TEXPERS Pension Observer Vol 3 2021

OPBESNESRIVOENRVOL.3,2021

THE OFFICIAL MAGAZINE OF THE TEXAS ASSOCIATON OF PUBLIC EMPLOYEE RETIREMENT SYSTEMS

ALSO INSIDE THIS ISSUE

RETIREMENT, PENSIONS, & ECONOMIC NEWS/ QUESTIONS & ANSWERS WITH TEXPERS'
NEWLY-ELECTED BOARD PRESIDENT, JAMES SMITH / 87TH TEXAS LEGISLATURE

ADDRESSED LAWS FOR PUBLIC PENSION FUNDS / WHY DO SO MANY LEADERS SCREW UP
THE RETURN TO OFFICE? / THREE TIPS TO ENGAGE YOUR FUND'S MEMBERSHIP

Congratulations
to TEXPERS President,

Jim Smith!

We look forward to your strong
leadership.

For more information, please contact: Gilbert Andrew Garcia, CFA
Ruby Muñoz Dang [email protected]
713-853-2359 www.facebook.com/gilbert.andrew.garcia
[email protected]

awards/rankings may not represent client experiences and are not indicative of future performance.
Go to www.garciahamiltonassociates.com/awards/ for additional information on each award.

Welcome to the team,

Mark Delaney and Marcus

Smith!

Mark Delaney, CFA
Senior Portfolio Manager/Strategist

Mark joins our investment team to help manage our $17.4 billion* in fixed
income assets as a Senior Portfolio Manager and Strategist. Mark is one of
the industry's most experienced fixed income investors having managed
money for over 40 years. Over his career, he has worked for Ohio PERS,
Transamerica Criterion, GE Asset Management, MEAG-New York, and the
Abu Dhabi Investment Authority. Mark worked with our Managing
Partner, Gilbert Garcia, in the early 1990's and he also worked with a few
other team members over the years. Mark wanted to return to Houston
to be closer to family and we are thrilled to have him join the team.

Marcus SMith
Vice President Of Marketing And Client Services

Marcus joins our marketing and client service team, bringing over 30
years of investment industry experience to the firm. He is an industry
veteran having held leadership positions with Ara Partners and Salient
Partners. Likewise, Marcus has worked with a few of our firm
professionals over the years. We are thrilled to have him join the team.

Award-Winning Over $17 Billion*
Firm Fixed Income AUM

For more information, please contact: *AUM as of 7/13/2021
Ruby Muñoz Dang
713-853-2359 Gilbert Andrew Garcia, CFA
[email protected] [email protected]
www.facebook.com/gilbert.andrew.garcia

Preparation
yields resilience

PFM’s OCIO professionals collaborate with clients to
build an investment program that allows for flexible,
proactive decision-making when every minute counts.
PFM is on your side when time isn’t.

Advice for people transforming their world pfm.com

Financial Advisory | Asset Management | Consulting
Financial Planning | Specialized Services | Alternative Finance

For important disclosures please go to pfm.com/disclosures

06 07-08

OPPORTUNISTIC POLICY UP FRONT
TEXPERS' executive director
asks, "are you well positioned Snippets of the latest studies,
post-pandemic?" research and briefs impacting

09-12 pensions, the economy, and
retirement.
BACK TO THE FUTURE
13-14
TEXPERS' Summer Educational
Forum looks back on the past QUESTIONS & ANSWERS

year while looking into the James Smith, the newly elected
future. president of TEXPERS, discusses
his background as a police officer
15-19
and the importance of secure
TXLEGE retirement and outlines his goals

The 87th Texas Legislature's for the association.
regular session is over. Here's
how it addressed laws for public 20-22

pension funds. BEST PRACTICES

Why do so many leaders screw
up the return to the office? A
behavioral scientist explains.

TEXPERS PENSION OBSERVER www.texpers.org | 5

OurBoard. APPOORESSITYT-OIPOUANNWEDDEELMLIC?

President Jim Smith 'POEPRPHOARPTSUINTISISTITCIMPEOLFIOCRY'AANLLOCATION
San Antonio Fire & Police Pension Fund
As we enter the second half of 2021, the question
1st Vice President Sherry Mose we continuously hear is “How is your portfolio
Houston Municipal Employees Pension System positioned post-pandemic?” As an investment
fiduciary it is prudent to have these discussions with
2nd Vice President Jose Cavazos your financial consultant and/or chief investment
Dallas Area Rapid Transit Retirement Plan & Trust officer. It also serves as a reminder that a sound
written investment policy and asset allocation policy
Treasurer Larry Knott will help keep you on track through uncertain market
Dallas Area Rapid Transit Retirement Plan & Trust cycles. It may be a good time to think about ways to further refine your
investment program to take advantage of future market dislocations and
Secretary Carla Brewer capture improved financial outcomes given where capital market
Dallas Employees' Retirement Fund valuations are positioned and the financial head winds (e.g., low rates)
being faced by public defined benefit investment fiduciaries.
Board Member Terry A. Bratton One method of doing so is to initiate an opportunistic investment policy
Houston Police Officers' Pension System allocation for investment strategies that do not fit neatly in traditional
stock, bond, private equity, and real estate allocations. Well-structured
Board Member Paul R. Brown investment policies of this type are written into the investment policy
Big Spring Firemen's Relief & Retirement Fund statement and are seen as a “farm team” of ideas and strategies that one
day may find themselves as part of the traditional investment program
Board Member Tyler C. Grossman based on success.
El Paso Fire & Police Pension Fund Examples include the introduction of infrastructure to help with further
improving inflation risk mitigation or an investment strategy that relaxes a
Board Member John D. Jenkins long-only constraints to further amplify an investment manager’s true skill
Dallas Employees' Retirement Fund in creating a most efficient portfolio. While an opportunistic policy
allocation may be not be suitable for all, it is a healthy governance topic to
Board Member Larry Reed further evaluate as we march towards another calendar year end with
San Antonio Fire & Police Pension Fund sizeable uncertainty about all aspects of the capital markets from
quantitative easing and to whether inflation is truly “transitory."
Board Member David Stacy If your Investment Policy Statement allows for a percentage of your
portfolio to be allocated to take advantage of dislocations in the financial
Our Staff.MidlandFiremen'sRelief&RetirementFund markets through the use of an “Opportunistic Policy Allocation” then it’s
prudent to do so when you, your Board, Staff and consultant see
Executive Director Art Alfaro opportunities and/or have preferences you wish to express. However, the
majority of the pension systems in TEXPERS are probably best served by
Director of Conferences & Member Relations sticking to their asset allocation as recommended by their financial
Carolyn Butterworth, CMP consultants and approved by their Boards.
While the future is entirely out of our control, how we prepare for and
Membership & Finance Supervisor Lena Terrell, CAP navigate through it is not. Sticking to the best practices will help direct your
plan through economic uncertainty.
Director of Communications & Event Marketing At the end of the day, the best possible answer to the question at hand is,
Allen Jones “we have a sound investment policy and asset allocation that serves us
well through up markets as well as down markets, so other than some re-
Member Services Specialist Samantha Polsgrove balancing we didn’t have to restructure our portfolio and feel confident that
it will serve us well in the long run to achieve the financial outcomes
Contact Information necessary to be successful!”
The TEXPERS Pension Observer
C/O Texas Association of Public Art Alfaro
Employee Retirement Systems
1504 San Antonio St., Suite 206 TEXPERS Executive Director

Austin, Texas 78701 TEXPERS PENSION OBSERVER
Telephone: 713-622-8018
E-mail: [email protected]

Copyright © 2021. TEXPERS Pension observer is the official
magazine of TEXPERS, published quarterly. Contributions to
TEXPERS Pension Observer are welcome, but the right is
reserved to select material to be edited and published.
Publication of any article is not to be deemed an endorsement of
the views expressed therein, nor shall publication of any
advertisement be considered an endorsement of the product or
service involved.

6  | www.texpers.org

UPFRONT
RETIREMENT PENSIONS

MIANBICLORLUEETNARNSEIINATGLIRSLE,YMGWEENONRTXRY PNUEWBLDICAPTLAAANVSADILAATBALBEAINSETHE
The most current data for public-sector retirement plans
A national survey finds that younger that have released financial reports through March 2021 is
generations are more concerned about available on the Public Plans Database.
retirement than older generations. The
COVID-19 pandemic has raised retirement The update includes information on 10 recently added
security concerns for 64% of Millennials plans, including the Houston police system. The database is
and 54% of Generation X. The level of accessible online at www.publicplansdata.org.
concern is at 42% for Baby Boomers and
25% for the Silent Generation. A new downloadable dataset of public sector defined
contribution plans also is available. These data represent
Generational Views of Retirement in the nearly $140 billion in retirement assets and 2.5 million
United States, a new issue brief from the members.
National Institute on Retirement Security
(NIRS), presents these findings. The The Public Plans Database is developed and maintained
report is available on the nonprofit public through a collaboration of the Center for Retirement
policy organization's website at Research at Boston College, MissionSquare Research
www.nirsonline.org.
■Institute, and the National Association of State Retirement
“Generation X and Millennials are the
first two generations that largely will Administrators.
enter retirement without a pension, so it’s
not surprising that their anxiety is higher,” ECONOMY
said Dan Doonan, NIRS executive director
and report co-author, in a news release. SREPPAONRISTHG-LRAENAGTEURAPGAENSDUERMVEICYHRAERSDPSOHNIDPESNTS
Even within racial and ethnic groups, the impact of the pandemic hasn't been felt equally across the
“Millennials and Gen X have lived U.S. population, according to new information released by the U.S. Census Bureau. The effect was even
through multiple economic downturns more profound for Hispanics (irrespective of race) who answered the bureau's surveys in Spanish
and decades of stagnant wages. Couple rather than English.
that with longer life spans and rising
health and long-term care costs, and it’s According to estimates, 8.8 million adults were food insecure early in the pandemic due to the
easy to understand their pessimism. changes caused by the pandemic, such as unemployment, mental health challenges, and the
Going forward, it will be critical for accumulation of debt. In March, Hispanic households reported that sometimes or often, they didn't
policymakers to find ways to re-stabilize have enough food to eat compared to white households. Those who spoke Spanish were particularly in
the retirement infrastructure so these need of food. Hispanics who took the survey in Spanish were 50% more likely to say that they or
generations can be self-sufficient in their someone in their household has lost employment income since the pandemic hit than Hispanics who
older years,” Doonan said. took the survey in English.

The research finds strong support for The findings are based on an analysis of recent data from the U.S. Census Bureau's experimental
pensions and Social Security, both of Household Pulse Survey. English is the most commonly spoken language in the United States, followed
which provide stable and predictable by Spanish. Household Pulse respondents have the option of answering the questionnaire in either
income that lasts through retirement.
Most Americans across generational lines ■English or Spanish, as with many Census Bureau surveys.
see the value of increasing contributions The impact of the pandemic on Hispanic communities is not uniform, according to the Bureau.
to Social Security, and the highest support www.texpers.org | 7
for expanding Social Security is among
Millennials (61%).

Similarly, pensions are viewed favorably
by all generations, with Millennials
expressing the highest favorability (81%).
There is broad agreement that all U.S.
workers should have access to a pension
to ensure financial independence in
retirement. Conducted by Greenwald
Research, information for this study was
collected from interviews conducted
between December 4–10, 2020, of 1,203
individuals aged 25 and older.

The final data were weighted by age,
gender, and income to reflect the
demographics of Americans aged 25 and
older.

Tabulations in some of the charts may
not add up to 100 due to rounding.

For this research, Millennials include
those ages 25 to 43, Gen X consists of
those ages 44 to 55, Baby Boomers
include those ages 56 to 74. For the Silent

■generation, the group includes those age

75 or older.

TEXPERS PENSION OBSERVER

UF

STUDY >

RSBAUTUNSDISNYOEMISDWSEAPALRROERFAEETSSTPSAOOCNRKSSSES TO

WRITTEN BY ALLEN JONES, TEXPERS DIRECTOR OF COMMUNICATIONS

In a new research study, researchers explore how data on ransomware attacks. The financial services
ransomware attacks position organizations against sector, including investment firms and organizations
law enforcement agencies tasked with defending that manage retirement incomes, may be particularly
them. Trustees and administrators of public pension vulnerable to cyber-attacks simply because of the type
plans, as well as their financial industry vendors, of data they maintain. A 2020 Clearswift survey in the
might find this study of interest. United Kingdom found that more than 70% of financial
institutions fell victim to cyberattacks that year. Stats do
Cybercriminals often seek to compromise data-rich not look much different in the US.
financial service industry organizations by stealing
money, destroying infrastructure, disrupting The stakes are enormous when it comes to attacks
operations, or stealing vital information. Their on retirement accounts. Retirement systems face
methods include ransomware, which encrypts an tremendous pressure to keep retirement savings safe
organization's files or computer network and from evolving cyber threats. In 2018, a woman
demands payment to regain access. discovered that cybercriminals had emptied her
retirement account worth nearly $200,000.
In a new study, a trio with The University of Texas at
Arlington's College of Business explains that Although many cybersecurity experts view retirement
companies are finding that it makes sense to funds as prime targets for cybercriminals, cyber-attacks
negotiate with their attackers to drive down the cost on retirement accounts have been small in scope
of the ransom. But such behavior is counterproductive compared with other industries. Built-in protection
to FBI guidelines and incentivizes attackers to carry against cyber attackers could raise red flags if
out further illegal activities, say the researchers. cybercriminals attempt to transfer money before a
specified distribution event, such as retirement.
Kay-Yut Chen, Jingguo Wang, and Yan Lang are
authors of the new study, Coping with Digital Regardless, public pension system managers and
Extortion: An Experimental Study on Benefit Appeals their vendors may want to take steps to ensure their
and Normative Appeals, published in the journal client's retirement funds and sensitive data are secure.
Management Science. Chen and Wang are professors When faced with ransomware, they may consider
of information systems and operations management taking a breath before giving in to the demands of
at UTA. Lang is a doctoral student in the department. attackers to allow law enforcement to investigate.

"From a policy perspective, the FBI is telling "We must convince companies that just because the
businesses not to give in," Wang said in a news bad actors come down on the ransom, it doesn't make
release. "But we've found that when you're trying to it right to pay them--and you'll probably continue to
run a business, there is almost always a ransom that have problems," Wang said in the UTA news release.
becomes similar to a break-even point." "We need to encourage firms to do the right thing in
security investing. Recognizing the long-term benefits
The study examines how to encourage companies to of this approach could help other companies come to
the right decision." PO
adopt strategies that reduce the risk of digital extortion.
TEXPERS PENSION OBSERVER
The UTA researchers applied behavioral game theory

to study tactics such as investing in cybersecurity or

refusing to pay ransoms. The researchers also studied

the strategic decisions of interacting players in human

subject experiments.

When an organization is a victim of ransomware,

"even if they pay the ransom, they still have must pay

for added security," said Chen, one of the study's co-

authors, in the news release.

Experts say an organization is attacked by

ransomware every 40 seconds, according to national

8  | www.texpers.org

FEATURE

AUGUST 29-31, 2021

@ GRAND HYATT SAN ANTONIO

GREAT SCOTT!
Now is The Time to Plan for TEXPERS' Summer Educational Forum

BY ALLEN JONES, Monday, Aug. 16. After that, TEXPERS society economically and concerning the
TEXPERS DIRECTOR OF members may register in person at the management of public employee pensions."
COMMUNICATIONS forum.
Those wishing to attend the forum must
"Back to the Future" is the theme of the "Back to the Future is a fitting theme for have a current TEXPERS membership.
Texas Association of Public Employee our forum," said TEXPERS Executive Those who do not have a membership may
Retirement Systems' 2021 Summer Director Art Alfaro. "We hosted a successful visit the association's Become A Member
Educational Forum, set for Aug. 29-31 in conference in May that acknowledged our page on www.texpers.org.
San Antonio, Texas. return to in-person gatherings since the
start of the pandemic in 2020. Our state TEXPERS hosts educational programs for
Online registration opened June 30 and is has gotten back to business, and our the trustees and administrators that
available by clicking here to access the members are looking to get an idea of what manage the retirement funds of police
event webpage. Online registration ends on the future holds for a post-pandemic officers, firefighters, and municipal and
district employees throughout Texas. The

10  | www.texpers.org TEXPERS PENSION OBSERVER

association has 68 member pension systems that 8 Benefits to
manage $32.7 billion in retirement assets for 57,728 Registering
active members and 60,737 retirees and beneficiary for the Forum
annuitants.
Peer Trustee Training
SCHEDULE Networking
For a separate registration
TEXPERS' Summer Educational Forum brings Texas' Connect with peers who face fee, enroll in Basic Trustee
key pension stakeholders together for education, similar challenges and Training to satisfy state-
training, and networking. The forum starts on Sunday, problem-solve together. mandated education for new
Aug. 29, with a golf tournament, Basic Trustee Training, trustees.
conference registration, and a members networking Exhibit Booths
event. Experts &
Meet with representatives Influencers
Basic Trustee Training is for new trustees and from various companies and
provides seven hours of training over seven content firms offering services to Attend general and breakout
areas. Training takes place between 8 a.m. and 4 p.m. help you manage the secure sessions to hear from the
The registration fee for Basic Trustee Training is retirements of public pensions and investments
separate from the event registration. The training fee employees. industry's thought leaders.
is $225 for TEXPERS member retirement systems and
employee group members and is $325 for non-member Self New Tactics
retirement systems. Investment
Curate new ideas that
Visit the forum's event page at www.texpers.org and When you register for the strengthens secure retirement
click Basic Trustee Training only. Those wishing to forum you're saying that for public employees.
attend the full conference and Basic Trustee Training, you're investing in your own
please register utilizing the Retirement Systems & professional development. Not Alone
Employee Groups link on the event page.
Focus Factor Your in space full of like-
Advanced Trustee Training for more seasoned minded people who are willing
trustees was held during TEXPERS' Annual Conference The flip side of learning new to take time away from the
in May and is not taking place during the Educational things is relearning classic office to learn something new.
Forum in August. fund management techniques.

The event continues on Monday, Aug. 30, from 7:30 For more details, visit www.texpers.org
a.m. to 5:30 p.m. The day features a breakfast for
attendees, an opening ceremony, general sessions, and www.texpers.org | 11
networking reception.

The forum's final day is on Tuesday, Aug. 31, and
features a full day of activity from 7:30 a.m. to 3:30
p.m. The last day features a mix of general and
breakout sessions.

Check back for additional details and an expanded
schedule as information becomes available.

VENUE

This year's forum takes place at the Grand Hyatt San
Antonio River Walk, 600 E. Market St., located in the
heart of the Alamo City. The hotel is within a 5-minute
walk of the city's famed River Walk, which features top
restaurants, museums, and shopping.

The forum programming takes place on the hotel's
second, third and fourth levels. A schedule will provide
programming locations when it becomes available.
TEXPERS also will post signs at the venue during the
forum.

TEXPERS PENSION OBSERVER

12 | www.texpers.org Forum attendees receive a special room rate if they
register their stay at the Grand Hyatt San Antonio River
Walk by Aug. 6. After registering for the forum online at
www.texpers.org, a confirmation email will include a
link that will allow registrants to make reservations at
the Grand Hyatt San Antonio.

Discounted parking is available at the hotel. Upon
arrival, inform hotel staff you are with the TEXPERS
Summer Educational Forum to get the best available
parking rate. On-site valet parking is available.

TRAVEL

The hotel is about 10 minutes from San Antonio
International Airport, which sits near the northeast
corner of the Interstate-410 and US Highway 281
intersection. Access to various forms of ground
transportation, including bus lines and car rental, is
available at the airport. Several rideshare companies
also operate in the city.

Check with providers for rates. PO

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TEXPERS PENSION OBSERVER

QUESTIONS & ANSWERS

James Smith is TEXPERS'
new board president. He
was elected by the board
members on May 23.

SMITH: NO. 1 GOAL IS TO
PROTECT RETIREMENT PLANS

INTERVIEWED BY ALLEN JONES, TEXPERS DIRECTOR OF COMMUNICATIONS

James Smith is TEXPERS' new board president, elected by the association's Board of Directors on May 23. Smith, who serves in
Police Position No. 8 on the Board, replaces Paul Brown as president. Smith says it is an honor to serve as president of TEXPERS'
Board of Directors. He is serving his second four-year term—first elected in 2014. His assembly re-elected him in 2018. For the
last three years, he served as first vice president of the TEXPERS Board of Directors. He also served on several of the Board's
sub-committees. In our Q&A, he discusses his service as a police officer, why secure retirement is important to public
employees, and what he hopes to achieve during his tenure as TEXPERS' Board president.

Question: You have served the San Antonio Police Department for degree in Criminal Justice. I received my commission to second
more than 20 years. Have you always worked in San Antonio, or have lieutenant as a Medical Service Corps Officer, entered active duty in
you worked in other departments? Tell us a bit about your professional 1987, and was assigned to Ft. Sam Houston.
background.
I served as an executive officer of a medical training company. I
Answer: I joined the SAPD after leaving the [US] Army as a captain. I then served as the Academy of Health Sciences protocol officer. I was
worked on patrol until I was promoted to detective, where I served as a promoted to the rank of captain. I then joined SAPD in 1992.
robbery detective. Once promoted to sergeant, I served as community
relations sergeant. My next assignment was as the supervisor of the Q: What motivated you to enter law enforcement as opposed to any
robbery/property crimes unit, and from there, I moved to asset other career?
forfeiture.
A: By joining the National Guard, I knew that I could receive a
I originally joined the Ohio National Guard as an enlisted soldier. I scholarship and complete my degree in criminal justice. Once I had
attended Kent State University, where I graduated with a bachelor's joined ROTC, I made it my pursuit to join the active-duty Army.

TEXPERS PENSION OBSERVER My desire had always been to be a police officer, but there were

www.texpers.org | 13

Q&A trustee position, I jumped at it. I knew it would be a new
challenge. Once I was on the board, I was so fortunate to
not many opportunities in Ohio. I am the first police officer have many mentors. There was so much to learn, and the
in my family. I was attracted to the profession because learning never stops. I currently serve as chairman of our
almost every police officer I met really enjoyed their job. I board which is a great honor.
have been so blessed in my life; I wanted to do something
to give back and make some small difference. Fellow TEXPERS Board Member Larry Reed inspired me to
run for a TEXPERS board position. He is one of my greatest
Q: What do you like about working as a police officer in mentors. I felt I could take what I had learned at our level
San Antonio? and apply it on a larger platform.

A: When I first moved to San Antonio for the military, I Q: As president of TEXPERS' Board of Directors, what are
fell in love with Texas and the city. I enjoyed the cultural your goals?
diversity San Antonio has. The citizens of San Antonio have
always been huge supporters of law enforcement which I A: My number one goal is to protect all of our member
know is rare in many places today. I think what makes a retirement plans. At the same time, I want to make
difference is that we are part of the community we serve. TEXPERS' educational conferences not viewed as "just a
Almost every officer I know not only gives back on the job, conference." I want to make it “The” conference of choice to
but they give back to the community by coaching, helping at attend for the best educational opportunities. Through
their churches and other numerous volunteer education and networking is how we maintain and protect
organizations. I consider my co-workers as brothers and our retirement plans.
sisters. We have one of the best-trained departments in the
US, along with great continuing education and training, but I also want to unify all of the plans our members
of course, I’m biased. represent to make sure everyone has an equal voice in our
organization. There is strength in unity.
Q: Police work can be dangerous. Why is the risk worth it
to you? What I have learned at my fund is that the members are
our customers. The entire board and staff must be
A: Police work, along with all first responder jobs, is a responsive to the membership. I want to convey this same
dangerous profession. We have to rely on our training and message to the many generous sponsors we have had
experience. We always have to be tactically sound. I think I through the years. You are our customers, too.
can speak for most officers when I say we don’t go into
situations thinking we may not come out alive. We use the Q: Is there anything else you'd like to say to the TEXPERS
term we are sheepdogs, protecting the flock. We are trained membership?
to react and head into danger while others are fleeing. I
truly think it is in our DNA makeup. Most importantly, I, A: First of all, it is a true honor to serve as President of
along with most, have to rely on our faith in God to protect TEXPERS. I’m truly humbled.
us. It is usually after a life and death situation is when we
reflect on what took place. I want to thank my predecessor, Paul Brown, for his
many dedicated years of service as president of TEXPERS
In my 29 years, unfortunately, I have had to attend over and all current and former TEXPERS board members, most
20 funerals of officers killed in the line of duty, and this is of whom have day jobs and funds to manage. As board
where you really reflect on the dangers of the job. Another members, they put a lot of sweat equity into their service
huge issue is the stress that comes from the job, crazy to TEXPERS.
shifts, bad eating habits, lack of rest, and the fact that
most of us internalize what we have been through not to I especially want to thank all of the member plans that
worry our families. We have also lost numerous officers make up TEXPERS. We would not exist if not for their
due to suicide over the years, which seems to be a growing membership. They work hard at their local levels and have
problem that needs more attention. a huge impact on current and future retirees and their
families. I want our members to please let us know what
Q: Did secure retirement and death benefits for your they would like to see at our future events, what
family play a role in your decision to become a police educational topics they would like to see explored, and any
officer and stick with it? speakers they think their peers would benefit from hearing.

A: When I first joined the police department, the fact we I also want to thank all of our sponsors for their
had a pension was a big reason that I was attracted to generosity over the years. They are members of our
SAPD. Once I had a family, the pension and disability association, too.
benefits help me sleep at night. Should tragedy ever strike,
I know my benefits will take care of my family. The fact As a board member and now president, I work for all of
that we can retire with a fair pension is the carrot at the our members. We have a great team as your board of
end of a stick that helps retain us as long-term servants to directors. If anyone has any issues, concerns, complaints,
the community we all serve. or advice, please contact me or any of your board members.
We are all here for you.
Q: You were first elected to serve as Active Police
Trustee of the San Antonio Fire and Police Pensions Fund in I want to stress the message of unity amongst our entire
September 2010 and in 2014, you were elected to the membership. We can not be splintered going forward in our
TEXPERS Board of Directors. What other organization do future battles to secure retirement for public employees.
you serve? We always want to fight from the position of strength.

A: I originally served on the Executive Board of the San I also thank Art Alfaro, TEXPERS' executive director, and
Antonio Police Officers Association, simultaneously serving his staff, who run day-to-day operations to make our
as treasurer of the San Antonio Hispanic officers organization a huge success. PO
Organization. Once I had the opportunity to run for a
TEXPERS PENSION OBSERVER
14  | www.texpers.org

TXLEGE

8LA7WTHSTFEOXRAPSULBELGIICSPLAETNUSRIOENAFDUDNRDESSSED

BY JOE GIMENEZ, TEXPERS CONTRIBUTOR

The 2021 Texas Legislature continued its pension legislation impacting TEXPERS and proposed a new grading system.
work of ensuring the financial soundness of member systems.” TEXPERS played a key role in advising the
Texas public employee retirement systems Legislature about these matters on
with the assistance and input of the Texas The TEXPERS Legislative Committee, members’ behalf.
Association of Public Employee Retirement chaired by Paul Brown, spent a lot of time
Systems. with Legislators and their staffs this Indeed, HB 3898 has the potential to
session. The Legislative Committee ‘touch’ nearly all Texas local pension funds
TEXPERS’ legislative consultant Eddie monitored or provided input on the 54 for firefighters, police, and municipal
Solis summarized key accomplishments: House bills and 36 Senate bills which employees. It starts by requiring pension
“As long as pension fund Trustees continue touched on various components of pension funds to achieve amortization periods of 30
to fulfill their fiduciary responsibilities and administration, funding, monitoring, years or less, with lots of if-then
strive towards the soundness of every investments, and other oversight. They contingencies over the next several years.
retirement system, there is no compelling kept eye on another eight joint or First, TEXPERS added a constructive voice
reason for the Legislature to take such a concurrent resolutions in the Legislature. to the case that systems which have
dramatic step of switching to DC plans. If All told, the committee carefully watched already been developing and implementing
pension funds continue to make the good over 103 different bills from January Funding Soundness Restoration Plans
faith effort towards compliance with through the last day of May. Thirteen should not immediately be required to
legislative responsibilities and Pension eventually passed and became law, adjust those to stricter standard for
Review Board Guidelines, then TEXPERS effective Sept. 1, 2021. amortization plans. Those plans have
will continue to be deserving of a seat at already invested time and money to comply
the table for all pension-related matters at House Bill 3898 with the 2015 law establishing FSRPs.
the legislature, to put forward the Of significance to most TEXPERS Legislators agreed and effectively
collective voice of its members and to members was House Bill 3898. It sought grandfathered about 14 systems which
contribute to the crafting of significant changes for amortization periods, were already in the FSRP process. The
independent investment evaluation firms,
TEXPERS PENSION OBSERVER www.texpers.org | 15

TL STadnaJcafnhaoeatmnetmfeoeeberotodthiscyndllehcsedSrorutlewiimwrervgaidefsiattaoreeirhinrdnmd,sigcjntuihtonhgseooometlpwlHrampbmoordooifuectisafsstraeriehetedrnioeeoasBpne.nlelriorele.ltrbgseBa4yaisbe2dtatlfiee8ioonmn6nrdoteosiofsnotfocnyfihcfheAtetachoprrhregricetmielohaSi1uerfnaiol5nnadTrgl,eArp,m2exnoS0saitslmi2suoccl1inetoHti.hnoiodnSduihFfmsusafiucreedietctrh,eiChnawdopnvdimerdfitsorhsmocPvotmhioiiudgtaltetiatrcedtghceeeeeoldeP,nosegecanavinlnsumeHsdlsanieooitfomanoodnfruiesFtsonlecuafdwrhnnidaddtnithre,vhgSacreeeettashtcdftsueruieugrorsncaFimtsht-oy5iomftdaonisfisnolseihcdtrroaihmvsPrraiycusrtt.gebrehHielaaaiiencsltt.

Pension Review Board now refers to those pension system sustainability,” Brown recommendations regarding investment
systems as “Legacy FSRPs,” those whose said. policies, assets allocations,
goals are to reduce their amortization appropriateness of fees, cash flow and
period below 40 years. (See chart, “FSRP HB 3898 also intends to bring even more liquidity, and governance processes.
Changes through HB 3898,” on page 17) transparency to and works to avoid Pension boards must respond to firms’
Only if a system does not adhere to its conflicts of interest to the third-party firms recommendations and reports in public
legacy plan will it be required to prepare a which perform evaluations of pension records.
new plan that achieves 30-year funds’ investment practices. Evaluating
amortization no later than two years after firms must state their qualifications and At one point late in the session, HB 3898
a triggering actuarial valuation or Sept. 1, experience and they must carefully note was amended to include pension system
2025, whichever is later. The 30-year any possible conflicts of interest. Also, the grading criteria. TEXPERs voiced concerns
provision coincides with the effective date independent firms must list the types of and provided various options for the stated
of the PRB Guidelines. The pension system remuneration they receive from sources goal of the proposal. The legislative
and its sponsor must report progress other than public retirement systems. And committee added that a system and data to
toward its goals every two years to the they must also explain whether they made monitor performance already exists and is
PRB.
TEXPERS PENSION OBSERVER
Legislators also recognized TEXPERS’
concerns that the changes which pension
funds often take a while to show up in the
form of lower amortization periods. The
previous law required FSRPs when systems
moved above 40-year amortizations for
several actuarial valuations. HB 3898 has
several qualifiers (detailed in the
accompanying charts) geared toward
moving systems between 30- and 40- year
amortizations, (and even to 25 years if a
pension system is already in an FSRP
situation). Effective Sept. 1, 2021, FSRPs will
need to be developed if a system has
exceeded 30 years for three consecutive
annual AVs (or two consecutive AVs for
those that conduct AVs every two or three
years).

And, effective Sept. 1, 2025, any system
exceeding 40 years, or exceeding 30 years
with a funded ratio below 65 percent, will
have to develop an FSRP. HB 3898 puts
more emphasis on plan sponsor
participation and cooperation with the
pension system for FSRP development,
including the ability to share costs for
actuarial valuations.

Paul Brown, TEXPERS legislative
committee chair during session, worked
diligently with House Pension committee
chair Rafael Anchía (D-Dallas) and his staff.

“Chair Anchía worked through numerous
issues in a constructive, collaborative
fashion. These were not easy fixes and they
did achieve some fairness for systems who
must now work to achieve goals set by the
Pension Review Board for long-term

16  | www.texpers.org

TL

TEXPERS PENSION OBSERVER www.texpers.org | 17

TL said. “Our member systems need to keep dishonorably discharged peace officers
their positive momentum and steady from job-hopping to other jurisdictions
reported in the color-coded reports that improvements as priorities. We will which need police. The bill also would have
are being compiled by the PRB. They could continue to offer input on what a stripped police officers of their future
easily be provided on the Texas Public meaningful evaluation scheme might look pension benefits if they were dishonorably
Pension Data Center website. like.” discharged.

Tyler Grossman, the El Paso pension Three other bills deserve attention, HB TEXPERS Legislative Committee
system’s executive director, took point on 867, HB 4286, and HB 4566. HB 867 enabled member James Smith, speaking as the
the issue for the TEXPERS legislative family law court judges to tap pension Board Chair for the San Antonio Fire and
committee, offering constructive funds for the payment of spousal Police Pension Fund and who is now
alternatives to the legislators. maintenance and child support as part of a president of the TEXPERS Board, testified
Qualified Domestic Relations Order. But against HB 4286 to the Texas House
“We looked closely at how grading public pension funds clarified and Homeland Security and Public Safety
systems that had been developed, ultimately retained their ability to keep committee. Smith noted how “dishonorable
particularly by one public policy institute in their members’ QDRO plans intact, as they discharge” for police differed from the
Florida,” Grossman said. “It becomes are part of funds’ actuarial calculations. same designation for the military. He said it
quickly apparent that grading Family law judges now have greater power would be inherently unjust to officers who
sensationalizes issues and has no real to order funds’ redirection of pension had dedicated decades of their lives to
substance. The PRB is already creating payments for child support and spousal public service only to be stripped of their
reports that color codes pension systems maintenance. The bill intends to update pensions for just mere allegations and
relative performance against others for state law to align more closely with current before any official determination of
certain operational metrics. The PRB can federal law. misconduct. The bill failed to emerge from
certainly build off that as a starting point the committee.
before legislating grading.” House Bill 4286
HB 4286 was a late bill submission that House Bill 4566
The amendment language was not sought to discourage the ability of Also, while HB 4566 did not pass, it could
included in the final version of HB 3898.

“The PRB will likely look closely at
grading before next session,” Grossman

18  | www.texpers.org TEXPERS PENSION OBSERVER

TL “As our legislative team continually reminds us, legislators and the
Pension Review Board are inviting our views in these processes,” Smith
be interpreted to provide a first-blush glimpse of what may be in store. said. “If we work with them in a spirit of constructive collaboration, we
HB 4566 was a response to PRB reports of a small number of systems will have success. There are numerous ways to engage with them and we
not in compliance with reporting deadlines. Again, TEXPERS’ Legislative will make every effort to produce the best possible outcomes.” PO
Committee stood up for members by informing legislators that the
statute currently provides the significant legal authority that could JwcasoniohtedmuoasGmsteipiumovenenecisrcniaaaealltzinTziodeiesnxspsaaui.snpbHuplpiecbeehlnnaicassfsifirooaeannilrsasffstuu.iionsnndtdessdpinTroEcfrXeisPsiEssRioSnal
compel systems to provide required data and reports.

The PRB has been reluctant to use this authority and stated to the
committee that their effort is to work cooperatively with any system.
TEXPERS questioned the need for more enforcement measures since
authority already existed. This bill did not move.

TEXPERS legislative consultant Eddie Solis has repeatedly observed
that the PRB is responding to legislators’ overall concerns and
expectation to gain the information they need to make informed
decisions about pension systems governance and administration.

“The best thing that pension systems can do is to continue to take
these matters seriously. Comply with PRB deadlines. Take their classes.
Ask for assistance when and if necessary. TEXPERS can help facilitate
that. And do everything possible to fulfill the responsibilities to your
system and its members to perform as well as it can.”

TEXPERS members will have numerous opportunities in the months
ahead to make public comments on the Pension Review Board’s
rulemaking for the new legislation. TEXPERS Board President James
Smith urges participation.

TEXPERS PENSION OBSERVER www.texpers.org | 19

BESTPRACTICES

MANAGEMENT

WUHPYTDHOESROEMTUARNNYTLOEATDHEEROSFFSICCREE?W
BY DR. GLEB TSIPURSKY, TEXPERS CONTRIBUTOR

Due to strong employee resistance and once-in-a-lifetime event, and screwing it up
turnover, Google backtracked on May 5 from its will mean far-reaching problems with staff
plan to force all employees to return back to retention, morale, and productivity. After all,
the office and allowed many to work remotely. nearly all employees of public retirement
Following Google’s bad example, Amazon tried systems can do their work fully remotely, and
to force all employees to return back to the so any return to the office must be handled in a
office; again, employee opposition and staff careful, considered, and research-based
resignations led to a reversal on June 10. manner informed by best practices.

These trillion-dollar companies lost many To make the right decisions requires the right
millions in the form of top staff leaving, information. You might wonder whether
employee morale plummeting, and major plan Amazon, Google, and so many other leaders
changes as a result of their poor return to forcing employees to return to the office had
office strategy. Yet the managers of public the right information. The answer is they did.
employee retirement systems don’t have There are many extensive, in-depth surveys
millions of dollars to waste. They need to get from Spring 2021 run by top-notch
their return to office strategies right. It’s a organizations such as the Harvard Business

20  | www.texpers.org TEXPERS PENSION OBSERVER

BP accountability and effective evaluation of employees.

School and the Society for Human Resource Management, as well as Mental Blindspots Leading to Disastrous Return to Office
companies such as Microsoft and Slack, which asked thousands of
employees about their preferences on returning to the office after Decisions
the pandemic.
Why are these leaders resistant to the seemingly-obvious
All of the surveys revealed strong preferences for working from solution: a hybrid model for most, with full-time permanent remote
home post pandemic at least half the time for over three-quarters work for those who both want it and show high effectiveness and
of all respondents. A quarter to a third of all respondents desired productivity? This is because of cognitive biases, which are mental
full-time remote work permanently. From 40 to 55% of respondents blindspots that lead to poor strategic and financial decision-making.
said they’d quit without permanent remote options for at least half Fortunately, by understanding these cognitive biases and taking
the work week; of these, many would leave if not permitted fully research-based steps to address them, we can make the best
remote work. Minority employees expressed an especially strong decisions.
preference for remote work to escape in-office discrimination.
Many people feel a desire to go back to the world before the
Leaders frequently proclaim that “people are our most important pandemic. They fall for the status quo bias, a desire to maintain or
resource.” Yet the leaders resistant to permitting substantial get back what they see as the appropriate situation and way of
telework are not living by that principle. Instead, they’re doing what doing things.
they feel comfortable with, even if it devastates employee morale,
engagement, and productivity, and seriously undercuts retention A major factor in leaders wanting everyone to return to the office
and recruitment, as well as harming diversity and inclusion. In the stems from their personal discomfort with work from home. They
end, their behavior is a major threat to the bottom line. As leaders spent their career surrounded by other people. They want to resume
of public retirement systems, you can’t afford to make such bad regularly walking the floors, surrounded by the energy of staff
decisions. working.

Why Are So Many Leaders Wary of Remote Work? They’re falling for the anchoring bias. This mental blindspot
After interviewing 61 mid-level and senior leaders on this causes us to feel anchored to our initial experiences and
information.
question in 12 organizations which I helped develop a strategic
approach to transitioning back to the office, I found that a large The evidence that work from home functions well for the vast
number of leaders wanted to return to what they saw as “normal” majority doesn’t cause them to shift their perspective in any
work life. By that, they meant turning back the clock to January significant manner. The confirmation bias offers an important
2020, before the pandemic. explanation for this seeming incongruity. Our minds are skilled at
ignoring information that contradicts our beliefs, and looking only
Another key concern for many involved personal discomfort. They for information that confirms them.
liked the feel of a full, buzzing office. They preferred to be
surrounded by others when they work. Reluctant leaders usually tell me they don’t want to do surveys
because they feel confident that the large majority of their
Other reasons involve challenges specifically related to remote employees would rather work at the office than at home. They wave
work. They listed deteriorating company culture and growing work- aside the fact that the large-scale public surveys show the
from-home burnout and Zoom fatigue. Others cited a rise in team opposite. For instance, one of the major complaints by Apple
conflicts and challenges in virtual collaboration and employees is a failure to do effective surveys and listen to
communication. A final category of concerns relates to a lack of employees.

TEXPERS PENSION OBSERVER In this refusal to do surveys, the confirmation bias is compounded
by another cognitive bias, called the false consensus effect. This
mental blindspot leads us to envision other people in our in-group -
such as those employed at our company - as being much more like
ourselves in their beliefs than is the actual case.
What about the specific challenges these resistant leaders brought
up related to working from home, ranging from burnout to
deteriorating culture and so on? Further inquiry on each problem
revealed that the leaders never addressed these work-from-home
problems strategically.

They transitioned to telework abruptly as part of the March 2020
lockdowns. Perceiving this shift as a very brief emergency, they
focused, naturally and appropriately, on accomplishing the
necessary tasks of the organization. They ignored the social and
emotional glue that truly holds organizations together, motivates
employees, and protects against burnout.

That speaks to a cognitive bias called functional fixedness. When
we have a certain perception of how systems should function, we
ignore other possible functions, uses, and behaviors. We do this
even if these new functions, uses and behaviors offer a better fit for
a changed situation, and would address our problems better.

Competitive Advantage in the New Normal

More forward-looking leaders realize the world changed. They
may feel uncomfortable with the idea of not having a full-time, in-
office culture. However, they recognize that for the sake of their
most important resource, it simply makes sense to let those

www.texpers.org | 21

BP COMMUNICATION

employees who can productively do so work from home much or all F3UTNIPDS'STOMEENMGBAEGRESHYIOPUR
of the time.
BY ALLEN JONES, TEXPERS DIRECTOR OF COMMUNICATIONS
For example, a host of large companies - ranging from insurance
giant Nationwide to tech firm Facebook to major drugmaker Every retirement system has its unique style of managing
Novartis - decided to let many or all of their currently-remote operations - each has different challenges. There is, however, one
employees work from home permanently. Many more announced a issue that all pension plan administrators and boards face,
switch to a permanent hybrid model of 2-4 days of remote work regardless of their size: engaging members.
after the pandemic, with some allowed full-time remote work.
One of the biggest issues we hear about from our system
The post-pandemic office will require the realignment of members is that they fear not everyone among their active and
employer-employee expectations. Leaders need to use research- retired plan members is engaged with the pension fund, making it
based strategies to overcome their gut reactions that cause them to hard for fund leadership to determine their needs. Here are three
fall victim to mental blindspot. Only by doing so can they seize the best practices to engage members that we've compiled from
competitive advantage from using their most important resource listening to our system members at conferences:
effectively to maximize their retention, recruitment, morale,
productivity, workplace culture, and thus their bottom line. PO Send out member satisfaction surveys. Sending an annual
survey to your members provides your fund with essential data
pTaBapAnusrrenooidtspioohntRuffotPriierennsrmroggaknfcyocaatRtnoitiseeicdnotaeTsncuseubaoralneflgtlmoyaihnnr-nasigrtCcve:ivtyiAonooemoDrMtawbiphsalineaeasnetsscuOidttiarefieiltvsfnrhoiektcAonieAmsuvBtdgaoa,evnhinCdnadtaaEcnglLnOheteecamamoaegdafdeeeErit.rnknxhitigpnen,egHDffruuyrtt.ottsbGuu,rirraldeeenb--d about how your members interact with their fund. It also
promotes what is available to the respondents of the survey.
Conduct focus groups. Invite a group of members for a
luncheon to discuss their thoughts about the fund, including
how they like to communicate with the fund (e.g., emails, print
publications, social media) and what information they most
need to address concerns their might have. When you interact
face-to-face, you usually discover issues you may not know
about and encourage a great dialogue.
Utilize your fund's social media platforms. Social media sites
such as Facebook, Twitter, and LinkedIn allow users to create
polls to ask members what they like or dislike about their fund.
Tailor polls to specific topics such as communications, in-
person gatherings, retirement planning, etc. The method is
easier for respondents to answer quickly, and the response rate
can be much higher than formal surveys. If you are unsure how
to create a poll on your social media platforms, conduct an
internet search asking "how to conduct polls on [insert name of
social media platform]."

As soon as you have received feedback from your members about
their needs and interests, adjust your communication strategy and
operational goals accordingly. In addition, let your members know
that they've been heard via your fund's communication channels
and at board meetings. Be sure and inform them of what your fund
is doing to respond to their needs, too. PO

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TEXPERS PENSION OBSERVER www.texpers.org | 23