:

SHA, L.L.C. d/b/a FirstCare Health Plans Major Benefit Change Highlights


Medical Deductible Individual -- $ 750.00

Family -- $ 2,250.00


Family -- $ 2,850.00

Pharmacy Deductible Individual -- $ 100.00

Family -- $ 300.00

$150 per member

(Excl. Preferred Generics)

Maximum Out of Pocket Individual -- $ 7,350.00

Family -- $ 14,700.00


Family -- $ 14,900.00

Specialist Office Visit Copay $60 $70

Urgent Care Copay $75

(deductible waived)

$50

(deductible waived)

Preferred Generic Prescription Drugs

Retail Copay


Retail Maintenance Copay

$15

$15

$5

$12.50

11




(up to 90-day Supply)

$45


$12.50


Preferred Brand Drugs













Non-preferred Brand Drugs













Specialty Medications


Tier 1 and 2 - 15% after drug deductible

Tier 3 - 25% after drug deductible

12

SHA, L.L.C. d/b/a FirstCare Health Plans Gross Premium Changes


Employee Only $ 534.04 $ 560.50 + 5.0%

Employee & Spouse $ 1,348.92 $ 1,416.52 + 5.0%


Employee & Family $ 1,385.36 $ 1,454.80 + 5.0%

Resolved, that the Board hereby approves the proposal for Scott and White Health Plan to offer to TRS-ActiveCare participants during fiscal year 2020 the same plan design it offered in fiscal year 2019, with the following proposed major benefit changes, along with any minor benefit changes that may be reflected in the applicable TRS and HMO plan documents, and approves and adopts the following gross monthly premium rates for enrollment in this HMO during fiscal year 2020, according to coverage tier:

Scott and White Health Plan Major Benefit Change Highlights


Medical Deductible Individual -- $ 1,000.00

Family -- $ 3,000.00


Family -- $2,850.00

Out-of-Pocket Maximum


Family -- $14,000.00


Family -- $14,900.00

Primary Care Provider Copay

$15, 1st office visit copay waived for

illness

$20, 1st office visit copay waived for illness,

$0 copay for primary visit for dependents age 19 and under

Emergency Room Copay

$250 + 20% coinsurance after deductible $500 after deductible

Scott and White Health Plan Gross Premium Changes


Employee Only $ 578.36 $ 558.54 - 3.4%

Employee & Spouse $ 1,353.40 $ 1,306.58 - 3.5%

Employee & Child(ren) $ 908.06 $ 876.76 - 3.4%

13

Employee & Family $ 1,509.56 $ 1,457.28 - 3.5%

Resolved, that the approved plans of coverage offered by each HMO to participants in TRS-ActiveCare who reside or work in the respective service areas of each HMO, each of which commences on Sept. 1, 2019, shall remain unchanged until further action by the Board.

Resolved, that the approved service area of each HMO shall remain unchanged until further action by the Board;

Resolved, that with prior written approval from the Executive Director or his designee, each HMO may offer to participants in TRS-ActiveCare who reside or work in the respective service areas of each HMO, lower premiums than those herein approved, each of which commences on Sept. 1, 2019.

Resolved, that the Board authorizes the Executive Director or his designees to take any actions, including the expenditure of funds and the execution of all documents, deemed by him or such designee to be necessary or advisable to implement this resolution and to administer the TRS-ActiveCare contracts with the HMOs in the best interests of the TRS-ActiveCare program.

10. Receive the report of the Budget Committee on its April 25, 2019 meeting and consider

proposed amendments to FY 2019 Budget for TRS-Care – Committee Chair. Dr. Gibson, Committee Chair, provided the following report of the Budget Committee:

The Budget Committee met Thursday, April 25th. The first item of business was approval of the minutes of the December 2018 Budget Committee meeting.

Mr. Green presented a high level overview of the FY 2019 mid-year budget as well as the FTE status report. He addressed the spending activity for the first six months of the fiscal year and the projected FTE cap variance.

Mr. Green presented a status of the TRS-Care funding. A budget amendment was adopted by the committee for recommendation to the board. The amendment would add $800,000 for TRS-Care HILOB expenses.

Mr. Green and Ms. Stroud presented an update on the Procurement Initiatives and HUB goals. They discussed the areas of concern identified in the procurement audit and the action plan for improvement. In addition, they reported on the HUB goal status as of March 2019.

On a motion by Dr. Gibson, on behalf of the Budget Committee, the Board approved the following resolution amending the fiscal year 2019 TRS-Care administrative operations budget:

RESOLUTION AMENDING THE FISCAL YEAR 2019 ADMINISTRATIVE OPERATIONS BUDGETS

14

FOR THE TEXAS PUBLIC SCHOOL RETIRED EMPLOYEES GROUP BENEFITS PROGRAM (TRS-CARE)

April 25-26, 2019 Whereas, Section 1575.054 of the Insurance Code authorizes the Teacher Retirement System of Texas (TRS) as trustee of the Texas Public School Retired Employees Group Benefits Program (TRS-Care) to pay the expenses incurred in developing and administering the group program as provided by a budget adopted by the trustee; Whereas, On July 26, 2018, the TRS Board of Trustees (Board) adopted the Fiscal Year (FY) 2019 Administrative Operations Budget and General Provisions for the Commission Credits Program and the TRS-Care program and provided that TRSCare program operations be funded from the TRS-Care fund; Whereas, The FY 2019 Administrative Operations Budgets for TRS-Care currently include amounts budgeted for salaries and professional services; Whereas, Additional resources are needed to document the new business processes and requirements, design, migrate, and condition the health data, develop the application with new forms and letters in new technologies, test, train business and counselors, and build and deploy the production environment; Whereas, the Budget Committee has recommended that the TRS-Care Administrative Operations Budget for salaries and professional services for FY 2019 be increased by $800,000; now, therefore, be it Resolved, That the Board, on behalf of TRS as trustee of TRS-Care, hereby amends the FY 2019 TRS-Care Administrative Operations Budget to increase the amount budgeted for salaries and professional services by $800,000 bringing the total TRSCare budget to $10,281,956. 11. Receive the report of the Policy Committee on its April 25, 2019 meeting and consider

the following – Committee Chair: a. Consider adoption of proposed amendments to the Resolution Designating Persons

Authorized to Sign TRS Vouchers; b. Consider adoption of proposed amendments to the Code of Ethics for Contractors; c. Consider adoption of proposed amendments to the General Authority Resolution; d. Consider adoption of proposed amendments to the External Communication Policy; e. Consider adoption of proposed amendments to the Securities Lending Policy; f. Consider adoption of a new rule and rule amendments to TRS Rules in Title 34, Part

3 of the Texas Administrative Code: i. New § 25.11, relating to Employees of Foreign TRS Subsidiaries.

ii. Amended § 51.2, relating to Vendor Protests, Dispute Resolution, and Hearing.

iii. Amended § 51.11, relating to Historically Underutilized Businesses. In Mr. Corpus absence, Mr. Hollingsworth provided the following report of the Policy Committee:

15

The Policy Committee met on April 25, 2019. The committee approved the proposed minutes of its December 2018 meeting. The committee conducted the required review of the Board’s security lending policy. The committee recommended to the Board adoption of proposed amendments to the policy. The committee recommended to the Board adoption of the proposed new and amended TRS rules 25.11, 51.2, 51.11 in Title 34, Part 3 of the Texas Administrative Code. The committee authorized for publication in the Texas Register the proposed amended TRS rules, as listed in the agenda, in Title 34, Part 3 of the Texas Administrative Code. The committee conducted the required review of the code of ethics for contractors. The committee recommended to the Board adoption of proposed amendments to the code of ethics for contractors. The Committee conducted the required review of the Board’s general authority resolutions. The committee recommended that the Board adopt the proposed amendments to the GAR. The committee then conducted the required review of the resolution designating persons authorized to sign TRS vouchers. No amendments were recommended. The committee conducted the required review of the external communications policy. No amendments were recommended.

On motion by Mr. Hollingsworth, on behalf of the Policy Committee, the Board adopted the proposed amendments to the security lending policy. On motion by Mr. Hollingsworth, on behalf of the Policy Committee, the Board adopted the proposed new and amended TRS rules 25.11, 51.2, and 51.11 in Title 34, Part 3 of the Texas Administrative Code. On motion by Mr. Hollingsworth, on behalf of the Policy Committee, the Board adopted the proposed amendments to the code of ethics for contractors. On motion by Mr. Hollingsworth, on behalf of the Policy Committee, the Board adopted the proposed amendments to the General Authority Resolution. 12. Receive the report of the Investment Management Committee on its April 25, 2019

meeting – Committee Chair. Mr. Colonnetta, Committee Chair, provided the following report of the Investment Management Committee:

16

The Investment Management Committee met on April 25, 2019. Jerry Albright began with his CIO update. The fourth quarter 2018 performance review was then reviewed by Steve Voss and Mike McCormick with Aon Hewitt. Next, Dale West provided an overview of the public equity markets, followed by an annual update on hedge funds presented by Brand Gilbert. James Nield then presented the semiannual risk report. Concluding the Investment Management Committee, we received an update on the strategic asset allocation. A review of the fiduciary duties was presented by Keith Johnson. Mohan Balachandran and Matt Talbert presented the strategic asset allocation study 2019 update. The final presentation was the benchmarking discussion conducted by Steve Voss and Mike McCormick with Aon Hewitt.

13. Receive the report of the Audit, Compliance and Ethics Committee on its April 25, 2019

meeting and consider proposed revisions to the Fiscal Year 2019 Audit Plan – Committee Chair.

Mr. Moss, Committee Chair, provided the following report of the Audit, Compliance and Ethics Committee:

The Audit Compliance and Ethics Committee met at 3:38 on Thursday, April 25, 2019 in the Boardroom. The minutes of the December 13, 2018, Audit, Compliance and Ethics Committee were approved. State Auditor’s Office staff presented the results of TRS’ comprehensive annual financial report audit for fiscal year 2018. The Chief Compliance Officer presented the routine compliance reports. The Chief Audit Executive presented recommended revisions to the fiscal year 2019 audit plan. The committee approved the recommendation to the Board of Trustees to adopt the proposed revisions to the fiscal year 2019 audit plan. Internal audit staff presented the results of projects, including reports from TRS compliance testing, incentive compensation testing, talent management, culture audit and employer testing. Internal audit staff also presented an update on outstanding audit and consulting recommendations and various administrative reports. The meeting ended at 5:11 p.m.

On motion by Mr. Moss, on behalf of the Audit, Compliance and Ethics Commission, the Board adopted the proposed revisions to the fiscal year 2019 audit plan.

17

14. Consider the selection of a vendor or vendors for Executive Assessments and Executive

Coaching, including consideration of a finding that deliberating or conferring on the selection of a vendor or vendors in open meeting would have a detrimental effect on the position of the retirement system in negotiations with a third person – Janet Bray.

Ms. Janet Bray stated the current contract for executive assessments and executive coaching to the executive director, chief investment officer and the chief audit executive is currently held by a single vendor that is to expire this August 31, 2019. She reported a solicitation separating the executive assessments and executive coaching was issued and reviewed the requirements for the separate contracts. Mr. Todd Brown and Mr. Tom Krapu with Access Sciences, presented for the executive coaching solicitation. Mr. Jim Ware and Ms. Liz Severyns with Focus Consulting Group, presented for the executive coaching and executive assessments solicitations. Dr. Troy Coleman with Coleman and Associates, presented for the executive coaching and executive assessments solicitations. On a motion by Mr. Colonnetta, seconded by Mr. Moss, the Board unanimously voted that deliberating or conferring on Board procurement matters in open meeting would have a detrimental effect on the position of the Retirement System in negotiating with a third person. At 12:56 p.m., Mr. Hollingsworth announced the Board would recess into executive session for agenda item 14, under Section 825.115(e) to discuss Board procurement matters. At 1:29 p.m., Mr. Hollingsworth reconvened the meeting in open session.

On a motion by Mr. Moss, seconded by Mr. Colonnetta, the Board adopted the following resolution selecting Focus Consulting to provide executive assessment services.

RESOLUTION REGARDING SELECTION OF EXECUTIVE ASSESSMENT CONTRACTOR

April 25-26, 2019

Resolved, That the Board of Trustees (the “board”) of the Teacher Retirement System of Texas (“TRS”) hereby selects Focus Consulting to provide TRS executive assessment services; and, Resolved, That the Board authorizes the Executive Director or a designee to negotiate a service contract for a term of two (2) years from contract award date with two (2) 1-year renewal options, having determined that Focus Consulting provides the best overall value to

18

TRS for the required services; and, if negotiation is deemed by the Executive Director in his discretion to be successful, then the Executive Director is hereby authorized to execute such contract, including future amendments, with Focus Consulting on such terms and conditions as the Executive Director may deem in his discretion to be in the best interest of TRS, and further to execute and deliver all such documents that the Executive Director may deem necessary or appropriate to effect this resolution with respect to such contract; and Resolved, That the Board authorizes the Executive Director to expend funds and to take all actions deemed by him to be necessary or advisable with such contract, on financial terms and conditions deemed by the Executive Director to be in the best interest of TRS, it being understood that the Board’s selection of Focus Consulting pursuant to this resolution shall not be construed as a binding agreement or obligation to contract, and there shall be no binding agreement among the parties until a full and final written contract is successfully negotiated and executed by both parties. 16. Review the report of the General Counsel on pending and contemplated litigation,

including updates on litigation involving benefit-program contributions, retirement benefits, health-benefit programs, investment matters and open records – Carolina de Onis.

Ms. de Onis reported on successfully getting an open records case dismissed. At 1:30 p.m., without further business Mr. Hollingsworth adjourned the meeting.

APPROVED BY THE BOARD OF TRUSTEES OF THE TEACHER RETIREMENT SYSTEM OF TEXAS ON THE 19th DAY OF JULY 2019.

ATTESTED BY: __________________________ _________________________ Katherine H. Farrell Date Secretary to the TRS Board of Trustees

19

TAB 16

Copyright © 2019 GRS – All rights reserved.


Funding Policy

Agenda

• Direction from Statute• What is a Funding Policy?• Industry Guidance on Funding Policy• Schedule• Questions

2

SB 2224, Sec. 802.2011

(b) The governing body of a public retirement system shall:

(1) adopt a written funding policy that details the governing body's plan for achieving a funded ratio of the system that is equal to or greater than 100 percent;”

Adopted no later than January 1, 2020

3

Funding Policy Defined

• The “Funding Policy” of a pension plan is a systematic set of procedures used to determine the annual contributions to be made by the employer in a specific year and series of years

• Under a “typical” funding policy the total contribution requirement equals:– Normal Cost (new accruals), plus– Amortization of Unfunded Liability

4

Typical Elements of a Funding Policy• Actuarial Cost Method: allocates the total present value of future benefits to each year

(Normal Cost) including all past years (Actuarial Accrued Liability or AAL)• Asset Smoothing Method: reduces the effect of short term market volatility while still

tracking the overall movement of the market value of plan assets• Amortization Methods: determines the length of time and the structure of the increase or

decrease in contributions required to systematically (1) fund any Unfunded Actuarial Accrued Liability or UAAL, or (2) recognize any Surplus, i.e., any assets in excess of the AAL

– Level dollar vs Level Percentage of Payroll/Budget– For initial liabilities– For changes in assumptions– For changes in benefit provisions– For gains and losses (deviations from expectation) that naturally occur

• Contribution stabilization techniques: or “direct rate smoothing” in addition to both asset smoothing and UAAL/Surplus amortization

• Procedures for Plans with lower funded ratios• Surplus management• Risk management

5

Difference in this Case

• The typical funding policy details every step on how to determine the employer contribution, sometimes to a specific dollar amount– Clearly, this would need to be a comprehensive

document• However, in TRS’ case, as the Board has no

authority on the amount of contribution, the policy could be more general and principles-based

6

What Would be the Purpose for a Funding Policy Adopted by the TRS Board?• While the Board has no discretion or authority

around the contributions into or the benefits paid out of TRS…

• A written funding policy can:– Help decision-makers come to a better understanding

of the principles and practices that help sustain benefits (and ultimately contributions) over the long-term

– Provide decision-makers a framework for understanding the tradeoffs related to reaching the goals of the Statute

7

Breaking Down the Statute• “plan for achieving a funded ratio of the system that is equal to or

greater than 100 percent”• The only way for the funded ratio to be 100% is for the Unfunded

Actuarial Accrued Liability (UAAL) to be $0– currently $48 billion and expected to increase for 8 to 12 years

• The UAAL is a more trackable, more explicitly manageable, and less manipulative number than the funded ratio or a funding period– Meaning, it will be easier to develop principles that reduce the UAAL

to $0 than to increase the funded ratio to 100%– There are situations where the funded ratio can increase over the

short to medium term, but that does not mean that “plan” will ultimately achieve 100% funded ratio (at least over a determinable period)

– However, any plan that systematically decreases the UAAL over time will ultimately achieve a 100% funded ratio

8

Industry Guidance on Appropriate Funding Policies• Exposure Draft for ASOP #4: Measuring Pension Obligations and Determining

Pension Plan Costs or Contributions– “select an amortization method that produces amortization payments that exceed nominal

interest on the unfunded actuarial accrued liability”• Blue Ribbon Panel Report on Funding Principles (SOA)

– “Furthermore, to avoid the undesirable accumulation of unamortized principal, amortization schedules should cover interest on unfunded amounts in full and amortize principal.”

• Actuarial Funding Policies and Practices for Public Pension Plans (CCA Public Plans Community)

– “The amortization policy should reflect explicit consideration of the level and duration of negative amortization, if any.”

– Defined any policy that combined negative amortization and an open amortization policy as “unacceptable”.

• Draft Pension Note on Fixed Rate Pension Funding (CCA Public Plans Community)– “Ideally the recommended higher fixed rate would result in a contribution rate of at least

normal cost plus nominal interest within a relatively short time frame.” • GFOA Best Practices

– Fund to 100%. Fund an actuarially appropriate amount.

9

Funding Policies for Fixed-Rate Pension PlansTexas Pension Review Board

• “Perhaps the most important element of a funding policy is to establish the funding objectives of the retirement system. Funding policies should aim to achieve full funding of benefit promises and should include a specific funded ratio and amortization period target”

• “Funding policies should include elements designed to impede deviation from progress toward funding goals. This may be done by establishing parameters under which future benefit increases and contribution reductions can be considered.”

10

Structure of a Principles-based Policy

1. State the goal– Reduce UAAL to $0– Consistent with intent of SB12 and SB2224

2. Provide framework for and guidance to future decision makers consistent with #1 concerning:

– Future expectations– How to monitor progress– Statement of when contribution decreases could be

considered (never?)– Financing future benefit enhancements

11

Schedule

• July: Provide Scope and Preview• September: Preliminary Ideas and Discussion • December: Final Decisions

12

In Summary

• Funding\Governance Policy has shown to the be the most distinctive factor between outcomes of pension systems– More than assumptions– More than benefit provisions– And even more than experience itself

• As required by Statute, this is the TRS Board’s opportunity to influence future decisions towards a more sustainable path

13

Links• https://www.prb.state.tx.us/txpen/wp-content/uploads/2019/02/Funding-Policy-Paper.pdf• https://www.soa.org/globalassets/assets/files/newsroom/brp-report.pdf• https://www.ccactuaries.org/Portals/0/pdf/CCA_PPC_White_Paper_on_Public_Pension_Fun

ding_Policy.pdf• http://www.actuarialstandardsboard.org/wp-content/uploads/2018/04/asop004_exposure-

draft_march-2018.pdf

14

https://www.prb.state.tx.us/txpen/wp-content/uploads/2019/02/Funding-Policy-Paper.pdf

https://www.soa.org/globalassets/assets/files/newsroom/brp-report.pdf

https://www.ccactuaries.org/Portals/0/pdf/CCA_PPC_White_Paper_on_Public_Pension_Funding_Policy.pdf

http://www.actuarialstandardsboard.org/wp-content/uploads/2018/04/asop004_exposure-draft_march-2018.pdf

TAB 17

Brian Guthrie – Chet Henry

July 18-19, 2019

TEAM PROGRAM UPDATE


TEAM STATUS

• 3rd of 6 Test Evaluation Summaries complete and accepted• Additional scope added to Perspecta contract (Extended from Dec 2019 to May

2020)• New Go Live date targeted for early April 2020 • Synchronized shared program schedule (Perspecta & TRS)• Payroll reconciliation effort underway• Phase 2 Cutover Planning underway

TEAM PROGRAM STATUS

3

TEAM PROGRAM DASHBOARD

4

QUALITY

TEAM TEST EVALUATION SUMMARY 3

6

TEST EVALUATION SUMMARY EXPECTATIONS

TES 4 Quality Concerns• Previous TES required multiple

code deliveries and collaborative activities in order to pass

• Each code delivery adds days to the schedule

• Staff are concerned about significant schedule overruns with TES 4

• Final test runs TES 5 and TES 6 are also large and complex 0

200

400

600

800

1000

1200

1400

1600

1800

TES 1 TES 2 TES 3 TES 4

TEST EVALUATION SUMMARIESTest Cases

7

CURRENT PROGRAM CONCERNS

• Larger & CRITICAL Test Evaluation Summaries (TES)• Change in PRSP leadership• Potential loss of additional PRSP staff

8

QUESTIONS?

Appendix

TEAM ANNUITY PAYROLL RECONCILIATION

11

TEAM G/L TESTING

12

TEAM DATA MIGRATION

13

TEAM Mainframe Decommissioning

14

TEAM CRM BURNDOWN

15

TEAM HILOB BURNDOWN

16

TAB 18

TEAM Program

INDEPENDENT PROGRAM ASSESSMENTBOARD PRESENTATION

MICHAEL JOHNSON| PRINCIPAL

July 2019

2

OBJECTIVESIndependent Program Assessment (IPA)

Provide independent reporting and oversight to the TRS Board and Executive Director, or designee, regarding critical risks related to the TRS Enterprise Application Modernization (TEAM) Program to enable informed decision making.

Critical risks focus:• Schedule: program substantially delayed

• Quality: scope requirements not adequately defined; significant defects in code development

• Cost: program substantially over budget

3

EXECUTION SCORES

C-B-C-

TEAM Overall Scores: based on Transparency Report

IPA Overall Scores: based on Transparency Report considerations and further risk outlook

CBC-

Apr May June

SUMMARY OBSERVATIONS & RECOMMENDATIONSPH

ASE 1 Releases of production system defect fixes and improvements continue. The

number of open defects trended up during June; 70% of total remaining open defects are classified as High/Urgent.

RECOMMENDATIONS:

• Monitor and closely manage TES 4 and payroll reconciliations progress, including resource needs/allocations, to meet quality acceptance criteria.

• Continue to evaluate, prioritize and clear Phase 1 production defects in upcoming releases to accomplish meeting business needs.

• Continue weekly monitoring of master TEAM schedule activities progress while prioritizing quality over time commitments.

PH

ASE 2

Perspecta contract change was finalized, along with an integrated revised master schedule that reflects Phase 2 implementation by May 2020. However, the risk of not meeting quality and schedule expectations is elevated given the significant size of upcoming Test Evaluation Summary (TES) package 4. Ongoing risk of resource constraints or attrition could potentially impact both phases.

4

KEY DISCUSSION MATTERS

5

Schedule (IPA Score = C-)

• The TEAM Master integrated project plan was re-baselined and resource loaded to manage schedule and resource contention risk; schedule status is reviewed on a weekly basis with all TRS and Perspecta project managers

• Availability of Subject Matter Experts, Business System Analysts and Quality Assurance testers continue to remain critical for all phases of testing

• The delivery and testing for TES package 4 acceptance and completion is at elevated risk of not meeting the October 28 scheduled milestone date; TES 4 covers multiple areas of functionality and is anticipated to be four times larger than TES 3


6

Quality (IPA Score = C-)

Phase 1: Production defects and backlog of Maintenance & Enhancements (M&Es) continue being worked, with the volume of open items still contributing to ongoing risk of resource constraints and not meeting quality expectations

• Maintenance Cycle (MC) 22 is on target for July 21 release to include over 120 defect and Maintenance and Enhancements (M&Es) fixes

• Total open Phase 1 Production defects increased 9% during June; 70% of total defects are classified as Urgent/High Priority


7

Quality (IPA Score = C-)

Phase 2: Quality risks are increasing and being closely monitored

• TES package 3 was delivered (two drop deliveries) and accepted by TRS after completing validation testing and collaborating with Perspecta on defect fixes

• TES package 4 is four times larger with approximately 1,700 test cases, thus significantly increasing the risk of not meeting quality acceptance criteria

• Results of annuity payroll reconciliations between TRUST and legacy systems are being tracked against quality criteria; the reconciliation level of effort is anticipated to increase in upcoming months

• HILOB (Healthcare) and CRM integration status updates are being reported weekly to monitor and manage risks


8

Cost (IPA Score = B-)

• Implementing full payroll requirements (GASB 68), continuation of Phase 1 post go-live defect resolutions and certain new functionality for improvements increased total project costs and used all budget contingency

• Risk of continuing increased costs• Failure to meet quality acceptance criteria in upcoming Phase 2 TES package

deliveries or unfavorable payroll reconciliation results could result in additional schedule delays and costs

• TRUST-HILOB (Healthcare), TRUST-CRM workflow scope, and remaining volume of urgent/high priority Phase 1 TRUST defects and Maintenance & Enhancements may increase TRS resource costs

AUSTIN8310 N. Capital of Texas Highway Bldg. 1, Ste. 420Austin, TX 78731512-437-7900

WWW.BRIDGEPOINTCONSULTING.COM

DALLAS325 North Saint Paul St Suite 2550Dallas, Texas 75201214-269-7850

HOUSTON1001 McKinney Street10th FloorHouston, Texas 77002832-783-4900

CONTACT US

AUSTIN | DALLAS | HOUSTON

THANK YOU

TAB 19

Brian Guthrie, Executive Director

July 19, 2019

Executive Director’s Report

• General Updates• 2019 ED’s Award of Excellence; and

2019 Shining Example Award• Sunset Review Update• Board Election Update• Upcoming Board Meeting Agendas

Past Conferences and Meetings:• May 19 - 22, 2019: NCPERS Annual Conference, Austin, TX• June 6 - 7, 2019: CEM CoP II, Toronto, CA• June 9 - 12, 2019: NCTR’s Administrative Assistant Workshop, Boise, ID• June 12 - 14, 2019: NCTR’s System Directors’ Meeting, Boise, ID• July 10, 2019: TRS Joint Public/Private SPN Summit, New York, NY• July 10 - 12, 2019: PPI’s Summer Roundtable, Chicago, IL

General Update

3

Upcoming Conferences and Meetings:• July 21 - 24, 2019: NCTR 19th Annual Trustee Workshop, Berkeley, CA• August 3 – 7, 2019: NASRA Annual Conference, Williamsburg, VA • August 11 – 13, 2019: TEXPERS’ 2019 Summer Educational Forum, El Paso, TX• August 22, 2019: EC Retreat, Austin, TX• September 25-26, 2019: Aon’s 2019 Retirement & Investments Client Conference,

Chicago, IL• October 3 – 6, 2019: NASRA Executive Council Meeting, Niagara Falls, NY• October 13 – 15, 2019: NCTR 97th Annual Meeting, Nashville, TN• October 17 – 18, 2019: Focus Leadership Forum, Chicago, IL

General Updates

4

General Updates

TRTA 2019 District Fall ConferencesDistrict Date Location District President

1 October 18, 2019 Weslaco Dr. Irene Gulley

2 October 30, 2019 Corpus Christi Beverly Tackett

3 October 16, 2019 Beeville Becky Williams

4 October 15, 2019 Houston Dr. Mary Widmier

5 October 3, 2019 Beaumont Artemus Hancock

6 October 9, 2019 Huntsville Johnnie Walker

7 October 1, 2019 Nacogdoches Linda Metteauer

8 October 17, 2019 Pittsburg Carolyn Joan Cook

9 October 2, 2019 Witchita Falls Karla Wallace

10 October 28, 2019 Dallas Valois Hounsel

TRTA 2019 District Fall Conferences (Continued)District Date Location District President

11 October 1, 2019 Fort Worth Frana Patterson

12 September 10, 2019 Waco Shirley Boyd

13 September 12, 2019 San Marcos Susan Pulis

14 September 24, 2019 Abilene Sharon Daugherty

15 October 10, 2019 Brady Dr. Janis Patronis

16 October 17, 2019 Amarillo Judy Hart

17 October 3, 2019 Lubbock Terri Navrkal

18 September 27, 2019 Midland Ricky Chandler

19 October 8, 2019 El Paso Paul Pearson

20 October 24, 2019 Boerne Suann Agold

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2019 ED’s Award of Excellence

Winner of the 2019 Executive Director’s Award of Excellence: Private Equity 2.0 Team

The Private Equity team worked together with the IMD Management Committee, TRS Legal Counsel, IMD Talent Management and McKinsey in the development of a strategic plan for the private equity portfolio. The team developed both the high-level plan as well as key implementation initiatives shared by the PE team and IMD Management Committee. The Private Equity 2.0 plan has the potential to generate billions of additional dollars to the Trust on the basis of fee savings and asset selection. The strategy aligns with the mission of seeking to secure future pension retirement income by maximizing net returns from a key portfolio with the IMD. The team continues to make progress on executing their plan.

Neil Randall Michael Lazorik Deanna Buck

Tamara Polewik Scott Ramsower Carolina de Onis

Shelby Wanstrath Will Carpenter Denise Lopez

Tommy Albright Kaitlin Miles Heather Traeger

Justin Wang Yemi Ojutiku Horacio Zambrana

Deniz Oran Stephanie Daul Beth Booker (Contractor)

Sam Dobberpuhl Cait Macdonald Eric Lang

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2019 Shining Example Award

Winner of the 2019 Shining Example Award: Office Visit Counseling

The Office Visit Counseling team pulled together this year in an effort to double the number of office visits available to members from 10,000 to 20,000 appointments. They provided input and feedback on a proposal developed by their peers to increase office visit appointments and decrease the 90-day waiting period to book an appointment. The finalized plan resulted in counselors conducting office visits back to back every hour of their day along with serving walk-in customers. Presentations around the state of Texas and field office visits are completed in addition to the increased workload in the office. The team eagerly stepped up to the challenge and our members are now able to schedule an appointment within seven days. As a result of hard work, improved efficiencies, and teamwork the OV team is on track to exceed the appointment availability goal of 20,000.

Sekethia Tejeda Courtney Alexander Lawrencia Brown

Brian Hyde Donnetta Kellogg Valerie Cabrera

Laura Cook Ian Klingspor Chandra Sims

Carolyn Canales Angie Cano Yvette Carter

Melissa Hernandez Robert Darrah Jennifer Gasior

Anissa Dungan Diane Green Veronica Dixon

Dante Johnson Debra Marrs Alesheia White

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Sunset Review

Potential Major Policy Issues for Sunset

Pension Benefit Clarity and Efficiency:• Employment after retirement provisions.• Disability retirement requirements.

Health Care Benefit Plans:• TRS-Care Sustainability.• TRS-ActiveCare affordability

Enhance Investment Flexibility:• Real estate Provisions

Sunset Timeline:Sept. 1, 2019 TRS Self-Evaluation Report DueOct. 2019 – June 2020 Sunset Staff on site at TRSJuly – Dec. 2020 Sunset Commission HearingsJan. 2021 Legislative Session Begins

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2019 Board Elections and SBOE Nominations

TRS Public School District Trustee position • May 6, 2019: TRS Board of Trustees Election for Public School District position concluded• May 28, 2019: TRS Election Review Committee met and certified election results• May 28, 2019: Sent letter to Governor Abbot listing the top three candidates

• Mr. Michael Ball, CPA• Mr. Rashad N. Muhammad• Mr. Al A. Rodriguez

TRS State Board of Education (SBOE) Trustee position• June 14, 2019: SBOE voted on three nominees• June 17, 2019: Sent letter to Governor Abbot listing top three nominees

• Mr. David Corpus• Ms. Nellie Ingram• Ms. Ysrael Valencia

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Upcoming Agendas

September 19 - 20, 2019September 19, 2019 (2 Day Quarterly Meeting) September 20, 2019Committees Board

Strategy and Planning Committee Approve Calendar Year 2020 MeetingsResults Forum on Talent Management Team TEAM UpdateResults Forum on Employer Audit’s ED ReportExecutive Retreat Update Committee Reports

Benefits Committee Adopt Board Funding PolicyOperational Overview

Compensation CommitteeReview IMD and ED’s PIPP

Policy CommitteeUpdate Policy Review ScheduleReview Mission StatementAmend IPS

Investment Management CommitteeCIO and Market Updates2nd Quarter 2019 Performance ReviewSPN Public/PrivateUpdate on IMD Legal and Compliance

ACE CommitteeCompleted Internal and External Audits.Compliance Update

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Upcoming Agendas

December 12 - 13, 2019December 12, 2019 (2 Day Quarterly Meeting) December 13, 2019Committees Board

Strategy and Planning Committee TEAM UpdateResults Forum on: Achieving Trust’s Actuarial Assumed RoR; ED ReportImproving Customer Service Experience; Committee ReportsImproving Timeliness and Accuracy in Employer Reported Data;Improving Strategic Communication.Benefits CommitteeOperational OverviewBudget CommitteeCAFR ReviewFiscal Year End ReportPolicy CommitteeProxy Policy ReviewCommission Credits Policy Review Investment Management CommitteeCIO Update3rd Quarter 2019 Performance ReviewAnnual Trading, Risk and Multi-Asset Strategies Group UpdatesACE CommitteeTRS Comprehensive Annual Financial Statement AuditTRS Investment Company of Texas (TRICOT) Financial AuditTalent Management and Culture Audit UpdateCompleted Internal and External Audits.

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TAB 20

Andrew Roth

July 19, 2019

Chief Operations and Administrative Officer Presentation

COAO Update

CalSTRS to TRS: Observations at the 90 Day Mark

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COAO Update

Shared Services Focus• Developing operational Key Performance Indicators (KPIs) for shared

services performance evaluation.• Will identify appropriate metrics and performance targets.• Building on KPI work already done by business areas.• Initial focus on Procurement and Talent Acquisition.

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COAO Update

Long Term Facilities Project: Workgroup status• Leading workgroup to ensure collaboration and alignment across the

enterprise.• Collaborative meetings with ERS, CalSTRS, and industry experts available

through existing TRS relationships. • Next Steps: Focus on rigorous evaluation of options.

Diversity, Equity and Inclusion Director: Status of Hiring • Rich Candidate pool.• Enterprise participation.

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COAO Update

Classification and Compensation Review• Deloitte on boarded in June.• Goal is to develop a modern classification and compensation system that

will meet the TRS needs moving forward. • Focus is on developing a career path in key business areas to assist with

recruitment and retention in one of the most competitive labor markets in the nation.

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COAO Update

CEM Community of Practice (CoP) for System Implementation: June 2019• Served as Executive Sponsor for CoP.• Andrew Roth and Chris Cutler conducted a presentation on vendor

management; CEM requested permission to use the presentation as the basis for best practices insights.

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TRS Board of Trustees Meeting Documents/board_book... · 2019-07-18 · July 18, 2019 – 8:00 a.m....

Documents

Transcript of TRS Board of Trustees Meeting Documents/board_book... · 2019-07-18 · July 18, 2019 – 8:00 a.m....