DOWNLOADABLE VERSION: TEXPERS Pension Observer Vol 2 2022

THE OFFICIAL MAGAZINE OF THE TEXAS ASSOCIATION OF PUBLIC EMPLOYEE RETIREMENT SYSTEMS | VOL. 2, 2022

PLUS: BEST PRACTICES IN CYBER SECURITY!

Eva Velasquez, president and CEO of the Identity Theft Resource Center,
shares tips on what your organization and employees should do to
secure personal data. p. 21

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*Data as of February 28, 2020 Beth McWilliams Mark Delaney, CFA Marcus Smith
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CONTENTS

UP FRONT COVER STORY: TEXPERS held its Summer Educational Forum BALANCE SHEET
at Hotel Paso Del Norte in El Paso, Texas, Aug. 21-23, 2022.
04 Our session notes include 12 key takeaways. p. 9 19
COULD PRIVATE
PRESIDENT'S NOTE FEATURES REAL ESTATE HELP
YOUR FUND?
TEXPERS Board President Jim 14
Smith sees the association's VOTERS PASS MUNICIPAL BONDS FOR Columnist Garrett Zdolshek of
"family" of system, investment FIREFIGHTER PENSIONS IDR Investment Management
and vendor members growing points out the benefits of the
stronger. As his term At the polls in May, Longview citizens approved $45.6 alternative asset.
continues, he says he looks million in bonds to pay a lump sum to its firefighters'
forward to the path ahead for pension fund. BEST PRACTICES
public pensions in Texas.
15 19
05 PENSION DOLLARS BENEFIT SMALL PUBLIC CRITICISM
TOWNS AND RURAL TEXAS: STUDY BY A TRUSTEE: TIPS
NEW RULES FOR RESPONDING
Public pension plans have a particularly positive economic
PROPOSED FOR impact in small towns and rural areas. See how the Lone Lawyer Gary B. Lawson
Start State fared in the research. provides legal insight into
FSRPS dealing with disgruntled board
members.
The Texas Pension Review
Board has has created new 19
proposed rules to address LEGACY DEBT: NEW
situtionas in which pension TOOL AVAILABLE
funds may find themselves as
they bring their amortization A report suggests there are
periods below 40, 30, and 25 more modern ways to cope
years to comply with Funding with a fund's unfunded
Soundness Restoration Plans. liabilities from years ago.

06 21
TIPS FOR SECURING
NEWS BRIEFS PERSONAL DATA

There might be an increase in Eva Velasquez, President and
pensionable salaries for CEO of the Identity Theft
teachers, and Americans want Resource Center, explains the
to learn about personal importance of securing
finance. Check out these and personal data and
other pensions, retirement, organizations protecting
and TEXPERS news you might themselves.
have missed.
www.texpers.org | 1
07

RETIREMENT

SECURITY

New research suggests
policies should be prioritized
to help middle-class families
save for retirement.

13

GIVING THANKS

Sponsors contribute to the
success of our educational
conferences. See who
supported our Summer
Educational Forum in El Paso,
Texas, Aug. 21-23, 2022.

TEXPERS PENSION OBSERVER

Our Board. About Us.
The Texas Association of Public Employee Retirement Systems is a
President Jim Smith voluntary nonprofit association that provides education and legislative
San Antonio Fire & Police Pension Fund advisory services to the trustees, administrators, professional service
providers, and employee groups that manage the retirement money of police
1st Vice President Sherry Mose officers, firefighters, and municipal and district employees in cities across
Houston Municipal Employees Pension System Texas.

2nd Vice President Jose Cavazos TEXPERS has 68 member pension systems that manage $32.7 billion in
Dallas Area Rapid Transit Retirement Plan & Trust retirement assets for 57,728 active members and 60,737 retirees and
beneficiary annuitants. Any public employee retirement system of Texas is
Treasurer Larry Knott eligible for membership and encouraged to join.
Dallas Area Rapid Transit Retirement Plan & Trust
TEXPERS’ past and present membership has consisted of police and fire
Secretary Carla Brewer departments, municipal employees, airport authorities, hospital districts,
Dallas Employees' Retirement Fund regional planning commissions, river authorities, transit authorities,
community colleges, and university medical centers. TEXPERS membership
Board Member Terry A. Bratton also includes investment and brokerage firms, actuaries, and general
Houston Police Officers' Pension System businesses that provide services to pension funds as permitted by association
bylaws.
Board Member Paul R. Brown
Big Spring Firemen's Relief & Retirement Fund It is important for trustees and administrators to voluntarily give their time
to strengthen and enhance their pension fund management skills. As such,
Board Member Tyler C. Grossman TEXPERS supported HB 13, enacted by the 83rd Legislature, and participated in
El Paso Fire & Police Pension Fund the Pension Review Board working committee that developed the Minimum
Education and Training Program. The MET Program has been approved by the
Board Member John D. Jenkins PRB and was effective January 1, 2015. In turn, TEXPERS developed the Basic
Dallas Employees' Retirement Fund Trustee Training class, which fulfills the requirements of the Program, and
offers it at least twice yearly prior to our conferences.
Board Member Larry Reed
San Antonio Fire & Police Pension Fund TEXPERS is dedicated to making high-quality, low-cost and convenient
training available to our members. We believe that it is critical to advancing
Board Member David Stacy the excellence of Texas public fund management and the public’s confidence
Midland Firemen's Relief & Retirement Fund in trustees and administrators to manage their retirement systems
prudently.
Our Staff.
TEXPERS conducts an Annual Conference each spring and a Summer
Executive Director Art Alfaro Educational Forum in August each year. Along with the Basic Trustee Training
class, we offer additional focused workshops designed around the current
Director of Conferences & Events topics or trends focused on public fund management and investment issues.
Carolyn Butterworth, CMP We also conduct various seminars, workshops, and field trips throughout the
year.
Membership & Finance Supervisor Lena Terrell, CAP
TEXPERS education and training provides one avenue to assist trustees with
Director of Communications & Event Marketing maintaining their knowledge of state-of-the-art pension fund management
Allen Jones techniques and changes in the law or court decisions concerning pension
funds. In addition, they serve as a focal point for the exchange of ideas and
Member Services Specialist Samantha Polsgrove best practices among participating members across the state.

Contact Information TEXPERS PENSION OBSERVER
The TEXPERS Pension Observer
C/O Texas Association of Public
Employee Retirement Systems
1504 San Antonio St., Suite 206

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

Copyright © 2022. 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.

2 | www.texpers.org

5900 Southwest Parkway, Building 1, Austin, TX 78735
www.sageadvisory.com
512.327.5530

PRESIDENT'SNOTE

SMITH HUMBLED TO BE RE-ELECTED TO SERVE
ANOTHER TERM AS ASSOCIATION'S PRESIDENT

'FLIP THROUGH THIS MAGAZINE' TO SEE WHAT TOOK PLACE AT OUR EL PASO CONFERENCE

The TEXPERS Annual Conference was held in Fort financial and actuarial health of Texas' state and local government defined

Worth in April, and now the Summer Educational benefit public retirement systems.

Forum has come and gone in El Paso this August. I While she will be sorely missed at the PRB, we were fortunate to have had

cannot believe how quickly time moves. the opportunity to meet Amy Cardona, the new executive director of the PRB.

I'm humbled that I was elected to another four- Amy and her staff will be great to work with in the future. I reassured Amy
year term by the Association's Police caucus to that TEXPERS and all of our funds will be at the ready to help the PRB
serve on the TEXPERS board of directors at the in any way we can and work together on any issues that may arise.

April conference. I'm equally humbled to have In closing, what can TEXPERS do for you? I would ask you to please reach
out to us and let us know what you would like to take place at future TEXPERS
been elected by the TEXPERS Board of Directors events. You have a unique perspective, having attended many events

to serve for the next two years.
Working as President with and learning from the other TEXPERS Board

members has been a pleasure. throughout the country.

I would also like to reiterate that the entire TEXPERS Board and staff need

After our two conferences in 2021, and now having two conferences help from you, the membership. We need your best ideas of what you expect
under our belt, I want to thank Art Alfaro for his excellent leadership and from your association. Please, let us know of speakers you may have heard or
management skills in dealing with and maintaining TEXPERS' daily topics you would like us to address.
operations and successfully leading our wonderful staff in completing
four gatherings. Also, if your individual plan needs some assistance or guidance, please
reach out to our Board members, staff, our sponsors, and especially members
I heard so many compliments that it was impossible to keep count. It was of any funds. We have a lot of brilliant folks who are part of our entire

great to hear all the accolades from seasoned TEXPERS veterans and many membership. We will get stronger as long as we stay unified and continue to

TEXPERS rookies. educate ourselves to prepare for any issues we may face in the future.

During the Fort Worth event, I had the opportunity to talk with Rep. Rafael Should anyone ever want to reach out to me dealing with any concern,

Anchía (D-Dallas), who chairs the Pensions sub-committee. He had complaint, or compliment, you can reach me via our TEXPERS phone number

attended many sessions before speaking to us during our Annual at 713-622-8018 or email me through the association email at

Conference in Fort Worth. He stated that he wants to meet with the [email protected].

stakeholders to hammer out any legislation that may come before his It is truly an honor and privilege to serve as President of this great

committee. He committed to having an open-door policy and keeping lines organization.

of communication open.

I tried to soak up all the wonderful things that were going on during both May God bless you and your entire family,

events. Fort Worth and El Paso served as excellent host cities, I enjoyed Jim Smith
staying at the hotels, and our speakers were outstanding. Most

importantly, the time we all spent with old and new friends is something Jim Smith,
we can't put a price tag on. We have formed into one large family. TEXPERS Board President

I can only see our family getting bigger and stronger. I had the

opportunity to learn from many of my peers, and the industry thought

leaders and brought those ideas back home to my fund to implement.

Attending TEXPERS events is one of the best things you can do for your

service to a public employee retirement plan as an administrator, trustee,

or investment manager. TEXPERS equips attendees with skills and industry

insight needed to manage the retirement money of their active and retired

workforce.

I encourage you to flip through this magazine to read about the various

sessions, special events and sponsors our staff put together at our recent

Summer Educational Forum in El Paso, Texas.

We picked a fantastic location at Hotel Paso Del Norte. This historic venue

was within walking distance of dining, conference networking events, and

short excursions to make the most of our stay while visiting El Paso.

I want to convey my gratitude to our many sponsors who made our Forum

possible.

While I have your attention, I'd like to congratulate Anumeha "Anu" Pictured from left, Rep. Philip Cortez (D-San Antonio), TEXPERS Board
President Jim Smith, and Rep. Rafael Anchía (D-Dallas) during
Kumar for being selected as the executive director of Austin Fire Fighters TEXPERS' 2022 Annual Conference in Fort Worth, held Aprl 3-6, 2022.
Relief and Retirement Fund. She was hired by the fund in March of this
year after working as the executive director of the Texas Pension Review
Board from 2015 to 2022. The state agency is mandated to oversee the

4 | www.texpers.org TEXPERS PENSION OBSERVER

UPFRONT COMPLIANCE

PENSION REVIEW BOARD CREATING NEW RULES FOR
'PLAN-FRIENDLY' FSRP IMPLEMENTATIONS

already in an FSRP process, become subject

The Texas Pension Review Board to the FSRP requirements, fall short of their
committee creating rules for implementing
House Bill 3898 accepted new, flexible FSRP, or revise their FSRP and still are not
proposals from the agency's staff at its
May meeting. The rules were to be moving in the right directions actuarially.
presented to the full Board on July 14, when
the official public comment period will PRB staff actuary David Fee explained,
begin.
for example, how the corridors would
Ultimate consideration of all comments
and changes is planned for the October PRB provide guidance as to when a system
meeting. Visit www.texpers.org for
additional coverage. would be required to submit revised FSRPs.

The staff’s proposed rules attempt to He also suggested that systems with
address the untold number of situations in
which pension funds may find themselves adequate funding ratios and amortization
as they bring their amortization periods
below 40, 30, and 25 years to comply with periods could submit voluntary FSRPs that
HB 3898.
could use that corridor as guides to keep
The law, passed in the 2021 legislative
session, has a trigger date of Sept. 1, 2025, them from triggering a formal FSRP
and allows for the widely varying schedule
with which pension funds conduct their process.
actuarial valuation reports and implement
plan reforms. Prior to the meeting, TEXPERS Legislative

HB 3898’s changes sought to address Committee member Tyler Grossman
PRB concerns that too much time was
elapsing between the first signs of penned comments about the proposed
actuarial trouble and the development and
implementation of Funding Soundness rules, requesting that a “final rules product
Restoration Plans.
also preserves the ability of individual
PRB policy analyst Madilyn Jarman at the
May meeting walked the PRB Actuarial systems to work with their respective
Committee through many different
scenarios in which systems in FSRP status, government sponsors to jointly determine
or those needing to bring their amortization
periods below 30 years by Sept. 1, 2025, [whether automatic risk-sharing Figure 1: The example chart above would use pension
might find themselves. mechanisms and/or adjustable benefit or systems’ projections to create a compliance corridor
unique to that system based on their funded ratio and
Jarman explained how the rules introduce contribution structures] need to be taken to amortization period. Source: “Policy for Determining
new concepts, like “Compliance Corridors,” fulfill [revised]-FSRP requirements and Promoting Compliance with Funding Soundness
which recognize that it takes time for consistent with each system’s governing Restoration Plan Requirements (DRAFT),” preliminary
pension funds to adjust benefits, statute and/or the plan sponsor’s charter.” draft of proposed rules, presentation of Pension
investment results, and contributions from
members and their City sponsors. She Grossman is also the executive director Review Board staff at the May 18, 2022, Actuarial
described how the corridor is wide in the of the El Paso Firemen and Policemen's Committee.
first years of implementation as the
adjustments begin working. The rules draft Pension Fund.
presented by Jarman includes corridors for
both funded ratios and amortization Kolby Beckham, chair of the Longview
periods (see Figure 1).
Firemen's Relief & Retirement Fund, noted
But toward the end of 10 years, the
corridor narrows, as the adjustments that many funds are already paying 100%
should have had the time needed to
succeed or otherwise adjust to any or more of the normal cost of their plan.
negative market situations which may have
occurred. PRB actuarial committee Normal costs are contributions necessary,
members probed numerous possibilities
that might affect pension systems that are added to investment income, that pays for

benefits earned each year.

Before automatic cost sharing takes

effect, Beckham suggests evaluating the

normal cost paid by members. He said,

“Asking for members that are already

paying 100% of their benefit to give more is

not fair or equitable.”

The legacy FSRP laws, when combined

with the new ones, make implementation

complex, says PRB Vice Chair Keith

Brainard.

“It would be a lot simpler if the PRB and

its staff did not try to inject some amount

of grace and flexibility into this," he said. "A

lot of the additional flexibility we’re dealing

with here is creating positive incentives for

pension plans to do the right thing and to

avoid taking a hit, frankly, from the

statute.” Joe Gimenez is a public relations professional who

He said the complexity was meant to specializes in pension fund communications. He has

■meet legal requirements while still being assisted TEXPERS and several Texas pension funds in crisis
situations and public affairs.
plan-friendly.

New York • Connecticut • Washington D.C. • California www.texpers.org | 5

TEXPERS PENSION OBSERVER

UF NEWS BRIEFS POLL AMERICANS WANT PERSONAL

PENSIONABLE SALARY FINANCE CLASSES
FOR TEACHERS MIGHT
INCREASE STAFF REPORT - In a survey conducted
in March by the National Endowment for
JOE GIMENEZ - Texas teachers who try to Financial Education, over 80% of U.S.
earn extra salary through various incentive adults said states should require a
programs will gain additional, personal finance class in high school.
commensurate contributions to their
pension after a recent procedural move by According to the survey:
the Teacher Retirement System of Texas. 88% said their state should require a
semester- or year-long financial
The Teacher Retirement System of Texas education course for graduation
in late May put the finishing touches by 80% said they wish they were
adopting some amendments to Texas required to take a semester- or year-
Administrative Code for the pensionable long financial education course
payroll add-ons. The amendments related during high school
to bills passed in 2019 and 2021 relating to The most important financial
school district financing. education topic is spending and
budgeting (75%), followed by
When the Texas Legislature passed
House Bill 3 in 2019, it included a teacher ■managing credit (55%), saving
incentive allotment (TIA) as an optional
compensation program. (49%), and earning income (47%).

The TIA program enables school districts TEXPERS AND AMTEC BRING CONTINUING EDUCATION TO
to recognize effective, top-performing HOUSTON-AREA PUBLIC EMPLOYEE PENSION SYSTEMS
teachers with additional compensation.
Some employees receiving TIA can be put STAFF REPORT - TEXPERS and the American Bernard Vanderhaar, Capital square
on a viable pathway to six-figure salaries, Trustees Education Council co-hosted its Half-Day Jacob Keidkamp, FactRight, Inc.
in hope of retaining them in their positions. Investment Forum from 11:15 a.m. to 4:30 p.m. on Connie Love, John Henry Oil
Friday, June 10, 2022, in Houston, Texas. Geoff Flahardy, ExchangeRight REIT
The bill also sought to encourage
teachers in rural districts with additional The event offered TEXPERS Public Employee TEXPERS' Executive Director Art Alfaro also provided
compensation. Pension System Members from the greater- an update on the association.
Houston area the opportunity to earn Texas
Then in 2021, when the Legislature passed Pension Review Board-approved continuing The Half-Day Forum is part of an initiative to bring
HB 3 modifying public school financing, it education hours and the chance to network over a professional development and networking
enabled those incentives to be considered free lunch at Ruth's Chris Steak House. opportunities to TEXPERS member systems throughout
as salary and wages for the purposes of the state.
teacher retirement benefit computations. Presenters covered real estate, private equity,
and capital markets investment topics geared Half-Day Forums have already been held for funds
The TRS action means TIA compensation toward pension plant trustees, investment staff within the Dallas and Austin areas. ■
could make substantial impacts on an members, investment advisors, investment
employee's TRS pension if that officers, and analysts.
compensation is creditable compensation
The program's presenters included:
■under TRS laws and rules. Brian Kasal, Four Star Wealth Management

6 | www.texpers.org New
Member!

TEXPERS PENSION OBSERVER

UF RETIREMENT SECURITY

ARE RETIREMENT SAVINGS TAX BREAKS LEAVING
MIDDLE-CLASS HOUSEHOLDS BEHIND?

PRIORITIZING POLICIES TO HELP MIDDLE-CLASS FAMILIES CAN HELP ADDRESS
THE NATION'S RETIREMENT SAVING SHORTFALL, SAY INSTITUTE RESEARCHERS

Having the right tax breaks to increase retirement for retirement, also play a role.
savings disproportionately benefits high-income The value of tax incentives for saving is much greater for those at
households and does little for middle-class families, higher income levels, who face higher marginal tax rates. These
finds a new report from the National Institute on incentives are quite weak for much of the middle class. Further, those
Retirement Security. who can invest earlier and at higher levels benefit more from deferring
taxation on investment gains.
The Washington, D.C.-based nonprofit, nonpartisan The tax expenditures for retirement savings, oriented around the
organization contributes to policymaking through defined contribution system, give rise to inequities beyond income
research to develop a deep understanding of the and wealth. Tax incentives for saving exacerbate geographic and racial
value of retirement security to employees, employers, inequities in retirement.
and the economy. According to its latest report, the Solutions to these inequities should focus on increasing participation
top 10 percent of income earners receive the majority in the retirement savings system and ensuring working families also
of tax breaks for defined contribution (DC) plans and receive adequate incentives to save for retirement. A potential
Individual Retirement Accounts (IRAs). Moreover, solution could be to build upon Social Security by changing benefits or
according to the report, the top 30 percent of workers incorporating lifetime income options for savers. Another option is to
by income receive 89 percent of the present value of eliminate deduction-based tax expenditures and replace them with
tax benefits for DC plans and IRAs. refundable credits. One solution is to increase access and participation in
savings plans, which some states are doing for workers without
Consequently, the Institute's researchers say, there workplace plans, thus making it easier to participate. Finally, curbing
is a "missing middle" because the tax code offers abuses of the existing system would ensure that the significant sums of
meager retirement benefits for working Americans. federal tax revenue dedicated to retirement security are directed at
An Institute news release notes that these workers generating retirement income.
face rising retirement costs. They don't often have retirement plans at work
and depend on more than just Social Security income to maintain quality of ■To learn more about the report, visit www.nirsonline.org and follow the
life in retirement.
Institute on Twitter @NIRSonline.
The recently released report, The Missing Middle: How Tax Incentives For
Retirement Savings Leave Middle Class Families Behind, documents how TEXPERS is an Educational Sustainers Member of
current tax incentives fail to promote adequate retirement security for the the National Institute of Retirement Security.
middle class. Among the factors considered are marginal tax rates,
retirement plan participation, and income distribution. Additionally, the Allen Jones is director of communications and events
research offers solutions that could boost retirement security for middle- marketing at TEXPERS. He joined the association in 2017.
class families.
www.texpers.org | 7
"Saving for retirement is one of the biggest financial challenges facing
middle-class families," said Dan Doonan, National Institute on Retirement
Security executive director. "But the middle class is left behind by the
retirement savings system in key ways, including tax incentives."

He says it's encouraging that policymakers are examining the nation's
retirement savings shortfall. He believes it is critical to understand the policy
levers available to help middle-class Americans save for retirement.

"For example, policy areas to look at would be strengthening Social
Security, increasing access and participation in retirement plans, reforming
the deduction-based tax system, and ensuring the tax breaks are directed at
generating retirement income," Doonan says. "Together, such policy changes
could make a real impact ensuring working Americans will have ample
income to be self-sufficient and maintain their standard of living in
retirement."

The report's key findings are:

The current retirement saving structure suffers from a missing
middle. Social Security's progressive nature helps prevent old-age
poverty. Still, its level of income replacement falls off much more quickly
than private savings provide adequate retirement income for middle-
class workers.

Tax expenditures for various retirement programs are heavily skewed
toward high-income earners. This is partially due to the design of the
tax breaks themselves. However, several other factors, such as
participation in employer-sponsored retirement plans and financial tax
breaks themselves. However, several other factors, such as participation
in employer-sponsored retirement plans and financial resources to save

TEXPERS PENSION OBSERVER

New York • Connecticut • Washington D.C. • California

2022 Summer Educational Forum PHOTO/Allen Jones
Steve Hagenbuckle of TerraCap Management delivers the keynote presentation on Aug. 22,
12 Key 2022,duringTEXPERS'SummerEducationalForuminElPaso,Texas. TerraCap
Takeaways Management was a Gold Sponsor of the conference.

WRITTEN BY ALLEN JONES

Nearly 270 people attended TEXPERS' Summer Educational
Forum, Aug. 21-23, 2022, in El Paso, located in the far
western corner of the Lone Star State, bordering Mexico.

Forum attendees enjoyed comfortable temperatures
thanks to a bout of rain in El Paso, usually known for its
approximately 302 sunny days each year. Combined with a
walkable downtown district and the historic Hotel Paso Del
Norte Marriott Autograph Collection, the Forum made for
successful professional development and networking
opportunity.

The Forum was predicted to provide a $250,000 boost to
the El Paso economy, according to a report in El Paso Inc.

"The event, hosted by our Association, brought together
thought leaders to discuss topics trustees and
administrators of public pension systems need to know
when managing annuitants' retirement funds," says
TEXPERS Executive Director Art Alfaro. "The theme, Sharing
Solutions in Sun City, challenged our presenters to develop
content that not only provided our attendees with
information but that would allow them to return to their
funds with actionable ideas. Our Forum also provided ample
opportunities for all of our System and Associate members
to network."

Each year, the Forum offers plenty of ideas, tips, and
insights into the public employee pension and investment
industry. The event held in El Paso was no exception.

The following list includes notes taken during TEXPERS'
Summer Educational Forum presentations:

02. "You can see that 13.8% of the total U.S.
workforce is part of pension plans or state

and local employees."



- From Historic & Current Market Volatility,

What Are Implications to Investors?,

"Inflation occurs with a decrease in supply Keynote Presentation by Steve
and increase in demand."
01.
Hagenbuckle, TerraCap Management
Notes: Social Security coverage is unavailable to 25% of

- From Current Market Environment, an this workforce. In addition:

Educational Workshop presented by Sean 66% of firefighters and law enforcement do not receive
SS benefits
Windsor, Champion Capital Research 50% of teachers do not receive SS benefits

Notes: The term inflation refers to the general increase in
prices of goods and services in economics. Inflation reduces
the purchasing power of money when the general price
level rises, resulting in fewer goods and services being
available for sale.

TEXPERS PENSION OBSERVER www.texpers.org | 9

03. "We've done some calculations; for the next 5
to 10 years, emerging market equities will
probably be the No. 1 returning asset class,

close to 5%, followed by international small
caps, then emerging market debt ... and
obviously international."



- From Emerging Markets on the Edge:

Opportunity or Dead Money?, Presentation

by Martin Schulz, Federated Hermes

Notes: Some of the worse assets will be US bonds, US large
caps, and US small caps. The US still represents a quarter
of GDP. Emerging Markets = More than a third of GDP, not
just China.

PHOTO/Allen Jones
James Perry, of Maples Group, sings the National Anthem while a Color Guard presents the
U.S. and Texas flags during the opening ceremony of the general sessions on Aug. 22, 2022, of
TEXPERS' Summer Educational Forum in El Paso, Texas.

04. "It is important to note that there are only
five systems that have an L-FSRP [Legacy-
Funding Soundness Restoration Plan] and 05. "What is ESG shareholder litigation? It is
that there will not be any more than that." securities litigation or a case brought by
shareholders relating in some way to an

environmental, social or governance issue."

- From Funding Soundness Restoration Plan


Overview: Understanding the Rules and - From the Case For and Against

Policy, Presented by Ashley Rendon, Texas

Pension Review Board

Notes: That's because when any FSRP was submitted Shareholders Litigating ESG Issues,
before Sept. 1, 2021 deadline, the system was
grandfathered, and their 10-year period can play out. Presented by Joshua W. Ruthizer, Esq., Wolf
However, the system is subject to progress updates to the
PRB every two years. Popper, LLP; James Smith, San Antonio Fire

& Police Pension Fund; and Tyler Grossman,

El Paso Firemen & Policemen's Pension Fund



Notes: Whatever your funds' views are on ESG investing,
trustees should be aware of ESG shareholder litigation
options as there have been federal and state cases.

10 | www.texpers.org TEXPERS PENSION OBSERVER

06. "As you know, the fed has been raising rates
pretty dramatically, so we think middle

market, direct lending, and private credit is a
strong strategy."



- From Diversifying Strategies in an

Inflationary Environment, moderated by

Kevin Vandolder of AndCo Consulting,

featuring thought leaders Steve Shekane,

Constitution Capital Partners; Daniel Brady,

PNC Capital Advisors; and Zack Ellison,

Applied Real Intelligence PHOTO/Allen Jones

MikeTrainer, presidentoftheSanAntonioFireandPolicePensionersAssociation,takesa
seatbeforethenextpresentationstartsduringdayoneof TEXPERS'SummerEducational
Notes: Floating interest rates. As rates go up, getting paid Forum heldAug.21-23,2022,inElPaso,Texas.
more interest on underlying investments. (Middle markets
are $100 million and below).

07. "Since the global financial crisis, we've really
been in a favorable financial environment for

risk assets - not only risk assets - fixed
income as well, low to falling rates, stable

growth. It has been really 60/40 portfolio 08. "What is a dislocation? This is observed as a
going back to 2008-2009. It has been asset precipitous decline in market pricing. This can
allocation that has beat most others but now,

as we're changing, the investment landscape be caused by one of two things: Either it's
is shifting a bit with inflation, growth because of market-specific stress or because

concerns, and rising rates - that level of of exogenous shock."

diversification probably isn't going to cut it."



- From Navigating Market Dislocations
- From Getting Real with Real Assets:
presented by Amit Sanghani, Napier Park
Important Implications in a Shifting
Global
Economic Landscape, moderated by Scott


Whalen, Verus Investments and featuring Notes: Events of the last two years, pandemic, is an

thought leaders Marcus Berry, TA Realty example of an exogenous or external factor. A specific
market stress example is the late-2015/early-2016 energy
Michele Butler, Cohen & Steers Brian oil and gas crisis, which had particular impacts on different

Watson, Invesco markets.



Notes: Areas experts represented included real estate,
commodities, and midstream energy.

TEXPERS PENSION OBSERVER www.texpers.org | 11

09. "Emerging market debt is fixed income 11. "What we do for one pension system isn't the
securities issued by governments, state- same for all. Outsourcing model doesn't have
to be the same for your neighbor."
owned entities, also known as quasi-

sovereigns, and corporations." - From Outsourcing Administrative Services,

panel moderated by Paul Brown, Big Spring
Firemen's Relief & Retirement Fund
- From Emerging Markets Debt, Jared Lou, featuring thought leaders Stephanie
Masson and AJ Weber of Lauterbach & Amen
William Blair & Company LLP

Notes: Emerging Markets Debt, or EMD, can be issued in Notes: Outsourcing requests can include backup for when
hard currencies such as U.S. dollars, Euro, British Pound, administrators leave positions, such as in accounting,
Japanese Yen, and other currencies. Issuers can also issue meeting coordination, tax reporting, customer service,
in local currencies such as the Mexican Peso and the contribution reports, etc.
Brazilian Real.

10. "The power of a defined benefit plan versus a 12. "CLO equity offers mid-teens returns, and
defined contribution plan is enormous. So the there's just not a lot of things that offers
pooling that comes from just simply having those level of returns today."


the same assets and the same pool, right - From The Case for CLO Equity; Why CLO
away, you have scale. So, when you think Equity, Why Now?, presented by Chris
about a defined contribution plan and each Mascarinas, Oxford Funds
individual is investing on his or her own, the
fee scale is tremendously different. So, just Notes: CLOs, or collateralized loan obligations, are
the fees alone are a huge saving in a defined primarily broadly syndicated U.S. Corporate Loans. They
benefit plan versus a defined contribution differ from CDOs, or collateralized debt obligations, which
hold toxic stuff such as mortgage-backed and asset-
plan."

■backed securities. Biggest difference is CLOs have few

- From The Power of Pooling & Challenges defaults.

for Public Pensions, presented by Charles Downloadable copies of the slide decks as
well as video recordings of the talks at
Millard, Amundi Asset Management www.bit.ly/2022TEXPERSEdForum.

Notes: Early baby-boomer retirees who have a defined TEXPERS PENSION OBSERVER
benefit plan and retire at 65 are 11.6% less likely to run out
of money for retirement.

12 | www.texpers.org

TEXPERS PENSION OBSERVER www.texpers.org | 13

The winning streak of public support for City Council decided in February that 2021. That required LFRRF to achieve a 30-
issuing pension obligation bonds remains in Pension Obligation Bonds were the best year amortization period by Sept. 1, 2025.
place. Voters in Longview and Arlington city option for adequately funding its The POBs were issued in view of bringing
officials have affirmed this financing tool in firefighters’ retirement plan. The City Longview fund into compliance.
recent months. already contributes 19% of firefighters’
pensionable payroll to the plan. After the Also in early May, the City of Irving issued
On May 7, Longview voters approved a bond’s passage, a portion of that will go news indicating that it had, on April 21,
$45.6 million bond issuance to provide a toward paying the principal and interest successfully issued $80 million in pension
lump sum payment to their city’s pension payments. But the pension fund benefits obligation bonds for the Irving Firemen’s
fund for firefighters. from the lump sum’s long-term investment Relief and Retirement Fund. The City
possibilities. Council approved the issuance in August
The Gregg County election office 2019. The City of Irving’s press release
confirmed that 2,038 (59.07%) people The Longview fund received favorable estimated it would save $48 million over
approved the bond and 1,412 (40.93 %) did media coverage in Longview after Texas the next 25 years by financing the pension
not. The city will raise property taxes by 2 Pension Review Board members in fund’s outstanding liability.
cents per $100 valuation, or $33.37 on the February complimented a Memorandum of
average $166,867 home in Longview. Understanding between the City and the According to PRB records, the Irving fund
pension fund. The memorandum, which had triggered completion of a Funding
Tellingly, Longview voters did not became part of the bond covenant, Soundness Restoration Plan with its
approve $230 million in school district established firm conditions prohibiting January 2014 actuarial valuation report
bonds despite school district officials’ benefit increases before certain funding showing a 63.4 year amortization period.
reassurances that the bonds would not and amortization metrics are reached. Its December 2019 AVR revealed that
increase the tax rate. Only about 33% of progress had been made, with a lower 43.6
voters approved those bonds, while 67% The Pension Review Board is the state year amortization period.
did not, according to Gregg County election agency mandated to oversee all Texas and
results. local public retirement systems regarding The system is required to achieve an
their actuarial soundness and compliance
“I know this is a difficult time to have to with state reporting requirements. The ■amortization period of less than 40 years
look at increasing taxes, but [voter] support agency's records showed that the
for us is just amazing," said Kolby Beckham, Longview firefighters’ pension had infinite by 2026.
the chair of the Longview Firefighters Relief amortizations in each of its actuarial
and Retirement Fund, in a Longview News valuation reports from 2018-2020. Joe Gimenez is a public relations
Journal report. "This is just a huge win for professional who specializes in pension fund
the retirees, for the active firefighters and Since it had not completed a Funding communications. He has assisted TEXPERS
even the firefighters we haven’t hired yet." Soundness Restoration Plan targeting 40 and several Texas pension funds in crisis
years by September 1, 2021, it became situations and public affairs.
According to the Journal, the Longview subject to the HB 3898, a law passed in
TEXPERS PENSION OBSERVER
14 | www.texpers.org

In 2018, public pension benefit dollars the highest percentages of their metropolitan peers and an average
represented between 0.4% and 1.1% on populations receiving public pension benefits as a percent of TPI of 1.2% vs.
average of Gross Domestic Product (GDP) benefits. 0.9% among its peer group.
for each county type in Texas. New Micropolitan, or small town, counties Tyler Bond, NIRS research manager and
research indicates that public pension experience a greater relative impact in co-author of the study, says there are
plans have a particularly positive economic terms of both Gross Domestic Product many outliers due to the sheer number of
impact on small towns and rural (GDP) and Total Personal Income from counties in Texas.
communities. pension benefit dollars than rural or "Texas illustrates a number of the key
metropolitan counties. Texas small findings from the research," Bond says.
The National Institute on Retirement town counties had benefits as a percent "While the six counties containing the six
Security released a study on July 12, 2022, of TPI of 1.9% and benefits as a percent largest cities [Houston, Dallas, Fort Worth,
titled Fortifying Main Street: The Economic of GDP of 1.1%. Austin, San Antonio, and El Paso] in Texas
Benefit of Public Pension Dollars in Small Nationally, pension benefits impacted have the greatest numbers of public
Towns and Rural America, that details the personal income in rural counties more pension benefit recipients, all six counties
findings after studying 2,922 counties in 43 than metropolitan ones, while pension are below the state average in terms of
states across the United States. In its study, benefits impacted GDP in metropolitan both percent of GDP and percent of
the nonprofit retirement security think- and rural counties reasonably closely. personal income. This would be expected
tank examined how less populated In Texas, rural counties saw an average given the size of the economies in those
counties in the U.S. with smaller economies percent of TPI of 2% versus 0.9% for cities. Also, due to the sheer number of
are affected by the flow of public pension metropolitan counties, while GDP for counties in Texas, especially sparsely
benefits compared to more populated, rural was 0.4% and metropolitan was populated counties in west Texas, there are
urban counties with larger economies. The 0.8%. some outliers in the data, and Texas sees a
study included 254 Texas counties. State capital counties are outliers larger spread between low and high
compared to other metropolitan percentages among the different counties
The key findings are as follows: counties, likely because they have a than most other states."
Public pension benefit dollars represent more significant number of public According to new data from the U.S.
between 1% and 3% of GDP on average employees, write the study's Census Bureau, population shifts and
in the 2,922 counties studied in the U.S. researchers. In the study, the Texas uneven growth have impacted small towns
At 2% average Total Personal Income capital of Austin is in Travis County. and rural communities. NIRS executive
(TPI), rural counties in the Lone Star Although it is a metropolitan county, it director Dan Doonan, who co-authored the
State have the highest percentage of differs from its metropolitan cohorts in report, says this, coupled with current
residents receiving public pension Texas. The capital county has an economic trends, has put a lot of pressure
benefits. This is in line with national average benefits as a percent of GDP of on rural counties and small cities.
data indicating that rural counties have 1% vs. 0.8% average among its "Often, the largest employer in these

TEXPERS PENSION OBSERVER www.texpers.org | 15

smaller towns is a public entity like a Allen Jones is the director of
school system or municipality that employs communications and events marketing at
teachers, nurses, firefighters, and public TEXPERS. He joined the association in 2017.
safety officials," he says. "These public You can contact the author at
employees spend their career serving their [email protected].
communities at a time when a growing
number of young workers are leaving their
hometowns for job opportunities in urban
areas. Eventually, public employees in rural
and smaller communities retire and
typically stay in their hometown. Retired
public employees spend their pension
income in their towns on goods and
services like housing, food, medicine and
clothing, which serves as a stable source of
economic activity in smaller communities."

Doonan says NIRS' new research shows
that pension benefit dollars have a
significant economic impact on struggling
small towns and rural communities.

Through its prior research, Pensionomics
2021: Measuring the Economic Impact of DB
Pension Expenditures, the Institute focused
on the downstream economic impact of the
spending of pension benefits.

County-level pension benefits are the
focus of its Fortifying Main Street study.
NIRS reports that new county-level data on
Gross Domestic Product only became
available recently, enabling new research
areas.

Based on previous studies, NIRS
researchers concluded that rural areas
receive greater relative economic benefits
from pension benefit dollars than cities.
Cities likely receive more pension benefit
dollars in absolute terms. Still, these are
dwarfed by the size of the economy in large
cities, according to the NIRS report.

Fortifying Main Street: The Economic
Benefit of Public Pension Dollars in Small
Towns and Rural America is authored by
Doonan and Bond from NIRS, along with

■Nathan Chobo from Linea Solutions Inc.

In Texas, the National Institute on
Retirement Security received data
from the following plans:
Employees Retirement System of
Texas, Teacher Retirement System
of Texas, Texas County and
District Retirement System, Texas
Emergency Services Retirement
System, El Paso Firemen and
Policemen's Pension Fund, City of
Austin Employees' Retirement
System, Dallas Pollice and Fire
Pension System, Houston
Firefighters Relief and Retirement
Fund, and Houston Police Officers
Pension System.

TEXPERS is an Educational Sustainers Member of
the National Institute of Retirement Security.

16| www.texpers.org TEXPERS PENSION OBSERVER

BALANCESHEET

Why have the 5 largest pension plans in the NFI-ODCE Index provided a 27% trailing investing directly in expensive assets or in
the county increased their allocations to one year return, one of the best performing one or two fund offerings. However, with
private real estate by over 22% in the past sectors. indexing, a plan of any size can gain instant
5 years? And how can smaller investors exposure to over 3000 high quality assets –
participate? In this article, we highlight the Index funds have become a common knowing that large and sophisticated plans
portfolio benefits that have spurred a have already performed due diligence –
significant growth in private real estate portfolio management tool to easily which mitigates manager selection risk.
allocations, including the opportunity to
index, while also focusing on three main achieve market returns, broad PORTFOLIO BENEFITS
questions investors today are asking:
diversification, and/or reduced volatility. Private real estate is playing a more
What is the current market outlook for Whether this is due to the proof that crucial role in portfolio construction than
private real estate? investors have a slim chance to ever before. With low yields, rising risk of
How does private real estate provide consistently outperform the market index, bonds, the volatility of the stock market
risk-return benefits that improve or simply because of the low fees and ease and rising inflation, private real estate has
portfolio outcomes? of use, public market indexing has become become a critical part of the asset
Will private real estate produce healthy very popular for even the largest pensions allocation pie, providing current income like
returns during periods of rising in the world.Even within private real estate, bonds but lower volatility than stocks.
inflation? the return difference has been evident with Potential portfolio benefits include:
the best performing and worst performing
fund within the NCREIF NFI-ODCE Index Durable Income – Higher income
having over a 20% return difference. returns than, REITs, US Stocks and
Long-Term Bonds
MARKET OUTLOOK For the first time ever, investors can now True Diversification – Low correlation
to stocks, REITs and bonds
The NCREIF NFI-ODCE Index, or sometimes gain access to the NFI-ODCE Index and Attractive Risk Adjusted Returns –
Positioned well on the risk-adjusted
just pronounced “Odyssey,” is the most receive the same indexing benefits of return spectrum
Inflation Hedge – Historically
widely used index by institutional private real estate through an index fund. performed higher than stocks and
The IDR ODCE Index Fund seeks to closely bonds in high inflation periods
investors as the benchmark for private track the NFI-ODCE Index through a single
real estate performance. Similar to how investment, providing investors of all sizes INFLATION HEDGE
the S&P 500 Index measures the composite the ability to obtain a private real estate
performance of the 500 largest publicly index exposure through a single, low-cost Given today’s inflationary environment,
traded companies, the NFI-ODCE Index investment. investors are increasing looking for ways
tracks the performance of 27 of the top U.S. to protect their capital from devaluation.
core open ended real estate funds While larger plans certainly appreciate In private real estate, the same lease
collectively owning over $300B of assets
diversified by property type and location. the efficiency of indexing in real estate, www.texpers.org | 17
These 3,000+ assets are generally highly
occupied and utilize low leverage (~22%), smaller plans may be the biggest
keeping volatility low. Over the past year, beneficiaries. The ability to achieve broad
diversification in private real estate is
TEXPERS PENSION OBSERVER nearly impossible for smaller plans

BS

HELPFUL NOTES

structure that frequently generate stable CONCLUSION WHAT IS PRIVATE EQUITY
income also serves as a hedge for inflation.
In general, investors are concerned about Institutional investors continue to seek the REAL ESTATE?
inflation as it increases the cost of goods benefits of private real estate. Now that the
and services, which in turn, reduces the
purchasing power of their investment worst of the pandemic and economic The investment website Investopedia
income. Many building owners negotiate downturn that initially triggered describes private equity real estate as an
rental rate escalations that adjust in widespread risk-aversion has passed. alternative asset class consisting of
conjunction with the Consumer Price Index
(CPI) in an effort to offset expected Many have revisited performance pooled private and public investments
inflationary pressures. Under this premise,
tenants pay rent escalations based on an expectations of every asset class and have professionally managed.
inflation forecast, or in accordance with
actual inflation results. This approach found private real estate to be a critical Firms usually pool outside investors and
allows property owners to account for component of their investment portfolio. use their capital to acquire and develop
expected inflation, but depending on the Some critics attribute real estate’s properties before selling them. The
property type, they can also adjust for outperformance to low interest rates in investment tool is typically only available
unexpected inflation. recent years. to institutional investors, according to the
financial website The Motley Fool.
Under normal market conditions, real While the asset class has certainly
estate provides inflation protection. In benefitted from low rates, we believe real
markets that are over-built, however, real
estate is less effective against inflation estate plays a critical role within a multi- Here are a few key takeaways:
because supply levels exceed investor asset portfolio throughout all economic Private equity real estate is a
demand, resulting in less income and cycles. Thus, we expect investors to professionally managed fund that
inflation protection. In the case of the NFI- continue receiving attractive returns for the invests in real estate.
ODCE Index, supply is seen to be at near its risk associated with investing in Unlike REITs, private equity real estate
all time low, creating a strong positive commercial real estate due to strong asset investing requires substantial capital
tailwind in the hedge against current, and
possible future, inflation. Exhibit 1 shows prices, improved economic conditions, and and may only be available to high-net-
that private real estate was the second-
best performing sector, only trailing gold, positive investor sentiment – as the case worth or accredited investors,
during the last major inflationary period in according to Motley Fool.
the late 1970’s. ■for commercial real estate will remain According to Investopedia, investment

strong over the next several years. ■returns of 8%-10% are not uncommon.
ALLEN JONES
Source: RMB Capital, Ibbotson Associates,

Inc., Zephyr StyleADVISOR, Bloomberg,

Quarterly Report. Past performance is no Garrett Zdolshek, Portfolio Manager, Gio Tramonto,
guarantee of future results. The NFI-ODCE Analyst, works for IDR Investment Management LLC, a
Index is not directly investable. USAA Real Estate affiliate member. Investing in private

real estate indexing strategies is the focus of IDR

Investment Management. Find out more about

Zdolshek at IDRInvestments.com.

18 | www.texpers.org TEXPERS PENSION OBSERVER

BESTPRACTICES

GOVERNANCE

REPORT SUGGESTS NEW TOOL
TO DEAL WITH LEGACY DEBT

Pension plans and other governmental within the board and from having school To spread legacy costs over multiple generations and
entities recently received some useful related travel costs reimbursed, and to identify fixed versus variable costs, a recent brief by
advice from the United States Supreme stipulating that Wilson would be subject to the Center for Retirement Research at Boston College
Court about what governing board’s can do further disciplinary action unless he ceased recommends segregating legacy debt - unfunded
when a board member’s actions are and desisted his censured actions. liabilities from years ago - from other unfunded
thought to be inconsistent with the best liabilities.
interests of their Fund and its members. Wilson amended his original complaint in
The case is Houston Community College state court claiming that the “censure” Moreover, the strategy uses municipal bond yields to
District v Wilson U.S. Sup. Ct. March 24 violated his Constitutional First calculate liabilities and contributions instead of
2022. Amendment rights to free speech and equal assumed asset returns. By using the approach,
protection. Wilson’s case was removed to government resource allocation, public credibility, and
Mr. Wilson an elected member of the Federal Court. intergenerational fairness would improve, says the
Board of Trustees of the Houston report's author.
Community College System (the “System”) The 5th Circuit agreed with Wilson,
regularly disagreed with the Board about holding that the board had violated In June, the Center published the second of two briefs
what he felt was best for HCC, including Wilson's right to free speech by “censuring” on public pension underfunding. The author of the briefs
among other things partnering with the him, but the 5th Circuit denied Wilson’s says state and local policymakers are struggling to deal
middle east country of Qatar to open a claim that the board’s denying his use of with growing pension costs, but do not understand the
campus in Qatar[1]. funds to fulfill his duties was also a reasons.
violation of his rights.
In fact, Mr. Wilson was so adamant that According to the newest brief, the current approach
he: (a) brought lawsuits challenging Wilson’s lawyer during oral argument at to managing pension liabilities has three problems:
several board’s actions, (b) hired a private the Supreme Court suggested the Board
investigator to determine if a board had the right to criticize Wilson, but that 1.It does not recognize the unique aspect of legacy
member in fact lived in the district, (c) their use of the term “censure” and the liabilities.
maintained a website where he regularly denial of up to $5,000 of travel and other
criticized the board, and (d) set up expenses went too far and interfered with 2.It attributes the cost associated with historical
robocalls to trustee constituents to make Wilson’s First Amendment rights of free liabilities to current workers.
his strong views well known. speech.
3.It uses assumed investment returns to value future
The System’s board eventually The U.S. Supreme Court first determined benefits.
“censured” Wilson for violating the board's that Mr. Wilson had not properly preserved
bylaws and for not acting in the best his arguments to challenge the 5th Circuit’s A new approach would address these issues by:
interests of the college and board, baring holding about the denial of his right to use 1.spreading the costs over multiple generations by
Wilson from holding officer positions System funds for his claimed System
expenses, but ruled that Wilson had separating legacy unfunded liabilities;
TEXPERS PENSION OBSERVER preserved his right to appeal on the sole 2.treating unfunded liabilities and normal costs as
question if the board’s “censure” violated
fixed and variable costs, respectively; and
3.utilizing modern finance techniques to calculate

liabilities and contributions by using the average
yield on investment-grade municipal bonds (after
adjusting for tax exemptions).
To read the full briefs, visit crr.be.edu.

www.texpers.org | 19

BP elected representative.” “…the censure did disparage and thus diminish the value of
not prevent Mr. Wilson from doing his job, it the investment, perhaps a board might
This First Amendment rights? did not deny him any privilege of office and want to consider “censuring” that board
The U.S. Supreme Court’s UNANIMOUS Mr. Wilson does not allege it was member. What if a board believes that one
defamatory.” of its members has violated the
decision overturned the 5th Circuit and held confidentiality or other rules for Open
in favor of the Board, noting numerous The Supreme Court pointed out that this Meetings laws?
examples of lawful United States Wilson decision does not address questions
Congressional as well as state and local where government officials censor those It would seem that a board’s discharge of
government censuring their elected who may be subordinate to them, for its fiduciary duties in the best interests of
members. example students, employees, or licensees, its members might well lead some board to
for in those cases censure might be enough conclude that a public reprimand, a
Reading the transcript of the oral to materially impair First Amendment “censure” of the conduct of one of its
arguments at the Court and questions from rights, or if censure was accompanied by members is in order. Now, thanks to
the Justices it seems clear that a number of some real punishment or was directed at decision of the U.S. Supreme Court in
Justices thought that the question of a private individuals or some government Houston Community College System v
governmental bodies approval or official serving on some other body. Wilson, upon the advice of counsel and a
disapproval of expenses was not the careful examination of the facts, censuring
correct role of the judiciary[2]. To clarify its guidance the Court noted
that this case dealt with a narrow issue ■a board member might well be the path a
The Supreme Court also noted that, “… that involved only “…a censure of one
elected bodies in this country have long member of an elected body by other board wishes to consider.
exercised the power to censure their members of the same body. It does not
members.” “As early as colonial times, the involve expulsion, exclusion, or any other NOTES:
power of assemblies to censure their form of punishment.” 1.As an aside, articles the author has read
members was more or less assumed.” suggest that the Community College of
SO WHAT IS THE LESSON WE AT TEXPERS Qatar is an independent enterprise of
The Supreme Court then gave some its nation’s government, but that
examples of what would likely be CAN TAKE FOR BOARDS OF PENSION academic programs are administered
impermissible “adverse action” including an by HCCD and degrees granted are the
arrest, a prosecution or a dismissal from TRUSTEES? same as if the students graduated from
governmental employment, and added that the Houston campus.
even “[D]eprevations less harsh than Sometimes a board may conclude that a 2.“JUSTICE BREYER: …And the same is
dismissal” can sometimes qualify too.” board member has acted or spoken “out of true on which expenses you can run,
The Court, citing an earlier Supreme Court line”, perhaps in a manner they consider which expenses you can't run. So, if we
case suggested that to distinguish material harmful to the best interest of their Fund or get into the business of starting to
from immaterial “adverse action” one might its members. For example, a board member really oversee this, then – then we've
ask whether the government’s conduct may strongly object to and “dis” an changed the government structure
would “chill a person of ordinary investment made by their Fund, perhaps significantly.”
firmness”… from engaging in “future First suggesting that those currently managing
Amendment activity.” the investment are are doing something
wrong. If such comments could be seen as
Noting that Wilson was an elected official, harming the pension fund’s ability to obtain
the Court stated “…we expect elected the highest and best yield on that
representatives to shoulder a degree of investment, maybe scaring off prospective
criticism about their public service from buyers or tenants, or embolding those in
their constituents and their peers…” “The the general public or media to further
censure at issue before us was a form of
speech by elected representatives.” And, “It
concerned the public conduct of another

Having represented government pension plans in pension law, tax law, commercial transactions, open meetings,
and public information matters, Gary B. Lawson is a frequent speaker at TEXPERS, the National League of Cities,
and Guns and Hoses. His pension and health plan testimony has been heard by Congress and the Louisiana
Legislature. He runs a law firm. Contact him at [email protected].

20 | www.texpers.org TEXPERS PENSION OBSERVER

BP

It is critically important for organizations minimal cybersecurity and data privacy surveyed reported a data breach, security
of all types to ensure their employees work protections. Every business owner, breach or both. Seventy-five (75) percent of
securely, both at the office and at home. organization leader and team member those have experienced more than one
Good cyber security habits help secure should operate as if you are already under breach; 33% have experienced more than
members’ personal data and protect attack (because you probably are). three breaches.
businesses. Threat actors continually look
for ways to attack. This means assisting When a cyberattack occurs at your As many companies have been impacted
employees in working safely while remote organization, stopping the attack and by COVID-19 restrictions, SMBs find
is more critical than ever due to the impact restoring your systems to normal operation themselves ill-prepared to address
of two trends – the dramatic increase of is priority number one. Once that is cybersecurity issues. At this point, you may
people working from home and the effects addressed, the next action must be be asking yourself, “What can our small
of data breaches, particularly the rise in restoring trust among your customers business do to better prepare?” We took
data breaches and data breach costs. [annuitants for pension systems and some time to develop best practices and
pension systems for fund vendors] and actions to take.
WHY IT IS IMPORTANT TO SECURE prospects by understanding what
happened, and why it happened. The end ACTIONS TO TAKE
PERSONAL DATA goal needs to be developing plans,
processes, and policies around To protect you and your customer’s data,
With more people working remotely, the cybersecurity to detect and prevent future organizations should:
internet-centric environments of office and attacks.
home introduce a new set of security Adopt robust security policies. The
vulnerabilities. According to a report SMB CYBERSECURITY & CYBER RESILIENCE stronger the policies are, the harder it
published by Malwarebytes, 20% of will be for a cyber attacker to succeed.
cybersecurity leaders say they have faced a The antiquated notion that some Train all team members on
security breach because of a remote organizations are too small to be attacked cybersecurity. Show your employees
worker in 2020. The Identity Theft Resource because there is less value in their what to look out for, do and avoid.
Center (ITRC) tracked more data breaches information is simply not true. Small Training should be tailored to the
in 2021 (1,862) than we have since we business are more likely to be targeted individual and their respective function.
started tracking publicly-reported data with a ransomware attack. According to Know the vendor’s security posture. It is
breaches in 2005. For context, data Infrascale, 46% of all small businesses not enough to just have good
compromises were up more than 68% in have been the targets of a ransomware cybersecurity. Everyone you work with
2021 than 2020. attack. Of the companies hit with a also need protections equal to or better
ransomware attack, nearly three-quarters than yours.
There is no going back to the days when (73%) have paid a ransom. According to our Practice data minimization and avoid
small organizations could get by with 2021 Business Aftermath Report, 58% of collecting more information than is
the small business owners and leaders needed. Threat actors don’t just want
TEXPERS PENSION OBSERVER money. They want data, too. The more

www.texpers.org | 21

BP OTHER BEST PRACTICES Eva Velasquez is the President/CEO of
the Identity Theft Resource Center. She
you have, the bigger the target you There are other best practices that can previously served as the Vice President
become. keep you and others safe: of Operations for the San Diego Better
Patch software as soon as updates are Business Bureau and for 21 years at the
available and make sure good back-ups It is important to educate yourself San Diego District Attorney’s Office.
are in place. If you don’t have in-house about the terms of service and other She is a recognized expert who has been
resources, hire a managed security policies you agree to because once you featured on CNBC Nightly Business
service provider (MSSP) to handle all check the box, you may have agreed to Report, CBS Morning News, NBC Nightly
your routine IT and OT tasks and have your information stored and sold, News, Huffington Post Live, Forbes,
monitoring. automatic account renewals, location- Bloomberg, Kiplinger’s, and numerous
based monitoring and more. other media outlets. Eva is a recipient of
Employees should: Also, when making a purchase online, the National Crime Victim Service Award
Update all of their software, including use secure payment methods that from the U.S. Department of Justice and
the operating system and applications. include a dispute resolution process. the National Consumer League’s
Keeping software updated reduces the Finally, log out of accounts when you Florence Kelley Consumer Leadership
likelihood of an attack. Set your are done. It sounds harmless. However, Award. Eva is a published author, a
software to automatically update. it is a bad habit that makes it easier for member of the advisory board of The
Add a stronger passphrase to home Wi- someone to share or steal your Knoble, and is regularly invited to speak
Fi and wired networks. A strong 12+ information. at industry and policy events, including
character passphrase is difficult for a the Center for Evidence Based Policy at
cybercriminal to crack. CONTACT THE ITRC George Mason University and the ABA
Keep work passwords and personal Financial Fraud Prevention, Strategy,
passwords separate to reduce the risk Completely eliminating identity crimes and Investigation Symposium, and
of a credential stuffing attack. Using often feels like an unachievable goal. briefing events for the FTC, CFPB, IRS,
the same password could result in a However, sound best practices to protect DHS, PRAC, and the US House of
hacker gaining access to multiple your data and others information can Representatives.
accounts at work and at home. reduce the number of victims of these
Add multi-factor authentication (MFA) crimes. The ITRC is always available to
to personal and business accounts answer questions you may have, or assist
when possible. This helps ensure any you if you believe you may be the victim of
attempt to login to a protected login is an identity crime. You can speak with an
actually the account owner. expert advisor toll-free by calling
Avoid clicking on any links, opening 888.400.5530 or using the live-chat
attachments or downloading files from
an unsolicited email, text or social ■function on the ITRC website. Just visit
media DM. Criminals try to strike with
various identity-related scams, www.idtheftcenter.org to get started.
including COVID-19 scams. Always go
directly to the source of a contact to
verify the validity of the message.

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