Annual Comprehensive Financial Report for the fiscal year ended June 30, 2021 PSRS YYeeaarrss 1946-2021 Making a Positive I I on Our Employers PUBLIC SCHOOL & EDUCATION EMPLOYEE RETIREMENT SYSTEMS OF MISSOURI Annual Comprehensive Financial Report for the fiscal year ended June 30, 2021 PSRS YYeeaarrss 1946-2021 Dearld Snider Executive Director PO Box 268 3210 W. Truman Blvd. Jefferson City, MO 65102-0268 (573) 634-5290 or (800) 392-6848 www.psrs-peers.org Prepared by PSRS/PEERS Staff Photography: Renette Reiske Making a Positive on Our Employers UBLIC SCHOOL & EDUCATION EMPLOYEE RETIREMENT SYS1Q1S OF MISSOURI ►TA BLE OF CONTENTS SECTION INTRODUCTORY SECTION Mission Statement, Goals, Focus Areas .................................................................................................................4 Economic Impact ....................................................................................................................................................5 Board of Trustees ....................................................................................................................................................6 Administrative Organization ..................................................................................................................................7 PSRS Celebrates 75 Years .......................................................................................................................................8 Transmittal Letter .................................................................................................................................................10 Certificate of Achievement for Excellence in Financial Reporting ......................................................................14 Public Pension Coordinating Council Public Pension Standards Awards ..........................................................15 Professional Services .............................................................................................................................................16 FINANCIAL SECTION Independent Auditors’ Report from Williams Keepers, LLC .............................................................................17 Management’s Discussion and Analysis ...............................................................................................................19 Basic Financial Statements ...................................................................................................................................26 Statements of Fiduciary Net Position ............................................................................................................26 Statements of Changes in Fiduciary Net Position .........................................................................................27 Notes to the Financial Statements .................................................................................................................28 Required Supplementary Information .................................................................................................................52 Schedules of Changes in the Employers’ Net Pension Liability ....................................................................52 Schedules of Employers’ Net Pension Liability .............................................................................................54 Schedules of Employer Contributions ..........................................................................................................55 Schedules of Investment Returns ..................................................................................................................55 Notes to the Schedules of Required Supplementary Information ................................................................56 Staff Retiree Health Plan - Defined Benefit OPEB Plan ................................................................................58 Schedules of Administrative Expenses .................................................................................................................59 Schedules of Professional Services .......................................................................................................................60 Schedules of Investment Expenses .......................................................................................................................60 INVESTMENT SECTION Letter from Verus ..................................................................................................................................................61 Letter from the Chief Investment Officer ............................................................................................................62 Investment Policy Summary .................................................................................................................................66 Total Fund Review ................................................................................................................................................71 Public Risk Assets Summary ................................................................................................................................76 U.S. Public Equity Program Summary .................................................................................................................78 Alpha Overlay Program Summary ........................................................................................................................81 Non-U.S. Public Equity Program Summary .........................................................................................................83 Public Credit Program Summary .........................................................................................................................86 Hedged Assets Program Summary .......................................................................................................................88 Safe Assets Summary ............................................................................................................................................91 Private Risk Assets Summary ................................................................................................................................94 Private Equity Program Summary ........................................................................................................................96 Private Credit Program Summary ........................................................................................................................99 Private Real Estate Program Summary ...............................................................................................................101 U.S. Public Equity Broker Commissions Report ...............................................................................................104 Non-U.S. Public Equity Broker Commissions Report .......................................................................................104 Investment Summary ..........................................................................................................................................105 Investment Expenses ...........................................................................................................................................106 ► 2 PSRS/PEERS of MISSOURI 2021 ANNUAL COMPREHENSIVE FINANCIAL REPORT TABLE OF CONTENTS SECTION ◄ ACTUARIAL SECTION Certification of Actuarial Results, PricewaterhouseCoopers LLP .....................................................................107 Schedules of Funding Progress ...........................................................................................................................109 Required Contribution Rates and Amortization of Unfunded Liability ..........................................................110 Reconciliation of Unfunded Actuarial Accrued Liability..................................................................................111 Schedules of Active Member Valuation Data.....................................................................................................112 Solvency Tests .....................................................................................................................................................113 Schedules of Retirees and Beneficiaries Added to and Removed from Retirement Rolls ................................114 PSRS Summary Plan Description ......................................................................................................................115 PEERS Summary Plan Description ....................................................................................................................117 PSRS and PEERS Summary of Actuarial Assumptions and Methods ..............................................................120 STATISTICAL SECTION Statistical Summary ............................................................................................................................................127 Summary of Benefit Recipients by Type .............................................................................................................128 Schedules of Changes in Fiduciary Net Position, Last 10 Fiscal Years ..............................................................129 PSRS Summary of Changes in Membership During 2020-2021 ......................................................................130 PEERS Summary of Changes in Membership During 2020-2021 ....................................................................131 PSRS 2020-2021 New Service Retirees ..............................................................................................................132 PEERS 2020-2021 New Service Retirees ............................................................................................................133 PSRS Schedule of Average Benefit Payments to New Service Retirees..............................................................134 PEERS Schedule of Average Benefit Payments to New Service Retirees ...........................................................135 Comparisons of Actuarial Assets and Total Actuarial Liabilities ......................................................................136 Growth in Membership ......................................................................................................................................137 PSRS Schedule of Covered Employees in the Top 10 Employers ......................................................................138 PEERS Schedule of Covered Employees in the Top 10 Employers ...................................................................140 PSRS/PEERS of MISSOURI 2021 ANNUAL COMPREHENSIVE FINANCIAL REPORT ◄ 3 I N T R O D U C T O R Y S E C T I O N PSRS/PEERS partners with 534 employers who, through their participation in the Retirement Systems, provide their eligible employees membership in a defined benefit pension plan. PSRS/PEERS membership helps their employees achieve financial security in retirement. At the same time, our participating employers are an integral part of what makes the Retirement Systems so successful. We are proud to work with each PSRS/PEERS participating public K-12 school district, community college and educational association to make a positive impact for them and for our members. PSRS/PEERS of MISSOURI 2021 ANNUAL COMPREHENSIVE FINANCIAL REPORT Introductory Section Mission Statement, Goals, Focus Areas ..........................................................................................................4 Economic Impact .............................................................................................................................................5 Board of Trustees .............................................................................................................................................6 Administrative Organization ...........................................................................................................................7 PSRS Celebrates 75 Years ................................................................................................................................8 Transmittal Letter ..........................................................................................................................................10 Certificate of Achievement for Excellence in Financial Reporting ...............................................................14 Public Pension Coordinating Council Public Pension Standards Awards ...................................................15 Professional Services ......................................................................................................................................16 ► INTRODUCTORY SECTION Mission Statement, Goals, Focus Areas MISSION STATEMENT To provide financial security and peace of mind for Missouri’s public education community. GOALS To provide retirement To help school districts To manage the Systems in security to Missouri’s attract and retain the best a prudent and cost-efficient educators and education and brightest educators manner while continuing to employees after a full and employees for provide exceptional service career of service. Missouri’s school children. to our members. FOCUS AREAS Culture of Excellence System & Financial Stability E n n o ga a ti g v e o ment I n n ► 4 PSRS/PEERS of MISSOURI 2021 ANNUAL COMPREHENSIVE FINANCIAL REPORT INTRODUCTORY SECTION ◄ Economic Impact The benefits distributed by PSRS/PEERS make a sizable contribution to Missouri’s economy and help Missouri public schools attract and retain quality teachers and education employees. As of June 30, 2021, approximately 101,000 individuals received benefits from PSRS/PEERS. Total benefits paid for the one-year period ended June 30, 2021 were nearly $3.2 billion. Of this amount, more than $2.8 billion, or 89%, was distributed among Missouri’s 114 counties, positively impacting the state’s economy. CO•LO R KEY • Less than $1 million Atchison Nodaway Worth Harrison Mercer Putnam Schuyler Scotland Clark • $1 - $4.9 million GGeenntrtryy Sullivan Adair • $5 - $9.9 million Holt Grundy Knox Lewis Andrew Daviess • $10 - $24.9 million DeKalb Linn Macon Shelby Marion • $25 - $49.9 million Buchanan Clinton Caldwell Livingston • $50 - $99.9 million Chariton Randolph Ralls Monroe Platte Carroll $100 million + Ray Pike Clay Audrain Howard Saline y Lafayette er Lincoln Jackson Boone m o g Cooper Callaway nt o St. Charles Johnson Pettis M Warren St. Louis City Cass Moniteau e St. Louis d Cole na Henry Morgan Osage sco Franklin a Bates Benton G Jefferson Miller Maries n o St. Clair Camden Crawford ngt Hickory hi Ste. Vernon Pulaski Phelps Was Genevieve St. Cedar Dallas Laclede Iron Francois Perry Polk Dent Barton Reynolds Dade Madison er Cape g Girardeau Texas n Greene Webster Wright olli Jasper Shannon B Lawrence Wayne Scott Christian Douglas Carter Newton Howell Stoddard Mississippi Barry McDonald Stone Taney Ozark Oregon Ripley Butler New Madrid Pemiscot Dunklin ◄ PSRS/PEERS of MISSOURI 2021 ANNUAL COMPREHENSIVE FINANCIAL REPORT 5 ► INTRODUCTORY SECTION Board of Trustees As of June 30, 2021 The PSRS/PEERS Board of Trustees is charged by law with the administration of PSRS/PEERS. Trustees are committed to providing services to the members and beneficiaries professionally, promptly, courteously and efficiently. The Board meets regularly six times a year, with special meetings called as necessary. It is the fiduciary responsibility of those charged with the administration of PSRS and PEERS to: • Effectively collect contributions, Jason Hoffman, Chair Jason Steliga, Vice Chair • Prudently invest the assets to obtain Elected PEERS Trustee Elected PSRS Trustee optimum returns, • Equitably provide benefits, • Impartially and in accordance with applicable law administer the benefit programs, and • Set contribution rates that are adequate to fund promised benefits. The seven-member Board consists of three elected PSRS active members; one elected PEERS active member; and three governor-appointed trustees, one of whom must be a PSRS or PEERS retiree. Trustees serve four-year terms and serve without Scott Hunt Sharon Kissinger compensation. Appointed Trustee Appointed Trustee Beth Knes Dr. Kyle Collins Dr. Melinda Moss Appointed Trustee Elected PSRS Trustee Elected PSRS Trustee ► 6 PSRS/PEERS of MISSOURI 2021 ANNUAL COMPREHENSIVE FINANCIAL REPORT INTRODUCTORY SECTION ◄ Administrative Organization As of June 30, 2021 Dearld Snider Craig Husting, CFA Bill Betts Executive Director Chief Investment Officer Assistant Executive Director, Operations Board of Trustees r-------------- ---------------7 I Executive I Director Dearld Snider Assistant Executive Chief Investment Officer Director, Operations Craig Husting, CFA Bill Betts Director of Director of Director of Chief Financial General Legislation and Executive and Board Internal Audit Officer Counsel Policy Administration Jeff Hyman, CPA Anita Brand, CPA Sarah Swoboda Maria Walden Jennifer Martin Director of Director of Director of Director of Chief Technology Communications Human Resources Employer Services Member Services Officer Susan Wood Kim Harris Stacie Verslues Nicole Hamler Lisa Scheulen ◄ PSRS/PEERS of MISSOURI 2021 ANNUAL COMPREHENSIVE FINANCIAL REPORT 7