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Friday, May 31, 2019

Texas Governor Signs House Resolution Urging Congress to Repeal Social Security Act Provisions


By Allen Jones, TEXPERS Communications Manager

Texas Gov. Greg Abbott signed May 27 a state House resolution urging Congress to repeal Social Security Act provisions that diminish the retirement earnings of public employees.

TEXPERS supported the measure, House Concurrent Resolution 19, which was sent to the governor's office May 17 after being adopted by both the House and Senate. A related resolution, SCR 5 had been proposed in the Senate but didn't make it out of the state legislature.

Concurrent resolutions may be used to request action from other entities, including Congress, or for memorials, congratulations, or commendations. The resolution requests Congress to revoke the Government Pension Offset and the Windfall Elimination Provision of the Social Security Act. 

Public employees who receive a pension based on work for a federal, state or local government where Social Security taxes are not withheld may find their Social Security benefits reduced because of legislation enacted by Congress in 1977 and 1983. The Government Pension Offset, or GPO, applies to those eligible for Social Security spouse's or widow's or widower's benefits. The Windfall Elimination Provision, or WEP, applies to those eligible for their own Social Security benefit.
HCR 19 was authored by Rep. Abel Herrero, D-Corpus Christi. The resolution refers to the Social Security provisions as "punitive and discriminatory" stipulations that target "hundreds of thousands of teachers, police officers, firefighters, and other public servants."
"The GPO and WEP as applied to public employees are unreasonable and unjust and will cause tens of thousands of government retirees to experience a diminished quality of life or be forced to return to work to make up for the effects of these provisions," according to the resolution.

Sen. Sherrod Brown.
The resolution is to be submitted to Congressional leadership, urging them to repeal the GPO and WEP offsets. In the U.S. Senate, S.521, filed by Sen. Sherrod Brown, D-Ohio, is currently in the Senate Committee on Finance and calls for the elimination of the offset and windfall provisions from the Social Security Act. Co-sponsors of the bill are Sen. Susan M. Collins, R-Maine, Sen. Tammy Baldwin, D-Wisconsin, and Sen. Lisa Murkowski, R-Alaska. A related bill has yet to be filed.


During the 86th legislative session, TEXPERS officials announced their support for the repeals, and asked its members to lobby legislators to pass the resolution. TEXPERS isn't alone in supporting efforts to repeal the two Social Security Act provisions. 
Texas is among 15 states affected by WEP and GPO offsets. Other states include Alaska, California, Colorado, Connecticut, Georgia, Kentucky, Louisiana, Maine, Missouri, Massachusetts, Ohio, Rohde Island, Nevada and Illinois.
The GPO and WEP measures, according to the National Committee to Preserve Social Security and Medicare, were once "intended to address a perceived inequity between those who spent a lifetime working and paying into Social Security and government employees who did not pay into the system." In the more than 30 years since Congress enacted the provisions, the measures have "proved to be both unfair and unworkable," according to the National Committee. 

John Lawson Retires as Executive Director of Houston Police Officers' Pension System 


By Allen Jones, TEXPERS Communications Manager

John Lawson, second from right, sings the National Anthem. He is retiring as
executive director of the Houston Police Officer's Pension System.
John Lawson, who has helmed the Houston Police Officers’ Pension System for the last 25 years, is retiring as the fund’s executive director.

His last day with the retirement system is May 31, and a nationwide search is on for his replacement. Whoever steps into the role will inherit a fund with more than 9,000 members and $5.5 billion in assets. Under Lawson’s leadership, it has grown to become the largest local government fund in Texas.

“When I first arrived here, there was something like $600 million or $800 million in assets,” he said. “We’ve been fortunate in the fact that we’ve made some good decisions.”

It helped that Lawson had a financial planning background. Before joining HPOPS, he worked for investment management company Merrill Lynch.

He became the fund’s executive director on July 18, 1994. Since then, he witnessed one of the best and one of the worst times in the investment markets. The Great Recession occurred between December 2007 and June 2009. The economic slump is considered the most significant downturn since the Great Depression. Lawson remembers sitting at his desk at the HPOPS office on Sawyer Street in Houston at one point during that period and realizing there was no liquidity in the market.

“You couldn’t even liquidate an index fund of S&P 500 stocks,” he said. “That was a very scary time.”

Since then, markets have rebounded but it took several years for the economy to recover from pre-crisis levels of employment and outlook. Lawson's investment industry background certainly came in handy in guiding HPOPS through the recession. Despite having a hands-on approach to the investment process, Lawson says he cannot take all the credit for the good decisions that the plan has made. He has relied on a small staff of accountants, investment analysts, and strategists to help move the fund in the right direction.

TEXPERS members may know Lawson from the association’s annual conferences and educational forums. He, along with TEXPERS’ former executive director Max Patterson, Jack Gastler of Acadian Asset Management, and James Perry of Maples Fund Services, usually sings the National Anthem during the programs’ opening ceremonies. Lawson also sits on TEXPERS’ Legislative Committee, helping monitor the goings-on at the state Capitol.

TEXPERS conducted a phone interview with Lawson two weeks before his final day in office. TEXPERS edited some of the questions and answers for brevity and clarity.

Why did you decide this is the year you wanted to retire?
Because I’m 71 years old and I don’t want to die sitting at my desk. It is time for new blood, new ideas, and that sort of thing.

Over your 25-year period with HPOPS, what are some significant events
you’ve witnessed that have impacted pensions?
Probably, one of the most significant things has been the advent of deferred retirement option plans, or DROP, for governmental plans. In hindsight, it was the bane of governmental pension systems. It put the systems in a situation where they are unsustainable because boards of trustees continued to enhance DROPs. We have DROP at HPOPS for people hired on to the police department before October of 2004. Right now, we’ve got about 500 people who are standing in the wings, waiting to enter DROP. Those people will all be in DROP by 2023. Once that is done, there will be no more entry into DROP. Of course, the people hired after October of 2004 did not have the same benefit as those employed before that period.

Politically, how have you seen the defined benefit public pension atmosphere change over the years?
Defined benefit pensions are a dirty word across the United States. I know that our members think this issue about DB plans is just a local issue, but that isn’t true. If you go back in time under financial accounting, and the [Financial Accounting Standards Board] in 1986, they issued FAS 86, which was aimed at corporate plans. That announcement was the death nail in the coffin of corporate DB plans. Today, depending upon the statistics that you want to believe, there is probably about 12 percent of corporations that still have some sort of DB plan. In 1974, with the advent of ERISA [the Employee Retirement Income Security Act], that also was the advent of the 401(k), which wasn’t meant to be the be-all, end-all of retirement programs. But it has made its way to where it is now. 

What do you think this dirty word that has become DBs will change over the years, or will it be something pension systems will have to work around?
It is a mixed bag. If you look at the trajectory of corporate plans, really it is only the largest of corporations that are willing to afford the cost of a DB plan today. You see them mainly in things like integrated oil companies. What’s happened in corporate plans is that the risk has been shifted to the individual to plan for their retirement.

If you can believe all the numbers that are thrown about by different organizations that keep track of this sort of thing today, the average person has less than $100,000 for retirement. Then they have Social Security. That’s not nearly enough and combined with that you have the Baby Boom generation coming along. They seem to be extending their working life, like me, and unfortunately, once they retire, they seem to be hunting part-time jobs to supplement. I was born in 1947, a year shy of the advent of the Baby Boom generation that resulted from World War II. It supposedly ended in 1964.

You have this huge boa constrictor eating a bowling ball and as the Baby Boom generation moves through, everything they’ve touched, they’ve distorted. They are now in or approaching retirement and they are distorting the retirement system in
the U.S. and elsewhere in the world – this isn’t just happening in the U.S. But as they move through, what we are going to learn or experience is this massive group of people are ill-prepared for retirement and probably, at some point, you’ve got a kind of a crisis on your hands. How does the U.S. support these people? Does it support them at all?

Also, if you look at the economics of that, the U.S. is a consumer-based economy. Roughly two-thirds of our economy is driven by what we are going to buy every day. What’s going to happen with all of that?

The reason I say it is mixed bag is that I can’t see the future real clear, but I can certainly see the standard of living if we are not careful in the U.S., will certainly decline and will be less competitive in world markets. So, does the government step in and supplement everybody’s income?

I brought this up to a legislator in 2017 when Houston was restructuring its plan, and the comment was, “Well, we can’t worry about that now. We’ll have to wait and worry about that another day.” 

What various ways have you been involved at HPOPS?
I’ve been the administrator for the whole time. I do a little bit of everything. When I first got here, there were two ladies. One was the receptionist. The other was the benefits lady, for lack of a better word, at that time, and there was an accountant here. I’m kind of frugal in the way I run an operation. But today, we have 19 or 20 people and the investment staff, for example, is headed by a chief investment officer. We have an analyst and a part-time strategist.

That isn’t a very big staff, so I spend, I don’t know, about 40 percent of my time also involved in the investment process. Whenever I first got here, I spent almost all my
time in the investment process because there was no one at that point. And then, you know, I’ve seen and been involved in the creation of everything in the plan from that time forward. I’m still intimately involved in benefits administration.

One of the things that I did early on, I was a financial planner by training, and I felt like that was necessary for our members. I still feel like that is extremely important. I want to think if I was not the first, I was one of the first plans that had a staff financial planner that was not trying to sell anything to anyone, just there to help people see their economic way clearer. Now, I think most plans provide for that aspect, as well as corporate America. They do that big time.

The other thing, whenever I first came here, there was no computer. Over the years, we’ve developed a very sophisticated computer system. We house our computers in a center away from here. We have two co-locations. 

At one time, we had what I like to describe as “sneakernet.” We had a bunch of paper files where all the records were kept. If you wanted to look at somebody’s file to see where they were in the process of retirement, you had to walk down the hall to see whose desk has the manila folder with all the information.

Today, we do records management. We have an administrative system that we’ve put together ourselves that is unique to our organization. We tried to go out to third-party vendors to do that. They are trying to sell their products, so their products are always kind of a generalist approach. You must spend money besides buying the software to work with them continually updating. So, we just decided we might as well put together our own product that is unique to us. We have a programmer that works part-time for us and is constantly rewriting the software here.

Do you have any parting advice to your peers you’d like to give?
Let me say this to the TEXPERS members, don’t get too damn greedy because you won’t have a plan. That is the essence of the 1990s coming into 2000s. That’s when all these things were built, like DROPs, and we’ve spent almost 20 years now taking it apart and getting it to where it is manageable. From my members’ standpoint, they look at all of this and think, “The city promised us.” Well, the city has other things it wants to do besides pay pension benefits. That is any city, really. You  don’t want to kill the goose that lays the golden egg. I think, at least, the larger local
plans have run afoul of that over the years.

I’ve enjoyed a great career. I’ve worked for various boards of trustees during that time. Not all of them have been good, but the boards that I’ve worked for in the latter half of my career have been really stellar people, really consciences. I appreciate that. Any executive director will tell you that if you want to be miserable, have a board of trustees that are dysfunctional. You will be unhappy.

Editor's Note: The Houston Police Officer's Pension System is conducting a national search to replace Lawson. Visit TEXPERS' online job board to learn more.

Thursday, May 30, 2019


TEXPERS Job Board Available to Retirement System Members


The Houston Police Officers' Pension System is looking for a new executive director of the nearly $5.6 billion fund.

The Houston police retirement fund is looking for a "hands-on, detail-oriented servant leader," according to a positiondescription posted to TEXPERS' online job board. The executive director reports to the fund's board of trustees and is responsible for all aspects of the fund's management, including analysis of funding, investment oversight, operational and strategic planning, and fiduciary and governance issues, among other details. Salary is commensurate with qualifications.

The Houston-based job is among several listed on TEXPERS'website. The TEXPERS Job Board is a free service for TEXPERS retirement system members, who are invited to post a job, manage their job postings, and look for jobs. At the site, click on the "Job Board" link at the top of the page.

In addition to the Houston police retirement fund job, listed is a deputy director of administrative services position at the Texas Municipal Retirement System and a data warehouse developer position at Employees Retirement System of Texas. Both of those jobs are located in Austin.

Thursday, May 23, 2019

Legislative Update

Gov. Abbott Expected to Sign Two Pension-related Bills


TEXPERS Staff Report - Updated 5.29.19

Texas Gov. Greg Abbott could soon be signing legislation establishing a new investment report for public pension systems to provide, and another bill requiring the retirement plans to adopt written funding policies is already awaiting his signature. 


SB 322 Progress

Texas Legislature Online as of May 23, 2019. Click image to enlarge. 


Senate Bill 322 would require certain public retirement systems to report, by asset class, direct and indirect commissions and fees paid by the funds during the prior fiscal year for the sale, purchase, or management of system assets along with the names of investment managers hired by the funds. Funds required to compile the report will have to select an "independent firm" to evaluate investment practices and make recommendations for improvement. 

"Systems that already are currently required by law to submit such a report as well as systems that have a book value of $30 million or less are exempt from the bill," says Eddie Solis, of lobbying firm HillCo Partners and TEXPERS' lobbyist at the state Capitol. 

On May 22, the House passed the Senate bill after making changes suggested by the Texas Association of Public Employee Retirement Systems. An amended bill returned to the Senate for final approval before heading to the governor's office to be signed. 

Sen. Joan Huffman, R-Houston, and Rep. Jim Murphy, R-Houston, sponsored SB 322 and filed it Jan. 10. If signed into law, the requirements would take effect Sept. 1. 

TEXPERS has been tracking the bill and working with legislators on amendments. 

"TEXPERS discussed concerns with the bill with both Senate and House authors and proposed language allowing a system to utilize a consultant already contracted with by the system to minimize or avoid costs as well as proposed language to move the date out to accommodate the timing of the report," Solis says. "Both Senate and House authors were understanding to the benefit of these amendments and accepted the language."

You can follow the bill's progression on TEXPERS' legislative advocacy website. Click here to read the current text.


SB 2224 Progress

Texas Legislature Online as of May 23, 2019. Click image to enlarge.


Another bill, SB 2224, sponsored by Huffman and Murphy, also is awaiting the governor's signature. If signed, the law would require public retirement systems to adopt a written funding policy that details the fund's plan for achieving 100 percent funding. Also, the legislation would require public pension plans to make the policy publicly available and file it with its associated governmental entity. 

"This bill was discussed by TEXPERS' Legislative Committee and with the State Pension Review Board and found to be workable to systems," Solis says. 

If signed by the governor, SB 2224 would become law Sept. 1. You can find the text of the law here

As SB 322 and SB 2224 make their final rounds toward becoming law, TEXPERS will provide additional updates.

Wednesday, May 15, 2019

Texas Senate Honors Retired Police Officers Association's Former Executive with Resolution


By Allen Jones, TEXPERS Communications Manager

The Texas Senate adopted on May 14 a resolution honoring and congratulating W. M. "Bill" Elkin on his retirement from the Houston Police Retired Officers Association.

Senate Resolution 732 recognizes Elkin's service to the organization as well as his prior 38 years as an officer of the Houston Police Department. 

Elkin retired as the association's executive director in December of last year. He spent roughly 21 years with the organization, serving as its first executive director. This year, the association gave Elkin the honorary title of Lifetime Director Emeritus.

"Whereas, during a span of over four decades of noteworthy leadership with these various associations, [Elkin] worked with the Texas Legislature to improve pension benefits and address other matters of significance for both active and retired officers; he helped give voice to those who devoted their careers to protecting and serving area citizens, and this year, he became the first person awarded the title of Lifetime Director Emeritus of the Houston Police Retired Officers Association;..."

The resolution was authored by Sen. John Whitmire, D-Houston.

Anthony Kivela is the new executive director of the Houston Police Retired Officers Association. In a Feb. 24 post to the association's website, Kivela says he is "thrilled and privileged to have the opportunity to follow" in Elkin's footsteps. 

Texas Senate Confirms Keith Brainard to State Public Pension Oversight Agency


By Allen Jones, TEXPERS Communications Manager


Keith Brainard
The Texas Senate has confirmed the reappointment of Keith Brainard to the State Pension Review Board. 

Brainard is vice-chair of the agency, which reviews all state and local public retirement systems for actuarial soundness. His term expires in 2025. 

Gov. Greg Abbott's office announced on May 1 the reappointed of Brainard to the Pension Review Board. The appointment was subject to Senate confirmation.

Brainard is a research director for the National Association of State Retirement Administrators, a nonprofit with members representing more than two-thirds of the $5.2 trillion held in trust for nearly 15 million working and 10 million retired employees of state and local government in the United States. Brainard is a co-author of The Governmental Plans Answer Book, according to a NASRA staff biography. Through his work, he established databases of public pension statistics. He also is a recipient of the Award for Excellence in Government Finance from the Government Finance Officers Association. Also, according to the announcement of his reappointment, Brainard is a former city council member for the City of Georgetown, where he resides. 




Thursday, May 9, 2019



TEXPERS’ Members Stay on Task, Beat Long-term Benchmarks



James Perry, Maples Group study coordinator, along with
Elizabeth Shiang, presents results of the asset allocation
study during TEXPERS' Annual Conference in Austin. 
By Joe Gimenez, Guest Contributor

The TEXPERS annual survey of its members revealed upbeat statistics about their collective investment performance: They beat the benchmark indexes which held the same types of investments in the most crucial 20-year period.

Our survey’s respondents – nearly two-thirds of the systems monitored by the Texas Pension Review Board – had a 7.3 percent composite return for the 20-year period ended September 30, 2018.

Even though this composite return slightly underperformed their collective 7.4 percent target rate, our members outperformed a widely recognized industry benchmark of global stocks and bonds. They beat, by 1.8 percent, a passive 60 percent allocation to the MSCI ACWI Index and a 40 percent allocation to the Bloomberg Barclays Global Aggregate over the last two decades on an annualized basis net of fees.

“It is remarkable how the pension systems have handled the preceding 20-year period,” said James Perry, the Maples Group study coordinator which produced the TEXPERS survey. “Considering that it included the Dot-Com bubble and bust of 1998-2003, the global financial crisis of 2007-09, and the uncertainty of quantitative easing and its unwinding, it’s safe to say that as a group these systems have successfully navigated some of the worst that the global markets have thrown at them. It’s a credit to their ability to manage their members’ retirement assets.”

TEXPERS released its yearly “Report on the Asset Allocation and Investment Performance of Texas Public Employee Retirement Systems" at its 30th Annual Conference for pension fund trustees and staff in Austin. The study confirmed that Texas pension funds hold 51 percent of their dollar-weighted asset allocations in domestic and international stocks. Alternative strategy investments comprised 28 percent and fixed income 20 percent of their portfolios. The respondents manage $58.45 billion in combined total assets.

“It’s very important that pension funds have strong long-term performance to match their employees’ anticipated career path and retirement goals,” said Paul Brown, the president of TEXPERS’ Board of Directors. “Our members’ ability to get close to future targets is remarkable. It is comforting to public employees who want to know their benefits will be there after 20 or more years of service.”

In addition, a shorter term measure was positive as well. TEXPERS members’ 15-year composite return of 7.5 percent also beat the Global 60/40 portfolio return of 6.5 percent.

TEXPERS conducts the annual survey to document its member systems’ diversification with respect to the types of assets invested in, and the investment performance of these systems with respect to their actuarially assumed returns, market benchmarks and other public funds.

The report findings are conveyed to members of the Texas Legislature and help us to demonstrate that local systems are being managed in compliance with the “prudent expert” rule. As the report notes, this rule requires that fiduciaries to exercise their duties with the care, skill, prudence and diligence under the prevailing circumstances that a prudent person acting in a like capacity and familiar with matters of the type would use in the conduct of an enterprise with a like character and like aims.

Of particular value to members is the analyses of standard deviation in the 5-, 10-, 15- and 20-year periods, on pages 15-19 of the report. Those pages can help benchmark your system’s performance against those pensions systems which are similar in size to yours and take into account the investing environments for those time periods.

Another benefit of the report is the asset allocation analysis, which allows you the opportunity to compare your portfolio mix with funds of similar size, or those of higher and lower performance. These can provide some guidance to those Boards considering changes to their portfolio mix.

TEXPERS’ report notes that, overall, Texas pension funds continued to orient their target rates toward more conservative expectations. The average rate in 2018 was 7.4 percent, down from 7.5 percent in 2017, and 8.0 percent in 2013. By lowering their target rates, the pension systems have responded to widespread sentiment that the higher returns of the late 1990s and early 2000s may not be possible in future market and economic environments.

In a Texas-wide press release announcing the report findings, TEXPERS Board President Brown recognized the following standout systems for 20-year performance above the target:
  • 8.71 percent - Houston Municipal Employees Pension System
  • 8.33 percent - CPS Energy Employees' Benefit Trust
  • 8.20 percent - Austin Police Retirement System
About the Author: 

Joe Gimenez is a public relations professional who specializes in pension fund communications. He has assisted TEXPERS and several Texas pension funds in crisis situations and public affairs.







Reports: Sharmila Kassam to leave Texas ERS


By Allen Jones, TEXPERS Communications Manager


Sharmila Kassam, second from right, participates in a panel discussion.
UPDATE May, 15, 2019: Sharmila Chatterjee Kassam, the former deputy chief investment officer at Texas Employees Retirement System, has joined Funston Advisor Services as a senior consultant, according to a May 15 article in Pensions & Investment. A managing partner at the firm confirmed the hiring in an email with P&I.

Texas Employees Retirement System's deputy chief investment officer, Sharmila Chatterjee Kassam, is leaving the fund, according to two news reports. 

A spokesperson for the $29.6 billion fund confirmed Kassam is stepping down from her position with the system, according to Pension & Investments. And Institutional Investor's Leanna Orr reports that Kassam told the publication that although she has not resigned from the fund, she is "creating an orderly transition" out of the ERS.

Kassam told Institutional Investor that she is proud of her achievements and indicated that she and the ERS are seeing things differently when it comes to the management of the fund and its staff. Kassam co-managed the fund's investment program and a 77-person staff. In the article, she describes the public-sector job as one that has aged her.

Mary Jane Wardlow, Texas ERS' spokeswoman, states that the deputy chief investment officer position is in transition but did not provide additional detail in an email to P&I. Aso of May 9, the position was not listed as open on the fund's website. Job openings are listed here.

Kassam has worked as the fund's deputy chief investment officer since 2014. According to her LinkedIn profile, she has worked for Texas ERS for more than 11 years. She began as an assistant general counsel in the ERS' Investments and Securities division in 2008. 

In addition to working for the Austin-based Texas ERS, Kassam's LinkedIn profile lists she is a board member of the YMCA of Austin. Kassam also has served as a speaker on a number of investment discussion panels at TEXPERS conferences and educational forums. She most recently served on two panel presentations at TEXPERS' Annual Conference in Austin last month.

Prior to joining the ERS, she was chief operating officer and general counsel for the Trevor Romain Co. and worked as an attorney for Wilson Sonsini Goodrich and Rosati. She has spent 15 years in the venture and corporate industries.