A meeting of the Governing Board of the Colorado Retirement Association was held on December 9, 2022, at 9:00 a.m.
The following were present at the meeting:
- Chris Felton, Board Chairman
- Darius Allen, Board Member
- Tobe Allumbaugh, Board Member – Participated by Zoom
- Jerry DiTullio, Board Member – Participated by Zoom
- Adam Ford, Board Member – Participated by Zoom
- Meghan Martinez, Board Member – Participated by Zoom
- Terri Schafer, Board Member – Participated by Zoom
- Tim Mullen, Executive Director
- Ed Krisor, Legal Counsel
- Denis Rice, Chief Financial Officer
- Mike Whalen, Retirement Plan Services Director
- Matt Evans, Retirement Services Coordinator
- 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 October 21, 2022 meeting and if there were any comments. There being none, a motion was made by Chris Felton to approve the minutes as presented. Jerry DiTullio seconded the motion and it passed unanimously.
Jerry DiTullio abstained from the vote as he was not at the last meeting.
Tim Mullen introduced Lisa Lewallen, who has been working from Pennsylvania for the past two years and is in town for the holidays and for training. Tim introduced Liz Ortega, CRA’s new operations staff member. Denis Rice gave a brief overview of Liz’s qualifications and background.
Meghan Martinez joined the Board meeting.
Innovest-Quarterly Update – September 30, 2022:
Peter Mustian and Jared Martin from Innovest Portfolio Solutions, CRA’s investment advisor, joined the Board meeting.
Jared Martin presented the historical overview of 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 retirement plan fiduciaries are and who are not
- Fiduciary functions including:
- Monitoring investments and service providers
- Reasonableness of plan fees
- Interpreting plan provisions and application of plan terms
- Ensuring the plan operates in compliance with applicable rules and regulations
- 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 the processes, and then proper documentation of the processes.
Regarding the reasonableness of fees, fiduciary liability insurance carriers are taking notice of the current uptick in lawsuits that primarily question if fees are “reasonable” for the services being provided by the retirement plan provider. These insurance carriers are now requiring certain disclosures as part of an excessive fee questionnaire. These questions address recordkeeping fees, investment fees, documentation, proprietary funds/services, and inquiries by plaintiff litigators. CRA has provided all pertinent processes and procedures regarding fees to their liability insurance carrier.
Mr. Martin discussed CRA’s plan fees. The 401(a) and 457(b) plan fees are comparable with other plans of scale within the industry. Tim Mullen noted that CRA is a multi-employer plan (MEP) and these plans are inherently more expensive to administer. A significant benefit of MEPs is their economies of scale available when selecting institutional class mutual funds, providing savings to participants. CRA also provides customized Target Date Portfolios with a blend of actively and passively managed funds. Actively managed funds are somewhat more expensive; however, this blend of funds has proven beneficial with enhanced returns to participants, well in excess of the higher costs.
Continuing his presentation, Mr. Martin provided an overview of CRA’s investment lineup structure, noting that the custom design of the Target Date Portfolios has been a benefit to participants over the past few years when compared to off-the-shelf products. These portfolios contain more than half of the CRA’s plan assets. Mr. Martin concluded his presentation with a brief market overview and outlook.
Peter Mustian reviewed the Manager Scorecard and Fund Watchlist stating there are no major concerns or any recommended changes in strategy. Peter continued with the table of returns sharing that recent performance has struggled, however, long- term performance remains solid.
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. Mr. Mustian mentioned an opportunity to provide a change from CRA’s currently utilized Dodge & Cox Institutional share class fund (Dodge & Cox Stock Fund – I, DODGX) to an available Dodge & Cox Institutional X share class (Dodge & Cox Stock X, DOXGX). A brief discussion noted the net expense ratio to participants between the two share classes are the same, however the new fund has a lower gross expense ratio with no recordkeeping offset, providing a simpler and cleaner administrative process for participants.
A motion was made by Chris Felton to accept the recommended share class changes as presented by Innovest. Adam Ford seconded the motion and it passed unanimously.
Tim thanked the Innovest team for their work and the presentation as they left the Board meeting. Board Chairperson, Chris Felton called for a short break at 10:16 a.m.
The session reconvened at 10:30 a.m.
Denis Rice began his presentation noting that the December 2, 2022, year-to-date (YTD) fund performances ranged from a low of-34.01% (Artisan Mid Cap Inst’l) to a high of 1.42% (Book Value Fund). CRA’s Alternative Investments, available only within the Target Date Portfolios, performed better with a high of 21.78% (Tortoise MLP & Pipeline Fund I) and a low of -17.55% (DFA Emerging Markets Core Equity Fund I).
As of November 30, 2022, the YTD blended rate of return for the 401(a) and 457(b) plans is -9.73%, this compares to S&P being down by 14%.
CRA’s plan loan balances have changed minimally. Effective December 1st, the loan rate is now at 8%. Schwab balances are down 8.24% from September 9th, and represent 1.72% of total plans assets as of December 2nd.
Contributions are lower than distributions which is a continuation of what we have seen over the last couple of years. This is not unexpected given the large number of retirees in our plans.
Mr. Rice presented the Plan and Association financial statements for the 1st fiscal quarter ended September 30, 2022. This discussion reviewed the balance sheets, income statements, budget versus actual, and the Association’s general ledger.
Entity qualification review: 12th Judicial District
Tim Mullen gave a brief overview of the 12th Judicial District and their desire to participate in both the 401(a) and 457(b) plans. Ed Krisor, CRA’s legal counsel, stated that he has reviewed the supplied information and the 12th Judicial District qualifies to participate in CRA’s plans. Darius Allen moved to allow the 12th Judicial District to join CRA. Meghan Martinez seconded the motion, and it passed unanimously. The Participation Agreement will have an effective date of January 1, 2023.
Select a Board Vice Chairperson:
Chris Felton discussed the Vice Chairperson vacancy and related responsibilities. Chris asked if there were any volunteers for the vacant position. Adam Ford volunteered for the Vice Chairperson position. As there were no other volunteers, Toby Allumbaugh motioned to approve the appointment of Adam Ford to the CRA Vice Chairperson position. Jerry DiTullio seconded the motion and it passed unanimously.
CRA Activity Updates:
Tim Mullen stated that CRA is responding to a Request for Proposal for retirement services for Evergreen Fire Protection District dba Evergreen Fire/Rescue. The response will be going out today, December 9th.
The Colorado Government Financial Officers Association conference in Grand Junction was attended by Mike Whalen and Matt Benitez. CRA had a vendor booth and Mike and Matt gave a presentation on multi-employer plans.
CRA continues to send out information on our retirement plan services. CRA is continuing the CRA Retirement Series in the month of December.
Tim commented that benefits season has kept our Client Service Managers very busy. Employers are continuing to look for ways to enhance their benefit offerings to employees.
Chris 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.
Chris Felton acknowledged all CRA staff for the exceptional work they have done throughout the year.
The next meeting of the CRA Board of Directors will be held on February 17, 2023.
Chris Felton asked if anyone had anything additional for the good of the order. There being no further business to come before the Board, Chris Felton adjourned the meeting at 11:10 a.m.