Monday, August 21, 2017

PRB Establishes Committee to Study 'Principles' of Pension Fund Design 

By Allen Jones, TEXPERS' Communications Manager 

The State Pension Review Board of Texas established a three-person committee to develop “principles” its members consider best for retirement plan design. Once compiled, the committee is to present its recommendation to the entire board for review and possible adoption.

Keith Brainard, board vice chairman, suggested the formation of the committee during an Aug. 11 board meeting held at the state Capitol. The committee was formed after discussion of an item on the meeting’s agenda that called for the development of “PRB Principles of Retirement Plan Design.”

A timeframe to submit a report was not discussed, and Brainard says any “best principals” of retirement plan design eventually adopted by the board would not be enforceable by the agency. He says any approved report would serve as a general statement of appropriate elements funds should consider.

The committee will discuss benefit plans. However, Brainard says he doesn’t want to consider moving from pooled asset plans to anything that would require individuals to oversee their own investments.

He was appointed by the board to lead the committee. Board member Stephanie Leibe and Josh McGee, the PRB chairman, also were named to serve on the committee.

During the meeting’s public comments session, TEXPERS board member David Stacy said he appreciated Brainard’s interest in establishing best practices and urged the board to keep meetings open to the public.

“I know it is a pain and cumbersome [to keep meetings open],” Stacy says, “but it ensures the meetings are fully vetted [by constituents].”

TEXPERS will continue to provide updates regarding the committee’s work. Click here for a link to the agenda and meeting materials.

Highlights from the PRB meeting:
  • New pension funding guidelines went into effect June 30. A funding requirements document outlines six funding policies that are intended to help funds “determine a reasonable approach to responsible funding” regardless if a plan’s contribution rates are fixed or actuarially determined. Among the guidelines, the PRB suggests actual contributions made to a plan should be sufficient to cover typical costs and to amortize unfunded actuarial accrued liability during “as brief a period as possible, but not to exceed 30 years.” The guideline states that 10 to 25 years is a preferable target range. “Plans with amortization periods that exceed 30 years as of June 30, 2017, should seek to reduce their amortization period to 30 years or less as soon as practicable, but not later than June 30, 2025,” according to the document. Plans that use multiple amortizations, according to the document, should make sure the weighted average of all amortization periods does not exceed 30 years. The guideline also states that “benefit increases should not be adopted if all plan changes being considered cause a material increase in the amortization period and if the resulting amortization period exceeds 25 years.” Click here for the funding requirements document. 
  • Funded ratios of public pension plans in the state are the same as they have been, says Kenny Herbold, the PRB’s staff actuary. He presented an actuarial valuation report on the fiscal conditions of 93 registered plans during the agency’s Aug. 11 board meeting. According to his report, the funded ratio of assets and liabilities is 79.4 percent for the current effective date. The prior effective date funded ratio was 79.8 percent. Market value of assets are $243 billion. The last effective date value of assets was $235.5 billion. Actuarial value of assets for the current effective date is $253.3 billion. The prior effective date value of assets was $242.6 billion. Of 93 plans registered, 29 plans have amortization periods between 10 and 25 years, 19 range between 25 and 30 years, 18 have periods ranging between 30 and 40 years, 13 have periods ranging more than 40 years but are not infinite, seven have ranges less than 10 years, four have infinite amortization periods, and three have zero years. Plan discount rates for the current effective date among the 93 registered plans: 25 range between 7.5 and 8 percent, 22 have 8 percent, 16 have 7.5 percent, 11 are between 7 and 7.5 percent, nine are less than 7 percent, seven are at 7 percent, and three are more than 8 percent. The median plan discount rate is 7.75 percent. 
  • Ashley Rendon, a policy analyst with the PRB, updated the board on progress of 12 pension plans making towards achieving a 40 year amortization period. The systems previously submitted funding soundness restoration plans with the PRB. Two plans, the Harlingen Firemen’s Relief and Retirement Fund and the Odessa Firemen’s Relief and Retirement Fund, previously had infinite amortization periods. As of Dec. 31, 2016, the Harlingen fund had an amortization period of 48.4. As of Jan. 1, 2017, the Odessa fund had a period of 48.6, although the calculation was still under review. Among the plans, Wichita Falls Firemen’s’ Relief and Retirement Fund had a Jan. 1, 2015, reported amortization period of 105.9. That plan is now at 49.4 as of Jan. 1 of this year. A full list of funds are listed under TAB 3C in the document link above. 
  • The PRB is seeking to copyright its trustee training materials. Although the material will remain open source, anyone who copies the text of the materials will be required to attribute the PRB as the source. • The next PRB meeting is set for 10 a.m. Nov. 16. The location has not been determined, however, it is expected to be held at the state Capital building, says McGee, chairman of the PRB. The meeting’s agenda will be posted to the PRB’s website at

Wednesday, August 16, 2017

Hedge fund management firm for two San Antonio pension systems closes

By Allen Jones
TEXPERS Communications Manager

The closure of Los Angeles-based macro hedge fund firm CommonWealth Opportunity Capital GP LLC will not impact its two public pension system clients in San Antonio.

The funds will most likely move to another manager. The funds’ beneficiaries also should not see an impact by the firm’s shutting.

According to a July 26 Reuters report, CommonWealth’s closure follows a loss of about 2.7 percent this year through mid-July in one of its hedge funds. The firm was launched in 2008 and produced average annual returns close to 10 percent. The news agency says many macro hedge funds struggled this year, reporting that the HFRI Macro Index is down 0.73 percent this year through June and fell 2.4 percent during the 12 months prior.

The firm’s leader, Adam Fisher, is joining Soros Fund Management LLC. 

Allen Jones
Author Bio: Allen Jones is the communications and public relations manager for TEXPERS. He has a bachelor's degree in journalism and communications. He is a former community journalist and editor. He previously worked for the Houston Community Newspapers group, international community lifestyle magazine publisher Hibu, and was a freelance writer for the Houston Chronicle. 

TEXPERS members attend 

symposium and game in Chicago

TEXPERS members attended the Commodities, Futures and Derivatives Symposium June 19-21 in Chicago. Over two ½ days and one full day, attendees visited the Chicago Board Options Exchange, Chicago Mercantile Exchange and the offices of Associate Advisor William Blair. The agenda was filled with education and training around options; retirement system trustees already investing or considering investing in this space were fully informed about it by the end of the third day.  Fifty trustees and sponsors heard speakers on topics that included: macro-diversification, energy sector investing, listed options markets, and much more. One evening’s networking event featured a visit to Wrigley Field to watch the Chicago Cubs play the San Diego Padres.

Advocacy Advice

5 Tips to easily take advantage of national observances to promote defined benefits

By Allen Jones
TEXPERS Communications Manager

National holidays and observances offer pension systems prime opportunities to promote the importance of defined benefits.

Some national celebrations, like Public Service Recognition Week, are no-brainers when it comes to potential avenues for advocacy outreach. That observance honors public employees such as your system's members. However, there are many other holidays and observances that you might not realize can prove to be prime opportunities to promote your cause online.

For example, Aug. 21 is National Senior Citizens Day, an observance created to show appreciation to our senior citizens and to recognize their achievements. State demographics indicate that persons age 65 and older made up 3.1 million of the state’s population in 2014, the most recent census data provided by the Texas Demographic Center. Also, consider that many of the state’s older residents are retired police officers, firefighters, teachers and other public servants who have dedicated their careers to working for their fellow Texans.

This observance could allow your fund the chance to advocate for defined benefits through your system’s various online social media channels, such as Twitter and Facebook.

Here’s how your fund can use this observance and others to your advantage:

Plan Ahead. Take time to search out the state’s and nation’s various observances and holidays. Knowing in advance what is out there gives you time to establish research and initiatives to promote. 

A good source is In addition to listing the multitude of observances held across the United States, the site offers historical background on each date’s designation.

Consider all Observances: Even obscure observances can gain your fund attention. May 4 is often referred to as Star Wars Day (May the Fourth be with you – get it?). Each year, the topic trends on social media sites such as Twitter and Facebook. The hashtag #MayThe4th and #StarWars were used to help audiences track the observance on their social media platforms. Think of hashtags as labels that help organize topics on social media channels.

TEXPERS took the opportunity to create a Facebook post encouraging people who saw posts featuring the hashtags to ask their state legislators to support defined benefits for firefighters, police, and city employees.

Screenshot of TEXPERS Facebook post related to the national observance of Star Wars Day.
TEXPERS also took advantage of Mother’s Day and International Firefighters Day by posting a brief statistic and pleas for support. For example, for Mother’s Day, TEXPERS wrote, “There were an estimated 252,000 firefighters working in the U.S. in 2016, according to the Bureau of Labor Statistics. Women, many of them mothers, made up 3.5 percent of the total workforce for the occupation, not counting those in leadership roles. Like their male counterparts, female firefighters spend time away from their families and children working to save lives and property. The least we can do is protect their retirement pensions. Tell your legislators to support defined benefit plans for all public employees.” The hashtags #TxLege, #Pensions, #MothersDay #Firefighters and #Retirement were used to help get the message in front of social media users that may track those topics.

Screenshot of TEXPERS Facebook post observing Mother's Day while advocating for defined benefits.
You don’t have to create a graphic if you don’t have the skills. Just type up a message and include the appropriate hashtags for the observance and the audience you want to grab the attention of. You could take a photo of a system member on the job to post with your fund’s message. Or, use sites such as to create more graphic oriented posts quickly. The site’s basic features are free to use.

Tie Messages to Defined Benefits: Advocate for your system members and retirees by helping your community understand how defined benefits work and why the retirement plan is essential to maintain. For example, when state and local governments fail to provide promised funding and try to dismantle defined-benefit pensions by switching to 401(k)-like retirement programs, they fail to recognize the work these public servants provided, often at much lower wages than their private-sector cohorts. Visit sites such as for statistics and data that support your fund’s message.

Put Your All Into the Campaign: Spend a little time on crafting your message to the holiday or observance. Also, get more than one person involved in helping to promote the advocacy campaign. Fund executives, board members, and system members all can participate in some way, whether that is sharing social media posts on their personal Twitter and Facebook pages, asking their family and friends to write letters, or personally speaking with their elected officials regarding the campaign.

Include the Message Everywhere: Don’t just use one mode of advocacy to promote the campaign. Consider posting the message to your email signatures and writing a note about the observance to your system’s website. Also, consider having community supporters, such as local businesses, include information on their own communications materials such as emails and websites.

Using these tips, your fund can easily find unique ways to take advantage of observances and holidays to advocate for defined benefits.

Allen Jones
Author Bio: Allen Jones is the communications and public relations manager for TEXPERS. He has a bachelor's degree in journalism and communications. He is a former community journalist and editor. He previously worked for the Houston Community Newspapers group, international community lifestyle magazine publisher Hibu, and was a freelance writer for the Houston Chronicle. 

TRS appoints Jerry Albright as new CIO

By Allen Jones
TEXPERS Communications Manager

Nearly a month following the June 16 announcement that Thomas “Britt” Harris resigned his job as chief investment officer with the Teacher Retirement System of Texas, TRS trustees appointed Jerry Albright as the agency’s the new CIO.

Jerry Albright
The TRS announced Albright’s appointment July 13. In a news release, TRS board chairman David Kelly describes Albright as capable, experienced and knowledgeable.

Albright isn’t new to TRS. He served as interim CIO for TRS before being hired to the position. Before that, Albright served as chairman of the agency’s Internal Investment Committee. He also was sole director of TRICOT London, the first international office for the TRS pension fund. He previously served as TRS Investment Division’s chief operating officer as well as the director of investment operations.

Albright has Texas roots. Before joining TRS in 1994, Albright was the executive vice president and a member of the board of directors for a multi-bank holding company in Texas. He also served as director on the board of two affiliated banks. He has a bachelor’s degree from Texas A&M University.

“Jerry has gained an international reputation as someone who understands the quickly changing landscape of the investment industry and how to stay ahead of the curve,” says Joe Colonnetta, a TRS board member and chairman of the board’s Investment Committee. “I am confident Jerry will lead a seamless transition.”

TRS delivers retirement and related benefits that have been authorized by the Texas Legislature and manages a more than $140 billion trust fund established to finance member benefits. Nearly 1.5 million public education and higher education employees and retirees currently participate in the system.

“Jerry has what it takes to build on our success over the past 10 years,” Kelly says.

Ten years is how long Albright’s predecessor, Harris, worked at the TRS as its CIO. He left the agency to take a similar job at The University of Texas Investment Management Co., a nonprofit formed in 1996 to oversee investments of the University of Texas.

When Harris joined TRS in November 2006, the pension fund's value was $100 billion. Shortly after his arrival, the fund’s value dropped to $67 billion during the 2007-2008 financial crisis. According to TRS, it was under Harris’ leadership that the TRS investment team guided the fund back to financial health.

“We’ve been incredibly fortunate to have Britt lead our investment division and instill a strong culture of excellence over the past decade,” Kelly says. “Not only did he bring a new level of sophistication to our investment program, but he did so during the nation’s worst financial crisis since the Great Depression. Our strong financial condition today is a testament to his talents and abilities.”

Before working with TRS, Harris served as CEO of Bridgewater Associates, CIO and president of Verizon Investment Management Corp., CIO and president of GTE Investment Management Corp., and managing director for Switzerland-based tech leader Asea Brown Boveri.

“Serving TRS has been one of the great honors of my professional life,” Harris states in a news release. “Our teachers and educators are such important people, and it has been a privilege to serve them. I will greatly miss everyone at TRS, but the fund’s organization is very strong and my confidence in TRS staff could not be higher.” 

Allen Jones
Author Bio: Allen Jones is the communications and public relations manager for TEXPERS. He has a bachelor's degree in journalism and communications. He is a former community journalist and editor. He previously worked for the Houston Community Newspapers group, international community lifestyle magazine publisher Hibu, and was a freelance writer for the Houston Chronicle. 

Pulling Apart

Report: Texas economy will see $160 billion loss if public pensions continue to be dismantled

By Allen Jones
TEXPERS Communications Manager

If defined-benefit public-sector pensions in Texas continue to be dismantled, the state’s economy will suffer a $160 billion setback by the year 2025, according to a new report by the National Conference on Public Employee Retirement Systems.

Michael Kahn, Director of
Research at NCPERS.
“Public pensions are under constant attack,” says Michael Kahn, the report’s author and director of research at NCPERS. “Dismantling includes reduction of benefits, moves to replace the plans with do-it-yourself 401(k)-like defined contribution plans and switching to hybrid plans.”

Kahn’s study, “Economic Loss: The Hidden Cost of PrevailingPension Reforms,” examines the economic impact the undoing of defined-benefit public pension, or DB, plans would have in the United States within eight years. The U.S. would face a $3 trillion economic loss, according to the study. The report’s projections are based on pension reform trends Kahn tracked during the last 10 to 15 years.

Texas would be especially hit by so-called public pension “reforms.” It would take the fourth largest economic hit among all 50 states. California would see a more than $1 trillion financial hit, followed by New York with a $290 billion loss, and Florida with a nearly $180 billion setback to its economy.

“Opponents, having little or no understanding of how public pensions are funded, promote misleading information about rate-of-return assumptions and huge unfunded liabilities to convince policymakers to dismantle public pensions,” Kahn wrote in his research paper’s executive summary. “Some states are taking actions that are chipping away at public pensions without realizing the economic damage their actions will inflict on their states and our country’s economic future.”

During Texas’ recent legislative session, law makers attempted to interpret under-funding issues among public pensions in the cities of Houston and Dallas as statewide problems. Bills were filed to try and do away with a state and local checks-and-balance system to ensure actuarial soundness of plans, to require local municipalities to seek voter approval for pension obligation bonds, and to switch certain defined-benefit plans to defined-contribution schemes that would place the burden of investing on public workers.

Among the bills proposed during the recent legislative session, Senate Bill 1752 sought to move the Employees Retirement System of Texas and the Teacher Retirement System of Texas to defined-contribution or hybrid plans. Sen. Paul Bettencourt, R-Houston, a proponent of defined contribution plans, wrote the bill. Despite his efforts to dismantle the public pensions of the two retirement groups, his bill failed to receive a hearing by the Senate’s State Affairs committee.

Even though most attempts to change defined-benefit plans in Texas failed to gain traction this year, DC proponents are already prepping for renewed attacks during the state’s next legislative session in 2019. Kahn says policy makers need to understand how public pensions are funded, the economic damage that will occur in 2025 if the dismantling of DB plans continue, and what can be done to address funding issues without further erosion of defined-benefit public pensions.

“A great deal of criticism of public pensions is based on a faulty understanding of how long-term liabilities are funded,” Kahn says.

In his report, he writes: opponents of DB plans “tend to whip up fear by arguing that cities and states can’t cover their long-term pension liabilities with current revenues. That’s like saying your 30-year mortgage is in trouble if you can’t pay it off from the year’s salary.”

According to his research report, opponents of DB plans are applying rules to public-sector pensions, such as rate-of-return assumptions, that are designed for private-sector pensions. And, findings indicate that public pensions are not in as bad a shape as opponents claim.

According to Kahn’s research, 76 percent of the money flowing into public pensions is coming from investment earnings. The figure in 1940, the heyday of public pensions, was 22 percent. And data shows that average funding levels are steadily moving up since 2014.

If defined-benefit plans continue to be undone, an estimated $19 trillion in total personal income in the U.S. would be reduced by $3.3 trillion in eight years, according to NCPERS’ new economic impact study. The study also projects the 4 percent rate of national economic growth would decline to 3.29 percent.

Adverse changes to DB plans also would result in an increase in income inequality by an average of 15 percent over 10 years, says Kahn. That, he adds, undermines the rate of economic growth by about 18 percent.

“Spending by retirees stimulates local economies, and pension assets are a major source of capital for businesses, locally and nationally,” Kahn says.

Pensions generate tax revenue at the local, state and national levels and are derived from two sources: Taxes paid by beneficiaries directly on their pension benefits and taxes resulting from expenditures made from pension benefits after income taxes are deducted. That would include sales taxes from a retail purchase.

In 2014, $519.7 billion in pension benefits were paid to 24 million Americans, according to the National Institute on Retirement Security, a nonprofit research, and education organization. The total economic output attributed to pension benefit expenditures in the U.S. that year was $1.2 trillion. In Texas, according to NIRS, public pensioners spent $22 billion and paid $3.5 billion in federal, state and local taxes.

Kahn and other economic researchers say cuts to pensions are usually greater than the pensions’ positive impact. The negative impact of pension cuts is realized in the economy dollar for dollar and is multiplied several times over as it ripples throughout the entire economy, Kahn explains. Because recipients may spend only a portion of their checks in local economies, the full picture of the positive influence of pensions on the economy may not be fully understood. 

In addition to spending by public pensioners, Kahn says pension systems invest in the world’s economy. The U.S. mortgage market, its private equity and high-tech industries as well as many start-up companies rely on pension funds as a source of capital.

Kahn says there are several strategies to fund public pensions without dismantling them, and some states are already exploring and implementing them. According to his report, the best way to adequately fund public pensions is through progressive tax reforms. There are, however, other measures that can be put in place to ebb the dismantling of public pensions. 

The report suggests:
  • Utilizing asset monetization and dedicated revenue sources, such as parking or limited sales taxes
  • Seeking well-designed pension obligation bonds
  • Reformation of income systems
  • Closing of wasteful tax loopholes
  • Management of risks in economic ups and downs
  • Stabilizing funds and economies of scale

Kahn says these aren’t perfect solutions, but they are much better alternatives to dismantling DB plans

Allen Jones,
TEXPERS Communications Manager
Author Bio: Allen Jones is the communications and public relations manager for TEXPERS. He has a bachelor's degree in journalism and communications. He is a former community journalist and editor. He previously worked for the Houston Community Newspapers group, international community lifestyle magazine publisher Hibu, and was a freelance writer for the Houston Chronicle. 

Wednesday, August 9, 2017

Attn: TEXPERS Retirement System and Employee Group Members

TEXPERS has scheduled Basic Trustee Training for Friday, October 20th, 2017 in Austin at Dimensional Fund Advisors (6300 Bee Cave Road). 
Registration is open! Click here to login and register.

This class meets the Minimum Education and Training requirement of the Pension Review Board for new trustees to take seven hours of training over seven content areas. The class begins at 8 am and ends by 4:30 pm. An Agenda will be available and posted soon.

The survey conducted last week showed that we should have sufficient attendance but TEXPERS may need to cancel this class if minimum registration numbers are not met at least two weeks prior to the course, so please don't wait until the last minute!

It has not been decided if TEXPERS will conduct a class in April on South Padre on Saturday, April 14 prior to the Annual Conference. A survey will be conducted later this year to determine if there is interest.

We will conduct an Advanced Trustee Training class in conjunction with the Annual Conference. This class, as well as some sessions at the TEXPERS conferences, can be used to meet the PRB continuing education rule (four hours of training every two years after the initial requirement has been met).

If you have questions, let me know! 

Barbara Zlatnik, CAE

Tuesday, August 1, 2017

Already registered? GREAT - 

If not, it's time to make your plans!

Register today: 

Plan Sponsors/Retirement Systems click here:  PS
Investment Professionals/All Others click here:  IP

Hope to see you in San Antonio!

Friday, July 28, 2017

TEXPERS Advises Galveston on Pension Fund Dynamics

TEXPERS' executive director, Max Patterson, urges the city of Galveston to guard itself against the pitfalls of moving to 401(k)-styled defined contribution plans for its public employees, police officers and firefighters. Patterson wrote a July 25 op-ed for The Daily News of Galveston County. 

Click here to read Patterson's editorial. If you don't have a subscription to the newspaper's site, 
the full article as originally submitted is posted below. 

Raise the Foundations of Galveston's Pension Funds

By Max Patterson

"Stay in school. Finish your degree. Don't get distracted." It's hard to argue against these words of wisdom. Tried and true, they offer solid guideposts to success in life.

The cities which contribute to their pension funds for police, firefighters and city workers have similar words of wisdom to guide them: "Fund the full contribution required to maintain a healthy retirement plan. Work with your pension fund board closely. Don't disrupt your pension systems' ability to make long-term investments."

We know principles these work well. Most of the 93 pension systems monitored by a state monitoring agency have used these to thrive since the great financial meltdown of 2008-09. They have, in the aggregate, shortened the time it would take to pay off all current and future retirement obligations to their employees. 

Not all cities have recovered in equal fashion. Unforeseen problems can arise. In Dallas, outsized investments in real estate couldn't mature as expected. In Houston, adjustments to unsustainable benefits promised in the stock market heydays before 2001 were made. Those cities worked on solutions to those challenges in the last regular legislative session.

Galveston's pension funds have faced down a double whammy. In 2008, Hurricane Ike struck, requiring the city to lay off police, firefighters and municipal workers while retaining the obligations to their retirements. Pension fund health can suffer when the contributions for younger employees aren't available as assets for longer-term investing. At the same time, pension fund assets across the United States were suffering hard knocks from the stock market.

These blows might have spelled absolute disaster for Galveston's pension funds. It did not. Texas pension funds are durable - they are structured well to weather storms. Galveston's pension funds have shown steady improvements in the last six critical years of adjustment, just like most other Texas pension systems. The Galveston Employees' Retirement Fund now has one of the most cherished positions in the state, below the 15-year mark for amortization period, a measure similar to the estimated payoff for your home mortgage. Galveston's pension systems for firefighters and police also have shown slow but steady progress given the setbacks.

Now is not the time for Galveston to become impatient or to defer payments to its pension funds. We know that surefire disaster occurs when a city shortchanges its annual required contribution. The ARC is the number actuaries derive after they number-crunch every single factor to determine the lowest contribution for the city to pay for workers' employment.

Having an actuarially sound pension fund attracts good people to serve in tough, thankless jobs. A solid retirement plan with modest but adequate benefits also helps retain a workforce. There is a competitive market for well-trained police, firefighters and municipal employees. Other Texas cities and towns would love to have your city's staff. They promote their retirement plans to your employees. Don't think for a second that Galveston can move away from defined benefit plans and not suffer. That's not the experience of any city or town which disrupted its retirement plans.

As Galveston continues its economic juggernaut and moves forward on its remarkable recovery after Hurricane Ike, the city should do what it has historically done. It should look at the likelihood of future storms and raise foundations. Fund your pension systems appropriately. Don't set them on course to go underwater.

Patterson is executive director of the Texas Association of Public Employee Retirement Systems and previously served as the appointed city treasurer for three city pension plans in Houston's Finance & Administration Department in 1990-96. 

Wednesday, July 26, 2017

With trillions in investments, public retirement systems may shape global climate change reform efforts. Find out what risks your fund needs to be aware of inside the new edition of TEXPERS Pension Observer. 

Things you'll learn in this issue:
  • Why you need to gauge how your fund communicates with its members
  • How to prepare your fund for Texas' next legislative session
  • New insights into pension system investments
  • How TEXPERS' new communications manager can work with your fund to spread the importance of defined benefits
  • How climate change plays into your fund's investment risks
  • The five best practices in becoming an empowered leader of your fund
TEXPERS Pension Observer is published quarterly and is the official magazine of the Texas Association of Public Employee Retirement Systems. 

A print version is in the mail and will soon arrive in the mailboxes of TEXPERS members. Until then, enjoy the digital version below.

Tuesday, July 25, 2017

Wednesday, July 19, 2017

Infographic: TEXPERS Summer Forum. Don't miss out! Register today!

Registration open for firefighter pension trustee training conference

By Allen Jones
TEXPERS Communications Manager

Fiduciary responsibility, board management, and investment practices are some of the topics firefighters serving pension boards can learn about during an upcoming trustee training conference.

The Texas Local Fire Fighters' Pension Conference occurs Oct. 1-3 at The Woodlands Waterway Marriot Hotel and Convention Center, 1601 Lake Robbins Dr. in The Woodlands. The township is a master-planned community located north of Houston along Texas 45.

Registration is required to attend the conference and costs $50 for trustee members. Those wanting to bring a spouse must pay an extra $25 registration fee. A registration form is available on the conference website at

In addition to the board training programs, a golf tournament, skeet shooting, and a dinner will be offered free of charge. Those looking to stay at the hotel will receive a nightly room rate of $159.

Event sponsorship opportunities are available. Sponsorships range from $1,000 to $3,000 and provide a variety of marketing opportunities based on support level. Vendor booths are available for $500. Visit the conference website for additional details.

The Texas Local Fire Fighters Pension Conference, a nonprofit corporation, hosts the event. According to its website, in addition to hosting the conference, the goal of the TLFF is to provide educational opportunities including regional workshops and lectures.

Legislative session good despite multitude of bills targeting public retirement

TEXPERS Communications Manager

Public pensions made it through Texas’ 85th legislative session relatively unscathed, but that wasn’t for lack of trying on the part of legislators. TEXPERS tracked 27 bills related to public pensions and retirement during the session, which ended May 29. The association opposed 12 bills and supported one. TEXPERS took a neutral stance on the remaining bills.

Among those opposed by TEXPERS were two firmly pushed bills, Senate Bill 509 by Sen. Joan Huffman, R-Houston, and House Bill 2434 by Rep. Dan Flynn, R-Canton. Neither bill passed but both would have created unfunded mandates for pension systems.

Huffman’s bill would have required certain public pensions systems to evaluate investments in a report separate from those the systems already provide the state’s Pension Review Board. The proposed legislation did not offer any state funding assistance to pension systems. Flynn’s bill would have required certain funds to adopt a funding plan to achieve actuarial soundness. Not only would the legislation have required pensions systems to take on additional costs, but it would also have moved the Pension Review Board from an oversight agency to a statutory authority.

“Moving forward, it is incumbent upon all plans to attempt to address the issues raised by these two bills otherwise they are likely to reappear in the next session,” says TEXPERS Executive Director Max Patterson.

Other bills that were successfully opposed included legislation that would have limited the amount of annuity for basic pay of members of the armed forces, limited the ability of municipalities to raise funds for pension shortfalls, given cities the authority to approve or reject ordinances or resolutions regarding their pension funds, and moved the Employees Retirement System of Texas and Teacher Retirement System of Texas to defined contribution plans.

During the session, the legislature also addressed pension funding issues in Houston and Dallas, which were both local issues. Patterson hopes those funds will improve upon their problems and will not reappear in the next session in 2019.

An opposed bill that did manage to pass was known as the University Park bill. House Bill 3056, authored by Rep. Morgan Meyer, R-Dallas, and Flynn, is intended to replace the City of University Park’s 76-year-old pension system. The bill achieves that by amending the firefighters’ pension so it can place all of the fire department’s new hires in the Texas Municipal Retirement System. The amendment goes into effect Sept. 1. Although wording narrowed the exclusion to “municipalities with populations less than 200,000, in counties with a population not less than 2 million and not more than 4 million,” the concern is the trend could spread.

“Hopefully that will remain unique to University Park and not have a ripple effect on the other small plans,” Patterson said.

The lone bill supported involved the creation of a statewide retirement program for Texas workers who do not have access to employer-sponsored 401(k) investment plans. The legislation, House Bill 3601 authored by Rep. Roberto Alonzo, D-Dallas, stalled in the House’s Pensions Committee. (See a related article below).

TEXPERS previously published a recap of the legislative session on its blog. Op-eds from Patterson and TEXPERS’ board president, Paul Brown, regarding the session can also be found in “TEXPERS Pension Observer,” the association’s membership magazine. A digital edition of the magazine is available on the online.

The work of TEXPERS’ Legislative Committee and its Legislative Subcommittee in reviewing bills was extremely helpful and very much appreciated, Patterson says.

“Ways to improve the process will be ongoing with every effort to look for improvements,” he added.

Author Bio: Allen Jones is the communications and public relations manager for TEXPERS. He has a bachelor's degree in Journalism and Communications. He is a former community journalist and editor. He previously worked for the Houston Community Newspapers group and Hibu and was a freelance writer for the Houston Chronicle. 

Statewide IRA plan could level playing field with public pensions

By Allen Jones
TEXPERS Communications Manager

Legislation seeking to establish a statewide 401(k) retirement plan for private-sector workers who do not have access to retirement benefits through their employers failed to make it into law this legislative session. That doesn’t mean the idea has been K.O.-ed.

The legislation was among 27 pensions and retirement related bills tracked by TEXPERS during Texas’ 85th legislative session. It also was the only bill to receive the association’s backing.

Authored by Rep. Roberto Alonzo, D-Dallas, House Bill 3601 died without having received a single vote. When the legislative session ended May 29, the bill was left pending action in the state’s House Pensions Committee, preventing it from progressing to the full House for a vote.

Establishing the state retirement pool may have failed to gain traction this year, but for Alonzo, authoring the bill was merely a first step to help secure retirement for millions of full-time working Texans who do not have access to retirement savings. The state’s regular legislative session may be over, but he intends to keep building support for the plan until he can refile it during the state’s next legislative session in 2019.

“Sometimes it takes several sessions to get a bill across the finish line,” Alonzo says.

The Dallas representative has been in office since November 1992. His constituency re-elected him in January. Alonzo spent many years focusing on securing defined benefit pensions for public employees. During the recent legislative session, he served as vice chairman of the House Pensions Committee. He was named Legislator of the Year in 2015 by the Texas Public Employees Association, a legislative advocacy organization for state government employees and retirees. He also took a leadership role in addressing the unfunded liabilities of the Employees Retirement System pension fund.

Alonzo says he will run for reelection in 2019 and is confident he will retain his seat in the House. Securing retirement for public and private-sector workers is at the top of his agenda.

Before becoming a lawyer and later running his first campaign for office in 1992, he grew up on a family farm in Crystal City, Texas. The seat of Zavala County, Crystal City was settled as a farming and ranching community was once referred to as the “Spinach Capital of the World.” Growing up, Alonzo says he never thought about a pension or retirement while working his family’s farm.

“Our pension was having a big family,” he says. “We took care of each other. I’m 60 years old now. I’m grown up; I’m an attorney and a legislator. I see the benefit of pensions. I see how the government can be a part of it by ensuring those who’ve contributed to society have some savings when they retire.”

Alonzo’s retirement bill received the support of TEXPERS, says its executive director, Max Patterson, because it would be an opportunity to see all working Texans start planning for their golden years.

Many critics want to compare public workers having a defined benefit plan when private-sector workers only have 401(k)s, Patterson says, but a state pool would level the playing field. Plus, he says, a statewide 401(k) would be voluntary as those workers would have the option of opting out of the plan.

“Numerous states have moved in this direction, and now it’s time for Texas to come on board,” Patterson says.

In July, Oregon became the first state to launch a retirement savings program for employees whose employers don’t provide one. California, Connecticut, Illinois, and Maryland also gained legislative approval to establish similar programs. According to a July 10 report in “Pensions & Investments” magazine, 24 other states are considering a similar idea and legislators are keeping an eye out on the challenges faced by states that have already enacted the investment programs.

More than 30 million full-time, full-year private-sector workers between the ages of 18 and 64 do not have access to an employer-based retirement plan, according to data provided in a 2016 report published by The PEW Charitable Trusts. That means that nationwide, only 58 percent of workers had access to a workplace retirement plan. And the study indicates that among those, 49 percent of workers were not participating in a plan. The percentage is worse in Texas. Only 50 percent of its workers have access to retirement, according to the PEW report.

Under Alonzo’s proposed plan, the Texas program would be managed by the state and offer conservative investment options. He says enacting a pooled plan would stabilize contributions and equalize investment risk while providing for a lifetime of retirement income for Texans.
Current studies indicate a significant number of Americans are struggling financially and are not saving for retirement. Investment experts believe state programs like Alonzo’s proposal could encourage retirement savings.

Rachel Schneider is senior vice president of the Center for Financial Services Innovation, an organization dedicated to improving the financial health of Americans. She says Alonzo’s proposal is precisely what states should be doing to help people better prepare for life after work.

She recently co-authored “The Financial Diaries: How American Families Cope in a World of Uncertainty.” The book is the result of a lengthy research study into why a large portion of Americans feel financially insecure. In the book, Schneider and her co-author, Johnathan Morduch, found that 65 percent of households in the study sample had a savings account, but only 8 percent of them saved at least as much as their perceived need. Schneider says households were saving money, but not for long-term needs, especially not retirement.

“On average, 72 percent of their savings was intended for needs that had to be met within the next six months,” she says. “Eighty-three percent would be spent within a year. Only 10 percent was for needs three or more years away.”

In addition, the book’s authors say those workers with access to 401(k)s are taking on too much risk as private investors. It is a risk employers should be shouldering if states cannot enact retirement programs.

“What we are doing right now is expecting people to know so much about their own financial lives and their own financial futures,” Schneider says. “That isn’t realistic.”

Schneider says government institutions are best positioned to create pooled risk structures that spread the cost of economic ups and downs across large groups.

“Achieving this will require a mix of legislation, regulation, collective action, and recognition by businesses that worker and consumer protections are in their corporate self-interest,” she says.

She likes what Texas and other states are trying to do for private-sector workers, but says more needs to be done, such as urging financial service companies to create savings programs that enable people to make good choices so the shift within the investment market is less worrisome.

“Financial service companies can do a lot to create new products or services or improve financial services to do more to build financial health,” Schneider says.

She hopes lawmakers and companies will use her research to understand why so many Americans are feeling financially insecure. Understanding that she says will help create stable earnings which will then enable people to save for lives outside the workforce.

Author Bio: Allen Jones is the communications and public relations manager for TEXPERS. He has a bachelor's degree in Journalism and Communications. He is a former community journalist and editor. He previously worked for the Houston Community Newspapers group and Hibu and was a freelance writer for the Houston Chronicle.