Board Oversight > Minutes Archive > December 15, 2023, CRA Minutes

December 15, 2023, CRA Minutes

Board Meeting: September 15

A meeting of the Governing Board of the Colorado Retirement Association was held on December 15, 2023 at 9:00 a.m.

The following were present at the meeting:

  • Chris Felton, Board Chairperson
  • Adam Ford, Vice Chairperson Darius Allen, Board Member
  • Tobe Allumbaugh, Board Member- Participated by Zoom
  • Jerry DiTullio, Board Member – Participated by Zoom
  • Meghan Martinez, Board Member-Participated by Zoom
  • Terri Schafer, Board Member
  • Tim Mullen, Executive Director
  • Ed Krisor, Legal Counsel
  • Denis Rice, Chief Financial Officer
  • Mike Whalen, Retirement Plan Services Director
  • Lois Kruse, Office Administrator

Board Chairperson, Chris Felton, called the meeting to order at 9:02 a.m.

Mr. Felton asked members of the Board if they reviewed the minutes from the September 15, 2023 meeting and if there were any comments. There being none, a motion was made by Mr. Felton to approve the minutes as presented. Darius Allen seconded the motion and it passed unanimously. Meghan Martinez and Terri Schafer abstained from the vote as they were not present at that meeting.

2023 Annual Audit Report:
Jim Cowgill, CPA and Office Managing Partner for Plante Moran PLLC, began his presentation thanking CRA for its continuing business relationship. Mr. Cowgill noted that the 2023 audit is currently in draft form due to one outstanding confirmation. Mr. Cowgill does not anticipate any changes to the audit report, and once the confirmation is received, Plante Moran plans to issue a clean, unqualified opinion.

Required audit communication to the CRA Board from Plante Moran was discussed, with Mr. Cowgill stating there were no significant audit findings, no disagreements with management, nor any difficulties encountered in performing the audit.

Mr. Cowgill presented the audit report, discussing various financial highlights within the audited financial statements. Mr. Cowgill thanked management and staff for their assistance with the audit.

Innovest – Quarterly Update September 30, 2023:
Peter Mustian, Jared Martin and Brett Minnick from Innovest Portfolio Solutions, CRA’s Investment Advisor, began their presentation. Mr. Martin introduced Mr. Minnick to the Board. Mr. Minnick gave a brief overview of his background and history with Innovest and CRA.

Mr. Martin presented a brief historical overview of Innovest’s history with CRA, including various reports, activities and fund changes over the years.

Mr. Martin noted this is the quarter where Innovest provides the Board with fiduciary education and overview. The discussion included:

  • Who are retirement plan fiduciaries and who are not
  • Fiduciary functions including:
    • Monitoring investments and service providers
    • Reasonableness of plan fees
    • Interpreting plan provisions and application of plan terms, as necessary
    • Ensuring the plan operates in compliance with applicable rules and regulation.
  • Duties of Loyalty, of Prudence, to Diversify, to Follow Plan Documents; and the duty to ensure Plan Fees are reasonable.

The above functions and duties are accomplished through organization, implementation of sound processes, and then proper documentation of the processes followed.

Mr. Martin noted that CRA does not fall under the Employee Income Security Act of 1974 (ERISA). ERISA does not apply to public plans. Public plans are governed by their state’s adoption of the Uniform Prudent Investor Act (UPIA), which is modeled after ERISA. Both of these acts were created for the benefit of plan participants, putting their interests first. CRA and Innovest follow the best practices of ERISA.

Mr. Martin gave a brief overview noting CRA’s 401(a) and 457(b) plan fees are in-line or less than plans of like size in the industry. It was also noted that CRA’s service model, which provides significant education and consultation for participants and employers, increases costs. These types of costs are not generally included in the fee analysis/benchmarking that CRA is compared against. Innovest and CRA are looking into other public plan sources for a more accurate, apples to apples fee comparison. Mr. Martin also discussed CRA’s mutual fund menu coverage (the duty to diversify), and total asset allocations for the plans.

Peter Mustian began his portion of the presentation with an overview of the markets, current economic themes, headwinds, tailwinds, inflation, etc. and the impact all these factors have on the market.

Overall, the markets for 2023 have been quite strong through September 30th, even though the third quarter had negative investment returns in most categories. The market did begin to rally in November. Equity valuations are slightly above historical levels, driven primarily by strong performance of the largest stocks. This concentration of price and performance for the 7 to 10 largest stocks in the S&P 500 is concerning.

Looking forward, it appears the economy will likely slow. The Federal Reserve’s concerns about inflation have eased recently. There is talk of multiple small interest rate reductions in 2024.

Brett Minnick began his portion of the presentation discussing CRA’s mutual fund Manager Scorecard and CRA’s Investment Policy Statement (IPS) Watch List.

Mr. Minnick discussed the American Beacon International Equity fund and the American Funds Europacific Growth fund, noting various concerns including performance, management and ownership changes, and assets under management.

Innovest will present a formal Watchlist Report for these two funds at the February 16, 2024 Board of Directors meeting.

Mr. Minnick also discussed the Tortoise Energy Infrastructure fund and the iMGP Alternative Strategy fund, noting that these funds are only available within the Target Date Portfolios (TDPs) and are not available as standalone investments. Tortoise Energy has had recent management changes, thus the concern for discussion. iMGP Alternative has also had recent management changes in addition to investment style concerns and a decrease in assets under management.

In conjunction with Innovest’s asset allocation review of the TDPs at the next Board meeting, Innovest will also provide alternative recommendations for the American Beacon International Equity fund and the iMGP Alternative Strategy fund.

The Board meeting included Innovest’s annual share class review. This is where CRA’s investment funds are analyzed to see if there are other classes of shares available at lower costs. This review also takes into account recordkeeping offsets. CRA does not keep these offsets but remits them back to the participants. Innovest recommends no share class changes at this time.

Mr. Felton and Mr. Mullen thanked the Innovest team for their presentation. Innovest left the Board meeting at this time.

Legislative Update:
Joan Green, CRA’s Legislative Lobbyist, briefly discussed several bills that are currently being proposed for the upcoming legislative session.

  • Addressing additional PERA service retirees for schools. Proposes a PERA retiree refundable income tax credit.
  • Technical corrections to a previous FPPA Bills passed.
  • Addressing the State contribution to the FPPA Death & Disability fund.

Mrs. Green noted that these Bills are not anticipated to have an impact on CRA.

Financial Update:
Denis Rice presented the Plan and Association financial statements for the 1st fiscal quarter ended September 30, 2023. The discussion reviewed the balance sheets, income statements, budget versus actual, and the Association’s general ledger.

Mr. Rice made note of CRA’s new hire, Holly Kline who will be joining the Operations team the first of the year.

Also discussed is CRA’s changing of health plans to the Public Sector Health Care Group. CRA expects to realize decent savings in this budget area.

Mr. Rice continued his presentation noting that the December 7, 2023, year-to-date (YTD) fund performances ranged from a low of -4.29% (Fidelity Small Cap Index Fund) to a high of 30.61% (Harbor Capital Appreciation Instl.). CRA’s Alternative Investments, available only within the Target Date Portfolios, ranged from a high of 9.29% (Tortoise MLP & Pipeline Fund I) to a low of -1.07% (Blackrock Strategic Income Opportunities I).

Comparatively, through December 7, 2023, YTD S&P returns are up 19.43%. Schwab self-directed balances are up for the same time period.

As of November 30, 2023, the YTD blended rate of return for both the 401(a) and 457 (b) plans is 11.42%.

Mr. Rice noted that loans are up 5% since June 30, 2023. The current loan interest rate is 9.5%.

Entity Qualification Reviews:

  • City of Monte Vista
  • Gunnison County Metropolitan Recreation District
  • Saguache County
  • San Juan River Village Metropolitan District
  • South Park Parks and Recreation District
  • Town of Red Cliff

Tim Mullen noted that all six entities will be offering the 401(a) and 457(b) plans to employees. Ed Krisor has reviewed the supplied information for all six entities. They all qualify to participate in CRA’s plans.

A motion was made by Adam Ford to allow the six entities

CRA Activity Updates:
Tim Mullen began his presentation sharing that within the last three years, the CRA Board has approved adding approximately 29 new employer groups. Eleven of those employer groups will be starting with CRA in January.

Board Chairman, Chris Felton, gave accolades to staff and management for supporting the direction and mission CRA set forth in a strategic plan six years ago.

Mr. Mullen commented on CRA’s retirement webinar series, noting that the December 6th webinar was regarding Social Security.

Mr. Mullen will be attending the County Sheriffs of Colorado conference on January 17 and 18, 2024, as well as the Colorado Water Conference January 31 through February 2, 2024. Other staff will also be attending.

Expense Reports:
Mr. Felton asked the members of the Board if there were any questions or concerns regarding the expense reports. There being none, the reports were accepted as presented.

The next meeting of the CRA Board of Directors will be held on Friday, February 16, 2024.

Mr. Felton asked if anyone had anything additional for the good of the order. There being no further business to come before the Board, Mr. Felton adjourned the meeting at 11:23 a.m.