Wednesday, September 20, 2017

Start a Grassroots Effort at Your Fund

Education is key in creating pension advocacy

By Allen Jones
TEXPERS Communications Manager

Credit: iStock
America’s northern neighbor, Canada, has turned out to be a proving ground for public pension systems that are actively preparing plan participants to spread the importance of defined benefits. The systems can teach Texas funds a thing or two about grassroots advocacy building.

Ontario-based public pension plans are turning to their participants to convince the country’s corporate employers to keep DB plans, according to an article recently published in Pensions & Investments magazine. Systems are building grassroots networks by educating their plan participants about the value of their retirement plans and counting on the messages spreading to their friends and family and eventually to private companies.

The P&I article highlighted three public pension systems that have developed grassroots efforts. They include:
  •       The Healthcare of Ontario Pension Plan recruits plan participants who are educated in the DB model to serve as ambassadors. The participants are then able to correct misleading views of DB retirement plans among their friends, relatives and colleagues in the private sector.
  •       The Ontario Public Service Employees Union Pension Plan established a “People for Pensions” program. The program explains the difference between DB benefits and other retirement plan models to the system’s plan participants so they will have the knowledge they need to discuss DB with people they know.
  •       The Colleges of Applied Arts and Technology Pension Plan established a program called “Building Plan Champions.” P&I describes it as a “participant- and employer-education program.” Again, the goal is that those educated in the value of DB plans will have the knowledge to speak to others.
The Colleges of Applied Arts and Technology Pension Plan, or CAAT, conducts annual surveys of its members. Those surveys show that plan participants want long-term retirement protection and are willing to pay up to 10 percent to get there, with a 10 percent match from their employer, says Derek Dobson, the system’s CEO and plan manager, in the P&I report.
“That would be enough to guarantee retirement security for them,” he told the magazine. “The Canadian culture is such that Canadians want DB plans. The question is, how to get them access.”
CAAT provides seminars, offers webinars, and has produced online videos to help educate its members about defined benefits. The goal isn’t to ensure plan participants understand their benefits and have the knowledge to talk about the value of their retirement plans when conversations arise. CAAT’s program goal is to educate 5,000 members and is 91 percent there, according to information CAAT provided TEXPERS.

CAAT members and employers are surveyed on their knowledge of DB plans, and those with a high level of knowledge are designated as “champions.”
“Early on, about 8 percent or 9 percent (of those surveyed) were designated as ‘champions,’ but after the seminars, we identified 35 percent as ‘champions,’” Dobson told P&I magazine. “Clearly, there’s a direct link that the more you understand a pension, the more value you place in it, and they can go out and defend their defined benefit plans.”
Offering the various learning opportunities is attracting plan participants. According to information from CAAT and shared with TEXPERS, the 90-minute seminars are often held on Saturdays and have attracted as many as 270 people. Plan members are spending lunch hours and breaks attending CAAT’s webinars, which run for 1 hour and 45 minutes. The pension system also produced nine videos that discuss some of the most common questions regarding defined benefits.

Grassroots efforts such as CAAT’s are bottom-up approaches to facilitating change, says Aabha Brown, a clinical assistant professor of social work at the University of Houston. She spoke to TEXPERS about the Canadian pension systems and how Texas funds can also engage their members to contextualize the value of defined benefits.

Effective grassroots programs, Brown says, have three key components: education, a story to tell, and a clear message.
“It is often hard to make a change if advocates don’t understand why resources are important in the first place,” she says.
Brown says the “grasstops,” or executives, often speak a different language than their “grassroots” plan members. Topics must be explained in a manner they understand and can articulate to their peers or other intended audience.

The education could come in the form of seminars, speaker luncheons, webinars, online videos, discussion groups, newsletters or emails to plan members. Once plan members are educated, there must be a story to tell. People connect with stories, Brown says.
“People often don’t connect to statistics,” she says. “Even though data may connect with an issue, people do not connect to the data. In the case of defined benefits, people enjoy retirement due to having a secure plan or those who do not have one don’t enjoy retirement.”
Those stories don’t always have to be about a threat to pensions. Although bad news does spread, so does good news.
“Consider how benefits are positively helping people,” Brown says.
Any story, though, must have a clear message.
“If a pension system wants to equip their people, they need to very clear in what they are wanting people to act on,” Brown says. “Often, organizations talk about how good a benefit is but they are not clear on what action they are seeking through their stories.”
Brown suggests that pension systems provide multiple ways for their plan participants to get involved. It may be encouraging people to talk to their friends and family about the value of defined benefits. It could be recruiting retirees to write letters to legislators. Maybe, it is to go door-to-door to hand out informational pamphlets. Others may be better at using the phone to advocate for defined benefits. Or, possibly solicit ambassadors to speak one-on-one to lawmakers or testify during legislative hearings.
“Having diversity of actions people can take is important,” Brown says. “Not everybody is wired to go speak to legislators or write a letter.”
She also suggests finding ways to acknowledge the efforts of advocates who are getting the word out and celebrate milestones achieved.
“If 100 members sign a petition or make a phone call, show appreciation and get the message out to other advocates,” she says. “It may motivate those on the sidelines to get involved.”
The big takeaway from CAAT and other Canadian pension plans: Texas public pension systems looking to start a grassroots movement must begin by properly cultivating their greatest assets – the members.

In Texas, The El Paso Firemen & Policemen’s Pension Fund is equipping its members to better understand DB plans by teaching them how to use their deferred compensation accounts to learn about investing. By showing them that deferred benefits are easier due to pooled risk and professional investment management, the members find out how relevant DB plans are, says Tyler Grossman, the fund’s executive director.
“They can see how long it takes to save and how much if they tried to do it on their own,” he says.
The program is part of a series of informational summits the system established this year to help educate its members on the value of DB plans. So far, the El Paso system has held two summits. It is hosting its third Nov. 28. Each summit has a five-member panel, including Grossman who talks about the plan’s Forward Deferred Retirement Option Plans, how members can create health funds with it and cost of living adjustments.
“Each panel member speaks on a subject,” he says. “The other topics are insurance, deferred compensation, taxes, and an attorney for estate planning. Each one expresses how important it is to preserve their DB and the importance of protecting it at all costs.”
Grossman hopes not only will his fund’s member become more knowledgeable of their retirement plans; they will talk up the plan among their friends and family, kick-starting a grassroots effort in the El Paso community.

Allen Jones
About the Author:
Allen Jones is the communications manager for the Texas Association of Public Employee Retirement Systems. Email him at or call 713-622-8018.

TLFFRA to host 2017 Local Firefighter Pension Conference

The 2017 Texas Local Fire Fighter Pension Conference is Sept. 30-Oct. 3 in The Woodlands.

Hosted by the Texas Local Firefighter Retirement Act, the event features vendors, networking, golfing, and educational opportunities. The conference will be held at The Woodlands Waterway Marriott Hotel and Convention Center, 1601 Lake Robbins Dr., in The Woodlands.

Trustee member fees are $50. Add $25 to bring a spouse. The fee includes access to a golf tournament Oct. 1, skeet/sporting clay shoot Oct. 1, and dinner on Oct. 2. Click here to register.

A full agenda can be accessed here. Visit the TLFFRA website for additional information.

Online membership renewal for 2018 is open

As a reminder, when renewing your membership please update your organizations profile. Some of the information on your account will be 
utilized to print the 2018 membership directory, which will be 
available to members at the Annual Conference.
  1. Log in to your TEXPERS online account, if you do not have your username and password please use the "Forgot Password" link.
  2. Please select "Membership Renewal" on the left side
  3. Please go through the renewal steps (note: System Members will need current total assets or total fund balance to renew)
  4. Once you are on the last page select "Register and Pay Online" to use a credit card. Or you can select "Register & Bill Me"

The "Bill Me" option will create an invoice under the "My Invoices" section for you
The "Pay Online" will process a credit card payment, you will be emailed a receipt, you can also view your receipt from the "My Transactions" section.

Please note: Retirement system members, your fund administrator or the person at your fund that is responsible for your TEXPERS membership will take care of renewing the dues.
We appreciate your continued support!!

Attendance and participation in TEXPERS conferences requires your membership be in good standing. If by Dec. 31 you have not submitted your dues or notified the TEXPERS office of your intent to renew, your membership will cease. If you are no longer interested in renewing your membership with TEXPERS, please notify us.

New book serves as reference manual for pension trustees

Plan design. Expected contributions. Investment policy. These are a few of the topics discussed in a new book, “One of a Kind! A Practical Guide for 21st Century Public Pension Trustees.”

The book is published by Funston Advisory Services LLC. It is organized by topic, starting off with “Public Pension Policy” and ending with “Reporting and Reassurance.” Each chapter is written by a different specialist and includes a section of self-assessment.

Rick Funston, the Funston Advisory’s managing partner, says the firm put the book together to answer frequently asked questions by public pension trustees and executives.
“Our approach is to describe the issue, why it’s important, the lessons learned by other systems, the options available and the respective pros and cons,” he says.
The book isn’t a prescription for a public pension system’s ailments, however. Funston says it is up to each trustee and board to determine what works best for them in their specific circumstances.

The book is available on

TEXPERS' 2017 Summer Forum, San Antonio, Texas

Public sector employees overwhelmingly pick defined benefits over individually managed retirement accounts

By Allen Jones
TEXPERS, Communications Manager

Texas public pension plan administrators and trustees have a new study to reference in highlighting the importance of maintaining defined benefits for the state’s police, firefighters and other public workers.

Public sector employees in states with retirement plan choice overwhelmingly pick defined benefits (DB) pension plans over 401(k)-type defined contribution (DC) individual accounts, according to a new study by the National Institute on Retirement Security, a nonprofit research and education organization.
“The report makes it clear that when given a choice, public employees care about the type of retirement benefits they receive,” says Diane Oakley, executive director of NIRS.
Oakley spoke to TEXPERS about the study, “Decisions, Decisions: An Update on Retirement Plan Choices for Public Employees and Employers,” which examines new hire elections in 2015 for systems in seven states that provide public workers with a choice of DB or hybrid DB/DC and DC plans. The systems studied are located in Colorado, Florida, Michigan, North Dakota, Ohio, South Carolina and Utah.

Of the systems studied by researchers, the percentage of persons who took advantage of DB pensions in 2015 was 80 percent or higher in six states, according to the new report. Two of the state systems studied had pension take-up rates greater than 95 percent. Florida and Michigan had take-up rates of 76 percent and 75 percent, respectively. 

Although Texas public pension systems are not among the retirement plans studied in the report, the information is useful in gauging how receptive public workers here could be to a choice of benefit plans, Oakley says. The study is an update to previous research NIRS researchers conducted in 2011.
“The information really didn’t change much from our 2011 study,” Oakley says.
The report is co-authored by Jennifer Brown, manager of research for NIRS, and Matt Larrabee, principal and consulting actuary with Millman. Brown says the study’s findings are consistent with previous polling that finds American’s strongly support pensions for providing economic security in retirement.
“Our findings also suggest that the public sector is unlikely to mimic the trend away from pensions as seen in the private sector for two reasons,” Brown states in a news release announcing the new study. “First, there is strong employee support for pensions. Second, DB pensions remain the most cost-effective way for public employers to provide a modest and secure retirement benefit for employees who typically earn less than comparable private sector employees.”
The report, published late August, also indicates that employees directing their own investments in 401(k)-like defined contribution plans typically earn lower investment returns than that of state pension plans. The report attributes the investment advantage in public DB pensions to lower plan expenses, professional asset management and optimal investment allocations used by the DB plan over decades. DB pension plans also benefit from prolonged risk pooling, says Oakley, NIRS’ executive director.

That’s not the only reason why the 401(k)-like accounts aren’t catching on when public employees or employers are given a choice, however. According to the NIRS report, DC plans typically lack supplemental benefits such as death and disability protection. Some plans have attempted to address these differences, but these provisions require extra contributions that are not deposited to the members’ DC accounts. Plus, “making a complete shift from a DB to a DC structure does nothing in and of itself to close any existing DB funding shortfalls, and can increase near-term costs,” according to the study.

The new report also examines the issue of states eliminating DB pensions and moving new hires into DC accounts in the hopes of lowering costs or addressing funding shortfalls often caused by states skipping their full actuarial contributions. However, the experience of states shows that such a change has the opposite impact with a DB to DC switch increasing retirement costs for employers and taxpayers in the immediate future, according to a synopsis of the report provided by NIRS.

DC plans would especially be less cost-efficient for small pension systems, Oakley says. Not only are DB plans the most cost-effective way to fund lifetime retirement benefits, but defined benefits also continue to help recruit and retain public employees, she adds.
“Of the small minority who choose defined contributions, they tend to leave their jobs more often than those with defined benefit retirement plans,” Oakley says.
According to the NIRS report, the public sector workforce has a median tenure rate that is twice that experienced in the private sector.

Allen Jones
About the Author:
Allen Jones is the communications manager for the Texas Association of Public Employee Retirement Systems. Email him at or call 713-622-8018.

Headed Down the Rabbit Hole? Maybe Not

Threat to globalization must be acknowledged, 

but history suggests it won't be derailed

Credit: iStock
By Michael Reynal
Guest Columnist

Chinese President Xi Jinping recently traveled to the World Economic Forum in Davos and championed the benefits of globalization while highlighting the risks of protectionism. Meanwhile, populists in Britain and the United States—stalwart nations of global free trade—have been busy talking up the scourge of globalization. It’s an upside-down world only Lewis Carroll would understand.

Indeed, globalization is in the cross-hairs of many politicians. Threats of tariffs and protectionism abound, and, if enacted, they could pose a drag on global economic growth. Nobody correctly predicted the political outcomes of the past year, and certainly nobody knows how nationalism will manifest itself in future trade policies. Yet there is a feeling that more sensible minds will prevail and globalization is, ultimately, unyielding. Moreover, any setbacks and subsequent market volatility might provide opportunities for active managers who can capitalize when stock prices disconnect from fundamentals.

History as our guide
I fully acknowledges that there are very real risks to globalization today. But as an equity manager with a global perspective, I still believe in trade liberalization and its ability to lift both developing and developed countries. Statistics from the World Trade Organization show a longer-term trend of rising international trade following the conclusion of World War II between 1950 up until the global financial crisis in 2007-2008. There may be setbacks along the way, but I think the slowing pace of trade liberalization and rising protectionism rhetoric is unlikely to completely reverse globalization.

Ultimately, globalization is driven by four key factors: cross-border capital flows, trade, migration, and the free-flow of ideas and communication. Capital flows and trade may have hit a speed bump, but migration and the exchange of ideas and knowledge continue unabated. In fact, the era of digital globalization (the vehicle of increased knowledge-sharing) is still in its infancy. A 2016 report from McKinsey Global Institute asserts that in contrast to slowing international trade in recent years, digital flowsare showing no signs of abating. Cross-border bandwidth “has grown 45 times larger since 2005,” and “is projected to grow by another nine times in the next five years,” according to the report. All of this is boosting participation in the global economy and suggests that globalization is not reversing.

Risks remain
Yet, in recent years, globalization has resulted in uneven economic growth among nations, as well as disruptions across various sectors of the economy. This is the reality, and it may be fueling the recent rise of populism and nationalist rhetoric. There has been heightened talk of protectionism, and, surprisingly, much of it is emanating from the West. This includes rumblings from the new U.S. administration of a 45 percent tariff on Chinese goods, or a border adjustment or“mirror” tax for goods produced in Mexico. No doubt about it, if enacted, these types of protectionist measures could create short-term pain for global investors.

Once protectionism grabs hold, it runs the risk of spawning new tariffs, weakening consumer confidence, and elevating geopolitical tensions. Consumer costs could rise while supply chains are disrupted, resulting in job losses that could continue in a disturbing feedback cycle.

The takeaway
That’s just one possible dystopian economic future, but the likelihood of such a bleak scenario is a long-shot in my opinion. There’s simply too much to be lost on all fronts. In China, for example, the Central Authority must hold up its half of the tacit agreement whereby Beijing continues on a path to economic liberalization (albeit not always as quickly as hoped) in return for stability, peace and control. The U.S. and other developed economies are also unlikely to launch into full protectionism at the risk of hampering economic growth.

In times like these, it’s incumbent upon investors to retain their longer-term focus and commitment as to why they are allocating to emerging markets. That may be to capture potential higher rates of growth, to diversify return streams, or even to diminish their inherent home-country bias. Moreover, emerging markets often tend to over-react to macroeconomic developments in the short term, and this can provide opportunities for active managers.

As emerging markets investors, we’ve been dealing with challenges for more than 16 years, so we take the latest protectionism “threats” in stride and are confident that we will continue to find ways to uncover opportunities in fast-growing and exciting developing markets.

The views expressed herein do not constitute research, investment advice or trade recommendations.

Michael Reynal
About the Author:
Michael Reynal is chief investment officer of Sophus Capital and a portfolio manager of the Victory Sophus Emerging Markets Fund, Victory Sophus Emerging Markets Small Cap Fund and Victory Sophus China Fund.