February 2021 Board Meeting Book - TRS - Texas.gov

February 2 02 1

TRS B oard of Trustees Meeting

Teacher Retirement Sy stem of Tex as 1000 Red River Street Austin, Texas 78701-2698

TEACHER RETIREMENT SYSTEM OF TEXAS MEETING BOARD OF TRUSTEES

AGENDA

February 26, 2021 – 8:00 a.m.

By Videoconference

All or part of the February 26, 2021 meeting of the TRS Board of Trustees may be held by telephone or video conference call as authorized under Sections 551.130 and 551.127 of the Texas Government Code. THIS MEETING WILL BE CONDUCTED BY VIDEOCONFERENCE IN ACCORDANCE WITH THE GOVERNOR’S AUTHORIZATION CONCERNING SUSPENSION OF CERTAIN OPEN MEETING LAW REQUIREMENTS IN RESPONSE TO THE COVID-19 (CORONAVIRUS) DISASTER. A quorum of members of the Board will participate in the meeting and will be audible to the public. Members of the public may access the meeting by clicking https://trs-texas.zoom.us/j/94441572854?pwd=SDFWcW5rdUZTaXNOZ0REcGhUSSthZz09

– Meeting ID: 944 4157 2854, please email the Board Secretary to obtain the meeting password at [email protected]. Members of the public may provide public comment by registering first with the Board Secretary by submitting an email to [email protected] identifying the name of the speaker and topic, no later than 5:00 pm on February 25, 2021. The open portions of the Board meeting are being broadcast over the Internet. Access to the Internet broadcast and agenda materials of the Board meeting is provided at www.trs.texas.gov. A recording of the meeting will be available at www.trs.texas.gov. NOTE: The Board will NOT take up the following agenda items: 5, 6, 12, 13, 15, 16, 20, 21 and 22. The Board may take up the remaining agenda items out of order during the meeting.

1. Call roll of Board members.

2. Consider the following administrative matters – Jarvis V. Hollingsworth:

A. Approval of the December 2020 proposed meeting minutes; and

B. Setting, rescheduling or canceling future Board meetings.

3. Chief Operations and Administration Officer (COAO) update – Andrew Roth.

4. Receive an update on TRS Core Values – Caasi Lamb and Keith Robinson, Focus Consulting.

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5. Receive an update on the 2021-25 Strategic Plan – Caasi Lamb.

6. Receive an update on the Member Satisfaction Survey and Reporting Employer Satisfaction Survey results – Caasi Lamb; Dr. Rene Paulson Elite Research and Dr. Kirby Goidel, Texas A&M University.

7. Receive an update on the enhanced TRS Complaint Process – Andrew Roth and Heather Traeger.

8. Receive governance training on Teachable Moments of the Last Decade and Thoughts on the Risks of 2021 and Beyond – Amanda Jenami.

9. Review and discuss the Executive Director's report on the following matters – Brian Guthrie:

A. Administrative operational matters, including updates on financial, audit, legal, staff services, special projects, strategic planning, legislative, Sunset Update, Trustee Elections and personnel matters.

B. Update on COVID-19 and TRS operations. C. Board operational matters, including a review of draft agendas for

upcoming meetings. D. Event notices or reminders; holiday and other schedules of interest; board

member, employee or other individual recognitions; and expressions of thanks, congratulations, or condolences.

10. Receive the annual update on TRS Diversity, Equity and Inclusion – Kellie Sauls.

11. Receive an annual review of TRS health plans performance, including benchmark

comparisons, COVID and new plan year, new carrier installation and Retiree Advisory Council (RAC) update – Katrina Daniel, Grace Meuller, RAC Chair; Kirsten Schatten and Kenneth Vieira, Segal.

12. Receive an update on the TEAM Program – Andrew Roth, Billy Lowe, Jennifer Whitman and Adam Fambrough.

13. Receive an update from the TEAM Program Independent Program Assessment (IPA) Vendor – Doug Holt and Jonathan Scofield, EY.

14. Receive an update regarding Benefit Services – Brian Guthrie, Andrew Roth, Don Green, and Barbie Pearson.

15. Receive annual update on Cybersecurity – Frank Williams.

16. Review the report of the General Counsel on pending and contemplated litigation, including updates on litigation involving benefit-program contributions, retirement benefits, health-benefit programs, investment matters, open records – Heather Traeger.

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17. Provide an opportunity for public comment – Jarvis V. Hollingsworth.

18. Receive an Investment Education Presentation including information on Interest

Rates and PE Ratio – Steve Voss and Mike McCormick, Aon.

19. Receive the CIO Update including Fleet Strategy; Talent Management; Accomplishments; Notices; Awards; Key Dates and Upcoming Events; and Market Update – Jase Auby.

20. Receive the Emerging Manager Annual Update - Kirk Sims.

21. Receive the Annual Update on IMD Operations & Talent Management Group - Sylvia Bell.

22. Review of IMD Legal & Compliance - Heather Traeger.

23. Receive an update on ESG Investing - Lauren Gellhaus, Steve Voss, Mike McCormick and Meredith Jones, Aon.

24. Receive an update and consider long term facilities planning on potential new building, including the potential final selection of a developer for the main campus and the associated costs, potential renovations or sale of the Red River campus, and leases at 816 Congress and Indeed Tower, including considering a finding that to deliberate or confer in open meeting would have a detrimental effect on the position of the retirement system in negotiations with a third person – Brian Guthrie, Andrew Roth, and Eric Lang.

The Board may convene in Executive Session under the following, but not limited to:

a. Texas Government Code, Section 551.071: Consultation with Attorney; b. Texas Government Code, Section 551.072: Deliberation Regarding Real

Property; c. Texas Government Code, Section 551.074: Personnel Matters Relating to

Appointment, Employment, Evaluation, Assignment, Duties, Discipline, or Dismissal of Officers or Employees including but not limited to the Executive Director, Chief Audit Executive, Chief Investment Officer.

d. Texas Government Code, Section 551.076: Deliberation Regarding Security Devices or Security Audits;

e. Texas Government Code, Section 551.089: Deliberation Regarding Security Devices or Security Audits; or

f. Texas Government Code, Section 825.115: Applicability of Certain Laws; g. Texas Government Code, Section 825.3011: Certain Consultations

Concerning Investments.

Minutes of the Board of Trustees

December 9, 2020

The Board of Trustees of the Teacher Retirement System of Texas met on December 9, 2020 via videoconference in accordance with the Governor’s authorization concerning suspension of certain Open Meeting law requirements in response to the COVID-19 (Coronavirus) disaster.

The following Board members were present:

Jarvis V. Hollingsworth, Chair Nanette Sissney, Vice Chair Michael Ball David Corpus John Elliott Christopher Moss James Dick Nance Robert H. Walls, Jr.

Others present:

Brian Guthrie, TRS Mr. David Hinds Andrew Roth, TRS Mr. Ron Hinds Don Green, TRS Heather Traeger, TRS Jase Auby, TRS Barbie Pearson, TRS Katrina Daniel, TRS Amanda Jenami, TRS Kevin Wakley, TRS Katherine Farrell, TRS Suzanne Dugan, Cohen Milstein Mr. Hollingsworth called the meeting to order at 8:00 a.m.

1. Call roll of Board members.

Ms. Farrell called the roll. A quorum was present.

Mr. Hollingsworth provided welcoming remarks noting the Board was convening by videoconference under the Governor’s Office’s authorization concerning suspension of certain Open Meetings law requirements in response to COVID-19. Mr. Hollingsworth reviewed the schedule for the next three days.

2. Consider the following administrative matters including:

a. Approval of the September 2020 proposed meeting minutes; and On a motion by Mr. Corpus, seconded by Mr. Nance, the board unanimously approved the minutes of the September 2020 Board Meeting, as presented.

b. Setting, rescheduling or canceling future Board meetings; and Mr. Hollingsworth stated the proposal on the table was to move the December 2021 meeting up a day to December 7 and 8th from December 9 and 10. He also noted the proposal included expanding the upcoming February board meeting to include February 24th in case there is a need to meet virtually. On a motion by Ms. Sissney, seconded by Mr. Elliott, the Board unanimously approved moving the December 2021 meeting dates to December 7 and8, 2021 and expanding the February meeting to include February 24th if held virtually.

c. Consider election of the Board Vice-Chair Mr. Hollingsworth stated each year the board elects the Board vice chair. He said the current vice chair of the Board is Ms. Sissney and she has indicated an interest to serve again for the upcoming calendar year 2021. He asked if there was any other interest from any other Board member. Not hearing nay, Mr. Hollingsworth moved that Ms Sissney be considered as the vice chairman of the Board of Trustees for the Teacher Retirement System of Texas. Mr. Hollingsworth asked if any opposition, hearing none, the motion passed by acclamation. At 8:08 am, Mr. Hollingsworth recessed the Board Meeting, noting the Board would reconvene after the scheduled committee meetings to take up the Hinds Appeal. At 11:58 am, Mr. Hollingsworth reconvened the Board Meeting.

3. Consider the administrative appeal of David L. Hinds. Mr. Hollingsworth announced the next item was to consider the administrative appeal of Mr. David L. Hinds in David L. Hinds v. Teacher Retirement System of Texas SOAH Docket NO. 323-19-1748, TRS Docket No. 19-01. He said Mr. Hinds appeals the decision of TRS executive Director Brian Guthrie denying Mr. Hind’s appeal and adopted without changes the findings of fact and conclusions of law from the proposal for decision issued by Sarah Starnes, administrative law judge for the State Office of Administrative Hearings. Mr. Hollingsworth noted the primary issue is whether Mr. Hinds exceeded the limits on employment after retirement in the month of February 2014, and therefore forfeited his annuity payment for that month. He said each party will have five minutes to make their presentation to the Board with a one minute rebuttal from Mr. Hinds. Mr. Hollingsworth stated Mr. Hinds was represented by Mr. Ronald D. Hinds, and TRS staff was represented by Assistant General Counsel Kevin Wakley.

Mr. Ron Hinds argued that after speaking with a TRS representative to receive assurance he agreed to work as a substitute teacher in 2014 to assist the Amarillo Independent School District when the orchestra teacher was out for chemotherapy. Mr. Ron Hinds referenced TRS’ own internal documents B43, 41 and 44 confirming that Mr. David Hinds made this call on January 17 and did speak to a TRS representative. Mr. Hinds further argued that Suzuki was a private entity, 100% funded by the parents of the children who are trying to learn to play the violin, could not count against Mr. David Hinds in terms of satisfying the provision of the Government Code and referenced pages 12, 13, 27, 28, 50-53 of TRS’ own exhibits. Mr. Kevin Wakley argued it was undisputed that Mr. David Hinds exceeded the number of days allowed under the half-time or less standard for the month at issue. He said Mr. Hinds during that month was combining both part-time work and substitute work and that under the statute he exceeded the allowed number of workdays in that month. Mr. Wakley argued that even if Mr. Hinds was provided incorrect information by the TRS counselor, the administrative law judge made clear in her proposal for decision, the concept of equitable estoppel does not apply against a state agency. Mr. Wakley argued the Suzuki music program at Amarillo Community College (ACC) was employment by ACC and must be counted for the employment-after-retirement purposes. He noted ACC pays the instructors, reports them to TRS both as active members and as retirees. Mr. Wakley argued the source of the funding is not determinative of whether employment existed. He stated it is very common for private grant money to fund teacher or professor positions and that does not determine whether or not those teachers or professors are working for the public university or public school. Mr. Wakley closed by thanking Mr. Hinds for his 40 years of service to the Texas public schools. He noted that retirees that inadvertently run afoul of the return to work limits present sympathetic cases, Mr. Hinds is no exception. However, in following the law the Board must uphold Mr. Guthrie’s position and deny the appeal. Mr. Ron Hinds in rebuttal argued that if Suzuki’s numbers were not included in the calculation, then there is no case. He reiterated Suzuki is a private entity, not one penny comes from public funds to support it. He stated at some point cannot a person rely on TRS and what they tell them in a conversation as to what they can and cannot do. He concluded by asking the Board to do the right thing here and rescind this decision and relieve David Hinds of any responsibility for payback. After a short question and answer period, at 12:22 pm, Mr. Hollingsworth announced the Board will go into executive session under Section 551.071 to discuss the administrative appeal of David L. Hinds and consult with legal counsel as needed. At 12:38 pm, Mr. Hollingsworth reconvened the Board in open meeting. On a motion by Mr. Moss, and seconded by Mr. Corpus, the board unanimously voted to deny the appeal and uphold the executive director’s decision. At 12:41 p.m., Mr. Hollingsworth recessed the meeting until 8:00 a.m. tomorrow morning.

December 10, 2020



Jarvis V. Hollingsworth, Chair Nanette Sissney, Vice Chair Michael Ball David Corpus John Elliott Christopher Moss James Nance Robert H. Walls, Jr.

Others present:

Brian Guthrie, TRS Michael Johnson, Bridgepoint Consulting Andrew Roth, TRS Don Green, TRS Jase Auby, TRS Amanda Jenami, TRS Barbie Pearson, TRS Katrina Daniel, TRS Heather Traeger, TRS Eric Lang, TRS Katherine Farrell, TRS Billy Lowe, TRS Jennifer Whitman, TRS Adam Fambrough, TRS Eric Lang, TRS Suzanne Dugan, Cohen Millstein At 9:10 a.m. the Chair reconvened the board meeting.

4. Receive an update on the TEAM Program – Andrew Roth, Billy Lowe, Jennifer Whitman and Adam Fambrough.

Ms. Jennifer Whitman reviewed the TEAM dashboard updated for the month of November. She noted all releases currently are on schedule and in green status, including the Health Insurance Line of Business (HILOB) release. She said key status update for this month center around the

first major release. She said the quality assurance testing team had begun their final rounds of regression testing on schedule on November 2nd with the UAT entry quality gate scheduled for January 21, which is a quality milestone prior to beginning user testing. She reported after the quality gate there will be multiple rounds of user acceptance testing to ensure the system meets business needs and perform all business processes with no interruption in customer service when go live with the application. Ms. Whitman noted other items for this month were the posting of a solicitation to bring an external vendor in to create and run performance test against the Pension Line of Business web self-service release scheduled to go live in Spring of 2022. Mr. Adam Fambrough reported on the remaining Phase 2 functionality. He reported good progress is being made with continued work on feedbacks and enhancements to the production TRUST system. He reported 148 maintenance and enhancement releases since TRUST go-live in October of 2017; closing almost 1,200 RER defects since go live. He said because of the system enhancements, ongoing training and employer familiarization of the RE portal, there is a decrease in the number of days required to complete reports by the REs. Mr. Billy Lowe noted that Michael Johnson with Bridgepoint will be presenting the last IPA report. He thanked Michael and his team for all of their support for the TEAM program.

5. Receive an update from the TEAM Program Independent Program Assessment (IPA) Vendor – Michael Johnson, Bridgepoint Consulting.

Mr. Hollingsworth introduced the agenda item by noting Bridgepoint served as the Board’s independent oversight authority since December 2012. He extended appreciation on behalf of the Board of Trustees and staff for all of the work Bridgepoint has done over the years. Mr. Michael Johnson thanked TRS for the working relationship with the team and the Board. Mr. Johnson stated he would reflect on the control as that have been put in place through the shift of delivery from an external vendor to an internal vendor. He noted the internal team has started delivering on the Phase 2 items. He said a critical milestone for the Board to monitor is the first production release which is scheduled for Q-2 of calendar 2021. He said all indications are in the right direction. Mr. Johnson reviewed the dashboard outlining the key areas of focus, ensuring controls are in place for scope, cost, schedule and quality. He reported the controls have been established and are appropriately being monitored by the internal team. He concluded by saying the key is execution, focusing on the internal team and making sure they have the resources needed to accomplish the goals.

6. Receive an update and consider long-term facilities planning on potential new building, including the potential final selection of a developer for the main campus and the associated costs, potential renovations or sale of he Red River campus, and leases at 816 Congress and Indeed Tower, including considering a finding that to deliberate or confer in open meeting would have a detrimental effect on the position of the retirement system in negotiations with a third person – Brian Guthrie, Andrew Roth and Eric Lang.

Mr. Brian Guthrie provided an overview of where things stood regarding long-term facilities planning. He said the vision of the long-term facilities and why they are undertaking this effort is to decrease the leased space footprint and generate significant savings to the fund. He noted this effort in terms of trying to get out of lease space by 2025 is consistent with the Texas Facilities Commission efforts to consolidate agency facilities and minimize leased offices. He said a necessity for additional space is driving this initiative. He referenced the pandemic and currently how currently a majority of TRS staff are working from home while noting this will not always continue to be the case. He said the current work-from-home percentage, which is approximately 65 to 70 percent of the workforce is not sustainable in the long term. Mr. Guthrie reported the status quo, in other words doing the same or doing nothing, is the most expensive option in the long term. He also said normal operations will not return until probably the summer of 2021 with widespread distribution of the vaccine. He stated a return to what we know as “normal” not only impacts how we do business, but it also impacts what solution is selected and when we select it. Mr. Guthrie reviewed information covered and actions taken during the past board meetings. He also reviewed FTE growth that has been fairly constant and consistent with population growth since 2000. He stated compared to our equivalently sized peers who have significantly more FTEs, TRS also ranked eighth of thirteen regarding service provided to our members by CEM benchmarking service. Mr. Guthrie reported on the subleasing activity. He said Indeed Tower is expected to be completed in late first quarter of 2021 and Cushman & Wakefield is aggressively marketing the space to any suitors. Mr. Andrew Roth stated that in addition to the considerations listed of growing staff, growing membership and constrained space, there is a window of opportunity that will soon close to be considered. He said they identified through the current procurement a solution that will likely go away in six to twelve months, which would also avoid the cost of the current lease for IMD at 816 Congress. He stated a delay in the current long-term facilities effort means there will be fewer, less viable, or more expensive options in the future if the current procurement closes and the process must start all over again. He stated that if the decision is made not to move forward that instead of turning around immediately and initiating a new procurement, it would be wise to wait for a period of time to start the process over again. Mr. Roth reviewed the costs for remaining with the status quo and with a new headquarters. He reported for IMD to remain in 816 Congress and for headquarters to remain status quo for another five years the costs would be approximately $33 million and for 10 years would be $78 million. He noted costs for leasing adds up quickly as does maintenance on an aging building. He stated a new headquarters would be a generational solution, eliminating the need for leasing and certain expected maintenance expenses at Red River.

Mr. Guthrie concluded by reviewing a proposed timeline for the board to review options and making determinations. In response to Ms. Sissney’s inquiry, Mr. Guthrie stated the regional office in El Paso was included in the Legislative Appropriation Request and recommended by the Sunset Commission. However, he said the El Paso regional office would not have a significant impact on the volume of visits here in Austin for those members do not make the trip to Austin. On a motion by Mr. Ball, seconded by Mr. Moss, the board unanimously voted that deliberating or conferring on the 816 lease, Indeed Tower, developer selection or other facility related Board procurement in open meeting related to item 6 would have a detrimental effect on the position of the Retirement System in negotiations with third parties. At 10:34 a.m., Mr. Hollingsworth announced the Board would go into executive session under the following agenda items and sections of the Government Code: item 6 under Sections 825.115(e), 551.071 and 551.072, to discuss Board procurement matters, real property and consult with legal counsel as needed; and under item 7 under Section 551.071, to consult with legal counsel. At 12:26 p.m., Mr. Hollingsworth reconvened the Board Meeting.

7. Review the report of the General Counsel on pending and contemplated litigation, including updates on litigation involving benefit-program contributions, retirement benefits, health-benefit programs, investment matters, open records – Heather Traeger.

At 12:27 p.m., Mr. Hollingsworth recessed the meeting until 8:00 a.m. tomorrow morning.

Minutes of the Board of Trustees

December 11, 2020



Jarvis V. Hollingsworth, Chair Nanette Sissney, Vice Chair Michael Ball David Corpus John Elliott Christopher Moss James Dick Nance Robert H. Walls, Jr.

Others present:

Brian Guthrie, TRS Veronica Sance Andrew Roth, TRS Craig Campbell Don Green, TRS Daniel Goodmon Heather Traeger, TRS Robert Farrell Jase Auby, TRS Jonathan Scofield, EY Barbie Pearson, TRS Doug Holt, EY Katrina Daniel, TRS Doug Doer, Grant Thornton Amanda Jenami, TRS Ivy Bela, Grant Thornton Katherine Farrell, TRS Joe Newton, GRS Suzanne Dugan, Cohen Millstein Dan Sibilik, GRS Mr. Hollingsworth called the meeting to order at 8:00 a.m. Ms. Farrell called the roll. A quorum was present.

8. Provide an opportunity for public comment.

Ms. Veronica Sance expressed concern over the impacts of the sale of the Baldwin Hills Crenshaw Mall to LIVWRK. She said she is a resident of the community and is one of the approximately 67,000 residents that will be highly displaced if the sale of the mall goes through to LIVWRK. Mr. Craig Campbell expressed concern over the long-term facilities planning focus on centralization. He supports regional offices for members to sit down with TRS counselors. He

noted building bridges not buildings should be the priority. He also provided a list of items to be included in the surveys referenced in the communication plan. He stated the investment managers bonuses of $13.1 million drew the ire of members. He concluded with request for a COLA.

9. Receive the report of the Benefits Committee on its December 9, 2020 meeting and consider approval of the Benefit Payments for September 1, 2020 to November 30, 2020– Committee Chair.

Mr. Ball, Committee Chair, provided the following report of the Benefits Committee: The Benefits Committee met on December 9, 2020. The committee approved the proposed minutes of the Benefits Committee for the September 16, 2020 meeting. Ms. Barbie Pearson provided an update on the benefit payments for September through November 2020. The committee recommends to the Board the approval of benefit payments for September through November 2020. The committee received an update from Ms. Pearson on Benefit Services operations for first quarter of fiscal year 2021. This report included increasing workload and trends in benefits for the first quarter of fiscal year 2021, and a short video related to the newly designed annual statements sent to members. Next the committee received an update from the chief health care officer, Ms. Katrina Daniel, on the quarterly performance of TRS-Care and TRS-ActiveCare, including the impact of COVID and the implementation of new plans and rates to begin January 1, 2021.

Mr. Ball concluded his report with the following motion: On a motion by Mr. Ball, the Board unanimously voted to approve benefit payments for September 1, 2020 through November 30, 2020, as recommended by the Benefits Committee.

10. Receive the report of the Policy Committee on its December 9, 2020 meeting and

consider adoption of the following: – Committee Chair A. Proposed amendments to TRS Rule 47.17 Calculation of Alternate Payee

Benefits Before a Member’s Benefit Begins, in Chapter 47 of Title 34, Part 3 of the Texas Administrative Code; and

B. Proposed Member Engagement Policy. Mr. Elliott, Committee Chair, provided the following report of the Policy Committee:

The Policy Committee met on December 9, 2020. The committee approved the proposed minutes of its September 2020 meeting.

The committee recommended to the Board adoption of the proposed amendments to TRS Rule 47.17 pertaining to the calculation of alternate payee benefits before a member’s benefit begins, as provided in Title 34, Part 3 of the Texas Administrative Code. The committee recommended to the Board adoption of the proposed Member Engagement Policy.

Mr. Elliott concluded his report with the following motions: On a motion by Mr. Elliott, the Board unanimously approved the adoption of the proposed amendments to TRS Rule 47.17 pertaining to the calculation of alternate payee benefits before a member’s benefit begins, as provided in Title 34, Part 3 of the Texas Administrative Code., as recommended by the Policy Committee. On a motion by Mr. Elliott, the Board unanimously approved the adoption of the Member Engagement Policy, as recommended by the Policy Committee. Mr. Hollingsworth announced agenda item 12 would be taken up next.

12. Receive the report of the Investment Management Committee on its December 9,

2020 meeting – Committee Chair. Mr. Corpus, Committee Chair, provided the following report of the Investment Management Committee:

The Investment Management Committee met on December 9, 2020. The committee adopted the minutes of its September 2020 meeting. Jase Auby began with his CIO update. The third quarter 2020 performance review was presented by Steve Voss and Mike McCormick with Aon. James Nield then provided an annual update of the risk and portfolio management. Following we received an annual update on the trading group presented by Bernie Bozelli and Demtrius Pope. Concluding the Investment Management Committee, Ashley Baum provided a review of the absolute return portfolio.

13. Receive the report of the Audit, Compliance, and Ethics Committee on its December 10, 2020 – Committee Chair.

Mr. Moss, Committee Chair, provided the following report of the Audit, Compliance and Ethics Committee:

The Audit, Compliance and Ethics Committee met on December 10, 2020 via videoconference. The committee approved the minutes of the September 17, 2020 Audit, Compliance and Ethics Committee.

State Auditor’s Office staff presented the results of the audit of the TRS’ Comprehensive Annual Financial Report, the CAFR, for fiscal year 2020. State Auditor’s Office staff presented the results of the incentive compensation at TRS for plan year ending September 30, 2019. Crowe, LLP auditors presented the results of the financial audit of TRS’ investment company, TRICOT, for fiscal year 2020. EY staff presented the results of its maturity assessment for the Unified Risk Management Program. The general counsel and chief compliance officer presented routine compliance reports. Internal Audit staff presented the results of audits from compliance with health care federal regulations, TRS use of leverage in asset allocation, and Investment Management Division’s data system. Internal Audit staff also presented the Internal Audit annual report, a follow up on outstanding audit and consulting recommendations and various administrative reports.

Mr. Hollingsworth announced agenda item 11 would be taken up next.

11. Receive the report of the Budget Committee on its December 9, 2020 meeting –

Committee Chair.

Ms. Sissney, Committee Chair, provided the following report of the Budget Committee:

The Budget Committee met on December 9, 2020. The first item of business was the approval of the minutes from the July 15, 2020 Budget Committee meeting. Ms. Duarte introduced the Comprehensive Annual Finance Report for fiscal year 2020 and provided an update on membership data. Ms. Duarte then passed the presentation to Ms. Zigmond, who provided a high-level overview of the 2020 CAFR, which showed a net position for the Pension Trust Fund of $165.4 billion, compared to $158 billion on last year’s CAFR. Overviews of the TRS-Care and TRS-ActiveCare funds were also presented. Mr. Leith concluded the presentation with an overview of the investment data as recommended by the Texas Sunset Commission. Mr. Don Green then presented a high-level overview of FY 2020 year-end budget. He explained the agency’s effort in responding to legislative directives to identify cost savings and managing the economic ramifications of COVID-19. In June 2020 estimated savings was about 11 percent, the year-end savings were 16 percent for FY20. In response to recommendations made by Internal Audit and the Texas Sunset Commission, cost benefit analysis of implementing a parallel investment accounting system was presented by Mr. Green, Mr. Leith, Ms. Bell, Ms. Jenami and Mr.

Subramanian with Cutter. Alternative solutions were discussed. An approach to enhance the current in-house solution by adding staff expertise and software was deemed to be the most prudent approach. Mr. Green will provide periodic updates to the Board on the progress of this implementation.

Mr. Hollingsworth announced agenda item 14 would be taken up next. 14. Review and Discuss the Executive Director’s report on the following matters – Brian

Guthrie: A. Administrative operational matters, including updates on financial, audit, legal,

staff services, special projects, strategic planning, legislative, Sunset Update, and personnel matters.

B. Update on COVID-19 and TRS operations. C. Board operational matters, including a review of draft agendas for upcoming

meetings. D. Event notices or reminders; holiday and other schedules of interest; board

member, employee or other individual recognitions; and expressions of thanks, congratulations, or condolences.

Mr. Guthrie provided an overview of general updates, past and upcoming conferences. He gave an update on Return to Office for TRS staff. He said staff since March continues to work from home but slowly the percentage of people onsite is increasing. He noted since the last Board Meeting they did reopen to the public with limited in-person counseling visits which began October 26. He said the number of visits a day are limited by the space. He said this was likely the new norm moving forward for the next several months and probably into early spring. Mr. Guthrie reported the in-person visits were closed the week after Thanksgiving in light of public health warnings and will do the same for after Christmas and New Year holidays. Mr. Guthrie said the Sunset Commission hearing was the past Monday. He said it went very smoothly and wanted to tank everyone here at TRS, including the trustees, who contributed to that report. He thanked Sunset staff who were a pleasure to work with and the entire commission. He said the final hearing will be January 13, 2021, where the final report will be adopted. Mr. Guthrie announced the nomination period for the Trustee Election was open until January 25th. He reported that Heather Traeger was named co-chair of the Regulatory Advisory Committee for the National Society of Compliance Professionals and that he is now immediate past president for NCTR and regional VP for NASRA. He was very pleased to announce that TRS was named a Top Workplace for 2020. Mr. Guthrie concluded by reviewing the proposed items for the February and April Board meetings.

Mr. Hollingsworth announced two speakers who previously signed up to provide public comment were now available and would allow them time to speak.

8. Provide an opportunity for public comment. Mr. Damien Goodmon, board member of Downtown Crenshaw Raising and member of the advisory committee for Capri Urban Investors, expressed concern regarding TRS’ investment in an iconic commercial center in the center of Los Angeles Black community. He stated Downtown Crenshaw Rising remains the most natural buyer and most capable manager of the asset and large scale redevelopment. Mr. Robert Farrell, retired member of the Los Angeles City Council, requested the Board to consider Mr. Goodmon’s request. Mr. Hollingsworth announced agenda item 15 would be taken up next. 15. Review the TRS Pension Trust Fund Actuarial valuation for the fiscal year ending

August 31, 2020 – Joe Newton and Dan Sibilik, GRS. Mr. Joe Newton began by stating this was probably the strongest actuarial valuation this system has had in a couple of decades as far as where we are and where we are expected to go and seeing things on the horizon. Mr. Dan Sibilik provided an overview of the valuation. He reported the estimated market return for the year was 7.24 percent, which is almost exactly what the assumption was at 7.25. Mr. Sibilik reviewed the contribution schedule for the base rate with projections up to 2025. He said that TRS with the ultimate rate of 9.51 is the lowest contribution rate among its peers. He discussed the impact of COVID up to August 31, 2020. Ms. Sibilik then reviewed the unfunded actuarial accrued liability. He noted this year’s valuation is slightly better than last years by being fully funded one year earlier than predicted last year. Mr. Newton stated the main reason the unfunded liability is expected to pay off one year sooner this year is because of the head count increases which led to payroll growing much faster than expected. He said fewer retirements occurred than was expected creating a $300 million gain. He noted there is still quite a few years away before the unfunded liability is starting to come down, noting it actually grows for the first few year prior to it starting to come down. Mr. Newton reviewed the Board’s funding policy adopted last year. He said policy provides TRS with the ability to communicate the support of contributions and benefit policies that will systematically decrease the unfunded over time in order to achieve a funded ration that is equal to or greater than 100 percent. He then reviewed modeling as to when TRS would need to ask for greater contributions. Mr. Newton concluded by TRS are on a better road, needing the policy process to continue to work. He said the Board’s funding policy provides a strong mechanism for protecting the system.

16. Review the TRS-Care Actuarial Valuation and Other Post-Employment Benefits

(OPEB) reports for the fiscal year ending August 31, 2020 and receive an overview and update on TRS-Care and TRS-ActiveCare – Katrina Daniel and Joe Newton, GRS.

Mr. Newton stated the OPEB is an accounting exercise. He said there is no requirement to pre-fund the benefits. He reported the net OPEB liability decreased from $47 billion in 2019 down to $38 billion in 2020. He noted one of the reasons for the change was the Medicare Advantage premiums that TRS negotiated with the vendor for five years had a significant impact to the liability. Mr. Newton reviewed what advanced funding of the benefits would look like. Ms. Katrina Daniel provided a review of the annual report on the performance of TRS health plans. She stated that these benefits will experience more than $150 million annual across the plans. She reported they are finishing the installment of new vendors in the TRS-Care Standard plan for non-Medicare retirees enrolled in care, and then the Medicare Advantage plan. She reviewed the impact COVID has had on the plans. She noted members have deferred care they normally would have sought but have had significant costs due to COVID. Ms. Daniel discussed the size of the health plans and how, as the largest commercial purchaser and second largest purchaser in Texas behind the Medicaid program, they are able to wield the purchasing power into savings. She said the reduction in the OPEB liability has also resulted in an improved fund balance. Ms. Daniel concluded by reviewing TRS-ActiveCare. She stated ActiveCare compared to what districts outside of ActiveCare are purchasing, is 12 percent below the median cost of those plans. She noted the significant value when compared with benefits and the cost of those benefits. 17. Consider the engagement of an Independent Program Assessment (IPA) vendor for

the TEAM Program, including considering a finding that to deliberate or confer in open meeting would have a detrimental effect on the position of the retirement system in negotiations with a third person – Amanda Jenami.

Ms. Amanda Jenami provided an overview of the process followed in selecting the finalists that will present today to select the vendor to provide independent assessment of the TEAM Program risks and progress to ensure successful completion of the project. Ms. Jenami stated the vendors will be presenting in alphabetical order. Mr. Doug Holt and Jonathan Scofield of EY provided a presentation on their experience, tools, and approach for serving as the Independent Program Assessment vendor. Mr. Doug Doerr and Ms. Ivy Bela of Grant Thornton provided a presentation on their experience, tools, and approach for serving as the Independent Program Assessment vendor. Mr. Hollingsworth announced taking up next agenda item 18 for the public presentation and then recessing into executive session for agenda items 17 and 18.

18. Consider personnel matters, including the appointment, employment, evaluation, compensation, performance, duties, discipline, or dismissal of the Executive Director, Chief Audit Executive, Chief Investment Officer, or General Counsel and Chief Compliance Officer – Jarvis V. Hollingsworth. a. Discuss and consider the evaluation, compensation, and duties of the Executive Director. b. Discuss and consider the compensation and duties of the Chief Investment Officer. c. Discuss and consider the compensation and duties of the Chief Audit Executive.

Mr. Keith Robinson provided a brief overview of the process for C-suite evaluations specific to the executive director, chief investment officer, and the chief audit executive. Ms. Janet Bray discussed the timing of next year’s evaluation process. She recommended the evaluation timeline for the executive director, chief investment officer and chief audit executive be shifted to the end of the calendar year, very much like how this year was handled. She said the current process kicks off in May and concludes with the July board meeting. She said the shift would have the process kick off in October after the end of the fiscal year and end with the December Board meeting. She stated this shift would allow the Board to evaluate performance data for the entire fiscal year. She noted the schedule does not affect the collection or calculation of either the IMD or executive director incentive plan. Ms. Bray provided the history of the agency use of unclassified positions for positions that do not fit within the parameters of the state system. She noted the current unclassified positions were created in 2014, 2015 and 2018. Mr. Guthrie stated since Ms. Heather Traeger became the general counsel, they would like to make changes to the classifications within the Legal and Compliance Division. In particular, he said they would like to update the current unclassified chief compliance officer position and change the title to reflect Ms. Traeger’s new role as general counsel, combining the classification into one as general counsel and CCO. He noted the CCO position will continue to be held by Ms. Traeger and the resulting full-time employee opening will then be used for the newly created deputy chief compliance officer position, which will also be an unclassified position. Mr. Hollingsworth then announced the Board would recess into executive session for agenda items 17 and 18. On a motion by Mr. Corpus, seconded by Mr. Elliott, the Board unanimously voted that deliberating or conferring on the engagement for the independent program assessment vendor for the TEAM Program in an open meeting would have a detrimental effect on the position of the Retirement System on negotiations with a third person.

At 11:01 am, Mr. Hollingsworth stated the Board will now go into executive session under the following agenda items and sections of the Government Code: item 17 under Section 825.11(b)(3) to discuss Board procurement matters related to the independent program assessment vendor, and item 18 under Section 551.074 to discuss and consider personnel matters related to the appointment, employment, evaluation, assignment of duties, discipline or dismissal of the executive director, the chief audit executive, the chief investment officer, or general counsel and chief compliance officer. At 2:17 pm, Mr. Hollingsworth reconvened the Board. On a motion by Mr. Moss, seconded by Mr. Ball, the Board unanimously voted to approve the following resolution authorizing the executive director to contract with EY to provide IPA services to the Board for the TEAM program:

RESOLUTION REGARDING SELECTION OF TEAM INDEPENDENT PROGRAM

ASSESSMENT SERVICES AND RELATED CONTRACT AUTHORITY WHEREAS, The Board of Trustees (“Board”) of the Teacher Retirement System of Texas (“TRS”) is engaged in an electronic pension administration system modernization effort, TRS Enterprise Application Modernization (“TEAM”);

WHEREAS, The Board has determined that it is in the best interest of TRS to engage independent assistance with program assessment for the TEAM program;

WHEREAS, Section 825.101 of the Texas Government Code states that the Board is responsible for the general administration and operation of the retirement system, and Section 825.103 of the Texas Government Code states that the Board has exclusive authority over the purchase of goods and services using trust funds and shall control all aspects of information technology and associated resources relating to the retirement system;

WHEREAS, TRS Bylaws subsection 1.8(j) provides that the Board is responsible for monitoring and evaluating the effectiveness of the retirement system;

WHEREAS, TRS Bylaws subsections 5.6(b) and 5.6(e) delegate authority to the Executive Director to contract for the purchase of services and the execution of vouchers for payments, in accordance with actions of the Board; WHEREAS, In 2012, TRS conducted a competitive procurement for Independent Program Assessment (IPA) services for the TEAM program and, at the December 2012 board meeting, the Board selected Bridgepoint Consulting;

WHEREAS, In 2020, TRS conducted a new competitive procurement for the TEAM program IPA services;

WHEREAS, The Board wishes to authorize the Executive Director to enter into a contract for IPA services for the TEAM program; now, therefore be it

Resolved, That the Board, pursuant to Sections 825.101 and 825.103 of the Texas Government Code, hereby authorizes the Executive Director of TRS or his designee to negotiate, with the assistance and advice of legal counsel, a contract with EY to provide IPA services to the Board for the TEAM program for a term to commence on January 1, 2021, or the date the contract is fully executed, and terminate on December 31, 2024; and, if negotiations are deemed in his or her discretion to be successful, then the Executive Director or his designee is hereby authorized to execute a contract on such terms and conditions as such officer may deem, in his or her discretion, to be in the best interest of TRS, and further to execute and deliver all such other documents, including all future extensions or amendments to the contract, that such officer may deem necessary or appropriate to effectuate this resolution, as conclusively evidenced by the taking of the action or the execution and delivery of the documents, and to incur, approve and pay any budgeted expenses or costs reasonably necessary or advisable with respect to such contract or amendments. Resolved, That if for any reason, the Executive Director concludes in his sole judgment that TRS is not reasonably likely to successfully negotiate a contract with _______EY______, then the Board hereby selects ________ Grant Thornton _____ to provide IPA services to the Board for the TEAM program, subject to the successful negotiation and execution of a final agreement, for a term to commence on January 1, 2021, or the date the contract is fully executed, and terminate on December 31, 2024. Resolved, That once the Executive Director concludes in his sole judgment that TRS is not reasonably likely to successfully negotiate a contract with _________EY________, then the Board hereby authorizes the Executive Director or his designees to expend funds and to take all actions deemed by him or a designee to be necessary or advisable to implement this resolution, including the negotiation and execution of all documents needed to finalize an acceptable contract with _________Grant Thornton________, the same or better financial terms presented to the Board and on such other terms and conditions deemed by the Executive Director or a designee to be in the best interest of TRS, and from time to time to amend or modify the contract as deemed by the Executive Director or a designee to be in the best interest of TRS.

Resolved, That nothing in this resolution may be construed as a contract, an offer to contract with a power of acceptance that would form a contract, or an acceptance of an offer to contract, and TRS is not and will not be legally bound to any agreement unless and until the Executive Director has executed and delivered definitive agreements relating to the subject matter, as applicable.

On a motion by Mr. Moss and seconded by Mr. Corpus, the Board voted unanimously to approve the following resolution authorizing a one-time merit payment in the amount of $20,000 to the chief audit executive, Amanda Jenami:

Resolution Awarding a One-Time Merit Payment to the Chief Audit Executive Whereas, Section 825.208 of the Texas Government Code provides that, notwithstanding any other law, the Board of Trustees (“Board”) of the Teacher Retirement System of Texas ("TRS") shall approve the rate of compensation of all persons it employs; Whereas, Subsection 1.7(u) of the Board’s bylaws provides that the Board shall be responsible for the selection, replacement, dismissal, performance evaluation, and compensation of the Chief Audit Executive in consultation with the Audit Committee and the Executive Director; Whereas, Subsection 1.7(l) of the Board's bylaws provides that the Board may consider or take any action otherwise specified to be taken or considered by a committee; and Whereas, The Board wishes to amend the compensation of the Chief Audit Executive; now, therefore be it Resolved, That the Board hereby authorizes a one-time merit payment as follows:

One-time merit payment to the Chief Audit Executive (the incumbent is Amanda Jenami): Award a one-time merit payment effective January 1, 2021 in the amount of $ _20,000___; and

Resolved, That nothing in the adoption of this resolution alters the at-will nature of employment that TRS has with any of its employees, creates a contract between TRS and any TRS employee, or confers on any TRS employee the right to continued employment with TRS, including the Chief Audit Executive or any other employee.

19. Chief Operations and Administration Officer (COAO) update – Andrew Roth. Mr. Roth reviewed highlights in terms of things that were accomplished in 2020. He noted they had migrated the mainframe to a cloud-based provider that will exist for system. He said TRS took the TEAM project over from the vendor. He stated 90 percent of the operations moved to remote work by end of March and implemented stringent safety measures for those who remained onsite. Mr. Roth concluded by stating the diversity, equity and inclusion division is reviewing its strategic plan that includes performance metrics, specific milestones and an implementation schedule and timeline. He stated a procurement for a diversity and inclusion assessment service was underway that will provide a number of analytics related to diversity and inclusion for TRS.

At 2:30 pm, Mr. Hollingsworth adjourned the meeting.

APPROVED BY THE BOARD OF TRUSTEES OF THE TEACHER RETIREMENT SYSTEM OF TEXAS ON THE ___ DAY OF FEBRUARY 2021.

ATTESTED BY: __________________________ _________________________ Katherine H. Farrell Date Secretary to the TRS Board of Trustees

Future Meetings for Calendar Year 2021

April 15 – 16, 2021April 14 – 16, 2021 (if virtual meeting)

July 15 – 16, 2021

September 16 – 17, 2021

December 7 – 8, 2021

Setting and Re-scheduling Future Board Meeting Dates

1

Andrew RothFebruary 26, 2021

CHIEF OPERATIONS AND ADMINISTRATION OFFICER REPORT

Teacher Retirement System of TexasTeacher Retirement System of Texas

CHIEF OPERATIONS AND ADMINISTRATION OFFICERREPORT

Staffing Investment Opportunities: Spotlight On Cybersecurity

3

Staffing Spotlight: Cybersecurity

Key Activities

✓ Provide assurance to TRS Leadership and the Board that the organization is appropriately managing information security risk.

✓ Create and maintain information security policies and help set implementation goals.✓ Monitor the threat and regulatory landscapes and identify the top risks facing the

organization.✓ Invest in and manage advanced capabilities to improve the protection against and

detection of cyber attacks on the organization.✓ Assist risk owners (in the first line of defense) to make risk management tradeoff

decisions and select appropriate security controls.✓ Facilitate and monitor the implementation and maintenance of security controls across

the organization.

3

Facilitate and monitor the implementation and maintenance of security controls across

4


Investment Management$177 Billion Under

Management

Health Insurance & BenefitsOver 690,000 Covered Lives

Pension Benefits1.7 Million Members

Cyber Attacks(Malware, Phishing, DOS, SQL injections,…)

Expanding Regulatory and Legal Requirements

Growing Threat Landscape

Move to Continuous Delivery (DevOps)

Increase in Internaland External Audit

Long term impacts of the COVID pandemic

Cloud Computing

Accelerated Digital Business Initiatives

Citizen Development

Information Information SecuritySecurity

Protecting

Health Insurance Portability and Accountability Act of 1996(HIPAA)

Confidential Transaction Information, Including Material Non-Public Information

(MNPI)

Confidential Member Information including Protected Health Information (PHI)

Move to Continuous

Legal Assessment and Analysis

5


5

6


GROWING REGULATORY BURDEN

• Regulations governing cybersecurity continue to proliferate

• Between 2000-2010, regulations grew at a slower pace

• Between 2010-2015, growth of regulations intensified

• From 2015-today, the trend has only accelerated

• TRS is subject to well over 20 different regulatory laws promulgated by the State of Texas, the US Federal Government, and international regulations due to the global reach of TRS operations and investment data

7


Threat & Risk Management

Security Operations Management

Security Infrastructure Management

Security Infrastructure

❑ Cybersecurity Threat Analyst❑ Cybersecurity Risk Analyst❑ Information Security Tech Writer

Positions Skills

❑ Cybersecurity Cloud Specialist❑ Cybersecurity Architect

❑ Cybersecurity Operations Analysis❑ Privacy and Regulatory Attorney

Positions Current Needs in Staffing and Expertise:

✓ Risk Management and Auditing Support✓ Policy Creation, Writing, and Alignment✓ Privacy and Regulatory Expertise✓ Incident Investigations

✓ Cloud Security Design and Validations✓ Security Framework Assessment and

Deployment ✓ DevOps Security Engineering and Architecture

✓ Enhanced Security Controls and Features for Network Operating System

✓ Identity and Access Management of Standard, Privileged, and Service Accounts

✓ Data Security and Privacy Law

Security Operations Management

4 – FTE’s

8

Staffing Spotlight: Cybersecurity Current Staffing

Information Security1 – Information Security Officer

Threat & Risk Management

1 - FTE

Security Infrastructure Management

3 - FTE’s

▪ Risk Assessments▪ Threat Analysis▪ Incident Response &

Reporting▪ Coordinate with Legal &

Compliance on Regulatoryand Policy Compliance

▪ Policy Creation/Revision▪ Coordinate with Legal &

Compliance on Legal Review▪ Privacy Analysis/Compliance▪ Reporting▪ Audit Response

▪ Security Guidelines and Control integration into Systems and Processes

▪ Patch Management▪ Application Validations▪ Cloud Security▪ Security Procedure

Design▪ Security Incidents and

Events Monitor Design▪ Configuration and

Management of security platforms

▪ Security Architecture

▪ Penetration Testing▪ Security Investigations▪ Alert Monitoring▪ Vulnerability Scanning▪ Phishing Campaigns▪ Static and Dynamic

Application Testing▪ Website Security

Validations▪ Onboarding / Offboarding

9


“Texas ranked third among

states in the number of cybercrime victims and second in the number of financial losses in 2017,”

Hegar said. “Unfortunately,

cybercriminals see Texas’

large, ever-growing population as a large and ever-growing pool of potential targets.”– Glenn Hegar, Texas Comptroller

TEXAS COMPTROLLER OF PUBLIC ACCOUNTS

Information Security Roles # of Reported FTE’s

Information Security Management 3Compliance Team 6Data Loss Prevention and Cyber Security Awareness Training 3

Digital Forensics 2Technical Risk Assessment Team 5Privacy Officer 1Identity & Access Management 9Operational/Infrastructure Security 7Total: 36

Since the pandemic began, the FBI reported a 300% increase in reported cybercrimes. – FBI: Internet Crime Complaint Center (IC3)

10


CALIFORNIA STATE TEACHERS’ RETIREMENT SYSTEM

CalSTRS TRS

Membership Size 975,000 1,682,798Health Insurance- Retirees N/A 220,213- Active Members N/A 472,988Investments Under Management $248B $177BTotal FTE’s 1,200+ 863FTE’s Dedicated to Information Security 20 9

11


Caasi Lamb, Director of Strategic Initiatives

Keith Robinson, Focus Consulting Group

February 24, 2021

CORE VALUES REFRESH PROJECTTeacher Retirement System of Texas

2

• Background

• Process

• Key Dates

• Presentation from Focus Consulting Group

• New Core Values

Overview

• Designed to create a culture at TRS that supports the agency’s mission

• Communicated regularly to TRS staff and external oversight entities

• Current values established in 2013Customer Satisfaction Collaboration/TeamworkAccountability RespectEthics ExcellenceEmployee Fulfillment

• Internal Audit • Review process• Communication plan • Performance measures

3

Background

Improving the retirement security of our members by prudently investing and managing the Trust assets and delivering benefits that make a positive difference in their lives.

4

Process

Focus Groups• Gain additional insight into survey

results• 12 groups consisting of six staff

groups, four manager groups, new hire group, and the DE&I Council

Introductory WebinarProvide information on the process

Culture Survey• All employees• 594 total responses (73% completion

rate)

5

Date Task

August – October 2020 Held introductory webinar; conducted survey and focus groups

January 2021 Reviewed Culture Survey Report with the Executive Council and determined new Core Values

February 2021 Review key findings and present new Core Values to Board of Trustees; identify performance measures

March 2021 Communicate new Core Values at All Hands Meeting

March – December 2021 Implement Core Values Communications Plan

Key Dates

Core Value Refresh Board Overview

Teacher Retirement System of Texas (TRS)

February 24, 2021

Copyright 2020 The Focus Consulting Group. Use only with permission.

TRS Values in Action

Green/Underlined = Match between top existing and aspirational values in given yearRed/Italicized = Sludge Factor

= TRS articulated value AND actual or aspirational value

7

ARTICULATED VALUES ACTUAL VALUES ASPIRATIONAL VALUES

Customer Satisfaction Balance (work/life) Balance (work/life)Collaboration/Teamwork Member Focused Collaboration/Teamwork

Accountability Collaboration/Teamwork Continuous ImprovementRespect Professional Employee EmpowermentEthics Ethical/Integrity Leadership Development/Mentoring

Excellence Customer Satisfaction Member FocusedEmployee Fulfillment Diversity Long-term Perspective/Vision

Strong Work Ethic RespectBureaucracy Growth Mindset (learning culture)Appreciation Efficiency

Culture Journey: Sludge

8

MARCH 2013: 14%N=362

% OF VOTES

SEPT 2020: 12%N=594

% OF VOTES

Bureaucracy 22% Bureaucracy 23%

Politics 20% Slow Moving/Reactive 20%

Territorial 19% Politics 16%

Slow Moving/Reactive 16% Siloed 16%

Defensive Behaviors 12% Defensive 8%

Gossip 11% Short-term Focus 8%

Short-Term Focus 10% Entitlement 7%

Entitlement 10% Blame 6%

Blame 6% Gossip 5%

Manipulation 6% Negative 5%

Negative 6% Disrespect 4%

Disrespect 6% Manipulation 4%

Building Blocks of Culture: Aspirational DNA (Maslow)

Purpose/Meaning

Mastery/Development

Belonging/Connection

Safety/Security

Control

Approval

Security

Purpose

Fear of losing any one of these leads to anxiety

Achieving this leads to happiness, contentment

9

Customer Satisfaction (A A)Ethics (A A)Employee Fulfillment (A)Member Focused (A A)Long-term Perspective/Vision (A)

Balance (work/life) (A A)Employee Empowerment (A)Respect (A A)

Excellence (A)Continuous Improvement (A)Leadership Development/Mentoring (A)Growth Mindset (learning culture) (A)Efficiency (A)

Collaboration/Teamwork (A A A)Accountability (A)

A = TRS Articulated Values (2013)A = TRS Actual ValuesA = TRS Aspirational Values

Conclusions• TRS has been deliberate in designing, executing, and reinforcing its culture.

• At TRS, the Maslow scores are strong, providing a solid foundation for culture resulting in workability.

• TRS is effective at both frequency and transparency of communication.

• There is a noted appreciation for the agency’s willingness to measure and improve its culture.

• TRS experiences both meta and subcultures; however, they are primarily complimentary, and the subcultures do not conflict with the current TRS metaculture.

• TRS is a purpose driven organization (Maslow’s highest level) where intrinsic surpasses extrinsic motivation.

• Key attraction features to the agency are: purpose (at both the agency and personal level), culture, and work/life balance afforded employees.

• Comments convey a strong, purpose driven organization, expressed on several levels:• Agency mission• Dedication to the teachers of Texas• Personal fulfillment in the work itself• Dedication to colleagues at TRS

10

Questions & Comments

11

Jim Ware847-373-8853

[email protected]

Liz Severyns847-636-7491

[email protected]

Keith Robinson312-560-7216

[email protected]

Bryan Kozlowski646-201-5243

[email protected]

mailto:[email protected]




12

Current Core Values (2013)

• Customer Satisfaction• Collaboration/Teamwork• Accountability• Respect• Ethics• Excellence• Employee Fulfillment

New Core Values (2021)

• Member Focused• Ethics• Accountability• Respect• Diversity• Efficiency• Collaboration• Excellence

Overlap between current and new core values

New Core Values

Appendix

TRS Culture Review - Appendix

14

1. Steps and Timeline

2. Culture: what is it and why is it important?

3. Additional data

Steps and Timeline

15

Culture Survey Introduction Webinar

Survey open for response

FCG Data Analysis and Report Generation

Initial Debrief with Brian Guthrie, Andrew Roth and CVR team

FCG Facilitated Focus Groups

August 25, 2020

September 29

September 12 – September 26

August 26 – September 11

October 5 – October 9

TRS Board Presentation

January 8, 2021EC Retreat

February 24

Culture: What is it and why is it important?

16

Culture by…

Design Not Default

17

http://junknomore.com/crooked-house-the-beginning/

4. Excel lence

Purpose

4. Excel lence4. Excel lence

Excellence

ClientCollaboration

X

18

* Values chosen are examples and not TRS’ chosen values

Goal of Culture: Practicing the same beliefs, values and behaviors.

TRS Additional Data from the Culture Survey

19

a. Maslow and Culture

b. Strategy

c. Success Factors

d. Loyalty

e. Division Scorecard

Maslow Summary

20

Belonging / Connection: 4.63

Safety / Security: 4.81

Purpose / Meaning: 5.15

Mastery / Development: 4.49

Scale: Strongly Agree (6) to Strongly Disagree (1)

Belonging / Connection: 4.63 Purpose / Meaning: 5.15Belonging / Connection: 4.63

Strategy: TRS strategic goals are….

2020

Very clear to me and I know my role in executing them 62%

Very clear to me but I do not know my role in executing them 9%

Somewhat clear to me 25%

Not clear to me 3%

Have not been communicated to me 2%

21

N=589

Success Factors: 2013 v. 2020

Percent Agree Percent Disagree

2013* 2020 2013* 2020

As an agency, we have the ability to attract top talent. 74% 81% 15% 13%We have an ownership mentality; our employees think like leaders of the agency. 51% 66% 30% 28%

We are good at executing plans in a timely manner. 72% 72% 14% 26%

We have the resources to do our work well. 73% 85% 20% 15%

Our agency encourages open and transparent communication. 69% 86% 16% 14%

Decision making is timely and effective. 67% 74% 18% 25%

Executive leaders communicate well (clear and transparent). 65% 89% 23% 10%

Department managers communicate well (clear and transparent) N/A 82% N/A 15%

I feel like our agency is a leader among public retirement systems. N/A 84% N/A 5%

Agree=slightly agree, agree, strongly agree Disagree=slightly disagree, disagree, strongly disagree

* Questions in 2013 were worded slightly different than in 2020 and contained a “neutral” answer option

• N/A = data unavailable-question was not asked in 2013 22

Loyalty Factor: Financial Incentive

23

4%

19%

52%

25%

4%

20%

48%

29%

0%10%20%30%40%50%60%70%80%90%

100%

Unhappy Camper Neutral Happy Camper Raving Fan

TRS 2020TRS 2013

N=589N=350

Think about what level of financial incentive it would take for you to leave TRS. Which of the following statements most closely describes your current attitude:

Loyalty: Top Reasons to Join and Top Reasons to Leave

24

Reasons to JoinN=589 2020

Quality of Work/Life Balance 69%

Strong, Positive Culture 51%

Challenging, Meaningful Work 49%

Reasons to LeaveN=589 2020

Compensation and Benefits 25%

I have no plans to leave TRS 24%

Career Opportunity 24%

TRS Division Scorecard

Factor TRS Executive Finance HIB IT IMD Benefits

Alignment of Values:

(existing to aspirational)3 6 5 4 7 5 5

Sludge % 12% 15% 16% 12% 6% 11% 15%

Effective Decision Making (Agree)

74% 74% 68% 65% 83% 77% 66%

Top Talent (Agree) 81% 92% 81% 79% 85% 81% 75%

Loyalty (Happy Campers/Raving

Fans)77% 75% 80% 64% 85% 78% 75%

Sludge in Top Values 1 1 0 0 0 1 1

25

Caasi Lamb, Director of Strategic InitiativesFebruary 24, 2021

2021-25 STRATEGIC PLAN UPDATETeacher Retirement System of Texas

2

Overview

Agenda

• Background & Process

• Structure

• Potential Updates to Strategic Plan

• Year Ahead

• Appendix A: 2021-25 Strategic Plan

3

Background & Process

Strategic planning is a process of identifying an organization’s future direction and allocating resources in

pursuit of that future direction.

Political

Environmental

Legal

Technological

Social

Economic

Benefits

• Intentional • Aligned • Focused • Accountable

Improving the retirement security of our members by prudently investing and managing the Trust assets and delivering benefits that make a positive difference in their lives.

4

Present results forum report to Strategic Planning

Committee of the Board

Align Areas of Focus with the Strategic Plan

Develop a new 5 year plan every even-numbered year

Submit plan to LBB and Governor’s Office every other

year


5

PRESENTATION TITLE >>> NAME FEB-09-15PRESENTATION TITLE >>> NAME >>> DATE

Inform the process and plan regarding:

• Direction• Priorities• Clarity

Hold results forums and report out

Align resources and engage on the plan

Submit five-year plan to LBB and Governor's Office

Adopt new plan or amend existing plan

Develop new plan or identify updates to existing plan

Conduct environmental scanning

Review mission statement & core valuesID

ENTI

FYDE

VELO

PEX

ECUT

E

PeriodicallyEvery 4 years

Annually

New: Even YearsUpdate: Odd Years

Even Years

Ongoing

Quarterly

New: Even YearsUpdate: Odd Years


6


7

Structure

Goal

Objective Objective Objective

Strategy Strategy Strategy Strategy Strategy Strategy

4Goals

17Objectives

Strategies42

TR

S S

trat

egic

Pla

n

Facilitate access to competitive, reliable health care benefits for our members.

Ensure that people, processes, and technology align to achieve excellence in the delivery of services to members.

01. Sustain a financially sound pension system.

Continuously improve our benefit delivery.

02.

03.

04.

8

Potential Updates to Strategic Plan

Reconcile current plan to newly identified

opportunities and threats

Provide update to Board of Trustees

Conduct environmental scanning

Identify opportunities, threats, customer needs, and internal

operational needs

Opportunities1. Employment after retirement2. Data analytics3. Value proposition for investment in

staffing4. Cyber security5. Educate stakeholders6. Post-pandemic work environment

Customer Needs1. TRUST Phase II & HILOB2. Adequate staffing to meet service level

expectations and member needs3. Member self-service4. Ease of access to TRS (regional offices)5. Comprehensive health care coverage at

affordable rates

Threats1. Failure to meet rate of return 2. Recruit, retain, and develop talent3. Cyber security4. Destabilization of TRS-ActiveCare5. Procurement6. Failure to receive scheduled pension

contribution increases

Internal Operational Needs1. Long-term facilities2. Data management3. Process efficiencies4. Investment in shared services to support

core lines of business5. Recruit, retain, and develop talent6. Expanded remote work post-pandemic

9

How well does the Strategic Plan address the top opportunities, threats,

customer needs, and internal operational needs?


Strategic Plan Fit & Alignment

10


Consider updating the Strategic Plan to include the following: • Comprehensive workforce strategy• Post-pandemic work environment• Process efficiencies

Type of Change Strategic Plan Proposed Language

Add new strategy G4.O1 Strategy 5 Develop and implement a comprehensive workforce strategy that includes expanded remote work, onsite facility needs, appropriate staffing levels, and the technological tools necessary to support appropriate workforce strategies.

Amend existing strategy to include artificial intelligence

G4.O2. Strategy 3 Provide advanced data analytics tools, artificial intelligence, and data management practices to gain business intelligence and improve decision-making.

Amend existing strategy to make applicable to entire organization

G4.O8 Strategy 1 Investigate best practices and feasibility of incorporating artificial intelligence into business processes.

Add new strategy G4.O8 Strategy 2 Identify opportunities for improved productivity, process efficiencies, and performance monitoring.

Year Ahead

Results Forum Report Out (Q4)• Attract, retain and develop a

highly competent staff • Facilities and space

requirements • Improve strategic

communications

Adopt FY 2021 Areas of Focus

Fiscal Year 2020 Recap Results Forum Report Out (Q1)• Achieve the investment rate

of return• Improve the customer service

experience• Increase identification of

underpayments and collection of future contributions

• Improve timeliness and accuracy in employer-reported data

Update Strategic Plan(as applicable)

Results Forum Report Out (Q3) • Improve pension funding

communication• Improve communication

regarding the impact of changing plan design

• Improve health care funding needs communication

• Increase the value of health care benefits

• Improve the health of our members

Adopt FY 2022 Areas of Focus

Results Forum Report Out (Q2)• Advance and enhance IT

systems and services• Enhance the information

security program• Fiduciary responsibility and

ethical conduct• Improve and maintain

effective procurement and contract management

• Evaluate automation and technology solutions

Mid-Year KPI Data Provided

July 2021Strategic Planning Committee

September 2021Strategic Planning Committee

April 2021Strategic Planning Committee

December 2020Strategic Planning Committee

September 2020Strategic Planning Committee

11

February 2021 Board MeetingCore Values

Strategic Plan Fit & AlignmentSatisfaction Survey Results

FISCAL YEAR 2021 FISCAL YEAR 2022

APPENDIX A2021-25 STRATEGIC PLAN

Sustain a financially sound pension system.GOAL 1

13

2021-25 Strategic Plan

Objective 1: Improve communication regarding pension funding needs. Strategy 1: Serve as a trusted resource and engage with policymakers on pension funding.

Objective 2: Increase identification of underpayments and collection of future contributions to TRS.Strategy 1: Increase testing coverage of high-risk reporting employers.

Objective 3: Achieve the trust’s actuarial assumed rate of return as measured on rolling 20-year periods.*Strategy 1: Maintain an effective investment governance structure.Strategy 2: Enhance current competitive advantages and total returns.Strategy 3: Manage cost structures to increase net alpha generated.

Objective 4: Improve communication regarding the impact of changing pension plan design.Strategy 1: Serve as a trusted resource and engage with policymakers on pension plan design.

* Executive Director’s Areas of Focus

Objective 1: Improve the customer service experience for members and employers.*Strategy 1: Increase capacity to serve members.Strategy 2: Improve response time to reporting employers. Strategy 3: Provide additional online functionality.Strategy 4: Build and define operational support for Benefit Services.Strategy 5: Consolidate customer service inquiries regarding health care and pension benefits into one call center (One Team One Mission) .*

Objective 2: Improve timeliness and accuracy in employer reported data. Strategy 1: Stabilize the reporting employer portal.Strategy 2: Begin using data analytics tools to review employer-reported data.

14



Continuously improve our benefit delivery.GOAL 2

Objective 1: Improve communication efforts regarding health care funding needs. Strategy 1: Serve as a trusted resource and engage with policymakers on health care funding.*

Objective 2: Increase the value of health care benefits.Strategy 1: Engage the best health care vendors through competitive procurement to ensure our members have the highest value health care.Strategy 2: Re-engineer TRS-ActiveCare to better meet district needs.*

Objective 3: Improve the health of our members.Strategy 1: Improve engagement of plan participants with an initial focus on population with high impact conditions, such as diabetes. Strategy 2: Optimize disease management for high-risk populations.

15

Facilitate access to competitive, reliable health care benefits for our members.GOAL 3



Objective 1: Attract, retain, and develop a diverse and highly competent staff.*

Strategy 1: Position TRS as a destination employer to meet the needs of our current and future workforce.Strategy 2: Promote a strong workplace culture that is inclusive and fosters creativity and innovation.Strategy 3: Improve diversity representation at all levels of the organization.Strategy 4: Expand learning and development opportunities.

Objective 2: Advance and enhance IT systems and services.*

Strategy 1: Build, maintain and enhance a robust, highly available IT environment in support of applications and services.Strategy 2: Expand and ease the ability to perform TRS work from anywhere, at any time, and across most any device.Strategy 3: Provide advanced data analytics tools and data management practices to gain business intelligence and improve decision -making.Strategy 4: Implement modern information systems across all lines of business divisions with priority on modernization of legacy systems. *Strategy 5: Enhance the operating model for continuous business process improvement that enables transparent, data -driven decisions and

rapid delivery of high-quality IT capabilities.

16

Ensure that people, processes, and technology align to achieve excellence in the delivery of services to members. GOAL 4



Objective 3: Enhance the information security program.*Strategy 1: Provide a secure computing environment that supports a data privacy and integrity framework.Strategy 2: Develop an information security framework based on adaptive security architecture best practices to

manage and mitigate cyber-security threats.

Objective 4: Identify appropriate solutions for TRS facilities and space requirements.*Strategy 1: Successful completion of generational solution for housing all of TRS.Strategy 2: Obtain legislative approval and funding for regional offices.

Objective 5: Foster a culture of fiduciary responsibility and ethical conduct.Strategy 1: Embed/Integrate culture of ethics and compliance within the business process.Strategy 2: Enhance visibility of, and accessibility to, Legal & Compliance throughout TRS.

17




Objective 6: Improve and maintain effective procurement and contract management practices.*Strategy 1: Implement significant program recommendations related to the Purchasing and Contracts Enhancement Plan.Strategy 2: Implement source to pay software system.Strategy 3: Increase the number of utilized Historically Underutilized Businesses (HUBs).*Strategy 4: Promote purchasing selection practices that foster meaningful and substantive inclusion of historically

underutilized businesses (HUBs).Strategy 5: Improve outreach activities to foster and strengthen relationships among HUB vendors, prime contractors,

and purchasers.Strategy 6: Leverage Diversity, Equity, & Inclusion (DE&I) outreach and partnerships to identify and work with

HUB eligible businesses as a pipeline for HUB contracted services.

18




Objective 7: Improve strategic communications.Strategy 1: Ensure that member-facing content is easily understandable and accessible to readers.Strategy 2: Develop a communication and outreach plan to better help members and employers plan for retirement.

Objective 8: Evaluate automation and technology solutions to enhance existing processes.Strategy 1: Investigate best practices and feasibility of incorporating artificial intelligence into Legal & Compliance processes.

19



Caasi Lamb, Director of Strategic Initiatives

Dr. Kirby Goidel, Texas A&M University Public Policy Research InstituteDr. Rene Paulson, Elite Research

February 24, 2021

SATISFACTION SURVEY RESULTSTeacher Retirement System of Texas

2

OVERVIEW

3

OVERVIEW

Reporting Employer Satisfaction Survey• Purpose is to provide feedback to TRS management on the services provided

• Conducted annually

• Contracted with Texas A&M University Public Policy Research Institute

• Second time to conduct this survey

• Surveyed all public and higher education employers

Member Satisfaction Survey• Purpose is to gauge active and retired member satisfaction with TRS services

• Conducted annually

• Contracted with Elite Research

• Surveyed a sample of active members and retirees

REPORTING EMPLOYER SATISFACTION SURVEY

Reporting Employer Satisfaction SurveySurvey Process▪ Administered by Texas A&M University Public Policy Research Institute▪ Collection in February 2020▪ Online survey representing 1,322 organizations▪ 838 respondents representing 909 Reporting Employers (REs)▪ Representative survey based on RE type

Overall Satisfaction with TRS Services▪ Ratings of overall TRS service

improved significantly relative to 2019.

▪ Ratings for TRS coaches continue to be more positive than ratings for TRS services overall.

▪ REs perceive coaches as an ally in dealing with an often complex and difficult system. 38%

43%

13%

4% 1%

45%41%

11%

2% 1%0%

20%

40%

60%

80%

Excellent Good Fair Not sogood

Poor

Rating of Service Received from Reporting Employer Coach

2019 2020

13%

49%

30%

5% 3%

21%

55%

21%

3% 0%0%

20%

40%

60%

80%

Excellent Good Fair Not sogood

Poor

Rating the Overall Quality of TRS Services

2019 2020

Frequency of Contact with TRS Coaches▪ REs report less contact with TRS coaches, possibly due to resolution of 444 defects and enhancements to the RE Portal in 2019.

▪ REs representing public schools contact TRS coaches less often than higher education.

66%

22%

11%0.7%

72%

19%9%

0.3%0%

20%

40%

60%

80%

100%

Rarely, nomore than

once or twice amonth

Occassionally,about onceevery week

Regularly,several times a

week

Daily

Frequency of Contact with TRS Reporting Employer Coach

2019 2020

75%

18%7%

0%

29% 29%38%

4%0%

20%

40%

60%

80%

100%

Rarely, nomore than

once or twicea month

Occassionally,about onceevery week

Regularly,several times

a week

Daily

Frequency of Contact with Coach by Institution Type

Public School Higher Ed

Evaluations of TRS Coaches by Dimension

▪ REs rate coaches well for everything but calling so you can speak to a person.▪ Relative to 2019, all the evaluations were similar, with improvements in directing REs to appropriate websites and

responding quickly. The difference on “responds quickly” may reflect a change in question wording.

69% 67% 67% 62%

44%

75%

26% 28% 26% 29% 29% 23%

4% 5% 5% 7%16%

2%1% 1% 1% 2%12%

0.4%0%

20%

40%

60%

80%

100%

Understandsquestions and

respondsappropriately

Directs you toresources onthe website

Explains stepsto correct

errors

Respondswithin service

standard(two-days)

Is available soyou can speak

to a person

Communicatesvia email

Rating of TRS Coach by Dimension of Performance

Very Well Somewhat Well Not Very Well Not Well at All

94% 88% 92%81%

95% 95% 93% 91%

0%

20%

40%

60%

80%

100%

Understands questionsand

respondsappropriately

Directs you toresources

on the website

Explains stepsneeded to correct

errors

Responds withinservice standard

(two-days)

Rating of TRS Rating Coaches "Very Well" or "Well" by Dimension

2019 2020

Importance of Dimensions of Evaluations ▪ REs rate understanding questions,

explaining steps to correct errors, and responding quickly as the most important qualities.

▪ Calling so you can talk to a person and being directed to appropriate resources on the web are least important.

▪ There has been a significant increase in the importance of communication via email and a decrease in the importance of being directed to appropriate resources on the web.

98%

81%

98% 96%

64%78%

97%

76%

97% 95%

68%

88%

0%

20%

40%

60%

80%

100%

Understandsquestions and

respondsappropiately

Directs you toresources on the

website

Explains thesteps to correct

errors

Responds withinservice standard

(two-days)

Is available soyou can speak toa person on the

phone

Communicatesvia email

Rating of Services Provided by TRS Coaches as "Very Important"

2019 2020

Reasonableness of Two-Day Standard Response Time

▪Most REs see a two-day standard response as reasonable though there is a substantial minority that would like a quicker response time.

▪ A near consensus of REs receive a response within 48 hours

▪ Reported response times have increased significantly over the past year.

60%

86%

65%

81%

0%

20%

40%

60%

80%

100%

Reasonableness ofTwo-Day Response

Responded within48 Hours

Reasonableness of Two-Day Response and Reported Response Time

Public School Higher Education

39% 37%

22%

1% 1%

47%39%

12%0.8% 0.8%

0%

20%

40%

60%

80%

100%

Within 24hours

Within 48hours

Within aweek

Within amonth

My coachrarely

responds

Reported Response Times

2019 2020

Rating of TRS Training and Training Resources

▪ 72 percent of REs reported attending training over the past year. Most rate the training and the resources provided during training positively.

▪ REs rate more individualized training most positively for greatly improving their understanding.

26% 28% 24% 22% 24%

52%64% 59% 61% 57%

17%

3%15% 15% 18%

2% 6% 3% 3% 1%2% 0% 0% 0% 0%0%

20%

40%

60%

80%

100%

Introduction to TRSReporting

(N=94)

1-on-1/IndividualTraining(N=40)

Spring 2019 REPortal Training

(N=369)

Fall 2019 LegislativeUpdate Training

(N=313)

Some OtherTraining(N=90)

Rating of Training for Resources/Information Provided

Excellent Good Fair Not so good Poor

26% 28% 24% 22% 24%

52%64% 59% 61% 57%

17%

3%15% 15% 18%

2% 6% 3% 3% 1%2% 0% 0% 0% 0%0%

20%

40%

60%

80%

100%

Introduction to TRSReporting

(N=94)

1-on-1/IndividualTraining(N=40)

Spring 2019 REPortal Training

(N=369)

Fall 2019 LegislativeUpdate Training

(N=313)

Some OtherTraining(N=90)

Rating of Training for Resources/Information Provided

Excellent Good Fair Not so good Poor

Helpfulness of TRS Resources

▪ REs rate the newsletter and TRS emails as the most helpful resource followed by the payroll manual, and file formatting guide. The defects/workaround list was rated as least helpful. ▪ There is no consensus on how best to deliver training materials to REs. More than a third respondents prefer written or online but there are also preferences for webinars and in-person training materials.

56%

53%

52%

48%

45%

45%

44%

33%

0% 10% 20% 30% 40% 50% 60%

Update newsletter/TRS emails

Payroll manual

File formatting guide

Legislative change videos

Errors/warning list

RE portal training videos

RE portal web message

Defects/workaround list

Helpfulness of Resources (Percent Very Helpful)

36%

24%

8%

29%

2%

0% 20% 40% 60%

Written or online

Live interaction/Webinar

Recorded videos

In-person

Other

Preference for Receiving Training Materials

ConclusionsOverall Satisfaction

▪ Ratings of overall TRS service improved relative to 2019

Coaches▪ REs continue to evaluate their coaches more positively than TRS services

◦ Positive reviews for understanding questions and responding appropriately, directing REs to appropriate resources on the website, and explaining the steps to correct errors

◦ Less positive about ability to contact coaches by phone▪ Less reported contact with TRS coaches in 2020; this improvement is possibly due to the resolution of defects or

implementation of enhancements to the RE Portal in 2019▪ Assessed response times have improved after adopting a two-day standard response time goal; because REs are often

operating under an immediate deadline, some note the need for even quicker responses

Training▪ REs rate training sessions positively, however ratings indicate the trainings are “somewhat” rather than “very” valuable▪ Training resources are evaluated positively in terms of their usefulness by users, and evaluations have improved relative

to 2019

MEMBERSATISFACTION SURVEY

Teacher Retirement System of Texas

Member Satisfaction Survey

Rene Paulson, PhDFebruary 24, 2021

Survey Process

▪ Administered by Elite Research, LLC▪ Collection in September 2020▪ Online and phone survey▪ Segmented on gender, age, and prior TRS contact▪ Population:1 Million Active and 400,000 Retired▪ Sample: 34,775 Active and 7,650 Retired

16

Active Retired

E-mail 1,382 437Phone 299 213

SMS Text 107 9Total 1,788 659

Collection method

Overall Satisfaction

▪ Rating steady between 2020 and 2019 with greater percent of respondents Very Satisfied▪ Retirees more satisfied than active members with active members more likely to respond Neutral

17

12%

43%

26%15%

4% 0.5%

19%

56%

9% 12%4%

0.0%0%

20%

40%

60%

80%

Very Satisfied Satisfied Neutral Unsatisfied VeryUnsatisfied

No Response

Overall Satisfaction with TRS (2019)

Active (N = 828) Retiree (N = 439)

18%

35%29%

9% 7% 2%

37% 37%

10%5%

10%1%

0%

20%

40%

60%

80%


No Response

Overall Satisfaction with TRS (2020)

Active (N = 1,747) Retiree (N = 650)

Member Satisfaction

18

▪ Member Satisfaction❖ Retirees rate performance higher than Actives

▪ TRS Provides a Secure Retirement❖ Very important and actives rate performance lower❖ Possible need for retirement planning education

▪ Operates in My Best Interest ❖ Very important and actives rate performance lower❖ Possible need for greater communication on TRS

decisions

Acts Ethically

Provides a Secure Retirement

Operates in My Best Interest

Provides Needed Info

Easy to Understand InfoListens to Members

Provides a Secure Retirement

Operates in My Best Interest

Acts Ethically

Provides Needed Info

Easy to Understand Info

Listens to Members

0%

20%

40%

60%

80%

0% 20% 40% 60% 80% 100%

Impo

rtanc

e

Performance

TRS Active and Retiree Values

Active Retiree

Importance: Rate which items are the most important to you (Choose top 3): e.g., I know TRS operates in my best interest.Performance: Rate whether you agree or disagree with the following statements: e.g., I know TRS operates in my best interest.Note: Percent calculations exclude Neutral and No Response.

Age Group

19

▪ Younger members less likely to rate as satisfied; more likely to rate as neutral ▪ Younger members less likely to have financial confidence in their retirement; continues through 40-49 years

36%42%

49%

64% 62%

23% 20%14% 11% 15%

36% 37% 34%

23% 21%

0%

20%

40%

60%

80%

<30 years 30-39 years 40-49 years 50-59 years 60+ years

Overall Satisfaction with TRSFor Active Members by Age

Satisfied Unsatisfied Neutral

41% 45%39%

51%57%

46%51%

58%

43%37%

13%4% 3% 6% 6%

0%

20%

40%

60%

80%

<30 years 30-39 years 40-49 years 50-59 years 60+ years

Financial Confidence in Retirementfor Active Members by Age

Confident Not Confident No Response

Interactions Importance Rating

20

▪ Email▪ Calling and speaking to a counselor▪ Mail▪ Website▪ Visiting in-person▪ Participating in a group benefit presentation

Importance : Rate your preferred ways to obtain information about your TRS membership and benefits (Choose top 3): e.g., email.Note: Percent calculations exclude Neutral and No Response.

Results❖ Both Actives and Retirees have a strong preference for Email and Speaking to a Counselor❖ Retirees have a strong preference for Mail

Interactions Satisfaction Rating

21

▪ Increase in Very Satisfied and decline in Unsatisfied and Very Unsatisfied rating in 2020

21%

36%

22%

8% 4%10%

40% 38%

10%4% 2% 6%

0%

20%

40%

60%

80%


No Response

Satisfaction with TRS Interactions (2020)

Active Retiree

13%

52%

15% 14%6%

0%

18%

60%

12% 9%2% 0%

0%

20%

40%

60%

80%


No Response

Satisfaction with TRS Interactions (2019)

Active Retiree

Benefits Handbook

22

▪ Active members rate Estimating Benefits and Decision to Retire topics higher in importance▪ Retirees rate Health Benefits topics higher in importance▪ Performance ratings are consistently higher for Retirees

76%

62%

42%36%

25%

9%

30%

13%

46%51%

29%

7%

0%

20%

40%

60%

80%

100%

Estimate Benefits Decide when toRetire

Understand Benefits Health Benefits Employment AfterRetirement

Service Credit

Importance of Topics

Active Retiree

69% 69% 68% 66% 64% 63%

79% 76% 75% 76% 74% 73%

0%

20%

40%

60%

80%

100%

Estimate Benefits Decide when toRetire

Understand Benefits Health Benefits Employment AfterRetirement

Service Credit

Performance in Providing Information

Active Retiree

Importance : If you were to refer to the Handbook, what would be most important (Choose top 3): e.g., Estimate benefits.

Performance: How well does TRS provide information on the following topics (percent Very Well or Well): e.g., Estimate benefits.

Note: Percent calculations exclude Neutral and No Response.

MyTRS

23

▪ Percent of Retirees reporting having visited MyTRS increased in 2020 relative to 2019

63%

37%

1%

63%

31%

5%

0%

20%

40%

60%

80%

Yes No No Response

Ever Visited MyTRS - Active

2019 2020

51% 48%

1%

57%

39%

4%0%

20%

40%

60%

80%

Yes No No Response

Ever Visited MyTRS - Retiree

2019 2020

Note: MyTRS is the online access portion of the TRS website. It allows members to update contact information, estimate retirement benefits, request a bill for reinstatement of withdrawn service, and register for a group benefit presentation.

MyTRS

24

▪ Members have not registered with MyTRS because they either have no reason to register, are not aware of MyTRS, or are not sure how to register

50%

29%

45%

7%

47%

33%

20%

3%0%

20%

40%

60%

80%

No reason to register atthis time

Not Aware of MyTRS Not sure how toregister

Do not have internetaccess

Reasons for Not Visiting MyTRS (Active)

2019 2020

63%

27% 23% 23%34%

28% 25%

9%

0%

20%

40%

60%

80%

No reason to register atthis time

Not Aware of MyTRS Not sure how to register Do not have internetaccess

Reasons for Not Visiting MyTRS (Retiree)

2019 2020

Health Insurance Benefits

25

▪ More Active and Retired members rating as Very Satisfied 2020▪ Decline in Unsatisfied rating in 2020

4%

44%

18%27%

7%0.4%

11%

36% 32%

11%7% 4.1%

0%

20%

40%

60%

80%

Very Satisfied Satisfied Neutral Unsatisfed VeryUnsatisfied

No Response

Overall Satisfaction with TRS-ActiveCare Services

2019 2020

10%

62%

7%18%

3% 0.0%

26%

49%

15%6% 3% 1.1%

0%

20%

40%

60%

80%

Very Satisfied Satisfied Neutral Unsatisfed VeryUnsatisfied

No Response

Overall Satisfaction with TRS-Care Services

2019 2020

Vendor Change Communication

26

▪ TRS-ActiveCare transitioned from Aetna to Blue Cross Blue Shield of Texas (BCBSTX) on September 1, 2020

▪ TRS-Care Standard transitioned from Aetna to BCBSTX on January 1, 2021

▪ TRS-Care Medicare Advantage transitioned from Humana to UnitedHealthcare on January 1, 2021

Results❖ Active Members satisfied with vendor change communication❖ Retirees less satisfied with vendor change communication

24%

49%

18%

6%2.1% 1.2%

14%

38%

25%

15%

4.3% 3.2%

0%

20%

40%

60%

Very Satisfied Satisfied Neutral Unsatisfied Very Unsatisfied No Response

Satisfaction with Vendor Change Communications

TRS-ActiveCare TRS-Care

Enrollment

27

▪ 56% of Actives are not enrolled in TRS-ActiveCare and 36% of Retirees are not enrolled in TRS-Care▪ Coverage elsewhere and high costs rated as reasons for not enrolling▪ Respondents state lowering deductibles and premiums and increasing coverage would improve healthcare plans

77%

27% 27%

11%6%

84%

31%

21%14%

7%

0%

20%

40%

60%

80%

100%

Have coverage availableelsewhere

Cost too high Not eligible Certain services/drugsnot covered

Don't feel need forcoverage

Reasons for Not Enrolling in TRS-ActiveCare or TRS-Care


32%

27%

19%

12%9%

30%

21%19%

9%12%

0%

10%

20%

30%

40%

Lower deductibles andout-of-pocket

maximums

Lower premiums Cover additional servicesor procedures

Expanded providernetwork

Cover additionalprescription drugs

Most Important Ways to Improve Healthcare Programs


Retirement Estimates

28

▪ Retirement estimates do not currently include TRS-Care estimates

Results❖ 77% of Active Member respondents stated that it would be helpful to include the TRS-Care premium in

their retirement income estimate

Health Savings Accounts (HSAs)

29

▪ 32% of Active Members and 22% of Retirees stated they would participate in an HSA ▪ In 2019, 41% of Active Members and 32% of Retirees said they would participate

32%40%

28%

15%

71%

15%22%

49%

29%

10%

79%

12%

0%

20%

40%

60%

80%

100%

Yes No No Response Yes No No Response

If you could enroll in HSA as part of TRS healthcare, would you beinterested?

Would it change your decision if TRS provided assistance inchoosing an HSA and facilitated contributions to the HSA?

Health Savings Accounts

Active Retiree

Healthcare Resources

30

▪ All resources are highly rated for performance▪ Website is rated as the most important resource for obtaining information on healthcare programs

55%

38% 42% 42%

3%

20%

86% 88%78% 78% 79%

91%

0%

20%

40%

60%

80%

100%

Active Retired Active Retired Active Retired

Website Customer Service Line The Pulse

Rating of Healthcare Resources

Importance: Active Importance: Retiree Performance

Importance: Which of the following provides the greatest value to you: e.g., The Pulse

Performance: How satisfied are you with (percent Very Satisfied or Satisfied): TRS-ActiveCare/Care customer service line, website, The Pulse


Communications

31

▪ Active Member and Retiree 2020 Ratings for Information Relevance and Understandability declined between 2020 and 2019, with more respondents replying Neutral or No Answer

63%57%

62%56%

19% 16%22% 19%18%

26%15%

25%

1% 1% 0% 1%0%

20%

40%

60%

80%

100%

2019 2020 2019 2020

Information Provided is Relevant Information Provided is Easy to Understand

Active Member Rating of Information Provided by TRS

Agree Disagree Neutral No Response

80% 78%84%

76%

8% 8% 10% 9%11% 13%6%

15%

1% 1% 0% 1%0%

20%

40%

60%

80%

100%

2019 2020 2019 2020

Information Provided is Relevant Information Provided is Easy to Understand

Retiree Rating of Information Provided by TRS

Agree Disagree Neutral No Response

Publications

32

▪ Active Member Most Important Publications: Retirement Plans and Options, Retirement Planning, Actions that Impact my Retirement, Financial Health of the Pension Fund

▪ Retiree’s Most Important Publications: Healthcare Funds Financial Health, TRS Administrative Operations

Importance: How important is it for you to receive information on the following: e.g., Retirement Plans/Options


90% 87% 86%82% 83% 82%

78% 78%73%

67%

78% 81%

61%69%

63%

77%83%

79% 76%

85%

0%

20%

40%

60%

80%

100%

RetirementPlans/Options

RetirementPlanning

RetirementImpact

LegislativeUpdates

PensionFinancial Health

Health Plans HealthcareFunds Financial

Health

InvestmentPerformance

Board Actions Admin. Ops

Importance of TRS Publications

Active Retiree

Email Subscription

33

▪ Increase in subscribers in 2020▪ Majority of Active Members and Retirees that are not subscribed, not aware of email subscription service▪ Majority of members not subscribed to TRS emails stated that they were not aware of the service

40%

56%

4%

21%

78%

1%

46%37%

16% 15%

73%

11%

0%

20%

40%

60%

80%

100%


Currently subscribed to the TRS email subscriptionservice

Aware that TRS offers an email subscription service

Email Subscription Service (Active)

2019 2020

43%55%

2%

37%

62%

0%

47%40%

13% 17%

73%

10%

0%

20%

40%

60%

80%

100%


Currently subscribed to the TRS email subscriptionservice

Aware that TRS offers an email subscription service

Email Subscription Service (Retiree)

2019 2020

Social Media

34

▪ Increase in importance and performance for all social media communication methods from 2019 to 2020

Importance: How important is it for you to be able to find TRS information on: e.g., Facebook

Performance: How helpful is the information TRS provides on (percent Very Helpful or Helpful): e.g., Facebook


48% 48% 42%52% 49% 43%

70% 74% 73%80%

68%78%

0%

20%

40%

60%

80%

100%

2019 2020 2019 2020 2019 2020

Facebook YouTube Twitter

Active Member Rating of Social Media

Importance: 2019 Importance: 2020 Performance

46% 42% 38%50% 44% 40%

62%75%

65%75%

67%76%

0%

20%

40%

60%

80%

100%

2019 2020 2019 2020 2019 2020

Facebook YouTube Twitter

Retiree Rating of Social Media

Importance: 2019 Importance: 2020 Performance

Summary of Feedback

35

▪ Benefit Services❖ Members want more availability of staff to answer calls and respond to emails❖ Continue to inform about MyTRS and to enhance MyTRS (chat, balance access, pension estimates, personalized

information, simplified retirement process, mobile app)❖ Benefits Handbook: Continue to refine language relating to estimating benefits, decision to retire, and healthcare

benefits❖ Active Members: Provide retirement planning education and education on saving for retirement outside TRS

▪ Health Insurance Benefits❖ Continue to educate on healthcare program value, identify opportunities to lower deductibles and premiums, and

increase coverage of services and procedures❖ Consider offering Health Savings Accounts❖ Include TRS-Care premium in retirement income estimate❖ Continue to support healthcare communication resources (Website, Customer Service Line, The Pulse)

▪ Communications❖ Continue to communicate TRS decisions❖ Continue Plain Language program with TRS publications❖ Educate on the availability of the TRS email subscription service❖ Continue to support social media efforts

Elite Research, LLC

Empowering researchers in nonprofit, academic, government, and business realms by educating and mentoring clients, providing research and editing expertise

1.800.806.5661 9901 E. Valley Ranch Pkwy, Suite 2035Irving, TX 75063

[email protected]

36

Presenter Name: Heather Traeger and Andrew RothFebruary 24, 2021

Complaints ProcessTeacher Retirement System of Texas

2

BACKGROUND

TRS is committed to achieving the highest levels of member satisfaction by delivering services consistent with our mission and in a manner that actively encourages honesty, integrity and ethical behavior among our employees.

Member communications, including routine questions, concerns, and complaints are received by knowledgeable TRS representatives who respond by telephone, letter, or email in a timely manner.

3

BACKGROUND

TRS Priority – Member Service, Member Communications, Member Satisfaction

Members, retirees, and employees may reach TRS through at least 10 pathways:

• Compact with Texans• Health and Insurance Benefits Member Ally Team• Member Services• TRS Comments (Contact Us weblink)• Governmental Relations• Appeals Processes• Hotline Process• SAO Process• Rule Revision Process• Calls and emails to TRS personnel (e.g., Privacy Officer,

CCO, CAE, Trustees, staff)

4

BACKGROUND

Approximate Monthly Communications Volume

Trustees 0-3*

Compact with Texans 28

“Contact Us” page 218

Health and Insurance Benefits 49,964 **

Benefit Services 48,918***

Government Relations 105

Social Media 30

*Can exceed 100s when there is a material issue (e.g., rate of return)**Includes customer service for TRS administered health products, including TRS staff and vendors***Direct customer service only

5

COMPLAINTS PROCESS

To streamline and refine its member responsiveness through existing communications channels, in 2020, TRS created a centralized Complaint Log.

Reports will be provided to TRS’ Executive Committee monthly; Reports will be provided to the Board quarterly in the Audit, Compliance and Ethics Committee

TRS member and retiree

communicationsComplaints Log

• Review interactions with members at executive and trustee levels

• Address trends in complaint categories

• Timeliness of responses• Escalation needs

6

DEFINITION OF “COMPLAINT”

Consistent with the Compact With Texans:

A complaint involves a dissatisfaction with TRS, a TRS employee, a TRS contractor, or actions (or inaction) in service that 1) TRS has authority to resolve and 2) requests or implies that TRS respond or take some action.

A complaint is distinguished from a general dissatisfaction with TRS regulations or events outside TRS’ purview or authority (e.g., the cost of Active Care premiums or statutory constraints for employment after retirement).

7

“COMPLAINTS” CATEGORIES

Quality of service provided (internal process failure)• Timeliness of response• Inappropriate responses from TRS employees:• Incorrect information provided/entered• Disclosure errors• Self-Service applicationsObservation/report of improper conduct (conduct inconsistent with TRS ethics policies) by TRS, TRS employee or TRS

contractor

• Inappropriate behavior in front of members• Inappropriate behavior in front of staff• Inappropriate behavior when employees are representing TRS at a function such as presentations, conferences, training

sessions, conventions any place where they are working in a TRS employee capacityReporting Employers Customer Service• Untimely Responses• Incorrect Information• Inappropriate behavior via phone or email of coach to employer• TRS implementation ChallengesReporting Employers• Penalty Interest (depends on situation)• Security measures such as encrypted emails with member information

8

COMPONENTS OF COMPLAINTS LOG

* Communication is considered a “Complaint” if all conditions are satisfied

Appeals Log (Benefits)

Large-Scale Agency Issues

(External)

OE Ethics Related Matters (OE) Written

Involves dissatisfaction with TRS, TRS Employee,

TRS Contractor

TRS has authority to resolve

Requests or implies that TRS will respond or take

action

“Complaints”

“Complaint”*:

Complaints Log:Classification/ Source:

9

COMPLAINTS RESOLUTION

Communication Received by the Departments

Department Liaison

confirms that communication

qualifies as a Complaint

Complaint?

Response sent to the Complainant via secure email, phone

call or letter

Response sent to the Inquirer via secure email,

phone call or letter

Resolved

Yes

Follow up needed?

No

Follow up communication sent to the Complainant

NoResponse needed?

Yes No

Yes

REPORTING

10

“COMPLAINTS” REPORTING

Example of the Quarterly Complaints Report to BoardMonthly Complaints Received – 34

Category Oct-20 Nov-20 Dec-20 Outstanding – 2

Appeals Log 8 10 7

OE Ethics Related Matters N/A N/A N/A

Large-Scale Agency Issues N/A N/A N/A

Point-in-Time Complaints

# Date Received Department Source Complaint Category Complainant Brief Statement of ComplaintResponse Provided

Resolution Date

1 10/15/2020 Gov. Relations Written Correspondence (Trustees) Other: LTF Member Dissatisfaction with TRS LTF strategy. Yes 10/16/2020

2 10/27/2020 Benefit Services Compact with Texans Quality of Service Provided: Timeliness of response Beneficiary Delay in receiving claim information. Yes 10/28/2020

3 10/27/2020 Gov. Relations Government Affairs/Legislators Other: EAR surcharges Beneficiary Questions regarding surcharges. Yes 10/28/2020

4 10/27/2020 Benefit Services Written Correspondence Quality of Service Provided: Timeliness of response Beneficiary Delay in processing of death claim payment. Yes 10/28/2020

5 10/30/2020 Gov. Relations Government Affairs/Legislators Other: TRS-Care MA contract negotiations Member

Dissatisfaction with TRS healthcareYes 10/30/2020

6 12/1/2020 HIB Compact with Texans Quality of Service Provided: Incorrect information provided Member Dissatisfaction with the outcome of the call

and treatment. Yes 12/2/2020

7 12/12/2020 HIB Written Correspondence (Trustees)

Quality of Service Provided; Self-Service applications - lack of needed functionality Member Cancellation of the health insurance coverage

without notice; Direct deposit issue. Yes 1/8/2021

8 12/14/2020 L&C Hotline/Ethicspoint Report of improper conduct by TRS employee Employee Allegation of retaliation against TRS employee. TBD TBD

9 12/19/2020 L&C Hotline/Ethicspoint Other: Fraud Anonymous Allegation of fraud. TBD TBD

11

Appendix

12

COMPLAINT TYPES

Monthly Complaints

Monthly Complaints are classified by entire categories of communications, such as appeals. As with other Complaints, only those communications satisfying the definition will be reported. These Complaints are generally reported to TRS Compliance on a monthly basis, but could be more frequently, for inclusion in the Complaints Log.

Point-in-Time Complaints

Point-in-time Complaints are reported on a rolling basis at the time they are made to TRS; they are classified into a number of categories and subcategories.

Quality of Service Provided (internal process failure)Observation/Report of Improper Conduct (conduct inconsistent with TRS ethics policies) by TRS, TRS employee or TRS contractorReporting Employers Customer Service Reporting Employers (e.g., penalty interest, late report, security measures such as encrypted emails with member information)

Amanda Jenami, CPA, CIA, CIDA, CISA, CFSA, CFE, CRMA, CGAP, CCSA, MBAFebruary 2021

GOVERNANCE AND RISK MANAGEMENT TRAININGT each er Retirem ent System of T exas

Teachable Moments of the Last DecadeT h e Big g est C orporate Scandalsof th e 2010s

2

Reference Materials

G uiding P rinciples of C orporate G overnance

Reference Materials: The Guiding Principles of Corporate Governance

Core actions and responsibilities th at prom ote:• Successf ul• Eth ical• Sustainab le corporate g overnance

A few examples:# 4 M aintain sustainab le strateg y f ocused on long term perf orm ance and value.# 5 Ensure com pany culture is h ealth y.# 6 Receive tim ely, com plete, relevant, & accurate inf orm ation.

8 Principles:

Reference Materials: The Three Lines of Defense Model

The Three Lines of Defense: Illustrated

6

1st LOD: Texans’ Defensive Lineman JJ Watt 2nd LOD: Ravens’ Linebacker Ray Lewis 3rd LOD: Ravens’ Safety Earl Thomas

Background

Section 1. Case Studies

a) V olk sw ag en Em issions Scandal

b ) W ells F arg o A ccount F raud

c) Eq uif ax Data Breach

d) Boeing 737 M ax Back -to-Back C rash es

Section 2: Top Risks of 2021

The Biggest Corporate Scandals of the 2010s: Volkswagen Emissions Scandal

SCANDAL: VOLKSWAGEN EMISSIONSV W ordered to recall 482,000diesel cars sold in th e U S.V W m odels w ere em itting up to 40times m ore toxic f um es th anperm itted.• illegal em issions b ypassing

sof tw are.• 11 million vehicles

SEPTEMBER 18, 2015

The Biggest Corporate Scandals of the 2010s: Volkswagen’s “Dieselgate”

CAUSESCAUSES

Causes• A utocratic leadersh ip• W anted world #1 autom ak er• T h e “ C lean Diesel” strateg y did not w ork • Eth ics took a b ack seat • Eng ineers installed cheating software• I nappropriate ‘ T one at th e T op’ • C om pliance f unction f ailed • I nternal A udit late to th e party• Board of sh areh olders/w ork er

representatives

• V W adm itted to ch eating• C EO f orced to resig n; ch arg ed w ith f raud• 10 managers ch arg ed w ith fraud, false

certification, aiding and abetting, etc.• V W paid $47B in f ines and recall costs• Sh are price took a dive (37%)• 3-year prob ation• L ost w orld # 1 spot• V W b rand plum m eted

THE CONSEQUENCES

37%) STOCK DECLINE

-37%

The Biggest Corporate Scandals for the 2010s: Volkswagen’s “Dieselgate”

LESSONS LEARNED

• V W Sustainab ility Report (2014): “ Sustainab ility m eans th at w e conduct our b usiness activities on a responsible and long-term b asis and do not seek short-term success at the expense of others”

• H ad corporate values in g lossy b roch ures b ut did not live by them.

• Be w ary of autocratic leaders

T h e b oard sh ould ensure th at the culture of th e com pany is healthy.

GUIDING PRINCIPLES

#5: CULTURE

#4: LONG TERM FOCUS

T h e Board sh ould m aintain a sustainable strategy f ocused on long term performance and value.

The Biggest Corporate Scandals of the 2010s: Wells Fargo Account Fraud

SCANDAL: WELLS FARGO ACCOUNT FRAUDW F em ployees opened m ore th an 2 million unauthorized deposit and credit card accounts

SEPTEMBER 8, 2016

The Biggest Corporate Scandals of the 2010s: Wells Fargo Account Fraud

CAUSES

• ‘T h e k ing of cross-sell’• Em ployees w ere ‘ G oing f or G r-8’• System ic issue• H otline com plaints w ere not addressed• W h istleb low er retaliation• I nternal A udit f ailed to respond to

num erous w arning sig ns• A ll th ree lines of def ense f ailed • I nef f ective Board oversig h t

THE CONSEQUENCES

• C EO retired, forfeited $ 41 m illion in eq uity aw ards; fined $17.5 million & b anned

• 8 other executives charged (including C h ief A uditor, A udit Director, G C , Risk O f f icer)

• O ver $3 billion in penalties • O ver 5,300 em ployees f ired• T h e BBB revok ed accreditation

STOCK DECLINE

-14%

Wells Fargo Account Fraud: Where was Internal Audit?

See nothing, hear nothing, say nothing?

Everybody knew there was fraud going on, and the people trying to flag it were the ones who got in trouble,” said a former branch manager in Scottsdale, Ariz .

PressureEm ployees w ere b erated and/or f ired f or not m eeting targ etsOpportunityEm ployees k new h ow to com m it th e f raudRationalizationJustif ication: Everyone else is doing it.

Red Flags:• 700 Eth ics H otline C om plaints• Security: ‘ Spik e in sales integ rity

m atters. ’ (July 2012)

The Biggest Corporate Scandals of the 2010s: Well Fargo Account Fraud

• W h at g ets measured, g ets done• F ocus on custom er service• A lig n K P I s, incentive com pensation plans w ith

L T g oals

LESSONS LEARNED PRINCIPLE #4: LONG TERM PERFORMANCE

T h e b oard sh ould ensure th at th e com panym aintains a sustainab le strateg y f ocused onlong-term performance and value. T h isincludes:• Evaluating risk s, including reputational

risks, and seeking to balance risk andreward af ter considering all relevantstakeholders .

The Biggest Corporate Scandals of the 2010s: Equifax Data Breach

SCANDAL: EQUIFAX DATA BREACHSEPTEMBER 7, 2017

Eq uif ax announced th at a h ack er h adg ained access to th e inf orm ation of up to143 million Americans including :• N am es, DO Bs• addresses • credit card num b ers• Social Security numbers

Equifax Breach Timeline

Date Event

3/8/2017 T h e U . S. C ERT sends Eq uif ax and oth ers a notice to patch a vulnerab ility in A pach e Struts3/9/2017 Eq uif ax dissem inates U . S. C ERT notif ication internally to I T personnel3/15/2017 Eq uif ax I nf orm ation Security departm ent scans system s f or th e vulnerab ility. F inds none.

5/13 – 7/30/17 T h e h ack ers g ain entry and access P I I inf orm ation. Security scans do not detect activity.

7/29 – 7/30/17 I nf orm ation Security ob serves suspicious activity. T ak es th e portal of f line

7/31/2017 C I O verb ally notif ies C EO of ‘ suspicious activity. ’8/1-8/2/2017 T h ree executives sell th eir Eq uif ax sh ares (total of $ 1. 8 m illion)8/15/2017 C EO is notif ied of b reach8/22/2017 T h e Board is notif ied of b reach9/7/2017 Eq uif ax announces b reach9/15/2017 C I O and C SO resig n9/26/2017 C EO Rich ard Sm ith retires af ter 12 years


• A $ 575 m illion settlem ent to h elp victim s• C onsum ers incensed b y th e ‘ b otch ed’

response• C EO retired• I nsider trading f ines • Sh are price plum m eted• I ndictm ents: 2/11/2020

THE CONSEQUENCES

STOCK DECLINE

-35%

CAUSES

P oor data g overnance:• K now n vulnerab ility th at w as unpatch ed. • Eq uif ax’ s unseg m ented netw ork .• A dm inistrative passw ords stored in plain text. • A ttack ers undetected due to an expired th ird-party

certif ication.I nadeq uate I T audit coverag eA ll th ree lines of def ense f ailedBoard: I nadeq uate oversig h t of inf orm ation security


GUIDING PRINCIPLE # 6 : BOARD INFORMATIONLESSONS LEARNED

• P ractice g ood data g overnance• Ensure netw ork is seg m ented• Ensure th ird party certif ication is current• M aintain adeq uate I T audit coverag e• Respond w ith speed, transparency, integ rity

& vig or• N otif y C EO and Board im m ediately; • Disclose to th e pub lic in a tim ely m anner

T h e b oard sh ould ensure th at structures and practices exist and are w ell-g overned so th at it receives timely, complete, relevant, accurate, and reliable information to perf orm its oversig h t ef f ectively.

B oards should have adeq uate access to cybersecurity ex p ertise, and discussions about cyber- risk m anagem ent should be given regular and adeq uate tim e on the board m eeting agenda.

THE CONSEQUENCES

The Biggest Corporate Scandals of the 2010s: Boeing 737 Max

SCANDAL: BOEING 737 MAX PLANE CRASHES• O n Oct. 29, 2018, a Lion Air

f lig h t crash ed just momentsafter takeoff, killing all 189people on b oard.

• O n March 10, 2019 , anEthiopian Airlines f lig h tcrash ed shortly after takeoff,killing all 157 people on b oard.

OCTOBER 2018-MARCH 2019


• 346 people lost th eir lives• C EO f orced to resig n • P lane g rounded: cost m ore th an $1B• $9 billion in custom er com pensation costs• $500M settlement w ith victim f am ilies• Boeing ch arg ed w ith fraud conspiracy• F ined $2.5 billion• F A A oversig h t leg islation

THE CONSEQUENCES

STOCK DECLINE

-22%

CAUSES

Control Breakdowns at Boeing• Saf ety culture

• A nti-stall sof tw are• P rioritiz ed prof its and speed of delivery over q uality &

saf ety• Bipartisan I nvestig ation

• F ailed desig n & developm ent • ‘ O perated w ith in a culture of concealm ent

• I nef f ective Board oversig h t (C EO & C h air)• Sh areh older law suit ag ainst th e Board (F eb 2021)

Oversight Control Breakdowns (@ FAA)• N o perm anent top F A A of f icial f or 14 m onth s• N ew F A A C h ief ack now ledg ed m istak es• C eded m aj or certif ication responsib ilities to Boeing• Bipartisan I nvestig ation: F A A f ailed in its oversig h t and

certif ication


LESSONS LEARNED

• W h en th e risk of f ailure is catastroph ic, no sh ortcuts.

• P ractice g ood crisis m anag em ent: tak e responsib ility

• T h ird party certif ication process is crucial

M aintain a sustainable strategy f ocused on long-term perf orm ance and value. T h is includes:Evaluating risk s, including reputational risk s, and seeking to balance risk and reward af ter considering all relevant stakeholders.

GUIDING PRINCIPLE #4: LONG TERM PERSPECTIVE

Top Risks for 2021

Top Risks of 2021: Introduction

Qualitative Interviews:• 30 Board m em b ers• 90 Dif f erent O rg aniz ations• 30 C -suite executives• 30 C h ief A udit Executives

A Quantitative Survey of CAEs• 384 responses

Risk:K now ledg eO rg aniz ational C apab ilityRelevance

1. Business Continuity/ Crisis Response2. Cybersecurity3. Talent Management4. Culture5. Organizational Governance6. Disruptive Innovation7. Data Governance8. Board Information9. Third Party Risks10. Economic and Political Volatility11. Sustainability

Top Risks of 2021

2021 Risk Ratings – All Respondents

T alent m anag em ent and disruptive innovation em erg e as clear areas f or im provem ent

100%

90% Capability

80%

70% Knowledge

60%

50% Relevance

40%

30%

20%

ONRISK 2021 RISK RATINGS – ALL RESPONDENTS

Source:O n R i s k 2 0 2 1 q u a l i t a t i v e s u r v e y . n = 9 0 .

10%

s u v e y . n 9 0 .

Average Ratings by Respondent Group

AV ERAGE RATIN GS B Y RESP O N D EN TGRO UP

Source:OnRisk 2021 q ualitativesurvey. n = 90.

(i) M anag em ent’ s perceptions on risk relevance are g enerally not alig ned w ith th ose of Boards and C A Es;(ii) P erceptions on capab ility to m anag e risk s are m ore alig ned

Business Continuity/Crisis Management - Survey Results & Proposed Actions



87%50%60% 50% 60% 93% 43% 62%47%

C-SUITE

• L everag e experiences of th e g lob al pandem ic to identif y org aniz ational streng th s and opportunities f or im provem ent.

• W ork collab oratively to im plem ent im provem ents w h ere necessary.

CAE



BOARD



Cybersecurity Risk: Survey Results & Proposed Actions

C-SUITEBOARD

PROPOSED ACTIONS:• C onsistently evaluate em erg ing cyb er th reats • G et com plete perspectives on current status• H ave b oard/m anag em ent discussions of w h ich risk s to

avoid, accept, m itig ate or transf er. • Develop specif ic risk m anag em ent plans.

PROPOSED ACTIONS:• U nderstand leg al im plications of cyb er risk s• Ensure appropriate tim e is allocated f or m anag em ent, I A ,

and outside SM Es to b rief Board m em b ers on emerging cyber threats, organizational efforts, and existing vulnerabilities.

CAE

PROPOSED ACTIONS:• P erf orm routine evaluations of RM f unctions related to

cyb ersecurity• I dentif y opportunities to educate m anag em ent and th e Board on

emerging cyber risks

AV ERAGE RATIN GS B Y RESP O N D EN T GRO UP

Source:OnRisk 2021 q ualitative survey. n = 90.

79%23%40% 50% 43% 90% 47% 23% 72%

Talent Management: Survey Results & Proposed Actions

C-SUITEBOARD

PROPOSED ACTIONS:• Evolve th e com petencies th at are m ost in dem and• C onsider adaptab ility and f lexib ility sk ills• F ocus on succession planning , upsk illing strateg ies,

and recruitm ent.

PROPOSED ACTIONS:• C ontinue to ensure th at m anag em ent is com m itted

to m anag ing talent at all levels of th e org aniz ation • O b tain consistent b rief ing s on talent-related

processes and initiatives

PROPOSED ACTIONS:• P rovide assurance around talent m anag em ent• M aintain open lines of com m unication reg arding Board

perspectives of k ey areas of talent f ocus

CAEAV ERAGE RATIN GS B Y RESP O N D EN T GRO UP


82%53%27% 37% 30% 78% 27% 40% 67%

Culture: Survey Results and Proposed Actions



83%73%50% 47% 67% 73% 37% 60% 67%

C-SUITE

PROPOSED ACTIONS:• A ct in a m anner th at prom otes an ef f ective culture.• Estab lish consistent processes to g aug e th e culture

and com m unicate th ose perceptions to th e b oard tim ely.

CAE

PROPOSED ACTIONS:• C onsider perf orm ing eng ag em ents th at provide an ob j ective

assessm ent of org aniz ational culture. • P rovide assurance th at m anag em ent’ s actions are alig ned w ith

leading practices related to org aniz ational culture.

BOARD

PROPOSED ACTIONS:• Review assessm ents of org aniz ational culture w ith

th e internal audit f unction and m anag em ent. • Ensure executive g oals and incentives are alig ned

w ith an ef f ective org aniz ational culture.

Top Risks: How does this apply to TRS?

Cybersecurity:• Ensure appropriate talent/ staf f ing levels• C onsider cyb ersecurity insurance• Board b rief ing s on cyb ersecurity • Enh ance audit coverag e: I nf orm ation Security;

V ulnerab ility A ssessm ent; T h ird P arty Risk s Talent Management• A ustin Job M ark et

• A pple; F aceb ook ;• G oog le; O racle; • T esla

• W ork to rem ain T op W ork place• P rom ote Em ployee V alue P roposition• L eg islature’ s f ocus on m em b er service

Culture:• I m plem entation of DEI prog ram• Diversity now one of th e core values• Board b rief ing s on DEI initiatives• C ulture A udit (2018)• P eriodic culture/ core values ref resh

Closing Statement & Questions

APPENDICES

APPENDICES

APPENDIX 1A: Third Party Risk: Survey Results & Proposed Actions

C-SUITEBOARD

PROPOSED ACTIONS:• M aintain a com preh ensive list of th ird-party arrang em ents• Develop risk -b ased approach f or procuring and m onitoring

relationsh ips

PROPOSED ACTIONS:• Evaluate internal audit plans to ensure th at adeq uate

resources are allocated to th ird-party risk s. • Req uest periodic status updates on k ey th ird-party

relationsh ips.

CAE

PROPOSED ACTIONS:• Reg ularly m onitor procurem ent and m onitoring processes• I nclude eng ag em ents to review th ird-party relationsh ips th at

are operationally or strateg ically im portant.



78%67%53% 43% 50% 64% 61% 61% 50%

APPENDIX IB: Board Information - Survey Results & Proposed Actions

C-SUITEBO A RD

ACTIONS:• Ensure transparent, com plete, and tim ely inf orm ation is

provided to th e b oard, particularly reg arding k ey risk s

ACTIONS:• Set expectations w ith m anag em ent and C A Es ab out

th e level of inf orm ation to b e provided. • Be w illing to com m unicate if excessive am ounts of

inf orm ation overw h elm clear m essag ing . • Seek independent assurance related to th e q uality of

inf orm ation provided. CAE

ACTIONS:• Evaluate inf orm ation provided to th e b oard, noting

inconsistencies or om issions. • I nq uire w ith b oard m em b ers ab out th e q uality of inf orm ation b eing

provided and b e w illing to contrib ute an ob j ective.



80%77%60% 59% 48% 67% 61% 61% 50%

APPENDIX 1C: Disruptive Innovation - Survey Results & Proposed Actions

C-SUITEBO A RD

ACTIONS:• L everag e th e k now ledg e of b oard m em b ers to identif y

w ays to innovate and identif y com petitors’ attem pts to disrupt b usiness as usual.

ACTIONS:• Sh are w ith th e org aniz ation any g uidance and w isdom

accum ulated th roug h outside and diverse experiences. • Set expectations f or m anag em ent to provide proactive

strateg ies th at leverag e innovation f or com petitive advantag e and to b e prepared to react tim ely to disruption.

CAE

ACTIONS:• Ensure a th oroug h understanding of strateg ic risk s and

opportunities to leverag e innovation to b e disruptive • I dentif y potential risk s th at could inh ib it org aniz ations’ strateg ies

to innovate and disrupt



68%43%33% 37% 33% 74% 20% 33% 60%

APPENDIX 1D: Organizational Governance - Survey Results & Proposed Actions

C-SUITEBO A RD

ACTIONS:• A lig n w ith th e Board on th e relevance of org aniz ational

g overnance• M aintain h ealth y dialog ue around risk m anag em ent and ll

k ey g overnance roles

ACTIONS:• Ensure th at senior m anag em ent understands and ag rees

upon org aniz ational g overnance as a priority f or ach ieving org aniz ational ob j ectives.

CAE

ACTIONS:• M aintain a consistent line of com m unication w ith b oard m em b ers

to ensure th eir needs are b eing m et.



80%67%57% 50% 67% 84% 60% 73% 53%

APPENDIX 1E: Data Governance - Survey Results & Proposed Actions

C-SUITEBOARD

ACTIONS:• Drive leading practices in data g overnance th at ensure

com pliance w ith law s and reg ulations as w ell as prog ress tow ard m eeting strateg ic ob j ectives.

ACTIONS:• Expect education on k ey aspects of data g overnance and

req uest b rief ing s f rom m anag em ent and internal audit on h ow th e org aniz ation strateg ically m anag es data.

CAE

ACTIONS:• P rovide training to b oard m em b ers on th e k ey aspects of data

g overnance and provide assurance th at m anag em ent practices are leading edg e.



70%37%43% 47% 43% 73% 43% 50% 60%

APPENDIX 1F: Sustainability - Survey Results & Proposed Actions

C-SUITEBO A RD

ACTIONS:• Recog niz e sustainab ility’ s g row ing im portance to

org aniz ational stak eh olders, including custom ers, em ployees, and investors.

• I dentif y opportunities to enh ance long -term stak eh older value b y em b racing sustainab ility leadersh ip as a strateg ic opportunity.

ACTIONS:• Req uire m anag em ent to b uild sustainab ility into strateg ic

plans. • Set expectations of internal auditors to provide assurance

related to voluntary sustainab ility reporting .

CAE

ACTIONS:• Educate internal audit team s ab out em erg ing risk s related to

sustainab ility and h ow sustainab ility f its into org aniz ations’ operational and strateg ic priorities.



50%33%37% 40% 10% 50% 30% 30% 43%

APPENDIX 1G: Economic and Political Volatility - Survey Results & Proposed Actions

C-SUITEBOARD

ACTIONS:• Build conting encies and scenario plans f or dealing w ith

potential outcom es. • C om m unicate w ith th e b oard ab out th e potential upsides

and dow nsides of political ch ang es and econom ic sw ing s

ACTIONS:• Eng ag e m anag em ent and internal auditors in

discussions reg arding potential econom ic and political outcom es and inq uire ab out th e readiness of org aniz ations to b e f lexib le.

CAE

ACTIONS:• Better educate internal auditors on h ow econom ic and political

uncertainities m ay af f ect th e lik elih ood of ach ieving org aniz ational ob j ectives.

AV ERAGE RATIN GS B Y RESP O N D EN T GRO UP


72%53%47% 40% 33% 72% 37% 40% 43%

Assurance Insights 2020 and 2021

APPENDIX 2: Top Risks 2021 – Definitions (I)

• CY B ERSECURITY : The growing sophistication and variety of cyberattacks continue to wreak havoc on organizations’ brands and reputations, often resulting in disastrous financial impacts. This risk examines whether organizations are sufficiently prepared to manage cyber threats that could cause disruption and reputational harm.

• TH IRD PARTY : For an organization to be successful, it has to maintain healthy and fruitful relationships with its external business partnerships and vendors. This risk examines organizations’ abilities to select and monitor third-party relationships.

• B OARD INFORMATION: As regulators, investors, and the public demand stronger board oversight, boards place greater reliance on the information they are provided for decision-making. This risk examines whether boards feel confident that they are receiving complete, timely, transparent, accurate, and relevant information.

• SUSTAINAB ILITY : The growth of environmental, social, and governance (ESG) awareness increasingly influences organizational decision-making. This risk examines organizations’ abilities to establish strategies to address long-term sustainability issues.

• DISRUPTIVE INNOVATION: We are in an era of innovative business models, fueled by disruptive technologies. This risk examines whether organizations are prepared to adapt to and/or capitalize on disruption.

APPENDIX 2: Top Risks 2021 – Definitions (II)

• ECONOMIC AND POLITICAL VOLATILITY : National elections, multinational trade agreements, new or extended protectionary tariffs, and uncertainty around timing of routine macroeconomic cycles all create volatility in the markets in which organizations operate. This risk examines the challenges and uncertainties organizations face in a dynamic and potentially volatile economic and political environment.

• ORGANIZ ATIONAL GOVERNANCE: Governance encompasses all aspects of how an organization is directed and managed: the system of rules, practices, processes, and controls by which it operates. This risk examines whether organizations’ governance assists or hinders achievement of objectives.

• DATA GOVERNANCE: Organizations’ reliance on data is expanding exponentially, complicated by advances in technology and changes in regulations. This risk examines organizations’ overall strategic management of data: its collection, use, storage, security, and disposition.

• TALENT MANAGEMENT: A growing gig economy, dynamic labor conditions, and the continuing impact of digitalization are redefining how work gets done. This risk examines challenges organizations face in identifying, acquiring, upskilling, and retaining the right talent to achieve their objectives.

• CULTURE: “The way things get done around here” has been at the core of a number of corporate scandals. This risk examines whether organizations understand, monitor, and manage the tone, incentives, and actions that drive the desired behavior.

• B USINESS CONTINUITY AND CRISIS MANAGEMENT: Organizations face significant existential challenges, from cyber breaches and pandemics to reputational scandals and succession planning. This risk examines organizations’ abilities to prepare, react, respond, and recover.

20

19

american corporategovernance index

Failure to Make the Grade

TABLEof CONTENTS

Introduction.......................................................................................3

Guiding Principles of Corporate Governance ............................ 4

Corporate Governance Roles ..........................................................7

The Board ........................................................................................7

Executive Management .................................................................7

Internal Audit ..................................................................................7

Corporate Governance in 2019 ..................................................... 8

Observations .................................................................................. 9

Key Findings ................................................................................. 10

Principle 1 ....................................................................................... 14

Principle 2 ....................................................................................... 15

Principle 3 ....................................................................................... 16

Principle 4 ........................................................................................17

Principle 5 ....................................................................................... 18

Principle 6 ....................................................................................... 19

Principle 7 ....................................................................................... 20

Principle 8 ....................................................................................... 21

Additional Findings ....................................................................... 23

Survey Participants ........................................................................ 27

Self-assessment of Corporate Governance Quality ................ 27

Index Methodology ....................................................................... 28

Guiding Principles of Corporate Governance References...... 29

Acknowledgments ......................................................................... 30

Introduction

Corporate governance encompasses all aspects of how an organization is directed and managed — the system of rules, practices, processes, and controls by which it operates. As a result, corporate governance is unique to each organization.

This distinctiveness is part of the reason why many companies may resist legislation and regulations that dictate how they should be run. Indeed, at the heart of the American success story is a free-market system that rewards hard work, ingenuity, innovation, and shrewd deci-sion-making. But that entrepreneurial story must continue to evolve if the United States expects to remain among the world’s preeminent economic powers.

Companies are under increasing pressure from investors, regulators, and special-interest groups to demonstrate value and sustainability, particularly in the context of environmental, social, and governance (ESG) metrics. Indeed, sustainable investment in the United States reached nearly $12 trillion in 2018, which accounted for 25.7% of the nation’s total assets under management, according to the Global Sustainable Investment Alliance.1 Investors are seeking assurance that companies are providing not only accurate and transparent accounting of their finances, but are acting ethically while meeting objectives that align with the needs and interests of stakeholders.

A number of well-established indices o�er short-term insight into economic performance, consumer confidence, and other aspects of business. Examination of financial reporting and accounting also are well understood. But what is lacking is a comprehensive measure — an index — of the state of American corporate governance, one that examines the e�ectiveness of interaction between key stakeholders, the board, executive management, internal audit, and others. An index that gauges whether the board and management are acting in the best interest of the company, whether there is a vision toward sustainability, a healthy culture, transparent and accurate disclosures, and e�ective policies and structures. The Institute of Internal Auditors (IIA) and the Neel Corporate Governance Center at the University of Tennessee, Knoxville’s Haslam College of Business have answered the call and are proud to present the inaugural American Corporate Governance Index (ACGI).

1 Global Sustainable Investment Alliance Global Sustainable Investment Review 2018.

3

http://www.gsi-alliance.org/trends-report-2018/

Guiding Principles of Corporate Governance

The Guiding Principles of Corporate Governance define core actions and responsibilities that promote successful, ethical, and sustainable corporate governance. They go beyond the publicly observable measures of corporate governance, such as the number of board meetings, biographical information for directors, and executive compensation disclosures, which alone fail to capture the e�ectiveness of an organization’s corporate governance system. Prescriptive solutions have not been proposed because corporate governance does not allow for a one-size-fits-all approach and companies will need to find their own best practices based on the company’s age, size, complexity, extent of international operations, etc. The following Guiding Principles reflect a compendium of viewpoints from sources cited in the References section on page 29. 2

Companies should seek legal advice before implementing specific corporate governance policies and procedures to ensure compliance with applicable laws and regulations, including securities exchange listing requirements.

DEFINITIONCorporate governance is the overarching set of policies, procedures, and relationships that enables an organization to establish objectives, set ethical boundaries to the acceptable means with which those objectives will be met, monitor the achievement of objectives, reward successful achievements, and discipline unsuccessful or inappropriate attempts to meet objectives, in order to keep the organization aligned with the needs and interests of its primary stakeholders.

Principle 1E�ective corporate governance requires regular and constructive interaction among key stakeholders, the board, management, internal audit, legal counsel, and external audit and other advisors.

Principle 2The board should ensure that key stakeholders are identified and, where appropriate, stakeholder feedback is regularly solicited to evaluate whether corporate policies meet key stakeholders’ needs and expectations.

• Key stakeholders can change over time, and as such, boards should ensure processes are in place to regularly monitor the identification of key stakeholders.

• Key stakeholders are those who have a material impact on corporate operations, or on whom the corporate operations have a material impact.

• Stakeholders can be external or internal and include communities a�ected by the company’s operations, creditors, customers, employees, regulators, shareholders, suppliers, etc.

• When evaluating business success, the company should also evaluate its social and environmental impact and determine whether it aligns with corporate objectives and the interests of key stakeholders.

Principle 3Board members should act in the best interest of the company and the shareholders while balancing the interests of other key external and internal stakeholders.

• The board should exhibit su�cient independence and objectivity in fact and appearance. There should be a clear form of leadership for the board that is distinct from management. Each board member should employ healthy skepticism in meeting his or her responsibilities and be willing to challenge the CEO and other board members constructively.

• Board members should exhibit high integrity and competence, and provide diverse perspectives in terms of industry expertise, technical expertise, culture, and thought.

• Board members should exhibit a commitment of time and active involvement, including preparation for and direct participation in appropriate board, committee, and shareholder meetings. They should be informed on relevant issues, particularly those involving potential or existing crises, and be available to consult with management, as needed.

• Board members should receive ongoing education and training to perform their responsibilities, including areas of emerging risk to the company.

• Board members should be compensated in a way that encourages alignment with key stakeholder interests.

• Executive sessions should be held regularly and often, as they are critical in establishing an appropriate environment of objectivity and candor. These sessions should include independent directors and those outside directors who do not qualify as independent, but exclude members of management.

• The board should undergo regular, robust evaluations and, as needed, members should be rotated (including leadership positions within the board) to ensure a balance of company-specific knowledge and new perspectives. E�ective board evaluations should lead to improved governance and corporate outcomes.

• Shareholders should have fair opportunities to nominate and regularly vote on the retention of board members.

4

Principle 4The board should ensure that the company maintains a sustainable strategy focused on long-term performance and value. This includes:

• Defining corporate objectives and approving long-term strategic goals.

• Evaluating risks, including reputational risks, and seeking to balance risk and reward after considering all relevant stakeholders.

• Designing management compensation to align with long-term strategic goals, regularly evaluating performance of the CEO, and overseeing management succession planning.

• Ensuring that all employees receive adequate training and are compensated in a way that encourages achievement of corporate objectives.

Principle 5The board should ensure that the culture of the company is healthy, regularly monitor and evaluate the company’s core culture and values, assess the integrity and ethics of senior management, and, as needed, intervene to correct misaligned corporate objectives and culture.

Principle 6The board should ensure that structures and practices exist and are well-governed so that it receives timely, complete, relevant, accurate, and reliable information to perform its oversight e�ectively.

• Each board member should have unrestricted access to management, as needed, to fulfill their responsibilities.

• Board members have a responsibility to protect the confidentiality of non-public information.

Principle 7The board should ensure corporate disclosures are consistently transparent and accurate, and in compliance with legal requirements, regulatory expectations, and ethical norms.

• The board should ensure that an independent committee (an Audit Committee or equivalent) with appropriate expertise is responsible for oversight of both internal and external auditors. Internal audit should have direct and unfiltered access to this committee; it should be adequately resourced; and its purpose, authority, and responsibility should be formally defined and consistent with the International Standards for the Professional Practice of Internal Auditing.

• The board should oversee the company’s assessment of the risk of fraud specifically and ensure that adequate controls are in place to detect and deter fraud.

• The board should have in place processes for employees or other stakeholders to report suspected fraud or misconduct to independent members of the board without fear of retaliation.

Principle 8Companies should be purposeful and transparent in choosing and describing their key policies and procedures related to corporate governance to allow key stakeholders an opportunity to evaluate whether the chosen policies and procedures are optimal for the specific company.

• The board should ensure that the company regularly evaluates the full system of corporate governance to ensure that individual components are operating as expected, and that all components operate in a cohesive manner to achieve corporate objectives.

• The board should ensure that corporate governance evaluations encourage the reporting of potential deficiencies at all levels, including within the board, without fear of retaliation.

• The board should ensure that the company addresses any deficiencies in a timely manner.

2 Individual quotations and citations are not provided since the intention is to create a summarized set of viewpoints from multiple sources.

5

“Is the board getting the full spin on the issue? Or are they getting what management wants them to see?”

6

Brian GuthrieFebruary 26, 2021

EXECUTIVE DIRECTORS REPORT

Teacher Retirement Sy stem of Tex as

2

• General Updates• Review of TRS Employee Demographics• Trustee Election Update• Awards and Acknowledgements• Upcoming Agendas

3

General Updates

Week of Feb. 15th - special appreciation to Facilities and Security staff who were on site.

4

General Updates

Upcoming Conferences and Meetings:

March 8 - 10, 2021: Council of Institutional Investors Spring Conference, Virtual.

May 4-7, 2021: Pension Bridge Conference, Virtual.

TBD: NCPERS’ Annual Conference & Exhibition

Past Meetings and Updates:

January 12, 2021 First Day of Legislative Session

January 26, 2021 TRS/ERS Emerging Manager Conference, Virtual

February 16-18, 2021 PPI’s 2021 Winter Roundtable, Virtual

February 22 – 24, 2021: NASRA Winter Meeting and Joint Legislative Conference, Virtual

February 22, 2021 Senate Finance Committee, Austin, TX

February 23, 2021 House Appropriations Committee, Austin, TX

February 25, 2021 House Appropriations Sub-Committee on Article III, Austin, TX

5

General Updates

Return to Office Update:

To ensure the safety of our staff, TRS implemented a phased approach to return to office and member visits to the agency that can be modified as circumstances change.

• On December 23, 2020 City of Austin moved to Stage 5.

• On February 9, 2021 City of Austin moved back to Stage 4.

• TRS to open for limited in person office visit beginning March 1, 2021.

• TRS continues to operate in Phase 2 and will likely continue to do so into Spring 2021.

TRS Employee Demographics

6

Average Age Average TRS Tenure FY 2020 Turnover Rate

EthnicityGender Average State Tenure Employees Eligible to Retire*

* N ote: Based on rule of 80

56% Female44% Male 11.34 Years 9.4%

7.4%6.6 Years44.2 Years

White (54%)

Hispanic (24%)

Black (14%)

Asian/American Indian (8%)

TRS Employee Demographics

7

15.6%13.6%

15.7%13.6%

10.8%9.4%

14.6%

22.2%

FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2023 FY 2026

Percent of TRS Employees Eligible for Retirement

*Estimates are based on active employees as of 12/31/2020. Estimates for FY 2023 and FY 2026 are made using the role of 80

14.2%

23.6%

34.6%

8.5%

13.0%

19.9%

2021

2023

2026

Management versus Non-Management Positions

Management

Non-Management

Benefits Executive Finance HIB IMD IT2021 6.9% 12.2% 18.0% 0.0% 2.9% 15.4%2023 12.6% 18.3% 29.0% 3.9% 4.6% 20.4%2026 18.2% 26.1% 44.0% 5.9% 11.4% 28.4%

Eligibility by Division

Retirement Eligibility Trends

Retirement Eligibility Projections*

8

Division

Percent of TRS Employees Eligible to Retire as of:

January 2021 January 2023 January 2026

Eligible Employees PercentEligible Eligible Employees Percent

Eligible Eligible Employees PercentEligible

Executive Division** 14 12.2% 21 18.3% 30 26.1%Investment Management 5 % 8 4.6% 20 11.4%Benefit Services 16 % 29 12.6% 42 18.2%Finance 18 % 29 29.0% 44 44.0%Information Technology 25 % 33 20.4% 46 28.4%Health and Insurance Benefits 20 1 2 5.9% 3 5.9%Total 78 9.4% 122 14.6% 185 22.2%

Executive Council Members 6 40.0% 8 53.3% 9 60.0%57

Notes: *Estimates are based on the rule of 80 using active employees as of 12/31/2020 and includes return-to-work retirees. **Executive Division includes Legal & Compliance, Internal Audit, Communications, Government Relations, Organizational Excellence, and Strategic Initiatives

9

Trustee Election Update

• January 25, 2021: Nominations closed with 6 candidates reaching 250 signatures. • February 3, 2021: Drawing held to determine the order of candidates’ names on the ballot• March 15, 2021: Ballots will be mailed separately this year. March TRS News will contain

candidates’ biographical information.• May 5, 2021: Deadline for receiving completed ballots.• Week of May 31, 2021: Send the names of the top three candidates to the Governor.

2021 Candidates for Public School District Employee Trustee Position

Cedric T. Menchion, Chief Financial Officer Dripping Springs ISD

Andrew Peters, Superintendent Caldwell ISD

K risti McAlexander Cross, Payroll Director K aty ISD

Elvis Williams, Chief Operations Officer Edgewood ISD

E. Arial Elliott, Superintendent Greenwood ISD

Scot Hafley, Director of Athletics Wichita Falls ISD

10

Awards and Acknowledgements

Heather Traeger - Committee MemberFINRA National Adjudicatory Council (NAC)

FINRA is authorized by Congress to protect America’s investors by making sure the broker-dealer industry operates fairly and honestly. Oversees more than 624,000 brokers across the country – and analyze billions of daily market events.

The NAC is a FINRA committee that reviews initial decisions rendered in FINRA disciplinary and membership proceedings.

11

Awards and Acknowledgements

12

Upcoming Agendas

April 15 -16 , 2 02 1 (Q uarterly Meeting)

April 15 , 2 02 1 April 16 , 2 02 1

Strategic P lanning Committee TEAM UpdateResults Forum Report OutProposed Update to Strategic Plan for 2021-2025 Committee Reports

B enefits Committee Long Term Space Planning Operational UpdatesApproval of Benefits Member and Employer Survey ResultsTRS-ActiveCare Plan design

ED Report – Midyear valuationB udget CommitteeFY2021 Mid year and FTE Report COAO ReportReview Proposed FY2022 Budget

Ethics/Fiduciary Training

P olicy Committee Cybersecurity ReportReview Litigation Policy

Investment Management CommitteeCIO Update4th Q uarter 2020 Performance ReviewSemi-annual Risk ReportAnnual Rvw of Public MktsAnnual Rvw of Public SPN

Audit Compliance and Ethics CommitteeInternal Audit and Compliance reports Red font denotes items moved from February meeting to April.

13

Upcoming Agendas

July 15 - 16 , 2021 ( Q uarterly Meeting)July 15 , 2021 July 16 , 2021

Strategic Planning Committee TEAM UpdateResults Forum Report Out

Committee Reports

B enefits Committee Long Term Space PlanningOperational UpdatesApproval of Benefits Select Actuary

B udget Committee Select Medical Board PositionPropose Adoption of FY2022 BudgetState Certifications Renew Fiduciary Counsel ContractHUB Goals

ED ReportPolicy CommitteeReview of Procurement Policy COAO ReportPossible proposed rules from new legislation

Investment Management CommitteeCIO Update1st Quarter 2021 Performance ReviewAnnual Review of External Private Market UpdateReview proposed modifications to IPS

Audit Compliance and Ethics CommitteeInternal Audit and Compliance reports

TAB 10

Kellie SaulsFebruary 2021

DIVERSITY, EQUITY AND INCLUSIONTeacher Retirement System of Texas

1

Overview

1. Review DE&I Vision, Charge and outline of work from February 2020

2. Current stage of DE&I work

3. DE&I Strategy, Performance Metrics and Measurement

4. DE&I Highlights from the year

5. Areas of Focus for 2021

2

Our Vision

Diversity, Equity and Inclusion for TRS

We strive toward a vision where:

All areas of the organization reflect the diversity of the state of Texas, promoting our culture of inclusion and belonging. All employees across the organization professionally thrive, grow and achieve a high level of professional satisfaction knowing they have been encouraged and supported in their contribution to the achievement of the organization’s mission.

3

Our DE&I Charge

• We want to effectively compete for talent in an increasingly diverse laborforce

• We want to maintain a high level of talent retention through inclusion, equity and belonging practices

• We want to continuously improve upon the services and investment returns delivered to our members

4

Approach

Ongoing DE&I Work

Strategic Plan

FY20 Q3Strategic Plan developed and submitted for review and input

FY20 Q4Strategic Plan revised, reviewed again, finalized and published

FY21 Q1Internal marketing of DEI Plan; develop Progress Report template

Quick AssessDevelop schedule to do quick assessments on/toward progress

Annual Re-AssessProgress will be determined, and adjustments made as necessary

ReportAnnual DE&I Report will be generated to provide overview and update

Vision

DiversityRepresentation; Demographic make-up of the agency

EquityAccess to and use of resources for success within the agency

InclusionSense of belonging, value, ownership in the agency and its achievements

Assessment

GDIBAssessment to determine level of progress and challenge areas

Inclusion IndexIdentify gaps, provide tools, target efforts to achieve goals

Add’l ResourcesTRS OE; PreviousTRS surveys; CQC; conversations; CFA; DBP Inclusion Index

PrioritizeDevelop a list of focus areas for each year; determine reasonable timeline

CollaborationWork across the organization to implement DE&I practices into work

Work the PlanDevelop working schedule to support, pivot and/or initiate

Implementation MeasureProgress

5

Approach

Ongoing DE&I Work

Vision

DiversityRepresentation; Demographic make-up of the agency

EquityAccess to and use of resources for success within the agency

InclusionSense of belonging, value, ownership in the agency and its achievements

Assessment

GDIB Assessment to determine level of progress and challenge areas

Inclusion IndexIdentify gaps, provide tools, target efforts to achieve goals

Add’l ResourcesTRS OE; PreviousTRS surveys; CQC; conversations; CFA; DBP Inclusion Index

6

Approach

Ongoing DE&I Work

Strategic Plan

FY20 Q3Strategic Plan developed and submitted for review and input

FY20 Q4Strategic Plan revised, reviewed again, finalized and published

FY21 Q1Internal marketing of DEI Plan; develop Progress Report template

Interim AssessDevelop schedule to do quick assessments on/toward progress

Annual Re-AssessProgress will be determined and adjustments made as necessary





Implementation MeasureProgress

7

DE&I Strategy

TRS Implementation StrategyPrioritized DE&I

Support development and recruitment

Address organizational systems and proactively challenge and train.

Build on the legacy of the TRS culture.

1

2

3

4

D. Assurance that TRS is equipped to meet the unique challenges of the 21st century with a thriving, high-performing, and diverse workforce that is conducive to innovative and enriching ideas, practices and delivery upon the TRS mission.

E. A diverse workplace that promotes fair treatment, access and opportunity for advancement, and a work culture where all employees feel welcome, respected, supported, and valued.

I. Pledge that TRS values and seeks out diverse partnerships and opportunities across all lines of business and endeavors to continuously strengthen and enhance these relationships.

Outcomes BeneficiariesMembers, Board of Trustees, and Citizens of Texas

TRS Employees

Partners/stakeholders (vendors, strategic partners, contractors, community partners and agencies)

Potential Pain Points• Sufficient DE&I staff to fully execute plan• Invest in DE&I budget to support full execution of plan 8

DE&I Performance Metrics

• What we are measuring

• Why we are measuring

• What the benefits entail

• A tool/service will help us measure in a meaningful way

9


Key Performance Metrics

• Gender• Division• Generation

• Race/Ethnicity• Veteran Status• Trend data for Gender and Race/Ethnicity

• Years of TRS Service• Level w/in the Agency

New Hire Demographics DFiscal year data broken out by the follow attributes: • Gender• Division

• Race/Ethnicity• Veteran Status

• Generation• Level w/in the Agency

Applicants Demographics D EFiscal year data broken out by the follow attributes: • Gender• Source of Application

• Race/Ethnicity

Employee Demographics DFiscal year data broken out by the follow attributes:

• Veteran Status

10


Key Performance Metrics

Termination Demographics EFiscal year data broken out by the follow attributes: • Gender• Division• Type of termination

• Race/Ethnicity• Generation

• Years of TRS Service• Level w/in the Agency

Recruiting D INumber of recruiting partnerships focused on increasing diversity applicants

Training D E INumber of attendees for each DE&I related training event broken out by the following attributes:• Division • Level within the Agency

Employee Resource Groups (ERGs) E Number/type of ERGs (active and in development) IMembership numbers for each ERG broken out by division.

Employee Survey Results EAggregate scores for specific questions asked as part of the Survey of Employee I Engagement

11

Implementation and Measurement Loop

Implementation

Measurement

Implementation




Measure Progress

Quick AssessDevelop schedule to do quick assessments on/toward progress

Annual Re-AssessProgress will be determined and adjustments made as necessary


12

AssessPlan

DE&I Measurement Tool

Determine movement on identified DE&I metrics, assess those movements and adjust if needed.

Determine progress on TRS Strategic Goals as it relates to talent and trust performance.

Maintain consistency and accountability around DE&I goals.

Employ a statistically rigorous methodology to ensure that data is accurate, valid and reliable.

Use industry best practice through 3rd party measurement to ensure standardization and realistic benchmarking.

Purpose of the DE&I Measurement Tool Status: Initiated the P&C process; completed the Scope of Work.

Next Steps: Complete P&C process with selection of vendor and initiate DE&I measurement.

1

2

3

4

5

13

Collaboration: L&CP&CIMDOE/OCMCommunicationsIT

Highlighted Activity - Diversity

Howard University Alliance

Status: Maintain contact; utilizing HU app to connect with students and alumniNext Steps: Assess year-long engagement

NABA – Austin Chapter:

Status: Solid relationship establishedNext Steps: Partner on Student Conferences; Fall 2021 Conference hosted in Austin

Outreach to:

Status: Contact made with local chapters across TexasNext Steps: Secure speaking engagements for TRS

14


1 Survey responses of two events can be made available for Board rev iew. A third University of Houston event has been scheduled for the spring semester.

2 Survey response for the IMD Open House event can be made available for Board rev iew. Based on positive responses, future v irtual events will be planned.

Effort

Focus onTexas HSIs and HBCUs

Status

Executebrand awareness campaign

IntroduceTRS to diverse talent through virtual eventsand DE&I focused landing page.

University of Houston1

Prairie View A&M Univ.IMD Open House2

Diversity Pipeline Development

Next Steps

Trackeffectiveness of brand awareness campaign via post-event surveys and landing page data.

Developsocial media strategy to target diverse audience.

15


Brand Awareness

Talen

t Fun

nel Prospect

ApplicantInterviewee

New Hire

16

Highlighted Activity - Equity

Collaboration:OEDE&I Training and ActivitiesDiversity RecruitingEmployee Value Proposition

Strategy TeamDE&I Performance MetricsCore Values Refresh

IMDDiversity Recruiting

Training on Equitable PracticesEfforts: Unconscious Bias I and IIStatus: Offered 1x/quarter through 2021Next Steps: DE&I Training for Managers Pilot

Equity AuditStatus: Discovery phase; learning from those organizations that have completed oneNext Steps: Collaborate with OE and Internal Audit; Determine timeline and develop an audit plan (if warranted)

17

Lunch & Learn Survey Results

Survey Results From:• LGBTQ+ Allyship at Work• Lessons From the Life of Nelson Mandela• Multigenerational Diversity• IMD Women In Finance• “How to be an Antiracist” Book Discussion

85% Positive Feedback on Events

Appreciating:Education

Work & Life WisdomPositive Influence

Moving Forward:More Book Club Discussions

Application of Lessons LearnedBroader, more Global Information

Clearing up Communication on Event Formats

“Not only was this training

relevant, but it was incredibly insightful. I love

that TRS is on the front-lines of helping us become

more accepting of all individuals.”

“I thought this was a

very refreshing seminar and would

love more like this!”

18

Highlighted Activity - Inclusion

Training on Inclusive CultureStatus: Cultural Intelligence and Unconscious Bias has launchedNext Steps: Pre/Post-Assessments Analysis over time

DE&I CouncilStatus: Concluded Year 1; Survey ResultsNext Steps: Inclusion focused with emphasis on connections given remote work and physical work locations

ERGsStatus: Two ERGs fully launched; Four ERGs in progress with project leads/teamsNext Steps: Support launch of the other four ERGs; Bring together all the ERG leaders

19

Areas of Focus

IMD• External Investors DE&I measurement

and accountability• ERG support• Continued Diversity and Inclusion efforts

Benefit Services• Leadership team DE&I sessions monthly

Recruiting, Inclusion and Accountability

L&C• Multigenerational workshop collaboration

IT• Diversity Recruiting

20

21

Summary – Year

GDIB Benchmarks Categories Status Highlights

Foundation(Drive Strategy)

• DE&I Vision, Strategy and Business Case

• Leadership and Accountability

• DEI Structure and Implementation

1st draft complete

Complete; next stage ready

In-progress

DE&I strategic plan

EC DE&I Training; Managers Pilot

DE&I Director, Intern, Council, ERGs

Internal(Attract and Retain)

• Recruitment, Retention, Development, Advancement

• Benefits, Work-Life Integration, and Flexibility

• Job Design, Classification, and Compensation

• DE&I Learning and Education

Brand awareness launch; Metrics and measurement

CVR strat team lead; OE lead (EVP)

OE lead and collab; UB Train’g

DEI training integrated (OE)

Virtual events and landing page; Perf Metrics ID’d; procuring service/tool

Disabilities Awareness; Caregiver ERG

Perf Metrics ID’d; Manager Pilot

DE&I Training Portfolio (pos. marks)

Bridging(Align and Connect)

• Assessment, Measurement and Research

• DE&I Communications

• Connecting DE&I Sustainability

Measurement tool/serv P&C process

Ad Hoc comms (email, e.g. hx months)

Exploratory

Initial Assess period; Perf Metrics ID’d

Kaleidoscope; Leaders mtgs; DEI site

Initial discussions with IMD

External(Listen and Serve Society)

• Community, Government Relations, and Social Responsibility

• Products and Services Development

• Marketing and Customer Service

• Supplier Diversity

DEI landscape awareness

Exploring support of service delivery

Exploring support of service delivery

In-progress; P&C lead

ATX DE&I Leaders; Focus on Texas

Accessibility and Generational Training

Ext Comms (eg, brand); BenServ Mtgs

Regular HUB meetings; Implement’g plan

Next Steps

Next Steps

22

Questions

Thank YouAny Questions?

?

23

TAB 11

© 2021 by The Segal Group, Inc.

Board Meeting


February 2 6 , 2 02 1

Health Plan Program Review

2

With You Today

2

K enneth C. V ieira, FSA, FCA, MAAASenior V ice P residentEast Region P ublic Sector Market Leader

TRS Ex ecutive Sponsor

K irsten R. Schatten, ASA, FCA, MAAASenior V ice P residentN ational P ublic Sector H ealth P ractice Leader

TRS Account Manager

3

Segal’s Large Public Sector ClientsHealth & Retirement Consulting

Current clients include 2 1 State H ealth P lansP roud partner with Tex as TRS since N ovember 2 019

4

Suite of health and benefit plan management services operates on a continuum in which each service supports and compliments other essential services

Plan ManagementRequires Unique “Team” Expertise

Benefits Planning

Budget Activities

Vendor Management

Communications

Compliance

Ad Hoc Support

Plan Management

• Input from your leadership & Council• Strategy, based on goals

and objectives• Work plan calendar

• Annual plan/budget goals• Plan design modeling• Rate setting and

contribution strategy

• Audits• Network, claims &

cost containment • Renewals/RFPs

• Communication review and assistance

• Wellness communications

• Compliance assessments• Legislative and regulatory

updates• Training sessions,

(HIPAA, etc.)

• Administration and technology support

• Specialized research• Benchmarking

5

• The benchmarking states have been de-identified, but include:– Alabama (PEEHIP)– Georgia– Illinois– North Carolina– Tennessee– Wisconsin

• Data Collected:– Plan type (PPO, HMO, HDHP, etc.)– Plan design (deductibles, copays, maximum out-of-pocket limits, etc.)– Cost (total costs/premiums, employee/state cost share, coverage tier structure)

• TRS and Benchmark States’ plan information is current

• TRS Current Enrollment

TRS Requested Segal to Benchmark Peer States

Program Employees/Retirees Dependents Total ParticipantsActiveCare 282,000 149,000 431,000

Care Standard 50,000 16,000 66,000

Medicare Advantage 138,000 20,000 158,000

Total 470,000 185,000 655,000

6

Plan Efficiency–Measures how efficient plans are by comparing total costs–Captures the amount of health care each dollar of premium buys–Holds benefit designs constant to allow for an apples-to-apples comparison

What’s the Benchmark?

What the Employer/State

Contributes

Premium the Member Pays

Member Out-of-Pocket Costs when they Seek Care

Efficiency Benchmark looks atTotal Costs

7

–TRS plans are efficient compared to peers in the benchmarking study• Each dollar of premium in TRS buys more health care than peers• This is especially pronounced for TRS-ActiveCare where total costs are 15% - 25% less

than peers• TRS-Care Standard’s population makes it challenging to benchmark. Costs look to be

consistent with peers.–TRS health plans receive considerably less funding than peers

• Employer contributions in TRS-ActiveCare are 55% - 65% of peers• State contributions in TRS-Care are more in line with peers• TRS members bear a greater share of the total costs as reflected in higher member

premiums and out-of-pocket costs than peers–TRS plans outperform peers from a total cost perspective, reflecting effective management of the programs

–TRS has had annual trends of 2 -3 % less than market over the last 6 y ears

Key Findings

The efficiencies amount to over $ 3 00 million saved annually .

8

Benchmark Plan Types

% of States

HDHP/CDHP Plans

P ercentage of B enchmark States O ffering

PPO Plans

HMO/EPO Plans

100%

6 7 %

92%

59%

57%

6 7 %

ActiveCare Care Standard

ActiveCare is consistent with B enchmark states, but Care Standard is the only pre-6 5 retiree program not linked to active plan options

9

Term Definition

Covered Benefits Medical and Pharmacy services covered by the Plan

Total Cost Negotiated Cost of Covered Benefits under the Plan

Member Out of Pocket Cost (OOP)

Portion of Total Cost paid by Member= Deductible + Coinsurance + Copays

Premium Rate Portion of Total Cost paid by the Plan= Total Cost less Member OOP

Actuarial Value Calculated Percentage of Covered Benefits paid by the Plan = Premium Rate / Total CostSimilar to Exchange Metal Level Plans (60%,70%,etc)

Employer Contribution Amount of Premium Rate paid by employer

Employee Contribution Amount of Premium Rate paid by employee

Employer Cost Employer Contribution

Employee Cost Employee Contribution + Member OOP

Employer Subsidy % Percent of Total Cost paid by Employer

Definitions of Health Plan Costs

10

• Actuarial value provides measurement of overall plan value to the member out-of-pocket (OOP) costs (deductible, coinsurance, copays). A plan that has simply a 30% coinsurance would have a 70% AV.

• As Actuarial Values increase, member Out of Pocket costs decrease

ActiveCare: Benchmark States Actuarial Value (AV)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

AV Member OOP Cost %

TRS AV s are on the lower end of the B enchmark States

11

ActiveCare: Employer Cost – Single

Total Employer Cost Single

$ 0

$ 100

$ 200

$ 300

$ 400

$ 500

$ 600

$ 700

$ 800

$ 900

$ 1,000

O n Average: Tex as contributes 3 5 -4 5 % less than the B enchmark States

12

ActiveCare: Employee Cost – Single

TRS Employ ee Costs are higher than the B enchmark States

Total Employee Cost = EE Premiums + EE OOP Costs

$ 0

$ 50

$ 100

$ 150

$ 200

$ 250

$ 300

$ 350

EE Premiums EE Out of Pocket Costs

13

• Total Cost represents the “Allowed Cost” or “TOP Line” covered claims expense

• The lower the Total Cost, the better the management of health care dollars.

ActiveCare: Total Cost – Single

Total Cost Single

O n Average: TRS’ s Total Cost is 15 -2 5 % lower than the B enchmark States

$ 0

$ 200

$ 400

$ 600

$ 800

$ 1,000

$ 1,200

$ 1,400

ER Contributions EE Premiums EE Out of Pocket Costs

14

Employer Subsidy % = Employer Cost / Total Costs

As the percentages increase, the employee would have less financial responsibility

ActiveCare: Employer Subsidy % – Single

Employer Subsidy %TRS Benchmarking States

TRS ActiveCare pay s less than 6 0% of the total cost - much less than the B enchmark States

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

15

Historical Trends – Comparison to TRS

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2016 2017 2018 2019 2020 2021

PPO HMO Rx TRS

Source: 2020 Segal Health Plan Cost Trend Survey

TRS Average P remium Increases have consistently been lower than the marketApprox imately 2 -3 % lower over the past 6 y ears

16

TRS Care Standard comparable to Benchmark States – right in middle of pack

Populations vary between states with likely risk differentials, making direct comparisons more difficult

Care Standard: Total Cost – Single

Total Cost - Single

H igh variability between states – ER Cost, EE P remiums & EE O O P Cost

$ 0

$ 200

$ 400

$ 600

$ 800

$ 1,000

$ 1,200

$ 1,400

$ 1,600

$ 1,800

$ 2,000

ER Contributions EE Premiums EE Out of Pocket Costs

17

Employer Subsidy % = Employer Cost / Total Costs

As the percentages increase, the employee would have less financial responsibility

Care Standard: Employer Subsidy % – Single

Employer Subsidy %TRS Benchmarking States

Care Standard percentage more consistent with B enchmark States

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

18

• Successful Procurements–Best in class RFPs–Unbiased objective evaluation

• Networks and Pricing• Medical management

–Changed 2 vendors this year• Major Undertaking for Implementations• BCBS

Pricing SavingsCurating NetworksDeep dive on Medical ManagementValue Based Design

• UHC Medicare Advantage – Guaranteed Pricing with a Market Leader

• Size–Administrative fees are low, < 4% of total cost (meaning 96% pays for member claims)–Stop Loss Reinsurance not necessary, this saves 1.5% – 3% annually

Why does TRS have lower costs?

TRS has some of the best contracts in the Country for medical, pharmacy and Medicare Advantage programs

19

• Successful Contract Management–Working with BCBS to Curate Networks and new to market solutions for specific services–PBM Market Check yields one of the best contracts in the industry

• Medical Network Management–Balancing network depth, breadth, quality and pricing–Utilization Management–Large Case Management–Other programs and Point Solutions (e.g. Diabetes pilot)

• Pharmacy Program Management–Rapidly changing market–Contract terms – discounts, rebates, Utilization management (Including Prior Auths for

Specialty drugs with a robust pipeline)

• Staying on top of New Legislation

Why does TRS have lower costs?

Given the siz e of the TRS staff, the level of ex pertise and q uality is clearly shown in program performance

20

• ACA Strengthening

• New Federal Legislation–Price Transparency

• Hospitals• Health Plans• Surprise Billing (Out of Network, ER and

Ambulance)• New consumerism tools

• Pharmacy–Rx Pricing Reduction Act (Most Favored Nations)–Point-of-Sale Rebates for Medicare–Potential Pharmacy Part D Redesign

• COVID-19–Vaccinations–Mental Health Support

• Innovative and Curative Therapies

• Value Based Care – more evolution

• Digital Solutions / Telemedicine

• Social Determinants of Health

• Mental Health Parity and Addiction Equity Act–Non Q uantitative Limits

Health Care Market Forecast

N ew Administration with different initiative could change … … . every thing

21

Thank you!

What additional questions can we address today?

Katrina DanielChief Health Care OfficerFebruary 2021

HEALTH CARE REPORT

Teacher Retirement Sy stem of Tex as B oard of Trustees

Katrina DanielChief Health Care OfficerFebruary 2021

HEALTH CARE REPORT

Teacher Retirement Sy stem of Tex as B oard of Trustees

23

TRS-ActiveCare: Competing Coverage Creates Risks to P ublic Education Employ ees

• Districts offering competing coverage represent 14% of participating districts and employ 10% of eligible employees

• Increase in costs represents 1.7% of TRS-ActiveCare annual claims paid

• Current impact to TRS manageable• However, competing coverage presents

greater financial risk over longer-term

School D istricts O ffering Competing Coverage

Made with flourish.studio

• Transfers financial risk to employees

• No contracts with hospitals to define network or protect members from balancing billing

• Burdensome authorization process

• Potentially narrow network of physicians

• Excludes most specialty drug coverage

• High cost of specialty drugs may impair access to potentially life-saving treatment

24

Features of Competing Plans Increase Costs for Members who Need Health Care the Most

TRS-ActiveCare: Competing Coverage Shifts Costs to Employees who Need Care the Most

25

TRS-ActiveCare: Competing Coverage Shifts Costs to Employees who Need Care

In Most Districts Employees Leaving TRS-ActiveCare Have Higher Average Costs

In most districts, employees leaving TRS-ActiveCare have higher average costs

Note: PEPY = Per Employee Per Year Cost

$6,448

$7,450

$4,752

No Competing Coverage

Stayed Left

99%118%

% o

f Avg

PEP

Y

26

TRS-ActiveCare: Competing Coverage Shifts Costs to Employees who Need Care

Competing Coverage Leaves ActiveCare with Employees that Have Higher Total Cost

adverse selection: lower cost employees leave and higher-cost employee stay


$6,448

$7,450

$4,752

No Competing Coverage Competing Coverage

Stayed Left Stayed Left

99%118% 114%

73%

% o

f Avg

PEP

Y

27

TRS-ActiveCare: Competing Coverage Creates Adverse Selection

100% 100%74%

No Competing Coverage Competing Coverage

Stayed Yes Stayed Left

% o

f Avg

PEP

Y

125%

Members Leaving in Competing Coverage Districts Have Lower Specialty Drug Costs Paid by Plan Compared to Employees Staying


adverse selection:lower cost employees leave and higher-cost employee stay

28

TRS-ActiveCare: The Financial Impact of Adverse Selection

Competing Plans Attract Lower-Cost Employees,Increasing Costs in TRS-ActiveCare

$240 40% $41 MEmployees leaving TRS had 38% lower monthly medical &

pharmacy costs

Employees leaving TRS had 40% lower specialty

drug costs

Increase in premiums to

remaining employees

Note: Comparisons are between employees leaving and staying within districts offering competing coverage.

The Committee recommends that the plan be structured in such a way to avoid adverse selection by the school districts.

29

TRS-ActiveCare: Legislative H istory

[T]he greater resulting issue of districts backing out of ActiveCare is the resulting ‘adverse selection’ that

occurs.

30

TRS-ActiveCare: Competitive Costs for Similar Coverage

$702

$795

TRS-ActiveCare Non-Par TX ISDs

TRS-ActiveCare HD Monthly Per Employee Cost are Lower than Similar Plans in Texas

Method notes available in appendix.

TRS per employee cost is $93 and

12% below median

31

Implementation Update: Vendor Transitions

Implementations occurred close together for large volume of members

• 100% Remote workforce • Implementation of 4 new health plans • +700,000 members impacted• TRS-ActiveCare transition final on 9/1/20• TRS-Care transition final on 1/1/21

32

Implementation Update: V endor Coordination

Implementation req uired ex tensive vendor coordination

• Included coordinating with four medical vendors during transition

• Goals included continuity of benefits, network adequacy, and smooth data transmission for minimal disruptions to members and partners

TRS

UHCCVS

BCBSTX

bSwift

AetnaHumana

Segal

Teladoc

RediMD

Payflex

33

Implementation Update: Intra-agency Coordination

Coordination within TRS involved + 3 0 people across divisions

• Execute contracts• Communicate changes to

members• Share eligibility & key data with

vendors• Evaluate & monitor risk• Provide customer service

TRS

Ops

Finance

Comms

LegalInternal

Audit

PMO

Exec

TRS IT

0

2,000

4,000

6,000

Apr

Jul

Oct

Jan

By Incurred Week

Dis

tinct

Peo

ple

Suspected Confirmed

COVID-19 New Diagnoses By Week

34

TRS-Care & TRS-ActiveCare: COVID Case Counts Similar to State Trends

Case counts will increase as more claims are received for this period. The decrease each week in December is at least partially due to claims submission lag. TRS cases have followed broader Texas trends.

Note: An individual is only counted once in this chart based on the first relevant diagnoses.

35

TRS-Care & TRS-ActiveCare: COVID Case Counts

Program Confirmed Suspected Percentage of Enrollment

TRS-Care-MA 4,648 n/a 3%TRS-Care-Standard

2,954 10,451 21%

TRS-ActiveCare 20,266 73,744 20%

TRS-ActiveCare Relationship

Total Confirmed & Suspected

Percentage of Enrollment

Employee 72,139 23.65%Dependents 21,849 12.95%

Note: Cases/counts are shown for members enrolled in December 2020.

36

TRS-Care & TRS-ActiveCare: COVID Costs for Self-Insured Plans

Note: FY 2021 costs will depend on the degree of community spread of COVID-19 and various factors which can change depending on vaccinations and public health interventions.

$73.2 m$166.4 m$26.5 m

$96.2 m

FY2020 FY2021

COVID Costs Expected to Grow in FY2021 after $100 M in FY2020

TRS-ActiveCare TRS-CareStandard• Due to fund balance, primary financial risk is to TRS-ActiveCare

• Anticipate maintaining a positive fund balance in FY20 and beyond

• COVID costs and changes in broader utilization will be a factor in rate setting

• Most of TRS-Care population is in Medicare Advantage which is fully insured – the carrier bears the risk of the cost

37

Implementation Update: Developing New TRS-ActiveCare Roles to Improve Service

-DA-District

Ambassadors

-PHG-Personal Health

Guide

• Contact for district leadership• Provide general plan info & education• Offer annual enrollment, health fairs,

& wellness presentation support

• Participant & school district calls• Support for benefits, claims,

prior authorizations & referrals• Locate & assign primary care providers• Refer to other BCBS departments

38

Implementation Update: Communicating Changes to TRS-Care Members

16

4 4

10

FY 2018 FY 2019 FY 2020 FY 2021

Touch Points Per ParticipantIncreased mailings and communications to prepare

retirees for transition• Increase in avg contacts per

member before year of plan changes

• Meetings, webinars, direct mail, emails, and web traffic all increased

39

Implementation Update: High Volume of Work Completed

High volume of tasks completed on top of existing duties

• ActiveCare: +1,600 action items• Example: Collect PCP selections

through bswift when district vendor cannot

• TRS-Care: +650 action items• Example: Establish IVR phone

routing from BCBSTX for members asking for HIB staff

Workstreams

Enrollment & Eligibility

Customer Service

Network

Benefits

Comms

Contracting

40

TRS-Care: Call Volumes Increased in December During Implementation

0%

20%

40%

60%

80%

100%

September October November December

Service Level (HIB & ACT)

26,222 28,770 26,266

40,979

10,058 10,239 11,230

15,495

September October November December

TRS-Care Calls ReceivedReceived by Carriers Received by ACT & HIB

Service Level for Carriers is 90% within 1 Minute

41

Implementation Update: Outcomes

Everyone enrolled

ID cards distributed

Care transitions occurred

Scripts filled

Premiums collected

Calls answered

timelyLargest transition of members in TRS history

• All key dates achieved• Very few escalations by

members• +800,000 ID cards distributed

to members

TAB 12

Brian GuthrieAndrew RothAdam FambroughBilly LoweJennifer Whitman

TEAM ProgramPresentation

TEAM TIMELINE

2

2009 - The Next Generation (TNG) Project2009 - ERM Spotlight Report – Legacy system a risk2010 - Educational Tour2010 - Developed a Roadmap for TEAM2011 - Included TEAM in the 2011–2015 TRS Strategic Plan 2012 - Developed RFO for LOB System Replacement2013 - HP selected as the LOB vendor Oct 20132014 - TEAM officially kicked off Jan 20142017 - Phase 1 Go Live Oct 20172020 - Terminated the contract with Perspecta (formerly HP) Feb 2020

TEAM – TAKING ON REMAINING DEVELOPMENT IN-HOUSE

3

ISSUE ENCOUNTED WITH PERSPECTA RESOLUTION BY BRINGING IT IN-HOUSE1. Waterfall methodology used by Perspecta resulted in

difficulty adapting to changing business prioritiesTwo of the twelve principles behind the Agile methodology being used by TRS are:• Early and Continuous Delivery of Valuable Software• Embrace Change

2. Quality of the product being delivered by Perspecta The Agile methodology produces smaller, more frequent releases, which means fewer chances of defects in the final product

3. Attrition of key Perspecta staff The key TEAM Program team are TRS staff, which has an extremely low attrition rate

4. Continued company buyouts after the initial contract signed with Hewlett-Packard (HPSL)

Ownership of the solution stays with TRS, whose only purpose is to serve its membership

5. Contractual bound to two major phase deployments Split the remaining Phase 2 phase release into multiple releases as defined in the TRUST Incremental Release plan

FACTORS FOR THE DECISION

WHY UNDERTAKE TEAM

4

Why was the Legacy System a risk?(Before) (After)

Teacher Retirement System of Texas - Application Portfolio - DraftUpdated: 9/2/2011, Version: 8.0Author: Simon Robe,

1.0 7/6/2011 Inital template. Imported form Forester application asssessment documents2.0 7/13/2011 Initial layout3.0 7/14/2011 Includes ERP and member records meetings4.0 7/21/2011 Includes more member records, payrol and health insurance meetings. All interfaces transcribed. Second layout.5.0 7/22/2011 Updated with complexity metric and banding. Added Application groups6.0 7/27/2011 Updated after first review. Added data base and shared service boxes.7.0 8/3/2011 Remaining review transcriptions and re-layout8.0 8/3/2011 Proofed. Added Property Inventory and OPIN. E-Mailed to TRS

Change Log

Integration %

SUMMARYBusiness Functions : Member RecordsSource : ..?IT Contact : ..?Owner : ..?Languages : NaturalDatabases : AdabasePlatforms : ..?Middleware : ..?Comments : ..?

Employee Member

Employee Member Account

_

Employee Member Data

TRSP - TRS PayrollA copy of the USPS state payroll data forthe 500 or so TRS employees. Replicatessome of the fuctionality of the TRAQS andMEMR applications but separates the data

for privacy reasons. Produces the datarequired to produce annual statements for

employees.

Workflow %Logging / Audit %

Reporting / Analytics %

Remaining Functionality %

SUMMARYBusiness Functions : General AccountingSource : CustomIT Contact : Deering Blazer/Travis GageOwner : Jamie MichelsLanguages : NaturalDatabases : DB2Platforms : MainframeMiddleware : TIBCOComments : ..?

Budget Line Item

TRS Fund

Department

Contracts

Expense Category

_

Budget Sub LedgerTRS operating budget and related expense and payment information. Vendor and

contract information.DBMS : ADABAS 8.1.3

Associated Applications : BEVO, GLASAccess Tools : Natural 4.2.3

Data Exchange : Texas Building and Procurement ComissionProduction Date : 1991

_ _

Shared Services

BEVO - Budget, Expense, and VoucheringTracks TRS operating budget and related expenses. Tracks contracts related tooperating expenses. Generates payment requests which are sent to the Uniform

Statewide Accounting System (USAS). Provides reports for central and departmentalmanagement. Stores data used in answering budget/expenditure questions from TRS

Board, central agencies, legislature.

Outbound Correspondence %


Integration %



SUMMARYBusiness Functions : Benefit ProcessingSource : CustomIT Contact : Linda BrownOwner : Liz OliphintLanguages : NaturalDatabases : ADABASPlatforms : MainframeMiddleware : ..?Comments : ..?

Member

Member Account

_

Claim

Death Beneficiary

_

Claims DataInformation needed to process all member death claims madeby beneficiaries. Processing information is transferred from

the Member Records and Annuity Payroll databasesdepending on the status of the member at the time of death.

Contains additional processing and tracking information that isentered and maintained through on-line applications.

DBMS : ADABAS 8.1.3, DB2 9Associated Applications : DCLM

Access Tools : Natural 4.2.3Data Exchange : N/A

Production Date : 1988

NLTRService : Letter Writing

ProfileService : GUI and Workflow

IDEN/SAASService : Security

DJDCService : Report Distribution

ReportsProdService : Report Distribution

Shared Services

DCLM - Death ClaimsSystem designed to process all claims by beneficiaries including lump sum

death benefits and continuing retirement options.


SUMMARYBusiness Functions : General AccountingSource : CustomIT Contact : Deering Blazer/Travis GageOwner : Jamie MichelsLanguages : NaturalDatabases : ADABASPlatforms : MainframeMiddleware : ..?Comments : ..?

GL Account

TRS Fund

Ledger

Fiscal Year

GL Transaction

_

General LedgerGeneral ledger transactions and balances. USAS interface

tracking and cash reconciliation.DBMS : ADABAS 8.1.3

Associated Applications : BEVO, GLASAccess Tools : Natural 4.2.3

Data Exchange : Texas Comptroller of Public AccountsProduction Date : 1991



Shared Services

GLAS - General Ledger Accounting SystemTracks TRS General Ledger. Tracks cash received at TRS. Creates

reports and spreadsheets for cash reconciliation. Stores & reports USAScash info. Stores USAS payment info for non-member-benefit transactions.

Tracked at the fund level.




SUMMARYBusiness Functions : CARESource : CustomIT Contact : Linda BrownOwner : Bob JordanLanguages : NaturalDatabases : ADABASPlatforms : MainframeMiddleware : ..?Comments : ..?

Member

Member Insurance Plan

Insurance Plan

Plan Options

Insurance Premium Payments

_

Member Health Insurance Data

HEIN - Care Group Health InsuranceMaintains information regarding health insurance coverage for all eligiblepublic school members, retirees, and dependents. Claims are handled byAETNA. TRS and AETNA exchange coverage information electronically.


SUMMARYBusiness Functions : TelecomSource : Package/CustomIT Contact : ..?Owner : Kyle WeigumLanguages : NaturalDatabases : ADABAS/DB2/VSAM/HIPATHPlatforms : MainframeMiddleware : ..?Comments : ..?


Shared Services

Member Calls

_

_

Call Data

IVR - Interactive Voice ResponseAllows members a self-service option for interacting with TRS. IVR classifies the

purpose of member calls and routes call to appropriate Benefit Counselor.


SUMMARYBusiness Functions : MDSSource : Package/CustomIT Contact : Cherylene PalmerOwner : Jimmie SavageLanguages : vb.netDatabases : SQL SVRPlatforms : Mainframe with a partitionMiddleware : ..?Comments : The current version has a seperate login. The new version will use Active Directory. Includes a VBap[plication for direct access but most access is through the Profile interface.


SUMMARYBusiness Functions : Open SystemsSource : PackageIT Contact : Nobody in-houseOwner : Juan WassenLanguages : unknownDatabases : OraclePlatforms : Unix ServerMiddleware : ..?Comments : ..?

Images

FileNet - Panagon ImageThis system performs Imaging and document management. Document Management

gives our Records Manager the necessary control of the life cycle of a TRSdocument. This includes security and access of the document.

Document

Member

Reporting Entity

Document Type

_

_

Document Indexing DataThis database is an index of all imaged documents for all active and retired

members of TRS. The index values are the key to randomly accessing imageddocuments from optical storage.

DBMS : Oracle8i 8.1.7.4.0, SQL Server 2005Associated Applications : Member Profile, Imaging, Filenet Panagon Imaging Services

Access Tools : Filenet Panagon 3 and Visual Basic 6Data Exchange : N/A


Imaging - ImagingThe Imaging application is an in-house customization of FileNet’s Panagon IDM Desktop.

It is designed for business users to access imaged member documents that are storedon the FileNet Image Server. It enables the business users to view documents out of aworking queue in conjunction with the TRS Profiles application, which is a GUI interfacefor users to enter member data into the mainframe system via the terminal emulator and

screen scraping. Users can also enter data directly into the mainframe system via theterminal emulator application (Attachmate Extra!). The program also allows for ad hocqueries via File Search. The application also maintains user information such as user’s

department id, team id and menu access levels on a Microsoft SQL Server database.The SQL Server database also stores various log files for reporting and audit trail

purposes. Hard-copy documents are scanned into the system and converted to imagesand then are indexed and committed in the Records Management department via two

online programs (Batch Scan and Batch Indexing). Both the mainframe-generated formsand TRS Profiles-generated screen shots are automatically indexed and committed intothe image server via a batch processing program called AutoCommit or AutoImage. Thedistributor application, a batch processing program, routes newly-committed documents

to work queues based on batch prefix (batch type) and DocType (Form Number).Documents are also consolidated by tax number and filed in subfolders via the distributor

program.

Payee Address

Payee

Anuitant

Payee Addresses

SUMMARYBusiness Functions : Benefit Accounting/MDS/Benefit ProcessingSource : CustomIT Contact : Greg Speer/Doug Marshall/Wayne FriesOwner : Margie Hoton/Jimmie Savage/LizOliphintLanguages : NaturalDatabases : ADABASPlatforms : MainfraimMiddleware : ..?Comments : Key file is the Benefits Payeefile

PADR - Payee AddressManages a subset of the demographicsfor payees including the payee address.


SUMMARYBusiness Functions : Benefit AccountingSource : CustomIT Contact : Charlie VahrenkampOwner : Margir Horton/Art Mata/LizOliphintLanguages : NaturalDatabases : ADABASPlatforms : MainframeMiddleware : ..?Comments : ..?

Form Templates

Form Templates

NLTR - Letter writingGeneralized templated letter

writing service. Supports massmailings (welcome letters) andon-request individual mailings.

Workflow %

Business Rules %

Integration %Reporting / Analytics %


SUMMARYBusiness Functions : Benefit AccountingSource : CustomIT Contact : Kim Webb /James TullosOwner : Margie HortonLanguages : Natural/JAVADatabases : DB2Platforms : Sun Application Server/Web ApplicationMiddleware : ..?Comments : ..?

Reporting Entity Ledger

Reporting Entity Contacts

Member

Member Account

TRAQS WebSimilar data to the TRAQS Internal data base but accessible outside the

firewall to reporting entities. No historyDBMS : DB2 LUW 9

Reporting Entity Ledger

Reporting Entity Contacts

Member

Member Account

TRAQS InternalPayroll information, TRS contribution amounts, and miscellaneous

information reported to TRS by over 1300 school districts and highereducation entities each month. Includes history. The design is based on

the Enterpise "Legacy" data model. There is a newer version.DBMS : DB2 UD

Associated Applications : TRAQSAccess Tools : Natural 4.2.3

Data Exchange : 1300+ Texas School Districts and Higher EducationProduction Date : 2000

TRAQS - TRS Reporting and QuerySubmission and validation processing and balancing of payroll and

miscellanenous reports required by TRS from reporting entites. System alsoallows for viewing of processing results for both internal and external users.

Logging / Audit %

Business Rules %

Reporting / Analytics %Remaining Functionality %

SUMMARYBusiness Functions : Benefit Accounting/MDS/General AccountingSource : CustomIT Contact : Kim WebbOwner : Margie Horton/Jimmie Savage/Jamie MichelsLanguages : NaturalDatabases : VSAMPlatforms : MainframeMiddleware : ..?Comments : ..?

Life InsuranceBeneficiary

In case of death whilestill a member.

Beneficiary Calculation

Appeal

Member

Child Support

Spousal Support

Payee

Member Account

Member Contract

Member RecordsCurrent year contribution posting information and 25+

years of historical postings for all active records,statistical and biographical information, terminationhistories, active member addresses, and a limited

amount of information regarding the status of areporting entity.

DBMS : ADABAS 8.1.3, VSAMAssociated Applications : Member Records







Shared Services

MEMR - Member RecordsMaintains the master membership account information for the current year.

Logging / Audit %



SUMMARYBusiness Functions : Benefit ProcessingSource : CustomIT Contact : Wayne FriesOwner : Liz OliphintLanguages : NaturalDatabases : DB2Platforms : MainframeMiddleware : ..?Comments : There are only 700 members on DROP that isa deprecated program.

Member

Drop Transactions

_

DROP Participant Data

DROP - Deferred RetirementOption Plan

This system administers enrollment andmaintenance of members who elect to work

and accrue funds in a special account.Allows members eligible for retirement to

defer receiving payment in order to accrueinterest on their pension that was taken as aone-time payment when they activate their

payments. No longer offered but stillsupported.


SUMMARYBusiness Functions : LegalSource : CustomIT Contact : John YagerOwner : Clarke HowardLanguages : vb.netDatabases : SQL SVRPlatforms : ServerMiddleware : Chrystal ReportsComments : Standslone application. Not actually in useas no comnplaints have been filed.

Member

HIPAA Complaint

HIPAA Complaints(HIPAA)

Information related to trackingHIPAA complaints

DBMS : SQL Server 2005Associated Applications : HIPAAAccess Tools : Visual Basic 6.0

Data Exchange : N/AProduction Date : 2003

Active DirectoryService : Authentication and

Authorization

Chrystal ReportsService : Reporting

Shared Services

HIPPA - HIPAA complaintsDatabase

This database is used by the TRS LegalDepartment to track HIPAA complaints.

The types of complaints that are handledare: Use, Disclosure, and HIPAA Rights.A complaint is processed and can havethe following dispositions: Valid, Invalid,Untimely. A complaint can be filed with

OAG, HHS, or both.

Health Insurance

ERP


SUMMARYBusiness Functions : Benefit CounselingSource : CustomIT Contact : Greg SpeerOwner : Tom GuerinLanguages : NaturalDatabases : ADABAS/DB2/VSAMPlatforms : MainframeMiddleware : ..?Comments : ..?

Identity DataTax Id to data base cross reference

INFO - InformationThe purpose of the INFO system was

originally to provide general informationabout all systems at TRS. Later,commands were added which

consolidates all TRS information for agiven member id number.


SUMMARYBusiness Functions : ActiveCareSource : CustomIT Contact : John YagerOwner : Bob JordanLanguages : vb.netDatabases : SQL SVRPlatforms : ServerMiddleware : ..?Comments : Standalone application. Tracks insurance claim appeals.

Member

Appeal

Claim

Active Care Appeals (ACAD)Information related to active care appeals.

DBMS : SQL Server 2005Associated Applications : ACAD

Access Tools : Visual Basic 6Data Exchange : N/A



Authorization


Shared Services

ACAD - ActiveCare AppealsThis database is used by TRS-ActiveCare to track appeals made by

members who are appealing decisions made by Blue Cross/Blue Shieldregarding their coverage. The types of appeals that are tracked are asfollows: Medical, Drug, Eligibility/Enrollment, HIPAA, and Other. Thedatabase has the following choices as reasons why Blue Cross denied

the member’s claim or coverage: Plan Design, Plan Exclusion,Precertification failure, Eligibility/Enrollment, Preexisting condition,

Nonmedical necessity, COBRA, and Other. A single record can containone or more TRS Actions, which are comprised of TRS action

(Administrative, Appeal Committee, Appeal Hearing, TRS AppealConference, and Other), the date the action took place, and comments

about the action. The TRS Executive Director has the final say in anappeal if it is denied and the member requests that the ED review the

case. The database tracks the date of the Executive Director decision,the date the letter about the decision was postmarked, and their

comments about the decision.

Logging / Audit %

Integration %



SUMMARYBusiness Functions : Benefit AccountingSource : CustomIT Contact : Wayne Fries/Doug Marshall/Jed MonroeOwner : Art Mata/Margie HortonLanguages : NaturalDatabases : ADABASPlatforms : MainframeMiddleware : TIBCOComments : ..?

Annuitant

Benefit Payment

Benefit Withholding

_

_

_

Annuity PayrollRepository for all data representing annuities paid to retired

members and other annuitants.DBMS : ADABAS 8.1.3, VSAM

Associated Applications :ALTP,ANPA,BENE,BULL,DCLM,DROP,HEIN,PADR,RETP,RTTS,OPIN

Access Tools : Natural 4.2.3Data Exchange : Texas Department of Human Services, Employees Retirement

System of Texas, Texas Comptroller of Public AccountsProduction Date : 1987


ProfileService : GUI and

Workflow

DJDCService : Report

Distribution


Shared Services

ANPA - Annuity PayrollThe Annuity Payroll System supports the administration of TRS

annuities. It adds annuitants from the Retirements System, and hasannuitants added or updated by the Claims System. The Annuity

Payroll System processes monthly benefit payments for allqualifying annuitants, withholding applicable amounts for federaltax withholding, insurance deductions, and association dues. The

system tracks all transactions and issues annual 1099R statementsand other supporting documentation and forms as requested.


Business Rules %


SUMMARYBusiness Functions : Benefit Accounting/ProcessingSource : CustomIT Contact : Greg SpeerOwner : Art Mata/Liz OliphintLanguages : NaturalDatabases : ADABASPlatforms : MainframeMiddleware : ..?Comments : ..?

Payee

Annuitant

_

Alternative Payee Data

ALTP - Alternate PayeeThe purpose of the ALTP system is to

automate ongoing payments, which arepayments deducted from the benefits ofTRS Members or the ongoing benefit to

their beneficiaries. Examples arerollovers, child support payments

Annuity Payroll

SUMMARYBusiness Functions : Benefit ProcessingSource : CustomIT Contact : Ron McGrathOwner : Liz OliphintLanguages : NaturalDatabases : ADABASPlatforms : MainframeMiddleware : ..?Comments : ..?

Member

Member AccountService time, Health

insurance eligibility, Salary,Years of service, Start

dates, District

Eligible Service

Disability

ERS Service

Retirement EstimatesThe pending retirement

estimate is based onexisting data. Other

"What if" estimates arealso stored.

RetirementsAll data necessary for calulating retirement and disability

benefits for a member.DBMS : ADABAS 8.1.3, VSAMAssociated Applications : RET*




Uses the files but not theprocess

ProfileService : GUI and

Workflow

DJDCService : Report

Distribution

ReportsProdService : Report

Distribution

Shared Services

Acronym - 415B SubsystemHandles annuity payments larger than the federal threshold.

415B - 415B SubsystemHandles annuity payments larger than the federal threshold.

RETP - RetirementsInformation needed to transition a member from active service toretirement. Existing salary, service, demographic, and beneficiary

information is transferred from the Member Records database.Contains additional processing and tracking information that is

entered and maintained through on-line applications. Asubmodule handles disability processing for members retiring on

dsiability.

Retirement


Logging / Audit %

Integration %


SUMMARYBusiness Functions : Benefit ProcessingSource : CustomIT Contact : Robert RamirezOwner : Liz OliphintLanguages : NaturalDatabases : ADABASPlatforms : MainframeMiddleware : ..?Comments : ..?

Member

Refund

_

RefundsInformation needed to refund contributions to amember who is terminating service with TRS.

Existing contribution and demographicinformation is transferred from the Member

Records database. Contains additionalprocessing and tracking information that is

entered and maintained through on-lineapplications.

DBMS : ADABAS 8.1.3Associated Applications : REFM



REFM - RefundsMember refunds are created when employment hasbeen terminated and required documents have beenreceived by TRS. Refunded amounts are depositedamounts posted on the MEMR file from employmentdate to termination date which get sent back to the

former employee.


Logging / Audit %

Business Rules %

Integration %



SUMMARYBusiness Functions : Benefit Accounting/ProcessingSource : CustomIT Contact : Ivan LidakerOwner : Margir Horton/Art Mata/Liz OliphintLanguages : NaturalDatabases : ADABASPlatforms : MainframeMiddleware : ..?Comments : ..?

Member

Service Entitlement

_

SSBB DataInformation related to member purchaseof special services such as withdrawn,

military, out-of-state, etc. Includes billingand purchase agreement information.

DBMS : ADABAS 8.1.3, DB2 9Associated Applications : SSBB

Access Tools : Natural 4.2.3Data Exchange : Texas Comptroller of Public Accounts


SSBB - Special Service Buy-Back

The Special Service Buy-back applicationallows the purchase of previously withdrawn

TRS service, the purchase of previous militaryservice, and the purchase of qualified out-of-

state service.

Miscellaneous


SUMMARYBusiness Functions : ..?Source : ..?IT Contact : ..?Owner : ..?Languages : Visual Basic .netDatabases : DB2Platforms : ..?Middleware : EntireXComments : ..?

Department

Budget Line Item

Fund

_

Expense Category

Enterprise Data Base

TBRS - Budget RequestUsed by TRS management and accounting staff for the

purpose of viewing, editing, and submitting theirdepartment's budget for upcoming fiscal years.


SUMMARYBusiness Functions : Benefit ProcessingSource : CustomIT Contact : Linda BrownOwner : Liz OliphintLanguages : NaturalDatabases : DB2Platforms : MainframeMiddleware : ..?Comments : This is another view of theClaims Benficiary files. It has beensporadically maintained ans is one of thesources of data quality issues.

Annuity Beneficiary

Annuitant

_

Beneficiary MasterData

Pension beneficiaries (lumpsum or monthly)

DBMS : Adabase

BENE - BenficiaryThis system is used to add andmaintain beneficiary information

for annuitants both living anddeceased.


SUMMARYBusiness Functions : BenefitProcessingSource : CustomIT Contact : Kim WebbOwner : Liz OliphintLanguages : NaturalDatabases : VSAMPlatforms : MainframeMiddleware : ..?Comments : ..?

MEMB - MemberBenefits

DescriptionUsed tomaintain “Black Book”

information and printrequests for service

billing. There is a dataentry screen for adding

and maintaininginformation on districts

such as: ineligible salarypayments, salary

applications, career ladderpayments, etc.

SUMMARYBusiness Functions : Benefit ProcessingSource : CustomIT Contact : Java DudesOwner : Craig NicholasLanguages : JAVA /NaturalDatabases : DB2/ADABASPlatforms : Sun Application Server/Web ApplicationMiddleware : ..?Comments : ..?

_

_

_

TRS Rapid InformationExchange (SchoolCalendar) (TRIX)

School district reporting entitiescalendar year information

DBMS : DB2 LUW 9Associated Applications : TRIX

Access Tools : JAVA2Data Exchange : N/A


TRIX - TRS RapidInformation exchange

Web-based school district reporting entitiescalendar year information

Shared Services


SUMMARYBusiness Functions : Benefit Accounting/Processing/CARESource : CustomIT Contact : Linda BrownOwner : Art Mata/Liz Oliphint/Margie Horton/FrankDilorenzoLanguages : NaturalDatabases : SequentialPlatforms : MainframeMiddleware : ..?Comments : ..?

Bulletin

Bulletin Data

BULL - Bulletin BoardMessage system for pertinentinformation pertaining to active

members and annuitants (keyed off oftaxID). This can be a general messagerelating to an alternate payee, healthinsurance, or an “Owes TRS” bulletin.


SUMMARYBusiness Functions : InvestmentsSource : CustomIT Contact : JAVA dudesOwner : Howard Goldman, Margie HortonLanguages : JAVADatabases : DB2Platforms : Sun Application Server/WebApplicationMiddleware : ..?Comments : ..?

_

_

_

TRS Email System(TRSU)

TRS employees email the TRSUpdate and general email to

reporting entities and the TRSNews to members signed up

through MEAC.DBMS : DB2 LUW 9

Associated Applications : TRSUAccess Tools : JAVA2Data Exchange : N/A


TRSU - TRS EmailSystem

TRS employees email the TRSUpdate and general email to

reporting entities and the TRS Newsto members signed up through

MEAC.

RE - ReportingEntities

1300 reporting entitiesincluding school districts,

charter schools and highereducation institutions.

From : RETo : TRAQS

Membership InformationFrequency : Ad hoc

From : TRSUTo : RE

Informational Emailmessages

From : RETo : TRAQS

Payroll contribution dataand SSBB deductions

Frequency : Monthly

From : TRAQSTo : MEMR

Membership Information


Verfied contribution data

TINS - ControllerController's office.

uitse

he3,

onnPA

EAc

icerk

From : PADR

To : TINS

USAS - Uniform Statewide Accounting System

From : BEVOVouchers (mostly vendors

and operating paymentrequests)

To : USASVouchers (mostly vendors

and operating paymentrequests)

From : USASTo : GLAS

Payment confirmations andcash liquidation

transactionsTechnology : ftp processed by

AP1200Frequency : Daily

AETNA - AETNAHealth Insurer for members

From : AETNATo : HEIN

Membership confirmationinformation

Technology : Excel SpreadsheetFrequency : Bi-Annual

Used to check eligibility recordsconsistency

From : HEINTo : AETNA

Eligibility changesFrequency : Weekly

Business Rules %

SUMMARYBusiness Functions : Member ServicesSource : CustomIT Contact : JAVA dudesOwner : Liz OliphintLanguages : JAVADatabases : DB2Platforms : Sun Application Server/Web ApplicationMiddleware : ..?Comments : This is a member web site that does not requireauthentication and signon.

Request

_

_

Online Self ServiceApplications

(OSSA)Web-based Retirement Calculators

DBMS : DB2 LUW 9Associated Applications : OSSAAccess Tools : JAVA2, Natural


OSSA - Online Self ServiceApplications

Web-based Retirement Calculators, RequestWithdrawn Service Bill, Request Retirement

Estimate

Member Records

SUMMARYBusiness Functions : Benefit AccountingSource : CustomIT Contact : ..?Owner : Kimm Webb, Doug MarshalLanguages : Cobol, NaturalDatabases : VSAM, DB2Platforms : MainframeMiddleware : ..?Comments : ..?

Annuitant

Annuitant Work Hours

_

EAR Data

EAR - Employment AfterRetirement

Employment after retirement processingof report details as submitted by reporting

entities. This information is utilized toensure compliance with applicable lawsand rules regarding employment after

retirement.

From : BEVOTo : TBRS

Departmental budget andactuals

Technology : BatchFrequency : Annual (Feb)

From : TBRSTo : BEVO

Departmental budget andactuals

Technology : ManualFrequency : Annual

TBRS creates Excel spreadsheetbudgets. When approved, this

spreadsheet is then entered backinto BEVO.

From : BEVOTo : GLAS

Payments summary, e.g,payroll cash receipts and

manually entered paymentsTechnology : BatchFrequency : Daily

From : EBExcess benefits data 415B

Frequency : Monthly

To : USPSExcess benefits data 415B

Frequency : Monthly

USPS - State Payroll System

pa

udd

Da

Wrut

e

Se

d S

syha

From : USPSPay details for TRS

employees.Frequency : Monthly/Daily

In future, details of work hours will beincluded to calculate impact oneligibility of leave without pay.

To : TRSPPay details for TRS

employees.Frequency : Monthly/Daily

In future, details of work hours will beincluded to calculate impact oneligibility of leave without pay.

From : USPS415B Payments. Highcontribution retirement

deposits.Frequency : Monthly

To : EB415B Payments. Highcontribution retirement

deposits.Frequency : Monthly

From : USPSTRS employee data.

Address, budgeted salary.Technology : ftpFrequency : Daily

To : HRTRS employee data.

Address, budgeted salary.Technology : ftpFrequency : Daily

fofofe

et

From : TRSPPay data entries for each

department (budgetactuals)

Technology : Batch File

To : BEVOPay data entries for each

department (budgetactuals)

Technology : Batch File

rt

up

From : GLASVoucher document

numbers

To : REFMVoucher document

numbers

From : DCLMTo : GLAS

Voucher documentnumbers

m : Teach

From : GLASVoucher document

numbers

To : ANPAVoucher document

numbers

From : GLASTo : BEVO

Voucher documentnumbers

LB - Controller's LockBox Application

From : LBTo : GLAS

Lock Box payments. Usedto confirm paymentpostings in GLAS.

Technology : BatchFrequency : Daily

From : USASVendor / Employee 1099s.These are recomputed by

BEVO.

To : BEVOVendor / Employee 1099s.These are recomputed by

BEVO.

IRS - Internal Revenue Service

Systtes

O

From : BEVORecomputed 1099s

To : IRSRecomputed 1099s

SB - State St Bank

From : GLASTo : SB

Investment summary info topost in journalling file

Frequency : 3 entries per month

IRS - InternalRevenue Service

From : ANPATo : IRS

1099s

n

n/

m

Ne

ee

e

R

From : REFM1099s

To : IRS1099s

G

nsa

in

As

E

AStio

From : REFMTermination transactions

(Savings to retired)Frequency : Daily

To : USASTermination transactions

(Savings to retired)Frequency : Daily

DSHS - Texas DSHS

From : DSHSTo : DCLM

Deaths

From : TRAQSTo : RE

Membership InformationInvalid RecordsFrequency : Ad hoc

From : RETo : TRAQS

Employment AfterRetirement Report. Workhours required to check

eligibility.Frequency : Monthly

From : RETo : TRAQS

Miscellaneous informationrequired from reporting

entities in order to identifyinvalid payments.

Frequency : Monthly

From : TRAQSTo : RE

Invalid Employment afterretirement records

Frequency : Monthly

TXNET -Controller's application

From : TXNETTo : TRAQSPayment deposit

confirmationsFrequency : Daily

From : TRAQSPending subledger

transactions

To : GLASPending subledger

transactions

From : MEMRTo : LGRS

Archived member data andledger information

Frequency : Annual


SUMMARYBusiness Functions : Benefit AccountingSource : CustomIT Contact : Kim WebbOwner : Margie HortonLanguages : NaturalDatabases : VSAMPlatforms : MainframeMiddleware : ..?Comments : ..?

Life InsuranceBeneficiary

In case of death whilsstill a member.

Beneficiary Calculation

Appeal

Member

Child Support

Spousal Support

Payee

Member Account

Member Contract

Member RecordsArchived previous year member account information.

DBMS : ADABAS 8.1.3, VSAMAssociated Applications : Member Records



LGRS - Member RecordsArchived member account information

From : MEMRTo : RETP

Member recordsFrequency : Daily

Copy is persisted in the retirmentsystme for termination processing,

e.g., paid military time, last salaries,out-of-state time, DOB, service

years.

From : RETPTo : MEMR

Request to terminateFrequency : Daily

From : RETPTo : GLAS

Termination transactions(Active savings to

retirement reserve)

From : MEMRTo : GLAS

Termination transactions(Active savings to

retirement reserve)

From : MEMRTo : REFM

Member recordsFrequency : Daily

Copy is persisted in the retirmentsystme for termination processing

From : REFMTo : MEMR

Request to terminateFrequency : Daily

From : SSBBTo : MEMR

Confirmed account credits

From : MEMRTo : SSBB

Memeber name and DOB

From : TRAQSTo : SSBB

SSDTechnology : BatchFrequency : Daily


SUMMARYBusiness Functions : ActiveCareSource : CustomIT Contact : John YagerOwner : Bob JordanLanguages : vb.netDatabases : SQL SVRPlatforms : ServerMiddleware : Crystal ReportsComments : Stand alone application. Tracks only changes to coverage inital andongoing eligability and membership is tracked elsewhere.


Authorization


Shared Services

Member

Medical Insurance Plan

Plan Option

Plan Changes

_

_

Acive Care Exceptions

ACED - ActiveCare ExceptionsThis database is used by TRS Active-Care to track enrollment exceptionsby school district employees. The types of requests that are handled are:

Administrative Action, Add Dependent(s), Annual Enrollment, AddEnrollee, Change Effective Date, COBRA Enrollment, Credit/Funding,

COBRA Plan Change, COBRA Reinstatement, COBRA Extension,Decline Coverage, Drop Dependent(s), Drop Enrollee, Initial Enrollment,Not Applicable to ActiveCare, Plan Change, Plan Change, and SpecialEnrollment. The requests are processed and a decision is made. The

types of decisions are: Approved, Allow 15 Days to Close, Denied, Dropis no further restrictions, Forwarded to other TRS Department, Pending,Referred to Appeals Committee, Resolved Issue, Request Withdrawn,

Special Future Enrollment, and Split Decision.

GL Tra

P llFrom : DCLM

TerminationsThis is a direct update by DCLM; not

strictly an interface

To : HEINTerminations

This is a direct update by DCLM; notstrictly an interface

Caremark - CaremarkPharmacy insuranceFrom : HEIN

To : CaremarkEligibility changes

RDS - Retiree DrugSubsidy

Texas program thatprovides a subsisdy for

some drug costs.

From : HEINTo : RDS

Eligible members

From : RDSTo : HEIN

Eligibility confirmations

ining Func

Fund

D ptuals

P yh receipts

Rec

From : HEINVouchers and refunds

Frequency : Weekly

To : GLASVouchers and refunds

Frequency : Weekly

BCBS - Blue CrossBlue Shield of Texas

From : BCBSTo : HEIN

Members moving thierhealth care over to

retirement

FroFrom : HEIN

Insurance contributiondeductions

To : ANPAInsurance contribution

deductions

From : TRAQSInsurance billing payments

To : GLASInsurance billing payments

From : ONACPayment info. Gross/netpay and IRS deductions

To : ANPAPayment info. Gross/netpay and IRS deductions

? - ?Private supplier of death notifications

From : DCLMTo : ?

Member listings

From : ?To : DCLM

Deaths

From : MEMRTo : GLAS

DROP AdjustmentFrequency : Annual

From : RETPTo : ANPA

Retirement DataThis is the calculated retirement data.

Annuity, PLSO (Paritla Lump SumOption), Years of Service, Start Date,

etc.

From : TRAQSTo : ONAC

Limited memberdemographics

Long name, birth date

From : MEMRMember and annuitants

recordsIncludes annual statemnts, 1099 data

To : ONACMember and annuitants

recordsIncludes annual statemnts, 1099 data

From : REFMTo : ONAC

Member records

From : SSBBTo : ONAC

TRUS

r s

Fil

of tMR

f

t

From : RETP

To : ONAC

rate

QS

y of

S

hlwo

alc

ns

t ::

ngDD

esuc

uaoy

From : RETPMember tax withholding

Entered online

To : ONACMember tax withholding

Entered online

From : DROPTo : ONAC

Member records

From : ONACIs this the batch auto issue

process? In that case itshould go through Imaging.

To : PADRIs this the batch auto issue

process? In that case itshould go through Imaging.

This systembers w

ccount.

R cords

From : TRSPActuarial data

Frequency : Fiscal year endAggregated data. Check this?

To : TRAQSActuarial data

Frequency : Fiscal year endAggregated data. Check this?

From : TRSPTo : MEMR

Dump of TRS employeeend of year statement data.

Frequency : Annual

From : TRAQSTo : RE

Active Care billing dataFrequency : Monthly

/M

S

e

?

cofofof

F

From : SSBBBuy Back Contributions

Frequency : MonthlyVolume : 1-2 per month

To : GLASBuy Back Contributions

Frequency : MonthlyVolume : 1-2 per month

From : DROPTo : MEMR

End of year money transferFrequency : Annual

ging

unti

ervvrvr

From : REFMRequest for information oftermination refund data

Frequency : On Request

To : TRAQSRequest for information oftermination refund data



District deposit balancesFrequency : Daily


SSB PaymentsFrequency : Daily

From : INFOTo : TRSP

Technology : EntireX

y : Daily

the 500i ality of the T

d ta

From : TRAQSRetiree hours

Technology : Direct UpdateFrequency : Every 30 minutes

Volume : One dataset per entity permonth

To : EARRetiree hours

Technology : Direct UpdateFrequency : Every 30 minutes

Volume : One dataset per entity permonth

SUMMARYBusiness Functions : ISSSource : CustomIT Contact : Charlie VahrenkampOwner : T.A. MillerLanguages : NaturalDatabases : DB2Platforms : MainframeMiddleware : ..?Comments : Part manual process and part batchjob.

Ex-Spouse Court Orders

_

_

800.005 Data

804.005 - 804.005 PayeeFile managed in the Temporary Work Filelocation that tracks ex-spouses who areallocated a portion of a retiree's pension.

Not considered an application.

Rem

emmb

ngpp

be

From : 804.005804.005 Payee payment

amountsFrequency : Monthly

To : GLAS804.005 Payee payment

amountsFrequency : Monthly

From : ALTPTo : ANPA

Alternate payee voucherdata

From : PADRAlternate payee voucher

data

To : ANPAAlternate payee voucher

data

Reporting

Member Counsellingand Services

FUNCTIONFunctional Group : RetirementPrimary Users : ..?# Of Users : ..?Business Functions : ISSCriticality : ..?Primary Data Subjects : ..?

Member

_

ERS Data

ERST - ERS ServiceERS sends a file to verify a subset of

retirees with TRS and to bill TRS

FUNCTIONFunctional Group : ServicesPrimary Users : ..?# Of Users : 50-60Business Functions : ISSCriticality : ..?Primary Data Subjects : ..?

Report Distrifbution Rules

Report Templates

_

ReportManagement Data

DJDC - ReportDistribution

System designed to allow thespecification and distribution of

reports.


FUNCTIONFunctional Group : MiscellaneousPrimary Users : ..?# Of Users : ..?Business Functions : Internal AuditCriticality : ..?Primary Data Subjects : ..?

Audit Recommendation

_

_

Audit RecommendationTracking (ARTS)

Information related to tracing audit findingsand recommendations.

DBMS : SQL Server 2005Associated Applications : ARTSAccess Tools : Visual Basic 6


ARTS - Audit RecommendationsTracking System

The ARTS system is used by Internal Audit staff totrack their findings and recommendations.

Quarterly reports are generated by the databaseand used for presentation to the TRS Board of

Trustees audit committee. These consist ofImplemented, Non-Implemented – Less than 1

Year, and Non-Implemented – More than 1 Yearreports. Other reports are used for Internal Audit’s

use. Some of these include: ImplementationDelayed, Divisions/Departments, and Audit Type.

Inbound Correspondence %

FUNCTIONFunctional Group : MiscellaneousPrimary Users : ..?# Of Users : 7Business Functions : ..?Criticality : ..?Primary Data Subjects : ..?

Job Posting

Job Applicant

Interview

Department

HR DataEnterprise database tables.The IDEN (security)and COM (addresses, emails and phones) are

shared. Most tables are job-related and used byJPATH only.

DBMS : Db2Associated Applications : JPATH


JPATH - Job Posting/ApplicantTracking

Description


FUNCTIONFunctional Group : ERPPrimary Users : ..?# Of Users : ..?Business Functions : ISSCriticality : ..?Primary Data Subjects : ..?

Employee

Department

_

Database

HR - HR DataWarehouse


FUNCTIONFunctional Group : MiscellaneousPrimary Users : ..?# Of Users : 220Business Functions : Special ProjectsCriticality : ..?Primary Data Subjects : ..?

_

_

_

403B Exchange403B InformationDBMS : DB2 LUW 9

Associated Applications : 403BAccess Tools : JAVA2

Data Exchange : 403B CompaniesProduction Date : 2007

FOTB - 403(b) WebApplication

Web-based application showing403(b) products and fees.


FUNCTIONFunctional Group : MemberServicesPrimary Users : ..?# Of Users : 250000Business Functions : ..?Criticality : ..?Primary Data Subjects : ..?

Integration %FUNCTIONFunctional Group : Member ServicesPrimary Users : ..?# Of Users : ..?Business Functions : ..?Criticality : ..?Primary Data Subjects : ..?

EL - Enterprise LoadInterface application that synchronises the mainframe member data with the ONAC data. This is a two-way feed

Member

_

_

Member Account

_

_

Member Contact

_

_

_

_

_

Online Personal Access (OAPI)Active members account information.

DBMS : DB2 LUW 9Associated Applications : OAPI

Access Tools : JAVA2, Natural 4.2.3Data Exchange : N/A


ONAC - My TRSOnline Access for members, retirees, and beneficiaries receiving a continuing annuity. Includes access to 1099-Rs, addresses, annualstatements, withholding information, and other information. Allows members to register for presentations, subscribe to TRS-Connect

publications and submit requests for retirement, replacement packets and service purchase bills.

From : IVRTo : TCCCall log data

SUMMARYBusiness Functions : Annuity PayrollSource : ..?IT Contact : ..?Owner : ..?Languages : NaturalDatabases : AdabasePlatforms : MainframeMiddleware : ..?Comments : This function is part of the TRSP applicationas it is performed by the same depertment but is entirelyindependent of the TRS payroll function.

Annuitant

415B Payment

415B Data

EB - Excess BenefitsProcess monthly 415B payments forannuitants who recive more than the

federally restricted pension amount. Thedifference is made up by the state.

bbe

be

Da

From : TCCIn-house appointments with

potential retireesTechnology : Entire X


To : RETPIn-house appointments with

potential retireesTechnology : Entire X


From : PADRTo : BENE

Beneficiary addressesThis is initiated via a profile interface.


Report

ReportManagement

Data

RPROD - Reports ProdSystem for writing reports as PDFs

to shared folders.


Form Templates

Form Templates

LifeCycle - LCAdobe replacement product for

Exixior for creating custom forms.

From : ALTPBeneficiary addresses

To : EBBeneficiary addresses

From : BENETo : EB

Beneficiary data

From : RETPTo : ANPA

Annuity Corrections, e.g., toadjust for late bonuses or

mis-entered data.Technology : MANUALLY Entered

From : RETPTo : ALTP

trustee rollover withholdinginfo

%

From : 415BAs new hire

To : USPSAs new hire

From : 415BTo : ANPA

415B calculation data

OP - D

ABASms : M

Miid

From : SSBBEligible service years.

Annual salary

To : RETPEligible service years.

Annual salary

From : DCLMBeneficiary data

To : RETPBeneficiary data

From : EBTo : ANPA

415B Payments

From : HRTo : JPATHemployees and

departmentsRemaining Functionality %

SUMMARYPrimary Users : ..?Technologies : ..?Business Functions : ..?Comments : ..?Ownership : ..?ITGroup : ..?Owner : ..?Languages : 0Databases : ..?Platforms : ..?Middleware : ..?


Shared Services

SRD - State ReportDistribution

Receives reports generated by thestate systems and distributes them

within TRS

From : USASState-produced reports

To : SRDState-produced reports

From : USPSState-produced reports

To : SRDState-produced reports

From : TRIXTo : MEMB

School calendar data

From : ONACTo : TCC

Online member requestactivity

Technology : ODBC

From : ONACTo : TCC

Field AppointmentsTechnology : ODBC

SUMMARYPrimary Users : ..?Technologies : ..?Business Functions : ..?Comments : Dashboard is a series of Profile screens with the addition of an IVRinterface and a call logging data base.Ownership : ..?ITGroup : ..?Owner : ..?Languages : 0Databases : SQL ServerPlatforms : WindowsMiddleware : EntireX


Batch FormsService : Outbound

Correspondence

ImagingService : Imaging

Shared Services

Member Calls

_

_

Call Data

TCC - DashboardProvides information from various applications to the telephone counselorsand personnel in TRS-Card. Logging data is stored for reporting purposes.

a

A

Tdep

y :

AAsces

asn D

FM

From : TRAQSDistrict info


To : TCCDistrict info


From : SSBBService years purchased

with rollover money.

To : DCLMService years purchased

with rollover money.

RecR

Usesproce

SDistribu

e

ALTPof th

menbenefit

From : PADRPayee addressses

To : DCLMPayee addressses

From : MEMRTo : DCLM

Active member deaths

To : GL

From : ANPARetiree Deaths

To : DCLMRetiree Deaths

M

Muency

the rsing,

Retireretir

e

From : ALTPAlternate payee rollover

addresses

To : DCLMAlternate payee rollover

addresses

From : DCLMTo : TRAQSReported deaths


FUNCTIONFunctional Group : Shared ServicesPrimary Users : ..?# Of Users : ..?Business Functions : ..?Criticality : ..?Primary Data Subjects : ..?

TablesMiscelaneous tables

TBMA - TableMaintenance

Miscellaneous tables used for codes,security access lists and totals.



TablesMiscellaneous tables

TABL - Table LookupMore static lookup tables, e.g.,

holidays. Currently deprecated withno new tables in favor of TBMA.

Remaining Functionality %FUNCTIONFunctional Group : Shared ServicesPrimary Users : ..?# Of Users : ..?Business Functions : ..?Criticality : ..?Primary Data Subjects : ..?

TablesMiscellaneous tables

PARM - ParametersPARM is a small system that sets up

and displays records that othersystems use for such things as record

counters, run times, flags, and soforth. The system itself does no

processing of any kind, produces noreports, and runs no batch programs.



Work RequestsQueued work requests

TW - Temp WorkAn adabase file used to queue work

requests. Effectively a workflowqueuing mechanism.

Integration %

SUMMARYBusiness Functions : ..?Source : CustomIT Contact : Yalin, Greg Noll, LissetteOwner : ..?Languages : VBDatabases : see commentPlatforms : see commentMiddleware : ..?Comments : ..?


ImagingService : Workflow and Inbound

Correspondence

Shared Services

TRSP - ProfilesConsolidated internal membershipinformation for internal use. This

application provides a common interaceto multiple applications and is organizedaround particular functions, e.g., Benefit

Profile. Typically invokes CICScommands using an emulator and

displays the green screen in a window,but also uses screen scraping to both

display and update CICS screens alongwith the imaging system and other non-

mainframe applications.

Security %


User IDsAuthentication data

IDEN - IdentificationSign-on

Maintains agency employee IDS

Security %


Authorization DataMainframe command authorizations

SAAS - SecurityApplication Access

SystemNatural command access by user id.



Access Data ?Does this application maintain access

history?

MOA - SecurityReporting

Security reporting

FM

To : MEM

includedithout pay

rt details as stilized to

%

Databasess : A

t ct : Charlie Va

amounts

i

From : TRAQSLimited address updates

To : PADRLimited address updates

oe

NaturalDatab

surance c

From : RETPPending retirements

To : TargetPending retirements

From : PADRPayee demographics

To : HEINPayee demographics

ingd

pote

Rat

oili

d p

A

Me

nt

AAsAc

Tood

A

From : TRSUMember activity emails

To : ONACMember activity emails

Servrvr ic

From : SourceRequested refund and

termination dataFrequency : On Request

To : TargetRequested refund and

termination dataFrequency : On Request

FUNCTIONFunctional Group : ServicesPrimary Users : ..?# Of Users : ..?Criticality : ..?Primary Data Subjects : ..?

Form Templates

Form Templates

Batch Forms - BF


Payment depositconfirmations from TXNETafter validation by TRQS

Frequency : Daily

From : TRSPTo : MEMR

Balances of terminatedemployees.

Security Nomenclature Mashup / CommonInterface Inbound Correspondence / Workflow Reporting Outbound

Correspondence

Key

Data Subject

DatabaseName

Service NameService : Type ofservice (security,

Nomenclature, etc.)

Shared Services

SUMMARYPrimary Users : ..?Technologies : ..?Business Functions : ..?Comments : ..?Ownership : ..?ITGroup : ..?Owner : ..?Languages : 0Databases : ..?Platforms : ..?Middleware : ..?

Acronym -Application Name

Description

From : SourceTo : Target

Short DescriptionTechnology : ..?Frequency : ..?

Volume : ..?Style : ..?

Long DescriptionNotes

The total shaded arearepresents the relative

complexity of theapplication as a whole. Thecolored bands represent anestimate of the proportion of

the code dedicated toproviding each type of

functionality.

INTERFACE COLORSFor split interfaces connectors, the color of each end is the color

of the source and target applications as an aid to finding theother end of the connector.

For direct (non-split) interfaces, it is the color of the sourceapplication.

From : Source To : Target

The line color of theapplication is associatedwith its Functional group.

Acronym - ExternalSource Name

An external source or targetfor data coming into or

going out of the enterprise

In Development


Security %Workflow %

Inbound Correspondence %Logging / Audit %Business Rules %

Integration %Reporting / Analytics %


Based on the legacyenterprise data model

Based on the currententerprise data model

From : OPINTo : AETNA

Enrolled members anddeductions

From : AETNATo : OPIN

Confirmed payments

Annuitant

Benefit Payment

Benefit Withholding

Integration %


FUNCTIONFunctional Group : MiscellaneousPrimary Users : ..?Criticality : ..?Primary Data Subjects : ..?

IDEN / SAASService : Security


Shared Services

Property Item

Property Data

INVY - PropertyInventory

Tracks TRS equipement andfurniture. Slated for replacement by

a spreadsheet system.

From : INVYTo : SPA

Inventory itemsTechnology : Manual transfer

SPA - SPAState Controller Application

From : SPATo : INVY

Inventory itemsTechnology : Manual transfer

FUNCTIONFunctional Group : Health InsurancePrimary Users : ..?# Of Users : ..?Criticality : ..?Primary Data Subjects : ..?

IDEN / SAASService : Security


Shared Services

Member

LT Care Enrollment

LT Care Payment

Property Data

OPIN - OptionalInsurance

For retired members with optionallong term care insurance

MS Dynamics

CRM

HP Clarety LOBBatch, Web Services, Self -Service

IBMFilenet

ECM

KoFaxDocument Scanning

HPExStream

Correspondence Generation &

Delivery

Credit Card Processing

Service

External Systems• Government• HealthCare• Financial• Others

Monitoring &

Logging

TRS - ESB

Contact Center Siemens

OpenScape

Monitoring &

Logging

Scan Services

IVR Services

ID Service

Common Information

Model

ECM Services

CRM Services

Mail Services

VPN, SFTP VPN, SFTP, email

Active Directory

& Security

ID

Security Service

Corticon BRE

WhosOnMessaging/Chat

Prebuilt Integration

IIOP Adapter

AdapterAdapter Adapter

Polling Service

MFT Adapter

Clarety Services

Doc Creation

Doc Retrieve

Saved Reports

Customer Data LOB Data Communi

cationsCC

PaymentsOther

Services

MFT Adapter

File Adapter

Common File

Service

Secure File Storage

System

Prebuilt (Screen Pop)Integration

PrebuiltIntegration

Silanis Electronic Signature

Adapter

eSign Services

Applications / SystemsCommon Services

Application ServicesESB Components


Service based integration

Index:

Two Main Drivers1. Modernize our technology to better serve and provide value to our members 2. The legacy system was a “high risk” for TRS

TEAM QUALITY ASSURANCE

Continuous quality rigor built into the processContinuous Agile Testing

Multiple Regression CyclesUser Acceptance Testing

AutomationIncreased automation to retest previously developed features

5

TEAM QUALITY ASSURANCE

Quality is high priorityHolding ourselves to a higher standard

6

Vendor Trend TRS In-House Trend

7

KEY STATUS UPDATESINCREMENTAL RELEASE PROGRESSAchievements

• 12/14/2020 – HILOB Pre-UAT (preparation for User Acceptance Testing) began• 01/04/2020 – Payment Address and Web Self Service Releases completed fifth

development sprints• 01/21/2021 – HILOB UAT Entry Quality Gate / HILOB User Acceptance Testing

began• 01/25/2021 – HILOB Cutover Dry Run #1

Key Goals Upcoming

• 03/01/2021 – Payment Address Release & Web Self Service Business Process Regression Testing Round 1

• 03/20/2021 – HILOB Cutover Dry Run #2

Issues/Risks

• Resource constraints on key technical teams

TEAM – WHERE WE ARE NOW

8

TASK DUE DATE ACTUAL STATUS26 HILOB User Acceptance Testing (UAT) begins 1/21/21 1/19/21 Completed27 HILOB Dry Run #1 (Go-Live test) begins 1/25/21 1/25/21 Completed28 HILOB Security Testing begins 2/08/21 2/08/21 Completed29 Planned Production Release (Pension) (To be rescheduled

after business closures due to extreme weather)2/21/21 Pending

30 Payment Address & Web Self Service Releases End to End Business Process Testing Round #1

3/01/21 Pending

31 HILOB Dry Run #2 (Go-Live test) begins 3/20/21 Pending32 HILOB User Acceptance Testing (UAT) ends / UAT Exit

Quality Gate4/09/21 Pending

33 HILOB Go-Live (tentative) 4/19/21 Pending

2728

293126 32

01/01/21 03/01/21 05/01/21

30 33

TEAM EXECUTION

Improvements with HILOB

• Modern interface and navigation• Expedited processes for maintaining and

tracking sensitive populations• Automated reporting for population tracking• Automate process for surviving spouses• Built-in logic to avoid errors and discrepancies

that happen in current legacy system• Will be integrated with Pension Line of Business

system, reducing data entry errors and maintaining a single member profile

9

MEMBER BUSINESS VALUE

Additional Detailed Information

10

APPENDIX

TEAM PRODUCT LINE ROADMAP

STATUS

On time

TEAM PRODUCT LINE ROADMAP – 12 MONTH VIEW

BUDGET

TEAM EXECUTION

14

Completed

TASK DUE DATE ACTUAL STATUS22 Begin End to End Regression testing for Health Insurance

Line of Business System (HILOB)11/02/20 11/02/20 Completed

23 Post Procurement for Performance Test Vendor for MyTRS/WSS (Pension Line of Business System)

11/20/20 11/20/20 Completed

24 Planned Production Release 12/13/20 12/13/20 Completed

25 HILOB Quality Gate – UAT Entry 1/20/21 1/15/21 Completed26 HILOB User Acceptance Testing (UAT) Begins 1/21/21 1/19/21 Completed27 HILOB Dry Run #1 (Go-Live test) begins 1/25/21 1/25/21 Completed

01/01/2112/01/20 02/01/21

2324

262522

11/01/2027

TEAM EXECUTION

15

TASK DUE DATE ACTUAL STATUS28 HILOB Security Testing begins 2/08/21 2/08/21 Completed29 Planned Production Release - (To be rescheduled after

business closures due to extreme weather)2/21/21 Pending

30 Payment Address & Web Self Service Releases End to End Business Process Testing Round #1

3/01/21 Pending

31 HILOB Dry Run #2 (Go-Live test) begins 3/20/21 Pending32 HILOB User Acceptance Testing (UAT) ends / UAT Exit

Quality Gate4/9/21 Pending

33 HILOB Go-Live (tentative) 4/19/21 Pending

04/01/2103/01/20 05/01/21

30 323128

02/01/21

Current

3329

TEAM EXECUTION

16

Next

TASK DUE DATE ACTUAL STATUS34 Payment Address Release Code Complete 5/11/21 In Progress

35 Payment Address Release Final Regression Testing begins 6/23/21 Not Started36 Retirement Application Processing & Death Application

Processing (RAP/DTH) Release Development begins6/23/21 Not Started

07/01/2106/01/20 08/01/21

35

3634

05/01/21

17

Historical Architecture

18

New Architecture

MS Dynamics

CRM

HP Clarety LOBBatch, Web Services, Self -Service

IBMFilenet

ECM

KoFaxDocument Scanning

HPExStream

Correspondence Generation &

Delivery

Credit Card Processing

Service

External Systems• Government• HealthCare• Financial• Others

Monitoring &

Logging

TRS - ESB

Contact Center Siemens

OpenScape

Monitoring &

Logging

Scan Services

IVR Services

ID Service

Common Information

Model

ECM Services

CRM Services

Mail Services

VPN, SFTP VPN, SFTP, email

Active Directory

& Security

ID

Security Service

Corticon BRE

WhosOnMessaging/Chat


IIOP Adapter

AdapterAdapter Adapter

Polling Service

MFT Adapter

Clarety Services

Doc Creation

Doc Retrieve

Saved Reports

Customer Data LOB Data Communi

cationsCC

PaymentsOther

Services

MFT Adapter

File Adapter

Common File

Service

Secure File Storage

System

Prebuilt (Screen Pop)Integration

PrebuiltIntegration

Silanis Electronic Signature

Adapter

eSign Services

Applications / SystemsCommon Services

Application ServicesESB Components


Service based integration

Index:

TAB 13

Board IPA Update

February 2021

Agenda

Page 2

01 Reintroduction

03 Activity to Date

02 Board Expectations

04 Program Summary

IPA Team and Objectives

Page 3

Mark GoldblattProject Lead Analyst

Hassan MirzaProject Analyst

Richard (Doug) HoltAccount Executive

Jonathan ScofieldEngagement Lead

Gather, analyze, and provide recommendations thatimprove program governance

Advise on significant program activities and leadingpractices in key areas of the program

Assess program effectiveness and efficiency so TRScontinues to serve the expanding and ever-changing needsof your stakeholders

You have prioritized the importance of an independentprogram assessment partner to contribute the firmfoundation needed to proceed with greater confidence

Expectations for April Board Meeting

10 February 2021Page 4

Quick Wins andRecommendations

Provide immediateimprovement

actions and longrun enhancementrecommendations

Opportunitiesand Risks

Identify State of theprogram

and categorizeTEAM programimprovement

opportunities andrisks

Wall of Fame

Celebrate ourpeople, teams andaccomplishments

Summary of IPAwork to date

Provide cumulativesummary of workcompleted over

previous quarter

Capture and trackTEAM programtrends and keyperformance

metrics

Trends andKPIs

Activity to Date

Page 5

Summary and Highlights:• Kicked off program 2/3/21• Conducted executive

retrospective• Began developing partnerships• Introductions and invites to

SteerCo meetings, daily standups, demos, and retrospectives

• Onboarding:• System access• Information gathering

• Next up:• Attending/shadowing

SteerCo meetings, dailystand ups, demos, andretrospectives

Executive Retrospective Responses – sentiment on Programefforts to date

Collaboration

Good support fromexecutive leadership

Shared vision of thefuture and end goal

More collaborationbetween business & IT

Collaboration

Responsiveness

Relationship between ITand Business

Pivoting to changingneeds

Addressing businessneeds/priorities

Addressing blockers

Able to respond quicklyto demands

Schedule

Meeting Milestonedeadlines

Making progress

Meeting milestones

What has gone well?Relationship

Stronger relationshipwith IPA

Collaboration betweenTRS and IPA

IPA partnership forsuccess/not just looking

for gotchas

Focusing on the rightthings with IPA effort

Program Lifecycle

Resource Managementacross portfolio

Advanced notice ofissues

Controlling intakepipeline for other

projects

Integration

Managing day-to-daybusiness with

implementation

What can we improve?

TEAM Program Summary


Summary

Quick Wins

Wall of Fame Risks

Trends and KPI’s

85%Program Governance

55%Product Management

25%Technical Solution

Trends and KPIs


Facet Area of Review Q1 Q2 Q3 Q4

Program Governance

Decision framework

Organizational change management (OCM)

Performance management

Governance effectiveness

Benefits design and realization

Product Management

Quality management Example

Risk management

Communications management

Technical Solution

Methodology and development

Testing and validation

Cutover and support

Sustainability modelEx

ampl

eRa

tings

*As the program advances we will bring in additional areas of review and rank them.

Questions

TAB 14

Brian GuthrieAndrew RothBarbie PearsonDon GreenFebruary 25, 2021

PENSION BENEFITS REPORTTeacher Retirement System of Texas

Pension BenefitCustomer Service

3

Front Office FTEs

4

Sunset Recommendations and Survey Highlights

Sunset Recommendations

• Repair relationship with members by focusing on their needs. oDevelop a communication

and outreach plan to better help members and employers plan for retirement.

oMake improved efforts to return contributions to inactive members before funds are forfeit.

oAdopt a member engagement policy to increase transparency on key decisions.

Member Survey

• Members want:o more availability of staff to

answer calls and respond to emails;

o inform about MyTRS and enhancements to MyTRS (chat, balance access, pension estimates, personalized information, simplified retirement process, mobile app);

o refine language in the Benefits Handbook relating to estimating benefits, decision to retire, and healthcare benefits; and

o provide retirement planning education and education on saving for retirement outside TRS.

Employer Survey

• Employers want:o TRS to respond to

questions within 48 hours;

o responses by email; and

o less direction to appropriate resources on the web.

5

What is customer service?

TCCProcessing

Employer Reporting

Training, QA & WFM

Health Insurance

1,682,708

1.26 1.25 1.25 1.33

1.12 1.22

1.49

-

0.50

1.00

1.50

2.00

2.50

3.00

1,000,000

1,100,000

1,200,000

1,300,000

1,400,000

1,500,000

1,600,000

1,700,000

1,800,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Member & FTE Trends

Membership Benefit Services FTE's/10K Members

Peer System4.2 Customer Service FTEs

per 10K Members

As of 1/2021

6

Key Activities & Customer Service FTEs

2010 vs. 2020

Retirement 2020Estimates: 94,412; 88% increase Retirements: 19,770; 18% increase

Death Claims 2020Claims: 18,470; 21% increase

Member Calls 2020Received: 603,663; 25% increase

Employer ReportingReports: 92,535; 470% increase

583,896

962,072

0

100

200

300

400

500

600

100,000

300,000

500,000

700,000

900,000

1,100,000

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

FTEs

Key A

ctivit

ies

Fiscal Years

Key Activities FTEs

7

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021Projection

FY2022Projection

Retirement Estimates 59,754 72,250 66,065 68,246 64,409 62,905 69,526 68,765 74,631 91,213 94,412 99,133 104,089Retirements 16,751 21,109 21,742 21,397 20,901 20,132 21,807 20,426 19,385 23,820 19,770 20,759 21,796

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Retirements Retirement Estimates

Retirement Processes

8


FY2022Projection

Death Claims 14,693 15,148 15,616 16,099 16,597 16,608 18,220 18,263 16,798 18,925 18,470 19,394 20,363

-

5,000

10,000

15,000

20,000

25,000

Death Claims

Death Claims

9


FY2022Projection

Member Calls Received 481,868 553,634 560,166 577,620 513,065 501,593 550,147 597,055 621,641 656,489 603,663 689,313 723,779Member Calls Answered 457,364 496,210 494,281 504,998 500,668 486,572 506,362 550,865 424,436 575,651 510,816 536,357 563,175Member Calls Abandoned 24,504 57,775 69,076 65,495 12,397 15,021 43,785 46,190 197,205 80,838 92,847 97,489 102,364

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Member Calls Received Member Calls Answered Member Calls Abandoned

Telephone Counseling

10

Employer Reporting Customer Service

FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020Employer Calls 13,753 20,321 12,099 12,693Employer eMails 182,109 280,583 273,848 267,408Employer Reports Completed 16,065 16,293 15,789 15,875 151,442 109,017 92,535

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

Employer Reports Completed Employer eMails Employer Calls

• Community/Junior Colleges• Senior Universities• Medical/Dental Universities

Higher Education

• ISDs• Regional Service Centers• Charter Schools

Non-Higher Education

11

Customer Service FTE Request

TeamsCurrent

FTE2021 FTE

Need Total

Claims Team 16 10 26

Current Benefit Services FTEs: 248

Total FTE increase needed: 10Total Benefit Services FTEs with increase: 258

Benefit Services percentage increase in FTEs: 4%

Recruiting, Hiring and Training PlanProject hiring 10 FTEs in May 2021 to address steadily increasing workload in the Benefit Processing area.

1-3 Months

Recruit & Hire

3 Months 6-8 Months

Train

8-12 Months

Results

12

Member & Employer Experience

Goals for Increasing FTEs❖ Provide world class service to members and employers❖ Deliver services that exceed expectations❖ Continually improve member and employer experience

Assumptions❖ Membership will continue to increase❖ Members prefer face-to-face & telephone service; written

communication and email correspondence❖ Employers prefer email correspondence, timely responses, and

in-person training❖ TRS pension benefits are complex

Strategies❖ Maintain competitive salaries and reward excellent performance❖ Develop strong retention policy❖ Develop & maintain knowledge-based system❖ Deliver year-round training to enhance pension and health care

knowledge❖ Expand quality assurance reviews to back-office processing key

activities❖ Understand member and employer information delivery

preferences

Opportunity❖ Improve service level

o Answer 80 percent of calls in three minuteso Prepare and mail 90 percent of retirement estimates within 31 dayso Claims acknowledged within 14 days of notificationo Claims payments made within 31 days of receipt of all paperworko 90 percent of regular reports completed by the end of each quarter

❖ Open more channels of communication including chat and screen sharing

❖ Ability to cross-train staff to use their skills in critical areas as needed

13

Overtime

$0

$200,000

$400,000

$600,000

$800,000

2015 2016 2017 2018 2019 2020 2021

Benefit Processing

$0

$20,000

$40,000

$60,000

2015 2016 2017 2018 2019 2020 2021

Benefit Accounting

2019 2020

Benefit Accounting

2016 2017 2018

Benefit Accounting

$20,000

2015$0

• Current overtime costs equivalent to the cost of 11 FTEs

• It is our goal to reduce reliance on the use of overtime as we onboard additional staff resources

• Current overtime equivalent to the cost of 1 FTE

14

Fiscal Impact

• FY 2021 Fiscal Impact

• Projects hiring 10 FTEs in May 2021 to address steadily increasing workload in the Benefit Processing area

• Cost estimate is $228K, includes salaries and benefits that can be funded within available budget

• FY 2022 Resource Planning

• Plan to provide an analysis at the July Board meeting on future Benefit Services workload and staffing need projections for FY22 as part of the annual budget development process

15

Historical Trend

145166 164 165 167

182 191 192 192 189 195 204 206

248

0

100

200

300

2000 2005 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Benefit Services FTE

Actual FTE

204 206

248

2019 2020 2021

189 195 204

2017 2018

204

20162015

Actual FTE

• 4% average increase over the last 20 year

TAB 15

Frank WilliamsFebruary 25, 2021

INFORMATION SECURITY REPORT


2

OVERVIEW

Agenda• Holistic Look at 2020

• Building Blocks to Protect TRS:

• Business Fundamentals

• IT Fundamentals

• Security Program Fundamentals

• Advanced Security Programs

• Emerging Technology

3

HOLISTIC LOOK: 2020 – A TRANSFORMATIONAL YEAR IN CYBERSECURITY

4

BUILDING BLOCKS: BUSINESS FUNDAMENTALS

Digital Transformation initiatives frequently outpace the ability to provide effective security. These digital ambitions dramatically expand our cyber attack surface. Regulations and oversight are also constantly evolving.

The top 2 factors that help determine the priority ofTRS’s cybersecurity spending are:

1) Implementing security best practices2) Compliance mandates

5

LEGISLATIVE AND REGULATORY BURDENS

6

BUILDING BLOCKS: IT FUNDAMENTALS

Formalized management programs of these IT fundamentals can slow progress, but they must be engrained in the evolving TRS culture to create a strong defense against various threats.

Formalized management programs of these IT Formalized management programs of these IT fundamentals can slow progress, but they must be fundamentals can slow progress, but they must be fundamentals can slow progress, but they must be engrained in the evolving TRS culture to create a engrained in the evolving TRS culture to create a strong defense against various threats. strong defense against various threats.

Formalized management programs of these IT fundamentals can slow progress, but they must be engrained in the evolving TRS culture to create a strong defense against various threats.

Formalized management programs of these IT Formalized management programs of these IT fundamentals can slow progress, but they must be fundamentals can slow progress, but they must be fundamentals can slow progress, but they must be engrained in the evolving TRS culture to create a strong defense against various threats.

fundamentals can slow progress, but they must be

strong defense against various threats.

INTERNAL PROJECTS: IMPROVEMENTS TO INFRASTRUCTURE

7

8

BUILDING BLOCKS: SECURITY PROGRAM FUNDAMENTALS

Effective threat management is about understanding your attack surface and gaps. TRS Information Security operations continue to evolve beyond traditional security mechanisms, and our program fundamentals are constantly adapting to the changes coming out of digital transformation.

9

TRS-WIDE TRAINING

10

BUILDING BLOCKS: ADVANCED SECURITY PROGRAMS

Beyond the fundamentals,TRS cybersecurity staff provide highly adaptive services to support the speed of enterprise expansion amongst a full stack of new growth opportunities.

11

ENTERPRISE GROWTH

12

BUILDING BLOCKS: EMERGING TECHNOLOGY

These emerging technologies can be used for cyber defense to fully harness the power of installed security technology that is often siloed in nature.

These technologies are alsoempowering the future of cyber crime.

13

OPERATIONAL MODEL: BUILDING BLOCKS TO PROTECT TRS

TAB 18

Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company

Nothing in this document should be construed as legal or investment advice. Please consult with your independent professional for any such advice. To protect the confidential and proprietary information included in this material, it may not be disclosed or provided to any third parties without the approval of Aon.

Teacher Retirement Sy stem of Tex asInvestment Education Presentation

Proprietary & Confidential Investment advice and consulting services provided by Aon Investments USA Inc., an Aon Company. 2

Summary: Own or Loan

This education presentation focuses on the primary decision of investors when looking to allocate cash

– Should they purchase assets ( O wn) or loan their cash to someone else (Loan)

The presentation evaluates the market forces that impact the value of the assets investors Own as well as the assets investors have decided to Loan

The presentation also reviews the rational for one investor to both Own and Loan (i.e. the benefits of diversification)

The presentation concludes with a review of some investment jargon, including;– Standard Deviation, P/E Ratio, and Value/Growth Investing


Investment Decision

Asset owners looking to invest have two primary options

– O wn Assets – Purchase Return Seeking Assets

Equity (public and private)Real EstateInfrastructureNatural Resources

– Loan Assets – Purchase BondsU.S. TreasuriesCorporate Bonds

Own Loan


O wning Assets


Considerations of Asset Ownership

Investors can make money through – D ividends – A portion of the profits of an asset paid

back to the asset owner on a regular reoccurring basis

– Capital Appreciation – An increase in the value of an asset due to its increased efficiency, desirability, demand, or scarcity

i.e. increased demand for mobile services resulting from COVID

Investors can lose money through – Capital D epreciation – A decrease in value of an

Asset due to its decreased desirability, demand, or scarcity – Typically unique scenarios (above)

– B ankruptcy – Inability to meet the promised obligation to debt holders

i.e. interest on debt is increasing more quickly than profitability of the asset

Black Monday10/87-10/87

Asian & Russia Crisis10/97-10/88

Dot Com Bubble3/00 –10/02

COVID Pandemic

2/20 – 3/20Financial

Crisis9/08 – 3/09

-10%

-5%

0%

5%

10%

15%

20%

25%

Rolling 5-year Return of the MSCI ACWI IMI

Total Return Price Return Dividend Return


Factors Affecting Asset Owners

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

0.0%1.0%2.0%3.0%4.0%5.0%6.0%

Rolling 10-year Real GDP and Inflation

Real GDP Inflation

01234567

05

10152025303540

Historical MSCI ACWI P/E Ratio and Federal Funds Rate(Jun 1994 - Dec 2020)

ACWI PE Ratio Fed Funds Rate

Broadly speaking, assets appreciate in the long run due to; – Economic Growth – The world will grow and become

more efficient over time– Inflation – The purchasing power of a dollar will

decrease over time

Asset prices bounce around in the short term due to; – Investor Ex pectations – Changes in investor outlook

for future growth (P/E Ratio)– Interest Rates – Rising short term (Fed controlled)

interest rates makes cash more desirable (higher return) and borrowing less desirable (more expensive)


Loaning Assets


Considerations of Loaning Assets (Bonds)

Loans (Bonds) can make money through – Coupon P ay ments – Required payment agreed upon

in advance for loaning money– Capital Appreciation – Due to falling interest rates

The coupon payment is now higher than what the market is offering, so people will pay more for it

Bonds can lose money through – D efault – Inability to make required interest payment

Treasury positions are unlikely to ever default– Capital D epreciation – Due to rising interest rates

An investor can purchase a new bond offering a higher yield, so they are not willing to pay full price for an older bond with a lower yield

-5.0%

0.0%

5.0%

10.0%

15.0%

Rolling 10-year Return of Blmbg. Barc. U.S. Long Treasury

Price Return Coupon Return Total Return


0

20

40

60

80

100

0%

5%

10%

15%

20%

10-year Treasury Bond Yield(1/1/1962 - 12/31/2020)

Factors Affecting Asset Loaners:Interest Rates – Why do they Change

The Federal Reserve Can buy bonds using cash (increase supply of cash &

decrease rates), or sell bonds receiving cash (decrease supply of cash & increase rates)

– The Fed sets short term interest rate (yield on cash)– The Fed can impact longer duration interest rates by

buying or selling longer duration bonds

Inflation An increase in inflation (or expected inflation) can drive

interest rates higher– Investors demand a higher return to offset the reduced

purchasing power

Supply and D emand Like the price of any other asset, interest rates are a

reflection of a supply/demand equilibrium – Demand for Treasury bonds tend to increase during

market volatility, which drives rates lower


0

20

40

60

80

100

0100200300400500600700

Jun-

89Ju

n-90

Jun-

91Ju

n-92

Jun-

93Ju

n-94

Jun-

95Ju

n-96

Jun-

97Ju

n-98

Jun-

99Ju

n-00

Jun-

01Ju

n-02

Jun-

03Ju

n-04

Jun-

05Ju

n-06

Jun-

07Ju

n-08

Jun-

09Ju

n-10

Jun-

11Ju

n-12

Jun-

13Ju

n-14

Jun-

15Ju

n-16

Jun-

17Ju

n-18

Jun-

19Ju

n-20

bps

(Monthly)

U. S. IG Corporate Credit: O AS over Treasuries (bps) through D ecember 2 02 0

Source: Barclays

Factors Affecting Asset Loaners: The Yield Curve & Credit Spreads

Bonds that have credit risk require an additional return to compensate for the additional risk

– Credit spreads are the additional yield over risk free bonds (Treasuries), to compensate for this risk

Changes in spread impact the value of a bond in the same way as changes in interest rates

– Rising spreads decreases the value of a bond, and declining spreads increase the value

The Yield Curve is currently and typically upward sloping– This is to compensate for the reduced liquidity of longer

duration bonds– Represents an expectation that rates will rise in the

future

0.0%

0.4%

0.8%

1.2%

1.6%

2.0%

0 1 3 5 7 10 20 30

Yiel

d

Maturity (Years)

U.S. Treasury Yield Curve

2/8/2021


B enefit of O wning and Loaning


Why do Investors Own and Loan? (Hypothetical) The table to the right shows a simplistic

and hypothetical portfolio of 2 assets– Each asset returns 8%– An investor can achieve higher returns

at a reduced level of volatility through diversification

– Removing the correlation benefit or choosing to not rebalance eliminates this benefit

This is why investors diversify their portfolio and set rebalancing ranges

Y ear 1 Y ear 2 Cumulative

Negative Correlation & Annual RebalanceInvestment “A” 20% -10% 8%Investment “B” -10% 20% 8%50/50 Portfolio 5% 5% 10.3%

Correlation = 1 (i.e. no diversification benefit)Investment “A” 20% -10% 8%Investment “B” 20% -10% 8%50/50 Portfolio 20% -10% 8%

Remove RebalancingInvestment “A” 20% -10% 8%Investment “B” -10% 20% 8%50/50 Portfolio 20% -10% 8%


Why do Investors Own and Loan? (Actual)

-1-0.8-0.6-0.4-0.2

00.20.40.60.8

1

Rolling 5-Year Correlation of Global Equities and Long Treasuries

5-Year Risk and Return

Over the time period show the average correlation has been ~ 0

As show the correlation has fluctuated– Since the late 90s the correlation has been negative– From 1977 to 1998 the correlation was positive

Over the trailing 5-Year period an investor was able to achieve dramatically better returns by diversifying between stocks and bonds


TRS Implications


Asset Allocation – The Most Important Decision

Long-term asset allocation (which asset classes to use and in what percent) explains more than 90% of the difference in returns between institutional funds

Selecting investments that are appropriately diversified, and consider the liability of the investment program is paramount

Source: Brinson, Singer and Beebower, “Determinants of Portfolio Performance II: An Update” 1991

Long-Term Target Asset

Allocation, 91%

Short-Term Allocation

Changes, 2%

Active Security Selection

(Managers), 5%

Unexplained, 2%


TRS Asset Allocation Process

The TRS asset allocation process was robust

The process evaluated projected funded ratio, cash flow, liquidity, and economic cost across many economic scenarios

The process works to evaluate if the program is maximizing the benefits available from diversification


TRS Diversification Framework


Investment Jargon


What is Standard Deviation?

Standard deviation is a measure of how widely an investment return can differ from its expected, or average, result

– Or has differed in the past

Suppose we have an investment with an expected return of 10% per year and a standard deviation of 20%

– We would expect the return to be between -10% and + 30% in 2 of 3 years

– We would expect the return to be between -30% and + 50% in 19 of 20 years

Distribution of Returns

-60 -50 -40 -30 -20 -10 0 10 20 30 40 50 60 70 80

1 Standard Deviation (2/3)

2 Standard Deviations (19/20)

Expected Return = 10% Standard D eviation=

Risk=

V ariance=

V olatility


What is PE Ratio?

The P/E ratio is a reflection of the current value of a company relative to its current earnings– A higher P/E ratio means that investors are paying more for the same level of earnings, which

would imply that investors expect higher expected earnings growth into the future (or why would they pay more?)

The chart to the right shows that higher growth industries tend to have higher P/E ratios

-60

-20

20

60

100

140

MSCI ACWI P/E Ratio by SectorAs of December 31, 2019

Trailing P/E Forward P/E


What is a Value Stock? What is a Growth Stock?

V alue Stocks – Stocks that are expected to outperform because they are trading below what they are really worth

– Represent ~ half of the equity market with financial ratios that exhibit “Value”

The table above outlines the difference in common ratios for the market, value, and growth

– Have outperformed over very long periods of time– Have underperformed over recent periods

0%

5000%

10000%

15000%

20000%

Cumulative Returns of the S&P 500 Growth and S&P 500 Value Indices(Jan 1975 - Dec 2020)

S&P 500 Growth S&P 500 Value

Growth Stocks – Stocks that are expected to outperform in the future because of their potential to grow quickly– Represent ~ half of the equity market with financial

ratios that exhibit “Growth”– Have significantly outperformed over recent periods

0.55

75.8%

3.0% 7.6%0.15

24.1%

0.8%2.7%

0.37

53.2%

1.9% 5.0%

0.000.100.200.300.400.500.600.700.80

Book toPrice

Sales toPrice

DividendYield

Free CashFlow Yield

9.7

6.0

15.914.2

12.410.1

0.0

5.0

10.0

15.0

20.0

EarningsGrowth

SalesGrowth

Value Ratios Growth Ratios


Appendix – Glossary of Selected Investment Terms


Appendix— Glossary of Selected Investment TermsActive Returns: Measures the average excess return of the portfolio relative to a benchmark. The excess return is annualized. The higher the active return, the better the portfolio’s performance versus the benchmark.

Alpha: Measures nonsystematic return, or the return that cannot be attributed to the market. Thus, it can be thought of as how the manager performed if the market had no gain or loss. A positive alpha implies that the manager has added value to the return of the portfolio over that of the market.

B eta: Measures the risk level of the manager. Beta measures the systematic risk, or the return that is attributable to market movements. A beta equal to one indicates a risk level equivalent to the market. Higher betas are associated with higher risk levels, while lower betas are associated with lower risk levels.

Common Stock: Securities that show ownership in a corporation. Stockholders share profits or losses in the corporation through dividends and changes in the stock’s market value.

Consumer P rice Index (CP I): A measure of the average change in prices over time of a fixed group of goods and services. The CPI is published by the Bureau of Labor Statistics in the Department of Labor and is released monthly. It is widely used as a cost-of-living benchmark.

Correlation: Statistical measure of the degree to which the movements of two variables are related, ranging from 1 to -1. For asset allocation purposes, mixing two assets with a correlation less than 1 results in a benefit of diversification because the two assets do not behave in exactly the same manner.

Coupon: The interest on a debt security, e.g., a bond, the issuer promises to pay the holder until maturity, expressed as an annual percentage of the security’s face value. For example, a bond with a 10% coupon will pay $ 10 per $ 100 of the face amount per year.

Credit Risk: The risk that an issuer may default on its securities. Relative degrees of credit risk are delineated by the rating agencies.

Currency Risk: Fluctuations in exchange rates can add to, or detract from, investment returns.

D ebt: General name for bonds, notes, mortgages, and other forms of paper evidencing amounts owed and payable on specified dates or on demand.

D erivatives: Securities, such as futures, options, or swaps, that derive their value from another security.

D iversification: Reducing risk by investing in more than one type of security, such as stocks, bonds, and money market instruments.

D ividend: A cash or other distribution to preferred or common stockholders.

D ividend Y ield: Annual percentage of return earned by an investor on a common or preferred stock. The yield is determined by dividing the amount of the annual dividends by the current market price.

D uration: Measure of the price change of a bond to a change in its yield to maturity. It summarizes, in a single number, the characteristics that cause bond prices to change in response to a change in interest rates. The price of a bond with a duration of three years will rise by approximately 3% for each 1% decrease in its yield to maturity. That price will decrease by 3% for each 1% increase in the bond’s yield. Price changes for two different bonds can be compared using duration. A bond with a duration of six years will exhibit twice the percentage price change of a bond with a three year duration. The actual calculation of a bond’s duration is somewhat complicated, but the idea behind the calculation is straight forward. The first step is to measure the time interval until receipt for each cash flow (coupon and principal payments) from a bond. The second step is to compute a weighted average of these time intervals. Each time interval is measured by the present value of that cash flow. This weighted average is the duration of the bond measured in years.

Efficient Market: A securities market in which prices accurately reflect all available knowledge and adjust immediately to any new information. Academicians who subscribe to the efficient market hypothesis maintain that a professional money manager can only achieve consistently superior investment results by taking greater than market risk.

Emerging Market: A financial market of a developing country, usually a small market with a short operating history.

Eq uity : Ownership or proprietary rights and interests in a company. Synonymous with common stock.

ERISA: The Employee Retirement Income Security Act of 1974 (ERISA) protects the retirement assets of Americans, by implementing rules that qualified plans must follow to ensure that plan fiduciaries do not misuse plan assets.

Ex cess Risk: A measure of the standard deviation of a portfolio’s performance relative to the risk free return, represented by 90-Day T-Bills. Ex ecution Costs: Total execution costs (the cost of buying and selling stocks) have three components: (1) the actual dollars paid to the broker in commissions, (2) the market impact (i.e., the impact that a manager’s trade has on the market price for the stock, this varies with the size of the trade and the skill of the trader), and (3) the opportunity cost (positive or negative) that is the result of not executing the trade instantaneously

Ex pense Ratio: A figure that represents the percentage of fund assets paid for operating expenses and management fees, including 12b-1 fees, administrative fees, and all other asset-based costs incurred by the fund, except for brokerage costs and sales charges.

Fiduciary : An individual, corporation, or association holding assets for a beneficiary. The fiduciary is charged with the responsibility of investing the money wisely for the beneficiary’s benefit.


Appendix— Glossary of Selected Investment TermsInterest-Rate Risk: When interest rates rise, the market value of fixed-income securities (such as bonds) declines. Similarly, when interest rates decline, the market value of fixed-income securities increases.

Investment Grade: Bonds rated in the top four rating categories (AAA, AA, A, BBB) are commonly known as investment grade securities.

Junk B ond: A bond with a rating of BB or less. Also know as “non-investment grade”.

Liq uidity : The ability to convert an investment into cash promptly with a minimum risk of principal.

Market Risk: Fluctuations in prices for the market as a whole or in specific sectors, brought on by outside forces. It is part of a security’s risk that is common to all securities of the same general class (stocks, bonds) and thus cannot be eliminated through diversification.

Maturity : The date on which a loan, bond, mortgage or other debt security becomes due and is to be paid off.

Modern P ortfolio Theory : The theoretical framework for designing investment portfolios based upon the risk and reward characteristics of the entire portfolio, which is held not to be equivalent to the aggregation of the individual securities of the portfolio. The major tenet of the theory holds that reward is directly related to risk, which can be divided into two basic parts: 1) systematic risk (portfolios' behavior as a function of the market' s behavior), and 2) unsystematic risk (portfolios' behavior attributable to selection of individual securities). Because un-systematic risk can be largely eliminated through diversification, the portfolio will be subject principally to systematic risk.

Mortgage-B acked Securities: Bonds which are a general obligation of the issuing institution, but are secured by a pool of mortgages.

Mutual Fund: An investment company that pools money of individuals and invests it into stocks, bonds and other securities under the guidance of a professional manager.

P assive Management: Buying and holding all (or most) of the stocks in an index (such as S&P 500 Index). There is no research done to select individual securities.

Fix ed Income: Securities/investments in which the income during ownership is fixed or constant. Generally refers to any type of bond investment.

Futures: Contracts to by or sell anything (a stock, a basket of stocks, commodities such as grain, gold, etc.) on a specified day in the future for a preset price. These contracts are traded on exchanges.

Government B onds: Bonds backed by the federal government, whether issued by the Treasury or one of the government agencies.

Growth Stock: Stock of a company which is growing earnings and/or revenue faster than its industry or the overall market and is expected to continue to show high levels of profit growth and P/E multiples. Such a company usually pays little or no dividends, preferring to use the income to finance further expansion. Generally, these stocks are contrasted with value stocks that trade at lower P/E multiples.

H edge Funds: A subset of alternative investments that incorporate all investment strategies run with an orientation to producing primarily absolute returns using largely marketable securities. These strategies typically include short-selling and often require the use of leverage. As a result, correlations with broader markets are expected to be modest to low.

H igh Y ield B ond: Debt issued by a company that is experiencing financial difficulty and may not be able to meet payments on its obligations. These securities carry a higher interest rate than other corporate bonds due to their higher risk.

Immuniz ation: A process for designing fixed income portfolios to obtain a target rate of return over a specified time period, within a narrow range, despite market conditions.

Index : A statistical yardstick composed of a basket of securities with a set of characteristics. An example of this would include the " S&P 500“, which is an index of 500 stocks.

Inflation: A general rise in prices, usually measured by changes in prices of major indices, such as the Consumer Price Index.

Information Ratio: The Information Ratio to a manager series vs. a benchmark series is the is the quotient of the annualized excess return and the annualized standard deviation of excess return. This is one estimate of how much value is being added through active management decisions.

Interest Rates: The percentage paid as a fee for the use of money, expressed as an annual percentage of the principal amount. The rate is influenced by a variety of factors including economic growth, inflation, supply/demand and international factors.


Appendix— Glossary of Selected Investment TermsP rice/ Earnings Ratio This is the weighted average of the price/earnings ratios of all stocks in a fund’s portfolio. The P/E ratio of a stock is obtained by dividing the current price of the stock by its trailing 12 months’ earnings per share.

P rice/ B ook Ratio: The ratio of a stock’s price to its book value per share. This number is used by securities analysts and money managers to judge whether a stock is undervalued or overvalued. A stock selling at a high price/book ratio, such as 3 or higher, may represent a popular growth stock with minimal book value. A stock selling below its book value may attract value-oriented investors who think that the company’s management may undertake steps, such as selling assets or restructuring the company, to unlock the hidden value on the company’s balance sheet.

P rice/ Earnings Ratio: The ratio of a company’s stock price to its earnings per share. Price/Earnings ratio is a common measure of the relative valuation of a stock.

P rivate Eq uity : Equity capital invested in a private company.

Rate of Return: The yield obtainable on a security based on its purchase price or its current market price. This may be amortized yield to maturity on a bond or the current income return.

Return: The amount of money received annually from an investment, usually expressed as a percentage.

Risk: Uncertainty as to whether or not an investment choice will perform as expected, particularly due to factors beyond one’s control (in other words, the odds an investment will make or lose money.)

Risk Return Graph: This graph is used to compare the performance and risk (standard deviation) of the fund against the performance and risk of an appropriate benchmark for a specific period of time.

Risk/ Reward: The trade-off between preserving your investment and maximizing your profit. In general, the higher the return, the more likely you are to lose your initial investment. Lower risk usually results in less profit.

RO E (Return on Eq uity ): The amount, expressed as a percentage, earned on a company’s common stock investment for a given period. Return on equity tells commons stockholders how effectually their money is being employed.

R-Sq uared Statistic: A statistic that measures the reliability of alpha and beta in explaining the return of a manager as a linear function of the market. Higher R-squared values indicate more reliable alpha and beta statistics and are useful in assessing a manager’s investment style.

Sector: A particular group of stocks, usually found in one industry or a combination of industries, such as airline or railroad stocks.

Sharpe Ratio: This is a risk-adjusted measure calculated by using standard deviation and excess return to determine reward per unit of risk. In general, the higher the Sharpe Ratio, the better the fund’s historical risk-adjusted performance. The Sharpe ratio is calculated by dividing the fund’s annual excess return by the fund’s annualized standard deviation.

Spread: The yield or price differential between two different securities

Standard D eviation: A statistical gauge of risk which measures the spread of the difference of returns from their average. The more a portfolio’s returns vary from its average, the higher the standard deviation.

Stock: A certificate of ownership. A contract between the issuing corporation and the owner which gives the latter an interest in the management of the corporation the right to participate in its profits.

Total Return: The aggregate increase or decrease in the value of the portfolio resulting from the net appreciation or depreciation of the principal of the fund, plus or minus the net income or loss experienced by the fund during the period.

Tracking Error: The deviation of a dependent variable (i.e., an investment portfolio) with respect to a reference function (i.e., a benchmark.)

Treasuries: Negotiable debt obligations of the U.S. government, secured by its full faith and credit and issued at various schedules and maturities.

Trustee: A bank designated as the custodian of funds and official representative of bondholders to enforce their contract with the issuer.

Turnover: The rate at which securities within a portfolio are bought and sold.

Turnover Ratio: This is a measure of the fund’s trading activity that is calculated by taking the lesser of purchases or sales (excluding all securities with maturities of less than one year) and dividing by average monthly assets. The resulting percentage loosely represents the percentage of the portfolio’s holdings that have changed over the past year.

Universe: These are composites of managers that share a common investment style and provide a peer analysis of how the fund is performing relative to other investments in the same asset and style category.

Universe Up/ D own Capture: The up and down capture is a measure of how well a manager was able to replicate or improve on phases of positive benchmark returns, and how badly the manager was affected by phases of negative benchmark returns. To calculate the capture, we first form a new series from the manager and benchmark series by dropping all time periods where the benchmark return is zero or negative. The up capture is then the quotient of the annualized return of the resulting manager series, divided by the annualized return of the resulting benchmark series. The down capture is calculated analogously.

V alue Stock: A stock that is considered to be a good investment at a desirable price, based on fundamental analysis, such as its P/B and its P/E, among other criteria. Generally, these stocks are contrasted with growth stocks that trade at higher P/E multiples.

FootnoteInvestment advice and consulting services provided by Aon Investments USA Inc. 26

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This document is not intended to provide, and shall not be relied upon for, accounting, legal or tax advice. Any accounting, legal, or taxation position described in this presentation is a general statement and shall only be used as a guide. It does not constitute accounting, legal, and tax advice and is based on Aon Investments’ understanding of current laws and interpretation.

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© Aon plc 2020. All rights reserved.

TAB 19

CIO UP D ATE

Jase Auby, Chief Investment OfficerFebruary 2021

INVESTMENT MANAGEMENT DIVISION


2

CIO UpdateIMD at a Glance

Priorities Our People

Snapshot as of January 2021IMD FTEs 191

Shared-Services 15Contractors 19

Secondees 6

Activity Phase I Phase IIHired 30 16

Recruiting 2 3Pipeline 0 12

32 31

Key Dates and Upcoming Events

Event Location DatesCouncil of Institutional Investors (CII) Spring Conference

Virtual March 8-10, 2021

Strategic Partnership Network (SPN) Summits

Virtual May 27, 2021

• Total Trust. Ended 2020 calendar year at an all-time high inassets under management ($176.9B). 1-year return of 11.6%.

• Return to Office. Continue to monitor COVID-19 conditions in anticipation of next phase of the Return to Office program

• Emerging Managers. Virtually hosted the 2021 Emerging Manager Conference with over 2,600 attendees, including representation from 55 allocators

• Recruiting and Talent Management Activities

o Town Hall. Hosted annual Town Hall event virtually to emphasize IMD culture and collaboration including guest speaker TRS Trustee Nanette Sissney

o Announced winners of the Annual Excellence in Investing Award and Spotlight Award

o Recruiting. Resumed Build the Fleet hiring with a target of 8 new FTE fleet hires throughout the first quarter

o Internship Program. Completed recruiting process for the IMD Intern Class of 2021. Includes six interns in Public Markets and two interns in Investment Operations.

Market Update

4

Executive Summary

• The second half of 2020 was characterized by:

o Resurgence of COVID-19 infection rates and approval of multiple vaccines with better-than-expected efficacy

o Continued recovery and rally in global equity markets, led by the United States and Emerging Markets

o Accommodative global monetary policy stance while interest rates remained near record lows

o Strong initial rebound of global economic growth as other leading economic indicators remain mixed

o Political tensions within the United States and the election of a new presidential administration

• In the first half of 2021, markets are focused on:

o Widespread vaccination of population has potential to uplift economic growth and virus depressed sectors

o Global monetary policy to remain accommodative to recovery with suppressed worldwide interest rates

o Continued fiscal stimulus and government spending to add further momentum to economic recovery

o Inflation to remain subdued while unemployment begins to recover with new stimulus and potential growth

o New political leadership and policies in the US could add volatility to markets and international economy

5

2020 In ReviewOverview

• Pandemic• Over two million have died worldwide from COVID with 400,000 in the U.S.• While vaccine efficacy was better than expected, the rollout to the general population will likely take longer than planned

• Government Response• Congress provided $2 trillion and $900 billion in assistance to the unemployed and small businesses in March and December

2020, respectively. Additional $1.9 trillion is under consideration.• The Fed lowered the funds rate to zero and its balance sheet increased from $3.7 trillion to $6.7 trillion (including the

purchase of corporates)

• Economy• GDP fell -31% annually in 2Q 2020 before rebounding +33% in 3Q 2020. Advance estimates are for 4.0% in 4Q 2020 and -2.3%

for calendar year 2020• Continuing jobless claims jumped from 1.7 million in March to 25 million in May (currently 4.7 million). Unemployment rate

peaked at 14.8% in April (currently 6.7%).

• Markets• The S&P 500 advanced 18.4% in 2020, including a -34% decline from February highs, and recovery of 70.2% from March lows• Growth dominated Value (by 42%), the U.S. topped EAFE (by 11%), and Tech was the best performing sector (up 44%)• The top 5 names (AAPL, MSFT, AMZN, GOOGL, FB) returned 65% vs. 10% for the rest of the S&P 500

Source: Bloomberg, FRED, BEA

6

2020 In ReviewMarket Returns

Source: Bloomberg

-40%

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P 3

.0%

UK

ILB

3.6

%

JPY

4.9

%

UK

B.

5.1

%

Au

stra

lia B

. 5

.4%

Sou

th K

ore

an W

on

6.0

%

Ch

ina

Re

nm

inb

i 6

.3%

Jap

an E

q.

6.6

%

Bra

zil I

LB 6

.9%

Suga

r 6

.9%

Co

tto

n 7

.7%

Ital

y B

. 7

.9%

EUR

8.2

%

CH

F 8

.4%

AU

D 8

.8%

Au

stra

lia IL

B 8

.9%

Alu

min

um

9.4

%

Can

ada

B.

9.4

%

Wh

eat

9.6

%

US

B.

10

.0%

US

ILB

11

.0%

Euro

pe

ILB

11

.2%

Co

rn 1

2.7

%

Ind

ia E

q.

16

.8%

Nic

kel

18

.5%

USA

Eq

. 2

1.1

%

Go

ld 2

2.5

%

Co

pp

er 2

3.8

%

Ch

ina

Eq.

26

.7%

Taiw

an E

q.

26

.9%

Soyb

ean

32

.5%

Ko

rea

Eq.

34

.0%

Silv

er

43

.9%

Asset Class PerformanceDecember 31, 2019 - December 31, 2020 • Local • Percent (%)

Dev Equity EM Equity Bonds Commodities Currency Credit ILB

75% of assets had positive returns in calendar year 2020

• Top 5: Silver +44%, Korea Eq +36%, Soybeans +33%, Taiwan Eq +32%, China Eq +28%

• Bottom 5: Greek equities ‐33%, Brazilian Real ‐29%, WTI ‐28%, Russian Ruble ‐20%, Nat Gas ‐16%

US Equity

US Bonds

Oil

7

2020 In ReviewThe S&P 500’s historic drawdown

Source: Bloomberg

Dec 14: US Begins Vaccinations

Dec 21: US $900b Stimulus

3756

8

2020 In ReviewRemarkable drawdown and subsequent recovery

Source: Credit Suisse, S&P, Haver Analytics

The market peak to trough was short-lived… …and the rebound outpaced history

9

2020 In ReviewMarket leaders and laggards

Source: Bloomberg

US and Emerging Markets outperformed… …while US Growth continued its dominance

20%

18% 18%

12%

8%

5%

0%

5%

10%

15%

20%

25%

Russell 2000 S&P 500 EM EAFE - FarEast

EAFE+C EAFE -Europe

2020 Global Market Returns

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

US Value vs. US Growth Performance

MSCI US Value MSCI US Growth

43%

1%

10

0

5

10

15

20

25

30

1996 2000 2004 2008 2012 2016 2020

S&P 500 P/E Ratio

S&P 500 P/E

Equity and Bond Yields

Source: Bloomberg, FactsetNote: P/E Ratio = S&P 500 index price/forward annual earnings per share = 3756/$167.4 = 22.4x. Earnings Yield (E/P) = S&P 500 forward annual earnings per share/index price = $167.4/3756 = 4.5%

Average = 16.2x

-4%

-2%

0%

2%

4%

6%

8%

1996 2000 2004 2008 2012 2016 2020

Equity Premium (S&P 500 E/P Ratio – 10 Year UST Yield)

Average = 2.7%

3.6%

Overvalued

Undervalued

22.4x

4.5%

0.9%0%

2%

4%

6%

8%

10%

12%

1996 2000 2004 2008 2012 2016 2020

S&P 500 E/P Ratio

S&P 500 E/P 10-Yr UST Yield

Undervalued

Overvalued

Undervalued

Overvalued

11

Indicators show the US is in Early to Mid Cycle

Source: TRS IMD

US Cycle Conditions

• The US is currently between Early (8 signals on) and Mid (11 signals on) Cycle

Count of Signals On 8 11 4

Special Topic: Long-Term Investing

13

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1980 1985 1990 1995 2000 2005 2010 2015 2020

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Core CPI Core PCE Fed Target

Special Topic: Long-Term InvestingOverview

Source: US Bureau of Economic Analysis (BEA), Federal Reserve Economic Data (FRED), Goldman Sachs, BloombergNote: Inflation figures calculated year over year on a monthly basis, adjusted S&P 500 EPS calculated as twelve trailing months on a quarterly basis

Special Topics Update on Growth Special Topic

Update on Inflation Special Topic Update on Interest Rates Special Topic

As of 12/31

As of 11/30 As of 12/31

Topic Date

1 Recession September 20172 Growth February 20183 Inflation September 20184 Strategic Asset Allocation February 20195 Value September 20196 Diversification February 20207 Interest Rates September 20208 Long-Term Investing February 2021

0

40

80

120

160

200

240

400

1200

2000

2800

3600

4400

5200

S&P 500 Adjusted EPS (RHS)

S&P 500 Price (LHS)

2021E4300

2022E4600

12/313756

2021E$178

2022E$196

0.91%

US 10 Year Bond Yield

14

Special Topic: Long-Term InvestingWhy invest over the long-term?

Source: JPMorgan

“You have never lost money in stocks over any 20-year period.” – Jeremy Siegel, author of ‘Stocks for the Long Run’

1. Weather Volatility. Market corrections and drawdowns will happen

2. Stay Invested. Most investors cannot accurately time the markets

3. Diversification. Withstand various economic cycles and worldwide geopolitical conflicts

4. Hold Illiquid Assets. Long-term horizon allows for a higher allocation to illiquid assets

5. Avoid Emotional Biases. Short-term investing can allow feelings to dictate often poorly timed decisions

6. Power of Compounding. Reinvesting earnings and compounding can make an exponential difference over time

1. Weather Volatility

15

Special Topic: Long-Term Investing1. Weather Volatility. Volatility is normal and should not be a deterrent

Source JPMorgan, FactSet, S&PNote: As of December 31, 2020. Red dots indicate intra-year drops which refers to the largest market drop from a peak to a trough. Bars represent calendar year returns

16

Special Topic: Long-Term Investing1. Weather Volatility. Over the long-run, stocks have outperformed

Source: Fred, New York University (NYU), Bloomberg, Robert Shiller (Yale University)Note: Asset class returns represented as follows: Stocks (S&P 500 total return), Corporate Bonds (Moody’s Seasoned Baa), Government Bonds (10-Yr Treasury Bond), Treasury Bills (3-Month Treasury Bill), Inflation (CPI All Urban Consumers)

1,000

10,000

100,000

1,000,000

10,000,000

100,000,000

Stocks, Bonds and Bills Over TimeGrowth of $10,000 (1927-2020)

Compound Annual Return

Stocks 9.8%

Corporate Bonds 7.0%

Government Bonds 4.9%

Treasury Bills 3.3%

Inflation 3.0%

$59,286,815

$5,373,605

$892,090

$208,182

$151,315

17

Special Topic: Long-Term Investing2. Stay Invested. Staying invested matters, especially on the best days

Source: Bloomberg

$38,386

$17,586

$10,428

$6,692

$4,479 $3,075 $2,178

Fully Invested Missed 10 Best Days Missed 20 Best Days Missed 30 Best Days Missed 40 Best Days Missed 50 Best Days Missed 60 Best Days

S&P 500 Total Return ScenariosGrowth of $10,000 (January 2000-December 2020)

6.6% Annualized

Return

2.7%

0.2%

-1.9%-3.8%

-5.5%-7.0%

Since 2000… • Three of the S&P 500’s ten best days occurred in 2020

• All ten of the best days occurred in volatile and recessionary conditions (2008, 2009, 2020)

• On average, the 60 best days returned 4.9%

18

Special Topic: Long-Term Investing3. Diversification. Long-term value of diversification

Source Bridgewater

Since 1900, a diverse, equal-weight portfolio mix across five developed countries performed almost as well as the best performer

19

Special Topic: Long-Term Investing4. Hold Illiquid Assets. Long-term investing allows for a higher allocation to illiquid assets

Source: Morgan Stanley, State Street BankNote: Long-term expected returns calculated from Capital Markets Assumptions survey responses submitted by 26 firms representing TRS external managers, Strategic Partners and consultants.

Pensions continue to shift towards more illiquid assets… …with the potential for higher uncorrelated returns

Public Equities

TRS 2019 SAA

20

Special Topic: Long-Term Investing6. Power of Compounding. The power of compounding can have a dramatic effect

Source: Bloomberg, Robert Shiller (Yale University)

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

70 75 80 85 90 95 00 05 10 15 20

S&P 500 Price Return vs. Total ReturnGrowth of $10,000 Since 1970

With Dividends Reinvested

Price Return Only

December 2020: $1,736,036

December 2020: $405,588

Annualized Cumulative

Total Return 10.6% 17,260%

Price Return 7.5% 3,956%

21

Special Topic: Long-Term InvestingLong-Term Investing Considerations

Risk factors and opportunities which move too slowly to affect the short-term need to be accounted for in the long-run:

1. Demographics. Aging populations and number of workers can affect economic growth

2. Valuation Cycles. Equity and bond valuation trends are observable in the long-run

3. Commodity Cycles. Long-term structural changes in demand

4. Sector Composition. S&P 500 sector composition has shifted over time

5. Market Concentration. Today’s market has become quite concentrated in the top 5 stocks

6. Shiller Valuations. Long-term metrics help understand fluctuations over different periods of a business cycle

7. Inflation. Stocks have been a proven hedge against inflation

22

Special Topic: Long-Term Investing1. Demographics. Number of workers is a lead determinant of economic growth

Source: JPMorgan, Census Bureau, DOD, DOJ, BLSNote: Future working-age population is calculated as the total estimated number of Americans from the Census Bureau, per the February 2020 report, controlled for military enrollment, growth in institutionalized population and demographic trends. Growth in working-age population does not include illegal immigration; DOD Troop Readiness reports used to estimate percent of population enlisted. Numbers may not sum due to rounding.

3.1% 2.5% 0.9% 1.4% 2.0% 1.5% 0.9%

1.2%

1.9%

2.4%

1.7%

1.3%

0.3%

1.4%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

'50-'59 '60-'69 '70-'79 '80-'89 '90-'99 '00-'09 '10-'19

Drivers of GDP GrowthAverage Year-Over-Year % Change

4.3%4.4%

3.3%3.1%

3.4%

1.8%

2.3%

Growth in workers+ Growth in real output per worker

Growth in real GDP

23

Special Topic: Long-Term Investing1. Demographics. Aging populations and longer life spans make long-term investing even more important

Source: Organisation for Economic Co-Operation and Development (OECD)Note: Working age population defined as ages 15-64. Actual data from 1960-2018, forecasted data from 2019-2060

50%

55%

60%

65%

70%

75%

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

20

30

20

35

20

40

20

45

20

50

20

55

20

60

World

50%

55%

60%

65%

70%

75%

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

20

30

20

35

20

40

20

45

20

50

20

55

20

60

United States

50%

55%

60%

65%

70%

75%

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

20

30

20

35

20

40

20

45

20

50

20

55

20

60

European Union

50%

55%

60%

65%

70%

75%

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

20

30

20

35

20

40

20

45

20

50

20

55

20

60

China

50%

55%

60%

65%

70%

75%

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

20

30

20

35

20

40

20

45

20

50

20

55

20

60

Japan

50%

55%

60%

65%

70%

75%

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

20

30

20

35

20

40

20

45

20

50

20

55

20

60

G20

65.3%

61.8%

65.4%

60.1%

64.6%

56.2%

71.2%

55.7%

59.7%

51.6%

67.7%

60.7%

Working Age Population as % of Total Population (Ages 15-64)

24

Special Topic: Long-Term Investing2. Valuation Cycles. Long-term valuation cycles

Source: Deutshe Bank, GFD

1. First Era of Globalization(1860-1914)

2. Great Wars and the Depression (1914-1945)

3. Bretton Woods and Gold-Based Monetary System(1945-1971)

4. Start of Fiat Money and High Inflation Era(1971-1980)

5. Second Era of Globalization (1980-2020?)

6. Age of Disorder(2020? - ????)

1 2 3 4 5 6

Aggregated 15 DM country average bond (nominal yields) and equityPercentile valuations (100% = most expensive; 0% = cheapest)

25

Special Topic: Long-Term Investing3. Commodity Cycles. Long-term commodity “super cycles”

Source: Stifel, Warren & Pearson Commodity Index (1795–1912), WPI Commodities (1913–1925), equal-weighted (1/3rd ea.) PPI Energy, PPI Farm Products and PPI Metals (Ferrous and Non-Ferrous) ex-precious metals (1926-1956), Refinitiv Equal Weight (CCI) Index (1956–1994), and Refinitiv Core Commodity CRB Index (1994 to present)Note: Blue dots forecast dots are estimates

US Commodity Price Index Since 1795 = Inflation Peak = Inflation Trough

10

-Yr

Ro

llin

g C

om

po

un

d G

row

th R

ate

26

Special Topic: Long-Term Investing4. Sector Composition. S&P 500 sector composition has shifted over time

Source: Goldman Sachs

27

Special Topic: Long-Term Investing5. Market Concentration. Today’s market has become quite concentrated in the top 5 stocks

Source: Morgan Stanley, Cornerstone

28

Special Topic: Long-Term Investing6. Shiller Valuation. Long-term P/E ratios look expensive

Source: Deutsche BankNote: Data as of December 31, 2020. Legend arranged from high to low based on the current value

Long-Term (10 Year) P/E Ratio

Overvalued

Undervalued

29

Special Topic: Long-Term Investing6. Shiller Valuation. However, adjusted for interest rates, valuations are not stressed

Source: Deutsche BankNote: Data as of December 31, 2020

Long-Term Earnings Yield (10 Year) minus Bond Yield

Undervalued

Overvalued

30

Special Topic: Long-Term Investing7. Inflation. Stocks have been a proven hedge against inflation

Source: Stocks for the Long Run (Jeremy Siegel)

31

Special Topic: Long-Term InvestingConclusion

• Market Update

o The second half of 2020 was characterized by a continued recovery in global equity markets, led by the US and Emerging Markets, amid a resurgence in COVID-19 infection rates and political tensions within the US

o Over the first half of 2021, global markets are expected to extend the momentum of strong performance propelled by the anticipation of widespread vaccination, potential revival of the global economy, and accommodative global monetary and fiscal policy

• Special Topic: Long-Term Investing

o A long-term investment horizon is a strength for TRS

o It allows us to avoid short-term volatility and realize higher returns over time

o When your time horizon is long-term, slow moving factors need to be considered as drivers of returns

APPENDIX

33

Strategic Asset Allocation

Diversification Framework Strategic Asset Allocation

34

Macroeconomic UpdateInflation, Growth, Leading Economic Indicators (LEI)

Source: Bloomberg, FactSet, TRS IMD, Blackrock as of 12/31/20201 Equity Risk Premium is the forward earnings yield of the local equity market index less applicable 10 year government bond yield2 For USA, 10yr US Treasuries; for Europe, 10yr German gov. bonds; for Japan, 10yr Japanese gov. bonds; for EM, a blend of 10yr Chinese, South Korean, and Brazilian gov. bonds

Region10yr gov.

bond yields2

Equity Risk Premium

Current 10-Year Average

USA 0.9% 3.6% 4.4%

Eurozone -0.6% 6.4% 6.8%

UK 0.2% 6.8% 6.3%

Japan 0.0% 5.4% 7.0%

Emerging Markets 3.1% 3.4% 4.9%

USA 9-Box Leading Economic Indicators

Global 9-Box Government Bond Yields and ERP1

March 2020 June 2020 September 2020

US Box 4 Box 7 Box 4

Europe Box 4 Box 7 Box 7

Japan Box 4 Box 4 Box 4

China Box 1 Box 4 Box 5

EM ex-China Box 5 Box 4 Box 4

35

60

80

100

120

140

160

180

200

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021USA Japan World Emerging Markets Europe

-3.1

6.9

9.5

7.2

11.5

9.9

14.2

9.5

15.8

26.1

-31.5

-2.8

4.8

7.8

11.7

13.5

19.9

23.0

6.526.2

14.414.4

28.811.9

29.425.2

34.826.2

-35 -30 -25 -20 -15 -10 -5 0 5 10 15 20 25 30 35

EnergyFinancials

UtilitiesCons Staples

IndustrialsHealthcare

MaterialsTelecom

Cons DiscInfo Tech

2H 2020 1-Year 5-Year

25.321.5

31.1

20.823.3

21.1

7.6

18.3

5.4

14.515.5

7.6

12.8

6.88.7

0

5

10

15

20

25

30

35

USA IMI (18% of BMark)

Non-US Developed(13% of BMark)

Emerging Markets(9% of BMark)

Europe Japan


Public Equities40% of TRS Policy Benchmark

Source: Bloomberg, FactSetNote: All returns are in US Dollar terms

40% of Benchmark

20.820.823.3

5.4

14.5

6.86.88.7

Europe Japan

Current3rd Quartile

Median

1st Quartile

Legend

As of 12/31, Forward PE (2001-2020)As of 12/31, USD, % Annualized

As of 12/31, USD, % Annualized, Sorted by 1-Year As of 12/31, Forward EPS Indexed to 100

5

10

15

20

25

30

USA Non USDeveloped

EmergingMarkets

Europe Japan

Regional Performance Regional Valuations

Global Sector Performance Regional Earnings

36

-2

0

2

4

6

8

10

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Government Bonds Non-US Govt Bonds TIPS High Yield

0.1 0.1 0.1

0.1 0.1 0.1

-8

-3

2

7

2000 2003 2006 2009 2011 2014 2017 2020 2022 2025

Taylor Rule Fed Funds Eff. Fed Exp Market Exp

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5Today Beg of 2020 5 Years Ago

-2.9

0.1

4.7

9.611.3

17.7

0.6

11.0 10.8

7.17.8

1.2

5.1 5.2

8.6

-5

0

5

10

15

20

Government Bonds(16% of BMark)

Cash(2% of BMark)

TIPS Non-US GovernmentBonds

High Yield


Fixed Income16% of TRS Policy Benchmark

Source: Bloomberg, MSCI, FactSet (note all returns are in US Dollar terms)1Taylor Rule Definition: A central bank nominal policy rate set equal to a neutral real rate plus the current level of inflation, which responds to changes in the inflation gap (as measured by the difference between the current rate of inflation and the central bank's inflation target) and the output gap (as measured by the difference between NAIRU and the current unemployment rate).

Performance Yields

Cash Rate1 US Yield Curve

As of 12/31, %As of 12/31, USD, % Annualized

As of 12/31, % As of 12/31, Yield to Maturity, %

37

7.9

12.2

21.4

10.1

6.8 6.05.7

10.3

17.4

6.27.4

5.33.4

4.5

8.2

5.4

3.02.1

0

5

10

15

20

Stable Value(5% of BMark)

Directional EquityLong/Short

Credit CTA Macro


398209

335 291 257

581

925 91811391225

801634

-812

-239

192338

235 156 176

-11

-328

-49 -98-258-255

-1000

-500

0

500

1000

1500

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Equity Hedge Event Driven Macro Relative Value Fund of Funds

100

110

120

130

140

150

160

170

180

Directional HFs (HFRI FOF Index) Stable Value HF (HFRI FOFC Index)

Hedge Funds5% of TRS Policy Benchmark

Source: Bloomberg, HFR1Jensen’s alpha is a measure of alpha versus the equity market at equivalent risk. For example, if hedge funds are 20% as risky as the market then they are judged to have a 20% equity/80% cash benchmark.

Performance Alpha Versus Equivalent Risk Equity1

Average Hedge Fund Fees Hedge Fund Launches v. Liquidations

As of 12/31, Cumulative Jensen’s Alpha, Indexed to 100As of 12/31, USD, % Annualized

As of 9/30, Average Management Fee Per Strategy (%) As of 9/30, Count of Net Launches (Launches – Liquidations)

38

20.4 19.9

25.5

10.2

13.911.7

28.9

1.8

12.3 13.115.6

6.5

0

5

10

15

20

25

30

35

Private Equity(14% of BMark)

Buyout Venture Private Debt


279

165

0

40

80

120

160

200

240

280

320

Capital Raised ($bn) Average

418

185

0

100

200

300

400

500

Capital Invested ($bn) Average

-2x

3x

8x

13x

18x

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Public to Private Spread Russell 1000 Index Large US Buyouts (>$500M)

Private Equity14% of TRS Policy Benchmark

Source: State Street Bank, Preqin, S&PNote: Market data for US Large Buyout Market unless specified otherwise1PE Benchmark performance shown as TWRs, PE Strategy (Buyout, Venture, Private Debt) performance shown as IRRs. PE Benchmark and Strategy performance based on valuations as of 9/30/2020.

Performance1 Multiples

Transaction Volume Fundraising Activity

As of 12/31As of 12/31, USD, % Annualized

As of 12/31 As of 12/31

39

-1.5-0.2 -0.1

-4.3

4.1

0.52.8 2.3

-6.3

10.1

5.7 5.9 5.7

3.1

12.6

-10

-5

0

5

10

15

Real Estate(15% of BMark)

Office Apartment Retail Industrial


5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Average Apartments Industrial Office Retail

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

2001 2005 2008 2011 2014 2017 2020

Average Apartments Industrial Office Retail

-15

-10

-5

0

5

10

2001 2004 2007 2010 2013 2017 2020

Income Appreciation Total Return

Real Estate14% of TRS Policy Benchmark

Source: Bloomberg, NCREIF, Real Capital Analytics, State Street Bank1Property Type Return Indices are Property-level indices and do not reflect leverage or asset management fees, whereas NCREIF ODCE is a fund-level index and is levered and net of fees. Returns are for US-based properties only. Real Estate Benchmark and Strategy performance (Office, Apartment, Retail, Industrial) shown as TWRs based on valuations as of 9/30/2019.

Performance1 Cap Rates

Income Growth Composition of Returns


As of 9/30 As of 9/30

40

5.1 4.87.7

-5.4

-20.2

6.6

2.1

-2.8

10.7

-24-22-20-18-16-14-12-10

-8-6-4-202468

1012

ENRI(6% of BMark)

Natural Resources Infrastructure


20

25

30

35

40

5

8

10

13

15

18

20

2012 2013 2014 2015 2016 2017 2018 2019 2020

OP

EC P

rod

uct

ion

(m

mb

bls

/d)

US

/ Sa

ud

i Pro

du

ctio

n

(mm

bb

ls/d

)

US (LHS) Saudi Arabia (LHS) OPEC (RHS)

0

1

2

3

4

5

0

20

40

60

80

100

120

2014 2015 2016 2017 2018 2019 2021

Crude Spot (LHS, $/bbl) Natural Gas Spot (RHS, $/mmbtu)

-

20

40

60

80

100

120

140

160

0

200

400

600

800

1,000

1,200

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

S&P 500 Energy Total Return Index (LHS, Price) Crude Spot (RHS, $/bbl)

Energy, Natural Resources and Infrastructure6% of TRS Policy Benchmark

Source: State Street Bank, Bloomberg, Cambridge, EIA1ENRI Benchmark performance shown as TWRs, ENRI Strategy (Natural Resources and Infrastructure) shown as IRRs. ENRI benchmark and Strategy performance based on valuations as of 9/30/2019

Performance1 Energy Equity Performance

Energy Prices Oil Market Production


As of 12/31 As of 9/30

TAB 20

EMERGIN G MAN AGER AN N UAL UP D ATE

Kirk Sims, Emerging Manager Program DirectorFebruary 2021



2

Executive Summary

Performance

• The Program’s performance was affected by the COVID environment, resulting in the 5-year return versus the Benchmark at -34 bp

• $515 million approved to be allocated across 23 emerging managers in 2020

• $4.5 billion allocated to emerging managers since inception

Manager Graduation

• Since program inception, 7 managers have been promoted to the TRS Premier List and received a Trust-level commitment

• Trust-level commitments to EM Program graduates is $3.0 billion

Commitment to Diversity

• 53% of total capital allocated since inception, and 70% of capital allocated in 2020 was to diverse managers

Source: State Street as of September 30, 2020; TRS IMD

Key Objectives Key Accomplishments

EM Select

• 1 Private Equity and 2 Real Estate managers received EM Select allocations in 2020

• In total, $280 million has been allocated to 4 managers since 2019 as part of the EM Select Program

Building the Fleet

• Olivia Dwan joined the team to support administrative and event planning activities

Program Activity

• 54% of private markets capital allocated to Innovation

• Hosted over 134 manager meetings in 2020

• Program Director participated in 30 engagement activities including publications across well know media outlets and investor conferences

• TRS / ERS hosted the first ever virtual Emerging Manager Conference on January 26, 2021

• Recognition from the publication Institutional Investor for innovation in 2020

3

TRS Emerging Manager Program Team

Kirk Sims, CFAProgram Director

Key Partners

Private Markets Public Markets

Charles PippenDedicated GCM Secondee(Onsite at TRS in Austin)

EM Program Team

Tommy Heitz, CAIASr. Investment Analyst

EM Program Advisors

Jase Auby, CFAChief Investment Officer

Scott RamsowerDirectorPrivate Equity

Matt HalsteadDirectorReal Estate

Michael Ijeh, CAIAAssociatePublic Markets

Carolyn HansardSr. DirectorEnergy, Infrastructure, & Natural Resources

Sylvia Bell, CPAChief Operating Officer

Olivia DwanAdmin - Contractor

4

Emerging Manager Program Highlights

Source: TRS IMD

$4.5 bnUnderlying Commitments

$5.9 bn program size

#

16Years Program History

190Managers Backed

7TRS Graduates to

Premier List

$3.0 bn invested with EM Graduates at the Trust

Level

4EM Select Commitments

323Investments

53%Diverse Manager

Commitments

5

Performance and CommitmentsAs of September 30, 2020

Source: State Street and TRS IMD

Emerging Manager Program

Total Time Weighted Returns

1-Yr 3-Yr 5-Yr

Returns -1.6% 6.5% 7.7%

Benchmark 4.8% 7.4% 8.0%

Alpha (bp) -637 -96 -34

Underlying Allocations: $4,510 MM

Private Equity$2,228

Real Estate$1,365

ENRI$140

Public Markets

$777

Net Asset Value: $2,002 MM

Private Equity$891

Real Estate$602

ENRI$42

Public Markets

$468

Commitments by Diversity Type

Non-minority47.2%

16.5%

13.4%

12.2%

10.8%

Women

Asian American

HispanicAmerican

African American

6

This slide was intentionally left blank.

7


8


9


10

Looking Ahead – Emerging Manager Program (EMP)

1) EM Select for Public Markets

In partnership with the TRS EPU team, begin to evaluate a transitional capital program for Hedge Fund and Long Only Emerging Managers to transition from the traditional Emerging Manager Program sized allocations to Trust size allocations. This will also allow greater interactivity between high performing EMP managers and EPU.

2) Analytics

In conjunction with the EMP partners and TRS data teams, continue to expand the EMP’s analytic capability

3) Hedge Fund Portfolio

As part of our commitment to continuous improvement, the EMP will do a deep dive on the hedge fund portfolio • Review current portfolio, sizing and structure• Evaluate prospective managers

4) Partnership Competitive Landscape

Survey investment capability of emerging manager industry specialists

Focus Areas for 2021

11

$119 $95

$160 $111 $99

$66

$187

$395

$291 $326

$420 $446

$562

$450

$633

$515

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

EM 1.0 EM 2.0 EM 3.0

Co-Investments added to the private

equity program

GCM PE Program started

EM HF/LO Program started

GCM RA Program started

Completed $2 bnRe-up

Commitment

Public Markets

Real Estate

Private Equity

ENRI

History of Emerging Manager Program Allocations

Source: TRS IMDNote: Represents timing of underlying allocations to investment managers. US Dollars in millions.

Launched EM Innovation & EM SelectExpanded EM asset classes to include ENRI

APPENDIX

13

Joint Ventures21%

Seeding35%Anchor Investments

9%

Co-investments5%

New Primary Fund Managers

4%

Re-Up Primary Fund Managers

26%

Portfolio Diversification – Investment TypePrivate market investments in calendar year 2020

Source: TRS IMD

Joint Ventures41%

New Primary Fund Managers20%

Re-Up Primary Fund

Managers39%

Joint Ventures16%

Anchor Investments

15%

New Primary Fund Managers

12%

Re-Up Primary Fund

Managers57%

Inn

ova

tio

n T

ype

Real Estate ($226.1 MM)Private Equity ($129.1 MM) Energy, Natural Resources, Infrastructure ($49.6 MM)

14

Credit, 18%

Event Driven, 15%

Long Only, 31%

Equity Long/Short, 28%

Equity Market Neutral, 8%

Opportunistic, 48%

Value-Add, 34%

Core, 2%

Rass, 16%

Non Minority, 54%

Hispanic American, 16%

African American, 4%

Asian American, 8%

Women, 18%

Portfolio DiversificationAs of September 30, 2020

Source: TRS IMD

Real EstatePrivate Equity

Mid/Small Buyout, 60%

Credit/Special Situations, 22%

Growth, 12%

Venture Capital, 6%

Non Minority, 19%



Women, 24%

Asian American, 34%

Public Markets

Non Minority, 53%



Asian American, 8%

Women, 8%

Div

ers

ity

Stra

tegy

15


TAB 21

AN N UAL UP D ATE O N TRS IN V ESTMEN T O P ERATIO N S

Sylvia Bell, Chief Operating OfficerFebruary 2021



2

Executive Summary

• Investment Operations objective is to manage a scalable operating model to support the execution of all investment decisions

o Investment Operations: Manage the investment book of record for optimal investment decision-making

o Talent Management: Attract, retain and grow a best-in-class TRS investment team

o Investment Data & Systems: Manage our technology platform for data accessibility and collaboration

Investment Investment Management Management

Division

3

Investment OperationsGlobal Reach, Breadth, and Impact

Manage Core Investment Systems and Relationships• 128 investment applications and services managed• 24 counterparties and clearing brokers• 37 medium and large sized projects planned and executed• Manage State Street relationship

o 11 key measures, 116 reports, and 33 data feeds on custom service level agreement

o 69 member dedicated team with 1 on-site• Fully integrated with RR Shared Services (OE, Fiscal Services, IT)

Settle Trades and Move Cash Globally 24x7• 133,580 transactions ($656.6 billion) with 99.9% settlement success rate

o 56 markets and 38 currencieso 105,176 equity transactions ($61.0 billion)o 8,800 foreign exchange transactions ($67.0 billion)o 8,898 derivatives transactions ($373.1 billion)o 2,080 fixed income transactions (70.0 billion)o 5,628 cash transactions ($70.4 billion)o 2,998 derivative collateral movements ($15.1 billion)

• Internal Transition Management team led $17.9 billion in transfers across 50 different accounts

• Added $44.6 million to the Trust by investing excess cash in SSB short-term investment fund

Reconciliation, Pricing and Asset Servicing• 19,904 assets priced daily or monthly• 1,695 accounts reconciled daily or monthly• Multi-source, multi-level pricing hierarchy• Daily custom cash forecasting and liquidity reporting• 2,997 corporate actions • $51.1 million tax reclaims filed and $27.8 million collected• $6.6 million commissions saved by custom trade netting process (since

inception)• $13.0 million saved by implementing enhanced custody (since inception)

Deliver Investment Results for Investment Decision Making• 311 daily custom reports, 9,000+ data fields, 405 interfaces• Daily holdings, performance, liquidity, counterparty, and leverage for

asset allocation, risk and compliance• Monthly performance results for Management Committee and Board

Manage Talent, Budget, Travel, and Audits• 215+ IMD team members (FTE and contractors) and growing• Over 1,000 learning hours delivered via 22 events • $103.5 million in IMD Budget

o $66.4 million in operating and state street budget managed o $21.6 million in commissions forecast, verified, and paido $15.5 million in legal and research fees paid from the Trusto 218 domestic and 30 international trips managed, significantly less

due to COVIDo 229 vendors managed

• 62 audits completed successfully in last 5 yearsSource: TRS IMDNote: All transaction amounts are as of or for the period end 2020 unless otherwise noted

4

Investment Operations Organizational Chart

Sylvia Bell, CPAChief Operating Officer - IMDMA, University of Florida

Maribel NesudaExecutive Assistant

Kendall CourtneyDirectorMBA, St. Edwards UniversityHead of IO

Kelly NewhallInvestment ManagerBBA, University of TexasInvestment Operations Lead

Craig McCulloughInvestment Manager BA, University of TexasPerformance & Analytics Lead

Stephen Machicek, CPAInvestment ManagerBBA, Univ of Texas at El PasoBudget & Accounting Lead

Investment Operations

Karoline FreemanSr. AssociateBBA, Univ of New MexicoSecurities Analyst

David CoxSr. AssociateBBA, Baylor University Investment Data & Systems Lead

Yangers PuentesSr. AssociateB.Ed, ISPEJV, Havana, CubaData Engineer

Barbara ForssellSr. AssociateBBA, Texas A&M UniversityProject Manager

Roy KurianSr. AssociateMS, Bharathidasan UniversityBusiness Analyst

Kerry SkehanSr. AssociateMS, Nazarene UniversityCash & Securities Lead

Chris Pan, CPASr. AssociateBBA, University of TexasFinancial Analyst

Jeff BatasAssociateBS, San Diego State UnivFinancial Analyst

Andrea DrummondAssociateBS, Oklahoma State UnivBusiness Analyst

Lisa PeavyAssociateMA, Texas State UniversityBusiness Analyst

Kate Rhoden, CPAAssociateBBA, Univ of TX at San AntonioFinancial Analyst

Maz RohaniAssociateBBA, Binghamton UnivFinancial Analyst

Performance & Analytics Talent Management Events Planning & Facilities

Jared SimpsonSr. AssociateBBA, Texas Tech UniversityPerformance Analyst

Brandon BiltonAnalystBBA, Prairie View A&M Univ.Performance Analyst

Horacio ZambranaDirectorBS, San Jose State UniversityTalent Management Lead

Maria Vega GonzalezSr. Analyst Ed.D, Grand Canyon Univ, AZLearning and Development

Samantha CochranSr. AnalystBS, Univ. of Central FloridaTalent and Performance

Patty SteinwedellSr. AnalystBS, N. Carolina State UnivTalent and Performance

Patricia CantuSr. Associate

Events & Facilities Lead

Hugo Rangel Assistant

Facilities

Melissa JurenekContractorBA, University of TexasFront Desk Receptionist

Caitlin GrimesContractorBA, Texas State UniversityFront Desk Receptionist

Andrew MoynihanSr. AnalystMBA, Boston CollegeDerivative Analyst

Matthew NapolielloSr. AnalystBBA, Loyola Univ MarylandFinancial Analyst

Yohan SkariaSr. AnalystBS, College of Staten IslandDerivative Analyst

Kristi VorceSr. AnalystProcure to Pay Analyst

Marnesyl Yap, CIMA, CBASr. AnalystBS, Xavier UniversityCash Analyst

Felicia SylviaAnalystBBA, University of HoustonSecurities Analyst

Paige DouthitAnalystBS, Texas State UniversitySecurities Analyst

Angela HydeContractorMBA, University of HoustonDerivative Analyst

Jacqueline LichtenbergerContractorBSA, University of TexasProcure to Pay Analyst

Grace MuraidaContractorProcure to Pay Analyst

Melanie ReeveContractorBA, Texas Tech UniversityProcure to Pay Analyst

Greg Reisman, CPAContractorMPA, Univ of Texas at AustinFinancial Analyst

Nitin ShrimaliContractorMS, Wayne State UnivBusiness Analyst

5

Investment Operations Accomplishments and Priorities

• Investment Operations:o Implemented 2019 SAA ($51 billion AUM)

o Successfully executed 2020 Risk Battle Plan

o Scaled strategic partnership with global custodian

o Reviewed and implemented additional liquidity options

o Seamlessly coordinated IMD move to remote work in response to COVID

• Investment Data and Systems:o Launched data management initiative with Accenture

o Improved IMD IT governance and reporting

• Talent Management:o Continued to “Build the Fleet” (30 FTEs in FY 2020)

o Launched Performance Management 2.0 initiative with Deloitte

• Investment Operations:

o Lead Master Custodian RFP

o Implement Middle Office Operations

o Enhance Investment Manager Fee Reporting and Analysis

o Plan and coordinate IMD return to office

• Investment Data and Systems:

o Establish Data Governance Office

o Implement IMD data architecture & platform

o Optimize current IMD data operations

• Talent Management:

o Implement Performance Management 2.0 roadmap

o Partner to promote IMD Diversity, Equity and Inclusion

2020 Accomplishments 2021 Priorities

6

Investment Operations Priority Master Custodian RFP

• Shift focus from service delivery to service partnership that will scale as TRS grows

• Leverage Custodian to enhance the TRS Middle Office operations:

o Improve the Investment Book of Record (IBOR)

o Align custodian resources to allow TRS resources to focus on higher value work

o Increased emphasis on enriched fit-for-purpose investment portfolio data

o Focus on governance to enhance accountability of results

RFP Effort Aligned to IO Strategy RFP Summary Timeline

Event Target Completion Date

Develop RFP and Statement of Work February 2021

Issue RFP April 2021

Respondent Proposals Due May 2021

Staff Recommendation Due August 2021

Board Selection and Award September 2021

Contract Negotiations Complete January 2022

7

Investment Operations Priority Enhance Investment Manager Fee Reporting & Analysis

• Operating expenses represent 7% of total costs

• Expenses netted to performance represent 93% of total costs of which 87% represents manager and performance fees

• Background:o Management and performance fees totaled $1.3 billion in

2020, 87% of total costs

o Build The Fleet initiative aims to reduce investment fees and increase efficiencies by hiring more internal investment resources and making more direct investments

• Benefits:o Increased transparency, analytics, and controls to ensure

manager fees are accurate and reasonable

o Quarterly reporting

• Activitieso Engaged external consultant to collect and independently

calculate Private Equity, Real Estate, Special Opportunities, and ENRI management fees and carry

o Develop total trust quarterly fee reporting and analysis

Note: Operating Expenses includes Commission Credits of $20,844,305 and $21,366,146 for fiscal year 2019 & 2020, respectively which are expenses also netted from performance

IMD Actuals Investment Manager Fee Reporting & AnalysisExpenses FY 2019 FY 2020 ChangeSalaries & Benefits Expense 39,970,269$ 43,947,770$ 3,977,502$ Subscriptions and Reference Data 14,043,919 14,895,841 851,922 Rent Expense 4,993,640 4,380,919 (612,721) Professional Fees and Services 3,380,495 3,925,503 545,008 Contract Labor 2,634,068 2,711,531 77,463 Other Operating Expenses 1,806,919 851,590 (955,329) Travel 970,016 711,784 (258,232) Software 355,956 36,608 (319,348) Indirect Expenses 15,695,636 29,187,741 13,492,105 Total Operating Expenses 83,850,918$ 100,649,287$ 16,798,369$ Management & Performance Fees 1,302,875,647 1,273,343,601 (29,532,046) Broker Commissions 47,067,970 35,753,286 (11,314,684) External Custodial Fees 27,154,060 32,319,422 5,165,362 Bank Fees 16,453,271 8,222,073 (8,231,198) Research Fees 9,643,681 8,853,740 (789,941) External Legal Fees 5,178,624 6,030,055 851,431 Expenses Netted to Performance 1,408,373,253$ 1,364,522,177$ (43,851,076)$ Grand Total $ 1,492,224,171 $ 1,465,171,464 $ (27,052,707)

APPENDIX

9

Investment Operations The Investment Process

Pre-Trade Trade Processing Daily Monitoring

From Investment Decision to Investment Book

From Investment Book to Investment Decision

State Street BankAccounting, Performance, Compliance &

Investment Book of Record

InvestmentDecision

Investment Systems Data Warehouse

Asset Management

Investment Analytics & Reporting

Pre-Trade Trade Processing

AssetManagement

DailyMonitoring

DataWarehouse

InvestmentSystems

Investment Analytics and Reporting

10

Investment Operations State Street Bank Operations

11

Investment Operations PriorityMiddle Office and Data Management

• Background:o Industry is shifting from asset type expertise to portfolio

management expertise

• Benefits:o Middle Office team and processes effectively bridges Back

and Front Office for business valueo Allows Front Office to refocus on investment decisions, not

preparing data

• Activities:o Procure custody services provider matched to IMD Middle

Office needso Refine workforce resource planning & formalize roles and

responsibilitieso Develop roadmap to success for better portfolio

management alignmento Establish robust governance process and measures of

success

• Background: o Data is an investment asset and must be managed

accordingly

• Benefits:o Data platform effectively supports investment decision

makingo Data is trusted and operations are scalable

• Activities:o Data Architecture and Platformo Design centralized capture, storage, and distribution of data

across IMDo Data Governance & Organizationo Implement top-down alignment for enterprise data

governance

Enhance Middle Office Modernize Data Management

TAB 22

IN V ESTMEN T LEGAL & CO MP LIAN CE UP D ATE

Heather Traeger, General Counsel & Chief Compliance OfficerFebruary 2021



2

Securities Litigation

Equities & Derivatives

Funds and Allocated Structures

Foreign Offices

Investment Management Agreements

Ethics

Investment Policies

Direct Investments

Legislation

Regulations, Statues & Policies

Executive

Public Markets

Risk and Portfolio

Management

Private EquityReal Estate

Energy Natural Resources &

Infrastructure

Trade Management

Investment Operations

Investment Legal & Compliance: Essential to IMD Mission

L&C guiding principles: better deal terms, risk mitigation,

compliance, ethical integrity, and profit center

• Expert Legal Advice

• Relentless Client Focus

• Trusted Business Partner

IMD Legal & Compliance

3

Investment Legal & Compliance: Partner in IMD Transactions

0

50

100

150

200

250

FY2016 FY2017 FY2018 FY2019 FY2020

Investment Matters by Group

ENRI PE RE External Public Markets Executive Other

Sourcing & Building Partnerships

• Work directly with external manager's L&C teams

Investment Due Diligence & Decision Making

• Work with IMD early in investment and operational due diligence process to address potential issues

• Analyze structuring, regulatory and policy issues

Legal & Closing Process

• Work side-by-side with IMD in negotiating terms and documenting the business deals

• Manage legal negotiation, external counsel, document drafting

Monitoring and Governance

• Address post-investment issues

• File and track regulatory forms

Source: TRS IMD Note: Funds = Co-Investments, Commingled Funds, Single LP Funds, Direct Investments, IMA’s, Hedge Funds

4


5

Investment Legal & Compliance: Organization

`

Alice McAfee

Team Lead, Government

Procurement Solutions (GPS)

JD, MA, BA, UT Austin

Stephanie Perkins

Assistant General Counsel

JD, UT Austin

BA, Vanderbilt

Heather Traeger

General Counsel & Chief

Compliance Officer

JD, University of Houston

BA, Williams College

Denise Lopez, CPA

Team Lead, Investments

JD, Cornell

BBA, UT Austin

Jessica Palvino

Chief of Staff/COO

JD, Baylor

BS, Texas A&M

Dennis Gold

Sr. Investment Counsel

JD, BA, UT Austin

Lane Arnold

Investment Counsel

JD, SMU

BA, Harvard College

Deanna Buck, CPA

Investment Counsel

LLM, NYU

JD, BA, Georgetown

Bianca Sandoval Green

Investment Counsel

JD, BA, UT, Austin

Steve Poliner

Investment Counsel

JD, NYU

BS, BA, Duke University

Bo Simmons

Investment Counsel

JD, Columbia

BA, University of Missouri

Jennifer Steiger

Investment Counsel

JD, MBA,UT Austin

BA, Stanford University

BOARD, PIA, PROCUREMENT

EMPLOYMENT / IP

LEGAL OPERATIONS / TAX

Anna Espinosa

Legal Assistant

BA, Paralegal Certification,

UT Austin

Adam Costa

Sr. Compliance Specialist

BA, University of Pittsburgh

Michele Fullon

Compliance Specialist

MBA, CUNY Baruch College

BS, Northeastern University

INVESTMENT LEGALINVESTMENT COMPLIANCE

Elena Ivanova

Compliance Specialist

BA, MEBIK

COMPLIANCE

J.R. Morgan

Investment Counsel

JD, UCLA

BA, BS, Evergreen State

Chris Bowlin

Compliance Counsel

JD, Texas Wesleyan

MS, BS, Texas A&M

22Advanced

degrees and certificates

20Years average

of legal experience

20Years average of compliance

experience

Shared Services

6

Investment Legal & Compliance: Summary of Accomplishments

• Hosted 5th annual Legal Investment Summit

• Hosted first legal bootcamp

• Created external counsel manual

• Provided IMD limited partnership agreement training

• Integrated with IMD Business Continuity Team

• Supported recession reaction

• Monitored and responded to temporary regulatory relief and requirements

• Developed and implemented remote operating plan to ensure no workflow interruptions for the business teams

• Automated annual Employee Ethics Policy certification

• Collaborated with Investment Operations on refining the operational due diligence process

• Implemented daily compliance testing on Internal Portfolio Management Agreements (IPMA)

• Consulted on IPS revisions and IIC procedures guide

• Worked with outside counsel and peers to respond to the shareholder disclosure amendment with the Japan Foreign Exchange and Foreign Trade (FEFTA)

• Addressed MNPI/Personal trading issues with market volatility

• Analyzed impact of new non-U.S. regulations

Addressed COVID-19 Issues Training

Implemented Best Practices Adhered to new Regulatory Requirements

7

Investment Legal & Compliance: 2021 Priorities

• Legal Summit 2021

• Real estate initiatives for 87th Legislative Session

• DE&I initiatives

• Internal counsel practice manual

• Tricot 2.0 and long-term facilities issues

• Procurement & Contracting-IMD process

• Data architecture projects

• Charles River transition for Compliance

• Centralize operational due diligence process for public and private markets

• Additional training programs

• Mechanism to compare key business terms

Training Legal 3.0

Office Initiatives Best Practices

APPENDIX

9

Investment Legal & Compliance: Integral and Accretive to IMD

• Walk side-by-side with IMD through full transaction life cycle

• Understand “must-have” versus “nice-to-have” and have judgement and experience to differentiate

• Deliver creative solutions for IMD innovations

• Provide confidence to IMD to conduct business in new markets, jurisdictions and financial arenas

• Enhance IMD and TRS brand

• Advise on business issues, structures, legal requirements, and “Texas Way” on terms

• Avoid litigation, regulatory deficiencies, criminal and civil penalties, headline risk, and policy violations for failure to satisfy legal and policy obligations

• Identify and address emerging risks

• Prevent unnecessary disruption of transactions

• Employ technology and systematic procedures to enhance risk mitigation program

• Organize information-sharing sessions with peers

• Significant involvement in industry and regulatory groups on issues of shareholder and investor rights

• Craft cultural realignment to reflect sophistication and scope of IMD operations

• Build compliance and risk awareness into daily business processes

• Provide centralized resource to IMD for questions and concerns

• Inform management and trustees of compliance efforts

• Develop expertise to take advisory, consulting, and training function in-house and reduce reliance and associated costs on consultants or external counsel

• Design and implement technology and operational solutions that allow scaling of functions and staff

• Strategic management of costs: selective distribution of internal vs external workload and deliberative selection of external counsel and consultants

• Internal staffing: maintain legal fees for 4 consecutive years despite year-on-year increase in number and complexity of transactions)

• Securities class actions: drive lower fees, seek participation opportunities, and support innovations to market to increase recoveries

Better Deal Terms Risk Mitigation

Culture of Compliance and Ethical Integrity Profit Center

TAB 23

UP D ATE O N ESG IN V ESTIN G

Lauren Gellhaus, Head of ESG

Meredith Jones, Partner Responsible Investment & ESG AdvisoryFebruary 2021



2

Discussion Agenda

• Current Status of ESG Investing – Aon

o ESG and Why it Matters

o 2020 ESG Influencing Factors

• ESG Update – IMD

o Overview of Peer Practices and ESG Policies

o IMD Polices and Practices

o ESG in Action: Proxy Voting

ESG and Why it Matters

Material Environmental, Social, and Governance (ESG) factors are becoming mission-critical to companies and their stakeholders, and as such are gaining in importance with asset owners

Four organizations publishing the most commonly cited ESG reporting frameworks are: the CDP (formerly the Carbon Disclosure Project), the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD).

Sources: : “Rate the Raters 2020” SustainAbility, March 2020 http://dx.doi.org/10.1080/20430795.2015.1118917 , https://www.bloomberg.com/news/articles/2019-04-01/global-sustainable-investments-rise-34-percent-to-30-7-trillion https://hbr.org/2016/10/the-comprehensive-business-case-for-sustainability

Aon | Retirement & Investment Proprietary & Confidential

Dramatic increase in ESG-focused investment products

Environmental & Social issues can demonstrably harm shareholder value

Corporate performance: 90% of studies show ESG-CFP correlation

Lack of reporting standards create uncertainty for ESG stakeholders

Environmental, social and governance (“ESG”) refers to non-financial risks associated with a company or industry that have the potential to have a material financial impact on a company in the future.

http://dx.doi.org/10.1080/20430795.2015.1118917

https://www.bloomberg.com/news/articles/2019-04-01/global-sustainable-investments-rise-34-percent-to-30-7-trillion

https://hbr.org/2016/10/the-comprehensive-business-case-for-sustainability


ESG Stakeholders

Company Customers Investors Society Regulators

Corporate financial performance

Cohesive Human Capital strategy

Employee engagement & retention / Productivity

Product Innovation

Branding opportunities / Public Relations

Best in class products & solutions Designed for an evolving future

Innovation

A trusted and enduring partner

Resiliency in the face of a changing global landscape

Holistic Risk Management

Best practice protection against environmental, social & governance pitfalls

Value Protection

Pride of Ownership

Innovation for Value Creation

Companies positioned to positively impact people and planet

Resilient companies create resilient employees, local and global economies

Innovation to solve future problems

While TRS is subject to state and US regulation, global regulation will prompt changes in the way ESG is evaluated . A growing list of regulations across geographies increase expectations for corporate, asset manager and investor behavior with regards to environmental, social and governance issues

Employees

Safe workplaces

Job security

Fair wages

Opportunities for upskilling & promotion

Diversity, equity and inclusion

Increased resiliency

Benefits to people and planet


2020: An ESG Accelerator

Covid-19o Workforce safety becomes an industry-wide

issueo Who is “essential”?o “K” shaped recoveryo Proportionality of furloughs, pay cuts, etc.o Supply chains, cash flow, benefits, liability, etc.

Social Justiceo Diversity and inclusiono Systemic racismo Economic opportunityo Economic mobilityo “K” shaped recovery

Regulationo US - Regulation S-Ko EU - Sustainable Finance Disclosure

Regulation, Climate BenchmarksRegulation, Taxonomy Regulation

o UK – Stewardship Code

Climate Changeo Environmental risks pose the greatest

threats to the global economy, perCambridge Global Risk Index

o Prioritizing a “green” Covid-19 recovery

US Administration Changeo Biden Administration likely to enact new

climate change regulations & disclosureso Investors may be less constrained using

ESG in investment decisions / 2020 DOLguidance vacated or amended

Result: Record Asset Flows for Sustainable Funds


2020 Department of Labor ESG Guidance

– As a minimum requirement for meeting the standard of loyalty and fiduciary care, fiduciaries must evaluate investments and investment courses of actionbased “solely on pecuniary factors and based on appropriate investment horizons.”

– Fiduciaries cannot sacrifice returns or increase risk to promote non-financial goals, which might include environmental or social causes.

– Fiduciaries must consider reasonably available alternatives as part of their duty of fiduciary care.

– If a fiduciary uses non-financial factors to choose among investments that are otherwise indistinguishable financially, the rule requires documentationproving that such decisions were made with appropriately careful “analysis and evaluation.”

– The rule does not categorically prohibit investments that support non-financial goals. However, fiduciaries still must satisfy the prudence and loyaltyprovisions in ERISA and in the final rule, which means pecuniary interests must still be served.

– While the rule is considered “final” and has been submitted to the Office of Management and Budget, there are still challenges to implementation. A newadministration could vacate the rule altogether, and, barring that, legal challenges are expected.

Source: https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/final-rule-on-financial-factors-in-selecting-plan-investments

https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/final-rule-on-financial-factors-in-selecting-plan-investments

7

ESG Peer Practices

• There is no “standard” approach to ESG. Significant variation exists across and within regions, asset classes, and organization types.

• Overall, most institutions are at the early stage of integrating ESG into their processes, particularly in the US

• Based on a global study, the top three drivers for the broad adoption of ESG investing include: 1) Right Thing to Do, 2) Risk-Adjusted Performance, and 3) Mitigate Investment Risk

• As institutional investors pursue ESG investing, ESG integration is the most popular approach with 75% of global respondents currently, or considering, integrating ESG into their investment decisions

Sources: BlackRock Global Client Sustainable Investing Survey. July – September 2020, BlackRock 2020 Global Sustainable Investing Survey, Barclays ESG Investor Pulse December 2020

8

ESG Policies Overview

• Approaches to ESG policies and guidelines vary significantly at the global and regional levels

o Different approaches range from relying on the broad nature of an investment policy to capture ESG related risks to creating a standalone ESG policy

• The degree of ESG policy adoption differs by region: Europe > North America > Emerging Markets

Sources: TRS IMD (Peer group consists of 24 of the largest global pensions including 14 from the United States, 4 from Canada, 4 from Europe, and 2 from Asia), Mercer European Asset Allocation Insights 2020

54%29%

17%29%

43%

29%

Peer ESG Policies

Standalone ESG PolicyESG Language in other Governing DocumentsNo ESG Related Governing Documents

Exterior Ring: US Only Peers

Interior Ring:Global Peers

o 88% of European pension plans integrate ESG into their investment policy, up from 68% in 2019

o In contrast, pensions in the North America are less likely to adopt an ESG policy. However, the level of adoption is trending positively.

9

Current IMD Polices and Practices

• Voting Proxieso Institutional Shareholder Services (ISS) serves as

TRS’s proxy advisor, providing benchmark guidelines, inclusive of ESG related topics, for all proxy votes conducted by IMD

• Legal and Policy Exclusionso State Law: No investments in Iran, Sudan,

terrorism, and companies boycotting Israelo Board Policy: No investments in adult

entertainment

• Dedicated ESG Resourceso IMD has a designated investment professional

focusing on ESG research, trust-wide education, and the implementation of best practices

• Emerging Managers Programo Diverse managers represent a majority of IMD’s

Emerging Manager Program commitments

• Transparency & LP Alignmento Private Equity helped author ILPA’s Principles

• Due Diligence & Monitoringo IMD Public and Private Equity teams include ESG

questions in their formal due diligence

• Invested Capital o 67 external managers are UN PRI Signatories,

equating to >$59B in invested capital

Source: TRS IMD, UN PRI

10

IMD ESG Update

• 2020 Accomplishments

o Added ESG questions to External Public Markets annual certification questionnaire

Working to add similar questions to External Private Markets questionnaires

o Established an educational series on ESG-related topics e.g. SASB presented on materiality

o Initiated subscription to MSCI ESG ratings and ESG indices after a successful trial of the products

o Worked with partners to better understand the latest ESG research, best practices, and key themes

Completed an ESG project with BlackRock as part of the annual SPN project series

• 2021 Goals

o As part of IPS process, IMD will likely recommend adding a statement on ESG

o Continue educational efforts by bringing in industry leaders and experts to present on ESG-related topics

o Work with each IMD group to ensure that material ESG risks and considerations are considered when assessing new and existing investments

o Establish a committee from across IMD to drive trust-wide ESG initiatives

11

Example ESG Language within IPS

• As part of the annual review of the Investment Policy Statement, IMD will likely recommend adding a statement on ESG. Below is an example of potential language.

Environmental, social, and governance (ESG) factors influence the performance of TRS’s investments. In making investment decisions, the Investment Division will consider ESG factors that are material to long-term returns and levels of risk. Materiality of specific ESG factors vary across strategies, companies, sectors, geographies and asset classes.

All investments must be made prudently and in accordance with fiduciary and ethical standards, without promoting interests unrelated to the portfolio’s stated objectives of controlling risk and achieving a long-term rate of return.

At least annually, the Investment Division will provide the Board an update on the Trust’s ESG efforts, methods and results.

12

Proxy Voting

• Proxy votes are a Trust asset

• IMD’s objective is to vote proxies prudently and in the best economic interests of the Trust so to maximize portfolio returns over time

• TRS’s Proxy Advisor, currently Institutional Shareholder Services (ISS), is selected by the TRS Board

o ISS has served as TRS's Proxy Advisor since 2002

o ISS has 3,100 clients globally, of which 185 are pension funds (46% US/54% outside the US)

o ISS services 119 global markets and ensures coverage of 100% of all domestic and international securities traded on major exchanges and indices

o 52,000 meetings and 12.2mn ballots voted in 2020

• ISS votes proxies on TRS’s behalf based on ISS’s Benchmark Policy recommendations

o 21,535 ballots processed on behalf of TRS in 2020

Source: ISS

13

ISS Benchmark Policy Overview

• ISS's Benchmark Policy focuses on the following key topics:

Details on the benchmark policy can be found on the ISS website: https://www.issgovernance.com/policy-gateway/voting-policies/

Governance

Social

o Board Independence and Compositiono Director on Multiple Boardso Adequate Risk Oversight by Directoro Auditor Standardso Auditor Rotationo Executive Compensationo Incentive Planso Capital and Restructuringo Mergers and Acquisitions

o Board Diversity (e.g. gender and racial/ethnic)o Adequate Risk Oversight by Directoro Disclosure (e.g. consumer and product safety, human

rights, animal welfare, political activities)

Environmental

o Adequate Risk Oversight by Directoro Disclosure (e.g. climate change, sustainability)

https://www.issgovernance.com/policy-gateway/voting-policies/

14

Governance Example: Board Director Independence

• ISS benchmark guidelines promote a minimum of 1/3 of independent board directors with higher minimums in more developed regions such as the US, Canada, and Europe

o ISS Action: ISS will generally recommend voting against non-independent directors if minimums are not met

Source: ISS1 Percent reflects the minimum percent of independent Board directors. A number means the required number of independent directors. 2 Variation exists across and within countries. The numbers shown are approximates. 3 These tallies are approximate as each against vote rationale often contains multiple considerations

Boards should be sufficiently independent from management to ensure that they are able and motivated to effectively supervise management's performance

15

Governance Example: Executive Compensation

• ISS Benchmark Guidelines: ISS votes case-by-case on executive compensation proposals, considering multiple quantitative and qualitative factors. Core principles underlying all evaluations:o Maintain appropriate pay-for-performance alignment, with emphasis on long-term shareholder valueo Avoid arrangements that risk “pay for failure”o Maintain an independent and effective compensation committeeo Provide shareholders with clear, comprehensive compensation disclosures

Source: ISS

Executive pay practices must be designed to attract, retain, and appropriately motivate the key employees who drive shareholder value creation over the long-term

16

Social Example: Board Diversity

• ISS benchmark guidelines promote gender and ethnic/racial board diversity in select regions

o ISS Action: ISS will generally recommend voting against the chair of the nominating committee (or other directors on a case-by-case basis) if the amount of board diversity doesn't meet the minimum guideline

Source: ISS1 2020 US gender diversity minimum includes a list of mitigating factors that were removed within the 2021 guidelines2 These tallies are approximate as each against vote rationale often contains multiple considerations

Boards should be sufficiently diverse to ensure consideration of a wide range of perspectives

17

Environmental Example: Environmental Disclosures

• ISS Benchmark Guidelines: ISS does not have strict guidance in terms of environmental proposals, but ISS’s guidance promotes disclosure and reasonable oversight

o ISS Action: ISS is amending policy guidelines globally to include environmental risks as part of boards’ explicit oversight responsibilities with a focus on climate change

Source: ISS

Many shareholders are increasingly focused on a range of environmental factors that can impact their investments and are engaging with companies regarding such risks; however, these issues have yet

to receive broad investor support.

18

Summary Information

• ESG continues to be a growing trend. In 2020, several catalysts helped propel ESG forward, including the COVID crisis, the emphasis on social justice, and the change of presidential administration.

• Whereas ESG was once synonymous with simple screens that narrowed the investable universe (e.g. excluding tobacco), ESG integration is now the most common approach for sustainable investors

• ESG research continues to be a priority for IMD and IMD is also actively engaged in numerous efforts including internal education opportunities and ESG integration within investment processes

• IMD will continue to take prudent steps forward while being ever mindful of its fiduciary duty and objectives to control risk and produce a long-term rate of return

APPENDIX

20

Appendix

• ISS Policy Development Process

• ESG Policy Examples

o Employees Retirement System of Texas

o New York State Common Retirement Fund

o Minnesota State Board of Investments

o California State Teachers' Retirement System

• ESG Questions Added to External Public Markets Questionnaire

• Summary of Findings from 2020 EPU Certification Questionnaire

21

ISS Policy Development Process

Feb 1stNovemberOctoberJuly/AugustProxy Season through June

Internal Reviewduring and after

proxy season

New Policy takes effect

• Every year, ISS conducts a global policy review process and updates the ISS Benchmark Proxy Voting Guidelines for the upcoming year

• IMD's Proxy Committee reviews updates to the ISS Benchmark Policy, confirms that they are appropriate for IMD, and prepares a summary to the TRS Board highlighting key changes

Policy Survey and Roundtables

Open Comment Period

Final Policy Updates

announcement

22

ESG Policy Example: ERS – Language in Investment Policy Statement

• Texas ERS has Social/Environmental language embedded within its Investment Policy Statement as part of ERS’ Proxy Voting Policy (Addendum I), as shown below

• Other pensions that have ESG-related language embedded within their respective investment statements and/or proxy polices include State Teachers Retirement Ohio, Ohio Public Employee Retirement System, Colorado PERA and Ontario Teachers’ Pension Plan

23

ESG Policy Example: New York Common – ESG Proxy Guidelines

• New York State Common Retirement Fund makes all proxy voting decisions independently, using its Environmental, Social & Governance Principles and Proxy Voting Guidelines to determine how the fund votes its proxies.

• According to the Guidelines, “The Fund’s Investment Philosophy requires the consideration of environmental, social, and governance (ESG) factors in the Fund’s investment process because they can influence both risk and return. The Fund, as a long-term owner that invests in all sectors of the economy (i.e., a “universal owner”), works to promote sound ESG practices at its portfolio companies through active ownership and public policy advocacy. The Corporate Governance Program is designed to enhance long-term value through a commitment to ESG and a strategic focus on sustainability, diversity, and accountability.”

• Issues covered in the Guidelines include, but are not limited to, a) board of director’s independence, accountability & responsibility, b) executive and director compensation, c) climate change, d) diversity, equity & inclusion, and e) human capital management, labor & human rights.

24

ESG Policy Example: Minnesota – ESG Initiatives Resolution

• Minnesota State Board of Investments (MSBI) adopted a resolution that outlines the pension’s ESG initiatives. The resolution is brief, less than two pages, and therefore does not go into as much depth as a full policy.

• The resolution emphasizes that fiduciary responsibility is the touchstone of any decision of the MSBI.

• The resolution addresses:

o Continuing to actively vote proxies in accordance to MSBI proxy guidelines, policies, and precedents

o Participating in ESG coalitions and engaging with corporations on ESG related issues i.e. Council of Institutional Investors, UN Principles for Responsible Investing, and Institutional Limited Partners Association

o Preparing ESG informational materials and Stewardship Report updates

o Developing and implementing plans to address ESG investment risks, evaluating options for reducing investments to long-term carbon risk exposure, and promoting efforts for greater diversity and inclusion on corporate boards and within the investment industry

25

ESG Policy Example: CalSTRS – Standalone ESG Policy

• CalSTRS has a distinct Investment Policy for Mitigating Environmental, Social, and Governance Risks (ESG Policy) that is an attachment to its Investment Policy and Management Plan.

• According to the ESG Policy, to help manage the risk of investing a global portfolio in a complex governance environment, CalSTRS has developed a series of procedures to follow when faced with any major environmental, social or governance issue as identified by the ESG risk factors. When faced with a decision or other activity that potentially violates CalSTRS ESG Policy; the Investment Staff, CIO and Investment Committee will undertake the following actions:

o The CIO will assess the potential ESG policy violation both as an ESG risk and as an impact to the System. The extent of the responsibility of the System to devote resources to address these issues will be determined by: 1) the size of the investment, and 2) the gravity of the violation of CalSTRS ESG Policies.

o At the CIO’s direction, the Investment Staff will directly engage corporate management or other appropriate parties to seek information and understanding concerning the ESG policy violation and its ramifications on the System.

o The CIO and investment staff will provide a report to the Investment Committee of the findings associated with an ESG policy violation engagement and recommend any further action of engagement or need to commit further System resources. The Investment Committee can marshal further resources given the gravity of the situation.

• CalSTRS expects all investment managers, both internal and external, to assess the risk of each of the following factors whenmaking an active investment:

o Monetary Transparency, Data Dissemination, Accounting, Payment System: Central Bank, Securities Regulation, Auditing, Fiscal Transparency, Corporate Governance, Banking Supervision, Payment System: Principles, Insolvency Framework, Money Laundering, Insurance Supervision, Respect for Human Rights, Respect for Civil Liberties, Respect for Cultural and Ethnic Identities, Respect for Property Rights, Respect for Political Rights, Discrimination Based on Race, Sex, Disability, Language, or Social Status, Worker Rights, Environmental, Climate Change, Resource Efficiency, War/Conflicts/Acts of Terrorism, and Human Health

26

ESG Questions Added to External Public Markets Questionnaire

• External Public Markets requires the completion of an Annual Certification Questionnaire by invested managers and by prospective managers that are being taken to the Internal Investment Committee

• In 2020 four ESG-related questions were added to the questionnaire:

o Does your firm have an established ESG policy? Why or why not? If yes, are you willing to provide a copy of the policy?

o Is ESG incorporated into your investment decision-making process? If yes, how does your firm identify, assess, and integrate ESG into security selection and portfolio construction?

o What firm resources are dedicated to ESG research and / or ESG integration?

o Does your firm have any ESG and / or diversity and inclusion initiatives at the firm-level? If so, can you please broadly describe the current initiatives?

• The questions were based on industry standards and existing peer practices, while also considering what is most informative for IMD’s internal purposes

27

Summary of Findings from 2020 EPU Certification Questionnaire

• 57% of long-oriented (LO) respondents have an established ESG policy and 67% explicitly incorporate ESG into investment decisions with another 10% doing so on a limited basis

• An additional 19% of LO respondents are either exploring or are currently in the process of developing an ESG policy

• Similar results were found for hedge fund (HF) respondents with 68% stating that they have or are in the process of developing an official ESG policy

• Amongst HF respondents, over two-thirds incorporate ESG to some extent into investment making decisions; however, this was significantly more pronounced within directional managers (85%) than stable value managers (55%)

Source: TRS IMD

ESG Incorporated into Investment DecisionsExternal Public Market Mangers

LO - Yes HF - Yes LO - LimitedHF - Limited LO - No HF - No

No (28.8%)

Yes(61.5%)

Limited(9.6%)


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28

TAB 24

Brian Guthrie, Executive DirectorAndrew Roth, COAO

February 26, 2021

TRS Long-Term Facilities Update

1

TRS Long-Term Facilities: Agenda

I. Vision: Generational SolutionII. Overview of September and December BOT meetingsIII. Indeed Tower Sublease UpdateIV. Current WorkstreamsV. Status of Remote WorkVI. Next Steps

2

TRS Long-Term Facilities: Vision

Generational Solution • Generates significant savings to the fund by decreasing use of leased space• Consistent with Texas Facilities Commission’s mission on consolidating agency facilities and

minimizing use of leased offices• Reduces need for costly improvements on outdated HQ buildings• Eliminates a costly piecemeal approach

Why is this necessary?• Space needs compounded over time• TRS is out of space; relying on work-from-home an unsustainable solution• Status quo is the most expensive option

3

TRS Long-Term Facilities: Vision

Other Considerations• Current environment is uncertain and unprecedented• Pandemic-driven changes require cautious, deliberate, and thoughtful approach

Non-negotiables• Decision must be in the best interest of the members and the fund• A prudent fiduciary decision needs to be made• Most economically advantageous long-term decision

4

September 2020 Board Meeting

• Presented business case for additional space

• Highlighted ongoing diligence activities• Provided WFH analysis efforts• Shared update on leasing activities and

options• Discussed current market conditions• Detailed options and cost• Approved a resolution to negotiate with

selected finalists

December 2020 Board Meeting

• Updated the board on Indeed Tower subleasing activities

• Discussed the need for space: flexibility, timing, and cost

• Discussed cost and timing associated with current options as of December 2020

TRS Long-Term Facilities: 2020 Overview

5

TRS Long-Term Facilities: Indeed Tower Sublease Update

Sublease Activity• Building expected to be completed in Spring of 2021• Cushman & Wakefield aggressively marketing space

o Responding to multiple inquiries about the spaceo Conducting tours for potential sublessees

• TRS staff toured the space to determine necessity of build-out worko Moving forward to request appropriate permits

6

Build-to-Suit Opportunities

• Follow through on design work for potential Build-to-Suit (BTS) options

• Explore potential legal issues with existing options

• Explore potential legal issues with proposed transaction structures

Red River Campus

• Initiate critical maintenance projects• Identify areas to remodel to provide

additional seating• Identify and implement necessary COVID

protocols for existing seating and pending remodel opportunities

• Develop 3, 5, and 7-year facilities plans

TRS Long-Term Facilities: Current Workstreams

7

TRS Long-Term Facilities: Current Workstreams

• Lease extended to March 2023• Additional 2-year term provides flexibility and stability while assessing solutions• Space can be utilized for transition and supports continued growth of IMD team• Continue to develop long-term facilities solution

8

816 Congress

Strengths

• Flexibility• Reduced employee stress associated with

traffic and commuting• Productivity gains in certain areas• Allows TRS to continue to deliver

uninterrupted services to members during a global pandemic

Challenges

• Technology issues• Productivity loss in key member-facing

business areas• Compliance and data security associated

with remote work strategies• Suboptimal employee onboarding and

training experience• Culture erosion

TRS Long-Term Facilities: Status of Remote Work

9

TRS Long-Term Facilities: Next Steps

Next Steps

• Continue due diligence on existing options• Continue to look for the best possible option for TRS and its members • Evaluate potential issues with return to work

➢Members (in-person visits at Red River)➢External Partners (in-person visits to 816 Congress)

• Initiate maintenance and space efficiency activities at Red River that can be done while staff occupancy is low

10

Appendix

2021

• Ramp up RTO efforts for staff at Red River and 816 Congress locations

• Prepare buildings for social distancing in the workplace with initial significant wave of RTO activities

• Continue diligence work on potential BTS options

• Aggressively market sublease space at Indeed Tower

• Obtain permits for “whiteboxing” space at Indeed to attract sublease tenants if necessary

2022

• If no BTS solution identified in 2021, determine if (and when) additional leased space for Red River campus is necessary

• Determine what options exist for IMD team at 816 Congress

• Identify parking solutions for both Red River and 816 Congress

TRS Long-Term Facilities: Updated Timeline

12

2023

• Lease at 816 Congress expires 3/31/23• Space needs at Red River will exceed

available space

2024

• Space needs at Red River will exceed available space

TRS Long-Term Facilities: Status of Return to Office Efforts

13

February 2021 Board Meeting Book - TRS - Texas.gov

Documents

Transcript of February 2021 Board Meeting Book - TRS - Texas.gov