LAGERS June Board Report

LAGERS June Board Report

The LAGERS Board of Trustees has a fiduciary duty to its membership to ensure the system is administered in a fiscally sound manner. The board meets at least quarterly to make sure LAGERS continues to deliver on its commitments of strength and security.

The board gathered on March 24, 2023 for their quarterly meeting. Below is a summary of the meeting. For more information on LAGERS Board of Trustees or official meeting minutes, please visit our Board of Trustees page.

Committee Updates

The Audit and Finance Committee reported discussion on LAGERS’ Fiscal Year 2024 Budget, which includes the addition of three new positions to LAGERS staff: a Cybersecurity Manager, a Senior Software Engineer, and an Employer Reporting Analyst. Management believes all three new positions are essential in fulfilling LAGERS’ mission of providing and preserving retirement security for those dedicated to serving our communities. The budget was unanimously approved.

The Committee also reported discussion on LAGERS’ proxy voting procedures. Staff shared the results of a recent internal review of proxy votes cast by LAGERS’ investment managers on behalf of the LAGERS membership, noting no issues were identified.

Chief Financial Report

LAGERS’ Chief Financial Officer, Melissa Rackers, presented two resolutions for the board’s consideration: the Fiscal Year 2023 Interest Resolution and Post Retirement Resolution.

The Interest Resolution proposed an increase to the interest credits for the Member Deposit Fund (the fund which holds any member contributions) from 0.5% to 2.0%. The Post Retirement Resolution proposed authorizing a full cost of living adjustment (COLA) for retirees in October in accordance with LAGERS’ statutes and policies. While the final COLA amounts will be based on the June Consumer Price Index (CPI), staff reported the system has sufficient reserves to fund this year’s adjustment, and it is expected that all retirees will still be in a ‘catch-up’ phase due to the system’s statutory 4% cap amount on COLAs.

Both resolutions were unanimously approved.

Investment Update

LAGERS’ investment team presented the investment activity from the last quarter, which included $390 million in commitments to the following asset classes:

  • $155.5 million to Equity
  • $125.2 million to Fixed Income
  • $69.3 million to Real Assets/Real Return
  • $40.0 million to Strategic

The investment team also discussed the recent Request for Proposals (RFP) seeking Global Custody, Securities Lending and Performance Measurement services. Full responses were received from JP Morgan, BNY Mellon, State Street and Northern Trust. Following a thorough review of each proposal by the RFP workgroup, a recommendation to retain Northern Trust was made. The LAGERS Board voted to approve the recommendation, subject to final fee negotiation.

In follow-up to staff’s proxy voting review, staff also recommended formalizing a reporting process for all proxy voting through the adoption of a new Proxy Voting Policy. Staff believes the new policy will help ensure continued alignment between internal and external fiduciaries in carrying out voting responsibilities solely for the benefit of the LAGERS membership. The policy was unanimously approved.

Learn about LAGERS Investments

Legislative Update

LAGERS’ legislative team presented an end-of-session update. No bills with negative impact to the LAGERS system were passed in 2023. Staff provided commentary on key legislative activity as well as a summary of pension legislation of interest including:

First Responder Definition – A provision within Senate Bill 24 and 186 modifies the definition of first responder within Missouri state statute to redefine dispatchers as “telecommunicator first responders.” Although there is no direct impact to LAGERS, the new language will better align state statutes with LAGERS’ public safety classification.

Task Force One Reemployment Rights- Senate Bill 24 provides that Missouri Task Force One (MO-TF1) members be entitled to initial employment rights, re-employment rights, retention in employment rights, promotion rights, and discrimination protections as provided by federal law (USERRA) for members of the military. LAGERS already classifies MO-TF1 deployments as military leave.

New Sheriffs Ineligible for LAGERS – As part of a funding package for the Sheriffs’ Retirement System, clarifying language was added requiring all new sheriffs after January 1, 2024, be enrolled in the Sheriffs’ Retirement System regardless of their county’s participation in LAGERS. This legislation will not impact any current sheriff already participating in LAGERS.

Senior Tax Relief – Two tax provisions passed in Senate Bill 190 intended to protect retirees on a fixed income including an optional tax credit for freezing property valuations, and an expansion of the state’s public pension tax exemption. *Please consult your tax professional with any questions about your individual tax situation.

Staff also provided an update regarding the Request for Proposal for the system’s Legislative Consultant provider. The RFP is currently open.

For more information on LAGERS’ legislative efforts, visit LAGERS’ Issues and Advocacy Page.

Actuary’s Report

LAGERS’ actuary, Mita Drazilov, with Gabriel Roeder Smith, & Co, presented the preliminary results of the 55th annual actuarial valuation of the system. Mr. Drazilov noted the purpose of the annual valuation is twofold:

  1. Establish contribution rates for each employer in the system.
  2. Determine the overall funding and financial condition of the plan.

Of note, the projected funding ratio of the plan is expected to decrease slightly to 95.1% (down from 96.5%). The decrease is primarily due to larger than expected pay increases across the board at LAGERS employers. Despite this experience, Mr. Drazilov believes LAGERS continues to be in excellent condition.

All employer valuations will be finalized by June 30, 2023.